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Bank Millennium - good business results, focus on customer experience, fourth consecutive quarter of positive net result

Consolidated results of Bank Millennium Capital Group for 3Q23/9M23

In the 3rd quarter of 2023 Bank Millennium Group attained net profit in the amount of 103 mln PLN and 461 mln PLN during the first nine months of this year. September 2023 was the twelfth consecutive month in which the net result was positive. Net profit for Q3 2023 adjusted for costs related to FX mortgage loans and after taking into account the hypothetical bank tax would be record-breaking, at 819 mln PLN (9M23: 2 237 mln PLN, +45% y/y).

Capital ratios improved significantly in the reporting period – the Group's T1 capital ratio increased to 13.5% from 11.7% at the end of June 2023. It is worth noting that the Bank issued EUR500 million of MREL eligible four-year bonds, closing the regulatory gap.

- During the first three quarters of this year, we achieved a significant consolidated net profit of 461 mln PLN, thanks to the good business results of retail and corporate banking, although the costs related to the FX mortgage loans portfolio were still a significant burden. - said Joao Bras Jorge, Chairman of the Management Board of Bank Millennium.

- From a business point of view, it was a good quarter. The number of active retail customers increased by more than 32 000 to close to 2,98 million customers. The bank's remote channels were even more popular. 2,66 mln clients were using electronic banking, while the mobile app was in use by over 2,4 mln, which means an annual increase by no less than 11%. At the end of the quarter customers’ deposits reached the level of 106.2 bn PLN, 9% higher y/y (+6% q/q). The Bank increased sales of mortgage loans, concluded new agreements with a total value of almost 1.3 bn PLN (+36% q/q) and achieved a market share of nearly 10%. Sales of cash loans amounted to 1.66 bn PLN, which represented a significant increase of 9% compared to the third quarter of 2022. In corporate banking, the Bank continued to develop digital customer service, i.a. introducing new features in a new mobile application for companies, which was built completely new in terms of technology, with a new design, focused on user convenience, with considerable customisation options. - said Joao Bras Jorge, Chairman of the Management Board of Bank Millennium.

The Bank has consistently focused on high quality and care for a positive customer experience in contacts with the bank, for which it was awarded the first place in both categories of the Newsweek magazine ranking: Traditional Banking and Remote Banking. This is another important award for the bank this year, recognised in the sector – in May it won first place in the Golden Bank ranking for the best multi-channel customer service.

- We continued to conclude amicable settlements with borrowers of foreign currency loans. Since the beginning of 2020, when settlements began to be offered more actively, we have concluded more than 20,000 amicable settlements until the end of September this year. This represents more than 33% of the number of FX mortgage loan agreements active at the start of the settlements programme. The Bank attaches great importance to the reduction of its portfolio of FX mortgage loans and the associated risk, and therefore remains open to individually negotiated amicable solutions, including conversion of loans into PLN, early partial or full repayments. - said Joao Bras Jorge, Chairman of the Management Board of Bank Millennium.

Key developments in the period

The key developments in 3Q23 were as follows:

  • NII adjusted for cost of credit holidays increased 3% q/q (9M23: +16% y/y) on a combination of higher number of calendar days in the period and 10%+ higher IEAs which more than offset the negative impact of gradually declining market interest rates; the size and profitability of the securities portfolio continued to increase while loan mix continued to change in favour of NII; the y/y growth continued to decelerate on high base effect and stood at 8% in the quarter;
  • quarterly NIM eased to 477bp from the all-time high of 2Q23 (485bp) but this was largely a denominator effect (high growth of IEAs) as income yield improved in the period while deposit cost marginally contracted;
  • cost efficiency remained high (9M23 opex without BFG/IPS costs up 14% y/y vs. reported 9M23 income growing 32% y/y) owing to a combination of a steady increase in the digitalisation of our business and well as relations with clients with strong cost response to revenue pressures; headcount remained broadly stable (number of active employees up 66 or 1% in 3Q23 and flat since YE22), optimisation of the physical distribution network continued (own branches down by 31 units or 8% in the last twelve months) complemented the increasing share of digital services (digital customers: 2.7mn, up 7% y/y, number of active mobile customers: 2.4mn, up 11% y/y);
  • loan portfolio was flat in the quarter (net/gross loans: -6% y/y each) with trends in FX-mortgage portfolio (down 15% q/q on a reported basis and down >50% y/y) remaining the key decisive factor; loan book w/o FX-mortgages was almost flat on all counts (+1% q/q, -1% y/y); FX-mortgages (reported basis) continued to shrink fast on a combination of FX movements, repayments, provisioning (in line with IFRS9 most of legal risk provisions are booked against gross value of loans under court proceedings), write-downs and amicable settlements; as a result, the share of all FX-mortgages in total gross loans decreased to 5.2% (BM originated only: 4.6%) from 10.2% (9.4%) in the same period last year;
  • non-mortgage retail portfolio was up 2% q/q and up 5% y/y owing chiefly to improved origination of cash loans (PLN1.7bn or +9% y/y in 3Q23 alone and PLN4.8bn, up 19% y/y, in 9M23); BM’s market share in origination in 3Q23 stood at 10.4%, while in 9M23 at 10.7%, slightly above the 10.3% in 9M22; origination (disbursements) of PLN mortgages improved significantly and growing 27% q/q to PLN1.3bn, it exceed the PLN1bn threshold first time since 3Q22; 9M23 origination totalled PLN3.2bn and remained significantly (43%) below the level in the same period last year; BM’s market share in originations stood at 8.7% in 3Q23 and 9.5% in 9M23 vs. 10.7% in 3Q22 and 12.9% in 9M22 respectively;
  • loan book quality was broadly stable in 3Q23 with NPL ratio ticking up to 4.7% from 4.5% at the end of June’23; consumer loans segment (higher volume of Stage 3 loans, flat portfolio) was the main source of the change; retail segment overall saw NPL ratio ticking up to 4.9% from 4.8% at the end of June’23 while, similarly, corporate segment saw NPL ratio ticking up to 3.7% from 3.6% (chiefly an outcome of decreasing denominator, i.e. loan portfolio, as volume of Stage 3 loans was flat q/q); NPL coverage hardly changed (72% from 73% at the end of June’23 and 70% at YE22); cost of risk remained low (31bps in 3Q23, 9M23: 40bp vs. 9M22: 44bps) owing to the continued low cost of risk in the corporate segment;
  • customer deposits were up 6% in the quarter and up 9% y/y with retail deposits up 4% q/q and corporate ones up 11%; direction in deposit mix change reversed again and share of term deposits increased to 37% from 35% at the end of June’23 (33% at YE22 and 18% at YE21); the liquidity of the Bank remained very comfortable with L/D ratio easing further to below 70%;
  • AuM of Millennium TFI and third-party funds combined continued to increase (up 3% q/q in 3Q23); at over PLN7.4bn they were strongly up in y/y terms (+16%);
  • capital ratios improved visibly (Group TCR: 16.6%/T1:13.5% vs. 14.8%/11.7% respectively at the end of June’23) and therefore the surplus over the required minimum levels widened further to 4.0ppt and 3.3ppt respectively; the improvement was mainly an outcome of an inclusion of 1H23 net profit into regulatory capital (76bp impact on T1 ratio), securitisation of leasing portfolio (47bp) and lower unrealised losses on debt securities portfolio and DTA (46bp);
  • in September 2023, the Bank issued EUR500mn worth of MREL eligible bonds (4NC3) which combined with the abovementioned improvement of capital ratios more than closed the gap to interim MREL + CBR requirement; as a result in October’23, BFG repealed an administration procedure with regards to the Bank which, among others, prohibited distribution by the Bank of profits in excess of the maximum distributable amount related to the minimum requirement for own funds and eligible liabilities (M-MDA); the Bank expects to meet the YE23 MREL targets.

Results of the Group are also available here: