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Bank Millennium – 1st quarter 2020 overshadowed by the coronavirus


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Results and activity of Bank Millennium Group after Q1 2020
Consolidated net profit of Bank Millennium Group in Q1 2020 reached PLN18.1 million (-89% y/y). Excluding extraordinary events, it would amount to PLN190 million and remain at last year's level. The number of active retail clients exceeded 2.6 million (+708 thousand y/y). The Bank had record-high sales of mortgages (PLN1.34 billion; +57% y/y) and growth of value of the corporate loans portfolio (PLN19.6 billion; +6% y/y). From mid-March the unprecedented crisis caused by the COVID-19 pandemic seriously disturbed the economy and social life. The Bank immediately launched support measures addressed to its customers.

- In the age of the COVID-19 pandemic the safety of employees and customers as well as seamless service became of paramount importance. Most Millennium employees work remotely; branches remain open with observance of safety rules, Internet and mobile banking works normally. Despite the negative economic background, the Group's liquidity and capital position remain strong. We were one of the first banks to implement a temporary deferral of payment of cash loan, mortgage loan and business loan instalments. In the Polish Development Fund (PFR) Financial Shield programme we made available applications for financial support directly in the Millenet system - Joao Bras Jorge, Chairman of the Management Board of Bank Millennium, said. - 92% of clients surveyed in April were satisfied with the Bank's operations. Most of them did not experience any problems and appreciated the possibility of online banking*.

- Bank Millennium Foundation financially supported the Polish Academy of Science PAN, Institute of Bio-organic Chemistry in Poznań, which developed the first Polish COVID-19 test and conducts research and development on new generation tests. I believe helping to increasing the scale and accelerate the process of testing is a prerequisite for returning to truly normal social and economic life – the CEO added.

Main financial and business highlights

Profit affected by integration costs and extraordinary provisions

  • 1Q20 reported net profit of PLN18.1mn or extraordinary items/one-off adjusted (*) at PLN190mn, i.e. at a similar level as a year ago
  • PLN30mn (PLN24mn after tax) of Euro Bank related integration costs, synergies of PLN24mn
  • PLN55mn increase of provisions for FX mortgage legal risk
  • PLN60mn (PLN49mn after tax) pre-emptive COVID-19 related provision
  • Adjusted* ROE at 8.4% and cost/income at 48.3%

(*) without one-offs: in 1Q20: 1) integration costs (PLN 30.1mn), 2) PLN55.3mn provisions for FX mortgage legal risk, 3) proactive Covid-19 provision of PLN60mn, 4) linear distribution of BFG resolution fund fee of PLN58.2mn; in 1Q19: 1) integration costs (PLN 2mn), 2) PLN26.9mn release of tax asset provision, 3) linear distribution of BFG resolution fund fee of PLN73.3mn;

Higher income and cost after the merger

  • Operating income grew by 24% y/y
  • Net interest income grew by 38% y/y
  • Net commission income grew by 19% y/y
  • Operating costs up 28% y/y without integration costs (reported up 35% y/y) and down 5% q/q without integration and BFG costs

High asset quality and liquidity maintained

  • Impaired loans ratio at 4.75%
  • Cost of risk** at 108bp (75bp ex-Covid-19 provision)
  • Loans to deposits ratio at low level of 86%

(**) on gross loans

Solid capital and lower regulatory buffers

  • Group’s Total Capital Ratio (TCR) at 19.5% and CET1 ratio at 16.5% after incorporating 2H19 profit and well above levels required by the regulator (15.4% and 12.2% respectively)
  • KNF reduced FX mortgage related buffer to 4.9% in Nov’19
  • Systemic risk buffer cut to 0% from 3% in Mar’20

