1. Short overview of mBank Group

mBank Group is the fourth-largest financial institution in Poland measured by total assets. It offers retail, corporate and investment banking as well as other financial services such as leasing, factoring, insurance, financing of commercial real property, brokerage operations, wealth management, corporate finance and advisory in the scope of capital markets. mBank is the only Polish bank, which successfully replicated its Polish business model on foreign markets - in 2007 it started its retail operations in the Czech Republic and Slovakia.

2014 brought about accelerated economic growth, which stepped up from 1.7% in 2013 to 3.3%. The growth rate was higher than projected in most forecasts early in the year. Inflation came as an unpleasant surprise in 2014: despite expectations, it was a year of a decline of inflation, which fell below zero for the first time ever in July and stood at -1% at the end of the year.

The steady fall of inflation was combined with growing uncertainty about the market conditions in Poland and beyond. A series of adverse events (further slow-down in the eurozone, economic crisis in some Central and Eastern European countries, mainly Russia and Ukraine) put in question the potential dynamic growth of foreign demand for Polish goods and services. Coupled with a decline of many economic indicators, these factors prompted the Monetary Policy Council to resume monetary policy easing. After cutting the main interest rate by 50 basis points in October, the Monetary Policy Council remained dovish and signalled further cuts.

2014 turned out to be moderately better than 2013 for the financial results of the Polish banking sector despite several factors that had a negative impact on them. Apart from the above-mentioned reduction of the main interest rate by the Monetary Policy Council (with a simultaneous reduction of the lombard rate by 100 bp), in July 2014 interchange rate was lowered to 0.5% from 1.3%. Notwithstanding this, the net profit of the sector in 2014 totalled PLN 16.2 billion compared to PLN 15.2 billion reported in 2013. The growth in the profit of the banking sector is attributable mainly to an improved net interest income.

Also for mBank Group, despite the challenging market environment, 2014 was better than the previous one. The Group reported a sound loan and deposit growth across segments. As a result of growing income, the net profit grew compared to 2013. The Group implemented a number of projects which made it even better prepared for both market and regulatory challenges in the coming years. The key events of 2014 include:

  • Growth in the net profit of mBank Group by 6.7% compared to 2013 to PLN 1,286.7 million.
  • Growth in income by 7.2% year on year mainly thanks to core income, i.e. net interest income and net fee and commission income.
  • Income growing faster than costs contributed to the improvement in effectiveness measured by the cost to income ratio – the ratio decreased to 44.9% at the end of the year.
  • Growth in net loans by 9.3% compared to the previous year – credit portfolio increased markedly in the segment of both individual and corporate clients.
  • Considerable growth in clients’ deposits by 17.4% year on year, mainly due to a growth in deposits of corporate clients, with a simultaneous growth in deposits of individual clients.
  • Stable quality of assets and of cost of risk at 72 bps.
  • High quality of capital base – capital ratios surpassing regulatory requirements: CET 1 ratio at 12.2%, total capital ratio at 14.7%.
  • High acquisition of clients – in 2014, 320 thousand individual and 1,454 corporate clients were acquired.
  • Record-high sale of non-mortgage loans – in 2014 consumer loans in the amount of more than PLN 4.4 billion were sold.
  • As a result of the faster increase of deposits, the loan to deposit ratio decreased to 103.0% at the end of the year.
  • Issue of the next tranches of bonds under the EMTN programme – in 2014 two tranches in the amount of EUR 500 million each were issued.
  • Issue of covered bonds in the amount of more than PLN 1 billion.
  • Establishing cooperation with Orange, a telecommunications operator, and creating Orange Finance, a joint mobile banking service.
  • Signing of a strategic agreement with AXA Group on distribution of insurance products through the channels of mBank and a simultaneous sale of BRE Ubezpieczenia.

