Strategy fulfilment and business development perspectives
During 2016, Bank Millennium continued implementing its strategic plan for 2015-17, keeping the main direction with adjustments needed in face of negative impacts caused by new tax and regulatory developments. The main medium term objectives are focused on protection and rebuilding profitability affected by the new banking tax, together with:
- To reach 1.6 million active Retail Customers;
- Increase of market share in Retail Customer funds to more than 6%;
- Cost-to-income in the interval of 45%-47%;
- Loans to deposits ratio at less than 95%.
The main initiatives, for the purposes of implementing the Bank’s strategic plan, aim to improve results by focusing on both the income and costs items in the Retail and Companies segments and are based on four pillars:
- Acceleration of the acquisition of Retail Customers focused on gaining scale on digital world and the value of new Customers seen on a marginal cost/revenues, while maintaining the focus on products with a higher margin in order to maintain the profitability of the segment;
- Maximize Customer value and increase the efficiency in Customer retention through advanced analytical methods;
- Maintain the momentum in the Companies segment, by keeping profitability through stronger focus in assets optimization and value creation than loan growth, reducing the cost of risk and reinforcing the Banks positioning in specialized financing;
- Maintenance of an operational excellence and rigorous cost control, through a simplified digital operational model, preparing the IT platform for the future.
During 2016, the Bank increased active retail customers by 122 thousand being close to 1.5 million such customers at year-end. This growth was accompanied by the growth of retail deposits, by 11% yearly, which outperformed the market allowing to reach 5.8% share. The Group maintained also double digit growth of cash loan portfolio (+11% yearly) and accelerated sale of Polish Zloty mortgage loans (+30% yearly). In companies business, profitability growth was a main goal: gross profit grew by 31% yearly, supported by much lower cost of risk. Implementation of 2015-2017 strategy allowed Bank Millennium to consolidate its position as a leading quality and technologically advanced bank and to fulfil most of its targets. New banking tax introduced in Poland since 2016 and no dividend distribution affected ROE target.
In digitalization area, the Bank continues fast development of online platform, focusing on omnichannel approach, assuming full integration of Millenet, Mobile Banking, TeleMillennium and Millennium Branches. This gives customers utmost level of service and allows the Bank to use advanced business analytics.
In the infrastructure and operational area, the Bank kept high excellence and cost discipline and maintained operating costs at low growth, much lower than operating and core income growth. Therefore, Bank Millennium managed to keep Cost to Income ratio at 45% (or 50% without one-off items), which indicates continuation of a positive trend began few years ago.
Finally, the Bank improved a lot liquidity buffers (Loan to Deposits at 84%) and kept comfortable high capital ratios (TCR on Group level at 17,4%). This bodes well in the view of past and expected new capital buffers introduced in Poland. However, due to KNF position in the matter of the dividend policy of banks issued in December 2016, 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.
Going forward, Bank Millennium is continuing its current organic growth strategy, being focused on customer fast acquisition, while consolidating its position as a leading quality and technology advanced bank. Sustainable growth of retail deposit base, change of asset mix with increasing share of consumer loans, strict risk and profitability criteria in loan growth and leveraging digital platform to maximize sales are other strategic objectives for the Bank in 2017 year.