24th Mar 2006 14:58
Bank Pekao SA23 March 2006 Bank Pekao S.A. Opinion and Report of the Independent Auditor Financial Year ended 31 December 2005 KPMG Audyt Sp. z o.o. The opinion contains 2 pages The report supplementing the auditor's opinion contains 12 pages Opinion of the independent auditor and report supplementing the auditor's opinion on the financial statements for the financial year ended 31 December 2005 Opinion OF THE independent AUDITOR To the General Shareholders' Meeting of Bank Pekao S.A. We have audited the accompanying financial statements of Bank Pekao S.A. seatedin Warszawa, ul. Grzybowska 53/57, 00-950 Warszawa ("Bank"), consisting of thebalance sheet as at 31 December 2005, with total assets of and total liabilitiesand equity of PLN 61,445,212 thousand, the profit and loss account for the yearthen ended with a net profit of PLN 1,439,416 thousand, the statement of changesin equity for the year then ended with an increase in equity of PLN 492,622thousand, the cash flow statement for the year then ended with an increase incash amounting to PLN 911,765 thousand, and supplementary notes to the financialstatements. The Management of the Bank is responsible for the accuracy of the accountingrecords and the preparation and true and fair presentation of the financialstatements in accordance with International Financial Reporting Standards asadopted by the European Union, and in respect to matters that are not regulatedby the above standards, in accordance with the requirements of the AccountingAct dated 29 September 1994 (Official Journal from 2002, No. 76, item 694 withamendments) and respective bylaws and regulations, the requirements for issuersof securities admitted or sought to be admitted to trading on an officialstock-exchange listing market. Our responsibility is to express an opinion onthese financial statements, and whether the financial statements are derivedfrom properly maintained accounting records and supporting documentation, basedon our audit. The financial statements of the Bank for the financial year ended31 December 2004, before the transition described in note 51 "First timeadoption of International Financial Reporting Standards" of supplementary notes,were audited by another auditor, whose report dated 8 March 2005, expressed anunqualified opinion on those financial statements. We conducted our audit in accordance with section 7 of the Accounting Act dated29 September 1994, the professional standards established by the Polish NationalCouncil of Certified Auditors and International Standards on Auditing. Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatements. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement of the Bank, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for ouropinion. In our opinion, the accompanying financial statements of Bank Pekao S.A.including note 51 "First time adoption of International Financial ReportingStandards" of supplementary notes present fairly, in all material respects, thefinancial position of the Bank as at 31 December 2005, the results of itsoperations and its cash flows for the year then ended in accordance withInternational Financial Reporting Standards as adopted by the European Union,and in respect to matters that are not regulated by the above standards, inaccordance with the requirements of the Accounting Act dated 29 September 1994and respective bylaws and regulations, the requirements for issuers ofsecurities admitted or sought to be admitted to trading on an officialstock-exchange listing market and the provisions laws and of the Bank's statutethat apply to the Bank's financial statements and have been prepared fromaccounting records, that in all material respects have been properly maintained,together with supporting documentation. As required under the Polish Accounting Act dated 29 September 1994 we alsoreport that the Report on the Bank's activities includes, in all materialaspects, the information required by Art. 49 of the Accounting Act and by theDecree of the Ministry of Finance dated 19 October 2005 on current and periodicinformation provided by issuers of securities (Official Journal from 2005, No209, item 1744) and the information is consistent with the financial statements. Signed on the Polish original Signed on the Polish original.................................................... ..........................................................Certified Auditor No. 9941/7390, For KPMG Audyt Sp. z o.o.Boena Graczyk Ul. Chodna 51, 00-867 Warsaw Richard Cysarz, Member of the Board of Directors Signed on the Polish original .......................................................... For KPMG Audyt Sp. z o.o. ul. Chodna 51, 00-867 Warsaw Certified Auditor No. 9941/7390, Boena Graczyk, Member of the Board of Directors Warsaw, 21 March 2006 Bank Pekao S.A. Report supplementing the auditor's opinion on the financial statements Financial Year ended 31 December 2005 KPMG Audyt Sp. z o.o. The report supplementing the auditor's opinion contains 12 pages Report supplementing the auditor's opinion on the financial statements for the financial year ended 31 December 2005 Contents1 General 31.1 