Bank Millennium – more than 2 million active clients, record-high organic growth while integrating Euro Bank

- Q3 of 2019 was a period of double-digit organic growth and further business expansion. September data show, that Bank Millennium’s deposits rose 19%, consumer loans were 21% up, while corporate loans increased 11% yearly. Thanks to consolidation with Euro Bank the Group’s loans portfolio and clients’ deposits increased by more than a third, 36% and 33% yearly - Joao Bras Jorge, Chairman of the Management Board of Bank Millennium, said. - We are growing faster than planned, which is a good sign as regards fulfilment of the strategy until 2020. If the costs and provisions involved with the acquisition of Euro Bank would be deducted, the Group’s net profit would have been 651 million PLN (+17% y/y).

Key consolidated financial results of Bank Millennium Group (including 4 months of Euro Bank’s results)

• consolidated net profit after 3 quarters of 2019 reached 534 million PLN (-2.6 y/y).
• net profit in Q3 2019 totalled 200 million PLN (+15% Q/Q).
• the acquisition of Euro Bank caused extraordinary costs and provisions: year-to-date 64 million PLN cost of integration and 89 million PLN of extraordinary IFRS 9 related provisions.
• net profit without one-offs and with evenly distributed BFG contribution, would be 651 million PLN, being 17% higher in annual terms.
• Q3 result was impact by 45 million PLN of positive revaluation of PSP (owner of BLIK) shares and 53 million PLN reserve to cover cash loans up-front fees potential return.
• ROE, net of one-offs and with evenly distributed BFG contribution, reached the double-digit figure of 10% (vs 9.5% in 1-3Q 2018).
• net interest income grew 30% y/y (13% growth without Euro Bank).

The fast growth of Bank Millennium’s business (without the Euro Bank effect) shows effectiveness of implementation of the organic strategy announced in 2017, the target of which was i.a. getting 600,000 new active customers in 3 years. 2 years down the road the Bank has already acquired more than 421,000 clients.

In October 2019 Fitch agency affirmed Bank’s ratings at BBB- with stable outlook.

Business highlights

Retail Banking

In Q3 the acquisition of new clients of Bank Millennium was based on further digitalisation and optimisation of processes. As compared with the end of Q2, the number of active clients increased by the record-high number of 69,000 and at end of September was over 2 million. 1.59 million people were using electronic banking, while the mobile app and mobile Millenet were in use by more than 1.2 million people (+34% y/y). The share of remote channels in sales of personal accounts was 25%, with 52% in cash loan sales. Unwaveringly popular was the referral programme “Like it! Share it”, in which more than 81,000 customers registered in Q3 and more than 600,000 since its launch.

From the start of the year there was record expansion of Bank Millennium’s retail lending - sales of cash loans reached the value of 3 bln PLN, (+30% y/y) and mortgage loan sales also reached 3 billion PLN (+24% y/y). In Q3 2019 alone their sales stood at 1 billion and 1.1 billion PLN respectively. This was driven by competitive product offerings, promo actions supporting acquisition as well as good relations with sales partners. Also the fast pace of growth of loan sales in the mobile channel (115% y/y) was not without importance. In addition, in the same period of 9 months of 2019, the sale of cash loans at Euro Bank amounted to 1.7 billion PLN and instalment loans, also offered by Euro Bank - 390 million PLN (+ 43% y/y). The total balance of Euro Bank loans amounted to 13.6 billion PLN (+4.8% y/y). As of 30 September 2019 loans for individuals in Bank Millennium (with Euro Bank) reached the value of 52.5 billion PLN gross, growing 48% y/y.

Bank Millennium continued dynamic growth of retail customers’ savings with stable rate of return on the portfolio. In Q3 there was 5% quarterly growth of the value of deposits (+2.6 billion PLN), and their balance at the end of September 2019 was 18% higher than the year before. This allowed market share to increase to 6.29% at end of September. The attractive deposit offer also resulted in a clear 19% increase per year in the value of funds accumulated in Euro Bank – as of 30 September 2019, their balance amounted to 8.5 billion PLN. As of end of September 2019 total funds of personal clients in both banks increased 30% and reached the value of 69.4 billion PLN.

