2017 Financial results of Bank Pekao S.A. Record 4th quarter and acceleration of growth following ownership changes. Warsaw, 27th of February 2018

Transcription

1 2017 Financial results of Bank Pekao S.A. Record 4th quarter and acceleration of growth following ownership changes Warsaw, 27th of February 2018

2 Key achievements in 4Q17 and FY2017 Summary financial results for 2017 Detailed financial results Business development 2018 Outlook 1

3 Summary Financial results Business development 2018 Outlook Key achievements in 4Q17 and FY2017 Record quarter and acceleration of growth Net profit 1,2 B 1, Net profit 1,054m: Best quarterly profit on record for Bank Pekao 0,8 Average net profit (per quarter) 2 Operating income Over 4% growth in the 4Q17, supported by net fee and commission income generation 0, ,4 Lending 3 Record new sales volumes in the key retail products volumes 0,2 4 Capital position Strong capital position supported by a diversified capital structure that meets dividend distribution requirements of up to 100% of Bank s unconsolidated net profit 0, The gain on remeasurement to fair value of previously held shares of PPIM & Xelion

4 Summary Financial results Business development 2018 Outlook Key achievements in 4Q17 and FY2017 Acceleration in all strategic areas Vision for 2020: Pekao to be the leader of profitability focused on relationships and efficiency due to its scale Key achievements in Leader in smart growth Better profitability supported by expansion of core income in 2017 Record sale of cash loans (8.8B) and mortgages (9.1B) in 2017 Acceleration of lending volumes in corporate banking in 2H Expert in efficiency and quality Operating costs maintained in line with inflation despite one-off costs Growth in number of mobile banking active users +40% New simplified product offering in retail banking 3 Integrated risk management expert Stable and high quality asset base of Pekao amid normalisation of cost of risk in the sector Active loan portfolio management Improvement of the NPL ratio (5.4%) with high coverage ratio (74.4%) 4 Employer of the best talent Top Employer 2017 award Strengthening competences in key areas of the Bank Talent acquisition from recognised global financial institutions 3 Key goals 2020: C/I <40% ROE: 14% Net profit >3b PLN

5 Summary Financial results Business development 2018 Outlook Key achievements in 4Q17 and FY2017 Record 4Q17 net profit Record 4Q17 net profit Net profit (m PLN) Strong rebound in core income generation Core operating income (m PLN) Recovery in net fee and commission income Net fee and commission income (m PLN) +4.3% % % Q 17 2Q 17 3Q 17 4Q 17 1Q 17 2Q 17 3Q 17 4Q 17 1Q 17 2Q 17 3Q 17 4Q 17 4 The gain on remeasurement to fair value of previously held shares of PPIM & Xelion

6 Summary Financial results Business development 2018 Outlook Key achievements in 4Q17 and FY2017 The most important results in our business lines Key retail loans Corporate loans Investment products New sales of key retail loans (m PLN) Corporate loan volumes (B PLN) Net sale of mutual funds and SCD (m PLN) +9% % 59,3 x , Annual growth of sales volumes Consumer loans +23% Mortgages +13% 56,2 55,9 Annual growth of volumes Dynamic growth in SME Corporate sector growth trajectory maintained 295 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 Mar 17 Jun 17 Sep 17 Dec 17 1Q 17 2Q 17 3Q 17 4Q 17 5

7 Key achievements in 4Q17 and FY2017 Summary financial results for 2017 Detailed financial results Business development 2018 Outlook 6

8 Summary Financial results Business Development Outlook 2018 Improvement in all financial KPIs Profitability 2017 ΔY/Y Net profit mln 8.6% RoE 11.0%/9.2% pts NIM 2.78% 1 bps Growth levers Growth in profit from core activity supported by the acquisition of PPIM Higher profitability coupled with stable equity position Growth in profitable segments and lower costs of deposit base Efficiency and risk C/I 44.4% (0.9 pts) 2 Cost dynamic at inflation level with a significant acceleration of income CoR 44bps (1 bps) Lower cost of risk together with an excellent quality of the loan portfolio Business development Key retail loans 57 B 14.4% Retail deposits 76 B 7.6% New key retail loans 18 B 23.1% Consistent growth of lending volumes in PLN mortgage and cash loan products Larger deposit base combined with lower cost of deposit funding Record sales volumes thanks to new acquisition tools 7 1) excluding the gain on re-measurement to fair value of previously held shares of PPIM & Xelion 2) excluding impact of VISA share sale and NPL sale

9 Key achievements in 4Q17 and FY2017 Summary financial results for 2017 Detailed financial results Business development 2018 Outlook 8

10 Summary Financial results Business Development Outlook 2018 Net profit: Improvement despite regulatory burdens Net profit growth (annual and quarterly basis) Comment m PLN % % +7.5% % Net profit growth +19.4% q/q in 4Q17 supported by the disposal of the NPL portfolio Better profitability despite higher banking tax cost in 2017 relative to m net profit resulting from the acquisition of the controlling stake in Pioneer Pekao IM and Xelion Q 16 3Q 17 4Q 17 PPIM & Xelion NPL Value for investors Net profit growth of +8.6% y/y to 2.5b on a nominal basis Improvement in ROE to 11.0%, achieved with TCR of 17.1% and T1 of 16.1% 9 1) change excluding impact of the PPIM and Xelion transaction: 414 mln PLN and NPL portfolio sale 108 mln PLN

11 Summary Financial results Business Development Outlook 2018 Consistent income growth with conservative cost management m PLN Gross operating profit m PLN Operating income +5.7% % +3.5% % % % Q 16 3Q 17 4Q Q 16 3Q 17 4Q 17 Operating costs 2017 gross operating profit at PLN 4 087m, +5.7% y/y on comparable basis, thanks to income growth by +3.9% y/y and consistent improvement in profitability overtime m PLN % +7.6% C/I ratio at 44.4% in 2017, improvement by 0,9 pts excluding impact of VISA transaction and NPL sale % change on comparable basis (excluding impact of PLN 263 mln VISA transaction and PLN 142 mln NPL sale in 2016 as well as excluding impact of PLN 143 mln NPL sale in 2017) Incomparable items (VISA, NPL) Q 16 3Q 17 4Q 17

