Management Board Report

on Performance of mBank S.A. Group

in 2023

(including Management Board Report on Performance of mBank S.A.)

This document is a translation from the original Polish version. In case of any discrepancies between the Polish and English versions, the Polish version shall prevail.

Management Board Report on Performance of mBank S.A. Group in 2023

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Table of content ................................................................................................ 2

1. About mBank Group ..................................................................................... 8

1.1. Business model and history of mBank Group .................................................................................... 8

1.2. Composition of mBank Group ................................................................................................................ 11

1.3. mBank Group geographical presence ................................................................................................. 14

1.4. Information for investors ......................................................................................................................... 15

1.5. Credit ratings of mBank and mBank Hipoteczny ............................................................................ 19

1.6. ESG ratings and indices of mBank ....................................................................................................... 21

1.7. Key events and projects of mBank Group in 2023 ........................................................................ 23

1.8. Awards and distinctions ........................................................................................................................... 28

2. mBank Group’s environment ....................................................................... 31

2.1. Macroeconomic environment ................................................................................................................. 31

2.2. Market and regulatory environment ................................................................................................... 39

2.3. mBank Group’s market position of segments .................................................................................. 45

2.4. Outlook for the banking sector and mBank for 2024 ................................................................... 46

3. Strategy of mBank Group ............................................................................ 48

3.1. From an icon of mobility, to an icon of possibility - strategy for 2021-2025 ...................... 48

3.2. Vision for mBank Group, pillars of the strategy and main directions of development .... 49

3.3. ESG in the strategy of mBank Group .................................................................................................. 54

3.4. Strategic financial targets of mBank Group for 2025 ................................................................... 57

4. Financial position of mBank Group and mBank in 2023 .................................... 60

4.1. Financial position of mBank Group ...................................................................................................... 60

4.2. Changes in the consolidated statement of financial position of mBank Group ................... 68

4.3. Financial position of mBank in 2023 ................................................................................................... 73

4.4. Changes in the statement of financial position of mBank .......................................................... 78

5. mBank Group capital and funding ................................................................. 80

5.1. mBank Group capital base ...................................................................................................................... 80

5.2. mBank Group funding ............................................................................................................................... 83

6. Retail Banking Area .................................................................................... 85

6.1. Financial results .......................................................................................................................................... 86

6.2. Activity of Retail Banking Area in numbers ...................................................................................... 87

6.3. Retail Banking of mBank in Poland ...................................................................................................... 88

6.4. Retail Banking in the Czech Republic and Slovakia ....................................................................... 94

7. Corporate and Investment Banking Area ....................................................... 96

7.1. Financial results .......................................................................................................................................... 97

7.2. Activity of Corporate and Investment Banking Area in numbers ............................................. 98

7.3. Corporate and Investment Banking of mBank ................................................................................ 98

8. Activities of subsidiaries of mBank Group ..................................................... 104

8.1. Summary of financial results of mBank Group subsidiaries ..................................................... 104

8.2. Business activity of selected subsidiaries ........................................................................................ 104

9. Risk management .................................................................................... 107

9.1. Risk management foundations ............................................................................................................ 107

9.2. Main risks of mBank Group’s business ............................................................................................. 108

9.3. Capital adequacy ...................................................................................................................................... 120

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10.1. Changes in employment ........................................................................................................................ 123

10.2. Training and development activities ................................................................................................. 124

10.3. mBank Group’s incentive programme .............................................................................................. 129

10.4. Management by Objectives (MbO/OKR) .......................................................................................... 132

11. mBank and corporate social responsibility .................................................... 133

11.1. mBank Foundation ................................................................................................................................... 133

11.2. Other social-oriented activities ........................................................................................................... 134

12. Non-financial information .......................................................................... 137

12.1. Information about the statement ....................................................................................................... 137

12.2. Description of the entity’s business model ..................................................................................... 137

12.3. Structure of mBank Group .................................................................................................................... 137

12.4. Values of mBank Group ......................................................................................................................... 138

12.5. ESG management .................................................................................................................................... 139

12.6. Policies, due diligence and results of actions taken .................................................................... 140

12.7. Key risk factors and risk management ............................................................................................ 142

12.8. Governance information ........................................................................................................................ 157

12.9. EU Taxonomy disclosures ...................................................................................................................... 171

12.10.Information related to the climate and the environment ......................................................... 208

12.11.Group staff policies .................................................................................................................................. 211

12.12.Policies related to the respect for human rights .......................................................................... 214

12.13.Social impact policies .............................................................................................................................. 216

12.14.Responsible banking ............................................................................................................................... 221

12.15.Secure customer finance ....................................................................................................................... 222

13. Statement of mBank on application of corporate governance principles in 2023 224

13.1. Application of corporate governance principles at mBank ........................................................ 224

13.2. Internal control and risk management systems in the process of preparing financial statements of mBank .......................................................................................................................................... 233

13.3. Significant blocks of shares .................................................................................................................. 236

13.4. Principles of appointing and dismissing Management Board members ............................... 238

13.5. Rules for amending the company’s By-laws .................................................................................. 238

13.6. Procedures and powers of the General Meeting ........................................................................... 239

13.7. Composition, competences and procedures of the Management Board and the Supervisory Board ................................................................................................................................................ 241

13.8. Application of the Diversity Policy of mBank S.A. to the Management Board and Supervisory Board ................................................................................................................................................ 262

Glossary ....................................................................................................... 265

Statements of the Management Board .............................................................. 267

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Management Board Report on Performance of mBank S.A. Group in 2023

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■ Superior operating financial performance reflecting the strengths of mBank’s business model

□ Profit before tax of the Core Business (mBank Group excluding FX Mortgage Loans segment) at PLN 5,988.4 million

□ Net ROE of the Core Business at 40.0%

□ Net profit attributable to Owners of mBank at PLN 24.1 million, largely affected by costs of legal risk related to the foreign currency mortgage loan portfolio of PLN 4,908.2 million and banking tax of PLN 743.6 million

■ Total revenues at the highest level in history

□ Record-high total income of PLN 10,802.3 million generated by growth in both business segments,

□ High growth in net interest income to PLN 8,873.5 million, driven by interest rate hikes, active management of deposit costs and focus on the profitable client business

□ Significant net interest margin improvement to 4.2%

■ Capital ratios well above the regulatory requirements and ample liquidity levels

□ Consolidated Tier 1 ratio of 14.7% and Total Capital Ratio at 17.0%

□ Significant increase in buffers above PFSA requirements at 5.6 pps for Tier 1 and 5.9 pps for TCR,

□ Synthetic securitisation transaction for a portfolio of PLN 10.0 billion, improving year-end TCR of mBank Group by approximately 0.9 pps

□ Expiry of the individual additional capital requirement under Pillar 2 for risks related to foreign currency mortgage loans

□ MREL TREA at the level of 25.62%, MREL TEM at the level of 9.15%, above the requirements

□ Liquidity ratios of mBank Group significantly above the regulatory minima: LCR at 217% and NSFR at 157%

■ Excellent efficiency despite rising material and staff-related expenses

□ Cost to income ratio at 28.5%

□ Decrease in total overhead costs (including depreciation) by 7.4% due to lower contributions to BFG and one-off costs recorded in 2022 (contribution to the Borrower Support Fund and the Protection Scheme)

□ Excluding BFG contributions and one-off costs in 2022, costs increased by 17.0% due to inflationary pressures and investments in future growth

■ Prudent risk management reflected in a high quality portfolio – risk costs at 93 bps, NPL ratio at 4.2%

■ Progress in implementing the business and ESG strategy for 2021-2025, strengthening the business model and competitive position

□ Rising scale of digital sales and service, with the share of non-mortgage loans sold via mobile devices at 61%

□ Focus on customer relationships fulfilling profitability and capital efficiency (AROR) objectives

□ Development of digital solutions to improve the quality and security of customer service and to protect clients’ financial health by implementing new personal financial manager (PFM) functionalities

■ Strong protection against legal risks ensured by high provisions; successfully continued settlement programme

□ The coverage ratio of CHF portfolio with created provisions for legal risk at 99.5% in relation to the active portfolio, significantly higher than market average

□ Under the settlement programme rolled out in Q4 2022, mBank signed over 13,000 settlements with clients by the end of 2023, and presented the proposal to all clients holding an active CHF loan

■ Dynamics of loans weakened by negative adjustments and slowdown in new retail sales

□ Corporate loans down by 2.6% YoY due to selective approach and focus on capital efficiency; excluding reverse repo/buy sell back transactions and the FX effect, loans to corporate clients increased by 1.4%

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□ Retail loans dynamics in negative territory due to adjustments resulting from costs of legal risk related to FX mortgage loans; excluding FX mortgage portfolio, retail loans down by 0.6% year on year driven by a higher interest rates environment.

Summary of results of mBank Group Core Business in 2023

Core Business – results of mBank Group excluding the FX Mortgage Loans segment.

Total income - calculated as the sum of net interest income, net fee and commission income, dividend income, net trading income, other income, other operating income and other operating expenses.

Net impairment losses and fair value change on loans and advances - the sum of impairment or reversal of impairment on financial assets not measured at fair value through profit or loss and gains or losses from non-trading loans and advances mandatorily measured at fair value through profit or loss.

Net interest margin – calculated by dividing net interest income by average interest earning assets. Net interest income calculated for the purpose of net interest margin excludes gains or losses on modification. Gains or losses on modification includes co sts of credit holidays. Interest earning assets are a sum of cash and balances with the Central Bank, loans and advances to banks, debt securities (in all valuation methods) and loans and advances to customers (net; in all valuation methods). The average interest earning assets are calculated on the basis of the balances as at the end of each month. Net interest income is annualized based on the number of days in the analysed period (an annualization factor is calculated by dividing a number of days in the year by a number of days in the analysed period).

Cost/Income ratio – calculated by dividing overhead costs and depreciation by total income (excluding tax on Group’s balance sheet items).

ROE net – calculated by dividing net profit/loss attributable to Owners of the Bank by the average equity attributable to Owners of the Bank, net of the year’s results. The average equity is calculated on the basis of the balances as at the end of each month. Net profit/loss attributable to Owners of the Bank is annualized based on the number of days in the analysed period (an annualization factor is calculated by dividing a number of days in the year by a number of days in the analysed period).

ROA net - calculated by dividing net profit/loss attributable to Owners of the Bank by the average total assets. The average total assets are calculated on the basis of the balances as at the end of each month. Net profit/loss attributable to Owners of the Bank is annualized based on the number of days in the analysed period (an annualization factor is calculated by dividing a number of days in the year by a number of days in the analysed period).

In order to present the genuine and undistorted performance of mBank Group, the non-core part, comprising of foreign currency mortgage loans, is shown separately from the total business.

Non-core assets are defined as all residential mortgage loans granted to individual customers in Poland that at any point in time were in another currency than PLN. In addition to the FX mortgage loan portfolio, associated provisions for legal risk arising from these contracts are also allocated to the segment .

The capital allocated to the non-core unit amounted to PLN 653 million as of December 31, 2023. It is calculated primarily based on:

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■ total risk exposure amount of the segment and minimum Tier 1 capital ratio required by PFSA,

■ economic capital for operational risk.

From the managerial perspective, growth of mBank’s core business is effectively based on lower capital due to its portion being set aside for FX Mortgage Loans segment.

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1.1. Business model and history of mBank Group

mBank Group conducts business based on the universal banking model, specialising in servicing all client groups. The offer includes retail, SME, corporate and investment banking as well as other financial products and services such as leasing, factoring, brokerage, wealth management, investment funds, insurance, payment gateway and corporate finance. Services provided under mBank logo are marked with different colours, depending on the target group of the offer.

