Introduction to mbank Group The most successful organic growth story in Poland

Transcription

1 Introduction to mbank Group The most successful organic growth story in Poland August 2016

2 mbank Group in a snapshot General description Key financial data (PLN M) Set up in 1986, mbank (originally BRE Export Development Bank) is Poland s 4th largest universal banking group in terms of total assets and loans, and 5th by deposits at the end of June 2016 Servicing 4.3 million retail clients and 20,220 corporate clients in Poland and over 850 thou. 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 Net loans 66,947 68,210 74,582 78,434 Assets 102, , , ,523 Deposits 57,984 61,674 72,422 81,141 Equity 9,619 10,256 11,073 12,275 Total income 3,571 3,674 3,939 4,093 Net profit 1,197 1,206 1,287 1,301 Cost/Income ratio 46.5% 45.7% 44.9% 50.1% Cost of risk 0.66% 0.70% 0.72% 0.54% ROE net 14.6% 13.1% 13.1% 11.8% CET 1 ratio 13.0% 14.2% 12.3% % 1 Total Capital Ratio 18.7% 19.4% 14.7% % 1 NPL ratio 5.2% 6.3% 2 6.3% 2 5.7% 2 NPL coverage 69.6% 53.6% % % 2 Listed on the Warsaw Stock Exchange since 1992 with a market value of ca. EUR 3.2 billion, a member of WIG-20 blue chip index since its inception in 1994 mbank Group s key market shares as of % Highly capitalised, liquid bank with a strong funding profile and a well balanced business mix between retail and corporate banking segments 6.6% 7.7% 5.9% 6.3% Rated BBB by Fitch and BBB by Standard & Poor s A strategic shareholder, Germany s Commerzbank, owns 69.5% of mbank s shares 1 Since the end of March 2014 the capital ratios are calculated in accordance with Basel III rules 2 Since Q4/13 a modified methodology of non-performing loan (NPL) recognition in retail area has been applied Retail Loans Mortgage Loans Retail Deposits Corporate Loans Corporate Deposits 2

3 From a specialized corporate bank to a large universal bank Brief history Key product lines Q2/ Founding of Bank Rozwoju Eksportu (Export Development Bank) as a joint-stock company Retail Banking Corporate and Financial Markets Debut on the Warsaw Stock Exchange An agreement on strategic partnership singed with German Commerzbank 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, the first mbank outlets are set up in the Czech Republic and Slovakia The announcement of One Bank Strategy for ; the establishment of Euro Medium Term Note Programme (EMTN) Launch of New mbank transactional platform; rebranding Group brands are replaced with the strongest name: mbank Migration of clients of former MultiBank to mbank transactional platform A wide range of modern financial services for mass market, affluent and private banking clients as well as entrepreneurs Poland Czech Republic and Slovakia 5,146 thou. clients mbank Group s revenue composition Financial Markets and Other Corporates and Investment Banking 7% 35% Total income: PLN 4,093 million Fully fledged offering: Corporate banking Transactional banking Investment banking Brokerage Leasing Factoring 58% 20,220 clients Retail Banking 3

4 Poland s largest organically developed retail banking franchise Number of retail customers (thou.) Key retail banking highlights Retail loans: PLN 48.3 B Retail deposits: PLN 49.5 B [as of ] 3, CAGR +6% 4,134 4, , ,146 4, Launch of New mbank transactional platform with over 200 new features and improvements: state-of-the-art user interface, real time CRM, merchant funded deals, video banking, instant and intuitive search, peer-to-peer payments, next generation Personal Finance Manager Orange Finance mbank CZSK 3,366 3,528 3,556 3,757 3,934 4,046 Awarded twice with "Best of Show" prize for the project of New mbank Poland /16 New mbank recognized as the most disruptive innovation in the world mbank s positions in internet and mobile banking in Poland as of Number of customers with internet banking access Number of mobile banking users Share in personal accounts of individual customers 3.72 M 1.11 M 10.1% #2 #3 #3 In February 2014 mbank launched a new mobile application allowing customers for easy access to their accounts, cards, loans, deposits, insurance, stock quotes, exchange rates and investment portfolio. Customer satisfaction proved by top awards Newsweek s Friendly Bank 2nd position in the categories On-line bank and Mobile banking in 3rd place among traditional banks offering the highest quality of service 1st position in 2012, and 2014 in the ranking of TNS Polska and Puls Biznesu Quality you can bank on Best Private Banking in Poland Source: Report PRNews.pl 4

