Financial and
ESG report 2020

Execution of the 2018-2020 strategy

2020 was the last year of the Bank’s 3-year strategy. It unexpectedly proved to be a challenging year because of the COVID-19 pandemic.

M2020-151 M2020-151

The consolidated net profit of the Bank Millennium Group was PLN 23 million, much lower than the figure one year earlier. The direct and indirect impact of the COVID-19 pandemic (which included lower levels of economic activity for a portion of the year, impact of the unprecedented cut of the base rate by 140 bps in Q1-Q2 2020) and material non-recurring negative items of the profit and loss account put the financial performance of the Group and Bank Millennium under stress. Although the 2020 profit was much below the Bank’s ambitions, the initiatives undertaken and costs incurred during the year to implement them will benefit the Bank in the future.  

The Bank reacted promptly and efficiently to the reduced revenue generation capacity and, as a result, the overall increase in costs in 2020 (+2% y/y, including depreciation and amortization) was slower than the increase in revenues (+3%). In Q4 2020, personnel costs fell 17% y/y and 10% q/q and we expect this positive trend to be continued into 2021. The Bank also beefed up its risk buffers (NPL/DPD90+ coverage ratios at 66%/119%, respectively, compared to 62%/106% at the end of 2019. Provisions for the legal risk associated with foreign currency mortgage loans increased to 6.7% at the end of 2020, excluding the former Euro Bank portfolio), while capital ratios remained at a high level (on the consolidated basis TCR/T1 was 19.5%/16.5%, respectively, or 14.1%/11.3% in respect to the regulatory requirements). The Bank also reduced the time needed to achieve synergies from the Euro Bank merger. Combined with the new initiatives aimed at improving the operating efficiency, the Bank shrank its distribution network by 15% (702 outlets vs. 830 at the end of 2019, with 124, or 21%, of own branches closed in this period) and the number of active FTEs was reduced by 14% down to 6.6 thousand. As a result, the Bank achieved significant and recurring net synergies (pre-tax PLN 100 million in 2020), which should double in 2021. 

In spite of the challenges caused by the COVID-19 pandemic, in 2020 mortgage loan payouts reached a record high level of PLN 6.8 billion (up by 57% y/y) and the Bank’s market share in sales increased significantly from 7.3% last year to 12.2%. Total assets managed by Millennium TFI and external funds increased to more than PLN 8.4 billion, which almost fully offset the repurchases in Q1 2020. The number of debit cards issued exceeded 3 million for the first time in the Bank’s history.  

Putting aside all negative effects of the pandemic, we see 2020 as a year of acceleration of our transformation towards the new era in banking. We strongly supported our customers during the pandemic and managed to strengthen our relationships. As a result, cross-selling ratios increased in many categories. We also acquired new customers despite the challenges of the pandemic. The digitization process accelerated considerably, both from the customer’s perspective as well as within the Bank. The number of digital customers rose by 12% y/y to 2.05 million and the number of active mobile customers reached nearly 1.7 million (up 18%). 

Detailed information regarding the execution of the strategy can be found in the “Management Board Activity Report of Bank Millennium and Bank Millennium Group for 2020”.  

The Bank Millennium Group’s growth outlook

The unprecedented scale of changes in the economic environment brought about by the outbreak of the COVID-19 pandemic in early 2020, coupled with dynamic changes in customer behavior, led to a sudden increase in the number of challenges facing banks, reduced predictability and increased uncertainty to exceptional levels. In this situation, the Bank Millennium Group made a decision to extend the strategy for 2018-2020 by another year and prepare a new one for the 2022-2024 period.  

The Bank’s goal for the next 1.5-2 years is to restore its operating results, which were eroded by the COVID-19 crisis and its direct and indirect consequences. We intend to achieve this goal by completing the current cost savings program, introducing new programs to improve operating efficiency and improving business performance by implementing an updated pricing policy and growing sales of key products.  

In 2021, the Bank will continue to focus on improving its operating efficiency through restructuring of and streamlining of processes, automation and standardization. We intend to reduce our branch network, maintain the current strict control over costs, despite the higher legal and IT costs, in order to achieve the cost/income ratio of 47% and, in the medium term, set the goal at about 40%, compared to 49% in 2020.  

We are working on achieving full digitization, actively migrating customers to the digital platform, with the goal of exceeding an 80% share of digital customers by the end of 2021. 

Search results