Major events in 2017

The PKO Bank Polski SA Group has been strengthening its position as leader of Polish banking, offering services to retail as well as institutional customers for ninety-eight years.

2017 in a nutshell:

  1. PKO Bank Polski SA is the most valuable Polish company listed on the WSE. The value of the Bank’s shares reached PLN 55 billion, and the price of the shares increased during the year by more than 57%.
  2. The Bank’s Group acquired KBC TFI SA and plans merging the new company with PKO TFI SA, which would additionally accelerate the current dynamic development of PKO TFI SA, which is already a leader in the retail funds segment.
  3. PKO Bank Polski SA continued its development abroad and formed the second foreign branch – the corporate branch in Prague.
  4. The Bank’s Group was increased for ZenCard Sp. z o.o., which provides services within the scope of IT and computer technologies.

Major events in 2017

The development of the business activities of the PKO Bank Polski SA Group in 2017 and the results achieved confirmed its position as a leader in the Polish banking system. The market value of PKO Bank Polski SA exceeded PLN 55 billion as at the end of 2017, which means that the Bank is the most valuable Polish company quoted on the Warsaw Stock Exchange.

The PKO Bank Polski SA Group executes its strategy of “We support the development of Poland and the Poles”, which is in answer to the changing market environment and to the need to adapt to the new challenges facing the banking sector and the Polish economy. The direction of the transformation of the Bank’s business model remains strictly linked to the dynamically developing digitization of social life and Poland’s economic development strategy.

The Bank’s Group systematically develops electronic banking channels and the innovativeness of the branches

The financial sector is one of the most technologically advanced sectors and the PKO Bank Polski SA Group has been setting trends in this field for years.

  • PKO Bank Polski SA maintains the leader’s position in mobile banking in Poland. The number of IKO activations exceeded 2 million in 2017, which means that their number was nearly doubled during the year. The application software IKO is ranked first among mobile banking application software in the three largest shops with application software: Google Play, App Store and Windows Phone Store and for more than two years now the number of stars awarded to IKO has not dropped below 4.5 out of 5. In March 2017, IKO won in the ranking of mobile applications of the 100 largest banks in the world, conducted by the prestigious British monthly Retail Banker International – it is the most highly assessed mobile application by its users.
  • PKO Bank Polski continually develops the electronic banking functionality. In 2017, the Bank’s customers were given the possibility of applying via iPKO electronic banking for the Tax Office to prepare their initial tax return for 2016 in the form of PIT-37 and submit it on behalf of the taxpayer. Customers were eager to make use of the e-administration solutions offered to them as part of the transaction services – the number of Trusted Profiles opened by customers in iPKO and Inteligo exceeded 200 thousand; additionally, nearly 180 thousand applications for benefits from the Rodzina 500+ (Family 500+) programme were submitted. The year 2017 was also a year of starting work on a ground-breaking solution for future entrepreneurs – a fully remote process for registering a business and at the same time opening a bank account. The application was put through testing at the end of 2017, and in the first weeks of 2018, the customers were able to use it. The Bank also introduced new solutions in the area of online payments – faster, more convenient and more secure shopping through the Internet is ensured by a new function “Płacę z iPKO”, which enables choosing a credit card as a means of payments.
  • An important innovation introduced by PKO Bank Polski SA in cooperation with Krajowa Izba Rozliczeniowa SA (KIR) and Polski Standard Płatności Sp. z o.o. (PSP) is a new type of payment in offices and e-offices – a transfer initiated using the BLIK code from IKO. It enables accepting payments at any office counter directly in an officer’s computer, which uses a special application available via KIR.
  • The Bank introduced the first self-service desks in its branches. The self-service desks can be used by all inpidual and corporate clients holding cards to their bank accounts. The first self-service desks were made available to customers for their convenience: two in Warsaw and two in Jelenia Góra. The desks have been equipped with touchscreens and additional software which enables effecting more complex transactions other than deposits and cash withdrawals.
  • For the first time in Poland tests of the digital pen were conducted thanks to which a form signed by a customer can reach the banking system in real time. PKO Bank Polski SA together with the start-up IC Solutions started the pilot programme of the IC Pen. The shorter time of service, reducing the amount of used paper and automatic digital archiving – are only some of the benefits of the innovative solution.
  • The Bank introduced a service called PKO Masowe Wypłaty which enables cash withdrawals. To date, such transactions were only possible in the Bank’s branches or agencies. This function was introduced in 3 thousand of the Bank’s own ATM machines. PKO Masowe Wypłaty is a service addressed to firms or institutions that perform numerous one-off cash withdrawals, which are ready to outsource this process outside their own network. The service is also offered to customers who perform repeated withdrawals on behalf of beneficiaries who do not have a bank account or prefer to receive cash.
  • The ZenCard loyalty platform has been integrated with the systems of CEUP eService Sp. z o.o. acting as the Bank’s Group clearing agent, which provided the possibility of offering an added service to retail chains. The first joint project with ZenCard Sp. z o.o. and CEUP eService Sp. z o.o. was the promotion campaign for customers of the MAKRO chain who paid by Visa card.

