9. Retail Banking

mBank’s Retail Banking segment serves 4,688.6 thousand individual clients and microenterprises in Poland, the Czech Republic and Slovakia online, directly through the call centre, via mobile banking and other state-of-the-art technological solutions, as well as in a network of 256 branches. The Bank offers a broad range of products and services including current and savings accounts, accounts for microenterprises, credit products, deposit products, payment cards, investment products, insurance products, brokerage services, and leasing for microenterprises. In 2013, the Bank launched a modern, user-friendly online platform (New mBank) designed from scratch, which provides more than 200 new functionalities, solutions and improvements.

Summary of the activity of Retail Banking (mBank only)

 

 

thou.

31.12.2012

31.12.2013

31.12.2014

YoY change

Number of retail clients, including:

4,133.9

4,368.4

4,688.6

7.3%

Poland

3,528.1

3,695.3

3,926.5

6.3%

Foreign branches

605.8

673.1

762.1

13.2%

       The Czech Republic

443.2

486.4

534.2

9.8%

       Slovakia

162.6

186.7

227.9

22.1%

PLN M

Loans to retail clients, including:

37,645.4

38,138.7

40,615.0

6.5%

Poland

35,874.9

36,009.6

37,666.1

4.6%

           mortgage loans

29,705.4

29,248.2

29,680.2

1.5%

           non-mortgage loans

6,169.5

6,761.4

7,985.9

18.1%

Foreign branches

1,770.5

2,129.1

2,948.9

38.5%

       The Czech Republic

1,485.9

1,712.0

2,281.4

33.3%

       Slovakia

284.5

417.2

667.5

60.0%

Deposits of retail clients, including:

33,858.9

33,897.9

38,999.4

15.0%

Poland

29,473.7

29,047.7

33,381.0

14.9%

Foreign branches

4,385.2

4,850.2

5,618.5

15.8%

       The Czech Republic

2,970.8

3,076.8

3,788.6

23.1%

       Slovakia

1,414.4

1,773.4

1,829.8

3.2%

Investment funds (Poland)

2,654.5

4,482.8

5,252.1

17.2%

thou.

Credit cards, including

733.9

795.2

864.4

8.7%

Poland

701.9

757.7

817.4

7.9%

Foreign branches

32.0

37.5

47.0

25.3%

Debit cards, including:

5,534.2

6,710.3

7,556.2

12.6%

Poland

4,783.5

5,683.6

6,351.3

11.7%

Foreign branches

750.7

1,026.7

1,204.9

17.4%

 

 

 

 

 

 

 

Distribution network

Advisory Centres within "One Network" Project

-

-

1.0

-

Light branches within "One Network" Project

-

-

2.0

-

mBank (former Multibank)

133.0

133.0

131.0

-

mKiosks (incl. Partner Kiosks)

68.0

68.0

67.0

-

Aspiro Financial Centres

26.0

24.0

23.0

-

Czech Republic & Slovakia

35.0

35.0

35.0

-

 

 

 

 

 

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Data in the table based on internal management system.

 

Retail Banking segment financial results

The Retail Banking segment generated a profit before tax of PLN 1,063.7 million in 2014, which represents an increase of PLN 105.5 million, i.e., 11.0% year on year.

Retail Banking: decomposition of the profit before tax

 

 

PLN M

2013

2014

Change in PLN m

Change in %

Net interest income

1,506.0

1,685.8

179.8

11.9%

Net fee and commission income

490.8

513.0

22.2

4.5%

Dividend income

0.2

0.1

-0.1

-50.0%

Net trading income

122.9

127.4

4.5

3.7%

Gains less losses from investment securities, investments in subsidiaries and associates

13.5

-0.7

-14.2

-105.2%

Net other operating income

70.3

52.2

-18.1

-25.7%

Total income

2,203.7

2,377.8

174.1

7.9%

Net impairment losses on loans and advances

-297.7

-326.7

-29.0

9.7%

Overhead costs and amortization & depreciation

-947.8

-987.4

-39.6

4.2%

Profit before tax of Retail Banking

958.2

1,063.7

105.5

11.0%

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The profit before tax of Retail Banking in 2014 was driven by the following factors:

  • Increase of total income by PLN 174.1 million, i.e., 7.9% year on year to PLN 2,377.8 million. Net interest income increased by PLN 179.8 million, i.e., 11.9% and net fee and commission income increased by PLN 22.2 million, i.e., 4.5%.
  • Increase of operating expenses (including depreciation and amortisation) by PLN 39.6 million, i.e., 4.2% year on year.
  • Increase of net impairment losses on loans and advances by PLN 29.0 million, i.e., 9.7% year on year.

