Year’s highlights

From the very beginning, the PKO Bank Polski Group engaged in the fight against the pandemic. It supported numerous initiatives to ensure operational continuity and safety of customers and employees. It helped local communities and contributed to nation-wide projects. The bank's digital transformation strategy helped conduct its business activities during the coronavirus pandemic.

PKO Annual
Report Online
2020

Activities related to the COVID-19 pandemic

Since the beginning of the COVID-19 pandemic, the bank’s group has supported Poles and has been involved in activities preventing the spread of coronavirus. The main goal of those activities is to ensure safety of the bank’s customers and employees, as well as to support local communities, hospitals and medical staff.

23.6

mln PLN

Total value of aid provided by PKO Bank Polski

75.7

mln PLN

Employee-related expenses during the pandemic

With respect to supporting local communities, the group:

transferred monetary donations exceeding PLN 6 million in total to hospitals, including COVID-19-dedicated hospitals and laboratories, helping in the purchase of medical and protective equipment,
transferred in-kind donations to hospitals, medical facilities, social assistance centres and orphanages throughout Poland, including, among other things, 360 thousand protective masks, almost 10 thousand articles of protective clothing, 142 vehicles for hospital purposes, the Main Sanitary Inspectorate (GIS) and the Territorial Defence Forces,
based on an agreement concluded between the PKO Bank Polski Foundation and Warsaw Genomics, it purchased and commissioned the conduct of diagnostic tests for the presence of SARS-CoV-2, in addition the foundation made available its account number to the employers’ coalition and financed another pool of diagnostic tests from the funds collected from firms and individuals,
started cooperation with government institutions, including:
- co-created the application system for the Anti-Crisis Shield,
- the bank’s employees supported helplines and development of the Chief Sanitary Inspectorate’s systems and the Ministry of Development in respect of the Anti-Crisis Shield,
- National Cloud Operator (jointly controlled by PKO Bank Polski) prepared a solution which enables patients to use video consultations with medical personnel without leaving home,
supported humanitarian aid convoys organized by the Ministry of Foreign Affairs to Kazakhstan, Uzbekistan and Ukraine (PKO Bank Polski Foundation),
equipped its branches in personal protective equipment to protect employees and customers in the branches,
started educating customers to encourage them to use remote channels,
conducted an action “Donate plasma – help battle COVID-19” to encourage employees of PKO Bank Polski to donate their blood plasma.

The total value of the aid provided by PKO Bank Polski and its Polish subsidiaries exceeded PLN 23 million (net of the costs of purchasing protection materials for employees and customers). In addition, the bank’s company KREDOBANK supported Ukrainian citizens by transferring donations to Lviv Oblast hospitals for the purchase of medical and personal protection equipment.

PKO Bank Polski was awarded in the 4th edition of the Polish Radio Business Awards in the category “Polish Philanthropist” and in the Rzeczpospolita journal ranking “Firms most important for Poland” for fighting the COVID-19, saving the Polish economy and health services.

The group has supported customers during the COVID-19 pandemic:

In 2020, the group offered special solutions which helped to maintain the customers’ financial liquidity (e.g. by temporary reductions in financial charges and facilitations in extending or concluding agreements). The scope of aid changed and was adapted to the pandemic conditions, and restrictions in business activities, and it accounted for the guidelines of the regulators:

PKO Bank Polski, PKO Bank Hipoteczny, PKO Leasing and Prime Car Management enabled the borrowers and lessees to suspend or extend instalment payments (principal, or principal and interest or interest) for up to 6 months,
the group facilitated applying for suspension of payments and implemented a more comfortable, remote process of signing annexes to contracts,
the bank introduced simplified procedures in the process financing firms, enterprises and corporations for extending selected renewable products and internal customer limits and restructuring agreements,
bank umożliwił klientom indywidualnym czasowe zawieszenie spłaty kart kredytowych, a firmom i przedsiębiorstwom czasowe zawieszenie spłaty kart kredytowych typu Biznes,
the bank enabled a temporary suspension of credit card repayments for retail customers, and a temporary suspendsion of repayment of “Biznes” cards for firms and enterprises,
selected group companies enabled early return of vehicles on preferential conditions under the lease and subscription contracts (Prime Car Management) and introduced facilitations with respect to factoring payments (PKO Faktoring),
KREDOBANK used programmes of credit reliefs and implemented fast track decision-making procedures for renewals of credit lines.

The group’s customers could also avail themselves of statutory moratoria, including suspension of the performance of agreements with respect to mortgage loans and consumer loans, and preferential student loans in the bank and PKO Bank Hipoteczny. In total, more than 206 thousand customers of the group availed themselves of the voluntary and statutory moratoria with respect to loans and advances in 2020, pursuant to the European Banking Authority’s guide, and the total carrying amount, gross, of loans and advances covered by the moratoria amounted to PLN 32.7 billion. At the end of 2020, the gross carrying amount of active moratoria was PLN 3.0 billion. Detailed data on the amounts of moratoria granted is in the consolidated financial statements for 2020 (in Note 62).

