Letter from the Chairwoman of the Supervisory Board of mBank S.A. to the
Shareholders
Dear Shareholders,
The
year
2023
did
not
bring
the
stability
we
have
all
been
waiting
for
since
the
outbreak
of
the
Covid-19
pandemic.
Russia’s
continued
hostilities
in
Ukraine
and
the
escalation
of
the
Israeli-Palestinian
conflict
in
Gaza
continue
to
fuel
the
sense
of
global
insecurity.
Geopolitical
uncertainty
is
one
of
the
biggest
obstacles
to
the
stability
of
the
global
financial
markets.
It
has
brought
back
a
series
of
well-known
risks
from
the
past
that
seemed
unlikely
to
return
any
time
soon:
inflation,
cost-of-
living
crises,
trade
wars,
capital
flight
from
emerging
markets,
widespread
social
unrest,
and
geopolitical
confrontations.
New
challenges
and
new
opportunities
emerge
in
view
of
the
rapid
development
of
generative
artificial
intelligence
technology
and
the
accelerating
climate
crisis.
Investments
in
the
implementation
of
the
European
Sustainable
Finance
Agenda
are
increasing
while
technological
advances open an optimistic vision of the future of the green transition.
According
to
the
latest
research
by
the
Polish
Bank
Association
for
2023,
banks
in
Poland
have
become
too
small
to
finance
significant
investment
projects.
The
banking
sector’s
assets
in
relation
to
GDP
have
fallen
to
88.5
percent
from
97.1
percent
in
2022.
This
puts
Poland
at
the
bottom
of
the
European
Union
ranking,
behind
other
countries
in
Central
and
Eastern
European
such
as
the
Czech
Republic
(131.4
percent)
or
Hungary
(108
percent).
This
is
worrying
as
Poland
has
for
years
reported
one
of
the
lowest
investment
rates
in
the
European
Union.
The
investment
needs
of
climate
transition
are
huge
as
we
have
to
catch
up
with
the
other
member
states
while
around
70
percent
of
energy
consumption
in
Poland
is
produced
from
fossil
fuels.
According
to
estimates
by
the
Polish
Sustainable
Finance
Platform,
the
cumulative
investment
gap
to
achieve
climate
neutrality
in
Poland
by
2050
will
be
between
EUR
1.64
trillion
and
EUR
2.04
trillion
between
2028
and
2050.
In
order
to
boost
the
banks’
ability
to
finance
the
economy,
it
is
essential
to
increase
the
banks’
capital,
which
is
difficult
due
to
the
industry’s
public
burden,
the
highest
in
Europe,
as
well
as
other
government
interventions
totalling
PLN
33
billion in the last two years.
Last
year
brought
a
sharp
slowdown
in
Poland’s
economic
growth.
GDP
growth
dropped
to
around
0.2
percent
from
5.3
percent
in
2022
but
the
bottom
of
the
cycle
appears
to
be
behind
us.
Price
indices
peaked
at
the
beginning
of
2023.
From
then
on,
inflation
dropped,
mainly
due
to
diminishing
cost
pressures
caused
by
the
global
supply
shock.
In
December
2023,
inflation
stood
at
6.1
percent
on
an
annualised
basis,
remaining
far
from
the
NBP’s
strategic
inflation
target.
Persistently
high
interest
rates
caused
a
slowdown
in
lending.
However,
the
government’s
“First
Housing”
programme
(2
Percent
Safe
Loan)
was
very
popular
among
consumers.
More
than
100,000
applications
were
submitted
for
a
preferential
loan
under
this
funding
scheme
in
2023.
Meanwhile,
the
volume
of
deposits grew steadily and their maturity mix evolved.
Despite
a
host
of
considerable
challenges
posed
by
the
demanding
external
environment,
the
mBank
Group
earned
its
highest
revenue
ever,
reaching
PLN
10.8
billion.
The
main
driver
of
growth
was
net
interest
income,
which
increased
by
21.7
percent
year-on-year.
This
was
clearly
driven
by
effective
management
of
deposit
and
loan
margins
in
a
high
interest
rate
environment.
Consequently,
the
net
interest margin increased from 3.71 percent in 2022 to 4.18 percent in 2023.
As
in
the
previous
two
years,
the
cost
of
legal
risk
associated
with
foreign
currency
mortgage
loans
remained
a
significant
burden.
The
case
law
was
predominantly
unfavourable
to
banks
in
2023,
aggravated
by
a
high
influx
of
new
lawsuits.
