Bank Millennium assesses sensitivity to rate cuts at close to zero; in Q2 increased interest in mortgages expected

"Our sensitivity to a 100 basis point cut in interest rates in a static environment is close to zero. We have tried to reduce the sensitivity of our net interest income to interest rate changes, this has been achieved through the bond portfolio, where we have a large fixed interest portfolio, and the loan portfolio, which is also partly fixed interest," the bank's deputy CEO Fernando Bicho told the conference following the publication the results for the first quarter of 2025.

"This gives us some security. Of course, we have to keep in mind that in reality there is a dynamic development of the loan and deposit portfolio, and the final result will also depend on how loans and deposits develop in the next four quarters," he added.

Millennium's net interest income stood at PLN 1,423.5 million (EUR 335.7 mln) in the first quarter, which means it rose by 5.1 percent year on year, while falling 5.4 percent in quarterly terms.

The bank pointed out that the year-on-year increase was the result of higher income, which in turn was driven by higher interest-generating assets, improved yields on the bond portfolio and lower deposit costs. The quarterly decline was, in turn, largely the result of fewer calendar days, the effect of a high base (reversal of the so-called credit holiday costs of PLN 45 million or EUR 10.6 mln in the fourth quarter of 2024) and the cost of the securitisation transaction completed in December 2024.

The quarterly interest margin decreased to 423 basis points from 437 basis points in the previous quarter.

Sales of mortgage loans amounted to PLN 789 million (EUR 186.05 mln) against PLN 1,133 million (EUR 267.16 mln) in the last quarter of 2024. The bank's market share of sales fell to 3.3 percent from 8.2 percent in the prior year period.

"We expect an increase in customer interest in mortgage loans in the second quarter. In our view, it was not only interest rates [that had an impact on lower loan sales - PAP ed.], but some customers believed that real estate prices were high," the bank's CEO Joao Bras Jorge said.

Millennium's CEO reported that the bank is seeing more interest in mortgage loans.

“However, we are seeing some improvement in mortgage volumes in the market, and we are also noticing improvement in this area,” Joao Bras Jorge said.

“Arguably, in the first quarter we were in a small market with too low a position (...) but the improvement in the market also means an improvement in our position in this market,” he added.

Write-offs for legal risk of foreign currency mortgages in the first quarter of 2025 amounted to PLN 444.8 million (EUR 105.1 mln), down by 19 percent year on year and by 2 percent quarter on quarter. Millennium's deputy CEO maintained that in 2025 these provisions should be lower than in 2024, but they will still be significant.

"We cannot say that in the second quarter, the reserves will be lower than in the first one. However, if there are no extraordinary events, this should be the last year when these reserves are so high," Bicho assessed.

According to the CEO, Erste's plans to acquire another listed lender, Santander BP, can also be evaluated through the prism of confidence in the development of the Polish economy.

"As for any impact on our shareholders, in our opinion there is none. There is still very much value to materialise in our bank. We believe that the implementation of our strategy will have a significant impact on results," Joao Bras Jorge concluded.

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