Financial situation

The main items of the statement of financial position

The total assets of the PKO Bank Polski SA Group as at the end of 2017 amounted to PLN 296.9 billion, which represents an increase of 4.0% y/y.

The increase in the Group’s assets was mainly due to an increased volume of loans and advances to customers of PLN 5.0 billion y/y, cash and balances with the Central Bank of PLN 4.5 billion y/y and securities of PLN 2.7 billion y/y.

The increase in the total assets was mainly financed with an increase in amounts due to customers of PLN 13.7 billion y/y and an increase in liabilities in respect of securities issued of PLN 9.4 billion y/y.

Structure of assets (in PLN billion)

Structure of equity and liabilities (in PLN billion)

Loans and advances to customers

As at the end of 2017, the value of the portfolio of loans and advances to customers of the Bank’s Group was PLN 205.7 billion and it increased in annual terms by PLN 5.0 billion.

Net loans and advances to customers by type (in PLN billion)

Net loans and advances to customers by maturity 

*including transactions with a repurchase clause, debt securities and finance lease receivables

Housing loans are the main item in the structure of net loan portfolio by type (51.6% of the portfolio as at the end of 2017) and their volume remained on a stable level during the year. The increase in the portfolio of PLN housing loans was nearly fully offset by a decrease in the volume of the portfolio of foreign currency housing loans, which remained under a significant influence of the exchange rate effect. In 2017, the most profitable consumer loans increased by PLN 1.4 billion and business loans by PLN 3.6 billion.

Long-term loans played a dominant role in the maturity structure of loans and advances to customers (78.0% of the portfolio), the volume of which increased by 1 p.p. y/y compared with 2016, whereas short-term loans recorded a negative dynamics of -1 p.p. and their share in the structure amounted to 22%.

Securities 

As at the end of 2017, the securities portfolio of the PKO Bank Polski SA Group amounted to PLN 54 billion and it went up by nearly PLN 3 billion compared with the end of 2016.

Securities portfolio (in PLN billion) 

Debt securities issued by the State Treasury dominated in the structure of the portfolio by type, and they went up by over PLN 8 billion in 2017, at the expense of NBP bills (down by PLN 4.9 billion y/y).

Amounts due to customers

Amounts due to customers constitute the main source of financing the assets. Their balance as at the end of 2017 amounted to PLN 218.8 billion and it went up since the start of the year by PLN 13.8 billion. Amounts due to individuals are the main item in the structure of amounts due to customers by type (69.1% of the portfolio as at the end of 2017), which is accompanied by an increase in amounts due to corporate entities and amounts due to state budget entities.

The maturity structure of amounts due to customers changed in 2017. The balance of amounts due to customers maturing up to 1 month increased by PLN 22.7 billion and represented 72% of all amounts due to customers as at the end of 2017. In the remaining items of the maturity analysis there was a drop related to the migration of cash from term deposits to current deposits and to investment fund companies.

Amounts due to customers by type (in PLN billion)

Amounts due to customers by maturity

External financing

The PKO Bank Polski SA Group is an active participant of the market of debt security issues, both local and international. These actions are intended to diversify the sources of financing of operations and to adapt them to regulatory requirements.

External financing (in PLN billion)

As at the end of 2017, there was a change in the structure of financing. There was a considerable decrease in the share of loans received from monetary financial institutions. These loans amounted to PLN 2.8 billion as at 31 December 2017 and went down by 84.1% y/y as a result of a considerably earlier repayment of the credit line from Nordea Bank AB (publ). It is an element of the transaction under which PKO Bank Polski SA acquired the assets of Nordea Group (the loan was obtained for the financing of the acquired portfolio of mortgage loans).

As at the end of 2017, issues of securities where the main item of the said sources of financing, and they went up by PLN 9.4 billion, i.e. by 65.1% compared with the prior year.

The decrease in the level of long-term sources of financing is mainly a result of:

  • a considerable repayment of the credit line from Nordea Bank AB;
  • utilizing the call option in respect of the subordinated loan of CHF 224 million;

accompanied by an increase in:

  • issue of own Eurobonds of PKO Bank Polski SA as part of the EMTN programme launched in April 2017, of EUR 750 million and CHF 400 million;
  • issue of debentures and short-term bonds by PKO Bank Hipoteczny SA, the balance of which as at the end of 2017 increased by PLN 5.6 billion and PLN 1.1 billion respectively.

