Bank Millennium S.A. (MIL) Earnings Call Transcript & Summary

[Audio Gap] 9:00. I think it's time. We can start our meeting. Pursuant to Article 409 Paragraph 1 of the commercial companies code, paragraph 8 of the bank's regulations and regulations of the general meeting, I call this meeting -- in connection with Article 395 of the commercial companies code and paragraph 8.1 of the bank's regulations -- I welcome everyone, especially [ Mr. Lampart ], who is for the 20th time, 20 years, has been participated in the bank's meeting. Let me introduce to you [ Mr. Marek Vatacievic ], the notary. He will prepare the minutes from this meeting, from this general meeting. The deliberations of the general meeting are transmitted on the Internet network. Voting is performed with the use of tablets in the computer systems prepared for the needs of voting, checked by the notary, also in terms of secret balloting. Let me ask a representative of the UNICOM company to present the instructions how to vote.

Good morning. Let me remind you how to use tablets during voting. You will have buttons: yes; no; abstained; and divide, if anyone wanted to use the possibility of voting separately from each -- if you want to vote uniformly, you should vote through pressing the button with the decision which you would like -- how you would like to vote, yes, no or abstained. And then on the next screen there will be the button confirm. If this is really your decision, you confirm to effectively vote. If you mistakenly have pressed the wrong button and you would like to change it, there is the button return to return to the previous screen in order to correct your decision, and then confirm. I think that, the application, you know very well. There will be no problem, but if you had any technical problems, we are at your disposal throughout this meeting and provide all the necessary assistance.

Thank you. Do you have any questions about the instructions? No. Let's move to the election of the Chairman of the General Meeting according to Article 409 of the commercial companies code and regulations of the general meeting. Please suggest the candidates.

I would like to suggest the candidature of Mr. Marek Furtek for the Chairman of this meeting.

Thank you. Mr. Marek Furtek is well known to the shareholders. Please confirm that you agree to be a candidate. Do we have other candidates? No. So in accordance to paragraph 10 of the bank statute, we vote by majority and the secret ballot according to the commercial companies code. Can we establish how many votes? How many shareholders are present? We have 203 shareholders when -- which we can see with our naked eye, shares 838,092,543. And now I call a vote. Ladies and gentlemen, please vote. [Voting]

Resolution #1, concerning the election of the Chairman of the General Meeting. The vote -- can we finish the vote now? Please count the votes. 838,092,542 votes were cast yes; against, no; abstentions, no. Marek Furtek has been elected Chairman of this meeting. Will he please take his seat? And I will remove myself.

Thank you very much. Good morning. In relation to what Mr. Chairman said, let me note that [ Jacek Lampart ] is not the only person who has been for 20 years with us in our sometimes stormy meetings of the shareholders. In relation to what Mr. Chairman Kott said, in supplementation of his statement, I would like to say that the general meeting was prepared, convened with the observance of all legal regulations according to the commercial companies code, Accounting Act, the Act on public trading in securities and the stock exchange in Warsaw. And I would like to state, and I ask Mr. Notary to minute, that the information on convening this meeting, with all the necessary information and materials -- published on the website of the bank of the 21st February 2020. And since then till now, it has been invariably on the website of the bank. The information about the general meeting, with the agenda, was also subject to the current report -- to the relevant current report. According to the information -- the more than 25% of the equity of the bank, so the condition is met. And we have the list. Thank you very much. The condition is met as to the quorum. I'm signing the attendance list so that we could proceed further. Obviously, the list is open for further participants, for joining further participants during the meeting. This is an ordinary general meeting of shareholders. Documents for annual closure will be considered. They were made available at appropriate time for the shareholders [ at the seat ] of the company. According as we got presence, attendance, this is modest. For reasons which I do not have to discuss, several members of Management Board and Supervisory Board were not able to attend. Also, information about the legal expert -- Director of the Legal Department, Mr. Grzegorz Marzec, as always, will be our expert for banking and commercial law in all the matters which were put on the agenda. Ladies and gentlemen, on the basis of the information presented by me and circumstances I state, I declare this meeting correctly convened and is capable on taking the resolutions and matters envisaged in the agenda. And the agenda published by the Management Board envisages, after the items which have been exhausted, presentation of the agenda, election of the electoral committee, discussion and considering the financial report of the Bank Millennium and consolidated report of the Management Board and consolidated report on nonfinancial information then consideration and approval of the financial report of the Capital Group. #10 (sic) [ #9 ], considering the report of the management -- of the Supervisory Board; #10, taking the resolution on the distribution of profits; #11, granting discharge of members of the Management Board and Supervisory Board; #12, taking resolution concerning changes in the statutes; and closing the agenda. None of the shareholders suggested any change to the agenda or amendments to drafts of the agenda -- of the resolutions. Then the next point is election of the electoral commission of article -- on the basis of Article 12 of the regulations of general meetings, but we have professional service of voting, so we do not want an electoral commission. Does anyone have any doubt from the shareholders? No. So thank you very much. So let's move to item 7, which covers consideration and approval of financial reports and report on the activity. And I call on Mr. Chairman, Joao Bras Jorge, to speak.