5 C l i e n t s < 4 5 y e a r s No. of inhabitants > 100 thou. Supportive demographic profile of mbank s retail client base Age structure of mbank s client 78% 50% 18.0% 15.6% 7.3% 14.0% 9.9% 19.0% 17.4% Distribution of mbank s clients by place of residence 63% 28% 19.9% 8.2% 58.3% 8.4% 23.8% 27.1% 23.6% 5.4% 4.4% 15.1% 6.8% 26.1% 15.9% 16.0% 39.7% Poland* Poland* below 26 < 30 ; 35 ) < 45 ; 60 ) over 200 thou. < 50 ; 100 ) thou. village < 26 ; 30 ) < 35 ; 45 ) 60 and over < 100 ; 200 ) thou. below 50 thou. Retail customer base in Poland features an attractive demographic profile covering younger population With 60% between years old, mbank s customers feature greater cross-selling potential compared to the broad mature Polish population (34%) Majority of mbank s clients are mostly living in urban areas and large cities of more than 100 thou. residents Such characteristic makes mbank s clients less exposed to unemployment as well as underpins branch-light and digital model of operations * Distribution of Poland s population excluding residents below 15 * Distribution of the whole Poland s population Source: Calculations based on mbank s internal retail statistics as of Q and Central Statistical Office (GUS) data as of 31 December

6 Strong presence and leading expertise in corporate banking Number of corporate customers Key corporate banking highlights Corporate loans: PLN 33.9 B Corporate deposits: PLN 35.1 B [as of ] Corporate customers split: K1 annual sales over PLN 500 M and non-banking financial institutions K2 annual sales PLN 30 M to PLN 500 M K3 annual sales below 30 M 13,977 1,185 4,246 8, ,095 1,228 4,583 9, CAGR +9% 16,333 1,255 5,022 10,056 17,787 1,838 5,144 10, ,562 1,983 5,748 11,831 20,220 2,138 5,883 12,199 06/16 Integrated corporate and investment banking franchise with comprehensive product offering, anchored in transactional banking Longstanding history of corporate banking services providing mbank with competitive advantage Technologically advanced CRM model Unique sector driven client coverage model for large corporates Geographical proximity driven coverage range model for smaller companies mbank s market shares in investment banking services as of Market for non-treasury debt 15.2% #5 #5 11.9% 12.5% 10.0% 10.9% Selected international awards The Best Foreign Exchange Provider in Poland The Best Cash Management Provider in Poland Treasury bills and bonds IRS/FRA contracts FX Spot & Forward Shortterm debt Corporate debt The Best Corporate/Institutional Internet Bank in Poland 2014 in the World s Best Internet Banks competition in CEE Region 6

7 Fully fledged offering supplemented by mbank Subsidiaries Overview of major mbank Group s companies established in 1999 specialised mortgage bank and the largest issuer of covered bonds in the Polish market Outstanding amount of covered bonds issued: PLN 4.6 B Volume of covered bonds issued in H1/16: PLN 450 M and EUR 50 M established in 1991 provides financial and operating leasing of cars, trucks, machinery and real estate Leasing contracts in H1/16: PLN 2,076 M (+10% YoY) Market share: 7.4%, position: 2nd established in 1995 offers factoring services, incl. domestic and export recourse and non-recourse factoring and import guarantees Factoring contracts in H1/16: PLN 5,451 M (+9% YoY) Market share: 7.4%, position: 8th Covered Bonds Issuance (PLN M) Target 2016: PLN 1.75 B +141% % 1, ,541 Plan 663 (38%) 2016 integrated into the organizational structure of mbank as of managing portfolios of securities on commission and providing wealth management services covering among other things financial planning, tax and investment advisory services Assets under management at the end of H1/16: PLN 5.1 B integrated into the organizational structure of mbank as of provides a full range of services and products to institutional and retail investors as well as issuers Market shares in H1/16: 4.0% in equities, 6.4% in bonds, 13.0% in futures, 10.1% in options Number of accounts: thou. 7

8 Highly efficient platform underpinning solid financial results Total income & Net Interest Margin (PLN M) Total costs & C/I ratio (PLN M) One-off regulatory costs (additional payments to the BFG and Mortgage Support Fund) in 2.5% 2.4% 2.2% 2.3% 2.1% 2.1% 2.3% 47.7% 46.5% 45.7% 44.9% 50.1% 46.7% 43.9% Trading & other CAGR NFC +4% NII 3,521 3,571 3, ,167 2,280 2,226 3,939 4, ,491 2, % 2,003 2, ,193 1,361 1,680 1,661 CAGR +5% 1,678 1, ,857 +4% H1/15 H1/ H1/15 H1/16 Loan Loss Provisions & Cost of Risk (PLN M) Net profit & Return on Equity (PLN M) bps % 14.6% 13.1% 13.1% 11.8% 12.3% 11.5% CAGR +3% CAGR +3% % ,135 1,197 1,206 1,287 1, % H1/15 H1/ H1/15 H1/16 8

