Bank Millennium in 2016 – high profit, higher number of customers, innovative solutions

Consolidated net profit of Bank Millennium Group in 2016 amounted to 701m PLN, increasing by 28.3% y/y, while Return on Equity (ROE) was at the level of 10.4%, up from 9% in 2015. The net result in Q4 2016 was 131.5m PLN. The number of active personal customers increased to 1,492 thous. at the end of the quarter i.e. up 122 thous. during the last 12 months. The Bank achieved 38% growth of the number of customers using mobile devices and 16% increase of active internet customers, reaching almost one million. In 2016 the Bank paid 252m PLN income tax and more than 174m PLN bank tax.

Commenting on the Bank’s activity in 2016 Joao Bras Jorge, the Chairman of the Management Board of Bank Millennium said:

• In 2016 Bank Millennium Group generated 701m PLN net profit. Its level was significantly affected by the sale of shares in VISA Europe, the new bank tax paid from February 2016 as well as increasing income in key segments of the Bank’s activity.
• Consolidated equity grew 7.7% to almost 7bn PLN, which allowed capital ratios to remain above regulatory requirements: consolidated Total Capital Ratio (TCR) increased to 17.4%, and Tier 1 went up to 17.3%.
• 2016 was another year of implementation of the Bank’s medium-term strategy for 2015 - 2017. The Bank attained the 2016 plan in terms of growth of active retail customers, the total number of which approached 1.5 million. It is worth adding that almost 1 million of them are active users of internet and mobile banking. The Bank is one of the market leaders in digital transformation and technological innovations, which include sale of motor insurance with use of a unique scanning technology or goodie – an innovative smart shopping platform.
• In 2016 the Bank took part in building e-administration, enabling its customers i.a. to submit applications in the Family 500+ programme, to use the ZUS Electronic Services Platform as well as Trusted Profile, which provides safe and convenient access to public administration websites (including ePUAP-ie, PUE ZUS, CEIDG).

2016 financial highlights

Total Group’s operating income in 2016 amounted to 2,472m PLN and grew 22.6% y/y. Net interest income (pro-forma) after 4 quarters of 2016 reached the amount of 1,556m PLN and was higher by 9.7% as compared with the same period of the previous year. Net commission income after 4 quarters of 2016 valued at 581m PLN, which means a decrease y/y of 2.5%, however with the growing quarterly trend. Total costs in 2016 stood at 1,112m PLN and were 2.3% higher y/y. Net profit of Bank Millennium Group equalled to 701m PLN. Its final amount was affected by the sale of shares in VISA Europe as well as bank tax paid from February 2016. Customers’ funds in Bank Millennium Group reached 63,093m PLN, showing 5.3% growth as compared with the end of 2015. As of the end of 2016 total net loans of Bank Millennium Group were 47,020m PLN, which means growth by 1.4% annually, caused i.a. by the increase of cash loans (gross growth 10.7% y/y), mortgages in Polish zloties and specialised financing for companies (leasing, factoring).

Liquidity, quality of assets and solvency

The Group’s capital position remains very strong. Consolidated equity grew 7.7% annually to 6,941m PLN. Consolidated total capital ratio reached 17.4%, while Tier1 was 17.3%, well above regulatory requirements. The Group has one of the lowest impaired loans ratios among Polish banks at 4.5%. This ratio for the mortgage portfolio levelled-off at 2.5%.

The Bank’s business activity

Retail Banking – growth accelerator: number of customers and innovation growth

One of the assumptions of the Bank’s 2015-2017 strategy is enlargement of the active retail customer base by 300 thous. The strategic customer acquisition assumptions are being implemented on an ongoing basis. The number of active personal customers of the Bank grew in 2016 by more than 122 thous. to reach close to 1.5 million, first of all thanks to increasing number of new personal and savings accounts. At end of 2016 the number of Konto 360° accounts – the Bank’s flagship product - was 631 thous. i.e. 66% more than a year ago, growing particularly among young people.

The Bank offers to its customers further functionalities via internet banking, on the other hand a friendly, unique digital platform, which ensures positive customer experience in contacts with the Bank. Increasingly often the functionalities facilitate non-banking daily duties, such as buying insurance, ticketing or paying parking fees.

The Bank regularly measures the level of customer satisfaction. The Net Promoter Score (NPS), measuring the willingness to recommend products and services, is for our individual customers one of the highest in the banking sector according to a study conducted by TNS Zoom Finance (an independent research centre) in Q4 2016.

At the end of the year the balance of deposits was higher in annual terms by 4.1bn PLN i.e. 11.4% to reach 39.7bn PLN. The share in the market of personal deposits as compared with the previous year grew 0.2 pp to reach 5.8%.

