mbank STORY DISRUPTIVE BUSINESS MODEL IN FULL RANGE RETAIL BANK ING Maximum benefits and convenience in personal finance
Directions of BRE Bank s Strategic Growth BRE Bank: The best financial institution for demanding customers Investment Banking Corporate Banking Retail Banking (+ PB) To keep up profits and to mitigate risks The roots of BRE Bank inception To grow and to generate significant profits
mbank and MultiBank Retail Banking Mass customers Customers Affluent customers Standardised products Products Products tailored to segments Preference for electronic access channels Operating model Multi-channel architecture Leader in Internet Banking Leader in Service Quality
2008 SL Consulting 4 MBANK MISSION AND VISION The vision Personal finances require simple solutions at arm s length. Products and services should work on straightforward, easy to understand principles. We don t promise that you ll find with us everything that has ever been invented in the world of finance, but you ll certainly find the things that are the most important for you, at the best quality and price available on the market The mision statement Maximum benefits and convenience in personal finance
2008 SL Consulting 5 MBANK CORE VALUES price quality Is going to be main market advantage at the launching phase Despite low price, high quality needs to be addressed as well it is important to build credibility and trust simplicity Products and processes are as simple and clear as possible convenience Internet as a main access channel will assure accessibility in the 24/7/365 model. Reliable and user-friendly interface will base on Polish experience innovation community True internet bank. mbank will not be afraid of this term. However it is crucial to underline, that bank operating in internet is able to provide clients with cheap and high-quality banking products Various mbank activities (internet forum, on-line chats, sporting events), that successfully build community in Poland, will make mbank distinctive on Czech and Slovak market
2008 SL Consulting 6 PHILOSOPHY OF MBANK High tech Low cost Self service 24/7/365 Simplicity, Reliability, Honesty (No hidden fees and costs) High quality Low price Continuous improvement through Innovation in: Products Processes Distribution and Communication
2008 SL Consulting 7 MBANK 2009 LEADING RETAIL FINANCIAL INSTITUTION FOR EMERGING NEW GENERATION OF CUSTOMERS Target Group Wide mainstream in 2007: Selfdirected, quality and price sensitive, capable of using new technologies, seeking financial benefits, convenience and freedom Products: Innovative, attractive and transparent banking and non-banking financial products, offered within single, revolutionary open platform - financial portal with one login and password Strategic positioning: mbank, the leader of Internet banking, offers those who rationally manage their personal finances, the most essential products and services at the best possible prices and the highest quality on the market. Technology Scalable, flexible and efficient central IT system, central back-office, automated processes and innovative distribution channels based on Internet solutions Distribution and communication channels Exclusively virtual bank with free Internet banking service and Contact Center operating in 24/7 model Transparent, aggressive communication
Source: 'Delphi' team analysis 2008 SL Consulting 8 MBANK BUSINESS MODEL: FULL RANGE PRODUCT OFFER Current account as a center of the mbank universe insurance products investment products savings current account consumer finance credit cards mortgage loans
Source: 'Delphi' team analysis 2008 SL Consulting 9 EKONTO MOST CONVENIENT CURRENT ACCOUNT CONVENIENCE Access 24/7/365 Free of charge ATMs and deposit machines No minimum regular in-flows BEST PRICE WITH NO FEE FOR Maintenance Transfers Debit card INNOVATIVE FULL ON-LINE INTEGRATION OF PERSONAL FINANCE Transfers and payments Cash management Brokerage services Credit cards, cash loans, mortgages Funds: investment and mutual Insurance e-commerce SELF MANAGEMENT Efficient processes Transparent and easy to apply procedures Full range on-line offer First choice Current Account satisfies all financial needs through on-line integration and management
