Strategy of mBank Group for 2021-2025 - From an icon of mobility, to an icon of possibility.
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Strategy of mBank Group for 2021-2025 From an icon of mobility, to an icon of possibility. November 2021
Agenda mBank on the threshold of a new strategy Vision and strategic pillars for 2021-2025 ▪ Retail banking ▪ E-commerce segment ▪ Corporate banking ▪ Technology, security and data ▪ Employees and organisation culture ESG strategy of mBank Group Strategic financial targets for 2025 mBank Group's Strategy for 2021-2025 2
mBank Group has gained market shares in all strategic categories… Successful organic growth evidenced by mBank Group’s market shares in key business volumes Volumes of Retail Banking in Poland Retail lending volumes in Poland Loans Deposits Housing loans Non-mortgage loans +1.4 +2.4 +1.1 +1.6 7.8% 8.3% 8.2% 7.0% 6.4% 7.1% 5.9% 5.4% 09.2017 09.2021 09.2017 09.2021 09.2017 09.2021 09.2017 09.2021 Volumes of Corporate Banking mBank’s supplementary offer Loans Deposits Leasing Factoring +0.7 +3.1 +0.7 +1.4 8.7% 12.5% 8.1% 8.5% 8.0% 7.4% 7.1% 9.4% 09.2017 09.2021 09.2017 09.2021 H1 2017 H1 2021 H1 2017 H1 2021 Source: Calculation based on data published by the National Bank of Poland (NBP), Polish Leasing Association (PLA) and Polish Factors Association (PFA). mBank Group's Strategy for 2021-2025 3
… and is well-positioned for further efficient and profitable growth Ranking of major Polish banks by key financial and business metrics Total assets Users of mobile application Cost/Income ratio PLN billion, as of 30.09.2021 thousand, in Poland, as of 30.09.2021 normalized for 9M 2021 PKO BP 403.5 PKO BP 3,745 mBank 40.7% #1 Pekao SA 247.4 mBank 2,506 #2 PKO BP 41.6% Santander BP 233.7 ING BSK 2,171 Santander BP 42.2% mBank 208.2 #4 Pekao SA 1,991 ING BSK 43.5% ING BSK 200.5 Santander BP 1,905 Alior Bank 43.6% BNP Paribas 127.6 Millennium 1,695 Millennium 45.4% Millennium 103.8 BNP Paribas 850 Pekao SA 49.4% Alior Bank 78.2 Alior Bank 704 BNP Paribas 51.9% Citi Handlowy 60.5 Credit Agricole 384 Citi Handlowy 66.2% Getin Noble 48.7 Citi Handlowy 288 Getin Noble 71.4% Note: Normalized C/I ratio adjusted for linear booking of the Resolution Fund over the year and without one-off gains (for PKO BP and Citi Handlowy). Source: Summary based on banks’ consolidated financial statements, statistics provided by the PRNews.pl (as of 09.11.2021). mBank Group's Strategy for 2021-2025 4
Our mission "Convenient, secure, focused on your future... mBank – more than a mobile bank". mBank Group's Strategy for 2021-2025 5
Vision and strategic pillars for 2021-2025 6
Vision for mBank Group and guiding principles for the organisation We will anchor the future of mBank on seven pillars understanding of customer banking secrecy and needs in their life cycle firm promise to protect and calibrating products customer information, adequately to support them personal data and financial in most effective way profile of their activities mobile access being the offering a premier security of clients’ core medium/channel experience for payments and assets for interaction our clients in the placed with mBank with the client e-commerce universe executing ESG agenda helping clients to keep focused on our their finances in order responsibility for climate, by providing them with society and financial advanced financial health of our clients management capabilities mBank Group's Strategy for 2021-2025 7
Philosophy of risk management at mBank Group The risk management strategy of mBank is based on three pillars pursuing prudent and stable transforming and developing supporting sustainable growth risk management the Risk Area We indicate the directions of expansion We shape a safe and profitable balance Thanks to automation, digitalization to build a diversified loan portfolio with a sheet, managing risk in mBank Group and efficient processes, we are ready significant share of prospective sectors. in an integrated manner. to increase the scale of business. ▪ We actively support business growth, ▪ Integrating the business needs and ▪ We apply a broader perspective, based on an appropriate pricing risk principles, with the regulatory expand our competences, and policy that reflects the client's risk requirements, we provide a framework develop skills related to data analysis profile and secures profitability. for risk management across the bank. and processing. ▪ In our credit policies and decisions, ▪ We make decisions taking into ▪ We promote the development of we take into account the impact on account return on capital, and base a risk culture at mBank, its broad the natural environment. We on high-quality information understanding and the use effective and consistent from consistent internal importance of multi-faceted algorithms to assess clients. and external databases. looking into the future. mBank Group's Strategy for 2021-2025 8
Pillars of new mBank Group’s strategy for 2021-2025 We will focus on 5 areas of our interest Leading retail The first-choice Best digital banking franchise bank for corporate banking integrated with e-commerce market for high-potential client life cycle participants companies Technology, security and data as a source of advantage Distinctive people and organisation culture mBank Group's Strategy for 2021-2025 9
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle Net revenue per active customer – individual clients at mBank in Poland, 2020 MAX ▪ mBank’s current customer Peak earning point = 46 Core banking products demographic profile is a Savings consequence of our digital Non-mortgage loans operating model, value PLN mortgage proposition, and brand 50% positioning since the start of retail operations. ▪ The age structure is a strong ally in driving up our business volumes and, 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 as a result, the revenues. MIN customer age ▪ mBank will experience Age distribution 2025 vs 2020 – active individual customers at mBank in Poland significant growth of 140 average profitability per thousand ø age 2025 ø age 2020 76.1% of mBank’s clients are below 46 Tysiące 37.0 37.3 customer. The average our 120 in 2020 and 72.7% in 2025 clients is currently 37. This is 100 well below the age at which 80 2020 2025 the bank’s revenue per client reaches its maximum 60 level (age of 46). This 40 demographic effect will 20 naturally contribute to multiplication of mBank’s 0 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 value in the coming years. Source: mBank’s internal data. customer age mBank Group's Strategy for 2021-2025 10
