This document is a translation of a document originally issued in Polish. The only binding version is the original Polish version
Consolidated financial statements
of the PKO Bank Polski S.A. Group
for the year ended 31 December 2023
SELECTED FINANCIAL DATA DERIVED FROM THE CONSOLIDATED FINANCIAL STATEMENTS
|
SELECTED FINANCIAL DATA
|
PLN million |
|
EUR million |
|
||
|
2023 |
2022 |
Change % (A-B)/B |
2023 |
2022 |
Change % (D-E)/E |
|
|
A |
B |
C |
D |
E |
F |
|
|
Net interest income |
18,318 |
11,424 |
60.3% |
4,045 |
2,437 |
65.9% |
|
Net fee and commission income |
4,626 |
4,498 |
2.8% |
1,022 |
959 |
6.7% |
|
Net expected credit losses and net impairment allowances on non-financial assets |
(1,373) |
(1,564) |
(12.2%) |
(303) |
(334) |
(9.3%) |
|
Administrative expenses |
(7,635) |
(7,769) |
(1.7%) |
(1,686) |
(1,657) |
1.8% |
|
Profit before tax |
8,562 |
4,767 |
79.6% |
1,891 |
1,017 |
85.9% |
|
Net profit (including non-controlling shareholders) |
5,505 |
3,312 |
66.2% |
1,216 |
706 |
72.2% |
|
Net profit attributable to the parent company |
5,502 |
3,312 |
66.1% |
1,215 |
706 |
72.1% |
|
Earnings per share for the period - basic (in PLN/EUR) |
4.40 |
2.65 |
66.0% |
0.97 |
0.57 |
70.2% |
|
Earnings per share for the period - diluted (in PLN/EUR) |
4.40 |
2.65 |
66.0% |
0.97 |
0.57 |
70.2% |
|
Net comprehensive income |
11,120 |
16 |
6,940.0% |
2,456 |
3 |
8,176.0% |
|
Total net cash flows |
(667) |
11,220 |
(105.9)% |
(147) |
2,393 |
(106.1%) |
|
SELECTED FINANCIAL DATA
|
PLN million |
|
EUR million |
|
||
|
31.12.2023 |
31.12.2022 |
Change % (A-B)/B |
31.12.2023 |
31.12.2022 |
Change % (D-E)/E |
|
|
A |
B |
C |
D |
E |
F |
|
|
|
|
|
|
|
|
|
|
Total assets |
501,516 |
431,447 |
16.2% |
115,344 |
91,995 |
25.4% |
|
Total equity |
45,227 |
35,707 |
26.7% |
10,402 |
7,614 |
36.6% |
|
Share capital |
1,250 |
1,250 |
- |
287 |
267 |
7.5% |
|
Number of shares (in million) |
1,250 |
1,250 |
- |
1,250 |
1,250 |
- |
|
Book value per share (in PLN/EUR) |
36.18 |
28.57 |
26.6% |
8.32 |
6.09 |
36.6% |
|
Diluted number of shares (in million) |
1,250 |
1,250 |
- |
1,250 |
1,250 |
- |
|
Diluted book value per share (in PLN/EUR) |
36.18 |
28.57 |
26.6% |
8.32 |
6.09 |
36.6% |
|
Total Capital Ratio (%) |
18.65 |
19.07 |
(2.2%) |
18.65 |
19.07 |
(2.2%) |
|
Tier 1 |
41,727 |
41,175 |
1.3% |
9,597 |
8,780 |
9.3% |
|
Tier 2 |
2,080 |
2,584 |
(19.5%) |
478 |
551 |
(13.3%) |
|
SELECTED FINANCIAL STATEMENT ITEMS HAVE BEEN TRANSLATED INTO EUR AT THE FOLLOWING RATES |
2023 |
2022 |
|
arithmetic mean of the NBP exchange rates at the end of a month (income statement, statement of comprehensive income and cash flow statement items) |
4.5284 |
4.6883 |
|
|
31.12.2023 |
31.12.2022 |
|
NBP mid exchange rates at the date indicated (statement of financial position items) |
4.3480 |
4.6899 |
TABLE OF CONTENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
General information about the Group
2. Changes in the Group companies
3. Information on members of the Supervisory Board and Management Board
4. Approval of the consolidated financial statements
5. Representation by the Management Board
8. The basis for preparation of the financial statements
SIGNIFICANT ACCOUNTING POLICIES
9. Functional currency, presentation currency and foreign currencies
10.3. acquisition of subsidiaries (business combinations)
10.4. Associates and joint ventures
11. General accounting policies for financial instruments
11.1. Accounting for transactions
11.2. offsetting financial instruments
11.3. Derecognition of financial instruments from the statement of financial position
11.4. The principles for classification of financial instruments
11.5. Financial assets measured at amortized cost
11.6. Financial assets measured at fair value through other comprehensive income
11.7. Financial assets measured at fair value through profit or loss
11.9. Reclassification of financial assets
11.10. Modifications – Changes in contractual cash flows
11.11. Measurement of purchased or originated credit-impaired financial assets (POCI)
11.12. Measurement of financial liabilities
14. IFRS 17 “Insurance contracts”
14.1. Measurement and presentation of insurance products
14.5. Impact assessment - classification and measurement
14.6. Impact of IFRS 17 on own funds and capital adequacy measures
15. New standards and interpretations and their amendments
SUPPLEMENTARY NOTES TO THE INCOME STATEMENT
17. Interest income and expense
18. Fee and commission income and expenses
20. Gains/(losses) on financial transactions
21. Foreign exchange gains/ (losses)
22. Gains/(losses) on derecognition of financial instruments
23. Other operating income and expenses
24. Net allowances for expected credit losses
25. Impairment of non-financial assets
26. Cost of the legal risk of mortgage loans in convertible currencies
28. Tax on certain financial institutions
SUPPLEMENTARY NOTES TO THE STATEMENT OF FINANCIAL POSITION – FINANCIAL INSTRUMENTS
31. Cash and balances with Central Bank
33. Hedge accounting and other derivative instruments
33.1. Hedge accounting – financial information
33.2. Other derivative instruments – financial information
35. Loans and advances to customers
38.1. Loans and advances received
38.2. Liabilities in respect of debt securities in issue
38.3. Subordinated liabilities
OTHER SUPPLEMENTARY NOTES TO THE STATEMENT OF FINANCIAL POSITION AND CONTINGENT LIABILITIES
39.2. Main elements of measurement according to IFRS 17
39.2.1. Identification and aggregation of insurance contracts
39.2.4. Best estimate of future cash flows
39.2.6. Adjustment for non-financial risk
39.2.7. Contractual service margin (CSM)
39.2.8. Insurance finance income or expenses
39.2.9. Outward reinsurance contracts
41. Property, plant and equipment
42. Investments in associates and joint ventures
46. Contingent liabilities and off-balance sheet liabilities received and granted
48. Equity and shareholding structure of the Bank
FAIR VALUE OF FINANCIAL INSTRUMENTS
RISK MANAGEMENT WITHIN THE GROUP
51. Risk management within the Group
52. specific activities in the area of risk management undertaken by the Group n 2023
54. Credit risk – financial information
54.1. Financial assets by stage
54.2. Change in the gross carrying amount
54.3. Changes in allowances for expected credit losses
55. Offsetting financial assets and financial liabilities
56. Managing credit concentration risk in the Group
58. Exposure to the counterparty credit risk
60. Information on securitization of the lease portfolio and package sale of receivables
61. Management of currency risk associated with mortgage loans for individuals
62. Interest rate risk management
63.1. Financial assets and liabilities by currency
64.2. Assets pledged as collateral for liabilities and transferred financial assets
64.3. Current and non-current assets and liabilities
65. Operational risk management
67. Management of insurance and financial risks in the group's insurance business
67.4. Insurance and financial risks in insurance business - financial information
Capital management at the Group
70. Dividends and distribution of retained earnings
71. Notes to the consolidated cash flow statement
72. Transactions with the State Treasury and related parties
73. Benefits for the PKO Bank Polski SA key management
74.4. Lessor – Operating leases
76. Information on the entity authorized to audit the financial statements
77. Impact of the geopolitical situation in Ukraine on the PKO Bank Polski S.A. Group
78. Interest rate benchmarks reform
79. Events that occurred after the date on which the financial statements are prepared
|
INCOME STATEMENT |
Note |
2023 |
2022 (restated)** |
|
Net interest income |
18,318 |
11,424 |
|
|
Interest and similar income |
|
31,217 |
19,751 |
|
of which calculated under the effective interest rate method |
|
30,668 |
19,196 |
|
Interest expense |
|
(12,899) |
(8,327) |
|
Net fee and commission income |
4,626 |
4,498 |
|
|
Fee and commission income |
|
6,301 |
6,059 |
|
Fee and commission expense |
|
(1,675) |
(1,561) |
|
Other net income |
|
1,188 |
1,287 |
|
Net income from insurance business, of which: |
711 |
779 |
|
|
Insurance revenue (net of reinsurance) |
|
1,242 |
1,174 |
|
Cost of insurance activities (net of reinsurance) |
|
(389) |
(324) |
|
Dividend income |
14 |
51 |
|
|
Gains/(losses) on financial transactions |
167 |
358 |
|
|
Foreign exchange gains/ (losses) |
99 |
(73) |
|
|
Gains/(losses) on derecognition of financial instruments |
57 |
(26) |
|
|
of which measured at amortized cost |
|
24 |
15 |
|
Net other operating income and expense |
140 |
198 |
|
|
Result on business activities |
|
24,132 |
17,209 |
|
Net allowances for expected credit losses |
(1,265) |
(1,501) |
|
|
Net impairment losses on non-financial assets |
(108) |
(63) |
|
|
Cost of legal risk of mortgage loans in convertible currencies |
(5,430) |
(1,914) |
|
|
Administrative expenses |
(7,635) |
(7,769) |
|
|
of which net regulatory charges |
|
(622) |
(1,887) |
|
Tax on certain financial institutions |
(1,231) |
(1,266) |
|
|
Share in profits and losses of associates and joint ventures |
99 |
71 |
|
|
Profit before tax |
|
8,562 |
4,767 |
|
Income tax expense |
(3,057) |
(1,455) |
|
|
|
|
|
|
|
Net profit/(loss) (including non-controlling interest) |
|
5,505 |
3,312 |
|
Profit (loss) attributable to non-controlling shareholders |
|
3 |
- |
|
Net profit attributable to equity holders of the parent company |
|
5,502 |
3,312 |
|
|
|
|
|
|
Earnings per share |
|
|
|
|
– basic earnings per share for the period (PLN) |
|
4.40 |
2.65 |
|
– diluted earnings per share for the period (PLN)* |
|
4.40 |
2.65 |
|
Weighted average number of ordinary shares during the period (in million)* |
|
1,250 |
1,250 |
** The Income statement for 2022 was restated due to the implementation of IFRS 17 “Insurance Contracts” (see note “IFRS 17 Insurance Contracts")
|
Note |
2023 |
2022 (restated)* |
|
|
Net profit (including non-controlling shareholders) |
|
5,505 |
3,312 |
|
Other comprehensive income |
|
5,615 |
(3,296) |
|
Items which may be reclassified to profit or loss |
|
5,618 |
(3,289) |
|
Cash flow hedges (net) |
3,358 |
(1,519) |
|
|
Cash flow hedges (gross) |
|
4,146 |
(1,901) |
|
Deferred tax |
(788) |
382 |
|
|
Hedges of net investments in foreign operations |
|
- |
4 |
|
Fair value of financial assets measured at fair value through other comprehensive income (net) |
2,440 |
(1,676) |
|
|
Remeasurement of fair value, gross |
|
3,029 |
(2,112) |
|
Gains /losses transferred to the profit or loss (on disposal) |
|
(33) |
41 |
|
Deferred tax |
(556) |
395 |
|
|
Currency translation differences on foreign operations |
|
(124) |
(87) |
|
Share in other comprehensive income of associates |
|
(31) |
(18) |
|
Finance income and costs from insurance business, net |
(25) |
7 |
|
|
Finance income and costs from insurance business, gross |
|
(31) |
9 |
|
Deferred tax |
|
6 |
(2) |
|
Items which cannot be reclassified to profit or loss |
|
(3) |
(7) |
|
Actuarial gains and losses (net) |
|
(3) |
(7) |
|
Actuarial gains and losses (gross) |
(4) |
(9) |
|
|
Deferred tax |
1 |
2 |
|
|
Total net comprehensive income |
|
11,120 |
16 |
|
Total net comprehensive income, of which attributable to: |
|
11,120 |
16 |
|
equity holders of the parent |
|
11,117 |
16 |
|
non-controlling interest |
|
3 |
- |
* The Statement of comprehensive income for 2022 was restated due to the implementation of IFRS 17 “Insurance Contracts” (see note “IFRS 17 Insurance Contracts")
|
Note |
31.12.2023 |
31.12.2022 (restated)* |
01.01.2022 (restated)* |
|
|
ASSETS |
|
501,516 |
431,447 |
418,668 |
|
Cash and balances with Central Bank |
17,813 |
15,917 |
11,587 |
|
|
Amounts due from banks |
32 |
14,438 |
16,101 |
9,010 |
|
Hedging derivatives |
33 |
1,174 |
1,042 |
933 |
|
Other derivative instruments |
8,406 |
13,162 |
10,903 |
|
|
Securities |
197,484 |
135,632 |
135,440 |
|
|
Reverse repo transactions |
|
372 |
7 |
0 |
|
Loans and advances to customers |
245,776 |
232,959 |
235,695 |
|
|
Assets in respect of insurance activities |
90 |
115 |
128 |
|
|
Property, plant and equipment under operating lease |
2,117 |
1,764 |
1,371 |
|
|
Property, plant and equipment |
3,203 |
2,917 |
3,108 |
|
|
Non-current assets held for sale |
|
19 |
10 |
18 |
|
Intangible assets |
3,918 |
3,512 |
3,443 |
|
|
Investments in associates and joint ventures |
284 |
285 |
285 |
|
|
Current income tax receivable |
|
6 |
52 |
36 |
|
Deferred tax assets |
4,000 |
5,187 |
4,116 |
|
|
Other assets |
2,416 |
2,785 |
2,595 |
|
|
LIABILITIES AND EQUITY |
|
501,516 |
431,447 |
418,668 |
|
Liabilities |
|
456,289 |
395,740 |
380,689 |
|
Amounts due to Central bank |
|
10 |
9 |
8 |
|
Amounts due to banks |
3,423 |
3,011 |
3,821 |
|
|
Hedging derivatives |
2,992 |
7,469 |
4,806 |
|
|
Other derivative instruments |
9,291 |
12,978 |
11,008 |
|
|
Amounts due to customers |
399,193 |
338,868 |
321,266 |
|
|
Liabilities in respect of insurance activities |
2,915 |
2,878 |
3,317 |
|
|
Loans and advances received |
1,489 |
2,294 |
2,461 |
|
|
Securities in issue |
17,201 |
15,510 |
23,872 |
|
|
Subordinated liabilities |
2,774 |
2,781 |
2,716 |
|
|
Other liabilities |
11,007 |
7,010 |
5,360 |
|
|
Current income tax liabilities |
|
1,117 |
765 |
18 |
|
Deferred tax liabilities |
712 |
77 |
379 |
|
|
Provisions |
4,165 |
2,090 |
1,657 |
|
|
EQUITY |
|
45,227 |
35,707 |
37,979 |
|
Share capital |
|
1,250 |
1,250 |
1,250 |
|
Reserves and accumulated other comprehensive income |
|
27,676 |
22,239 |
25,330 |
|
Retained earnings |
|
10,810 |
8,920 |
6,539 |
|
Net profit or loss for the year |
|
5,502 |
3,312 |
4,874 |
|
Capital and reserves attributable to equity holders of the parent company |
|
45,238 |
35,721 |
37,993 |
|
Non-controlling interests |
|
(11) |
(14) |
(14) |
* The statement of financial position as at 1 January 2022 and 31 December 2022 was restated due to the implementation of IFRS 17 “Insurance Contracts” (see note “IFRS 17 Insurance Contracts")
|
FOR THE YEAR ENDED 31 DECEMBER 2023 |
Share capital |
Reserves and accumulated other comprehensive income |
|
Net profit or loss for the period |
Total capital and reserves attributable to equity holders of the parent company |
Total non-controlling interests |
Total equity |
||||
|
Reserves |
Accumulated other comprehensive income |
Reserves and accumulated other comprehensive income |
Retained earnings |
||||||||
|
Supplementary capital |
General banking risk fund |
Other reserves |
|||||||||
|
As at the beginning of the period, after changes in accounting policies |
1,250 |
23,085 |
1,070 |
7,091 |
(9,007) |
22,239 |
8,920 |
3,312 |
35,721 |
(14) |
35,707 |
|
Transfer from retained earnings |
- |
- |
- |
- |
- |
- |
3,312 |
(3,312) |
- |
- |
- |
|
Transfer from retained earnings to equity |
- |
115 |
- |
1,647 |
- |
1,762 |
(1,762) |
- |
- |
- |
- |
|
Dividend, including interim dividend |
- |
- |
- |
(1,600) |
- |
(1,600) |
- |
- |
(1,600) |
- |
(1,600) |
|
Comprehensive income |
- |
- |
- |
- |
5,615 |
5,615 |
- |
5,502 |
11,117 |
3 |
11,120 |
|
Offset of accumulated losses |
- |
(340) |
- |
- |
- |
(340) |
340 |
- |
- |
- |
- |
|
As at the end of the period |
1,250 |
22,860 |
1,070 |
7,138 |
(3,392) |
27,676 |
10,810 |
5,502 |
45,238 |
(11) |
45,227 |
|
FOR THE YEAR ENDED 31 DECEMBER 2023 |
Accumulated other comprehensive income |
|||||||
|
Share in other comprehensive income of associates and joint ventures |
Fair value of financial assets measured at fair value through other comprehensive income |
Cash flow hedges
|
Finance income and costs from insurance business |
Actuarial gains and losses |
Currency translation differences on foreign operations
|
Total |
||
|
As at the beginning of the period, after changes in accounting policies |
(35) |
(3,461) |
(5,218) |
24 |
(21) |
(296) |
(9,007) |
|
|
Comprehensive income |
(31) |
2,440 |
3,358 |
(25) |
(3) |
(124) |
5,615 |
|
|
As at the end of the period |
(66) |
(1,021) |
(1,860) |
(1) |
(24) |
(420) |
(3,392) |
|
|
FOR THE YEAR ENDED 31 DECEMBER 2022 |
Share capital |
Reserves and accumulated other comprehensive income |
|
Net profit or loss for the period |
Total capital and reserves attributable to equity holders of the parent company |
Total non-controlling interests |
Total equity |
||||
|
Reserves |
Accumulated other comprehensive income |
Reserves and accumulated other comprehensive income |
Retained earnings |
||||||||
|
Supplementary capital |
General banking risk fund |
Other reserves |
|||||||||
|
As at the beginning of the period |
1,250 |
23,003 |
1,070 |
6,968 |
(5,728) |
25,313 |
6,270 |
4,874 |
37,707 |
(14) |
37,693 |
|
Changes in accounting policies* |
- |
- |
- |
- |
17 |
17 |
269 |
- |
286 |
- |
286 |
|
As at the beginning of the period, after policy changes |
1,250 |
23,003 |
1,070 |
6,968 |
(5,711) |
25,330 |
6,539 |
4,874 |
37,993 |
(14) |
37,979 |
|
Transfer from retained earnings |
- |
- |
- |
- |
- |
- |
4,874 |
(4,874) |
- |
- |
- |
|
Transfer from retained earnings to equity |
- |
82 |
- |
123 |
- |
205 |
(205) |
- |
- |
- |
- |
|
Dividend |
- |
- |
- |
- |
- |
- |
(2,288) |
- |
(2,288) |
- |
(2,288) |
|
Comprehensive income |
- |
- |
- |
- |
(3,296) |
(3,296) |
- |
3,312 |
16 |
- |
16 |
|
As at the end of the period |
1,250 |
23,085 |
1,070 |
7,091 |
(9,007) |
22,239 |
8,920 |
3,312 |
35,721 |
(14) |
35,707 |
*For details on the impact of the implementation of IFRS 17 on the Group's equity, see Note „IFRS 17 Insurance contracts”
|
FOR THE YEAR ENDED 31 DECEMBER 2022 |
|
Accumulated other comprehensive income |
||||||
|
Share in other comprehensive income of associates and joint ventures
|
Fair value of financial assets measured at fair value through other comprehensive income |
Cash flow hedges
|
Hedges of net investments in foreign operations |
Finance income and costs from insurance business |
Actuarial gains and losses |
Currency translation differences on foreign operations
|
Total |
|
|
As at the beginning of the period |
(1,785) |
(3,699) |
(4) |
- |
(14) |
(209) |
(5,728) |
|
|
Changes in accounting policies* |
- |
- |
- |
|
17 |
- |
- |
17 |
|
As at the beginning of the period, after policy changes |
(17) |
(1,785) |
(3,699) |
(4) |
17 |
(14) |
(209) |
(5,711) |
|
Comprehensive income |
(18) |
(1,676) |
(1,519) |
4 |
7 |
(7) |
(87) |
(3,296) |
|
As at the end of the period |
(35) |
(3,461) |
(5,218) |
- |
24 |
(21) |
(296) |
(9,007) |
*For details on the impact of the implementation of IFRS 17 on the Group's equity, see Note „IFRS 17 Insurance contracts.”
|
|
Note |
2023 |
2022 (restated)* |
|
Cash flows from operating activities |
|
|
|
|
Profit before tax |
|
8,562 |
4,767 |
|
Income tax paid |
|
(1,793) |
(1,429) |
|
Total adjustments: |
|
40,108 |
15,205 |
|
Depreciation and amortization |
1,371 |
1,267 |
|
|
(Gains)/losses on investing activities |
(87) |
(97) |
|
|
Interest and dividends received |
(6,549) |
(3,758) |
|
|
Interest paid |
754 |
581 |
|
|
Change in: |
|
|
|
|
amounts due from banks |
(905) |
(213) |
|
|
hedging derivatives |
|
(4,609) |
2,554 |
|
other derivative instruments |
|
1,069 |
(289) |
|
securities |
(6,360) |
(4,288) |
|
|
loans and advances to customers |
(13,282) |
1,686 |
|
|
reverse repo transactions |
|
(365) |
(7) |
|
assets in respect of insurance activities |
|
24 |
13 |
|
property, plant and equipment under operating lease |
|
(353) |
(640) |
|
non-current assets held for sale |
(8) |
8 |
|
|
other assets |
360 |
(216) |
|
|
accumulated allowances for expected credit losses |
381 |
1,191 |
|
|
accumulated allowances on non-financial assets and other provisions |
2,222 |
270 |
|
|
amounts due to the Central Bank |
|
1 |
1 |
|
amounts due to banks |
|
412 |
(810) |
|
amounts due to customers |
|
60,325 |
17,602 |
|
liabilities in respect of insurance activities |
|
37 |
(439) |
|
loan and advances received |
335 |
(35) |
|
|
liabilities in respect of debt securities in issue |
(500) |
742 |
|
|
subordinated liabilities |
(7) |
65 |
|
|
other liabilities |
2,662 |
1,905 |
|
|
Other adjustments |
3,180 |
(1,888) |
|
|
Net cash from/used in operating activities |
|
46,877 |
18,543 |
* The Statement of cash flows for 2022 was restated due to the implementation of IFRS 17 “Insurance Contracts” (see note “IFRS 17 Insurance Contracts")
|
|
Note |
2023 |
2022 (restated)* |
|
Cash flows from investing activities |
|
|
|
|
Inflows from investing activities |
|
788,046 |
102,154 |
|
Redemption of securities measured at fair value through other comprehensive income |
|
774,906 |
89,661 |
|
Redemption of securities measured at amortized cost |
|
6,371 |
7,765 |
|
Interest received on securities measured at fair value through other comprehensive income |
|
4,396 |
1,987 |
|
Interest received on securities measured at amortized cost |
|
2,139 |
1,720 |
|
Proceeds from disposal of intangible assets, property, plant and equipment and assets held for sale |
|
142 |
255 |
|
Other inflows from investing activities including dividends |
92 |
766 |
|
|
Outflows on investing activities |
|
(835,624) |
(97,116) |
|
Increase in equity of joint ventures |
|
- |
- |
|
Purchase of securities measured at fair value through other comprehensive income |
|
(810,745) |
(92,919) |
|
Purchase of securities measured at amortized cost |
|
(23,111) |
(2,452) |
|
Purchase of intangible assets and property, plant and equipment |
|
(1,768) |
(1,038) |
|
Other outflows on investing activities |
- |
(707) |
|
|
Net cash from/used in investing activities |
|
(47,578) |
5,038 |
* The Statement of cash flows for 2022 was restated due to the implementation of IFRS 17 “Insurance Contracts” (see note “IFRS 17 Insurance Contracts")
|
|
Note |
2023 |
2022 (restated)* |
|
Cash flows from financing activities |
|
|
|
|
Payment of dividends |
|
- |
(2,288) |
|
Proceeds from debt securities in issue |
13,105 |
8,421 |
|
|
Redemption of debt securities |
(10,914) |
(17,525) |
|
|
Taking up loans and advances |
12 |
620 |
|
|
Repayment of loans and advances |
(1,152) |
(753) |
|
|
Payment of lease liabilities |
(266) |
(255) |
|
|
Repayment of interest on long-term liabilities |
(751) |
(581) |
|
|
Net cash from financing activities |
|
34 |
(12,361) |
|
Total net cash flows |
|
(667) |
11,220 |
|
of which foreign exchange differences on cash and cash equivalents |
|
(872) |
100 |
|
Cash and cash equivalents at the beginning of the period |
|
31,995 |
20,775 |
|
Cash and cash equivalents at the end of the period |
31,328 |
31,995 |
* The Statement of cash flows for 2022 was restated due to the implementation of IFRS 17 “Insurance Contracts” (see note “IFRS 17 Insurance Contracts")
Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna (PKO Bank Polski S.A. or the Bank) was established by virtue of a decree signed on 7 February 1919 by the Head of State Józef Piłsudski, Prime Minister Ignacy Paderewski and Hubert Linde, post and telegraph minister and simultaneously the first president, as Pocztowa Kasa Oszczędnościowa. In 1950, the Bank began operating as Powszechna Kasa Oszczędności Bank Państwowy (state-owned bank). Pursuant to the Decree of the Council of Ministers dated 18 January 2000, Powszechna Kasa Oszczędności (a state-owned bank) was transformed into a state owned joint-stock company, Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna.
On 12 April 2000, Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna was registered and entered into the Commercial Register maintained by the District Court for the City of Warsaw, Commercial Court, 16th Registration Department. At present, the court with jurisdiction over the Bank’s affairs is the District Court in Warsaw, 13th Commercial Division of the National Court Register. The Bank was registered under the number KRS 0000026438 and was assigned the statistical number REGON 016298263.
|
Country of registration |
Poland |
|
Registered office |
Warsaw |
|
Address of the registered office of the entity |
Puławska street 15, 02-515 Warsaw |
According to the Bulletin of the Warsaw Stock Exchange (Ceduła Giełdowa), the Bank is classified under the macro-sector ‘‘Finance’’, in the ‘‘Banks’’ sector.
The Powszechna Kasa Oszczędnościowa Bank Polski Spółka Akcyjna Group (“the PKO Bank Polski S.A. Group”, “the Bank’s Group”, “the Group”) conducts its operations within the territory of the Republic of Poland and through subsidiaries in Ukraine, Sweden and Ireland; it also has branches in the Federal Republic of Germany (“the German Branch”), the Czech Republic (“the Czech Branch”) and in the Slovak Republic (“the Slovak Branch”).
PKO Bank Polski S.A., as the parent company, is a universal deposit and credit bank which services both Polish and foreign individuals, legal and other entities. The Bank may hold and trade in cash in foreign currencies, as well as conduct foreign exchange and foreign currency transactions, open and maintain bank accounts in banks abroad, and deposit foreign currency in those accounts.
Through its subsidiaries, the Group offers mortgage loans, provides specialized financial services related to leases, factoring, debt collection, investment funds, pension funds and insurance, as well as provides services related to car fleet management, transfer agent, technological solutions, IT outsourcing and business support, real estate management and also conducts banking operations and provides debt collection and financing services in Ukraine.
In 2023 and 2022, the Bank did not change the name of the reporting unit or other identification data.
The PKO Bank Polski S.A. Group consists of the following subsidiaries:
|
No. |
ENTITY NAME |
REGISTERED OFFICE |
ACTIVITY |
OWNERSHIP INTEREST (%) |
|
|
DIRECT SUBSIDIARIES |
31.12.2023 |
31.12.2022 |
|||
|
1 |
PKO Bank Hipoteczny S.A. |
Warsaw |
banking activities |
100 |
100 |
|
2 |
PKO Towarzystwo Funduszy Inwestycyjnych S.A. |
Warsaw |
investment fund management |
100 |
100 |
|
3 |
PKO Leasing S.A. |
Łódź |
leases and loans |
100 |
100 |
|
4 |
PKO BP BANKOWY PTE S.A. |
Warsaw |
pension fund management |
100 |
100 |
|
5 |
PKO BP Finat sp. z o.o. |
Warsaw |
services, including transfer agent services and outsourcing of IT specialists |
100 |
100 |
|
6 |
PKO Życie Towarzystwo Ubezpieczeń S.A. |
Warsaw |
life insurance |
100 |
100 |
|
7 |
PKO Towarzystwo Ubezpieczeń S.A. |
Warsaw |
other personal insurance and property insurance |
100 |
100 |
|
8 |
PKO Finance AB |
Sollentuna, Sweden |
financial services |
100 |
100 |
|
9 |
KREDOBANK S.A. |
Lviv, Ukraine |
banking activities |
100 |
100 |
|
10 |
Merkury - fiz an1 |
Warsaw |
investing funds collected from fund participants |
100 |
100 |
|
11 |
NEPTUN - fizan1 |
Warsaw |
100 |
100 |
|
|
12 |
PKO VC - fizan1 |
Warsaw |
100 |
100 |
|
1 PKO Bank Polski S.A. holds investment certificates of the Fund; the percentage of the Fund’s investment certificates held is presented in the item “Share in capital”.
|
No. |
ENTITY NAME |
REGISTERED OFFICE |
ACTIVITY |
OWNERSHIP INTEREST (%)* |
|
|
INDIRECT SUBSIDIARIES |
31.12.2023 |
31.12.2022 |
|||
|
|
PKO Leasing S.A. GROUP |
|
|
|
|
|
1 |
PKO Agencja Ubezpieczeniowa sp. z o.o. |
Warsaw |
intermediation in concluding insurance agreements |
100 |
100 |
|
|
1.1 PKO Leasing Finanse sp. z o.o. |
Warsaw |
sale of post-lease assets |
100 |
100 |
|
2 |
PKO Leasing Sverige AB |
Stockholm, Sweden |
leasing |
100 |
100 |
|
3 |
Prime Car Management S.A. |
Gdańsk |
leasing, fleet management |
100 |
100 |
|
|
3.1 Futura Leasing S.A. |
Gdańsk |
sale of post-lease assets |
100 |
100 |
|
|
3.2 Masterlease sp. z o.o. |
Gdańsk |
leasing |
100 |
100 |
|
|
3.3 MasterRent24 sp. z o.o. |
Gdańsk |
short-term lease of cars |
100 |
100 |
|
4 |
PKO Faktoring S.A. |
Warsaw |
factoring |
100 |
100 |
|
5 |
Polish Lease Prime 1 DAC1 |
Dublin, Ireland |
SPV established for securitization of lease receivables |
- |
- |
|
|
PKO Życie Towarzystwo Ubezpieczeń S.A. GROUP |
|
|
||
|
6 |
Ubezpieczeniowe Usługi Finansowe sp. z o.o. |
Warsaw |
services |
100 |
100 |
|
|
KREDOBANK S.A. GROUP |
|
|
|
|
|
7 |
“KREDOLEASING” sp. z o.o. |
Lviv, Ukraine |
leasing |
100 |
100 |
|
|
Merkury - fiz an |
|
|
|
|
|
8 |
“Zarząd Majątkiem Górczewska” sp. z o.o. |
Warsaw |
property management |
100 |
100 |
|
9 |
Molina sp. z o.o. |
Warsaw |
general partner in partnerships limited by shares of a fund |
100 |
100 |
|
10 |
Molina spółka z ograniczoną odpowiedzialnością 1 S.K.A. |
Warsaw |
buying and selling real estate on own account, real estate management |
100 |
100 |
|
11 |
Molina spółka z ograniczoną odpowiedzialnością 2 S.K.A. w likwidacji (in liquidation) |
Warsaw |
100 |
100 |
|
|
12 |
Molina spółka z ograniczoną odpowiedzialnością 4 S.K.A. w likwidacji (in liquidation) |
Warsaw |
100 |
100 |
|
|
13 |
Molina spółka z ograniczoną odpowiedzialnością 6 S.K.A. w likwidacji (in liquidation) |
Warsaw |
100 |
100 |
|
|
|
NEPTUN - fizan |
|
|
|
|
|
14 |
Qualia sp. z o.o. |
Warsaw |
after-sale services in respect of developer products |
100 |
100 |
|
15 |
Sarnia Dolina sp. z o.o. |
Warsaw |
development activities |
100 |
100 |
|
16 |
Bankowe Towarzystwo Kapitałowe S.A. |
Warsaw |
services |
100 |
100 |
|
|
16.1 „Inter-Risk Ukraina" spółka z dodatkową odpowiedzialnością2 |
Kiev, Ukraine |
debt collection |
99.90 |
99.90 |
|
|
16.2 Finansowa Kompania “Prywatne Inwestycje” sp. z o.o.3 |
Kiev, Ukraine |
financial services |
95.4676 |
95.4676 |
|
|
16.2.1 Finansowa Kompania “Idea Kapitał” sp. z o.o. |
Lviv, Ukraine |
services |
100 |
100 |
|
17 |
“Sopot Zdrój" sp. z o.o. |
Sopot |
property management |
72.9769 |
72.9769 |
* share of direct parent in the entity’s equity
1) In accordance with IFRS 10, PKO Leasing S.A. exercises control over the company, although it does not have a capital share In it.
2) Finansowa Kompania “Prywatne Inwestycje” sp. z o.o. is the second shareholder of the company.
3) “Inter-Risk Ukraina” – a company with additional liability – is the second shareholder of the company.
The Group has the following associates and joint ventures:
|
No |
ENTITY NAME |
REGISTERED OFFICE |
ACTIVITY |
OWNERSHIP INTEREST (%)* |
|
|
31.12.2023 |
31.12.2022 |
||||
|
|
Joint ventures of PKO Bank Polski S.A. |
|
|
||
|
1 |
Operator Chmury Krajowej sp. z o.o. |
Warsaw |
cloud computing services |
50 |
50 |
|
2 |
Centrum Elektronicznych Usług Płatniczych eService sp. z o.o. |
Warsaw |
financial services support activities, including handling transactions concluded using payment instruments |
34 |
34 |
|
|
1 EVO Payments International s.r.o. |
Prague, the Czech Republic |
financial services support activities |
100 |
100 |
|
|
Joint venture NEPTUN - fizan |
|
|
|
|
|
|
2 “Centrum Obsługi Biznesu" sp. z o.o. |
Poznań |
property management |
41.45 |
41.45 |
|
|
Joint venture PKO VC - fizan |
|
|
|
|
|
|
3 BSafer sp. z o.o. |
Stalowa Wola |
managing marketing consents |
35.06 |
35.06 |
|
|
Associates of PKO Bank Polski S.A. |
|
|
||
|
1 |
Bank Pocztowy S.A. |
Bydgoszcz |
banking activities |
25.0001 |
25.0001 |
|
2 |
“Poznański Fundusz Poręczeń Kredytowych” sp. z o.o. |
Poznań |
guarantees |
33.33 |
33.33 |
|
3 |
System Ochrony Banków Komercyjnych S.A. |
Warsaw |
manager of the security system referred to in Article 130e of the Banking Law |
21.11 |
21.11 |
* share in equity of the entity exercising joint control / having a significant impact / the direct parent.
In 2023, the following events occurred in the structure of the Group.
• In September 2023, the Bank's Management Board approved the merger of the investment funds NEPTUN - fiz an (the acquiring fund) and Merkury - fiz an (the acquired fund) by transferring the assets of the acquired fund to the existing acquiring fund and allocating investment certificates of the acquired fund to a participant of the acquiring fund in exchange for investment certificates of the acquired fund. This merger was effected on 30 January 2024. In the Bank's annual separate financial statements, Mercury - fiz an, in accordance with International Financial Reporting Standard 5, is reported as an asset held for sale and in the Group's annual consolidated financial statements, the fund and its subsidiaries are included in the consolidation.
• “KREDOLEASING” sp. z o.o., a subsidiary of KREDOBANK S.A., commenced leasing activities. The company launched operations to a limited extent due to the war in Ukraine, where it is based.
Composition of the Bank's Supervisory Board as at 31 December 2023:
• Robert Pietryszyn – Chair of the Supervisory Board
• Wojciech Jasiński – Deputy Chair of the Supervisory Board
• Dominik Kaczmarski – Secretary of the Supervisory Board
• Mariusz Andrzejewski – Member of the Supervisory Board
• Andrzej Kisielewicz – Member of the Supervisory Board
• Rafał Kos – Member of the Supervisory Board
• Tomasz Kuczur – Member of the Supervisory Board
• Maciej Łopiński – Member of the Supervisory Board
• Bogdan Szafrański – Member of the Supervisory Board
• Agnieszka Winnik-Kalemba – Member of the Supervisory Board
With effect from 24 March 2023, Mr Maciej Łopiński resigned as Chair of the Bank's Supervisory Board, while remaining a member of the Bank's Supervisory Board. The Minister of State Assets, acting as an Authorised Shareholder within the meaning of § 11(2) of the Bank's Articles of Association, in consideration of § 35(1) of the Bank's Articles of Association, in accordance with § 12(1) of the Bank's Articles of Association, appointed Mr Robert Pietryszyn as Chair of the Bank's Supervisory Board as of 24 March 2023.
On 2 February 2024, the Extraordinary General Shareholders' Meeting (EGM) of the Bank recalled the following members from the Bank's Supervisory Board: Mr Mariusz Andrzejewski, Mr Wojciech Jasiński, Mr Dominik Kaczmarski, Mr Rafał Kos, Mr Tomasz Kuczur, Mr Maciej Łopiński, Mr Robert Pietryszyn, Mr Bogdan Szafrański. At the same time, the EGM appointed the following persons to the Bank's Supervisory Board:
• Mr Maciej Cieślukowski,
• Ms Hanna Kuzińska,
• Mr Szymon Midera,
• Mr Andrzej Oślizło,
• Mr Marek Panfil,
• Mr Marek Radzikowski,
• Mr Paweł Waniowski,
• Ms Katarzyna Zimnicka-Jankowska.
The State Treasury as the Eligible Shareholder, pursuant to the Bank’s Articles of Association, appointed:
• Ms Katarzyna Zimnicka-Jankowska – for the position of the Chair of the Bank’s Supervisory Board
• Mr Paweł Waniowski - for the position of the Deputy Chair of the Bank’s Supervisory Board.
Composition of the Bank's Management Board as at 31 December 2023:
• Dariusz Szwed – President of the Management Board
• Maciej Brzozowski – Vice-President of the Management Board
• Marcin Eckert – Vice-President of the Management Board
• Paweł Gruza – Vice-President of the Management Board
• Wojciech Iwanicki – Vice-President of the Management Board
• Andrzej Kopyrski – Vice-President of the Management Board
• Artur Kurcweil – Vice-President of the Management Board
• Piotr Mazur – Vice-President of the Management Board
On 6 April 2023, Mr Paweł Gruza resigned, effective at the end of 12 April 2023, from heading the Bank's Management Board and from applying for the position of President of the Bank's Management Board. At the same time, Mr Paweł Gruza did not resign from his membership of the Bank's Management Board or from his position as Vice-President of the Bank's Management Board.
With effect from 13 April 2023, Mr Mieczysław Król resigned as a member of the Bank's Management Board.
The Bank's Supervisory Board dismissed Mr Maks Kraczkowski from the Bank's Management Board with effect from 13 April 2023.
The Bank's Supervisory Board resolved to appoint Mr Dariusz Szwed as Vice-President of the Bank's Management Board, effective 14 April 2023, for the current joint term of office of the Bank's Management Board, which commenced on 3 July 2020, and at the same time appointed Mr Dariusz Szwed as President of the Bank's Management Board, subject to the approval of the Polish Financial Supervision Authority and as of the date of such approval. Until the approval by the Polish Financial Supervision Authority (“PFSA”), the Supervisory Board has entrusted Mr Dariusz Szwed with directing the work of the Management Board.
On 31 August 2023, the PFSA unanimously approved the appointment of Dariusz Szwed as President of the Management Board of PKO Bank Polski.
On 7 February 2024, Mr Dariusz Szwed resigned from the function of the President of the Bank's Management Board as well as from the membership in the Bank's Management Board effective as of 14 February 2024.
• Mr Andrzej Kopyrski,
• Mr Paweł Gruza,
• Mr Maciej Brzozowski,
• Mr Marcin Eckert,
• Mr Wojciech Iwanicki,
• Mr Artur Kurcweil.
The resolutions on the aforementioned recalls became effective upon adoption.
The Supervisory Board delegated the following members of the Supervisory Board:
• Mr Szymon Midera to temporarily perform the duties of Vice President of the Management Board from 15 February 2024, with assignment to manage the work of the Management Board,
• Mr Maciej Cieślukowski to temporarily perform the duties of Vice-President of the Management Board from 14 February 2024,
• Mr Marek Radzikowski to temporarily perform the duties of Vice-President of the Management Board from 14 February 2024.
These consolidated financial statements of the Group (the financial statements), subject to review by the Audit Committee was approved for publication by the Management Board on 5 March 2024 and adopted by the Bank's Supervisory Board on 6 March 2024.
The Management Board hereby represents that, to its best knowledge, the financial statements of the Group and the comparative data have been prepared in accordance with the applicable accounting policies and give a true, fair and clear view of the Group’s financial position and its results of operations.
The financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as endorsed by the European Union (EU) as at 31 December 2023, and in the areas not regulated by these standards, in accordance with the requirements of the Accounting Act of 29 September 1994 and the respective secondary legislation issued on its basis, as well as the requirements relating to issuers of securities registered or applying for registration on the stock exchange official listing market.
The financial statements have been prepared on the basis of the assumption that the Bank’s Group will continue as a going concern for a period of at least 12 months from the date of approval for publication by the Management Board, i.e from 5 March 2024. As at the date of signing of these financial statements, the Management Board of the Bank did not identify any facts or circumstances which would indicate any threats to the Group’s ability to continue in operation as a going concern for at least 12 months after the publication as a result of intended or forced discontinuing or significantly curtailing the existing operations of the Bank’s Group.
The Bank's Management Board considered the impact of: current situation in Ukraine, legal risk of mortgage loans in convertible currencies and planned amendments to the Act on crowdfunding for business ventures and assistance to borrowers in respect of the new credit holiday programme and assessed that these factors do not cause significant uncertainty in the Group's ability to continue as a going concern.
The external business conditions covering the macroeconomic environment, the situation on the financial markets, the state of the Polish banking and non-banking sector, the regulatory and legal environment, as well as the factors that will affect future financial results are described in detail in the Management Board Report on the operations of the PKO Bank Polski S.A. Group (note 2 “External business conditions").
Disclosures concerning: the situation in Ukraine are presented in the note “Impact of the geopolitical situation in Ukraine on the PKO Bank Polski S.A. Group”, the legal risk of mortgage loans in convertible currencies in the notes “The costs of legal risk of mortgage loans in convertible currencies” and credit holidays in the note “Loans and advances to customers”.
The consolidated financial statements of the PKO Bank Polski S.A. Group cover the year ended 31 December 2023 and include comparative data for the year ended 31 December 2022. The financial data is presented in millions of Polish zlotys (PLN), unless otherwise indicated.
These financial statements have been prepared on a fair value basis in respect of financial assets and liabilities measured at fair value through profit or loss, including derivatives and financial assets measured at fair value through other comprehensive income. The remaining financial assets are recognized by the Group at amortized cost less allowances for expected credit losses. Other financial liabilities are recognized by the Group at amortized cost. Non-current assets are measured at acquisition cost less accumulated depreciation and impairment losses. Fixed assets or groups of assets classified as held for sale are recognized by the Group at the lower of their carrying amount and fair value less costs to sell.
When preparing the financial statements, the Group makes estimates and adopts assumptions which directly affect both the financial statements and the supplementary information included therein. The estimates and assumptions applied by the Capital Group to report the value of assets and liabilities, as well as income and expenses are made using historical data and other factors that are available and considered appropriate in particular circumstances. Assumptions regarding the future and the available data are used for assessing the carrying amounts of assets and liabilities which cannot be clearly determined using other sources. In making estimates, the Group takes into consideration the reasons and sources of the uncertainties that are anticipated at the end of the reporting period. Actual results may differ from estimates.
Estimates and assumptions made by the Group are subject to periodic reviews. Changes in estimates are recognized in the period to which they relate.
Significant accounting policies and estimates and judgments applied in the preparation of these financial statements are presented in this Chapter and in individual notes further in the financial statements. In all years presented, these accounting policies are applied consistently, with the exception of issues described in the note “IFRS 17 Insurance contracts”.
In addition, the Group has reviewed its accounting policy disclosures taking into account the fact that, in accordance with the interpretation of the amendments to IAS 1, specific information is more useful than disclosures that contain only standard information or duplications or summaries of the requirements of the IFRSs, and information on specific accounting policies is particularly relevant when it relates to an area where the Group exercises its own judgement.
The functional currency of the parent and other entities included in these financial statements, except for the German Branch, the Czech Branch, the Slovak Branch and entities conducting their activities outside of the Republic of Poland, is the Polish zloty. The functional currency of the entities operating in Ukraine is the Ukrainian hryvnia, the functional currency of the German Branch, the Slovak Branch and the entities operating in Sweden and Ireland is the euro, and the functional currency of the Czech Branch is the Czech koruna.
• Transactions and balances in foreign currencies
At the end of each reporting period, the Group translates:
• monetary items in foreign currencies – at the closing exchange rate, i.e. the mid-exchange rate quoted by the National Bank of Poland at the end of the reporting period;
• non-monetary items measured at fair value in a foreign currency, such as equity instruments classified as financial assets, are translated using the average exchange rates quoted by the National Bank of Poland, effective on the date on which the fair value was determined.
|
UAH/PLN |
2023 |
2022 |
|
Foreign exchange rates as at the end of the period |
0.1037 |
0.1258 |
|
Arithmetic mean of exchange rates as at the last day of each month in the period |
0.1153 |
0.1354 |
|
The highest exchange rate during the period |
0.1258 |
0.1467 |
|
The lowest exchange rate during the period |
0.1037 |
0.1258 |
|
EUR/PLN |
2023 |
2022 |
|
Foreign exchange rates as at the end of the period |
4.3480 |
4.6899 |
|
Arithmetic mean of exchange rates as at the last day of each month in the period |
4.5284 |
4.6883 |
|
The highest exchange rate during the period |
4.7170 |
4.8698 |
|
The lowest exchange rate during the period |
4.3480 |
4.5756 |
|
CZK/PLN |
2023 |
2022 |
|
Foreign exchange rates as at the end of the period |
0.1759 |
0.1942 |
|
Arithmetic mean of exchange rates as at the last day of each month in the period |
0.1889 |
0.1909 |
|
The highest exchange rate during the period |
0.1999 |
0.1980 |
|
The lowest exchange rate during the period |
0.1759 |
0.1851 |
Subsidiaries are entities controlled by the parent company, which means that the parent company has a direct or indirect impact on the financial and operating policy of the given entity in order to gain economic benefits from its operations.
In the case of PKO Leasing S.A. (PKOL, the Company), control of Polish Lease Prime 1 DAC is exercised despite not holding an equity interest. Polish Lease Prime 1 DAC is a special purpose vehicle (SPV) formed to securitise receivables arising from PKOL's leases, which include car, truck, plant and equipment leases.
The SPV meets the definition of a structured entity subject to consolidation (under IFRS 12). PKOL's power is manifested, among other things, in the fact that the Company acts as the Servicer and therefore has influence over the SPV's key activities (providing funds for the SPV's ongoing debt service). The results of the SPV's operations are, in principle, determined by the performance of the portfolio subject to the securitisation transaction, and the maintenance of the portfolio's profitability is determined by PKOL through its debt collection activities (the Company decides on its own on the activities, including the initiation of hard debt collection measures). In addition, the receivables portfolio's loss ratio does not exceed the share of Junior Funding received from PKOL and therefore it is PKOL that is exposed to the credit risk arising from the receivables.
The PKO Bank Polski SA Group does not meet the definition of “an investment entity”.
All subsidiaries of the PKO Bank Polski S.A. Group are consolidated using the acquisition method. The following items are eliminated in full: mutual receivables and payables, income and expenses, and mutual cash flows in the statement of cash flows, of consolidated entities, e.g. from mutual financing agreements, cash deposits, IT services, , derivative transactions, fixed asset leases, transfers of loan receivables portfolios and settlements of agency fees from the sale of insurance.
In other comprehensive income, the Group recognises finance income and expenses from insurance business and foreign exchange differences arising from the translation of foreign operations into Polish currency at an exchange rate representing the arithmetic mean of the average exchange rates prevailing on the last day of each month of the financial period as quoted by the National Bank of Poland.
The consolidated statement of cash flows is prepared on the basis of the consolidated statement of financial position, consolidated income statement and additional notes and explanations.
Financial statements of subsidiaries are prepared for the same reporting periods as the financial statements of the parent company. Consolidation adjustments are made in order to eliminate any differences in the accounting policies applied by the Bank and its subsidiaries.
The acquisition of subsidiaries by the Group is accounted for under the acquisition method.
In respect of mergers of the Group companies, i.e. the so-called transactions under joint control, the predecessor accounting method is applied, i.e. the acquired subsidiary is recognized at the carrying amount of its assets and liabilities recognized in the Group’s consolidated financial statements in respect of the given subsidiary, including the goodwill arising from the acquisition of that subsidiary.
Investments in associates and joint ventures are accounted in accordance with the equity method and are initially stated at cost. At each balance sheet date, the Group makes an assessment of whether there is any evidence of impairment of investments in associates and joint ventures. If any such evidence exists, the Group estimates the recoverable amount, i.e. the value in use of the investment or the fair value of the investment less costs to sell, whichever of these values is higher.
The value in use of investments is determined based on the present value of the estimated expected future cash flows from the continued use of these assets, using models dedicated to each individual entity. These cash flows are discounted at a discount rate based on the cost of equity estimated on a case-by-case basis for each investment. The current bid price received or the value estimated on the basis of valuation techniques commonly used by market participants (including valuations provided by a specialised third party) is accepted as the fair value of the investment.
If the carrying amount of an asset exceeds its recoverable amount, the Group recognizes an impairment allowance in the income statement.
Financial assets and financial liabilities, including forward transactions and regular-way transactions, which carry an obligation or a right to purchase or sell in the future an agreed number of specified financial instruments at a fixed price, are entered into the books of account under the date of the contract, irrespective of the settlement date provided in the contract.
Financial assets and financial liabilities are offset by the Group and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
The Group excludes financial assets from the statement of financial position when, among other things, they are subject to invalidation by a final court judgement, cancellation by prescription or they are uncollectible. When the said assets are derecognized, they are charged to the respective credit loss allowances or losses in respect of legal risk (in case of invalidation of CHF loans).
In the event that no allowances have been recognised, or if the amount of the allowance is less than the amount of the financial asset, the amount of the credit loss allowance is increased by the difference between the value of the asset and the amount of the allowance that has been recognized to date.
The Group classifies financial assets into the following categories:
• measured at amortized cost;
• measured at fair value through other comprehensive income;
• measured at fair value through profit or loss.
The Group classifies financial liabilities into the following categories:
• measured at amortized cost;
• measured at fair value through profit or loss.
Classification of financial assets as at the date of their acquisition or origin depends on the business model adopted by the Group to manage a given group of assets and the characteristics of the contractual cash flows from a single asset or group of assets. The Group identifies the following business models:
• the “held to collect” cash flows model, in which financial assets originated or acquired are held in order to collect benefits from contractual cash flows – this model is typical for lending activities;
• the “held to collect and sell” cash flows model, in which financial assets originated or acquired are held to collect benefits from contractual cash flows, but they may also be sold (frequently and in transactions of a high volume) – this model is typical for liquidity management activities;
• the residual model – other than the “held to collect” or the “held to collect and sell” cash flows model.
• business model
The business model is determined by the Group upon initial recognition of financial assets. The Group determines the business model at the level of individual groups of assets, in the context of the business area in connection with which the financial assets originated or were acquired, and is based, among other things, on the following factors:
• the method for assessing and reporting the results of the financial assets portfolio;
• the method for managing the risk associated with such assets and the principles of remunerating the persons managing such portfolios.
In the “held to collect” business model, the Group sets out the following classification criteria:
• insignificant sales (less than 5% of the portfolio), even if frequent,
• infrequent sales (no more than 1 transaction - understood as 1 sale) - occasional sales transactions during the year, even if of significant value,
• sales close to maturity (a period of no more than 5% of the remaining period to maturity).
In addition, the Group uses the criterion of "incidental sales" in the event of an increase in the level of credit risk, a change in laws or regulations - the sales are made in order to maintain the assumed level of regulatory capital, in accordance with the principles described in the strategy for managing such portfolios.
• Assessment of contractual cash flow characteristics
The assessment of the contractual cash flow characteristics establishes, based on a test of contractual cash flows, whether contractual cash flows are solely payments of principal and interest on the principal amount outstanding (hereinafter “SPPI”). Interest is defined as consideration for the time value of money, credit risk relating to the principal remaining to be repaid within a specified period and other essential risks and costs associated with granting financing, as well as the profit margin.
Contractual cash flow characteristics do not affect the classification of the financial asset if:
• their effect on the contractual cash flows from that asset could not be significant (de minimis characteristic); In order to confirm the de minimis characteristic, the Group calculates the percentage change in cash flows for each reporting period separately, as well as cumulatively over the life of the financial instrument. A situation where the percentage change in cash flows does not exceed the materiality threshold of 5% does not constitute a breach of the SPPI test
• they are not genuine, i.e. they affect the contractual cash flows from the instrument only in the case of occurrence of a very rare, unusual or very unlikely event (non-genuine characteristic).
In order to make such a determination, the potential impact of the contractual cash flow characteristics in each reporting period and throughout the whole life of the financial instrument is considered.
The SPPI test is performed for each financial asset in the “held to collect” or “held to collect and sell” models upon initial recognition (and for substantial modifications after subsequent recognition of a financial asset).
In the case of financial assets having characteristics associated with sustainable development (green loans, where a customer may benefit from a reduced margin upon presentation of an energy efficiency certificate), the cash flow changes are assessed taking into account the possible impact of the characteristic associated with sustainable development in every reporting period and cumulatively throughout the lending period. It is also considered whether the impact of this characteristic on contractual cash flows is associated with credit risk. If the interest is increased or decreased in consequence of an increase or a decrease in credit risk, which indicates a positive correlation between the credit margin and the credit risk level, the SPPI criteria are met.
The Group analyses, among other things, the following features of financial assets which result in the SPPI test being failed:
• leverage in the design of interest rate, understood as a multiplier higher than 1;
• a creditor’s right to participate in the profit – contractual cash flows are not only the repayment of principal and interest on the outstanding principal;
• limitation of the debtor’s liabilities (resulting in a non-recourse asset);
• early repayment and extension option contingent on a future economic event which does not relate to the agreement, particularly an event not related to a change in the borrower’s credit risk level;
• covenants providing for an increase or decrease in interest rate in line with an increase or decrease in credit risk, which reflects a negative relation between the loan margin and the level of credit risk;
• interest rates unilaterally determined by the Group (administered interest rates), if they do not approximate variable market rates.
If the qualitative assessment performed as part of the SPPI test is insufficient to determine whether the contractual cash flows are solely payments of principal and interest, a benchmark test (quantitative assessment) is performed to determine the difference between the (non-discounted) contractual cash flows and the (non-discounted) cash flows that would occur should the time value of money remain unchanged (the reference level of cash flows). The Group performs benchmark tests mainly when there is a mismatch between the frequency of interest rate updates and the interest rate tenor, interest rate updates based on interest rate averaging or interest rate updates based on lagged values (e.g. the value applicable one month before the revaluation date). The materiality criterion for the difference in cash flows between the agreement being tested and the benchmark at a single scenario level was set at 5% for the sum of undiscounted cash flows over the agreement horizon and 5% for the sum of cash flows in the quarterly reporting periods.
• a financial asset is “held to collect”;
• the terms and conditions of an agreement concerning the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding (the SPPI test is passed).
The Group classifies amounts due from banks, loans and advances to customers and debt securities as financial assets measured at amortised cost.
The carrying amount of this category of assets is determined using the effective interest rate described in the note “Interest income and expenses”, which is used to determine (calculate) the interest income generated by the asset in a given period, adjusting it for expected credit loss allowances.
Assets for which the schedule of future cash flows necessary for calculating the effective interest rate cannot be determined, are not measured at amortized cost. Financial assets recognized in this item are measured at amounts due, including interest on receivables, taking into account allowances for expected credit losses (see note “Net allowances for expected credit losses”). Commissions and fees connected with the arising of or decisive for the financial qualities of such assets should be settled over the period of life of the asset using the straight-line method, and are included in commission income.
• the financial asset is held in accordance with the business model aimed at both receiving contractual cash flows and selling the asset; and
• the terms and conditions of an agreement concerning the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding (the SPPI test is passed).
The Group classifies debt securities into the category of financial assets measured at fair value through other comprehensive income
For methods of determining fair value, see note “„Fair value hierarchy”.
Financial assets measured at fair value through other comprehensive income are measured at fair value. The effects of changes in the fair value of such financial assets until derecognition or reclassification are recognized in other comprehensive income, except for income of a similar nature to interest income, net allowances for expected credit losses (see note „Net allowances for expected credit losses”) and foreign exchange gains or losses, which are recognized in profit or loss.
The gain or loss recognized in other comprehensive income constitutes the difference between the fair value of a financial asset as at the measurement date and the value of the asset at amortized cost.
If a financial asset has been derecognized, accumulated gains and losses previously reported in other comprehensive income are reclassified from other comprehensive income to financial profit or loss in the form of a reclassification adjustment.
If financial assets do not meet the aforementioned qualification criteria to be measured at amortized cost or at fair value through other comprehensive income, the Group classifies them as financial assets measured at fair value through profit or loss.
In the Group’s financial statements, financial assets measured at fair value through profit or loss are presented as follows:
• held for trading - financial assets which:
• are acquired or incurred principally for the purpose of selling or repurchasing it in the near term; or
• on initial recognition are part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
• are a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).
• financial assets that are not held for trading and must be measured at fair value through profit or loss – financial assets that have not passed the test of contractual cash flow characteristics (irrespective of the business model); or financial assets classified to the residual model;
• financial assets designated to be measured at fair value through profit or loss at initial recognition (option to measure at fair value through profit or loss).
Gains or losses on assets measured at fair value through profit or loss are recognized in profit or loss. Gains or losses on the measurement of the financial asset at fair value comprise the difference between the fair value of the asset and its value at amortized cost determined as at the measurement date.
Income similar to interest income on instruments measured at fair value through profit or loss are recognised in profit or loss under the heading “Interest income and expenses”.
Investments in equity instruments are measured at fair value through profit or loss.
Financial assets may be reclassified only in the event of a change in the business model relating to an asset or a group of assets resulting from the commencement or discontinuation of a material part of operations. Such changes are very infrequent. Reclassification is presented prospectively, i.e. without changing the effects of fair value measurements, allowances or accrued interest recognised to date.
The Group has not made any changes to the business model for financial assets in 2023.
Modification – understood as a change in the contractual cash flows in respect of a financial asset based on an annex to the contract, may be substantial or non-substantial. A change in the contractual cash flows resulting from execution of the terms of the contract is not a modification.
When the contractual cash flows of a financial asset are renegotiated or otherwise modified based on an annex to the agreement or by general legislation, and the renegotiation or modification does not result in the derecognition of that financial asset (“Non-substantial modification”), the gross carrying amount of the financial asset is recalculated and gain or loss arising from such modification is recognized in profit or loss (as interest income or expense).
An adjustment of the carrying amount of a financial asset resulting from the modification is recognized in interest income/ expenses over time using the effective interest rate method. The Group accounts for, among other things, the adjustment to the carrying amount due to recognised credit holidays using the effective interest rate method.
In certain circumstances, renegotiation or modification of contractual cash flows associated with a financial asset may lead to derecognition of the financial asset. If an existing financial asset is derecognized due to its modification, and a modified asset is subsequently recognized, the modified asset is treated as a “new” financial asset (“a substantial modification”). The new asset is recognized at the fair value and a new effective interest rate applicable to the new asset is calculated. If the characteristics of a modified new financial asset (after signing an annex) comply with the arm’s length conditions, the carrying amount of that financial asset is equal to its fair value.
The assessment whether a given modification of financial assets is a substantial or a non-substantial modification depends on satisfaction of certain quantitative and qualitative criteria.
The following qualitative criteria have been adopted:
1. currency conversion;
2. change of debtor, other than caused by the debtor’s death;
3. introducing or removing a contractual characteristic that adversely affects the test of cash flow characteristics (SPPI test) or removal of these features;
The occurrence of at least one of these criteria results in a substantial modification.
The quantitative criterion consists of a 10% test analysing the change in the contractual terms of a financial asset resulting in a difference between the amount of future cash flows arising from the changed financial asset discounted using the original effective interest rate and the amount of the future cash flows that would arise from the original financial asset discounted using the same interest rate. The other quantitative criterion is an increase in a debtor’s exposure, which includes an increase in the capital and off-balance sheet liabilities granted of more than 10% in relation to the amount of capital and off-balance sheet liabilities prior to the increase for each individual exposure. The third criterion is the extension of the original term of cash loans, business loans serviced in branch by more than 1 year and by more than double the residual term; cash loans, business loans handled by collection units by more than 1 year; home loans serviced in branch and handled by collection units by more than 4 years.
In the event of the occurrence of a quantitative criterion (a difference) of more than 10%, the modification is considered substantial, whereas a quantitative criterion of 10% or less means that the modification is considered non-substantial.
Derecognition of financial instruments measured at fair value through other comprehensive income or at amortized cost typically relates to a sale or a substantial modification of such assets.
In the Group, POCI assets arise mainly as a result of a restructuring process, i.e. an extension of the agreement term and a significant modification of the agreement terms, resulting in the derecognition of the asset and the re-recognition of the "new" impaired asset.
Such assets are initially recognized at the net carrying amount (net of allowances), which corresponds to their fair value. Interest income on POCI assets is calculated based on the net carrying amount using the effective interest rate adjusted for credit risk recognized over the life of the asset. The credit-adjusted effective interest rate is calculated taking into account future cash flows adjusted for the effect of credit risk recognized over the life of the asset. The change in estimates of future recoveries in further reporting periods is recognized as a gain or loss on expected credit losses.
Liabilities in respect of a short position in securities and some of the liabilities in respect of insurance products are measured at fair value through profit or loss.
Other financial liabilities are measured at amortized cost using the effective interest rate method. In the case of financial liabilities for which it is not possible to estimate the schedule of future cash flows and the effective interest rate, they are measured at the amount due.
The Group mitigates its direct impact on the environment and adjusts its lending policies addressed to the various sectors of the economy in order to also motivate its customers to mitigate their environmental impact.
The issues associated with the Group’s environmental impact and its pro-environmental initiatives are described in the Directors’ Report of the PKO Bank Polski S.A. Group for 2023 in the following chapters:
• 13.4 “Non-financial factors in the Bank's strategy”,
• 13.5 “Key non-financial performance indicators”,
• 13.7 “Material topics: management and risks”, including: 13.7.6 “Environment”, 13.7.7 “Climate” and 13.7.8 “Sustainable development”.
From 2021 onwards, ESG risks have been included in the Group's risk management strategy. For issues related to ESG risk management, see note “ESG risk management”.
This note describes the impact of climate-related factors on the specific components of the Group’s financial statement, including in particular the impact of climate risk on the measurement of the expected credit losses and concentration of credit risk.
• Sources of uncertainty of estimates, significant judgments and the ability to continue as a going concern
The Group is exposed to climate risk, including:
• physical risk (e.g. risk arising from more frequent/serious weather phenomena); and
• economic transformation risk (e.g. risk associated with transition to less polluting, low-emission economy, extremization of the seasons).
The climate risk may potentially affect the estimates and assessments applied by the Group (including those used in the calculation of allowances for expected credit losses).
As detailed below, there were no significant climate-related estimates or judgements in the Group that would materially affect the values recognised in these financial statements.
Climate-related issues do not present a threat to the Group’s ability to continue in operation as a going concern in the period of 12 months after the approval of these financial statements by the Management Board for publication.
• classification and measurement of financial instruments at fair value
The climate risk may affect the expected cash flows from loans granted and, therefore, expose the Group to credit losses. The borrower-specific attributes, physical risk and transition risk may (individually or in combination) affect the expected cash flows, as well as the potential future economic scenarios which are taken into account in the measurement of expected credit losses.
The impact of climate-related risk factors on the expected credit losses will vary depending on the severity and duration of the anticipated climate threats, their direct and indirect impact on the borrower and the lender’s loan portfolio, and the loan portfolio duration.
In the lending process for corporate Customers and SME Customers evaluated with the use of the rating method, the Group each time assesses the impact of environmental, social and governance factors (ESG factors) on the Customer’s creditworthiness, and identifies credit transactions with an increased financial leverage (levered transactions). The Group also examines the impact of credit transactions on ESG and classifies them to four categories, from transactions with a positive impact on ESG to those with a material negative impact. When assessing the ESG factors, the Group takes into account such factors as the risk of climate change and its impact on the customer’s operations, potential influence of the customer on climate, factors related to human capital or health and safety, and governance factors (including the corporate culture and internal audit).
In the fair value measurement of financial instruments classified to level 3 of fair value the Group does not use unobservable data relating to climate risk:
• debt securities – generally constitute financing of business entities from industries not exposed to significant climate risk (e.g. insurance companies, developers),
• granted loans – they generally represent financing for households and their fair value is estimated by applying the discounted cash-flow method using an effective credit spread,
• not listed shares in other entities – they do not include companies from sectors which are exposed to significant climate risk.
• Property, plant and equipment, property, plant and equipment leased out under operating lease and intangible assets
Climate-related issues do not affect depreciation and amortization recognized by the Group as at 31 December 2023 and 2022. Moreover, climate-related factors did not cause any indications of impairment of non-financial assets and did not affect their recoverable value as at 31 December 2023 and 2022.
It should be noted, though, that the potential impact of climate change risk, understood as a sudden, rapid transformation of the economy towards lower emissions (a rapid generation change of a significant class of assets in financing) may ultimately be important for the Group’s lease entities.
• Inventories – Climate-related issues do not affect the carrying amount of the inventories held by the Group as at 31 December 2023 and 2022.
• Taxes Climate-related issues do not affect deferred income tax assets recognized by the Group as at 31 December 2023 and 2022.
• provisions and litigation – As at 31 December 2023 and 2022, there were no proceedings involving any climate or environmental issues at the Group. In the years 2023-2022, there were no administrative proceedings relating to violations of environmental regulations or the Group’s impact on climate that would lead to any fines being imposed on the Group.
• insurance activities
Intensification of extreme weather phenomena, including in particular the risk of flood, is a specific instance of physical risk to insurance activities. The effect of this risk on the financial results and solvency is mitigated mainly by risk selection and a properly structured reinsurance programme. Insurance companies calculate the capital requirement for catastrophic risk and analyse the stress test scenarios for flood risk.
At present, insurance companies do not have environmental taxonomy for investment assets due to the fact that they do not offer new investment products.
Upon the occurrence of an event constituting materialization of climate risk, insurance companies also recognize provisions for losses.
In the case of life insurance activities, the said risk is not sufficiently material to allow quantification of liabilities - they are valued based on an assessment of the cumulative probability of occurrence of insured events.
The ESG measures taken by the Group's insurance companies are described in note “ESG risk management”.
Following the implementation of IFRS 17 as of 1 January 2023, changes have also been made to the comparative figures for 2022, as detailed in note IFRS 17 “Insurance Contracts”. In 2023 the Group implemented amendments to IAS 12 Income Taxes, whose impact was only of a presentational nature, i.e. the recognition of deferred tax on leasing transactions in, respectively, deferred tax assets and deferred tax liabilities (see note Income taxes).
The Group made no other changes to accounting policies or presentation in 2023.
International Financial Reporting Standard 17 Insurance Contracts ('IFRS 17') was published by the International Accounting Standards Board in May 2017 and amended by it in June 2020 and in December 2021. IFRS 17 was endorsed for use in European Union countries on 19 November 2021 by Regulation 2021/2036 of the European Union.
The aim of the new standard is to introduce new uniform rules for the measurement of insurance and reinsurance contracts, ensuring greater comparability of reporting between providers of insurance products, and to provide a number of new disclosures for the use of financial statement users.
This standard is mandatorily applicable from 1 January 2023. IFRS 17 replaced IFRS 4 “Insurance Contracts”, which enabled entities to recognize insurance contracts according to the accounting principles based on the national standards.
IFRS 17 changed the recognition, measurement, presentation and disclosure of insurance contracts distributed by Group companies, both as products linked to, among others, mortgage loans, cash loans and leasing products, and as stand-alone products.
The Group has implemented the standard in the retrospective full and modified approach for the part of the portfolio.
The implementation of IFRS 17 as at 1 January 2022 resulted in an increase in the Group’s assets by PLN 582 million, liabilities by PLN 296 million and equity by PLN 286 million.
The key differences in the measurement and presentation of insurance products that apply to the Group and that came into effect upon implementation of IFRS 17 are presented below.
The standard applies to insurance contracts, reinsurance contracts and investment contracts with direct participation features.
The new standard defines an insurance contract as a contract in which one party accepts a significant insurance risk from the policyholder and undertakes to compensate the insured for an adverse effect arising from, an uncertain future event. This definition is in principle consistent with the definition in IFRS 4
The standard does not apply to, among others, investment contracts, product guarantees issued by the manufacturer, loan guarantees, catastrophe bonds and so-called weather derivatives (contracts that require a payment based on a climatic, geological or other physical variable that is not specific to a party to the contract).
The biggest impact on the occurrence of differences compared to the current IFRS 4 have:
• the valuation of liabilities and assets under insurance contracts, which:
o is based on the value of the best estimate of future cash flows;
o reflects the time value of money;
o includes the risk adjustment for non-financial risk;
o includes the expected value of future profits;
• recognition of expected profits for the group of insurance contracts over time, in proportion to the so-called coverage units, corresponding to the level of service provided by the insurance company in each reporting period;
• recognition of entire expected loss on insurance contracts at the point at which the entity assesses that the contract is onerous, which may be at the date of initial recognition of that contract or at subsequent measurement;
• separate (from direct business contracts) measurement of liabilities and assets for outward reinsurance.
Until the implementation of the new standard, the Group recognised net income on insurance activities under commission income – in the line “offering insurance products” which comprised premium income, costs of insurance activities, claims and change in technical reserves, and the impact of the reinsurer’s share in the aforementioned items.
Due to the fact that the Group offers insurance products along with loans and advances and lease products and it is impossible to purchase from the Group an insurance product that is identical as to the legal form, conditions and economic content without purchasing a loan, an advance or a lease product, the payments received by the Group for the insurance products sold were treated as an integral part of the remuneration for the financial instruments offered. All premium received by the Group split in accordance with Recommendation U on the basis of the relative fair value model into a portion relating to:
• the insurance product - measured using an actuarial model in accordance with the requirements of IFRS 4 (recognised in commission income, line "offering insurance products")
• the portion relating to the credit product – settled using the effective interest rate method and recognized in interest income and, in the part corresponding to the performance of the agency service, if the insurer is a Group company, accounted for using the straight line method during the term of the insurance product and is recognized as commission income (line: offering insurance products).
Costs directly attributable to selling insurance products were accounted for as a component of the amortized cost of a financial instrument or on a one-off basis. The provision for future refunds was allocated to the financial instrument and insurance service in accordance with the relative fair value model.
The Group presented its insurance activities under the following headings in the statement of financial position:
• Assets from insurance activities – receivables on account of reinsurance and share of reinsurers in technical reserves.
• Liabilities in respect of insurance activities – technical reserves to cover current and future claims and costs which may arise from the insurance contracts concluded, i.e. unearned premium and unexpired risk reserves, outstanding claims and benefits reserve, reserve for bonuses and discounts for the insured, as well as deferred reinsurance commission and reinsurance related liabilities.
• Amounts due to customers – “Liabilities in respect of insurance products”: liabilities from unit-linked products, safe capital product, structured products and insurance deposits.
In accordance with IFRS 17, all insurance products offered by the Group are recognized and measured under this standard as insurance products. At the consolidated Group level, the premium received by the Group is no longer split in accordance with Recommendation U on the basis of the relative fair value model (this model was maintained for the Bank's separate financial statements).
The components of the net insurance income, including the portion that formed part of the Group's interest income, commission income or administrative expenses and related directly to insurance contracts, is measured using an actuarial model and presented in the "Net income from insurance business” and, as appropriate, in the lines "Insurance revenue (net of reinsurance)" and "Cost of insurance activities (net of reinsurance)".
The implementation of IFRS 17 at the consolidated level also affected the carrying amount of loans and advances to customers. The premium element recognised under the relative fair value model, adjusting the gross carrying amount of loans at the Bank level, at the consolidated level is an element of the assets and liabilities arising from insurance activities, measured in accordance with the principles set out in IFRS 17.
Starting from 1 January 2023, products i.e. liabilities from unit-linked products, “safe capital”, previously recognised under IFRS 9, are measured under IFRS 17 as part of liabilities from insurance activities (previously presented under “Amounts due to customers” – “Liabilities in respect of insurance products”). On the other hand, structured products and insurance deposits, as investment products, continue to be recognised in accordance with IFRS 9 in the line “Amounts due to customers”.
• Transition date
The Group applied IFRS 17 for the first time in the period beginning 1 January 2023. The Group has implemented IFRS 17 in the retrospective full and modified approach for the part of the portfolio (MRA approach). Due to the need to prepare comparative data, 1 January 2022 is assumed as the date of transition to the new standard.
Detailed accounting policies and financial information for the insurance business are described in note INSURANCE BUSINESS.
The following tables present the cumulative effect of adjustments resulting from the implementation of IFRS 17 on the Group's assets, liabilities and equity as at 1 January 2022.
|
DATE OF TRANSITION TO THE NEW STANDARD |
31.12.2021 (pursuant to IFRS 4) |
Adjustment due to implementation of IFRS 17 |
01.01.2022 (pursuant to IFRS 17) |
|
TOTAL ASSETS, of which: |
418,086 |
582 |
418,668 |
|
Loans and advances to customers |
234,300 |
1,395 |
235,695 |
|
Assets in respect of insurance activities |
911 |
(783) |
128 |
|
Intangible assets |
3,463 |
(20) |
3,443 |
|
Other assets |
2,605 |
(10) |
2,595 |
|
TOTAL LIABILITIES AND EQUITY |
418,086 |
582 |
418,668 |
|
TOTAL LIABILITIES, of which: |
380,393 |
296 |
380,689 |
|
Amounts due to customers |
322,296 |
(1,030) |
321,266 |
|
Liabilities in respect of insurance activities |
2,008 |
1,309 |
3,317 |
|
Other liabilities |
5,366 |
(6) |
5,360 |
|
Deferred tax liabilities |
356 |
23 |
379 |
|
EQUITY, of which: |
37,693 |
286 |
37,979 |
|
Reserves and accumulated other comprehensive income |
25,313 |
17 |
25,330 |
|
Unappropriated profit (taking into account profit or loss for 2021) |
11,144 |
269 |
11,413 |
|
Capital and reserves attributable to equity holders of the parent company |
37,707 |
286 |
37,993 |
• The increase in equity by PLN 286 million, of which PLN 269 million in retained earnings, results from a retrospective change in the recognition of historically collected insurance premiums and a change in the measurement methodology for insurance liabilities. Until the implementation of IFRS 17, the entire premium received by the Group was split in accordance with Recommendation U on the basis of the relative fair value model into an insurance product portion - measured using an actuarial model in accordance with the requirements of IFRS 4 - and a credit product portion - accounted for using the effective interest rate method. With the implementation of IFRS 17, insurance premiums were recognised in full as insurance component measured using the general model (GMM model). As a consequence, the rate of revenue recognition and therefore the historically recognised profit included in retained earnings has changed.
The value of the insurance premium previously recognised as a component of the gross carrying amount of loans and advances to customers and accounted for over the life of the loan product, now representing part of the insurance business measured using the new methodology under IFRS 17 is recognised over the life of the insurance product, which has translated into a positive increase in equity.
• The increase in other capital by PLN 17 million related to the recognition of part of the finance income and costs from insurance business in other comprehensive income (a new element introduced by IFRS 17). Under IFRS 17, the Group used the option to split the finance income and costs of its insurance business into the portions recognized in profit or loss and other comprehensive income. By using this option, the Group can reduce the volatility of the income statement resulting from fluctuations in the interest rate structure. The change in contractual service margin (CSM) value is calculated using a fixed locked-in discount rate structure corresponding to the structure at the time the cohort was recognised. The difference between the calculation based on locked-in curves and the current curves at the time of calculation is presented in other comprehensive income. This approach also ensures consistent presentation of income statement items resulting from changes in liabilities and segregated assets.
• Loans and advances to customers increased by PLN 1,395 million, due to the discontinuation of the premium element accounted for using the effective interest rate method and adjusting the gross carrying amount of loans. The value of this premium previously recognised as a component of the gross carrying amount of loans and advances to customers is now part of the insurance business measured using the new methodology under IFRS 17, thereby translating into an increase in the balance of liabilities in respect of insurance activities.
• In accordance with IFRS 17, the liability from insurance operations as at 1 January 2022 increased by PLN 1,309 million to PLN 3,317 million, of which liability for remaining coverage (LRC) is PLN 3,143 million and liability for incurred claims (LIC) is PLN 174 million.
• There was also a decrease of PLN 783 million in the line of assets in respect of insurance activities, which is primarily due to the adoption of a different method of determining insurance assets and liabilities with the reinsurer’s share (previously, receivables on account of reinsurance and share of reinsurers in technical reserves were presented under this item). In accordance with IFRS 17, the value of assets in respect of insurance activities as at 1 January 2022 amounts to 128 million and applies to outward reinsurance contracts measured using the GMM model, of which liability for remaining coverage (LRC) amounts to PLN 107 million and liability for incurred claims (LIC) amounts to PLN 21 million.
• In intangible assets, the Group recognised future gains on insurance contracts (hereinafter Value in force, VIF) resulting from the settlement of the acquisition on 1 April 2014 of "Nordea Polska Towarzystwo Ubezpieczeń na Życie" SA (currently PKO Życie Towarzystwo Ubezpieczeń S.A.). Following the implementation of IFRS 17, VIF amounts to PLN 2 million as at 1 January 2022 (negative adjustment of PLN 20 million). The remeasurement is due to the fact that a significant part of the products for which VIF has been recognised are subject to the requirements of IFRS 17, so that VIF for this part of the portfolio is replaced by the contractual service margin (CSM). The amount of contractual service margin from the acquired portfolio subject to measurement in accordance with IFRS 17 is higher than the value of the recognised VIF, due to the prudential valuation that was applied for liability measurement purposes at the time of the transaction. The new VIF value has been limited to policies subject to measurement in accordance with IFRS 9 and has been calculated in line with the original recognition of the VIF (i.e. measurement of the VIF at the time of the transaction and adoption of an amortisation pattern based on the distribution of projected future profits).
• A significant part of the products, i.e. the liabilities from the majority of unit-linked products and the "safe capital" product was presented under “Amounts due to customers” – “Liabilities in respect of insurance products”. Following the implementation of IFRS 17, these products are treated as part of liabilities in respect of insurance activities and measured in accordance with the new standard. The value of the adjustment to the item "Amounts due to customers" on this account amounted to a negative PLN 1,030 million. The carrying amount of the liabilities in respect of insurance products presented under "Amounts due to customers" amounts to PLN 175 million after adjustments and relates to structured products and insurance deposits which are treated as investment products measured in accordance with IFRS 9.
The following tables present the cumulative impact of the adjustments due to the implementation of IFRS 17 on the Group's assets, liabilities and equity as at 31 December 2022, the items of comprehensive income including the income statement and the items of the statement of cash flows for the period of 2022.
|
31 December 2022 |
published |
Adjustment due to implementation of IFRS 17 |
restated |
|
ASSETS, of which: |
430,683 |
764 |
431,447 |
|
Loans and advances to customers |
231,721 |
1,238 |
232,959 |
|
Assets in respect of insurance activities |
555 |
(440) |
115 |
|
Intangible assets |
3,527 |
(15) |
3,512 |
|
Other assets |
2,804 |
(19) |
2,785 |
|
LIABILITIES AND EQUITY |
430,683 |
764 |
431,447 |
|
Liabilities, of which: |
395,248 |
492 |
395,740 |
|
Amounts due to customers |
339,582 |
(714) |
338,868 |
|
Liabilities in respect of insurance activities |
1,732 |
1,146 |
2,878 |
|
Other liabilities |
7,014 |
(4) |
7,010 |
|
Deferred tax liabilities |
13 |
64 |
77 |
|
EQUITY, of which: |
35,435 |
272 |
35,707 |
|
Reserves and accumulated other comprehensive income |
22,215 |
24 |
22,239 |
|
Retained earnings |
8,651 |
269 |
8,920 |
|
Net profit or loss for the year |
3,333 |
(21) |
3,312 |
|
Capital and reserves attributable to equity holders of the parent company |
35,449 |
272 |
35,721 |
|
INCOME STATEMENT (selected items) – 2022 |
published |
Adjustment due to implementation of IFRS 17 |
restated |
|
Net interest income |
11,813 |
(389) |
11,424 |
|
Interest and similar income |
20,140 |
(389) |
19,751 |
|
of which calculated under the effective interest rate method |
19,580 |
(384) |
19,196 |
|
Net fee and commission income |
4,951 |
(453) |
4,498 |
|
Fee and commission income |
6,515 |
(456) |
6,059 |
|
Fee and commission expense |
(1,564) |
3 |
(1,561) |
|
Other net income |
508 |
779 |
1,287 |
|
Net income from insurance business, of which: |
- |
779 |
779 |
|
Insurance revenue (net of reinsurance) |
- |
1,174 |
1,174 |
|
Cost of insurance activities (net of reinsurance) |
- |
(324) |
(324) |
|
Result on business activities |
17,272 |
(63) |
17,209 |
|
Administrative expenses |
(7,850) |
81 |
(7,769) |
|
of which net regulatory charges |
(1,889) |
2 |
(1,887) |
|
Profit before tax |
4,749 |
18 |
4,767 |
|
Income tax expense |
(1,416) |
(39) |
(1455) |
|
Net profit (including non-controlling shareholders) |
3,333 |
(21) |
3,312 |
|
Net profit attributable to equity holders of the parent company |
3,333 |
(21) |
3,312 |
|
STATEMENT OF COMPREHENSIVE INCOME (selected items) – 2022 |
published |
Adjustment due to implementation of IFRS 17 |
restated |
|
Net profit (including non-controlling shareholders) |
3,333 |
(21) |
3,312 |
|
Other comprehensive income |
(3,303) |
7 |
(3,296) |
|
Items which may be reclassified to profit or loss |
(3,296) |
7 |
(3,289) |
|
Finance income and costs from insurance business, gross |
- |
9 |
9 |
|
Deferred tax |
- |
(2) |
(2) |
|
Finance income and costs from insurance business, net |
- |
7 |
7 |
|
Total net comprehensive income |
30 |
(14) |
16 |
|
Total net comprehensive income, of which attributable to: |
30 |
(14) |
16 |
|
equity holders of the parent |
30 |
(14) |
16 |
|
published |
Adjustment due to implementation of IFRS 17 |
restated |
|
|
Profit before tax |
4,749 |
18 |
4,767 |
|
Total adjustments |
15,223 |
(18) |
15,205 |
|
Depreciation and amortization |
1,278 |
(11) |
1,267 |
|
Change in loans and advances to customers |
1,529 |
157 |
1,686 |
|
Change in asset in respect of insurance activities |
356 |
(343) |
13 |
|
Change in amounts due to customers |
17,286 |
316 |
17,602 |
|
Change in liabilities in respect of insurance activities |
(276) |
(163) |
(439) |
|
Change in other liabilities |
1,903 |
2 |
1,905 |
|
Other adjustments |
(1,912) |
24 |
(1,888) |
|
Net cash from/used in operating activities |
18,543 |
- |
18,543 |
According to CRR Regulation, prudential consolidation is used for capital adequacy purposes, which unlike consolidation in accordance with IFRS, covers only subsidiaries that meet the definition of an institution, financial institution or any ancillary services enterprise. Therefore, the following insurance companies of the Group are excluded from prudential consolidation: PKO Towarzystwo Ubezpieczeń S.A. and PKO Życie Towarzystwo Ubezpieczeń S.A. The insurance companies are measured using the equity method.
Thus, the implementation of IFRS 17 at the date of the opening balance sheet affects the value of equity investments recognised (own funds requirements for credit risk), as well as retained earnings and accumulated other comprehensive income from the remeasurement of insurance companies measured using the equity method.
The total impact of the adjustments on the total capital ratio is +0.01 b.p. as at 31 December 2022.
• Standards and interpretations and their amendments effective from 1 January 2023
|
Standards and interpretations * |
Description of changes and impact |
|
|
IFRS 17 “Insurance contracts” (1.01.2023/ 19.11. 2021) and amendments to IFRS 17 (1.01.2023/ 8.09.2022) |
For details, see Note 14 “IFRS 17 Insurance contracts” |
|
|
Amendments to IAS 1 “Presentation of financial statements” and IAS 8 “Accounting policies, changes in accounting estimates and errors” (1.01.2023/2.03.2022)) |
Amendments to IAS 1 contain guidelines on the application of the term “material” in disclosures of the accounting policies. Instead of significant accounting policies, the amendments require disclosure of material information about accounting policies, with explanations and examples of how an entity can identify material information about accounting policies. The amendments to IAS 8 introduce a new definition of accounting estimates. Under the new definition, accounting estimates are monetary amounts in the financial statements that are subject to measurement uncertainty. The introduction of the definition of accounting estimates and other amendments to IAS 8 are intended to help entities distinguish between changes in accounting policies and changes in accounting estimates. The amendments to IAS 1 affect the scope of information presented in the Group's annual financial statements for 2023. For details, see “BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS”. |
|
|
amendments to IAS 1 - classification of liabilities (1.01.2024/ 19.12.2023) |
The changes relate to the classification of liabilities in the statement of financial position as short-term or long-term. They clarify that the classification of liabilities as short-term or long-term should take into account, as at the classification date, the existence of a debt extension, regardless of the entity's intention to use it for a period longer than 12 months, and should take into account the fulfillment of the conditions of such extension as at the date of assessment, if it is conditional. The Group does not have any agreements containing the aforementioned provisions and therefore the Group is not affected by the amendment. |
|
|
Amendments to IAS 12 “Income taxes” (1.01.2023/11.08.2022) |
Amendments to IAS 12 require that the entities recognise in the financial statements deferred tax assets and liabilities resulting from transactions, other than business combinations, in which equal amounts of deductible and taxable temporary differences arise on initial recognition. The amendment is presentational in nature. For details, see note: “INCOME TAX”. |
|
|
Amendments to IAS 12 “Income taxes” (1.01.2023/8.11.2023) |
The amendments apply to entities for which OECD Pillar 2 tax regulations apply, i.e. the introduction of global minimum taxation for the largest groups earning profits in different tax jurisdictions (“Pillar”). Among other things, the amendments introduce an exception to the requirements of IAS 12, whereby entities do not recognise and disclose deferred tax assets and liabilities related to the Pillar. The application of the exception must be disclosed by entities. In addition, the amendments also introduce, among other things, a requirement for separate disclosure of current tax expense related to the Pillar. The provisions for a global minimum tax have not yet been implemented in Poland. They have also not been implemented in certain jurisdictions where the Group operates (Ukraine, Sweden). From 2024 onwards, they will apply in tax jurisdictions where the Group operates in the form of foreign branches (Germany, Czech Republic, Slovakia, Romania). The Group is currently evaluating the future impact on the consolidated financial statements. |
|
|
Amendment to IFRS 16 “Leases” (1.01.2024/20.11.2023) |
The amendments clarify how a seller-lessee should measure sale and leaseback transactions that meet the requirements of IFRS 15 to recognise an asset as a sale. The amendments concern cases where the instalments payable under a leaseback agreement are variable, i.e. other than based on a rate or index. The amendments require the seller-lessee to measure the lease liability in such a way that the differences between the actual variable amounts paid under the agreement and the amounts included in the initial measurement of the liability are recognised directly through profit or loss. A retrospective approach applies to these amendments. The Group does not currently have sale and leaseback transactions with variable lease instalments other than those based on a rate or index, and therefore the Group is not affected by the amendment. |
|
* The effective date in EU / date of endorsement by EU is provided in parentheses
• NEW STANDARDS AND INTERPRETATIONS, AND AMENDMENTS THERETO, WHICH HAVE BEEN PUBLISHED BUT HAVE NOT BEEN ENDORSED BY THE EUROPEAN UNION
|
Standards and interpretations * |
Description of changes and impact |
|
Amendments to IAS 7 “Statement of Cash Flows” and amendments to IFRS 7 “Financial Instruments: Disclosures” (1.01.2024/ NO DATA)
|
• an assessment of how the aforementioned agreements affect the entity's liabilities and cash flows; and • understanding the impact of the aforementioned agreements on the entity's exposure to liquidity risk and the impact when the agreements expire. In addition, the amendments complement the current IFRS requirements by adding additional disclosure requirements to IAS 7 on, among other things: • terms and conditions of reverse factoring agreements; • disclosures at the beginning and end of the reporting period of the carrying amount of the aforementioned liabilities, the value of liabilities paid, the timing of payments. The IASB has decided that, in most cases, entities can present aggregated information on the above matters. The Group does not currently have any reverse factoring transactions relating to the above amendments and therefore the Group should not be affected by the amendment. |
* the expected effective date in EU / date of endorsement by EU is provided in parentheses
The segmentation note was prepared on the basis of the internal reporting system, i.e. information provided to the Management Board of PKO Bank Polski S.A., which is used to assess the achieved results and allocate resources.
The principles of identifying revenues and costs as well as assets and liabilities applied in the segmentation report are consistent with the accounting principles described in these financial statements. The presented assets and liabilities of the segment are operating assets and liabilities used by the segment in its operating activities. The values of assets and liabilities as well as revenues and costs for individual segments are based on internal management information. The segment results, assets and liabilities also include items that can be assigned based on rational assumptions. On this basis, the segments recognize the impact of significant one-off events, such as negative goodwill arising from the acquisition of the company, goodwill impairment losses, impairment losses on associates, and the cost of legal risk of the portfolio of mortgage loans in convertible currencies.
Share of profits and losses of associates and joint ventures, profits and losses of non-controlling shareholders, income tax charge for the presentation of the result and deferred tax assets, current income tax receivables, current income tax liabilities and provisions due to deferred income tax in the presentation of the statement of financial position were recognized at the Group level (unallocated assets and liabilities).
The Group settles transactions between segments as if they were related to unrelated entities, using internal settlement rates based on market rates for a given currency and maturity date, taking into account liquidity margins. Transactions between the segments are carried out on normal commercial terms.
Following the introduction of the disclosures in respect of IFRS 17 as of 1 January 2023, corresponding changes have been made to the comparative figures for 2022 (as detailed in note IFRS 17 “Insurance Contracts”).
The PKO Bank Polski S.A. Group conducts business activities within segments offering specific products and services addressed to specific groups of customers. The manner in which the business segments are divided ensures consistency with the sales management model and offers customers a comprehensive product mix comprising both traditional banking products and more complex investment products, as well as services provided by the Group entities.
The segmentation note presented below is included in the internal reporting system, i.e. information presented to the Management Board of PKO Bank Polski S.A., which is used to assess the achieved results and allocate resources.
The segment report presented below reflects the internal organizational structure of the PKO Bank Polski S.A. Group.
The Group operates in three main segments:
|
Retail segment |
The retail segment offers a full range of services to individuals as part of retail, private and mortgage banking. It also comprises transactions concluded with legal persons, i.e. firms and enterprises. The products and services offered to customers in this segment include, among other things: current accounts, savings accounts, term deposits, private banking services, investment and insurance products, investment funds, credit and debit cards, electronic and mobile banking services. With regard to financing, this segment offers consumer loans, mortgage loans, including those offered by PKO Bank Hipoteczny S.A., as well as Corporate loans for firms and enterprises, developers, cooperatives and property managers, and leases and factoring offered by the PKO Leasing S.A. Group. In addition, the results of the retail segment comprise the results of the following companies: PKO TFI S.A., PKO BP BANKOWY PTE S.A., PKO Życie Towarzystwo Ubezpieczeń S.A., PKO Towarzystwo Ubezpieczeń S.A., PKO BP Finat sp. z o.o. |
|
Corporate and investment segment |
The corporate and investment segment comprises transactions concluded with large corporate customers and financial institutions. This segment offers the following products and services: maintaining current accounts and term deposits, cash management and trade finance services, safekeeping of securities, currency products and derivatives, corporate loans, leasing and factoring offered by the PKO Leasing S.A. Group. As part of this segment’s activities, the Group also concludes, on its own or in consortiums with other banks, agreements for financing large projects in the form of loans and issues of non-Treasury securities. The segment also comprises own activities, i.e. investing activities, brokerage activities, interbank transactions, as well as transactions in derivative instruments and debt securities. The results of the corporate and investment segments also comprise the results of the companies operating in Ukraine and companies conducting technological services, real estate development and real estate management activities as well as funds investing money collected from investment fund participants. |
|
Transfer center and other |
The transfer & other activities centre comprises the result on internal settlements related to funds transfer pricing, the result on the Group’s investment portfolio of debt securities, the result on long-term sources of financing and the result on positions classified for hedge accounting, as well as the results not allocated to any other segment. Internal funds transfer is based on arm’s length transfer pricing. Long-term external financing includes issuing securities, including mortgage covered bonds, subordinated liabilities and loans received from financial institutions. The results of PKO Finance AB are presented as part of this segment. |
financial information
The tables below present data on revenues, costs, profits / losses as well as assets and liabilities of the individual reporting segments of the Group for the periods ended 31 December 2023 and 31 December 2022.
|
Income statement by segment |
Continuing operations |
|||
|
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total operations of the Group |
|
|
2023 |
||||
|
Net interest income |
15,143 |
6,348 |
(3,173) |
18,318 |
|
Net fee and commission income |
3,555 |
1,124 |
(53) |
4,626 |
|
Other net income |
1,011 |
224 |
(47) |
1,188 |
|
Net income from insurance business |
696 |
15 |
- |
711 |
|
Dividend income |
- |
14 |
- |
14 |
|
Gains/(losses) on financial transactions |
40 |
98 |
29 |
167 |
|
Foreign exchange gains/ (losses) |
116 |
4 |
(21) |
99 |
|
Gains/(losses) on derecognition of financial instruments |
25 |
19 |
13 |
57 |
|
Net other operating income and expense |
114 |
94 |
(68) |
140 |
|
Income/(expenses) relating to internal customers |
20 |
(20) |
- |
- |
|
Result on business activities |
19,709 |
7,696 |
(3,273) |
24,132 |
|
Net allowances for expected credit losses |
(993) |
(272) |
- |
(1,265) |
|
Net impairment losses on non-financial assets |
(6) |
(53) |
(49) |
(108) |
|
Cost of legal risk of mortgage loans in convertible currencies |
(5,430) |
- |
- |
(5,430) |
|
Administrative expenses, of which: |
(6,313) |
(1,320) |
(2) |
(7,635) |
|
depreciation and amortization |
(938) |
(149) |
- |
(1,087) |
|
net regulatory charges |
(444) |
(176) |
(2) |
(622) |
|
Tax on certain financial institutions |
(754) |
(439) |
(38) |
(1,231) |
|
Share in profits and losses of associates and joint ventures |
- |
- |
- |
99 |
|
Segment profit/(loss) |
6,213 |
5,612 |
(3,362) |
8,562 |
|
Income tax expense (tax burden) |
|
|
|
(3,057) |
|
Net profit (including non-controlling shareholders) |
|
|
|
5,505 |
|
Profit (loss) attributable to non-controlling shareholders |
|
|
|
3 |
|
Net profit attributable to equity holders of the parent company |
|
|
|
5,502 |
|
Income statement by segment |
Continuing operations |
|||
|
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total operations of the Group |
|
|
2022 |
||||
|
Net interest income |
7,711 |
3,892 |
(179) |
11,424 |
|
Net fee and commission income |
3,408 |
1,097 |
(7) |
4,498 |
|
Other net income |
1,185 |
483 |
(381) |
1,287 |
|
Net income from insurance business |
772 |
7 |
- |
779 |
|
Dividend income |
- |
51 |
- |
51 |
|
Gains/(losses) on financial transactions |
172 |
200 |
(14) |
358 |
|
Foreign exchange gains/ (losses) |
87 |
196 |
(356) |
(73) |
|
Gains/(losses) on derecognition of financial instruments |
(1) |
(23) |
(2) |
(26) |
|
Net other operating income and expense |
129 |
78 |
(9) |
198 |
|
Income/(expenses) relating to internal customers |
26 |
(26) |
- |
- |
|
Result on business activities |
12,304 |
5,472 |
(567) |
17,209 |
|
Net allowances for expected credit losses |
(959) |
(542) |
- |
(1,501) |
|
Net impairment losses on non-financial assets |
(41) |
(1) |
(21) |
(63) |
|
Cost of legal risk of mortgage loans in convertible currencies |
(1,914) |
- |
- |
(1,914) |
|
Administrative expenses, of which: |
(6,404) |
(1,333) |
(32) |
(7,769) |
|
depreciation and amortization |
(880) |
(139) |
- |
(1,019) |
|
net regulatory charges |
(1,475) |
(380) |
(32) |
(1,887) |
|
Tax on certain financial institutions |
(737) |
(382) |
(147) |
(1,266) |
|
Share in profits and losses of associates and joint ventures |
- |
- |
- |
71 |
|
Segment profit/(loss) |
2,249 |
3,214 |
(767) |
4,767 |
|
Income tax expense (tax burden) |
|
|
|
(1,455) |
|
Net profit (including non-controlling shareholders) |
|
|
|
3,312 |
|
Net profit attributable to equity holders of the parent company |
|
|
|
3,312 |
|
INTEREST INCOME BY SEGMENT |
2023 |
||||||
|
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total |
||||
|
Loans and other amounts due from banks and the Central Bank |
13 |
963 |
762 |
1,738 |
|||
|
Debt securities |
96 |
4,518 |
2,298 |
6,912 |
|||
|
Loans and advances to customers (excluding finance lease receivables) |
15,897 |
5,093 |
- |
20,990 |
|||
|
Finance lease receivables |
1,107 |
470 |
- |
1,577 |
|||
|
|
|
|
|
|
|||
|
Total |
17,113 |
11,044 |
3,060 |
31,217 |
|||
|
INTEREST INCOME BY SEGMENT |
2022 |
|||
|
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total |
|
|
Loans and other amounts due from banks and the Central Bank |
11 |
587 |
560 |
1,158 |
|
Debt securities |
56 |
2,047 |
1,734 |
3,837 |
|
Loans and advances to customers (excluding finance lease receivables) |
9,937 |
3,506 |
- |
13,443 |
|
Finance lease receivables |
978 |
306 |
- |
1,284 |
|
Amounts due to customers (excluding loans and advances received) |
- |
29 |
- |
29 |
|
|
|
|
|
|
|
Total |
10,982 |
6,475 |
2,294 |
19,751 |
|
FEE AND COMMISSION INCOME BY SEGMENT |
2023 |
|
|
|
|
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total |
|
|
Loans, insurance, operating leases and fleet management |
768 |
467 |
- |
1,235 |
|
lending |
542 |
379 |
- |
921 |
|
offering insurance products |
73 |
19 |
- |
92 |
|
operating leases and fleet management |
153 |
69 |
- |
222 |
|
Investment funds, pension funds and brokerage activities |
675 |
119 |
- |
794 |
|
servicing investment funds and OFE (including management fees) |
435 |
5 |
- |
440 |
|
servicing and selling investment and insurance products |
4 |
- |
- |
4 |
|
brokerage activities |
236 |
114 |
- |
350 |
|
Cards |
2,118 |
56 |
- |
2,174 |
|
Margins on foreign exchange transactions |
489 |
232 |
- |
721 |
|
Bank accounts and other |
1,012 |
365 |
- |
1,377 |
|
servicing bank accounts |
796 |
178 |
- |
974 |
|
cash operations |
51 |
57 |
- |
108 |
|
servicing foreign mass transactions |
86 |
50 |
- |
136 |
|
customer orders |
16 |
38 |
- |
54 |
|
fiduciary services |
- |
9 |
- |
9 |
|
other |
63 |
33 |
- |
96 |
|
|
|
|
|
|
|
Total |
5,062 |
1,239 |
- |
6,301 |
|
FEE AND COMMISSION INCOME BY SEGMENT |
2022 |
|
|
|
|
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total |
|
|
Loans, insurance, operating leases and fleet management |
767 |
386 |
- |
1,153 |
|
lending |
542 |
324 |
- |
866 |
|
offering insurance products |
102 |
15 |
- |
117 |
|
operating leases and fleet management |
123 |
47 |
- |
170 |
|
Investment funds, pension funds and brokerage activities |
650 |
122 |
- |
772 |
|
servicing investment funds and OFE (including management fees) |
381 |
8 |
- |
389 |
|
servicing and selling investment and insurance products |
2 |
- |
- |
2 |
|
brokerage activities |
267 |
114 |
- |
381 |
|
Cards |
1,906 |
83 |
- |
1,989 |
|
Margins on foreign exchange transactions |
521 |
290 |
- |
811 |
|
Bank accounts and other |
991 |
343 |
- |
1,334 |
|
servicing bank accounts |
801 |
178 |
- |
979 |
|
cash operations |
37 |
52 |
- |
89 |
|
servicing foreign mass transactions |
69 |
43 |
- |
112 |
|
customer orders |
27 |
36 |
- |
63 |
|
fiduciary services |
- |
9 |
- |
9 |
|
other |
57 |
25 |
- |
82 |
|
|
|
|
|
|
|
Total |
4,835 |
1,224 |
- |
6,059 |
|
Assets and liabilities by segment |
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total operations of the Group |
|
31.12.2023 |
||||
|
Assets |
182,510 |
205,155 |
109,561 |
497,226 |
|
Investments in associates and joint ventures |
|
- |
- |
284 |
|
Unallocated assets |
- |
- |
- |
4,006 |
|
Total assets |
182,510 |
205,155 |
109,561 |
501,516 |
|
Liabilities |
338,611 |
90,016 |
25,833 |
454,460 |
|
Unallocated liabilities |
- |
- |
- |
1,829 |
|
Total liabilities |
338,611 |
90,016 |
25,833 |
456,289 |
|
Assets and liabilities by segment |
Retail segment |
Corporate and investment segment |
Transfer center and other |
Total operations of the Group |
|
31.12.2022 |
||||
|
Assets |
176,655 |
157,849 |
91,419 |
425,923 |
|
Investments in associates and joint ventures |
- |
285 |
- |
285 |
|
Unallocated assets |
- |
- |
- |
5,239 |
|
Total assets |
176,655 |
158,134 |
91,419 |
431,447 |
|
Liabilities |
288,718 |
79,423 |
26,757 |
394,898 |
|
Unallocated liabilities |
- |
- |
- |
842 |
|
Total liabilities |
288,718 |
79,423 |
26,757 |
395,740 |
Information on geographical areas
The PKO Bank Polski S.A. Group also divides its operations into geographical segments. The PKO Bank Polski S.A. Group conducts its operations in the Republic of Poland, as well as in Ukraine (through the KREDOBANK S.A. Group, “Inter-Risk Ukraina” company with additional liability, Finansowa Kompania “Prywatne Inwestycje" sp. z o.o., KREDOLEASING sp. z o.o. and Finansowa Kompania “Idea Kapitał” sp. z o.o.), in Sweden (through PKO Finance AB and PKO Leasing Sverige AB) and in Ireland (through Polish Lease Prime 1 DAC1). PKO Bank Polski S.A. also has foreign corporate branches in the Federal Republic of Germany, the Czech Republic and the Slovak Republic.
For presentation purposes, the results of the companies operating in Sweden and Ireland and of the Bank’s branches operating in Germany, the Czech Republic and Slovakia were recognized in the geographic area “Poland” due to their impact on the scale of the operations of the PKO Bank Polski S.A. Group.
The results of the companies recognized in the segment “Ukraine” include intercompany transactions with other companies of the PKO Bank Polski S.A. Group operating in Ukraine. Intercompany transactions with other companies of the PKO Bank Polski S.A. Group and consolidation adjustments are presented in the results of the segment “Poland”.
|
2023 |
Poland |
Ukraine |
Total |
|
Net interest income |
17,945 |
373 |
18,318 |
|
Net fee and commission income |
4,516 |
110 |
4,626 |
|
Other net income |
1,181 |
7 |
1,188 |
|
Net income from insurance business |
711 |
- |
711 |
|
Dividend income |
14 |
- |
14 |
|
Gains/(losses) on financial transactions |
167 |
- |
167 |
|
Foreign exchange gains/ (losses) |
97 |
2 |
99 |
|
Gains/(losses) on derecognition of financial instruments |
55 |
2 |
57 |
|
Net other operating income and expense |
137 |
3 |
140 |
|
Result on business activities |
23,642 |
490 |
24,132 |
|
Net allowances for expected credit losses |
(1,244) |
(21) |
(1,265) |
|
Net impairment losses on non-financial assets |
(108) |
- |
(108) |
|
Cost of legal risk of mortgage loans in convertible currencies |
(5,430) |
- |
(5,430) |
|
Administrative expenses, of which: |
(7,433) |
(202) |
(7,635) |
|
depreciation and amortization |
(1,051) |
(36) |
(1,087) |
|
net regulatory charges |
(607) |
(15) |
(622) |
|
Tax on certain financial institutions |
(1,231) |
- |
(1,231) |
|
Share in profits and losses of associates and joint ventures |
99 |
- |
99 |
|
Segment profit/(loss) |
8,295 |
267 |
8,562 |
|
Income tax expense (tax burden) |
|
|
(3,057) |
|
Net profit (including non-controlling shareholders) |
|
|
5,505 |
|
Profit (loss) attributable to non-controlling shareholders |
|
|
3 |
|
Net profit attributable to equity holders of the parent company |
|
|
5,502 |
|
31.12.2023 |
Poland |
Ukraine |
Total |
|
Assets, of which: |
491,452 |
5,774 |
497,226 |
|
Loans and advances to customers |
244,479 |
1,297 |
245,776 |
|
Investments in associates and joint ventures |
284 |
- |
284 |
|
Current income tax receivables and deferred income tax asset |
3,970 |
36 |
4,006 |
|
Total assets |
495,706 |
5,810 |
501,516 |
|
Liabilities, of which: |
449,384 |
5,076 |
454,460 |
|
Amounts due to customers |
394,375 |
4,818 |
399,193 |
|
Current income tax liabilities and deferred income tax liabilities |
1,725 |
104 |
1,829 |
|
Total liabilities |
451,109 |
5,180 |
456,289 |
|
2022 |
Poland |
Ukraine |
Total |
|
Net interest income |
11,149 |
275 |
11,424 |
|
Net fee and commission income |
4,350 |
148 |
4,498 |
|
Other net income |
1,280 |
7 |
1,287 |
|
Net income from insurance business |
779 |
- |
779 |
|
Dividend income |
51 |
- |
51 |
|
Gains/(losses) on financial transactions |
358 |
- |
358 |
|
Foreign exchange gains/ (losses) |
(75) |
2 |
(73) |
|
Gains/(losses) on derecognition of financial instruments |
(27) |
1 |
(26) |
|
Net other operating income and expense |
194 |
4 |
198 |
|
Income/(expenses) relating to internal customers |
- |
- |
- |
|
Result on business activities |
16,779 |
430 |
17,209 |
|
Net allowances for expected credit losses |
(1,276) |
(225) |
(1,501) |
|
Net impairment losses on non-financial assets |
(63) |
- |
(63) |
|
Cost of legal risk of mortgage loans in convertible currencies |
(1,914) |
- |
(1,914) |
|
Administrative expenses, of which: |
(7,583) |
(186) |
(7,769) |
|
depreciation and amortization |
(978) |
(41) |
(1,019) |
|
net regulatory charges |
(1,874) |
(13) |
(1,887) |
|
Tax on certain financial institutions |
(1,266) |
- |
(1,266) |
|
Share in profits and losses of associates and joint ventures |
71 |
- |
71 |
|
Segment profit/(loss) |
4,748 |
19 |
4,767 |
|
Income tax expense (tax burden) |
|
|
(1,455) |
|
Net profit (including non-controlling shareholders) |
|
|
3,312 |
|
Net profit attributable to equity holders of the parent company |
|
|
3,312 |
|
31.12.2022 |
Poland |
Ukraine |
Total |
|
Assets, of which: |
421,052 |
4,871 |
425,923 |
|
Loans and advances to customers |
231,382 |
1,577 |
232,959 |
|
Investments in associates and joint ventures |
285 |
- |
285 |
|
Current income tax receivables and deferred income tax asset |
5,231 |
8 |
5,239 |
|
Total assets |
426,568 |
4,879 |
431,447 |
|
Liabilities, of which: |
390,533 |
4,365 |
394,898 |
|
Amounts due to customers |
334,729 |
4,139 |
338,868 |
|
Current income tax liabilities and deferred income tax liabilities |
841 |
1 |
842 |
|
Total liabilities |
391,374 |
4,366 |
395,740 |
Accounting policies
Interest income and expenses comprise interest, including premiums and discounts in respect of financial instruments measured at amortized cost and instruments measured at fair value through other comprehensive income, as well as income similar in nature to interest on instruments measured at fair value through profit or loss, including interest income and expense on derivative hedging instruments. Interest income and expenses also include fees and commissions received and paid, which are deferred using the effective interest rate and which are taken into account in the measurement of the financial instrument, including costs of remuneration of agents and intermediaries for the sale of the financial instrument, costs of employee bonuses to the extent that relate directly to selling credit products.
The Group consistently applies the method of presenting the total net interest income/(expense) on hedging instruments for all hedging strategies in the line “derivative hedging instruments” under “Net interest income” – the positive total amount for a period is presented in “Interest income” and the negative total amount is presented in “Interest expenses”.
Interest income and expense are recognised using the effective interest rate method, except for:
• non-POCI financial assets that subsequently became POCI assets. Interest income on these assets is calculated on the net carrying amount using the original effective interest rate from the moment of recognizing premises for impairment of the asset, with the calculation of interest income for stage 3 being made based on the net carrying amount calculated using the previous month's net-to-gross ratio;
Interest income also includes:
• the effect of the fair value measurement of financial assets acquired as part of business combinations between subsidiaries
• effect of statutory credit holidays, introduced by the Act on crowdfunding for business ventures and assistance to borrowers, recognised in the second half of 2022 in correspondence with the gross carrying amount of mortgage loans granted in PLN (Note „Loans and advances to customers”).
• the impact of the amendment of the Act of 23 March 2017 on mortgage credit and supervision of mortgage credit intermediaries and agents (Journal of Laws of 2020, items 1027 and 2320 and of 2022, items 872 and 1488), concerning the reimbursement of the additional mortgage cost associated with waiting for the mortgage to be registered in the mortgage register, borne by the customer until the mortgage is registered in the mortgage register by deducting interest income, as the value of the estimated return of the margin for customers calculated until the date of registration of the mortgage in the mortgage register.
financial information:
|
2023 |
2022 |
|
|
Loans and other amounts due from banks and the Central Bank1 |
1,738 |
1,158 |
|
Debt securities2 |
6,912 |
3,837 |
|
measured at amortized cost |
2,239 |
1,487 |
|
measured at fair value through other comprehensive income |
4,629 |
2,315 |
|
measured at fair value through profit or loss |
44 |
35 |
|
Loans and advances to customers2,3 |
20,990 |
13,443 |
|
measured at amortized cost |
20,485 |
12,925 |
|
measured at fair value through profit or loss |
505 |
518 |
|
Finance lease receivables3 |
1,577 |
1,284 |
|
Amounts due to customers |
- |
29 |
|
Total |
31,217 |
19,751 |
|
of which: interest income on impaired financial instruments |
601 |
438 |
|
|
|
|
|
Interest income calculated using the effective interest rate method on financial instruments measured: |
30,668 |
19,196 |
|
at amortized cost |
26,039 |
16,881 |
|
at fair value through other comprehensive income |
4,629 |
2,315 |
|
Income similar to interest income on instruments measured at fair value through profit or loss |
549 |
555 |
|
Total |
31,217 |
19,751 |
1 Under this item, in 2023, the Group recognised interest income on funds in call accounts (central clearing through a clearing broker) of PLN 205 million (PLN 297 million in the corresponding period) and interest income on funds in the current account with the NBP of PLN 762 million (PLN 560 million in the corresponding period).
2 The increase in interest income is mainly due to the higher level of market interest rates, increase in the securities portfolio and a change in the structure of the average volume of the loan portfolio (increase in the share of corporate and consumer loans at the expense of the share of housing loans in foreign currencies and PLN). The interest income from loans and advances to customers in the 12 months ended 31 December 2022 includes the effect of the Act on crowdfunding for business ventures and assistance for borrowers (so-called "credit holidays") in the amount of PLN 3,111 million (note “Loans and advances to customers”).
3 Interest income on loans advanced to customers and finance lease receivables for 2022 has been adjusted by PLN 389 million for the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contracts").
|
INTEREST EXPENSE |
2023 |
2022 |
|
Hedging derivatives1 |
(3,817) |
(3,580) |
|
Amounts due to banks |
(87) |
(134) |
|
Interbank deposits |
- |
(6) |
|
Loans and advances received |
(93) |
(83) |
|
Leases |
(35) |
(19) |
|
Amounts due to customers2 |
(7,901) |
(3,720) |
|
Issues of securities |
(739) |
(621) |
|
Subordinated liabilities |
(227) |
(164) |
|
|
|
|
|
Total |
(12,899) |
(8,327) |
1 The increase in interest expense related to hedging derivatives of PLN 237 million relates mainly to IRS transactions (payments made at a floating rate exceed those received at a fixed rate).
2 The increase in costs by PLN 4,181 million is mainly related to an increase in average interest rates on deposits associated with increases in PLN interest rates following the MPC's decisions and changes in the term structure involving an increase in the share of term deposits bearing interest at higher rates.
During the course of a working day, the Group may use funds from the mandatory reserve accounts for ongoing payments, on the basis of an instruction submitted to the National Bank of Poland (NBP). However, the Bank must ensure that the average monthly balance on this account complies with the requirements set in the mandatory reserve declaration.
accounting policies:
The Group recognizes fee and commission income that is not accounted for using the effective interest rate in such a manner so as to reflect the transfer of the goods or services promised to a customer in an amount reflecting the consideration to which – in accordance with the Group’s expectations – it will be entitled in return for the goods or services in accordance with the five stage model for recognizing revenue.
Fee and commission income includes one-off amounts charged by the Group for services not related directly to the creation of financial assets, as well as amounts charged by the Group’s services performed, which are recognized on a straight-line basis. Fee and commission income also includes fees and commissions recognized on a straight-line basis, received on loans and advances granted with an unspecified schedule of future cash flows for which the effective interest rate cannot be determined.
Upon concluding a contract, the Group assesses whether it will be capable of fulfilling the commitment to perform over time or at a point in time.
The following items are also included in commission income:
• net income on operating leases, short-term rental and net income on the provision of fleet management services – in the line “operating leases and fleet management” – see note “Leases”;
financial information
|
FEE AND COMMISSION INCOME |
2023 |
2022 |
|
Loans, insurance, operating leases and fleet management |
1,235 |
1,153 |
|
lending |
921 |
866 |
|
offering insurance products1 |
92 |
117 |
|
operating leases and fleet management |
222 |
170 |
|
Investment funds, pension funds and brokerage activities |
794 |
772 |
|
servicing investment funds and OFE (including management fees) |
440 |
389 |
|
servicing and selling investment and insurance products1 |
4 |
2 |
|
brokerage activities |
350 |
381 |
|
Cards |
2,174 |
1,989 |
|
Margins on foreign exchange transactions |
721 |
811 |
|
Bank accounts and other |
1,377 |
1,334 |
|
servicing bank accounts |
974 |
979 |
|
cash operations |
108 |
89 |
|
servicing foreign mass transactions |
136 |
112 |
|
customer orders |
54 |
63 |
|
fiduciary services |
9 |
9 |
|
other |
96 |
82 |
|
|
|
|
|
Total, of which: |
6,301 |
6,059 |
|
income from financial instruments not measured at fair value through profit or loss |
5,808 |
5,607 |
1 Fee and commission income from offering insurance products and servicing and selling investment and insurance products for 2022 has been adjusted by PLN 456 million for the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contracts").
The Parent Company is a direct participant in the Central Securities Depository of Poland (Krajowy Depozyt Papierów Wartościowych) and the Securities Register (at the National Bank of Poland). The Parent Company maintains securities accounts and handles transactions on the domestic and foreign markets, provides fiduciary services and performs a depository role for pension and investment funds. Assets held by the Parent Company as part of providing fiduciary services have not been disclosed in these financial statements since they do not meet the definition of the Parent Company’s assets. Revenue from the provision of these services is recognised in commission income, line "fiduciary services".
|
FEE AND COMMISSION EXPENSE |
2023 |
2022 |
|
Loans and insurance |
(115) |
(97) |
|
commission paid to external entities for product sales |
(24) |
(20) |
|
cost of construction project supervision and property appraisal |
(41) |
(28) |
|
fees to Biuro Informacji Kredytowej |
(25) |
(23) |
|
loan handling |
(25) |
(26) |
|
Investment funds, pension funds and brokerage activities |
(47) |
(44) |
|
Cards |
(1,296) |
(1,257) |
|
Bank accounts and other |
(217) |
(163) |
|
clearing services |
(62) |
(56) |
|
commissions for operating services provided by banks |
(14) |
(16) |
|
sending short text messages (SMS) |
(55) |
(50) |
|
selling banking products |
(1) |
(1) |
|
servicing foreign mass transactions |
(22) |
(22) |
|
other |
(63) |
(18) |
|
|
|
|
|
Total |
(1,675) |
(1,561) |
1 The item "other" includes costs for the guarantee agreement entered into by the Group on 27 February 2023 (for details, see note "Contingent liabilities and off-balance sheet liabilities received and granted”).
|
NET INCOME ON OPERATING LEASES AND FLEET MANAGEMENT |
2023 |
2022 |
|
Income on operating leases and fleet management |
574 |
513 |
|
Costs of operating leases and fleet management |
(68) |
(95) |
|
Depreciation of property, plant and equipment under operating leases |
(284) |
(248) |
|
Net income on operating leases and fleet management |
222 |
170 |
Accounting policies:
Dividend income is recognized on the date when the shareholders’ rights to its receipt is determined, if the Group is entitled to dividend.
financial information
|
DIVIDEND INCOME |
2023 |
2022 |
|
from financial assets held for trading |
1 |
1 |
|
from financial instruments not held for trading, measured at fair value through profit or loss |
13 |
50 |
|
|
|
|
|
Total |
14 |
51 |
Accounting policies:
The net gain/(loss) on financial transactions includes gains and losses arising from disposal of financial instruments designated as financial assets / liabilities measured at fair value through profit or loss and the effect of their measurement at fair value. This item also includes the ineffective portion of cash flow hedges in the case of hedging strategies in which IRS contracts are the hedging instrument, as well as gains and losses on the hedging instrument and hedged item relating to the hedged risk (fair value hedges).
Related notes: “Hedge accounting and other derivative instruments”, “Securities”, “Loans and advances to customers”
financial information
|
GAINS/(LOSSES) ON FINANCIAL TRANSACTIONS |
2023 |
2022 |
|
Financial instruments held for trading, of which: |
114 |
400 |
|
Derivatives¹ |
93 |
400 |
|
Equity instruments |
4 |
(2) |
|
Debt securities |
16 |
2 |
|
Other |
1 |
- |
|
Financial instruments not held for trading, measured at fair value through profit or loss, of which: |
62 |
(26) |
|
Equity instruments |
99 |
11 |
|
Debt securities |
10 |
8 |
|
Loans and advances to customers |
(47) |
(45) |
|
Hedge accounting |
(9) |
(16) |
|
|
|
|
|
Total |
167 |
358 |
1 Of which due to stock options and stock exchange indices PLN 86 million (in 2022 - PLN 212 million) and IRS: PLN 66 million (in 2022 - PLN 145 million).
Accounting policies:
Foreign exchange gains (losses) comprise foreign exchange gains and losses, both realized and unrealized, resulting from valuation of assets and liabilities denominated in foreign currencies and from the fair value measurement of foreign currency derivatives (FX forward, FX swap, CIRS and currency options). In the case of the hedging strategies in which CIRS contracts are the hedging instrument, this item also includes the ineffective portion of cash flow hedges (for details, please see the note “Hedge accounting and other derivative instruments”).
Allowances for expected credit losses in respect of loans, advances and other foreign currency-denominated receivables, which are recorded in PLN, are revalued when the measurement of the underlying foreign currency-denominated assets changes. The effect of such remeasurement due to foreign exchange differences is recognized in foreign exchange gains/losses.
financial information
|
|
2023 |
2022 |
|
Foreign exchange gains/ (losses) |
99 |
(73) |
An increase in net foreign exchange income results mainly from an improvement in the net income on currency derivatives.
Accounting policies: Derecognition of financial instruments measured at fair value through other comprehensive income or at amortized cost typically relates to a sale or a substantial modification of such assets (note “Modifications – Changes in contractual cash flows”).
related notes: “Consolidated statement of comprehensive income”,
financial information
|
2023 |
2022 |
|
|
Measured at fair value through other comprehensive income |
33 |
(41) |
|
Measured at amortized cost |
24 |
15 |
|
Total |
57 |
(26) |
Accounting policies:
Other operating income comprises income not directly related to banking activities. Other operating income mainly includes gains on the sale of investments in residential real estate, sale/scrapping of property, plant and equipment, intangible assets and assets held for sale, damages, fines and penalties received, and income from lease/rental of properties. In the Group companies, other operating income also include, respectively, revenue from the sale of finished goods, goods for resale and materials. Other operating income also includes reversed provisions for legal claims, excluding legal claims relating to mortgage loans in foreign currencies and income in respect of the valuation and sale of CO2 emission allowances.
Other operating expenses include mainly costs of donations given, ancillary expenses, penalties, damages and fines given, losses on sale/scrapping of property, plant and equipment, intangible assets and assets repossessed for debt. In the Group companies, other operating expenses also include, cost of finished goods, goods for resale and materials. Other operating expenses also include provisions recognized for legal claims, excluding legal claims relating to mortgage loans in foreign currencies, costs of provisions for refunds to customers on early repayment of consumer and mortgage loans before the CJEU ruling (see note “Provisions”) and costs in respect of the valuation and sale of CO2 emission allowances.
The Group enters into purchase and sale transactions for commodity forward contracts for CO2 emission allowances. The result from the measurement at fair value and the result from the realisation of these derivative transactions are presented in the result on financial transactions. These contracts are settled through the physical delivery of a commodity, i.e. the transfer of CO2 allowances between the account of the transferor and the account of the buyer in the EU Registry in exchange for a cash consideration. CO2 emission allowances purchased by the Group, as a tradable commodity for resale, are included in inventory and are measured at fair value. The results of the valuation of these assets between the date of acquisition and the date of sale, as well as the result of their sale, are recognised in other operating income and expenses.
financial information
|
OTHER OPERATING INCOME |
2023 |
2022 |
|
Net revenues from the sale of products and services |
146 |
118 |
|
Gains on sale or scrapping of property, plant and equipment, property, plant and equipment leased out under operating lease, intangible assets and assets held for sale |
95 |
108 |
|
Damages, compensation and penalties received |
51 |
47 |
|
Ancillary income |
6 |
11 |
|
Recovery of receivables expired, forgiven or written off |
9 |
2 |
|
Reversal of provision for future payments |
5 |
2 |
|
Reversal of provision recognized for legal claims excluding legal claims relating to repaid mortgage loans in convertible currencies |
3 |
7 |
|
Income from sale of CO2 emission allowances |
17 |
43 |
|
Other |
82 |
90 |
|
|
|
|
|
Total |
414 |
428 |
1 including, with regard to leasing activities, revenue from early termination of agreements in the amount of PLN 14 million (in 2022 - PLN 15 million), result on settlement of damages and expired operating lease agreements in the amount of PLN 8 million (in 2022 - PLN 8 million).
|
OTHER OPERATING EXPENSES |
2023 |
2022 |
|
Cost of products and services sold |
(1) |
(1) |
|
Losses on sale or scrapping of property, plant and equipment, property, plant and equipment leased out under operating lease, intangible assets and assets held for sale |
(8) |
(11) |
|
Damages, compensation and penalties paid |
(6) |
(1) |
|
Donations made |
(29) |
(54) |
|
Sundry expenses |
(19) |
(15) |
|
Recognition of provision for potential refunds of fees and commission to customers |
- |
(13) |
|
Recognition of provision for future payments |
(1) |
(2) |
|
Recognition of provision for legal claims excluding legal claims relating to repaid mortgage loans in convertible currencies |
(17) |
(12) |
|
Costs from sale of CO2 emission allowances |
(44) |
(25) |
|
Other |
(149) |
(96) |
|
|
|
|
|
Total |
(274) |
(230) |
1 including costs of external services incurred in connection with debt collection in the amount of PLN 26 million (in 2022 - PLN 20 million) and litigation costs, including legal representation, reimbursed to borrowers under settlements concerning loans granted in CHF in the amount of PLN 29 million (in 2022 - PLN 0 million), remarketing costs of PLN 24 million (PLN 23 million in 2022).
Accounting policies:
The allowance for expected credit losses is recognized in the financial statements in the following manner:
• Financial assets measured at amortized cost: the allowance reduces the gross carrying amount of the financial asset (adjusted for adjustments to the gross carrying amount for legal risk of mortgage loans in convertible currencies, statutory credit holidays and for potential reimbursements to customers for the expected early repayment of consumer and mortgage loans); changes in the allowances amount are recognised in the income statement;
• Off-balance sheet liabilities of a financial nature and financial guarantees: the allowance is presented as a provision under liabilities; changes in the provisions amount are recognized in the income statement;
• Financial instruments measured at fair value through other comprehensive income: the carrying amount of assets recognized at fair value is not additionally decreased by the allowances; however, each change in the measurement is divided into the impairment component, which is recognized in the income statement, and the component relating to other changes in the fair value measurement, which is recognized in other comprehensive income.
Estimates and judgments:
The Group reviews its loan portfolio for impairment at least quarterly. To determine whether an impairment should be recognised in the income statement, the Group assesses whether there is any data indicating a measurable reduction in the estimated future cash flows relating to the loan portfolio. The methodology and assumptions used to determine the estimated cash flow amounts and the periods over which they will occur are reviewed on a regular basis.
• measurement and assessment of credit risk: expected credit losses
With regard to impairment, the Group applies the concept of expected losses.
The impairment model is applicable to financial assets that are not measured at fair value through profit or loss, comprising:
• debt financial instruments comprising credit exposures and securities;
• lease receivables;
• other financial assets;
• off-balance sheet financial and guarantee liabilities.
Impairment allowances for exposure reflect 12-month or lifetime expected credit losses on such exposures for a given financial asset.
The time horizon of an expected loss depends on whether a significant increase in credit risk occurred since the moment of initial recognition. Based on this criterion, financial assets are allocated to 3 stages:
• Stage 1 – exposures in which the credit risk is not significantly higher than upon initial recognition and no evidence of impairment is found;
• Stage 2 – exposures in which the credit risk is significantly higher than upon initial recognition, but no evidence of impairment is found;
• Stage 3 –assets in respect of which evidence of impairment is recognized, including assets granted or purchased with evidence of impairment recognized (upon being granted or purchased).
• Significant increase in credit risk
A significant increase in credit risk is verified according to the likeliness of default and its changes with respect to the date of originating the loan.
• Mortgage and other retail exposures
The Group uses a model based on a marginal PD calculation, i.e. the probability of default in a given month, to assess a significant increase in credit risk for mortgage exposures and other retail exposures. This probability depends on the time that has passed from originating the exposure. This enables reflecting the differences in credit quality that are typical of exposures to individuals over the lifetime of the exposure. The marginal PD curves were determined on the basis of historic data at the level of homogeneous portfolios, which are separated according to the type of product, the year of their origination, the loan currency and the credit quality at the time of origination. The marginal PD is attributed to individual exposures by scaling the curve at the level of the portfolio to the individual assessment of the exposure / customer using application models (using data from loan applications) and behavioural models. The Group identifies the premise of a significant increase in credit risk for a given exposure by comparing individual PD curves over the exposure horizon as at the date of initial recognition and as at the reporting date. Only the parts of the original and current PD curves which correspond to the period from the reporting date to the date of maturity of the exposure are compared as at each reporting date. The comparison is based on the average probability of default over the life of the loan in the period under review adjusted for current and forecast macroeconomic indicators.
The result of this comparison, referred to as α statistics, is referred to the threshold value above which an increase in credit risk is considered significant. The threshold value is determined on the basis of the historical relationship between the values of the α statistics and the default arising. In this process the following probabilities are minimized:
• classification into a set of credit exposures with a significant increase in the level of credit risk (based on the α statistic), for which no event of default took place during the audited period (type I error)
• non-classification into the set of credit exposures with a significant increase in the level of credit risk (based on the statistics) for which an event of default occurred during the audited period (type II error).
According to data as at the end of 2023, an increase in the PD parameter of at least 2.5 compared to the value at the time of its recognition in the Group’s accounting records in respect of mortgage exposures and an increase of at least 2.5 in respect of other retail exposures constitutes a premise of a significant deterioration in credit quality.
With respect to credit exposures for which the current risk of default does not exceed the level provided for in the price of the loan, the results of the comparison of the probability of default curves as at the date of initial recognition and as at the reporting date do not signify a significant increase in credit risk.
• Exposures to institutional customers
In order to assess the significant increase in credit risk for institutional customers the Group applies the model based on the Markov chains. Historical data is used to build matrices of probabilities of customers migrating between individual classes of risk that are determined on the basis of the Group’s rating and scoring models. These migrations are determined within homogeneous portfolios, classified using, among other things, customer and customer segment assessment methodologies.
An individual highest acceptable value of the probability of default is set for each category of risk and portfolio on the date of the initial recognition of the credit exposure, which, if exceeded, is identified as a significant increase in credit risk. This value is set on the basis of the average probability of default for categories of risk worse than that at initial recognition of the exposure, weighted by the probability of transition to those categories of risk in the given time horizon.
In accordance with the data as at the end of 2023, the minimum deterioration in the category of risk which constitutes a premise of a significant increase in credit risk compared to the current category of risk were as follows:
|
Risk category |
PD range |
Minimum range of the risk category deterioration indicating a significant increase in credit risk1 |
|
A-B |
0.0 – 0.90% |
2 categories |
|
C |
0.90 – 1.78% |
2 categories |
|
D |
1.78 – 3.55% |
2 categories |
|
E |
3.55-7.07% |
2 categories |
|
F |
7.07-14.07% |
1 category |
|
G |
14.07-99.99% |
not applicable2 |
1 average values (the ranges are determined separately for homogeneous groups of customers)
2 deterioration of the risk category is a direct indication of impairment
The Group uses all available qualitative and quantitative information to identify the remaining premises of a significant increase in credit risk, including:
• marking a credit exposure as POCI without any indication of impairment,
• restructuring measures introducing forbearance for a debtor in financial difficulties;
• delays in repayment of a material amount of principal or interest (understood as an amount exceeding PLN 400 for retail exposures or PLN 2,000 for other credit exposures and 1% of the debtor's total cumulative loan exposure to the Bank and the other entities of the Bank's Group) exceeding 30 days;
• identified early warning signals as part of the monitoring process, suggesting a material increase in credit risk (including changes in collateral, modifications of the terms of agreement with the customer, in particular relating to the schedule of loan utilization or repayment, reduction of the Bank’s exposure to the customer);
• significant increase in the LTV ratio;
• quarantine for Stage 2 exposures, which have not shown premises for impairment in the previous 3 months.
• filing for consumer bankruptcy by any of the joint borrowers;
• transfer of the credit exposure for management on a general basis by the Bank’s restructuring and debt collection units;
• use by the borrower of a mortgage loan from statutory support in loan repayment.
• Impaired loans and definition of default
The premise for the impairment of a credit exposure is, in particular:
• delays in repayment of a material amount of principal or interest (understood as an amount exceeding PLN 400 for retail exposures or PLN 2,000 for other credit exposures and 1% of the debtor's total cumulative loan exposure to the Bank and the other entities of the Bank's Group) exceeding 90 days;
• a deterioration in the debtor’s economic and financial position during the lending period or a risk to the completion of the investment project financed, expressed by the classification into a rating class or risk category suggesting a material risk of default (rating H);
• the conclusion of a restructuring agreement or the application of relief in debt repayment, which is forced by economic or legal reasons arising from the customer’s financial difficulties (until the claim is recognized as remedied);
• filing a motion for the debtor’s bankruptcy, placing the debtor into liquidation or the opening of enforcement proceedings with respect to the debtor;
• declaration of consumer bankruptcy by any of the joint borrowers;
• information on death of all borrowers who are natural persons or entrepreneurs running individual business activity or a civil partnership (unless such business activity is continued by a successor);
• the occurrence of other events indicating the debtor's inability to repay his total liability under the agreement.
In accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions and investment firms (“CRR”), the Group defines a state of default if it assesses that the debtor is unable to repay the loan liability without resorting to exercising the collateral or if the exposure is overdue more than 90 days. The premises of default are identical to the premises for impairment of the exposure.
Both the process of assessing a material increase in credit risk and the process of calculating the expected loss are conducted monthly at the level of individual exposures. They use a dedicated computing environment that allows for the distribution of the results to the Group’s internal units.
The Group has separated the portfolio of financial assets with low credit risk by classifying financial instruments for which the average long-term default rate does not exceed the probability of default specified by the rating agency for the worst class investment rating. This portfolio includes, in particular, exposures to banks, governments, local government entities and housing cooperatives and communities.
• Calculation of the expected credit loss
The model for the calculation of the expected credit loss is based on applying detailed segmentation to the credit portfolio, taking into account the following characteristics at product and customer level:
• type of credit product;
• currency of the product;
• year of granting;
• assessment of risk of the customer’s default;
• the customer’s business segment;
• method of assessing the customer risk.
The Group calculates expected credit losses on an individual and on a portfolio basis.
The individual basis is used in respect of individually significant exposures. The expected credit loss from the exposure is determined as the difference between its gross carrying amount (in the case of an off-balance sheet credit exposure – the value of its balance sheet equivalent) and the present value of the expected future cash flows, established by taking into account the possible scenarios regarding the performance of the contract and the management of credit exposure, weighted by the probability of their realization.
The portfolio method is applied to exposures that are not individually significant and in the event of a failure to identify premises of impairment.
In the portfolio method, the expected loss is calculated as the product of the credit risk parameters: the probability of default (PD), the loss given default (LGD) and the value of the exposure at default (EAD); each of these parameters assumes the form of a vector representing the number of months covering the horizon of estimation of the credit loss.
The Group sets this horizon for retail exposures without a repayment schedule on the basis of behavioural data from historical observations. The loss expected both in the entire duration of the exposure and in a period of 12 months is the sum of expected losses in the individual periods discounted using the effective interest rate. The Group adjusts the parameter specifying the level of exposure at the time of default by the future repayments arising from the schedule and potential overpayments and underpayments to specify the value of the asset at the time of default in a given period.
In the calculations of expected credit losses the estimates concerning future macroeconomic conditions are taken into account. In terms of portfolio analysis, the impact of macroeconomic scenarios is taken into account in the amount of the individual risk parameters. The methodology for calculating the risk parameters includes the study of the dependencies of these parameters on the macroeconomic conditions based on historical data. Three macroeconomic scenarios based on the Bank’s own projections are used for calculating the expected loss:
• a baseline scenario with a probability of 75%
• and two alternative scenarios, with a probability of 20% and 5%, respectively.
The scope of the projected indicators includes:
• GDP growth rate,
• unemployment rate,
• WIBOR 3M rate,
• SARON 3M rate,
• CHF/PLN exchange rate,
• property price index
• NBP reference rate.
The final expected loss is the weighted average probability of scenarios from expected losses corresponding to individual scenarios.
The Group ensures compliance of the macroeconomic scenarios used for the calculation of the risk parameters with macroeconomic scenarios used for the credit risk budgeting processes.
The baseline scenario uses the base macroeconomic projections. The projections are prepared on the basis of the quantitative models, taking into account adjustments for the presence of one-off events.
The extreme scenarios apply to cases of so-called internal shock, as a result of which the so-called external variables (foreign interest rates) do not change with respect to the baseline scenario. The extreme scenarios are developed on the basis of a statistical and econometric analysis, i.e. they do not reflect the events described, but the projected path. Two scenarios are identified, optimistic and pessimistic.
The share of the scenarios for the GDP path (GDP growth rate) that falls between the optimistic and the pessimistic scenario is referred to as the probability of the baseline scenario. Such an assumption is used to project GDP growth, using a potential rate of growth of the Polish economy that varies over time, calculated with the use of quarterly data provided by the Central Statistical Office. The values of other macroeconomic variables used in the scenarios (rate of unemployment, property price index) are estimated after the extreme paths of GDP growth are defined.
The rate of unemployment is calculated on the basis of the quantified dependence on the difference between GDP growth and the potential rate of economic growth. The result is adjusted for significant structural changes taking place in the Polish economy, which are not encompassed by the quantitative model, in particular:
• the ageing of the Polish population (and the appearance of unsatisfied demand for labour, which will limit the scale of increase in the rate of unemployment in a situation in an economic downturn);
• the Polish labour market is nearing full employment (restrictions of supply mean that there is increasingly less space for a further decline in the rate of unemployment);
• the inflow of immigrants (only partly included in the official statistics).
The level of the property price index is set on the basis of changes in GDP, taking into account the conditions of supply and demand on the market based on the data and trends presented by the NBP in the publication “Information on housing prices and the situation on the residential and commercial property market in Poland” and the Bank’s own analyses.
The projections for deposit rates are mainly prepared on the basis of assumptions regarding central bank interest rates.
The CHF/PLN exchange rate is a cross rate of the EUR/PLN and EUR/CHF exchange rates. Its projections are a combination of projections for these two rates. The EUR/PLN and EUR/CHF projections are prepared on the basis of a macroeconomic analysis (current and historical) based on econometric methods, as well as on a technical analysis of the financial markets.
In 2023, the macroeconomic model incorporates factors to reflect current domestic and global events: the impact of the current macroeconomic situation (high inflation) on customers’ ability to settle their obligations, as well as the impact of Russia’s invasion of Ukraine on fuel prices and, consequently, on the health of companies. Additional factors in the model include:
● taking into account the high level of interest rates on the quality of the credit portfolio and increases in energy prices on the situation of enterprises, using the historically observed portfolio quality dependency on the level of interest rates and energy prices,
• consideration of the effect of exchange rate volatility on the quality of the foreign currency housing loan portfolio, as a result of the escalation of hostilities in Ukraine.
In addition, due to the significant influx of refugees following Russia's invasion of Ukraine and the uncertainty of its impact on the labour market, the model in all portfolios does not take into account a decrease in unemployment as a factor improving the quality of the loan portfolio.
The applied approach to the impact of macroeconomic forecasts on risk parameters describes the situation simultaneously in all branches of the economy and may not take into account the problems of individual industries caused by the pandemic, which is why the Group has conducted additional analyses of the loan portfolio, including leasing portfolio. These analyses, carried out by risk experts, mainly included an assessment of the impact of specific macroeconomic conditions not taken into account in the portfolio approach and helped identify clients and industries particularly affected by the current economic situation.
For the loan and advances portfolio, this is particularly the case in the construction, automotive, office and retail rental sectors, organic fertiliser production and energy-intensive industries. Exposures with highest PD values (D rating or worse) belonging to identified industries were marked with the indication of "significant increase in credit risk" and covered by increased write-downs. In 2023, as a result of the above measures, the Group increased the write-downs for expected credit losses by PLN 272 million, which represents approx. 16% of the value of write-downs on the entire portfolio of economic loans classified as Stage 2.
In the case of the portfolio of finance lease receivables, this relates to the following sectors: transport, construction, hotel, finishing, furniture, automotive, paper, agriculture, fertiliser and steel. For these sectors, the Group divided the portfolio into the portfolio of customers with a higher level of risk and the portfolio of standard customers, and for both these groups introduced adjustments to the model PD to increase the coverage of the write-down on this portfolio, with standard clients being lower than for customers with increased risk levels. The most numerous of the identified groups include the transport sector, which accounts for 24% of the healthy portfolio (of which 3% of the healthy portfolio is at a higher risk level), the remaining industries constitute 24% of a healthy portfolio. The introduced changes resulted in an increase in allowances by PLN 9 million for the steel and fertilizer industry in 2023, and by PLN 12 million for the agricultural sector. The industry add-ons applied in 2022 resulted in an increase in valuation allowances by PLN 11 million for the transport industry and PLN 27 million for other industries.
The tables below present projections of the key macroeconomic parameters and their assumed probabilities of materialization.
|
scenario as at 31.12.2023 |
Baseline |
optimistic |
pessimistic |
||||||
|
probability |
75% |
5% |
20% |
||||||
|
|
2024 |
2025 |
2026 |
2024 |
2025 |
2026 |
2024 |
2025 |
2026 |
|
GDP growth y/y |
3.9 |
3.8 |
3.2 |
9.4 |
8.8 |
4.7 |
(1.7) |
(1.7) |
1.3 |
|
Unemployment rate |
2.7 |
2.7 |
2.5 |
2.4 |
2.5 |
2.7 |
4.3 |
4.4 |
3.0 |
|
Property price index |
107.7 |
115.4 |
118.3 |
115.1 |
130.7 |
134.0 |
100.6 |
101.6 |
104.2 |
|
WIBOR 3M (%) |
5.6 |
5.0 |
3.7 |
6.6 |
5.7 |
3.9 |
4.3 |
2.5 |
2.8 |
|
CHF/PLN |
4.4 |
4.1 |
3.9 |
4.1 |
3.8 |
3.6 |
5.1 |
4.9 |
4.5 |
|
scenario as at 31.12.2022 |
Baseline |
optimistic |
pessimistic |
||||||
|
probability |
75% |
5% |
20% |
||||||
|
|
2023 |
2024 |
2025 |
2023 |
2024 |
2025 |
2023 |
2024 |
2025 |
|
GDP growth y/y |
(0.3) |
2.8 |
2.9 |
5.2 |
8.2 |
6.2 |
(5.8) |
(2.5) |
(0.4) |
|
Unemployment rate |
3.9 |
4.7 |
3.9 |
2.9 |
3.4 |
3.1 |
4.3 |
5.3 |
4.3 |
|
Property price index |
97.0 |
96.1 |
98.2 |
103.9 |
110.8 |
114.9 |
90.6 |
83.1 |
83.6 |
|
WIBOR 3M (%) |
6.8 |
5.8 |
4.6 |
7.3 |
6.1 |
4.7 |
6.2 |
4.6 |
3.8 |
|
CHF/PLN |
4.6 |
4.2 |
4.1 |
4.4 |
4.1 |
4.0 |
5.1 |
5.3 |
4.9 |
The table below presents the estimated sensitivity of the level of allowances for expected credit losses to macroeconomic conditions, calculated as the change in the level of allowances for expected credit losses in respect of not impaired exposures resulting from the materialization of particular macroeconomic scenarios as at 31 December 2023 and 31 December 2022.
|
|
31.12.2023 |
31.12.2022 |
||
|
|
optimistic |
pessimistic |
optimistic |
pessimistic |
|
estimated change in the level of allowances for expected credit losses for not impaired exposures due to the materialization of particular macroeconomic scenarios (in PLN million) |
(702) |
624 |
(290) |
527 |
The table below presents the estimated sensitivity of the level of allowances for expected losses as a result of scenarios of deterioration or improvement in risk parameters as at 31 December 2023 and 31 December 2022.
|
ESTIMATED CHANGE IN EXPECTED CREDIT LOSSES RESULTING FROM MATERIALIZATION OF A SCENARIO OF THE RISK PARAMETERS, THE DETERIORATION OR IMPROVEMENT, OF WHICH:1 |
+10% scenario |
(10%) scenario |
+10% scenario |
(10%) scenario |
|
|
31.12.2023 |
31.12.2022 |
||
|
changes in the present value of estimated cash flows for the Bank’s portfolio of individually impaired loans and advances assessed on an individual basis |
||||
|
THE SECURITIES |
- |
- |
(37) |
49 |
|
Stage 1 |
- |
- |
- |
12 |
|
Stage 3 |
- |
- |
(37) |
37 |
|
LOANS AND ADVANCES TO CUSTOMERS |
(71) |
107 |
(92) |
138 |
|
Stage 3 |
(71) |
107 |
(92) |
138 |
|
Changes in the probability of default |
||||
|
THE SECURITIES |
9 |
(9) |
9 |
(9) |
|
Stage 1 |
8 |
(8) |
8 |
(8) |
|
Stage 2 |
1 |
(1) |
1 |
(1) |
|
LOANS AND ADVANCES TO CUSTOMERS |
233 |
(256) |
201 |
(237) |
|
Stage 1 |
116 |
(116) |
101 |
(107) |
|
Stage 2 |
117 |
(140) |
100 |
(130) |
|
Changes in recovery rates |
||||
|
THE SECURITIES |
(9) |
9 |
(9) |
9 |
|
Stage 1 |
(7) |
7 |
(8) |
8 |
|
Stage 2 |
(2) |
2 |
(1) |
1 |
|
LOANS AND ADVANCES TO CUSTOMERS |
(570) |
571 |
(545) |
546 |
|
Stage 1 |
(168) |
168 |
(163) |
163 |
|
Stage 2 |
(215) |
215 |
(215) |
216 |
|
Stage 3 |
(187) |
188 |
(167) |
167 |
1 “()” decrease in write-downs", “+” increase in write-downs
Related notes: “Amounts due from banks, “Securities”, “Loans and advances to customers”, “Credit risk – financial information”, “Other assets”, “Provisions”
financial information
|
NET ALLOWANCES FOR EXPECTED CREDIT LOSSES |
2023 |
2022 |
|
Amounts due from banks |
(7) |
(2) |
|
Debt securities |
(54) |
19 |
|
measured at fair value through other comprehensive income |
(50) |
34 |
|
measured at amortized cost |
(4) |
(15) |
|
Loans and advances to customers |
(1,269) |
(1,347) |
|
measured at amortized cost |
(1,269) |
(1,347) |
|
housing loans |
(168) |
(126) |
|
business loans |
(361) |
(391) |
|
consumer loans |
(681) |
(684) |
|
factoring receivables |
(3) |
(5) |
|
finance lease receivables |
(56) |
(141) |
|
Other financial assets |
(8) |
(14) |
|
Provisions for financial liabilities and guarantees granted |
73 |
(157) |
|
Total |
(1,265) |
(1,501) |
Estimates and judgments:
At the end of each reporting period the Group assesses whether there are any indications of impairment of any non-financial non-current assets, right-of-use assets (or cash-generating units).
If any indications occur and annually in the case of intangible assets which are not amortized, as well as intangible assets not yet placed in service and goodwill, the Bank estimates the recoverable amount being the higher of the fair value less costs to sell or the value in use of a non-current asset (or a cash-generating unit), and, if the carrying amount of an asset exceeds its recoverable amount, the Group recognizes an impairment loss in the income statement. In order to estimate these amounts it is necessary to adopt assumptions concerning, among other things, the projected future cash flows that the Group may obtain from further use or sale of a given non-current asset (or a cash-generating unit). Adopting different assumptions concerning the valuation of future cash flows could affect the carrying amount of certain non-current assets.
Related notes: “Intangible assets”, “Property, plant and equipment”, “Investments in associates and joint ventures”, “Other assets”, “Leases”
financial information
|
NET IMPAIRMENT OF NON-FINANCIAL ASSETS |
2023 |
2022 |
|
Property, plant and equipment1 |
(41) |
(3) |
|
Assets held for sale |
(1) |
- |
|
Intangible assets2 |
(1) |
(21) |
|
Investments in associates and joint ventures |
(11) |
- |
|
Other non-financial assets, including inventories3 |
(54) |
(39) |
|
|
|
|
|
Total |
(108) |
(63) |
1 of which PLN 38 million in 2023 relates to the allowance recognised on the Group's property.
2 the Group recognised impairment of intangible assets – customer relationships in the amount of PLN 1 million (PLN 21 million in 2022)
3 Other non-financial assets include, among others, allowances for customer-related costs recognised on customer receivables in the amount of PLN 32 million (in 2022 - PLN 21 million) and allowances for shortages and damages and other receivables in the amount of PLN 20 million (in 2022 - PLN 21 million).
|
CHANGE IN ACCUMULATED IMPAIRMENT LOSSES ON NON-FINANCIAL ASSETS |
Opening balance |
Impairment of non-financial assets |
Other |
Closing balance |
|
2023 |
|
|
|
|
|
Property, plant and equipment under operating lease |
(3) |
- |
- |
(3) |
|
Property, plant and equipment |
(102) |
(41) |
8 |
(135) |
|
Non-current assets held for sale |
(1) |
(1) |
2 |
- |
|
Intangible assets |
(382) |
(1) |
1 |
(382) |
|
Investments in associates and joint ventures |
(264) |
(11) |
- |
(275) |
|
Other non-financial assets, including inventories |
(337) |
(54) |
33 |
(358) |
|
Total |
(1,089) |
(108) |
44 |
(1,153) |
|
CHANGE IN ACCUMULATED IMPAIRMENT LOSSES ON NON-FINANCIAL ASSETS |
Opening balance |
Impairment of non-financial assets |
Other |
Closing balance |
|
2022 |
|
|
|
|
|
Property, plant and equipment under operating lease |
(3) |
- |
(1) |
(4) |
|
Property, plant and equipment |
(100) |
(3) |
1 |
(102) |
|
Non-current assets held for sale |
(1) |
- |
- |
(1) |
|
Intangible assets |
(396) |
(21) |
35 |
(382) |
|
Investments in associates and joint ventures |
(264) |
- |
- |
(264) |
|
Other non-financial assets, including inventories |
(354) |
(39) |
56 |
(337) |
|
|
|
|
|
|
|
Total |
(1,118) |
(63) |
91 |
(1,090) |
Accounting policies and estimates and judgments:
In connection with the current legal disputes regarding loans in convertible currencies, the Group has identified a risk that the cash flows on the portfolio of mortgage loans denominated in and indexed to foreign currencies planned on the basis of schedules may not be fully recoverable and/or a liability resulting in a future outflow of funds may arise. Following the revisions to cash flow estimates, the Group reduces the gross carrying amount of mortgage loans denominated in and indexed to foreign currencies in accordance with the requirements of IFRS 9 Financial Instruments, paragraph B5.4.6, and/or recognises provisions for legal risk in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The cost of legal risk was estimated taking into account a number of assumptions which have a significant effect on the amount of the estimates recognized in the Group’s financial statements.
The Group recognizes as the decrease of the gross carrying amount of mortgage loans the effect of legal risk related to potential litigation and settlements for the portfolio of mortgage loans in convertible currencies and existing legal claims related to loan exposures recognized as at the balance sheet date (active loans) in the statement of financial position. If the estimated loss due to legal risk exceeds the gross value of the loan and for loans repaid, as well as in respect of statutory interest, the Group recognizes provisions for legal risk, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. In accordance with IAS 37, the amount of the provision should reflect the most appropriate estimate of the expenditure required to meet the present obligation at the balance sheet date.
The costs of legal risk related to mortgage loans in convertible currencies were estimated using a statistical method taking into account the effect of customer characteristics as the sum of the products of:
● probabilities of specific outcomes of legal disputes and the amount of loss in the event of various dispute outcome scenarios, taking into account the current and expected number of court cases throughout the period of the Group’s exposure to such risk; and
● probability of the customer reaching a settlement and the amount of loss from the settlement.
In view of the judgment of the Court of Justice of the European Union (CJEU) in Case C-520/21 of 15 June 2023 concerning the possibility for consumers and banks to claim beyond the consideration provided under a loan agreement that has been declared invalid by the Court (for details see note “LEGAL CLAIMS”) and the associated additional uncertainty regarding the choice of course of action by the bank's customers, the expected future number of disputes was statistically modelled with the introduction of expert elements reflecting the fact that the impact of the aforementioned non-recurring event will be observed only in subsequent periods.
The Group also estimates the probabilities of adverse outcomes for the actual and potential claims. In the evaluation of such probabilities, the Group uses the support of third party law firms. In the Group’s opinion, the level of estimated costs of legal risk is also affected by such factors as: duration of legal proceedings and high costs which must be incurred to initiate and conduct legal proceedings.
The Group has also taken into account, as an impact on the probability of settlements, the tax preferences of customers falling within the scope of the Regulation of the Minister of Finance of 11 March 2022 on suspending the collection of income tax on certain types of income (revenue) related to a mortgage loan granted for residential purposes, as amended by the Regulation of 20 December 2022, which is in force until 31 December 2024.
Given the significant uncertainty as to the assumptions made, the methodology of assessing losses in respect of the legal risk is periodically reviewed in the subsequent reporting periods. Uncertainty of estimates relates both to the number of future lawsuits, the court decisions in this respect and to the expected number of settlements, which can be affected in particular by changes in the judicial decisions concerning mortgage loans denominated in or indexed to foreign currencies, a change in base interest rates or a change in the PLN/CHF exchange rate.
In its judgment in Case C-520/21, the CJEU indicated, among other things, that the EU rules preclude a judicial construction of national law whereby a credit institution is entitled to demand compensation from a consumer that goes beyond the reimbursement of the principal paid for the performance of that agreement and beyond the payment of statutory default interest from the date of the call for payment. In this respect, the model's parameters have been adjusted in line with the judgment.
In the judgment referred to above, the CJEU also indicated that, as regards analogous claims by consumers against banks, the provisions of the Directive do not preclude consumers from bringing such claims against banks, provided that the objectives of Directive 93/13 and the principle of proportionality are respected. In the Group's opinion, on the grounds of national legislation and the principle of proportionality, the customers cannot make additional claims against the Group, primarily because they have not provided the Group with a financial service consisting in the provision of capital. Nor is it reasonable to conclude that the Group has enriched itself at the expense of the customer and the consumer has been impoverished. With the funds obtained, the customer met its housing needs and the Group bore the costs of raising the funds, making them available and servicing the loan over the years. The Group assesses that, at this stage, the likelihood of outcomes that are favourable to consumers, including a claim for additional compensation, generating a material adverse financial impact is difficult to estimate and, in addition, there are uncertainties as to how the level of such compensation to the customer should be calculated. This approach is supported by the fact that there have been no adverse court decisions for the Group relating to this issue.
The Group regularly, on a quarterly basis, monitors the model’s adequacy by comparing the actual key model parameters with the calculated values. In addition, new empirical data (more accurate or resulting from a longer observation) gradually modify or replace previous assumptions. The model is being adapted to the current settlement offer and changes made in this respect. During 2023, the Group updated the probability of signing a settlement or filing a lawsuit based on empirical data.
At the end of 2023, there were 3,599 pending court proceedings relating to loans in CHF for which the customer's obligations to the Group had been repaid before the date of the lawsuit (representing approximately 4% of borrowers with repaid loans). The Group monitors the level of inflow of applications for repaid loans on an ongoing basis and models the level of expected loss for legal risk for these customers. Potential litigation settlement scenarios and their probability values for each litigation case are considered in the first instance. In doing so, the Bank has conservatively assumed the highest probabilities for the scenario that the loan agreement is declared invalid. To the indicated population of repaid customers, the Group makes a settlement offer in each case. The expected levels of conversion from lawsuit to settlement are included in the legal risk provision calculation model and adjusted on an ongoing basis to reflect the current situation.
In 2023, the Group recognised the cost of legal risk of PLN 5,430 million.
The Group has analysed the model’s sensitivity to changes in key parameters:
|
ANALYSIS OF THE MODEL'S SENSITIVITY TO CHANGES IN KEY PARAMETERS |
Increase/decrease of cost of legal risk of mortgage loans in convertible currencies |
|
|
|
31.12.2023 |
31.12.2022 |
|
1 p.p. decrease in the likelihood of the Bank winning in court (instead of a 1 p.p. increase in the probability of declaring an agreement invalid) |
101 |
63 |
|
1 p.p. decrease in the number of settlements |
25 |
22 |
|
1 p.p. increase in the number of lawsuits for the active portfolio (at the cost of inactive customers) |
46 |
64 |
|
1 p.p. increase in the lawsuit to settlement conversion ratio |
(71) |
(26) |
|
1 p.p. increase in the number of lawsuits for the repaid portfolio |
34 |
35 |
|
extension of the period for accrual of statutory interest by 90 days |
204 |
- |
Related notes: “Loans and advances to customers”, “Other assets”, “Provisions”, “Legal claims” and „Management of currency risk associated with mortgage loans for individuals”.
financial information
Starting from 4 October 2021, following a decision of 23 April 2021 of the Extraordinary General Meeting of PKO Bank Polski S.A., the Bank has been concluding settlements with consumers who concluded loan agreements or cash advance agreements with the Bank secured by mortgages and indexed to foreign currencies or denominated in foreign currencies (hereinafter: settlements with consumers).
|
(pcs) |
31.12.2023 |
31.12.2022 |
|
Number of mediation applications registered |
57,036 |
37,500 |
|
Total number of settlements concluded, including those concluded |
36,822 |
20,396 |
|
in mediation proceedings |
35,154 |
19,786 |
|
in court proceedings |
1,668 |
610 |
In 2023, the Group continued to encourage customers to join the programme.
|
IMPACT OF LEGAL RISK OF MORTGAGE LOANS IN CONVERTIBLE CURRENCIES |
Gross carrying amount of mortgage loans in convertible currencies net of the cost of legal risk of mortgage loans in convertible currencies |
Accumulated cost of legal risk of mortgage loans in convertible currencies |
Gross carrying amount of mortgage loans in convertible currencies including the cost of legal risk of mortgage loans in convertible currencies |
|
as at 31.12.2023 |
|
|
|
|
Loans and advances to customers/adjustment reducing the carrying amount of loans, of which: |
14,945 |
8,306 |
6,639 |
|
- related to the portfolio of mortgage loans in CHF |
13,096 |
8,306 |
4,790 |
|
Provisions |
|
3,001 |
|
|
Total |
|
11,307 |
|
|
as at 31.12.2022 |
|||
|
Loans and advances to customers/adjustment reducing the carrying amount of loans, of which: |
19,015 |
7,378 |
11,637 |
|
- related to the portfolio of mortgage loans in CHF |
16,731 |
7,378 |
9,353 |
|
Provisions |
|
851 |
|
|
Adjustment to the gross carrying amount of other assets |
|
94 |
|
|
Total |
|
8,323 |
|
|
Change in the accumulated cost of legal risk of mortgage loans in convertible currencies during the period |
2023 |
2022 |
|
Carrying amount at the beginning of the period |
(8,323) |
(7,023) |
|
revaluation of loss for the period |
195 |
(864) |
|
offset of settlements and judgments for the period against accumulated losses* |
2,251 |
1,478 |
|
Increase in adjustment to gross carrying amount of loans and advances to customers and other assets, increase in provisions for legal risk |
(5,430) |
(1,914) |
|
Carrying amount at the end of the period |
(11,307) |
(8,323) |
* The item also includes the effects of final judgments mainly invalidating loan agreements, which for the year ended 31 December 2023 amount to PLN 717 million, including PLN 264 million in relation to the derecognition of receivables from the cost of use of capital (in the year ended 31 December 2022, the effects of invalidations: PLN 151 million)
Revaluation of the loss in respect of the legal risk is associated with the effect of changes in foreign exchange rates on the part of the loss which is recognized in the convertible currency as adjustment to the gross carrying amount of loans.
Accounting policies:
Employee benefits
Employee benefits comprise wages and salaries and social insurance (including provisions for retirement and disability benefits, which are discussed in detail in the note “Provisions” ), as well as costs of the employee pension scheme constituting a defined contribution scheme and the programme of variable remuneration components for persons occupying managerial positions, a portion of which is recorded as a liability in respect of share-based payments settled in cash, in accordance with IFRS 2 Share-based payments (the programme of variable remuneration components is discussed in detail in the note “Remuneration of the PKO Bank Polski S.A. key management”).
Moreover, as part of wages and salaries the Group recognises a provision for future liabilities in respect of compensation and severance bonuses paid out to employees with whom the employment relationship is terminated for reasons not related to the employees; and accruals related to costs attributable to the current period, which will be incurred in the following period, including bonuses and holiday pay, taking account of all unused holiday.
For additional information, see also the note “Provisions”
Overheads – Overheads include the costs of maintaining fixed assets, IT and telecommunications services costs, costs of administration, promotion and advertising, property protection and training.
Lease payments under short-term and low-value leases are recognized in the income statement as an expense on a straight-line basis over the lease term.
Depreciation and amortisation
Costs of depreciation of property, plant and equipment, including right-of-use property, plant and equipment are recognised under the heading “Administrative expenses”, item “Depreciation”.
Costs of depreciation of tangible fixed assets under operating leases are recognised in fee and commission income in the line “operating leases and fleet management” as a component of the net income from operating leases and fleet management.
Depreciation and amortization is charged using the straight-line method, consisting in a systematic, even distribution of the initial value of a fixed asset, the right to use and an intangible asset over the specified depreciation/amortization period, regardless of any possible periods of the assets not being used.
For non-financial non-current assets it is assumed that the residual value is nil, unless there is an obligation by a third party to buy back the asset, or if there is an active market which will continue to exist at the end of the asset’s period of use and it is possible to determine the value of the asset on this market.
Costs relating to the purchase or construction of buildings are allocated to significant parts of the building (components) when such components have different useful lives or when each of the components generates benefits for the Group in a different manner. Each component of a building is depreciated separately. Intangible assets with indefinite useful lives, which are subject to an annual impairment test, are not amortized.
costs of regulatory charges – In this item, the Group presents mainly the charges paid by the Group, resulting from the legal regulations governing the Group's activities, to other entities, i.e. The Polish Financial Supervision Authority (PFSA), the Bank Guarantee Fund (BGF), the Borrower Support Fund and also to the assistance fund operated by System Ochrony Banków Komercyjnych S.A. (SOBK). In this item, the Group also recognises other taxes other than income tax expense and tax on certain financial institutions, which is presented under a separate heading:
• contributions and payments to the BGF – According to IFRIC 21 “Levies” – fees paid by the Group to the Bank Guarantee Fund are recognized in profit or loss upon the occurrence of the obligating event. The Group makes contributions to the banks’ guarantee fund (quarterly) and the banks’ compulsory resolution (annually). Contributions to the guarantee fund and the mandatory restructuring fund are not tax-deductible.
• Fees to the PFSA – In accordance with IFRIC 21 "Levies", fees paid by the Group to the Polish Financial Supervision Authority are recognized in profit or loss upon the occurrence of the obligating event. Both fees (to cover the cost of banking supervision and to cover the costs of supervision over the capital market) are paid once a year. Fees paid to the Polish Financial Supervision Authority are tax deductible.
• Flat-rate income tax – The Act of 23 October 2018 on amendments to, among other things, the acts on income taxes, introduced a possibility of an alternative to taxation with WHT, namely a 3% tax on certain interest paid to non-residents. Therefore, on 29 March 2019 the Bank filed a notification on the election of the 3% taxation option with the tax office in respect of:
• interest on loans which is paid by the Bank to PKO Finance AB with its registered office in Sweden (pursuant to the Act, the election of the taxation option relates to the years 2014 -2022) and
• interest on Eurobonds issued by the Bank before 1 January 2019.
• Other taxes and fees – flat-rate income tax, property tax, payments made to the State Fund for the Rehabilitation of Disabled Persons, motor vehicle tax, excise duty, court and stamp duties, fees related to mediation at the PFSA, a contribution to finance the activities of the Financial Ombudsman and their Office, as well as municipal and administrative fees.
Estimates and judgments:
In estimating useful lives of particular types of property, plant and equipment, including assets leased out under operating lease, intangible assets and investment properties, the following factors are considered:
• expected physical wear and tear estimated based on the average periods of use recorded to date, reflecting the rate of wear and tear, intensity of use etc.;
• technical or market obsolescence;
• legal and other limitations of the asset’s use;
• expected usage of the asset;
• climate-related issues, i.e. the climate factors potentially affecting the useful lives of assets (e.g. ageing, legal limitations or unavailability of assets);
• other factors that may affect the useful economic life of the asset type concerned.
When the period of use of a given asset results from a contract term, the useful life of such an asset corresponds to the period defined in the contract. If the estimated useful life is shorter than the period defined in the contract, the estimated useful life is applied. The amortization/depreciation method and useful life are verified at least once a year.
Depreciation /amortization periods applied by the PKO Bank Polski S.A. Group:
|
Fixed assets |
Useful lives |
|
Buildings, premises, cooperative rights to premises (including investment real estate) |
from 25 to 60 years |
|
Leasehold improvements (buildings, premises) |
from 1 to 11 years (or the lease term, if shorter) |
|
Machines, technical devices, tools and instruments |
from 2 to 15 years |
|
Computer units |
from 2 to 10 years |
|
Vehicles |
from 3 to 5 years |
|
Intangible assets |
Useful lives |
|
Software |
from 1 to 24 years |
|
Other intangible assets |
from 2 to 20 years |
The impact of changes in the useful lives of depreciated assets classified as land and buildings is presented in the table below:
|
CHANGE IN THE USEFUL LIVES OF DEPRECIATED ASSETS CLASSIFIED AS LAND AND BUILDINGS |
31.12.2023 |
31.12.2022 |
||
|
+10 years scenario |
-10 years scenario |
+10 years scenario |
-10 years scenario |
|
|
Depreciation costs |
162 |
(30) |
165 |
|
Related notes: “Intangible assets”, “Property, plant and equipment”, “Provisions”, “Benefits for the PKO Bank Polski SA key management.”, “Leases”
financial information
|
ADMINISTRATIVE EXPENSES1 |
2023 |
2022 |
|
Employee benefits |
(4,140) |
(3,403) |
|
Overheads, of which: |
(1,786) |
(1,460) |
|
Rent |
(116) |
(98) |
|
IT |
(455) |
(386) |
|
Depreciation and amortization |
(1,087) |
(1,019) |
|
property, plant and equipment, of which: |
(532) |
(527) |
|
right-of-use assets |
(244) |
(232) |
|
IT |
(125) |
(120) |
|
investment properties |
- |
(1) |
|
intangible assets, of which: |
(555) |
(492) |
|
IT |
(547) |
(480) |
|
Costs of regulatory charges |
(622) |
(1,887) |
|
Total |
(7,635) |
(7,769) |
1 Administrative expenses for 2022 have been adjusted by PLN 81 million for the implementation of IFRS 17 "Insurance Contracts" (see note “IFRS 17 Insurance Contracts")
|
EMPLOYEE BENEFITS |
2023 |
2022 |
|
Wages and salaries, including:1 |
(3,454) |
(2,843) |
|
costs of contributions to the employee pension plan |
(90) |
(75) |
|
Social security, of which:1 |
(570) |
(470) |
|
contributions for disability and retirement benefits |
(480) |
(408) |
|
Other employee benefits |
(116) |
(90) |
|
|
|
|
|
Total |
(4,140) |
(3,403) |
1 Employee benefit expense 2022 has been adjusted by PLN 48 million for the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contracts")
|
NET REGULATORY CHARGES |
2023 |
2022 |
|
Contribution and payments to the Bank Guarantee Fund (BFG), of which: |
(280) |
(409) |
|
to the Resolution Fund |
(280) |
(291) |
|
to the Bank Guarantee Fund |
- |
(118) |
|
Fees to the PFSA1 |
(55) |
(49) |
|
Fee for the assistance fund operated by System Ochrony Banków Komercyjnych S.A. |
- |
(956) |
|
Borrower Support Fund |
- |
(313) |
|
Flat rate income tax |
- |
(5) |
|
Other taxes and fees1 |
(287) |
(155) |
|
|
|
|
|
Total |
(622) |
(1,887) |
1 Fees to the PFSA for 2022 have been adjusted by PLN 2 million for the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contracts")
• Fee for the assistance fund operated by System Ochrony Banków Komercyjnych S.A.:
On 14 June 2022, PKO Bank Polski S.A. and 7 other commercial banks, i.e. Alior Bank S.A., BNP Paribas Bank Polska S.A., ING Bank Śląski S.A., mBank S.A., Millennium Bank S.A., Bank Polska Kasa Opieki S.A. and Santander Bank Polska S.A. (the Participating Banks) formed a system for the protection of commercial banks, which is referred to in Chapter 10a of the Banking Law. The system is supervised by the PFSA.
• Fee for the borrower support fund:
The Act of 14 July 2022 on crowdfunding for businesses and support for borrowers introduced changes in the operation of the Borrower Support Fund, which will offer support to borrowers of up to PLN 2,000 per month, payable over a period of up to 36 months. Repayment of the support will begin after two years in 144 equal and interest-free instalments. The customers who have repaid the first 100 instalments in time may be relieved from the obligation to repay a part of the support received. A customer can benefit from the support when one of the following conditions is met:
• at least one of the borrowers is unemployed;
• the monthly housing loan servicing costs exceed 50 per cent of the customer’s monthly income;
• monthly income after deduction of the loan costs does not exceed PLN 1,552 per person in a one-person household or PLN 1,200 per person in a multi-person household in 2022.
From this, the Fund has been injected with additional funds of approximately PLN 1.4 billion until the end of 2022. In 2022, the Group recognised a cost in respect of additional payments to the Borrower Support Fund of 313 million.
accounting policies:
As of 1 February 2016, the Act of 15 January 2016 on tax on certain financial institutions came into force, which covered, among other things, banks and insurance companies. The tax is charged on the surplus of a Bank’s total assets above PLN 4 billion, based on the trial balance as at the end of each month. The tax base of insurance companies within one Group is determined jointly as the surplus of total assets over PLN 2 billion Banks are entitled to reduce the tax base by deducting, among other things, own funds and the value of Treasury securities held. Additionally, banks reduce the tax base by the value of assets acquired from the NBP, constituting collateral of a refinancing loan granted by the NBP.
Insurance companies are entitled to reduce their tax base by the value of assets accumulated under the contracts for Employee Capital Plans that they service, as referred to in the Act on Employee Capital Plans of 4 October 2018. As a result of the amendment to the Act on taxation of certain financial institutions, effective from 7 May 2022, both banks and insurance companies may reduce the tax base by the value of bonds purchased and loans or advances, respectively, issued or granted by the Bank Guarantee Fund or an asset management entity referred to in the Act of 10 June 2016 on the Bank Guarantee Fund, Deposit Guarantee Scheme and Resolution. Act of 16 November 2022 amending the Act on tax on selected financial institutions and certain other acts expanded the catalogue of items by which a bank may reduce the tax base, including, in particular, the value of treasury securities covered by a statutory guarantee of the State Treasury (the amendments entered into force on 1 January 2023).
The tax rate for all taxpayers is 0.0366% per month, and the tax is paid monthly by the 25th day of the month following the month to which it relates.
The tax paid is not tax-deductible for corporate income tax purposes.
financial information
|
TAX ON CERTAIN FINANCIAL INSTITUTIONS |
2023 |
2022 |
|
|
|
|
|
PKO Bank Polski S.A. |
(1,166) |
(1,190) |
|
PKO Życie Towarzystwo Ubezpieczeń S.A. |
(3) |
(3) |
|
PKO Bank Hipoteczny S.A. |
(58) |
(70) |
|
PKO Towarzystwo Ubezpieczeń S.A. |
(4) |
(3) |
|
Total |
(1,231) |
(1,266) |
The decrease in the value of the tax on certain financial institutions in 2023 compared to 2022, despite the increase in total assets, is attributable to the amendment of the Act on the tax on certain financial institutions effective from 1 January 2023 (Act of 16 November 2022).
accounting policies:
Corporate income tax is recognized as current tax and deferred tax. The current income tax is recognized in the income statement. Deferred income tax, depending on the source of temporary differences, is recorded in the income statement or in other comprehensive income.
• Current tax
The main categories permanently recognised as non-deductible costs include the tax on certain financial institutions, contributions and payments to the BGF and the Borrowers' Support Fund, as well as the State Fund for the Rehabilitation of the Disabled (PFRON). In addition, the Bank does not recognise in the tax account the cost of legal risk of mortgage loans in convertible currencies subject to the inclusion in the discontinuation of the amounts of capital forgiven resulting from the settlements in accordance with the Regulation of the Minister of Finance of 11 March 2022 on suspending the collection of income tax on certain types of income (revenue) related to a mortgage loan granted for residential purposes, as amended by the Regulation of 20 December 2022, which is in force until 31 December 2024 (for details, see table reconciliation of the effective tax rate).
Pursuant to the principles governing the statute of limitations for tax liabilities, the correctness of income tax settlements may be audited within five years of the end of the year in which the deadline for the submission of the respective tax returns passed.
Group companies are corporate income tax payers. The amount of the companies’ current tax liability is transferred to offices of the tax administration authorities with jurisdiction over their location within the statutory deadlines.
• Deferred income tax
Deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply in the period in which the asset is realized or liability is settled, using tax rates (and tax laws) that prevail at the reporting date. those whose future use is certain at the reporting date.
The Group recognises a deferred tax asset arising from the entitlement to apply a tax preference in respect of the settlements covered by the Regulation of the Minister of Finance of 11 March 2022 on suspending the collection of income tax on certain types of income (revenues) associated with mortgage loans granted for housing purposes, as amended by the Regulation of 20 December 2022, which is effective until 31 December 2024, and from the entitlement to adjust tax revenues in connection with judgments invalidating loan agreements.
financial information:
• tax expense
|
TAX EXPENSE |
2023 |
2022 |
|
Income tax expense recognized in the income statement1 |
(3,057) |
(1,455) |
|
Current income tax expense |
(2,572) |
(2,052) |
|
Deferred income tax on temporary differences |
(485) |
597 |
|
Income tax expense recognized in other comprehensive income in respect of temporary differences |
(1,337) |
777 |
|
Total |
(4,394) |
(678) |
1 the tax expense recognised in the income statement for 2022 was adjusted by PLN 39 million for the implementation of IFRS 17 "Insurance Contracts" (see note “IFRS 17 Insurance contracts”).
• reconciliation of the effective tax rate
|
RECONCILIATION OF THE EFFECTIVE TAX RATE |
2023 |
2022 |
|
Profit or loss before tax |
8,562 |
4,767 |
|
Tax at the statutory rate in force in Poland (19%) |
(1,627) |
(906) |
|
Effect of different tax rates of foreign entities |
(82) |
1 |
|
Effect of permanent differences between profit before income tax and taxable income, including: |
(1,348) |
(549) |
|
cost of legal risk of mortgage loans in convertible currencies |
(993) |
(143) |
|
tax on certain financial institutions |
(234) |
(240) |
|
contributions and payments to the Bank Guarantee Fund |
(53) |
(78) |
|
Borrower Support Fund |
- |
(60) |
|
non-deductible impairment losses on investments in subordinates |
- |
(10) |
|
non-deductible allowances for expected credit losses on credit exposures |
(28) |
(44) |
|
dividend income |
3 |
3 |
|
interest on foreign exchange gains in Sweden |
- |
27 |
|
reversal of assets from reclassification of temporary differences to permanent differences |
(37) |
- |
|
other permanent differences |
(6) |
(4) |
|
|
|
|
|
Income tax expense recognized in the income statement |
(3,057) |
(1,455) |
|
|
|
|
|
Effective tax rate (%) |
35.70 |
30.52 |
• net deferred tax assets
|
DEFERRED TAX LIABILITIES AND ASSETS 2023 |
31.12.2022 |
Effect of amendments to IAS 12* |
01.01.2023 taking into account amendments to IAS 12 |
Income statement |
Other comprehensive income |
31.12.2023 |
|
Interest accrued on receivables (loans) |
368 |
- |
368 |
(5) |
- |
363 |
|
Interest on securities |
222 |
- |
222 |
8 |
- |
230 |
|
Valuation of securities |
- |
- |
- |
12 |
6 |
18 |
|
Valuation of derivative financial instruments |
40 |
- |
40 |
(5) |
(21) |
14 |
|
Difference between carrying amount and tax base of property, plant and equipment and intangible assets, including leased assets* |
223 |
160 |
383 |
44 |
- |
427 |
|
Taxable income on the reversal of IBNR allowance, which was previously tax deductible, on implementation of IFRS 9 |
26 |
- |
26 |
(13) |
- |
13 |
|
Prepaid costs |
29 |
- |
29 |
(24) |
- |
5 |
|
Other taxable temporary differences |
121 |
- |
121 |
(16) |
(6) |
99 |
|
Deferred tax liabilities, gross |
1 029 |
160 |
1 189 |
1 |
(21) |
1 169 |
|
|
|
|
|
|
|
|
|
Interest accrued on liabilities |
214 |
- |
214 |
153 |
- |
367 |
|
Valuation of derivative financial instruments |
1 389 |
- |
1 389 |
3 |
(809) |
583 |
|
Valuation of securities |
872 |
- |
872 |
(41) |
(550) |
281 |
|
Provision for employee benefits |
103 |
- |
103 |
16 |
1 |
120 |
|
Allowances for expected credit losses |
1 477 |
- |
1 477 |
95 |
- |
1 572 |
|
Fair value measurement of loans |
157 |
- |
157 |
33 |
- |
190 |
|
Commissions to be settled in time using the straight-line valuation method and effective interest rate |
1 133 |
- |
1 133 |
(442) |
- |
691 |
|
Other deductible temporary differences |
38 |
- |
38 |
10 |
- |
48 |
|
Provision for costs to be incurred |
73 |
- |
73 |
1 |
- |
74 |
|
Tax loss brought forward |
1 |
- |
1 |
(1) |
- |
- |
|
Impact of legal risk of mortgage loans in convertible currencies |
321 |
- |
321 |
(212) |
- |
109 |
|
Premium on securities |
122 |
- |
122 |
(49) |
- |
73 |
|
Foreign exchange differences |
239 |
160 |
399 |
(50) |
- |
349 |
|
Difference between carrying amount and tax base of property, plant and equipment and intangible assets, including leased assets |
6 139 |
160 |
6 299 |
(484) |
(1 358) |
4 458 |
|
|
|
|
|
|
|
|
|
Total effect of temporary differences |
5 110 |
- |
5 110 |
(485) |
(1 337) |
3 288 |
|
Deferred income tax liabilities (presented in the statement of financial position) |
49 |
160 |
209 |
524 |
(21) |
712 |
|
Deferred tax assets (presented in the statement of financial position) |
5 159 |
160 |
5 319 |
39 |
(1 358) |
4 000 |
* The opening balance was adjusted due to the entry into force on 1 January 2023 of the amendments to IAS 12 "Income Taxes" introducing the requirement to recognise assets and liabilities for temporary differences in the financial statements also for transactions other than business combinations.
|
DEFERRED TAX LIABILITIES AND ASSETS 2022* |
01.01.2022 |
Income statement |
Other comprehensive income |
31.12.2022 |
|
Interest accrued on receivables (loans) |
235 |
133 |
- |
368 |
|
Interest on securities |
158 |
64 |
- |
222 |
|
Valuation of securities |
20 |
(19) |
(1) |
- |
|
Valuation of derivative financial instruments |
34 |
23 |
(17) |
40 |
|
Difference between carrying amount and tax base of property, plant and equipment and intangible assets, including leased assets |
206 |
17 |
- |
223 |
|
Taxable income on the reversal of IBNR allowance, which was previously tax deductible, on implementation of IFRS 9 |
39 |
(13) |
- |
26 |
|
Prepaid costs |
60 |
(31) |
- |
29 |
|
Interest on foreign exchange gains in Sweden |
288 |
(288) |
- |
- |
|
Other taxable temporary differences |
49 |
101 |
(1) |
149 |
|
Deferred tax liabilities, gross |
1,089 |
(13) |
(19) |
1,057 |
|
|
|
|
|
|
|
Interest accrued on liabilities |
40 |
174 |
- |
214 |
|
Valuation of derivative financial instruments |
952 |
76 |
361 |
1,389 |
|
Valuation of securities |
459 |
18 |
395 |
872 |
|
Provision for employee benefits |
102 |
(1) |
2 |
103 |
|
Allowances for expected credit losses |
1,341 |
136 |
- |
1,477 |
|
Fair value measurement of loans |
146 |
11 |
- |
157 |
|
Commissions to be settled in time using the straight-line valuation method and effective interest rate |
877 |
284 |
- |
1,161 |
|
Other deductible temporary differences |
36 |
2 |
- |
38 |
|
Provision for costs to be incurred |
61 |
12 |
- |
73 |
|
Tax loss brought forward |
6 |
(5) |
- |
1 |
|
Impact of legal risk of mortgage loans in convertible currencies |
342 |
(21) |
- |
321 |
|
Premium on securities |
76 |
46 |
- |
122 |
|
Foreign exchange differences |
- |
- |
- |
- |
|
Difference between carrying amount and tax base of property, plant and equipment and intangible assets, including leased assets |
387 |
(148) |
- |
239 |
|
Deferred tax liabilities, gross |
4,825 |
584 |
758 |
6,167 |
|
|
|
|
|
|
|
Total effect of temporary differences |
3,736 |
597 |
777 |
5,110 |
|
Deferred income tax liabilities (presented in the statement of financial position) |
379 |
(285) |
(17) |
77 |
|
Deferred tax assets (presented in the statement of financial position) |
4,115 |
312 |
760 |
5,187 |
* Comparative figures for 2022 were restated for the implementation of IFRS 17 “Insurance contracts” (see note “IFRS 17 Insurance contracts”).
• Tax Group
Pursuant to the agreement dated 3 November 2021, PKO Bank Polski S.A., PKO Bank Hipoteczny S.A. and PKO Leasing S.A. have extended the operation of PGK PKO Banku Polskiego S.A. ("PGK PKO Bank Polski S.A."), which was established pursuant to the agreement dated 5 November 2018, for a further three fiscal years (2022 - 2024). These agreements have been registered with the relevant head of the tax office.
A tax group is an institution of the tax law stipulated in the provisions of the Corporate Income Tax Act. Its creation means that the income of the Tax Group companies will be consolidated for corporate income tax purposes and that certain solutions will be available facilitating the application of specific regulations of the Corporate Income Tax Act, dedicated specifically to tax groups.
PKO Bank Polski S.A. is the parent of PGK PKO Banku Polskiego S.A. PGK PKO Banku Polskiego S.A. was established for three tax years. Current income tax settlements are presented broken down into receivables and liabilities of PKO Bank Polski S.A. and receivables and liabilities of subsidiaries included in the Tax Group.
The Bank has a Tax Strategy for PKO Bank Polski S.A. in place, adopted by resolution of the Management Board No 392/C/2021 of 5 October 2021, approved by resolution of the Supervisory Board no. 154/2021 of 14 October 2021. On 17 December 2021, the Strategy was published on the Bank’s website at: https://www.pkobp.pl/grupa-pko-banku-polskiego/pko-bank-polski/strategia-podatkowa/.
In the execution of its statutory annual obligations resulting from Article 27c of the Corporate Income Tax Act, the Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna Tax Group prepared in 2023 the Information on the tax strategy implemented in 2022, which is available on the Bank’s website at https://www.pkobp.pl/grupa-pko-banku-polskiego/pko-bank-polski/strategia-podatkowa/ or: https://www.pkobp.pl/informacja-o-realizowanej-strategii-podatkowej/. On 19 December 2023, the Bank notified the head of the competent tax office of the address of the webpage on which the Information is available.
Corporate income tax on the income earned by the PKO Bank Polski S.A. Group in the years 2023 and 2022 by tax jurisdiction:
|
Corporate income tax |
2023 |
2022 |
|
Capital Group |
2,572 |
2,052 |
|
Poland |
2,426 |
1,791 |
|
Sweden |
- |
258 |
|
Germany |
9 |
- |
|
Czech Republic |
6 |
- |
|
Ukraine |
131 |
3 |
Tax systems of countries in which the Bank and the PKO Bank Polski S.A. Group entities have their registered offices or branches are often subject to amendments to laws, including as a result of operations aimed at tightening the tax system, both at national and international level.
In addition, understanding of some of the regulations of the tax law, due to their ambiguity, may in practice lead to inconsistent individual interpretations of the tax authorities, differing from the interpretation by the taxpayer, and the resulting disputes may only be resolved by the national or European courts. Therefore, interpretations of the tax law by the tax authorities differing from the practices implemented by the Bank or the PKO Bank Polski S.A. Group entities cannot be eliminated and may have a significant unfavourable impact on their operations and financial condition, despite the various actions aimed at mitigating this risk, which are regularly undertaken and allowed by law.
On 23 December 2021, PKO Finance AB (hereinafter “Company”) received from the Swedish tax authorities a negative decision concerning the long-standing dispute relating to doubts about taxation in Sweden of foreign exchange gains on loans granted to the Bank and liabilities in respect of the issue. Based on this decision, the Company must pay SEK 160,726,808 in additional income tax and interest for the fiscal year 2019. On 13 February 2023, the Company paid the tax for 2022 in the amount of SEK 446,665,741, following the interpretation of the Swedish tax authorities in order to avoid potential penalty interest of 3.75 p.a. Despite having made the payments, the Company disagrees with the verdicts of the Swedish tax office and intends to use the appeal procedure to regain the amounts mentioned above. As potential tax liabilities of PKO Finance AB for 2015-2016 have become time-barred, the Group has decided to reverse the deferred income tax liabilities for 2015-2016 in the amount of PLN 74 million in 2022.
|
INCOME STATEMENT |
2023 |
2022 |
|
Net profit attributable to equity holders of the parent company |
5,502 |
3,312 |
|
Weighted average number of ordinary shares during the period (in million) |
1,250 |
1,250 |
|
Earnings per share |
|
|
|
– basic earnings per share for the period (PLN) |
4.40 |
2.65 |
|
– diluted earnings per share for the period (PLN) |
4.40 |
2.65 |
In the years 2023 and 2022, there were no dilutive instruments.
