Bank Millennium: Poland's Post-Communist Banking Pioneer

I. Introduction & Episode Roadmap

Picture the fall of 1989 in Warsaw. The Berlin Wall had just come down, Solidarity had swept Poland's first partially free elections, and the command economy was crumbling. In this heady atmosphere of transformation, a small group of state-linked enterprises—including the national insurance giants Warta and PZU, postal service Poczta Polska, and others—pooled their resources to launch something audacious: one of Poland's first commercial banks with private equity under the newly liberalized banking laws.

Bank Millennium was established on June 7, 1989, as Bank Inicjatyw Gospodarczych BIG SA, emerging as one of the first commercial banks in Poland under the new banking law enacted following the collapse of communism. At founding, approximately 98% of shares were owned by state-linked entities including Warta, PZU, and Poczta Polska, with 2% held by employees, reflecting its roots in the transitioning economy.

Today, Bank Millennium stands as a testament to three and a half decades of survival, reinvention, and near-death experience. Majority-owned by Banco Comercial Português S.A. (Millennium bcp) with a 50.1% stake as of late 2024, the bank ranks as Poland's seventh-largest by assets, holding approximately 153 billion PLN in total assets as of September 2025. It employs around 6,800 full-time equivalents and serves over 3.2 million active retail customers, alongside corporate clients, through a network of 592 branches and robust digital banking channels like the Millenet platform and mobile app.

But behind these steady figures lies one of Europe's most dramatic banking stories: a tale of post-communist pioneering, a Portuguese alliance that transformed the institution, and a Swiss franc mortgage crisis that nearly destroyed it. The central question of this deep dive is simple yet profound: How did a bank born in the final months of communism become a digital-first universal bank—while surviving one of Europe's largest consumer loan scandals?

Bank Millennium S.A. is a major universal bank in Poland, headquartered in Warsaw and founded in 1989 as Bank Inicjatyw Gospodarczych BIG S.A., with its current name adopted in 2003 following integration into the Portuguese Millennium Group.

The story unfolds across distinct eras: the wild early years of Polish capitalism, the construction of a universal banking platform through aggressive mergers, the fateful decision to chase Swiss franc mortgage profits in the 2000s, the existential crisis that followed, and the digital transformation that may yet redeem the institution. Along the way, we'll examine the Portuguese connection, the regulatory battles, the court cases, and the strategic playbook that has kept Bank Millennium alive while others—like Getin Noble Bank—collapsed under similar pressures.

For investors, Bank Millennium offers a case study in the risks and rewards of emerging market banking, the long tail of risk management failures, and the surprising resilience of institutions that refuse to die.

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II. Origins: Birth in the Ashes of Communism (1989–1992)

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The Context: Poland's Economic Transformation

To understand Bank Millennium's origins, you must first understand the chaos from which it emerged. In 1989, Poland was experiencing hyperinflation that would peak at over 500% annually. The Balcerowicz Plan—named after Finance Minister Leszek Balcerowicz—was about to introduce "shock therapy" to liberalize prices, privatize state enterprises, and build a market economy from scratch. The banking sector, such as it existed under communism, consisted primarily of state-controlled institutions serving the command economy.

The bank's early years coincided with Poland's profound economic transformation, including hyperinflation rates exceeding 500% in 1989 and subsequent stabilization efforts under the Balcerowicz Plan, which introduced sweeping reforms to liberalize markets and restructure the banking sector.

Into this environment stepped a coalition of founding shareholders with deep roots in the old system but eyes fixed on the new. Bank Millennium SA was established in 1989 as Bank Inicjatyw Gospodarczych BIG SA. Initially, 98% of shares in it were owned by Warta, Poczta Polska, PZU, Universal and Transakcja foreign trade headquarters (KC PZPR and ZSMP), and 2% were held by natural persons.

The ownership structure tells a fascinating story of transition. Warta and PZU were the dominant insurance companies of communist Poland. Poczta Polska was the state postal service. Universal and Transakcja were foreign trade enterprises with connections to the Communist Party (KC PZPR) and the Socialist Union of Polish Youth (ZSMP). These were not dissidents building a new world; they were institutions of the old order repositioning themselves for the new. That 2% held by natural persons? Those were the entrepreneurs and managers who saw opportunity in the chaos.

It commenced operations on July 17, 1989, with a structure incorporating private equity, distinguishing it from the predominantly state-controlled financial institutions of the communist era.

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Founding & Initial Strategy

BIG SA—the name stood for Bank Inicjatyw Gospodarczych, or Bank of Economic Initiatives—positioned itself from the start as something different. While other Polish banks remained bureaucratic relics of central planning, at that time the Bank was focusing on corporate business. This was deliberate: serving the emerging private sector meant less competition from entrenched state banks and more opportunity to build relationships with the entrepreneurs who would shape Poland's economic future.

BIG SA navigated these challenges by focusing on foundational commercial banking services, initially targeting corporate clients with innovations such as Poland's first Visa payment card for businesses in 1991 and the launch of leasing operations in 1990.

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Early Milestones—A Series of "Firsts"

What happened next established a pattern that would define Bank Millennium for decades: an aggressive pursuit of firsts. Building its foundations the Bank issued the first payment card in Poland – Visa for business customers (1991) and began its leasing operation.

Think about that: in a country where people had lived under rationing and command economics just two years earlier, a private bank was issuing Visa cards. The symbolic power was enormous—a tangible connection to Western consumer capitalism.

But the most significant milestone came in 1992. In 1992 the Bank's shares were the first shares of a financial institution to make a debut on the Warsaw Stock Exchange. The Warsaw Stock Exchange itself had only reopened in April 1991, and BIG SA became the first financial institution to list there. This was more than a fundraising exercise; it was a statement of intent. The bank was positioning itself as a transparent, market-oriented institution in an economy still learning what that meant.