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle Deep understanding of customer base resulting in precise segmentation ( 8-12 ) ( 13-17 ) ( 18-20 ) ( 21-27 ) ( 28-40 ) ( 41+ ) Winning primary Filling investment Emerging Teenagers Settling young relationships in gap for matured junior segment as acquisition Older teenagers adults with adult segment segment as a ground engine, gaining financial convenient for future with a focus on independence payments and client base social bonds lending Benefiting from growth of affluent clients Monetization driven by Acquisition fuelled by young segments customer base maturing mBank Group's Strategy for 2021-2025 11
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle We will be further growing organically through the acquisition of new (primarily young) clients and accompany them throughout the whole life cycle, providing precisely calibrated value proposition. We will support demographic-anchored growth by developing adequate value proposition: key components of the offer communication and sales ▪ Payment Assistant 2.0 eliminating inconvenience of manual bill payments ▪ We will prepare a list of needs and and subscription management, thanks to accurate notifications and likely banking product purchases for automation tool, enabling one-click payments and monitoring of their status each cohort, starting from today to ▪ digital mortgage loan process for individual clients decades ahead. ▪ convenient and secure payment tools in e-commerce and POS transactions, ▪ Such prospective coverage supplemented by one-click non-mortgage lending will be a framework of the conversation that ▪ expansion of the “members get members” model by launching an our advisors will follow. ambassador program for young people to support new acquisition ▪ increase the number of active individual clients by an additional 1.05 million by the end of 2025 compared to 3.05 million at the end of December 2020 (in Poland) strategic ▪ upgrade junior mobile banking application by adding next functionalities in order to acquire 300 targets thousand of youngest clients by the end of 2025 ▪ achieve top-3 market position in new mortgage lending through development of an advanced digital process for sales and application processing by 2023 mBank Group's Strategy for 2021-2025 12
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle We will develop a comprehensive investment offering suited to the needs of each client segment to contribute to their long-term asset growth and benefit from the revenue potential of this area. We will expand investments and wealth management as a response to emerging customer needs: aligned approach modern and comprehensive investment solutions ▪ We will introduce new customer ▪ We are establishing own investment funds company (TFI) that will allow for segmentation with the defined greater operational flexibility and eliminate reputational risk. service model for each group. ▪ We aspire to be the leader in modern and purposeful investment solutions, ▪ In order to successfully address the in particular ESG-compliant and megatrend ones. needs of all segments, we will ▪ We will develop “one-click investment strategy” as the easiest way to invest implement digital-first with mBank and introduce online-only investment solutions in a partnership approach in distribution with a robo-advisory firm. of investments with personal services ▪ We will set up various strategic alliances with well-recognized foreign aligned to specifics investment entities to supplement mBank's asset allocation and geographic of these groups. diversification, as well as gain access to liquid markets. ▪ maintain the growth of assets under management (AUM) at PLN 1.5-2.0 B annually strategic targets ▪ increase the share of clients in mBank’s lower affluent and mass market segment having at least one investment product to 50% by 2025 mBank Group's Strategy for 2021-2025 13
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle We will help our customers to wisely manage their current and future finances by providing well-structured information on their inflows, spending and assets. We want to make personal financial management (PFM) a cornerstone of our offering: development of PFM solution value for the customer ▪ The multi-stage development will ▪ Transforming raw data into valuable start with the automatic reports knowledge presented in a form of summarizing what happened with convenient tips and reports, supporting the customer’s money and balances. management of current and future financial situation, will be the key to solidify long-term ▪ Next statements will include relationships with our customers. spending trends, dependences of expenses and income, information ▪ PFM will give customers an ultimate control on a cash surplus or shortage. over their budgets, cash flows, savings and investments as well as will support them in ▪ Further release of reports will be we intend to improve our preparation for life-cycle events (purchase of enriched with insights, like spending PFM functionalities and house, children education, retirement). alerts or limits for categories. expand customer coverage strategic ▪ have 50% of customers actively using PFM functionalities on regular basis in 2025 targets ▪ reach NPS of 70 in regard to PFM service in 2025 mBank Group's Strategy for 2021-2025 14
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle We will boost digital sales and service by enabling to easily fulfil all needs on a mobile device with a support of premium contact center if needed. mBank’s future growth will be anchored in digital channels and mobile banking: transformation of service model, keeping professional human support enhanced CRM system ▪ We intend to consistently improve ▪ We will introduce agile branch ▪ We will apply personalized approach remote identity confirmation to setup, where employees can switch in communication and sales. offer the most intuitive account between various working modes. ▪ We will use contextual events and opening process to our clients. We will monitor their performance demographic characteristics. By ▪ Our advisors in branches and in order to optimise our footprint. looking for patterns and similarities contact center will assist, guide ▪ mBank’s contact center will reach to other people, we will be able to and support customers to primarily the highest standards in servicing predict undiscovered needs for use self-service via digital channels. complex scenarios. products and services. ▪ become a mobile-first bank with 50% of sales and service executed via mobile devices in 2025 ▪ improve digital onboarding process and have 50% of retail customers acquired remotely in 2025 strategic ▪ reach digitalisation ratio (calculated as a proportion of applications/orders for products and services targets executed in digital channels compared to such actions in all channels) of 90% by 2025 ▪ raise the share of cashless branches within mBank’s network to 50% in 2025 ▪ automate 30% of the traffic to contact center with voice/chat bots till 2025 mBank Group's Strategy for 2021-2025 15
