Consolidated income statement

The consolidated net profit of the PKO Bank Polski SA Group generated in 2016 amounted to PLN 2 874.0 million and was higher by PLN 264.5 million (by 10.1%) than in 2015. 

In the PKO Bank Polski SA Group’s income statement in 2016, the sum of revenue positions amounted to PLN 11 790.7 million and was by PLN 1 126.0 million, i.e. by 10.6% higher than in 2015, mainly in effect of the growth of net interest income and remaining income.

Income statement of PKO Bank Polski SA Group (in PLN million)

 20162015CHANGE
(PLN millions)
CHANGE
(in %)
Interest and similar income9 964.49 657.8306.63.2%
Interest expense and similar charges-2 209.6-2 629.2419.6-16.0%
Net interest income7 754.87 028.6726.210.3%
Fee and commission income3 579.63 598.3-18.7-0.5%
Fee and commission expense-886.2-747.7-138.518.5%
Net fee and commission income2 693.42 850.6-157.2-5.5%
Dividend income10.310.7-0.4-3.7%
Net income from financial instruments measured at fair value4.440.6-36.2-89.2%
Income from investment securities506.187.7418.45.8x
Net foreign exchange gains (losses)503.2369.0134.236.4%
Other net operating income and expense318.5277.541.014.8%
Net impairment allowance and write-downs-1 622.7-1 475.9-146.89.9%
Administrative expenses-5 590.4-6 036.2445.8-7.4%
Tax on certain financial institutions-828.90.0-828.9x
Operating profit3 748.73 152.6596.118.9%
Share of profit (loss) of associates and joint ventures34.538.1-3.6-9.4%
Profit (loss) before income tax3 783.23 190.7592.518.6%
Income tax expense-907.1-589.5-317.653.9%
Net profit (including non-controlling shareholders)2 876.12 601.2274.910.6%
Profit (loss) attributable to non-controlling shareholders2.1-8.310.4x
Net profit (loss)2 874.02 609.5264.510.1%

After eliminating from the 2016 results the charges associated with tax on certain financial institutions and major one-off events, such as:

  • the settlement of the acquisition of Visa Europe Limited by Visa Inc., in which PKO Bank Polski SA took part; its effect on the Bank’s result amounted to PLN 417.6 million,
  • the effect of the settlement of the sale of assets of Qualia Development Sp. z o.o. and its subsidiaries; as a result of this transaction, the Group recognized additional income of approx. PLN 114 million in net other operating income and expenses and the events from 2015:
    • payments in the amount of PLN 337.9 million made to the Bank Guarantee Fund (BGF) as part of the guaranteed funds protection fund (FOŚG) for the payment of guaranteed funds to holders of deposits with Spółdzielczy Bank Rzemiosła i Rolnictwa in Wołomin after its bankruptcy,
    • payments to the Borrowers’ Support Fund in the amount of PLN 142 million

the comparable net profit for 2016 amounted to PLN 3 255.0 million and was 8.6% higher than in 2015.

Income statement of PKO Bank Polski SA Group (in PLN million) excluding oneoffs

 2016one-offs2016 excluding one-offs2015one-offs2015 excluding one-offsChange
(in PLN mn)
Change
(in %)
Net interest income7 754.80.07 754.87 028.60.07 028.6726.210.3%
Net fee and commission income2 693.40.02 693.42 850.60.02 850.6-157.2-5.5%
Dividend income10.30.010.310.70.010.7-0.4-3.7%
Net income from financial instruments measured at fair vale4.40.04.440.60.040.6-36.2-89.2%
Gains less losses from investment securities506.1417.688.587.70.087.70.80.9%
Net foreign exchange gains (losses)503.20.0503.2369.00.0369.0134.236.4%
Net other operating income and expense318.5114.0204.5277.50.0277.5-73.0-26.3%
Net impairment allowance and write-downs-1 622.70.0-1 622.7-1 475.90.0-1 475.9-146.89.9%
Administrative expenses-5 590.40.0-5 590.4-6 036.2-480.0-5 556.2-34.20.6%
Bank on certain financial institutions-828.9-828.90.00.00.00.00.0x
Operating profit3 748.7-297.34 046.03 152.6-480.03 632.6413.411.4%
Share in profit (loss) of associates and joint ventures34.50.034.538.10.038.1-3.6-9.4%
Profit befoe income tax3 783.2-297.34 080.53 190.7-480.03 670.7409.811.2%
Income tax expense-907.1-83.6-823.5-589.591.2-680.7-142.821.0%
Net profit (including non-controlling shareholders)2 876.1-381.03 257.12 601.2-388.82 990.0267.18.9%
Profit (loss) attributable to non-controlling shareholders2.10.02.1-8.30.0-8.310.4x
Zysk (strata) netto2 874.0-381.03 255.02 609.5-388.82 998.3256.78.6%

