Financial Results of the PKO Bank Polski Group for the year 03 Warsaw, 0 March 04
. Executive summary 3. Financial results 6 3. Risk management 9 4. Business activity 34 5. Appendix 44
Executive summary Consolidated net income in Q4 03 rose by 5% q/q to PLN 938 mn,, bringing consolidated net income for the year 03 to PLN 3,30 mn (y/y decline of 3.6%). Net income on business activity for the year 03 reached PLN 0.7 bn (y/y decline of 7.9%), including the Q4 03 increase of 5.8% q/q. Increase in net interest income (+5.4% q/q) achieved primarily through reduction of interest expense resulting from adjustment of the price offer for deposit products and shift in their structure toward current deposits; Increase in net fee & commission income (+7.7% q/q) achieved primarily through increased net income from servicing of investment funds and brokerage activities; and increased net income from sale of loan insurance; Increase in net other income by PLN 505 mn q/q, primarily the effect of sale of a majority interest in the eservice company. Expansion of the operating base Assets increase to PLN 99 bn (+3.% y/y) as net loans increase to PLN 50 bn (+4.3% y/y), funded through increase in deposits from customers to PLN 5 bn (+3.9% y/y). Cost discipline and improved portfolio quality Reduction of operating costs by.3% in annual terms; Reduction of the cost of risk by 4 bps y/y, improvement in coverage ratio by. pps y/y and decline in NPL by 0.7 pps y/y (-0.4 pps q/q). Retention of high operational efficiency Cost / Income ratio (C/I) at 43.% Return on Equity (ROE) at 3.% Return on Assets (ROA) at.6% Interest margin at 3.7% Strong liquidity and capital position Loans / Stable funding resources at 90% Capital Adequacy Ratio at 3.6% (Core Tier at.5%) 3
Selected 03 Business Initiatives Acquisition of Nordea Group assets in accordance with Strategy for 03-05 05 PKO Bank Polski executed an agreement for acquisition of Nordea Bank Polska, Nordea Finance Polska, Nordea Polska TUnŻ, and of a corporate loan portfolio serviced by Nordea, a Nordic-based financial services group. The benefits accruing from the transaction will include, among others: growth of its affluent segment customer base; expansion of the key urban party of its distribution network; and strengthening of its corporate banking operations. The merger has also created growth opportunities for its bancassurance services and mortgage banking. PKO Bank Polski and EVO Payments International entered into a strategic alliance The Bank signed an agreement with a leading payment services operator active in US, Canada and Europe under which it sold a share stake in eservice and concluded a 0-year strategic alliance in the electronic payments market. The transaction was approved by the European Commission and by the end of 03 PKO Bank Polski finalised the sale of a 66% equity interest in CEUP eservice. The alliance with an international technology partner will accelerate development of the company based on innovative solutions offered to the existing and future clients and customers. New local mobile payments standard PKO Bank Polski and five other banks came to an agreement on development of a new mobile payments standard for Poland, which would be based on the innovative IKO mobile payments solution PKO Bank Polski implemented. In December 03 the aforementioned banks executed a joint investment agreement while in January 04 they registered with the National Court Register the Polski Standard Płatności Sp. z o.o. company and are currently in the process of organising its operational launch. PKO Junior or banking for minors of up to 3 years of age The Bank launched one of the world s first internet banking services addressed to minors, a comprehensive financial education programme in itself. The new personal internet bank account enables children of up to 3 years of age to: collect their allowances and pocket money; initiate money transfers; save for specific purposes; and achieve challenging goals set by parents. Also, with the parents of children between ages of 0 and years in mind the Bank developed the PKO Initial Capital deposit product. New retail network sales model The Bank has launched a retail network project aimed at strengthening its market leadership. The project s key pillars include: a new goal setting and rewards system; focus on profit driving activities and initiatives; and new management tools. Under the branch network regeneration scheme, the customers received 05 upgraded branch facilities in 03 and over 00 such branches over 0-03. 03 also saw reorganisation of the Banks corporate outlet network and implementation of new standards in the work of customer advisers and specialists; all aimed at providing the customers with higher standard customer service efficiency and ensuring greater customer satisfaction at collaboration with the Bank. Bank`s Quality 03 and the Most Valuable Brand once more PKO Bank Polski ranked in the forefront as it took the third position in a league table prepared by TNS Polska and Puls Biznesu. The quality of its customer service standards was rated very highly: with a result of 7.4%, between this year and a year earlier, the Bank leapfrogged four positions. In 03 Dom Maklerski PKO Banku Polskiego ranked first in the Forbes league table of brokerage firms; as assessed by institutional investors (up from position no. 5). The Bank also defended its top positions gained in 0 and was once again number one among financial companies and number in the general classification of the Ranking of Polish Brands. The banking sector leader s brand was valued at PLN 3.7 bn. 4
Selected 03 Business Initiatives PKO Bank Polski investment loans with de minimis guarantees PKO Bank Polski and Bank Gospodarstwa Krajowego signed another cooperation agreement within the framework of a government programme for small and medium enterprises. It enables businesses to apply BGK loan guarantee support toward financing business expansion investment projects. Since March 03 loan guarantee Programme de minimis has suported companies, which had not got sufficient collateral and could not receive a loan. By the 03-end 7.7 thousand guarantees in the amount of about PLN. billion was granted via PKO Bank Polski, which was about 30% of all guarantees granted via banks participating in the Programme. Total amount of guaranteed loans, which were sold by PKO Bank Polski exceeded PLN 3.5 billion in 03 The Inteligo internet banking system experiences important changes PKO Bank Polski completed the process of migrating Inteligo on to the Alnova IT platform, which the Bank operates on. Having a common IT has opened up possibilities of implementing functionalities Inteligo could not offer before. IKO a winner of the Effective Mobile Marketing Awards 03 The IKO application was the winner in the Most Effective Mobile Payment Solution category at the international Effective Mobile Marketing Awards 03 competition organised by the Mobile Marketing Magazine. The competition organisers praised IKO for its attractive graphics and utility. Over 00,000 users have now activated the app, completing over 50,000 phone-enabled transactions. Local government friendly PKO Bank Polski The Bank won a tender for servicing current accounts of the Mazowieckie Region, including its subordinate budgetary units and cultural institutions, for a renewed four-year period. The Bank also services the budgets of the Wielkopolskie, Zachodniopomorskie, Lubelskie and Kujawsko-Pomorskie regions as well as of many municipalities. At the th Local Self Government Capital and Finance Forum, held under the auspices of the President of Poland, the Bank was awarded the King Casimir the Great statuette for its attractive offer based on understanding of market realities and its openness to the needs of self-government entities. Once more the Contact Center leads the Bank Call Centres Ranking Dedication, credibility and professionalism of its consultants, as well as product knowledge and the capabilities of matching the offer and the customer needs enabled PKO Bank Polski Contact Center to come out the winner of the ARC Rynek i Opinia ranking for the fifth consecutive year. The Bank collected 99.4 out of the 00 points achievable. Interviewers assessed very highly the commitment and professionalism of the Bank s consultants in providing information on mortgage loans, credit cards, loans, bank accounts, etc. Customer Ombudsman in PKO Bank Polski Cultivating customer satisfaction and long term customer relationships form part of its priority objectives, which is why PKO Bank Polski appointed the Customer Ombudsman; as one of the few in the Polish banking sector. From January 04 has been available to the customers, with the primary role of considering applications of customers dissatisfied with the way the Bank had handled their claims and complaints. 5
Plan for integration of the Nordea assets assumes finalizing the main stage of works in Q 05 Mile- stones Trans- action March April May June July August Sept October Nov Dec Jan Febr March April -M 0 +M +M +3M +4M +5M +6M +7M +8M +9M +0M +M +M KNF Closing Legal merger Rebranding Operational merger decision GSM Court register entry Forced share buyout Transaction Adoption of the merger plan closing Application to KNF for its consent to merger of the banks Transfer of control Legal merger "Small-scale" rebranding Rebranding Nordea Bank Polska The Nordea network starts servicing PKO clients Migration to the PKO systems Nordea Life Transfer of control "Small-scale" rebranding Rebranding Bank assumes a Joint Venture with strategic insurance partner with compliance to Recommendation U requirements Nordea Finance Transfer of control "Small-scale" rebranding Rebranding Legal merger and migration of the leasing business 6
Integration synergies and costs in the years 03-07 07 Costs of integration (PLN mn) 80 60,0 60 OPEX CAPEX 40 0 00,8 86,0 80 60 60,8 40 37,0,0 0 48, 6, 8, 3,9 5, 0 0,8 03 04 05 06 07 Income and costs synergies (PLN mn) 3.5 08.0 synergie Cost synergies kosztowe synergie Income przychodowe synergies 64. 76.0 70.0 4.0 37. 8.0 9. 3. 38.0 47.5-03 04 05 06 07 PKO Bank Polski has assumed the total integration expenditures over four years to close at PLN 305 mn; Opex will represent over 75% or PLN 37.8 mn of those expenditures; Capex will thus stand at close to 5% of the integration expenditures; The key integration budget items will include: IT system migration (over 55%), personnel costs (%), marketing and communications (7%), real estate (5%) and other (.5%); The assumed integration expenditures are equivalent to average in comparable transactions in both Poland and the international markets, even though the cost structure is somewhat different on account of the cost of unbundling of the IT area. After a detailed verification exercise, the Bank now expects the cost saving synergies to be higher than originally assumed; The Bank expects to realise the IT area related synergies rather rapidly: at termination of cooperation with the supplier of the IT services carved out of Nordea Bank Polska; Total acquisition synergies are estimated at PLN 3.5 mn (gross); as of 07, i.e. counting from completion of the integration process; Key synergies will be delivered through: integration of the functions such as IT, support and cross-selling; acquisition of new clients and customers; and bancassurance in the retail banking business; The transaction will have a positive impact on the PKO BP Group s net financial result as early as in 04; At completion of the integration process in 07, estimated EPS attrition will reach nearly 9%, with ROI of around 3%. 7
Financial Summary * 03 0 Change Change Q4'3 Q3'3 y/y q/q Net interest income 6 7 8 089-6.9% 75 67 +5.4% Net F&C income 3 006 97 +3.% 85 757 +7.7% 7% P&L items (PLN mn) Result on business activity 0 707 6-7.9% 3 76 55 +5.8% Administrative expenses -4 63-4 683 -.3% - 8-6 +4. 9% Net impairment allowance - 038-35 -.4% -683-488 +40. % Net profit 3 30 3 739-3.6% 938 75 +4. 7% Assets 99. 0 93. +3.% 99. 0.3 -.0% Balance sheet (PLN bn) Net loans 49.6 43.5 +4.3% 49.6 49.6 +0.0% Deposits 5.9 46. +3.9% 5.9 50.9 +0.7% Stable financial resources 66.7 60.6 +3.8% 66.7 65.7 +0.6% Total equity 5. 4.4 +.9% 5. 4. +4.0% *) Due to a change in the accounting principles applicable to recognition of insurance products related revenues and expenses, relevant data in respect of the previous periods have been restated to ensure comparability. 8
Key performance indicators* 03 0 Change y/y Q4'3 Q3'3 Change q/q ROE net (%) 3. 6.0 -.8 pp. 3..9 +0.3 pp. Basic financial indicators ROA net (%).6.0-0.4 pp..6.6 0.0 pp. C/I (%) 43. 40.3 +.9 pp. 43. 44.7 -.5 pp. NIM ) (%) 3.7 4.7 -.0 pp. 3.7 3.9-0. pp. NPL ratio 3) (%) 8. 8.9-0.7 pp. 8. 8.6-0.4 pp. Quality of loan pottfolio Coverage ratio 4) (%) 5.7 50.5 +. pp. 5.7 5.4 +0.3 pp. Cost of risk (bp.) 3 45-4 3 9 Capital position CAR (%) 3.6.9 +0.7 pp. 3.6 3.7-0. pp. Core Tier (%).5.8 +0.7 pp..5.6-0. pp. *) Due to a change in the accounting principles applicable to recognition of insurance products related revenues and expenses, relevant data in respect of the previous periods have been restated to ensure comparability. () Administrative expenses of last 4 quarters / result on business activity for last 4 quarters () Net interest margin = net interest income of last 4 quarters / average interest bearing assets at the beginning and the end of the period of last 4 quarters (formula consistent with that applied in the PKO Bank Polski Group Directors Report) (3) Share of loans with recognised impairment in total gross loans (4) Coverage of loans with recognised impairment with impairment allowances 9
Macroeconomic environment The economy has moved into the recovery phase GDP and decomposition of growth rate (% y/y) Labour market (%) 6.0 4.0.0 0.0 -.0-4.0 003 004 005 006 007 008 009 00 0 0 03 7 Wages growth in enterprises (% y/y) 6 No minal wages 5 3 4 3.3 3 0 - - GDP household consumption expenditures external trade contribution (pp) gross fixed investments (RA) Real wages () Percentage share of the number of unemployed population in the number of economically active population (i.e. employed and unemployed persons); consistent with EU methodology..6.6 5 0 5 0-5 -0 6 4 0 8 6 4 0 - -4 3 Unemployment rate Employment growth (y/y) Unemployment rate, LFS ) 3.4 9.8 0.3 Having reached cyclical trough in Q-Q 03, the economy accelerated to.7% y/y in Q4 03; not just confirming the expected recovery, but delivering a surprising upside. Importantly, domestic final sales were the driver of that acceleration; expanding.9% y/y in Q4 vs..0% in Q3. The recovery has a solid domestic momentum: we expect GDP growth of ~3% in 04. The main risk is the potential escalation of the Russia-Ukraine crisis. in Q4 unemployment rose less than suggested by seasonal pattern; resulting in a deceleration/reversal of the trend (0.0pp. y/y vs. +0.6pp y/y in Q3). This is consistent with acceleration of GDP growth around potential growth (.5%-3%). Stable nominal wage growth, combined with low inflation boosts real wages, which are growing at the strongest pace since 009, in turn, boosting private consumption 0
Macroeconomic environment Inflation trend reversal, stronger PLN, neutral monetary policy Inflation rate (% y/y) 5 CPI 5 PLN exchange rates 4 PLN/EUR 3 4.5 3 0 Core inflation.0 0.7 4 3 PLN/CHF PLN/USD 3.38 3.0 Interest rates (% eop) 6 5-year yield 5 WIBOR 3M 4 3.65 Reference rate 3.7.50 3 CPI inflation fell to 0.7% y/y in December 03. The main drivers of the decline were falling communication service and fuel prices. We forecast inflation to start drifting upwards from Q 04 onwards and to reach the lower bound of the NBP s inflation target (.5%+/- %pt) by June 04. In November 03 the MPC hinted at the intention of leaving interest rates unchanged (.50% of the reference rate) at least until mid-04. We expect the start of the policy normalization at the turn of Q4 04 and Q 05. The MPC may but does not have to change its guidance (they can also drop the reference to mid-04 and shift to data-driven mode). Economic recovery helped the zloty to appreciate against the major currencies in Q4 03. Tapering in the U.S. and deterioration of the situation in Turkey, Ukraine, India and other emerging markets are likely to stop further appreciation in Q 04.
