Results of business segments

Bank Millennium recent financial performance is significantly influenced by the costs related to managing legacy FX mortgage portfolio of loans. To isolate these costs and other financial results related to this portfolio Bank decided to isolate a new segment from Retail and present it in financial statements as “FX mortgage”. Such change impacts only results presentation and is not triggering any organizational changes in the Bank. New segment includes loans separated based on active FX mortgage contracts for a given period and is applying to portfolios of retail mortgages originated in Bank Millennium and Eurobank in foreign currencies. This portfolio is expected to run-off in line with repayments of FX loans and conversions to PLN loans.

Presented below are data regarding the Profit and Loss Account for the Group’s four business segments: retail segment, corporate segment, FX mortgage loans segment and treasury operations, assets/liabilities management and the other segment. The retail segment comprises services provided to individual customers on the mass market, affluent customers, sole traders as well as services to small companies (with annual turnover below PLN5mn). The corporate segment involves services to medium and large companies as well as public sector entities. The treasury operations, assets/liabilities management and other business comprises the Group’s treasury investments, interbank market transactions, taking positions in debt securities, brokerage activity as well as other transactions not classified in the first  three segments.

Total operating income of the retail segment in 2021 was PLN2,579mn million, which represents a strong increase of 20% y/y. Net interest income of the retail segment grew materially by 20% y/y as a result of higher business volumes and improvement in spreads, partly supported by interest rate hikes in 4Q21 mentioned earlier in the text. Net commission income presented considerable growth of 9% y/y. Operating costs of the retail segment fell by 10% y/y pointing to improving efficiency of the segment.

As a result of the abovementioned evolution of operation income and costs, total retail segment pre-provision income increased very strongly by 73% vs. the level of 2020. The cost of risk of the segment presented a material decrease by 34%.

Operating profit of the retail segment for 2021 – after consideration of the provisions – amounted to PLN1,034mn and showed a high growth of 224% y/y.

Total operating income for the corporate segment in 2021 stood at PLN 592 million, i.e. 14% higher compared to the level of 2020. This was the result of much higher all the income items presented above, of which net interest income: +10% y/y and net commission income: + 21% y/y. Operating costs of the corporate segment saw a 5% increase y/y.

As a result of the above pre-provision income grew strongly by 20% y/y. Value of net impairment write-offs regarding loans to companies presented a material decrease as additional provisions for COVID-19 impact in 2020 could be partly released after the situation of many corporate clients improved. Taking all above factors together, the operating profit of the corporate segment saw a very strong increase of +105% y/y to the level of PLN355mn in 2021.

Total operating income of the Treasury, ALM and other segments in 2021 was PLN434mn, which represents a drop by 46% y/y growth. The main reason for the drop was the decrease of net interest income by 33% as a result of lower income from ALM operations including from the bond portfolio. Operating costs decreased -6% y/y. Operating profit of the entire segment fell by 54% y/y and reached PLN316mn for 2021.

Total operating loss of the newly separated FX Mortgage segment in 2021 was PLN2,393mn, which is significantly higher compared to the previous year due to high provisions for legal risk related to the loan book of PLN2,305mn.