Financial and
ESG report 2020

Balance Sheet and Off – Balance Sheet items

The Group’s assets as at 31 December 2020, amounted to PLN 97,772mn, and stayed on similar level as at the end of 2019. Structure of the Group’s assets as well as changes of their particular components have been presented in the table below:

Assets

Group’s Assets (PLN million) 

31.12.2020 31.12.2019 Change
y/y
Value Structure Value Structure (%)
Cash and operations with the Central Bank  1 460.3  1.5%  2 203.4  2.3%  -33.7% 
Loans and advances to banks  625.4  0.6%  784.3  0.8%  -20.3% 
Loans and advances to clients  74 088.3  75.8%  69 615.4  71.1%  6.4% 
Receivables from securities bought with sell-back clause  66.4  0.1%  205.4  0.2%  -67.7% 
Debt securities  18 971.6  19.4%  22 865.7  23.4%  -17.0% 
Derivatives (for hedging and trading)  176.0  0.2%  155.6  0.2%  13.1% 
Shares and other financial instruments*  230.6  0.2%  96.5  0.1%  139.0% 
Tangible and intangible fixed assets**   956.6  1.0%  1 009.0  1.0%  -5.2% 
Other assets  1 196.6  1.2%  981.0  1.0%  22.0% 
Total assets  97 771.8  100.0%  97 916.4  100.0%  -0.1% 
(*) including investments in associates
(**) excluding fixed assets for sale

 

The most visible moves within assets in 2020 were growth of loans by PLN4.5bn and decrease of debt securities by PLN3.9bn.  

Total net loans of Bank Millennium Group reached PLN74,088mn as at the end of December 2020 and grew 6% y/y. The growth of loans without foreign currency mortgage portfolio was higher, at 9% y/y. FX mortgage loans decreased by 2% y/y. The share of FX mortgage loans (excluding these taken over with Euro Bank) in total gross loans has dropped during the year to 17.4% on December 2020 from 19.1% a year before. 

The net value of loans to households amounted to PLN55,697mn at the end of December 2020, up 9% y/y. Within this item PLN mortgages grew strongly by 22% y/y but growth rate of consumer loans slowed to 2% y/y.  

In 2020, origination of mortgage loans was much higher than in 2019 and reached PLN6.8bn translating into an outstanding annual growth of 57% with 4Q20 sales setting a new quarterly record of PLN2.1bn worth of loans.  

The net value of consumer loans reached PLN15,296mn growing +2% y/y. Origination of cash loans decelerated and amounted to PLN4.6bn for 2020 (-7% y/y). It was mostly affected by the COVID-19 pandemic which resulted in lower demand for the product and consequently pushed the annual sale level below the high level recorded in the previous year.  

Net value of loans to companies amounted to PLN18,931mn as at the end of December 2020 and decreased slightly by 1% yearly as the COVID-19 pandemic had a considerable adverse effect on new lending to companies. The decrease referred mostly to leasing portfolio (-5% y/y) which was more vulnerable to decelerating investments, whereas other loans grew by 1% y/y, above the market growth rate.  

The structure and evolution of loans to clients of the Group is presented in the table below: 

Loans and advances to clients (PLN million)

31.12.2020 31.12.2019 Change
y/y
Loans to households  55 697.4  50 998.2  9.2% 

– PLN mortgage loans 

26 273.9  21 469.5  22.4% 

– FX mortgage loans 

14 127.9  14 464.1  -2.3% 

– of which Bank Millennium loans 

13 139.8  13 492.7  -2.6% 

– of which ex-Euro Bank loans 

988.1  971.4  1.7% 

– consumer loans 

15 295.6  15 064.6  1.5% 
Loans to companies and public sector  18 390.9  18 617.2  -1.2% 

– leasing 

6 303.5  6 659.9  -5.4% 

– other loans to companies and factoring 

12 087.4  11 957.3  1.1% 
Net loans & advances to clients  74 088.3  69 615.4  6.4% 
Net loans and advances to clients excluding FX mortgage loans  59 960.4  55 151.3  8.7% 
Impairment write-offs  2 489.4  2 046.1  21.7% 
Gross* loans and advances to clients  76 577.7  71 661.5  6.9% 
(*) Including, besides provisions for credit risk, also fair value adjustment of loan portfolio presented in fair value as well as modification. Includes also IFRS9 initial adjustment. Gross loan portfolio in this case presents value of loans and advances before mentioned provisions and adjustments.