The group’s customers could also avail themselves of the aid tools introduced under the anti-crisis shields offered by BGK and PFR:

guarantees securing repayment of loans or advances under the de minimis portfolio guarantee line with the BGK, including security for foreign currency loans; the total amount of the de minimis guarantees granted in 2020 amounted to PLN 4.2 billion,
the BGK Liquidity Guarantee Fund created to help medium and large companies damaged by the effects of the pandemic; the total amount of guarantees granted to the bank’s customers in 2020 was PLN 2.1 billion (of the PLN 18 billion financing pot available),
application for a financial subsidy from the PFR Financial Shield 1.0 earmarked for micro, small and medium-sized enterprises using the bank’s transaction services; approx. 67 thousand enterprises employing 0.5 million people received funds through the bank totalling PLN 10.5 billion – the bank had the largest participation share in distributing this form of aid,
preferential interest on liquidity and preferential loans earmarked for large enterprises from the PFR Financial Shield 1.0 directly with the PFR; the total amount of both financial instruments is PLN 17.5 billion – the bank is the only bank servicing these loans,
filing applications for co-financing interest on working capital loans earmarked for businesses, which due to the economic conditions caused by the COVID-19 pandemic lost financial liquidity or are threatened with such loss,
PKO Faktoring, as one of first the factors in Poland, concluded a portfolio guarantee line with BGK, which gives customers the option to secure up to 80% of the amount of the factoring limit granted under quasi-factoring or reverse factoring contracts; by 31 December 2020, the total amount of guarantees granted to the company’s customers was PLN 135 million,
in November 2020, PKO Leasing signed an arrangement to cooperate with ARP Leasing sp. z o.o., a company of the Agencja Rozwoju Przemysłu S.A. The arrangement relates to the principles of refinancing lease contracts for businesses from the transport and bus sector afflicted by COVID-19 by ARP Leasing,
liquidity reverse leases with a Cosme-Covid guarantee granted by the European Investment Fund,
filing applications for subsidies from the PFR Financial Shield 2.0 in the internet services iPKO and iPKO business, earmarked for micro- small- and medium-sized enterprises from 54 industries which had to limit business activity due to the COVID-19 epidemic.

Th bank conducted actions to ensure safety of its employees:

equipped the employees with necessary means of personal protection, such as disinfecting gels and liquids, masks, gloves and protective visors, and introducing safety procedures in branches, which included monitoring of customer traffic and disinfection of customer service points.
protected the advisors’ workspaces with special plastic protections, ensuring that the branches are cleaned using disinfectants and if necessary, ozoned,
implementing various work modes (remote, office, rotational) and adapting them to the epidemic conditions, and specifically protecting employees whose health is especially threatened,
provided the employees with company cars to travel between the work place and home, enabling parking the cars in parking places or in places assigned to the bank, and launched refunds of costs incurred for parking private cars close to the workplace during periods of heightened restrictions,
adapted the healthcare model for employees and enabling constant access to telemedicine and psychological support, and to be vaccinated against flu,
launched a special information campaign on the pandemic for employees,
made available on an internal portal materials facilitating remote work, sets of good practices and instructions relating to work organization,
made available to approx.13 thousand employees licences to the communication tool Microsoft Teams,
implemented digitization of employee documentation,
launched and developed an offer of remote development actions,
performed systematic pulse checks, gathering current information from employees on: their physical and mental state, remote work and areas which require support,
made available the solution #TimeForFeedback, which supports teams in building commitment and open relations in transferring feedback.

In 2020, the bank’s expenses on employees related to functioning during the pandemic and mitigating its effects amounted to PLN 75.7 million. Other entities of the group took similar actions tailored to the nature of their operations and employment structure. Total expenses on behalf of employees in relation to functioning during the pandemic in the subsidiaries amounted to PLN 7.1 million in 2020.

Development of services and tools supporting operations during the pandemic

The group developed services offered remotely:

The number of active IKO applications provided to customers by the bank reached a record high of 5.2 million on the Polish banking market.
A personal account may now be opened in the IKO mobile application using a selfie, and a company account with simultaneous registration of the business with the Central Registration and Information on Business (CEIDG). The application also allows checking the balance of an account with another bank and the use of services of a voice assistant.
The bank jointly with PKO Leasing and Prime Car Management launched the Automarket.pl platform which ensures the safe purchase of new and second-hand cars with a documented mileage.
The bank launched its first cloud applications. Within the project for building its Future Service Points, it virtualized working stations in retail branches. The project is being performed in cooperation with the National Cloud Operator.
The bank, jointly with PKO Leasing and Prime Car Management, launched the Automarket.pl platform which ensures the safe purchase of new and second-hand cars with a documented mileage.

