Bank Hipoteczny Mortgage Covered Bond Investor Presentation. Proven track record and prospects for future growth

Transcription

1 Bank Mortgage Bond Investor Presentation Proven track record and prospects for future growth

2 Investment Highlights - well capitalised, liquid Bank with unique story of successful organic growth, well recognised Bank Group as a mobile icon Mortgage High - most active issuer of covered in Poland with longest covered issuer history on capital market covered rated A by Fitch Ratings (3 notches above issuer rating and 1 notch above sovereign) credit quality cover pool with comfort FX structure for EUR and PLN Bonds issues Poland one of EU s most resilient economies with healthy and attractive banking sector Stable and growing residential market in Poland with prospects for mortgage growth Legal consideration of Bonds in line with the best market practices protecting covered investors 2

3 Agenda 1 Group & Group overview and key performance overview Role in Group Strategy Financial results and asset and liability structure Debt securities issued 2 issuances track record and Bond Market Mortgage Bond Programmes Issuance plans 3 Distribution by real estate type, currency, ir and geographical Credit risk and other statistics 4 economy fundamentals Banking sector stability 5 & Stable and growing residential market in Poland real estate - activity of developers Commercial real estate investment volume 6 Legal consideration of Bonds 3

4 Group in a snapshot General description Key financial Group 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 December 2016 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 Change 15 /16 Net loans 78,434 81,763 +4% Assets 123, ,744 +8% Deposits 81,141 91, % Equity 12,275 13,051 +5% Total income 4,093 4,295 +5% Net profit 1,301 1,219 (6%) Cost/Income ratio 50.1% 45.7% (4.4 pp) Cost of risk 0.54% 0.46% (0.08 pp) ROE net 11.8% 10.1% (1.7pp) CET 1 ratio 14.3% 17.3% +3 pp Total Capital Ratio 17.3% 20.3% +3 pp NPL ratio 5.7% 5.4% (0,3 pp) 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 # ,3 milions clients 20,940 clients PKO BP Pekao BZ WBK ING BSK BGŻ BNP Paribas Getin Noble Millennium Source: s consolidated financial statements as of mgroup 4

5 Group unique story of successful organic growth Number of retail customers (thou.) Retail loans: PLN 48.9 B Retail deposits: PLN 53.5 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, 's mortgage clients predominantly live in urban areas and large cities of more than 100 thou. residents Number of corporate customers Corporate loans: PLN 34.2 B Corporate deposits: PLN 37.4 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 CZSK Poland 4, , ,556 3, ,333 1,255 5,022 10, ,787 1,838 5,144 10, , , ,562 1,983 5,748 11, ,378 5, , ,940 2,123 6,067 12, Brief history 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, 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, added a high street brick-andmortar bank, offering a broad range of products and services targeted to affluent customers and micro-businesses seeking high quality, personalized service at branches., which launched retail operations in the Czech Republic and Slovakia in 2007, managing to replicate its business model in foreign markets. As a result, s client base has grown almost entirely organically, reaching 5,348 thou. retail clients and 20.9 thou. corporate customers at the end of has got more than 1.3 million active users of mobile banking. Source: s consolidated financial statements. mgroup 5

6 overview and role in Group strategy Poland s largest specialist mortgage bank in terms of total assets, and total loans volume. Corporate structure Since 1999 has been playing a leading role in the financing of project on the real estate market. The most active issuer of covered in Poland with longest Bonds issuer history on capital market and only issuer of public-sector covered in Poland. Immediate Parent Strategically important subsidiary of Ultimate Parent Bonds Project - one of the key initiative of Group s strategy is remodeling balance sheet by increasing the share of debt instruments on the basis of long-term source of funding. Hence, issuance of Bonds by became a key element of s Group integrated balance sheet management strategy. The main objectives of the covered project Improving stability of the financing the Group through the application of long-term solutions regarding the mortgage portfolio; Diversification of the funding sources Improving long-term liquidity in the Group adaption to the NSFR requirements Mortgage lending and financing developer and (details on next slides) 6

