59. Concentration of credit risk at the Group

The Group defines credit concentration risk as one of arising from a considerable exposure to single entities or to group of entities whose repayment capacity depends on a common risk factor.

Concentration by the largest entities

The Banking Law specifies maximum concentration limits for the Bank which has an influence upon the Group. The risk of concentration of exposures to individual customers and groups of related customers is monitored in accordance with CRR Regulation, according to which the Group does not assume an exposure to a customer or a group of related customers, whose value exceeds 25% of the value of its recognised capital.

As at 31 December 2016 and 31 December 2015, those concentration limits had not been exceeded. As at 31 December 2016, the level of concentration of the Bank risk due to the largest exposure to a single entity was equal to 10.4% of the Bank’s recognised capital (as at 31 December 2015 15.2%). Among 20 largest borrowers of the Group there are exclusively clients.

31.12.201631.12.2015
No.Credit exposure includes loans, advances, purchased debts, discounts on bills of exchange, realised guarantees, interest receivable and off-balance sheet and capital exposures *Share in loan portfolio, which includes off-balance sheet and capital exposuresNo.Credit exposure includes loans, advances, purchased debts, discounts on bills of exchange, realised guarantees, interest receivable and off-balance sheet and capital exposures *Share in loan portfolio, which includes off-balance sheet and capital exposures
1.3 200.01.16%1.4 107.31.55%
2.2 887.21.05%2.2 721.71.03%
3.2 450.00.89%3.2 080.00.79%
4.2 371.10.86%4.1 910.40.72%
5.2 064.50.75%5.1 841.90.70%
6.1 582.60.57%6.1 668.60.63%
7.1 570.70.57%7.1 593.90.60%
8.1 481.90.54%8.1 216.60.46%
9.1 435.40.52%9.1 212.60.46%
10.1 080.90.39%10.1 007.80.38%
11.992.00.36%11.965.10.37%
12.955.60.35%12.964.00.36%
13.882.60.32%13.894.80.34%
14.871.70.32%14.870.90.33%
15.828.40.30%15.852.90.32%
16.773.60.28%16.811.40.31%
17.761.10.28%17.790.60.30%
18.704.90.26%18.771.20.29%
19.671.50.24%19.748.70.28%
20.618.20.22%20.704.20.27%
Total28 183.910.21%Total27 734.610.49%

* off-balance sheet exposure includes liability resulting from derivative transactions in the amount of their equivalent in the statement of financial position.

Off-balance sheet exposure includes liability resulting from derivative transactions in the amount of their equivalent in the statement of financial position.

Concentration by the largest capital groups

The greatest exposure of the PKO Bank Polski SA Group towards a capital group of borrowers amounted to 1.14% of the Group’s loan portfolio (as at 31 December 2015 1.61%). The 5 largest capital groups include only clients of PKO Bank Polski SA.

As at 31 December 2016 and as at 31 December 2015 the greatest exposure concentration of Group amounted to 10.2% of the Capital Group recognised capital (as at 31 December 2015 15.7%).

31.12.201631.12.2015
No.Credit exposure includes loans, advances, purchased debts, discounts on bills of exchange, realised guarantees, interest receivable and off-balance sheet and capital exposures *Share in loan portfolio, which includes off-balance sheet and capital exposuresNo.Credit exposure includes loans, advances, purchased debts, discounts on bills of exchange, realised guarantees, interest receivable and off-balance sheet and capital exposures *Share in loan portfolio, which includes off-balance sheet and capital exposures
1.3 160.21.14%1.4 247.71.61%
2.2 467.70.89%2.3 288.91.24%
3.2 396.50.87%3.2 925.71.11%
4.2 118.30.77%4.2 746.01.04%
5.2 090.60.76%5.2 045.70.77%
Total12 233.34.43%Total15 254.05.77%

* off-balance sheet exposure includes liability resulting from derivative transactions in the amount of their equivalent in the statement of financial position.

 

Concentration by industries

As compared with 31 December 2015 the exposure of Capital Group in industry sectors has increased by approx. PLN 12 billion. The increase in exposure results exclusively from the interest of the PKO Leasing SA Group in Raiffeisen-Leasing Polska SA and an increase in exposure in industry sections of the Bank’s credit portfolio. The total exposure in the four largest industry groups ‘Industrial processing:’, ‘Maintenance of real estate’, ‘Wholesale and retail trade (...)’, and ‘Public administration and national defense’ amounted to approx. 54% of the total loan portfolio covered by sector analysis.