9.1. Retail Banking in Poland

Retail Banking (including Private Banking) in Poland in 2014

 9-phone

41 thousand Orange Finance accounts

9-pig

mBank as a no. 1 brand in acquisition

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2014 – SME’s year

In 2014, the efforts in the Retail Banking segment were in large part focused on a better understanding of clients’ needs. Such an approach to building customer relationships produced tangible results, including client acquisition which increased by 6.3% year on year in net terms.

In 2014, the Bank pursued its growth strategy in the segment of SMEs (small and medium-sized enterprises). SME clients were offered finance programmes using investment loans guaranteed by Bank Gospodarstwa Krajowego (BGK). Their volume at PLN 239 million demonstrates the success of the instrument, developed in order to support entrepreneurship in Poland. This performance ranked the Bank as Poland’s second largest provider of loans with BGK guarantees. Finally, more than 40 thousand SMEs brought their business to mBank in 2014.

To address clients’ needs, the Bank implemented new solutions and effectively used existing solutions. One of such initiatives was to expand clients’ financing options through “Leasing in Retail” which targets corporate clients who can enter into leasing contracts for vehicles up to 3.5 tonnes. The project operated together with mLeasing helped to triple the value of leasing contracts year on year.

Another revolutionary tool is the FX Platform (mPlatforma walutowa) launched in September 2014. The FX Platform largely improved the currency exchange options for SMEs. Within four months of the launch, more than 2.8 thousand companies moved their currency transactions to mBank. The product demonstrates that mBank’s values (functionality, convenience, mobility) can also address more advanced banking needs. This was corroborated by the appreciation of the industry: the World’s Best Foreign Exchange Banks and Providers 2015 award.

Intensive efforts to build long-term relationships with retail clients were acknowledged with numerous awards for the Bank. Among others, mBank was awarded by Forbes and named the Most Friendly Corporate Bank in Poland.

In 2014, mBank’s Retail Banking put in place a strategic project of co-operation with Orange, one of the biggest telecom operators in Poland, to develop the Orange Finance product offer launched on October 2, 2014. With the state-of-the-art products tailored to the needs of the Bank’s clients and Orange Polska users, more than 41 thousand individual accounts were opened with Orange Finance in 2014. The number of new accounts continues to grow month by month, and the development of the offer planned in the coming months will make it even more unique on the market, opening access to an attractive group of customers who use innovative online and mobile solutions.

In 2014, mBank Group announced a long term cooperation with AXA Group by signing on September 11 a contract of sale of 100% BRE Ubezpieczenia Towarzystwo Ubezpieczeń i Reasekuracji shares. Upon fulfillment of the condition precedents in the form of approval of the Office of Competition and Consumer Protection (OCCP) and the absence of objection of Polish Financial Supervision Authority (mBank Group got OCCP’s approval on November 13, 2014), AXA Group will receive exclusive rights to distribute life and non-life insurance products to mBank customers. For mBank Group it is another step towards modernization of its offer due to the ability to distribute innovative products through its branches, as well as the electronic and mobile platforms. For more information about the cooperation with AXA Group please see section 2.3. Key projects of mBank Group in 2014.

In 2014, mBank opened 255.7 thousand new accounts, an increase of 8.2% year on year. From August 2014, monthly sales were in excess of 20 thousand accounts. In addition, according to a Bankier.pl ranking, the mBank brand is the first market player in customer acquisition in 2014 with a strong lead over its immediate peers. The Bank owes this performance mainly to the New mBank project: an innovative transactional service, changes to the branch network, and the new mobile banking application launched in 2014.

