Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period
ending 31
st
December 2024
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.
2
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Financial Highlights
Amount ‘000 PLN
Amount ‘000 EUR
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Interest income and other of similar nature
8 658 943
8 300 383
2 011 743
1 832 962
Fee and commission income
917 834
912 357
213 241
201 474
Profit (loss) before income tax
770 548
1 224 773
179 022
270 465
Profit (loss) after taxes
643 103
510 259
149 413
112 680
Total comprehensive income of the period
671 150
1 209 770
155 929
267 152
Net cash flows from operating activities
13 187 054
13 945 189
3 063 764
3 079 496
Net cash flows from investing activities
(19 183 484)
(11 946 312)
(4 456 922)
(2 638 087)
Net cash flows from financing activities
1 664 646
2 166 447
386 749
478 413
Net cash flows, total
(4 331 784)
4 165 324
(1 006 409)
919 822
31.12.2024
31.12.2023
31.12.2024
31.12.2023
Total Assets
137 699 862
124 887 757
32 225 570
28 723 035
Liabilities to banks and other monetary institutions
323 296
565 384
75 660
130 033
Liabilities to customers
117 642 600
107 505 636
27 531 617
24 725 307
Equity
7 285 413
6 614 263
1 704 988
1 521 220
Share capital
1 213 117
1 213 117
283 903
279 006
Number of shares (pcs.)
1 213 116 777
1 213 116 777
1 213 116 777
1 213 116 777
Book value per share (in PLN/EUR)
6.01
5.45
1.41
1.25
Diluted book value per share (in PLN/EUR)
6.01
5.45
1.41
1.25
Total Capital Ratio (TCR)
17.96%
19.04%
17.96%
19.04%
Pledged or paid dividend per share (in PLN/EUR)
-
-
-
-
Exchange rates accepted to convert selected financial data into EUR
for items as at the balance sheet date
-
-
4.2730
4.3480
for items for the period covered by the report
(exchange rate calculated as the average of exchange rates
at the end of individual months of the period)
-
-
4.3042
4.5284
3
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Quarterly financial information
STATEMENT OF PROFIT AND LOSS
Amount ‘000 PLN
1.01.2024 -
31.12.2024
1.10.2024 -
31.12.2024*
1.01.2023 -
31.12.2023
1.10.2023 -
31.12.2023*
Net interest income
5 420 645
1 467 184
5 134 504
1 255 492
Interest income and other of similar nature
8 658 943
2 278 000
8 300 383
2 080 855
Income calculated using the effective interest method
8 557 972
2 257 156
8 191 912
2 047 483
Interest income from Financial assets at amortised
cost, including:
6 425 198
1 782 881
6 385 562
1 615 466
- the impact of the adjustment to the gross
carrying amount of loans due to credit holidays
(106 788)
38 558
(11 404)
(11 404)
Interest income from Financial assets at fair value
through other comprehensive income
2 132 774
474 275
1 806 350
432 017
Result of similar nature to interest from Financial
assets at fair value through profit or loss
100 971
20 844
108 471
33 372
Interest expenses
(3 238 298)
(810 816)
(3 165 879)
(825 363)
Net fee and commission income
668 157
160 215
683 726
166 413
Fee and commission income
917 834
221 206
912 357
225 147
Fee and commission expenses
(249 677)
(60 991)
(228 631)
(58 734)
Dividend income
38 741
3 687
32 137
153
Result on derecognition of financial assets and liabilities
not measured at fair value through profit or loss
(10 753)
(11 072)
541 425
1 582
Results on financial assets and liabilities held for trading
(6 566)
(2 445)
47 982
50 355
Result on non-trading financial assets mandatorily at fair
value through profit or loss
18 125
13 152
12 359
761
Result on hedge accounting
1 544
1 343
1 160
(357)
Result on exchange differences
(179 401)
(59 745)
(76 838)
(29 243)
Other operating income
318 501
76 994
405 347
125 840
Other operating expenses
(486 039)
(135 018)
(260 264)
(63 675)
Administrative expenses
(1 954 321)
(516 707)
(1 713 662)
(456 226)
Impairment losses on financial assets
(237 422)
14 509
(222 266)
(50 782)
Impairment losses on non-financial assets
(4 274)
79
(84)
(31)
Provisions for legal risk connected with FX mortgage loans
(2 179 070)
(522 680)
(3 065 380)
(701 580)
Result on modification
(182 238)
(70 825)
(88 184)
(20 323)
Depreciation
(222 662)
(58 310)
(207 189)
(51 855)
Share of the profit of investments in subsidiaries
0
0
0
0
Banking tax
(232 419)
(98 907)
0
0
Profit before income taxes
770 548
261 454
1 224 773
226 524
Corporate income tax
(127 445)
(126 496)
(714 514)
(135 353)
Profit after taxes
643 103
134 958
510 259
91 171
* quarterly financial information has not been audited by an independent auditor
4
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
STATEMENT OF TOTAL COMPREHENSIVE INCOME
Amount ‘000 PLN
1.01.2024 -
31.12.2024
1.10.2024 -
31.12.2024*
1.01.2023 -
31.12.2023
1.10.2023 -
31.12.2023*
Profit after taxes
643 103
134 958
510 259
91 171
Other comprehensive income items that may be (or were)
reclassified to profit or loss
25 448
(73 434)
869 606
115 111
Result on debt securities at fair value through other
comprehensive income
156 112
(69 426)
671 753
92 337
Result on credit portfolio at fair value through other
comprehensive income
(160 097)
(7 717)
(154 014)
(55 419)
Hedge accounting
29 433
3 709
351 867
78 193
Other comprehensive income items that will not be
reclassified to profit or loss
9 178
9 178
(6 012)
(6 012)
Actuarial gains (losses)
1 331
1 331
(10 434)
(10 434)
Result on equity instruments at fair value through other
comprehensive income
7 847
7 847
4 422
4 422
Total comprehensive income items before taxes
34 626
(64 256)
863 594
109 099
Corporate income tax on other comprehensive income items
that may be (or were) reclassified to profit or loss
(4 835)
13 952
(165 225)
(21 871)
Corporate income tax on other comprehensive income items
that will not be reclassified to profit or loss
(1 744)
(1 744)
1 142
1 142
Total comprehensive income items after taxes
28 047
(52 047)
699 511
88 370
Total comprehensive income for the period
671 150
82 911
1 209 770
179 541
* quarterly financial information has not been audited by an independent auditor
5
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
ANNUAL FINANCIAL STATEMENTS OF THE BANK MILLENNIUM S.A.
FOR THE 12-MONTH PERIOD ENDING 31
ST
DECEMBER 2024
TABLE OF CONTENT
1. STATEMENT OF PROFIT AND LOSS .................................................................. 7
2. STATEMENT OF TOTAL COMPREHENSIVE INCOME ................................................ 8
3. STATEMENT OF FINANCIAL POSITION .............................................................. 9
4. STATEMENT OF CHANGES IN EQUITY ............................................................. 11
5. CASH FLOW STATEMENT ............................................................................ 12
6. GENERAL INFORMATION ABOUT ISSUER .......................................................... 14
7. ACCOUNTING POLICY ................................................................................ 15
7.1. STATEMENT OF COMPLIANCE WITH THE INTERNATIONAL FINANCIAL REPORTING STANDARDS .................. 15
7.2. STANDARDS AND INTERPRETATIONS APPLIED IN 2024 AND THOSE NOT BINDING AT THE BALANCE SHEET DATE.. 17
7.3. ADOPTED ACCOUNTING PRINCIPLES ......................................................................... 19
8. FINANCIAL RISK MANAGEMENT .................................................................... 47
8.1. RISK MANAGEMENT ........................................................................................ 47
8.2. CAPITAL MANAGEMENT .................................................................................... 51
8.3. CREDIT RISK ............................................................................................... 58
8.4. MARKET RISK AND INTEREST RATE RISK .................................................................... 79
8.5. LIQUIDITY RISK ............................................................................................ 86
8.6. OPERATIONAL RISK ........................................................................................ 90
8.7. RISK OF NEGATIVE IMPACT ON THE NATURAL ENVIRONMENT .................................................. 91
9. TRANSACTIONS WITH RELATED ENTITIES ........................................................ 92
9.1. TRANSACTIONS WITH THE SUBSIDIARIES AND PARENT’S GROUP .............................................. 92
9.2. TRANSACTIONS WITH THE MANAGING AND SUPERVISING PERSONS ........................................... 95
9.3. INFORMATION ON COMPENSATIONS AND BENEFITS OF THE PERSONS SUPERVISING AND MANAGING THE BANK ... 95
10. FAIR VALUE ........................................................................................... 97
11. CONTINGENT LIABILITIES AND ASSETS .......................................................... 102
11.1. LAWSUITS AND SIGNIFICANT PROCEEDINGS ................................................................ 102
11.2. OFF-BALANCE ITEMS ..................................................................................... 109
12. LEGAL RISK RELATED TO FOREIGN CURRENCY MORTGAGE LOANS ........................ 111
13. NOTES TO THE FINANCIAL STATEMENTS ........................................................ 122
1. INTEREST INCOME AND OTHER OF SIMILAR NATURE ........................................................ 122
2. INTEREST EXPENSE ....................................................................................... 122
3. FEE AND COMMISSION INCOME AND EXPENSE ............................................................... 123
4. DIVIDEND INCOME ........................................................................................ 123
5. RESULT ON DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES NOT MEASURED AT FAIR VALUE THROUGH
PROFIT OR LOSS .......................................................................................... 124
6. RESULTS ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING ........................................ 125
7. RESULTS ON NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS ..... 125
8. RESULT ON HEDGE ACCOUNTING .......................................................................... 125
9. OTHER OPERATING INCOME .............................................................................. 126
10. OTHER OPERATING EXPENSE .............................................................................. 126
11. ADMINISTRATIVE EXPENSES ............................................................................... 127
12. IMPAIRMENT LOSSES ON FINANCIAL ASSETS ................................................................ 127
13. IMPAIRMENT LOSSES ON NON-FINANCIAL ASSETS ........................................................... 128
14. PROVISIONS FOR LEGAL RISK CONNECTED WITH FX MORTGAGE LOANS ...................................... 128
6
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
15. DEPRECIATION AND AMORTIZATION ....................................................................... 129
16. CORPORATE INCOME TAX ................................................................................. 130
17. EARNINGS PER SHARE .................................................................................... 132
18. CASH, BALANCES AT THE CENTRAL BANK .................................................................. 132
19. FINANCIAL ASSETS HELD FOR TRADING .................................................................... 133
20. NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS, OTHER THAN LOANS
AND ADVANCES TO CUSTOMERS ........................................................................... 135
21. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME............................... 136
22. LOANS AND ADVANCES TO CUSTOMERS .................................................................... 137
23. FINANCIAL ASSETS AT AMORTISED COST OTHER THAN LOANS AND ADVANCES TO CUSTOMERS ................ 145
24. DERIVATIVES – HEDGE ACCOUNTING ...................................................................... 147
25. INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES .......................................... 151
26. TANGIBLE FIXED ASSETS .................................................................................. 154
27. INTANGIBLE FIXED ASSETS ................................................................................ 157
28. DEFERRED INCOME TAX ASSETS........................................................................... 160
29. OTHER ASSETS ........................................................................................... 162
30. NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE ............................... 163
31. FINANCIAL LIABILITIES HELD FOR TRADING ................................................................ 163
32. LIABILITIES TO BANKS AND OTHER MONETARY INSTITUTIONS ............................................... 163
33. LIABILITIES TO CUSTOMERS ............................................................................... 164
34. SALE AND REPURCHASE AGREEMENTS ..................................................................... 165
35. DEBT SECURITIES ISSUED ................................................................................. 165
36. SUBORDINATED DEBT ..................................................................................... 166
37. PROVISIONS ............................................................................................. 167
38. OTHER LIABILITIES ....................................................................................... 168
39. EQUITY .................................................................................................. 169
40. FINANCIAL LIABILITIES BY CONTRACTUAL MATURITY ....................................................... 173
14. SUPPLEMENTARY INFORMATION ................................................................. 175
14.1. 2023 DIVIDEND .......................................................................................... 175
14.2. DATA ABOUT ASSETS, WHICH SECURE LIABILITIES .......................................................... 175
14.3. SECURITIES COVERED BY TRANSACTIONS WITH A BUY-BACK CLAUSE (SBB) ................................. 177
14.4. OFFSETTING OF ASSETS AND LIABILITIES ON THE BASIS OF ISDA AGREEMENTS .............................. 177
14.5. ADDITIONAL EXPLANATIONS TO THE CASH FLOW STATEMENT ............................................... 178
14.6. INFORMATION ON CUSTODY ACTIVITY ..................................................................... 178
14.7. SHARE BASED PAYMENTS ................................................................................. 178
14.8. ADDITIONAL INFORMATION AND OTHER ESSENTIAL EVENTS BETWEEN THE DATE, FOR WHICH THE FINANCIAL
REPORT WAS PREPARED AND ITS PUBLICATION DATE ....................................................... 180
7
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
1. Statement of Profit and Loss
Amount ‘000 PLN
Note
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Net interest income
5 420 645
5 134 504
Interest income and other of similar nature
1
8 658 943
8 300 383
Income calculated using the effective interest method
8 557 972
8 191 912
Interest income from Financial assets at amortised cost, including:
6 425 198
6 385 562
- the impact of the adjustment to the gross carrying amount of loans due
to credit holidays
(106 788)
(11 404)
Interest income from Financial assets at fair value through other comprehensive
income
2 132 774
1 806 350
Result of similar nature to interest from Financial assets at fair value through
profit or loss
100 971
108 471
Interest expenses
2
(3 238 298)
(3 165 879)
Net fee and commission income
668 157
683 726
Fee and commission income
3
917 834
912 357
Fee and commission expenses
3
(249 677)
(228 631)
Dividend income
4
38 741
32 137
Result on derecognition of financial assets and liabilities not measured at fair value
through profit or loss
5
(10 753)
541 425
Results on financial assets and liabilities held for trading
6
(6 566)
47 982
Result on non-trading financial assets mandatorily at fair value through profit or loss
7
18 125
12 359
Result on hedge accounting
8
1 544
1 160
Result on exchange differences, including:
(179 401)
(76 838)
- costs of settlements on foreign currency mortgage loans
14
(403 405)
(273 791)
Other operating income
9
318 501
405 347
Other operating expenses
10
(486 039)
(260 264)
Administrative expenses
11
(1 954 321)
(1 713 662)
Impairment losses on financial assets
12
(237 422)
(222 266)
Impairment losses on non-financial assets
13
(4 274)
(84)
Provisions for legal risk connected with FX mortgage loans
14
(2 179 070)
(3 065 380)
Result on modification, including:
(182 238)
(88 184)
- costs of settlements on foreign currency mortgage loans
14
(146 599)
(52 227)
Depreciation
15
(222 662)
(207 189)
Share of the profit of investments in subsidiaries
0
0
Banking tax
(232 419)
0
Profit before income taxes
770 548
1 224 773
Corporate income tax
16
(127 445)
(714 514)
Profit after taxes
643 103
510 259
Notes on pages 14-183 are integral part of these financial statements.
8
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
2. Statement of Total Comprehensive Income
Amount ‘000 PLN
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Profit after taxes
643 103
510 259
Other comprehensive income items that may be (or were) reclassified to profit or loss
25 448
869 606
Result on debt securities at fair value through other comprehensive income
156 112
671 753
Result on credit portfolio at fair value through other comprehensive income
(160 097)
(154 014)
Hedge accounting
29 433
351 867
Other comprehensive income items that will not be reclassified to profit or loss
9 178
(6 012)
Actuarial gains (losses)
1 331
(10 434)
Result on equity instruments at fair value through other comprehensive income
7 847
4 422
Other comprehensive income items before taxes
34 626
863 594
Corporate income tax on other comprehensive income items that may be (or were)
reclassified to profit or loss
(4 835)
(165 225)
Corporate income tax on other comprehensive income items that will not be reclassified to
profit or loss
(1 744)
1 142
Other comprehensive income items after taxes
28 047
699 511
Total comprehensive income for the period
671 150
1 209 770
Notes on pages 14-183 are integral part of these financial statements.
9
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
3. Statement of Financial Position
ASSETS
Amount '000 PLN
Note
31.12.2024
31.12.2023
Cash, cash balances at central banks
18
5 178 984
5 094 984
Financial assets held for trading
19
812 573
609 252
Derivatives
257 094
498 577
Equity instruments
115
121
Debt securities
555 364
110 554
Non-trading financial assets mandatorily at fair value through profit or loss, other than
Loans and advances to customers
20
118 399
147 623
Equity instruments
66 609
66 609
Debt securities
51 790
81 014
Financial assets at fair value through other comprehensive income
21
29 023 647
21 924 652
Equity instruments
36 708
28 789
Debt securities
28 986 939
21 895 863
Loans and advances to customers
22
71 936 712
72 405 446
Mandatorily at fair value through profit or loss
1 825
19 349
Fair valued through other comprehensive income
11 135 416
11 799 748
Valued at amortised cost
60 799 471
60 586 349
Financial assets at amortised cost other than Loans and advances to customers
23
26 632 671
21 469 710
Debt securities
24 059 861
18 439 780
Deposits, loans and advances to banks and other monetary institutions
2 378 592
1 866 688
Reverse sale and repurchase agreements
194 218
1 163 242
Derivatives – Hedge accounting
24
112 365
74 213
Investments in subsidiaries, joint ventures and associates
25
517 214
399 223
Tangible fixed assets
26
574 660
553 087
Intangible fixed assets
27
560 317
481 128
Income tax assets
611 379
368 279
Current income tax assets
0
0
Deferred income tax assets
28
611 379
368 279
Other assets
29
1 620 941
1 360 160
Non-current assets and disposal groups classified as held for sale
30
0
0
Total assets
137 699 862
124 887 757
10
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
LIABILITIES AND EQUITY
Amount '000 PLN
Note
31.12.2024
31.12.2023
LIABILITIES
Financial liabilities held for trading
31
417 518
579 331
Derivatives
226 749
576 611
Liabilities from short sale of securities
190 769
2 720
Financial liabilities measured at amortised cost
124 752 615
112 664 017
Liabilities to banks and other monetary institutions
32
323 296
565 384
Liabilities to customers
33
117 642 600
107 505 636
Sale and repurchase agreements
34
194 223
0
Debt securities issued
35
5 030 166
3 027 952
Subordinated debt
36
1 562 330
1 565 045
Derivatives – Hedge accounting
24
107 439
193 664
Provisions
37
2 899 615
1 444 173
Pending legal issues
2 846 010
1 401 798
Commitments and guarantees given
53 605
42 375
Income tax liabilities
215 590
460 456
Current income tax liabilities
215 590
460 456
Deferred income tax liabilities
0
0
Other liabilities
38
2 021 672
2 931 853
Total Liabilities
130 414 449
118 273 494
EQUITY
Share capital
39
1 213 117
1 213 117
Own shares
(21)
(21)
Share premium
1 147 241
1 147 241
Accumulated other comprehensive income
39
(111 295)
(139 342)
Retained earnings, including:
39
5 036 371
4 393 268
- current profit /loss
643 103
510 259
- other
4 393 268
3 883 009
Total equity
7 285 413
6 614 263
Total equity and total liabilities
137 699 862
124 887 757
31.12.2024
31.12.2023
Book value of net assets
7 285 413
6 614 263
Number of shares (pcs.)
1 213 116 777
1 213 116 777
Book value per share (in PLN)
6.01
5,45
Notes on pages 14-183 are integral part of these financial statements.
11
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
4. Statement of Changes in Equity
Amount ‘000 PLN
Total
equity
Share
capital
Own
shares
Share
premium
Accumulated
other
comprehensive
income
Retained earnings
Unappropriated
result
Other
reserves
01.01.2024 – 31.12.2024
Equity at the beginning
of the period
6 614 263
1 213 117
(21)
1 147 241
(139 342)
510 259
3 883 009
Total comprehensive
income for 2024 (net)
671 150
0
0
0
28 047
643 103
0
current profit /loss
643 103
0
0
0
0
643 103
0
other comprehensive
income items after
taxes
28 047
0
0
0
28 047
0
0
Purchase and transfer of
own shares to employees
0
0
0
0
0
0
0
Transfer between items of
reserves
0
0
0
0
0
(510 259)
510 259
Equity at the end of the
period
7 285 413
1 213 117
(21)
1 147 241
(111 295)
643 103
4 393 268
Amount ‘000 PLN
Total
equity
Share
capital
Own
shares
Share
premium
Accumulated
other
comprehensive
income
Retained earnings
Unappropriated
result
Other
reserves
01.01.2023 – 31.12.2023
Equity at the beginning
of the period
5 404 493
1 213 117
(21)
1 147 241
(838 853)
(1 029 899)
4 912 908
Total comprehensive
income for 2023 (net)
1 209 770
0
0
0
699 511
510 259
0
current profit /loss
510 259
0
0
0
0
510 259
0
other comprehensive
income items after
taxes
699 511
0
0
0
699 511
0
0
Purchase and transfer of
own shares to employees
0
0
0
0
0
0
0
Transfer between items
of reserves
0
0
0
0
0
1 029 899
(1 029 899)
Equity at the end of the
period
6 614 263
1 213 117
(21)
1 147 241
(139 342)
510 259
3 883 009
Detailed information concerning changes in different equity items are presented in the note (39).
12
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
5. Cash Flow Statement
A. Cash flows from operating activities
Amount ‘000 PLN
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Profit (loss) after taxes
643 103
510 259
Total adjustments:
12 543 951
13 434 930
Interest received
8 244 034
7 783 242
Interest paid
(2 772 057)
(2 835 628)
Depreciation and amortization
222 662
207 189
Foreign exchange (gains)/ losses
0
0
Dividends
(38 741)
(32 137)
Changes in provisions
1 455 442
428 907
Result on sale and liquidation of assets
(3 843)
(643 337)
Change in financial assets held for trading
(265 642)
142 502
Change in loans and advances to banks
(950 688)
(167 390)
Change in loans and advances to customers
(5 474 017)
(3 087 504)
Change in receivables from securities bought with sell-back clause (loans and advances)
924 661
(1 226 207)
Change in financial liabilities valued at fair value through profit and loss (held for trading)
(248 038)
(166 477)
Change in deposits from banks
(226 321)
(39 152)
Change in deposits from customers
12 855 742
11 984 160
Change in liabilities from securities sold with buy-back clause
231 736
35 178
Change in debt securities
209 296
509 530
Change in income tax settlements
(275 220)
744 479
Income tax paid
(219 325)
(204 851)
Change in other assets and liabilities
(1 252 277)
(128 685)
Other
126 547
131 111
Net cash flows from operating activities
13 187 054
13 945 189
13
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
B. Cash flows from investing activities
Amount ‘000 PLN
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Inflows:
556 431 334
474 152 795
Proceeds from sale of property, plant and equipment and intangible assets
7 722
9 150
Proceeds from sale of shares in related entities
1 000
600 000
Proceeds from sale of investment financial assets
556 383 871
473 511 508
Other
38 741
32 137
Outflows:
(575 614 818)
(486 099 107)
Acquisition of property, plant and equipment and intangible assets
(244 783)
(184 006)
Purchase of shares in subordinated companies
(120 000)
(99 000)
Acquisition of investment financial assets
(575 250 035)
(485 816 101)
Other
0
0
Net cash flows from investing activities
(19 183 484)
(11 946 312)
C. Cash flows from financing activities
Amount ‘000 PLN
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Inflows from financing activities:
2 131 700
2 316 276
Long-term bank loans
0
0
Issue of debt securities
2 131 700
2 316 276
Increase in subordinated debt
0
0
Net proceeds from issues of shares and additional capital paid-in
0
0
Other inflows from financing activities
0
0
Outflows from financing activities:
(467 054)
(149 829)
Repayment of long-term bank loans
0
(5 000)
Redemption of debt securities
0
0
Decrease in subordinated debt
0
0
Issue of shares expenses
0
0
Redemption of shares
0
0
Dividends paid and other payments to owners
0
0
Other outflows from financing activities
(467 054)
(144 829)
Net cash flows from financing activities
1 664 646
2 166 447
D. Net cash flows. Total (A + B + C)
(4 331 784)
4 165 324
- including change resulting from FX differences
(343)
(21 705)
E. Cash and cash equivalents at the beginning of the reporting period
18 396 413
14 231 089
F. Cash and cash equivalents at the end of the reporting period (D + E)
14 064 629
18 396 413
Additional information regarding cash flows statement is presented in point 5) of chapter 14.
“Supplementary information”. Information on liabilities classified as financing activities is presented
in points 32), 35), 36) of chapter 13. “Notes to the Financial Statements”.
14
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
6. General Information about Issuer
Bank Millennium S.A. (the Bank) is a universal bank that operates in Poland, offering its services to all
market segments via a network of branches, corporate centers, individual advisors and mobile and
electronic banking.
The Bank, entered under the number KRS 0000010186 in the National Court Register kept by the Local
Court for the Capital City of Warsaw (Poland), 13th Business Department of the National Court
Register, with its registered office in Warsaw, ul. Stanisława Żaryna 2A, 02-593 Warsaw, Poland.
The Bank is listed on the Warsaw Stock Exchange since 1992, first Bank ever to float its shares on the
WSE.
The Bank is a parent company of a Bank Millennium Capital Group (the Group) with over 6,700 employees
with core business comprising banking, leasing, factoring, brokerage, capital operations, investment
fund management and web portals activity.
Supervisory Board and Management Board of Bank Millennium S.A. as at 31 December 2024
Composition of the Supervisory Board as at 31 December 2024 was as follows:
▪ Bogusław Kott - Chairman of the Supervisory Board,
▪ Nuno Manuel da Silva Amado – Deputy Chairman of the Supervisory Board,
▪ Dariusz Rosati – Deputy Chairman and Secretary of the Supervisory Board,
▪ Miguel de Campos Pereira de Bragança – Member of the Supervisory Board,
▪ Olga Grygier-Siddons – Member of the Supervisory Board,
▪ Anna Jakubowski – Member of the Supervisory Board,
▪ Grzegorz Jędrys – Member of the Supervisory Board,
▪ Alojzy Nowak – Member of the Supervisory Board,
▪ Jose Miguel Bensliman Schorcht da Silva Pessanha – Member of the Supervisory Board
▪ Miguel Maya Dias Pinheiro – Member of the Supervisory Board,
▪ Beata Stelmach – Member of the Supervisory Board
▪ Lingjiang Xu – Member of the Supervisory Board.
On January 22, 2025 Ms. Beata Stelmach, Member of the Bank's Supervisory Board, in connection with
her appointment to the position of the President of the Management Board of another entity, resigned
from the position of a Member of the Bank's Supervisory Board with effect from 31 January 2025.
Composition of the Management Board as at 31 December 2024 was as follows:
▪ Joao Nuno Lima Bras Jorge – Chairman of the Management Board,
▪ Fernando Maria Cardoso Rodrigues Bicho – Deputy Chairman of the Management Board,
▪ Wojciech Haase – Member of the Management Board,
▪ Andrzej Gliński – Member of the Management Board,
▪ Wojciech Rybak – Member of the Management Board,
▪ Antonio Ferreira Pinto Júnior – Member of the Management Board,
▪ Jarosław Hermann – Member of the Management Board.
15
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
7. Accounting Policy
7.1. STATEMENT OF COMPLIANCE WITH THE INTERNATIONAL FINANCIAL
REPORTING STANDARDS
These financial statements of the Bank have been prepared in accordance with International Financial
Reporting Standards (‘IFRS’), as adopted by the European Union and with respect to matters not
regulated by the above standards, in accordance with the accounting principles as set out in the
Accounting Act dated 29 September 1994 (unified text - Official Journal from 2023, item 120) and the
respective bylaws and regulations and the requirements for issuers of securities admitted or sought
to be admitted to trading on an official stock-exchange listing market. These financial statements
meet the reporting requirements described in the Regulation of the Minister of Finance of March 29,
2018 regarding current and periodic information published by issuers of securities and conditions for
recognizing as equivalent information required by the laws of a non-member state (Journal of Laws
of 2018, item 757).
This financial report was approved for publication by the Management Board on 24 February 2025.
Following the signing by the President of the Republic of Poland and announcement in the Journal of
Laws of the Republic of Poland on the same day of the Act of 7 July 2022 on crowdfunding for business
ventures and assistance to borrowers (‘the Act’), introducing, among others, a possibility of up to 8
months of Credit Holidays in 2022-2023 for PLN mortgage borrowers, the Group recorded in 2022 a
pre-tax cost of PLN 1,324.2 million (PLN 1,072,6 million after tax), of which PLN 1,291.6 million
related to the Bank, and PLN 32.6 million related to Millennium Bank Hipoteczny S.A.
Due to costs generated as a result of the above mentioned Act, it could be reasonably assumed that
the Bank would record a negative net result for the 3rd quarter of 2022 and as a result its capital
ratios could fall below the current minimum requirements set by Polish Financial Supervision Authority
(‘PFSA’). As the emergence of risk of a breach of respective capital ratios represents a prerequisite
stipulated in the art. 142 sec. 1 and 2 of the Banking Act of 29 August 1997 (Journal of Laws 2021,
item 2439, i.e. 28 December 2021, as amended), on July 15th 2022 the Management Board of the
Bank took a decision to launch the Recovery Plan, notifying of the fact both PFSA and Bank Guarantee
Fund.
Additionally, the Bank has also submitted to PFSA the Capital Protection Plan, pursuant to the Article
60 sec. 1 of the Act of 5 August 2015 on macroprudential supervision of the financial system and crisis
management in the financial system (Journal of Laws of 2022, item 963, i.e. of 6 May 2022, as
amended). PFSA approved this plan on 28th October 2022 and communicated this fact to the Bank on
14th November 2022.
In May 2024, the Management Board of the Bank concluded that the objectives of the Capital
Protection Plan have been achieved and decided on the completion of its realization. Subsequently,
In June 2024, the Management Board decided to exit the state of implementation of the Recovery
Plan and to complete its realization.
All key assumptions of both plans were achieved, including all defined indicators reached safe levels,
and the Group's profitability and financial results were clearly improved. In the area of capital
management, capital ratios have been restored to levels exceeding minimum regulatory requirements
and the Bank and the Group meet MREL requirements, including the combined buffer requirements.
16
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The Bank's Management Board does not identify future circumstances that would support further
continuation of the plans.
As of 31 December 2024, the Tier 1 ratio was 546 bps (Bank) and 497 bps (Group) above the minimum
requirement, and the Total Capital Ratio (TCR) was 574 bps (Bank) and 503 bps (Group) above the
minimum requirement.
In terms of MRELtrea and MRELtem requirements, the Group presents a surplus compared to the
minimum required levels (including the Combined Buffer Requirement) as of 31 December 2024
(MRELtrea surplus was 7.28 p.p. and MRELtem surplus 2.8 p.p.). Assuming no extraordinary factors,
the Group plans to maintain both MREL ratios above the minimum required levels with a safe surplus.
Profitability of the Bank and the Group was improved despite the recording one-off costs (recognized
in these financial statements as a reduction in interest income) related to the so-called credit holidays
which in the final settlement burdened the Bank's financial result for 2024 with the amount of PLN
106.8 million (respectively for the Group, these costs amounted to PLN 112.7 million). This
adjustment resulted from the signing by the President of the Republic of Poland and the
announcement in the Journal of Laws of the Republic of Poland of the Act of April 12, 2024 amending
the Act on support for borrowers who have taken out a housing loan and are in a difficult financial
situation and the Act on crowdfunding for business ventures and assistance to borrowers which, among
other things, extended the possibility for borrowers to suspend the repayment of a mortgage loan
granted in Polish currency by an additional four months in 2024 (credit holidays).
The Bank monitors, on the current basis, the financial situation in particular, the Bank is aware of the
risks associated with further negative developments regarding the legal risk of FX mortgage loans that
could imply the need to increase the level of provisions for such risk beyond the provisions that were
recognised as at the balance sheet date and whose amount results from previous trends. In the Bank’s
view, these events, if materialized, would adversely affect the results of the Bank/Group in future,
and would reduce the organic generation of capital that is envisaged, but would not prevent the
Bank/Group from continuing to implement its strategy and the generation of results that would
mitigate the impact of such events.
The liquidity position of Bank Millennium Group remained strong in 4Q 2024. LCR ratio reached the
level of 371% at the of December 2024, well above the supervisory minimum of 100%. Loan-to-deposit
ratio remained low at 64% and the share of liquid debt securities (mainly bonds and bills issued by
Poland government, other EU countries, European Union, multilateral development banks and NBP
bills) in the Group’s total assets remains significant at 39%.
At same time the Bank achieved good operational and business results, while actively managing and
mitigating the different risks related to the banking activity. Taking into account the above
circumstances and identified uncertainties, in particular, the Bank's capacity to meet capital solvency
ratios and MREL requirements in subsequent reporting periods - the Bank's Management Board based
on the analysis of all aspects of the Bank's operations and its current and forecast financial position,
concluded that the application of the going concern assumption in the preparation of these financial
statements is appropriate.
In 2024, the Bank did not change its accounting principles or the method of financial data
presentation.
17
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
7.2. STANDARDS AND INTERPRETATIONS APPLIED IN 2024 AND THOSE
NOT BINDING AT THE BALANCE SHEET DATE
STANDARDS INITIALLY APPLIED IN FINANCIAL STATEMENTS 2024
The following amendments to existing standards issued by the International Accounting Standards
Board (IASB) and approved for use in the EU were first applied in the Bank's financial statements for
2024:
Standard
Title
Amendments to IAS 1
Classification of Liabilities as Current or Non-Current and Non-
current Liabilities with Covenants
Amendments to IAS 7 and
IFRS 7
Supplier Finance Arrangements
Amendments to IFRS 16
Lease Liability in a Sale and Leaseback
The adoption of mentioned above amendments to the existing standards have not led to any material
changes in the Bank’s financial statements 2024.
INFORMATION REGARDING ISSUED STANDARDS AND AMENDMENTS TO THE EXISTING STANDARDS ISSUED BY IASB AND
ADOPTED BY THE EU BUT NOT YET EFFECTIVE
Standards and amendments to the existing standards issued by IASB and adopted by the EU but not
yet effective:
Standard
Title
Effective date
Amendments to IAS 21
Lack of Exchangeability
1 January 2025
The Bank anticipates that the adoption of the aforementioned amendment to existing standard will
have no material impact on the financial statements of the Bank.
18
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
NEW STANDARDS AND AMENDMENTS TO THE EXISTING STANDARDS ISSUED BY IASB BUT NOT YET ADOPTED BY THE EU
At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the
International Accounting Standards Board (IASB) except for the following new standards and
amendments to the existing standards, which were not endorsed for use in EU:
Standard
Title
EU adoption status
Amendments to IFRS
9 and IFRS 7
Amendments to the Classification and
Measurement of Financial Instruments
(IASB effective date: 1 January 2026)
Not yet adopted by EU
Amendments to IFRS
9 and IFRS 7
Contracts Referencing Nature-dependent
Electricity (IASB effective date: 1 January
2026)
Not yet adopted by EU
Amendments to IFRS
1, IFRS 7, IFRS 9,
IFRS 10 and IAS 7
Annual Improvements to IFRS Accounting
Standards - Volume 11
(IASB effective date: 1 January 2026)
Not yet adopted by EU
IFRS 18
Presentation and Disclosures in Financial
Statements
(IASB effective date: 1 January 2027)
Not yet adopted by EU
IFRS 19
Subsidiaries without Public Accountability:
Disclosures
(IASB effective date: 1 January 2027)
Not yet adopted by EU
IFRS 14
Regulatory Deferral Accounts
(IASB effective date: 1 January 2016)
European Commission has
decided not to launch the
endorsement process of
this interim standard and
to wait for the final
standard
Amendments to IFRS
10 and IAS 28
Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
and further amendments (effective date
deferred by IASB indefinitely but earlier
application permitted)
Endorsement process
postponed indefinitely until
the research project on the
equity method has been
concluded
The Bank anticipates that the adoption of the aforementioned standard and amendments to existing
standards will have no material impact on the financial statements of the Bank.
19
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
7.3. ADOPTED ACCOUNTING PRINCIPLES
Basis of Financial Statements Preparation
Financial statements of the Bank are prepared for the financial year from 1 January 2024 to 31
December 2024 on the basis of the going concern assumption of the Bank, namely scale of business is
not to be reduced substantially in a period of not less than one year from the balance sheet date.
The financial statements have been prepared in PLN, and all values, unless otherwise indicated, are
given in PLN rounded to one thousand.
The financial statements, have been prepared based on the fair value principle for financial assets
and liabilities recognised at FVTPL including derivative instruments, and financial assets classified as
FVTOCI. Other items of financial assets and liabilities (including loans and advances) are presented at
amortized cost with effective interest rate applied less impairment charges (except loans which failed
SPPI test), or at their purchase price less impairment charges.
The preparation of financial statements in accordance with IFRS, as adopted by the EU, requires from
the management the use of estimates and assumptions that affect applied accounting principles and
the amounts (assets, liabilities, incomes and costs) reported in the financial statements and notes
thereto. The respective unit of the Bank is responsible for selection, application, development, and
verification of adopted estimations; the assumptions are then subject to approval by the Bank’s
management.
Estimations and assumptions applied to the presentation of value of assets, liabilities, revenues and
costs, are made on basis of historical data available and other factors considered to be relevant in
given circumstances. Applied assumptions related to the future and available data sources are the
base for making estimations regarding carrying value of assets and liabilities, which cannot be
determined explicitly on basis of other sources. The actual results may differ from those estimates.
The conformity between actual results and adopted estimations and assumptions is verified on regular
basis. Adjustments to estimates are recognized in the period when the estimation was changed,
provided that the adjustment applies to this period alone, or in the period when the estimation was
changed and in the following periods, should the adjustment impact both the current and future
periods.
The below-presented accounting principles have been applied to all reporting periods presented in
the financial statements.
Functional currency and presentation currency
Functional currency and presentation currency
The items contained in the financial statements of the Bank are presented in the currency of their
basic economic environment, in which a given entity operates (‘the functional currency’). The
financial statements are presented in Polish zlotys, being the functional currency and the presentation
currency for the Bank.
20
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Transactions and balances
Transactions expressed in foreign currency are translated into the functional currency by applying the
exchange rate at the date of the transaction. Exchange rate profits and losses due to settlements of
these transactions and to the balance sheet valuation of assets and monetary commitments expressed
in foreign currency are accounted for in the profit and loss account.
Exchange rate differences on monetary items, both those valued at fair value through the profit and
loss account or valued at fair value through other comprehensive income are disclosed in the profit
and loss account.
Exchange rate differences on non-monetary items valued at fair value through the profit and loss, are
accounted in the profit and loss account. Exchange rate differences due to items, such as equity
instruments valued at fair value through other comprehensive income, are included in Other
comprehensive income.
Mergers under joint control
In the case of mergers of the Capital Group companies (transaction under joint control), the Bank
adopts the accounting principle consisting in the application of the "predecessor accounting" method.
In the separate financial statements, the Bank recognizes the carrying amounts of the assets and
liabilities of the acquiree that is a subsidiary according to the values included in the consolidated
financial statements of the Capital Group in relation to this subsidiary, including also goodwill arising
on the acquisition of this subsidiary.
A possible difference between the carrying amount of the net assets acquired after the adjustments
referred to above and the value of investments in a subsidiary disclosed in the separate financial
statements of the Bank is recognized in equity as "Retained earnings".
The net financial result achieved by the company being acquired up to the day preceding the date of
merger is disclosed in the Bank's financial statements under equity as "Retained earnings".
Application of estimates in connection with Accounting Policies
The preparation of financial statements in accordance with IFRS requires from the Bank the use of
estimates and assumptions that affect the amounts reported in the financial statements.
The estimates and assumptions, revised by the Bank management on a regular basis, are made on
basis of historical experience and other factors, including expectations concerning future events,
considered being relevant in given circumstances.
Despite the fact, that such estimates are based on best knowledge about current conditions and
activities undertaken by the Bank, the actual results may differ from the estimates. The major areas
for which the Bank makes estimates are presented below:
▪ Impairment of loans and advances
Impairment estimation model within the Bank has been based on the concept of “expected credit
loss”, (hereinafter: ECL). In result impairment charges are calculated based on expected credit losses
and forecasts of expected future economic conditions have to be taken into account when conducting
evaluation of credit risk of an exposure.
The methodology and assumptions adopted for determining credit impairments are regularly reviewed
in order to reduce discrepancies between the estimated and actual losses. In order to assess the
adequacy of the impairment determined both in individual analysis and collective analysis a historical
verification (backtesting) is conducted from time to time (at least once a year), which results will be
taken into account in order to improve the quality of the process.
Further details are presented in Chapter 8. “Financial Risk Management”.
21
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
▪ Fair value of financial instruments
Fair value of financial instruments not quoted on active markets is determined with use of
measurement techniques consistent with the Bank’s accounting policy. With respect to non-option
derivatives and debt securities use is made of models based on discounted cash flows. Option pricing
models are applied to option instruments. All models are approved prior to use and also calibrated to
ensure that attained results reflect the actual fair value of the measured instruments. If possible,
only observable data from the active market are used in the models.
In case of lack of measurement parameters coming from the active market, fair value is determined
on the basis of application of measurement techniques using estimated input parameters.
The Bank measures financial instruments using the measurement methods below in the following
hierarchical order:
▪ Prices quoted on the active market for identical instruments for following financial instruments:
Treasury fixed-coupon, zero-coupon debt securities and floating interest debt securities;
▪ Techniques of measurement based on parameters coming from the market for following financial
instruments:
Treasury floating interest debt securities,
Derivatives:
▪ FRA, IRS, CIRS,
▪ FX Swap, FX Forward,
▪ Embedded derivatives,
Bills issued by the Central Bank;
▪ Techniques of measurement with use of significant parameters not coming from the market:
Debt securities of other issuers (e.g. municipalities),
Shares of VISA Incorporation,
Loans and advances mandatorily at fair value through profit or loss,
Derivatives:
▪ FX Options acquired by the Bank,
▪ Indexes options acquired/placed by the Bank.
In order to determine the fair value of VISA preferred shares, the time value of money and the
time line for conversion of preferred stock in common stock of VISA were taken into account.
To estimate the fair value of loans, due to the lack of availability of the market value, an internal
valuation model was used, taking into account the assumption that at the time of granting the
loan the fair value is equal to transaction price.
The fair value of loans without recognized impairment is equal to the sum of future expected cash
flows discounted at the balance sheet date. The discounting rate is the sum of: the cost of risk,
the cost of financing, the value of the expected return.
The fair value of impaired loans is equal to the sum of future expected recoveries discounted using
the effective interest rate, recognizing that the average expected recoveries fully take into
account the element of credit risk.
For derivative financial instruments valuation the Bank applies the component of credit risk taking
into account both: counterparty risk (credit value adjustment – CVA) and own Bank’s risk (debit
value adjustment - DVA). The Bank assesses that unobservable inputs related to applying this
component used for fair value measurement are not significant.
▪ Impairment of other non-current assets
The Bank assesses the existence of any indications that a non-current asset may be impaired at each
balance sheet date. If such indications exist, the Bank performs an estimation of recoverable amount.
Estimation of value-in-use of a non-current asset (or cash generating units) requires assumptions to
be adopted, regarding, among others, amounts and timing of future cash flows, which the Bank may
obtain from the given non-current asset (or cash generating unit). The Bank performs an estimation
of the fair value less costs to sell on the basis of available market data regarding this subject or
estimations made by external parties.
22
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
▪ Impact of legal risk connected with FX mortgage loans
The Bank estimated the impact of legal risk on the recoverability of the expected cash flows resulting
from concluded contracts for the active portfolio of mortgage loans in CHF, adjusting, in accordance
with point B5.4.6 of IFRS 9, the gross carrying amount of the portfolio by reducing the expected cash
flows from mortgage loan contracts denominated or indexed to CHF, and recognized a provision in
accordance with International Accounting Standard 37 Provisions, Contingent Liabilities and
Contingent Assets (“IAS 37”) for fully repaid loans, statutory interest costs and in a situation where
the gross carrying amount of the loan was lower than the value of the assessed risk.
A detailed description of the adopted valuation methodology is presented in Chapter 12 "Legal risk
related to foreign currency mortgage loans".
• Adjustment due to credit holidays
The way the impact of credit holidays has been recognised is presented later in this Chapter.
• Valuation of the portfolio of loans dedicated to pooling to Mortgage Bank
In the case of the portfolio of mortgage loans in PLN, which will be subject to sale (pooling) to
Mortgage Bank in the future, it is measured at fair value through other comprehensive income.
The fair value of the loans is calculated as the sum of discounted cash flows from principal repayments
and interest payments on individual accounts.
Key assumptions:
i) for loans, the starting point for determining the projected cash flows (interest and principal
installments) are the schedules of principal and interest
ii) the calculation of the discount rate adopted to estimate the value of cash flows takes into
account: the WIBOR reference rate, the calibration margin determined on the basis of the latest
production of the mortgage loan portfolio analogous to the valued portfolio, the cost of risk of
the valued portfolio and the percentage of prepayment adjustment.
▪ Provisions for potential returns of costs associated with loans in case of early repayment
Taking into consideration The Court of Justice of the European Union verdict, in which it stated that
consumer has rights to demand the reduction of the total loan cost corresponding to interest and
costs for the remaining term of the agreement in case of early repayment of loan, Bank creates a
provision for potential returns to the clients. The provision is estimated based on the maximum
amount of potential returns and the probability of payment being made.
▪ Other Estimate Values
Retirement provision is calculated using an actuarial method by an independent actuary as the present
value of future liabilities of the Bank due to employees based on headcount and remuneration as of
the date of the update. The estimation of the provision is made on the basis of several assumptions,
regarding macroeconomic conditions and employee turnover, mortality risk and other.
With regard to employee benefits, such as bonuses granted to directors and key management
personnel, bonuses for employees, the Management Board makes assumptions and estimates
regarding the amount of benefits as at the balance sheet date. The final amount of bonuses granted
is established by Personnel Committee of the Management Board or Personnel Committee of the
Supervisory Board.
23
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Financial assets and liabilities
Classification
In accordance with the IFRS 9 requirements financial assets are classified at the moment of their
initial recognition (and the date of IFRS implementation) into one of three categories:
1) Financial assets valued at amortised cost (herein from „AC” – Amortised Cost),
2) Financial assets valued at fair value through profit & loss (herein from „FVTPL),
3) Financial assets valued at fair value through other comprehensive income (herein from „FVTOCI”).
The classification of financial instruments into one of the above categories is performed based on:
1) The business model of managing financial assets,
The assessment of the business model is aimed at determining whether the financial asset is
held:
▪ to collect contractual cash flows resulting from the contract,
▪ both in order to collect contractual cash flows arising from the contract and the sale of
a financial asset or
▪ for other business purposes.
2) Test of contractual cash flow characteristics connected with financial assets (herein from „SPPI
test”).
The purpose of the SPPI test (Solely Payment of Principal and Interest) is to assess the
characteristics of contract cash flows in order to verify if:
▪ The contractual terms trigger, at specific dates, certain cash flows which constitute
solely a payment of principal and interest on such principal,
▪ The principal constitutes the fair value of a loan at the moment of its recognition,
▪ The interest reflects the value of money over time and credit risk, liquidity risk, the
Bank’s margin and other administrative costs connected with the value of the principal
outstanding at any given moment.
Financial instruments are classified at the moment of recognition or significant modification of the
instrument. A change in the classification of financial assets is caused by a change in the business
model. Reclassification is made prospectively, i.e. it does not affect fair value measurements, write-
downs or accrued interests recorded to the date of reclassification.
Business Models of the Bank
In accordance with IFRS 9 the manner of assets management may be assigned to the following models:
1) Held To Collect (herein from „HTC”),
2) Both Held to Collect and for Sale (herein from “HTC&FS”),
3) Other models, e.g. trading activity, management of assets based on fair value fluctuations,
maximising cash flows through sales.
Held To Collect Model (HTC)
Model characteristics:
1) The objective of the model is to hold financial assets in order to collect their contractual cash
flows,
2) Sales are infrequent,
3) In principle, lower levels of sales compared to other models (in terms of frequency and volume).
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Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Conditions allowing sale in the HTC model:
1) Low frequency,
2) Low volume,
3) Sale connected with credit risk (sale caused by the deterioration of the credit quality of a given
financial asset to a level at which it no longer meets the investment policy requirements).
A sale having at least one of the above features does not preclude qualifying a group of assets in the
HTC module.
Impact on classification and valuation:
Instruments assigned to the HTC model are classified as valued at amortised cost (AC) on condition
that the criteria of the SPPI Test are met. The value of instruments is calculated based on effective
interest rate which is applied to determine interest income and then adjusted for impairment
allowances reflecting expected credit losses. Consequently, subject to valuation at amortised cost is
the Bank’s credit portfolio (except loans not meeting the SPPI test) and debt securities issued by local
government units (municipal bonds portfolio), because these instruments in principle are held by the
Bank in order to collect contract cash flows, while sales transactions occur infrequently.
Both Held to Collect and for Sale Model (HTC&FS)
Model characteristics:
1) The integral objectives of the business model are both to collect contractual cash flows and sell
assets (in particular the model meets the assumptions of HTC&FS, if its objective is to manage
everyday liquidity needs, maintain an adopted interest yield profile and/or match the duration
of the financial assets and liabilities),
2) The levels of sales are usually higher than in the HTC model.
Impact on classification and valuation:
In accordance with IFRS 9 instruments assigned to the HTC&FS model are classified as valued at fair
value through other comprehensive income (FVTOCI) on condition that the contractual terms of these
instruments trigger at particular moments cash flows constituting solely a payment of principal and
interest on such principal (the SPPI test is met). These instruments are measured at fair value net of
impairment allowances, the fair value result is recognised in other comprehensive income until
financial assets is derecognised.
The HTC&FS model is applied mainly to the portfolio of debt government securities and money bills
of the National Bank of Poland in particular the liquidity and investment portfolio as well as to the
portfolio of mortgage loans dedicated to pooling to Bank Hipoteczny.
Equity instruments (with the exception of related entities) are classified as valued at fair value
through profit & loss (FVTPL), provided that entities which manage them do not intend to hold them
as a strategic investment, or at fair value through other comprehensive income (FVTOCI) for
instruments which are not held for trading purposes. The decision to use the option to value capital
instruments at fair value through other comprehensive income is taken by the Bank on the day of the
initial recognition of the instrument and constitute an irrevocable designation (even at the moment
of selling, the profit/loss on the transaction shall not be recognised in the Profit and Loss Account).
Other models
Model characteristics:
1) The business model does not meet the assumptions of the HTC and HTC&FS models.
2) The collecting of cash flows on interest and principal is not the main objective of the business
model (the SPPI test is not satisfied),
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Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
This category should include in particular:
1) Portfolios managed in order to collect cash flows from the sale of assets, in particular „held for
trading”,
2) Portfolios whose management results are evaluated at fair value.
A financial asset should be considered as held for trading, if:
1) It was purchased mainly for the purpose of selling in a very short term,
2) At the moment of initial recognition it is part of a portfolio of financial instruments managed
jointly for which there is evidence confirming a regularity that they have recently actually
generated short-term profits, or
3) Is a derivative instrument, with the exclusion of derivative instruments included in hedge
accounting and being effective hedging instruments.
The term “trading” means active and frequent purchases and sales of instruments. However, these
features do not constitute a necessary condition in order to classify a financial instrument as held for
trading.
Impact on classification and valuation:
Financial assets kept under models other than HTC or HTC&FS are valued at fair value through profit
& loss (FVTPL).
A business model other than HTC or HTC&FS shall apply to portfolios of the following financial assets:
1) Derivative instruments,
2) Debt securities held for trading,
3) Capital instruments not appointed to be a strategic investment,
4) Financial assets irrevocably designated at initial recognition to be valued at fair value through
profit & loss (even in case the asset does not meet criteria to be FVTPL) in order to eliminate or
significantly mitigate accounting mismatch if would appear in case such designation is not made.
Test of characteristics of contractual cash flows (SPPI test)
The evaluation of the fulfilment of the SPPI Test is carried out in the following cases:
▪ granting a debt instrument;
▪ purchase of debt instrument;
▪ renegotiation of contractual terms.
The subject of the SPPI Test are the contractual terms of debt instruments recognised in the balance
sheet, whereas the off-balance sheet products are not analyzed.
The SPPI test is carried out at the design stage of the product/loan agreement, which allows making
approvals with taking into account the future method of exposure valuation.
