The consolidated net profit of the PKO Bank Polski SA Group generated in 2015 amounted to PLN 2 609,9 million which was PLN 644.6 (-19.8%) million lower than in 2014.
After eliminating non-recurring events:
- fees to the Bank Guarantee Fund (BGF) under the fund for the protection of guaranteed funds (FOŚG) to cover the payments of guaranteed funds to depositors of Spółdzielczy Bank Rzemiosła i Rolnictwa from Wołomin in connection with its bankruptcy in the amount of PLN 337.93 million.
- fees for Borrowers Support Fund in the amount of PLN 142 million, comparable net profit amounted to PLN 2 998.3 million and was 7.9% lower than in 2014.
In the PKO Bank Polski SA Group’s income statement for the year 2015, the sum of revenue positions amounted to PLN 10 665 million and was PLN 481.7 million, i.e. by 4.3% lower than in 2014, mainly due to decrease of net interest income by 6.6% y/y.
Income statement of PKO Bank Polski SA Group (in PLN million)
| 2015 | 2014 | Change (PLN million) | Change (%) | |
| Interest and similar income | 9 657.8 | 10 737.4 | (1 079.7) | -10.1% |
| Interest expense and similar charges | (2 629.2) | (3 214.5) | 585.3 | -18.2% |
| Net interest income | 7 028.6 | 7 522.9 | (494.3) | -6.6% |
| Fee and commission income | 3 598.3 | 3 901.9 | (303.6) | -7.8% |
| Fee and commission expense | (747.7) | (968.4) | 220.7 | -22.8% |
| Net fee and commission income | 2 850.6 | 2 933.5 | (82.9) | -2.8% |
| Dividend income | 10.7 | 6.5 | 4.1 | 63.7% |
| Net income from financial instruments measured at fair value | 40.6 | 75.2 | (34.6) | -46.0% |
| Income from investment securities | 87.7 | 150.1 | (62.3) | -41.5% |
| Net foreign exchange gains (losses) | 369.1 | 235.8 | 133.3 | 56.5% |
| Other net operating income and expense | 277.5 | 222.6 | 54.9 | 24.7% |
| Net impairment allowance and write-downs | (1 475.9) | (1 898.7) | 422.8 | -22.3% |
| Administrative expenses | (6 036.3) | (5 245.1) | (791.1) | 15.1% |
| Operating profit | 3 152.6 | 4 002.8 | (850.1) | -21.2% |
| Share of profit (loss) of associatesand joint ventures | 38.1 | 31.81 | 6.3 | 19.8% |
| Profit (loss) before income tax | 3 190.8 | 4 034.6 | (843.8) | -20.9% |
| Income tax expense | (589.5) | (791.7) | 202.3 | -25.5% |
| Net profit (including non-controlling shareholders) | 2 601.3 | 3 242.8 | (641.6) | -19.8% |
| Profit (loss) attributable to non-controlling shareholders | (8.3) | (11.3) | 3.0 | -26.5% |
| Net profit (loss) | 2 609.6 | 3 254.1 | (644.6) | -19.8% |
Net interest income
Obtained in 2015 net interest income amounted to PLN 7 028.6 million and was PLN 494.3 million lower than last year. Net interest income was determined by the further decline in the level of market interest rates (for WIBOR 1M and 3M was annualized respectively 0.43 p.p. and 0.34 p.p.), it was partially compensated by an increase in revenues associated with the increase in the loan portfolio and reduction of financing costs.
Interest income (PLN million)
Interest expense (PLN million)
In 2015, interest income amounted to PLN 9 657.8 million and compared with the previous year was lower by 10.1%, mainly as a result of the decrease in:
- income from loans and advances to customers by 11.3% y/y – the effect of a decline in zloty interest rates, which for WIBOR 1M and 3M was annualized respectively by 0.43 p.p. and 0.34 p.p., reduce in interest rates on consumer loans is based on a 4xLombard formula (from the end of 2013, the maximum interest on loans fell by 6 p.p. from 16% to 10%). This decrease was partially compensated by an increase in the loan portfolio,
- with the increase in income from hedging derivatives by 31.3% y/y, mainly IRS transaction in PLN.
In the same period, the interest rates expenses stood at (-)18.2% y/y, resulting from a lower average interest rates on deposits as a result of lower market interest rates and adjusting pricing of deposit products and changes in the structure of deposits (increase in the share of current deposits)
The interest margin declined by approx. 0.6 p.p. y/y to 3.0% at the end of 2015. The increase in interest-bearing assets by 7.8% y/y (mainly portfolio of loans and advances to customers), it did not translated into a corresponding increase in annualized net interest income, staying under pressure of record-low interest rates.
In 2015, the average interest rate on loans of PKO Bank Polski SA amounted to 4.2%, and the average interest rate deposits in total stood at 1.1% against, respectively 5.3% and 1.4% in 2014.
Net fee and commission income
Net fee and commission income in 2015 amounted to PLN 2 850.6 million and were lower by PLN 82.9 million than in a last year, resulting in a decline in commission income by PLN 303.6 million, while commission costs were lower by PLN 220.7 million.
Commision income structure (PLN million)
Commision costs structure (PLN million)
The level of fee income was mainly determined by:
- a decrease of card payments (-127.5 million y/y), mainly due to decrease in commissions for interchange fee, as a consequence of the mandatory reduction of the interchange fees by the payment organizations to 0.2% for debit cards and 0.3% for credit cards since early 2015 - lower commissions in were accompanied by an increase in card volume transactions,
- a decline in fee income from loan insurance (PLN -97.6 million y/y), mainly due to decrease in commissions from insurance of consumer loans, additionally there was an increase in sales of insurance products offered by the PKO Bank Polski SA Group in 2015, of which the results of the Group are presented in the category of other profit from the insurance activity,
- a decrease in the cost of acquisition services by PLN 44.6 million y/y, higher costs of 2014 were related to the acquisition of the insurance company,
- a decrease in income from operating bank accounts (PLN -23.2 million y/y),
- a decrease in income from cash operations (PLN -12.8 million y/y) in connection with the development of electronic banking,
- an increase in commission income from services for investment and pension funds (including management fees) of PLN 23.5 million y/y,
- an increase in income from loans and borrowings (PLN +33.1 million y/y) as a result of an increase in sales of loans,
- an increase in income from investment and insurance products (PLN +45.4 million y/y), as a result of enlargement of the Group by insurance company since the second quarter of 2014 and extended product range of the Group by investment and insurance products.
Other result
In 2015 the other result amounted to PLN 785.6 million and increased by 13.8% compared with the previous year. The level of residual result was mainly determined by:
- an increase in net foreign exchange gain of PLN 133.3 million,
- improvement in the result on other operating activities of PLN 54.9 million, mainly due to the increase in net distribution policies, which at the level of the Group is presented in the category as other result of insurance activities,
- the lower results achieved from investment securities and instruments measured at fair value by a total of PLN 96.9 million, determined by the situation on the Polish debt market.
Other income (PLN million)
Administrative expenses
In 2015 administrative expense amounted to PLN 6 036.3 million and increased by 15.1% compared with the previous year. After excluding the one-off events - BFG fee within the protection fund for guaranteed cash in the amount of PLN 337.93 million and is charged to the Fund for Support borrowers in the amount of 142 million PLN - General administrative expenses amounted to PLN 5 556.4 million and increased by 5.9% compared with the previous year.
The level of administrative expenses was determined mainly by changes in the PKO Bank Polski SA Group structure in 2014, of which mainly the purchase of the Nordea Group entities and by an increase in premiums and fees to the Bank Guarantee Fund of PLN 211.4 million y/y (mainly due to the increase in interest rates charges of BGF). In addition, 2015 was loaded with an additional costs related to: creating Borrowers Support Fund (PLN 1420.0 million) and payment to BGF - payment of guaranteed deposits accumulated in SK Bank (PLN 337.9 million), which caused the operating efficiency of the PKO Bank Polski SA Group, measured by the annualised C/I ratio, to shape up at the level of 56.6% (+9.5 p.p. y/y). After eliminating the effects of one-offs, the level of the indicator stood at 52.1% (+5.0 p.p. y/y).
Administrative expenses structure (PLN million)
The components of C/I PKO Bank Polski SA Group
C/I of PKO Bank Polski SA
Net impairment allowance and write-downs
Net impairment allowance and write-downs reflects the conservative approach of PKO Bank Polski SA in the recognition and measurement of credit risk. The improvement in net write-downs (-22.3% y/y) was mainly due to reduction in write-downs on the portfolio of commercial loans in connection with the improvement of the quality of new loans compared to the older generation.
Participation rates of loans with impairment and the coverage of impaired loans at the end of 2015 amounted to 6.6% (a decrease of 0.3 p.p. compared to 2014) and 63.3% (an increase of 1.4 p.p. compared to 2014), by improving the quality of corporate loans.
The cost of risk at the end of 2015 amounted to 0.7% compared to 1.0% at the end of 2014, mainly due to the improvement in net write-downs on corporate loans.
Net write-downs on receivables of the PKO Bank Polski SA Group
Cost of risk and NPL of the PKO Bank Polski SA Group