 

Source: PRNews.pl/Bankier.pl

The sales of credit cards also increased year on year in 2014. The number of active mBank credit cards grew as well in 2014.

Development of the retail banking offer in Poland

Loans

The loan portfolio structure of Retail Banking in Poland (household loans) at the end of December 2014 was as follows:

 

mBank’s activities in the sales of non-mortgage loans were focused on personalised credit offers for selected clients. Owing to implemented improvements, the timing of a credit decision over electronic channels was cut from 15 minutes to 30 seconds without the need to complete any forms or file documents. The implementation was awarded in the global Efma ranking where the 30 second mobile loan was named the Most Promising Idea.

mBank also implemented a number of modifications in the offer for clients, ranging from financing of online shopping at Allegro.pl (“0% PayU Instalments”) through Miles and More credit card promotions to revolving loans “0% for Starters”.

The sales of non-mortgage loans increased by 13.6% year on year to PLN 3,998.7 million in 2014.

The sales of credit cards also increased year on year in 2014. The number of active mBank credit cards grew as well in 2014, which is particularly important in view of the falling interchange fees.

Starting in February 2014, mBank in co-operation with the Aspiro network promoted consolidation loans with the “Guarantee of the Lowest Instalment”, which were well received by clients; as a result, sales through Aspiro doubled.

In early May 2014, mBank launched a new type of loan, mRaty, for online shopping and other e-services. mRaty is an instalment loan dedicated to the online purchase of any product or service up to PLN 20 thousand. In June 2014, the product was launched for clients of the biggest auction platform Allegro.pl, supported by one of the fast payment operators PayU. In November and December 2014, in co-operation with Allegro.pl and PayU, the Bank launched the “0% PayU Instalments” promotion; combined with a marketing campaign on Allegro, it grew the sales of mBank’s mRaty by a factor of 5 and attracted 7 thousand new clients.

An important development from the perspective of mBank’s strategy came in Q4 2014 when the Lombard rate was cut to 3.0%, resulting in a reduction of the maximum interest rate on loans from 16% to 12%. In response to the significant change of market conditions, mBank implemented modifications to credit fees and commissions which largely offset the adverse financial impact.

Furthermore, in 2014, mBank in co-operation with mBank Hipoteczny pursued a long-term project designed to issue covered bonds secured with liabilities under mortgage loans. In the project, mBank Hipoteczny grants loans to individuals through mBank. Another part of the project put in place in 2014 was a transfer of a loan portfolio of PLN 338 million from mBank to mBank Hipoteczny. The transfer will allow for increased issues of covered bonds secured with the transferred loans by mBH. The loan transfer process will continue in 2015.

The sales of mortgage loans in 2014 stood at PLN 2,421.4 million, which represents an increase of 71.2% year on year.

The key characteristic of portfolio of mortgage loans for individuals (excluding Private Banking clients) is summarised below:

 

 

 

31.12.2013

31.12.2014

Balance sheet value (mld zł)

26.5

27.6

Average maturity (years)

20.8

20.3

Average value (thousand PLN)

273.4

275.4

Average LTV (%)

78.4%

80.7%

NPL (%)*

4.4%

5.0%

* The NPL ratio calculated in accordance with a more strict client perspective methodology; data based on internal management system.

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In 2014, mBank also developed sales of car loans for individuals and small companies. The Bank grants loans in co-operation with the BMW brand as well as Jaguar/Land Rover.

Deposits and investment funds

The strong results of the sales of savings products were possible thanks to a number of initiatives taken including focused management of the product offer, smart pricing of deposits targeting selected client segments, as well as a new behavioural segmentation of clients. The balances of deposit products increased while the financial discipline was maintained. As an additional measure of success, the growth rate of deposit balances was much stronger than the market average (35% higher).

While the retail deposit base grew, so did the balances of assets allocated by clients to investment funds. In H1 2014, the Bank focused on offering investment products to clients, mainly through the Investment Fund Supermarket in its new version launched early in the year. The new platform allows clients not only to make transactions in shares of domestic and international investment funds but also to access additional tools which facilitate browsing through funds as well as monitoring and analysing of clients’ investments in funds.

