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Bank Millennium S.A.
Earnings Release • Jan 31, 2025
5525_rns_2025-01-31_42534593-b1da-4a47-bb2d-8679754fd3eb.pdf
Earnings Release
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Attachment to the current report no. 6/2025
SELECTED PRELIMINARY NON-AUDITED RESULTS OF BANK MILLENNIUM S.A. CAPITAL GROUP IN 4Q24/FY2024
FINANCIAL RESULTS IN BRIEF
Bank Millennium S.A. Capital Group's ('BM Group', 'Group') reported net profit of PLN173 million in 4Q24 and PLN719 million in 2024 overall (up 25% y/y). Translating into annualised 9% ROE in the quarter (full year 2024: 9.8%), this solid quarterly result was achieved despite continued elevated costs related to FX-mortgage portfolio (PLN768 million after tax). The solid operating performance was supported by reversal of a part of estimated cost of credit holidays (PLN36 million after tax).
| Profit & Loss in brief | 2024 | 2023 | y/y | 4Q24 | 3Q24 | q/q |
|---|---|---|---|---|---|---|
| (PLN million) | ||||||
| Net interest income | 5 530 | 5 253 | 5% | 1 505 | 1 489 | 1% |
| Net commission income | 777 | 782 | -1% | 188 | 199 | -5% |
| Core income | 6 307 | 6 036 | 4% | 1 693 | 1 688 | 0% |
| Other non-interest income | (311) | 687 | - | (98) | (27) | - |
| Total operating income | 5 996 | 6 723 | -11% | 1 595 | 1 660 | -4% |
| Personnel costs | (1 197) | (1 035) | 16% | (310) | (303) | 2% |
| Other administrative costs | (1 056) | (958) | 10% | (287) | (250) | 15% |
| Total operating costs | (2 253) | (1 993) | 13% | (596) | (553) | 8% |
| Impairment provisions and other cost of risk * |
(319) | (299) | 6% | (5) | (123) | -96% |
| Other modification | (138) | (52) | 165% | (61) | (35) | 75% |
| FX legal risk related provision | (2 179) | (3 065) | -29% | (523) | (533) | -2% |
| Banking tax | (232) | 0 | - | (99) | (99) | - |
| Pre-income tax profit | 875 | 1 312 | -33% | 311 | 317 | -2% |
| Income tax | (156) | (737) | -79% | (139) | (127) | 9% |
| Net profit – reported | 719 | 576 | 25% | 173 | 190 | -9% |
| Net profit – adjusted ** | 3 202 | 2 993 | 7% | 904 | 796 | 14% |
| NIM | 4.4% | 4.6% | -0.2 p.p. | 4.4% | 4.4% | 0.0 p.p. |
| Cost/income reported | 37.6% | 29.6% | 7.9 p.p. | 37.4% | 33.3% | 4.1 p.p. |
| Cost/income adjusted *** | 30.8% | 29.5% | 1.2 p.p. | 30.7% | 29.9% | 0.8 p.p. |
| Cost of risk (bp) | 40 | 39 | 1 b.p. | 1 | 58 | -57 b.p. |
| ROE | 9.8% | 9.1% | 0.7 p.p. | |||
| ROE adjusted ** | 18.5% | 21.7% | -3.2 p.p. |
(*) Impairment provisions for financial and non-financial assets including also fair value adjustment of credit portfolio (PLN0.7mn in 2024 and PLN-1.0mn in 2023) and loans modification effect not related to amicable settlements with FX mortgage borrowers (PLN-44.1mn in 2024 and PLN-36.0mn in 2023)
(**) Without extraordinary items, i.e. impact of credit holidays in 2024 (initial provision of PLN-201mn in 2Q24 and a release of PLN44m in 3Q24 and PLN45m in 4Q24) and in 2023 (negative PLN9mn), financial impact of insurance transaction (total pretax income of PLN652.4mn in 2023) and FX mortgage loan related costs/incomes (in legal risk provisions, FX position, operating cost and other operating income/cost including indemnity from Societe Generale as well as tax effects) and hypothetical banking tax until the end of May 2024; ROE: Equity adjusted by all FX mortgage related costs incurred since 2020
(***) Without extraordinary income or cost
| Key Balance Sheet indicators (PLN million) |
31.12.2024 | 31.12.2023 | y/y | 30.09.2024 | q/q |
|---|---|---|---|---|---|
| Loans to households | 56 935 | 56 386 | 1% | 57 594 | -1% |
| Loans to companies and public sector |
18 046 | 17 257 | 5% | 17 948 | 1% |
| Total net loans to clients | 74 981 | 73 643 | 2% | 75 542 | -1% |
| Total assets | 139 152 | 125 520 | 11% | 135 588 | 3% |
| Deposits of individuals | 87 567 | 76 600 | 14% | 84 530 | 4% |
| Deposits of companies and public sector |
29 690 | 30 647 | -3% | 29 451 | 1% |
| Total deposits | 117 257 | 107 246 | 9% | 113 981 | 3% |
| Impaired loan ratio * | 4.5% | 4.6% | -0.1 p.p. | 4.6% | -0.1 p.p. |
| CET1 = T1 | 15.1% | 14.7% | 0.4 p.p. | 15.3% | -0.2 p.p. |
| TCR | 17.6% | 18.1% | -0.5 p.p. | 17.9% | -0.3 p.p. |
(*) Impaired loan ratio = credit risk provisions / impaired loans
4Q24 net profit without FX-mortgage related costs would amount to record PLN941 million (2024: PLN3,110 million), while additionally adjusted for the credit holiday cost reversal it would reach a level of PLN904 million (adjusted 2024: PLN3,202 million, up 7% y/y) translating into an adjusted ROE of 19% (2024: 18.5%).
