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2018 Financial and Social Report

Corporate banking is a business line supporting, in professional and comprehensive manner, companies, which generate annual sales revenue above 5 mln PLN as well as institutions and public sector units. It features long term, stable and partnership cooperation with customers based upon mutual trust, commitment and understanding. The Bank’s strategy for 2018 – 2020 assumes increase of customer base by 19% in the Corporate Banking area.

Bank’s relations with companies are based upon individual approach to cooperation founded on precise
and comprehensive analysis of customer’s financial needs, understanding of business challenges, sector of economy and region. This way the Bank creates comprehensive financial solutions tailor-made to meet unique needs of specific customer business supported by modern digital solutions to cut down the time of customer involvement in operational activities connected with cooperation with the Bank. In order to ensure the highest service quality, the shortest possible time for the Bank to respond and access for the customers, the Bank has consistently automated internal processes connected with service provision. The priority is to ensure the highest quality customer experience in all transactional and relation developing interactions. Among digital communication tools the Bank offers solutions allowing customers to save time and more effectively achieve their objectives connected with financial services. The most modern technology solutions facilitate integration of processes also on the part of the customer.

Services to Corporate Banking customers are provided by an expanded sales network of nationwide outreach. Relationship Managers offer their services in 31 locations. This is the first line of contact where client’s needs are taken care of and new solutions are proposed, additionally consultants provide operational support. RMs and Consultants are supported by Product Specialists with expert knowledge on performance of products and services designed for companies. RMs, Consultants and Product Specialists are highly trained professionals, supporting customers in purchase, sales, investment policies, liquidity management and flow organisation as well as transaction security.

Bank Millennium attaches specific importance to consistent development of sales force competences. RMs, besides a unique development programme ending with certification, improve their competences by participating in regular trainings and workshops. This way, they are able to present innovative solutions meeting customers’ needs. The Bank also provides development programme for Consultants including training on products and processes as well as service standards. This aims to have the service continuously adjusted to current customer needs.

In the area of corporate banking, the Bank focuses on solutions ensuring high service quality. To this end, with use of methodology design thinkingand leanto simplify internal processes and improve operational efficiency. The need to carefully listen to customer voice in key moments of cooperation with the Bank is the basis for enhancements to be implemented. Year by year Bank Millennium has been raising its service quality and this translates into growing customer satisfaction.

In lending area, 2018 was the record breaking year. Despite limited demand for financing, specifically withrespect to corporate investments, the loan portfolio grew fast and evenly throughout all categories with growth dynamics greater than the market. Volume of all credit products – loans to finance current needs, investment loans, leasing, trade finance products and products with participation of EU funding  – increased in 2018 by 14% y/y to reach the level of 18.1 bn PLN gross and it was the highest growth in the last 5 years.

Currently, the bank is working on automation and optimisation of credit processes to shorten the customer’s time committed to operational matters to help the customer focus on key business challenges.

The year 2018 marked a consecutive record breaking year in the area of factoring. Factoring turnover generated by Bank Millennium stood at the record-high level of 19.8 bn PLN. With two-digit dynamics y/y at 18% growth of turnover value, Bank was ranked 5th in the ranking of factoring institutions associated in the Polish Factors Association with market share at 8.1%. Factoring assets as of end of 2018 were 2.6 bn PLN i.e. they grew 22% y/y.

The factoring transaction support system used by the Bank has been expanded by functionality allowing, within supplier financing programmes offered by the Bank, to confirm receivables by supplier directly in the system. This solution has enhanced operational support of programmes of this type and speeds up disbursement of funds to suppliers.

Trade finance area recorded also significant increases of portfolio of guarantees and letters of credit. The value of active guarantee portfolio reached nearly 0.9 bn PLN i.e. grew by 23% y/y. In 2018 the Bank introduced e-guarantee into its offer i.e. bank guarantee issued in electronic format (PDF file) with use of qualified electronic signatures of the Bank’s authorised representatives. The main advantages of this product include express delivery of the guarantee to indicated e-mail address or to be downloaded in Millenet system and no costs of paper logistics. It marks the next step to ensuring the highest service quality and to reduce paper documentation to bare minimum.

The year 2018 brought about further improvement of income on term deposits with unchanged interest rates while maintaining deposit base stability. The total value of corporate banking deposit funds (including SME), as on 31 December 2018 reached the value of 18.5 bn PLN i.e. showing 9% growth y/y.

Corporate banking customers have access to comprehensive offer incorporating transactional banking products for companies, supported by efficient and ergonomic internet banking system, mobile app and solutions based upon web service technology. In 2018, the Bank offered, in addition, SWIFT Net service to facilitate sending files with payments through the SWIFT network via SWIFT FileAct solution. With respect to transactional products and services, the bank offers solutions supporting management of collection of receivables, payment settlements, liquidity and financial surplus management and payment cards.

