Other information

Off-balance sheet liabilities granted

At the end of 2015, guarantees and other financial off-balance sheet liabilities granted with respect to related parties of the PKO Bank Polski SA amounted to PLN 2 301.2 million and decreased by PLN 1 037.7 million as compared to the end of 2014

The largest off-balance sheet liabilities granted are related to the following entities:

  • PKO Leasing SA – PLN 1 396.7 million,
  • PKO BP Faktoring SA. – PLN 522.3 million.

All above mentioned transactions with related parties were concluded on arm’s length. The details of related party transactions are presented in the financial statements of PKO Bank Polski SA for the year 2015.

At the end of 2015, guarantees and other financial off-balance sheet liabilities granted with respect to related parties of the PKO Bank Polski SA Group amounted to PLN 3.1 million and decreased by PLN 2.8 million as compared to the end of 2014. The largest off-balance sheet liability relates to Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o. (PLN 2.0 million).

Reacquisition of own shares

During the period covered by this Report, PKO Bank Polski SA did not re-acquire its shares on its own account.

Information about the activities of the PKO Bank Polski SA outside the territory of the Republic of Poland

 

Data in thousand PLN Profit/loss before tax Income tax Profit Number of employees
In European Union:        
PKO Finance AB 2 409 -544 1 864 0
In third countries:        
KREDOBANK SA Group 24 171 -5 255 18 916 2 043

Financial data are derived from financial statements of above companies and prepared in accordance with IFRS applicable in the PKO Bank Polski SA.In companies of PKO Finance AB performance of the functions of the members of the Board is based on the ratio of corporate governance.

Significant contracts and important agreements with the central bank or supervisory authorities

In 2015, PKO Bank Polski SA disclosed in its current reports all the agreements with clients for which the total value of services arising from long-term agreements with the given client meets the criteria defined in the Decree of the Minister of Finance of 19 February 2009 on current and periodical information submitted by issuers of securities and the conditions of considering as equivalent the information required by law of a non-member country (Journal of Laws No. 33, item 259).

In 2015, the Bank did not conclude any significant agreements with the central bank or supervisory authorities.

As at the date of the financial statements preparation, PKO Bank Polski SA is not aware of any agreements as a result of which changes may occur in the future in the proportions of shares held by the current shareholders.

On 12 September 2014, KREDOBANK SA and the National Bank of Ukraine concluded the "Agreement on improving the profitability of KREDOBANK SA" whose main points are a reduction to less than 10% share of assets classified according to the classification of the National Bank of Ukraine to the category of doubtful or lost, and an increase in share capital of KREDOBANK SA. In 2015, the National Bank of Ukraine granted a permission to KREDOBANK SA to repay ahead of schedule a subordinated loan, granted by PKO Bank Polski SA, in the amount of USD 15 million and to allocate resources to increase the share capital of KREDOBANK SA. In September 2015 subordinated loan was repaid, and in November 2015, PKO Bank Polski SA paid acquisition of 33 billion shares with a total nominal value and issue price of UAH 330 million.

As at the end of 2015 of KREDOBANK SA fulfilled all obligations arising from the agreement - an official confirmation will be issued on the basis of the final financial statements of 2015.

Published forecasts related to financial results for 2015

PKO Bank Polski SA did not publish forecasts related to financial results for 2015.

Guarantees and loan commitments granted

As at 31 December 2015, the total value of guarantees and loan commitments granted amounted to PLN 57 572.0 million with loan commitments making up 73.9% of this amount. Total rate of growth of guarantees and loan commitments granted amounted to 8.9% y/y, mainly due to the increase in financial liabilities granted to non-financial entities.            

Off-balance sheet liabilities granted (in PLN million)

Specification 31.12.2015 31.12.2014 Change (mPLN) Change(%)
Loan commitments 42 544.4 38 333.1 4 211.3 11.0%
financial entities 2 306.2 534.0 1 772.20 4.3x
non-financials 36 157.9 34 540.6 1 617.3 4.7%
budgetary entities 4 080.4 3 258.6 821.8 25.2%
of which: irrevocable 30 513.9 27 730.8 2 783.0 10.0%
The guarantees granted: 15 027.6 14 539.5 488.0 3.4%
financial entities 729.2 179.7 549.5 4.1x
non-financials 14 231.7 14 282.9 (51.2) -0.4%
budgetary entities 66.72 76.92 (10.2) -13.3%
Total 57 572.0 52 872.6 4 699.3 8.9%

Loans and advances taken, guarantees and warranties agreements

In 2015, PKO Bank Polski SA did not take out any loans or advances or receive any guarantees or warranties that were not related to operating activity of PKO Bank Polski SA.

