2014 Highlights

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.