12 Summary Financial results Business Development Outlook 2018 Growth in core income by 4.3% in 4Q17 Operating income Comment m PLN +3.9% % +3.5% % A strong increase in income from core operations by 4.3% q/q, reflects operating income dynamic for the year A clear improvement in income in 4Q17 strengthened by the highest net interest income in 4 years and a significant rebound in net fee and commission income Growth of operating income in 2017, +3.9% y/y on comparable terms Q 16 3Q 17 4Q 17 Core income Other Incomparable items (VISA, NPL) Change on comparable basis (excluding impact of PLN 263 mln VISA transaction and 1) - dynamika PLN 150 porównywalna mln PLN sale (z wyłączeniem in 2016 and wpływu excluding transakcji impact VISA of PLN -263 mln 143 zł mln i sprzedaży NPL sale portfela in 2017) NPL -150 mln zł w 2016 r. oraz z wyłączeniem sprzedaży -143 mln zł portfela NPL w 2017 r.) 11

13 Summary Financial results Business Development Outlook 2018 Further expansion of net interest margin coupled with volume growth Interest income Comment m PLN +4.8% +7.0% +3.3% Q 16 3Q 17 4Q 17 Net interest margin in the upward trajectory thanks to continued shift in asset mix into products with higher profitability potential and lower cost of deposit base +1bps Interest margin +6bps +1bps Growth in interest income fully offsets impact of the dividend payment and the maturity of high margin bonds in the banks asset portfolio 2,77% 2,78% 2,74% 2,79% 2,80% Q 16 3Q 17 4Q 17

14 Summary Financial results Business Development Outlook 2018 Targeted loan growth in profitable segments m PLN m PLN Retail loans +14.4% +3.3% Dec16 Sep 17 Dec 17 Key retail loans Other retail loans Corporate loans % +2.2% Comment Sound growth in key retail loans +14.4% y/y with a very good dynamic in the fourth quarter Record sales dynamic in mortgage and consumer loan products Corporate loans +7,1% y/y with further acceleration in fourth quarter to +2.2% reflecting pick-up in investment activity in the economy Loan growth in corporate banking focused on relationships with the highest potential of profitability and cross-sell Dec16 Sep 17 Dec Corporates Public sector 1) excl. BSB and reverse repo transactions

15 Summary Financial results Business Development Outlook 2018 Stable growth in deposit base Retail savings Comment m PLN +7.6% +2.4% Dec16 Sep 17 Dec 17 Retail deposits Mutual funds Retail and corporate deposits dynamic at healthy level, respectively +7.6% i +9.1% y/y combined with customer migration from term deposits to current accounts m PLN Corporate deposits % Seasonal growth in corporate deposits in the 4 quarter % Growth of mutual fund assets at 9.6% y/y supported by acceleration of new sales (+46% q/q) Dec16 Sep 17 Dec ) excl. BSB and repo transactions

16 Summary Financial results Business Development Outlook 2018 Pick up in net fee and commission income in 4Q17: +6.4% q/q Net fee and commission income (annual and quarterly basis) Comment m PLN -1.5% % +6.4% Strong positive dynamics in case of fees and commissions from lending activity in 4Q17 q/q driven by stable margins and sales growth Further improvement in capital markets fees due to significantly higher net sales of investment funds Q 16 3Q 17 4Q 17 Cards Capital markets FX commercial fees Loans Other 15

17 Summary Financial results Business Development Outlook 2018 Operating costs at inflation level Operating costs (annual and quarterly basis) Comment m PLN +1.6% +7.6% % Full year operating costs at PLN m, +1.6% y/y Increase in administrative costs due to reduction of the Bank's branch network 2 and cost of marketing campaign BGF + banking tax Q 16 3Q 17 4Q Impact of remuneration structure (higher variable element) on overall higher personnel costs in the 4th quarter of 2017 Costs incl. BGF, banking tax Significant increase in regulatory burden in 2017 Depreciation Non-personnel costs Personnel costs 16 1) banking tax for 11 months in ) reduction of 66 Bank s branches kw/kw

18 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 Achievements Summary Financial results Business Development Outlook 2018 High quality of assets amid normalized CoR level in the sector Loans NPL coverage ratio Comment m PLN NPL 6.0% 6.0% 5.4% Dec 16 Sep 17 Dec 17 74,5% 72,1% 74,4% Dec 16 Sep 17 Dec 17 Cost of risk stabilisation after the period of record low write-offs in the sector at the end of 2016 and beginning of 2017 Non-performing Performing Cost of risk (annual and quarterly basis) NPL ratio at 5.4% with one of the highest coverage ratios in the Polish banking sector at 74.4% -1bps 0,45% 0,44% Cost of risk (quarterly) 0,47% 0,47% 0,48% 0,46% 0,50% ~0,45% Sale of NPL portfolio, completed in the 4th quarter of 2017, supports our policy of active risk management 0,37% 0,40% 0,39%