In 2015, KREDOBANK SA did not take out any loans or advances or receive any guarantees or warranties that were not related to its operating activity.

Underwriting agreements and guarantees granted to subsidiaries

As at 31 December 2015 issues of PKO Leasing SA (the Bank’s subsidiary) bonds were regulated by the Underwriting Agreement for the Organisation, Conducting and Servicing of the Bond Issuance Programme as at 10 November 2011, in accordance with which the maximum value of the programme was PLN 600 million.

As at 31 December 2015 PKO Leasing SA issued bonds for a total of PLN 365 million, including bonds with a value of PLN 365 million sold on the secondary market and 24 bonds with a value of PLN 0.24 million held in the portfolio of PKO Bank Polski SA.

In 2015 PKO Bank Polski SA:

  • granted a guarantee up to EUR 44 million to European Investment Bank (EBI) in respect of the repayment of the loan; guarantee was issued for the period ending 14 September 2024,
  • granted a guarantee up to EUR 57.5 million to PKO Leasing SA in respect of the repayment of the loan to Council of Europe Development Bank (CEB); guarantee was issued for the period ending 30 September 2023,
  • granted a guarantee up to PLN 489 thousands to PKO Leasing SA in respect of office space rent; guarantee was issued for the period ending 30 June 2018,
  • granted a guarantee up to PLN 30 thousands to PKO Leasing SA in respect of office space rent; guarantee was issued for the period ending 8 December 2020,
  • extended duration and increased value of the guarantee granted to PKO Życie Towarzystwo Ubezpieczeń SA in respect of lease of office space; guarantee in the amount of 215 thousand EUR has been issued for a period up to 30 April 2016.

Enforceable titles issued

In 2015, PKO Bank Polski SA issued 4 939 banking enforceable titles for a total amount of PLN 951.6 million, CHF 2.2 million and EUR 0.3 million.

In the case of KREDOBANK SA, the Ukrainian law does not allow to issue enforceable titles as defined in the Polish Banking Law. In accordance with the Ukrainian law, bank liabilities are pursued in a court of law based on the provisions of the Code of Civil Procedure and Code of Economic Procedure.

PKO Mortgage Bank SA in 2015 not issued banking enforcement orders.

Debt write-offs

The PKO Bank Polski SA in 2014, reduced a credits and loans impairment write-off to customers amounted to PLN 1 233 million.

In the first quarter of 2015 PKO Bank Polski SA wrote- off USD 8.250 thousand loans granted to Financial Company " Prywatne Inwestycje" Sp. o.o. and USD 8 284 thousand loans granted to Financial Company "Idea Capital" Sp. o.o. as well as the interest due to the above loans (outstanding loans). Write-offs were carried out on a request from the companies due to the economic situation in Ukraine, including in particular a progressive devaluation of the hryvnia resulting in the lack of the possibility to generate by the Companies revenues in respect of recoveries of receivables in UAH at the level required to repay the loans received from the Bank and the limitations of the National Bank of Ukraine exchange and transfer of currency abroad.

Proceedings pending before the court, arbitration tribunal or public administrative authority

As of 31 December 2015, the total value of court proceedings against the PKO Bank Polski SA Group entities (including the Bank) amounted to PLN 638 019 thousand, of which PLN 45 792 thousand concerned court proceedings in Ukraine (as at 31 December 2014 the total value of above mentioned court proceedings amounted to PLN 427 555 thousand), while the total value of court proceedings initiated by the PKO Bank Polski SA Group entities (including the Bank) as at 31 December 2015 amounted to PLN 697 041 thousand, of which PLN 98 680 thousand concerned court proceedings in Ukraine, related mainly to recovery of loans granted by KREDOBANK SA (as at 31 December 2014 the total value of the above mentioned court proceedings amounted to PLN 767 505 thousand)..

Neither the Bank nor the other Group entities have conducted any proceedings pending before court, arbitration tribunal or public administration

authority concerning liabilities or receivables, the value of which amounts to at least 10% of the own funds of PKO Bank Polski SA.

Proxies, Management Board meetings and execution of the resolutions of the General Shareholders’ Meeting

As at 31 December 2015 there were 6 proxies of the Bank.

By resolution No. 593/D/2015 of the Management Board of 7 September 2015 on the appeal and granting proxies, 7 existing proxies were cancelled and 6 new total proxies were granted. By decision of the District Court for the Capital City of Warsaw in Warsaw XIII Economic Department of the National Court Register dated 2 October 2015, the information of Bank proxies was changed (Marek Wieczorkowicz was relieved from the office) and changed (due to changes in the Statue of the Bank in September 2015, including § 21 concerning submission of declarations of will on behalf of the Bank) record with the National Court concerning the type of proxy i.e. the total proxy, which authorizes each proxies to act jointly with a member of the Board or other proxy.

