Balance sheet and off – balance sheet items
Assets
The Group’s assets as at 31 December 2016 reached PLN 68,793 million, which means an increase by 3.9% compared to the end of 2015. The structure of Group’s assets and the changes of their particular components is presented in the table below:
Scrollbar is
below the table
|
ASSETS (PLN million) |
31.12.2016 | 31.12.2015 | Change 2016/2015 |
||
|---|---|---|---|---|---|
| Value | Structure | Value | Structure | ||
| Cash and operations with the Central Bank | 1 778.8 | 2.6% | 1 946.4 | 2.9% | -8.6% |
| Loans and advances to banks | 1 267.8 | 1.8% | 2 348.8 | 3.5% | -46.0% |
| Loans and advances to Clients | 47 020.0 | 68.4% | 46 369.4 | 70.0% | 1.4% |
| Receivables from securities bought with sell-back clause | 90.5 | 0.1% | 0.0 | 0.0% | – |
| Debt securities | 17 406.7 | 25.3% | 14 056.3 | 21.2% | 23.8% |
| Derivatives (for hedging and trading) | 267.9 | 0.4% | 429.2 | 0.6% | -37.6% |
| Shares and other financial instruments* | 43.2 | 0.1% | 229.6 | 0.3% | -81.2% |
| Intangible assets and property, plant and equipment ** | 226.4 | 0.3% | 218.2 | 0.3% | 3.8% |
| Other assets | 691.4 | 1.0% | 637.4 | 1.0% | 8.5% |
| Total assets | 68 792.8 | 100.0% | 66 235.3 | 100.0% | 3.9% |
(*) including investments in associates
(**) excluding fixed assets for sale
Higher assets level resulted primarily from the growth of debt securities by PLN 3,350 million (or by 23.8%), including predominantly debt securities issued by the Polish State Treasury and the National Bank of Poland (the central bank) as well as from the growth of loans to Clients by PLN 651 million (or by 1.4%).
Loans and advances to Clients +
Loans and advances to Clients constitute a dominant position in the Group’s asset structure (68.4% as on 31 December 2016). Total value of loans reached PLN 47,020 million (in net terms) as at the end of December 2016, which means an increase by 1.4% yearly.
As at the end of December 2016, loans for individuals amounted to PLN 33,242 million and grew by 1.0%. Mortgage loans remain the biggest part of this portfolio with total net balance of PLN 27,492 million which means a decrease by 0.7% year-on-year due to natural amortisation of this portfolio. The decrease would have been even higher if not the CHF/PLN rate increase versus the end of 2015. PLN mortgage loans (gross) grew by 2.5% year-on-year driven by higher disbursements of new loans in 2016: PLN 895 million, which means an increase by 30% year-on-year.
Non-mortgage retail loans (cash loans, credit cards, overdrafts etc.) amounted to PLN 5,750 million as at the end of December 2016 and grew strongly by 10.1%, or PLN 527 million, year-on-year. The increase was mainly driven by robust new cash loans sales, which amounted to PLN 2,265 million in 2016.
Loans to companies (including leasing) amounted to PLN 13,778 million as at 31 December 2016, growing by 2.3% yearly. The growth was mainly driven by leasing receivables: a strong increase by 10.6% year-on-year. The net value of the leasing portfolio reached PLN 5,132 million as at the end of December 2016.
