25th Sep 2008 18:28
Report on the activities
of the Bank Pekao S.A. Group
for the first half of 2008
Warsaw, September 2008
1 Highlights
2 Summary
3 External activity conditions
4 Important events and internal circumstances
4.1 Completion of the Operational Integration
4.2 Developmental direction of the Bank and the Group
4.2.1 The Strategy of Bank Pekao S.A.
4.2.2 Investment plans (including equity)
4.2.3 Development of activity in Ukraine
4.3 Changes within the Group
4.4 Statutory bodies of the Bank
4.5 The Bank's shareholding structure
4.6 Assessment of the financial credibility of Bank Pekao S.A.
5 Activity of Bank Pekao S.A. Group
5.1 Important factors influencing Group's activities and results
5.2 Factors which will affect the results of the Group
5.3 Description of major sources of risk and threats
5.4 Bank Pekao S.A. on the Polish Banking Market
5.4.1 Retail Banking
5.4.2 Affluent Customers
5.4.3 Business Customers (Small and Micro Enterprises)
5.4.4 Corporate Banking
5.4.5 Cooperation with International and Domestic Financial Institutions
5.4.6 Bank Pekao S.A.'s Participation in Financing EU Projects
5.4.7 Distribution network for products and services
5.5 Major areas of the Group's companies activities
5.5.1 Banking activity
5.5.2 Brokerage services
5.5.3 Assets management
5.5.4 Leasing activity
5.5.5 Other financial services
5.5.6 Other entities included in the consolidated financial statements
6 Balance sheet and financial results
6.1 Structure of the consolidated balance sheet
6.1.1 Assets
6.1.2 Liabilities
6.1.3 Off-balance sheet items
6.2 The structure of the net profit of the Group
6.3 Consolidated Income Statement
7 Post balance sheet events
8 Human Resources Management
9 Other information
10 Representations of the Bank's Management Board
Highlights
(PLN million)
|
1 H 2008 |
1 H 2007 |
2007 |
2006 |
2005 |
|
|
Income statement* |
|||||
|
Total income** |
4,367.2 |
4,247.7 |
5,357.9 |
4,657.9 |
4,413.3 |
|
Costs** |
(1,893.6) |
(1,846.6) |
(2,736.5) |
(2,347.0) |
(2,346.4) |
|
Operating income before provisions** |
2,473.6 |
2,401.1 |
2,621.4 |
2,310.9 |
2,066.9 |
|
Pre-tax profit** |
2,420.0 |
2,272.9 |
2,581.9 |
2,179.5 |
1,873.6 |
|
Net profit attributable to equity holders of the Company |
1,967.3 |
1,823.4 |
2,155.5 |
1,787.5 |
1,537.7 |
|
Balance sheet |
|||||
|
Total assets |
120,942.3 |
122,592.3 |
124,096.2 |
67,703.7 |
61,972.0 |
|
Loans and advances to customers*** |
73,067.0 |
67,656.9 |
69,698.5 |
32,747.3 |
28,975.7 |
|
Amounts due to customers |
86,687.8 |
89,593.6 |
89,944.1 |
51,793.6 |
46,847.9 |
|
Shareholders' equity |
13,962.7 |
13,167.8 |
14,747.3 |
8,892.6 |
8,422.7 |
|
Employment and network |
|||||
|
Total number of employees |
22,785 |
15,942 |
22,926 |
15,647 |
15,942 |
|
Total number of outlets (Bank Pekao S.A. and UniCredit Bank Ltd.) |
1,111 |
805 |
1,100 |
795 |
780 |
|
Total number of ATMs (Bank Pekao S.A. and UniCredit Bank Ltd.) |
1,947 |
1,334 |
1,885 |
1,262 |
1,244 |
|
First half of 2008 financial credibility ratings |
Short-term rating |
Long-term rating |
Outlook |
||
|
Fitch Ratings |
F1 |
A |
Positive |
||
|
Standard and Poor's |
A-1 |
A |
Stable |
||
|
Moody's Investors Service Ltd. |
Prime-1 |
A2 |
Positive |
* For the first half of 2007 - combined data, they were not subject to verification and/or review by external auditor.
**Data for 2007 and 2006 relate only to continuing operations.
*** Including debt securities eligible for rediscounting at the Central Bank.
|
1 H 2008 |
1 H 2007 |
2007 |
2006 |
2005 |
|
|
Profitability ratios |
|||||
|
Return on average equity (ROE) |
24.1% |
24.1% |
23.7% |
21.1% |
19.2% |
|
Net interest margin** |
4.3% |
3.9% |
4.1% |
4.2% |
4.4% |
|
Non-interest income / total income* |
47.4% |
51.1% |
48.8% |
48.7% |
46.9% |
|
Costs / income* |
43.4% |
43.5% |
51.1% |
50.4% |
53.2% |
|
|
|
|
|||
|
Balance sheet structure ratios |
|||||
|
Net loans / balance sheet total |
60.4% |
55.2% |
56.2% |
48.4% |
46.8% |
|
Debt securities / balance sheet total |
21.1% |
23.4% |
19.8% |
25.1% |
30.3% |
|
Deposits / balance sheet total |
71.7% |
73.1% |
72.5% |
76.5% |
75.6% |
|
Loans / deposits |
84.3% |
75.5% |
77.5% |
63.2% |
61.9% |
|
Equity / balance sheet total |
11.5% |
10.7% |
11.9% |
13.1% |
13.6% |
|
Capital adequacy ratio |
10.8% |
14.7% |
12.1% |
16.5% |
19.5% |
* For the first half of 2007 - combined data, they were not subject to verification and/or review by external auditor.
** Excluding buy sell back and sell buy back transactions.
Summary
In order to provide better comparability, the financial statements in respect of the first half of 2007 (hereafter referred to as "combined data" or "combined result") are presented as a "combination"* of the financial results of the Bank Pekao Group and Pekao285, i.e. that part of Bank BPH S.A. merged with Bank Pekao S.A. through the division of Bank BPH S.A. as registered on 29th November 2007.
In the first half of 2008 Bank Pekao S.A. Group is reporting net profit attributable to equity holders of PLN 1,967.3 million, i.e. PLN 143.9 million (7.9%) higher than combined result in first half of 2007.
The results for the first half of 2008 show a positive dynamic despite the pressure of the difficult situation in the international financial markets and performance of Warsaw Stock Exchange. As a result, the decrease of shares prices was accompanied by redemptions of mutual funds and decrease of mutual funds assets value. Another negative factor influencing results was the slowdown in the market of mortgage loans denominated in PLN.
Factors mentioned above influenced results of the Bank as well as results of some subsidiaries.
Despite that and with continued efforts in the last phase of the integration process, the Group achieved good results. Growth of net financial result was supported by commercial activity, thanks to which the decrease of commissions related to investment products was partially compensated for by the growth in net interest income. At the same time operating costs were kept under control (despite the integration costs) and cost of risk has substantially decreased.
In the first half of 2008, the Group's total income amounted to PLN 4,367.2 million, PLN 119.5 million (2.8%) higher than combined income in the first half of 2007.
Growth in net interest income by PLN 222.3 million (10.7%) allowed to partially compensate for the decrease in net fees and commissions income.
Fee and commission income decreased by PLN 296.5 million (19.4%) in comparison to combined income in the first half of 2007, mainly due to lower commissions on investment products. As a result of significant decline in demand, lower sales of mutual funds translated into lower up-front fees while the decrease of mutual funds assets under management additionally impacted management fees. Additionally lower activity on Warsaw Stock Exchange caused a decrease of fees and commissions related to shares turnover of retail customers.
Total overhead costs (including depreciation) in the first half of 2008 amounted to PLN 1,893.6 million, i.e. were higher in comparison with the combined costs in the first half of 2007 only by PLN 47.0 million (2.5%), i.e. below the inflation rate.
In the first half of 2008, impairment losses on loans and advances amounted to PLN 121.8 million and were PLN 84.7 million (41.0%) lower than the combined result for the first half of 2007, thanks to effective credit risk management and a good macroeconomics. At the end of June 2008, the ratio of impaired receivables to total receivables amounted to 7.1% compared to 7.7% at the end of 2007. The ratio decreased due to the increased volume of total loans and a reduced volume of impaired loans.
At the end of June 2008, volume of savings of the Group's retail clients (deposits, structured certificates of deposits and mutual funds) amounted to PLN 60,833.7 million. Variation of savings volume of retail clients of PLN 6,367.4 million compared to the end of 2007 was mainly a result of negative valuation of mutual funds under management (estimated at the level of ca. PLN 4.7 billion), impacted by adverse market conditions and also negative influence of PLN appreciation on FX deposits (ca. PLN 0.9 billion). Value of corporate deposits was also impacted by PLN appreciation, it's decrease was partially compensated by the increase in volume of sell buy back transactions volume.
The volume of loans of Group's clients as at the end of June 2008 amounted to PLN 75,821.0 million, of which corporate loans PLN 51,631.0 million and retail loans PLN 24,190.0 million. The growth of loans portfolio by PLN 1,988.8 million, despite negative impact of PLN appreciation estimated for over PLN 1 billion, was driven by an increase in corporate loans and PLN mortgage loans.
* Note: it should be emphasised, that the "combined data" were not subject to verification and/or review by external auditor and information presented below as "combined data" should be treated as indicative.
External activity conditions
The main tendencies in economy
Macroeconomics of Poland in the first half of 2008 were characterized by a relatively strong pace of GDP growth, but yet signs of weakening became visible. Positive data on a current situation stemmed largely from strong domestic demand. It was mainly due to a stable and strong increases in wages enforced by increasing inflation pressures. Business experienced strong investments that increased potential growth capacity. This, along with reduction in the public sector deficit, were the main factors for improvements in the long-term.
Economic growth
According to StatOffices (GUS) estimations, in the first half of 2008 GDP increased by 5.9% in the first half of 2008. Underlying this though is a gradual GDP weakening if compared with the 6.9% growth in the first half of 2007. The pace of economic growth in the second quarter of 2008 came to 5.8% supporting the view of a downward trend. In the first half of 2008 domestic demand at 6.2% preformed marginally better than the pace of GDP growth. Compared with contribution levels reported in a prior year, the impact of investment demand on the GDP growth also decreased, with 2.9 p.p. exceeding the first quarter of 2008 level (2.2 p.p.). In individual consumption the scale of contribution to GDP growth in the first quarter of 2008 came to 3.7 p.p. against 4.5 p.p. in the prior year, however the relative growth was observed in the second quarter with this year level of 3.4 p.p. from 3.1 p.p. in 2007. There were some negative impact of external demand on the economic growth dynamics in the second quarter of 2008 could be observed (negative net export impact at 0.6 p.p.). A gradual slowdown of economic growth is anticipated in the second half of 2008.
Despite some deceleration in economic growth, household income rose at a relatively strong pace. In the first half of 2008 wages increased by 11.6% y-o-y. Profits of enterprises improved as well, however its dynamic was visibly weaker compared to the last two years readings. In spite of general increases, the main economic indicators decreased in comparison to the levels recorded in a prior year.
Inflation, interest rates
Ongoing high levels of consumer demand, accompanied with growth in regulated prices and global increases in energy and petrol prices all contributed to an increase in inflation. In 2007 inflation stood at 4.0% y-o-y, while after six months of 2008 inflation increased to 4.6% y-o-y. This upward inflation trend influenced interest rate increases by the Monetary Policy Council, which increased the reference interest rate from 5,0% at the beginning of the year to 6,0% in June 2008. The first half of 2008 were marked with the increasing yield on debt securities, with the average T-bonds yield increasing by 60-70bp.
External sector
Strong domestic demand in connection with weakening economic conditions of main trading partners, gave rise to a further deepening of the Current Account Deficit. In the first half of 2008, the cumulative C/A deficit reached EUR 9.5 billion, compared with PLN 5.9 billion in the first half of 2007.
Capital market
The first half of 2008 was characterized a significant fall of stock market indices. The WIG index recorded a 26.06% reduction. Indices of small and medium enterprises performed much worse. After significant increases in the first half of 2007, mWIG40 and sWIG80 fell by 34.22% and 28.72% respectively in January 2008 - June 2008 period.
Banking sector
In the first quarter of 2008 the annual growth in household loans exceeded 37% decreasing to 35% in the second quarter of 2008. Strongest growth was in the mortgage loans with y-o-y growth at the end of the first half of 2008 almost to 42%, compared with more than 50% y-o-y at the end of 2007. As interest rates in PLN increased, the spread of mortgage loans in PLN vs. CHF also widened, which in turn resulted in an increasing share of loans taken in foreign currencies and slowdown in the market of PLN mortgage loans. Corporate loans increased 25% y-o-y.
On the deposits side, household deposits increased notably - 23% y-o-y for the first half of 2008 compared with 10% y-o-y at the end of 2007. The main factors of this acceleration are an upward revision of deposit rates being offered by banks, stemming from NBP interest rate hikes on the one hand, and increased liquidity needs on the other hand. An additional factor of household deposit base growth was an outflow of money from mutual funds. Corporate deposits grew at a decreased pace - from 14.4 y-o-y recorded at the end of 2007 to less than 7% in the first half of 2008.
Important events and internal circumstances
Completion of the Operational Integration
On 29th November 2007 the legal integration of Bank Pekao S.A. with the part of Bank BPH S.A. transferred as an organized part of the enterprise was completed.
Since the beginning of 2008, intensive efforts have been undertaken relating to the migration of accounts and client data of Pekao285 outlets from Bank BPH's IT platform to Bank Pekao's IT platform. The operational integration was successfully completed in May.
It has been the biggest operation of this kind in the history of Polish banking. Branches were integrated and customer data were migrated as scheduled, only 6 months after the legal merger. Retail and corporate branches were integrated into 12 groups, each including 20 to 30 branches in a given region. Because of the application of a new IT system, nearly 7,000 new employees of Bank Pekao S.A. were trained. To minimise inconveniences for customers, work on the network was done on weekends. Corporate customers data were integrated during one of April weekends. Such a success was possible thanks to the joint effort of all employees involved in the project.
Operational merger was a great challenge for the Bank. It has required involvement of almost all employees and close cooperation of all divisions throughout the Bank. The Bank managed to complete the whole process in accordance with the plan and to eliminate appearing difficulties. Operational risk was effectively managed during entire migration process.
In terms of operations, Bank Pekao S.A. is now a single organism, which allows us, after several months of very intensive integration efforts, to focus on everyday work and further development of business activity, and in particular on improving customers' satisfaction.
Developmental direction of the Bank and the Group
The Strategy of Bank Pekao S.A.
General overview
Bank Pekao S.A. is the largest bank in Poland by assets and one of the leading financial institutions in the CEE banking sector in terms of scale of activity.
