Group’s financial position

The results achieved by the PKO Bank Polski Group led to the main financial effectiveness ratios reaching the following levels:
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Key financial indicators

31.12.2020 31.12.2019 Change
Net ROE (net profit/(loss)/average equity) -6.0% 10.0% -16.0 p.p.
Net ROTE (net profit/(loss)/average equity less intangible assets) -6.5% 10.9% -17.4 p.p.
Net ROA (net profit/(loss)/average assets) -0.7% 1.2% -1.9 p.p.
C/I (cost-to-income ratio) 41.0% 41.3% -0.3 p.p.
Interest margin (net interest income/average interest-bearing assets) 3.03% 3.41% -0.38 p.p.
Share of impaired exposures 4.4% 4.3% +0.1 p.p.
Cost of credit risk1) 0.78% 0.46% +0.32 p.p.
Total capital ratio (equity/total capital requirement*12.5) 18.18% 19.88% -1.70 p.p.
Common equity Tier 1 (CET1) 16.99% 18.61% -1.62 p.p.
1) After excluding the impact of COVID-19, the cost of credit risk as at 31 December 2020 would be -0.39% (-0.08 p.p. y/y).

Consolidated income statement

2020 2019 Change
(in PLN million)
Net interest income 10,346 10,290 56 0.5%
Net fee and commission income 3,904 3,731 173 4.6%
Net other income 354 558 -203 -36.5%
Dividend income 15 14 1 9.5%
Result on financial transactions 236 356 -120 -33.7%
Net foreign exchange gains/(losses) 182 104 78 75.0%
Net other operating income and expenses -79 84 -163 x
Result on business activities 14,604 14,579 26 0.2%
Operating expenses -5,983 -6,021 38 -0.6%
Tax on certain financial institutions -1,055 -1,022 -33 3.2%
Net operating result 7,566 7,536 31 0.4%
Net write-downs and impairment -9,277 -1,748 -7,530 5.3x
Share in profits and losses of associates and joint ventures 16 31 -15 -49.4%
Profit/loss before tax -1,696 5,819 -7,515 x
Income tax expense -865 -1,787 922 -51.6%
Net profit/loss (including non-controlling shareholders) -2,561 4,032 -6,593 x
Profit (loss) attributable to non-controlling shareholders -4 1 -5 -503.6%
Net profit/loss -2,557 4,031 -6,588 x

Major line items of the consolidated income statement:

The consolidated net result of the PKO Bank Polski Group in 2020 amounted to PLN -2 557 million and was PLN 6 588 million lower than in 2019. The result on the group’s business activities amounted to PLN 14 604 million and was PLN 26 million (+0.2% y/y), mainly as a result of an increase in net interest income and in fee and commission income, and a decrease in net other income.

Other items include other net income (excl. commission refunds), credit allowances excl. COVID-19, tax on certain financial institutions, corporate income tax, share in profits and losses of associates and joint ventures, and those attributable to non-controlling shareholders.

Net interest income for 2020 amounted to PLN 10 346 million, which was PLN 56 million more than in the previous year. The increase in the y/y net interest income was caused by an increase in interest income on hedge accounting and an increase in income from securities in effect of an increase in their volume, as well as a decrease in interest expense on customer deposits. At the same time income from borrowings granted to customers dropped as a result of the changes which resulted from the MPC’s decision on reductions of interest rates in the first half of 2020.


Interest income amounted to PLN 11 801 million and was 6.6% lower than in 2019. This was mainly the effect of:

  • a decrease in income from financing granted to customers of PLN 1 574 million y/y – resulting mainly from the drop in average market interest rates on financing granted to customers of 0.8 p.p., partly compensated by an increase in the average volume of financing of PLN 10 billion, accompanied by a change in its structure (an increase in the share of PLN housing loans accompanied by a decrease in the share of business and foreign currency housing loans),
  • higher income on securities (PLN +345 million y/y), mainly as a result of an increase in their average volume of PLN 36 billion, which related mainly to Treasury bonds,
  • higher income from hedge accounting (PLN +449 million y/y), as a result of an increase in the volume of IRS PLN transactions and an increase in spreads between interest income received and paid on transactions and accounting for the designated CIRS transactions.

In order to maintain comparability of data, the interest income was adjusted. Income on non-Treasury bonds recognized in the financial statements in income from debt securities was transferred to income on financing granted to customers. In 2020, interest income went down by PLN 233 million in connection with the judgment of the Court of Justice of the European Union in respect of the consumer’s right to reduce the cost of the loan in the event of repayment of the loan before the deadline specified in the loan agreement.


Interest expense amounted to PLN 1 455 million and was PLN 892 million lower compared with 2019. The lower interest expense was mainly the effect of a drop in the costs of the deposit base of PLN 775 million y/y, which in particular was the effect of lower PLN interest rates after the decisions of the MPC.