7 mortgage lending Agency model of Mortgage Lending Model of cooperation Comprehensive model of cooperation between and in terms of sales, services and management of the portfolio of retail loans secured by mortgage, and subsequently the issuance of covered on this basis Entire mortgage lending transferred to (from Q2 2016) Share of mbh in total Group new ML sales: 59% 54% 45% 46% 97% 100% 87% 90% Product policy Product offer (all fin parameters) Marketing and communication Transaction ownership 7 09/15 11/15 01/16 03/16 05/16 07/16 09/16 11/16 After sales process Pooling model Transfer of existing residential mortgage loans portfolio from to its refinancing with mortgage covered : Based on framework agreement on acquiring portfolios of mortgage loans provides after-sale services Maintaining a good relationship with the clients no changes from the customer perspective.! Pooling of 's retail mortgage portfolio is a pioneer transaction of the mortgage transfer on the market. Source: s consolidated financial statements. Characteristics of the portfolio eligible for transfer Loans to finance the purchase of real estate No delays & defaults First rank joint contractual ordinary mortgage on all property pledged as collateral Property located on territory The remaining term of the loan over three years Suitable internal rating Applies only to PLN denominated loans. Amount of the loan at the transaction date does not exceed 100% LtV limit 7

8 commercial real estate Commercial Real Estate The Bank offer in the area of commercial loans includes in particular: mortgage loan to housing developers projects construction loan for the implementation of new commercial investment to commercial developers loans for the financing of commercial real estate projects that are consistent with the Bank s credit policy refinancing loan for refinancing or purchase of existing commercial properties (office buildings, warehouses, shopping centers and malls, logistics centers, hotels, guest houses, commercial premises, etc.), including commercial loans acquired from S.A. Commercial Real Estate by property type Warehouse/Logistic centre Mixed use property Housing development Commercial premises 0,22 (5%) 0,36 (8%) 0,29 (6%) 0,37 (8%) Hotel Other 1,53 (32%) Shopping centre 0,05 (1%) 0,18 (4%) Total 4,71 bn PLN Offices 1,71 (36%) Characteristics of funded projects Maximum lending term - Duration of the loan for commercial real estate is up to 15 years. Loan currency - The Bankgrants commercial loans denominated in EUR and PLN. Own funds - 25% of the total investment cost is the minimum own funds of the borrower. Security - Basic security required by the Bank includes: the highest priority mortgage established for the benefit of the Bank on the ownership or the right of perpetual usufruct of the property, assignment of rights from insurance against fire and other perils for real estate which is the subject of credit or the registered pledge on those rights, assignment of rights from the insurance contract against all risks of building construction (CAR) in the case of real estate lending in construction or pledge on such rights. Source: financial statements. Data as of 31 December

9 key financials Summary of Key Financials: Profit and Loss Account in PLN M Net interest income Net Fee & Commission income Total income 1) Total costs 2) (40.6) (43.4) (51.1) (62.6) (65.7) Loan Loss Provisions (26.3) (34.9) (20.9) (24.8) (21.6) Operating result Net profit Net Interest Margin (NIM) % 1.55% 1.37% TCR 11.97% 14.92% 13.31% 13.81% 14.54% Cost/Income ratio 50.16% 52.16% 50.36% 54.82% 48.96% Cost of Risk % 0.39% 0.26% Gross Return on Equity (ROE) 3.62% 0.98% 4.91% 3.91% 3.62% 1) total income (defined as net interest income + net fee and commission income + net trading income + other operating income - other operating expenses) 2) total cost (overhead costs + amortisation and depreciation) 9

10 Development of Revenues and Costs Development of Total Income (PLN M) Development of Total Costs (PLN M) nd NIM (bps) 52.2% 50.4% 54.8% 48.9% C/I (%) +17% +12.5% +22.1% change 15/ % % Net Interest Income Net Fee and Commission Income Trading and Other Income +17.6% +4% +18.0% change 15/ % +15.8% -32.0% -30.8% Personnel Costs Material Costs Depreciation & Amortization Other Loan Loss Provisions (PLN M) & Cost of Risk % Cost of Risk (bps) Net Profit (PLN M) & Gross Return on Equity (ROE) 0.98% 5.7% 3.9% 3.6% ROE +24.6%

11 Asset and liability structure Structure of Assets (PLN M) Structure of Liabilities (PLN M) 4, , % 6, , % 8, , ,649 1, , % 10.6% 0.4% 88.4% 0.4% Amounts due from banks Loans and advances to customers Derivative financial instruments Investment securities Other 4, , , , , , , , , , % ,5% 6, % % 3, % 2016 Amounts due to other banks Amounts due to customers Debt securities in issue Equity Other Total Gross Loans (PLN M) Balance sheet value % +27% 9, ,4% change 15/ ,7% Equity (PLN M) 14,9% 13,3% 13,8% 14,5% TCR (%) 7,392 3,429 3, ,706 5, ,601 4, ,375 3, % +68,2% 3,800 +6,4% , , , , % Commercial loans Housing loans to individual clients Public loans *On 27 February 2017 paid up in full increase by PLN thousand, i.e. to PLN thousand 11

