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Bank Millennium SABank Millennium expects gradual increase in cost of risk following portfolio structure change
Listed lender Bank Millennium expects a gradual increase in the cost of risk over the next few years, up to around 60 bps, in line with the planned change in the structure of its loan portfolio, the bank's deputy CEO Fernando Bicho informed on Tuesday. He added that he hopes for a further decline in provisions for legal risk.
"The cost of risk at 50 bps or more than 50 bps is still achievable (in 2024 -PAP)," Bicho told a conference.
"The evolution of the cost of risk going forward will reflect a gradual change in the bank's balance sheet structure. With the implementation of the strategy, we will have corporate loans, but there will be a decrease in mortgages, so there will be some increase in the overall cost of risk - it will probably be around 60 bps," he added.
The CEO continued that this will not be a spike, adding that the cost of risk will gradually increase, reflecting the change in the structure of the loan portfolio.
Currently, Bank Millennium's cost of credit risk is at 53 bps.
Bicho reported that the floods have not affected the level of credit provisions made by the bank.
The bank's legal risk provisioning/gross active loan portfolio ratio is at 111 percent.
In its methodology for calculating provisions for its CHF loan portfolio, Millennium assumed that 86 percent of such active loans will be litigated, 24 percent of repaid loans (excluding loans subject to amicable settlements) are or will be subject to litigation and 10 percent of active suits will be subject to settlements.
Bicho reported that the bank does not plan to create 'upfront' provisions for costs related to the CHF portfolio and hopes to maintain the downward trend of reducing these costs.
"Associated costs this year are lower in comparison to last year, and we expect the trend of declining costs to continue. There should be an improvement in 2025, but it will still have a significant impact (...) from 2026 onwards, provisions will be visibly falling," Bicho said.
"We are reaching a significant number of settlements during litigation, if this continues it will contribute to the decline in legal costs," Bicho said.
The bank said in its strategy published on Monday that its main targets by 2028 are to double its corporate banking loan portfolio to above PLN 25 billion (EUR 5.75 mln), increase the number of retail customers to 3.7 million and achieve a ROE of around 18 percent.
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