The structure and evolution of loans to Clients of the Group is presented in the table below:
Scrollbar is
below the table
|
Loans to Clients (PLN million) |
31.12.2016 | 31.12.2015 | Change
(value) |
Change
(%) |
|---|---|---|---|---|
| Loans to households | 33 241.6 | 32 906.0 | 335.7 | 1.0% |
| – mortgage loans | 27 492.0 | 27 683.4 | -191.4 | -0.7% |
| – other loans to households | 5 749.6 | 5 222.6 | 527 | 10.1% |
| Loans to companies and the public sector | 13 778.4 | 13 463.4 | 315 | 2.3% |
| – leasing | 5 132.4 | 4 639.8 | 492,6 | 10.6% |
| – other loans to companies | 8 646.0 | 8 823.7 | -177,6 | -2.0% |
| Net Loans & Advances to Clients | 47 020.0 | 46 369.4 | 650,7 | 1.4% |
| Impairment write-offs | 1 364.9 | 1 460.9 | -96 | -6.6% |
| Gross loans and advances to Clients | 48 385.0 | 47 830.3 | 554.6 | 1.2% |
The average interest rate of the Bank’s loan portfolio in 2016 was 4.10%. This interest rate includes interest income on hedging derivative transactions (mostly cross-currency interest rate swaps), connected with loans granted in foreign currencies, which are compensating for the lower nominal interest rate of such loans.
Debt securities +
The value of debt securities equalled PLN 17,407 million at the end of December 2016 and increased strongly by PLN 3,350 million (i.e. 23.8%) compared to the balance as on 31 December 2015 thus improving substantially the liquidity buffer. Major part of debt securities (i.e. 99.2%) were bonds and bills issued by the Polish State Treasury and the National Bank of Poland (the central bank). The share of debt securities in Group’s Total Assets increased to 25.3% from 21.2% as at the end of 2015.
Derivatives +
Value of derivatives (designated for trading and hedging) totalled PLN 268 million at the end of December 2016, which means a decrease by 37.6% compared to 31 December 2015.
Loans and advances to banks +
Loans and advances to banks (including interbank deposits) amounted to PLN 1,268 million as at the end of December 2016, which means a visible decrease by 46.0% year-on-year due to lower value of collateral deposits securing hedging transaction placed in counterparty banks. This resulted mostly from active management of the currency swaps portfolio, different structure of hedging instruments and different conditions of renewed hedging contracts.
Shares and other financial instruments +
Shares and other financial instruments amounted to PLN 43 million as at the end of December 2016, which means a strong decrease by PLN 186 million compared to 31 December 2015. This change results from the closing of transaction on shares in Visa Europe Ltd on 21st June 2016 described in the beginning of this chapter.
Intangible assets and property, plant and equipment (capital expenditure) +
Intangible assets and property, plant and equipment amounted to PLN 226 million as at the end of December 2016, which means small increase by 3.8% yearly.
Total capital expenditure (CAPEX) of the Group during 2016 amounted to PLN 53.3 million, of which PLN 27.1 million spent for the Bank’s physical infrastructure (branches, ATMs, security etc.) and PLN 24.1 million spent on software and IT infrastructure. The remaining much smaller value of expenditures refers to the Bank’s subsidiaries. The planned investments of Bank Millennium Group in 2017 are PLN 75.4 million.
Liabilities
The structure of Group’s liabilities and equity and the changes of their particular components is presented in the table below:
Scrollbar is
below the table
|
LIABILITIES (PLN million) |
31.12.2016 | 31.12.2015 | Change
2016/2015 (%) |
||
|---|---|---|---|---|---|
| Value | Structure | Value | Structure | ||
| Deposits from banks | 1 270.7 | 2.1% | 1 443.9 | 2.4% | -12.0% |
| Deposits from Customers | 55 875.6 | 90.3% | 52 810.4 | 88.3% | 5.8% |
| Liabilities from securities sold with buy-back clause | 0.0 | 0.0% | 0.0 | 0.0% | – |
| Financial liabilities valued at fair value through P&L and hedging derivatives | 1 488.7 | 2.4% | 2 476.7 | 4.1% | -39.9% |
| Liabilities from issue of debt securities | 1 313.8 | 2.1% | 1 134.3 | 1.9% | 15.8% |
| Provisions | 49.4 | 0.1% | 30.8 | 0.1% | 60.2% |
| Subordinated debt | 664.0 | 1.1% | 639.6 | 1.1% | 3.8% |
| Other liabilities* | 1 189.3 | 1.9% | 1 256.3 | 2.1% | -5.3% |
| Total liabilities | 61 851.6 | 100.0% | 59 792.1 | 100.0% | 3.4% |
| Total equity | 6 941.2 | 6 443.2 | 7.7% | ||
| Total liabilities and equity | 68 792.8 | 66 235.3 | 3.9% | ||
(*) including tax liabilities
As at the end of December 2016, liabilities accounted for 89.9%, while Group’s equity accounted for 10.1% of the total liabilities and equity.
