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 2018

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 5th by net loans and deposits at the end of June 2018 Servicing 4.6 million retail clients and 22.9 thou. corporate clients in Poland and over 900 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 H Total assets 123, , , ,018 Net loans 78,434 81,763 84,476 89,601 Deposits 81,141 91,418 91,496 97,794 Equity 12,275 13,051 14,292 14,521 Total income 4,093 4,295 4,454 2,589 Net profit 1,301 1,219 1, Net interest margin 2.13% 2.30% 2.48% 2.57% Cost/Income ratio 50.1% 45.7% 45.9% 42.9% Cost of risk 0.54% 0.46% 0.61% 0.78% Return on Equity 11.8% 10.1% 8.3% 10.1% Tier 1 ratio 14.3% 17.3% 18.3% 17.1% Total Capital Ratio 17.3% 20.3% 21.0% 20.1% NPL ratio 5.7% 5.4% 5.2% 5.2% Coverage ratio 58.9% 57.1% 59.2% 60.4% Listed on the Warsaw Stock Exchange since 1992 with a market value of ca. EUR 4.1 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 69.4% of mbank s shares Main product lines RETAIL BANKING A wide range of modern financial services for mass market, affluent and private banking clients as well as entrepreneurs Poland Czech Republic and Slovakia 5,508 thou. clients CORPORATE AND FINANCIAL MARKETS Fully fledged offering: Corporate banking Transactional banking Investment banking Brokerage Leasing Factoring 22.9 thou. clients 2

3 From a specialized corporate bank to a large universal bank Brief history Market shares as of Founding of Bank Rozwoju Eksportu (Export Development Bank) as a joint-stock company 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 7.5% 7.6% 7.7% 6.9% 6.4% Total assets of the sector Total loans Total deposits non-financial sector Leasing Factoring Composition of mbank Group s profit before income tax Foreign expansion of bank s retail operations, first outlets in the Czech Republic and Slovakia The announcement of One Bank Strategy for 2012-; the establishment of Euro Medium Term Note Programme (EMTN) Launch of New mbank transactional platform; rebranding of the Group under mbank name The announcement of new mbank Group s strategy ( mobile Bank ) for Financial Markets and Other Corporates and Investment Banking 33.1% 60.5% Retail Banking Establishment of maccelerator a fund aimed 2017 to invest in FinTech start-ups Profit before income tax: PLN 1,528 million in % 3

4 Poland s largest organically developed retail banking franchise Number of retail customers (thou.) Market shares households segment 4, ,556 CAGR +6% 4,551 4, ,757 3,672 5,342 5,508 5, ,906 4,076 4,228 The number of mobile application users at mbank is the second highest among Polish banks and reached 1,330 thousand Orange Finance mbank CZSK 6.6% 5.4% 6.5% 5.7% 6.6% 5.9% Loans 6.5% 6.1% Deposits 6.5% 6.0% 6.3% 5.9% 6.4% 6.1% mbank Poland H /15 12/15 06/16 12/16 06/17 12/17 06/18 mbank s Mobile Application focus on client convenience In April 2017, mbank launched a new mobile application with the Android Pay and Apple Pay functionality, the possibility of logging in with a fingerprint, and a display of the clients spending to help them control their budget. The software has a new interface and simpler navigation, inspired by users habits. Customer can connect with call center directly from the app. In July 2017 the share of clients who logged into their accounts via mobile devices exceeded the logins from computers; in June 2018 it reached 59%, compared to 55% in 2017, 37% in and 28% in Number of Retail Service Locations H mbank (former MultiBank) Advisory centres mfinanse Light branches mkiosks mbank CZSK 4

5 Premier transactional bank with digital DNA Growth of non-cash transactions with payment cards at mbank Number of transactions (million) Value of transactions (PLN billion) +24% +23% +21% +20% Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Role of digital channel in mbank s acquisition and product sales Customer acquisition by channel, Sales mix by channel, 7% 2% 14% 57% 36% 7% 6% 84% 86% 2% 3rd party Phone Digital Branches 13% 4% 3% 4% 3% 10% 27% 72% 83% 66% 15% mbank Average for Polish Banks Average for CE Banks mbank Average for Polish Banks Average for CE Banks Source: Finalta, 100% McKinsey subsidiary. Note: Data in terms of quantity of products sold (completed sales process). 5

6 Supportive demographic profile of mbank s retail client base Distribution of Polish banks by attractiveness of customer base in terms of age and education % of customers under 30 years old 40% Poland average Highest share of the Young (<30 years old) 30% mbank s clients are expected to reach their highest personal income levels in the future 20% Poland average 10% 0% % of customers with higher education 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% Source: mbank based on declarative answers from the syndicate survey Zoom Finance 4Q 16 by TNS, n=8.6k customers. 6

