As at 2018 end, capital adequacy in Bank Millennium Group remained on very high and safe level. Total Capital Ratio stayed at year end at 21.68% level for the Group (21.49% for the Bank) and Common Equity Tier 1 Capital ratio (equals T1 ratio) was at 19.77% for the Group (19.54% for the Bank). Therefore, minimum capital levels required by KNF for Bank and Group were achieved with a surplus.
As at 2018 end, capital adequacy in Group, measured by Common Equity Tier 1 Capital ratio and Total Capital Ratio, decreased in one year period by ca 0.3 p.p.
In 2018, risk-weighted assets grew by ca PLN 3.9 billion (by 12%), as result of the growth of loan portfolio. Own Funds raised by ca PLN 753 million in 2018, mainly as a result of 100% retention of 2017 net earnings.
Minimum capital levels required by KNF for Bank and Group were achieved with a surplus.
In January 2019 KNF sent to Bank the individual dividend policy recommendation, in which it set the following additional buffers for dividend distribution above minimum required as at 2018 end for TCR: +1.5% and full conservation buffer 2.5% to pay 75%; + additional Stress test add-on (3.14% for the Bank/Group) to pay 100%. KNF kept additional criteria for banks with FX mortgage portfolio (K1 based on FX mortgage share in total portfolio and K2 based on share of 2007-2008 vintages in total FX mortgage portfolio).
Bank Millennium has a dividend policy of distributing between 35% to 50% of net profit, subject to regulatory recommendations. The high capital ratios (as at 2018 year-end) would allow to pay 75% if not additional K1/K2 criteria. Taking above into account and considering the planned acquisition of Eurobank SA, the Management Board of the Bank will submit to AGM a proposal of full retention of 2018 net profit in Bank’s own funds. Assuming acceptance of this proposal by AGM, positive impact on T1 and TCR ratio will be approximately 2.1 p.p. (to levels 21.85% and 23.76% for Group, respectively).
After the reporting period, i.e. on 17 January 2019 the Bank had taken decision on the issue of PLN 830 million of subordinated bonds which were fully paid and subscribed as on 30 January 2019. The Bonds, after approval of KNF will constitute Bank’s Tier II instruments and will result in further increase of Group’s TCR ratio by ca 2.3 p.p. to the level of 26.02% (based on 31.12.2018 data, including retention of full 2018 net profits).
Leverage ratio stood at the safe level of 8%-9%, with a small quarterly changes and exceeds almost three times a value deemed as safe (3%).
In a long perspective, capital adequacy level of Bank and Group is evaluated as satisfactory. Capital ratios are in long-term increasing trend, and their levels significantly exceed values defined in regulations.