Earnings call transcript: Bank Handlowy Q2 2025 sees strategic shifts

Bank Handlowy w Warszawie SA reported its Q2 2025 earnings, showcasing significant growth in net profit and strategic shifts in its business model. According to InvestingPro analysis, the bank maintains a "GREAT" overall financial health score of 3.4 out of 5, with particularly strong marks in profitability and growth. Despite a robust performance in several areas, the company’s stock saw a decline of 1.13% following the earnings release, closing at $28.69. This movement places the stock within its 52-week range of $23.30 to $33.67, with current trading near Fair Value levels.

Key Takeaways

• Bank Handlowy reported a 26% quarter-on-quarter growth in net profit.
• The company is exiting its consumer banking business, planning a transfer by mid-2026.
• Strong performance in institutional banking, with a 19% growth in deposits.
• Cost-income ratio maintained at 20%, indicating disciplined cost management.
• Stock price declined by 1.13% in response to the earnings announcement.

Company Performance

Bank Handlowy demonstrated robust performance in the second quarter of 2025, with a net profit of $546 million, marking a 26% increase from the previous quarter. The company’s return on equity stood at 17%, while maintaining an attractive P/E ratio of 7.84x. Lending grew by 14%, while deposits saw a 19% increase, underscoring strong customer engagement and trust. The bank has consistently rewarded shareholders, with InvestingPro data showing a significant 9.71% dividend yield and four consecutive years of dividend increases.

Financial Highlights

• Net Profit: $546 million (26% quarter-on-quarter growth)
• Return on Equity: 17.9%
• Lending Growth: 14%
• Deposit Growth: 19%
• Capital Ratio: 27.1% TLAC
• Revenue Growth: 7% quarter-on-quarter, 3% year-on-year

Outlook & Guidance

Looking forward, Bank Handlowy is focused on completing the sale of its consumer banking division by mid-2026. The company plans to continue strengthening its institutional banking segment, which is already contributing significantly to its revenue. Analyst consensus from InvestingPro suggests moderate optimism, with price targets ranging from $28.20 to $35.04. The bank also announced a dividend payout of 1.3 billion, providing an 8.3% yield, alongside an additional $449 million shareholder payment. For deeper insights into Bank Handlowy’s valuation and growth prospects, including 6 additional ProTips and comprehensive financial analysis, investors can access the full Pro Research Report.

Executive Commentary

Matry Krivonio, Head of Strategy, stated, "We walk the talk in a way," reflecting confidence in the company’s strategic direction. He also described the transaction loss calculation as "a conservative view," suggesting a cautious approach to financial management. Krivonio highlighted the bank’s long-standing community engagement, saying, "We have been doing volunteering projects for twenty years."

Risks and Challenges

• The exit from consumer banking could lead to short-term operational disruptions.
• Maintaining growth in a competitive banking sector poses challenges.
• Potential cost pressures as operating expenses grew by 1%.
• Macroeconomic uncertainties might impact future lending and deposit growth.
• Regulatory changes could affect the bank’s strategic initiatives.

Despite a solid performance, Bank Handlowy faces challenges as it navigates strategic shifts and market dynamics. Investors remain cautious, as reflected in the stock’s recent decline.

Full transcript - Bank Handlowy w Warszawie SA (BHW) Q2 2025:

Adam Piotrag, Investor Relations Head, City Hanover: Hello, everyone. This is the earnings call, for the second quarter, 2025 of, City Hanover. My name is Adam Piotrag. I’m I’m investor relations head. I’m with Matry Krivonio, the head of the strategy and investor relations department.

He will go through the presentation. The presentation is available on our website, investor relations, CT Hanover, or you can see on the on your screen. So let’s start. And after the presentation, there will be a q and a session. Maciek?

Matry Krivonio, Head of Strategy and Investor Relations Department, City Hanover: Thank you very much, Adam. So welcome to all of you. Thank you for joining. Let me start with page two, which is a summary of key events in the second quarter. So what happens on the consumer banking side, maybe ourselves with the the business where we announced on the May 27, we have signed the sale agreement, which which we published to the market.

So following the the signing of the agreement, we have also updated the strategic directions, which are banked for global business, and this was also communicated to the market. We have prepared the merger plan, and so we are well on track to transfer the consumer banking operations to the buyer, which as per plan is scheduled for mid twenty twenty six. There is a series of different approvals, including the regulatory approvals, so we will be executing to get to get these. In terms of our strategy implementation, we we walk the talk in a way. So the as you will see in the in the material today, the there’s high dynamics of lending growth among the institutional banking clients.

