Powszechna Kasa Oszczednosci Bank Polski SA

WSE:PKO

Earnings Call Transcript

[Dariusz Chorylo, executive]

So good morning, ladies and gentlemen. It's a pleasure to welcome you to the presentation of results of PKO BP for 2024. My name is Dariusz Chorylo, and I'm Director of Investor Relations. So we are joined today by the CEO, Szymon Midera; Krzysztof Dresler, Deputy CEO; Piotr Mazur, overseeing Risk Management; and Piotr Bujak, Chief Economist.

[Unknown Executive]

Hello. So it's been a year since I've joined the new Board. And to be frank, we have ramped up and accelerated. And we are very excited to see increased loyalty of our customers, and this is what we are going to discuss today. We are on the podium. We rank among the top 3 banks in terms of NPS in retail and corporate banking. We have accelerated business growth. In terms of volume, we have also ramped up financial performance and all the makings of efficiency, profitability, and cost efficiency.

[Szymon Midera, executive]

Hello, and welcome today. Today, we are meeting in a wider group, CEO Dresler; Mazur; and Piotr Bujak, in a new hat who is going to share his macroeconomic outlook today.

So let's get started. I would like to stress a profound transformation we are now witnessing and full focus on customer needs. PKO is ultimately ready to follow and satisfy customer needs. We are going beyond traditional banking. We're seeking for customers proactively as partners. We follow customers anywhere they need banking products today. So this is the quintessence of what we're doing today. We are undergoing profound transformation as we are building a brand new business model.

We have done a lot in terms of value creation. We are creating value for customers. We are boosting volumes. We are also building value for shareholders. Let me just remind you that last year alone, capitalization of the bank was up by nearly 19%, PLN 12 billion. So we are speeding up today. We are deep diving into implementation of [indiscernible]. It's a brand-new strategy we have adopted, which will put the focus on the customer. It's not an outcome of our ignorance and the green deal, it's an illustration of going outside traditional banking infrastructure, mobile apps, branch. We are creating a new ecosystem and results will become visible in the next quarters. And by the way already today you can see that our communication model with you is changing. We are showing you new elements and quarter-by-quarter will be showcasing you execution level of our targets and goals and all results of personalization of our targets.

Now as to performance, it was a robust year. We saw the customer base growing by 220,000 and this growth of the bigger customer base and customer confidence. And let me stress once again that we saw an increase in the loyalty of the biggest customer base in Poland, what translated into higher savings, which were up by 11% in terms of savings. We have not only savings and deposits, but also unit linked funds and bonds and financing of our commerce, totaled PLN 300 billion. This has translated into a higher balance sheet, totaling PLN 525 billion, and the capital buffer still exceeds 4 percentage points. So Tier 1 totaled 17.39% and we can still think about satisfying the needs of our retail and corporate customers, funding the economy and sharing our profits with shareholders.

This business growth is above market average. And I would like to stress it, we are growing faster today than the market and our competitors, faster than the leading 5 Polish banks. This has translated into robust financial performance. We are very glad that we see an increase by 20% year-to-year in our core revenue. Net interest income has gone up by nearly 8%. We've seen cost-to-income ratio going down to 29.5%, and we have PLN 9.8 billion of net profit with full control of credit risk. And we have historically lowest credit risk at 39 basis points. And once again, what we find important, customers have put trust in us. This is -- these are our main stakeholders, and this translates into faster growth on the market. We have 1.8x faster growth in consumer loan and 1.5x times faster growth in corporate loans. We are growing faster than the market, so we are capturing more market share. We are consolidating the spending on the bank on the Polish market and we have very high profitability. Net result is up by 70% year-to-year. Our net interest income and F&C has been growing faster than on the banking market in Poland.

What translates into capitalization, which was up by 19% last year alone. So this is PLN 12 billion for the last year. We are the most valuable company on the Polish stock exchange. So now please present macroeconomic outlook. Macroeconomic backdrop is creating favorable operating conditions for the bank, although it's far from perfect. In 2024, we saw GDP going up, what has been reflected by increased demand for loans whilst assets were demonstrating high quality. And during the past quarters, ever since we have been experiencing the revival of the Polish economy after Fall 2023, there was some downfalls. Economic revival in 2024 was quite atypical.