In that same year the Bank acquired Łódzki Bank Rozwoju SA – the first takeover of a private bank in the post-war history of the Polish financial market.

The acquisition of Łódzki Bank Rozwoju SA (Łódź Development Bank) established another pattern: growth through acquisition. This was the first private bank takeover in Poland since before World War II—a milestone that positioned BIG SA as a consolidator in a fragmented market. The Łódź acquisition also expanded the bank's geographic footprint into Poland's industrial heartland.

Following the IPO in 1990 it became a private bank. The 1990 IPO transformed the ownership structure, diluting the state-linked founding shareholders and creating a more diversified shareholder base. This transition from quasi-state to private ownership was crucial: it gave the bank the independence to pursue aggressive growth strategies without the constraints of bureaucratic oversight.

For investors, the early Bank Millennium offers lessons in the value of timing and positioning. Being first—first credit card, first listed bank, first acquirer—established brand recognition and market position that would prove durable. But these early years also planted seeds of risk: an aggressive, acquisitive culture that would sometimes prioritize growth over prudence.

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III. Building Scale: Mergers & Portuguese Partnership (1992–2003)

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From Corporate Bank to Universal Bank

The 1990s represented the most dynamic period of consolidation in Polish banking history. Former state banks were privatizing, foreign institutions were entering the market, and ambitious domestic players were racing to build scale. BIG SA was among the most aggressive.

Thanks to the rapid development of its product and service range the Bank soon became a universal bank.

The transition from corporate banking to universal banking—serving both businesses and individuals—was strategically essential. Corporate banking alone couldn't provide the stable deposit base and diversified revenue streams that would be necessary to compete with larger institutions. The question was how to make that transition quickly.

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The Bank Gdański Merger (1997)

The answer came in 1997 with the bank's most transformative deal. An important milestone in this process was the merger with Bank Gdański SA (1997) and the emergence of BIG Bank Gdański SA – an institution with a universal business profile, providing services to all market segments.

Bank Gdański was a regional bank with deep roots in Poland's northern port city—a center of the Solidarity movement and a gateway to Baltic trade. The merger wasn't just about scale; it was about capability. The bank's evolution included a merger with Bank Gdański SA in 1997, forming BIG Bank Gdański SA and expanding into universal banking.

The combined entity—now called BIG Bank Gdański SA—had the geographic footprint, the customer base, and the product range to compete with Poland's largest banks. But perhaps more importantly, the merger attracted the attention of a potential partner that would reshape the institution entirely.

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Enter Banco Comercial Português—The Portuguese Connection

In 1998, with cooperation of the Portuguese Banco Comercial Portugues (BCP), the Bank launched the modern Millennium retail network, thus marking the start of a new era in Polish retail banking.

Why would a Portuguese bank be interested in Poland? BCP—Portugal's largest private commercial bank—was seeking growth opportunities beyond its relatively small home market. Eastern Europe, with its rapid economic growth and underdeveloped financial systems, offered precisely that. Poland, the largest market in the region, was the prize.

In 1998, it partnered with Portugal's Banco Comercial Português (BCP) to launch the Millennium retail banking network, introducing advanced services and marking a significant rebranding effort.

The partnership represented more than capital. BCP brought Western European banking know-how, systems, and expertise to a Polish institution that was still learning to operate in market conditions. The launch of the Millennium retail network was particularly significant—it introduced modern branch designs, customer service standards, and product offerings that set new benchmarks in the Polish market.

This partnership supported the rebranding efforts that later solidified the Millennium identity, expanding the bank's retail footprint.

BCP's stake in the bank grew steadily through share acquisitions in 1999 and 2000, as the Portuguese bank deepened its commitment to the Polish market. By the early 2000s, BCP had secured strategic control over what would become one of Poland's most significant retail banking franchises.

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The Millennium Rebranding (2003)

BIG Bank GDAŃSKI SA hereby announces that on 8 January 2003 it received decision of the Warsaw District Court, the 19th Business Section of the National Court Registry, on the registration of the amendment in the Bank's Articles of Association, consisting in the Bank's name change. Therefore, on 8 January 2003, BIG Bank GDAŃSKI SA changed its name into Bank Millennium SA.

The name change was more than cosmetic. The decision to change the bank's name was preceded by specialized marketing research carried out among its clients. The research showed that the name Bank Millennium provides a more complete reflection of values offered by the bank, is synonymous with cutting-edge financial services, and is highly acceptable as the name for a bank with the universal structure of services and products.

The rebranding unified the disparate legacies of BIG SA, Bank Gdański, and the Millennium retail network under a single, forward-looking identity. Since 2003 the Bank has been operating under the name of Bank Millennium, its business mission focusing on the delivery of universal, modern financial products and services to all Customer segments as well as generating growth of Shareholder value.

For investors, the 1992-2003 period illustrates the power of strategic partnerships in emerging markets. BCP brought capital, expertise, and credibility; Bank Millennium provided local market knowledge and an established customer base. The combination created value that neither party could have achieved alone. But the partnership also created dependencies and governance complexities that would become relevant during future crises.

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IV. The Swiss Franc Mortgage Boom—Seeds of a Crisis (2004–2008)

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Poland Joins the EU—Optimism Everywhere

May 1, 2004: Poland officially joined the European Union. For Poles who remembered the gray decades of communist rule, it was a moment of validation—their country was finally, officially, part of the Western European project. For bankers, it was something else entirely: a green light for expansion.

The FX mortgage became a big business in 2004, when Poland joined the European Union, with hundreds of thousands Poles taking mortgages in foreign exchange, mainly in Swiss francs. The country was in full development, and in 2004, the future looked bright.

The logic seemed impeccable. Poland's economy was growing rapidly—EU structural funds were pouring in, foreign investment was accelerating, and wages were rising. Polish interest rates, however, remained stubbornly high as the central bank fought to control inflation. This created a massive arbitrage opportunity.