The level of the external financing was also affected by ongoing repayments of instalments of other loans and the exchange rate effect.

Detailed information on the issues carried out by the PKO Bank Polski SA Group is provided in Note 35 to the Consolidated financial statements of the PKO Bank Polski SA Group for the year ended 31 December 2017.

Information on business segments and geographical areas

Segment reporting

The PKO Bank Polski SA Group conducts business activities within segments offering specific products and services addressed to specific groups of customers. The manner in which the business segments are divided ensures consistency with the sales management model and offers customers a comprehensive product mix comprising both traditional banking products and more complex investment products, as well as services provided by the PKO Bank Polski SA Group entities. The segment note presented below is included in the internal reporting system, i.e. information presented to the Management Board of PKO Bank Polski SA, used to assess the achieved results and allocate resources. The segment report presented below reflects the internal organizational structure of the PKO Bank Polski SA Group.

The PKO Bank Polski SA Group comprises three basic segments: retail, corporate and investment, and transfer & other activities centre:

1. The retail segment offers a full range of services to individuals as part of retail, private and mortgage banking. It also comprises transactions concluded with legal persons, i.e. small- and medium-sized enterprises. The products and services offered to the customers in this segment comprise: current and savings accounts, term deposits, private banking services, combined investment and insurance products, credit and debit cards, electronic banking services. With regard to financing, this segment offers consumer loans, mortgage loans, including those offered by PKO Bank Hipoteczny SA, as well as business loans for small- and medium-sized enterprises, developers, cooperatives and property managers, and leases and factoring offered by the PKO Leasing SA Group. In addition, the results of the retail segment comprise the results of the following companies: PKO TFI SA, PKO BP Bankowy PTE SA, PKO Życie Towarzystwo Ubezpieczeń SA, PKO Towarzystwo Ubezpieczeń SA, PKO BP Finat Sp. z o.o. and ZenCard Sp. z o.o.

2. The corporate and investment segment includes transactions concluded with large corporate clients and financial institutions. This segment offers the following products and services: maintaining current accounts and term deposits, safekeeping of securities, currency products and derivatives, business loans, leasing and factoring offered by the PKO Leasing SA Group. In this segment, PKO Bank Polski SA also concludes, on its own or as part of syndicates with other banks, agreements for the financing of large projects in the form of loans and issues of non-treasury securities. Moreover, the segment comprises own operations, i.e. investing activities, brokerage activities, interbank transactions, transactions in derivatives and debt securities. The results of the corporate and investment segments also comprise the results of the companies operating in Ukraine, mainly KREDOBANK SA and the companies which conduct real estate development and real estate management activities.

3. The transfer and other activities centre comprises the result on internal settlements related to funds transfer pricing, the result on long-term sources of financing and the result on positions classified for hedge accounting, as well as the results not allocated to any other segment. Internal funds transfer is based on arm’s length transfer pricing.  Transactions between the operating segments are conducted on an arm’s length basis. Long-term external financing includes issuing securities, including covered bonds, subordinated liabilities and loans received from financial institutions.  As part of this segment, the results of PKO Finance AB are presented.

The PKO BP SA Group usually accounts for transactions between the segments as if they were transactions between unrelated entities – using internal settlements rates. Transactions between the segments are conducted on an arm’s length basis.

Accounting policies applied in the segment report are consistent with the accounting policies described in Note 3 to these financial statements. 

Disclosed assets and liabilities are operating assets and liabilities used by the segment in its operating activities. The values of assets, liabilities, income and expenses of the particular segments are based on internal management information. Assets and liabilities as well as income and costs related to these assets and liabilities are assigned to particular segments.

The income tax expense in respect of the presentation of the financial result, and deferred income tax assets, current income tax receivables, current income tax liabilities and deferred income tax provision in respect of the presentation of the statement of financial position were recognized at Group level.

The following tables present data on revenues and results of individual operating segments of the PKO Bank Polski SA Group for the 12-month period ended 31 December 2017 and 31 December 2016, as well as assets and liabilities as at 31 December 2017 and as at 31 December 2016.

