Record-breaking Quarter for PKO Bank Polski

In the 1st Quarter of 2011, the consolidated net profit amounted to PLN 1,838.3 M, in the same period the Bank earned PLN 1,895.2 M of net profit. On the annual basis, the consolidated profit and profit earned by the Bank increased by 22.4% and by 17.5% respectively.

– The last half a year was outstandingly successful for the Bank. The financial result goes up systematically, and its high dynamics is maintained. Also changes to the products and services on offer bring about visible effects – the Bank acquires new clients. Our shareholders should be satisfied with ROE, ROA and C/I accomplished by the Bank, which make us distinct amongst the largest banks in Poland – says Zbigniew Jagiełło, CEO, President of the Management Board of the Bank.

The financial results accomplished in the first half of 2011 were mostly triggered by a dynamic increase of the interest income obtained as a consequence of high dynamics of the loan portfolio and increased interest rates. The consolidated interest income increased by 16.6% y/y.

The interest margin of PKO Bank Polski Capital Group in 1st Half 2011 reached the level of 4.5%, i.e. it was 0.1 pp higher when compared with 1st Quarter and 0.4 pp higher than a year ago.

Also, the financial effectiveness of the Group and the Bank increased. In the 1st Half of 2011, net ROE for the Group was 16.3%, and it increased by 2.0 pp y/y, net ROE for the Bank was 16.6% and it went up by 1.5 pp y/y. Net ROA was 2.1% y/y for the Group in the period, and it was 0.4 pp higher, net ROA for the Bank was 2.1% and was 0.3 pp higher y/y.

In the 1st Quarter of 2011, the cost discipline was maintained, and thus the efficiency measured with C/I ratio increased. C/I ratio for the Bank went down to the all-time low quarterly level of 37.9% compared with 39.7% for the 1st Half of 2010. For the Group the ratio reached the record value of 39.9% and it was by 2 pp lower compared with last year owing to a 9.5% increase y/y of the result on business activity with the activity costs increased by 4.3% y/y.

PKO Bank Polski Group continues its prudent policy with respect to credit risk. In the first half of the year, the result on net impairment allowance remained at stable level, similarly to the result obtained in the corresponding period of 2010. The ratio of impaired loans was 7.6%.

At the end of June 2011, the total of assets of PKO Bank Polski Capital Group exceeded PLN 178.7 billion and it was 7.8% higher than at the end of June 2010. Over this time, the gross loan level increased by PLN 11.8 billion y/y, mostly as a result of increased balance of housing loans (by PLN 8.0 billion y/y). Deposits went up by PLN 9.8 billion y/y, chiefly due to the increased level of time deposits of business entities (by PLN 8.4 billion y/y/).

In the first half of the year, the safe level of capital adequacy ratio was maintained. It was 12.6% for the Group.

Additionally, the Bank is characterized by stable sources of funding: mostly deposits and, as an additional source, funds obtained from Eurobonds issue. The ratio of net loans to stable sources of funds at the end of June 2011 was 91.6%.

For some time now, PKO Bank Polski has been successfully implementing the Leader Strategy 2010-12, which assumes the acceleration of organic growth and strengthening of the position of unchallenged leader in the Polish banking sector. The Bank is also amongst the leaders of the Central and Eastern European banks in terms of capitalization. As part of implementation of the Strategy goals, the Bank introduced a new offer of current accounts. From the launch of the campaign, the sale of new accounts was in excess of 360 thousand, of which ca. 200 thousand are accounts opened by individuals who had no account with the Bank to date. PKO Bank Polski is increasingly better perceived by clients. Importantly, the decrease in the number of accounts maintained by the Bank was halted. Additionally, PKO Bank Polski commenced the process of modernization of its image, which involves the change of its visual identification, and the new concept for operation of the network of branches and agencies as sales-effective and corresponding to clients' changing needs.

Furthermore, the electronic banking functionalities are being developed, inclusive of implementation of mobile banking. The Bank is a pioneer in mass conversion of cards into contactless payment cards – as of today more than 3 million of debit cards with this function were issued.