12 Quality of the loan portfolio Quality of the loan portfolio (PLN M) 4,53% 4,32% 3,89% 4,09% 3,72% NPL ratio 339,2 338,3 330,4 375,0 353,6 December '15 March '16 June '16 September '16 December '16 Loan portfolio (gross) Non-performing loans (gross) NPL by business lines (PLN M) Cost of Risk by business lines (bps) 8,76% 7,36% 7,18% commercial portfolio 0,55% 0,59% 0,49% commercial portfolio retail portfolio retail portfolio 0,00% 0,02% 0,08% 0,11% 0,04% 0,04%

13 Debt securities issued Debt financial instruments by type (carrying value, PLN M) Debt financial instruments by currency (carrying value, PLN M) +47.1% +31.1% +19.2% 4, ,172 2, ,927 2,688 1,986 6, , % 1.3% 86.1% Short-term notes Long-term notes Public CB Mortgage CB 2, ,289 3, ,274 4,157 1,242 2,915 6,116 2,033 4,083 33% 67% EUR PLN Maturity of debt financial instruments by type (nominal value, PLN M) EUR - Mortgage Bonds PLN - Mortgage Bonds PLN - Long - term notes PLN - Short - term notes Data as of: December 30 th, Based on EUR/PLN NBP rate

14 Bond Market in Poland Bond market players in Poland public issuance (bn PLN) Mortgage covered currency split 11,55 PKO Bank 6,11 (53%) Total 11,5 bn PLN 4,18 (36%) EUR PLN 6,43 (56%) 5,13 (44%) 4,18 1,75 (42%) 2,44 (58%) 6,11 4,32 (71%) 29% (1,80) 1,26 0,90 0,36 (29%) 1,26 (11%) Total Market mbh PKO BH Pekao BH is a significant and frequent issuer with 36% market shares in total outstanding amount of covered with the longest issuer history on the market. Starting from 2012 active in the primary market s EUR debt segment which reflected in the currency structure of its issues Issuer of 15-year mortgage covered which are one of the longest maturity instruments issued by commercial enterprises in history. First PLN fixed rate Bonds issuer Data as of June 30 th, 2017 Pekao Bank Fixed Float Mortgage covered float/fix rate split 11,55 5,62 (49%) 5,93 (51%) Total Market 4,18 0,98 (23%) 3,20 (77%) mbh 6,11 4,58 (75%) 25% (1,53) PKO BH 1,26 0,06 1,20 (5%) Pekao BH 14

15 Mortgage CB rating uplift among issuers Country ceiling AA-/A/Aa3 Mortgage CB issues -/-/Aa3 Mortgage CB issues +1 notch +2 notches Mortgage CB issues A/-/- Positive/-/- A/-/- Stable/ - / - +1 notch Poland Sovereign Long Term Commerzbank Long term A-/BBB+/A2 Stable/Negative/Stable +3 notches BBB+/A-/Baa1 Stable / Negative / Stable PKO Bank Polski Long term PKO Bank Long term -/-/A2 - / - / Stable -/-/Baa1 - / - / Stable +4 notches Pekao Bank SA Long term Pekao SA Long term A-/-/- Stable/ - / - +1 notch A-/BBB+/A2 Stable/ Stable/ Stable Long term Long term BBB/BBB+/- Stable/ Negative /- BBB/-/- Stable/-/- Fitch/ S&P / Moody s as of x notch - relation to sovereign rating +x notch - relation to issuer rating Fitch Ratings has upgraded 's mortgage covered bond programme to 'A' from 'BBB+ (by 2 notches) -higher than Sovereign rating (+1 notch) and removed the Rating Watch Positive. The Outlook is Positive - The resolved rating watch as well as the upgrade of the programme follows a review of the legal opinions and the historical performance data and reflects legislative amendments to the covered framework, effective 1st January FitchRatings mortgage covered program rated 3 notches higher than issuer rating Source: Rating Agencies press releases 15

16 issuer track record Crucial milestones in issuance history First issue of Mortgage Bond in Poland (after 1945) First listed Bond in Poland First issue of Public Sector Bonds New residential mortgage sales Strategy implemented outstanding covered m PLN EBRD invests in 3 series in USD 15 m USD 2 series in EUR 20 m EUR EIB invests in 2 series in PLN 300 m PLN 15Y Bonds longest maturity in Poland First fixed rate PLN Bonds issues ,429 3,163 3,706 16

17 Issuance activity on the Bonds Market Data as of June 30 th, 2017 Bonds Issuance (PLN M) +279% , , (45%) 870 (55%) 2016 Private placement of EUR 70 milion and PLN 400 million 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 Issuance of Bonds in original currencies: (LC M, by quarter) Summary of Mortgage Bonds issued in Amount Currency Issue date Maturity date Tenor (years) Coupon 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%) 24.9M EUR Fixed (0.94%) PLN X 50 EUR Number of issues Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q1/15 Q2/15 Q1/16 Q3/16 Q4/16 Q1/17 17