1.1. Key financial and business data of mBank Group

 

 

2010

2011

2012

2013

2014

YoY change

Key Financials (PLN thou.):

 

 

 

 

 

 

Net Fee & Commission income

1,810,964

2,148,602

2,279,597

2,225,811

2,490,658

11.9%

Net Fee & Commission income

745,919

839,972

786,546

834,738

901,690

8.0%

Total income

3,124,559

3,563,510

3,570,774

3,673,524

3,939,168

7.2%

Total costs (incl. A&D)

-1,617,269

-1,722,913

-1,661,331

-1,678,043

-1,770,565

5.5%

Loan Loss Provisions

-634,779

-373,470

-444,635

-477,778

-515,903

8.0%

Profit before income tax

872,511

1,467,127

1,464,808

1,517,703

1,652,700

8.9%

Net profit attributable to shareholders

641,602

1,134,972

1,197,321

1,206,375

1,286,668

6.7%

 

 

 

 

 

 

 

Balance Sheet (PLN thou.):

 

 

 

 

 

 

Total assets

90,038,831

98,875,647

102,144,983

104,282,761

117,985,822

13.1%

Total liabilities

82,961,546

90,802,982

92,526,062

94,026,323

106,912,844

13.7%

Total equity

7,077,285

8,072,665

9,618,921

10,256,438

11,072,978

8.0%

 

 

 

 

 

 

 

Key Indicators:

 

 

 

 

 

 

Cost/Income ratio

51.8%

48.3%

46.5%

45.7%

44.9%

-

ROE net

11.8%

16.4%

14.6%

13.1%

13.1%

-

NIM

2.2%

2.5%

2.4%

2.2%

2.3%

-

NPL ratio#

5.3%

4.7%

5.2%

6.3%

6.4%

-

Coverage ratio

68.0%

66.2%

64.1%

47.8%

51.9%

-

Core Tier 1 / CET 1* 

10.4%

9.6%

13.0%

14.2%

12.2%

-

CAR / Total Capital Ratio*

15.9%

15.0%

18.7%

19.4%

14.7%

-

Employment (FTE. at the end of period)

6,018

6,294

6,138

6,073

6,318

4.0%

 

 

 

 

 

 

 

Investor & Shareholder Information:

 

 

 

 

 

 

Share capital (PLN thou.)

168,347

168,411

168,556

168,696

168,840

-

Number of shares

42,086,674

42,102,746

42,138,976

42,174,013

42,210,057

0.1%

P/BV

1.9

1.3

1.4

2.1

1.9

-9.4%

 

 

 

 

 

 

 

Business Data:

 

 

 

 

 

 

Retail Banking

 

 

 

 

 

 

No. of customers (thou.)

3,656

3,893

4,134

4,368

4,689

7.3%

Total loans (PLN M)

33,659

38,689

37,704

38,308

41,560

8.5%

Total deposits (PLN M)

25,068

26,701

33,234

34,203

39,285

14.9%

 

 

 

 

 

 

 

Corporate Banking

 

 

 

 

 

 

No. of customers (thou.)

13,271

13,977

15,095

16,333

17,787

8.9%

Total loans (PLN M)

25,574

27,890

28,405

29,475

32,841

11.4%

Total deposits (PLN M)

21,154

27,015

24,249

26,753

32,237

20.5%

prev next

 

* Since Q4/13 a modified methodology of NPL recognition in retail area has been applied (the NPL ratio is calculated in accordance to a more strict client perspective methodology).

**Since the end of march 2014 capital ratios are calculated according to the rules based on the Basel III.

1.2. History of mBank

1-2-historia-strzalka Establishment of Bank Rozwoju Eksportu as a joint-stock company with aim to service the needs of Poland’s expanding export-oriented companies
 
Receipt of credit line facilities from the World Bank and International Finance Corporation; BRE Bank becomes a member of the international settlement system SWIFT
 
Start of BRE Bank Group: BRE Brokers, the Group’s first subsidiary is established
 
Listing of BRE Bank on the Warsaw Stock Exchange
 
Signing of a strategic partnership agreement with Commerzbank AG
 
Poland’s first Private Banking offer is launched
 
Merger with Polski Bank Rozwoju SA
 
Establishment of mBank – the first Internet-only bank in Poland – completed in just one hundred days
 
Launch of MultiBank, the second retail arm of BRE Bank, targeting affluent customers
 
Start of iBRE, a modern Internet banking system for companies
 
Foreign expansion of retail operations, the first branches of mBank are set up in the Czech Republic and Slovakia
 
