37. Investments in associates and joint ventures

PKO Annual
Report Online
2020

Centrum Elektronicznych Usług Płatniczych eService sp. z o.o.

The Bank has the shares entitling to 34% votes at the General Meeting of Shareholders. The second shareholder is EVO International Payments Acquisition GmbH in Germany.

According to the agreement signed by the partners, regulating the principles of cooperation, decisions regarding the significant activities of the company require consent of both partners.

Both Shareholders have the right to appoint their representatives in the Supervisory Board: in the case of the Supervisory Board of 5 members, PKO Bank Polski S.A. has the right to appoint 2 members (in the case of 7 members of PKO – 3 members). The Bank has two representatives on the Supervisory Board consisting of 7 people and indicates the independent member. Decisions reserved to the competence of the Supervisory Board regarding significant activities require the consent of at least one representative of PKO Bank Polski S.A. and one representative of the other shareholder.

Bank Pocztowy SA

PKO Bank Polski S.A. is a significant investor – it holds 25% plus 10 votes at the Company’s shareholders’ meeting. Poczta Polska SA is the other shareholder. Through its representatives on the Supervisory Board and the Company’s Shareholders’ Meeting, the Bank participates in the policymaking process, including decisions on dividends and other ways of profit distribution.

„Poznański Fundusz Poręczeń Kredytowych" sp. z o.o.

PKO Bank Polski S.A. holds 33.33% votes at the Company’s Shareholders’ Meeting. The Bank has two representatives on the Company’s Supervisory Board which consists of 4 people. Other shareholders have 1 representative each on the Supervisory Board. Through its representatives on the Supervisory Board and the Company’s Shareholders’ Meeting, the Bank participates in the policymaking process, including decisions on dividends and other ways of profit distribution.

Operator Chmury Krajowej sp. z o.o.

The Bank has shares in the Company which carry 34% of votes at the Shareholders’ Meeting, with Polski Fundusz Rozwoju SA being the other shareholder.

In accordance with the Company’s Articles of Association:

each of the shareholders is personally entitled to appoint and dismiss members of the Management Board and the Supervisory Board, with the Bank and PFR having the right to appoint an equal number of members of each of the said bodies;
additionally, the Bank has the exclusive right to appoint the President of the Management Board and PFR has the exclusive right to appoint the Chair of the Supervisory Board;

all key decisions relating to the Company’s operations must be taken by a unanimous resolution of the Supervisory Board or by a unanimous resolution of the Shareholders’ Meeting.

BSafer sp. z o.o.

PKO VC – fizan (a subsidiary of PKO Bank Polski S.A.) holds the company’s shares entitling to 35.06% of votes at the Shareholders' Meeting, and the other majority shareholder of the company is Michał Pilch 59.740%

Pursuant to the Articles of Association, decisions regarding the significant activities of the Company (i.e. activities that have a significant impact on the amount of returns generated by the Company, where returns are understood as e.g. dividends, increasing or decreasing the share capital of the Company, passing or returning additional payments, the value of the Company’s shares in the balance sheet of the shareholder) were reserved to the competence of the General Meeting of Shareholders and require the consent of both shareholders.

Financial information

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ASSOCIATES	31.12.2020	31.12.2019
Bank Pocztowy S.A.	–	88
Acquisition price	184	184
Change in the share of net assets	85	78
Impairment allowances	(269)	(174)
“Poznański Fundusz Poręczeń Kredytowych” sp. z o.o.	–	–
Acquisition price	2	2
Change in the share of net assets	4	4
Impairment allowances	(6)	(6)
Total	–	88

JOINT VENTURES	31.12.2020	31.12.2019
„Centrum Obsługi Biznesu” sp. z o.o.	–	–
Acquisition price	18	17
Change in the share of net assets	(18)	(14)
Impairment allowances	–	(3)
Grupa Centrum Elektronicznych Usług Płatniczych eService sp. z o.o.	271	250
Value of shares as at the date of obtaining joint control	197	197
Change in the share of net assets	74	53
Operator Chmury Krajowej sp. z o.o.	20	39
Value of shares as at the date of obtaining joint control	43	43
Change in the share of net assets	(23)	(4)
Total	291	289

CHANGE IN INVESTMENTS IN ASSOCIATES	2020	2019
Investments in associates as at the beginning of the period	88	88
Share in profits/ (losses)	–	5
Net impairment allowance	(95)	(5)
Share in the change in other equity components	7	–
Investments in associates as at the end of the period	–	88

CHANGE IN INVESTMENTS IN JOINT VENTURES	2020	2019
Investments in joint ventures as at the beginning of the period	289	256
Reclassification of shares from subsidiaries to joint ventures	–	43
Share in profits/ (losses)	16	26
Net impairment allowance	3	–
Dividend	(17)	(36)
Other	1	–
Investments in joint ventures as at the end of the period	292	289

IMPAIRMENT ALLOWANCES – RECONCILIATION OF MOVEMENTS	2020	2019
As at the beginning of the period	183	178
Recognized during the period	95	5
Reversed during the period	(3)	–
As at the end of the period	275	183

The Group tested the shares held in Bank Pocztowy S.A. for impairment. The valuation was performed using the discounted dividend method. The valuation model took account of the reduction in NBP interest rates introduced by the Monetary Policy Council in March and April of this year (by a total of 100 bp) and the impact of the COVID-19 pandemic on financial projections, especially including the expected increase in the cost of credit risk.

Bank Pocztowy S.A. operates on the basis of the agency model in cooperation with the Polish Post (Poczta Polska, its majority shareholder) and on the basis of its own network in the retail and corporate segment. The agency model with the Polish Post is permanently profitable, whereas the own network of Bank Pocztowy S.A. is not profitable. The NBP interest rate decreases and the increase in the cost of risk due to COVID-19 will make it even less profitable.

Despite the profitable agency model with the Polish Post, the result of the impairment test of the Bank Pocztowy S.A. shares held by the Group resulted in the recognition of a further allowance for the Group’s capital exposure in Bank Pocztowy S.A. in the amount of PLN 95 million.

As at 31 December 2020, and as at 31 December 2019, the parent company did not have any share in contingent liabilities of associates acquired together with another investor.

Selected information on associates and joint ventures

A summary of the financial data separately for each joint venture and each associate of the Group is presented below. The amounts presented are derived from the financial statements of the individual entities prepared in accordance with IFRS or the Polish Accounting Standards (PAS). In the case of companies which have subsidiaries, the presented data is derived from the consolidated financial statements of these companies. The data for 2019 is derived from audited financial statements.