FOR THE YEAR ENDED
31 DECEMBER 2017
Continuing operations
Retail segmentCorporate and
investment segment
Transfer
centreand other
Total activity of the
PKO Bank Polski SA Group
     
Net interest income6 9751 4032288 606
Net fee and commission income2 373602(6)2 969
Other net income44944891988
Gains/(losses) on financial transaction546354
Net foreign exchange gains/(losses)21319742452
Dividend income-12-12
Net other operating income and expense20521946470
Income/(expenses) relating to internal customers26(26)--
Net impairment allowances and provisions(1 085)(535)-(1 620)
Administrative expenses, of which:(4 767)(881)(136)(5 784)
Amortization and depreciation(727)(117)-(844)
Tax on certain financial institutions(710)(251)29(932)
Shares in profits (losses) of associates and jointly controlled entities---22
Segment profit/(loss) before tax3 2357862064 249
Income tax expense (tax burden)---(1 140)
Profit (loss) attributable to non-controlling shareholders---5
Net profit attributable to the equity holders of the parent company 3 2357862063 104

AS AT 31 DECEMBER 2017Continuing operations
Retail segmentCorporate and
investment segment
Transfer centre
and other
Total activity of the
PKO Bank Polski SA Group
Assets161 380128 1515 612295 143
Unallocated assets---1 769
Total assets161 380128 1515 612296 912
Liabilities172 24059 18128 611260 032
Unallocated liabilities---624
Total liabilities172 24059 18128 611260 656

FOR THE YEAR ENDED 31 December 2016Continuing operations
 Retail segmentCorporate and
investment segment
Transfer centre
and other
Total activity of the
PKO Bank Polski SA Group
     
Net interest income6 5851 203(33)7 755
Net fee and commission income2 141555(3)2 693
Other net income3575244611 342
Gains/(losses) on financial transaction10102398510
Net foreign exchange gains/(losses)26617562503
Dividend income-10-10
Net other operating income and expenses552631319
Income/(expenses) relating to internal customers26(26)--
Net impairment allowances and provisions(1 088)(535)-(1 623)
Administrative expenses, of which:(4 685)(905)-(5 590)
Amortization and depreciation(706)(95)-(801)
Tax on certain financial institutions(606)(228)5(829)
Shares in profits (losses) of associates and jointly controlled entities---35
Segment profit/(loss) before tax2 7046144303 783
Income tax expense (tax burden)---(907)
Profit (loss) attributable to non-controlling shareholders---2
Net profit attributable to the equity holders of the parent company 2 7046144302 874

AS AT 31 DECEMBER 2016Continuing operations
 Retail segmentCorporate and
investment segment
Transfer centre
and other
Total activity of the
PKO Bank Polski SA Group
     
Assets157 417122 2964 071283 784
Unallocated assets---1 789
Total assets157 417122 2964 071285 573
Liabilities168 47648 89935 293252 668
Unallocated liabilities---336
Total liabilities168 47648 89935 293253 004

Information on geographical areas

Additionally, the PKO Bank Polski SA Group divides its operations into geographical areas. The Group conducts activities in the Republic of Poland and in Ukraine through the KREDOBANK SA Group, ‘‘Inter-Risk Ukraina’’ Sp. z o.o. and Finansowa Kompania ‘‘Prywatne Inwestycje’’ Sp. z o.o., in Sweden through subsidiaries: PKO Finance AB and PKO Leasing Sverige AB, in Ireland through the subsidiary: ROOF Poland Leasing 2014 DAC, as well as through a corporate branch of PKO Bank Polski SA (PKO Bank Polski Niederlassung Deutschland) in the Federal Republic of Germany and through a corporate branch in the Czech Republic. For presentation purposes, the results of companies operating in Sweden and the results of the branches operating in Germany and the Czech Republic, which from the point of view of the scale of operations of the PKO Bank Polski SA Group are not significant, are included in the segment of Poland.