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Why Swiss Francs? The Economics of FX Lending

The interest rate in other territories was lower than the local Polish rates, meaning buying a house happened at more attractive mortgage conditions. On top of that, more people could afford that mortgage because the conditions were more favourable. In 2008, for example, the annual interest rate in Zlotys was around 8,7%, compared to the one in Swiss francs 4.4%.

The math was simple and seductive. For instance, in Poland, in July 2008 the LIBOR 3M basic rate stood at 2.79%, and the average margin applied by banks for CHF loans amounted to 1.5%, allowing loans to be subject to a 4.2% interest rate. In contrast, the WIBOR 3M basic rate, applicable to loans denominated in Polish zlotys (PLN), amounted to 6.66% which, added to the average margin (1.5%), gave an annual interest rate of 8.16%, almost double the interest rate for 'franc loans'.

A family looking to buy a home could afford roughly 30-40% more house with a Swiss franc mortgage than with a zloty-denominated loan. And everyone believed the zloty would appreciate against the franc over time—after all, Poland was converging with Western Europe, and its currency should strengthen accordingly.

The overall belief back then was that the Polish economy could only go up faster than the old economies like Switzerland. These banks warned consumers about the risk, but the risk was perceived as very low, and chances seemed higher that people would make a profit than that it would lead to a loss.

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The Market Environment & Bank Behavior

The future outlook after the accession to the EU in 2004 was one of socio-economic optimism, and while FX loans were known to expose debtors to both interest rate risk and currency risk, any attempts to regulate FX housing loans were resisted by lawmakers.

The regulatory environment was permissive. Politicians, eager to promote homeownership as a symbol of Poland's new prosperity, were reluctant to restrict popular mortgage products. Banks, eager to grow their loan books and capture market share, competed aggressively on FX lending.

The number of franc mortgage loans peaked in 2008, when almost 70% of all outstanding mortgages were issued in the franc.

Let that sink in: at the peak, nearly seven out of ten Polish mortgages were denominated in a currency that most borrowers couldn't earn. This wasn't a niche product—it was the dominant form of housing finance.

Bank Millennium was among the most aggressive lenders in this space. Bank Millennium has the highest percentage of Swiss franc mortgages in its portfolio among Poland's largest banks at 9.4%, followed by mBank SA with 5.4% and BNP Paribas Bank Polska SA with 4.7%. The bank built a substantial franchise on FX mortgages, attracting customers with competitive rates and efficient processing.

Bear in mind that for example, MBank had 51,6% of its mortgages in Swiss-denominated loans, Bank Millennium 41,3% and BNP Paribas Polska 36,9%.

In absolute terms, the concentration was staggering. At peak, over 40% of Bank Millennium's entire mortgage portfolio was denominated in Swiss francs. This wasn't diversification—it was a one-way bet on currency stability that would prove catastrophically wrong.

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The Warning Signs Nobody Heeded

In 2007, the Polish zloty appreciated against the Swiss franc by 10% and in the first half of 2008 by another 10%. Although appreciation of currencies of countries on the convergence path can be substantiated by the Balassa-Samuelson effect, if the trend exceeds the theory implications, it is likely that a change in expectations or demand would trigger a sharp trend reversal. This is what happened in Poland at the onset of the financial crisis. Between August 2008 and March 2009, the Polish zloty depreciated by 60%.

The warning signs were there for anyone who cared to look. Currency appreciation that exceeded economic fundamentals suggested a bubble. The global financial system was showing stress throughout 2007 and early 2008. But the music was still playing, and banks kept dancing.

For investors, the Swiss franc mortgage boom illustrates how apparently rational individual decisions can aggregate into systemic risk. Each loan made sense in isolation—lower payments, affordable housing, currency that "everyone knew" would remain stable. But the concentration of risk across the banking system created a vulnerability that would take decades to resolve.

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V. The Swiss Franc Time Bomb Explodes (2008–2015)

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First Shock: The Global Financial Crisis

September 2008: Lehman Brothers collapsed, and the world changed. For Polish franc borrowers, the consequences were immediate and devastating.

The Swiss franc is now worth more than double its exchange rate of two zlotys before the 2008 crisis, when hundreds of thousands of Polish homebuyers had financed their purchases in Swiss francs, taking advantage of lower interest rates in Switzerland but ignoring the currency risk.

The mechanism was brutally simple. As global investors fled to safety, they poured money into the Swiss franc—one of the world's traditional safe-haven currencies. The franc strengthened; the zloty weakened. Polish borrowers who had taken loans at 2 zlotys per franc suddenly found themselves repaying at 3, then 3.5 zlotys per franc.

The risk materialized after the GFC as the franc appreciated against the euro and Eastern European currencies by about 40% in 2008–11, followed by a rapid increase of about 20% after a sudden change in Swiss monetary policy in January 2015. This led to a corresponding surge of CHF debtors' outstanding principals and repayment burden.

For a family that had borrowed 300,000 zlotys worth of Swiss francs, the outstanding principal suddenly increased to 400,000 or 450,000 zlotys—even as they continued making payments. Monthly installments rose. Property values fell. Negative equity became the norm rather than the exception.

Between August 2008 and March 2009, the Polish zloty depreciated by 60%. Although, by 2009, lending in Swiss francs had almost stopped, the value of the Polish household debt expressed in Polish zloty further rose.

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Black Thursday: January 15, 2015

If the 2008 crisis was a slow-motion disaster, what happened on January 15, 2015, was a sudden explosion.

Enter 15 January 2015: Switzerland announced scrapping its currency peg with euro of 1,20 to the euro. The Swiss franc jumps 20%. Polish Zloty to Swiss franc jumps from 3,5 to 5 Zloty overnight.