In effect of consistent development of services and electronic systems a significant increase in transaction rate has been recorded. In 2018 the number of domestic transfers increased by 13%, 17% increase in number of foreign transfers was recorded as well as 21% increase in number of card transactions. This brought growth of the volume of money on current accounts, reaching the record-high level of 9.6 bn PLN (+22% y/y) in December 2018. The share of funds on current accounts in deposit portfolio amounted to 39.5%. The total value of deposits funds of business customers (including SME) was 18.5 bn PLN (+9 % y/y).

In 2018 a new cash management module in the Millenet system was made available. The new functionalities facilitate management of one-off and periodical open withdrawals. Currently, more than 50% withdrawals are ordered automatically through Millenet.

Another improvement for customers using cash products included provision of access to open and close payments in Poczta Polska outlets and provision of armoured transport service. These services are specifically important for customers selling goods in small townships or out of town location with limited access to bank branches. Furthermore, electronic Banking Payment Evidence (eBDW) containing the QR code was implemented to accelerate the process of close payment booking and improve booking quality.

In the Millenet internet banking system the cross-border transfer module was improved and this led to a significant increase to almost 100% of the ratio of transactions done completely automatically. In addition, an option was offered to open, in the system, consecutive PLN and FX accounts. Already in the second month after opening of the service, nearly 40% of accounts were opened this way.

The Bank also conducted implementation projects resulting from changes in applicable regulations. According to the Act of 15 December 2017 amending the act on value added tax and certain other acts, on 1 July 2018 the Bank offered to companies a split payment mechanism available in the electronic banking system. In this service the Bank opened an additional VAT account for every company and introduced a new type of bank transfer, also online – split payment transfer/VAT transfer. Information on the new solution was delivered, inter alia, during the cycle of 10 business breakfasts.

The Bank has been intensively developing MillenetLink (a module of direct communication between the ERP systems of companies and electronic banking) to enable automation of sending transactions as well as recovering banking information. The service permits strong reduction of costs of everyday banking transactions; hence for many companies it is a basic necessity solution. MillenetLink supports data exchange in standards popular on the market thereby facilitating implementation and integration of many banks from the ERP system level.

In the second half of the year the Bank performed a pilot launch of the new Millennium Leasing customer electronic service system. Companies, which are simultaneously customers of Millennium Leasing and Bank Millennium, can have access to lease products in Millenet without the need for an additional logon. The lease module enables access to current information about agreements, the schedule of lease payments as well as receiving electronic invoices.

The Bank continued to build its brand name recognition on the corporate banking market sharing its knowledge on important financial, tax, legal and market issues with companies. The Bank also co-organised events offering opportunity for companies to exchange experience between them.

In 2018 Bank conducted two series of business breakfast meetings addressed to persons responsible in companies for financial matters. The first series was devoted to amendments to the tax act. During the series of meetings, the Bank and Deloitte experts discussed practical impacts of split payment introduction. The second series of breakfasts covered issues related to cyber-security – Bank experts discussed examples of tactics followed by cyber criminals and provided guidelines on designing safe and efficient payment execution processes.

Cybercrime fraud prevention was a theme of the meeting of the Polish Corporate Treasurer Association with the Bank being its partner again. During session performed in the form of case studies risks inherent in the corporate payment process were presented as well as schemes employed by cyber criminals and security principles were developed to protect against attacks and extortion in corporate electronic banking.

The Bank also joined initiatives connected with family business. Within partnershipcooperation with the Family Business Institute, the Bank representatives prepared publications for information services and delivered presentations at congresses organised by the Institute. The Forbes’ Family Business Forum with the Bank being co-initiator and main partner was a leading initiative in the family business area. During more than ten regional meetings at which local ranking results were announced relative to the fastest growing family companies, the Bank experts made presentations on current macro-economic situation and took part in panel discussions.

The Bank continued its cooperation with the CFO Club established by publisher of Harvard Business Review Polska, whose mission is to disseminate knowledge, facilitate exchange of experiences and delivering tools to modern CFOs. Within the Club activities, the bank representatives participated in meetings, prepared publications and co-chaired webinars. The main themes in 2018 included the CFO role in strategic risk management, issues relating to compliance and FX risk management.

The Treasury Department offer includes a broad range of products: spot FX transactions, deposit products, FX risk management instruments (fx forward, fx swap, options) and interest rate risk management instruments (transactions: FRA, IRS, CIRS).