Retail business

  • 2.6mn active clients (34% y/y); 708,000 new clients after 1 year including 494,000 taken over with Euro Bank
  • 32% yearly growth of deposits
  • 47% yearly growth of loans (72% y/y without FX mortgages)
  • High PLN1.3bn origination of mortgages and cash loans translating into y/y growth of respective loan books of +57% and +31%
  • Accelerating pace of growth in microbusiness accounts, 20,000 y/y net growth of active accounts (24% new accounts were opened on-line)
  • 96,000 microbusiness clients

Companies business

  • Current accounts volumes grew by +39% y/y
  • Growth of loans to companies: +7% y/y
  • 6% annual growth in factoring turnover
  • Growing number and volume of transactions in all main products for companies

Support actions in relation to the COVID-19 coronavirus pandemic (March/April 2020)

Since the threat appeared, it made a great technological and organisational effort to provide current support to customers. Customers, encouraged to choose remote banking, were using electronic and mobile banking to a much greater extent than in previous months. The number of logons to mobile banking grew in March to the record-high figure of 36 million (33 million in February) and in the Millenet system - to 12 million (10 million in February).

Facilities for retail customers:

  • Temporary deferral of loan repayment for cash loan and mortgage customers in a difficult situation (the entire principal-interest instalment is suspended and the loan period is extended by the duration of the suspension). As of 4th May, there were 41,900 applications approved relating to outstanding cash loans, 16,000 applications for mortgages loans with respective loan volumes of PLN1,191mn and PLN4,486mn. The number of applications for credit holidays has been steadily declining since the introduction of the offer.
  • Contactless payments up to PLN100 without PIN - the Bank increased the maximum amount of contactless payments without use of PIN. Holders of Visa cards were provided with Garmin Pay payments, where the limit does not apply.
  • Opening an account with a selfie - the possibility to open a personal account remotely with identity confirmation using Personal ID photos and a selfie.

For businesses:

  • Temporary deferral of payment of loan instalments for microbusinesses and companies, which encountered interim problems caused by the pandemic. The programme also covers factoring and leasing. The number of credit holidays for corporate customers stood at c800 (SMEs: 700) as the end of April with total value of loans with deferred payments totalling less than PLN500mn.
  • De minimis guarantees under very attractive terms and without a commission for BGK as part of an assistance pack for small and medium businesses in cooperation with BGK (up to 80% of loan amount at renewal or increase of the loan amount, extension of the maximum guarantee period up to 39 months for a working capital loan).
  • Support for medium and large companies in maintaining liquidity – after signing another agreement with BGK they can get support in the form of liquidity guarantees securing credit transactions from the Liquidity Guarantees Fund.
  • Participation in the Polish Development Fund PFR Financial Shield programme for micro, small and medium businesses, which suffered in result of the pandemic. The Bank introduced the possibility of applying for a subsidy directly in Millenet Internet banking. The entire process, including receiving the decision and signing the agreement with PFR is online in the Millenet system.
  • Companies can sign agreements fully electronically. Digital circulation of documents is based on qualified signature with qualified timestamp. It applies to loan agreements and their collaterals, transactional banking, factoring, trade finance and treasury products.

For all of us:

  • Financial support of the fight against the pandemic - Bank Millennium Foundation donated PLN500,000 to the Polish Academy of Science PAN, Institute of Bio-organic Chemistry in Poznań, which developed the first Polish COVID-19 test and continues to work on new generation tests.
  • Support for employees and their families – the Bank created a Special Support Fund for Employees in case of coronavirus infection, in the amount of PLN1 million with the bank’s funds.
  • Culture sponsoring in the #zostanwdomu (stayathome) campaign – the Bank is releasing online free of charge Millennium Docs Against Gravity films as well as online versions of theatre shows aired years ago by TVP in the Pearls of Millennium series.
  • Bank Millennium Foundation has prepared an online version of the “Finansowy Elementarz”, educational program for preschool children.

*Customer opinion surveys cited by the CEO come from a telephone interview conducted among ca. 1,000 retail customers of Bank Millennium from 3.04 to 05.05.2020. The sample reflects the structure of the customer base in terms of gender and age.

Results of the Group are also available here: