In 2018 Bank Millennium earned 761 m PLN – the best result ever

Preliminary results and activity of Bank Millennium Group after 4 quarters of 2018

- In 2018 thanks to accelerated organic growth and further business expansion assumed in the Bank’s strategy, we earned the record-high amount of 761 m PLN net. We acquired 202 000 new personal customers and their growing activity was reflected in the explosion of volumes of most products. Cash loan sales grew 39% y/y; mortgages increased 31% y/y and retail deposits were up 18% y/y. Also lending in the corporate sector grew 14% - highest in the course of the last 5 years. In result net interest income, the main driver of the Bank’s result, improved more than 8% - Joao Bras Jorge, Chairman of the Management Board of Bank Millennium, said.

- In the course of the last few months we took decisions of breakthrough importance for the Bank’s further development - we started the project of launching a mortgage bank and we signed an agreement on acquisition of Euro Bank. We enlarged the scale of operation and remained a leader in quality. We are the most often recommended bank in Poland with the market’s highest NPS score of 61. Yet again we were among the top three banks in all categories of “Newsweek’s Friendly Bank” ranking (i.a. 1st place in the “Mobile Banking” category) – Joao Bras Jorge added.

Financial highlights

In 2018 Bank Millennium Group generated a historically high net profit of 761 m PLN, growing almost 12% over 2017. The result was improving every quarter to reach an also record-high (without one-offs) quarterly net profit in Q4 of 213 m PLN.

The main driver of profit improvement was net interest income, which grew more than 8% y/y thanks to fast growths of business volumes. Interest income improvement enables income to increase 6.1% annually i.e. faster than the increase of operating costs (5.4% annually). Thanks to improvement of quality of the loans portfolio in a favourable economic environment the level of risk write-offs was 7.4% lower than in 2017. A higher balance of loans and deposits caused the growth of bank tax by 5.4% yearly (higher assets) and income tax by 8.2% (higher income). When summing both taxes (463 m PLN) and VAT paid by the Bank (30 m PLN), effective tax rate reached 40% of operating profit. Nevertheless net profit was close to 12% up y/y and was not distorted by any one-off events.

Bank Millennium Group finished the year with a significant liquidity surplus (loans/deposits ratio below 80%) and strong capital ratios (TCR at 21.7%). This ratio will strongly increase further in Q1 2019 in result of the retention of full net profit of 2018 in own funds and issue of subordinated bonds on 30 January. It is a natural step to strengthen capital and liquidity buffers to finalise the acquisition of Euro Bank planned for Q2 of this year.

Business highlights

Retail Banking

Since the start of the year the Bank increased its active customers’ base by the record-high figure of 202 000 and as of 31 December 2018 was serving more than 1.8 m active customers. 1.36 m people were using electronic banking while the mobile app and mobile Millenet were in use by 963 000 (+36% y/y). The unwaveringly key product for building acquisition of new customers was the Konto 360° account supported with powerful development of sales of most important products in online channels as well as new editions of the “Like it? Share it!” referral programme (more than 377 000 customers registered in it up to end of December).

Share of electronic channels in sales volume of key products :

• Personal accounts 22%
• Cash loans 43%
• Current account overdrafts 41%
• Term deposits 89%
• Savings accounts 30%

In 2018 new sales of mortgage loans reached the record-high value of 3.3 bn PLN and cash loans were at 3.2 bn PLN. In case of mortgages this represented 31% growth over 2017 while in case of cash loans by as much as 39%. In Q4 alone sales of cash loans reached the value of 809 m PLN (+ 41% q/q), while mortgages were at 892 m PLN.

Such a high result in sales of mortgage loans gave the Bank the sixth place on the market with a share of 6.6%. The main success factor was full control over the process time and significant shortening of its pace (preliminary credit decision during 5 working days). The portfolio of cash loans grew 21% y/y (+1,04 bn PLN) i.e. more than double the market rate.

The total value of loans to individuals as of 31 December 2018 reached the value of 36.4 bn PLN gross.

Despite low interest rates and increasing competition the value of personal deposits grew 7.6 bn PLN (+18% y/y) to reach the level of 47.7 bn PLN. This means the Bank’s market share increased to 6.16%.

Goodie smartshopping app

2018 has been a year of particularly strong development of the goodie smartshopping platform. The total number of installations reached the record-high level of 900 000, with 2018 accounting for as much as 790 000. Users had the availability of 2500 deals, discounts and clearance offers of more than 1100 brands of traditional and online stores and restaurants, with close to 400 000 loyalty cards being set up thanks to a strong promotion effort. The breakthrough came with the launch of cashback service i.e. return of part of the money spent on online purchases. During merely four months nearly 10 000 people benefited from it with 59 000 transactions being made.

