Building the WealthTech platform

MeDirect’s Wealth SuperApp is designed to meet the needs of the underserved affluent market segment for wealth services. Its aim is to offer, on a single platform with open architecture, a broad range of online investment solutions, superior user experience and attractive pricing, combined with high quality transactional banking capabilities. The starting point is to ensure fast and seamless client onboarding. Recently released upgrades to the platform enable potential customers to onboard in five minutes, while complying with all relevant KYC and other regulatory requirements.

Once onboarded, wealth customers can access a range of products unparalleled in MeDirect’s target markets. Customers can choose from amongst more than 1,500 mutual funds, as well as 500 ETFs, 3,000 equities and 300 bonds, trading on 17 stock exchanges around the world. In the coming months, MeDirect will expand its client offering with disruptive products building on this brokerage platform, including online advisory services.

This package of investment services is complemented by seamless and easy-to-use mobile banking with multi-currency capabilities. Later in 2022, MeDirect intends to launch its virtual and physical card product. All in all, within one attractive and easy-to-use platform, MeDirect provides its clients with the choice of how they want to invest and grow their money, while giving them the possibility to use the app seamlessly for everyday banking needs.

Growing the retail platform

The attractiveness of MeDirect’s value proposition is evidenced by the rapid growth in its customer base, both in Belgium and Malta, as well as high levels of customer satisfaction. MeDirect’s customer base grew to 102,000 in 2021, up 37% from year-end 2020. The Group’s customers accounted for €4.5 billion of client financial assets, of which €1.5 billion were investments held in custody with MeDirect.

In Belgium, MeDirect was again rated in the top five banks for digital investing and savings by Spaargids.be. In Malta, MeDirect’s digital onboarding solution was the winner of Tech.MT’s award for Best Use of Technology in Business Transformation. MeDirect will continue to develop and deploy new products and improved user experience by leveraging its advanced tech platform.

De-risking and diversifying the balance sheet

MeDirect continued the de-risking and diversification of its balance sheet that started in 2019. MeDirect’s International Corporate Lending ("ICL") portfolio has been reduced to €0.6 billion at year-end 2021, down from a peak of €1.8 billion in March 2019.

The capital released has been used to strengthen MeDirect’s capital ratios and to reinvest in mortgage products in the Netherlands and more recently in Malta and Belgium. MeDirect’s low-risk Dutch government guaranteed mortgage portfolio reached €1.6 billion by year-end 2021. During 2021, MeDirect also launched its platform for the origination of Belgian mortgages in partnership with Allianz Benelux S.A./N.V. MeDirect’s Maltese home loans business, launched in the first quarter of 2021, has applied innovative technology to set new standards in the local mortgage market in relation to time-to-quote and time-to-approval, through a smooth and client-oriented process.

MeDirect’s total capital ratio has increased to 19.2%, the highest since it began to be regulated by the European Central Bank as part of the Single Supervisory Mechanism in 2016. MeDirect also maintains ample liquidity, with a Liquidity

Coverage Ratio of 363% as of year-end 2021. Such ratios are in excess of all regulatory requirements, recommendations and management buffers. During 2022, MeDirect will continue to explore ways to reinforce its capital base, with the aim of further supporting the growth of its core business lines: wealth and mortgages.

Overall, borrowers in our corporate credit portfolio have evidenced an improved operating performance during 2021 following the economic recovery during the year. Considering the prudent level of provisioning already applied in 2020 due to the pandemic, impairment losses have been significantly reduced from €65 million in 2020 to €2 million in 2021. This reduction in impairments and cost discipline contributed to a significantly improved financial performance, from a loss before tax of €75 million in 2020 to a loss before tax of €14 million in 2021, notwithstanding significant new investment in its platform.

Strengthening the operating model

Operating as a tech company:As one of its competitive advantages, MeDirect owns the intellectual property of critical elements of its value proposition, including seamless service aggregation capabilities. To date, over 20 million lines of code have been deployed in a Continuous Integration/Continuous Deployment (“CI/CD") enabled stack. With a cloud-agnostic and scalable architecture, developed by a tech team consisting of top talent, MeDirect has positioned itself as a software house with substantial headroom for growth.

Improving efficiency:Notwithstanding significant continuing investment in its technology platform and the growth of its operations, MeDirect has managed to maintain its fixed cost base almost flat from the previous year. As a percentage of total assets, fixed costs were reduced from 1.50% in 2020 to 1.24% in 2021. The Group has continued to source talent from an international pool to support the continued growth of its businesses and the development of its tech platform.