The interest margin decreased by 0.38 p.p. y/y and amounted to 3.03%. The decrease in the margin was mainly the result of lower returns on assets following from a change in the structure of interest-bearing assets (the share of securities with the lowest interest rates increased mainly at the expense of the share of amounts due from customers bearing the highest interest rates). Additionally, the decrease in returns was impacted by the decrease in market rates in Poland which to a larger degree translated into a drop in interest on assets than on liabilities. In 2020 the average interest rate on PKO Bank Polski’s loans was 4.0% (2019: 4.7%), and the average interest rate on total deposits was 0.3% (2019: 0.7%).

In 2020, net fee and commission income amounted to PLN 3 904 million, which was PLN 173 million more than in the previous year. The level of net commission income was determined by:

  • higher net income on margins in Forex transactions (+PLN 106 million y/y) in effect of an increase in the number of transactions and active management of the level of the spreads in the tables,
  • higher net income on loans, and insurance and operating leases (PLN +73 million y/y), mainly in effect of an increase in commission on business loans and leases, and a drop in costs of granting the loans,
  • higher net income on payment and credit cards (PLN +15 million y/y) due to the higher number of cards and higher volumes of non-cash transactions,
  • higher net income from maintaining bank accounts and other net income (PLN +13 million y/y), among other things as a result of an increase in commissions for maintaining bank accounts and domestic bank transfers in the corporate segment,
  • lower net income from investment funds, pension funds and brokerage activities (PLN -34 million y/y), caused mainly by outflows of fund assets in the second quarter of the year, a change in their structure and a decrease in the commission for managing funds.

Other net income earned in 2020 amounted to PLN 354 million and was PLN 203 million lower than in 2019 due to:

  • lower net income on financial operations (PLN -120 million y/y), as a result of lower net income on the remeasurement of the bank’s investment securities and on embedded derivatives,
  • other net operating income PLN 163 million y/y lower due to:
    • recognizing the gain on the bargain purchase of Prime Car Management of PLN 102 million in 2019,
    • partially releasing, in 2019, the provision for proceedings before the President of the Office for Competition and Consumer Protection concerning practices which violate the collective interests of consumers (PLN 58 million), which was set up in 2018 in the amount of PLN 62.5 million (the information on setting up the provision was published in current report no. 24/2018 dated 27 June 2018),
  • higher net foreign exchange gains/(losses) (PLN +78 million y/y) – mainly as a result of an improvement in the results from the ineffective portions of CIRS hedging transactions in hedge accounting (lower volatility – high negative result in 2019) and results on Treasury operations and other differences.

In 2020, operating expenses amounted to PLN 5 984 million and were 0.6% y/y lower. Their level was mainly determined by:

  • a PLN 242 million (-7.5% y/y) decrease in employee benefit costs, mainly as a result of a drop in the number of the group’s employees of 1 849 FTE in 2020, including 1 700 FTEs in the bank alone,
  • a decrease in tangible costs of PLN 94 million (-7.0% y/y), mainly in connection with a decrease in the following expenses:
    • promotion and advertising (of PLN 87 million), mainly in the bank in effect of changes in dates or cancelling sponsor and image projects (as a result of the epidemic situation in Poland) and in consideration of the high costs related to the bank’s centenary celebrations in 2019,
    • other tangible costs (of PLN 24 million), mainly in the CENTRUM HAFFNERA Group caused by limiting the operations of the hotel as a result of the restrictions following from the COVID-19 pandemic,
    • accompanied by higher IT expenses (of PLN 28 million), mainly in the bank (of PLN 21 million) in connection with an increase in outsourcing expenses,
  • an increase of PLN 159 million (+31.3% y/y) in contributions to the Bank Guarantee Fund (BGF) – BGF costs amounted to PLN 668 million, of which PLN 350 million constituted the contribution to the mandatory deposit guarantee fund. In 2019 costs in respect of the BGF were PLN 509 million, of which the contribution to the mandatory deposit guarantee fund was PLN 161 million,
  • an increase of PLN 88 million in the costs of withheld tax on the issue of foreign bonds; this increase was related to adjustments in gross-ups of interest for the years 2017-2019 in 2019 and accounting for the 3% tax on interest paid for the period 2014-2019 following amendments to the tax regulations,
  • an increase of PLN 57 million (+6.2% y/y) in amortization and depreciation as a result of the amortization of intangible assets related to the computerization of the bank, and depreciation of buildings and structures.

Regulatory costs include net regulatory charges.

The effectiveness of operations of the PKO Bank Polski Group measured with the C/l ratio on an annual basis was 41.0% and it improved by 0.3 p.p. y/y in consequence of better results on business activities (+0.2% y/y), accompanied by lower operating expenses (-0.6% y/y).

