PKO Bank Polski Group: Great business result against the rising regulatory costs

· The net profit of the PKO Bank Polski Group in the first half of 2022 exceeded PLN 1.8 billion, and the profitability measured by the return on equity (ROE) amounted to 11.5%.

· The bank increased its core business income by over 36%. The total net interest and commission income in the first half of 2022 was PLN 9,267 million.

· The Group systematically increased the scale of its operations. Its assets increased to PLN 429 billion, which means a change compared to the second quarter of 2021 by almost PLN 37 billion. The cost-to-income ratio (C/I) was 42.1 percent.

· The bank's results in the half of 2022 were significantly influenced by the fee for the aid fund of the Commercial Bank Protection System (IPS) in the amount of PLN 872 million.

· In the second quarter of 2022, the Bank continued its digital transformation by introducing new functions in the IKO mobile app and dynamically increasing the share of remote channels and bots in customer service. The number of active mobile apps at the end of June 2022 was nearly 6.8 million.

· The PKO Bank Polski Group also continued multidimensional aid activities addressed both to refugees and employees of the Group's companies operating in Ukraine.

- In the first half of 2022, the PKO Bank Polski Group operated in demanding surroundings and in the environment of increasing regulatory costs. In such conditions, we managed to generate a net result of PLN 1.8 billion. The second quarter was a period of further growth in the scale of business and improvement in the result on banking activity. The digitization of services, and thus the high level of digital advancement, translated into an increase in the share of remote channels in sales - emphasized Paweł Gruza, Vice President of PKO Bank Polski, managing the work of the Management Board. – Increasing of the involvement of our clients in remote channels, and thus offering them more and more attractive and user-friendly solutions is our priority. Putting the customer first, we will carefully observe the economic environment and react to any challenges on an ongoing basis - Paweł Gruza added.

The net result of the PKO Bank Polski Capital Group in the first half of 2022 exceeded PLN 1.8 billion. The bank increased its core business income by over 36 percent, and the interest income by 45 percent. The total net interest and commission income in the first half of 2022 amounted to PLN 9,267 million. On the other hand, the bank recorded an increase in operating costs by PLN 1.13 billion. This was due to the increase in regulatory costs and the inclusion of a fee for the protection system of commercial banks in the amount of PLN 872 million.

The bank's results are supported by strict cost discipline and an increase in the scale of the business. The quarterly reported cost-to-income ratio (C/I) in the second quarter of 2022 was 42.1% after taking into account the fee for the protection system of commercial banks. C/I without this cost would be 36.4 percent. The Group's assets in the first half of 2022 reached the value of PLN 429 billion, customer savings increased at a double-digit pace to PLN 326 billion, and the financing provided to customers approached PLN 250 billion. In the second quarter, the increase in the value of financing provided to corporate clients also significantly accelerated to the level of 16.8% y/y, and the number of accounts for individual customers, which missed the level of 8, 8 mln.

The quality of the loan portfolio continued to improve gradually with the NPL ratio of 3.86%. The quarterly cost of risk in the first half of 2022 was 0.58%. The bank also maintained a strong capital and liquidity position. The total capital ratio of the bank's group after the second quarter of 2022 was 17.31% and was above the regulatory minimums.

PKO Bank Polski, operating in an environment of high inflation and high interest rates, met the expectations of its clients. It prepared and successively updated the deposit offer, introducing new products and increasing the interest rate on the existing ones. As part of the offer for individual customers, in the first half of 2022, it introduced for example 3-month mobile deposit available in the IKO app with an interest rate of 5.75 percent and the limit of 50,000 PLN, and in July a progressive deposit for 18 months, the interest rate of which changes every 6 months and amounts to 3, 6 and 9 percent in subsequent saving periods. The changes in the deposit offer also concerned products intended for customers from the corporate and enterprise segment.

In the first half of 2022, the PKO Bank Polski Group was also consistently developing modern services and products, including those offered in remote channels. The number of active IKO mobile applications is systematically growing and at the end of June 2022 it amounted to over 6.8 million, which means almost 20 percent increase y/y. In the second quarter of 2022, a record number of transactions carried out in the IKO application was also recorded. It amounted to 163 million, which means an increase by 47% y/y.

In the first half of 2022, PKO Bank Polski made it possible for customers to verify through a mobile app the identity of a bank employee, who calls the customer. Thanks to this innovative solution, the security of customers has significantly increased. They can make sure that they are actually talking to a bank employee and are not victims of a fraud. Over 40,000 of customers also used the possibility of summing up and analysing the expenses made with the card at a specific seller at a specific time, made available by the bank, using the IKO voice assistant. The bank and its subsidiaries also supported Poland's energy transformation by supplementing the green product offer and co-financing sustainable projects. The bank's actions were reflected in the improvement of ESG ratings.

The bank increases the share of remote channels and bots in customer service and sales. In the first half of 2022, the share of digital sales for consumer loans amounted to 80%. Customers also made over 9.3 million transactions using the contactless BLIK in the IKO app. The importance of digitizing the process of talking to customers is also growing. The number of calls carried out by robots exceeded 12 million. The robots support the incoming and outgoing hotline and the voice assistant in IKO, and 100 percent. Inbound traffic on the bank's hotline is first handled by a bot that precisely directs the client to the appropriate consultant. Progressive robotization is one of the pillars of the digital transformation of PKO Bank Polski. The bank has already roboticized 198 business processes, with the total number of completed operations exceeding 137 million.

The liquidity situation of Kredobank, despite the ongoing conflict in Ukraine, remains at a stable and safe level. The company did not notice a decrease in liquidity measures and no significant outflow of deposits. In the network of 73 units, 17 units were located in the regions most affected by hostilities. In June 2022, Kredobank took the first place in the reliability of bank deposits by the Ukrainian Standard-Ranking. Moreover, Kredobank has been classified by the National Bank of Ukraine as one of the systemically important banks of Ukraine.

In the second quarter of 2022, PKO Bank Polski continued offering settlements for individual clients who have active mortgage loans in CHF. The total number of settlements concluded by June 30, 2022 was 15,461, of which 15,151 were concluded in mediation proceedings and 310 in the course of court proceedings. Additionally, in order to limit the interest rate risk, from the beginning of the settlement program, the bank offers borrowers the option of paying interest using a fixed interest rate for 5 years. This proposal is becoming more and more popular, and more than 75% of customers who continue to pay off the loan after signing the settlement agreement have already chosen it in the settlement process.

From the very first moments of Russia's aggression against Ukraine the PKO Bank Polski Group joined

the aid activities by providing multidimensional support to the refugees. The bank offered Ukrainian citizens a package of business amenities: it simplified the process of opening a bank account, and by June 30, 2022, nearly 266,000 accounts in a special offer were opened for them. Ukrainian citizens could also count on a quick and free issue of a temporary card to the account, as well as no fee, incl. for account maintenance and foreign transfer orders to banks in Ukraine. PKO Bank Polski, is the only bank in Poland, which enables the exchange of Ukrainian hryvna into Polish zloty at the rate set by the National Bank of Ukraine. Until June 30 over 86 thousand of hryvnia exchange transactions, with no fees and spread were made. The service is available in 100 bank branches.

In addition, PKO Bank Polski and its Foundation were the first in Poland to launch a general fundraiser for war refugees. By June 30, over PLN 11.9 million had been transferred to the account of the Bank Foundation, of which over PLN 7.4 million had already been transferred to organizations helping refugees and those in need directly in Ukraine.

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