2019 in Bank Millennium – successful merger with Euro Bank, 734,000 new active customers, double-digit growth of the Group’s loans (+32%) and deposits (+23%) portfolios, strong organic growth

- The most important event of 2019 was the fast and perfectly executed merger with Euro Bank, which resulted in a surge of the bank’s development potential. After the merger Bank Millennium Group has assets amounting to 98.1 bln PLN and equity amounting to 9 bln PLN, while serving 2.6 million active retail customers. Despite the costs of integration and the need to create provisions I am satisfied with the result of 561 mln PLN net profit. It shows how effectively the organic growth strategy is being implemented and that we have an innovative advantage on the market. In parallel to great commitment to the process of merging with Euro Bank, this year we i.a. launched new generation banking – new internet and mobile banking personalised for each customer, we also stepped into the world of open banking - Joao Bras Jorge, Chairman of the Management Board of Bank Millennium, said.

Key consolidated financial results of the Group

Consolidated unaudited net profit of Bank Millennium Group in 2019 totalled 561 mln PLN and was 26% lower than in the same period of 2018. The result was affected by some extraordinary events, the most important of them being the acquisition of Euro Bank on 31 May 2019. During the last 12 months the Bank incurred in related costs and provisions the total amount of 205 mln PLN (166 mln PLN after taxes). The result was positively affected by 27 mln PLN from recovery of a tax asset as well as 45 mln PLN capital gain from revaluation of shares in the PSP company. Another significant extraordinary item was 223 mln PLN provision on FX mortgage related legal risk, which finally in this amount was charged into 4Q net profit. Adjusted with all extra costs and gains, net profit would have been 889 mln PLN (+17%).

The merger with Euro Bank, which ended with successful migration of all branches, customers and products to the Millennium brand and systems, enabled total assets to increase 22% to 98.1 bln PLN. Customers’ deposits reached 81.5 bln PLN and loans stood at 69.8 bln PLN. Despite the merger the Group closed 2019 with a high liquidity surplus (Loans to Deposits ratio below 86%) and a strong capital position (TCR at 20.1%). Cost/income ratio was 49.7%, and after adjustment with one-offs – 47.4%. Return on ROE capital for 2019, adjusted for one-off items, amounted to 10.2% and was higher by 0.6 pp than last year.

Solid return on operations in result of Euro Bank acquisition:

• consolidated net profit after 4 quarters of 2019 reached 561 mln PLN (-26% y/y); excluding extraordinary items it would have been 889 mln PLN (+17%)
• net profit in Q4 2019 totalled 27 mln PLN (or 274 mln PLN when adjusted for extraordinary items)
• costs of integration and provisions relating to Euro Bank: 205 mln PLN
• provisions for legal risk involved with FX mortgages: 223 mln PLN (increased from 150 mln PLN initially communicated on 16 January 2020 )
• adjusted ROE: 10.2%; adjusted cost/income ratio: 47.4%

Impact of integration with Euro Bank on incomes and costs:

• operating income grew 27% y/y
• net interest income grew 33% y/y
• operating income grew 36% y/y (28% without integration costs)
• provision for refunds of fees on consumer loans repaid before maturity 66 mln PLN

Business highlights

Retail Banking

In 2019 the Bank increased the active customers’ base by the record-high number of 734,000, which constitutes 40% annual growth (+264,000 in result of organic growth). As of 31 December the Bank was serving 2.6 million active retail customers, including 494,000 from former Euro Bank. 1.8 million customers were using electronic banking (+32% y/y), while the mobile app was in use by 1.41 million (+44% y/y).

The Bank continued the business model based on further digitalisation and again increased the share of digital channels in selling products. For example share of digital sales channels in acquisition of cash loans totalled 53%. As regards other online services, the highest growth was observed in BLIK transactions (+99% y/y) and in the number of activated HCE cards (362%).

The product, which was building the excellent rate of new customer acquisition, was Konto 360°, supported by media campaigns, good cooperation with partners and the “Like it? Share it!” referrals programme. At the end of the year the programme already had 670,900 participants, of which in 2019 alone almost 294,000 were acquired.

Despite huge commitment to the process of integration with Euro Bank, 2019 brought further growth of lending. Sales of cash loans reached the record-high value of 4,1 bln PLN, (+28% y/y) (Euro Bank data from 9th of November 2019). Excellent sales and the merger effect brought doubling of the value of the consumer loans portfolio to 15.1 bln PLN.

The Bank also sustained a high position on the mortgage loans market. Their sales reached the solid value of 4.2 bln PLN (+26% y/y) (Euro Bank data from 9th of November 2019). This growth was well above the 17% rate, at which the market grew over the same period. This resulted in the sixth place on the ranking of mortgage lending, with a market share of 7.3%.

The total value of loans to individuals as of 31 December 2019 reached 52.6 bln PLN gross (+44% y/y; +9% y/y without Euro Bank).

Despite an unfavourable market environment - low interest rates, increasing competition from other banks, real estate market and Treasury bonds - the Bank took advantage of growing funds of natural persons on the market. In 2019 total growth of the volume of personal deposits was 13.9 bln PLN (+28% y/y; +10% y/y without Euro Bank) to reach the value of 61.1 bln PLN.