7 Strong presence and leading expertise in corporate banking Number of corporate customers Market shares enterprises segment 16,333 1,255 5,022 10,056 17,787 1,838 5,144 10,805 CAGR +8% 19,562 1,983 5,748 11,831 22,048 22,934 20,940 2,148 2,093 2,123 6,067 7,088 7,551 12,750 12,867 13,235 Corporate customers split, starting from 2018: K1 annual sales over PLN 1 B and non-banking financial institutions K2 annual sales PLN 50 M to PLN 1 B K3 annual sales below 50 M and full accounting 9.7% 6.4% 9.8% 6.3% 10.0% 6.3% Loans Deposits 10.1% 9.6% 6.1% 6.3% 9.6% 6.4% 9.5% 6.5% H /15 12/15 06/16 12/16 06/17 12/17 06/18 mcompanynet new version of the transactional system Number of Corporate Service Locations In 2017 corporates gained access to a new version of mbank s transactional service CompanyNet. The system is easier, more intuitive and adjustable to the individual needs of the user. Corporate clients can also use the advanced mobile application mbank CompanyMobile, which makes it possible to manage their company s finances on the move mbank s branches, incl. 10 advisory centres mbank s offices, incl. 1 advisory centre mleasing mfaktoring mbank Hipoteczny Zachodnio- Pomorskie 2 2 Lubuskie 2 1 Dolnośląskie 2 2 Pomorskie Wielkopolskie Kujawsko- Pomorskie 1 1 Łódzkie 4 1 Opolskie Śląskie 1 2 Warmińsko- Mazurskie 4 3 Mazowieckie 1 Świętokrzyskie Małopolskie 1 1 Podlaskie Lubelskie Podkarpackie

8 Highly efficient platform underpinning solid financial results Total Income & Margin (PLN M) NII NFC Trading and other Total Costs & C/I ratio (PLN M) Personnel Material and other BFG 2.2% 2.3% 2.1% 2.3% 2.5% 2.6% 45.7% 44.9% 50.1% 45.7% 45.9% 42.9% 3, , CAGR +5% 3,939 4, , , , ,833 4, , , ,671 H , , CAGR +5% one-off Regulatory costs 2,051 1,963 2, , H Loan Loss Provisions & Cost of Risk (PLN M) Net Profit & Return on Equity (PLN M) 0.70% 0.72% 0.54% 0.46% 0.61% 0.78% 13.1% 13.1% 11.8% 10.1% 8.3% 10.1% CAGR +2% CAGR -2% ,206 1,287 1,301 1,219 1, H H

9 A well balanced business mix reflected in volumes Structure of mbank Group s Gross Loans as of Public sector loans and other PLN 0.8 B Non-mortgage retail loans PLN 14.9 B Mortgage loans to Microfirms PLN 2.3 B Mortgage LC loans to Individuals PLN 16.1 B 16% 3% 55% 1% 17% Total: PLN 92.7 B 44% 19% Corporate loans PLN 40.8 B Mortgage FX loans to Individuals PLN 17.9 B Structure of mbank Group s Deposits as of Individual clients: term deposits PLN 12.2 B 61% Individual clients: current accounts PLN 47.7 B 2% 12% Total: PLN 97.8 B 49% 26% 11% Public sector clients PLN 2.3 B Corporate clients: current accounts* PLN 25.4 B Corporate clients: term deposits PLN 10.2 B * incl. repo transactions, loans and advances received, other liabilities Total Gross Loans (PLN B) CAGR +5% +6% Total Deposits (PLN B) CAGR +10% % H H 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 Major issues of debt instruments as of Issue size Issue date Maturity date Tenor Coupon Other Subordinated liabilities EMTN Other debt securities in issue Due to banks 3% 2% 7% 6% 4% 30% 48% Retail deposits 78% Corporate deposits Senior Unsecured Debt under EMTN programme 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 180 M Y 0.565% Subordinated debt (Tier II) PLN 500 M Y PLN 750 M Y WIBOR 6M bps WIBOR 6M bps mbank Group s capital ratios calculated in accordance with Basel III rules mbank Group s loan-to-deposit ratio (PLN B) % 17.3% 5.2% 14.7% 3.0% 2.5% % 3.0% % 2.7% % % 103.0% 96.7% 92.3% 89.4% 91.6% 14.2% 12.2% 14.3% 17.3% 18.3% 17.1% H H Core Tier 1 / CET 1 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 10

