Bank Millennium (MIL) Q4 2024 earnings summary

Executive summary

• Net profit for 2024 reached PLN 719 million, up 25% year-over-year; adjusted net profit excluding extraordinary items was PLN 3.2 billion, up 7% from 2023, reflecting strong core profitability despite extraordinary costs from credit holidays and FX-mortgage provisions.

• Net interest income grew 7% year-over-year (excluding credit holidays), with net interest margin stable at 4.35% for the year; cost to income ratio reported at 37.6%, adjusted to 30.8%.

• Asset quality remained robust, with NPL ratio at 4.5% and cost of risk at 40bps; capital and liquidity positions comfortably above regulatory requirements.

• Digital transformation and customer acquisition targets exceeded, with retail customer base over 3.1 million, 92% digitally active, and digital sales channels accounting for up to 84% of cash loans and 95% of term deposits.

• Exited recovery plan in 2024, achieving strategic goals in profitability, customer growth, and digitalization.

Financial highlights

• Q4 net profit was PLN 173 million; adjusted for extraordinary items, Q4 profit reached PLN 904 million, up 20% year-over-year.

• Net interest income (excluding credit holidays) rose to PLN 5,643 million (+7% y/y); net commission income slightly down 1% year-over-year.

• Total operating income declined 11% year-over-year due to extraordinary items; operating costs increased 13% year-over-year, mainly from staff and legal costs.

• Cost to income ratio reported at 37.6%, adjusted to 30.8%; return on equity at 18.5% (adjusted).

• Loan-to-deposit ratio at 64%; customer deposits up 9% year-over-year, loans up 2% year-over-year.

Outlook and guidance

• Expectation for 2025 is cautiously optimistic for net interest income, with gradual deposit cost adjustments as interest rates trend down.

• Cost of risk expected to rise slightly to 50-60bps as loan mix shifts toward corporate, but outlook remains benign.

• Double-digit cost growth expected in 2025, with a move to single-digit growth in 2026 as legal-related costs decline.

• FX mortgage-related costs expected to remain material in 2025 but should decrease, potentially marking the last year of significant impact barring negative legal developments.

• Management expects further capital surplus in 1Q25 following regulatory buffer withdrawals; retention of FY24 profits to add about 90bps to T1 ratio if approved.