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2018 Financial and Social Report

Retail banking constitutes an important area in Bank Millennium activities. The Bank has a broad catalogue of universal banking products and services designed for individual customers, affluent individualsindividual customers (Prestige), Private Banking and business customers. Customers have access to products and services through branch network, internet banking, mobile and telephone banking and the network of ATMs. In effect of the omni-channel approach, customers gain comprehensive experience in contacts with the Bank and manage their finances in a convenient and safe manner.

In 2018, the objective set for customer acquisition was achieved in line with strategic assumptions. Since the beginning of the year the Bank increased its active customers’ base by the record-high figure of 202 thous. and as of 31 December 2018 was serving more than 1,8 million active retail customers. 1,36 million customers were using electronic banking while the mobile app and mobile Millenet were in use by 963 thous. (increase by 36% y/y).

Sale of current accounts increased in 2018 by 23% relative to the previous year and exceeded 430 thous. Continuously, theKonto 360° account was the key product supporting acquisition of new customers – one of the most preferred personal account in Poland. In the competition „Golden Banker”, the account was ranked the best in the market for the second consecutive year. In 2018, the number of Konto 360º accounts in the Bank portfolio exceeded 1,2 mln, with majority opened by customers  who did not use personal accounts in earlier used personal accounts in Bank Millennium earlier.

Promotion of Konto 360º accounts in 2018 was supported by:

  • consecutive rounds of advertising campaigns in TV stations and cinemas
  • intensive promotional activities involving the use of goodie shopping app and in cooperation with external internet portals – more than 22% personal accounts were acquired online
  • consecutive rounds of special offering „Get 360 PLN”
  • new rounds of referral programme „Like it! Share it” under which attractive prizes are awarded for recommendation of Konto 360°or Konto 360° Student to others people. Until 31 December more than 377 thous. customers registered in the programme

In addition, as in the previous year, within the period from September until November 2018 a Konto 360° Student promotion campaign was conducted in schools and universities. The above activities, supported by an opportunity to open Konto 360° Junior accounts in internet banking were welcomed with great interest among young customers and their parents.

Year 2018 was very successful for the Bank in the area of deposit base management. Despite unfavourableenvironment – low interest rates and increasing competition from banks, real estate market or retail state treasury bonds – the Bank took advantage of growing funds of natural persons on the market and the value of personal deposits grew by 7,6 bn PLN (+18% y/y) to reach the level of 47,7 bn PLN. Rapid increase of customer deposits supported growth of the Bank’s market share by nearly 0,5 pp. to reach the level of 6,2%. Despite dynamic growth of the deposit portfolio, the bank maintained its profitability at the level similar to that recorded in the previous year.

After comprehensive reconstruction of offer of basic savings products in 2017, in 2018 the Bank focused on active promotion and offering of Konto Oszczędnościowe Profit with attractive interest rate applied to new funds. The account enjoyed major interest on the part of customers. Responding to growing market needs in investing surplus funds in foreign currencies, the Bank continued to offer promotional interest on savings accounts in EUR and USD, thus triggering growth in deposited funds by nearly 50%.

The Bank introduced and developed attractive offer of savings and investment products supporting diversification of deposits. Among other solutions, the Bank introduced into its offer the Deposit in Investment Duo – an attractive combination of interest bearing term deposit with investment fund. Deposited funds are split in half: 50% of funds are applied to 3 or 6-month Deposit in Duo, while the remaining 50% are allocated as investment in a selected sub-fund within the Millennium FIO Investment Plan.

The Bank also encouraged regular and long-term saving for retirement. To this end, the most attractive interest rate on the market at 3% was maintained on the Individual Retirement Account.

The Bank continued its strategy of offering a diversified investment products portfolio which was built both from own solutions as well as third party products. Depending on client segment the Bank offered structured products, mutual funds and investment linked insurance products.

In June, in order to make the offer more attractive, the Bank improved its bundle offer of terms deposit and Millennium TFI funds. Second half of the year was a period of upgrading the third party mutual funds offer by adding three new proposals. The Bank launched also a promotion for Millennium TFI funds by waving up-front fee during the promotional period. Also the new digital service allowing to track results and characteristics of mutual funds was offered to clients.

During 2018 major regulatory changes were imposed on investment products line. The Bank implemented and stabilized MiFID2, new RODO regulations and Insurance Distribution Directive, which covered investment linked insurance products.

Prestige is an offer designed for affluent persons having assets from 100 thous. to 1 mln PLN or making monthlypayments to the account in the minimum amount of 10 thous. PLN. Private Banking addresses the needs of the most affluent individual customers having assets above 1 mln PLN, expecting high quality service and offers of financial products prepared to meet their individual needs. Bank offers to these customers a broad range of investment products and investment and insurance products – domestic and foreign investment funds, investment programmes, structured products and closed investment funds available through subscription. Private Banking customers can use credit cards Millennium MasterCard® World Elite™ with access to World MasterCard Rewards programme, World Elite MasterCard Privileges Partnership Programme, insurance package as well as Assistanceand Concierge package.

