Introduction to mbank Group The most successful organic growth story in Poland August 2015
mbank Group in a snapshot General description Key financial data (PLN M) Set up in 1986, mbank (originally BRE Export Development Bank) is Poland s 4th largest universal banking group in terms of total assets and loans, and 5th by deposits at the end of June 2015 Servicing 4 million retail clients and 18,654 corporate clients in Poland and over 750 thou. retail clients in Czech Republic and Slovakia mbank has leading positions in retail, corporate, SME and private banking, leasing, factoring, commercial real estate financing, brokerage, corporate finance and capital markets advisory as well as distribution of insurance Listed on the Warsaw Stock Exchange since 1992 with a market value of ca. EUR 4.0 billion, a member of WIG-20 blue chip index since its inception in 1994 Highly capitalised, liquid bank with a strong funding profile and a well balanced business mix between retail and corporate banking segments 2014 H1 2015 Net loans 66,947 68,210 74,582 77,242 Assets 102,145 104,283 117,986 120,604 Deposits 57,984 61,674 72,422 73,058 Equity 9,619 10,256 11,073 11,548 Total income 3,571 3,674 3,939 2,003 Net profit 1,197 1,206 1,287 672 Cost/Income ratio 46.5% 45.7% 44.9% 46.8% Cost of risk (bps) 66 70 72 54 ROE net 14.6% 13.1% 13.1% 12.3% CET 1 ratio 13.0% 14.2% 12.2% 13.5% Total Capital Ratio 18.7% 19.4% 14.7% 16.4% NPL ratio 5.2% 6.3%* 6.4%* 6.0%* NPL coverage 69.6% 53.6%* 56.8%* 62.3%* mbank Group s key market shares as of 30.06.2015 6.6% * in Q4/13 the modified methodology of NPL recognition in retail area was applied 7.7% 5.4% 6.4% 9.7% Rated BBB- by Fitch and BBB by Standard & Poor s A strategic shareholder, Germany s Commerzbank, owns 69.5% of mbank s shares Retail Loans Mortgage Loans Retail Deposits Loans Deposits 2
From a specialized corporate bank to a large universal bank Brief history Key product lines H1 2015 1986 Founding of Bank Rozwoju Eksportu (Export Development Bank) as a joint-stock company Retail Banking and Financial Markets 1992 1994 1995 Debut on the Warsaw Stock Exchange An agreement on strategic partnership singed with German Commerzbank The Bank launches its Private Banking Bank starts operations in the retail banking segment, launching, in just 100 days, mbank the first Internet Bank in Poland A wide range of modern financial services for mass market, affluent and private banking clients as well as entrepreneurs Poland Czech Republic and Slovakia 4,924 thou. clients Fully fledged offering: banking Transactional banking Investment banking Brokerage Leasing Factoring 18,654 clients 2000 2001 2007 Bank launches its second retail arm, MultiBank, brick-and-mortar bank aimed at servicing demanding and affluent clients Foreign expansion of bank s retail operations, the first mbank outlets are set up in the Czech Republic and Slovakia The announcement of One Bank Strategy for -2016; the establishment of Euro Medium Term Note Programme (EMTN) Launch of New mbank transactional platform; rebranding Group brands are replaced with the strongest name: mbank mbank Group s revenue composition 2014 Financial Markets and Other s and Investment Banking 6% 34% 60% Total income: PLN 3,939.2 M Retail Banking 3
Poland s largest organically developed retail banking franchise Number of retail customers (thou.) Key retail banking highlights Retail loans: PLN 45.3 B Retail deposits: PLN 41.4 B [as of 30.06.2015] 3,677 504 3,925 559 +6% 4,134 606 4,368 673 4,924 4,689 147 41 762 775 Launch of New mbank transactional platform with over 200 new features and improvements: state-of-the-art user interface, real time CRM, merchant funded deals, video banking, instant and intuitive search, peer-to-peer payments, next generation Personal Finance Manager Orange Finance mbank CZSK 3,173 3,366 3,528 3,695 3,885 4,002 Awarded twice with "Best of Show" prize for the project of New mbank Poland 2014 06/15 New mbank recognized as the most disruptive innovation in the world mbank s positions in internet and mobile banking in Poland as of 31.03.2015 Number of customers with internet banking access Number of mobile banking users Share in personal accounts of individual customers 3.47 M 0.95 M 10.2% #2 #1 #3 In February 2014 mbank launched a new mobile application allowing customers for easy access to their accounts, cards, loans, deposits, insurance, stock quotes, exchange rates and investment portfolio. Customer satisfaction proved by top awards Newsweek s Friendly Bank 2nd position in the categories On-line bank and Mobile banking in 2014 3rd place among traditional banks offering the highest quality of service 1st position in, and 2014 in the ranking of TNS Polska and Puls Biznesu Quality you can bank on Best Private Banking in Poland Source: Report PRNews.pl 4
