A Break-through Year for the Digital Disruptor: Alior Bank Records Growth Beyond Strategic Targets
New loan production driven by strong organic growth largely exceeded the annual target in 2017 (PLN 6.9 billion v. PLN 5-6 billion) and Alior Bank moved from the ninth rank to being the eighth largest bank in Poland as measured by total assets.
The Bank’s capital and liquidity position improved considerably in 2017, opening space for further dynamic growth. The Bank’s net profit amounted to PLN 515 million in 2017, which was in line with the current market consensus and 15 percent above the June 2017 consensus. The net profit was mainly driven by H2 results, when the net profit amounted to PLN 333 million. Alior Bank reported return on equity (ROE) of 8.0 percent in 2017; however, ROE would be 11.1 percent when including the target synergies generated by the merger with Core Bank BPH and excluding the integration costs. The target synergies generated by the merger with Core Bank BPH at PLN 381 million will be achieved already in 2018, one year earlier than initially expected. The Bank successfully pursues its Digital Disruptor strategy. In retail banking, the Bank has added a new deposit account, raised PLN 3 billion of deposits, and launched a new release of online and mobile banking platforms. The Bank’s position in the microfirm and SME segment improved substantially. In the Bank’s priority segment of microfirms, total loans stood at PLN 5.2 billion in 2017, up by 30 percent year on year, driving the Bank’s revenue in the segment up by 24 percent. Innovation remains the Bank’s key competitive advantage. Alior Bank aspires to be a European innovation leader within a few years by introducing new management models with respect to innovation and IT (Agilor). The Bank is implementing an Open API solution with a sandbox and is planning to launch an iLab. It will work with customers in order to develop solutions which improve customer satisfaction. The Bank will establish a fintech acceleration programme. The Bank’s solid results in 2017 boosted its stock price, which closed the year at PLN 79.50, representing an increase of 47 percent year on year. The Bank’s capitalisation crossed the mark of PLN 10 billion for the first time in history.
- In 2017, Alior Bank proved capable of successfully implementing large strategic projects including the merger with Core Bank BPH, maintaining a high pace of organic growth, and remaining a Polish banking leader in terms of earnings and costs. Moreover, the Bank’s capital and liquidity position improved, said Michał Chyczewski, Alior Bank Vice-President and acting CEO.
The consolidated net profit of the Alior Bank Group attributable to the shareholders of the parent entity stood at PLN 515 million in 2017, which was in line with the current market consensus. The net profit was driven by the results of Q4, when the net profit amounted to PLN 143 million. The Bank reported a return on equity (ROE) of 8.0 percent in 2017; however, ROE would amount to 11.1 percent when including the target synergies generated by the merger with Core Bank BPH end excluding integration costs. The costs of integration with Core Bank BPH were reduced to PLN 105 million compared to the originally expected PLN 195 million. The synergies generated by the merger stood at PLN 195 million. The target synergies at PLN 381 million will be achieved already in 2018.
Alior Bank steadily improves its key financial indicators. Its cost efficiency has improved despite on-going business expansion. The net interest margin amounted to 4.6 percent, the highest level in the Polish banking sector. The liquidity position has improved substantially as LCR increased to 124 percent.
Total revenue was more than PLN 3.7 billion in 2017, representing an increase of 38 percent. Thanks to continued growth of new lending volumes, the net interest income was more than PLN 2.8 billion, up by nearly 46 percent year on year. The net fee and commission income increased as well to PLN 453 million, up by nearly 37 percent year on year. Trading and other income stood at PLN 418 million in 2017.
Alior Bank’s lending volumes stood at PLN 51.3 billion at 2017YE, up by nearly 11 percent year on year. The gross loan book growth amounted to PLN 6.9 billion. The new volume was well above the strategic target (PLN 5-6 billion) and it was mainly driven by the growth in Q4 2017 thanks to the Bank’s improved capital position.
Customers’ deposits stood at PLN 57.6 billion in 2017, up by nearly 12 percent year on year. The solid result was driven by successful deposit campaigns, including a new Deposit Account (Konto Lokacyjne), attracting customers in strategic segments.
The Bank successfully improved its capital position. TCR and Tier 1 ratios improved year on year and reached 15.2 percent and 12.1 percent, respectively, compared to 13.7 percent and 11.3 percent at 2016YE.
The Bank’s results boosted its stock price, which closed 2017 at PLN 79.50, up by 47 percent year on year. The WIG20 index gained 31 percent and WIG-Banks gained 35 percent in 2017.