Net result w/o FX-mortgage related costs, w/o credit holidays and bancassurance transaction but with hypothetical banking tax between July'22 to May'24
4Q24 was another quarter of solid performance from the operating perspective. Loan growth remained moderate (impact of fast contracting FX-mortgage portfolio) but corporate book showed early signs of recovery (+1% q/q, + 5% y/y). Liquidity surplus increased further (deposits up 3% q/q and up 9% y/y while L/D ratio reached a new low of 64%) which, combined with lowered deposit pricing translated into further growth of NII (+1% q/q, +5% y/y) and NIM. Number of active retail clients remained in a steady uptrend (3.148 million, up 5% y/y) while volume of investment products grew 5% q/q to PLN11.1 billion.
On the FX-mortgage front, steady risk reduction continued. Quarterly number of new amicable settlements with FX-mortgage borrowers increased further and reached a long unseen level of 1,261. To date, settlements totalled nearly 26,000, an equivalent of 42% of the number of loan agreements active at moment of the full roll-out of amicable settlements effort. Inflow new of FX-mortgage claims against the Bank continued to slow (<1,200 in 4Q24), the number of active claims against the Bank
for the first time dropped q/q while the ratio of legal risk provisions to gross active book crossed the level of 120%.
Capital ratios marginally decreased in the period while the surplus of T1/TCR ratios remained above 5 percentage points each. MREL ratios surpluses over minimum requirements remained comfortable at nearly 8 percentage points for MREL trea and nearly 3 percentage points for MREL tem respectively. On January 23, 2025 the Bank received a decision from the regulator on a withdrawal of P2R buffer on solo basis (so far 1.47 percentage points) and expects a similar decision with regards to the P2R buffer on consolidated basis. In December 2024 the regulator also decided on non-imposing of P2G buffer.
Substantial and extraordinary P&L items in 2024
In 1Q24, the BM Group recognised annual cost of BFG resolution fund fee in the amount of PLN61 million.
In 2Q24, results (interest income line) were impacted by PLN201mn estimated costs of credit holidays for PLN mortgage borrowers. The amount was at the lower end of the preliminary estimated range of PLN201–PLN247 million (details in current report no 17/2024 of May 5, 2024), indicating a relatively low borrowers' interest in the scheme. Indeed, this was reflected in both 3Q24 and 4Q24 when respectively PLN44 million and PLN45 million of the estimated cost was reversed. The final pre-tax cost for the full year 2024 settled at PLN133 million.
1H24 tax line brought a positive value owing to number of items, including a recognition of DTA totalling PLN223 million (1Q24: PLN52 million, 2Q24: PLN171 million) as well as 2022-23 CIT refunds and reductions of current CIT liabilities. The DTA was, among others, related to future adjustments of interest income earned on mortgage loans indexed to CHF and FX differences on these loans which are the subject of court disputes for their cancellation. 3Q24 brought practically no change in the amount of the earlier created DTA, while 4Q24 brought a PLN35 million decrease.
Results of BM Group are occasionally impacted by sale of NPLs. These are a part of ordinary conduct of the business and management of the NPL portfolio and in recent years typically took place in 2Q and 4Q. While 2Q24 saw PLN45 million pre-tax profit on the transaction (presented in credit risk line), 4Q24 brought a relatively higher than usual PLN74 million result on the NPL sale.