We announced the payout of the second highest dividend in the history of the bank from 2024 profits. This was 1,300,000,000.0, which translated into 8.3% dividend yield. We informed, in fact, last Friday about the KNF approval for the payment of 2019 profits in 2025, which is additional $449,000,000 that will be paid to shareholders. Now moving on, brief introduction on how we we changed the reporting structure of the bank. It’s the first time that we used IFRS five, which is about assets held for sale and discounted operations.

So we have classified the consumer banking as discount discontinued operations, and the remaining part of the business will be presented as continued operations, sticking to the to the accounting terms. This includes institutional banking. So the institutional banking covers, as you see on the slide, three main areas of activities. The first one is markets. This is both the client business and professional markets.

The the second one is the services, which covers transaction trade solutions and custody activities. And the third one is banking. So it’s both the lending portfolio and the investment banking activity of the bank. So we will be presenting the revenue the revenue split following these these three areas. Going forward, there will be more details around the areas of activity.

Now moving on to Page four, which is a brief summary of the financial results. So key a snapshot of key figures at the total bank level. The revenue of This translates into a return on equity of 17.9 with strong balance sheet growth, strong double digit figures here, so 14% growth in lending and 19% in deposits, with carried on strong capital ratio of 27.1 TLAC three year ratio. Key highlights in terms of the of Q2 and activity. Think it’s worth highlighting the net profit, excluding the transaction loss, this was $546,000,000 so 26% quarter on quarter growth.

In terms of the lending, I have mentioned the balance sheet growth. The lending growth is about the banking sector average with loan volumes growing at 7% quarter on quarter in institutional banking. The revenue growth of 7% quarter on quarter, it was partly due to strong performance in financial markets, which I’ll be covering on the following slides. And we have reaffirmed our market leading position in Poland in the custody activities. And just to remind you, our market share is over 40% in custody.

We are exiting consumer business, but it’s been the third consecutive quarter in increase of retail deposits. And Citigold’s private bank portfolio is also growing by 5% quarter on quarter. So all in all, good trends in the consumer banking business. Coming back to the institutional side, so Page five is the business volume slide. So as you can see, as per our strategic directions that we are executing, the that was a quarter of strong dynamics of client assets, 7% growth, which is above the banking sector of 2% quarter on quarter, even 19% vis a vis the banking sector of 6% year on year.

It was commercial banking and corporate clients that were primarily responsible for the growth. On the deposit side, also strong volumes with deposits growing quarter on quarter 12% versus the banking sector of 627% year on year growth with the banking sector growing at 20%. The financial markets trends, the drivers, I would point to a body of transactions concluded through the Brokerage House, which was up 63 year on year. Strong client FX transaction volumes with 7% growth. Very healthy growth in trade finance assets with 4% to 7% growth for the portfolio year on year.

And also the relationship banking where new financing increased by six 36% year on year. In terms of the the volumes, the representation here is the the transactions. So as you see on the slide, several transactions from ranging from, you know, FX solutions for for Germany, Martin’s, which was tailor made, in fact. I think talking about FX, it’s worth mentioning that we have launched City Velocity platform, which is our new new platform, completely revisited in terms of user experience design and functionalities with automation of transactions. This also includes reporting and research.

We there is an option to integrate with client systems. So very much state of the art, new implementation that is well valued by our clients. We have been supporting Allegro in two transactions around accelerated liquidity offering. As you can see on the slide, we were sole partner supporting liquidity of the Polish Polsky System Kauzyny, which is a recycling company around product packaging. And we have also granted the syndicated loan.

We were in the syndication for the company from the IT sector, and the amount was 1,000,000,000 total. Coming back for a second to the consumer banking business volumes. This was another solid quarter there. Growth in lending, in line with the sector at 2%. And it was both in mortgage and unsecured loans, which grew 2% quarter on quarter.

With deposit, flattish 1%, but as you can see on the trends, high volumes of deposits and also FX volumes were growing with 2% year on year growth in terms of number of transactions. Citicantor, our FX tool available online and 1% growth in FX volumes on the consumer side. I have mentioned in the beginning, the private banking segment, strong double digit growth rates in terms of the total relationship balance as well as a number of private clients and slightly flattish or down trends in terms of that card volumes. The card transaction value was flattish, in fact, 1% down the last second, and cross border was down 7% year over year. Not going into details on the next slide in terms of the global community today.

I think it’s just worth mentioning. We’ve been doing the volunteering projects for twenty years now, so it’s it’s an important year for us where we are present in the different volunteering programs. We are supporting different disadvantaged groups, and and we can work for the environment. 200 2,300 of volunteers with more than thirteen thousand hours and 20,000 beneficiaries in the whole program this year. So something to be proud of definitely and something we do for the community we operate in.