ZA OKRES ZAKOŃCZONY 31 GRUDNIA 2017 ROKUPolskaUkrainaRazem
Wynik z tytułu odsetek8 4531538 606
Wynik z tytułu prowizji i opłat2 915542 969
Wynik pozostały97513988
Ogólne koszty administracyjne(5 660)(124)(5 784)
Wynik z tytułu odpisów aktualizujących z tytułu utraty wartości i rezerw(1 595)(25)(1 620)
Podatek od niektórych instytucji finansowych(932)-(932)
Udział w zyskach (stratach) jednostek stowarzyszonych i wspólnych przedsięwzięciach--22
Zysk brutto4 156714 249
Podatek dochodowy (obciążenie podatkowe)--(1 140)
Zyski i straty udziałowców niesprawujących kontroli--5
Zysk netto przypadający na akcjonariuszy jednostki dominującej4 156713 104

31 GRUDNIA 2017 ROKUPolskaUkrainaRazem
Aktywa, w tym:295 1331 779296 912
niefinansowe aktywa trwałe6 249946 343
aktywa z tytułu odroczonego podatku oraz należność z tytułu bieżącego podatku dochodowego1 76451 769
Zobowiązania259 0481 608260 656

ZA OKRES ZAKOŃCZONY 31 GRUDNIA 2016 ROKUPolskaUkrainaRazem
Wynik z tytułu odsetek7 6181377 755
Wynik z tytułu prowizji i opłat2 649442 693
Wynik pozostały1 34021 342
Ogólne koszty administracyjne(5 481)(109)(5 590)
Wynik z tytułu odpisów aktualizujących z tytułu utraty wartości i rezerw(1 589)(34)(1 623)
Podatek od niektórych instytucji finansowych(829)-(829)
Udział w zyskach (stratach) jednostek stowarzyszonych i wspólnych przedsięwzięciach--35
Zysk brutto3 708403 783
Podatek dochodowy--(907)
Zyski i straty udziałowców niesprawujących kontroli--2
Zysk netto przypadający na akcjonariuszy jednostki dominującej3 708402 874

31 GRUDNIA 2016 ROKUPolskaUkrainaRazem
Aktywa, w tym:283 8611 712285 573
niefinansowe aktywa trwałe6 685836 768
aktywa z tytułu odroczonego podatku oraz należność z tytułu bieżącego podatku dochodowego1 78091 789
Zobowiązania251 4441 560253 004

  

Consolidated statement of financial position

 Note31.12.201731.12.2016
ASSETS   
Cash and cash balances with the Central Bank1917 81013 325
Amounts due from banks205 2335 345
Financial assets held for trading, excluding derivative financial instruments21431326
Derivative financial instruments222 5982 901
Financial instruments designated at fair value through profit or loss upon initial recognition248 15713 937
Loans and advances to customers25205 628200 606
Available-for-sale investment securities2643 67536 676
Investment securities held to maturity271 812466
Investments in associates and joint ventures41393386
Non-current assets held for sale2813814
Inventories29186260
Intangible assets303 2423 422
Property, plant and equipment302 9153 086
Current income tax receivable 210
Deferred income tax asset171 7671 779
Other assets312 9253 034
    
TOTAL ASSETS 296 912285 573
    
LIABILITIES AND EQUITY   
Liabilities   
Amounts due to the Central Bank 64
Amounts due to banks324 55819 208
Derivative financial instruments222 7404 198
Amounts due to customers33218 800205 066
Liabilities in respect of insurance activities342 9992 944
Debt securities in issue3523 93214 493
Subordinated liabilities361 7202 539
Other liabilities375 0623 987
Current income tax liabilities 588305
Deferred income tax provision173631
Provisions38215229
    
TOTAL LIABILITIES 260 656253 004
    
Equity   
Share capital391 2501 250
Other capital3932 23628 701
Foreign exchange differences on translation of foreign branches39(257)(221)
Retained earnings39(66)(19)
Net profit or loss for the year393 1042 874
Capital and reserves attributable to equity holders of the parent company3936 26732 585
Non-controlling interests39(11)(16)
    
TOTAL EQUITY 36 25632 569
TOTAL LIABILITIES AND EQUITY 296 912285 573
    
Capital adequacy ratio7117,37%15,81%
Book value (in PLN million) 36 25632 569
Number of shares (in million) 1 2501 250
Book value per share (in PLN) 29,0026,05
Diluted number of shares (in million) 1 2501 250
Diluted book value per share (in PLN) 29,0026,05

Statement of changes in consolidated equity

FOR THE YEAR ENDED 31 DECEMBER 2017Share
capital
Other capitalExchange
differences on
translating
foreign
operations
Retained
earnings
Net profit
or loss
for the year

Capital and
reserves
attributable to
equity holders
of the parent
company

Non-controlling
interests
Total
equity
  ReservesOther comprehensive incomeTotal other
capital and
reserves
      