The bank prepared a sales model for elderly customers and for those who had never used electronic channels for banking services. The model included educating the customer in using the intuitive application, and adapted sales processes in branches so as to enable customers to sign contracts with the assistance of an advisor for cash loans, a current account overdraft or a credit card directly in IKO, without the need to print the documents.
KREDOBANK, based on PKO Bank Polski’s experience, as the first bank on the Ukrainian market, implemented a video advisor solution. The “Online Video Consultant” service is based on the infrastructure of the National Cloud Operator.
The bank introduced an option to remotely activate the travel voucher, and to open an investment account totally online using the e-Signature service mSzafir in iPKO.

PKO Bank Polski as the European leader of digital banking

PKO Bank Polski won the Finnoscore 2020 ranking and became the European leader of digital banking. It was rated highly in the following categories: online banking, social media, mobile application, omnichannel communication and innovation strategy. The leading position in the ranking is due among other things to the bank’s strategy which is based on digital transformation.

Finnoscore ranking is based on publicly available information and objectively assesses the digital maturity and innovation experience of banks. PKO Bank Polski has been recognized for high quality and attractiveness of its digital offer and communication with clients. The study included 300 criteria in 12 selected segments. The analysis, which covers the period from January to October 2020, comprised 200 banks from 26 countries in Europe and North America. PKO Bank Polski received the highest marks in the following categories: online banking, social media and omnichannel communication. The authors of the ranking also highly rated PKO Bank Polski in the following categories: mobile application and online onboarding.

The position of the leader in the ranking is due to the digital transformation carried out for years, which additionally accelerated during the pandemic. The current „PKO Banking Platform” strategy assumes, inter alia, further increasing the availability and mobility of the offer, as well as even deeper personalization of communication with customers. The bank is also becoming even more open and innovative, gradually turning into a banking platform with financial services embedded in solutions that focus no longer on just providing a banking product, but on enabling customers to achieve the goal – e.g. buying a flat, buying a car or ticket booking. Digitization of processes using robotization, artificial intelligence and advanced data analytics and the accompanying transformation of the entire organization gradually transforms PKO Bank Polski into a technology company with a banking license.

PKO Bank Polski joins the European Payments Initiative

PKO Bank Polski, as the only bank from Poland, acceded to the European Payments Initiative (EPI). EPI is an alliance of leading European banks aimed at building the European payments system with its own cards for consumers and companies, a digital wallet, immediate payments and transfers over the phone. EPI will support European public institutions by creating a European payments solution.

Zbigniew Jagiełło CEO of PKO Bank Polski

The main goal of the European Payment Initiative is to launch an alternative model of card and digital payments. This will happen in line with competition law and in agreement with the European Commission, balancing the interests of both publishers and payment acceptors. In practice, this means that consumers and businesses across Europe will benefit in the future. Cross-border and local payments in the European area will be improved, their costs will become more competitive for Europeans, including Poles, of course, than at present. We bring our BLIK experience to EPI and firmly believe that both solutions will be complementary in the future.

PKO Bank Polski will serve the European Payment Initiative with its knowledge and experience gained in creating the IKO mobile application, which was also a pillar of building the Polish BLIK mobile payment system. Thanks to the implementation of the EPI project and the creation of a European payment system, bank customers as well as Polish citizens and enterprises will be able to make transactions and transfer money using a solution with pan-European coverage, user-friendly, cost-competitive and safe. At the same time, the solution will have the added value of a European identity.

Record year for the Brokerage House

2020 was a record year for the Brokerage House of PKO Bank Polski in numerous aspects: the highest monthly commission on stock exchange trading and daily commission on the secondary market, the largest volume of monthly sales of Treasury savings bonds, a historic IPO of Allegro in all respects and the highest revenues from sales of analytical products. The value of realized turnover on the secondary market of shares reached the level of PLN 72.6 billion, which constituted 11.2% of the market turnover and placed the bank’s Brokerage House in the leading position in the ranking of brokerage houses.

1. place

Annual trading value on WSE

PLN 72.6 bln

Turnover on the secondary market

+12.4% y/y

Growth in number of brokerage accounts

The Brokerage House has strengthened its market position in all areas of activity. In addition to a wide offer that allows investing in global markets, it offers clients the largest sales network of brokerage services and a fully remote option to open and maintain an investment account. Additionally, the Brokerage House has launched a Virtual Customer Service Point (POK) providing access to the full range of services by telephone. In 2020, the Brokerage House of PKO Bank Polski once again received the most important award of the WSE – Broker of the Year 2019, and for the third time in the government it won the overall ranking of stock exchange analysts organized by the „Parkiet” magazine.

