21.09.2001
Strenghtening capital base
After BIG Bank GDAŃSKI S.A. shareholding structure has stabilized and after the merger of BBG S.A. with BIG BANK S.A., the process of the active adaptation of the merged Bank to clients' expectations and challenges posed by a competitive financial services market has started. The process, within a framework of several programs, planned for the years 2001-2002, firs of all, has resulted in a new, more precise client segmentation. Its key element is the separation of specialized business lines offering their services to difference client segments through their own sales networks.
Retails services are rendered through the Millennium network (with 220 out of projected 400 branches operational), services to small enterprises are rendered by the new Millennium Biznes network (79 offices operations in Poland out of approximately 100 projected), services for medium enterprises are handled by Regional Customer Service Centres, located in all 16 voivodships, whereas services for strategic clients are centralized in a central national unit. The Bank's offer has been extended to include full service to the private banking sector, offered through a special Millennium Prestige network, with separate corporate identity and individual service system (two out of 16 projected branches in that network are already operational).
The establishment of new business lines and the modification of the organization of client relations makes it possible to start cross selling of products by different networks and to develop bancassurance services. At the same time, one of the priorities for the Bank is to develop electronic distribution channels, offering them to clients from all market segments, and its banking offer is supplemented by specialized services (leasing, brokerage services, factoring) rendered by BIG Group companies.
In order to ensure high operational quality and organizational efficiency of units responsible for client relations, the Bank is thoroughly restructuring its support functions. The main project in this regard is the upgrade of the ICBS Release 7.1 IT system, which will be a starting point for the developed, based on the system, of a single operating platform for the entire Bank. There are also significant changes as regards the centralization and reorganization of the credit approval process to enable the reduction of time necessary to take credit decisions and to improve their quality, the centralization of back office functions, already completed for bank cards, client files, settlements and collaboration with external operators and subsidiaries, as well as cash management.
The implementation of such programs is related to the necessary changes of employment structure and the preparation of the staff for tasks resulting from the creation of new business lines and the reorganization of support functions. The program of changes is on-going and the rate of its implementation depends on the completion of different projects in the program.
The new client segmentation, the development of electronic distribution channels, and increase in the number of retail branches from 200 (30.09.1999) to 348 (31.08.2001), customisation of services in the corporate sector and the reorganization of back office functions enabled the Bank to increase the number of retail clients serviced from 755 thousand (30.09.1999) to 927 thousand (31.08.2001), increase the number of active cards from 456 thousand (31.12.2000) to 557 thousand (31.08.2001), and to achieve an increase in the loan portfolio by 13.4% during the first six months of 2001.
It is important to point out that there is a growing acceptance among the Bank clients of the use of electronic distribution channels (multifunctional ATMs, call centre for retail clients and the ESOBIG system for corporate clients). Almost 50% of all Millennium retail transactions are carried out with the use of electronic distribution channels: the number of ATM transactions in the network of 662 ATMs of Millennium retail platform and 207 ATMs in other branches Bank branches is 2.192 thousand per month (as at 31.08.2001) as compared to 1,579 thousand as at 30.09.1999. The number of transactions through the call centre increased from 11 thousand in September 1999 to 183 thousand in August 2001, and the number of clients using the ESOBIG system increased tenfold during the last ten years and at present it has 1749 users.
Business development and support function restructuring program implemented by the Bank involves significant capital expenditures concentrated over a short time. A full, conforming to plans, implementation of restructuring programs and related investment projects is of strategic significance for the future development of the Bank. That is why, after necessary analysis, the Bank decided that for their implementation it is necessary to enhance its capital base.
The equity enhancement plan assumes:
* an increase in the share capital by 764 million zlotys by issuing 424,590,872 shares with the issue price of 1.8 zlotys each with a pre-emptive right, at the ratio of 1:1 (the assumed completion date: the end of 2001)
* incurring subordinated debt (most likely by issuing bonds) with a nominal value of 275 million zlotys for ten years (to be implemented in October and November 2001).
In order to propose the Bank equity base consolidation and get the approval of the proposed arrangements, the Management Board of the Bank called the Extraordinary General Meeting of Shareholders for 22 October 2001 with both an increase in the share capital and the taking of subordinated debt on its agenda.
The decisions coincided in time with the change of the Bank's provisioning policy and the evaluation of the security portfolio based on fair value. As a consequence of the above principles and based on the forecast macroeconomic situation developments, and first of all, the forecast rate of growth in the national economy in the near future, the Bank decided to make a recommendation to the Extraordinary General Meeting of Shareholders concerning the establishment of a special Development and Risk Fund. It would consist of the existing reserve capital of the Bank and part of its spare capital of the total estimate amount of 740 million zlotys. The Fund, which, once created, will be used based on regulations adopted by the Bank Supervisory Board, will be allocated for the financing subsequent stages of the Bank restructuring program and for risk allocations
As a result of the equity enhancement, BIG Bank GDAŃSKI S.A. is expecting to achieve in December 2001 a solvency ratio at 10.9% and reserve coverage ratio (under international standards) above 75%. In a medium-term perspective (year 2005) ROE is assumed at the level of 18-20%.