Also credit card sales in Bank Millennium saw an excellent result. In Q3 for the first time more than 10,000 new cards were issued i.e. double the number from last year. At the end of September 2019 the credit cards portfolio comprised 392,600 cards (+9.6% y/y).

Electronic banking for individuals

In Q3 2019 Bank Millennium was working on developing electronic channels and adapting them to binding regulations. Such as:

• improvement of new-generation banking solutions (New Digital Experience) in Millenet and the mobile app. “Events” section was enriched to include notifications about temporarily blocking payment cards as well as about contactless payments with a phone. New ways were introduced of personalising the home page.
• Autopay service was developed to include additional options such as trip history, fees log, viewing invoices as well as improvements in the vehicle registration process.
• clients were given the opportunity to consolidate their loans in the Bank (aside from the pre-approved offering) in the mobile app, thanks to which instead of several monthly payments they can now make only one. In the omnichannel approach the process was linked with the existing one in the Millenet online system.
• electronic channels were adapted to standards consistent with PSD2 Directive - a new method of activating electronic channels was introduced, additional security features appeared when logging on and authenticating transactions, and also the process of opening accounts in branches was adjusted to the new requirements.
• Polski Standard Płatności (operator of the BLIK mobile payments system where Bank Millennium is a shareholder) and Mastercard are starting strategic cooperation. Thanks to it users of BLIK will soon be paying contactless in Poland and abroad. As a consequence of the value attributed to PSP, the Bank revalued its share stake with positive impact on Q3.

Corporate Banking

Along with the continuing positive dynamics of investment in the economy in Q3 2019, corporate banking continued its positive trend and in accordance with the strategy it saw double-digit growth of the volume of loans granted. The value of credit products inclusive of leasing and factoring grew in the last 12 months by 11%, to reach 19 billion PLN gross. The volume of new bank loan-financed transactions grew 9% till 30 September and the value of new factoring limits was 11% higher.

Completed factoring turnover was 8% higher than in the same period of last year. Factoring assets as of end of the quarter were 2.5 billion PLN i.e. they grew 3% y/y. Leasing assets stood at 6.7 billion PLN and grew by 9% y/y. Value of active limits for guarantees and letters of credit granted by the Bank at end of September grew 12% to the level of 1.9 billion PLN. One out of four guarantees was issued in the form of an e-guarantee.

The growing customer base and scope of cooperation led to further increase of the number of transactions made. The good liquidity situation of clients was conducive to strong growth of the volume of core deposits on current accounts, which increased 28% y/y by 30 September, reaching 10 billion PLN. Also a 9% y/y growth of FX transactions could be seen. The total value of deposits of corporate clients (including microbusiness) was 19.7 billion PLN (+23 % y/y).

Electronic banking for corporate clients

In Q3 2019 Bank Millennium adapted electronic channels to binding regulations and implemented a number of improvements awaited by clients. Such as:

• in compliance with PSD2 requirements, from 14 September 2019 Millenet users, in order to gain access to electronic banking, use one of two ways of two-factor authentication - confirmation of authentication with an SMS password or a code generated by one of two types of hardware tokens offered by the Bank.
• in August the Bank offered to clients a hardware token with scanner, 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.
• 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 has started relationships with producers/suppliers of leading ERP systems. Since June clients who have Optima and XL Comarch systems can activate MillenetLink without the need to make additional modifications of these systems.
  - since June MillenetLink also allows sending authorised orders with use of a digital signature with qualified certificate, which allowed payments on the client’s side to be automated.

Goodie smartshopping app

The total number of goodie downloads exceeded 1.3 million from the beginning, with 400,000 from the start of this year. 730,000 virtual customer loyalty cards have been registered in the app as well as stamp cards in 58 loyalty programmes. Towards the end of September goodie users could use maps of 29 shopping centres in all Poland. In Q3 2019 goodie was consistently developing cashback. Total turnover generated by its users grew to 50 million PLN in the course of three months, with the sum of calculated refund reaching almost 2 million PLN.

Results of the Group are also available here: https://www.bankmillennium.pl/about-the-bank/investor-relations