Good morning, ladies and gentlemen. On this slide, we can see our results over the last 5 years. In particular concerning the results on core business, we can see what successes we achieved at our bank. Concerning net profit this year, we had one-off cost of Euro Bank integration and legal provisions on Swiss franc loans. On this slide, we can see the summary concerning our business. We can see how bank very well developed in terms of deposits, retail loans and corporate loans and also the number of clients and in particular mobile and online clients. We had very good results in 2019 in terms of business volume. Credit volume of company went up by 7%. Consumer loans went up by 16% without Euro Bank but 103% with Euro Bank, with the inclusion of the Euro Bank impact. In terms of deposits, the volume of deposits went up by 10% without Euro Bank merger. And we achieved PLN 561 million of net profit. Obviously, this is less than last year because, like I said before, we had the costs of integrating Euro Bank and also the provision for legal risk connected with the Swiss franc. And concerning the costs, they went up by 36% and 27% without the costs of integration. And this is also important, how strong and big is now the scale of the number of branches. Concerning net interest income, we had 2.499 million -- 2 -- sorry, PLN 2.499 billion, which is 33% more than last year. Concerning net commission income, we achieved PLN 699 million, 6% more than last year. There's not much impact from Euro Bank merger on that. Concerning the quality of our assets, our situation is good. We had 57 basis points in risk costs and demonstrating that we can develop our credit business and have stable risk costs. Our liquidity situation is very strong. Loan-to-deposit is 85.6%. And our capital situation is strong. At the end of the year, we had total capital ratio 20.1% and Tier 1 16.9%, and that was after Euro Bank. And we issued shares when -- we didn't issue share -- when we did the acquisition. And the purchase of Euro Bank. Transaction -- on the 5th of November 2018, we had the transaction agreement, then the transaction was actually executed on 31st of May in 2019, the legal merger on the 1st of October 2019 and operational merger 11th of November. And this was one of the fastest, one of the most seamless mergers in the market. And now the Millennium branch system: Everything is working like one bank. And obviously this transaction is important not only as the protection of the bank's position, but we increased our position, upgraded our position in terms especially of consumer loans. This transaction was also very important because we can now say that we are everywhere in Poland, all over the country, not only in big towns but also in small towns. According to the recommendation of the Polish Financial Supervision commission -- Authority, we cannot propose a dividend to this institution, but the bank's Management Board thinks that the bank's dividend policy is important. But the bank took over Euro Bank, so the Management Board will present to the general meeting of the shareholders to retain the whole profit worked out in 2019 in own capitals of the bank, including due to the merger and later integration of Euro Bank. I would also like to say a few words about the big challenge which we have. The coronavirus will have terrible consequences in Poland and elsewhere. The protection of health of our employees is most important, but in banking we must provide the basic service in Poland with the observance of all safety, security principles. Our branches are open. Online banking, ATMs and mobile banking operate property -- properly. We propose to our individual clients 3 months credit vacations without commissions. And we are also in constant touch with corporate clients, and we support them in this very challenging task. And Bank Millennium is actively involved in the plans of the banking sector and supporting the economy. Finally, I will ask my colleague Wojciech Haase because, last year, we had a few questions about [ CSA ] and the policy of credit lending, in this respect.