General information about the Bank 31.2 Auditor information 31.3 Legal status 31.4 Prior period financial statements 51.5 Audit scope and responsibilities 52 Financial analysis of the Bank 72.1 Summary of the financial statements 72.2 Selected financial ratios 102.3 Interpretation of selected financial ratios 103 Detailed report 113.1 Accounting records and data protection 113.2 Verification of assets and liabilities 113.3 Compliance with banking regulations 113.4 Audit materiality 113.5 Supplementary notes, comprising of significant accounting policies and otherexplanatory notes 113.6 Report on the Bank's activities 123.7 Information on the opinion of the independent auditor 12 1 General 1.1 General information about the Bank 1.1.1 Bank name Bank Pekao S.A. 1.1.2 Registered office ul. Grzybowska 53/57 00-950 Warszawa 1.1.3 Registration in the National Court Register Seat of the court: Regional Court in Warsaw, XIX Commercial DepartmentDate: 2 July 2001Registration number: 0000014843 1.1.4 Tax Office and Provincial Statistical Office registration NIP: 526-00-06-841REGON: 000010205 1.2 Auditor information KPMG Audyt Sp. z o. o.ul. Chodna 51,00-867 Warsaw KPMG Audyt Sp. z o.o. is registered as a company authorised to audit financial statements (number 458). 1.3 Legal status 1.3.1 Share capital The Bank was established for an indefinite period under the terms of the Notarial Deed dated 18 October 1929. The share capital of the Bankamounted to PLN 166,481,687 as at 31 December 2005 and was divided into 166,481,687 ordinary shares with a nominal value of PLN 1 each. As at 31 December 2005, the shareholders' structure was as follows: Name of the Number of shares Number of Nominal value Percentage of Shareholder Shares Voting Rights of shares share capital (%) PLN '000 (w %)-------------------- -------- ------- -------- --------UniCreditoItaliano S.p.A 88,121,725 52.9% 88,121 52.9%Minority shareholders 78,359,962 47.1% 78,360 47.1%-------------------- -------- ------- -------- --------Total 166,481,687 100.0% 166,481 100.0%==================== ======== ======= ======== ======== 1.3.2 Related parties The Bank is a member of the Bank UniCredito Italiano S.p.A Capital Group, seatedin Genua. The Bank is also the parent company of Bank Pekao Capital Group. 1.3.3 Management of the Bank The Management Board is responsible for the management of the Bank. At 31 December 2005, the Management Board of the Bank was comprised of thefollowing members: • Jan Krzysztof Bielecki - President of the Board, CEO• Luigi Lovaglio - Vice - President of the Board, COO• Sabina Olton - Vice - President of the Board, Chief Accountant• Przemysaw Figarski - Board Member• Irene Grzybowski - Board Member• Paolo Iannone - Board Member• Christopher Kosmider - Board Member• Marian Wayski - Board Member No changes took place in composition of the Management Board of the Bank during 2005 or through the date of this report. 1.3.4 Scope of activities The Bank Pekao S.A. is a universal commercial bank offering a wide range ofbanking service to private individual and corporate customers in accordance withthe scope of service described in the Bank's Statutes of Association. The Bankis conducting transactions in both in Polish zoty and foreign currency in Polandas well as abroad. The Bank actively participates in trading on the domestic andforeign financial markets. 1.4 Prior period financial statements The 31 December 2004 financial statements were audited by Ernst & Young AuditSp. z o. o. and received an unqualified opinion. The prior year financial statements were approved at the General Shareholders'Meeting on 5 April 2005 where it was resolved to allocate the profit for theprior financial year of PLN 1,343 mln as follows: • Dividends for shareholders PLN 1,065 mln; • Reserve capital PLN 277 mln. The closing balances as at 31 December 2004 have been properly recorded prior toInternational Financial Reporting Standards' adjustments as the opening balancesof the audited year.Due to the changes in the applied accounting policies, resulting from theadoption of the accounting policies that are in compliance with InternationalFinancial Reporting Standards as adopted by the European Union the relatedcorresponding figures for the year ended 31 December 2004 have been restated bythe Bank together with the opening balances of the audited year. Furthermore, inaccordance with IFRS 1, the Bank has elected not to restate the correspondingfigures in order to comply with IAS 32 and IAS 39. The adjustments resultingfrom changes in accounting policies, in order to comply with IAS 32 and IAS 39,and have been made to the opening balance of equity as at 1 January 2005.The financial statements were submitted to the Registry Court on 19 April 2005and were published in Monitor Polski B No. 1690 on 28 October 2005. 