Bank Handlowy w Warszawie S.A. (BHW) Earnings Call Transcript

Hello, everyone. Welcome to financial results disclosure of Citi Handlowy for third quarter 2025. My name is Adam Piotrak. I'm Investor Relations Head. I'm with Maciej Krywoniuk, the Head of Strategy and Investor Relations Department. He will go through the presentation. The presentation is available on our website, investorrelations.citihandlowy.pl and is available on the screen. So Maciej?

Thank you very much, Adam. So it's my pleasure to share with you today the financial results of Citi Handlowy for the third quarter 2025. It's another quarter where we are executing the strategy that we have shared with you in the first half of the year. I will be discussing the growth in lending volumes that we shared with you, we're going to deliver some key transactions where we participated in and also the dividend that we have paid out. We paid out PLN 1.3 billion initially. And in October, we paid out PLN 450 million to our shareholders as well. So this is part of our dividend policy and that we are executing upon. Coming back to numbers. So Q3 2025 in terms of the results. For the total bank, the revenue was above the PLN 1 billion and net profit reached PLN 469 million. This translated into a return on equity at 17.1%. Talking about balance sheet and the dynamics and volumes. At the total bank level, the lending volume grew 14% year-on-year and deposits were up 16% year-over-year. The capital position, this remains strong with TLAC TREA ratio at 25.6% at the end of the third quarter. A few of the highlights in terms of the lending volumes I shared with you. Institutional Banking, the lending volume grew by 4% quarter-on-quarter. It was the fourth consecutive quarter where we recorded growth. In terms of financial markets, we arranged 2 debt securities at the amount of PLN 1.5 billion. We have shared with you some time back that we will be investing in platforms for our clients. And so we launched Citi Velocity onboarding -- gradually onboarding new clients to our FX platform. The CitiDirect, we are digitizing the services for transaction banking clients. When you look at the number of transactions processed by CitiDirect, it amounted to 9.8 million, which is 2% quarter-on-quarter growth. The Consumer Banking, the Wealth Management business volumes growth continued and the number of clients in strategically important CPC segment, so the Citigold Private Client segment was up by 4% quarter-on-quarter. When you look at assets under management, the average amount increased by 6% quarter-on-quarter. It's my pleasure to share with you that we are also implementing AI tools aimed at improving quality and effectiveness of the services to our clients, giving more time for our employees, and we implemented Citi Stylus and Citi Assist, which are globally used tools in Citi. Moving on to Page 3, which is summarizing the business volumes in the Institutional Banking segments. It's my pleasure to share with you that we have recorded growth across all 3 segments in the third quarter and growth -- year-on-year growth in our Corporate Clients segment was the most significant with 45% year-on-year growth. Both Global Banking and Commercial Banking clients were growing as well. And we grew 4% quarter-on-quarter. If you look at year-on-year growth, it's more than 4x the market with 27% growth of the lending book. And deposit volumes slightly down quarter-on-quarter, but if you look at year-on-year, the growth was at a very solid level of 20%. In terms of the segment performance, the first markets, you see that FX transaction volumes grew by 3%. The brokerage house very strong growth of 84% year-on-year in value of transactions. The services and transactional activity, cross-border were up 7% in terms of the money transfer. The value of trade finance assets was up 33% year-over-year. And banking was focused on deepening our relationships with our clients. We granted new financing in the amount which was higher by 32% compared to last year. And all this proves that we are executing the repositioning of Citi Handlowy towards institutional only bank. I'll be covering the consumer banking in a while, but moving on to Page 4, which is just a brief snapshot of key transactions in the quarter. As you can see, we were active in debt capital markets. You see the issuances of debt securities on the page. The [ Kaucja.pl ] is the example of transaction where we are involved in the sustainable area. We were a part for the recycling system introduced in Poland on October 1. And the transaction from the core lending area is just an example of financing for energy sector transformation and decarbonization-related projects, which are also at the core of our strategic priorities for the next 3 years. Moving on to Consumer Banking. It's a discontinued from an accounting point of view, segment of our activity, but also an important element of -- still important element of Citi Handlowy. So loan volumes flattish, both year-on-year and quarter-on-quarter, but growth in the deposit volumes and growth in the wealth management volumes. I have shared that the AUMs were growing. So the average assets grew by 6% quarter-on-quarter. When you look at other dynamics, the private banking with Citigold Private Clients portfolio was 13% year-on-year growth and some declines, but not significant declines in the cards area where transaction value in terms of the domestic and cross-border was down year-on-year. But all in all, a pretty strong quarter in terms of the business activity among our clients in the consumer banking area, especially in the wealth management space where we are growing both the client portfolio and the business volumes are growing as well. The social responsibility Page #6, we