Accounting policies:
Classification into valuation categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”.
financial information:
|
CASH AND BALANCES WITH CENTRAL BANK |
31.12.2023 |
31.12.2022 |
|
Current account with the Central Bank |
7,750 |
|
|
Cash |
4,382 |
4,215 |
|
Deposits with the Central Bank |
3,752 |
3,951 |
|
Other |
- |
1 |
|
Total |
17,813 |
15,917 |
Accounting policies:
Valuation and classification into categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”.
financial information
For more information on credit risk exposures, see note “Credit risk – financial information”.
|
31.12.2023 |
31.12.2022 |
|
|
Measured at amortized cost |
14,447 |
16,103 |
|
Deposits with banks |
11,994 |
13,374 |
|
Current accounts |
1,676 |
2,215 |
|
Loans and advances granted |
776 |
513 |
|
Cash in transit |
1 |
- |
|
Gross carrying amount |
14,447 |
16,103 |
|
Allowances for expected credit losses |
(9) |
(2) |
|
Net carrying amount |
14,438 |
16,101 |
|
31.12.2023 |
31.12.2022 |
|
|
up to 1 month |
14,064 |
15,935 |
|
1 to 3 months |
276 |
102 |
|
3 months to 1 year |
89 |
56 |
|
1 to 5 years |
8 |
8 |
|
more than 5 years |
1 |
- |
|
|
|
|
|
Total |
14,438 |
16,101 |
Accounting policies:
The Group uses derivative financial instruments for risk management purposes related to the Bank’s operations.
The Group most often uses the following derivative instruments: IRS, CIRS, FX Swap, options, commodity swap, FRA, Forward and Futures.
Derivative financial instruments are stated at fair value from the transaction date.
A derivative is presented under “Derivative hedging instruments” (if the instrument qualifies for hedge accounting) or “Other derivatives” (if the instrument does not qualify for hedge accounting) - as an asset if its fair value is positive or a liability if its fair value is negative.
For other derivatives (not designated for hedge accounting), the Group recognises changes in the fair value of the instruments and the gain or loss on the settlement of these instruments in either the net gain or loss on financial instruments, depending on the type of instrument.
The Group applies hedge accounting to hedge its interest rate risk and foreign exchange risk. The hedging transactions are concluded to mitigate the risk of incurring losses as a result of unfavourable changes in foreign currency exchange rates and interest rates. Cash flows related to the transactions performed, the fair value of assets held and the shares in the net assets and liabilities of foreign entities are hedged.
Interest rate risk includes in particular:
• the risk related to the repricing (change in interest rates) frequency and dates mismatch of the assets and liabilities, and of off-balance sheet items (repricing date mismatch risk);
• the risk following from the change in the angle of inclination and shape of the yield curve (yield curve risk);
• the risk resulting from an imperfect match between the reference rates used in respect of banking products and the changes in the market rates, or from imperfect transmission systems of changes in market interest rates on those products (base risk);
• risks resulting from options, including embedded options, e.g. restrictions on interests on loans (option risk).
The Group’s foreign exchange risk arises as a result of transactions performed as part of:
• core business activities;
• trading activities;
• contracts concluded by the Group which generate foreign exchange risk.
Foreign exchange risk arising from the Group’s activities is managed, where required, by specialized units as part of their own operations based on the data received on open currency positions.
The Group has a system of threshold values and limits attributed to particular interest rate and foreign exchange risks, aimed at determining the maximum allowable risk level which ensures that the strategic tolerance limits are not exceeded.
The Group decided to continue to apply the provisions of IAS 39 and did not apply IFRS 9 to hedge accounting.
• Cash flow hedges
Changes in the fair value of a derivative financial instrument designated as a cash flow hedge are recognized directly in other comprehensive income in respect of the portion constituting the effective portion of the hedge.
Amounts transferred directly to other comprehensive income are transferred to the income statement in the same period or periods in which the hedged planned transaction affects the income statement. Interest and foreign exchange gains/losses are presented in the income statement in “Net interest income” and “Net foreign exchange gains (losses)”, respectively.
The Group hedges both assets that generate interest income and liabilities that generate interest expense using IRS or CIRS transactions.
The Group consistently applies the method of presenting the total net interest income/(expense) on hedging instruments for all hedging strategies in the line “derivative hedging instruments” under “Net interest income” – the positive total amount for a period is presented in “Interest income” and the negative total amount is presented in “Interest expenses”.
The effectiveness tests comprise the measurement of hedging transactions net of interest accrued and foreign exchange gains (losses) on the nominal value of the hedging transactions (in the case of CIRS transactions).
Hedge effectiveness is verified through the use of prospective and retrospective effectiveness tests. The tests are performed on a monthly basis.
a) if the hedging instrument is a CIRS, the ineffectiveness is recognised in foreign exchange gains/losses,
b) if the hedging instrument is an IRS, ineffectiveness is recognised in net gain/(loss) on financial instruments measured at fair value through profit or loss,
c) if the hedging instrument is a CIRS and an IRS, ineffectiveness is recognised in, respectively, foreign exchange gains/losses and in net gain/(loss) on financial instruments measured at fair value through profit or loss.
In the event of artificial inefficiency (efficiency outside the range [80%,125%]), its result is recognised in foreign exchange gains/losses. Artificial ineffectiveness arises from the construction of the retrospective test as a quotient of changes in the valuation of hedged and hedging instruments. Where valuation changes on one side of a hedging relationship (CIRS or IRS) are relatively small, the assessment of effectiveness may show artificial ineffectiveness, i.e. one that occurs despite the high compatibility of the terms of the hedged and hedging instruments.
• Fair value hedges
Changes in the fair value of a derivative hedging instrument designated as fair value hedge are recognized in “Gains/ (losses) financial transactions”, net of the interest component. The interest component is presented in the same line item as interest income on the hedged item, i.e. in “Net interest income”.
The Group hedges both assets that generate interest income and liabilities that generate interest expense using IRS or CIRS transactions. The Group consistently applies the method of presenting the total net interest income/(expense) on hedging instruments for all hedging strategies in the line “derivative hedging instruments” under “Net interest income” – the positive total amount for a period is presented in “Interest income” and the negative total amount is presented in “Interest expenses”.
A change in the fair value adjustment to the hedged item is recognized in “Gains/ (losses) financial transactions” .
The part of the fair value adjustment which is not hedged is recognized:
• for a hedged item which is a financial asset or a financial liability classified as measured at fair value through profit or loss – as income or costs, as appropriate, in gains/(losses) on financial transactions;
• for a hedged item which is a financial asset measured at fair value through other comprehensive income – in other comprehensive income, where the change in the fair value of financial instruments measured at fair value through other comprehensive is presented.
The effectiveness tests comprise the measurement of hedging transactions net of accrued interest.
Hedge effectiveness is verified through the use of prospective and retrospective effectiveness tests. The tests are performed on a monthly basis.
The items securities, loans and advances to customers and amounts due to customers include an adjustment for fair value hedge accounting for securities, loans and advances to customers and amounts due to customers, respectively, representing the hedged item.
Estimates and judgments
The fair value of derivative instruments other than options is designated using the measurement methods that base on discounted cash flows which may be obtained from a given financial instrument. The measurement techniques for financial instruments other than options are based on yield curves constructed on the basis of available market data (deposit rates on the interbank market, quotations of IRS transactions). Options are valued using option pricing models. The variables and assumptions used in a valuation include, where available, data derived from observable markets.
The fair value of derivative instruments accounts for DVA (debit value adjustment), and CVA (credit value adjustment). The process of calculation of CVA and DVA adjustments includes the selection of a method for determining the spread of the counterparty’s or the Group’s credit risk (e.g. a market price method based on the continuous price quotations of debt instruments issued by the counterparty, a method of spread implied from Credit Default Swap contracts), an estimation of the probability of default by the counterparty or the Group and the recovery rate, as well as the calculation of CVA and DVA adjustments.
The Group made simulations to assess the potential impact of changes in the yield curves on the transaction value.
|
31.12.2023 |
31.12.2022 |
|||
|
+50bp scenario |
scenario -50bp |
+50bp scenario |
scenario -50bp |
|
|
IRS |
(547) |
556 |
(741) |
755 |
|
CIRS |
(12) |
12 |
(5) |
5 |
|
other instruments |
(4) |
4 |
(5) |
5 |
|
|
|
|
|
|
|
Total |
(563) |
572 |
(751) |
765 |
|
ESTIMATED CHANGE IN VALUATION OF DERIVATIVES OTHER THAN OPTIONS FOLLOWING A PARALLEL SHIFT IN YIELD CURVES: |
31.12.2023 |
31.12.2022 |
||
|
+50bp scenario |
scenario -50bp |
+50bp scenario |
scenario -50bp |
|
|
IRS |
(529) |
538 |
(723) |
737 |
|
CIRS |
(18) |
18 |
(33) |
33 |
|
other instruments |
(4) |
4 |
(7) |
7 |
|
|
|
|
|
|
|
Total |
(551) |
560 |
(763) |
777 |
types of hedging strategies applied by the Group
As at 31 December 2023 the Group had had active relationships as part of:
• 7 strategies for hedging cash flow volatility;
• 5 strategies for hedging fair value volatility.
In 2023, the Group terminated the hedging relationships as part of the hedging strategy “Hedging fair value volatility of fixed-interest-rate security measured at fair value through other comprehensive income in convertible currencies resulting from interest rate risk, using IRS transactions”, due to failure to meet the prospective effectiveness test. The effect of discontinuing hedge accounting in the above relationships on profit or loss was PLN 8.3 million.
In 2023, the Group implemented a new hedging strategy – Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using a CIRS transaction.
No other changes were made to other active hedging strategies in 2023.
In 2022, the Group introduced two new hedging strategies to hedge fair value volatility.
The tables below summarize the types of strategies applied by the Group.
|
Type of hedging strategy |
Cash flow hedges (Strategies No: 1, 5,6,7,9,14,15,19) |
|
Risk hedged |
foreign exchange risk and interest rate risk |
|
Hedging instrument |
float – float CIRSs fixed – float CIRSs |
|
Hedged item |
• the portfolio of floating interest loans in foreign currencies and • the portfolio of short-term negotiated deposits in PLN, including their future renewals. In designating the hedged item, the Group used the IAS39 AG 99C in the version adopted by the European Union, or • fixed interest rate financial liability denominated in foreign currency or • the portfolio of floating interest rate regular savings products in PLN or • a financial liability in foreign currencies • |
|
sources of hedge ineffectiveness |
• margin on the hedging instrument • differences in discount on the hedged item and the hedging instrument • CVA/DVA adjustment of the hedging instrument
|
|
The period in which cash flows are expected to occur and affect the financial results:
|
January 2024 – February 2025 |
|
Strategy No |
Strategy Name |
|
1 |
Hedges against fluctuations in cash flows on variable interest CHF loans, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on negotiated deposits in PLN, resulting from interest rate risk, using CIRS transactions (inactive)
|
|
5 |
Hedges against fluctuations in cash flows on variable interest loans in convertible currencies, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using CIRS transactions.
|
|
6 |
Hedges against fluctuations in cash flows on variable interest loans in convertible currencies other than CHF, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on negotiated deposits in PLN, resulting from interest rate risk, using CIRS transactions (inactive).
|
|
7 |
Hedges against fluctuations in cash flows on variable interest loans in convertible currencies, resulting from interest rate risk and currency risk, and hedging against fluctuations in cash flows on regular savings bank products in PLN, resulting from interest rate risk, using CIRS transactions (inactive).
|
|
9 |
Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using CIRS or CIRS-EP transactions.
|
|
14 |
Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on financial liabilities in a convertible currency resulting from foreign currency risk, using two CIRS transactions.
|
|
15 |
Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on financial liabilities in a convertible currency resulting from foreign currency risk, using two CIRS transactions (inactive)
|
|
19 |
Hedges against fluctuations in cash flows on variable interest PLN loans, resulting from interest rate risk, and hedging against fluctuations in cash flows on a fixed-rate financial liability in a convertible currency resulting from foreign currency risk, using CIRS transactions.
|
|
Type of hedging strategy |
Cash flow hedges (Strategies No: 2,3,4,16) |
|
Risk hedged |
interest rate risk |
|
Hedging instrument |
fixed - float IRSs |
|
Hedged item |
the portfolio of loans in PLN or foreign currencies indexed to a floating interest rate |
|
sources of hedge ineffectiveness |
• change in market parameters between the moment of determining the terms and conditions relating to the hedged item and the moment of concluding the hedge • differences in discount on the hedged item and the hedging instrument • CVA/DVA adjustment of the hedging instrument
|
|
The period in which cash flows are expected to occur and affect the financial results: |
January 2024 – June 2032 |
|
Strategy No |
Strategy Name |
|
2 |
Hedges against fluctuations in cash flows from variable interest loans in PLN, resulting from interest rate risk, using IRS transactions. |
|
3 |
Hedges against fluctuations in cash flows from variable interest loans in convertible currencies, resulting from interest rate risk, using IRS transactions. |
|
4 |
Hedges against fluctuations in cash flows from variable interest loans in convertible currencies, resulting from interest rate risk, using IRS transactions. |
|
16 |
Hedges against fluctuations in cash flows on deposits in PLN, resulting from interest rate risk, using IRS transactions (inactive). |
|
Type of hedging strategy |
Fair value volatility hedges (strategy No: 8,10,11,12,17,18) |
|
Risk hedged |
interest rate risk |
|
Hedging instrument |
fixed - float IRSs |
|
Hedged item |
interest rate risk component relating to a fixed interest rate loan or security in a foreign currency or in PLN, which corresponds to the market IRS rate interest rate risk component of a portfolio of financial liabilities replicated by a portfolio of fixed-rate instruments measured at amortised cost, corresponding to the market IRS ate |
|
sources of hedge ineffectiveness |
• change in market parameters between the moment of determining the terms and conditions relating to the hedged item and the moment of concluding the hedge • CVA/DVA adjustment of the hedging instrument • difference between the present value of the floating leg of IRS and the present value of the nominal value of a security |
|
Strategy No |
Strategy Name |
|
8 |
Hedges against fair value volatility of fixed-interest-rate loans in convertible currencies resulting from interest rate risk, using IRS transactions. |
|
10 |
Hedges against fair value volatility of fixed-interest-rate security in convertible currencies measured at amortised cost, resulting from interest rate risk, using IRS transactions. |
|
11 |
Hedges against fair value volatility of fixed-interest-rate security measured at fair value through other comprehensive income in convertible currencies resulting from interest rate risk, using IRS transactions. |
|
12 |
Hedges against fair value volatility of fixed-interest-rate FVOCI security in PLN resulting from interest rate risk, using IRS transactions. |
|
17 |
Hedges against fluctuations in the fair value of a portfolio of financial liabilities in PLN measured at amortized cost, resulting from interest rate risk, using IRS transactions |
|
18 |
Hedges against fluctuations in the fair value of a portfolio of financial liabilities in convertible currencies measured at amortized cost, resulting from interest rate risk, using IRS transactions |
• carrying amount of hedging instruments
|
CARRYING AMOUNT OF HEDGING INSTRUMENTS |
31.12.2023 |
31.12.2022 |
||
|
Assets |
Liabilities |
Assets |
Liabilities |
|
|
Cash flow hedges |
473 |
2,972 |
888 |
7,336 |
|
interest rate risk – IRS |
147 |
2,167 |
31 |
6,507 |
|
IRS PLN (strategy 2.16) |
112 |
2,127 |
31 |
6,331 |
|
IRS EUR (strategy 3.4) |
35 |
40 |
- |
176 |
|
foreign exchange risk and interest rate risk – CIRS |
326 |
805 |
857 |
829 |
|
CIRS CHF/USD (strategy 5.15) |
|
46 |
- |
32 |
|
CIRS PLN/EUR (strategy 9) |
55 |
|
181 |
- |
|
CIRS PLN/CHF (strategy 14.15) |
271 |
|
676 |
- |
|
CIRS CHF/EUR (strategy 14) |
|
552 |
- |
797 |
|
CIRS PLN/EUR (strategy 19) |
|
207 |
- |
- |
|
Fair value hedges |
701 |
20 |
154 |
133 |
|
interest rate risk – IRS |
701 |
20 |
154 |
133 |
|
IRS EUR (strategy 8,10,11,18) |
92 |
19 |
75 |
91 |
|
IRS USD (strategy 8; 11.18) |
4 |
1 |
14 |
- |
|
IRS PLN (strategy 12.17) |
605 |
|
65 |
42 |
|
|
|
|
|
|
|
Total |
1,174 |
2,992 |
1,042 |
7,469 |
• Cash flow hedges
|
CHANGE IN OTHER COMPREHENSIVE INCOME RELATING TO CASH FLOW HEDGES |
2023 |
2022 |
|
Accumulated other comprehensive income at the beginning of the period, net |
(5,218) |
(3,699) |
|
Impact on other comprehensive income during the period, gross |
4,146 |
(1,901) |
|
Gains/losses recognized in other comprehensive income during the period |
(425) |
(6,525) |
|
Amounts transferred from other comprehensive income to the income statement, of which: |
4,571 |
4,624 |
|
- net interest income |
3,758 |
3,588 |
|
- net foreign exchange gains/ (losses) |
813 |
1,036 |
|
Tax effect |
(788) |
382 |
|
Accumulated other comprehensive income at the end of the period, net |
(1,860) |
(5,218) |
|
INEFFECTIVE PORTION OF CASH FLOW HEDGES |
2023 |
2022 |
|
Ineffective portion of cash flow hedges recognized in the income statements, including in: |
(2) |
(5) |
|
Foreign exchange gains/ (losses) |
(1) |
(5) |
|
CIRS CHF/USD (strategy 5.15) |
2 |
(2) |
|
CIRS PLN/CHF (strategy 14.15) |
(8) |
(8) |
|
CIRS CHF/EUR (strategy 14) |
5 |
5 |
|
Gains/(losses) on financial transactions |
(1) |
- |
|
IRS PLN (strategy 2.16) |
(1) |
- |
• Fair value hedges
|
INTEREST RATE AND FOREIGN EXCHANGE RISK HEDGES |
31.12.2023 |
31.12.2022 |
|
Fair value measurement of the hedging derivative instrument |
681 |
20 |
|
Interest rate risk hedge – fixed - float IRSs |
681 |
20 |
|
Fair value adjustment of the hedged instrument attributable to the hedged risk |
(461) |
(51) |
|
Interest rate risk hedge, of which: |
(461) |
(51) |
|
Securities |
(21) |
(30) |
|
Loans and advances to customers |
(2) |
(8) |
|
Fair value adjustment recognized in OCI |
(26) |
(69) |
|
Amounts due to customers |
(412) |
56 |
|
FAIR VALUE ADJUSTMENT OF THE HEDGED INSTRUMENT ATTRIBUTABLE TO THE HEDGED RISK BY TYPE OF HEDGING INSTRUMENT |
31.12.2023 |
31.12.2022 |
|
IRS EUR (strategy 8,10,11,18) |
(41) |
25 |
|
IRS USD (strategy 8; 11.18) |
(4) |
(18) |
|
IRS PLN (strategy 12.17) |
(416) |
(58) |
|
Total |
(461) |
(51) |
• nominal value of hedging instruments by maturity
|
Strategy No |
Hedging derivative |
up to 1 month |
1 to 3 months |
3 months to 1 year |
1 to 5 years |
More than 5 years |
Total |
Change in the fair value since designation |
Nominal-weighted average fixed interest rate/ Nominal-weighted average margin |
|
|
31.12.2023 |
|
|
|
|
|
|
|
|
|
|
Hedge type: Cash flow hedges |
||||||||
|
|
Hedged risk: interest rate risk |
||||||||
|
2.16 |
PLN fixed - float IRSs |
705 |
4,950 |
6,796 |
30,840 |
177 |
43,468 |
(2,060) |
2.7097% |
|
3.4 |
EUR fixed – float IRSs |
- |
630 |
130 |
4,944 |
222 |
5,926 |
(25) |
2.0611% |
|
|
Risk hedged: foreign exchange and interest rate risks |
||||||||
|
14 |
Float CHF/float PLN CIRSs |
|
|
||||||
|
float CHF |
- |
- |
2,702 |
- |
- |
2,702 |
254 |
0.3596% |
|
|
float PLN |
- |
- |
2,418 |
- |
- |
2,418 |
0.5292% |
||
|
5 |
CIRS fixed USD/float CHF |
|
|
||||||
|
fixed USD |
153 |
- |
307 |
- |
- |
460 |
(43) |
0.4142% |
|
|
float CHF |
164 |
- |
328 |
- |
- |
492 |
- |
||
|
9 |
Float PLN/fixed EUR CIRSs |
|
|
||||||
|
float PLN |
2,101 |
- |
- |
- |
- |
2,101 |
65 |
- |
|
|
fixed EUR |
2,170 |
- |
- |
- |
- |
2,170 |
0.7690% |
||
|
19 |
Float PLN/fixed EUR CIRSs |
|
|
||||||
|
float PLN |
- |
- |
- |
2,595 |
- |
2,595 |
(226) |
- |
|
|
fixed EUR |
|
- |
- |
2,391 |
- |
2,391 |
1.8935% |
||
|
14 |
CIRS fixed EUR/float CHF |
|
|
||||||
|
fixed EUR |
- |
- |
2,174 |
- |
- |
2,174 |
(540) |
0.7640% |
|
|
float CHF |
- |
- |
2,702 |
- |
- |
2,702 |
- |
||
|
|
Hedge type: Fair value hedges |
|
|
||||||
|
|
Hedged risk: interest rate risk |
|
|
||||||
|
12.17 |
PLN fixed – float IRSs |
- |
- |
- |
5,960 |
2,091 |
8,051 |
386 |
5.9261% |
|
11.18 |
USD fixed – float IRSs |
319 |
- |
- |
236 |
- |
555 |
1 |
2.6551% |
|
8,10,11,18 |
EUR fixed – float IRSs |
0 |
152 |
696 |
3,404 |
548 |
4,800 |
9 |
2.2604% |
|
Strategy No |
Hedging derivative |
up to 1 month |
1 to 3 months |
3 months to 1 year |
1 to 5 years |
More than 5 years |
Total |
Change in the fair value since designation |
Nominal-weighted average fixed interest rate/ Nominal-weighted average margin |
|
|
31.12.2022 |
|
|
|
|
|
|
|
|
|
|
Hedge type: Cash flow hedges |
||||||||
|
|
Hedged risk: interest rate risk |
||||||||
|
2.16 |
PLN fixed - float IRSs |
- |
1,501 |
29,674 |
42,269 |
1,278 |
74,722 |
(5,928) |
2.5090% |
|
3.4 |
EUR fixed – float IRSs |
- |
- |
703 |
5,206 |
253 |
6,162 |
(65) |
1.6952% |
|
|
Risk hedged: foreign exchange and interest rate risks |
||||||||
|
14.15 |
Float CHF/float PLN CIRSs |
|
|
||||||
|
float CHF |
2,551 |
|
|
2,751 |
|
5,302 |
671 |
0.3555% |
|
|
float PLN |
2,204 |
- |
- |
2,418 |
- |
4,622 |
0.4614% |
||
|
5.15 |
CIRS fixed USD/float CHF |
|
|
||||||
|
fixed USD |
- |
- |
585 |
511 |
|
1,096 |
(21) |
0.3871% |
|
|
float CHF |
- |
- |
572 |
501 |
|
1,073 |
- |
||
|
9 |
Float PLN/fixed EUR CIRSs |
|
|
||||||
|
float PLN |
- |
- |
- |
2,101 |
- |
2,101 |
199 |
- |
|
|
fixed EUR |
- |
- |
- |
2,340 |
|
2,340 |
0.7690% |
||
|
14 |
CIRS fixed EUR/float CHF |
|
|
||||||
|
fixed EUR |
2,345 |
|
|
2,345 |
|
4,690 |
(656) |
0.6970% |
|
|
float CHF |
2,551 |
|
|
2,751 |
|
5,302 |
- |
||
|
|
Hedge type: Fair value hedges |
|
|
||||||
|
|
Hedged risk: interest rate risk |
|
|
||||||
|
12.17 |
PLN fixed – float IRSs |
- |
- |
- |
- |
2,841 |
2,841 |
30 |
6.2990% |
|
11.18 |
USD fixed – float IRSs |
- |
- |
- |
357 |
|
357 |
3 |
1.5128% |
|
8,10,11,18 |
EUR fixed – float IRSs |
- |
- |
469 |
3,508 |
591 |
4,568 |
(6) |
1.5789% |
• financial information on hedged items (in original currencies)
|
HEDGED ITEM |
CARRYING AMOUNT OF THE HEDGED ITEM |
ITEM OF THE STATEMENT OF FINANCIAL POSITION |
CHANGE IN THE FAIR VALUE OF THE HEDGED ITEM* |
STRATEGY NO |
|
31.12.2023 |
||||
|
Cash flow hedges |
||||
|
Loans in PLN |
43,467 |
Loans and advances to customers |
2,080 |
2 |
|
Loans in EUR |
1,363 |
Loans and advances to customers |
26 |
3; 4 |
|
Loans in CHF |
105 |
Loans and advances to customers |
43 |
5 |
|
Financial liability in USD |
116 |
Amounts due to customers |
||
|
Loans in PLN |
2,101 |
Loans and advances to customers |
(61) |
9 |
|
Financial liability in EUR |
499 |
Securities in issue |
||
|
Loans in PLN |
5,013 |
Loans and advances to customers |
517 |
14 |
|
Financial liability in EUR |
1,050 |
Securities in issue |
||
|
Fair value hedges |
||||
|
Loans in EUR |
11 |
Loans and advances to customers |
(1) |
8 |
|
Security in EUR |
30 |
Securities measured at amortized cost |
(5) |
10 |
|
Security in EUR |
62 |
Securities measured at fair value through other comprehensive income |
(2) |
11 |
|
Security in PLN |
- |
Securities measured at fair value through other comprehensive income |
(15) |
12 |
|
Portfolio of financial liabilities |
8,051 |
Amounts due to customers |
(403) |
17 |
|
Portfolio of financial liabilities |
1,001 |
Amounts due to customers |
(2) |
18 |
|
Portfolio of financial liabilities |
60 |
Amounts due to customers |
(1) |
18 |
*in a cash flow hedge, the change in fair value of the hedged item reflects the change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the period
|
HEDGED ITEM |
CARRYING AMOUNT OF THE HEDGED ITEM |
ITEM OF THE STATEMENT OF FINANCIAL POSITION |
CHANGE IN THE FAIR VALUE OF THE HEDGED ITEM* |
STRATEGY NO |
|
31.12.2022 |
||||
|
Cash flow hedges |
||||
|
Loans in CHF |
225 |
Loans and advances to customers |
19 |
5 |
|
Financial liability in USD |
249 |
Amounts due to customers |
||
|
Loans in PLN |
74,721 |
Loans and advances to customers |
5,969 |
2 |
|
Loans in EUR |
1,314 |
Loans and advances to customers |
64 |
3; 4 |
|
Loans in PLN |
2,101 |
Loans and advances to customers |
(195) |
9 |
|
Financial liability in EUR |
499 |
Securities in issue |
||
|
Loans in PLN |
4,622 |
Loans and advances to customers |
(8) |
14 |
|
Financial liability in EUR |
999 |
Securities in issue |
||
|
Fair value hedges |
||||
|
Security in EUR |
30 |
Securities measured at amortized cost |
(6) |
10 |
|
Security in EUR |
202 |
Securities measured at fair value through other comprehensive income |
(8) |
11 |
|
Security in USD |
81 |
Securities measured at fair value through other comprehensive income |
(3) |
11 |
|
Loans in EUR |
13 |
Loans and advances to customers |
(1) |
8 |
|
Security in PLN |
- |
Securities measured at fair value through other comprehensive income |
(21) |
12 |
|
Portfolio of financial liabilities in PLN |
2,841 |
Amounts due to customers |
(38) |
17 |
|
Portfolio of financial liabilities in EUR |
729 |
Amounts due to customers |
20 |
18 |
* in a cash flow hedge, the change in fair value of the hedged item reflects the change in value of the hedged item used as the basis for recognising hedge ineffectiveness for the period
|
OTHER DERIVATIVE INSTRUMENTS - BY TYPE |
31.12.2023 |
31.12.2022 |
||
|
Assets |
Liabilities |
Assets |
Liabilities |
|
|
IRS |
4,398 |
5,153 |
8,275 |
8,101 |
|
CIRS |
46 |
49 |
408 |
350 |
|
FX Swap |
1,648 |
1,942 |
1,245 |
1,039 |
|
Options |
952 |
1,051 |
842 |
926 |
|
Commodity swap1 |
167 |
157 |
1,380 |
1,384 |
|
FRA |
31 |
30 |
24 |
24 |
|
Forward |
930 |
695 |
577 |
799 |
|
Commodity Forward2 |
234 |
213 |
404 |
355 |
|
Other |
- |
1 |
7 |
- |
|
|
|
|
|
|
|
Total |
8,406 |
9,291 |
13,162 |
12,978 |
1 The item includes valuation of gas market participation contracts: assets of PLN 84 million (PLN 1,229 million as at 31 December 2022 ) – and liabilities of PLN 81 million (PLN 1,237 million as at 31 December 2022 ).
2 The item includes valuation of contracts for CO2 emission allowances.
|
|
31.12.2023 |
31.12.2022 |
|
CVA and CDA adjustments |
4 |
146 |
|
NOMINAL AMOUNTS OF UNDERLYING INSTRUMENTS (BUY AND SELL TOGETHER) other derivative instruments |
||||||
|
31.12.2023 |
up to 1 month |
1 to 3 months |
3 months to 1 year |
1 to 5 years |
more than 5 years |
Total |
|
IRS |
5,294 |
21,658 |
86,536 |
211,422 |
41,800 |
366,710 |
|
Purchase |
2,647 |
10,829 |
43,268 |
105,711 |
20,900 |
183,355 |
|
Sale |
2,647 |
10,829 |
43,268 |
105,711 |
20,900 |
183,355 |
|
CIRS |
- |
- |
- |
6,726 |
2,044 |
8,770 |
|
Purchase |
- |
- |
- |
3,368 |
1,022 |
4,390 |
|
Sale |
- |
- |
- |
3,358 |
1,022 |
4,380 |
|
FX Swap |
34,259 |
23,842 |
26,558 |
15,460 |
- |
100,119 |
|
Purchase of currencies |
17,160 |
11,834 |
13,138 |
7,694 |
- |
49,826 |
|
Sale of currencies |
17,099 |
12,008 |
13,420 |
7,766 |
- |
50,293 |
|
Options |
25,382 |
18,646 |
51,054 |
17,100 |
1,053 |
113,235 |
|
Purchase |
12,751 |
9,362 |
25,591 |
8,339 |
525 |
56,568 |
|
Sale |
12,631 |
9,284 |
25,463 |
8,761 |
528 |
56,667 |
|
FRA |
- |
- |
32,463 |
10,079 |
- |
42,542 |
|
Purchase |
- |
- |
16,697 |
5,191 |
- |
21,888 |
|
Sale |
- |
- |
15,766 |
4,888 |
- |
20,654 |
|
Forward |
8,527 |
14,466 |
19,030 |
7,238 |
- |
49,261 |
|
Purchase of currencies |
4,246 |
7,368 |
9,538 |
3,664 |
- |
24,816 |
|
Sale of currencies |
4,281 |
7,098 |
9,492 |
3,574 |
- |
24,445 |
|
Other, including commodity swap, commodity forward and futures |
980 |
3,067 |
3,367 |
466 |
- |
7,880 |
|
Purchase |
494 |
1,591 |
1,636 |
234 |
- |
3,955 |
|
Sale |
486 |
1,476 |
1,731 |
232 |
- |
3,925 |
|
|
|
|
|
|
|
|
|
Total |
74,442 |
81,679 |
219,008 |
268,491 |
44,897 |
688,517 |
|
NOMINAL AMOUNTS OF UNDERLYING INSTRUMENTS (BUY AND SELL TOGETHER) other derivative instruments |
||||||
|
31.12.2022 |
up to 1 month |
1 to 3 months |
3 months to 1 year |
1 to 5 years |
more than 5 years |
Total |
|
IRS |
6,730 |
16,972 |
88,148 |
236,010 |
53,496 |
401,356 |
|
Purchase |
3,365 |
8,486 |
44,074 |
118,005 |
26,748 |
200,678 |
|
Sale |
3,365 |
8,486 |
44,074 |
118,005 |
26,748 |
200,678 |
|
CIRS |
14,124 |
- |
2,870 |
31,020 |
2,168 |
50,182 |
|
Purchase |
7,025 |
- |
1,435 |
15,362 |
1,084 |
24,906 |
|
Sale |
7,099 |
- |
1,435 |
15,658 |
1,084 |
25,276 |
|
FX Swap |
34,144 |
32,795 |
36,739 |
29,127 |
- |
132,805 |
|
Purchase of currencies |
17,045 |
16,362 |
18,356 |
14,769 |
- |
66,532 |
|
Sale of currencies |
17,099 |
16,433 |
18,383 |
14,358 |
- |
66,273 |
|
Options |
21,765 |
46,129 |
62,797 |
29,681 |
1,787 |
162,159 |
|
Purchase |
10,817 |
22,857 |
31,486 |
14,871 |
892 |
80,923 |
|
Sale |
10,948 |
23,272 |
31,311 |
14,810 |
895 |
81,236 |
|
FRA |
- |
- |
38,913 |
1,910 |
- |
40,823 |
|
Purchase |
- |
- |
20,016 |
932 |
- |
20,948 |
|
Sale |
- |
- |
18,897 |
978 |
- |
19,875 |
|
Forward |
7,492 |
25,761 |
30,224 |
6,519 |
- |
69,996 |
|
Purchase of currencies |
3,752 |
12,891 |
15,150 |
3,120 |
- |
34,913 |
|
Sale of currencies |
3,740 |
12,870 |
15,074 |
3,399 |
- |
35,083 |
|
Other, including commodity swap, commodity forward and futures |
1,091 |
2,171 |
6,877 |
251 |
- |
10,390 |
|
Purchase |
546 |
1,108 |
3,431 |
126 |
- |
5,211 |
|
Sale |
545 |
1,063 |
3,446 |
125 |
- |
5,179 |
|
|
|
|
|
|
|
|
|
Total |
85,346 |
123,828 |
266,568 |
334,518 |
57,451 |
867,711 |
Accounting policies
Valuation and classification into categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”.
The item “Securities” also includes an adjustment relating to fair value hedge accounting for securities representing hedged items (note “Hedge accounting and other derivative instruments”).
financial information
For more information on credit risk exposures, see note “Credit risk – financial information”.
|
SECURITIES |
held for trading |
not held for trading, measured at fair value through profit or loss |
measured at fair value through other comprehensive income |
measured at amortized cost |
Total |
|
31.12.2023 |
|
|
|
|
|
|
Debt securities |
546 |
592 |
108,054 |
87,227 |
196,419 |
|
NBP money bills |
- |
- |
28,974 |
- |
28,974 |
|
Treasury bonds (in PLN) |
472 |
232 |
52,545 |
58,836 |
112,085 |
|
Treasury bonds (in foreign currencies) |
1 |
295 |
4,574 |
1,439 |
6,309 |
|
corporate bonds (in PLN) secured with the State Treasury guarantees |
9 |
- |
10,180 |
13,619 |
23,808 |
|
municipal bonds (in PLN) |
12 |
- |
5,105 |
8,658 |
13,775 |
|
corporate bonds (in PLN)1 |
52 |
65 |
2,609 |
2,413 |
5,139 |
|
corporate bonds (in foreign currencies) |
- |
- |
4,067 |
2,262 |
6,329 |
|
Equity securities |
32 |
1,054 |
- |
- |
1,086 |
|
shares in other entities - not listed |
- |
342 |
- |
- |
342 |
|
shares in other entities - listed |
30 |
124 |
- |
- |
154 |
|
participation units in investment funds, investment certificates, rights to shares, pre-emptive rights |
2 |
588 |
- |
- |
590 |
|
|
|
|
|
|
|
|
Total (excluding adjustment relating to fair value hedge accounting) |
578 |
1,646 |
108,054 |
87,227 |
197,505 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
- |
- |
- |
(21) |
(21) |
|
|
|
|
|
|
|
|
Total |
578 |
1,646 |
108,054 |
87,206 |
197,484 |
1 The item includes bonds of international financial organizations of PLN 3,658 million.
|
SECURITIES |
held for trading |
not held for trading, measured at fair value through profit or loss |
measured at fair value through other comprehensive income |
measured at amortized cost |
Total |
|
31.12.2022 |
|
|
|
|
|
|
Debt securities |
164 |
578 |
65,211 |
68,556 |
134,509 |
|
NBP money bills |
- |
- |
80 |
- |
80 |
|
Treasury bonds (in PLN) |
89 |
191 |
43,066 |
45,893 |
89,239 |
|
Treasury bonds (in foreign currencies) |
2 |
321 |
4,397 |
713 |
5,433 |
|
corporate bonds (in PLN) secured with the State Treasury guarantees |
3 |
- |
9,373 |
12,100 |
21,476 |
|
municipal bonds (in PLN) |
14 |
- |
5,054 |
6,182 |
11,250 |
|
corporate bonds (in PLN)1 |
56 |
66 |
2,852 |
1,989 |
4,963 |
|
corporate bonds (in foreign currencies) |
- |
- |
389 |
1,679 |
2,068 |
|
Equity securities |
29 |
1,124 |
- |
- |
1,153 |
|
shares in other entities - not listed |
- |
358 |
- |
- |
358 |
|
shares in other entities - listed |
27 |
115 |
- |
- |
142 |
|
participation units in investment funds, investment certificates, rights to shares, pre-emptive rights |
2 |
651 |
- |
- |
653 |
|
|
|
|
|
|
|
|
Total (excluding adjustment relating to fair value hedge accounting) |
193 |
1,702 |
65,211 |
68,556 |
135,662 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
- |
- |
- |
(30) |
(30) |
|
|
|
|
|
|
|
|
Total |
193 |
1,702 |
65,211 |
68,526 |
135,632 |
1 The item includes bonds of international financial organizations of PLN 3,550 million.
|
31.12.2023 |
31.12.2022 |
|
|
- Polish Treasury bonds |
1,328 |
2,209 |
|
- Ukrainian Treasury bonds |
836 |
420 |
|
- US Treasury bonds |
3,633 |
2,804 |
|
- Treasury bonds of the Federal Republic of Germany |
218 |
- |
|
- French Treasury bonds |
294 |
- |
|
|
|
|
|
Total |
6,309 |
5,433 |
|
|
31.12.2023 |
31.12.2022 |
|
allowance not reducing the fair value of securities measured at fair value through other comprehensive income |
62 |
|
SECURITIES BY MATURITY (excluding adjustments relating to fair value hedge accounting) |
held for trading |
not held for trading, measured at fair value through profit or loss |
measured at fair value through other comprehensive income |
measured at amortized cost |
Total |
|
31.12.2023 |
|
|
|
|
|
|
without a stated maturity – equity securities |
31 |
1,081 |
- |
- |
1,112 |
|
up to 1 month |
61 |
3 |
35,184 |
21 |
35,269 |
|
1 to 3 months |
- |
- |
4,360 |
475 |
4,835 |
|
3 months to 1 year |
249 |
103 |
11,060 |
14,615 |
26,027 |
|
1 to 5 years |
191 |
348 |
40,794 |
40,295 |
81,628 |
|
more than 5 years |
46 |
111 |
16,656 |
31,821 |
48,634 |
|
|
|
|
|
|
|
|
Total |
578 |
1,646 |
108,054 |
87,227 |
197,505 |
|
SECURITIES BY MATURITY (excluding adjustments relating to fair value hedge accounting) |
held for trading |
not held for trading, measured at fair value through profit or loss |
measured at fair value through other comprehensive income |
measured at amortized cost |
Total |
|
31.12.2022 |
|
|
|
|
|
|
without a stated maturity – equity securities |
29 |
1,124 |
- |
- |
1,153 |
|
up to 1 month |
19 |
46 |
3,222 |
1,514 |
4,801 |
|
1 to 3 months |
- |
- |
278 |
211 |
489 |
|
3 months to 1 year |
17 |
28 |
3,729 |
1,275 |
5,049 |
|
1 to 5 years |
104 |
465 |
37,935 |
37,705 |
76,209 |
|
more than 5 years |
24 |
39 |
20,047 |
27,851 |
47,961 |
|
|
|
|
|
|
|
|
Total |
193 |
1,702 |
65,211 |
68,556 |
135,662 |
Loans and advances to customers are classified in the individual measurement categories in accordance with the principles for selecting the business model and evaluating the characteristics of contractual cash flows referred to in the note “General accounting policies for financial instruments”.
Loans and advances to customers include:
• amounts due from loans and advances granted,
• factoring receivables,
• and finance lease receivables.
The category of loans and advances to customers measured at fair value through profit or loss includes the following products: cash loans, credit cards and revolving loans, whose contractual formula for interest calculation includes a multiplier.
The Group adjusts the gross carrying amount of housing loans measured at amortised cost by recognizing the effect of:
• legal risk related to potential litigation for the portfolio of mortgage loans in convertible currencies and existing legal claims related to loan exposures recognized as at the balance sheet date in the statement of financial position (see “Cost of legal risk of mortgage loans in convertible currencies”)
• the so-called statutory credit holidays, recognized in the second half of 2022.
The statutory credit holidays were introduced by the Act of 7 July 2022 on the crowdfunding of business ventures and on assistance for borrowers of 14 July 2022 (hereinafter: the “Act”), containing a package of assistance for mortgage borrowers. According to the Act, statutory credit holidays applied to mortgage loans granted in Polish zloty and provided the possibility to suspend loan repayment for up to 8 months between 2022 and 2023 – two months in each of Q3 and Q4 of 2022 and one month in each of the four quarters of 2023. The loan repayment suspension could be used by the customer if the agreement was concluded before 1 July 2022 and the loan period ended after 31 December 2022. Credit holidays could only be used for one loan. The repayment schedule of loan instalments was extended by the number of credit holiday months used.
The Group believes that the entitlement of customers to benefit from the suspension of loan repayments was a statutory cash flow modification that occurs on the date the Act has been signed by the President, i.e. 14 July 2022.
Accordingly, in the second half of 2022, the Group adjusted the gross carrying amount of mortgage loans by deducting interest income. The value of the adjustment was determined as the difference between the present value of the estimated cash flows resulting from the loan agreements, taking into account the suspension of instalment payments, and the present gross carrying amount of the loan portfolio. The loss calculation was based on the assumption that approximately 63% of customers holding a PLN-denominated mortgage loan would choose to benefit from credit holidays (customer participation rate).
By the end of December 2023, 298.5 thousand of the Group's customers applied for a suspension of mortgage repayment, representing 54% of the total number of loans and 64% of the gross carrying amount of total loans eligible for credit holidays. The total number of suspensions applied for as at 31 December 2023 was 2,055 thousand, representing 47% of the maximum number of instalments to be suspended for all eligible customers.
In the fourth quarter of 2023, the Group estimated the actual level of the credit holiday loss, taking into account, among other things, empirical data on the participation rate of customers' use of credit holidays and early repayments made by customers throughout the period of the statutory credit holiday programme.
Based on the outcome of the aforementioned analysis, in 2023 the Group has remeasured the credit holiday loss and reduced, proportionally, the amortisation of this loss to date. The total effect recognised in the Group's accounting books on this account amounted to PLN 105 million (including a reduction in the loss recognised in July 2022 of PLN 130 million and a proportional reduction in amortisation to date of PLN 25 million) - which translated into an increase in net interest income and a decrease in the adjustment of the gross carrying amount of loans. The realised loss on statutory credit holidays, excluding the effect of amortisation, was, in the opinion of the Group, PLN 2,980 million compared to PLN 3,111 million recognised in July 2022.
Work is currently underway in the Polish Parliament to agree amendments to the Act of 7 July 2022 on the crowdfunding of business ventures and on assistance for borrowers, which would provide borrowers with the opportunity to take advantage of the statutory credit holidays also in 2024. Should the amended legislation come into force, depending on the solutions adopted, it could have a significant impact on the Bank's financial performance in 2024. In line with established practice, the Bank believes that the customers' entitlement to benefit from the suspension of loan repayments for subsequent periods will be a statutory cash flow modification that will take place on the day the President signs the amendments to the Act.
In addition, the Group adjusts the gross carrying amount of residential and consumer loans measured at amortised cost by recognising the impact of potential commission reimbursements to customers for the expected early repayment of active consumer and mortgage loans in the future.
The recognition of finance lease receivables is described in note "Leases" Section “Leases – Lessor”.
The item “Loans and advances to customers” also includes an adjustment relating to fair value hedge accounting for loans representing hedged items (see the note “Hedge accounting and other derivative instruments”).
Estimates and judgments: “Net allowances for expected credit losses”, “Cost of legal risk of mortgage loans in convertible currencies”.
