Financial and
ESG report 2020

Impact of COVID-19 pandemic on activity of BM group

The outbreak of coronavirus pandemic in 1Q20 resulted in rapid changes in the dynamics of the BM Group’s business and enforced changes of its strategic priorities. Business dynamics saw significant volatility during the year reflecting the level of the pandemic, anti-pandemic regulations introduced by the government and their impact of activity of customers of the Group.

DSF8141-1 DSF8141-1

Volatile business dynamics, uneven impact of the pandemic on business goals

While the first months of 1Q20 brought strong business volumes (record high origination of mortgages in February, beat by even stronger volumes in March, strong cash loan origination in January and February), in March the outbreak of COVID-19 pandemic resulted in a shift of the Bank’s and customers’ priorities. As uninterrupted operating performance on the one hand and safety of employees and customers on the other became the new focal points, the second half of the month in particular, brought significant drop in newly originated volumes, especially in cash loans, while additionally extra costs were incurred in conjunction with the pandemic.  

Despite this challenging backdrop, 1Q20 overall brought high disbursements of mortgages (PLN1,343 million, up 57% y/y) and cash loans (PLN1,297 million, up 31%), a further continuation of growth in the number of active retail customers (new record of 2.6 million, up 34% y/y), current accounts (3,435 thousand, up 41%), active micro-business clients (96.4 thousand, up 27%) as well as cards (debit cards: 2,911 thousand up 29%, credit cards: 466 thousand, up 25%). Mutual funds managed by Millennium TFI as well as the third-party ones saw significant redemptions in March. In the corporate segment, most sales KPIs were a tad below these in the preceding period but nonetheless, the corporate loan book grew 2% q/q (up 6% y/y), while deposits were only marginally down q/q and up 7% y/y. 

Subsequent quarters brought significant volatility in customers’ activity and business results of the BM Group as a result (detailed information available in quarterly and semi-annual reports).  

2Q20, the most volatile of all quarters of this year, brought new all-time disbursements of mortgages (PLN1.5 billion, up 15% q/q and up 18% y/y) with market share in originations increasing to nearly 16% in June from c7% in June the year before but a drop of new cash loan sales to PLN1.1 billion (down 17% q/q). Mutual funds managed by Millennium TFI as well as the third-party ones saw Inflows returning in May and June after significant redemptions in March and smaller ones in April. Corporate business was initially focused on customer support (facilitation of banking services) and protection (credit holidays, intermediation of support credit facilities from BGK/PFR among others). Later in the period, demand for borrowing remained moderate both at BM group and in the market overall with originations remaining below pre- pre-Covid levels but in some lines of business such as factoring a pick-up was more apparent. 

M2020-053 M2020-053

Following the relaxation of pandemic restrictions in June, early weeks of 3Q20 brought a strong rebound of economic activity which translated into an improvement of the transaction volumes in corporate business and a pick-up of lending growth and higher retail customers’ activity. The quarter brought a continuation of strong mortgage disbursements to a new record level of PLN1.8 billion (up 15% q/q, market share in originations of 14.5%) while originations of cash loans, albeit less linear, grew q/q to solid PLN1.2 billion. The number of active digital customers crossed the 2 million mark (up 27% y/y), number of active mobile customers exceeded 1.6 million (up 33%) and downloads of goodie application since its launch exceeded 2 million. Mutual funds managed by Millennium TFI as well as the third-party ones saw continuation of inflows (partly a result of conversion of deposits at the Bank) resulting in a 13% q/q growth in AuM in both categories combined (2Q: up 9% q/q). Corporate business continued to support customers (further facilitation of access to banking services including increasing share of digital signage of agreements, improving functionality of FX platform or 3D Secure authorisation of internet card payments, broadened number of products with BGK guarantees, high number of educational webinars etc.) but at the same time customer activity rebounded, returning in several areas to pre-COVID-19 levels. Factoring business increased compared to the respective period of the last year (volumes up 6% y/y, assets up 4% y/y), number of guarantees and LoCs issued increased 4% q/q to pre-COVID-19 level while the y/y growth in the number of transactions returned to a high single digit level. Demand for loans remained subdued owing to excessive liquidity (injections within government anti-crisis schemes) and low corporates’ propensity to invest. Totalling PLN18.1 billion (net), corporate loan portfolio decreased 1% q/q and was down 1% y/y while the year-to-date contraction rate of 3% was lower than this of the market overall. 