 

Average interest rate on the Bank’s portfolio in 2020 was 3.8%. This rate reflects net interest income on hedging derivatives (mainly FX and interest rate SWAPs) regarding loans granted in foreign currencies, which offsets the nominally lower interest rate on these loans. 

Value of debt securities reached PLN18,972mn at the end of December 2020, which means a decrease of 17% y/y as a consequence of assets/liabilities and interest margin management policy resulting in decrease of term deposits. An important part of the debt securities portfolio (99.5%) were bonds and bills issued by the Polish State Treasury and National Bank of Poland (Central Bank). The share of debt securities in the Group’s total assets was 19.4% at end of 2020, pointing to a strong liquidity position.  

The value of derivatives (for trading and hedging) totalled PLN176mn at end of December 2020, which constitutes an increase of 13% vs 31 December 2019.  

Loans and advances to banks (including interbank deposits) stood at PLN625mn at the end of December 2020, which means a decrease by 20% y/y, largely in result of lower of balances on current accounts but also lower balances of term deposits.  

Value of equities/shares and other financial instruments amounted to PLN231mn at the end of December 2020 and increased by 139% y/y in connection with higher valuation of equities and shares held. 

Tangible fixed assets and intangibles and goodwill of the Group amounted to PLN957mn at the end of December 2020 and declined by 5% y/y, mainly as a result of lower value of tangible fixed assets. 

Total investment of the Group in 2020 amounted to PLN100.4mn. Outlays for the bank’s physical infrastructure (branches, ATMs, security etc.) amounted to PLN17.7mn and PLN81.9mn for software and IT infrastructure. Value of other outlays i.e. PLN0.8mn, relates to Bank’s subsidiaries.  

The Bank Millennium Group plans investment capital expenditures in 2021 in the amount of PLN125.2mn, out of which ca. 80% will be allocated to IT projects (i.e. further internet and mobile banking developments and capacity extensions). 

Bank’s unconsolidated assets, as on 31 December 2020 reached the value of PLN97,016mn and stayed on similar level as at the end of 2019. Structure of the Bank’s assets and changes of individual components are presented in table below: 

Group’s Assets (PLN million) 

31.12.2020 31.12.2019 Change
y/y
Value Structure Value Structure (%)
Cash and operations with the Central Bank  1 460.3  1.5%  2 203.4  2.3%  -33.7% 
Loans and advances to banks  625.4  0.6%  784.3  0.8%  -20.3% 
Loans and advances to clients  74 088.3  75.8%  69 615.4  71.1%  6.4% 
Receivables from securities bought with sell-back clause  66.4  0.1%  205.4  0.2%  -67.7% 
Debt securities  18 971.6  19.4%  22 865.7  23.4%  -17.0% 
Derivatives (for hedging and trading)  176.0  0.2%  155.6  0.2%  13.1% 
Shares and other financial instruments*  230.6  0.2%  96.5  0.1%  139.0% 
Tangible and intangible fixed assets**   956.6  1.0%  1 009.0  1.0%  -5.2% 
Other assets  1 196.6  1.2%  981.0  1.0%  22.0% 
Total assets  97 771.8  100.0%  97 916.4  100.0%  -0.1% 
(*) including investments in associates
(**) excluding fixed assets for sale

 

The key difference between the level of assets of Bank standalone and the consolidated Group is the value of loans to customers. In the first place it relates to receivables due from leasing company customers (although significant part of the said receivables was acquired by the Bank) and relates to elimination of mutual transactions between the Bank and other companies from the Capital Group in consolidated financial statements.  

Total Loans to customers in the Bank amounted to PLN73,501mn at the end of December 2020, representing the growth of 7% y/y. Except for leasing receivables, values and annual changes of other key components of Bank credits are similar or exactly the same as for the Capital Group. 