The bank was established in 1986 as Bank Rozwoju Eksportu (BRE Bank) , initially focusing on corporate clients. We have been operating in the segment of individual clients since 2000, i.e. from the moment of launching mBank, a fully online bank. In 2001, we established MultiBank, which complemented the bank’s business model with servicing clients in the outlet network in the largest Polish cities. Since the very beginning, mBank has relied on organic growth, which means that the current scale of its business has been achieved without takeovers of other banks and financial institutions. mBank is the only bank in Poland with successful track record of rolling out its online retail banking model into foreign markets. Since 2007, we have been operating in the Czech Republic and Slovakia. In 2013, we unified our brand under mBank name, which was most powerful of our brands.

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mBank’s widely recognised operational excellence is based on the state-of-the-art user interface for online banking, next-generation mobile application, video banking, as well as real-time, event-driven customer relationship management (CRM) based on client behaviour patterns. The whole product offer is centred around the current account with a broad spectrum of financial services accessible in just “one click”, as the strategic aim of mBank is to be the most convenient transactional bank on the market. Our internet platform available to clients is modern, convenient, easy-to-access and user-friendly. We have also been systematically expanding our mobile application to provide customers with the possibility of managing their finances wherever they are.

Giving priority to users’ comfort, mBank regularly improves its offer and thus remains at the forefront of institutions introducing new solutions, such as Personal Finance Manager (PFM) for retail clients or further development of Paynow payment gateway for e-commerce. mBank has been accompanying its retail customers in their everyday lives for 23 years, providing a wide range of additional services based on online or mobile banking. These involve, among others, the possibility to access public administration services from mBank’s transactional platform and the possibility to submit an application for benefit programmes such as the “ Family 500+ ” benefit in mBank’s mobile application. Further benefits include additional services, such as mOkazje (mDiscounts) and possibility to pay for car parks in several dozen Polish cities using mBank’s application.

mBank’s offer includes products and services tailored to various customers’ needs, including loans, savings, investment and insurance products as well as other solutions dedicated to enterprises and businesses. The comprehensive offer makes it possible to more effectively address specific requirements of particular groups of customers. At the same time, the coherent business model in all of the mentioned areas enables clients’ to easily move between segments, which allows mBank to support their professional and personal development at all stages.

mBank Group aims to build a partnership with corporate customers, which is based on good relations and comprehensive advisory. Drawing on the BRE Bank S.A. experiences and competencies, we know how important it is to take individual approach to a customer and to adequately understand the specifics of their business. We support entrepreneurs from the very beginning of their professional path, enabling them to launch their business with mBank online or in the bank’s branch and offering them a package of kick-off services such as financing, accounting and currency services or terminals. We introduce new products to our offer on a regular basis and pay special attention to providing remote access to our services. Large enterprises and international corporations successfully use the integrated range of commercial banking solutions, with particular focus on the advanced platform of transactional banking and mobile application. This comprehensive product offer is complemented by investment banking services, such as equity capital markets (ECM), debt capital markets (DCM) and mergers & acquisitions (M&A) advisory services.

mBank’s distribution concept combines the most technologically advanced solutions, which meet the market challenges and set new trends in the Polish banking sector. Internet and mobile-based tools as well as the extensive network of distribution outlets and call centre build a comprehensive contact platform for mBank’s customers. The IT platform architecture allows the bank to develop and introduce new products, services and sales channels efficiently and with a low operational risk. Thanks to such a flexible infrastructure, mBank is able to effectively manage its business expansion strategy.

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Net loans (Net loans and advances to customers) – the sum of loans and advances to customers measured at amortised cost, non- trading loans and advances mandatorily measured at fair value through profit or loss, and loans and advances classified as trading assets.

Total income - calculated as the sum of net interest income, net fee and commission income, dividend income, net trading income, other income, other operating income and other operating expenses.

Total costs (Total overhead costs (including deprecation)) - calculated as the sum of total overhead costs and depreciation.

Loan loss provisions (Net impairment losses and fair value change on loans and advances) – the sum of impairment or reversal of impairment on financial assets not measured at fair value through profit or loss and gains or losses from non-trading loans and advances mandatorily measured at fair value through profit or loss.

Net interest margin - calculated by dividing net interest income by average interest earning assets. Net interest income calculated for the purpose of net interest margin excludes gains or losses on modification. Gains or losses on modification includes costs of credit holidays. Interest earning assets are a sum of cash and balances with the Central Bank, loans and advances to banks, debt securities (in all valuation methods) and loans and advances to customers (net; in all valuation methods). The average interest earning assets are calculated on the basis of the balances as at the end of each month. Net interest income is annualized based on the number of days in the analysed period (an annualization factor is calculated by dividing a number of days in the year by a number of days in the analysed period).

Cost/Income ratio - calculated by dividing overhead costs and depreciation by total income (excluding tax on Group’s balance sheet items).

Return on Equity (ROE) (Net ROE) - calculated by dividing net profit/loss attributable to Owners of the Bank by the average equity attributable to Owners of the Bank, net of the year’s results. The average equity is calculated on the basis of the balances as at the end of each month. Net profit/loss attributable to Owners of the Bank is annualized based on the number of days in the analysed period (an annualization factor is calculated by dividing a number of days in the year by a number of days in the analysed period).

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1.2. Composition of mBank Group

Composition of mBank Group and main areas of its activity

The subsidiaries of mBank Group offer a complex service for the customers and allow for processes optimisation and achieving various business targets. The structure of mBank Group from the perspective of segments and business areas as of end of 2023, is presented below:

1 mBank owns 100% shares in Asekum Sp. z o.o. and LeaseLink Sp. z o.o. indirectly, through mLeasing Sp. z o.o.

2 mBank owns 100% shares in mFinanse CZ s.r.o. and mFinanse SK s.r.o. indirectly, through mFinanse S.A.

At the beginning of 2021, we have separated FX Mortgage Loans segment from Retail Banking segment. This change aimed to present separately results related to the product, which has been withdrawn from the offer for individual customers, and at the same time is significant from the point of view of the assigned assets and the impact on the Group's results. As a result a more accurate and undistorted image of mBank Group is presented. Additionally, we separated the Treasury and Other segment from the core business.

From the beginning of 2023, the Group started to consolidate the subsidiary mTowarzystwo Funduszy Inwestycyjnych S.A. (mTFI) in relation to the start of its operating activities. mTFI operates in the area of establishment and management of investment funds and providing portfolio management services which may include one or more financial instruments. The subsidiary operates on the basis of the Polish Financial Supervision Authority’s permission and is a subject to its supervision.

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In Q2 2023, technology assets of Samito from mAccelerator portfolio, were sold as an organised p art of enterprise.

mBank Group (including consolidated subsidiaries) as at the end of 2023 was composed as presented on the diagram below.

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mBank’s Authorities

Supervisory Board of mBank

On December 9, 2022, Dr Hans-Georg Beyer has been appointed as the Member of the Supervisory Board of mBank S.A. under a resolution of the bank's Supervisory Board. Hans-Georg Beyer’s tenure began on January 1, 2023 for the duration of the present term of office of the Supervisory Board.

On March 30, 2023 the XXXVI Ordinary General Meeting of mBank S.A. appointed Thomas Schaufler for the position of a member of the Supervisory Board as of March 31, 2023 for the duration of the present term of office of the Supervisory Board. Thomas Schaufler replaced Arno Walter who on October 14, 2022 resigned from the function of member of the Supervisory Board as of March 30, 2023.

On October 20, 2023, Dr Marcus Chromik informed the Supervisory Board about his intention to resign from the function of a member of mBank Supervisory Board as of December 31, 2023.

On December 14, 2023, Bernhard Spalt has been appointed as a member of mBank Supervisory Board as of January 1, 2024, under a resolution of the Supervisory Board.

As of December 31, 2023, the composition of the Supervisory Board of mBank S.A. was as follows:

1. Agnieszka Słomka-Gołębiowska - Chairwoman of the Supervisory Board

2. Bettina Orlopp – Deputy Chairwoman of the Supervisory Board

3. Hans Georg Beyer – Member of the Supervisory Board

4. Tomasz Bieske – Member of the Supervisory Board

5. Marcus Chromik – Member of the Supervisory Board (until December 31, 2023; succeeded by Bernhard Spalt on January 1, 2024)

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6. Mirosław Godlewski – Member of the Supervisory Board

7. Aleksandra Gren – Member of the Supervisory Board

8. Thomas Schaufler – Member of the Supervisory Board

There are four independent members in the Supervisory Board:

1. Agnieszka Słomka-Gołębiowska

2. Tomasz Bieske

3. Mirosław Godlewski

4. Aleksandra Gren

Five committees operate within the Supervisory Board: the Executive Committee, the Risk Committee, the Audit Committee, the Remuneration and Nomination Committee and the IT Committee. The composition and tasks of the Supervisory Board committees are described in chapter 13. "Statement of mBank on application of corporate governance principles in 2023".

Management Board of mBank

On January 17, 2023 Andreas Böger resigned from the function of Vice-President of the Management Board, Chief Financial Officer. The resignation took effect as of April 30, 2023. The reason for the resignation were plans of Andreas Böger to take on the role of Divisional Board Member responsible for Group Finance at Commerzbank AG.

On March 30, 2023 the Supervisory Board of mBank appointed new members to the Management Board of mBank as of May 1, 2023 for the duration of the present term of office of the Management Board:

■ Pascal Ruhland, for the post of Vice-President of the Management Board, Chief Financial Officer;

■ Julia Nusser, for the post of Vice-President of the Management Board, Chief People & Regulatory Officer

As of December 31, 2023, the composition of the Management Board was as follows:

1. Cezary Stypułkowski - President of the Management Board, Chief Executive Officer

2. Krzysztof Dąbrowski - Vice-president of the Management Board, Head of Operations and Information Technology

3. Cezary Kocik - Vice-president of the Management Board, Head of Retail Banking

4. Marek Lusztyn - Vice-president of the Management Board, Chief Risk Officer

5. Julia Nusser - Vice-President of the Management Board, Chief People & Regulatory Officer

6. Adam Pers - Vice-president of the Management Board, Head of Corporate and Investment Banking

7. Pascal Ruhland - Vice-President of the Management Board, Chief Financial Officer

For more information on the Management Board and Supervisory Board of mBank, see chapter 13. “Statement of mBank on application of corporate governance principles in 2023”.

1.3. mBank Group geographical presence

mBank offers its services not only in Poland, but also in the Czech Republic and Slovakia. The leading role of mobile and internet banking provider is supplemented by comprehensive service in the branches. In Poland, retail branches network covers 307 outlets whereas corporate network comprises 43 points of service, additionally supplemented by branches of mBank Group subsidiaries. In 2023 the number of branches in Poland decreased by 12. At the same time we opened one branch in the Czech Republic. When contacting the consultants in the branches, clients can not only use products and services of mBank Group, but also install and learn how to use mobile and internet banking.

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■ 83 mBank branches

■ 31 light branches

■ 15 advisory centres

■ 138 mKiosks

■ 40 Financial centres and agency service points of mFinanse

Czech Republic

■ 14 financial centres and light branches

■ 18 mKiosks

Slovakia:

■ 6 financial centres and light branches

■ 9 mKiosks

Corporate branches:

■ 29 corporate branches

■ 14 corporate offices

Depending on their needs, our clients can take advantage of full product offering and cash services in traditional mBank branches. Comprehensive portfolio of more sophisticated financial products, such as mortgage loans and corporate funding, is available also in financial centres and agency service points of mFinanse. In the advisory centres, both individual and corporate clients are served, who can also use the services of mBank Group’s subsidiaries. The light branches are dedicated to distribute basic financial products and provide clients with cash services up to defined limits. mKiosks, located in the shopping malls, allow clients to familiarize with mBank’s offer, open an account and obtain a non-mortgage loan.

