Other Information

Off-balance sheet liabilities granted

At the end of 2013, guarantees and other financial off-balance sheet liabilities granted with respect to related parties of the PKO Bank Polski SA amounted to PLN 1 699.1 million and decreased by PLN 310.2 million as compared to the end of 2012.
The largest off-balance sheet liabilities granted are related to the following entities:

• PKO Leasing SA – PLN 1 097.8 million,
• PKO Bank Polski Faktoring SA – PLN 286.5 million,
• PKO Bankowy Leasing Sp. z o.o. – PLN 269.3 million.

All above mentioned transactions with related parties were concluded on arm’s length. The details of related party transactions are presented in the financial statements of PKO Bank Polski SA for the year 2013.

At the end of 2013, guarantees and other financial off-balance sheet liabilities granted with respect to related parties of the PKO Bank Polski SA Group amounted to PLN 52.4 million and increased by PLN 50.8 million as compared to the end of 2012. The largest off-balance sheet liability relates to Centrum Elektronicznych Usług Płatniczych ‘eService’ Sp. z o.o. (PLN 50.0 million).

Reacquisition of own shares

During the period covered by this Report, PKO Bank Polski SA did not re-acquire its shares on its own account.

Significant contracts and important agreements with the central bank or supervisory authorities

In 2013, PKO Bank Polski SA disclosed in its current reports all the agreements with clients for which the total value of services arising from long-term agreements with the given client met the criteria defined in the Decree of the Minister of Finance of 19 February 2009 on current and periodical information submitted by issuers of securities and the conditions of considering as equivalent the information required by law of a non-member country (Journal of Laws No. 33, item 259).

In 2013, the Bank did not conclude any significant agreements with the central bank or with the regulators.

As at the date of the financial statements, PKO Bank Polski SA is not aware of any agreements as a result of which changes may occur in the future in the proportions of shares held by the current shareholders.
In October 2013, as a result of a planned and complex control carried out by the National Bank of Ukraine (NBU), KREDOBANK SA was required to develop and submit the ‘Agreement committing to improve the profitability of the activity of KREDOBANK SA’. The agreement is in the process of approval. The impact of changing macroeconomic conditions in Ukraine on parameters, that are the subject of arrangements with the NBU, is particularly analysed.

The other PKO Bank Polski SA Group entities did not conclude any significant agreements with the Central Bank or with the regulations.
Neither did the PKO Bank Polski SA Group entities conclude any significant agreements in 2013.

Guarantees and financial commitments

As at 31 December 2013, the total value of guarantees and loan commitments granted amounted to PLN 44 597.8 million, with financial commitments making up 76.7% of this amount. Total rate of growth of guarantees and loan commitments granted amounted to 4.0% y/y mainly as a result of an increase of loans granted to non-financial and state budget entities.

Off-balance sheet liabilities granted (in PLN million)

Loans and advances taken, guarantees and warranties agreements

In 2013, PKO Bank Polski SA did not take out any loans or advances or receive any guarantees or warranties that were not related to operating activity of PKO Bank Polski SA.
In 2013, KREDOBANK SA did not take out any loans or advances or receive any guarantees or warranties that were not related to its operating activity.

Underwriting agreements and guarantees granted to subsidiaries

As at 31 December 2013, issues of PKO Leasing SA (the Bank’s subsidiary) bonds were regulated by the Underwriting Agreement for the Organisation, Conducting and Servicing of the Bond Issuance Programme as at 10 November 2011, in accordance with the maximum value of the programme was PLN 600 million.

As at 31 December 2013, PKO Leasing SA issued bonds for a total of PLN 475 million, including bonds with a value of PLN 441 million sold on the secondary market, and bonds with a value of PLN 34 million held in the portfolio of PKO Bank Polski SA.
In 2013, PKO Bank Polski SA:

• granted a guarantee of up to PLN 100 thousand to Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o. (until 30 December 2013 a subsidiary of the Bank) to secure obligations following from the distribution agreement; the guarantee is valid until 30 September 2014,
• prolonged until 31 December 2013 the period of validity of the guarantee granted to PKO Leasing SA in respect of rental of office premises up to PLN 342 thousand,
• increased the value of the guarantee granted to Centrum Elektronicznych Usług Płatniczych eService Sp. z o.o. (until 30 December 2013 a subsidiary of the Bank) to the amount PLN 540 thousand in respect of rental of office premises and prolonged until 30 September 2016 the period of validity of the guarantee (above is effective as of 1 January 2014). 

Enforceable titles issued by the Bank

In 2013, PKO Bank Polski SA issued 50 143 banking enforceable titles for a total amount of PLN 3 668 053 497, CHF 26 268 228, USD 3 467 976 and EUR 10 670 118.

