Purchase of assets from the Nordea Group is one of the most important elements of the realisation of PKO Bank Polski SA’s strategy for the years 2013-2015, it is also the result of a change in approach to the development of the activities of PKO Bank Polski SA.
The economic growth rate in Poland in 2014 remained stable, despite the weakening of the economic activity in the Eurozone and unfavourable geopolitical situation. Increase in domestic demand supported by an improving situation on labour market and deflation as well as increasing an actual purchasing power of households, had positive influence on Polish economy. Given the faster GDP growth rate in 2014, the increase in the employment rate as well as wages and salaries in the corporate sector was recorded. Additionally, in 2014 the historically low interest rates influenced the banks’ financial results.
The PKO Bank Polski SA Group activities in 2014 were focused on works related to finalising the transaction of acquisition of the Nordea Group’s assets, the legal merger with Nordea Bank Polska SA and preparing operational merger of both banks. At the same time, the Group ensured core business activities, the growth of assets profitability and continued activities aimed at optimising of operating costs.
Purchase of assets from the Nordea Group is one of the most important elements of the realisation of PKO Bank Polski SA’s strategy for the years 2013-2015, it is also the result of a change in approach to the development of the activities of PKO Bank Polski SA. After the years of organic growth which consolidated the Bank’s position as the leader of the domestic banking sector, mergers and acquisitions constitute a natural, next stage in the Bank’s development. It is the Bank’s response to the dynamic market situation, the need to protect its market position and the profitability of its operations, especially in the current strict legal regulations and environment of low interest rates. At the same time, the measures taken by the Bank are consistently aimed at meeting the growing needs of its customers who expect to receive top quality services, a product offer tailored to their needs, and modern, suitable technological solutions.
Within the transaction finalised in April 2014, the Group expanded by purchased assets: Nordea Bank Polska SA, Nordea Polska Towarzystwo Ubezpieczeń na Życie SA (currently PKO Życie Towarzystwo Ubezpieczeń SA) and a lease and factoring company, Nordea Finance Polska SA, which was merged with PKO Leasing SA.
Execution of the transaction of the assets acquisition significantly improved the Group's position in the segment of affluent retail customers, enhanced its competencies in the corporate banking segment and broadened the offer in the area of bancassurance.
Calendar of acquisition of the Nordea Group entities
| June 2013 | 1 | Conclusion of an agreement with Nordea Bank AB (publ), defining the terms of the realisation of the transaction of acquisition of Nordea Bank Polska SA and Nordea Polska Towarzystwo Ubezpieczeń na Życie SA and Nordea Finance Polska SA as well as receivables portfolio granted to corporate customers. |
| September 2013 | 2 | The consent of the Ukrainian Antimonopoly Committee to take control over the companies that are the subject of the transaction. |
| October 2013 | 3 | The consent of the President of the Competition and Consumer Protection Office for the concentration involving the taking control over the companies that are the subject of the transaction by PKO Bank Polski SA. |
| March 2014 | 4 | The consent of the Polish Financial Supervision Authority for the acquisition of shares of Nordea Bank Polska SA by PKO Bank Polski SA. |
| apr-14 | 5 | Formal acquisition of shares of the Nordea Group entities. |
| May 2014 | 6 | Nordea Polska Towarzystwo Ubezpieczeń na Życie SA changed the name to PKO Życie Towarzystwo Ubezpieczeń SA |
| June 2014 | 7 | Nordea Finance Polska SA changed the name to PKO Leasing Pro SA. |
| September 2014 | 8 | The Polish Financial Supervision Authority issued a consent for the merger of PKO Bank Polski SA and Nordea Bank Polska SA. |
| 9 | PKO Leasing Pro SA merger with PKO Leasing SA | |
| October 2014 | 10 | The legal merger, which ended the formal integration stage of two banks. |
| First half of 2015 | 11 | Planned date of the operational merger of banks. |
The first stage of the integration ended on 31 October 2014 with the legal merger of Nordea Bank Polska SA with the parent company of the Group, PKO Bank Polski SA. Upon the legal merger, Nordea Bank Polska SA ceased to function as a separate entity, and PKO Bank Polski SA became a party to all agreements concluded by this bank with its customers. The Nordea Bank Polska SA brand was withdrawn and replaced with the PKO Bank Polski SA brand.
The second stage of the integration covers the period from the legal merger to the completion of the operational merger. During this period the operations of two banks will be gradually unified, i.a. with regard to access to the branches and transaction systems for all customers, regardless of which bank’s customers they were before the commencement of the integration process. The completion of these activities is scheduled for the first half of 2015.
Apart from the acquisition of the assets of Nordea, the essential elements of the strategy being implemented, which strengthen competitive advantages and give a strong base for the long-term development of PKO Bank Polski SA as the banking leader in Poland and Central Europe, include the establishment of PKO Bank Hipoteczny SA and expansion into the foreign markets.