1.4. Information for investors

Information on mBank shares and shareholders

mBank shares have been listed on the Warsaw Stock Exchange (WSE) since 1992.

As at December 31, 2023, mBank’s registered share capital amounted to PLN 169,860,668 and was divided into 42,465,167 shares, including 42,454,167 ordinary bearer shares and 11,000 ordinary registered shares with a nominal value of PLN 4 each. Each share carries one voting right at the General Meeting.

In 2023, the total number of shares increased by 31,672. The new shares were issued pursuant to Resolution No. 38 of the 31st Annual General Meeting of mBank S.A. dated May 9, 2018 on issuing subscription warrants, a conditional increase of the share capital with exclusion of the pre-emptive right of the existing shareholders to take up subscription warrants and shares, a change of the Company’s by-laws and on applying for admission of shares to trading on the regulated market, and on dematerialisation of the shares.

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mBank shareholders and share price on the WSE

mBank shareholders

Commerzbank AG has been the majority shareholder of mBank since 1994. Its stake increased gradually from 21.0% in 1995 to 50.0% in 2000 and 72.2% in 2003. Starting from 2005, Commerzbank’s stake has been gradually declining due to the implementation of the managerial options programmes.

As at December 31, 2022, Commerzbank AG held 69.12% of shares and votes at the General Meeting of mBank. The majority of the remaining 30.88% of shares, which are in free float, are held by financial investors, in particular Polish pension funds and Polish and foreign investment funds. As of December 31, 2023, apart from Commerzbank AG, the share of no shareholder exceeded the 5% threshold of shares and votes at the general meeting.

For more information about mBank’s shareholders read the Statement of mBank on Application of Corporate Governance Principles in 2023, chapter 13.3 “Significant blocks of shares”.

Performance of mBank shares on the WSE in 2023

At the beginning of 2023, share prices of banks continued the upward trend which began in late September 2022. Certain Q1 2023 events, in particular the opinion of the Advocate General of the CJEU unfavourable to banks and the dampened sentiment on the European and U.S. financial markets, triggered a sell-off of banking shares and a decrease in their prices. The collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank as well as fears that further banks may follow suit caused a mass sell-off of banking shares in the United States. In Europe, the struggles of Credit Suisse resulted in a sell-off of European banking shares and stirred fears of systemic risk. Once Credit Suisse had been taken over by UBS, the situation on stock markets began to improve. To some extent these events also affected banks’ share prices on the WSE. In March, the WIG-Banking index reached the lowest level in 2023.

Good Q1 and H1 results reported by banks helped banking share prices to rebound. Investors reacted calmly to the CJEU ruling announced on June 15, which was consistent with the prior opinion of the Advocate General and the market expectations. In August, the drops in global financial markets triggered by Fitch’s downgrade of the U.S. rating and information about an economic slowdown in China and in the Eurozone resulted in a correction of the upward trend in the share prices of Polish banks. In September, banking share prices were negatively affected by a reference rate cut announced by the Monetary Policy Council. The market assumed that the radical cut (by 75 bps) and the resulting decrease in the interest on loans would significantly hit banks’ results.

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The chart below shows the relative changes in mBank’s share price and stock market indices (left axis) and the volume of mBank’s shares traded in 2023 (right axis).

mBank’s share price in 2023 increased more than the WIG-Banks Index, which in turn performed much better than the broad-based WIG index and the WIG20 index.

In 2023, the WIG-Banks index went up by 76.9% compared to the level recorded at the end of December 2022. WIG and WIG20 went up by 36.53% and 30.7%, respectively, compared to the levels recorded at the end of 2022.

The closing price of mBank share at the last trading session in 2023 (December 29) stood at PLN 535.00, up by 80.7% compared with the last trading day of 2022 (December 30).

The chart below shows the relative changes in mBank’s share price and stock market indices over the last five years.

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mBank’s capitalisation amounted to PLN 22,7 billion (EUR 5.2 billion) as at December 31, 2023, which represents an increase from PLN 12.6 billion (EUR 2.7 billion) reported at the end of 2022. P/BV (price/book value) ratio of mBank Group stood at 1.7 compared with 1.0 a year before.

From among the bank analysts and brokers actively monitoring mBank’s financial performance and issuing recommendations on mBank shares, six analysts advised investors to buy shares of mBank, four issued “hold” recommendations and one recommended to sell mBank’s shares at the end of 2023. For comparison, a year before, six analysts recommended buying mBank’s shares, while five recommended holding them.

The current consensus regarding mBank Group’s expected results is available on mBank’s website: https://www.mbank.pl/en/investor-relations/shares/consensus.html.

Investor Relations at mBank

The Investor Relations team, acting in cooperation with the Management Board and other organisational units, provides analysts and investors with reliable and complete information about mBank Group.

When communicating with investors, the media and clients, mBank applies the Information Policy, which is based on the principles of open and transparent communication, taking into account the needs of all stakeholders. We provide them with universal and equal access to information in accordance with the highest market standards and applicable laws. We spare no effort to ensure that the information provided by us is up to date, reliable, useful, coherent, and comparable with information provided by other banks. We present it in a clear and transparent manner.

We have been actively communicating with capital market participants, which includes addressing our activities to the information needs of individual groups, in accordance with the best market standards and practices. Similar to other issuers worldwide, we have adopted a hybrid approach to the IR activities, which combines the advantages of face-to-face shareholder meetings with remote communication.

Information provided via e-mail and the regularly updated content published on the official mBank’s website play a significant role in communications with stakeholders.

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In addition, the Responsible Bank website contains information on various aspects of our activities related to sustainable development. Materials published there include our integrated/ESG reports and information about our ESG strategy and activities, sustainable development standards (i.e. primarily policies and procedures applicable at the bank), declarations regarding our ESG goals, as well as ratings, indices and awards related to this area. The website is a response to the growing interest of investors and rating agencies in the subject of ESG, as well as a reflection of the higher level of our ambitions in terms of ESG goals we set for ourselves as part of the strategy.

Analysts and mBank’s investors are kept informed about major developments in mBank Group via a monthly Newsletter and ad-hoc messages sent by email.

In 2023, investors and stock market analysts participated in four earnings conferences . All meetings with the Management Board accompanying the announcement of quarterly figures were posted on the bank’s website. Our relations with analysts, shareholders and potential investors are also strengthened through meetings at conferences organised by Polish and foreign brokerage houses . In 2023, mBank participated in seven conferences and in a roadshow organised in connection with the issuance of bonds under the EMTN Programme.

In 2023, the Management Board representatives also held meetings with analysts from rating agencies . In addition, the bank has been in regular contact with rating agencies through teleconferences and emails.

1.5. Credit ratings of mBank and mBank Hipoteczny

mBank's credit ratings assigned on request

mBank has solicited ratings assigned by S&P Global Ratings (S&P) and Fitch Ratings (Fitch).

S&P Global Ratings

On June 27, 2023, S&P Global Ratings (S&P) affirmed mBank’s “BBB/A-2“ long- and short-term issuer credit ratings and revised the outlook of the long-term rating from developing to stable.

Moreover, S&P affirmed the rating of senior preferred bonds issued by mBank at “BBB” and downgraded senior non-preferred debt instruments from “BBB-” to “BB+”.

The stable outlook reflects S&P’s opinion that the Bank's underlying profitability and capitalization over the next 12-24 months will allow it to absorb future costs of legal risk arising from CHF mortgage loans and potential government-obligated costs.

Fitch Ratings

On July 13, 2023, Fitch affirmed mBank’s Long term Issuer Default Rating at “BBB-”, Viability Rating at “bbb-”, revised the outlook of the long term rating from negative to stable and placed mBank's Long- term Senior Preferred debt rating of “BBB” and Senior Non-Preferred debt rating of “BBB-” on Rating Watch Negative (RWN).

The revision of the rating outlook reflects Fitch’s view that mBank's improved core profitability meaningfully strengthens its ability to absorb further costs of legal risk related to foreign currency mortgage loan portfolio and reduces the pressure on mBank's capitalization.

On December 19, 2023, Fitch Ratings downgraded Bank's long-term senior debt ratings and removed them from RWN. Senior Preferred debt was downgraded from "BBB" to "BBB-" and Senior Non-Preferred debt from "BBB-" to "BB+".

The downgrade of mBank’s senior debt long term ratings primarily reflected the change in Fitch’s expectation around the structure of the Bank's resolution buffer (including likely more extensive use of SP debt) and Fitch’s forecasts for the Bank’s capital ratios and requirements.

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Other credit ratings

Rating of mBank and mBank Hipoteczny assigned by Moody’s Investors Service

Moody's Investors Service (Moody's) evaluates mBank's creditworthiness based on publicly available information. Moody's assigned solicited rating to mBank Hipoteczny and mortgage covered bonds issued by mBank Hipoteczny.

On March 24, 2023, Moody's downgraded mBank's long-term deposit rating from "A3" to "Baa1" and the Baseline Credit Assessment (BCA) from "baa3" to "ba1". The adjusted BCA (i.e. including potential support from Commerzbank) was downgraded from "baa2" to "baa3". The short-term deposit rating was affirmed at "P-2". In the opinion of Moody's, the change in the rating resulted from the increase in risk related to the CHF mortgage loans portfolio. In addition, on March 24, 2023, Moody's downgraded the long-term issuer rating for mBank Hipoteczny from "Baa1" to "Baa2". The rating of covered bonds remains at “Aa1”.

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1) Ra tings based solely on publicly available information

mBank’s ratings by Capital Intelligence Ratings and EuroRating based on publicly available information

Capital Intelligence Ratings

On April 6, 2023, Capital Intelligence Ratings lowered mBank's long-term foreign currency rating from "BBB+" to "BBB" and changed the rating outlook from negative to stable. The agency also affirmed mBank's short-term foreign currency rating at "A2" and downgraded Bank Standalone Rating (BSR) from "bbb+" to "bbb". The change in the rating resulted from the lowering of the operating environment risk rating (OPERA), which was influenced, among others, by the growing costs of legal risk related to FX mortgage loans.

EuroRating

On June 2, 2023, EuroRating affirmed the bank's rating at “BBB-” and changed the rating outlook from stable to negative. This rating was affirmed on August 18, 2023.

Summary of ratings for Poland, mBank and Commerzbank

The table below compares long-term ratings (foreign currency) for mBank, Commerzbank and Poland assigned by S&P, Fitch and Moody’s as of December 31, 2023.

1) Long-term deposit rating. For mBank based on publicly available information. LT ICR of Commerzbank by Moody’s is A2.

Rating outlook in parentheses.

1.6. ESG ratings and indices of mBank

Rating of mBank assigned by Sustainalytics

On June 16, 2023, mBank Group received an ESG Risk Rating of 13.0 and was assessed by Morningstar Sustainalytics to be at low risk of experiencing material financial impacts from ESG factors. In no event the ESG Risk Rating shall be construed as investment advice or expert opinion as defined by the applicable legislation.

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mBank Group ESG Risk Rating improved over the year in terms of ESG Risk management, in particular in scope of Product Governance and Business Ethics categories assessed by Sustainalytics. Sustainalytics ESG Risk Rating Summary Report dated June 16, 2023 along with the disclaimer is available on our website: www.mbank.pl/en/investor-relations/ratings-debt-instruments/ . It must be noted that the score might be subject to change over the year in case of various issues impacting ESG assessment of the company. An up-to-date rating can be obtained by the investors from Morningstar Sustainalytics.