ESG and Social responsibility

MeDirect has intensified its focus on environmental, social and governance (“ESG”) initiatives, hiring a Group Head - Sustainability and setting up an ESG Committee. MeDirect continues to integrate ESG principles into the Group’s business and to raise ESG awareness within the organisation. In the context of workplace diversity, MeDirect employs the nationals of over 22 countries and has a workforce that is 41% female, including a number of senior

executives. MeDirect continues to accommodate the needs of its employees and allows its staff to work from home or at the office to ensure they feel comfortable in their working environment. MeDirect contributes to the local communities in which it operates by supporting charitable organisations as well as talented individuals in areas such as sports and culture through sponsorships, donations and the voluntary actions of its employees.

Conclusion

The year 2021 witnessed MeDirect’s recovery from the extraordinary challenges of 2020. In spite of a volatile macroeconomic environment, MeDirect continued to show highly disciplined execution of its strategic transformation roadmap. During 2022, management expects to be faced with multiple

challenges such as the war between Russia and Ukraine, higher inflation and supply chain disruption. Notwithstanding, management is confident that it can create a sustainable business model by executing its business plan and deploying its leading WealthTech platform at a pan-European level.

Vision, Mission and Core Values

Our vision is very simple: Enable people to take care of their own money, with confidence.

To support this, we aim to democratise investing by creating a Wealth SuperApp built around the logic of vertical integration in the retail digital investment space. Our vision statement embodies our core strategy and the market “sweet spot” we target – the underserved affluent customer segment.

Those segments cover a large client universe from first time to active investors looking for a wide choice of investment products and a highly convenient platform. It includes:

• customers who are unsatisfied with the offline journey with their traditional investment advisor;

• customers who do not have the time or the willingness to manage their money and look to either delegate or to be guided;

• digital savvy clients who want to be guided in their investment process;

• tech savvy customers who manage their money by themselves and just need the right platform to do it; and

• customers who are not accepted by Private Banking, which typically caters for customers with very significant investible wealth.

On the basis of this vision, MeDirect aims to grow as a pan-European platform starting from our two core markets in Belgium and Malta, and possibly expand into new geographies.

To achieve this we will offer, on a single platform with open architecture, a broad range of online investment solutions combined with superior UX and attractive pricing. Targeted at the underserved affluent segment, our App intends to address wide investor needs covering trading, advisory and discretionary management services, coupled with daily banking.

Technology is the backbone of our success. We developed internally critical components of the value chain which form part of our cognitive ecosystem, allowing us to deploy seamless service aggregation capabilities. Our Tech architecture is state-of-the-art, with scalability and modularity at its core, built by a talented team recruited from cutting-edge technology sectors including iGaming and Telecom.

Our strategic priorities are heavily influenced by our core values:

Autonomy:

We empower our customers to navigate the financial world and give them the choice how to manage their money. We encourage our employees to take ownership of their work and grow their skills.

Innovation:

We do not rest on our laurels. We are results driven and constantly review how we go about delivering on our vision and improve our value proposition.

Transparency:

The financial world isn’t simple, but the MeDirect app is. We get straight to the point when we communicate, with our clients and among us.

Responsibility:

We advocate for equality, diversity and inclusion and we care for our environment in all that we do.

How our purpose ties into our core strategy

Our core strategy is centred around four main pillars:

1. Offering disruptive digital investing solutions for affluent clients

MeDirect focuses on the affluent customer segment (typically with €30k-€300k in wealth) that value convenience, transparency and a large selection of investment products.

MeDirect aims to provide a full range of investment services from brokerage to investment advice to discretionary management of investment portfolios, combined with a high-quality daily banking function.

Our platform combines both aggregated services and internally built innovative products.

2. Low risk and capital efficient B2B2C mortgage lending platform

With mortgages offerings currently in the Netherlands, Belgium and Malta, we have developed a lending platform that is scalable and competitive.

MeDirect operates a B2B2C approach, by partnering with top notch servicing and origination partners, focusing on niche segments in this market, while still maintaining an appropriate risk-reward balance. The mortgage lending platform leverages on our Technology, Product and User Experience capabilities to build a best-in-class platform.