The
mBank
Group
recognised
legal
risk
costs
related
to
foreign
currency
loans
of
PLN
4.9
billion
in
the
profit
and
loss
account
for
2023.
These
costs
were
mainly
due
to
updated
assumptions
regarding
the
population
of
clients
litigating
against
the
Bank,
the
expected
distribution
of
court
judgments,
the
cost
of
the
settlement
programme,
and
changes
in
other
model
parameters,
in
particular
following
the
CJEU
judgment
in
case
C-520/21
on
remuneration
for
the
use
of
capital
in
the
event
of
invalidation
of
a
foreign
currency
loan
agreement.
Significant
progress
was
made
in
the
execution
of
the
programme
of
settlements
with
borrowers
as
an
alternative
to
lengthy
and
costly
litigation.
The
Bank
concluded
13,321
settlements
with
clients
as
at
the
end
of
2023;
compared
to
the
end
of
2022
(1,886
settlements),
this
demonstrates
high
efficiency
of
the
engagement.
The
provision
coverage
of
the
CHF-indexed
loan
portfolio
was
99.5
percent.
Combined
with
the
Bank’s
capital
allocated
to
the
"Foreign
Currency
Mortgage
Loans"
segment,
this
ensures
strong
protection
in
the
event
of
the
materialisation
of
legal
risks
relating
to
foreign
currency
loans.
At
the
same
time,
the
Bank
focused
on
its
cost
efficiency,
which
ensured a cost/income ratio (C/I) of 28.5 percent for 2023 (34.3 percent in 2022).
The
mBank
Group
closed
2023
with
a
pre-tax
profit
of
PLN
970.6
million.
Its
net
profit
was
PLN
24.1
million
against
a
net
loss
of
PLN
702.7
million
in
2022.
It
should
be
stressed
that
the
financial
performance
of
the
core
business,
i.e.
excluding
the
Foreign
Currency
Mortgage
Loans
segment,
confirms
the
effective
deployment
of
the
unique
features
of
the
business
model
and
opens
a
positive
outlook
to
continue
organic
growth
and
thus
increase
shareholder
value.
The
mBank
Group’s
core
business
generated
a
net
profit
of
PLN
5,041.9
million
in
2023,
twice
as
much
as
in
2022. The Group’s ROE was 40.0 percent in 2023 vs. 22.1 percent in 2022.
The
impact
of
adverse
factors
exerting
pressure
on
the
capital
ratios
was
mitigated
by
the
Bank’s
proactive
measures
to
maintain
robust
capital
buffers,
both
for
the
Tier
1
ratio
and
the
TCR
(14.71
percent
and
17.04
percent
for
Tier
1
and
TCR,
respectively, at the end of 2023).
This
was
possible,
among
others,
thanks
to
the
synthetic
securitisation
transaction
on
a
portfolio
of
retail
non-mortgage
loans
with
a
total
value
of
PLN
9.96
billion.
The
transaction
was
unique
in
many
respects,
both
in
its
value
(the
largest
securitised
portfolio
in
Central
and
Eastern
Europe)
and
by
virtue
of
its
innovative
edge
and
comprehensive
scope;
it
was
structured
with
synthetic
excess
spread
(SES)
under
the
new
draft
RTS
(EBA/RTS/2023/02)
in
line
with
the
STS
criteria
(simple,
transparent
and
standardised
securitisation)
under
Regulation
2021/557
of
the
European
Parliament
and
of
the
Council.
In
addition,
the
MREL
requirements
were
more
than
met
with
the
issuance
of
green
senior
non-preferred
bonds
at
a
total
nominal
value
of
€750
million
under
the
EMTN
Programme.
This
is
the
largest
bond
issue
in
mBank’s
history
and
the
second
benchmark
transaction
under
the
mBank
Group’s
Green
Bond
Framework.
More
than
120
investors
participated
in
the
bookbuild,
with
demand
hitting
€1.48
billion
(73
percent
were
ESG
investors).
The
success
of
this
issue
demonstrates
that
ESG
factors
are
key
in
European
capital
market
transactions
and
that
well-structured
green
bonds
attract
a
large
and
diversified
investor
community.
Furthermore,
the
bank
demonstrated
the
stability
and
safety
of
its
liquidity
management,
as
evidenced
by
high
levels
of
the
liquidity
ratios LCR and NSFR and a net loan-to-deposit ratio of 61.2 percent.
This
performance
was
possible
thanks
to
the
determined
implementation
of
the
mBank
Group’s
strategy
for
2021-2025
"From
an
icon
of
mobility
to
an
icon
of
possibility."