Financial information
For more information on credit risk exposures, see note “Credit risk – financial information”.
|
31.12.2023 |
31.12.2022 |
|
|
real estate |
112,514 |
109,141 |
|
consumer |
32,263 |
30,883 |
|
business |
76,515 |
71,188 |
|
factoring receivables |
5,386 |
3,591 |
|
finance lease receivables |
19,100 |
18,164 |
|
Loans and advances to customers |
245,778 |
232,967 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
(2) |
(8) |
|
Total |
245,776 |
232,959 |
|
LOANS AND ADVANCES TO CUSTOMERS 31.12.2023 |
not held for trading, measured at fair value through profit or loss |
measured at amortized cost |
Total |
|
retail and private banking |
2,790 |
136,902 |
139,692 |
|
real estate |
1 |
107,332 |
107,333 |
|
consumer |
2,789 |
29,474 |
32,263 |
|
finance lease receivables |
- |
96 |
96 |
|
companies and enterprises |
54 |
31,434 |
31,488 |
|
real estate |
- |
5,055 |
5,055 |
|
business |
54 |
13,746 |
13,800 |
|
factoring receivables |
- |
273 |
273 |
|
finance lease receivables |
- |
12,360 |
12,360 |
|
corporate |
27 |
74,571 |
74,598 |
|
real estate |
- |
126 |
126 |
|
business |
27 |
62,688 |
62,715 |
|
factoring receivables |
- |
5,113 |
5,113 |
|
finance lease receivables |
- |
6,644 |
6,644 |
|
Loans and advances to customers (excluding adjustment relating to fair value hedge accounting) |
2,871 |
242,907 |
245,778 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
- |
(2) |
(2) |
|
Total |
2,871 |
242,905 |
245,776 |
|
LOANS AND ADVANCES TO CUSTOMERS 31.12.2022 |
not held for trading, measured at fair value through profit or loss |
measured at amortized cost |
Total |
|
retail and private banking |
3,505 |
131,112 |
134,617 |
|
real estate |
4 |
103,637 |
103,641 |
|
consumer |
3,501 |
27,382 |
30,883 |
|
finance lease receivables |
- |
93 |
93 |
|
companies and enterprises |
44 |
31,316 |
31,360 |
|
real estate |
- |
5,382 |
5,382 |
|
business |
44 |
13,496 |
13,540 |
|
factoring receivables |
- |
243 |
243 |
|
finance lease receivables |
- |
12,195 |
12,195 |
|
corporate |
41 |
66,949 |
66,990 |
|
real estate |
- |
118 |
118 |
|
business |
41 |
57,607 |
57,648 |
|
factoring receivables |
- |
3,348 |
3,348 |
|
finance lease receivables |
- |
5,876 |
5,876 |
|
Loans and advances to customers (excluding adjustment relating to fair value hedge accounting) |
3,590 |
229,377 |
232,967 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
- |
(8) |
(8) |
|
Total |
3,590 |
229,369 |
232,959 |
1 Loans and advances to customers as at 31 December 2022 have been adjusted by PLN 1,238 for the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contracts")
|
not held for trading, mandatorily measured at fair value through profit or loss |
measured at amortized cost |
Total |
|
|
31.12.2023 |
|
|
|
|
up to 1 month |
723 |
11,695 |
12,418 |
|
1 to 3 months |
376 |
11,140 |
11,516 |
|
3 months to 1 year |
1,442 |
38,157 |
39,599 |
|
1 to 5 years |
315 |
78,849 |
79,164 |
|
more than 5 years |
15 |
103,066 |
103,081 |
|
|
|
|
|
|
Total |
2,871 |
242,907 |
245,778 |
|
LOANS AND ADVANCES TO CUSTOMERS BY MATURITY (excluding adjustments relating to fair value hedge accounting) |
not held for trading, mandatorily measured at fair value through profit or loss |
measured at amortized cost |
Total |
|
31.12.2022 |
|
|
|
|
up to 1 month |
755 |
12,012 |
12,767 |
|
1 to 3 months |
453 |
9,581 |
10,034 |
|
3 months to 1 year |
1,733 |
34,606 |
36,339 |
|
1 to 5 years |
603 |
75,253 |
75,856 |
|
more than 5 years |
46 |
97,925 |
97,971 |
|
|
|
|
|
|
Total |
3,590 |
229,377 |
232,967 |
Accounting policies: Valuation and classification into categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”.
financial information
|
AMOUNTS DUE TO BANKS |
31.12.2023 |
31.12.2022 |
|
Measured at fair value through profit or loss: |
25 |
2 |
|
Liabilities in respect of a short position in securities |
25 |
2 |
|
Measured at amortized cost |
3,398 |
3,009 |
|
Deposits from banks |
1,120 |
1,936 |
|
Current accounts |
2,240 |
1,057 |
|
Other monetary market deposits |
38 |
16 |
|
|
|
|
|
Total |
3,423 |
3,011 |
|
31.12.2023 |
31.12.2022 |
|
|
Measured at fair value through profit or loss: |
25 |
2 |
|
up to 1 month |
25 |
2 |
|
|
|
|
|
Measured at amortized cost: |
3,398 |
3,009 |
|
up to 1 month |
3,392 |
2,963 |
|
1 to 3 months |
- |
31 |
|
3 months to 1 year |
6 |
15 |
|
|
|
|
|
Total |
3,423 |
3,011 |
Accounting policies:
Valuation and classification into categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”. Detailed policies concerning “Liabilities in respect of insurance products” are described in note “Insurance business” and “IFRS 17 Insurance contracts”.
The item “Amounts due to customers” also includes an adjustment relating to fair value hedge accounting for amounts due to customers representing hedged items (note “Hedge accounting and other derivative instruments”).
Financial information
|
AMOUNTS DUE TO CUSTOMERS |
Amounts due to households |
Amounts due to business entities |
Amounts due to state budget entities |
Total |
|
31.12.2023 |
|
|
|
|
|
Measured at fair value through profit or loss |
165 |
277 |
- |
442 |
|
Liabilities in respect of a short position in securities |
- |
277 |
- |
277 |
|
Liabilities in respect of insurance products |
165 |
- |
- |
165 |
|
Measured at amortized cost |
306,450 |
76,372 |
15,517 |
398,339 |
|
Cash on current accounts and overnight deposits of which |
201,238 |
55,097 |
14,551 |
270,886 |
|
savings accounts and other interest-bearing assets |
49,845 |
18,765 |
9,956 |
78,566 |
|
Term deposits |
104,689 |
20,450 |
927 |
126,066 |
|
Other liabilities |
505 |
825 |
39 |
1,369 |
|
Liabilities in respect of insurance products |
18 |
- |
- |
18 |
|
Amounts due to customers (excluding adjustment relating to fair value hedge accounting) |
306,615 |
76,649 |
15,517 |
398,781 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
412 |
- |
- |
412 |
|
|
|
|
|
|
|
Total |
307,027 |
76,649 |
15,517 |
399,193 |
|
AMOUNTS DUE TO CUSTOMERS |
Amounts due to households |
Amounts due to business entities |
Amounts due to state budget entities |
Total |
|
31.12.2022 |
|
|
|
|
|
Measured at fair value through profit or loss |
149 |
5 |
- |
154 |
|
Liabilities in respect of a short position in securities |
- |
5 |
- |
5 |
|
Liabilities in respect of insurance products |
149 |
- |
- |
149 |
|
Measured at amortized cost |
262,948 |
58,634 |
17,188 |
338,770 |
|
Cash on current accounts and overnight deposits of which |
180,298 |
40,290 |
16,224 |
236,812 |
|
savings accounts and other interest-bearing assets |
41,953 |
12,933 |
11,615 |
66,501 |
|
Term deposits |
82,127 |
17,748 |
913 |
100,788 |
|
Other liabilities |
505 |
596 |
51 |
1,152 |
|
Liabilities in respect of insurance products1 |
18 |
- |
- |
18 |
|
Amounts due to customers (excluding adjustment relating to fair value hedge accounting) |
263,097 |
58,639 |
17,188 |
338,924 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
(56) |
- |
- |
(56) |
|
|
|
|
|
|
|
Total |
263,041 |
58,639 |
17,188 |
338,868 |
1Liabilities in respect of insurance products as at 31 December 2022 have been adjusted by PLN 714 million for the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contracts")
|
AMOUNTS DUE TO CUSTOMERS BY MATURITY (excluding adjustment relating to fair value hedge accounting) |
31.12.2023 |
31.12.2022 |
|
Measured at fair value through profit or loss: |
442 |
154 |
|
up to 1 month |
277 |
5 |
|
|
|
|
|
Measured at amortized cost: |
398,339 |
338,770 |
|
up to 1 month |
308,655 |
272,203 |
|
1 to 3 months |
35,935 |
29,307 |
|
3 months to 1 year |
39,428 |
10,392 |
|
1 to 5 years |
8,600 |
21,520 |
|
more than 5 years |
5,721 |
5,348 |
|
|
|
|
|
Total |
398,781 |
338,924 |
|
AMOUNTS DUE TO CUSTOMERS BY SEGMENT |
31.12.2023 |
31.12.2022 |
|
Amounts due to customers (excluding adjustment relating to fair value hedge accounting) |
398,781 |
338,924 |
|
retail and private banking |
275,458 |
234,382 |
|
corporate |
69,502 |
55,812 |
|
companies and enterprises |
53,636 |
48,562 |
|
other liabilities (including liabilities in respect of insurance products) |
185 |
168 |
|
Adjustment relating to fair value hedge accounting (note “Hedge accounting and other derivative instruments”) |
412 |
(56) |
|
|
|
|
|
Total |
399,193 |
338,868 |
Accounting policies: Valuation and classification into categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”.
Financial information
|
FINANCING RECEIVED |
31.12.2023 |
31.12.2022 |
|
Loans and advances received from: |
1,489 |
2,294 |
|
banks |
- |
309 |
|
international financial organisations |
1,478 |
1,972 |
|
other financial institutions |
11 |
13 |
|
Liabilities in respect of debt securities in issue: |
17,201 |
15,510 |
|
bonds issued by PKO Bank Polski S.A. |
3,421 |
- |
|
mortgage covered bonds issued by PKO Bank Hipoteczny S.A. |
10,418 |
12,057 |
|
bonds issued by PKO Bank Hipoteczny S.A. |
1,755 |
1,265 |
|
bonds issued by the PKO Leasing S.A. Group |
1,607 |
2,188 |
|
Subordinated liabilities |
2,774 |
2,781 |
|
Total |
21,464 |
20,585 |
|
31.12.2023 |
31.12.2022 |
|
|
1 to 3 months |
- |
11 |
|
3 months to 1 year |
- |
1,107 |
|
1 to 5 years |
1,489 |
1,176 |
|
Total |
1,489 |
2,294 |
Loans and advances received from banks
|
Date of receipt |
Notional amount |
Currency |
Maturity |
Carrying amount at 31.12.2023 |
Carrying amount at 31.12.2022 |
|
10.06.2019 |
150 |
PLN |
15.06.2023 |
- |
150 |
|
04.12.2019 |
500 |
PLN |
04.12.2023 |
- |
159 |
|
Total |
|
|
|
- |
309 |
Loans and advances received from International Financial Organizations
|
Notional amount |
Currency |
Maturity |
Carrying amount at 31.12.2023 |
Carrying amount at 31.12.2022 |
|
|
25.09.2013 |
70 |
EUR |
25.09.2023 |
- |
70 |
|
13.04.2018 |
40 |
EUR |
31.03.2023 |
- |
11 |
|
23.10.2018 |
646 |
PLN |
23.10.2023 |
- |
656 |
|
28.11.2018 |
50 |
EUR |
30.11.2023 |
- |
59 |
|
10.02.2021 |
50 |
EUR |
02.02.2026 |
219 |
235 |
|
06.12.2021 |
50 |
EUR |
27.11.2026 |
220 |
235 |
|
06.12.2021 |
50 |
EUR |
27.11.2026 |
220 |
235 |
|
08.04.2022 |
100 |
EUR |
02.04.2027 |
- |
471 |
|
08.04.2022 |
200 |
EUR |
08.12.2028 |
819 |
- |
|
Total |
|
|
|
1,478 |
1,972 |
Loans and advances received from other financial institutions
|
Date of receipt |
Notional amount |
Currency |
Maturity |
Carrying amount at 31.12.2023 |
Carrying amount at 31.12.2022 |
|
25.10.2021 |
100 |
UAH |
24.10.2023 |
- |
13 |
|
06.12.2023 |
100 |
UAH |
05.12.2025 |
11 |
- |
|
Total |
|
|
|
11 |
13 |
|
LIABILITIES IN RESPECT OF DEBT SECURITIES IN ISSUE BY MATURITY |
31.12.2023 |
31.12.2022 |
|
Measured at amortized cost: |
|
|
|
up to 1 month |
2,703 |
2,669 |
|
1 to 3 months |
1,749 |
791 |
|
3 months to 1 year |
4,594 |
2,851 |
|
1 to 5 years |
8,155 |
9,138 |
|
more than 5 years |
- |
61 |
|
|
|
|
|
Total |
17,201 |
15,510 |
• Bonds issued by PKO Bank Polski S.A.
On 8 August 2022, the Management Board of the Bank approved the establishment of a programme for the issue of Eurobonds by the Bank as the issuer (the Euro Medium Term Notes Programme – the “EMTN Programme”) of up to EUR 4 billion. Under the EMTN Programme, it will be possible to issue unsecured Eurobonds in any currency, including those in respect of which obligations may be classified as eligible liabilities or as the Bank’s own funds. Bonds issued under the EMTN Programme will be registered with the international central securities depository (ICSD) operated by Euroclear Bank SA/NV or Clearstream Banking société anonyme. The Bank may apply for admission of individual series of Eurobonds to trading on a regulated market operated by the Luxembourg Stock Exchange, the Warsaw Stock Exchange.
On 16 December 2022, the Moody's Investors Service rating agency assigned a (P)Baa3 rating to the EMTN Programme, for the unsecured bonds designated as Senior Non Preferred.
On 20 December 2022, the Prospectus for the EMTN Programme was approved by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. On 20 January 2023, the CSSF approved the first Supplement to the prospectus for the EMTN Programme.
On 1 February 2023, the Bank, as part of its inaugural EMTN issue allowing it to cover the senior portion of the requirement (being the difference between the MREL requirements denominated on a consolidated basis and the MREL on a stand-alone basis), issued 3-year Senior Preferred Notes with a total value of EUR 750 million, with the possibility of early redemption two years after the issue. The coupon of the issue is fixed, at 5.625%, payable annually until the early redemption date, and variable thereafter, with quarterly payments. Moody’s Investors Service has assigned a rating of A3 to the issue. The bonds were admitted to trading on a regulated market on the Luxembourg Stock Exchange and the Warsaw Stock Exchange.
• Mortgage-covered bonds issued by PKO Bank Hipoteczny SA
|
Issue date |
Type of interest rate |
Interest (index + margin) |
Notional amount |
Currency |
Maturity |
Carrying amount at 31.12.2023 |
Carrying amount at 31.12.2022 |
|
02.02.2017 |
fixed |
0.82 |
25 |
EUR |
02.02.2024 |
110 |
118 |
|
30.03.2017 |
fixed |
0,625 |
500 |
EUR |
24.01.2023 |
- |
2,359 |
|
27.09.2017 |
fixed |
0.75 |
500 |
EUR |
27.08.2024 |
2,179 |
2,351 |
|
27.10.2017 |
variable |
WIBOR3M +0.60 |
500 |
PLN |
27.06.2023 |
- |
500 |
|
22.03.2018 |
fixed |
0.75 |
500 |
EUR |
24.01.2024 |
2,188 |
2,360 |
|
27.04.2018 |
variable |
WIBOR3M +0.49 |
698 |
PLN |
25.04.2024 |
706 |
708 |
|
27.07.2018 |
variable |
WIBOR3M +0.62 |
500 |
PLN |
25.07.2025 |
506 |
507 |
|
24.08.2018 |
fixed |
3.4875 |
60 |
PLN |
24.08.2028 |
61 |
61 |
|
26.10.2018 |
variable |
WIBOR3M +0.66 |
230 |
PLN |
28.04.2025 |
233 |
233 |
|
10.06.2019 |
variable |
WIBOR3M +0.60 |
245 |
PLN |
30.09.2024 |
249 |
244 |
|
02.12.2019 |
variable |
WIBOR3M +0.51 |
250 |
PLN |
02.12.2024 |
251 |
251 |
|
04.07.2022 |
fixed |
2,125 |
500 |
EUR |
25.06.2025 |
2,195 |
2,365 |
|
09.02.2023 |
variable |
WIBOR3M +0.85 |
499 |
PLN |
09.02.2026 |
503 |
- |
|
28.06.2023 |
variable |
WIBOR3M +0.78 |
500 |
PLN |
29.06.2026 |
500 |
- |
|
02.11.2023 |
variable |
WIBOR3M +0.78 |
730 |
PLN |
02.11.2026 |
757 |
- |
|
Total |
|
|
|
|
|
10,418 |
12,057 |
• Bonds issued by PKO Bank Hipoteczny S.A.
|
Issue date |
Type of interest rate |
Interest (index + margin) |
Notional amount |
Currency |
Maturity |
Carrying amount at 31.12.2023 |
Carrying amount at 31.12.2022 |
|
24.01.2022 |
variable |
WIBOR3M+0.28 |
124 |
PLN |
25.07.2023 |
- |
126 |
|
24.02.2022 |
variable |
WIBOR3M+0.30 |
115 |
PLN |
19.05.2023 |
- |
116 |
|
03.10.2022 |
zero-coupon |
|
293 |
PLN |
03.04.2023 |
- |
286 |
|
02.11.2022 |
zero-coupon |
|
125 |
PLN |
09.05.2023 |
- |
121 |
|
02.11.2022 |
zero-coupon |
|
100 |
PLN |
03.04.2023 |
- |
98 |
|
16.12.2022 |
zero-coupon |
|
232 |
PLN |
16.03.2023 |
- |
228 |
|
16.12.2022 |
zero-coupon |
|
300 |
PLN |
16.06.2023 |
- |
290 |
|
11.10.2023 |
zero-coupon |
|
206 |
PLN |
26.02.2024 |
203 |
- |
|
16.11.2023 |
zero-coupon |
|
237 |
PLN |
26.02.2024 |
234 |
- |
|
18.12.2023 |
zero-coupon |
|
310 |
PLN |
18.03.2024 |
306 |
- |
|
11.10.2023 |
zero-coupon |
|
349 |
PLN |
11.04.2024 |
343 |
- |
|
16.11.2023 |
zero-coupon |
|
285 |
PLN |
14.05.2024 |
279 |
- |
|
18.12.2023 |
zero-coupon |
|
400 |
PLN |
07.06.2024 |
390 |
- |
|
Total |
|
|
|
|
|
1,755 |
1,265 |
• Bonds issued by the PKO Leasing SA Group
|
Type of interest rate |
Interest rate (index + margin) |
Notional amount |
Currency |
Maturity |
Carrying amount at 31.12.2023 |
Carrying amount at 31.12.2022 |
|
|
26.09.20191 |
variable |
WIBOR 3M + margin |
1,060 |
PLN |
28.12.2029 |
- |
1,067 |
|
10.10.2022 |
variable |
WIBOR 3M + margin |
311 |
PLN |
17.01.2023 |
- |
310 |
|
24.10.2022 |
variable |
WIBOR 3M + margin |
164 |
PLN |
01.02.2023 |
- |
163 |
|
14.11.2022 |
variable |
WIBOR 3M + margin |
182 |
PLN |
10.03.2023 |
- |
179 |
|
28.11.2022 |
variable |
WIBOR 3M + margin |
225 |
PLN |
27.03.2023 |
- |
222 |
|
05.12.2022 |
variable |
WIBOR 3M + margin |
164 |
PLN |
13.04.2023 |
- |
161 |
|
22.12.2022 |
variable |
WIBOR 3M + margin |
88 |
PLN |
24.04.2023 |
- |
86 |
|
28.09.2023 |
variable |
WIBOR 3M + margin |
332 |
PLN |
18.01.2024 |
331 |
- |
|
18.10.2023 |
variable |
WIBOR 3M + margin |
195 |
PLN |
30.01.2024 |
194 |
- |
|
30.10.2023 |
variable |
WIBOR 3M + margin |
417 |
PLN |
16.02.2024 |
414 |
- |
|
01.12.2023 |
variable |
WIBOR 3M + margin |
490 |
PLN |
05.03.2024 |
485 |
- |
|
11.12.2023 |
variable |
WIBOR 3M + margin |
186 |
PLN |
05.04.2024 |
183 |
- |
|
Total |
|
|
|
|
|
1,607 |
2,188 |
1 The bonds issued as part of securitization of lease receivables taken up by the PKO Leasing SA Group as part of the acquisition of Raiffeisen Leasing Polska S.A. and issued as part of securitization of lease receivables conducted in September 2019. Bonds were secured with securitized lease receivables (see the Note “Information on securitization of the lease portfolio and portfolio sale of receivables”).
|
Type of liability |
Type of interest rate |
Notional amount |
Currency |
Period |
Carrying amount |
|
|
31.12.2023 |
31.12.2022 |
|||||
|
Subordinated bonds |
6M WIBOR +0.0155 |
1,700 |
PLN |
28.08.2017 - 28.08.2027 |
1,748 |
1,752 |
|
Subordinated bonds |
6M WIBOR +0.0150 |
1,000 |
PLN |
05.03.2018 - 06.03.2028 |
1,026 |
1,029 |
|
Total |
|
|
|
|
2,774 |
2,781 |
Accounting policies:
The Group applied IFRS 17 for the first time in the period beginning 1 January 2023. Due to the need to prepare comparative data, 1 January 2022 is assumed as the date of transition to the new standard. The Group has implemented IFRS 17 as of 1 January 2023 using a full retrospective approach and a modified approach for part of its portfolio.
The risk-free interest rate curves published by EIOPA (European Insurance and Occupational Pensions Authority) were used for the measurement at the transition date.
The most significant elements of the IFRS 17 measurement and the main methodological decisions made by the Group are presented below.
In order to identify insurance contracts and inward reinsurance contracts that are within the scope of IFRS 17, the Group verifies whether, under a given contract, the entity accepts a significant insurance risk from the policyholder and undertakes to compensate the policyholder for an adverse effect defined as an uncertain future insurable event.
According to the analysis, all products of an insurance nature offered by the Group's insurance companies have been classified as insurance contracts and thus fall within the scope of IFRS 17. The exception to this is only a small proportion of policies with UFK (unit-linked insurance) contracts, which are classified as investment agreements and measured in accordance with IFRS 9.
The Group analysed the products, i.e. performance guarantees, to identify links with the requirements of IFRS 17. The analysis confirmed that these products do not meet the definition of an insurance contract under IFRS 17, due to the fact that there is no insurance risk in this type of contract, but rather credit risk related to the non-recovery of funds from customers. Accordingly, the Group recognises and measures performance guarantees in accordance with IFRS 9.
• portfolio dimension - based on the risk characteristics of individual insurance contracts and based on existing insurance portfolio management processes;
• profitability dimension:
o for life insurance - at the level of a single contract by measuring the given insurance contract;
o for non-life insurance - all contracts are treated as profitable, unless there are facts or circumstances that indicate that they are not profitable. Profitability is assessed at the level of the IFRS 17 portfolio, while it is permissible to move the assessment to the level of the quarter or year cohorts;
• cohort dimension - the Group decided to use quarterly cohorts for both life and non-life insurance and reinsurance. The Group does not expect to apply the exemption from reporting under the requirement for annual cohorts.
The purpose of this aggregation is to ensure that profits are recognized over time in proportion to the insurance services provided, and losses are recognized immediately when the entity assesses that the concluded contract gives rise to a burden. The above aggregation makes it impossible to offset gains and losses between identified groups of insurance contracts, even within a single portfolio. Grouping of insurance contracts occurs upon initial recognition, and the Group will not reassess the groups in subsequent periods unless there is a rationale for discontinuing contract recognition as specified in IFRS 17, such as:
• when the obligation specified in the insurance contract expires or is discharged or cancelled; or
• the terms of an insurance contract are modified, for example by agreement between the parties to the contract or by a change in regulation, and the Group derecognises the original contract and recognise the modified contract as a new contract.
For the purpose of measurement of liabilities, the value of financial flows within the contract boundaries is estimated. Contract boundaries cover the period during which the Group is obliged to provide the services covered by the insurance contract. This period may arise from premiums already paid or premiums in respect of which the insured may be liable to pay. Cash flows are treated as flows within the contract boundaries if they result from the insurance cover provided during the above period, even if the physical payment goes beyond the contract boundaries.
The service obligation defining the contract boundaries expires when there is a realistic possibility of a risk reassessment and tariff change. If there is no such practical possibility, the measurement of liabilities includes all future expected premiums.
In the Group the contract boundary approach is largely consistent with the Solvency II measurement approach used to date. The exceptions are contract boundaries applied in unit-linked products, where the guidelines for future cash flows derived from the “KNF Office's Position on the Contract Boundary for the Purpose of Determining Insurance or Reinsurance Liabilities” are used for measurement for the needs of Solvency II. In contrast, for the needs of IFRS 17, in unit-linked products with regular premiums, the future premium is modelled in accordance with the policyholder's liabilities described in the general terms and conditions of insurance and in the policy.
Under IFRS 17, contracts may be measured according to the following methods:
1) GMM – general measurement model – the basic measurement model, wherein the total value of the insurance liability is calculated as the sum of:
a) discounted value of the best estimate of future cash flows - expected (probability-weighted) cash flows from premiums, claims, benefits, acquisition expenses and costs;
b) risk adjustment for non-financial risk, RA – an individual estimate of the financial value of the offset for uncertainty related to the amount and timing of future cash flows, and
c) contractual service margin, CSM – representing an estimate of future profits recognized during the policy term. The CSM value is sensitive to changes in estimates of cash flows, resulting e.g. from changed non-economic assumptions. CSM cannot be a negative value – any losses on the contracts shall be recognized immediately in the income statement (an exception is made for outward reinsurance contracts, for which the CSM may be negative);
2) PAA – premium allocation approach
The premium allocation approach (PAA), is a simplified approach where the measurement of liability for remaining coverage (LRC) is analogous to the provision for unearned premiums mechanism in IFRS 4 (without separate presentation of RA and CSM). The PAA method is applied for short-term contracts of up to 1 year and longer, as long as the relevant qualifying criteria for applying the simplification are satisfied, as specified in paragraphs 53 or 69 of IFRS 17. The measurement of liability for incurred claims (LIC) is carried out using the GMM model (without CSM calculations). At the time of implementation of IFRS 17, the PAA method is not used by the Group to measure insurance liabilities/assets;
3) VFA – variable fee approach
The liability measurement method used for IFRS 17 reporting of insurance contracts with direct profit sharing, where the measurement of liabilities is performed similarly to the GMM approach with the difference that changes in the contract margin component of the CSM in subsequent periods also include the impact of changes in economic factors, not just insurance factors.
Due to the specific nature of the insurance and reinsurance contracts in non-life insurance offered within the Group (insurance of several years), the criteria for applying the simplified valuation method based on premium allocation - PAA - were not met at the date of transition. Accordingly, both life insurance contracts and non-life insurance and reinsurance contracts are measured using the general model - GMM. The exception to this is direct profit-sharing insurance contracts, for which the Group uses the VFA model.
Cash flows within the boundary of an insurance contract are those that relate directly to the fulfilment of the contract, including cash flows for which the entity has discretion over the amount or timing.
The cash flows within the boundary include:
• premiums (including premium adjustments and instalment premiums) from a policyholder and any additional cash flows that result from those premiums;
• payments to (or on behalf of) a policyholder, including claims that have already been reported but have not yet been paid (i.e. reported claims), incurred claims for events that have occurred but for which claims have not been reported and all future claims for which the entity has a substantive obligation;
• an allocation of insurance acquisition cash flows attributable to the portfolio to which the contract belongs;
• claim handling costs;
• costs the entity will incur in providing contractual benefits paid in kind;
• policy administration and maintenance costs;
• taxes on transactions.
Separate presentation of outward reinsurance contracts and insurance and reinsurance contracts is required under the new standard.
Within each of these two groups, separate presentation is required for assets and liabilities of portfolios depending on whether the sum of the balance sheet items making up the insurance portfolio measurement is a net asset or liability.
Estimates of future cash flows are updated upon each calculation, taking into account all historical data available at the time of valuation and expert assessments of future cash flows.
The individual assumptions, in particular loss ratios, mortality rates and lapse rates, are determined on the basis of an analysis of historical data, but at the same time taking into account their expected changes in the future, e.g. due to tariff modifications or the current economic situation.
The Group does not currently have insurance products with discretionary profit-sharing.
The Group uses discount rate curves determined under the bottom-up approach (IFRS 17 paragraph B80), which assumes that discount curves are determined based on smooth risk-free rate curves.
Base discount curves are set at risk-free discount rates published by EIOPA (European Insurance and Occupational Pensions Authority). As part of the simplification adopted, no illiquidity premium was applied.
The table below shows the discount curves used to discount cash flows.
|
Breakdown of yield curves - PLN
|
Current reporting period |
Comparable reporting period |
|||||||||
|
1 year |
5 years |
10 years |
15 years |
20 years |
1 year |
5 years |
10 years |
15 years |
20 years |
||
|
Life – protection insurance |
4.95% |
4.85% |
5.10% |
5.11% |
4.95% |
6.40% |
6.74% |
6.65% |
6.39% |
6.01% |
|
|
Property – protection insurance |
4.95% |
4.85% |
5.10% |
5.11% |
4.95% |
6.40% |
6.74% |
6.65% |
6.39% |
6.01% |
|
|
Other |
4.95% |
4.85% |
5.10% |
5.11% |
4.95% |
6.40% |
6.74% |
6.65% |
6.39% |
6.01% |
|
The Group includes a risk adjustment for non-financial risks in the measurement of insurance contracts. Due to the different risk characteristics for the portfolio of life and non-life insurance and for the future flows arising from the liabilities of payable claims and those arising from the remaining insurance period, the adjustment for non-financial risk for these liabilities is estimated independently.
For non-life insurance, the adjustment for future coverage is determined using the Value at Risk (VaR) method, using a modified Solvency Capital Requirement (SCR) calculation according to the Solvency II standard formula. Two approaches are used to determine the adjustment for the loss reserve: the VaR method analogous to the approach for future coverage and the bootstrap method (a method of estimating the distribution of estimation errors, by means of a multiple draw with return from a sample).
For life insurance, for liabilities arising from the remaining insurance period, the adjustment is determined using the cost of capital (CoC) method, and for liabilities for payable claims using the bootstrap method.
To determine adjustments for non-financial risks from reinsurance contracts, the Group applies these techniques both gross and net of reinsurance and derives the amount of risk transferred to the reinsurer as the difference between the two results.
Using the confidence level technique, the Group estimates the probability distribution of the expected present value of future cash flows from insurance contracts at each reporting date and calculates the adjustment for non-financial risks as the excess of the value at risk at the 75th percentile (target confidence level) over the expected present value of future cash flows.
Using the cost of capital technique, the Group determines the adjustment for non-financial risks by applying the cost of capital rate to the amount of capital required at each future reporting date and discounting the outcome using risk-free rates.
For the purposes of recognising the change in the risk adjustment for non-financial risks in the income statement, no disaggregation is made into an insurance service component and an insurance finance component, but it is presented in its entirety in the net income from insurance business.
The contract margin is part of the liabilities (or assets) under insurance and reinsurance contracts. The contract margin reflects the outstanding profit for a group of insurance contracts and is therefore released as income in the income statement. The amount of margin release in a reporting period is determined as the value of unrecognised expected future profit attributable to the period in accordance with a pattern of so-called coverage units, which determine the volume of insurance service provided in each period.
The pattern of coverage units provided was estimated on the basis of sums insured (life insurance) or premiums earned assuming a pro rata approach (property insurance)
In contrast to the valuation of other components of the liability for remaining coverage, the CSM is determined in a recursive manner, i.e. its value at the end of a given reporting period depends on the value on the opening balance sheet.
The initial value of the contract margin for groups of non-onerous contracts is determined on initial recognition as the value that balances the liability for remaining coverage, i.e. such that the total liability for remaining coverage equals 0 and thus does not generate income or expenses. For onerous contracts, the CSM on initial recognition is equal to zero.
For insurance contracts without direct participation features, the carrying amount of the contractual service margin of a group of contracts at the end of the reporting period equals the carrying amount at the start of the reporting period adjusted for:
• the effect of any new contracts added to the group;
• interest accreted on the carrying amount of the contractual service margin during the reporting period, measured at the discount rates at the time of initial recognition;
• the changes in fulfilment cash flows relating to future service, except to the extent that:
o such increases in the fulfilment cash flows exceed the carrying amount of the contractual service margin, giving rise to a loss; or
o such decreases in the fulfilment cash flows are allocated to the loss component of the liability for remaining coverage;
• the effect of any currency exchange differences arising on the contractual service margin; and
• the amount recognised as insurance revenue because of the insurance contract services provided in the period, determined by the allocation of the contractual service margin remaining at the end of the reporting period (before any allocation) over the current and remaining coverage period.
Changes in expected future cash flows relating to a past or current service do not modify the CSM, but are recognised immediately in the income statement.
For groups of insurance contracts with direct participation features, the carrying amount of CSM of a group of contracts at the end of the reporting period equals the carrying amount of the CSM at the start of the reporting period adjusted for:
• the effect of new contracts added to the group;
• the amount of the entity’s share of the fair value of the underlying instrument;
• he changes in fulfilment cash flows relating to future service;
• the effect of any currency exchange differences;
• the amount of the CSM recognised in the income statement as insurance revenue because of the insurance contract services provided in the period.
• OCI option – the Group has exercised the option to disaggregate the finance income and costs of its insurance operations into the portions recognized in profit or loss and other comprehensive income for all IFRS 17 portfolios, except for contract portfolios containing direct profit sharing. The amount recognised in the income statement is determined by a systematic allocation of the expected total insurance finance income or expenses over the duration of the group of contracts. The value of insurance finance income and expenses reported in the income statement is determined on the basis of the discount rates from the time of initial recognition of the respective group of contracts. At the same time, the difference between the total insurance finance income and expenses and the amount reported in the income statement is presented in other comprehensive income.
• Investment component – The main portfolio with a non-distinguishable investment component is the unit-linked insurance portfolio. The investment components excluded from insurance revenue and insurance service expenses are determined as the hypothetical surrender value (including the value of the life benefit) specified in the terms of the insurance contract.
The Group values all outward reinsurance contracts using the general GMM model, on a similar basis to the valuation of the insurance portfolio. A key difference in the valuation of reinsurance contracts relative to the valuation of insurance contracts is that a loss component cannot be recognised, while a negative contract margin is allowed.
FINANCIAL INFORMATION
|
NET INCOME FROM INSURANCE BUSINESS AND FINANCE INCOME AND COSTS RECOGNISED IN OTHER COMPREHENSIVE INCOME FROM INSURANCE BUSINESS |
2023 |
2022 |
|
Changes in the period recognised in the income statement and in other comprehensive income, of which: |
680 |
788 |
|
1. Net income from insurance business (Income statement) |
711 |
779 |
|
Insurance revenue (net of reinsurance)1 |
1,241 |
1,172 |
|
Change in liability for remaining coverage (LRC) |
1,210 |
1,145 |
|
The amount of the contractual service margin recognised in profit or loss because of the transfer of insurance contract services in the period (amortisation of contractual margin) |
760 |
786 |
|
Change in risk adjustment for non-financial risk |
41 |
44 |
|
Anticipated claims and other insurance service costs during the period |
421 |
309 |
|
other amounts, for example, experience adjustments for premium receipts other than those that relate to future service |
(12) |
6 |
|
Allocation of the portion of the premiums that relate to the recovery of insurance acquisition cash flows |
31 |
27 |
|
Cost of insurance activities (net of reinsurance)2 |
(389) |
(325) |
|
Incurred claims (excluding investment components) and other incurred insurance service expenses |
(365) |
(283) |
|
Amortisation of insurance acquisition cash flows |
(31) |
(27) |
|
Changes that relate to future service, i.e. losses on onerous groups of contracts and reversals of such losses |
(15) |
(24) |
|
Changes that relate to past service, i.e. changes in fulfilment cash flows relating to the liability for incurred claims |
22 |
9 |
|
Investment components excluded from insurance revenue and insurance service expenses (net of reinsurance)3 |
(187) |
47 |
|
Change in fair value of underlying items for contracts with direct participation features |
(93) |
88 |
|
Interest accrued (discount) |
(94) |
(41) |
|
Net income from reinsurance business, of which:4 |
(47) |
(29) |
|
Interest accrued |
(3) |
(3) |
|
Change in fair value of underlying assets for contracts with direct participation features5 |
93 |
(86) |
|
2. Finance income and costs from insurance business recognised in other comprehensive income, including from6: |
(31) |
9 |
|
insurance activities (net of reinsurance) |
(33) |
9 |
|
reinsurance activities |
2 |
- |
1 Insurance revenue include only revenue from gross business. The item arises from the decomposition of the premium for individual components of cost and profit into:
a. amortisation of the contractual service margin,
b. adjustment for non-financial risk (additional security add-on),
c. anticipated claims and costs (the portion of the premium that is allocated to the payment of claims and benefits and costs),
d. acquisition costs (the portion of the premium that is allocated to acquisition costs),
e. other, e.g. experience-related adjustments (discrepancies between the expected premium and the premium actually earned).
2 Costs from insurance activities only include costs from gross business. The item comprises the following components:
a. Claims incurred and costs - the value of claims and costs incurred during the period (in the case of claims, claims incurred during the period are reported under this heading, regardless of whether they have been paid or remain in the loss reserve);
b. Acquisition costs incurred - an item that mirrors the item “Allocation of the portion of the premiums that relate to the recovery of insurance acquisition cash flows”; the impact of acquisition costs on the result is included in the amortisation of the contract service margin;
c. Changes related to the future service – losses (and their reversal) if a particular group of contracts is onerous, e.g. expected premiums will be lower than expected claims (losses are recognised in the income statement from a one-off basis and gains are deferred through gradual amortisation of the margin);
d. Changes related to the past service (result on the loss reserve) – the difference between the estimate of the loss reserve for the opening balance and its realisation in the reporting period.
3 This item includes insurance finance income and expenses recognised in the income statement. The item mainly includes two components: changes on the discounting of reserves and, in the case of contracts with direct participation features, the net investment income on the underlying assets.
4 Net income from reinsurance business – reflects the net income from outward reinsurance
5 Change in fair value of underlying assets for contracts with direct participation features – result on units in investment funds and investment certificates (contracts with direct participation features)
6Finance income and expenses recognised in other comprehensive income reflect the impact of changes in interest rates and other financial assumptions
|
CHANGE IN LIABILITIES IN RESPECT OF INSURANCE ACTIVITIES (NET OF REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2023 |
Liability for remaining coverage (LRC) |
Liabilities for incurred claims (LIC) |
Total |
|
|
excluding the loss component |
loss component |
|||
|
Opening balance, net - 1 January 2023 |
2,690 |
19 |
169 |
2,878 |
|
Insurance revenue |
(1,241) |
- |
- |
(1,241) |
|
Costs of insurance activities |
31 |
(1) |
359 |
389 |
|
incurred claims and other incurred insurance service expenses |
- |
(16) |
381 |
365 |
|
amortisation of insurance acquisition cash flows |
31 |
- |
- |
31 |
|
losses on onerous groups of contracts and reversals of such losses |
- |
15 |
- |
15 |
|
changes in fulfilment cash flows relating to the liability for incurred claims |
- |
- |
(22) |
(22) |
|
Investment components excluded from insurance revenue and insurance service expenses |
44 |
1 |
142 |
187 |
|
Net income from insurance business (Income statement) |
(1,166) |
- |
501 |
(665) |
|
Insurance finance income or expenses recognised in other comprehensive income (gross) |
33 |
- |
- |
33 |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(1,133) |
- |
501 |
(632) |
|
premiums received for insurance contracts issued |
1,185 |
- |
- |
1,185 |
|
incurred claims paid and other insurance service expenses paid for insurance contracts issued |
- |
- |
(480) |
(480) |
|
insurance acquisition cash flows |
(36) |
- |
- |
(36) |
|
Total cash flows |
1,149 |
- |
(480) |
669 |
|
Closing balance, net - 31 December 2023 |
2,706 |
19 |
190 |
2,915 |
|
Property – protection insurance |
1,169 |
- |
91 |
1,260 |
|
Life – protection insurance |
972 |
19 |
44 |
1,035 |
|
Other |
565 |
- |
55 |
620 |
|
CHANGE IN ASSETS IN RESPECT OF INSURANCE ACTIVITIES (REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2023 |
Assets on account of reinsurance (for remaining coverage, LRC) |
Assets for losses incurred (LIC) |
Total |
|
|
excluding the loss component |
loss component |
|||
|
Opening balance, net - 1 January 2023 |
86 |
- |
29 |
115 |
|
Allocation of reinsurance premiums paid |
(102) |
- |
- |
(102) |
|
Amounts recoverable from reinsurers1 |
- |
- |
52 |
52 |
|
Investment components excluded from insurance revenue and insurance service expenses |
3 |
- |
- |
3 |
|
Net income from insurance business (Income statement) |
(99) |
- |
52 |
(47) |
|
Insurance finance income or expenses recognised in other comprehensive income (gross) |
2 |
- |
- |
2 |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(97) |
- |
52 |
(45) |
|
premiums received for reinsurance contracts held |
70 |
- |
- |
70 |
|
amounts received |
- |
- |
(50) |
(50) |
|
Total cash flows |
70 |
- |
(50) |
20 |
|
Closing balance, net - 31 December 2023 |
59 |
- |
31 |
90 |
|
Property – protection insurance |
56 |
- |
27 |
83 |
|
Life – protection insurance |
3 |
- |
4 |
7 |
1This item includes the recovery of claims incurred and other insurance service costs
|
CHANGE IN LIABILITIES IN RESPECT OF INSURANCE ACTIVITIES (NET OF REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2022 |
Liability for remaining coverage (LRC) |
Liabilities for incurred claims (LIC) |
Total |
|
|
excluding the loss component |
loss component |
|||
|
Opening balance, net - 1 January 2022 |
3,131 |
11 |
175 |
3,317 |
|
Insurance revenue |
(1,172) |
- |
- |
(1,172) |
|
Costs of insurance activities |
27 |
9 |
289 |
325 |
|
incurred claims and other incurred insurance service expenses |
- |
(15) |
298 |
283 |
|
amortisation of insurance acquisition cash flows |
27 |
- |
- |
27 |
|
losses on onerous groups of contracts and reversals of such losses |
- |
24 |
- |
24 |
|
changes in fulfilment cash flows relating to the liability for incurred claims |
- |
- |
(9) |
(9) |
|
Investment components excluded from insurance revenue and insurance service expenses |
(264) |
1 |
216 |
(47) |
|
Net income from insurance business (Income statement) |
(1,409) |
10 |
505 |
(894) |
|
Insurance finance income or expenses recognised in other comprehensive income (gross) |
(7) |
(2) |
- |
(9) |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(1,416) |
8 |
505 |
(903) |
|
premiums received for insurance contracts issued |
1,002 |
- |
- |
1,002 |
|
incurred claims paid and other insurance service expenses paid for insurance contracts issued |
- |
- |
(511) |
(511) |
|
insurance acquisition cash flows |
(27) |
- |
- |
(27) |
|
Total cash flows |
975 |
- |
(511) |
464 |
|
Closing balance, net - 31 December 2022 |
2,690 |
19 |
169 |
2,878 |
|
Property – protection insurance |
1,243 |
- |
59 |
1,302 |
|
Life – protection insurance |
849 |
19 |
47 |
915 |
|
Other |
598 |
- |
63 |
661 |
|
CHANGE IN ASSETS IN RESPECT OF INSURANCE ACTIVITIES (REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2022 |
Assets on account of reinsurance (for remaining coverage, LRC) |
Assets for losses incurred (LIC) |
Total |
|
|
excluding the loss component |
loss component |
|||
|
Opening balance, net - 1 January 2022 |
107 |
- |
21 |
128 |
|
Allocation of reinsurance premiums paid |
(84) |
- |
- |
(84) |
|
Amounts recoverable from reinsurers1 |
- |
- |
52 |
52 |
|
Investment components excluded from insurance revenue and insurance service expenses |
3 |
- |
- |
3 |
|
Net income from insurance business (Income statement) |
(81) |
- |
52 |
(29) |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(81) |
- |
52 |
(29) |
|
premiums received for reinsurance contracts held |
61 |
- |
- |
61 |
|
amounts received |
- |
- |
(44) |
(44) |
|
Total cash flows |
60 |
- |
(44) |
10 |
|
Closing balance, net - 31 December 2022 |
86 |
- |
29 |
115 |
|
Property – protection insurance |
83 |
- |
25 |
108 |
|
Life – protection insurance |
3 |
- |
4 |
7 |
1This item includes the recovery of claims incurred and other insurance service costs
|
CHANGE IN LIABILITIES IN RESPECT OF INSURANCE ACTIVITIES (NET OF REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2023 |
Estimates of present value of future cash flows |
Non-financial risk adjustment |
Contract margin |
Total |
|
Opening balance, net - 1 January 2023 |
1,468 |
73 |
1,337 |
2,878 |
|
Changes that relate to current service |
64 |
(36) |
(875) |
(847) |
|
change in contractual service margin |
- |
- |
(762) |
(762) |
|
change in risk adjustment for non-financial risk |
- |
(42) |
- |
(42) |
|
experience adjustments1 |
64 |
6 |
(113) |
(43) |
|
Changes that relate to future service |
(657) |
49 |
625 |
17 |
|
changes in estimates that adjust the contractual service margin |
36 |
(3) |
(32) |
1 |
|
losses on onerous groups of contracts and reversals of such losses |
3 |
- |
- |
3 |
|
the effects of contracts initially recognised in the period |
(696) |
52 |
657 |
13 |
|
Changes that relate to past service, i.e. changes in fulfilment cash flows relating to incurred claims |
(17) |
(5) |
- |
(22) |
|
Investment components excluded from insurance revenue and insurance service expenses |
120 |
- |
67 |
187 |
|
Net income from insurance business (Income statement) |
(490) |
8 |
(183) |
(665) |
|
Insurance finance income or expenses recognised in other comprehensive income (gross) |
33 |
- |
- |
33 |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(457) |
8 |
(183) |
(632) |
|
Cash flows |
669 |
- |
- |
669 |
|
Closing balance, net - 31 December 2023 |
1,680 |
81 |
1,154 |
2,915 |
1this item reflects the difference between expected and realised premium cash flows for contract cohorts for which the difference is not recognised in the contractual service margin
|
CHANGE IN ASSETS IN RESPECT OF INSURANCE ACTIVITIES (REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2023 |
Estimates of present value of future cash flows |
Non-financial risk adjustment |
Contract margin |
Total |
|
Opening balance, net - 1 January 2023 |
62 |
10 |
43 |
115 |
|
Changes that relate to current service |
(2) |
(3) |
(38) |
(43) |
|
change in contractual service margin |
- |
- |
(43) |
(43) |
|
change in risk adjustment for non-financial risk |
- |
(6) |
- |
(6) |
|
experience adjustments1 |
(2) |
3 |
5 |
6 |
|
Changes that relate to future service |
(29) |
5 |
24 |
- |
|
changes in estimates that adjust the contractual service margin |
(10) |
- |
10 |
- |
|
the effects of contracts initially recognised in the period |
(19) |
5 |
14 |
- |
|
Changes that relate to past service, i.e. changes in fulfilment cash flows relating to incurred claims |
(6) |
(1) |
- |
(7) |
|
Investment components excluded from insurance revenue and insurance service expenses |
1 |
- |
2 |
3 |
|
Net income from insurance business (Income statement) |
(36) |
1 |
(12) |
(47) |
|
Insurance finance income or expenses recognised in other comprehensive income (gross) |
2 |
- |
- |
2 |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(34) |
1 |
(12) |
(45) |
|
Cash flows |
20 |
- |
- |
20 |
|
Closing balance, net - 31 December 2023 |
48 |
11 |
31 |
90 |
1this item reflects the difference between expected and realised premium cash flows for contract cohorts for which the difference is not recognised in the contractual service margin
|
CHANGE IN LIABILITIES IN RESPECT OF INSURANCE ACTIVITIES (NET OF REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2022 |
Estimates of present value of future cash flows |
Non-financial risk adjustment |
Contract margin |
Total |
|
Opening balance, net - 1 January 2022 |
1,806 |
82 |
1,429 |
3,317 |
|
Changes that relate to current service |
11 |
(39) |
(833) |
(861) |
|
change in contractual service margin |
- |
- |
(790) |
(790) |
|
change in risk adjustment for non-financial risk |
- |
(44) |
- |
(44) |
|
experience adjustments1 |
11 |
5 |
(43) |
(27) |
|
Changes that relate to future service |
(719) |
34 |
708 |
23 |
|
changes in estimates that adjust the contractual service margin |
(74) |
(6) |
80 |
- |
|
losses on onerous groups of contracts and reversals of such losses |
14 |
- |
- |
14 |
|
the effects of contracts initially recognised in the period |
(659) |
40 |
628 |
9 |
|
Changes that relate to past service, i.e. changes in fulfilment cash flows relating to incurred claims |
(5) |
(4) |
- |
(9) |
|
Investment components excluded from insurance revenue and insurance service expenses |
(80) |
- |
33 |
(47) |
|
Net income from insurance business (Income statement) |
(793) |
(9) |
(92) |
(894) |
|
Insurance finance income or expenses recognised in other comprehensive income (gross) |
(9) |
- |
- |
(9) |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(802) |
(9) |
(92) |
(903) |
|
Cash flows |
464 |
- |
- |
464 |
|
Closing balance, net - 31 December 2022 |
1,468 |
73 |
1,337 |
2,878 |
1this item reflects the difference between expected and realised premium cash flows for contract cohorts for which the difference is not recognised in the contractual service margin
|
CHANGE IN ASSETS IN RESPECT OF INSURANCE ACTIVITIES (REINSURANCE) DURING THE 12 MONTHS ENDED 31 DECEMBER 2022 |
Estimates of present value of future cash flows |
Non-financial risk adjustment |
Contract margin |
Total |
|
Opening balance, net - 1 January 2022 |
64 |
14 |
50 |
128 |
|
Changes that relate to current service |
12 |
(3) |
(39) |
(30) |
|
change in contractual service margin |
- |
- |
(42) |
(42) |
|
change in risk adjustment for non-financial risk |
- |
(5) |
- |
(5) |
|
experience adjustments1 |
12 |
2 |
3 |
17 |
|
Changes that relate to future service |
(30) |
- |
30 |
- |
|
changes in estimates that do not adjust the contractual service margin |
(17) |
(3) |
20 |
- |
|
the effects of contracts initially recognised in the period |
(13) |
3 |
10 |
- |
|
Changes that relate to past service, i.e. changes in fulfilment cash flows relating to incurred claims |
(1) |
(1) |
- |
(2) |
|
Investment components excluded from insurance revenue and insurance service expenses |
1 |
- |
2 |
3 |
|
Net income from insurance business (Income statement) |
(18) |
(4) |
(7) |
(29) |
|
Changes in the period recognised in the income statement and in other comprehensive income |
(18) |
(4) |
(7) |
(29) |
|
Cash flows |
16 |
- |
- |
16 |
|
Closing balance, net - 31 December 2022 |
62 |
10 |
43 |
115 |
1this item reflects the difference between expected and realised premium cash flows for contract cohorts for which the difference is not recognised in the contractual service margin
|
CONTRACTUAL SERVICE MARGIN TO BE RECOGNISED IN THE INCOME STATEMENT - 31.12.2023 |
<1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
5-10 years |
above 10 years |
Total |
|||
|
Insurance contracts |
|
|
|
|
|
|
|
|
|||
|
Property – protection insurance |
349 |
202 |
93 |
41 |
14 |
9 |
- |
708 |
|||
|
Life – protection insurance |
219 |
93 |
51 |
27 |
13 |
12 |
1 |
416 |
|||
|
Other |
5 |
4 |
3 |
3 |
2 |
7 |
6 |
30 |
|||
|
Total |
573 |
299 |
147 |
71 |
29 |
28 |
7 |
1,154 |
|||
|
Reinsurance contracts |
|
|
|
|
|
|
|
|
|||
|
Property – protection insurance |
15 |
7 |
2 |
1 |
- |
- |
- |
25 |
|||
|
Life – protection insurance |
4 |
- |
- |
- |
- |
1 |
1 |
6 |
|||
|
Total |
19 |
7 |
2 |
1 |
- |
1 |
1 |
31 |
|||
|
|
|
|
|
|
|
|
|
|
|||
|
CONTRACT MARGIN TO BE RECOGNISED IN THE INCOME STATEMENT - 31.12.2022 |
<1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
5-10 years |
above 10 years |
Total |
|||
|
Insurance contracts |
|
|
|
|
|
|
|
|
|||
|
Property – protection insurance |
386 |
249 |
148 |
49 |
19 |
19 |
- |
870 |
|||
|
Life – protection insurance |
194 |
102 |
62 |
36 |
20 |
20 |
2 |
436 |
|||
|
Other |
5 |
4 |
3 |
3 |
2 |
7 |
7 |
31 |
|||
|
Total |
585 |
355 |
213 |
88 |
41 |
46 |
9 |
1,337 |
|||
|
Reinsurance contracts |
|
|
|
|
|
|
|
|
|||
|
Property – protection insurance |
23 |
11 |
5 |
1 |
- |
- |
- |
40 |
|||
|
Life – protection insurance |
(1) |
(1) |
- |
1 |
1 |
2 |
1 |
3 |
|||
|
Total |
22 |
10 |
5 |
2 |
1 |
2 |
1 |
43 |
|||
|
FINANCIAL INSTRUMENTS RELATING TO CONTRACTS WITH DIRECT PARTICIPATION FEATURES |
31.12.2023 |
31.12.2022 |
|||||||||
|
Deposits with financial institutions |
23 |
20 |
|||||||||
|
Bonds |
179 |
138 |
|||||||||
|
Equity securities |
569 |
630 |
|||||||||
|
Total financial instruments - assets |
771 |
788 |
|||||||||
Accounting policies:
Software - Acquired computer software licences are recognized in the amount of costs incurred on the purchase and preparation of the software for use, taking into consideration accumulated amortization and impairment losses.
