Introduction to mBank Group
MAY 2020
The most successful organic growth story in Poland
2016 2017 2018 2019
Total assets 133,744 131,424 145,781 158,721
Net loans 81,763 84,476 94,766 105,347
Deposits 91,418 91,496 102,009 116,661
Equity 13,051 14,292 15,171 16,153
Total income 4,295 4,454 5,080 5,524
Net profit 1,219 1,092 1,303 1,010
Net interest margin 2.30% 2.48% 2.58% 2.69%
Cost/Income ratio 45.7% 45.9% 42.6% 42.2%
Cost of risk 0.46% 0.61% 0.78% 0.79%
Return on Equity 10.1% 8.3% 9.4% 6.6%
Tier 1 ratio 17.3% 18.3% 17.5% 16.5%
Total Capital Ratio 20.3% 21.0% 20.7% 19.5%
NPL ratio 5.4% 5.2% 4.8% 4.5%
Coverage ratio 57.1% 59.2% 62.5% 60.7%
|2
mBank Group in a snapshot
Set up in 1986, mBank (originally BRE – Export
Development Bank) is Poland’s 4th largest universal
banking group in terms of total assets and 5th by
net loans and deposits at the end of March 2020
Servicing 4.6 million retail clients and 27.1 thousand
corporate clients in Poland and almost 965 thousand
retail clients in Czech Republic and Slovakia
mBank has leading positions in retail, corporate,
SME and private banking, leasing, factoring,
commercial real estate financing, brokerage,
corporate finance and capital markets advisory as
well as distribution of insurance
Listed on the Warsaw Stock Exchange since 1992
with a market value of ca. EUR 3.4 billion, a member
of WIG-20 blue chip index since its inception in 1994
Highly capitalised, liquid bank with a strong funding
profile and a well balanced business mix between
retail and corporate banking segments
Rated ‘BBB-’ by Fitch and ‘BBB’ by Standard & Poor’s
A strategic shareholder, Germany’s Commerzbank,
owns 69.3% of mBank’s shares
General description Key financial data (PLN M)
Main product lines
CORPORATE AND FINANCIAL MARKETS
Fully fledged offering:
• Corporate banking
• Transactional banking
• Investment banking
• Brokerage
• Leasing
• Factoring
27.1 thou. clients
RETAIL BANKING
A wide range of modernfinancial services formass market, affluentand private bankingclients as well as entrepreneurs
5,649 thou. clients
PolandCzech Republicand Slovakia
Introduction to mBank Group
51,7%
40,5%
7,8%
|3
From a specialized corporate bank to a large universal bank
2016
2013
2007
2001
2000
1995
Founding of Bank Rozwoju Eksportu (Export Development Bank) as a joint-stock company
Debut on the Warsaw Stock Exchange
The Bank launches its Private Banking
Bank starts operations in the retail banking segment, launching, in just 100 days, mBank – the first Internet Bank in Poland
Bank launches its second retail arm, MultiBank, brick-and-mortar bank aimed at servicing demanding and affluent clients
Foreign expansion of bank’s retail operations, first outlets in the Czech Republic and Slovakia
Launch of New mBank transactional platform;rebranding of the Group under mBank name
An agreement on strategic partnership singed with Commerzbank AG
1992
1986
1994
Retail Banking
Corporates and
Investment Banking
Financial Markets
and Other
The announcement of new mBank Group’s strategy (“mobile Bank”) for 2016-2020
2017
Establishment of mAccelerator – a fund aimed to invest in FinTech start-ups
2018 Profit before income tax: PLN 1,555 thousand in 2019
40.5%
51.7%7.8%
Brief history Market shares as of 31.03.2020*
Composition of mBank Group’s profit before income tax
Total assetsof the sector
FactoringTotal loans Total deposits
7.3%8.2% 8.3%8.5%
non-financial sector
Strategic partnership with WOŚP, launch of e-commerce services via mElements
Introduction to mBank Group
*share in Total Assets: mBank’s March’20 data / sector’s February’20 data due to data availability
|4
Poland’s largest organically developed retail banking franchise
Number of retail customers (thou.) Market shares – households segment
mBank’s omnichannel approach provides different contact options Number of Retail Service Locations
Introduction to mBank Group
6.4%
7.3%
7.2%
6.0%
6.3%
6.5%
09/17
6.0%
03/17
6.9%
5.9%
03/18
6.4%
6.2%
09/18
6.6%
6.5%
03/19
6.6%
09/19 03/20
Loans DepositsCAGR
797869 905
924959 965
4,426
33
2015
3,757
762
277
20162014
5,052
2018
3,672
361
195
3,906 4,076
2017
335 23
4,643
2019
5,604
4,551 4,663
5,3425,685
03/20
5,649
4,682
+4%
mBank Poland
Kompakt Finanse
mBank CZSK
Note: A drop in the number of customers recorded in 2019due to the cessation of the activity of Kompakt Finanse.