Legal and court costs related to FX-mortgage portfolio continued to burden BM Group's through the entire year 2024, but 4Q24 saw a cumulation of these costs (PLN166 million or 30% of full year amount), as described in more details further in this report.
Lastly, the Bank returned to paying banking tax in 2Q24 (PLN35 million charge in June), and 3Q24 as well as 4Q24 saw full quarterly charges of PLN99 million each in contrast to no charge in respective quarters of the preceding year and full 2023.
Key developments in the period
The key developments in 4Q24 were as follows:
• 4Q24 NII adjusted for cost of credit holidays (PLN45mn) increased 1% q/q and reached a new record high level while the reported one was also up 1% q/q; the q/q growth of adjusted NII was an outcome of higher income from bond portfolio on the one hand and lower deposit cost on the other hand which more than offset interest costs of green EUR500mn MREL bond issue; interest earning assets overall (IEAs) increased visibly, reflecting high collection of deposits in the period; interest rates were stable with 3M WIBOR averaging 5.85%; the y/y growth of quarterly NII without credit holidays accelerated significantly to 13% from 5% in the previous quarter (chiefly low base effect of first time recognition of costs of inaugural MREL bonds issue); 2024 NII adjusted for credit holidays grew 7% y/y (reported one was up 5% y/y) driven by higher IEAs, improving profitability of the bond portfolio and lower cost of deposits;
NII excluding cost of credit holidays (PLNmn)
• quarterly NIM remained broadly stable (437bp vs. from 439bp in the preceding quarter) with higher IEAs (up 4%) and changing asset mix having the most pronounced impact, offsetting the steadily decreasing cost of deposits;
• cost inflation was broadly stable in 4Q24 (opex up 13% y/y from 12% in 3Q24) with higher legal costs and higher wages behind the y/y growth; seasonally high legal costs were in turn the main driver behind the 8% q/q growth (up 4% on adjusted basis); 2024 reported opex was up 13% y/y; headcount remained broadly stable (number of active employees up 36 in the last twelve months), optimisation of the physical distribution network continued (own branches down by 11 units or 3% in the last twelve months) complementing the increasing share of digital services (digital customers: 2.91mn, up 8% y/y, number of active mobile customers: 2.65mn, up 7% y/y);
- loan portfolio marginally decreased in the quarter, while in y/y terms net/gross loans were up +1%/+2%; downward trend in FX-mortgage portfolio remained the key decisive factor as net/gross loan book w/o FX-mortgages was flat in the period and +4% y/y; FX-mortgages continued to shrink fast (on a reported basis down 29% q/q and down 56% y/y) on a combination of FX movements, repayments, provisioning (in line with IFRS9 part of legal risk provisions are booked against gross value of loans under court proceedings), write-downs and amicable settlements; as a result, the share of all FX-mortgages in total gross loans decreased to 1.8% (BM originated only: 1.5%) from 4.1% (3.6%) in the same period last year;
- non-FX mortgage portfolio was flat q/q and up 4% y/y with non-mortgage retail loans up 1% q/q and up 7% y/y; origination of cash loans at PLN1.6bn in the period (down q/q and up 5% y/y) contributed the most; BM's market share in origination of cash loans in 4Q24 stood at 9.7%, close to the 9.9% in 4Q23; origination (disbursements) of PLN mortgages decreased q/q and y/y to PLN1.1bn (market share of 5.4%);
Mortgages: disbursements and market share in originations
- loan book quality marginally improved in 4Q24 with total NPL ratio at 4.5% reflecting the improvement of the NPL ratio in both corporate segment (4.7% from 4.9% at the end of September'24) and retail one (4.4% vs. 4.6%); consumer loans segment saw a further drop of the NPL rate (8.2% from 8.8%) while this of the mortgage portfolio marginally trended down; the NPL coverage ratio marginally increased to 73% (72% at YE23); quarterly cost of risk was 1bps, reflecting significant contribution from NPL sale and updates of parameters in the retail risk model with positive 18bps credit risk cost in the retail segment and negative 78bps in the corporate one; in 2024 overall cost of risk amounted to 40bps;
- customer deposits were up 3% in the quarter and up 9% y/y with retail deposits up 4% q/q and corporate ones up 1% q/q (chiefly due to growth in current accounts as term deposits were down again as a result of tighter price management); the share of total term deposits dropped further to 35% from 36% at the end of September'24 (36% at YE23); the liquidity of the Bank remained very comfortable with L/D ratio decreasing to a new all-time low of 64%;
- AuM of Millennium TFI and third-party funds combined again grew at a healthy rate (5% q/q) with y/y growth rate of 35% taking total AuM to nearly PLN11.1bn;
- capital ratios marginally decreased (Group TCR: 17.6%/T1:15.1% vs. 17.9%/15.3% respectively at the end of September'24) with the surpluses over the required minimum T1 and TCR ratios remaining comfortably above 5.0 p.p. each; on January 23, 2025 the Bank received a decision from the regulator on a withdrawal of the P2R buffer on solo basis (so far 1.47 percentage points) and expects a similar decision with regards to the P2R buffer on consolidated basis; furthermore end of 2024 ratios do not include 2H24 profits and the Management of Board of the Bank intends to propose at the 2025 AGM to retain the full 2024 net profit in own funds; this would, ceteris paribus, add c.90 basis points to T1 ratio;
- MREL ratios surpluses over minimum requirements remained comfortable at nearly 8 percentage points for MREL trea and nearly 3 percentage points for MREL tem respectively; Longterm Funding Ratio (LTFR ratio) stood at 28% at YE24 and the Group intends to close the gap to the 40% level recommended as of December 31, 2026 largely through issuance of covered bonds by its mortgage subsidiary Millennium Bank Hipoteczny ("MBH"); debut issues took place already in 2024 (PLN800mn altogether) and MBH intends to issue more covered bonds in both 2025 and 2026.
