Share price of PKO Bank Polski SA at the Warsaw Stock Exchange

Price and volume of trading in  PKO Bank Polski SA shares between 31.12.2004-30.12.2015

Change of PKO Bank Polski SA share price compared to WIG 20 indices in the period 01.01.2005-30.12.2015 (31.12.2004=100%)

Strategy of PKO Bank Polski SA is focused on building long-term value for shareholders by strengthening competitive advantage, continuous efficiency improvement, investments in new technologies and increasing customer satisfaction. For the years 2012 - 2015, the Bank executed the

  • majority of the planned strategic goals in the following areas:
  • significant improvement in asset quality and a decline in risk costs,
  • an increase in market share in loans and deposits through organic growth and acquisitions,
  • maintain customer satisfaction above the average in the sector,
  • ensuring capital adequacy at a safe level,
  • strengthening liquidity measures.

Only two of the seven key strategic objectives, ie. Return on Equity (ROE) and Cost/Income ratio (C/I) was realized below planned. Nevertheless, both ROE and C/I in PKO Bank Polski SA for 2015 were significantly better than the average in the sector. Decreased value of these objectives in comparison to planned one occurred due to the following external factors:

  • decrease in interest rates in Poland to its lowest level for over 25 years, which reflected in sector and the Bank’s significant decline in margins and net interest income. PKO Bank Polski SA has the safest and most effective long-term financing structure in the form of stable retail deposits, but at the same time they cause - through the maturity dates and share of current deposits - increase the Bank's sensitivity to interest rates changes by the Polish National Bank. The effective management of this risk still is reflected in one of the highest margin levels and net interest income, which due to optimizing the balance sheet structure and the development of credit were in each quarter of 2015 uptrend.
  • fees for the Bank Guarantee Fund doubled within 3 years
  • decrease of interchange fees for card payments from 1.7% to 0.2%

Despite such significant changes in the market environment in the last three years, in the fourth quarter of 2015 PKO Bank Polski SA reached 11% consolidated Return on Equity (ROE), excluding one-off expense for the Borrowers’ Support Fund and bankruptcy of Spółdzielczy Bank Rzemiosła i Rolnictwa based in Wołomin. Throughout the period of implementation of the strategy, return on equity in this amount was above the cost of capital indicated by market analysts, and thus assured the economic benefit for shareholders. Economic profit is not reflected in the market value of PKO Bank Polski SA, visible in the decline of shares on the Warsaw Stock Exchange. Other factors to those mentioned above that affected this decrease are:

  • implementation of bank tax on the Polish market, which was included in the investors valuations, resulting in market overvaluation of listed banks on the Warsaw Stock Exchange. Valuation changes of Polish banks is a long term process, visible in case of Bank’s multipliers valuation in 2014, as the convergence of these valuations to more mature markets and lower growth rates, margins and return on equity. In the Bank's opinion this is a structural change in the Polish market.
  • The turmoil in the financial markets related to the release, contrary to earlier declarations, by the Central Bank of Switzerland (SNB) of the Swiss franc against the euro, which resulted in abrupt weakening of the zloty against the CHF in 2015. The result was a temporary dividend suspension by the Financial Supervision Commission and debate about activities to support mortgage borrowers in CHF, which, dependingon the variant, can mean significant costs for many banks, which translates to an additional discount in investor valuation. According to the Financial Supervision Authority, after reviewing and granting additional capital buffers, PKO Bank Polski SA meets the criteria for the dividend payment for 2014 years.
  • Incurring significant expenses by PKO Bank Polski SA with bankruptcy of Spółdzielczy Bank Rzemiosła i Rolnictwa based in Wołomin in the fourth quarter of 2015.

Despite the unfavourable market factors that structurally affected profitability level of the banking sector in Poland, the Bank focused on achieving constant business results for investors and adapting the business model to the new market environment to ensure a return on equity above its cost and thus increasing shareholders’ value.