In 2020, net write-downs and impairment jointly with the costs of the legal risk of mortgage loans in convertible currencies amounted to PLN -9 277 million and were PLN 7 530 million lower than in 2019. The bank recognized the costs of legal risk of mortgage loans in convertible foreign currencies of PLN -6 552 million (an increase of PLN 6 101 million compared with 2019). The legal risk is connected with the portfolio of mortgage loans in convertible currencies granted to households in the years 1999-2012 and is related to potential customer claims. A detailed description of the costs of legal risk is included in Note 23.

Mortgage loans include the cost of legal risk related to mortgage loans in convertible currencies amounting to PLN 6 552 mln in 2020 and PLN 451.5 mln in 2019.

In 2020, net write-downs for credit risk and non-financial assets were PLN -2 725 million and deteriorated by PLN 1 429 million compared with 2019, mainly as a result of write-downs recorded in connection with COVID-19 and impairment of: the shares in Bank Pocztowy, goodwill (which arose as a result of acquiring Nordea Bank Polska and PKO Leasing Pro) and real estate. The share of impaired loans amounted to 4.4% as at the end of 2020 (+0.1 p.p. y/y).

The cost of credit risk was 0.748% at the end of 2020, which marks a 0.31 p.p. deterioration compared with the prior year.


Consolidated statement of financial position

At the end of 2020, total assets of the PKO Bank Polski Group amounted to nearly PLN 377 billion and increased by approx. PLN 29 billion as of the beginning of the year. Therefore, the group reinforced its leading position on the Polish banking market. On the assets side, the group noted an increase, mainly in the securities portfolio, and on the side of sources of finance the increase was determined mainly by the increase in the deposit base.

Major line items of the consolidated statement of financial position:

At the end of 2020, financing granted to customers of the group was PLN 235.8 billion, which represents a decrease of PLN 8.3 billion y/y. The volume of retail and private banking loans dropped by PLN 2.9 billion, mainly as a result of the adjustment to the gross carrying amount of mortgage loans introduced pursuant to IFRS 9 for the expected potential impact of settlement agreements with customers, accompanied by an increase in consumer loans.

In 2020, a drop in corporate loans was also noted (PLN -4.3 billion) and in loans to firms and enterprises (PLN -1.1 billion), which resulted both from a lower volume of working capital loans and current account overdrafts used and from increasing the allowances for business loans.

Corporate loans include lease receivables and non-Treasury bonds (excl. those held for trading).

Retail and private banking loans were the main items in the structure of financing by type, with a share of 59.1% at the end of 2020.

The PKO Bank Polski Group finances its operations with domestic and foreign sources which are derived from deposits (also from the interbank market), equity and borrowings from the wholesale market. Borrowings from the wholesale market comprise liabilities with respect to the issue of securities, subordinated liabilities and loans and advances from monetary and non-monetary institutions. The main source of financing of the group’s operations are customer deposits, comprising ¾ of all sources of finance.

Due to its optimum structure of financing, the group has full capacity to perform its investment plans, including capital investments. In order to carry out capital investments, the group utilizes mainly resources derived from its equity and issue of securities.

Interbank market deposits include reverse repo transactions.
Market financing include issues of securities and subordinated liabilities, and loans and advances received.

Customer deposits constitute the basic source of financing the group’s assets. At the end of 2020, amounts due to customers amounted to PLN 282.4 billion, which is an increase of PLN 26.2 billion since the beginning of the year. The main factor that contributed to the increase in the deposit base was an increase in retail and private banking deposits (PLN +22.8 billion) and deposits of business entities (PLN +12.2 billion), accompanied by a decrease in deposits of corporate entities (PLN -8.8 billion).

Retail and private banking deposits include liabilities in respect of insurance products.

In the structure of customer deposits by type, the main items are the retail and private banking deposits (70.3% as at the end of 2020). The share of current deposits in the break-down of total deposits increased and amounted to 81.6% (+11.8 p.p. compared with the end of 2019).

Other liabilities include liabilities in respect of insurance products.

The level of non-current sources of financing was PLN 37 billion at the end of 2020. The following factors had an impact on the unchanged level of financing:

  • premature redemption of EMTN bonds of the bank with a nominal value of EUR 250 million and of the PKO Finance AB issues with a nominal value of USD 195.41 million,
  • sale of bonds with a nominal value of PLN 0.64 billion issued under the lease receivables securitization in 2019 by PKO Leasing outside the group,
  • issue and redemption of bonds with a total nominal value of PLN 1.0 billion and PLN 0.3 billion respectively by PKO Leasing,
  • issue and redemption of bonds with a total nominal value of PLN 4.2 billion and PLN 3.8 billion respectively by PKO Bank Hipoteczny,
  • repayment of instalments on loans received from international financial institutions in accordance with the payment schedule,
  • higher exchange rates of the EUR (PLN +0.36) and CHF (PLN +0.34), accompanied by a drop in the exchange rate of the USD (PLN -0.04).

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