In addition to the functional development of the Investment Fund Supermarket, mBank’s offer of investment funds was extended in 2014 as 11 new funds and a new investment fund company, Altus TFI, were added to those on offer.

Changes in the pension savings system boosted additional interest in pension savings products. In response to clients’ needs, a new transactional service for Individual Pension Accounts was launched in H2 2014. It facilitates the monitoring of investment performance and allows clients to check the outstanding amount of the annual investment limit.

In H2 2014, due to unfavourable conditions on the Polish capital market, the Bank focused mainly on working with clients on deposit and savings products. As a result of these activities, amid increasing number of clients with savings, the balance of deposits with the Bank increased substantially.

In 2014, the Bank continued to pursue the strategy of strengthening its position in investments and savings, and diversified the solutions offered to clients, including in particular:

  • launch of a new version of the Investment Fund Supermarket;
    • launch of new functionalities of the Bank’s transactional system for Individual Pension Accounts;
    • implementation of a term deposit promotion to attract new clients and new assets;
    • implementation of deposits for new cash into the Bank’s regular offer;
    • implementation of several subscriptions for investment certificates of Closed-end Investment Funds;
    • implementation of the Bank’s first subscriptions for structured certificates;
    • offering clients the option of investing in subsequent subscriptions for structured deposits;
    • launch of a public offer of bonds for retail clients.

Cards

In 2014, the value of transactions made by mBank retail banking clients with payment cards was more than PLN 17.6 billion and was record-high, growing by 18.5% year on year. As the frequency of use of cards by mBank clients increased by some 30% year on year in combination with smaller amount of payments, mBank’s market share in non-cash transactions increased to 12.2% (after 9 months of 2014), from 12.0% in 2013. mBank’s credit cards are used to make a very high average number of transactions, which is more than double the market average.

In 2014, most of the initiatives in the credit card segment focused on growing the number of transactions and active use of credit, mainly following yet another reduction of the interchange fee in July 2014 and a significant reduction of the interest rates in October 2014. As part of these initiatives, measures were taken to promote the Repayment by Instalment Service and the Fast Cash service using the card limit; as a result, the value of credit card limits paid by instalment increased by a factor of 8.

In the implementation of its payment development strategy, mBank implemented new payment instruments:

  • BLIK mobile payments for all users of mBank’s mobile application;
  • Orange NFC mobile payments for users of Orange smartphones with NFC functionalities;
  • MC PayPass sticker for touchless payments using a mobile phone without NFC functionalities.

In addition, since Q4 2014, mBank is the only bank in Poland to offer Miles and More credit cards whose holders collect miles for non-cash transactions. In the last months of 2014, mBank engaged in a number of marketing initiatives to grow the acquisition of such cards.

Furthermore, the migration of debit cards to touchless technology was completed in 2014: most of mBank’s payment cards allow users to make quick touchless payments and nearly 80% of POS (point of sale) terminals on the market support the technology. 

9.2. Retail Banking in the Czech Republic and Slovakia

 

Key macroeconomic parameters

2014

Banking sector indicators

2014

Real GDP growth rate (forecast)

2.3%

Base interest rate

0.05%

Nominal GDP per capita (EUR)

14,200*

Loan to Deposit ratio

76.7%

GDP per capita in PPS (EU-28=100)

80%*

Non-performing loans ratio

6.0%

Average annual inflation rate

0.4%

Capital Adequacy Ratio (CAR)

18.0%*

Unemployment rate

6.1%

Return on Assets (ROA)

1.3%*

Employment rate

69.8%*

Return on Equity (ROE)

14.0%*

Population

10.5 M

Number of banks

45

Source: Eurostat, Česká národní banka (ČNB), Český statistický úřad (ČSÚ).

* Cumulative 9 month data (as of September 30, 2014), latest available

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GDP, inflation, interest and FX rates

The Czech National Bank (CNB) expects real GDP in the Czech Republic to pick up in 2014, after a 0.9% contraction in 2013. It forecasts a GDP growth of 2.3% for the entire 2014, accelerating to 2.6% in 2015 and 3.0% in 2016. An ongoing economic recovery has been driven by domestic demand factors, including fixed capital investment, household consumption, and a build-up of inventories. Investment activity grew strongly in 2014, as the domestic environment improved, foreign industrial orders picked up and the government increased its efforts to make use of EU funds.