Responding
to
the
dynamically
changing
environment,
mBank
performed
a
fundamental
review
of
its
development
directions
and
strategic
objectives
in
2023.
The
Supervisory
Board
took
note
of
the
Management
Board’s
report
on
the
status
of
implementation
of
the
mBank
Group’s
strategy
and
the
revision
of
selected
business
targets
and
measures
while
maintaining
the
Group’s
key development directions.
The
mBank
Group
constantly
strives
to
be
a
leader
in
sustainable
development
in
the
banking
industry,
which
is
why
the
ESG
strategy
is
an
integral
part
of
the
mBank
Group
Strategy.
The
Group’s
determination
to
consistently
integrate
environmental,
social
and
governance
factors
in
every
part
of
its
business
is
evidenced
by
its
revised
aspirations
and
key
directions
of
action.
The
Bank
supports
businesses
and
consumers
in
the
green
transition
and
offers
a
reduced
margin
for
mortgage
loans
on
properties
that
meet
high
energy
efficiency
standards.
The
Bank
works
to
increase
its
participation
in
financing
RES
projects
and
sustainable
financing,
and
in
arranging
green
bond
issues
for
customers.
In
2023,
mBank
committed
more
than
PLN
5.3
billion
in
sustainable
loans
and
almost
PLN
4.4
billion
in
capital
for
sustainable
financing,
including
more
than
PLN
1
billion
in
sustainable
and
green
bonds
and
more
than
PLN
1
billion
in
Sustainability
Linked
Loans.
In
2023,
mBank
continued
its
work
on
reducing
and
reporting
its
carbon
footprint
and
on
submitting climate targets to the Science Based Targets initiative.
An
integral
part
of
mBank’s
ESG
strategy
is
building
an
inclusive
work
environment.
The
Bank
was
once
again
recognised
by
the
Responsible
Business
Forum
as
one
of
the
best
employers
managing
diversity
and
building
an
inclusive
culture.
The
Bank
is one of the best rated employers according to the Kincentric Poland survey.
Communication
with
shareholders
and
investors
is
of
key
importance
for
mBank.
Thanks
to
the
high
utility
value
of
its
reports,
the
Bank
won
for
the
eleventh
consecutive
year
the
special
award
"The
Best
of
the
Best"
in
last
year’s
edition
of
The
Best
Annual
Report
competition
organised
by
the
Institute
of
Accounting
and
Taxation
for
the
best
annual
report
in
the
category
of
financial
institutions.
In
the
same
ranking,
the
Bank
once
again
received
an
award
for
the
best
corporate
governance compliance statement.
It
is
gratifying
to
see
that
the
mBank
Group
remains
aware
of
the
responsibility
but
also
the
opportunity
that
comes
from
developing
sustainable
finance
and
an
ESG
agenda.
It
is
important
to
note
the
actions
taken
by
mBank
to
maintain
its
position
as
a
leader
in
digitalisation
in
banking.
The
expansion
of
the
range
of
services
available
in
remote
channels,
including
new
functions
in
the
mobile
application
for
retail
clients
and
the
mBank
Company
Mobile
application
for
corporate
clients,
and
the
development
of
personal
finance
management
functionalities
contributes
to
the
growth
of
mBank’s
base
of
both
retail
and
corporate
clients,
especially
those
using
mobile
applications.
In
the
age
of
a
technology
race,
mBank
creates
its
products
and
services
to
be
intuitive
and
easy
to
use,
in
line
with
the
slogan
"technology
at
your
service".
What
is
essential
to
clients
is
a
sense
of
security,
a
priority
also
in
the
digital
context.
mBank’s
audio
crime
series
"Jazgot",
aimed
at
raising
public
awareness
of
cyber
security,
was
awarded
gold
in
the
"Golden
Clips"
competition
in
the category "Content Marketing - Branded Content".
On
behalf
of
the
Supervisory
Board,
I
would
like
to
thank
the
Management
Board
and
the
employees
of
mBank
for
their
cooperation
and
commitment,
and
you,
dear
Shareholders,
for
your
trust.
I
am
confident
that
despite
the
uncertainty
in
many
aspects
of
socio-economic
life
and
the
dynamically
changing
regulatory
environment,
mBank
will
continue
to
successfully
implement
its
strategy
"From
an
icon
of
mobility
to
an
icon
of
possibility"
in
2024,
generating
the
expected
return
on
investment
and
ensuring
stable
development
of
mBank,
so
important
to
clients,
employees, regulators, and other stakeholders.
Professor Agnieszka Słomka-Gołębiowska
Chairwoman of the Supervisory Board