FX-mortgage portfolio and related costs
All-in quarterly costs related to FX-mortgage portfolio originated by BM (legal risk provisions, costs of amicable settlements as well as legal and court costs) increased 17% q/q to PLN861 million pre-tax (up 20% q/q to PLN768 million after tax) and again were a material drag on the core business of the
Group. The growth was driven by legal, court and amicable settlement costs as explained in detail further in the report, while cost of legal risk provisioning was broadly stable in the period.
In 2024 overall, all-in FX-mortgage costs totalled PLN3,219 million pre-tax (PLN2,558 million after tax) and were 9% lower than in the previous year.
(*) without legal risk costs related to FX-mortgages originated by former Euro Bank
Total cost of provisions against legal risk related to FX-mortgage portfolio ('FX-mortgage provisions') amounted to PLN523 million pre-tax in 4Q24 (2024: PLN2,179 million) with PLN483 million attributable to FX-mortgages originated by Bank Millennium. In 2024 overall, the latter totalled PLN1,979 and were down 30% y/y with the downtrend in quarterly cost observed practically since 1Q23.
Post-tax cost of FX-mortgage related provisions attributable to portfolio originated by Bank Millennium totalled PLN463 million in 4Q24 (2024: PLN 1,554 million) vs. PLN599 million in 4Q23 (2023: PLN2,762 million).
In 4Q24 further provisioning was driven by updated inputs into the Bank's provisioning methodology, reflecting, inter alia, actual and expected inflow of court claims as well as provisions for potential late interest payments. In 2024 overall, provisions for statutory interest accounted for over 40% of the overall legal risk provision cost while the updated expectations on new cases for approximately 25%.
Quarterly provisions against legal risk of FX-mortgage book (PLNmn)
At the end of Dec'24, provisions for the portfolio originated by Bank Millennium were at the level of PLN7,724 million (an equivalent of 122% of the grossed-up active FX-mortgage book) and at PLN740 million for the portfolio originated by former Euro Bank. The y/y growth of PLN455 million of balance of provisions for loans originated by Bank Millennium was much lower than the respective annual P&L charge of PLN1,979 million. This was mainly due to the much increased use of these provisions (PLN1,323 million in 2024 overall) and to a lesser extent an outcome of changes of PLNCHF exchange rate. Allocated provisions, i.e. decreasing gross balance sheet value of the respective loan books, stood at PLN5,163 million for portfolio originated by Bank Millennium and PLN502 million for portfolio originated by former Euro Bank.
Provisions against legal risk of FX-mortgage book (BM portfolio, PLNmn)
(*) actual outstanding B/S provisions not equal to the sum of P&L charges
Legal risk provision/active gross loans
Note: legal risk provisions/active gross FX mortgage book (post IFRS9 adjustments where necessary); excl. f.Euro Bank portfolio in case of BM
On December 31, 2024, the Bank had 21,854 loan agreements and additionally 2,223 loan agreements from former Euro Bank under individual ongoing litigations (excluding claims submitted by the Bank against clients i.e. debt collection cases) concerning indexation clauses of FX mortgage loans submitted to the court. A relatively small proportion of these (~16.0%) was filed by borrowers who had repaid their FX-mortgages entirely or converted them into PLN mortgages at the date of submitting the court case (~21% according to their current status), although they represent a higher share of recently filed cases.