With respect to the offer for small and medium-sized enterprises, the loan-related procedures were simplified and the loan-granting process was accelerated. From the beginning of the year, the loan volumes for small and medium-sized enterprises increased considerably, by as much as 7.3%.

The Bank develops its offer for corporate clients, enhancing its market position in this segment. In recent time, the corporate segment saw a dynamic increase of loan volumes, reaching the record level of portfolio in the 2nd Quarter of 2011. From the beginning of the year, the segment gained 7.3% of volume growth, and 6.8% on the annual basis. The portfolio of corporate loans exceeded the level of PLN 30 billion, reaching the all-time high value of PLN 31.2 billion at the end of the 1st Half of 2011. At the end of the first half of the year, the level of corporate deposits was PLN 28.3 billion, i.e. it increased by 7.6 y/y.

Modernization of the investment segment commenced with the implementation of the new model of capital group. Additionally, each part of the Bank's investment business is developed, such as the Brokerage House, which has recently significantly expanded the network of sales of its services to the overall number of 1000 branches, which is the largest distribution network in Poland. Assets kept by clients on escrow accounts are record-high, and they exceed PLN 50 billion.

The sources of funding are effectively diversified on account of opening programs for Eurobonds and PLN bonds issue.

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The consolidated net profit of PKO Bank Polski for the first half of 2011 was PLN 1.838 billion. With more than 25% market share, the Bank also enjoys the leading position in the sale of Polish Zloty mortgage loans according to Polish Bank Association, offering, in addition to traditional mortgage loans, also preferential housing loans with State subsidies. PKO Bank Polski regularly receives awards in prestigious rankings. As the sector leader, it was the winner of the ranking for "50 Largest Banks in Poland in 2011" compiled by the "Bank" monthly. Due to the highest financial results in the market, the Bank also secured the first place in the ranking of the largest financial institutions in Poland, compiled by "Gazeta Finansowa". The market leader also won two awards in the nineteenth edition of "Best Banks" ranking organized by "Gazeta Bankowa" in cooperation with the consulting company of PWC. PKO Bank Polski was awarded the second place in the categories of large banks and most efficient bank. In the ranking of best financial institutions organized by "Rzeczpospolita" daily, the Bank was distinguished in two categories: commercial banks and brokerage houses. As many as five products of PKO Bank Polski, namely: mortgage loan, cash loan, account, deposit account and credit card, received "Reader's Digest" monthly certificates of "Product of the Year 2010" as most frequently and most willingly selected by clients. The Bank has also won the "Golden Banker" award for the best cash loan and loan for businesses in the market. It was also awarded the title of Reliable Employer of 2010 and won the contest for "Entrepreneur-Friendly Bank" and the certificate of "Client-Friendly Company". Additionally, it was pronounced the best commercial bank by Warsaw Business Journal. PKO Bank Polski’s innovative solutions for corporate banking were awarded in the Europrodukt competition. The bank received three statues in the last edition of the competition in the product category – payroll and consolidated account and escrow account. The cutting edge technological solutions implemented by the Bank have been recognised by "Gazeta Bankowa", which awarded the bank the title “IT Banking Leader of Financial Institutions 2010”. PKO Bank Polski is also the strongest bank in terms of its image in Poland, which is confirmed by its leading position in the "Top Brand" ranking of the "Press" magazine, as well as the Golden Statue for Trustworthy Brand in the banking category awarded to it in the annual study of European Trusted Brands carried out by "Reader’s Digest" publishing. The Bank's strong image was also recognized by it being awarded the title of the Ambassador of Polish Economy in the category of European Brand by Business Centre Club. The brand of PKO Bank Polski is also the most expensive one in the Polish banking market. The experts of "The Banker" magazine estimated its value at USD 1.5 billion, and in the ranking of "Rzeczpospolita" – "Polish Brands 2010" – its value was set at PLN 3.6 billion.