have been and will be active in the social space. I just wanted to share with you that Polish Foundation perspective, which is an educational foundation, got a grant in the amount of USD [ 1 ]million for their activities. We are part of the series of programs aimed at helping locally in the Polish market, also giving access to the Citi Foundation and their activities that are available for Polish participants. Moving on to Page 8, which is the revenue page. So starting with the Institutional Banking. As you can see, the rates impact is visible in the top line that we are sharing with you this quarter, the 5% decline in revenue line year-on-year and 11% quarter-on-quarter. It's worth underlining that the base for that is second quarter 2025 was positively impacted by gains realized in the markets area. There were no such gains in this quarter. So this is why -- and that's what's primarily behind the decline in the top line. When you look at the segment's performance, the client revenue was up 7% despite the rates. And record high level revenue of transaction banking customer and relationship banking this quarter. On the Consumer Banking, almost PLN 107 million in the revenue, down 3% quarter-over-quarter, primarily driven -- and the decline was driven by the rates impact that we have recorded following the rate cut cycle. The net interest income also impacted by the decline of NBP rate that was down by 100 basis points when you look at the trend. So 7% down year-on-year, 3% down quarter-over-quarter. All this was compensated by growth in lending volumes. When you look at the dynamics of the interest income from our clients, it was up by 8% year-over-year. So we were able to compensate the rates impact by the volume growth. On the Consumer Banking, the net interest income amounted to PLN 217 million, down by 7% quarter-over-quarter. Moving on to fees. So fees were solid this quarter. The year-on-year growth was by 9% and stable level versus second quarter of '25 with PLN 106 million in fees generated in the third quarter of 2025 in institutional banking. This was also driven by strong performance in the transaction banking, primarily trade finance area. The transaction banking fees were up 10% Q-on-Q and 6% year-over-year. Custody, this is where we are #1 in the market. When you look at year-on-year growth, it was up 32%. The net fees and commission income in the consumer banking area, it was at PLN 46 million in the third quarter, 14% growth quarter-on-quarter, 5% growth year-over-year. This was driven by higher AUMs, which translated into stronger performance and fees in the consumer banking. Moving on to Treasury. I indicated that Q2 was very strong in Citi Handlowy, where we recorded AFS gains north of PLN 100 million. The treasury line in the third quarter at PLN 762 million was close to Q1 levels and average recorded last year. We always share with you that looking at this line of our P&L, it's more -- we need to take more long-term view than analyzing single quarters. Some underlying trends when you look at income and FX, the client activity in institutional banking, it was up by 2% quarter-on-quarter. Looking at the mix of our balance sheet and the structural balance sheet, primarily high-quality liquid debt securities, which constitute the majority of the balance sheet reflecting the quality of the portfolio. And the revaluation reserve in September 2025, PLN 137 million, we are actively managing balance sheet, recognizing the gains we were able to achieve the positive revaluation in the third quarter. Expenses, definitely, we remain disciplined in expense line. The expense line is pretty much stable both year-on-year and quarter-over-quarter despite recorded inflation. When you look at the expenses, the type of the expenses, the staff expenses and regulatory expenses were the one that were growing. And would characterize the quarter as solid in terms of the cost income at 23% in Institutional Banking in the third quarter. Even including regulatory expenses in Q1, we would have around 26% cost-income ratio, which is a very healthy number for our institutional banking and Q3 expenses in the consumer banking area amounted to PLN 189 million, which is down by 15% quarter-on-quarter, slightly higher by 8% year-over-year, primarily driven by staff expenses in our retail business. Last but not least, our cost of risk. In Institutional Banking, we have reclassified a few exposures from Stage 1 to Stage 2. This is where the PLN 19 million cost of credit is coming from in the Institutional Banking segment in the third quarter. You can tell it's elevated vis-a-vis the trends recorded in the previous quarters. However, with cost of risk at a very low level at around 20 basis points. There are no worrying signals for us. These are just a few exposures that were reclassified, but we do not see structural issues in the portfolio quality at this stage, which is reflected in the right-hand side of the slide, if you look at both the coverage ratio and share of Stage 3 in our lending book, it's significantly below the banking sectors in terms of share of Stage 3 and where we are well provisioned with coverage ratio above the banking sector levels. The cost of risk in Consumer Banking was at PLN 3 million, and this is also a reflection of the quality of our consumer banking lending book. This will be it from my side in terms of the summary of the performance in the third quarter. It's time to open up for questions.

Okay, Maciej. Thank you very much. I think that everything is clear. So thank you for joining. If you have any more questions, you can -- we are available. You can find our address on the website. So thank you very much, and have a nice rest of the day.

Thank you for joining. Have a good rest of the day.