Source: 'Delphi' team analysis 2008 SL Consulting 10 EMAX SAVINGS ACCOUNT REVOLUTION IN MASS MARKET CONVENIENT ACCESS 24/7/365 ATM and Deposit Machines Debit Card payments INNOVATION Real instant access Savings Account with interest rate as good as the term deposit BEST PRICE Interest rate of term deposit No charge for early withdrawal Free of charge debit card SELF MANAGEMENT Many Accounts create convenience for on purpose savings Basic multipurpose Savings Account creates maximum benefits and convenience
SFI MUTUAL FUNDS ACCESSIBLE DIRECTLY FROM THE CURRENT ACCOUNT BEST PRICE No initial charge No additional charges Entire invested capital is working for the client Management fee is the only charge CONVENIENCE Directly connected to the Current Account Access 24/7/365 Only 2 clicks for buy or sell INNOVATION Access to un-limited Investment Funds offering from a single platform Open architecture No buy or sell fees Investment Account integrated with Current Account SELF MANAGEMENT E-Learning for new & unexperienced investors Recommendations for unexperienced investors COMMUNITY Online Education Center Open architecture with unlimited Investment Funds access fully integrated with the Current Account Source: 'Delphi' team analysis 2008 SL Consulting 11
Source: 'Delphi' team analysis 2008 SL Consulting 12 EMAKLER BROKER SERVICES REVOLUTION IN MASS MARKET CONVENIENCE Directly connected to the Current Account Access 24/7/365 No extra login needed INNOVATION Broker Account conveniently integrated with Current Account BEST PRICE No fee for the Broker Account Lowest transactional charges on the market High interest rate for uninvested funds SELF MANAGEMENT Online Education Center for new & un-experienced investors Interactive analytical tools available online COMMUNITY Online Education Center Broker Account online connected to the Current Account enables an integrated management of the individual financial standing unmatched in the marketplace
Source: 'Delphi' team analysis 2008 SL Consulting 13 SUS INSURANCE REVOLUTION IN MASS MARKET CONVENIENCE BEST PRICE Insurance fully integrated with the Current Account Single process for all insurers and all types of insurance Product offering transparent & easy to understand Access on-line 24/7/365 Client shares unmatched price benefits through online self service and elimination of agents, brokers, High profitability thanks to cost savings SELF MANAGEMENT Direct channels enable high number of options to choose from via direct channels Fully flexible payment options e.g. monthly COMMUNITY INNOVATION Online Education Center Automatic best option recommendations Broad selection of life and non-life insurance products from 4-5 insurance companies Lower risk when selling insurance products to identified bank clients Single process for all insurers and all types of insurance Disruptive bancassurance model fully compatible with the requirements of e- commerce best price and simple processes transparent to the client
Source: 'Delphi' team analysis 2008 SL Consulting 14 MORTGAGE REVOLUTION IN MASS MARKET CONVENIENCE Automatic integration of the Current Account with the mortgage account INNOVATION The online offset mechanism reduces the prime and enables the best application of the periodic peaks on the Current Account to serve the mortgage BEST PRICE The offset mechanism significantly reduces the cost of servicing the mortgage SELF MANAGEMENT Client may use direct channels to self-manage the offset mechanism Unique functionality based upon online integration of the mortgage loan with the Current Account enables off-setting periodic peaks in account balance against the loan prime COMMUNITY Online Education Center
2008 SL Consulting 15 MBANK BUSINESS MODEL Electronic Revolution in Mass Market On-line brokerage linked to current account Car Insurance Supermarket new type of Bancassurance Mutual Funds Supermarket: Open architecture No front load fee Unit link (life insurance +investment in Mutual funds) Instant access Saving Account Free of charge Current Account 2000 2003 2004 2005 2007 Comments The strategy of innovation is in mbank s business model continuous, ongoing process. The only constant element is a change. On average, once a year mbank implements major new innovation.
