The “One Bank” Strategy for 2012-2016 provided for optimisation of the Bank’s balance sheet in terms of its profitability and structure by increasing the share of client deposits in funding, further diversification of the funding base, and a bigger share of high-yield assets.

The “mobile Bank” Strategy, implemented in mid-2016, provided for the strengthening of the funding profile due to the increasing volume of covered bonds and transaction deposits and maintaining the loan-to-deposit ratio on the level of at most slightly above 100% every year (90.3% at the end of 2019). It was reflected in the changes of the structure of mBank Group’s funding in previous years.

The new strategy of mBank Group for 2020-2023 provides for the growth of the share of total client deposits as well as further deployment of the wholesale financing sources for lending, especially via issuances of Eurobonds within EMTN programme and covered bonds by mBank Hipoteczny. We intend to keep the loan to deposit ratio in the range of 92-94%.

Bond issued under the EMTN Programme

After the successful first eurobond issue in October 2012 and issue of CHF bonds in October 2013, mBank Group completed further issues under the EUR 3 billion EMTN Programme in 2014. In 2015, there were no issues under the EMTN Programme, whereas on October 12, 2015, bonds worth EUR 500 million were repaid. On September 21, 2016, mBank, through its foreign subsidiary mFinance France, completed the issue of bonds with a nominal value of EUR 500 million, maturing in 2020. In 2017, there was one issue under the EMTN Programme. On March 28, 2017, mFinance France issued 6-year bonds with a nominal value of CHF 200 million and 1.005% coupon.

In 2018 two issuances under the programme took place. On June 7, 2018, mBank issued unsecured bonds at nominal value of CHF 180 million, with 0.565% coupon and four-year maturity. On September 5, 2018, an issue of EUR 500 million, 1.058% coupon and four-year maturity was completed. Two EMTN tranches were repaid in 2018, CHF 200 million in October and CZK 500 million (a private placement) in December.

On April 1, 2019, the tranche on the amount of EUR 500 million was redeemed. Only several days later, on April 5, 2019 mBank issued 5.5-year unsecured bonds in the amount of CHF 125 million with the coupon of 1.0183%. Bonds are subject to the English law and are traded on the Swiss stock exchange SIX Swiss Exchange Ltd.

The following table presents a summary of outstanding tranches:

Issuer Issue date Nominal value Maturity date Coupon
mFinance France 26.11.2014  EUR 500 M 26.11.2021 2.000%
mFinance France 26.09.2016 EUR  500 M 26.09.2020 1.398%
mFinance France 28.03.2017  CHF 200M 28.03.2023 1.005%
mBank 07.06.2018  CHF 180 M 07.06.2022 0.565%
mBank 05.09.2018 EUR 500 M 05.09.2022 1.058%
mBank 05.04.2019 CHF 125 M 04.10.2024 1.0183%

mBank continues its efforts aimed to diversify the sources of funding and to ensure stable refinancing on attractive terms.

Activity on the covered bond market

mBank Hipoteczny (mBH) is a mortgage bank with the longest track record of issuing covered bonds on the Polish capital market. As of December 31, 2019, the value of issued mortgage covered bonds amounted to PLN 8.2 billion.

Covered bond issues conducted by mBank Hipoteczny constitute an important part of mBank Group’s funding strategy.

In 2019, mBank Hipoteczny placed two issues of mortgage covered bonds in the total nominal amount of PLN 1.4 billion. A summary of mBH activity on the public market in 2019 is presented in the following table.

Volume Currency Issue date Maturity Tenor (in years) Coupon Place of quotation
100 million PLN 22.02.2019 20.12.2028 9 years 10 months WIBOR 3M + 80 p.b. WSE Secondary Market and Bondspot
300 million EUR 12.11.2019 15.09.2025 5 years 10 months 0.242%
(MS + 43 p.b.)
Luxembourg Stock Exchange

PLN 100 million issue was performed under the Domestic Covered Bonds Issuance Programme accepted by the PFSA in 2016. Book building was run by mBank, 8 investors declared their will do purchase covered bonds, including asset management firms, banks, insurers and pension funds. It is currently the covered bonds issuance quoted at the WSE with the longest maturity.

EUR 300 million issue was another benchmark covered bonds issuance on the international market performed under the International Covered Bonds Issue Programme. The final pricing reached 43 basis points over MS (Mid-Swap) and coupon was set at 0.242%. From the mBank Group’s perspective, it is the most favourably placed debt issuance on the international market in the history.

In total 74 investors declared their will do purchase covered bonds for a joined value of over EUR 1 billion (3.4 times the placed amount). After the allocation, the structure of the transaction by the geographical and institutional distribution was the following:

Covered bonds issued by mBank Hipoteczny are characterised by low investment risk, which is a result of the statutory obligation to apply complex security mechanisms while issuing and trading in such instruments.

On May 27, 2019, Moody’s Investors Service assigned a rating Aa3 to the covered bonds issued by mBank Hipoteczny. It is the highest possible to achieve rating for the financial instruments issued in Poland (local and foreign currency bond ceilings for Poland). It is higher by 2 notches than the rating of Poland and by 5 notches than the long-term issuer rating, assigned by the agency at Baa2. On November 12, 2019, the rating of EUR covered bonds was affirmed at Aa3.

Moody’s Investors Service assigned also the short-term issuer rating for mBank Hipoteczny at Prime-2. At the same time, the agency assigned the Counterparty Risk Assessment (long-term and short-term) at the level of A3 (cr) and Prime-2 (cr), respectively, and Counterparty Risk Rating (long-term and short-term) at the level of A3 (cr) and Prime-2 (cr), respectively. The outlook of long-term ratings is stable.

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