And just briefly on page number 10, which is the implementation of IFRS five. This is linked to the carve out of the consumer bank and presentation of the discounted operations. So as you can see on the walk, that’s the walk on the on the bank’s net profits and how we how we arrived at at the 546,000,000 of net profit excluding the loss on transaction. The loss loss was 381,000,000,000 million slotted, and the the reported net profit, as you can see, is 166. So happy to give you more details in in in case there there are questions.

But just just one point to know, the three eight one number, this is the conservative view. This doesn’t include the 100,000,000 earn out. If we recognize the area earn out, this would be recognized as recognized as revenue in the next year. The revenue page, which is page 11. So this is the institutional banking revenue.

So the the continued operations and the revenue growing both quarter on quarter and year on year with 7% quarterly growth and 3% yearly growth. I think strong Q2 with strong markets business and realized gains there. But as shared with you, definitely a set of solid business volumes in this quarter with growth of assets around 19%, strong cash flow, strong foreign foreign exchange activity and strong trade. So these are the the businesses I would point to. If you look at the revenues in terms of the management view on the on the three areas, have shared with you in the beginning.

So markets, they represent 43% of the mix services are 51% and banking is 6%. Now the consumer banking revenues, they amounted to 76,000,000. This is a decrease of 7% year on year, and this is a function of falling interest rates in the second quarter. The net interest income. So following the 50 basis points decline in rates, the net interest income is slightly down, 3% quarter on quarter and 5% year over year.

And the SEK 500,000,000 net interest income, the SEK $530,000,000 in the second quarter, the decline in rates is slightly compensated by the growth of the lending portfolio. If you look at the right hand side and the dynamics of interest income from the nonfinancial clients, they are up 22% quarter on quarter and 24% year on year. The consumer banking net interest income amounted to 232,000,000. This is, again, the the function of the rate sensitivity on the consumer banking side. In terms of the fees, which are on the next page, they are 4% down quarter on quarter.

And there was there was one off transaction in the first q, the IPO related revenue that we booked. There were no significant one offs this quarter, so more more on a comparable basis in terms of the fee Year over year, it’s ex Y also has 3% growth. In terms of the consumer bank, 40,000,000 of fees in the second quarter, slightly lower fees. This is a decrease of 9% year on year. And slightly lower fees in the installment products, which, on the other hand, we have reported increased fees and the investment product sale.

All in all, the quarter on quarter revenue, fee revenue is kind of stable. And the treasury activity, 15% growth quarter on quarter, so strong performance here. And realized gains, as as I have shared with you, that you can see on the on the treasury results graph, 10% growth year over year. And we have reversed the trend of the revaluation reserve, which is a positive news on the page. Now moving on to expenses.

So we carry on the cost discipline. If you look at the at the graph of the operating expenses, you see that the costs were down this quarter. They amounted to 171,000,000. The first quarter was impacted by one offs primarily to the regulatory expenses. So the first and the second quarter are hardly comparable.

However, I think what stands out is the costincome ratio of 20% on the quarterly approach. When you look at the types of expenses, we had recorded growth, but it’s primarily staff expenses and regulatory expenses that has been growing in the 2025. Mhmm. And so all in all, the cost base was flattish with 1% dynamics. In the consumer business, the operating expenses amounted to 223,000,000 Polish zloty, which is an increase by 23% year over year.

And I would point to three components of the growth, the regulatory costs, so the BFG charge, the transaction related expenses. As you know, we are in the process of exiting, and then there are some specifically transaction related costs that we have booked. And there is also increase in the staff cost line on the consumer banking side. Cost of risks cost of risks, so only PLN one million of provisions booked in the first quarter, which is, again, the reflection of the high quality of the lending book that we carry on the books, better than market coverage ratios and NPL ratios. The cost of risk on the consumer banking side is at 1,000,000 Polish zloty.

The positive result of write offs and the positive impact was driven by the NPL portfolio side and also positively contributing to the PLN by 10,000,000 Polish zloty. You’ll see also the coverage and share of stage three where we are significantly better than the banking sector. So in brief, the the this is the set of of figures that we wanted to share with you for the for the second quarter. Some new reporting cuts, as you have seen, and this is something that we’ll be continuing following the implementation of the IFRS five this quarter. So I I might expect some questions around around the numbers.

So we we are opening the q and a session just now. I believe it was clear for for everyone. So if there are no no questions, so thank you very much for joining. We are available, you know, both by email and and under mobile phone. So if if you need anything, just reach out.

Again, thank you for your time, and have a good rest of the day.

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