2008 SL Consulting 16 TECHNOLOGY OF MBANK Altamira Core Banking system Central System Central Host Customer Centric All kind of products parameterized in product factory, available for customers any time and at any distribution channel Up to 10 mln customers UniFlow and UniWniosek Supportive banking systems: Innovative flow solutions for sales and customer service Rapid product flow and customer application development Fast and automated processes Easy sales partners launch Centralized and digitalized back-office operations One Central Location Massive use of scans Digital archives
2008 SL Consulting 17 DISTRIBUTION AND COMMUNICATION CHANNELS Multichannel distribution model based on Internet and Internet technology The most cost-sensitive elements of clients acquisitions and service are shifted to remote direct or self service physical channels The most quality-defective factor a man extracted from the sequence in the most frequent operations Permanent availability and constant high quality of of all services from any place in the world Self-service Post/Courier ATMs Direct electronic Internet Telephone Subsidiary man-backed physical channels Financial Centers mkiosks Agents mbank fetched market opportunity in consumer credit - cash loans and mortgage loans - with new efficient model of physical sales network: mbank mortgage sales per location is 18 times higher than the market average
Source: GemiusTraffic 2008.09.08 2008.09.14 2008 SL Consulting 18 MBANK WEBSITE IS A POWERFUL FINANCIAL PORTAL 350 000 300 000 250 000 200 000 150 000 100 000 1 200 000 1 000 000 800 000 600 000 400 000 50 000 200 000 0 2008.09.08 Mon Tue Wed Thu Fri Sat 2008.09.14 Sun Returning visitors (cookies) First time visitors (cookies) Page views 0 Custommers acquisition via internet till end of: 2001 88 ths 2004 582 ths 2007 1 232 ths 2008 1 465 ths
Number of users (coocies) Source: GemiusTraffic 2007.10.01 2007.10.31 2008 SL Consulting 19 CONVENIENCE TO VISIT THE MBANK ANYTIME Average hour mbank customers visits on www.mbank.pl Weekend Each day Working day Comments 12 256 visitors in average every hour, 14 213 in working days, 6 632 on weekaeds Highest visitors frequency between 12-13 - 20 800 customers, 24 240 n working days, 11 209 on weekends Lowest visitors frequency between 4:00 5:00 a.m 294 customers
Source: mbank internal data 2008 SL Consulting 20 MBANK CONTACT CENTER THE BIGGEST BANKING CC IN POLAND 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 04:14 04:00 03:45 03:31 03:17 03:02 02:48 02:33 0 PONIEDZIAŁEK WTOREK ŚRODA CZWARTEK PIĄTEK SOBOTA NIEDZIELA Monday Tuesday Wednesday Thursday Friday Saturday Sunday 02:19 Il. tel. odebranych Il.tel. straconych (systemowe) callbacki czat maile Średni czas rozmowy I linia: Answered calls Lost calls (system) Callbacks Chat Mails Average time of call 9 550 calls in working days 405 calls per hour. In hours of the biggest traffic (10 A.M. 8 P.M.) it raises to 720 per hour. 220 000 calls monthly 4 600 talks per week through chat
Source: mbank internal data 2008 SL Consulting 21 MBANK CLIENT NEW GENERATION CUSTOMER IS VISITING BANK FREQUENTLY AND DOING IN SELF SERVICE MULTIPLE TRANSACTIONS 250 000 customers currently log on daily to the mbank transactional system 250 000 200 000 150 000 average 100 000 50 000 0 2007-01-01 2007-02-01 2007-03-01 2007-04-01 2007-05-01 2007-06-01 2007-07-01 2007-08-01 2007-09-01 2007-10-01 2007-11-01 2007-12-01 In the afternoon and evening hours in each second : 10 clients log on 5 transfers are being made 15 card authorizations occur 420 transactions are made
2008 SL Consulting 22 MKIOSKS Internet bank in the real world Service desk 2 KIOSK 2 Internet Telephone 2 ATM withdrawals Service desk 1 KIOSK 1 Internet Telephone 1 ATM deposits Description Shopping centres in big cities and urban areas Modular architecture easy-adopting arrangement to different spaces Mobility quick and easy relocation of mkiosk Advice on and sale of consumer credits Gaining customers and opening of accounts Cash deposits and withdrawals Self-service financial management points: terminal telephone