4Q24 was the first quarter when the number of active claims against the Bank dropped q/q, reflecting slowing inflow of new cases, higher number of final verdicts and last but not least impact of amicable settlements of cases who were already during dispute in court. It is also worth noting that the quarterly number of new claims against the Bank averaged below 1,500 in 2024, below the 1,700+ in 2023. Moreover, since 3Q23 (quarterly peak with nearly 1,900 claims filed) the number of newly filed claims has been in a steady decline, similarly to trends observed on the market overall and among some peer banks. However, more time is required to confirm the trend.
New lawsuits against Bank Millennium* (#)
(*) without claims related to FX-mortgages originated by former Euro Bank
BM f.EB
The Bank is highly focused on reduction of its FX-mortgage portfolio and the related risk and therefore continues to actively offer its customers amicable solutions (i.a. conversions to Polish zloty, prepayments, early repayments or collectively 'amicable settlements') regarding FX-mortgages on negotiated terms. The number of amicable settlements reached 1,261 in 4Q24 (2024: 4,458), significantly more than in the preceding quarter and again exceeding the number of new cases filed against the Bank. Nearly 26,000 amicable settlements were reached since early 2020 when a more intensive effort started. These represent over 42% of the number of active FX-mortgage agreements at the start of the effort. As a result of these negotiations, final court verdicts and other natural drivers, in 4Q24 the number of active FX-mortgage loans decreased by 2,134 (2024: 7,852) to 24,573, following the 2,052 drop in 3Q24 and 5,586 in 2003 overall.
In 4Q24, costs related to amicable settlements totalled PLN176 million (2024: PLN540 million) pretax and were booked in FX-result and in result on modifications. The cost of the settlements was higher, both in total and per case, than in 3Q24, reflecting, among others, an increasing number and share of in-court settlements. In 4Q24, 604 such settlements were achieved (48% of all settlements in the period), compared to 408 in 3Q24 (38%).In 2024 overall, 1,567 in-court settlements were reached (35% of total) compared to 536 (15%) in 2023 overall.
Amicable settlements (in and out of court)(#)
Costs of amicable settlements (PLNmn, pre-tax)
Note: some items might have been adjusted from the previously reported values
As a result of these trends, the pace of BM's FX-mortgage portfolio's contraction accelerated and in 4Q24 it decreased 9% (in CHF terms, gross, w/o impact of allocated legal risk provisions) while the y/y contraction rate accelerated to 26%. The share of total FX-mortgage book (gross loans less allocated legal risk provisions) in total Group's gross loans dropped to 1.8% at the end of December '24, while the share of FX-mortgage loans originated by BM dropped to 1.5%.
CHF mortgage portfolio (CHFmn) pre-provision*
(*) Originated by Bank Millennium and without the deduction of allocated legal risk provision
FX mortgage book as % of total consolidated gross loans
Note: the share of total gross FX-mortgages not deducting allocated legal risk provisions was 8.5% at the end of December'24
Legal and court costs, booked in admin costs and other operating costs, were significantly up this quarter and totalled PLN166 million largely due to counterclaims filed by the Bank. In 2024 overall, these totalled PLN545 million and compared against PLN269 million in 2023.
Summing it all up, excluding all FX-mortgage related costs in 4Q24 (PLN861 million pre-tax/ PLN768 million after tax) the BM Group would post, excluding the positive impact of adjustment of credit holidays cost, 4Q24 net profit of PLN941 million. This compares against adjusted 3Q24 net profit of PLN831 million and 4Q23 adjusted net profit of PLN793 million.
In 2024 overall, post adjustments for all-in FX-mortgage costs (PLN3,219 million pre-tax / PLN2,558 million after tax) net profit would amount to PLN 3,110 million compared to PLN3,514 million in 2023.
Reported net result w/o FX-mortgage costs* (PLNmn)
(*) Hypothetical banking tax added to results in Jul'22 to May'24 period.
More information about the risk related to the FX mortgage portfolio will be presented in the audited financial results for 2024 due to be published on February 24, 2025.