Successful issue of new shares, in which the Bank raises nearly PLN 2 billion
 
mBank’s mobile transactional platform for iOS and Android is launched
 
„One Bank” Strategy for 2012-2016 is announced
 
Rebranding – Group brands are replaced with the strongest name: mBank New mBank transactional platform is launched
 
Launch of cooperation with Orange
Launch of New mBank platform for clients in Czech Republic and Slovakia
 

1.3. mBank Group’s business model in a snapshot

mBank Group is the fourth-largest measured by total assets financial institution in Poland, providing retail, corporate and investment banking as well as other financial services, including leasing, factoring, commercial real estate financing, brokerage, wealth management, corporate finance and capital markets advisory as well as distribution of insurance.

Historically, the strength of mBank lied in corporate banking, as since its establishment in 1986 the Bank has served some of Poland’s largest companies involved in foreign trade on export markets. A longstanding experience in corporate banking services set the stage for the Bank’s further expansion into the small and medium-sized corporate client segment.

In 2000, mBank started its retail operations by launching a fully Internet-based bank, which was a pioneering project in the Polish market based on the Internet, direct service through call centres, and later on mobile banking and also other new technology-based solutions. In 2001, the Bank’s second retail arm was launched as a high street brick-and-mortar bank, offering a broad range of products and services targeted at affluent customers and micro-businesses seeking high quality, personalised service.

mBank is the only Polish bank with a successful track record of rolling out its domestic business model into foreign markets. In 2007, mBank launched retail operations in the Czech Republic and Slovakia, focusing initially on transactional and deposit products and now expanding also into mortgage and consumer loans as the bank has been able to establish and develop strong client relationships.

As a result, the Bank’s client base has grown almost entirely organically, reaching 4,689 thousand retail clients and 17,787 corporate customers at the end of 2014.

Over the past few years, mBank has strengthened its client-oriented approach and has been pursuing a stable, focused strategy as a modern and innovative transactional bank providing an integrated range of multiple products and services meeting the needs of its clients. In 2013, mBank launched a reinvented, modern, convenient, easily accessible and user-friendly Internet platform (New mBank) with more than 200 new features, which won global recognition for innovation in banking taking home many international awards.

mBank’s widely recognised operational excellence is based on its state-of-the-art user interface for online banking, next-generation mobile applications, video banking and P2P payments via Facebook and text messaging, and real-time, event-driven customer relationship management (CRM) based on client behaviour patterns. The whole product offer is centred around the current account with a broad spectrum of financial services accessible in just “one click”, as the aim is to be the most convenient transactional bank for all clients.

Following the implementation of the “One Bank Strategy”, mBank reorganised its corporate and investment banking functions in order to offer to its corporate clients fully integrated commercial banking products, services and solutions. A comprehensive product offering, anchored in transactional banking, is complemented by investment banking services, such as ECM, DCM and M&A advisory services.

mBank’s distribution concept combines the most technologically advanced solutions adapted for the Polish banking market and current and future operating environment, including Internet and mobile-based tools (such as its retail banking platform “New mBank” and corporate banking Internet platform “mBank CompanyNet”), premium service quality and a mid-sized physical distribution network located throughout Poland.

With its proven ability in achieving the communicated targets, mBank is well positioned to continue its successful business growth in both retail and corporate segment through exploiting attractive market opportunities. The IT platform architecture allows the Bank to develop and introduce new products, services and sales channels rapidly, inexpensively and with a low operational risk. Thanks to such a flexible infrastructure, mBank is able to manage its business expansion strategy.

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.

1.5. mBank Group before and after the financial crisis

The financial crisis, started with the crash on the American real estate market, changed the face of banking globally. In 2008 the banking sector in Poland was still characterised by intensive expansion on the market of housing loans denominated in foreign currencies, which widened the gap between loans and deposits as well as caused the capital adequacy ratio to fall. Banks were financing the increase in lending mainly by liabilities towards other banks, in particular to parent companies, which resulted in an increase in their sensitivity to the situation on the Polish and the global financial markets as well as in a deterioration in the structure of financing sources[1]. Following the collapse of Lehman Brothers on September 15, 2008 the confidence in financial markets dropped further and, consequently, liquidity decreased and financing costs for banks increased. A number of financial institutions in the world needed a substantial recapitalisation from the taxpayers’ money.

