Financial position of the Bank

The results achieved by PKO Bank Polski in 2021 enabled the key financial efficiency indicators to achieve the levels shown in the table below.
Annual Report

Financial ratios of PKO Bank Polski S.A.

31.12.2021 31.12.2020 Zmiana
Net ROE (net profit/(loss)/average equity) 11.9% -7.1% +19 p.p.
Net ROTE (net profit/(loss)/average equity less intangible assets) 12.8% -7.6% +20.4 p.p.
Net ROA (net profit/(loss)/average assets) 1.3% -0.9% +2.2 p.p.
C/I (cost to income ratio) 39.1% 40.2% -1.1 p.p.
Interest margin (net interest income/average interest-bearing assets) 2.60% 2.95% -0.35 p.p.
Share of impaired exposures 3.90% 4.50% -0.60 p.p.
Cost of credit risk 0.54% 0.77% -0.23 p.p.
Total capital ratio (own funds/total capital requirement*12.5) 19.84% 19.78% +0.06 p.p.
Common equity Tier 1 (CET 1) 18.47% 18.45% +0.02 p.p.

Income statement

In 2021, the net profit of PKO Bank Polski S.A. amounted to PLN 4,596 million and went up by PLN 7,540 million y/y. The level of the main result was due to an improvement in the net write-downs and impairment and increase in net result on business activities, accompanied by higher operating expenses.

In 2021 the net result on business activities amounted to PLN 13,577 million and was PLN 681 million, i.e. 5.3% higher than in 2020. This was mainly the effect of an increase in net fee and commission income of PLN 425 million y/y and net other income of PLN 729 million, with a drop in the net interest income of PLN 473 million y/y.

Income statement of PKO Bank Polski S.A. (in PLN millions)

2021 2020 Change
(PLN million)
Net interest income 8,711 9,184 -473 -5.1%
Net fee and commission income 3,542 3,117 425 13.6%
Net other income 1,324 595 729 1.2x
Dividend income 624 332 292 88.1%
Result on financial transactions 367 213 154 72.2%
Net foreign exchange gains/(losses) 429 133 296 2.2x
Net other operating income and expenses -95 -83 -12 15.1%
Result on business activities 13,577 12,896 681 5.3%
Operating expenses -5,304 -5,180 -124 2.4%
Tax on certain financial institutions -987 -957 -30 3.1%
Net operating result 7,287 6,759 528 7.8%
Net write-downs and impairment -1,311 -9,025 7,714 -85.5%
Profit/loss before tax 5,976 -2,266 8,242 3.6x
Income tax -1,380 -678 -702 1.0x
Net profit/loss 4,596 -2,944 7,540 2.6x

1) Other net income reflects dividend income, net income on financial operations, net foreign exchange gains/(losses) and other net operating income and expense.

Net interest income for 2021 amounted to PLN 8,711 million, i.e. PLN 473 million less than in the previous year. The lower result y/y was mainly due to a decrease in income from financing granted to Customers as a consequence of the MPC decisions to reduce interest rates, made in the first half of 2020. The decrease was partly offset with a decrease in interest expense on amounts due to Customers and an increase in income on securities due to an increase in the volume.

nterest income in 2021 amounted to PLN 9,164 million and was 11.3% lower than in 2020, mainly in effect of:

  • a decrease in income from financing granted to Customers of PLN 867 million y/y – related mainly to the drop in the average interest rate on financing granted to Customers of 0.4 p.p., accompanied by a change in the structure of the average volume of loan receivables (an increase in the share of PLN housing and consumer loans, with a decrease in the share of business and foreign currency housing loans);
  • higher income on securities (PLN +102 million y/y), mainly as a result of an increase in the average volume of PLN 28 billion, which resulted mainly from purchases of Treasury bonds, accompanied by a drop in their average interest rate of 0.3 p.p.;
  • lower income from hedging accounting (PLN -377 million y/y), as a result of a drop in the average CIRS transaction volume of PLN 15 billion y/y.

In order to maintain the comparability of data, interest income was adjusted: income from non-Treasury bonds which is recognized in the financial statements in income from debt securities was transferred to income from financing granted to Customers.