1.5 Audit scope and responsibilities This report of the independent auditor was prepared for the GeneralShareholders' Meeting of Bank Pekao S.A. seated Warszawa ul. Grzybowska 53/57,00-950 Warszawa, and relates to the financial statements comprising: the balancesheet as at 31 December 2005 with total assets of and total liabilities andequity of PLN 61,445,212 thousand, the profit and loss account for the year thenended with a net profit of PLN 1,439,416 thousand, the statement of changes inequity for the year then ended with an increase in equity of PLN 492,622thousand, the cash flow statement for the year then ended with an increase incash amounting to PLN 911,765 thousand and supplementary notes to the financialstatements. The audited Bank prepares its financial statements in accordance withInternational Financial Reporting Standards as adopted by the European Union onthe basis of the decision of Management Board dated 22 February 2005. The financial statements have been audited on the basis of the decision ofGeneral Shareholders' Meeting dated 5 April 2005 on the appointment of theauditor. The financial statements have been audited in accordance with the contract dated16 May 2005. We conducted the audit in accordance with section 7 of the Accounting Act dated29 September 1994 (Official Journal from 2002, no 76, item 694 with amendments),the professional standards established by the Polish National Council ofCertified Auditors and International Standards on Auditing. We have conducted the interim audit in the Bank's head office during the periodfrom 24 October 2005 to 23 December 2005. We have conducted the final audit ofthe financial statements in the Bank's head office during the period from 2January 2006 to 20 March 2006. The Management of the Bank is responsible for the accuracy of the accountingrecords and the preparation and true and fair presentation of the financialstatements in accordance with International Financial Reporting Standards asadopted by the European Union, and in respect to matters that are not regulatedby the above standards, in accordance with the requirements of the AccountingAct dated 29 September 1994 and respective bylaws and regulations, therequirements for issuers of securities admitted or sought to be admitted totrading on an official stock-exchange listing market. Our responsibility is to express an opinion, with a supplementing report, onthese financial statements, and whether the financial statements are derivedfrom properly maintained accounting records and supporting documentation, basedon our audit. On 21 March 2006, the Management Board of the Bank submitted a statement as tothe true and fair presentation of the financial statements presented for auditwhich confirmed that there were no undisclosed matters which could significantlyinfluence the information presented in the financial statements for the auditedyear. All our requests for additional documents and information necessary forexpressing our opinion and preparing the report have been fulfilled. KPMG Audyt Sp. z o.o., the members of its Management Board and Supervisory Boardand other persons involved in the audit of financial statements of the Bankfulfil independence requirements. The scope of the work planned and performedhas not been limited in any way. The method and scope of our audit is detailedin working papers prepared by us and retained in the offices of KPMG Audyt Sp. zo.o. 2 Financial analysis of the Bank 2.1 Summary of the financial statements 2.1.1 Profit and loss account 2005 2004 PLN '000 PLN '000Interest income 3,814,563 3,705,863Interest expense (1,563,907) (1,591,139)Net interest income 2,250,656 2,114,724Fee and commission income 1,513,310 1,512,065Fee and commission expense (154,615) (142,227)Net fee and commission income 1,358,695 1,369,838Dividend income 96,746 41,081Result on financial instruments at fair valuethrough profit and loss 64,871 46,645Result on investment securities 74,153 13,569Foreign exchange result 263,026 284,094Other operating income 104,459 129,976Other operating expense (70,857) (80,547)Net other operating income 33,602 49,429Net impairment losses on financial assets andoff-balance sheet items (234,267) (340,172)Administrative costs (2,165,330) (2,152,088)Operating profit 1,742,152 1,427,120Gross profit 1,742,152 1,427,120Income tax expense (302,736) (190,208)Net profit for the year 1,439,416 1,236,912 Earnings per share (PLN)- basic 8.65 7.44- diluted 8.64 7.44 2.1.2 Balance sheet ASSETS 31.12.2005 % of 31.12.2004 % of balance balance sheet total PLN '000 sheet total PLN '000 Cash, duefrom 3,573,613 5.8% 3,935,112 6.6%Central BankBillseligibleforrediscountingin Central 6,106 0.0% 8,768 0.0%BankLoans andadvances tobanks 7,000,770 11.4% 5,956,598 10.0%Financialassets heldfor trading 2,217,887 3.6% 2,939,203 4.9%Derivativefinancialinstruments 499,290 0.8% 503,481 0.8%Otherfinancialinstrumentsatfair value 1,781,317 2.9% 1,336,721 2.2%throughprofitand lossLoans andadvances tocustomers 28,727,143 46.8% 26,533,709 44.6%Investmentsecurities 14,490,374 23.6% 15,028,457 25.3%- availablefor sale 11,902,500 19.4% 10,098,484 17.0%- held tomaturity 2,587,874 4.2% 4,929,973 8.3%Non-currentassets heldfor sale 37,650 0.1% - -Investmentsin 514,666 0.8% 544,801 0.9%subsidiariesInvestmentsin 42,234 0.1% 28,690 0.1%associatesIntangibleassets 636,048 1.0% 617,982 1.0%Tangibleassets 1,422,389 2.3% 1,520,209 2.6%Investmentproperties 58,170 0.1% 48,556 0.1%Tax assets 152,008 0.2% 66,966 0.1%Other 285,547 