The bank offers a superior client service platform for Polish and international clients supported by best practice management systems.
Segment-based service model
Bank Pekao S.A. offers a segment-based service model. Specifically, this involves:
For individual customers (Mass, Affluent, and Private Banking), providing dedicated business models and segment-specific service levels and product offers, including dedicated Relationship Managers for Affluent and Private Banking customers.
For SME customers, providing professional product and service offers by dedicated SME Relationship Managers.
For corporate customers, segmenting corporate customers into Mid-Corporates and Large Corporates (based on turnover, sector, public/private ownership, domestic/international ownership, and other criteria) to ensure presence in all attractive client segments, and servicing these segments through Relationship Managers dedicated to each segment to optimize service levels and servicing costs. These Relationship Managers focus on providing high quality and efficient customer service supported by top sales management practices and integrated sales tools.
Distribution network (outlets)
Bank Pekao S.A. offers its customers superior outlets and ATM network, with convenient access countrywide.
The branch network is the primary location for sale and service of retail customers, as well as Affluent and SME customers (with dedicated Relationship Managers).
Private banking customers are served through a network of Private Banking Offices, located in the largest cities in Poland.
Corporate customers are served by dedicated Relationship Managers. Large Corporate customers are served through a centralized team located in Warsaw while Mid-Corporate customers are served through Relationship managers located in a network of regional Corporate Centers. Transactional capabilities for corporate customers (cash transactions, night vaults, automatic cash withdrawals, etc) are provided by the branches.
Investment plans (including equity)
The Group's development strategy aims at strengthening its leading position in the financial sector. The development of the Bank and the Group does not exclude investments by the Bank in other financial entities.
Development of activity in Ukraine
As of 30th June 2008 UniCredit Bank pursues its activity through 61 branches and 107 debit card and consumer credit sale outlets. The number of outlets was rationalised in the second quarter of 2008 in the framework of the optimisation programme. The Bank provides services for 126.5 thousand individual clients and almost 2.6 thousand corporate clients.
According to information provided by Bank Austria Creditanstalt AG (BA-CA), a member of UniCredit Group, BA-CA on 24th January 2008 completed the acquisition of 94.2% of the share capital of Ukrsotsbank (which is the fourth largest bank in Ukraine by assets) from the group of investors represented by Interpipe Group. The structure of the Ukrainian operations belonging to the UniCredit Group is currently being assessed.
Changes within the Group
The Bank Pekao S.A. Capital Group as at 30th June 2008 consists of Bank Pekao S.A as the parent entity and 25 subsidiary entities.
The following entities are included in the consolidated financial report as at 30th June 2008:
|
Company's name |
Core activity |
% of shareholder's share capital |
Status of consolidation |
|
|
Parent entity |
||||
|
Bank Pekao S.A. |
Banking |
- |
- |
|
|
Entities fully consolidated |
||||
|
UniCredit Bank Ltd. |
Banking |
100.00 |
full |
|
|
Centralny Dom Maklerski Pekao S.A. |
Brokerage |
100.00 |
full |
|
|
Pekao Fundusz Kapitalowy Sp. z o.o. |
Financial |
100.00 |
full |
|
|
Pekao Leasing Sp. z o. o. |
Leasing |
100.00 |
full |
|
|
Pekao Faktoring Sp. z o.o. |
Financial |
100.00 |
full |
|
|
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A. |
Financial |
65.00 |
full |
|
|
Pekao Telecentrum Sp. z o. o. (former Drukbank Sp. z o.o.) |
No activities performed |
100.00 |
full |
|
|
Centrum Kart S.A. |
Financial |
100.00 |
full |
|
|
Pekao Financial Services Sp. z o. o. |
Financial |
100.00 |
full |
|
|
Pekao Bank Hipoteczny S.A.* |
Banking |
100.00 |
full |
|
|
Pekao Leasing Holding S.A. (former BPH PBK Leasing S.A.) |
Leasing |
80.10 |
full |
|
|
Finanse plc * |
No activities performed |
100.00 |
full |
|
|
Indirect subsidiary - subsidiary of Pekao Leasing Holding S.A. |
||||
|
Pekao Leasing i Finanse S.A. (former BPH Leasing S.A.) |
Leasing |
80.10 |
full |
|
|
Pekao Auto Finanse S.A. (former BPH Auto Finanse S.A.) |
Car lease and fleet management |
80.10 |
full |
|
|
Indirect subsidiary - subsidiary of UniCredit Bank Ltd. |
||||
|
BDK Consulting Sp. z o. o. |
Consulting, hotels, transportation |
99.99 |
full |
|
|
Subsidiary entities non-consolidated |
||||
|
Final Holding Sp. z o. o. |
Holding management |
100.00 |
non- consolidated |
|
|
BPH Real Estate S.A. |
Real estate |
100.00 |
non- consolidated |
|
|
Centrum Uslug Ksiegowych Sp. z o.o. |
Accounting service |
100.00 |
non- consolidated |
|
|
Property Sp. z o. o. (in liquidation) |
Real estate |
100.00 |
non- consolidated |
|
|
Centrum Bankowości Bezpośredniej Sp. z o. o. |
Call-center |
100.00 |
non- consolidated |
|
|
Indirect subsidiary - subsidiary of Final Holding Sp. z o. o. |
||||
|
PBKL S.A. (in bankruptcy) |
N/A |
84.51/84.79 |
non- consolidated |
|
|
Final S.A. |
Aluminum profiles manufacture |
99.82/99.84 |
non- consolidated |
|
|
Indirect subsidiary - subsidiary of PBK Property Spolka z o.o. (in liquidation) |
||||
|
FBP Media Sp. z o. o. |
Real estate |
100.00 |
non- consolidated |
|
|
Indirect subsidiary - subsidiary of BPH Real Estate S.A. |
||||
|
Metropolis Sp. z o. o. |
Real estate - venture capital |
100.00 |
non- consolidated |
|
|
Jana Kazimierza Development Sp. z o. o. |
Real estate - venture capital |
100.00 |
non- consolidated |
|
|
Associated with Bank Pekao S.A. |
||||
|
Central Poland Fund LLC |
Financial brokerage |
53.19 |
Equity |
|
|
Xelion. Doradcy Finansowi Sp. z o.o. |
Supporting, financial and insurance |
50.00 |
Equity |
|
|
Pioneer Pekao Investment Management S.A. |
Financial brokerage |
49.00 |
Equity |
|
|
Pirelli Pekao Real Estate Sp. z o.o |
Real estate |
25.00 |
Equity |
|
|
Krajowa Izba Rozliczeniowa S.A. |
Clearing House |
34.44 |
Equity |
|
|
Biuro Informacji Kredytowej S.A. |
Credit information services |
30.70 |
not valuated under equity method |
|
|
CPF Management |
Financial brokerage no activities performed |
40.00 |
not valuated under equity method |
|
|
Bankowe Doradztwo Podatkowe Sp. z o. o. |
Tax Advisory |
74.00/48.68 |
not valuated under equity method |
|
|
Polish Banking System S.A.. (in liquidation) |
In liquidation |
48.90 |
not valuated under equity method |
|
|
PPP Budpress Sp. z o. o. (in liquidation) |
In liquidation |
36.20 |
not valuated under equity method |
|
* Percentage shares of entities which make up the Pekao S.A. Capital Group at the General Shareholders Meeting/General Partner sMeeting are as follows:
Final Holding Sp. z o. o. - a subsidiary of Bank Pekao S.A. - holds 0.04 % share in Pekao Bank Hipoteczny S.A. Total share of the Group in BPH Bank Hipoteczny S.A. equity is 100%,
Final Holding Sp. z o. o. - a subsidiary of Bank Pekao S.A. - holds 0.02 % share in equity of Finanse plc. Total share of the Group in Finanse plc equity is 100%.
As at 30th June 2008 the composition of the Capital Group was unchanged as compared to 31st December 2007.
Statutory bodies of the Bank
Supervisory Board
The composition of the Supervisory Board had not changed in the first half of 2008.
Composition of the Supervisory Board
|
30.06.2008 |
31.12.2007 |
||
|
1. |
Jerzy Woznicki Chairman of the Supervisory Board |
1. |
Jerzy Woznicki Chairman of the Supervisory Board |
|
2. |
Paolo Fiorentino Deputy Chairman, Secretary of the Supervisory Board |
2. |
Paolo Fiorentino Deputy Chairman, Secretary of the Supervisory Board |
|
3. |
Federico Ghizzoni Deputy Chairman of the Supervisory Board |
3. |
Federico Ghizzoni Deputy Chairman of the Supervisory Board |
|
4. |
Pawel Dangel Member of the Supervisory Board |
4. |
Pawel Dangel Member of the Supervisory Board |
|
5. |
Fausto Galmarini Member of the Supervisory Board |
5. |
Fausto Galmarini Member of the Supervisory Board |
|
6. |
Oliver Greene Member of the Supervisory Board |
6. |
Oliver Greene Member of the Supervisory Board |
|
7. |
Enrico Pavoni Member of the Supervisory Board |
7. |
Enrico Pavoni Member of the Supervisory Board |
|
8. |
Leszek Pawlowicz Member of the Supervisory Board |
8. |
Leszek Pawlowicz Member of the Supervisory Board |
|
9. |
Krzysztof Pawlowski Member of the Supervisory Board |
9. |
Krzysztof Pawlowski Member of the Supervisory Board |
Management Board
On 9th May 2008, Mr Przemyslaw Gdanski, Vice President of the Bank resigned from his position.
The Supervisory Board of Bank Pekao S.A. on the meeting held on 4th June 2008 appointed Mr. Andrzej Kopyrski to the position of Vice President of the Management Board for the current common term of office of the Management Board.
At the same meeting, on 4th June 2008, Mr. Christopher Kosmider resigned from the position of Vice President and Member of the Management Board of Bank Pekao S.A.
Composition of the Management Board
|
30.06.2008 |
31.12.2007 |
||
|
1. |
Jan Krzysztof Bielecki President of the Management Board, CEO |
1. |
Jan Krzysztof Bielecki President of the Management Board, CEO |
|
2. |
Luigi Lovaglio First Vice President of the Management Board, General Manager |
2. |
Luigi Lovaglio First Vice President of the Management Board, General Manager |
|
3. |
Paolo Iannone Vice President of the Management Board |
3. |
Przemyslaw Gdanski Vice President of the Management Board |
|
4. |
Andrzej Kopyrski Vice President of the Management Board |
4. |
Paolo Iannone Vice President of the Management Board |
|
5. |
Katarzyna Niezgoda Vice President of the Management Board |
5. |
Christopher Kosmider Vice President of the Management Board |
|
6. |
Grzegorz Piwowar Vice President of the Management Board |
6. |
Katarzyna Niezgoda Vice President of the Management Board |
|
7. |
Marian Wazynski Vice President of the Management Board |
7. |
Grzegorz Piwowar Vice President of the Management Board |
|
8. |
Marian Wazynski Vice President of the Management Board |
The members of the Management Board shall be appointed for the common term, which shall last three years.
The Supervisory Board appoints and recalls the members of the Management Board of the Bank. The Deputy Presidents and members of the Management Board of the Bank are appointed and recalled at the request of the President of the Management Board of the Bank. Appointment of two members of the Management Board of the Bank, including the President of the Management Board requires the approval of the Banking Supervision Commission. The Supervisory Board has to advise the Commission to express its approval.
The scope of operations and scope of actions of Members of the Management Board of the Bank have been set forth under the Statutes of the Bank and the law - the Code of Commercial Companies, as well as the By-Laws of the Management Board of the Bank. The scope of operations of the Management Board of the Bank includes matters not reserved by virtue of the binding provisions of the law or of the Statutes of the Bank to the competence of the Bank's other statutory bodies.
The Bank's shareholding structure
The shareholders of Bank Pekao S.A. owning directly or indirectly through their subsidiaries at least 5% of the total number of voting rights at the General Meeting of Bank Pekao S.A. are as follows:
|
Shareholder's name |
# of shares and votes at the General Meeting |
Share in share capital and total number of votes at the General Meeting |
# of shares and votes at the General Meeting |
Share in share capital and total number of votes at the General Meeting |
||
|
30th June 2008 |
31st December 2007 |
|||||
|
UniCredito Italiano S.p.A. |
155 433 755 |
59,28% |
155,433,755 |
59.36% |
||
|
Other shareholders |
106 778 874 |
40,72% |
106,432,902 |
40.64% |
||
|
Total |
262 212 629 |
100,00% |
261,866,657 |
100.00% |
||
Since the beginning of 2008 share capital of the Bank has been increased by PLN 345,972 as a result of the issue of 345,972 series G ordinary bearer shares which have been taken up by participants of the share option programme.
Assessment of the financial credibility of Bank Pekao S.A.
As at 30th June 2008, Bank Pekao S.A. had the following financial credibility ratings:
|
Bank Pekao S.A. |
Poland |
|
Fitch Ratings |
||
|
Long-term rating (IDR) in local currency |
A |
A |
|
Long-term rating (IDR) in foreign currency |
A |
A- |
|
Short-term rating |
F1 |
F2 |
|
Individual rating |
B/C |
- |
|
Support rating |
1 |
- |
|
Outlook of IDR |
Positive |
Stable |
|
Standard and Poor's |
||
|
Long-term rating in local currency |
A |
A |
|
Long-term rating in foreign currency |
A |
A- |
|
Short-term rating |
A-1 |
A-2 |
|
Outlook of IDR |
Stable |
Stable |
|
Moody's Investors Service Ltd. (The Bank has not ordered Moody's rating) |
||
|
Long-term deposit rating |
A2 |
A2 |
|
Short-term deposit rating |
Prime-1 |
Prime-1 |
|
Financial strength |
C |
D (banks average in country) |
|
Outlook |
Positive |
Stable |
Activity of Bank Pekao S.A. Group
Important factors influencing Group's activities and results
The main factors influencing the Group's activities and results in the first half of 2008 include:
difficult situation in the international financial markets and Warsaw Stock Exchange
completion of operational integration,
development of activity in Ukraine,
overhead costs under control,
cost of risk reduction,
the sale of part of Centralny Dom Maklerski.
Difficult situation in the international financial markets and Warsaw Stock Exchange
The results for the first half of 2008 show a positive dynamic, despite the pressure of the difficult situation in the international financial markets and performance of Warsaw Stock Exchange. As a result, the decrease of shares prices was accompanied by redemptions of mutual funds and decrease of mutual fund assets value. Another negative factor influencing results was the slowdown in the market of mortgage loans denominated in PLN. Factors mentioned above influenced results of Bank Pekao S.A. as well as results of some subsidiaries.
Completion of operational integration
On 29th November 2007 the legal integration of Bank Pekao S.A. with the part of Bank BPH S.A. transferred as an organized part of the enterprise was completed.