2008 SL Consulting 23 FINANCIAL CENTERS Internet bank in the real world Functions Advice on and sale of credit and investment products Cash deposits and withdrawals using self-service equipment Self-service points for managing personal finances: terminal and telephone
2008 SL Consulting 24 FINANCIAL CENTERS Internet bank in the real world
25 FINANCIAL CENTERS AND MKIOSKS Internet bank in the real world Financial Centeres 100 mkiosk 100 100 mkiosk (partnership) 27 82 94 106 56 61 40 7 22 14 15 15 20 22 24 2003 2004 2005 2006 2007 2008 2009 2010
Source: SMG KRC, March 2007 2008 SL Consulting 26 MBANK NEW GENERATION OF CUSTOMERS Higher education 63% 24% Banking Sector Clients under 35 year old 70% 50% Banking Sector Target group: Sensitive to price and quality of service, prone to use new technologies, seeking comfort and valuing independence, well educated, socialy active and enterprising Internet users Credit card owners 100% 31% Banking Sector 24% 10% Banking Sector
2007-12-31 Mar June Sept Dec 2009-03-31 2007-12-31 Mar June Sept Dec 2009-03-31 2007-12-31 Mar June Sept Dec 2009-03-31 MBANK.PL CURRENT PERFORMANCE Third biggest retail bank in Poland in terms of number of clients. Continuously outperforming the market in deposit and credit growth. Market leader in brokerage. 1 869 ths Data for 2009.03.31 m EUR 2 510 m EUR 2 596 2 000 1 800 1 600 1 400 1 455 91 Clients (ths) 91 94 66 1 869 72 14 000 12 000 10 000 9 485 Assets under management (m PLN) 1 399 447 578 252 11 802 14 000 12 000 10 000 Loans and mortgages (m PLN) 2 688 12 207 1 304 1 200 1 000 800 600 400 200 +28% 8 000 6 000 4 000 2 000 +24% 8 000 6 000 4 000 2 000 5 399 836 634 1 347 +126% 0 0-359 0-2 000 state increase Source: mbank internal data 2008 SL Consulting 27
state increase Source: mbank internal data 2008 SL Consulting 28 MBANK PERFORMANCE TO DATE Clients [ths] 342 274 339 255 215 11 112 214 209 2000 2001 2002 2003 2004 2005 2006 2007 2008 Accelerated growth in acquisition of individual clients over the period of 8 years shows the unique track record. Accounts SME [ths] 299 20 36 35 40 40 62 66 2002 2003 2004 2005 2006 2007 2008f 12.2008f Impressive mbank growth in the prospective segment of microenterprises. To date mbank is ranked second on the market
state increase Source: mbank internal data 2008 SL Consulting 29 MBANK PERFORMANCE TO DATE Assets under management [m PLN] 2 675 4 172 791 723 500 984 1 293 19 1 019 2000 2001 2002 2003 2004 2005 2006 2007 2008 Loans [m PLN] 5 504 4 158 341 637 1 902 2 356 2000 2001 2002 2003 2004 2005 2006 2007 2008 mbank business develpment was driven by client and deposit acquisition in the first phase followed by mortgage and cash loans growth.
MBANK MARKET POSITION Number of individual clients Market (left scale) Market share mbank (right scale) 25 000 000 9,34% 20 000 000 8,00% 8,50% 15 000 000 5,20% 6,80% 10 000 000 3,90% 2,60% 5 000 000 0,10% 1,10% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Current accounts Polish market [Dec 2007] 2 000 000 1 500 000 1 000 000 500 000 0 Other 18% Pekao 20% Millennium 7% ING BŚ 7% BZ WBK 7% mbank 8% Source: Parkiet, TNS PKO BP 33% mbank big bang growth has changed the landscape in the retail banking in Poland. Rank 3 in terms of number of clients and current accounts is an impressive achievement 2008 SL Consulting 30
Source: mbank internal data, insurance companies 2008 SL Consulting 31 MBANK PERFORMANCE IN NEW, OFF-BALANCE, BUSINESS FIELDS: DIRECT INSURANCES AND ONLINE BROKERAGE Direct Car Insurances [ 000] 1,7 24,4 66,9 II 2007 VI 2007 End 2007 mbank started selling direct car insurances in early 2007. More than 66 thsd. where sold by the end of 2007 The value of car direct insurances in 2008 is forecasted to reach 500 m PLN. mbank aims at selling approximately 37 m PLN. On-line brokerage accounts [ 000] CAGR 159 % 82,9 34,5 12,4 2005 2006 2007 The product earlier available only to a narrow group of sophisticated customers now offered to mass customers mbank is a market leader in terms of number of opened brokerage accounts