Cash loan sales in 2016 stood at 2,265m PLN, which means a solid result in spite of lower performance than last year. The number of current account authorised overdrafts set up in the year grew more than 17 thous. i.e. 7% and the portfolio of credit cards recorded growth for the first time since 2011. Total consumer loans portfolio grew more than 10% p.a. in 2016 to the level of 6,269m PLN.

The value of new mortgages sales following latest Q4 promotion actions, totalled 895m PLN in entire 2016, growing 30% compared with 2015, giving hope for further growth in 2017.

Total loans for personal customers were 34,084m PLN, which means 1.4% growth y/y including PLN loans growing by 5,6%.

Development of internet and mobile banking

2016 brought further growth of internet and mobile banking. The number of active customers of internet banking at end 2016 was 980 thous. (16% y/y), while active mobile banking users towards the end of December were more than 596 thous., which means 38% y/y growth. The online and mobile banking systems account for 33% of new loans, which constituted 23% of the value of sales of cash loans. More than 87% of term deposits were set up by means of electronic or mobile banking.

Bank Millennium launched many innovative solutions, some of which were market firsts, e.g. motor insurance completely online, with use of scanning the graphic code from the vehicle registration certificate.

Towards the end of 2016 the Bank launched goodie – a smart shopping platform, which gathers information concerning discounts, special offers and new shopping opportunities. By understanding customers’ needs and knowing where they shop and how, the Bank has created a tool, which will bring inspiration and pleasure in making purchases for good prices. The platform will facilitate finding the best deals both online as well as in traditional shops and shopping centres. Goodie was built by an interdisciplinary team of experts from various areas, put together as an internal start-up.

Bank Millennium was also strongly supporting development of e-administration as one of the first players on the market to enable customers to access such public administration services as submitting Family 500+ applications via Millenet internet banking system and also gave customers access to the ZUS Electronic Services Platform by means of the internet banking system.

Moreover 2016 also brought further development of the mobile app. Bank Millennium was the first on the market to introduce the possibility of approving online 3D Secure card payments with a fingerprint. An important project was the launch of contactless payments with a phone – a solution using HCE technology and allowing a virtual payment card to be issued in the mobile banking app. In 2016 promotion of Mobile Deposit continued – this is a three month deposit with higher interest rate – set-up with use of augmented reality. Bank Millennium was one of first banks in Poland to make use of this technology. The solution turned out to be extremely popular – customers of Bank Millennium have set-up the highest number of deposits on the market with use of a mobile app.

BLIK mobile payments also continued to be developed. The function of “Purchases without code” was introduced, thanks to which paying by BLIK for purchases does not require copying the code; a single click in the app is all it takes.

Corporate Banking – partnership approach and innovation appreciated by customers

2016 was another year of corporate banking revenue growth, which was 31% y/y and reached 250m PLN. Apart of low cost of risk this good result is the effect of innovative solutions both in the area of banking as well as customer service, who perceive Bank Millennium as a credible and trusted partner. The basis for good results of corporate banking was i.a. implementation of a sales model built around the needs of customers, expanding the relationship with them in transactional and FX banking.

The number of local transfers last year increased 9% compared with the preceding year and reached 36 million. Also the value of FX transactions made by customers in the Bank increased 28% to reach the value of 27.3bn PLN. The value of funds on current accounts grew 22% annually to 6,746m PLN.

In 2016 the value of total credit products, including corporate leasing and factoring, increased 0.6% y/y and amounted to 14,301m PLN.

The value of assets leased in 2016 was 2.6bn PLN, which means 7% growth over 2015 and 23% increase in terms of the number of signed agreements. The leasing portfolio grew 484m PLN (10%) y/y to reach 5.2bn PLN. These results represent a 6% market share and the 7th place among leasing companies.

Factoring turnover after 4 quarters of 2016 reached the level of 14,640m PLN, i.e. more by 8.8% over the same period of the previous year. In 2016 Bank Millennium moved from 5th to 4th place with a market share of 9.2% as of end of 2016.

In 2016 Bank Millennium saw further digitalisation of business processes and innovations in the area of electronic banking, offering i.a. access to transactions on the FX market in the mobile app. Also many existing functionalities of the Millenet internet banking system were improved, making the user interface even more intuitive.

Since 2016 the Bank has also been supporting its customers in adapting to regulatory requirements, offering import of payments in EUR in XML format as well as statements in Standard Audit File format.

The full report will be available here:

www.bankmillennium.pl/about-the-bank/investor-relations/financial-reports/annual-reports