“PKO Bank Polski. The Best Everyday”, the strategy for the years 2013-2015

Implementation of the new strategy over the next three years is also expected to yield: median annual asset growth rate of ca 4-5%; retention of high profitability under conditions of reduced interest rates; and maintenance of cost evolution at the rate of inflation. The strategy also provides for strengthening of the distribution network in at the poviat (county) level and in attractive locations of major cities.
Strategic alliances and acquisitions are perceived as complementary to the traditional development through organic growth. The bank plans, among others, strategic alliances in bancassurance and electronic payments. This year it set a new standard in mobile payments: IKO, a project aimed at building a shared infrastructure for mobile payments in Poland, jointly with other banks and financial institutions.

The new PKO Bank Polski strategy represents a response to the long term developmental challenges of the Polish and global banking sector. It is based on such fundamentals as: customer satisfaction, efficiency and innovation. In implementation of the new strategic plan, the bank will take advantage of its existing competitive strengths in order to build a position of leadership in the Polish market for the long term. Over the next three years it will continue perfecting itself on daily basis. For our customers and clients this will translate into better quality of service and state-of-the-art products. We will also pursue numerous growth opportunities aimed at strengthening our position: through generation of new revenue streams and acquisitions, which our capital strength permits. We will continue to actively monitor the Polish market for potential acquisition targets, says Zbigniew Jagiełło, President of the Management Board of PKO Bank Polski.

Disbalances in the global economy, demographic shifts, rapid development of the Internet, economic downturn, difficulties in access to financing, overregulation, competition from non-banking institutions (particularly in the payments and consumer finance markets) have all contributed to rapid transformation of the global as well as the Polish banking sector. The new strategy of PKO Bank Polski takes into consideration all of the determinants of running business in the future. It is based on the premise that the Polish banking sector continues to have an attractive growth potential: all the key indicators, such as loans to GDP and deposits to GDP, are below the euro zone levels. The bank forecasts acceleration of economic growth in Poland from the second half of 2013; assuming economic conditions in the euro zone stabilise over the next two years. It also expects interest rates to remain at stable low level at least until mid-2014. The bank also anticipates that as a result of the lower interest rates the credit market will revive in the years 2014 and 2015, accompanied by reversal of the negative trend in consumer finance.
 
The bank’s view of the Polish banking market development prospects incorporates the following assumptions: the electronic payments segment represents a major growth potential, because Poles readily adopt new solutions, as testified by the growing scale of non-cash transactions, development of self-directed tools and decline in the scale of teller handled transactions; demand for investment, savings and insurance products will increase; mortgage lending will continue developing; however, it will be the margins and re-sale of other products and services that will be of key significance to product profitability. Funding will be a material limiting factor to loan volume growth. In the corporate market the bank expects growth in debt securities issues (impact of the Basil III norms). We will also see banks funding themselves through long-term deposits and bonds, to a growing extent. In this perspective we will also experience aging of the society (majority of the funds will be with customers of 40+), but also increasing penetration of financial services among the 10 million of the unbanked Poles.
PKO Bank Polski’s starting position to implementation of the strategy for the years 2013-2015 is excellent. The success of the previous Leader strategy for the years 2010-2012 consolidated the bank’s position of undisputed leadership on the Polish banking market. Its competitive position is outstanding and very strong in terms of the main financial parameters: high profitability, efficiency, and strong capital and liquidity positions. It also benefits from other competitive strengths, namely, its strong brand, and its largest customer base and distribution network.

The New Strategy for the years 2013-2015 defines six strategic lines of action for PKO Bank Polski:
• Customer satisfaction;
• Excellence in distribution – relates to better and more efficient customer service and development of the  remote channels;
• Innovation and technology – stepping up innovation in delivery of new financial solutions,  not just in the  realm of products, but also distribution channels;
• Organisational efficiency – relates to maintaining strong competitiveness through introduction of  intelligent management information, risk optimisation and liquidity management;
• Development of competence – relates largely to staff competence and corporate culture development;
• Acquisitions and alliances – funded with the significant capital surpluses available.

The strategic directions of development will translate into 11 key initiatives implemented in each one of the bank’s business lines.
The retail market segment will be dominated by the “customer-centric” stance: the use of complete knowledge about the customer to serve them better; and the continued modernisation of branches and agency outlets, with simultaneous effort to increase utilisation of the direct channels in the sale products and services. In developing the offer, the bank will concentrate on innovative solutions, and development of insurance and investment and savings products. The bank also aims at refreshing its image as a modern institution.

The corporate market segment will focus on development of relationship banking, with plans to implement a sophisticated pricing policy which is expected to improve the bank’s competitive position, and on development of key competences, including improving sector specific know-how in selected industries. The other important objective of corporate market is the development of transaction banking through development of mass payments solutions, implementation of innovative products and improved operational efficiency of the bank’s transaction system.
The investment banking segment plans involve integration of the sales model, greater use of the corporate client base, selling of investment products through the branch network, and participation in major scale investment programmes in energy, mining and infrastructure. Optimisation of asset and liability management will translate into a more efficient liquidity management, particularly in the context of the new long-term financial stability rules defined through Basil III.

The bank will continue with optimisation of its subsidiaries’ operations, divestment of the Group’s non-core assets, and utilisation of its existing synergies. The strategy provides for achievement of one of the top three positions in the investment funds, leasing and factoring markets, and the sixth position in the pension funds market.
The plans for the remaining divisions of the organisation are largely focused on: reduction of the cost of risk; development of the bank’s IT system, enabling efficient achievement of business priorities; increasing organisational efficiency; optimising expenses; and adoption of an integrated statutory and tax accounting model.

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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.