Five years after the crisis, the Polish and the global banking sectors have undergone a profound transformation. In particular, the crisis resulted in significant regulatory tightening, both on the European (among others, Basel III, the CRR/CRD IV package) and the national levels (recommendations of the PFSA), as well as in stricter supervision of the banking sector in the form of stress tests and asset quality reviews. Regulations and investors forced banks to strengthen their capital bases and to focus on stable sources of financing as well as to apply a more rigorous approach towards risk management.

In the years 2008-2014 the business model and, consequently, the balance sheet structure of mBank Group were modified. The current business model of mBank conforms to the existing and future regulatory requirements as well as enables effective reacting to new opportunities and challenges occurring on the market.


[1] Kotowicz, A. (ed.) (2009), Report on the condition of Polish banks in 2008, Warsaw: Office of the Polish Financial Supervision Authority, p. 47

1.5.1. Capitalisation

At the end of 2008 the total capital of mBank Group amounted to PLN 4,048 million, the capital adequacy ratio was 10.03% and the Common Equity Tier 1 capital ratio was 5.6%. The Bank’s capital strategy assumed an effective capital use and maintaining a relatively high share of the Tier 2 supplementary capital in foreign currency (the Swiss franc) in order to decrease the sensitivity of capital ratios to exchange rate fluctuations. The Bank has taken a number of actions to adjust its capital structure to the current and future regulatory requirements. At the end of 2014 the total capital of mBank Group amounted to PLN 11,073 million and the total capital ratio was 14.66%.

Issue of shares

In May 2010 12,371,200 mBank’s shares were issued. As a result of the issue, PLN 1,979.4 million was obtained and the Bank’s capital grew significantly, thus, increasing the security of its operations. The capital adequacy ratio of mBank Group increased to 15.9% and the Tier 1 capital ratio to 10.4% at the end of 2010. It should be emphasised that the issue attracted a lot of interest from investors, despite other competitive offers on the market. All offered shares were acquired, with an oversubscription rate of 1.6.

Issue of subordinated bonds

In December 2013 and 2014 the Bank issued subordinated bonds worth PLN 500 million and PLN 750 million. The funds from the issue in December 2013 amounting to PLN 500 million were recognised in total as Tier 2 capital. In January 2015 the PFSA gave consent to recognising as the supplementary capital the amount obtained by the Bank through the issue in December 2014 totalling PLN 750 million.

Moreover, in March 2014 the Bank conducted early redemption of subordinated bonds with a nominal value of CHF 90 million. The Bank conducted the said redemption in view of the entry into force of Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential requirements for credit institutions and investment firms, because those bonds were not fully taken into account in calculating Tier 2 capital.

Due to the actions of the Bank and regulatory changes, the supplementary capital taken into account in calculating Tier 2 capital amounted to PLN 1.6 billion at the end of 2014. For more information on the capital structure and issue of subordinated bonds please see chapter 6. mBank Group capital and funding.

The chart below illustrates the development of capital ratios of mBank Group between 2008 and 2014.

 

1.5.2. Financing of operations

In 2008 the main source of financing of mBank’s operations, apart from deposits of retail and corporate clients, were medium- and long-term loans denominated in foreign currencies, taken out with mBank’s strategic investor, Commerzbank, and with other banks. The loans were extended mainly in CHF and EUR and financed lending in those currencies. Simultaneously, the loan to deposit ratio of mBank Group was one of the highest on the market and amounted to 138% at the end of 2008.

The “One Bank” Strategy for the years 2012-2016 aims at optimising the Bank’s balance sheet with regard to its profitability and structure by increasing the share of client deposit financing, further diversification of the financing base and increasing the share of assets with higher profitability. The expiring loans taken out with Commerzbank are not being renewed and the Bank is focusing on long-term sources of financing by issuing bonds and covered bonds.