Most importantly, this business line is complementary to MeDirect’s disruptive wealth offering – MeDirect strives extract the full potential of synergies between the two business lines, including cross-sell mortgages to wealth or vice-versa.

3. Advanced tech allowing for scalability and fast time-to-market

Over the recent years, MeDirect has built the technological foundations to maintain a competitive advantage over our competitors.

Our tech platform has built a strong in-house software development team with experience in developing award winning solutions in international iGaming companies. Through its cloud-agnostic tech architecture, MeDirect has the ability to aggregate services by seamlessly integrating with strategically selected third-party providers that support its digital offering. This modular ecosystem of partners is containerised1and built to support flexibility in the platform.

An important element of our tech strategy is the ability to containerise the platform, by transitioning away from a monolith setup. This allows us to scale-up for higher volumes but maintain lower costs. Operating with a modular microservices architecture, MeDirect continues to innovate and meet business needs, with all customer touchpoints offered through an omni-channel delivery.

Our transformation has also allowed us the ability to monitor real-time and provide a unified, end-to-end view of technical environment, with automatic mapping of business transactions at code level of the underlying software applications.

4. Efficient operational model

MeDirect operates a high-quality service centre in Malta consisting of technology, digital channels, operations and other support teams. These teams are the engine that drives MeDirect to make our Group simpler, better and faster for our customers and workforce. The role of these teams include:

• the development of software and applications to improve MeDirect’s customer experience;

• the management of the IT systems and infrastructure and support;

• the management of customer operations and change across MeDirect; and

• the provision of professional services in various areas such as finance, risk and treasury amongst others.

Dedicated marketing and product teams, as well as control functions, are located in each country. This international set-up enables MeDirect to scale up efficiently while remaining flexible and close to local market requirements, in particular from a customer and regulatory standpoint.

We hereby present the annual report of MeDirect Bank (Malta) plc (the “Bank” or “MeDirect Malta”) and of the Bank and its subsidiaries (“MeDirect” or “the Group”) for the year ended 31 December 2021.2These results reflect the consolidated position of the Bank and its principal subsidiaries.3

Implementing a game-changing WealthTech value proposition

MeDirect’s quest to “democratise investing” reached a critical milestone in December 2021, when MeDirect launched its revamped brokerage trading platform in Malta and shortly thereafter (early 2022) in Belgium. This new platform offers users a more intuitive design and easy access to 5,300 financial instruments.

MeDirect’s open architecture platform offers customers the opportunity to choose their preferred investment from a broad range of financial instruments. MeDirect offers over 1,500 mutual funds managed by international leading fund houses, more than 500 ETFs, as well as over 3,000 equities listed on 17 stock exchanges throughout the world, and finally a

selection of local and international bonds. The upgrade to the brokerage platform features the introduction of real-time pricing on equities and ETFs. This ensures that customers using MeDirect for their trading can benefit from the latest information and prices, making it easier to take advantage of investment opportunities. In addition, the new user interface features improved search facilities, including guided searches, as well as different options for presentation of information on personalised dashboards and other screens. MeDirect’s development teams work continuously to improve the platform with the aim of building a superior user experience.

Early in 2022, MeDirect launched its trading platform on a mobile app in Malta, giving customers the ability to invest real-time from anywhere.

The MeDirect mobile app enables clients to have an all-in-one banking and wealth solution with full control of their finances (savings, wealth and investment) from a single platform. The full platform was launched in Belgium in mid-February 2022.

Continued investment in MeDirect’s WealthTech platform has generated a 30% increase in customer assets versus 2020. That figure is only expected to grow with successful implementation of MeDirect’s WealthTech transformation journey.

MeDirect’s achievements in the past year are just the start in delivering a Wealth SuperApp. MeDirect will continue to deliver exciting and disruptive investment solutions that will continue to empower customers to navigate the complexity of the financial world, in particular to meet the needs of the underserved affluent customer segment.

In-house technology team transforming our digital ambition into reality

Technology is at the core of MeDirect’s competitive advantage, acting as an enabler to build our value proposition. Over a two-year period, MeDirect has built a software development team which spans over three geographies and is rated on par with the world’s leading fintechs. This has enabled MeDirect to revitalise the digital touchpoints by enabling an omni-channel journey on both web and mobile within the investment space and enriching the daily banking possibilities. The ecosystem is built

in-house which provides MeDirect the flexibility to keep the platform as intuitive as possible, while adding more client driven features to enrich this platform which is formed from 20 million lines of code within MeDirect’s source repositories. This architecture allows for scalability and agility in releases, which enables us to provide our customers with a best-in-class investment experience.