On the one hand, we saw improvement in the standing of households, which benefited from lower inflation. On the other hand, lower inflation had a negative impact on financial condition of enterprises, which is why despite differences in performance of different market segments and some differences in terms of the quality of assets in the household sector, we saw robust demand for loans. While in the business sector, huge impact of lower inflation translated in higher demand for loans.

In terms of asset quality, these macroeconomic trends were also reflected there. So the quality of assets in household sector was higher than in the business sector because rapid business inflation had an impact on the financial standing of household retail customers, and deteriorated the standing of businesses. This year, we expect a breakthrough in economy, especially in terms of investment activity. The revival of the Polish economy, which started last year should gain momentum and economic growth will be spread more evenly what will have an impact on households and companies alike.

Recent data indicates that things are improving for businesses, and we look forward to robust investment activity. Key role will be played by releasing EU funding for Poland and fundamental structural challenges for Polish economy regardless of EU funding, energy transition or the need to increase productivity in the face of diminishing traditional competitive edge of the Polish economy, which used to be cheap labor. So structural challenges and trends, in the midterm, will be increasing demand for loans demonstrated by businesses.

The banking sector with an improved capital standing is able to satisfy this demand on a wide scale. So we expect revival of loan sales to businesses.

So another major element of economic outlook, which has an impact on the banking sector is the condition of the labor market. We saw a drop in the number of FTEs, but the unemployment rate is not growing. In recent months, it was going down, what has an impact on the quality of assets in the household sector. This positive trend will not be reversed quite contrary. It may be reinforced service. Indicated companies plan to increase employment level later this year with economic revival. So we believe that the unemployment rate this year will be going down, what will increase the quality of household assets.

And final element of economic reality, which has an impact on the banking sector. Interest rates. Most economies believe that the National Bank of Poland kept its rates stable last year, what limited uptake for loans, but at the same time, had a positive impact on net interest income. In the next quarters later this year, we expect interest rates to go down again. And in the base scenario, we assumed that first slash will be introduced in Q3 by 75 basis points and disposes will continue during the next year where rates will be slashed by 100 basis points.

It should be stressed that in the past, rate cuts coincided with downturn. So they did not necessarily revive loan sales, but we believe that this time, rates will be slashed when economy is ramping up, and we believe this will animate and stimulate loan sales because, like I've said before, capital-wise, banks are ready to satisfy this demand. Under the last few sentences of the comments, the table that is presented to the right that presents our baseline scenario for the development of the credit campaign. We believe that it is partly conservative, quite cautious, please note that on the one hand, we can see the acceleration of the increase of credit in general and in every key sector as compared to the previous year. So in our opinion, mortgages in the PLN should go up together with the consumer loans as well as the loans for the businesses. This is the increase to the largest extent, as I told you earlier. And the growth of credits, however, will be lower than the nominal GDP growth.

So we believe that the actual of the credit campaign throughout the year, especially in the resumption of the decrease of interest rates can be even greater.

Thank you very much. Let us move on. We are diving deeper in our business results, and there is going to be a corporate part, which is a non-standard approach to the presentation. You can see very good signals from the end of the previous year, quarter-to-quarter, credit campaign in the corporate sector went up by 5% all over the year, we are at 5.5%. Nominally, it does not seem to be a lot, but let us remember that a quarter or 2 quarters ago, 1% increase in this area was considered to be a success. That is why we closed the year at the level above 5%, and it makes us really very glad. It allowed us to strengthen the position of the bank in the market as well as the increased market share in the sector deposits and the growth here is a little bit over 4 percentage points.

As every quarter, we present the most important transactions, corporate transactions in that period of time. And I would like to note that actually depicts the quality of our corporate clients. But it also shows a significant diversification of the portfolio.

Let us move on to retail. And here, the growth was very dynamic indeed, and that was significantly above the market. In the retail credits, we went up at the level of over 12%. And it makes us really very glad that we can see the sales in consumer finance. It is cash loan, new sales year-on-year went up by 60%. And it all translates to the increase of the market share, a significant percentage point of an additional market share in consumer loans and mortgages, and this is very consistent with what we've been talking about since the very beginning. It's about the profitable business growth above the market as well as the strengthening of our position in the financial market in Poland.