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle We will continue to develop an ecosystem of non-banking services to strengthen the intensity of relationship with customers through providing them with additional utility and convenience. We will focus on delivering the most wanted value-added services: e-government commercial services bancassurance ▪ We will continue to integrate new ▪ We will link our mobile application ▪ We will evolve bancassurance area e-government services. with a range of lifestyle services. by offering standalone insurances ▪ We will remain dynamically ▪ Major categories to be successively tailored to the needs of particular reacting to all new public schemes added are: health service providers, demographic segments. accessible online, such as family utility companies (energy ▪ We will adjust sales and aftersales benefits (Rodzina 500+, and gas providers), processes to the mobile-first Dobry start 300+), telecommunication approach, target our pandemic-related state companies, but also offer to get contextual support for enterprises public transport, visibility in many (PFR Financial Shield), parking and highway additional touchpoints and other. tickets, events, etc. (e.g. shopping platforms). strategic have 2.8 million of individual customers and 200 thousand firms in retail segment actively using at least target one value-added service offered by mBank by 2025 mBank Group's Strategy for 2021-2025 16
Pillars of new mBank Group’s strategy for 2021-2025 Leading retail banking franchise integrated with client life cycle We will support entrepreneurs and small firms to grow their business by providing them with both the industry-customized expertise and integrated platform for managing financial, accounting and administrative issues. We want to relieve business owners of their daily routine tasks, so that they can focus on their core activity: business command centre professional support a single business control panel instead of services dispersed across multiple ▪ a nationwide network of cooperating applications (for accounting, organisational or marketing activities) certified accountants (OSCBR), offering also tax and legal expertise integrated bank accounts ▪ education through webinars, blog FX platform accounting and products posts, online sessions with experts services ▪ centres of competence providing online business consulting services adjusted to mOrganizer Paynow business specifics and situation of starter pack different groups of entrepreneurs ▪ reach 20-30% market share in new acquisition of sole proprietors (self-employed) and limited liability strategic companies by 2025 targets ▪ become the only bank of choice for 85% of business clients serviced within mBank’s Retail Banking area by 2025 mBank Group's Strategy for 2021-2025 17
Pillars of new mBank Group’s strategy for 2021-2025 The first-choice bank for e-commerce market participants We will modernize and extend our existing mDiscounts (mOkazje) platform to make it more attractive e-commerce solution for both online buyers and sellers. We aspire to be the favourite platform for our customers buying on the Internet: unique position in Polish e-commerce mDiscounts 2.0 Out of all banks in Poland, mBank is best-positioned to ▪ We plan to reshape our existing succeed on this market with: mDiscounts (mOkazje) platform ▪ ~30% of all local e-commerce into more modern marketplace, transactions done by our clients with both POS and online deals available, and more merchants ▪ a customer base active in digital added to broaden the offer. channels (including more than 2.5 million users of mobile application) ▪ We will speed up money back under mDiscounts offers to instant ▪ already wide recognition of our shopping-related benefit during the purchase. offering of mDiscounts (with 2.5 million of clients having given marketing consent) ▪ In addition to attractive prices for items from selected categories, we will provide a benefit of secured online shopping, thanks to Buy Now, Pay Later (BNPL) as well as option of free shipping. mBank Group's Strategy for 2021-2025 18
Pillars of new mBank Group’s strategy for 2021-2025 The first-choice bank for e-commerce market participants We want Paynow to become a significant player in online payments, with market share reflecting the share of mBank's consumers in Polish e-commerce. The organic growth path of Paynow will be based on the following elements: scalable and superior payment extended and cost-efficient solution processing capabilities integrated offering ▪ the cloud architecture which ▪ quickest settlements of a large ▪ all payment and financing options Paynow is based on allows for number of simultaneous provided by mBank Group, efficient and easy business transactions what is particularly consisting of Buy Now, Pay Later expansion as well as ensures the demanded by specific segments of (BNPL), instalments (mRaty), and lower cost base e-commerce (e.g. tickets for events) LeaseLink’s solutions exclusive features to enrich merchants value chain Dedicated team Choose payment method specialized in ▪ one-click payments to increase convenience for customers e-commerce merchants BLIK when shopping at particular e-shops and targeted marketing Enter 6-digit code from the phone ▪ marketing automation to improve effectiveness of will accelerate merchant campaigns directed towards customers and acquisition of Card payment Enter data from the card shopping cart conversion new customers. Online transfer ▪ API-on-API solutions that will make integration with Choose the bank and pay Paynow much easier mBank Group's Strategy for 2021-2025 19
Pillars of new mBank Group’s strategy for 2021-2025 The first-choice bank for e-commerce market participants We will extend the offering of value-added services (VAS) designed for online sellers to increase the importance of relationship with mBank by partnering with them in main parts of their e-commerce activity. More comprehensive VAS palette that will complement the products we already offer: enhanced merchant value proposition financing of merchants Merchants will enjoy an integrated view of their bank account together ▪ We will strengthen our expertise in with a full navigation of their e-commerce business, including: the field of analysing: ‒ e-commerce turnover dynamics a one-stop-shop solution ‒ specifics of offered products or banking products … services and services … ‒ seasonality of the business from to … statistics on visits ‒ dependencies between online and conversions sellers and their clientele … ▪ Our offer will be available at marketplaces, ▪ Additional services will be offered at competitive prices as mBank should shopping platforms gain from the scale and its negotiation power in establishing partnerships. and merchants’ sites to ▪ We will also focus on seamless configuration of all the components instead avoid disintermediation. of complicated one-by-one connection of many elements. mBank Group's Strategy for 2021-2025 20
