Alior Bank (GPW:ALR) Q2 2026 Earnings Call

0:02 Good morning. This is Dominik Brokov from the Investment Relations department. Welcome to the Results Conference, where we discuss the results after the first half of twenty twenty six. In the first half of our meeting, there will be a presentation. We will discuss bank results and the trends which we envisage. We will hear from Jotr Zapski, the President of the Bank, will talk about the business side. Dyslav Wojterra, who will tell us about the financial side and Marcin Cieszewski will talk about risk. After the first part, we will swiftly move on to a Q and A session. Everyone is invited to ask questions already during the first part, which will allow us to fluidly move to the Q and A session. I hand over Good to the morning, everyone.

0:54 Welcome at our results conference discussing the second half the first half of twenty twenty six. Let me firstly look at business results and then we will move on to risk and finance according to our agenda. Beginning with the heart of the matter, we've had a good quarter, and a good first half, 1,370,000,000 in revenue, which is 10% less than a comparable quarter of the previous year, but the result

1:31 includes the result of CJEU. If we didn't have that one off, it would be on the same level as the previous year, which with lower interest rates shows that our business activity brings good results. Three sixty seven million losses in profit, which includes the one off that I mentioned above. Without that one off event, we would have $33,000,000 in profit, which is 20% less than in the previous result,

2:14 which would be the result of the CID deck. The slide shows the CDI at quarter three a. We would have 37.7 without that, so that's a very good result. The NPL is close to our strategic goal. Similarly with the cost of risk according to our assumption, 17.5% is the capital ratio, which allows us to good results, very high RORs, which if we take the CJEU out, we have a very good result and very high level of NIM.

3:02 We're still the kind of a player which has a high level of margin in the market and that's what we want to maintain. On the right hand side, you can see some strategic perspective. We have three pillars of our growth, high resilience and operational excellence. Our activity in these pillars is quite strong. We've had a good quarter about 50% growth in the mortgage loans, gross percent in total. Sales, we have a growing group of customers, 6% of relation customers. Customers are banking in the mobile app.

3:49 We launched the mobile app. We see considerable growth there, above 20%. Growth as for leading, the activity is very vigorous and has brought us a 30% growth year on year, which is twice what would be the market situation. A very good issue, 80,000,000 is at a good marginal price, 1.6. And also, we are happy about

4:37 The situation, the cost, a mere 2% rise as regards cost, our cost discipline allows us, to be very efficient in this regard. We're managing our income statement very well in this regard. As for the dividend, paid it out at the level of 1,100,000,000.

5:04 A glance at the business side of our activities, assets grew by 7%. The assets in total are EUR 106,000,000,000, worth performing loans, 6,000,000,000 deposits grew by 9%. Some additional ratios as for the share of credit in assets about 65% and we are focusing on loans rather than issues of bonds as in some other parts of the business. As for the share of mortgage loans in total loans also grows, it is 35%.

5:54 Now nonperforming loans is on the down track. As for deposits in retail, we have 14% growth and 31% growth of assets under management of the TFI, the investment fund of the bank. So we are catching the customers who moved from the deposit side to the investment fund. As for the operational activities, two perspectives there, the business customer and the retail customer.

6:40 First, the retail customers and let's talk about mortgage loans and almost 50% growth is there. As for non mortgage loans, there is a steady level, slightly decreased, but the structure is changing. As you can see, there are more cash flows handed out now. So we're growing them more vigorously than in the consumer finance loan field. This is crucial because we're generating more margins there. As for the installment of loans,

7:15 the sales is going down because we are choosing the cooperation with partners where we generate higher margins and we therefore give up certain non profitable activities. As far as the balance of lender deposit is concerned, it grew by 7%. The structure of the balance is also changing to the benefit of

7:43 the loans for real estate, which is burgundy color as for rents of assets of retail customers looks very well. We've had another very good quarter where all the constituent parts of the bar on the right hand side are growing at the tune of 15% year on year. We are also very happy about the growth in the number of customers. We are number seven in the banks. So we don't have the scale of some of the competitors ahead of us, but we've had a good result, 7% growth in the relational customers, which is our internal retail ratio.

