mbank Group A Leading Bank in One of EU s Strongest Economies

Transcription

1 mbank Group A Leading Bank in One of EU s Strongest Economies Debt Investor Presentation

2 Disclaimer (1/2) These materials have been prepared by mbank S.A. (the "Bank"). Any person or entity considering making any investment based upon information contained in these materials should ensure that they are properly, independently and professionally advised. These materials were designed for use by specific persons familiar with the business and affairs of the Bank and its subsidiaries and affiliates and should be considered only in connection with other information, oral or written, provided by the Bank (or any subsidiary or affiliate) herewith. These materials are not intended to provide the sole basis for evaluating, and should not be considered as a recommendation with respect to, any transaction or other matter. The information in these materials, which does not purport to be comprehensive, has been provided by the Bank and has not been independently verified. 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3 Disclaimer (2/2) This document is an advertisement and not a prospectus and investors should not subscribe for or purchase any securities referred to in this document except on the basis of information in any prospectus to be published by the Bank. Copies of the updated base prospectus in respect of mfinance France SA s ( mfinance ) 3,000,000,000 Euro Medium Term Note Programme guaranteed by the Bank dated 8 March 2017 (as supplemented by the prospectus supplements dated 15 May 2017 and 23 August 2017) (the "Prospectus") will be available, when published, in electronic form, together with all documents incorporated by reference on the website of the Luxembourg Stock Exchange ( The Prospectus includes a description of risk factors relevant to mfinance and the Bank. mfinance France S.A. was formerly known as BRE Finance France S.A. and the Bank was formerly known as BRE Bank SA. This document has not been approved by the Commission de Surveillance du Secteur Financier or any other competent authority in the European Economic Area. This document does not constitute or form part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any Notes of the Bank or mfinance or any other securities, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Bank or mfinance. The information contained herein is for discussion purposes only and does not purport to contain all the information that may be required to evaluate the Bank, mfinance or their respective financial positions. Any offer, inducement or announcement to acquire Notes of mfinance will be made solely by means of the Prospectus and any decision to keep, buy or sell Notes in mfinance should be made solely on the basis of information contained in the Prospectus. This document does not constitute a recommendation regarding the Notes of mfinance or the Bank or any other securities. The information in this document is still in draft form and is subject to verification, finalisation and change, and none of the Bank, mfinance, Commerzbank Aktiengesellschaft, UBS Limited, Credit Suisse Securities (Europe) Limited or any other person is under any duty to update or inform you of any changes to such information. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Bank, mfinance, Commerzbank Aktiengesellschaft, UBS Limited, Credit Suisse Securities (Europe) Limited or any of such persons' directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this document and no liability whatsoever is accepted by the Bank, mfinance, Commerzbank Aktiengesellschaft, UBS Limited, Credit Suisse Securities (Europe) Limited or any of such persons' members, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith. Certain statements, beliefs and opinions in this document, including those related to the Notes, are forward-looking, which reflect the Bank and mfinance's current expectations and projections about future events. These statements typically contain words such as "anticipate", "assume", "believe", "expect", "plan", "intend" and words of similar substance. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Neither the Bank, mfinance nor any other person undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. No statement in this presentation is intended to be a profit forecast. This presentation contains information regarding the past performance of the Bank and its subsidiaries. Such performance may not be representative of the entire performance of the Bank and its subsidiaries. Past performance is neither a guide to future returns nor to the future performance of the Bank. 3

4 Agenda Key Investment Highlights mbank Group s Performance - Financial Results - Balance Sheet - Asset Quality - Funding & Capital Transactions Overview Appendices - Additional Information on the Polish Economy - Additional Information on the Polish Banking Sector - Detailed mbank Group s Financial Information - Management Team 4

5 Key Investment Highlights A leading universal bank in Poland 1 A profitable and well-capitalized banking sector Prudent risk management and a robust balance sheet A resilient economy with fundamentals supporting growth prospects Leading market positions, highly efficient platform underpinning strong financial results Bank s strategy building on key competitive strengths 5

6 mbank Group in a snapshot General description Key financial data (PLN M) Poland s 4 th largest universal banking group in terms of total assets and customer gross loans and 5 th by deposits as at the end of September 2017 Well capitalised, liquid bank with a strong funding profile Among Poland s most efficient banking platform built on the principles of organic growth A well balanced business mix with leadership positions in both retail and corporate banking segments attracting continued inflows of new clients Credit rating by Fitch (BBB/F2) and Standard & Poor s (BBB+/A-2) Listed on the Warsaw Stock Exchange since 1992, 69.4% owned by Commerzbank 9M/17 Total assets 117, , , ,478 Net loans 74,582 78,434 81,763 85,532 Deposits 72,422 81,141 91,418 90,678 Equity 11,073 12,275 13,051 13,967 Total income 3,939 4,093 4,295 3,312 Net profit 1,287 1,301 1, Cost/Income ratio 44.9% 50.1% 45.7% 46.8% Cost of risk 0.72% 0.54% 0.46% 0.59% Return on Equity 13.1% 11.8% 10.1% 7.9% CET 1 ratio 12.2% 14.3% 17.3% 17.8% Total Capital Ratio 14.7% 17.3% 20.3% 20.5% NPL ratio 6.4% 5.7% 5.4% 5.2% NPL coverage ratio 51.9% 58.9% 57.1% 59.1% Key product lines as of Market position by total assets (PLN B) as of Retail Banking Corporates and Financial Markets A wide range of modern financial services for mass market, affluent and private banking clients as well as entrepreneurs Poland Czech Republic and Slovakia Fully fledged offering: Corporate banking Transactional banking Investment banking Brokerage Leasing Factoring # ,259 thou. clients 21,825 clients PKO BP Pekao BZ WBK ING BSK BGŻ BNP Paribas Millennium Getin Noble Source: Banks consolidated financial statements as of