The Swiss National Bank's decision to abandon its euro peg—introduced in 2011 to prevent excessive franc appreciation—blindsided markets worldwide. For Polish borrowers, it was catastrophic. Initially convinced by banks that the franc was a stable currency, debtors saw their outstanding debt and monthly repayments soar after the czarny czwartek (Black Thursday) event in 2015 when the Swiss National Bank unpegged the franc from the euro.

The date became seared into Polish collective memory as "czarny czwartek"—Black Thursday. Overnight, mortgages that borrowers had been struggling to service became utterly unaffordable. The outstanding balance on a typical loan jumped by 40% in a single day. Households that had been barely managing suddenly faced financial ruin.

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The Human Cost & Political Dimensions

This decision affects the 700,000 Poles who, between 2000 and 2012, took out a loan with a low-interest rate, but where the amount to be repaid, in the national currency, was indexed or denominated in Swiss francs.

Seven hundred thousand families. In a country of 38 million people, that's roughly one in fourteen households. The crisis touched every demographic: young professionals who had bought their first apartments, families who had upgraded to larger homes, entrepreneurs who had leveraged real estate for business expansion.

It was a societal drama for many, leading to a revolt of close to 20% of customers who started claims against their bank. Polish courts decided banks had sufficiently warned customers about the potential FX risk.

Initially, Polish courts sided with banks, finding that disclosure requirements had been met. But borrowers, organized into advocacy groups, continued to press their case. The "frankowicze"—franc borrowers—became a political force, demanding legislative relief and legal remedies.

They arrived in a perfect storm. But OK, they should have been more cautious. My friend acknowledged that management boards back then were blinded by the short-term gains of FX mortgages without much considering bad experiences in the past, like in Italy. However, overall, in 2004, the FX mortgages made banks realise more people's dreams. They mismanaged their risks, and as everything collapsed, they tried to keep consumers liable for the risks they signed up for and suddenly lost the trust of people, politicians and society.

For Bank Millennium, with its outsized exposure, the crisis was existential. The bank that had pioneered so many firsts now faced the prospect of being the first major casualty of a risk it had helped create.

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VI. Litigation Tsunami & Existential Threat (2015–Present)

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The Legal Battle Begins

What followed January 2015 was not a quick resolution but a grinding, decade-long legal war between banks and borrowers. The battleground was the concept of "unfair contract terms" under EU consumer protection law.

So, until today, there have been more than 130,000 legal cases in Polish courts. Especially since 2019 and the first major ECJ verdict in the Polish case, up to 99% of litigations are being ruled in favour of borrowers.

The legal landscape shifted decisively starting in 2019, when the European Court of Justice began issuing rulings that consistently favored consumers. By the end of Q3 2024, Polish banks had reported a staggering 120,500 active lawsuits – an increase of over 14,000 cases compared to the end of 2023. Polish common courts ruled in favour of consumers in approximately 97% of verdicts.

That 97% win rate is remarkable—and devastating for banks. According to the law firm Bochenek, Ciesielski & Partners, last year 97% of the lawsuits in this massive court case were won by the borrowers.

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Bank Millennium's Disproportionate Exposure

Foreign-currency mortgages were a significant reason for the collapse of Getin Noble Bank SA, which entered a orderly restructuring in late 2022, while large legal provisions for Swiss franc mortgages were one reason for a financial recovery program at Bank Millennium SA, a unit of Portugal's Banco Comercial Português SA.

The reference to Getin Noble Bank's collapse is instructive. That institution—once a significant player in Polish retail banking—was essentially destroyed by its FX mortgage portfolio. Bank Millennium, with even higher concentration, faced similar existential risk.

Bank Millennium, which needed a recovery plan after its capital ratios fell below regulatory requirements, previously said that it could face a pretax cost of roughly 5.6 billion zlotys if all its Swiss franc mortgage agreements currently under court proceedings were declared invalid without proper compensation for the use of capital. The amount equates to 86% of the bank's total capital.

Eighty-six percent of total capital at risk. For most banks, that would be a death sentence. Bank Millennium was forced to implement a formal recovery plan—a regulatory tool typically reserved for institutions on the verge of failure.

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European Court of Justice Rulings

The legal environment continued to worsen for banks. The court said that banks were not entitled to demand that customers pay for the cost of capital on any foreign currency mortgages that have already been deemed by local judges to have contained "unfair terms."

This ruling was particularly significant because banks had hoped to recover at least the cost of capital—the value of the money lent—even if contracts were voided. The ECJ rejected this argument, effectively creating a scenario where borrowers could get "free money"—keeping their properties while having their loans invalidated.

In a key ruling in favour of thousands of Polish borrowers who took out billions in foreign-currency mortgages, the European Court of Justice (ECJ) has found that banks cannot demand extra fees for loan contracts that have been invalidated due to unlawful clauses. The decision has been welcomed by borrowers, who regard the practice of banks demanding additional payment for what they call "non-contractual use of capital" during the course of an invalidated loan as a way to discourage them from pursuing claims.

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Current Provisioning & Resolution Efforts

By 2025, Bank Millennium has made substantial progress in addressing its FX mortgage legacy, though the cost has been enormous.

Provisions for legal risks related to CHF loans amounted to PLN 444.8 million in Q1 2025, with total balance sheet provisions reaching PLN 7.3 billion. The coverage ratio of the active foreign currency loan portfolio increased to 132%, and the rate of decline of this portfolio accelerated to 29%. The bank's management also notes in the report that the quarterly number of new settlements still exceeded the number of new claims filed. A total of 1,103 agreements were signed at the pre-trial and trial stages (1,261 in Q4 2024), and 1,083 new lawsuits were filed (1,170 in the previous quarter).

The key metrics tell a story of gradual resolution: settlements exceeding new lawsuits, the portfolio shrinking at an accelerating rate, and coverage ratios above 100% providing a cushion against remaining risks.