On November 7, 2013, the CNB committed to sell the Czech crowns and buy euros as needed in order to prevent the crown from appreciating beyond the historically low rate of CZK 27 per euro, while the currency floats freely on the weaker side of this threshold. In February 2015, the CNB repeated that it was ready to take steps for the crown's further weakening in case of prolonged strengthening of pressures for a price fall able to cause a drop in domestic demand and if inflation expectations decrease and risks of deflationary development in the domestic economy are renewed. The CNB also informed that it will not end the forex intervention regime earlier than in the second half of 2016.

Throughout 2013 and 2014 the interest rates remained unchanged and the repo rate was maintained at 0.05%.

The year on year growth of consumer prices decelerated to 0.1% in December 2014, compared to 1.4% at the end of 2013. The average inflation rate reached 0.4% for 2014, dropping by 1.0 percentage point from the preceding year level of 1.4%, and was the lowest since 2003. The substantial decline in oil prices in recent months is forecast to put further downward pressure on inflation over the next quarters.

The strengthening of the Czech economy is reflected in improving labour market conditions. The country’s unemployment rate has stabilised at the lowest level in the Central and Eastern Europe (CEE) region. The seasonally adjusted unemployment rate reached 5.8% in December 2014 and decreased by 1.0 percentage point year on year. The employment rate of 69.8% recorded at the end of 2014 was the highest in the history, increasing by 1.5 percentage point compared to December 2013.

Banking sector

The developments recorded in the Czech financial sector in 2014 were mostly positive. Banks strengthened its capital adequacy. Funding and liquidity profiles continued to be solid with the sector’s loan to deposit ratio of 76.7%. The asset quality remained resilient as demonstrated by the stable levels of non-performing loans ratio in both 2013 and 2014 (a slight decrease to 6.0% at the end of 2014). The relatively contained levels of NPL ratios in the Czech Republic reflect the country’s relatively strong industrial base, and limited foreign-currency lending (predominantly to corporate customers and almost non-existent in retail segment) compared to some other countries in the CEE region.

System-wide net interest margins has been shrinking over recent years, as loan yields have continued to decline at a rapid pace. The average interest rate on outstanding mortgage loans, as measured by local real estate company Hypoindex, has declined every month since October 2013, reaching the historical low of 2.4% in December 2014.

Overall, in spite of lower net interest margins, the profitability of the Czech banking sector is among the highest in the CEE region, as measured by a return on assets close to 1.3%. It is expected to stabilise at the current levels, as net interest income, which constitutes more than 60% of the sector’s operating revenues, will continue to be impacted by the low interest-rate environment, in turn, affecting new lending and re-pricing. However, banks’ weaker interest income is seen to be partially offset by reduced competition for deposits and by the anticipated economic recovery, translating into the expansion of loan books. In particular, robust capital buffers of Czech banks will enable them to take advantage of the growth in mortgage lending and those corporate sectors which will be more favourably affected by the rebound in economic activity and external demand.

 

The growth in total retail lending was predominantly driven by mortgage loans, which expanded by 6.7% in 2014, while the volume of consumer loans showed a minor contraction of 0.7% during the same period. The share of non-performing loans in the total volume of loans to households was 4.7% in December 2014, declining from 5.0% at the end of 2013. Household deposits have accelerated significantly since Q1 2014, showing the annual growth pace of 6.1% at the end of 2014 compared to 2.4% in 2013.

9.2.2.   Economy and banking sector in Slovakia

 

 

Key macroeconomic parameters

2014

Banking sector indicators

2014

Real GDP growth rate

2.4%

Base interest rate

0.05%

Nominal GDP per capita (EUR)

13,300*

Loan to Deposit ratio

95.5%

GDP per capita in PPS (EU-28=100)

76%*

Non-performing loans ratio

4.8%

Average annual inflation rate

-0.1%

Capital Adequacy Ratio (CAR)

17.0%*

Unemployment rate

13.4%

Return on Assets (ROA)

0.9%

Employment rate

61.3%*

Return on Equity (ROE)

7.7%

Population

5.4 m

Number of banks

27

Source: Eurostat, Národná banka Slovenska (NBS).