And now talking about deposits. We have a several percentage growth year-on-year. And I want to draw your attention to our dominance in the market of the investment fund sales. So it's close to 40% increase of assets of investment funds year-on-year. We captured about 30% of new sales, but we also strengthened our position by plus 1 percentage point in this area.

I would like to thank very much the clients and employees for that. And Krzysztof?

[Krzysztof Dresler, executive]

Thank you very much, Szymon. That is a great privilege and it is a great distinction for me to be able to present annual results of the largest bank in Poland, but also the largest company which is quoted in the stock exchange market with the capitalization that exceeded the pricing of the previous year when we were coming to this place and we were planning our activities to increase the value of the company. So we want to thank all the employees very closely. Everyone contributed to that. We want to thank our clients, our customers who have been loyal to us. We really make an effort to expand our services, and we try to meet the needs of our customers and clients can be executed.

The net profit is at the level of PLN 9.3 billion. Although there were some extraordinary events -- to the -- provided on the lower, we consider those extraordinary events influence the net result in the amount of PLN 5.3 billion. Now it is PLN 5.1 billion. The difference is not really significant, but the amount is really right, PLN 4.9 billion. This is what the write-off was on the loss of value for the provisions in the Swiss franc denominated loans. Well, let us hope that the Apple Pay -- the Swiss franc Apple Pay issue is already addressed. And this year, we already foresee some further actions to this extent. However, we believe that 2026 is going to be the year which we will enter with blank slate from the perspective of the mitigation of the Swiss franc risk.

To the right on top, we can see the quarterly net profit, and this is something which makes us really very happy. And this is about the predictability and stability of the result. Although extraordinary items really are having an impact on us, it is not only connected with the cost connected with the Swiss franc provisions, but also credit holidays, and we try to make sure that this result is as predictable as possible from your perspective. And there is a thing that I think that really makes us very glad, and this is about the structure of this result. We led to the increase of the basic banking activity result by 20% and the basic activity, which is made up of the interest rate result as well as the commissions result, constitutes the main drivers for the strengthening of the financial position of the bank, and the result from the basic activity is now at the level of PLN 28.7 billion. So this is the growth by 20% year-on-year.

We can also see that quarter-on-quarter, we also were able to improve significantly the basic activity results. Without credit holidays, it is 3.6%. Credit holidays, due to the fact that it had an impact on the result of Q2 as a special, well, provision, we calculated for the compensation in Q4. In Q4, we added PLN 266 million because the actual cost of the credit holidays was at the level of PLN 212 million. So this is definitely something that we will keep stressing the increase of the revenue from the basic activity constitutes the main objective, and this is what we are focusing on.

And now talking about the significant increase of the interest rate result. We let you know that the interest rate commission -- profit margin did not show its peak after Q3. And this results from the fact that there is a balanced structure that is still working with the portfolio, we still have PLN 490 billion bonds. We still have part of the bond portfolio purchased at different point of time and the exchange of those bonds by the bonds under the current conditions of interest rates makes the interest rate profit margin go up. So we still have some capacity, at least, to stabilize. In long term, we look at it, as Piotr showed, the macro economy is really inevitable. We foresee the decreases of interest rates and the bank is getting ready to grab it, however, the contribution of the interest result is really very high.

I want to stress that when we look at 7 largest Polish banks, although we, as a retail bank have the contribution of interest rate result at such a significant level in the structure of the result from the basic activity, the contribution of the result on interest vis-a-vis the entirety is on average lower than in others. So although we are a leading bank with a significant credit portfolio, other banks use that the commissions activity to a greater extent. And so last year, we now take a two-digit result from F&C, so that is why we can stress that this growth is not really an interference with the table of the fees and commissions. This is a transactional result purely. And we are really very happy that our clients want to use the services that we are offering. We try to improve that. That is why we are really thinking about the fulfillment of the dreams of our clients, customers, a natural process as well as businesses.

And this is what Szymon mentioned, the digital mortgage. This is a mild step towards the servicing of that basic dream of all of us to simply buying your own home. So these are the requirements that we are always going to have because we want our clients to use these services. The same goes for the credit card transactions. In every bond, we are growing. It's also important to say that the dynamics pertaining to savings is very important. To understand this in a broad sense, it's not only about our deposits, it's also about the TFIs, it's about bonds.