In the case of KREDOBANK SA, the Ukrainian law does not allow to issue enforceable titles as defined in the Polish Banking Law. In accordance with the Ukrainian law, bank liabilities are pursued in a court of law based on the provisions of the Code of Civil Procedure.

Debt write-offs

In 2013, decrease of impairment allowances due to derecognition of loans and advances to customers in the PKO Bank Polski SA Group amounted to PLN 1 775.8 million.

Proceedings pending before the court, arbitration tribunal or public administrative authority 

As of 31 December 2013, the total value of court proceedings against the PKO Bank Polski SA Group entities (including the Bank) amounted to PLN 342 658 thousand, of which PLN 12 134 thousand concerned court proceedings in Ukraine (as at 31 December 2012 the total value of above mentioned court proceedings amounted to PLN 404 689 thousand), while the total value of court proceedings initiated by the PKO Bank Polski SA Group entities (including the Bank) amounted to PLN 525 949 thousand, of which PLN 218 254 thousand concerned court proceedings in Ukraine, related mainly to recovery of loans granted by KREDOBANK SA (as at 31 December 2012 the total value of above mentioned court proceedings amounted to PLN 335 932 thousand).

Neither the Bank nor the other Group entities have conducted any proceedings pending before court, arbitration tribunal or public administration authority concerning liabilities or receivables, the value of which amounts to at least 10% of the own funds of PKO Bank Polski SA.

Proxies, Management Board meetings and execution of the resolutions of the General Shareholders’ Meeting

In 2013 one new proxy was appointed and no proxy was dismissed. As at 31 December 2013 there were 7 proxies of the Bank.
In 2013, the Bank’s Management Board held 58 meetings and adopted 878 resolutions.

At the meeting on 20 June 2013 the General Shareholders’ Meeting adopted 27 resolutions, which recommended undertaking specific actions, that were executed.
Major actions and decisions of the Management Board, which affected the Bank’s financial position and operations, are presented in different parts of this Directors’ Report.

Factors which will affect future financial performance of the PKO Bank Polski SA Group

In the near future, the results of the PKO Bank Polski SA Group will be affected by economic processes which will take place in Poland and in the global economy as well as by reactions of the financial markets. The interest rate policy applied by the Monetary Policy Council and by other largest central banks will also have a great impact on the future performance.

In addition, the future financial results of the PKO Bank Polski SA Group will be affected by the agreement concerning the acquisition of shares of: Nordea Bank Polska SA, Nordea Polska Towarzystwo Ubezpieczeń na Życie SA and Nordea Finance Polska SA by PKO Bank Polski SA.

The results of the PKO Bank Polski SA Group will be impacted also by the economic and political conditions in Ukraine where operate the Group entities: KREDOBANK SA and factoring and debt collection company. PKO Bank Polski SA is continuing activities to ensure the safe operation of its Entities in Ukraine in terms of current political and economy conditions, covering the strengthening of supervisory activities, including i.e. monitoring the funds transferred to those Entities by the Bank and development in the regulatory requirements of the National Bank of Ukraine. PKO Bank Polski SA constantly analysis macroeconomic risks for activity of KREDOBANK SA. 

Seasonality or cyclical nature of activities in the reporting period

PKO Bank Polski SA is a universal bank, which provides services on the territory of Poland, and thus its activities are exposed to similar fluctuations to those affecting the entire Polish economy. The activities of other companies of the PKO Bank Polski SA Group also do not show any particular seasonality or cyclical characteristics.

Results of changes in the entity’s structure, including the effects of merger, takeover or disposal of the Group entities, long-term investments, division, restructuring and discontinuation of activities

The results of changes in the entity’s structure, including the results of merger, takeover or disposal of the Group entities have been described in point 4 of this Directors’ Report.

Information on warranties on loans and advances granted by the issuer or by the issuer’s subsidiary or on a guarantee granted – cumulatively to a single entity or its subsidiary, if the total value of outstanding warranties and guaranties constitutes at least 10% of the issuer’s own funds

In 2013 PKO Bank Polski SA did not grant any warranties on loan or advance or a guarantee to a single entity or its subsidiary that would constitute at least 10% of the Bank’s own funds.

In 2013, subsidiaries of PKO Bank Polski SA did not grant any guarantees or warranties on loans or advances to a single entity or its subsidiary that would constitute at least 10% of the Bank’s own funds. 

Information on any transaction or a number of transactions concluded by the issuer or its subsidiary with related parties, if they are significant and were concluded not on arm’s length 

In 2013, PKO Bank Polski SA provided services, on arm’s length, to its related (subordinated) entities. The services comprised maintaining bank accounts, accepting deposits, granting loans and advances, issuing debt securities, granting guarantees and current foreign exchange transactions, as well as offering investment fund units, lease and factoring products, rental of terminals and payment transactions of billing services offered by the entities of the PKO Bank Polski SA Group. At the same time leased a space in building of Centrum Finansowe Puławska Sp. z o.o. to selected Companies of the Group.

A list of major transactions concluded by PKO Bank Polski SA with subordinated entities, including their indebtedness in relation to the Bank as at 31 December 2013 was presented in the financial statements of PKO Bank Polski SA for the year ended 31 December 2013.

In 2013, PKO Bank Polski SA did not conclude any material transaction with related parties not on arm’s length. At the same time, in 2013, PKO Bank Polski SA has made a capital contribution to KREDOBANK SA by a financial donation in the amount of USD 20 681 thousand (i.e. PLN 63 793 thousand according to the average NBP exchange rate as of the date of funds transfer). Above mentioned donation is treated as the other form of capitalisation of the Company and, in the statement of financial position of PKO Bank Polski SA, it increases the purchase price of a share of this Company.

In 2013 the subsidiaries of PKO Bank Polski SA did not conclude any material transaction with related parties not on arm’s length. 

Post balance sheet significant events

1. On 13 January 2014, a new company – Polski Standard Płatności Sp. z o.o. was registered with the National Court Register. The share capital of the Company amounts to PLN 2 271 thousand. All shares of the Company were acquired by PKO Bank Polski SA. The Company was established as part of the project for building a new mobile payments standard in Poland.

2. On 16 January 2014, PKO Bank Polski, carried out, through PKO Finance AB, as a part of the opened in 2008 EMTN programme, another issue of Eurobonds in the amount of EUR 500 million with 5- year maturity, with a fix coupon – 2.324%.

3. On 20 January 2014, the National Court Register registered the reduction of the share capital of CENTRUM HAFFNERA Sp. z o.o. through redemption of shares owned by the Shareholder - the City of Sopot and as of 20 January 2014 CENTRUM HAFFNERA Sp. z o.o. became a subsidiary of PKO Bank Polski SA.

4. On 5 February 2014, PKO Bank Polski SA make a capitalisation to KREDOBANK SA through a financial donation in the amount of USD 6 020 thousand (i.e. PLN 18 656 thousand at the average NBP exchange rate as at the date of funds transfer).

5. In February 2014, there was a fulfilment of the following suspensive conditions, relating to the completion of the acquisition transaction of the Nordea Group entities:

• a condition involving the uninterrupted (significantly) provision, by the entity from the Nordea Group (i.e. Nordea IT Polska Sp. z o.o.) in favour of Nordea Bank Polska SA, within the contractual period, of IT services defined in the outsourcing agreement, enabling the safe operation of Nordea Bank Polska SA prior to migration of data, customer data, services and systems of Nordea Bank Polska SA to the Bank systems,
• issuing by the PFSA a decision declaring no grounds for objections against acquisition by PKO Bank Polski SA of shares of Nordea Bank Polska Towarzystwo Ubezpieczeń na Życie SA in a number resulting in exceeding a 50% share in the share capital and in the total number of votes at the general meeting of this Company.

6. On 3 March 2013 Polish Financial Supervision Authority took the decision that there were no ground for objections against the acquisition of shares of Nordea Bank Polska SA in a number resulting in exceeding a 50% stake in the share capital and the total number of votes at the general meeting of the Entity. Obtaining the decision satisfies the last condition precedent for the closing of the Transaction set out in the Agreement. Additionally, obtaining the Nordea Bank Polska Decision satisfies the condition determined in item 24 of the tender offer for the sale of shares of Nordea Bank Polska announced by the Bank on 3 December 2013 (the “Tender Offer”). 

Subject to technical capability, the Bank will take actions aimed at settling the transaction of acquisition of shares of Nordea Bank Polska under the Tender Offer on 4 April 2014. If technical considerations prevent the settlement of this transaction on 4 April 2014, it will be settled on 9 April 2014 at the latest.

Declaration of the Management Board

The Management Board of PKO Bank Polski SA certifies that, to the best of its knowledge:

• the annual financial statements and comparative data have been prepared in accordance with binding accounting and reporting standards and present a true and fair view of financial condition and results of the PKO Bank Polski SA Group,
• the annual PKO Bank Polski SA Group Directors’ Report presents a true and fair view of the development and achievements as well as condition of the PKO Bank Polski SA Group, including a description of the basic risks and threats.

The Management Board of PKO Bank Polski SA certifies that the entity authorised to audit the financial statements and which is performing the audit of annual consolidated financial statements, has been elected in compliance with applicable laws. The entity as well as the certified auditors performing the audit fulfilled all criteria for providing unbiased and independent audit opinion in compliance with applicable laws and professional norms.