In the retail segment, the Bank increased the share of sales through electronic channels. The Bank works to increase the share of customers for whom it is the bank of first choice. Towards this objective, the Bank uses an innovative behavioural segmentation and improves the innovative edge of its digital channels. The Bank introduced an innovative savings and checking account Konto Jakże Osobiste in 2017 supported by a multichannel marketing campaign.
In the business segment, the Bank focused on microfirms and small and medium-sized enterprises. The competitive advantage in this market relies on advanced process automation and digital channels. The segment offers attractive margins and locks relatively little capital. Microfirms and small enterprises generated 26 percent of the Bank’s revenue in 2017. The profitability of this segment is mainly a function of enhancements and innovations. The fully automated credit process ensures that the preliminary credit decision for tickets up to PLN 600,000 in three product categories is available within 30 minutes and financing is disbursed within one business day. The Bank supports an online process for opening of business accounts for self-employed individuals, which is integrated with the business register database CEIDG. The Bank continues to develop the platform zafirmowani.pl, which offers useful know-how and practical solutions for companies, including a free-of-charge accounting and book-keeping application.
Alior Bank is planning to invest ca. PLN 100 million per year in IT and innovations till 2020, including PLN 10 million per year in fintech partnerships and projects. The Bank is implementing a new innovation management model which leverages coexisting and interacting internal and external environments. As a part of the new model, the Bank will launch an iLab to work with customers and improve customer experience. The Bank will engage in in-house crowdsourcing and offer career paths based on innovation and in-house incubation.
Alior Bank is planning to support innovative startups by launching in June an acceleration programme combined with a fund that will invest in fintechs and insurtechs.
The first edition of the startup programme will Focus on Open Banking, APIs under PSD2, and much more. The programme will provide mentoring, a test environment, and a work space within the Warsaw Spire. Selected companies will raise funding through the fund. The call for participants in the first edition is expected to open this April.
The accelerator is expected to support around 10 startups in the first year. Companies which deliver the best technologies will be offered funding. Jointly developed technologies will be implemented at Alior Bank. The fund is expected to invest PLN 10 million per year or PLN 30 million within the time horizon of the Digital Disruptor strategy. Investments will have a time horizon of 10 years.
Alior Bank’s capabilities of in-house incubation of fintech business models came to fruition in 2017 with the launch of the BANCOVO platform, a fully digital transactional intermediary in the cash loan market. According to the Digital Disruptor strategy, innovation is the foundation of Alior Bank’s competitive advantage. The Bank launched new releases of its mobile and online banking platforms in 2017 and it is planning to upgrade them further this year.
The Bank is an active participant of the M&A market in the industry. Its merger with Core Bank BPH, the fastest and one of the most efficient acquisitions in the Polish banking sector, was completed within months. The migration that took place in March 2018 gave clients of the former Bank BPH access to an extensive branch network and a broad range of services and solutions including online currency exchange, the mobile payment system BLIK, and GooglePay.
Alior Bank improved collaboration within the PZU Group in 2017, resulting in a bigger share of financial products in PZU’s sales as well as the implementation of other strategic projects. The Management Boards of Alior Bank and Bank Pekao signed a memorandum of understanding in October 2017 in order to define potential strategies of co-operation with a view to growing shareholder value and client proposition.
- In 2017, Alior Bank proved capable of successfully implementing large strategic projects including the merger with Core Bank BPH, maintaining a high pace of organic growth, and remaining a Polish banking leader in terms of earnings and costs. Moreover, the Bank’s capital and liquidity position improved, said Michał Chyczewski, Alior Bank Vice-President and acting CEO.
The consolidated net profit of the Alior Bank Group attributable to the shareholders of the parent entity stood at PLN 515 million in 2017, which was in line with the current market consensus. The net profit was driven by the results of Q4, when the net profit amounted to PLN 143 million. The Bank reported a return on equity (ROE) of 8.0 percent in 2017; however, ROE would amount to 11.1 percent when including the target synergies generated by the merger with Core Bank BPH end excluding integration costs. The costs of integration with Core Bank BPH were reduced to PLN 105 million compared to the originally expected PLN 195 million. The synergies generated by the merger stood at PLN 195 million. The target synergies at PLN 381 million will be achieved already in 2018.
Alior Bank steadily improves its key financial indicators. Its cost efficiency has improved despite on-going business expansion. The net interest margin amounted to 4.6 percent, the highest level in the Polish banking sector. The liquidity position has improved substantially as LCR increased to 124 percent.