Pillars of new mBank Group’s strategy for 2021-2025 Best digital corporate banking for high-potential companies We will initiate, develop and intensify the cooperation with companies from prospective industries and the fastest growing sectors of the economy as well as continue to support socially responsible business and energy transformation. ▪ We will create dedicated financing rules for fast developing We want to be more involved in: industries. Clients will be offered with additional products and services tailored to the specifics of their business. We will e-commerce and businesses € apply adequate credit assessment policies. supporting it ▪ We want to acquire leaders in their respective industries. renewable With close cooperation between business and risk area, energy sources automation the network of our customer relationship managers will be and digitalization supported by a team of sector analysts. solutions modern ▪ We will focus on energy transformation by providing a full technologies, digital scope of corporate and investment banking products to entertainment companies striving to conduct more sustainable business. healthcare and We will continue financing of renewable energy, waste pharma industry management and energy efficiency projects, develop EU funds ESG-linked products and arrange the issuance of green bonds. beneficiaries strategic rise mBank’s involvement into financing of the prospective industries (defined above) to PLN 13 billion in target 2025 from PLN 4.3 billion at the end of 2020 mBank Group's Strategy for 2021-2025 21
Pillars of new mBank Group’s strategy for 2021-2025 Best digital corporate banking for high-potential companies We will contribute to the growth of SME segment in Poland and benefit from its progressing e-commerce entry and higher profitability. We will focus on 3 main dimensions: operational effectiveness digital journey business growth and excellence ▪ early identification of client needs ▪ promotion of internet banking ▪ expansion of customer base, higher to adequately adjust service model cross-sell index and proportion of ▪ development of pre-approved (remote/hybrid/local) at the active, profitable relationships credit products and improved acquisition phase thanks to distinctive transactionality time-to-agreement in the process ▪ extensive self-service digital ▪ cooperation with mLeasing and ▪ one credit process for products offering to eliminate the need to mFaktoring and constant increase provided by mBank, mFaktoring visit a branch or contact personally of the base of shared clients and mLeasing to deliver full ▪ active usage of data analytics in spectrum of financing options ▪ a joint dedicated offer in a fast and after-sales service to provide light process, followed by one ▪ focus on most efficient collaterals customers with better calibrated credit decision encompassing all (BGK guarantees and mortgages) advice on products and services products strategic maintain a growth rate of mBank's SME segment (K3) at 10% per year in the area of client acquisition, target credit volumes and revenues mBank Group's Strategy for 2021-2025 22
Pillars of new mBank Group’s strategy for 2021-2025 Best digital corporate banking for high-potential companies We will amplify our leading position in investment banking on the Polish market. We will strengthen relationships with our corporate customers through additional knowledge-based services and assistance of top-rated advisors. A long-term and responsible investment banking model with a strong compliance culture: strong internal competences… … to offer the best services ▪ We will further enhance our consulting competences ▪ We aspire to be a relevant player in IPO listings. In to support companies in finding the right responses to parallel, we want to remain very active in tender offers market challenges and transformative demands. and share buy-backs and maintain a strong position in this less cyclical segment of the ECM market. ▪ We will invest in the knowledge and professionalism of our experts to create additional value for customers by ▪ We will continue to support our clients in acquisitions, proposing solutions best suited to their needs. disposals and other equity transactions with the full scope of available services, including corporate and M&A advisory both on public and private side. access to advanced extensive customer market ▪ We will be prepared to supplement equity component expertise experience trust information with leverage financing to create and derive more value from these complex transactions. strategic have mBank's customer advisors to be rated as the best on the market in initiating and offering target solutions that create value for corporate customers mBank Group's Strategy for 2021-2025 23
Pillars of new mBank Group’s strategy for 2021-2025 Best digital corporate banking for high-potential companies We will provide the best end-to-end digital banking experience for corporate customers in Poland. We plan to focus on the 5 areas: ▪ Customers will be able ▪ Clients will gain an to sign an agreement, end-to-end digital digital improvement access to the accounts open and manage any customer experience of traditional products without any breaks product, and initiate digitally enhanced (24/7/365), cards will any interaction with customer service be virtualized, volume perfect UX/UI mBank without a need of cash processed in experience in digital digital sales of personal meeting branches reduced channels ▪ Transactional platform mBank ▪ Customer Service Team will be ▪ Upgrade of sales processes, introduction CompanyNet together with application equipped with digital tools enabling of advanced data analytics to leverage mBank CompanyMobile will be the remote interaction via all contact the knowledge on the customer gateway to any product or service channels, screen sharing functionality behaviours, transactions, situation ▪ make digital onboarding a dominant form of new account opening for corporate customers, achieving the level of 90% of digitally opened accounts in 2025 strategic ▪ boost mobile banking penetration and its usage among corporate customers, with an increase of targets companies having mBank CompanyMobile application to 80% of total base in 2025 ▪ reduce the paper usage in corporate and investment banking area by 50% in 2022 compared to 2020 level, and further to 10% of starting volume in 2025 mBank Group's Strategy for 2021-2025 24