9 A well balanced business mix reflected in volumes Structure of mbank Group s Gross Loans as of Public sector loans and other PLN 1.7 B Non-mortgage retail loans PLN 10.5 B Mortgage loans to Microfirms PLN 2.5 B Mortgage PLN loans to Individuals PLN 8.9 B 2% 13% 3% 11% 58% 40% Total: PLN 83.9 B 31% Corporate loans PLN 33.9 B Mortgage FX loans to Individuals PLN 26.4 B Structure of mbank Group s Deposits as of Public sector clients PLN 0.7 B Individual clients: term deposits PLN 14.3 B Individual clients: current accounts PLN 35.1 B 58% 1% 17% 28% Total: PLN 85.3 B 41% 13% Corporate clients: current accounts* PLN 23.8 B Corporate clients: term deposits PLN 11.4 B * incl. repo transactions, loans and advances received, other liabilities Development of Total Gross Loans (PLN B) CAGR +4% % Development of Total Deposits (PLN B) CAGR +11% % /15 06/ /15 06/16 Individual clients Corporate clients Public sector and other Individual clients Corporate clients Public sector 9

10 A diversified funding base and strong capital position mbank Group s funding structure as of mbank s ratings Major issues of debt instruments Issue size Issue date Tenor Coupon Subordinated liabilities EMTN Other debt securities in issue Other Due to banks 4% 3% 5% 4% 10% 31% 43% Retail deposits 74% Corporate deposits Long-term rating Fitch Short-term rating BBB F2 Standard & Poor s Long-term credit rating BBB Short-term credit rating A-2 Senior Unsecured Debt under EMTN programme CHF 200 M Y 2.500% CZK 500 M Y 2.320% EUR 500 M Y 2.375% EUR 500 M Y 2.000% Subordinated debt (Tier II) PLN 500 M Y PLN 750 M Y WIBOR 6M bps WIBOR 6M bps mbank Group s capital ratios mbank Group s loan to deposit ratio (PLN B) % 5.4% 18.7% 5.7% 19.4% 5.2% 14.7% 2.5% 17.3% 3.0% % 2.7% 125.1% 115.5% 110.6% 103.0% 96.7% 94.7% Target L/D ratio 115% 9.6% 13.0% 14.2% 12.2% 14.3% 15.6% / /16 Core Tier 1 / CET 1 Tier 2 XX.X Total risk exposure amount Note: Since the end of March 2014 the capital ratios are calculated in accordance with the rules based on Basel III 10

11 mbank Group s strategy for Specific business actions will be based on three strategy pillars 1 Empathy 2 Mobility 3 Efficiency Offer the best customer experience i.e. give clients what they need just in time they need Make banking easy Focused customer acquisition oriented on development of active client base, incl. mbank s aspiration to acquire 1/3 of the young entering the banking market Broaden the sources of information about the client to target our offer more precisely Be the point of reference in terms of mobile banking Offer the best (most convenient, hassle-free, intuitive and engaging) mobile application on the banking market Enhance mobile first distribution approach within the multichannel model Minimize the functionality gap between mobile and internet Expand base of active mobile app users and sales via mobile channel Grow while keeping the FTE base at current level Increase average revenues per client every year Enhance assets profitability through an active management of balance sheet structure Strengthen funding independence through rising volume of covered bonds and clients transactional deposits Simplify, streamline, automate and digitalise all processes to be a paperless bank 11

12 mbank Group s strategy for Financial performance targets 5 key measures Financial measure Target point 1 Cost efficiency: Cost/Income ratio Top3 in Poland, every year to be one of three most efficient listed banks in Poland 2 Owner s capital profitability: Return on Equity (ROE net) Top3 in Poland, every year to be among the three most profitable listed banks in Poland, assuming ROE adjusted for dividend payment 3 Balance sheet profitability: Return on Assets (ROA net) Top3 in Poland, in 2020 to be one of three listed banks in Poland with the highest ROA 4 Capital position in terms of core capital: CET 1 ratio Maintain CET 1 ratio min. 1.5 p.p. above capital requirement for mbank and the ability to pay dividend every year 5 Financial stability and liquidity: Loan-to-Deposit ratio Maintain L/D ratio at the level not significantly higher than 100%, every year 12

13 mbank benefits from several strategic advantages Competitive strengths of mbank Group Exceptionally favourable demographics Strategic balance sheet management Modern, flexible, state-of-the-art banking platform Inherent ability for organic growth Structural cost advantage A distribution mix that anticipates shifting client preferences 13