The number of settlements reached 1,103 in 1Q25 (1Q24: 1,104, 2024 overall: 4,458), a broadly similar level to this in the preceding quarter and 1Q24, and again exceeding the number of new cases filed against the Bank. Nearly 27,000 settlements were reached since early 2020 when a more intensive effort started. These represent nearly 44% of the number of active FX-mortgage agreements at the start of the effort.

The bank expects 2025 to be the last year with significant costs related to FX mortgage legal issues, with impacts expected to be lower than in previous years.

For investors, the Swiss franc mortgage saga offers several lessons. First, concentration risk can be lethal—Bank Millennium's heavy exposure to a single product category nearly destroyed it. Second, regulatory and legal risks can compound over many years—the 2008 lending decisions are still generating costs in 2025. Third, survival is possible through a combination of aggressive provisioning, settlement activity, and strategic acquisitions (discussed below) that dilute legacy problems.

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VII. The Euro Bank Acquisition—Doubling Down (2019)

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Strategic Rationale

In the midst of the Swiss franc crisis, Bank Millennium made a bold strategic move: it acquired Euro Bank from Société Générale. The timing seemed paradoxical—why would a bank facing existential challenges from its existing portfolio take on another institution?

On 5 November 2018, Bank Millennium (acquiring entity) announced and signed the preliminary agreement related to the acquisition of 99.787% shares of Euro Bank S.A. (acquired entity) from SG Financial Services Holdings ("Seller"), a wholly owned subsidiary of Societe Generale S.A.

The strategic logic was actually straightforward: dilution. By acquiring Euro Bank—a consumer-focused lender with no Swiss franc exposure—Bank Millennium could reduce the proportion of FX mortgages in its total portfolio while simultaneously gaining scale in the growing consumer loan market.

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Deal Execution

The acquisition price (in the amount of PLN 1,833,000,000), according to the agreement, was paid with cash and was financed from the internal means of the Bank.

PLN 1.833 billion in cash—roughly $500 million at the time—was a substantial bet. A significant expansion occurred in 2019 when Bank Millennium acquired Euro Bank from Société Générale for a reference price of 1.833 billion PLN, adding 250 owned branches and 251 franchised outlets along with 1.4 million retail customers.

The deal structure was notable for what it didn't involve. The Euro Bank acquisition transaction was carried out without increasing the Bank's share capital. This meant no shareholder dilution—a critical consideration for a bank whose stock was already under pressure from FX mortgage concerns.

May 31, 2019 Bank Millennium S.A. took over Euro Bank as a result of acquiring about 99.79% of the shares that were bought from Société Générale. On September 10, 2019, the Polish Financial Supervision Authority (KNF) granted permission to merge banks. On October 1, 2019, there was a legal merger, Bank Millennium and Euro Bank became one bank.

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Integration Success

The speed of execution was remarkable. It was one of the fastest executions of mergers on the market. On 11 November 2019, one year after its announced, the Euro Bank acquisition process was effectively finalized.

The successful migration of all the Euro Bank's branches, clients and products to the Bank Millennium logo and platform paved the way to the realization of benefits from the merger. The enlarged branch network (830 at the end of 2019) and a 2.6-million active client database facilitates the process of accelerating sales.

As a result of the transaction related to the acquisition of Euro Bank shares, Bank Millennium strengthened its important position in the Polish banking sector. The transaction increased the number of the Bank's clients by 1.4 million and therefore allowed the Bank to become one of the largest Polish bank in terms of the number of retail clients.

The acquisition of Euro Bank enabled Millennium Bank to acquire competences in the franchise model and strengthen its presence in smaller cities, where Euro Bank was strongly located, and contributed to increase of the geographical coverage of the Bank's distribution network.

The franchise model deserves particular attention. Euro Bank operated many of its branches through franchisees rather than direct employees—a more capital-efficient distribution model that reduced fixed costs while maintaining market presence.

This means that the Bank Millennium Group's capital and liquidity were efficiently used, which should result in an increased efficiency and return on equity through economies of scale and synergies. The Bank's position in the consumer loan segment, which is another very important element of the Group's strategy, has increased significantly. Faster sales of cash loans by Bank Millennium and the effect of the merger effectively doubled the portfolio up to PLN 15.1 billion.

For investors, the Euro Bank acquisition demonstrates how strategic M&A can address legacy problems. Rather than simply provisioning against FX losses, Bank Millennium used the acquisition to fundamentally reshape its portfolio mix. The consumer loan portfolio doubled; the FX mortgage share declined proportionally. It wasn't a cure, but it was a meaningful step toward recovery.

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VIII. Digital Transformation & Modern Strategy (2019–Present)

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COVID-19 Accelerates Digital Shift

The COVID-19 pandemic, which devastated many industries, proved a catalyst for Bank Millennium's digital transformation.

The COVID-19 pandemic accelerated Bank Millennium's digital transformation, with consumer habits shifting toward remote banking amid lockdowns. In 2020, the bank's mobile application saw an 18% year-over-year increase in users, reaching 1.66 million active users by year-end. This momentum continued, reaching 3 million active digital users as of September 2025, supported by enhanced app features and seamless online services.

In its development strategy, the bank focuses on modern service channels. The number of clients actively using electronic banking exceeded 2 million in 2020, and from the Millenet mobile and mobile application 1.7 million (+ 18% y/y).

The growth trajectory is impressive: from 1.66 million mobile users in 2020 to 3 million active digital users by late 2025. In line with the 'Value and Growth' strategy, the bank plans to have over 95% of its customers be digitally active by 2028. Surpassing the milestone of 3 million active users of digital channels marks a significant step toward achieving this goal.

It is the application that is the main channel of access to the bank for many people and it is primarily responsible for exceeding the limit of 3 million active users. Over 70% of customers now use mobile banking exclusively.

