The consolidated net profit of the PKO Bank Polski SA Group generated in 2014 amounted to PLN 3 254.1 million which was PLN 24.3 million higher than in 2013.
Net profit (in PLN million)
Results on business activities (in PLN million)
In the PKO Bank Polski SA Group’s income statement for the year 2014, the sum of revenue positions amounted to PLN 11 147 million and was PLN 439.7 million, i.e. by 4.1% higher than in 2013, mainly due to increase of net interest income by 11.9% y/y.
Income statement of the PKO Bank Polski SA Group (in PLN million)
| 2014 | 2013 | Change (in PLN million) | Change (in %) | |
|---|---|---|---|---|
| Interest and similar income | 10,737.4 | 10,763.5 | (26.1) | -0.2% |
| Interest expense and similar charges | (3,214.5) | (4,041.5) | 827.0 | -20.5% |
| Net interest income | 7,522.9 | 6,722.0 | 801.0 | 11.9% |
| Fee and commission income | 4,002.2 | 3,926.6 | 75.6 | 1.9% |
| Fee and commission expense | (1,068.6) | (920.9) | (147.8) | 16.1% |
| Net fee and commission income | 2,933.5 | 3,005.8 | (72.2) | -2.4% |
| Dividend income | 6.5 | 5.8 | 0.7 | 12.9% |
| Net income from financial instruments measured at fair value | 75.2 | 54.3 | 20.9 | 38.4% |
| Gains less losses from investment securities | 150.1 | 67.5 | 82.6 | 2.2x |
| Net foreign exchange gains (losses) | 235.8 | 241.8 | (6.1) | -2.5% |
| Net other operating income and expense | 222.6 | 609.7 | (387.2) | -63.5% |
| Net impairment allowance and write-downs | (1,898.7) | (2,037.9) | 139.2 | -6.8% |
| Administrative expenses | (5,245.1) | (4,622.5) | (622.6) | 13.5% |
| Operating profit | 4,002.8 | 4,046.4 | (43.7) | -1.1% |
| Share of profit (loss) of associates and joint ventures | 31.8 | (2.0) | 33.8 | x |
| Profit (loss) before income tax | 4,034.6 | 4,044.5 | (9.9) | -0.2% |
| Income tax expense | (791.7) | (816.3) | 24.5 | -3.0% |
| Net profit (including non-controlling shareholders) | 3,242.8 | 3,228.2 | 14.6 | 0.5% |
| Profit (loss) attributable to non-controlling shareholders | (11.3) | (1.6) | (9.7) | 7.1x |
| Net profit (loss) | 3,254.1 | 3,229.8 | 24.3 | 0.8% |
Net interest income
The net interest income generated in 2014 was PLN 801.0 million higher than in the previous year, mainly due to a decrease in interest expense by PLN 827 million, along with a stable level of interest income at PLN 10 737.4 million. Net interest income was determined i.a. by the further fall in market interest rates (which for 1M and 3M WIBOR on an annual basis was 0.53 pp. and 0.65 pp. respectively), which was offset by an increase in revenues related to the increase in the loan portfolio.
Structure of interest income (in mln PLN)
Structure of interest expense (in mln PLN)
In 2014, interest income amounted to PLN 10 737.4 million and in comparison with 2013 was lower by 0.2%, mainly as a result of:
- a decrease in income from derivative hedging instruments (-PLN 111.0 million y/y), as a result of narrowing the spread between the PLN and foreign currency rates as a result of the drop in the WIBOR market rates and the drop in the average volume of CIRS transactions,
- with an increase in income in respect of loans and advances to customers (increase by PLN 84.0 million y/y).
In 2014, interest expense amounted to PLN 3 214.5 million and was lower by 20.5% than in 2013 mainly due to a drop in the costs of amounts due to customers of PLN 917.4 million y/y. The drop in the costs of amounts due to customers resulted from a lower average interest rate on deposits – the effect of the drop in market interest rates and the adaptation of the price offer of deposit products.
Also the change in the structure of deposits had a positive effect on the level of the interest expense on amounts due to customers.
In 2014, the average interest rate on loans in PKO Bank Polski SA amounted to 5.2%, whereas the average interest rate on deposits in total amounted to 1.6%, as compared with 6.1% and 2.3% respectively in 2013.
Interest margin of the PKO Bank Polski SA Group amounted to 3.6% in 2014 and still remains at a stable level on an annual basis despite a drop of interest rates.