C l i e n t s < 4 5 y e a r s No. of inhabitants > 100 thou. Supportive demographic profile of mbank s retail client base Age structure of mbank s client 78% 51% 18.0% 16.2% 7.6% 14.0% 9.9% 19.0% 17.0% Distribution of mbank s clients by place of residence 63% 28% 19.9% 8.3% 58.3% 8.4% 23.9% 27.1% 24.0% 5.4% 4.4% 15.1% 6.8% 25.3% 15.9% 16.0% 39.6% Poland* Poland* below 26 < 30 ; 35 ) < 45 ; 60 ) over 200 thou. < 50 ; 100 ) thou. village < 26 ; 30 ) < 35 ; 45 ) 60 and over < 100 ; 200 ) thou. below 50 thou. Retail customer base in Poland features an attractive demographic profile covering younger population With 60% between 26-44 years old, mbank s customers feature greater cross-selling potential compared to the broad mature Polish population (34%) Majority of mbank s clients are mostly living in urban areas and large cities of more than 100 thou. residents Such characteristic makes mbank s clients less exposed to unemployment as well as underpins branch-light and digital model of operations * Distribution of Poland s population excluding residents below 15 * Distribution of the whole Poland s population Source: Calculations based on mbank s internal retail statistics as of Q1 2014 and Central Statistical Office (GUS) data as of 31 December. 5
Strong presence and leading expertise in corporate banking Number of corporate customers Key corporate banking highlights loans: PLN 32.2 B deposits: PLN 29.7 B [as of 30.06.2015] customers split: K1 annual sales over PLN 500 M and non-banking financial institutions K2 annual sales PLN 30 M to PLN 500 M K3 annual sales below 30 M 13,271 13,977 1,185 1,101 3,993 4,246 8,177 8,546 +8% 15,095 1,228 4,583 9,284 16,333 1,255 5,022 10,056 17,787 1,838 5,144 10,805 2014 18,654 1,867 5,485 11,302 06/15 Integrated corporate and investment banking franchise with comprehensive product offering, anchored in transactional banking Longstanding history of corporate banking services providing mbank with competitive advantage Technologically advanced CRM model Unique sector driven client coverage model for large corporates Geographical proximity driven coverage range model for smaller companies mbank s market shares in investment banking services as of 30.06.2015 Market for non-treasury debt 15.8% #4 #3 11.7% 11.8% 12.4% Selected international awards The Best Foreign Exchange Provider in Poland 2015 The Best Cash Management Provider in Poland 8.3% Treasury bills and bonds IRS/FRA contracts FX Spot & Forward Shortterm debt debt The Best /Institutional Internet Bank in Poland 2014 in the World s Best Internet Banks competition in CEE Region 6
Fully fledged offering supplemented by mbank Subsidiaries Overview of major mbank Group s companies established in 1999 specialised mortgage bank and the largest issuer of covered bonds in the Polish market Outstanding amount of Covered Bonds issued: PLN 3.7 B Volume of Covered bonds issued in 2015: PLN 450 M and EUR 81 M established in 1991 provides financial and operating leasing of cars, trucks, machinery and real estate Leasing contracts in H1/15: PLN 1,887 M (+27% YoY) Market share: 7.9%, position: 3rd established in 1995 offers factoring services, incl. domestic and export recourse and non-recourse factoring and import guarantees Factoring contracts in H1/15: PLN 5,003 M (+25% YoY) Market share: 8.0%, position: 7th Covered Bonds Issuance (PLN M) Target 2015: PLN 1.5 B +141% 417 +49% 1,004 2014 Plan 786 (52%) 2015 established in 2000 managing portfolios of securities on commission and providing wealth management services covering among other things financial planning, tax and investment advisory services Assets under management at the end of H1/15: PLN 5.8 B established in 1991 provides a full range of services and products to institutional and retail investors as well as issuers Market shares in H1/15: 5.5% in equities, 5.2% in bonds, 17.6% in futures, 15.2% in options Number of accounts: 294.8 thou. 7
Highly efficient platform underpinning solid financial results Total income & NIM (PLN M) Total costs & C/I ratio (PLN M) 2.2% 2.5% 2.4% 2.2% 2.3% 2.3% 2.1% 51.8% 47.7% 46.5% 45.7% 44.9% 44.7% 46.8% Trading & other NFC NII 3,125 568 746 1,811 +6% 3,521 3,571 3,674 514 505 613 840 787 835 2,167 2,280 2,226 3,939 547 902 2,491 1,980 287 485 1,208 +1% 2,003 386 424 1,193 1,617 1,680 +2% 1,661 1,678 1,771 Increase due to higher BFG charge 886 +6% 938 2014 H1/14 H1/15 2014 H1/14 H1/15 Loan Loss Provisions & Cost of Risk (PLN M) Net profit & Return on Equity (PLN M) bps 114 60 66 70 72 70 54 11.8% 16.4% 14.6% 13.1% 13.1% 13.6% 12.3% -5% +19% 635 373 445 478 516-15% 245 208 +1% 1,287 1,135 1,197 1,206 642 663 672 2014 H1/14 H1/15 2014 H1/14 H1/15 8