Goodwill - Goodwill arising on acquisition of subsidiaries is recognized under “Intangible assets” and goodwill arising on acquisition of associates and joint ventures is recognized under “Investments in associates and joint ventures”. The test for goodwill impairment is carried out at least at the end of each year.
Customer relations and value in force - As a result of a settlement of the transaction, two components of intangible assets that are recognized separately from goodwill, i.e. customer relations and value in force, representing the present value of future profits from concluded insurance contracts, were identified. These components of intangible assets are amortized by declining balance method based on the rate of economic benefits consumption arising from their use.
Other intangible assets – Other intangible assets acquired by the Group are recognized at the cost of purchase or manufacture, less accumulated amortization and impairment losses.
Development costs – The costs of completed development projects are classified as intangible assets in connection with the expected economic benefits to be obtained and meeting specific terms and conditions, i.e. if there is a possibility and intention to complete and use the internally generated intangible asset, there are appropriate technical and financial resources to complete the development and to use the asset and it is possible to reliably measure the expenditure incurred during its development which can be directly attributed to generating the intangible asset.
The Group classifies the effects of in-house development work that can be used for the Group's operations as intangible assets.
• the possibility of purchasing from a software supplier without incurring significant costs, and
• the ability to use the software independently without significantly reducing the usefulness or value of the software,
• the possibility of running the software on own hardware or entering into an agreement with another party not related to the supplier to use the software.
Based on the above criteria, the Group classifies part of the software as an intangible asset and part as a service, with the costs recognised in operating expenses.
Related notes:
• Useful lives – note “Administrative expenses”;
• Impairment losses – note “Net impairment losses on non-financial assets”
Financial information
|
Software |
Goodwill |
Future profit on concluded insurance contracts |
Customer relations |
Other, including capital expenditure |
of which: software |
Total |
|||||
|
2023 |
|
|
|
|
|
|
|
||||
|
Gross carrying amount at the beginning of the period |
6,439 |
1,407 |
45 |
94 |
802 |
671 |
8,787 |
||||
|
Purchase |
55 |
- |
- |
- |
853 |
853 |
908 |
||||
|
Transfers from capital expenditure |
894 |
- |
- |
- |
(896) |
(897) |
(2) |
||||
|
Scrapping and sale |
(32) |
- |
- |
- |
- |
- |
(32) |
||||
|
Other |
10 |
- |
- |
- |
44 |
43 |
54 |
||||
|
Gross carrying amount at the end of the period |
7,366 |
1,407 |
45 |
94 |
803 |
670 |
9,715 |
||||
|
|
|||||||||||
|
Accumulated amortization as at the beginning of the period |
(4,663) |
- |
(44) |
(90) |
(96) |
- |
(4,893) |
||||
|
Amortization charge for the period |
(547) |
- |
(3) |
(2) |
(3) |
- |
(555) |
||||
|
Scrapping and sale |
30 |
- |
2 |
- |
- |
- |
32 |
||||
|
Other |
1 |
- |
- |
- |
- |
- |
1 |
||||
|
Accumulated amortization as at the end of the period |
(5,179) |
- |
(45) |
(92) |
(99) |
- |
(5,415) |
||||
|
|
|||||||||||
|
Impairment losses as at the beginning of the period |
(18) |
(354) |
- |
- |
(10) |
- |
(382) |
||||
|
Recognized during the period |
(1) |
- |
- |
- |
- |
- |
(1) |
||||
|
Other |
1 |
- |
- |
- |
- |
- |
1 |
||||
|
Impairment losses as at the end of the period |
(18) |
(354) |
- |
- |
(10) |
- |
(382) |
||||
|
|
|||||||||||
|
Carrying amount as at the beginning of the period, net |
1,758 |
1,053 |
1 |
4 |
696 |
671 |
3,512 |
||||
|
Carrying amount as at the end of the period, net |
2,169 |
1,053 |
- |
2 |
694 |
670 |
3,918 |
||||
|
INTANGIBLE ASSETS |
Software |
Goodwill |
Future profit on concluded insurance contracts |
Customer relations |
Other, including capital expenditure |
of which: software |
Total |
|
Gross carrying amount at the beginning of the period |
5,908 |
1,407 |
44 |
158 |
776 |
642 |
8,293 |
|
Purchase |
45 |
- |
- |
- |
492 |
492 |
537 |
|
Transfers from capital expenditure |
504 |
- |
- |
- |
(504) |
(504) |
- |
|
Scrapping and sale |
(18) |
- |
- |
(64) |
- |
- |
(82) |
|
Other |
- |
- |
1 |
- |
38 |
41 |
39 |
|
Gross carrying amount at the end of the period |
6,439 |
1,407 |
45 |
94 |
802 |
671 |
8,787 |
|
|
|||||||
|
Accumulated amortization as at the beginning of the period |
(4,203) |
- |
(42) |
(117) |
(92) |
- |
(4,454) |
|
Amortization charge for the period |
(479) |
- |
(2) |
(7) |
(4) |
- |
(492) |
|
Scrapping and sale |
19 |
- |
- |
34 |
- |
- |
53 |
|
Accumulated amortization as at the end of the period |
(4,663) |
- |
(44) |
(90) |
(96) |
- |
(4,893) |
|
|
|||||||
|
Impairment losses as at the beginning of the period |
(18) |
(354) |
- |
(9) |
(15) |
(2) |
(396) |
|
Recognized during the period |
- |
- |
- |
(21) |
- |
- |
(21) |
|
Other |
- |
- |
- |
30 |
5 |
2 |
35 |
|
Impairment losses as at the end of the period |
(18) |
(354) |
- |
- |
(10) |
- |
(382) |
|
|
|||||||
|
Carrying amount as at the beginning of the period, net |
1,687 |
1,053 |
2 |
32 |
669 |
640 |
3,443 |
|
Carrying amount as at the end of the period, net |
1,758 |
1,053 |
1 |
4 |
696 |
671 |
3,512 |
The comparative figures for 2022 and the opening balances for 2023 have been similarly adjusted by PLN 15 million and PLN 20 million due to the implementation of IFRS 17 "Insurance Contracts" (see note "IFRS 17 Insurance Contract").
From the Bank’s perspective, expenditure incurred on the Integrated Information System (IIS) is a significant item of intangible assets. The total capital expenditure incurred on the IIS in 2007–2023 was PLN 1,272 million (PLN 1,392 million in 2006-2022).
The net carrying amount of the Integrated Information System (IIS) as at 31 December 2023 was PLN 624 million (PLN 651 million as at 31 December 2022). The expected useful life of the system is 24 years. As at 31 December 2023, its remaining useful life is 7 years.
• Goodwill
|
Net goodwill |
31.12.2023 |
31.12.2022 |
|
Nordea Bank Polska S.A. |
747 |
|
|
PKO Życie Towarzystwo Ubezpieczeń S.A. |
91 |
91 |
|
Raiffeisen - Leasing Polska SA and its subsidiaries (PKO Leasing SA) |
57 |
57 |
|
PKO Towarzystwo Funduszy Inwestycyjnych S.A. |
150 |
150 |
|
Assets taken over from CFP sp. z o.o. |
8 |
8 |
|
Total |
1,053 |
1,053 |
|
Impairment test – method |
|
|
Nordea Bank Polska S.A. |
At the time of the acquisition, two cash-generating units ("CGUs") were distinguished to which the goodwill arising from the acquisition of Nordea Bank Polska SA was allocated – retail and corporate CGUs, corresponding to the operating segments. The Bank recognised an impairment loss on the goodwill attributable to the corporate CGU of PLN 117 million on 30 June 2020. Goodwill of Nordea Bank Polska S.A. of PLN 747 million belongs to the retail segment. The impairment test is performed by comparing the carrying amount of the CGUs with their recoverable amount. The residual value of a CGU has been calculated by extrapolating the cash flow projections beyond the projection period using the growth rate adopted at a level of 3.7%. Cash flow projections used in the impairment test covered a period of 10 years and are based on the assumptions included in the financial plan of the Bank for 2024. A discount rate of 12.48%, taking into account the risk-free rate and risk premium, was used for the discounting of the future cash flows. The impairment test of the goodwill arising from the acquisition of Nordea Bank Polska S.A. assigned to the retail CGU carried out as at 31 December 2023 did not indicate any impairment. |
|
PKO Towarzystwo Funduszy Inwestycyjnych S.A. |
The impairment test was carried out on the basis of the three-year financial forecast prepared by the Company based on the discounted dividend method, taking into account the residual value. No impairment of goodwill was identified. |
|
PKO Życie Towarzystwo Ubezpieczeń S.A. |
The impairment test carried out was developed on the basis of the present value of expected future cash flows for the Bank, taking into account the residual value. Future cash flows were estimated on the basis prepared by the Company’s 10 year financial forecast. No impairment of goodwill was identified. |
|
PKO Leasing Pro S.A. |
The goodwill arising on the acquisition of the Company was allocated to the whole of PKO Leasing S.A. as the immediate parent company, which acquired the assets of PKO Leasing Pro S.A. in the merger. The impairment test was prepared on the basis of the present value of the expected future cash flows generated by the Company, estimated on the basis of the financial forecast prepared by the Company for five years with the simultaneous fading out of activities thereafter. No further impairment was identified. |
|
Raiffeisen - Leasing Polska S.A. and its subsidiaries (PKO Leasing S.A.) |
The goodwill that arose on the acquisition of these companies was allocated to the portion of the assets of the PKO Leasing S.A. Group that was separately recorded in the accounts as assets of the Raiffeisen-Leasing Polska S.A. Group that was acquired. The impairment test was carried out on the basis of the five-year financial forecast prepared by the Company based on the discounted dividend method, taking into account the residual value. No impairment of goodwill was identified. |
The valuation methods and forecast periods were adapted to the specific features of activities related to the assets or companies being valued.
Accounting policies:
Property, plant and equipment – are measured at the cost of purchase or manufacture, less accumulated depreciation and impairment losses.
Investment properties – are measured according to the accounting policies applied to property, plant and equipment.
Capital expenditure – The carrying amount of property, plant and equipment items is increased by additional capital expenditure incurred during their use, provided that they satisfy the criteria for classification to fixed assets.
Right-of-use assets are presented in the same items in which the underlying assets would be presented, if they were owned by the Group (note “Leases”).
Related notes:
• Useful lives – note “Administrative expenses”;
• Impairment losses – note “Net impairment losses on non-financial assets”
Financial information
• Property, plant and equipment
|
Land and buildings |
Machinery and equipment, including computer hardware |
Fixed assets under construction |
Other, including vehicles |
Total |
|
|
2023 |
|
|
|
|
|
|
Gross carrying amount at the beginning of the period |
4,121 |
1,832 |
154 |
903 |
7,010 |
|
Purchase, including modifications |
467 |
26 |
343 |
36 |
872 |
|
Transfers from capital expenditure |
39 |
138 |
(207) |
31 |
1 |
|
Scrapping and sale |
(80) |
(65) |
- |
(15) |
(160) |
|
Other |
(61) |
(23) |
(5) |
3 |
(86) |
|
Gross carrying amount at the end of the period |
4,486 |
1,908 |
285 |
958 |
7,637 |
|
Accumulated amortization as at the beginning of the period |
(2,056) |
(1,398) |
- |
(537) |
(3,991) |
|
Amortization charge for the period |
(318) |
(157) |
- |
(57) |
(532) |
|
Scrapping and sale |
69 |
64 |
- |
35 |
168 |
|
Other |
34 |
17 |
- |
5 |
56 |
|
Accumulated amortization as at the end of the period |
(2,271) |
(1,474) |
- |
(554) |
(4,299) |
|
Impairment losses as at the beginning of the period |
(97) |
(1) |
(3) |
(1) |
(102) |
|
Recognized during the period |
(38) |
(4) |
- |
- |
(42) |
|
Reversed during the period |
1 |
- |
- |
- |
1 |
|
Other |
7 |
1 |
- |
- |
8 |
|
Impairment losses as at the end of the period |
(127) |
(4) |
(3) |
(1) |
(135) |
|
Carrying amount as at the beginning of the period, net |
1,968 |
433 |
151 |
365 |
2,917 |
|
Carrying amount as at the end of the period, net |
2,088 |
430 |
282 |
403 |
3,203 |
|
Land and buildings |
Machinery and equipment, including computer hardware |
Fixed assets under construction |
Other, including vehicles |
Total |
|
|
2022 |
|
|
|
|
|
|
Gross carrying amount at the beginning of the period |
3,977 |
1,768 |
217 |
909 |
6,871 |
|
Purchase, including modifications |
165 |
37 |
175 |
28 |
405 |
|
Transfers from capital expenditure |
50 |
142 |
(234) |
42 |
- |
|
Scrapping and sale |
(46) |
(92) |
- |
(58) |
(196) |
|
Other |
(25) |
(23) |
(4) |
(18) |
(70) |
|
Gross carrying amount at the end of the period |
4,121 |
1,832 |
154 |
903 |
7,010 |
|
Accumulated amortization as at the beginning of the period |
(1,789) |
(1,352) |
- |
(522) |
(3,663) |
|
Amortization charge for the period |
(314) |
(153) |
- |
(60) |
(527) |
|
Scrapping and sale |
29 |
91 |
- |
31 |
151 |
|
Other |
18 |
16 |
- |
14 |
48 |
|
Accumulated amortization as at the end of the period |
(2,056) |
(1,398) |
- |
(537) |
(3,991) |
|
Impairment losses as at the beginning of the period |
(95) |
(1) |
(4) |
- |
(100) |
|
Recognized during the period |
(3) |
- |
- |
- |
(3) |
|
Other |
1 |
- |
1 |
(1) |
1 |
|
Impairment losses as at the end of the period |
(97) |
(1) |
(3) |
(1) |
(102) |
|
Carrying amount as at the beginning of the period, net |
2,093 |
415 |
213 |
387 |
3,108 |
|
Carrying amount as at the end of the period, net |
1,968 |
433 |
151 |
365 |
2,917 |
|
Investment properties |
31.12.2023 |
31.12.2022 |
|
Gross carrying amount |
89 |
62 |
|
Accumulated depreciation |
(16) |
(23) |
|
Impairment losses |
(3) |
(3) |
|
|
|
|
|
Net carrying amount |
70 |
36 |
Financial information
• Centrum Elektronicznych Usług Płatniczych eService sp. z o.o.
The Bank holds shares entitling to 34% votes at the General Meeting of Shareholders, and the second is a shareholder of EVO International Payments Acquisition GmbH in Germany.
According to the agreement signed by the partners, regulating the principles of cooperation, decisions regarding the significant activities of the company require consent of both shareholders.
Both Shareholders have the right to appoint their representatives in the Supervisory Board: in the case of the Supervisory Board consisting of 5 members, PKO Bank Polski S.A. has the right to appoint 2 members (in the case of 7 members, PKO appoints 3 members). The Bank has two representatives on the Supervisory Board consisting of 7 people and indicates the independent member. Decisions reserved to the competence of the Supervisory Board regarding significant activities require the consent of at least one representative of PKO Bank Polski S.A. and one representative of the other shareholder.
• Operator Chmury Krajowej sp. z o.o.
The Bank holds shares in the Company which carry 50% of votes at the Shareholders’ Meeting, with Polski Fundusz Rozwoju S.A. being the other shareholder.
In accordance with the Company’s Articles of Association:
a) each of the shareholders is personally entitled to appoint and dismiss members of the Management Board and the Supervisory Board, with the Bank and PFR having the right to appoint an equal number of members of each of the said bodies;
b) additionally, the Bank has the exclusive right to appoint the President of the Management Board and PFR has the exclusive right to appoint the Chair of the Supervisory Board;
c) all key decisions relating to the Company’s operations must be taken by a unanimous resolution of the Supervisory Board or by a unanimous resolution of the Shareholders’ Meeting.
• BSafer sp. z o.o.
PKO VC - fizan (a subsidiary of PKO Bank Polski S.A.) holds the company’s shares carrying 35.06% of votes at the Shareholders’ Meeting, and the other majority shareholder of the company is Michał Pilch 59.740%.
Pursuant to the Articles of Association, decisions regarding the significant activities of the Company (i.e. activities that have a significant impact on the amount of returns generated by the Company, where returns are understood as e.g. dividends, increasing or decreasing the share capital of the Company, passing or returning additional payments, the value of the Company’s shares in the balance sheet of the shareholder) were reserved to the competence of the General Shareholders’ Meeting and require the consent of both shareholders.
|
JOINT VENTURES |
31.12.2023 |
31.12.2022 |
|
“Centrum Obsługi Biznesu" sp. z o.o. |
- |
- |
|
Acquisition price |
17 |
17 |
|
Change in net investment |
(17) |
(17) |
|
Centrum Elektronicznych Usług Płatniczych eService sp. z o.o. Group |
280 |
275 |
|
Value of shares as at the date of obtaining joint control |
197 |
197 |
|
Change in net investment |
139 |
130 |
|
Dividend |
(57) |
(53) |
|
Operator Chmury Krajowej sp. z o.o. |
4 |
10 |
|
Value of shares as at the date of obtaining joint control |
61 |
61 |
|
Change in net investment |
(57) |
(51) |
|
BSafer sp. z o.o. |
- |
- |
|
Acquisition price |
1 |
1 |
|
Impairment loss |
(1) |
(1) |
|
Total |
284 |
285 |
|
CHANGE IN INVESTMENTS IN JOINT VENTURES |
2023 |
2022 |
|
Investments in joint ventures as at the beginning of the period |
285 |
|
|
Share in profits and losses |
56 |
53 |
|
Dividend |
(57) |
(53) |
|
Investments in joint ventures as at the end of the period |
284 |
285 |
Selected information on joint ventures
A summary of the financial data separately for each joint venture of the Group is presented below. The amounts presented are derived from the financial statements of the individual entities prepared in accordance with the IFRSs or the Polish Accounting Standards (PAS). In the case of companies which have subsidiaries, the presented data is derived from the consolidated financial statements of these companies. The data for 2022 is derived from audited financial statements.
|
Centrum Elektronicznych Usług Płatniczych eService sp. z o.o. |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – IFRSs |
|
|
|
Current assets |
449 |
384 |
|
Non-current assets |
164 |
184 |
|
Current liabilities |
245 |
200 |
|
Non-current liabilities |
23 |
39 |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
643 |
621 |
|
Profit/(loss) for the period |
185 |
182 |
|
Other comprehensive income |
3 |
8 |
|
Total comprehensive income |
188 |
190 |
|
Dividends received from the company |
57 |
53 |
|
“Centrum Obsługi Biznesu" sp. z o.o. |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – PASs |
|
|
|
Current assets |
7 |
4 |
|
Non-current assets |
72 |
75 |
|
Current liabilities |
82 |
85 |
|
Non-current liabilities |
1 |
- |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
8,472 |
8,537 |
|
Profit/(loss) for the period |
7,844 |
8,121 |
|
Operator Chmury Krajowej sp. z o.o. |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – PASs |
|
|
|
Current assets |
185 |
130 |
|
Non-current assets |
49 |
59 |
|
Current liabilities |
62 |
119 |
|
Non-current liabilities |
4 |
33 |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
355 |
212 |
|
Profit/(loss) for the period |
(13) |
(20) |
|
BSafer sp. z o.o. (in PLN thousand) |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – PASs |
|
|
|
Current assets |
10 |
10 |
|
Non-current assets |
- |
15 |
|
Current liabilities |
160 |
35 |
|
Non-current liabilities |
- |
111 |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
1 |
- |
|
Profit/(loss) for the period |
(30) |
(50) |
The Group did not recognize any additional impairment losses on goodwill and investments in joint ventures in 2023 and 2022.
Financial information
• Bank Pocztowy S.A.
PKO Bank Polski S.A. is a significant investor – it holds 25% plus 10 votes at the Company’s shareholders’ meeting. Poczta Polska S.A. is the other shareholder. Through its representatives on the Supervisory Board and the Company’s Shareholders’ Meeting, the Bank participates in the policymaking process, including decisions on dividends and other ways of profit distribution.
• “Poznański Fundusz Poręczeń Kredytowych" sp. z o.o.
PKO Bank Polski S.A. holds 33.33% votes at the Company’s Shareholders’ Meeting. The Bank has two representatives on the Company’s Supervisory Board which consists of 4 people. Other shareholders have one representative each on the Supervisory Board. Through its representatives on the Supervisory Board and the Company’s Shareholders’ Meeting, the Bank participates in the policymaking process, including decisions on dividends and other ways of profit distribution.
• SYSTEM OCHRONY BANKÓW KOMERCYJNYCH S.A.
PKO Bank Polski S.A. holds shares in the company carrying 21.1% of the votes at the Shareholders' Meeting. The remaining shares are held by: Alior Bank S.A. (8.1% of shares), Bank Polska Kasa Opieki S.A. (14.7% of shares), Bank Millenium S.A. (8.5% of shares), BNP Paribas Bank Polska S.A. (9.4% of shares), ING Bank Śląski S.A. (13.0% of shares), mBank S.A. (12.2% of shares), Santander Bank Polska S.A. (12.9% of shares).
In accordance with the Company's Articles of Association:
a) key operational and financial decisions must be approved by the General Meeting, including, but not limited to, the following matters: granting of aid, granting of support, admission of a new bank to the protection scheme, making additional contributions to the aid fund, appointment and removal of the President of the Management Board, dissolution of the Company, cancellation of the liability for aid granted or any other act having such effect;
b) the number of members of the Supervisory Board corresponds to the number of shareholders of the company,
|
ASSOCIATES |
31.12.2023 |
31.12.2022 |
|
Bank Pocztowy S.A. |
- |
|
|
Acquisition price |
184 |
184 |
|
Change in net investment |
84 |
73 |
|
Impairment loss |
(268) |
(257) |
|
“Poznański Fundusz Poręczeń Kredytowych" sp. z o.o. |
- |
- |
|
Acquisition price |
2 |
2 |
|
Change in net investment |
5 |
4 |
|
Impairment loss |
(7) |
(6) |
|
Total |
- |
- |
|
CHANGE IN INVESTMENTS IN ASSOCIATES |
2023 |
2022 |
|
|
Value of investments in associates at the beginning of the period |
- |
||
|
Share in profits and losses |
41 |
19 |
|
|
Net impairment loss |
(11) |
- |
|
|
Share in the change in other comprehensive income |
(30) |
(19) |
|
|
Value of investments in associates at the end of the period |
- |
- |
|
As at 31 December 2023, and as at 31 December 2022, the parent entity did not have any share in contingent liabilities of associates acquired together with another investor.
Selected information on associates
A summary of the financial data separately for each associate of the Group was presented below. The amounts presented are derived from the financial statements of the individual entities prepared in accordance with the IFRSs or the Polish Accounting Standards (PAS). In the case of companies which have subsidiaries, the presented data is derived from the consolidated financial statements of these companies. The data for 2022 is derived from audited financial statements.
|
Bank Pocztowy S.A. (figures as published by the company) |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – IFRSs |
|
|
|
Total assets |
8,472 |
8,537 |
|
Total liabilities |
7,844 |
8,121 |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
345 |
596 |
|
Profit/(loss) for the period |
106 |
105 |
|
Other comprehensive income |
105 |
(93) |
|
Total comprehensive income |
211 |
12 |
|
“Poznański Fundusz Poręczeń Kredytowych" sp. z o.o. |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – PASs |
|
|
|
Current assets |
39 |
38 |
|
Current liabilities |
3 |
4 |
|
Non-current liabilities |
15 |
15 |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
3 |
2 |
|
Profit/(loss) for the period |
- |
- |
|
System Ochrony Banków Komercyjnych S.A. |
31.12.2023 |
31.12.2022 |
|
type of accounting standards – PASs |
|
|
|
Current assets |
12 |
28 |
|
Non-current assets |
- |
343 |
|
Current liabilities |
11 |
370 |
|
|
01.01-31.12.2023 |
01.01-31.12.2022 |
|
Revenue |
1 |
2 |
|
Profit/(loss) for the period |
- |
- |
Accounting policies:
Valuation and classification of other financial assets into categories is carried out in accordance with the principles for determining the business model and assessing the characteristics of contractual cash flows referred to in note “General accounting policies for financial instruments”.
Other financial assets recognized in this item are stated at amounts due, comprising also potential interest on such assets, taking into consideration provisions for expected credit losses.
Other non-financial assets are measured in accordance with the valuation principles applicable to specific categories of assets recognized in this item.
Inventories are measured at the lower of cost and net realisable value.
financial information
For more information on other financial assets in terms of credit risk exposure, see note “Credit risk – financial information”.
|
OTHER ASSETS |
31.12.2023 |
31.12.2022* |
|
Other financial assets |
1,474 |
1,850 |
|
Settlements in respect of card transactions |
480 |
620 |
|
Settlement of financial instruments |
143 |
134 |
|
Receivables in respect of cash settlements |
408 |
340 |
|
Receivables and settlements in respect of trading in securities |
28 |
24 |
|
Sale of foreign currencies |
30 |
- |
|
Trade receivables |
273 |
213 |
|
Other |
112 |
401 |
|
Other non-financial assets |
942 |
935 |
|
Inventories |
206 |
287 |
|
Assets for sale |
183 |
126 |
|
Prepayments and deferred costs |
163 |
131 |
|
VAT receivable |
33 |
45 |
|
Receivables from the State Budget in respect of flat-rate income tax |
- |
12 |
|
Receivables from settlements with the National Clearing House |
- |
1 |
|
Receivables from customers for whom the agreements have been legally declared invalid in respect of the principal originally disbursed to these customers. |
217 |
186 |
|
Other |
140 |
147 |
|
|
|
|
|
Total |
2,416 |
2,785 |
*The comparative figures for 2022 have been adjusted by PLN 19 million for the implementation of IFRS 17 "Insurance Contracts" (see note “IFRS 17 Insurance Contracts”).
• Other non-financial assets
|
OTHER NON-FINANCIAL ASSETS |
31.12.2023 |
31.12.2022 |
|
Gross amount |
1,300 |
1,274 |
|
Impairment losses |
(358) |
(337) |
|
Net carrying amount |
942 |
937 |
|
Other non-financial assets – CHANGES IN IMPAIRMENT LOSSES |
2023 |
2022 |
|
As at the beginning of the period |
(337) |
(330) |
|
Recognized during the period |
(74) |
(66) |
|
Derecognition of assets and settlements |
53 |
36 |
|
Reversed during the period |
20 |
27 |
|
Other |
(20) |
(4) |
|
As at the end of the period |
(358) |
(337) |
• Management of foreclosed collateral – item “assets for sale”
Foreclosed collaterals as a result of restructuring or debt collection activities are either designated for sale or used by the Group for internal purposes. Details of the foreclosed assets are analysed in order to determine whether they can be used by the Group for internal purposes. All of the assets foreclosed as a result of restructuring and debt collection activities in the years ended 31 December 2023 and 31 December 2022, respectively, were designated as held for sale. Activities undertaken by the Group are aimed at selling assets as soon as possible. The primary procedure for the sale of assets is an open tender. In justified cases, the sale follows a different procedure depending on the specifics of the sold property.
• Other non-financial assets – inventories
|
OTHER ASSETS – INVENTORIES |
31.12.2023 |
31.12.2022 |
|
Goods |
185 |
264 |
|
Materials |
23 |
22 |
|
Inventory write-downs |
(2) |
1 |
|
|
|
|
|
Total |
206 |
287 |
Accounting policies:
Valuation and classification of other liabilities into categories is carried out in accordance with the principles referred to in note “General accounting policies for financial instruments”.
Other financial liabilities included in this item are measured at amounts due which cover potential interest on the liabilities, and the accrual for future payments in reliably estimated, justified amounts necessary to meet the present obligation as at the end of the reporting period.
Other non-financial liabilities are measured in accordance with the measurement policies binding for particular types of liabilities recognized in this item.
Financial information
|
OTHER LIABILITIES |
31.12.2023 |
31.12.2022* |
|
Other financial liabilities |
6,084 |
4,385 |
|
Costs to be paid |
812 |
781 |
|
Interbank settlements |
1,011 |
868 |
|
Liabilities arising from investing activities and internal operations |
395 |
134 |
|
Amounts due to suppliers |
231 |
205 |
|
Liabilities and settlements in respect of trading in securities |
745 |
354 |
|
Settlement of financial instruments |
68 |
40 |
|
liabilities in respect of foreign exchange activities |
721 |
762 |
|
Liabilities in respect of payment cards |
980 |
315 |
|
Lease liabilities |
1,088 |
896 |
|
Other |
33 |
30 |
|
Other non-financial liabilities |
4,923 |
2,625 |
|
Deferred income |
620 |
560 |
|
Dividend payable to shareholders |
1,600 |
- |
|
Liability in respect of tax on certain financial institutions |
111 |
105 |
|
Liabilities in respect of a contribution to the Bank Guarantee Fund maintained in the form of payment obligations |
847 |
847 |
|
to the Resolution Fund |
461 |
461 |
|
to the Bank Guarantee Fund |
386 |
386 |
|
Liabilities under the public law |
1,057 |
478 |
|
Commitments relating to the reimbursement of principal and interest instalments paid by customers on invalidated mortgage loan agreements in convertible currencies |
165 |
132 |
|
Other |
523 |
503 |
|
|
|
|
|
Total |
11,007 |
7,010 |
*The comparative figures for 2022 have been adjusted by PLN 4 million for the implementation of IFRS 17 "Insurance Contracts" (see note “IFRS 17 Insurance Contracts”).
The item “Liabilities in respect of contributions to the Bank Guarantee Fund” includes an obligation to pay contributions to the BGF (see note “Assets pledged to secure liabilities and financial assets transferred”).
Accounting policies:
• Provisions for financial liabilities and guarantees granted
The provision for financial liabilities and guarantees is established at the amount of the expected credit losses (for details please see the note “Net expected credit losses”).
In the portfolio analysis, when determining provisions, portfolio parameters estimated using statistical methods are used, based on historical observations of exposures with the same characteristics, the parameters which define a marginal probability of evidence of impairment, the average utilization of an off-balance sheet liability and the level of anticipated loss in the event of impairment in subsequent months in the period from the reporting date to the horizon of the calculation of the anticipated loss.
With regard to exposures which are material on an individual basis, and are subject to assessment, the provision is determined on a case by case basis – as the difference between the expected amount of the balance sheet exposure which will arise as a result of an off-balance sheet liability at the date of overdue amounts arising treated as evidence of impairment, and the present value of the expected future cash flows obtained from the exposure.
• provisions for legal claims, excluding legal claims relating to mortgage loans in convertible currencies
The provisions for legal claims include disputes with business partners, customers and external institutions (e.g. UOKiK), and are created based on an evaluation of the probability of a court case being lost by the Group and the expected amount of payment (litigation pending has been discussed in the detail in the note “Legal claims”). Provisions for legal claims are recognized in the amount of expected outflow of economic benefits.
• Provisions for potential legal claims against the bank relating to mortgage loans in convertible currencies
The provisions are described in the note “Cost of the legal risk of mortgage loans in convertible currencies”.
• Provisions for refunds of costs to the customers on early repayment of consumer loans
The amount of the provision for refunds of costs to customers on early repayment of consumer loans is affected by the percentage of prepaid consumer loans, expected amount of consumer claims referring to refunds of loan costs prepaid before the balance sheet data and the average amount of the refund. The expected amount of consumer claims and the average amount of the refund are based on the historical data relating to the number of claims filed and the average amounts of the refunds to customers.
• provision for pensions and other defined post-employment benefits
The provision for retirement and disability benefits resulting from the Labour Code is recognized individually for each employee on the basis of an actuarial valuation. The provision for employee benefits is determined on the basis of the Group’s internal regulations.
Valuation of the provision for employee benefits is performed using actuarial techniques and assumptions. The calculation of the provision includes all retirement and pension benefits expected to be paid in the future. The provision was recognized on the basis of a list of persons with all necessary employee information, in particular the length of their service, age and gender. The provisions calculated are equal to discounted future payments, taking into account staff turnover.
• provision for accrued holiday entitlements
The provision for accrued holiday entitlements is recognized at the amount of expected inflows of cash, excluding discounting, based on the number of days of holiday remaining to be utilized by the Bank’s employees and average monthly salary.
• other provisions
Other provisions mainly include provisions for potential claims on the sale of receivables, described in detail in the Note “Information on securitization of the lease portfolio and package sale of receivables”.
Provisions for future payments are measured at reliably estimated, justified amounts necessary to meet the present obligation as at the end of the reporting period. All provisions are recognized in the profit and loss account, excluding actuarial gains and losses recognized in other comprehensive income.
If the effect of the time value of money is material, the amount of the provision is determined by discounting the estimated future cash flows to their present value, using the discount rate before tax which reflects the current market assessments of the time value of money and the potential risk related to a given obligation.
Estimates and judgments:
|
COMPONENTS AFFECTING THE PROVISION AMOUNT (%) |
31.12.2023 |
31.12.2022 |
|
financial discount rate adopted |
5.20 |
6.80 |
|
weighted average ratio of employee mobility |
9.33 |
9.46 |
|
average remaining period of service in years |
7.45 |
7.40 |
|
10-year average assumed annual increase in the basis calculation of retirement benefits |
2.83 |
3.55 |
The impact of the increase/decrease in the financial discount rate and of the planned increases of 1 p.p. in the provision base on the decrease/increase in the value of the provision for retirement and other defined benefit post- employment plans as at 31 December 2023 and as at 31 December 2022 is presented in the tables below:
|
ESTIMATED CHANGE IN PROVISION for pensions and other liabilities in respect of defined post-employment benefits |
31.12.2023 |
31.12.2022 |
||
|
+1pp scenario |
-1pp scenario |
+1pp scenario |
-1pp scenario |
|
|
|
|
|
|
|
|
Discount rate |
5 |
(4) |
5 |
|
|
Planned increases in base amounts |
6 |
(5) |
6 |
(4) |
The Group performed a sensitivity analysis of the provision for reimbursement for customers on early repayments of consumer and mortgage loans before the balance sheet date as at 31 December 2023 and 31 December 2022 due to changes in the number of claims and average value of a refund.
|
ESTIMATED CHANGE IN PROVISION |
Change in the number of claims |
Change in the average amount of reimbursement |
||
|
-10% |
10% |
-10% |
10% |
|
|
31.12.2023 |
(1) |
1 |
(1) |
1 |
|
31.12.2022 |
(1) |
1 |
(1) |
1 |
Financial information
|
FOR THE YEAR ENDED 31 DECEMBER 2023 |
Provisions for financial liabilities and guarantees granted¹ |
Provisions for legal claims, excluding legal claims relating to repaid mortgage loans in convertible currencies |
Provisions for legal claims against the bank relating to mortgage loans in convertible currencies |
Provisions for refunds of costs to customers on early repayment of consumer and mortgage loans |
Provisions for pensions and other defined post-employment benefits |
Restructuring |
Provision for accrued holiday entitlements |
Other provisions, including provisions for employee disputed claims |
Total |
|
As at the beginning of the period |
833 |
103 |
851 |
18 |
66 |
35 |
119 |
65 |
2,090 |
|
Increases, including increases of existing provisions |
9 |
17 |
2,384 |
- |
14 |
- |
36 |
29 |
2,489 |
|
Utilized amounts |
- |
(2) |
(234) |
(9) |
(6) |
(6) |
(13) |
(39) |
(309) |
|
Unused provisions reversed during the period |
(82) |
(3) |
- |
- |
(2) |
- |
(3) |
(6) |
(96) |
|
Other changes and reclassifications |
(9) |
(1) |
- |
1 |
- |
- |
(1) |
1 |
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
As at the end of the period |
751 |
114 |
3,001 |
10 |
72 |
29 |
138 |
50 |
4,165 |
|
Short-term provisions |
595 |
7 |
- |
9 |
13 |
29 |
138 |
8 |
799 |
|
Long-term provisions |
156 |
107 |
3,001 |
1 |
59 |
- |
- |
42 |
3,366 |
1 See note “Credit risk – financial information”.
|
FOR THE YEAR ENDED 31 DECEMBER 2022 |
Provisions for financial liabilities and guarantees granted¹ |
Provisions for legal claims, excluding legal claims relating to repaid mortgage loans in convertible currencies |
Provisions for legal claims against the bank relating to mortgage loans in convertible currencies |
Provisions for refunds of costs to customers on early repayment of consumer and mortgage loans |
Provisions for pensions and other defined post-employment benefits |
Restructuring |
Provision for accrued holiday entitlements |
Other provisions, including provisions for employee disputed claims |
Total |
|
As at the beginning of the period |
675 |
106 |
595 |
17 |
57 |
47 |
111 |
49 |
1,657 |
|
Increases, including increases of existing provisions |
159 |
12 |
383 |
13 |
16 |
- |
36 |
51 |
670 |
|
Utilized amounts |
- |
(8) |
(127) |
(12) |
(5) |
(12) |
(15) |
(34) |
(213) |
|
Unused provisions reversed during the period |
(2) |
(7) |
- |
- |
(1) |
- |
(13) |
(2) |
(25) |
|
Other changes and reclassifications |
1 |
- |
- |
- |
(1) |
- |
- |
1 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
As at the end of the period |
833 |
103 |
851 |
18 |
66 |
35 |
119 |
65 |
2,090 |
|
Short-term provisions |
688 |
6 |
- |
17 |
10 |
35 |
119 |
7 |
882 |
|
Long-term provisions |
145 |
97 |
851 |
1 |
56 |
- |
- |
58 |
1,208 |
1 See note “Credit risk – financial information”.
|
Provisions for disability and retirement benefits(actuarial provision) |
2023 |
2022 |
|
Liability at the beginning of the period |
63 |
53 |
|
Current service cost |
2 |
3 |
|
Interest expense |
4 |
2 |
|
Actuarial (gains) and losses recognized in other comprehensive income |
4 |
9 |
|
Benefits paid |
(4) |
(4) |
|
Liability at the end of the period (net) |
69 |
63 |
|
Breakdown of actuarial gains and losses (actuarial provision) |
Total amount of provisions |
|
|
2023 |
2022 |
|
|
Change in financial assumptions |
7 |
(10) |
|
Change in demographic assumptions |
1 |
- |
|
Other changes |
(4) |
19 |
|
Total actuarial (gains) and losses |
4 |
9 |
Accounting policies:
For the principles of recognising provisions for off-balance sheet commitments granted, see the note "Provisions".
Upon initial recognition financial guarantee agreements are stated at fair value. In subsequent periods, as at the balance sheet date, financial guarantees are measured at the higher of:
• allowances for expected credit losses; or
• the amount of commission recognized initially, less accumulated amortization in accordance with IFRS 15.