BM GROUP's FINANCIAL DATA IN BRIEF
| Operating income (PLNmn) |
2024 | 2023 | Change y/y |
4Q24 | 3Q24 | Change q/q |
|---|---|---|---|---|---|---|
| Net interest income | 5 530 | 5 253 | 5% | 1 505 | 1 489 | 1% |
| Impact of credit holidays on net interest income |
(113) | (9) | - | 45 | 44 | - |
| Net interest income adjusted | 5 643 | 5 263 | 7% | 1 460 | 1 445 | 1% |
| Net commission income | 777 | 782 | -1% | 188 | 199 | -5% |
| Core income | 6 307 | 6 036 | 4% | 1 693 | 1 688 | 0% |
| Core income without credit holidays |
6 419 | 6 045 | 6% | 1 648 | 1 644 | 0% |
| Other non-interest income* | (311) | 687 | - | (98) | (27) | - |
| Total operating income | 5 996 | 6 723 | -11% | 1 595 | 1 660 | -4% |
| Total operating income adjusted** |
6 873 | 6 397 | 7% | 1 776 | 1 759 | 1% |
(*) Without fair value adjustment of credit portfolio (PLN0.7mn in 2024 and PLN-1.0mn in 2023), which is included in the cost of risk line
(**) Without extraordinary items, i.e. impact of credit holidays in 2024 (initial provision of PLN-201mn in 2Q24 and a release of PLN44mn in 3Q24 and PLN45mn in 4Q24) and in 2023 (negative PLN9mn), financial impact of insurance transaction (total pre-tax income of PLN652mn in 2023) and FX mortgage loan related costs/incomes (in FX position and other operating income/cost including indemnity from Societe Generale)
| y/y | 4Q24 | 3Q24 | q/q | ||
|---|---|---|---|---|---|
| (1 197) | (1 035) | 16% | (310) | (303) | 2% |
| (1 056) | (958) | 10% | (287) | (250) | 15% |
| (61) | (60) | 1% | 0 | 0 | - |
| (2 253) | (1 993) | 13% | (596) | (553) | 8% |
| (2 192) | (1 933) | 13% | (596) | (553) | 8% |
| 37.6% | 29.6% | 7.9 p.p. | 37.4% | 33.3% | 4.1 p.p. |
| 30.8% | 29.5% | 1.2 p.p. | 30.7% | 29.9% | 0.8 p.p. |
| 2024 2023 |
(*) without extraordinary income or cost
| Employment (FTEs) |
31.12.2024 | 31.12.2023 | y/y | 30.09.2024 | q/q |
|---|---|---|---|---|---|
| Bank Millennium S.A. | 6 450 | 6 460 | 0% | 6 434 | 0% |
| Subsidiaries | 264 | 287 | -8% | 262 | 1% |
| Total Bank Millennium Group | 6 714 | 6 747 | 0% | 6 696 | 0% |
| Total BM Group (active* FTEs) | 6 355 | 6 320 | 1% | 6 338 | 0% |
(*) active FTEs denote employees not on long-term leaves
| Net profit (PLNmn) |
2024 | 2023 | y/y | 4Q24 | 3Q24 | q/q |
|---|---|---|---|---|---|---|
| Operating income | 5 996 | 6 723 | -11% | 1 595 | 1 660 | -4% |
| Operating costs | (2 253) | (1 993) | 13% | (596) | (553) | 8% |
| Impairment provisions and other cost of risk* |
(319) | (299) | 6% | (5) | (123) | -96% |
| Other modifications** | (138) | (52) | 165% | (61) | (35) | 75% |
| FX legal risk related provision | (2 179) | (3 065) | -29% | (523) | (533) | -2% |
| Banking tax | (232) | 0 | - | (99) | (99) | - |
| Pre-tax profit | 875 | 1 312 | -33% | 311 | 317 | -2% |
| Income tax | (156) | (737) | - | (139) | (127) | - |
| Net profit – reported | 719 | 576 | 25% | 173 | 190 | -9% |
| Net profit – adjusted*** | 3 202 | 2 993 | 7% | 904 | 796 | 14% |
(*) Impairment provisions for financial and non-financial assets including also fair value adjustment of credit portfolio (PLN0.7mn in 2024 and PLN-1.0mn in 2023) and loans modification effect not related to amicable settlements with FX mortgage borrowers (PLN-44.1mn in 2024 and PLN-36.0mn in 2023)
(**) The value of modification booked in given period resulting from amicable settlements with FX mortgage borrowers and referring to a specific group of such agreements.