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Branch Network Optimization

The digital shift enabled a significant rationalization of the physical branch network. Following the acquisition of Euro Bank in 2019, Bank Millennium pursued integration efforts that included optimizing its branch network to enhance efficiency. This process involved a 21% reduction in branches during 2020, streamlining operations from the combined post-merger footprint to a more focused distribution model by 2021.

From 830 branches immediately after the Euro Bank merger to approximately 592 today—a reduction of nearly 30%. This wasn't just cost-cutting; it reflected a fundamental shift in how customers interact with their bank. Digital channels handle routine transactions; branches serve complex needs like mortgage applications and wealth management.

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Strategy 2028—Value & Growth

Bank Millennium has announced a new strategy for 2025-2028. "Strategy 2028 – Value & Growth" aimed at driving dynamic growth in both the corporate and retail banking segments.

The key goals by 2028 include: doubling corporate loans portfolio to over PLN25 billion, increasing the number of active retail customers to 3.7 million and achieving return on capital (i.e., ROE) of approx. 18%. The Bank plans to achieve these goals through a series of business initiatives supported by further digitization and implementation of technological innovations, improved operational efficiency and enhanced customer experience, all while maintaining cost discipline.

The strategic targets are ambitious but achievable. While pushing for growth, we will continue to apply a strong cost discipline (C/I of approximately 37 percent in 2028) and to focus on risk management (NPL ratio below 4 percent in 2028) and capital solidity. This will allow us to deliver a significant increase in profitability (ROE of approximately 18 percent in 2028) and to return to dividend distribution from 2027.

The dividend target is particularly significant. Bank Millennium suspended dividend payments during the FX mortgage crisis; resuming distributions would signal that the worst is truly behind the institution.

Digital transformation initiatives aim to achieve over 95% digitally active retail customers through the adoption of AI, cloud technologies, and hyperpersonalization features in banking services.

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The Group Structure Today

Apart from the bank the most important companies in the Group are: Millennium Leasing (lease business), Millennium Dom Maklerski (brokerage business), Millennium TFI (mutual funds) and Millennium Goodie. The offerings of these companies complement the services and products offered by the bank.

Launched as an internal startup in 2017, it has facilitated over PLN 3 billion in user spending and distributed more than PLN 50 million in cashback rewards by late 2023, with features like price comparison engines enhancing its utility.

Millennium Goodie, the bank's cashback and shopping platform, represents an attempt to build network effects and customer engagement beyond traditional banking products. It's a recognition that in an era of commoditized banking services, customer relationships are built through value-added services.

For investors, the Strategy 2028 framework provides clear metrics against which to evaluate management execution. The key question is whether the bank can achieve growth while maintaining the cost discipline and risk management necessary to prevent a recurrence of past problems.

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IX. The Portuguese Connection: BCP's Role

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A Cross-Border Banking Marriage

The relationship between Bank Millennium and its Portuguese parent, Banco Comercial Português (BCP), has shaped the Polish bank's strategy, governance, and culture for over a quarter century.

Bank Millennium was founded in 1989 when the Polish free market and democratic political transformations started. The bank was the first financial institution quoted on the Warsaw Stock Exchange (1992) and gained its present scale through mergers with other banks (in 1992 and 1997), as well as organic growth supported by the new business model, which has been developed in co-operation with its owner—the Portuguese bank Millennium BCP, which holds 51% of its shares.

BCP holds a 50.10% stake, comprising 607,771,505 shares and an equivalent number of votes as of December 31, 2024. This majority ownership grants BCP significant control over the bank's direction, including the nomination of candidates to the supervisory board. Through this influence, BCP aligns Bank Millennium's policies and operations with the broader standards of its Portuguese parent group.

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Knowledge Transfer & Governance

The partnership has delivered tangible benefits beyond capital. BCP brought Western European banking expertise to Poland at a time when the country was still developing its financial infrastructure.

In terms of partnerships, Bank Millennium maintains a strategic alliance with its majority shareholder, Banco Comercial Português (BCP), which supports cross-border services, knowledge sharing in digital banking, and group-wide financing strategies, including renewable energy initiatives.

The management pipeline from Portugal to Poland has been a consistent feature. The current CEO, João Brás Jorge, brings a Portuguese perspective informed by BCP's broader international operations. This cross-pollination of talent has helped Bank Millennium adopt best practices from markets where BCP has experience.

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BCP's Own Crisis & Recovery (2012–2015)

Crucially, BCP faced its own existential crisis during the European sovereign debt crisis—at precisely the same time Bank Millennium was grappling with the early stages of the Swiss franc problem.

In 2012, Millennium in the middle of the European sovereign debt crisis, BCP received €3 billion in state support through the issuance of contingent convertible bonds with an interest rate of around 10%. In 2014, Millennium BCP raised €2.25 billion in fresh capital through a rights issue.

In 2012, Banco Comercial Português (BCP) received a €3 billion capital injection as part of Portugal's €78 billion EU-IMF bailout program, which allocated €12 billion specifically for bank recapitalizations to address vulnerabilities exposed by the sovereign debt crisis.

However, the European Central Bank's comprehensive assessment that October revealed BCP's failure under the adverse stress scenario, with a €1.14 billion capital shortfall stemming from projected NPL spikes and earnings erosion in a downturn. The bank preemptively addressed this via a €2.25 billion rights issue completed in July 2014, bolstering common equity tier 1 ratios but underscoring lingering vulnerabilities from unresolved legacy assets.

In 2017 the bank raised another €1.5 billion through a rights issue for shareholders as well as the direct sale of shares to Chinese conglomerate Fosun International. Immediately after that capital raising, Millennium BCP paid off the remaining €700 million in CoCo bonds, thereby regaining its autonomy from the state and ending any possibility of nationalization through a forced conversion of the bonds.