First of all, I'd like to send my special welcome to Mr. [ Kuba Gogolewski ], our shareholder. I hope that the situation improves. We'll meet in person. And Mr. [ Kuba Gogolewski ] will be confident that we are climate oriented. I send my greetings to him. But starting with our exposure to mines, to coal mines, to miners and plants which produce electric power from coal. There has been a drop since last year, which confirms that we are not active in financing production of energy, but what are we talking about? We are talking from the point of view of the portfolio of a bank, a small percentage. And corporate portfolio is below 1% compared to 2018 in the case of the portfolio. This is a drop from 3%. And the structure of the corporate portfolio, this is from 1% to 0.7%. Our exposures in terms of coal mines are leasings in -- which in 2021 will expire or will be repaid. And we have some exposures to power plants which produce electricity from coal mine usually, but our exposure is gradually being reduced and will be repaid by 2024, before the dates resulting from the agreement of the [ Paris club ]. This is one aspect of the matter. The other one is that we are taking an active part in financing projects with renewable green energy, and our exposure is in 9 digits. I cannot give you specific amounts because I am subject to banking law. I will tell you, [ Kuba ], more, [ Mr. Kuba ]. We are working on other projects where we want to have support of sources of renewable energy. This is photovoltaics. And when we meet together, we'll go into details. We are not active. We have our own policy. And the figures which I presented to you, gradually we are lowering. We've got negligible prospects in this respect. Thank you very much.

Report of the activity of the Supervisory Board in 2009 (sic) [ 2019 ] covers elements resulting from the law -- principle of corporate governance and good practices of companies listed on the stock exchange. 2019 was another year of the operation of the bank, of the Supervisory Board in the composition for 3-year term of office ending with the general meeting in 2020. In the reporting period, the Supervisory Board met the criteria resulting from law, including independent members and Polish national members. With due diligence, it exercised supervision on all activities of the bank, guided by objective judgment and taking of correct operation of the bank. The Supervisory Board conducted its work mainly during meetings, in which Management Board members participated and other members presenting particular issues. The Supervisory Board analyzed and took final decisions considering proposals and information about various issues and perspectives in accordance with the competencies. It analyzed finance, audit, compliance, management of risk and remuneration policy. What was in particular in focus of attention were mortgage loans, Swiss franc loans, especially in terms of risks relating to the rulings of the European court of justice and Polish courts. The Supervisor Board devoted much attention to issues connected with the merger of Bank Millennium and Euro Bank, taking decision, monitoring the process of merger in order to retain good results and high standards of client service. As part of the Supervisory Board, 4 standing committees operate: Audit Committee, Personnel Committee, Strategic Committee and Risk Committee, which consist of selected members of the Supervisory Board. In the reporting period, the composition of the committees ensured appropriate standard of supervision on particular areas. In particular, members provided the guarantee of proper execution of duties resulting from the background and professional experience. The committees took appropriate steps as needed and -- existing circumstances both during meetings and outside them, during consultations and talks with other persons, including members of the Management Board. In view of the results of the bank, the Supervisory Board moves for granting to all members of the Management Board discharge of their duties for the year 2019. Remuneration policy. Supervision over remuneration policy was under the Personnel Committee. The Board and the committee under their prerogatives performed assessments resulting from standards and regulations about -- regulations of Management Board members. The Board has a positive opinion about remunerational policy in the Capital Group and says that the activities under the Capital Group reflected the requirement of safe management of remuneration components and the reactions to changing situation in the bank and legal environments. The Supervisory Board finds that the bank, for 2019, implemented properly the principles of corporate governance of the Polish Financial Supervision Authority. The solutions at the bank to implement the principles properly take into account the principles of optimum organization of the bank with regard to good practices of companies listed on the Warsaw Stock Exchange. The -- of 2016. The Supervisory Board assesses that the bank fulfilled the information duties about explanations and current and periodic information. The Supervisory Board assesses social, sponsoring and education actions conducted by the bank as rational and socially useful, providing not only direct support for projects but also contributing positive impact influencing the development of culture, education and economy. Such actions engender confidence in the bank as an institution not only maximizing profit but also implementing the principle of social corporate responsibility. Supervisory Board -- the Supervisory Board has familiarized itself with the opinion of the auditor on financial reports and reports of the activity of the Management Board and also as regards nonfinancial information. On this basis, the Supervisory Board finds that the financial report for 2019 and consolidating Management Board's report on bank and Capital Group and consolidated report on nonfinancial information on Millennium -- of Millennium S.A. and Capital Group for 2019 have been prepared correctly in substantive and formal terms, are in accordance with accounts and facts and present fair and true situation of the bank and the Capital Group for the year 2019. The Supervisory Board recommends to the general meeting the adoption of the documents in the version submitted by the Management Board, with the -- together with the opinion of the auditor and the confirmation [ letter ]. The Supervisory Board finds it justified, the position of the Management Board on distribution of the net profit of the bank for 2019 in the amount of PLN 600 million, as on the panel in a way that number, PLN 39 million, as on the board will be allocated to cover the effect of the settlement of the merger with Euro Bank S.A. in the Bank Millennium's book. And the remaining amount as quoted on the panel will be fully allocated to the reserve capital. This proposal comes both from the position of the supervisory authority numerously presented in relevant letters to the bank. And it is also related to the merger with Euro Bank, which was conducted without share issue. Hence, the Supervisory Board shares the view of the Management Board that all the profit for 2019 should be retained, as strong capital [ bank ] is the base for further development and protects the bank in case of deteriorating macroeconomic situation. The Supervisory Board unanimously recommends to the General Meeting of Shareholders to adopt the relevant motion of the Management Board. The Supervisory Board reviewed the situation of the bank in 2019 taking into account the internal control system, the risk management system, compliance and internal audit functions. For this purpose, the Supervisory Board reviewed various financial statements, the business parameters of the bank and the Capital Group. I will not go into details of the components of the financial and business activity. They have been already presented in the financial report. However, I'd like to state that, having reviewed the financial statement, the results of the bank and the Capital Group for 2019 and the strategic plans for the upcoming years, the Supervisory Board gives a positive assessment of the financial situation of the bank and the group, especially very good prospects for the further operations. Assessing on the basis of rational premises taking to account the improvement actions, according to the Supervisory Board, the internal control system as a whole, plus its components, including risk management system and information communication system, effectively and properly responds to the regulatory requirements and -- well managed or adequate to the bank's size and exposure to the risks related to the activity of the bank and the Capital Group of Bank Millennium. Finally, let me underscore that the Supervisory Board, when expressing hopes for the dynamic further development of the bank, pays respects in view of the very good financial results of the bank and Capital Group for 2019 as well as the development initiatives. It should be also underscored that cooperation with Management Board was very effective based on [ transfers of ] information and communication. We hereby pay our tribute to the members of the Management Board and the employees of the bank and Capital Group of Bank Millennium. Thank you for the involvement and effective work in this so challenging year. Thank you very much.