Banking sector performance Robust deposits growth, moderate loans dynamics 30 Loan growth rates (% y/y) 5 Housing 0 5 Total 0 5 0-5 -0 Deposit 0 growth rates (% y/y) Consumer, Corporate 4.5 3.8..8 Mutual funds market (PLN bn) 3 9 7 5 3 - -3-5 net inflow net mutual fund assets 3 88.9 95 80 65 50 35 0 05 90 5 0 5 0-5 Total Private individuals Corporates 9.6 5.9 5.6 3 Economic recovery helped the zloty to appreciate against the major currencies in Q4 03. Tapering in the U.S. and deterioration of the situation in Turkey, Ukraine, India and other emerging markets are likely to stop further appreciation in Q 04. The deceleration in total deposits growth (5.6% y/y) largely due to slower household deposits dynamics, while corporate deposits growth accelerated. The Loan-to-Deposit (LTD) ratio stabilized at 06%. Inflows into mutual funds continued in 4Q 03, driven by a rise in real disposable income, low inrerest rates on bank deposits and rising stock prices. -0
04 macroeconomic and banking sector outlook 0 03 04F GDP % y/y.9.6.8 3.3 Deposits - FX adjusted growth rate (%) Consumption % y/y. 0.8.9 Investments % y/y -.7-0.4 5.5 Public sector deficit % GDP -3.9-4. 4.6 0. 9. 8. 9.7 5.5 8.6 6.6 4. 5.7 5.6 5.4 6. 6. 6. Public debt ) % GDP 5.7 54.5 47.6 CPI % 3.7 0.9.8 Unemployment rate % eop 3.4 3.4 3. WIBOR 3M % eop 4..7 3.5 Reference rate % eop 4.5.50 3.00 PLN/EUR exchange rate PLN eop 4.09 4.5 4.5 PLN/USD exchange rate PLN eop 3.0 3.0 3.4 ) According to the ESA95 methodology, with one-off capital transfer due to pension funds asset transfer; without the transfer, the public sector deficit in 04 remains close to 03; at -4.% GDP. ) According to domestic methodology. Source: Bank s forecasts 6.0 00 0 0 03 04F 7. 4.5..5 Total Private individuals Instututional entites 6. Loans- FX adjusted growth rate (%).0 7. 4.7 Total -3.4-3.9 Retail Mortgage Consumer Institutional entites 5.9 6.4 4. 3.3.5 00 0 0 03 04F 0. 8.0 7.6 4.8 3
Market share Standalone data Loans market share (%) 0.0 5.0 9. 8.9 9.0 9.0 9.0 9.0 9.0 9. Private individuals 6.4 3.5 6.0 6.0 6. 6.3 6. 6. 6. Total 3.0 3.0 3. 3.6 3.3 3. 3. Institutional entities Mutual funds market share PLN bn 40 00 6.5 6.5 6.7 60 0 7 9 33 80 6.9 6.9 56 46 7.4 7. 66 73 7.6 8.0 % 7.0 89 6.0 5.0 0.0 5.0 0.0 Q' Q' 3Q' 4Q' Q'3 Q'3 3Q'3 4Q'3 Deposits market share (%) 5.0 0.0 5.0.3.0.9.8... 7.5 7.4..5.7 6.9 6.8 6.7 6.5 6. 6.3 0.5 0. 9.5 8.9 8.6 Q' Q' 3Q' 4Q' Q'3 Q'3 3Q'3 4Q'3 9.4 Private individuals Total Institutional entities 40 0 Q' Q' 3Q' 4Q' Q'3 Q'3 3Q'3 4Q'3 Total assets of mutuals funds (PLN bn) PKO TFI market share (%) Decrease in market share by 0.5 pp y/y; mainly as an effect of net interest income optimalization as well as mutual fund units sale. Growth of PKO TFI s market share in total assets of mutual funds by 0.7 pp. y/y; thanks to higher than market growth rate (+43% y/y vs. +30% y/y for the market). 4.0 3.0 4
Financial results 5
Profit and loss account* Result on business activity Gross profit 6 +5.8% -7,9% 4 633 +30.0%-,7% 3 76 0 707 3 4 044 55 933 58 478 958 94 0 Q'3 Q'3 Q3'3 Q4'3 03 Total administrative expenses 0 Q'3 Q'3 Q3'3 Q4'3 03 0 Q'3 Q'3 Q3'3 Q4'3 03 Income tax 0 Q'3 Q'3 Q3'3 Q4'3 03-4 683-0 - 06-6 - 8-4 63 +4.9% -,3% -7-88 + -80 + -895-76 -86 +5.8% -8,8% Net impairment allowance 0 Q'3 Q'3 Q3'3 Q4'3 03 Net profit 3 739 +4.7% -3,6% 938 3 30-35 -448-49 -488-683 - 038 +40.%-,4% % % Change y/y Change q/q 75 753 786 0 Q'3 Q'3 Q3'3 Q4'3 03 *) Due to a change in the accounting principles applicable to recognition of insurance products related revenues and expenses, relevant data in respect of the previous periods have been restated to ensure comparability. 6
Result on business activity Split of result on business activity 5,3% 9,% 5,6% 0,4% 5,% 30,0% 8,% 5,7% PLN mn 0 03 Change Change Q3'3 Q4'3 y/y q/q Net interest income 8 089 6 7-6.9% 67 75 +5.4% Net F&C result 97 3 006 +3.% 757 85 +7.7% Other income 66 979 +59.0% 4 647 +357.6% 69,6% 6,8% 64,4% 54,0% Result on financial operations and didvidens 8 8-9.9% 35 3-35.% Net FX result 56 4-5.6% 67 99 +47.5% 3 Net other income 78 60 +43.% 39 55 +47.4% 0 03 Q3'3 Q4'3 Net interest income Net F&C result Other income In 03 a change in the accounting principles applicable to recognition of insurance products related revenues and expenses was enacted. As a result: the previously presented net interest income of 0 increased by PLN 07 mn the previously presented net F&C income of 0 decreased by PLN 55 mn Without the accounting principle adjustment, net interest income would have declined by (-)7.5% y/y while net F&C income would have risen by (+)4.9% y/y 3 Result on business activity 6 0 707-7.9% 55 3 76 +5.8% For the quarterly data restated for comparability, the following adjustments were made: net interest income of Q3 3 increased by PLN 49 mn, and of Q4 3 by PLN 60 mn net F&C income of Q3 3 decreased by PLN 5 mn, and of Q4 3 by PLN 60 mn Without the accounting principle adjustment, net interest income would have risen by (+)5.0% q/q while net F&C income would have risen by (+)7.8% q/q. This net income item increased as it includes income of PLN 35 mn from the sale in Q4 3 of a 66% interest in the eservice subsidiary and income of PLN 6 mn on fair value adjustment of the remaining eservice share interest. 7