(***) Without extraordinary items, i.e. impact of credit holidays (initial provision of PLN-201mn in 2Q24 and a release of PLN44m in 3Q24 and PLN45m in 4Q24), financial impact of insurance transaction (total pre-tax income of PLN652mn in 2023) and FX mortgage loan related costs/incomes (in legal risk provisions, FX position, operating cost and other operating income/cost including indemnity from Societe Generale as well as tax effects) and hypothetical banking tax until the end of May 2024
| Loans and advances to clients (PLNmn) |
31.12.2024 31.12.2023 | y/y 30.09.2024 | q/q | ||
|---|---|---|---|---|---|
| Loans to households | 56 935 | 56 386 | 1% | 57 594 | -1% |
| - PLN mortgage loans |
37 321 | 36 356 | 3% | 37 548 | -1% |
| - FX mortgage loans |
1 314 | 2 989 | -56% | 1 849 | -29% |
| - of which Bank Millennium loans |
1 127 | 2 651 | -57% | 1 630 | -31% |
| - of which ex-Euro Bank loans |
187 | 338 | -45% | 219 | -15% |
| - consumer loans |
18 301 | 17 040 | 7% | 18 196 | 1% |
| Loans to companies and public sector | 18 046 | 17 257 | 5% | 17 948 | 1% |
| - leasing |
6 948 | 6 599 | 5% | 6 854 | 1% |
| - other loans to companies and factoring |
11 098 | 10 658 | 4% | 11 094 | 0% |
| Net loans & advances to clients | 74 981 | 73 643 | 2% | 75 542 | -1% |
| Net loans and advances to clients excluding FX mortgage loans |
73 667 | 70 654 | 4% | 73 693 | 0% |
| Impairment write-offs | 2 514 | 2 518 | 0% | 2 607 | -4% |
| Gross* loans and advances to clients | 77 496 | 76 161 | 2% | 78 150 | -1% |
(*) Including, besides provisions for credit risk, also fair value adjustment of loan portfolio presented in fair value as well as modification. Gross loan portfolio in this case presents value of loans and advances before mentioned provisions and adjustments but after allocating legal risk provisions related to FX mortgage loans.
| Customer deposits (PLN million) |
31.12.2024 | 31.12.2023 | y/y 30.09.2024 | q/q | |
|---|---|---|---|---|---|
| Deposits of individuals | 87 567 | 76 600 | 14% | 84 530 | 4% |
| Deposits of companies and public sector |
29 690 | 30 647 | -3% | 29 451 | 1% |
| Total deposits | 117 257 | 107 246 | 9% | 113 981 | 3% |
LIQUIDITY, ASSET QUALITY AND SOLVENCY
The liquidity position of Bank Millennium Group remained very strong during 2024. LCR ratio reached the level of 371% at the of December 2024, well above the supervisory minimum of 100%. Loan-todeposit ratio remained at secure level of 64% and the share of liquid debt securities (mainly bonds issued by the sovereigns, European Union, multilateral development banks and NBP bills) in the Group's total assets remains significant at 39%.
At the end of December 2024 the share of impaired loans (including stage 3 portfolio and the defaulted portfolio of Purchased or Originated Credit Impaired assets – POCI) in total loan portfolio reached the level of 4.45%. This means a drop of 13bp from the level of 4.58% at the end of 2023, which was achieved largely due to the sales of NPL portfolios and Group's write-offs policy. Share of loans pastdue more than 90 days in total portfolio increased from 2.12% in December 2023 to 2.19% in December 2024.
Coverage ratio of impaired loans, defined as relation of total risk provisions to the volume of stage 3 loans and POCI assets in default, has slightly increased from 72.21% in December 2023 to 72.89% at the end of 2024. The ratio improved despite the reduction by PLN254mn of 100% covered loans (writeoffs) and by PLN286mn of highly covered loans (sales) in 2024. Coverage by total provisions of loans past-due more than 90 days decreased from 156% year ago to 148% at the end of December 2024.
Group loans quality indicators 31.12.2024 31.12.2023 Total impaired loans (PLN million) 3 450 3 488 Total provisions (PLN million) 2 514 2 518 Impaired over total loans ratio (%) 4.45% 4.58% Loans past-due over 90 days /total loans (%) 2.19% 2.12% Total provisions/impaired loans (%) 72.89% 72.21% Total provisions/loans past-due (>90d) (%) 147.91% 155.68%
The evolution of main indicators of the Group's loan portfolio quality is presented below:
(*) Purchase Price Allocation (PPA) implied consolidation of Euro Bank impaired (stage 3) portfolio at net value
Impaired loans ratio for retail clients decreased from 4.79% to 4.40% (including drop in other retail of 1.39pp and drop in mortgage portfolio of 0.09pp) and at the same time increased in the corporate portfolio from 3.77% to 4.65% (growth in leasing portfolio of 0.30pp and growth in other corporate portfolio of 1.31pp). The value of foreign currency mortgage loans (deducted by allocated provisions) decreased as much by approx. 56.3% year-to-date (in PLN terms) as a result of amortization of this portfolio as well as due to increase of provisions created for legal risk. Additionally, it should be noted that ex-Euro Bank mortgage portfolio, in amount of approx. PLN697mn, enjoys a guarantee and indemnity from Société Genéralé. Excluding this portfolio, the share of FX mortgage loans in the total loan portfolio decreases from 3.7% to 1.5%. The improvement in the currency structure of the mortgage loan portfolio was supported by a significant increase in sales of new loans in PLN.
