Chapter 4

IV. Discussion of consolidated financial statement components

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2011

ASSETS Note 31.12.2011
PLN'000
31.12.2010
PLN'000
Change
PLN'000
Change
(%)
31.12.2011
Structure
(%)
31.12.2010
Structur
(%)
Cash and balances with the central bank 1. 9,142,168 6,182,412 2,959,756 48 5 4
Amounts due from banks 2. 2,396,227 2,307,032 89,195 4 1 1
Financial assets held for trading 3. 1,311,089 1,503,649 (192,560) (13) 1 1
Derivative financial instruments 4. 3,064,733 1,719,085 1,345,648 78 2 2
Financial instruments designated at fair value through profit and loss 5. 12,467,201 10,758,331 1,708,870 16 7 6
Loans and advances to customers 6. 141,634,494 130,668,119 10,966,375 8 74 77
Investment securities available for sale 7. 14,393,276 10,219,400 4,173,876 41 8 6
Investments in associates and jointly controlled entities 8. 123,119 172,931 (49,812) (29) - -
Non-current assets held for sale 20,410 19,784 626 3 - -
Inventories 9. 566,846 530,275 36,571 7 - -
Intangible assets 10. 1,800,008 1,802,037 (2,029) - 1 1
Tangible fixed assets 11. 2,541,317 2,576,445 (35,128) (1) 1 2
Current income tax receivables 28. 5,957 4,318 1,639 38 - -
Deferred income tax asset 28. 543,922 582,802 (38,880) (7) - -
Other assets 12. 737,270 613,881 123,389 20 - -
Total assets 190,748,037 169,660,501 21,087,536 12 100 100
LIABILITIES AND EQUITY Note 31.12.2011
PLN’000
31.12.2010
PLN’000
Change PLN’000 Change (%) 31.12.2011 Change (%) 31.12.2010 Change (%)
Amounts due to the central bank 3,454 3,370 84 2 - -
Amounts due to banks 13. 6,239,164 5,233,875 1,005,289 19 4 3
Derivative financial instruments 4 2,645,281 2,404,795 240,486 10 1 2
Amounts due to customers 14. 146,473,897 132,981,215 13,492,682 10 77 78
Debt securities in issue 15. 7,771,779 3,298,867 4,472,912 136 4 2
Subordinated liabilities 16. 1,614,377 1,611,779 2,598 - 1 1
Other liabilities 17. 2,450,763 2,092,834 357,929 17 1 1
Current income tax liabilities 28. 78,810 67,744 11,066 16 - -
Deferred income tax liability 28. 29,364 22,764 6,600 29 - -
Provisions 18. 619,164 583,690 35,474 6 - -
Total liabilities 167,926,053 148,300,933 19,625,120 13 88 87
Share capital 1,250,000 1,250,000 - - 1 1
Other capital 17,881,264 16,888,145 993,119 6 9 10
Foreign exchange differences on translation of foreign entities (92,023) (109,747) 17,724 (16) - -
Retained earnings (23,162) 112,297 (135,459) (121) - -
Net profit for the year 3,807,195 3,216,883 590,312 18 2 2
Equity attributable to equity holders of the parent company 22,823,274 21,357,578 1,465,696 7 12 13
Non-controlling interests (1,290) 1,990 (3,280) (165) - -
Total equity 19. 22,821,984 21,359,568 1,462,416 7 12 13
Total equity and liabilities 190,748,037 169,660,501 21,087,536 12 100 100

CONSOLIDATED INCOME STATEMENT for the financial year ended 31 December 2011

Note 2011 PLN’000 2010 PLN’000 ChangePLN’000 Change(%) 2011 Structure (%) 2010 Structure (%)
Interest income 12.037.762 10.415.315 1.622.447 16 72 69
Interest expense (4.428.646) (3.899.149) (529.497) 14 37 35
Net interest income 21. 7,609,116 6,516,166 1,092,950 17
Fee and commission income 3,837,165 3,880,863 (43,698) (1) 23 26
Fee and commission expense (735,721) (738,034) 2,313 - 6 7
Net fee and commission income 22. 3,101,444 3,142,829 (41,385) (1)
Dividend income 6,800 5,663 1,137 20 - -
designated at fair value through profit and loss (75,056) (62,577) (12,479) 20 1 1
Gains less losses from investment securities 20,179 73,056 (52,877) (72) - -
Net foreign exchange gains 23. 337,296 346,762 (9,466) (3) 2 2
Other operating income 24.  451,723 469,388 (17,665) (4) 3 3
Other operating expense 25. (309,186) (293,736) (15,450) 5 3 2
Net impairment allowance and write-downs 26. (1,930,447) (1,868,364) (62,083) 3 16 17
Administrative expenses 27. (4,411,357) (4,249,136) (162,221) 4 37 38
Operating profit/loss 4,800,512 4,080,051 720,461 18
Share in profits and losses of associates and jointly controlled entities (19,652) (815) (18,837) 2,311 - -
Profit before income tax 4,780,860 4,079,236 701,624 17
Note 2011 PLN’000 2010 PLN’000 Change PLN’000 Change (%) 2011 Structure (%) 2010 Structure (%)
Profit before income tax 4,780,860 4,079,236 701,624 17
Corporate income tax (976,115) (866,430) (109,685) 13
Net profit (including non-controlling interests) 3,804,745 3,212,806 591,939 18
Profits and losses of non-controlling interests (2,450) (4,077) 1,627 (40)

Net profit attributable to the parent company

3,807,195 3,216,883 590,312 18
Total income 16,690,925 15,191,047 1,499,878 10 100 100
Total expenses (11,910,065) (11,111,811) (798,254) 7 100 100
Profit before income tax 4,780,860 4,079,236 701,624 17

 Selected ratios characterizing the Group’s financial position and results

The following ratios characterize the Group’s activities, results of operations during the financial year and its financial position as at the balance date compared with the prior year (1) :

2011 2010
Profitability ratios
Gross profitability (profit before tax/total income) 28.6% 26.9%
Net profitability (net profit / total income) 22.8% 21.1%
Return on equity (net profit /average net assets) (2) 17.2% 15.4%
Return on assets (net profit /average total assets) (2) 2.1% 2.0%
Cost / income ratio (administrative expenses / profit on banking activities (3) 39.6% 41.7%
Profitability ratio on interest-bearing assets (interest income / average interest-bearing assets) (2) 7.1% 6.8%
Cost of borrowings (interest expense / average interest-bearing liabilities) (2) 2.9% 2.8%
Asset quality ratios
Interest-bearing assets to total assets (4) 93.9% 93.9%
Loans with identified impairment to total loans to customers 8.0% 8.0%
Coverage with impairment allowances of impaired loans and advances to customers 42.3% 40.0%

Cost of risk (5)

1.3%  1.4% 
Liquidity ratios
Cumulated liquidity gap up to 1 month in real terms. in PLN'000 (6) 19,393,513 17,310,022
Cumulated liquidity gap from 1 to 3 months in real terms. in PLN'000 (6) 17,793,708 16,360,180
Loans to deposits 96.7% 98.3%
Other ratios
Capital adequacy ratio 12.37% 12.47%
Own funds (PLN'000) 18,342,916 17,618,546
Total capital requirement (PLN'000) 11,864,692 11,301,786
(1) Individual ratio levels may differ from those presented in the consolidated financial statements due to a different calculation method.
(2) The average balances of balance sheet items were calculated on the basis of the balances of individual items at the beginning and the end of the current and prior financial year.
(3) The profit on banking activities defined as operating profit less administrative expenses and net impairment allowances.
(4) Interest-bearing assets are defined as balances with the central bank (excluding cash), amounts due from banks and customers, investment securities and securities designated at fair value through profit and loss and held for trading. 
(5) The cost of risk calculated by dividing net impairment allowances on loans and advances to customers for the year by the average balance of gross loans and advances to customers.
(6) Liquidity ratios are defined as the ratio of assets receivable to liabilities payable in accordance with due dates in real terms as at the balance date.
Consolidated statement of financial position as at 31 December 2011

1. Cash and balances with the central bank

As at 31 December 2011, ‘Cash and balances with the central bank’ amounted to PLN 9,142,168 thousand (PLN 6,182,412 thousand in 2010), of which 99% (PLN 9,060,280 thousand) related to the Bank. Three fourths of the total balance (PLN 6,845,759 thousand) was represented by the cash maintained by the Bank on the account in the National Bank of Poland (PLN 3,782,717 thousand as at 31 December 2010).

As at the balance date, the Bank calculated and maintained a mandatory reserve in accordance with Resolution No. 15/2004 of the Management Board of the National Bank of Poland dated 13 April 2004 on the terms and procedures for calculating and maintaining mandatory reserves by banks. The declared mandatory reserve with the NBP as at 31 December 2011 amounted to PLN 4,975,268 thousand (PLN 4,553,482 thousand as at 31 December 2010).

2. Amounts due from banks

As at the balance date, the balance of amounts due from banks was PLN 2,396,227 thousand, of which PLN 2,189,913 thousand (i.e. 91%) related to the Bank (PLN 2,135,065 thousand,
i.e. 93% as at 31 December 2010). The balance of amounts due from banks as at respective balance dates and the movements therein are presented in the table below:

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Placements with other banks 1,912,647 1,493,827 418,820 28
Current accounts 405,724 722,717 (316,993) (44)
Loans and advances granted 76,483 84,462 (7,979) (9)
Receivables in respect of transactions not yet cleared 32,385 28,089 4,296 15
Cash in transit 1,800 6,862 (5,062) (74)
Total 2,429,039 2,335,957 93,082 4
Impairment allowance (32,812) (28,925) (3,887) 13
Total, net 2,396,227 2,307,032 89,195 4

The increase in the balance of amounts due from banks (of PLN 89,195 thousand, i.e. 4%) was mainly due to the increase in the balance of placements with other banks (an increase of PLN 418,820 thousand, i.e. 28%), which was partly offset by a drop in the balance of current accounts (a decrease of PLN 316,993 thousand, i.e. 44%).