The Bank also reached the highest level of acquisition of new accounts for Biznes customers (businesses with revenues up to 5 mln PLN) recording 97% y/y sales growth (number of new customers increased over 22,000). As on 31 December 2019 Bank Millennium had almost 89,000 active Biznes segment customers.

New solutions in Millenet and mobile app for personal customers

• new generation banking. The Bank has launched the new Millenet internet banking system as well as the mobile app, fully personalised for each customer. It uses technologies and solutions, which are unique on the Polish market and also have an exceptional design, providing customers with a completely new digital experience.
• automatic motorway toll payment. The Bank was the first bank in Poland to launch in its mobile app the service of automatic motorway toll payment - Autopay from Blue Media. Thanks to this service customers can travel on a motorway without having to stop at the toll gates. The toll will be charged automatically to the customer’s account or credit card.
• launch of ApplePay, contactless payments with a phone and smartwatch for iOS operating system users. ApplePay can be used by holders of Visa and Mastercard debit and credit cards.
• supporting e-administration and Government programmes in Millenet. The Bank has enabled applying for family benefits in Rodzina 500+ and Dobry Start 300+ programmes, in accordance with the new assumptions (from 1 July 2019). It has also implemented the possibility to pay income tax directly in the Twój e-PIT service. Customers can now use Millenet to pay their liabilities to the tax office without the need to exit the tax website. All transfer data will be provided automatically.
• temporary card blocking in the mobile app and unlocking passwords in Millenet. New solutions for customers include the convenient temporary blocking of cards in the app (the blockage may be activated and deactivated any number of times) as well as quickly unlocking the Millenet password fully online.

Open banking and alignment with PSD2 standards

In 2019 the Bank aligned its services with the requirements of PSD2. It introduced a new method of activating electronic channels as well as additional security features when logging on and authenticating transactions. The Bank was one of the first to launch the open banking production interface compliant with the Polish API standard. It also launched a pilot of the service of aggregating accounts and information about accounts from other banks in its mobile app and the internet banking system.

Corporate Banking

Despite limited market demand for financing, the volume of all credit products granted to businesses – loans to finance current needs, investment loans, leasing, trade finance products and products with participation of EU funding – increased in 2019 by 7% y/y to reach the level of 18.6 bln PLN net. Growth was also seen in current financing (13% y/y) and investment loans (8% y/y).

In terms of factoring turnover, with 21 bln PLN the Bank was ranked 6th among factoring institutions associated in the Polish Factors Association, with market share at 7.5%. Factoring assets as of end of 2019 were 2.7 bln PLN i.e. they grew 3% y/y. In trade finance strong growth of total granted new limits was seen – by no less than 36% y/y, while the value of the portfolio of active guarantees and letters of credit reached 0.9 bln PLN.

The value of lease agreements disbursed during the year totalled 3.5 bln PLN, which means a result on the 2018 level. The scale of operation is illustrated by the signing of more than 231,000 from the beginning the company's existence. As on 31 December 2019 the value of capital committed to active leasing agreements reached 6.8 bln PLN (+5.4% y/y).

In result of high quality of services offered and the increasing penetration of customer relations, the transaction rate grew further. In consequence in 2019 this brought growth of the volume of funds on current accounts, reaching the record-high level of 11.4 bln PLN (+19% y/y) in December. The total value of deposits of business customers (including SME) was 20.36 bln PLN, growing 10% in annual terms.

The Bank continued its cooperation with the CFO Club established by publisher of Harvard Business Review Polska. In the Club the Bank’s representatives were preparing publications, co-hosting webinars and meetings devoted this year to cybersecurity, strategic risk management and development of leadership skills of CFOs. The Bank was also working with Forbes magazine in two strategic initiatives – it was the strategic partner of Family Business Forum and of the twelfth edition of Diamonds by the Forbes monthly, including a ranking of Polish companies, prepared by the magazine.

Digital improvements for corporate customers

• The Bank offered to clients a hardware token with reader, an innovative device for logging on and authorising transactions. It is the first solution in Poland to be based on proprietary Cronto technology from OneSpan. The device provides highest security level and a comfort of use, which is unique among such devices.
• Millennium was one of the first banks to introduce the possibility of checking an account on the White List of VAT taxpayers directly in the transfer form in e-banking. Thanks to this service the time needed to send a business money transfer to a counterparty is now much shorter.
• The Bank implemented the micro account for tax payments, an intuitive process, which shows every customer-taxpayer, what account should be used for a particular form number. For example if it is VAT, then the system will point to the need to enter the Individual Tax Account (including micro account of the Tax Office).
• In cooperation with Millennium Leasing, the Bank was developing an internet module for managing lease products, available to customers as a Millenet component. The module allows online viewing of key information about the lease agreements, related insurance as well as viewing and paying for invoices.
• Optimisation of the process of sending cross-border transfers in the mobile app. By simplifying the method of identifying the recipient’s bank, based on data entered, users have the availability of a bank search engine. If the data are unique to one bank only, the remaining data will be provided automatically on the transfer form.
• The Bank improved the MillenetLink service, a channel for communicating directly with clients’ ERP (Enterprise Resource Planning) systems. In order to assure efficient integration of banking and client systems, the Bank is cooperating with producers/suppliers of leading ERP systems. Since June clients who have Comarch systems can activate MillenetLink without the need to make additional modifications of these systems.

Results of the Group are also available here: