In 2016, the banking sector operated in conditions of historically low levels of interest rates and new regulation burdens, under positive macroeconomic environment. The situation on the loan-deposit market was shaped by the favorable situation on the labor market. The level of domestic demand was supported by the government programme ‘Rodzina 500+’ and deflation which have been increasing the real purchasing power of households.
In the period under analysis, PKO Bank Polski SA Group continued sustainable growth focused on improving customer service quality by increasing the innovativeness of its products and distribution channels. Initiatives were undertaken to increase the quality of services, among other things, by actions aimed at increasing innovativeness in the area of new financial solutions, both with regards to products and the distribution channels, in particular in the scope of electronic banking and mobile payments.
In 2016, PKO Bank Polski SA introduced a special offer for holders of Karta Dużej Rodziny (Large Family Card) under which the commission for granting housing loans Własny Kąt Hipoteczny was reduced by 50%.
The Group systematically develops electronic banking channels. In 2016, the Bank launched an updated version of the information service which offers more convenient contact with the Bank to the customers and faster access to banking services. The Bank also introduced additional logging security in the form of a security image, which provides customers with a higher level of security when using electronic banking services.
PKO Bank Polski SA offers modern technological solutions to its customers including safe access to banking services available at any place using the telephone. IKO is the most popular and the most developed system of mobile payments in Poland. The aggregate number of IKO activations exceeds one million in 2016. The application is constantly enriched with new functionalities: ability to pay to the telephone number of another IKO user, payments to cash deposit stations using the BLIK code and making payments and transfers using QR codes. The changes have transformed the IKO application used for payments or withdrawals to mobile application being the bank in the phone.
The up-to-date technological solutions of PKO Bank Polski SA have been appreciated by the Chamber of Digital Economy – the Bank was elected the most digitized bank in the competition E-COMMERCE POLSKA AWARDS 2016. The title was granted to Bank in recognition of its involvement in e-administration and cybersecurity projects as well as projects embracing the quality of mobile and electronic banking. This is yet another distinction for the Bank for innovation, implementing leading edge technologies and creating solutions which become a benchmark for other financial institutions.
The development of the product offer was supported by implementing ‘Nowy Rytm Sprzedaży’ (the New Sales Rhythm) – an innovative sales programme, ensuring wider knowledge about the customers and enabling the presentation of offers to them that are best adapted to their needs, while simplifying the sales processes and formalities. The programme was supported by an integrated incentive system for advisers in the branch network.
In 2016, PKO Bank Polski SA commenced cooperation with Poczta Polska SA (Poczta) within the scope of handling payment cards in Poczta branches. As a result of this cooperation, by the end of 2016, nearly 8 thousand payment terminals were installed in the entire Poczta network thanks to which the customers of more than 4.6 thousand Poczta branches can make card payments for services such as payment of bills or sending parcels.
PKO Bank Polski SA was the first bank to offer its customers the possibility of creating a trusted profile from the level of internet banking. The Trusted Profile enables access to services of various offices through the Internet without leaving home and visiting a given office in person. Thanks to this, customers may electronically register their business activities and at the same time register them with the tax office, the Central Statistical Office and the Social Insurance Office (ZUS, KRUS), and avail themselves of the PUE ZUS function.
In 2016, the Bank strengthened its leading position in the field of services for local governments by signing a contract for complex service for podkarpackie voivodeship and its 23 organizational units. In total, the Bank provides services for 6 voivodeships.
In the third quarter of 2016, PKO Bank Polski SA became a strategic partner of the Polski Fundusz Rozwoju (PFR) Group within the scope of providing the export support offer. PFR will deal with the operational management of financial and advisory products. The value of the support offered by PFR under the Programme of International Expansion of Polish Enterprises may reach up to PLN 60 billion.
In August 2016, the Bank concluded an annex to the agreement for the portfolio guarantee line from the Guarantee Fund of the Innovative Economy Operational Programme (IEOP), thanks to which the Bank obtained the possibility not only of non-revolving working capital loans and investment loans but also BIZNES PARTNER bank overdrafts and working capital revolving loans being covered by guarantees.
