Capital adequacy

As at the end of 2019, the total capital ratio of the PKO Bank Polski Group stood at 18.42% (-0.46 p.p. y/y), and the core capital T1 ratio amounted to 17.16% (-0.38 p.p. y/y).

The decrease in the capital ratios was mainly due to an increase in capital requirements of approx. +PLN 1.1 billion (mainly with respect to credit risk as a result of an increase in total assets), with an increase in own funds of approx. PLN 1.6 billion. The increase in equity was mainly stimulated by accumulation of 50% of the bank’s profit of 2018 of PLN 1.7 billion, and accumulation of a part of the net profit of the Group subject to prudential consolidation earned in the first half of 2019 of PLN 1 038 billion.

As at the end of 2019 IFRS 16, which was implemented as of 1 January 2019, also had an impact on the equity ratios, as it led to an increase in requirements of PLN 0.08 billion and to a decrease in own funds of approx. -PLN 0.11 billion as a result of writing off the rights to perpetual usufruct of land, which in turn led to a decrease in the total capital ratio of approx. 15 bp and of the T1 base capital ratio of approx. 14 bp.

Compared with 31 December 2018, the total capital ratio of PKO Bank Polski as at 31 December 2019 dropped to 20.66% (-0.67 p.p. y/y), and the core capital T1 ratio went down to 19.21% (-0.59 p.p. y/y).

The drop in the T1 ratio mainly resulted from an increase in capital requirements of approx. PLN 0.8 billion which was party compensated by an increase in own funds, mainly as a result of the accumulation of a part of the bank’s net profit earned in the first half of 2019 of PLN 1 042 billion.