EMTN issue programme

In 2012 BRE Finance France S.A. (as the issuer, currently mFinance France) and mBank (as the issue underwriter) signed an agreement on a Euro Medium Term Notes (EMTN) issue programme for a total amount of up to EUR 2 billion, increased to EUR 3 billion in 2014. The aim of the programme is the issue of debt securities in many tranches and currencies, with a diversified interest structure. For more information on the issue of bonds within the EMTN programme please see chapter 6. mBank Group capital and funding.

Increasing the share of client deposit financing

In view of the relatively high share of mortgage loans denominated in CHF and their financing with loans in that currency, the loan to deposit ratio of mBank Group was one of the highest in the Polish banking sector. The “One Bank” Strategy aims at lowering that ratio and the target level set during the preparation of the strategy was 115% in 2016. At the end of 2014, the level was lowered even to 103%, which means that the Bank’s strategy with regard to acquiring client deposits proved to be effective. The Bank does not apply an aggressive pricing policy, but focuses on acquiring new clients and maintaining the present ones as well as on encouraging them to choose mBank as their first-choice bank. The chart below illustrates the development of the loan to deposit ratio of mBank Group in the years 2008-2014.

 

Issue of covered bonds

With a view to diversifying the sources and lowering the costs of financing, mBank Hipoteczny (mBH) increased its activity on the market of covered bond issues. mBH is the leader on that market with a share of 73.4% as at the end of December 2014. The value of the covered bonds issued in 2014 exceeded PLN 1 billion and was the highest in the Bank’s history; the total nominal value of the covered bonds issued by mBH amounted to PLN 3,027 million at the end of 2014. Issue of covered bonds is a significant part of the Bank’s strategy with regard to changes in the balance sheet structure and to the diversification of its financing sources. Major changes occur also in the legal environment. On August 26, 2014 the Council of Ministers adopted assumptions to the draft of the act on amendments to the act on covered bonds and mortgage banks and to some other acts proposed by the Ministry of Finance. In the opinion of the Bank, changes included in the assumptions to the act on covered bonds and mortgage banks should have a positive impact on the development of the covered bond market in Poland. Ultimately, covered bonds are to be the dominant source of financing of mBank’s mortgage loans. For more information on the issue of covered bonds of mBank Hipoteczny see chapter 6. mBank Group capital and funding.

The effects of the above-mentioned actions taken by mBank Group in recent years are illustrated by the chart below which presents the evolution of the financing profile of mBank Group in the years 2008-2014.

Decreasing the share of mortgage loans denominated in foreign currencies

Addressing the market needs and using the financing in the form of medium- and long-term loans taken out with the parent company, in the years 2003-2011 mBank was offering its retail clients mortgage loans denominated in foreign currencies, mostly in the Swiss franc (CHF). The biggest increase in those loans occurred in the years 2008-2009, but, starting from 2010, the sales of such loans were gradually limited and in August 2011 the sales of loans denominated in CHF were stopped completely. Therefore, the portfolio of mortgage loans denominated in CHF is decreasing gradually — annually, the portfolio shrinks by CHF 350-400 million. The chart below shows the value of the portfolio of those loans and its significant decrease starting from 2010.

 

Thanks to the actions taken by mBank Group in the period after the financial crisis, described in this chapter, the Bank has not only more liquid and diversified financing, but also a stronger capital base, which is being additionally improved by the growing profits thanks to their full or partial retention.

1.6. Mobile application – mBank’s approach and summary of activities in 2014

1-6-mbank-mobileMobile technologies are changing our lives. They give us speed, independence, convenience, they are personalised and serve multiple purposes, they connect us with the whole world – all that here and now, immediately. Within just a few years, numerous firms based only on mobile technologies appeared.

1-6-uber
1-6-news-republic
1-6-yo

One of many examples of revolutionary business models may be the Uber mobile application used to order road transport services by way of matching passengers with drivers who have the application. In December 2014 the company was valued at USD 41 billion.

The mobile application News Republic presents daily 50 thousand articles containing the most comprehensive daily reports and breaking news from over 1,000 licensed and trusted information channels all over the world. Its enormous success is reflected in the number of downloads just on Android devices – over 5 million.