8:29 Those who open accounts and transact are giving us 14% growth. And at the bottom, you see how they are banking with us. They are banking mostly or very vigorously with the mobile app. The share of sales initiatives in the mobile channel grew by 21%. That's the number of mobile app users growth and the share of sales initiatives in the mobile channel grew by which now represents about 43% of the total sales by our There's been a very important part of the business, which is the investment services of Alior Bank Group. The balance of customer assets is on the rise, has been a 21% growth year on year in all the constituent parts of the

9:22 bar that you can see. On the right hand side, you can see the net brokerage commissioner of the brokerage house. We will hear more from Gustaf about this, but let me just focus on the fact that we promised to be in the second pillar of our strategy, stabilizing our results by growing the commission. And you can see that the TFI activity and the brokerage house activity deals with that handsomely. Some additional figures has been a growth in the number of brokerage accounts by 4%. The funds grew by 36% in open end investment funds and there's been a sales growth of structured products. All in all, this feeds into the commission profits at a high level than had been promised.

10:14 Both customers who are interested in investments received from us proper mobile service. We've been offering some considerable possibilities. There has been a growth in new brokerage houses or investment fund

10:39 transfers and we have two digit growth in those fields. So you can see that customers very much use this channel of distribution and wish to invest with it. Now a few words about the business customer. On the left hand side, you can see the balance of loans and deposits. The growth balance grew by EUR 1,400,000,000. The lodges The middle of this structure, the most active growth part is the leading activity on the side of the bank and the leading company. On the right hand side, you can see the deposits of business customers broken down into the term deposits and current and other deposits. It's quite stable.

11:34 But what is important is that the yellow bar keeps growing, which is the current deposit, thanks to which and thanks to the changes in which we are able to decrease the financing costs. Now as far as the business customer in terms of the quality of the loan portfolio, the performing loans on the left hand side is quite stable. The nonperforming loan is consistently On growing the right hand side, you have the structure of the

12:17 loan balance in micro SME and large companies. What you can see is considerable growth in the yellow bar. We are really moving on there. We generate considerable margins there. We know how to play in this field and we can focus on this for small and medium sized companies. This is our focus. As for the micro companies, well, as I mentioned previously, we will keep discussing that the NPLs are still quite high in that

12:48 field. So going down or decreasing that portfolio is our priority. But it's not happening very fast because it takes time to catch up there. But we keep being active in the market, but we'll take some time before this balance is stabilized. As a burgundy part is obviously the large companies, there is more competition there. We're not active in all types of transactions. We want to participate in those

13:19 which provide us with good margins. The competition is very tight right now. The low interest rate created situation where not all the contracts are attractive for us and that's how it looks. There's been a growth in the number of new current accounts. Not a big growth, just 5%, but considering the trajectory which I mentioned previously in different segments, it gives us a satisfactory result. The customers use digital banking channels, which is something that we are very happy about in both purchase and bank online and that's something that makes us very happy. About the leading now, we distribute leading products by our banking network and by our leading company. The 30% growth is much higher than the market has grown, which makes us very happy because we've also maintained good risk parameters.

14:18 The leading portfolio grew by 14%. The segments where we try to be active have noticed growth. We have very good shares in the market, therein we keep increasing those shares. This is our response to the activities in the micro and small and medium sized companies. Now as for some awards and distinctions, we have had a few in the second quarter. The market has appreciated us in a number of fields but I think it will be more interesting to hear from Martin about how we have managed to implement our business in terms of the risk.

15:06 Hello and welcome. Quarter two

15:12 ended with a very safe capital and liquidity performance liabilities. We have issued TS and P bonds valued at 800,000,000 and it should be stressed that we had only subscription. Good margin, 1.6 above VIBOR. And at the same time, we have redeemed N Series bonds before the term with 2.81% margin. So a significant decline in the cost of financing.