Net interest income
Obtained in 2016 net interest income amounted to PLN 7 754.8 million and was PLN 726.2 million higher than last year. The improvement in the net interest resulted from an increase in revenue connected with an increase in the loan portfolio and securities portfolio, as well as a significant reduction in financing costs.
Interest income (in PLN million)





Interest expense (in PLN million)





Interest income in 2016 amounted to PLN 9 964.4 million in compared to 2015 was higher by 306.6 million, which is mainly the result of growth: 
  • income from loans and advances to customers of PLN 251.5 million y/y – the drop in income resulting from the drop in market interest rates for PLN and EUR was fully offset by an increase in the average volume of loan receivables, mainly housing and consumer loans, 
  • income from securities by PLN 153.4 million y/y determined by an increase in the average volume of securities (mainly Treasury Bonds),
  • with a decrease in income from hedging derivatives (PLN -110.8 million y/y), mainly due to IRS transactions in PLN matured in 2016.
Interest costs in 2016 amounted to PLN 2 209.6 million in compared to 2015 was lower by 16.0%, which is mainly the result:
  • a decrease in the cost of liabilities to customers of PLN 362.4 million y/y, resulting from a lower average interest rate on deposits – the effect of adapting the pricing offer of deposit products to decreasing market rates and the expiry of long-term deposits also resulted from changes in the deposit structure which involved an increase in the share of current deposits in total deposits,
  • PLN 101.7 million lower costs of external financing y/y, which was determined by a drop in the level of bonds issued under the EMTN programme, which are gradually replaced with cheaper financing in the form of mortgage bonds, 
The interest margin increase by approx. 0.2 p.p. y/y to 3.2% at the end of 2016. Average interest-earning assets increased by 6.3% y/y (Mainly the portfolio of amounts due from customers and the securities portfolio), and the annualized net interest income increased by 10.3%, mainly as a result of lower interest expense, with a simultaneous increase in interest income on loans and securities (the effect of an increase in volume).
In 2016, the average interest rate on loans of PKO Bank Polski SA amounted to 4.1% and the average interest rate deposits in total stood at 0.8% against, respectively 4.2% and 1.1% in 2015.

Net fee and commission income

Net fee and commission income amounted to PLN 2 693.4 million in 2016 and was PLN 157.2 million lower than in the previous year as a result of commission expenses which were PLN 138.5 million higher accompanied by stable commission income at a level of PLN 3 579.6 million.

Commision income structure (in PLN million)





Commision costs structure (in PLN million)





The level of net commission income was mainly determined by:
  • a lower net commission income on loan insurance (PLN -9.4 million y/y), which was due to, among other things, a decrease in commissions on housing loans insurance; in addition, the sales of insurance products offered by the PKO Bank Polski SA Group entities increased in 2016, and the results on such sales on the Group level are presented under other results on insurance activities,
  • a decrease in income on maintaining bank accounts (PLN -11.2 million y/y),
  • a decrease in net commission income on maintaining investment funds and pension funds (including management fees) of PLN 18.2 million y/y due to a decrease in management fees and commissions for sale and repurchase, which was a result of adjusting the offer to the market conditions; at the same time, the value of assets under management increased,
  • a decrease in income from brokerage activities (PLN -12 million y/y) due to a decrease in the commissions on bond issue arrangement,
  • a PLN 6.0 million y/y increase in the costs of maintaining control over construction projects and property valuation, associated with an increase in the sales of housing loans,
  • a lower level of income on loans and advances granted (PLN -44.7 million y/y), mainly in respect of business loans,
  • a stable result on payment cards (-0.2% y/y). The relatively lower income growth was mainly a result of a high reference level (in the 2nd quarter of 2015, the Bank received payments from payment organizations due to renegotiation of the agreements with such organizations). After eliminating this one-off event, the Group’s result on payment cards was PLN 53 million higher than as at the end of 2015, which was partly due to an increase in the income from issue and renewal of cards.
Other income

In 2016 other income amounted to PLN 1 342.5 million and increase by PLN 557.0 million compared to the previous year. Level of the other result was mainly determined by the following:

  • an increase in gains less losses on investment securities of PLN 418.4 million y/y, which was caused by the settlement, in June 2016, of the acquisition of Visa Europe Limited by Visa Inc., in which PKO Bank Polski SA participated; the Bank recognized PLN 417.6 million in this respect,
  • an increase in net foreign exchange gains (losses) by PLN 134.2 million, connected mainly with an increase in customer interest in structured deposits based on exchange rate indices,
  • an increase in net other operating income of PLN 40.0 million, mainly in consequence of two sales transactions in the third quarter of 2016 of the assets of Qualia Development Sp. z o.o. and its subsidiaries; in this respect the Group recognized additional income of approx. PLN 114 million in other operating income and expenses, given the adverse effect of higher costs of donations,
  • accompanied by the result on instruments measured at fair value lower by PLN 36.2 million in total, in consequence of the situation on the Polish debt market, in particular the revaluation of Treasury bonds observed at the end of 2016. 

After eliminating one-off events, the other income would amount to approx. PLN 810.9 million, i.e. +3.2% y/y.

Other income (in PLN million)





Administrative expenses

Administrative expenses (in PLN million)





In 2016, administrative expenses amounted to PLN 5 590.4 million and was lower by 7.4% compared to the same period of previous year.
After eliminating the one-off events that occurred in 2015 (the BGF payment to the guaranteed funds protection fund of PLN 337.9 million and payment to the Borrowers’ Support Fund of PLN 142.0 million), general administrative expenses were 0.6% higher than in the previous year. Their amount was mainly determined by an increase in the costs of employee benefits of PLN 69.3 million, i.e. 2.5%, which was accompanied by a decrease in material costs of PLN 40.8 million y/y, i.e. 2.8%, and a decrease in amortization and depreciation of PLN 17.9 million y/y, i.e. 2.2%.
As at 31 December 2016, employment in the PKO Bank Polski SA Group amounted to 29 441 full-time positions, which is an increase by 220 positions y/y. Change in employment in subsidiaries y/y is a result of business development and the acquisition of RLPL in December 2016.
The effectiveness of PKO Bank Polski SA Group’s performance measured by annualized C/I ratio reached 47.4%. 

The components C/I PKO Bank Polski SA Group

The components of C/I PKO Bank Polski SA Group

Tax on certain financial institutions

Starting from February 2016 banks and other financial institutions are obliged to pay tax on certain financial institutions. Tax burden on the Group in 2016 amounted to PLN 828.9 million, of which the majority was attributable to PKO Bank Polski SA (PLN 820.2 million).
Net impairment allowance and writer-downs

The amount of net impairment write-downs and provisions reflects the conservative approach of the PKO Bank Polski SA Group to recognizing and measuring credit risk. The net write-downs deteriorated (9.9% y/y) due to an increase in write-downs recorded by the Bank on corporate customer portfolios.

The share of loans with recognized impairment and coverage of loans with recognized impairment as at the end of 2016 amounted to 5.9% (a decrease of 0.7 p.p. in relation to 2015) and 65.5% (an increase of 2.2 p.p. in relation to 2015), respectively. The improvement was due to an improvement in the quality of business loans and the consistent policy of selling irregular receivables.

The cost of risk1 at the end of 2016 amounted to 0.75% and has not changed significantly compared to 2015.

1. Calculated by division of net impairment allowance and write-downs of loans and advances to customers for 12 month period ended 31 December 2016 and 2015 by the average, gross balance of loans and advances to customers at the beginning and at the end of reporting period and quarterly periods in between

Net impairment allowances on receivables of the PKO Bank Polski SA Group

Cost of risk and NPL of the PKO Bank Polski SA Group