Group’s financial position

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

Annual Report

Key financial indicators of the Group

31.12.2018 31.12.2019 Change (y/y)
ROE net (net profit/average total equity) 10.00% 10.00% 0.0 p.p.
ROTE net (net profit/average equity less intangble assets) 11.00% 10.90% -0.1 p.p.
ROA net (net profit/average total assets) 1.20% 1.20% 0.0 p.p.
C/l (cost-to-income ratio) 44.20% 41.90% -2.3 p.p.
Net interest margin (net interest income/average interest-bearing assets) 3.40% 3.40% 0.0 p.p.
Share of impaired loans 4.90% 4.10% -0.8 p.p.
Cost of credit risk 0.59% 0.47% -0.12 p.p.
Capital adequacy ratio (own funds/total capital requirement*12.5) 18.88% 18.42% -0.46 p.p.
Tier 1 capital ratio (CET 1) 17.54% 17.16% -0.38 p.p.

Consolidated income statement

2018 2019 Change
(in PLN mln)
Net interest income 9 345 10 279 934 10.0%
Net fee and commission income 3 013 3 047 34 1.1%
Net other income 981 1 344 363 37.0%
Dividend income 12 14 2 16.7%
Net income/expense on financial operations 163 320 157 96.3%
Net foreign exchange gains/(losses) 489 473 -16 -3.3%
Net other operating income and expenses 317 537 220 69.4%
Result on business activities 13 339 14 670 1 331 10.0%
Administrative expenses -5 897 -6 148 -251 4.3%
Tax on certain financial institutions -950 -1 022 -72 7.6%
Net operating profit/(loss) 6 492 7 500 1 008 15.5%
Net write-downs and impairment -1 451 -1 712 -261 18.0%
Shares in profits (losses) of associates and jointly controlled entities 37 31 -6 -16.2%
Profit before tax 5 078 5 819 741 14.6%
Income tax -1 336 -1 787 -451 33.8%
Net profit (including non-controlling shareholders)  3 742 4 032 290 7.7%
Profit (loss) attributable to non-controlling shareholders 1 1 0 0.0%
Net profit 3 741 4 031 290 7.8%

Net profit of the PKO Bank Polski Group in 2019 amounted to PLN 4 031 million and was higher by some PLN 290 million (+7.8% y/y). The result on business activities reached PLN 14 670 million and was higher by PLN 1 331 million (+10.0% y/y), mainly due to an increase in net interest income.

Net interest income for 2019 amounted to PLN 10 279 million (+PLN 934 million y/y). The higher result was determined by an increase in volume, while interest margin was maintained.

Interest income* amounted to PLN 12 760 million and was PLN 1 166 million higher than in 2018, mainly due to:

  • an increase in financing granted to customers of PLN 949 million y/y – related to the increase in the amounts due from loans and leases of over PLN 17 billion and an increase in average interest rate resulting from a change in their structure (an increase in the share of consumer loans and lease receivables mainly at the expense of foreign currency housing loans) with stable market interest rate levels for PLN, CHF and EUR,
  • higher income on securities (+PLN 243 million y/y), mainly as a result of the increase in the average volume of Treasury bonds of PLN 12 billion.

*To ensure data comparability, interest income was adjusted as follows: income on non-Treasury bonds, which are recognized in income from debt securities in the financial statements, was transferred to income for loans and advances to customers.

In 2019, interest income dropped by PLN 178 million in connection with the judgment of the Court of Justice of the European Union in respect of consumer’s right to reduce the loan’s cost 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 232 million higher than in the corresponding period of 2018. This resulted mainly from an increase in the costs of the deposit base of PLN 134 million y/y, connected with an increase in the average volume of deposits of PLN 24 million compared with the prior year, with higher costs of external financing of PLN 45 million and higher costs of premium on securities of PLN 58 million.

The net interest margin remained at the prior-year level and stood at 3.4% as at the end of 2019. In 2019, the average interest rate on the bank’s loans was 4.7%, and the average interest rate on total deposits was 0.7%, compared with 4.7% and 0.7% respectively in 2018.

In 2019 net fee and commission income amounted to PLN 3 047 million, i.e. PLN 34 million more than in the previous year.

The level of the net commission income was determined by:

  • higher net income on loans and insurance (+PLN 105 million y/y), mainly in effect of an increase in commission on business loans and leases, and sales of insurance products linked to housing loans,
  • higher net income on payment and credit cards (+PLN 35 million y/y) due to the higher number of cards and higher volumes of non-cash transactions;
  • lower net income on servicing bank accounts and on other activities (-PLN 18 million y/y), related – among other things – to the fall of commissions in cash operations, as a result of growing volume of non-cash transations,
  • lower net income on investment funds, pension funds and brokerage activities (-PLN 88 million y/y), mainly due to a drop in sales of the funds and changes in its structure, and reducing commission for managing funds, mainly as a result of regulatory changes.

Net other income earned in 2019 amounted to PLN 1 344 million and was PLN 363 million higher than in 2018.

Net other income was determined by:

  • higher net income on financial operations (+PLN 157 million y/y), mainly as a result of a higher net result of the remeasurement of shares and net income on embedded derivatives,
  • other net operating income and higher costs of PLN 220 million y/y – among other things, as a result of:
    • recognizing profit on one-off acquisition of PCM of PLN 102 million and recognizing that company’s result in 2019 (PLN 127 million),
    • partially releasing the provision for proceedings before the President of the Office for Competition and Consumer Protection concerning practices which violate the collective interests of consumers* (PLN 58 million), which was set up in 2018 in the amount of PLN 62.5 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,
  • lower net foreign exchange gains/(losses) (-PLN 16 million y/y) – mainly as a result of a drop in the ineffectiveness of CIRS hedges in Hedge Accounting.

