Success of the “Leader” strategy

The bank achieved the targets of its 2010-2012 “Leader” strategy in spite of heightened volatility prevailing in the financial markets and the real economy. Its consolidated balance sheet total, as at the end of 2012, reached the record-breaking PLN193.5 billion. Equally, net income from business operations (EBITDA) of the Group, as at the end of 2012, reached its historic highest of over PLN11.6 billion. Over the strategy implementation period it increased by over 30 per cent. The consolidated return on equity rose by 1.1 of a percentage point while return on assets rose by 0.4 of a percentage point. ROE and ROA, as at the end of 2012, reached 15.9 per cent. and 2 per cent. respectively. Also, operational efficiency and cost discipline improved considerably over the course of the past three years; resulting in achievement of the lowest C/I ratio among the large listed banks. The Group’s C/I stood at 39.9 per cent., as at the end of 2012, which represented a decrease of 8 percentage points in comparison to the 2009 year-end ratio value.

“Consistent with the targets assumed under the just completed “Leader” strategy, over the course of the past three years PKO Bank Polski strengthened its the position of undisputed leader in the Polish banking market. We maintained the position of leadership in the CEE region in terms of assets, net profit and equity capital. Above all, the bank demonstrates high capacity for revenue generation while maintaining moderate risk and adequate liquidity levels. In the course of implementation of the strategy, we achieved the highest earnings in the sector; built on above-average profitability and effectiveness, and maintained high and highly stable ROE. We also succeeded in changing the bank’s organisational DNA in many respects, and particularly in quality, innovativeness and corporate culture. The bank also exhibits capacity for further continued growth, which we will have demonstrated shortly: through our next strategy adopted for the years 2013-2015,” said Zbigniew Jagiełło, President of the Management Board of PKO Bank Polski.

The bank is also well perceived by the investor community; as the success of this and past year’s secondary share offerings ably attests to. At completion of those, the bank’s shareholding structure changed: the State Treasury’s holding declined by a total of 9.6 percentage points to 31.39 per cent.; BGK ceased to be the bank’s shareholder; while holdings of two entities, namely ING OFE and Aviva OFE, exceeded the threshold of five per cent. of votes at the General Shareholders’ Meeting. As a result of this year’s transactions, PKO Bank Polski became the local market company with the largest free float capitalisation on the Warsaw Stock Exchange (WSE). Its free float currently stands at 68.6 per cent. and its shares are the market’s most traded bank equities. The bank’s share in the market’s key indices has also been readjusted upwards.

The bank stands out as the sole representative of its sector on the WSE to have been paying out dividends to shareholders consistently every year since its market début in 2004, which testifies of its robust fundamentals and solid financial results. When paying out dividend from net profit for the year 2012, PKO Bank Polski will be compliant with the new criteria laid out by the Polish Financial Supervision Commission. In April 2012 the bank implemented its new long-term dividend policy establishing stable profit payout to the shareholders of all excess capital after provision for the minimum capital adequacy requirements plus essential capital buffer.

Debt market investors perceive the bank as a stable and reliable issuer. PKO Bank Polski has been active on both the local and the international debt market for some time, where it has been obtaining vary favourable price terms; historically better than many Polish as well as international institutions. The bond issues it has placed on the market to date total equivalent of over PLN10 billion. Last year, the bank executed a PLN1.6 billion domestic subordinated bond issue; its proceeds were used to replace a previous issue of the same nominal value and were disclosed under supplementary capital funds. In addition, the bank regularly issues short-term debt. It has also successfully arranged international bond issues: in EUR, CHF and USD. Last year’s USD1 billion issue was the first of the kind among Polish banks to be dedicated to the American market. The 2010 EUR800 million issue was also the first of the kind among Polish banks in the Euro-market. The same is true of its 2011 CHF denominated issue: the first of the kind among Polish banks. The bank’s bond issuance opened that market up for other Polish issuers. PKO Bank Polski has served a benchmark for other financial institutions domiciled in Poland, with Polish state securities serving as the benchmark in the bank’s issuance activity.

