Strategy

Strategic Plan: Excelling 24

The strategic cycle launched in 2021 reflects Millennium bcp’s determination to accelerate transformation and strengthen its positioning for the future, preparing to face and overcome the challenges that are shaping both the macroeconomic environment and bank’s competitive landscape.

Successfully executing on the key priorities and levers of Millennium bcp's previous Strategic Plan cycle (2018-2021) was crucial for setting the Bank on a solid normalisation path, by significantly reducing its legacy exposures. It also laid important foundations for the future by substantially accelerating Bank's level of digitization.

This trajectory was particularly influenced by developments in Portugal (a 40% reduction of NPEs compared to 2018 and mobile Customers up by 48% in 2020), where the Bank managed to recover its volume growth trend (~5% p.a. growth in loans and Customer deposits over 2018-20) and increase its share of revenues (+0.6pp in 2018-20), despite the environment of margin compression under a context of continued low interest rates.

In Poland, despite a positive operational performance and the ability shown in the swift integration of EuroBank, the bottom-line result has been hindered by negative developments in FX mortgages (despite the Bank stopped writing new FX mortgages in 2008).

Entering in this cycle, the Bank faced an economic turmoil environment, whose recovery prospects were expected to bring promising growth opportunities. Greater customer expectations, more digital and e-commerce activity, the increasing threat of tech platforms and digital attackers, and the overriding requirement of sustainability were factors that together presented significant challenges but also major opportunities.

The Bank's profitability was also constrained by legislative developments in Portugal, namely the contributions to the National Resolution Fund and limitations regarding fair commissions and fees.

The Strategic Plan update was designed to preserve relevant priorities from the previous strategic cycle, consolidating the progress made and adding elements consistent with the new framework.

This Strategic Plan reflected Millennium bcp’s aspiration to achieve robust profitability and balance sheet position levels, and to manage the impact from the crisis caused by the pandemic, while accelerating its competitive differentiation in efficiency and Customer engagement levels, supported by targeted human touch, new mobile/digital solutions and new business models, enabled by a highly skilled and effective talent base, while at the same time addressing social sustainability challenges with a focus on climate change risks and the opportunities that may unfold from their mitigation.

Therefore, the main strategic priorities for Millennium bcp in Portugal have been set out for this cycle, preserving a balance between continuity and the implementation of bolder initiatives that reinforced the competitive edge and innovation in Millennium bcp’s positioning:

• Serving Customers’ financial and protection needs with personalised solutions that combine targeted human touch with a leading mobile platform: aspiring to increase relevance and develop high engagement relationships that empower our Customers in their financial lives. This priority is about being the bank of choice for retail Customers’ needs, and in which Millennium holds a leadership position: investment management, bancassurance and personal lending solutions.
• Being a trusted partner for corporate recovery and transformation: supporting Customers in accessing opportunities driven by EU funds for economic recovery (PRR, PT 2030), while, at the same time, enabling solutions to encourage an increase in digitalization, competitiveness and export-oriented corporate landscape.
• Capital and risk resilience: reinforcing the balance sheet and ensuring readiness for the post-pandemic scenario by strengthening both risk and capital management practices.
• Best in class in efficiency: realising cost savings enabled by productivity gains initiated in the previous cycle as a result of several transformational changes implemented, including the full exploitation of mobile and automated capabilities, increased efficiency in the branch network and tech and data-driven process reengineering and automation.
• Deepening the advantage of data and technology: focusing efforts on the implementation of our next-generation data platform while scaling advanced analytic models, enabling differentiation through mass personalization capabilities, intelligent automation, informed and agile business and regulatory management. In parallel, the Bank will expand the deployment of its new technology infrastructure, including advancing its cloud platform, using modular IT building blocks augmented by the digital experience platform and new cybersecurity solutions, designed to deliver agility and speed to market, scale, resilience and cost efficiency.
• Developing skills and renewing talent: reinforcing Millennium bcp's ability to attract, develop and retain the best talent to embrace modern challenges in critical domains and adapt working practices to reflect the new paradigm, while promoting an equal-opportunity environment.
• Sustainability-driven: adapting our business model to increase differentiation towards communities and Customers' growing expectations in the sustainability area, while capturing associated business opportunities as well as addressing regulatory requirements.
• Lastly, Millennium bcp's innovation initiatives enable the Bank to explore broader opportunities, going beyond traditional banking, not only in order to deliver a superior Customer experience, but also to support our income growth and cost-containment goals.

The execution of these priorities in Portugal was combined with consistent initiatives that allowed the prudent use of full growth potential of our international operations, constantly seeking for ways to optimize their footprint.

This plan will enable Millennium bcp to deliver against a set of bold targets for 2024. The Group aspires to improve C/I (to ~40% in 2024) and profitability (aiming at a ROE of ~10%). In parallel, Millennium bcp has the goal to significantly reduce cost of risk (to ~50 bps) and NPE ratio (to ~4%), while keeping, also, a prudent CET1 ratio (>12.5%). Additionally, the Bank continued to invest in the mobile penetration increase (from 48% to more than 65%), while maintaining the focus on leading digital customer satisfaction (#1 in digital NPS).

Targets for 2024

In this new Strategic Plan cycle, Millennium bcp aims to speed up the transition in Portugal towards a strengthened competitive and ready for the future position, notwithstanding the risks that shape the macroeconomic environment and the competitive landscape.

Our aspiration can be synthesised as:

• Achieve robust profitability, asset quality and capital levels, managing the impact of the crisis caused by the pandemic, the war in Ukraine effects and the distribution crisis, with consequent price inflation;
• Accelerate Millennium bcp’s competitive differentiation in efficiency and Customer engagement, supported by targeted human touch, mobile/digital solutions and in new business models with an excellence talent base;
• Address social, environmental and corporate governance challenges with a focus on the risks arising from climate change, and the opportunities associated with adopting solutions to mitigate and adapt to this new reality.

In the international business, Millennium bcp will continue the journey started in 2018 making adjustments in light of recent developments. In Poland, where it is implementing a resilient plan, the focus is on meeting the risks of exposure to mortgage loans in Swiss francs, reducing the need for provisions for this risk, ensuring the continued development of the commercial franchise and Customer satisfaction. In Mozambique, it will continue to adapt the business model to improve the service and address the evolving needs of Customers, maintaining a strong commitment to profitability, efficiency and risk control model.

The successful execution of Millennium bcp’s strategic priorities will reinforce its franchise position and business model sustainability.

Strategic Plan

	H1 2023		2024
C/I ratio	32%		≈40%
Cost of risk	50 bp		≈50 bp
RoE	16.8%		≈10%
CET1 ratio	14%		>12.5%
NPE ratio	3.7%		≈4%
Share of mobile Customers	66%		>65%
Growth of high engagement Customers* (vs 2020)	+11%		+12%
Average ESG rating**	69%		>80%

*Adjusted cost to income: without the positive one-off effect related with the sale of 80% of Millennium Financial Services stake (international operations) and without the charge regarding mainly the compensation for the temporary reduction of remuneration in the period 2014/2017 in Portugal.
**Active Customers with card transactions in the previous 90 days or funds > €100 (>MZM 1,000 in Mozambique)
***Average of Top 3 indices (DJSI, CDP and MSCI) | NPE include loans to Customers only.​​