As part of the SPPI Test, the impact of the modified element on the cash flows resulting from the
concluded contract is assessed. Contract characteristics introducing volatility or cash flow risk not
directly related to interest and capital interest payments may be assessed as having no impact on the
classification (fulfilment of SPPI criteria) if they are defined as having negligible classification impact
(existence of a "de minimis" characteristic) or such impact is not negligible (no “de minimis”
character) but can only occur in extremely rare cases (existence of the “not genuine” attribute).
In cases where there is a modification of the time value of money, eg in case where a period of
interest rate mismatch with the base rate tenor, in order to verify the fulfilment of the SPPI Test,
the Bank performs an assessment based on the Benchmark Test, ie a comparison of the instrument
resulting from the contract with the base instrument (which has the same contractual features as the
instrument under analysis, with the exception of the time value of money element).
26
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Non-recourse assets (products for which the Bank’s claim is limited to certain debtor's assets or cash
flows from specific assets), in particular "project finance" and "object finance" products (products in
which the borrower, most often a special purpose vehicle is characterized by the minimum level of
equity, and the only component of its assets is the credited asset), are assessed by comparing the
value of the collateral in relation to the principal amount of the loan. Identification of the appropriate
buffer to cover the risk of changes in the value of the collateral satisfies the SPPI Test conditions.
The negative result of the SPPI Test implies the valuation of the debt at FVTPL, causing a departure
from the valuation at amortized cost or FVTOCI.
Modifications to the terms of the loan agreement
Modifications to the terms of the loan agreement during the loan period include:
▪ changing the dates of repayment of all or part of the receivables,
▪ changes in the amount of the repayment instalments,
▪ changing the interest or stop charging interest,
▪ capitalization of arrears or current interest,
▪ currency conversion (unless such a possibility results from the original contract),
▪ establishing, amending or abolishing the existing security for receivables.
Any mentioned above modification may result in the need to exclude from the balance sheet and re-
classify the financial asset taking into account the SPPI test.
If the contractual terms of the loan are modified, the Bank performs a qualitative and quantitative
assessment to determine whether a given modification should be considered significant and,
consequently, derecognize the original financial asset from the balance sheet and recognize it as a
new (modified) asset at fair value. A significant modification takes place if the following conditions
are met:
▪ quantitative criteria:
- increase in the debtor's exposure, understood as an increase in the capital of each single credit
exposure above 10% compared to the capital before the increase. If the quantitative criterion
exceeds 10%, the modification is considered significant, while the occurrence of the quantitative
criterion up to 10% results in the modification being considered insignificant.
- extending the financing period, understood as extending the maturity date of the current
agreement. The modification is considered significant if the financing period is extended by: 8
years for mortgage loans, 5 years for other credit exposures in the retail segment, 3 years for
exposures in the corporate segment.
▪ qualitative criteria: conversion of the exposure to another currency (unless the possibility of
conversion was included in the original agreement), change of SPPI test result, change of debtor,
change of legal form or type of financial instrument. The occurrence of a qualitative criterion
results in recognizing the modification as significant.
If the cash flows resulting from the agreement are subject to modification, which does not lead to
derecognition of a given asset (so called ‘insignificant modification”), the Bank adjusts the gross
carrying amount of the financial asset and recognizes the profit or loss due to insignificant
modification in the financial result (in a separate item of the Loss Profit Statement – “result on
modification”). The adjustment of the gross carrying amount of a financial asset is the difference
between the discounted cash flows before and after the contract modification. All costs and fees
incurred adjust the carrying amount of the modified financial asset and are depreciated in the period
remaining until the maturity date of the modified financial asset.
27
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Credit Holidays
Following the signing by the President of the Republic of Poland and announcement in the Journal of
Laws of the Republic of Poland on the same day of the Act of 7 July 2022 on crowdfunding for business
ventures and assistance to borrowers (“the Act”), introducing, among others, a possibility of up to 8
months of credit holidays (suspension of instalment payments up to 8 monthly instalments) in 2022-
2023 (“credit holidays”) for PLN mortgage borrowers, the Bank recognized in 2023 an adjustment in
the amount of PLN 11.4 million as the final settlement of the impact of credit holidays in 2022–2023.
Whereas following the signing by the President of the Republic of Poland and the announcement in
the Journal of Laws of the Republic of Poland of the Act of April 12, 2024 amending the Act on support
for borrowers who have taken out a mortgage loan and are in a difficult financial situation and the
Act on crowdfunding for business ventures and aid borrowers which, among other things, extends the
possibility for borrowers to suspend the repayment of a mortgage loan granted in Polish currency for
a period of up to four months (suspension of repayments up to 4 monthly installments), during the
year, the Bank recognized an adjustment due to credit holidays, which in the final settlement
(the program is already over) charged the Bank's financial result for 2024 by PLN 106.8 million. The
credit holidays in 2024 were used by customers holding a total of around 16% of the balance of the
PLN mortgage loan portfolio concluded before June 30, 2022 with an original loan amount not
exceeding PLN 1.2 million, measured based on the capital balance as at May 31, 2024.
The adjustment was calculated and recognized in accordance with IFRS 9, as a reduction of interest
income on assets measured at amortized cost and, on the other hand, reducing the gross value of
mortgage loans in PLN.
Pursuant to the concluded agreement, in the event of the entry into force of regulations enabling
customers to take advantage of subsequent credit holidays (not mentioned above), Bank Millennium
undertakes to return to Millennium Mortgage Bank the equivalent of benefits in the form of lost
interest income in connection with the suspension of repayment of loans constituting an element of
proceeds from sold mortgage loan portfolios (applies to proceeds from the portfolio that was sold by
Bank Millennium to Millennium Mortgage Bank in November 2023 and tranches sold later).
POCI assets
POCI assets ("purchased or originated credit-impaired") are financial assets that, upon initial
recognition, have an identified impairment. Financial assets that were classified as POCI at the time
of initial recognition are treated by the Bank as POCI in all subsequent periods until they are
derecognized from balance sheet, and expected credit loss is estimated based on ECL covering the
remaining life time of the financial asset, regardless of future changes in estimates of cash flows
generated by them (possible improvement of assets quality).
POCI assets can be created in 3 different ways, i.e.:
1) through the acquisition of a contract that meets the definition of POCI (e.g. as a result of the
purchase of the "bad credit" portfolio),
2) by entering into a contract that is POCI at the time of original granting (e.g. granting a loan to a
client in bad financial condition with the hope of improving it in the future)
3) through a significant modification of the contract included in stage 3 leading to derecognition of
the contract from the balance sheet, and then to its further recognition in the balance sheet as a
contract meeting the definition of POCI.
Receivables and liabilities from lease contracts
The Bank is a party to lease contracts, on the basis of which it grants for paid use or benefit of non-
current assets or intangible assets for an agreed period of time.
28
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In the case of lease contracts, which result in transferring substantially all risks and rewards incidental
to ownership of the asset under lease, the subject of the lease is derecognized. A receivable amount
is recognized instead, however, in an amount equal to the present value of minimum lease payments.
Lease payments are accounted for (apportioned between the financial income and the reduction of
the balance of receivables) to reach constant periodic rate of return from the outstanding receivables.
Lease payments for contracts, which do not fulfil qualifications of a finance lease, are recognized as
income in the profit and loss, using the straight-line method, throughout the period of the lease.
The Bank is also a party to lease contracts, under which it takes for paid use or drawing benefits
another party’s non-current assets or intangible assets for an agreed period. These are mainly rental
agreements. In case of these contracts the financial report shows, both assets under the right of use
and liabilities under the lease, in separate items of the explanatory notes to the lines “Tangible fixed
assets” and “Other liabilities” respectively. On the start date of the lease, lease payments contained
in the valuation of the lease liability shall comprise following payments for the right to use the
underlying asset during the lease period, which remain due on that date:
• fixed lease payments less any and all due lease incentives,
• variable lease payments, which depend on the index or rate, initially valuated with use of this
index or this rate in accordance with their value on start date,
• amounts expected to be paid by the lessee under the guaranteed final value,
• the buy option strike price if it can be assumed with sufficient certainty that the lessee will
exercise this option,
• monetary penalties for lease termination if the lease terms and conditions stipulated that the
lessee may exercise the lease termination option.
A right to use asset comprises:
• amount of initial valuation of the lease liability,
• any and all lease payments paid on the start date or before it, less any and all lease incentives
received.
Financial result reflects following items:
• depreciation of right to use,
• interest on lease liabilities,
• VAT on rent invoices reported in cost of rent.
The Bank has adopted the following assumptions, based on which lease agreements are carried in
financial statements:
• calculation of liabilities and assets will use net values (VAT is excluded) of future cash flows,
• in case of agreements denominated in currency the liabilities will be carried in the original
currency of the contract while assets in Polish zloty converted at the rate from date of signing
the contract or an annex to the contract, which is also the day when the leasing starts,
• the right to use the asset will be depreciated according to the lease period,
• the Bank uses the option of not recognizing leasing in the case of short-term contracts for space
lease and car leasing contracts,
• the Bank also uses the option of not recognizing leasing in the case of leasing assets with a low
initial value, such as renting small areas, e.g. for garbage arbors, ramps, ATMs and devices such
as coffee machines, water dispensers, audiomarketing and aromatamarketing devices,
• new contracts will be discounted according to the SWAP rate on the day of signing the contract /
annex to the contract appropriate for the duration of the contract and applicable for the
currency, increased by the margin determined and updated in relation to the risk premium for
the financial liabilities incurred by the Bank.
Financial liabilities
Upon initial recognition a financial liability shall be classified as:
1) a financial liability measured at fair value through profit loss, or
2) other financial liability (measured at AC).
Additionally, financial liabilities shall not be reclassified subsequent to their initial recognition.
29
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Recognition of financial instruments in the balance sheet
The Bank recognizes financial assets or liabilities on the balance sheet, when it becomes a party to
the contractual provisions of the instrument. Standardized purchase and sale transactions of financial
assets are recognized at the trade date.
All financial instruments at their initial recognition are valued at fair value adjusted, in the case of a
financial instrument not valued at fair value through profit or loss, by transaction costs that are
directly attributable to the acquisition or issue of the financial asset/liability.
De-recognition of financial instruments from the balance sheet
The Bank derecognizes a financial asset when: the contractual rights to the cash flows from the
financial asset expire, or the Bank transfers the financial asset to third party. The transfer takes place
when the Bank:
▪ transfers the contractual right to receive the cash flows from the financial asset, or
▪ retains the contractual rights to receive the cash flows from the financial asset, but assumes a
contractual obligation to pay those cash flows to an entity from outside the Bank.
On transferring a financial asset, the Bank evaluates the extent to which it retains the risks and
rewards of ownership of the financial asset. Accordingly, where the Bank:
▪ transfers substantially all the risks and rewards of ownership of the financial asset, it derecognises
the financial asset from the balance sheet;
▪ retains substantially all the risks and rewards of ownership of the financial asset, it continues to
recognise the financial asset in the balance sheet;
▪ neither transfers nor retains substantially all the risks and rewards of ownership of the financial
asset, it determines whether it has retained control of the financial asset. In this case if the Bank
has retained control, it continues to recognise the financial asset in the balance sheet to the extent
of its continuing involvement in the financial asset, and if the Bank has not retained control, it
derecognises the financial asset accordingly.
The Bank removes a financial liability (or a part of a financial liability) from its balance sheet when
the obligation specified in the contract is discharged or cancelled or expired.
Hedge Accounting and Derivatives
Valuation at fair value
Derivative instruments are reported at fair value starting from the day of conclusion of the
transaction. Fair value is determined on the basis of quotations of instruments on active markets,
including pricing of recently concluded transactions. A market is considered as active when the quoted
instrument prices are regularly available and result from actual transactions on the market and
represent a level, at which the Bank could conclude such transactions. If the market for the
instruments is not active the Bank determines fair value with use of measurement techniques,
including models based on discounted cash flows and options measurement models. The measurement
techniques used by the Bank are based on maximum use of input data coming from the active market,
such as interest rates, FX rates and implied volatilities. In case of lack of input data from the active
market the Bank makes use in the measurement techniques of proprietary estimates of measurement
parameters, based on best knowledge and experience.
An additional element of the valuation of derivatives is a component of credit risk including both the
risk of the counterparty (credit value adjustment - CVA) and own Bank’s risk (debit value adjustment
- DVA).
30
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Recognition of derivative instruments embedded in liabilities
The Bank distinguishes and records in the balance sheet the derivatives which are a component of
hybrid instruments. A hybrid agreement contains an underlying (host) contract (not being a derivative)
and an embedded derivative which on the basis of a specific interest rate, price of financial
instrument, price of a commodity, rate of a currency, index of prices or rates or another variable
modifies part or the total of the cash flows resulting from the underlying contract.
Embedded derivative instruments are treated as stand-alone derivative instruments provided they
meet conditions presented below. Embedded derivative instruments are valued at fair value, and
their changes are recognized in the profit and loss. Embedded derivative instruments are recognized
and valued separately from the host contract if, and only if:
▪ the economic characteristics and risks of the embedded derivative are not closely related to
the economic characteristics and risks of the host contract,
▪ a separate instrument with the same terms as the embedded derivative would meet the
definition of a derivative; and
▪ the hybrid (combined) financial instrument is not measured at fair value with changes in fair
value recognized in profit or loss.
The method of recognizing the resulting fair value gain or loss depends on whether the given
derivative instrument is designated as a hedging instrument, and if it is, it also depends on the nature
of the hedging relationship and the hedged item.
Derivative instruments designated as hedging instruments – hedge accounting
The Bank uses derivative instruments in order to hedge against interest rate risk and FX risk arising
from operating, financing and investing activities of the Bank. Some derivative instruments are
designated as a hedging instrument of:
▪ cash flows hedges of recognized asset or liability or highly probable forecasted transaction
(cash flow hedges), or:
▪ fair value hedges of recognized asset or liability or firm commitment (fair value hedges).
Hedge accounting criteria
The Bank uses hedge accounting, based on IAS 39, if the following conditions are met:
▪ At the inception of the hedge there is formal designation and documentation of the hedging
relationship and the Bank’s risk management objective and strategy for undertaking the hedge.
That documentation includes identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged. It documents also, at the inception of the hedge
and through the period of hedge relationship, the assessment of the hedging instrument's
effectiveness in offsetting the exposure to changes in fair value or cash flows of the hedged item;
▪ The hedge is expected to be highly effective in achieving offsetting changes in fair value or cash
flows attributable to the hedged risk, consistently with the originally documented risk
management strategy for that particular hedging relationship (prospective effectiveness test);
▪ For cash flow hedges, a forecast transaction that is the subject of the hedge must be highly
probable and must present an exposure to variations in cash flows that could ultimately affect
profit or loss (high probability test);
▪ The effectiveness of the hedge can be reliably measured, i.e. the fair value or cash flows of the
hedged item that are attributable to the hedged risk and the fair value of the hedging instrument
can be reliably measured;
▪ The hedge is assessed on an ongoing basis and determined actually to have been highly effective
throughout the financial reporting periods for which the hedge was designated (backward-looking
effectiveness test).
31
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Cash flow hedge
Cash flow hedge: a hedge of the exposure to variability in cash flows that (i) is attributable to a
particular risk associated with a recognised asset or liability (such as all or some future interest
payments on variable rate debt) or a highly probable forecast transaction and (ii) could affect profit
or loss.
A cash flow hedge is accounted for as follows: the portion of the gain or loss on the hedging instrument
that is determined to be an effective hedge is recognised in equity through the other comprehensive
income; and the ineffective portion of the gain or loss on the hedging instrument is recognised in
Result on financial instruments valued at fair value through profit and loss.
The associated gains or losses that were recognised in other comprehensive income (effective hedge),
at the moment of recognition of a financial asset and liability being a result of planned hedged future
transaction, are transferred into profit or loss in the same period or periods during which the asset
acquired or liability assumed affects the profit or loss.
In case of a hedge of non-financial asset or a non-financial liability, the associated gains and losses
recognised in other comprehensive income as an effective hedge, are transferred successively into
the profit or loss account in the same period or periods during which the asset acquired or liability
assumed affects the profit or loss account directly from equity or are transferred from equity to initial
purchase price in the balance sheet and recognized successfully in the periods, in which non – financial
asset or liability has impact on profit and loss account.
Fair value hedge
Fair value hedge: a hedge of the exposure to changes in fair value of a recognised asset or liability or
an unrecognised firm commitment, or an identified portion of such an asset, liability or firm
commitment, that is attributable to a particular risk and could affect the profit or loss.
Changes in the fair value of derivative instruments classified and eligible as fair value hedges are
recognised in the Profit and Loss along with their corresponding changes of the hedged asset or
liability relating to the risk hedged by the Bank.
It means that any gains or losses resulting from re-measuring the hedging instrument at fair value (for
a derivative hedging instrument) are recognised in profit or loss and the gains or losses on the hedged
item attributable to the hedged risk adjust the carrying amount of the hedged item and are recognised
in profit or loss. This applies if the hedged item is otherwise measured at cost. Recognition of the
gain or loss attributable to the hedged risk in profit or loss applies if the hedged item is an FVOCI
asset. The valuation of hedged financial assets classified as FVOCI, resulting from factors other than
risk hedged, is recognized in other comprehensive income till the date of sale or maturity of this
financial asset.
Termination of hedge accounting
If the fair value hedge no longer meets the criteria for applying hedge accounting, the carrying value
adjustment of the hedged instrument valued at amortized cost and effective interest rate, is linearly
amortized through profit and loss account over the period ending on the maturity date. The value of
hedged financial assets classified as FVOCI resulting from factors other than hedged risks is recognized
in the revaluation reserve till the date of sale or maturity of this financial asset.
If the cash flow hedge no longer meets the criteria for hedge accounting, the valuation of hedging
instrument recognized in other comprehensive income at the date of the last effectiveness test
remains in equity until the realization of cash flow resulting from the hedged item. Then the amount
is transferred into profit and loss account in the periods, in which the hedged transaction influences
the profit and loss account.
32
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Derivative instruments not qualifying as hedging instruments
Derivative instruments that are not subject to hedge accounting principles are classified as
instruments held for trading, and valued at fair value. The changes in fair value of derivative
instruments held for trading are recognized in the profit and loss in item “Results on financial assets
and liabilities held for trading”/“Result on exchange differences”, which was described below.
The Bank uses the following principles of recognition of gains and losses resulting from the valuation
of derivative instruments:
▪ FX forward
Forward transactions are valued at fair value on discounted future cash flows basis, taking into
account the credit risk of the counterparty (and the Bank) as long as there is non-performance risk
of the transaction parties with respect to future settlement of the deal. Any changes in fair value
of FX forward transactions are recorded in “Result on exchange differences” of the Profit and Loss
Account.
Moreover the Bank designated selected FX forward transactions as hedging instruments. The
method of capturing and valuating hedging financial instruments was described in the part on
hedge accounting.
▪ FX SWAP
FX SWAP transactions are measured at fair value based on the discounted future cash-flow method
with use of interest rate curves based on spread reflecting current market conditions and with
taking into account the credit risk of the counterparty (and the Bank) as long as there is non-
performance risk of the transaction parties with respect to future settlement of the deal. Changes
of fair value of FX SWAP transactions are reported in “Results on financial assets and liabilities
held for trading” in the Profit and Loss Account.
▪ Interest Rate SWAP (IRS)
IRS transactions are valued at fair value on discounted future cash flows basis, taking into account
the credit risk of the counterparty (and the Bank) as long as there is non-performance risk of the
transaction parties with respect to future settlement of the deal. Any changes in fair value of IRS
transactions are recorded in “Results on financial assets and liabilities held for trading” of the
Profit and Loss Account.
Moreover the Bank designated selected IRS transactions as hedging instruments. The method of
capturing and valuating hedging financial instruments was described in the part on hedge
accounting.
▪ Cross – Currency Swap (CCS)
CCS transactions are measured at fair value based on the discounted future cash-flows method
with use of interest rate curves adjusted with market spread reflecting its term structure and with
taking into account the credit risk of the counterparty (and the Bank) as long as there is non-
performance risk of the transaction parties with respect to future settlement of the deal. Changes
of fair value of CCS transactions are reported in “Results on financial assets and liabilities held for
trading”.
Moreover the Bank designated selected CCS transactions as hedging instruments. The method of
recognition and measurement of hedging instruments was described in the part devoted to hedge
accounting.
33
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
▪ IRS transactions with embedded options
The transactions are valued at fair value: the swap component is valued with use of the future
cash flows discounting method taking into account the credit risk of the counterparty (and the
Bank) as long as there is non-performance risk of the transaction parties with respect to future
settlement of the deal, while the option component is valued with use of the option valuation
models. Any changes in fair value of the above transactions are recorded in “Results on financial
assets and liabilities held for trading” of the Profit and Loss Account. The option component hedges
options embedded in securities or deposits offered by the Bank.
▪ FX and Index options
Option transactions are measured at fair value with use of option measurement models. In case of
options issued by the Bank’s counterparties, the model measurement is supplemented with impact
on fair value of the estimated credit risk parameter. Changes of fair value of options are reported
in “Results on financial assets and liabilities held for trading” line of the Profit and Loss Account.
▪ Forward Rate Agreement (FRA)
FRA transactions are valued at fair value on discounted future cash flows basis and with taking into
account the credit risk of the counterparty (and the Bank) as long as there is non-performance risk
of the transaction parties with respect to future settlement of the deal. Any changes in fair value
of FRA transactions are recorded in “Results on financial assets and liabilities held for trading” of
the Profit and Loss Account.
▪ Commodity futures
Commodity futures are measured at fair value based on the discounted future cash flow
methodology, using reference prices set at the LME reference market (London Metal Exchange),
whereas the Bank does not keep own positions on the commodity market. Changes of fair value
are reported in “Results on financial assets and liabilities held for trading” of the Profit and Loss
Account.
▪ Commodity options
Commodity options are measured at fair value with use of option valuation models as well as
reference prices set at the LME reference market (London Metal Exchange), whereas the Bank does
not keep own positions on the commodity market. Changes of fair value are reported in “Results
on financial assets and liabilities held for trading” of the Profit and Loss Account.
Impairment of financial assets
General assumptions of the model
Impairment estimation model has been based on the concept of “expected credit loss”, (hereinafter:
ECL). Impairment charges now have to be calculated based on expected credit losses and forecasts
and expected future economic conditions have to be taken into account when conducting evaluation
of credit risk of an exposure.
The implemented impairment model applies to financial assets classified in accordance with IFRS 9
as financial assets measured at amortized cost or at fair value through other comprehensive income,
(except for equity instruments) and for off balance liabilities.
34
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
According to IFRS 9, credit exposures are classified in the following categories:
▪ Stage 1 – non-impaired exposures, for which expected credit loss is estimated for the 12-month
period,
▪ Stage 2 – non-impaired exposures, for which a significant increase in risk has been identified and
for which expected credit loss is estimated for the remaining life time of the financial asset,
▪ Stage 3 – exposures with identified signs of impairment, for which expected credit loss is estimated
for the remaining life time of the financial asset.
In the case of exposures classified as POCI (purchased or originated credit impaired) which, upon their
initial recognition in the balance sheet, are recognized as impaired, expected credit loss is estimated
based on ECL covering the remaining life time of the financial asset.
Identification of a significant increase in credit risk
Assets, for which there has been identified a significant increase in credit risk compared to the initial
recognition in the balance sheet, are classified in Stage 2. The significant increase in credit risk is
recognized based on qualitative and quantitative criteria. The qualitative criteria include:
▪ repayment delays of more than 30 days,
▪ forborne exposures in non-default status,
▪ using the support of the Borrower Support Fund,
▪ occurrence of seizures on current accounts resulting from enforcement orders,
▪ procedural rating, which is reflecting early delays in payments,
▪ taking a risk-mitigating decision for corporate clients, triggered by the early warning system,
▪ events related to an increase in credit risk, the so called “soft signs” of impairment, identified as
part of an individual analysis involving individually significant customers.
The quantitative criterion involves a comparison of the lifetime PD value determined on initial
recognition of an exposure in the balance sheet, with the lifetime PD value determined at the current
reporting date. If an empirically determined threshold of the relative change in the lifetime PD value
is exceeded then an exposure is automatically transferred to Stage 2. The quantitative assessment
does not cover exposures analyzed individually.
Incorporation of forward looking information on economic conditions (FLI)
In the process of calculation of expected credit losses, the Bank uses forward looking information
about macroeconomic events. The Macroeconomic Analysis Office prepares three macroeconomic
scenarios (base, optimistic and pessimistic) and determines the probability of their occurrence. The
forecasts translate directly or indirectly into the values of estimated parameters and exposures.
Unification of the default definition across the Group
The Group has adopted an uniform definition of default, both for the purpose of calculation of capital
requirements and for the estimation of impairment. Starting from 2020, for the retail portfolio, the
Group uses the definition of default, which is in line with the EBA Guidelines (EBA/GL/2016/07), the
so-called New Definition of Default. Unified Default definition includes following triggers:
▪ DPD>90 days considering materiality thresholds for due amount: absolute PLN 400 for retail
and PLN 2000 for corporates and relative threshold of 1% in relation to total exposure,
▪ Restructured loans (forborne),
▪ Loans in vindication process,
▪ Other triggers defined in EBA Guidelines,
▪ Qualitative triggers identified in the individual analysis.
Bank is using cross-default approach for all segments.
35
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PD Model
The PD model, created for the calculation of expected credit losses, is based on empirical data
concerning 12-month default rates, which are then used to estimate lifetime PD values (including FLI)
using appropriate statistical and econometric methods. The segmentation adopted for this purpose at
the customer level is consistent with the segmentation used for capital requirement calculation
purposes. Additionally, the Bank has been using rating information from internal rating models to
calculate PDs.
LGD Models
The main components of LGD models are the probability of cure and the recovery rate estimated on
the basis of discounted cash flows. Models reflect the current economic situation and utilize forward
looking information on macroeconomic events (FLI).
For the corporate portfolio, LGD model is based on a component determining parameterized recovery
for the key types of collateral and a component determining the recovery rate for the unsecured part.
All the parameters were calculated on the basis of historical data, including discounted cash flows
achieved by the corporate debt recovery unit.
EaD Model
The EaD model used in the Bank includes calculation of parameters such as: average limit utilization
(LU), credit conversion factor (CCF), prepayment ratio, behavioural life expectancy. Segmentation is
based on the type of customer (retail, corporate, leasing) and product (products with/without a
schedule). Forecasts of foreign exchange rates are used as FLI adjustment.
Write-offs
The Bank directly reduces the gross carrying amount of a financial asset if there are no reasonable
grounds to recover a given financial asset in whole or partially. As a result of write-off, a financial
asset component ceases, in whole or partially, to be recognized in the financial statements.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet
when there is a legally enforceable right to offset the recognised amounts and there is an intention
to settle on a net basis, or realise the asset and settle the liability simultaneously.
Transactions with sell/buy-back clauses
Repo and sell-buy back transactions as well as reverse-repo and buy-sell back transactions, are
transactions of sale and purchase of securities for which a commitment has been made to repurchase
or resell them at a contractual date and for specified contractual price.
The Bank presents financial assets sold with the repurchase clauses (repo, sell buy-back) in its balance
sheet, by simultaneously recognizing a financial liability resulting from the repurchase clause,
provided that risks and rewards relating to this asset are retained by the Bank after the transfer.
36
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
When the Bank purchases securities with a sell back clause (reverse repo, buy-sell-back), the financial
assets are presented as receivables arising from sell back clause.
Transactions with repurchase/resell agreement are measured at amortized cost. Securities, which are
the subjects of transactions with repurchase clause, are not removed from the balance sheet and are
measured in accordance with principles applicable for particular securities portfolio. The difference
between sale and repurchase price is treated as interest cost/ income, and is accrued over the period
of the agreement by application of an effective interest rate.
Property, plant and equipment and Intangible Assets
Own property, plant and equipment
Tangible fixed assets are the controlled fixed assets and outlays made to build such assets. Tangible
fixed assets include fixed assets with an expected period of use above one year, maintained to be
used to serve the Bank’s needs or to be transferred to other entities, based on the lease contract or
for administrative purposes.
Tangible fixed assets are reported at historical cost less depreciation and impairment.
Fixed assets under construction are disclosed at purchase price or production costs and are not subject
to depreciation.
The Bank recognizes as a part of the asset’s carrying value, the replacement costs as incurred, only
when it is probable that future economic benefits associated with these items will flow to the Bank,
and the cost of the item can be reliably measured. Other outlays are recognised in profit and loss
when incurred.
Costs of repairs and maintenance of property, plant and equipment are charged to the profit and loss
in the reporting period in which they were incurred.
Intangible Assets
An intangible asset is an identifiable non-pecuniary asset which does not have physical form and will
generate economic benefits for the Bank in the future.
The main components of intangible assets are licenses for computer software.
Purchased computer software licences are capitalised in the amount of costs incurred for the purchase
and adaptation for use of specific computer software. Expenses attached to the development or
maintenance of computer software is expensed when incurred.
Other intangibles purchased by the Bank are recognized at cost less accumulated amortization and
accumulated impairment allowances.
Subsequent costs incurred after initial recognition of acquired intangible assets are recognized only
when it is probable that future economic benefits will flow to the Bank. In the other cases, costs are
charged to the profit and loss in the reporting period in which they were incurred.
All intangible assets are subject to periodic review in order to verify whether there were triggers
indicating possible loss of values, which would require a test for the loss of values and an impairment
recognition.
37
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Depreciation and amortization charges
The depreciation charge of tangible and intangible assets is accounted for on a straight line basis with
the use of defined depreciation rates throughout the period of their useful lives. The depreciable
amount is the cost of an asset, or other amount substituted for cost, less its residual value. The useful
life, amortization/ depreciation rates and residual values of tangible and intangible assets are
reviewed annually. Conclusions of the review may lead to a change of depreciation periods recognized
prospectively from the date of application.
Land, an intangible asset with an unspecified useful life, outlays for tangible assets and intangible
assets are not depreciated. At each balance sheet date intangible assets with indefinite useful life
are regularly tested for impairment.
The following depreciation rates are applied to basic categories of tangible and intangible assets and
for investment property:
Selected categories of property, plant and equipment:
Bank buildings: 2.5%
Lease holding improvements: usually for 10 years
Computer hardware: 20%
Network devices: 20%
Vehicles as standard: 25%
Telecommunication equipment: in the range 10%-20%
Intangibles (software): expected useful life
Main applications (systems): expected useful life
Depreciation and amortization charges are recognized as operating expenses in the profit and loss
account.
Non-current assets held for sale
The Bank classifies a non-current asset as held for sale, if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use. For this to be the case the
asset is available for immediate sale in its present condition subject only to terms that are usual and
customary for sales of such assets and its sale is highly probable. The sale is highly probable if the
appropriate level of management is committed to a plan to sell the asset (or disposal group), and an
active programme to locate a buyer and complete the plan has been initiated. Further, the asset is
actively marketed for sale at a price that is reasonable in relation to its current fair value. In addition,
the sale is expected to qualify for recognition as a completed sale within one year from the date of
classification.
Non-current assets held for sale are measured at the lower of: its carrying amount or fair value less
cost to sell. Assets classified in this category are not depreciated.
When criteria for classification to non-current assets held for sale are not met, the Bank ceases to
classify the assets as held for sale and makes reclassification to other assets category. The Bank
measures a non-current asset that ceases to be classified as held for sale at the lower of:
▪ its carrying amount before the asset (or disposal group) was classified as held for sale,
adjusted for any depreciation, amortisation or revaluations that would have been recognised
had the asset (or disposal group) not been classified as held for sale, and
▪ its recoverable amount at the date of the subsequent decision not to sell.
38
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Impairment of non-financial non-current assets
The Bank assesses the existence of any indications that a non-current asset may be impaired at each
balance sheet date. If such indications exist, the Bank estimates the recoverable amount of the asset
and if the recoverable amount of an asset is less than its carrying amount, the Bank recognizes
impairment charge in the profit and loss.
The impairment loss is the difference between the carrying amount and the recoverable amount of
the asset. Recoverable amount is the higher of an asset’s fair value less cost to sell and its value in
use. Value in use is established for particular assets, if a given asset generates cash flows substantially
independent of those generated by other assets or groups of assets.
If such indications exist, the Bank performs an estimation of recoverable value. If, and only if, the
recoverable value of an asset is less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable value.
If pursuant to IAS 36, paragraph 21 there is no reason to believe that an asset’s value in use materially
exceeds its fair value less costs to sell, the asset’s fair value less costs to sell may be used as its
recoverable amount. This will be particularly the case of an asset that is held for disposal.
An impairment loss can be reversed only to the amount, where the book value of impaired asset does
not exceed its book value, which decreased by depreciation charge, would be established, if any
impairment loss would not be recognized.
Other Assets
Other assets are presented at nominal value, taking into account impairment losses, except for
receivables due from Société Générale S.A. under an “CHF Portfolio Indemnity and Guarantee
Agreement”, which are recorded in the amount of the legal risk reserve, taking into account the
credit risk component of Société Générale S.A. (apart from settlements resulting from the realization
of the reserve, which correspond to the costs incurred). The methodology for creating provisions for
legal risk related to the mortgage loan portfolio, including, among others, the former Euro Bank
denominated in CHF or denominated in PLN but indexed to CHF, is described in Chapter 12 "Legal risk
related to foreign currency mortgage loans", while information on the genesis of these receivables is
included under Note 29 Other Assets in Chapter 13 "Notes to the Financial Statements".
Deferred costs (assets) refer to those expenses that will be charged to the profit and loss account
over time in future reporting periods.
Accruals and Deferred Income
Accruals are liabilities for costs arising from services provided to the Group, which will be payable
over future periods. The accruals are recognized in the caption “Other Liabilities” in the balance
sheet. Deferred income comprises among others received amounts of future services and other types
of income received in advance to be settled against in the profit and loss in future reporting periods.
They are presented in the caption “Other Liabilities” in the balance sheet.
Provisions
Provisions are established when (1) the Bank has an obligation (legal or constructive) as a result of
past events, and (2) it is probable (i.e. more likely than not) that an outflow of resources embodying
economic benefits will be required to settle the obligation; and (3) a reliable estimate can be made
of the amount of the obligation. If the effect is material, the amount of provision is measured by
discounted, expected cash flows using pre-tax rate that reflects current market assessments of the
time value of money and those risks specific to the liability.
39
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
A provision for restructuring costs is recognised only when the general criteria for provisions
recognition as well as specific criteria for restructuring provision recognition specified in IAS 37 are
met. In particular, the constructive obligation to restructure arises only when the Bank has a detailed
formal plan for the restructuring and has raised a valid expectation in those affected that it would
carry out the restructuring by starting to implement that plan or announcing its main features to
those affected by it.
A detailed formal plan for the restructuring identifies at least: the business or part of a business
concerned; the principal locations affected; the location, function, and approximate number of
employees who will be compensated for terminating their services; the expenditures that will be
undertaken; and when the plan will be implemented.
A restructuring provision includes only the direct expenditures arising from the restructuring, which
are those that are both: (a) necessarily entailed by the restructuring; and (b) not associated with the
ongoing activities of the entity. The restructuring provision does not cover future operating expenses.
Employee Benefits
Short-term employee benefits
Short-term employee benefits of the Bank (other than termination benefits due wholly within 12
months after work is completed) comprises of wages, salaries, bonuses and paid annual leave and
social security contributions.
The Bank recognizes the anticipated, undiscounted value of short-term employee benefits as an
expense of an accounting period when an employee has rendered service (regardless of payment date)
in correspondence with other on-balance liabilities.
The amount of short-term employee benefits on the unused holidays to which Bank employees are
entitled is calculated as the sum of unused holidays to which particular Bank employees are entitled.
Long-term employee benefits
The Bank’s liabilities on long-term employee benefits are equal to the amount of future benefits,
which the employee will receive in return for providing his services in the current and earlier periods,
which are not fully due within 12 months from carrying out the work. In accordance with the
Employees Remuneration By-laws and the Labour Code employees having worked a specific number
of years and attained the required age are entitled to receive a pension severance payment.
Retirement pension severance payments provision is calculated using an actuarial method by an
independent actuary as the present value of the Bank’s future liabilities due to employees according
to the headcount and wages as at the date of revaluation. Valuation is done using the projected unit
credit method. Under this method, each period of service gives power to an additional unit of benefit
entitlement and each unit of benefit is calculated separately. Computation takes into account that
the base salary of each employee will vary over time according to certain assumptions. The provision
is updated on an annual basis. The parameters that have a significant impact on the amount of current
liabilities are: the rate of mobility (rotation), the discount rate, the rate of wage growth. The nominal
discount rate for the calculation for 2024 has been set at 5.61%. The calculation of the commitments
is made for employees currently employed and do not apply to persons who will start working in the
future.
40
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In 2012, the Bank implemented a policy specifying the principles of remuneration for persons having
a significant impact on the risk profile of Bank Millennium, as amended. In accordance with the policy,
the Bank's employees who have a significant impact on its risk profile receive variable remuneration,
part of which is paid in the form of financial instruments. Until 2018, the financial instrument took
the form of phantom shares. From 2019, the Bank, by decision of the General Meeting of Shareholders
of the Bank on August 27, 2019, introduced a 3-year incentive program to reward eligible persons
previously identified as having a significant impact on the risk profile (Risk Taker). As part of it, the
Own Shares purchased by the Bank were, in accordance with the applicable Risk Takers' remuneration
policy, intended as a financial instrument for free acquisition in an appropriate number by designated
Risk Takers during the Program Period. In bonus programs effective from January 1, 2020, financial
instruments were awarded to Risk Takers I - Members of the Management Board of Bank Millennium
SA. In 2023, the Personnel Committee of the Supervisory Board decided to convert own shares granted
to Members of the Management Board in the 2019 and 2021 program in the form of own shares into
phantom shares. Under the 2022 and 2023 program, phantom shares were granted as a financial
instrument. Detailed information is presented in Chapter 14) point 7).
Provisions for short-term and long-term employee benefits are recognized in the caption “Other
Liabilities” in balance sheet in correspondence with the “staff costs” in the profit and loss.
The Bank fulfils a programme of post – employment benefits called defined contribution plan. Under
this plan the Bank pays fixed contributions into the state pension fund. Post – employment benefits
are paid to an employee from the proceeds of the fund including the return on the invested
contributions. Consequently, the Bank does not have a legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay all employee benefits relating to
employee service.
Bank’s Equity
Equity consists of capital and funds established in compliance with the respective provisions of the
law, i.e., the appropriate legislative acts, the Company by-laws, or the Articles of Association.
Equity is comprised of the share capital, share premium, revaluation reserve and retained earnings.
All balances of capital and funds are presented at nominal value.
Share Capital
Share capital is presented at nominal value, in accordance with the Articles of Association and the
entry in the Register of Companies.
If the entity acquires its own shares, then the paid amount together with the costs directly attributed
to such purchase is treated as a change in the Equity. Acquired own shares are treated as own shares
and disclosed as reduction of the Equity until the time they are cancelled.
Dividends for the financial year, which have been approved by the General Shareholders’ Meeting,
but not distributed as of the balance sheet day, are disclosed in the caption „Other Liabilities” in the
balance sheet.
Share Premium
Share premium is formed from agio obtained from the issue of shares reduced by the attached direct
costs incurred with that issue.
41
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Accumulated other comprehensive income
Accumulated other comprehensive income consists of: the valuation of financial assets measured at
fair value through other comprehensive income, the result of cash flow hedge valuation and actuarial
gains (losses) regarding provisions for retirement benefits with deferred income tax effect applied.
Accumulated other comprehensive income is not subject to distribution.
Retained Earnings
Retained earnings are created with charges against profit and are allocated for purposes specified in
the Articles of Association or other legal regulations (the remaining part of supplementary capital,
additional reserve capital, including general banking risk fund) or constitute previous years’
profit/loss or year-to-date net financial result.
The General Banking Risk Fund at Bank Millennium SA is created from profit after tax in accordance
with the Banking Act dated 29 August 1997 as later amended.
Net profit of the current year represents net profit adjusted by corporate income tax. Losses
attributed to non-controlling interests and exceeding the value of equity attributed to them are
charged to the Bank’s equity.
Financial guarantee
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due
in accordance with the original or modified terms of a debt instrument.
The financial guarantees granted are valued at the higher of the following values:
• amounts of write-offs for expected credit losses,
• the amount initially recognized less the cumulative amount of income recognized in accordance
with IFRS 15.
Interest income and other of similar nature
Interest income includes interest on financial instruments measured at amortized cost and financial
assets measured at fair value through other comprehensive income using the effective interest rate
method.
The effective interest rate method is a method of calculating the amortized cost of a financial asset
or financial liability and the allocation of interest cost or interest income and certain commissions
(constituting an integral part of the interest rate) to the relevant period. The effective interest rate
is the rate that exactly discounts the estimated future cash flows (in the period until the financial
instrument expires) up to the gross carrying amount of the asset / amortised cost of the liability.
When calculating the effective interest rate, the Bank estimates cash flows considering all contractual
terms of a given financial instrument, without taking into account possible future losses due to unpaid
loans. This calculation includes all fees paid or received between parties to the contract, which are
an integral part of the effective interest rate, and transaction costs and all other differences due to
the premium or discount.
42
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Interest income includes interest and commissions (received or due) included in the calculation of the
effective interest rate on: loans, interbank deposits and debt securities not classified into held for
trading category. Interest income also includes costs directly related to the conclusion of
a loan agreement borne by the Group (mainly commissions paid to external and own agents for
concluding a mortgage agreement and related property valuation costs related to this type of
contract) that are a component of the effective interest rate and are settled in time.
Upon recognizing the impairment of a financial instrument measured at amortized cost and financial
assets measured at fair value through other comprehensive income, interest income is recognized in
the Profit and Loss Account but is calculated on the newly established carrying amount of the financial
instrument (that is, less impairment).
Interest income also includes net interest income on derivative instruments designated and being
effective hedging instruments in hedge accounting (a detailed description of the existing hedging
relationships is included in note (24)).
Interest income and costs on derivatives classified as held for trading as well as interest income and
the settlement of a discount or premium on debt financial instruments classified as held for trading
are recognized under the item "Result of similar nature to interest from financial assets at fair value
through profit and loss" of the Profit and Loss Account. This item also includes interest income arising
from assets that are measured at fair value through profit and loss.
Interest costs
Interest costs include in particular interest resulting from financial instruments measured at
amortized cost using the effective interest rate method described above.
Fee and commission Income/ Fee and commission Costs
Fee and commission income and expenses received from banking operations on client accounts, from
operations on payment cards and brokerage activity is recognized in the profit and loss at the time
the service is rendered; other fees and commissions are deferred and recognized as revenue over
time.
The basic types of commissions related to credit operations in the Bank include among others: loan
origination fees and commissions, and commitment fees.
Fees and commissions (both income and expense) directly attributable to initial recognition of
financial assets with established repayment schedules are recognized in profit and loss account as
effective interest rate component and are part of interest income. Other, attributed to initial
recognition of financial assets without established repayment schedules are amortized on
a straight-line basis through the expected life of the financial instrument. Fees and commissions on
pledge to grant a loan, which is probable to be drawn, are deferred and since initial recognition of
financial assets are amortized as component of effective interest rate or on a straight-line basis based
on above mentioned criteria. In the case of loans and advances with undetermined instalment
payments and changes in interest, e.g. overdraft facilities and credit cards commissions are settled
over the duration of the card or overdraft limit by the straight-line method and included in commission
income.
43
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In connection with the Bank's bancassurance activity (selling insurance services), based on the
criterion how the income from aforementioned activity is recorded, two groups of products can be
identified.
The first group consists of insurance products without direct links with the financial instrument - in
this case the Bank's remuneration is recognised as income after performance of a significant act, i.e.
in a date of commencement or renewal of insurance policies, taking into account provisions for
thinkable returns.
In the second group (where there is a direct link to a financial instrument, particularly when the
insurance product is offered to the customer only with credit product, i.e. there is not possibility to
buy from the bank separately, without a credit product, the same insurance product in terms of form,
legal and economic conditions) two sub-groups can be identified:
a) In the case of insurance for which the insurance premium is collected monthly, the
remuneration is recognised in the profit and loss account at the time the remuneration is
received.
b) In insurance for which the insurance premium is charged once for an insurance period longer
than one month, the Bank allocate the total value of remuneration for combined transaction
due to their respect for the individual elements of the transaction, after deducting by
provision on the part of the remuneration to be reimbursed, for example as a result of the
cancellation by the customer with insurance, prepayments or other titles. Provision estimate
is based on an analysis of historical information about the real returns in the past and
predictions as to the trend returns in the future.
Allocation of remuneration referred to above is based on the methodology of “relative fair
value” involving division of the total remuneration pro rata to, respectively, fair value of
remuneration with respect to financial instrument and fair value of intermediation service.
Determination of the above fair values is based on market data including, in particular, for:
▪ Intermediation services – upon market approach involving the use of prices and other
market data for similar market transactions,
▪ Remuneration relative to financial instrument – upon income approach based on
conversion of future amounts into present value using information on interest rates and
other charges applicable to identical or similar financial instruments offered separately
from the insurance product.
Individual, separated elements of a given transaction or several transactions considered
jointly are subject to the following income recognition principles:
▪ Fees charged by insurance agencies – partially including fee for performance of a
significant act, recognised in revenue on the day of commencement or renewal of
insurance policy.
▪ Fees/charges constituting an integral part of effective interest rate accruing on financial
instrument – treated as adjustment of effective interest rate and recognised under
interest income.
▪ interest income.
Currently, the Bank's offer does not include any insurance for which the premium is charged once in
advance for an insurance period longer than one month.
Remaining fees and commissions connected with financial services offered by the Bank, such as:
▪ Asset management services;
▪ Services connected with cash management;
▪ Brokerage services;
are recognised in the Profit and Loss Account on an one-off basis.
44
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Dividend Income
Dividend income is recognized in the profit and loss when the shareholders’ right to receive payment
is established.
Result on derecognition of financial assets and liabilities not measured at fair value through profit
or loss
The result on derecognition of financial assets and liabilities not measured at fair value through profit
or loss includes gains and losses arising from the sale of debt financial instruments classified to the
portfolio measured at fair value through comprehensive income and other gains and losses resulting
from investing activities.
In 2023, the Bank completed a bancassurance transaction, part of the result of which was recognized
in “Result on derecognition of financial assets and liabilities not measured at fair value through profit
or loss”, more information on this subject is presented in Chapter 13., note (5).
Result on financial assets and liabilities held for trading
The result on financial assets and financial liabilities held for trading contains gains and losses on
disposal of financial instruments classified as financial assets / liabilities measured held for trading
and the effect of valuation of these instruments at fair value (incl. debt, equity and derivative
instruments intended for trading).
Result on non-trading financial assets mandatorily at fair value through profit or loss
The result on non-trading financial assets mandatorily at fair value through profit or loss includes
gains and losses on disposal and the effect of the measurement of financial instruments classified to
this category of assets.
Result on hedge accounting
The result on hedge accounting includes in particular: changes in the fair value of the hedging
instrument (including discontinuation), changes in the fair value of the hedged item resulting from
the hedged risk and inefficiencies resulting from cash flow hedges recognized in profit or loss.
Result on exchange differences
Foreign exchange differences include: i) realized result and result from the valuation of FX spot and
FX Forward transactions ii) positive and negative exchange rate differences, both realized and
unrealized, resulting from the daily valuation of foreign currency assets and liabilities, valid as at the
balance sheet day average NBP exchange rate and affecting income or expenses from the exchange
position.
Other Operating Income and Expenses
Other operating income and expenses include expenses and incomes not associated directly with the
banking activity. In particular, this is result on sale and liquidation of fixed assets, income from sale
of other services, received and paid damages, penalties and fines and provisions for litigations issues.
45
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Franchise fees
Franchise is a model of cooperation between the Bank and independent entrepreneurs who, based on
concluded agreements of the nature of agency agreements, defined by law, perform agency activities
in the sale of products and services from the Bank’s offer to the Bank’s clients and potential clients.
The cooperating franchisees use the Bank’s trademarks and know-how when performing the
agreement, and franchise outlets are almost as functional for customers as Bank’s own outlets
(excluding investment products). For cooperation, the Bank charges a franchise fee for the use of
trademarks and fees for renting IT equipment from the Bank necessary to perform activities in a given
branch and pays franchisees commissions on banking products and services sold.
Banking tax
The tax on certain financial institutions ("banking tax") is the tax presented in the Income Statement
under "Banking tax" levied on bank’s assets (it is not an income tax). In accordance with the Polish
Act of January 15, 2016 on the tax on certain financial institutions (consolidated text - Journal of
Laws 2023, item 623), domestic banks are the taxpayers and the tax base is defined as a surplus of
the total value of the bank's assets resulting from the trial balance, determined as at the last day of
the month, based on entries in the general ledger accounts, over the amount of PLN 4 billion. The
banking tax is 0.0366% of the tax base per month. As a result of the implementation of the Recovery
Plan from July 2022, Bank Millennium S.A. benefited from the exemption from the banking tax starting
from that month until May 2024.
Other taxes
The Bank is also taxpayer of the following taxes:
1) value added tax (VAT) performing activities both taxable (e.g. leasing, factoring services) and
exempt from VAT (e.g. banking services, brokerage);
2) real estate tax;
3) tax on means of transport;
4) other taxes occasionally charged to them (e.g. tax on civil law transactions, excise duty, foreign
withholding tax not subject to deduction).
In addition, the Bank is required to pay various fees (e.g. stamp duty, fees for perpetual usufruct of
land). Costs related to these taxes and fees are presented in the Administrative Expenses Note under
“Taxes and fees”.
Revenues, costs and assets are recognized in the amount less VAT, tax on civil law transactions and
other sales taxes, except when the sales tax paid on the purchase of goods and services is not
recoverable from tax authorities; then VAT is recognized as an expense or as part of the cost of
acquiring an asset, respectively. The amount of tax recoverable or payable to the tax authorities is
presented in the financial statement as part of receivables or liabilities.
46
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Income Tax
Corporate income tax comprises current and deferred tax.
Current income tax is calculated on profit before tax, established in accordance with appropriate
accounting regulations adjusted by non-taxable income and non-tax deductible expenses, with usage
of binding tax rate. Moreover, for tax purposes, the gross profit is adjusted by previous years’ income
and expenses realised for tax purposes in a given reporting period and deductions from income arising
from e.g. donations.
Deferred income tax is recognized in profit and loss, except for when it is recognized in other
comprehensive income or directly in equity because it relates to transactions that are also recognized
in other comprehensive income or directly in equity.
Provision for deferred income tax is recognized in liabilities in the caption “Deferred income tax
liabilities”. Deferred income tax asset is recognized in assets as “Deferred income tax assets”. The
Bank offsets deferred tax assets and deferred tax liabilities, because it has a legally enforceable right
for such netting and the deferred tax assets and the deferred tax liabilities relate to income taxes
(levied by the same taxation authority).
Deferred income tax provision is recognised using the balance sheet method for all positive temporary
differences except when it arises from the amortization of goodwill or initial recognition of an asset
or liability in a transaction which is not a business combination and at the time of the transactions
affects neither accounting profit nor taxable profit (tax loss).
Deferred income tax assets are recognised using the balance sheet method with respect to tax loss
carry forwards and all negative temporary differences as at the balance sheet date between carrying
amount of an asset or liability in the balance sheet and its tax value only to the extent that it is
probable that future taxable profit will be available against which the deductions can be utilised.
Deferred income tax assets are not recognised for negative temporary differences arising from the
initial recognition of an asset or liability in a transaction which is not a business combination and at
the time of the transactions affects neither accounting profit nor taxable profit (tax loss).
An asset or a liability arising from temporary differences associated with investments in subsidiaries
and associates are not included in calculation of deferred income tax assets or liabilities, unless the
Bank is able to control the timing of the reversal of the temporary differences and it is probable that
the temporary difference will reverse in the foreseeable future.
The amount of calculated deferred tax is based on expected degree of realisation of balance-sheet
values of assets and liabilities with use of tax rates, which are expected to be in force when the asset
is realised or provision eliminated, assuming the tax rates (and tax legislation) legally or factually in
force as of the balance sheet date.
47
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
8. Financial Risk Management
The management of risk is one of the key tasks of the Management Board in the process of effective
management of the Bank. It defines the framework for business development, profitability, and
stability, by creating rules ensuring the Bank’s compliance with best internal control practices and
legal requirements and coordination of the strategy for managing all risks.
8.1. RISK MANAGEMENT
The mission of risk management in the Bank Millennium is to ensure that all types of risks are
managed, monitored, and controlled as required for the risk profile (risk appetite), nature and scale
of the Bank's operations. Important principle of risk management is the optimization of the risk and
profitability trade-off – the Bank pays special attention to ensure that its business decisions balance
risk and profitability adequately.
