Retail banking

• Increase of core income by 4.7% year on year.
• First position in the ranking thanks to the 11.4% market share of mBank Brokerage Bureau in the market of brokerage services for retail clients.
• Sales of mortgage loans at the level of almost PLN 9.0 billion, higher by 9.9% compared to the previous year. Sales of non-mortgage loans, at the level of PLN 7.1 billion, was lower by -30.9% compared to the previous year due to smaller demand and restrictions imposed by the bank during the COVID-19 pandemic.
• Increase in the number of active users of mobile application by 20.0%, up to 2,274.3 thousand.
• Increase of retail deposits by 26.2% in 2020, mainly driven by growing current accounts and savings (+40.0% year on year).
• Increase of the value of transactions carried out with mBank’s payment cards by 6.3%; slight decrease in the number of card transactions by -0.6% year on year, partly caused by smaller frequency of shopping during pandemic.
• Supporting individual clients and micro-enterprises during the pandemic by offering to postpone loan installments as the first bank on the market.
• Further development of digital banking: remote mortgage, the possibility of setting up an account via „selfie” and supporting companies in e-transformation.

Challenges experienced in unsecured lending in 2020 directed our efforts towards faster development of digital services. As the pandemic changed our clients’ behaviour, we needed to align our offer and processes with their new needs. We were the first bank in the sector to offer support tools to clients whose financial standing suffered in the pandemic, attracting strong customer interest and eventually supporting approx. 100 thousand clients.

Never before were digital communication channels as important as during the pandemic. Despite the difficult environment, we continued to optimise digital processes with a focus on “digital first”. We modified unsecured lending processes. More borrowers than ever before can provide all documents necessary for a credit decision with convenience and security via electronic channels. More and more customers take cash loans in the mobile application. Sales via the mobile app accounted for nearly 20.0% of the total volume in 2020 v. 12.6% in 2019. As measured by the number of loans, the figures are even higher due to a lower average loan amount in the app.

Thanks to AIS (Account Information Service), the PSD2 process provides a new way of confirming borrowers’ income level in the lending process. Clients can easily log in their bank and automatically forward the account history to mBank in order to confirm their income level in the credit rating process.

We have optimised e-commerce loan sales in 2020. We have improved the e-commerce lending process on the online platform Allegro so clients get the credit decision without delay.

Customer demand for unsecured loans dropped in 2020. However, thanks to technological innovation, our market share remained stable throughout the year. New sales of non-mortgage loans to retail clients in Poland stood at PLN 3.9 billion in 2020 v. PLN 6.8 billion in 2019, down -42.7% year on year.

Sales of mortgage loans grew very dynamically in Q1 2020. However, the growth rate was curbed by the pandemic as the lending policy tightened and customers’ behaviour changed. We actively addressed the new conditions and sales bounced back to the 2019 level in Q3. With total sales of more than PLN 6 billion, we maintained our market share in this product category.

Due to the pandemic, we focused in H1 on enabling remote submission and processing of mortgage loan applications. Safety and convenience of clients and employees were our top priority. We optimised processes throughout the year to accelerate credit decision-making. The waiting time for credit decisions was cut by 20% year on year.

We continued to reduce the average LTV of the new portfolio, resulting in better financial safety of borrowers as well as more resilient loan portfolio for the bank. Average margins increased while client activity and product saturation remained strong. The share of clients classified ad Intensive and Active increased. The classification criteria include: transfer of income above a certain threshold; holding a non-mortgage loan or a term deposit; at least 15 payment transactions per month.

The NPL ratio of the mortgage loan portfolio for individuals in Poland dropped year on year and stood at 2.1% at the end of 2020, compared with 2.0% a year before.

The graph below presents the structure of the Retail Banking loan portfolio in Poland (including mBank Hipoteczny) at the end of 2020:

Despite three interest rate cuts imposed by the Monetary Policy Council (RPP) in H1 2020, the volume of the bank’s retail deposits substantially increased. Balances in current accounts and savings accounts grew rapidly, while the share of term deposits dropped. Those developments were driven by three key factors. First, clients deposited cash received under support schemes mitigating the adverse impact of COVID-19. Second, customers tended to save more and spend less on consumption and investments due to the uncertain economic conditions during the pandemic. Third, mobility restrictions were imposed during the pandemic, in particular, most countries closed their borders.