So we can see that when we look at the assets result in the portfolio of our customers, we are able to demonstrate it. Although the internal structure shows the shift of the funds from the time deposits to current deposits because they prefer some liquidity in their pockets. But in the long term, a significant amount of funds goes to TFI or bonds. It is very important because the brokers activity also contributed significantly to the net commissions results. So these are the main result drivers for the two-digit growth and are important.

Talking about the cost discipline. We are perhaps more precise when we use the wording the improvement of cost-effectiveness. We spent quite much time in strategy to get the best possible result of the improvement of effectiveness. As far as automatization and robotization is concerned, standardization of some functions, our goal is quite ambitious. Within 3 years, we want to see the improvement without an increase of the number of jobs, but we simply want to get result of cost effectiveness that we want it to be quite visible.

So we are definitely intending to focus on that. This year, we also foresee the first year of the strategy, there will be slight two-digit growth of cost. But at the end of the day, I believe that we will be moving around between 5% to 10% strategically. So the discipline and cost effectiveness will be kept by us. We try to keep it at a very high level.

Well, [indiscernible] mentioned that when we compare it with the peer group, we can see that our level is really the best. So we can see that the dynamic is not really overpriced.

And there is another thing that we wanted to show to you. We have the largest bank in Poland. We are the largest market cap in the stock exchange market, and our comparisons are of an international nature. We chose 6 European banks, and please look that ROE that is really burdened by one-offs differentiated significantly the 19.2% as compared with Intesa, Nordea, KBC or BNP Paribas. It shows that we are really on top. When we look at the CBI, I really spent quite much time on it to show to you that we are really in a very good position from the perspective of the capital adequacy. And we also -- we have properly guided. But from the perspective of ROE, higher capital, just actually have because we can get optimized by cutting the base and then the ROE will be higher, but we are not talking about it. We are talking about the strategy of development and growth. We are here talking about preparation of the bank for the impact of the 2 upcoming investment waves as possible. This is connected with energy and robotics.

When we look at the cost of risk, all of this is happening under the conditions that the cost of risk in Europe is not really very low. Piotr will talk more about it. But in Poland, it seems that it is at a relatively low level. And the perspective of Europe, we can see that it still can be developed and more can be achieved with this retail structure.

And my last slide is on our issuance throughout the year. We are here in the double capital regime, if you will. The issuance that we do in spite of a significant capital surplus that we report is almost 5 percentage points now. We are forced to issue from the perspective of the resolution regulation also in the liabilities market. We are a fixed participant in the market. We are a fixed player. We are not really focusing on high-volume amounts. We are distributing it to avoid the market pressure and the buyout of the market.

We try to be present in the European market in order not to take domestic market from other banks. To the left, you can see also our work last year, for example, we made 600 investors and our work is giving very specific fruit because the profit margin that we paid was replaced in January. It was 250 basis points, and now we got an offer of 105 basis points at a very difficult moment at the beginning of January. And I believe that we are now going to pace up to the breakthrough at the level of 100 basis points.

To the left, we are showing what is ahead of us. We are talking about the buffer. It is about the combined buffer. We can see the increase of the requirement of MREL TREA. And I believe that we are prepared to do that. We are going to continue a strategy of the presence of the constant presence, and we will also update information about our bank investors, both European and others. We also expanded our horizon to investors from other continents.

So for the time being, that's it from me. And Piotr, over to you.

[Piotr Mazur, executive]

So good morning. Hello, and welcome. This is the first time in the recent history of this bank when the level of impairment loans fell beyond and under PLN 1 billion with the robust growth of the loan portfolio. So with an NPL of 3.21%, this ranks us amongst the leading banks in Poland in terms of loan portfolio quality. We are at the top, and this is a reason to be proud.

I'd like to take this opportunity and thank employees of our branches because we owe it to you, employees of our corporations, of our subsidiaries, risk department employees, great collaboration with risk department has underpinned this success in the market. We are in the lead. And like Krzysztof said, let's look at the European market. And PKO Bank Polski looks quite decent, and we are aligned to market results, but this is the Polish market with one of the lowest risk levels. The average figure for Poland is definitely much higher. So there is a lot to be done in that respect.