The goals of the risk management mission are achieved through implementation of the following
actions:
▪ Development of risk management strategies, credit policy, processes and procedures defining
the principles for acceptance of the allowable level of types of risk,
▪ Increasingly wider implementation of the IT tools for risks identification, control, and
measurement,
▪ Increasing awareness of employees as regards their responsibility for proper risk management at
every level of the Bank's organizational structure.
Risk management is centralized for the Bank and considers the need to obtain the assumed
profitability and to maintain proper risk-capital relationship, in the context of having proper level of
capital to cover the risk. Within risk management system, a broad range of methods is used, both
qualitative and quantitative, including advanced mathematical and statistical tools supported by
adequate IT systems.
When defining the business and profitability targets, the Bank considers the specified risk framework
(Risk Appetite) to ensure that business structure and growth will respect the risk profile that is
targeted and that will be reflected in several indicators such as:
▪ Loan growth in specific products / segments
▪ Structure of the loan portfolio
▪ Asset quality indicators
▪ Cost of risk
▪ Capital requirements / Economic capital
▪ Amount and structure of liquidity needed.
The risk management and control model at the Bank’s level is based on the following main principles:
▪ ensuring the full-scope quantification and parameterization of distinct types of risks in the
perspective of optimizing balance sheet and off-balance sheet items to the assumed level of
profitability of business activity. The primary areas of analysis encompass credit risk, market
risk, liquidity risk and operational risk; legal, compliance and litigation risks also are subject to
specific attention,
▪ all types of risks are monitored and controlled in reference to the profitability of operations and
the level of capital necessary to ensure the safety of operations from the point of view of capital
adequacy. The results of risk measuring are regularly reported as part of the management
information system,
▪ the segregation of duties between risk origination, risk management and risk control.
48
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The Risk management process of the Bank is presented in the below diagram:
The split of competence in the field of risk management is as follows:
▪ The Supervisory Board is responsible for overseeing the compliance of the Bank’s risk-taking
policy with the Bank’s strategy and its financial plan. Within the Supervisory Board acts the
Committee for Risk Matters, which supports it in realization of those tasks, among others, issuing
opinion on the Bank's Risk Strategy, including the Bank's Risk Appetite.
▪ The Management Board is responsible for the effectiveness of the risk management system,
internal capital estimation process, for reviewing the internal capital calculation and
maintenance process and the internal control systems.
▪ The Credit Committee, the Capital, Assets and Liabilities Committee, and the Liabilities at Risk
Committee are responsible for current management of different areas of banking risk, within the
framework determined by the Management Board.
▪ The Risk Committee and the Processes and Operational Risk Committee are responsible for
defining the policy and for monitoring and control of different areas of banking risk, within the
framework determined by the Management Board.
▪ The Products Committee reviews proposals for the implementation and withdrawal of products
and services from the bank's offering.
▪ The AML Committee is responsible for supervision of anti-money laundering and terrorism
financing in the Bank and cooperation in the area of combating financial crime.
▪ The Validation Committee is responsible for confirmation of risk models’ validation results and
follow-up in the implementation of the measures defined by the Models Validation Office.
▪ The Sustainability Committee is responsible for making key decisions regarding sustainable
development in the Bank Millennium S.A. Group, in relation to environmental, social and
governance factors.
▪ The Sub-Committee for Court Cases is responsible for expressing opinions and taking decisions in
matters regarding court proceedings, for the cases when value of the dispute or direct effect for
assets value as a consequence of court verdict exceeds 1 mln PLN or as result of multiple cases
with the same nature, excluding cases belonging to the restructuring and recovery portfolio of
Bank’s receivables managed by the Corporate Recovery Department and Retail Restructuring and
Debt Collection Department. The Sub-Committee for Court Cases is also competent for disputes
in the portfolio of the Retail Restructuring and Debt Collection Department, which the nature of
the dispute corresponds to the nature of court disputes supervised by the Court Cases Risk Sub-
committee referred to in the first sentence above and matters relating to the determination of
terms of settlement as to the effects of legal relationships at the pre-trial stage or in
circumstances indicating a significant likelihood of litigation (such as in the process of FX
mortgage negotiations and amicable settlements with borrowers), and if materialized, would fall
within the competence of the Court Cases Risk Sub-committee, excluding cases managed by
Corporate Recovery Department.
Delineate key
risk definitions
Delineate the
models and
definitions to
classify
customers,
products,
processes, and
risk measures
Define Risk
Strategy
Defining
principles and
risk targets
according to risk
appetite, risk
capacity and
business
strategy
Define risk
policy
Defining
thresholds,
levels,
competences,
limits, cut-offs
according to Risk
Strategy
Implement
defined policy
Designing
products with
Business and
implement
them in tools
and
regulations,
Decision
processes
Monitor,
Control,
Reporting
Monitor the
models
performance and
the portfolios
behavior
49
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
▪ The Risk Department is responsible for risk management, including identifying, measuring,
analysing, monitoring, and reporting on risk within the Bank. The Risk Department also prepares
risk management policies and procedures as well as provides information and proposes courses
of action necessary for the Capital, Assets and Liabilities Committee, Risk Committee, and the
Management Board to make decisions with respect to risk management.
▪ The Rating Department is mainly responsible for risk rating assignment for Corporate clients
(based on the evaluation of clients’ creditworthiness) as well as for rating monitoring and
potential revision during the period of its validity. Rating assignment process is independent from
credit decision process.
▪ The Corporate Credit Underwriting Department, Mortgage Credit Underwriting Department and
Consumer Finance Credit Underwriting Department have responsibility, within the Corporate
Customer segment and Retail Customer segment, respectively, for the credit decision process,
including analysing customers’ financial situation, preparing credit proposals for the decision-
making levels, and making credit decisions within specified limits.
▪ The Retail Liabilities Monitoring and Collection Department and Retail Liabilities Restructuring
and Recovery Department have responsibility for monitoring repayment of overdue debts by
retail customers and their collection.
▪ The Corporate Recovery Department develops specific strategies with respect to each debtor
from recovery portfolio, which aims to maximize timely collection of the outstanding debt and
minimize the risk incurred by the Group. This approach is constantly revised to reflect updated
information, and the best practices and experiences regarding collection of overdue debts.
▪ The Treasury Control and Analyses Office has responsibility for monitoring the use of part of the
Group’s limits, including counterparty and stop-loss limits, the Group’s FX position, results of
active trading and control of operations of the treasury segment.
▪ The Models Validation Office has responsibility for qualitative and quantitative models’ analysis
and validation, independent from the function of models’ development; development of the
models’ validation and monitoring tools; activities connected with issuing opinions on the
adequacy of the models for the segment, for which they were developed; preparing reports for
the Validation Committee needs.
▪ The purpose of the Sustainability Department is to supervise and coordinate the process of
implementing the principles of sustainable development in the Bank and the Group.
▪ The Anti-fraud Sub-unit has responsibility for implementation and monitoring Bank policy
execution in the scope of fraud risk management in cooperation with others Bank units. The Sub-
unit constitutes a competence centre for anti-fraud process.
▪ The Compliance Department has the responsibility to ensure compliance with legal regulations,
related regulatory standards, market principles and standards as well as internal organization
regulations and codes of conduct, and in anti-money laundering process.
▪ The Legal Department has responsibility for handling the litigation cases of the Bank, with
support of external legal offices and legal experts whenever necessary.
The Bank has prepared a comprehensive guideline document for the risk management policy/strategy:
“Risk Strategy for 2025-2027”. The document takes a 3-year perspective and is reviewed and updated
annually. It is approved by the Bank’s Management Board and Supervisory Board. The risk strategy is
inextricably linked to other strategic documents, such as: Budget, Liquidity Plan, and Capital Plan.
The Risk Strategy bases on the two concepts defined by the Group:
1. Risk profile – current risk profile in amount or type of risk the Bank is currently exposed. The
Bank should also have a forward-looking view how their risk profile may change under both
expected and stress economic scenarios in accordance with risk tolerance,
2. Risk appetite – the maximum amount or type of risk the Bank is prepared to accept/tolerate to
achieve its financial and strategic objective. Three zones are defined in accordance with
warning/action required level.
50
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Risk appetite must ensure that business structure and growth will respect the forward risk profile.
Risk appetite was reflected through defined indicators in several key areas, such as:
▪ Solvency
▪ Liquidity and funding
▪ Earnings volatility and Business mix
▪ Operational activity and reputation.
The Bank has a clear risk strategy, covering retail credit, corporate credit, markets activity and
liquidity, operational and capital management, legal and ICT risks. For each risk type and overall, the
Bank clearly define the risk appetite.
The Risk Management is mainly defined through the principles and targets defined in Risk Strategy
and complemented in more detail by the principles and qualitative guidelines defined in the following
documents:
▪ Capital Management and Planning Framework
▪ Credit Principles and Guidelines
▪ Rules on Concentration Risk Management
▪ Principles and Rules of Liquidity Risk Management
▪ Principles and Guidelines on Market Risk Management on Financial Markets
▪ Principles and Guidelines for Market Risk Management in Banking Book
▪ Investment Policy
▪ Principles and Guidelines for Management of Operational Risk
▪ Policy, Rules, and Principles of the Model Risk Management
▪ Stress tests policy
▪ Sustainability Policy
▪ Bye-laws of Bank Millennium SA - Program of counteracting Anti-Money Laundering and financing
terrorism.
Within risk appetite, the Bank has defined tolerance zones for its measures (build up based on the
“traffic lights” principle). As for all tolerance zones for risk appetite, it has been set:
▪ Risk appetite status – green zone means a measure within risk appetite, yellow zone means an
increased risk of risk appetite breach, red zone means risk appetite breach.
▪ Escalation process of actions/decisions taken - bodies/organizational entities responsible for
decisions and actions in a particular zone.
▪ Risk appetite monitoring process.
The Bank pays particular attention to continuous improvement of the risk management process. One
measurable effect of this is a success of the received authorization to the further use of the IRB
approach in the process of calculating capital requirements.
51
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
8.2. CAPITAL MANAGEMENT
Capital management and planning
Capital management relates to two areas: capital adequacy management and capital allocation. For
both areas, management goals were set.
The goal of capital adequacy management is: (a) meeting the requirements specified in external
regulations (regulatory capital adequacy) and (b) ensuring the solvency in normal and stressed
conditions (economic capital adequacy/internal capital). Completing that goal, Bank strives to
achieve internal long-term capital limits (targets), defined in Risk Strategy.
Capital allocation purpose is to create value for shareholders by maximizing the return on risk in
business activity, considering established risk appetite.
In a scope of capital management process, there is also a capital planning process. The goal of capital
planning is to designate the own funds (capital base that is risk-taking capacity) and capital usage
(regulatory capital requirements and economic capital) in a way to ensure that capital targets/limits
shall be met, given forecasted business strategy and risk profile – in normal and stressed
macroeconomic conditions.
Regulatory capital adequacy
The Bank is obliged by law to meet minimum own funds requirements, set in art. 92 of Regulation
(EU) No 575/2013 on prudential requirements for credit institutions and investment firms, amending
Regulation (EU) No 648/2012 (CRR). At the same time, the following buffers were included in capital
targets/limits:
▪ Pillar II FX mortgage loans buffer (P2R buffer) - Polish Financial Supervision Authority
(PFSA)decision regarding order to maintain additional own funds to secure risk resulting from FX
mortgage loans granted to households, under the art. 138.2.2 of Banking Act. A value of that
buffer is defined for particular banks by PFSA every year as a result of Supervisory Review and
Evaluation Process (SREP) and relates to risk that is in PFSA’s opinion - inadequately covered by
minimum own funds requirements, set in CRR art. 92. As at 31 December 2024, the buffer was
set by PFSA in the decisions issued in the end of 2023 in the level of 1.47 pp (Bank) and 1.46 pp
(Group) as for Total Capital Ratio (TCR), which corresponds to capital requirements over Tier 1
ratio of 1.10 pp (Bank and Group), and which corresponds to capital requirements over CET1
ratio of 0.82 pp (Bank and Group);
On 23rd January 2025, the Bank received from PFSA decision regarding the expiration of the
decision from 13
th
December 2023 on additional own funds to secure risk resulting from FX
mortgage for households loan portfolio („P2R buffer”) at solo basis. Therefore, from that day, at
solo basis, P2R equals 0,0%.
▪ Combined buffer – defined in Act on macro prudential supervision over the financial system and
crisis management – that consists of:
▪ Capital conservation buffer at the level of 2.5%;
▪ Other systemically important institution buffer (OSII) – at the level of 0.25%, and the value is
set by PFSA each year
1
;
▪ Systemic risk buffer at the level of 0% in force from March 2020, in line with Regulation of
Ministry of Development and Finance;
▪ Countercyclical buffer at the 0% level. According to Regulation of the Minister of Finance, the
countercyclical capital requirement will be introduced from 25 September 2025 at 1% and
raised to 2% on 25 September 2026.
1
In November 2020 PFSA issued the decision on identification the Bank as other systemically important institution and
imposing OSII Buffer of 0.25%
52
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In accordance with binding legal requirements and recommendations of PFSA, the Bank defined
regulatory minimum levels of capital ratios, being at the same time the base of defining capital limits.
The below table presents these levels as of 31 December 2024. The Bank will inform on each change
of required capital levels in accordance with regulations.
Capital ratio
31.12.2024
CET1 ratio
Bank
Group
Minimum
4.50%
4.50%
P2R Buffer
0.82%
0.82%
TSCR CET1 (Total SREP Capital Requirements)
5.32%
5.32%
Capital Conservation Buffer
2.50%
2.50%
OSII Buffer
0.25%
0.25%
Systemic risk buffer
0.00%
0.00%
Countercyclical capital buffer
0.00%
0.00%
Combined buffer
2.75%
2.75%
OCR CET1 (Overall Capital Requirements CET1)
8.07%
8.07%
T1 ratio
Bank
Group
Minimum
6.00%
6.00%
P2R Buffer
1.10%
1.10%
TSCR T1 (Total SREP Capital Requirements)
7.10%
7.10%
Capital Conservation Buffer
2.50%
2.50%
OSII Buffer
0.25%
0.25%
Systemic risk buffer
0.00%
0.00%
Countercyclical capital buffer
0.00%
0.00%
Combined buffer
2.75%
2.75%
OCR T1 (Overall Capital Requirements T1)
9.85%
9.85%
TCR ratio
Bank
Group
Minimum
8.00%
8.00%
P2R Buffer
1.47%
1.46%
TSCR TCR (Total SREP Capital Requirements)
9.47%
9.46%
Capital Conservation Buffer
2.50%
2.50%
OSII Buffer
0.25%
0.25%
Systemic risk buffer
0.00%
0.00%
Countercyclical capital buffer
0.00%
0.00%
Combined buffer
2.75%
2.75%
OCR TCR (Overall Capital Requirements TCR)
12.22%
12.21%
53
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Considering of mentioned before decision on expiration of P2R, the minimum regulatory capital ratios
required for the Bank are presented in the table below.
Capital ratio
From 23.01.2025
CET1 ratio
Bank
Minimum
4.50%
P2R Buffer
0.00%
TSCR CET1 (Total SREP Capital Requirements)
4.50%
Capital Conservation Buffer
2.50%
OSII Buffer
0.25%
Systemic risk buffer
0.00%
Countercyclical capital buffer
0.00%
Combined buffer
2.75%
OCR CET1 (Overall Capital Requirements CET1)
7.25%
T1 ratio
Bank
Minimum
6.00%
P2R Buffer
0.00%
TSCR T1 (Total SREP Capital Requirements)
6.00%
Capital Conservation Buffer
2.50%
OSII Buffer
0.25%
Systemic risk buffer
0.00%
Countercyclical capital buffer
0.00%
Combined buffer
2.75%
OCR T1 (Overall Capital Requirements T1)
8.75%
TCR ratio
Bank
Minimum
8.00%
P2R Buffer
0.00%
TSCR TCR (Total SREP Capital Requirements)
8.00%
Capital Conservation Buffer
2.50%
OSII Buffer
0.25%
Systemic risk buffer
0.00%
Countercyclical capital buffer
0.00%
Combined buffer
2.75%
OCR TCR (Overall Capital Requirements TCR)
10.75%
In December 2024, the Bank received a letter from the PFSA about non-imposing of additional capital
add-on (P2G). In the supervisory assessment process, the Bank's sensitivity to the possible
materialisation of stress scenarios affecting the level of own funds and risk exposure was assessed as
low. In particular, on the basis of the 2024 supervisory stress tests carried out by the PFSA, the PFSA
set the P2G capital add-ons, before the offsetting of the capital conservation buffer, at 0.17pp at the
stand-alone level and 0.28pp at the consolidated level. The total capital charges recommended under
Pillar II offset by the capital buffer requirement are 0.00pp at the stand-alone level and 0.00pp at
the consolidated level.
54
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Capital risk, expressed in the above capital targets/limits, is measured, and monitored in a regular
manner. Capital limits were defined based on the minimum regulatory capital levels. They are the
basis of setting safety zones and risk appetite. Capital ratios in each zone determine the need to
make appropriate decisions or management actions. Regular monitoring of capital risk is based on the
classification of capital ratios into appropriate zones, and then the assessment of trends and factors
influencing the level of capital adequacy is carried out.
Own funds capital requirements
The Bank calculates its own funds requirements using standard methodologies and is implementing at
the same time a project of an implementation of internal ratings-based method (IRB) for calculation
of own funds requirements for credit risk and obtaining of approval decisions from Regulatory
Authorities on that matter.
In the end of 2012, Banco de Portugal (consolidating Regulator) with cooperation of PFSA granted an
approval to the use of IRB approach as to following loan portfolios: (i) Retail exposures to individual
persons secured by residential real estate collateral (RRE), (ii) Qualifying revolving retail exposures
(QRRE). According to the mentioned approval, minimum own funds requirements calculated using the
IRB approach should be temporarily maintained at no less than 80% (“Regulatory floor”) of the
respective capital requirements calculated using the Standardized approach.
In the end of 2014, the Bank received another decision by Regulatory Authorities regarding the IRB
process. According to its content, for the RRE and QRRE loan portfolios, the minimum own funds
requirements calculated using the IRB approach had to be temporarily maintained at no less than 70%
(“Regulatory floor”) of the respective capital requirements calculated using the Standardized
approach until the Bank fulfils further defined conditions.
In July 2017, the Bank received the decision of Competent Authorities (ECB cooperating with PFSA)
on approval the material changes to IRB LGD models and revoking the “Regulatory floor”.
Since 2018, the Bank has been successively implementing a multi-stage process of implementing
changes to the IRB method, related to the requirements regarding the new definition of default. In
the first phase, in line with the “two-step approach” approved by Competent Authorities, the Bank
in 2020 successfully implemented solutions for the new definition of default in the production
environment. The Bank is obliged to include an additional conservative charge on the estimates of
the RWA value for exposures classified under the IRB approach. The level of this add-on, calculated
based on the supervisory algorithm, was set at 5% above the value resulting from the IRB method.
In 2021, all credit risk models included in the rating system subject to the current regulatory approval
were recalibrated and rebuilt. In 2021 the Bank also obtained a decision from Competent Authorities
to approve significant changes to the IRB models used (LGD, LGD in-default and ELBE) for rating
systems subject to the IRB approval.
In 2024, these models were recalibrated in connection with the modification of the default definition
and an application for consent to their use was submitted to the Supervisory Authority.
Further work was also carried out on credit risk models for the remaining credit portfolios covered by
the IRB implementation plan: other retail exposures and exposures to corporates.
55
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Internal capital
The Bank defines internal capital according to Polish Banking Act, as the estimated amount needed
to cover all identified, material risks found in the Bank’s activity and changes in economic
environment, considering the anticipated level of risk in the future.
Internal capital is used in capital management in following processes: economic capital adequacy
management and capital allocation. The Bank defined an internal (economic) capital estimation
process. To this end, as for measurable risk types, mathematic and statistic models and methods are
used.
Maintaining economic capital adequacy means a coverage (provision) of internal capital (that is an
aggregated risk measure) by available financial resources (own funds). An obligation to banks to have
in place that sort of risk coverage stems from Banking Act. It was mirrored in the Group’s capital
targets/limits: economic capital buffer and economic capital buffer in stressed conditions.
In 2024, both above capital targets were met with a surplus.
At the same time internal capital is utilized in capital allocation process, to assign an internal capital
to products/business lines, calculating risk-adjusted performance measures, setting risk limits and
internal capital reallocation.
Capital ratios and capital adequacy
Capital ratios of the Bank over the last three years was as follows
2
:
31.12.2024
31.12.2023
31.12.2022
Risk-weighted assets
40 928.3
37 960.4
48 046.0
Own Funds requirements, including:
3 274.2
3 036.8
3 843.7
- Credit risk and counterparty credit risk
2 773.8
2 589.0
3 386.7
- Market risk
19.8
15.4
18.0
- Operational risk
478.0
427.0
432.3
- Credit Valuation Adjustment CVA
2.6
5.4
6.7
Own Funds, including:
7 352.5
7 228.3
6 980.1
Common Equity Tier 1 Capital
6 264.6
5 847.4
5 458.9
Tier 2 Capital
1 087.9
1 380.9
1 521.2
Total Capital Ratio (TCR)
17.96%
19.04%
14.53%
Tier 1 Capital ratio (T1)
15.31%
15.40%
11.36%
Common Equity Tier 1 Capital ratio (CET1)
15.31%
15.40%
11.36%
Leverage ratio
4.68%
4.77%
4.74%
2
Bank uses transitional arrangements for IFRS 9 and considers a temporary treatment of unrealized gains and losses on bonds
measured by fair value through other comprehensive income (FVOCI) in accordance with Art. 468 of the CRR. As at 31.12.2024,
if IFRS 9 transitional arrangements and temporary treatment according to Art. 468 of the CRR had not been applied, capital
ratios were as follows:
- TCR: 17.83%
- T1: 15.18%
- CET1: 15.18%
- Leverage ratio: 4.65%
56
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Capital adequacy showed as surpluses/deficits on required or recommended levels (as of 31 December
2024) are presented in the below table.
Capital adequacy
31.12.2024
31.12.2023
31.12.2022
Total Capital Ratio (TCR)
17.96%
19.04%
14.53%
Minimum required level (OCR)
12.22%
12.22%
12.70%
Surplus (+) / Deficit (-) of TCR capital adequacy (p.p.)
5.74
6.82
1.83
Minimum recommended level TCR (OCR+P2G)
12.22%
13.81%
14.42%
Surplus (+) / Deficit (-) on recommended level (p.p.)
5.74
5.23
0.11
Tier 1 Capital ratio (T1)
15.31%
15.40%
11.36%
Minimum required level (OCR)
9.85%
9.85%
10.22%
Surplus (+) / Deficit (-) of T1 capital adequacy (p.p.)
5.46
5.55
1.14
Minimum recommended level T1 (OCR+P2G)
9.85%
11.44%
11.94%
Surplus (+) / Deficit (-) on recommended level (p.p.)
5.46
3.96
-0.58
Common Equity Tier 1 Capital ratio (CET1)
15.31%
15.40%
11.36%
Minimum required level (OCR)
8.07%
8.07%
8.35%
Minimum recommended level CET1 (OCR+P2G)
8.07%
9.66%
10.07%
Surplus (+) / Deficit (-) on recommended level (p.p.)
7.24
5.74
1.29
Leverage ratio
4.68%
4.77%
4.74%
Minimum required level
3.00%
3.00%
3.00%
Surplus (+) / Deficit (-) of Leverage ratio (p.p.)
1.68
1.77
1.74
In December 2024, Bank carried out a transaction of synthetic securitization of a portfolio of corporate
and SME loans with the total value PLN of 2.1 billion with the option of increasing the nominal amount
of the Transaction up to the maximum amount of PLN 4.1 billion (Ramp-up Option). As part of the
Transaction, the Bank transferred to the investor (EBRD) a significant part of the credit risk from the
selected portfolio subject to securitisation. The selected loan portfolio covered by the securitisation
remains on the Bank's balance sheet. The transfer of the risk of the securitised portfolio is carried out
through a credit protection instrument in the form of a financial guarantee issued by the EBRD.
The transaction meets the requirements for the transfer of a significant part of the risk specified in
the CRR Regulation (Regulation of the European Parliament and of the Council No. 575/2013 of 26
June 2013 on prudential requirements for credit institutions and investment firms). The Bank is
waiting for confirmation of regulatory non-objection to the use of the transaction in the calculation
of risk-weighted assets.
Taking into account the impact of this transaction, capital ratios as at 31 December, 2024, would
increase in terms of the Common Equity Tier 1 ratio by 35 bps to 15.66% and in terms of the Total
Capital Ratio by 42 bps to 18.38%.
Earlier, in 2024, the Bank renegotiated and extended the period of replenishment of two transactions
concluded in 2023. The replenishment period for the securitisation transactions done by Bank’s
subsidiary, Millennium Leasing, was extended till April 2025 and the replenishment period for Bank’s
transaction on the unsecured retail loans was extended till August 2025.
57
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
At the end of 2024, compared to the end of 2023, capital adequacy measured by the Tier 1 core
capital ratio and by the total capital ratio decreased by 9 and 108 bps respectively.
Risk-weighted assets (RWA) increased by PLN 2,968 million (by 8%) in 2024. The largest annual change
concerned RWA for credit risk - an increase of PLN 2,310 million (by 7%). Changes in RWA for
operational risk, market risk and CVA (due to the fair value adjustment for credit risk) were smaller
- a total increase of PLN 658 million.
Own funds increased by PLN 124 million (by 2%) in 2024, with core capital increasing by PLN 417
million and Tier 2 capital decreasing by PLN 293 million (due to regular depreciation of the existing
subordinated bond issues).
The minimum values of capital ratios required by the PFSA in terms of the combined buffer
requirement (OCR) are achieved with a large surplus at the end of 2024. Also, in terms of the levels
expected by the PFSA, they were achieved for all capital ratios with a clear surplus
Leverage ratio stood at the safe level of 4.68%, and it significantly exceeds the regulatory minimum
(3%).
Entry into force starting from January 2025 onwards the Regulation (EU) 2024/1623 of the European
Parliament amending Regulation (EU) No 575/2013 (CRR 3) will impact the Bank’s capital adequacy
ratios.
Main changes will regard credit conversion factors (CCF) under standardized method, new approach
to the determination of off-balance sheet exposures, risk weight for exposures secured by real estate
property, deletion of 1.06 scaling factor from risk weight calculation under IRB method (credit risk)
and change the way of operational risk capital requirements calculation.
According to current Bank's estimates, the impact on capital ratios at solo level due to the
introduction of CRR3 would amount as at 31 December 2024 up to (non-audited data):
Potential impact of CRR 3 implementation (Bank)
Lower Case
Higher Case
On Total Capital Ratio (TCR)
-1.10%
-2.20%
On Tier 1 Capital ratio (T1)
-0.95%
-1.90%
On Risk Weighted Assets
+6.3%
+13.5%
Bank is still waiting for some areas of CRR 3 interpretations to be closed, namely the calculation of
the operational risk capital requirements, and is working on the revision of the approach for
determination of off-balance-sheet exposures.
Minimum requirement for own funds and eligible liabilities (MREL)
The Bank manages MREL requirements ratios in a manner analogous to capital adequacy ratios.
The Bank received a joint decision of the resolution authorities in June 2024, requiring it to meet the
MREL requirements. The updated minimum requirements are 18.03% (consolidated MRELtrea) and
5.91% (consolidated MRELtem). Additionally, with respect to the above decisions, the Bank should
also meet the MREL requirement taking into account the Combined Buffer Requirement (currently
2.75%).
58
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Taking the above into account, in September 2024 the Bank successfully completed the subscription
of senior non-preferred green bonds with a total value of EUR 500 million under the EMTN Program
(Current Reports No. 26/2024 and 27/2024).
MREL
31.12.2024
30.09.2024
30.06.2024
31.12.2023
MRELtrea ratio (consolidated)
28.06%
28.60%
22.92%
23.77%
Minimum required level MRELtrea
18.03%
18.03%
18.03%
18.89%
Surplus (+) / Deficit (-) of MRELtrea (pp)
10.03
10.57
4.89
4.88
Minimum required level including Combined Buffer
requirement (CBR)
20.78%
20.78%
20.78%
21.64%
Surplus (+) / Deficit (-) of MRELtrea+CBR (pp)
7.28
7.82
2.14
2.13
MRELtem (consolidated)
8.71%
8.97%
7.05%
7.50%
Minimum required level of MRELtem
5.91%
5.91%
5.91%
5.91%
Surplus (+) / Deficit (-) of MRELtem (pp)
2.80
3.06
1.14
1.59
In terms of the MRELtrea and MRELtem requirements, the Group presents a surplus compared to the
minimum required levels as of December 31, 2024, and also meets the MRELtrea Requirement after
the inclusion of the Combined Buffer Requirement.
8.3. CREDIT RISK
The credit risk is one of the most important risk types for the Bank Millennium SA and therefore
considerable attention is given to management of credit risk-bearing exposures. Credit risk relates to
balance-sheet credit exposures as well as off-balance sheet financial instruments, such as granted
and unutilized credit lines, guarantees and letters of credit, as well as limits for transactions in
financial instruments.
The credit policy is subject to periodic reviews and verification process considering the prevailing
market conditions and changes in the Bank’s regulatory environment.
The Bank uses several rating systems to manage credit risk depending on the type of exposure and
the customer segment involved. A rating system is a set of methods (models), processes, controls,
data collection procedures and IT systems that identify and measure credit risk, sort levels of exposure
by grades or pools (granting of credit rating) and quantify probability of default and expected loss
estimates for specific types of exposure.
In 2024, in the corporate segment, the Bank focused on the optimal use of capital while maintaining
the current profitability and maintaining a good risk profile. The Bank also carried out activities aimed
at streamlining and accelerating credit processes, including decision-making. In the retail segment,
the Bank focused on adapting its credit policy to the changing macroeconomic environment, in
particular, development activities were continued to optimize and digitize the process, while
adapting it to the changing market situation and the changing external regulatory environment.
59
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
(3a) Measurement of Credit Risk
Loans and advances
Measurement of credit risk, for the purpose of the credit portfolio management, on the level of
individual customers and transactions, on account of granted loans is done with the consideration of
three base parameters:
(i) Probability of Default (PD) of a customer or counterparty as regards their liability;
(ii) amount of Exposure at Default (EAD) and
(iii) the ratio of Loss Given Default (LGD) regarding the customer’s liability.
(i) The Bank assesses the probability of default (PD) of individual counterparties, using internal rating
models adapted to various categories of customers and transactions. The Bank’s customers are
divided into 15 rating classes, which for the purposes of this Report have been grouped into 6
main brackets. The Bank’s Master Ratings Scale, presented below, also contains the scale of
probabilities of non-compliance with the liabilities specified for a given class/rating group. Rating
models are subject to regular reviews and whenever necessary to relevant modification.
Validation Committee confirm modifications of models.
The Bank regularly analyses and assesses rating results and their predictive power with respect to
cases of default. The process of assigning client risk assessments (for Corporates performed by
Rating Department independently from credit decision process and transactions) is supported by
IT systems, obtaining, and analysing information from internal and external databases.
The Bank’s internal rating scale:
Master scale
Description of rating
1-3
Highest quality
4-6
Good quality
7-9
Medium quality
10-12
Low quality
13-14
Watched/Procedural
15
Default
(ii) EAD – amount of exposure at default – concerns amount which according to the Bank’s predictions
will be the Bank’s receivables at the time of default against liabilities. Liabilities are understood
by the Bank to mean every amount disbursed plus further amounts, which may be disbursed until
default, if such occurs.
(iii) LGD – loss given default is what the Bank expects will be its losses resulting from actual cases of
default, with the consideration of internal and external costs of recovery and the discount effect.
Unification of the default definition in the Bank
The Bank has adopted a uniform definition of default, both in the calculation of capital requirements
and for the purposes of estimating impairment. The Group uses the definition of default in line with
the EBA Guidelines, the so-called New Definition of Default.
Unified Default definition includes following triggers:
▪ DPD>90 days considering materiality thresholds for due amount: absolute PLN 400 for retail and
PLN 2000 for corporates and relative threshold of 1% in relation to total exposure,
▪ Restructured loans (forborne),
▪ Loans in vindication process,
▪ Other triggers defined in EBA Guidelines,
▪ Qualitative triggers identified in the individual analysis.
The Bank is using cross-default approach for all segments.
60
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Debt Securities
Debt securities from Polish State Treasury and from the Polish Central Bank are monitored based on
Polish rating. Whereas the economic and financial situation of issuers of municipal debt securities is
monitored on a quarterly basis based on their financial reporting. Debt securities from other European
Union member states and supra national institutions are monitored based on their respective ratings.
The Bank doesn’t apply Low Credit Risk (LCR) exemption neither for State Treasury and Central Bank
exposures nor for any other groups of exposures.
Derivatives
The Bank maintains strict control over the limits of net open derivative positions both with respect
to amounts and transaction maturities. Credit risk exposures resulting from derivatives are managed
as part of total credit limits defined for individual customers calculated based on verification of
natural exposure and analysis of customer’s financial situation, and as part of counterparties’ limits.
The Bank offers Treasury products for FX risk or interest rate risk only for hedging purposes and under
Treasury limits assigned to clients or secured by collateral - deposit.
Most of the Bank’s agreements include the possibility of calling the client to replenish the margin
deposit (if the valuation of the client’s open position exceeds treasury limit, the so-called margin
call); and if the client does not supplement the deposit, the Bank has the right to close the position.
Credit risk-based off-balance sheet liabilities
Credit risk-based off-balance sheet liabilities include granted guarantees and letters of credit,
granted and unused limits (credit, factoring, guarantees and letters of credit and cards) as well as
granted and unpaid tranches of non-renewable loans. The primary purpose of these instruments is to
enable the customer to manage in a specific manner the funds allocated by the Group.
Granted guarantees and letters of credit granted are unconditional and irrevocable - after the receipt
of a claim compliant with the terms of the guarantee or letter of credit, the Group must make
a payment. Typically, guarantees and letters of credit are related to commercial transactions.
In the case of most of the granted and unused limits, the Group has the option of refusing to execute
the client's instruction regarding the use of funds from these limits - either unconditionally or upon
meeting the conditions set out in the documents and by-laws applicable to a given limit.
In the case of granted and undisbursed tranches of non-revolving loans, their disbursement depends
on the fulfilment of the conditions set out in the documents and by-laws applicable to a given non-
revolving loan.
(3b) Limits control and risk mitigation policy
The Bank measures, monitors and controls large credit exposures and high credit risk concentrations,
wherever they are identified. Concentration risk management process encompasses single-name
exposures with respect to an individual borrower or group of connected borrowers (with material
capital, organizational or significant economic relations) and sectoral concentration – to economic
industries, geographical regions, countries, and the real estate financing portfolio (including FX
loans), portfolio in foreign currencies and other. Above types of sectoral exposures are subject to
internal limits system. Information about the utilization of limits is presented at the Supervisory
Board, the Committee for Risk Matters, and the Risk Committee.
61
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The internal limits (mentioned above) are monitored quarterly. Limits are subject to annual or more
frequent review, when deemed appropriate. The limits are approved by the Supervisory Board or the
Risk Committee.
Management of credit risk exposure is also performed through regular monitoring of customers’
economic and financial situation and/or track record of their relationship with the Bank from the
point of view of punctual repayment of their principal and interest liabilities.
Collateral
The Bank accepts collateral to mitigate its credit risk exposure; the key role of collateral is to
minimize loss in the event of customers' default in repayment of credit transactions in contractual
amounts and on contractual dates by ensuring an alternative source of repayment of due and payable
amounts. Collateral is accepted in accordance with the credit policy principles defined for each
customer segment. The key principle is that collateral for credit transaction should correspond to the
credit risk incurred by the Bank, considering the specific nature of the transaction (i.e., its type,
amount, repayment period and the customer's rating).
The credit policy defines the types, kinds and legal forms of collateral accepted in the Bank as well
as more detailed requirements that are to ensure the probability of selling collateral of respective
types in the context of the Bank's recovery experiences.
The Bank pays special attention to the correct determination of collateral value. It defined the rules
for preparing and verifying collateral valuation and does its utmost to ensure that such valuations are
objective, conservative and reflect the true value of the collateral. To ensure effective establishment
of collateral, the Bank has developed appropriate forms of collateral agreements, applications,
powers-of-attorney, and representations.
In the retail segment, accepted collateral consists mainly of residential real property (mortgage loans)
and financial assets. In the case of the corporate segment, all types of real estate (residential,
commercial, land) are accepted, as well as assignments of receivables under contracts.
Temporary collateral is also accepted in the period before the final collateral is established.
Additionally, the Bank uses various forms of instruments supplementing the collateral, which facilitate
enforcement or increase probability of effective repayment of debt from a specific collateral. Those
instruments include statement of submitting to enforcement in the form of
a notarial deed, blank promissory note, power-of-attorney to a bank account, assignment of rights
under an insurance agreement.
The Bank monitors the collateral to ensure that it satisfies the terms of the agreement, i.e., that the
final collateral of the transaction has been established in a legally effective manner or that the
insurance policies are renewed. The value of the collateral is also monitored during the term of the
credit transaction.
In accordance with credit policy adopted in the Bank it is also allowed to grant a transaction without
collateral, but this takes place according to principles, which are different depending on the client’s
segment. But in the case of the deterioration of the debtor’s economic and financial situation, in
documents signed with the client the Bank stipulates the possibility of taking additional collateral for
the transaction.
62
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
(3c) Policy with respect to impairment and creation of impairment charges
Organisation of the Process
The process of impairment identification and measurement with respect to loan exposures is
regulated in the internal instruction introduced with IFRS9 application. The document defines in detail
the mode and principles of individual and collective analysis, including algorithms for calculating
parameters.
The methodology and assumptions adopted for determining credit impairments are regularly reviewed
to reduce discrepancies between the estimated and actual losses. To assess the adequacy of the
impairment determined both in individual analysis and collective analysis a historical verification
(back testing) is conducted from time to time (at least once a quarter), which results will be
considered to improve the quality of the process.
The Supervision over the process of estimating impairment charges and provisions is exercised at the
Bank by the Risk Department (DMR), which also has direct responsibility for individual analysis in the
business portfolio at the Bank, as well as collective analysis. In addition to DMR, the process also
involves recovery and restructuring units. These are the Corporate Recovery Department – DNG
(individual analysis for the recovery-restructuring portfolio for corporate customers) and the Retail
Liabilities Restructuring and Recovery Department - DRW (individual analysis of individually significant
retail impairments, mainly mortgages). DMR is a unit not connected with the process of lending; it is
supervised by the Management Board Member responsible for risk management.
The Management Board of the Bank plays an active role in the process of determining impairment
charges and provisions. The results of credit portfolio valuation are submitted to the Management
Board for acceptance in a monthly cycle with a detailed explanation of the most significant changes
with an impact on the overall level of impairment charges and provisions, in the period covered by
the analysis. Methodological changes resulting from the validation process and methodological
improvements are presented at the Validation Committee, and subsequently at the Risk Committee
which includes all the Management Board Members.
In monthly periods detailed reports are prepared presenting information about the Bank’s retail
portfolio in various cross-sections, including the level of impairment charges and provisions, their
dynamics and structure. The recipients of these reports are Members of the Management Board,
supervising the activity of the Bank in finance, risk, and management information.
Expected credit loss measurement
Impairment estimation model within the Bank has been based on the concept of “expected credit
loss,” (hereinafter: ECL). As a direct result of using this approach, impairment charges now must be
calculated based on expected credit losses and forecasts of expected future economic conditions
must be considered when conducting evaluation of credit risk of an exposure.
The implemented impairment model applies to financial assets classified in accordance with IFRS 9
as financial assets measured at amortized cost or at fair value through other comprehensive income,
except for equity instruments.
63
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
According to IFRS 9, credit exposures are classified in the following categories:
▪ Stage 1 – non-impaired exposures, for which expected credit loss is estimated for the 12-month
period,
▪ Stage 2 – non-impaired exposures, for which a significant increase in risk has been identified
(SICR) and for which expected credit loss is estimated for the remaining lifetime of the financial
asset,
▪ Stage 3 – credit impaired exposures, for which expected credit loss is estimated for the remaining
lifetime of the financial asset.
▪ POCI (purchased or originated credit impaired) – exposures which, upon their initial recognition
in the balance sheet, are recognized as impaired, expected losses are estimated for the
remaining life of the financial asset.
Identification of a significant increase in credit risk (SICR)
Assets, for which there has been identified a significant increase in credit risk compared to the initial
recognition in the balance sheet, are classified in Stage 2. The significant increase in credit risk is
recognized based on qualitative and quantitative criteria. The qualitative criteria include:
▪ repayment delays of more than 30 days,
▪ forborne exposures in non-default status,
▪ using the support from Banking Support Fund,
▪ occurrence of seizures on current accounts resulting from enforcement orders,
▪ procedural rating, which is reflecting early delays in payments,
▪ taking a risk-mitigating decision for corporate clients, triggered by the early warning system,
▪ events related to an increase in credit risk, identified within process of an individual analysis
involving individually significant customers.
The quantitative criterion involves a comparison of the lifetime PD value determined on initial
recognition of an exposure in the balance sheet, with the lifetime PD value determined at the current
reporting date. If an empirically determined threshold of the relative change in the lifetime PD value
is exceeded, then an exposure is automatically transferred to Stage 2. The quantitative assessment
does not cover exposures analysed individually.
Individual analysis of impairment for credit receivables
Individual analysis contains customers identified as significantly important both for business portfolio
and recovery portfolio. Credit exposures are selected for individual analysis based on materiality
criteria which ensure that case-by case analysis covers at least 50% of the Bank’s business corporate
portfolio and 80% of the portfolio managed by entities responsible for the recovery and restructuring
of corporate receivables.
Principal elements of the process of individual analysis:
1) Identification of soft signs of impairment being one of qualitative triggers of Significant Increase
of Credit Risk (SICR).
This process covers biggest business corporate customers, for which financial-economic situation is
analysed on a quarterly basis based on latest financial statement, events connected with company
activities, information concerning related entities and economic environment, expectation about
future changes, etc. There was defined catalogue of so called “soft signs of impairment,”
identification of which means significant increase of credit risk (SICR) and causing classification of all
exposures of such customer to Stage 2.
64
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
2) Identification of impairment triggers.
The Bank defined impairment triggers for individual analysis and adjusted them to its operational
profile. The catalogue of triggers contains among others following elements:
▪ The economic and financial situation pointing to the Customer’s considerable financial
problems,
▪ Breach of the contract, e.g., significant delays in payments of principal or interest
▪ Stating the customer’s unreliability in communicating information about his economic and
financial situation,
▪ Permanent lack of possibility of establishing contact with the customer in the case of violating
the terms of the agreement,
▪ High probability of bankruptcy or a different type of reorganising the Customer’s
enterprise/business,
▪ Declaring bankruptcy or opening a recovery plan with respect to the Customer,
▪ Granting the Customer who has financial difficulties, facilities concerning financing conditions
(restructuring).
Internal regulations allow discovering above-mentioned triggers by indicating specific cases and
situations corresponding to them, with respect to triggers resulting from the Customer’s considerable
financial problems, violating the critical terms of the agreement and high probability of a bankruptcy
or a different enterprise reorganisation.
3) Scenario approach in calculation of impairment allowances for individually analysed customers.
If at least one of impairment triggers has been identified during the individual analysis, all exposures
of given customer are classified in Stage 3 and then detailed analysis of forecasted cash-flows should
be performed. Since introducing IFRS9 the Bank is using scenario approach. It means that analyst
should define at least two recovery scenarios which reflect described and approved recovery
strategies: the main and alternative ones with assigned probabilities of realisation. The Bank has
defined guidelines regarding the weights used for individual scenarios. Scenarios can be based on
restructuring or vindication strategy; mixed solutions are also used.
Every scenario contains two general types of recoveries: direct cash-flows from customers and
recovered amounts from collateral.
4) Estimating expected cash-flows.
One element of the impairment calculation process is the estimation of the probability of cash flows
included in the timetable, pertaining to the following items: principal, interest, and other cash flows.
The probability of realising cash flows included in the timetable results from the conducted
assessment of the customer’s economic and financial situation (indication of the sources of potential
repayments) must be justified and assessed based on current documentation and knowledge
(universally understood) of his situation with the inclusion of financial projections. This information
is gathered by an analyst prior to the actual analysis in accordance with the guidelines specified in
appropriate Bank regulations.
In the event of estimating the probability of cash flows for customers in the portfolio managed by
restructuring-recovery departments analysts will consider the individual nature of each transaction
pointing among others to the following elements which may have an impact on the value of potential
cash flows:
▪ Operational strategy with respect to the Customer adopted by the Bank,
▪ Results of negotiations with the customer and his attitude, i.e., willingness to settle his arrears,
▪ Improvement/deterioration of his economic and financial situation.
The Bank also uses the formal terms of setting and justifying the amount of probability and amount
of the payment by the Bank of funds under the extended off-balance sheet credit exposure such as
guarantees and letters of credit.
65
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
5) Estimation of the fair value of collateral, specifying the expected date of sale and estimation of
expected revenues from the sale after deduction of the costs of the recovery process.
The inclusion of cash flows from realisation of collateral must be preceded by an analysis of how
realistically it can be sold and estimation of its fair value after recovery costs.
To ensure the fairness of the principles of establishing collateral recoveries, the Bank prepared
guidelines for corporate segment with respect to the recommended parameters of the recovery rate
and recovery period for selected collateral groups. Depending on the place of the exposure in the
Bank’s structure (business portfolio, restructuring-recovery portfolio) and type of exposure separate
principles have been specified for portfolio types: business and restructuring-recovery. The
recommended recovery rates and period of collateral recovery are verified in annual periods.
Collective analysis of the credit portfolio
Subject to collective analysis are the following receivables from the group of credit exposures:
▪ Individually insignificant exposures.
▪ Individually significant exposures for which there has not been recognised impairment triggers
because of an individual analysis.
For the purposes of collective analysis, the Bank has defined homogenous portfolios consisting of
exposures with a similar credit risk profile. These portfolios have been created based on segmentation
into business lines, types of credit products, number of days of default, type of collateral etc. The
division into homogenous portfolios is verified from time to time for their uniformity.
The expected credit loss in a collective analysis is calculated using Probability of Default (PD),
Exposure at Default (EAD), and Loss Given Default (LGD) parameters, which are the outcome of the
following models:
▪ The PD model is based on empirical data concerning 12-month default rates, which are then used
to estimate lifetime PD values using appropriate statistical and econometric methods. The
segmentation adopted for this purpose at the customer level is consistent with the segmentation
used for capital requirement calculation purposes. Additionally, the Bank has been using rating
information from internal rating models to calculate PDs.
▪ The LGD models for the retail portfolio used by the Bank in the capital calculation process were
adjusted to IFRS 9 requirements in estimating impairment. The main components of these models
are the probability of cure, and the recovery rate estimated based on discounted cash flows. The
necessary adaptations to IFRS 9 include, among other things, exclusion of the conservatism buffer,
indirect costs, and adjustments for economic slowdown.
▪ For the corporate portfolio, LGD model is based on a component determining parameterized
recovery for the key types of collateral and a component determining the recovery rate for the
unsecured part. All the parameters were calculated based on historical data, including discounted
cash flows achieved by the corporate debt recovery unit.
▪ The EAD model used in the Bank includes calculation of parameters such as: average limit
utilization (LU), credit conversion factor (CCF), prepayment ratio and behavioural lifetime.
Segmentation is based on the type of customer (retail, corporate) and product (products
with/without a schedule).
The results of models employed in collective analysis are subject to periodical verification. The
parameters and models are also covered by the process of models’ management governed by the
document „Principles of Managing Credit Risk Models,” which specifies, among others, the principles
of creating, approving, monitoring and validation, and historical verification of models.
66
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Forward-looking information incorporated in the ECL models
In the process of calculation of expected credit losses, the Bank uses forward-looking information
(FLI) about future macroeconomic events. FLI is used in PD, LGD, and EAD as well as in the process of
determination of SICR and allocation of exposures to Stage 2 (Transfer Logic). The Macroeconomic
Analysis Office prepares three macroeconomic scenarios (baseline, optimistic and pessimistic) and
determines the probability of their occurrence. Forecasts translate directly or indirectly into the
values of estimated parameters and exposures and their impact vary by model, product type, rating-
class etc. The Bank uses macroeconomic forecasts prepared only internally. Forecasts are provided
on a quarterly basis for a 3-year time horizon.
As with any economic forecasts, the projections and likelihoods of occurrence are subject to
a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different
to those projected.
Economic variable assumptions
The most significant period-end assumptions used for the ECL estimate as of 31 December 2024 are
set out below.
Macroeconomic variable
Scenario
2025
2026
2027
Gross Domestic Product
(annual average, % y/y)
Base
+4.6
+4.3
+3.9
Optimistic
+1.9
+2.1
+2.6
Mild recession
+4.7
+4.5
+4.3
Retail Sales
(annual average, % y/y)
Base
+5.4
+5.4
+5.1
Optimistic
+3.2
+3.3
+3.9
Mild recession
+4.6
+4.3
+3.9
Unemployment rate
(at the end of given year)
Base
5.1
5.2
5.2
Optimistic
4.7
4.7
4.8
Mild recession
6.2
7.0
6.6
The weightings assigned to each economic scenario on 31 December 2024 were as follows:
Base
Optimistic
Mild recession
Applied weighting
60%
10%
30%
ECL sensitivity to macroeconomic scenarios
For assessing the sensitivity of ECL for future macroeconomic conditions, the Bank calculated
unweighted ECL for each defined scenario separately. The impact of applying an optimistic or mild
recession scenario separately does not exceed 1.0% of the ECL value estimated in the base case.
Reversal of impairment
Impairment Instruction being core document of Internal regulations provides a detailed definition of
the principle of reversing impairment losses. In principle, reversing a loss and elimination of
a revaluation charge is possible in the case of cessation of the impairment triggers, including the
repayment of arrears or in the case of selling receivables. Reclassification to the Non-Impaired
category is possible only when the customer has successfully passed the “quarantine” period, during
which he will not show delay in the repayment of principal or interest above 30 days. The quarantine
period only starts counting after any eventual grace period that may be granted on the restructuring.
67
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Detailed rules regarding the applicable quarantine periods (at least 3 or 12 months for forced
restructuring) and reclassification from default are in line with the EBA guidelines regarding the
definition of default.
Sale of receivables
In 2024, the Bank sold credit exposures classified as impaired, in the total balance sheet amount of
PLN 279 million.
(3d) Maximum exposure to credit risk
31.12.2024
31.12.2023
Exposures exposed to credit risk connected with balance sheet assets
130 064 109
117 750 843
Deposits, loans and advances to banks and other monetary institutions
2 378 592
1 866 688
Loans and advances to customers:
71 936 713
72 405 447
Mandatorily at fair value through profit or loss:
1 825
19 349
Loans to private individuals:
1 755
19 280
Receivables on account of payment cards
1 755
8 753
Credit in current account
0
10 527
Loans to companies
70
69
Valued at fair value through other comprehensive income
11 135 416
11 799 748
Valued at amortised cost:
60 799 472
60 586 349
Loans to private individuals:
42 838 157
43 531 149
Receivables on account of payment cards
1 177 834
1 148 190
Cash loans and other loans to private individuals
17 120 347
15 872 412
Mortgage loans
24 539 976
26 510 547
Loans to companies and public sector
17 915 993
17 003 760
Loans to public entities
45 322
51 440
Financial derivatives and Adjustment from fair value hedge
369 459
572 790
Debt instruments held for trading
555 364
110 554
Debt instruments mandatorily at fair value through profit or loss
51 790
81 014
Debt instruments at fair value through other comprehensive income
28 986 939
21 895 863
Debt instruments at amortised cost
24 059 861
18 439 780
Repurchase agreements
194 218
1 163 242
Other financial assets
1 531 173
1 215 465
Credit risk connected with off-balance sheet items
14 869 414
14 264 568
Financial guarantees
1 713 693
1 713 980
Credit commitments
13 155 721
12 550 588
The table above presents the structure of the Bank’s exposures to credit risk as of 31 December 2024
and 31 December 2023, not considering risk-mitigating instruments. As regards balance-sheet assets,
the exposures presented above are based on net amounts presented in the balance sheet.