93 93 92 89 89
36 37 38 40 42
145 153 160 166 166
41 42 44 44 4433 33 33 37 40
03/19
1413
12/19
381
13
06/19 09/19
14 14
03/20
361 371390 395
mBank (former MultiBank) Advisory centres
Light branches mKiosks mBank CZSK
mFinanse1
Regardless of the starting point, unconstrained and smooth switching between the channels is a key element of mBank’s value proposition.
All customer processes are identicalfor all channels in order to ensureconsistent user experience, witha unification of the content, format, graphics and interactive components.
|5
06/1906/17 09/1912/17 06/18 12/18 03/19
1,808
12/19
2,005
1,0041,181
1,895
1,3301,484 1,580 1,674
03/20
+521 +111+86#2 by the number of
mobile application users among Polish banks
28
03/2012/1712/16 12/18 12/19
37%
55%
62.5%
72.2% 69.7%
12/15
-2.5 pp
In July 2017the share of clients who logged in to their accounts via
mobile devices exceeded the logins
from computers.
Google Pay and Apple Pay (for Visa and MasterCard
holders) for contactless payments with a phone in POS
The possibility of logging in
with a PIN code, fingerprint
or Face ID
A display with a pace of the
client’s spending to help
the users control their budget
Mobile authorisation – confirmation of operations made
in the transaction system via the mobile application
(instead of entering the code received in text message)
Payment Assistant – reminders of regular payments,
allowing the users to quickly settle invoices
mLine in a click – connection with consultants directly
from the application, without the need of ID and telecode
Quick cash loan with a decision
in 1 minute from request submission,
based on pre-approved limit
determined for the client
Express transfers using telephone
numbers within the BLIK system
Scanning of data to the transfer form from both paper
or electronic invoices instead of manual filling
mBank’s offer and solutions based on the mobile first paradigm
Focus on client convenience through well-designed functionalities Active Users of mBank’s Mobile Application (thou.)
Share of clients who log in to the accounts via mobile devices
Introduction to mBank Group
|6
Premier transactional bank with digital DNA
Growth of non-cash transactions with payment cards at mBank
Source: mBank’s internal data and comparison based on external benchmarking study, June 2019. Note: Data in terms of quantity of products sold (completed sales process).
Introduction to mBank Group
Role of digital channel in mBank’s acquisition and product sales
Number of transactions (million) Value of transactions (PLN billion)
Q3/18Q1/18
148.6130.8
Q4/19Q2/18
156.5 161.8
Q4/18
160.0
Q1/19
185.3
Q2/19
195.9
Q3/19
196.6
Q1/20
179.5
+22%
+12%
Q2/18 Q4/19
10.03
Q4/18Q1/18
8.329.89
11.619.36
Q3/18
10.64
Q1/19
11.62
Q2/19
12.32
Q3/19
12.63
Q1/20
+21%
+16%
Customer acquisition by channel, 2018 Sales mix by channel, 2018
60% 64%
88%75%
35% 31%22%
mBank
5% 1% 4%
Average for Polish Banks
2% 1%
Average for WE Banks
9%
Average for CE Banks
3%
Digital
3rd party
Branches
Contactcentre
24%
54%76%
66%
68%
41%17% 30%
Average for CE Banks
8%
mBank
4%3%2% 3%
Average for Polish Banks
4%
Average for WE Banks
|7
Supportive demographic profile of mBank’s retail client base
Distribution of Polish banks by attractiveness of customer base in terms of age and education
Source: mBank based on declarative answers from Target Group Index by Kantar MillwardBrown, June 2019, 20.1k customers.