Thanks to its extensive product offer and professional customer service, the Bank’s Group is a leading partner of Polish entrepreneurship

The Bank’s Group offers comprehensive solutions tailored to the inpidual needs of its corporate customers, taking into account their size, industry sector and current development stage. It ensures professional tools to the customers, which are helpful in conducting business activities. The Bank’s Group analyses customer expectations and adapts the current product offer so as to best deal with the growing competition and satisfy both the lending and other than lending needs of its customers. In 2017, the Bank undertook the following activities:

  • The Bank created an automatic connection with the register of the Central Register and Information on Economic Activity (CEIDG) operated by the Ministry of Development. Thanks to downloading data directly from the CEIDG, the process of opening a corporate account has been simplified and accelerated.
  • PKO Bank Polski SA and Polskie Górnictwo Naftowe i Gazownictwo SA (PGNiG) signed an agreement on strategic cooperation in the area of transaction banking. The agreement enables commission-free payment of bills by retail customers of PGNiG in nearly 1.2 thousand branches and 0.8 thousand agencies of PKO Bank Polski SA throughout the country.
  • PKN ORLEN and PKO Bank Polski SA signed an agreement for maintaining a cash pool system the overriding objective of which is to centralize financial liquidity in the international ORLEN Group. As the first step, the Bank will ensure centralization of the cash of companies from Poland, Germany, the Czech Republic, Lithuania, Latvia, Estonia and Sweden. The cash pool system will include ongoing consolidation of positive and negative balances in the main currencies used by the Group. By signing this major contract, the Bank strengthened its leader’s position in banking services to large capital groups.
  • The branch of PKO Bank Polski SA in the Czech Republic (with its registered office in Prague) has begun operations. Based on this branch PKO Bank Polski SA wishes to become the first choice bank for Polish companies operating on the Czech market and a gateway for Czech companies entering the Polish market. The branch in Prague is the second branch of the Bank abroad, after the branch of PKO Bank Polski SA in the Federal Republic of Germany (with its registered office in Frankfurt am Main).
  • A joint product of PKO Bank Polski SA and Korporacja Ubezpieczeń Kredytów Eksportowych (KUKE) “Polisa na Świat” was launched on the market and is available in the Bank’s outlets throughout Poland. Thanks to the strategic cooperation of PKO Bank Polski SA and KUKE (the PFR Group), the Bank provides support to Polish companies in their foreign expansion.
  • In September 2017, the Bank signed a contract for serving the budget of the Pomorskie Voivodeship. It is the eighth of the sixteen voivodeships that is served by the Bank next to Kujawsko-Pomorskie, Lubelskie, Mazowieckie, Podkarpackie, Świętokrzyskie, Wielkopolskie and Zachodniopomorskie. In this way, the Bank confirmed its position of unquestioned leader in the sector of services to local governments.
  • The Bank launched the Export Support Platform (Platforma Wsparcia Eksportu) – a comprehensive analytical tool with up-to-date business data and analyses which helps entrepreneurs establish commercial relations on foreign markets and educates and supports them in their proper choice of financial instruments that would be useful in international trade and which are to be found in the offer of the Bank’s Group.

Increased scale of operations of the PKO Bank Polski SA Group thanks to a selective approach to acquisition.

The PKO Bank Polski SA Group effectively combined dynamic organic growth with selective acquisitions conducted on terms that are attractive for the group and the shareholders.