So let's go back to loan risk. We can see a slightly higher number of nonperforming loans. And this is the after effect of energy hike and the slowdown in the German market, especially in the automotive sector. So we see slightly higher number of allowances and nonperforming loans. Considering economic growth ahead, we believe that this is a temporary slump in quality. We don't see any major signs of higher risk in this portfolio. But we are very happy to see how the retail portfolio is performing both mortgages and consumer finance. This is where we are growing. And the level of NPL is dropping and the cost of risk is going down as well together with consumer finance, where we have double-digit growth, and we are increasing open market share. And I believe it's a major success, a very safe and very dynamic growth in the loan sector.

So this is an explanation why things are going so well in risk and retail. We are showing you for some time that we are investing a lot in advanced analytics. In 2024, nearly PLN 30 billion from new sales were driven by highly advanced machine learning models we are now using in our business. We have moved with analytics to cloud, which improved our capability to improve our models. New models have greater potential to discriminate, to boost sales without increasing the risk. We are also using advanced analytics in restructuring, and efficiency is going up. And recently, we are testing the potential use of lease graphs and initial test indicate that the results may be very promising.

We have allowance worth nearly PLN 5 billion, and we have increased coverage to 134%. We're still maintaining a very stable level of settlement applications. Settlement is the key to manage the risk. As you can see the number of port settlements is increasing. But what's more important on the right-hand side, you can see that for the first time, we have a quarter where the number of litigation has gone down. So this is a great sign. And last but not least, very strong capital position. We have 4 percentage points worth of excess over the dividends. We have space to ramp up sales of loans.

Thank you very much.

[Unknown Executive]

So ladies and gentlemen, we have decided taking this opportunity that results are truly robust. We have decided and we have published a strategy in Q4 last year. The CEO has mentioned that we are going to update and bring you up to speed on execution of this strategy. We are going to update our aspirations. And we have decided very briefly to discuss our ambitions for this year. What should be highlighted is adequate preparation of the bank, which is well poised to embrace upcoming investments.

The first wave is visible in volumes. Perhaps you don't see dynamic growth, but we see it day to day. We have addressed the key challenge of the Polish economy, namely energy transition. Piotr has mentioned it, robotization, automation of the economy. So there is room to capitalize on low employment level. The economy needs to get automated. We have 47% of the National Resilience Plan allocated to robotization and automation. So it's being scheduled.

Looking at net interest income. We're not looking in terms of our appetite for NII, but we analyze it in terms of increased demand of natural persons in different segments of the economy because the bank will help them execute on their plans. Piotr has mentioned macroeconomic outlook. It is possible that corporate loans will go up and it's going to be a double-digit figure, but we need to be poised for that, and it will have an impact on net interest income. Perhaps mortgages will go up as well. Perhaps cash deposits will be up. We are ready for that as well.

Looking at net interest income, we are ready for rate drops. And if nothing major happens, I don't see a dramatic slump in net interest income this year. So we are focusing on our volumes, considering that pressure on NII this year will not be significant yet. So we believe that volumes will be up, which will have an impact on the net interest income. So revenue on investment fund, high customer activity, I'm talking about corporate clients and retail clients in remote channels and in brokerage houses.

One of the pillars of our strategy is better handling better customer throughout the entire life cycle, which means that the savings portfolio will become more complex as other segments will be embraced and included in the portfolio, including brokerage services. So this is something we are focusing on and basic credit card, which are performing very well. Current accounts are also performing well, so core business for us is utterly important. We are not talking about speculative hikes in fees and commissions. We have such trade-offs of higher interest rates.

In terms of cost operating expenses, like I've said before, this year is the first year where we are implementing our strategy. So we have planned expenses and investments, which are booked of expenses and investments over a longer period of time. We are going to make intros into such channels as e-commerce 'pay now, buy later.' We want to navigate easier in terms of marketing. So BFG is PLN 600 million per year. We want to keep certain costs and expenses in check and visible inflation results. So over investment estimation of overheads and payroll expenses, which is why I have said that similar cost dynamics will be seen this year, it's going to be a double-digit figure. But in the longer run, we would like to follow inflation-plus trends.

