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Interim Results part 5 (1-5)

25th Sep 2008 18:28

RNS Number : 3435E

Bank Pekao SA

25 September 2008

BANK

POLSKA KASA OPIEKI

SPÓŁKA AKCYJNA

Condensed Interim Unconsolidated Financial Statements of Bank Pekao S.A.

for the period from 1st January 2008 to 30th June 2008

Warsaw, September 2008

TABLE OF CONTENTS

Income statement

BALANCE SHEET

STATEMENT OF CHANGES IN EQUITY

CASH FLOW STATEMENT

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS

1.Accounting polices

2.Interest income

3.Interest expenses

4.Fee and commission income

5.Fee and commission expense

6.Dividend income

7.Result on financial instruments valued at fair value

8.Result on investment securities

9.Other operating income and expense

10.Net provision charges for financial assets and contingent liabilities and commitments

11.Administrative costs

12.Earnings per share

13.Loans and advances due from banks

14.Financial assets held for trading

15.Derivative financial instruments

16.Other financial instruments measured at fair value through profit and loss

17.Loans and advances to customers

18.Cash flow hedge (macro hedge)

19.Investment securities

20.Non - current assets held for sale

21.Investments in subsidiaries

22.Investments in associates

23.Intangible assets

24.Tangible fixed assets

25.Investment properties

26.Amounts due to other banks

27.Financial liabilities held for trading

28.Amounts due to customers

29.Debt securities issued

30.Provisions

31.Equity

32.Contingent liabilities and insurance contracts

33.Dividend paid

34.Litigation

35.Transactions with related parties

36.Events after the balance sheet date

Condensed INTERIM UNCONSOLIDATED Financial Statements of the Bank Pekao S.A.

The financial data included in these condensed interim unconsolidated financial statements have been presented in PLN thousand.

Income statement

	Note	I Half 2008	I Half 2007

Interest income	2	3 749 088	1 967 746
Interest expense	3	(1 675 416)	(837 950)

Net interest income		2 073 672	1 129 796
Fee and commission income	4	1 334 892	1 004 291
Fee and commission expense	5	(247 575)	(117 621)

Net fee and commission income		1 087 317	886 670
Dividend income	6	337 623	243 055
Result on financial instruments at fair value	7	(8 671)	44 380
Result on investment securities	8	80 495	10 651
Foreign exchange result		265 252	136 883
Other operating income	9	115 340	51 953
Other operating expense	9	(38 083)	(28 094)

Net other operating income		77 257	23 859
Net provision charges for financial assets and contingent liabilities and commitments	10	(94 875)	(76 668)
Administrative costs	11	(1 714 595)	(1 112 462)
Operating profit		2 103 475	1 286 164
Profit before income tax		2 103 475	1 286 164
Income tax expense		(336 994)	(217 920)
Net profit		1 766 481	1 068 244

Earning per share (in PLN per share)
- basic	12	6,74	6,39
- diluted	12	6,73	6,39

BALANCE SHEET

	Note	30.06.2008	31.12.2007
ASSETS
Cash and amounts due from Central Bank		7 407 392	5 082 829
Debt securities eligible for rediscounting at Central Bank		2 618	1 108
Loans and advances due from banks	13	8 702 814	17 551 065
Financial assets held for trading	14	2 842 790	2 828 802
Derivative financial instruments	15	2 186 208	1 917 960
Other financial instruments at fair value through profit or loss	16	3 873 138	3 777 679
Loans and advances to customers	17	66 692 356	63 955 254
Hedging derivative financial instruments	18	24 312	40 672
Investment securities	19	18 681 716	17 715 886
1. Available for sale		17 925 101	17 128 996
2. Held to maturity		756 615	586 890
Non-current assets held for sale	20	137 393	514
Investments in subsidiaries	21	1 631 876	1 631 694
Investments in associates	22	56 755	56 530
Intangible assets	23	665 660	668 183
Tangible fixed assets	24	1 757 580	1 908 424
Investment properties	25	54 266	55 730
Income taxes		440 244	349 412
1. Current tax assets		-	-
2. Deferred income tax assets		440 244	349 412
Other assets		1 400 281	2 026 814
TOTAL ASSETS		116 557 399	119 568 556
LIABILITIES
Liabilities
Amounts due to the Central Bank		1 360 105	1 485 921
Amounts due to other banks	26	7 795 249	6 884 279
Financial liabilities held for trading	27	239 324	491 382
Derivative financial instruments	15	2 194 956	1 683 306
Amounts due to customers	28	86 263 706	89 160 124
Debt securities issued	29	2 136 837	2 097 070
Hedging derivative financial instruments	18	126 057	29 083
Current income tax liabilities		173 501	51 793
Provisions for deferred income tax		-	-
Provisions	30	353 422	374 998
Other liabilities		2 512 147	2 932 216
Total liabilities		103 155 304	105 190 172

Equity
Share capital	31	262 213	261 867
Other capital and reserves	31	11 373 401	12 109 917
Prior and current year profits	31	1 766 481	2 006 600
Total equity		13 402 095	14 378 384
TOTAL LIABILITIES		116 557 399	119 568 556

STATEMENT OF CHANGES IN EQUITY

For the period from 1st January 2008 to 30th June 2008 and for the period from 1st January 2007 to 30th June 2007