68
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Loans and advances to customers mandatorily at fair value through profit or loss
31.12.2024
31.12.2023
Mandatorily at fair value through profit or loss *
1 825
19 345
▪ Companies
70
65
▪ Individuals
1 755
19 280
▪ Public sector
0
0
* The above data includes the fair value adjustment, in the amount of:
(10 940)
(21 772)
Loans and advances to customers at fair value through other comprehensive income
Balance sheet value:
31.12.2024
31.12.2023
at fair value through other comprehensive income *
11 135 416
11 799 748
▪ Companies
0
0
▪ Individuals
11 135 416
11 799 748
▪ Public sector
0
0
* The above data includes the fair value adjustment, in the amount of:
(58 287)
101 810
The credit quality of financial assets
PLN’000, as of the end of 2024
Stage 1 (12-
month ECL)
Stage 2
(lifetime ECL)
Stage 3
(lifetime ECL)
POCI
Total
Balance exposures exposed to credit risk
111 765 047
4 798 116
2 936 353
82 228
119 581 744
Balance impairment
286 589
296 505
1 681 620
33 613
2 298 327
Loans and advances to banks (external rating
Fitch: from BBB to AAA; Moody's: from B3 to
Aaa; S&P: from B+ to AAA)
2 378 610
2 378 610
Loans and advances to private individuals
(according to Master Scale):
38 448 575
3 914 189
2 356 084
69 669
44 788 517
▪ 1-3 Highest quality
20 797 857
266 832
0
2 875
21 067 564
▪ 4-6 Good quality
8 376 846
848 297
0
2 397
9 227 540
▪ 7-9 Medium quality
7 174 869
1 309 947
0
1 880
8 486 696
▪ 10-12 Low quality
1 985 051
1 013 711
0
1 993
3 000 755
▪ 13-14 Watched
424
475 281
0
113
475 818
▪ 15 Default
0
0
2 356 084
60 412
2 416 496
▪ Without rating (*)
113 528
121
0
0
113 648
Impairment
188 235
264 464
1 453 030
32 745
1 938 474
69
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PLN’000, as of the end of 2024
Stage 1 (12-
month ECL)
Stage 2
(lifetime ECL)
Stage 3
(lifetime ECL)
POCI
Total
Loans and advances to companies (according
to Master Scale):
8 516 516
789 549
499 299
12 559
9 817 922
▪ 1-3 Highest quality
403 095
391
0
0
403 485
▪ 4-6 Good quality
1 375 095
36 417
0
0
1 411 512
▪ 7-9 Medium quality
3 227 254
231 851
0
0
3 459 104
▪ 10-12 Low quality
1 549 874
474 979
0
0
2 024 853
▪ 13-14 Watched
0
45 893
0
0
45 893
▪ 15 Default
0
0
499 038
12 530
511 568
▪ Without rating (*)
1 961 198
19
261
29
1 961 507
Impairment
70 105
29 465
205 541
868
305 979
Loans and advances to public entities
(according to Master Scale):
45 449
1
0
0
45 450
▪ 1-3 Highest quality
0
0
0
0
0
▪ 4-6 Good quality
352
0
0
0
352
▪ 7-9 Medium quality
392
0
0
0
392
▪ 10-12 Low quality
0
0
0
0
0
▪ 13-14 Watched
0
0
0
0
0
▪ 15 Default
0
0
0
0
0
▪ Without rating (*)
44 705
1
0
0
44 706
Impairment
129
0
0
0
129
Factoring (according to Master Scale):
2 536 369
94 377
80 970
0
2 711 716
▪ 1-3 Highest quality
46 004
0
0
0
46 004
▪ 4-6 Good quality
805 613
455
0
0
806 069
▪ 7-9 Medium quality
900 426
696
0
0
901 122
▪ 10-12 Low quality
716 568
93 211
0
0
809 779
▪ 13-14 Watched
0
0
0
0
0
▪ 15 Default
0
0
80 970
0
80 970
▪ Without rating (*)
67 758
15
0
0
67 772
Impairment
26 942
2 577
23 049
0
52 568
Repurchased receivables from Millennium
Leasing (according to Master Scale):
5 734 263
0
0
0
5 734 263
▪ 1-3 Highest quality
0
0
0
0
0
▪ 4-6 Good quality
0
0
0
0
0
▪ 7-9 Medium quality
0
0
0
0
0
▪ 10-12 Low quality
0
0
0
0
0
▪ 13-14 Watched
0
0
0
0
0
▪ 15 Default
0
0
0
0
0
▪ Without rating (*)
5 734 263
0
0
0
5 734 263
Impairment
1 178
0
0
0
1 178
Derivatives and adjustment from fair value
hedge (according to Master Scale):
257 094
0
0
0
257 094
▪ 1-3 Highest quality
198 702
198 702
▪ 4-6 Good quality
18 660
18 660
▪ 7-9 Medium quality
5 695
5 695
▪ 10-12 Low quality
1 001
1 001
▪ 13-14 Watched
0
0
▪ 15 Default
0
0
▪ Without rating
33 036
33 036
▪ fair value adjustment due to
hedge accounting
0
0
▪ Valuation of future FX
payments
0
0
▪ Hedging derivative
0
0
70
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PLN’000, as of the end of 2024
Stage 1 (12-
month ECL)
Stage 2
(lifetime ECL)
Stage 3
(lifetime ECL)
POCI
Total
Trading debt securities (State Treasury**
bonds)
555 364
555 364
Debt securities mandatorily at fair value
through profit or loss
51 790
51 790
Investment debt securities (State Treasury**,
Central Bank**, Local Government, EIB) at
fair value through other comprehensive
income
28 986 939
28 986 939
Receivables from securities bought with sell-
back clause
194 218
194 218
Debt securities valued at amortised cost
24 059 861
24 059 861
* The group of clients without an internal rating includes, among others, exposures related to loans to local government units
as well as investment projects and some leasing clients.
** rating for Poland in 2024 A- (S&P), A2 (Moody’s), A- (Fitch).
PLN’000, as of the end of 2023
Stage 1 (12-
month ECL)
Stage 2
(lifetime ECL)
Stage 3
(lifetime ECL)
POCI
Total
Balance exposures exposed to credit risk
99 170 260
4 689 208
2 980 468
116 789
106 956 725
Balance impairment
368 334
329 468
1 577 638
23 924
2 299 364
Loans and advances to banks (external rating
Fitch: from BBB to AAA; Moody's: from B3 to
Aaa; S&P: from B+ to AAA)
1 866 848
1 866 848
Loans and advances to private individuals
(according to Master Scale):
38 933 934
3 968 908
2 579 655
93 690
45 576 188
▪ 1-3 Highest quality
21 924 854
143 690
0
2 941
22 071 485
▪ 4-6 Good quality
8 297 717
940 110
0
3 332
9 241 159
▪ 7-9 Medium quality
6 585 768
1 165 848
0
3 021
7 754 637
▪ 10-12 Low quality
2 021 353
1 140 779
0
1 154
3 163 287
▪ 13-14 Watched
1 428
578 470
0
741
580 639
▪ 15 Default
0
0
2 579 655
82 501
2 662 156
▪ Without rating (*)
102 814
10
0
0
102 825
Impairment
297 243
302 936
1 419 526
25 124
2 044 828
Loans and advances to companies (according
to Master Scale):
8 182 213
636 402
362 494
23 099
9 204 208
▪ 1-3 Highest quality
218 968
1 732
0
0
220 700
▪ 4-6 Good quality
1 548 483
43 490
0
0
1 591 973
▪ 7-9 Medium quality
3 454 666
186 005
0
0
3 640 671
▪ 10-12 Low quality
1 141 101
330 044
0
0
1 471 144
▪ 13-14 Watched
0
37 072
0
0
37 072
▪ 15 Default
0
0
362 233
23 099
385 332
▪ Without rating (*)
1 818 995
38 060
261
0
1 857 316
Impairment
53 867
24 425
145 862
(1 200)
222 954
Loans and advances to public entities
(according to Master Scale):
51 748
1
0
0
51 749
▪ 1-3 Highest quality
0
0
0
0
0
▪ 4-6 Good quality
558
0
0
0
558
▪ 7-9 Medium quality
0
0
0
0
0
▪ 10-12 Low quality
0
0
0
0
0
▪ 13-14 Watched
0
0
0
0
0
▪ 15 Default
0
0
0
0
0
▪ Without rating (*)
51 190
1
0
0
51 191
Impairment
120
0
0
0
120
71
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PLN’000, as of the end of 2023
Stage 1 (12-
month ECL)
Stage 2
(lifetime ECL)
Stage 3
(lifetime ECL)
POCI
Total
Factoring (according to Master Scale):
2 402 318
83 896
38 319
0
2 524 533
▪ 1-3 Highest quality
28 385
1 360
0
0
29 745
▪ 4-6 Good quality
918 089
0
0
0
918 089
▪ 7-9 Medium quality
1 103 218
28 638
0
0
1 131 856
▪ 10-12 Low quality
302 794
53 877
0
0
356 671
▪ 13-14 Watched
0
0
0
0
0
▪ 15 Default
0
0
38 319
0
38 319
▪ Without rating (*)
49 831
21
0
0
49 852
Impairment
16 240
2 107
12 251
0
30 598
Repurchased receivables from Millennium
Leasing (according to Master Scale):
5 529 101
0
0
0
5 529 101
▪ 1-3 Highest quality
0
0
0
0
0
▪ 4-6 Good quality
0
0
0
0
0
▪ 7-9 Medium quality
0
0
0
0
0
▪ 10-12 Low quality
0
0
0
0
0
▪ 13-14 Watched
0
0
0
0
0
▪ 15 Default
0
0
0
0
0
▪ Without rating (*)
5 529 101
0
0
0
5 529 101
Impairment
864
0
0
0
864
Derivatives and adjustment from fair value
hedge (according to Master Scale):
513 645
0
0
0
513 645
▪ 1-3 Highest quality
317 799
317 799
▪ 4-6 Good quality
58 159
58 159
▪ 7-9 Medium quality
23 339
23 339
▪ 10-12 Low quality
1 330
1 330
▪ 13-14 Watched
0
0
▪ 15 Default
0
0
▪ Without rating
97 949
97 949
▪ fair value adjustment due to
hedge accounting
0
0
▪ Valuation of future FX
payments
0
0
▪ Hedging derivative
15 069
15 069
Debt securities mandatorily at fair value
through profit or loss
110 554
110 554
Trading debt securities (State Treasury**
bonds)
81 014
81 014
Investment debt securities (State Treasury**,
Central Bank**, Local Government, EIB) at
fair value through other comprehensive
income
21 895 863
21 895 863
Receivables from securities bought with sell-
back clause
1 163 242
1 163 242
Debt securities valued at amortised cost
18 439 780
18 439 780
* - the group of clients without an internal rating includes, among others, exposures related to loans to local government
units as well as investment projects and some leasing clients;
** rating for Poland in 2023: A- (S&P), A2 (Moody’s), A- (Fitch).
72
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
(3e) Loans
Impaired loans and advances
The gross amount of impaired loans and advances broken down into customer segments is as follows:
Gross exposure in ‘000 PLN
31.12.2024
Loans and advances to customers
Loans and
advances
to banks
Total
Companies
Mortgages
Other retail
By type of analysis
Case by case analysis
409 499
99 499
2 802
0
511 799
Collective analysis
183 040
713 757
1 600 438
0
2 497 235
Total
592 538
813 256
1 603 240
0
3 009 034
Gross exposure in ‘000 PLN
31.12.2023
Loans and advances to customers
Loans and
advances
to banks
Total
Companies
Mortgages
Other retail
By type of analysis
Case by case analysis
286 606
115 334
2 881
0
404 821
Collective analysis
137 045
768 458
1 775 483
0
2 680 986
Total
423 651
883 792
1 778 364
0
3 085 807
Loans and advances covered by case-by-case analysis
The quantification of the value of the portfolio subjected to case-by-case analysis as well as of the
value of created charges, split between impaired receivables (and respectively charges) is presented
in financial notes.
The tables below present the structure of the impaired portfolio subjected to case-by-case analysis.
Case by Case loans and advances to customers - by currency
31.12.2024
31.12.2023
Amount in
‘000 PLN
Share %
Coverage by
impairment
provisions
Amount in
‘000 PLN
Share %
Coverage by
impairment
provisions
PLN
292 179
57,1%
31,9%
291 133
71,9%
30,8%
CHF
16 738
3,3%
14,1%*
36 341
9,0%
19,2%*
EUR
202 879
39,6%
48,6%
77 348
19,1%
47,7%
USD
4
0,0%
60,1%
0
0,0%
Total (Case by Case impaired)
511 799
100,0%
37,9%
404 821
100,0%
33,0%
*) coverage excluding legal risk provisions, if included the coverage would be 56.4% (2024) and 53.6% (2023)
73
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Case by Case loans and advances to customers - by coverage ratio
31.12.2024
31.12.2023
Amount in ‘000 PLN
Share %
Amount in ‘000 PLN
Share %
Up to 20%
121 965
23.8%
168 186
41.5%
20% - 40%
197 252
38.5%
119 674
29.6%
40% - 60%
81 092
15.8%
40 637
10.0%
60% - 80%
71 813
14.0%
20 892
5.2%
Above 80%
39 678
7.8%
55 431
13.7%
Total (Case by Case impaired)
511 799
100.0%
404 821
100.0%
At the end of 2024, the financial impact from the established collaterals securing the Bank’s
receivables with impairment recognised under individual analysis (Case by Case) amounted to PLN
262.4 million (at the end of 2023 respectively PLN 198.8 million). It is the amount, by which the level
of required provisions assigned to relevant portfolio would be higher if flows from collaterals were
not to be considered in individual analysis.
Restructured loans and advances
The restructuring of receivables is done by dedicated units (separately for corporate and retail
receivables).
The restructuring of both corporate and retail receivables allows the Bank to take effective action
towards the customers, the purpose of which is to minimize losses and mitigate, as quickly as possible,
any risks to which the Bank is exposed in connection with client transactions giving rise to the Bank's
off-balance sheet receivables or liabilities.
The restructuring process applies to the receivables which, based on the principles in place in the
Bank, are transferred to restructuring and recovery portfolios and includes setting new terms of
transactions which are acceptable for the Bank (including the terms of their repayment and their
collateral and possibly obtaining additional collateral).
Recovery of retail receivables is a fully centralised process implemented in two stages:
▪ monitoring and amicable debt collection proceedings - conducted by Retail Liabilities Monitoring
and Collection Department,
▪ restructuring and execution proceedings – implemented by Retail Liabilities Restructuring and
Recovery Department.
Process performed by Retail Liabilities Monitoring and Collection Department involves direct
telephone contacts with Customers and obtaining repayment of receivables due to the Bank. In case
of failure to receive repayment or in case the Customer applies for debt restructuring, the case is
taken over by the Retail Liabilities Restructuring and Recovery Department and involves all
restructuring and execution activities.
Recovery process is supported by specialised IT system covering the entire Customer portfolio, fully
automated at the stage of portfolio monitoring and supporting actions undertaken in later
restructuring and recovery phases. The behavioural scoring model constitutes an integral component
of the system, used at the warning stage. The system is used for retail liabilities collection process
applicable to all retail Customer segments.
74
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The scoring model is based on internal calculations including, inter alia, Customer’s business segment
type of credit risk-based product (applicable, primarily, to mortgage products) and history of
cooperation with the Customer relative to previous restructuring and execution activities. Late
receivables from retail customers are sent to the IT system automatically no later than 4 days after
the date of the receivable becoming due and payable.
The restructuring and recovery process applicable to corporate receivables (i.e., balance and off-
balance receivables due from corporate and SME customers) is centralized and performed by the
Corporate Recovery Department. Recovery of corporate receivables aims to maximize the recovery
amounts and to mitigate risk incurred by the Bank in the shortest possible periods of time by carrying
out the accepted restructuring and recovery strategies towards:
▪ the customer,
▪ corporate receivables,
▪ collateral ensuring their repayment.
The actions performed as part of those strategies include, among others: setting the terms and
conditions of Customer financing, terms and conditions of restructuring corporate receivables (also
within court restructuring proceedings), including the terms on which they will be repaid and secured,
obtaining valuable and liquid collateral, achieving amicable repayment, recovery of due and payable
receivables (also by court executive officer), also from collateral, actions performed within debtors’
bankruptcy proceedings, conducting required legal actions.
Corporate Recovery Department manages the corporate receivable restructuring and recovery process
by using IT applications supporting the decision-making process and monitoring. They provide
instantaneous information on receivables, collateral, approach used and key actions and dates.
All restructured exposures are classified directly after signing sufficient annex/agreement to Stage 3.
In terms of regular payments such exposure can be cured when fulfil internally defined quarantine
rules in accordance with EBA Guidelines concerning New Definition of Default. Cured restructured
cases are classified to Stage 2 for at least following 2 years after cure in accordance with EBA technical
standards for forborne exposures.
The table below presents the loan portfolio with recognised impairment managed by the Bank’s
organisational units responsible for loan restructuring.
Gross exposure in ‘000 PLN
31.12.2024
31.12.2023
Loans and advances to private individuals
1 212 457
1 327 462
Loans and advances to companies
195 385
191 320
Total
1 407 842
1 518 782
75
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
(3f) Collateral transferred to the Bank
In 2024 there were no major seizures by the Bank or sale of fixed assets constituting loan collateral.
The above situation was caused by the implementation of other more cost-effective paths of satisfying
oneself from lien or transfers of title (more effective in terms of time and money with the limitation
of costs), i.e., leading to the sale of the object of collateral under the Bank’s supervision and with
the allocation of obtained sources for repayment. A variety of such action is concluding agreements
with official receivers based on which the receiver for an agreed fee secures and stores objects of
collateral and in agreement with the Bank puts them up for sale and sells them (also as part of selling
organized parts or the debtor’s whole enterprise). Funds obtained in such a way are allocated directly
for repayment of the Bank’s receivables (such debt-collection procedure is implemented without
recording transferred collateral on the so-called “Fixed Assets for Sale”).
(3g) Policy for writing off receivables
Credit exposures, with respect to which the Bank no longer expects any cash flows to be recovered
and for which impairment provisions (or fair value adjustments in case of overdue receivables
originated from derivatives) have been created fully covering the outstanding debt are written-off
the balance sheet against said provisions and transferred to off-balance. This operation does not cause
the debt to be cancelled and the legal and recovery actions, reasonable from the economic point of
view, are not interrupted to enforce repayment.
In most of cases the Bank writes off receivables against impairment provisions when said receivables
are found to be unrecoverable i.e., among other things:
▪ obtaining a decision on ineffectiveness of execution proceedings;
▪ death of a debtor;
▪ confirmation that there are no chances to satisfy claims from the estate in bankruptcy;
▪ exhaustion of all opportunities to carry out execution due to the lack of assets of the main debtor
and other obligors (e.g., collateral providers).
Gross exposure write-offs in ‘000 PLN
In 2024
Loans and advances to customers
Loans and
advances
to banks
Total
Companies
Mortgages
Other retail
Receivables written-off excluded from
enforcement activity
2 802
6 791
93 670
0
103 263
Receivables written-off being subject to
enforcement activity
1 029
487
121 496
0
123 012
Invalidated Mortgage FX Receivables
0
28 078
0
0
28 078
Total written-off
3 831
35 355
215 166
0
254 353
Gross exposure write-offs in ‘000 PLN
In 2023
Loans and advances to customers
Loans and
advances
to banks
Total
Companies
Mortgages
Other retail
Receivables written-off excluded from
enforcement activity
482
12 498
23 506
0
36 486
Receivables written-off being subject to
enforcement activity
3 459
62
114 155
0
117 676
Invalidated Mortgage FX Receivables
0
23 907
0
0
23 907
Total written-off
3 941
36 467
137 660
0
178 069
76
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
(3h) Concentration of risks of financial assets with exposure to credit risk
Economy sectors
The table below presents the Bank’s main categories of credit exposure broken down into
components, according to category of customers.
31.12.2024
Financial
intermediation
Industry and
constructions
Wholesale and
retail business
Transport and
communication
Public sector
Mortgage loans
Consumer
loans*
Other sectors
Total
Loans and advances to
banks
2 378 610
0
0
0
0
0
0
0
2 378 610
Loans and advances to
customers (Amortized
cost)
7 108 792
3 377 257
4 562 098
620 643
28 075
25 081 516
19 706 931
2 612 486
63 097 798
Loans and advances to
customers (Fair value
through OCI)
0
0
0
0
0
11 135 416
0
0
11 135 416
Loans and advances to
customers
(Fair value through P&L)
0
0
3
67
0
0
1 755
0
1 825
Trading securities
33
75
0
4
555 365
0
0
2
555 479
Instruments valued at
amortised cost
2 305 191
0
0
0
21 754 678
0
0
0
24 059 869
Instruments mandatorily
at fair value through P&L
118 399
0
0
0
0
0
0
0
118 399
Derivatives and
adjustment due to fair
value hedge
357 208
6 006
1 627
2 073
0
0
0
2 545
369 459
Investment securities
472 631
4 996
0
285
28 550 699
0
0
32
29 028 643
Repurchase agreements
194 218
0
0
0
0
0
0
0
194 218
Total
12 935 082
3 388 334
4 563 728
623 072
50 888 817
36 216 932
19 708 686
2 615 065
130 939 716
* including: credit cards, cash loans, current accounts overdrafts
77
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
31.12.2023
Financial
intermediation
Industry and
constructions
Wholesale and
retail business
Transport and
communication
Public sector
Mortgage loans
Consumer loans*
Other sectors
Total
Loans and advances to
banks
1 866 848
0
0
0
0
0
0
0
1 866 848
Loans and advances to
customers (Amortized
cost)
6 625 870
3 184 931
4 305 847
557 179
25 262
27 100 062
18 476 051
2 610 511
62 885 713
Loans and advances to
customers
(Fair value through OCI)
0
0
0
0
0
11 799 748
0
0
11 799 748
Loans and advances to
customers
(Fair value through P&L)
0
8
3
58
0
0
19 280
0
19 349
Trading securities
28
86
0
4
110 554
0
0
3
110 675
Instruments valued at
amortised cost
1 716 205
0
0
0
16 723 581
0
0
0
18 439 786
Instruments mandatorily
at fair value through P&L
147 623
0
0
0
0
0
0
0
147 623
Derivatives and
adjustment due to fair
value hedge
541 888
19 001
7 830
2 032
0
0
0
2 040
572 791
Investment securities
473 361
4 996
0
290
21 450 968
0
0
33
21 929 648
Repurchase agreements
1 163 242
0
0
0
0
0
0
0
1 163 242
Total
12 535 065
3 209 022
4 313 680
559 563
38 310 365
38 899 810
18 495 331
2 612 587
118 935 423
* including: credit cards, cash loans, current accounts overdrafts
Loans and advances to customers by economy sectors and segment
Taking into consideration segments and activity sectors concentration risk, the Bank defines internal
concentration limits in accordance with the risk tolerance allowing it to keep well diversified loan
portfolio.
The main items of loan book are mortgage loans (48.9%) and cash loans (23.2%). The portfolio of loans
to companies from different sectors like industry, construction, transport and communication, retail
and wholesale business, financial intermediation and public sector represents 25% of the total
portfolio.
78
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Sector name
2024
Balance Exposure
(PLN million)
Share
(%)
2023
Balance Exposure
(PLN million)
Share
(%)
Credits for individual persons
56 050.5
75.4%
57 370.7
76.8%
Mortgage
36 341.9
48.9%
38 853.6
52.0%
Cash loan
17 216.6
23.2%
16 037.3
21.5%
Credit cards and other
2 492.1
3.4%
2 479.8
3.3%
Credit for companies*
18 309.4
24.6%
17 309.6
23.2%
Wholesale and retail trade; repair
4 562.1
6.1%
4 305.8
5.8%
Manufacturing
2 590.3
3.5%
2 631.1
3.5%
Construction
786.9
1.1%
553.9
0.7%
Transportation and storage
620.6
0.8%
557.1
0.7%
Public administration and defence
28.1
0.0%
25.3
0.0%
Information and communication
793.4
1.1%
813.1
1.1%
Other Services
325.7
0.4%
293.6
0.4%
Financial and insurance activities
7 108.8
9.6%
6 625.9
8.9%
Real estate activities
642.5
0.9%
675.8
0.9%
Professional, scientific, and technical
services
252.1
0.3%
288.8
0.4%
Mining and quarrying
16.2
0.0%
2.3
0.0%
Water supply, sewage, and waste
102.2
0.1%
55.8
0.1%
Electricity, gas, water
65.4
0.1%
35.3
0.0%
Accommodation and food service activities
187.6
0.3%
183.6
0.2%
Education
76.1
0.1%
68.1
0.1%
Agriculture, forestry, and fishing
15.3
0.0%
17.9
0.0%
Human health and social work activities
99.4
0.1%
142.8
0.2%
Culture, recreation, and entertainment
36.7
0.0%
33.4
0.0%
Total (gross)
74 359.9
100.0%
74 680.3
100.0%
* incl. Microbusiness, annual turnover below PLN 5 million
Concentration ratio of the 20 largest customers in the Bank’s loan portfolio (considering groups of
connected entities) at the end of 2024 equals 5.5% comparing with 5.2% at the end of 2023.
Concentration ratio in 2024 for the 10 largest customers also increased slightly: from 4.0% at the end
of the previous year to 4.2%.
79
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
8.4. MARKET RISK AND INTEREST RATE RISK
The market risk encompasses current and prospective impact on earnings or capital, arising from
changes in the value of the Bank’s portfolio due to adverse movement in interest rates, foreign
exchange rates or prices of bonds, equities, or commodities.
The interest rate risk arising from Banking Book activities (IRRBB) encompasses current or prospective
impact to both the earnings and the economic value of the Bank’s portfolio arising from adverse
movements in interest rates that affect interest rate sensitive instruments. The risk includes gap risk,
basis risk and option risk.
Market risk
The Bank’s market risk measurement allows monitoring of all the risk types, which are generic risk
(including interest rate risk, foreign exchange risk and equity risk), non-linear risk, specific risk, and
commodity risk. In 2024 the non-linear and commodities risk did not exist in the Bank. The equity risk
assumed to be irrelevant since the Bank’s engagement in equity instruments is immaterial.
Each market risk type is measured individually using appropriate risk models and then integrated
measurement of total market risk is built from those assessments without considering any type of
diversification between the four risk types (the worst-case scenario).
The main measure used by the Bank to evaluate market risks (interest rate risk, foreign exchange
risk, equity risk) is the parametric VaR (Value at Risk) model – an expected loss that may arise on the
portfolio over a specified period (holding period) and with specified probability (confidence level)
from an adverse market movement.
The Value at Risk in the Bank (VaR) is calculated considering the holding period of 10 working days
and a 99% confidence level (one tail). In line with regulatory requirements of CRD V/CRR II, the
volatility associated with each market risk vertex considered in the VaR model (and respective
correlation between them) has been estimated by the equally weighted changes of market parameters
using the effective observation period of historical data of last year. The EWMA method (exponentially
weighted moving average method) with effectively shorter observation period is only justified by a
significant upsurge in price volatility.
To monitor and limit the positions in instruments, for which it is not possible to properly assess market
risk with the use of the VaR model (non-linear risk, commodity risk and specific risk), the appropriate
assessment rules were defined. The non-linear risk is measured according to internally developed
methodology which is in line with the VaR methodology – the same time horizon and significant level
is used. Specific and commodities’ risks are measured through standard approach defined in
supervisory regulations, with a corresponding change of the time horizon considered.
The market risk measurement is carried out daily (intra-day and end-of-day), both on an individual
basis for each of the areas responsible for risk taking and risk management, and in consolidated terms
for Global Bank, Trading and Banking Book considering the effect of the diversification that exists
between the portfolios. In addition, each Book is divided into the risk management areas.
To ensure that the VaR model adopted is appropriate for the evaluation of the risks involved in the
open positions, a back-testing process has been instituted and is carried out daily.
80
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
All reported excesses are documented. This includes an explanation of their causes and their
incorporation in one of the three classes of excess explanation: adequacy of the model, insufficient
model accuracy or unanticipated market movements.
Parallel to the VaR calculation the portfolios are subject to a set of sensitivity analysis and stress
scenarios, to:
▪ Estimate the potential economic loss resulting from extreme variations in market risk factors,
▪ Identify the market risk movements, possibly not captured by VaR, to which the portfolios are
more sensitive,
▪ Identify the actions that can be taken to reduce the impact of extreme variations in the risk
factors.
The following types of market scenarios are being applied:
▪ Parallel shifts of the yield curves;
▪ More steep or flat shape of the yield curves;
▪ Variations of the exchange rates;
▪ Historical adverse scenarios;
▪ Customized scenarios based on observed, adverse changes of market risk parameters.
The global VaR limit is expressed in million PLN. The limit is divided into the books, risk management
areas and various types of risk, which enables the Bank for full measurement, monitoring, and control
of market risk. The market risk exposure (VaR) together with the limit utilization is reported daily to
all areas responsible for management and control of market risk in the Bank.
The market risk limits are revised at least once a year and to consider, inter alia, the change of the
consolidated Own Funds, current and projected balance sheet structure as well as the market
environment. The market risk limits valid for 2024 reflected the assumptions and risk appetite defined
under Risk Strategy 2024-2026. The current limits in place have been valid since 30
th
September 2024
and remains conservative - level for Global Bank is no more than 574.5m PLN and for Trading Book no
more than 20.8m PLN.
In 2024, the VaR limits were not breached for Global Bank and also for Trading and Banking Book.
It should be noted that the value at risk in Banking Book is only complementary risk measurement tool
as positions are expected to be held to maturity and are normally not marked to market (see next
section - Interest rate risk in Banking Book, IRRBB). All excesses of market risk limits are always
reported, documented, and ratified at the proper competence level.
Within the current market environment, the Bank continued to act very prudently. In 2024 the VaR
indicators for the Bank remained on average at the level of PLN 263.2million (48% of the limit) and
PLN 223.4 million (39% of the limit) as of the end of December 2024. The diversification effect applies
to the generic risk and reflects correlation between its constituents. The low level of diversification
effect relates to the fact that the Bank’s market risk is mainly the interest rate risk. The figures in
the Table below also include the exposures to market risk generated in subordinated companies, as
the Bank manages market risk at central level.
81
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The market risk in terms of VaR for the Bank (‘000 PLN):
VaR measures for market
risk (‘000 PLN)
VaR (2024)
31.12.2023
Average
Maximum
Minimum
31.12.2024
Total risk
269 971
263 193
298 165
192 017
223 391
Generic risk
199 442
179 983
213 965
102 075
134 159
Interest Rate Risk
199 439
179 992
213 969
102 072
134 158
FX Risk
22
81
851
16
46
Equity Risk
13
16
36
7
13
Diversification Effect
0.0%
0.0%
Specific risk
70 529
83 210
91 456
70 203
89 233
The corresponding exposures as of 2023 respectively amounted to (‘000 PLN):
VaR measures for market
risk (‘000 PLN)
VaR (2023)
31.12.2022
Average
Maximum
Minimum
31.12.2023
Total risk
372 712
317 222
422 101
190 970
269 971
Generic risk
359 279
288 142
395 934
172 162
199 442
Interest Rate Risk
359 270
288 120
395 935
172 158
199 439
FX Risk
229
156
6 704
19
22
Equity Risk
0
3
18
0
13
Diversification Effect
0.1%
0.0%
Specific risk
13 432
29 080
70 818
13 432
70 529
The market risk exposure divided into Trading Book and Banking Book together with risk type division
is presented in the table below (‘000 PLN):
Banking Book:
VaR measures for
market risk (‘000 PLN)
VaR (2024)
31.12.2023
Average
Maximum
Minimum
31.12.2024
Total risk
269 052
261 853
297 344
191 331
223 121
Generic risk
198 527
178 647
211 281
101 393
133 892
Interest Rate Risk
198 527
178 647
211 281
101 393
133 892
FX Risk
0
0
0
0
0
Equity Risk
0
0
0
0
0
Diversification Effect
0.0%
0.0%
Specific risk
70 525
83 205
91 453
70 200
89 229
VaR measures for
market risk (‘000 PLN)
VaR (2023)
31.12.2022
Average
Maximum
Minimum
31.12.2023
Total risk
372 708
314 227
412 345
189 577
269 052
Generic risk
359 277
285 148
386 154
170 770
198 527
Interest Rate Risk
359 277
285 148
386 154
170 770
198 527
FX Risk
0
0
0
0
0
Equity Risk
0
0
0
0
0
Diversification Effect
0.0%
0.0%
Specific risk
13 430
29 079
70 813
13 430
70 525
82
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Trading Book:
VaR measures for
market risk (‘000 PLN)
VaR (2024)
31.12.2023
Average
Maximum
Minimum
31.12.2024
Total risk
1 078
2 365
7 512
269
784
Generic risk
1 075
2 361
7 509
264
780
Interest Rate Risk
1 071
2 348
7 516
263
780
FX Risk
24
82
850
16
44
Equity Risk
13
16
36
7
13
Diversification Effect
3.1%
7.3%
Specific risk
3
5
37
2
4
VaR measures for
market risk (‘000 PLN)
VaR (2023)
31.12.2022
Average
Maximum
Minimum
31.12.2023
Total risk
1 336
4 116
12 309
393
1 078
Generic risk
1 334
4 115
12 309
389
1 075
Interest Rate Risk
1 310
4 064
12 146
390
1 071
FX Risk
240
111
4 375
19
24
Equity Risk
0
3
18
0
13
Diversification Effect
16.2%
3.1%
Specific risk
2
1
18
0
3
Open positions mostly included interest-rate instruments and FX risk instruments. The FX risk covers
all the foreign exchange exposures of the Bank. According to the Risk Strategy, the FX open position
is allowed, however should be kept at low levels. For this purpose, the Bank has introduced a system
of conservative limits for FX open positions (both Intraday and Overnight limits) and allows keeping
FX open positions only in Trading Book.
In 2024, as a rule FX position generated in the Banking Book was fully transferred to the Trading Book
where it was managed daily. During 2024 the FX open position remained on average at the level of
PLN 14.0 million with maximum of PLN 50.2 million. In 2024, the FX Total open position (Intraday as
well as Overnight) remained below 2% of Own Funds and well below the maximum limits in place.
Evolution of the total FX open position (Overnight) in Trading Portfolio (PLN thousand):
Total position
Period Average
Period Minimum
Period Maximum
The Last Day of
Period
2024
13 956
4 080
50 167
12 591
2023
12 149
3 320
50 622
13 344
In addition to above mentioned market risk limits, the stop loss limits are introduced for the financial
markets’ portfolios. The aim is to limit the maximum losses of the trading activity of the Bank. In
case the limit is reached, a review of the management strategy and assumptions for the positions in
question must be undertaken. Stop loss limits were not reached.
83
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In the back-testing calculation for VaR model in Trading Book, four excesses were detected during
the last twelve months (see table below, PLN thousand).
Reporting Date
VaR
(generic risk)
Theoretical change in the
value of the portfolio
(absolute values)
Number of excesses
in last 12 months *
2024-12-31
780
125
4
2023-12-31
1 075
502
8
* The excess is said to happen whenever the difference between the absolute change in portfolio value and VaR measure is
positive.
In 2024, all excesses in the process of VaR model back testing were caused by unanticipated market
movements caused mainly by changes on Swap Curve, PLN Government Yield Curve and Money Market.
The number of excesses proves the model adequacy (green zone: 1 - 8 excesses acceptable).
VaR assessment is supplemented by monitoring the market risk sensitivity to the above-mentioned
stress tests scenarios of portfolios carrying market risk.
The results of market risk sensitivity and customized stress tests were regularly reported to the
Capital, Assets and Liabilities Committee.
Interest rate risk in Banking Book (IRRBB)
In case of the Banking Book, the main component of the market risk is interest rate risk.
Exposure to interest rate risk in the Banking Book are primarily generated by the differences in
repricing dates of assets and liabilities as well as its reference indexes, if contractually existing. It is
specifically affected by the unbalance between assets and liabilities that have fixed rate, especially
by the liabilities which cannot have interest rate lower than zero. Consequently, the level of
sensitivity to interest rate changes is influenced by the level of interest rates taken as a reference.
Additionally, due to specificity of the polish legal system, the interest rate of credits is limited (it
cannot exceed two times Reference Rate of the National Bank of Poland increased by 7 percentage
points). In situations of decreasing interest rates, the impact on Net Interest Income is negative and
depends on the share of the fixed rate loan portfolio that is affected by the new maximum rate. On
the other hand, assumptions regarding the timing and size of deposits repricing are also important
when assessing the interest rate sensitivity and risk.
Regarding the interest rate risk in Banking Book, the following principles are in place:
▪ The market risk that results from the commercial banking activity is hedged or transferred on
the monthly basis to areas that actively manage market risk and that are measured in terms of
risk and profit and loss,
▪ The Bank primarily uses natural hedging between loans and deposits as well as fixed rate bonds
and derivatives to manage interest rate risk with the main purpose of protecting the net interest
income.
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Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The variations in market interest rate have an influence on the Bank’s net interest income, both under
a short and medium-term perspective, also affecting its economic value in the long term. The
measurement of both is complementary in understanding the complete scope of interest rate risk in
Banking Book. For this reason, apart from daily market risk measurement in terms of value at risk,
the scope of the additional measurement of interest rate risk covers both earnings-based and
economic value measures, which are monthly:
▪ the impact on the economic value of equity (EVE) resulting from six supervisory outlier test (SOT)
scenarios,
• the impact on net interest income over a time horizon of next 12 months resulting from a
supervisory outlier test (SOT) scenarios - parallel up and parallel down scenarios,
• the impact on the economic value of equity (EVE) resulting from 100 bps upward/downward yield
curve movements,
• the interest rate sensitivity in terms of BPVx100, that is the change of the portfolio’s value for
the parallel movement in the yield curve by 1 basis point multiplied by 100,
• the impact on net interest income over a time horizon of next 12 months resulting from one-off
interest rate shock of 100 basis points.
And quarterly:
• the impact on the economic value of equity (EVE) resulting from 200 bps upward/downward yield
curve movements, including scenarios defined by the supervisor (standard, supervisory test
assuming sudden parallel +/-200 basis points shift of the yield curve).
The interest rate risk measurement is carried for all the risk management areas in the Bank, with the
particular attention on Banking Book.
For interest rate risk management for non-maturing assets and liabilities or for the instruments with
Client’s option embedded, the Bank is defining specific assumptions supported by use of statistical
models sensitive to change of interest rates, including:
▪ Due date for balances and interest flows arising from non-maturing deposits are defined based
on historical data regarding customer behaviour, considering the stability of the volumes and
with assumption of a maximum maturity of 5 years,
▪ The tendency to faster repayment of receivables than contractually scheduled is taken under
consideration by calculating a prepayment rate in respect to all relevant Banks’ loan portfolios
based on historical data. The scope of repayment analysis includes mortgage and personal loans
indexed both to fixed and variable rate.
▪ The equity, fixed assets, and other assets that are assumed to have repricing period of 1 or 3
years. However, to understand the impact of the chosen maturity profile the IRRBB measurement
is carried out without inclusion of the equity capital to isolate the effects on both EVE and
earnings perspectives.
The results of the above-mentioned analysis for BPVx100 and economic value measures were regularly
monitored and reported to the Capital, Assets and Liabilities Committee, to Risk Committee, the
Management Board and Supervisory Board. The results of the IRRBB measurement as of the end of
December 2024 indicate that in the EVE perspective the Group is the most exposed to the scenario of
interest rates increase, while in the earnings perspective – to a decrease. The supervisory outlier test
results of December 2024 show that even under the most severe outlier test scenario, the decline of
EVE for Banking Book is below supervisory limit of 15% of Tier 1.
The results of the sensitivity of the Banking Book to changes of interest rates in terms of BPVx100 and
EVE under supervisory stress tests are presented in Table below.
85
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Sensitivity of the Banking Book to changes of interest rates was as follows (‘000 PLN):
31.12.2024
31.12.2023
BPVx100
BPVx100
PLN
(245 989)
(291 188)
CHF
(9 080)
(8 200)
EUR
45 108
3 046
USD
21 878
23 121
Other
9 497
3 588
TOTAL
(178 585)
(269 634)
Equity, fixed and other assets
122 966
112 975
TOTAL
(55 619)
(156 673)
Sensitivity to changes of interest rates
31.12.2024
31.12.2023
Standard, supervisory test (parallel yield curve +/-200 bp % Own Funds)
-6.05%
-7.33%
Supervisory outlier test (the most severe scenario, % CET1)
-11.89%
-11.05%
The results of sensitivity of NII for the next 12 months after 31
st
December 2024 and for position in
Polish Zloty in Banking Book are carried out under the following assumptions:
• static balance sheet structure as of that reference date (no change during the following 12
months),
• reference level of net interest income if all assets and liabilities with variable interest rate
already reflect market interest rates levels as of 31
st
December 2024 (for example, the NBP
Reference rate at the end of 2024 was set at 5.75%),
• application of a parallel move of 100 bps in the PLN yield curve up and down is an additional shock
to all market interest rates levels as of 31
st
December 2024 and is set at the repricing date of the
assets and liabilities that happens during the 12 following months.
In a scenario of parallel decrease of Polish interest rates by 100 bps, the results are positive and equal
to PLN 4 million or 0.08% of the Group’s NII reference level. In a scenario of parallel increase of Polish
interest rates by 100 bps, the results are positive and equal to PLN 3 million or 0.05% of the Group’s
NII reference level. The results show that the Bank is now in balanced situation regarding impacts in
the scenario of a decline or increase in interest rates. The impact is currently significantly below limit
(10% of a reference NII level from previous 12 months).
Sensitivity of NII for PLN to changes of interest rates
31.12.2024
31.12.2023
Parallel yield curve increase by 100bp
0.05%
0.88%
Parallel yield curve decrease by 100bp
0.08%
-1.28%
Similar sensitivity results for all significant currencies (PLN, CHF, EUR, USD) under a 100 bp shock (for
each currency) under the same assumptions are presented in the table below.
Sensitivity of NII for all significant currencies to changes of
interest rates
31.12.2024
31.12.2023
Parallel yield curve increase by 100bp
0.49%
2.06%
Parallel yield curve decrease by 100bp
-0.49%
-2.59%
Bank also meets the supervisory limit of Supervisory Outlier Tests for net interest income which is
defined at the level of 5% of Tier 1 Capital.
Supervisory Outlier Test for NII for all significant currencies,
%CET1
31.12.2024
31.12.2023
Parallel up
0.52%
3.87%
Parallel down
-3.64%
-6.58%
86
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
8.5. LIQUIDITY RISK
The objective of liquidity risk management is to ensure and maintain the Bank’s ability to meet both
current, as well as future funding requirements considering costs of funding.
Liquidity risk reflects the possibility of incurring significant losses because of deteriorated financing
conditions (financing risk) and/or of the sale of assets for less than their market value (market
liquidity risk) to meet the needs for funding arising from the Bank’s obligations.
Both the financing requirements and any liquidity surplus of subsidiaries are managed by transactions
with the Bank unless specific market transactions are previously decided and agreed. The Treasury
Department is responsible for the day-to-day management of the Bank’s liquidity position in
accordance with the adopted rules and procedures considering goals defined by the Management
Board and the Capital, Assets and Liabilities Committee.
In 2024, the Bank continued to be characterized by very solid liquidity position. All the supervisory
and internal liquidity indicators remained significantly above minimum limits in place. The steps taken
as part of standard and binding risk management procedures have proved sufficient for managing
liquidity in the current market environment.
In 2024, in consequences of the increase of the deposits from Customers at the faster pace than loans,
the Bank’s Loan-to-Deposit ratio decreased and was equalled to 61% at the end of December 2024
(comparing to level of 67% as of end of December 2023). The liquidity assets portfolio is treated by
the Bank’s as liquidity reserve, which will overcome crisis situations. The liquidity assets portfolio
consists of liquid debt securities issued or guaranteed by Polish government, other EU’s sovereigns,
European Union, and multilateral development banks. It is additionally supplemented by the cash and
exposures to the National Bank of Poland. At the end of 2024, the share of above-mentioned liquid
debt securities (including NBP Bills) in total securities portfolio amounted to 99.9% and allowed to
reach the level of approx. PLN 53.7 billion (39% of total assets), whereas at the end of December 2023
PLN 40.7 billion (33% of total assets).
Consequently, the large, diversified, and stable funding from retail, corporate and public sector
Clients remains the main source of financing of the Bank. At the end of 2024 total Clients’ deposits
of the Bank reached the level of PLN 117.6 billion (PLN 107.5 billion at the end of December 2023).
The deposit base constituted mainly funds of individuals Clients, of which the share in total Client’s
deposits equalled to approx. 74.4% at the end of December 2024 (71.3% at the end of December 2023).
The high share of funds from individuals had a positive impact on the Bank’s liquidity and supported
the compliance of the supervisory liquidity measures.
Concentration of the deposits base, based on the share of top 5 and top 20 depositors, at the end of
2024 amounted respectively to 1.4% and 3.8% (in December 2023 it was respectively 2.3% and 5.4%).
The level of deposit concentration is regularly monitored and did not have any negative impact on
the stability of the deposit base in 2024. In case of significant increase of the share of the largest
depositors, the additional funds from the depositors are not treated as stable. Despite of that, to
prevent deposit base fluctuations, the Bank maintains the reserves of liquid assets in the form of
securities portfolio.
The deposit base is supplemented by medium – long term funding: at the end of 2024, the source of
medium-term funding included subordinated debt, own EUR bonds issue, green EUR bonds issue,
covered bonds issued by Millennium Mortgage Bank, and securitization of loan portfolio. Deposits from
financial institutions and other money market operations complement the range of tools for liquidity
management.
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Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The total Credit Linked Notes issued by the Bank amounts to PLN 602.8 million at the end of 2024
year in comparison to PLN 731.5 million at the end of 2023. The Bank has no medium-term loans from
financial institutions at the end of 2024, the same as at the end of 2023.
The Bank manages FX liquidity using FX-denominated deposits, own issue of EUR bonds as well as
Cross Currency Swap and FX Swap transactions. The importance of swaps has been decreasing because
of the reduction of the FX mortgage loan portfolio and the hedge in foreign currency of the provisions
for legal risk. For most counterparties, the Bank has signed a Credit Support Annex to the master
agreements. As a result, in case of unfavourable changes of FX rates (PLN depreciation), the Bank is
obliged to place deposits as a collateral with counterparties to secure the settlement of derivative
instruments in the future, and in case of favourable FX rates changes (PLN appreciation) receives
deposits as a collateral from the counterparties. There is no relationship between level of the Bank’s
ratings and parameters of collateral in any of the signed ISDA Schedules and Credit Support Annexes
(both international and domestic). The potential downgrade of any of the ratings will not have impact
on method of calculation and collateral exchange. It should be noted that the need of currency swaps
has been decreasing at a relevant pace due to the significant reduction in the FX mortgage loan
portfolio.
The Bank assesses the possibility of unfavourable changes of FX rates (especially CHF and EUR, which
causes increase of liquidity needs), analyses the impact on liquidity risk and reflects this risk in the
liquidity plans.
Liquidity risk evaluation measures
The estimation of the Bank’s liquidity risk is carried out with the use of both measures defined by the
supervisory authorities and internally, for which exposure limits were established.
The evolution of the Bank’s liquidity position in short-term horizons is tested daily based on liquid
asset portfolio, Central Bank’s eligible collateral for standard monetary operation and two internally
defined indicators: immediate liquidity and quarterly liquidity. The last two indicators measure the
maximum borrowing requirement, which could arise on a particular day, taking into consideration the
cash-flow projections for spot date and period of 3 months, respectively. Additionally, the liquid asset
portfolio is calculated on the daily basis.
These figures are compared with the exposure limits in force and reported daily to the areas
responsible for the management and control of the liquidity risk in the Bank as well as presented in
monthly and/or quarterly basis to the Bank’s Management Board and Supervisory Board.
The liquidity risk limits are revised at least once a year to consider, inter alia, the change of the size
of the consolidated own funds, current and expected balance sheet structure, historical limits’
consumption, as well as current market conditions and supervisory requirements. According to rules
in place, all eventual excesses of internal liquidity risk limits are always reported, documented, and
ratified at the proper competence level.
According to the final provisions of CRD V/CRR II package, the Bank is calculating the liquidity
coverage requirement (LCR) and the net stable funding ratio (NSFR). The regulatory minimum of 100%
for both LCR and NSFR was met by the Bank. LCR reached the level of 342% at the end of December
2024 (309% as of the end of December 2023). The increase was mainly connected with significant
increase of deposit from retail Clients, which was invested in liquid assets portfolio. The measure is
calculated daily and has been reported on the monthly basis to NBP since March 2014. Internally, the
LCR is estimated daily and reported to the areas responsible for the management and control of the
liquidity risk in the Bank. NSFR is monitored and reported monthly. In 2024, the NSFR was above the
supervisory minimum of 100% (supervisory minimum valid since June 2021). NSFR reached the level
of 196% at the end of December 2024 (185% as of the end of December 2023). Moreover, in line with
PFSA Recommendation WFD (issued in July 2024), the Bank is calculating at the Group level monthly
Long Term Funding Ratio (LTFR/WFD), which in December 2024 reached 28,0%.
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Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Current Liquidity indicators
31.12.2024
Immediate liquidity
ratio (%) *
Quarterly liquidity
ratio (%)*
Central Bank Collateral
/ Total Deposits (%)**
Liquid assets
Portfolio (m PLN)***
LCR (%)
Indicator
39%
39%
35%
53 473
342%
31.12.2023
Immediate liquidity
ratio (%)*
Quarterly liquidity
ratio (%)*
Central Bank Collateral
/ Total Deposits (%)**
Liquid assets
Portfolio (m PLN)***
LCR (%)
Indicator
34%
37%
28%
41 358
309%
* - Immediate and Quarterly Liquidity Indicator: Ratio between value of the liquidity buffer available for discount with the
Central Bank (NBP) minus the net outflows projected for the next 3 working days for Immediate Liquidity Indicator and for
the next 3 months for Quarterly Liquidity Indicator in all convertible currencies and the total deposits. The liquidity buffer
is determined as the difference between the sum of the portfolio of unencumbered central bank (NBP) eligible assets after
haircuts, mobilized or not to the respective monetary policy pool, and by cash and deposits held in the NBP in the part
available for withdrawal, and the gross funding with NBP and accrued interest
** - Central Bank Collateral / Total Deposits: Ratio between the value after haircuts of the eligible collateral for NBP, plus
the cash and deposits in the Central Bank (NBP) deducted of the minimum reserve requirements and the total customers’
deposits
*** - Liquid Assets Portfolio: The sum of cash, nostro balance (reduced by the required obligatory reserve), unencumbered
liquid securities portfolio, NBP-Bills and short-term, due from banks (up to 1 month).
The Bank monitors liquidity based on internal liquidity measures, considering the impact of FX rates
on the liquidity situation.
Additionally, the Bank employs an internal structural liquidity analysis based on cumulative, behaviour
liquidity gaps calculated. The safe level adopted by the Bank for the ratio of liquidity shortfall is
established for each time bucket below 5 years.
In December 2024, liquidity gaps were maintained positive and still at safe levels. The results of
cumulative, behaviour liquidity gaps (normal conditions) are presented in tables below.
31.12.2024
Adjusted Liquidity Gap (PLN mln)
Up to 6M
Up to 1Y
Up to 2Y
Up to 5Y
Counterbalancing capacity
51 995
51 995
51 995
51 995
Outflows
11 004
2 078
3 035
14 117
Outflows Cumulated
11 004
13 082
16 117
30 234
Inflows
10 524
4 516
7 747
17 663
Inflows Cumulated
10 524
15 040
22 788
40 451
Liquidity Gap
51 516
2 437
4 713
3 546
Liquidity Gap Cumulated
51 516
53 953
58 666
62 212
89
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
31.12.2023
Adjusted Liquidity Gap (PLN mln)
Up to 6M
Up to 1Y
Up to 2Y
Up to 5Y
Counterbalancing capacity
40 501
40 501
40 501
40 501
Outflows
12 051
1 691
2 639
9 017
Outflows Cumulated
12 051
13 742
16 381
25 399
Inflows
13 557
4 421
7 642
14 518
Inflows Cumulated
13 557
17 979
25 620
40 138
Liquidity Gap
42 008
2 730
5 002
5 500
Liquidity Gap Cumulated
42 008
44 738
49 740
55 240
The Bank structural liquidity risk management tool covers sensitivity analysis and stress scenarios
(idiosyncratic, systemic and combination of both). For stress tests, liquidity gaps are calculated on a
real basis assuming a conservative approach to the assessment of probability of cash flow occurrence
among others considering increased deposits outflows, decreased or delayed loans repayment inflows,
deteriorated liquidity of the secondary securities market, the highest cost of funding - the assumption
of the worst observed margins on deposits in the Bank, parallel shift of the yield curve and PLN
depreciation.