24% 28% 48%32% 36% 40% 52%44% 565 60% 64%
10%
24%
12%
14%
16%
18%
20%
22%
26%
28%
30%
Poland average
% of customers with higher education
Highest share of the Young (<30 years old)
% of customers under 30 years old
Poland average
mBank’s clients are expected to reach their highest personal income levels in the future
Introduction to mBank Group
|8
Strong presence and leading expertise in corporate banking
Number of corporate customers Market shares – enterprises segment
Digital access channels for corporate customers Number of Corporate Service Locations
Introduction to mBank Group
7.5%
10.3%
11.2%11.3%
9.6%
7.4%
9.8%
6.2%6.6%
03/18
6.7%
9.4%
6.4%
9.6%
6.5%
03/1903/17 09/17 09/18 09/19 03/20
Loans Deposits
Łódzkie
Zachodnio-Pomorskie
PomorskieWarmińsko-Mazurskie
Podlaskie
Mazowieckie
Lubelskie
Świętokrzyskie
Podkarpackie
Małopolskie
ŚląskieOpolskie
Dolnośląskie
Wielkopolskie
Kujawsko-Pomorskie
Lubuskie
2 21 2
1 1
5 2
2 1
2 3
1
2 2 1 1
4 11
2 1
2
2
1
1
mBank’s branches,
incl. 14 advisory centres
mBank’s offices
30
16
K1 – annual salesover PLN 1 Band non-banking financial institutions
K2 – annual salesPLN 50 M to PLN 1 B
K3 – annual salesbelow 50 M and full accounting
Corporate customers split, starting from 2018:
5,144
15,946
1,838
10,805
1,983
5,748
22,048
2015
12,750
6,067
11,831
2,123
2016
7,520
2,093
23,706
7,088
19,562
2017
2,193
13,993
2018
2,319
8,211
26,476
20192014
17,787
20,940
03/20
27,084
16,270
8,468
2,346
12,867
+8%
CAGR
Online transactional platform mBank CompanyNet, offeringa high level of personalization, including adjusted layout of a desktop, shortcuts to the most frequent operations
Mobile applicationmBank CompanyMobile,which makes it possible to manage the company’s finances on the move
one-off regulatory costsCAGR
NII NFC Trading and other
CAGR
|9
CAGR
CAGR
13.1% 11.8% 10.1% 8.3% 9.4%0.72% 0.54% 0.46% 0.61% 0.78%
844 855 877 903 952
856 866 925 960
2014
71 151194136
20162015
11 180
2017
180
1,031
2018
256
1,054
1,019
2019
1,7712,051 1,963 2,043 2,164 2,329
+6%+8%
Personnel Material and other BFG
2.7%2.3% 2.1% 2.3% 2.5% 2.6% 42.2%44.9% 50.1% 45.7% 45.9% 42.6%
0.79% 6.6%
+8%
516421 365
508694
794
20152014 2016 2017 2018 2019
+9% +14%+14%
2017
1,0101,0921,2191,3011,287
2014 2015 2016
1,303
2018 2019
-22%-22%
-5%
Note: A drop of net profit in 2019 caused by the provisions for legal risk related to the FX mortgage loans of PLN 387.8 million.
