Corporates and Financial Markets

The Corporates and Financial Markets segment serves 29,083 corporate clients including: large enterprises (K1 – annual sales exceeding PLN 1 billion), mid-sized enterprises (K2 – annual sales of PLN 50 million – PLN 1 billion) and small enterprises (K3 – annual sales below PLN 50 million, full accounting) through a network of dedicated 46 branches. mBank Group’s offer of products and services for corporate clients focuses on traditional banking products and services (including corporate accounts, domestic and international money transfers, payment cards, cash services, and liquidity management products), corporate finance products, hedging instruments, equity capital market (ECM) services, debt capital market (DCM) instruments, mergers and acquisitions (M&A), leasing and factoring. The segment comprises two areas: Corporate and Investment Banking, and Financial Markets. In line with the resolution of the Supervisory Board of mBank adopted on June 25, 2020, regarding the dismissal of Mr. Frank Bock from the post of Vice-President of the Management Board, Head of Financial Markets of mBank S.A. as of December 31, 2020, the financial markets area was subject to the reorganization within other business areas of the bank, which was completed at the end of 2020.

Key financial data of Corporates and Financial Markets (at the end of 2020):

Key business data:

The Corporate and Investment Banking segment generated a profit before tax of PLN 365.3 million in 2020, which represents a decrease by PLN 268.6 million, i.e. -42.4% year on year. Core income, comprising net interest income and net fee and commission income, grew on an annual basis. The reason for lower profit before tax was mainly higher level of net impairment losses and fair value change on loans and advances.

Despite the challenges related to the COVID-19 pandemic, 2020 was a period of dynamic changes. Due to the imposition of new safety principles and social distancing, the bank was faced with both new opportunities and challenges. During the pandemic, mBank introduced many improvements within the framework of the #bankujzdomu (#bankfromhome) initiative. The key question was how to open accounts, conclude new agreements, disburse productsor exchange documents with clients. We launched numerous projects to cope with the challenges of the new normal.

Within 13 days, we implemented a fully functional remote process for concluding agreements and exchanging documentation with clients. The process takes place via the internet banking system mBank CompanyNet and with the use of a qualified certificate. Currently, clients sign agreements and send them to the bank remotely, without the need to visit our branches. All applications, statements, documents and agreements which do not need to be made in writing to be legally valid can be signed this way. The solution is addressed to corporate clients who already use mBank’s services and have access to mBank CompanyNet, but want to extend the cooperation with the bank by renewing a loan or ordering additional cards. Until now, most of the above-mentioned activities required direct contact with a corporate advisor. The new functionality was also introduced as a means of acquiring new clients, who can enter into cooperation with the bank using a qualified signature. The new process accounts for a large share of signed documents (approx. 2,000 documents monthly at the moment).

In H1 2020, we implemented full digitalisation of the new client acquisition and onboarding process. The system was launched in early July. The new solution, which is unique on the Polish market, is based on a state-of-the-art platform enabling the sales forces to interact with the client. The platform supports the sales and formal onboarding process. It guides clients through the entire procedure connected with opening an account, activating access to online banking and ordering cards or cash services. In addition, the platform supports the Know Your Customer activities and other compliance aspects, which are necessary in the process of establishing cooperation with a client. Thanks to the system, paper versions of applications, agreements and signature specimen cards are no longer needed. Moreover, the system enables automation of the exchange of information with external sources (information integrator). Currently, the system enables the activation of four products: account, cash services, cards, and electronic banking. At further stages, we will implement new functionalities to expand the target group. Since the launch of the process, we acquired more than 1,100 corporate clients from all segments. This confirms that the process is universal. It is suitable for clients of all sizes, regardless of how complex their organisational structures may be. The fact that more than 60% of new relationships with corporate clients are entered into via digital onboarding testifies to its success.

In 2020, we did our best to maintain high acquisition of new companies. The corporate client base (K1, K2 and K3) grew by 2,607 companies to 29,083 compared with December 2019. Client acquisition grew by 9.8% year on year. This dynamic acquisition together with the state aid granted to companies as part of counteracting negative consequences of the pandemic translated into rise of the value of funds accumulated in current accounts with mBank. At the end of 2020, the value of current accounts totalled PLN 33.7 billion, up by 35.7% year on year. The high volume of current deposits is a springboard for continued development of transactional banking.