The impairment allowance of PLN 32,812 thousand (PLN 28,925 thousand as at 31 December 2010) was mainly related to amounts due from a foreign bank in respect of transactions in derivative instruments not yet cleared but declared due, in the amount of PLN 32,385 thousand (PLN 28,089 thousand as at 31 December 2010).

As at the balance date, amounts due denominated in foreign currencies represented an equivalent of PLN 2,062,246 thousand, i.e. 85% of the gross balance (PLN 2,087,392 thousand, i.e. 89% of the gross balance as at 31 December 2010).

3. Financial assets held for trading

As at 31 December 2011, the balance of ‘Financial assets held for trading’ amounted to PLN 1,311,089 thousand and comprised solely the Bank’s balance. The balance comprised the following assets:

31.12.2011 PLN'000 31.12.2010 PLN'000 Change PLN'000 Change (%)
Treasury bonds (PLN) 1,219,069 1,483,144 (264,075) (18)
Treasury bills 49,402 - 49,402 100
Other 42,618 20,505 22,113 108
Total 1,311,089 1,503,649 (192,560) (13)

The fall in the valuation of financial assets held for trading of PLN 192,560 thousand (i.e. 13%) as at the balance date was due to a decrease in the Bank’s exposure in Polish Treasury bonds (down PLN 264,075 thousand, i.e. 18%) and it was partly offset by an increase in the Bank’s exposure in Treasury bills (up by PLN 49,402 thousand, there were none in the portfolio as at 31 December 2010) and other securities (up by PLN 22,113 thousand, i.e. 108%). The portfolio of financial assets held for trading was subject to significant fluctuations as at the end of the individual months of the audited period, reaching the highest balance as at the end of March 2011 (PLN 3,329,249 thousand).

As at 31 December 2011, Treasury bonds represented 93% of the balance of all financial assets held for trading.

4. Derivative financial instruments

The balance of receivables in respect of positive fair value of derivatives increased by PLN 1,345,648 thousand (i.e. by 78%) compared with the end of 2010 and amounted to PLN 3,064,733 thousand as at 31 December 2011. The liabilities in respect of negative fair value of derivatives amounted to PLN 2,645,281 thousand and they increased by PLN 240,486 thousand (i.e. by 10%) compared with the end of 2010. The Bank’s share in both balances was nearly 100% and comprised the following transactions:

31.12.2011
Assets PLN'000
31.12.2011
Liabilities PLN'000

31.12.2010
Assets PLN'000

31.12.2010
Liabilities PLN'000
Interest rate swaps 2,399,066 2,378,165 1,585,613 2,252,113
- including CIRS: 419,640 421,039 126,219 687,977
Currency forwards 557,624 195,991 80,560 126,585
Options 106,492 70,112 46,397 25,382
Other 1,551 1,013 6,515 715
Total 3,064,733 2,645,281 1,719,085 2,404,795

The movements in the above-mentioned balances as at 31 December 2011 compared with the balances as at 31 December 2010 are presented in the table below:

Change Assets PLN'000 Change Assets % Change Liabilities PLN'000 Change Liabilities %
Interest rate swaps 813,453 51 126,052 6
- including CIRS 293,421 232 (266,938) (39)
Currency forwards 477,064 592 69,406 55
Options 60,095 130 44,730 176
Other (4,964) (76) 298 42
Total 1,345,648 78 240,486 10

In 2011, there was an increase in both the positive and negative fair values of derivatives. The most significant change related to the increase in the positive fair value of interest rate transactions and currency forwards and was due to (among other things) the increase in the nominal amounts of the transactions concluded (an increase of PLN 157,724,082 thousand, i.e. 36% and PLN 23,845,196 thousand, i.e. 95% respectively). 

Beginning from 2009, the Bank has applied hedge accounting (a macro cash flow hedge) in accordance with IAS 39 F6.2 – F6.3. In 2011, the Bank established one new hedging relationship:

  • A hedge of the cash flow volatility on floating interest rate loans in CHF as a result of the interest rate risk, using IRS transactions. In connection with establishing the new hedging relationship in 2011, a net amount of PLN 28,415 thousand was recognized in the statement of comprehensive income.

in addition, the Bank continued to use the hedging relationships created in the previous years:

  • a hedge of the cash flow volatility on mortgage loans denominated in CHF and negotiated deposits in PLN as a result of the interest rate risk and the exchange risk, using CIRS transactions – due to the strategy being pursued in 2011, a net amount of PLN 45,337 thousand was recognized in the statement of comprehensive income;
  • a hedge of the cash flow volatility on floating interest rate loans in EUR as a result of the interest rate risk, using IRS transactions – due to the strategy being pursued in 2011, a net amount of PLN 70,325 thousand was recognized in the statement of comprehensive income;
  • a hedge of the cash flow volatility on floating interest rate loans in PLN as a result of the interest rate risk, using IRS transactions – due to the strategy being pursued in 2011, a net amount of PLN 184 thousand was recognized in the statement of comprehensive income.

In total, as a result of applying hedge accounting the Bank recognized PLN 144,261 thousand, net of deferred income tax (PLN 98,648 thousand net of deferred income tax in 2010) in the statement of comprehensive income. At the same time, the Bank recognized the ineffective portion of cash flow hedges of PLN 64,342 thousand in the income statement (PLN 82,879 thousand in 2010).

At the same time, the amount of PLN (1,112,235) thousand was cleared to net profit out of comprehensive income (PLN 267,292 thousand in 2010).

In accordance with the Bank’s accounting policies, the valuation of derivative hedging transactions is decomposed and affects the following items:

  • foreign exchange differences on revaluation of the nominal amount – net foreign  exchange gains;
  • interest accrued as at the balance date – net interest income;
  • mark-to-market – revaluation reserve and net gain/(loss) on financial instruments designated at fair value (the ineffective part).

As at the balance date, the net fair value measurement of derivative transactions designated as hedges as part of two hedging relationships applied by the Bank based on these instruments amounted to PLN 174,327 thousand:

Assets
31.12.2011
PLN'000
Liabilities
31.12.2011
PLN'000
Net
31.12.2011
PLN'000
Fair value measurement, including: 313,182 67,845 381,027
- measurement until the date of introducing hedge accounting (net income/loss from financial instruments designated at fair value) 111,117 (100,373) 10,744
- measurement from the date of introducing hedge accounting (revaluation reserve) 202,065 168,218 370,283
Foreign exchange differences on the revaluation of the nominal amount (net foreign exchange gains/losses); 74,732 (453,863) (379,131)
Interest accrued (net interest income) 129,011 43,420 172,431
Total 516,925 (342,598) 174,327
As at 31 December 2010, the net measurement to fair value of derivative transactions designated as hedges amounted to PLN (402,062) thousand:
Assets 31.12.2010 PLN'000 Liabilities 31.12.2010 PLN'000 Net 31.12.2010 PLN'000
Fair value measurement, including: 114,394 202,271 316,665
- measurement until the date of introducing hedge accounting (net income/loss from financial instruments designated at fair value) 140,855 (101,320) 39,535
- measurement from the date of introducing hedge accounting (revaluation reserve) (26,461) 303,591 277,130
Foreign exchange differences on the revaluation of the nominal amount (net foreign exchange gains/losses); (74,055) (822,521) (896,576)
Interest accrued (net interest income) 113,582 64,267 177,849
Total 153,921 (555,983) (402,062)

5. Financial instruments designated at fair value through profit and loss

The balance of ‘Financial instruments designated at fair value through profit and loss’ increased by PLN 1,708,870 thousand (i.e. by 16%) compared with the end of 2010 As at 31 December 2011, it was PLN 12,467,201 thousand, and as in the previous year, comprised solely the Bank’s balance. The portfolio comprised the following categories of securities:

31.12.2011 PLN'000 31.12.2010 PLN'000 Change PLN'000 Change (%)
NBP bills 8,593,791 3,997,780 4,596,011 115
Treasury bills 2,180,148 1,893,058 287,090 15
Treasury bonds (PLN) 1,318,278 4,738,644 (3,420,366) (72)
Municipal bonds (EUR) 143,973 128,849 15,124 12
Treasury bonds (EUR) 122,089 - 122,089 100
Municipal bonds 108,922 - 108,922 100
Total 12,467,201 10,758,331 1,708,870 16

The increase in the balance of financial instruments designated at fair value through profit and loss resulted mainly from increasing the Bank’s exposure in short-term securities – compared with the end of 2010, the balances of NBP bills and Treasury bills increased by PLN 4,596,011 thousand (i.e. by 115%) and PLN 287,090 thousand (i.e. 15%) respectively. The increase was partly offset by a drop in the balance of Treasury bonds in PLN (a decrease of PLN 3,420,366 thousand, i.e. 72% compared with the balance as at 31 December 2010). The most significant increase in the Bank’s exposure in NBP bills took place in December 2011 – the balance increased by PLN 3,595,066 thousand compared with the previous month.

All the financial instruments designated at fair value through profit and loss were issued by Polish entities. As at the balance date, instruments quoted on organized stock exchanges represented 11% of the balance (29% as at the end of 2010).