	Share capital	Other reserve capital, of which:							Priori and current year profit	Total equity
	Share capital	Total reserves	Share premium	General banking risk fund	other reserve capital	Revaluation reserves from financial instruments	Exchange differences from translation of foreign entities	Other	Priori and current year profit	Total equity
Equity as at 1st January 2008	261 867	12 109 917	9 063 248	1 237 850	1 855 533	(278 058)	(678)	232 022	2 006 600	14 378 384
Management options	346	43 245	42 025	-	-	-	-	1 220	-	43 591
Options exercised (share issue)	346	42 025	42 025	-	-	-	-		-	42 371
Revaluation of management share options	-	1 220	-	-	-	-	-	1 220	-	1 220
Valuation of financial instrument	-	(268 700)	-	-	-	(268 700)	-	-	-	(268 700)
Revaluation of available -for-sale investments net of deferred tax	-	(210 743)	-	-	-	(210 743)	-	-	-	(210 743)
Revaluation of hedging financial instruments net of deferred tax	-	(57 957)	-	-	-	(57 957)	-	-	-	(57 957)
Appropriation of retained earnings and current year profit	-	(510 641)	-	-	(510 641)	-	-	-	240 119	(750 760)
Dividend paid	-	(1 032 357)	-	-	(1 032 357)	-	-	-	(1 484 884)	(2 517 241)
Profit appropriation	-	521 716	-	-	521 716	-	-	-	(521 716)	-
Current year net profit	-	-	-	-	-	-	-	-	1 766481	1 766 481
Other	-	(420)	-	-	-	-	(420)	-	-	(420)
Foreign exchange differences from translation of foreign entities	-	(420)	-	-	-	-	( 420)	-	-	(420)
Equity as at 30th June 2008	262 213	11 373 401	9 105 273	1 237 850	1 344 892	(546 758)	(1 098)	233 242	1 766 481	13 402 095

	Share capital	Other reserve capital, of which:							Priori and current year profit	Total equity
	Share capital	Total reserves	Share premium	General banking risk fund	other reserve capital	Revaluation reserves from financial instruments	Exchange differences from translation of foreign entities	Other	Priori and current year profit	Total equity
Equity as at 1st January 2007	166 808	6 724 818	1 395 885	1 137 850	3 992 997	(15 141)	555	212 672	1 728 539	8 620 165
Management options	295	33 522	31 623	-	-	-	-	1 899	-	33 817
Options exercised (share issue)	295	31 623	31 623	-	-	-	-		-	31 918
Revaluation of management share options	-	1 899	-	-	-	-	-	1 899	-	1 899
Valuation of financial instrument	-	(117 830)	-	-	-	(117 830)	-	-	-	(117 830)
Revaluation of available -for-sale investments net of deferred tax	-	(117 830)	-	-	-	(117 830)	-	-	-	(117 830)
Appropriation of retained earnings and current year profit	-	224 611	-	100 000	109 611	-	-	15 000	(660 295)	(435 684)
Dividend paid	-	-	-	-	-	-	-	-	(1 503 928)	(1 503 928)
Profit appropriation	-	224 611	-	100 000	109 611	-	-	15 000	( 224 611)	-
Current year net profit	-	-	-	-	-	-	-	-	1 068 244	1 068 244
Other	-	(285)	-	-	-	-	(285)	-	-	(285)
Foreign exchange differences from translation of foreign entities	-	(285)	-	-	-	-	(285)	-	-	(285)
Equity as at 30th June 2007	167 103	6 864 836	1 427 508	1 237 850	4 102 608	(132 971)	270	229 571	1 068 244	8 100 183

CASH FLOW STATEMENT

	I Half 2008	I Half 2007
Cash flow from operating activities - indirect method
Net profit	1 766 481	1 068 244
Adjustments:	(2 911 428)	1 725 737
Amortization	183 261	151 400
(Profit) loss on foreign exchange differences	169 251	106 874
(Profit) loss on investing activities	(80 586)	(20 858)
Impairment	-	2 002
Interest and dividend	(440 509)	(631 541)
Change in loans and advances to banks	1 920 411	(125 993)
Change in financial assets as held for trading and other financial instruments at fair value	(109 447)	827 533
Change in derivative financial instruments	(268 248)	(163 697)
Change in loans and advances to customers	(2 738 612)	(997 778)
Change in investment securities available for sale	(1 141)	(3 979)
Change in deferred income tax assets	(27 791)	(3 252)
Change in other assets	528 851	(80 228)
Change in amounts due to banks	785 154	3 034 902
Change in liabilities as held for trading	(252 058)	(77 178)
Change in derivative financial instruments and other financial liability at fair value	511 650	172 096
Change in amounts due to customers	(2 896 418)	(229 813)
Change in debt securities in issue	25 614	-
Change in provisions	(21 576)	(4 905)
Change in other liabilities	(323 487)	(110 362)
Income tax paid	(240 533)	(340 657)
Current tax	364 786	221 171
Net cash flow from operating activities	(1 144 947)	2 793 981

Cash flows from investing activities
Investing activity inflows	11 044 852	23 254 617
Sale of shares investment securities	10 581 061	22 650 230
Proceeds from sale of intangible assets and tangible fixed assets	382	271
Other investing inflows	463 409	604 116
Investing activity outflows	(12 091 780)	(24 291 341)
Purchase of subordinated undertakings	(5 182)	(474 729)
Purchase of investment securities	(11 962 351)	(23 708 784)
Purchase of intangible assets and tangible fixed assets	(124 247)	(107 828)
Net cash flow used in investing activities	(1 046 928)	(1 036 724)

Cash flows from financing activities
Financing activity inflows	200 971	31 918
Issue of debt securities	158 396	-
Shares issues	42 575	31 918
Financing activity outflows	(2 612 372)	(1 503 932)
Redemption of debt securities	(95 131)	(4)
Dividends and other payments to shareholders	(2 517 241)	(1 503 928)
Net cash flow from financing activities	(2 411 401)	(1 472 014)

Total net cash flows	(4 603 276)	285 243
Net change in cash and cash equivalents	(4 603 276)	285 243
Cash and cash equivalents at the beginning of the period	16 814 198	10 577 405
Cash and cash equivalents at the end of the period	12 210 922	10 862 648

NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS

1. Accounting polices

Statement of compliance

These condensed interim unconsolidated financial statements were prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and other applicable regulations.

Basis of preparation

These condensed interim unconsolidated financial statements have been prepared in accordance with the same accounting policies as presented in the interim consolidated financial statements with the exception of capital investment disclosure rules, described below.

Accounting polices are consistent with those applied in the preparation of the Bank's financial statements for the financial year ended 31st December 2007.

Investment in subsidiaries, associates and joint ventures

Subsidiaries

Subsidiaries are the entities over which the Bank has direct or indirect control. Control is the ability to manage financial and operating policies in order to gain economic profits. Control basically is involved with larger number of votes in governing bodies. Control usually is implicated with the possession of the majority of votes in governing bodies.

Associates

Associated entities are entities over which the Bank has significant influence and are not subsidiaries or joint venture entities. The Bank usually determines significant influence by possession of 20 % to 50 % of the total number of votes in governing bodies.

Joint ventures

Join venture are entities, which are contractually agreed and in which the split of control over the activities dictates that any strategic financial and operating decisions relating to the activity require the unanimous consent of parties sharing control.

Recognition and valuation

Investments in subsidiaries, associates and joint ventures are recorded at cost of purchase less impairment if any. The carrying value is subject to tests for impairment in accordance with IAS 39. Any impairment is recognized in the profit and loss account as "Net provision charges for financial assets and contingent liabilities and commitments". Dividends are recognized in the profit and loss account when the Bank obtains legal rights to receive them.

Moreover equity investments in foreign entities represent non-monetary assets. Non-monetary assets are measured in accordance with historical cost expressed in the foreign currency and translated on the base of exchange rate from the transaction date. Investment in foreign entities purchased before IFRS adoption is calculated on the basis of balance sheet value as of the day of the transition into IFRS.

Condensed interim financial statements are presented in Polish zloty, and all amounts, unless indicated otherwise, are stated in PLN thousand.

2. Interest income

	I Half 2008	I Half 2007

Income on placements in other banks	294 033	240 423
Income on other placements on money market	85 973	14 351
Income on loans and advances to customers	2 660 418	1 281 589
Income on investment securities	516 200	365 218
Income on financial assets held for trading	78 260	18 539
Income on financial assets designated at fair value through profit and loss	114 204	47 626

Total	3 749 088	1 967 746
	I półrocze 2008	I półrocze 2007

3. Interest expenses

	I Half 2008	I Half 2007

Expense on other bank's deposits	(120 705)	(43 648)
Expense on other deposits on the money market	(142 208)	(58 547
Expense on customer's deposits	(1 228 930)	(575 702)
Expense on obtained loans	(134 440)	(134 149)
Expense due to the amortization of premium on investment securities	(22 413)	(25 904)
Expense on debt securities	(26 720)	-

Total	(1 675 416)	(837 950)

4. Fee and commission income

	I Half 2008	I Half 2007

Accounts maintenance and payment orders	506 642	310 053
Payment cards	395 508	222 846
Acquisition services	185 633	332 794
Credits and loans granted	128 571	94 135
Custody activity	31 893	15 084
Guarantees and similar operations	18 847	11 441
Securities operations	18 574	2 619
Other	49 224	15 319

Total	1 334 892	1 004 291

5. Fee and commission expense

	I Half 2008	I Half 2007

Payment cards	(200 871)	(100 047)
Securities operations	(4 385)	(2 234)
Custody activity	(2 467)	(1 382)
Acquisition services	(13 175)	(5 084)
Transfers	(11 291)	(3 529)
Accounts maintenance	(1 168)	(1 254)
Other	(14 218)	(4 091)

Total	(247 575)	(117 621)

6. Dividend income

	I Half 2008	I Half 2007
Dividend income from the issuers:
Subsidiaries	212 719	164 347
Associates	119 964	76 713
Other entitie	4 940	1 995

Total	337 623	243 055

7. Result on financial instruments valued at fair value

a) Result on assets and liabilities held for trading

	I Half 2008	I Half 2007

Derivative instruments	29 412	57 634
Debt Instruments	2 569	28 437

Total	31 981	86 071

b) Result on financial assets and financial liabilities valued at fair value through profit and loss

	I Half 2008	I Half 2007

Debt Instruments	(40 652)	(41 691)

Total	(40 652)	(41 691)

Total result on financial instruments valued at fair value (a+b)	(8 671)	44 380

8. Result on investment securities

Realized result on financial assets and liabilities other than valued at fair value through profit and loss

	I Half 2008	I Half 2007
Realized profits
Financial assets available for sale	83 877	12 242
Debt securities in issue	387	-

Total	84 264	12 242

Realized losses
Financial assets available for sale	(631)	(1 591)
Debt securities in issue	(3 138)	-

Total	(3 769)	(1 591)

Net realized profit	80 495	10 651

9. Other operating income and expense

	I Half 2008	I Half 2007
Other operating income
Rent and other revenue	23 570	12 087
Gains on sale of properties and other assets	4 530	11 297
Recovery of prescribed, written-off against provisions and bad debts	9 708	6 883
Credit insurance	7 342	7 838
Recovery of debt collection costs	5 899	2 455
Recovery of administrative costs	6 957	2 094
Releases of provisions for other assets	416	2 842
Releases of provisions for liabilities	25 200	33
Compensation, fees and penalties	357	35
Income from waved liabilities	14 354	-
Other	17 007	6 389

Total	115 340	51 953

	I Half 2008	I Half 2007
Other operating expenses
Debt recovery costs	(9 175)	(5 854)
Credit insurance	(7 424)	(6 416)
Donations	(2 300)	(2 052)
Impairment of intangible and tangible fixed assets and other assets	(1 122)	(467)
Customer complaints	(2 017)	(878)
Losses on disposal and liquidation of properties and other assets	(760)	(1 201)
Provision charges for litigation and claims	(978)	(2 155)
Compensation, fees and penalties	(157)	(97)
Debt write off's	(2)	(4)
Other	(14 148)	(8 970)

Total	(38 083)	(28 094)

10. Net provision charges for financial assets and contingent liabilities and commitments

	I Half 2008	I Half 2007
Provision charges
Loans and advances	(930 176)	(904 282)
Financial assets available for sale	(1)	-
Investments held to maturity	(26)	(17)
Investments in subsidiaries	-	(913)
Contingent liabilities and commitments	(113 235)	(108 077)

Total	(1 043 438)	(1 013 289)


Provision releases
Loans and advances	820 126	819 995
Financial assets available for sale	352	-
Investments held to maturity	36	52
Contingent liabilities and commitments	128 049	116 574

Total	948 563	936 621

Net provision	(94 875)	(76 668)

11. Administrative costs

	I Half 2008	I Half 2007

Payroll and employee benefits	(844 456)	(583 344)
including:
Wages and salaries	(717 014)	(481 594)
Insurance and other charges related with employees	(126 222)	(99 851)
Cost of share-based payments	(1 220)	(1 899)
Other administrative costs	(647 547)	(362 221)
Amortization and depreciation	(183 261)	(151 400)
Taxes and charges	(18 264)	(11 322)
Annual Bank Guarantee Fund fee	(7 907)	(4 175)
Polish Financial Supervision Authority (PFSA) fee	(13 160)	-

Total	(1 714 595)	(1 112 462)

12. Earnings per share

Basic earnings per share

Basic earnings per share are calculated by dividing net profit by the average weighted number of ordinary shares listed during a given period.

	I Half 2008	I Half 2007

Net profit	1 766 481	1 068 244
Weighted average number of ordinary shares in the period	262 147 533	167 052 213
Earnings per each share (in PLN per share)	6.74	6.39

Diluted earnings per share

Diluted earnings per share are calculated based on the respective profit of ordinary shareholders of the holding company by dividing the profit of such shareholders by the average weighted number of ordinary shares listed during a given period, adjusted for all potentially diluting ordinary shares.

There are diluting instruments in the Bank in the form of convertible bonds. For calculation purposes, it is assumed that these bonds will be converted into shares.

	I Half 2008	I Half 2007

Net profit	1 766 481	1 068 244
Weighted average number of ordinary shares in the period	262 147 533	167 052 213
Adjustments to the number of shares for the purpose of calculating the diluted earnings per share	148 976	193 423
Weighted average number of ordinary shares for the purpose of calculation of diluted earnings per share	262 296 509	167 245 636
Diluted earnings per each share (PLN per share)	6.73	6.39

13. Loans and advances due from banks

	30.06.2008	31.12.2007

Current account	1 637 261	4 251 495
Deposits and advances from other banks	4 297 418	7 753 893
Loans and advances	1 801 290	1 566 368
Unquoted securities	12 783	13 684
Repo transactions	634 943	2 564 669
Funds in transit	293 588	1 345 259
Interest	57 534	84 992
Total gross	8 734 817	17 580 360
Impairment provisions	(32 003)	(29 295)

Total net	8 702 814	17 551 065

14. Financial assets held for trading

	30.06.2008	31.12.2007

Debt securities
- issued by the State Treasury	1 975 529	1 975 575
- issued by other banks	279 566	101 376
- issued by non-financial entities	265 622	260 794
- issued by non-bank financial entities	322 073	491 057

Total	2 842 790	2 828 802

15. Derivative financial instruments

30.06.2008	Nominal values of base instruments	Fair value (negative)	Fair value (positive)
Currency transactions
Currency swaps	23 530 505	(90 788)	255 670
Currency forward contracts	17 842 653	(245 584)	196 593
Currency options	21 795 410	(150 470)	137 634
Cross Currency IRS	13 663 083	(231 548)	231 062
Interest rate transactions
Interest rate swaps (IRS)	113 472 291	(1 244 496)	1 119 329
Forward Rate Agreement (FRA)	48 211 308	(52 645)	65 807
Futures for debt securities	1 043 216	-	-
Cap/Floor	1 833 250	(11 901)	11 075
Other transactions
Securities forward contracts	1 680 264	(1 168)	1 917
Share options	3 484 984	(166 356)	167 121

Total	246 556 964	(2 194 956)	2 186 208

16. Other financial instruments measured at fair value through profit and loss

	30.06.2008	31.12.2007

Debt securities
- issued by non bank financial entities	465 669	538 986
- issued by the State Treasury	3 407 469	3 238 693

Total	3 873 138	3 777 679

Debt securities have been designated by the Bank as at fair value through profit and loss among other in order to eliminate or significantly reduce a measurement or recognition inconsistency between debt securities and derivatives economically hedging interest rate risk attributable to the debt securities.

17. Loans and advances to customers

	30.06.2008	31.12.2007

Loans	66 519 300	66 417 115
Payment cards receivables	628 185	510 444
Purchased receivables	464 527	393 896
Realized guarantees and commitments	37 171	40 366
Unquoted securities	60 082	60 993
Repo transactions	800 845	732 997
Receivables in transit	1 564 353	62 097
Interest	210 055	196 963
Total gross	70 284 518	68 414 871
Provision for the impairment of receivables	(3 592 162)	(4 459 617)

Total net	66 692 356	63 955 254

18. Cash flow hedge (macro hedge)

The hedge relationship description

The Bank through the derivative interest rate swap (IRS) transactions hedges a part of it's interest rate risk exposure arising from the volatility of the cash flows related to the variable interest Polish zloty assets (with the exception of the debt securities classified as held to maturity).

Hedged items

Cash flows arising from variable rate assets

Hedging instruments

A portfolio of IRS transactions (a short position - the Bank receives fixed flow of payments and pays a variable flow).

As at 30 June 2008 the net fair value of the hedging instruments amounted to PLN (101 745) thousand (as at 31 December 2007 PLN +11 589 thousand).

Balance sheet disclosure

The effective part of the hedging instruments valuation is recognized in revaluation equity.

Interest on hedged items and hedging instruments is recognized as interest income.

	30.06.2008	31.12.2007
Gross revaluation equity (deferral of the P&L recognition of the changes in the fair value of hedging instrument of the effective hedge)	(133 327)	(61 776)
Period in which the cash flows related to the hedged items are expected to occur.	01.07.2008 - 20.11.2017	01.01.2008 - 20.11.2017

19. Investment securities

	30.06.2008	31.12.2007

Securities available for sale	17 943 723	17 144 164
Debt securities	17 926 597	17 131 729
- issued by central banks	560 082	554 092
- issued by other banks	1 405 754	1 483 933
- issued by non bank financial entities	193 869	230 452
- issued by non financial entities	818 410	619 783
- issued by the State Treasury	14 596 356	13 834 692
- issued by local governments	352 126	408 777
Stock and shares in other entities	17 126	12 435
Securities held to maturity	756 702	586 994
- issued by central banks	277 515	394 381
- issued by other financial entities	15 095	17 277
- issued by the State Treasury	464 092	175 336
Total gross	18 700 425	17 731 158
Impairment of securities available for sale	(18 622)	(15 168)
Impairment of securities held to maturity	(87)	(104)

Total net	18 681 716	17 715 886

20. Non - current assets held for sale

In accordance with IFRS5 "Non-current Assets Held for Sale and Discontinued Operations", the Bank classified fixed assets and assets included in the disposal group, which meet the criteria of classification held for sale, in the separate balance sheet item.

As of June 2008 these include a portfolio of receivables, real estates and the other fixed assets.

The receivables will be sold to a securitisation fund. The portfolio includes corporate and SME loans. The Bank expected that the transaction will be closed by the end of 2008, after obtaining a binding offer from investors.

Real estate held for sale includes property located in Towarowa Street in Warsaw, on which the preliminary purchase contract was executed with Bank BPH S.A. The realization of the sale will occur after meeting all the necessary conditions for the contract. The Bank expected that the transaction will be closed by the end of 2008.

Moreover, certain real properties and the other fixed assets owned by the Bank were classified as held for sale.

Non-current assets held for sale:

	30.06.2008	31.12.2007
Receivables from customers	41 869	-
Properties	95 524	514

Total	137 393	514

Changes during the first half of 2008

	Property	Receivables from customers
Opening balance	514	-
Increase:	96 128	41 869
Transfer from investment properties	915	-
Transfer from tangible assets	95 213	-
Transfer from loans and advances to customers	-	41 869
Decrease:	(1 118)	-
Asset disposal	(1 118)	-
Closing balance	95 524	41 869

The disposals of properties during the first half of 2008 were settled as follows:

Income from sale	534
Book value of sold net assets (including costs of sales)	1 118

Profit / Loss on sale	(584)

Changes in value of 2007

	Property	Shares
Opening balance	8 784	-
Increase:	4 134	820
Transfer from investment properties	-	-
Transfer from tangible assets	2 639	-
Transfer from investments in subordinated undertakings	-	820
Foreign exchange differences	11	-
Other changes	1 484	-
Decrease:	(12 404)	(820)
Disposals	(12 194)	(820)
Other changes	(210)	-
Closing balance	514	-

During 2007 the Bank disposed of 55.25% of shares of it's subsidiary Pekao Access Spolka z o.o.

The disposals were settled as follows:

	Property	Shares	Total
Income from sale	39 453	820	40 273
Book value of sold net assets (including costs of sales)	12 195	820	13 015
Profit / Loss on sale	27 258	-	27 258

21. Investments in subsidiaries

	30.06.2008	31.12.2007

Banks	891 038	891 037
Other financial entities	700 549	700 550
Non - financial entities	40 289	40 107

Total	1 631 876	1 631 694

22. Investments in associates

	30.06.2008	31.12.2007
Banks		-	-
Other financial entities		47 860	42 860
Non - financial entities		8 895	13 670

Total		56 755	56 530

23. Intangible assets

	30.06.2008	31.12.2007
a)intangible assets. including:		613 985	616 508
- development costs		7 907	14 428
- licenses		398 782	419 509
- items unduly the expenses on intangible assets and prepayments on intangible assets		200 015	177 819
- other		7 281	4 752
b) goodwill		51 675	51 675

Total		665 660	668 183

Goodwill of PLN 51 675 thousand - represents goodwill which has been transferred to Pekao on integration with Bank BPH S.A.

This represents goodwill arising on Bank BPH S.A.'s acquisition of Pierwszy Komercyjny Bank S.A. "PKBL" w Lublinie and relates to those branches of the former PKBL which have been transferred to the Bank in effect of the Integration of the Banks.

24. Tangible fixed assets

	30.06.2008	31.12.2007

Property, plant and equipment :
a) fixed assets, including:	1 734 730	1 862 708
Land and buildings	1 336 782	1 462 525
Machinery and equipment	345 101	345 157
Means of transport	27 760	29 166
Other property. plant and equipment	25 087	25 860
b) Capital work in progress and prepayments for capital work in progress	22 850	45 716

Total	1 757 580	1 908 424

25. Investment properties

	30.06.2008	31.12.2007

Land	7 627	8 088
Buildings	46 639	47 642

Total	54 266	55 730

26. Amounts due to other banks

	30.06.2008	31.12.2007

Current accounts	2 742 281	1 168 399
Bank deposits and other liabilities	2 256 944	3 299 635
Loans and advances	754 367	820 951
Due in transit	704 861	495 952
Repo transactions	1 327 228	1 083 127
Interest accrued	9 568	16 215

Total	7 795 249	6 884 279

27. Financial liabilities held for trading

	30.06.2008	31.12.2007

Short position in securities	239 324	491 382

Total	239 324	491 382

28. Amounts due to customers

	30.06.2008	31.12.2007

Amounts due to corporate customers	37 534 803	42 275 767
Funds at current accounts and overnight deposits	19 939 607	21 956 454
Time credits, deposits and other liabilities	16 723 064	19 622 995
Due in transit	793 787	636 414
Interest accrued	78 345	59 904
Amounts due to budget entities	6 709 728	8 465 130
Funds at current accounts and overnight deposits	4 613 031	6 260 322
Time deposits and other liabilities	2 087 392	2 187 383
Due in transit	-	6 713
Interest accrued	9 305	10 712
Amounts due to individuals	38 319 618	35 712 058
Funds at current accounts and overnight deposits	17 513 170	18 061 507
Time deposits and other liabilities	20 190 052	17 569 942
Due in transit	494 407	2
Interest accrued	121 989	80 607
Repo transactions	3 699 557	2 707 169
Time transactions	3 691 651	2 703 862
Interest accrued	7 906	3 307

Total	86 263 706	89 160 124

29. Debt securities issued

	30.06.2008	31.12.2007

Bonds convertible into shares	31 850	31 978
Certificates of deposit	2 086 778	2 049 587
Interest accrued	18 209	15 505

Total	2 136 837	2 097 070

The Bank never has defaulted on repayment of principal or interest or redemption of its own securities.

30. Provisions

I Half 2008	Provision for litigation and claims	Provision for retirement benefits	Provision for undrawn credit facilities and guarantees issued	Other provision	Total
Balance as at 1st January 2008	53 971	113 511	186 161	21 355	374 998
Provision charges	978	3 771	113 235	1 905	119 889
Provision utilization	(6 124)	-	-	-	(6 124)
Provision releases	(4 588)	-	(128 049)	-	(132 637)
Foreign exchange differences	(199)	-	1 485	-	1 286
Other changes	(1 767)	-	(2 223)	-	(3 990)

Balance as at 30th June 2008	42 271	117 282	170 609	23 260	353 422

2007	Provision for litigation and claims	Provision for retirement benefits	Provision for undrawn credit facilities and guarantees issued	Other provisions	Total
Balance as at 1st January 2007	40 399	64 211	112 591	3 811	221 012
Merger of "Pekao 285"	20 287	25 983	52 419	-	98 689
Provision charges	2 797	23 317	240 472	17 544	284 130
Provision utilization	(2 793)	-	-	-	(2 793)
Provision releases	(8 032)	-	(221 403)	-	(229 435)
Foreign exchange differences	1 731	-	2 082	-	3 813
Other changes	(418)	-	-	-	(418)

Balance as at 31st December 2007	53 971	113 511	186 161	21 355	374 998

31. Equity

	30.06.2008	31.12.2007

Share capital	262 213	261 867
Supplementary capital	9 294 580	9 252 555
- Share premium	9 105 273	9 063 248
- Other	189 307	189 307
Revaluation reserve	(547 856)	(278 736)
- Revaluation of the portfolio of financial assets available for sale	(541 018)	(280 829)
- Deferred tax	102 255	52 810
- Revaluation of the portfolio of hedging instruments	(133 327)	(61 776)
- Deferred tax	25 332	11 737
- Other	(1 098)	(678)
General banking risk fund	1 237 850	1 237 850
Brokerage activity fund	15 000	15 000
Other reserve capital	1 344 892	1 855 533
Bonds convertible on shares -capital item	28 935	27 715
Prior year profit (loss)	-	-
Profit for the year	1 766 481	2 006 600

Total

13 402 095

14 378 384

32. Contingent liabilities and insurance contracts

Financial liabilities granted

	30.06.2008	31.12.2007

Financial liabilities granted:	31 804 402	34 314 599
- towards financial entities	1 748 730	2 726 872
- towards non-financial entities	29 100 453	29 315 970
- towards the budget	955 219	2 271 757
Including: granted irrevocable contingent liabilities and commitments	30 886 413	33 470 402

Guarantees liabilities granted

	30.06.2008	31.12.2007

1) Liabilities granted towards financial entities:	225 889	267 553
- guarantees	221 586	245 265
- confirmed export letters of credit	4 303	22 288
2) Liabilities granted towards non-financial entities:	3 882 268	3 871 799
- guarantees	3 882 261	3 871 752
- sureties	7	47
3) Liabilities granted towards the budget:	20 318	193 884
- guarantees	20 318	193 884

33. Dividend paid

Dividends and other distribution to shareholders are recorded directly in equity. A liability for dividends payment is not recognized until the Bank has an obligation to pay dividends, which is not until they are approved.

During the ordinary Shareholders Meeting of Bank Pekao S.A. on 23rd April 2008 a resolution was made to pay out a dividends for the year ended as at 31st December 2007 in the amount of PLN 9.60 per share, what gives a total amount of dividend of PLN 2 517 241 thousand.

In determining the 2007 dividend amount the Bank took into account the number of shares eligible - after the merger of Bank Pekao S.A. with the separated part of Bank BPH S.A. hereinafter called as "Pekao 285" - for dividend paid out starting from 1 January 2008. As such, the amount of dividend payment was assessed in consideration of the combined results generated in 2007 by both Bank Pekao S.A. and Pekao 285 operating under the structure of Bank BPH until the spin off.

The ex-dividend date was 15th May 2008 and the dividend was paid on 3rd June 2008. All the Bank's shares are ordinary shares.

34. Litigation

As at 30 June 2008 the number of the legal proceedings in courts appropriate bodies of concerning the liabilities of the Bank was 471 the total value of them was PLN 758 298 thousand, (as at 31 December 2007 there were 715 court proceedings amounting on PLN 777 189 thousand).

As at 30 June 2008 estimated provisions of PLN 42 271 thousand have been established where legal council estimates it is probable that financial settlement will be necessary (PLN 53 971 thousand at 31 December 2007).

As regards all other significant proceedings in progress against the Bank, the risk of cash outflow is remote.