7 Poland one of EU s most resilient economies Strengths The largest economy in the CEE with almost 50% of region s gross domestic product 1 Track record of steady growth despite prolonged turmoil on the international financial markets Growth supported by expansionary policy-mix, solid influx of EU funds under framework, high cost competitiveness and key location within the huge EU market The most liquid financial market in the region Economic rebound began in and GDP growth continued to remain solid in the next quarters Contributions to GDP growth mbank s forecast Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15 Q1/16 Q3/16 Q1/17 Q3/17 Q1/18 Q3/18 Investment Net exports Consumption Inventories GDP YoY (%) Poland one of the fastest growing economies in the CEE region GDP index (Q1 2008=100) 90 Q1/08 Q1/09 Q1/10 Q1/11 Q1/12 Q1/13 Q1/14 Q1/15 Q1/16 Q1/17 Poland Hungary Czech Republic Slovakia Bulgaria Romania Poland Nominal GDP share 42.0% 11.1% 16.8% Hungary 17.5% Romania Czech Republic Slovakia Bulgaria Romania Bulgaria Hungary Czech Republic Slovakia Source: Central Statistical Office of Poland, Eurostat. 1 Share of Nominal GDP of CEE region defined as: Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia 8.0% 4.7% Poland EU-28 Real GDP growth 4.0% 2.9% 3.8% 3.3% 3.6% 2.2% 3.6% 2.6% 3.5% 3.3% 1.9% 1.9% 5.0% 4.9% (average) 7

8 Sound fundamentals for the banking business Relatively strong labour market Inflation rebounded from historically low levels, as in other CEEs Unemployment rate Harmonised indices of consumer prices (HICP) 7.5% 8.9% 3.0% 3,0% 2.5% 2,5% 2.0% 2,0% 1.5% 1,5% 2.5% 2.5% 1.6% 4.6% 4.2% 1.0% 1,0% 0.5% 0,5% 2.7% 0.0% 0,0% -0.5% -0,5% -1.0% -1,0% Poland Czech Republic Hungary EU-28 Euro area -1.5% -1,5% Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Poland Czech Republic Hungary Consistent fiscal discipline General government debt (% of GDP) - Underleveraged private sector Domestic credit to private sector (% of GDP) % 88.9% 89.2% 95.3% 54.1% 51.8% 54.8% 51.8% 36.8% 34.9% Poland Czech Republic Slovakia Hungary Euro area Poland Hungary Czech Republic Euro Area EU-28 Source: Eurostat, World Bank. 8

9 A profitable and well-capitalized banking sector Banking sector penetration in Poland Capitalisation and Funding the Polish banking sector % GDP - growth TCR & CET 1 ratio Loan-to-deposit ratio 35.3% 14.6% 12.0% 12.3% 15.7% 14.7% 16.3% 17.7% 102.0% 102.2% 102.2% 98.9% 18.6% 21.3% 14.1% 13.4% 15.0% 16.1% Corporate loans Total retail loans Mortgage loans Corporate loans Total retail loans Mortgage loans CET 1 ratio Tier 2 Asset quality & Regulations the Polish banking sector Efficiency and Profitability the Polish banking sector NPL ratio Prudent supervision Cost / Income ratio Return on Equity 6.9% 6.1% 2.9% Strict origination standards for retail and mortgage loans FX mortgages only to borrowers earning income in the loan currency from July 53.0% 50.9% 58.7% 56.0% 10.1% 9.9% 6.6% 7.8% Total Retail Mortgages Minimum requirement for CET 1 ratio at 10.25% and for TCR at 13.25% since January Source: National Bank of Poland, Polish FSA, Central Statistical Office of Poland. Note: Ratios (C/I, ROE) impacted by one-off costs in and banking tax in. 9

10 Unique story of successful organic growth Brief history mbank developed its operations from corporate banking. Since its establishment in 1986 the bank has served some of Poland s largest companies involved in foreign trade on export markets. In 2000, mbank started its operations in the retail banking segment by launching a first fully Internet-based bank in Poland (developed in just 100 days). In 2001, mbank added a high street brickand-mortar bank, offering a broad range of products and services targeted to affluent customers and micro-businesses seeking high quality, personalized service at branches. mbank, which launched retail operations in the Czech Republic and Slovakia in 2007, managing to replicate its business model in foreign markets. As a result, mbank s client base has grown almost entirely organically, reaching 5,348 thou. retail clients and 20.9 thou. corporate customers at the end of. mbank has got more than 1.3 million active users of mobile banking. Number of retail customers (thou.) Retail loans: PLN 48.9 B Retail deposits: PLN 54.0 B [as of ] Favourable demographics of customer base: ca. 50% of retail clients are under the age of 35 and are expected to reach their highest personal income levels in the future, mbank's mortgage clients predominantly live in urban areas and large cities of more than 100 thou. residents Number of corporate customers Corporate loans: PLN 38.3 B Corporate deposits: PLN 34.7 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 Source: internal mbank s data. mbank CZSK 4, Poland 3,556 4, ,789 4,663 3,866 11,831 5, , , ,359 09/17 21,825 20,940 19,562 2,126 17,787 2,123 1,983 16,333 1,838 1,255 6,067 6,980 5,748 5,144 5,022 10,056 10,805 12, ,719 09/17 10

