Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Santander Bank Polska SA (BKZHY, Financial) reported a net profit of EUR 2.4 billion for the first half of 2024.
- Customer deposits grew by 7% year-on-year, totaling PLN 215 billion.
- The number of digital customers increased by 7% year-on-year, with mobile app users growing by over 13%.
- The bank's capital position remains strong with a TCR of 17.8% and Tier one ratio of 16.7%.
- Return on equity for the group was 19.1%, indicating strong profitability.
Negative Points
- The bank faced a significant tax burden of EUR 1,267 million in the second quarter.
- Total regulatory costs amounted to ZAR 172 million, impacting overall profitability.
- Net interest income declined by 3% in Q2, driven by the impact of COVID payment holidays.
- Total costs for the first six months grew by 11% year-on-year, driven by inflation, salary adjustments, and IT costs.
- Provisions for expected credit losses totaled EUR 611 million in the first six months, higher than the corresponding period last year.
Q & A Highlights
Q: What is the sensitivity of net interest income to a 100 basis point interest rate cut?
A: CFO: The sensitivity of net interest income is in the range of EUR300 to EUR330 million, assuming a constant balance sheet. We are preparing for a lower interest rate scenario and are within regulatory limits.
Q: Can you provide an update on provisions for Swiss franc loans and the expected coverage level?
A: Unidentified Executive: We have not received any specific expectations from regulators regarding coverage levels. We have exceeded 100% coverage, reflecting the market situation and court behaviors. Historically, we had 62,000 such agreements in Santander Bank Polska and 27,000 in Santander Consumer Bank.
Q: What is the current long-term funding ratio, and how do you plan to reach the required level?
A: Unidentified Executive: At the end of June, the long-term funding ratio was around 40%, in line with the target of 38%. Future levels will depend on factors like mortgage loan portfolio growth and RWA growth. If needed, we will issue additional funding to maintain the required level.
Q: Are there any plans to use a common IT platform with the Spanish parent company, and how do you handle cybersecurity?
A: Unidentified Executive: We take cybersecurity very seriously and have special surveillance on shared platforms. Our transactional banking channels are not the same as those used by our parent company. We have robust security measures and quickly addressed recent issues without additional costs.
Q: What is the outlook for the effective tax rate, and what factors influence it?
A: Head of Financial Control: The effective tax rate for the bank on a standalone basis was 22.4%, and 20.6% after stripping off certain effects. On a consolidated basis, it was 13.6% after adjustments. Factors influencing the rate include non-tax-deductible costs and technical assets created by subsidiaries.
Q: How will the unlocked EU recovery funds impact the bank's growth, and what is the reason behind the increase in the corporate loan portfolio?
A: Unidentified Executive: The unlocked EU recovery funds are positive for the Polish economy and the bank. We plan to participate in financing projects related to these funds. The increase in the corporate loan portfolio is due to higher investment activity and improved customer service quality.
Q: Has there been any change in pricing or risk appetite for consumer and corporate loans?
A: Unidentified Executive: There have been no changes in pricing or risk appetite. The growth in loans is sustainable across all lines, and we are optimistic about continued lending activity growth.
Q: What is the impact of payment holidays on provisions, and what is the outlook for business loans?
A: Unidentified Executive: The provision for payment holidays is approximately EUR135 million, with an expected hit rate of 15%. We do not expect additional provisions. The growth in business loans is expected to continue, driven by positive economic prospects.
Q: How do you see the share of term deposits in total deposits in the context of potential interest rate cuts?
A: Unidentified Executive: The share of term deposits is expected to remain stable in the coming quarters, even with potential interest rate cuts.
Q: What is the impact of new regulations like CRD V and CRR II on risk-weighted assets and capital ratios?
A: Unidentified Executive: We are still analyzing the impact of new regulations and considering mitigants. It is too early to share preliminary estimates, but we are confident in our capital structure and compliance with regulatory requirements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