In August 2014 PKO Bank Polski SA obtained the Polish Financial Supervision Authority’s consent to establish a mortgage bank. It is assumed that PKO Bank Hipoteczny SA will begin making sales in the retail network of PKO Bank Polski SA as well as through agents and intermediaries in the first quarter of 2015, after gaining the Polish Financial Supervision Authority’s consent to commence operating activities. PKO Bank Hipoteczny SA will offer long-term mortgage loans to retail customers and issue long-term mortgage bonds.
Building the Bank’s strategic position for the coming years also resulted in taking measures which will lead to launching the operations of its first foreign branch in 2015 – a corporate branch of PKO Bank Polski SA in Germany. Selecting the direction of the first stage of the foreign expansion is integrally associated with the high activity of the Bank’s institutional clients on the German market, the scale of the mutual trade, and the investment projects carried out. The registered office of the branch which will operate under the name of PKO Bank Polski Niederlassung Deutschland will be in Frankfurt am Main. The services offered at this branch will comprise: transaction banking products, Treasury products, trade finance, consulting services relating to foreign markets, and foreign loans.
Actions undertaken by the PKO Bank Polski SA Group in 2014 made it possible to achieve high financial results, and thanks to the acquisition of the Nordea Group’s assets, it strengthened its position among the largest financial institutions in Poland.
| 2014 | 2013 |
Change 2014/2013 | |
|---|---|---|---|
| Net profit | 3,254.1 PLN million | 3,229.8 PLN million | 0.8% |
| Result on business activities* | 11,146.6 PLN million | 10,706.9 PLN million | 4.1% |
| Net interest income | 7,522.9 PLN million | 6,722.0 PLN million | 11.9% |
| Net fee and commission income | 2,933.5 PLN million | 3,005.8 PLN million | -2.4% |
| Administrative expenses | (5,245.1) PLN million | (4,622.5) PLN million | 13.5% |
| Net impairment allowance and write-downs | (1,898.7) PLN million | (2,037.9) PLN million | -6.8% |
| C/I | 47.1% | 43.2% | 3.9 pp. |
| ROE net | 12.4% | 13.2% | -0.8 pp. |
| ROA net | 1.4% | 1.6% | -0.2 pp. |
* Result on business activities defined as operating profit before administrative expenses and net impairment allowance and write-downs.
The net profit of the PKO Bank Polski SA Group generated in 2014 amounted to PLN 3 254.1 million, which represents an increase of 0.8%, i.e. by PLN 24.3 million comparing to the previous year profit. The achieved level of net profit was determined by:
1) result on business activities of the PKO Bank Polski SA Group, which reached the level of PLN 11 146.6 million (+4.1% y/y), mainly due to:
- an increase in net interest income by 11.9% y/y, due to the optimisation of maintenance costs of deposit base, along with the further reduction in market interest rates,
- a stabilisation of net fee and commission income (a decrease of 2.4% y/y), realised under the pressure of regulatory restrictions in respect of fees for payment services,
- an increase in gains less losses from investment securities (2.2x y/y), due to the realisation of positive valuation of securities held by the Bank, in connection with a decrease of the yield on Polish bonds,
2) a decrease in net other operating income and expense (by 63.5% y/y)- due to a high reference base from 2013, when a part of shares in Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o was sold,
3) an increase of administrative expenses, being under the pressure of additional expenses incurred in connection with the merger of Nordea Bank Polska SA and the extension of the Group of new companies, along with maintaining cost discipline related to on-going operations. This resulted in high cost management effectiveness, the C/I ratio amounted to 47.1%,
4) net impairment allowance and write-downs, which improved by PLN 139.2 million than achieved in 2013, mainly due to lower impairment allowances on consumer and corporate loans.
Secure and effective structure of the statement of financial position of the PKO Banko Polski SA Group, characterised by strong deposit base and a high level of equity, enabled the further growth of business activities through stable organic growth and acquisitions as a natural next stage of the Bank’s development. Despite the acquisition of significant loans portfolio, the loan to deposit ratio (amounts due to customers) as at the end of 2014 amounted to 102.9% (the ratio of loans to stable sources of funding amounted to 86.4%), which proves the good condition of liquidity of the PKO Bank Polski SA Group.
As a result of actions taken in 2014 the PKO Bank Polski SA Group:
- increased total assets by nearly 1/4, including portfolio of amounts due from customers by 1/5,
- increased a share of loans and deposits market to the level of 17.9% and 17.3%, respectively,
- significantly improved the quality of the loan portfolio, measured by a ratio of impaired loans and coverage ratio of allowances.
- as a result of the acquisition of the company from the insurance industry, the Group expanded its insurance and investment products offer to customers,
and a parent company of the Group, PKO Bank Polski SA increased the number of clients by 442.9 thousand, mainly in a retail clients segment and increased a sales network by new 131 retail branches and 2 new private banking offices.
[1] Stable sources of financing include amounts due to customers (including funds from the issue of Eurobonds) and external financing in the form of: subordinated liabilities, issue of own debt securities and amounts due to financial institutions.