11 Highly efficient platform underpinning strong financial results Composition of mbank Group s profit before income tax mbank Group s key market shares in volumes as of % Financial Markets and Other 7.1% 62.5% Retail Banking 6.4% 7.1% 5.4% 5.9% 6.6% Corporates and Investment Banking 30.4% Profit before income tax: PLN 1,638 M Retail Loans Mortgage Loans Non-mortgage Loans Retail Deposits Corporate Loans Corporate Deposits mbank Group s efficiency of operations mbank Group s profitability Cost/Income ratio Revenue per employee (PLN thou.) Net profit attributable to owners of mbank (PLN M) Return on Equity 50.1% 45.7% 44.9% 45.7% 1,206 1,287 1,301 1, % 13.1% 11.8% 10.1% Source: mbank s calculation based on data published by the National Bank of Poland. 11

12 Prudent risk management and a robust balance sheet mbank Group s NPL ratio below the market level Loan-to-Deposit ratio reflects excess liquidity levels 6.3% 6.4% 5.7% 5.4% 5.2% -1.7 pp 6.9% 110.6% 103.0% 96.7% 89.4% 94.3% 09/17 Sector 09/17 09/17 A well funded balance sheet (PLN B) as of Total assets: PLN B Strong capitalisation and liquidity as of % 74.5 Assets Liabilities 17.8% 20.5% 10.5% PLN CHF Source: Polish FSA data for the sector. EUR USD Other Equity CET 1 Ratio Total Capital Ratio Equity/ Assets Securities/ Assets 12

13 Highlights of mbank Group s strategy 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 New mission emphasizes focus on being close to clients and taking advantage of the mobile revolution To help. Not to annoy. To delight Anywhere. 13

14 Highlights of mbank Group s strategy 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, by 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 14

15 Agenda Key Investment Highlights mbank Group s Performance - Financial Results - Balance Sheet - Asset Quality - Funding & Capital Transactions Overview Appendices - Additional Information on the Polish Economy - Additional Information on the Polish Banking Sector - Detailed mbank Group s Financial Information - Management Team 15

16 mbank Group s historical performance Historical View Balance Sheet Asset Quality Funding & Capital Total income & Net Interest Margin (PLN M) Total costs & C/I ratio (PLN M) One-off regulatory costs 2.2% 2.3% 2.1% 2.3% Trading & other CAGR NFC +5% NII 3,939 4,093 4,295 3, ,226 2,491 2,511 2, % 3, , % 44.9% 50.1% 45.7% 1,678 1,771 CAGR +5% 194 1, , % Contributions to the BFG 165 1,384 9M/17 9M/17 Loan Loss Provisions & Cost of Risk (PLN M) 0.70% 0.72% 0.54% 0.46% CAGR -9% 0.59% Net profit attributable to owners of mbank & Return on Equity (PLN M) 13.1% 13.1% 11.8% 10.1% 7.9% CAGR 0% ,206 1,287 1,301 1, M/17 9M/17 16

17 mbank Group s historical performance Historical View Balance Sheet Asset Quality Funding & Capital Total Assets (PLN B) Equity & Total Capital Ratio (PLN M) CAGR +9% -1% 19.38% 14.66% 17.25% 20.29% 20.47% CAGR +8% +7% ,256 11,073 12,275 13,051 13,967 09/17 09/17 Total Gross Loans (PLN B) CAGR +6% % Total Deposits (PLN B) CAGR +14% % /17 09/17 Individual clients Corporate clients Public sector and other Individual clients Corporate clients Public sector 17

18 Balance Sheet Analysis: Assets & Liabilities Historical view Balance Sheet Asset Quality Funding & Capital Structure of Assets (PLN B) Structure of Liabilities (PLN B) % 24% 1% 1% % 11% 10% % % /17 2% /17 6% Amounts due from banks Derivative financial instruments Amounts due to other banks Equity Loans and advances to customers Investment securities Amounts due to customers Other Trading securities Other Debt securities in issue 18

19 Balance Sheet Analysis: Currency Structure Historical view Balance Sheet Asset Quality Funding & Capital Currency Structure of Loans to Customers (net) (PLN B) Currency Structure of Amounts due to Banks and Customers 1 (PLN B) % 1% 17% 19% % 3% 16% 7% % % 09/17 09/17 PLN CHF EUR USD Other (mainly CZK) PLN CHF EUR USD Other (mainly CZK) 1 Including amounts due to other banks and customers and subordinated liabilities; 19

20 Balance Sheet Analysis: Structure of Loans & Deposits Historical view Balance Sheet Asset Quality Funding & Capital Structure of mbank Group s Gross Loans as of Structure of mbank Group s Deposits as of Non-mortgage retail loans PLN 12.9 B Mortgage loans to Microfirms PLN 2.3 B Public sector loans and other PLN 1.3 B 15% 2% 2% 16% Total: PLN 88.5 B 43% Corporate loans PLN 38.3 B Individual clients: term deposits PLN 12.1 B 60% Public sector clients PLN 1.9 B 14% 2% Total: PLN 90.7 B 29% 9% Corporate clients: current accounts 2 PLN 26.3 B Mortgage LC loans to Individuals 1 PLN 14.5 B 55% 22% Mortgage FX loans to Individuals PLN 19.2 B Individual clients: current accounts PLN 42.0 B 46% Corporate clients: term deposits PLN 8.4 B 1 Including local currency mortgage loans granted in Poland, the Czech Republic and Slovakia; 2 Including repo transactions, loans and advances received, other liabilities; 20