Corporate Banking

In 2018 corporate banking continued its dynamic growth and diversified development in almost all areas. Despite limited demand for financing, especially on part of small and medium enterprises, the value of balance-sheet credit products granted to companies increased by 2.2 bn PLN to the level of 18.1 bn PLN gross i.e. at the rate of 14% y/y (at the same time the market was growing at approx. 8.5%). The volume of transactions financed with lease increased 13%, with bank loans by 12% and with factoring by 22% y/y. The key driver of the growths was consistent development of customer relationships as well as further technology and process improvements.

The lease portfolio of Millennium Leasing grew 13% y/y in 2018 to the level of 6.5 bn PLN and the value of disbursed lease agreements stood at 3.5 bn PLN (+15% y/y). The company has the 9th place in a ranking of lease companies in Poland with 4.9% market share. At the same time factoring turnover generated by the Bank stood at the record-high level of 19.8 bn PLN. With 18% rate of growth of turnover value y/y the Bank is the fifth largest factor with 8.1% market share. Factoring assets as of end of 2018 were 2.6 bn PLN i.e. they grew 22% y/y. Value of the portfolio of active guarantees and letters of credit reached almost 0.9 bn PLN, growing 23% y/y.

An effect of the growing customer base as well as consistent expansion of electronic services and systems was further growth transaction volumes. The number of local transfers grew 13%; cross-border transfers by 17% and card transactions by 21%. This brought growth of the volume of money on current accounts, reaching the record-high level of 9.6 bn PLN (+22% y/y) in December 2018. The total value of deposit funds of business customers (including SME) was 18.5 bn PLN (+9 % y/y).

The Bank continued its involvement with initiatives relating to family business in partnership with the Family Business Institute and the Forbes Family Business Forum. It also continued the partnership with CFO Club - a joint initiative of the Bank and Harvard Business Review Polska.

Key digital improvements for individuals and corporate customers:

We have had another year of innovations and development of electronic banking. The introduced solutions made use of state-of-the-art technologies, allowing easier and more convenient operation of Millenet and the mobile app.

Milla transactional chatbot - a chatbot, which is unique in the Polish banking sector and allows i.a. sending a transfer (also BLIK), history search, topping up a prepaid card and phone. Milla has been based on NLU mechanisms (understanding intentions and parameters); ASR voice modules (speech to text conversion, thanks to which you can talk to the chatbot) as well as TTS (text to speech conversion, which allows Milla to give voice replies).

mobile authorisation i.e. a new and more convenient way to approve transactions executed in the internet banking system. Thanks to the new solution transactions can be confirmed in the Bank’s mobile app without the need enter SMS P@sswords.

dynamic development of BLIK payments - introduction of BLIK deposits in cash machines, paying by BLIK for online purchases (PayByLink) as well as introduction of a new option of checking who on the contact list uses BLIK transfers to phone number.

convenient update of data from ID in the Millenet transactional system and the mobile app - in a simple two-stage process customers can quickly and conveniently make an online change of the Personal Identity Card number, its issue and expiry date and also update the address.

Konto 360º Junior opened in Millenet - in order to open an account for a child aged over 13 parents can do it in the internet banking system. The process is fully online and the child can start managing the account immediately and make contactless payments with a phone thanks to the possibility of tokenising a card before its physical delivery.

split payment - on July 1st companies were offered the split payment mechanism. In this service the Bank opened an additional VAT account for every company and introduced a new type of bank transfer, also online - split payment transfer/transfer.

new SWIFTNet transactional channel - allows customers to send payment files to banks via SWIFT FileAct. Payments - local, internal and cross-border transfers - sent in the SWIFT network, are forwarded for processing immediately after receipt by the Bank.

development of MillenetLink - a module of direct communication between the ERP systems of companies and electronic banking to enable automation of sending transactions as well as recovering banking information. The service permits strong reduction of costs of everyday banking transactions.

Important dates in 2018

25 May - Bank Millennium completed all essential work involved with implementation of GDPR in processes relating to customer information management and is compliant with GDPR in all key areas.

28 June - Bank Millennium applied to Polish Financial Supervision Authority for permission to set up a mortgage bank under the name of “Millennium Bank Hipoteczny” with its seat in Warsaw.

1 November - on the basis of the Polish Financial Supervision Authority’s decision of 17.10.2018 Bank Millennium took over management of assets of the Spółdzielcza Kasa Oszczędnościowo-Kredytowa Piast credit union (SKOK Piast).

5 November - Bank Millennium and Société Générale signed an agreement on Euro Bank acquisition by Bank Millennium. The transaction involved acquisition by Bank Millennium of approx. 99,79% of shares in Euro Bank. On 28th December 2018 UOKiK agreed to the takeover of control over Euro Bank.

20 December - Bank Millennium implemented all required changes of the Payment Services Act, which transposed PSD2. As a payment institution it is fully prepared to provide customer service in accordance with the new rules.