19 Summary Financial results Business Development Outlook 2018 Bank meets all capital requirements, including 100% dividend payout Capital requirements (Tier 1) Capital adequacy ratio (TCR) pp 11,4% 5,4% 6,0% 6,0% Min. requirements 2018 Base minimum capital requirement: (1) Capital conservation buffer 1,875% (2) Systemic risk buffer 3% (3) OSII 0,5% (4) FX mortgage requirement 0,01% min. requirement according to art. 92 CRR 14,8% 8,8% Requirements for payment up to 100% of dividend 16,1% Pekao Group FY pp Requirement of combined buffers for payment of 100% of the dividend : (1) Capital conservation buffer 2,5%, (2) Systemic risk buffer 3%, (3) O-SII 0,5%, (4) FX mortgage requirement 0,01%, (5) Art. 142 par. 4 of Banking Law 1,5%, (6) ST 1,27% +3.7pp 13,4% Min. requirements Q 17-0,6pp 1,0pp 0,1pp Docelowo (0.3pp) 16,5% 17,1% PPIM transaction 2 Subordinated bonds (Tier 2) Other 4Q 17 Capital surplus meets capital requirements related to 100% of dividend both for TCR and for Tier 1 Buffer of 130bps above the level of Tier 1ratio, allowing for 100% of dividend payout from 2017 net profit and further organic growth of the business 18 1) Capital ratios for Pekao Group 2) Impact of PPIM transactiondoes not include gain on remeasurement to fair value of previously held shares PPIM & Xelion. Income from revaluation to capital will be credited after the GMS, increasing the ratio by 0.3 pp

20 Summary Financial results Business Development Outlook 2018 Impact of IFRS 9 implementation on the capital adequacy ratio Impact of IFRS9 on the capital adequacy Transitional capital impact (TCR) The Bank decided to apply transitionals with regards to the impact of IFRS 9 implementation on capital adequacy ratios -6bps -5bps -7bps -34bps -52bps The impact of IFRS 9 on the capital ratio in the first reporting period will be -6bps 17,1% 16,6% Total negative impact on capital adequacy ratio will be 52 bps The adoption of IFRS 9 did not result in any material changes in the methods applied to valuation of financial assets MSR 39 IFRS 9 75,4% 22,4% 75,7% 22,2% Valuation at amortized cost Valuation to fair value trough equity Valuation to fair value trough profit or loss (mandatory) 19 2,1% 2,1%

21 Key achievements in 4Q17 and FY2017 Summary financial results for 2017 Detailed financial results Business development 2018 Outlook 20

22 Summary Financial results Business development Outlook 2018 Retail banking: record sales of consumer loans and mortgages m PLN New sales of cash loans +14% ,5% Q 4Q Share of electronic channels in new sales proportion x5.4 27% 21% 5% Q 2017 Increased pool of bank clients, whom we granted consumer loans in expected processes Improving profitability of new sales of consumer loans and mortgages Innovative sale of mortgages in remote channels available 7 days a week 21 New sales of mortgages loans m PLN +33% % Q 4Q Share of new sales market mortgage loans +3.4pp 21% 18% New current account offer Konto Przekorzystne No fees Attractive offer of saving account Simplification of processes and documentation Cooperation with PZU in assurbanking Growth of daily sales of current accounts by +60% >4x growth of new Savings Account New marketing campaigns

23 Summary Financial results Business development Outlook 2018 Retail banking: strengthening of market position, development of bancassurance and investment product offering m PLN Consumer loans +22,8% +5,5% m PLN PLN Mortgage loans +12,6% ,9% m PLN Investment products 1 Net sales in Q4 close to total sales for previous 3quarters 842 >9x higher net sales y/y Dec 16 Sep 17 Dec 17 Dec 16 Sep 17 Dec 17 1Q 17 2Q 17 3Q 17 4Q consumer loan growth (y/y) PLN mortgage loan growth (y/y) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 7.8% 7.4% 7.2% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 8,0% 7,8% 7,6% 7,4% 7,2% 7,0% 6,8% 6,6% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 18.0% 17.8% 17.7% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 18,1% 18,0% 17,9% 17,8% 17,7% 17,6% 17,5% 22 1 net sale of investment funds and SCD in retail banking division Pekao Sector Market share (right axis)

24 Summary Financial results Business development Outlook 2018 Innovative digital banking X 2017 Active clients of digital banking (ths.) PeoPay and m.pekao24.pl Active clients of electronic banking (ths.) VI % + 8% Dec 16 Sep 17 Dec 17 Dec 16 Sep 17 Dec % 89% 93% >50% 27% Growth in the number of daily activations of digital banking (after the launch of a new version of PeoPay application ) Term deposits opened via electronic channels Transfers realized via electronic channels Customers using digital channels represent more than half of all the active customers of our electronic banking platform Sales of consumer loan PEX in electronic channels (in 4Q) First implementation of the online bancassurance offer with PZU: CPI PEX, insurance Direct OC/AC, Travel, Home - mojepzu.pl Unique Customers with at least 1 login in the last 3 months

25 Summary Financial results Business development Outlook 2018 Corporate bank of the first choice Actively supporting strategic projects of Polish corporates investing in Poland and abroad 1,9b PLN Term loan i RCF Loan agent, Arranger, Biggest Lender 400m USD Inventory financing loan Agent, Lender 200m EUR Construction of Galeria Północna shopping centre in Warsaw Investment loan Agent, Arranger, Sole Lender 116,6m EUR 7,5m PLN 129m PLN Revitalisation of EC Powiśle in Warsaw Construction, VAT and Investment Loan Loan Agent, Arranger of financing EdF Polska 170m PLN 40m USD Credit limits 150m PLN Guarantee line Financing and servicing bank POLISH INVESTMENT FORUM IN NEW YORK platform of dialogue for leading Polish companies and leading US investors Investment loans Leasing & Factoring m PLN m PLN Acceleration of volumes in the second half of % % % % Dec16 Jun 17 Sep 17 Dec 17 Dec16 Jun 17 Sep 17 Dec17