21 Balance Sheet Analysis: Loan Portfolio Structure Historical view Balance Sheet Asset Quality Funding & Capital mbank Group s Sector Exposure by Industry as of % 1.3% 1.2% 1.5% 1.3% 1.8% 1.7% 1.9% 2.2% 2.3% 2.5% 2.8% 4.6% 6.8% Total: PLN 88.5 B 55.3% Households Real estate management Building industry Food sector Transport and logistics Metals Motorization Construction materials Chemicals and plastics Wood, furniture and stationery Leasing and rental of movables Wholesale trade Scientific and technical activities Fuels Other (below 1.2%) A well diversified loan portfolio with granular structure 21

22 mbank s client base resilient to CHF strengthening Historical view Balance Sheet Asset Quality Funding & Capital Distribution of mbank s CHF mortgage borrowers by Debt-to-Income (DtI) levels Average DtI for 2007/08 CHF mortgage production: 37.2% at the end of 33.1% as of % 2.2% 3.9% 5.6% 14.6% 20.5% 21.6% 25.3% 20.6% 19.4% 13.4% 10.6% 9.6% As of Assumptions for : As of CHF LIBOR rate at -0.73% CHF/PLN exchange rate at % In the calculation of DtI level: Debt encompasses data from Credit Information Bureau (BIK), thus reflects all debt servicing costs of the customer Income includes only remuneration channelled via mbank s accounts, whereby in some cases the customers might receive a fraction of their income into another account 3.2% 2.4% 2.6% 2.1% 4.7% 4.5% No data available DtI < 10% DtI < 20% DtI < 30% DtI < 40% DtI < 50% DtI < 65% DtI < 75% DtI < 90% DtI 90% Development of real wages in Poland (rebased to 2005=100) A package of solutions for mbank s clients in need Passing on of negative LIBOR rate to all borrowers Reduced Swiss franc spread Repayment rescheduling, incl.: - respite for payment of capital over the period of 12 months - extension of loan maturity - flexible payment schedule - change of instalment payment date - change of instalment type (decreasing or equal) Source: mbank s internal calculations based on individual loan data; Central Statistical Office of Poland. 22

23 Quality of mbank Group s Loan Portfolio Historical view Balance Sheet Asset Quality Funding & Capital mbank Group s Impaired Loans Portfolio (PLN M) 4,424 4,915 4,631 4,537 +1% 4,580 mbank Group s NPL Ratio 6.3% 6.4% 5.7% 5.4% 5.2% mbank Group applies a conservative clientoriented approach in its methodology of NPL recognition. 09/17 mbank Group s NPL Ratio by segment mbank Group s NPL Coverage Ratio incl. IBNR provisions 64.3% 56.8% 53.6% 62.1% 09/ % 7.9% 7.1% 6.2% 5.8% 6.9% 6.2% 5.7% 5.2% NPL Ratio of Mortgage Loan Portfolio* 5.3% 5.2% 09/17 Corporate Portfolio* Retail Portfolio * excl. Reverse repo / buy-sell-back transactions 4.9% 47.8% 51.9% 58.9% 57.1% 59.1% 4.5% 3.8% 3.7% 3.6% * to Private Individuals in Poland 09/17 09/17 Note: Data for revised due to initial inflated amount of receivables with impairment for the corporate segment. 23

24 Loan Loss Provisions & Cost of Risk Historical view Balance Sheet Asset Quality Funding & Capital Net Impairment Losses on Loans and Advances (PLN M) mbank Group s Cost of Risk by Segment (bps) M/17 9M/17 Retail Banking Corporates and Financial Markets Retail Portfolio Corporate Portfolio Cost of Risk 24

25 Funding structure details Historical view Balance Sheet Asset Quality Funding & Capital mbank Group s funding structure as of mbank s ratings Loan to Deposit Ratio Other Subordinated liabilities EMTN Other debt securities in issue Due to banks 3% 2% 7% 5% 7% 31% 45% Retail deposits 76% Corporate deposits Long-term rating Fitch Short-term rating BBB F2 Standard & Poor s Long-term credit rating BBB+ Short-term credit rating A % 103.0% 96.7% +4.9 pp 94.3% 89.4% 09/17 Maturity of long-term funding instruments in original currencies as of (LC in million) 1,000 Summary of Issues under Euro Medium Term Note (EMTN) Programme Issue size Issue date Maturity date Tenor Coupon CHF 200 M Y 2.500% EUR 500 M Y 2.375% EUR 500 M Y 2.000% EUR 500 M Y 1.398% CHF 200 M Y 1.005% CHF Loans CHF Subloans EUR Loans EUR EMTN CHF EMTN 25

26 A stable CHF funding profile Historical view Balance Sheet Asset Quality Funding & Capital mbank s CHF funding composition as of (CHF M) 4,380 1, % direct CHF long-term funding ,116 0 CHF portfolio CHF loans CHF Subloans CHF EMTN Long-term cross currency swaps and repos Short-term market instruments CHF mortgage loans predominantly funded by long-term CHF-denominated funding from Commerzbank and bond markets Reliance on short term funding at marginal levels 26

