1.4. mBank Group’s strategic advantages

Over the past years mBank Group developed a range of competitive strengths, which enable the organisation to take advantage of growth opportunities and successfully achieve its strategic objectives. The key factors are illustrated and described below:

 1.4 key factors

Exceptionally favourable demographics

mBank’s unique value proposition in the retail banking segment, anchored in an attractive and forefront business model, has been developed to target young, aspiring and tech-savvy clients, who quickly adapt innovations. Consequently, mBank’s customer base has an advantageous demographic profile as compared to the Polish market.

A half of the Bank’s retail clients are under the age of 35 and are expected to reach their highest personal income levels in years to come, positioning mBank to reap the benefits from additional cross-selling opportunities of banking and insurance products. Maturing of the customer base provides a natural source for revenue growth as well as supports the asset quality of the Group and the responsiveness of its clients to cross-selling initiatives. Moreover, mBank’s mortgage clients are predominantly living in urban areas and large cities of more than 100 thousand residents and they are better educated than general mortgage owners in Poland.

Modern, flexible, state-of-the-art banking platform

Since 2000, anticipating the development and increasing accessibility of the Internet, mBank has applied and promoted a modern and highly convenient new retail banking model based on the Internet and other new technologically advanced solutions. As a result, the Bank is uniquely positioned in the market to offer a wide range of innovative products and services, meeting the changing needs of its target clients.

mBank, as a global innovator in banking, has been constantly improving its Internet and mobile transaction systems, which resulted in 2013 in the launch of a re-developed, modern, intuitive, easily accessible and user-friendly Internet platform (New mBank) with more than 200 new features and improvements. Implemented solutions are delivering higher client acquisition and transactionality. A flexibility of the mBank’s platform to expand or roll-out new strategic ventures is an additional advantage (e.g. an offering for the customers of Orange Finance).

A distribution mix that anticipates shifting client preferences

Given its multi-channel approach, which has been designed to anticipate and follow the changing needs of clients, mBank’s current sales mix is already ahead of what is expected to be the pattern of distribution prevailing in the banking sector in the coming years. Internet, mobile, video and call centre channels are rapidly gaining importance as demonstrated by the sales levels of various banking products generated by these channels as compared to traditional branches.

In particular, a half of current accounts and more than 2/3 of saving products are sold through mBank’s Internet platform. In addition, a growing number of balance enquires and transfers are handled via mBank’s mobile application. Such a sales mix guarantees no need for painful structural adjustments in the near future. Moreover, as the Bank promotes a self-service model in which retail customers operate their accounts predominantly via remote channels, it is also able to proactively use modern real time marketing and cross-sell more products.

Structural cost advantage

Heavy technology spending on the Internet and mobile transaction platforms as well as a light and efficient branch infrastructure result in a lower overall cost base and a high degree of operating flexibility. The Group’s competitive advantage stemming from its business model manifests itself in superior efficiency metrics compared to other Polish banks. Based on such ratios as cost to income, cost to average assets or gross loans to branches, mBank ranks among the top in all three categories when compared to the major Polish banks. mBank operates through the optimal number of branches, what implies that there will be no need to carry out a painful restructuring of its physical distribution network resulting in the branch closures.

Inherent ability for organic growth

mBank is the largest organically developed retail banking franchise in the CEE region. In contrast to most financial services groups in Poland, mBank has not grown through any significant mergers and acquisitions, proving its strong ability to constantly attract new customers in the three countries. The Group’s retail client base in Poland, the Czech Republic and Slovakia has grown solely organically by 209 thousand, 235 thousand and 320 thousand in 2012, 2013 and 2014, respectively, reaching approximately 4,688.6 thousand retail customers.

Strategic balance sheet management

Due to its continued focus on diversified, long-term and attractively priced funding, the Group managed to improve its liquidity profile, as demonstrated by gradually declining loan to deposit ratio.

On the asset side, development of balance sheet benefits from the phasing out of the legacy CHF-denominated mortgage loan portfolio and the intended expansion of higher margin lending products, such as retail consumer loans (predominantly cross-selling of non-mortgage loans to existing current account customers), PLN-denominated mortgage loans and SME loans. On the liabilities side, mBank is focused on ensuring a stable and adequate deposit base by leveraging the higher sight deposit volume as a primary banking relationship for majority of its retail clients.

Radical strengthening of balance sheet funding quality is also supported by issuances of senior unsecured and subordinated bonds in domestic and international markets. Moreover, mBank Hipoteczny maintains a leadership position on the Poland’s covered bond market, adding to the Group’s long-term financing sources. These transactions, performed both in EUR and PLN, not only help to cut the funding costs, but also better match maturity and currency of assets and liabilities.