In 2020, we continued the digitalisation and paperless strategies. The virtual branch is an integral part of the mBank CompanyNet system. Clients can use this tool to submit electronic applications pertaining to the key areas of cooperation with the bank. In total, clients can use more than 40 different application forms and electronic information exchange processes. The submission of electronic applications is convenient, quick and effective, both for clients and for the bank. The virtual branch enables efficient operation and full automation of expensive processes. In 2020, clients were increasingly eager to use the self-service option.

In the discussed period, we launched the Customer Centre. mBank employees created a new client service model and centralised processes while working remotely themselves. The Customer Centre makes it possible to comprehensively handle all enquiries as part of a single, centralised unit. This enables us to avoid redirections, delays and logistic challenges. The activities of the unit include:

• supporting clients in dealing with everyday issues related to account management; for example, helping clients assign or change authorisations to manage funds in an account or change address data,
• explaining to clients how to use electronic, online, and mobile banking systems,
• answering questions regarding banking products, account balances, available funds and limits, transfers and freezes,
• dealing with cash services, handling payments and other settlement products,
• handling complaints, reported issues and suggestions concerning our services and products,
• reacting to questions and reported issues pertaining to any corporate banking products (some reports are handled by external units).

In 2020, we also implemented a solution enabling us to confirm the identity of mBank CompanyNet users remotely. Since its launch, the service has been used in up to 40% of cases. The identity confirmation process is performed fully remotely, with the use of an individual and corporate account held with mBank. The solution significantly streamlines and facilitates the cooperation with the bank; it is convenient and fully automatic.

Other important innovations and solutions addressed to our corporate clients implemented in 2020, including the anti-crisis shield of the Polish Development Fund and the payment gateway Paynow, are described in chapter Innovations and Activities for clients.

mBank actively supports its clients from the private equity/venture capital (PE/VC) sector. In June 2020, we received the PSIK 2020 award in the “Best Financing Bank” category in the competition organised by the Polish Private Equity and Venture Capital Association. The award was made in recognition of our 2019 achievements, including the financing of 16 transactions (among others, new takeovers) with the participation of PE/VC funds, and recapitalisation/refinancing transactions and credit lines for private equity funds. At mBank, we provide financing in the form of senior loans, mezzanine financing, bond issues, or structured working capital programmes. We adjust the financing structures to the clients’ needs, ensuring fully flexible products. Every year, we are also appreciated by juries of international competitions. In 2020, we won the following titles:

• #1 in Poland’s Overall Best Service Cash Management by Euromoney 2020. It is an annual survey in which clients assess the quality of services provided by their banks. The questions prepared by Euromoney were answered by financial officers in companies (CFOs, treasurers, accountants). In 2020 we came first in the Overall Best Services in Poland category. This year a record high number of bank clients took part in the survey (more than 33,000, up by 25% compared with 2019).
• World’s Best Corporate/Institutional Digital Bank in Poland by Global Finance 2020. The jury of this year’s competition organised by Global Finance named mBank the best bank in Poland in the World’s Best Corporate/Institutional Digital Bank in CEE 2020 category. The international financial magazine recognises mBank every year. In 2019 it named mBank the best bank in Poland in two categories: World’s Best Treasury & Cash Management Banks and Providers 2019 and Best Corporate Digital Bank 2019. We also won an award for the best digital bank for corporates in Central and Eastern Europe (World’s Best Corporate/Institutional Digital Banks 2019). We are proud of the awarded prizes, considering that we have won them adapting to the new, remote reality. The solutions implemented during the pandemic, incl. remote process for concluding agreements, digital exchange of documents and online onboarding of new clients have been recognized internationally.

On 25 June 2020, the Supervisory Board of mBank adopted a resolution regarding dismissal of Mr. Frank Bock from the post of Vice-President of the Management Board, Head of Financial Markets of mBank S.A. The negative economic effects caused by the COVID-19 pandemic require the banking sector to adapt its strategy and take non-standard actions. Termination of the contract with Mr. Frank Bock as of 31.12.2020 is associated with the reorganization of the financial markets area within other business areas of the bank in order to increase efficiency of organizational structure and processes, and its effect is a reduction in the number of positions on the bank’s Management Board by one. Until the end of 2020 Mr. Frank Bock has been involved in the re-organization of the area.

In 2020 the Financial Markets segment generated a profit before tax of PLN 203.0 million compared with PLN 133.4 million posted in 2019, marking an increase by PLN 69.6 million, i.e. 52.2%, year on year. Net trading income and other income recorded the biggest dynamics. The latter grew among others thanks to the sale of debt securities.