So Piotr has said everything about it. We are still exploring different options. Our strategy is titled development and growth, which is about volumes, which is about customers, which is about R&D to use this engineering terms. So it's room for testing 'buy now, pay later.' It's room and space to test new channels, where cost of risks may be higher. So that's why we have 70 to 80 basis points worth of cost of risk in our strategy. I don't know how the economy is going to fare in the future if a moderately successful scenario will be realistic.

But two months ago, we were worrying if the after effect of the German recession will have a profound effect on the Polish economy. So we are trying to navigate the risk as best as we can and the cost of risk of Swiss franc products. We have announced previously that we would like to climb the hill eventually, we hope that in 2025, we will be through this stage. And this year, as we project, we will be addressing these costs, but we would like to have this chapter completed. And I hope you are great in Excel sheets, so you were able to translate everything I've said into facts and figures.

[Unknown Executive]

Thank you very much, gentlemen. To recap, so we are persistently implementing our plan, which is simple. We are consolidating our market position. We are growing faster than competitors. We are capturing profitable market share and this is the late motif of the past year. And we are very happy to see our customer base growth, and we are excited that we have more profound relation with our current customers. So we have climbed the podium. We rank among the top 3, and it bodes very well for strengthening our ties with our customers and our performance for this year.

And last but not least, this performance and its constituents, net interest income and F&C are growing faster than figures for competitors. That's exactly what we want to achieve. We want to grow faster and more effectively than the market. So this machine is now running smoothly.

In terms of dividend payout, I can ensure you that we are meeting requirements of recommendations of payments up to 75%. We are still waiting for the decision of the Polish financial authority.

So thank you very much, and we are here for you for Q&A session.

[Unknown Analyst]

My question is about credits, corporate loans. There was a trend that you noted that in Q4, it's about the dynamics in Q4 as well as the steady growth. I understand that at the level of the 1 quarter, they are not connected. But I have a question whether there are sectors that from the perspective of the worsening of the quality as well as the dynamics that are diverging from that.

[Szymon Midera, executive]

Talking about the corporate market, we really can see growth. We can see those clients gradually start reaching for the investment loans as well or the inflation leads to the increase of the current assets. As far as the risk is concerned, there were 2 large defaults, and I think that the market also noted growth in this area.

There are 2 sectors here. The first 1 is the sector that is sensitive to the energy cost. One of the default was very clearly connected with this aspect. And the other one, it's connected with the German market and automotive markets. Fortunately, the sector structure of PKO Bank Polski is diversified to that extent that we do not see a large problem with these areas. We believe that these were 2 significant defaults but in the portfolio, we do not see any significant threat to sectors. Construction and transport are the sectors where we can see that the temperature in the portfolio is elevating. But the transport service by us is mainly through leasing, which is a safe product for both the bank and client. And in the construction industry, our participation in the segment is relatively safe.

A few words from the macro perspective. For a few quarters, the revenues in the company was under a negative impact of a significant inflation decrease, it's already over. On the other hand, the cost side was under the impact of the increase of the labor cost, and this is connected to the increase of the minimum wages last year and significant dynamics of energy cost. These 2 elements are now already starting to set up differently from the revenue as well as from the cost perspective, the financial situation of the company show to be now much better than last year. And we can see already in the first-half data from businesses.

[Unknown Analyst]

My question was also about positive volumes in the credit action and credit campaign.

[Szymon Midera, executive]

Well, we look who are optimist on the pipeline of transactions in the corporate market. It is very much different situation than the one last year when we were trying to chase the rabbits to be able to close performance, this is also definitely better. It is also worthwhile stressing that analyses from the macroeconomic perspective Piotr is presenting those are independent analyses of the macro team. And they are conservative.

It doesn't mean that dynamics of our corporate portfolio is a direct translation of the dynamics from the table of [indiscernible]. It's a [indiscernible] case. We have our own aspirations. And yes, we are looking into the future more optimistically than what the table presents. And we also keep up the strategic objectives that we told you about at the end of October last year, that in the area of corporations, we will develop faster than the market that we will be capturing 2 additional percentage points in the financing of the companies.

