Ratings of mBank and mBank Hipoteczny

mBank's ratings

mBank signed rating agreements with Fitch Ratings (Fitch) and Standard & Poor’s Ratings Services (S&P’s). Ratings assigned by these agencies are presented in the table below.

On May 19, 2015, Fitch Ratings downgraded mBank's long-term IDR (Issuer Default Rating) from "A" to "BBB-" as a result of the downgrade of Commerzbank's IDR from "A+" to "BBB". Consequently, mBank's short-term rating was changed from "F1" to "F3”. The support rating was cut from “1” to “2”. Similarly, ratings of unsecured debt were reduced to “BBB-” for long-term senior unsecured debt and “F3” for shortterm senior unsecured debt.

Fitch’s decision to cut Commerzbank’s and, consequently, mBank’s rating was triggered by the agency’s assessment of the effects of implementation of the Bank Recovery and Resolution Directive (BRRD) which dramatically reduced the scope of potential state aid provided to banks.

Before the downgrade in May 2015, Commerzbank's long-term IDR was higher than the bank’s viability rating as it could potentially receive help from the German government. Following a verification of the support rating arising from the implementation of the BRRD, Commerzbank's long-term rating was cut to the level of the entity’s viability rating. This, in turn, was reflected in Fitch’s verification of Commerzbank's ability to provide mBank with potential support.

mBank's viability rating assessing mBank's creditworthiness based on factors such as business profile, management and strategy, risk profile, financial results and external environment had not changed and remained at "bbb-".

On June 9, 2015 Standard & Poor’s Ratings Services (S&P) downgraded mBank's long-term counterparty credit rating from “BBB+” to “BBB” following the downgrade of Commerzbank's rating from “A-” to “BBB+”. As a consequence, the rating of bonds issued by mFinance France under the Euro Medium Term Note Programme was cut to “BBB”. mBank’s short-term rating remained unchanged at “A2”.

The reduction of Commerzbank’s long-term rating and the resulting downgrade of mBank’s rating by S&P were driven by a verification of the probability of German state support for Commerzbank (due to BRRD implementation) and the consideration of the criteria determining the additional loss-absorbing capacity (ALAC).

On February 3, 2016, S&P changed the outlook on mBank’s rating from stable to negative following the change of Polish Banking Industry Risk from stable to negative. S&P’s negative view of the industry risk trend reflects the opinion that the banking sector’s ability to absorb losses and to withstand shocks could weaken over the next two years. According to S&P’s operating conditions for Polish banks remain difficult as a new bank levy, increased regulatory costs, and costs related to potential foreign-currency loan conversions will put further pressure on the sector's profitability in the low interest rate environment.

Apart from the ratings assigned by Fitch and S&P, mBank was also rated by Moody’s Investors Service as a non-participant in the rating process based on information available in the public domain.

On May 21, 2015, Moody’s upgraded the long-term deposit rating of mBank from “Baa3” to “Baa2”, and the short-term rating from “Prime-3” to “Prime-2”. The upgrade of the long-term rating of the Bank resulted from the application of an advanced LGF analysis (Loss Given Failure). The application of the LGF analysis compensated the effects of downgrading the assessment of government support, resulting from the implementation of the regulations on recovery and resolution of credit institutions.

In May 2015, Moody’s introduced a new assessment for banks – the Counterparty Risk Assessment (CR). CR shows how liabilities to counterparties will be treated if a bank is in default. mBank was given Baa1 (cr)/ P-2 (cr).

Ratings of mBank Hipoteczny S.A.

As at December 31, 2015, mBank Hipoteczny was assigned the following Fitch ratings:

Fitch’s assessment of mBank of May 19, 2015 also covered mBank Hipoteczny. mBank Hipoteczny’s longterm rating was downgraded from “A” to “BBB-”, the short-term rating from “F1” to “F3”, and the support rating from “1” to “2”. The rating of mBank Hipoteczny corresponds to the rating of mBank, which proves the meaning of this subsidiary to mBank.

On January 7, 2016, following the entry into force of the amended Act on Covered Bonds and Mortgage Banks as of 2016, the mortgage bonds issued by mBank Hipoteczny were put on Fitch’s watch list with a positive outlook (watch positive rating).

Ratings of Poland, mBank and Commerzbank – comparison

The table below compares the long-term ratings of Poland, mBank and Commerzbank as of December 31, 2015.

Investor Relations at mBank

mBank pays close attention to ensuring effective communication with its investors and analysts. Investment relations are part of the responsibilities of the Investor Relations and Group Strategy Department which, through cooperation with the Management Board and a number of units across the Bank, ensures that stakeholders receive correct and complete information about mBank Group.

In 2015, investors and stock market analysts participated in four conferences on mBank performance, both in person and via the Internet. All the meetings with the Management Board accompanying the announcement of quarterly financial figures were broadcast on the Internet in Polish and English and made available on the Bank’s website. In addition, after the publication of the Group's quarterly results, institutional investors were invited to participate in individual and group meetings with the President of the Management Board to discuss issues related to the Group and its results.

Relations with analysts, shareholders and potential investors are also strengthened through meetings at conferences held in Poland and abroad. In 2015, mBank participated in three conferences in Warsaw, six conferences held abroad and organised three meetings with representatives of the Management Board for institutional investors. Moreover, the Bank organised two roadshows in the United States. There were about 140 meetings for investors and analysts with representatives of the Management Board and/or the Investment Relations team throughout the year.

Like every year, in 2015 two sessions were organised as part of regular meetings with the Bank’s rating agencies and a number of video conferences with the rating agencies were held.

Analysts and investors of mBank are kept informed about important events related to mBank Group via monthly newsletters and e-mails.

The website of the Bank’s investor relations (http://www.mbank.pl/relacje-inwestorskie/) was designed with Polish and English speaking investors and analysts in mind. It offers up-to-date and thematically grouped information on mBank Group’s financial results, shareholding structure, Annual General Meetings, ratings and performance of mBank shares on the WSE. It also includes current and periodic reports and details on consensus estimates for the Group. A dedicated interactive business intelligence application called mBank Analyzer offers a quick and easy insight into mBank Group’s financial results and business data.

Research analysts’ recommendations

mBank Group and its performance are monitored by analysts representing various financial institutions, banks and brokers. mBank is on the watch lists of several domestic and foreign banks whose analysts issue their recommendations for mBank shares. These include the following: Citi Research (DM Banku Handlowego), Deutsche Bank, Goldman Sachs International, Haitong Securities, Millennium DM, BoA Merrill Lynch, Raiffeisen Centrobank, ING Securities, Wood & Company, J.P. Morgan, DM PKO BP, Pekao Investment Banking, DM BZ WBK, Ipopema Securities, Trigon DM, Erste Securities Polska, DM BOŚ, DM Banku BPS and Vestor DM.

As at December 31, 2015, the structure of recommendations for mBank’s shares was as follows:

The current consensus of expected results of mBank Group for 2016-2017 is available at mBank’s website: http://www.mbank.pl/relacje-inwestorskie/akcje-mbank/konsensus.html.

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