The top standards of the procurement processes and business reliability have been confirmed by PKO Bank Polski SA obtaining an international certificate from the Chartered Institute of Procurement and Supply (CIPS). The Bank is the first entity from the financial sector and third in Poland to be thus distinguished.
In June 2016, there has been settlement of acquisition of Visa Europe Limited by the Visa Inc. in which PKO Bank Polski SA was involved. The total amount recognized by the Bank in respect of the settlement of the above-mentioned transaction in the income statement (profit before tax) was PLN 417.6 million, including the amount reflected in other comprehensive income on valuation of shares of Visa Europe Limited of PLN 336.7 million.
In December 2016, PKO Leasing SA belonging to the PKO Bank Polski SA Group successfully closed the transaction of acquiring Raiffeisen-Leasing Polska SA (RLPL), thus becoming the main lease provider in Poland with an over 13% market share. Leasing is the second after loans source of financing of operations of business entities. Already before finalizing the transaction, PKO Leasing SA was the most dynamically developing lease enterprise in Poland. The business models of the companies complement one another. The acquisition of Raiffeisen-Leasing Polska SA will enable increasing the effectiveness of services and ensure a comprehensive offer to enterprises tailored to their needs at each stage of development.
Raiffeisen - Leasing Polska SA acquisition schedule
|2016||2 November 2016||Conclusion of the agreement by PKO Bank Polski SA, PKO Leasing SA (PKO Leasing) and Raiffeisen Bank International AG (RBI) on the purchase of 100% of shares in Raiffeisen-Leasing Polska SA (RLPL) by PKO Leasing from RBI.|
|10 November 2016||Obtaining the approval of the Antimonopoly Committee of Ukraine|
|17 November 2016||Obtaining the approval of the Polish Office of Competition and Consumer Protection (POCCP)|
|1 December 2016||Closing of the Transaction, comprising the purchase of 100% of shares in RLPL by PKO Leasing SA and replacing the financing granted to RLPL by RBI or the RBI Group entities by the PKO Bank Polski SA Group.|
|since 1 December 2016||Commencement of operational and IT integration|
|2017||I half of 2017||Legal merger|
In the third quarter of 2016 Qualia Development Sp. z o.o. and its subsidiaries completed two asset sale transactions. As a result, in other net operating income and expenses in the Group’s income statement additional income of approx. PLN 114 million was recognized.
In 2016 PKO Bank Hipoteczny SA conducted an issue of mortgage bonds addressed to institutional investors which met with wide interest. The institutions which purchased mortgage bonds included both domestic and foreign investors, including the European Bank of Reconstruction and Development. Mortgage bonds of PKO Bank Hipoteczny SA are one of the safest debt instruments on the Polish financial market. Moody’s rating of Aa3, which is the highest rating achievable by Polish securities, attests to this, i.e. in accordance with polish rating.
In October 2016, the Polish Financial Supervision Authority (PFSA) issued a positive opinion on the corporate branch in the Czech Republic. The PFSA studied the Bank’s notification application concerning the opening of a corporate branch in Prague and decided to send it over to the competent supervisory authorities in the Czech Republic. Once the notification application is sent by the PFSA, the proceedings before the Polish regulator are completed. The opening of the branch is planned for the 1st half of 2017. The operations of the Czech branch will focus on serving corporate customers.
Actions taken by the PKO Bank Polski SA Group in 2016 despite record low interest rates and significant regulatory changes made it possible to achieve high financial results, allowing the Group to strengthen its position among the largest financial institutions in Poland.
|Net profit||2 874||mn||PLN||2 610||mn||PLN||10.1%|
|Net interest income||7 755||mn||PLN||7 029||mn||PLN||10.3%|
|Net fee and commission income||2 693||mn||PLN||2 851||mn||PLN||-5.5%|
|Result on business activities*||11 791||mn||PLN||10 665||mn||PLN||10.6%|
|Administrative expenses||(5 590)||mn||PLN||(6 036)||mn||PLN||-7.4%|
|Tax on certain financial institutions||(829)||mn||PLN||-||mn||PLN||x|
|Net impairment allowance and write-downs||(1 623)||mn||PLN||(1 476)||mn||PLN||9.9%|
|Total assets||285 573||bn||PLN||266 940||bn||PLN||7.0%|
|Equity||32 569||bn||PLN||30 265||bn||PLN||7.6%|
|ROA net||1.1%||1.0%||0.1 p.p.|
|ROE net||9.1%||9.0%||0.1 p.p.|
|Net interest margin||3.2%||3.0%||0.2 p.p.|
|Share of impaired loans||5.9%||6.6%||-0.7 p.p.|
|Costs of risk||-0.75%||-0.72%||0 p.p.|
|Total capital ratio||15.81%||14.61%||1.2 p.p.|
* Result on business activities defined as operating profit before administrative expenses, tax on certain financial institutions and net impairment allowance and write-downs.