Pillars of new mBank Group’s strategy for 2021-2025 Best digital corporate banking for high-potential companies We will redesign credit process for corporate clients to make it more predictable, supporting business development as well as ensuring safe and adequate level of risk costs. We will transform our credit process comprehensively for the benefit of the client: digitization and automation internal reorganisation ▪ ePlatform for paperless communication with the clients ▪ simplification and standardization of information in end-to-end process, integration of key systems required from the client (internet banking, internal and external databases with ▪ redefinition of roles and responsibilities in the process; bank’s internal credit workflow system) its automation will allow relationship managers to focus ▪ development of advanced data analytics for ongoing more on acquisition and customer advisory early warning signals and automated decisions for ▪ establishment of strong cooperation culture between all smaller exposures process participants ▪ further automation of loan agreement preparation predictable credit process fast ▪ automated monitoring of exposures, with based on data already available in the bank transparent ambitious KPIs measurable strategic have over 50% of K2 and most of K3 clients using simplified credit process after the completion of all target project initiatives implementation mBank Group's Strategy for 2021-2025 25
Pillars of new mBank Group’s strategy for 2021-2025 Best digital corporate banking for high-potential companies We will grow the profitable corporate banking business, taking care of capital and cost efficiency (both at the level of the business line and the individual customer relationships). ▪ We will review the portfolio and continue the cooperation We have introduced a new metric: with companies for which the assumed AROR threshold is adjusted revenues on risk weighted assets fulfilled. The permanently inefficient customer relationships will be selectively, but consequently, reduced. − − ▪ We will use AROR in pricing decisions and planning the = ℎ ( ) relations with particular customers. To integrate this approach on the product level, we will implement supporting tools in the CRM system. There are 3 possible outcomes : ▪ Simplification and centralisation of internal processes, AROR < zero ≤ AROR < threshold ≤ AROR development of remote channels, and wider digital credit not to be granted, exposure to be reduced availability of products for customers will increase employment efficiency. We will automate time-consuming further analysis needed, conditional decision and repetitive tasks to gain more time for creative activities. minimum criteria met, positive assessment ▪ improve the profitability of mBank’s corporate and investment banking area through optimising risk strategic weighed assets to reach the assumed AROR level in 2025 targets ▪ increase employment productivity measured as a relation of total revenues to staff (FTEs) of corporate and investment banking division by 40% to 2025 compared to 2020 mBank Group's Strategy for 2021-2025 26
Pillars of new mBank Group’s strategy for 2021-2025 Technology, security and data as a source of advantage We will provide high quality, availability, security and stability of mBank’s solutions and services to customers on a continuous basis. We will focus on 2 main areas to improve stability: quality of software delivery improved incident response ▪ increase the level of maturity of the software ▪ redesign our current incident response development process through continuous monitoring model according to the best market and automation of security controls, implementation of practices including SRE (Site Reliability multi-level quality gates and further automation of all Engineering) and world class observability types of tests tools and practices ▪ adopt these new processes in the area of both software ▪ increase the focus of our DevOps teams on security and infrastructure development (IaaS) by implementing automatic detection of security gaps, continuous monitoring of software development ▪ implement new architectural standards in order to raise processes and standardisation of infrastructure the scale of building new and adopting existing reusable design patterns and components ▪ make our client-facing services available 24/7/365 at ~99.9% by 2025 strategic targets ▪ follow a unified way of designing IT solutions according to all standards of high availability, security and operability to be executed mBank Group's Strategy for 2021-2025 27
Pillars of new mBank Group’s strategy for 2021-2025 Technology, security and data as a source of advantage We will maintain the technological advantage of mBank in the financial sector by being cloud- ready, allowing for flexibility, scalability of technology and swift adaptation to business needs. We will develop hybrid cloud environment to enable flexibility of running workloads: transformation to reach the cloud-ready state benefits from the cloud We need to further re-architect mBank’s solutions as well as: ▪ boosting innovation ▪ expand IaaS capabilities (infrastructure as a service, private cloud) to support of business solutions cloud-readiness of the organisation ▪ enabling faster ▪ migrate applications developed internally to hybrid cloud technology stack time-to-market (containerisation) ▪ enlarging the scalability ▪ hone practical skills to leverage PaaS Cloud Services to accelerate of used technology time-to-market and innovations ▪ improving efficiency ▪ create principles of using standard third-party cloud applications (SaaS) and utilisation of our IT resources ▪ adopt a standardised way of implementing SaaS and PaaS based solutions ▪ increasing attractiveness of mBank in mBank, according to all security, regulatory and operational requirements as a digital institution and employer ▪ have more than 70% of key systems developed internally to be cloud-ready and run on hybrid cloud strategic (private or public) by 2025 targets ▪ ensure 100% of newly developed systems to be cloud-ready and run on hybrid cloud starting by 2025 mBank Group's Strategy for 2021-2025 28