14 Selected aspects of operating environment mbank in a market context 14

15 Macroeconomic environment remains supportive for banks Key economic indicators in Poland set to remain solid Dynamic volume growth should continue in % 3.4% 2016E % 3.4% % 3.1% 6.1% % 8.7% 2016E Polish banking sector 8.3% 5.3% 6.8% Higher margin product 6.8% 6.2% 10.3% 8.3% 9.8% 10.2% 1.7% 2.2% GDP growth Domestic demand Private consumption Investment Unemployment corporate loans mortgage loans other retail loans corprate deposits retail deposits Flexible exchange rate Ratings of Poland Banking sector penetration in Poland 4,6 4,4 Rating & Outlook 52.3% Loan-to-GDP ratio 4,2 4,0 3,8 3,6 Fitch Ratings Moody's A- Stable A2 Negative 15.7% 21.6% 13.2% 3,4 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 EUR/PLN USD/PLN CHF/PLN Standard & Poor's BBB+ Negative Total non-financial sector loans Corporate loans Mortgage loans Retail non-mortgage loans Source: mbank s estimates as of August 1, 2016; Bloomberg, the National Bank of Poland and Central Statistical Office (GUS). 15

16 Poland is main beneficiary of the EU funds The support from the EU funds for In Poland will receive EUR 82.5 billion to support the development in different areas, including: Programme title EUR billion Infrastructure and Environment 27.4 Smart Growth 8.6 Knowledge Education Development 4.7 Digital Poland 2.2 Eastern Poland 2.0 Technical Assistance 0.7 European Territorial Cooperation Regional Programmes 31.3 The development goals of the government for 2020 The objectives defined in Responsible Development Plan: increase in investment to over 25% of the GDP (from the level of 18% at present), increase in the share of R&D expenditure to 2% of the GDP, increase in the number of medium-sized and large enterprises to over , more Polish foreign direct investments (increase by 70%), growth of industrial production exceeding the GDP growth, GDP per capita of Poland at the level of 79% of the EU average. Responsible Development Plan for Poland approved by the government on The plan assumes 5 pillars of the economic development of Poland: 1) 1 Reindustrialisation 2) partnership for the strategic branches of the economy and cooperation chains, clusters and industrial valleys, technological parks, specialization, foreign investments; 3) 2 Development of innovative companies 4) preparing the Business Constitution, friendly legal environment and administration, review of research institutes; 5) 3 Capital for development 6) Polish Development Fund, EU funds, accelerating the implementation of operational programmes under the Partnership Agreement , Juncker s plan, EBRD, EIB, AIIB, growing savings; 7) 4 Foreign expansion 8) Export Support Division, dedicated financial offer, strong Polish brand; 9) 5 Social and regional development 10) comprehensive demographic programme, pact for rural areas, effective regional policy, education. Source: Ministry of Economic Development. 16

17 Banking penetration in Poland is lower than EU average Share of population aged 15+ having an account at a financial institution in selected European countries 2014 Share of population aged 15+ having a debit card in selected European countries 2014 Denmark 100.0% Sweden 97.6% Finland 100.0% Finland 96.7% Sweden 99.7% United Kingdom 96.4% United Kingdom 98.9% Denmark 95.5% Germany 98.8% Belgium 93.6% Belgium 98.1% Estonia 93.3% Estonia 97.7% Germany 92.0% Spain 97.6% Slovenia 91.3% Slovenia 97.2% Ireland 86.0% Austria 96.7% Luxembourg 84.8% France 96.6% Latvia 84.5% Luxembourg 96.2% Spain 82.6% Euro area 94.8% Austria 81.6% Ireland 94.7% France 81.1% Latvia 90.2% Euro area 81.1% Cyprus 90.2% Slovak Republic 70.5% Greece 87.5% Portugal 66.7% Portugal 87.4% Lithuania 64.8% Italy 87.3% Italy 64.5% Czech Republic 82.2% Czech Republic 64.0% Lithuania 77.9% Hungary 59.9% Poland 77.9% Greece 55.1% Slovak Republic 77.2% Poland 49.5% Hungary 72.3% Cyprus 48.9% Source: The World Bank, Global Financial Inclusion Database. 17