6. Loans and advances to customers

The portfolio of loans and advances to customers, measured by reference to the gross value of loans granted, increased in 2011 by PLN 11,767,948 thousand (i.e. 9%) compared with the balance as at 31 December 2010 and amounted to PLN 147,292,737 thousand.

The analysis of the structure and quality of the loan portfolio is presented in the points below.

a) Structure of the Group’s loan portfolio by type of loans

As at the balance date, the loan portfolio comprised:

31.12.2011 PLN'000 31.12.2010 PLN'000 Change PLN'000 Change (%)
Financial sector (excluding banks) 1,252,368 2,999,096 (1,746,728) (58)
corporate loans 1,252,368 2,999,096 (1,746,728) (58)
Non-financial sector 140,973,940 128,675,195 12,298,745 10
mortgage loans and loans to developers 71,156,253 62,678,534 8,477,719 14
corporate loans 45,480,936 40,353,507 5,127,429 13
consumer loans 24,336,751 25,643,154 (1,306,403) (5)
Public sector 5,066,429 3,850,498 1,215,931 32
corporate loans 5,066,429 3,849,854 1,216,575 32
mortgage loans - 644 (644) (100)
Total loans and advances, gross 147,292,737 135,524,789 11,767,948 9
Impairment allowance (5,658,243) (4,856,670) (801,573) 17
Total loans and advances, net 141,634,494 130,668,119 10,966,375 8

As at the balance date, the net loans and advances to customers amounted to PLN 141,634,494 thousand, of which PLN 137,548,973 thousand, i.e. 97%) related to the Bank (PLN 127,065,998 thousand, i.e. 97% as at 31 December 2010). The remaining 3% comprised among others lease receivables of Grupa Bankowy Fundusz Leasingowy SA of PLN 2,886,287 thousand
(PLN 2,470,759 thousand as at 31 December 2010) and loans and advances granted by Kredobank SA of PLN 775,708 thousand (PLN 1,035,672 thousand as at 31 December 2010). The decrease in the balance of loans and advances granted by Kredobank resulted from selling a part of the impaired loans portfolio to Finansowa Kompania ‘Prywatne Inwestycje’ Sp. z o.o. in the amount of PLN 239,187 thousand (both companies belong to the Group and are consolidated under the acquisition accounting method).

As at 31 December 2011, 24% (i.e. PLN 35,679,608 thousand) out of the balance of loans and advances was related to loans and advances granted in foreign currencies (of which 69% was denominated in the Swiss franc). As at 31 December 2010, amounts due denominated in foreign currencies represented 23% of the balance i.e. PLN 31,655,036 thousand (of which 72% related to the Swiss franc).

b) Structure of the Group’s loan portfolio in terms of quality

31.12.2011 PLN'000 31.12.2010 PLN'000 31.12.2011 Structure % 31.12.2010 Structure %
Impaired loans and advances 11,547,179 10,659,485 7.8 7.9
Loans and advances not impaired, gross 132,749,417 122,304,640 90.1 90.3
Impaired lease receivables 250,053 227,689 0.2 0.1
Lease receivables not impaired, gross 2,746,088 2,332,975 1.9 1.7
Total loans and advances, gross 147,292,737 135,524,789 100.0 100.0
Allowances for loans and advances impaired (4,893,392) (4,281,537) 86.5 88.1
Impairment allowances for incurred but not reported losses (IBNR) of loans and advances (656,478) (485,228) 11.6 10
Allowances for lease receivables impaired (96,271) (77,522) 1.7 1.6
Impairment allowances for incurred but not reported losses (IBNR) of lease receivables (12,102) (12,383) 0.2 0.3
Total impairment allowances for loans and advances (5,658,243) (4,856,670) 100.0 100.0
Total loans and advances, net 141,634,494 130,668,119

As at the end of 2011, the share of impaired loans in the total loan portfolio did not change compared with the end of 2010 and amounted to 8.o%. At the same time, the ratio of coverage with impairment allowances of impaired loans and advances to customers increased and amounted to 42.3% (40.0% as at 31 December 2010).

As at 31 December 2011 the balance sheet amount of impairment allowances in respect of the subsidiaries in Ukraine (Kredobank SA, Finansowa Kompania ‘Prywatne Inwestycje’ Sp. z o.o.) and the Bankowy Fundusz Leasingowy SA Group increased by PLN 188,333 thousand, i.e. 49% (where 30% is the actual increase in the balance and 19% is a result of foreign exchange rate fluctuations) and by PLN 20,524 thousand (i.e. 23%) respectively. The share of impaired loans/impaired lease receivables in the total balance of loans/lease receivables as at the balance date was 73.2% for the subsidiaries in the Ukraine (in total) and 8.3% for the Bankowy Fundusz Leasingowy SA Group and was by 3.2 pp. and by 0.6 pp. respectively lower than as at 31 December 2010.

The total gross carrying amount of the sold in 2011 impaired loans was PLN 1,342,488 thousand (the net amount was PLN 361,610 thousand).

The share of allowances for incurred but not reported impairment (IBNR) in the total allowances was higher than in the prior year - as at the balance date, the allowance amounted to PLN 668,580 thousand (11.8% of the total allowances), whereas in the prior year it amounted to PLN 505,052 thousand (10.4% of the total allowances). This was a result, among other things, of changing the methodology for calculating impairment allowances in respect of mortgage loans and periodic updating of the parameters applied in the calculation of the allowances at the Bank.

The reconciliation of the change in the balance of impairment allowances for loans and advances to customers in the balance sheet and the net impairment allowances as at 31 December 2011 is presented below (in PLN’000):

consumer loans PLN'000 mortgage loans PLN'000 corporate loans and lease receivables PLN'000 Total PLN'000
Impairment allowances on loans and advances to customers in the balance sheet as at 31 December 2010 (1,513,717) (983,311) (2,359,642) (4,856,670)
Net impairment allowances on loans recognized in the income statement (661,032) (392,106) (785,667) (1,838,805)
Other changes (13,328) (49,639) (69,982) (132,949)
Decrease in impairment allowances due to the derecognition of assets, not affecting the income statement 724,234 101,226 344,721 1,170,181
Impairment allowances on loans and advances to customers in the balance sheet as at 31 December 2011 (1,463,843) (1,323,830) (2,870,570) (5,658,243)

Other changes comprised mainly foreign exchange differences related to impairment allowances on amounts due in foreign currencies.

A decrease in impairment allowances due to the derecognition of assets, not affecting the income statement mainly relates to selling impaired loans.

7. Investment securities available for sale

As at 31 December 2011, the balance of ‘Investment securities available for sale’ was PLN 14,393,276 thousand, of which PLN 14,016,676 thousand, i.e. 97%, related to the Bank (PLN 9,868,073 thousand, i.e. 97% as at 31 December 2010). The breakdown of the balance as at the balance date is provided in the table below:

31.12.2011 PLN'000 31.12.2010 PLN'000 Change PLN'000 Change (%)
Issued by the State Treasury 8,679,028 5,813,314 2,865,714 49
Municipal bonds 3,458,356 2,824,173 634,183 22
Corporate bonds 2,137,215 1,456,333 680,882 47
Issued by other banks 50,870 50,858 12 -
Impairment (17,944) (21,259) 3,315 (16)
Total debt securities, net 14,307,525 10,123,419 4,184,106 41
Equity securities available for sale, gross 88,370 96,631 (8,261) (9)
Impairment (2,619) (650) (1,969) 303
Total equity securities, net 85,751 95,981 (10,230) (11)
Total, net 14,393,276 10,219,400 4,173,876 41

The change in the balance as at the balance date was mainly due to an increase in the Group’s exposure in securities issued by the State Treasury (an increase of PLN 2,865,714 thousand, i.e. 49%) and the growth in the corporate bonds portfolio (of PLN 680,882 thousand, i.e. 47%) and municipal bonds (of PLN 634,183 thousand, i.e. 22%).

The balance of corporate and municipal bonds comprised bonds issued by companies and local authorities for which the Bank acted as the underwriter. The material increase in the balance of corporate and municipal bonds was due to new issues being carried out in the last month of 2011 (an increase of PLN 337,506 thousand, i.e. 17% and PLN 331,642 thousand, i.e. 11%).

The impairment allowance for debt securities of PLN 17,944 thousand comprised mainly of an allowance recorded in connection with impairment of corporate debt securities and bills in the Bank’s portfolio of PLN 12,998 thousand (PLN 13,045 thousand as at 31 December 2010). The impairment allowance for equity securities of PLN 2,619 thousand (PLN 650 thousand as at 31 December 2010) comprised mainly of an allowance recorded in connection with equity securities not admitted for trading in the Bank’s portfolio of PLN 2,504 thousand (PLN 533 thousand as at 31 December 2010).

8. Investments in associates and jointly controlled entities

As at 31 December 2011, the balance of investments in associates and jointly controlled entities amounted to PLN 123,119 thousand and was PLN 49,812 thousand (i.e. 29%) lower than as at 31 December 2010: 
31.12.2011 PLN'000 31.12.2010 PLN'000 Change PLN'000 Change (%)
Jointly controlled entities 15,972 41,279 (25,307) (61)
The Centrum Haffnera Sp, z o,o, Group 10,665 31,981 (21,316) (67)
Haffnera Sp, z o,o,
Centrum Obsługi Biznesu Sp, z o,o, 5,307 9,298 (3,991) (43)
Associates 196,100 191,790 4,310 2
Bank Pocztowy SA 190,698 186,598 4,100 2
Poznański Fundusz Poręczeń Kredytowych Sp, z o,o, 4,975 4,967 8 -
Agencja Inwestycyjna Corp-SA SA 427 225 202 89
Shares in associates and co-subsidiaries - total, gross 212,072 233,069 (20,997) (9)
Impairment allowance (88,953) (60,138) (28,815) 48
Shares in jointly controlled entities and associates 123,119 172,931 (49,812) (29)

The drop in net investments in jointly controlled entities and associates was caused mainly by setting up an impairment allowance for Bank Pocztowy SA in the amount of PLN 28,807 thousand.