| Portfolio quality by products: | Loans past-due > 90 days ratio |
Impaired loans Ratio |
||
|---|---|---|---|---|
| 31.12.2024 | 31.12.2023 | 31.12.2024 | 31.12.2023 | |
| Mortgage | 0.95% | 1.00% | 2.29% | 2.37% |
| Other retail* | 4.65% | 5.38% | 8.16% | 9.55% |
| Total retail clients* | 2.28% | 2.48% | 4.40% | 4.79% |
| Leasing | 1.11% | 1.02% | 4.86% | 4.56% |
| Other loans to companies | 2.43% | 0.58% | 4.50% | 3.19% |
| Total companies | 1.85% | 0.77% | 4.65% | 3.77% |
| Total loan portfolio | 2.19% | 2.12% | 4.45% | 4.58% |
The evolution of the Group's loan portfolio quality by main products groups:
(*) incl. Microbusiness, annual turnover below PLN 5 million
In 4Q24, capital ratios of the Group marginally decreased compared to the 3Q24: TCR by 34 bps to 17.59% and T1/CET1 by 17 bps to 15.13%. This was a result of decrease of own funds by 2.1%. This drop was caused mainly by amortization of subordinated debt in Tier2 capital and an increase in the valuation of cash flow hedging instruments recognized in revaluation reserve, which has a negative impact on own funds. At the same time, own funds requirements and risk-weighted assets decreased by 0.2%.
| Main capital and liquidity indicators * | 31.12.2024 | 30.09.2024 | 31.12.2023 |
|---|---|---|---|
| (PLNmn) | |||
| Risk-weighted assets (RWA) for Group | 44 111.49 | 44 208.00 | 41 354.52 |
| Risk-weighted assets (RWA) for Bank | 39 926.96 | 40 529.86 | 37 960.43 |
| Own funds requirements for Group | 3 528.92 | 3 536.64 | 3 308.36 |
| Own funds requirements for Bank | 3 194.16 | 3 242.39 | 3 036.83 |
| Own Funds for Group | 7 761.23 | 7 928.84 | 7 470.63 |
| Own Funds for Bank | 7 338.76 | 7 520.55 | 7 228.30 |
| Total Capital Ratio (TCR) for Group | 17.59% | 17.94% | 18.06% |
| Total Capital Ratio (TCR) for Bank | 18.38% | 18.56% | 19.04% |
| Tier 1 ratio for Group | 15.13% | 15.30% | 14.73% |
| Tier 1 ratio for Bank | 15.66% | 15.68% | 15.40% |
| Common Equity Tier 1 (=T1) ratio for Group |
15.13% | 15.30% | 14.73% |
| Common Equity Tier 1 (=T1) ratio for Bank |
15.66% | 15.68% | 15.40% |
| Liquidity Coverage Ratio (LCR) for Group |
371% | 365% | 327% |
Main capital adequacy and liquidity ratios:
(*) Capital ratios are calculated according to transitional arrangements mitigating the impact of IFRS9 implementation on CET 1 capital.
Minimum required level of capital include:
- Pillar II RRE FX buffer KNF recommendation to maintain additional own funds for the coverage of additional capital requirements to secure the risk resulting from FX mortgage loans granted to households, in line with art. 138.1.2a of Banking Act. A value of that buffer is defined for banks by KNF every year as a result of Supervisory review and Evaluation process (SREP) and relates to risk that is in KNF's opinion - inadequately covered by minimum own funds requirements, set in CRR art. 92. At the end of 2024, the buffer was set by KNF in recommendations issued in the end of 2023 at the level of 1.47pp (Bank) and 1.46pp (Group) as for Total Capital Ratio (TCR), which corresponds to capital requirements over Tier 1 ratio of 1.10pp in Bank in Group, and which corresponds to capital requirements over CET 1 ratio of 0.82pp in Bank and Group. On January 23, 2025 the Bank received a decision from the regulator on a withdrawal of P2R buffer on solo basis and expects a similar decision with regards to the P2R buffer on consolidated basis.
- Combined buffer defined in Act on macroprudential supervision over the financial system and crisis management – that consists of:
- Capital conservation buffer at the level of 2.5%.
- Other systemically important institution buffer (OSII) at the level of 0.25%, and the value is set by KNF every year.
- Systemic risk buffer at the level of 0% from March 2020.
- Countercyclical buffer at the 0% level.