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2018 Financial and Social Report

Letter from the Chairman of the Management Board

Dear Sirs,

It is with true pleasure that I invite you to read the 2018 Annual Report; especially that it has been a year full of successes. We had record-high results – best in the Bank’s thirty-year history and we took breakthrough decisions, which bring the Bank into a completely new stage of development. In June we applied to the Polish Financial Supervision Authority for permission to create a mortgage bank and in November we signed the agreement on acquisition of Euro Bank.

Best result ever

Continuing organic growth stipulated in our medium-term strategy, in 2018 we posted record-high net profit of 761 million PLN and acquired over 200 thousands new customers. Growth of the number of customers and their increasing activity led to double-digit growths of most business lines, including the portfolio of consumer loans, PLN mortgages as well as business loans. This would not have been possible without the fantastic team of employees who contribute to building the Bank Millennium brand with their everyday commitment

PLN 761 million
net profit of the Group, best ever
22%
solvency ratio
46,5%
Cost/Income ratio
1.8 million
active retail customers

Organic growth to be further boosted by Euro Bank acquisition

On 5 November 2018 we signed an agreement with Société Générale on acquisition of Euro Bank. The transaction involved the purchase of 99.8% shares of Euro Bank. The transaction, which makes effective use of surplus capital and benefits from the liquidity situation, is expected to be closed in the 1st half of 2019, after the necessary permissions have been obtained. The subsequent merger with the Wrocław-based bank, drawing on the experience of both organisations, will significantly raise profit and scale of our operation and in the long run it will bring strong return on the investment.

Satisfied customers and the market

Customer centricity and focus on top quality customer experience were the key to all our activities. Thus growth of the number of customers went hand-in-hand with their satisfaction – 93% retail customers were satisfied with their relationship with us and 53% corporate customers were recommending us to others. In 2018 we were the most often recommended commercial bank in Poland with loyalty measured with the market’s highest NPS score of 61. Yet again we were among the top three banks in “Newsweek’s Friendly Bank” ranging (i.a. 1st place in the “Mobile Banking” category).

Innovation and further digitalisation

In the age of mass smartphonisation we were continuing our business model based on further digitalisation and development of mobile solutions. We again increased the share of digital channels in product sales, while mobile banking, enriched with a chatbot among other things, was being used by almost 1 million customers. In Deloitte’s report, which looks at digital maturity of banks in almost 40 countries in Europe and the Middle East, we came up among digital leaders of the region. We were described as a digitally mature bank, well prepared for the challenges of open banking, already now offering many non-banking services.

Bank without barriers, socially involved

We want all customers including disabled persons to feel comfortable with us. Eliminating digital, infrastructural and physical barriers in access to services was an important part of our strategy for 2018. For adapting the bank’s website to the needs of blind and visually impaired persons we won the “Website Without Barriers” competition. We were also engaged in cultural, educational and social projects. Yet again we were included in the Respect Index – index of companies, which operate in compliance with the best CSR standards.

What lies ahead?

The key aim in 2019 will be an effective coupling of further organic growth with effective integration with Euro Bank. Closing the Euro Bank acquisition deal should be in the first half of the year while the operational merger – in the second half. In parallel we are planning to obtain relevant licenses and to start the operation of our mortgage bank, which will allow us to issue covered bonds. Another step will be the full implementation of the EU PSD2 directive, which will open and thus revolutionise the market of payments and other financial services in Poland. We still want to be a leader of innovation, generate stable profit and focus on customer satisfaction.

Joao Bras Jorge

Chairman of the Management Board of Bank Millennium