6. Information on the segments of activities and on geographical areas

Information on the segments of activities

The PKO Bank Polski SA Group conducts business activities within segments offering specific products and services addressed to specific groups of customers. The manner in which the business segments are divided ensures consistency with the sales management model and offers the customers a comprehensive product mix comprising both traditional banking products and more complex investment products, as well as services provided by the PKO Bank Polski SA Group entities. The segment note below is included in internal reporting system, i.e. information presented to the Management Board of PKO Bank Polski SA, used to assess achieved results and to allocate resources. The segment report below presents an internal organizational structure of the PKO Bank Polski SA Group.

The PKO Bank Polski SA Group comprises three basic segments: retail, corporate and investment, and transfer centre:

  1. The retail segment offers a full range of services for individuals as part of retail and private banking as well as mortgage banking. Moreover, it comprises transactions conducted with legal persons, i.e. small and medium enterprises. The products and services offered to customers in this segment include, amongst others: current accounts, savings accounts, term deposits, private banking services, investment and insurance products, credit and debit cards, electronic banking services. With regard to financing, it covers consumer loans, mortgage loans, including those offered by PKO Bank Hipoteczny SA, as well as business loans to small and medium-sized enterprises, developers, cooperatives and property managers, and leases and factoring offered by the PKO Leasing SA Group. In addition, the results of the retail segment comprise the results of the following companies: PKO TFI SA, PKO BP BANKOWY PTE SA, PKO Życie Towarzystwo Ubezpieczeniowe SA, PKO Towarzystwo Ubezpieczeń SA and PKO BP Finat Sp. z o.o.
  2. The corporate and investment segment includes transactions concluded with large corporate clients and financial institutions. This segment comprises, i.a., the following products and services: current accounts, term deposits, depositary services, currency and derivative products, corporate loans, leases and factoring offered by the PKO Leasing SA Group. Within this segment, PKO Bank Polski SA also enters, individually or in a syndicate with other banks, into loan agreements financing large investment projects and issuance of non-Treasury securities. This segment also comprises the Bank’s portfolio activity on its own account i.e. investing and brokerage activities, interbank transactions, derivative instruments and debt securities. The results of the corporate and investment segments also comprise the results of the companies operating in Ukraine, mainly KREDOBANK SA and the companies which conduct real estate development and real estate management activities.
  3. The transfer centre comprises the result on internal settlements related to funds transfer pricing, the result on long-term sources of financing and the result on positions classified for hedge accounting. Internal funds transfer is based on transfer pricing dependent on market rates. The transactions between business segments are conducted at arms’ length. Long-term external financing includes the issuance of securities, subordinated liabilities and loans received from financial institutions. As part of this segment, the results of PKO Finance AB are presented. Moreover, the total results achieved by PKO Bank Polski SA on the acquisition of Visa Europe Ltd. by Visa Inc. were presented in the transfer centre.

The PKO Bank Polski SA Group typically settles inter-segment transactions as if they were concluded between unrelated parties, using internal settlement rates. The transactions between business segments are conducted at arms’ length.

Accounting policies applied in the segment report are consistent with accounting policies described in these financial statements.

Disclosed values of assets and liabilities are operating assets and liabilities used by segment in operating activities. Values of assets, liabilities, income and expenses of particular segments are based on internal management information. Assets and liabilities as well as income and costs related to these assets and liabilities are assigned to particular segments.

The income tax expense in respect of the presentation of the financial result, and deferred income tax assets, current income tax receivables, current income tax liabilities and deferred income tax liability in respect of statement of financial position presentation were recognised at the Group level.

The following tables present data on revenues and results of individual operating segments of the PKO Bank Polski SA Group for the 12 month period ended 31 December 2016 and 31 December 2015, as well as assets and liabilities as at 31 December 2016, and as at 31 December 2015.

For the year ended 31 December 2016 Continuing operations
 Retail segmentCorporate and investment segmentTransfer centreTotal activity of the PKO Bank Polski SA Group
     
Net interest income6 584.71 202.6(32.5)7 754.8
Net fee and commission income2 141.3554.8(2.7)2 693.4
Other net income356.8524.6461.11 342.5
Net result from financial operations10.1102.3398.1510.5
Net foreign exchange gains (losses)266.2175.461.6503.2
Dividend income-10.3-10.3
Net other operating income and expense54.1263.01.4318.5
Income/expenses relating to internal customers26.4(26.4)--
Net impairment allowance and write-downs(1 088.2)(534.5)-(1 622.7)
Administrative expenses, of which:(4 684.7)(905.4)(0.3)(5 590.4)
amortisation and depreciation(705.4)(95.3)-(800.7)
Tax on certain financial institutions(605.7)(227.9)4.7(828.9)
Share of profit (loss) of associates and joint ventures---34.5
Segment gross profit2 704.2614.2430.33 783.2
Income tax expense (tax burden)---(907.1)
Profit (loss) attributable to non-controlling shareholders---2.1
Net profit attributable to equity holders of the parent company2 704.2614.2430.32 874.0

As at 31 December 2016Continuing operations
 Retail segmentCorporate and investment segmentTransfer centreTotal activity of the PKO Bank Polski SA Group
     