9. Inventories

As at 31 December 2011, inventories amounted to PLN 566,846 thousand, of which
PLN 440,429 thousand (i.e. 83%) related to the Qualia Development Group (PLN 403,849 thousand i.e. 78% as at 31 December 2010). The balance comprised:

31.12.2011 PLN'000 31.12.2010 PLN'000 Change PLN'000 Change (%)
Work in progress – construction projects 271,709 261,609 10,100 4
Construction projects for sale 216,851 195,817 21,034 11
Goods for resale 102,412 96,298 6,114 6
Materials 8,962 11,409 (2,447) (21)
Inventory write-downs (33,088) (34,858) 1,770 (5)
Total 566,846 530,275 36,571 7

The largest portion of the remaining part of the balance comprised assets of the Bankowy Fundusz Leasingowy SA Group with a value of PLN 73,378 thousand (i.e. 13%) relating to non-current assets waiting to be leased and previously leased assets currently recovered – recognized in the goods for resale balance.

Impairment allowances on inventories of PLN 33,088 thousand as at 31 December 2011 related mainly to allowances in respect of the leased assets recovered by the Bankowy Fundusz Leasingowy SA Group of PLN 7,480 thousand (PLN 9,251 thousand as at 31 December 2010) and impairment allowances in the Qualia Development Group of PLN 25,607 thousand (unchanged compared with 2010), relating mainly to impairment of land and capitalized capital expenditure.

10. Intangible assets

As at the balance date, intangible assets amounted to PLN 1,800,008 thousand, of which PLN 1,508,310 thousand i.e. 84% related to the Bank (PLN 1,521,855 thousand, i.e. 85% as at 31 December 2010). The analytical break-down of the balance is shown in the table below.

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Software 2,859,020 2,479,718 379,302 15
Goodwill on acquisition 344,865 344,695 170 -
Development costs 3,486 3,486 - -
Other intangible assets (including capital expenditure) 224,958 397,155 (172,197) (43)
Total, gross 3,432,329 3,225,054 207,275 6
Accumulated amortization (1,497,026) (1,290,045) (206,981) 16
Impairment allowance (135,295) (132,972) (2,323) 2
Total, net 1,800,008 1,802,037 (2,029) -

Impairment allowance on inventories of PLN 135,295 thousand as at the balance date related mainly to impairment allowances in respect of Kredobank SA of PLN 79,762 thousand and companies of the Qualia Development Group of PLN 37,754 thousand (PLN 79,762 thousand and PLN 35,193 thousand as at 31 December 2010 respectively). Impairment allowance in respect of the Qualia Development Group related to Qualia spółka z ograniczoną odpowiedzialnością – Nowy Wilanów sp.k (PLN 30,740 thousand) and Sarnia
Dolina Sp. z o.o. (PLN 7,014 thousand).

The wear and tear of intangible assets measured with the ratio of accumulated amortization to gross intangible assets amounted to 44% (40% as at 31 December 2010).

11. Tangible fixed assets

As at the balance date the net carrying amount of the balance of ‘Tangible fixed assets’ amounted to PLN 2,541,317 thousand of which 79% related to the Bank (80% as at 31 December 2010). The analytical break-down of the balance is shown in the table below.

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Land and buildings 2,514,959 2,485,233 29,726 1
Machinery and equipment 2,262,764 2,314,537 (51,773) (2)
Fixed assets under construction 149,975 113,268 36,707 32
Means of transport 89,587 79,982 9,605 12
Investment properties 793 793 - -
Other 437,268 452,619 (15,351) (3)
Tangible fixed assets, gross 5,455,346 5,446,432 8,914 -
Accumulated depreciation (2,907,641) (2,851,553) (56,088) 2
Impairment allowance (6,388) (18,434) 12,046 (65)
Tangible fixed assets 2,541,317 2,576,445 (35,128) (1)

As at the balance date, the gross amount of tangible fixed assets increased slightly by
PLN 8,914 thousand compared with the end of the prior year. The increase in the balance of fixed assets and buildings of PLN 36,707 thousand (i.e. 32%) and land and buildings of PLN 29,726 thousand (i.e. 1%) was offset by a drop in the balance of machinery and equipment of PLN 51,773 thousand (i.e. 2%).

The balance of tangible fixed assets also included assets leased out under operating lease contracts of PLN 24,715 thousand (PLN 16,052 thousand as at 31 December 2010).

The decrease in the balance of impairment allowences as at 31 December 2011 resulted mainly from the Bank’s derecognition of fixed assets under construction (impairment allowance of PLN 17,246 thousand as at 31 December 2011).

The wear and tear of tangible fixed assets measured with the ratio of accumulated depreciation to gross tangible fixed assets amounted to 53% (52% as at 31 December 2010).

Tangible fixed assets are valued at cost less accumulated depreciation and impairment allowances.

12. Other assets

In 2011, the value of other assets increased by PLN 123,389 thousand (i.e. 20%) and amounted to PLN 737,270 thousand as at the balance date, of which PLN 448,971 thousand (i.e. 61%) related to the Bank, and PLN 179,314 thousand (i.e. 24%) to PKO BP Bankowy Powszechne Towarzystwo Emerytalne SA (PLN 367,781 thousand, i.e. 60% and PLN 142,558 thousand, i.e. 23% respectively as at 31 December 2010). The balance comprised the following asset categories:

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Prepayments and deferred costs 209,379 170,978 38,401 22
Settlements of payment card transactions 161,552 204,677 (43,125) (21)
Settlement of financial instruments 143,845 47,279 96,566 204
Receivables from customers 87,995 86,592 1,403 2
Receivables from other transactions with financial and non-financial entities 26,538 11,088 15,450 139
Receivables and settlements of securities turnover 1,730 8,020 (6,290) (78)
Receivables from unsettled transactions in derivatives 6,134 7,121 (987) (14)
Receivables from the State budget due to distribution of court fee stamps conducted by the Bank 3,350 9,311 (5,961) (64)
Other 96,747 68,815 27,932 41
Total 737,270 613,881 123,389 20

As at the balance date, prepayments and deferred costs related mainly to deferred customer acquisition costs of PLN 172,843 thousand (PLN 133,594 thousand as at 31 December 2010) incurred by PKO BP Bankowy Powszechne Towarzystwo Emerytalne SA.

As at the balance date, the gross carrying amount of other assets of PLN 922,388 thousand (PLN 789,147 thousand as at 31 December 2010) was reduced by impairment allowances of PLN 185,118 thousand (PLN 175,266 thousand as at 31 December 2010), of which 92%, i.e. PLN 170,651 thousand related to the Bank (96%, i.e. PLN 167,509 thousand as at 31 December 2010). Impairment allowances comprised mainly allowances on receivables due to unsettled, negotiated currency exchange transactions and transactions in derivatives conducted by the Bank of PLN 84,698 thousand (PLN 102,475 thousand as at 31 December 2010).

13. Amounts due to banks

As at 31 December 2011 the balance of ‘Amounts due to banks’ amounted to PLN 6,239,164 thousand (PLN 5,233,875 thousand as at the end of  2010), of which 85% related to the Bank (80% as at 31 December 2010). Apart from the Bank, the Bankowy Fundusz Leasingowy SA Group also had material liabilities in respect of other banks covering 14% of the balance (20% of the balance as at 31 December 2010). The balance comprised:

 

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Loans and advances received 4,360,878 4,068,332 292,546 7
Bank deposits 1,372,635 973,072 399,563 41
Current accounts 422,707 44,379 378,328 852
Other money-market deposits 82,944 93,646 (10,702) (11)
Amounts due to repurchase agreement - 54,446 (54,446) (100)
Total 6,239,164 5,233,875 1,005,289 19

The balance of loans and advances received related mainly to the Bank’s liabilities in respect of the syndicated loan in Swiss francs of PLN 3,443,872 thousand (PLN 2,999,116 thousand as at 31 December 2010) granted by a consortium of Polish and foreign banks in 2007 for five years, with an extension option, and loans from other banks received by the Bankowy Fundusz Leasingowy SA Group of PLN 899,536 thousand (PLN 1,051,693 thousand as at 31 December 2010).

The increase in loans and advances received as at 31 December 2011 was caused mainly by an increase in the valuation of the loan granted to the Bank (an increase of PLN 444,756 thousand, i.e. 15%) – due to the change in the CHF/PLN exchange rate (an increase from 3.16 as at the end of 2010 to 3.63 as at the end of 2011), with a drop in the balance of bank loans for other Group companies.

As at the balance date, 74% of amounts due to banks comprised foreign currency liabilities (72% as at 31 December 2010).

14. Amounts due to customers

As at the balance date, the balance of the ‘Amounts due to customers’ amounted to PLN 146,473,897 thousand, of which PLN 145,283,767 thousand (i.e. 99%) related to the Bank (PLN 131,847,359 thousand, i.e. 99% respectively as at 31 December 2010).