Net interest income () Net interst income (PLN mn) 5.0 4.5 4.0 3.5 3.0.5.0.5.0 0.5 0.0 4.9 4.8 4.6 4.4 3 045 03 907 4. 3.6 3.5 3.7 753 68 67 75 Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 Net Interest Net interest margin income and quarterly average interest Net interest rates margin quarterly Net Interest margin and average interest rates on loans and deposits (%) 8.0 7.0 6.0 5.0 4.0 3.0.0.0 0.0 7.5 7.3 4.7 7.0 4.4 4. 3. 3. 3.0 6.5 +5.4% 6. 3.9 3.7 4Q' Q'3 Q'3 3Q'3 Average interest rate on loans M () 4Q'3 Average interest rate on deposits M () Net interest margin M ().7.3 500 000 500 000 500 0 Interest income and expense (PLN mn) and 4000 WIBOR 3M average in the period 3 500 3 000 500 000 500 000 500 0 5.60 3 3 3 9 3 343 3 5 5.0 946 754 4.80 4.97 5.03 5.06 55 53 4.40 4.57 4.00 98 47 30 344 94 6 Stabilisation of NII and NIM in Q4 3 under conditions of maintenance of low market interest rates; mainly due to lower average interest rates on deposits; adjustment of the price offer for deposit products; and change of the structure in favour of current deposits. 3.77.97 94.70.67 Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 798 interest income interest expense WIBOR 3M (%) Drop in interest margin by.0 pp. y/y to 3.7% as a result of a decrease in annualised net interest income (due to a drop in market interest rates causing directly a decrease in interest-bearing assets mostly based on market rates faster paced than the decline in interest rates of the deposit offer); accompanied by an increase in the volume of average interest-bearing assets (mainly the portfolio of loans and advances to customers). Change of accounting rules increased NIM by ca. 0. pp. () Interest income (expense) for last 4 quarters / average net loans (deposits) at the beginning and the end of the period of last 4 quarters () Net Interest income for last 4 quarters / average interest bearing assets at the beginning and the end of the period of last 4 quarters (formula consistent with that applied in the PKO Bank Polski Group Directors Report) 3.60 3.0.80.40.00 8
Net interest income () Structure of interest income (PLN mn) Structure of interest expense (PLN mn) 57 3 98 870 486-8.4% -47.8% -7.7% 69 5 09 0 763 40 43 454 075-0.9% +9.6% 4 04 473 79 0 585-4.4% 9 066 3 4 638-4.8% 3 490 4 6 5 0 03 Customer loans Securities Derivative hedging instruments Other Interest rates on term deposits vs. WIBOR 3M (%) 7 4 3 0 average interest rate on term deposits averege WIBOR 3M 3 4 0 03 Customer deposits Debt securities in issue Other Income declined as PLN to FX rate spreads narrowed; resulting from decline in the WIBOR market rates and fall in the average volume of CIRS transactions. Income declined mainly as a result of falling average interest and structural adjustment of the portfolio. Income declined as a result of lower loan interest; tracking the falling market interest rates, and partly compensated by volume growth of new loans and advances portfolio by PLN 6. bn y/y. Interest expense was reduced as a result of lower average deposit interest; a result of falling market interest rates and adjustments made in the deposit products price offer. Another positive factor impacting interest expense on customer deposits was the change in the overall structure of deposits: increase in current deposits 9
Stable growth of F&C income despite of interchange fee drop and lower market growth Net fee and commission income (PLN mn) 77 734 77 78 77 684 757 85 97 y/y q/q +3. % 3 006 +7.7% 094 +.3% 08 +3.% 775 -.6% 755 +.8% 363 +6.7% 43 +8.% 685 +5.0% 79 +9.% Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 0 Loans & insurance 03 Mutual funds & brokerage Cards Net fee & commission income was primarily determined by: increase in income from servicing of investment and pension funds (including management fees) resulting from: improved profitability of the funds sales structures; over 40% increase in the value of assets under management; and the takeover in Q 3 of the assets of OFE Polsat; increase in net income from loan insurance; an effect of increase in saturation of loans with insurance policies, additionally supported by an increase in new loan sales; increase in income from servicing of bank accounts; decline in net income from banking cards primarily the effect of decline in interchange fee (IF) commissions, as the Visa and MasterCard payment organisations reduced the IF rates at the beginning of the year; the lower IF commissions were accompanied by an increase in card transactions; decline in commission income from treasury bond issue agent services; decline in income from cash transactions; as driven by the development of electronic banking. 0
Net other income Net other income (PLN mn) q/q Effect of the eservice transaction 647 r/r +59. 0 % 979 +357. 6 % 66 78 +43.% 60 +47.4% 86 84 4 05 33 4 58 Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 56 8-5.6% -9.9% 4 8 0 03 Net income from financial instruments and didvidends Net FX gains Net other operating income +47.5% -35.% Growth in net other operating income on annual and quarterly basis resulted from inclusion in this item of income on the sale in Q4 3 of a 66% stake in the eservice subsidiary amounting PLN 35 mn and on fair value readjustment of the remaining share interest in the eservice amounting PLN 6 mn.
Administrative expenses Administrative expenses (PLN mn) y/y q/q 305 8 -.3% 4 683 5 094 3 4 63 +4. 9% 0 06 6 54 +7.0% 579-8.0% 569 -.6% 59 +5.8% 57 -.% 55 +4.5% Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4' C/I ratio 40,3 4,5 43, 44,7 43, 0 Q'3 H'3 3Q'3 03 0 03 Personnel expense Non-personnel & other expense Depreciation Employment (FTEs) eop 0 03 Change y/y FTEs % Bank 5 399 4 437-96 -3.8% Group 8 556 7 387-69 -4.% Value of general and administrative expenses was primarily determined by: decline in employee benefit costs by PLN 57 mn y/y; decline in material and other costs by PLN 4 mn y/y, resulting, among others, from decline in costs of property maintenance and rental, in promotional expenses and KNF costs, and at increase in the Bank Guarantee Fund costs; primarily as a result of introduction of the prudential fee; increase in depreciation by PLN 38 mn y/y; primarily as a result of increase in amortisation of intangible fixed assets. The year 03 saw introduction of a change in accounting rules relating to presentation of actuarial gains and losses, which led to upward adjustment by PLN 64 mn of the previously presented employee benefit costs for the year 0 (effect of implementation of a change in MSR 9).
Net impairment allowance Net impairment allowance and write-offs (PLN mn) bp. 44 45 50-50 39 40 45-50 35 35 40 3-50 9 35 30-350 5-450 -448-49 0 3-550 -488 5-58 -574-566 0-650 05-658 -750-683 00 Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 Net impairment allowance (PLN mn) Share of loans with recognized impairment 3) Cost of risk M (bp.) 0 03 Change y/y Consumer loans 8.9% 9.7% +0.8 pp. Mortgage loans 3.7% 3.6% -0. pp. PLN 3.6% 3.% -0.5 pp. FX 4.0% 4.6% +0.6 pp. Corporate loans 4.%.6% -.5 pp. Total 8.9% 8.% -0.7 pp. 0 y/y 03 q/q -568-40 - 39-7.4% -4-3.3% -05-49.4% -56.3% +3.7% - 5 +34.% -0-87 - 038 -. 4% +40. % - 35 Consumer loans ) Mortgage loans ) ) Corporate loans ) Other Improvement in net income for the year primarily coming from reduced write-offs on consumer and housing loan portfolios and resulting from improved quality of the new loan originations comparative to the loans of the earlier generations. Increase in net impairment allowances in Q4 3 resulting from increased write-offs on corporate loans. Increase in write-offs in Q4 3 by circa PLN 00 mn in the subsidiaries operating in Ukraine; caused by the economic conditions prevailing in that country and differed tax write-off. () management accounts data () Housing loans to individuals (3) Calculated by dividing the gross carrying amount of impaired loans and advances to customers by the gross carrying amount of loans and advances to customers 3 3
Consolidated balance sheet Total assets Total equity and liabilities 3.6% 3.9% Other assets 74.3% 75.% 3.0% 5.0%.8%.0% 5.3%.0%.5% 3.6% 3.. 3..3.7%.6% 0.8% 5.3%.5% 0.8% 5.3%.5% 75.7% 76.%.%.7%.9%.9% 3.. 3..3 Loans and advances to customers Securities Derivative financial instruments Amounts due from other banks Cash and balances with the Cen.Bank Total eqiuty Other liabilities Subordinated liabilities Debt securities in issue Amounts due to customers Derivative financial instruments Amounts due to banks PLN bn 3.. 3..3. 3 Change y/y Cash and balances with the Cen.Bank 0.3 7. -9.6% Amounts due from other banks 3.4.9-44.% Derivative financial instruments 3.9 3.0 -.3% Securities 5. 9.8 +8.4% Loans and advances to customers 43.5 49.6 +4.3% Other assets 7.0 7.7 +0.% Total asse ts 93. 99. +3.% PLN bn 3.. 3..3. 3 Change y/y Amounts due to banks 3.7 3.8 +0.4% Derivative financial instruments 4.0 3.3-6.0% Amounts due to customers 46. 5.9 +3.9% Debt securities in issue 0.3 0.5 +.7% Subordinated liabilities.6.6-0.6% Other liabilities.9.9 +0.3% Total eqiuty 4.4 5. +.9% Total eqiuty and liabilities 93. 99. +3.% The year 03 saw introduction of a change in accounting rules relating to recognition of income and expense in the sale of insurance products, which led to the following adjustments in the previously presented items as at 3 December 0: in assets: reduction in the balance of loans and advances to customers by PLN 393 mn; and increase in value of deferred income tax asset by PLN 64 mn; in liabilities: reduction in other liabilities by PLN 58 mn; and in own capital: reduction in retained net profit of previous periods by PLN 33 mn and increase in net current year profit by PLN 4 mn. 4
Loans and deposits Gross loans (PLN bn) 0 Q'3 H'3 3Q'3 03 50.3 54.33 55.9 56.5 5 56.3 Currency structure of gross loans porfolio.4%.9%.8% 0.4% 0.4% 9.9% Deposits() (PLN bn) 0 Q'3 H'3 3Q'3 03 46. 48.4 49. 50.9 5.9 Term structure of total deposits ) 57.8% 59.4% 57.7% 55.5% 54.7% 78.6% 78.% 78.% 79.6% 79.6% 70.% 4.% 40.6% 4.3% 44.5% 45.3% 0 Q'3 H'3 3Q'3 03 Banking sector 0 Q'3 H'3 3Q'3 03 FX PLN 03 current+o/n term+other 98.% 99.% 99.6% 99.% 98.5% 89.3% 89.9% 90.6% 90.3% 89.8% Net loans/deposits Net loans/stable sources of funding () 0 Q'3 H'3 3Q'3 03 () Amounts due to customers () Amounts due to customers and long-term external funding in the form of: securities issues (including funds raised through issuance under an EMTN programme executed by PKO Finance AB); subordinated debt; and amounts due to financial institutions 5
Funding sources Amounts due to customers 87% Liabilities structure (total as at 3 December 03: PLN 74. bn) Debt securities in issue 6% Derivative financial instruments % More than 5Y 30% Subordinated liabilities % Other liabilities % Amounts due to banks % Deposit structure (total as at 3 December 03: PLN 5.9 bn) Amounts due to corporate entities % Amounts due to retail clients 77% Amounts due to State budget entities % Debt securities structure (total as at 3 December 03: PLN 0.5 bn) Retail and corporate deposits are the primary funding source. From Y to 5Y 56% Less than 3M 5% From 3M to Y 8% Financing agreements as at the end of 03 included: CHF 40 mn 3-year credit facility opened in July 0 EUR 800 mn 5Y Eurobonds raised in October 00 CHF 50 mn 5Y bonds issued in July 0 CHF 500 mn 3.5 Y bonds issued in September 0 USD,000 mn 0Y notes issued in September 0 on the US market under Rule 44A a PLN 700 mn domestic issue (short term) Also, in January 04 the Bank completed a EUR 500 mn 5Y bond issue 6