  Supplementary
capital
General
banking
risk fund
Other
reserves
Share in
other
comprehensive income of
associates and
joint ventures
Available-for
sale
financial
assets
Cash
flow
hedges
Actuarial
gains
and
losses
       
                
                
As at 1 January 20171 25024 4911 0703 607(1)(347)(109)(10)28 701(221)(19)2 87432 585(16)32 569
Transfer from retained earnings----------2 874(2 874)---
Total comprehensive income, of which: ----1619(7)1614(36)-3 1043 68253 687
Net profit-----------3 1043 10453 109
Other comprehensive income----1619(7)1614(36)--578-578
Transfer from retained earnings to reserves-2 883-38----2 921-(2 921)----
As at 31 December 20171 25027 3741 0703 645-272(116)(9)32 236(257)(66)3 10436 267(11)36 256

FOR THE YEAR ENDED 31 DECEMBER 2016Share capitalOther capitalExchange differences
on translating
foreign
operations
Retained
earnings
Net profit
or loss
for the
year
Capital and
reserves
attributable
to equity
holders of
the parent
company
Non-controlling
interests
Total
equity
 ReservesOther comprehensive incomeTotal other
capital and
reserves
      
  Supplementary
capital
General
banking
risk fund
Other
reserves
Share in other
comprehensive
income of
associates and
joint ventures
Available-for
sale
financial
assets
Cash
flow
hedges
Actuarial
gains and
losses
       
                
                
As at 1 January 20161 25020 7111 0703 536-171(58)(12)25 418(217)1 2222 61030 283(18)30 265
Transfer from retained earnings----------2 610(2 610)---
Total comprehensive income, of which: ----(1)(518)(51)2(568)(4)-2 8742 30222 304
Net profit-----------2 8742 87422 876
Other comprehensive income----(1)(518)(51)2(568)(4)--(572)-(572)
Transfer from retained earnings to reserves-3 780-71----3 851-(3 851)----
As at 31 December 20161 25024 4911 0703 607(1)(347)(109)(10)28 701(221)(19)2 87432 585(16)32 569
  

Consolidated statement of cash flows

 Note20172016
    
Cash flows from operating activities   
Profit before income tax 4 2493 783
Adjustments: 13 5003 313
Amortization and depreciation 844801
(Gains)/losses on investing activities47(117)(186)
Interest and dividends47(465)(236)
Change in:   
amounts due from banks47700325
financial instruments designated at fair value through profit
or loss upon initial recognition and financial assets held for trading
 5 6751 674
derivative financial instruments (1 155)1 020
loans and advances to customers47(4 844)(3 822)
other assets, inventories and non-current assets held for sale4745(1 311)
amounts due to banks47(1 202)(3 042)
amounts due to customers4715 3378 592
debt securities in issue47(1 119)443
provisions and impairment allowances47(172)(291)
other liabilities and liabilities in respect of insurance activities471 1241 101
Income tax paid (972)(918)
Other adjustments47(179)(837)
Net cash from/used in operating activities  17 7497 096
    
Cash flows from investing activities   
Inflows from investing activities 96 66350 580
Proceeds from sale and interest on investment securities 96 41550 294
Proceeds from sale of subsidiaries -134
Proceeds from sale of intangible assets, property,
plant and equipment and assets held for sale
 224131
Other inflows from investing activities (dividends) 2421
Outflows from investing activities (103 557)(59 536)
Purchase of a subsidiary, net of cash acquired (47)(571)
Increase in equity of an associate (23)(1)
Purchase of investment securities (102 862)(58 208)
Purchase of intangible assets and property, plant and equipment (625)(756)
Net cash from/used in investing activities  (6 894)(8 956)
    
Cash flows from financing activities   
Proceeds from debt securities in issue3517 8367 807
Proceeds from issue of subordinated bonds361 700-
Redemption of debt securities35(7 278)(4 747)
Repayment of a subordinated loan36(880)-
Repayment of liabilities arising from subordinated bonds36(1 656)-
Taking up loans and advances 311460
Repayment of loans and advances32;33(15 360)(485)
Repayment of interest on long-term borrowings (494)(473)
Net cash from financing activities  (5 821)2 562
Total net cash flows 5 034702
of which foreign exchange differences on cash and cash equivalents (366)135
Cash equivalents at the beginning of reporting period 17 96617 264
Cash equivalents at the end of reporting period4723 00017 966