Solid business results from implementation of the strategy despite difficult market environment

Thanks to the implementation of the "PKO Bank Polski. Every Day the Best" strategy within the last three years, the Bank has strengthened its leading position in all key market segments, and the number of clients increased by 809 thousand. By as much as 48 percent grew the number of clients with access to electronic banking offering the clients: the new iPKO application, IKO mobile banking and Inteligo offer. The implementation of the financial education program and banking accounts for children were completed successfully. Already 197 thousand children took advantage of the PKO Junior account and over 157 thousand - of the SKO account. Increased attractiveness of the Bank’s offer and didigtization of services make 80 percent clients satisfied with the Bank’s services. At the same time, despite difficult market conditions, the Bank achieved very good financial results during the three years of the strategy implementation – assets grew by nearly PLN 72 bn, the cost of risk has fallen by half and financial strength has risen to the highest levels in 10 years.

-The 2015 results confirm that thanks to the consistent implementation of the strategy, PKO Bank Polski has been well prepared to operate even in the challenging external environment. Another year in a row we have generated highest financial results in the banking sector, at the same time undertaking many activities that benefit the entire economy, such as: the rapid development of mobile and electronic banking, a new phase of growth in mortgage banking, supporting SMEs and the international expansion of Polish companies - says Zbigniew Jagiello, CEO of PKO Bank Polski.

PKO Bank Polski rapidly increased its scale of operations, with total assets growing by over PLN 18 billion to PLN 266.9 billion. Loans to clients increased by 6.1 percent to PLN 190.4 billion, and the value of deposits to PLN 195.8 billion, ie. by 12.3 percent. This allowed the Bank to maintain high market share in loans and deposits, 17.8 percent and 17.9 percent respectively.

Despite demanding market conditions the Bank generated solid financial result of PLN 2.61 bn. In turn, the fourth quarter result of last year was PLN 444 m.

Eliminating one-off events related to the additional contribution to Bank Guarantee Fund connected with the bankruptcy of SK Bank (PLN 337.9 million) and the payment to the Borrowers Support Fund (PLN 142.0 million), the profit for the fourth quarter amounted to PLN 833 million, and full-year profit to almost PLN 3 billion.

In this case (in comparable terms) return on equity (ROE) stood at 10.4 percent (11 percent in the fourth quarter 2015), and return on assets (ROA) at 1.2 percent (1.3 percent in the fourth quarter 2015).

Result on banking activity generated in 2015 amounted to PLN 10.7 bn. The result of the fourth quarter was by 3.5 percent higher q/q and was PLN 2.8 bn. The annual net interest income was PLN 7.03 bn and net fee and commission income was PLN 2.9 bn.

The integration of PKO Bank Polski with Nordea Bank Polska was completed in April 2015. In the last stage of the merger, called operational merger, data of over 300 thousand clients of the acquired bank were transferred to the PKO information systems, thus transactional systems and clients service processes were unified.

Cost synergies achieved as a result of the merger with Nordea amounted to PLN 153 million in 2015. They were mainly due to the integration of IT areas and support functions. Estimated for 2016 total cost synergies will amount to PLN 220 million, and will exceed the initial estimation by PLN 33 million. Integration results show a very high efficiency - only PLN 0,91 was spent for every PLN 1 of permanent, annually recurring savings.

Integration with Nordea and acquisition of its competences accelerated the development of bancassurance. The earlier acquisition of a life insurer was followed by the formation of a non-life insurer from scratch last year. Both companies operate under the common brand PKO Ubezpieczenia.

PKO Bank Hipoteczny was launched at the beginning of the second quarter 2015. One of its tasks is to raise long term financing by issuing mortgage bonds. At the year-end Bank Hipoteczny executed the pilot mortgage bonds offering with the value of PLN 30 million. PKO BH mortgage bonds received the long term Aa3 rating by Moody’s, which is the highest grade available for Polish securities.

In 2015, PKO Bank Polski completed the first phase of the strategy to support international expansion of Polish companies. In December 2015, the Bank launched a corporate branch in Frankfurt am Main, which aims to service Polish companies doing business behind the Western border.

The Bank was also developing its offer for individual customers, popularizing new payment technologies. In February 2015, the payment system used so far in the IKO mobile application has been made available to several largest banks in Poland, as a multibanking mobile payment standard BLIK. The project "From IKO to BLIK" has been recognized in the international competition organized by EFMA for the best innovation in the payments worldwide.

520 thousand people have downloaded IKO application already. Nearly 65 thousand users activated also contactless payments based on the HCE technology.

In 2015, the total capital ratio of PKO Bank Polski grew on a consolidated basis by 1.6 percentage points to the level of 14.6 percent, in comparison to 2014. Core Tier 1 increased to 13.3 percent.

Inter alia, the improvement was due to optimization of risk-weighted assets. It resulted in the drop of the total capital requirements by 2.8 percent year on year.

The cost of risk stood at a historically low level of 0.72 percent at the end of the last year. Its improvement was mainly driven by better result of business loans loss provisions.

Loan loss provisions were lower by 22.3 percent year n year, mainly due to decreased business loans provisions, which in turn resulted from improved quality of new loans compared to the loans granted in recent years. Also the share of impaired loans fell by 0.3 percentage points to the level of 6.6 percent and the coverage ratio rose by 1.4 percentage points to 63.3 percent.

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PKO Bank Polski is a leader of the Polish banking sector. The 2015 consolidated net profit was the highest in the sector and amounted to PLN 2.61. 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.