On 23 September 2015, a member of the Supervisory Board Ms Mirosława Boryczka resigned from the membership of the Supervisory Board. By decision of the District Court for the Capital City of Warsaw in Warsaw XIII Economic Department of the National Court Register, dated 17 November 2015, the change in the composition of the Supervisory Board was registered with the National Court Register of the Bank.

In 2015, the Bank’s Management Board held 52 meetings and adopted 857 resolutions.

Major actions and decisions of the Management Board, which affected the Bank’s financial position and operations, are presented in different parts of this Directors’ Report.

Factors which will affect future financial performance of the PKO Bank Polski SA Group

In the near future, the results of the PKO Bank Polski SA Group will be affected by economic processes which will take place in Poland and in the global economy as well as by reactions of the financial markets. The interest rate policy applied by the Monetary Policy Council and key central banks will also have a great impact on future performance. Specific predictions about trends in the economy are covered in this report in section 2.7.

The tax on bank assets is an important factor that will influence situation of the Bank and the entire financial sector and the economy. Additional tax burden will contribute to decline in net profit of the Bank and the sector in 2016. In the medium term it will contribute to reduction of lending potential across sector and return on equity. This mainly concerns banks with the lowest return on assets and at the same time the highest capital leverage.

Bank as a member of Visa Europe Limited is among the beneficiaries of the Transaction. Estimated Bank's share (excluding potential deferred payment of "earn-out") is expected to be EUR 88 875 thousand (which is equivalent to PLN 378 741 thousand according to NBP average exchange rate of 31 December 2015), including EUR 66 167 thousand that will be paid in cash and EUR 22 708 thousand paid with Visa Inc. shares. These amounts are not final and may change due to the complaint filed by the Bank subject to the proposed method of determining the Bank's participation in the settlement of the transaction and possible objections of the remaining members of Visa Europe Limited. The final settlement of amounts due to the Bank should take place by the 30 June 2016. Additional deferred payment of "earn-out" is possible. It would be paid in cash after sixteen quarters from the date of transaction settlement, but its real value is currently not possible to determine. The transaction is subject to receipt of applicable regulatory approvals.

The financial results of the PKO Bank Polski SA will also be influenced by political and economic situation of Ukraine. There are entities from the Bank Group operating in Ukraine: KREDOBANK SA and financial services and debt collection companies. In February 2015 there was a substantial depreciation of the Ukrainian hryvnia against foreign currencies, including the Polish zloty. Since the beginning of March 2015, after interest rates had been significantly raised, deprecation of hryvnia has significantly slowed down. The Law of the Supreme Council of Ukraine on currency conversion of loans granted to individuals and their partial write-off by the exchange rate from before the crisis was vetoed by the President of Ukraine. The works on the act is still lasting - in February 2016 a new project has been revealed, which involves restructuring of FX mortgage loans taken for the purchase of one apartment, converting a loan currency at the exchange rate from the date of conversion and partial write-off of the amount of restructured debt.An analysis has been carried out in the context of the impact of the possible restructuring on the financial results and the risk of a deterioration in asset quality of the Group in Ukraine. PKO Bank Polski SA continues efforts to ensure the safe operation of its companies in Ukraine by strengthening the supervisory activities, including monitoring of development of regulatory requirements set by the National Bank of Ukraine.

Seasonality or cyclical nature of activities in the reporting period

PKO Bank Polski SA is a universal bank providing services on the territory of the whole country, and thus its activity is exposed to similar fluctuations to those affecting the entire Polish economy. The activities of other companies of the PKO Bank Polski SA Group also do not show any particular seasonality or cyclical characteristics.

Results of changes in the entity’s structure, including the effects of merger, takeover or disposal of the Group entities, long-term investments, division, restructuring and discontinuation of activities

The results of changes in the entity’s structure, including the results of merger, takeover or disposal of the Group entities have been described in section 4 of this Directors’ Report.

Information on warranties on loan and advance granted by the issuer or by the issuer’s subsidiary or an guarantee granted – cumulatively to a single entity or its subsidiary, if the total value of outstanding warranties and guaranties constitutes at least 10% of the issuer’s equity

In 2015, PKO Bank Polski SA disclosed in its current reports all the agreements with clients for which the total value of services arising from long-term agreements with the given client met the criteria defined in the Decree of the Minister of Finance of 19 February 2009 on current

and periodical information submitted by issuers of securities and the conditions of considering as equivalent the information required by law of a non-member country (Journal of Laws No. 33, item 259).