Within the framework of the “Leader” strategy, the bank implemented a significant number of business initiatives which improved operational quality of all its service channels: the remote channels achieved the number one position in the market; the branch network was modernised and optimised; the product offer gained in attractiveness (with, among others, the SKO online and the new generation savings and checking accounts); and private banking for high net worth individuals was implemented, with new outlets opened up in Warsaw, Gdańsk and Kraków. The bank launched a series of advertising campaigns while the changes it introduced to its visual identity led to acquisition of a new and young group of customers as well as heightened perception of the bank as not just a strong, safe and trustworthy institution, but also as a truly modern business entity. One out of every three mortgage loans granted in Poland is granted by PKO Bank Polski, which is to say that the bank remains a market leader in distribution of housing loans.

The key companies of the PKO Bank Polski Group and the PKO Bank Polski Brokerage House also generated good financial results. Over the course of implementation of its strategy, eService significantly increased its market share as measured in the number of card payment terminals: by 8 percentage points to 27.4 per cent. As at the end of 2012, this subsidiary of the bank also held the second place in the market in terms of the volume of non-cash transactions processed. PKO Leasing – for the first time in its history – executed leasing contracts valued at above PLN2 billion, with its average annual sales growth rate in the years 2010-2012 hovering around 30 per cent.; this being the highest growth rate among the top leasing specialists in the market. From number nine position in the market in 2010, the subsidiary advanced to the fourth position in 2012. Also PKO TFI improved its market position, as it ranked number four, as at the end of 2012, with assets under management exceeding PLN10 billion (the highest value since 2008). PKO BP Bankowy PTE was also able to grow its market share over the past three years: by 42 per cent. in terms of the number of its participants; and by 27.4 per cent. in terms of the value of assets  under management, which growth was the highest among the pension funds active in the market. Over the period of implementation of the “Leader” strategy, the PKO Bank Polski Brokerage House participated in every one of the major privatisation transactions executed in the market thereby strengthening its market position; it ranked third and fourth among the WSE listed securities brokerage houses.

Net profit the PKO Bank Polski Group achieved in the year 2012 amounts to PLN3.75 billion, which is very close to that achieved in record year of 2011 and remains the highest in the sector; this in spite of the steep decline in Poland’s GDP growth. The Group also generated a record high EBITDA in 2012: above PLN11.6 billion. The Group has maintained high liquidity and strong capital adequacy position, as its consolidated capital adequacy ratio increased to 13.1 per cent. and Core Tier 1 ratio to 12 per cent., as at the end of 2012.
Over the past three years, the bank implemented a great many corporate social responsibility projects. Acting either directly or through a charitable foundation it had formed in 2010, PKO Bank Polski, among other things, supported the national culture and arts; promoted health lifestyle; and contributed to protection of the natural environment. Its engagement in charitable causes was also material.

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PKO Bank Polski is a Polish banking sector leader. Its consolidated net profit for the year 2012 totalled PLN3.75 billion. It is a Polish company with the highest value of free-float shares on the WSE. The bank has been regularly recognised in prestigious industry rankings. The Polish Accountancy and Tax Institute honoured the PKO Bank Polski Annual Report for the Year 2011 with the Grand Prize in The Best Annual Report competition, in the Banks and Financial Institutions category. It has now been the winner in that category for the second consecutive year.  PKO Bank Polski also received the Grand Prize in Bank monthly’s ranking of the 50 largest banks in Poland for 2012: among others, for growth rate of its balance sheet total and its overall market activity. Also, Gazeta Bankowa awarded the Bank for the highest performance in its category. PKO Bank Polski once again came out the winner in the survey of call centres of banks carried out by ARC Rynek i Opinia. PKO Bank Polski is also the country’s strongest image bank. It retains the position of the highest worth brand in the Polish banking market according to the prestigious The Banker magazine, which assessed the PKO Bank Polski brand value at USD1.25 billion. The Most Valuable Polish Brands Ranking 2012 of the Rzeczpospolita daily listed the PKO Bank Polski brand as the most valuable one in the finance category; its worth set at PLN3.72 billion. PKO Bank Polski is also the highest value domestic bank in Poland; this according to the Newsweek magazine’s ranking of the 100 most valuable companies. 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. A ranking based on an opinion poll of students has recognised the bank as one of the best employers of the banking sector. This high position achieved by bank in the employer category has been further confirmed through the surveys carried out among students of Poland’s best universities by the international Universum Global and AIESEC.