18 Outstanding Mortgage Bonds Data as of March 31 th, 2017 Mortgage covered public issuance All mortgage CBs PLN 4,583.7 m PLN-denominated PLN 2,835.0 m EUR-denominated PLN 1,748.7 m Distribution by currency EUR 4,58 1,75 (38%) Distribution by interest rate Fixed 4,58 0,98 (21%) WA Time to maturity PLN-denominated EUR-denominated 4.1 years 3.7 years 4.9 years PLN 2,84 (62%) Float 3,60 (79%) mbh mbh Mortgage covered maturity profile broken down by currency (PLN m) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ,584 31st Mar, EUR PLN

19 Domestic Bond Programme Law Mortgage Bond Programme by Law Prospectus date 26th August, 2016 Size Manner of offering Instruments Form Depository Secondary trading Required rating Maturity Interest rate Minimum value of a single series PLN 15.0 bn (or the equivalent of this amount in EUR or USD) Public Offering Mortgage covered ( Hipoteczne listy zastawne ) Dematerialised bearer securities KDPW, Poland Regulated market operated by GPW / BondSpot (Catalyst market) International investment-grade rating Not less than 1 year Fixed, floating Mandatory overcollateralisation Yes 10% Documents PLN 10.0 m (or the equivalent of this amount in USD or EUR) Base Prospectus Appendixes to the Base Prospectus issued by based on domestic Programme: Fulfil the criteria of UCITS Directive & criteria of Article 129 (7) of the Capital Requirements Regulation (CRR) Eligible as collateral for lombard facility, internal credit and repo operation with central bank (only PLN-denominated CBs) All mortgage covered (PLN and EUR-denominated) are listed on the Catalyst market Soft bullet / conditional pass-through - maturity of the covered obligations extended automatically by 12 months and if asset coverage or liquidity test were negative, pass through - in hypothetical case of mortgage bank s insolvency Mandatory liquidity reserve covering at least 6 months of interest due on the covered outstanding 19

20 EUR denominated issuance plans for near future Plans for EUR covered issuance has been a regular issuer of EUR denominated Bonds. A total of 15 transactions have been completed to date with a target issue size from EUR 20mln to EUR 50mln. Every EUR denominated Bonds were issued under mbh s Mortgage Bond Issuance Programme approved by PFSA in 2009 (already closed) and new Mortgage Bond Issuance Programme approved by PFSA on 26th August 2016 (described in presentation) - allows for public issuance. Since every transaction is a public issuance, mbh does not specify offer levels. The level will be established in the bookbuilding process. Nonetheless, it may be useful to indicate that the reverse enquiries with the following characteristics may be of interest to. Minimum size: EUR 20 m Maturity: 5-10 years EUR M BPS over Mid Swap Pricing (in EUR): up to Mid-Swaps +30 bps for 5Y covered ; up to Mid-Swaps +45 bps for 10Y covered. As a guide, linear interpolation can be used for maturities in between 5-10years. Please note these levels include all placement fees. 0 5Y BPS over Mid Swap (rhs) Minimum CB issue (lhs) 10Y 0 Please see legal disclaimer at the end of presentation 20

21 Bank International Bonds Programme Bond Recognition Law & Jurisdiction Prospectus date 6 July 2017 The Mortgage Bonds shall comply with (i) the requirements of Article 52(4) of the UCITS Directive, (ii) Art. 129 of the CRR and (iii) the Bond legislation. T&C`s: Law and Courts, English language legally binding Dealer Agreement, Paying Agency Agreement: English Law and English Courts, English language legally binding Size Form Base Prospectus approval Authority Clearing System Secondary trading Expected Bonds Rating Maturity Interest rate Currency Minimum value of a single series Involved Parties Issuer Arranger: Issuer`s Counsel Dealers Counsel: Fiscal and Paying Agent: Luxembourg Listing Agent: Appointed Dealers EUR 3.0 bn New Global Note - ECB repo eligible / Classical Global Note Commission de Surveillance du Secteur Financier, Luxembourg (CSSF) Clearstream / Euroclear Luxembourg Stock Exchange Fitch Ratings Ltd A outlook - positive Up to 30 years Fixed, floating Multi currency EUR 100,000 or its equivalent in other currencies Commerzbank Aktiengesellschaft Hogan Lovells as to and English law White & Case LLP as to and English law Deutsche Bank Aktiengesellschaft Deutsche Bank Luxembourg S.A. Commerzbank Aktiengesellschaft, Erste Group Bank AG, Société Générale, J.P. Morgan, Landesbank Baden-Württemberg. 22

