Assessment of Alior Bank S.A.
In 2014 the Alior Bank earned a net profit of PLN 337.0 million, achieving return on equity (ROE) of 13.0%.
The Management is of the opinion that in view of many factors which had a negative impact on the operations of banks in Poland (concerns about the sustainability of
economic growth, a record low level of interest rates, regulatory changes resulting in a drop in income with a simultaneous increase in bank overheads) the above financial result is satisfactory.
It forms a solid basis for a consistent and safe increase in the scale of the Bank’s operations in future years.
In 2014, the main source of the Bank’s revenues was the net interest income which despite the pressure from low interest rates, thanks to the dynamic growth in lending activities and effective management of the Bank’s pricing policy, increased year on year by PLN 210.8 million, to PLN 1,200.6 million.
In 2014, the main sources of the Bank’s revenues also included net commission and fee income which increased by PLN 89.8 million year on year and had a 14.3% share in the revenues generated by the Bank in 2013.
Additionally, the trading result constituting 14.3% of all revenues, and in particular the result achieved in connection with the foreign exchange transactions and interest rate transactions exercised on behalf of customers, had a material impact on the Bank’s revenues in 2014.
Strict control of costs which increased by only 9.9% year on year also had an impact on the result.
In the opinion of the Bank’s Management Board, the financial results earned by the Bank allow the presumption that as at the date of this Report the Bank will be able to achieve its strategic goals for 2016, i.e. a 4% share in the market, the Cost/Income ratio as a level no higher than 45% and ROE at a level no higher than 16%.
Alior Bank S.A. development prospects
In accordance with the information provided in Chapter II – the External environment of the Bank’s operations – in 2015 maintenance of favourable factors for the strong growth of Poland’s economy is anticipated.
In effect, Poland’s GDP is expected to grow robustly in 2015 and 2016. A strong labour market will contribute to increased consumption. Additionally, the use of EU funds will support the infrastructural expenses of the public sector. Unemployment will drop by 1 p.p. per annum, mainly in consequence of an increase in the number of employees at the same participation rate. In 2014 inflation dropped below zero and will remain at this level until early 2015.
The most important external factors affecting the GDP growth and inflation in Poland include primarily the stability and scale of recovery in the Eurozone, the possibility of considerable appreciation of the Euro, the potential bankruptcy of Russia leading to risk aversion, and potential escalation of the Ukraine-Russia conflict. Sustainability of higher growth in the Eurozone, Poland’s key trading partner, also depends on the unresolved conflict between Russia and Ukraine and the impact of sanctions imposed as a result of the conflict. Additionally, the drop in turnover in global trade and the slowing of growth in developing countries raises additional concerns as to the expected growth of the global economy.
Taking the external factors referred to above into consideration, to achieve its strategic goals Alior Bank intends to continue implementing the existing projects and to initiate new ones aimed at extending and optimizing the product offer, and to maintain a consistently dynamic rate of acquiring new customers. These actions constitute the basis for the Bank’s strategy which stipulates increasing the Bank’s in-depth relationships with the existing customers and gaining new ones within the existing distribution network. The key processes which will have an impact on the Bank’s operations include the process of its merger with Meritum Bank.
The combination of Meritum Bank’s experience, in particular in the cash loans segment and in banking for micro- and small enterprises, with the operations of Alior Bank, will enable achieving effective business synergies and creating a bank with promising development perspectives.
Additionally, a factor that will have a material impact on the Bank’s operations in 2015, will be the continuation of processes aimed at dynamic acquisition of customers and maintaining high sales volumes in sales of cash and mortgage loans (in respect of retail customers) and working capital and investment loans (in respect of business customers). The following will support customer acquisition and the generated level of sales:
developing banking activities as part of cooperation with T-Mobile Polska under the brand: T-Mobile Banking Services delivered by Alior Bank. In 2015, further new products to be introduced under our cooperation combining banking services with telecommunications services, including products for small businesses, and access channels will be developed. Alior Bank’s ambition is to acquire 2 million customers over the next five years based on the above initiative. The planned return on equity in the third year should reach 16%, growing to approx. 40% in the fifth year.
continued acquisition of customers in the Consumer Finance area. Based on sales of retail loans through the extensive network of retail shops, the Bank is building a customer base which will be used to further develop the sales of loan products (mainly cash loans). Increasing the scale of productization of the customers thus gained is one of the sources of strengthening the level of generated income.
cooperation with the subsidiary Money Makers aimed at better supplementing the Bank’s deposit offer with a wide offer of investment products is of particular importance in a situation in which the NBP maintains interest rates on a historically low level, thus creating an opportunity to offer customers products alternative to low-interest bank deposits.