Pillars of new mBank Group’s strategy for 2021-2025 Technology, security and data as a source of advantage We will address the full threat lifecycle and thus providing highest possible security to mBank’s clients and employees by continuous development of a multi-layer cybersecurity defence model for both on-premise and cloud solutions. We will constantly work to limit the risk of the threats materialising and improve the effectiveness of response: adequate cybersecurity solutions anti-fraud and scams prevention We act proactively, searching for weaknesses in mBank’s To protect our clients' money against criminals, we plan to: infrastructure and addressing vulnerabilities before they ▪ enhance our customer profiling solutions based on data are exploited. We also plan to: obtained from internal and external sources ▪ strengthen ‘security by design’ paradigm in relation to ▪ use artificial intelligence in the processes of analysing regular tests of the code of created applications customer behaviours ▪ continuously educate our security team ▪ use behavioural biometrics in fraud prevention ▪ extend our monitoring and response systems with AI/ML ▪ monitor 80% of critical systems running in the cloud and processing protected data by 2025 ▪ test 80% of new, critical applications developed at mBank in terms of security of its code strategic targets ▪ conduct comprehensive Red Team’s tests verifying the level of organisation's security and resistance to emerging cyber threats at least twice a year ▪ connect 80% of onboarding processes to the anti-fraud system by 2025 mBank Group's Strategy for 2021-2025 29
Pillars of new mBank Group’s strategy for 2021-2025 Technology, security and data as a source of advantage We will provide the highest possible protection of mobile application serving as a digital key to all mBank’s channels with the state-of-the-art security solutions. We will deliver the most secure and client-friendly identity confirmation process in all digital channels. We will evolve mBank’s remote services to ensure full security for clients: mobile security digital identity ▪ We want to deliver upgraded solutions that are invisible ▪ Traditional methods of identity confirmation using a for our clients and at the same time able to learn their password or a PIN code may no longer be sufficient. behavioural patterns in order to detect possible ▪ We will implement solutions that authenticate a client anomalies on their mobile devices. by using an electronic layer of documents ▪ We will implement RASP-like (Realtime such as ID card, passport, etc. Application Self-Protection) mechanism ▪ We will promote digital identity services and behavioural biometrics as an additional as allowing for convenient authentication technology supporting authorisation. at various moments of client-bank interaction. ▪ have 80% of mobile clients protected by RASP-like mechanism by 2025 ▪ provide 80% of clients who consented to behavioural biometrics with additional protection while strategic authorising operations targets ▪ use digital identity solutions in major business process requiring onboarding by 2025 ▪ redesign at least one high-risk process to use digital identity by 2025 mBank Group's Strategy for 2021-2025 30
Pillars of new mBank Group’s strategy for 2021-2025 Technology, security and data as a source of advantage We will employ artificial intelligence and data science to support creation of innovative customer products, better risk assessment, increase effectiveness of internal systems and workflows as well as maintain mBank’s image of the technological and digital leader. We will utilise AI technologies to support mBank’s offer development and security solutions: AI/ML applications right set-up ▪ automated client support agents (relying on voice analysis technology and ▪ streamline the management of natural language processing), working as personal finance assistants in some internal projects utilising artificial interaction scenarios (e.g. in contact center) intelligence technologies ▪ detection of fraudulent banking transactions, focusing primarily on internet ▪ attract more data science and banking and development of online infrastructure, such as systems for machine learning specialists customer behaviour analytics to mitigate the risk of impersonation attacks ▪ use AI/ML to both design ▪ prediction of churn in retail and corporate banking, by implementing network customer products or services powered classification algorithms and increasing data coverage and to make business processes ▪ process mining techniques for optimisation of internal business processes more efficient ▪ create and deploy at least four products or services in both retail and corporate banking based on strategic artificial intelligence (AI) engines by 2025 targets ▪ launch at least one client-oriented product or service using external machine learning (ML) cloud- based systems with large repositories of data and pre-trained models by 2025 mBank Group's Strategy for 2021-2025 31
Pillars of new mBank Group’s strategy for 2021-2025 Distinctive people and organisation culture We will create culture where cooperation is based on trust and positive intentions. mBank's culture of trust and good intentions is defined by 5 key values: Authenticity Empathy Courage Responsibility Cooperation take courageous understand your remember that you be open, assume good treat others with decisions, express strengths and talents, are a part of a greater intentions in others, empathy, be sensitive your views freely strive to be the best structure, act ethically consider different to the needs, opinions and respectfully, be version of yourself, and responsibly, keep points of view and and emotions of team straightforward, be have respect for your word, take care opinions, look for the members, clients ready to admit your differences and of the environment, best ways to achieve and society mistakes and draw appreciate them be socially sensitive common goals conclusions from them strategic reach the engagement score within the upper quartile for Europe (the Best Employers Zone, average target from the last 3 years, currently at the level of 71%) in 2024-2025 mBank Group's Strategy for 2021-2025 32
Pillars of new mBank Group’s strategy for 2021-2025 Distinctive people and organisation culture We will develop best-in-class hybrid work environment. Key components of mBank’s hybrid workplace will include: Smart working mindset Advanced workplace Flexible and adaptive combined with top skills technology and digitized workplace model and practices people processes performance evaluation highly productive top communication based on outputs; work environment and collaboration leaders skilled in and response to technology widely managing distributed employees’ needs adopted by employees teams ▪ Hybrid workplace academy: deploy world’s top know-how on individual, team and managerial level; ▪ Hybrid-ready employee journey: improve and digitize people HR processes; ▪ Employee health and well-being: provide support to the employees in terms of physical and mental health; strategic reach hybrid workplace index at the level of 80% (measuring voice of employees on key workplace target dimensions: collaboration, technology, health, sense of belonging) mBank Group's Strategy for 2021-2025 33