Rating of mBank assigned by MSCI

In October 2023 MSCI ESG Ratings confirmed mBank rating of A (on a scale of AAA-CCC). The report indicates that mBank applies leading practices in human resources management in the banking sector, such as an annual employee engagement survey and internship programmes. In the field of corporate governance, business ethics and consumer protection, the bank adopts solutions typical for the entire sector. The data protection policy is also in line with the average for global entities in the sector and covers employee training in data security and IT system audits.

The MSCI ESG Rating measures the resilience of a company to long-term ESG risks. Companies are assessed on a scale of AAA (leader) to CCC (laggard), according to exposure to industry-specific ESG risks and the ability to manage those risks relative to peers.

mBank’s MSCI ESG Rating along the disclaimer is available on our website: www.mbank.pl/en/investor- relations/ratings-debt-instruments/ . It must be noted that the score might be subject to change over the year in case of various issues impacting ESG assessment of the company. An up-to-date rating can be obtained by the investors from MSCI.

WIG-ESG index on the WSE

mBank is a member of WIG-ESG index on the Warsaw Stock Exchange since the beginning of its quotation, i.e. September 2019. We are one of the companies recognised as sustainable, i.e. obeying rules for social responsibility, in particular in scope of environment, social, economic and governance issues. In the previous years, we were a member of Respect Index. More information on the index is available on the website of Warsaw Stock Exchange: https://gpwbenchmark.pl/karta- indeksu?isin=PL9999998955 .

Bloomberg Gender-Equality Index 2023

In January 2023, mBank was among the elite group of companies included in the Bloomberg Gender Equality Index 2023 for the third time. The Index recognises publicly listed companies that actively support equal opportunities in the work environment. Bloomberg experts appreciated mBank’s efforts to ensure equal pay for women and men as well as inclusive work culture.

mBank is one of the 484 companies from 45 countries recognised in this edition of the index. Bloomberg Gender-Equality Index analyses the performance of public companies with capitalization above $1 billion in terms of gender equality in the work environment, measured in five areas: female leadership and talent development, equal pay and pay parity, inclusive work culture, anti-sexual harassment policy and pro-woman brand. Only companies that have performed above a globally defined threshold are eligible for inclusion in the index. More information about the index can be found on the website: https://www.bloomberg.com/gei/about/ .

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mBank successfully continues settlement program for clients with CHF mortgages

In Q4 2022, mBank launched an attractive settlement programme for clients with Swiss franc loans. The proposal consists in converting the loan from CHF into PLN and reducing the outstanding principal to be repaid. The settlement process is efficient and it does not burden borrowers with many formalities. Terms of annulment are determined individually and they are subject to negotiations. Converted loan bears interest at a variable or periodically fixed rate. As part of the settlement, the bank offers fixed interest rate in a much more attractive variant than in the standard offer of new loans. At the day of this report, interest rate is at the level of 4.99%. Settlements enables clients to definitively eliminate exchange rate risk and interest rate risk for up to 5 years (interest rates may vary in the future depending on market conditions).

The bank has offered a settlement to all clients with CHF mortgage loans. By the end of December 2023, mBank signed 13,321 settlements with clients.

Detailed description of the settlement programme is available on a special website (in Polish).

For more information on the settlement programme see note 34 of mBank S.A. Group Consolidated Financial Statements 2023.

The largest synthetic securitisation transaction in Central and Eastern Europe

In September 2023, the bank conducted a synthetic securitization transaction referencing a portfolio of retail non-mortgage loans with a total value of PLN 9,962.8 million (as of 30 June 2023).

As part of the securitization transaction, mBank transferred to investors a significant part of the credit risk of the securitized portfolio, which remained on the bank's balance sheet.

The risk transfer of the securitized portfolio is carried out through the issuance of credit linked notes (CLN). It is a recognized credit protection instrument. As part of the transaction, the bank issued CLN with a total nominal value of PLN 731 million, which were purchased by financial investors. Credit Linked Notes were introduced to trading in the alternative trading system on Vienna MTF operated by Wiener Börse AG (Vienna Stock Exchange).

The transaction resulted in an increase in the Common Equity Tier 1 (CET1) capital ratio by approximately 0.9 percentage points at the consolidated level, when referenced to reported figures for mBank Group at the end of June 2023.

The transaction meets the requirements for significant risk transfer specified in the CRR Regulation and has been structured as meeting the STS criteria (simple, transparent and standard securitization) in accordance with Regulation 2021/557.

It should be noted that this is the largest synthetic securitization transaction completed so far in Central and Eastern Europe in terms of portfolio volume. At the same time, this is the third securitization transaction conducted by mBank in 2 years - the previous ones were conducted in March and December 2022. The total nominal value of the securitized portfolio for the above-mentioned transactions exceeds PLN 20 billion. Securitization transactions support the implementation of key initiatives within the mBank Group's strategy.

More information on the securitisation transaction can be found in Note 29 of mBank S.A. Group Consolidated Financial Statements 2023.

Second green bonds issuance with nominal value of EUR 750 million

In September 2023, mBank placed an issuance of non-preferred senior bonds (NPS) in the green format with a total nominal value of EUR 750 million. The issued bonds have a 4-year maturity, with an option to redeem at the bank's request after 3 years from the date of issue (4NC3). The bonds bear interest at a fixed rate of 8.375% per annum for 3 years from the issue date and a variable rate of EURIBOR 3M plus a margin of 4.901% throughout the fourth year. The bonds were admitted to trading on the regulated market of the Luxembourg Stock Exchange. The issuance was carried out under the EMTN Program.

The issuance was preceded by a number of meetings with domestic and foreign investors, which resulted in the largest ever orderbook in mBank’s history - both in terms of volume and number of investors. A total of 121 investors signed up for mBank's debt securities for a total amount of EUR 1.48 billion. The demand from investors allowed the bank to obtain EUR 750 million, which means that it is the largest bond issuance in the history of mBank Group.

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Expiry of the additional capital requirement related to risk of FX mortgage loans

On December 20, 2023, mBank management board received the decision of the Polish Financial Supervision Authority (PFSA) concerning the expiry of the additional capital requirement to cover risks arising from mortgage-backed foreign currency loans and advances to households on the consolidated basis. Before receiving the decision, the bank on the consolidated basis was obliged by the PFSA to maintain own funds for the coverage of the additional capital requirement related to risk of foreign currency mortgage loans for households at the level of 1.18 p.p. which consisted of at least 75% of Tier 1 capital (equivalent to 0.89 p.p.) and at least of 56.25% of Common Equity Tier 1 capital (equivalent to 0.66 p.p.).

In line with the decision of the PFSA the additional capital requirement no longer applies. Moreover, mBank management board received analogous PFSA’s decision concerning the additional capital requirement at the individual level.

At the end of 2023, mBank’s capital ratios exceeded the PFSA requirements related to the minimum capital adequacy ratios both on the individual and consolidated levels. The surplus over total capital ratio increased to 5.9 p.p., and the surplus over Tier 1 capital ratio increased to 5.6 p.p.

New position on mBank’s Management Board: Vice-President for Compliance, Legal and HR

A new position has been created on mBank’s Management Board, taken up by Julia Nusser. Prior to joining mBank, Julia Nusser served as managing director at Commerzbank. Her tenure at mBank started on May 1, 2023 and will last until the end of the current term of the bank’s Management Board. The Vice- President for Compliance, Legal and HR is responsible for the departments of Compliance, Anti-Money Laundering, Legal and for data protection. The Vice-President is also responsible for strategic positioning of the HR function, including retaining and attracting new talent.

For more information about mBank’s Management Board, visit https://www.mbank.pl/en/about-us/bank- authorities/ .

‘2% Safe Mortgage’ programme subsidized by the government at mBank

Starting from September 14, 2023, mBank’s clients could apply for mortgage loans which were subsidized by the government. The loan was available for applicants who met several conditions, including an age criterion (clients had to be below 45 years old) and a property rights criterion (the loan was applicable only for the first purchase of a house or a flat). Maximum amount which could be granted was PLN 500,000 or PLN 600,000 for a married couple or an applicant raising at least one child. The programme assumed subsidies for the first 10 years of the loan agreement. After this period, the rate will change to a variable rate, and the installments will change to equal installments, unless the client applies for maintaining current conditions. The offer was very well-received by the clients.

mBank eco-loan on preferential terms for small and medium enterprises

The eco-loans support businesses in transition to higher energy efficiency. mBank provides the loans and Bank Gospodarstwa Krajowego (BGK) grants the European Union subsidies in the form of an environmental bonus. BGK’s co-financing is up to 70% of the eligible costs of modernisation.

The loans are aimed at small and medium-sized companies. The offer is available on the condition that the financed investment reduces primary energy consumption by at least 30%. The financing can be used to modernise existing infrastructure in order to increase the energy efficiency of the company’s processes: buildings, process lines, machinery and equipment, as well as for RES installations.

For more information about the eco-loans, visit https://www.mbank.pl/msp- korporacje/finansowanie/eko-kredyt/ (available in Polish only).

mBank co-finances Renewable Energy Sources projects

mBank took part in a consortium of three banks which provided loans totaling PLN 776 million for the construction of Kleczew Solar & Wind. It is Poland’s first large-scale solar and wind farm with a capacity of more than 200 MW. mBank provided 17% of the consortium’s loan volume. The farm is located on post-mining land in the municipality of Kleczew in the Wielkopolskie voivodeship.

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The investment is an example of the transition of a former mine site and a step towards the decarbonisation of the Polish economy.

Moreover, mBank granted loans to the subsidiary of Flyspot Group, AT Energia, for a total amount exceeding PLN 6.9 million to finance the construction of a photovoltaic farm with a capacity of approximately 2 MW in Zajączków, Poland.

Flyspot has four wind tunnels under its brand, which are dispatched in Warsaw, Wrocław, Gdańsk and Katowice. The aerodynamic tunnel uses powerful fans to generate wind force reaching up to 300 km/h. Such power entails high consumption of electric energy, therefore the company took a decision to search for alternative energy sources.

Funding construction of photovoltaic farms supports the implementation of mBank Group’s strategy, as one of its pillars is the financing of transition to green economy, in particular construction of alternative energy sources.

mBank and KUKE jointly finance domestic investments of Polish exporters

mBank has signed an agreement with the Export Credit Insurance Corporation (KUKE) which allows mBank clients to take loans for exporters to strengthen their production capacity and use payment insurance guarantees. Thanks to the agreement, 80% of the financing granted for an investment implemented in Poland will be secured by KUKE. The guarantees will mitigate the risk associated with the loan, allowing more companies to obtain financing from mBank. KUKE’s facilities boost the financial capacity of companies and have a positive impact on their relations with financing banks and contractors, enabling a significant increase in the scale of operations.

Strategic partnership of Paynow and LeaseLink

The two fintech subsidiaries of mBank commenced a cooperation in the scope of offering financing to corporate clients. Integration of LeaseLink with Paynow payment gateway provides SME clients with a possibility to directly finance purchases for their business with LeaseLink solutions. Furthermore, automatic process communication between LeaseLink, Paynow and suppliers ensures intuitive, convenient and quick client path.