Interest income and expense of the PKO Bank Polski SA Group (in PLN million)
| 2014 | Structure 2014 | 2013 | Structure | Change 2014/2013 | |
|---|---|---|---|---|---|
| 2013 | |||||
| Interest and similar income, of which: | 10,737.4 | 100.0% | 10,763.5 | 100.0% | -0.2% |
| Loans and advances to customers | 9,146.6 | 85.2% | 9,062.6 | 84.2% | 0.9% |
| Securities | 1,090.5 | 10.2% | 1,074.5 | 10.0% | 1.5% |
| Derivative hedging instruments | 343.3 | 3.2% | 454.3 | 4.2% | -24.4% |
| Placements with banks | 140.1 | 1.3% | 165.2 | 1.5% | -15.2% |
| Loans to banks | 7.2 | 0.1% | 2.9 | 0.0% | 2,5x |
| Other | 9.7 | 0.1% | 4.0 | 0.0% | 2,4x |
| Interest expense and similar charges, of which: | (3,214.5) | 100.0% | (4,041.5) | 100.0% | -20.5% |
| Amounts due to customers | (2,541.2) | 79.1% | (3,457.8) | 85.6% | -26.5% |
| Amounts due to banks | (86.1) | 2.7% | (32.0) | 0.8% | 2,7x |
| Own debt securities in issue | (512.7) | 15.9% | (472.6) | 11.7% | 8.5% |
| Deposits from banks | (11.4) | 0.4% | (17.1) | 0.4% | -33.4% |
| Premium on debt securities | (40.9) | 1.3% | (38.7) | 1.0% | 5.7% |
| available for sale | |||||
| Other expense | (22.2) | 0.7% | (23.3) | 0.6% | -4.6% |
| Net interest income | 7,522.9 | x | 6,722.0 | x | 11.9% |
Net fee and commission income
Net fee and commission income generated in 2014 amounted to PLN 2 933.5 million and was PLN 72.2 million lower than in the previous year, as a result of PLN 147.8 million increase in commission expenses, accompanied by higher commission income of PLN 75.6 million.
The structure of commision income (in PLN million)
The structure of commision expense (in PLN million)
The level of net fee and commission income was significantly determined by:
- a decrease in the result on payment cards (-18.6% y/y), mainly due to a decrease in commission related to interchange fee, in connection with a reduction of interchange fee rates by payment organisations - lower commission related to was accompanied by the increase in card transactions,
- a decrease in net fee and commission income in respect of loan insurance (-PLN 27.9 million y/y), mainly due to a decrease in insurance saturation of loans,
- an increase in acquisition service costs by 10.8 million y/y, connected with the acquisition of insurance company and the growth of investment and insurance product distribution costs,
- a decrease in income on cash transactions (-PLN 12.7 million y/y), related to the development of electronic banking,
- an increase in fee and commission income in respect of maintenance of bank accounts (+PLN 27.7 million y/y),
- an increase in commission income in respect of maintenance of investment funds and open pension funds (including management fees) by PLN 44.6 million y/y,
- an increase in income in respect of investment and insurance products (+PLN 60.5 million y/y), due to the acqusition of PKO Życie Towarzystwo Ubezpieczeń SA and expansion of the Group’s product offer by investment and insurance products.
Fee and commission income and expense of the PKO Bank Polski SA Group (in PLN million)
| 2014 | Structure 2014 | 2013 | Structure 2013 | Change 2014/2013 | |
|---|---|---|---|---|---|
| Fee and commission income, of which: | 4,002.2 | 100.0% | 3,926.6 | 100.0% | 1.9% |
| Payment cards | 1,271.5 | 31.8% | 1,314.3 | 33.5% | -3.3% |
| Maintenance of bank accounts | 922.2 | 23.0% | 894.5 | 22.8% | 3.1% |
| Loans and advances granted | 603.9 | 15.1% | 585.5 | 14.9% | 3.1% |
| Loan insurance | 238.3 | 6.0% | 266.2 | 6.8% | -10.5% |
| Maintenance of investment funds and OPF (including management fees) | 445.0 | 11.1% | 400.4 | 10.2% | 11.1% |
| Cash transactions | 114.1 | 2.8% | 126.8 | 3.2% | -10.0% |
| Securities transactions | 95.5 | 2.4% | 79.3 | 2.0% | 20.4% |
| Servicing foreign mass transactions | 68.7 | 1.7% | 52.3 | 1.3% | 31.3% |
| Providing the services of an agent for the issue of Treasury bonds | 23.0 | 0.6% | 29.0 | 0.7% | -20.6% |
| Sale and distribution of court fee stamps | 9.6 | 0.2% | 20.9 | 0.5% | -54.1% |
| Fiduciary activities | 4.4 | 0.1% | 4.3 | 0.1% | 1.0% |
| Insurance and investment products | 60.5 | 1.5% | 0.0 | 0.0% | x |
| Other* | 145.6 | 3.6% | 153.0 | 3.9% | -4.8% |
| Fee and commissions expense, of which: | (1,068.6) | 100.0% | (920.9) | 100.0% | 16.1% |
| Payment cards | (669.8) | 62.7% | (575.6) | 62.5% | 16.4% |
| Loan insurance | (100.2) | 9.4% | (95.0) | 10.3% | 5.5% |
| Acquisition services | (112.4) | 10.5% | (101.7) | 11.0% | 10.6% |
| Settlement services | (27.8) | 2.6% | (24.4) | 2.6% | 14.2% |
| Operating services provided by banks | (15.9) | 1.5% | (11.5) | 1.2% | 38.6% |
| Asset management | (18.8) | 1.8% | (12.6) | 1.4% | 49.0% |
| Other** | (123.6) | 11.6% | (100.1) | 10.9% | 23.5% |
| Net fee and commission income | 2,933.5 | x | 3,005.8 | x | -2.4% |
* Included in ‘Other’ are i.a.: commissions of the Brokerage House of PKO Bank Polski SA for servicing Initial Public Offering issue and commissions for servicing indebtedness of borrowers against the State budget.