26 Summary Financial results Business development Outlook 2018 Leader in Investment Banking Success in key areas Selected awards We implement strategic projects of Polish corporates FTF Galleon SA Investment banking: Strategic Advisory 5,14b PLN Global amount Financing of biggest acquisition in 2017 in commercial sector in CEE Bank: Arranger, MLA 2,7b PLN Global amount Financing of biggest acquisition in 2017 in commercial sector in Poland Bank: Bookrunner, MLA, Arranger Pekao IB: Transaction advisory 2,75b PLN Tender offer for Synthos shares The biggest in WSE history tender offer for shares, wholly financed with Polish capital Bank: Co-financing bank Pekao IB: Financial Advisor, Intermediary Best Corporate Bank in Poland 2017 We are the leader in corporate bond market Investment banking: Capital Markets 5b PLN Bonds issue program 2,25b PLN The biggest in history issue of subordinated bonds in financial sector 1,25b PLN Issue of subordinated bonds 874b PLN Issue of 4 series of 3-4- and 5-lyear bonds 1 Market shares ~55% of 200 biggest corporates in Poland are clients of Bank Pekao Arranger, Dealer, Issue Agent Co-arranger, Dealer Arranger, Dealer Dealer, Depository 1 >28% share of corporates DCM Leader in innovative transactional solutions 25 Modern Customer Service Model 1st PLACE IN DIGITALISATION AND AUTOMATION OF PROCESSES integration of Clients ERP/Financial-accounting systems with bank systems Pekao Connect PEKAO FX modern foreign exchange platform INDUSTRY SPECIALISATION in servicing of companies 1 15% share in financials DCM 1 >50% share in municipal DCM

27 Summary Financial results Business development Outlook 2018 The Best Investment Bank in Poland award for the second consecutive year For the second time in a row, Bank Pekao SA was named The Best Investment Bank in Poland 2018 by the Global Finance international magazine We participate in the most prominent structured and leverage finance transactions in the Polish market We are the market leader in placing bonds for corporates and public sector entities wezwanie na GPW, sfinansowane w całości polskim The kapitałem title was awarded by the group of international experts based on: number and size of deals range of provided services structuring capabilities and market shares distribution network, pricing ability to react to market conditions, innovation and market reputation 26

28 Summary Financial results Business development Outlook 2018 SME banking Achieved actions Implementation of new sales network and HQ setup m PLN SME and Micro Loans +15,5% New business platform Expanded product offering including corporate solutions (first IRS/CAP transaction in SME) Local points of sales support (Treasury and Factoring specialists, remote support channels) Market recognition Bank was the winner of ranking: Decade of EU Financial Instruments in Poland Bank was awarded the title of the leader in sale quality for loan products with de minimis guarantee ,6% +12,9% Strengthening of our market position Clear acceleration of income in 2nd half of 2017 Best fourth quarter (+7,6% vs. 1st quarter of 2017) Gru 16 Gru 17 Mikro SME 27

29 Summary Financial results Business development Outlook 2018 Private Banking: Dynamic increase of revenues driven by the investment product sales Investment product sales Loans sales mn PLN mn PLN +260% 13.9% Development of product s offer dedicated to Clients in Private Banking segment Product development in order to reach better adjustment to Client s needs Implementation to the offer in cooperation with CDM Pekao i.a.: 20 new open and closed funds (Union Investment TFI, Altus TFI, NN Investment Partners TFI, Allianz TFI and Skarbiec TFI in cooperation with z J.P. Morgan Asset Management) additionally, 7 subscriptions of structured products rapped into investment certificates (issued by UniCredit Bank AG). Awards Bank Pekao has been awarded the title of The Best Private Bank in Poland 2018 by Global Finance for the third year in a row. Second year in a row with the highest, 5-star note in private banking rating published by Forbes magazine. 28

30 Summary Financial results Business development Outlook 2018 Selected initiatives to be implemented in 2018 Retail banking SME banking Corporate banking Development of omnichannel Bancassurance and assurbanking New product offer Development of transactional banking Development of international business and supporting foreign expansion of Polish companies Dynamic development of micro segment Commoditisation of investment banking products for mid-sized companies sector Digitalisation of transaction service channels 29

31 Summary Financial results Business development Outlook 2018 Prizes and awards Recognition by Polish and international experts 30 Michał Krupiński CEO of Banku Pekao S.A. the best manger of state-owned company according to Parkiet Top Employer 2017 for Bank Pekao S.A. Bank Pekao awarded twice by the "Miesięcznik Finansowy Bank" (2017) Dziennik Gazeta Prawna - award in the category of profitability and efficiency Best Corporate Bank in Poland 2017 Best Trade Finance Provider for the best trade financing services Best Investment Bank in Poland for 2018 Bank of the year 2016 (2017) Innovation of the year for PEKAO CONNECT - Solutions integrating the financial processes of companies with Bank Pekao Bank Pekao S.A. "Sales Quality Leader" loans with de minimis guarantee Global Finance the best private banking in Poland 5 stars - the highest distinction of the Forbes magazine Bank Pekao S.A. was honored with the prestigious title of "Youthfriendly Institution" Bank Pekao SA with the best call centre among banks in 2017 (in 3 independent industry rankings)

32 Summary Financial results Business development Outlook 2018 Bank Pekao: Ambassador of Poland, facilitates significant economic events 48. World Economic Forum in Davos, the London Milken Summit, Investment Forum in New York and visit to Poland of prof. Nouriel Roubini 31

33 Summary Financial results Business development 2018 Outlook We develop competences in key areas Our achievements Bank of best employees TOP Employer 2018 (for the 8th time) We are at the top of first choice Employers (according to Pracodawca Roku Survey conducted by AIESEC Polska) We are a partner for leading Polish universities, i.e. Szkoła Główna Handlowa Managerial and expert staff Leading competences in key areas; we hire employees from global companies We conduct recruitment program in cooperation with abroad universities Top development programs for managerial staff Remuneration package adequate to competences, skills and experience & linked to the results achieved Patronage of the prestigious program of studies linked to an internship program Organizational culture based on values supporting Bank s strategy and coherent with brand s promise Leading competences constant development in key areas Attracting top candidates from the market We benefit from global and Polish companies experience 32 Bank of America BGŻ BNP Bank Pocztowy Oracle Gide Loyrette Nouel HB Reavis Wirtualna Polska mbank PKO BP Experian Credit Agricole