We modified our deposit offer and communication strategies depending on market developments. The key products we promoted in 2020 included regular savings with savings goals, term deposits for new clients opening accounts, as well as deposits combined with investment funds.

The volume of retail deposits in Poland stood at PLN 84,402.2 million at the end of 2020 compared to PLN 66,837.9 million as at the end of 2019 (+26.3% year on year). The strongest growth was observed in current accounts: for individual clients their value increased by 58.1% year on year, and for micro-enterprises even by 60.9% year on year. Savings accounts grew at a less dynamic pace, 25.4% for individual clients and 39.7% for micro-enterprises. They were accompanied by a decline in the balance on term deposits, respectively by -32.4% and -12.1% for the above-mentioned categories.

In 2020, clients’ assets invested in mutual funds fluctuated dynamically. Clients turned away from investment products early in the year but investments bounced back later. The net balance of fund investments and redemptions was positive in 2020.

Sales of investment products were driven by interest rate cuts which caused interest on savings products to drop. We helped clients to convert savings into fund investments. On August 1, 2020, we launched the Deposits & Funds campaign, which offered interest rates superior to standard deposits provided that clients invested some of their assets in funds.

We took a number of steps in 2020 to improve customer experience with the Investment Fund Supermarket service. Key enhancements included the availability of the Investment Fund Supermarket in the bank’s mobile application. We added new features to the transactional system and improved customer security. The list of funds offered to each client depends on the results of their MiFID survey.

In H1 2020, we launched the process of opening personal accounts with a selfie in the mobile application. Customers who are of age can open accounts remotely without ever visiting the bank’s branch or having their identity verified by a courier. mBank launched a new method of concluding personal account agreements where a mobile advisor visits customers at home. This came as a response to restrictions caused by COVID-19 and dwindling customer traffic in shopping malls and city centres.

In 2020, we encouraged our clients to use smartphones rather than payment cards. All mobile payments supported by our cards require no PIN to be entered on a terminal when shopping. Mastercard Mobile is a special card which does not exist as an actual plastic card. Clients can order the card for their accounts and add it instantly in Google Pay, Apple Pay, Garmin Pay and Fitbit Pay. The cards are active immediately when ordered. The card is green: we have issued more than 10 thousand cards, which means over 50 kg of plastic less in the environment!

We refreshed our card eKarta in 2020. It is an attractive solution for clients who pay online and want to stay secure. The eKarta is a separate purse which customers can use to pay online without disclosing the details of their main card. Customers decide when to prepay the eKarta and how much, while their remaining cash balances remain safe. In 2020, we additionally offered a virtual eKarta (eKarta Wirtualna). It does not exist as a plastic card and all payment details are available in the mobile application. We issued nearly 38,000 virtual cards since April 2020, saving nearly 190 kg of plastic. Customers can pay with the eKarta in one of two foreign currencies, either EUR or USD (chosen when applying for the card), without being charged a currency exchange fee.

Other mBank cards can also be used to pay online with more convenience. We protected clients from delays in the delivery of cards during the pandemic. The card number and all other necessary details are available in the mobile application. The functionality is offered for all debit, credit, and corporate cards. For the sake of security, in order to pay with a card online, clients are required to activate the card when they receive the plastic.

In June 2020, we offered a Mastercard card of the Pol’and’Rock limited edition designed by Jurek Owsiak (founder and president of the Great Orchestra of Christmas Charity Foundation, WOŚP). In December, we offered a limited series Mastercard card on the occasion of the 29^th Finale of WOŚP with a layout also designed by Jurek Owsiak.

In March, we increased the no-PIN touchless transaction limit to PLN 100. As a result, our clients do not have to touch terminals very often, protecting their health during the pandemic. In November, in co-operation with Google, we enabled Google Pay transactions in all amounts without PIN. Security is protected by smartphones which customers use to confirm payments.