** Included in ‘Other’ are i.a.: fee and expenses paid by the Brokerage House of PKO Bank Polski SA to WSE and to the National Depository for Securities (KDPW).
Administrative expenses
In 2014 administrative expense amounted to PLN 5 245.1 million and increased by 13.5% compared with the previous year. The level of administrative expenses was determined mainly by changes in the PKO Bank Polski SA Group structure in 2014, of which mainly the purchase of the Nordea Group entities, which caused the operating efficiency of the PKO Bank Polski SA Group, measured by the annualised C/I ratio, to shape up at the level of 47.1%.
The structure of administrative expenses (in PLN million)
C/I
Administrative expenses of the PKO Bank Polski SA Group (in PLN million)
| 2014 | Structure 2014 | 2013 | Structure 2013 | Change 2014/2013 | |
|---|---|---|---|---|---|
| Employee benefits | (2,672.4) | 51.0% | (2,514.8) | 54.4% | 6.3% |
| Overheads and other, of which: | (1,825.5) | 34.8% | (1,528.5) | 33.1% | 19.4% |
| Contribution and payments to the Bank Guarantee Fund | (233.8) | 4.5% | (167.7) | 3.6% | 39.4% |
| Amortisation and depreciation | (747.2) | 14.2% | (579.2) | 12.5% | 29.0% |
| TOTAL | (5,245.1) | 100.0% | (4,622.5) | 100.0% | 13.5% |
Net impairment allowance and write-downs
Net impairment allowance and write-downs reflects a conservative approach of the PKO Bank Polski SA Group to recognition and measurement of credit risk. Improvement of net impairment allowance (-6.8% y/y) is mainly the result of a decrease in the net impairment allowance on the consumer and corporate loans portfolio as a result of improvement of the quality of newly granted loans compared to the older generations.
As at the end of 2014, the share of impaired loans and the coverage ratio of impaired loans respectively amounted to 6.9% (a decrease by 1.3 pp. in comparison to 2013) and 61.8% (an increase by 10.0 pp. in comparison to 2013), due to improvement of the quality of all categories of loans.
The cost of risk at the end of 2014 amounted to 1.0% compared to 1.3% as at the end of 2013, as a result of the improvement of the net impairment allowance on the consumer and corporate loans portfolio.
Net impairment allowance and write-downs of the PKO Bank Polski SA Group (in PLN million)
| 2014 | Structure 2014 | 2013 | Structure 2013 | Change 2014/2013 | |
|---|---|---|---|---|---|
| Net impairment allowance and write-downs, of which: | |||||
| investment securities available for sale | (126.7) | 6.7% | (16.2) | 0.8% | 7.8x |
| loans and advances to customers measured at amortised cost | (1,733.7) | 91.3% | (2,028.3) | 99.5% | -14.5% |
| non-financial sector | (1,705.2) | 89.8% | (2,015.4) | 98.9% | -15.4% |
| consumer loans | (239.1) | 12.6% | (412.5) | 20.2% | -42.0% |
| housing loans | (365.4) | 19.2% | (269.4) | 13.2% | 35.7% |
| corporate loans | (1,036.5) | 54.6% | (1,308.3) | 64.2% | -20.8% |
| debt securities | (64.2) | 3.4% | (25.3) | 1.2% | 2.5x |
| financial sector | 5.3 | -0.3% | (8.1) | 0.4% | x |
| public sector | (0.8) | 0.0% | 10.7 | -0.5% | x |
| finance lease receivables | (32.9) | 1.7% | (15.5) | 0.8% | 2.1x |
| intangible assets | (37.2) | 2.0% | (11.0) | 0.5% | 3.4x |
| investments in associates and jointly controlled entities | 1.6 | -0.1% | (3.3) | 0.2% | x |
| tangible fixed assets | (3.2) | 0.2% | (0.5) | 0.0% | 6.9x |
| other | 0.5 | 0.0% | 21.4 | -1.1% | -97.6% |
| Total | (1,898.7) | 100.0% | (2,037.9) | 100.0% | -6.8% |