Strategy of mBank Group for 2020-2023

Growth fuelled by our clients

Warsaw, 12 December 2019

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This document and the information contained herein (unless otherwise indicated) has been prepared by mBank S.A. (the "Bank") solely for informational purposes (the "Presentation"). By reading the Presentation or attending the meeting at which the Presentation is made, you will be deemed to have (i) agreed to all of the following restrictions and made the following undertakings and (ii) acknowledged that you understand the legal and regulatory sanctions attached to the misuse, disclosure or improper circulation of the Presentation. This Presentation is published only to provide information regarding the adoption of the mBank Group's Strategy for 2020-2023. This material is not connected with the Commerzbank AG announcement of September 26, 2019, regarding the approval of a strategy including potential sale of the Bank's shares, of which the Bank informed in the current report 37/2019 of September 26, 2019.

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Summary: What will mBank be like?

In the horizon of the strategy for 2020-2023:

We will continue mBank's organic growth, based on the acquisition of young clients and dynamic companies from prospective industries.

We will accompany our clients throughout their lifecycle and development, designing our products, platforms, access channels and service model according to their needs.

We will remain the most convenient transactional bank and maintain our advantage in this area by providing our customers with ease and speed of use, high security standards, advanced platform, personalisation and a bonus for loyalty.

We will build our offer and solutions based on the mobile first paradigm, increasing the share of sales and service in the digital sphere.

We will intensify optimisation, automation and digitalisation of internal processes what will translate into savings and enhanced operational efficiency.

We will be systematically improving our profitability due to rising revenues, decent cost discipline and prudent approach to risk management, while more favourable balance sheet structure will result in higher net interest margin.

The strategic goal of mBank Group is to keep the position among top Polish banks in terms of key financial metrics

Financial targets of mBank Group for 2020-2023

Measure	Target level	Current level
Profitability	in 2023	9M 2019 (normalised)
Net interest margin (NIM)	~3.0%	2.7%
Cost/Income ratio (C/I)	~40%	43.4%
Return on equity (ROE net)	~10.5%	7.9%
Stability	every year	30.09.2019
Loans/Deposits ratio	in a range of 92-94%	90.3%
Capital ratios	year-end level min 1.5 p.p. above PFSA requirements	2.2 p.p. higher for Tier 1 ratio, 2.3 p.p. for Total Capital Ratio
Growth	CAGR 2019-2023	CAGR 09.2016-09.2019
Dynamics of loans	~6%	8.7%
Dynamics of deposits	~6%	10.8%
Dynamics of total revenues	~8%	9.7%
Dynamics of total costs	~5%	6.3%

Our goal is to pay 50% of net profit as a dividend.

Note: Normalised ratio (refers to Cost/Income ratio and return on equity) after 9M 2019 includes ¾ of an annual contribution to the resolution fund, booked in total in Q1/19. For the calculation of CAGRs of revenues and costs for the period 09.2016-09.2019 the data for 4 quarters preceding the given date was used, excluding one-off events.

Four pillars of the new strategy for 2020-2023 correspond to the key components of mBank's business model

In the strategy for 2020-2023, mBank Group will focus on 4 areas

Client (acquisition and development of long-term relationships)

We will grow organically through the continuous acquisition of new customers, in particular young people and firms. We will strengthen our position in the most profitable age group of 30-45.

Young customers

We will maintain our position in the following segments:

Individuals aged 13-28 years
Start-ups
E-commerce

Mid-sized cities

With relatively high penetration in large agglomerations, we want to strengthen our position in midsized cities (current share at ~7%)

Family banking

Leveraging on the social role of parents who are mBank's clients, we plan to faster enter into relations with clients aged 8-13

Professionals

We will solicit the segment of professionals providing services for other entrepreneurs (e.g. accountants)

Client (acquisition and development of long-term relationships)

Polish population is ageing
In 2025, the generations of 30- and 40-year olds will together make up about 30% of the population of Poland
mBank's participation in this group is relatively high (~12%), but at the same time the strength of relations is weakening

We will:

identify the most important stages in the customer life
recognise life events related to the difficulties such as divorce, diseases or accidents and offer help
retain profitable clients through anchor products: mortgage loans, savings and investment products

Client (acquisition and development of long-term relationships)

We will create a platform for cooperation with corporate clients based on partnership, convenience and professionalism.

Long-term relationship

Direct contact is essential when establishing relations
Availability of local advisors

Advisors' competences

Corporate clients appreciate professional, less formal contact
Proactive attitude of mBank's advisors
Knowledge and the flow of experience

Convenient corporate banking services
Self-servicing in corporate banking
Development and delivery of simple solutions

Client (acquisition and development of long-term relationships)

We will shape the portfolio of corporate clients anticipating trends and changes in the environment.