Securities split of portfolio 9.5 9.8 8.7 9.8 0.03 0.05 5. 0.03 0.05.8 3.7 4. 4.. 4..7.6.5 5. 0.3.6 3.4.0 0.5 0 Q'3 H'3 3Q'3 03 Trading ALPL AFS HTM Structure as at the 03 end 0.04 6% 6% Other debt securuties % 3% 40% 4% 47% 34% 0 03 Local government debt securuties NBP money market bills Issued by State Treasury Issued by State Treasury 8% Trading assets Eqiuty securities % Issued by local government bodies 9% Other debt securuties 7% NBP money market bills 9% Financial assets designated at fair value through P&L (ALPL) Issued by local government bodies % Issued by State Treasury Issued by 6% State Treasury 63% Investment securities available for sale (AFS) Issued by local government bodies 4% Equity securities % Other debt securuties % 7
Risk management 8
Quality of loan portfolio 00 80 60 40 0 00 80 60 40 0 0 Share of loans with recognized impairment and cost of risk 0.0% 9.% 8.9% 9.% 0.0% 8.6% 8.% 9.0% 8.3% 8.6% 8.4% 8.0% 8.0% 8.0% 7.0% 45 45 40 40 35 35 9 9 3 6.0% 0 5.0% 4.0% 3.0%.0%.0% 0.0% Q4' Q'3 Q'3 Q3'3 Q4'3 Cost of risk for last M (bp) Group Cost of risk for last M (bp) Bank Share of impaired loans (Group) Share of impaired loans (Bank) Quality of loan portfolio vs. banking sector Coverage of loans with recognized impairment by impairment allowance 50.5% 50.6% 5.% 5.4% 5.7% 50.7% 50.8% 5.5% 5.8% 5.0% Q4' Q'3 Q'3 Q3'3 Q4'3 Group Bank 8.0% 6.0% 4.0%.0% Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 Share of impaired loans (sector) Share of loans delayed past due over 90 days (sector) Share of impaired loans (PKO BP) Share of loans delayed past due over 90 days (PKO BP) Source: for the banking sector own calculations based on KNF data Share of loans with recognised impairment was retained at the previous quarter level; while cost of risk declined from the beginning of the year on standalone basis, among others, through: reclassification to the performing loans portfolio of loan exposures with negligible impairment allowances; the sale of bad debts; and transfer of some debts from balance to off-balance sheet ledgers, in a tax position neutral manner; treatment as transfers between the Bank's accounting records. Continuation of the gradual increase in the value of the coverage ratio for loans to customers with recognised impairment. 9
Quality of loan portfolio Standalone data Share of loans with recognized impairment 8.3% 8.6% 8.4% 8.0% 8.0% Coverage of loans with recognized impairment by impairment allowance 74.% 7.9% 70.5% 69.3% 7.3%.7% 3.0%.8%.6%.6% Other loans 54.7% 53.6% 50.7% 50.8% 5.5% 53.% 5.8% 5.0% 5.0% 5.% 44.% 45.% 46.4% 47.4% 47.% 5.6% 5.6% 5.7% 5.4% 5.4% Loans delayed past due over 90 days ) Q4' Q'3 Q'3 Q3'3 Q4'3 Cost of risk for last M (bp ( bp.) 37 8 7 9 5 03 94 8 95 Q4' Q'3 Q'3 Q3'3 Q4'3 Total Corporate loans Mortgage loans Consumer loans 45 40 35 9 0 4 9 5 Q4' Q'3 Q'3 Q3'3 Q4'3 Total Corporate loans Mortgage loans Consumer loans 5 Share of loans with recognised impairment as part of the Bank s loan book remains unchanged, on q/q basis. The declining trend in the costs of risk of corporate loans over the past months has been sustained. 30
Capital adequacy Own funds (PLN bn) 0.04 0.08 0. 0.3.53.5.5.57.54 0.5 Total capital requirement (PLN bn) 0.49 0.5 0.53 0.3 0.33 0.66 0.64 0.64 0.6 0.63 8.47 0.00 9.8 9.84 9.6.37.55.67.64.59 PLN bn 0 8 6 4 0 8 6 4 0 0 Q'3 H'3 3Q'3 03 Tier 3 Tier Tier 6.0%.6.4.5.3 0. 3.6% 3.7% 3.6% 4.0%.9% 3.3%.6%.8%.3%.6%.5%.0% 0.0%.5.7.8.6.6 8.0% 6.0% 4.0%.0% 0 Q'3 H'3 3Q'3 03 Own funds Total capital requirement CAR Core Tier 0 Q'3 H'3 3Q'3 03 Market risk Operating risk Credit risk Increase in CAR value by.0 pp. y/y mainly an effect of cummutation of own funds. As at the end of 3Q 3, average banking sector CAR stood at 5.6% and its Core Tier at 4.% Growth of Tier funds y/y mainly due to the recognition of PLN.34 bn of profit earned by the Bank in 0 and retained profit of previous years after dividend payout. 3
Basel III and CRD IV/CRR Capital adequacy Liquidity As part of the preparation for the changes resulting from enforcement of the Directive and the Regulation on prudential requirements and supervision (CRD IV / CRR Package), the Bank monitors regulatory changes (in particular, the technical standards associated with the CRD IV / CRR) on an ongoing basis. Additionally, in 03 the Bank participated in quantitative studies (QIS) on the impact of Basel III on the banking sector conducted by the Polish Financial Supervision Authority (KNF) and the European Banking Authority (EBA). Liquidity Coverage Ratio (LCR) 4% 0% 00% - level effective from 08 The Bank continues implementation of the CRR/CRD IV regulations. Preliminary estimates demonstrate limited impact of the new rules on the Bank s capital adequacy. The most important changes from the Bank s perspective include: amendment to the definition of own funds; and introduction of capital charge on CVA risk and non-delta risk of option transactions. 3..0 3..03 According to CRD IV / CRR, the minimum LCR levels to be maintained as of January 04 are: - 60% in 05-70% in 06-80% in 07-00% from January 08 3
Business activity 33