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Amounts due to retail customers 104,183,094 95,107,854 9,075,240 10
term deposits 55,523,745 48,398,185 7,125,560 15
current accounts and overnight deposits 48,187,307 46,416,011 1,771,296 4
other money-market deposits 472,042 293,658 178,384 61
Amounts due to corporate entities 38,468,560 31,826,551 6,642,009 21
term deposits 23,949,758 18,009,746 5,940,012 33
current accounts and overnight deposits 11,399,925 11,264,473 135,452 1
loans and advances received 1,988,013 1,856,819 131,194 7
repo transactions 644,005 446,175 197,830 44
other money-market deposits 486,859 249,338 237,521 95
Amounts due to State budget entities 3,822,243 6,046,810 (2,224,567) (37)
current accounts and overnight deposits 2,241,333 2,689,369 (448,036) (17)
term deposits 1,516,981 3,349,821 (1,832,840) (55)
other money-market deposits 63,929 7,620 56,309 739
Total amounts due to customers 146,473,897 132,981,215 13,492,682 10

In 2011 the structure of amounts due to customers changed – the share of term deposits increased (57% of the balance compared with 54% at the end of 2010) which was partly offset by a drop in current accounts (43% of the balance compared with 46% as at the end of 2010).

As at the balance date, 10% of the balance comprised liabilities denominated in foreign currencies (8% as at 31 December 2010).

In 2011, the Bank continued to increase its deposit base. The aim was realized by actively seeking new funds by products addressed to retail customers (housing savings account, term deposit with daily interest capitalization, Lokata 3+3, and Lokata 6+6) as well as by offering negotiable placements to corporate entities.

As at the balance date the value of the loan to deposit ratio (L/D) dropped and amounted to 96.7% (98.3% as at 31 December 2010).

15. Debt securities in issue

31.12.2011
PLN’000
31.12.2010
PLN’000
Change
PLN’000
Change (%)
Financial instruments measured at amortized cost 7,596,164 3,298,867 4,297,297 130
Bank bonds issued by PKO Bank Polski SA 2,929,973 - 2,929,973 100
Bonds issued by PKO Finance AB 4,476,996 3,187,766 1,289,230 40
Bonds issued by BFL SA 189,195 111,101 78,094 70

Financial instruments designated at fair value through profit and loss

- bank securities issued by PKO Bank Polski SA
175,615 - 175,615 100
Total 7,771,779 3,298,867 4,472,912 136

As at 31 December 2011, the balance of securities in issue amounted to PLN 7,771,779 thousand (PLN 3,298,867 thousand as at 31 December 2010), of which as at 31 December 2011, PLN 3,105,588 thousand (i.e. 40%) related to the Bank (PLN 4,476,996 thousand (i.e. 58%) related to PKO Finance AB, and PLN 189.195 thousand (i.e. 2%) to the Bankowy Fundusz Leasingowy SA Group (as at 31 December 2010 the Bank’s balance was nil, PLN 3,187,766 thousand (i.e. 97%) related to PKO Finance AB, and PLN 111.101 thousand, (i.e. 3%) to the Bankowy Fundusz Leasingowy SA Group).

In 2011 under the Bond Issue Program (the issue limit was set at PLN 5 billion), the Bank issued three-month zero-coupon bonds denominated in PLN. As at 31 December 2011 the Bank had bond liabilities in the nominal amount of PLN 2,250,000 thousand, at a discount rate of 5.27% issued in November 2011 and bonds in the nominal amount of PLN 700,000 thousand, at a discount rate of 5.32% issued in December 2011.

The balance relating to PKO Finance AB (of PLN 4,476,996 thousand) resulted from Euro bonds of PLN 800,000 thousand issued on international markets in 2010 and Euro bonds of CHF 250,000 thousand issued in 2011 – both issues were made on behalf of the Bank. PKO Finance AB is a Special Purpose Entity of the Parent Company and is fully consolidated.

BFL SA bonds carry a fluctuating coupon and mature in 2012.

Moreover, in 2011 the Bank offered its customers structured bank securities based on the S&P500 index, price of copper and gold. As at 31 December 2011 the Bank’s liabilities in respect of the securities issued amounted to PLN 175,615 thousand (no respective liability as at 31 December 2010). In accordance with IAS 39.11A (a) the Bank does not separate the embedded derivative from the underlying contract and measures the whole instrument at fair value through profit and loss.

16. Subordinated liabilities

The balance of subordinated liabilities as at 31 December 2011 of PLN 1,614,377 thousand (PLN 1,611,779 thousand as at 31 December 2010), which related fully to the Bank, comprised subordinated bonds issued by the Bank in 2007 with a total nominal value of PLN 1,600,700 thousand maturing on 30 October 2017 (with the option of early redemption in 2012).

The bonds were issued on the basis of the Act on Bonds of 29 June 1995 in order to increase the Bank’s supplementary funds in accordance with art. 127 par. 3  clause 2b of the Banking Law, pursuant to a decision of the Banking Supervision Authority No. 91 dated 5 December 2007 (the supplementary funds are increased by the nominal value of the bonds).

17. Other liabilities

As at the balance sheet date, other liabilities amounted to PLN 2,450,763 thousand, of which PLN 2,145,743  thousand (i.e. 88%) related to the Bank (PLN 1,774,930 thousand, i.e. 85% respectively as at 31 December 2010). Apart from the Bank, the following had a material share in the balance of other liabilities: Bankowy Fundusz Leasingowy Group (PLN 122,301 thousand (i.e. 5%) and respectively PLN 150,570 thousand (i.e. 7%) as at 31 December 2010) and the Qualia Development Group (PLN 68,318 thousand, i.e. 3%. and PLN 50,672 thousand, i.e. 3% respectively as at 31 December 2010). The balance comprised:

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Deferred income 305,372   345,302   (39,930) (12)
Accounts payable 291,040   304,515   (13,475) (4)
Other liabilities relating to: 1,854,351   1,443,017   411,334   29
Interbank settlements 580,998   174,854   406,144   232
liabilities relating to settlements of security transactions 279,204   181,456   97,748   54
liabilities due to suppliers 195,740   162,137   33,603   21
liabilities relating to investment activities and internal operations 182,964   196,687   (13,723) (7)
liabilities arising from foreign exchange transactions 147,009   283,408   (136,399) (48)
liabilities arising from social and legal transactions 140,546   131,849   8,697   7
settlements of financial instruments 82,861   39,851   43,010   108
liabilities related to payment cards 27,981   20,430   7,551   37
liabilities due to insurance companies 24,821   25,465   (644) (3)
liabilities due to UOKIK (the Competition and Consumer Protection Office) 16,597   22,310   (5,713) (26)
Subtotal – carried forward from the previous page 1,678,721 1,238,447 440,274 36
liabilities related to sales of value marks 12,626   14,375   (1,749) (12)

settlement of acquisition of machinery and equipment, materials, work and services

regarding the construction of tangible fixed assets
10,265   4,844   5,421   112

liabilities arising from transactions with financial and non-financial entities

11,949   29,065   (17,116) (59)
Other 140,790   156,286   (15,496) (10)
 Total  2,450,763   2,092,834   357,929   17

As at 31 December 2011, the following had the largest share in other liabilities: interbank settlements (24%) amounting to PLN 580.998 thousand, deferred income (12%) of PLN 305,372 thousand and accrued costs (12%) of PLN 291,040 thousand. These balances increased by PLN 406,144 thousand (i.e. 232%), PLN 39,930 thousand (i.e. 12%) and PLN 13,475 thousand (i.e. 4%) respectively as compared with the balances as at 31 December 2010.

The increase in other liabilities of PLN 357,929 thousand was generated mainly by an increase in the balance of interbank settlements of PLN 406,144 thousand, settlements arising from transactions in securities of PLN 97,748 thousand, and settlements of financial instruments of PLN 43,010 thousand, and was offset mainly by a drop in liabilities arising from social and legal transactions of PLN 136,399 thousand and deferred income of PLN 39,930 thousand.

18. Provisions

As at the balance sheet date, provisions amounted to PLN 619,164 thousand, of which PLN 615,489 thousand (i.e. 99%) related to the Bank (PLN 580,266 thousand, i.e. 99% respectively as at 31 December 2010). As at 31 December 2011, provisions comprised:

31.12.2011 PLN’000 31.12.2010 PLN’000 Change PLN’000 Change (%)
Provision for retirement benefits and anniversary bonuses 428,299   411,792   16,507   4
Provision for liabilities and guarantees granted 111,970   82,320   29,650   36
Provisions for disputed claims   3,638   7,479   (3,841) (51)
Other provisions 75,257   82,099   (6,842) (8)
Total  619,164   583,690   35,474   6

The increase in the balance of provisions as at the end of 2011 resulted mainly from an increase in the level of provisions for liabilities and guarantees granted of PLN 29,650 thousand (i.e. 36%) and provisions for pension and disability pension benefits and anniversary bonuses of PLN 16,507 thousand (i.e. 4%).

As at 31 December 2011, the provision for pension and retirement pension benefits, and for anniversary bonuses related mainly to the Bank (PLN 426,973 thousand as at the end of 2011 and PLN 410,723 thousand as at the end of 2010) and was based on the calculations of an independent actuary included in the report from February 2012. The report was prepared on the basis of balances as at 31 December 2011.

As at 31 December 2011 ‘Other provisions’ related mainly to the restructuring provision of PLN 63,636 thousand (PLN 65,861  thousand as at 31 December 2010). The restructuring provision relates to future liabilities in respect of compensations and severance payments to employees whose employment contracts will be terminated for reasons other than their fault. In accordance with IAS 37.72, the basis for creating this provision is the Bank’s employment restructuring plan.