In 2015 the PKO Bank Polski SA’s subsidiaries did not grant any warranties on loan or advance or a guarantee to a single entity or its subsidiary that would constitute at least 10% of the Bank’s own funds.

Information on transaction or a number of transactions concluded by the issuer or its subsidiary with related parties, if they are significant and were concluded not on arm’s length

In 2015, PKO Bank Polski SA provided on an arm’s length basis the following services to related (subordinated) entities on maintaining bank accounts, accepting deposits, granting loans and advances, issuing debt securities, granting guarantees and concluding foreign exchange transactions and offering participation units in funds, lease products, factoring products and insurance products offered by the PKO Bank Polski SA Group companies. At the same time, it rented space in the Centrum Finansowe Puławska building in Warsaw to selected Group entities.

A list of major transactions concluded by PKO Bank Polski SA with subordinated entities, including their indebtedness in relation to the Bank as at 31 December 2015 was presented in the Standalone Financial Statements of PKO Bank Polski SA for the year ended 31 December 2015.

In 2015 the subsidiaries of PKO Bank Polski SA did not conclude any material transaction with related parties not on arm’s length.

Subsequent events

  1. On 9th of January 2016, PKO Insurance Company launched the first offer of property insurance for individual customers of PKO Bank Polski SA, who are holders of credit cards. The proposed insurance provides protection in case of loss of income sources or hospital treatment resulting from an accident of the insured. On February 13, 2016, the Company began selling insurance covering loss of income for cash loan customers in PKO Bank Polish SA, and on February 15, 2016, the sale of real estate insurance, chattels, OC in private life, Assistance and loss of income for the clients of PKO Bank Polski SA and mortgage Bank PKO SA taking mortgages.
  2. On 20 January 2016 the Extraordinary General Meeting of PKO Insurance Company passed resolution to increase the Company's share capital through the acquisition of 5 000 PKO Bank Polish SA shares with a nominal value of PLN 1 000 each and an issue price of PLN 4 400 each, that is, for a total amount of PLN 22 000 thousand. The above-mentioned increase requires the approval of the Polish Financial Supervisory Commission (amendment of the Statue) and registration with the National Court Register.
  3. On 26 January 2016, PKO Bank Hipoteczny SA finalized the subsequent transfer of mortgages from PKO Bank Polski SA for a total amount of PLN 251 279 thousand.
  4. On 29 January 2016 the National Court Register recorded an decrease of the capital share of PKO BP Finat Sp. o.o. from the amount of PLN 107 302 500 to PLN 32 302 500 through the redemption of 750 000 shares with a nominal value of PLN 100 each, belonging to the sole shareholder - PKO Bank Polski SA.
  5. On February 3, 2016, Extraordinary General Meeting of Shareholders composed of Qualia Hotel Management LLC, Qualia - Residence LLC and Qualia LLC shareholders - Pomeranka LLP made resolutions concerning merger of the aforementioned companies. The merger will be done through the transfer of all assets of Qualia company - Residence Flotylla LLC and Qualia LLC - Pomeranka LLP (the acquired companies) to the company Qualia Hotel Management LLC (the acquiring company). The above-mentioned merger had been registered with the National Court Register on 29 February 2016.
  6. On 25 February 2016 the Extraordinary General Shareholders’ Meeting of the Bank on the basis of Article 385 § 1 of the Commercial Companies Code dismissed from the Supervisory Board of the Bank: Mr Jerzy Góra, Mr Mirosław Czekaj, Mr Piotr Marczak, Mr Marek Mroczkowski, Mr Krzysztof Kilian and Mrs Zofia Dzik.
    Moreover the Extraordinary General Shareholders’ Meeting of the Bank on the basis of Article 385 § 1 of the Commercial Companies Code appointed the Supervisory Board: Mr Mirosław Barszcz, Mr Adam Budnikowski, Mr Wojciech Jasiński, Mr Andrzej Kisielewicz, Mr Janusz Ostaszewski, Mr Piotr Sadownik and Mrs
    Agnieszka Winnik – Kalemba.
    The State Treasury, as the Entitled Shareholder on the basis of § 12 clause 1 of the Bank's Statue appointed Mr Piotr Sadownik as Chairman of the Supervisory Board of the Bank and Mrs Agnieszka Winnik – Kalemba as Deputy-Chairman of the Supervisory Board of the Bank.
  7. On 25 February 2016, the Extraordinary General Meeting adopted a resolution on amendments to the Articles of Association of the Bank.
    The adopted changes concerned i.e. procedure of appointing members of the Management Board. In place of provisions of the Articles of Association (§ 15 clause 1 item 8), whereby the Supervisory Board appoints and dismisses members of the Board at the request of the President, according to the adopted resolution such an appointment will not occur at the request of the President.
    By adopting the resolution of the Extraordinary General Meeting the provision of the Articles of Association, according to which a member of the Board may be dismissed only for important reasons (§ 19 clause 4 of the Articles of Association) was deleted.
    According to the adopted amendment to § 23 clause 1 point 4 of the Articles of Association, subordination of various areas of the Bank to the members of the Board shall be established by the Regulation of the Board, approved in accordance with § 15 clause 1 point 11 letter a) indent 1 by the Supervisory Board.
    Change of § 23 clause 3 serves an indication of the solid person who will lead the work of the Board in the absence of the President or the failure to appoint deputy in the absence of the supervisors of the Board.
    The changes will come into force on the date of their registration with the registration court.
  8. On 29 January 2016, the Bank concluded a guarantee agreement with a counterparty (the “Counterparty” or the “Guarantor”) providing for unfunded credit protection with respect of a portfolio of selected corporate exposures of the Bank, within the meaning of the CRR regulation ((the “Guarantee” and the “Guarantee Agreement” respectively). The value of the portfolio covered under the Guarantee (amount of the Guarantee) amounts (after rounding) to 5 034 581 272 PLN.
    The maximum time of the coverage under the Guarantee is 36 months, however the Bank shall be entitled to unilaterally terminate the Guarantee prior to the expiry of this period. The Guarantee Agreement provides for liquidated damages (contractual penalties) shall not exceed 24 000 000 PLN. The Guarantee Agreement does not preclude from seeking redress of further damages exceeding the sum of liquidated damages (contractual penalties).
  9. On 29 February 2016, the Bank conclude a guarantee agreement with a counterparty (the “Counterparty” or the “Guarantor”) providing for unfunded credit protection with respect of a portfolio of selected corporate exposures of the Bank, within the meaning of the CRR regulation (the “Guarantee” and the “Guarantee Agreement” respectively).
    The value of the portfolio covered under the Guarantee (amount of the Guarantee) amounts (after rounding) to 1 203 770 732 PLN. Maximum time of the coverage under the Guarantee is 36 months, however the Bank shall be entitled to unilaterally terminate the Guarantee prior to the expiry of this period. The Guarantee Agreement provides for liquidated damages (contractual penalties) that may be due to the Guarantor from the Bank in case of a breach of certain obligations of PKO Bank Polski under the Guarantee Agreement. The total amount of these liquidated damages (contractual penalties) shall not exceed 26 000 000 PLN. The Guarantee Agreement does not preclude from seeking redress of further damages exceeding the sum of liquidated damages (contractual penalties).