Business activity - volumes Standalone management data Gross loans (PLN bn) +.6% -0.3% 47.7 50.6 5.8 5.0 5.6 Customer deposits (PLN bn) +.5% +0.7% 43. 45. 45.0 45.6 46.7 0 Q'3 H'3 3Q'3 03 60% Gross loans by business lines (as at 3. 3..0.03) ) Share in loan portfolio 0.4 0% Retail and private banking 50% 68.8 40% Mortgage 30% 40.8 Corporate 0% SME 4.8 6.8 Housing Market Client 0% -0% -5% 0% 5% 0% 5% Volume growth rate (y/ y/y) 0 Q'3 H'3 3Q'3 03 00% Customer deposits by business lines (as at 3.. 3.0 03) ) 90% 80% 0.6 70% 60% Retail and private banking 50% 40% 30% Corporate 0%.3 SME Housing Market 0% Client 9.5 5. 0% -5% -0% -5% 0% 5% 0% 5% Volume growth rate (y/ y/y) Share in deposits portfolio 34
Retail segment Gross financial result of retail segment (PLN mn) Gross loans (PLN mn) 3 069 06.3 07.6 09.6 0.3 0.8 +4.% 980 -.9% 6.6 6.6 6.6 6.7 6.8 +.8% Net interest 5 934-8.% 5 446 income Net F&Cincome 63.8 65. 67.0 67.9 68.8 +7.8% +0.4% +.4% +.3% 5 -.% 7 99 8-3 768 -.9% -3 695-547 -3.7% - 80 Other income Net impairment allowance Administrative expenses 4.3 4.7 5.0 4.9 4.8.6. 0.9 0.8 0.4 3.. 3.03.3 30.06.3 30.09.3 3..3 Housing market client SME Mortgage banking Retail and private banking +3.6% -5.6% -0.8% -.8% 0 03 Deposits (PLN mn) 9. 3.3 4.6 5.4 5.4 4.6 4. 4.5 5. 5. 8.8 8.3 8.4 8.8 9.5 05.8 0.7.7.4 0.6 +5.% +.8% +8.6% +4.5% New sales of loans (PLN mn) 6.6 +7.9% 6. 6. 0.0% 0.5-3.% 5. 5. 0.5 0.6 +.5% +8.% 0.6 0.5.7 +8.8%.7.6.3.. +.4%.. -0.7% 0.9.0.3.5.7.0.3 +80.0% +5.8% -8.8% +5.4% -.7% +7.7% 3.. 3.03.3 30.06.3 30.09.3 3..3 Housing SME Retail and private banking Change y/y Change q/q Q4' Q'3 Q'3 Q3'3 Q4'3 Housing market client Mortgage banking SME Retail and private banking 35
Retail segment mortgage loans Standalone data Structure of mortgage loans portfolio Average LTV 35.% 34.8% 34.% 3.5% 30.8% 64.9% 65.% 65.9% 67.5% 69.% 50.% 49.8% 75% 75% 77% 77% 76% 66% 66% 68% 68% 68% 3.. 3.03.3 30.06.3 30.09.3 3..3 PLN FX Average carrying value of mortgage loan (PLN 000) Banking sector 03 6 67 70 66 6 30 34 36 36 36 7 3 5 7 Q4' Q'3 Q'3 Q3'3 Q4'3 Current average LTV of loans portfolio (eop) Average LTV of new sales Average value of mortgage loan in new sales (PLN 000) 68 80 97 90 94 3.. 3.03.3 30.06.3 30.09.3 3..3 Total PLN FX Q4' Q'3 Q'3 Q3'3 Q4'3 36
Corporate segment Gross financial result of corporate segment (PLN mn) Gross loans (PLN mn) 47 +9.4% 37 565 +7.8% 609 Net interest income Net F&Cincome -.4% 4.4 43.4 43.7 4. 40.8 3 0.0% 3 9 85-64 -.% -6-607 -658-7.7% Other income Net impairment allowance Administrative expenses 3.. 3.03.3 30.06.3 30.09.3 3..3 0 03 Deposits (PLN mn) -.0% 4.0.8 0.4.3 0.3 New sales of loans (PLN mn) 0.7-3.5% 0.0 6.3 6.5 6.4 5.9 Change y/y 3.5 4.4 3. 4.5 3.. 3.03.3 30.06.3 30.09.3 3..3 Q' Q' Q3' Q4' Q'3 Q'3 Q3'3 Q4'3 37
Credit risk concentration Structure of corporate ) loans by industry segment 7.6% 8.6%.0%.% 9.7% 9.%.4% 0.5% 5.% 5.4% 5.9% 5.9% Other exposure Electricity, gas, water, hot water and air to the mechanical systems production and supply Public administration and national defence obligatory social security Construction Wholesale and retail trade, repair of motor vehicles, including motorcycles Maintenance of real estate Receiveables due from corporate ) entities (PLN bn) 68.6 6. 70.8 7.3 70.9 69.6 +.5% 5.9 5.8 6.6 6.9 +0.4% 6.4 64.9 65.5 64.3 6.7 +0.6% 8.% 8.5% 3..0 3..03 Industrial processing Change y/y 3.. 3.03.3 30.06.3 30.09.3 3..3 Gross loans Corparate and municipal bonds The highly diversified structure of the loan book points to low sector exposure concentration, with the Industrial Processing exposures being the highest represented in the loan portfolio and standing at 8.5% at the end of 03. The greatest change occurred in Other Exposures, which declined by.0 pp. y/y. Exposure vis-a-vis the Construction sector being 5.% of gross loans at the end of 03 represented a decline of 0.5 pp y/y while its share in corporate loans declined by 0.9 pp y/y. () Gross loans of non-financial and state budget entities 38
Net financial results of the Group Entities PLN mn 0 03 Change Consolidated net profit 3 738.6 3 9.8-3.6% PKO Bank Polski 3 58.6 3 33.8-9.7% PKO Towarzystwo Funduszy Inwestycyjnych 3.8 35.0 +46.9% PKO BP BANKOWY PTE 6.8 4.4-4.5% PKO Leasing 0.9 7.0 +55.5% Inteligo Financial Services 0.4 4.5-9.0% Kredobank -36.8-37.6 na Qualia Development -.4-49.7 na increase in net income resulting from increased income from management of a greater asset base (4.8% y/y increase in assets under management) 3 6 decline in net income primarily resulting from creation of additional impairment allowances for assets effected by introduction of changes in the funded pillar of the pension system increase in net income driven by growth trend in the leasing services market gaining momentum 4 decline in net income resulting from transfer of the Pay-by-link business line to PKO BP in 03 5 decline in net income mainly driven by creation of accounting provision for deferred tax asset decline in net income primarily resulting from lower sales of housing units; due to continuing adverse property market trend 5 3 4 6 39
Activity in Ukraine Kredobank () Net loans (PLN mn) In the post-crisis years of 008-009, PKO Bank Polski s strategy for the 86 Ukrainian market provided for restructuring of Kredobank involving scaling down of its operations and its refocusing on the retail segment; 777 854 877 In 0-03, Kredobank pursued prudential lending policies and succeeded in growing its loan book by.9% (on net basis); 00 0 0 03 Deposits (PLN mn) 9 38 099 04 Deposits collected by Kredobank remained at a stable level of over PLN billion; The subsidiary bank maintained strong liquidity position as a hedge against a macroeconomic crisis; with Loans to Deposits Ratio remaining in the extremely safe range of 75-85%; Kredobank registered no liquidity problems whatsoever during the period of heightened turmoil in the banking market, in H 03 and in 04 to date; 00 0 0 03 Financial results (PLN mn) 4 88 5 0-5 -7 - -3 00 0 0 03 Result on business activity Net operating result Though downscaling its operations, the Bank has consistently improved its net income on business activity (36% in 0-03) and net operating income (costs down by 9.9% in 03); approaching the break-even point before provisions; Main contributors to the net loss Kredobank generated for 03 include: accounting provision for deferred tax asset (UAH 60 mn); implementation of the Postanova [regulation] No. 59 of the National Bank of Ukraine (additional general banking risk fund reserve); and additional impairments for the pre-00 loan book. 40