Value of debt securities in the Bank’s assets reached PLN18,956mn at the end of December 2020. Both the portfolio dynamics and structure remained similar as in the case of the Group (as described above).  

Equities/shares and other financial instruments presented in the Bank’s financial statements, unlike in the case of Group reports, incorporated valuation of shares in subsidiaries. Value of this item, as on 31 December 2020, amounted to PLN439mn, recording high increase by 137% y/y, so very similar growth rate as for the whole capital Group.  

The Bank’s fixed assets and intangibles amounted to PLN915mn at the end of December 2020 i.e. recording a decrease by 4% y/y (for reasons similar as in the case of the Group). 

Values and annual changes to other asset groups presented in the table above are similar to the corresponding items of consolidated Group, as described earlier in this document.

Liabilities

The structure of Group’s liabilities and equity and the changes of their particular components are presented in the table below: 

Group’s Liabilities and Equity (PLN million)  31.12.2020 31.12.2019 Change
y/y
Value Structure Value Structure (%)
Deposits from banks  1 057.7  1.2%  1 578.8  1.8%  -33.0% 
Deposits from customers  81 510.5  91.9%  81 454.8  91.5%  0.1% 
Liabilities from securities sold with buy-back clause  248.6  0.3%  90.7  0.1%  174.0% 
Financial liabilities valued at fair value through P&L and hedging derivatives   907.4  1.0%  779.8  0.9%  16.4% 
Liabilities from issue of debt securities  558.6  0.6%  1 183.2  1.3%  -52.8% 
Provisions  607.7  0.7%  165.2  0.2%  267.9% 
Subordinated debt  1 540.2  1.7%  1 546.2  1.7%  -0.4% 
Other liabilities*   2 250.2  2.5%  2 176.1  2.4%  3.4% 
Total liabilities  88 680.8  100.0%  88 974.9  100.0%  -0.3% 
Total equity  9 091.0    8 941.5    1.7% 
Total liabilities and equity  97 771.8    97 916.4    -0.1% 
* including tax liabilities

 

At the end of December 2020 liabilities accounted for 90.7%, while equity of the Group – for 9.3% of total liabilities and equity capitals.  

As on 31 December 2020 Group’s total liabilities amounted to PLN88,681mn and were on similar level relative to their value as on 31 December 2019.  

Customer deposits constituted the main line item under the Group’s accounting for, as on 31 December 2020, 91.9% of total liabilities. Customer deposits constitute the main source of financing of Group’s activities and incorporate, primarily, customer funds on current and saving accounts as well as on term deposit accounts 

The evolution of Clients Deposits is presented in the table below: 

Customer deposits (PLN million) 31.12.2020 31.12.2019 Change
y/y
Deposits of individuals   61 874.9  61 091.9  1.3% 
Deposits of companies and public sector  19 635.6  20 362.9  -3.6% 
Total deposits  81 510.5  81 454.8  0.1% 

 

Total deposits amounted to PLN81,511mn as at 31 December 2020 and their y/y growth decelerated to nearly zero percent. Deposits fell 5% quarterly which resulted from tighter margin management and decreasing term deposits. The outflow of term deposits in 4Q20 was especially visible in corporate segment (PLN-2.4bn vs. the end of September 2020) probably as a result of introduction of fees on deposits. 

Deposits of individuals reached PLN61,875mn as at 31 December 2020 growing 1% y/y and staying flat vs the end of the previous quarter. The Bank did not compete actively for retail term deposits and had to make significant cuts in the deposit interest rates after strong Monetary Policy Council interest rates cut. Within deposits, current and saving accounts continued to grow at a high pace (up 16% y/y), so their share in total deposits of individuals increased to 82%, which is correlated with higher customers’ transactionality. On the other hand, term deposits of individuals dropped 36% y/y. 