**The ratio of administrative expenses to result on business activities
The net profit of the PKO Bank Polski SA Group generated in 2016 amounted to PLN 2 874.0 million, which represents an increase 10.1%, i.e. by PLN 264.5 million comparing to the previous year profit. The achieved level of net profit was determined by:
1) improvement of the result on business activities of the PKO Bank Polski SA Group, which amounted to PLN 11 790.7 million (+10.6% y/y) mainly due to:
- an increase in the net interest income of 10.3% y/y, which was achieved thanks to the continuing actions to reduce in the costs of financing of the deposit base and an increase in the amount of interest-bearing assets,
- an increase in other net income of PLN 557.0 million, which was mainly associated with the settlement of the acquisition of Visa Europe Limited by Visa Inc. in June 2016 and sale transaction of asset components of Qualia Development Sp. z o.o. and its related entities in the third quarter 2016,
- at the same time, the net commission income, including, but not limited to, commissions on transactions on securities and loans, decreased by 5.5% y/y,
2) the introduction of tax on certain financial institutions (the bank tax) as of February 2016, which resulted in an additional charge on the financial result of PLN 828.9 million,
3) a decrease in operating expenses of PLN 445.8 million, associated with lower charge due amount of contributions and payments to the Bank Guarantee Fund (BGF) (mainly resulting from the 2015 base effect, i.e. the payment made to the BGF for disbursements of guaranteed funds in respect of deposits with Spółdzielczy Bank Rzemiosła i Rolnictwa in Wołomin and the additional expenses associated with the establishment of the Borrowers’ Support Fund). The C/I ratioby the end of 2016 amounted to 47.4% compared with 56.6% at the end of 2015;
4) net impairment allowance and write-downs, which deteriorated by PLN 146.8 million compared with 2015, accompanied by an increase in the gross loan portfolio of 5% and cost of risk at a similar level.
The structure of the statement of financial position of the PKO Bank Polski SA Group, characterized by strong deposit base and a safe level of equity, made it possible to achieve an increase in the result on business activities through stable organic growth and acquisitions, which constitute a further stage in the Bank’s development. The loan to deposit ratio (amounts due to customers) as at the end of 2016 amounted to 97.8% (the ratio of loans to stable sources of funding amounted to 83.7%), which proves the very good condition of liquidity of the Group.
As a result of actions taken in 2016 the PKO Bank Polski SA Group:
- increased total assets by almost PLN 19 billion, including portfolio of amounts due from customers by more than PLN 10 billion,
- maintained a high shares of loans and deposits market on the level of 17.8% and 17.3% respectively,
- strengthened the position in the leasing market by acquiring Raiffeisen-Leasing Poland SA,
- was he first on the market with 31.9% share in sales of mortgage loans to individuals,
- was the largest lender to small and medium sized enterprises of loans with de minimis guarantees and comprised 22.1% of market share,
- significantly improved the quality of the loan portfolio, measured by a ratio of impaired loans,
- increased the number of customers by more than 216 thousand, mainly in the household segment, and increased the number of customers using the IKO mobile banking to more than 1 million at the end of 2016,
- expanded the offer of insurance and investment products, and property insurance for customers, among other things, thanks to starting operating activities by PKO Towarzystwo Ubezpieczeń SA in January 2016,
- strengthened the capital position through action to increase the level of capital base as a result of accumulation of retained earnings for 2015, which resulted in an increase in the total capital ratio of 1.2 p.p. compared to year end of 2015 to a level of 15.8%.