Thank you, Mr. Chairman. Are there any questions or voices from the floor? If there are none, please take a look at the resolution #2 in -- it's for confirmation of the financial report of the bank and Capital Group and the joint report on -- the nonfinancial report of the bank and Capital Group. You can find it on the tablet. To avoid any ambiguities, I will just present the basic data. Net profit, as you have it; total income; and the assets and liabilities and equity; the total, PLN 96.824 billion, as you have it; and depletion of the net cash. These are the parameters, financial parameters, of the report which is to be accepted by the GMS. Do you have any comments? If not, I'd like to open the vote on the draft to accept the statements. Please cast your votes. [Voting]

Thank you very much. Well, we have the results: 836,396,622 that's in favor, and abstentions 1,695,920. That resolution has been adopted in the proposal voting. Now resolution #3, on adoption of the statement, financial statement, of Bank Millennium Capital Group. I will not present that draft extensive, just the basic data: the net profit, PLN 560.732 million; and the income; the liabilities and assets and -- as you have it; then depletion of the cash position. Do you have any questions? If not, I'd like to open the vote on the draft of the resolution. Please cast your votes and please screen the results when the vote is over. [Voting]

The number of votes cast then: in favor 836,396,622, abstentions 1,695,920. The percentage shares of votes against the total capital will be recorded. I'm not reading that. So the resolution has been adopted as proposed. Next one. This one is on distribution of profits according to the Management Board's recommendation -- or motion and recommendation of the Supervisory Board. It should be as follows. The net profit of Bank Millennium for the financial year finishing on 31st of December previous year; and the amount shall be divided and allocated, as far as, number one, to cover in the amount of PLN 39 million, as you have it, the effect of the settlement of the merger with Euro Bank in the Bank Millennium's books -- yes? Yes. I have changed the sequence of the resolutions. It has never been my intention. So let me get back. Fortunately, I haven't ordered the vote. Thank you for your support. So that's still resolution #4, in the matter of approving of Supervisory Board of Bank Millennium S.A. report on activity in the year of 2019 and making assessment of the remuneration policy in Bank Millennium S.A. I will not read this wording. It's a very vast account. And can we take a vote? Yes. Please proceed to vote. [Voting]

So the votes on approving the resolution and the number of votes cast: in favor 836,396,622, abstentions 1,695,920. So the resolution has been passed. And now in the proper sequence, that draft marked resolution #5, that's on distribution of profit. According to the draft, it should be as follows: the net profit for the financial year of the previous year in the amount PLN 600 million and as it goes, will be allocated for covering in the amount of PLN 39,956,686 the effect of settlement of the merger with Euro Bank S.A. in the books of Bank Millennium S.A. And the remaining amount, PLN 560,725,960.82, shall be entirely allocated to the reserve capital. The drafts can be found in the materials for the -- today's general meeting; on that draft, the wording of the content. Any comments? If not, please cast your votes. I hereby open the vote. [Voting]