Structure of exposure by industry as at 31 December 2016 and as at 31 December 2015 is presented in the table below:

SectionSection name31.12.201631.12.2015
  ExposureNumber of entitiesExposureNumber of entities
CIndustrial processing16.95%11.35%17.73%11.34%
LMaintenance of real estate14.69%17.09%16.62%19.94%
GWholesale and retail trade; repair of motor vehicles14.88%23.74%15.14%24.13%
FConstruction5.66%10.02%8.17%10.93%
OPublic administration and national defence, obligatory social security7.04%0.36%9.08%0.49%
DElectricity, gas, water vapour, hot water and air to the mechanical systems production and supply1.85%0.18%2.01%0.18%
Other exposures38.93%37.26%31.25%32.99%
Total100.00%100.00%100.00%100.00%
   

The above industry structure does not include exposure arising from debt securities reclassified from the category ‘available for sale’ to ‘loans and advances to customers’.

Concentration by geographical regions

The Group’s loan portfolio is diversified in terms of geographical concentration.

The structure of the loan portfolio by geographical regions is identified in the Capital Group due to Bank’s client area – a separate area for the retail market (ORD), a separate area for the corporate and investment banking (OKI).

As at 31 December 2016 the largest concentration of the ORD loan portfolio occurs in region of Warsaw and Katowice (these regions account for 25% of the ORD portfolio).

Concentration of credit risk by geographical regions for Retail Clients31.12.201631.12.2015
   
warszawski14.35%14.02%
katowicki10.82%10.78%
poznański9.85%9.82%
krakowski9.06%9.09%
łódzki8.76%8.90%
wrocławski9.15%8.87%
gdański8.64%8.60%
bydgoski7.43%7.56%
lubelski6.87%7.05%
białostocki6.42%6.51%
szczeciński6.17%6.17%
central0.83%0.97%
other0.84%0.99%
Ukraine0.81%0.67%
Total100.00%100.00%
 

As at 31 December 2016, the largest concentration of the OKI loan portfolio occurs in the headquarter and in the central macroregion (28% and 16% of the ORK portfolio, respectively).

Concentration of credit risk by geographical regions for Corporate Clients31.12.201631.12.2015
   
headquarter16.20%19.64%
central macroregion28.42%17.08%
north macroregion10.11%13.04%
west macroregion9.65%10.60%
south macroregion9.42%9.96%
south-east macroregion7.90%7.18%
north-east macroregion4.88%6.68%
south-west macroregion6.28%6.46%
other6.99%9.16%
Sweden0.15%0.20%
Total100.00%100.00%
 

Concentration of credit risk by currency

As at 31 December 2016, the share of exposure in convertible currencies, other than PLN, in the total loan portfolio of PKO Bank Polski SA Group amounted to 24.2%, which represents a decrease of approximately 1.0 p.p. compared to 31 December 2015.

The greatest part of the Group’s currency exposures are those in CHF and they relate mainly to the loan portfolio of the Bank. The share of loans in CHF amounted to 59% of total currency portfolio of the Group in 2016, which represents a decrease of approximately 5 p.p. compared to 31 December 2015. Loans in EUR

constitute another group of foreign exchange loans, their share in the whole portfolio amounted to 8% as at the end of 2016, and 34% in the foreign exchange portfolio.

Concentration of credit risk by currency31.12.201631.12.2015
PLN75.77%74.73%
Foreign currencies, of which:24.23%25.27%
CHF14.28%16.12%
EUR8.28%7.39%
USD1.10%1.32%
UAH0.38%0.35%
GBP0.04%0.03%
Total100.00%100.00%
 

Other types of concentration

The Group analyses the structure of the housing loan portfolio in terms of LTV levels. As at the end of 2016, as well as in 2015 the largest concentration was in the 71% - 90% LTV range.

The structure of the housing loan portfolio in terms of LTV31.12.201631.12.2015
0% - 50%25.34%23.18%
51%-70%22.35%19.38%
71% - 90%32.67%27.73%
91% - 100%9.10%13.54%
over 100%10.54%16.17%
Total100.00%100.00%
 

In accordance with the Recommendations S and T of the Polish Financial Supervision Authority, the Group uses internal limits on credit exposures related to the Group's customers defining the appetite for credit risk.

As at 31 December 2016, these limits have not been exceeded.