Pillars of new mBank Group’s strategy for 2021-2025 Distinctive people and organisation culture We will make people capabilities a competitive advantage for the bank. Our staff-based advantage over competitors will be based on: Strengths-based approach Focus on future skills T-shape philosophy to leverage needed combing individual for the high level of talents and organization competence with foster innovation to succeed curious mindset ▪ providing employees with talent diagnosis and advisory, re-modelling individual development processes; ▪ use cutting-edge technology to manage employee capabilities in a strategic, data-driven way; role-changing facilitation; advanced employee analytics to fast identify and match people with jobs; ▪ new methods of motivation adequate for younger generations with managers being the coach, engaging them in important tasks and projects, showing the purpose in daily work; strategic reach talent index at the level of 70% (reflecting the average of voice of employees and managers on target 3 aspects: strengths-based approach to development, adoption of future skills and employability) mBank Group's Strategy for 2021-2025 34
ESG strategy of mBank Group 35
ESG strategy of mBank Group for 2021-2025 ESG aspects play a crucial role in the way we manage our company We want to make a progress with our ESG agenda and stand out of our peer group. We will be more responsible and inclusive bank and expect it from our employees, clients and commercial partners. We will continue to contribute to the sustainable growth and well-being of the society. We support Sustainable Development Goals (SDGs) our commitments and best practices ESG governance and communication As the first Polish bank, we have We will constantly enhance our ESG disclosure standards independently signed the Principles to be favourably viewed by our shareholders and broader for Responsible Banking. investment community. We want to maintain and improve They serve as framework to achieve mBank's ratings and position in leading indices. the SDGs and the goals of the Paris Climate Agreement. 15.9 ESG Risk Rating Bloomberg GEI Gender-Equality Index Our intention is also to enter the Net-Zero Banking low risk by Sustainalytics Alliance of UNEP FI, the United Nations Environment FTSE4Good Programme Finance Initiative. as of 19.04.2021 Index Series mBank will use Science Based Targets Initiative (SBTI) WIG-ESG index methods to calculate and reduce the CO2 emissions associated with its credit portfolio (scope 3). As a partner to our clients, especially SME companies, we want to support A MSCI ESG Rating on WSE in Poland their transformation into low-carbon businesses. as of 15.05.2020 please refer to the last page for disclaimer statement mBank Group's Strategy for 2021-2025 36
ESG strategy of mBank Group for 2021-2025 Responsibility for climate Our promise: By 2050 we will become a fully climate-neutral bank. By 2030 we will reach climate neutrality in scope 1 and 2. Our goals (climate neutrality and energy transformation support) – direct impact: reduce direct environmental footprint of mBank Group by: ▪ development of data aggregation system concerning ▪ using clean energy, with a minimum 80% of the direct emissions volume of electric energy purchased for the needs of ▪ defining a timetable and milestones the bank coming from renewable sources by 2023 (2025, 2030, 2050) for reducing ▪ replacing mBank’s fleet with the carbon footprint and achieving low-emission vehicles gradually, climate neutrality in line with the Paris with no new diesel-powered cars Agreement goals starting from 2023 ▪ calculating our carbon footprint and subjecting our ▪ diminishing our waste, with having 100% of no longer estimation to an external audit by 2022 used, well-functioning equipment reused ▪ setting the example for sustainable cities and ▪ continuing elimination of paper from our processes communities through resource-efficient new mBank’s and plastic cards, by having 100% of mBank’s debit headquarters in Warsaw and Łódź cards for individual clients with a digital equivalent (mobile card) by 2025 mBank Group's Strategy for 2021-2025 37
ESG strategy of mBank Group for 2021-2025 Responsibility for climate Our promise: By 2050 we will become a fully climate-neutral bank. By 2030 we will reach climate neutrality in scope 1 and 2. Our goals (climate neutrality and energy transformation support) – indirect impact: be a leading bank supporting energy transition of our clients by: ▪ providing PLN 10 billion of funds for RES segment by ▪ granting PLN 25 billion of housing loans the end of 2023, including: collateralized on residential buildings that ▪ PLN 5 billion of own funds dedicated for new meet CO2 emission reduction norms resulting financing of green energy, waste management, from the low carbon trajectory in 2022-2025 e-mobility, and similar projects, ▪ selling PLN 1 billion of eco-mortgage loans for real ▪ PLN 5 billion from other sources such as consortia estates that meet the increased emission requirements and green bonds issues for clients confirmed by the Net Zero Energy Building ▪ increasing the share of corporate clients with ESG Certification (NZEB) in 2022-2025 products to 5% of total portfolio by 2023 ▪ financing PLN 1.7 billion of eco-investments of retail ▪ identifying carbon-intensive sectors within our small firms by 2025 portfolio and determining the level of CO2 pollution ▪ achieving at least 50% of our clients’ assets under that may be attributed to them mBank’s management invested in products compliant ▪ rising share of SME’s investments backed with ESG guidelines by 2025 by eco-compliant real estate to 10% by 2025 ▪ having no new products with a low ESG rating among third-party investment funds offered by mBank mBank Group's Strategy for 2021-2025 38
ESG strategy of mBank Group for 2021-2025 Responsibility for financial health of our clients Our promise: We support customers in safe and convenient banking as well as making conscious financial decisions. Our goals (transparency and ethics, inclusive banking): take care of good financial standing and future of our clients by: ▪ developing the personal finance management (PFM) ▪ conducting responsible sale accompanied by extensive functionalities to give clients the control over their information and transparent presentation of the risks budgets, cash flows, savings and investments as well associated with specific financial products as support them in preparation for life-cycle events ▪ using clear communication ▪ continuing educational campaigns on safe finances, and plain language including one cybersecurity campaign in each year of ▪ having all newly opened branches strategy implementation accessible to people with disabilities ▪ certifying our buildings, customer service and internet websites by 2023 mBank Group's Strategy for 2021-2025 39