15:59 This translated into MREL totaling 21.72%. On the capital side, we had very safe performance. All indicators totaled 17.57. Robust liquidity LCR at two eighty three at the end of six months the first six months of 2026. And coming back to

16:40 liquidity indicator, we have a significant surplus of capital on all levels and as a result, we can continue our growth. Non performing loans ratio, we continue

16:59 to go down below 5% of such loans and it's realistic. And we are continuing our strategy. We want this indicate to go down below 5% by the end of this year.

17:20 5.16%, that was the figure for the end of the first six months of this year. We had one default in the business customers segment, which has impacted this indicator and the cost of risk, which you can see on the bottom graph. Current total 0.71, but we

17:49 continue to implement our strategy. And this year and next year, implementing our strategy will be implemented provided that there will be no major turmoil on the market. And this indicator won't go above 0.8. Nonperforming loans balance at the end of second quarter totaled 3,000,000,000, more than NOK 3,000,000,000. For retail customers, at the end of first six months, it stood at 2.1%.

18:37 In case of business customers, the quarter ended with 11.8, considering

18:46 that no major changes and no major defaults will come underway, this indicator should go below two digit figure by the end of the year. The cost of risk, business customers, as you can see, the impact of the default.

19:09 So less than 2% is the result. And for retail customers, the result in quarter two sales of nonperforming loans portfolio led to core value be close to zero and over to GSWAP. Let me now discuss financial results. Revenues. Like Piotr has mentioned, we are very happy with development of our revenue in line with our strategy and in line with our expectations. Of course, in the first six months of this year, we need to take into consideration one off event, the judgment of CGEU, which has forced us to make an adjustment totally PLN 153,000,000 due on interest.

20:08 So we just like the rest of the sector, we have adjusted the balance sheet value of loans with expected value of future cash flows, and this is also reflected by million worth of

20:32 fees and commission results. So with winkering interest rates and fierce competition in the sector,

20:43 we have a slight increase by PLN 128,000,000. Our net profit is going up. If we look at different quarters, the situation is very similar. The difference between quarters is slightly bigger, so parameters are changing.

21:07 But adjusted revenue with one off event gives us the same position like in quarter two twenty twenty five.

21:19 Let's analyze our net profit. It should be stressed that in the first six months of this year, three major events took place. One of them is the adjustment of CI results as a result of CGEU

21:42 judgment. It's PLN 196,000,000. This is dark gray bar. The second event is the adjustment of the cost of risk by 98,000,000 and the impact of corporate income tax,

22:06 which is translated into higher effective tax rates. So it's $866,000,000 altogether in the first six months of twenty twenty six. If we compare it to the previous quarter, where we reported $4.00 3,000,000 considering only CGEU results, we would have profit aligned to our expectations. On the next slide, we have a more detailed breakdown of our profit and revenue, and we have three events in the quarter, in the first six months, which have a significant impact on the results. So adjustment following the CGEU judgment, higher cost of risk and higher corporate income tax, what translates into net profit for the quarter and for the first six months of the year.

23:18 Our key indicators, let's start with ROA, it's 11.5%. But considering the one off event, it's 14.3%. So it's a good result.

23:38 So 43% of COF and 37.7 NIM. Look. Robot. And

23:55 more about this, would tell you on the next slide. Net interest income includes the adjustment of PLN 153,000,000, and that would mean that in by quarter, we have comparable amounts. And that means that the increase that the growth of our business is compensating for dwindling interest rates.

24:25 And that's the slide I've mentioned on net interest rate. So very high margin over Alior last quarter, we communicated

24:42 that from 5.19, this figure has gone down to 4.5. And if we exclude this effect, the results would be 5.11. So that's in check with our aspirations and expectations for our margin and the growth of business. So we will try to keep NIM stable at approximately 5%. The cost of financing is going down slightly in line with market trends. Loan to deposit ratio remained stable above 70% for a longer period of time. And cost income ratio, 37.7.