The Bank's strategic development plans and its restructuring are implemented with the support of and in collaboration with Banco Comercial Portugues, BIG Bank GDAŃSKI S.A.'s partner and shareholder, which announced its plans to increase its shareholding in BBG S.A. and filed an application with the Banking Supervision Committee for consent to an increase of its shareholding in BBG SA up to 50% .
The establishment of new business lines and the modification of the organization of client relations makes it possible to start cross selling of products by different networks and to develop bancassurance services. At the same time, one of the priorities for the Bank is to develop electronic distribution channels, offering them to clients from all market segments, and its banking offer is supplemented by specialized services (leasing, brokerage services, factoring) rendered by BIG Group companies.
In order to ensure high operational quality and organizational efficiency of units responsible for client relations, the Bank is thoroughly restructuring its support functions. The main project in this regard is the upgrade of the ICBS Release 7.1 IT system, which will be a starting point for the developed, based on the system, of a single operating platform for the entire Bank. There are also significant changes as regards the centralization and reorganization of the credit approval process to enable the reduction of time necessary to take credit decisions and to improve their quality, the centralization of back office functions, already completed for bank cards, client files, settlements and collaboration with external operators and subsidiaries, as well as cash management.
The implementation of such programs is related to the necessary changes of employment structure and the preparation of the staff for tasks resulting from the creation of new business lines and the reorganization of support functions. The program of changes is on-going and the rate of its implementation depends on the completion of different projects in the program.
The new client segmentation, the development of electronic distribution channels, and increase in the number of retail branches from 200 (30.09.1999) to 348 (31.08.2001), customisation of services in the corporate sector and the reorganization of back office functions enabled the Bank to increase the number of retail clients serviced from 755 thousand (30.09.1999) to 927 thousand (31.08.2001), increase the number of active cards from 456 thousand (31.12.2000) to 557 thousand (31.08.2001), and to achieve an increase in the loan portfolio by 13.4% during the first six months of 2001.
It is important to point out that there is a growing acceptance among the Bank clients of the use of electronic distribution channels (multifunctional ATMs, call centre for retail clients and the ESOBIG system for corporate clients). Almost 50% of all Millennium retail transactions are carried out with the use of electronic distribution channels: the number of ATM transactions in the network of 662 ATMs of Millennium retail platform and 207 ATMs in other branches Bank branches is 2.192 thousand per month (as at 31.08.2001) as compared to 1,579 thousand as at 30.09.1999. The number of transactions through the call centre increased from 11 thousand in September 1999 to 183 thousand in August 2001, and the number of clients using the ESOBIG system increased tenfold during the last ten years and at present it has 1749 users.
Business development and support function restructuring program implemented by the Bank involves significant capital expenditures concentrated over a short time. A full, conforming to plans, implementation of restructuring programs and related investment projects is of strategic significance for the future development of the Bank. That is why, after necessary analysis, the Bank decided that for their implementation it is necessary to enhance its capital base.
The equity enhancement plan assumes:
* an increase in the share capital by 764 million zlotys by issuing 424,590,872 shares with the issue price of 1.8 zlotys each with a pre-emptive right, at the ratio of 1:1 (the assumed completion date: the end of 2001)
* incurring subordinated debt (most likely by issuing bonds) with a nominal value of 275 million zlotys for ten years (to be implemented in October and November 2001).
In order to propose the Bank equity base consolidation and get the approval of the proposed arrangements, the Management Board of the Bank called the Extraordinary General Meeting of Shareholders for 22 October 2001 with both an increase in the share capital and the taking of subordinated debt on its agenda.
The decisions coincided in time with the change of the Bank's provisioning policy and the evaluation of the security portfolio based on fair value. As a consequence of the above principles and based on the forecast macroeconomic situation developments, and first of all, the forecast rate of growth in the national economy in the near future, the Bank decided to make a recommendation to the Extraordinary General Meeting of Shareholders concerning the establishment of a special Development and Risk Fund. It would consist of the existing reserve capital of the Bank and part of its spare capital of the total estimate amount of 740 million zlotys. The Fund, which, once created, will be used based on regulations adopted by the Bank Supervisory Board, will be allocated for the financing subsequent stages of the Bank restructuring program and for risk allocations
As a result of the equity enhancement, BIG Bank GDAŃSKI S.A. is expecting to achieve in December 2001 a solvency ratio at 10.9% and reserve coverage ratio (under international standards) above 75%. In a medium-term perspective (year 2005) ROE is assumed at the level of 18-20%.
The Bank's strategic development plans and its restructuring are implemented with the support of and in collaboration with Banco Comercial Portugues, BIG Bank GDAŃSKI S.A.'s partner and shareholder, which announced its plans to increase its shareholding in BBG S.A. and filed an application with the Banking Supervision Committee for consent to an increase of its shareholding in BBG SA up to 50% .