Total revenue was more than PLN 3.7 billion in 2017, representing an increase of 38 percent. Thanks to continued growth of new lending volumes, the net interest income was more than PLN 2.8 billion, up by nearly 46 percent year on year. The net fee and commission income increased as well to PLN 453 million, up by nearly 37 percent year on year. Trading and other income stood at PLN 418 million in 2017.
Alior Bank’s lending volumes stood at PLN 51.3 billion at 2017YE, up by nearly 11 percent year on year. The gross loan book growth amounted to PLN 6.9 billion. The new volume was well above the strategic target (PLN 5-6 billion) and it was mainly driven by the growth in Q4 2017 thanks to the Bank’s improved capital position.
Customers’ deposits stood at PLN 57.6 billion in 2017, up by nearly 12 percent year on year. The solid result was driven by successful deposit campaigns, including a new Deposit Account (Konto Lokacyjne), attracting customers in strategic segments.
The Bank successfully improved its capital position. TCR and Tier 1 ratios improved year on year and reached 15.2 percent and 12.1 percent, respectively, compared to 13.7 percent and 11.3 percent at 2016YE.
The Bank’s results boosted its stock price, which closed 2017 at PLN 79.50, up by 47 percent year on year. The WIG20 index gained 31 percent and WIG-Banks gained 35 percent in 2017.
In the retail segment, the Bank increased the share of sales through electronic channels. The Bank works to increase the share of customers for whom it is the bank of first choice. Towards this objective, the Bank uses an innovative behavioural segmentation and improves the innovative edge of its digital channels. The Bank introduced an innovative savings and checking account Konto Jakże Osobiste in 2017 supported by a multichannel marketing campaign.
In the business segment, the Bank focused on microfirms and small and medium-sized enterprises. The competitive advantage in this market relies on advanced process automation and digital channels. The segment offers attractive margins and locks relatively little capital. Microfirms and small enterprises generated 26 percent of the Bank’s revenue in 2017. The profitability of this segment is mainly a function of enhancements and innovations. The fully automated credit process ensures that the preliminary credit decision for tickets up to PLN 600,000 in three product categories is available within 30 minutes and financing is disbursed within one business day. The Bank supports an online process for opening of business accounts for self-employed individuals, which is integrated with the business register database CEIDG. The Bank continues to develop the platform zafirmowani.pl, which offers useful know-how and practical solutions for companies, including a free-of-charge accounting and book-keeping application.
Alior Bank is planning to invest ca. PLN 100 million per year in IT and innovations till 2020, including PLN 10 million per year in fintech partnerships and projects. The Bank is implementing a new innovation management model which leverages coexisting and interacting internal and external environments. As a part of the new model, the Bank will launch an iLab to work with customers and improve customer experience. The Bank will engage in in-house crowdsourcing and offer career paths based on innovation and in-house incubation.
Alior Bank is planning to support innovative startups by launching in June an acceleration programme combined with a fund that will invest in fintechs and insurtechs.
The first edition of the startup programme will Focus on Open Banking, APIs under PSD2, and much more. The programme will provide mentoring, a test environment, and a work space within the Warsaw Spire. Selected companies will raise funding through the fund. The call for participants in the first edition is expected to open this April.
The accelerator is expected to support around 10 startups in the first year. Companies which deliver the best technologies will be offered funding. Jointly developed technologies will be implemented at Alior Bank. The fund is expected to invest PLN 10 million per year or PLN 30 million within the time horizon of the Digital Disruptor strategy. Investments will have a time horizon of 10 years.
Alior Bank’s capabilities of in-house incubation of fintech business models came to fruition in 2017 with the launch of the BANCOVO platform, a fully digital transactional intermediary in the cash loan market. According to the Digital Disruptor strategy, innovation is the foundation of Alior Bank’s competitive advantage. The Bank launched new releases of its mobile and online banking platforms in 2017 and it is planning to upgrade them further this year.
The Bank is an active participant of the M&A market in the industry. Its merger with Core Bank BPH, the fastest and one of the most efficient acquisitions in the Polish banking sector, was completed within months. The migration that took place in March 2018 gave clients of the former Bank BPH access to an extensive branch network and a broad range of services and solutions including online currency exchange, the mobile payment system BLIK, and GooglePay.
Alior Bank improved collaboration within the PZU Group in 2017, resulting in a bigger share of financial products in PZU’s sales as well as the implementation of other strategic projects. The Management Boards of Alior Bank and Bank Pekao signed a memorandum of understanding in October 2017 in order to define potential strategies of co-operation with a view to growing shareholder value and client proposition.