2020 at Bank Millennium – a year full of challenges, accelerated digital transformation and record sales of mortgage loans

The consolidated net profit of the Bank Millennium Group in 2020 amounted to PLN 23 million (PLN -109 million in 4Q). The result was influenced by the Covid-19 pandemic and extraordinary items, in particular PLN 677 million of provisions for legal risk related to the portfolio of foreign currency mortgage loans (PLN 380 million in 4Q) originated by Bank Millennium. After adjusting for special events, the net profit would be PLN 709 million (PLN 204 million in 4Q), and the adjusted ROE would amount to 7.8%. Sales of new mortgage loans reached a record value of PLN 6.8 billion (+ 57% y / y).

– In 2020, the biggest impact for the banking sector was the reduction of interest rates by the Monetary Policy Council to the historically lowest level, which significantly impacted our revenues. Bank Millennium has shown great flexibility and speed of operation, adapting to the changing conditions and new customer expectations. The bank focused in particular on accelerating the digitization process related to the rapid increase in customer interest in electronic banking, as well as on the digitization of internal processes as well as on reducing operating costs. In 2020, the number of digital customers increased by 12% yoy to 2.05 million, and the number of active mobile customers reached nearly 1.7 million, increasing by 18%. The outlook for 2021 is positive, the Polish economy, compared to other European countries, is less affected by the pandemic and the periodic freezing of the activity of certain industries. Among the positive signals for the future, we emphasize the growing interest of companies in loans for investment purposes and the sustained dynamics of sales of mortgage loans – said Joao Bras Jorge, President of the Management Board of Bank Millennium.

Major achievements:
  • stabilisation of NII and improvement of NIM; core income marginally up q/q with fees up 7% q/q and 6% y/y
  • quarterly mortgage loan originations above PLN2.0 billion mark (4Q: PLN2.1 billion, up 19% q/q, 2020: PLN 6.8 billion, up 57% y/y) translating into market share of 12.1% in 4Q20 and 12.2% in 2020 (4Q19: 7.9%, 2019: 7.3%)
  • AuM of Millennium TFI and third party funds combined grew 7% q/q to over PLN8.4 billion, more than offsetting outflows in 1Q20
  • number of debit cards issued crossing 3 million for the first time, number of active digital customers up 12% y/y to 2.05 million, number of active mobile customers nearing 1.7 million (up 18%).
2020 – a year of challenges but also accelerating transformation

While the 2020 net profit was admittedly well below our aspirations, the initiatives started and related costs endured during the year will pay-off going forward. We swiftly responded to revenue headwinds and as a result our cost growth in 2020 overall (+2% y/y including D&A) was slower than this of revenues (+3%). In 4Q20, HR costs were down 17% y/y and down 10% q/q and we expect the positive momentum to continue in 2021. Additionally, we increased risk buffers (NPL/DPD90+ coverage ratios at 66%/119% vs. 62%/106% at YE19 respectively; abovementioned provisions against legal FX-mortgage related risks at 6.7% of YE20 portfolio ex-Euro Bank) while our capital ratios remained strong (consolidated TCR/T1 of 19.5%/16.5% respectively against regulatory requirements of 14.1%/11.3%). Moreover, we shortened the timeline of implementation of merger synergies with Euro Bank. Combined with new efficiency improvement initiatives, this resulted in a 15% reduction of our distribution network (702 outlets vs. 830 at YE19 with 124 or 21% of own branches closed in the period) and 14% reduction of active FTEs to 6.6k. As a result, net synergies became tangible (PLN100mn pre-tax in 2020), recurrent and should double in 2021.
Bar all the negative impacts of the Covid-19 pandemic, we see 2020 as a year accelerating our transformation for a new era in banking. We firmly stood by our customers during the pandemic, as a result strengthening further our relations with them. As a result, cross-sell ratios increased in many categories. We also won new customers despite the challenges brought by the pandemic. Digitalisation process accelerated significantly, both at the front- and back-end.

2021 – a transition year before new mid-term strategy roll-out

The unprecedented scale of change of the business environment caused by the outbreak of Covid-19 pandemic in early 2020, combined with dynamic changes of customers’ behavioural patterns have dramatically increased the challenges that banks face, limited the visibility and increased uncertainty to an exceptional level. As a result, the BM Group decided to extend its 2018-20 strategy by another year and prepare a new one for the years 2022-2024.
The Bank aims to recover like for like operational results affected by the COVID-19 crisis and its direct and indirect consequences within 1.5 to 2 years. This is to be achieved by completion of the current cost streamlining program, introduction of new operational efficiency program as well as an improvement business results through improved pricing and sales increase in core products.

In 2021, the Bank will remain fully focused on operational efficiency through re-engineering of processes, automatization, standardisation and simplification. We intend to further optimise the branch network, continue tight cost control despite higher legal and IT expenses to achieve cost to income ratio of 47% and targeting c40% in the mid-term vs. 49% in 2020.
We are aiming at full digitalization, implementing a proactive migration of customers to digital and exceeding the 80% share of digital clients by the end of 2021.
We intend to keep the pace of customer acquisition based on quality of service and high NPS. In retail we aim to increase the portfolio of active clients, leveraging off the digital acquisition as well as franchise and mini-branch channels. Our aspiration is to increase origination of cash loans by double digits in percentage terms and to increase origination of mortgage loans while at the same time focusing on fee growth. We intend to maximize sales and volumes in investment funds capturing our natural market share 7% in the medium term. In the corporate business we plan to focus on existing exposures and with active approach to new clients in low- and mid-risk sectors to grow portfolio by over PLN1.0 billion including leasing and factoring. In leasing, we plan to return origination to its level from 2019 (PLN3.5 billion) after PLN2.5 billion in 2020. All of the credit growth, in both retail and corporate segments, must be achieved maintaining portfolio cost of risk below 80 bps and with a prudent monitoring on the economic evolution in this Covid-19 environment. We plan to keep the NPE ratio below the 5% threshold (4.9% at YE20).

As per our current Report no. 2/2021 from January 20, 2021, the Management Board of the Bank pledged to take steps aimed at withholding dividend pay-out in the first half of 2021 (including undistributed earnings from previous years) to comply with the FSA’s recommendation the Bank had received. This position was also taken by the Supervisory Board of the Bank.

Results of the Group are also available here: 

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Last Updated on February 16, 2021 by Karolina Ampulska