Stress tests are performed at least quarterly, to determine the Bank’s liquidity-risk profile, to ensure
that the Bank can fulfil its obligations in the event of a liquidity crisis and to update the liquidity
contingency plan and management decisions. Additionally, stress test results are used for setting
thresholds for early warning signals, which aim is to identify upcoming liquidity problems and to
indicate to the Management Board the eventual necessity of launching Liquidity Contingency Plan.
The assumptions for both internal structural liquidity analysis and stress tests are annually revised.
The last revision was carried out in December 2024. The approach is based on additional liquidity
monitoring metrics’ maturity ladder for supervisory liquidity reporting, however, includes internal
adjustments according to behavioural assumptions on balance and off-balance outflows and inflows.
As the maturity ladder is a contractual liquidity gap that assumes static balance sheet, the internal
assumptions regarding roll-over of funding and future interests cash flows were aligned and
eliminated. In December 2024 cumulative liquidity gap was positive and significantly better than in
December 2023, mainly due to increase on deposits from retail Clients, which was reflected in liquid
assets portfolio (counterbalancing capacity). The internally defined limit of 12% total assets was not
breached and the liquidity position was confirmed as solid. As of December 2024, also the results of
the stress test analysis demonstrated that liquidity position is not threatened as even in the most
severe scenario the survival period is still significantly above the limit of 3 months.
The information regarding the liquidity risk management, including the utilization of the established
limits for internal and supervisory measures, is reported monthly to the Capital, Assets and Liabilities
Committee and quarterly to the Management Board and Supervisory Board.
The process of the Bank’s planning and budgeting covers the preparation of the Liquidity Plan to make
sure that the growth of business will be supported by an appropriate liquidity financing structure and
supervisory requirements in terms of quantitative liquidity measures will be met.
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Annual Financial Report
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for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The Bank has also emergency procedures for situations of increased liquidity risk – the Liquidity
Contingency Plan (contingency plan in case the Bank’s financial liquidity deteriorates). The Liquidity
Contingency Plan establishes the concepts, priorities, responsibilities, and specific measures to be
taken in the event of a liquidity crisis. The Liquidity Contingency Plan is revised at least once a year.
In 2024 the Liquidity Contingency Plan was tested and revised to guarantee that it is operationally
robust. The Plan also confirmed warning thresholds for early warning indicators, considering scenarios
and stress test results. The revised Plan was approved by the Supervisory Board in November 2024.
8.6. OPERATIONAL RISK
Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes,
people, and systems, or from external events, including legal risk and excluding strategic and
reputational risk (last two are treated as separate categories). Operational risk is demonstrated in
every aspect of activity of the organization and constitutes its intrinsic part.
In the year 2024 there could be observed a continuous use of standards implemented for the purpose
of efficient management of operational risk, which are in line with the best practice of national and
international financial institutions. The solutions adopted also proved successful in the situation
related to the COVID-19 pandemic and the war in Ukraine. The adopted risk management structure
describes the various management levels and scopes of their duties and responsibilities.
Owners of defined business and support processes play a key role in the day-to-day operation of the
Bank. Process owner, basing on thorough knowledge about the process, accurately identifies and
mitigates recognized risks, thus constituting the first line of defence. The second line of defence is
the level of specialized units dealing with the organization of the management and control of an
acceptable level of risk, with consideration of the areas such as: compliance, anti-money laundering,
antifraud, security and business continuity as well as insurance and outsourcing. The third line of
defence is the independent internal audit unit.
Every decision regarding optimizing operational risk is preceded by cost-benefit analysis.
A higher risk management level is the Processes and Operational Risk Committee, which focuses on
threats identified in more than one process. All and any activities concerning operational risk are
coordinated and supervised by the Risk Committee, the Management Board, and the Supervisory
Board.
In keeping with the adopted model, risk management is a process of continuous improvement as
regards identification, assessment, monitoring, mitigating, and reporting by:
▪ Gathering operational risk events,
▪ Self-assessment of operational risk in individual processes,
▪ Analysis and monitoring of risk indicators.
The Bank gathers operational risk events in an IT tool. The tool supports management of operational
risk. Such events are being afterwards analysed in what concerns the source of event and possibility
of mitigating the effects and apply appropriate preventive actions. In the IT tool, events are being
ascribed to a certain risk category and proper process type, which is later used as a part of reporting
and risk self-assessment validation. The internal database of risk events additionally meets qualitative
and quantitative requirements for following the advanced approach in calculating capital
requirements on account of operational risk.
91
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The risk self-assessment was being realized together with the processes review. It relied on
assessment of adopted solutions’ effectiveness in fulfilling expectations of Clients and business
partners in the scope of both, services quality, and costs optimization. Approved operational risk and
control methodology allowed assessment of risk level in each process, considering existing controls
and basing on accepted scenarios. Mitigation actions were proposed implemented and are monitored
for purposes of assessment of risk levels above the accepted tolerance threshold.
During the risk and control self-assessment exercise an analysis of performance indicators was made,
including risk indicators defined for each process. Key persons - responsible for creating and
implementation activities in given processes - have defined and adjusted the indicators thus to make
them the best forecasts of future risks. On-going monitoring of indicators serves the purpose of
increasing effectiveness and productivity of processes as well as effective control of risk on the level
of individual actions within processes.
Information about operational risk in processes is included in the top-level dashboards consolidating
information about the process’s performance.
Considering the degree of development of operational risk management and the scale and profile of
its activity, the Bank calculates its capital requirement due to the operational risk using the Standard
Approach.
8.7. RISK OF NEGATIVE IMPACT ON THE NATURAL ENVIRONMENT
The risk of impact on the natural environment is associated mainly with the possible negative impact
of the Group on the environment and climate through its own operations, banking products and
services offered, including project finance, and managing climate, transformation and physical risks
to the Group. The Group prevents this risk by submitting to legal regulations, monitoring its own
environmental impact, and implementing environmentally friendly actions and observing the
“Environmental Policy of the Bank Millennium Group”, “ESG - Management and control principles”,
and the “Responsible Financing Principles”. The Group has incorporated environmental and social
risks in the client assessment, lending and project financing processes or offering investment products
(including Millennium TFI), taking into account not only the risks related to the business sectors in
which the clients operate, but also their approach to environmental, social and corporate governance
issues.
More information on managing the Group's impact on the environment and climate is presented in the
ESG report of the Bank and the Group (Management Board Report on the activity of Bank Millennium
S.A. and Capital Group of Bank Millennium S.A. in 2024).
92
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
9. Transactions with Related Entities
9.1. TRANSACTIONS WITH THE SUBSIDIARIES AND PARENT’S GROUP
All transactions among members of the Group made in 2024 and 2023 were driven by current activity.
The below table presents major amounts of intergroup transactions, these were transactions with the
following entities:
▪ MILLENNIUM BANK HIPOTECZNY,
▪ MILLENNIUM LEASING,
▪ MILLENNIUM CONSULTING,
▪ MILLENNIUM TFI
▪ MILLENNIUM SERVICE,
▪ MILLENNIUM TELECOMMUNICATION SERVICES,
▪ MILLENNIUM GOODIE,
▪ PIAST EXPERT.
and with the Capital Group of Bank parent company - Banco Comercial Portugues (ultimate parent
company), these transactions are mainly of banking nature.
Apart from transactions described herein, in the indicated period neither Bank Millennium S.A., nor
subsidiaries of Bank Millennium S.A. made any other transactions with related entities, which
individually or jointly may have been significant and concluded under terms and conditions other than
market-based.
ASSETS AND LIABILITIES FROM TRANSACTIONS WITH RELATED PARTIES (DATA IN ‘000 PLN) AS AT
31.12.2024
With
subsidiaries
With parent
company
With other entities
from parent group
ASSETS
Loans and advances to banks – accounts and deposits
1 944 076
1 788
0
Loans and advances to customers
6 863 794
0
0
Investments in associates
465 714
0
0
Financial assets valued at fair value through profit and loss (held for
trading)
1 249
0
0
Hedging derivatives
0
0
0
Other assets
17 835
0
0
LIABILITIES
Deposits from banks
6 803
121
0
Deposits from customers
385 388
0
0
Liabilities from securities sold with buy-back clause
0
0
0
Liabilities arising from debt securities
0
0
0
Financial liabilities valued at fair value through profit and loss (held
for trading)
652
0
0
Subordinated debt
0
0
0
Other liabilities, including:
33 908
234
14
financial leasing liabilities
27 074
0
0
93
Annual Financial Report
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for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
ASSETS AND LIABILITIES FROM TRANSACTIONS WITH RELATED PARTIES (DATA IN ‘000 PLN) AS AT
31.12.2023
With
subsidiaries
With parent
company
With other entities
from parent group
ASSETS
Loans and advances to banks – accounts and deposits
1 073 252
2 097
0
Loans and advances to customers
6 397 168
0
0
Investments in associates
346 714
0
0
Financial assets valued at fair value through profit and loss (held for
trading)
328
0
0
Hedging derivatives
0
0
0
Other assets
18 815
0
0
LIABILITIES
Deposits from banks
1 873
719
0
Deposits from customers
259 209
0
0
Liabilities from securities sold with buy-back clause
0
0
0
Liabilities arising from debt securities
0
0
0
Financial liabilities valued at fair value through profit and loss (held
for trading)
423
0
0
Subordinated debt
0
0
0
Other liabilities, including:
39 951
215
8
financial leasing liabilities
34 675
0
0
PROFIT AND LOSS ON TRANSACTIONS WITH RELATED PARTIES (DATA IN ‘000 PLN) FOR THE PERIOD OF
1.01-31.12.2024
With
subsidiaries
With parent
company
With other entities
from parent group
Income from:
Interest
461 443
5 398
0
Commissions
30 632
209
0
Financial instruments valued at fair value through other
comprehensive income
689
1 224
0
Dividends
26 618
0
0
Other net operating
27 788
0
0
Expense from:
Interest
11 910
46
0
Commissions
4
0
0
Financial assets and liabilities not measured at fair value through
profit or loss
8 771
0
0
Financial instruments valued at fair value through profit and loss
0
0
0
Other net operating
0
0
0
General and administrative expenses
14 449
185
6
94
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PROFIT AND LOSS ON TRANSACTIONS WITH RELATED PARTIES (DATA IN ‘000 PLN) FOR THE PERIOD OF
1.01-31.12.2023
With
subsidiaries
With parent
company
With other entities
from parent group
Income from:
Interest
431 240
2 676
0
Commissions
25 484
120
0
Financial instruments valued at fair value through profit and loss
3 221
28
0
Dividends
28 706
0
0
Financial assets and liabilities not measured at fair value through
profit or loss
2 441
0
0
Other net operating
25 100
0
0
Expense from:
Interest
11 707
2
0
Commissions
2
0
0
Financial instruments valued at fair value through profit and loss
0
0
0
Other net operating
0
0
0
General and administrative expenses
9 995
431
94
OFF-BALANCE TRANSACTIONS WITH RELATED PARTIES (DATA IN ‘000 PLN) AS AT 31.12.2024
With
subsidiaries
With parent
company
With other entities
from parent group
Conditional commitments
1 744 559
24 680
0
granted
1 428 155
0
0
obtained
316 404
24 680
0
Derivatives (par value)
180 379
0
0
OFF-BALANCE TRANSACTIONS WITH RELATED PARTIES (DATA IN ‘000 PLN) AS AT 31.12.2023
With
subsidiaries
With parent
company
With other entities
from parent group
Conditional commitments
1 181 891
25 513
0
granted
879 028
0
0
obtained
302 863
25 513
0
Derivatives (par value)
124 156
0
0
95
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
9.2. TRANSACTIONS WITH THE MANAGING AND SUPERVISING PERSONS
Information on total exposure towards the Bank’s managing and supervising persons as at 31.12.2024
(in ‘000 PLN):
The managing persons
The supervising persons
Total debt limit
including an unutilized limit
261.0
178.9
108.0
72.6
The Bank provides standard financial services to Members of the Management Board and Members of
the Supervisory Board and their relatives, which services comprise i.a.: keeping bank accounts,
accepting deposits or sale of financial instruments. In the Bank’s opinion these transactions are
concluded on market terms and conditions. In accordance with the credit lending policy adopted in
the Bank, term credits described in this section have appropriate collateral to mitigate its credit risk
exposure.
Information on total exposure towards the managing and supervising persons as at 31.12.2023 (in ‘000
PLN):
The managing persons
The supervising persons
Total debt limit
including an unutilized limit
258.0
193.0
111.0
105.6
9.3. INFORMATION ON COMPENSATIONS AND BENEFITS OF THE PERSONS
SUPERVISING AND MANAGING THE BANK
Salaries (including the balance of created and reversed provisions for payments of bonuses) and
benefits of managing persons recognized in Profit and loss account of the Bank were as follows (data
in thousand PLN):
Year
Salaries and bonuses
Benefits
Total
2024
24 075.0
2 344.8
26 419.8
2023
18 801.7
2 112.2
20 914.0
The benefits are mainly the costs of accommodation of the foreign members of the Management
Board. The values presented in the table above include items classified to the category of short-term
benefits and provision for variable remuneration components.
In 2024 and 2023, the Members of the Management Board did not receive any salaries or any fringe
benefits from Subsidiaries.
96
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Remuneration of the Members of the Supervisory Board of the Bank (data in thousand PLN):
Year
Short term salaries and benefits
2024
2 250.9
2023
2 125.5
In 2024 the Members of the Bank's Supervisory Board received remuneration for performing their
functions in subsidiaries in the amount of PLN 140.0 thousand (in 2023 - PLN 140.0 thousand).
97
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
10. Fair Value
The best reflection of fair value of financial instruments is the price which can be obtained for the
sale of assets or paid for the transfer of liability in case of market transactions (an exit price). For
many products and transactions for which market value to be taken directly from the quotations in
an active market (marking-to-market) is not available, the fair value must be estimated using internal
models based on discounted cash flows (marking-to-model). Financial cash flows for the various
instruments are determined according to their individual characteristics, and discounting factors
include changes in time both in market interest rates and margins.
According to IFRS 13 “Fair value measurement” in order to determinate fair value the Bank applies
models that are appropriate under existing circumstances and for which sufficient input data is
available, based to the maximum extent on observable input whereas minimizing use of unobservable
input, namely:
Level 1 - valuation based on the data fully observable (active market quotations);
Level 2 - valuation models using the information not constituting the data from level 1, but
observable, either directly or indirectly;
Level 3 - valuation models using unobservable data (not derived from an active market).
Valuation techniques used to determine fair value are applied consistently. Change in valuation
techniques resulting in a transfer between these methods occurs when:
▪ transfer from Level 1 to 2 takes place when for the financial instruments measured according
to Level 1 quoted market prices from an active market are not available at the balance sheet
day (previously used to be);
▪ transfer from Level 2 to 3 takes place when for the financial instruments measured according
to the Level 2 value of parameters not derived from the market has become significant at the
balance sheet day (and previously used to be irrelevant).
Financial instruments not recognized at fair value in the balance sheet
All estimation models are arbitrary to some extent and this is why they reflect only the value of those
instruments for which they were built. In these circumstances the presented differences between fair
values and balance-sheet values cannot be understood to mean adjustments of the economic value
of the Group. Fair value of these instruments is determined solely in order to meet the disclosure
requirements of IFRS 13 and IFRS 7.
The main assumptions and methods applied in estimating fair value of assets and liabilities of the
Bank are as follows:
Receivables and liabilities with respect to banks
The fair value of these instruments was determined by discounting the future principal and interest
flows with current rates, assuming that the flows arise on contractual dates.
Loans and advances granted to customers valued at amortised cost
The fair value of such instruments without specified repayment schedule, given their short-term
nature and the time-stable policy of the Group with respect to this portfolio, is close to balance-sheet
value.
98
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The fair value of instruments with defined maturity is estimated by discounting related cash flows on
contractual dates and under contractual conditions with the use of current zero-coupon rates and
credit risk margins.
In case of mortgage loans due to their long-term nature estimation of the future cash flows also
includes: the effect of early repayment and liquidity risk in foreign currencies.
Debt securities valued at amortised cost
The fair value of debt securities at amortised cost (mainly Treasury bonds in the Held to Collect
portfolio) was calculated on market quotations basis.
Liabilities to customers
The fair value of such instruments without maturity or with maturity under 30 days is considered by
the Bank to be close to balance-sheet value.
Fair value of instruments due and payable in 30 days or more is determined by discounting future cash
flows from principal and interest (including the current average margins by major currencies and time
periods) using current interest (including the original average margins by major currencies and time
periods) in contractual terms.
Subordinated liabilities, debt securities issued and medium-term loans
The fair value of these financial instruments is estimated on the basis of a model used for determining
the market value of floating-rate bonds with the current level of market rates and historical margin
for credit risk and in the case of fixed-rate coupon bonds, by discounting cash flows at the current
level of market rates and the original credit risk margin. Similar as in loan portfolio the Bank includes
the level of the original margin as a part of mid-term cost of financing obtained in the past in relation
to the current margin level for the comparable instruments, as long as reliable assessment is possible.
Due to lack of the mid-term loans liquid market as a reference to estimate current level of margins,
the Bank used the original margin.
The table below presents data as at 31.12.2024 (data in PLN thousand):
Note
Balance sheet value
Fair value
ASSETS MEASURED AT AMORTISED COST
Debt securities
23
24 059 861
24 169 924
Deposits, loans and advances to banks and other monetary
institutions
23
2 378 592
2 378 379
Loans and advances to customers (*)
22
60 799 471
60 268 245
LIABILITIES MEASURED AT AMORTISED COST
Liabilities to banks and other monetary institutions
32
323 296
323 296
Liabilities to customers
33
117 642 600
117 637 152
Debt securities issued
35
5 030 166
5 035 868
Subordinated debt
36
1 562 330
1 563 653
* The negative impact of fair value valuation of the loans portfolio is largely attributable to growth of loan spreads. The
methodology, which the Bank uses for valuation of the loans portfolio, assumes that current spreads best reflect existing
market conditions and economic situation. A corresponding rule is widely applied for valuation of debt securities, which are
not quoted on active markets. In result, paradoxically whenever the spreads of new loans increase, fair value of the “old”
loans portfolio falls.
99
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The fair value of debt securities measured at amortized cost for which market quotations are available
is determined based on them and, as a result, these assets are classified in the first valuation
category. The models used to determine the fair value of the other financial instruments listed in the
above table that are not recognized at fair value in the Bank's balance sheet use valuation techniques
based on parameters that are not derived from the market. Therefore, they are classified in the third
valuation category.
The table below presents data as at 31.12.2023 (data in PLN thousand):
Note
Balance sheet value
Fair value
ASSETS MEASURED AT AMORTISED COST
Debt securities
23
18 439 780
18 794 293
Deposits, loans and advances to banks and other monetary
institutions
23
1 866 688
1 866 684
Loans and advances to customers (*)
22
60 586 349
59 576 844
LIABILITIES MEASURED AT AMORTISED COST
Liabilities to banks and other monetary institutions
32
565 384
565 384
Liabilities to customers
33
107 505 636
107 542 781
Debt securities issued
35
3 027 952
3 038 317
Subordinated debt
36
1 565 045
1 563 479
Financial instruments recognized at fair value in the balance sheet
The table below presents balance-sheet values of instruments measured at fair value, by applied fair
value measurement technique:
Data in PLN‘000, as at 31.12.2024
Note
Quoted market
prices
Valuation
techniques -
observable inputs
Valuation
techniques -
significant
unobservable
inputs
Level 1
Level 2
Level 3
ASSETS
Financial assets held for trading
19
Valuation of derivatives
74 570
182 524
Equity instruments
115
Debt securities
555 364
Non-trading financial assets mandatorily at fair value
through profit or loss
20
Equity instruments
66 609
Debt securities
51 790
Loans and advances
22
1 825
Financial assets at fair value through other
comprehensive income
21
Equity instruments
481
36 227
Debt securities
20 389 685
8 597 254
Loans and advances
22
11 135 416
Derivatives – Hedge accounting
24
112 365
LIABILITIES
Financial liabilities held for trading
31
Valuation of derivatives
40 758
185 991
Short positions
190 769
Derivatives – Hedge accounting
24
107 439
100
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Data in ‘000 PLN, as at 31.12.2023
Note
Quoted market
prices
Valuation
techniques -
observable inputs
Valuation
techniques -
significant
unobservable
inputs
Level 1
Level 2
Level 3
ASSETS
Financial assets held for trading
19
Valuation of derivatives
81 819
416 758
Equity instruments
121
Debt securities
110 554
Non-trading financial assets mandatorily at fair value
through profit or loss
20
Equity instruments
66 609
Debt securities
81 014
Loans and advances
22
19 349
Financial assets at fair value through other
comprehensive income
21
Equity instruments
247
28 542
Debt securities
12 201 721
9 694 142
Loans and advances
11 799 748
Derivatives – Hedge accounting
24
74 213
LIABILITIES
Financial liabilities held for trading
31
Valuation of derivatives
151 265
425 346
Short positions
2 720
Derivatives – Hedge accounting
24
193 664
Using the criterion of valuation techniques as at 31.12.2024 Bank classified into the third category
following financial instruments:
▪ credit exposures with a leverage / multiplier feature inbuilt in the definition of interest rate
(these are credit card exposures and overdraft limits for which the interest rate is based on
a multiplier: 4 times the lombard rate). To estimate the fair value of loans, due to the lack
of availability of the market value, an internal valuation model was used, taking into account
the assumption that at the time of granting the loan the fair value is equal to the carrying
value. The fair value of loans without recognized impairment is equal to the sum of future
expected cash flows discounted at the balance sheet date. The discounting rate is the sum
of: the cost of risk, the cost of financing, the value of the expected return. The fair value of
impaired loans is equal to the sum of future expected recoveries discounted using the
effective interest rate, recognizing that the average expected recoveries fully take into
account the element of credit risk. In case of an increase in the discount rate by 1 pp valuation
of the portfolio would have been reduced by -0.1% (sensitivity analysis: based on the FV model
for the portfolio of credit cards);
▪ index options, option transactions are measured at fair value with use of option measurement
models, the model measurement is supplemented with impact on fair value of the estimated
credit risk parameter;
▪ VISA Inc. engagement shares; the method of fair value calculation of this instrument considers
the time value of money and the time line for conversion of preferred stock in common stock
of VISA.
▪ other equity instruments measured at fair value (unquoted on an active market).
In the reporting period, the Bank did not make transfers of financial instruments between the
techniques of fair value measurement.
101
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Changes of fair values of instruments measured on the basis of valuation techniques with use of
significant parameters not derived from the market are presented in the table below (in ’000 PLN):
Indexes
options
Options
embedded in
securities issued
and deposits
Shares
Debt
securities
Loans and
advances
FVP&L
Loans and
advances
FVOCI
Balance as at 31.12.2023
405 612
(414 200)
95 151
81 014
19 349
11 799 748
Settlement/sell/purchase/transfer
(248 040)
251 045
(46 959)
0
(21 554)
(1 298 422)
Change of valuation recognized in
equity
0
0
7 847
0
0
(160 097)
Interest income and other of
similar nature
0
0
0
0
3 285
794 187
Results on financial assets and
liabilities held for trading
20 623
(18 507)
0
0
0
0
Result on non-trading financial
assets mandatorily at fair value
through profit or loss
0
0
46 803
(29 224)
745
0
Result on exchange differences
0
0
(6)
0
0
0
Balance as at 31.12.2024
178 195
(181 662)
102 836
51 790
1 825
11 135 416
For options on indexes concluded on an inactive market, and FX options the Bank concludes back-to-
back transactions on the interbank market, in result estimated credit risk component has no impact
on the financial result.
Accordingly Bank’s estimation impact of adjustments for counterparty credit risk was not significant
from the point of view of individual derivative transactions concluded by the Bank. Consequently, the
Bank does not consider the impact of unobservable inputs used in the valuation of derivative
transactions for significant and in accordance with the provisions of IFRS 13.73 does not classify such
transactions for level 3 fair value measurements.
Indexes
options
Options
embedded in
securities issued
and deposits
Shares
Debt
securities
Loans and
advances
FVP&L
Loans and
advances
FVOCI
Balance as at 31.12.2022
247 414
(250 400)
90 755
72 057
97 982
11 221 252
Settlement/sell/purchase/transfer
94 879
(96 807)
0
0
(87 670)
(202 552)
Change of valuation recognized in
equity
0
0
4 422
0
0
(154 014)
Interest income and other of
similar nature
0
0
0
0
9 995
935 062
Results on financial assets and
liabilities held for trading
63 319
(66 993)
0
0
0
0
Result on non-trading financial
assets mandatorily at fair value
through profit or loss
0
0
0
8 957
(958)
0
Result on exchange differences
0
0
(26)
0
0
0
Balance as at 31.12.2023
405 612
(414 200)
95 151
81 014
19 349
11 799 748
102
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
11. Contingent Liabilities and Assets
11.1. LAWSUITS AND SIGNIFICANT PROCEEDINGS
Below please find the data on the court cases pending, brought up by and against entities of the Bank.
A separate category are the proceedings related to the activities of the Tax Control Authority
described in Chapter 13. note 16) "Corporate Income Tax".
Court cases brought up by the Bank
Value of the court litigations, as at 31.012.2024, in which the Bank was a plaintiff, totaled PLN 4,112.4
million. The increase in the value of the subjects of dispute in cases brought by the Bank compared
to previous periods results from the fact that lawsuits were filed against clients from the portfolio of
foreign currency mortgage loans.
Proceedings on infringement of collective consumer interests
On January 3 2018, the Bank received a decision of the Chairman of the Office for Protection of
Competition and Consumers (OPCC Chairman), in which the OPCC Chairman found infringement by
the Bank of the rights of consumers. In the opinion of the OPCC Chairman the essence of the violation
is that the Bank informed consumers (it regards 78 agreements) in responses to their complaints, that
the court verdict stating the abusiveness of the provisions of the loan agreement regarding exchange
rates does not apply to them. According to the position of the OPCC Chairman the abusiveness of
contract’s clauses determined by the court in the course of abstract control is constitutive and
effective for every contract from the beginning. As a result of the decision, the Bank was obliged to:
1) send information on the UOKiK’s decision to the said 78 clients,
2) place the information on decision and the decision itself on the website and on Twitter,
3) to pay a fine amounting to PLN 20.7 mln.
The Bank lodged an appeal within the statutory time limit.
On January 7, 2020, the first instance court dismissed the Bank's appeal in its entirety. The Bank
appealed against the judgment within the statutory deadline. The court presented the view that the
judgment issued in the course of the control of a contractual template (in the course of an abstract
control), recognizing the provisions of the template as abusive, determines the abusiveness of similar
provisions in previously concluded contracts. Therefore, the information provided to consumers was
incorrect and misleading. As regards the penalty imposed by OPCC, the court pointed out that the
policy of imposing penalties by the Office had changed in the direction of tightening penalties and
that the court agrees with this direction.
In the Bank's assessment, the Court should not assess the Bank's behaviour in 2015 from the
perspective of today's case-law views on the importance of abstract control (it was not until January
2016 that the Supreme Court's resolution supporting the view of the OPCC Chairman was published),
the more penalties for these behaviours should not be imposed using current policy. The above
constitutes a significant argument against the validity of the judgment and supports the appeal which
the Bank submitted to the Court of second instance.
The second instance court, in its judgment of February 24, 2022, completely revoked the decision of
the OPCC Chairman. On August 31, 2022, the OPCC Chairman lodged a cassation appeal to the Supreme
Court. On July 3, 2024, the Supreme Court issued a decision accepting the cassation appeal for
consideration. The Bank believes that the prognosis regarding the litigation chances of winning the
case before the Supreme Court is positive.
103
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Proceedings on competition-restricting practice
The Bank (along with other banks) is also a party to the dispute with OPCC, in which the OPCC
Chairman recognized the practice of participating banks, including Bank Millennium, in an agreement
aimed at jointly setting interchange fee rates charged on transactions made with Visa and Mastercard
cards as restrictive of competition, and by decision of 29 December 2006 imposed a fine on the Bank
in the amount of PLN 12.2 million. The Bank, along with other banks, appealed the decision.
In connection with the judgment of the Supreme Court and the judgment of the Court of Appeal in
Warsaw of November 23, 2020, the case is currently pending before the court of first instance - the
Court of Competition and Consumer Protection. The Bank has created a provision in the amount equal
to the imposed penalty.
Proceedings in the matter of recognition of provisions of the agreement format as abusive
On 22 September 2020 The Bank received decision of the Chairman of the Office for Protection of
Competition and Consumers (OPCC Chairman) recognising clauses stipulating principles of currency
exchange applied in the so-called anti-spread annex as abusive and prohibited the use thereof.
Penalty was imposed upon the Bank in the amount of 10.5 million PLN. Penalty amount takes account
of two mitigating circumstances: cooperation with the Office for Protection of Competition and
Consumers and discontinuation of the use of provisions in question.
The Bank was also requested, after the decision becomes final and binding, to inform consumers, by
registered mail, to the effect that the said clauses were deemed to be abusive and therefore not
binding upon them (without need to obtain court’s decision confirming this circumstance) and publish
the decision in the case on the Bank’s web site.
In the decision justification delivered in writing the OPCC Chairman stated that FX rates determined
by the Bank were determined at Bank’s discretion (on the basis of a concept, not specified in any
regulations, of average inter-bank market rate). Moreover, client had no precise knowledge on where
to look for said rates since provision referred to Reuters, without precisely defining the relevant site.
Provisions relating to FX rates in Bank’s tables were challenged since the Bank failed to define when
and how many times a day these tables were prepared and published.
In justification of the decision, the OPCC Chairman also indicated that in the course of the proceeding,
Bank Millennium presented various proposed solutions, which the OPCC Chairman deemed to be
insufficient.
The Bank appealed against the said decision within statutory term.
On March 31, 2022, the first instance court revoked the entire decision of the Chairman of the OPCC.
On May 23, 2022, the Chairman of the OPCC filed an appeal. On October 26, 2022, the Court of Appeal
changed the judgment of the court of first instance and shared the position of the Chairman of the
OPCC as to the abusiveness of the provisions regarding the determination of exchange rates in the
annexes concluded with foreign currency borrowers. On November 21, 2022, the Court of Appeals, at
the request of the Bank, suspended the execution of the judgment until the end of the cassation
proceedings. On January 30, 2023 the Bank filed a cassation appeal to the Supreme Court. By the
decision of March 20, 2024, the cassation appeal was accepted for consideration. The date of the
hearing has not been set yet. The Bank has created a provision in the amount equal to the imposed
penalty.
104
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Court cases against the Bank
As at 31.12.2024, the most important proceedings, in the group of the court cases where the Bank
was defendant, were following:
- The Bank is a defendant in two court proceedings, in which the subject of the dispute is the amount
of the interchange fee. The total value of claims reported in these cases is PLN 729.2 million. The
procedure with the highest value of the reported claim is the case is brought by PKN Orlen SA, the
plaintiff demands payment of PLN 635.7 million. The plaintiff in this proceeding alleges that the banks
acted under an agreement restricting competition on the acquiring services market by jointly setting
the level of the national interchange fee in the years 2006-2014. In this case, the Bank was sued
jointly with another bank and card organizations. In the case brought by LPP S.A. the allegations are
similar to those raised in the case brought by PKN Orlen SA, while the period of the alleged agreement
is indicated as 2008-2014. In this case, the Bank is sued jointly and severally with another bank. The
case was resolved positively for the Bank by the courts of both instances, and is currently at the stage
of a cassation appeal filed by LPP S.A. The Supreme Court did not issue a decision regarding the
acceptance of the cassation appeal for consideration. According to current estimates of the risk of
losing a dispute in these matters, the Bank did not create a provision. In addition, we point out that
the Bank participates as a side intervener in three other proceedings regarding the interchange fee.
Other banks are the defendant. Plaintiffs in these cases also accuse banks of acting as part of an
agreement restricting competition on the acquiring services market by jointly setting the level of the
national interchange fee in the years 2008-2014.
- A lawsuit brought up by shareholder of PCZ S.A. in bankruptcy (PHM, then the European Foundation
for Polish-Belgian Cooperation - EFWP-B, currently called The European Foundation for Polish-Kenyan
Cooperation) against Bank Millennium S.A., worth of the dispute 521.9 million PLN with statutory
interest from 05.04.2016 until the day of payment. The plaintiff filed the suit dated 23.10.2015 to
the Regional Court in Warsaw; the suit was served to the Bank on 04.04.2016. According to the
plaintiff, the basis for the claim is damage to their assets, due to the actions taken by the Bank and
consisting in the wrong interpretation of the Agreement for working capital loan concluded between
the Bank and PCZ S.A., which resulted in placing the loan on demand. The Bank is requesting complete
dismissal of the suit, stating disagreement with the charges raised in the claim. Supporting the
position of the Bank, the Bank’s attorney submitted a binding copy of final verdict of Appeal Court in
Wrocław favourable to the Bank, issued in the same legal state in the action brought by PCZ SA against
the Bank. On May 10, 2023, the Court of First Instance announced a judgment dismissing the claim in
its entirety. The verdict is not final, the plaintiff filed an appeal.
On May 6, 2024, the Bank's representative submitted a response to the appeal, requesting that it be
dismissed in its entirety as unfounded. On December 17, 2024, the Court of Appeal in Warsaw issued
a judgment favorable to the Bank, dismissing the Plaintiff's appeal. The judgment is final. Due to the
Plaintiff's submission of a motion for a written justification of the aforementioned judgment of the
Court of Appeal of December 17, 2024, it is possible for the Foundation to file a cassation appeal to
the Supreme Court.
The class action related to the LTV insurance:
On the 3 of December 2015 a class action was served on the Bank. A group of the Bank's debtors (454
borrowers party to 275 loan agreements) is represented by the Municipal Consumer Ombudsman in
Olsztyn. The plaintiffs demanded payment of the amount of PLN 3.5 million, claiming that the clauses
of the agreements, pertaining to the low down payment insurance, are unfair and thus not binding.
Plaintiff extended the group in the court letter filed on the 4th of April 2018, therefore the claims
increased from PLN 3.5 million to over PLN 5 million.
105
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Actual status:
On the 1 of October 2018, the group's representative corrected the total amount of claims pursued in
the proceedings and submitted a revised list of all group members, covering the total of 697 borrowers
– 432 loan agreements. The value of the subject of the dispute, as updated by the claimant, is PLN
7,371,107.94.
By the resolution of 1 April 2020 the court established the composition of the group as per request of
the plaintiff and decided to take witness evidence in writing. On 18.10.2024, the Court adjourned the
hearing without setting a new date. The Bank assesses that procedural chances of winning the case is
positive.
As at 31 December 2024, there were also 92 individual court cases regarding LTV insurance (cases in
which only a claim for the reimbursement of the commission or LTV insurance fee is presented).
Lawsuits filed by Financial Ombudsman for discontinuation of unfair market practices
On 13 August 2020 the Bank received lawsuit from the Financial Ombudsman. The Financial
Ombudsman, in the lawsuit, demands that the Bank and the Insurer (TU Europa) be ordered to
discontinue performing unfair market practices involving, as follows:
- presenting the offered loan repayment insurance as protecting interests of the insured in case
when insurance structure indicates that it protects the Bank’s interests;
- use of clauses linking the value of insurance benefit with the amount of borrower’s debt;
- use of clauses determining the amount of insurance premium without prior risk assessment
(underwriting);
- use of clauses excluding insurer’s liability for insurance accidents resulting from earlier causes.
Furthermore, the Ombudsman requires the Bank to be ordered to publish, on its web site, information
on use of unfair market practices.
The lawsuit does not include any demand for payment, by the Bank, of any specified amounts.
Nonetheless, if the practice is deemed to be abusive it may constitute grounds for future claims to
be filed by individual clients.
The case is being examined by the court of first instance. The date of the first hearing was set for
March 25, 2025. In the Bank's opinion, there are currently no prerequisites for creating provisions in
the case.
Court cases concerning Art. 45 of the Consumer Credit Act
By December 31, 2024, the Bank received 1,332 lawsuits in which the plaintiffs (both clients and
companies purchasing claims), alleging violation of the information obligations provided in Art. 30 of
the Consumer Credit Act, demand reimbursement of interest and other costs incurred in connection
with taking out a loan (free loan sanction within the meaning of Article 45 of the Consumer Credit
Act).
Based on publicly available information, it can be assumed that there will be an increase in the
number of lawsuits concerning Article 45 of the Consumer Credit Act. This phenomenon affects the
entire banking services sector. It is likely that a "new business model" will be created in the area of
law firms, which involves questioning consumer credit agreements.
As of December 31, 2024, 124 cases have been legally concluded, in 106 cases the Bank won the
dispute and lost in 18 cases. Disputes in the above respect should be subject to constant observation
and analysis. In the cases in question, the Bank makes an individual assessment of the litigation
chances in each of the court cases, which is justified by the lack of a uniform line of jurisprudence.
Currently, the Bank's litigation chances in the cases in question are assessed positively.
106
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
On 13 February 2025, the Court of Justice of the European Union issued a judgment in a case
registered under the reference number C472/23 as a result of an application filed by the District Court
for the Capital City of Warsaw. In its judgment, the CJEU, interpreting the provisions of Directive
2008/48/EC of the European Parliament and of the Council of 23 April 2008 on consumer credit
agreements, found that:
(i) the fact that a credit agreement indicates an annual percentage rate which turns out to be inflated
because certain terms of that agreement were subsequently found to be unfair within the meaning of
Article 6(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts and
therefore not binding on the consumer, does not in itself constitute an infringement of the obligation
to provide information laid down in that provision of Directive 2008/48.
(ii) the fact that a credit agreement lists a number of circumstances justifying an increase in the fees
related to the performance of the agreement, without a properly informed and sufficiently observant
and reasonable consumer being able to verify their occurrence or their impact on those fees,
constitutes an infringement of the information obligation laid down in that provision, provided that
this indication may undermine the consumer's ability to assess the extent of his obligation.
(iii) Directive 2008/48 does not preclude national legislation which provides, in the event of a breach
of the obligation to provide for information imposed on the creditor in accordance with Article 10(2)
of that directive, a uniform penalty consisting in depriving the creditor of the right to interest and
fees, irrespective of the individual degree of gravity of such a breach, provided that such breach may
undermine the consumer's ability to assess the extent of his obligation.
Following the judgment of the Tribunal, it is still up to the domestic courts to assess the possibility
of crediting non-interest costs of the loan and to assess compliance with the information obligation
regarding the possibility of changing fees. The CJEU also noted that the right to benefit from the free
loan sanction is updated only if a potential breach of the bank may undermine the consumer's ability
to assess the scope of his liability. Law firms purchasing clients' receivables publicize the judgment
as a ruling with a favorable ruling for consumers (opposite to the view of the Bank), which may
translate into an increase in the number of new cases.
Court cases regarding mortgage loans in PLN
By December 31, 2024, the Bank recorded the receipt of 135 lawsuits by borrowers of mortgage loans
in PLN for reimbursement of benefits provided under the loan agreement. Three final judgment were
issued dismissing the borrowers' claim. The borrowers' allegations focus on the WIBOR ratio as an
incomprehensible, unverifiable element affecting the consumer's liability, as well as the issue of
insufficient information on the effects of variable interest rates provided to the consumer by the bank
before the conclusion of the contract.
Based on publicly available information, it can be assumed that there will be an increase in the
number of lawsuits concerning mortgage loans in PLN. This phenomenon affects the entire sector of
banking services. It is possible that a "new business model" will be created in the area of law firms,
which consists in questioning mortgage contracts containing a variable interest rate clause based on
the WIBOR reference index.
On June 29, 2023, The Polish Financial Supervision Authority (KNF) announced that it had assessed
the ability of the WIBOR interest rate reference index to measure the market and economic realities.
The KNF stated that the WIBOR interest rate reference index is capable of measuring the market and
economic realities for which it was established. According to the Commission's assessment, the WIBOR
ratio responds appropriately to changes in liquidity conditions, changes in central bank rates and
economic realities (https://www.knf.gov.pl/komunikacja/komunikaty?articleId=82924&p_id=18 ).
107
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
On July 26, 2023, the Polish Financial Supervision Authority (PFSA) presented its position on legal and
economic issues related to mortgage loan agreements in Polish currency in which the WIBOR interest
rate reference index is used. This position can be used in court proceedings and can then be treated
as an “amicus curiae” opinion. The Polish Financial Supervision Authority stated that the WIBOR
reference index meets all legal requirements. In the opinion of the Polish Financial Supervision
Authority, there are no grounds to question the credibility and legality of WIBOR, in particular in the
context of the use of this indicator in mortgage loan agreements in the Polish currency
(Stanowisko_UKNF_dot_zagadnien_prawnych_i_ekonomicznych_zw_ze_wskaznikiem_referencyjnym_
WIBOR_83233.pdf).
Handling of unauthorised transactions
Currently, in connection with the activities of Bank Millennium - as it is the case with the activities
of other banks in Poland - the President of the Office of Competition and Consumer Protection is
conducting proceedings on the use of practices infringing the collective interests of consumers as
regards the so-called "unauthorized transactions". In the opinion of the President of the Office of
Competition and Consumer Protection, in the case of Bank Millennium, such actions include the
following: (i) failure – no later than by the end of the business day after the date of receipt of an
appropriate notification from the consumer regarding the occurrence of an unauthorised payment
transaction – to refund the amount of the unauthorised payment transaction or to restore the debited
payment account to the state that would have existed if the unauthorised payment transaction had
not taken place, despite the lack of justified and duly documented grounds to suspect fraud on the
part of the consumer and informing the authorities appointed to prosecute crimes about this suspicion
in writing, as well as (ii) providing consumers – in the replies to their reports regarding the occurrence
of unauthorized payment transactions – with information about the verification by the payment
service provider of the correct use of the payment instrument by using individual authentication data
in a way suggesting that the Bank's demonstration only that the disputed payment transactions have
been correctly authenticated constitutes at the same time demonstration of the authorization of such
a transaction and excludes its obligation to return the amount of the unauthorized transaction and
(iii) providing consumers – in the replies to their reports regarding the occurrence of unauthorized
payment transactions – with false information about authorization of the transactions questioned by
consumers, while presenting information indicating that the transactions took place as a result of an
intentional or grossly negligent violation by consumers of at least one of the obligations referred to
in Article 42 of the Payment Services Act and in the agreement between the consumer and the bank,
as a result of which they are liable for the questioned payment transactions.
In the course of the proceedings, the Bank provided appropriate explanations and also substantively
referred to the allegations formulated by the President of the Office of Competition and Consumer
Protection. The proceedings have been extended until June 30, 2025. The Bank did not create a
provision for these proceedings because at this stage of the proceedings, it is not possible to
reasonably predict the outcome of the proceedings.
As of December 31, 2024, the Bank was a party to 197 court proceedings in which customers
questioned the fact of their authorization of a transaction. In the cases in question, the Bank makes
an individual assessment of the litigation chances in each of the court cases, In cases where, in the
Bank's opinion, there is a greater probability of losing the dispute than winning it, provisions in the
appropriate amount are created.
108
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Administrative penalty proceedings by the Polish Financial Supervision Authority
On 22 December 2023, the Polish Financial Supervision Authority (KNF) started administrative
proceedings against bank Millennium S.A. that might result in a penalty being imposed on the Bank
under Article 176i(1)(4) of the Act on trading in financial instruments. On 16.09.2024, the Bank was
served with the Resolution of 13.09.2024 issued by the PFSA (“the Resolution”) pursuant to the
provisions of Chapter 2b of the Act of 21.07.2006 on Financial Market Supervision regarding: the
possibility of concluding an arrangement regarding the conditions for extraordinary easing of sanctions
and setting a 3-month deadline for concluding an arrangement. In response to the Resolution, on
27.09.2024 after considering the circumstances of the case, the Bank decided not to proceed with
the procedure of concluding the arrangement.
In the course of further proceedings the Bank received the following letters:
1. Letter from the KNF on the opportunity to present explanations before the decision is issued
(18.11.2024) regarding the opportunity to comment on the materials and evidence collected
during the proceedings. In response, the Bank on 19.12.2024 communicated the position of a party
to the proceedings in which it maintains the legal arguments contained in the letters submitted
in the proceedings and an indication that, in the Bank's opinion, the factual circumstances in the
case file described in the Bank's letters and this position do not justify the application of an
administrative sanction to the Bank as a supervised entity providing input to the WIRON reference
index.
2. Letter from the KNF extending the proceedings until 02.2025 (19.12.2024)
On 31.05.2024, the Polish Financial Supervision Authority initiated administrative proceedings against
Bank Millennium S.A. regarding the imposition of a financial penalty on the Bank pursuant to Art. 73
sec. 1 item 11 in conjunction with sec. 3 point 10 of the Act of 5 July 2018 on the National
Cybersecurity System (UKSC) in connection with failure to ensure that an information system security
audit was conducted within the statutory deadline. On 23 August 2024, the PFSA imposed a fine on
the Bank in the amount of PLN 150,000.00. The Bank appealed against the fine by filing a complaint
with the Provincial Administrative Court.
As at 31.12.2024, the total value of the subjects of the other litigations in which the Bank appeared
as defendant, stood at PLN 6,186.0 million (excluding the class actions described in the Chapter 12).
In this group the most important category are cases related with FX loans mortgage portfolio.
FX mortgage loans legal risk
FX mortgage loans legal risk is described in the Chapter 13. “Legal risk related to foreign currency
mortgage loans”.
109
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
11.2. OFF-BALANCE ITEMS
Amount ‘000 PLN
31.12.2024
31.12.2023
Off-balance conditional commitments granted and received
17 916 510
17 283 356
Commitments granted:
14 869 414
14 264 568
Loan commitments
13 155 721
12 550 588
guarantee
1 713 693
1 713 980
Commitments received:
3 047 096
3 018 788
financial
346
0
guarantee
3 046 750
3 018 788
The granted conditional commitments presented in the table above comprise commitments to grant
credit (such as: unutilised credit card limits, unutilised current account overdraft facilities, unutilised
tranches of investment loans) and issued guarantees and Letters of Credit (securing performance by
customers of the Bank of their obligations to third parties). The value of above-presented guarantee
commitments presents the maximum value of a loss, which may be incurred by the Bank, should the
customers default on their obligations. The Bank creates provisions for impaired irrevocable
conditional commitments, reported in the “provisions” item under liabilities in the balance-sheet.
The provision value is determined as the difference between the estimated amount of utilised
conditional exposure and the present value of expected future cash flows under this credit exposure.
In this context, the Bank considers that the values presented in the above table are similar to the fair
value of contingent liabilities.
The breakdown by entity of all net guarantee liabilities granted, reported in off-balance sheet items
is presented in the table below:
Customer – sector, amount ‘000 PLN
31.12.2024
31.12.2023
financial sector
142 080
164 734
non-financial sector (companies)
1 571 598
1 541 946
public sector
15
7 300
Total
1 713 693
1 713 980
As the parent company, the Bank granted subsidiaries lines for guarantees with a total value of PLN
26.1 million as at December 31, 2024. In addition, the Bank provided guarantees and sureties to
external entities on behalf of Group’s companies. The total value of guarantee obligations from the
above titles is presented in the table:
Subordinated company, amount ‘000 PLN
31.12.2024
31.12.2023
Millennium Leasing Sp. z o.o.
20 000
20 000
Millennium Service Sp. z o.o.
1 813
12 732
Millennium Goodie Sp. z o.o.
5 000
5 000
Total
26 813
37 732
110
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Guarantees and sureties granted to Clients
Commitments granted – guarantee, amount ‘000 PLN
31.12.2024
31.12.2023
Active guarantees and sureties
1 026 288
1 074 850
Lines for guarantees and sureties
690 978
642 747
Total
1 717 266
1 717 597
Provisions created
(3 572)
(3 617)
Commitments granted – guarantee after provisions
1 713 693
1 713 980
The structure of liabilities under active guarantees and sureties divided by particular criteria are
presented by the tables below (PLN’000):
By currency
31.12.2024
31.12.2023
PLN
750 333
716 929
Other currencies
275 955
357 921
Total:
1 026 288
1 074 850
By type of commitment
31.12.2024
31.12.2023
Number
Amount
Number
Amount
Guarantee
3 242
1 006 910
3 299
1 058 547
Surety
0
0
0
0
Re-guarantee
77
19 378
65
16 303
Total:
3 319
1 026 288
3 364
1 074 850
By object of the commitment
31.12.2024
31.12.2023
Number
Amount
% share
Number
Amount
% share
good performance of contract
2 747
542 308
52.84%
2 760
573 259
53.34%
punctual payment for goods or services
223
257 016
25.05%
249
295 486
27.49%
bid bond
92
21 484
2.09%
78
14 290
1.33%
rent payment
153
87 778
8.55%
159
81 397
7.58%
advance return
43
60 039
5.85%
42
42 591
3.96%
customs
23
17 731
1.73%
29
19 481
1.81%
payment of bank loan
13
7 017
0.68%
16
7 589
0.70%
other
25
32 915
3.21%
31
40 757
3.79%
Total:
3 319
1 026 288
100.00%
3 364
1 074 850
100.00%
111
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
12. Legal risk related to foreign currency mortgage
loans
On December 31, 2024, the Bank had 21,854 loan agreements and additionally 2,223 loan agreements
from former Euro Bank under individual ongoing litigations (excluding claims submitted by the Bank
against clients i.e. debt collection cases) concerning indexation clauses of FX mortgage loans
submitted to the courts (52% loans agreements before the courts of first instance and 48% loans
agreements before the courts of second instance) with the total value of claims filed by the plaintiffs
amounting to PLN 4,576.0 million and CHF 331.1 million (Bank Millennium portfolio: PLN 4,111.2
million and CHF 320.1 million and former Euro Bank portfolio: PLN 464.7 million and CHF 11.0 million).
The original value of the portfolio of CHF agreements granted (the sum of tranches paid to customers),
taking into account the exchange rate as at the date of disbursement of loan tranches, amounted to
PLN 19.4 billion for 109.0 thousand loan agreements (Bank Millennium portfolio: PLN 18.3 billion for
103.8 and former Euro Bank portfolio: PLN 1.1 billion for 5.2 thousand loan agreements). Out of 21,854
BM loan agreements in ongoing individual cases 431 are also part of class action. From the total
number of individual litigations against the Bank approximately 3,600 or 16% were submitted by
borrowers that had already naturally or early fully repaid the loan or were converted to polish zloty
at the moment of submission and had not a settlement agreement. Approximately another 880 cases
correspond to loans that were fully repaid during the proceedings (as court proceedings are lengthy).
The claims formulated by the clients in individual proceedings primarily concern the declaration of
invalidity of the contract and payment for reimbursement of paid principal and interest instalments
as undue performance, due to the abusive nature of indexation clauses, or maintenance of the
agreement in PLN with interest rate indexed to CHF Libor.
In addition, the Bank is a party to the group proceedings (class action) subject matter of which is to
determine the Bank's liability towards the group members based on unjust enrichment (undue benefit)
ground in connection with the foreign currency mortgage loans concluded. It is not a payment dispute.
The judgment in these proceedings will not directly grant any amounts to the group members. The
number of credit agreements covered by these proceedings is 3,273. Out of 3,273 loan agreements in
class action 431 are also part of ongoing individual cases, 1,563 concluded settlements and 29 received
final verdicts (invalidation of loan agreement). On 24 May 2022 the court issued a judgment on the
merits, dismissing the claim in full. On 13 December 2022 the claimant filed an appeal against the
judgment of 24 May 2022. On 25 June 2024 an appeal hearing was held, at which the Bank filed a
motion to amend the composition of the group and exclude those group members who had entered
into an amicable settlement. The court required the plaintiffs' attorneys to take a written position on
the current composition of the group. The date of the hearing will be set by the court ex officio.
The intense advertising campaign observed in the public domain affects the number of court disputes.
Until the end of 2019, 1,984 individual claims were filed against the Bank (in addition, 236 against
former Euro Bank), in 2020 the number increased by 3,005 (265), in 2021 the number increased by
6,157 (423), in 2022 the number increased by 5,758 (408), in 2023 the number increased by 6,879
(646), while in 2024 the number increased by 5,902 (672).
Based on ZBP (the Polish Banking Association) data gathered from all banks having FX mortgage loans,
vast majority of disputes were finally resolved against the banks. As far as Bank Millennium (incl.
former Euro Bank portfolio) is concerned, from 2015 until the end of 2024, 8,557 cases were finally
resolved (8,450 in claims submitted by clients against the Bank and 107 in claims submitted by the
Bank against clients i.e. debt collection cases) out of which 2,561 were settlements, 88 were
remissions, 75 rulings were favourable for the Bank and 5,833 were unfavourable including both
invalidation of loan agreements as well as conversions into PLN+LIBOR. The Bank undertakes proper
legal actions in order to secure repayment of initially disbursed capital of the loan.