In the future, we will continue to develop and deploy initiatives that meet the needs of our target market. Through our cloud-agnostic tech architecture, MeDirect has the ability to aggregate services by partnering through seamless integration with strategically selected third-party providers that support our digital offering. This modular ecosystem of partners is containerised4 and built to support flexibility.

The tireless efforts of MeDirect’s Tech, Channels and User Experience teams are enhancing the customer journey throughout the platform, and the Group has committed and continues to commit significant investments in order to ensure that the MeDirect customer experience is best-in-class. One example of the work of the development teams is the Group’s digital onboarding platform, through which clients can become customers of MeDirect within minutes. The result is a conversion rate of 80% for potential customers who start the onboarding process. The MeDirect digital onboarding process was recognised as the Best Use of Technology in Business Transformation at the 2021 eBusiness Awards organised by Tech.MT, a local public-private partnership promoting Malta as a tech centre.

In 2021, the Group’s client acquisition numbers increased 165% versus 2020, reaching the milestone of 100,000 customers. This was achieved through a set of important improvements in product scope, such as launching the new mortgage product and a full revamp of the investment platform, together with strong

marketing initiatives including the successful launch of an internally developed Member-Get-Member platform. Through this platform, a reward system was introduced for our existing clients who recommend MeDirect to their friends and family. Further enhancements to this programme are on course to be deployed during 2022.

Sound diversification through various asset classes

MeDirect also continued to diversify its credit portfolio. The Group continued to build its mortgage portfolio which now represents ca. 70% of its total credit portfolio5as at 31 December 2021 (as compared with 53% as at 31 December 2020).

MeDirect Belgium’s Dutch government guaranteed (“NHG”) mortgage book grew by approximately 50% in 2021. MeDirect Belgium closed its second securitisation of Dutch NHG mortgage loans, providing it with highly efficient long-term funding for the portfolio. MeDirect Belgium’s May 2020 Dutch NHG mortgage securitisation was awarded the 2020 Dutch Securitisation Award organised by the Institute for International Research and the Dutch Securitisation Association.

In December 2021, MeDirect Belgium launched a Belgian mortgage loan product in partnership with Allianz Benelux S.A/N.V. The offering is underpinned by a robust credit risk framework and will continue to diversify the Group’s asset base into the mortgage sector. Back office operational support of the Group’s Belgian mortgage portfolio is provided by Stater Belgium S.A./N.V., one of the top servicers in Belgium, ensuring efficient and timely processing of mortgage loans.

During 2021, MeDirect Malta successfully launched its new Maltese Home Loans offering, which applies innovative technology to create a smooth, client-oriented process. The programme has set new standards in the Maltese mortgage market for time-

to-quote and time-to-approval. By the end of the 2021 financial year, MeDirect Malta had originated €19 million of Maltese mortgages, with a significant pipeline already in place for 2022. MeDirect Malta will continue to enhance its offering by launching new types of mortgage products in the second quarter of 2022. These include home equity loans, a 10-year fixed rate mortgage product - unprecedented in the Maltese market - and a green home loan product which reinforces MeDirect’s commitment to improving Malta’s environment.

MeDirect has also continued the process of de-risking its International Corporate Lending (“ICL”) portfolio, with the aim of building a lower risk and well-diversified asset base across multiple sectors and geographies. By 31 December 2021, the ICL portfolio had been reduced to €0.6 billion, a reduction of 30% from the end of 2020.

The Maltese Corporate Banking business continued on its strong path, with lending income up by 20% versus 2020. This business provides a one-stop shop for Maltese SMEs and international companies operating in Malta, with the aim of supporting such businesses through financing and general banking services. Although this business line makes up 4.5% of the Group’s credit portfolio, MeDirect will continue to steadily grow this franchise and maintain its positive contribution to bottom line.

Intensified focus on ESG initiatives and Climate Change risks

MeDirect continues to embed environmental, social and governance (“ESG”) principles, including specific focus on Climate and Environment Related risks (“CER”) in the day-to-day running of the Group. The Group reinforced its organisational framework through appointment of a Group Head - Sustainability and establishment of an ESG committee to monitor the Group’s

progress in developing its ESG programme. The Group’s aim is to ensure that it is an attractive and employee-friendly workplace as well as a diversified workforce across nationality, capability and gender. More details on the Group’s ESG initiatives can be found in the Non-Financial Information Report starting on page 47.

