CEO’s letter

Dear shareholders and partners,

It is my pleasure to present to you the annual report
of the PKO Bank Polski Group.

Traditionally, we have reported good results and we are continuing this tradition by reporting the results of our activities in 2019. This was a very intense and at the same time fruitful year in the bank's development. The scale of our organization's operations increased significantly, the financial results were excellent and the effectiveness ratios improved.

Annual Report
We have achieved our financial strategy goals two years in advance. The strategy has been updated with new ambitious financial goals and provides for continuation of our digital transformation. PKO Bank Polski is entering the second century of its operations in excellent condition and is prepared to take on new, bold challenges to continue supporting the development of Poland and the Poles in the coming decades, while changing into a banking platform.

In 2019, we made a full use of the very good economic situation in Poland, with the GDP growth rate exceeding 4 percent, rising income of the population and good conditions on the labour market. By perfecting the internal processes and product offer, as well as focusing on the needs of our clients, the Group increased the balance sheet total up to PLN 348 billion, generating PLN 4.03 billion in consolidated net profit, which is 7.8 percent higher than a year before.

As a result of our consistent cost discipline, the cost-to-income ratio was reduced to 41.9 percent. Simultaneously, the quality of the credit portfolio improved, whereas cost of risk dropped down to 0.47 percent. Efficiency (measured with return on equity) remained high at 10 percent, while capital indices and other criteria specified by the financial supervision authority met a level allowing for disbursement of dividend up to 50 percent from the profit for the previous year. In 2019, the company’s excellent financial condition allowed dividend of PLN 1.66 billion to be paid out from the profit earned in 2018. Part of the 2018 profit of PLN 1.67 billion remained undivided, and is therefore available for disbursement in 2020.

PKO Bank Polski is entering the second century of its operations as an undisputed sector leader and at the same time the most valuable company on the Warsaw Stock Exchange (WSE). In 2019, PKO Bank Polski was also the leader in terms of trades of its shares generated on the WSE, and is the only Polish company included in the group of large companies of the developed market index by the global agency FTSE Russell. The actions taken by the bank are not only reflected in its market position, but also appreciated by international experts. For the fifth time in 2019, PKO Bank Polski was awarded the “Bank of the Year in Poland” title by the British monthly The Banker, a member of the Financial Times Group. This is undoubtedly a token of appreciation for the bank’s position on the market, its successes to-date and its strategic potential for further development.

In its operations, the bank applies the principle of sustainable development and pays increasing attention to the manner of using natural resources. In response to climate change, we began analysing the bank’s impact on the natural environment and we introduced climate factors as one of the criteria to be considered in sector policies, including with respect to high-emission industries. We also assessed the amount of greenhouse gases resulting from the bank’s operating activities – we started mapping the product portfolio and launched an ESG project to coordinate works on social, environmental and corporate governance challenges. Our actions to-date are reflected in the improvement of the bank’s ESG ratings.

In the coming years, the development of the PKO Bank Polski Group will be determined by how we use the potential of digital transformation. This global trend is our greatest inspiration, and its skilful adoption will bring successes such as those achieved by IKO – our flagship mobile app. In 2019, it was rated as the best in the world for the second time in a row according to customer opinions in the ranking of the British monthly Retail Banker International. IKO earned the largest number of positive opinions from among 100 banks globally that were included in the ranking. Our intention in developing our mobile banking is to make it as simple and as intuitive as possible, and this is what has gained the customers’ highest appreciation. Currently, IKO boasts more than 4.2 million active applications and a rapid increase in the number of transactions made via smartphones, making the bank the leader of mobile banking in Poland.

Today, the use of modern technologies and innovative solutions is the key to success in almost every field of life. Therefore, we are not stopping in our efforts to ensure that developments in this area contribute to building even more long-lasting relations with our customers, and to creating added value for our shareholders and for the whole Polish economy. Our paperless policy in banking processes is an excellent example of such actions. In 2019, our banking advisors in selected branches throughout Poland were equipped with touch screens, which allow for signing up for the most popular transaction services without paper documents. We also decided to participate in a joint three-bank investment in Autenti, a company that created a platform for digital signature and digital workflow of documents. The solution offered by the company will be used in the bank’s day-to-day business, where it will enhance the already-efficient workflow of electronic documents, in synergy with other tools at our disposal.

The strong position achieved by PKO Bank Polski during its 100 years of operations and the bank’s technological potential give us a natural mandate to take up the challenges, which extend outside the world of finance. The establishment of Polish National Cloud Operator, a technological company that offers services related to maintaining and remote processing of data, and offering digital transformation and cybersecurity to Polish businesses and public administration, is one example of our technological potential. In 2019, the company began its operations, and during the first few months it engaged in its first strategic partnership with Google. It will enable a significant acceleration of the digitization of the Polish economy, and at the same time guarantee that data is processed and safeguarded in Poland.

PKO Bank Polski has proudly commenced the second century of its operations. The sense of responsibility we feel each day for our organization’s further development motivates us to make further bold decisions. We remain faithful to our mission and constantly fuel our appetite for further successes, which will benefit not only our shareholders, customers, employees, but also the entire Polish economy.

Zbigniew Jagiełło
President of the Management Board of PKO Bank Polski

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