19. Equity

As at 31 December 2011, equity amounted to PLN 22,821,984 thousand (PLN 21,359,568 thousand as at 31 December 2010). The table below shows changes in equity in the audited year:

As at 31 December 2011, equity amounted to PLN 22,821,984 thousand (PLN 21,359,568 thousand as at 31 December 2010). The table below shows changes in equity in the audited year:


Click to enlarge

As at 31 December 2011, the Bank’s share capital amounted to PLN 1,250,000 thousand and consisted of 1,250,000,000 ordinary shares, each with a par value of PLN 1, including:

  • 312,500,000 series A registered shares;
  • 197,500,000 series A bearer shares;
  • 105,000,000 series B bearer shares;
  • 385,000,000 series C bearer shares;
  • 250,000,000 series D bearer shares.

On 30 June 2011, the General Shareholders’ Meeting of Powszechna Kasa Oszczędności Bank Polski SA passed a resolution relating to the appropriation of profit for 2010, in the amount of PLN 3,311,209 thousand, according to which PLN 800,000 thousand was to be transferred to reserve capital, PLN 36.209 thousand was to be transferred to other reserves and PLN 2,475,000 thousand to be paid out as dividend.

On 30 May 2011, the Ordinary General Shareholders’ Meeting of Bankowy Fundusz Leasingowy SA passed a resolution on appropriating the Company’s profit for 2010, earmarking PLN 17,037 thousand for transfer to reserve capital.

On 15 June 2011, the Ordinary General Shareholders’ Meeting of Qualia spółka z ograniczoną odpowiedzialnością – Neptun Park sp.k. (previous name - PKO BP Inwestycje – Neptun Park sp. z o.o.) passed a resolution on appropriating the Company’s profit for 2010 of PLN 5,556 thousand to be fully transferred to reserve capital.

On 1 June 2011, the Ordinary General Shareholders’ Meeting of Qualia spółka z ograniczoną odpowiedzialnością – Nowy Wilanów sp.k. (previous name - PKO BP Inwestycje – Nowy Wilanów sp. z o.o.) passed a resolution on appropriating the Company’s profit for 2010 of PLN 3,188 thousand to be fully transferred to reserve capital.

On 28 June 2011, the Ordinary General Shareholders’ Meeting of Inteligo Financial Services SA passed a resolution on appropriating the Company’s profit for 2010 of PLN 17,116 thousand, earmarking PLN 16,716 thousand to be paid out as dividend on behalf of the Bank and PLN 400 thousand to be transferred to reserve capital.

On 15 June 2011, the Ordinary General Shareholders’ Meeting of Centrum Elektronicznych Usług Płatniczych eService SA passed a resolution on the appropriation of the profit for 2010 of PLN 24,215 thousand earmarking PLN 22,200 thousand for payment of dividend to the Bank and PLN 2,015 thousand to be transferred to reserve capital (in accordance with art. 396 of the Commercial Companies Code).

On 27 May 2011, the Ordinary General Shareholders’ Meeting of Centrum Finansowe Puławska sp. z o.o – in liquidation passed a resolution to appropriate the Company’s profit for 2010 of PLN 11,920 thousand earmarking it for transfer to other reserves.

On 30 May 2011, the Ordinary General Shareholder’s Meeting of Bankowy Leasing Sp. z o.o. passed a resolution to cover company’s losses for 2010 of PLN 783 thousand from the reserve capital.

On 8 July 2011, the Ordinary General Shareholder’s Meeting of Fort Mokotów Sp. z o.o. passed a resolution to cover company’s losses for 2010 pf PLN 1,936 thousand (PLN 987 thousand related to the Bank) from the reserve capital.

The Group’s own funds calculated in accordance with the Banking Law and Resolution no. 325/2011 of the Polish Financial Supervision Authority amounted to PLN 18,342,916 thousand as at 31 December 2011 (PLN 17,618,546 thousand as at 31 December 2010) and were PLN 6,478,224 thousand higher than the total capital requirements which amounted to PLN 11,864,692 thousand (PLN 11,301,786 thousand as at 31 December 2010). As at 31December 2011, the capital adequacy ratio calculated amounted to 12.37% (12.47% as at 31 December 2010).

20. Reconciliation of the net assets of the consolidated entities with the Group’s consolidated net assets

The following table shows a reconciliation of equity of the consolidated entities with the consolidated equity of the Group as at the balance sheet date:

31.12.2011 PLN’000 31.12.2010 PLN’000
Net assets of companies / Groups:
Powszechna Kasa Oszczędności Bank Polski SA 22,802,375 21,201,848  
The Bankowe Towarzystwo Kapitałowe SA Group 5,318   5,124  
Bankowy Fundusz Leasingowy SA Group 108,177   99,835  
Centrum Elektronicznych Usług Płatniczych "eService" SA 86,927   85,417  
Centrum Finansowe Puławska Sp, z o,o, – w likwidacji 261,918  210,299  
Finansowa Kompania "Prywatne Inwestycje" Sp, z o,o, 1,414   -
Fort Mokotów Inwestycje Sp, z o,o, 105,087   105,609 
Inteligo Financial Services SA 152,612   152,724  
Kredobank SA 282,116   340,616  
PKO BP BANKOWY Powszechne Towarzystwo Emerytalne SA 240,450   237,433  
PKO BP Finat Sp, z o,o,  11,878   -
PKO Finance AB 892 425
PKO Towarzystwo Funduszy Inwestycyjnych SA 61,034   75,603 
Grupa Qualia Development Sp, z o,o, 208,355   147,786  
Total net assets 24,328,553 22,662,719
Eliminations / consolidation adjustments:
 - of share capitals of subsidiaries (1,544,158) (1,386,194)
 - of other equity items of subsidiaries 155,105 197,998  
 - impairment allowances for goodwill (117,516) (114,955)
Total eliminations (1,506,569) (1,303,151)
Consolidated net assets 22,821,984 21,359,568

As at 31 December 2011 impairment allowance for goodwill of PLN 117,516 thousand related to goodwill recognized on the acquisition of shares in Kredobank SA of PLN 79,762 thousand and goodwill recognized on the acquisition of shares in the Qualia Development Group companies of PLN 37,754 thousand (Note 10).
 
Consolidated income statement for the year ended 31 December 2011

21. Net interest income

The net interest income earned by the Group in 2011 amounted to PLN 7,609,116 thousand, of which PLN 7,528,168 thousand (i.e. 99%) related to the Bank (PLN 6,328,304 thousand, i.e. 97% in 2010). Net interest income comprised the following items:

2011 r. PLN’000 2010 r. PLN’000 Change PLN’000 Change (%)
Interest income: 12,037,762   10,415,315   1,622,447   16
Income from loans and advances to customers 9,782,468   8,532,201   1,250,267   15
Income from hedging instruments 814,275   649,116   165,159   25
Income from available-for-sale investment securities 576,630   457,802   118,828   26
Income from financial assets designated at fair value through profit or loss at initial recognition 561,826   494,702   67,124   14
Income from placements with banks 218,731   148,494   70,237   47

Income from financial instruments held for trading

74,847   128,940   (54,093) (42)

Income from securities held to maturity

-   156 (156) (100)
Other 8,985   3,904   5,081   130
Interest expense: (4,428,646) (3,899,149) (529,497) 14
Interest expense on customers (4,101,578) (3,715,721) (385,857) 10
Expenses on issue of debt securities (278,178) (123,382) (154,796) 125
Interest expense on deposits from banks   (45,684) (30,276) (15,408) 51
Premium expense on available-for-sale debt securities (1,322) (3,553) 2,231   (63)
Other (1,884) (26,217) 24,333   (93)
Net interest income 7,609,116   6,516,166   1,092,950   17

The increase in interest income of PLN 1,622,447 thousand (i.e. 16%) in 2011 was caused mainly by interest income on loans and advances to customers and income on hedging instruments which were higher than in 2010 (an increase of PLN 1,250,267 thousand, i.e. 15% and PLN 165,159 thousand, i.e. 25%) respectively. The increase in interest income on loans and advances to customers was caused mainly by an increase in the loan portfolio (a gross increase of PLN 11,767,948 thousand, i.e. 9% (Note 6)) and an increase in reference rates (the average annual WIBOR 1M rate in 2011 amounted to 4.37% compared with 3.62% in 2010).

The dynamics of interest expense were similar and amounted to 14%, which translated into an increase in interest expense of PLN 529,497 thousand in 2011. This was mainly the result of higher interest expense on customers and costs of issuing own debt securities (an increase of PLN 385,857 thousand, i.e. 10% and PLN 154,796 thousand, i.e. 125%) respectively. This increase resulted mainly from the increase in the balance of amounts due to customers (an increase of PLN 13,492,682 thousand, i.e. 10% (Note 14)) and securities in issue (an increase of PLN 4,472,912 thousand, i.e. 136% (Note 15)).

As a result, the interest margin calculated as the ratio of the net interest income to interest income did not change compared with 2010 and amounted to 63% in 2011. The interest spread, calculated as the difference between the rate of interest income on interest-bearing assets and the price of borrowings was 4.2% and did not change significantly (an increase of 0.2 pp.) as compared with 2010.