902 897 906 992976
9654,454
547
2015
2,491
685
2,511
5,524
2014
5,080
556
2,833
2016
607326
3,136
2017
3,496
2018
557
4,003
2019
3,939 4,093 4,295
+7% +9%+9%
Highly efficient platform underpinning solid financial results
Total Income & Margin(PLN M)
Total Costs & C/I ratio(PLN M)
Loan Loss Provisions & Cost of Risk(PLN M)
Net Profit & Return on Equity(PLN M)
Introduction to mBank Group
66.6%
55.6%
CAGRCAGR
|10
Individual clients Corporate clients Public sectorIndividual clients Corporate clients Public sector and other
3.0
48.9
32.8
2014
41.6
1.7
2015
1.5
34.2
2016
1.3
52.9
37.9
48.1
2017
0.6
44.2
2018
0.4
47.8
60.4
2019
46.3
87.4
33.4
77.4 81.4 84.697.8
108.5
+7% +11%
32.2
20152014
39.3
77.7
46.1
0.5
37.4
53.5
2016
1.2
2019
34.6
55.7
2017
0.7
35.3
65.9
2018
0.9
38.191.4
0.934.4
91.5
0.672.481.1
102.0116.7
+10% +14%+14%+11%
A well balanced business mix reflected in volumes
Structure of mBank Group’s gross loans and advances to customersas of 31.12.2019
Structure of mBank Group’s amounts due to customersas of 31.12.2019
Total Gross Loans(PLN B)
Total Deposits(PLN B)
Introduction to mBank Group
Total:PLN 108.5 B
Total:PLN 116.7 B
MortgageFX loans to IndividualsPLN 16.1 B
Corporate loans
PLN 47.8 B
MortgageLC loans to Individuals1
PLN 22.9 B
Non-mortgageretail loansPLN 18.8 B
Public sectorloans
PLN 0.4 B
Mortgage loans to
MicrofirmsPLN 2.5 B
44.0%
14.8%21.1%
2.3%
17.4%
0.4%Corporate
clients:current
accounts2
PLN 26.1 B
Public sector clients
PLN 0.8 B
Individual clients:
term depositsPLN 14.9 B
Individual clients:current
accountsPLN 62.8 B
Corporate clients:
term depositsPLN 9.1 B
Loans and advances receivedPLN 3.0 B
1 Including local currency mortgage loans granted in Poland, the Czech Republic and Slovakia 2 Including repo transactions
22.3
%
7.8%
2.6%
53.8%
12.8%
0.7%
|11
A diversified funding base and strong capital position
mBank Group’s Funding Structureas of 31.03.2020
Major issues of debt instruments
mBank Group’s capital ratios mBank Group’s loan-to-deposit ratio
Introduction to mBank Group
2017 2019
89.4%
2014
96.7%
2015
92.3%
2016
92.9%
2018
103.0%
90.3%
03/20
86.0%
2014
2.4%3.0%
12.2%14.3%
3.0%
2015
17.3% 16.5%
2016
2.7%
18.3%
2017
3.2%
17.5%
2018
3.0%
16.5%
2019
14.7%
17.3%
20.3% 21.0% 20.7%19.5%
03/20
19.4%
2.9
calculated in accordance with Basel III rules
Core Tier 1 / CET 1 Tier 2 Total risk exposure amountXX.X
68.0(PLN B)
1 Due to the adjustment of the application of the regulatory floor to the requirements of article 500 CRR and the extensions of the AIRB approach
65.31 84.166.5 69.4 76.2
82%
Due to banks
Corporate__deposits
Other debt securities in issue
Subordinated liabilities
Other
EMTN
Retaildeposits
Issue size Issue date Maturity date Tenor Coupon
EUR 500 M 26-11-2014 26-11-2021 7.0 Y 2.000%
EUR 500 M 26-09-2016 26-09-2020 4.0 Y 1.398%
CHF 200 M 28-03-2017 28-03-2023 6.0 Y 1.005%
CHF 180 M 07-06-2018 07-06-2022 4.0 Y 0.565%
EUR 500 M 05-09-2018 05-09-2022 4.0 Y 1.058%
CHF 125 M 05-04-2019 04-10-2024 5.5 Y 1.0183%
PLN 750 M 17-12-2014 17-01-2025 10.1 Y WIBOR6M+210
PLN 550 M 09-10-2018 10-10-2028 10.0 Y WIBOR6M+180
PLN 200 M 09-10-2018 10-10-2030 12.0 Y WIBOR6M+195
Senior Unsecured Debt under EMTN programme
Subordinated debt (Tier II) Margin (in bps)
53%
29%
1%5%
6%
2%
4%
88.8
|12Introduction to mBank Group
mBank has to fulfil one of the highest capital requirements
Regulatory capital requirements for mBank Group as of 31.03.2020
0.75%0.06%
Tier 1 Capital Ratio
2.50%
0.75%
6.00%
2.33%
0.06%
2.50%
3.11%
8.00%
Total Capital Ratio
11.64%
14.42%
Countercyclical Capital Buffer (CCyB) is calculated as the weighted average
of the countercyclical buffer rates that apply in the countries where the relevant
credit exposures of the Group are located.
