Net earnings came in at PLN 77.2m for 1Q09, up 119.4% q/q but down 77.6% y/y, above the consensus estimate of PLN 67.0m (with a range of PLN 50.0m – PLN 86.0m, according to PAP) and our forecast of PLN 66.3m. If not for higher-than-expected other operating income, due mainly to the sale of apartments at BRE.locum, the results would have come in below expectations. Net interest income was somewhat higher-than-expected, offsetting lower net fee income. However, the development of the net interest margin (over average assets) was negative, coming in at 1.94% (-11bp q/q and -23bp y/y), with pressure from higher funding costs. Deposit growth (-6.5% q/q and +5.0% y/y) was below our expectations, whilst loan growth (+7.7% q/q and +50.8% y/y) was affected by PLN depreciation with high exposure to FX-denominated mortgage loans. (142,6 PLN, 10,97%) has also reported slightly higher-than-expected costs (-24.0% q/q, +3.5% y/y) despite lower bonus accruals and advertising spending. Net provisions came in higher than expected at PLN 210.0m (+ 61.0% q/q and +844% y/y) including PLN 70m related to FX options. The cost of risk equated to 152bp (over average gross loans) versus 107bp last quarter, in line with our full year estimates. Whilst the initial market reaction may be positive, due to the higher bottom line, we would expect this to become negative as the details emerge.