25:41 Fees and commissions. Joss has mentioned that this is the key pillar of our strategy, and we are happy that fees and commission are going up by the quarter. So you can see significant improvement of fees and commission. So this is the result of higher brokerage commissions, growing volume of assets and marginal current accounts. And final part, operating costs. We have declared that we want to be transparent that we want to have a predictable cost trajectory.

26:30 And this is an example from the perspective of 2025 and the first six months of twenty twenty six, we can compare several quarters, and we can see that amounts are predictable, comparable between different periods. We see growth by EUR 6,000,000, 7,000,000, so 1% by every quarter. And something that we have declared early this year that we want to end this year would cost not higher than those treated by inflation. So this is the end of financial part. Piotr, over to you.

27:16 Thank you very much. So we are keeping our promises. We will be growing. We will be more resilient. We'll be better and our strategy is translated directly into our parameters. So in black font, these are results without the one off event, R1.5 million worth of profit, million dollars in profit, R11.5 million in ROE 40.3% costs and interest EUR 5,100,000 of NPLs.

28:06 So we are on the right track to deliver the strategy. So thank you very much for your attention and we can now answer your questions. Thank you very much, Pierre. It's now the beginning of our Q and A session. So loans for SMEs, one of the most critical segments of the market seems to be stagnating. What are the outlooks for the segment? I wouldn't say it's stagnating. We have two different trends. We need to reduce double digit NPL in this segment.

28:52 Our strategic objective is to keep it below 5%. So we have huge room for improvement. New business, we are reconstructing, we are introducing to our portfolio with other risk parameters. It's quite unlikely that it's going to grow so fast, especially that we are reducing NPLs. So in a while, we'll see this portfolio shrink. But I think more efficiency is on the horizon. We are not shifting our focus from this segment. And another question, what is the share of commercial profit subject to CGEU judgment? And how did you take it into consideration in Q2?

29:50 So what litigations do you expect also in relation to consumer credits which have been paid with for which this judgment may be relevant? When terms and conditions of such loans were amended? Quite a few questions. Let's start at the beginning. As far as I remember everything, the CJEU ruling from April relates to a small part of the portfolio of the consumer, about 25% of, so about one quarter of each. We already dropped the sale of loans we where we generated the non interest costs. We are respecting the ruling, and we have set up a correction of the interest results on the value of PLN130 million growth and as for the net result PLN96 million PLN.

30:58 We believe that the ruling should be implemented from the April date vis a vis the loans which had been paid off previously. We acted according to the law in purpose and the Polish regulatory authorities, which had not, objected to the practice that we applied. The loan offer rulings were changed one point five years ago. So within two years, 75% of our portfolio is being paid off and therefore the financing of the noninterest costs should relate only to a small part of the portfolio, about onefour. Thank you very much.

31:44 Let's move on to the next question. What is the level of commission income can we expect after a good second quarter? In the results of the second quarter, did we have any seasonal issues? No. I think we are witnessing regular business activities. When we consider brokerage activities, it obviously fluctuates depending on the interest of the customers in the activity of the stock market, for instance. But in our assessment, we are witnessing a regular business development there. We expect in the subsequent quarters in the second half of the year, the commission values which will be not lower from what we reported in the first half.

32:34 And the next question, what about the recent period and the mortgage and corporate loans? Well, let me say about the environment. It has certainly had an impact. We see a growth in the pressure. We talked about the business customer. The segments were higher. We are not going to fight for certain contracts which are not profitable. So there is a lot of pressure. We consider including some modification in installment loans and we are quite conscious and withdrawing from certain types of contracts because of the lower margins. But we could catch up in other areas, for instance, and the volumes of mortgage loans are growing well, the leasing activity is growing well.

33:33 So it's a trade off. The next question, what are the prospects regarding the consumer loans in the future? We view this market positively. The low interest rate is conducive to providing more loans to customers. Consumer loans, as you will notice, were used by some specialized providers. And now the whole of the sector wants to get involved in that because it's such an attractive factor as far as the margins are concerned with the risk which is well managed and which we can prove that you can manage it well. It's a very profitable sector in the business. So the consumer loans are certainly on our radar as part of our strategy.

