Strategic assumptions, concerning a product offer, the aim to strengthen or keep a market position in particular categories as well as an assessment of key trends and competitive situation, are reflected in the projections of mBank Group’s financial results. In particular, we intend to further consistently increase the share of higher yielding assets and customer deposits in the balance sheet structure, as well as maintain diversification of funding sources through issuances of Eurobonds (EMTN Programme) and covered bonds by mBank Hipoteczny.
Our strategic goal is to keep the position among top Polish banks in terms of key financial metrics. In the mid-term horizon, our profitability shall systematically improve thanks to rising revenues, decent cost discipline and prudent approach to risk management. Favourable changes in the balance sheet structure are going to translate into gradual improvement of net interest margin, while a growth of total income outpacing an inflation of costs will ensure higher efficiency. Consequently, we assume to generate a return for the shareholders that will be attractive compared to other Polish banks.
The activities of mBank Group in the coming years will be focused on achieving the following financial targets, defining our profitability, stability and growth. mBank Group financial aspirations set out under the Strategy for 2020-2023 and their completion is presented in the table below.
| Financial measure | Target point | Performance of mBank Group | Comment on achievement |
|---|---|---|---|
| Net interest margin (NIM) | increase to ~3.0% in 2023 |
2.3% in 2020 | The margin was negatively affected by interest rate cuts to the historically lowest level of 0.1% in Poland, which was not assumed in the plan. |
| Cost/Income ratio (C/I) | reduction to ~40% in 2023 |
41.1% in 2020 | The indicator is supported by the strengthening of cost discipline and the introduction of adjustment measures in response to the pandemic situation and its implications for the bank’s results. |
| Return on equity (ROE net) | improvement to ~10.5% in 2023 | reported 0.6% in 2020 (excluding the provisions for legal risk related to foreign currency loans: 6.8%) |
The decline in profitability was driven by a number of factors, the most significant of which were the increased cost of risk from the expected credit loss write-downs related to the pandemic, and the pressure on revenues as a consequence of interest rate cuts. |
| Loans/Deposits ratio | in a range of 92-94% every year | 79.8% as of end of 2020 | The huge inflow of deposits as a result of the transfer of aid funds to enterprises and the prudential limitation of expenses by households, combined with low demand for loans, translated into disproportions in the ratio of these volumes in 2020. |
| Capital ratios | year-end level minimum 1.5 p.p. above the PFSA requirements | Tier 1 ratio exceeded regulatory requirement by 5.8 pp and TCR by 6.0 pp as of end of 2020 | The significant surplus of the reported capital ratios above the requirements of the Polish Financial Supervision Authority resulted from the reduction of the systemic risk buffer for banks in Poland to 0% (from 3% previously) in March 2020. |
| Average annual growth (CAGR) of business volumes, income and costs in 2019-2023 at | ~6% for loans and deposits;
~8% for total income; ~5% for total costs |
Annual dynamics compared with 2019:
loans: 1.9%, net of FX effect |
In 2020, all assumed outcome trajectories were severely disrupted by the outbreak of the COVID-19 pandemic and measures taken to mitigate its effects. The significant variations reflect the unexpected development of volumes in the sector and the challenges to achieve planned revenues in an environment of notably lowered interest rates. |
In line with long-term strategy of mBank Group, our goal is to pay 50% of net profit as a dividend. The adopted dividend policy allows for keeping capital ratios at the safe levels.