Letter from the Chairman of the Management Board

The year 2021 was another unusual and difficult period in our business. Although the economic outlook after the end of the first waves of the pandemic was good, and vaccines gave hope for the normalization of life, the second half of the year brought inflation, economic uncertainties and … new variants of the coronavirus. However, I close the year with a sense of fulfilment and satisfaction with the effects we have achieved. This was possible thanks to the commitment and harmonious cooperation of all employees of the Bank Millennium Group, whom I wholeheartedly thank for this.

In 2021, we achieved good operational and business results, while actively managing and mitigating the different risks related to the banking activity. It was a year of high growth in retail lending, led by record sales of new mortgage loans and a rebound in consumer loan sales. As befits a leader in digital customer experience, the number of active digital customers exceeded 2.3 million (an increase of 10% y/y) and mobile customers 1.9 million (an increase of 16% y/y). We increased our core revenues (interest and commission revenues) and decreased operating costs. The quality of the loans portfolio improved, which allowed a lower cost of credit risk. The financial loss in the amount of PLN 1,332 million was caused by the creation of provisions for legal risk related to the portfolio of foreign currency mortgage loans (excluding Euro Bank) in the amount of PLN 2,086 million, additional costs incurred with individual amicable settlements with FX mortgage borrowers and with legal costs. Excluding these provisions and costs, the Group’s net profit would amount to PLN 1,098 million net.

The event of the year for the Bank was undoubtedly the announcement of our new Strategy for 2022-2024 entitled „Inspired by people”. The document is the result of the work of many teams and derives directly from the knowledge and inspiration of employees. The strategy assumes smart growth, solid business development and further technological progress. We want to maintain high operational efficiency and strengthen customer acquisition based on the growth engines developed in recent years – the sales of personal accounts, cash and mortgage loans, and selective growth in corporate. The key values of our activities remain unchanged. These are customer centricity, offering high quality of service, continuous innovation, accelerated digitalization, with the mobile app at its core, and a commitment to society and the environment.

The Bank is a signatory to the partnership for the implementation of the UN Sustainable Development Goals, which sets the direction for our activities. For 11 years, the Bank has been part of the index of the Warsaw Stock Exchange, which brings together companies with the highest standards of sustainable development. Bank Millennium Group does not provide financing for new coal mines and investments in coal-based energy, with the exception of new investments related to the reduction of pollution. A few years ago, the Bank decided to significantly reduce the exposures financing the coal industry. As a result, the portfolio’s exposures involved in coal and hydrocarbon mining are close to zero. For the coming years, we have set ourselves specific climate goals. The Bank’s plans are to reduce its own greenhouse gas emissions by 50% in 2022 compared to 2020 and to achieve climate neutrality in terms of its own emissions by 2027. It will also actively support corporate clients in their decarbonization activities, in developing their investment plans related to the package of the European funds, especially green finance.

Following a long period of only virtual activity of the Bank Millennium Foundation due to the pandemic, in 2021 its activity returned to real life. We continued the employee volunteering project #słuchaMYwspieraMY and the educational program „Financial ABCs”. We conducted 200 workshops in kindergartens throughout Poland and over 2 600 people in a difficult life situation received help from us. After the very popular 18th edition of the Millennium Docs Against Gravity festival, we have extended our cooperation with its organizer for another three years.

What lies ahead? In accordance with the new strategy for the years 2022-2024, the Bank plans to meet the growing, post-pandemic expectations of customers and shareholders. By 2024, we intend to achieve PLN 2 billion of net profit (excluding costs related to the portfolio of foreign currency mortgage loans) and ROE (without the above-mentioned costs) at the level of approx. 14%. Ambitious efficiencies and smart business growth will be made possible by further increasing the number of active customers to over 3 million in 2024 and improving a cost-effective, scalable operating platform allowing to achieve cost/income ratio of less than 37% in 2024.

We expect that in 2022 the Polish economy will remain on the positive path, although economic growth will slow down when compared to 2021. The economy will continue to be supported by household consumption, driven by the expected further decline in the unemployment rate and wage growth. However, high inflation and interest rate hikes will limit the dynamics of consumer spending. 2022 may also be a year of rebuilding investments, especially if European funds start to flow into Poland in a wider stream. The pandemic remains a factor of uncertainty, despite the fact that in 2021 the economy largely adapted to operate in its conditions. High inflation remains a risk, which may force higher than expected interest rate increases, which could imply a stronger slowdown of the economy.

Looking ahead to the coming year, I am optimistic. Bank Millennium is fully prepared for the challenges of the future and poised to implement ambitious, strategic goals. I hope that working on them will be a source of satisfaction for every employee. I cordially invite you to read the report.