In the summer holiday time, we launched the card package “Live Globally” featuring preferential currency conversion fees as well as free-of-charge cash withdrawals from ATMs abroad. For the convenience of clients who pay with cards abroad, we offered the option of blocking DCC transactions in the mobile app, where currency conversion required by the merchant could be costly to the client. Clients can also block surcharge fees added in ATMs on top of the withdrawal amount. The “Live Globally” package includes a multi-currency service, free-of-charge cash withdrawals from ATMs abroad, and a 15% discount on travel insurance. The multi-currency service was modified in April 2020. Ever since, clients are not required to hold currency accounts to pay in foreign currencies at attractive exchange rates and low currency conversion fees: they simply pay with a card and the bank converts the currency at an attractive rate. However, clients can still plug the card into a foreign currency account and pay directly in the transaction currency without being charged a currency conversion fee.

In 2020, we implemented fast delivery of cards to clients. We ship the card on the day following the client’s order. As a result, clients receive cards two to four days faster than before. Clients can activate renewed or duplicate cards with a PIN-enabled transaction, which offers greater convenience.

In 2020, we completed the migration of all our cards to the PSD2 requirements. For greater security, clients are requested more often to confirm transactions with a PIN, including payments under PLN 100.

In 2020, the value of payment card transactions made by mBank’s retail clients in Poland amounted to PLN 49.5 billion, which represents a rise by 6.3% year on year. The number of transactions made by mBank clients dropped slightly by -0.6% year on year. The market share of transactions with mBank’s cards was stable at 12.1% as at the end of September 2020 (last available data, cumulative).

mBank initiated the implementation of added value services provided on the mDeals platform which support the lifestyle and transactionality of our clients. In 2020, in partnership with The Heart, we offered pilot subscriptions to selected customer groups with partners including Allegro Smart, Empik, Audioteka, Lecton and Publico.

In Q4 2020, we launched initiation of eAdministration payments via KIR SA with an innovative PSD2 API solution. In 2021, following integration with National Node and Trusted Profile, our clients will be offered online services from the public administration, gaining access to a broad range of public services, such as remote applications for ID cards, car registration, and copies of marital status certificates.

In 2020, we continued the acquisition of affluent clients on the market and the conversion of affluent clients in our client base. We further developed and improved the Intensive Package with the mKonto Intensive account at its core. We communicated the Package to clients in three areas. First, in everyday banking, we offer free-of-charge bank accounts if the client’s account is credited with PLN 7 thousand per month or the balance of the client’s assets is at least PLN 100 thousand. Clients who meet those criteria get free-of-charge main cards for the account, free-of-charge cash withdrawals at ATMs around the world, and three free-of-charge express transfers each month. Second, in the area of financial needs, we offered promotions including mortgage loans at reduced commissions and margins as well as discounts on a health and life insurance package. We offered promotional terms of the eKonto Junior account for children. Clients were offered cash loans at reduced fees as well as promotional deposits combined with funds. Similar to 2019, we offered the multi-currency card Visa World Intensive and the credit card World Mastercard Intensive. Both cards feature currency conversion without a fee so clients avoid extra costs when paying in foreign currencies both online and in stores abroad. Our clients get priority mLine service and the support of a personal expert at a branch. Clients can contact them directly in the mobile application. During the pandemic, advisors reached out to the clients to offer support in everyday banking and financial management, including remote banking from home. In 2020, we delivered a series of investment webinars for our clients. Nearly 1,800 participants joined six online meetings.

The Brokerage Bureau of mBank provides a full range of brokerage services to individuals and private banking clients. We are one of the pioneers of private banking in Poland – in 2020 we celebrated twenty-fifth anniversary of our activity. Working with the affluent clients, we combine modernity with experience and professionalism. Our bureau also serves the largest Polish institutional investors (including pension funds, investment funds, and asset management companies) and foreign funds. The Brokerage Bureau enables clients to trade in regulated markets in Poland and abroad as well as in the OTC (CFD) market. Wealth management clients can use investment advisory services and asset portfolio management services. The Bureau is an active player in the equity market, preparing and conducting public and private offerings (IPO/SPO/ABB).