27 Issuance activity on the Covered Bonds Market Historical view Balance Sheet Asset Quality Funding & Capital Covered Bonds Issuance (PLN M, by year) 417 Private placement 1,004 1,541 established in , , , specialised mortgage bank and the largest issuer of covered bonds in the Polish market Covered bond issuance to become the dominant long-term financing source for the Group s mortgage lending and a competitive advantage in a tightening regulatory environment Summary of Mortgage Covered Bonds issued in (public issues) Amount Currency Issue date Maturity date Tenor (years) Coupon 7.5 M EUR EURIBOR 6M + 80bps 8.0 M EUR Fixed (3.50%) 15.0 M EUR Fixed (3.50%) 20.0 M EUR Fixed (3.20%) M PLN WIBOR 6M + 93bps M PLN WIBOR 6M + 93bps 20.0 M EUR Fixed (1.115%) 50.0 M EUR EURIBOR 3M + 87bps M PLN WIBOR 6M + 78bps 20.0 M EUR Fixed (1.135%) M PLN WIBOR 6M + 87bps 11.0 M EUR Fixed (1.285%) 50.0 M EUR EURIBOR 3M + 69bps M PLN WIBOR 3M + 110bps M PLN WIBOR 3M + 115bps M PLN WIBOR 3M + 120bps 50.0 M EUR EURIBOR 3M + 87bps 50.0 M PLN Fixed (2.91%) M PLN Fixed (2.91%) 13.0 M EUR Fixed (1.18%) 35.0 M EUR Fixed (1.183%) 24.9 M EUR Fixed (0.94%) M PLN WIBOR 3M + 75bps 1,000.0 M PLN WIBOR 3M + 82bps 27

28 Key regulatory ratios: capitalisation and liquidity Historical view Balance Sheet Asset Quality Funding & Capital mbank Group s Total Capital Ratio mbank s NSFR and LCR 19.38% 5.17% 14.66% 17.25% 2.96% 20.29% 2.97% 20.47% 2.64% 17.02% 187% 149% 144% 199% 152% 2.42% 113% 109% 109% 114% 110% Basel III requirement 100% 17.32% 17.83% 14.21% 12.24% 14.29% 13.21% (PLN B) / minimum requirement as of 09/17 09/17 Net Stable Funding Ratio (NSFR) Liquidity Coverage Ratio (LCR) CET 1 capital ratio Tier 2 XX.X Total risk exposure amount 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; Note: On the Polish FSA identified mbank as an other systemically important institution and imposed on the bank an additional buffer at 0.5% of total risk exposure amount. 28

29 Agenda Key Investment Highlights mbank Group s Performance - Financial Results - Balance Sheet - Asset Quality - Funding & Capital Transactions Overview Appendices - Additional Information on the Polish Economy - Additional Information on the Polish Banking Sector - Detailed mbank Group s Financial Information - Management Team 29

30 First tranche: 3-year EUR 500 M, Senior Unsecured Transaction details Distribution by investor location Issuer Guarantor BRE Finance France SA mbank S.A. (formerly BRE Bank SA) Austria 19% 11% 9% United Kingdom Benelux Format Issue rating Senior Unsecured Debt out of EMTN programme A (Fitch) / BBB+ (S&P) Germany 36% 9% Switzerland 7% 2% France 3% 4% Italy Poland Others Issue size EUR 500 M Maturity date 12th October Distribution by investor type Issue date 12th October % Banks Reoffer spread MS+225bps Coupon Listing 2.750% p.a. Bourse de Luxembourg Investment Funds 53% 5% 5% 2% Retail Others Pension Funds 30

31 Second tranche: 5-year CHF 200 M, Senior Unsecured Transaction details Distribution by investor location Issuer BRE Finance France SA Guarantor mbank S.A. (formerly BRE Bank SA) Format Senior Unsecured Debt out of EMTN programme Switzerland 89% 6% 5% Liechtenstein Germany Issue rating A (Fitch) / BBB+ (S&P) Issue size CHF 200 M Maturity date 8th October 2018 Distribution by investor type Issue date 8th October Reoffer spread MS+180bps Coupon 2.500% p.a. Listing SIX Swiss Exchange Private Banks and Commercial Banks 66% 17% 4% 13% Asset Managers Insurance Companies Pension Funds 31

32 Third tranche: 5-year EUR 500 M, Senior Unsecured Transaction details Distribution by investor location Issuer mfinance France S.A. Poland United Kingdom Guarantor mbank S.A. 15% 13% 11% CEE (excl. Poland) Format Issue rating Senior Unsecured Debt out of EMTN programme A (Fitch) / BBB+ (S&P) Germany 47% 11% 3% Austria & Switzerland Others Issue size EUR 500 M Maturity date 1st April 2019 Distribution by investor type Issue date 1st April Reoffer spread MS+145bps 26% Banks Coupon Listing 2.375% p.a. Bourse de Luxembourg Investment Funds 67% 6% 1% Insurance Companies & Pension Funds Others 32

33 Fourth tranche: 7-year EUR 500 M, Senior Unsecured Transaction details Distribution by investor location Issuer mfinance France S.A. United Kingdom France Guarantor mbank S.A. 24% 14% 9% Poland Format Issue rating Senior Unsecured Debt out of EMTN programme A (Fitch) / BBB+ (S&P) Germany & Austria 40% 9% Switzerland 4% Others Issue size EUR 500 M Distribution by investor type Maturity date 26th November 2021 Issue date 26th November 24% Banks, incl. Private Banks Reoffer spread MS+145bps 9% Hedge funds Coupon Listing 2.000% p.a. Bourse de Luxembourg Investment Funds 56% 8% 3% Insurance Companies & Pension Funds Others 33

34 Fifth tranche: 4-year EUR 500 M, Senior Unsecured Transaction details Distribution by investor location Poland Issuer Guarantor mfinance France S.A. mbank S.A. United Kingdom & Ireland 16% 15% 10% Switzerland Format Issue rating Senior Unsecured Debt out of EMTN programme BBB (Fitch) / BBB (S&P) Germany & Austria 36% 6% 9% 8% Others France Spain & Portugal Issue size EUR 500 M Maturity date 26th September 2020 Distribution by investor type Issue date 26th September Banks Reoffer spread Coupon Listing MS+157bps 1.398% p.a. Bourse de Luxembourg Investment Funds & Asset Managers 73% 17% 7% 3% Insurance Companies & Pension Funds Others 34