In 2021, interest income went down by PLN 452 due to the European Union Court of Justice’s judgment on the consumer’s right to a reduction in the cost of loans repaid before their contractual maturity (of which PLN 369 million is related to reimbursed costs paid automatically to the Customer before the balance sheet date, and PLN 83 million is related to the provision for future reimbursement of costs to Customers). In 2020, interest income was reduced only by reimbursed amounts paid automatically to Customers, by PLN 232 million (no provision was set up).

Interest expense amounted to PLN 453 million and was PLN 695 million lower than in 2020. The lower interest expense was mainly the effect of a drop in the costs of the deposit base of PLN 648 million y/y, which resulted from lower PLN interest rates after the decisions of the MPC.

The interest margin decreased by 0.35 p.p. y/y and amounted to 2.60% as at the end of 2021.

The decrease in the margin resulted from lower returns on assets in effect of changes in the structure of interest-bearing assets (the share of the lowest interest rates increased mainly at the expense of the share of the highest interest rates on receivables due from Customers). Moreover, a drop in the rate of return was affected by a drop in net interest income as a result of lower market interest rates in Poland, which to largely translated into a drop in interest rates on assets rather than on liabilities.

In 2021 the average interest rate on PKO Bank Polski S.A.’s loans was 3.5%, and the average interest rate on total deposits was 0.1%. In 2020, it was 3.8% and 0.3%, respectively.

In 2021 net fee and commission income amounted to PLN 3,542 million and was PLN 425 million higher than in the previous year. The increase was determined – among other things – by:

  • •        higher net income on margins in Forex transactions (PLN +106 million y/y) in effect of an increase in the number of transactions;
  • •        higher net income from maintaining bank accounts and other income (PLN +104 million y/y), among other things related to an increase in commission for maintaining the bank accounts of corporate Customers and higher net income on bank transfers and foreign transactions;
  • •        higher net income on loans and insurance (PLN +89 million y/y), mainly in effect of an increase in commission on business loans, and an increase in the sale of insurance linked to loans, and motor insurance;
  • •        higher net income on cards (PLN +83 million y/y) due to the higher number of cards and higher number of non-cash transactions,
  • •        higher net income from investment funds and brokerage activities (PLN +43 million y/y), mainly due to an increase in commission on securities exchange trading on the stock market, and on the sale of investment funds and Treasury bonds.

In 2021 net other income amounted to PLN 1,324 million and was PLN 729 million higher than that earned in 2020, among other things due to:

  • higher net foreign exchange gains/(losses) (PLN +296 million y/y) – mainly as a result of closing the currency position resulting from the EGSM decision to offer settlements to Customers;
  • higher dividend income (PLN +292 million y/y);
  • higher net income on financial operations (PLN +154 million y/y) – among other things, as a result of higher income on derivatives (including related to CO2 emission allowances) and higher net income on the sale of securities;
  • lower net other operating income and expense (PLN -12 million y/y), among other things, as a result of:
    • costs of provisions for returns to Customers on early repayment of consumer and mortgage loans lower by PLN 79 million;
    • setting up a provision in 2020 for potential proceedings before the President of the Office for Competition and Consumer Protection of PLN 41 million;
    • recognizing costs of PLN 17 million in 2021 in respect of an increase in liability related to providing additional capital to a subsidiary, whereas income recognized in 2020 in this respect amounted to PLN 24 million;
    • recognizing a loss in 2021 on the sale of CO2 emission allowances of PLN 60 million, which was fully offset with a positive valuation of Customers’ derivatives related to the CO2 emission allowances;
    • setting up, in 2021, an additional provision of PLN 20 million on donations to the Fundacja PKO BP foundation.

* covers the net result on regulatory burden

In 2021 operating expenses amounted to PLN 5,304 million and were 2.4% higher y/y. Their level was mainly determined by:

  • an increase of PLN 199 million, i.e. 7.9% of the costs of employee benefits, mainly as a result of payments of employee awards in respect of the Bank’s results in 2021 and higher bonuses;
  • an increase of PLN 43 million, i.e. 4.0% of tangible costs, mainly related to higher IT costs of PLN 33 million, i.e. 11.8%;
  • an increase of PLN 15 million, i.e. 1.8% of depreciation and amortization costs, mainly as a result of an increase in amortization of IT intangibles and depreciation resulting from real estate lease agreements;
  • a drop of PLN 185 million, i.e. of 28.6% of the costs of contributions to the Bank Guarantee Fund (BGF) – these costs amounted to PLN 461 million, of which PLN 232 million accounted for a contribution to the mandatory bank restructuring fund (in 2020 BFG costs were at the level of PLN 646 million, of which PLN 296 million accounted for the contribution to the mandatory restructuring fund),
  • an increase of PLN 10 million, i.e. of 33.5% of payments to the PFSA.