In 2020, in particular in its second half, investors’ activity on the Warsaw Stock Exchange (WSE) increased significantly compared with the previous years. The stock market (the main market) alone witnessed a 55% year-on-year increase in activity. A large part of the increase was attributable to retail clients. Their share in trading on the WSE in 2020 is estimated at around 25%. The Brokerage Bureau of mBank is the leader in the market of brokerage services for retail clients. In 2020, the Bureau’s clients accounted for 11.4% of all transactions in stocks on the main market of the WSE, which secured it the first spot. The Bureau’s turnover related to equity trading on the main market of the WSE stood at PLN 33.4 billion (up by 176% year on year). This gives mBank the fifth spot in terms of total turnover (with a share of 5.6%, up from the 15th to the 5th position). The Bureau’s share in equity trading on the client’s account on the main market and on New Connect stood at 8.4% (PLN 39.3 billion, fourth rank). The amount of commissions in the retail segment increased by 350% in 2020 compared with the previous year. Since the beginning of 2020, we have observed a growing interest of our clients, especially new ones, in investing in foreign markets. The number of brokerage accounts of the mBank Brokerage Bureau’s clients amounted to ca. 370,000 at the end of 2020. The Bureau opened ca. 47,700 new investment accounts in the discussed period (excluding brokerage pension accounts), which was the best result on the Polish market.

The period of increased market volatility in H1 2020 translated into a substantial outflow of assets from investment solutions on the Polish market. H2 2020 brought a radical improvement of the market environment, resulting in a sharp increase in managed assets. Due to better performance of stock markets outside Poland and relatively good rates of return achieved by many foreign segments of the debt market, we benefited from the shift in investment structure made in the previous years towards global, diversified, and transparent solutions.

In 2020, the Monetary Policy Council reduced the reference interest rate in Poland to 0.1%. Within a relatively short time, this led to a significant drop in the deposit rates offered by Polish banks to all client groups. According to Wealth Management’s observations, this change resulted in greater interest in asset management as a form of savings allocation.

In 2020, Wealth Management actively promoted thematic strategies launched in late 2019: Megatrends and the Sustainable ESG Strategy. These efforts paid off, with assets managed under both strategies amounting to approximately PLN 200 million and PLN 110 million, respectively. At the end of 2020, ESG Strategy assets accounted for 45% of assets in investment strategies with a comparable investment risk level. The increase in assets was accompanied by competitive investment results. Total assets managed as part of the asset management service grew by about 95% in 2020, while the value of assets managed by white-label investment funds rose by approx. 40%.

In 2020, Wealth Management continued to develop its offering of thematic strategies. In H2, we successfully introduced the Anti-Inflationary Strategy. Over the last few months, its assets reached approx. 5% of the total value of assets managed as part of the asset management service. We intend to continue these activities in 2021. Our plans also envisage the implementation of the ESG investing rules as part of other strategies, apart from the existing Sustainable ESG Strategy. Additionally, in H1 2021 we plan to significantly broaden our offering of subfunds dedicated to mBank’s retail clients as part of the umbrella fund mFundusze Dobrze Lokujące SFIO. New solutions for this client group will include an ESG strategy.

The first half of the previous year was characterised by very low transactional activity and enormous volatility. It was caused by the impact of the COVID-19 pandemic on global economies and behaviour of market players. The second half of the year brought a major revival in equity transactions, including IPO, SPO, and ABB. The Brokerage Bureau of mBank carried out four such transactions in 2020, including: the SPO of CCC (PLN 507 million) as a joint bookrunner, SPO of Mo-BRUK (PLN 281 million) as a global co-coordinator and a joint bookrunner, IPO of Answear.com (PLN 81 million) as a global co-coordinator and a joint bookrunner, and ABB of Scope Fluidics (PLN 21 million) as a global coordinator and a sole bookrunner). In addition, the Bureau carried out one squeeze-out, five share buybacks (including Elemental Holding (PLN 15 million), Erbud (PLN 17 million), Neuca (PLN 18 million), Seco Warwick (PLN 15 million)), and three tender offers for shares of WSE-listed companies (including Elemental Holding (PLN 12 million)). The Bureau is also an intermediary in two tender offers which will end in 2021.

In December 2020, the Management Board of mBank S.A. decided to establish mBank’s own investment fund company – mTFI. The decision was motivated by the growing scale of investment activity at mBank and prospects for further growth of assets under management in a low interest rate environment. At the end of 2020, the Brokerage Bureau of mBank managed assets worth PLN 1.6 billion as part of white-label investment solutions. Thanks to its own investment fund company, mBank will also be able to react more quickly to the changing environment, in particular with regard to the product offering in terms of thematic investment strategies (including ESG) and retirement solutions.