35 Agenda Key Investment Highlights mbank Group s Performance - Financial Results - Balance Sheet - Asset Quality - Funding & Capital Transactions Overview Appendices - Additional Information on the Polish Economy - Additional Information on the Polish Banking Sector - Detailed mbank Group s Financial Information - Management Team 35

36 Developments of Polish zloty and other EM currencies Emerging Markets currencies v. EUR, index = Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Source: Bloomberg. EUR/PLN EUR/HUF EUR/RUB EUR/TRY Polish Economy Banking Sector Financial Information Management Team 36

37 Growth-supporting policies and flexible exchange rate Growth-oriented policies Historically low interest rates are supporting business lending and reducing the interest burden faced by households Plans to reduce personal income taxes via higher tax-free allowance and increase progressivity of taxation Various measures to permanently raise household savings rate and, indirectly, private investment rate (an offset to demographic headwinds) Cautious monetary policy Clearly defined monetary policy target (2.5% +/-1 p.p.) Lack of asset purchase programmes Owing to recent market turbulences, MPC has also devoted some attention to ensuring wider macroeconomic stability Redistributive policies and increased spending on family support to tackle long-term demographic problems Flexible exchange rate as an asset Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Since April PLN depreciated by 10% against the euro and by 15% against the US dollar. Then, zloty appreciated by 5% against the euro and by almost 20% against the dollar. There are clear benefits to flexible exchange rate: fast adjustment, no need for internal devaluations. In addition, relatively low external debt makes currency depreciation a clear net positive for the economy (via exports mainly). EUR/PLN USD/PLN Source: Eurostat, Bloomberg. Polish Economy Banking Sector Financial Information Management Team 37

38 Strong growth will continue Strong growth in investment after a year of drought 12% 8% 4% 0% -4% -8% -12% Consumption is set to remain a key pillar of growth 9% -25 8% 7% 6% -30 5% 4% -35 3% 2% 1% -40 0% -1% -45 Q1/05 Q2/06 Q3/07 Q4/08 Q1/10 Q2/11 Q3/12 Q4/13 Q1/15 Q2/16 Q3/17 Construction output QoQ Household consumption YoY (LA) Major purchases planned (RA) Investment is coming back was not a year of investment. Revised national accounts data show the deepest decline in investment spending since the early 2000s. The situation has changed since the beginning of the year. According to short-term data, construction spending rebounded in H1/17. However, so far the rebound has been driven mainly by public investment, with stagnation in private spending. The bank expects that once EU funds start flowing in, overall investment growth will rise. With EU spending kicking off, low base effects and renewed interest in investing on the enterprises side, investment is set to accelerate to 10% YoY later this year. Consumption will remain a key driver of growth Thanks to very good labour market situation, strong wage growth and a big stock of savings from the child subsidy programme that started last year, Polish consumers are extremely happy. This already translated into very high consumption growth (close to 5% YoY). While statistical effects and higher inflation may put a dent in real income growth, it is believed that any resulting slowdown in household consumption will be minimal there s no indication of it this year. Source: Central Statistical Office of Poland, Eurostat. Polish Economy Banking Sector Financial Information Management Team 38

39 MPC expects stable rates until end-2018 Waiting for cracks in the rate setters consensus Inflation stabilized within the NBP s tolerance band (2.1% in October is the latest print). Lower fuel and food prices helped stabilize consumer price growth. The MPC remains unfazed by the uptick in inflation. Just as deflation was seen as temporary and benign, the current bout of inflation is seen as external and temporary, therefore not warranting a reaction form the NBP (i.e. a hike). Thus, the bank sees the MPC holding rates steady this year and in the first 6 months of The market, however, might think otherwise and start pricing in more hikes and earlier hikes when the path of core inflation becomes apparent. Polish assets: no clear trend Polish assets enjoyed a major rally in 2017, with equity market reaching a new multi-year high, big declines in bond yields and stronger zloty. Local factors have not played a major role, but Poland was clearly preferred in the EM basket and benefitted from the overall positive attitude towards emerging markets. Zloty remained a tad weaker in recent months, bond yields rose along with monetary policy expectations and global factors. Inflation rate (YoY) and the path of interest rates 3.0% 3,0% 2.5% 2,5% 2.0% 2,0% 1.5% 1,5% 1.0% 1,0% 0.5% 0,5% 0.0% 0,0% -0,5% -0.5% -1,0% -1.0% -1,5% -1.5% Key Polish interest rates -2,0% -2.0% 1,0 1.0 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Repo rate CPI inflation Core inflation Repo rate forecast CPI forecast Core CPI forecast 4, , , , , ,5 1.5 Wibor 3M NBP base rate 10-year yield Source: Central Statistical Office of Poland, Bloomberg. Polish Economy Banking Sector Financial Information Management Team 39

40 Credit growth rebounding, deposit growth slowed down Corporate loans and deposits (% YoY) 25% 20% 15% 10% 5% 0% -5% -10% Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Corporate deposits Corporate loans Corporate investment loans Household loans and deposits (% YoY) 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Household deposits Household loans Mortgage loans Corporate deposits slowed down considerably. Several explanations are likely, including: increased imports, shift from bank deposits to T-bonds, change in VAT refund policy reducing corporate liquidity. Corporate lending has accelerated in 2017, with investment loan growth at a new cycle high. Household deposits have slowed down as consumers set upon a spending spree. The savings that were accumulated in are being spent on goods and services. The growth rate remains firmly positive, though, as household incomes are rising at a brisk pace. Consumer loans have rebounded strongly. On the other hand, mortgage lending has been accelerating along with residential construction, but it is unlikely to show against the huge backdrop of existing loans. New production rose to almost PLN 12 B in Q2/17 (multi-year high). Source: National Bank of Poland. Polish Economy Banking Sector Financial Information Management Team 40

