Results of business segments

Total operating income of the retail segment in 2019 was PLN 2,450.5 million, which represents a very strong 35.2% y/y growth. The main reason of such strong growth was the acquisition of Euro Bank, thanks to which the last 7 months of 2019 included this bank’s results (basically entirely operating in the retail segment). Apart from the Euro Bank acquisition effect, the strong organic growth of Bank Millennium – in accordance with its strategy – is also reflected in improvement of the segment’s results. Annual growth of net interest income of the retail segment reached the exceptionally high rate of +47.8%, while net commission income grew +8.9% y/y (most commissions charged by Euro Bank were recognized in interest income by means of effective interest rate mechanism).

Operating costs of the retail segment also recorded high growth (43.2% y/y) related to the Euro Bank acquisition effect, including additional costs of integration in the amount of PLN 112.9 million (mainly legal, advisory and IT costs in relation to the acquisition, legal and operational merger concluded on 11 November 2019). Despite these additional costs the total retail segment pre-provision income grew significantly by 26.2% vs 2018. In the cost of risk write-offs item, apart from current write-offs for Euro Bank’s portfolio taken over on 31 May (on Group level), there was also a one-off write-off in the amount of PLN 88.6 million for Euro Bank’s portfolio as impact of the IFRS9 standard in relation to the takeover on 31 May (the item appeared only in the Group’s consolidated results). In relation to this and also to the process of gradually tailoring the principles of calculation of write-offs for credit risk of Millennium Group for the acquired portfolio of Euro Bank, total write-offs for impairment and other costs of risk in the retail segment were doubled during year to reach the value of PLN 354.5 million.

Operating profit of the retail segment – after consideration of the provisions – grew 6.9% per annum to reach the level of PLN 724.5 million.

Total operating income for the corporate segment in 2019 stood at PLN 530.9 million, i.e. unchanged vs 2018. Although net interest income grew strongly (10.9% year-on-year), however net commission income was down (6.6% year-on-year), also other income fell (27% year-on-year). Operating costs of the corporate segment saw a 3.7% decline in annual terms, thanks to which total income grew – before provisions – by 2.8% y/y. Value of net impairment write-offs regarding loans to companies increased 40.8% during the year to the amount of PLN 83.4 million. In result of the above operating profit of the corporate segment saw a slight decrease (6.1% annually) reaching the level of PLN 237.0 million in 2019.

Total operating income of the Treasury, ALM and other segments in 2019 was PLN 490.1 million, which represents a strong 27.4% y/y growth. Operating costs also increased strongly (57.2% y/y) due to growth of BFG fees. Nevertheless operating profit of the entire segment grew 17.9% y/y to PLN 345.0 million in 2019.

It should be noted that the provision connected with FX mortgage legal risk of PLN 223 million, was not allocated to the above segments.