LeaseLink is a fintech from mBank Group. The company enables clients to fund purchases made in online stores and stationary sales points with convenient installments. The partnership between LeaseLink and Paynow will tap into a new group of clients who expect fully online coverage of their payments. Stores will offer more ways of concluding payments and a solution increasing average value of a shopping cart.

mBank’s goal when developing Paynow is to build innovative, cost-effective and wide scope of integrated payment methods for stores. Thanks to the solution described, Paynow will gain an attractive and popular solution for companies, which has already been used by almost 100,000 businesses in the SME sector.

mBank educates using crime audio series “Jazgot” (Polish for “Clamor”)

The aim of the project is to raise awareness and educate on common cybercrimes. The series exposes investment scams promising "guaranteed high profit without risk”. Anyone who saves and invests can be prone to them. mBank has been a pioneer in the field of cybersecurity education for years. It was the first bank in Poland to conduct social campaigns on this subject. The audio series is another initiative of the “Self-defense on the Web” campaign. The series has been available on all major streaming services (Apple Podcasts, Google Podcasts, Spotify, YouTube and Voice House) since July 2023. The script was written by an acclaimed writer Łukasz Orbitowski, and the series was narrated by the journalist and presenter, Jarosław Kuźniar. The project was created in cooperation with Voice House. It received two awards in 2023, which are described in chapter 1.8 “Awards and distinctions”.

Image campaign „mBank. Technology at your service”

In autumn 2023, mBank launched an image campaign under the slogan “mBank. Technology at your service” in which the bank introduced new positioning of its brand. In the spots, mBank emphasizes that in the age of technology race it creates intuitive and easy to use products and services. Until the end of November, the spots showing what makes mBank different from other technological leaders were available on the television, in cinemas, on VOD platforms and in the internet. The main characters realize that at mBank they don’t have to study technology nor struggle with it because it is designed in intuitive way, providing support when needed, and not making life difficult.

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The project “m jak malarstwo” is a special fund set up by mBank in 2020. The fund created a collection of artworks by the most promising Polish artists. In February 2023, mBank exhibited selected works at the Rondo Art Gallery of the Academy of Fine Arts in Katowice. This is the second exhibition of paintings from the bank’s collection, which includes almost one hundred paintings. Information about the project “m jak malarstwo” is available at www.mjakmalarstwo.pl (available in Polish only), where works from the collection can be viewed.

In July, the New Horizons International Film Festival took place in Wrocław for the 23rd time. mBank has been cooperating with the festival since 2019. In addition to being a patron, mBank has been involved in other activities. In previous years, mBank was, among others, a partner of the prestigious Gala Screenings section, the VR films section and, together with the website Filmweb, created the podcasts “More New Horizons” and the radio programmes “New Horizons: More Good Cinema.” This year, mBank increased its support and became the festival’s title partner. On this occasion, mBank prepared a collector’s edition of debit cards for its clients.

This year marked the fifth anniversary of mBank's support for the Pol'And'Rock Festival. The festival is the largest such music event in Poland and one of the largest in Europe, organized since 1995 by the Great Orchestra of Christmas Charity Foundation. mBank has been a partner of the festival since 2018. On the occasion of the festival, mBank has prepared a commemorative payment card and festival souvenirs.

In September, the second edition of the "Great September" festival was held in Łódź. mBank was a patron of the event. More than 100 Polish performers played on a dozen stages. For festival participants, mBank prepared a number of attractions: discounts on tickets and festival souvenirs, a commemorative payment card, and tickets to a special festival event. Great September Showcase Festival&Conference is an event presenting the most interesting Polish artists and creating a space for music industry representatives to meet and exchange experiences.

mBank plays with the Great Orchestra of Christmas Charity

The Great Orchestra of Christmas Charity (WOŚP) played for the 31st time in 2023. For mBank, it was the sixth anniversary of its cooperation with the foundation as strategic partner and sponsor. The 31st finale of the Great Orchestra of Christmas Charity took place on January 29, 2023. This time, the foundation collected donations to fight sepsis and equip hospitals with modern diagnostic equipment. As usual, mBank topped up donations made by its clients. On this occasion, mBank prepared a collector’s payment card with a commemorative design. mBank added a special “heart” icon to the mobile app to streamline donations and contributed PLN 1 for each click on the icon. Thanks to customer engagement, mBank donated PLN 2 million to the foundation. Companies served by mBank’s corporate and investment banking could make a contribution to the collection organised by the Great Orchestra of Christmas Charity. mBank donated the equivalent of six months’ fees for accounts opened by companies from January to the end of February 2023.

The 32nd Finale of the Great Orchestra of Christmas Charity took place on January 28, 2024. During the 32nd Finale, the Foundation raised money for equipment to treat lung diseases. In addition to the souvenirs prepared each year and features provided in the mobile application, mBank also facilitated supporting the Foundation's goals with a "heart" icon in the transaction service. Starting this year, the Foundation commemorative payment cards have a blind notch. It makes the card easier to use for the visually impaired. The youngest clients who opened eKonto Junior received special pins for their new payment cards with motifs associated with the Orchestra. For corporate clients, mBank has prepared a promotion called "In the Rhythm of WOŚP 2024." mBank will donate fees for newly opened accounts and fees for the WOŚP payment cards to the Foundation. These will be the fees from January till the end of June 2024.

New features of mBank’s online banking and app

In 2023 we focused on improving the functionalities of our online banking and mobile app. The most important changes made in this period include:

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■ Mobile onboarding with automatic data reading: when opening an account client can take a picture of adequate quality of their identity document and the app will read the data based on the optical recognition of characters and automatically fill the application form. All the client has to do is to confirm the data.

■ Scheduling meetings with advisors for a particular time: In 2023, we made changes to the contact request form. Thanks to integration with advisors’ schedules clients can select a particular date and time for a meeting.

■ Autosaving incomplete applications: We introduced the autosave feature to let clients finish a draft application in a quick and convenient way. This solution saves data automatically, so when the client resumes the application, it looks exactly like when it was closed.

■ App activation using a card (physical token): Clients can now activate the mobile app using an active mBank payment card. This solution further increases our clients’ security. At the same time, it is now easier to link the app with a bank account. The verification stage, which our clients had the most problems with, was replaced by a text message code, automatically loaded in the activation process. Clients do not have to send a text message anymore; instead, they can simply hold the card near the phone.

■ Confirmation of mBank employee’s identity: We introduced a feature that confirms the identities of the employee and the client in the mobile app to protect our clients against cyber-crimes. The employee’s identity is verified in the mobile app.

■ Dashboard customisation: We continuously improve the dashboard to make our app more convenient and to address our clients’ individual needs. The latest features include personalised product tiles with new functions. Clients can set them up to have direct access to useful operations such as a money transfer or the option to break down credit card debt into instalments.

■ Changes in the Information Centre and new client inbox: In 2023 we started working on improving the Information Centre section of the app. It is the first step towards enhancing the inbox, which should ultimately become an education and communication centre. Here clients can see active mobile authorisation prompts and the history of authorisations. We also created a new version of the client inbox in our digital channels. Thanks to the redesign of the user interface, new filters and a separation of messages and notifications, the inbox is now more user-friendly and it is much easier to access unread messages.

■ Client ID preview in the app: This solution allows the client to check their ID used to log in to the online banking. Clients can now quickly and conveniently find their ID in the app.

Thanks to regular changes, we increased the number and involvement of app users in 2023. Our mobile app had 3.6 million users in December 2023 in Poland, Czech Republic and Slovakia (+9.2% YoY). Moreover, the number of Monthly Active Users (MAU) amounted to 3.4 million.

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mBank on the podium in the general classification of the Dziennik Gazeta Prawna daily competition

Jury of the competition organized by Dziennik Gazeta Prawna daily recognized innovation as mBank's strongest point. mBank placed first in this category. The jury appreciated verification of payments with cards based on biometrics and the mobile verification of employee's identity. mBank also took a third place in the growth category. These two successes translated into a place on the podium in the main competition. The ranking was based on financial data for 2022, a survey on innovation and ESG aspects, evaluation of the jury and polls.

mBank is a laureate of the Leaders of the Banking and Insurance World competition

Jury of the competition acknowledged mBank’s highest quality of service in all contact channels, most innovative electronic banking platform in Poland and applying best practice in the area of security, including wide range of educational initiatives in the area. mBank received the award also for consequently achieving goals related to sustainable development and corporate social responsibility (CSR), as well as cooperation with startups and introducing behavioral biometrics to card payments in the Internet.

First place in the Ranking of Banks published by the Financial Monthly BANK magazine

In the 27th edition of the consumers’ Ranking of Banks published by the Financial Monthly BANK magazine, mBank placed 1st. The assessment covered ten largest Polish banks. The institutions were ranked based on the sentiment of customers aged 26 and younger. Top score in nine out of sixteen evaluated categories placed mBank on the first place overall in the ranking. In four other categories, mBank came in the top three.

Second place in the satisfaction survey of Polish bank’s clients

In the satisfaction survey carried out by ARC Rynek i Opinia for 2022, mBank came second in all three categories of the competition - satisfaction index, loyalty index and recommendation index among individual bank customers. The survey was carried out using the CAWI method (online surveys conducted at ePanel.pl). A total of 2,515 respondents aged 18–65 who have a bank account participated in the survey. It covered ten largest banks in Poland.

mBank offers best domestic private banking – Euromoney Global Private Banking Awards

The international panel of experts sitting on the jury of the Euromoney Global Private Banking Awards awarded mBank the best domestic private bank. The bank has distinguished itself with a global and comprehensive approach to wealth management. mBank’s state-of-the-art technology allows customers to use variety of solutions (mobile onboarding, video calls or the digital portfolio management tools) in a fully secure and remote manner.

Best Private Bank in Poland 2023

For another year in a row, mBank’s private banking has been recognized in the international contest organized by British Banker and Professional Wealth Management, a magazine published by the Financial Times Group. mBank received the reward for excellent investment results, strong relationships with clients and its digital channels for communication. Jury appreciated mBank’s digital solutions for reporting the results of clients’ investment portfolio as well as its ESG activities (sustainable development).

World’s Best Corporate Digital Bank in Poland 2023

Global Finance magazine named mBank for the 10 th time the best digital bank in Poland in the World’s Best Corporate Digital Bank in Poland 2023 contest. The international jury appreciated mBank’s mobile application for corporate clients – mBank CompanyMobile. For its development mBank received the World’s Best Corporate Digital Bank 2023 title. Over the last few years the international magazine has hailed mBank the best bank in Poland or even in the Central and Eastern Europe (in 2020).

Euromoney Cash Management Survey 2023

mBank's strong position on the Cash Management services market is confirmed by first places in the Market Leader and Best Service categories in the Euromoney Cash Management Survey 2023. The survey is organized among corporate clients on transactional banking services. Votes of clients gave mBank the first place in Poland in 2022 and 2020 in the Best Service category. In 2023, mBank also took first place in the Market Leader Cash Management Bank category.

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mBank is one of two Polish institutions which have been included on the list of the top global fintech companies. The list, composed of 200 organizations, has been compiled by the CNBC television. The catalogue was created based on the cooperation with independent research company Statista and voluntary surveys. Statista analysed over 1 500 firms across nine different market segments: Neobanking, Digital payments, Digital assets, Digital financial planning, Digital wealth management, Alternate financing, Alternate lending, Digital banking solutions, Digital business solutions.

Effie Awards 2023 Gala

At the Effie Awards gala, mBank received a bronze statuette in the Social Media category. The organisers of the gala awarded mBank for its campaign “Kliknij w serce” (“Tap on the heart”). The campaign, organized in cooperation with the Great Orchestra of Christmas Charity (WOŚP) Foundation, BBDO Worldwide and Carat, was acclaimed for its creativity, efficiency and social impact. It aimed to entice clients to support the Foundation’s goals. For each time a client tapped on the heart in the application, mBank donated PLN 1 to WOŚP.