11 mbank has to fulfil one of the highest capital requirements Regulatory capital requirements for mbank Group as of % 0.02% 2.80% 0.75% % 2.65% 6.00% Tier 1 Capital Ratio 16.98% 0.02% 2.80% 0.75% % 3.53% 8.00% Total Capital Ratio Countercyclical Capital Buffer 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 determined at 3.0% in Poland entering into force from ; it replaced the previous Polish FSA add-on; 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 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; the implementation is gradual and it was raised to from 1.25% to 1.875% from and to 2.5% from Individual additional Pillar 2 capital requirement for risk related to FX retail mortgage loans 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 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/ Based on a decision of the Polish Financial Supervision Authority of , the OSII buffer imposed on mbank was lowered to 0.50% of the total risk exposure amount. 11

12 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 12

13 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 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 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 14

15 Macroeconomic environment remains supportive for banks GDP growth in Poland (% YoY) 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 (%) mbank s forecast Inflation rate (YoY) and the path of interest rates 3% 2% 1% 0% -1% -2% Repo rate CPI inflation Core inflation Repo rate forecast CPI forecast Core CPI forecast Flexible exchange rate 4,6 4,4 4,2 4,0 3,8 3,6 3,4 3,2 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 EUR/PLN USD/PLN CHF/PLN Key economic indicators for Poland F GDP growth (YoY) 3.0% 4.6% 4.8% Domestic demand (YoY) 2.2% 4.7% 5.8% Private consumption (YoY) 3.9% 4.8% 4.7% Investment (YoY) -8.2% 3.4% 9.2% Inflation (eop) 0.8% 2.1% 1.6% MPC rate (eop) CHF/PLN (eop) EUR/PLN (eop) Source: Central Statistical Office (GUS), National Bank of Poland, Bloomberg, mbank s estimates as of

16 Credit growth rebounding, deposit growth slowed down Corporate loans and deposits (% YoY, FX-adjusted) Household loans and deposits (% YoY, FX-adjusted) 25% 20% 15% 10% 5% 0% -5% -10% Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 14% 12% 10% 8% 6% 4% 2% 0% Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Corporate deposits Corporate loans Corporate investment loans Household deposits Household loans Mortgage loans Corporate deposits continue to grow at a lacklustre pace, mainly due to downward pressure on liquidity and income from rising material and labour costs. Corporate lending remains uneven. Household deposits rebounded sharply as alternative forms of saving lose their shine and nominal income growth remains solid. Mortgage lending is driving the acceleration in household credit. Corporate volumes YoY F Corporate loans 5.0% 5.9% 13.4% Corporate deposits 7.9% 2.4% 11.0% Household volumes YoY F Mortgage loans 4.8% -0.1% 7.2% Non-mortgage loans 5.5% 5.4% 6.5% Retail deposits 9.7% 4.2% 7.2% Source: National Bank of Poland, mbank s estimates as of

17 A well-capitalized and stable banking sector in Poland Share of 5 largest banks in sector s total assets Capital adequacy and Funding: capital and L/D ratios 50% 49% 48% 47% 46% 45% 44% 43% 42% 41% Concentration of Polish banking market has remained relatively moderate, but the consolidation has intensified over recent years 47.8% 40% TCR & Tier 1 ratio Tier 1 ratio Tier % 17.7% 16.3% 14.7% 17.3% 13.4% 15.0% 16.1% Loan-to-deposit ratio 102.2% 102.2% 98.9% 97.7% Asset quality: development of NPL ratios by segment Efficiency and Profitability: C/I ratio and ROE 13% 12% 11% 10% 9% 8% Impact of IFRS9 introduction 9.7% 7.6% Cost-to-Income ratio 58.7% 56.0% 56.4% 50.9% 9.9% Return on Equity 7.8% 7.1% 6.6% 7% 6% 6.5% 5% 4% Dec-10 Nov-11 Oct-12 Sep-13 Aug-14 Jul-15 Jun-16 May-17 Apr-18 Total non-financial sector Households Corporations 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

18 Operating conditions for banks have remained 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 2015, 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, 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 2015 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. In general LTV limit was set at 85%. On 9 October 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). Starting from February, 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 %. Since 1 January 2018 the minimum required capital ratios have been raised to % for Tier 1 and % for TCR. Moreover, the Polish FSA imposed individual additional capital requirements on banks most exposed to FX mortgage loans (for mbank Group at 2.65% for Tier 1 and 3.53% for TCR). Source: mbank based on the National Bank of Poland, the Polish Financial Supervision Authority, the Bank Guarantee Fund. 18