22 EUR PLN Mortgage highlights Characteristics as of notional: Mortgage 7.374,6 m PLN Overcollateralisatio n on high level Cover pool outstanding - public+ private Overcollateralisation regulatory minimum 10% 39,7% Receivables Substitution collateral Outstanding Bonds 7.325,8 m PLN 48,8 m PLN 5.279,0 m PLN Comfort Cover Pool FX structure for EUR and PLN MCB issues +49 m PLN Supplement collateral +61 m PLN USD cover pool FX space for PLN issues OC at cut-off date 39,7% Number of loans Number of residential mortgage Number of commercial loans Average loan size residential Average loan size commercial ,25 m PLN 12,39 m PLN WA LTV residential 77,04% FX space for EUR issues ~200 m EUR WA LTV commercial 66,99% NPL (above 90 days) 0,00% WA life (in years) 16,63 Rate type Geographical location CB Fitch Rating 100% Floating rate 100% Poland A High credit quality of cover pool 0% - NPL (above 90 days) 100% - Poland located mortgage 47% - Increasing share of residential real estate Seasoning the time duration between date of a loan agreement and the Report date LTV current value of loan to primary BHWN/MLV 24

23 Mortgage by real estate type Increasing share of residential real estate in mortgage cover pool Commercial real estate in Cover pool by the type of property % % 29% % % % 41% 47% 40% real estate 39% 36% Office Shopping malls % 84% % % % 60% 61% % 56% 53% Commercial real estate Hotel/Tourism 4% Retail 8% Warehouse/Logistic Centre Other commercially used 5% Bulding under construction 4% 1% 3% Other Commercial real estate Please note that residential real estate refers to both loans granted to individuals for housing purchases as well as loans to developers for residential housing construction. Data as of Please note: The category of mixed real estate includes i.a.: business premises/offices/warehouse centre; shopping mall/offices; business premises/shopping mall/warehouse centre 25

24 Mortgage currency, IR split Cover pool broken down by currency & interest rate Since 2014 the currency structure of the loan portfolio in mortgage cover pool was subject to changes resulting from a systematic growth of the portfolio of retail loans granted only in PLN. In comparison with the end of Dec 2014, the share of loans in PLN increased by 29 percentage points and, as at the end of March 2017, accounted for 60,22% of the cover pool. Amount of loans denominated in USD continue to phase out. Historically mbh didn t grant loans denominated in CHF. Hence, there is no CHF-denominated loans in cover pool. All of mortgage loans in cover pool are based on a floating interes rate. Share of EUR, USD and PLN-denominated loans in cover pool 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % 67% 39% 31% 2% 2% % 44% 2% % 49% 45% 53% 42% Distribution by Interest rate tenor Floating 6M 2% % 2% % 43% 44% 56% 56% 55% 1% % Floating 1M 1% % 39% 57% 60% 1% 1% EUR PLN USD 65% based on 3M interest rate 65% Data as of Floating 3M 26

25 Mortgage - by loans value Residencial mortgages Commercial loans Total Value Value Value Value % share in cover pool % share in cover pool (in PLN m) (in PLN m) (in PLN m) (in PLN m) % share in cover pool % 0 0% % % 3 0% % % 15 0% 637 9% % 280 4% 390 5% % 367 5% 367 5% % 463 6% 463 6% % 423 6% 423 6% % 481 7% 481 7% % 561 8% 561 8% % 225 3% 225 3% > % % % TOTAL % % % Residencial mortgages Commercial loans > 50.0 Data as of March 31 st,

26 Mortgage ML regional distribution Geographical distribution negatively correlated with unemployment by province strong client base portfolio % of mbh s Mortgage > 20% % % % < 1% Zachodnio- Pomorskie 4.32% Pomorskie 8.32% Warmińsko-Mazurskie 1.2% Podlaskie 0.96% Unemployment Rate in Poland 5.0% - 6.9% 7.0% - 8.9% 9.0% % 11.0% % Kujawsko- Pomorskie 2.61% Zachodnio- Pomorskie 11.0% Pomorskie 7.3% Kujawsko- Pomorskie 12.1% Warmińsko-Mazurskie 14.2% Podlaskie 10.4% Mazowieckie Lubuskie Wielkopolskie 41.83% 0.78% 7.29% Łódzkie 4.58% Lubelskie Dolnośląskie 2.33% 8.92% Świętokrzyskie Opolskie 0.6% 0.76% Śląskie 4.72% Podkarpackie Małopolskie 0.84% 9.96% Lubuskie 8.7% Dolnośląskie 7.3% Wielkopolskie 5.0% Opolskie 9.0% Łódzkie 8.6% Śląskie 6.6% Mazowieckie 7.2% Świętokrzyskie 10.8% Małopolskie 6.7% Lubelskie 10.4% Podkarpackie 11.6% Data as of March 31 st, 2017 Data as of December 30 th, 2016 Data sourse - GUS 28

27 Mortgage CRE/RRE regional distribution Geographical CRE/RRE regional distribution vs with vacancy ratio by main cities stable portfolio % of CRE/RRE regional distribution in Mortgage > 20% % % % < 1% Zachodnio- Pomorskie 2,46% Pomorskie 4,44% Kujawsko- Pomorskie 1.1% Warmińsko-Mazurskie 0.7% Podlaskie 0.07% Vacancy Ratio 6.0% - 8.0% 8.0% % 11.0% % 14.0% % Zachodnio- Pomorskie Szczecin 14.7% Pomorskie Tricity 11.1% No data avalible Mazowieckie Lubuskie Wielkopolskie 29.3% 0.42% 10.17% Łódzkie 4.0% Lubelskie Dolnośląskie 2.2% 16.9% Świętokrzyskie Opolskie 1.96% 1.6% Śląskie 8,55% Podkarpackie Małopolskie 4.8% 11.24% Dolnośląskie Wrocław 12.5% Wielkopolskie Poznań 13,60% Łódzkie Łódź 6.2% Śląskie 14.0% Małopolskie Kraków 7.2% Mazowieckie Warsaw 14,2% Lubelskie Lublin 10.9% Data as of March 31 st, 2017 Data as of December 30 th, 2016 Data sourse Cushman&Wakefiled 29

28 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, high cost competitiveness and key location within the huge EU market The most liquid financial market in the region Economic rebound began in 2013 and it s set to continue in the coming quarters; Poland should continue to outperform most of its peers Contributions to GDP growth s forecast Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q3/15 Q1/16 Q3/16 Q1/17 Q3/17 Investment Net exports Consumption Inventories GDP YoY (%) Poland one of the fastest growing economies in the CEE region GDP index (Q1 2008=100) 2015 Nominal GDP share Real GDP growth Q1/08 Q2/09 Q3/10 Q4/11 Q1/13 Q2/14 Q3/15 Q4/16 Poland Hungary Czech Republic Slovakia Bulgaria Romania Poland 43.8 % 11.1% 16.4% Hungary Romania Czech Republic Slovakia Bulgaria Romania Hungary Slovakia Bulgaria Czech Republic Source: Central Statistical Office of Poland, Eurostat. 1 Share of 2013 Nominal GDP of CEE region defined as: Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia 16.1 % 8.0% 4.5% Poland EU % 3.2% 3.3% 3.1% 2.8% 2.8% 3.3% 2.6% 2.4% 1.8% 1.9% 4.0% 4.9% 3.3% (average)

29 Sound fundamentals for the banking business Relatively strong labour market Inflation rebounded from historically low levels, as in other CEEs Unemployment rate % 9.6% 7% 7 6% 6 5% 5 Harmonised indices of consumer prices (HICP) 5.9% Poland 3.5% Czech Republic 4.5% Hungary EU-28 Euro area 4% 4 3% 3 2% 2 1% 1 0% 0-1% -2% Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16 Nov-16 Poland Czech Republic Hungary 2.1% 1.8% 0.9% Consistent fiscal discipline General government debt (% of GDP) Underleveraged private sector Domestic credit to private sector (% of GDP) % 90.7% 93.0% 100.0% 51.3% 41.4% 53.1% 53.9% 36.4% 51.2% Poland Source: Eurostat, World Bank. Czech Republic Slovakia Hungary Euro area Poland Hungary Czech Republic Euro Area EU-28 31

30 An attractive and healthy banking sector Banking sector penetration in Poland Capitalisation and Funding the banking sector % GDP growth TCR & CET 1 ratio Loan-to-deposit ratio 35.7% 14.6% 12.0% 12.3% 15.7% 14.7% 16.3% 17.6% 102.0% 102.2% 102.2% 98.9% 18.7% 21.6% 14.1% 13.4% 15.0% 16.0% Corporate loans Total retail loans Mortgage loans Corporate loans Total retail loans Mortgage loans CET 1 ratio Tier 2 09/ Asset quality & Regulations the banking sector Group s NPL ratio below the market level NPL ratio % 6.0% Prudent supervision Strict origination standards for retail and mortgage loans 6.3% 6.4% 5.7% 5.4% -1.6 pp 7.0% 2.9% FX mortgages only to borrowers earning income in the loan currency 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, FSA. Note: Ratios (C/I, ROE) impacted by one-off costs in 2015 and banking tax in Sector