Even the most out-of-the-box ideas, such as the communication application Yo, can – thanks to the mobile technology – become million-dollar-worth businesses within few months.

1-6-aplikacjaAccording to the survey of the Homo Homini Institute, over the past three years the number of people using mobile banking has tripled and currently 11.2% of respondents declare using banks’ services through this channel. What is more, over 55% of respondents believe that mobile banking will replace online banking in the future.

Coming in line with the current trends, in 2014 mBank also focused on the development of this channel, at the same time offering an innovative approach to the application introduction process. The mobile application was built from scratch by mBank expert team, with actual needs of clients in mind.

From the very moment of its implementation on February 19, 2014, the mobile tool has been available on three major operating systems covering 99% of the Polish mobile market (Android, iOS and Windows Phone).

The new application features many new, mobile scenarios, and the newest ones were designed from scratch, which is why they are much simpler and faster (e.g. checking the account balance without logging in). mOkazje (mDeals) and PUSH notifications informing about interesting promotions nearby or about new operations on the account were very well received. Clients quickly took to the “one click” loan and to the P2P transfers. Thanks to the implemented financial management, clients started to better organise their expenses by categorising, tagging or commenting them.

The most important elements:

  • available on the most popular mobile operating systems: Android, iOS and Windows Phone;
  • full capacity for conducting transactions;
  • security thanks to and a unique PIN;
  • access to key information and offers without logging in;
  • mobile mOkazje and geolocation of discounts, branches and ATMs;
  • option of PUSH notifications: new operations, account events, mOkazje nearby;
  • P2P payments ordered with a text message using the phone’s address book;
  • Poland’s fastest– perfect for the time of waiting in the queue at the till;
  • elements of financial management (PFM): possibility to categorise expenses;
  • possibility to modify transaction limits for the mobile channel;
  • functions for Windows Phone: tiles with the account balance and recipients on the desktop, interaction with map and navigation apps.

Introducing a new mobile application of mBank was supported by an advertising campaign presenting the easy way to manage one’s finances from every place, at every time.

mBank mobile application was received positively by clients. During the first month, a record-high number of downloads was reported – over 200 thousand. In addition to that, the client activity in the mobile channel has doubled.

 

  • Total number of mobile log-ins - +100% in 6 months.
  • Mobile log-ins per 1 customer – +80% in 15 months.
  • Mobile channel share in total no. of log-ins – +100% to 22% share.
  • Application download – +70% to 25 thou. per month.

The positive reception by clients translated directly into the number of mBank mobile users, turning the Bank into Poland’s leading bank in terms of the number of mobile banking clients.

 

Source: PRNews.pl/Bankier.pl

* users of mobile application and „light” version of website

mBank mobile application is positively assessed not only by experts, but also by clients. On the AppAward 2014 gala the bank won four main awards, out of which three were granted basing on the votes of Internet users, and one by the jury.

In 2014 Forrester, a research and advisory firm, placed mBank mobile banking among the best three applications in Europe.

Moreover, mBank was nominated for Mobile Trends Awards 2014, which are granted annually to the best mobile solutions.

Over 200 thousand application downloads within a month from the launch of its new version and a doubled mobile activity of clients – these examples prove that mBank is a mobile banking icon. The Bank is still working on further development of the application and adding new functionalities, including those proposed by clients. In 2015, mBank will give the highest priority to mobile payments and bringing into compliance the functionalities of its mobile banking application and Internet platform. The Bank will focus on purely mobile scenarios in order to enable users to perform them in no more than 30 seconds. mBank wants its mobile application to always keep up with the global trends.

1.7. Composition of mBank Group and main activities areas

mBank Group is composed of: mBank S.A. – a parent company, and 17 subsidiaries, where mBank holds majority of shares. At 2014 mLeasing, mBank Hipoteczny, Dom Maklerski mBanku, mFaktoring oraz BRE Ubezpieczenia were among most important subsidiaries at the Group. The composition of mBank Group by business segments and areas according to 2014 reporting rules was as follows:

1-7-sklad-grupy

In the year 2014 the Group aimed for adjusting its business model with regard to the sale of non-life and life insurance products, focussing on a future strategic partnership with a best in class international insurance group. On 11 September 2014 the Bank’s subsidiary Aspiro, the main shareholder of BRE Ubezpieczenia Towarzystwo Ubezpieczeń i Reasekuracji (BRE Ubezpieczenia TUiR), signed an agreement with AXA Group concerning the sale of 100% of shares in BRE Ubezpieczenia TUiR.