34:26 Thank you. Can you present the current data regarding the financing ratio in WFT? Well, at the end of the first half, we had 45 real. Regarding that particular ratio, we keep observing what's happening in the market. We are observing the changes implemented by the KNF, the Polish regulatory authority, with regards to that ratio. And we do not see a problem with meeting the requirements.

35:18 Thank you. Next question. Why did we have a lower level NPL level? Is it the new level of profits with regard to the segment? Well, there are some issues relating to the size of the portfolio and the other issue is the structure of the portfolio. And also, we need to take into account the market situation and the prices which are offered by businesses which purchase these liabilities. And the next question, dynamic of the operating costs. The dynamics of operating costs, OpEx has been good because of the reduction in employment.

36:04 Can you see other possibilities of savings there? And do you believe that, thanks to stringent cost controls, you will be able to catch up with the tempo of growth in the market? Well, we did not say that this is our aim to, of course, in this field. We focus on the kind of development of the business where some parts of it are more attractive. For instance, they provide higher margins of what just mentioned. We're not fighting for all kinds of products. We don't want to achieve all contracts. We can be more selective in our investment and, therefore, to the cost which these investments generate. Could you repeat the second part of the question?

36:52 Yes. OpEx and the reduction in employment can we see further possibilities possibilities of fading there? Or do you believe that due to more stringent cost controls, you could catch up the level of growth? Well, what we assume is that the automation will have an impact. If we invest a lot in the AI development field in robotics and high-tech solutions. We believe that the development in terms of servicing our customers and the provision of products will give us more possibility to limit the cost and give us an opportunity to develop our products. Any comment on the high level of cost in the business sector?

37:39 As I mentioned in my presentation, this regards one particular customer and one particular default which we identified in the second quarter of this year. Thank you. What is the NIM outlook for subsequent quarters? We mentioned a few times already that this is our sort of forte, the high level of margin. We will keep maintaining that. Using the selection of the product, we will hope to maintain above 5%. We will be reviewing the goals as far as the income in 2027 is concerned.

38:31 Well, let me answer that. Income in 2027 will be under pressure from a number of factors. And so therefore, we have to look at them carefully in our strategy. First of all, the CIT tax will impact. Also, the growth, the volume growth. Gismar mentioned about the margins. He want to maintain a high level of heat. What is, however, noticeable are some factors which differ from what we envisaged or assumed previously. The market is growing inwardly.

39:17 There's a lot of inward consumption, which will certainly impact the dividend. But we're not giving up. We are growing in sales. We are growing in the segments which are attractive in terms of margin. If they are not attractive in terms of the margin we try to be more distant to these products. We are not planning any communication in this area. We are simply keeping our finger on the pulse of the situation and we will react. Do you see any modifications in the situation, the competition and the credit market? Well, I mentioned the competition is tight. It's much more vigorous in consumer loans than it used to be a year or two years ago. All the universal banks started to play very aggressively in this sector, especially in cash loans.

40:11 And it is noticeable also in mortgage loans as far as the installment loans are concerned. The activity of the main players is also very high. As far as margins are concerned in the business sector, some segments grow quite well, but they grow because the margins are low. So the competition is high. BIK company also mentions a lot of consolidation in mortgages and cash loans as well. So the market is getting mixed and there's a lot of inward trend, a lot of dynamics in the market and this will certainly impact the competitiveness and the offer presented to the customer.

41:00 What about the CJEU ruling, in terms of the SKD loans, the sanctions of free bank loan? CJEU has nothing to do with the sanctions of free bank loan, the SKD loans. The ruling simply mean that from the moment of the ruling, the banks should not collect interest on commission and additional costs. But there is no ruling regarding SKG, so you should not make those two. There's a lot of question today. So the next question, what will the impact on the sale of NPL for the cost of rigs and what is the value of the NPL loan sold? Starting at the end, as for the value of the portfolio, we do not provide the data of the the impact on core is about 22. And that is all the questions that we've had.

42:03 Thank you very much. I want to thank everyone for their attention.