A well balanced business mix reflected in volumes Structure of mbank Group s Gross Loans as of 30.06.2015 Public sector loans and other PLN 2.7 B Non-mortgage retail loans PLN 9.3 B Mortgage loans to Microfirms PLN 2.5 B Mortgage PLN loans to Individuals PLN 6.7 B 3% 12% 3% 8% 57% 40% Total: PLN 80.3 B 34% loans PLN 32.2 B Mortgage FX loans to Individuals PLN 26.8 B Structure of mbank Group s Deposits as of 30.06.2015 Public sector clients PLN 2.0 B Individual clients: term deposits PLN 10.6 B Individual clients: current accounts PLN 30.8 B 15% 57% 3% 28% Total: PLN 73.1 B 42% 12% clients: current accounts* PLN 20.9 B clients: term deposits PLN 8.8 B * incl. repo transactions, loans and advances received, other liabilities Development of Total Gross Loans (PLN B) 61.8 2.6 25.6 70.2 3.7 27.9 +6% 69.5 3.4 70.6 2.8 28.4 29.5 77.4 3.0 32.8 +10% 80.3 72.7 2.7 2.5 32.2 30.6 Development of Total Deposits (PLN B) 47.1 0.9 21.1 54.2 0.5 27.0 +11% 58.0 0.5 24.3 61.7 0.7 26.8 +15% 72.4 73.1 0.9 63.3 2.0 32.2 1.0 26.6 29.7 33.7 38.7 37.7 38.3 41.6 39.7 45.3 25.1 26.7 33.2 34.2 39.3 35.7 41.4 2014 06/14 06/15 2014 06/14 06/15 Individual clients clients Public sector and other Individual clients clients Public sector 9
A diversified funding base and strong capital position mbank Group s funding structure as of 30.06.2015 mbank s ratings Major issues of debt instruments Issue size Issue date Tenor Coupon Subordinated liabilities EMTN Other debt securities in issue Other Due to banks 7% 3% 5% 4% 14% 38% 29% Retail deposits 67% deposits Long-term rating Fitch Short-term rating BBB- F3 Standard & Poor s Long-term credit rating BBB Short-term credit rating A-2 Senior Unsecured Debt under EMTN programme EUR 500 M 12-10- 3.0 Y 2.750% CHF 200 M 08-10- 5.0 Y 2.500% CZK 500 M 06-12- 5.0 Y 2.320% EUR 500 M 01-04-2014 5.0 Y 2.375% EUR 500 M 26-11-2014 7.0 Y 2.000% Subordinated debt (Tier II) PLN 500 M 03-12- 10.0 Y PLN 750 M 17-12-2014 10.1 Y WIBOR 6M + 225 bps WIBOR 6M + 210 bps mbank Group s capital ratios mbank Group s loan to deposit ratio (PLN B) 56.0 66.0 61.7 58.8 66.5 15.9% 5.5% 15.0% 5.4% 18.7% 5.7% 19.4% 5.2% 14.7% 2.5% 70.3 16.4% 2.9% 125.9% 125.1% 115.5% 110.6% 103.0% 105.7% Target L/D ratio 115% 10.4% 9.6% 13.0% 14.2% 12.2% 13.5% 2014 06/15 2014 06/15 Core Tier 1 / CET 1 Tier 2 XX.X Total risk exposure amount Note: Since the end of March 2014 the capital ratios are calculated in accordance with the rules based on Basel III 10
Highlights of mbank Group s -2016 strategy Key elements of the strategy Continued development and implementation of the One Bank approach Group rebranding with an aim to bring all retail operations under the common umbrella of One bank strategy and reorganisation of corporate and investment banking into an integrated One offering New One network concept to adjust to the changing customer behaviour and increase network availability Positioning the mbank name as the generic name for mobile banking Establish and maintain the position of the most convenient transactional bank in Poland Selectively exploit attractive opportunities to grow the business in retail and corporate Retail banking: Enhancing client acquisition through the "New mbank" platform; growing lending business with a more attractive risk-return profile and higher margin characteristics; ensuring a stable and adequate deposit base by leveraging the transactionality banking: Exploit expected growth in the sector as economy recovers; acceleration of lending and integrated corporate and investment banking offer to small and medium enterprises; continued growth in number of clients across all segments Active balance sheet management and continued improvement in profitability Continued focus on sourcing diversified and attractively priced funding including new area of covered bond program by mbank Hipoteczny Improving return on assets through change of lending mix and phase-out of legacy FX mortgage portfolio 2016 Strategy targets delivered already. Focus on maintaining adequate capitalisation, strict cost control, balanced business growth and improving returns for shareholders, allowing for generous dividend distribution (>50%) -2016 strategy targets almost already achieved Target 2016 Actual H1/15 Max. 48.0% 46.8% 115% 15.7% Min. 15% 105.7% Min. 1.4% 1.1% 11% 13.5% Cost/Income ratio Loan/Deposit ratio * Target based on Basel II AIRB approach, actual ratio based on fully loaded Basel III Gross ROE Net ROA CET1* 11