Activity in Ukraine Kredobank () Adequacy and liquidity Despite its financial losses, Kredobank has a strong financial standing and 0.8% 68.% 77.3% 84.3% maintains capital adequacy metrics at very high levels;.9%.0% Its capital buffer is maintained against such risks as the need to absorb the 6.% 9.8% effects of a macroeconomic crisis or of any unforeseen adverse decision of the tax authorities; 00 0 0 03 Capital adequacy N by UAS (min 0%) Net loans/deposits Quality of loan portfolio 84.4% Impact of the devaluation of UAH on Kredobank in 04 has been limited and occurred mainly through the capital funds, as a result of an increase in risk weighted assets denominated in foreign currencies; small part of the asset base, at less than 5%; 3.8% 5.6% 36.5% 3.7% 4.3% 3.8% 38.7% 00 0 0 03 Share of loans with recognized impairment Coverage of loans with recognized impairment by impairment allowance PKO Bank Polski exposure (PLN mn) 5 5 36 54 05 8 09 08 00 0 0 03 Capital exposure Subordinated loan Having restructured its loan portfolio and implemented prudential lending policies, Kredobank has demonstrated gradual asset quality improvement and increased coverage of NPLs with impairment allowances; Loans granted before 00 continue to represent by far the main part of the NPL portfolio while quality of the loan book formed in the years 00-03 remains high; Considering the political and macroeconomic risks in the Ukraine, capital exposure of PKO Bank Polski to that market is relatively low: PLN 54 mn in Kredobank shares and another PLN 08 mn in subordinated loans; Capital exposure to Kredobank is approximately equivalent to one-third of PKO Bank Polski s quarterly profits, while Kredobank s assets are equivalent to bare 0.75% of the Bank assets. 4
Basic operational data Item (eop) 0 Q'3 H'3 3Q'3 03 y/y Change q/q Number of current accounts ('000) 6 0 6 45 6 54 6 83 6 38 +.6% +0.6% Number of banking cards ('000) 7 64 7 0 7 5 7 090 7 080 -.% -0.% of which: credit cards 980 938 99 899 893-8.9% -0.7% Number of branches: 98 99 77 8 86 -.0% +0.4% - retail 34 35 38 4 47 +.% +0.4% - corporate 64 64 39 39 39-39.% 0.0% Number of agencies 08 0 49 5 074 -.% -3.7% Number of ATMs 803 9 945 960 99 +6.7% +.% Number of active IKO applications ('000) x 39 57 0 x +78.4% Number of eservice terminals 68 877 7 706 79 98 84 00 89 645 +30.% +6.7% 4
Appendix 43
Consolidated income statement of the PKO Bank Polski Group Profit and loss account (PLN '000) 0 restated 03 Change y/y Net interest income 8 089 68 6 7 96-6.9% Net fee and commission income 96 537 3 005 75 +3.% Other income 65 873 979 5 +59.0% Dividend income 8 08 5 766-8.6% Net income from financial instruments designated at fair value 94 88 54 309-4.3% Gains less losses from investment securities 79 83 67 484-5.4% Net foreign exchange gains 56 37 4 848-5.6% Net other operating income and expense 77 654 609 745 +43.% Total income items 6 678 0 706 866-7.9% Net impairment allowance and write-offs ( 35 8) ( 037 88) -.4% Administrative expenses (4 68 537) (4 6 543) -.3% Share in net profit (losses) of associates and jointly controlled entities 9 05 ( 978) n.m. Profit before income tax 4 63 938 4 044 464 -.7% Income tax expense (895 476) (86 7) -8.8% Net profit attributable to non-controlling shareholders ( 78) ( 600) +35.8% Net profit attributable to the parent company 3 738 640 3 9 793-3.6% *) Due to a change in the accounting principles applicable to recognition of insurance products related revenues and expenses, relevant data in respect of the previous periods have been restated to ensure comparability. * 44
Consolidated income statement of the PKO Bank Polski Group -quarterly Profit and loss account (PLN '000) Q4' Q'3 Q'3 Q3'3 Q4'3 restated * restated * restated * restated * restated * Q4'3/ Q4' Q4'3/ Q3'3 Net interest income 907 78 75 65 67 850 66 93 74 59-0.% +5.4% Net fee and commission income 77 47 77 540 76 876 756 544 84 79 +5.5% +7.7% Other income 84 344 57 785 33 5 4 34 646 8 +50.9% +357.6% Dividend income - - 5 95 47 - x x Net income from financial instruments designated at fair value 45 960 (55) 3 453 3 059 9 95-56.6% -35.8% Gains less losses from investment securities 57 83 8 34 33 09 3 45 706-95.3% -.0% Net foreign exchange gains 750 ( 5) 87 68 67 445 99 460 +337.% +47.5% Net other operating income and expense 57 8 4 84 4 70 38 94 54 693 +807.6% 3,5x Total income items 864 094 57 976 477 94 54 87 3 76 3 +0.9% +5.8% Net impairment allowance and write-offs (566 36) (447 983) (48 936) (487 763) (683 99) +0.6% +40.% Administrative expenses ( 304 763) ( 9 77) ( 05 767) ( 5 603) ( 8 446) -.8% +4.9% Share in net profit (losses) of associates and jointly controlled entities 4 598 ( 337) ( 36) 5 450-68.5% -87.% Profit before income tax 997 63 957 99 940 9 93 676 937 +.6% +30.0% Income tax expense (67 757) (7 684) (88 6) (80 494) (75 83) +64.4% +5.8% Net profit attributable to non-controlling shareholders (373) (77) (97) (4) ( ) +4.9% +963.% Net profit attributable to the parent company 830 9 786 4 75 757 75 96 938 38 +3.0% +4.7% *) Due to a change in the accounting principles applicable to recognition of insurance products related revenues and expenses, relevant data in respect of the previous periods have been restated to ensure comparability. 45