Solutions offered by the Bank help exporters and importers hedge against FX risk and, thereby, properly calculate costs and prices. Customers also can hedge against risk of deterioration of financial results due to unfavourable future changes of market interest rates. The proposed solutions facilitate calculation of fixed cost of financing and inflows of interest without requiring any changes to be introduced to existing loan or leasing agreements.

In 2018 the Treasury Department recorded 27% increase of materially active corporate customers, thus generating increase in profitability by 5.5% at the growth in FX volumes by 9%.

Bank Millennium provides custodial services on the basis of individual permit issued by the Securities and Exchange Commission. The Bank is a direct participant of the deposit and settlement systems such as National Deposit of Securities, NBP Register of securities, Euroclear Bank SA/NV and Clearstream Banking Luxembourg.

Among the Custodial Department customers there are domestic and foreign financial institutions (global custodial banks, banks – depositories of global depositary receipts, investment banks, asset management institutions, insurance companies, collective investment institutions, investment funds) and other legal persons actively participating in capital and money market transactions, requiring comprehensive and individualised service.

In terms of the number of domestic and foreign clients receiving the service and entrusting their assets to out custody, the Bank holds one of the leading positions in Poland. The total value of assets on securities accounts of customers, as on 31 December 2018 reached the value of 37,5 bn PLN. As at the end of 2018 the Bank maintained 12,5 thous. securities accounts and deposit accounts and performed depository function for 23 Investment Funds.

With respect to financing undertaken on international market, in 2018 the Bank continued its collaboration and managed active earlier and new agreements concluded with International Financial Institutions including, primarily, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB), which, as on 31 December, covered, as follows:

  • agreement concluded with EBRD in August 2018 on medium term loan in the amount of 300 mln PLN, granted by EBRD under the PolGEFF (Polish Green Energy Financing for Leasing) Project. Millennium Leasing is the borrower under this agreement, on the basis of guarantee issued by Bank Millennium. The loan proceeds will be used by ML to finance leasing agreements connected with purchases of machines and equipment contributing to transformation of the Polish economy in the direction of the so-called ‘green economy’ including, in particular, in the area of energy and resource efficiency, renewable energy, water management and waste management. The loan will be paid back in full in August 2023.
  • loan agreement concluded in December 2016 with EIB, to the amount of 100 mln EUR with Millennium Leasing acting as borrower and allocated to supporting activities in the area of financing of leasing agreements concluded with companies from SME sector. The loan was disbursed in four tranches within the period between June and December 2018. The last instalments will be repaid under individual tranches in 2025.
  • agreement concluded with EBRD in August 2015 on medium term loan in the amount of 50 mln PLN, granted by EBRD under the PolSEFF (Polish Sustainable Energy Financing Facility for Leasing) Project. The loan proceeds will be made available to the bank customers using leasing financing (via Millennium Leasing), to fund implementation of project facilitating improvement of energy efficiency of machines and equipment and reduction of energy consumption costs. The loan will be paid back in full in December 2020.
  • agreement concluded with EBRD in December 2013 on medium term loan in the equivalent amount of 75 mln EUR, designated to increase Bank Millennium capacity to finance SME sector customers in selected regions of the country. The loan was disbursed in CHF in two tranches with final maturity falling in December 2019.

In 2018 the Bank continued projects connected with the process, lasting already for many years, of strengthening the base of credible counterparts and partners on the inter-bank market, including, in particular, in the segment of instruments involving management of medium and long term liquidity in FX. One of the important aspects of the said activities was managing portfolio of agreements with domestic and foreign banks (including agreements of ISDA and GMRA types), which require regular adjustment to changing regulatory environment and market standards.

In this context, the bank implemented, inter alia, activities connected with entry into force of consecutive EMIR regulations, and MiFID II regulations effective since the beginning of 2018 (also in part directly relating to cooperation in the inter-bank market).

Irrespective of the above activities, during the past year Bank performed, on current basis, all other tasks connected with overall performance of international operations, in areas of implementation of various objectives including, inter alia, supporting settlements, ongoing financing of own needs and needs of Bank c, supporting foreign trade transactions, participating in international money and FX market transactions, operating on capital market. Achievement of these objectives was supported, to large extent, by the process of development of cooperation of the Bank with its foreign partners and counterparts, lasting for more than 25 years already. The Bank has been maintaining ongoing contacts with several hundred correspondent banks and their units located in all countries deemed important from the perspective of the structure of turnover of the Polish foreign trade  and transactions of non-commercial nature.

In parallel to medium term financing obtained on international market, in recent years the bank has successfully carried out senior debt issues denominated in PLN in the form of bonds placed among institutional investors on domestic market (in 2014 at the nominal value of 500 mln PLN, in 2015 300 mln PLN and in 2017 300 mln PLN), and subordinated debt (700 mln PLN in December 2017 and 830 mln PLN in January 2019).