34 Key achievements in 4Q17 and FY2017 Summary financial results for 2017 Detailed financial results Business development 2018 Outlook 33

35 Summary Financial results Projects 2018 Outlook Ambitions set in execution of our strategy Strategic goals of Bank Pekao for 2018 Macroeconomic assumptions Net profit Retail banking and SME Corporate banking Double-digit growth target y/y Double-digit growth in volumes and continued pick up in net fees and commissions Bank of the first choice with focus on profitability and cross-sell f GDP (% y/y) 4,6% 3,8% CPI (avg.) 2,0% 2,6% Unemployment rate (%) 6,6% 5,8% Public debt (%GDP) 48,9% 47,9% Base rate (eop) 1,50% 1,75% Pekao forecasts Banking sector trends Net interest margin Further expansion based on effective acquisition in key areas y/y f Dividend Ambition of distribution of ~ 100% of dividend from 2017 and 2018 net profit Cost discipline and effective risk management maintained Retail loans 1,8% 4,4% Corporate loans 6,0% 8,9% Retail deposits 4,1% 6,8% Corporate deposits 2,4% 6,0% Mutual funds 18,0% 7,0% 34

36 Key achievements in 4Q17 and FY2017 Summary financial results for 2017 Detailed financial results Business development 2018 Outlook 35

37 2018 Outlook Summary Financial results Business Development 2018 Outlook Expected solid performance for economy and banking sector Economy F GDP, % 2,9 4,6 3,8 Private consumption, % y/y 3,9 4,8 4,0 Investments, % y/y (7,9) 5,4 6,4 Unemployment, % eop 8,2 6,6 5,8 CPI, % avg (0,6) 2 2,6 3M Wibor, % eop 1,73 1,72 2,05 Reference rate, % eop 1,5 1,5 1,75 Exchange rate EUR, eop 4,42 4,17 4,12 Exchange rate USD, eop 4,18 3,48 3,52 Public sector balance, % GDP (2,5) (1,9) (2,4) Bank sector volumes F (2) Loans, % y/y 4,9 3,6 6,1 Retail, % y/y 5,2 1,8 4,4 Mortgage loans PLN 10,5 10,4 8,5 Consumer loans (1) 6,9 6,5 6,3 Corporate, % y/y 5,5 6,0 8,9 SME loans (3) 4,9 6,0 8,9 Savings (4), % y/y 9,3 5,6 6,4 Deposits, % y/y 9,2 4,4 6,4 Retail, % y/y 9,5 4,1 6,8 Corporate, % y/y 7,9 2,4 6,0 Mutual Funds (5), % y/y 10,5 18,0 7,0 Economic growth expected to reach 3.8% in 2018 after 4.6% GDP growth in Investment activity is set to further accelerate after signs of rebound observed in H following a decline in 2016 Households consumption is poised for a continued expansion on the back of buoyant wage growth and further increase in employment Bank volume are set to accelerate. Higher growth in investments is expected to translate into faster growth of corporate lending 36 Pekao forecasts (1) all loans other loans except of housing loans (2) internal macroeconomic scenario, fixed exchange rates (3) 2017 estimated (4) deposits + retail customers assets in investment funds units (2017 estimated) (5) retail customers assets in investment funds units (2017 estimated)

38 1Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18e 3Q 18e Achievements Summary Financial results Business Development 2018 Outlook Main trends GDP growth at the highest level in decade GDP composition PMI Index % yoy pts % y /y GDP Private consumption Public consumption Investments Export net Change in inventories GDP (% y/y) 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17e 1Q 18e 2Q 18e 3Q 18e 4Q 18e 2,7% 4,1% 4,0% 4,9% 5,0% 3,9% 3,9% 3,7% 3,6% Inv estments -9,7% -0,5% 0,9% 3,3% 11,8% 4,0% 6,0% 7,0% 7,1% Priv ate consumption 4,7% 4,7% 4,9% 4,8% 4,7% 4,2% 4,0% 3,9% 3,9% Contribution of fixed investment in GDP growth increased in recent quarters as a result of public investment improvement In 2018 growth in fixed investment is expected to accelerate as private investment activity rebounds Household consumption and export set for continued growth as EU growth is expected to remain high Manufacturing PMI index near all-time highs recently 37 Source: GUS, Pekao Research.

39 1Q 12 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18e 3Q 18e 1Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18e 3Q 18e Achievements Summary Financial results Business Development 2018 Outlook Main trends Strong job market but labour supply constraints increasingly visible Labour market Wages (Corporate Sector) m, avg %, eop 6, % 6 6, ,2 6, , , ,4 4 5, ,0 0 (2) 0 Corporate employment Unemployment rate (right) Salaries (ths avg.) right CPI (% y/y) Salaries (% y/y, avg.) Employ ment (mln people) Unemploy ment rate (eop) e 5,5 5,5 5,5 5,6 5,8 6,0 6,2 13,4% 13,4% 11,5% 9,7% 8,2% 6,6% 5,8% e Wages (% y /y ) 3,4% 2,9% 3,7% 3,5% 3,8% 5,9% 8,0% CPI (%, av g.) 3,7% 0,9% 0,0% -0,9% -0,6% 2,0% 2,6% Wage growth set to accelerate as wage expectations increase as a result of labour shortages Employment growth expected to slow amid supply side constraints Registered unemployment expected to decline to 5.8% at the end of 2018 from 6.6% at the end of Source: GUS, Pekao Research.