31 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 Stable and growing residential market in Poland New dwellings price dynamics in the CEE very low volatility in Poland index, 2010= Hungary Czech Republic Slovakia Poland Romania Low volatility of new dwellings price dynamics trough the years with strong demand and supply with potential for future growth 2016 was a year of high activity both on the side of demand and supply on the housing properties market. In total, at the end of 2016, in the main cities in Poland there were approx thousand apartments in the offer (an increase of 8% y/y), of which only approx. 17.2% of the offer consisted of completed premises. Data Source: Eurostat Potential for further mortgage growth Dwellings per 1,000 inhabitants in selected EU countries for Dwellings tenure status (2014) Mortgage or housing loan Owner occupied Rental 4% 17% 10% 11% 21% 33% 48% 35% 73% 95% 79% 61% 71% 39% 26% 34% Poland Hungary Czech Republic EU 28 Germany France 11% 11% 18% 18% 1% Poland Romania Slovakia Czech Hungary Republic 28% 27% 31% Euro area (EA-19) Germany France Data Source: Deloitte Property Index report published in July 2016 Data Source: Eurostat 33

32 Quarters ths real estate - activity of developers Changes to Poland s housing stock in the primary market high activity of developers on the primary housing market The number of dwellings put on the market (left axis) 2016 y/y 65 ths + 25,2% y/y The number of sold dwellings (left axis) 62 ths + 19% y/y The number of dwellings on offer (right axis) 3 ths +8% y/y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Growing supply is compensated by increasing demand (dwellings sold on the market vs. put on the market, and as a result the number of dwellings remains stable (the offer consist of the completed and still unsold flats) Offer sell-out period Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Warsaw Trojmiasto Poznan Lodz Krakow Wroclaw Average of 6 major cities Structure of the market offer according to the projects delivery date - December 31st, % 50% 4% 5% 25% untill The average time required for the dwellings to sell is shortened, the fastest sell out is in Trojmiasto and the longest in Poznan Prices are stable with slight upward trend from Data Source for the slide: REAS Analysis was based on major polish cities: Warsaw, Cracow, Poznań, Łódź, Wrocław, Gdańsk. 34

33 Commercial Real Estate investment volume Investment volume in Poland by sector m EUR ,5 Office Retail Warehouse Other , F Poland - CEE leader in CRE investment volumes (%) 11% 5% 7% 32% 45% Poland Czech Hungary Slovakia Romania Investment volume in Poland retail leading role (%) 17% 43% 0,4% 40% Office Retail Warehouse Other Data Source for the slide: Cushman&Wakefield Report Poland - CEE leader in CRE investment (45%). The volume of transactions concluded in 2016 on the commercial real property market amounted to approx. EUR 4.6 bn and the result was comparable with that recorded in 2015 (EUR 4.1 bn). The share of the markets was more or less equal in the case of office and trade space, and amounted to approx. 40%, whereas investments in the warehousing sector constitutes approx. 17% of the transaction volume. 35

34 Positive changes in Bonds Law Legal framework for Bonds The Act on Bonds and Mortgage Banks (Ustawa o listach zastawnych i bankach hipotecznych) of August 29, 1997 with changes in 2016 The Bankruptcy and Reorganization Law (Prawo upadłościowe) of February 28, 2003, Chapter II - Bankruptcy proceedings for mortgage banks, Article Mortgage Bank Specialised bank (mortgage bank) with the supervision of Financial Supervision Authority (KNF) Mortgage bank is a joint stock company with a legal personality (not a branch) with two licences: a banking licence and a consent to start operating activity, both granted by the KNF. A covered bond issuer may issue mortgage or public covered bond. Specific license for each covered bond type is required before the issuer may start to issue covered. Fundamental changes in 2016 revision of the Act on Bonds and Mortgage Banks - in line with the best market practices and with recommendations of the European Central Bank (ECB) and credit rating agencies Improvements: Increase of credibility and safety of covered soft bullet / pass-through - maturity of the covered obligations extended automatically by 12 months and if asset coverage or liquidity test were negative - pass through - in case of mortgage bank s insolvency (details on the next slide) mandatory liquidity reserve covering at least 6 months of interest due on the covered outstanding Regulatory status - Compliance with: CRR art 129 UCITS 52 (4) BRRD minimum legal overcollateralization requirement (OC) 10% CQS (credit quality steps) 2 Extension of covered bond supply increase refinancing limit for mortgage covered for residential mortgage loans to 80% from 60% LCR Delegated Act (liquidity buffer) ECB Repo Until minimum size achieved Extension of demand for covered introduce investment limit for Pension Funds 5% of portfolio NBP Repo income from interest or discounts on the covered earned by foreign investors is exempt from withholding tax (WHT) CBPP / LTRO 36