The number of votes cast, 838,092,542 valid votes. And all the votes were in favor for the proposed allocation and distribution of profit. Thank you very much. Now the next item, 11, discharge from duties of the members of the Management Board of Bank Millennium and Supervisory Board. Similarly to the previous assemblies, I propose the following modus operandi. We'll read the names of the members of the Management Board, and directly you will be able to cast your votes on discharging the members from the performance of their duties. And we are talking about the members who performed their duties from the first day to the last day of the year. Are we ready? Joao Jorge, the Chairman. Can you please cast your votes now? [Voting]

Can we? One second. Let's vote. This time -- yes. Can we? This is to discharge from the performance of their duties Mr. Fernando Bicho. Please cast your votes. [Voting]

And Mr. Wojciech Haase. Please vote. [Voting]

Mr. Andrzej Glinski. [Voting]

Thank you very much. Mr. Wojciech Rybak. [Voting]

Mr. Antonio Pinto Junior. [Voting]

Mr. Jaroslaw Hermann. [Voting]

This is the last vote in the cycle concerning the Management Board. Now I'd like to present to you the results of the votes. Yes, the results will be screened one by one following the sequence of the votes: Chairman Joao Jorge, the required majority, discharged from the performance of their duties. Please, next. We, of course, will have the printout for the judge, for the notary. Mr. Bicho, also the majority, much more than actually; and he was thus discharged from the performance of duties. Mr. Wojciech Haase also acquired the discharge. And Mr. Andrzej Glinski acquired the discharge. Wojciech -- Mr. Wojciech Rybak acquired the discharge. Mr. Antonio Pinto Junior, discharged from the performance of their duties. Also Mr. Jaroslaw Hermann was discharged from the performance of their duties. Thank you very much. Please inform me whether I can order the vote on the discharge from the performance of their duties for the members of the Supervisory Board. Yes, and let's proceed. As previously, I will limit myself to present then surname for the subsequent members of the Supervisory Board. That will mean the start of the vote. Mr. Boguslaw Kott. Please. [Voting]

Mr. Nuno Amado. [Voting]

Mr. Dariusz Rosati. [Voting]

Mr. Miguel de Bragança. [Voting]

Ms. Agnieszka Hryniewicz-Bieniek. [Voting]

Ms. Anna Jakubowski. [Voting]

Mr. Grzegorz Jedrys. [Voting]

Mr. Andrzej Kozminski. [Voting]

Mr. Alojzy Nowak. [Voting]

Mr. José da Silva Pessanha. [Voting]

Mr. Miguel Pinheiro. [Voting]

The last vote, #12, in this cycle, Mr. Lingjiang Xu. [Voting]

So the results are screened. Mr. Boguslaw Kott, the Chairman of Supervisory Board, has been discharged. Next, Mr. Nuno Amado has been also discharged. Mr. Dariusz Rosati has been discharged. And Mr. Miguel de Bragança has been discharged. Ms. Agnieszka Hryniewicz-Bieniek has been discharged. And Ms. Anna Kubowski (sic) [ Anna Jakubowski ] has been discharged. Mr. Grzegorz Jedrys has been discharged. Mr. Andrzej Kozminski has been discharged. Mr. Alojzy Nowak has been discharged. Mr. José da Silva Pessanha has been discharged. Mr. Miguel Pinheiro has been discharged, and Mr. Lingjiang Xu has been discharged. I believe, in all the votes, the results are the same as those presented for the last vote. Thank you very much. Having exhausted item 11, it's time to review item 12. I guess, this time, I'm right, item 12, which is adoption of the resolution in the matter of amendments to the articles of association of the bank. The proposed amendments and rationale are in the materials of the General Meeting of Shareholders. This is to amend or adjust the articles to the regulatory requirements. Any questions to that issue? The draft as regards the draft of the resolution should be commented on. Or are there any doubts? If not -- let me not read it. We have it in front of us. And I will then order the vote on the resolution in the matter of amendments to the articles of association as proposed by the Management Board. Can we? So I hereby open the vote. Please cast your votes. [Voting]

Number of votes cast 838,092,542, all in favor. The resolution stipulates that the Supervisory Board will develop and announce the consolidated texts of the articles of association with the amendments. As we have exhausted the agenda, I hereby announce this general meeting as closed. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]