Since the beginning of 2008, intensive efforts have been undertaken relating to the migration of accounts and data of clients handled by Pekao285 outlets from Bank BPH's IT platform to Bank Pekao's IT platform. The operational integration was successfully completed in May.
Development of activity in Ukraine
As of 30th June 2008 UniCredit Bank Ltd. conducts its activity through 61 branches and 107 debit card and consumer credit sales outlets. The number of outlets was rationalised in Q2 in the framework of the optimisation programme. The Bank provides services to over 126.5 thousand individual clients and almost 2.6 thousand corporate clients.
Development of commercial activity led to substantial growth of loans granted to clients.
Overhead costs under control
Total overhead costs (including depreciation) in the first half of 2008 amounted to PLN 1,893.6 million, i.e. were higher in comparison with the combined costs in the first half of 2007 by only PLN 47.0 million (2.5%), i.e. below the inflation rate.
Overhead costs were kept under control, the increase was connected mainly with the costs of integration and expansion in the Ukrainian market. In the first half of 2008, the Group's cost / income ratio amounted to 43.4%, in comparison with 43.5% in the first half of 2007.
Cost of risk reduction
In the first half of 2008, impairment losses on loans and advances amounted to PLN 121.8 million and were PLN 84.7 million (41.0%) lower than the combined result for the first half of 2007, thanks to effective credit risk management and a good macroeconomics.
At the end of June 2008, the ratio of impaired receivables to total receivables amounted to 7.1% compared to 7.7% at the end of 2007. The ratio decreased due to the increased volume of total loans and, at the same time, a reduced volume of impaired loans.
The sale of part of enterprise of Centralny Dom Maklerski (CDM)
The structure of the income statement in the first half of 2008 was influenced by a one-off transaction - the sale of part of CDM, which conducts corporate brokerage and investment banking services - with an impact on pre-tax profit of PLN 435.7 million and on net profit of PLN 352.4 million.
Factors which will affect the results of the Group
Despite a slight reduction in the growth rate, the Polish economy still develops at a fast rate, mainly thanks to the high growth of investments but also due to growth of consumer demand.
Significant economic growth is accompanied by even faster growth of individual consumption, resulting from continued optimistic consumer expectations and improved situation on the labour market combined with the growth of salaries.
In the financial sector the further growth of corporate and retail lending accompanied with accelerated increase of household deposits is being observed. On the other hand, as a result of the decline of prices in the stock markets in recent months, the value of assets of mutual funds has decreased mainly due to lower valuation and the ensuing outflow of the savings from the funds to bank deposits.
An important factor influencing the size and structure of the bank's loan portfolio is the increasing difference between domestic and foreign interest rates as well as the further PLN appreciation. These factors caused once again increased demand for mortgage loans denominated in foreign currencies (mainly CHF).
Already, since the fourth quarter of 2007, world prices of energy and food have been growing, which resulted in a significant acceleration of inflation. The growth of prices was also visible in the second quarter of 2008 and it is likely to last throughout 2008. The fast growth of inflation caused the Monetary Policy Council to commence a series of interest rate raises.
It is expected that, in future quarters, economic growth will gradually slow down, yet still remain at a high level. The symptoms of the growth of demand for corporate investment loans and for households mortgage loans are visible. The growth of household income and higher interest rates will favour the growth of savings, especially bank deposits.
Description of major sources of risk and threats
Economic Factors
Bank Pekao S.A. and its subsidiaries operate predominantly on the territory of Poland. Therefore, the Bank's performance will be influenced by the economic events in Poland and international events that have an impact on Poland's economy.
Taking into consideration the strategy of increasing activity on the Ukrainian market, the Group results might also be dependent on the economic trends in Ukraine. Currently the scale of risks and threats connected with the Ukrainian market is not significant.
Risk Management
Effective risk management is a prerequisite for maintaining a high level of security of the funds entrusted to the Bank, and for achieving a sustainable and balanced profit growth.
The key risks inherent in the Group's financial instruments include credit risk, liquidity risk, and market risk. A significant element of the risk management system is also operational risk. The Bank also identified other risks which are material in its activity and which are covered by the Internal Capital Adequacy Assessment Process.
The Bank has adopted a comprehensive and consolidated approach to risk management. It extends to all units of the Bank and its subsidiaries. Risks are monitored and controlled with respect to profitability and the funds necessary to cover the exposure.
The Management Board is responsible for achieving the strategic risk management goals, while the Supervisory Board oversees whether the Bank's policy of exposure to various types of risk is compliant with the overall strategy and financial plan. The Bank's Credit Committee plays an important role in the credit risk management, the Asset-Liability and Risk Committee in market and liquidity risk management, and management of the operational risk falls within the scope of responsibility of the Bank Security Committee.
The rules of managing each of the risks are defined in internal procedures and are subject to the assumptions of the credit and investment policies adopted annually by the Management Board and approved by the Supervisory Board. The rules of managing operational risk are determined by the objectives specified in the Operational Risk Management Strategy.
Credit Risk
Managing credit risk and maintaining it at a safe level is vital for the Bank's financial performance. In order to minimise credit risk, special procedures have been established, pertaining in particular to the rules of assessing transaction risk, collateralisation of loan and lease receivables, credit decision powers, and restrictions on lending to certain types of businesses.
Lending activities are subject to limits following both from the Banking Law and the Bank's internal standards, including limits concerning exposure concentration ratios for individual sectors of the economy, limit on the share of large exposures in the Bank's loan portfolio and limits of exposures to countries, foreign banks and domestic financial institutions.
The credit decision powers, lending restrictions as well as internal and external prudential standards, pertain to loans and guarantees as well as derivative transactions and debt instruments. The quality of the loan portfolio is also protected by way of periodic reviews and ongoing monitoring of the timely servicing of loans and the financial standing of customers.
Under the guidelines of UniCredit, the Bank has continued to work on further rationalisation of the credit process with a view to obtaining better efficiency and security, including in particular enhancement of the procedures and tools for risk measurement and monitoring.
Credit Risk Concentration Limits
In accordance with the Banking Law, a bank's exposure to a single entity or to entities linked by equity or organisational connections may not exceed 20% of the bank's equity if any of such entities is a related party of the bank, or otherwise 25% of the bank's equity. Moreover, the aggregate amount of the bank's exposures equal or in excess of 10% of its equity may not exceed the large exposure limit which is 800% of the bank's equity. In first half of 2008, the Bank did not exceed the maximum exposure limits defined in the Banking Law.
Sector Exposure Concentration
In order to mitigate the credit risk attributable to excessive sector concentration, the Bank has a system in place which allows to control the sector structure of exposures. The system includes setting sector concentration ratios, monitoring the loan portfolio, and information exchange procedures. The system supports the management of exposures to individual business areas classified in accordance with the Polish Classification of Business Activities (PKD).
Concentration ratios are established based on an analysis of investment risk, the quality of the credit exposure, trends prevailing in a given sector, the Bank's own funds and the sector's assets. Monthly comparison of the Bank's exposures with the applicable concentration ratios enables a quick identification of those sectors where an excessive risk concentration might occur. If such concentration occurs, the Bank analyses the sector's economic situation (both existing and forecast trends) as well as the quality of the exposure to the sector. Based on these measures the Bank's policy of mitigating sector risk is defined and adjusted to the changing environment.
Market and Liquidity Risks
The management of liquidity and market risks is a vital element of the Bank's risks management policy, which aims at optimising the structure of balance-sheet and off-balance-sheet items, taking into account the assumed relation of risk to income and comprehensive approach to all types of risk borne by the Bank in its business activities. The risks are monitored and controlled in relation to profitability and funds necessary to cover the exposure, and relevant reports are prepared on a regular basis.
The Asset-Liability and Risk Committee monitors and controls the capital adequacy and the exposure to liquidity and market risks against the external limits imposed by supervisory authorities and internal limits adopted by the Bank.
Liquidity Risk
The overall objective of the liquidity risk management is to ensure the Bank's ability to meet its current and future payment obligations, taking into account the cost of acquiring liquidity and the return on equity, to prevent liquidity crisis situations and define contingency solutions to be employed in the event of a crisis.
The Bank invests its funds (both in the Polish and foreign currencies) in compliance with the Banking Law and recommendations of supervisory authorities. The funds are invested mainly in Polish treasury securities, as well as in highly liquid securities of other sovereign issuers and financial institutions with the highest ratings, offering the required yields. Since such securities can be sold in a short notice, they provide the Bank with a liquidity reserve, allowing to overcome potential crisis situations.
In line with the recommendation of the banking supervisory authorities, the Bank applies and monitors internal liquidity measures that reflect the ratios of total adjusted maturing assets to total adjusted maturing liabilities.
The Bank has specific contingency procedures for addressing increased liquidity risk and for handling material deterioration of financial liquidity. The contingency plan in the event of deterioration of financial liquidity provides for four levels of the liquidity risk, based on the size and duration of cash outflow from customers' accounts. The plan specifies the sources of funds to cover such outflows. The contingency plan also defines the scope of the Bank management's responsibilities and authority to make decisions necessary to restore the required level of financial liquidity. Both the emergency plan and the possibility of obtaining funds from sources specified in the plan are subject to periodic verification.
Market Risk
In its commercial activities, the Bank is exposed to certain market risks, - the interest-rate and exchange-rate risks as well as other risks resulting from changes in market conditions.
As part of management of the interest-rate risk related to the banking book, the Bank seeks to maximise the economic value of its capital and achieve the interest income target within the set limits. In terms of the interest-rate risk, the Bank's position is monitored with the use of such tools as the interest-rate gap (revaluation gap) analysis, duration analysis, simulation analysis, and stress testing. The sensitivity of the Bank's interest income and the economic value of the Bank's capital to interest rate changes in the first half of 2008 remained within the binding in-house limits.
Foreign-exchange risk management aims at controlling the currency profile of balance-sheet and off-balance-sheet items so that it stays within the external and internal limits.
The VaR method is integral to the market risk management process at the Bank. Therefore, VaR limits have been set and are monitored on a daily basis. However, since these limits do not sufficiently protect the Bank against rare and large-scale changes in market conditions, the Bank also uses stress test analyses, which are to show how movements in market parameters affect the Bank's performance.
The instruments classified as held for trading and available for sale as well as derivative instruments are marked to market on a regular basis or, if no market prices are available, on the basis of valuation models which, in the Bank's opinion, provide the most proximate fair value of such instruments.
Operational Risk
Operational risk management is based on internal procedures approved by the Bank's Management Board. These procedures are consistent with "Recommendation M" of the Banking Supervisory Commission, as well as the Banking Supervision Commission's Resolution No. 1/2007 dated 13th March 2007. The procedures define the system of operational risk management, evaluation, monitoring, control/mitigation, reporting, outsourcing and classification of operations.
The system of control over operational risk management covers the Bank and its subsidiaries. Operational risk reports, including an analysis of operating events broken down by types of events and regions, a review of risk ratios, and an analysis of capital necessary to cover the operational risk, are provided to the Management Board.
For the purpose of operational risk mitigation, the Bank pursues its security policy procedures, including those referring to money laundering prevention. The Bank has also introduced and follows rules concerning security of the Bank's facilities, business continuity, protection of banking secret, personal data protection, as well as rules for the Bank units' cooperation with third parties. Other operational risk mitigation measures include contingency plans, internal audit controls, insurance schemes, and ongoing enhancement of the process quality. Moreover, in the event that any irregularities are identified, guidance is immediately provided concerning the scope, method and frequency of functional controls in the specific area of the Bank's operations.
Bank Pekao S.A. on the Polish Banking Market
Retail Banking
The Bank's offer for the largest group of retail customers choosing standard products and services is among the most comprehensive ones to be found on the Polish market of banking services.
Retail customers are offered the Eurokonto current and savings accounts, which come in nine different packages tailored to suit their individual needs. The Eurokonto packages are sold with a unique insurance product, Pakiet Pomocny (Assistance Package), designed jointly with Switzerland's Mondial Assistance Group.
Holders of the Eurokonto account receive an international Maestro payment card, which is accepted worldwide. Maestro cards can also be used as ATM cards to make cash withdrawals from ATMs marked with the Maestro and Cirrus symbols both in Poland and abroad. Retail customers are furthermore offered a wide selection of MasterCard or Visa debit or credit cards, tailored to suit their individual needs.
As part of the Bank's loan offer, retail customers are offered our key loan products, such as Pozyczka Ekspresowa (Express Loan) and PLN mortgage loans. Prosty Kredyt Mieszkaniowy (Simple Housing Loan) can be used to purchase a house or a flat, or to repay a housing loan taken out with another bank. Thanks to a variety of options, it is possible to design a loan best-suited to a given borrower. The Bank also sells Kredyt Mieszkaniowy z Doplata (Housing Loan with a Subsidy) under the government-led initiative designated as "Family in their Own Home".
In addition to a full palette of term deposits in PLN and foreign currencies, the Bank sells units in over 20 mutual funds managed by Pioneer Pekao TFI. The offering is enhanced with savings products: PAK PRO and PAK JUNIOR, Indywidualne Konto Emerytalne (Individual Pension Account) and Otwarty Fundusz Emerytalny Pekao (Open-End Pension Fund).
Affluent Customers
Affluent individuals, who demand high quality of service and an individualised approach, are served in the VIP Advisory Centres model.
The model, under which customer relations are largely handled by a single adviser, helps to build a personal relationship and intensify cooperation. As a result, advisers have an ever-better understanding of the needs of each customer and thus are able to guide them in choosing optimal financial solutions.
As part of the comprehensive dedicated product and service package, affluent customers are offered the Eurokonto VIP account bundled with unique assistance insurance cover Pakiet Pomocny (Assistance Package), which protects its holders against the consequences of unforeseen adverse events. Additionally, the account is bundled with a free accident insurance. Thanks to Pekao24, clients have a free-of-charge access to their account through Internet and fixed or mobile phone lines. Additionally clients can also place free of charge standing orders.
The most affluent clients of Bank Pekao S.A. are offered a private banking service model. The service gives them the guarantee of a comprehensive and tailored service provided with the highest quality. A personal banking adviser assists the client in choosing an optimal investment strategy both on domestic and foreign financial markets. Without making any concessions regarding the stability and security of investments, the adviser also aims at providing clients with constant and satisfactory financial benefits. In addition to standard services rendered to all retail customers, the Bank offers products and services tailored to the private banking clients' individual needs and expectations.
The offering for affluent customers is complemented with a wide selection of payment cards, including platinum, gold and silver MasterCard and Visa payment cards, with a variety of value added services, such as insurance, loyalty programmes and affinity programmes. Concurrently, the customer has a possibility to take advantage of additional functionalities, such as the PIN change option, online credit card service, including transfers from the card account, and transaction alerts in the form of text messages.