ESG strategy of mBank Group for 2021-2025 Responsibility for being an organization in line with ESG values Our promise: We walk the talk. We first accomplish and then communicate. We build corporate culture based on values and incorporate ESG into our daily life. Our goals (authenticity): introduce ESG factors into business and employee processes by: ▪ setting 10% of TOP 100 managers’ OKR (Objective and ▪ implementing Taxonomy in processes (including the Key Results) goals related to ESG credit process), procedures and products ▪ ensuring gender balance in the succession program, ▪ expanding responsible offer by launching at least one with a proportion of participants of a given gender at eco-product in every business line minimum 45% each year starting from 2021 ▪ preserving a gender diversity of the ▪ developing each new banking candidates in the final stage of the product along with its ESG recruitment process (for managerial evaluation from 2022 positions) ▪ cooperating only with partners and suppliers fulfilling ▪ implementing a hybrid work system that will meet the ESG standards (in line with a code) by 2025 needs of the employer and employees ▪ proactively promoting the proper segregation of litter ▪ having 90% of employees with a possibility to fulfil and organising a Clean Day event for employees once their jobs in a flexible manner by 2023 a year (a day dedicated for cleaning the Earth) mBank Group's Strategy for 2021-2025 40
ESG strategy of mBank Group for 2021-2025 Responsibility for society Our promise: We will contribute to social well-being. We will be a responsible corporate citizen. We will take care of our employees and their families. Our goals (a responsible corporate citizen): act for the financial and non-financial benefit of the society by: ▪ supporting the development of mathematical ▪ cooperating with the Great Orchestra of Christmas education in Poland through the activities of mBank Charity (WOŚP), which for years, has been supplying Foundation (mFundacja), including grant the health service with modern medical equipment programmes and competitions of national range ▪ encouraging to active participatory citizenship by ▪ creating a collection of paintings by young artists, launching an option to easy support NGOs and which will be open to the public, and extended thanks foundations directly from mBank’s mobile application, to an established fund (“m jak malarstwo”) allowing our clients to contribute and promote the civil society We play together mBank Group's Strategy for 2021-2025 41
Strategic financial targets for 2025 42
Financial targets of mBank Group for 2021-2025 The activities of mBank Group will be focused on achieving the following strategic financial targets Efficiency Cost/Income ratio (C/I) ~40% in 2025 year-end level min 2.5 p.p. Tier 1 capital ratio above the PFSA requirement Stability Cost of risk (COR) ~0.80% in the mid-term Loans CAGR 2021-2025: ~8% Growth Deposits CAGR 2021-2025: ~8-9% Total revenues CAGR 2021-2025: ~9-10% Net interest margin (NIM) ~2.5% in 2025 Profitability Return on equity (ROE) above 10% in 2025 mBank Group’s transition from best-in-class efficiency to satisfying profitability Note: Target level for capital ratios is valid under current regulatory regime and adopted assumptions. mBank Group's Strategy for 2021-2025 43
Potential divergence from baseline planning scenario Summary of main positive and negative factors that may impact mBank Group's results The financial targets for 2025 reflect a base scenario for mBank Group's development and they may be affected both positively and negatively by a number of factors. Upside potential to our revenue trajectory On the negative side, our financial performance and profitability may stem from: and capital position may deteriorate due to: ▪ faster and bigger interest rate hikes than ▪ adverse FX mortgage loan scenario and assumed in the financial plan regulatory instability ▪ higher dynamics of fee and commission ▪ worsening macroeconomic conditions income resulting from better contribution (lower GDP growth, high unemployment from new business/services and more rate, lack of private investments) and adjustments to the price lists unfavourable market development (PLN depreciation) impacting business volumes ▪ considerably increased new mortgage loan and risk profile production ▪ persistent inflation and tightening labour market putting pressure on cost base mBank Group's Strategy for 2021-2025 44
In the increasingly competitive market, attacking by new entrants, fintechs and internet giants, we can further build our advantage around fundamental banking values such as stability, security and secrecy. 45
DISCLAIMER This presentation is solely for information purposes and is published only to provide information regarding the adoption of the mBank Group’s Strategy for 2021-2025. The Bank emphasizes that the above assumptions and strategic goals do not constitute a forecast or estimate of results, including financial ones, and are only information on the planned areas of the Bank's activities and potential directions of development for 2021-2025. Publishing this information does not constitute an offer to sell or a an inducement of purchase or acquisition of any securities in any jurisdiction whatsoever, or an advertisement within the meaning of Article 53 section 1 of Polish Act of 29 July 2005 on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies, as amended, and is by no means intended to promote the purchase or acquisition of any securities or to induce their purchase or acquisition. Certain statements contained herein may constitute forward-looking statements. Forward-looking statements involve a number of known and unknown risks, uncertainties and other factors that could cause the Bank’s actual results, achievements or development to be materially different from any future results, achievements or development expressed or implied by such forward-looking statements, for which the Bank shall not be liable. Each potential investor should make his own analysis and assess the merits of the investment, taking into account all relevant circumstances. The use by mBank of any MSCI ESG RESEARCH LLC or its affiliates (“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement, recommendation, or promotion of mBank by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty. MSCI names and logos are trademarks or service marks of MSCI.
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