35 Tests perform initially 3 months after insolvency and subsequently every 3M Liquidity and 6M Coverage Maturity of covered Extended maturity of CB Repayment process in case of issuer insolvency Issuer insolvency Maturity of CB Coverage test* positive Initially extension by 12M Liquidity test* positive Soft bullet Coverage test positive Liquidity test negative or Coverage test negative Extension longest dated asset maturity plus 3Y Principal payment paid pass-through and pari-passu Earlier repayment 2/3 majority CBs holders decision on cover pool disposal Pass through *details on the next slide 37

36 Obligatory cover pool tests ensure safety of CB Coverage Test Verifies at the day of test whether the value of the assets in the cover pool allows for outstanding covered claims. Cover pool Core assets Substitute assets Liquidity buffer Hedging instruments CB claims Outstanding covered (principal) Due and unpaid interest from CB Cost of liquidating asset pool in case of insolvency 1 Test calculted also under stressed conditions: +/- 20% FX rate or highest year change in previous 12 M Tests performed min. once a 6M Liquidity Test Verifies at the day of test whether the value of the assets in the cover pool allows for outstanding covered claims even in extended maturity in case of issuer insolvency. Separately for 6M and 12M horizon Cover pool CB claims Substitute assets Liquidity buffer Net cash flows from hedging instruments in time horizon Interest payable in time horizon Principal amount that fall in time horizon Cost of liquidating asset pool in case of insolvency in time horizon 0 Additionally for 12 M horizon: Interest under receivables in the cover pool for the next 12 months Obligations towards holders (principal + interest) that became due but were not paid before the date of hypothetical insolvency Test calculated also under stressed conditions: +/- 20% FX rate or highest year change in previous 12 M +/- 400bps shift of interest rate curves Tests performed min. once a 3M 38

37 Disclaimer This presentation is for promotional purposes only and under no circumstances shall constitute an offer or invitation, or form the basis for a decision, to invest in the covered of S.A. The prospectus prepared in connection with the public offering to which this presentation relates and admission of the covered to trading on a regulated market (the "Prospectus") is the sole legally binding document containing information about the new public offering of the covered. The Prospectus has been submitted to the Financial Supervision Authority for approval. Once approved by the Financial Supervision Authority, the Prospectus will be published and available on the website of S.A. ( This document has been created and published by the Treasury Department of S.A., Warsaw. The document is intended for distribution to the bank's professional and institutional clients and not to its private clients. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Commerzbank Group with regard to the accuracy or completeness of the data. The opinions and estimates contained herein constitute our best judgement at this date and time, and are subject to change without notice. This report is for information purposes, it is not intended to be and should not be construed as a recommendation, offer or solicitation to acquire, or dispose of, any of the securities mentioned in this report. Commerzbank Group may provide banking or other advisory services to interested parties. This report is intended solely for distribution to professional and business customers. It is not intended to be distributed to private investors or private customers. Not for distribution to third parties. Commerzbank Group accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of or in any way connected with the use of all or any part of this report. In compliance with statutory and regulatory provisions, S.A. has made internal organisational arrangements so as to prevent as far as possible any conflicts of interest in preparing and transmitting analyses. These include, in particular, in-house information barriers (Chinese walls). These barriers prevent giving analysts access to information that may cause conflicts of interest for S.A. with regard to the analysed issuer or its financial instruments. These information barriers also apply to any information not in the public domain to which S.A. may have access from a business relationship with the client. For statutory or contractual reasons, this information cannot be used in an analysis of the securities and are therefore not included in this report. S.A., and/or its clients may conduct or may have conducted transactions for their own account or for account of another with respect to the financial instruments mentioned in this report or related investments before the recipient has received this report. S.A., its executives, managers and employees may hold shares or positions, possibly even short sale positions, in securities included in this report or related investments. 39

38 Contact details Group Treasury Karol Prażmo Direct dial: Head of Group Treasury Krzysztof Dubejko Direct dial: Head of mbh Treasury Wojciech Zdunkiewicz Direct dial: Investor Relations mbh Treasury Dealers for Domestic Programme - Andrzej Cwalina Direct dial: Financial Markets Department andrzej.cwalina@mbank.pl Sebastian Komendołowicz Direct dial: Financial Markets Department sebasian.komendolowicz@mbank.pl 40