40 1Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18e 3Q 18e 1Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 Achievements Summary Financial results Business Development 2018 Outlook Main trends Inflation likely to accelerate Inflation, interest rates Government bond yields % % Base rate ,5% M WIBOR (% eop) CPI (% y/y) Base rate NBP (%) 2Y 5Y 10Y Exchange rates NBP reference interest rate stood at 1.5%, lombard rate at 2.5% and deposit rate at 0.5% throughout 2017 CPI is expected to exceed NBP target (2.5%) already at the end of 1Q18, and then likely to approach 3% in mid This maybe an argument for the MPC to deliver a rate hike in 4Q18, first since 2012 PLN exchange rate remains stable vs. key currencies after the zloty appreciated in 2017 eop 5,0 4,5 4,0 3,5 3,0 2,5 2,0 Dec 17 y /y q/q EUR 4,17-5,7% -3,2% USD 3,48-16,7% -4,7% CHF 3,57-13,4% -5,2% 39 Source: NBP, GUS, Pekao Research. EUR/PLN USD/PLN CHF/PLN

41 Summary Financial results Business Development 2018 Outlook Main trends Moderate increase of loans and deposits Loans and advances to households and institutional clients Deposits of households and institutional clients B PLN B PLN Q17 2Q17 3Q17 4Q17 Households* Corporate** Q17 2Q17 3Q17 4Q17 Households* Corporate** % y /y Q 17 2Q 17 3Q 17 4Q 17 Households 0,3 4,6 5,5 6,6 5,2 4,5 3,1 3,3 1,8 Corporate 3,8 2,5 7,3 7,0 4,5 2,0 3,8 5,5 6, Q 17 2Q 17 3Q 17 4Q 17 7,8 6,5 9,2 9,4 9,5 8,1 5,7 5,4 4,1 2,9 4,5 7,7 3,8 8,5 3,0 6,3 6,8 4,9 In 2017 growth loans and advances to households curbed by PLN appreciation that reduced value of liabilities denominated in foreign currencies. After adjusting for FX effects, growth rate was similar to that observed in 2016 Stronger growth of claims institutional clients as a result of gradual improvement of their investments Slower growth of household deposits as savings were shifted towards real estate and equities (the effect of low interest rates). In case of institutional clients growth was also distorted by statistical base effect 40 * Households and non-profit institutions serving households ) ** Enterprises, non-bank financial institutions & public sector Source: NBP

42 Summary Financial results Business Development 2018 Outlook Key trends Moderate increase of loans and deposits Bank claims on households* Household deposits* % Ytd % Ytd 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% XII' I II III IV V VI VII VIII IX X XI XII 11% 9% 7% 5% 3% 1% -1% XII' I II III IV V VI VII VIII IX X XI XII Bank claims on institutional clients** Institutional client deposits** % Ytd 11% 9% 7% 5% 3% 1% % Ytd 15% 10% 5% 0% -5% -1% XII' I II III IV V VI VII VIII IX X XI XII -10% XII' I II III IV V VI VII VIII IX X XI XII 41 * Households and non-profit institutions serving households ** Enterprises, non-bank financial institutions & public sector Source: NBP

43 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 Achievements Summary Financial results Business Development 2018 Outlook Key trends Improving quality of sector loan portfolio Household non-performing loans* Corporate non-performing loans* 10% 8% 6% 4% 2% 0% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 16% 14% 12% 10% 8% 6% 4% Retail loans Mortgage Cash (right) Corporate loans SME Corporate Total 7,4% 7,1% 6,5% 6,2% 6,1% 6,1% Mortgage 2,8% 3,1% 3,1% 2,9% 2,9% 2,8% Cash 17,3% 14,7% 12,8% 12,3% 11,9% 11,5% Total 11,7% 11,6% 11,3% 10,0% 9,2% 8,2% SME 13,0% 13,0% 12,8% 11,7% 11,1% 10,0% Corporate 9,8% 9,6% 9,3% 7,7% 6,8% 5,8% Households: stabilization of headline NPL indicator, improvement in two main categories: mortgages and consumer loans Corporate sector: significant improvement in headline figure, thanks to improvement both in SME as well as in large corporate sectors 42 * Share of non-performing loans in portfolio Source: NBP

44 Summary Financial results Business Development 2018 Outlook Selected data 43

45 Summary Financial results Business Development 2018 Outlook Consolidated balance sheet mln PLN Dec 16 Sep 17 Dec 17 Q/Q % Y/Y % Cash and amounts due from Central Bank % -11% Loans and advances to banks % -19% Loans and advances to customers* % 8% Investment securities % 5% Assets held for sale % 36% Intangible assets % 156% Tangible fixed assets % 0% TOTAL ASSETS ,2% 6,5% Amounts due to the Central Bank % 0% Amounts due to other banks % 3% Financial liabilities held for trading % -30% Amounts due to customers % 6% Debt securities issued % 82% Total liabilities ,7% 7,2% Total Shareholders' equity ,5% 1,6% 44 (*) Including loans and advances from customers and receivables from finance leases

46 Summary Financial results Business Development 2018 Outlook Consolidated income statement mln PLN 4Q 16 3Q 17 4Q 17 Q/Q % Y/Y % 12M M 2017 Y/Y % Net interest income (1) ,0% 6,8% ,9% Net fee and commission ,4% 0,8% ,5% Operating income ,3% 14,8% ,0% Operating costs (2) ,9% 7,6% ,6% OPERATING PROFIT ,6% 20,7% ,2% Provisions ,3% 43,9% ,1% Guarantee funds charges ,5% -65,8% ,3% Banking tax ,1% 8,5% ,2% PROFIT BEFORE INCOME TAX ,6% 94,1% ,9% Income tax ,7% 32,1% ,8% GROUP NET INCOME (3) ,6% 113,1% ,6% Cost/Income Ratio (%) 45,1% 44,9% 42,3% - 0,1-0,1 43,7% 44,4% 0,7 Cost of Risk (%) 0,37% 0,46% 0,50% 0,1 0,4 0,45% 0,44% - 0,0 ROA (%) 1,2% 1,3% 2,4% 0,9 1,0 1,4% 1,4% 0,1 NIM (%) 2,74% 2,79% 2,80% 0,0 0,0 2,77% 2,78% 0,0 45 (1) NII and dividends and other income from equity investments (2) Costs excl. guarantee funds charges (3) Net profit attributable to equity holders of the Bank