The Best Annual Report

For the eleventh time in a row mBank won the special “The Best of the Best” award in the latest edition of The Best Annual Report contest organised by the Institute of Accountancy and Taxes (Instytut Rachunkowości i Podatków – IRiP). The accolade was granted for the best annual report in the financial institutions category. We were also awarded a distinction for the best Statement on Application of Corporate Governance Principles in the plebiscite. mBank’s reports have been appreciated by market commentators each year, which proves their high utility value for shareholders and investors.

Distinction for mBank’s mobile technology in the Mobile Trends Awards competition

mBank received another Mobile Trends Awards statuette. The prize was awarded for 2022 in the 'Mobile Campaign' category. The jury appreciated the bank’s activities promoting mobile onboarding, i.e. the remote account opening process.

mBank amongst best perceived employers in Poland

In the Kincentric Poland survey, mBank was amongst the best rated employers in Poland. The bank was regarded so highly on the basis of cyclical "Pulse Check" surveys completed by mBank employees, in which employees can indicate what they are satisfied with and what disappoints them in the work environment. The Kincentric Best Employers organization recognizes leading organizations around the world using the most objective metric possible - opinion of employees. It appreciates human factors which are the key to facilitating success: employee engagement, deep agility, engaging leadership, and a focus on talent.

mBank maintained 1st place in the Employer branding LinkedIn Talent Awards competition

mBank won the LinkedIn Talent Awards in the ‘Employer Branding’ category for the second year in a row. In this category, an international jury recognises companies that build strong employer brands with significant social engagement through online channels.

mBank’s crime audio series „Jazgot” appreciated by the market

Jazgot (Polish for “Clamor”), mBank's criminal audio series aimed at broadening the public's awareness of cyber-security, received gold in the 2023 Złote Spinacze (“Golden Paperclips”) competition in the "Content marketing - branded content" category. mBank produced "Jazgot" together with Voice House and Molecular Creative. In the same competition, mLeasing, a subsidiary of mBank, won the "Silver Paperclip" in the "Employee experience and internal communication" category for the project "Theory of Acids and Principles. On good chemistry with customers".

The mBank series also won first place in the "Innovation" 2023 competition, in the "Innovation in Audio Communication" category. The judges appreciated the innovation and uncommon combination: a crime series, a bank and an educational campaign.

mBank’s initiatives related to diversity and creating inclusive culture once again appreciated

Responsible Business Forum once again named mBank as one of the best Polish employers in terms of managing diversity and building inclusive culture. Inclusive banking results directly from mBank's strategy. The Diversity Charter Award recognizes employers who support DEI (diversity, equity, inclusion) areas. The competition is organized by the Diversity Charter organization supported by the Responsible Business Forum.

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Responsible Business Forum also acclaimed 10 projects which mBank managed in 2022. Their descriptions were compiled in the latest “Responsible Business in Poland. Good Practices” report. Amongst awarded mBank projects were: Help for Ukraine, mBank volunteers’ support for the Finale of the Great Orchestra of Christmas Charity, “People are awesome” campaign and cybersecurity test, mBank Foundation “Maths in green” book, Financing the energy transition, mBank’s decarbonization, Finance products which support ESG, Diverse and inclusive culture, Financial health of the clients, and Sustainable Development Code for Suppliers and Partners of mBank S.A. and Sustainability (ESG) Guide for mBank Group Suppliers.

mBank’s Brokerage Bureau was awarded by Warsaw Stock Exchange

Warsaw Stock Exchange (WSE) recognized mBank’s Brokerage Bureau for the highest activity on the futures market in 2022. WSE appreciated mBank’s Brokerage Bureau’s role in the derivatives market. The prizes were awarded during grand Stock Exchange Gala 2022 celebration.

Paynow payment gateway winner of the e-Commerce Poland Awards contest

Paynow payment gateway won the 11th edition of e-Commerce Polska Awards in the Innovative e- payment solution category. mBank designed the payment gateway in line with the latest trends in e- commerce. The award was collected by mBank and its subsidiary: mElements S.A.

Market highly regards analysts from mBank’s Brokerage Bureau

Four analysts from mBank’s Brokerage Bureau were distinguished in the 21st ranking published by the Parkiet daily. The ranking reflects the opinions of market participants. The ranking is divided into 14 sector categories. Analysts from mBank’s Brokerage Bureau were the winners in four of them: the energy sector, technical analysis, the health and biotechnology sector, and the telecommunications, media and e-commerce sectors.

More information on awards and distinctions can be found on the Bank’s website in the “Press Centre” section: https://en.media.mbank.pl/ .

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2.1. Macroeconomic environment

Economy and the banking sector in Poland

Source: Statistics Poland (GUS), Eurostat, Polish Financial Supervision Authority.

1 Data as at the end of 2022

2 Data as at December 2023 (as released on February 15, 2024)

3 Data as at September 30, 2023

Summary of developments

Preliminary data from the Central Statistical Office (GUS) indicated that the Polish economy grew by 0.2% in 2023, which is significantly lower than in 2022, when we saw growth of more than 5%. The main reason for the slowdown was the reversal of the inventory cycle, which built up throughout 2021 and 2022. Weakness was also not resisted by consumer demand, which was evident in two ways. Last year brought a deceleration in both exports and imports, but it was the second variable that declined more sharply. As a result, net exports were one of the main components of growth in 2023. Private consumption also performed poorly, with a negative contribution to growth. This is a big change from the previous two years. The main reason for this were high interest rates, as well as still high inflation, which weakened purchasing power. Finally, investment turned out to be very strong, to which both the private and public sectors contributed. Poland's GDP growth still looks promising compared to regional economies.

Depth of recession and pace of upswing in the region (Q4 2019 = 100)

Source: Own calculations based on Macrobond.

Inflation remained high through 2023, averaging 11.4%. While this is still very far from the target, it is worth noting the decline compared to 2022. Food and energy prices were most responsible for the slowdown in inflation, although core inflation also started falling in the second half of the year. The faster-than-expected extinction of the effects of food and energy shocks may have supported this trend.

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Source: Own calculations based on GUS.

Last year brought declines in yields on Treasury securities along the entire yield curve. This was aided by the decisions of the Monetary Policy Council (MPC), which in the second half of the year decided to cut interest rates by a total of 100 b.p. As a result, the main interest rate at the end of the year reached 5.75%. The MPC's reaction function changed as a result of the October parliamentary elections. Since then, the MPC has clearly begun to emphasize more strongly upward risks to inflation due to regulatory factors, but also expansionary fiscal policy. The planned net borrowing needs in 2024 are expected to be more than PLN 250 billion, but the market has taken this figure quite well. Supporting this is undoubtedly the unlocking of EU funds under the Recovery Fund. Another issue is the still high excess liquidity of the domestic banking sector, which should support demand for Treasury securities. The new government has helped improve market sentiment, which has resulted in a further decline in Treasury debt yields and appreciation of the zloty.

Polish Treasury bond yields

Source: Bloomberg.

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Source: Bloomberg

Banking sector

Poland: Household loans and deposits (excl. FX effect)

Source: Own calculations based on NBP data.

In 2023, we saw a marked increase in household deposits, helped by a very good labour market situation. The unemployment rate remained low throughout the year, and annual wage growth remained in double digits. Revenue was also supported by fiscal transfers. At the same time, there was a noticeable improvement in terms of credit creation, to which the NBP's interest rate cuts and the implementation of the "2% Safe Credit" programme contributed. In the case of the corporate sector, the dynamics of deposits did not change so much, and the rate of credit creation slowed down.

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Source: Own calculations based on NBP data.

Economy and the banking sector in the Czech Republic

Source: Eurostat, Česká národní banka (CNB), Český statistický úřad.

1 Data as of end of 2022

2 Cumulative data for 9 months (as at September 30, 2023)

GDP, inflation, interest rates and FX rates

Czech GDP remains stagnant, as evidenced by the fact that the GDP level has not managed to return above its pre-pandemic level until Q3 2023. The long-term weakness of the Czech economy can be linked to its exposure to the automotive market, which involves a heavy reliance on economic activity in Germany. The decomposition of growth shows weakness in consumer demand already from the second half of 2022. In 2023, we also saw a negative contribution to growth from the accumulation side (investments including inventories). At the same time, foreign trade had a positive impact on growth. However, this shows not the strength of exports, but a significant slump in domestic demand.

Throughout the previous year, we saw inflation decelerating. The annual CPI declined from over 17% in January 2023 to 6.9% in December. As a result, the average annual CPI was 10.7%. Weakness in economic activity resulted in a marked deceleration in core inflation. Over the course of 2023, we saw core inflation fall from 12.3% to 3.6%. Inflation declines are widespread across the basket.

Such a significant magnitude of disinflation, combined with a gloomy outlook for GDP growth, encouraged the central bank to cut interest rates in December by 25 b.p. It is expected that this cycle will continue into the new year, and the scale of rate cuts may even accelerate.

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Banking sector

The Czech banking sector in 2022 returned to its favourable development observed in years preceding the outbreak of Covid-19 pandemic. It continued to demonstrate high profitability in 2023, with return on equity (ROE) oscillating around 15%. It was backed by broadly stable net interest income, reflecting a small contraction of margin despite unchanged monetary policy rates. Cost of deposits increased further, also due to their evolving term structure, while development of rates on new loans was mixed, with rising pricing of mortgages and slightly declining for consumer credit. Net fee and commission income improved marginally. Good cost discipline allowed for keeping the rise of operating expenses below the inflation pace. Loan loss provisions persisted at low level, translating into risk costs close to zero.

Despite economic slowdown and high interest rates, asset quality remained very resilient in the Czech Republic as evidenced by a decrease of NPL ratio to 1.7% at the end of 2023 from 1.9% observed a year earlier, which is the second lowest level compared to other countries in the CEE region. Funding and liquidity profiles continued to be solid with the sector’s loan-to-deposit ratio of 65%. Czech banks have also been very well-capitalized. A decline in the aggregate risk weight coupled with growth of own funds offsetting an increase in total risk exposure amount contributed to their robust position. At its meeting on financial stability issues in November 2023, the Board of ČNB decided to leave the countercyclical capital buffer rate at 2.0% on the basis of an assessment of cyclical systemic risks.

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Having passed the contraction phase in H1 2021, corporate loans in the Czech Republic started rebounding and reached the growth pace of around 10% in Q3 2022. Their development in 2023 was volatile, with dynamics averaging at mid-single digit. Due to a difference in interest rate levels, the currency mix of financing for enterprises changed further, with falling lending in koruna and rising fraction of credit granted in euro. The share of non-performing loans in the total volume of loans to non- financial corporations was constantly declining from the end of 2021. It went down to historically low level of 2.6% in December 2023 from 3.4% a year earlier. Companies kept solid liquidity, through passing growing operating costs on their customers. These inflows supported growth of corporate deposits, which slowed down in H2 2023 due to base effects .

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Source: Eurostat, Národná banka Slovenska (NBS).

1 Data as of end of 2022

2 Cumulative data for 9 months (as at September 30, 2023)

GDP, inflation and interest rates

The Slovak economy has fared better compared to the Czech one, and GDP levels are currently above the pre-pandemic ceiling. However, the structure of growth is similar to other economies in the region. Namely, private consumption performed less well, while investment looked very good. According to the central bank's December forecast, full-year GDP growth could reach 1.2%. It is worth noting that, as in Poland, net exports will be a clear growth-supporting factor, although this will be mainly due to the weakness of domestic consumption (a significant drop in imports).

As in other countries, inflation in Slovakia slowed throughout last year. The annual rate fell from over 15% to less than 6%. We saw a similar decline in core prices. The Slovak central bank's December forecast shows inflation falling to 2.8% in 2024, compared to 10.7% last year. At the HICP level, the decline is expected to be even slightly deeper - 2.5%. Remarkably, however, the central bank forecasts a rebound in inflation toward 4% in subsequent years.

