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.