Grzegorz Zawada Director of the Investment and Private Banking Division

Last year was exceptional due to the pandemic. In an environment of low interest rates, significant volatility and Allegro’s unprecedented debut, we observed increased activity of all groups of investors. This had a key impact on the business and market position of the Brokerage House. However, the success would not be possible without the many years of work of our team. Its goal was to build a diversified brokerage business covering an offer for clients from all segments. The results show that we have achieved this goal, but still have the appetite for more. I would also like to emphasize that throughout the entire pandemic period, thanks to the high commitment of the team, we operated continuously and were always available to customers.

PKO TFI as the market leader of the Employee Capital Plans

At the end of 2020, PKO Towarzystwo Funduszy Inwestycyjnych, after completing three stages of creating the Employee Capital Plans (PPK), remained the leader in terms of the managed assets. The total number of contracts for asset management was 18,970 at the end of 2020, including 1,384 contracts with enterprises employing 250 and more staff. On the PPK accounts managed by the company there were assets worth PLN 962 million, which comprised 41.1% of all assets serviced by investment fund management companies and 34.1% of all PPK market assets.

Piotr Żochowski CEO of PKO TFI

Since launching of the PPK program, PKO TFI attached great importance to the educational campaign. One of the main elements of our cooperation with companies, both at the initial stage and after the conclusion of the PPK agreement, were meetings with employees, during which we shared knowledge about the program itself and arguments for joining the PPK. Our efforts in this area have paid off. The experiences and observation of the behavior of company employees from the first stage of the PPK implementation as well as previous experience with PPE programs give hope for increasing participation in the coming years.

PKO TFI manages 630 thousand registers of participants of the PPK program, of which nearly 476 thousand has already started to actually invest. It also supports approx. 81.5 thousand. Employee Pension Scheme Registers. In total, about PLN 1.8 billion is collected there. PKO TFI is successively gaining the trust of other important partners. In 2020, it concluded a contract for the management of PPK with the National Labor Inspectorate of the Chief Labor Inspectorate. The advantage of PKO TFI is the stability of the financial institution and the experience of the management of investment products, employee programs and life cycle funds.

Financial results achieved in 2020

Recognition of the costs of legal risk of mortgage loans in convertible currencies, the COVID-19 pandemic and reductions in interest rates by the MPC had a significant effect on the results achieved by the PKO Bank Polski Group in 2020. The group incurred a net loss of PLN -2 557 million, which is a drop in its results of PLN 6 588 million y/y. The change in the net result was caused by a combination of the following factors:

1) material deterioration in net write-downs and impairment of PLN 7 530 million as a result of:

an increase in the legal risk of mortgage loans in convertible currencies of PLN 6 101 million, which was reflected in the decision of the Extraordinary General Shareholders’ Meeting held on 23 April 2021 relating to concluding settlement agreements with customers,
deterioration in net write-downs for expected credit losses of PLN 1 147 million, mainly resulting from COVID-19-related write-downs,
deterioration of net impairment of non-financial assets of PLN 282 million.

2) improvement in the result on business activities which amounted to PLN 14 604 million (0.2% y/y), mainly due to:

an increase in net fee and commission income of 4.6% y/y caused by an increase in net income on margins on foreign exchange transactions and by an increase in net loans, insurance and operating lease income,
an increase in volumes (deposits, debt securities) and increase in revenues from hedge accounting, what partly compensated negative impact of fall in interest rates on net interest income.

3) a drop in operating expenses of 0.6% y/y, mainly costs of employee benefits.

Basic financial data of the PKO Bank Polski Group (in PLN mln):

	2020	2019	y/y
Net profit/loss	-2,557	4,031	-163.4%
Net interest income	10,346	10,290	+0.5%
Net fee and commission income	3,904	3,731	+4.6%
Result on business activities	14,604	14,579	+0.2%
Operating expenses	-5,983	-6,021	-0.6%
Tax on certain financial institutions	-1,055	-1,022	+3.2%
Net allowances and impairment	-9,277	-1,748	+430.9%
Total assets	376,966	347,897	+8.4%
Total equity	39,911	41,578	-4.0%
Net ROE	-6.0%	10.0%	-16.0 p.p.
Net ROTE	-6.5%	10.9%	-17.4 p.p.
Net ROA	-0.7%	1.2%	-1.9 p.p.
C/I (cost-to-income ratio)	41.0%	41.3%	-0.3 p.p.
Interest margin	3,03%	3.41%	-0.38 p.p.
Share of impaired exposures	4.4%	4.3%	+0.1 p.p.
Cost of credit risk	0.78%	0.46%	+0.32 p.p.
Total capital ratio	18.18%	19,88%	-1.70 p.p.
Common equity Tier 1 (CET1)	16.99%	18.61%	-1.62 p.p.

Business environment Regulatory and legal changes

Group in 2020 Group’s financial position