Customers with assets available for investments are offered a wide selection of mutual funds managed by Pioneer TFI, Prosperita insurance and savings products, a full spectrum of deposits in PLN and foreign currencies, as well as brokerage services.
Dom Maklerski
In December 2007, the Bank launched the operations of Dom Maklerski. It was set up to ensure uninterrupted brokerage services to customers whose accounts, following the merger, were migrated from Bank BPH S.A. to Bank Pekao S.A., as well as to offer individual customers comprehensive and professional service related to capital market products.
The mission of Dom Maklerski is to deliver the highest standards of brokerage service to achieve a maximum degree of satisfaction on the part of individual customers. The comprehensive offering allows customers to invest in equities, derivatives (financial futures and options), bonds and private market instruments.
Our investment product experts are not only sales persons, but also consultants and advisers. Their wealth of experience combined with an advanced telephone and online service platform, Pekao24Makler, guaranteeing modern management of surplus resources from any place and at any time, helps to expand the offering in a flexible manner, while keeping it in line with the evolving environment and changing needs of customers.
Business Customers (Small and Micro Enterprises)
Business Customers are offered a wide spectrum of products and services, including bank accounts, term deposits, payment cards, loans, guarantees in domestic and international transactions, foreign trade finance and packages ensuring complex banking services for business customers.
The Bank's offer was extended in June 2008 with a new family of "Pakiety Moj Biznes" ("My Business Packages") dedicated to small and medium enterprises. New packages are special sets of banking products and services offered jointly for a monthly fee under a single contract. Packages are addressed to business customers at different stage of development and tailored to their individual needs. The family of "Pakiety Moj Biznes" comprises: "Moj Biznes Startowy", "Moj Biznes", "Moj Biznes Dynamiczny", "Moj Biznes FX" and "Moj Biznes Premium".
New packages are equipped with the best in the market solutions, including access to the state-of-the-art Internet banking system PekaoFIRMA24. On top of standard functionalities like money transfers, standing orders, checking of account balances and executed or planned operations and blocking a card the system has unique functionalities like "Wielopodpis" (Multi- signature) allowing for optional acceptance of internet payment by several persons. Another new functionality is internet Autodealing, allowing for receiving foreign currencies exchange rates directly through the Internet.
Corporate Banking
Bank Pekao S.A. is the market leader in providing of banking services to large and medium enterprises. The Bank's corporate product mix is among the most comprehensive ones available on the market. Additionally, the Bank provides services to the public administration and local self-government sectors, social organisations and non-profit institutions. With quality of service for corporate customers paramount among the Bank priorities, The Bank keeps enhancing banking products and services and implements tools aimed at facilitating sales.
According to analyses conducted by our in-house experts, Bank Pekao S.A. has business relations with 40% of the companies which meet internal criteria for qualifying as corporate customers.
The leading role of the Bank in the corporate client segment is also confirmed by "Monitor Finansowy 2008" from research made by independent agency GfK Polonia in the beginning of 2008 on the sample of 1 000 enterprises with annual sale of PLN 10 million or more.
The service model for corporate customers is based on the key role of a dedicated Relationship Manager responsible for identifying the customer's needs and selecting suitable products and services. The Relationship Managers are assisted by product specialists.
Large Corporates are served on an individual basis by Relationship Managers working from the Head Office's Department of Large Corporates, which is divided into seven industry service offices.
A dedicated unit was also set up at the Head Office which serves the financial and public sectors and tailors our products to suit individual needs of customers from those sectors.
With a view to ensuring comprehensive banking and advisory service for medium-sized enterprises, they are served through 24 Regional Corporate Centres, grouped in six macro-regions, which can rely on strong support of the Bank's Head Office.
Thanks to close cooperation with experts in various fields of banking as well as the Group companies, the Bank also provides other financial services, including guarantees and sureties in domestic and foreign transactions, factoring and leasing. The Bank is a leading arranger of project financing, M&A financing and debt security issues. Our customers have access to a full suite of transactional products, as well as a wide range of money market and FX products, to be used either in day-to-day operations or to build long-term risk hedging structures with respect to currency or interest-rate risk.
CRM System "Fokus"
The CRM system Fokus is a sophisticated tool designed to comprehensively manage the sales process and corporate customer relations. Fokus is integrated with key banking systems and thus - as a single aggregated resource of key information indispensable for day-to-day handling of the customers' accounts - will become the major platform for the distribution network. The system will be upgraded and new functionalities will be launched with a view of ensuring optimal individualized service for corporate customers.
BusinessLine
Since early December 2007, corporate customers can contact the Bank via the BusinessLine call service. Through phone contact with BusinessLine, clients receive all of the necessary information and may notify the Bank about issues requiring immediate attention, as well as their desire to buy new products.
This service gradually takes over relations with all of the corporate clients ensuring a full service. The current capacity of the BusinessLine service reaches 10 thousand companies.
Transactional Services
The Bank's Transactional Services are geared to offer corporate customers modern solutions in the area of electronic banking, cash management and trade finance.
In addition to a strong focus on gaining market share and developing new services, the key priority in the Transactional Services area in 2007 and in the first quarter of 2008 was to adjust the product portfolio to the migration of customers data to Bank Pekao S.A.'s platform. The main objective behind those efforts was to ensure that corporate customers taken over by the Bank have access to the same product functionalities as its existing customers.
Under an agreement signed by the Bank, in the fourth quarter of 2008 the Bank will join the SEPA project (Single Euro Payment Area) in relation to euro payments. Participation in the SEPA project will allow customers to make euro payments more speedily and efficiently, in accordance with international standards.
Internet and electronic banking
PekaoBiznes24
PekaoBiznes24 is an advanced internet banking system designed for corporate clients. The system facilitates the management of financial assets by on-line settlements throughout the entire business day between clients having an account at Bank Pekao S.A. and by ensuring prompt settlements with counterparties holding accounts in other banks.
The PekaoBiznes24 system is systematically upgraded and many improvements to the system were made recently. New functions were introduced, including the possibility of identification of the person signing mass and group orders and packages in the Order Signing and Dispatching form. When the authorised signatory's initials are provided for each transaction, the route made by orders of the Customer can be easily traced. PDF reports in which the Customer receives, among others, a list of rejected orders, contain brief information on the reason of the rejection. The ability to mark imported orders as SORBNET transactions was added - transfers imported from files with a PLS extension are by default forwarded for execution through SORBNET.
Electronic Banking (Proffice)
The Bank's electronic banking system Proffice was extended with new functionalities, such as the Status and Orders module, Current Balances module, statements in the S.A.M2 and PDF file formats, Cash Management reports and duplicating orders filter.
The system is currently used by 4.9 thousand corporate clients and circa 1.3 million transactions are processed in the system per month using Proffice.
Investment Banking and Structured Finance
In the first half of 2008, Bank Pekao S.A. entered into 16 loan agreements for the total amount of PLN 20.2 billion, of which Bank Pekao S.A.'s share was PLN 2.9 billion.
The Bank acted as an arranger or co-arranger in 12 transactions (including four syndicated loans) with the loans' aggregate value of PLN 6.4 billion, of which the Bank's share in the loans amounted to PLN 2.3 billion.
The total value of new syndicated loans with respect to which the Bank acted as an arranger or syndicate member amounted to PLN 18.3 billion as at the end of June 2008, with the Bank's share amounting to PLN 1.1 billion.
The Bank's lending activity focused on the chemical, fuel, paper and telecommunications sectors. The Bank acted as an arranger and co-arranger of financing for two investment projects involving a significant expansion of production capacities in the fuel and paper industries.
Commercial Real Estate
In the first half of 2008, the business environment in the real property sector deteriorated. The turmoil in the US housing loan market impacted also a number of investment transactions in Poland. On the other hand, demand for commercial construction loans remained stable. In the housing sector there has been a substantial drop in the number of residential units sold; consequently, property developers have been forced to draw more funds on their existing loan facilities. Despite the unfavourable macroeconomic environment, in the first half of 2008 Bank Pekao S.A. entered into new transactions with the real property sector for the total amount of PLN 2.6 billion.
Thanks to its market experience, the Bank was able to enlarge its loan portfolio by providing loans to finance high-value and high-potential projects from various segments of the commercial real property market, including office buildings, shopping centres, warehouses and housing developments.
Bank Pekao S.A. continues to be an important and recognised financial institution operating in this market segment.
Financial Market
In the first half of 2008, the Bank ranked among the top three performers on the Polish inter-bank market, both in the deposit segment and in the foreign exchange and treasury bond segments. The Bank was one of few market players which quoted prices of treasury bonds on a continuous basis despite the prevailing negative market sentiment resulting from the liquidity crisis among the London banks. In the Ministry of Finance's ranking of Treasury Securities Dealers, the Bank was ranked second in the first and the second quarters of 2008.
Cooperation with Customers with Respect to Issues of Commercial Paper
In the first half of 2008, the Bank retained its leadership on the domestic market of non-treasury debt securities, ranking:
first in the market of short-term debt securities, with an almost 25% market share,
first in the market of mid-term corporate debt securities, where over two thirds of all issues were carried out through the agency of the Bank,
first in the market of mid-term issues for banks (excluding covered bonds), with a 20% market share.
Additionally, the Bank led the two largest mid-term corporate issues carried out in 2008: the PLN 350 million 5-year bond issue for a leading property developer and the PLN 500 million 5-year bond issue for a leading television station (almost 80% of the issue was placed by Bank Pekao S.A.).
As at the end of the first half of 2008, the total value of outstanding non-treasury debt securities issued through the Bank Pekao S.A. amounted to over PLN 11 billion.
Custodial Services
The Bank's custodial activities are performed pursuant to a decision by the Financial Supervision Authority. Bank's customers include Polish and international financial institutions, custodian and investment banks, insurance companies, mutual and pension funds, as well as non-financial institutions. Bank's custodial services include, in particular, settlement of transactions executed on domestic and international financial markets, custody of assets, handling of securities and cash accounts, assets valuation, and services related to dividend and interest payments.
The Bank operated 4,777 securities accounts as at 30th June 2008.
In the first half of 2008 the Bank continued to provide foreign financial institutions with custodial services in the territory of Poland and securities lending to ensure liquidity of their settlements. In the first half of 2008 the Bank acquired new clients, which are remote members of the WSE and provide clearing services in Poland for them. In addition, the Bank entered into co-operation with new custodian banks and foreign investment companies in the area of safekeeping of assets and settlement of transactions. The Bank maintained the leading position in the area of servicing depositary notes programmes, servicing more than 50% of these programmes.
Cooperation with International and Domestic Financial Institutions
Bank Pekao S.A. maintains correspondent relations with 2,191 international and Polish banks.
As at 30th June 2008, for the purposes of handling international settlements and payments, the Bank had 89 nostro accounts held with 65 banks in 31 countries, and maintained 236 loro accounts for 205 foreign customers (banks and other financial institutions) from 42 countries.
The Bank acts as an intermediary in transactions executed for the customers of other Polish banks and for that purpose maintains 50 loro currency accounts for 16 Polish banks and holds 5 nostro currency accounts with 2 Polish banks. The Bank provides buy-sell services of foreign cash for 22 polish banks and foreign bank's branches in Poland as well as buy-sell services of domestic cash for 16 polish banks.
Bank Pekao S.A.'s Participation in Financing EU Projects
As a result of its active participation in the EU aid funds programmes, Bank Pekao S.A. is ranked as a top player on the market of EU financing for enterprises.
In the first half of 2008, the Bank organised a series of conferences addressed to entrepreneurs. 29 conferences which were held under the auspices of the Ministry of Regional Development and the Fundusze Europejskie magazine were attended by over 2,800 entrepreneurs and 400 banking advisers. The meetings were conducted by banking experts who, together with the representatives of the Marshal's Offices, presented the opportunities offered by EU funds and gave practical advice on how to prepare and submit an application.
The online EU funds search engine, an innovative tool developed by the Bank's experts which is unique in Poland and helps to find information on the opportunities offered by the individual EU funds, is constantly developed and updated. The search engine, as well as an EU newsletter providing information on the latest legislative changes and newly launched EU programmes, can be accessed from the Bank's website.
Distribution network for products and services
The Bank makes use of its superior physical distribution available to its clients, with the most convenient network footprint countrywide. As a result of the integration with the separated part of Bank BPH S.A. this network has been additionally expanded with outlets incorporated to the Pekao structure. The distribution network is supplemented with teams of Relationship Managers and a network of Private Banking offices.
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|
30.06.2008 |
31.12.2007 |
|
Total number of PLN current accounts (in thousand) * |
4,299.7 |
4,179.7 |
|
of which packages (in thousand) |
3,188.4 |
3,205.1 |
|
Number of mortgage loans accounts (in thousand) ** |
181.2 |
181.0 |
|
of which PLN mortgage loans accounts (in thousand) |
121.1 |
117.1 |
|
Number of customers with consumer loans accounts (in thousand) *** |
591.9 |
605.3 |
|
Total number of outlets (in items) |
1,050 |
1,058 |
|
Total number of ATMs (in items) |
1,887 |
1,885 |
* Number of accounts including accounts of pre-paid cards.
** Retail customers accounts.
*** Includes "Pozyczka Ekspresowa" and "Pozyczka od reki".
The number of customers using alternative distribution channels such as the call centre and internet banking platform is systematically growing. Pekao24 Service (for retail and SME clients) and PekaoBiznes24 (for corporate clients) facilitate the management of financial assets, and scope of available services is being systematically extended.
The alternative distribution channels include all bank services that may be accessed by fixed line telephone, mobile phone and through the Internet.
Pekao24
Pekao24 service is an integral part of the Eurokonto packages offered in traditional outlets: Standard, Plus, VIP, Akademickie, Prestiz i Hipoteczne Plus, Agro i Podstawowe.
Pekao24 allows access to the account through three different channels:
TelePekao, which offers access to an account by telephone. The operation may be executed automatically with the keypad or with the assistance of a consultant,
PekaoSMS which enables access to an account through SMS sent from mobile phone,
PekaoInternet which gives access to an account through Internet.
This service is available 7 days a week, 24 hours a day both on the territory of Poland and abroad. The scope of services is being systematically extended. In the first half of 2008 a number of new functionalities were launched:
the possibility of term deposit termination,
the scope of applications was extended by cards application, Eurokonto overdraft granting and changing of monthly limits, opening a current account in convertible currencies and brokerage account in Dom Maklerski Pekao (Pekao Brokerage House),
an option of foreign currency transfers to domestic and foreign banks,
processing of applications for credit cards,
cancellation of a password defined for logging in PekaoInternet,
change and re-generation of PIN codes.
Information concerning internet banking (PekaoBiznes24) and electronic banking (Proffice) for corporate customers are presented in point 5.4.4. and information concerning internet banking PekaoFIRMA for Business Customers is presented in point 5.4.3.
Major areas of the Group's companies activities
Banking activity
UniCredit Bank Ltd.
As of 30th June 2008 UniCredit Bank pursues its activity through 61 branches and 107 debit cards and consumer credits sales outlets. The number of outlets was rationalised in the secon quarter of 2008 in the framework of an optimisation programme. The Bank provides services for 126.5 thousand individual clients and almost 2.6 thousand corporate clients.
According to information provided by Bank Austria Creditanstalt AG (BA-CA), a member of UniCredit Group, BA-CA on 24th January 2008 completed on the acquisition of 94.2% of the share capital of Ukrsotsbank (which is the fourth largest bank in Ukraine by assets) from the group of investors represented by Interpipe Group. The structure of the Ukrainian operations belonging to the UniCredit Group is currently being assessed.
Pekao Bank Hipoteczny S.A. (former BPH Bank Hipoteczny S.A.)
Pekao Bank Hipoteczny S.A., as the specialist mortgage bank, continued in the first half of 2008 the realisation of it's strategy of concentration on creating a safe loans portfolio by providing financing for mortgages of individuals as well as for purchase, construction, modernization or renovation of commercial property. Additionally, the offer allows to refinance loa0ns taken from another bank.
In first half of 2008 Pekao Bank Hipoteczny S.A. completed the extension of its internal sales network covering the 7 largest Polish urban agglomerations and was further developing its network of external sales partners with almost 150 partners as of 30th June 2008. At the same time the sale of loans through the network of Bank Pekao was developed.
Brokerage services
Centralny Dom Maklerski Pekao S.A. - CDM
As at 30th June 2008, CDM maintained 149.4 thousand investment accounts and its market share was 14.7%. CDM also offered on-line access to investment accounts, allowing its customers to buy and sell all instruments listed on the Warsaw Stock Exchange and on the OTC market (CeTO) through the Internet. As at 30th June 2008, CDM maintained 27.7 thousand on-line accounts, 1.3 thousand more than at the end of 2007.
At the end of June 2008, CDM, in cooperation with nine companies managing Mutual Funds and three Transfer Agents, offered via Client Service Points distribution of 143 Mutual Funds, including sub-funds adhered to umbrella funds.
In line with the Bank's strategy of concentration on retail brokerage services, being a part of the integrated services offered by the Bank to retail clients, CDM on the basis of a sale agreement dated 28th January 2008 sold to UniCredit CA IB part of the enterprise conducting corporate brokerage and investment banking services.
Activities on the secondary market
The first half of 2008 was dominated by negative performance of the stock exchange market, which was reflected by the drop in the WIG index by 26.1% relative to the end of 2007. In the first half of 2008, the volume of trading in shares declined by 30.2% y o y, while the volume of trading in futures contracts increased by 4.6 million contracts (or by 61.1%).
In the first half of 2008 the company achieved the following market positions on the Warsaw Stock Exchange:
a 17.8% share in the bond trading volume,
a 3.0% share in the stock trading volume,
a 4.1% share in the futures trading volume.
Assets management
Pioneer Pekao Investment Management S.A. - PPIM
As at the end of June 2008, the net assets value of mutual funds under management of Pioneer Pekao TFI S.A., a company managed by Pioneer Pekao Investment Management S.A. (in which the Bank holds a 49% share), amounted to PLN 20,278.0 million and was lower by PLN 8,439.5 million compared with the end of 2007. The decrease of assets was driven by unfavorable market conditions, which in turn resulted in significant redemptions of mutual funds and the decrease of assets valuation. As at 30th June 2008, the Company had 1,175.4 thousand accounts (a decrease by 7.5% in the first half of 2008).
The net assets value of mutual funds under management of Pioneer Pekao TFI S.A. is presented in the table below:
(PLN million)
|
30.06.2008 |
31.12.2007 |
|
|
Net assets value |
20,278.0 |
28,717.5 |
|
- bond and money market funds |
4,848.1 |
4,550.5 |
|
- equity funds |
6,237.6 |
10,564.7 |
|
- balanced funds |
9,192.3 |
13,602.3 |
In the first half of 2008 the company extended its offer with a Program Super Basket (so called "portfolio of funds") which is a specialized investment product allowing for systematic and long term investing in Pioneer mutual funds. Thanks to differentiation of the portfolio structure, the product allows for diversification of investment depending on individual expectations and risk profile of the clients.
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A. - Pekao Pioneer PTE
The activity of Pekao Pioneer PTE - Pension Fund (OFE) management company - involves gathering and investing funds that will be paid out to the customers after reaching retirement age.
As at 30th June 2008, the number of open-end pension fund accounts amounted to over 330 thousand and was over 27 thousand higher compared with 31st December 2007. The number of persons with at least one contribution recorded on the account was over 307 thousand.
At the end of June 2008, the value of assets managed by the company was PLN 2,183 million, which is an decrease of PLN 62 million compared with the end of 2007. As at the end of June 2008, PTE had a 1.6% share in the market of open-end pension funds, which remained unchanged from the end of 2007.
In the period from March 2005 till March 2008, Pekao PTE achieved the highest rate of return on investment among all pension funds.
Leasing activity
Pekao Leasing Sp. z o.o. - Pekao Leasing
Pekao Leasing provides financial services supporting the financing of fixed assets, i.e. motor vehicles, machinery, equipment and real estate through both operating and finance leases.
In the first half of 2008, the company concluded 2,858 new contracts. The value of leased assets was PLN 456.2 million ca. 63% of leased assets were motor vehicles and ca. 26% were machinery and equipment.
Through the sales cooperation programme established between the company and the Bank, the value of assets leased via the Bank's branches increased to PLN 207.6 million.
Pekao Leasing Holding S.A. (former BPH PBK Leasing S.A.) - Pekao Leasing Holding
Pekao Leasing Holding is a holding with subsidiaries:
Pekao Leasing i Finanse S.A, providing financial services supporting the financing of fixed assets through both operating and finance leases,
Pekao Auto Finanse S.A, providing services for vehicles' leasing, including vehicles fleet with management option.
The value of leased assets in the first half of 2008 amounted to PLN 623.1 million ca. 63% of leased assets were motor vehicles and ca. 32% were machinery and equipment.
Other financial services
Pekao Fundusz Kapitalowy Sp. z o.o. - PFK
PFK maintains corporate governance and actively searches for investors interested in the purchase of assets held in its portfolio.
Pekao Faktoring Sp. z o.o. - Pekao Faktoring
In addition to factoring services (recourse and non-recourse factoring) the company offers services related to factoring, namely collecting information regarding debtors' standing, payments collection, debt recovery, settlements accounting and monitoring of payments on an ongoing basis. Additionally, the company offers settlement of mass payment, financial advisory and consulting services regarding the choice of business financing methods, as well as extends loans relating to factoring agreements. The company cooperates with the Bank in promoting existing and new sales distribution channels.
Pekao Financial Services Sp. z o.o. - PFS
The company acts as a transfer agent for all members of the asset management market, namely mutual funds, pension funds, employees' pension programs and insurers.
In the first half of 2008, PFS continued its strategy of strengthening its market leadership position among transfer agents on the Polish market. As at the end of June 2008 the number of accounts of mutual and pension funds served reached 2.6 million.
Xelion. Doradcy Finansowi Sp. z o.o. - Xelion
In the first half of 2008, the company focused on further growth of assets, development of a nationwide network of financial advisers and activities aimed at strengthening its leadership in the financial advisory sector in Poland.
As at 30th June 2008 Xelion clients had access to, among others, 122 domestic and 143 foreign funds, 16 Asset Management strategies and Unit Linked products with 57 insurance capital funds. At the end of the first half of 2008 the net assets value of client's assets under management of Xelion reached over PLN 1,2 billion.
Centrum Kart S.A. - CK S.A.
The company provides a comprehensive service of card system management, transaction authorization and card personalisation.
In the first half of 2008 the activities of the company related mainly to rendering services to Bank Pekao S.A. and active participation in the process of operational integration of Bank Pekao S.A. and separated part of Bank BPH S.A., involving mainly preparation of IT systems for card services for an increased number of clients and its cards personalisation.
Other entities included in the consolidated financial statements
Other subordinated and associated entities included in the consolidated financial statement for the first half of 2008 include:
Pirelli Pekao Real Estate Sp. z o.o. - Pirelli Pekao
Pirelli Pekao is one of the leading development companies on the Polish market and in the future the company aims to become the leader in real estate development on the Polish market.
Biuro Informacji Kredytowej S.A. - BIK
The company was created from the initiative of the biggest polish banks in order to minimize credit risk of banks and other lending institutions, as well as to increase safety and security of money circulation. The company manages and develops a system of information exchange about credit history of banks' and SKOKs' clients.
Central Poland Fund LLC - CPF
The company manages asset portfolios to gain a satisfactory level of growth of companies' value and to gain optimum return on assets held for sale.
Krajowa Izba Rozliczeniowa S.A. - KIR
The main business activities of KIR are the management of the inter-bank settlement system, which covers exchange of payment orders, registration of such orders, determining parties' liabilities and reporting the results of inter-bank settlements made on the territory of Poland to the National Bank of Poland.
Pekao Telecentrum Sp. z o. o. (former Drukbank Sp. z o.o.)
The company does not conduct any business activities.
Finanse plc
The company does not conduct any business activities.
Balance sheet and financial results
Structure of the consolidated balance sheet
The balance sheet of Bank Pekao S.A. dominates the balance sheet of the Group. Not only does it determine the amount of total assets in balance sheet, but also the structure of the assets and liabilities. At the end of June 2008, the share of the total assets of Bank Pekao S.A. in the total assets of the whole Group was 96.4%.
The table below presents Group's balance sheet:
|
Assets |
30.06.08 |
31.12.07 |
||
|
PLN mil. |
Structure |
PLN mil. |
Structure |
|
|
Cash and balances with the Central Bank |
7,443.4 |
6.1% |
5,121.2 |
4.1% |
|
Loans and advances to banks* |
7,566.0 |
6.3% |
16,964.5 |
13.7% |
|
Loans and advances to customers** |
73,067.0 |
60.4% |
69,698.5 |
56.2% |
|
Securities*** |
25,515.4 |
21.1% |
24,563.3 |
19.8% |
|
Investments in subordinated undertakings |
328.1 |
0.3% |
388.2 |
0.3% |
|
Tangible and intangible assets |
2,561.0 |
2.1% |
2,709.6 |
2.2% |
|
Other assets |
4,461.4 |
3.7% |
4,650.9 |
3.7% |
|
Total assets |
120,942.3 |
100.0% |
124,096.2 |
100.0% |
* Including leasing receivables for banks.
** Including debt securities eligible for rediscounting at the Central Bank and leasing receivables for customers.
*** Including financial assets held for trading and other financial instruments at fair value through profit or loss.
|
Liabilities and equity |
30.06.08 |
31.12.07 |
||
|
PLN mil. |
Structure |
PLN mil. |
Structure |
|
|
Amounts due to the Central Bank |
1,360.1 |
1.1% |
1,485.9 |
1.2% |
|
Amounts due to banks |
9,618.2 |
8.0% |
8,456.2 |
6.8% |
|
Amounts due to customers |
86,687.8 |
71.7% |
89,944.1 |
72.5% |
|
Amounts due to own securities issued |
3,482.3 |
2.9% |
3,716.8 |
3.0% |
|
Other liabilities |
5,831.2 |
4.8% |
5,745.9 |
4.6% |
|
Shareholders' equity |
13,962.7 |
11.5% |
14,747.3 |
11.9% |
|
including minority interest |
82.9 |
0.1% |
80.5 |
0.1% |
|
Total liabilities and equity |
120,942.3 |
100.0% |
124,096.2 |
100.0% |
Assets
Changes in assets structure
Loans and advances to customers and securities are the dominant items in the structure of assets which constituted at the end of June 2008 60.4% and 21.1% of total assets respectively. (at the end of 2007 respectively 56.2% and 19.8%).
Cash and balances with the Central Bank
|
30.06.08 |
31.12.07 |
Change |
|
|
PLN mil. |
|||
|
Cash and balances with the Central Bank, including: |
7,443.4 |
5,121.2 |
45.3% |
|
cash |
2,108.6 |
2,570.9 |
(18.0%) |
|
current account |
3,614.2 |
802.5 |
350.4% |
|
reserve bonds |
1,686.7 |
1,698.9 |
(0.7%) |
|
other |
33.9 |
48.9 |
(30.7%) |
Loans and advances
Customer structure of loans and advances*
|
30.06.08 |
31.12.07 |
Change |
|
|
PLN mil. |
|||
|
Loans and advances in nominal value |
76,681.9 |
74,626.2 |
2.8% |
|
loans* |
75,821.0 |
73,832.2 |
2.7% |
|
retail |
24,190.0 |
24,236.3 |
(0.2%) |
|
corporate |
51,631.0 |
49,595.9 |
4.1% |
|
of which loans classified as assets for sale |
960.3 |
- |
x |
|
non quoted securities |
60.1 |
61.0 |
(1.5%) |
|
repo transactions |
800.8 |
733.0 |
9.2% |
|
Other |
839.4 |
281.2 |
198.5% |
|
Nominal value adjustment |
(450.6) |
(353.4) |
27.5% |
|
Impairment losses |
(4,003.7) |
(4,855.5) |
(17.5%) |
|
Net loans and advances |
73,067.0 |
69,698.5 |
4.8% |
* Including impaired loans classified as assets for sale, debt securities eligible for rediscounting at the Central Bank and leasing receivables for customers.
The volume of loans of Group's clients as at the end of June 2008 amounted to PLN 75,821.0 million, of which corporate loans PLN 51,631.0 million and retail loans PLN 24,190.0 million.
The growth of loans portfolio by PLN 1,988.8 million, despite negative impact of PLN appreciation estimated for over PLN 1 billion, was driven by an increase in corporate loans and PLN mortgage loans, and was supported by growth in commercial activity of UniCredit Bank Ltd.
Impairment of financial assets
|
30.06.08 |
31.12.07 |
Change |
|
|
PLN mil. |
|||
|
Gross credit and loans |
77,795.6 |
74,334.9 |
4.7% |
|
not impaired |
72,298.9 |
68,574.4 |
5.4% |
|
impaired |
5,496.7 |
5,760.5 |
(4.6%) |
* Including impaired loans classified as assets for sale, debt securities eligible for rediscounting at the Central Bank and net investment in the finance lease, including non quoted securities and BSB transactions.
The ratio of impaired receivables to total receivables at the end of June 2008 amounted to 7.1% as compared to 7.7% at the end of 2007. This ratio decreased as a result of an increase in total loans volume with a parallel decrease in impaired loans.