As on 31 December 2018 Bank Millennium had 39.3 thous. active Prestige customers and more than 4.1 thous. active Private banking customers.

In 2018 the Bank continued to implement its development strategy of competitive product offer and salesprocess, as launched in previous years. This brought fruit of record growth in sales by 39% y/y. Sales amounted to 3.2 bn PLN, including 809 mln PLN generated in Q4 (41% of growth q/q). Acquisition of cash and consolidation loans was supported by attractive promotional offers addressed to new customers and selected market segments thereby keeping high sales growth rate throughout the year.

In 2018 cash loan acquisition was supported by:

  • offer „100 PLN instalment for every 5 000 PLN of loan” applicable to loans in the amount of 5 000 PLN, 10 000 PLN or 15 000 PLN granted for 60 months with instalment, known in advance, in the amount respectively of 100 PLN, 200 PLN or 300 PLN. Pricing conditions under promotion are among the most attractive on the market. The offer was expanded by the amount of 20 000 PLN and loan version with insurance.
  • continuation of offer for financial sector employees
  • development and strong support in electronic channels resulting in increase of the share of non-branch channels (electronic or phone) from 34% in 2017 to 43% in Q4 2018.

Customers interested in beneficial transfer of their liabilities repaid in other banks to Bank Millennium could take advantage of a consolidation loan under special offers with repayment insurance, lower interest rate and no fee calculated against amounts transferred. Consolidation loan was supported by:

  • offer „Change the bank of your loan to Bank Millennium” with interest rate of 5.7%
  • launching the consolidation loan sales process in phone channel

In 2018 cash loan portfolio grew above average by 21% y/y (+1.04 bn PLN) and the growth rate 2.5 times higher than market rate and three times higher than in 2017.The total value of cash loans, as on 31 December 2018 reached the value of 6,5 bn PLN.

Year 2018 may be described as a year of stable growth and maintaining attractive offer. The Bank continued itscompetitive offer and sales process development strategy, which resulted in acceleration of the acquisition rate by 9,5% y/y. Sales growth was supported by the following campaigns:

  • offer „Overdraft for 0 PLN” designed to be offered to new Bank customers facilitating the use of the product, in the first year, with no additional costs – overdraft disbursement fee was 0 PLN. These conditions are among the most attractive on the market.
  • 7-day interest free period facilitating the use of the limit without interest costs in each accounting month.

Overdraft portfolio in 2018 increased by 9% y/y. According to NBP data, as at the end of December 2018 the relevant Bank Millennium market share reached 7.6%.

In effect of intensive marketing activities, credit card acquisition maintained the highest level in severalyears. Flagship products included, continuously, Impresja and Alfa cards providing their holders with 5% cash back for payments made at card Partners.

Credit card portfolio increased by more than 21 thous., translated, in comparison to 2017, into 6% growth. Bank Millennium reached, at the end of December, 6% share in the credit card market and in 3 quarter 8% share in transactions with credit cards.

In addition, the number of debit cards also grew systematically both on the market at large and in Bank Millennium. Debit card portfolio in the Bank at the end of 2018 reached 2,16 mln cards i.e. increased by 312 thous. annually (+16%). It is also worth mentioning that, as in the entire previous year, the rate of the bank portfolio growth remained above the market.

In 2018 Bank Millennium continued to keep a high position on the mortgage sales market. During the year theBank concluded 13,700 new agreements with the total value of almost 3.3 bn PLN (+31% y/y). This result allowed the Bank to take the sixth place in a lenders’ ranking with market share of more than 6.5%. It is important to note that these results were achieved with the average loan margin remaining at a very attractive level (above the market average). The main success factor was full control over the process time and significant shortening of its pace. In Q4 2018 the Bank’s customers were getting a preliminary credit decision in merely 5 working days.

Lending by the Bank in 2018, as was the case in 2017, was based on the offering of unconditional 0% fee for loan approval and 0% fee for early loan repayment. Such a structure of the bank’s offering was highly popular in particular among those customers who have only 10% own participation and who are particularly keen to reduce the upfront costs of the mortgage to a bare minimum.

In 2018 the Bank continued to introduce interesting solutions for FX borrowers. Customers had the opportunity at all times to benefit from a special offer of partial or full early repayment or currency conversion of an FX mortgage to PLN. Within the framework of these solutions the Bank could reduce its margin, which makes part of the interest rate. In case of partial early repayment the margin would be reduced with no less than 10% of debt outstanding being repaid. In case of full early repayment individual conditions could be negotiated. Unless the parties agreed otherwise, the instructions were carried out at a rate equal to the average NBP rate published on the day of execution of the instructions. The Bank’s special offer has remained valid non-stop (with minor modifications) since 2015.  Unless the parties agreed otherwise, the instructions were carried out at a rate equal to the average NBP rate published on the day of execution of the instructions. The Bank’s special offer has remained valid non-stop (with minor modifications) since 2015.

