Robust profit growth and high efficiency

2014.11.06

In the third quarter of 2014, PKO Bank Polski Group generated net profit of 873,4 million zł, 16.1 percent more y/y and 2.1 percent more than in the previous quarter. Net interest income increased by 21.6 percent y/y and by 2 percent q/q, reaching the amount of 1,979 million zł, net fee and commission income amounted to a high 727 million zł. In the third quarter, write-offs value dropped compared to the previous quarter and amounted to 475,2 million zł. Cost of risk improved by 0.2 percentage points y/y, reaching 1.09 percent. Traditionally, profitability and operating efficiency reached very high levels.

In the third quarter of 2014, PKO Bank Polski continued the integration process of the Nordea Group companies whose financial results were consistent with the assumptions. The acquisition of Nordea Group has increased consolidated net income in the third quarter of 2014 by 41 million zł and total assets by approx. 34 billion zł.

- As announced, PKO Bank Polski Group reported a better result in the third quarter 2014 than that achieved in previous quarters. We will also strive to make the whole of 2014 better than the last year. The acquisition of Nordea assets will gradually positively affect the improvement of results. The integration process was completed already in two acquired companies. Recently, as planned, Nordea Bank Polska merged with PKO Bank Polski. Now, another important step - operational merger – is ahead of us – says Zbigniew Jagiełło, CEO of PKO Bank Polski.

Consolidated net profit generated during 3 quarters of 2014 amounted to 2,531.5 million zł and was 10.5 percent higher than in the comparable period of 2013, positively affected by 13 per cent increase in net interest income. Additionally, net interest income increase was caused by the inclusion of the Nordea Group result of 302 million zł, starting from the second quarter of 2014. Net fee and commission income achieved in the same period amounted to 2,215.8 million zł, and was 1.1 percent higher y/y. The consolidated assets reached 244.4 billion zł, 21.5 percent higher y/y, as a result of net loans growth to the level of 178.3 billion zł (which corresponds to 19.2 percent y/y growth in loans), financed by 13.5 per cent y/y increase in customer deposits to the amount of 171.2 billion zł.

Profitability and efficiency of the PKO Bank Polski Group reached high levels. At the end of the third quarter of 2014, ROE rose by 0.6 percentage points y/y, to the level of 13.5 percent, ROA remained at 1.6 percent and the cost-to-income (C/I) ratio on an annual basis improved by 0.7 percentage points y/y and amounted to 44 percent. The value of this ratio should improve along with the realization of synergies resulting from the operational integration of Nordea Group.

Also improves the quality of the loan portfolio of PKO Bank Polski Group; the process is further accelerated by the consolidation of high-quality portfolio of Nordea. The ratio of loans impaired at the end of the third quarter of 2014 amounted to 7.1 per cent, which represents a decrease of 1.5-percentage points y/y. The cost of risk at the end of the third quarter amounted to 1.09 percent and improved by 0.2 percentage points y/y. Thus, significantly improved also the coverage ratio - by 6.7 percentage points y/y and reached 58.1 percent.

At the end of the third quarter 2014, net interest margin was maintained at a high level of 3.6 per cent on a consolidated basis, and 3.8 percent in the unitary terms.

The solvency ratio of PKO Bank Polski Group amounted to 12.7 per cent at the end of third quarter 2014. Strong capital position of PKO Bank Polski has been recently confirmed by assets quality review (AQR) and stress tests conducted by the Polish Financial Supervision Authority (KNF). PKO earned one of the best results in the Polish banking sector. The Bank also obtained the high 11th rank among all European banks surveyed by the AQR and stress tests, conducted by European Banking Authority and the European Central Bank.

Moreover, November 10 marks 10 years since the debut of PKO Bank Polski on the Warsaw Stock Exchange. On the day of the IPO, market capitalization of PKO Bank Polski amounted to 24.5 billion zł and has since doubled. Additionally, since the debut, PKO regularly shares its profits with shareholders. In 10 years, the Bank paid nearly 14.5 billion zł in dividends. The total rate of return (TSR) stood at 165 per cent, and its average annual growth over 10 years was 10.2 percent.

***

PKO Bank Polski is a leader of the Polish banking sector. After three quarters of 2014, PKO Bank Polski Group posted a consolidated net profit of PLN 2 531,5 million. PKO Bank Polski ranked #1 with six stars in the overall classification in the Forbes magazine Best Corporate Bank ranking. The Bank ranked #3 in the Banking Quality 2013 ranking of TNS Polska and Puls Biznesu. The Bank’s Contact Center, for the sixth time in a row, was a winner in a regular survey of banks’ hotlines carried out by ARC Rynek i Opinia. The Bank won for another consecutive year in the ranking of the top 50 banks in Poland published by the financial monthly Bank. PKO Bank Polski won this year’s edition of the ranking in the category of Property Financing Banks and ranked third among Consumer Finance Banks. PKO Bank Polski was awarded for the implementation of the IKO application in the Electronic Banking and E-Finance category of the 12th edition of the Financial Institutions IT Leader 2013 competition of Gazeta Bankowa. PKO Bank Polski was also awarded for its Innovation Centre in the category Back Office Systems. Around a dozen financial institutions, mainly representing the banking and insurance industry, competed for the IT Leader award. The jury of the Competition of the 8th E-Economy Congress awarded PKO Junior in the Project of the Year category. PKO Bank Polski also enjoys the strongest image among Polish banks. According to a prestigious magazine The Banker which values PKO Bank Polski’s brand name at USD 1.25 billion, the Bank remains the most valuable brand in Polish banking sector. According to the ranking of the Most Valuable Polish Brands 2013 by Rzeczpospolita daily, PKO Bank Polski remained the most valuable brand in the financial industry category, valued at PLN 3.7 billion. In 2012, the Jury of the Banking Leaders Competition, organised as a part of the Polish Economic Congress, awarded PKO Bank Polski as the Best Bank and the Most Innovative Bank for the new offer of School Saving Associations. In rankings based on students’ opinions, the Bank was ranked as one of the best employers in Poland. The Bank’s high position is also confirmed by surveys carried out by the international company Universum Global and AIESEC among students of Poland’s best universities. PKO Bank Polski is also a winner of the Golden Banker 2013 award in the Best Mortgage Loan and the Financial Innovation categories for its IKO application.