Bank’s financial position

The results achieved by PKO Bank Polski enabled key financial effectiveness ratios to reach levels presented below:

Annual Report

Key financial indicators of PKO Bank Polski

31.12.2018 31.12.2019 Change (y/y)
ROE net (net profit/average total equity) 9.1% 9.8% +0.7 p.p.
ROTE net (net profit/average equity less intangble assets) 9.7% 10,.4% +0.7 p.p.
ROA net (net profit/average total assets) 1.2% 1.3% +0.1 p.p.
C/I (cost-to-income ratio) 43.5% 41.0% -2.5 p.p.
Net interest margin (net interest income/average interest-bearing assets) 3.4% 3.4% 0.0 p.p.
Share of impaired loans 5.0% 4.2% -0.8 p.p.
Cost of credit risk 0.46% 0.61% -0.15 p.p.
Total capital ratio 21.33% 20.66% -0.67 p.p.
Tier 1 capital ratio (CET 1) 19.80% 19.21% -0.59 p.p.

Income statement

2018 2019 Change
(in PLN million)
Change (y/y)
Net interest income 8 544 9 279 735 8.6%
Net fee and commission income 2 482 2 470 -12 -0.5%
Net other income 912 1 037 125 13.7%
Dividend income 323 561 238 73.7%
Net income/expense on financial operations 175 329 154 88.0%
Net foreign exchange gains/(losses) 469 475 6 1.3%
Net other operating income and expenses -55 -328 -273 6x
Result on business activities 11 938 12 786 848 7.1%
Administrative expenses -5 187 -5 237 -50 1.0%
Tax on certain financial institutions -883 -931 -48 5.4%
Net operating profit/(loss) 5 868 6 618 750 12.8%
Net write-downs and impairment -1 397 -1 500 -103 7.4%
Profit before tax 4 471 5 118 647 14.5%
Income tax -1 136 -1 283 -147 12.9%
Net profit 3 335 3 835 500 15.0%



In 2019 PKO Bank Polski generated net profit of PLN 3 835 million (+15.0% y/y, i.e. PLN 500 million higher y/y), mainly as a result of higher profit on business activities and a better net write-downs and impairment balance, with higher administrative expenses.

The result on business activities in 2019 amounted to PLN 12 786 million and was PLN 848 million (+7.1% y/y) higher than in 2018, mainly in effect of an increase in net interest income of PLN 735 million y/y, and other income of PLN 125 million y/y, accompanied by a drop in net fee and commission income of PLN 12 million y/y.

Net interest income for 2019 amounted to PLN 9 279 million (+PLN 735 million y/y). The higher result was determined mainly by an increase in income on financing granted to customers, and income on securities in effect of the increase in the volumes.

In 2019 interest income* amounted to PLN 11 360 million and was 8.1% higher than in 2018 due to:

  • an increase in income from financing granted to customers of PLN 573 million y/y – related to the increase in the average volume of financing granted to customers of PLN 11 billion, with a change in the loan structure (a higher share of consumer and business loans and a lower share of foreign currency housing loans), with unchanged levels of market interest rates for PLN, CHF and EUR,
  • higher income on securities (+PLN 248 million y/y), mainly as a result of the increase in the average volume of PLN 12 billion, which resulted from purchases of T-bonds.

*To ensure data comparability, interest income was adjusted as follows: income from non-Treasury bonds, which are recognized in income from debt securities in the financial statements were transferred to income from financing granted to customers.

In 2019, interest income went down by PLN 178 million in connection with the judgment of the Court of Justice of the European Union in respect of the consumer’s right to reduce the cost of the loan in the event of repaying the loan before the deadline specified in the loan agreement.

Interest expense amounted to PLN 2 481 million and was PLN 121 million higher than in 2018. The higher interest expense was mainly the effect of an increase in the costs of the deposit base of PLN 69 million y/y, mainly current deposits.

The net interest margin remained unchanged y/y and amounted to 3.4% as at the end of 2019. In 2019, the average interest rate on PKO Bank Polski loans was 4.6%, and the average interest rate on total deposits was 0.6%, compared with 4.5% and 0.7% respectively in 2018.

In 2019, net fee and commission income amounted to PLN 2 470 million and was PLN 12 million lower than in the previous year.

The level of the net fee and commission income was determined by:

  • lower net income on investment funds and brokerage activities (-PLN 128 million y/y), mainly due to a drop in sales of the funds and changes in its structure, and reducing commission for managing funds and distributing participation units,
  • lower net income on servicing bank accounts and on other activities (-PLN 19 million y/y), related – among other things – to the fall of commissions in cash operations, as a result of growing volume of non-cash transactions,
  • higher net income on loans and insurance granted (+PLN 102 million y/y), mainly in effect of an increase in commission on business loans and leases, and sales of insurance products linked to these loans,
  • higher net income on payment and credit cards (+PLN 33 million y/y) due to the higher number of cards and higher volumes of non-cash transactions.

In 2019, net other income amounted to PLN 1 037 million and was PLN 125 million higher than that earned in 2018.

Net other income was determined by:

  • higher dividend income (+PLN 238 million),
  • higher net income on financial operations (+PLN 154 million y/y) – mainly as a result of higher net income on the remeasurement of the bank’s investment securities and net income on embedded derivatives,
  • higher net foreign exchange income (+PLN 6 million y/y) – mainly due to a better result on customer activities,
  • lower net other operating income and costs (-PLN 273 million y/y) as a result of:
  • recognizing costs of additional financing for a subsidiary of PLN 274 million,
  • setting up a provision for return of costs to customers in respect of the early repayment of consumer and mortgage covered loans of PLN 127 million,
  • partially releasing the provision for proceedings before the President of the Office for Competition and Consumer Protection concerning practices that violate the collective interests of consumers* (PLN 58 million), which was set up in 2018 in the amount of PLN 62.5 million.

*Information on setting up the provision was published in Current report no. 24/2018 on 27 June 2018.

In 2019, administrative expenses amounted to PLN 5 237 million and were 1.0% y/y higher.

Their level was mainly determined by:

  • an increase in the costs of employee benefits of PLN 117 million (+4.4% y/y), mainly as a result of conducted in 2019 valuation of working positions,
  • a decrease in non-personnel costs of PLN 147 million (-11.4% y/y), mainly in connection with lower expenses on the costs of maintenance and lease of fixed assets (mainly lower costs of property management related to introducing IFRS 16 as of January 2019),
  • an increase of PLN 65 million (+15.4% y/y) in contributions to the Bank Guarantee Fund (BGF),
  • an increase of PLN 12 million (+48% y/y) of payments to the Polish Financial Supervision Authority (PFSA),
  • an increase of PLN 140 million (+20.6% y/y) in depreciation, mainly in effect of implementing IFRS 16 in respect of the lease of property and cars, with a simultaneous drop in the amortization of intangible assets related to the computerization of the Bank, which resulted mainly from extending the period of using the Integrated IT System (ZSI) from the end of 2023 to the end of 2030,
  • a drop of PLN 135 million in the costs of withheld tax on the issue of foreign bonds related to adjustments  in gross-ups of interest for the years 2017-2019 and accounting for the 3% tax on interest paid for the period 2014‑2019), due to changes in tax regulations.

As part of employee costs in 2019, the bank incurred costs of prizes paid of PLN 57 million.

The effectiveness of operations of PKO Bank Polski measured with the C/l ratio was 41.0% (on an annual basis) and improved by 2.5 p.p. y/y in consequence of materially better results on business activities (+7.1% y/y), with a limited increase in operating expenses (+1.0% y/y).

In 2019, net write-downs and impairment together with costs of the legal risk of mortgage loans in convertible currencies amounted to -PLN 1 500 million and was PLN 103 million lower than in 2018.

In 2019, the bank recognized the impact of the legal risk of mortgage loans in convertible currencies of -PLN 451 million, of which: -PLN 29 million for repaid foreign currency loans for potential litigation, PLN -281 million for active loans in respect of changed estimated cash flows and -PLN 141 million for the provision for pending litigation. The balance sheet value of gross loans was adjusted by -PLN 422 million. The legal risk is connected with the portfolio of mortgage loans in convertible currencies granted to households and is related to potential customer claims.

*Includes cost of legal risk of mortgage loans in convertible currencies in the amount of PLN 451 million.

After excluding the costs of legal risk, the result amounted to -PLN 1 049 million and was PLN 348 million better in the prior year. The improvement was related to all items, mainly business loans.

The share of impaired loans amounted to 4.2% as at the end of 2019 (a 0.8 p.p. decrease compared with 2018). The cost of credit risk was 0.46% as at the end of 2019, which is a 0.15 p.p. improvement compared with the prior year.

The improvement in risk ratios with a simultaneous increase in gross financing granted to customers of approx. 1.0% y/y is the effect of the continuation of the current conservative credit risk management policy of the bank and of strict monitoring of the receivables portfolio.

Statement of financial position

Total assets, and total equity and liabilities of PKO Bank Polski exceeded PLN 317 billion (+PLN 16.8 billion y/y) by the end of 2019. PKO Bank Polski strengthened its leading position in terms of size on the Polish banking market.

On the assets side, the bank noted an increase in financing granted to customers and in the securities portfolio. With regard to the sources of financing, from the beginning of the year, there was an increase in amounts due to customers, mainly the population, and other liabilities, connected with recognizing in this component liabilities relating to the lease in connection with the implementation of IFRS 16.

As at the end of 2019 financing granted to the bank’s customers amounted to PLN 215.9 billion, which indicates an increase of PLN 8.8 billion y/y.

*Including non-Treasury bonds (excluding those held for trading).

Business loans and housing loans were the main items in the structure of net loan portfolio by type, with shares of 43.6% and 42.9% of the portfolio as at the end of 2019.

In 2019, a further increase was noted in the most profitable consumer loans (of PLN 3.0 billion) and business loans (of PLN 4.9 billion). The bank’s housing loans only increased by PLN 0,8 billion y/y due to the further sale of mortgage covered housing loans to PKO Bank Hipoteczny.

In the term structure of financing granted to customers, long-term loans dominate, which is mainly due to the high share of housing loans in the loan portfolio.

Amounts due to customers constitute the basic source of financing the bank’s assets. At the end of 2019, amounts due to customers amounted to PLN 252.9 billion, which is an increase of PLN 16.6 billion since the beginning of the year. The main factor that contributed to the increase in the deposit base was an increase in deposits placed by individuals (+PLN 21.2 billion) and deposits placed by business entities (+PLN 0.4 billion), accompanied by a decrease in deposits placed by State budget entities (-PLN 5.1 billion).


In the break-down of total amounts due to customers, the share of current deposits increased to 70.4% (+5.7 p.p. y.y).

PKO Bank Polski has been an active participant of the debt securities markets, both Polish and international for many years, which enables it to diversify the sources of financing its operations and to adapt them to the regulatory requirements regarding the long-term financial stability. In 2019, borrowings decreased by PLN 4.4 billion.

The following factors had an impact on the level of financing:

  • loans received from non-monetary financial institutions, including primarily from the subsidiary PKO Finance AB, went down by PLN 2.1 billion,
  • loans received from international financial institutions decreased by PLN 1.6 billion,
  • own issues for the domestic market went down by PLN 0.6 billion.

Detailed information on the issues conducted by PKO Bank Polski is provided in Note 30 and Note 31.

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