47 Summary Financial results Business Development 2018 Outlook Selected data Bank Dec 16 Sep 17 Dec 17 Q/Q % Y/Y % Outlets ,2% -8,3% ATM's ,9% -0,9% Employees ,5% -3,6% No of PLN current accounts (ths)* ,6% 3,5% No of mortgage loan accounts (ths)** ,4% 7,9% No of clients holding a consumer loan accounts (ths)*** ,9% -89,0% Number of individuals with an access to electronic banking Pekao24 (ths) ,8% 3,8% Number of individuals with an access to mobile banking (ths) ,0% 33,2% Group Dec 16 Sep 17 Dec 17 Q/Q % Y/Y % Employees**** ,2% -2,4% Outlets**** ,2% -8,3% ATM's**** ,9% -0,9% Number of MF accounts (ths)***** ,1% -2,8% Number of Brokerage accounts (ths)****** ,9% -1,6% (*) Number of accounts including pre-paid card accounts 46 (**) Retail clients accounts (***) Pożyczka Ekspresowa (Express Loan) (****) Credit Union (SKOK) Kopernik included since Dec 2014 (*****) Pioneer Pekao Investment Management S.A. (******) Including: Dom Maklerski Pekao (Dom Maklerski), subsidiarycentralny Dom Maklerski Pekao S.A. (CDM), and associated entity Dom Inwestycyjny Xelion Sp. z o.o. (Xelion)

48 Summary Financial results Business Development 2018 Outlook Activity by segments mln PLN Retail Banking Private Banking Corporate&Investment Banking Assets&Liabilities Management & Others Group 12M 16 12M 17 Y/Y % 12M 16 12M 17 Y/Y % 12M 16 12M 17 Y/Y % 12M 16 12M 17 Y/Y % 12M 16 12M 17 Y/Y % Net interest income (1) % % % % % Non-interest income % % % % % Operating income % % % % % Operating costs (2) % % % -7,5 5,8-177% % OPERATING PROFIT % % % % % Net write-downs/provision % 0 0 ####### % % % Guarantee funds charges % % % % % Banking tax #ARG! #ARG! #ARG! #ARG! #ARG! #ARG! #ARG! #ARG! #ARG! % % PROFIT BEFORE INCOME TAX % 27,3 32,9 20% % % ,9% 47 (1) Total net interest income, dividends and other income from equity investments (2) Operating cost excluding guarantee funds charges

49 Summary Financial results Business Development 2018 Outlook Group net profit structure mln PLN cumulative Group's share in capital % 12M 16 12M 17 Y/Y % Bank Pekao S.A. Banking - Poland 2 278, ,1-8,4% Entities - consolidated under full method 120,5 79,8-34% of which: Pekao Leasing Sp. z o.o. Leasing 100% 40,0 34,8-13% Centralny Dom Maklerski Pekao S.A. Brokerage 100% 25,3 33,1 31% Pekao Bank Hipoteczny S.A. Mortgage Bank 100% 8,7 5,8-33% Pekao PTE S.A. Pension Fund 100% 1,4-3,1-321% Pekao Faktoring Sp. z o.o. Factoring 100% 9,7 11,0 13% Pekao Investment Banking S.A. Brokerage 100% 24,4 4,7-81% Centrum Bankowości Bezpośredniej Sp. z o.o. Call Centre 100% 3,4 3,8 12% Pekao Financial Services Sp. z o.o. Servicing MF/PF 100% 7,5 6,0-20% Centrum Kart S.A. Cards 100% 0,3 0,8 167% Pekao Fundusz Kapitałowy Sp. z o.o. in liquidation Business consulting 100% 0,3 0,4 33% Pekao Property S.A. Real estate development 100% -0,3-24,5 8067% FPB "MEDIA" Sp. z o.o. - indirect Real estate development 100% -0,2 0,9-550% Dom Inwestycyjny Xelion Sp. z o.o. Financial Advisory 100% 0,0 0,3 ####### Pekao Investment Management S.A. Mutual Funds 100% 0,0 5,8 ####### Entities - valued under the equity method 38,6 39,5 2% Pioneer Pekao Investment Management S.A. * Mutual Funds 49% 36,4 36,9 1% Dom Inwestycyjny Xelion Sp. z o.o. ** Financial Advisory 50% 2,2 2,6 18% Exclusions and consolidation adjustments -158,6 267,7-269% Group Net Profit (**) 2 279, ,1 8,6% 48 (*) On December 11, 2017, the Bank acquired 51% of the stock in Pekao Investment Management S.A. and took control of this company. (**) On December 11, 2017, the Bank acquired 50% of the stock in Dom Inwestycyjny Xelion Sp. z o.o and took control of this company. NOTE: Data as reported

50 Summary Financial results Business Development 2018 Outlook Customers financing mln PLN Dec 16 Sep 17 Dec 17 Q/Q % Y/Y % Loans* ,6% 8,0% retail % 10% corporate % 5% Non quoted securities ,5% 2,3% Other % 9% Nominal value adjustment % -16% Impairment losses % -3% Net loans and advances % 8% Securities issues by non monetary entities** Reverse repo and buy-sell-back transactions ,8% -32,4% #DZIEL/0! #DZIEL/0! TOTAL CUSTOMERS FINANCING*** % 7% 49 (*) Including debt securities eligible for rediscounting at Central Bank, net investments in financial leases to customers (**) Securities issued by non monetary entities including local governments (***) Total customers financing includes Loans and advances at nominal value, Securities issued by non monetary entities, reverse repo transactions and buy-sell-back