35. Transactions with related parties

Transactions with related entities as at 30.06.2008:

Entity name	Dues from loans and advances	Securities	Financial derivatives contracts	Other dues from	Dues to loans and advances	Financial derivatives contracts	Other dues to
Group parent company
UniCredito Italiano S.p.A.	284 294	-	-		56 595		945
Entities of UniCredit Group's excluding entities of Pekao S.A. Group	454 877	-	188 477	22 272	1 793 381	122 570	46
Subsidiaries
UniCredit Bank Ltd.	1 556 525	-	-	-	4 853	-	828
Pekao Leasing Sp. z o.o.	884 194	-	73	-	836		18 166
Pekao Faktoring Sp. z o.o.	434 590		-	-	34 697	-	1 154
Centralny Dom Maklerski S.A.	-	-	-	-	1 070 798	-	441
Pekao Fundusz Kapitałowy Sp. z o.o.	-	-	-	-	66 511	-	-
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A.	-	-	-	198	9 503	-	-
Pekao Telecentrum Sp. z o.o. (ex. Drukbank Sp. z o.o.)	-	-	-	-	8 655	-	-
Centrum Kart S.A.	-	-	-	483	22 679	-	6 853
Pekao Financial Services Sp. z o.o.	-	-	-	-	8 201	-	3
Pekao Bank Hipoteczny S.A. (ex. BPH Bank Hipoteczny S.A	207 399	210 243	2 492	-	8 192	35 434	-
Pekao Leasing Holding S.A. (ex. BPH PBK Leasing S.A.)	212 413	129 410	259	-	2 890	259	7 544
Property Sp. z o.o. (in liquidation)	-	-	-	-	3 327	-	-
Final Holding Sp. z o.o.	-	-	-	-	143	-	-
BPH Real Estate S.A.	-	-	-	-	2 185	-	-
Centrum Usług Księgowych Sp. z o.o	-	-	-	-	60	-	-
Centrum Bankowości Bezpośredniej Sp.z o.o.	-	-	-	-	3 590	-	-
Associates		-
Pirelli Pekao Real Estate Sp. z o.o.	-	-	-	-	63 379	-	-
Xelion. Doradcy Finansowi Sp. z o.o.	-	-	-	-	6 852	-	-
Pioneer Pekao Investment Management S.A.	-	-	-	-	220 167	-	-
Krajowa Izba Rozliczeniowa S.A.	-	-	-	-	1 685	-	-
Bankowe Doradztwo Podatkowe Sp. z o.o.	-	-	-	-	136	-	-
Key managing Staff of the Bank or it's Parent Company	17 742	-	-	-	4 600	-	-
Razem	4 052 034	339 653	191 301	22 953	3 393 915	158 263	35 980

Transactions with related entities as at 31.12.2007:

Entity name	Dues from loans and advances	Securities		Financial derivatives contracts			Other dues from	Dues to loans and advances	Financial derivatives contracts	Other dues to
Group parent company
UniCredito Italiano S.p.A.	1 589 380	-		23 985			-	592 901	18 541	13 754
Entities of UniCredito Italiano Group's excluding entities of Pekao S.A. Group	2 360 425	-		397 440			283 162	2 081 909	83 316	637 161
Subsidiaries
UniCredit Bank Ltd. (ex. Bank Pekao (Ukraina) Ltd.)	881 099	-		-			149	1 204	-	224
Pekao Leasing Sp. z o.o.	884 569	-		77			736	88	122	15 781
Pekao Faktoring Sp. z o.o.	505 961	-		-			-	2 489	-	-
Centralny Dom Maklerski S.A.	-	-		-			26 804	803 495	-	3 928
Pekao Fundusz Kapitałowy Sp. z o.o.	-	-		-			-	64 966	-	-
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A.	-	-		-			175	14 578	-	-
Drukbank Sp. z o.o.	-	-		-			-	8 462	-	-
Centrum Kart S.A.	-	-		-			-	22 289	-	7 458
Pekao Financial Services Sp. z o.o.	-	-		-			-	9 484	-	-
BPH Bank Hipoteczny S.A.	183 835	211 664		746			-	10 939	28 386	-
BPH PBK Leasing S.A.	247 327	107 733		-			-	2 912	-	8 537
PBK Property Sp. z o.o.	-	-		-			-	3 112	-	-
Final Holding Sp. z o.o.	-	-		-			-	189	-	-
BPH Real Estate S.A.	-	-		-			-	38	-	-
Centrum Usług Księgowych Sp. z o.o.	-	-		-			-	32	-	-
Associates
Pirelli Pekao Real Estate Sp. z o.o.	-	-		-			-	89 157	-	-
Xelion. Doradcy Finansowi Sp. z o.o.	-	-		-			-	3 047	-	-
Pioneer Pekao Investment Management S.A.	-	-		-			-	214 999	-	-
Krajowa Izba Rozliczeniowa S.A.	-	-		-			-	26 162	-	-
Bankowe Doradztwo Podatkowe Sp. z o.o.	-	-		-			-	53	-	-
Key managing Staff of the Bank or it's Parent Company	12 376	-		-			-	10 415	-	-
Total	6 664 972	319 397		422 248			311 026	3 962 921	130 365	686 843
Income and expenses from transactions with related entities in the first half of 2008
Entity name			Interest income		Interest expense		Fee and commission income	Fee and commission expense	Other income	Other expense
Group parent company			7 651		(161)		3 916	(826)	1 192	(7 800)
Entities of UniCredit Group's excluding entities of Pekao S.A. Group's			32 038		(47 512)		165 834	(624)	10 698	(39 654)
Entities of Pekao S.A. Group's
Subsidiaries
UniCredit Bank Ltd.			25 447		(30)		-	(3)	-	-
Centralny Dom Maklerski Pekao S.A.			-		(33 653)		1 322	(16)	1 606	(2 449)
Pekao Leasing Sp. z o.o.			25 912		(568)		90	-	352	(77)
Pekao Faktoring Sp. z o.o.			11 631		(4)		430	(1)	27	-
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A.			-		(308)		1 833	-	-	-
Pekao Fundusz Kapitałowy Sp. z o.o.			-		(1 836)		1	-	7	-
Centrum Kart S.A.			-		(685)		9	-	587	(22 839)
Pekao Telecentrum Sp. z o.o. (ex. Drukbank Sp. z o.o.)			-		(234)		1	-	-	-
Pekao Financial Services Sp. z o.o.			-		(256)		4	(14)	-	-
BPH Bank Hipoteczny S.A.			9 019		(148)		45	-	109	(6 767)
Pekao Leasing Holding S.A. (ex. BPH PBK Leasing S.A.)			-		(3)		-	-	-	-
Pekao Leasing i Finanse S.A. (ex. BPH Leasing S.A.)			5 450		(80)		110	-	1 121	(106)
Pekao Auto Finanse S.A. (ex. BPH Auto Finanse S.A.)			3 933		(350)		106	-	15	(90)
Centrum Bankowości Bezpośredniej Sp. z o.o.			-		(39)		1	-	945	(52)
Centrum Usług Księgowych Sp. z o.o.			-		-		-	-	1	-
Metropolis Sp. z o.o.			-		-		-	-	23	-
Property Sp. z o.o. (in liquidation)			-		(48)		-	-	-	-
BPH Real Estate S.A.			-		(34)		1	-	-	-
Final Holding Sp. z o.o.			-		-		1	-	-	-


Income and expenses from transactions with related entities in the first half of 2008
Entity name			Interest income			Interest expense	Fee and commission income	Fee and commission expense	Other income	Other expense
Entities of Pekao S.A. Group's
Associates
Pioneer Pekao Investment Management S.A.			-			(6 259)	380	-	-	-
Xelion. Doradcy Finansowi Sp. z o.o.			7			(54)	16	(44)	54	-
Krajowa Izba Rozliczeniowa S.A.			-			(560)	4	-	-	(3 536)
Pirelli Pekao Real Estate Sp. z o.o			-			(2 354)	10	-	2	(197)
Bankowe Doradztwo Podatkowe Sp. z o.o.			-			(1)	-	-	17	-
Total entities of Pekao S.A. Group's			81 399			(47 504)	4 364	(78)	4 866	(36 113)
Key managing staff of the Bank or it's Parent Company			549			(174)	5	-	-	(2)

Total related entities			121 637			(95 351)	174 119	(1 528)	16 756	(83 569)

Income and expenses from transactions with related entities in the first half of 2007
Entity name	Interest income	Interest expense	Fee and commission income	Fee and commission expense	Other income	Other expense
Group parent company	6 040	(6)	215	(678)	16	(7 205)
Entities of UniCredit Group's excluding entities of Pekao S.A. Group's	21 058	(6 539)	299 091	(2 625)	34 216	(3 249)

Entities of Pekao S.A. Group's
Subsidiaries
UniCredit Bank Ltd.	2 744	(16)	408	(352)	-	-
Komercyjny Bank HVB Bank Ukraina S.A.	-	-	-	(2)	-	-
Centralny Dom Maklerski Pekao S.A.	1	(23 304)	1 875	(51)	1 802	(49)
Pekao Leasing Sp. z o.o.	20 169	(359)	77	-	169	(46)
Pekao Faktoring Sp. z o.o.	5 788	(5)	438	(1)	27	-
Pekao Fundusz Kapitałowy Sp. z o.o.	-	(836)	2	-	7	-
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A.	-	(219)	1 445	-	27	-
Centrum Kart S.A.	-	(453)	13	-	599	(19 592)
Drukbank Sp. z o.o.	-	(98)	1	-	-	-
Pekao Financial Services Sp. z o.o.	-	(152)	4	(19)	-	-
Pekao Access Sp. z o.o.	-	(1)	2	-	-	-
Associates
Pioneer Pekao Investment Management S.A.	-	(2 601)	607	-	-	-
Xelion. Doradcy Finansowi Sp. z o.o.	-	(247)	16	(127)	58	-
Krajowa Izba Rozliczeniowa S.A.	-	(34)	3	-	-	(2 509)
Pirelli Pekao Real Estate Sp. z o.o	-	(1 644)	26	(5)	3	(579)
Total entities of Pekao S.A. Group's	28 702	(29 969)	4 917	(557)	2 692	(22 775)
Key managing staff of the Bank or it's Parent Company	174	(39)	-	-	-	-
Other related entities	-	-	2	-	-	-
Total related entities	55 974	(36 553)	304 225	(3 860)	36 924	(33 229)

The off-balance sheet exposure related to: financing of related entities as at 30th June 2008 amounted to PLN 1 354 048 thousand (as at 31st December 2007 PLN 1 114 090 thousand); related to guarantying as at 30th June 2008 amounted to 27 267 thousand (as at 31st December 2007 PLN 156 691 thousand); credit cards limits towards related entities as at 30th June 2008 amounted to PLN 10 thousand (as at 31st December 2007 PLN 72 thousand).

36. Events after the balance sheet date

Sale of shares in related entity

On 4th August 2008 the Bank sold in favour of the natural person seventy four shares of Bankowe Doradztwo Podatkowe Ltd. with the total par value of PLN 37 370, comprising a 74.00% stake in the Company's share capital and representing the same number of votes at the shareholders meeting (but only 48.65% of total number of votes), for the price of PLN 37 370 which was the equivalent of the net book value on the balance sheet of Bank.

Agreement regarding put and call options of Bank shares

On 2nd September 2008 the Bank has received information that UniCredit S.p.A. and Ministry of the State Treasury ("MST") have signed 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 23 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.

Interim dividend payment for the Bank

On 18 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 Sądowy i Gospodarczy (being 5 September 2008).

Signatures of all members of the 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 of the Management Board, GM
Date	First Name/Family Name	Position/Function	Signature
22.09.2008	Paolo Iannone	Vice President of the Management Board
Date	First Name/Family Name	Position/Function	Signature
22.09.2008	Andrzej Kopyrski	Vice President of the Management Board
Date	First Name/Family Name	Position/Function	Signature
22.09.2008	Katarzyna Niezgoda	Vice President of the Management Board
Date	First Name/Family Name	Position/Function	Signature
22.09.2008	Grzegorz Piwowar	Vice President of the Management Board
Date	First Name/Family Name	Position/Function	Signature
22.09.2008	Marian Ważynski	Vice President of the Management Board
Date	First Name/Family Name	Position/Function	Signature

This information is provided by RNS

The company news service from the London Stock Exchange

END

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