Financial information
• Securities programmes covered with underwriting agreements (maximum Group’s commitment to take up securities)
As at 31 December 2023 and 31 December 2022, no underwriting agreements have been entered into.
|
VALUE OF CONTRACTUAL COMMITMENTS CONCERNING |
31.12.2023 |
31.12.2022 |
|
intangible assets |
81 |
|
|
property, plant and equipment |
98 |
141 |
|
Total |
183 |
222 |
• Financial and guarantee commitments granted
|
FINANCIAL AND GUARANTEE COMMITMENTS GRANTED 31.12.2023 |
Total |
Provisions per IFRS 9 |
Net carrying amount |
|
Credit lines and limits |
79,038 |
(641) |
78,397 |
|
real estate |
6,898 |
(20) |
6,878 |
|
business |
56,333 |
(498) |
55,835 |
|
consumer |
10,780 |
(123) |
10,657 |
|
in respect of factoring |
4,289 |
- |
4,289 |
|
in respect of finance leases |
738 |
- |
738 |
|
Other |
3,884 |
- |
3,884 |
|
Total financial commitments granted, including: |
82,922 |
(641) |
82,281 |
|
irrevocable commitments granted |
29,830 |
(392) |
29,438 |
|
POCI |
2 |
- |
2 |
|
|
|
|
|
|
Guarantees and sureties granted |
|
|
|
|
guarantees in domestic and foreign trading |
10,615 |
(107) |
10,508 |
|
to financial entities |
2,679 |
- |
2,679 |
|
to non-financial entities |
7,807 |
(107) |
7,700 |
|
to public entities |
129 |
- |
129 |
|
domestic municipal bonds (state budget entities) |
243 |
- |
243 |
|
letters of credit |
1,277 |
(3) |
1,274 |
|
to financial entities |
30 |
- |
30 |
|
to non-financial entities |
1,247 |
(3) |
1,244 |
|
payment guarantees to financial entities |
101 |
- |
101 |
|
Total guarantees and sureties granted, including: |
12,236 |
(110) |
12,126 |
|
irrevocable commitments granted |
5,503 |
(94) |
5,409 |
|
performance guarantee |
3,592 |
(57) |
3,535 |
|
POCI |
452 |
(2) |
450 |
|
|
|
|
|
|
Total financial and guarantee commitments granted |
95,158 |
(751) |
94,407 |
|
FINANCIAL AND GUARANTEE COMMITMENTS GRANTED 31.12.2022 |
Total |
Provisions per IFRS 9 |
Net carrying amount |
|
Credit lines and limits |
70,380 |
(590) |
69,790 |
|
real estate |
3,683 |
(21) |
3,662 |
|
business |
52,455 |
(414) |
52,041 |
|
consumer |
10,650 |
(155) |
10,495 |
|
in respect of factoring |
2,749 |
- |
2,749 |
|
in respect of finance leases |
843 |
- |
843 |
|
Other |
2,825 |
- |
2,825 |
|
Total financial commitments granted, including: |
73,205 |
(590) |
72,615 |
|
irrevocable commitments granted |
30,579 |
(301) |
30,278 |
|
POCI |
5 |
(1) |
4 |
|
|
|
|
|
|
Guarantees and sureties granted |
|
|
|
|
guarantees in domestic and foreign trading |
10,578 |
(236) |
10,342 |
|
to financial entities |
2,735 |
- |
2,735 |
|
to non-financial entities |
7,772 |
(236) |
7,536 |
|
to public entities |
71 |
- |
71 |
|
domestic municipal bonds (state budget entities) |
315 |
- |
315 |
|
Letters of credit |
1,514 |
(7) |
1,507 |
|
to non-financial entities |
1,514 |
(7) |
1,507 |
|
payment guarantees to financial entities |
71 |
- |
71 |
|
Total guarantees and sureties granted, including: |
12,478 |
(243) |
12,235 |
|
irrevocable commitments granted |
4,812 |
(234) |
4,578 |
|
performance guarantee |
3,640 |
(203) |
3,437 |
|
POCI |
284 |
(5) |
279 |
|
|
|
|
|
|
Total financial and guarantee commitments granted |
85,683 |
(833) |
84,850 |
For more information on credit risk exposures, see note “Credit risk – financial information”.
• nominal value of commitments granted by maturity
|
COMMITMENTS GRANTED BY MATURITY AS AT 31.12.2023 |
up to 1 month (inclusive) |
1 to 3 months (inclusive) |
3 months to 1 year (inclusive) |
1 year to 5 years inclusive |
more than 5 years |
Total |
|
|
|
|
|
|
|
|
|
commitments granted – financial |
17,208 |
4,606 |
32,016 |
17,464 |
11,628 |
82,922 |
|
commitments granted - guarantees and sureties |
930 |
1,404 |
3,600 |
4,495 |
1,807 |
12,236 |
|
|
|
|
|
|
|
|
|
Total |
18,138 |
6,010 |
35,616 |
21,959 |
13,435 |
95,158 |
|
COMMITMENTS GRANTED BY MATURITY AS AT 31.12.2022 |
up to 1 month (inclusive) |
1 to 3 months (inclusive) |
3 months to 1 year (inclusive) |
1 year to 5 years inclusive |
more than 5 years |
Total |
|
|
|
|
|
|
|
|
|
commitments granted – financial |
14,588 |
5,101 |
26,792 |
18,860 |
7,864 |
73,205 |
|
commitments granted - guarantees and sureties |
519 |
937 |
4,098 |
4,632 |
2,292 |
12,478 |
|
|
|
|
|
|
|
|
|
Total |
15,107 |
6,038 |
30,890 |
23,492 |
10,156 |
85,683 |
• Off-balance sheet liabilities received
|
OFF-BALANCE SHEET LIABILITIES RECEIVED BY NOMINAL VALUE |
31.12.2023 |
31.12.2022 |
|
Financial |
132 |
110 |
|
Guarantees |
19,361 |
9,516 |
|
|
|
|
|
Total |
19,493 |
9,626 |
The increase in off-balance sheet guarantee liabilities received is due, among other things, to the guarantee agreement entered into by the Group on 27 February 2023, providing unfunded credit protection in respect of a portfolio of selected corporate credit receivables of the Bank, in accordance with the CRR. The total value of the Bank's debt portfolio covered by this guarantee is over PLN 12,292 million, and the portfolio consists of the bond portfolio of PLN 1,515 million (“Portfolio A”) and the portfolio of other receivables of PLN 10,777 million (“Portfolio B”). The coverage ratio is 100% for Portfolio A and 80% for Portfolio B, therefore the total Guarantee amount is PLN 10,137 million. The maximum time of coverage under the Guarantee is 60 months, however the Group is entitled to terminate the Guarantee prior to the expiry of this period.
As at 31 December 2023, the total value of the subject matter of litigation in court proceedings (trials) pending in which the companies belonging to the PKO Bank Polski S.A. Group were defendants amounted to PLN 13,110 million (as at 31 December 2022: PLN 8,254 million), and the total value of the subject matter of litigation in court proceedings (trials) pending in which the companies belonging to the PKO Bank Polski S.A. Group were claimants as at 31 December 2023 was PLN 4,519 million (as at 31 December 2022: PLN 2,808 million).
• litigation against the Bank relating to mortgage loans in convertible currencies
As at 31 December 2023, 30,498 on court proceedings were pending against the Bank (as at 31 December 2022: 19,522) relating to mortgage loans granted in previous years in foreign currency with a total value in dispute of PLN 11,948 million (as at 31 December 2022: PLN 7,725 million), including one group proceeding with 72 loan agreements. The subject matter of the Bank’s customers’ actions are mainly claims for declaration of invalidity of an agreement or for payment of amounts paid by the customer to the Bank in performance of an invalid agreement. Customers allege abusive provisions and/or that the agreements are contrary to the law. None of the clauses used by the Bank in the agreements was entered in the register of prohibited contractual clauses. The number of lawsuits filed by customers against the Bank is significantly influenced by the intensive advertising campaign of law firms, which encourages borrowers to commission to them – for a fee – conducting cases against banks.
The Group monitors the status of court rulings in cases indexed or denominated in foreign currencies on an ongoing basis with respect to the shaping and possible changes in rulings.
As at 31 December 2023, 2,696 final rulings have been issued by the courts in cases against the Bank (including 2,653 rulings after 3 October 2019). 138 of these rulings (including in 97 rulings issued after 3 October 2019) are favourable for the Bank.
On 29 January 2021, in connection with the discrepancies in the interpretation of legal provisions in the jurisprudence of the Supreme Court and common courts and in order to ensure the uniformity of jurisprudence, the First President of the Supreme Court submitted a request for the full panel of the Civil Chamber of the Supreme Court to resolve the following legal issues concerning the subject of loans denominated and indexed in foreign currencies (legal basis: Article 83 § 1 of the Act of 8 December 2017 on the Supreme Court):
1. If a provision of an indexed or denominated loan agreement relating to the method of determining the foreign currency exchange rate is found to constitute an illicit contractual provision and is not binding on the consumer – is it then possible to assume that another method of determining the foreign currency exchange rate resulting from law or custom takes its place?
If the above question is answered in the negative:
2. In the event that it is impossible to establish a foreign currency exchange rate binding on the parties in a loan agreement indexed to such a currency, can the remainder of the agreement still be binding for the parties?
3. If it is not possible to establish a binding rate for a foreign currency in a loan agreement denominated in a foreign currency, can the remainder of the agreement still be binding for the parties?
Notwithstanding the content of the answers to questions 1 to 3:
4. In the event of the invalidity or ineffectiveness of a loan agreement, in the performance of which the bank disbursed to the borrower all or part of the amount of the loan and the borrower made repayments of the loan, do separate claims for wrongful performance arise for each of the parties, or does only a single claim arise, equal to the difference in performance, for the party whose total performance was higher?
5. Where a loan agreement is invalid or ineffective as a result of the unlawful nature of certain of its terms, does the limitation period for the bank’s claim for repayment of the sums paid under the loan begin to run from the time at which those sums were paid?
6. If, in the case of the invalidity or ineffectiveness of a loan agreement, either party has a claim for repayment of a performance made in performance of that agreement, may that party also claim a fee for the use of its funds by the other party?
A session of the full composition of the Civil Chamber for the examination of the aforementioned application was held on 11 May 2021. Before passing its resolution, the Supreme Court decided to consult five public institutions. Their opinions were prepared and sent to the Supreme Court. On 2 September 2021, the Supreme Court decided to apply to the CJEU for preliminary rulings on questions relating to the judicial system, which do not directly concern the issue of foreign currency loans. In its order of 9 January 2024 in Case C-658/22, the CJEU refused to answer the Supreme Court's questions, finding that the Supreme Court's request for a preliminary ruling was manifestly inadmissible.
In 2021, two resolutions of the Supreme Court and one ruling of the Court of Justice of the European Union were issued, which are significant from the perspective of the claims of Swiss franc borrowers. On 7 May 2021, the Supreme Court, represented by 7 judges of the Civil Chamber, passed the following resolution in case III CZP 6/21:
1) A prohibited contractual clause (Article 3851 § 1 of the Civil Code) is, from the beginning, by operation of law, ineffective in favour of the consumer, who may however subsequently grant an informed and voluntary consent for such a clause and thus make it effective retrospectively.
2) If a loan agreement cannot be binding without the ineffective clause, the consumer and the lender are entitled to bring separate claims for repayment of the benefits provided in the performance of the agreement (Article 410 § 1 in conjunction with Article 405 of the Civil Code). The lender may claim repayment of the benefit from the moment the loan agreement became permanently ineffective.
The resolution has the force of a legal rule, which means that an ordinary panel of the Supreme Court may not withdraw from the interpretation presented in an earlier resolution that has the force of a legal rule. If any panel of the Supreme Court intends to withdraw from a legal rule, it must present the legal issue for resolution to the full panel of the Chamber. In its justification for the said resolution, the Supreme Court referred to an earlier opinion (resolution III CZP 11/20 dated 16 February 2021) that the period of limitation of claims resulting from a loan agreement which is invalid due to the elimination of abusive clauses commences after the consumer has expressed informed consent not to be bound by the abusive clauses.
The Supreme Court decided that since a consumer has the right to remedy an abusive contractual clause and express his/her willingness to be bound by it, the lender cannot be certain whether the agreement is effective until the consumer makes such a decision, and the agreement is ineffective (suspended) until such time. The lender’s claims may not arise before such ineffectiveness (suspension) ceases to exist (which generally occurs as a result of the borrower’s statement), and therefore the period of limitation commences at that moment.
Taking into account the content of the Supreme Court’s resolution III CZP 6/21 and the non-uniform decisions of the common courts made against it, the Bank has filed lawsuits against customers whose agreements have been validly annulled, or whose lawsuits calls for payment based on the premise of invalidity derived from abusiveness were served on the Bank before 31 December 2020, for reimbursement of amounts disbursed in connection with the conclusion of an agreement whose validity has been questioned.
In its ruling of 15 June 2023 in Case C-520/21, the CJEU ruled that if a loan agreement containing unfair terms is declared invalid, Directive 93/13: (i) does not preclude a judicial construction of national law whereby a consumer is entitled to claim compensation from a credit institution that goes beyond reimbursement of the monthly instalments and fees paid for performance of that agreement and beyond payment of the statutory interest for late payment from the date of the call for payment, provided that the objectives of Directive 93/13 and the principle of proportionality are complied with, and that (ii) precludes a judicial construction of national law whereby a credit institution is entitled to demand compensation from a consumer that goes beyond the reimbursement of the principal paid for the performance of that agreement and beyond the payment of statutory default interest from the date of the call for payment.
In the Bank's opinion, on the grounds of national legislation and the principle of proportionality, the customers cannot make additional claims against the Bank, primarily because they have not provided the Bank with a financial service consisting in the provision of capital. Nor is it reasonable to conclude that the Bank has enriched itself at the expense of the customer and the consumer has been impoverished. With the funds obtained, the customer met its housing needs and the Bank bore the costs of raising the funds, making them available and servicing the loan over the years. Even if it were to be considered that there were legal grounds for the customers' claims, the customer's claims would not necessarily be upheld and the courts may exercise their jurisdiction to dismiss the action when it constitutes an abuse of rights. At present, there is no case law on such customer claims.
With regard to the banks' ability to pursue claims beyond the reimbursement of the capital paid in nominal terms, the CJEU also expressed its position in two orders issued at the end of 2023 and the beginning of 2024. In an order of 11 December 2023, the CJEU ruled that a banking institution is not entitled to demand from a consumer the reimbursement of amounts other than the capital paid for the performance of that agreement and statutory default interest from the time of the demand for payment. In this ruling, the CJEU, as in judgment C-520/21, did not explicitly rule out adjustment, leaving the possibility for banks to pursue this claim open. However, by another decision, issued in Case C-488/23 of 12 January 2024, the CJEU definitively determined that Banks are not able to claim adjustment from customers if the invalidity of the agreement is a consequence of the removal of abusive clauses from the agreement. The CJEU thus ruled that banks may not demand compensation from consumers consisting of a judicial adjustment of the payment corresponding to that capital, in the event of a substantial change in the purchasing power of the currency concerned after the transfer of that capital to the consumer. In the Bank's view, the CJEU's order goes beyond the framework of Directive 93/13, which does not apply to non-contractual obligations, and is in clear contradiction with the principles of social justice by favouring a specific group of borrowers over the rest of society.
• LITIGATION AGAINST THE BANK CONCERNING MORTGAGE LOANS BEARING INTEREST AT A FLOATING RATE
As at 31 December 2023, 147 court proceedings were pending against the Group (as at 31 December 2022: 5 lawsuits), in which customers challenge that the mortgage agreement was based on a floating interest rate structure and the rules for setting the WIBOR benchmark rate. The Group disputes the validity of the claims raised in these cases.
• LITIGATION AGAINST THE BANK CONCERNING THE FREE CREDIT SANCTION
As at 31 December 2023, there were 1,159 court proceedings pending against the Bank relating to the free credit sanction, with a total value in dispute of PLN 20.7 million. These proceedings are initiated by customers or entities that have acquired receivables from them and relate to the provisions of cash loan agreements. The Bank disputes the validity of the claims raised in these cases. The case law to date is largely in favour of the Bank.
• ACTIVITIES OF THE GROUP UNDERTAKEN IN CONNECTION WITH A PROPOSAL OF THE CHAIR OF THE POLISH FINANCIAL SUPERVISION AUTHORITY AND THE EXPECTED MEETING OF THE SUPREME COURT REGARDING LOANS GRANTED IN FOREIGN CURRENCIES
In December 2020, the Chair of the Polish Financial Supervision Authority (hereinafter: the PFSA Chair) made a proposal aimed at providing a systemic solution to the problem of housing loans in Swiss francs. In accordance with this solution, the banks would voluntarily offer settlement agreements to their customers. Under such agreements, the customers would repay their loans to the bank as if they had been originally granted in PLN with interest at WIBOR plus a historical margin applied to such loans.
The Group has analysed the benefits and risks associated with the possible approaches to the issue of foreign currency housing loans. In the Group’s opinion, for both the Bank and its customers it is better to reach a compromise and conclude a settlement agreement than engage in long legal disputes whose outcome is uncertain.
On 23 April 2021, the Extraordinary General Shareholders’ Meeting approved the possibility of offering settlement agreements to the customers. Subsequently, by a resolution dated 27 May 2021, the Supervisory Board approved the terms and conditions for offering settlement agreements proposed by the PFSA Chair. The process of amicable resolution of disputes concerning the validity of housing loan agreements was launched on 4 October 2021. The settlements are offered during mediation proceedings conducted by the Mediation Centre of the PFSA Court of Arbitration, during court proceedings and during proceedings initiated by a motion for settlement (see note: Cost of legal risk of mortgage loans in convertible currencies).
• Proceedings before the President of the Office of Competition and Consumer Protection (UOKiK)
• PROCEEDINGS REGARDING MODIFICATION CLAUSES
Proceedings initiated on 12 March 2019 on the acknowledgement that the provisions of the template agreement are inadmissible. The proceedings are related to modification clauses which specify the circumstances in which the Bank is entitled to amend the terms and conditions of the agreement, including the amount of fees and commission. In the opinion of the President of UOKiK the modification clauses applied by the Bank give the Bank unilateral unlimited and arbitrary possibilities of modifying the execution of the agreement. Consequently, the President of UOKiK is of the opinion that the clauses applied by the Bank shape the rights and obligations of the consumers in a way that is contrary to good practice and are a gross violation of their interests, which justifies the conclusion that they are abusive. In a letter of 31 May 2019, the Bank commented on the allegations of the President of UOKiK, indicating that they are unfounded. The Bank pointed out, among other things, that the contested clauses are specific and they precisely define the circumstances entitling the Bank to change the template. By order of 7 June 2022, UOKiK summoned the Bank to provide a range of information regarding the disputed clauses, the Bank's turnover and the revenue generated from changes in fees and commissions based on the disputed clauses. The UOKiK summons was implemented on 11 July and 30 September 2022. By subsequent orders, the President of UOKiK extended the deadline for the completion of the proceedings. The current deadline indicated by the President of UOKiK is 29 March 2024. As at 31 December 2023, the Group had not set up a provision for these proceedings.
• PROCEEDINGS REGARDING UNAUTHORIZED TRANSACTIONS
providing consumers - in responses to reports of unauthorised payment transactions - with information that the Bank has established the consumer's responsibility for the transaction reported, based on ascertaining that the authentication process performed was correct and referencing the provisions of the General Terms and Conditions of keeping bank accounts and providing services to individual customers by PKO Bank Polski S.A. regarding gross negligence and intent, without specifying to the consumer the factual basis for gross negligence or intent, and thus the presumption of gross negligence or intent without proving it, which misleads consumers about the entrepreneur's obligations under Article 45(2) of the Act on payment services with respect to the burden of proving gross negligence on the part of the consumer and the further pursuit of claims in this regard, which may constitute an unfair market practice and harm the collective interests of consumers,
making a refund to a consumer who is a customer of the Bank of the amount of a payment transaction reported by that consumer as unauthorised, pending the Bank's investigation of the complaint, and thereafter, if the Bank finds, during the complaint procedure, that the transaction was authorised by the consumer or that the consumer is liable for an unauthorised payment transaction, withdrawing the conditional return and deducting that amount from the consumer's current account or credit card account, except where there is a simultaneous return of that amount to the consumer under the so-called chargeback mechanism, which may breach Article 46(1) of the Act on payment services and harm the collective interests of consumers.
• Proceedings initiated by the President of UOKIK on 26 July 2017 concerning using practices which violate the collective interests of consumers have been concluded. The Bank was charged with collecting higher instalments on loans and advances denominated in foreign currencies than those arising from the information on foreign exchange risk presented to the consumers before concluding agreements and transferring potential foreign exchange risk to the consumers. By decision of 27 November 2023, the President of the UOKiK discontinued the proceedingsProceedings initiated by the President of UOKIK on 26 July 2017 concerning using practices which violate the collective interests of consumers have been concluded. The Bank was charged with collecting higher instalments on loans and advances denominated in foreign currencies than those arising from the information on foreign exchange risk presented to the consumers before concluding agreements and transferring potential foreign exchange risk to the consumers. By decision of 27 November 2023, the President of the UOKiK discontinued the proceedings.
• Proceedings before the court of competition and consumer protection
Two proceedings involving the Bank are pending before the Court of Competition and Consumer Protection:
• Proceedings on spread clauses
The proceedings were initiated by the Bank’s appeal (submitted on 13 November 2020) against the decision of the President of UOKiK dated 16 October 2020. In the said decision, the President of UOKiK declared the provisions of the template agreement “Annex to the housing loan/mortgage loan agreement” in the section “Appendix to the annex ‘Rules for determining foreign exchange spreads at PKO BP S.A.’” as inadmissible provisions and prohibited their use.
In addition, the President of UOKiK ordered that all consumers being parties to the assessed annexes about the decision to declare them inadmissible and its consequences be informed no later than within nine months from the effective date of the decision and ordered that a declaration be published whose text was indicated in the decision on the Bank’s website not later than 1 month from the effective date of the decision and to keep it there for 4 months. Furthermore, the President of UOKiK imposed a fine on the Bank of PLN 41 million, payable to the Financial Education Fund.
In its appeal against that decision, the Bank requested that the decision be amended by finding that there had been no breach of the ban on the use of prohibited contractual clauses, or by discontinuing the proceedings. It was also requested that the decision be annulled or amended by waiving or substantially reducing the fine. The appeal raised a number of substantive and procedural grounds of appeal. The Bank’s main arguments consist in pointing out that the decision of the President of UOKiK is a manifestation of unlawful and groundless interference with the Bank’s pricing policy, pointing out that there are no substantive grounds for the intervention of the President of UOKiK, i.e. there are no grounds for concluding that the Bank applied prohibited contractual provisions, and pointing out that the penalty imposed on the Bank is abnormally high. In response to the appeal, the President of UOKiK sustained the position expressed in the decision appealed against. In a judgment of 10 October 2023, the Court of Competition and Consumer Protection overturned the decision of the UOKiK in its entirety.
The ruling was appealed by the President of the UOKiK and the public prosecutor. At 31 December 2023, the Bank recognises a provision for these proceedings of PLN 41 million (31 December 2022: PLN 41 million).
• Proceedings related to restrictive practices on the market of payments with payment cards in Poland
The Bank is a party to proceedings initiated by the President of UOKiK on the basis of a decision dated 23 April 2001 upon the request of the Polish Trade and Distribution Organization – Employers Association (Polska Organizacja Handlu i Dystrybucji – Związek Pracodawców) against operators of the Visa and Europay payment systems and banks issuing Visa and Europay/ Eurocard/ Mastercard banking cards.
The claims under these proceedings relate to the use of practices limiting competition on the market of banking card payments in Poland, consisting of applying pre-agreed “interchange” fees for transactions made using the Visa and Europay/Eurocard/Mastercard cards as well as limiting access to this market for external entities.
On 29 December 2006, the UOKiK recognised practices involving the joint determination of interchange fees as restrictive of competition and ordered them to be abandoned, at the same time imposing, inter alia, a fine of PLN 16.6 million on the Bank. The Bank appealed against the decision of the President of UOKiK to the Court for Competition and Consumer Protection (Sąd Ochrony Konkurencji i Konsumentów - SOKiK). In its ruling dated 21 November 2013, SOKiK reduced the penalty imposed on the Bank to PLN 10.4 million.
The parties to the proceedings appealed against the ruling. The Court of Appeal in Warsaw in its ruling dated 6 October 2015 reinstated the initial amount of the imposed fines set in the decision of the UOKiK, i.e. the fine of PLN 16.6 million (the fine imposed on PKO Bank Polski S.A.) and the fine of PLN 4.8 million (the fine imposed on Nordea Bank Polska S.A., and PKO Bank Polski S.A. is a legal successor of Nordea Bank Polska SA through a merger under Article 492 § 1(1) of the Commercial Companies Code). The Bank paid the fine in October 2015. As a result of a cassation appeal brought by the Bank, the Supreme Court in a ruling dated 25 October 2017 annulled the contested ruling of the Court of Appeal in Warsaw and submitted the case for re-examination. The fine paid by the Bank was reimbursed to the Bank on 21 March 2018. On 23 November 2020, the Court of Appeal in Warsaw issued a ruling in which it revoked the ruling of the District Court in Warsaw dated 21 November 2013 and submitted it for re-examination. The case is currently proceeding at first instance before the Warsaw District Court. At 31 December 2023, the Group recognises a provision for these proceedings of PLN 21 million (31 December 2022: PLN 21 million).
• proceedings before the Polish Financial Supervision Authority
• Administrative proceedings initiated ex officio by the Polish Financial Supervision Authority (PFSA) are pending against the Bank. According to the PFSA's letters, irregularities have been identified which indicate that the Bank (as an insurance agent) has breached the legislation on the organisation and supervision of agency activities at the insurance agent's premises, to the extent related to the fulfilment of the obligation of professional development by individuals performing agency activities on behalf of the Bank. In the course of the proceedings, the Bank took steps to rectify the irregularities in the area of supervision of the performance of agency activities by individuals acting on behalf of the Bank, including with regard to compliance with the fulfilment of continuing professional development obligations by such individuals in subsequent years. The proceedings have been extended several times, most recently by an order of 30 November 2023 for an additional period of three months. Formally, the PFSA has not formulated the specific allegations underlying the proceedings. As at 31 December 2023, the Group had not set up a provision for these proceedings.
• The PFSA is conducting proceedings to impose an administrative penalty on the Bank, which conducts brokerage activities through an organisationally separate unit - the Brokerage Office - in connection with a suspected failure to comply with its obligations in the area of anti-money laundering and terrorist financing (hereinafter: "AML"). The Bank responded to the PFSA's request for written explanations regarding the scale of benefits achieved or losses avoided by the Bank in connection with violations of the AML Act, losses incurred by third parties in connection with violations of the AML Act, possible administrative penalties imposed under the provisions of the AML Act. In addition, the PFSA forwarded to the Bank's attention a letter addressed to the General Inspectorate of Financial Information (GIIF) requesting information on the Bank's violations of the AML Act to date. On 29 December 2023, the PFSA communicated a notice that, due to the need for an in-depth analysis of the evidence collected, the administrative proceedings are scheduled to be completed by 29 February 2024. As at 31 December 2023, the Group had not set up a provision for these proceedings.
• The PFSA is conducting proceedings to impose a monetary penalty on the Bank pursuant to Article 176i(1)(4) of the Act of 29 July 2005 on trading in financial instruments, in connection with the Bank's suspected breach of the management and control requirements set out in Article 16 of the Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 2016 No 171, p. 1 as amended). By letter dated 19 January 2024, the PFSA informed that the administrative proceedings are expected to be completed in March 2024. As at 31 December 2023, the Group had not set up a provision for these proceedings.
• Administrative proceedings, initiated ex officio by the Polish Financial Supervision Authority are pending against PKO TFI S.A (hereinafter: the Company) in respect of the imposition of an administrative penalty on PKO TFI S.A. under the provisions of the Act on counteracting money laundering and terrorist financing (hereinafter: the "Act"), in connection with the suspected failure to comply with the obligation set out in the Act by: (i) failure to properly apply financial security measures in the form of identification and verification of the customer when establishing economic relations via remote channels; (ii) failure to properly apply financial security measures in the form of identification and verification of the customer at the commencement of economic relations and failure to obtain data on the customer's country of birth; (iii) failure to properly apply financial security measures in the form of identifying the beneficial owner when establishing economic relations; failure to ensure that documents, data or information it holds relating to the business relationship are kept up to date; (iv) failure to apply enhanced financial security measures in cases of higher risk of money laundering or terrorist financing and in cases referred to in Articles 44 and 46 of the Act; (v) failure to introduce all necessary elements in the internal procedure of the obliged institution. By letter dated 20 April 2023, PKO TFI S.A. responded to the request from the PFSA. By notice of 29 December 2023, the PFSA announced that the proceedings had been further extended until 29 February 2024. As at 31 December 2023 the Group recognised a provision for these proceedings in the amount of PLN 2 million.
• Claims for damages in respect of the interchange fee
If the courts find the claims justified, the defendants may claim recourse in separate court proceedings from other banks, including from PKO Bank Polski S.A. As at 31 December 2023, the Bank joined eight proceedings as an outside intervener. Four of these proceedings resulted in final judgments in favour of the defendants dismissing the plaintiffs' claims. In another proceedings there was a non-final judgment dismissing the plaintiffs' claims. The claims were dismissed as the statute of limitations was upheld.
• Re-privatization claims relating to properties held by the Group
As at the date of the consolidated financial statements, there are:
• two proceedings to which the Bank is a party. In one proceeding, the Bank filed a cassation appeal against an unfavourable final judgment dismissing the Bank's claims, which was accepted for consideration. The second proceeding, concerning the annulment of the decision refusing to grant the applicant temporary ownership of the Bank's property, is pending before the Supreme Administrative Court, as the other party has filed a cassation appeal.
• three proceedings, two of which are suspended, to which the other Bank Group companies are parties. Two proceedings are at the administrative stage, one at the judicial and administrative stage.
The probability of serious claims arising against the Group as a result of the aforesaid proceedings is low.
Accounting policies:
Equity constitutes capital and reserves created in accordance with the legal regulations. The classification to particular components discussed below results from the Polish Commercial Companies Code, the Banking Law and the requirements of IAS 1.
Equity components of the subsidiaries other than share capital, in proportion to the parent’s interest in the subsidiary, are added to respective equity components of the parent. The Group’s equity includes only those parts of the equity of the subsidiaries which arose after the acquisition of shares by the parent. In accordance with the legislation in force in Poland, only the equity of the parent company and the equity of specific subsidiaries, determined on the basis of separate financial statements, are distributable.
Equity components:
• • Share capital is the capital of the parent, stated at the nominal value in accordance with the Articles of Association and entry in the Register of Businesses.
• Supplementary capital is created according to the Articles of Association of the Group entities, from annual write-offs from net profit, made until this capital reaches at least one third of the share capital and is intended to cover balance sheet losses that may arise in connection with the Bank’s operations. Supplementary capital may also be used for other purposes, in particular for increasing the share capital.
• General banking risk fund at PKO Bank Polski S.A. is created from profit after tax in accordance with the Banking Law, and it is to cover unidentified risks of the Bank’s operations.
• Other reserves are created from the appropriation of net profit. Other reserves are intended to cover any potential balance-sheet losses or for other purposes, in particular for the payment of dividends, interim dividends or the purchase of own shares for cancellation.
• Non-controlling interests represent the part of capital in a subsidiary, which cannot be directly or indirectly assigned to the parent company.
• Accumulated other comprehensive income includes the effects of the measurement of financial assets at fair value through other comprehensive income, allowances for expected credit losses on these assets, the effective portion of cash flow hedges and hedges of net investment in foreign operation in hedge accounting, insurance finance income and expenses, as well as actuarial gains and losses. Deferred tax on those items is recognized in other comprehensive income. Moreover, the item includes the share of the parent in the total other comprehensive income of associates and joint ventures and foreign exchange differences on translation to Polish currency of the net result of the foreign operation at an exchange rate constituting the arithmetic mean of the average foreign exchange rates as at the day ending each of the months in the financial year, as published by the National Bank of Poland.
financial information
• Shareholding structure of the Bank
According to the information available as at 31 December 2023, the Bank’s shareholding structure is as follows:
|
ENTITY NAME |
number of shares |
% of votes |
Nominal value of 1 share |
Ownership interest (%) |
|
As at 31 December 2023 |
|
|
|
|
|
State Treasury |
367,918,980 |
29.43% |
PLN 1 |
29.43% |
|
Nationale Nederlanden Otwarty Fundusz Emerytalny1 |
115,594,152 |
9.25% |
PLN 1 |
9.25% |
|
Allianz Polska Otwarty Fundusz Emerytalny1 |
101,787,594 |
8.14% |
PLN 1 |
8.14% |
|
Other shareholders2 |
664,699,274 |
53.18% |
PLN 1 |
53.18% |
|
Total |
1,250,000,000 |
100% |
--- |
100% |
|
As at 31 December 2022 |
|
|
|
|
|
State Treasury |
367,918,980 |
29.43% |
PLN 1 |
29.43% |
|
Nationale Nederlanden Otwarty Fundusz Emerytalny1 |
108,266,112 |
8.66% |
PLN 1 |
8.66% |
|
Allianz Polska Otwarty Fundusz Emerytalny1 |
106,567,559 |
8.53% |
PLN 1 |
8.53% |
|
Other shareholders2 |
667,247,349 |
53.38% |
PLN 1 |
53.38% |
|
Total |
1,250,000,000 |
100% |
--- |
100% |
1 Calculation of shareholdings as at the end of the year published by PTE in bi-annual and annual information about the structure of fund assets and quotation from the WSE Statistic Bulletin.
2 Including Bank Gospodarstwa Krajowego, which as at 31 December 2023 and 31 December 2022 held 24,487,297 shares carrying 1.96% of the votes at the GSM.
All shares of PKO Bank Polski S.A. carry the same rights and obligations. No shares are preference shares, in particular with respect to voting rights (one share carries one vote) or dividend. The Articles of Association of PKO Bank Polski S.A. limit the voting right of shareholders holding more than 10% of the total number of votes at the General Shareholders’ Meeting and prohibit these shareholders from exercising more than 10% of the total number of votes at the General Shareholders’ Meeting. The above restriction does not apply to:
• those shareholders who on the date of passing the resolution of the General Shareholders’ Meeting introducing the limitation of the voting rights had rights from the shares representing more than 10% of the total number of votes in the Bank (i.e. the State Treasury and BGK);
• shareholders who have rights from A-series registered shares (the State Treasury);
• shareholders acting jointly with the shareholders referred to in the second bullet point based on agreements concluded concerning the joint execution of voting rights on shares. Moreover, limitations to the voting rights of the shareholders expire at the moment when the share of the State Treasury in the Bank’s share capital drops below 5%.
In accordance with § 6 (2) of the PKO Bank Polski S.A.’s Articles of Association, the conversion of A-series registered shares into bearer shares and the transfer of these shares requires the approval of the Council of Ministers in the form of a resolution. Conversion into bearer shares or transfer of A-series registered shares, after obtaining the aforementioned approval, results in the expiry of the aforementioned restrictions in respect of shares subject to conversion into bearer shares or transfer, to the extent to which this approval was given.
Pursuant to Art. 13 (1) (26) of the Act dated 16 December 2016 on the rules for managing the State property, the shares of PKO Bank Polski S.A. owned by the State Treasury may not be sold (excluding statutory exceptions).
The Bank’s shares are listed on the Warsaw Stock Exchange.
• Structure of PKO Bank Polski S.A.’s share capital:
|
Series |
Type of shares |
Number of shares |
Nominal value of 1 share |
Nominal value of the series |
|
A Series |
ordinary registered shares |
312,500,000 |
PLN 1 |
312,500,000 |
|
A Series |
ordinary bearer shares |
197,500,000 |
PLN 1 |
197,500,000 |
|
B Series |
ordinary bearer shares |
105,000,000 |
PLN 1 |
105,000,000 |
|
C Series |
ordinary bearer shares |
385,000,000 |
PLN 1 |
385,000,000 |
|
D Series |
ordinary bearer shares |
250,000,000 |
PLN 1 |
250,000,000 |
|
Total |
- - - |
1,250,000,000 |
- - - |
1,250,000,000 |
In 2023 and in 2022, there were no changes in the amount of the share capital of PKO Bank Polski S.A. Shares of PKO Bank Polski S.A. issued are not preference shares and are fully paid up.
Accounting policies:
Depending on the classification of financial assets and liabilities to a specific level of the hierarchy, different methods of fair value measurement are used.
• Level 1: Prices quoted on active markets
Financial assets and liabilities whose fair value is stated directly at prices quoted (not adjusted) on active markets for identical assets and liabilities. In this category, the Group classifies financial and equity instruments for which there is an active market and for which the fair value is determined with reference to the market value, which is a bid price:
• debt securities valued using fixing from the Bondspot platform or Bloomberg or Reuters information services;
• debt and equity securities which are traded on regulated markets, including in the Biuro Maklerskie PKO BP portfolio;
• derivative instruments, which are traded on a regulated market.
• Level 2: Valuation techniques based on observable market data
Financial assets and liabilities whose fair value is determined using valuation models where all significant entry data are observable on the market directly (as prices) or indirectly (based on prices). In this category, the Group classifies financial instruments for which there is no active market:
|
VALUATION METHOD (TECHNIQUE) |
OBSERVABLE INPUTS |
|
|
CIRS, IRS, FRA |
Discounted cash flow valuation model |
Yield curves built on market data: money market rates, FRA, IRS, OIS, basis swap
|
|
FX FORWARDS AND FX SWAPS |
Discounted cash flow valuation model |
Yield curves built on market data: exchange rates, swap points, basis swaps
|
|
CURRENCY OPTIONS |
Valuation models specific for particular type of a currency option. |
Yield curves built on market data: exchange rates, swap points, basis swaps; volatility surfaces for relevant currency pairs
|
|
INTEREST RATE OPTIONS |
Valuation model for the respective currency option type |
Yield curves built on market data: money market rates, FRA, IRS, OIS, basis swap, caplet/floorlet volatility surfaces for relevant tenors
|
|
EQUITY OPTIONS |
Valuation model for the respective equity option type |
Yield curves built on market data: money market rates, FRA, IRS, OIS, basis swap; volatility surfaces determined using a local volatility model based on prices and volatilities of the relevant underlying instruments
|
|
COMMODITY SWAPS, COMMODITY FORWARDS |
Discounted cash flow valuation model |
Yield curves built on market data: money market rates, FRA, IRS, OIS, basis swap; forward curves for relevant commodities constructed based on futures prices and forward exchange rates (i.e. determined based on exchange rates, swap points)
|
|
COMMODITY OPTIONS |
Valuation model for the respective commodity option type |
Yield curves built on market data: money market rates, IRS; volatility surfaces for relevant commodities
|
|
EQUITY SWAPS |
Discounted cash flow valuation model |
Yield curves built on market data: money market rates, FRA, IRS, OIS, basis swap; forward curves for relevant underlying instruments based on futures prices
|
|
MUNICIPAL BONDS (IN PLN) CORPORATE BONDS |
Yield curve and risk margin model. |
Yield curves are built based on market rates, money market data, IRS transactions market.
|
|
NBP money bills |
Yield curve method |
Yield curves built on money market and OIS transaction market data. |
|
liabilities in respect of insurance products measured at fair value |
The value of the liabilities is equal to the number of units accumulated in the individual insurance capital fund balance on the reporting date multiplied by the fund unit price on the valuation date |
Number of fund units, unit price |
• Level 3: Other valuation techniques
Financial assets and liabilities whose fair value is determined using valuation models for which input data is not based on observable market data (unobservable input data). In this category, the Group classified financial instruments, which are valued using internal valuation models.
The fair value of equity and debt securities classified as financial assets is determined by the organizational units of the Head Office responsible for them, including the Treasury Products Department and the Brokerage Office. In their internal regulations, these units specify the detailed measurement methods, including determination of the data sources used for measurement purposes and the method of performing the calculation.
The Credit Risk Department develops the assumptions of the fair value model for financial assets arising from loans and advances granted or other financing agreements being the substitute of loans. The Assets and Liabilities Management Committee approves the fair value model for loan exposures.
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VALUATION METHOD (TECHNIQUE) |
UNOBSERVABLE INPUT |
|
|
FINANCIAL INSTRUMENTS NOT HELD FOR TRADING, MANDATORILY MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS |
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LOANS AND ADVANCES TO CUSTOMERS |
Discounted cash flow method. |
Effective margin on loans. |
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C-SERIES PREFERENCE SHARES OF VISA INC. |
Estimation of the fair value based on the current market value of the listed ordinary shares of Visa Inc., including a discount which takes into account the limited liquidity of C-series shares and the terms and conditions of conversion of C-series shares into ordinary shares.
|
Discount taking into account the limited liquidity of C-series shares and the terms of converting the C-series shares into ordinary shares. |
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CORPORATE BONDS |
Yield curve and risk margin model. Yield curves are built based on market rates, money market data and IRS transactions market data. |
Credit spread (credit margins determined on the basis of initial margins modified by credit indices quotes ascribed to issuers based on their ratings and business sectors). |
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SHARES IN BIURO INFORMACJI KREDYTOWEJ S.A. |
Estimation of the fair value based on the present value of projected results of the company |
Projected results of the company. Discount rate. |
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SHARES IN POLSKI STANDARD PŁATNOŚCI SP. Z O.O. |
Estimation of the fair value based on the present value of projected results of the company |
Projected results of the company. Discount rate. |
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SHARES IN SOCIETY FOR WORLDWIDE INTERBANK FINANCIAL TELECOMMUNICATION |
Market value of the shares estimated by the company. |
Market value estimated by the company. Discount rate. |
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SHARES IN KRAJOWA IZBA ROZLICZENIOWA SA |
Estimation of the fair value based on the present value of projected results of the company |
Projected results of the company. Discount rate. |
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SHARES IN WAŁBRZYSKA SPECJALNA STREFA EKONOMICZNA “INVEST-PARK” SP Z O.O. |
Fair value determined by an appraiser using the net adjusted assets method. |
Value of the company’s net assets. |
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SHARES IN WIELKOPOLSKIA GILDIA ROLNO OGRODNICZA SA |
Fair value determined by an appraiser using the net adjusted assets method. |
Value of the company’s net assets. |
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FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME |
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CORPORATE BONDS |
Yield curve and risk margin model. Yield curves are built based on market rates, money market data and IRS transactions market data. |
Credit spread (credit margins determined on the basis of initial margins modified by credit indices quotes ascribed to issuers based on their ratings and business sectors). |
Financial information
|
ASSETS MEASURED AT FAIR VALUE 31.12.2023 |
Carrying amount |
Level 1 |
Level 2 |
Level 3 |
|
Prices quoted on active markets |
Valuation techniques based on observable market data |
Other valuation techniques |
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|
Hedging derivatives |
1,174 |
- |
1,174 |
- |
|
Other derivative instruments |
8,406 |
2 |
8,404 |
- |
|
Securities |
110,278 |
99,964 |
9,652 |
662 |
|
held for trading |
578 |
578 |
- |
- |
|
debt securities |
546 |
546 |
- |
- |
|
shares in other entities - listed |
30 |
30 |
- |
- |
|
participation units in investment funds, investment certificates, rights to shares, pre-emptive rights |
2 |
2 |
- |
- |
|
not held for trading, measured at fair value through profit or loss |
1,646 |
1,132 |
128 |
386 |
|
debt securities |
592 |
526 |
20 |
46 |
|
shares in other entities - listed |
124 |
124 |
- |
- |
|
shares in other entities - not listed |
342 |
- |
2 |
340 |
|
participation units in investment funds, investment certificates, rights to shares, pre-emptive rights |
588 |
482 |
106 |
- |
|
measured at fair value through other comprehensive income |
108,054 |
98,254 |
9,524 |
276 |
|
debt securities |
108,054 |
98,254 |
9,524 |
276 |
|
Loans and advances to customers |
2,871 |
- |
- |
2,871 |
|
not held for trading, measured at fair value through profit or loss |
2,871 |
- |
- |
2,871 |
|
housing loans |
1 |
- |
- |
1 |
|
business loans |
81 |
- |
- |
81 |
|
consumer loans |
2,789 |
- |
- |
2,789 |
|
Total financial assets measured at fair value |
122,729 |
99,966 |
19,230 |
3,533 |
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LIABILITIES MEASURED AT FAIR VALUE |
Carrying amount |
Level 1 |
Level 2 |
Level 3 |
|
31.12.2023 |
Prices quoted on active markets |
Valuation techniques based on observable market data |
Other valuation techniques |
|
|
Hedging derivatives |
2,992 |
- |
2,992 |
- |
|
Other derivative instruments |
9,291 |
- |
9,291 |
- |
|
Liabilities in respect of a short position in securities |
302 |
302 |
- |
- |
|
Liabilities in respect of insurance products |
165 |
- |
165 |
- |
|
Total financial liabilities measured at fair value |
12,750 |
302 |
12,448 |
- |
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ASSETS MEASURED AT FAIR VALUE 31.12.2022 |
Carrying amount |
Level 1 |
Level 2 |
Level 3 |
|
Prices quoted on active markets |
Valuation techniques based on observable market data |
Other valuation techniques |
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|
Hedging derivatives |
1,042 |
- |
1,042 |
- |
|
Other derivative instruments |
13,162 |
1 |
13,161 |
- |
|
Securities |
67,106 |
52,864 |
13,198 |
1,044 |
|
held for trading |
193 |
193 |
- |
- |
|
debt securities |
164 |
164 |
- |
- |
|
shares in other entities - listed |
27 |
27 |
- |
- |
|
participation units in investment funds, investment certificates, rights to shares, pre-emptive rights |
2 |
2 |
- |
- |
|
not held for trading, measured at fair value through profit or loss |
1,702 |
1,180 |
120 |
402 |
|
debt securities |
578 |
511 |
22 |
45 |
|
shares in other entities - listed |
115 |
115 |
- |
- |
|
shares in other entities - not listed |
358 |
- |
1 |
357 |
|
participation units in investment funds, investment certificates, rights to shares, pre-emptive rights |
651 |
554 |
97 |
- |
|
measured at fair value through other comprehensive income |
65,211 |
51,491 |
13,078 |
642 |
|
debt securities |
65,211 |
51,491 |
13,078 |
642 |
|
Loans and advances to customers |
3,590 |
- |
- |
3,590 |
|
not held for trading, measured at fair value through profit or loss |
3,590 |
- |
- |
3,590 |
|
housing loans |
4 |
- |
- |
4 |
|
business loans |
85 |
- |
- |
85 |
|
consumer loans |
3,501 |
- |
- |
3,501 |
|
Total financial assets measured at fair value |
84,900 |
52,865 |
27,401 |
4,634 |
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LIABILITIES MEASURED AT FAIR VALUE |
Carrying amount |
Level 1 |
Level 2 |
Level 3 |
|
31.12.2022 |
Prices quoted on active markets |
Valuation techniques based on observable market data |
Other valuation techniques |
|
|
Hedging derivatives |
7,469 |
- |
7,469 |
- |
|
Other derivative instruments |
12,978 |
- |
12,978 |
- |
|
Liabilities in respect of a short position in securities |
7 |
7 |
- |
- |
|
Liabilities in respect of insurance products |
149 |
- |
149 |
- |
|
Total financial liabilities measured at fair value |
20,603 |
7 |
20,596 |
- |
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IMPACT OF ESTIMATES ON FAIR VALUE MEASUREMENT OF LEVEL 3 FINANCIAL INSTRUMENTS |
31.12.2023 |
31.12.2022 |
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Fair value in |
Fair value in |
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|
positive scenario |
negative scenario |
positive scenario |
negative scenario |
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|
Shares in Visa Inc.1 |
77 |
145 |
133 |
|
|
Other equity investments2 |
238 |
215 |
189 |
171 |
|
Corporate bonds3 |
326 |
325 |
681 |
679 |
|
Loans and advances to customers4 |
2,727 |
3,015 |
3,770 |
3,410 |
1 scenario assuming a discount rate in respect of the future conditions of converting C-series shares to ordinary shares at a level of 0%/100% respectively
2 Scenario assuming a change in the discount rate of +/- 5%
3 scenario assuming a change in the credit spread of +/-10%
4 scenario assuming a change in the company’s value of +/- 0.5p.p.
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RECONCILIATION OF CHANGES DURING THE REPORTING PERIOD TO FAIR VALUE AT LEVEL 3 |
2023 |
2022 |
|
Opening balance at the beginning of the period |
5,711 |
|
|
Increase in exposure to equity instruments |
62 |
25 |
|
Decrease in exposure to equity instruments |
(81) |
(3) |
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Increase in exposure to corporate bonds |
- |
9 |
|
Decrease in exposure to corporate bonds |