Systemic Risk Buffer (SRB), originally set at 3.0% in Poland, was reduced to
0% starting from 19.03.2020; for mBank it applies only to domestic exposures.
Other Systemically Important Institution (O-SII) Buffer imposed by an
administrative decision of the PFSA, in which mBank has been identified as other
systemically important institution; its level is reviewed annually.
Conservation Capital Buffer (CCB) is equal for all banks in Poland as
introduced by the Act on Macroprudential Supervision Over the Financial System
and Crisis Management in the Financial System; it was implemented gradually
and raised from 1.25% to 2.5% starting from 01.01.2019.
Individual additional Pillar 2 capital requirement for risk related to FX
retail mortgage loans (FXP2) imposed as a result of risk assessment carried
out by the PFSA within the supervisory review and evaluation process (“SREP”);
its level is reviewed annually.
CRR Regulation minimum level (CRR) based on Regulation (EU)
No 575/2013 of the European Parliament and of the Council of 26 June 2013 on
prudential requirements for credit institutions and investment firms and
amending Regulation (EU) No 648/2012.
The MREL requirement on mBank’s sub-consolidated basis communicated by the BFG on 05.02.2020 amounts to 14.54% ofthe total liabilities and own funds which corresponds to 27.515% of total risk exposure and should be met by 01.01.2024.
|13
What will mBank be like in the horizon of the strategy for 2020-2023?
We will…… build our offer and solutions based on the mobile first paradigm,increasing the share of sales and service in the digital sphere.
… remain the most convenient transactional bank by providing ourcustomers with ease and speed of use, high security standards,advanced platform, personalisation and a bonus for loyalty.
… accompany our clients throughout their lifecycle and development,designing our products, platforms, access channels and service modelaccording to their needs.
… intensify optimisation, automation and digitalisation of internalprocesses what will translate into savings for the organisation and
enhanced operational efficiency.
… continue mBank’s organic growth, based on the acquisition of youngclients and dynamic companies from prospective industries.
… be systematically improving our profitability due to rising revenues,decent cost discipline and prudent approach to risk management, while
more favourable balance sheet structure will result in higher margin.
mBank Group’s Strategy for 2020-2023
Introduction to mBank Group
|14
In the strategy for 2020-2023, mBank Group focuses on 4 areas
Client PlatformAcquisition &
long-term relationsEcosystem &
user experience
EfficiencyOperational advantage
Employees& organisation culture
Four pillars of the strategy for 2020-2023 correspond to the key
components of mBank’s business model
mBank Group’s Strategy for 2020-2023
Introduction to mBank Group
|15
mBank educatesmBank cares about the
climate and the environmentmBank promotes prosperity
We limit our indirect impact.
credit policy regardingindustries relevantin the context ofEU climate policy
mBank in theESG Index (GPW)
We limit our direct impact.
measurement and reductionof our carbon footprint
reduction of energyconsumption
saving water, paperand office supplies
Be among top three leaders of social responsibility in the banking sector
Top aim
Direction guidelines
Sustainable Development Goals (SDGs) set by the United Nations
We support the developmentof mathematical educationand equalize educational opportunities for young people.
national competitionsand grant programmes
We teach how to use online and mobile banking safely.We make customers more sensitive to cybercrime threats in the banking area.
social (educational)campaigns
We support organisations that work for social welfare.
cooperation with WOŚP
We are accessible to clients with disabilities (inclusive banking).
We act ethically.
Code of Conduct 2.0
We communicate withour customers in a fair, clear and transparent way.