BCP's crisis and recovery had direct implications for Bank Millennium. During the peak stress period, the Portuguese parent was in no position to inject additional capital into its Polish subsidiary. Bank Millennium had to manage its FX mortgage crisis largely on its own resources—a constraint that influenced the bank's conservative provisioning approach and ultimately its survival strategy.

For investors, the BCP relationship represents both strength and vulnerability. The Portuguese parent provides strategic direction, management expertise, and brand unity. But BCP's own financial position has at times constrained support for Bank Millennium, and any future stress at the parent level could spill over to the subsidiary.

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X. Playbook: Business & Investing Lessons

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Timing & Macro Environment

Bank Millennium's history offers a masterclass in the importance of timing in emerging markets. Building its foundations the Bank issued the first payment card in Poland – Visa for business customers (1991). In 1992 the Bank's shares were the first shares of a financial institution to make a debut on the Warsaw Stock Exchange. In that same year the Bank acquired Łódzki Bank Rozwoju SA – the first takeover of a private bank in the post-war history of the Polish financial market.

Being first in each of these categories—first Visa card, first listed bank, first acquirer—established competitive advantages that persist three decades later. First-mover status confers brand recognition, customer relationships, and operational expertise that late entrants struggle to replicate.

But timing also created vulnerabilities. Poland's EU accession in 2004 coincided with the peak of the FX lending boom—a moment when macro optimism overwhelmed risk assessment.

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M&A Strategy

The bank's growth through mergers—Łódzki Bank Rozwoju in 1992, Bank Gdański in 1997, Euro Bank in 2019—demonstrates a consistent acquisition playbook.

It was one of the fastest executions of mergers on the market.

Speed of integration has been a consistent strength. The Euro Bank merger, completed within a year of announcement, minimized customer disruption and maximized synergy capture. Slow integrations allow competitors to poach customers and talent; Bank Millennium's rapid execution limited these risks.

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Risk Management Failures

The Swiss franc mortgage episode illustrates classic risk management failures that investors should watch for in any financial institution:

Concentration Risk: When 40%+ of your mortgage portfolio is in a single currency denomination, you're running a concentrated bet regardless of what risk models suggest.

Correlation Assumptions: FX mortgages appeared diversified across thousands of borrowers, but they all shared the same currency exposure. When the franc moved, every loan moved together.

Long-Tail Risk: The consequences of 2004-2008 lending decisions are still generating costs in 2025—a two-decade tail that exceeded any reasonable planning horizon.

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Digital Transformation Under Pressure

The COVID-19 pandemic accelerated Bank Millennium's digital transformation. In 2020, the bank's mobile application saw an 18% year-over-year increase in users, reaching 1.66 million active users by year-end. This momentum continued, reaching 3 million active digital users as of September 2025.

Adversity forced innovation. The FX mortgage crisis consumed capital that might otherwise have funded transformational investments, yet the bank found ways to invest in digital capabilities that are now driving growth. Sometimes crisis creates the focus and urgency that comfortable times lack.

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Stakeholder Management

The Swiss franc saga required Bank Millennium to navigate competing interests from regulators, politicians, customers, shareholders, and the parent company—often with conflicting demands. The settlement strategy—negotiating agreements that exceeded new lawsuit filings—represents a sophisticated approach to stakeholder management that prioritizes resolution over confrontation.

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XI. Analysis: Competitive Position & Investment Framework

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Porter's 5 Forces Analysis

1. Threat of New Entrants: MODERATE

Banking licenses create meaningful barriers, but technology is lowering entry costs for digital-first competitors. In 2024, Bank Millennium S.A. achieved the position of 8th largest bank in Poland with a market share of 4.14%. Fintechs like Revolut are expanding in Poland, unbundling payments and simple deposits from traditional banking relationships.

2. Bargaining Power of Suppliers: LOW

Customer deposits, the primary funding source, totaled around 117.0 billion PLN at year-end 2024. Banks source funding primarily from customer deposits—a disaggregated supplier base with limited individual bargaining power.

3. Bargaining Power of Buyers: MODERATE-HIGH

Low switching costs in retail banking and increasing price transparency through digital comparison tools give customers meaningful power. The CHF litigation demonstrated that customers can organize collectively to challenge bank practices.

4. Threat of Substitutes: GROWING

Fintech unbundling across payments, lending, and savings creates ongoing substitution pressure. Buy-now-pay-later products compete directly with consumer credit.

5. Competitive Rivalry: HIGH

Key direct competitors include Bank Pekao S.A., Santander Bank Polska S.A., ING Bank Śląski S.A., and mBank S.A. These institutions are significant players in the Polish banking landscape, each with substantial assets and market presence.

The Polish banking market features a mix of domestic champions (PKO BP, Pekao) and international players (Santander, BNP Paribas, ING). As of September 2024, PKO Bank Polski held a substantial 15.70% of the market by total assets. This leadership expanded significantly by Q1 2025, with market shares reaching 19.8% in consumer loans and 26.1% in PLN mortgage loans.

Bank Millennium competes effectively in retail but lacks the scale of the largest players.

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Hamilton's 7 Powers Analysis

1. Scale Economies: MODERATE

The Euro Bank acquisition transaction was carried out without increasing the Bank's share capital. This means that the Bank Millennium Group's capital and liquidity were efficiently used, which should result in an increased efficiency and return on equity through economies of scale and synergies.

IT infrastructure costs spread across a larger customer base, but PKO BP has superior scale. Bank Millennium is mid-sized—large enough to afford sophisticated systems, but not large enough to dominate on cost.

2. Network Economics: LIMITED

Traditional banking has weak network effects. The Goodie platform represents an attempt to build merchant-customer network effects, but traditional banking relationships don't create the winner-take-all dynamics of true network businesses.