112
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The outstanding gross balance of the loan agreements under individual court cases and class action
against the Bank (incl. former Euro Bank portfolio) on 31 December 2024 was CHF 1,189 million (of
which the outstanding amount of the loan agreements under the class action proceeding was CHF 86
million).
If all Bank Millennium’s originated loan agreements currently under individual and class action court
proceedings would be declared invalid without any compensation for the use of capital, the pre-tax
cost could reach PLN 7,087 million. Overall losses would be higher or lower depending on the final
court jurisprudence in this regard and the consideration of additional costs in the court verdicts.
In the 12 months of 2024, the Bank created PLN 1 979,2 million of provisions for Bank Millennium
originated portfolio and PLN 199,9 million for the former Euro Bank originated portfolio. The balance
sheet value of provisions for the Bank Millennium portfolio at the end of December 2024 was PLN 7
724,1 million, and for the former Euro Bank portfolio - PLN 739,6 million.
The methodology developed by the Bank of calculating provisions for legal risk involved with indexed
loans is based on the following main parameters resulting from historical observations or expert
assumptions:
(i) the number of ongoing cases (including class action agreements) and potential future lawsuits;
(ii) As regards the number of future court cases, the Bank monitors customer behaviors, analyzes
their willingness to sue the Bank, including due to economic factors and applies the following
assumptions:
a. regarding active loans (i.e., loans with an outstanding balance), the Bank estimates the
percentage of customers covered by methodology in this group of clients at 88% of the
total number of active loans (including expected number of amicable settlements).
b. regarding loans already fully repaid or converted to polish zloty, the Bank attributes a
much lower probability of becoming the subject of a court case (the Bank assumes that
approximately 24% of the repaid loans that had an economic justification for suing the
Bank but were not covered by a prior settlement have sued or will decide to sue the Bank
in the future);
(iii) the amount of the Bank's potential loss in the event of a specific court judgment (including
statutory interest estimation);
(iv) the probability of obtaining a specific court judgement calculated on the basis of statistics of
judgments in cases where the Bank is a party;
(v) estimates involved with amicable settlements with clients, concluded in court or out of court:
a. the bank assumes a 12% probability of success in concluding a settlement as part of
negotiations conducted with clients in the course of court proceedings,
b. negotiations are conducted on a case-by-case basis and can be stopped at any time by
the Bank,
c. due to significant negotiation efforts already made in the past, the probability of success
in these negotiations in the future is decreasing, and at the same time most customers
have already contacted the Bank regarding the possible conversion of loans into PLN, so
at the moment the Bank adopts a conservative approach when taking into account the
potential impact of this factor.
113
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The Bank is open to negotiate case by case favorable conditions for early repayment or conversion of
loans to PLN. As a result of these negotiations, the number of active FX mortgage loans originated by
Bank Millennium decreased by 25,883. As of the end of 2024, the Bank had 24,573 active FX mortgage
loans. Cost incurred in conjunctions with these negotiations totaled PLN 2 217,0 million. This cost is
presented mainly in ‘Result on exchange differences’ and also in ‘Result on modification’ in the profit
and loss statement (the values of costs charged to particular items of the Income Statement due to
settlements are presented in Note 14 in Chapter 13 ‘Notes to the Financial Statements’).
Taking into consideration the above-mentioned information regarding court cases (active and already
closed after verdicts), realized settlements and assumptions regarding future number of court cases
and settlements, as well as the historical number and original amount of loans granted, it can be said
that the already materialized risk (reflected in the provisions and in the losses already booked through
the P&L) accounts for 60% of the historical number of loans granted and for 73% of the original
disbursed capital.
Legal risk from former Euro Bank portfolio is fully covered by Indemnity Agreement with Société
Générale S.A.
The bank analyzed the sensitivity of the amount of the provision to changes in specific methodology
parameters:
Parameter
Scenario
Impact on loss
Change in the number of court
cases adopted in the assumptions
In addition, 1,000 new customers file a
lawsuit against the Bank
PLN 188 million
Change in costs incurred in
connection with the judgment or
settlement
Change in cost levels by 1% compared
to the assumed
PLN 77 million
On December 8, 2020, Mr. Jacek Jastrzębski, the Chairman of the Polish Financial Supervision
Authority (“PFSA”) proposed a “sector” solution to address the sector risks related to FX mortgages.
The solution would consist in offering banks’ clients a voluntary possibility of concluding arrangements
based on which a client would settle a CHF Mortgage Loan as if it was a PLN loan bearing interest at
an appropriate WIBOR rate increased by the margin historically employed for such loans. The decision
to generally implement this solution could imply the need of creating upfront provisions for the losses
resulting from the conversion of CHF Mortgage Loans. The Bank in practice has been using elements
of the proposal of above system solution on many individual negotiations with FX mortgage borrowers,
including in the course of court proceedings.
Due to the circumstances stemming from the CJEU which excludes demanding by the Bank amounts
exceeding the return of disbursed capital, the possibility of successful implementation of a general
offer of KNF solution is low.
It can reasonably be assumed that the legal issues relating to foreign currency mortgage loans will be
further examined by the domestic courts and the European Court of Justice which could potentially
result in the further interpretations, that are relevant for the assessing of the risks associated with
proceedings.
The issues related to the statute of limitations for the Bank's and the customer's restitutionary claims
following the invalidation of a loan agreement remain an area that may be subject to further analysis
in the jurisprudence of Polish courts. Legal interpretations in this subject may have an impact for
the amount of provisions in the future.
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The only binding version is the original Polish version.
There is a need for constant analysis of these matters. The Bank will have to regularly review and
may need to continue to create additional provisions for FX mortgage legal risk, taking into
consideration not only the above mentioned developments, but also the negative verdicts in the courts
regarding FX mortgage loans and important parameters, such as the number of new customer claims,
including those relating to repaid loan agreements.
The assumptions for the draft act on special solutions for the examination of cases related to loan
agreements denominated in or indexed to the Swiss franc concluded with consumers have been
published on the website of the Chancellery of the Prime Minister (link: Draft act on special solutions
for the examination of cases concerning loan agreements denominated or indexed to the Swiss franc
concluded with consumers - Chancellery of the President of the Republic of Poland) of the Council of
Ministers - Portal Gov.pl).
According to the information provided, Q2 2025 was indicated as the planned date of adoption of the
draft by the Council of Ministers. Pursuant to the legislative procedure, after its adoption, the draft
should be referred to the Polish Parliament, and then, if it is passed, it should be sent to the President
for his signature and then published in the Journal of Laws.
The adoption of the act in the form implementing the announced assumptions may significantly
accelerate the case adjudication time for cases regarding the validity of housing loan agreements
indexed to CHF.
The Court of Justice of the European Union and the Polish Supreme Court rulings relevant to risk
assessment
Jurisprudence of the Court of Justice of the European Union
On 3 October 2019, the Court of Justice of the European Union (the CJEU) issued the judgment in
Case C-260/18 in connection with the preliminary questions formulated by the District Court of
Warsaw in the case against Raiffeisen Bank International AG. The judgment of the CJEU, as regards
the interpretation of European Union law made therein, is binding on domestic courts. The judgment
in question interpreted Article 6 of Directive 93/13. In the light of the subject matter judgment the
said provision must be interpreted in such a way that (i) the national court may invalidate a credit
agreement if the removal of unfair terms detected in this agreement would alter the nature of the
main subject-matter of the contract; (ii) the effects for the consumer’s situation resulting from the
cancellation of the contract must be assessed in the light of the circumstances existing or foreseeable
at the time when the dispute arose and the will of the consumer is decisive as to whether he wishes
to maintain the contract; (iii) Article 6 of the Directive precludes the filling-in of gaps in the contract
caused by the removal of unfair terms from the contract solely on the basis of national legislation of
a general nature or established customs; (iv) Article 6 of the Directive precludes the maintenance of
unfair terms in the contract if the consumer has not consented to the maintenance of such terms. It
can be noticed the CJEU found doubtful the possibility of a credit agreement being performed further
in PLN while keeping interest calculated according to LIBOR.
The CJEU judgment concerns only the situation where the national court has previously found the
contract term to be abusive. It is the exclusive competence of the national courts to assess, in the
course of judicial proceedings, whether a particular contract term can be regarded as abusive in the
circumstances of the case.
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st
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This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
On 29 April 2021, the CJEU issued the judgement in the case C-19/20 in connection with the
preliminary questions formulated by the District Court in Gdańsk in the case against of ex-BPH S.A.,
the CJEU said that:
(i) it is for the national court to find that a term in a contract is unfair, even if it has been
contractually amended by those parties. Such a finding leads to the restoration of the
situation that the consumer would have been in in the absence of the term found to be unfair,
except where the consumer, by means of amendment of the unfair term, has waived such
restoration by free and informed consent. However, it does not follow from Council Directive
93/13 that a finding that the original term is unfair would, in principle, lead to annulment of
the contract, since the amendment of that term made it possible to restore the balance
between the obligations and rights of those parties arising under the contract and to remove
the defect which vitiated it;
(ii) the national court may remove only the unfair element of a term in a contract concluded
between a seller or supplier and a consumer where the deterrent objective pursued by Council
Directive 93/13 is ensured by national legislative provisions governing the use of that term,
provided that that element consists of a separate contractual obligation, capable of being
subject to an individual examination of its unfair nature. At the same time, provisions of the
Directive preclude the referring court from removing only the unfair element of a term in a
contract concluded between a seller or supplier and a consumer where such removal would
amount to revising the content of that term by altering its substance;
(iii) the consequences of a judicial finding that a term if a contract concluded between a seller
or supplier and a consumer is unfair are covered by national law and the question of continuity
of the contract should be assessed by the national court of its own motion in accordance with
an objective approach on the basis of those provisions;
(iv) the national court, finding that a term in a contract concluded between a seller or supplier
and a consumer is unfair, shall inform the consumer, in the context of the national procedural
rules after both parties have been heard, of the legal consequences entailed by annulment of
the contract, irrespective of whether the consumer is represented by a professional
representative.
On November 18, 2021, the Court of Justice of the European Union (CJEU) issued a judgment in case
C-212/20 in connection with questions submitted by the District Court for Warsaw Wola in Warsaw in
the case against Raiffeisen Bank International AG. The CJEU stated that:
(i) the content of the clause of the loan agreement concluded between the entrepreneur and
the consumer fixing the purchase and sale price of the foreign currency to which the loan is
indexed should, on the basis of clear and comprehensible criteria, enable the consumer who
is reasonably well informed and sufficiently observant and rational to understand how the
exchange rate of the foreign currency used to calculate the amount of the loan instalments
is determined, so that the consumer is able to determine himself at any time the exchange
rate used by the entrepreneur;
(ii) a national court which has found that a term of the agreement concluded between an
entrepreneur and a consumer is unfair cannot interpret that term in order to mitigate its
unfairness, even if such an interpretation would correspond to the common will of the parties.
On 10 June 2021, the Court of Justice of the European Union (CJEU) issued an order in case C-198/20
in connection with questions submitted by the District Court for Warsaw Wola in Warsaw in the case
against Santander Bank Polska SA. The CJEU stated that the protection provided for in Council
Directive 93/13/EEC is granted to all consumers, not just those who can be considered to be “duly
informed and reasonably observant and circumspect average consumer”.
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The only binding version is the original Polish version.
On 8 September 2022, the Court of Justice of the European Union (CJEU) issued a judgment in joined
cases C-80/21, C-81/21, C-82/21 in connection with questions submitted by the District Court for
Warsaw Śródmieście in Warsaw in cases against Deutsche Bank SA and mBank SA. The CJEU stated
that:
(i) a national court may find that the parts of a contractual term of the agreement concluded
between a consumer and an entrepreneur which render it unfair are unfair, if such a deletion
would not amount to a change in the content of that term that affects its substance, which is
for the referring court to verify;
(ii) a national court cannot, after annulling an unfair term contained in an agreement concluded
between a consumer and an entrepreneur which does not render the agreement invalid in its
entirety, replace that term with a supplementary provision of the national law;
(iii) a national court may not, after having declared invalid an unfair term contained in an
agreement concluded between a consumer and an entrepreneur which entails the invalidity
of that agreement in its entirety, replace the contractual term which has been declared
invalid either by interpretation of the parties' declaration of intent in order to avoid the
cancellation of that agreement or by a provision of national law of a supplementary nature,
even if the consumer has been informed of the effects of the invalidity of that agreement,
and accepted them;
(iv) the ten-year limitation period for a consumer's claim seeking reimbursement of sums unduly
paid to the entrepreneur in performance of an unfair term of a loan agreement does not start
to run on the date of each performance made by the consumer if the consumer was not able
on that date to assess on his own the unfairness of the contractual term or if he had not
become aware of the unfair nature of that term and without taking into account the
circumstances that the agreement provided for a repayment period – in this case thirty years
– well in excess of the ten-year statutory limitation period.
On March 16, 2023, the Court of Justice of the European Union issued a judgment in a case registered
under case number C-6/22, following preliminary questions submitted by the District Court for
Warsaw-Wola in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled
that:
(i) in the event that a contract concluded between a consumer and a seller or supplier is declared
invalid because one of its terms is unfair, it is for the Member States, by means of their
national law, to make provision for the effects of that invalidation, in compliance with the
protection granted to the consumer by that directive, in particular, by ensuring the
restoration of the legal and factual situation that he or she would have been in if that unfair
term had not existed;
(ii) a national court is not allowed:
a. to examine of its own motion, without any prerogative conferred on it by national law in
that regard, the financial situation of a consumer who has sought the invalidation of the
contract between him or her and a seller or supplier on account of the presence of an
unfair term without which the contract cannot legally continue to exist, even if that
invalidation is liable to expose the consumer to particularly unfavorable consequences
and
b. to refuse to declare that invalidation where the consumer has expressly sought it, after
being objectively and exhaustively informed of the legal consequences and the
particularly unfavorable financial consequences which it may have for him or her;
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The only binding version is the original Polish version.
(iii) a national court is not allowed, after it has found that a term in a contract concluded between
a seller or supplier and a consumer is unfair, to fill gaps resulting from the removal of the
unfair term contained therein by the application of a provision of national law which cannot
be characterised as a supplementary provision. However, it is for the national court, taking
account of its domestic law as a whole, to take all the measures necessary to protect the
consumer from the particularly unfavorable consequences which annulment of the contract
might entail for him or her.
On June 8, 2023, the Court of Justice of the European Union issued a judgment in a case registered
under case number C-570/21, following preliminary questions submitted by the District Court in
Warsaw in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled that:
(i) provisions of Council Directive 93/13 must be interpreted as meaning that the concept of
‘consumer’, within the meaning of that provision, covers a person who has concluded a loan
contract intended for a purpose in part within and in part outside his or her trade, business
or profession, together with a joint-borrower who did not act within his or her trade, business
or profession, where the trade, business or professional purpose is so limited as not to be
predominant in the overall context of that contract;
(ii) provisions of Directive 93/13 must be interpreted as meaning that in order to determine
whether a person falls within the concept of ‘consumer’, within the meaning of that provision,
and, specifically, whether the trade, business or professional purpose of a loan contract
concluded by that person is so limited as not to be predominant in the overall context of that
contract, the referring court is required to take into consideration all the relevant
circumstances surrounding that contract, both quantitative and qualitative, such as, in
particular, the distribution of the borrowed capital between, on the one hand, a trade,
business or profession and, on the other hand, a non-professional activity and, where there
are several borrowers, the fact that only one of them is pursuing a professional purpose or
that the lender made the grant of credit intended for consumer purposes conditional on a
partial allocation of the amount borrowed to the repayment of debts connected with a trade,
business or profession.
On June 15, 2023, the Court of Justice of the European Union issued a judgment in a case registered
under case number C-287/22, following preliminary questions submitted by the District Court in
Warsaw in a case against the former Getin Noble Bank S.A. In the judgment, the CJEU ruled that
provisions of the Directive 93/13 must be interpreted as precluding national case-law according to
which a national court may dismiss an application for the grant of interim measures lodged by a
consumer seeking the suspension, pending a final decision on the invalidity of the loan agreement
concluded by that consumer on the ground that that loan agreement contains unfair terms, of the
payment of the monthly instalments due under that loan agreement, where the grant of those interim
measures is necessary to ensure the full effectiveness of that decision.
On June 15, 2023, the CJEU issued a judgment in a case registered under case number C-520/21,
following preliminary questions submitted by the District Court in Warsaw in a case against Bank
Millennium, in which indicated that Directive 93/13 does not expressly regulate the consequences of
invalidity of a contract concluded between a credit institution and a consumer after the removal of
unfair terms contained therein. The CJEU stated that:
(i) the provisions of the Directive 93/13 do not preclude a judicial interpretation of national law,
according to which the consumer has the right to demand compensation from the credit
institution beyond the reimbursement of monthly instalments and costs paid for the
performance of this contract and the payment of statutory default interest from the date of
the request for payment provided that the objectives of Directive 93/13 and the principle of
proportionality are respected;
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The only binding version is the original Polish version.
(ii) the provisions of Directive 93/13 preclude the judicial interpretation of national law,
according to which a credit institution has the right to demand compensation from the
consumer that goes beyond the return of the capital paid for the performance of this contract
and beyond the payment of statutory default interest from the date of the request for
payment.
On September 21, 2023, the CJEU issued a judgement in a case registered under case number C-
139/22, following preliminary questions submitted by the District Court in Warsaw in a case against
mBank. The CJEU stated that:
(i) provisions of the Directive 93/13 must be interpreted as not precluding a contractual term
which has not been individually negotiated from being regarded as unfair by the national
authorities concerned merely by virtue of the fact that its content is equivalent to that of a
standard contract term entered in the national register of standard business terms held to be
unlawful;
(ii) the contractual term which, because of the circumstances for the performance of certain
obligations of the consumer concerned provided for in that term, must be regarded as unfair,
may not cease to be considered unfair on account of another term of that contract which
provides for the possibility for that consumer to perform those obligations under different
circumstances;
(iii) a seller or supplier is obliged to inform the consumer concerned of the essential
characteristics of the contract concluded with that seller or supplier and the risks associated
with that contract, even though that consumer is its employee and has relevant knowledge in
the field of the contract.
On December 7, 2023, the CJEU issued the judgement in the case C-140/22 in connection with the
preliminary questions formulated by the District Court in Warsaw in the case against of mBank S.A.
The Court stated that provisions of the Directive 93/13 must be interpreted as meaning that, in the
context of the cancellation, in its entirety, of a mortgage loan agreement concluded with a consumer
by a banking institution on the ground that that agreement contains an unfair term without which it
cannot continue in existence:
(i) they preclude the judicial interpretation of national law according to which the exercise of
the rights which that consumer draws from that directive is conditional on the lodging, by
that consumer, before a court, of a declaration by which he or she states, first, not to consent
to that unfair term remaining effective, secondly, to be aware of the fact that the nullity of
that term entails the cancellation of that agreement and, moreover, of the consequences of
that cancellation and, thirdly, to consent to the cancellation of that agreement;
(ii) they preclude the compensation sought by the consumer concerned in respect of the
restitution of the sums paid by him or her in the performance of the agreement at issue being
reduced by the equivalent of the interest which that banking institution would have received
if that agreement had remained in force.
The Court of Justice of European Union by an order of December 11, 2023, closed the case registered
under case number C-756/22 initiated by the District Court in Warsaw in the case brought by Bank
Millennium and ruled that the provisions of Directive 93/13 must be interpreted as meaning that, in
the context of declaring a mortgage loan agreement concluded with a consumer by a banking
institution to be invalid in its entirety on the grounds that, that the contract contains unfair terms
without which it cannot be continued, they preclude a judicial interpretation of the law of a Member
State according to which that institution is entitled to recover from that consumer amounts other
than the capital paid in performance of that contract and statutory interest for delay from the time
of the demand for payment.
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for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
On December 14, 2023, the CJEU issued the judgement in the case C-28/22 in connection with the
preliminary questions referred by the District Court in Warsaw in the case of ex-Getin Noble Bank S.A.
The Court stated that:
(i) provisions of Directive 93/13 read in the light of the principle of effectiveness must be
interpreted as precluding a judicial interpretation of national law according to which,
following the cancellation of a mortgage loan agreement concluded with a consumer by a
seller or supplier, on account of unfair terms contained in that agreement, the limitation
period for the claims of that 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 that 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;
(ii) provisions of the Directive 93/13 must be interpreted as not precluding a judicial
interpretation of national law according to which it is not for a seller or supplier who has
concluded a mortgage loan agreement with a consumer to ascertain whether the consumer is
aware of the consequences of the removal of the unfair terms contained in that agreement
or of that agreement being no longer capable of continuing in existence if those terms were
removed;
(iii) provisions of the Directive 93/13, read in the light of the principle of effectiveness, must be
interpreted as precluding a judicial interpretation of national law according to which, where
a mortgage loan agreement concluded with a consumer by a seller or supplier is no longer
capable of continuing in existence after the unfair terms in that agreement have been
removed, that seller or supplier may rely on a right of retention which allows him or her to
make the restitution of the sums which it has received from that consumer conditional on
that consumer making an offer to repay the sums which he or she has himself or herself
received from that seller or supplier or to provide a security for the repayment of those sums,
where the exercise by that seller or supplier of that right of retention entails the loss, for
that consumer, of the right to obtain default interest as from the expiry of the time limit set
for performance by the seller or supplier concerned, following receipt by that seller or
supplier of a request to repay the sums he or she had been paid in performance of that
agreement.
The Court of Justice of the European Union by an order of January 15, 2024, closed the case registered
under case number C-488/23 following a question from the District Court of Warsaw, indicating that
the right of a financial institution to demand the valorization of the disbursed capital after a loan
agreement has been declared invalid was excluded in the judgment of June 15, 2023 issued in case
C-520/21.
On January 18, 2024, the CJEU issued the judgement in the case C-531/22 in connection with the
preliminary questions referred by the District Court in Warsaw in the case of ex-Getin Noble Bank S.A.
The Court stated that:
(i) the provisions of Directive 93/13 preclude national legislation which provides that a national
court may not examine of its own motion the potentially unfair nature of the terms contained
in a contract and draw the consequences thereof, where it is supervising enforcement
proceedings carried out on the basis of a final decision to issue an order for payment which is
subject to res judicata:
a. if the regulations do not provide for such an examination at the stage of issuing a payment
order, or
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st
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This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
b. if such examination is provided for only at the stage of opposition to the order for
payment in question, provided that there is a significant risk that the consumer in
question will not file the required opposition either because the time limit specified for
this purpose is very short, or because of the cost of the proceedings before the court in
relation to the amount of the disputed debt, or because the national legislation does not
provide for the obligation to provide that consumer with all the information necessary
for him to establish the extent of his rights;
(ii) the provisions of Directive 93/13 do not preclude national case law according to which the
entry of a term of a contract in a national register of prohibited clauses has the effect of
declaring that term unfair in any proceedings involving a consumer, including against a trader
other than the one against whom proceedings for the entry of the said term in that national
register were pending, and where that term does not have the same wording as the term
entered in the said register, but has the same meaning and has the same effect with respect
to the consumer in question.
By decision of 3 May 2024, the Court of Justice of the European Union closed the case registered under
case no. C-348/23 following a question from the District Court in Warsaw, indicating that they
preclude the recognition that the legal effects related to the declaration of invalidity of the contract
are conditional on the fulfilment by the consumer of the condition precedent for that consumer to
make a declaration before the national court, that it does not agree to maintain the contractual term
in force and that it is aware that the invalidity of the said term entails the annulment of the loan
agreement and its effects and that it consents to the annulment of the agreement.
By decision of 8 May 2024, the Court of Justice of the European Union closed the case registered under
case no. C-424/22 as a result of a question from the Regional Court in Kraków, indicating that they
preclude the application by a financial institution of the right of retention which makes the consumer's
receipt of the amounts awarded to him by the court conditional on the consumer's simultaneous offer
of reimbursement or security for the return of the entire benefit received from that financial
institution.
Jurisprudence of the Polish Supreme Court
On 7 May 2021, the Supreme Court composed of 7 judges of the Supreme Court, issued a resolution
for which the meaning of legal principle has been granted, stating that:
(i) an abusive contractual clause (art. 385(1) § 1 of the Civil Code), by force of the law itself, is
ineffective to the benefit of the consumer who may consequently give conscious and free
consent to this clause and thus restore its effectiveness retroactively;
(ii) if without the ineffective clause the loan agreement cannot bind, the consumer and the lender
shall be eligible for separate claims for return of monetary performances made in exercising
this agreement (art. 410 § 1 in relation to art. 405 of the Civil Code). The lender may demand
return of the performance from the moment the loan agreement becomes permanently
ineffective.
On April 28, 2022 the Supreme Court issued a resolution (III CZP 40/22) in which it indicated that in
disputes with consumers, the provision of Article 358(1) of the Civil Code is a special provision to
Article 353(1) of the Civil Code, which means that if the prerequisites for the application of both
provisions exist, the court should apply the special provision and declare the contractual provision
permanently ineffective, rather than invalid. This decision of the Supreme Court should be perceived
as significantly limiting the risk of the bank's claims for return of capital being time-barred.
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st
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This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The effect of the Supreme Court's resolution of 7 May 2021 is that the bank is entitled to a refund of
the cash benefit provided by the bank in performance of a permanently ineffective contract. Taking
into account the uncertainty as to the starting point of the limitation period for the bank's claims,
the Bank, in order to protect its interests, files lawsuits for payment against borrowers in a court
dispute with the Bank and in other circumstances where such risk may exist. The Bank's demand
consists of a claim for return of the capital made available to the borrower under the contract. By 31
December 2024 the Bank filed 16 040 lawsuits against the borrowers.
On 25 April 2024, a session of the Civil Chamber of the Supreme Court was held to answer questions
formulated by the First President of the Supreme Court, published on 29 January 2021, on key issues
related to FX mortgage loan agreements. The Supreme Court, composed of the entire Civil Chamber,
adopted a resolution having the force of a legal principle, in which it stated that:
(i) When finding that a provision of an indexed or denominated credit agreement relating to the
manner of determining the foreign currency exchange rate constitutes an unfair contractual
provision and is not binding, then in currently existing legal situation it cannot be stated that
such a provision could be replaced by another formula of defining the foreign currency
exchange rate resulting from law or custom.
(ii) In case of impossibility to determine the foreign currency exchange rate binding the parties
in the indexed or denominated loan agreement, the agreement is not binding also in the
remaining scope.
(iii) If, in the performance of a credit agreement which is not binding due to the unfair nature of
its provisions, the bank has disbursed to the borrower all or part of the amount of the credit
and the borrower has made repayments of the credit, independent claims for repayment of
the undue performance shall arise in favor of each party.
(iv) If a credit agreement is not binding due to the unfair nature of its provisions, the statute of
limitations of the bank's claim for repayment of amounts disbursed under the credit shall, as
a rule, start to run from the day following the day on which the borrower challenges being
bound by the provisions of agreement.
(v) If a credit agreement is not binding due to the unfair nature of its provisions, there shall be
no legal basis for any party to claim interest or other remuneration because of using party's
pecuniary means during the period from the provision of undue benefit until the delay in the
return of this benefit.
On 19 June 2024, the Supreme Court issued a resolution by a panel of 7 Supreme Court judges (III CZP
31/23) stating that:
The right of retention (Article 496 of the Civil Code) does not apply to the party that can set off its
claim against the claim of the other party.
Due to the CJEU jurisprudence interpreting the causes and effects of invalidity of foreign currency
mortgage loan agreements as well as above indicated resolution of the Civil Chamber of the Supreme
Court, the area of interpretation of regulations by Polish courts in this respect appears to be limited.
However, further jurisprudential practice of the Polish courts will play certain role in practical
realisation of the CJEU's and the Supreme Court’s guidance.
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st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
13. Notes to the Financial Statements
Amounts presented in the notes to the financial statements are presented in PLN thousands.
1. INTEREST INCOME AND OTHER OF SIMILAR NATURE
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Interest income from Financial assets at fair value through other comprehensive income
2 132 774
1 806 350
Debt securities
1 338 587
871 288
Loans and advances
794 187
935 062
Interest income from Financial assets at amortised cost
6 425 198
6 385 562
Balances with the Central Bank
223 301
222 277
Loans and advances to customers, including:
5 058 108
5 508 395
- the impact of the adjustment to the gross carrying amount of loans due to credit
holidays
(106 788)
(11 404)
Debt securities
985 630
552 276
Deposits, loans and advances to banks
113 796
34 786
Transactions with repurchase agreements
44 363
67 828
Hedging derivatives
0
0
Result of similar nature to interest, including:
100 971
108 471
Loans and advances to customers mandatorily at fair value through profit or loss
3 285
9 995
Financial assets held for trading - derivatives
81 723
93 610
Financial assets held for trading - debt securities
15 963
4 866
Total
8 658 943
8 300 383
Interest income for the year 2024 contains interest accrued on impaired loans in the amount of PLN
177,985 thous. (for corresponding data in the year 2023 the amount of such interest stood at PLN
214,843 thous.).
Interest income from instruments measured at amortized cost for 2024 includes an adjustment for
credit holidays (reducing income) in the amount of PLN 106.8 million (for corresponding data in the
year 2023 the amount of adjustment stood at PLN 11.4 million), more information on this subject is
presented in Chapter 7.3 Adopted accounting principles.
2. INTEREST EXPENSE
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Interest expense from Financial liabilities measured at amortised cost
(3 238 298)
(3 165 879)
Liabilities to banks and other monetary institutions
(14 393)
(12 602)
Liabilities to customers
(2 668 228)
(2 834 187)
Transactions with repurchase agreement
(37 513)
(35 178)
Debt securities issued
(367 570)
(115 891)
Subordinated debt
(125 557)
(141 686)
Leasing liabilities
(11 352)
(9 325)
Hedging derivatives
(13 685)
(17 010)
Other
0
0
Total
(3 238 298)
(3 165 879)
In the "Hedging derivatives" line, the Bank presents interest income on account of derivative
instruments designated and being effective hedging instruments in terms of securing cash flows and
fair value. A detailed description of the hedging relationships used by the Bank is included in note
(24).
123
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
3. FEE AND COMMISSION INCOME AND EXPENSE
3a. Fee and commission income
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Resulting from accounts service
113 298
117 576
Resulting from money transfers, cash payments and withdrawals and other payment
transactions
102 097
94 976
Resulting from loans granted
161 707
169 111
Resulting from guarantees and sureties granted
13 711
14 924
Resulting from payment and credit cards
317 104
293 979
Resulting from sale of insurance products
88 680
117 975
Resulting from distribution of investment funds units and other savings products
52 861
46 094
Resulting from brokerage and custody service
14 574
12 215
Other
53 802
45 507
Total
917 834
912 357
3b. Fee and commission expense
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Resulting from accounts service
(44 419)
(44 320)
Resulting from money transfers. cash payments and withdrawals and other payment
transactions
(4 548)
(4 930)
Resulting from loans granted
(18 822)
(9 466)
Resulting from payment and credit cards
(117 815)
(111 309)
Resulting from brokerage and fiduciary services
(2 586)
(2 233)
Resulting from selling insurance products
(8 280)
(9 518)
Other
(53 207)
(46 855)
Total
(249 677)
(228 631)
4. DIVIDEND INCOME
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Trading financial assets
0
0
Non-trading financial assets mandatorily at fair value through profit or loss
544
630
Financial assets at fair value through other comprehensive income
3 082
2 801
Investments in subordinated companies
26 618
28 706
Investments in associated companies
8 497
0
Total
38 741
32 137
124
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
5. RESULT ON DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES
NOT MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Result on bancassurance transaction
0
553 912
Operations on debt instruments
143
(12 353)
Sale of the FVTOCI portfolio
(8 771)
2 441
Costs of financial operations
(2 125)
(2 575)
Total
(10 753)
541 425
Bancassurance transaction
On February 13, 2023 the Bank's Management Board announced that after obtaining the necessary
corporate approvals, on February 13, 2023, the Bank concluded an agreement ("Agreement") for the
sale of 80% of shares in Millennium Financial Services sp. z o. o. (currently Europa Millennium Financial
Services sp. z o.o,, hereinafter “Company") to Towarzystwo Ubezpieczeń na Życie Europa S.A., which
acquires 72% of the Company's shares, and Towarzystwo Ubezpieczeń Europa S.A., which acquires 8%
of the Company's shares (collectively, the "Buyer").
The Bank also concluded agreements with the Buyers and the Company regarding the exclusive
insurance distribution model, including cooperation agreements, distribution agreements and agency
agreements. Strategic insurance cooperation provides for long-term (10 years) cooperation in the field
of bancassurance in relation to specific insurance related to credit products offered by the Bank.
The essence of the transaction provided for in the Agreement was the direct purchase of Shares by
the Buyers from the Bank for a defined initial price, which may be subject to a price adjustment
mechanism after the closing of the Transaction.
On March 29, 2023, 80% of the shares in the company were transferred to the Buyers, and the final
settlement of the transaction, together with the price adjustment, took place in December 2023.
Since as part of the transaction, in addition to Agreement, the Bank also concluded other agreements
with the Buyers and the Company, the Bank analyzed individual agreements and their economic
effects in accordance with the requirements of IFRS 10, IFRS 15 and IFRS 9. As a result, the Bank
identified contractual obligations and assessed the assignment of contractual remuneration for
individual elements of the transaction, determining the appropriate method of recognizing revenues
from single contractual obligations.
As a result, the Bank recognized in 2023 in the Profit and Loss Account total result of PLN 652.4 million
(gross), which consisted of:
1) profit realized on sale: payment of the price less the fair value of the shares at the moment of
loss of control in the amount of PLN 553.9 million (gross) was included in the item “Result on
derecognition of financial assets and liabilities not measured at fair value through profit or loss”;
2) an inflow of PLN 46.0 million (gross) as a valuation of the derivative at the time of final settlement
of the transaction in December 2023, resulting from the agreed potential future remuneration
payments, was recognized as “Result on financial assets and liabilities held for trading”;
3) At the same time, due to the loss of control over the Company, the Bank valued the remaining
non-controlling share in the Company at fair value of PLN 52.5 million (gross), this amount was
included in "Other operating income".
125
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Starting from the moment of loss of control, the investment in the Company is treated as an
involvement in an associated entity (the Bank holds 20% of the shares in the Company) and is valued
at the Group level using the equity method, while in the Bank's financial statements the valuation
model is fair value with the valuation effect recorded in the Profit and Loss Account.
6. RESULTS ON FINANCIAL ASSETS AND LIABILITIES HELD FOR TRADING
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Result on debt instruments
(1 475)
6 003
Result on derivatives
(5 091)
41 955
Result on other financial operations
0
24
Total
(6 566)
47 982
7. RESULTS ON NON-TRADING FINANCIAL ASSETS MANDATORILY AT
FAIR VALUE THROUGH PROFIT OR LOSS
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Loans and advances to customers
745
(958)
Result on equity instruments
46 605
4 360
Result on debt instruments
(29 225)
8 957
Total
18 125
12 359
8. RESULT ON HEDGE ACCOUNTING
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Changes in the fair value of the hedging instrument (including abandonment)
18 323
42 413
Changes in the fair value of the hedged item resulting from the hedged risk
(16 558)
(43 499)
Inefficiency in cash flow hedges
(221)
2 246
Inefficiencies due to net investment hedges in foreign operations
0
0
Total
1 544
1 160
126
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
9. OTHER OPERATING INCOME
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Gain on sale and liquidation of property, plant and equipment, intangible assets
5 630
4 923
Income from sale of other services
13 607
10 085
Income from collection service
26 014
11 745
Income from write-back of provisions for disputed claims
4 233
11 783
Valuation of the Société Générale S.A. guarantee and indemnity agreement*
223 086
259 921
Valuation of the remaining non-controlling share in the Europa MFS Sp. z o.o.
0
52 487
Other
45 931
54 403
Total
318 501
405 347
* In implementing the Euro Bank share purchase agreement, which ultimately led to the Purchase of Euro Bank by Bank
Millennium and subsequent Legal Merger, in order to limit the risk associated with the Euro Bank's portfolio of mortgage loans
denominated in CHF or denominated in PLN but indexed to CHF, Euro Bank and Société Générale S.A. concluded on 31 May
2019 a “CHF Portfolio Indemnity and Guarantee Agreement” under which the losses resulting from legal risk are covered by
Société Générale S.A.
10. OTHER OPERATING EXPENSE
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Loss on sale and liquidation of property, plant and equipment, intangible assets
(920)
(1 631)
Indemnifications, penalties and fines paid
(85 843)
(37 134)
Costs of provisions for disputed claims
(8 915)
(30 208)
Costs related with providing other services
(2 631)
(2 737)
Donations made
(2 039)
(1 086)
Costs of collection service
(295 321)
(144 561)
Costs of legal representation
(72 072)
(26 568)
Other
(18 298)
(16 339)
Total
(486 039)
(260 264)
On 11 September 2019 The Court of Justice of the European Union ruled in the case of Lexitor against
SKOK Stefczyka, Santander Consumer Bank and mBank (case C 383/18) in which it stated that
consumer has rights to demand the reduction of the total loan cost corresponding to interest and
costs for the remaining term of the agreement in case of early repayment of loan.
Taking into consideration this verdict, the Group creates provisions for potential returns which as at
December 31, 2024 amounted to PLN 70.6 million.
127
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
11. ADMINISTRATIVE EXPENSES
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Staff costs:
(1 138 045)
(982 355)
Salaries
(930 982)
(805 121)
Surcharges on pay
(160 910)
(138 630)
Employee benefits, including:
(46 153)
(38 604)
- provisions for retirement benefits
(5 816)
(4 600)
- provisions for unused employee holiday
(2 303)
(3 227)
- other
(38 034)
(30 777)
Other administrative expenses:
(816 276)
(731 307)
Costs of advertising, promotion and representation
(76 659)
(70 864)
IT and communications costs
(165 054)
(152 432)
Costs of renting
(54 388)
(59 724)
Costs of buildings maintenance, equipment and materials
(54 774)
(49 115)
ATM and cash maintenance costs
(35 639)
(35 106)
Costs of consultancy, audit and legal advisory and translation
(177 811)
(146 957)
Taxes and fees
(43 705)
(42 129)
KIR - clearing charges
(14 814)
(12 855)
PFRON costs
(8 973)
(8 071)
Banking Guarantee Fund costs
(60 841)
(60 034)
Financial Supervision costs
(16 475)
(14 178)
Cost of payments to IPS
0
0
Other
(107 143)
(79 842)
Total
(1 954 321)
(1 713 662)
12. IMPAIRMENT LOSSES ON FINANCIAL ASSETS
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Impairment losses on loans and advances to customers
(226 111)
(219 847)
Impairment charges on loans and advances to customers
(1 318 147)
(1 299 920)
Reversal of impairment charges on loans and advances to customers
916 884
962 459
Amounts recovered from loans written off
60 227
39 689
Sale of receivables
114 926
77 926
Other directly recognised in profit and loss
(1)
(1)
Impairment losses on securities
(2)
1
Impairment charges on securities
(2)
(2)
Reversal of impairment charges on securities
0
3
Impairment losses on off-balance sheet liabilities
(11 309)
(2 420)
Impairment charges on off-balance sheet liabilities
(52 302)
(40 336)
Reversal of impairment charges on off-balance sheet liabilities
40 993
37 916
Total
(237 422)
(222 266)
128
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
13. IMPAIRMENT LOSSES ON NON-FINANCIAL ASSETS
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Fixed assets
0
0
Other assets
(4 274)
(84)
Total
(4 274)
(84)
14. PROVISIONS FOR LEGAL RISK CONNECTED WITH FX MORTGAGE
LOANS
In the case of the portfolio of foreign currency mortgage loans, claims filed by customers, primarily
concerning the declaration of invalidity of the agreement and the return of paid principal and interest
installments, as well as settlements offered to borrowers by the Bank, have a significant impact on
the amount and repayment dates of the expected cash flows resulting from the loan agreement
estimated by the Bank. Taking the above into account, the Bank believes that the appropriate way to
reflect the legal risk related to the portfolio of active foreign currency mortgage loans is to apply the
provisions of IFRS 9 paragraph B5.4.6, which in practice means reducing the gross carrying amount of
these loans in order to reflect the current estimates of cash flows from these agreements.
As regards following:
(i) repaid foreign currency mortgage loans;
(ii) active loans, in the case of which the provision created for legal risk exceeds the current
carrying amount (for this surplus);
(iii) for risks related to rights to statutory interest (for delaying restitution claims),
the provisions of IAS 37 are applied, according to which the Bank creates a provision for court cases,
recognizing it in the balance sheet as a component of provisions for claims.
In 2024, the Bank adjusted the method of presenting information on changes in provisions for the
portfolio of foreign currency mortgage loans. The previously adopted simplified methodology
consisted in presenting the creation of the entire provision amount in accordance with IAS 37 and
then making a balance sheet allocation of the part of the provision reducing the gross value of loans
in accordance with IFRS 9. The currently used method of presentation assumes the division of changes
in the provision into two separate streams (IFRS 9 and IAS 37). The change had no impact on the
presentation of data in statement of financial position and statement of the profit and loss; it affected
only the way information is presented in notes dedicated to provisions movements and the adjustment
was aimed at improving the readability of the financial statements. As a result of the change in the
method of presentation, appropriate adjustments were made to the comparable data for 2023 in
notes 14 and 37.
129
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
01.01.2024 - 31.12.2024
TOTAL
Provisions reducing
the gross carrying
amount of loans
Provisions for
pending legal issues
Balance at the beginning of the period
7 871 789
6 516 460
1 355 329
Amounts written off
(1 386 008)
(972 009)
(413 999)
Costs of provisions for legal risk connected wIth
FX mortgage loans
2 179 070
321 928
1 857 142
Increase of provisions due to FX rates differences
(201 155)
(201 155)
0
Balance at the end of the period
8 463 696
5 665 224
2 798 472
01.01.2023 - 31.12.2023
TOTAL
Provisions reducing
the gross carrying
amount of loans
Provisions for
pending legal issues
Balance at the beginning of the period
5 395 344
4 572 901
822 443
Amounts written off
(521 769)
(521 769)
0
Costs of provisions for legal risk connected wIth
FX mortgage loans
3 065 380
2 532 494
532 886
Increase of provisions due to FX rates differences
(67 166)
(67 166)
0
Balance at the end of the period
7 871 789
6 516 460
1 355 329
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Costs of settlements recognized in the profit and loss account, including:
(550 004)
(326 018)
- included in the “Result on exchange differences”
(403 405)
(273 791)
- included in the “Result on modification”
(146 599)
(52 227)
Costs of settlements charged to previously created provisions
(348 097)
(90 169)
15. DEPRECIATION AND AMORTIZATION
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Property, plant and equipment
(159 032)
(153 446)
Intangible assets
(63 630)
(53 743)
Total
(222 662)
(207 189)
130
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
16. CORPORATE INCOME TAX
16a. Income tax reported in income statement
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Current tax
(377 124)
(603 679)
Current year
(384 860)
(605 053)
Adjustment to prior periods
7 736
1 374
Deferred tax:
249 679
(110 835)
Recognition and reversal of temporary differences
249 679
(110 835)
Total income tax reported in income statement
(127 445)
(714 514)
16b. Effective tax rate
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Profit before tax / (loss)
770 548
1 224 773
Statutory tax rate
19,00%
19%
Income tax according to obligatory income tax rate of 19%
(146 404)
(232 707)
Impact of permanent differences on tax charges:
(5 571)
(488 299)
Non-taxable income
100 332
54 668
Dividend income
7 257
5 986
Release of other provisions
40 929
48 570
Adjustment of income from cancellations of CHF loans
50 845
0
Other
1 301
112
Cost which is not a tax cost
(105 903)
(542 967)
PFRON fee
(1 705)
(1 533)
Fees for Banking Guarantee Fund
(11 560)
(11 406)
Banking tax
(44 160)
(604)
Receivables written off
(24 614)
(14 945)
Costs of litigations and claims
(204 234)
(512 055)
Asset from future cancellations of loans in CHF
186 862
0
Other
(6 492)
(2 424)
Deduction of the tax paid abroad
96
112
Other differences between gross financial result and taxable income with income tax
(including R&D relief)
24 434
6 380
Total income tax reported in income statement
(127 445)
(714 514)
Effective tax rate
16.54%
58.34%
131
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
16c. Deferred tax reported in equity
31.12.2024
31.12.2023
Valuation of investment assets at fair value through other comprehensive income
10 447
41 599
Valuation of credit portfolio at fair value through other comprehensive income
11 074
(19 344)
Valuation of cash flow hedging instruments
4 704
10 297
Actuarial gains (losses)
(119)
133
Deferred tax reported directly in equity
26 106
32 685
Changes in deferred tax recognized directly in equity are presented in Note (39b).
Withholding tax audit for years 2015-17
On 12 February 2019 the Head of Western Pomeranian Customs & Tax Office (Zachodniopomorski
Urząd Celno-Skarbowy w Szczecinie, ZUCS) commenced tax audits regarding the correctness of
withholding tax (WHT) settlements for years 2015 and 2016. On 17 December 2019 the Bank received
audit results as of 13 December 2019, in which ZUCS questioned WHT-exemption on coupon interest
from bonds paid to MB Finance AB with the seat in Sweden constituting a collateral to 10Y
subordinated bonds with a par value of EUR 150 mio. issued by this company in December 2007 (fully
amortized in December 2017). On 11 June 2021 Bank received 2nd instance decisions of ZUCS
decreasing the amount of WHT arrear from PLN 6.6 to 5.3 mio. This amount with penalty interests
were paid by Bank on 18 June 2021. Bank lodged complaints on these decisions to the administrative
court in Szczecin (WSA). WSA in its judgements as of 13 and 27 October 2021 wholly overruled both
ZUCS’s decisions. ZUCS appealed from these judgments to the Supreme Administrative Court (NSA).
On 13 April 2021 Head of ZUCS commenced a WHT audit for year 2017. As expected in the audit result
ZUCS challenged WHT-exemption on coupon interests paid by Bank to MBF in this year as well
(disputable WHT amount is ca. PLN 2.2 mio.). Bank does not agree with such findings as well and will
continue a dispute with ZUCS. On 21 March 2022 Bank received the ZUCS’s decision on WHT audit
transformation into a tax proceeding. On 30 June 2022 Bank received the ZUCS’s decision determining
WHT arrear of ca. PLN 2.2 mio. Bank paid a tax with and interest appealed from this decision. On 23
February 2023 WSA suspended the court litigation concerning WHT for 2017 until the final NSA’s
judgements regarding WHT for years 2015-16.
Bank received an expert opinion as of January 29, 2020 of tax professors from the Public Finances
Law Department of the Faculty of Law and Administration at Nicolaus Copernicus University in Torun,
according to which ZUCS’s statement violates binding tax law provisions.
On 21 January 2025, the NSA issued an unfavourable judgment for the Bank, annulling both judgments
of the WSA in Szczecin in the WHT case for the years 2015-16. In connection with this, it is possible
that the WSA will suspend the court-administrative proceedings in the field of WHT for 2017 and
follow the same line of judgement of the NSA.
Judgement of the Supreme Administrative Court
On 6 December 2023, the Supreme Administrative Court (NSA) issued a judgment on the Bank's
complaint against the tax ruling of the Director of the National Tax Information Service on the
principles of recognising the CIT effects of invalidations of mortgage loans indexed to foreign
currencies and foreign currency loans, in particular in Swiss francs (CHF Loans), adjudicated by
common courts. According to the judgment, the Bank should recognize the tax consequences not by
including the resulting losses as tax-deductible costs, but by adjusting the previously CIT taxable
revenues from the above-mentioned loans and advances (foreign exchange gains, interest,
commissions and fees), taking into account the principles of limitation of tax liabilities. Until the
above judgment was issued, the remaining interpretation issues were clarified and the calculation
methodology was developed, the Bank, prudently, due to doubts as to the detailed rules of revenue
adjustment and the lack of possibility of reliable estimation, did not recognize losses due to the
cancellation of CHF loans for CIT and deferred tax purposes.
132
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In 2024, after developing by the Bank the methodology and clarifying the interpretation issues, as a
consequence of the judgment issued by the Supreme Administrative Court, the Bank made
adjustments to the CIT returns for the years 2020-22 and in May this year the Bank obtained a CIT
refund from the Tax Office in the total amount of PLN 7.7 million in connection with the cancellation
of CHF loans in these years. Guided by the developed methodology applied to the above adjustments,
the Bank:
1) recognized in the first half of 2024 a deferred tax asset (DTA) in the total amount of PLN 222.6
million (of which 171.0 million in the second quarter) due to future adjustments of interest income
and foreign exchange gains on CHF loans that are the subject of court disputes for their cancellation;
2) recognizes from the beginning of the year in the current CIT tax adjustments of interest and positive
exchange differences on court annulments of CHF loans. The above events had a positive impact on
the net result, reducing the income tax burden. As at 31 December 2024, the balance of the deferred
tax asset arising from the invalidation of CHF loans amounted to PLN 186.8 million.
The calculation of the DTA besides the current CHF/PLN exchange rate also depends on the volume
of new court cases and final cancellations of CHF loans, as well as settlements concluded with
borrowers, and therefore it will be subject to changes depending on changes in the above parameters.
17. EARNINGS PER SHARE
In accordance with the requirements of IAS 33, the Bank calculates earnings per share based on
consolidated data and presents it accordingly in the consolidated financial statements.
18. CASH, BALANCES AT THE CENTRAL BANK
18a. Cash, balances at the central bank
31.12.2024
31.12.2023
Cash
1 065 998
919 265
Cash in Central Bank
4 112 986
4 175 719
Other funds
0
0
Total
5 178 984
5 094 984
In the period from 1 December 2024 to 9 February 2024 the Bank was obliged to keep on its current
account with NBP (the central bank) an average balance of PLN 3,974,623 thousand (arithmetic
average of balances on the NBP current account on all days of the deposit-holding period).
133
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
18b. Cash, balances at the Central Bank – by currency
31.12.2024
31.12.2023
in Polish currency
4 309 067
4 399 501
in foreign currencies (after conversion to PLN)
869 917
695 483
▪ currency: USD
78 400
69 123
▪ currency: EUR
745 984
582 187
▪ currency: CHF
16 063
17 089
▪ currency: GBP
22 372
18 251
▪ other currencies
7 098
8 833
Total
5 178 984
5 094 984
19. FINANCIAL ASSETS HELD FOR TRADING
19a. Financial assets held for trading
31.12.2024
31.12.2023
Debt securities
555 364
110 554
Issued by State Treasury
555 364
110 554
a) bills
0
0
b) bonds
555 364
110 554
Equity instruments
115
121
Positive valuation of derivatives
257 094
498 577
Total
812 573
609 252
Information on financial assets securing liabilities is presented in point 2) of Chapter 14.
19b. Debt securities valued at fair value through profit and loss (held for trading), at balance sheet
value
31.12.2024
31.12.2023
▪ with fixed interest rate
108 141
48 243
▪ with variable interest rate
447 223
62 311
Total
555 364
110 554
134
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
19c. Debt securities valued at fair value through profit and loss (held for trading), by maturity
31.12.2024
31.12.2023
to 1 month
0
2 790
above 1 month to 3 months
0
0
above 3 months to 1 year
2 372
1 657
above 1 year to 5 years
472 055
75 307
above 5 years
80 937
30 800
Total
555 364
110 554
19d. Change of debt securities and equity instruments valued at fair value through profit and loss
(held for trading)
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Balance at the beginning of the period
110 675
24 323
Increases (purchase, takeover and accrual of interest and discount)
17 003 282
10 685 599
Reductions (sale and redemption)
(16 556 021)
(10 599 136)
Differences from valuation at fair value
(2 457)
(111)
Balance at the end of the period
555 479
110 675
19e. Financial assets and liabilities held for trading - Valuation of derivatives, Adjustment from fair
value hedge and Short positions as at:
31.12.2024
Par value of instruments with future maturity
Fair value
below 3
months
from 3 months
to 1 year
from 1 year
to 5 years
above 5
years
Total
Assets
Liabilities
1. Interest rate derivatives
899 208
1 372 822
9 111 580
555 427
(2 610)
11 026
13 636
Forward Rate Agreements
(FRA)
0
0
0
0
0
0
0
Interest rate swaps (IRS)
899 208
1 137 324
8 470 802
555 427
(2 610)
3 964
6 574
Other interest rate contracts:
options
0
235 498
640 778
0
0
7 062
7 062
2. FX derivatives*
8 416 883
1 816 443
979 954
0
36 422
63 544
27 122
FX contracts
1 407 582
980 304
92 927
0
(14 983)
2 255
17 238
FX swaps
7 009 301
836 139
31 427
0
50 222
59 128
8 906
Other FX contracts (CIRS)
0
0
855 600
0
1 183
2 161
978
FX options
0
0
0
0
0
0
0
3. Embedded instruments
307 203
534 393
700 523
0
(181 662)
0
181 662
Options embedded in deposits
307 203
534 393
700 523
0
(181 662)
0
181 662
Options embedded in
securities issued
0
0
0
0
0
0
0
4. Indexes options
331 314
561 328
713 218
0
178 195
182 524
4 329
Total
9 954 608
4 284 986
11 505 275
555 427
30 345
257 094
226 749
Valuation of hedged position in fair value hedge accounting
-
0
0
Liabilities from short sale of debt securities
-
-
190 769
*Notional value for double-currency derivatives constitutes the sum of both transactions expressed in PLN
135
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
31.12.2023
Par value of instruments with future maturity
Fair value
below 3
months
from 3 months
to 1 year
from 1 year
to 5 years
above 5
years
Total
Assets
Liabilities
1. Interest rate derivatives
2 317 330
2 514 918
7 492 310
383 670
(9 488)
12 060
21 548
Forward Rate Agreements
(FRA)
0
0
0
0
0
0
0
Interest rate swaps (IRS)
2 197 874
2 255 207
6 836 859
363 000
(9 488)
538
10 026
Other interest rate contracts:
options
119 456
259 711
655 451
20 670
0
11 522
11 522
2. FX derivatives*
7 839 593
3 413 391
122 070
0
(59 958)
69 759
129 717
FX contracts
1 526 891
737 568
61 066
0
(28 087)
9 993
38 080
FX swaps
6 312 702
2 675 823
61 004
0
(31 871)
59 766
91 637
Other FX contracts (CIRS)
0
0
0
0
0
0
0
FX options
0
0
0
0
0
0
0
3. Embedded instruments
472 247
2 018 329
858 866
0
(414 200)
0
414 200
Options embedded in deposits
472 247
2 018 329
858 866
0
(414 200)
0
414 200
Options embedded in
securities issued
0
0
0
0
0
0
0
4. Indexes options
549 165
2 172 086
875 462
0
405 612
416 758
11 146
Total
11 178 335
10 118 723
9 348 709
383 670
(78 034)
498 577
576 611
Valuation of hedged position in fair value hedge accounting
-
0
0
Liabilities from short sale of debt securities
-
-
2 720
*Notional value for double-currency derivatives constitutes the sum of both transactions expressed in PLN
20. NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE
THROUGH PROFIT OR LOSS, OTHER THAN LOANS AND ADVANCES TO
CUSTOMERS
31.12.2024
31.12.2023
Equity instruments
66 609
66 609
credit institutions
0
0
other corporates
66 609
66 609
Debt securities
51 790
81 014
credit institutions
0
0
other corporates
51 790
81 014
Total
118 399
147 623
136
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
21. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER
COMPREHENSIVE INCOME
21a. Financial assets at fair value through other comprehensive income
31.12.2024
31.12.2023
Debt securities
28 986 939
21 895 863
Issued by State Treasury
19 953 433
11 756 814
a) bills
0
0
b) bonds
19 953 433
11 756 814
Issued by Central Bank
8 597 254
9 694 142
a) bills
8 597 254
9 694 142
b) bonds
0
0
Other securities
436 252
444 907
a) listed
436 252
444 907
b) not listed
0
0
Shares and interests in other entities
36 708
28 789
Other financial instruments
0
0
Total financial assets at fair value through other comprehensive income
29 023 647
21 924 652
Including:
Instruments listed on the active market
20 390 166
12 201 967
Instruments not listed on the active market
8 633 481
9 722 685
21b. Debt securities at fair value through other comprehensive income
31.12.2024
31.12.2023
▪ with fixed interest rate
19 312 165
18 131 748
▪ with variable interest rate
9 674 774
3 764 115
Total
28 986 939
21 895 863
21c. Debt securities at fair value through other comprehensive income by maturity
31.12.2024
31.12.2023
▪ to 1 month
8 597 254
9 977 621
▪ above 1 month to 3 months
0
22012
▪ above 3 months to 1 year
5 676 045
2 177 193
▪ above 1 year to 5 years
13 223 736
9 406 242
▪ above 5 years
1 489 903
312 795
Total
28 986 938
21 895 863
137
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
21d. Change of financial assets at fair value through other comprehensive income
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Balance at the beginning of the period
21 924 652
16 438 458
Increases (purchase and accrual of interest and discount)
554 476 615
469 769 603
Reductions (sale and redemption)
(547 541 651)
(464 959 558)
Difference from measurement at fair value
164 037
676 175
Impairment write-offs
0
0
Other
(6)
(26)
Balance at the end of the period
29 023 647
21 924 652
22. LOANS AND ADVANCES TO CUSTOMERS
22a. Loans and advances to customers mandatorily at fair value through profit or loss
Balance sheet value:
31.12.2024
31.12.2023
Mandatorily at fair value through profit or loss
1 825
19 349
Lans and advances
0
10 527
- Individuals
0
10 527
Credit cards
1 825
8 822
- Companies
70
69
- Individuals
1 755
8 753
At the implementation of IFRS 9 Group separated credit exposures which include, in the interest rate
definition, leverage/multiplier feature and presents aforementioned exposures in these financial
statements as "Non-trading financial assets mandatorily at fair value through profit or loss - Credits
and advances". The provisions of IFRS 9 indicate that the multiplier feature modifies money over time
and causes the need to apply fair value measurement, however the economic sense of the transaction,
i.e. portfolio management not based on fair value and maintaining the portfolio to obtain cash flows
from the contract, constitute characteristics of portfolios valued at amortized cost. In 2021, as a
result of a change in contractual provisions (eliminating the multiplier feature), some of these
exposures began to be re-measured at amortized cost. The change concerned loans where clients
fully repaid their commitment, the interest on which was calculated based on the old formula
containing a multiplier. Exposures recorded after that time under new contractual conditions (without
a multiplier) are measured at amortized cost.
138
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
22b. Loans and advances to customers at fair value through other comprehensive income
Balance sheet value:
31.12.2024
31.12.2023
at fair value through other comprehensive income *
11 135 416
11 799 748
▪ Companies
0
0
▪ Individuals
11 135 416
11 799 748
▪ Public sector
0
0
Balance sheet value - maturity
31.12.2024
31.12.2023
to 1 month
19 860
18 132
above 1 month to 3 months
33 392
33 532
above 3 months to 1 year
163 478
164 838
above 1 year to 5 years
1 151 759
1 143 687
above 5 years
9 766 927
10 439 559
Total
11 135 416
11 799 748
22c. Loans and advances to customers valued at amortised cost
31.12.2024
Balance sheet value, gross
Accumulated impairment allowances
Balance
sheet
value, net
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Valued at amortised cost
55 281 367
4 807 332
3 009 099
(286 837)
(263 504)
(1 747 986)
60 799 471
Companies
16 799 316
883 892
592 509
(98 631)
(31 760)
(229 333)
17 915 993
Individuals
38 436 602
3 923 439
2 416 590
(188 077)
(231 744)
(1 518 653)
42 838 157
Public sector
45 449
1
0
(129)
0
0
45 321
31.12.2023
Balance sheet value, gross
Accumulated impairment allowances
Balance
sheet
value, net
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Valued at amortised cost
55 099 489
4 700 417
3 085 807
(368 582)
(288 019)
(1 642 763)
60 586 349
Companies
16 114 126
720 324
423 534
(71 384)
(26 255)
(156 777)
17 003 568
Individuals
38 933 615
3 980 089
2 662 273
(297 078)
(261 764)
(1 485 986)
43 531 149
Public sector
51 748
4
0
(120)
0
0
51 632
The Bank writes down the gross carrying amount of a financial asset when there is no reasonable
probability that it will be fully (total writes off) or partially (partial writes off) recovered. Following
the recorded partial writes off the Bank transferred to off-balance sheet evidence (deducting the
carrying value of gross receivables) penalty interest amounting to PLN 498 million as at 31.12.2024.
139
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
22d. Loans and advances to customers
31.12.2024
31.12.2023
Loans and advances
60 909 755
60 846 292
to companies
18 061 216
17 052 488
to private individuals
42 803 187
43 742 276
to public sector
45 352
51 528
Receivables on account of payment cards
1 281 402
1 209 612
due from companies
12 924
13 569
due from private individuals
1 268 478
1 196 043
Purchased receivables
148 514
143 844
from companies
148 514
143 844
from public sector
0
0
Guarantees and sureties realised
321
560
Debt securities eligible for rediscount at Central Bank
0
0
Other
104 033
104 560
Interest
653 773
580 845
Total:
63 097 798
62 885 713
Impairment allowances
(2 298 327)
(2 299 364)
Total balance sheet value
60 799 471
60 586 349
22e. Quality of loans and advances to customers portfolio valued at amortised cost
31.12.2024
31.12.2023
Loans and advances to customers (gross)
63 097 798
62 885 713
impaired
3 009 099
3 085 807
not impaired
60 088 699
59 799 906
Impairment allowances
(2 298 327)
(2 299 364)
for impaired exposures
(1 747 986)
(1 642 763)
for not impaired exposures
(550 341)
(656 601)
Loans and advances to customers (net)
60 799 471
60 586 349
22f. Loans and advances to customers portfolio valued at amortised cost by methodology of
impairment assessment
31.12.2024
31.12.2023
Loans and advances to customers (gross)
63 097 798
62 885 713
case by case analysis
511 799
381 751
collective analysis
62 585 999
62 503 962
Impairment allowances
(2 298 327)
(2 299 364)
on the basis of case by case analysis
(194 181)
(134 507)
on the basis of collective analysis
(2 104 146)
(2 164 857)
Loans and advances to customers (net)
60 799 471
60 586 349
140
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
22g. Loans and advances to customers portfolio valued at amortised cost by customers
31.12.2024
31.12.2023
Loans and advances to customers (gross)
63 097 798
62 885 713
corporate customers
18 321 167
17 309 736
individuals
44 776 631
45 575 977
Impairment allowances
(2 298 327)
(2 299 364)
for receivables from corporate customers
(359 853)
(254 536)
for receivables from private individuals
(1 938 474)
(2 044 828)
Loans and advances to customers (net)
60 799 471
60 586 349
22h. Movements in impairment allowances for loans and advances to customers carried at amortised
cost
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Balance at the beginning of the period
2 299 364
2 242 135
Change in value of provisions:
(1 037)
57 229
Impairment allowances created in the period
1 229 349
1 214 029
Amounts written off
(218 506)
(165 261)
Impairment allowances released in the period
(831 022)
(885 407)
Sale of receivables
(247 429)
(173 110)
KOIM created in the period(*)
69 359
71 261
Transfer to FVTOCI portfolio
0
0
Changes resulting from FX rates differences
(5 260)
(8 016)
Other
2 472
3 733
Balance at the end of the period
2 298 327
2 299 364
* In accordance with IFRS 9, the Bank calculates interest on the loan portfolio with a recognized impairment based on the net
exposure value. For this purpose, the so-called impaired interest adjustment (“KOIM”) is calculated and recorded as a
reduction of interest income. Aforementioned KOIM adjustment in the balance sheet is presented as an impairment
allowances, and as a consequence the reconciliation of the change in impairment allowances requires consideration of the
KOIM recognized in the interest income.
The Bank records POCI assets in the balance sheet mainly as a result of recognition of impaired loans
after the merger with Euro Bank S.A. and takeover of SKOK Piast. At the time of the merger, the
aforementioned assets were included in the Bank's books at fair value.
The value of POCI assets is as follows:
Gross balance
sheet value
Accumulated
impairment
Net balance sheet
value
31.12.2024
- Companies
12 566
(868)
11 698
- Individuals
69 669
(32 758)
36 911
- Public sector
0
0
0
31.12.2023
- Companies
23 106
1 200
24 306
- Individuals
93 690
(25 136)
68 554
- Public sector
0
0
0
141
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
22i. Changes in impairment allowances and gross carrying amount of loans and advances valued at
amortised cost divided into stages and classes:
Companies: impairment allowances,
2024
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
71 384
26 531
157 700
(1 199)
254 416
Transfers between stages
4 645
(33 662)
29 016
0
(0)
Increase due to granting or purchase
45 753
0
0
0
45 753
Changes in credit risk
(15 292)
41 624
72 393
2 557
101 281
Decrease due to derecognition (except
exposures sold and written off)
(8 684)
(2 432)
(23 036)
(52)
(34 204)
Sale of loans and advances
0
0
(8 710)
0
(8 710)
Loans and advances written off
0
0
(3 716)
0
(3 716)
KOIM
0
0
5 627
25
5 652
Other (including FX differences)
826
(20)
(1 091)
(463)
(748)
Balance at the end of the period
98 632
32 041
228 184
868
359 725
Companies: impairment allowances,
2023
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
86 060
31 819
168 990
26
286 895
Transfers between stages
5 748
(31 259)
25 511
0
0
Increase due to granting or purchase
41 306
0
0
0
41 306
Changes in credit risk
(51 642)
29 083
17 787
170
(4 602)
Decrease due to derecognition (except
exposures sold and written off)
(11 286)
(2 989)
(37 460)
0
(51 734)
Sale of loans and advances
0
0
(18 448)
0
(18 448)
Loans and advances written off
0
0
(2 794)
0
(2 794)
KOIM
0
0
7 822
25
7 847
Other (including FX differences)
1 198
(123)
(3 709)
(1 420)
(4 055)
Balance at the end of the period
71 384
26 531
157 700
(1 199)
254 416
Companies: loans and advances balance
sheet value, gross, 2024
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
16 114 126
720 295
400 457
23 106
17 257 984
Transfers between stages
(682 380)
470 295
212 085
0
0
Granted or purchased loans and advances
4 639 337
0
0
0
4 639 337
Repaid loans and advances
(3 120 652)
(305 794)
(118 680)
(9 807)
(3 554 933)
Loans and advances sold
0
0
(10 481)
0
(10 481)
Loans and advances written off
0
0
(3 716)
0
(3 716)
Other (including FX differences)
(151 115)
(932)
100 307
(734)
(52 474)
Balance at the end of the period
16 799 316
883 863
579 973
12 566
18 275 717
142
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Companies: loans and advances balance
sheet value, gross, 2023
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
17 329 382
877 603
340 331
15 216
18 562 532
Transfers between stages
(426 587)
209 847
216 740
0
0
Granted or purchased loans and advances
10 909 052
0
0
0
10 909 052
Repaid loans and advances
(11 410 308)
(353 947)
(118 943)
(2 291)
(11 885 488)
Loans and advances sold
0
0
(27 120)
0
(27 120)
Loans and advances written off
0
0
(4 243)
0
(4 243)
Other (including FX differences)
(287 413)
(13 208)
(6 308)
10 180
(296 749)
Balance at the end of the period
16 114 126
720 295
400 457
23 106
17 257 984
Individuals: impairment allowances,
2024
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
297 078
302 936
1 419 678
25 136
2 044 828
Transfers between stages
248 566
(398 582)
150 017
0
(0)
Increase due to granting or purchase
186 922
0
0
0
186 922
Changes in credit risk
(473 317)
386 132
385 966
33 021
331 802
Decrease due to derecognition (except
exposures sold and written off)
(70 500)
(26 705)
(128 807)
(7 242)
(233 255)
Sale of loans and advances
0
0
(228 703)
(10 016)
(238 719)
Loans and advances written off
0
0
(205 782)
(9 008)
(214 791)
KOIM
0
0
62 804
903
63 707
Other (including FX differences)
(672)
684
(1 997)
(35)
(2 021)
Balance at the end of the period
188 077
264 464
1 453 175
32 758
1 938 474
Individuals: impairment allowances,
2023
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
244 370
337 581
1 359 999
13 150
1 955 100
Transfers between stages
276 396
(452 320)
175 924
0
0
Increase due to granting or purchase
181 421
0
0
0
181 421
Changes in credit risk
(357 854)
450 310
216 304
43 311
352 071
Decrease due to derecognition (except
exposures sold and written off)
(47 088)
(30 052)
(106 397)
(6 289)
(189 826)
Sale of loans and advances
0
0
(140 294)
(14 368)
(154 662)
Loans and advances written off
0
0
(150 680)
(11 787)
(162 467)
KOIM
0
0
62 356
1 058
63 414
Other (including FX differences)
(168)
(2 583)
2 466
61
(223)
Balance at the end of the period
297 078
302 936
1 419 678
25 136
2 044 828
143
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Individuals: loans and advances balance
sheet value, gross, 2024
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
38 933 616
3 968 886
2 579 786
93 690
45 575 978
Transfers between stages
(1 037 575)
680 237
357 339
0
0
Granted or purchased loans and advances
10 466 916
0
0
0
10 466 916
Repaid loans and advances
(10 455 492)
(736 857)
(311 114)
(26 277)
(11 529 739)
Change in provisions for legal risk of the
foreign currency-indexed mortgage loan
portfolio
803 437
11 997
35 802
0
851 236
Loans and advances sold
0
0
(264 873)
(181)
(265 053)
Loans and advances written off
0
0
(214 706)
(85)
(214 791)
Other (including FX differences)
(274 300)
(10 081)
173 944
2 521
(107 916)
Balance at the end of the period
38 436 601
3 914 183
2 356 178
69 669
44 776 631
Individuals: loans and advances balance
sheet value, gross, 2023
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
40 774 383
4 510 649
2 592 018
137 235
48 014 284
Transfers between stages
(734 560)
151 736
582 824
0
0
Granted or purchased loans and advances
9 025 966
0
0
0
9 025 966
Repaid loans and advances
(8 028 068)
(643 216)
(208 749)
(13 771)
(8 893 804)
Reversal of Credit Holidays adjustment
487 239
39 361
4 874
0
531 474
Change in provisions for legal risk of the
foreign currency-indexed mortgage loan
portfolio
(2 402 463)
(81 448)
(48 583)
0
(2 532 494)
Loans and advances sold
0
0
(187 711)
(14 887)
(202 599)
Loans and advances written off
0
0
(149 430)
(11 588)
(161 018)
Other (including FX differences)
(188 881)
(8 197)
(5 456)
(3 298)
(205 832)
Balance at the end of the period
38 933 616
3 968 886
2 579 786
93 690
45 575 978
Public sector: impairment allowances,
2024
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
120
0
0
0
120
Transfers between stages
0
0
0
0
0
Increase due to granting or purchase
45
0
0
0
45
Changes in credit risk
6
0
0
0
6
Decrease due to derecognition (except
exposures sold and written off)
(23)
0
0
0
(23)
Other (including FX differences)
(19)
0
0
0
(19)
Balance at the end of the period
129
0
0
0
129
Public sector: impairment allowances,
2023
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
141
0
0
0
141
Transfers between stages
0
0
0
0
0
Increase due to granting or purchase
24
0
0
0
24
Changes in credit risk
7
0
0
0
7
Decrease due to derecognition (except
exposures sold and written off)
(46)
0
0
0
(46)
Other (including FX differences)
(6)
0
0
0
(6)
Balance at the end of the period
120
0
0
0
120
144
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Public sector: loans and advances
balance sheet value, gross, 2024
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
51 748
4
0
0
51 752
Transfers between stages
0
0
0
0
0
Granted or purchased loans and advances
8 884
0
0
0
8 884
Repaid loans and advances
(15 182)
(3)
0
0
(15 185)
Loans and advances sold
0
0
0
0
0
Loans and advances written off
0
0
0
0
0
Other (including FX differences)
0
0
0
0
0
Balance at the end of the period
45 449
1
0
0
45 450
Public sector: loans and advances
balance sheet value, gross, 2023
Stage 1
Stage 2
Stage 3
POCI
Total
Balance at the beginning of the period
201 688
3
0
0
201 691
Transfers between stages
(0)
0
0
0
0
Granted or purchased loans and advances
12 319
1
0
0
12 320
Repaid loans and advances
(162 259)
0
0
0
(162 259)
Loans and advances sold
0
0
0
0
0
Loans and advances written off
0
0
0
0
0
Other (including FX differences)
0
0
0
0
(0)
Balance at the end of the period
51 748
4
0
0
51 752
22j. Loans and advances to customers portfolio valued at amortised cost by maturity
31.12.2024
31.12.2023
Current accounts
3 676 289
3 549 230
to 1 month
7 789 339
7 635 654
above 1 month to 3 months
2 208 463
2 248 593
above 3 months to 1 year
6 054 478
5 794 013
above 1 year to 5 years
20 076 568
19 245 201
above 5 years
20 776 798
21 891 719
past due
1 862 090
1 940 458
Interest
653 773
580 845
Total gross
63 097 798
62 885 713
145
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
22k. Loans and advances to customers portfolio valued at amortised cost by currency
31.12.2024
31.12.2023
Balance sheet
value, gross
Impairment
allowances
Balance sheet
value
Balance sheet
value, gross
Impairment
allowances
Balance sheet
value
in Polish currency
57 584 409
(2 127 147)
55 457 262
55 846 851
(2 106 279)
53 740 572
in foreign currencies (after
conversion to PLN)
5 513 389
(171 180)
5 342 209
7 038 862
(193 085)
6 845 777
currency: USD
61 794
(629)
61 165
55 055
(1 333)
53 722
currency: EUR
4 067 326
(116 287)
3 951 039
3 840 747
(50 470)
3 790 277
currency: CHF*
1 360 546
(53 852)
1 306 694
3 121 973
(141 009)
2 980 964
other currencies
23 723
(412)
23 311
21 087
(273)
20 814
Total
63 097 798
(2 298 327)
60 799 471
62 885 713
(2 299 364)
60 586 349
* gross carrying amount of mortgage is decreased by the change in expected cash flows resulting from the issue of legal risk of
CHF mortgage loans, the adjustment is presented in note (14).
23. FINANCIAL ASSETS AT AMORTISED COST OTHER THAN LOANS AND
ADVANCES TO CUSTOMERS
23a. Financial assets at amortised cost other than Loans and advances to customers
31.12.2024
Balance sheet value, gross
Accumulated impairment write-offs
Balance
sheet value,
net
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Debt securities
24 059 869
0
0
(8)
0
0
24 059 861
Deposits, loans and
advances to banks and
other monetary
institutions
2 378 610
0
0
(18)
0
0
2 378 592
Repurchase agreements
194 218
0
0
0
0
0
194 218
31.12.2023
Balance sheet value, gross
Accumulated impairment write-offs
Balance
sheet value,
net
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Debt securities
18 439 786
0
0
(6)
0
0
18 439 780
Deposits, loans and
advances to banks and
other monetary
institutions
1 866 848
0
0
(160)
0
0
1 866 688
Repurchase agreements
1 163 242
0
0
0
0
0
1 163 242
146
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
23b. Debt securities
31.12.2024
31.12.2023
Banks and other credit institutions
2 305 191
1 716 205
Other companies
0
0
Public sector – local governments
37 736
35 273
Public sector - securities issued by governments of:
21 716 934
16 688 302
Poland
13 027 316
9 215 365
Austria
2 162 028
855 857
Belgium
2 213 612
1 630 811
France
1 883 292
1 586 555
European Union
1 703 876
1 487 906
Netherlands
726 810
0
Germany
0
1 911 808
Total
24 059 861
18 439 780
23c. Deposits, loans and advances to banks and other monetary institutions
31.12.2024
31.12.2023
Current accounts
278 628
571 479
Deposits
154 662
219 804
Loans and advances granted
1 943 735
1 073 069
Interest
1 585
2 496
Total (gross) deposits, loans and advances
2 378 610
1 866 848
Impairment allowances
(18)
(160)
Total (net) deposits, loans and advances
2 378 592
1 866 688
23d. Deposits, loans and advances to banks and other monetary institutions by maturity date
31.12.2024
31.12.2023
Current accounts
278 628
571 479
to 1 month
218 397
265 873
above 1 month to 3 months
10 000
0
above 3 months to 1 year
0
20 000
above 1 year to 5 years
1 870 000
1 007 000
above 5 years
0
0
past due
0
0
Interest
1 585
2 496
Total (gross) deposits, loans and advances
2 378 610
1 866 848
147
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
23e. Deposits, loans and advances to banks and other monetary institutions by currency
31.12.2024
31.12.2023
in Polish currency
1 955 655
1 177 932
in foreign currencies (after conversion to PLN)
422 955
688 916
▪ currency: USD
93 834
426 214
▪ currency: EUR
173 372
127 401
▪ currency: CNY
13 648
22 741
▪ currency: CHF
22 450
18 203
▪ currency: GBP
21 944
17 951
▪ currency: JPY
4 307
2 792
▪ other currencies
93 400
73 614
Total
2 378 610
1 866 848
23f. Change of impairment allowances for deposits, loans and advances to banks and other monetary
institutions
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Balance at the beginning of the period
160
281
Impairment allowances created in the period
18
160
Impairment allowances released in the period
(160)
(281)
Balance at the end of the period
18
160
23g. Reverse sale and repurchase agreements
31.12.2024
31.12.2023
credit institutions
194 162
1 146 305
other customers
0
11 553
interest
56
5 384
Total
194 218
1 163 242
24. DERIVATIVES – HEDGE ACCOUNTING
Starting from 1 January 2006 the Bank established first formal hedging relationship against cash flow
volatility.
The Risk Strategy approved in the Bank defines a general rules for hedging of market risk generated
by its commercial activity. External transactions eligible for hedge accounting are pointed in the
Strategy just after the natural economic hedge.
The Bank applied (as at 31.12.2024) Cash Flow Hedge relations to eliminate the variability of cash
flows:
✓ on FX denominated mortgage loans and financing them PLN deposits,
✓ on PLN denominated financial assets,
✓ due to future income and interest costs denominated in foreign currencies,
attributable to interest rate risk and currency risk in the time horizon limited to maturity of hedging
instruments, presented in note (24b).
148
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In addition, the Bank applied a fair value hedge for a fixed interest rate debt instrument and during
2024, a new hedge relationships were established, namely:
✓ fair value of cash flows from issued fixed-rate liabilities denominated in foreign currencies,
✓ fair value of the risk profile assigned to portfolios of homogeneous, non-interest-bearing current
accounts - separately in PLN and in foreign currencies (portfolio hedge).
The underlying of hedged and hedging items are economically related in a way that they respond in
a similar way to the hedged risk, their fair value will offset in response to the market interest and FX
rates movements.
The Bank performs the effectiveness tests on a monthly basis, calculates and compares the changes
in fair value of hedged and hedging positions. Hedge effectiveness is tested using hypothetical
derivative method, hedged items are presented as a hypothetical derivative, for which changes in the
fair value are calculated and compared with changes in fair value of hedging instruments. Hedge
ineffectiveness can arise from differences in repricing dates of hedged and hedging positions or from
designation as hedging item the existing derivative instrument. The Bank designates hedging
instruments on their trade date and by this eliminates this source of ineffectiveness. Hedge
ineffectiveness reported by the Bank includes amortization of the fair value changes recognized as
effective for derivatives classified on their termination date as hedging.
Detailed information on cash flow hedge relations applied by the Bank, items designated as hedged
and hedging and presentation of the result (as at 31.12.2024) is shown in a table below:
Hedge of volatility of the cash
flows generated by PLN
denominated financial assets
Cash flow volatility hedge for
the flows generated by FX
mortgage portfolio and its
underlying PLN liabilities
Fair value hedge of a fixed
interest rate debt instrument
Description of hedge
transactions
The Bank hedges the risk of the
volatility of cash flows
generated by PLN denominated
financial assets. The volatility
of cash flows results from
interest rate risk.
The Bank hedges the risk of the
volatility of cash flows generated
by FX mortgages and by PLN
liabilities financially underlying
such loans. The volatility of cash
flows results from the currency
risk and interest rate risk.
The Bank hedges part of the
interest rate risk associated
with the change in the fair
value of a fixed-rate debt
instrument recorded in other
comprehensive income,
resulting from fluctuations in
market interest rate.
Hedged items
Cash flows resulting from PLN
denominated financial assets.
Cash flows resulting from the FX
mortgage loan portfolio and PLN
deposits together with issued
debt PLN securities funding
them.
A portfolio of fixed coupon
debt securities classified as
financial assets measured at
fair value through other
comprehensive income
denominated in PLN.
Hedging instruments
IRS transactions
CIRS transactions
IRS transactions
Presentation of the
result on the hedged
and hedging
transactions
Effective part of the valuation
of hedging instruments is
recognised in revaluation
reserve; interest on both: the
hedged and the hedging
instruments are recognised in
net interest income.
Ineffective part of the
valuation of hedging
instruments is recognized in
the income statement as a
result on instruments measured
at fair value through profit and
loss.
Effective part of the valuation of
hedging instruments is
recognised in revaluation
reserve; Ineffective part of the
valuation of hedging instruments
is recognized in the income
statement as a result on
instruments measured at fair
value through profit and loss.
The result on the change in the
fair value measurement of
hedged items in the hedged
risk is referred to the result on
hedge accounting. The
remaining part of the change
in fair value measurement is
recognized in other
comprehensive income.
Interest on debt securities is
recognized in net interest
income. The change in fair
value measurement of
derivative instruments being a
hedge is presented in the
result on hedge accounting,
and interest on these
instruments is recognized in
the interest result.
149
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Cash flow volatility hedge due
to future income and interest
costs denominated in foreign
currencies
Hedging the fair value of cash
flows from issued fixed-rate
liabilities denominated in
foreign currencies
Hedging the fair value of the
risk profile assigned to a
portfolio of homogeneous, non-
interest-bearing current
accounts in PLN and separately
foreign currencies (portfolio
hedging)
Description of
hedge transactions
The Bank hedges the risk of the
volatility of cash flows generated
by income and interest costs
denominated in foreign
currencies. The volatility of cash
flows results from the currency
risk.
The Bank hedges part of the
interest rate risk related to
changes in the fair value of
cash flows from issued fixed-
rate liabilities denominated in
foreign currencies, resulting
from the volatility of market
interest rates.
The Bank hedges part of the
interest rate risk related to the
change in the fair value of the
risk profile assigned to the
portfolios of homogeneous, non-
interest-bearing current
accounts in PLN and separately
foreign currencies, resulting
from the volatility of market
interest rates.
Hedged items
Cash flows resulting from income
and interest costs denominated
in foreign currencies.
Cash flows from issued fixed-
rate liabilities denominated in
foreign currencies
Risk profile assigned to a
portfolios of homogeneous, non-
interest-bearing current
accounts in PLN and separately
in foreign currencies.
Hedging
instruments
FX position resulting from
recognized future leasing
liabilities.
IRS transactions
IRS transactions
Presentation of the
result on the
hedged and
hedging
transactions
The effective part of the spot
revaluation of hedging
instruments is recognized in the
revaluation reserve.
The ineffective part of the
valuation of the hedging item is
recognized in the income
statement as a result on
instruments measured at fair
value through profit and loss.
The result from the change in
the fair value measurement of
flows from hedged items in
terms of the hedged risk is
recognized in the result from
hedge accounting. Interest on
debt securities is recognized in
interest income. The change in
the fair value measurement of
derivative instruments
constituting hedging is
presented in the result from
hedge accounting, and interest
on these instruments is
recognized in net interest
income.
The result from the change in
fair value measurement
determined for hedged items in
terms of the hedged risk is
recognized in the result from
hedge accounting. The change in
the fair value measurement of
derivative instruments
constituting security is presented
in the result from hedge
accounting, and interest on
these instruments is recognized
in net interest income.
24a. Hedge accounting
31.12.2024
Par value of instruments with future maturity
Fair values
below 3
months
from 3 months
to 1 year
from 1 year
to 5 years
above 5 years
Total
Assets
Liabilities
1. Derivative instruments constituting cash flow hedges related to interest rate and/or exchange rate *
CIRS contracts
802 830
0
0
0
(100 751)
0
100 751
IRS contracts
0
75 000
400 000
0
(6 688)
0
6 688
FXS contracts
0
0
0
0
0
0
0
2. Derivatives used as interest rate hedges related to interest rates
IRS contracts
0
505 060
6 128 180
0
112 365
112 365
0
3. Total hedging
derivatives
802 830
580 060
6 528 180
0
4 926
112 365
107 439
* Notional value for double-currency derivatives constitutes the sum of both transactions expressed in PLN.
150
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
31.12.2023
Par value of instruments with future maturity
Fair values
below 3
months
from 3 months
to 1 year
from 1 year
to 5 years
above 5 years
Total
Assets
Liabilities
1. Derivative instruments constituting cash flow hedges related to interest rate and/or exchange rate *
CIRS contracts
3 083 034
203 445
817 400
0
(150 631)
15 069
165 700
IRS contracts
2 170 000
0
475 000
0
(27 964)
0
27 964
FXS contracts
0
0
0
0
0
0
0
2. Derivatives used as interest rate hedges related to interest rates
IRS contracts
0
0
2 264 000
0
59 144
59 144
0
3. Total hedging
derivatives
5 253 034
203 445
3 556 400
0
(119 451)
74 213
193 664
* Notional value for double-currency derivatives constitutes the sum of both transactions expressed in PLN.
24b. Hedge accounting for cash flow volatility
Hedge relationship
Maximum date of occurrence of cash
flows whose value is hedged
Hedge of volatility of the cash flows generated by PLN denominated financial
assets
2026-05-11
Cash flow volatility hedge for the flows generated by FX mortgage portfolio and
its underlying PLN liabilities
2025-01-07
Fair value hedge of a fixed interest rate debt instrument
2027-07-25
Cash flow volatility hedge due to future income and interest costs denominated
in foreign currencies
2030-04-30
Fair value hedge of cash flows from issued fixed-rate liabilities denominated in
foreign currencies
2028-09-25
Fair value hedges of the risk profile assigned to portfolios of homogeneous, non-
interest-bearing current accounts, separately in PLN and in foreign currencies
(portfolio hedge)
2028-06-26
The inefficient part of the valuation of hedging instruments recognized in the Profit and Loss Account in 2024 amounted to
PLN 1,544 thousand. (in 2022, it was PLN 1,160 thousand, respectively)
The inefficient part of the valuation of hedging instruments recognized in the Profit and loss account
and losses was presented in note (8).
24c. Cash flow hedge – Hedged Instruments
Type of
contract
Balance sheet item
Changes in fair value used
in the calculation of the
ineffectiveness in the
period
Balance in cash flow
hedge reserve for
continuing hedges
Balance in cash flow
hedge reserve for
discontinued hedges
- CIRS
Loans and advances to
customers
(4 489)
(40)
0
- IRS
Debt instruments
(12 350)
(24 054)
0
- FX spot
Future interest income
and costs
(4 312)
(667)
0
- IRS
Loans and advances to
customers
(8 282)
0
0
Total
(29 433)
(24 760)
0
151
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
24d. Cash flow hedge – Hedging instruments
Type of contract
Changes in fair value used in the
calculation of the ineffectiveness
in the period
Ineffectiveness recognized in P&L
Amounts reclassified
from reserves to
results
- CIRS
4 268
(221)
0
- IRS
12 350
0
0
- FX spot
4 312
0
0
- IRS
8 282
0
0
Total
29 212
(221)
0
24e. Fair value hedge – Hedged instruments
Type of contract
Balance sheet item
Changes in the fair value of the
hedged instrument used in the
calculation of the ineffectiveness in
the period
IRS
Debt instruments valued in other comprehensive
income
(9 826)
IRS
Issued liabilities
(4 009)
IRS
Liabilities to clients
(2 723)
Total
(16 558)
24f. Fair value hedge – Hedging instruments
Type of contract
Changes in the fair value of the hedging
instrument used in the calculation of the
ineffectiveness in the period
Ineffectiveness recognized in P&L
IRS
9 466
(359)
IRS
5 121
1 112
IRS
3 735
1 013
Total
18 323
1 765
25. INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
25a. Investments in related entities
31.12.2024
31.12.2023
Investments in subsidiaries
517 214
399 223
25b. Change of investments in related entities
01.01.2024 -
31.12.2024
01.01.2023 -
31.12.2023
Balance at the beginning of the period
399 223
247 823
Sale of 80% stake in Millennium Financial Services Sp. z o. o.
0
(88)
Initial valuation of 20% stake in Europa Millennium Financial Services Sp. z o.o.
0
52 487
Valuation of stake in Europa Millennium Financial Services Sp. z o.o.
(1 009)
0
Increase of share in Millennium Bank Hipoteczny S.A.
120 000
99 000
Refund of additional capital payment of Millennium Goodie Sp. z o.
(1 000)
0
Balance at the end of the period
517 214
399 223
152
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
25c. Investments in related entities as at 31.12.2024
Name
Activity domain
Head office
% of the Bank’s
capital share
% of the Bank’s
voting share
MILLENNIUM BANK
HIPOTECZNY S.A.
Mortgage bank
Warszawa
100
100
MILLENNIUM LEASING
Sp. z o.o.
leasing services
Warszawa
100
100
MILLENNIUM CONSULTING
S.A.*
advisory services
Warszawa
100
100
MILLENNIUM SERVICE
Sp. z o.o.
rental and management of
real estate, insurance and
brokers activity
Warszawa
100
100
MILLENNIUM GOODIE
Sp. z o.o.
web portals activity
Warszawa
100
100
MILLENNIUM
TELECOMMUNICATION
SERVICES Sp. z o.o.
financial operations - equity
markets, advisory services
Warszawa
100
100
EUROPA MILLENNIUM
FINANCIAL SERVICES
Sp. z o.o.
agents' activities
and insurance brokers
Wrocław
20
20
PIAST EXPERT
Sp. z o.o. in liquidation
marketing services
Warszawa
100
100
LUBUSKIE FABRYKI MEBLI
S.A. in liquidation
furniture manufacturer
Świebodzin
50 + 1 share
50 +1 share
* Millennium Consulting S.A., subsidiary of the Bank, is a 100% holder of Millennium TFI S.A.
Name
Gross value of
shares/
interests
Impairment
allowances
Additional
capital paid in
Assets
Liabilities
Equity
Income
Profit / (Loss)
Relationship
MILLENNIUM BANK
HIPOTECZNY S.A.
390 000
0
0
3 136 565
2 754 876
130 000
39 970
17 070
subordinated
MILLENNIUM LEASING
Sp. z o.o.
63 942
0
0
7 724 974
7 412 561
48 195
124 480
17 878
subordinated
MILLENNIUM
CONSULTING S.A.*
4 340
0
0
70 933
113
4 340
20 541
20 158
subordinated
MILLENNIUM SERVICE
Sp. z o.o.
1 000
0
0
76 036
14 865
1 000
42 683
31 491
subordinated
MILLENNIUM GOODIE
Sp. z o.o.
597
0
0
16 353
14 532
500
6 024
220
subordinated
MILLENNIUM
TELECOMMUNICATION
SERVICES Sp. z o.o.
98
0
0
527
27
100
1 448
31
subordinated
EUROPA MILLENNIUM
FINANCIAL SERVICES
Sp. z o.o.**
51 500
0
0
110 014
72 565
100
49 630
37 350
associated
PIAST EXPERT Sp. z
o.o. in liquidation
5 737
0
0
6 371
5
5 900
531
440
subordinated
LUBUSKIE FABRYKI
MEBLI S.A. in
liquidation
6 700
(6 700)
0
company in liquidation
subordinated
TOTAL
523 914
(6 700)
0
* Millennium Consulting S.A., subsidiary of the Bank, is a 100% holder of Millennium TFI S.A. shares
** data of Europa Millennium Financial Services sp. z o.o. as of 30.11.2024
153
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
25d. Investments in related entities as at 31.12.2023
Name
Activity domain
Head office
% of the Bank’s
capital share
% of the Bank’s
voting share
MILLENNIUM BANK
HIPOTECZNY S.A.
Mortgage bank
Warszawa
100
100
MILLENNIUM LEASING
Sp. z o.o.
leasing services
Warszawa
100
100
MILLENNIUM CONSULTING
S.A.*
advisory services
Warszawa
100
100
MILLENNIUM SERVICE
Sp. z o.o.
rental and management of
real estate, insurance and
brokers activity
Warszawa
100
100
MILLENNIUM GOODIE
Sp. z o.o.
web portals activity
Warszawa
100
100
MILLENNIUM
TELECOMMUNICATION
SERVICES Sp. z o.o.
financial operations - equity
markets, advisory services
Warszawa
100
100
EUROPA MILLENNIUM
FINANCIAL SERVICES
Sp. z o.o.
agents' activities
and insurance brokers
Wrocław
20
20
PIAST EXPERT
Sp. z o.o. in liquidation
marketing services
Warszawa
100
100
LUBUSKIE FABRYKI MEBLI
S.A. in liquidation
furniture manufacturer
Świebodzin
50 + 1 share
50 +1 share
* Millennium Consulting S.A., subsidiary of the Bank, is a 100% holder of Millennium TFI S.A. shares
** On March 29, 2023, 80% of shares in Millennium Financial Services sp. z o.o. (currently Europa Millennium Financial Services
sp. z o.o ) were transferred from the Bank to Towarzystwo Ubezpieczeń na Życie Europa S.A., which acquired 72% of the
Company's shares, and Towarzystwo Ubezpieczeń Europa S.A., which acquired 8% of the Company's shares, respectively, which
is described in more details in note 5 “Result on derecognition of financial assets and liabilities not measured at value fair
through profit or loss” in Chapter 14 “Notes to Consolidated Financial Data”.
Name
Gross value of
shares/
interests
Impairment
allowances
Additional
capital paid in
Assets
Liabilities
Equity
Income
Profit / (Loss)
Relationship
MILLENNIUM BANK
HIPOTECZNY S.A.
270 000
0
0
1 324 111
1 078 847
90 000
26 006
9 523
subordinated
MILLENNIUM LEASING
Sp. z o.o.
63 942
0
0
7 316 483
7 023 164
48 195
149 695
43 363
subordinated
MILLENNIUM
CONSULTING S.A.*
4 340
0
0
50 776
108
4 340
3 301
2 886
subordinated
MILLENNIUM SERVICE
Sp. z o.o.
1 000
0
0
64 741
8 442
1 000
37 520
26 616
subordinated
MILLENNIUM GOODIE
Sp. z o.o.
597
0
1 000
14 571
11 972
500
5 101
1 082
subordinated
MILLENNIUM
TELECOMMUNICATION
SERVICES Sp. z o.o.
98
0
0
491
22
100
1 468
32
subordinated
EUROPA MILLENNIUM
FINANCIAL SERVICES
Sp. z o.o.
52 509
0
0
54 145
29 557
100
32 271
24 548
associated
PIAST EXPERT Sp. z
o.o. in liquidation
5 737
0
0
6 032
105
5 900
121
27
subordinated
LUBUSKIE FABRYKI
MEBLI S.A. in
liquidation
6 700
(6 700)
0
company in liquidation
subordinated
TOTAL
404 923
(6 700)
1 000
* Millennium Consulting S.A., subsidiary of the Bank, is a 100% holder of Millennium TFI S.A. shares
154
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
26. TANGIBLE FIXED ASSETS
26a. Property, plant and equipment
31.12.2024
31.12.2023
Land
2 189
2 189
Buildings and premises
106 006
95 042
Machines and equipment
99 330
98 534
Vehicles
18 636
19 839
Other fixed assets
23 043
23 507
Fixed assets under construction
88 984
66 226
Rights to use office space
236 472
247 750
Total
574 660
553 087
155
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
26b. Change of balance of property, plant and equipment (by type groups) in the period 01.01.2024 –
31.12.2024
Land
Buildings
and
premises
Machines
and
equipment
Vehicles
Other
fixed
assets
Fixed
assets
under
construc-
tion
Rights to
use
office
space
TOTAL
a) gross value of property, plant and
equipment at the beginning of the
period
2 189
315 480
279 520
38 610
83 012
66 226
542 694
1 327 731
b) increases (on account of)
0
24 649
36 616
9 100
7 834
91 925
81 894
252 018
purchase
0
0
0
0
0
35 734
0
35 734
transfer from fixed assets under
construction
0
24 649
36 616
0
7 834
0
0
69 099
financial lease
0
0
0
9 100
0
0
81 894
90 994
unpaid investments
0
0
0
0
0
56 191
0
56 191
other
0
0
0
0
0
0
0
0
c) reductions (on account of)
0
2 892
6 471
10 146
2 250
69 167
25 542
116 468
sale
0
0
0
0
423
0
0
423
liquidation
0
2 553
6 344
0
1 780
0
25 542
36 219
settlement of fixed assets under
construction
0
0
0
0
0
69 099
0
69 099
financial lease
0
339
127
10 146
47
0
0
10 659
other
0
0
0
0
0
68
0
68
d) gross value of property, plant
and equipment at the end of the
period
2 189
337 237
309 665
37 564
88 596
88 984
599 046
1 463 281
e) cumulated depreciation
(amortization) at the beginning of
the period
0
219 641
180 986
18 771
59 505
0
294 944
773 847
f) depreciation over the period (on
account of)
0
11 130
29 349
157
6 048
0
67 630
114 314
current write-off (P&L)
0
13 791
35 460
9 120
8 248
0
92 413
159 032
reductions on account of sale
0
0
0
0
(422)
0
0
(422)
reductions on account of
liquidation
0
(2 322)
(5 984)
0
(1 732)
0
(24 783)
(34 821)
financial lease
0
(339)
(127)
(8 963)
(46)
0
0
(9 475)
other
0
0
0
0
0
0
0
0
g) cumulated depreciation
(amortization) at the end of the
period
0
230 771
210 335
18 928
65 553
0
362 574
888 161
h) impairment allowances at the
beginning of the period
0
797
0
0
0
0
0
797
creation of allowances
0
0
0
0
0
0
0
0
release of allowances
0
337
0
0
0
0
0
337
i) impairment allowances at the end
of the period
0
460
0
0
0
0
0
460
j) net value of property, plant and
equipment at the end of the period
2 189
106 006
99 330
18 636
23 043
88 984
236 472
574 660
including assets used based on
leasing agreements
0
673
6 388
18 637
28
50
236 472
262 248
156
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
26c. Change of balance of property, plant and equipment (by type groups) in the period 01.01.2023 –
31.12.2023
Land
Buildings
and
premises
Machines
and
equipment
Vehicles
Other
fixed
assets
Fixed
assets
under
construc-
tion
Rights to
use
office
space
TOTAL
a) gross value of property, plant and
equipment at the beginning of the
period
2 219
293 448
264 877
33 824
80 932
74 030
522 938
1 272 268
b) increases (on account of)
0
37 970
27 893
13 951
8 014
68 033
77 283
233 144
purchase
0
0
0
0
0
33 091
0
33 091
transfer from fixed assets under
construction
0
37 970
27 893
0
8 014
0
0
73 877
financial lease
0
0
0
13 951
0
0
77 283
91 234
unpaid investments
0
0
0
0
0
34 942
0
34 942
other
0
0
0
0
0
0
0
0
c) reductions (on account of)
30
15 938
13 250
9 165
5 934
75 837
57 527
177 681
sale
30
3 050
93
0
693
0
0
3 866
liquidation
0
12 888
13 139
0
5 221
0
57 527
88 775
settlement of fixed assets under
construction
0
0
0
0
0
73 909
0
73 909
financial lease
0
0
18
9 165
20
0
0
9 203
other
0
0
0
0
0
1 928
0
1 928
d) gross value of property, plant
and equipment at the end of the
period
2 189
315 480
279 520
38 610
83 012
66 226
542 694
1 327 731
e) cumulated depreciation
(amortization) at the beginning of
the period
0
221 596
159 885
19 616
56 762
0
256 070
713 929
f) depreciation over the period (on
account of)
0
(1 955)
21 101
(845)
2 743
0
38 874
59 918
current write-off (P&L)
0
11 888
33 932
7 552
8 201
0
91 873
153 446
reductions on account of sale
0
(1 702)
(90)
0
(684)
0
0
(2 476)
reductions on account of
liquidation
0
(12 141)
(12 723)
0
(4 754)
0
(52 999)
(82 617)
financial lease
0
0
(18)
(8 397)
(20)
0
0
(8 435)
other
0
0
0
0
0
0
0
0
g) cumulated depreciation
(amortization) at the end of the
period
0
219 641
180 986
18 771
59 505
0
294 944
773 847
h) impairment allowances at the
beginning of the period
0
797
0
0
0
0
0
797
creation of allowances
0
0
0
0
0
0
0
0
release of allowances
0
0
0
0
0
0
0
0
i) impairment allowances at the end
of the period
0
797
0
0
0
0
0
797
j) net value of property, plant and
equipment at the end of the period
2 189
95 042
98 534
19 839
23 507
66 226
247 750
553 087
including assets used based on
leasing agreements
0
1 270
9 745
19 839
0
50
247 750
278 654
157
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
27. INTANGIBLE FIXED ASSETS
27a. Intangible fixed assets
31.12.2024
31.12.2023
Goodwill due to merger with Euro Bank S.A.
192 126
192 126
Other intangible fixed assets:
368 191
289 002
concessions, patents, licenses, know-how and similar assets
68 226
24 157
computer software
71 754
78 921
other
5 576
7 296
advances for intangible assets
222 635
178 628
Total
560 317
481 128
As a result of the purchase by Bank Millennium of 99.787% of shares of Euro Bank S.A. from SG Financial
Services Holdings, a 100% subsidiary of Société Générale S.A., and the subsequent merger with the
above-mentioned entity in 2019, the difference in the fair value of the acquired assets and liabilities
as at the acquisition date to the purchase price was determined and, in accordance with the provisions
of IFRS 3.32, was recognized as goodwill in intangible assets (assigned to retail activities).
With respect to goodwill, an impairment test is performed at least once a year, regardless of any
indication that impairment may have occurred.
The input data for the goodwill test include the result on retail assets and liabilities allocated to
related activities. To determine the amount of capital, an estimate of risk-weighted assets and a
capital adequacy ratio that meets regulatory minimums for the business were used. The test is
performed by comparing the present value of cash flows generated by the listed assets with the
estimated amount of capital. Cash flow forecasts have been prepared based on management's
assumptions about all the conditions that will occur over the remaining useful lives of the assets. They
are consistent with the medium-term financial plan adopted by the Bank for 2025-2028 and the Bank's
Strategy. Data for subsequent years after 2024 are the result of extrapolation of forecasts assuming
continued changes in the balance sheet and income statement. To discount the flows, the cost of
capital index was used, consisting of the sum of the market rate and the risk premium.
The test, executed as at the end of 2024, showed a surplus of the current value of cash flows over
the net book value of the cash-generating unit and therefore no impairment was found for this unit.