On December 8, 2014, mBank S.A. and UniCredit Bank Czech Republic and Slovakia a.s. (UniCredit) assigned a contract , according to which mBank S.A. sold 100% of Transfinance a.s. shares to UniCredit. On January 20, 2015, after fulfillment of the conditions precedent, the transaction was concluded. The sale of Transfinance represents a further step in executing One Bank Strategy for the years 2012-2016 and is the last stage of factoring operations restructurization out of Polish borders, i.e. after having sold Magyar Factor zRt and Intermarket Bank AG in 2011. In accordance with the abovementioned, as at December 31, 2014, the Group clasified Transfinance a.s. as an asset (groups for sale) intended to be sold.

From the beginning of 2014 the reporting of mBank Group business segments has changed. The Retail Banking segment, apart from the results of retail banking operations in Poland, the Czech Republic and Slovakia, includes also the results of the retail segments of mLeasing and Dom Maklerski mBanku. And the Corporates and Financial Markets segment was divided into two sub-segments: Corporate and Investment Banking (previously Corporates and Institutions) and Financial Markets (previously Trading and Investments). From the beginning of 2014, the Corporate and Investment Banking sub-segment includes results from offering financial instruments (options, contracts) to enterprises and organising issue of debt instruments for corporate clients. In addition, this area covers results of the corporate segments of mLeasing and Dom Maklerski mBanku. The Financial Markets sub-segment covers mainly operations concerning treasury, financial markets and liquidity, interest rate risk, foreign exchange risk as well as trade and investment portfolio management. This sub-segment includes also the results of mFinance France.

In view of the above, at the end of 2014 the division of the operations of mBank Group into segments and business areas was the following:

 

 

Segment

 

 

Retail Banking

Corporates and Financial Markets

Corporate and Investment Banking

Financial Markets

Bank

  • Retail customers and microenterprises
  • Affluent retail customers
  • Private Banking
  • Corporations and non-banking financial institutions (capital groups) (K1)
  • Large Companies (K2)
  • SME (K3)
  • Banks
  • Corporate clients in scope of trading and sales
  • Market and Liquidity Risk Management

Consolidated subsidiaries

  • Dom Maklerski mBanku S.A. (brokerage house) - Retail
  • mLeasing Sp. z o.o. - Retail
  • Aspiro S.A.
  • mBank Hipoteczny S.A.
  • mWealth Management S.A.
  • BRE Ubezpieczenia TUiR S.A.(an insurance company)
  • BRE Ubezpieczenia
    Sp. z o.o.
  • BRE Agent Ubezpieczeniowy Sp. z o.o.
  • AWL I Sp. z o.o.
  • Dom Maklerski mBanku S.A. (brokerage house) - Corporate
  • mLeasing Sp. z o.o. - Corporate
  • mFaktoring S.A.
  • Garbary Sp. z o.o. (company in restructuring)
  • Transfinance a.s.(a factoring company in the Czech Republic)
  • MLV 45 Sp. z o.o. Sp. k.
  • mFinance France S.A. (special purpose entity reserved for financing activities of the Bank)

 

Other subsidiaries

  • mLocum S.A. (a real estate developer)
  • mCentrum Operacji Sp. z o.o. (outsourcing services provider)
  • BDH Development Sp. z o.o. (a real estate management company)
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Under IFRS, all of the above subsidiaries are consolidated by way of acquisition accounting. The business of selected subsidiaries is briefly described in chapter 10. Business activity of mBank Group subsidiaries.

Changes in authorities of mBank

Supervisory Board of mBank S.A.