In June 2018 the Bank applied to Polish Financial Supervision Authority for permission to set up a mortgage bank under the name of “Millennium Bank Hipoteczny” with its seat in Warsaw, with Bank Millennium being its sole shareholder. The new bank is designed to raise medium and long term financing through covered bonds to fuel up further development of real estate financing.

The total value of all loan types to individuals referred to above as on 31 December 2018 reached the value of 36,4 bn PLN gross.

The level of sale of insurance linked with credit products including, in particular, cash loan insurance had a key impact upon the level of bancassurance revenue in 2018. The Bank successfully continued to offer also the insurance products in collaboration with several insurance institutions ensuring access through both bank branches and remote channels. The Bank offered also opportunity for customers to purchase credit card and current account insurance in mobile app upon the opening of an account or credit card.

With respect to travel insurance, available fully online in mobile app and Millenet transaction system, innovative service „Travel assistance” was appreciated in international competitions The Innovators, organised by „Global Finance” magazine and EFMA Innovation in Insurance. The year 2018 was also marked by regulatory changes. The Bank adjusted its bancassurance operations to meet requirements of the Act on insurance distribution, which entered into force on 1 October 2018.

The year 2018 was marked by extremely intensive development of electronic and mobile banking, thus providing solutions, which are innovative on the Polish market. New solutions were based upon the state-of-the-art technologies and offered more convenient ways of using Millenet and app. Customer centricity and proper care for the highest quality customer experience were the key to all changes introduced by the Bank – we have carefully listened to customers, observed their preferences and tested services with them in the banking User-Experience Lab.

Within the process of developing personalised offer using augmented reality technology, access was provided in mobile app to the process of Birthday Deposit opening bearing 3% interest rate p.a. The app was also enriched by a function of application for credit card (service available for persons having preliminary assessment of their credit capacity). In addition, the Bank also introduced the possibility of creating a virtual counterpart of an inactive card (debit and credit). In this way you can start using the card immediately for contactless payments with your phone, without having to wait for the plastic. New solutions also included a service of cash deposit with BLIK without use of the card. Such payment can be made on all Bank Millennium ATMs and requires BLIK code only. Bank Millennium was one of the first banks in Poland to introduce this service.

Other enhancements include:

  • Milla transactional chatbot – a chatbot, which is unique in the Polish banking sector and allows i.e. sending a transfer (also BLIK), history search, topping up a prepaid card and phone. Milla has been based on NLU mechanisms (understanding intentions and parameters); ASR voice modules (speech to text conversion, thanks to which you can talk to the chatbot) as well as TTS (text to speech conversion, which allows Milla to give voice replies).
  • opening account in mobile app by persons, who are not Bank customers yet – after downloading app from a store the option is available of applying for Konto 360account. Just fill-in the application in a few simple steps and a courier will deliver the agreement.
  • refreshing outlay of home page of mobile app and location of entry to the form of BLIK transfer to phone (P2P payment) at the screen level immediately after login. When making P2P payment you can see, right away, which friends from your phone contact list are registered in the service (BLIK icon will appear by the contact name on the form).
  • extending PayByLink type internet payments by adding BLIK– when doing shopping, after selecting “Millennium – internet payments” you can choose the way to authorise transaction. Besides traditional method (login to internet banking and confirming with SMS P@ssword) you can choose BLIK authorisation.
  • expanding e-administration services by adding online application for the “Good Start” and “Family 500+” programmes for the new benefit period after adjusting to this year’s regulations.
  • convenient update of data from ID in the Millenet transactional system and the mobile app – in a simple two-stage process you can quickly and conveniently make an online change of the Personal Identity Card number, its issue and expiry date and also update the address.
  • option to apply for credit products on a 24/7 basis as well as getting promo deals. Expansion of the investment offering available in Millenet involved the possibility to buy and trade in four new external TFI funds.
  •  Konto 360º Junior opened in Millenet – parents do not have to go out to open an account for a child aged over 13. They can do it through internet banking service. The process is fully online and the child can start managing the account immediately and make contactless payments with a phone (bank provides possibility of tokenising a card before its physical delivery).
  • still easier online payments – expanded local transfer form combines functions of a standard transfer and BLIK transfer to phone number, with the option of easily finding of addressee in the contact list on a smart-phone. This means an opportunity to make transfer to account or phone number from the same form.
  • implementing PAD directive on basic account- in the regulations area the Bank effectively implemented the PAD directive on basic payment account, which customers can open since August of this year
  • mobile authorisation i.e. a new and more convenient way to approve transactions executed in the internet banking system – thanks to the new solution transactions can be confirmed in the Bank’s mobile app without the need enter SMS P@sswords. All you need is to logon to the mobile app and confirm the transaction with one click on the screen.
  • reminder of the option to take advantage of travel insurance prior to departure – a relevant message is sent to customers who gave the necessary approvals, including location acceptance, and have been at the airport for a longer period. The mechanism works at all airports in Poland.