In 2020, the activities of the financial market products sales area were focused on ensuring continuous top quality service to corporate and retail clients amid the challenges posed by the COVID-19 pandemic. In early March 2020, we finalised the scheduled development activities, which included a new manner of feeding prices to transaction platforms and the digitalisation of the client onboarding process. We supported the management of digital relationships with clients. These measures helped us achieve an even higher standard of customer service. Since mid-March 2020 all the employees of the Financial Market Sales Department have been working remotely. Throughout this time, they took regular measures designed to retain clients, increase the number of transactions, and boost income from cooperation with clients, in particular:

• Increased telephone activity and cross-selling of financial market products translated into higher margins on transactions with corporate clients, which rose by 12.6% compared with last year.
• For the commodities team, 2020 was a time of active acquisition, which was reflected in the number of new clients concluding commodity transactions (39 new clients). We also recorded an increase in the number of active clients (111 vs. 87 in 2019) and in the number of concluded transactions. We would not have been able to achieve such a dynamic growth and handle so many transactions without the automation of the process of registering and confirming transactions (FM Desk). Additionally, the team broadened their experience by selling new products, increased their presence in the media (LinkedIn, TV) and implemented cyclical commodity research for the bank’s clients (EUA – auctioning of CO2 permits, metals).
• The project team participated in more than 100 projects and concluded hedging transactions in 77 projects in 2020. It increased the income on hedging transactions by 15.8% year on year, thereby achieving a record-high margin of PLN 22 million. The transactions pertained to projects related to structured finance, CRE and RES projects. It is worth noting that the margin earned on the nine RES projects financed in 2020 surged by more than 200% on 2019. Moreover, in 2020, we brought the cross-selling and bundling of derivatives into compliance with the requirements of MIFID II and the guidelines and recommendations of the Polish Financial Supervision Authority (KNF).
• Numerous acquisition measures and stronger cooperation with business lines in the Retail Client Sales Division resulted in margins going up by 23% year on year in 2020. The improved onboarding model for new clients, new margin group matrix, and increased night-time limits on the FX platform contributed to higher number of active clients using the service. The number of corporate clients went up by 8.7% year on year (to more than 28,000 clients), while the number of individual clients increased by 18% year on year (to more than 137,000 clients).

mBank’s market shares in specific financial instrument markets as of November 30, 2020, are presented below:

In the area of Financial Markets mBank cooperates with financial institutions. Banking financial institutions are served by mBank’s Financial Clients Department (DKF). In H2 2020, due to changes in the bank’s organisational structure, DKF took over the responsibilities of the Financial Institutions Department. DKF’s work focuses on, among other things, obtaining financing from other banks. We also provide the possibility to deposit surplus funds with other banks, and grant financing to banking clients.

As of December 31, 2020, mBank had seven active loans in the amount of PLN 4,271 million. In 2020, the bank paid off a USD loan of PLN 188 million before maturity. mBank’s total exposure under loans from other banks was higher by PLN 227 million compared to the end of 2019 due to the significant weakening of the zloty against the euro and Swiss franc at the end of 2020.

At the end of December 2020, mBank’s total exposure under loans granted to other banks reached the equivalent of PLN 101.6 million, down by PLN 44.1 million compared with 2019. mBank’s portfolio included short and medium-term active loans granted to Polish and foreign banks.

Thanks to very good business relations with banking clients and excellent service quality, mBank maintains its strong position as regards handling settlements in PLN.

Furthermore, in 2020, the Financial Clients Department focused its efforts on actively supporting commercial transactions concluded by Polish exporters. The support included, in particular, offering adequate short-term financing to banking financial institutions. At the same time, we continued to serve banks from the Commonwealth of Independent States and offer them medium-term loans secured with KUKE insurance policies.

We found 2020 challenging due to the COVID-19 pandemic, which forced us to change our work model. Even though face-to-face contacts and meetings now take place virtually, with clients being served via email and videoconferences, the relations with correspondent banks have not been disrupted. Our customer service standard has remained unchanged throughout the pandemic. Owing to the experience and skills gained, we can continue to strengthen our relationships with other banks.

mBank provides services including settlement of transactions in securities registered in local and foreign markets, safe-keeping of clients’ assets, maintenance of securities accounts and registers of securities in non-public trading, maintenance of asset registers of pension funds and investment funds, monitoring the valuation of their assets, and processing corporate actions. mBank’s custody clients are mainly financial institutions, in particular investment and pension funds, local and foreign financial institutions, banks offering custodian and investment services, insurance companies, asset management institutions and non-financial institutions.

In 2020, the number of served investment funds decreased by -15.7% year on year.