introduction to mbank groupintroduction to mbank group 51,7% 40,5% 7,8% |3 from a specialized...

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


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


*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


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


|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).


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


|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


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)


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)


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


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


|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



|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.


Corporate Social Responsibility and Sustainable Development Strategy of mBank


|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.



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


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)


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


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


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