PKO BANK POLSKI GROUP DELIVERS STABLE AND HIGH PROFITS AND FURTHER EFFICIENCY GAINS

In the 1st half of 2012 conditions in the Polish banking industry improved somewhat while the sector’s profit growth decelerated compared to the equivalent period a year earlier. The banks’ lending activity also slowed down as the housing finance market activity declined, consumer loans market stagnated and corporate loans market experienced limited growth.

 “Under conditions of severe market volatility and uncertainty, the PKO Bank Polski Group generated high financial results and continued to increase its operational efficiency. The Group’s safe and effective balance sheet structure and its stable sources of funding allow us to conclude that we are well prepared for the challenges ahead - in business, capital and liquidity terms”, states Zbigniew Jagiełło, Management Board President and CEO of PKO Bank Polski.

The high net profit of the PKO Bank Polski Group in respect of the first 6 months of the year 2012 was generated mainly as an effect of growth in result on business activity, and primarily growth in net interest income. Consolidated net interest income for the 1st half of 2012 reached PLN 4 042.2 million representing 13.1% YoY growth.

The high net profit growth improved further the Bank’s and the Group’s profitability metrics. As at the end of the 1st half of the year, ROE stood at 17.5% or 1.2 pp increase against the 1st half of a year earlier. Interest margin rose by 0.2 pp to 4.7% at the end of June 2012.

The Group has successfully maintained high cost discipline for a number of years. The substantial growth in the PKO Bank Polski Group’s revenue in the 1st half of 2012 accompanied by modest increase in general and administrative expenses yielded further significant improvement in the already impressive operating efficiency measured by C/I ratio. As at the end of June 2012, the indicator reached 38.8% and was by 1.1 pp lower than in the same period a year earlier.

The Group’s annualised balance sheet total as at the end of the 1st half of 2012 also increased, as a result of growth of the deposit base and a bond issue the Bank placed in the domestic and the international market. The total rose to PLN 190 437.9 million, or by 6.6% YoY, and formed the basis for expansion of lending and growth of the securities portfolio; more particularly, PKO Bank Polski was active in the corporate and the mortgage lending markets.

The PKO Bank Polski Group has pursued a conservative policy of credit risk recognition and assessment. Net consolidated write-downs in the 1st half of 2012 reached at PLN1 101.3 million. Net impairment losses in the period represented 8.7% of the portfolio.

The Group maintained strong capital base. Its consolidated capital adequacy ratio, as at the end of the 1st half of 2012, stood at 13.01% while its Core Tier 1 ratio at 12%.

In July 2012 the Ministry of Treasury of Poland divested 95 million PKO Bank Polski shares. At completion of the transaction the State Treasury retained 33.39% of the Company shares. Strong interest in acquisition of the PKO Bank Polski stock confirmed that the market appreciates the strategy the Bank has consistently pursued since the year 2010; delivering high and stable financial results quarter after quarter as well as very high profitability and operational efficiency. Most recently, the group of the Bank’s significant shareholders has been joined by ING OFE, with a 5.17% holding.

PKO Bank Polski continues as the largest corporate contributor to the WIG 20 index. At the one-off adjustment of the index at the end of July 2012, its share in the index rose to 15%.

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PKO Bank Polski is a Polish banking sector leader. Its consolidated net profit for the first half of 2012 totalled PLN 1.95 billion. The bank has been regularly recognised in prestigious industry rankings.  It received the Bank of the Year in Poland honour award of The Banker international monthly.  Its financial results and comprehensive modernisation effort met with recognition. The Polish Accountancy and Tax Institute honoured the PKO Bank Polski Annual Report for the Year 2010 with the Grand Prize in The Best Annual Report competition, in the Banks and Financial Institutions category. The Bank was recognised, among other things, for its balance sheet total growth rate and its overall market activity. Additionally, Gazeta Bankowa named the bank the Highest Effectiveness entity in its category. PKO Bank Polski once again ranked the highest in ARC Market and Opinion’s survey of bank call-centre help-lines. PKO Bank Polski is the country’s strongest image bank in Poland. It is also the highest value brand in the Polish banking market. Experts of The Banker magazine assessed its value at USD1.5 billion while the Polish Brands 2011 ranking of the Rzeczpospolita daily valued it at PLN3.75 billion. According to Newsweek’s 100 Most Valuable Firms ranking, it is also the highest value domestic bank. Philanthropic activities of PKO Bank Polski met with recognition of the Academy for the Development of Philanthropy in Poland, which granted the Bank and its Inteligo Financial Services the Benefactor of the Year 2010 statuette, and of the Polish Donors Forum, which granted the Bank the Special Award for its longstanding and consistent support of public interest causes. The Bank is counted among the best banking sector employers; so indicate the key league tables complied based on opinion pools held among students. Its high position in this respect has been further validated through surveys ran by the Universum Global international researchers and the AIESEC association among students of the country’s best universities.