Letter of the President of the Management Board of mBank S.A. to the Shareholders
Dear Shareholders,
After
the
turbulences
which
the
world,
Poland,
the
local
banking
sector
and
our
company
faced
in
2022,
we
did
not
enjoy
a
significant
calming
down
in
2023.
The
number
of
challenges
ahead
of
us
did
not
diminish,
and
the
operational
environment
in
its
macroeconomic,
geopolitical,
regulatory
and
business
dimensions
did
not
become
any
less
uncertain
and
complex.
The
collapse
of
Silicon
Valley
Bank
and
several
other
regional
banks
in
the
United
States
and
the
acquisition
of
Credit
Suisse
by
UBS in Europe reverberated widely. With these events, market attention focused on liquidity, interest
rate
risk,
and
the
valuation
of
assets
on
the
balance
sheets
of
financial
institutions.
In
Poland,
despite
high
inflation
persisting
far
from
the
target,
the
Monetary
Policy
Council
decided
to
reduce
the
reference
rate
twice,
surprising
in
particular
with
an
unexpected
cut
by
75
basis
points
in
September
2023.
However,
that
did
not
have
a
material
impact
on
lending,
which
remained
subdued
in
most
segments.
The
only
exception
was
a
rebound
in
mortgages
due
to
the
launch
of
the
government’s
“2%
Safe
Mortgage”
programme
in
the
second
half
of
the
year.
The
availability
of
subsidies
for
eligible
clients
resulted
in
a
massive
increase
in
new
sales.
From
the
perspective
of
the
banking
sector,
the
key
concerns
included
the
benchmark
reform
and
its
timetable,
as
well
as
the
evolution
of
the
legal
environment,
with
increasingly
unfavourable
jurisprudence
in
CHF
mortgage
cases
and
a
trend
where long-term contracts are being challenged on no grounds.
In
2023,
we
achieved
excellent
operating
performance
on
our
core
business.
We
generated
record
total
income
of
PLN
10.8
billion
thanks
to
our
highest-ever
net
interest
income
of
almost
PLN
8.9
billion.
On
a
comparable
basis,
excluding
the
impact
of
the
“credit
holidays”,
it
grew
by
21.7%
year
on
year.
Active
shaping
of
the
term
structure
and
product
mix
on
both
sides
of
the
balance
sheet,
including
accurate
management
of
deposit
rates,
allowed
for
improvement
of
the
net
interest
margin
by
almost
0.5
p.p.
compared
to
2022
to
4.2%.
Net
fee
and
commission
income
amounted
to
PLN
1.9
billion
and
was
lower
by
9.6%
year
on
year.
The
main
reason
for
the
drop
were
elevated
costs
related
to
client
compliance processes as well as product sale intermediaries.
Total
costs
at
PLN
3.1
billion
decreased
by
7.4%
year
on
year
as
a
result
of
the
base
effect
as
the
year
of
2022
was
burdened
by
extraordinary
charges
to
the
Institutional
Protection
Scheme
(IPS)
and
the
Borrowers’
Support
Fund,
as
well
as
higher
payments
to
the
Bank
Guarantee
Fund.
Excluding
these
compulsory
contributions,
mBank
Group’s
cost
base
grew
by
17.0%
year
on
year.
The
double-digit
dynamics
of
personnel
expenses
was
a
function
of
salary
increases
for
our
employees
and
development
of
headcount,
which
expanded
by
around
300
FTEs
during
the
year.
Material
costs
were
driven
by
administration,
real
estate,
IT
and
marketing
expenses.
The
capital
expenditures
related
mainly
to
projects
aimed
at
future
growth
and
implementing
new
and
enhancing
existing
functionalities
of
our
digital
platforms.
Despite
significant
inflationary
pressures,
amid
favourable
conditions
resulting
from
the
level
of
interest
rates,
we
maintained
excellent
efficiency,
evidenced
by
a cost/income ratio of 28.5% and a leading position among our peers.
The
higher
cost
of
risk,
which
reached
93
bps
in
2023,
was
driven
by
macroeconomic
and
market
factors
impacting
clients
as
well
as
negative
one-off
effects.
Following
a
conservative
approach
in
assessing
potential
impairment,
we
implemented
an
additional
trigger
for
classification
of
exposures
to
Stage
2
for
expected
losses.
The
increase
in
credit
risk
provisions
for
the
retail
portfolio
also
reflected
the
observed
deterioration
in
payment
discipline
among
entrepreneurs
and
small
firms
and
the
recalibration
of
model
parameters
for
non-mortgage
loans.
Provisioning
in
the
corporate
segment
was
unevenly
distributed
over
the
course
of
the
year,
with
a
very
low
level
in
the
first
part
of
the
year
and
a
significant
increase
in
Q4,
driven
by
the
default
of
two
large
clients.
The
good
overall
quality
of
our
assets
is
confirmed
by
the
NPL
ratio,
oscillating
well
below
the
average
for
the
Polish
banking
sector.
It
stood
at
4.2%
at
the
end
of
2023,
supported
by
regular
disposals
of
non-performing
receivables
.
The
high
result
on
mBank
Group’s
ongoing
business
was
almost
entirely
consumed
by
the
huge
costs
of
legal
risks
related
to
the
portfolio
of
foreign
currency
mortgages,
which
have
been
weighing
on
the
company’s
operations
and
profitability
for
several
years.
As
a
consequence
of
the
provisions
set
up
for
these
contracts
in
2023
in
a
total
amount
of
PLN
4.9
billion,
our
reported
net
profit
stood
at
PLN
24
million.
These
figures
amply
demonstrate
the
scale
of
the
problem
caused
by
the
pro-consumer,