The Annual General Meeting held on March 31, 2014 appointed the Supervisory Board for a three-year term. On October, 20 2014 Jan Szomburg resigned from his position of a Member of the Supervisory Board as of October 27, 2014. The resignation was connected with a proposal to take on an advisory function at Commerzbank Group AG. Agnieszka Słomka-Gołębiowska was appointed as a new Member of the Supervisory Board as of October, 28 2014 until the end of the current term of office of the Supervisory Board.

As of December 31, 2014, the Supervisory Board was composed of the following members:

  1. Maciej Leśny – Chairman of the Supervisory Board
  2. Martin Zielke – Deputy Chairman of the Supervisory Board
  3. Martin Blessing – Member of the Supervisory Board
  4. Andre Carls – Member of the Supervisory Board
  5. Stephan Engels – Member of the Supervisory Board
  6. Thorsten Kanzler – Member of the Supervisory Board
  7. Teresa Mokrysz – Member of the Supervisory Board
  8. Stefan Schmittmann – Member of the Supervisory Board
  9. Agnieszka Słomka-Gołębiowska – Member of the Supervisory Board
  10. Waldemar Stawski – Member of the Supervisory Board
  11. Wiesław Thor – Member of the Supervisory Board
  12. Marek Wierzbowski - Member of the Supervisory Board.

Management Board of mBank S.A.

As of December 31, 2014, the Management Board was composed of the following members:

  1. Cezary Stypułkowski – President of the Management Board, Chief Executive Officer
  2. Lidia Jabłonowska-Luba – Deputy President of the Management Board, Chief Risk Officer
  3. Przemysław Gdański – Deputy President of the Management Board, Head of Corporate
    and Investment Banking
  4. Jörg Hessenmüller – Deputy President of the Management Board, Chief Financial Officer
  5. Hans-Dieter Kemler – Deputy President of the Management Board, Head of Financial Markets
  6. Cezary Kocik – Deputy President of the Management Board, Head of Retail Banking
  7. Jarosław Mastalerz – Deputy President of the Management Board, Chief Operations Officer.

For more information on profiles of Members of the Supervisory Board and the Management Board of mBank please see chapter 16. Statement of mBank on application of Corporate Governance principles.

7. mBank Group in the financial services market in 2014

At the end of 2014, mBank was among the largest Polish banks across all relevant market segments.

Most of the Group subsidiaries also rank high in their respective market segments. The table below presents the market share and the position of mBank and of selected subsidiaries at the end of 2014 compared to 2013:

 

 

Business category

Market position in 2014*

Market Share

 

 

2013

2014

Corporate Banking

Corporate loans

 

5.9%

6.2%

Corporate deposits

 

8.3%

8.8%

Leasing

3

6.9%

7.4%

Poland

7

8.3%

7.9%

Retail Banking in Poland

Total loans

 

6.2%

6.2%

   Of which mortgage loans

 

7.4%

7.3%

             Non-mortgage loans 

 

4.4%

4.6%

Deposits

 

5.0%

5.3%

Retail Banking in the Czech Republic

Total loans

 

0.9%

1.2%

   Of which mortgage loans

 

1.3%

1.6%

            Non-mortgage loans 

 

0.3%

0.5%

Deposits

 

1.1%

1.3%

Retail Banking in Slovakia

 

 

 

Total loans

 

0.5%

0.7%

   Of which mortgage loans

 

0.6%

0.8%

             Non-mortgage loans 

 

0.2%

0.3%

Deposits

 

1.6%

1.5%

Investment Banking

Financial markets

 

Treasury bills and bonds

 

10.9%

14.8%

IRS/FRA

 

25.2%

27.3%

FX spot and forward

 

10.7%

10.9%

Non-Treasury securities

 

Short-term debt securities

5

15.1%

8.1%

Corporate bonds

3

13.7%

12.9%

Bank debt securities**

1

31.7%

34.3%

Brokerage

 

Equities trading

9

4.1%

3.9%

Futures

2

17.5%

18.0%

Options

3

20.3%

17.9%

Source: Own calculations based on data from mBank, NBP, WSE, CNB, NBS, Fitch Polska, Polish Factors Association, Polish Leasing Association, press reports

* where determinable

** excluding “road bonds” issued by Bank Gospodarstwa Krajowego (BGK) 

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