22. Net fee and commission income

In 2011, net fee and commission  income earned by the Group amounted to PLN 3,101,444 thousand of which PLN 2,730,653 thousand (i.e. 88%) related to the Bank (PLN 2,799,996 thousand, i.e. 89% in 2010) and PLN 263,894 thousand (i.e. 9%) related to PKO Towarzystwo Funduszy Inwestycyjnych SA (PLN 263,399 thousand, i.e. 8% in 2011). Net fee and commission income comprised the following items:
 

2011 r. PLN’000 2010 r. PLN’000 Change PLN’000  Change (%)

Income from fees and commission

3,837,165   3,880,863   (43,698) (1)
Income from payment cards 1,048,720   963,434   85,286   9
Income from maintenance of bank accounts 916,484   922,632   (6,148) -  
Income from loans and advances granted 582,100   528,824   53,276   10
Income from loan insurance 515,499   653,501   (138,002) (21)
Income from maintenance of investment funds and open pension funds (including management fees) 340,751   338,144   2,607   1
Income from cash transactions 160,451   177,684   (17,233) (10)
Income from securities transactionsi 70,344   73,261   (2,917) (4
Income from foreign mass transactions 47,966   44,754   3,212   7
Income from distribution of court fee stamps 18,625   26,255   (7,630) (29)
Income from fiduciary services 2,806   1,659   1,147   69
Other 133,419   150,715   (17,296) (11)
Fee and commission expense (735,721) (738,034) 2,313   -
Expenses on payment cards (320,592) (293,247) (27,345) 9
Expenses on acquisition services (140,216) (144,252) 4,036   (3)
Expenses on loan insurance (133,488) (150,842) 17,354   (12)
Expenses on settlement services (20,977) (21,751) 774 (4)
Expenses on asset management (16,158) (21,672) 5,514   (25)
Expenses on commission for operating services of other banks (11,435) (10,137) (1,298) 13
Other (92,855) (96,133) 3,278   (3)
Net fee and commission income 3,101,444   3,142,829   (41,385) (1)

In 2011, fee and commission income decreased by PLN 43,698 thousand (i.e. 1%). This drop resulted, among other things, from income on loan insurance being PLN 138,002 thousand (i.e. 21%) lower, partly offset by an increase in income from payment cards of PLN 85,286 thousand (i.e. 9%) and income on loans and advances to customers (an increase of PLN 53,276 thousand (i.e. 10%). The drop in income from loan insurance resulted mainly from a decrease in the volume of consumer loans granted (a drop in the volume of consumer loans of PLN 1,306,404 thousand, i.e. 5% (Note 6)) and reimbursing customers with commission in connection with the early repayment of loans or renouncement of insurance. The increase in income from credit cards resulted mainly from an increase in the number of transactions concluded using payment cards in the Bank of 5.7% compared with the prior year.

Fee and commission expense in 2011 dropped by PLN 2,313 thousand compared with 2010. This drop resulted mainly from a drop in commission expense on loan insurance (of PLN 17,354 thousand, i.e. 12%), a drop in costs of asset management (of PLN 5,514 thousand, i.e. 25%) and a decrease in acquisition costs (of PLN 4,036 thousand, i.e. 3%). The drop in the balance was partly offset by an increase in fee and commission expense on payment cards (an increase of PLN 27,345 thousand, i.e. 9%).

23. Net foreign exchange gains

In 2011, net foreign exchange gains amounted to PLN 337,296 thousand (PLN 346,762 thousand in 2010. Net foreign exchange gains include gains and losses on revaluation and transactions in assets and liabilities in foreign currencies and fair value measurement of foreign exchange derivatives (FX forward, FX swap, CIRS and currency options). In 2011, net foreign exchange gains amounted to PLN 337,296 thousand, of which PLN 331,367 thousand (i.e. 98%) related to the Bank (PLN 341,348 thousand, i.e. 98% in 2010). Compared with 2010, net foreign exchange gains dropped by PLN 9,466 thousand (i.e. 3%).

2011 PLN’000 2010 PLN’000 Change PLN’000  Change (%)
Foreign exchange differences on financial instruments at fair value through profit or loss 523,174   (1,026,841) 1,550,015   (151)
Foreign exchange differences on translation (185,878) 1,373,603   (1,559,481) (114)
Total 337,296   346,762   (9,466) (3)

Compared with 2010 the result on the components of the balance reversed. In 2011 the Bank realized net foreign exchange gains on instruments at fair value through profit or loss (a net gain of PLN 523,174 thousand compared with the net loss of PLN 1,026,841 thousand in 2010). This result was mainly determined by the measurement of derivative instruments and resulted chiefly from a change in the measurement of CIRS contracts used mainly by the Bank to manage interest rate risk, the measurement of which changed by PLN 560,359 thousand, i.e. 210% (a change from negative net value of PLN 266,938 thousand as at the end of 2010 to a positive net value of PLN 293,421 as at the end of 2011 – Note 4).

At the same time, the net loss on other foreign exchange differences (including the result on revaluation of loans and advances) amounted to PLN 185,878 thousand (a drop compared with the gain of PLN 1,373,603 thousand in the prior year).

24. Other operating income

In 2011, other operating income amounted to PLN 451,723 thousand (PLN 469,388 thousand in 2010). Centrum Elektronicznych Usług Płatniczych eService SA had the largest share in the balance (PLN 126,833 thousand, i.e. 28%),the Bankowy Fundusz Leasingowy SA Group (PLN 114,284 thousand, i.e. 25%) and the Qualia Development Group (PLN 103,990 thousand, i.e. 23%). The balance comprised:

 
2011 PLN’000 2010 PLN’000 Change PLN’000 Change (%)
Net sales of products and services 256,051   323,919   (67,868) (21)
Sale or scrapping of tangible fixed assets, intangible assets and assets held for sale 76,636   51,255   25,381   50
Sundry income 20,630   20,730   (100) -
Damages, penalties and fines received 19,219   23,443   (4,224) (18)
Expired, forgiven and uncollectible receivables recovered 5,336   4,977   359 7
Sales of shares in jointly controlled entities and associates -   1,426   (1,426) (100)
Other 73,851   43,638   30,213   69
Total 451,723 469,388   (17,665) (4)

In 2011, net sales of products and services related mostly to income from development activities of the Qualia Development Group (PLN 102,983 thousand, i.e. 40% of the balance and respectively PLN 155,342 thousand i.e. 48% of the balance in 2010) and activities of Centrum Elektronicznych Usług Płatniczych eService (PLN 124,390 thousand, i.e. 49% of the balance and respectively PLN 145,164 thousand, i.e. 45% of the balance in 2010).

25. Other operating expenses

In 2011, other operating expenses amounted to PLN 309,186 thousand, of which PLN 98,924 thousand (i.e. 32%) related to Centrum Elektronicznych Usług Płatniczych eService SA (PLN 90,489 thousand, i.e. 31% in 2010), PLN 72,150 thousand (i.e. 23%) related to the Qualia Development Group (PLN 110,923 thousand i.e. 38% in 2010) and PLN 71.983 thousand (i.e. 23%) to the Bankowy Fundusz Leasingowy SA Group (PLN 62,455 thousand, i.e. 21% in 2010). The balance comprised:

2011 PLN’000 2010 PLN’000 Change PLN’000 Change (%)
Cost of sale of products and services (171,543) (200,536) 28,993   (14)
Costs of sale or scrapping of tangible fixed assets, intangible assets and assets held for sale (69,946) (48,107) (21,839) 45
Costs of donations made (11,571) (4,296) (7,275) 169
Sundry costs (4,696) (4,378) (318) 7
Other (51,430) (36,419) (15,011) 41
Total (309,186) (293,736) (15,450) 5

In 2011, costs of sales of products and services related mostly to costs of development activities of the Qualia Development Group (PLN 73,370 thousand, i.e. 43% of the balance in 2011 and respectively PLN 110,352 thousand, i.e. 55% of the balance in 2010) and activities of Centrum Elektronicznych Usług Płatniczych eService (PLN 98,742 thousand, i.e. 57% of the balance in 2011 and respectively PLN 89,607 thousand, i.e. 45% of the balance in 2010).

26. Net impairment allowance and write-downs

In 2011, the net impairment allowances and write-downs were negative (an excess of allowances set up over those reversed) and amounted to PLN 1,930,447 thousand. The negative result increased by PLN 62,083 thousand as compared with 2010. The Bank represented the largest part of the balance (PLN 1,826,739 thousand, i.e. 95% (PLN 1,673,082 thousand, i.e. 89% in 2010). The remaining part of the balance related mainly to the negative result on impairment allowances in respect of Kredobank SA of PLN 69,755 thousand, i.e. 4% (PLN 122,655 thousand, i.e. 7% in 2010) and the Bankowy Fundusz Leasingowy SA Group of PLN 30,001 thousand, i.e. 2% (PLN 32,720 thousand, i.e. 2% in 2010).

2011 PLN'000 2010 PLN'000 Change PLN'000 Change (%)
Loans and advances to customers (1,838,805) (1,746,215) (92,590) 5
Investments in entities accounted for under the equity accounting method (28,815) (55,110) 26,295 (48)
Intangible assets (2,561) (37,837) 35,276 (93)
Tangible fixed assets (4,549) (28,790) 24,241 (84)
Investment securities - available for sale 1,330 (1,319) 2,649 (201)
Non-current assets held for sale - (1,281) 1,281 (100)
Amounts due from banks 68 (738) 806 (109)
Other (57,115) 2,926 (60,041) (2,052)
Net impairment allowance charge (1,930,447) (1,868,364) (62,083) 3

In 2011 the increase in net impairment allowances was mainly influenced by the increase in impairment allowances on corporate loans impairment allowances of PLN 120,490 thousand (i.e. 19%) and on housing loans – an increase of PLN 123,445 thousand (i.e. 46%), which increase was offset by a drop in net impairment allowances for consumer loans (a drop of PLN 152,756 thousand, i.e. 19%). Detailed information on the quality of the loan portfolio is shown in Note 6.

Impairment allowances for investment in entities accounted for under the equity method resulted mainly from setting up an impairment allowance for shares in the associate Bank Pocztowy SA of PLN 28,807 thousand in 2011 (a net write-down of PLN 55,171 thousand in 2010).

The remaining portion of the balance was the negative amount of PLN 57,115 thousand in 2011 and comprised mainly the negative result on valuation of liabilities and guarantees granted and impairment allowances on other assets.