0.5% 463,194 0.8%assets TOTAL 61,445,212 100.0% 59,532,447 100.0%ASSETS LIABILITIESANDSHAREHOLDERS'EQUITY 31.12.2005 % of 31.12.2004 % of balance balance sheet total PLN '000 sheet total PLN '000 Due toCentral 1,950,710 3.2% 2,151,743 3.6%BankDue to otherbanks 1,993,601 3.2% 1,350,796 2.3%Financialliabilitiesheld fortrading 545,930 0.9% 438,219 0.7%Derivativefinancialinstruments 607,689 1.0% 623,683 1.1%Due tocustomers 46,849,748 76.2% 45,860,364 77.0%Debtsecuritiesissued 17 0.0% 23,205 0.0%Current taxliability 4,427 0.0% - -Provisions 105,013 0.2% 344,075 0.6%Otherliabilities 1,191,819 1.9% 844,266 1.4%Totalliabilities 53,248,954 86.7% 51,636,351 86.7% Share 166,482 0.3% 166,482 0.3%capitalReserves 6,522,997 10.6% 6,126,790 10.3%Prior andcurrent yearprofits 1,506,779 2.5% 1,602,824 2.7%TotalShareholders'equity 8,196,258 13.3% 7,896,096 13.3% TOTALLIABILITIESANDSHAREHOLDERS' 61,445,212 100.0% 59,532,447 100.0%EQUITY 2.2 Selected financial ratios 31.12.2005 31.12.2004Total assets (PLN '000) 61,445,212 59,532,447Gross profit (PLN '000) 1,742,152 1,427,120Net profit (PLN '000) 1,439,416 1,236,912Shareholders' equity* (PLN '000) 6,756,842 6,659,184Return on equity 21.46% 19.04%Capital adequacy ratio 17.95% 20.65%Net receivables to total assets 62.16% 59.38%Income earning assets to total assets 94.13% 93.70%Interest bearing liabilities to total liabilities 84.54% 84.74% * excluding current year net profit 2.3 Interpretation of selected financial ratios Net profit for the year ended 31 December 2005 was higher by 16.4% as comparedto the prior period. The increase was mainly driven by an increase of netinterest income and a decrease in impairment losses. Total assets increased by 3.2% compared to the prior year. The most significantincrease on the asset side was due to an increase of loans and advances tocustomers as well as loans and advances to banks. On the liability side, theincrease was driven by an increase of customer deposits and an increase ofborrowings from banks. 3 Detailed report 3.1 Accounting records and data protection The Bank's accounting policies have been described in the notes to the financialstatements to the extent required by International Financial Reporting Standardsas adopted by the European Union. The financial statements were prepared on the basis of accounting records thatare maintained, in all material aspects in accordance with the requirements ofsection 2 "Maintenance of the accounting records" and section 8 "Dataprotection" of the Accounting Act dated 29 September 1994. 3.2 Verification of assets and liabilities The Bank performed a verification of all significant assets and liabilities inaccordance with the requirements and time frame specified in Art. 26 of theAccounting Act and in compliance with the Decree of the Ministry of Financedated 10 December 2001 regarding special accounting principles for banks(Official Journal No. 149 from 2001, item 1673 with amendments).Differences have been recorded in the period covered by the financialstatements. 3.3 Compliance with banking regulations Based on our audit we have not identified any significant deviations in thebank's compliance with the banking regulatory norms pertaining among others toloan concentration, obligatory reserve and capital adequacy ratio. 3.4 Audit materiality We have planned and applied an appropriate level of precision in conducting ouraudit procedures in order to obtain reasonable assurance about whether thefinancial statements taken as a whole are free of material misstatements. 3.5 Supplementary notes, comprising of significant accounting policies and other explanatory notes Information included in the supplementary notes to the financial statements ispresented accurately and completely in all material aspects. The supplementarynotes should be read in conjunction with the financial statements taken as awhole. 3.6 Report on the Bank's activities The Report on the Bank's activities includes, in all material aspects, theinformation required by Article 49 of the Accounting Act dated 29 September 1994and by the Decree of the Ministry of Finance dated 19 October 2005 on currentand periodic information provided by issuers of securities (Official Journalfrom 2005, No 209, item 1744) and the information is consistent with thefinancial statements. 3.7 Information on the opinion of the independent auditor Based on our audit of the financial statements as at and for the year ended 31December 2005, we have issued an unqualified opinion as follows. Signed on the Polish original Signed on the Polish original.................................................... ..........................................................Certified Auditor No. 9941/7390, For KPMG Audyt Sp. z o.o.Boena Graczyk Ul. Chodna 51, 00-867 Warsaw Richard Cysarz, Member of the Board of Directors Signed on the Polish original .......................................................... For KPMG Audyt Sp. z o.o. ul. Chodna 51, 00-867 Warsaw Certified Auditor No. 9941/7390, Boena Graczyk, Member of the Board of Directors Warsaw, 21 March 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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