The best results in the banking sector for the 1st half-year 2010

In the first half of 2010 the economic situation of the banking sector improved compared with the corresponding period last year. However, it was still affected by the negative risk factors connected with uncertainty about future economic conditions and customers’ credit risk.

“In that period we continued our efforts to maintain a strong deposit and capital base, which is the basis of the stable development of the business, while at the same time maintaining the priorities regarding effectiveness and effective restructuring of costs. The results show that the Strategy for the years 2010-2012 is being realized very consistently”, says Zbigniew Jagiello, Chairman of the Management Board of PKO Bank Polski.

In the 1st half of 2010, the PKO Bank Polski Group, having at its disposal the highest assets in the Polish banking sector, achieved the best financial results and an excellent cost-to-revenue indicator while maintaining a conservative approach to risk. At the same time a strong market position as well as high return on equity and return on assets were maintained. The solvency or capital adequacy ratio increased owing to an increase in the capital base and an increase in the whole capital requirement.

In that period the PKO Bank Polski Group made a net income of PLN 1,502 million, significantly more than a year earlier (an increase of 30.6% y/y). Owing to an increase in income from interest and fees by 33% y/y and 30 % y/y respectively, the result on business activity was PLN 4.9 billion (increase of 12% y/y).

There was a considerable improvement in the cost-to-income ratio. The C/I indicator reached 41.9% and was 6 basis points better than in the previous year. Cost restructuring was continued in the 1st half of 2010. As a result, general and administrative costs were reduced (a drop of 1.9% y/y) mainly as a result of reduction in material and other costs by 12.2% y/y, while the scale of the Group’s business grew.

As at the end of June 2010 the PKO Bank Polski Group’s assets were the largest in the sector, namely PLN 165.7 billion (increase of 16.5% y/y).

After the first half of 2010 high ROE and ROA net indicators were kept up. The first being 14.3%, the latter – 1.7%. The ROE result was affected by undistributed earnings of 2009 retained in equity in consequence of the decision by the Shareholders’ Meeting about a conditional payment of dividend.

The solvency ratio in that period was 12.98% for the Group and it was 1.77 basis points higher than at the end of the first half of 2009.

The net income of PKO Bank Polski for the first half of 2010 was PLN 323.6 million higher than in the corresponding period of 2009. The income from business operations amounted to PLN 4,724.9 million and was PLN 599.5 million higher, i.e. 14.5%, than in the same period of the previous year, which was due mainly to income from interest (growth of PLN 810 million, or 36.9% y/y) and fees and duties (increase of PLN 363.7 million, i.e. 34.2% y/y).

At the same time, owing to restructuring efforts started in 2009 and budget discipline, general and administrative costs were reduced (a drop of 2.2% y/y), mainly as a result of significant reduction in material and other costs (by 13% y/y). That was the result of smaller spending on promotion, advertising, IT, telecommunication and mail and courier services.

That, combined with a 14.5% increase in income, caused the C/I indicator to fall 6.8 basis points y/y to 39.7% for the Bank.

In the 1st half-year 2010, ROE was 15% and ROA was 1.8%. In the same period, the solvency ratio reached 12.51% and compared to the end of the first half of 2009 it grew 1.83 basis points.

As on June 30, 2010, the total assets of PKO Bank Polski amounted to PLN 162,807 million,6% more than at the end of December 2009.

In the first half-year of 2010 there was an increase in the credit portfolio of PLN 17.5 billion y/y thanks to the activation of sales action, and also due to an increase in currency rates. At the same time, customer deposits were PLN 15.1 billion more than the year before.