Better Results, High Effectiveness, Improved Loan Portfolio Quality

Net of the extraordinary gains on the sale of a majority interest in eServices in 2013, which increased the comparative base, the net profit increased by 16.7 percent YoY. The net interest income increased by nearly 12 percent YoY and stood at PLN 7.52 bn. The net fee and commission income was high at PLN 2.93 bn. The profit of Q4 2014 alone was PLN 723 mn. The key challenges to PKO Bank Polski in 2014 included the integration of Nordea Group companies. The legal merger took place on 31 October 2014 when Nordea Bank Polska discontinued its operation as a stand-alone entity. The acquired assets of Nordea added PLN 120 mn to the consolidated net profit and ca. PLN 30 bn to the balance sheet total in 2014. The consolidated balance sheet total stood at PLN 248.7 bn at the end of 2014, representing an increase of 24.8 percent YoY.

Despite an environment of historically low interest rates, the PKO Bank Polski Group maintained its high return on assets and return on equity. ROA was 1.4 percent and ROE was 12.4 percent.

“Last year was challenging but successful for PKO Bank Polski. The Bank generated solid financial results and expanded in all of its business areas. It is well positioned for the challenges of the coming years. Banks must now prepare for the new regulatory environment and low interest rates which exert strong pressures on the profitability of the sector. PKO will offset reduced revenue from some of its business lines with additional lending based on business expansion. It will also actively offer non-lending products including investment funds, insurance, transactional banking services. The Bank will also continue to improve its effectiveness by developing new technologies, especially mobile technologies,” said Zbigniew Jagiełło, President of PKO Bank Polski.

Despite the lower interest rates, the consolidated interest margin remained stable at 3.6 percent at the end of 2014. It should be noted that the capital adequacy ratio continued to improve and stood at 13 percent on a consolidated basis at the end of 2014.

The PKO Group continued to pursue its strategy of improving the loan portfolio quality in 2014. The share of non-performing loans was the lowest in three years. The NPL ratio was 6.9 percent (a decrease of 1.3 percentage points year on year) and the coverage ratio was 61.8 percent (an increase of 10 percentage points year on year) at the end of 2014 owing to improved quality of all loan categories.

The significant improvement of loan loss provisions (a decrease of 6.8 percent year on year) was possible mainly due to lower provisions against consumer and business loans as the quality of new lending improved compared to the existing portfolio.

The PKO Group’s cost/income ratio was 47.1 percent and the Bank’s C/I ratio was even lower at 43.5 percent. Administrative overheads increased by 13.5 percent in 2014, mainly due to the cost of the Nordea Group, recognised for the first time in the results of the Group, as well as the integration budget. The total share of the Nordea Group (including integration costs) in administrative overheads was ca. PLN 500 mn in 2014.

With the acquisition of Nordea assets and its own strong business activity, PKO Bank Polski consolidated the leader’s position in assets, deposits and loans. The Bank ranked even more prominently ahead of its peers. The advantage of PKO Bank Polski over the runner-up bank in terms of assets increased to PLN 80 bn, which is the size of a medium bank in Poland. PKO’s share in the assets of the sector increased by close to 2 percentage points YoY to nearly 16 percent. Its market share in loans increased by 1.8 percentage points YoY to 17.9 percent and its market share in deposits increased by 1 percentage point YoY to 17.3 percent.

Despite the acquisition of a sizeable loan portfolio in late 2014, the ratio of loans to stable sources of funding was 86.4 percent, which attests to the very robust liquidity position of the PKO Group.

PKO Bank Polski acquired 442.9 thousand clients in 2014, mainly in the retail banking segment. The branch network opened 131 new retail branches and 2 new private banking outlets. The total number of the Bank’s clients grew to nearly 8.9 million.

In addition to the dynamic growth of retail banking, where the loan portfolio increased by more than PLN 21 bn, PKO Bank Polski grew its corporate lending in 2014. The Bank extended both working capital and investment loans to companies. The corporate loan portfolio grew by more than PLN 17 bn.

PKO Bank Polski was the biggest lender among the 23 banks that grant de minimis guarantee loans. The Bank served ca. 36 percent of companies which benefit from the programme. The total balance of loans under the de minimis programme was ca. PLN 6.8 bn, including PLN 4.4 bn granted in 2014 alone. Nearly 30 thousand clients of the Bank concluded close to 32 thousand contracts under the programme as at the end of 2014.

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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.