Over the 2023 horizon, the European Central Bank raised the deposit rate to 4% from 2%. Over the horizon of the new year, monetary easing can be expected, encouraged by the stabilization of inflation at the eurozone level near the 2% target and a weak picture of economic activity.

Banking sector

The profitability of Slovak banks improved further in 2023, after many years when it was weaker than in other countries of the CEE region. The increase was almost entirely driven by rising net interest income, especially from the corporate sector, accompanied by an uptrend of margin. Lending rates climbed, while slowdown in loan demand reducing the need for additional sources of funding allowed for moderate growth of deposit cost. Development of other results items barely impacted the dynamics of net profit. Net fees and commissions repeated their level from 2022. Restrained expansion of administrative expenses was offset by lower loan loss provisions. At the beginning of December 2023, Slovak government approved a new tax on banks as part of a set of measures aimed at consolidating public finances and reducing a soaring deficit. The 30% windfall tax on profits was determined to be effective as of January. The levy is then set to fall 5 percentage points per year to 15% in 2027.

The NPL ratio for Slovakia is among lowest in the CEE region, reaching 1.6% at the end of 2023, and maintaining at the same level as a year earlier. Similar dynamics of loan expansion and the stock of non- performing receivables contributed to stable asset quality. The overall loan-to-deposit ratio continued to be above 100% in 2023, but including covered bonds and other issued debt securities, which are popular source of funding for Slovak banks, it would amount to around 95%. The sector’s total capital ratio was supported by slightly faster growth in own funds than in its risk-weighted assets, strengthening the resilience against potential unfavourable developments. Národná banka Slovenska increased the countercyclical capital buffer (CCyB) rate by 0.5 p.p. to 1.5% with effect from August 2023.

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After being on a decelerating path over recent years, total loans to households broke the trend in March 2021. The annual growth rate was increasing until mid-2022, when it exceeded 11%. Then, along with interest rate hikes, it started steadily weakening to 4% at the end of 2023. The development of portfolio was predominantly driven by mortgage loans and some time lag to the changes in their origination. In H1 2022 many households accelerated their decision to apply for a financing for the purchase of flat or house or for an early resetting of the rate fixation period for an older loan. It was followed by a sharp drop of demand and mortgage lending market stabilised at new lower levels later in 2023. Despite a downtrend in prices of residential real estate in all regions of the country which began around mid-2022 and continued in 2023, housing affordability in Slovakia has remained at its worst level in a decade. In contrast, consumer credit stopped shrinking in H2 2022 and reached the highest dynamics since the outbreak of Covid-19 pandemic, reflecting increased need for financing due to higher inflation. After improvement recorded in preceding years, the share of non-performing loans in the total volume of loans to households remained broadly stable during 2023 at around 1.8%. For both mortgage and consumer credit, the indicators have been at historical lows. The post-pandemic surge in consumer spending and subsequent period of high inflation dampened the inflow of new retail funds. Growth of household deposits dropped from 10% observed in Q2 2021 to a negative territory. A one-year period of contraction ended in Q4 2023, with an increase of above 2% recorded in December.

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2.2. Market and regulatory environment

mBank Group is an active participant and often a leader of changes introduced in anticipation of and in response to developments in its environment, including the area of regulations and technology. The employees of mBank Group spare no effort in proactively adjusting the offer and principles of operation to new challenges, always with an eye on building top quality relationships with stakeholders. Some of the requirements imposed on mBank and the Group subsidiaries do not affect clients directly, but still involve a heavy workload connected with adjusting internal processes. Below we discuss selected key developments significantly affecting mBank Group observed in 2023 or anticipated in the nearest future. Capital requirements as well as regulations on accounting and reporting standards have been addressed in following, dedicated sections of this report.

Judgement of the Court of Justice of the European Union in Case C-520/21

On June 15, 2023, the Court of Justice of the European Union (CJEU) passed a judgement regarding remuneration for the use of capital. The CJEU ruled as follows: In the context of the annulment in its entirety of a mortgage loan agreement on the ground that it cannot continue in existence after the removal of the unfair terms, Article 6 (1) and Article 7 (1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as:

■ not precluding a judicial interpretation of national law according to which the consumer has the right to seek compensation from the credit institution going beyond reimbursement of the monthly instalments paid and the expenses paid in respect of the performance of that agreement together with the payment of default interest at the statutory rate from the date on which notice is served, provided that the objectives of Directive 93/13 and the principle of proportionality are observed, and

■ precluding a judicial interpretation of national law according to which the credit institution is entitled to seek compensation from the consumer going beyond reimbursement of the capital paid in respect of the performance of that agreement together with the payment of default interest at the statutory rate from the date on which notice is served.

Judgement of the Court of Justice of the European Union in Case C-645/22

On October 12, 2023, the CJEU ruled that Article 6 (1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as precluding a national court, where it has found that a contract cannot remain valid following the removal of an unfair term and the consumer concerned expresses the intention to preserve that contract by amending that term, from ruling on the measures to be taken to restore the effective balance between the rights and obligations of the parties to that contract without first examining the consequences of annulling that contract in its entirety, even where that court has the possibility of replacing that term with a supplementary provision of national law or with a provision applicable where those parties so agree.

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On December 7, 2023, the Court of Justice of the European Union ruled on the question whether the principles of effectiveness and equivalence preclude the judicial interpretation of national legislation in the case where a contract contains an unfair term without which it cannot be performed. The CJEU ruled that Article 6 (1) and Article 7 (1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts preclude the judicial interpretation of national law according to which the exercise of the rights which the consumer draws from that directive is conditional on the lodging, by that consumer, before a court, of a declaration referred to in the questions referred for a preliminary ruling and preclude the compensation sought by the consumer concerned in respect of the restitution of the sums paid by him or her from being reduced by the equivalent of the interest which that banking institution would have received if that agreement had remained in force.

Judgement of the Court of Justice of the European Union in Case C-756/22

On December 11, 2023, the CJEU passed a judgement in case C-756/22 stipulating as follows: “In the context of the annulment in its entirety of a mortgage loan agreement between a consumer and a banking institution on the ground that it cannot continue in existence after the removal of the unfair terms, Article 6 (1) and Article 7 (1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as precluding a judicial interpretation of national law according to which the credit institution is entitled to seek compensation from the consumer going beyond reimbursement of the capital paid in respect of the performance of that agreement together with the payment of default interest at the statutory rate from the date on which notice is served.”

Judgement of the Court of Justice of the European Union in Case C-28/22

On December 14, 2023, the Court of Justice of the European Union passed a judgement stipulating that it is unacceptable that following the cancellation of a mortgage loan agreement between a consumer and a seller or supplier on account of unfair terms contained in that agreement, the limitation period for the claims of the seller or supplier stemming from the nullity of that agreement starts to run only as from the date on which the agreement becomes definitively unenforceable, whereas the limitation period for the claims of the consumer stemming from the nullity of that agreement begins to run as from the day on which the consumer became aware, or should reasonably have become aware, of the unfair nature of the term entailing such nullity.

The key information about regulations and court rulings connected with mortgage and housing loans granted in CHF to individuals is provided in Note 34 to the Consolidated Financial Statements of mBank S.A. Group for 2023.

Judgement of the Court of Justice of the European Union in Case C-326/22

On October 12, 2023, the CJEU answered the question about consumer loans referred for a prejudicial ruling by a Polish court. The CJEU ruled that a consumer may request, from the creditor, a copy of the agreement and all information concerning the repayment of the credit not featured in the agreement itself, but which is necessary for verifying the calculation of the sum owed by the creditor by virtue of the reduction in the total cost of the credit due to its early repayment and for allowing that consumer to bring a possible action for the recovery of that amount. Having regard to that objective of ensuring a high level of protection for consumer interests, it is necessary that the consumer have all information concerning the cost of the credit to allow him or her to establish its total extent. It follows that it is for the creditor to provide the information necessary to establish the amount of the reduction in the total cost of the credit to which the consumer is entitled.

Safe 2% Loan and Home Savings Account – Act of April 14, 2023 on State Aid for Home Buyers

On July 1, 2023, an act entered into force introducing, among others, the “Safe 2% Loan”, i.e. a mortgage-backed loan with instalments that are or have been eligible for a subsidy. In order to be eligible for the loan, applicants must meet several conditions, including that they cannot own a flat, a house or a cooperative member’s ownership right to a residential dwelling unit and must meet the age criterion. Originally, the Safe 2% Loan was to be available until December 31, 2027; however, on December 28, 2023, Bank Gospodarstwa Krajowego announced that the statutory limit on subsidies to the Safe 2% Loan had been reached and that as of January 2, 2024, banks would no longer accept applications. The borrowers whose applications submitted by December 31, 2023 inclusive were correctly registered by participating banks in the subsidy registration system by the end of January 7, 2024, were given the right to receive the subsidy.

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The instalment subsidy will be available for 10 years. The loan will be repaid in equal principal instalments (decreasing principal and interest instalments). In accordance with information published on the website of the Ministry of Development and Technology, in the 10-year period the borrower will pay 2% interest on the loan plus margins, commissions and other fees of the lending bank (if applicable).

Moreover, the act introduces a home savings account. Systematic payments to this account (at least 11 payments of at least PLN 500 in a year) will be rewarded with an additional savings bonus from the state budget. The bonus will be equal to the annual inflation rate or the rate of change in the price per one square metre of a usable area of a residential building. Every year, the rate more preferrable to savers will apply. In addition, savings will bear interest as per the table of interest rates of the bank operating the account and the interest will be exempt from the capital gains tax.

Amendments to Recommendation J of the Polish Financial Supervision Authority (KNF) on Rules for Collecting and Processing Real Estate Market Data by Banks

On March 24, 2023, the Polish Financial Supervision Authority passed amendments to Recommendation J setting out good practices for banks collecting and processing real estate market data saved in their own databases and in inter-bank databases which support the management of risk posed by mortgage-backed credit exposures. The amended version comprises 10 recommendations. It applies to all loans secured by a mortgage granted on or after its effective date. Among others, Recommendation J governs the collection and processing of real estate market data by banks and the creation and use of databases.

Amendments to Recommendation S of the Polish Financial Supervision Authority (KNF) on Best Practice for the Management of Mortgage-Backed Credit Exposures

On June 19, 2023, the Polish Financial Supervision Authority passed amendments to Recommendation S, a best-practice guideline for the management of mortgage-backed credit exposures. The amended Recommendation S applies to banks’ participation in the government programme whereby Bank Gospodarstwa Krajowego offers guarantees for mortgage loans with no downpayment under the rules set out in the Act on Guaranteed Housing Loan. Banks will no longer be obliged to request downpayments and will be allowed to lend the full value of the property posted as collateral. The amendments also cover provisions concerning the method of assessing creditworthiness of clients applying for the Safe 2% Loan. Additionally, the new KNF provisions present the methodology for calculating the interest rate buffer. The buffer takes into account fluctuations in the interest rate level observed when measuring and assessing the risk associated with mortgage-backed credit exposures. The interest rate may be variable or periodically fixed. The Polish Financial Supervision Authority expects banks and branches of credit institutions to align their operations with the amended Recommendation S by July 1, 2024.

Act of October 6, 2022 on Amending Acts to Combat Usury

The act entered into force on May 18, 2023. It significantly reduces the limits on non-interest costs of consumer credit. The non-interest costs independent of the lending period were reduced from 25% to 10% of the total loan amount. The non-interest costs dependent on the lending period were reduced from 30% to 10% of the total loan amount. A separate cap on non-interest credit costs was set for loans with a repayment period of less than 30 days – at a maximum of 5% of the total loan amount. The legislator significantly reduced the limit on non-interest costs of consumer credit in the entire lending period from 100% to 45% of the total loan amount. The new limits on non-interest costs of consumer credit entered into force on December 18, 2022 but do not apply to agreements signed before this date.