41 Asset quality trends in Poland Comparison of NPL ratios for CEE countries 12.8% 12.3% 11.9% Improving risk indicators in Poland NPL ratios by sector 13% 12% 9.7% 11% 10% 6.4% 4.6% 4.1% 9% 8% 7% 8.3% 6.9% Bulgaria Slovenia Hungary Romania Poland Slovakia Czech Republic 6% 6.1% 5% Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13 Jun-14 Mar-15 Dec-15 Sep-16 Jun-17 Total Households Corporates Mortgage NPL ratio evolution in Poland 3.6% 3,6% 3.2% 3,2% 2.8% 2,8% 3.4% 2.9% 2.4% 2,4% 2.0% 2,0% 1.6% 1,6% 1.2% 1,2% 0.8% 0,8% Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13 Jun-14 Mar-15 Dec-15 Sep-16 Jun-17 Total Mortgages FX Mortgages Source: ECB (Statistical Data Warehouse), Polish FSA, National Bank of Poland. A conservative regulatory environment Recommendation S Foreign-currency mortgage loans as a niche product offered only to borrowers earning permanent income in the loan currency Introduction of a limitation on LtV: to 90%, if part of the loan exceeding the 80% limit was insured or backed by high quality collateral, and to 80% in other cases; a gradual reduction to the target levels in 2017 Recommended to retail customers repayment period no longer than 25 years for retail customers Recommendation T Assessment of the client's standing based on certificates of income, external databases, e.g. the Credit Information Bureau (BIK) Maximum Debt-to-Income ratio determined by the bank s management board and approved by the supervisory board Polish Economy Banking Sector Financial Information Management Team 41

42 Mortgage penetration in Poland remains low while home ownership rates are among the highest in Europe Romania Bulgaria Slovakia POLAND Hungary Slovenia Greece Czech Republic Italy Spain EU Portugal France Belgium Austria Finland United Kingdom Germany Denmark Sweden Netherlands Distribution of population by tenure status in selected countries (data for, in %) Owner, no outstanding mortgage or housing loan Owner, with mortgage or loan Tenant, rent at market price Tenant, rent at reduced price or free Source: Eurostat (data updated on ). Polish Economy Banking Sector Financial Information Management Team 42

43 Consolidated Profit and Loss Account under IFRS Quarterly results (PLN thou.) Net interest income Net fee and commission income Dividend income Net trading income incl. FX result Gains less losses from investment securities Net other operating income Total income Total operating costs ( ) ( ) ( ) ( ) Overhead costs ( ) ( ) ( ) ( ) Amortisation ( ) ( ) ( ) ( ) Loan loss provisions ( ) ( ) ( ) ( ) Operating profit Taxes on the Group balance sheet items - - (3 650) ( ) Profit before income tax Net profit attributable to owners of mbank Including the share in the profits (losses) of joint ventures Polish Economy Banking Sector Financial Information Management Team 43

44 Consolidated Statement of Financial Position Assets (PLN thou.) Cash and balances with Central Bank Loans and advances to banks Trading securities Derivative financial instruments Loans and advances to customers Investment securities Intangible assets Tangible fixed assets Other assets Total assets Liabilities (PLN thou.) Amounts due to other banks Derivative financial instruments Amounts due to customers Debt securities in issue Subordinated liabilities Other liabilities Total liabilities Total equity Total liabilities and equity Polish Economy Banking Sector Financial Information Management Team 44

45 Development of Total Income and Total Costs Development of Total Income (PLN M) Development of Total Costs (PLN M) 3, % 3, % 4, % 4, change 16/ % +1.0% 45.7% 1, % 44.9% 1, % 2, % 45.7% -4% 1, Cost/Income ratio change 16/ % +12.0% -6.8% 2,226 2,491 2,511 2, % % +2.6% Net Interest Income Net Fee and Commission Income Trading and Other Income 1 1 Including: in one-off gains on the sale of BRE Ubezpieczenia TUiR (PLN million) and PZU shares (PLN million); in a gain on the settlement of Visa transaction (PLN million); Personnel Costs Material Costs Other Costs Regular BFG contribution Amortization One-off regulatory costs 1 1 Including: in payment to the BFG related to the bankruptcy of Cooperative Bank in Wołomin and contribution to the Mortgage Support Fund; in additional payment to the BFG related to the bankruptcy of Cooperative Bank in Nadarzyn; Polish Economy Banking Sector Financial Information Management Team 45

46 Net Interest Income & Margin Interest Income Structure (PLN M) Interest Expense Structure (PLN M) NIM [%] 3, , , % 3, , , % 2, , , , , , , Cash and short-term deposits Loans and advances Amounts due to banks Subordinated liabilities Investment securities Derivatives classified into banking book Amounts due to customers Other Debt securities held for trading Other Issue of debt securities Polish Economy Banking Sector Financial Information Management Team 46

47 Fee and Commission Income & Trading Income Fee and Commission Income Structure (PLN M) Net Trading Income Structure (PLN M) +8% 1, , , , % Credit related fees Brokerage & issue fees Portfolio management Guarantees and trade finance Accounts & Money transfers Insurance activity FX Result Other Trading Income Payment card fees Other (incl. custody) Polish Economy Banking Sector Financial Information Management Team 47