Total value of the agreement concluded by the Bank with a Counterparty and its subsidiaries within last 12 months is 6 238 351 995 PLN. Guarantee Agreement constitute the largest of the contracts concluded by the Bank and Contractor or its subsidiaries in the last 12 months

Declaration of the Management Board

The Management Board of PKO Bank Polski SA certifies that, to the best of its knowledge:

  • the annual financial statements and comparative data have been prepared in accordance with binding accounting and reporting standards and present a true, fair and transparent view of financial condition and results of the PKO Bank Polski SA Group,
  • the annual Directors’ Report of the PKO Bank Polski SA Group presents a true view of the development and achievements as well as condition of the PKO Bank Polski SA Group, including a description of the basic risks and threats.

The Management Board of PKO Bank Polski SA certifies that the entity authorised to audit the financial statements and which is performing the audit of annual consolidated financial statements, has been elected in compliance with applicable laws. The entity as well as the certified auditors performing the audit fulfilled all criteria for providing unbiased and independent audit opinion in compliance with applicable laws and professional norms.

The PKO Bank Polski SA Group Directors’ Report for the year 2015 consists of 100 subsequently numbered pages.

Signatures of all members of the Management Board

01.03.2016 Zbigniew Jagiełło President of the Management Board .............................. (signature)
01.03.2016 Piotr Alicki Vice-President of the Management Board .............................. (signature)
01.03.2016 Bartosz Drabikowski Vice-President of the Management Board .............................. (signature)  
01.03.2016 Piotr Mazur Vice-President of the Management Board .............................. (signature)  
01.03.2016 Jarosław Myjak Vice-President of the Management Board .............................. (signature)  
01.03.2016 Jacek Obłękowski Vice-President of the Management Board ............................. (signature)  
01.03.2016 Jakub Papierski Vice-President of the Management Board ............................. (signature)