Source: mbank internal data 2008 SL Consulting 32 MBANK FINANCIAL RESULTS Break Even Point [ths PLN] 600 000 500 000 400 000 300 000 353 716 537 627 200 000 100 000 0-100 000 237 673 200 587 165 405 116 213 54 964-168 -1 187 3 838 12 973 72 577 28 417-7 061-7 044-30 339 Break Even Point -45 937-48 191 2000 2001 2002 2003 2004 2005 2006 2007 2008 Results on banking activity Gross financial results
Source: mbank internal data 2008 SL Consulting 33 MBANK FINANCIAL RESULTS Payback, Investment vs. gross result [ths PLN] 300 000 250 000 Investment Cumulated gross result + depreciation 200 000 150 000 100 000 79 958 August 2007, Payback date 142 819 117 998 97 302 162 151 243 898 201 727 50 000 0 12 332 25 018 53 538-50 000-100 000-150 000-82 964-98 852-6 997-34 479-40 499-71 551 2000 2001 2002 2003 2004 2005 2006 2007 Comments In August 2007 investment in mbank paid back, after over 6 years of operations. Total investment till payback time amounted to 168M PLN, of which 60% are intangible assets
COSTS STRUCTURE Cost structure comparison [2007] TOTAL in m PLN = Depreciation Other costs Non-personnel costs 161 16% 9% 4 082 9% 2% 33% Comments mbank keeps low share of employee benefits in total costs, what is the result of specific mbanks business model In mbank, marketing and administrative costs are two key positions in non-personnel costs that have 16% and 17% Employee benefits 55% Quite high level of other internal costs can be explained i.e. by considerable costs of contact center 56% 21% mbank PKO BP Source: mbank, PKO bp, Delphi team analysis 2008 SL Consulting 34
MBANK IN THE CZECH REP. AND SLOVAKIA Economic background 2006 Czech Republic Slovakia Poland Population [M] 10.2 5.4 38.1 GDP per capita [EUR] 11 010 8 150 7 120 Real GDP growth [%] 6.1 8.3 6.1 Inflation [%] 2.5 4.3 1.0 Unemployment [%] 7.7 12.0 14.9 Average salary [EUR] 1 657 536 643 (2005) (2006) (2006) Household loans 27.7 30.4 CAGR (2000-2006) 1 17.3 Household deposits CAGR (2000-2006) 6.0 1.1 2 2.9 1 2000-2005 CAGR Source: CEEmea Banks The Big Picture, Citigroup Global Markets, Equity Research, April 2007; Directional Economics, ING Wholesale Banking, April 2007 Czech Statistical Office; Statistical Office of the Slovak Republic; 2008 SL Consulting 35
31.12.2007 Source: mbank internal data Jan Feb Mar Apr May Jun Jul 18 Aug 06-05-2009 31.12.2007 Jan Feb Mar Apr May Jun Jul 18 Aug 06.05.2009 Mar Apr May Jun Jul 2008 SL Consulting 18 Aug 06.05.2009 36 MBANK.CZ IS CHANGING THE LANDSCAPE OF CZECH BANKING SECTOR Data actual for 2009.05.06 232 ths m EUR 670 m EUR 140 250 200 150 100 50 18 14 13 18 Clients (ths) 12 14 13 +1223% 15 8 232 107 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 128 1 030 1 829 1 606 Deposits (m CZK) 1 396 1 401 1 740 1 626 993 +13912% 176 893 144 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 163 Loans and mortgages (m CZK) +2185% 116 185 271 139 3 733 2 858 0 0 0 state increase
31.12.2007 Source: mbank internal data Jan Feb Mar Apr May Jun Jul 18 Aug 06.05.2009 31.12.2007 Jan Feb Mar Apr May Jun Jul 18 Aug 06.05.2009 Mar Apr May Jun Jul 2008 SL Consulting 18 Aug 06.05.2009 37 MBANK.SK IS CHANGING THE LANDSCAPE OF SLOVAK BANKING SECTOR mbank.sk is doing well in client acquisition and deposit gathering. Credits will accelerate soon. Data actual for 2009.05.06 73 ths m EUR 214 m EUR 84 80 70 60 50 40 30 20 10 8 5 4 6 Clients (ths) 3 3 +787% 4 4 2 73 35 7 000 6 000 5 000 4 000 3 000 2 000 1 000 150 382 637 628 Deposits (m SKK) 528 641 515 709 +4205% 201 2085 6 448 3 000 2 500 2 000 1 500 1 000 500 Loans and mortgages (m SKK) 0 111 +1131% 141 261 91 2 533 1 722 0 0 0 state increase