The effectiveness of operations of the PKO Bank Polski S.A. measured with the C/l ratio on an annual basis was at 39.1% and improved by 1.1 p.p. y/y in consequence of the faster increase in the net income on business activities (5.3% y/y) than the increase in operating expenses (2.4% y/y).

* includes the cost of legal risk related to mortgage loans in convertible currencies of PLN 6,552 million.

In 2021, net write-downs and impairment amounted to PLN -1,311 and were PLN 7,714 million more favourable compared with the same period of the prior year, which was due to write-downs on COVID-19 of PLN 1,124 million recognized in 2020, and costs of the legal risk of mortgage loans in convertible currencies of PLN 6,552 million.

In 2021 no costs of legal risk were incurred.

Net write-downs on non-financial assets amounted to PLN -55 million and were PLN 322 million more favourable than in the prior year, mainly due to write-downs on non-financial assets recognized in 2020, i.e. write-down on goodwill of Nordea Bank Polska S.A. (corporate CGU) of PLN -116 million, write-down on the value of shares of Bank Pocztowy S.A. of PLN -88 million, impairment of real estates of PLN -61 million, impairment of shares of PKO BP BANKOWY PTE S.A. of PLN -37 million and shares of ZenCard sp. z o.o. of PLN -5 million.

The share of impaired loans amounted to 3.90% as at the end of 2021 (a 0.60 p.p. decrease compared with 2020).

At the end of 2021, the cost of risk amounted to 0.54% and was 0.23 p.p. lower than that obtained in the same period of the prior year.

The Bank continues its conservative credit risk management policy of the Bank’s Group and strict monitoring of the receivables portfolio

Statement of financial position

As at the end of 2021, total assets of PKO Bank Polski S.A. amounted to nearly PLN 389 billion and increased by PLN 44 billion since the beginning of the year. Therefore, PKO Bank Polski S.A. reinforced its position as the largest financial institution in the Polish banking sector.

On the assets side the Bank noted, among other things, an increase in financing granted to Customers and the securities portfolio, and on the side of sources of finance the growth was determined mainly by an increase in the deposit base.

Major items of the Statement of Financial Position

As at the end of 2021 financing granted to Customers amounted to PLN 219.7 billion, which is an increase of PLN 12.8 billion y/y.

The volume of retail and private banking loans increased by PLN 6.5 billion and was related to real estate loans. Volumes of corporate loans and loans for companies and enterprises went up by PLN 5.8 billion and PLN 0.5 billion, respectively.

Retail and private banking loans, and corporate loans were the main items in the structure of net financing granted to Customers by type, with shares of 54.7% and 37.4% of the portfolio respectively as at the end of 2021.

* including non-Treasury bonds (excluding held for trading)

Amounts due to Customers constitute the basic source of financing of the Bank’s assets. As at the end of 2021 amounts due to Customers reached PLN 318.0 billion, which is an increase of PLN 39.1 billion since the beginning of the year. The increase in the deposit base was due to an increase in all categories of Customers: retail and private banking deposits (PLN +17.5 billion), corporate deposits (PLN +17.0 billion) and deposits from companies and enterprises (PLN +4.6 billion).

In the structure of amounts due to Customers by type, the main items are the retail and private banking deposits (67.1% as at the end of 2021).

The share of current deposits in the break-down of total deposits increased to 84.4% (+2.2 p.p. compared with the end of 2020).

PKO Bank Polski S.A. is an active participant of the debt securities markets, which enables it to diversify the sources of financing its operations and to adapt them to the regulatory requirements regarding long-term financial stability.

In 2021 borrowings decreased by PLN 3.8 billion, as a result of:

  • maturity of the Bank’s EMTN bonds with a nominal value of EUR 500 million and CHF 400 million;
  • repayment of loan instalments received from international financial institutions in accordance with the payment schedule;
  • higher exchange rates of the USD (PLN +0.30) and CHF (PLN +0.18), accompanied by a drop in the exchange rate of the EUR (PLN -0.02).

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