* Cumulative 9 month data (as of September 30, 2014), latest available

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GDP, inflation and interest rates

The Slovak National Bank (NBS) forecasts real GDP growth to accelerate to 2.4% in 2014 and then to 2.9% in 2015 and 3.6% in 2016, up from the level of 1.4% in 2013. The key driver behind this rebound is the continuing recovery of domestic demand. Following three consecutive years of decline, private consumption is projected to have increased by 2.1% in 2014, supported by growing disposable income, low inflation, improving labour market conditions, and an increase in consumer confidence. Going forward, private consumption will also be bolstered by a series of labour market reforms that take effect in 2015, including a rise in the minimum wage and a reduction in the social contributions paid by low-income workers.

As a small and open economy, Slovakia is dependent on the general macroeconomic situation in Europe, especially in Germany, Czech Republic and Poland which together accounted for more than 40% of its exports in the recent years. Slovak exports dropped sharply in Q2 and Q3 of 2014, mainly due to weak demand from its main trading partners. Export growth is projected to have slowed down to 4.4% in 2014 and is expected to decline further in 2015, before rebounding the year after. Imports are likely to have grown faster than exports in 2014 due to the recovery in domestic consumption and investment, which would mean that net exports were a drag on GDP growth in 2014. The government’s tight fiscal policy has allowed the country to keep its fiscal indicators at healthy levels, which maintain its appeals to foreign investors and capital inflows.

In Slovakia, as a member of euro zone, the key interest rate, set by the European Central Bank (ECB), was lowered by 0.1 percentage point to 0.05% on September 10, 2014. This reduction followed the earlier ECB decision about the cut by also 0.1 percentage point from 0.25% taken on June 11, 2014.

In December 2014, an annual inflation stood at -0.1%, compared to a growth of consumer prices at 0.4% recorded at the end of 2013. The drop was mainly driven by the prices of transport, energy, food and non-alcoholic beverages as well as postal and telecommunication services. The average annual inflation rate for 2014 also reached -0.1%, dropping from 1.4% in 2013.

Throughout 2014 the unemployment in Slovakia was gradually decreasing in line with the improvement in economic activity. The seasonally adjusted unemployment rate reached 12.5% in December 2014 and decreased by 1.5 percentage point year on year. The positive employ­ment trend, resulting from a series of measures supporting the labour market, is expected to have a further downward effect on the unemployment rate in 2015.

Banking sector

Slovak banks have seen a stronger operating environment as economic growth rebounds. Even with slightly stronger loan growth, the overall loan to deposit ratio in the sector is expected to be kept close to its current level of 95%, as banks remain keen to use deposits to fund their lending activity and the reliance on wholesale funding sources is very low. The Slovak banking sector’s capital adequacy is among the highest in the CEE region, after the Czech Republic. The banks have strengthened their capital buffers in recent years through some profit retention and optimisation of risk-weighted assets, thereby providing adequate loss-absorption capacity.

The overall stability of the NPL ratio was mainly the result of the high growth in mortgage loans, thus compensating for the mild increase in the stock of non-performing loans. The NPL ratio for Slovakia is the lowest in the CEE region at 4.8% at the end of December 2014. The asset quality can potentially improve further mainly due to strengthening business activities and raising household income.

The profitability of Slovak banking sector has faced some challenges and an upside potential for the current level of return on assets at around 1.0% is limited. While the latest ECB rate cut in September 2014 has led to further pressure on net interest margin, a sound credit growth, especially in the higher-margin retail business, accompanied by lower credit costs position the banks to maintain decent profitability. On the other hand, a factor that limits the banks’ earnings is the government’s bank levy introduced in January 2012. This levy continued to weigh negatively on the profits of banking sector in both 2013 and 2014. However, after the targeted National Resolution Fund reaches EUR 500 million, the levy rate is assumed to decrease from 0.4% to 0.2% of banks’ liabilities.

