PKO Bank Polski successfully passed the capital exercise of European banks

Powszechna Kasa Oszczędności Bank Polski SA (PKO Bank Polski) notes the announcements made today by the EBA and KNF regarding the capital exercise, which demonstrate the following result for the Bank.

The capital exercise proposed by the EBA and agreed by the Council on 26 October 2011 requires banks to strengthen their capital positions by building up a temporary capital buffer against sovereign debt exposures to reflect current market prices. In addition, it requires them to establish a buffer such that the Core Tier 1 capital ratio reaches a level of 9% by the end of June 2012. The amount of any final capital shortfall identified is based on September 2011 figures. The amount of the sovereign capital buffer will not be revised.

71 banks across Europe, including PKO Bank Polski, were subject to the capital exercise whose objective is to create an exceptional and temporary capital buffer to address current market concerns over sovereign risk and other residual credit risk related to the current difficult market environment. This buffer would explicitly not be designed to cover losses in sovereigns but to provide a reassurance to markets about banks’ ability to withstand a range of shocks and still maintain adequate capital.

Following completion of the capital exercise conducted by the European Banking Authority, in close cooperation with the competent national authority, the exercise has determined that PKO Bank Polski meets the 9% Core Tier 1 ratio after the removal of the prudential filters on sovereign assets in the Available-for-Sale portfolio and prudent valuation of sovereign debt in the Held-to-Maturity and Loans and receivables portfolios, reflecting current market prices. Core Tier 1 ratio of the Bank is 11.16% and thus the Bank does not have a capital shortfall.

The capital to be raised and measures to be taken by the banks are designed to restore confidence in market participants, to facilitate banks’ access to the funding markets as well as to put them in the condition to continue providing financial support to the real economy.

The methodology underlying the capital exercise was outlined by the EBA prior to its announcement to ensure consistency across all banks in the EU banking system involved in the exercise.

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Polish PKO BP is the leader of the Polish banking sector. According to the calculations of Intelace Research, with assets of 42.232 billion euros at the end of 2010, it was also the largest bank in Central and Eastern Europe. Consolidated net profit of PKO Bank Polski after 3 quarters of 2011 amounted to 2.855 billion PLN. The Bank also occupies a leading position in sales of mortgages. PKO Bank Polski is regularly awarded in prestigious rankings. Recently it was named “Bank of the Year in Poland” by The Banker magazine. The Institute for Accounting and Taxes awarded the 2010  Annual Report of PKO Bank Polski with the top prize in the competition "Best Annual Report" in the banks and financial institutions category. As many as five products of PKO Bank Polski: mortgages, cash loans, accounts, deposits and credit cards, have been awarded by the magazine Reader's Digest with "Product of the Year 2010" certificates as the most often and most frequently chosen products by customers. The Bank has won the "Golden Banker" award as the best in the loan market and the loan market for firms, has also won the contest "Entrepreneur-Friendly Bank", holds the certificate "Customer-Friendly Company" and is the best commercial bank according to Warsaw Business Journal. PKO Bank Polski’s innovative solutions for corporate banking were awarded in the Europrodukt  competition. The bank received three statuettes in the last edition of the competition in the product category – payroll and consolidated account and escrow account. Moreover, Bank’s electronic banking system iPKO Biznes gained for the second time the European Medal granted by Business Centre Club. According to analysis by the research firm MillwardBrown SMG/KRC, among the surveyed financial institutions PKO Bank Polski enjoys the highest confidence – three quarters of respondents trust its financial stability. PKO Bank Polski is also the strongest bank in the country in terms of image, as shown by its position as leader in the "Top Brand"  ranking compiled by Press magazine. It is also the most valuable brand on the Polish banking market. Specialists from The Banker magazine estimated the value of its brand at 1.5 billion USD and in Rzeczpospolita "Polish Brands 2010" ranking  its value was set at 3.6 billion PLN. Moreover, the charity work of PKO Bank Polski has been recognised by the Academy for the Development of Philanthropy in Poland, which awarded the Bank and Inteligo Financial Services with the statuette "Benefactor of the Year 2010" and by the Donors' Forum in Poland which gave the Bank the Special Award for its long-term and consistent support for socially useful activities.