The main events of 2015

The GDP growth rate in Poland in 2015 remained stable. The external demand weakened due to the recession in Russia and Ukraine and other emerging countries, but on the Polish economy the greater impact had a recovery in the euro area. Stable domestic demand was supported by the improving situation on the labour market and deflation, that was increasing real purchasing power of households, as well as by the significant drop in oil prices. There was an increase in employment in the enterprise sector and a marked decline in the unemployment rate. Financial results of the banks in 2015 were also determined by exceptionally low levels of interest rates.

2015 was marked with the implementation of many important strategic projects in PKO Bank Polski SA, projects set the foundation for further dynamic business development.

In April 2015, the operational merger of PKO Bank Polski SA with Nordea Bank Polska SA ended with a full success. As a result, there was a unification of the activities of both banks, including access to educational and transactional system for all customers. The merger was the fastest merger of two banks carried on the Polish market and one of the fastest in Europe. The migration work were carried out without any prejudice to the continuity, stability and security of the operation of the Bank’s computer system.

The essential elements of the strategy being implemented, which strengthen competitive advantages and give a strong base for the long-term development of PKO Bank Polski SA, was the establishment of PKO Bank Hipoteczny SA. In April 2015, after obtaining the authorization of the Financial Supervision Authority to start operations, PKO Bank Hipoteczny SA began selling at the retail network of PKO Bank Polski SA and by the agents and intermediaries. In 2015, PKO Bank Hipoteczny SA finalized the work associated with obtaining the credit rating. Mortgage bonds of the Bank received the highest achievable rating in Poland –Aa3 assigned by Moody’s, which indicates a very high level of safety of debt securities. It stems directly from the mortgage bonds backed by debt only in respect of PLN mortgage loans.

Building the Bank’s strategic position for the coming years also resulted in launch of its first foreign branch in 2015 – a corporate branch of PKO Bank Polski SA in Germany. Selecting the direction of the first stage of the foreign expansion is integrally associated with the high activity of the Bank’s institutional clients on the German market, the scale of the mutual trade, and the investment projects carried out. The registered office of the branch which operates under the name of PKO Bank Polski Niederlassung Deutschland is in Frankfurt am Main. The services offered at this branch comprise of: transaction banking products, Treasury products, trade finance, consulting services relating to foreign markets, and foreign loans.

In 2015, the worldwide unique mobile payment system BLIK has been released for the Bank’s clients, application was built on the basis of IKO of PKO Bank Polski SA application. This is the result carried at the initiative of PKO Bank Polski SA under the cooperation with 6 banks and is available to customers of these banks i.e. Alior Bank SA, Millenium Bank SA, Bank Zachodni WBK SA, ING Bank Slaski SA, mBank SA (including Orange Finance) and PKO Bank Polski SA (including Inteligo). With BLIK, clients have the ability to use the innovative system of cashless payments using mobile phone.

Actions undertaken by the PKO Bank Polski SA Group in 2015 made it possible to achieve high financial results, and thanks to that the Group strengthened its position among the largest financial institutions in Poland.

  2015 2014 Change 2015/ 2014
Net profit 2 609.6 PLN mln 3 254.1 PLN mln -19.8%
Result on business activities* 10 664.8 PLN mln 11 146.6 PLN mln -4.3%
Net interest income 7 028.6 PLN mln 7 522.9 PLN mln -6.6%
Net fee and commission income 2 850.6 PLN mln 2 933.5 PLN mln -2.8%
Administrative expenses (6 036.3) PLN mln (5 245.1) PLN mln 15.1%
Net impairment allowance and write-downs (1 475.9) PLN mln (1 898.7) PLN mln -22.3%
ROA net 1.0%   1.4%   -0.4 p.p.
ROE net 9.0%   12.4%   -3.4 p.p.
C/I 56.6%   47.1%   9.5 p.p.
Interest margin 3.0%   3.6%   -0.6 p.p.
The share of loans impaired 6.6%   6.9%   -0.3 p.p.
Cost of risk -0.7%   -1.0%   0.3 p.p.
Total capital ratio 14.6%   13.0%   1.6 p.p.

* Result on business activities defined as operating profit before administrative expenses and net impairment allowance and write-downs.

The net profit of the PKO Bank Polski SA Group generated in 2015 amounted to PLN 2 609.9 million, which represents an decrease of 19.8%, i.e. by PLN 644.6 million comparing to the previous year profit. The achieved level of net profit was determined by:

1. result on business activities of the PKO Bank Polski SA Group, which reached the level of PLN 10 664.8 million (-4.3% y/y), mainly due to:

  • a decrease in net interest income by 6.6% y/y, due to the realised along with the further reduction in market interest rates and reduction of maximum interest rate of loans,
  • a decrease of net fee and commission income (a decrease of 2.8% y/y), realised under the pressure of regulatory restrictions in respect of fees for payment services,
  • the increase in the net foreign exchange (by 56.5% y/y),

2. an increase of administrative expenses, related to the increase in premiums and contributions to the Bank Guarantee Fund (mainly due to the increase in interest rates charges of BGF) and additional costs related to the establishment of Borrowers Support Fund and payment to BGF of funds guaranteed from gathered deposits in the Spóldzielczy Bank Rzemiosła i Rolnictwa w Wołominie.1This resulted in decline in the effectiveness of C/I cost management ratio and amounted 56.6% compared to 47.1% at the end of 2014 C/I ratio adjusted for one-off events related to the additional mandatory burdens amounted to 52.1%

3. net impairment allowance and write-downs, which improved by PLN 422.8 million than achieved in 2014, mainly due to lower impairment allowances on corporate loans in connection with the improvement of the quality of new loans compared to the older generation.

The structure of the statement of financial position of the PKO Bank Polski SA Group, characterised by strong deposit base and a safe level of equity, maintaining a high result of business activities through stable organic growth and acquisitions as a next stage of the Bank’s development. The loan to deposit ratio (amounts due to customers) as at the end of 2015 amounted to 97.3% (the ratio of loans to stable sources of funding2 amounted to 85.0%), which proves the good condition of liquidity of the PKO Bank Polski SA Group.

As a result of actions taken in 2015 the PKO Bank Polski SA Group:

  • increased total assets by more than PLN 18 billion, including portfolio of amounts due from customers by almost PLN 11 billion,
  • maintained a high share of loans and deposits market on the level of 17.8% and 17.9%, respectively,
  • was the first on the market with 24.9% share in sales of mortgage loans to individuals3,
  • in loans for small and medium sized enterprises was the largest lender providing de minimis credit guarantees with 24.7% of market share4,
  • improved the quality of the loan portfolio, measured by a ratio of impaired loans and cost risk ratio,
  • expanded its insurance and investment products offer to customers,
  • increased the number of clients by 88 thousand, mainly in a retail clients segment and clients using mobile banking IKO, which at the end of 2015 amounted to above 430 thousand,
  • strengthened the capital position through action to increase the level of capital base and optimized risk weighted assets, which resulted in an increase in the total capital ratio of 1.6 p.p. annualized to 14.6%.

1. Pursuant to the Resolution of the Management Board of the Bank Guarantee Fund (BGF) No. 87/DGD/2015 of 26 November 2015, banks were obliged to pay a fee within the fund of protection of guaranteed funds (FPOGF) to cover the payments of guaranteed funds to depositors of Spółdzielczy Bank Rzemiosła I Rolnictwa w Wołominie  in connection with its bankruptcy.

2.  Stable sources of financing include amounts due to customers (including funds from the issue of Eurobonds) and external financing in the form of: subordinated liabilities, issue of own debt securities and amounts due to financial institutions.

3. Data of Association of Polish Banks

4. According to the data provided by the Center for Sureties and Guarantees of Bank Gospodarstwa Krajowego as at 31 December 2015