18 Operating conditions for banks have become more challenging Key factors affecting operations and profitability of Polish banks Low interest rate environment Interest cap on non-mortgage loans Reduced interchange fee on cards Lowered maximum Loan-to-Value limits Charges to the Bank Guarantee Fund Tax imposed of financial institutions Additional capital requirements After two interest rate cuts, by 0.5% in October 2014 and another 0.5% in March, the Monetary Policy Council has kept the NBP interest rates unchanged with the reference rate currently at 1.50%, compared to the level of 4.25% at the end of Polish consumer lending rates are legally capped at 10% [=2 * (1.5% + 3.5%)]. 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%. Starting from 29 January the interchange fee on card transactions in Poland was reduced from 0.5% to 0.2% for debit cards and 0.3% for credit cards. Earlier, from 1 July 2014 the maximum interchange fee rate was cut from % to 0.5% for card payment transactions. 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. Consequently, general LTV limit in 2016 is set at 85%. The Bank Guarantee Fund operates the deposit guarantee scheme in Poland (deposits up to the equivalent of EUR 100 thou. is guaranteed in full). For 2016 total charges payable by banks were raised slightly to 0.246% of total risk exposure amount, consisting of 0.167% annual contribution and 0.079% prudential levy. 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 %. On 23 October, the Polish FSA imposed individual additional capital requirements on banks most exposed to FX mortgage loans (for mbank at 2.79% for CET 1 and 3.72% for TCR). Moreover, since 1 January 2016 the minimum required capital ratios have been raised to 10.25% for CET 1 and 13.25% for TCR. Source: mbank based on the National Bank of Poland, the Polish Financial Supervision Authority, the Bank Guarantee Fund. 18

19 Client transactionality in Poland has been constantly growing NUMBER of non-cash transactions with payment cards Polish banking sector (in million) VALUE of non-cash transactions with payment cards Polish banking sector (in PLN billion) +28% +15% % QoQ +5.8% % QoQ +7.3% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 mbank (in million) and its market share 12.4% 11.8% 11.9% 12.0% 12.1% 12.1% 12.1% 12.0% 12.0% 12.1% 11.9% 11.6% QoQ +4.2% mbank (in PLN billion) and its market share 11.9% 11.7% 11.7% 11.2% 11.2% 11.3% 11.3% 11.4% 11.5% 11.1% 11.1% 11.0% QoQ +5.5% +32% +23% Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Source: mbank calculations based on data published by National Bank of Poland (NBP). 19

20 mbank s efficiency and profitability is higher than sector average Du Pont Analysis for mbank and the sector (commercial banks with foreign branches) Net Interest Income mbank: 2.05% Sector: 2.21% Net Fees and Commissions mbank: 0.73% Sector: 0.84% Trading and Other Income mbank: 0.56% Sector: 0.54% Value Creators mbank: 3.34% Sector: 3.59% Value Destroyers mbank: -2.28% Sector: -2.75% + Return on Assets mbank: 1.06% Sector: 0.84% - x leverage Return on Equity mbank: 11.17% Sector: 7.60% Administrative Expenses mbank: -1.68% Loan Loss Provisions mbank: -0.34% Tax and Other Expenses mbank: -0.26% Equity Multiplier mbank: 10.49x Sector: -2.04% Sector: -0.52% Sector: -0.19% Sector: 9.01x Source: mbank calculations based on data published by the Polish FSA for the sector (commercial banks with foreign branches). Total average assets used in the denominator. 20

21 mbank s margin has been converging to the sector average Development of net interest margin (over total assets) at mbank and the sector 3,0% 2,8% 2,6% 2,4% 2,2% 2,0% 1,8% 2.21% 2.18% 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,6% mbank Sector NBP reference rate (RA) 1,4% Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 1,5% 1,0% Development of net fee and commission margin (over total assets) at mbank and the sector 1,4% 1,3% 1,2% 1,1% 1,0% 0,9% 0,8% 0,7% 0,6% mbank Sector 0,5% Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan % 0.67% Source: mbank calculations based on data published by the Polish FSA for the sector (commercial banks with foreign branches). Total average assets used in the denominator. 21

22 mbank s business model anticipates long-term digitalisation trends mbank has no structural problems with costs Optimal distribution network (volumes in PLN M) Cost/Income ratio Costs / Assets Gross loans per branch Deposits per branch -5.6 p.p p.p. +83% +58% 50.1% 55.7% 2.27% % Average for peer group Average for peer group Average for peer group Average for peer group Channels of interactions with the clients have been evolving Small branch network compared to the peers 2% 5% 1% 5% 21% 32% 46% 50% 28% 12% Branch Call center ATM Online Mobile Share of interactions through mobile channel doubled in 2 years Income and expenses per branch (PLN M) +41% mbank Peer group % % Core revenues Total costs Net profit Source: mbank s calculations based on banks consolidated financial statements; Bain&Company. Note: All figures as of FY. Peer group consists of Top-8 listed Polish banks. 22