We ensure diversity and equal opportunities.
mBank Group’s Strategy for 2020-2023
Corporate Social Responsibility and Sustainable Development Strategy of mBank
Introduction to mBank Group
|16
Financial targets of mBank Group for 2020-2023
Our goal is to pay 50% of net profit as a dividend.
Measure Target level Current level
Profitability in 2023 2019 (recurrent)
Net interest margin (NIM) ~3.0% 2.7%
Cost/Income ratio (C/I) ~40% 42.2%
Return on equity (ROE net) ~10.5% 9.2%
Stability every year 31.12.2019
Loans/Deposits ratio in a range of 92-94% 90.3%
Capital ratiosyear-end level min 1.5 p.p. above PFSA requirements
2.1 p.p. higher for Tier 1 ratio, 2.2 p.p. for Total Capital Ratio
Growth CAGR 2019-2023 CAGR 2016-2019
Dynamics of loans ~6% 8.7%
Dynamics of deposits ~6% 8.5%
Dynamics of total revenues ~8% 10.9%
Dynamics of total costs ~5% 6.1%
Note: Data for 2019 presented excluding the provisions for legal risk related to the FX mortgage loans of PLN 387.8 million (which lowered the reported ROE to 6.6%).For the calculation of CAGRs of revenues and costs, data excluding one-off events were used.
mBank Group’s Strategy for 2020-2023
Introduction to mBank Group
3.7 3.3 3.64.6
3.1 3.4 2.8 2.8
4.8 4.35.5 5.1 5.2 5.3 5.2 4.9 4.8 4.6
3.93.2
1.5
-8.4
-5.7-4.0
-14-12-10-8-6-4-202468
Q1/15 Q3/15 Q1/16 Q3/16 Q1/17 Q3/17 Q1/18 Q3/18 Q1/19 Q3/19 Q1/20 Q3/20
Investment Net exports Consumption
Inventories GDP YoY (%)
|17
COVID-19 pandemic caused first recession in Poland ever
GDP growth in Poland (% YoY) Inflation rate (YoY) and the path of interest rates
Flexible exchange rate Key economic indicators for Poland
Introduction to mBank Group
Source: Central Statistical Office (GUS), National Bank of Poland, Bloomberg, mBank’s estimates as of 02.04.2020.
mBank’s forecast
2019 2020F 2021F
GDP growth (YoY) 4.1% -4.2% 3.5%
Domestic demand (YoY) 3.5% -8.6% 5.3%
Private consumption (YoY) 3.9% -10.6% 5.3%
Investment (YoY) 6.9% -9.4% 4.9%
Inflation (eop) 3.4% 1.8% 1.2%
MPC rate (eop) 1.50% 0.50% 0.50%
CHF/PLN (eop) 3.92 4.30 4.05
EUR/PLN (eop) 4.25 4.60 4.40
2021-2%
-1%
0%
1%
2%
3%
4%
5%
2015 2016 2017 2018 2019 2020
Repo rate CPI inflation Core inflation
Repo rate forecast CPI forecast Core CPI forecast
3,60
3,80
4,00
4,20
4,40
4,60
4,80
Jan.19 Mar.19 May.19 Jul.19 Sep.19 Nov.19 Jan.20 Mar.20
EUR/PLN CHF/PLN USD/PLN
|18
Lower demand for credit and robust deposit base
Corporate loans and deposits (% YoY, FX-adjusted) Household loans and deposits (% YoY, FX-adjusted)
Introduction to mBank Group
Source: National Bank of Poland, mBank’s estimates as of 02.04.2020.
Limited consumption opens up prospects for steady deposit inflow near term. Household lending is set to stall in the next quarters. Mortgage loans are expected to decelerate.