The cost of risk amounted to 1.3% in 2011 (1.4% in 2010).

27. Administrative expenses

Administrative expenses incurred by the Group in 2011 amounted to PLN 4,411,357 thousand and were PLN 162,221 thousand (i.e. 4%) higher than the costs incurred in 2010. The Bank’s expenses comprised 90% of the total Group balance (share unchanged compared with 2010).

  2011 PLN’000 2010 PLN’000 Change PLN’000 Change (%)
Staff costs (2,403,744) (2,374,901) (28,843) 1
Overheads (1,276,586) (1,237,892) (38,694) 3
Amortization and depreciation (520,161) (512,319) (7,842) 2
Taxes and fees (74,129) (70,640) (3,489) 5
Contribution and payments to the Banking Guarantee Fund (136,737) (53,384) (83,353) 156
Total (4,411,357) (4,249,136) (162,221) 4

The increase in administrative expenses in 2011 resulted mainly from an increase in contributions to the Banking Guarantee Fund (an increase of PLN 83,353 thousand, i.e. 156%), overheads (an increase of PLN 38,694 thousand, i.e. 3%) and staff costs (an increase of PLN 28,843 thousand, i.e. 1%).

The Group’s effectiveness ratios in the audited year were as follows:

2011 PLN’000 2010 PLN’000
Administrative expenses (4,411,357) (4,249,136)
Annual average number of full-time employees 29,352   30,439  
Administrative expenses per employee (150) (140)
Net profit per employee 130 106

The cost to income ratio amounted to 39.6% in the audited year (41.7% in 2010). The improvement in the C/I ratio was mainly caused by an increase in net interest income (Note 21). Administrative expenses per employee increased, mainly as a result of a drop in the number of employees of 1,087 (i.e. 4%). At the same time net profit per employee increased (a 23% increase in the annual average compared with 2010).

28. Income tax expense

The total income tax expense for the audited year was as follows:

2011 PLN’000 2010 PLN’000 Change PLN’000 Change (%)
Deferred income tax (18,039) 197,744   (215,783) (109)
Current income tax expense (958,076) (1,064,174) 106,098   (10)
Income tax expense shown in the income statement (976,115) (866,430) (109,685) 13
Income tax expense disclosed in other comprehensive income (27,441) (20,390) (7,051) 35
Total  (1,003,556) (886,820) (116,736) 13

The effective tax rate amounted to 20.4% in 2011 and was 0.8 pp. lower than in the prior year.

(a) Deferred income tax

Deferred income tax relates to timing differences between the book values of assets and liabilities and their tax bases. The balance of deferred tax comprises deductible and taxable temporary differences:

Statement of financial position 2011 PLN'000 Statement of financial position 2010 PLN'000 Income statement PLN'000
Deferred income tax liability
Interest capitalized on mortgage loans 190,844 211,576 20,732
Interest accrued on receivables 176,076 111,398 (64,678)
Interest on securities 58,187 44,537 (13,650)
Valuation of derivatives, including: 94,471 98,859 -
- recognized in the income statement 9,514 47,741 38,227
- recognized in other comprehensive income 84,957 51,118 -
Valuation of securities, including: 16,414 - -
- recognized in the income statement 15,443 - (15,443)
- recognized in other comprehensive income 971 - -

Difference between tax and accounting depreciation

293,318 256,004 (35,291)
Other temporary taxable differences 29,363 24,786 -
- recognized in the income statement 29,307 24,535 (6,795)
- recognized in other comprehensive income 56 251 -
Deferred income tax liability, gross 858,673 747,160
- recognized in the income statement 772,689 695,791 (76,898)
- recognized in other comprehensive income 85,984 51,369 -
Deferred income tax assets
Interest accrued on liabilities 391,527 406,364 (14,837)
Valuation of securities, including: 24,550 57,394 -
- recognized in the income statement 11,580 50,640 (39,060)
- recognized in other comprehensive income 12,970 6,754 -
Adjustment to ESP valuation 211,011 218,000 (6,989)
Impairment allowance on loan exposures 414,558 335,477 79,081
Provisions for employee benefits 126,714 118,613 8,101
Valuation of derivative instruments 16,093 19,470 (3,377)
Other temporary deductible differences, including 188,778 151,880 -
- recognized in the income statement 188,202 152,262 35,940
- recognized in other comprehensive income 576 (382) -
Deferred tax assets, gross, including: 1,373,231 1,307,198 -
- recognized in the income statement 1,359,685 1,300,826 58,859
- recognized in other comprehensive income 13,546 6,372 -
Total effect of temporary differences, including: 514,558 560,038 -
- recognized in the income statement 586,996 605,035 (18,039)
- recognized in other comprehensive income (72,438) (44,997) -
Deferred income tax asset 543,922 582,802 -
Deferred income tax provision 29,364 22,764 -
Net impact of the deferred income tax on the income statement - - (18,039)

Due to the fact that the Group recognized net deductible differences as at 31 December 2011, it recognized a deferred tax asset of PLN 543,922 thousand (PLN 582,802 thousand as at the end of 2010). The deferred income tax provision recognized in the statement of financial position amounted to PLN 29,364 thousand (PLN 22,764 thousand as at the end of 2010).

(b) Current income tax
2011 PLN’000 2010 PLN’000 Change PLN’000 Change (%)
Profit before tax 4,780,860 4,079,236 701,624 17
Current income tax at the statutory rate (19%) (908,363) (775,055) (133,308) 17
Effect of other income tax rates (2,504) (340) (2,164) 636
Permanent differences, including: (73,996) (66,154) (7,842) 12
Provisions released and positive revaluation not constituting taxable income (51,399) (36,487) (14,912) 41
Other non-deductible costs (17,656) (19,480) 1,824 (9)
Dividend income 17,859 20,501 (2,642) (13)
Other (22,800) (30,688) 7,888 (26)
Other differences, including donations 8,508 (25,064) 33,572 (134)
Settlement of tax loss 240 183 57 31
Total tax charge (976,115) (866,430) (109,685) 13
Effective tax rate 20,40% 21,20% -0,8pp. -

Temporary difference in
deferred tax recognized in

the income statement
(18,039) 197,744 (215,783) (109)
Current income tax expense (958,076) (1,064,174) 106,098 (10)

In the audited year, corporate income tax for Group companies was calculated at a rate of 19% (for Poland) and 23% (for the Ukraine), based on profit before tax determined on the basis of IFRS regulations as adopted by the EU, adjusted for non-taxable income and non-deductible costs. Corporate income tax for the year constitutes the sum of current income tax calculated by Group entities (including the Bank – PLN 910,115 thousand).

29. Reconciliation of the net result of the consolidated entities with the Group’s consolidated net profit

Reconciliation of the net profits/(losses) of consolidated companies with the consolidated net profit of the Group for the audited year is shown below:

  2011 PLN'000 2010 PLN'000
Net profit/(loss):
Powszechna Kasa Oszczędności Bank Polski SA 3,953,622 3,311,209
The Bankowe Towarzystwo Kapitałowe SA Group (2,806) (4,440)
The Bankowy Fundusz Leasingowy SA Group 8,412 10,531
Centrum Elektronicznych Usług Płatniczych "eService" SA 23,710 24,215
Centrum Finansowe Puławska Sp, z o,o, – w likwidacji 12,619 11,920
Finansowa Kompania "Prywatne Inwestycje" Sp, z o,o, 81 -
Fort Mokotów Inwestycje Sp, z o,o, (522) (261)
Inteligo Financial Services SA 19,898 18,076
Kredobank SA (93,815) (40,314)
PKO BP BANKOWY Powszechne Towarzystwo Emerytalne SA 4,714 12,125
PKO BP Finat Sp, z o,o, 970 -
PKO Finance AB 393 28
PKO Towarzystwo Funduszy Inwestycyjnych SA 37,821 48,463
Qualia Development Sp, z o,o, Group (4,555) (10,574)
Total net profit of the consolidated entities 3,960,542 3,380,978
Consolidation adjustments, including:
- dividends (87,228) (104,232)
- impairment allowance (2,561) (35,193)
- other (66,008) (28,747)
Net profit of the Group 3,804,745 3,212,806

In 2011 the impairment allowance of PLN 2,561 thousand related to impairment of goodwill of Qualia spółka z ograniczoną odpowiedzialnością – Nowy Wilanów sp.k. (in 2010 respectively to the impairment of goodwill of PKO Qualia spółka z ograniczoną odpowiedzialnością – Nowy Wilanów sp.k. of PLN 28,179 thousand and Sarnia Dolina Sp. z o.o. of PLN 7,014 thousand).

30. Off-balance sheet items

The value of off-balance sheet liabilities granted and received as at 31 December 2011 is shown in the table below:

  31.12.2011 PLN’000 21.12.2010 PLN’000 Change PLN’000 Change (%)
Off-balance sheet liabilities granted, including: 36,890,388 36,785,378 105,010 -
Financing granted 30,455,658 29,505,024 950,634 3
Guarantees and warranties granted – nominal value 6,434,730 7,280,354 (845,624) (12)
Off-balance sheet liabilities received, including: 2,801,398 2,632,689 168,709 6
Guarantees and warranties received 1,918,281 2,228,815 (310,534) (14)
Financing received 883,117 403,874 479,243 119

The slight increase in off-balance sheet liabilities granted (of PLN 105,010 thousand) resulted from the increase in off-balance sheet liabilities relating to finance of PLN 950,634 thousand (i.e. 3%) with a simultaneous decrease in the nominal value of guarantees and warranties granted of PLN 845,624 thousand (i.e. 12%).