Pandemic safety measures were partly reinstated in 4Q20 but had less impact on consumer sentiment and activity the corporate segment than in spring. Quarterly mortgage loan disbursements exceeded PLN2.0 billion mark (up 19% q/q) translating into PLN 6.8 billion in 2020 overall (up 57% y/y) while market share in new production reached 12.1% in 4Q20 and 12.2% in 2020 (4Q19: 7.9%, 2019: 7.3%). Origination of cash loans dropped to PLN1 billion totalling PLN4.6 billion in 2020 overall (-7% y/y) which translates into a stable market share of 10.7%. The  number of debit cards issued crossed 3 million for the first time, number of active digital customers was up 12% y/y to 2.05 million, number of active mobile customers neared 1.7 million (up 18%). AuM of Millennium TFI and third party funds combined grew 7% q/q to over PLN8.4 billion, nearly offsetting outflows in 1Q20. Demand for borrowing remained muted in the corporate segment but nonetheless the total portfolio grew 1% q/q (gross) while the y/y growth rate remained at negative 1% due to the contraction of leasing portfolio. Nonetheless, this was above the market’s rate of contraction.  

Support for customers during COVID-19 pandemic

In the face of the unprecedented health, economic and social crisis the most important issue for Bank Millennium was to ensure the safety of employees and customers maintaining the continuity and high quality of business and services. Clients remained the priority for Bank Millennium Group through this crisis and a range of comprehensive measures to support our retail and business customers were implemented. 

Key solutions implemented at the early stage of the COVID-19 epidemic included:

Retail clients:

Credit holidays – temporary deferral of principal and interest instalments
Contactless card transactions up to PLN100 without PIN confirmation
Most transactions can be done safely and remotely from home
Fully online current account opening with the use of selfie
Dedicated website and banner communication on the portal

Micro-companies and corporate customers:

Application for PFR financial support (subsidy with redemption possibility) in Millenet for micro business and SME
Temporary suspension of loan instalments, including factoring, leasing and charge cards for all companies (as above)
Quick and simplified mode of credit renewal for SME and large companies
BGK guarantees under new, more favourable conditions for micro business and SME (de minimis guarantee)
Launching loans supported by BGK Liquidity Guaranties Fund for medium and large companies
Temporary suspension of loan instalments for leasing of transport equipment within the framework offered by ARP Leasing
Remote signing of all agreements for SME and large companies

At the later stage, The Bank continued to facilitate multichannel access to its services and products and to limit paper documents. Mobile authorisation of a part of transactions at branches was introduced. A new version of mobile application was launched, offering an option of tracking a status of mortgage loan application. This functionality will also be available in Millenet. Within Finanse 360° service, the number of external banks set up continued to increase, while application process for a cash loan was enhanced by an introduction of login to another bank to confirm applicant’s revenues. The bank also provided access to PUE ZUS platform from Millenet, offering its customers alternative way to obtain a tourist voucher offered by the government. 

The increased popularity of remote access channels and greatly facilitated online access to banking services that the outbreak of the pandemic had accelerated, manifested themselves through much higher number of logins to web (Millenet) and mobile access, higher number of electronic transfers and e-commerce card transactions or higher share of digital channels in origination of cash loans and overdrafts. At the same time the number of calls/emails to the contact centre fell from April/May peak to below pre-COVID-19 levels. 

As a part of customer support, the BM group introduced a programme of credit moratoria. After the initial spike in late March/early April and in June when a part of retail customers applied for extensions of credit holidays to six months, the number of applications for credit holidays in the retail segment declined significantly. At the end of June, loans with active and approved credit holidays represented 10% of total loan portfolio, less than 12% of retail portfolio, less than 3% of retail portfolio and around 12% of leasing portfolio. On December 31, 2020 there were 9,367 active ‘COVID-19 credit holidays’ schemes relating to outstanding cash loans and 892 active holidays schemes on mortgage loans with respective loan volumes of PLN267 million and PLN250 million. The public credit moratoria introduced in June by the so called ‘Anti-crisis shield 4.0’ enjoyed little take up so far with merely 444 applications filed by the end of the year (outstanding balance of PLN53 million). The number of credit holidays for corporate customers also fell significantly (to c50) from levels observed at the end of September with value of loans with deferred exposures totalling PLN44 million. The quality of PLN7.6 billion worth of exposures that had been subject to credit moratoria was solid with c2.5% delayed over 30 days or with default triggers identified. Cash loans were at YE20 the segment where the proportion was the highest (5.1%), while PLN mortgages showed least quality problems (1.1%). 

The impact of pandemic on financial results of BM Group

From the perspective of year 2020 overall, the impact of the pandemic on results of the BM Group was significant despite lower than initially expected negative impact on economic growth and key economic parameters, particularly the unemployment rate. The 2020 net profit was well below our aspirations. Itself, the cumulative NII drop in 2020 compared to the annualised 4Q19 level totalled PLN223 million or 8%. Owing to mitigating actions the negative impact was eventually smaller than our estimates made in 2Q20 (PLN240 million to PLN285 million) but nonetheless it, ceteris paribus, resulted in lower NII than would otherwise have been achieved. 

Search results