Corporates deal with severe demand hit and enacted cost-cutting measures. Government programmes are set to provide them with liquidity. Develop-ment of corporate lending is set to stall and reverse. Source: NBP Source: NBP
Household volumes – YoY 2019 2020F 2021F
Mortgage loans 6.7% 3.3% -1.4%
Non-mortgage loans 5.1% -7.3% -18.3%
Retail deposits 9.7% 6.0% -1.4%
Corporate volumes – YoY 2019 2020F 2021F
Corporate loans 3.0% -20.5% -7.5%
Corporate deposits 10.0% -18.6% 9.3%
0%
2%
4%
6%
8%
10%
12%
Jan.13 Jan.14 Jan.15 Jan.16 Jan.17 Jan.18 Jan.19 Jan.20
Household deposits Household loans Mortgage loans
-10%
-5%
0%
5%
10%
15%
20%
Jan.13 Jan.14 Jan.15 Jan.16 Jan.17 Jan.18 Jan.19 Jan.20
Corporate deposits Corporate loans Corporate investment loans
|19
Polish banking sector is stable and well-capitalized
Loan penetration: key credit categories to GDP (%) in Poland Capital adequacy and Funding: capital and L/D ratios
Asset quality: development of NPL ratios by segment Efficiency and Profitability: C/I ratio and ROE
Introduction to mBank Group
Source: mBank calculations based on data published by the Polish FSA, National Bank of Poland. Note: Ratios (C/I, ROE) impacted by one-off costs in 2015 and banking tax in 2016-2019.
56.3%
2016
56.3%
2017 2018
55.4%
2019
56.0%
Cost-to-Income ratio Return on Equity
2018
7.1%6.4%
7.1%7.8%
2016 2017 2019
Total Capital Ratio Loan-to-deposit ratio
95.7%
2016
90.2%94.8%
2017 2018 2019
92.3%
2016 20192017
17.7%
2018
19.0% 19.0% 19.1%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
Total non-financial sector Households Corporations
8.1%
6.4%
5.5%
Impact of IFRS9 introduction
15.6
Corporate loans Housing loans
12.1
Consumer loans
14.115.9
5.1
18.2
20.919.6
5.7
9.58.2 8.7
2005 2010 2015 2018
|20
Operating conditions for banks have remained challenging
Low interest rate environment
Interest cap onnon-mortgage loans
After two interest rate cuts, by 0.5% in March 2020 and another 0.5% in April 2020, the reference rate
currently at 0.50%, at the lowest level ever recorded in Poland. The outbreak and consequences of COVID-
19 outburst at the beginning of 2020 make it unlikely for the Monetary Policy Council to rise the NBP
interest rates.
Polish consumer lending rates are legally capped at 8% [=2 * (0.5% + 3.5%)], meaning that interest rates
cut by 100 bps done in 2020 decreased cap on non-mortgage loans by 200 bps. Since January 2016,
contractual interest on loan is not allowed to be higher than ‘maximum interest’ defined in the Civil Code,
i.e. two times ‘statutory interest’, which is equal to the sum of NBP reference rate and 3.5%.
Lowered maximum Loan-to-Value limits
Charges to the Bank Guarantee Fund
Tax imposed offinancial institutions
Additional capital requirements
On 9 October 2016 entered into force the Act on the Bank Guarantee Fund, Deposit Guarantee Scheme and
Resolution. Consequently, in 2017 two new funds – Deposit Guarantee Fund and Resolution Fund – were
created as well as a calculation of banks’ contributions were changed (no longer based on TREA).
Despite the temporarily decreased systemic risk buffer in Poland (0% since 19 March 2020), capital
requirements remain to be kept at solid levels. Moreover, the Polish FSA individual additional capital
requirements on banks most exposed to FX mortgage loans remains in place.
According to the amendment to Recommendation S, LTV limits for residential real estate mortgage loans
were set at 90%, if part of the loan exceeding the 80% limit was insured or backed by high quality collateral,
and at 80% in other cases. A transition period assumes a gradual reduction of the limits to the target
levels in 2017, by decreasing 5 p.p. every year. In 2016 general LTV limit was set at 85%.
Starting from February 2016, banks, other credit institutions and insurers have to pay a special tax. In case
of banks, assets above PLN 4 billion are taxed, with own funds and government bonds deducted from the tax
base. Banks under recovery proceedings are not to pay the tax. The monthly tax rate is set at 0.0366%.
Source: mBank based on the National Bank of Poland, the Polish Financial Supervision Authority, the Bank Guarantee Fund.
Key factors affecting operations and profitability of Polish banks
Introduction to mBank Group