  • In the fourth quarter of 2017, the Bank’s Group acquired 100% of shares in KBC TFI SA by which as at the end of 2017 it strengthened its position in the segment of retail funds, with a market share of 17.2%. According to plans, the investment fund companies operating as part of the Bank’s Group will be merged in the first half of 2018. Thanks to the planned business combination of PKO TFI SA and KBC TFI SA, the customers will gain access to a more comprehensive offer for depositing their savings. As at the end of 2017, the two companies managed assets with a value of over PLN 29 billion.
  • In the first quarter of 2017, the Bank’s Group acquired 100% of shares in ZenCard Sp. z o.o., which provides services within the scope of IT and computer technologies. The Company developed a platform for creating rebate and loyalty programmes, which at the same time enables the virtualization of loyalty cards. The platform is integrated with the payment terminal and enables resigning from numerous separate loyalty cards or separate applications installed on telephones, as it offers one customer payment card, which at the same time is a virtual loyalty card for each of the sales agents. The company’s strategic partner is CEUP eService Sp. z o.o. – one of the largest clearing agents in Poland.

The activities undertaken by the PKO Bank Polski SA Group in 2017 enabled it to achieve very good financial results and strengthen its position among the largest financial institutions in Poland.

The net profit generated by the PKO Bank Polski SA Group in 2017 amounted to PLN 3 104 million, which represents an 8.0%, i.e. nearly PLN 230 million increase compared with the prior year. The level of the net profit achieved was determined by:

1) an improvement of the result on business activities, which amounted to PLN 12 563 million (+6.6% y/y), mainly due to:

  • an increase in the net interest income of 11.0% y/y, which was mainly achieved thanks to an increase in interest income;
  • an increase in net commission income of 10.2% y/y, among others, from investment funds and insurance activity;
  • a decrease in other net income of PLN 354 million, which was mainly associated with the settlement of the acquisition of Visa Europe Limited by Visa Inc. in June 2016 and the sale of assets of Qualia Development Sp. z o.o. and its subsidiaries in the third quarter of 2016.

2) an increase in tax on certain financial institutions (the bank tax) of PLN 103 million y/y, related to the increased scale of the Bank Group’s operations and a mismatch of the periods for which the tax is due (the tax is payable from February 2016);

3) an increase in administrative expenses of 3.5% y/y, mainly employee benefits. The C/I ratio as at the end of 2017 amounted to 46.0% compared with 47.4% as at the end of 2016;

4) stable net impairment allowance and write-downs of PLN 1 620 million and a decrease in the costs of risk to 71 b.p.

The improvement in the results of the PKO Bank Polski SA Group was possible thanks to the structure of the balance sheet which was characterized by a strong deposit base and a safe level of equity. The ratio of loans to deposits (amounts due to customers) as at the end of 2017 amounted to 94.0% (the ratio of loans to stable sources of financing1 amounted to 83.2%), which proves the very good condition of liquidity of the Bank’s Group.

As a result of actions undertaken in 2017, the PKO Bank Polski SA Group:

  • increased total assets by over 11 billion PLN and customers receivables portfolio by over 5 billion PLN;
  • exceeded 7 million current accounts of inpiduals, thus strengthening its leadership position in this category;
  • increased the number of customers by nearly 300 thousand, mainly in the household segment and the number of customers using the IKO mobile banking, which exceeded 2 million at the end of 2017;
  • maintained a high share in the loans and deposits market on a level of 17.7% and 17.9%, respectively;
  • was the first on the market of housing loans to inpiduals2 having a nearly 30% market share;
  • was the largest lender to small and medium enterprises of loans with de minimis guarantees, having a 20.5% market share;3
  • significantly improved the quality of the loan portfolio measured by the ratio of impaired loans and reduced the cost of risk;
  • extended the offer of insurance and investment products and property insurance to customers, among other things, by introducing insurance products unrelated to banking products, available in iPKO and IKO mobile channels into its offer;
  • strengthened its capital position by increasing equity through retaining the net profit generated in 2016, which translated into an increase in the total capital adequacy ratio by 1.56 p.p. compared with the end of 2016 to 17.37%.

1. Stable sources of financing include amounts due to customers and external financing in the form of subordinated liabilities, own issue of debt securities and loans received from financial institutions.
2. Data from the Polish Banks Association.
3. According to the data provided by Centrum Poręczeń i Gwarancji Banku Gospodarstwa Krajowego of 31 December 2017.