Financial and
ESG report 2020

Letter from the Chairman of the Management Board

Dear Sirs,

For a person managing a bank every year is intense and unique. In this respect 2020 was absolutely surprising and unpredictable. The Bank was operating under difficult epidemic conditions, in an environment of significant economic slowdown and decrease of interest rates to historically low levels.

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The key elements were protection of life of employees and customers and business continuity. To maintain the operational capability of the entire sector, a guarantee of availability of funds, seamless payments done by customers and implementing forms of supporting clients in this stressful times. The banking sector passed the test colours flying. Bank Millennium has shown great flexibility and speed of operation. Experience of 2020 made me realise even more, how important in any organisation are the employees who make-up a great team. I want to thank all employees of Bank Millennium Group for great commitment, harmonious cooperation and for the ability to face-up to difficult situations.  

2020 will be remembered by us as the year of the three-fold reduction of interest rates by the Monetary Policy Council to virtually zero level, which permanently lowered credit margins and changed the business model of the entire banking sector in Poland for a long time. In such difficult conditions, the Bank Millennium Group’s consolidated net profit, taking into account the large burden of provisions, amounted to PLN 23 million and was much below our aspirations. Adjusted for extraordinary events (in particular, PLN 677 million of provisions for legal risk related to the portfolio of FX mortgage loans granted by Bank Millennium), the net profit would be PLN 709 million, and the adjusted ROE of 7.8%. However, we were distinguished by strong capital ratios – the consolidated TCR/T1 ratios were 19.5%/16.5% respectively, well above the regulatory requirements. 

The business results for 2020 were more positive than our expectations. The number of active retail clients exceeded 2.6 million.

Mortgage loans achieved record sales of PLN 6.8 billion and increased by 57% compared to the previous year, and the market share reached 12.2%. The four quarters of 2020 also brought solid sales of cash loans worth PLN 4.62 billion. Electronic banking was actively used by over 2.05 million retail clients, and the mobile application was used by 1.7 million. In the third quarter, there was a noticeable start to a recovery in corporate banking activity, that demonstrate a fast reaction of companies to the new environment and a lower economic deterioration that forecasted.  

In 2020 many new functionalities were introduced in internet banking, mobile application and branches. As one of the first banks in Poland, Bank Millennium began offering services using the potential of open banking, based on the PSD2 directive. We have also enriched our offer with further non-banking services – we are consistently developing our electronic banking channels, perceiving them as a center for managing every day, not only financial, users’ affairs. Innovation is still one of the strategic elements of the Bank’s development. The fact that we have been focusing on the development of remote channels for years was extremely important in the year when we had to quickly adapt our services to the new realities and when banking from home became an everyday reality for most of our clients. 

The year 2020 has shown even more the importance of the philosophy of running a business and achieving goals, with simultaneous great attention to ethics, responsibility, care for customers, employees, local community and the environment. The business goal of „banking without physical, infrastructural and digital barriers” became particularly important socially in 2020. Thanks to electronic banking, our clients could safely pursue their financial goals during the pandemic, without leaving home. The branch employees supported customers who had so far been less active using the application or online banking, as a result the number of customers using electronic banking increased by 12%, and the number of customers using the mobile application by 18%. Immediately after the outbreak of the pandemic, we launched aid measures by introducing, among others, credit holidays for people and companies experiencing problems with debt repayment, and we helped medium and large enterprises to maintain liquidity. Through the banking platform, our clients could take part in the PFR Financial Shield government program and benefit from financial support for their ventures. 

We consistently implemented charity programs. This year, the Bank Millennium Foundation and the Bank provided financial support to the Institute of Bioorganic Chemistry Institute of the Polish Academy of Sciences, which developed the first Polish test for COVID-19. In the event of coronavirus infection, the need to cover the costs of treatment and rehabilitation, we have created a Special Support Fund for Bank Millennium Group employees. 

The Bank is a signatory of the partnership for the implementation of the UN Sustainable Development Goals, which sets our course of action. For 11 years Bank is in  Warsaw Stock Exchange index, which brings together companies with the highest standards of sustainable development. The Bank attaches great importance to the activity for climate protection, to new European Union regulations resulting from the concept of creating a green economy. In 2020, he formulated a new version of the environmental policy, according to which, inter alia, does not finance projects in the coal sector and declares commitment to the development of renewable energy. For 10 years, the Bank has been reporting the level of its own CO2 emissions. This year, the Bank took second place among Polish enterprises in the ranking „Climate leaders Poland 2021”. 

The crisis made us even more aware of the importance of financial education. For many years, the Bank Millennium Foundation has been running an educational program aimed at pre-school children, i.e. in the period of shaping habits and attitudes. Children who get to know the world of finance from an early age, in adulthood, especially in crisis situations, cope much better – say the parents of preschoolers who participated in the survey conducted for the Bank Millennium Foundation. These conclusions confirm the sense of our actions. That is why this year, despite the pandemic, we continued the program in the online formula, enriching it with guide materials „Guide for parents – How to teach children to finance”, available and promoted on the Internet. 

What's ahead of us? The way we have dealt with the unprecedented events of the past months allows us to be optimistic about the coming ones.

In the next 1.5-2 years, we want to reach the operating results from before the pandemic. We plan to finalize the cost optimization and operational efficiency program, and improve business results by increasing sales. Taking advantage of all the advantages of our digital maturity, we want to participate even more in the challenges of open banking and the development of non-banking services. In 2021, we will strive to achieve the cost / income ratio at the level of 47% and 40% in the following years, and by constantly improving the quality of service, we will continue to achieve the highest customer satisfaction rates. 

We expect that in 2021 economic growth will be in the recovery phase after the crisis, and according to our forecasts, the GDP dynamics will amount to 4.4%. The economy should be supported by consumption of households with a favorable, moderate increase in unemployment and exports. Due to the pandemic, however, the forecasts are subject to increased uncertainty, although the spread of the vaccine may provide an opportunity to improve the economic sentiment. We expect interest rates to remain at record lows in 2021 – the reference rate will be just 0.1% – and inflation to stay around the central bank’s target of 2.5%. 

We assume that it will be a year of a real return to normal economic and social life and an improvement in the mood of the society. 

I cordially invite you to read the report. 

Joao Bras Jorge
Chairman of the Management Board of Bank Millennium

[GRI 102-14]

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