Accelerating economic recovery and low interest rates provide banks with good credit opportunities. Total loans grew at a high single-digit level in 2014, compared with 5.1% in 2013. After negative trends in corporate lending observed in H2 2012 and 2013, a moderate expansion of banks’ commercial books was recorded in 2014, supported by higher borrowing needs from SME segment. The share of non-performing loans in the total volume of loans to non-financial corporations amounted to 7.9% at the end of 2014, compared to 7.5% in 2013. The corporate deposit base showed rapid increase in Q4 2013 and the annual growth pace remained high at around 10% until August 2014. During the last three months of 2014, the negative trends in corporate deposits were observed, partially due to the high base effect.

The improving economy and low credit costs have promoted strong development of household loans in Slovakia. Retail lending has continued to grow rapidly over the recent years, mainly due to housing loan acceleration, with the year on year pace exceeding 10% in 2014. The increase in mortgage lending has not been accompanied by a house price bubble so far, with house prices remaining relatively stable after the 18% decrease experienced between 2008 and 2011. The share of non-performing loans in the total volume of loans to households was 4.3% in December 2014, worsening marginally from 4.2% at the end of 2013. Retail deposits grew at a low single-digit pace during 2014, but started to speed up in the second half of the year to 4.1% recorded in December, compared to 2.7% at the end of 2013. Since the mid-2013 the clear opposite trends within the structure of household deposits have been observed. The volume of term deposits has been decreasing over the past quarters, what is more than compensated by accelerating retail demand deposits, which expanded by 12.7% in 2014.

9.2.3.   Summary of foreign operations of mBank

mBank in both the Czech Republic and Slovakia provides retail banking services to individuals. The Bank offers products such as current accounts, savings accounts, payment and credit cards, overdrafts or housing loans. Additionally, clients of mBank in the Czech Republic are provided with financial advisory services.

The activity of mBank in the Czech Republic and Slovakia in 2014 was focused on implementing the assumptions of the “One Bank” strategy. In February 2014, the platform of the New mBank was launched and rebranding was carried out. The process of migration of clients to the New mBank platform was completed in November 2014. The Bank has not identified any negative factors (churn, lower client activity) related to this process. 

Foreign branches broadened also the offer of investment products – in May the innovative mSaver was added to it. mSaver not only supports the inflow of clients’ deposits, but also encourages them to use payment cards more frequently. In December 2014 mBank launched the new mobile application 2.0, and started positioning itself as the Mobility Icon also on the Czech and Slovak markets.

2014 was very favourable for foreign operations of mBank, with regard to acquisition, optimisation as well as in the innovation area. Compared to 2013, income of foreign branches increased by 25.8%, sales of non-mortgage loans (NML) doubled, and the year on year acquisition of clients amounted to 89 thousand which strengthened the position of mBank as the fifth largest bank on the Czech market in terms of the number of clients.

The Project mILKY WAY consisting in new pricing, repositioning and aiming at increasing clients’ trust in mBank also turned out to be an successful. Moreover, the Tariff of Fees and Commissions was significantly shortened. Additionally, in mid-December 2014, mBank made the new mobile application available to the clients of foreign branches in the Czech Republic and Slovakia (available for major operating systems - Android, iOS, Windows Phone and Windows 8.1).

mBank received a number of awards for its activity in the Czech Republic and Slovakia in 2014, e.g. for the best mortgage loan in Slovakia by the financial service Finparada, the Silver crown for mKonto for companies in the Czech Republic by the financial service Zlata koruna, as well as the first award for a mortgage loan in an independent review mystery shopping, carried out in the Czech Republic by the financial service bankovnipoplatky.com and the advisory firm Mindbridge. 

Moreover, the new mBank transaction platform in the Czech Republic and in Slovakia, implemented in Q1 2014, was recognised in the "Bank Innovator 2014" competition organised by Hospodářské noviny, an economic daily. mBank was ranked second in the "Banking Innovator" category. In December 2014, mBank in Slovakia was recognised in the competition for the best banking product of 2014 and received: Golden Minca for mKonto, Golden Minca for mSaver, Silver Minca for the VISA debit card with mKonto, Silver Minca for the VISA credit card, Bronze Minca for its new online banking, Bronze Minca for mKonto Biznes.