48 Changing funding base towards more diversification Evolution of mbank Group s Funding Mix 100% 80% 60% 3% 2% 12% 7% 31% Other Subordinated debt Debt securities in issue Development of mbank Group s Own Funds (PLN M) 11,400 9,751 11,971 13,244 14,166 40% Medium & long-term funding 1 20% 45% Corporate deposits Retail deposits 0% 12/13 12/14 12/15 12/16 1 Loans granted by Commerzbank and other bilateral credit agreements 09/17 mbank s subordinated securities outstanding as of Type Nominal value Currency Maturity date Tier II eligible Bond 170 M CHF perpetual Yes (partly) Bond 80 M CHF perpetual Yes (partly) Bond 500 M PLN Yes Bond 750 M PLN Yes Note: The exchange rate used in translating foreign currency subordinated liabilities was 1 CHF = PLN (the National Bank of Poland). c. PLN 2,190 million of CRD IV eligible and non-eligible instruments offer additional cushion for fixed income investors mbank issued 2 tranches of subordinated bonds with a total nominal value of PLN 500 million on December 3,, and PLN 750 million on December 17,. The maturity of bonds is 10 years and they are traded on the transaction platforms of the Warsaw Stock Exchange and BondSpot Polish Economy Banking Sector Financial Information Management Team 48

49 mbank s mortgage client domicile in Poland mbank s portfolio distribution by province Unemployment rate by province as of Zachodnio- Pomorskie 4.4% Pomorskie 10.2% Kujawsko- Pomorskie 4.1% Warmińsko-Mazurskie 2.0% Podlaskie 1.4% Zachodnio- Pomorskie 8.9% Pomorskie 5.7% Kujawsko- Pomorskie 10.1% Warmińsko-Mazurskie 11.8% Podlaskie 8.9% Lubuskie 1.8% Wielkopolskie 8.0% Mazowieckie 28.6% Lubuskie 6.8% Wielkopolskie 4.0% Mazowieckie 5.9% Dolnośląskie 10.5% Opolskie 1.8% Łódzkie 8.5% Lubelskie 2.1% Świętokrzyskie Śląskie 1.0% 9.4% Podkarpackie Małopolskie 1.0% 5.4% Dolnośląskie 6.1% Opolskie 7.4% Łódzkie 7.1% Śląskie 5.5% Świętokrzyskie 8.9% Małopolskie 5.5% Lubelskie 8.7% Podkarpackie 9.7% % of mbank s mortgage portfolio 28.6% % 7.0% - 9.9% 4.0% - 6.9% 1.0% - 3.9% Unemployment Rate in Poland 4.0% - 5.9% 6.0% - 7.9% 8.0% - 9.4% 9.5% % Mortgage portfolio concentrated in low unemployment areas, with 34.6% of clients living in the biggest cities in Poland (Warsaw, Cracow, Poznan, Lodz, Wroclaw, Tricity) Source: internal mbank s data, Central Statistical Office of Poland. Polish Economy Banking Sector Financial Information Management Team 49

50 mbank s Management Team Cezary Stypułkowski President of the Management Board Chief Executive Officer Holds a Ph.D. in corporate law from the University of Warsaw, studied at Columbia University Business School in New York as a member of the Fulbright Program Between 1991 and 2003 chaired the Management Board of Bank Handlowy S.A. From 2003 to 2006 acted as President of the Management Board of PZU Group In 2007 appointed Managing Director of J.P. Morgan Investment Bank responsible for Central and Eastern Europe A member of Institute of International Finance in Washington CEO of mbank since October 2010 Andreas Böger Vice-President of the Management Board Chief Financial Officer In a Managing Director in Global Capital Markets and Co-Head of Capital Solutions Europe & CEEMEA at Deutsche Bank in London In joined Commerzbank as head of the Corporate Finance division within Group Development & Strategy CFO of mbank since July 2017 Lidia Jabłonowska-Luba Vice-president of the Management Board Chief Risk Officer From 1994 to 2001 worked for Schroeder Smith Barney Poland In 2002 joined Bank Handlowy, then Kredyt Bank as deputy president in charge of finance and risk In 2010 appointed Senior General Manager at KBC Group in Brussels responsible for managing all risk types Vice-President of the Management Board since April Adam Pers Vice-President of the Management Board Head of Corporate and Investment Banking In worked for Raiffeisen Bank in various positions In 2012 joined mbank where his first task was to restructure financial markets area; then he was promoted to Managing Director and integrated cooperation with trading area Member of the Management Board of mbank since October 2017 Frank Bock Vice-President of the Management Board Head of Financial Markets Worked for WestLB and was ALM Director at Dresdner Bank Since 2009 a Managing Director in Treasury at Commerzbank responsible for ALM, market risk and liquidity management for Central and Eastern Europe Member of the Management Board of mbank since May 2017 Cezary Kocik Vice-President of the Management Board Head of Retail Banking From 1994 to 1996 in Stockbroker House of PBG Bank Since 2004 in mbank as Head of Retail Credit Risk Department, Head of Marketing and Sales Department, Managing Director for retail banking sales and business processes Member of the Management Board of mbank since 2012 Krzysztof Dąbrowski Vice-President of the Management Board Chief Operating Officer In built and managed the Software Development Practice at shared services center of F.Hoffman-La Roche In CTO of Polish e-commerce leader Allegro Group In joined mbank as a Managing Director and CIO/CTO Member of the Management Board of mbank since April 2017 Polish Economy Banking Sector Financial Information Management Team 50