[Dariusz Chorylo, executive]

If you have no more questions, and I see that there are no more questions. We have a question from our internet audience. The first question is about the development of the interest rate profit margin in 2025.

[Szymon Midera, executive]

I already answered that question. We have taken up a number of different steps in order to secure the interest rate result of the bank in longer term. Keeping in mind the fact that the scenario that is presented by Piotr in relation to the decrease of the interest rate is about 100 percentage points in 2025 in total. This is what we were getting prepared for. They were 2 elements. And the first 1 is the preparation, which is securing for the circumstances of the decrease.

And secondly, it is also worthwhile remembering supervisor outlier test, and it was introduced -- the merger was introduced last May. And we expect stabilization of the interest rate results from the banking sector, the sensitivity of the interest rate result. And in practice, it translates on to the stabilization of the interest rate profit margin. We still have some backup in order to bring about a rapid decrease of interest rate profit margin drop. We do not have a baseline scenario that we expect that there will be a rapid decrease of the interest rate profit margin this year.

Now we expect that it's going to be towards the stabilization. It also means that the interest rate result will be translated on the basis of the activity. We aren't going to push the clients, but we will definitely help to solve their expectation solutions as well as their intentions -- the current intentions. And with the data from the beginning of the year, confirm the stabilization Krzysztof is talking about. And we expect that the profit margin will be kept at the level of the one of 2024.

[Unknown Executive]

A few words from the macro perspective. Please note that the improvement of the prospects for the growth of the Polish economy that is now taking place in connection with the declarations that are being made by the new ruling in Germany or in the European Union as well as the recent forecast of the National Bank of Poland. These are the factors that increase the probability of the resumption of the decrease of the interest rates will take place later than what we assumed in the current baseline scenario and the total order of magnitude of decreases throughout the year will be lower than 75 basis points that is now assumed in our baseline scenario.

[Dariusz Chorylo, executive]

There is another question about the profit distribution. The first question is about when we can expect the proposal of dividend and the other one about the probability of the buyback this year.

[Szymon Midera, executive]

In the strategy, we assume that around 75%, 50%, and this is the order. We meet conditions for the payout of 75%. And I believe that very soon, we are going to get an individual confirmation from the commission, but we will see what it is going to be like, but we believe that it is going to change the 75%. So this is what we are going to prepared for. And now it is the move on the side of the shareholders. We are ready to go forward with the process as soon as possible for buyback this year, we are working on this. We are prepared professionally. We simply have to service it, but I can't really say anything about that. For the time being, we do not have any specific ideas.

[Dariusz Chorylo, executive]

Another question about the CRR3 reform and the impact on TCR index in 2025.

[Szymon Midera, executive]

It's just 1% as far as the index is concerned.

[Dariusz Chorylo, executive]

Next, technical question. Have we introduced a part of the net result of 2024 in our regulatory capital?

[Szymon Midera, executive]

Yes. As far as regulatory capital is concerned, we introduced PLN 1.3 billion of profit from the first semester of 2024. So we need the requirements for 75% to be paid out.

[Dariusz Chorylo, executive]

There are also a few questions on the provisions for the Swiss francs in 2025.

[Szymon Midera, executive]

I think that question was already answered, but perhaps we can repeat that, if the audience needs that. We believe that 2025 is the last year when we are creating material write-offs. And they will most probably be lower than in 2024, but we continue to see them as a significant volume, but it seems that it is the last year, and the base is being saturated. That is why we believe that it is the case.

[Dariusz Chorylo, executive]

There is a question about the share of the assets for the fixed rates in the balance sheet of the market.

[Szymon Midera, executive]

We have 2 dimensions. The first 1 is new sales because we addressed the question of securing ourselves for the circumstances of the decrease in fixed rates, also by more active offering of a fixed rate in the mortgages, for example. Here in new sales, there was some periods where almost 80% of sales was offered. Now with a fixed rate in the outstanding balance, however, which means in the whole balance sheet of the credit portfolio it is a little bit over 50%.

[Dariusz Chorylo, executive]

That's how we exhausted questions from internet audience. Thank you very much, and you are very much welcome to participate in the subsequent presentation. Thank you very much. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]