Key financial performance highlights

Balance sheet strength is critical to MeDirect’s ability to serve its customers and to achieve its financial ambitions. The quality of the Group’s balance sheet positions it well to continue to support its customers and deliver value to its shareholders.

The size of the balance sheet remained stable, with ongoing diversification and de-risking being implemented. The Group continued to reduce the ICL book and to increase the low-risk Dutch NHG mortgages portfolio. The growth of the NHG portfolio was facilitated through a second securitisation completed in January 2021.

MeDirect’s capital, liquidity and funding metrics remained strong during the year, well above regulatory minimum requirements.

•MeDirect has a strong capital position with MDB Group’s total capital ratio of 19.2% as at 31 December 2021, well above the TSCR6benchmark of 11%. During the year, the MDB Group’s capital base was supplemented by the issue of €11 million of fixed rate reset callable subordinated notes due in 2031. The proceeds of that Tier 2 capital issuance were used to increase further MeDirect’s regulatory capital base and to support the execution of its business strategy.

•The MDB Group’s liquidity reserves remained strong at €786 million as at 31 December 2021, with Liquidity Coverage Ratio (“LCR”) at 363% (minimum requirement of 100%).

•The MDB Group’s Net Stable Funding Ratio (“NSFR”) as at 31 December 2021 was 133.5% (minimum requirement of 100%).

•The MDB Group’s leverage ratio stood at 4.9% as at 31 December 2021 (minimum requirement of 3%).

MDB Group’s Non-Performing Loans (“NPL”) ratio decreased from 9.5% as at 31 December 2020 to 6.7% as at 31 December 2021. The Group worked to reduce its NPL ratio via individual borrower strategies aimed at maximising recoveries as well as through debt sales and write-off strategies following effective debt restructuring.

The Group’s financial results for the financial year ended 31 December 2021 improved significantly compared to the prior year, from a loss before tax of €75 million in 2020 to a loss before tax of €14 million in 2021, as a result of improved economic conditions resulting in a reduced net loan impairment expense, which decreased from €65 million in 2020 to €2 million in 2021.

In 2020 the Group deployed a comprehensive, conservative and forward-looking expected credit loss approach in response to the impact of COVID-19.

Events have demonstrated that MeDirect’s prudent approach to provisioning was appropriate to cover expected future losses. The full impact of the pandemic is now clearer, and markets reflect the positive impact of vaccination programmes and the lifting of pandemic-related restrictions. The Group’s lower cost of risk of €2 million for the financial year, was driven primarily by the release of IFRS 9 Stage 1 and 2 provisions as a result of reductions in the international corporate lending portfolio and an improved macroeconomic outlook.

MeDirect’s robust balance sheet and capital strength gives it the flexibility to continue to implement its business transformation and to build on the achievements of 2021.

Dividends and reserves

The accumulated losses of the Group amounted to €34.1 million (2020: €16.5 million) and the retained earnings of the Bank amounted to €1.5 million (2020: accumulated losses of €5.2 million). After consideration of the financial results of the Group as well as an uncertain macroeconomic environment, the directors of the Bank do not recommend the payment of a final dividend, despite the strong capital and liquidity ratios of the Group.

The Board has determined that the Group should conserve its capital to maximise its ability to support its customers, to continue to invest in its Wealth platform and to continue to build and diversify its balance sheet.

Focus on financial key performance indicators

Through the use of financial key performance indicators (“KPIs”), senior management regularly track, monitor and analyse the Group’s financial performance. KPIs are the tools by which MeDirect’s businesses and operations are managed, monitored and directed and indicate when the Group needs to undertake corrective measures. KPIs (and associated risk appetite and risk tolerance metrics) ensure that key risk metrics are constantly monitored. KPIs also play an essential role in MeDirect’s performance management process.

MeDirect focuses particularly on quantitative KPIs that are actively monitored on a regular basis through dashboards monthly management reports. In addition, The Group’s management and Board evaluate non-financial metrics such as customer satisfaction, employee engagement and sustainability. During 2021, MeDirect developed a more granular framework for the regular evaluation and monitoring of non-financial metrics.

The principal financial KPIs of the MDB Group are presented in the following table: