Performance of business segments

mBank’s Retail Banking segment serves 5,685 thousand individual clients and microenterprises in Poland, the Czech Republic and Slovakia online, directly through the call centre, via mobile banking and other state-of-the-art technological solutions, as well as in a wide network of branches. The bank offers a broad range of products and services including current and savings accounts, accounts for microenterprises, credit products, deposit products, payment cards, investment products, insurance products, brokerage services, and leasing for microenterprises. In 2013, the bank launched a modern, user-friendly online platform (New mBank) designed from scratch, which provides more than 200 new functionalities and solutions. Similar to our mobile application, the transactional platform is constantly improved and enjoys great popularity among our clients.

Key financial data (at the end of 2018):

Key business data:

In 2018, the Retail Banking segment generated a profit before tax of PLN 1,183.3 million, which represents an increase by PLN 242.4 million, i.e. 25.8% year on year.

The profit before tax of Retail Banking in 2018 was driven by the following factors:

• Increase in total income by PLN 489.1 million or 18.3% year on year, to PLN 3,165.0 million. Net interest income expanded significantly by PLN 297.4 million (supported by rising volumes and a shift in the credit portfolio structure toward high-margin products). The high income in 2018 was also backed by a profit from selling an organised part of enterprise of mFinanse (PLN 219.7 million). The transaction brought about lower net commission income, since commissions for agency services regarding the sale of insurance products of external financial entities fell substantially;

• Increase in operating expenses (including depreciation) by PLN 123.2 million, i.e. 10.3% year on year, driven mainly by the growth in staff-related expenses;

• Higher net impairment losses and fair value change on loans and advances, i.e. PLN 113.5 million or 33.1% up compared to the previous year, which was attributable to the introduction of a new accounting standard (IFRS 9), change in the retail credit portfolio structure and a growing volume of non-mortgage loans (unsecured loans);

• Tax on the Group’s balance sheet items at PLN 205.9 million.

The Corporates and Financial Markets segment serves 23,706 corporate clients including large enterprises (K1 – annual sales exceeding PLN 1 billion), mid-sized enterprises (K2 – annual sales of PLN 50 million – PLN 1 billion) and small enterprises (K3 – annual sales below PLN 50 million, full accounting) through a network of dedicated 46 branches. mBank Group’s offer of products and services for corporate clients focuses on traditional banking products and services (including corporate accounts, domestic and international money transfers, payment cards, cash services, and liquidity management products), corporate finance products, hedging instruments, equity capital market (ECM) services, debt capital market (DCM) instruments, mergers and acquisitions (M&A), leasing and factoring. The segment comprises two areas: Corporate and Investment Banking, and Financial Markets.

Key financial data (at the end of 2018):

Key business data:

The Corporate and Investment Banking segment generated a profit before tax of PLN 545.7 million in 2018, which represents an increase by PLN 72.4 million, i.e. 15.3% year on year.

The profit before tax of Corporate and Investment Banking in 2018 was driven by the following factors:

• Higher total income compared with the previous year (+PLN 169.2 million, i.e. 11.3%). The increase was observed in net interest income (+PLN 90.1 million, i.e. +10.8%), which was mainly caused by higher credit margins and volumes and lower costs of deposits (as a result of the conversion of term deposits into transactional accounts). The growth in net fee and commission income by PLN 50.5 million, i.e. 7.3%, was attributable mainly to higher credit-related commissions resulting from a substantial increase of loans origination;

• Slight increase in operating expenses (including depreciation) by PLN 14.7 million, i.e. 2.1%, in the analysed period;
• Increase in net impairment losses and fair value change on loans and advances by PLN 70.0 million, i.e. 41.6%, compared with 2017;
• Tax on the Group’s balance sheet items at PLN 153.9 million.

In 2018 the Financial Markets segment generated a profit before tax of PLN 83.4 million in 2018, compared with PLN 96.8 million posted in 2017, marking a drop by PLN 13.4 million, i.e. 13.9%, year on year.

The profit before tax of Financial Markets in 2018 was driven by the following factors:

• Slight drop in total income by PLN 1.2 million on the prior year. The decrease in core income resulted mainly from reduced net interest income (-PLN 28.6 million, i.e. 10.2%), mainly due to lower yields on treasury bonds. At the same time, net trading income increased by PLN 32.8 million or 50.6%, which was attributable to the valuation of interest rate derivatives and larger volume of transactions concluded with clients;

• Increase in operating expenses (including depreciation) to PLN 109.3 million;
• Tax on the Group’s balance sheet items at PLN 36.5 million.