Assets157 417.3122 295.84 070.6283 783.7
Unallocated assets---1 789.0
Total assets157 417.3122 295.84 070.6285 572.7
Liabilities168 476.348 899.135 292.9252 668.3
Unallocated liabilities---335.8
Total liabilities168 476.348 899.135 292.9253 004.1

For the year ended 31 December 2015 Continuing operations*
 Retail segmentCorporate and investment segmentTransfer centreTotal activity of the PKO Bank Polski SA Group
     
Net interest income6 233.41 013.6(218.4)7 028.6
Net fee and commission income2 337.6510.82.22 850.6
Other net income352.1427.55.9785.5
Net result from financial operations6.3131.2(9.2)128.3
Net foreign exchange gains (losses)184.5173.910.6369.0
Dividend income-10.7-10.7
Net other operating income and expense135.2137.84.5277.5
Income/expenses relating to internal customers26.1(26.1)--
Net impairment allowance and write-downs(1 110.7)(365.2)-(1 475.9)
Administrative expenses, of which:(5 146.6)(889.3)(0.3)(6 036.2)
amortisation and depreciation(728.4)(90.2)-(818.6)
Share of profit (loss) of associates and joint ventures---38.1
Segment gross profit2 665.8697.4(210.6)3 190.7
Income tax expense (tax burden)---(589.5)
Profit (loss) attributable to non-controlling shareholders---(8.3)
Net profit attributable to equity holders of the parent company2 665.8697.4(210.6)2 609.5

* The data for 2015 was restated to ensure comparability due to a presentation change resulting from the allocation of subsidiaries to individual segments.

As at 31 December 2015Continuing operations*
 Retail segmentCorporate and investment segmentTransfer centreTotal activity of the PKO Bank Polski SA Group
     
Assets147 631.6114 820.73 539.5265 991.8
Unallocated assets---948.1
Total assets147 631.6114 820.73 539.5266 939.9
Liabilities153 031.352 881.530 704.3236 617.1
Unallocated liabilities---57.9
Total liabilities153 031.352 881.530 704.3236 675.0

* The data for 2015 was restated to ensure comparability due to a change in the accounting treatment of funds deposited with the Central Bank (these funds were moved from the transfer centre to the corporate and investment segment), a change relating to funds raised as a result of the issuance of medium- and long-term securities (these funds were moved from the corporate and investment segment to the transfer centre) and a presentation change resulting from the allocation of subsidiaries to individual segments.

Information on geographical areas

Complementary, the Group applies geographical areas distribution. The Group conducts activities in the Republic of Poland and in Ukraine through the KREDOBANK SA Group, ‘Inter-Risk Ukraina’ Sp. z o.o. and Finansowa Kompania ‘Prywatne Inwestycje’ Sp. z o.o., in Sweden through subsidiaries: PKO Finance AB and

PKO Leasing Sverige AB, in Ireland: ROOF Poland Leasing 2014 DAC, as well as in the Federal Republic of Germany through corporate branch of PKO Bank Polski SA. For presentation purposes, the results of companies operating in Sweden and results of the Branch operating in the Germany, which from the point of view of the scale of operations of the PKO Bank Polski SA Group are not significant, are included in the segment of Poland.

For the year ended 31 December 2016 PolandUkraineTotal
Net interest income7 617.3137.57 754.8
Net fee and commission income2 649.743.72 693.4
Other net income1 340.52.01 342.5
Administrative expenses(5 481.6)(108.8)(5 590.4)
Net impairment allowance and write-downs(1 588.8)(33.9)(1 622.7)
Tax on certain financial institutions(828.9)-(828.9)
Share of profit (loss) of associates and joint ventures--34.5
Profit (loss) before income tax3 708.240.53 783.2
Income tax expense (tax burden)--(907.1)
Profit (loss) attributable to non-controlling shareholders--2.1
Net profit (loss) attributable to equity holders of the parent company3 708.240.52 874.0

As at 31 December 2016PolandUkraineTotal
Assets of which:283 860.91 711.8285 572.7
non-financial fixed assets6 685.382.56 767.8
deferred tax assets and current income tax receivable1 779.99.11 789.0
Liabilities251 444.21 559.9253 004.1

For the year ended 31 December 2015 PolandUkraineTotal
Net interest income6 926.0102.67 028.6
Net fee and commission income2 807.942.72 850.6
Other net income832.5(47.0)785.5
Administrative expenses(5 935.7)(100.5)(6 036.2)
Net impairment allowance and write-downs(1 439.9)(36.0)(1 475.9)
Share of profit (loss) of associates and joint ventures--38.1
Profit (loss) before income tax3 190.8(38.2)3 190.7
Income tax expense (tax burden)--(589.5)
Profit (loss) attributable to non-controlling shareholders--(8.3)
Net profit (loss) attributable to equity holders of the parent company 3 190.8 (38.2) 2 609.5

As at 31 December 2015PolandUkraineTotal
Assets of which:265 572.21 367.7266 939.9
non-financial fixed assets6 388.265.96 454.1
deferred tax assets and current income tax receivable936.012.1948.1
Liabilities235 382.21 292.8236 675.0