In 2020, mBank continued to cooperate with its strategic insurance partner AXA in the area of bancassurance. The partnership covers selling insurance products to mBank clients and focuses particularly on the standalone product segment, including motor, travel, home, and life insurance as well as the segment of products linked to banking products, e.g. loans.

The bank developed its insurance offer to meet the expectations of customers who intensively use remote channels to satisfy their needs and contact the bank. Currently, all standalone insurances are available in every access channel and all can be purchased in the mBank mobile application. More and more customers are using this option – in 2020 34% of standalone insurance was purchased through the application (an increase by 10 pp).

Due to the COVID-19 pandemic, business owners needed our special support in 2020.

We actively participated in government schemes mitigating the adverse impact of the pandemic. Our clients applied for PFR subsidies via the mBank transactional service, as described in detail in chapter Activities for clients. We reached out with scheme communications to all businesses possible. As a result, nearly 20% of all businesses which received PFR subsidies were mBank clients. More than 37 thousand clients filed applications via mBank. Subsidies in a total amount of PLN 3.3 billion were credited to accounts with mBank. Another area of key importance in securing cash for businesses was financing secured with BGK de minimis and COSME guarantees. Under the umbrella of support schemes, we offered online credit holidays. We also offered overdraft facilities with interest subsidies at 2 pps provided by the BGK Interest Subsidy Fund. Our clients could submit financial documentation fully online. In response to the government’s decision to offer social security contribution holidays, we decided to charge no account fees provided that clients pay their social security contributions. More than 70 thousand clients used that option.

In addition to the facilitation of government schemes, we offered our own support to businesses. As early as March 2020, we opened a free-of-charge accounting hotline. More than 200 accountants who are our partners in the National Certified Accounting Firm Network OSCBR were available 24/7. Our accountants assisted businesses more than 6 thousand times, providing advice about the PFR Shield 1.0 as well as smaller support schemes during the pandemic. We continue the partnership under the umbrella of the PFR Shield 2.0 implemented in January 2021.

The number of OSCBR accounting firms increased by 10% in 2020 and we had 1,681 partners at the year’s end. To be certified, accountants have to complete theoretical and expert training. We expanded the scope of accounting services for businesses. Since April 2020, clients can sign an agreement to start a business and open a corporate account with mBank by visiting our accountant rather than an mBank branch, which is a state-of-the-art and comprehensive solution. The 170 accounting firms in the OSCBR network provide support to clients prior to opening a business. The accounting firms opened nearly 4,000 new mBank corporate accounts, twice as many as in 2019.We also released a number of updated accounting manuals and launched the Inbox functionality in the mOrganizer system to support the exchange of documents between businesses and accountants.

In July 2020, we established a partnership with the Polish Security Printing Works (PWPW). We were the first bank to enable fully remote opening of accounts for clients without a prior banking relationship. The process relies on e-ID cards with electronic layers embedded.

In business finance, we focused on continued process improvements in the context of E2E Digital. mBank’s business clients have access to an invoicing service, which is described in detail in the sub-section “New features of the mBank service” of chapter Innovations.

Year 2020 was definitely a good year for e-commerce. We accompany clients in their digital transition to align business operations with changing economic conditions. In early May 2020, we offered a set of tools to help business clients launch online sales. In co-operation with partners, we help clients open and operate online stores on the RedCart and Skyshop platforms for PLN 1 net for three months. We charged no fees for the Paynow payment gateway during the pandemic. We offered a Samito system which automatically supports sales and client outreach at half the regular price for three months. We offered the tool 1basket (1koszyk) at reduced transaction fees of 1.5%. The tool supports sales in the social media without operating an online store. We also offered a package of 180 free-of-charge sponsored product placements on Allegro. For more information about operating an online business with mBank tools, visit our website.

In 2020, we launched the social campaign “Digital Revolutions” (Cyfrowe rewolucje) which supports microfirms, small and mid-sized companies in e-commerce expansion. The project is described in detail in chapter Innovations.

It was our top priority in 2020 to maintain a dialogue with businesses and listen to their needs and expectations. We continued our monthly meetings with businesspeople (“OkO w OkO)” in a new remote format. We delivered educational webinars for business clients moderated by mBank experts and market specialists to address current needs.