Deposits from companies and public sector decreased -4% y/y to PLN19,636mn as at the end of December 2020. Term deposits fell very strongly by 55% y/y, especially in 4Q20: -45% vs the end of the previous quarter. The drop was partly compensated by the dynamic growth of current accounts: +37% y/y. Similar to the retail deposits case, this was mainly the effect of strong reduction of central bank interest rates. 

Average interest rate on all deposits in the Bank in 2020 amounted to 0.5% 

Deposits of banks, including credits received, as on 31 December 2020, amounted to PLN1,058mn, accounting for 1.2% of the Group’s liabilities. Value of this item declined by PLN521mn (or by 33%) relative to the balance as on 31 December 2019, mainly in effect of lower, by PLN645mn, balance of credits received from financial institutions. The said credits include funds received from the European Investment Bank and the European Bank for Reconstruction and Development (in EUR, CHF and PLN) with original maturities of up to 7 years, constituting an important line item within long-term and medium-term wholesale financing obtained by the Group. 

Financial liabilities valued at fair value through Profit and Loss Account and derivative instruments included, primarily, negative valuation of derivatives for trading or hedging and liabilities resulting from securities subject to short sale. Value of this item, as on 31 December 2020, amounted to PLN907mn, recording an increase by 16% relative to the balance as on 31 December 2019, mainly due to increasing negative valuation of hedging derivatives (mainly FX swaps) by PLN 312mn y/y. The above was caused, primarily, by changing FX rates and interest rates cuts on the Polish market 

The value of provisions as on 31 December 2020 was PLN608mn which signifies strong growth by PLN442mn or 268% y/y. The reason for the increase was creating new provisions for legal issues, especially claims related to FX mortgage loans agreements.  

Securities issued by the Group amounted to PLN559mn as on 31 December 2020 recording significant decrease by PLN625mn (or 53%) relative to the balance as on 31 December 2019. The decrease resulted from repurchase of securities issued by the Bank and its subsidiary Millennium Leasing. The biggest repurchases included PLN300mn Banks’ bonds series for institutional investors (in 1H20). The repurchase of Millennium Leasing bonds amounted to PLN106mn. 

The value of subordinated debt amounted to PLN1,540mn as on 31 December 2020, and stayed on similar level vs. the end of 2019 (a very minor difference results from interest accrued). The subordinated debt line includes ten-year subordinated bonds in PLN at the total nominal value of PLN830mn maturing in January 2029 and ten-year bonds in PLN at the total nominal value of PLN700mn maturing in December 2027.  

As on 31 December 2020, equity capital of the Group amounted to PLN9,091mn and recorded increase by PLN149mn or 2% y/y. Apart from the net profit generated in 2020 the main factor of the growth of equity was positive valuation of securities of PLN143mn since 31 December 2019.   

The Bank Management Board will present, to the General Meeting of Shareholders, proposal to retain the entire net profit for 2020 in own funds. 

Information on capital adequacy was presented in Chapter 7 of this document and in a separate report untitled “Report on capital adequacy, risk and remuneration policy in the Bank Millennium Capital Group for 2020”. 

The non-consolidated Bank’s liabilities as at 31 December 2020 reached the value of PLN88,180mn million and stayed on similar level compared to the end of 2019. Structure of the Bank’s liabilities and own equity capitals as well as changes of their particular components are presented in the table below: 

Bank’s Liabilities and Equity (PLN million) 

31.12.2020 31.12.2019 Change
y/y
Value Structure Value Structure (%)
Deposits from banks  563.9  0.6%  849.5  1.0%  -33.6% 
Deposits from customers  81 832.5  92.8%  81 637.5  92.8%  0.2% 
Liabilities from securities sold with buy-back clause  248.6  0.3%  90.7  0.1%  174.0% 
Financial liabilities at fair value through P&L and hedging derivat  907.4  1.0%  779.9  0.9%  16.4% 
Liabilities from issue of debt securities  484.7  0.5%  1 003.7  1.1%  -51.7% 
Provisions  607.4  0.7%  164.7  0.2%  268.7% 
Subordinated debt  1 540.2  1.7%  1 546.2  1.8%  -0.4% 
Other liabilities*   1 995.4  2.3%  1 923.0  2.2%  3.8% 
Total liabilities  88 179.9  100.0%  87 995.2  100.0%  0.2% 
Total equity  8 835.7    8 690.1    1.7% 
Total liabilities and equity  97 015.6    96 685.2    0.3% 
(*) including tax liabilities

 

The key difference between non-consolidated Bank’s and Group’s liabilities is the value of liabilities from issued securities of the leasing company of PLN74mn (presented in the Group’s statements).  

