Perfect results in the banking sector for 3rd quarter of 2010 owing to two-digit increases

The situation of the banking sector in Poland improved in the 3rd quarter of 2010, but it continued to be under the negative influence of high credit risk. The situation in the deposit and credit market was shaped by a recovery in the market of housing credit, limited activity in granting consumer credit and credit for companies as well as a higher accrual of private persons’ deposits.

– In that period, PKO Bank Polski SA continued activities aimed at maintaining a strong deposit and credit base. They are the foundation of stable business development, while priorities are maintained as far as efficient activity and effective cost control are concerned - says Zbigniew Jagiełło, President of the Management Board of PKO Bank Polski.

In the 3rd quarter of 2010, the Capital Group of PKO Bank Polski, holding the highest assets in the Polish banking sector, achieved perfect financial results and an outstanding CIR, while maintaining a conservative approach to risk. At the same time, its strong market position and high profitability of capital and assets were preserved. In comparison to the corresponding period of the previous year, there was an increase in the capital adequacy ratio, thanks to an increase in the capital base and increase in the total capital requirement.

In that period, the PKO Group of Bank Polski achieved a net profit of  PLN 2.349 m, considerably higher than the one a year ago (increase by 31.3% y/y). Thanks to increasing the interest and fee results by 31.7% y/y and 24.1% y/y respectively, a business result of PLN 7.545 m (rise of 15.4% y/y) was achieved.

There was a significant improvement in the costs income ratio. The C/I ratio reached 41.0% and was by 6.5 pp better than a year ago. In the 3^rd quarter of 2010, cost restructuring was continued. As a result, overhead administrative costs were reduced (decrease of 0.4% y/y), mainly due to the reduction of tangible expenditure and other expenditure by 8.1% y/y, while increasing the scale of the Group’s activity.

At the end of September 2010, the assets of the PKO Group of Bank Polski were the highest in the sector and amounted to PLN 166.9bn (increase by 13.8% y/y). The net credits/deposits ratio in that period was 96.3%, which means an increase by 1.4 pp in comparison to the state from a year before as a result of a higher increase in net credits than in deposits (by 13.3% and 11.7% y/y respectively).

On 12 October 2010, PKO Bank Polski, through its subsidiary PKO Finance AB, issued 5-year eurobonds, with the value of EUR 800 m. It was the first such issue in history, and its success proves that the Bank is capable of using capital markets effectively, also in the segment of debt financing, which allows diversifying sources of financing the Bank’s activity.

After the 3^rd quarter of 2010, high net ROE and ROA ratios were maintained, with the former at the level of 14.1%, and the latter 1.8%. The result of ROE was achieved by retaining profit for 2009 in shareholders’ equity as a result of the decision made by the General Meeting of Shareholders on a conditional payment of the dividend.

The capital adequacy ratio in that period was 12.8% for the Group and, in comparison to the level at the end of the 3^rd quarter of 2009, it was higher by 1.9 pp.

The net profit of PKO Bank Polski obtained in the 3^rd quarter of 2010 was by PLN 617 m higher than in the corresponding period of 2009. The business result amounted to PLN 7.276 m and was higher by PLN 1.106 m, i.e. by 17.9% in comparison to the corresponding period of the previous year, which was mainly achieved due to interest amounting to PLN 4.695 m (increase of PLN 1.220 m, i.e. 35.1% y/y) and the result from commission and fees amounting to PLN 2.178 m (increase of PLN 480 m, i.e. 28.3% y/y).

At the same time, thanks to restructuring activities commenced in 2009 and budget discipline, overhead administrative costs were reduced (decrease of 1% y/y), mainly due to a significant decrease in tangible and other expenditure (decrease of 9.6% y/y). This was achieved by lower expenditure, mainly for promotion and advertisement, computer technology, telecommunications as well as postal and courier services.

Owing to the simultaneous increase in income of 17.9%, the C/I ratio fell by 7.5 pp y/y to 39.0% for the Bank.

The net ROE ratio in the 3^rd quarter of 2010 amounted to 15.2%, and ROA 2.0%. The capital adequacy ratio in the same period was 12.3% and, in comparison to the level at the end of the 3^rd quarter of 2009, it increased by 1.9 pp.

The total assets of PKO Bank Polski on 30 September 2010 was PLN 164.2bn and was by 14.4% higher than at the end of September 2009.

In the 3^rd quarter of 2010, there was an increase in the credit portfolio (according to the Bank’s operational data) by PLN 16.2bn y/y thanks to the activation of sales. The volume of bank mortgage credits, representing 43% of the whole credit portfolio, increased by 21% y/y. The second, in terms of its size, portfolio of corporate credits (23% share in the portfolio) increased by 7% y/y. Retail and private banking credit, representing 18% of all credit, increased by 12% y/y. On the other hand, MSP credit volumes increased by 22% in annual terms.

At the same time, client deposits (according to the Bank’s operational data) were by PLN 13.7bn higher than a year before. The volume of retail and private banking deposits, representing 68% of the deposit base, increased by 9% y/y. There was an increase in the volume of corporate deposits by 24% y/y and deposits of housing market clients by 22% y/y. MSP deposits were by 0.4% higher than the year before.

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PKO Bank Polski is the leader of the Polish banking sector in terms of financial results. After the 3^rd quarter of 2010, it achieved a net profit of zł 2.5bn. With its 28-percent share in the market, the Bank is also a leader in selling credit, offering preferential mortgages subsidized by the state in addition to traditional commercial mortgages. PKO Bank Polski has often been awarded in many prestigious rankings. According to the financial advisors of Open Finance, it held 1^st place in the quality evaluation of credit in zlotys and in euros. Its offer of mortgage credit, in terms of complying to clients’ unusual expectations, was regarded the best in the market by Comperia.pl, a financial comparison engine. The Bank was also appreciated for flexibility of its offer of credit granted to finance various goals and in the category of the best saving and investment bank. The Bank is alsoa winner of  the ”Golden Banker” for the best mortgage credit in the market, as well as the winner of the competition “Entrepreneur Friendly Bank” and a holder of the certificate “Client Friendly Company”. According to analyses of the research company MillwardBrown SMG/KRC, PKO Bank Polski is the most trusted among the researched financial institutions– ¾ of those surveyed trust its financial stability. PKO Bank Polski is also the strongest bank in the country in terms of image, which is confirmed by its leading position in the Top Marka (Top Brand) ranking according to “Press” magazine. It is also the most expensive brand in the Polish banking market– the specialists from “The Banker” magazine assessed its value at one billion dollars.