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The directive applies to certain credit agreements (excluding, among other things, mortgage loans and loans exceeding EUR 100,000). It lays down a “common framework for harmonisation of certain aspects of the laws, regulations and administrative provisions of the Member States concerning credit agreements for consumers”. It regulates, among others, matters connected with pre-contractual information (e.g. information included in advertising, adequate explanations), allowing bundling practices and prohibiting tying practices, a lack of inferred agreement of the consumer, the obligation to assess the creditworthiness of the consumer, the form and content of credit agreements, a right of withdrawal, early repayment, and the rules for the calculation of the annual percentage rate of charge. The directive was published in the Official Journal of the European Union on October 30, 2023. It repealed Directive 2008/48/EC with effect from November 20, 2026. Member States are obliged to publish, by November 20, 2025, the laws necessary to implement the directive. The new laws will apply from November 20, 2026.

Act of December 1, 2022 on Financial Information System

The act sets out the rules for operation of the Financial Information System (SinF). It entered into force on February 10, 2023. It enables quick and smooth access to information on accounts held for individuals and entities linked to serious crime. The primary purpose of collecting account information is to combat money laundering and terrorism financing. The act obliges the bank to provide to SInF information on accounts, agreements on safekeeping of items and securities, and agreements on safe deposit box. Such information will be processed in SInF for five years from the account closure date or from the agreement termination/expiry date.

Act of May 26, 2023 on Amending Certain Acts to Mitigate Certain Consequences of Identity Theft

The underlying purpose of the act is to increase protection against fraud resulting from “theft of data enabling unique identification of individuals”, such as the personal identification number (PESEL). It aims at restricting the possibility of using stolen data to assume financial and property obligations. According to the new regulations, the bank will be obliged to verify if the PESEL number of a consumer has been entered into the register of blocked PESEL numbers before concluding certain agreements with the consumer and before a bank account holder makes a cash withdrawal at the bank’s cash desk. If, at the time of concluding an agreement, the consumer’s PESEL number was entered into the register of blocked PESEL numbers, the bank will not have the right to satisfy its claims under this agreement or sell the receivables arising from it.

Stance of the Office of the Polish Financial Supervision Authority (UKNF) on proper use in the financial sector of solutions for establishing business relationships without the physical presence of the client

On September 29, 2023 the Office of the Polish Financial Supervision Authority (UKNF) published its stance on proper use in the financial sector of solutions for establishing business relationships without the physical presence of the client. It contains good practices in fulfilling obligations arising from the Act on Combating Money Laundering and Terrorism Financing and related to, among other things, actions that obligated institutions supervised by the Polish Financial Supervision Authority (KNF) should take in the process of establishing business relationships with new clients without their physical presence. It also applies to the use of services provided by third parties in accordance with the national law. It also defines good practices in implementing policies and procedures, the internal control system and internal supervision applied in cases where due diligence measures are remotely applied to a client.

Regulation (EU) 2022/2554 of the European Parliament and of the Council on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014, (EU) No 909/2014 and (EU) 2016/1011 (Digital Operational Resilience Act – DORA)

The DORA regulation establishes uniform requirements for the security of network and information systems supporting the business processes of financial entities. These requirements will assist in achieving a high common level of digital operational resilience. The DORA regulation sets out, among other things, requirements applicable to financial entities. The requirements cover:

■ information and communication technology (ICT) risk management;

■ reporting major ICT-related incidents to the competent authorities;

■ reporting major operational or security payment-related incidents to the competent authorities by financial entities;

■ digital operational resilience testing;

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■ information and intelligence sharing in relation to cyber threats and vulnerabilities;

■ measures for the sound management of ICT third-party risk.

The DORA regulation entered into force on January 16, 2023. Its addressees must align their operations with the new requirements by January 17, 2025.

Act of April 14, 2023 on Amending the Act on Investment Funds and Managing Alternative Investment Funds, the Act on Bonds and the Act on the Bank Guarantee Fund, Deposit Guarantee Scheme and Resolution and Certain Other Acts

The Act introduces certain amendments to the Act on Bonds of January 15, 2015 by adding a new category of bonds, i.e. capital bonds. Banks will classify this bond category as regulatory capital. Capital bonds may be issued for the purpose of classifying as own funds as Additional Tier 1 or Tier 2 instruments, in accordance with Article 52 or Article 63 of Regulation (EU) No. 575/2013 of the European Parliament and of the Council. The act specifies in detail the scope of data and information that must be contained in the terms and conditions of a capital bonds issue, including a detailed description of the risk factors arising from a specific loss absorption mechanism if the trigger event specified in the terms and conditions occurs. Capital bonds will become due upon declaration of bankruptcy or initiation of liquidation of their issuer. The act introduces an instrument to cover capital shortage by supporting institutions that apply to State Treasury for assistance in achieving the applicable capital requirements. The State Treasury will then temporarily acquire shares or bonds of such an institution.

Moreover, the act introduces amendments to the Banking Law Act of August 29, 1997 governing solutions regarding subordinated loan agreement taken out to classify it as an Additional Tier 1 instrument. The Management Board of the Bank will be able to write off such a loan by way of a permanent write-off or a temporary write-off reducing the subordinated loan amount in whole or in part upon the occurrence of an trigger event specified in the agreement. The claim for repayment of the subordinated loan will become due upon the bank's declaration of bankruptcy or liquidation. The act entered into force on October 1, 2023.

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council as regards sustainability reporting standards

ESRS, or the European Sustainability Reporting Standards, constitute a necessary complementation of the EU Corporate Sustainability Reporting Directive (CSRD, Directive (EU) 2022/2464 of 14 December 2022). The regulation specifies the rules for selecting metrics and the methods of addressing them in reports integrating sustainability matters, broken down into the environmental, social and corporate governance areas. The regulation will enter into force on January 1, 2024. The new reporting format will enable greater comparability of information between companies, ensure greater credibility of information thanks to the obligation to audit published information, and will assist market participants in in-depth analyses of the ESG aspects in their business.

Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023 supplementing the EU Taxonomy for the remaining four environmental objectives (Environmental Delegated Act)

On November 21, 2023 the European Commission published Commission Delegated Regulation supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council. It establishes the technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to the sustainable use and protection of water and marine resources, to the transition to a circular economy, to pollution prevention and control, or to the protection and restoration of biodiversity and ecosystems and for determining whether that economic activity causes no significant harm to any of the other environmental objectives. The regulation also changed the template for specific public disclosures for those economic activities. The regulation also introduces amendments to Delegated Regulation (EU) 2021/2178 on disclosure of non-financial information under Article 8 of the EU Taxonomy. It imposes an obligation on financial institutions to report the Taxonomy-eligibility of their exposures to new economic activities in the transition period from January 1, 2024 to December 31, 2025, and to report the Taxonomy-alignment of their exposures from January 1, 2026. In June 2023, amendments to Commission Delegated Regulation (EU) 2021/2139 supplementing the EU Taxonomy for the first two environmental objectives (Climate Delegated Act) were also introduced. They expand the scope of economic activities contributing to climate change mitigation and adaptation, mainly in the manufacturing and transport sectors.

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The regulation on green bonds was published on November 30, 2023 in the Official Journal of the European Union. It entered into force on December 21, 2023 and will apply from December 21, 2024 with the 18-month transition period to allow external auditors to provide their services after notifying ESMA. The regulation establishes a new standard for green bonds based on assets consistent with the EU Taxonomy for issuers and investors. The standard will constitute an alternative for the Green Bond Principles (GBP) standard of the International Capital Market Association (ICMA), which is currently commonly used on the market. The regulation requires, among other things, including information on green or sustainability bonds in the prospectus and preparing the so-called “factsheet” containing basic issue parameters in a strictly specified form.

Act on Amendments to Certain Acts to Ensure Financial Market Development and Protection of Financial Market Investors

On August 16, 2023 the Sejm adopted the Act on Amendments to Certain Acts to Ensure Financial Market Development and Protection of Financial Market Investors. The act amended 31 acts and introduced changes with regard to, among others, outsourcing and sub-outsourcing applicable to banks and investment firms, implementation of the so-called single banking license and the internal rating-based methods for banks. Moreover, the act also introduces numerous changes to the manner in which banks conduct brokerage activity, which is why work is underway to prepare a new implementing act in this regard to the Act on Trading in Financial Instruments. The act entered into force on September 29, 2023 with numerous exceptions provided for in the act.

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Source: Own calculations based on data from mBank, NBP, WSE, Česká národní banka (ČNB), Národná banka Slovenska (NBS), Fitch Polska, Polish Factors Association, Polish Leasing Association, press reports.

1 mBank Group ratios calculated as defined in chapter 4. “Financial position of mBank Group and mBank in 2023”, except for Net Interest Margin which was adjusted to sector calculation (net interest income divided by average total assets). Below presented are definitions for the sector data. According to the PFSA’s methodology, total income is decreased by a part of legal risk costs attributed to active FX mortgage loan portfolio, what negatively affects cost-to-income (C/I) ratio for the sector.

Sector data as at December 31, 2023 (released on February 15, 2024). Sector ratios calculated based on the monthly data of banking sector published by PFSA (banking sector together with branches of credit institutions).

Net interest margin : net interest income divided by average total assets (calculated based on the end-of-month data)

Cost/Income ratio (incl. banking tax): total costs (sum of administration costs and depreciation) divided by net total operating income.

Return on assets : profit for the year divided by average total assets (calculated based on the end-of-month data)

Return on equity : profit for the year divided by average total equity (calculated based on the end-of-month data)

Loan to deposit ratio : sum of loans and advances at amortised cost, loans and advances/other receivables at fair value through other comprehensive income and loans and advances/other receivables designated at fair value through profit or loss divided by deposits (measured at amortised cost) as of the end of period.

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What will 2024 be like for the Polish economy?

Source: mBank’s estimates as at February 1, 2024. YoY – year on year, EOP – end of period.

The economic outlook for 2024 looks quite optimistic. GDP growth is expected to accelerate to 3.5%, driven primarily by private consumption. A resilient labour market, a strong minimum wage hike, fiscal transfers and good consumer sentiment should support private consumption growth of 4.6%. At the same time, the investment outlook looks somewhat weaker due to the deceleration of public sector investment (the effect of the election calendar and the reduction in local government deposits). At the same time, private sector outlays should perform decently, helped by the energy transition. The path of inflation in 2024 may take a U-shaped form. The first half of the year should pass with increasingly lower inflation, while in the second half of the year it is expected to rebound (the effect of the removal of anti- inflationary shields and a rebound in economic activity). As a result, we could end 2024 with inflation higher than at the end of the previous year. In an environment of inflation persistence, including core inflation, the NBP is expected to maintain interest rates at current levels. With interest rate cuts abroad and stabilization of rates in Poland, the zloty may continue its moderate appreciation.

Banking sector and monetary aggregates

Source: mBank’s estimates as at February 1, 2024.

In 2023, we experienced a continuation of the deceleration in mortgage lending. At the same time, other loans, including in the corporate sector, performed better. During the year there was a recovery in the banking sector's equity, supported by lower interest rates on Treasury securities. A factor supporting the sector's profitability in 2024 may be an increase in demand for credit as a result of a potential new government mortgage subsidy program. A risk factor, on the other hand, is a possible form of credit vacations, although these should not be as costly as the previous version of the program.

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