CEO’s annual letter

Dear Sir/Madam,

It is a great pleasure to present the annual financial report on the activities of the PKO Bank Polski Group for the year 2021. The document summarizes the period in which the Polish economy dynamically accelerated its growth, after a difficult time of uncertainty and global turmoil caused by the pandemic. It was a year of rebuilding results for the banking sector and for PKO Bank Polski it was also an intense and fruitful period of development. The result is a significant increase in the scale of the company's operations, excellent financial results and an improvement in key profitability ratios.
Annual Report

Last year PKO Bank Polski took full advantage of the economic situation in Poland, which enjoyed a nearly 6 percent GDP growth, growing population’s incomes and a good situation on the labour market. Thanks to improving internal processes and expanding an offer while focusing on the needs of its customers, our capital group increased the balance sheet to PLN 418 billion and generated PLN 4.9 billion of consolidated net profit. This is the highest profit in more than 100 years of the history of PKO Bank Polski.

The Bank recovered and noted again an increase in results on business activity, which amounted to PLN 15.2 billion and was by 3.9 percent higher than the year before. The record profit was also achieved thanks to the maintenance of high cost discipline. The cost-to-income ratio (C/I) for the Group was at a very good level of 40.6 percent. The Bank’s results were also supported by the falling cost of risk, which in 2021 amounted to 0.55 percent and was below the levels assumed in the strategy of the Bank. Together with a strong capital position and the results of European stress-tests, which confirmed that PKO Bank Polski is one of the most resilient banks to a turmoils in Europe, it shows that it is possible to reconcile dynamic and responsible development of business activities.

In its activities, apart from taking care of results and stability, PKO Bank Polski is also guided by the principle of sustainable development and attaches great importance to the method of using natural resources. In 2021, it adopted indicators in the ESG area and included them in the non-financial objectives of the Bank’s Capital Group for the following years. The Bank pledged to eliminate exposure to the coal mining sector by 2030, to continue increasing the green financing, and to further reduce greenhouse gas emissions. The company will continue to work on other non-financial indicators and targets related to the ESG area, and will consider the challenges related to sustainable development more broadly in its next strategy.

2021 was another year when the entire world struggled with the COVID-19 pandemic. From the very beginning, the PKO Bank Polski Capital Group was involved in the fight against its consequences and supported local communities and activities organized at the national level. In 2021, the company made cash and in-kind donations with a total value of PLN 2.9 million to medical facilities and aid organizations, supported the National Vaccination Program and continued involvement in aid programs for companies, including those offered by Bank Gospodarstwa Krajowego and the Polish Development Fund. The Bank also developed organizational tools and solutions that enable remote work, facilitate communication with customers and ensure smooth customer service.

In its running of business during the pandemic, PKO Bank Polski was helped by modern technological solutions and a high level of digital development. The bank’s IKO mobile app was still gaining in popularity, and it is already installed on more than 6 million mobile devices. Since its launch nearly nine years ago, customers have logged in to it over 4 billion times and made over 1 billion transactions using it, for a total amount of nearly PLN 300 billion. Using the Bank’s services without leaving your home is also supported by consistently developed additional services that enrich the ecosystem of PKO Bank Polski services. The Bank’s technological development was and will remain one of the pillars of our strategy.

Last year in the banking sector was also marked by legal risk of housing loans denominated in foreign currencies. Due to the scale of this phenomenon and uncertainty related to its final solution, it remains one of the main risks to the financial stability of the sector. It seems, however, that because of judgements issued by the Supreme Court, the probability of materialization of court decisions that would be most costly for banks is decreasing. One of the reasons for this decrease is, among others, the fact that Bank customers have been offered the possibility of concluding settlements. PKO Bank Polski was the first to come up with such a solution. After three months of offering a conciliatory path, at the end of 2021, over 19 000 requests for mediation were registered, of which 7.1 thousand already have a positive outcome. The share of mediations ended with a positive outcome in relation to the total number of mediations is about 80%, which we believe is a positive sign.

For PKO Bank Polski, 2021 was a special time. The company achieved the financial goals set in the current strategy one year in advance and started work on setting new directions of development. The new strategy will have to respond to changes in the environment that have occurred in recent years, such as accelerated digitization, demographic changes, increased importance of ESG, increases in interest rates or recently – a change in the geopolitical situation

The next strategy of PKO Bank Polski will also have a symbolic dimension. The commencement of its implementation will coincide with the change of the company’s seat and its return to Świętokrzyska street in Warsaw, near the place where the pre-war address of the Bank was. The new strategy will therefore open another important chapter in the history of PKO Bank Polski. I will do my best to make it even better than the previous one.

Iwona Duda
President of the PKO Bank Polski Management Board

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