158
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
27b. Change of balance of intangible fixed assets (by type groups) in the period 01.01.2024 –
31.12.2024
concessions,
patents, licenses,
know-how and
similar assets
computer
software
other
advances for
intangible
assets
TOTAL
a) gross value of intangible fixed
assets at the beginning of the period
107 016
320 035
25 021
178 628
630 700
b) increases (on account of)
72 858
25 954
0
143 758
242 570
purchase
0
0
0
121 804
121 804
unpaid investments
0
0
0
21 954
21 954
settlement of advances
72 858
25 954
0
0
98 812
other
0
0
0
0
0
c) reductions (on account of)
0
0
0
99 751
99 751
liquidation
0
0
0
0
0
settlement of advances
0
0
0
98 812
98 812
other
0
0
0
939
939
d) gross value of intangible fixed
assets at the end of the period
179 874
345 989
25 021
222 635
773 519
e) cumulated depreciation at the
beginning of the period
82 859
241 114
17 725
0
341 698
f) depreciation over the period (on
account of)
28 789
33 121
1 720
0
63 630
current write-off (P&L)
28 789
33 121
1 720
0
63 630
liquidation
0
0
0
0
0
other
0
0
0
0
0
g) cumulated depreciation at the
end of the period
111 648
274 235
19 445
0
405 328
h) impairment allowances at the
beginning of the period
0
0
0
0
0
i) impairment allowances at the end
of the period
0
0
0
0
0
j) net value of intangible fixed assets
at the end of the period
68 226
71 754
5 576
222 635
368 191
159
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
27c. Change of balance of intangible fixed assets (by type groups) in the period 01.01.2023 –
31.12.2023
concessions,
patents, licenses,
know-how and
similar assets
computer
software
other
advances for
intangible
assets
TOTAL
a) gross value of intangible fixed
assets at the beginning of the period
94 856
301 712
25 021
107 201
528 790
b) increases (on account of)
12 160
18 467
0
102 021
132 648
purchase
0
0
0
92 067
92 067
unpaid investments
0
0
0
9 954
9 954
settlement of advances
12 160
18 467
0
0
30 627
other
0
0
0
0
0
c) reductions (on account of)
0
144
0
30 594
30 738
liquidation
0
144
0
0
144
settlement of advances
0
0
0
30 594
30 594
other
0
0
0
0
0
d) gross value of intangible fixed
assets at the end of the period
107 016
320 035
25 021
178 628
630 700
e) cumulated depreciation at the
beginning of the period
60 097
212 502
15 497
0
288 096
f) depreciation over the period (on
account of)
22 762
28 612
2 228
0
53 602
current write-off (P&L)
22 762
28 753
2 228
0
53 743
liquidation
0
(143)
0
0
(143)
other
0
0
0
0
0
g) cumulated depreciation at the
end of the period
82 859
241 114
17 725
0
341 698
h) impairment allowances at the
beginning of the period
0
0
0
0
0
i) impairment allowances at the end
of the period
0
0
0
0
0
j) net value of intangible fixed assets
at the end of the period
24 157
78 921
7 296
178 628
289 002
160
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
28. DEFERRED INCOME TAX ASSETS
28a. Deferred income tax assets and liability
31.12.2024
31.12.2023
Deferred
income tax
asset
Deferred
income tax
provision
Net deferred
income tax
asset
Deferred
income tax
asset
Deferred
income tax
provision
Net deferred
income tax
asset
Difference between tax and balance
sheet depreciation
64
(1 304)
(1 240)
128
(1 498)
(1 370)
Balance sheet valuation of financial
instruments
11 574
(48 155)
(36 581)
1 332
(36 476)
(35 144)
Unrealised receivables/ liabilities
on account of derivatives
55 499
(63 179)
(7 680)
67 024
(67 597)
(573)
Interest on deposits and securities
to be paid/ received
81 322
(329 891)
(248 569)
122 682
(323 515)
(200 833)
Interest and discount on loans and
receivables
0
(132 089)
(132 089)
0
(113 015)
(113 015)
Income and cost settled at effective
interest rate
0
(34 939)
(34 939)
60 214
0
60 214
Impairment of loans presented as
temporary differences
552 935
0
552 935
494 879
0
494 879
Employee benefits
27 276
0
27 276
21 984
0
21 984
Rights to use
4 242
0
4 242
4 128
0
4 128
Provisions for future costs
305 302
0
305 302
138 929
0
138 929
Asset from future cancellations of
loans in CHF
186 862
0
186 862
0
0
0
Valuation of investment assets,
loans, cash flows hedge and
actuarial gains (losses) recognized
in other comprehensive income
32 940
(6 834)
26 106
57 252
(24 567)
32 685
Shares valuation
1 273
(27 556)
(26 283)
1 273
(33 300)
(32 027)
Other
1
(3 964)
(3 963)
144
(1 723)
(1 579)
Total
1 259 290
(647 911)
611 379
969 970
(601 692)
368 279
Net deferred income tax asset
205 983
22 137
28b. Change of temporary differences
31.12.2023
Adjustments to
previous years
Changes to
financial result
Changes to
equity
31.12.2024
Difference between tax and balance sheet
depreciation
(1 370)
130
(1 240)
Balance sheet valuation of financial
instruments
(35 144)
(1 437)
(36 581)
Unrealised receivables/ liabilities on account
of derivatives
(573)
(7 107)
(7 680)
Interest on deposits and securities to be
paid/received
(200 833)
(47 736)
(248 569)
Interest and discount on loans and receivables
(113 015)
(19 074)
(132 089)
Income and cost settled at effective interest
rate
60 214
(95 153)
(34 939)
Impairment of loans presented as temporary
differences
494 879
58 056
552 935
Employee benefits
21 984
5 292
27 276
Rights to use
4 128
114
4 242
Provisions for future costs
138 929
166 373
305 302
Asset from future cancellations of loans in CHF
0
186 862
186 862
Valuation of investment assets, loans, cash
flows hedge and actuarial gains (losses)
recognized in other comprehensive income
32 685
0
(6 579)
26 106
Shares valuation
(32 027)
5 744
(26 283)
Other
(1 579)
(2 384)
(3 963)
Total
368 279
0
249 680
(6 579)
611 379
161
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
28c. Change of temporary differences
31.12.2022
Adjustments to
previous years
Changes to
financial result
Changes to
equity
31.12.2023
Difference between tax and balance sheet
depreciation
(2 080)
710
(1 370)
Balance sheet valuation of financial
instruments
(27 144)
(8 000)
(35 144)
Unrealised receivables/ liabilities on
account of derivatives
13 602
(14 174)
(573)
Interest on deposits and securities to be
paid/received
(217 807)
16 975
(200 833)
Interest and discount on loans and
receivables
(108 724)
(4 292)
(113 015)
Income and cost settled at effective
interest rate
236 022
(175 807)
60 214
Impairment of loans presented as
temporary differences
465 900
28 978
494 879
Employee benefits
19 604
2 380
21 984
Rights to use
4 719
(591)
4 128
Provisions for future costs
79 551
59 378
138 929
Valuation of investment assets, loans, cash
flows hedge and actuarial gains (losses)
recognized in other comprehensive income
196 768
(164 083)
32 685
Shares valuation
(18 147)
(13 880)
(32 027)
Other
931
(2 510)
(1 579)
Total
643 196
0
(110 835)
(164 083)
368 279
28d. Change of deferred income tax
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Difference between tax and balance sheet depreciation
130
710
Balance sheet valuation of financial instruments
(1 437)
(8 000)
Unrealised receivables/ liabilities on account of derivatives
(7 107)
(14 174)
Interest on deposits and securities to be paid/ received
(47 736)
16 975
Interest and discount on loans and receivables
(19 074)
(4 292)
Income and cost settled at effective interest rate
(95 153)
(175 807)
Impairment of loans presented as temporary differences
58 056
28 978
Employee benefits
5 292
2 380
Rights to use
114
(591)
Provisions for future costs
166 373
59 378
Asset from future cancellations of loans in CHF
186 862
0
Shares valuation
5 744
(13 880)
Other
(2 384)
(2 510)
Change of deferred income tax recognized in financial result
249 680
(110 835)
Valuation of investment assets, loans, cash flows hedge and actuarial gains (losses)
recognized in other comprehensive income
(6 579)
(164 083)
162
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
28e. Negative temporary differences for which the deferred income tax asset was not recognised in
the balance sheet
Temporary differences expiry year
31.12.2024
31.12.2023
Unlimited
10 009
10 009
Total
10 009
10 009
The value of negative temporary differences presented in the above table was recalculated with the
valid tax rate.
In accordance with IAS 12, the Bank offset deferred income tax assets with deferred income tax
liabilities.
31.12.2024
31.12.2023
Net deferred income tax assets
611 379
368 279
Net deferred income tax provision
-
-
TOTAL
611 379
368 279
29. OTHER ASSETS
31.12.2024
31.12.2023
Expenses to be settled
77 397
129 508
Income to be received
53 996
37 719
Interbank settlements
6 924
4 349
Settlements of financial instruments transactions
19 881
44
Receivables from sundry debtors, including:
1 476 275
1 197 900
- receivables due from Société Générale S.A. under an “CHF Portfolio Indemnity and
Guarantee Agreement”*
797 262
625 100
- receivables due to legally invalidated foreign currency mortgage loans
267 507
325 700
Public and legal settlements
12 372
15 186
Total other assets (gross)
1 646 845
1 384 706
Impairment allowances
(25 904)
(24 546)
Total other assets (net)
1 620 941
1 360 160
▪ including other financial assets**
1 531 172
1 215 466
▪ including long-term other assets
0
0
* In implementing the Euro Bank share purchase agreement, which ultimately led to the Purchase of Euro Bank by Bank
Millennium and subsequent Legal Merger, in order to limit the risk associated with the Euro Bank's portfolio of mortgage loans
denominated in CHF or denominated in PLN but indexed to CHF, Euro Bank and Société Générale S.A. concluded on 31 May
2019 a “CHF Portfolio Indemnity and Guarantee Agreement” under which the losses resulting from legal risk are covered by
Société Générale S.A.
** other financial assets includes all of the remaining other net assets excluding the Expenses to be settled and Public and
legal settlements
163
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
30. NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD
FOR SALE
As at December 31, 2024 and December 31, 2023, the Bank did not classify any assets to the Non-
current asset held for sale.
31. FINANCIAL LIABILITIES HELD FOR TRADING
31.12.2024
31.12.2023
Negative valuation of derivatives
226 749
576 611
Adjustment due to fair value hedge
0
0
Short sale of securities
190 769
2 720
Financial liabilities valued at fair value through profit and loss
417 518
579 331
The division of the negative valuation of derivatives into specific types of instruments is presented in
note (19).
32. LIABILITIES TO BANKS AND OTHER MONETARY INSTITUTIONS
32a. Liabilities to banks and other monetary institutions
31.12.2024
31.12.2023
In current account
38 643
27 260
Term deposits
284 091
536 188
Loans and advances received
0
0
Interest
562
1 936
Total
323 296
565 384
32b. Liabilities to banks and other monetary institutions by maturity
31.12.2024
31.12.2023
Current accounts
38 643
27 260
▪ to 1 month
281 500
530 573
▪ above 1 month to 3 months
2 591
3 102
▪ above 3 months to 1 year
0
2 513
▪ above 1 year to 5 years
0
0
▪ above 5 years
0
0
Interest
562
1 936
Total
323 296
565 384
164
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
32c. Liabilities to banks and other monetary institutions by currency
31.12.2024
31.12.2023
in Polish currency
64 023
261 050
in foreign currencies (after conversion to PLN)
259 273
304 334
▪ currency: USD
2997
3
▪ currency: EUR
256 276
304 331
▪ currency: CHF
0
0
▪ other currencies
0
0
Total
323 296
565 384
33. LIABILITIES TO CUSTOMERS
33a. Structure of liabilities to customers by type
31.12.2024
31.12.2023
Amounts due to private individuals
87 566 756
76 599 831
Balances on current accounts
57 540 848
50 242 523
Term deposits
29 463 221
25 771 736
Other
293 855
278 997
Accrued interest
268 832
306 575
Amounts due to companies
25 353 336
26 605 648
Balances on current accounts
15 139 387
14 803 963
Term deposits
9 863 902
11 267 674
Other
304 749
488 536
Accrued interest
45 298
45 475
Amounts due to public sector
4 722 508
4 300 157
Balances on current accounts
4 281 851
3 318 534
Term deposits
434 813
974 507
Other
1 683
1 677
Accrued interest
4 161
5 439
Total
117 642 600
107 505 636
33b. Liabilities to customers by maturity
31.12.2024
31.12.2023
Current accounts
76 962 086
68 365 020
to 1 month
14 765 403
13 701 474
above 1 month to 3 months
14 711 027
11 948 566
above 3 months to 1 year
9 590 167
11 330 805
above 1 year to 5 years
1 246 980
1 766 561
above 5 years
48 645
35 721
Interest
318 292
357 489
Total
117 642 600
107 505 636
165
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
33c. Liabilities to customers by currency
31.12.2024
31.12.2023
in Polish currency
106 733 736
96 237 779
in foreign currencies (after conversion to PLN)
10 908 864
11 267 857
▪ currency: USD
2 498 299
2 550 089
▪ currency: EUR
7 675 813
8 044 025
▪ currency: GBP
383 090
383 030
▪ currency: CHF
231 448
242 561
▪ other currencies
120 214
48 152
Total
117 642 600
107 505 636
34. SALE AND REPURCHASE AGREEMENTS
Liabilities from securities sold with buy-back clause
31.12.2024
31.12.2023
a) to the Central Bank
0
0
b) to banks
194 162
0
c) to customers
0
0
d) interest
61
0
Total
194 223
0
35. DEBT SECURITIES ISSUED
35a. Liabilities from debt securities
31.12.2024
31.12.2023
Bonds
4 873 379
2 903 111
Valuation of Bank’s bonds designated to fair value hedge
52 463
49 304
Interest
104 324
75 537
Total
5 030 166
3 027 952
35b. Liabilities from debt securities by final legal maturity
31.12.2024
31.12.2023
▪ to 1 month
0
0
▪ above 1 month to 3 months
0
0
▪ above 3 months to 1 year
52463
0
▪ above 1 year to 5 years
4 270 610
2 220 915
▪ above 5 years
602 769
731 500
Interest
104 324
75 537
Total
5 030 166
3 027 952
166
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
35c. Change of debt securities
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Balance at the beginning of the period
3 027 952
243 753
Increases, on account of:
2 502 429
2 825 806
Issue of bonds
2 131 700
2 660 611
valuation of Bank’s bonds designated to fair value hedge
3 159
49 304
interest accrual
367 570
115 891
Reductions, on account of:
(500 215)
(41 607)
repurchase of bonds
(128 731)
0
other changes in carrying amount (including exchange rate differences)
(32 701)
0
interest payment
(338 783)
(41 607)
Balance at the end of the period
5 030 166
3 027 952
35d. Debt securities by type
As at 31.12.2024
Balance sheet value
Including
interests
Final legal maturity
Market
Bank Millennium - BMCN_012040
117 955
4 186
2040-01-25
Vienna MTF
Bank Millennium - BMCN_082036
497 997
8 997
2036-08-25
Vienna MTF
Bank Millennium - MILP-2027/09
2 238 911
60 692
2027-09-18
Luxembourg SE
Bank Millennium - MILP-2029/09
2 175 303
30 449
2029-09-25
Luxembourg SE
Total
5 030 166
104 324
As at 31.12.2023
Balance sheet value
Including
interests
Final legal maturity
Market
Bank Millennium - BMCN_012040
251 341
8 841
2040-01-25
Vienna MTF
Bank Millennium - BMCN_082036
494 106
5 107
2036-08-25
Vienna MTF
Bank Millennium - MILP-2027/09
2 282 505
61 589
2027-09-18
Luxembourg SE
Total
3 027 952
75 537
36. SUBORDINATED DEBT
36a. Subordinated debt
31.12.2024
31.12.2023
Amount of subordinated bonds in PLN - BKMO_071227R
700 000
700 000
Currency
PLN
PLN
Interest rate
8.08%
8.12%
Maturity
2027-12-07
2027-12-07
Interest
3 719
3 738
Amount of subordinated bonds in PLN - BKMO_300129W
830 000
830 000
Currency
PLN
PLN
Interest rate
8.17%
8.94%
Maturity
2029-01-30
2029-01-30
Interest
28 611
31 307
Balance sheet value of subordinated debt
1 562 330
1 565 045
167
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
36b. Change of subordinated debt
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Balance at the beginning of the period
1 565 045
1 568 083
Increases, on account of:
125 557
141 686
issue of subordinated bonds
0
0
interest accrual
125 557
141 686
Reductions, on account of:
(128 272)
(144 724)
redemption of subordinated bonds
0
0
interest payment
(128 272)
(144 724)
Balance at the end of the period
1 562 330
1 565 045
During 2024 and 2023 the Bank did not have any delays in the payment of principal and interest
instalments, nor did it infringe any contractual provisions resulting from its subordinated liabilities.
37. PROVISIONS
37a. Provisions
31.12.2024
31.12.2023
Provision for commitments and guarantees given
53 605
42 375
Provision for pending legal issues
2 846 010
1 401 798
Provision for legal risk connected with fx mortgage loans
2 798 472
1 355 329
Total
2 899 615
1 444 173
37b. Change of Provision for commitments and guarantees given
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Balance at the beginning of the period
42 375
40 174
Charge of provision
52 302
40 336
Release of provision
(40 993)
(37 916)
FX rates differences
(79)
(219)
Balance at the end of the period
53 605
42 375
37c. Change of Provision for pending legal issues
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Balance at the beginning of the period
1 401 798
975 092
Charge of provision
13 553
30 208
Release of provision
(8 872)
(11 783)
Utilisation of provision
(420 111)
(112 313)
Creation of provision for legal risk connected with FX mortgage loans*
1 857 142
532 886
Reclassification of provisions
2 500
(12 292)
Balance at the end of the period
2 846 010
1 401 798
* Creation of provisions for legal risk related to foreign currency mortgage loans is described in more detail in Chapter 12
“Legal risk related to foreign currency mortgage loans”.
168
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
38. OTHER LIABILITIES
38a. Other liabilities
31.12.2024
31.12.2023
Short-term
1 551 766
2 456 966
Accrued costs - bonuses, salaries
74 982
49 735
Accrued costs - other
233 595
193 796
Provisions for return of insurance fees
98 921
186 661
Interbank settlements
482 843
745 986
Provisions for potential return of fees in the event of early repayment of the loan
70 600
76 400
Settlement of transactions on financial instruments
0
0
Other creditors, including:
413 895
1 013 454
- liabilities due to legally invalidated foreign currency mortgage loans
244 094
288 253
- settlements for card transactions
7
192 141
- insurance settlements
16 342
59 775
Liabilities due to leases
93 915
93 192
Liabilities to public sector
39 461
35 244
Deferred income
19 321
41 551
Provisions for unused employee holiday
19 635
17 089
Provisions for retirement benefits
4 288
3 263
Other
310
595
Long-term
469 906
474 887
Provisions for retirement benefits
44 024
41 964
Accrued costs
0
0
Commitment to pay – BGF*
227 409
209 209
Liabilities due to leases
198 473
219 518
Accrued costs
0
4 196
Total
2 021 672
2 931 853
including other financial liabilities**
1 565 650
2 382 194
* The Bank uses the option of contributing some of the fees paid to the BGF in the form of a payment obligation, which
involves recognizing a commitment to pay and simultaneously recording encumbered assets in the form of debt securities held
on a separate account created for this purpose.
** other financial liabilities includes all of the other liabilities excluding the Liabilities to public sector, Deferred income,
Provisions for return, Commitment to pay – BGF, and other items
38b. Liabilities from lease
31.12.2024
31.12.2023
Liabilities from lease (gross)
324 449
342 039
Unrealised financial costs
(32 061)
(29 329)
Current value of minimum lease instalments
292 387
312 710
Liabilities from lease (gross) by maturity
Under 1 year
108 308
105 182
From 1 year to 5 years
207 906
207 517
Above 5 years
8 235
29 340
Total
324 449
342 039
Liabilities from lease (net) by maturity
Under 1 year
93 915
93 192
From 1 year to 5 years
190 422
190 501
Above 5 years
8 051
29 017
Total
292 388
312 710
169
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
38c. Change of provisions for unused employee holiday
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Balance at the beginning of the period
17 089
13 862
Charge of provisions/ reversal of provisions
2 303
3 227
Utilisation of provisions
0
0
Other
243
0
Balance at the end of the period
19 635
17 089
38d. Change of provisions for retirement benefits
1.01.2024 -
31.12.2024
1.01.2023 -
31.12.2023
Balance at the beginning of the period
45 227
31 541
Charge of provisions/ reversal of provisions
5 816
4 600
Utilisation of provisions/ reclassification of provision
(1 400)
(1 348)
Actuarial gains (losses)
(1 331)
10 434
Balance at the end of the period
48 312
45 227
39. EQUITY
39a. Capital
The share capital of the Bank Millennium S.A. is PLN 1,213,116,777 divided into 1,213,116,777 shares
of PLN 1 par value each, as presented by the table below.
SHARE CAPITAL
Par value of one share = 1 PLN.
Series/
issue
Share type
Type of
preference
Number of
shares
Value of
series/issue
(PLN)
Manner of
capital
coverage
Registration
date
Right to
dividend
A
registered founder
x2 as to voting
106 850
106 850
cash
30.06.1989
30.06.1989
B1
registered ordinary
150 000
150 000
cash
13.06.1990
01.01.1990
B2
registered ordinary
150 000
150 000
cash
13.12.1990
01.01.1990
C
bearer ordinary
4 693 150
4 693 150
cash
17.05.1991
01.01.1991
D1
bearer ordinary
1 700 002
1 700 002
cash
31.12.1991
01.01.1992
D2
bearer ordinary
2 611 366
2 611 366
cash
31.01.1992
01.01.1992
D3
bearer ordinary
1 001 500
1 001 500
cash
10.03.1992
01.01.1992
E
bearer ordinary
6 000 000
6 000 000
cash
28.05.1993
01.01.1992
F
bearer ordinary
9 372 721
9 372 721
cash
10.12.1993
01.01.1993
G
bearer ordinary
8 000 000
8 000 000
cash
30.05.1994
01.10.1993
H
bearer ordinary
7 082 129
7 082 129
cash
24.10.1994
01.10.1994
Increasing of par value of shares from 1 to 4 PLN
122 603 154
surplus
24.11.1994
1:4 split
122 603 154
05.12.1994
I
bearer ordinary
65 000 000
65 000 000
cash
12.08.1997
01.10.1996
J
bearer ordinary
196 120 000
196 120 000
capitals of Bank
Gdański S.A.
12.09.1997
01.10.1996
K
bearer ordinary
424 590 872
424 590 872
cash
31.12.2001
01.01.2001
L
bearer ordinary
363 935 033
363 935 033
cash
26.02.2010
01.01.2009
Total number of shares
1 213 116 777
Total share capital
1 213 116 777
170
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In the reporting period a conversions of 8000 ordinary registered shares into the bearer shares took
place. As a consequence number of registered shares as of 31.12.2024 amounted to 99,480 of which
61,600 are founders’ shares, privileged so that one share entitles to two votes at the Annual General
Meeting.
According to the information available to the Bank, with respect to shareholders holding more than
5% of votes at the General Meeting, the Bank's shareholders are the following entities
Shareholder 31.12.2024
Number of
shares
% share in
share capital
Number of
votes
% share in
votes at
Shareholders’
Meeting
Banco Comercial Portugues S.A.
607 771 505
50.10
607 771 505
50.10
Nationale-Nederlanden Otwarty Fundusz Emerytalny
112 638 286
9.29
112 638 286
9.29
Allianz Polska Otwarty Fundusz Emerytalny
108 832 510
8.97
108 832 510
8.97
Otwarty Fundusz Emerytalny PZU „Złota Jesień”
65 599 757
5.41
65 599 757
5.41
The data contained in the table has been determined according to the rules described below. With
regard to Banco Comercial Portugues S.A. this data collected in connection with the registration of
shareholders entitled to participate in the Ordinary General Meeting of Shareholders held on March
27, 2024. In the scope of Nationale-Nederlanden Otwarty Fundusz Emerytalny Allianz Polska Otwarty
Fundusz Emerytalny oraz Otwartego Funduszu Emerytalnego PZU „Złota Jesień” the number of shares
and their participation in the share capital of the Bank were calculated on the basis of the annual
structure of assets of the above mentioned Funds as at 31 December 2024 (announced on the websites
respectively: www.nn.pl , www.allianz.pl and www.pzu.pl) In terms of the calculations made on the
basis of the annual structures of the above mentioned funds, the volume-weighted average price
(VWAP) of the Bank's shares was assumed at PLN 8.9290.
Shareholder 31.12.2023
Number of
shares
% share in
share capital
Number of
votes
% share in
votes at
Shareholders’
Meeting
Banco Comercial Portugues S.A.
607 771 505
50.10
607 771 505
50.10
Nationale-Nederlanden Otwarty Fundusz Emerytalny
107 970 039
8.90
107 970 039
8.90
Allianz Polska Otwarty Fundusz Emerytalny
100 990 351
8.32
100 990 351
8.32
Otwarty Fundusz Emerytalny PZU „Złota Jesień”
65 492 207
5.40
65 492 207
5.40
171
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
39b. Accumulated other comprehensive income
Other comprehensive income arises on the recognition of:
▪ effect of valuation (at fair value) of financial assets FVTOCI in the net amount, i.e. after
having accounted for deferred tax. These values (related to debt securities and loans) are
taken off revaluation reserve at the moment of excluding the valued assets from the books of
account - in full or in part or at the moment of recognising impairment (the effect of valuation
is then put through the profit and loss account), the effect on capital instruments valuation
is not transferred to the profit and loss account.
▪ effect of valuation (at fair value) of derivatives hedging cash flows in the net amount, i.e.
having accounted for deferred tax. Revaluation reserve records such part of profits or losses
connected with the derivatives hedging cash flows which is an effective hedge, while the
ineffective part of the profits or losses connected with such hedging instrument is recognised
in the profit and loss account.
▪ actuarial gains (losses) at their net value, i.e. after deferred tax. Aforementioned gains or
losses result from the discounting of future liabilities arising from a provision created for
retirement benefits. Valuation is done using the projected unit cost method. The parameters
that have a significant impact on the amount of current liabilities are: the rate of mobility
(rotation) of employees, the discount rate, the rate of wage growth. These values are not
reclassified to the profit and loss account.
Accumulated other comprehensive income
31.12.2024
31.12.2023
Effect of valuation (gross)
(137 400)
(172 027)
Deferred income tax
26 105
32 685
Net effect of valuation
(111 295)
(139 342)
The sources of revaluation reserve are as follows (data in PLN thousand):
Revaluation reserve on FVTOCI assets 1.01.2024 - 31.12.2024
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
(218 941)
41 600
(177 341)
Transfer to income statement of the period as a result of sale
(143)
27
(116)
Change connected with maturity of securities
0
0
0
Profit/loss on revaluation of FVTOCI debt securities, recognized in equity
156 256
(29 689)
126 567
Profit/loss on revaluation of FVTOCI shares, recognized in equity
7 847
(1 491)
6 356
Revaluation reserve at the end of the period
(54 981)
10 447
(44 534)
Revaluation reserve on FVTOCI assets 1.01.2023 - 31.12.2023
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
(895 116)
170 073
(725 043)
Transfer to income statement of the period as a result of sale
12 353
(2 347)
10 006
Change connected with maturity of securities
70 973
(13 485)
57 488
Profit/loss on revaluation of FVTOCI debt securities, recognized in equity
588 427
(111 801)
476 626
Profit/loss on revaluation of FVTOCI shares, recognized in equity
4 422
(840)
3 582
Revaluation reserve at the end of the period
(218 941)
41 600
(177 341)
172
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Revaluation reserve on cash flows hedge financial instruments 1.01.2024 - 31.12.2024
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
(54 194)
10 297
(43 897)
Gains or losses on valuation of financial instruments recognized in equity
29 212
(5 550)
23 662
Transfer to income statement during period
221
(42)
179
Revaluation reserve at the end of the period
(24 761)
4 705
(20 056)
Revaluation reserve on cash flows hedge financial instruments 1.01.2023 - 31.12.2023
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
(406 061)
77 151
(328 910)
Gains or losses on valuation of financial instruments recognized in equity
354 113
(67 281)
286 832
Transfer to income statement during period
(2 246)
427
(1 819)
Revaluation reserve at the end of the period
(54 194)
10 297
(43 897)
Revaluation reserve due to actuarial gains (losses) 1.01.2024 - 31.12.2024
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
(702)
132
(570)
Change in the obligations arising from the provision for retirement benefits
1 331
(253)
1 078
Revaluation reserve at the end of the period
629
(121)
508
Revaluation reserve due to actuarial gains (losses) 1.01.2023 - 31.12.2023
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
9 732
(1 850)
7 882
Change in the obligations arising from the provision for retirement benefits
(10 434)
1 982
(8 452)
Revaluation reserve at the end of the period
(702)
132
(570)
Revaluation reserve on FVTOCI credit portolio 1.01.2024 - 31.12.2024
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
101 810
(19 344)
82 466
Gains or losses on valuation of financial instruments recognized in equity
(157 018)
29 833
(127 185)
Transfer to Profit and loss due to impairment calculation
(3 079)
585
(2 494)
Revaluation reserve at the end of the period
(58 287)
11 074
(47 213)
Revaluation reserve on FVTOCI credit portolio 1.01.2023 - 31.12.2023
Gross value
Deferred tax
Total
Revaluation reserve at the beginning of the period
255 824
(48 607)
207 217
Gains or losses on valuation of financial instruments recognized in equity
(145 054)
27 561
(117 493)
Transfer to Profit and loss due to impairment calculation
(8 960)
1 702
(7 258)
Revaluation reserve at the end of the period
101 810
(19 344)
82 466
173
Annual Financial Report
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for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
39c. Retained earnings
Supplementary
capital
Reserve capital
General banking
risk fund
Retained
earnings
TOTAL
Retained earnings at the beginning of
the period 01.01.2024
374 957
3 279 150
228 902
510 259
4 393 268
appropriation of profit, including:
cover of loss
0
510 259
0
(510 259)
0
charge due to transfer of own shares
to employees
0
0
0
0
0
net profit/ (loss) of the period
0
0
0
643 103
643 103
Retained earnings at the end of the
period 31.12.2024
374 957
3 789 409
228 902
643 103
5 036 371
Supplementary
capital
Reserve capital
General banking
risk fund
Retained
earnings
TOTAL
Retained earnings at the beginning of
the period 01.01.2023
374 957
4 309 049
228 902
(1 029 899)
3 883 009
appropriation of profit, including:
cover of loss
0
(1 029 899)
0
1 029 899
0
charge due to transfer of own shares
to employees
0
0
0
0
0
net profit/ (loss) of the period
0
0
0
510 259
510 259
Retained earnings at the end of the
period 31.12.2023
374 957
3 279 150
228 902
510 259
4 393 268
40. FINANCIAL LIABILITIES BY CONTRACTUAL MATURITY
31.12.2024
Below 1
month
from 1
month to 3
months
from 3
months to
1 year
from 1
year
to 5 years
above
5 years
TOTAL
Deposits from banks
320 705
2 591
0
0
0
323 296
Deposits from customers
91 870 954
14 927 597
9 817 405
1 251 544
48 645
117 916 145
Liabilities from securities sold
with buy-back clause
194 254
0
0
0
0
194 254
Debt securities
4 186
8 997
579 212
5 538 619
1 301 540
7 432 554
Subordinated debt
0
28 611
128 090
1 018 593
830 000
2 005 294
Liabilities from trading
derivatives - notional value
3 589 735
1 426 436
2 104 353
6 051 771
263 740
13 436 035
Liabilities from hedging
derivatives - notional value
468 280
1 077 044
192 070
5 856 460
0
7 593 854
Commitments granted - financial
13 155 721
0
0
0
0
13 155 721
Commitments granted -
guarantee
1 713 693
0
0
0
0
1 713 693
TOTAL
111 317 528
17 471 276
12 821 130
19 716 987
2 443 925
163 770 846
174
Annual Financial Report
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for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
31.12.2023
Below 1
month
from 1
month to 3
months
from 3
months to
1 year
from 1
year
to 5 years
above
5 years
TOTAL
Deposits from banks
560 856
3 102
2 514
0
0
566 472
Deposits from customers
82 204 097
12 164 714
11 612 194
1 776 691
35 721
107 793 417
Liabilities from securities sold
with buy-back clause
0
0
0
0
0
0
Debt securities
8 841
5 106
412 247
3 574 240
1 662 215
5 662 649
Subordinated debt
0
31 307
134 779
1 170 252
830 000
2 166 338
Liabilities from trading
derivatives - notional value
2 795 970
2 753 193
5 104 452
4 773 421
173 335
15 600 371
Liabilities from hedging
derivatives - notional value
1 708 280
1 945 044
117 070
3 117 280
0
6 887 674
Commitments granted - financial
12 550 588
0
0
0
0
12 550 588
Commitments granted -
guarantee
1 713 980
0
0
0
0
1 713 980
TOTAL
101 542 612
16 902 466
17 383 256
14 411 884
2 701 271
152 941 489
175
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
14. Supplementary Information
14.1. 2023 DIVIDEND
Bank Millennium has a dividend policy of distribution between 35% and 50% of net profit, taking into
account supervisory recommendations. Considering that in the Recovery Plan and the Capital
Protection Plan, the Bank adopted the assumption that no dividend would be paid from the 2023
profit, as well as taking into account the recommendation of the Polish Financial Supervision Authority
formulated in the letter of 22 February 2024 regarding the non-payment of dividend, the Management
Board of the Bank presented a proposal and the Ordinary General Meeting of the Bank, held on March
27, 2024, decided to allocate the entire profit earned in 2023 in the amount of PLN 510,259,398.40
to reserve capital.
14.2. DATA ABOUT ASSETS, WHICH SECURE LIABILITIES
As at 31 December 2024 following assets of the Bank constituted collateral of liabilities (PLN’000):
No.
Type of assets
Portfolio
Secured liability
Par value of
assets
Balance sheet
value of assets
1.
Treasury Bonds
DS0727
Held to maturity
Securing the Fund for Protection of Funds
Guaranteed as part of the Bank Guarantee
Fund
267 000
247 461
2.
Treasury Bonds
PS0527
Held to maturity
Security of payment obligation to BFG
contribution - guarantee fund
142 000
139 128
3.
Treasury Bonds
DS0726
Held to maturity
Security of payment obligation to BFG
contribution compulsory resolution fund
150 000
144 743
4.
Treasury Bonds
PS0425
Held to Collect and
for Sale
pledge on the Bank's account related to a
securitization transaction
550 000
545 358
5.
Treasury Bonds
WZ0525
Held to Collect and
for Sale
pledge on the Bank's account related to a
securitization transaction
127 000
128 110
6.
Treasury Bonds
PS0527
Held to maturity
financial and registered pledge on the
Bank's account in the brokerage house
188 850
185 031
7.
Treasury Bonds
PS0527
Held to maturity
financial pledge on the Bank's account in
the brokerage house
583 659
571 855
8.
Cash
receivables
initial settlement deposit in KDPW CCP
(MAGB)
11 000
11 000
9.
Cash
receivables
ASO guarantee fund (PAGB)
795
795
10.
Cash
receivables
appropriate security deposit at KDPW CCP
(MATS)
321
321
11.
Cash
receivables
Settlement on transactions concluded
24 657
24 657
12.
Deposits placed
Deposits in banks
Settlement on transactions concluded
144 662
145 063
TOTAL
2 189 944
2 143 522
Additionally, as at 31 December 2024, the Bank had concluded short-term (usually settled within 7
days) sales transactions of Treasury securities with a repurchase agreement, the subject of which
were securities with a value of PLN 194,088 thousand.
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st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
As at 31 December 2023 following assets of the Bank constituted collateral of liabilities (PLN’000):
No.
Type of assets
Portfolio
Secured liability
Par value
of assets
Balance sheet
value of assets
1.
Treasury Bonds
DS0727
Held to maturity
Securing the Fund for Protection of Funds
Guaranteed as part of the Bank Guarantee Fund
255 000
228 434
2.
Treasury Bonds
DS0726
Held to maturity
Securing the Fund for Protection of Funds
Guaranteed as part of the Bank Guarantee Fund
52 000
48 267
3.
Treasury Bonds
PS0527
Held to maturity
Security of payment obligation to BFG contribution
- guarantee fund
142 000
136 644
4.
Treasury Bonds
DS0726
Held to maturity
Security of payment obligation to BFG contribution
- compulsory resolution fund
135 000
125 307
5.
Treasury Bonds
PS0425
Held to Collect and for
Sale
pledge on the Bank's account related to a
securitization transaction
572 500
544 527
6.
Treasury Bonds
WZ0525
Held to Collect and for
Sale
pledge on the Bank's account related to a
securitization transaction
220 500
221 887
7.
Treasury Bonds
PS0524
Held to Collect and for
Sale
pledge on the Bank's account related to a
securitization transaction
50 000
50 425
8.
Treasury Bonds
PS0527
Held to maturity
financial and registered pledge on the Bank's
account in the brokerage house
64 850
62 404
9.
Treasury Bonds
PS0527
Held to maturity
financial pledge on the Bank's account in the
brokerage house
583 659
561 642
10.
Treasury Bonds
PS0527
Held to maturity
financial pledge on the Bank's account in the
brokerage house
124 000
119 323
11.
Cash
receivables
initial settlement deposit in KDPW CCP (MAGB)
11 000
11 000
12.
Cash
receivables
ASO guarantee fund (PAGB)
1 927
1 927
13.
Cash
receivables
settlement of concluded transactions
47 909
47 909
14.
Deposits placed
Deposits in banks
settlement of concluded transactions
159 804
160 135
TOTAL
2 420 149
2 319 831
As at 31 December 2023, the Bank did not have concluded transactions of sale of treasury securities
with repurchase agreements.
The Bank is also obliged to maintain the obligatory reserve on the current account with the NBP, the
amount of which depends on the average balance of funds of customer deposit accounts and the
reserve rate set by the NBP. From the Bank's point of view, the funds held as part of the obligsatory
reserve constitute restricted assets. The value of the provision maintained at the end of the financial
year is presented in note (18).
177
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
14.3. SECURITIES COVERED BY TRANSACTIONS WITH A BUY-BACK CLAUSE
(SBB)
The following securities (presented in the Bank's balance sheet) were the subject of repurchase
transactions (SBB), in PLN thousand:
As at 31.12.2024 r.
Type of security
Nominal value
Balance sheet value
Treasury bonds
193 346
194 088
TOTAL
193 346
194 088
As at 31.12.2023 r.
Type of security
Nominal value
Balance sheet value
Treasury bonds
0
0
TOTAL
0
0
As a result of concluding repurchase transactions involving securities presented in the table above,
the Bank is exposed to risks similar to those in the case of holding securities with the same
characteristics in its own portfolio.
14.4. OFFSETTING OF ASSETS AND LIABILITIES ON THE BASIS OF ISDA
AGREEMENTS
The majority of the Bank's derivatives portfolio arises due to conclusion by the Bank framework ISDA
agreements (International Swaps and Derivatives Agreements). Provisions included in the agreements
define comprehensive procedures in case of infringement (mainly difficulties in payments), and
provide possibility to cancel a deal, making settlements with counterparty base on offset amount of
mutual receivables and liabilities. To date, the Bank has not exercised that option, however, in order
to meet information requirements as described in IFRS 7 the following table presents the fair values
of derivative instruments (both classified as held for trading and dedicated to hedge accounting) as
well as cash collaterals under ISDA framework agreements with a theoretical maximum amount
resulting from the settlement on the basis of compensation.
PLN’000
Amounts to be received
Amounts to be paid
Valuation of derivatives
366 724
208 941
Amount of cash collaterals accepted/granted
(266 489)
(145 063)
Financial assets and liabilities covered by framework ISDA
agreements allowing compensation
100 235
63 878
Theoretical maximum amount of compensation
(48 920)
(48 920)
Financial assets and liabilities covered by framework ISDA
agreements allowing compensation taking into account
theoretical amount of compensation
51 315
14 958
178
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
14.5. ADDITIONAL EXPLANATIONS TO THE CASH FLOW STATEMENT
For the purpose of the cash flow statement the following financial assets are classified by the Bank
as cash or its equivalents:
PLN’000
31.12.2024
31.12.2023
Cash and balances with the Central Bank
5 178 984
5 094 984
Receivables from interbank deposits*
288 391
612 467
Debt securities issued by the State Treasury*
8 597 254
12 688 962
of which FVTOCI and HTC
8 597 254
12 686 172
of which held for trading
0
2 790
Total
14 064 629
18 396 413
* Financial assets with maturity below three months
For the purpose of the cash flow statement the following classification of activity types was adopted:
1. Operating activities – cover the basic scope of operations connected with services provided by the
Bank’s units covering events whose purpose is to earn profit and not being investment or financial
activity,
2. Investment activities cover operations connected with the purchasing and selling of fixed assets,
in particular financial assets not included in the ”for trading” category, shares and shares in
subsidiaries, tangible and intangible fixed assets,
3. Financial activities cover activities connected with raising of funds in the form of capital or
liabilities, as well as servicing sources of funding.
14.6. INFORMATION ON CUSTODY ACTIVITY
As of 31.12.2024 the Custody Department of Bank Millennium S.A. maintained 12,843 accounts in
which Customers’ assets were kept with the total value of PLN 69 billion. Net revenue from the
custody business for 2024 amounted to PLN 4.9 million. The Custody Department serves as a depositary
bank for 22 mutual funds including 21 of Millennium TFI S.A.
14.7. SHARE BASED PAYMENTS
In 2012, the Bank implemented a policy specifying the principles of remuneration for persons having
a significant impact on the risk profile of the Bank, as amended.
In accordance with the policy, the Bank's employees who have a significant impact on its risk profile
receive variable remuneration, part of which is paid in the form of financial instruments.
179
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Until 2018, the financial instrument took the form of phantom shares. From 2019, the Bank, by
decision of the General Meeting of Shareholders of the Bank on August 27, 2019, introduced a 3-year
incentive program to reward eligible persons previously identified as having a significant impact on
the risk profile (Risk Taker). As part of it, the Own Shares purchased by the Bank were, in accordance
with the applicable Risk Takers' remuneration policy, intended as a financial instrument for free
acquisition in an appropriate number by designated Risk Takers during the Program Period.
In bonus programs effective from January 1, 2020, financial instruments were awarded to Risk Takers
I - Members of the Management Board of Bank Millennium SA.
For 2020, Risk Takers I – Members of the Management Board of Bank Millennium SA were not awarded
a bonus.
In 2023, the Personnel Committee of the Supervisory Board decided to convert own shares granted to
Members of the Management Board in the 2019 and 2021 program in the form of own shares into
phantom shares. Under the 2022 and 2023 program, phantom shares were granted as a financial
instrument.
Variable remuneration –
2019
2020
2021
2022
2023
financial instruments for:
Kind of transactions in the light
of IFRS 2
Own Share-based payment transactions
Cash-settled
share-based
payments
Cash-settled
share-based
payments
Commencement of vesting
period
1 January 2019
1 January 2020
1 January 2021
1 January
2022
1 January 2023
The date of announcing the
program
27 August 2019
1 January
2022
1 January 2023
Starting date of the program in
accordance with the definition
of IFRS 2
Date of the Personnel Committee meeting taking place after closing of financial year
Number of granted
instruments
Determined at the grant date of the program in accordance with the definition of IFRS 2
Maturity date
3 years since the
date of granting
program
5 years since the date of granting program
Vesting date*
31 December
2019
31 December
2020
31 December
2021
31 December
2022
31 December
2023
Vesting conditions
Employment in
the Bank 2019,
results of the
Bank and
individual
performance
Employment in
the Bank 2020,
results of the
Bank and
individual
performance
Employment in
the Bank 2021,
results of the
Bank and
individual
performance
Employment
in the Bank
2022, results
of the Bank
and individual
performance
Employment in
the Bank 2023,
results of the
Bank and
individual
performance
Program settlement
Program 2023: On the settlement day, the participant will be paid an amount of cash
constituting the product of the phantom shares held by the participant and the arithmetic
average price of the Bank's shares on the WSE at the closing of 20 consecutive sessions
preceding the settlement day. Phantom shares are settled in 5 equal annual instalments
starting from the date of the Personnel Committee at which they were allocated.
Programs 2019-2021: On the settlement date of the program, the participant was granted
own shares; a deferred tranche of the program in 2024.
Program valuation
The fair value of the program is determined at each balance sheet date according to the
rules adopted for determining the value of the program on the settlement date.
* Confirmed by decisions of the Bank's Personnel Committees assessing the work of eligible employee
180
Annual Financial Report
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for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
Financial instruments granted to
members of the Management Board of
the Bank, for the year:
2020
2021
2022
2023
Phantom shares
Phantom shares
Phantom shares
Date of shares assigning
-
13.04.2022
03.11.2023
07.05.2024
Number of shares
-
255 980
282 060
586 821
granted
-
-
-
-
deferred
-
191 985
225 648
306 172
In retention
63 995
56 412
280 649
Value as at assigning date (PLN)
-
1 680 000
1 968 750
5 588 336
granted
-
deferred
-
1 260 000
1 575 000
2 915 698
In retention
420 000
393 750
2 672 638
Fair value as at 31.12.2024 (PLN)
-
2 278 222
2 510 334
5 222 707
In retention - the number of phantom shares includes the second deferred tranche for 2021, the first
tranche for 2022 and the part granted for 2023. These shares are granted to Members of the
Management Board, but are subject to retention for 12 months, i.e. until May 7, 2025.
At the publication date of the Annual Report, the Personnel Committee of the Supervisory Board has
not taken a decision on the amount of variable remuneration for the members of the Management
Board for 2024.
14.8. ADDITIONAL INFORMATION AND OTHER ESSENTIAL EVENTS
BETWEEN THE DATE, FOR WHICH THE FINANCIAL REPORT WAS
PREPARED AND ITS PUBLICATION DATE
REFORM OF BENCHMARKS
WIBOR
In May 2022, the Polish government announced that WIBOR would be replaced by a different (lower)
rate from 1 January 2023. In June 2022, a Working Group was established, including commercial
banks, GPW Benchmark (Administrator of WIBOR), KNF.
In July 2022, the National Working Group on Reference Rate Reform (NWG) was established in
connection with the planned reform of reference rates in Poland. The objective of the NGR's work to
introduce a new interest rate benchmark and replace the currently used WIBOR index with it while
ensuring the compliance with BMR, including in particular ensuring credibility, transparency and
reliability in the development and application of the new benchmark.
The National Working Group involves representatives of the Ministry of Finance, the National Bank of
Poland, the Office of the Financial Supervision Authority, the Bank Guarantee Fund, the Polish
Development Fund, the Warsaw Stock Exchange, the National Depository for Securities, Bank
Gospodarstwa Krajowego, the GPW Benchmark, as well as representatives of credit institutions, i.e.
in particular, banks, financial institutions, including investment funds, insurance companies, factoring
and leasing companies, entities that are bond issuers, including corporate and municipal bonds,
clearing houses.
181
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
The work of the National Working Group is coordinated and supervised by a Steering Committee
including representatives of key institutions: Financial Supervision Authority, the National Bank of
Poland, the Ministry of Finance, the Bank Guarantee Fund, as well as the GPW Benchmark - the
administrator of the reference rates, BondSpot S.A - and the Polish Bank Association (Polish: Związek
Banków Polskich).
The NWG's activities are executed in a project formula, where project streams have been identified
and where Bank Millennium representatives are actively contributing to the work.
The National Working Group initially selected the WIRON index to become the key interest rate
benchmark under the BMR and to be used in financial contracts, financial instruments and as the
preferred alternative benchmark to WIBOR.
In connection with this, Bank Millennium S.A. established, by resolution of the Bank's Management
Board of 24 August 2022, an internal project reporting to the Management Board (Deputy Chairman
of the Management Board - CFO and Member of the Management Board overseeing the areas of retail
and corporate products), in order to duly manage the WIBOR to WIRON transition process and to
implement the work in accordance with the roadmap. This work involves representatives from a
significant number of the Bank's business units, including, in particular, representatives responsible
for product areas and risk management issues, including, in particular, interest rate risk and
operational risk. The structure of the project includes the division into streams covering products and
processes where the WIBOR benchmark is applied, the management of the project by a dedicated
project manager and the periodical reporting of statuses on the individual streams.
The Bank uses the WIBOR reference rate in the following products (in PLN million as of 31 December
2024):
- mortgage loans: 20 461,76 mortgage loans based on WIBOR (excluding 13 900,74 mortgage loans
currently with temporary fixed rate where the clients have the option to switch to variable rate
indexed to WIBOR after the end of such temporary fixed rate initial period);
- loan products, factoring and corporate discounting products: 19 044,11;
- debt instruments (13 169,30);
- Assets: 11 036,53
- Liabilities: 2 132,77
- derivative instruments: 13 491,95
The Bank also applies instruments based on WIBOR benchmarks in hedge accounting, details of the
hedging relationships used by the Group, the items designated as hedged and hedging and the
presentation of the result on these transactions are presented in Note 24 "Derivatives - Hedge
accounting" in Chapter 13 "Notes to the Consolidated Financial Statements.
In March 2023, the Steering Committee of the National Working Group on Benchmark Reform adopted
recommendations on new products, both banking, leasing and factoring, as well as previously
published ones on bonds and derivatives.
In July 2023, the NWG SC adopted a Recommendation on applying a fallback rate for WIBOR
benchmark in interest rate derivatives.
In August 2023, The NWG Steering Committee has adopted a Recommendation on the rules and
methods of conversion of WIBOR-based debt instruments.
In April 2024, the Steering Committee of the National Working Group for benchmark reform adopted
a paper on Methods of applying the RFR and selected rules for calculating compound rates.
On 29 March 2024, the Steering Committee of the National Working Group for benchmark reform
unanimously decided to commence a review and analysis of risk-free-rate (RFR) replacement choices
for WIBOR benchmark, including both WIRON and other possible interest rate indices or benchmarks.
182
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
In June 2024, the NWG launched a public consultation on the review and evaluation of alternative
interest rate indices as a basis for reviewing the September 2022 NGR SC decision to select WIRON as
the optimal replacement for the WIBOR benchmark index. The subject of the consultation was the
WIRON, WIRON+, WIRF, WIRF+ and WRR indices, which participants in the consultation were able to
assess from the perspective of criteria concerning the quality of the indices, their characteristics,
their potential for the development of the financial market and the market for banking products.
Participants also had the opportunity to comment on the current market and regulatory environment
and related initiatives that could help strengthen the new index, the market it describes and the
instruments based on it.
On 9 July 2024, the National Working Group announced that the collection of opinions as part of the
public consultation process had ended on 1 July 2024.
In October 2024, The Steering Committee of the National Working Group on Benchmark Reform
announced the launch of additional round of public consultations until October 31
st
, 2024. With a view
to meeting the deadline set for the end of 2027 for the conversion of benchmarks in Poland, the NWG
Steering Committee has decided to include four indices from the WIRF family in the next round of
public consultations.
In December 2024, the NWG Steering Committee decided to select the proposed index marked with
technical name WIRF– and based on unsecured deposits of Credit Institutions and Financial Institutions
as the ultimate interest rate benchmark to replace the WIBOR benchmark. The next step for the NWG
SC will be to update the Roadmap as part of the current schedule of activities aimed at replacing the
WIBOR benchmark with the ultimate WIRF– benchmark, whose final name is to be chosen in the course
of further work. The NWG SC is also planning to review and update, in the near future, the NWG’s
recommendations issued so far, in particular the standards for the application of a new RFR
benchmark in new banking, leasing and factoring products and financial instruments, as well as the
standards for voluntary conversion for legacy portfolio of contracts and financial instruments that use
the WIBOR benchmark.
WIRF– is ultimately to become the key interest rate benchmark as defined in the BMR which can be
applied in financial contracts (e.g. credit agreements), financial instruments (e.g. debt securities or
derivatives) and by investment funds (e.g. to determine the asset management fees).
In the current phase of the project, the Bank monitors on an ongoing basis the changing situation,
market development, communication of the administrator, as well as consultations and decisions of
the Steering Committee of the National Working Group, and makes appropriate decisions in this
respect, depending on the changing situation.
In addition, according to the project of changes of the Roadmap announced by the Steering Committee
of the National Working Group in October 2023 and was confirmed by the NWG in April 2024, the final
moment of conversion would happen by end of 2027. Currently, the Roadmap is being updated to
reflect the provisions of the NGR SC with regard to the revision of the benchmark reform schedule.
Therefore, a regulatory event has been postponed and should occur in Q3/Q4 2026. However, there
is currently a) no information regarding the potential regulatory event referred to in Article 23c(1) of
the BMR; b) lack of a regulation of the Minister of Finance referred to in Article 61c of the Act of 5
August 2015 on macro-prudential supervision of the financial system and crisis management in the
financial system concerning a replacement or at least a draft of such a regulation and thus
information, whether the Minister of Finance will designate one or several WIBOR replacements; c)
lack of information on the amount of the adjustment spread or the method of calculating this spread,
d) whether there will be corresponding adjustment changes to existing contracts related to this (and
if so, which ones). Therefore given the current stage of the work of the National Working Group and
the planned postponement of the maximum dates for the implementation of the Roadmap, indicating
a final conversion date at the end of 2027, it is currently not possible to estimate the financial impact
of the WIBOR reform.
183
Annual Financial Report
of the Bank Millennium S.A.
for the 12-month period ending 31
st
December 2024
This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
There were no other significant events affecting the financial statements and future results of the
Group between the date on which the report was prepared and the date of its publication.
Date
Name and surname
Position/Function
Signature
24.02.2025
Joao Bras Jorge
Chairman of
the Management Board
Signed by a qualified
electronic signature
24.02.2025
Fernando Bicho
Deputy Chairman of
the Management Board
Signed by a qualified
electronic signature
24.02.2025
Wojciech Haase
Member of
the Management Board
Signed by a qualified
electronic signature
24.02.2025
Andrzej Gliński
Member of
the Management Board
Signed by a qualified
electronic signature
24.02.2025
Wojciech Rybak
Member of
the Management Board
Signed by a qualified
electronic signature
24.02.2025
Antonio Pinto Junior
Member of
the Management Board
Signed by a qualified
electronic signature
24.02.2025
Jarosław Hermann
Member of
the Management Board
Signed by a qualified
electronic signature