The balance sheet value of impairment losses provisions at the end of June 2008 amounted to PLN 4,003.7 million of which PLN 476.2 million was attributed to the impairment losses resulting from incurred but not recognised losses (IBNR).
The currency structure of the receivables from customers
|
Receivables from customers* denominated in: |
30.06.08 |
31.12.07 |
||
|
PLN mil. |
% |
PLN mil. |
% |
|
|
- PLN |
59,001.2 |
76.6% |
55,452.0 |
74.4% |
|
- foreign currencies** |
18,069.5 |
23.4% |
19,102.0 |
25.6% |
|
Total |
77,070.7 |
100.0% |
74,554.0 |
100.0% |
|
Impairment losses |
(4,003.7) |
x |
(4,855.5) |
x |
|
Total net |
73,067.0 |
x |
69,698.5 |
x |
* Including interests and amounts due in transit .
** Including indexed loans.
PLN prevails in the currency structure of the receivables from customers, with share in total receivables at the end of June 2008 of 76.6%. The highest share among foreign currency receivables had those denominated in EUR - 49.0%, CHF - 32.8% and USD - 13.6%.
Receivable structure by maturity
|
Receivables from customers* by maturity |
30.06.08 |
31.12.07 |
||
|
PLN mil. |
% |
PLN mil. |
% |
|
|
Current and up to 1 month |
15,220.4 |
19.7% |
13,598.8 |
18.2% |
|
1-3 months |
2,817.9 |
3.7% |
2,780.2 |
3.7% |
|
3 months - 1 year |
7,182.3 |
9.3% |
6,966.9 |
9.4% |
|
1-5 years |
23,591.8 |
30.6% |
22,846.1 |
30.6% |
|
Over 5 years |
27,418.9 |
35.6% |
28,080.8 |
37.7% |
|
Other |
839.4 |
1.1% |
281.2 |
0.4% |
|
Total |
77,070.7 |
100.0% |
74,554.0 |
100.0% |
|
Impairment losses |
(4,003.7) |
x |
(4,855.5) |
x |
|
Total net |
73,067.0 |
x |
69,698.5 |
x |
* Including interests and amounts due in transit .
Broken down by maturities, receivables with maturity over 5 years have the highest share (35.6%), mainly attributed to mortgage loans, receivables for which the maturity date already passed and a large loan for a central state investment.
Loan portfolio concentration
The Group's loan portfolio concentration is shaped according to the policy of reducing the Group's loan portfolio dependence on a narrow group of clients.
As of the end of June 2008 indebtedness of the largest client valued at effective interest rate stood at PLN 1,569.6 million (nominal value of PLN 1,895.4 million). The debt is a result of a loan contracted for a central state investment, which starting from the beginning of 1999 is being repaid quarterly. The final repayment date of the loan is 30th December 2012. The loan agreement for financing the central state investment was concluded on 30th April 1984. The loan is refinanced by the National Bank of Poland and guaranteed by the State Treasury.
The concentration of the Group's loan portfolio is as follows*:
|
30.06.08 |
31.12.07 |
|
|
PLN mil. |
||
|
10 largest borrowers |
5,710.3 |
5,892.7 |
|
20 largest borrowers |
8,598.5 |
8,822.3 |
|
50 largest borrowers |
13,844.0 |
14,273.9 |
\* This listing covers the largest borrowers (excluding banks) on the basis of used loans. The values of the concentration ratios shown in the table are significantly influenced by the central state investment loan described above.
The table below presents 10 largest borrowers* of the Group as of 30th June 2008.
PLN mil.
|
Total exposure |
Balance sheet exposure |
Off-balance sheet exposure |
|
|
Client 1 |
1,600.0 |
0.0 |
1,600.0 |
|
Client 2 |
1,569.6 |
1,569.6 |
0.0 |
|
Client 3 |
1,285.8 |
561.4 |
724.4 |
|
Client 4 |
1,215.1 |
727.7 |
487.4 |
|
Client 5 |
872.0 |
139.5 |
732.5 |
|
Client 6 |
736.7 |
0.0 |
736.7 |
|
Client 7 |
682.2 |
234.3 |
447.9 |
|
Client 8 |
665.9 |
97.8 |
568.1 |
|
Client 9 |
620.8 |
248.1 |
372.7 |
|
Client 10 |
607.0 |
341.5 |
265.5 |
* This data does not include exposure related to the shares and other securities, derivatives or loan exposure to banks. This list entails exposure to one entity, i.e. without exposure to related entities.
Liabilities
Changes in the liabilities structure
Funds deposited by customers represent the most significant part of the total liabilities of the Group. As at the end of June 2008 amounts due to customers amounted to PLN 86,687.8 million and constituted 71.7% of total liabilities and equity as at the end of June 2008 (72.5% as at the end of 2007).
External sources of financing
|
30.06.08 |
31.12.07 |
Change |
|
|
PLN mil. |
|||
|
Amounts due to the Central Bank |
1,360.1 |
1,485.9 |
(8.5%) |
|
Amounts due to banks |
9,618.2 |
8,456.2 |
13.7% |
|
Amounts due to customers |
86,687.8 |
89,944.1 |
(3.6%) |
|
Amounts due to own securities issued |
3,482.3 |
3,716.8 |
(6.3%) |
|
Total external sources of financing |
101,148.4 |
103,603.0 |
(2.4%) |
Apart from customers' deposits and funds from interbank market, the Bank uses also a refinancing loan from the National Bank of Poland for financing a loan contracted for a central state investment.
Bank Pekao S.A. acquires deposits mainly in Poland.
The geographical structure of the deposits acquired by domestic branches of Bank Pekao S.A. at the end of June 2008 was as follows:
|
Region |
% of total deposits |
|
Warszawski |
37.0% |
|
Malopolski |
16.2% |
|
Poludniowo - Wschodni |
9.0% |
|
Centralny |
8.9% |
|
Mazowiecki |
8.4% |
|
Wielkopolski |
6.5% |
|
Zachodni |
4.8% |
|
Pomorski |
4.8% |
|
Dolnoslaski |
4.4% |
|
Total |
100.0% |
The deposit base of the Group is well diversified. The main sources of deposits are retail and corporate customers. The Bank does not depend on any single client or group of clients.
Total customer savings
|
30.06.08 |
31.12.07 |
Change |
|
|
PLN mil. |
|||
|
Customer deposits |
81,496.9 |
86,440.9 |
(5.7%) |
|
retail |
38,437.1 |
36,434.0 |
5.5% |
|
corporate |
43,059.8 |
50,006.9 |
(13.9%) |
|
Sell buy back transactions |
3,691.7 |
2,703.9 |
36.5% |
|
Other |
1,499.2 |
799.3 |
87.6% |
|
Liabilities to customers |
86,687.8 |
89,944.1 |
(3.6%) |
|
Structured Certificate of Deposits |
2,118.6 |
2,049.6 |
3.4% |
|
Mutual funds managed by PPIM |
20,278.0 |
28,717.5 |
(29.4%) |
|
including sold in the Group's network |
18,848.8 |
27,000.3 |
(30.2%) |
|
Total savings |
103,893.5 |
117,208.0 |
(11.4%) |
|
including retail |
60,833.7 |
67,201.1 |
(9.5%) |
At the end of June 2008, volume of savings of the Group's retail clients (deposits, structured certificates of deposits and mutual funds) amounted to PLN 60,833.7 million. Variation of savings volume of retail clients of PLN 6,367.4 million compared to the end of 2007 was mainly a result of negative valuation of mutual funds under management (estimated at the level of ca. PLN 4.7 billion), impacted by adverse market conditions and also negative influence of PLN appreciation on FX deposits (ca. PLN 0.9 billion).
Value of corporate deposits was also impacted by PLN appreciation, it's decrease was partially compensated by the increase in volume of sell buy back transactions volume.
The currency structure of liabilities
|
Liabilities to customers* denominated in: |
30.06.08 |
31.12.07 |
||
|
PLN mil. |
% |
PLN mil. |
% |
|
|
- PLN |
71,946.6 |
83.0% |
72,513.1 |
80.6% |
|
- Foreign currency |
14,741.2 |
17.0% |
17,431.2 |
19.4% |
|
- Value correction |
0.0 |
x |
(0.2) |
x |
|
Total |
86,687.8 |
100.0% |
89,944.1 |
100.0% |
* Including interest and amounts due in transit.
PLN prevails in the currency structure of the Group's liabilities to customers, with share in total liabilities at the end of June 2007 of 83.0%. The highest share among foreign currency liabilities were EUR - 61.5% and USD - 31.8%.
Maturity structure of liabilities
|
30.06.08 |
31.12.07 |
|||
|
PLN mil. |
% |
PLN mil. |
% |
|
|
On demand |
42,346.5 |
49.7% |
46,519.6 |
52.2% |
|
Term |
42,842.1 |
50.3% |
42,625.1 |
47.8% |
|
Total deposits |
85,188.6 |
100.0% |
89,144.7 |
100.0% |
|
Accrued interest |
211.0 |
x |
156.4 |
x |
|
Amounts due in transit |
1,288.2 |
x |
643.1 |
x |
|
Value correction |
0.0 |
x |
(0.2) |
x |
|
Total amounts due to customers |
86,687.8 |
x |
89,944.1 |
x |
Off-balance sheet items
Information on contingent assets and liabilities
(PLN million)
|
30.06.2008 |
31.12.2007 |
|
|
Contingent liabilities granted and received |
50,693.4 |
61,325.0 |
|
Liabilities granted: |
35,871.9 |
38,716.8 |
|
Financial |
31,633.8 |
34,264.6 |
|
Guarantees |
4,238.1 |
4,452.2 |
|
Liabilities received: |
14,821.5 |
22,608.2 |
|
Financial |
3,397.9 |
2,199.5 |
|
Guarantees |
11,423.6 |
20,408.7 |
|
Financial derivatives |
249,543.3 |
298,579.7 |
|
currency transactions |
76,672.6 |
109,653.5 |
|
interest rate transactions |
167,574.8 |
188,215.7 |
|
securities transactions |
5,295.9 |
710.5 |
|
Other |
21,553.5 |
17,663.0 |
|
Total off-balance sheet items |
321,790.2 |
377,567.7 |
As at 30th June 2008 the Group had the following open off-balance sheet liabilities for an amount equal to or greater than PLN 300 million*:
PLN mil.
|
Client |
Industry by PKD (Polish Classification of Business Activity) |
Endorsement, guarantee, sureties |
Open lines of credit |
Letters of credit |
Total |
|
Client 1 |
Social security |
0.0 |
1 600.0 |
0.0 |
1,600.0 |
|
Client 2 |
Manufacture and distribution of gaseous fuels |
0.0 |
736.7 |
0.0 |
736.7 |
|
Client 3 |
Publishing activities |
2.0 |
730.5 |
0.0 |
732.5 |
|
Client 4 |
Producing and processing of petroleum products |
100.0 |
624.3 |
0.0 |
724.3 |
|
Client 5 |
Insurance |
0.0 |
600.0 |
0.0 |
600.0 |
|
Client 6 |
Property service |
0.0 |
568.1 |
0.0 |
568.1 |
|
Client 7 |
Financial consulting |
0.1 |
485.5 |
1.8 |
487.4 |
|
Client 8 |
Informatics |
6.5 |
441.4 |
0.0 |
447.9 |
|
Client 9 |
Property service |
0.0 |
444.3 |
0.0 |
444.3 |
|
Client 10 |
Business and management consultancy activities |
0.0 |
399.1 |
0.0 |
399.1 |
|
Client 11 |
Construction |
207.2 |
174.9 |
0.0 |
382.1 |
|
Client 12 |
Telecommunications |
100.0 |
272.7 |
0.0 |
372.7 |
|
Client 13 |
Property service |
0.0 |
324.3 |
0.0 |
324.3 |
|
Client 14 |
Electric producing |
100.5 |
208.8 |
0.0 |
309.3 |
|
Client 15 |
Transport |
0.5 |
300.0 |
0.0 |
300.5 |
* Data do not include the guarantees of issues.
Important guarantees and sureties granted by the Group
The Group pursues a conservative policy in relation to the guarantees and sureties. Guarantees for amount equal or higher than PLN 100 million as of 30th June 2008* related to the following single customers:
(PLN mil.)
|
Client 1 |
207.2 |
|
Client 2 |
163.2 |
|
Client 3 |
139.8 |
|
Client 4 |
127.2 |
|
Client 5 |
127.0 |
|
Client 6 |
126.2 |
|
Client 7 |
115.0 |
|
Client 8 |
100.5 |
|
Client 9 |
100.0 |
|
Client 10 |
100.0 |
* Data do not include the guarantees of issues.
In the first half of 2008 the Group did not grant sureties of loans or guarantees to any single entity or subsidiary of that entity, the total value of which would have at least 10% of the Group's own funds.
The structure of the net profit of the Group
In order to assure better comparability of dynamics of the main components of the income statement, data covering the first half of 2007 are presented as "combined data (hereafter referred to as "combined data" or "combined result") of Pekao Group and Pekao285, i.e. the part of Bank BPH S.A. merged with Bank Pekao S.A. as a result of the Spin-off of Bank BPH S.A. registered on 29th November 2007". It should be emphasised, that the "combined data" were not subject to verification and/or review by external auditor and information presented below as "combined data" should be treated as indicative.
The structure of the net profit of the Group is shown in the following table:
(PLN million)
|
|
1H 2008 |
1H 2007 combined* |
|
Net profit of Bank Pekao S.A. |
1,766.5 |
1,849.4 |
|
Entities consolidated under full method |
|
|
|
Centralny Dom Maklerski Pekao S.A.** |
396.0 |
113.9 |
|
Pekao Leasing Holding S.A.*** |
19.8 |
15.1 |
|
Pekao Bank Hipoteczny S.A. (former BPH Bank Hipoteczny S.A.) |
12.6 |
15.5 |
|
Pekao Leasing Sp. z o.o. |
8.8 |
10.0 |
|
UniCredit Bank Ltd.**** |
8.7 |
(5.4) |
|
Pekao Pioneer PTE S.A. |
8.2 |
5.7 |
|
Pekao Financial Services Sp. z o.o. |
7.8 |
7.2 |
|
Pekao Faktoring Sp. z o.o. |
4.4 |
3.2 |
|
Centrum Kart S.A. |
4.1 |
1.2 |
|
Pekao Fundusz Kapitalowy Sp. z o.o. |
1.5 |
2.5 |
|
Pekao Telecentrum Sp. z o. o. (former Drukbank Sp. z o.o.) |
0.2 |
0.0 |
|
Finanse plc. (d. BPH Finance plc.) |
- |
1.0 |
|
Pekao Access Sp. z o.o. |
- |
(0.1) |
|
Entities valued under the equity method |
|
|
|
Pioneer Pekao Investment Management S.A. |
59.8 |
66.7 |
|
Pirelli Pekao Real Estate Sp. z o.o. |
4.8 |
12.0 |
|
Krajowa Izba Rozliczeniowa S.A.***** |
6.8 |
2.5 |
|
Central Poland Fund LLC |
0.0 |
0.0 |
|
Xelion. Doradcy Finansowi Sp. z o.o. |
(3.5) |
(4.2) |
|
Exclusions and consolidation adjustments ****** |
(339.2) |
(272.8) |
|
Net profit of the Group attributable to shareholders |
1,967.3 |
1,823.4 |
* The "combined data" were not subject to verification and/or review by external auditor.