The value of customer deposits of the Bank reached PLN81,832mn as on 31 December 2020 and was higher by PLN322mn than the balance for the Group (mainly effect of intra-group elimination). Deposits, similar to the Group’s case, were flat year-on-year.  

The values and annual changes of such liabilities lines of the Bank’s balance sheet as Liabilities from securities sold with buy-back clause, Financial liabilities at fair value through P&L and hedging derivatives, Provisions and Subordinated debt are similar to those of their equivalents in the consolidated reports for the Group, as discussed above in this part of the report. 

Bank’s own equity, as on 31 December 2020, amounted to PLN8,836mn and recorded increase by 2% y/y (similar level of growth as in the case of Group’s consolidated equity). 

Contingent liabilities

The structure of contingent liabilities of the Group is presented in the table below: 

Group’s Contingent Liabilities  (PLN million) 31.12.2020 31.12.2019 Change y/y (%)
Total contingent liabilities  15 722.7  12 169.9  29.2% 
1. Liabilities granted:  14 177.2  11 629.6  21.9% 
a) financial  12 420.9  9 883.1  25.7% 
b) guarantees  1 756.3  1 746.6  0.6% 
2. Liabilities received:  1 545.6  540.3  186.1% 
a) financial  0.0  0.0   
b) guarantees  1 545.6  540.3  186.1% 

 

Through these operations the Group executes transactions generating conditional liabilities. The main items under conditional liabilities (granted) are as follows: (i) financial liabilities mainly relative to loan prolongation (including, inter alia, not utilised credit card limits, not utilised overdraft facilities, not utilised tranches of investment loans) and (ii) guarantees, including mainly guarantees and letters of credit issued by the Group (to secure performance of obligations undertaken by Group’s customers vis a vis third parties). Granted conditional liabilities result in Group’s exposures to various risks, including credit risk. The Group creates provisions against irrevocable risk based conditional liabilities booked in the line item “Provisions” on the liability side of the balance sheet.  

As on 31 December 2020, the total value of conditional liabilities of the Group amounted to PLN15,723mn, including liabilities granted by the Group at the level of PLN14,177mnIn 2020, the value of conditional financial liabilities granted by the Group increased by 22%, mainly financial liabilities, which grew by 26% due to higher value of commitments related to lending activity.  

More information on the issue of conditional liabilities can be found in Chapter 13 of the Financial Statements of Bank Millennium S.A. Capital Group for the period of 12 months ending on 31 December 2020.  

The structure of contingent liabilities of the non-consolidated Bank is presented in the table below: 

Bank’s Contingent Liabilities
(PLN million)
31.12.2020 31.12.2019 Change y/y (%)
Total contingent liabilities  16 589.2  12 995.3  27.7% 
1. Liabilities granted: 15 040.7  12 452.0  20.8% 
a) financial  12 478.7  9 939.5  25.5% 
b) guarantees  2 562.0  2 512.5  2.0% 
2. Liabilities received:  1 548.4  543.2  185.0% 
a) financial  0.0  0.0   
b) guarantees  1 548.4  543.2  185.0% 

 

The total value of conditional liabilities granted and received by the Bank amounted to PLN16,589mn, recording increase by 28% in annual terms. The main difference between this value and the value of the Group’s conditional liabilities is the balance of guarantees granted: at the Bank’s level guarantees granted to Group companies are presented to be netted off at the level of the Group. The key items among these guarantees were guarantees securing repayment of loans granted to Millennium Leasing to the total amount of PLN789mn. Evolution in the area of other granted and received conditional liabilities of the Bank remains similar to that recorded for the Group, as described above.  

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