3. Switching Costs: MODERATE

Primary banking relationships create meaningful switching friction (recurring payments, salary deposits, credit history), but these barriers are lower than they were a decade ago.

4. Brand: MODERATE

In 2023, the best bank in terms of customer service, cost of service, and trust was Millennium Bank, followed by ING Bank Slaski.

Strong brand recognition for service quality, but not differentiated enough to command premium pricing.

5. Cornered Resource: NONE

No unique resources that competitors cannot replicate.

6. Counter-Positioning: LIMITED

The digital-first positioning creates some differentiation from legacy-focused competitors, but the strategy is widely imitated.

7. Process Power: MODERATE

Bank Millennium is a leader in digital solutions on the Polish market. This year again it won the title of the Best Digital Bank in Poland, awarded by the prestigious Global Finance Magazine.

Operational excellence in digital banking creates some sustainable advantage, but competitors are catching up.

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Key Performance Indicators to Monitor

For investors following Bank Millennium, three KPIs deserve ongoing attention:

1. FX Mortgage Portfolio as % of Total Loans The share of total FX-mortgage book (gross loans less allocated legal risk provisions) in total Group's gross loans dropped to 1.6% at the end of March'25. This ratio should continue declining toward zero as the legacy portfolio winds down. Any reversal would signal settlement failure or unexpected litigation.

2. Settlements vs. New Lawsuits Ratio The bank's management also notes in the report that the quarterly number of new settlements still exceeded the number of new claims filed. As long as settlements exceed new lawsuits, the litigation backlog is shrinking. A reversal would signal renewed borrower activism.

3. Cost-to-Income Ratio Target: approximately 37% by 2028. This ratio captures the bank's ability to generate revenue growth while maintaining cost discipline—essential for achieving ROE targets in a potentially lower-interest-rate environment.

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Bull Case

Bank Millennium has survived the worst of the Swiss franc crisis and emerges as a leaner, more digital institution. The FX mortgage portfolio has shrunk to under 2% of total loans; 2025 is expected to be the last year of significant provisioning. Net income of Bank Millennium reached EUR 121.1 million in the first six months of 2025, showing a significant growth of 46.2% from the EUR 82.8 million recorded in the first half of the previous year. The performance of the Polish subsidiary was favourably influenced by the reduction in the overall amount of costs associated with the portfolio of foreign exchange mortgage loans.

With the burden lifting, capital can flow to growth initiatives and eventually dividends. The Strategy 2028 targets—18% ROE, dividend resumption from 2027—become achievable. Digital excellence provides differentiation in a competitive market.

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Bear Case

The Polish banking sector remains crowded and competitive, with PKO BP commanding dominant market share. Interest rate cuts could compress net interest margins. The euro adoption path—once expected to strengthen the zloty and benefit the economy—remains uncertain. Any new consumer lending scandal (the recent CJEU ruling on cash loan commissions suggests ongoing regulatory risk) could trigger another provisioning cycle.

Polish banks from Alior Bank SA to Bank Millennium SA face a new wave of lawsuits potentially costing the industry billions of zloty after the European Union's top court sided with customers in a dispute over interest payments on consumer loans.

Perhaps most importantly, the 50.1% BCP stake creates governance complexity. Any stress at the parent level could spill over to Bank Millennium.

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XII. Conclusion: The Long Road from Crisis to Recovery

Bank Millennium's journey from a 1989 startup born in the chaos of communist collapse to a 2025 digital banking leader encapsulates the promise and peril of emerging market financial institutions. The bank pioneered Polish capitalism—first credit card, first listed bank, first acquirer—then nearly destroyed itself through concentration in Swiss franc mortgages.

"The first quarter of 2025 was another quarter of solid operating performance. Loan growth remained moderate (impact of a rapidly shrinking foreign currency mortgage portfolio), but the corporate portfolio showed early signs of recovery (up 2 percent quarter on quarter, up 4 percent year on year), while consumer loan sales reached their second highest level ever with market share rising to a record 13 percent."

The recovery is real but incomplete. Provisions for legal risks related to CHF loans amounted to PLN 444.8 million in Q1 2025, with total balance sheet provisions reaching PLN 7.3 billion. The coverage ratio of the active foreign currency loan portfolio increased to 132%.

Management's expectation that 2025 will be the last year of significant FX mortgage costs, if realized, would mark the end of a seventeen-year saga that began with the EU accession euphoria of 2004 and peaked with Black Thursday in 2015.

For investors considering Bank Millennium, the key question is not whether the bank will survive—that question has been answered—but what kind of institution will emerge from the crisis. The Strategy 2028 vision of a digital-first, customer-centric bank achieving 18% ROE is ambitious but grounded in tangible progress: 3 million digital users, leading service quality scores, and a business model increasingly freed from legacy burdens.

The Portuguese partnership continues to provide strategic direction and international perspective, though BCP's own history of crisis and recovery means that parental support cannot be assumed in all scenarios.

What cannot be disputed is the institutional resilience demonstrated over three and a half decades. Bank Millennium has survived hyperinflation, the transition from communism, multiple banking crises, the 2008 financial earthquake, and the Swiss franc catastrophe. That survival instinct—combined with digital capabilities and a shrinking legacy portfolio—may yet prove the foundation for the next chapter of Poland's banking pioneer.

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Material Legal and Regulatory Considerations: Bank Millennium remains subject to ongoing litigation related to Swiss franc mortgages, with approximately 120,500 active lawsuits across Polish banks as of Q3 2024. The European Court of Justice has issued multiple rulings favorable to borrowers, creating precedents that affect provisioning requirements. The bank operates under Polish Financial Supervision Authority (KNF) oversight and has been designated under BCP's group supervision by the European Central Bank. Future regulatory changes, including potential mortgage holiday extensions or new consumer protection requirements, could materially impact earnings.