As at 31 December 2016, Group’s total liabilities amounted to PLN 61,852 million and increased by PLN 2,059 million (or 3.4%) relative to the value as on 31 December 2015. The increase resulted, primarily, from visible growth in Customer deposits (by PLN 3,065 million).
Deposits from Customers +
Deposits from Customers constituted the Group’s main liability and as on 31 December 2016 they accounted for 90.3% of total liabilities.
Deposits from Customers provide the main source of financing of the Group’s activities and include, mainly, Customer funds deposited on current, saving and term deposit accounts. As on 31 December 2016 deposits from Customers amounted to PLN 55,876 million and recorded an increase of PLN 3,065 million i.e. 5.8% relative to the balance as at 31 December 2015.
As at 31 December 2016 deposits from individual Customers amounted to PLN 39,682 million and accounted for 71.0% of the total balance of deposits from Customers. This group of deposits increased strongly by PLN 4,065 million or by 11.4% year-on-year supported by growing number of current accounts and customers. Current and saving accounts were the main driver of this growth (higher by 35% year-on-year) and constituted 58% of total deposits from individuals.
Deposits of companies and public sector amounted to PLN 16,194 million as at 31 December 2016 and decreased by 5.8% year-on-year, which is in line with Bank’s Asset-Liability-Management and pricing policy and correlated with high growth of deposits of individuals, mentioned above.
The evolution of Clients Deposits is presented in the table below:
Scrollbar is
below the table
|
Deposits of Clients (PLN million) |
31,12,2016 | 31,12,2015 | Change (value) | Change
(%) |
|---|---|---|---|---|
| Deposits of individuals | 39 681.7 | 35 616.4 | 4 065.3 | 11.4% |
| Deposits of companies and public sector | 16 193.9 | 17 194.0 | -1 000.1 | -5.8% |
| Total Deposits | 55 875.6 | 52 810.4 | 3 065.2 | 5.8% |
The average interest rate of deposits placed with the Bank in 2016 was 1.27%.
Deposits from banks +
Deposits from banks, including received loans, as at 31 December 2016 amounted to PLN 1,271 million, accounting for 2.1% of the Group’s liabilities. The value of that item decreased by PLN 173 million (i.e. 12.0%) vs. the balance as at 31 December 2015, mostly due to lower value of deposits from other banks, whereas the balance of loans from financial institutions increased by 8.2% year-on-year and amounted to PLN 898 million (expressed in PLN) as at 31 December 2016. These were mainly loans from European Bank for Reconstruction and Development and loans from European Investment Bank (most of them in EUR, but also in CHF and PLN) with original maturities up to 8 years, which were the important items of wholesale long-term and medium-term funding received by the Group.
Financial liabilities valued at fair value through profit and loss and derivatives +
Financial liabilities valued at fair value through profit and loss and derivatives included, primarily, negative valuation of derivatives designated for trading or hedging. As at 31 December 2016 the value of this item amounted to PLN 1,489 million and decreased by PLN 988 million or 39.9% relative to the balance of 31 December 2015, first of all due to the decrease of negative valuation of derivatives used for hedging purpose (mainly CIRS). This resulted mostly from active management of the currency swaps portfolio, different structure of hedging instruments and different conditions of renewed hedging contracts.