** The result of the first half of 2008 includes the effect of sale of corporate brokerage and investment banking services part of the company.
*** The result of the subsidiary includes results of it's subsidiaries Pekao Leasing i Finanse S.A and Pekao Auto Finanse S.A.
**** The result of the first half of 2007 includes the result of UniCredit Bank Ltd. of the first half of 2007 and the result of Komercyjny Bank HVB Ukraina S.A. of the second quarter of 2007,
***** The Bank's share in the net profit of the subsidiary amounted to 22,96% till 29.11.2007, and 34,44% since 30.11.2007.
****** Includes transactions within the Group, including dividends from subsidiaries for the year 2007 paid in 2008 and net profit attributable to minority interest.
The results of Bank Pekao S.A.
The main items from the income statement of the Bank for the first half of 2008 and combined data for the first half of 2007 are as follows:
(PLN million)
|
1H 2008 |
1H 2007 combined* |
Change |
|
|
Net interest income** |
2,106.9 |
1,927.7 |
9.3% |
|
Non-interest income |
1,806.0 |
2,202.1 |
(18.0%) |
|
Total income |
3,912.9 |
4,129.8 |
(5.3%) |
|
Overhead costs (including depreciation) |
(1,714.5) |
(1,690.5) |
1.4% |
|
Operating income |
2,198.4 |
2,439.3 |
(9.9%) |
|
Impairment losses on loans and advances |
(94.9) |
(186.2) |
(49.0%) |
|
Pre-tax profit |
2,103.5 |
2,253.1 |
(6.6%) |
|
Net profit |
1,766.5 |
1,849.4 |
(4.5%) |
* The "combined data" were not subject to verification and/or review by external auditor.
** Including income on SWAP operations.
The combined net profit and combined total income of the Bank in the first half of 2007 includes a one-off transaction comprising the sale of shares in Commercial Union PTE with an impact on the combined total income of PLN 178,0 million and on combined net profit of PLN 144.2 million.
The income of the Bank in the first half of 2008 in comparison with combined data for the first half of 2007 was influenced by:
an increase in net interest income of PLN 179.2 million,
lower fees and commissions income - by PLN 213.5 million, mainly due to unfavorable market conditions impacting income on investment products.
At the same time operating costs were kept under control despite of the integration cost while the cost of risk has decreased substantially.
The main items of the Bank's balance sheet at the end of June 2008 in comparison with the end of December 2007 are as follows:
|
30.06.2008 |
31.12.2007 |
Change |
|
|
Total gross loans in PLN million* |
69,050.4 |
67,701.6 |
2.0% |
|
Impaired receivables to total receivables in % |
7.0 |
7.7 |
0.7 p.p. |
|
Total deposits in PLN million** |
81,066.3 |
85,658.8 |
(5.4%) |
|
Total assets in PLN million |
116,557.4 |
119,568.6 |
(2.5%) |
|
Structured Certificates of Deposits in PLN million |
2,118.6 |
2,049.6 |
3.4% |
|
Mutual funds distributed through the Bank's network in PLN million |
16,954.9 |
24,153.9 |
(29.8%) |
|
Capital adequacy ratio in % |
9.8 |
11.1 |
(1.4 p.p.) |
* The nominal value, including impaired loans classified as assets for sale.
** The nominal value.
The volume of the Bank's loans as at the end of June 2008 amounted to PLN 69,050.4 million, of which corporate loans PLN 45,951.0 million and retail loans PLN 23,099.4 million. In the first half of 2008 gross loans volumes increased by PLN 1 348.8 million (2.0%).
At the end of June 2008, savings of the Bank's clients amounted to PLN 100,139.8 million and were PLN 11,722.5 million lower than at the end of 2007.
Results of the Bank's important related entities
Centralny Dom Maklerski Pekao S.A. - CDM
In the first half of 2008, CDM made a net profit of PLN 396.0 million, compared with PLN 113.9 million in the first half of 2007. Due to the sale of CDM's corporate business (profit on sale PLN 352.4 million), the result achieved in the current period is not comparable with the profit for the first half of 2007.
Pioneer Pekao Investment Management S.A. - PPIM
The consolidated net profit of the PPIM for the first half of 2008 amounted to PLN 122.0 million and was 10.3% lower than in the first half of 2007. The Bank's share in the net profit amounted to PLN 59.8 million. The lower profitability of PPIM is attributable to adverse market conditions, leading to significant withdrawals from investment funds and a decrease in valuations of investment funds' assets, mainly due to the declines in share prices.
Pekao Leasing Sp. z o.o. - Pekao Leasing
In the first half of 2008, Pekao Leasing made a net profit of PLN 8.8 million, compared with the net profit of PLN 10.0 million in the first half of 2007. After excluding the effect of a one-off transaction carried out in the first half of 2007, the company recorded an improvement in net profit, mainly due to higher income generated thanks to growth of its lease portfolio.
Pekao Leasing Holding S.A. - Pekao Leasing Holding
The consolidated net profit of the company reached PLN 19.8 million in the first half of 2008, compared to net profit of PLN 15.1 million in the first half of 2007. The profit growth was achieved mainly due to higher income generated thanks to growth of the lease portfolio.
Pekao Bank Hipoteczny S.A.
The achieved net profit of the company reached PLN 12.6 million in the first half of 2008, compared to net profit of PLN 15.5 million in the first half of 2007.
UniCredit Bank Ltd. - UniCredit Bank
Net profit of the company amounted to PLN 8.7 million in the first half of 2008, compared with a net result of PLN -5.4 million in the first half of 2007. The result of the first half of 2007 includes the result of UniCredit Bank of the first half of 2007 and the result of Komercyjny Bank HVB Ukraina S.A. of the second quarter of 2007.
Xelion. Doradcy Finansowi Sp. z o.o.- Xelion
In the first half of 2008, the company incurred a net result of PLN -6,9 (Bank's share: PLN -3.5 million) compared with the net result of PLN -8.5 million in the first half of 2007. The result improvement was due to the fact that the company concentrated on further development of the network of financial advisers, development of activities in other regions of Poland and further development of the product offer while ensuring the highest quality of services as well as cost cutting.
Consolidated Income Statement
Results of the Group
In the first half of 2008 Bank Pekao S.A. Group is reporting net profit attributable to equity holders of PLN 1,967.3 million, i.e. PLN 143.9 million (7.9%) higher than the combined result in the first half of 2007.
The results for the first half of 2008 show a positive dynamic, despite the pressure of the difficult situation in the international financial markets and performance of Warsaw Stock Exchange. As a result, the further decrease of shares prices was accompanied by redemptions of mutual funds and substantial decrease of mutual funds assets value. Another negative factor influencing results was the slowdown in the market of mortgage loans denominated in PLN .
Factors mentioned above influenced results of the Bank as well as results of some subsidiaries.
Despite that and with continued efforts in the last phase of the integration process, the Group achieved good results. Growth of net financial result was supported by commercial activity, thanks to which the decrease of commissions related to investment products was partially compensated for by the growth in net interest income. At the same time operating costs were kept under control (despite the integration costs) and cost of risk has substantially decreased.
High efficiency of Pekao Group is confirmed by return on average equity (ROE), which in the first half of 2008 stood at 24.1%*.
The structure of the Income Statement both in the first half of 2007 and first half of 2008 was influenced by one-off transactions:
in the first half of 2007 the sale of shares in Commercial Union PTE with impact of transaction on pre-tax profit of PLN 178.0 million and on net profit of PLN 144.2 million,
in the first half of 2008 the sale of part of enterprise of CDM conducting corporate brokerage and investment banking services with impact of transaction on pre-tax profit of PLN 435.7 million and on net profit of PLN 352.4 million.
The consolidated income statement for the first half of 2008 and combined data for the first half of 2007 are presented below:
(PLN million)
|
1H 2008 |
1H 2007 combined** |
Change |
|
|
Net interest income *** |
2,298.4 |
2,076.1 |
10.7% |
|
Fee and commission income |
1,229.6 |
1,526.1 |
(19.4%) |
|
Dividend income |
5.2 |
6.5 |
(20.0%) |
|
Trading income / FX gains |
314.2 |
583.9 |
(46.2%) |
|
Net other operating income / expenses |
83.6 |
55.1 |
51.7% |
|
Gain on sale of discontinued operations |
436.2 |
0.0 |
x |
|
Total income |
4,367.2 |
4,247.7 |
2.8% |
|
Overhead costs (including depreciation) |
(1,893.6) |
(1,846.6) |
2.5% |
|
Operating income |
2,473.6 |
2,401.1 |
3.0% |
|
Impairment losses on loans and advances |
(121.8) |
(206.5) |
(41.0%) |
|
Share in net profit (loss) of the associates |
68.2 |
78.3 |
(12.9%) |
|
Pre-tax profit |
2,420.0 |
2,272.9 |
6.5% |
|
Tax charge |
(445.9) |
(444.6) |
0.3% |
|
Net profit |
1,974.1 |
1,828.3 |
8.0% |
|
Attributable to equity holders of the Company |
1,967.3 |
1,823.4 |
7.9% |
|
Attributable to minority interest |
6.8 |
4.9 |
38.8% |
** The "combined data" were not subject to verification and/or review by external auditor.
*** Including income on SWAP transactions.
* For the purpose of calculation of that ratio, result of one-off transaction i.e. gain on sale of part of the enterprise of CDM Pekao S.A. conducting corporate brokerage and investment banking services was included in the result of the first quarter of 2008, however it was not annualized.
The Group's income
In the first half of 2008, the Group's total income amounted to PLN 4,367.2 million, PLN 119.5 million (2.8%) higher than combined income in the first half of 2007.
Growth in net interest income by PLN 222.3 million (10.7%) allowed to partially compensate for the decrease in net fees and commissions income.
Fee and commission income decreased by PLN 296.5 million (19.4%) in comparison to combined income in the first half of 2007, mainly due to lower commissions on investment products. As a result of significant decline in demand, lower sales of mutual funds translated into lower up-front fees while the decrease of mutual funds assets under management additionally impacted management fees. Additionally lower activity on Warsaw Stock Exchange caused a decrease of fees and commissions related to shares turnover of retail customers.
The Group's overhead costs (including depreciation)
Total overhead costs (including depreciation) in the first half of 2008 amounted to PLN 1,893.6 million, i.e. were higher in comparison with the combined costs in the first half of 2007 only by PLN 47.0 million (2.5%), i.e. below the inflation rate.
(PLN million)
|
1H 2008 |
1H 2007 combined* |
Change |
|
|
Overhead costs (including depreciation) |
(1,893.6) |
(1,846.6) |
2.5% |
|
Personnel costs |
(949.2) |
(952.2) |
(0.3%) |
|
Non-personnel costs |
(741.2) |
(702.9) |
5.4% |
|
Depreciation |
(203.2) |
(191.5) |
6.1% |
* The "combined data" were not subject to verification and/or review by external auditor.
Overhead costs were kept under control and the increase was connected mainly with the costs of the integration and also expansion in the Ukrainian market.
In the first half of 2008, the Group's cost / income ratio amounted to 43.4%, in comparison with 43.5% in the first half of 2007.
As at the end of June 2008, the Bank had 20,396 employees, compared to 20,636 as at the end of December 2007. The Group had 22,785 employees, compared to 22,926 as at the end of December 2007.
Impairment losses on loans and advances
In the first half of 2008, impairment losses on loans and advances amounted to PLN 121.8 million and were PLN 84.7 million (41.0%) lower than the combined result for the first half of 2007, thanks to effective credit risk management and a good macroeconomics.
At the end of June 2008, the ratio of impaired receivables to total receivables amounted to 7.1% compared to 7.7% at the end of 2007. The ratio decreased due to the increased volume of total loans and a reduced volume of impaired loans.
Write-offs for revaluation of assets
(PLN million)
|
Group |
Bank Pekao S.A. |
||||
|
1H 2008 |
1H 2007* |
1H 2008 |
1H 2007* |
||
|
Total |
(121.8) |
(92.3) |
(94.9) |
(76.7) |
|
|
for loan receivables |
(137.3) |
(100.8) |
(110.3) |
(84.3) |
|
|
for off-balance sheet liabilities |
15.1 |
8.5 |
15.1 |
8.5 |
|
|
other |
0.4 |
0.0 |
0.3 |
(0.9) |
|
* Data as published for the first half of 2007.
Adjustments for provisions, deferred tax provision and assets
(PLN million)
|
Group |
Bank Pekao S.A. |
|||
|
30.06.2008 |
31.12.2007 |
30.06.2008 |
31.12.2007 |
|
|
Total provisions |
357.9 |
379.8 |
353.4 |
375.0 |
|
of which: |
||||
|
provisions for off-balance sheet liabilities |
170.6 |
186.2 |
170.6 |
186.2 |
|
provisions for liabilities to employees |
129.4 |
123.6 |
127.5 |
121.9 |
|
other provisions |
57.9 |
70.0 |
55.3 |
66.9 |
|
Provision for deferred tax |
3.7 |
0.3 |
0.0 |
0.0 |
|
Deferred tax assets |
513.4 |
419.0 |
440,2 |
349.4 |
Post balance sheet events
Sale of shares in related entity
On 4th August 2008 Bank sold in favour of the natural person 74 shares of Bankowe Doradztwo Podatkowe Ltd. with the total par value of PLN 37,370 (PLN 505 each), comprising a 74.00% stake in the Company`s share capital and representing the same number of votes at the shareholders meeting (but only 48.68% of total number of votes), classified as a long-term investment, for the price of PLN 37,370 which was the equivalent of the net book value on the balance sheet of Bank.
Interim dividend payment for the Bank
On 18th August 2008 the Management Board of Centralny Dom Maklerski Pekao Spółka Akcyjna approved a resolution to pay an interim dividend for the year 2008 in the amount of PLN 187,800 thousand. The dividend payment will take place within a period of one month from the date of publication of the information on the planned dividend payment in Monitor Sadowy i Gospodarczy (being 5th September 2008).
