Fitch Ratings has affirmed Bank Millennium S.A.'s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB-' with Stable Outlooks and Viability Rating (VR) at 'bbb-'.
A full list of rating actions is below.
Key Rating Drivers
Intrinsic Profile Drives Ratings: Millennium's ratings balance the benefits of a well-established retail franchise in Poland, strengthened capitalisation and adequate asset quality. They also consider improving core profitability as costs related to legacy foreign-currency (FC) mortgage loans are significantly diminishing. Millennium's National Ratings reflect the bank's creditworthiness relative to Polish peers.
Retail-Focused Bank: Millennium's business profile reflects its traditional business model focused on the domestic market and skewed towards retail customers with an ambition to grow the corporate segment. The bank ranks seventh by total assets and its franchise in its key market segments is adequate but without pricing power.
Moderate Risk Profile, Decreased Legal Risk: The bank's risk profile balances operating environment risks with a business profile geared towards traditional retail and commercial banking. Millennium focuses on servicing private individuals in urban areas, and its corporate loan portfolio is moderately diversified, with a sizeable share of leasing exposures. Exposure to consumer lending is proportionally higher than at domestic peers. The residual risk related to FC mortgage loans has significantly decreased to manageable levels.
Resilient Asset Quality: The bank's prudent underwriting and economic growth in Poland has resulted in the impaired loans ratio decreasing in line with the strategic target of under 4% (3.7% at end-2025), also supported by write-offs and loans growth. The latter, plus a gradually changing loan mix, is likely to put loan impairment charges in the next two years closer to 40bp-50bp of average gross loans.
Continued Improvement in Profitability: We expect operating profit to improve to about 4% of risk-weighted assets (RWAs) in 2026 (2025: 3%) and comfortably above 4% in 2027 due to a substantial reduction of costs related to FC mortgage loans and legal risk provisions. Underlying profitability will continue to benefit from good cost efficiency and contained credit losses but will continue to face a mild decrease in the net interest margin in 2026.
Adequate; Growing Capital Buffers: Pro-forma the inclusion of 2H25 profits, the common equity Tier 1 (CET1) ratio was about 15% at end-2025, which we view as adequate for its business and risk profile. We expect the CET1 ratio to grow to about 16.5% by end-2027 (including 2026 retained earnings), on improved internal capital generation despite expected dynamic loans growth and renewed capital distribution.
Stable Funding and Liquidity: Millennium's funding mainly relies on a stable and granular base of customer deposits, with a significant portion derived from non-interest-bearing current accounts. This results in a healthy loan to deposit ratio, of about 60% at end-2025. The bank has established access to debt markets, principally to meet the minimum requirement for own funds and eligible liabilities (MREL) and through the issuance of covered bonds. Its liquidity is sound and is largely invested in Polish sovereign debt securities and central bank bills.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Millennium benefits from material rating headroom. A substantial and prolonged deterioration in capitalisation, with the CET1 ratio decreasing below 13% without credible prospects to be restored in the medium term, along with the operating profit/RWAs ratio declining below 1.5% and with the impaired loans ratio increasing significantly above 4% could result in a downgrade. This could come from significant pressure from a deteriorating macro-environment or by a heightened risk profile resulting in high credit losses.
A significant shift in jurisprudence, leading to a prolonged and material increase in legal costs, remains a risk that could persistently erode Millennium's capitalisation and put its ratings under pressure.
The National Ratings are also sensitive to negative changes in the bank's credit profile relative to Polish peers.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
An upgrade of Millennium's VR would require an improved business profile and stronger franchise, higher earnings generation, with the operating profit/RWAs ratio increasing above 3.5%, while maintaining the CET1 ratio at around 15%. A strengthened risk profile would also be rating-positive, as well as an impaired loans ratio reaching 3%.
Fitch notes that the ratings of banks operating in developed resolution regimes could be affected if the 'Exposure Draft: Bank Rating Criteria' is implemented as proposed upon conversion into final criteria.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Millennium's senior non-preferred debt is rated in line with its IDR, reflecting our expectations that the bank will use only senior non-preferred and more junior debt to meet its MREL.
Millennium's Short-Term IDR of 'F3' is the only option mapping to a Long-Term IDR of 'BBB-' under Fitch's correspondence table.
Millennium's 'b+' Shareholder Support Rating (SSR) reflects limited probability of support available from its 50.1% owner, Banco Comercial Portugues, S.A. (BCP, BBB+/Positive). The SSR reflects the subsidiary's significant size in comparison to the parent company, as it represented about one-third of BCP's consolidated assets at end-2025. It also factors in the inconsistent record of support, particularly since Millennium had to undertake a recovery plan without capital support from its parent.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The SNP debt rating is sensitive to changes in the bank's Long-Term IDR. The SNP debt would be downgraded to one notch below the bank's Long-Term IDR if we expect Millennium to use senior preferred debt to meet its MREL requirement while SNP and more junior debt did not exceed 10% of the Millennium resolution group's RWAs on a sustained basis.
The Short-Term IDR is primarily sensitive to changes in the bank's Long-Term IDR,
A diminished propensity by the parent to provide support to its subsidiary would negatively affect the SSR. An upgrade of the SSR would require evidence of BCP having a stronger propensity to support Millennium and higher integration, for instance in terms of capital and funding management.
VR ADJUSTMENTS
The asset quality score of 'bbb-' is above the 'bb' category implied score due to the following adjustment reason: collateral and reserves (positive).
The earnings & profitability score of 'bbb-' is above the 'bb' category implied score due to the following adjustment reason: historical and future metrics (positive).
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
Millennium's SSR is linked to BCP's Long-Term IDR.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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