Debt securities issued +
Debt securities issued by the Group as at 31 December 2016 amounted to PLN 1,314 million, which means an increase by PLN 180 million (or by 15.8%) relative to the balance recorded as at 31 December 2015. At the end of December 2016 the value of bank debt securities issued by the Bank and possessed by individual Customers as savings products amounted to PLN 279 million, whereas the value of the Bank’s bonds possessed mostly by institutional investors amounted to PLN 833 million (most of which, with the balance sheet value of PLN 803 million, are traded on Catalyst – ASO BondSpot debt instruments exchange in Warsaw). Apart from the Bank’s debt securities and bonds, the Bank’s subsidiary Millennium Leasing issued bonds for private and institutional investors. The balance sheet value of bonds issued by this company as at 31 December 2016 was PLN 202 million. The issuance of bonds by Millennium Leasing was the main reason for the yearly increase of Group’s liabilities from issued debt securities. Debt securities were issued by the Group in order to raise funds for financing the general Group’s operations and to strengthen the mid-term funding of Bank Millennium Group.
Subordinated debt +
The value of subordinated debt amounted to PLN 664 million as at 31 December 2016 and increased by 3.8% vs. the balance as at the end of 2015, only as a result of EUR/PLN rate increase. This item includes liabilities from ten-year subordinated bonds of nominal value of EUR 150 million, issued by the Bank in December 2007.
Equity +
As at 31 December 2016 the equity of the Group amounted to PLN 6,941 million and grew by PLN 498 million or 7.7% year-on-year. The main reason of the growth of equity was net profit generated during the 2016 financial year, without payment of any dividend for 2015 as decided by AGM of the Bank held on 31 March 2016. The impact of revaluation reserve changes on this growth was negative (PLN 203 million, most of which was related to the transaction on Visa Europe shares).
On 6th December 2016, KNF issued its position in the matter of the dividend policy of banks (among other entities) in 2017. Based on this recommendations, the Management Board of the Bank will submit to the General shareholders meeting a proposal to retain in own funds the full net profit of 2016.
The information about capital adequacy is presented in Chapter VII of this document and in a separate report titled “Capital Adequacy, Risk and Remuneration Policy for 2016”.
Contingent liabilities
Structure of contingent liabilities of the Group is presented in the table below:
Scrollbar is
below the table
|
CONTINGENT LIABILITIES (PLN million) |
31.12.2016 | 31.12.2015 | Change
2016/2015 (%) |
|---|---|---|---|
| Total contingent liabilities | 8 202.3 | 7 884.0 | 4.0 |
| 1. Liabilities granted: | 8 097.7 | 7 823.4 | 3.5 |
| a) financial | 7 014.0 | 6 712.9 | 4.5 |
| b) guarantees | 1 083.7 | 1 110.5 | -2.4 |
| 2. Liabilities received: | 104.6 | 60.6 | 72.7 |
| a) financial | 0.0 | 4.0 | -100.0% |
| b) guarantees | 104.6 | 56.6 | 84.7 |
In the course of its operations, the Group executes transactions in effect of which contingent liabilities arise. The main contingent liability items (granted) include: (i) financial commitments, mainly to extend loans (including, inter alia, not utilised credit card limits, not used overdraft facilities, not utilised investment loan tranches) and (ii) guarantees, including mainly guarantees and letters of credit issued by the Group (providing security for performance, by the Group Customers, of their commitments relative to third parties). Contingent liabilities granted cause that the Group is exposed to various risk types including credit risk. The Group creates provisions against irrevocable risk based contingent liabilities, booked in the item „Provisions” in the liabilities side of the Balance Sheet.
As on 31 December 2016, the total value of contingent liabilities of the Group amounted to PLN 8,202 million, including commitments granted by the Group of PLN 8,098 million. During 2016 the value of contingent financial liabilities granted by the Group increased by 4.5%, whereas the value of guarantee commitments decreased by 2.4%.
More information on contingent liabilities can be found in Chapter 12 of the Annual Consolidated Report of the Bank Millennium S.A. Capital Group for the 12-month period ending 31st December 2016.