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

In 2019 operating expenses amounted to PLN 6 148 million and were 4.3% y/y higher.

*Includes net regulatory charges.

Their level was mainly determined by:

  • an increase by PLN 192 million (+6.4% y/y) of employee benefits, including growth by PLN 112 million in the bank (mainly as a result of conducted in 2019 valuation of job positions) and in other entities of the Group by PLN 79 million (mainly as a result of PCM purchase),
  • a decrease in overheads of PLN 131 million (-8.9% y/y), mainly in connection with a decrease in the following expenses:
    • costs of maintenance and lease of fixed assets (by PLN 185 million, mainly lower costs of property management related to introducing IFRS 16 as of January 2019),
    • with simultaneously higher expenses on: marketing (by PLN 22 million), mainly due to the bank’s centenary and IT expenses (by PLN 21 million),
  • an increase of PLN 82 million (+19.2% y/y) in contributions to the Bank Guarantee Fund (BGF) – BGF costs amounted to PLN 509 million, of which PLN 348 million constituted the contribution to the fund for the mandatory restructuring of banks. In the corresponding period of the prior year costs in respect of the BGF were PLN 427 million, of which the contribution for mandatory bank restructuring was PLN 167 million,
  • an increase of PLN 13 million (+46.4% y/y) of payments to the Polish Financial Supervision Authority (PFSA),
  • an increase of PLN 228 million (+27.8% y/y) in depreciation, mainly in effect of implementing IFRS 16 in respect of the lease of property and cars, and recognition of the costs of acquisition of PCM of PLN 87 million, with a simultaneous drop in the amortization of intangible assets related to extending the period of using the Integrated IT System (ZSI) from the end of 2023 until the end of 2030,
  • a drop of PLN 130 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 a result of the implementation of IFRS 16, non-personnel costs were not charged with lease instalments of approx. PLN 219 million. The costs of lease instalments were allocated to depreciation in the amount of approx. PLN 206 million and to interest expenses of PLN 26 million.

The effectiveness of operations of the PKO Bank Polski Group measured with the C/l ratio was 41.9% (on an annual basis) and improved by 2.3 p.p. y/y in consequence of better results on business activities (+10.0% y/y), with a lower increase in operating expenses (+4.3% y/y).

In 2019, net write-downs and impairment with costs of the legal risk of mortgage loans in convertible currencies amounted to -PLN 1 712 million and was PLN 261 million less favourable than in 2018.

In 2019, the bank recognized the impact of 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 relates to potential customer claims.

After excluding the costs of the legal risk, the net write-downs and impairment in 2019 amounted to -PLN 1 261 million and was PLN 190 million better than in 2018. The improvement was mainly related to loans.

The share of impaired loans amounted to 4.1% as at the end of 2019 (-0.8 p.p. y/y). In 2019, a part of the consumer loan portfolio measured at amortized cost (approx. PLN 9 billion) was reclassified to the portfolio measured at fair value through profit or loss which resulted in a decrease in the share of impaired loans of approx. 0.2 p.p. The cost of credit risk was 0.47% as at the end of 2019 (+0.12 p.p. y/y).

The improvement in risk ratios with a simultaneous increase in the gross loans and advances to customers of 3.6% y/y is the effect of the continuation of the current conservative credit risk management policy of the bank’s Group and strict monitoring of the receivables portfolio.


Consolidated statement of financial position

As at the end of 2019 the PKO Bank Polski Group’s total assets amounted to approx. PLN 348 billion and increased by approx. PLN 24 billion as of the beginning of the year. Thus, the Group strengthened its leading position in terms of size on the Polish banking market.



The bank’s Group noted an increase in financing granted to customers, in cash and balances with the Central Bank and in the securities portfolio. In respect of the financing sources, from the beginning of the year, there was an increase in amounts due to customers, mainly the population, and in external financing in the form of issues of securities.

As at the end of 2019, financing granted to customers of the bank’s Group exceeded PLN 245.3 billion and increased by over PLN 15 billion y/y.

In the term structure of loans and advances 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 Group’s assets. At the end of 2019, they amounted to PLN 256.2 billion, marking a PLN 17.4 billion increase since the beginning of the year. The main factor that contributed to the increase in the deposit base was the increase in deposits placed by individuals (+PLN 21.4 billion) and business entities (+PLN 1.1 billion), accompanied by a decrease in deposits placed by state budget entities (-PLN 5.1 billion).


The share of current deposits in the break-down of total deposits increased and amounted to 69.8% (+5.6 p.p. y/y).

The PKO Bank Polski Group is an active participant of the debt securities markets, both Polish and international. Such activities are aimed at diversifying the sources of financing operations and adapting them to the regulatory requirements.

As at the end of 2019 the level of long-term external financing was approx. PLN 37 billion and it increased by PLN 1.0 billion compared with the beginning of the year.


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

  • continued issue of mortgage covered bonds by PKO Bank Hipoteczny with a nominal value  of EUR 700 million and PLN 500 million,
  • redemption of bonds issued by PKO Finance AB of EUR 500 million in January 2019,
  • as part of the securitization of lease receivables of PKO Leasing, issue of bonds with a nominal value of PLN 1.8 billion in September 2019 taken up by external investors,
  • repayment of loans received from international financial institutions.

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