Key tasks:

Include dynamic companies in portfolio
Maintain individual approach to large corporations
Develop platform connecting entrepreneurs
Support clients in value creation (including M&As) and succession process
Support and promote responsible companies

Implementation:

Building industry knowledge, defining potential clients from specified industries
Creating adequate policies, work procedures, limits and product pallets
Conducting cross-sectional research

Preferred industries in corporate portfolio:

effectiveness measurement

Client (acquisition and development of long-term relationships)

We will increase the likelihood of recommending mBank's services by our clients.

Banking decisions of more than 60% of customers are connected with the recommendation of trusted persons.

We will:

offer the quickest way "to get things done"
eliminate waiting and unnecessary efforts of the customer
appreciate loyalty
personalise clients' experiences
act in a predictable manner
represent uncompromising business ethics
provide a sense of security with reliable technological banking solutions

Client (acquisition and development of long-term relationships)

Simplify the offer in each business line, including the price list and tariffs

Reduce the amount of marketing information No2Spam
Assistance in the event of failure during operations in the transaction system, using a card, etc.

We will pursue the principles of empathy in contacts with customers.

Strengthen the image of mBank as a professional institution
Rely more on feedback provided by customers, change the organisation to meet their expectations
Improve the most important points of contact

Platform (ecosystem & user experience)

We will continuously improve remote bank access channels using the digital first (mobile first) approach.

revolutionary digital assistance in the service model: all frontline employees will become part of the digital channels
e-Commerce UX (user experience), digital assistance and personalisation of price offers
omni-sale with better reporting, change management and sales control
API model for extended range of the sales platform, incl. e-commerce

Distribution model transformation: 80% of sales in own digital channels & API and 50% in mobile mode in 4 years

Platform (ecosystem & user experience)

We will develop mBank's retail platform by complementing it with additional products and services, including non-financial ones, in order to ensure complete customer service.

We will provide personalised offer:

Savings, investments and retirement-oriented products benefiting from mBank's partnerships
Innovative lending:
- fast credit decisions and effective use of the transaction-related moments for distribution of consumer loans through mobile channels
- offering the most convenient and fastest mortgage loan on the market
Enriching the platform with value-added services while keeping it simple and transparent
Selective use of API and cooperation with mAccelerator as well as test value recognition with customers

Source: Picture: the RS2 report Open Retailing and Open Banking – Payments Industry Challenges.

Pillars of mBank Group's strategy for 2020-2023 Platform (ecosystem & user experience)

Efficiency (operational advantage)

We will maintain our technological advantage in the financial sector. We will optimise our IT architecture using leading solutions.

We will:

expand our business-technology team
invest more in the development of competences of our employees (both technical and soft skills)
provide interdisciplinary teams ensuring end-to-end solution delivery
continue to make our structure and work organisation more flexible

We will:

migrate key applications to a modern technological pile based on microservices and containers by 2023
increase the automation of IT processes
transfer existing systems to other, cheaper platforms
release the potential of a public cloud computing

Efficiency (operational advantage)

We will increase the scope of customer digital self-service. We will optimise our sales network.

Digital Assistant and adaptive user interface
Automated NPS and FCR measurement
Improve customer experience in omniservice

Maintain the number of branches at the 2020 level
Adjust the design and equipment and adapt it to habits of our customers
Implement automatic text and voice assistants
Safe contact with the bank on popular instant messengers available

Outlays of mobile applications and browser services for entrepreneurs
Personalisation of interfaces with AI support

Efficiency (operational advantage)

We will improve the operational efficiency of the bank by implementing automation on a large scale and simplifying processes.

Centralisation of operational processes

Process takeover entirely by specialised operating units
Relieve the burden of business units
End-to-end process owned by one person only

Simplification of internal processes

Set a definition of process ownership
Measurement of costs of processes in the organisation
Elimination of paper documentations flow
Educating employees in various systems in the bank

Unified methodology for managing operations

Methodology based on best market practices
Central measurement system
State-of-the-art analytical and process engineering tools

Efficiency (operational advantage)

We will shorten the time of issuing opinions and internal consultations in implementing new solutions, while maintaining full alignment with regulations and compliance requirements.

We will provide highest cyber security standards.

Maintain investments in educational programs for the clients in the field of security
Continue to intensively develop solutions protecting our customers
Focus on the latest technologies, including machine learning, artificial intelligence, biometrics and other

Employees and organisation culture

Technology-supported work environment that inspires to be innovative will be built on three key levels:

We will:

coach smart managers who know how to inspire development, bring out value from diversity and encourage to care about clients through strategic thinking, innovation and willingness to take up challenges
encourage employees to experiment, be open to technologies, automate processes and look for new solutions
be regulations-compliant and empathic

We will:

increase work efficiency by providing employees with the best applications, software and IT equipment

People Technology Culture of

automate simple and repetitive tasks and focus on value-adding activities
implement RegTech solutions to help employees comply with procedures and regulatory requirements
use HR technologies and predictive analytics to make informed decisions about investing in people

We will:

promote our desired values

cooperation

apply feedback to all HR processes throughout the employee's life cycle
focus on breaking down hierarchical structures
use tools supporting mobility and agile methods
implement Objectives and Key Results system
increase the diversity of characters, personalities, experiences, gender and age