Agreement between UniCredit S.p.A. and Ministry of the State Treasury regarding put and call options of Bank Polska Kasa Opieki S.A. shares
Management Board of Bank Polska Kasa Opieki S.A. ("Bank") hereby informs that on 2nd September 2008 has received information that UniCredit S.p.A. and Ministry of the State Treasury ("MST") have signed the agreement regarding put and call options of Bank shares held by MST. On the basis of this agreement the MST shall have a Put Option, while UniCredit shall have a Call Option, with respect to the shares held by the MST in Bank and summing up to approximately 3.95% of Bank's share capital.
According to this agreement, in both cases of options the price will be calculated as the volume-weighted average of the official daily quotations of Bank's shares on the Warsaw Stock Exchange S.A. for a period of six months preceding the date of exercise of the option, increased by 3%.
The put option may be exercised by the MST since the date of signing of the agreement to 30th June 2009, whilst the call option may be exercised by UniCredit S.p.A. since 23rd December 2008 until 23rd December 2009.
The MST shall have the right to terminate the agreement unilaterally until 22nd December 2008.
Upon the signing of the agreement, the Privatization Agreement dated the 23rd June 1999 regarding Bank Polska Kasa Opieki S.A., the Privatization Agreement dated the 22nd October 1998 regarding Bank BPH S.A. and the Agreement regarding Bank Pekao S.A. and Bank BPH S.A. between the MST and UniCredit S.p.A. dated the 19th April 2006 shall be deemed fully completed.
Information on the Lehman Brothers
The recent default of the Lehman Brothers Group has not affected the Bank Pekao S.A. Group due to the insignificant exposure to Lehman Brothers Group entities. The Bank will keep its cautious risk approach, monitoring closely the development of the situation in the international financial markets.
Human Resources Management
Trends in Personnel Policy
The principles of the personnel policy reflect the Bank's mission and the key values of its corporate culture. They are particularly determined by the awareness that the quality of work, competences and motivation of employees are the key success factors on the path to achieving the Bank's business goals.
Consequently, in the first half of 2008 the key focus of the human resources management was:
professional development of the employees and support of continuous improvement of their skills,
retention of key personnel through the implementation of effective incentive systems,
efficient talent spotting within the organisation.
These priorities were accompanied by particular emphasis on promoting the corporate culture ethics shared across the UniCredit Group, as defined in the UniCredit Integrity Chart.
Training and Professional Development
The main objective of the Bank's training policy in 2008 is to prepare its employees for selling new financial solutions, digitalisation of processes and development of skills needed to build leadership capacity within the common organisational culture.
The activities in the first half of 2008 were focused on providing support to employees during the migration process connected with the incorporation of a part of Bank BPH's business and supporting the human resources Managers in connection with the changes.
The scope of topics covered by the training programmes embarked upon by the Bank stemmed from prior analysis of the Bank's needs, including the responsibilities of individual business divisions, employee groups, as well as competencies possessed by employees in various positions, which relied, among other things, on the results of the Periodic Employee Evaluation System implemented by the Bank.
All development programmes are carried out with the use of modern teaching methods, prepared on the basis of a needs analysis and the latest global trends. During the meetings, the participants learn more about the organisation and build relationships, which helps them to succeed in completion of their tasks.
Special group and individual activities are organised for the top management staff and the group of employees identified as "Talents". Each key manager and expert is offered individual advice regarding his or her professional development. Individual activities are also designed for such employees with a view to developing their qualifications and skills.
As part of a special, dedicated programme, members of the Bank's management staff were trained to strengthen their leadership within the organisation. Based on their experience and skills, the managers will support their teams in the achievement of business objectives and motivate the employees to increase their work commitment.
At the end of the first half of 2008, a project related to the Periodical Employee Evaluation was launched.
The Bank employees selected by their superiors in the evaluation process, take part in a training project aimed at developing and supporting their strengths and filling any identified competence gaps.
All interested employees also took part in workshops organised as a follow-up to the Employee Opinion Survey. The participants of the workshops worked on solutions aimed at increasing the level of satisfaction of the Bank's employees.
In total, there were 55.2 thousand participants who took part in all forms of training conducted in the first half of 2008. Training was offered to 16,894 employees, i.e. 81,4% of the Bank's total workforce.
Incentive and Retention Systems
The key incentive system in place at the Bank is the MBO (Management by Objectives), which has served to support the performance of tasks since 2000. The employees covered by the MBO system are tasked with individual projects, whose successful completion makes them eligible to receive a specific amount of annual bonus. The system covers mainly employees in the managerial positions and in front-office sales jobs which play a vital role in helping the Bank achieve its business targets in a given year.
In addition, in the first half of 2008 contests and sales campaigns were run for the employees of individual divisions with the aim to bolster their motivation and commitment in pursuing business targets defined individually as part of a given campaign.
The best achievers were invited to conventions organised abroad by their respective divisions and at the level of the UniCredit Group.
Another focus of the HR policy in 2008 was to foster the talented staff's affiliation with the Bank. That focus was addressed through the Loyalty Plan. The first half of 2008 saw the launch of another edition of the Loyalty Plan, whose participants were employees handpicked from across all the Bank's divisions.
Additionally, the Bank continues to operate its existing staff incentive schemes, including the Long-Term Incentive Plan for 2007-2011, which covers members of the Bank's Management Board and the remaining managerial staff, the personnel of key importance from the point of view of the implementation of the Bank's strategy, as well as employees of the Bank's subsidiaries.
Integrity Charter
As a member of the UniCredit Group, Bank Pekao S.A. applies the UniCredit Integrity Charter. Besides the pursuit of business goals and the operational integration of the Bank into the UniCredit Group, an issue of key importance is the cultural integration of a community whose members speak different languages, hold different religious beliefs and prefer different ways of life. To further that objective, all banks of the UniCredit Group have adopted the UniCredit Integrity Charter, which helps reconcile the pursuit of profit with the respect for the interests of all UniCredit's business and social partners.
The Integrity Charter pinpoints the core values underlying the relations with each of the two groups of partners and provides standards of conduct which ought to be followed in these relations. Equal treatment, respect, freedom, transparency, reciprocity, and trust - these values, universally professed and observed by all employees of the Bank and of the Group, constitute universal standards of behaviour expected to be complied with by all employees regardless of their position, thus shaping the corporate culture and enhancing the image of the organisation.
In many countries in which the Group is present (in 2007, also in Poland) the project "Justice with the Integrity Charter" was implemented. It allows those employees who believe that the manner in which they were treated was in violation of any of the values enshrined in the Integrity Charter to seek redress with the help of the Integrity Charter ombudsmen.
Relations with Trade Unions
In the first half of 2008, the Bank entered into negotiations and consultations with the trade unions mainly with respect to those areas where it was required to do so based on its internal labour-law regulations. During the discussed period, negotiations were under way over amendments to the Rules of the Company Social Benefits Fund. As part of the ongoing interaction, a meeting between trade union representatives and the Integrity Charter ombudsmen was arranged and an agreement on the content of a new intranet portal for the trade unions and the Employee Council was reached.
Other information
The position of the Management Board regarding the possibility of achieving forecasts
The Bank has not published the forecast of financial results for 2008.
Share the Bank held by the Bank's Directors
According to the Bank's knowledge, as at 30th June 2008 the members of the Bank's management and supervisory bodies held 170,239 shares of Bank Pekao S.A. with a nominal value of PLN 170,239. The table below presents the number of shares held by the Management Board Members:
|
Name and Surname |
30.06.2008 |
31.12.2007 |
Change |
|
Jan Krzysztof Bielecki |
45,000 |
10,000 |
35,000 |
|
Luigi Lovaglio |
98,036 |
65,357 |
32,679 |
|
Marian Wazynski |
27,203 |
13,089 |
14,114 |
|
Total |
170,239 |
88,446 |
81,793 |
Information regarding contracts for post termination benefits
The management contracts concluded by the Issuer with Management Board Members provide for the following compensations:
Jan Krzysztof Bielecki, President of the Management Board: 18 times the base salary for the last month of work upon lapse of the term of office without re-appointment for another term of office or revocation, prejudiced only by dismissal pursuant to Art. 52 or Art. 53 of the Labor Code or improper performance of duties, or breach of the Pekao Charter, or Management Board or Supervisory Board resolutions,
Andrzej Kopyrski, Vice President of the Management Board: 18 times the base salary for the last month of work upon lapse of the term of office without re-appointment for another term of office or revocation, prejudiced only by dismissal pursuant to Art. 52 or Art. 53 of the Labor Code, or improper performance of duties, or breach of the Pekao Charter, or Management Board or Supervisory Board resolutions,
Katarzyna Niezgoda, Vice President of the Management Board: 18 times the base salary for the last month of work upon lapse of the term of office without re-appointment for another term of office or revocation, prejudiced only by dismissal pursuant to Art. 52 or Art. 53 of the Labor Code, or improper performance of duties, or breach of the Pekao Charter, or Management Board or Supervisory Board resolutions,
Grzegorz Piwowar, Vice President of the Management Board: 18 times the base salary for the last month of work upon lapse of the term of office without re-appointment for another term of office or revocation, prejudiced only by dismissal pursuant to Art. 52 or Art. 53 of the Labor Code, or improper performance of duties, or breach of the Pekao Charter, or Management Board or Supervisory Board resolutions,
Marian Wazynski, Vice President of the Management Board: 18 times the base salary for the last month of work upon lapse of the term of office without re-appointment for another term of office or revocation, prejudiced only by dismissal pursuant to Art. 52 or Art. 53 of the Labor Code, or improper performance of duties, or breach of the Pekao Charter, or Management Board or Supervisory Board resolutions.
Average interest rates in Bank Pekao S.A. in June 2008
The average nominal interest rates for the basic types of PLN and foreign currency deposits for non-financial sector residents:
|
- PLN retail deposits |
2.5% p.a. |
|
- PLN corporate clients deposits |
4.4% p.a. |
|
- total foreign currency deposits in USD |
0.7% p.a. |
|
- total foreign currency deposits in EUR |
0.3% p.a. |
The average nominal interest rates for the PLN loans for non-financial sector residents:
|
- total retail loans |
9.6% p.a. |
|
- mortgage |
7.3% p.a. |
|
- other |
12.6% p.a. |
|
- corporate loans |
7.0% p.a. |
Number and value of titles of execution and value of collaterals
The collateral used by the Bank to hedge against risks related to its lending activities includes: bank guarantees, sureties under the Civil Code, blank promissory note, endorsement on bill, transfer of debt, mortgages, registered pledge, pledge, assignment as collateral, appropriation of assets in bank accounts, deposits.
For corporate clients, the total value of the collateral for impaired transactions as at 30th June 2008 amounted to PLN 2,659.9 million. In the first half of 2008, 170 titles of execution were issued on behalf of the Bank in the total amount of PLN 34.6 million.
For retail clients, the total value of the collateral for impaired transactions as at 30th June 2008 amounted to PLN 420.9 million. In the first half of 2008, 2,281 titles of execution were issued on behalf of the Bank in the total amount of PLN 28.9 million.
Stock option programme
On the basis of Resolution No. 6 of the Bank's Extraordinary General Meeting dated 25th July 2003 on the issue of registered bonds under an incentive programme, the Bank issued registered A and B series bonds with pre-emptive rights to take up the Bank's F series shares as well as registered C and D series bonds with pre-emptive rights to take up the Bank's G series shares.
All the pre-emptive rights to take up F series shares pursuant to the implementation of the right of priority ensuing from the A and B series bonds and all the pre-emptive rights to take up G series shares pursuant to the implementation of the right of priority ensuing from the C series bonds were executed.
The Bank acquired 69,028 registered series C bonds from Pekao Faktoring Sp. z o.o., for the purpose of redemption, and a total of 345,972 series C bonds from eligible persons, upon the request thereof for early redemption, pursuant to the implementation of the right of priority to take up the Bank's shares ensuing from the bonds, for the purpose of redemption thereof.
The issue price of G series shares amounts to PLN 123.06.
The execution of the pre-emptive rights to take up G series shares can be exercised in respect of D series bonds from 1st January 2009 to 31st December 2012.
D series bonds can be purchased from the Trustee agent by eligible persons until 30th December 2008.
The bonds that will not be sold by the Trustee agent by 30th December 2008, will be purchased on 31st December 2008 by the Bank for the purpose of redemption at the nominal value.
The Bank has also joined the UniCredit Group incentive program "Long-Term Incentive Plan 2007", based on offering the stock options and shares of UniCredito Italiano S.p.A. to the selected key managers and employees of the UniCredit Group. 61 employees of Pekao Group, including 7 members of the Management Board, are participating in this programme.
Transactions with related entities
Transactions with related entities are described in the Notes to the Interim Consolidated Financial Statements of Bank Pekao S.A. Group for the period from 1st January 2008 till 30th June 2008.
Information on the agreement with the Central Bank
Information on the loan agreement with the Central Bank for financing the central state investment is described in the Notes to the Interim Consolidated Financial Statements of Bank Pekao S.A. Group for the period from 1st January 2008 till 30th June 2008.
Accounting principles adopted in the preparation of the Interim Consolidated Financial Statements
Accounting principles adopted in the preparation of the Interim Consolidated Financial Statements are described in the Notes to the Interim Consolidated Financial Statements of Bank Pekao S.A. Group for the period from 1st January 2008 till 30th June 2008.
Representations of the Bank's Management Board
The Management Board of Bank Pekao S.A. declares to the best of its knowledge that:
the consolidated semi annual financial statements and comparative figures have been prepared in accordance with the binding accounting policies and that they reflect in a true, fair and clear manner the Bank Pekao S.A. Group financial position and its results,
the consolidated annual Report on the activities for the first half of 2008 provides the true picture of the Bank Pekao S.A. Group development, achievements and situation, including the main risks and threats.
The Management Board of Bank Pekao S.A. declares that the registered audit company performing the auditing of the consolidated annual financial statements of the Bank Pekao S.A. Group has been selected in line with the binding legal regulations. The company and the registered auditors performing auditing meet the requirements indispensable for issuing an objective and independent audit opinion concerning consolidated financial statement, in line with the relevant provisions of the Polish law.
Signatures of all Members of the Bank's Management Board
|
22/09/2008 |
Jan Krzysztof Bielecki |
President, CEO |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
|
22/09/2008 |
Luigi Lovaglio |
First Vice President, General Manager |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
|
22/09/2008 |
Paolo Iannone |
Vice President |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
|
22/09/2008 |
Andrzej Kopyrski |
Vice President |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
|
22/09/2008 |
Katarzyna Niezgoda |
Vice President |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
|
22/09/2008 |
Grzegorz Piwowar |
Vice President |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
|
22/09/2008 |
Marian Wazynski |
Vice President |
||||
|
Date |
First Name / Family Name |
Position / Function |
Signature |
|||
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