51 Summary Financial results Business Development 2018 Outlook Loans exposure by sector SECTOR DESCRIPTION Wholesale and retail trade; repair of motor vehicles and motorcycles 15,4% 15,4% Public administration and defence; compulsory social security 10,3% 9,3% Real estate activities 12,4% 13,7% Electricity, gas, steam and air conditioning supply 7,3% 6,6% Finance and Insurance activity 4,1% 3,8% Transportation and storage 6,4% 6,3% Construction 6,8% 6,6% Manufacture of metals, metal products and machinery 5,0% 5,3% Manufacture of beverages and food products 4,4% 4,7% Manufacture of chemicals, pharmaceuticals and refined petroleum products 4,5% 5,1% Other manufacturing 7,6% 7,3% Other sectors 12,6% 15,9% Total 100% 100% 50

52 Summary Financial results Business Development 2018 Outlook Mutual funds Pekao Investment Management S.A. Mutual funds volumes Mutual funds assets structure (PPIM SA) mln PLN +11.3% +2.6% 13% % 73% Dec 16 Sep 17 Dec 17 Third party funds distributed by the Group Pekao Investment Management SA ( PPIM before) Equity funds Balance funds Money and bonds funds 51

53 Summary Financial results Business Development 2018 Outlook Ratings of Bank Pekao S.A. FITCH RATINGS (*) PEKAO POLAND Long-term rating (IDR) A- A- Short-term rating F2 F2 Viability rating a- - Support rating 5 - Outlook Negative Stable S&P GLOBAL RATINGS PEKAO POLAND Long-term rating BBB+ BBB+ Short-term rating A-2 A-2 Stand-alone bbb+ - Outlook Stable Stable MOODY'S INVESTORS SERVICE LTD PEKAO (unsolicited rating) POLAND Long-term foreign-currency deposit rating A2 A2 Short-term deposit rating Prime-1 Prime-1 BCA baa1 - Outlook Stable Stable 52 On 20 October, 2017 Fitch Ratings informed the Bank of confirming the Long-Term rating of IDR at "A-" and Viability Rating (VR) at "a-"fitch has changed the Outlook from Stable to Negative and Support Rating to "5".

54 Summary Financial results Business Development 2018 Outlook Shareholders: diversified shareholders base Banku Pekao S.A. shareholders Largest investors 42% 16% PZU SA PFR SA 6% 13% 20% 2% Unicredit Other Pension Funds 2 1 MF PZU Group is the largest financial group in CEE Nearly 300 bn PLN of assets under management More than 22 million clients in five countries Geographical structure 14% 6% 10% Poland 56% 13% US UK Other European countries Other The Polish Development Fund (PFR) is a group of financial and advisory institutions supporting companies, local governments and individuals Invests in sustainable social and economic development of Poland Bank Pekao SA is listed on the Warsaw Stock Exchange and London Stock Exchange (GDRs program) The third largest bank on WSE in terms of market capitalisation (34.0 bl zł) WIGBanki, WIG 20, WIG 30, MSCI, CEERIUS Sustainability Index 53 1 Source : Analizy online, as at 30th of June, Source: Polish Pension Funds annual reports dated 31st of December, 2017

55 Summary Financial results Business Development 2018 Outlook Investor relations team: contact and calendar CONTACT DETAILS FINANCIAL CALENDAR Q&A related to the presentation: Paweł Rzeźniczak Head of IR, Strategy & Corporate Development Group ph.: Dorota Faszczewska-Ward ph.: Iwona Milewska ph.: February April May June August October 2018 Annual Report 2017 and Webcasting Start of Blackout Period First Quarter Report and Webcasting Start of Blackout Period Semi-annual Report and Webcasting Start of Blackout Period Krzysztof Szlichciński ph.: krzysztof.szlichcinski@pekao.com.pl 7 November 2018 Third Quarter Report and Webcasting 54 Visit us at: Blackout Period two weeks period before publication of financial statements. During this period we do not organise meetings with investors and analysts

56 Disclaimer This presentation (the Presentation ) has been prepared by Bank Polska Kasa Opieki Spółka Akcyjna ( Bank ) for the clients, shareholders and financial analysts. The Presentation should not be treated as an offer or invitation to purchase any securities or financial instruments or as advice or recommendation in respect to such securities or financial instruments. The presented data are only general information and does not refer to an offer by the Bank for products or services. In order to take advantage of the services and products of the Bank, one should be thoroughly familiar with the characteristics of the particular service or product, its rules, risks and legal and tax consequences of the use of particular services or products. The strategy presented in the Presentation contains goals which are the ambition of the Management Board and do not constitute any financial results forecast. Rights for the Presentation as a whole are reserved to the Bank. The Presentation is subject to the protection provided by law, in particular: the Act dated 4 February 1994 on Copyright and Related Rights (consolidated text in Journal. Laws of 2006, No. 90, item. 631, as amended); the Act dated 27 July 2001 on the protection of Databases (Journal of Laws No. 128, item. 1402, as amended); the Act dated 16 April 1993 on Combating Unfair Competition (consolidated text in Journal of Laws of 2003, No. 153, item 1503, as amended) and the Act dated 30 June 2000 on Industrial Property Law (consolidated text in Journal. Laws of 2003, No. 119, item. 1117, as amended). The Presentation may include forward looking statements, the Bank s outlook for the future, future plans and strategies or anticipated events that are not historical facts. Since these statements are based on assumptions, expectations, projections and provisional data about future events, the content is inherently uncertain. Factors that could cause or contribute to differences in current expectations include, but are not limited to: (i) general economic conditions, among which the economic conditions of the business areas and the markets in which the Bank and its subsidiaries operate, (ii) the performance of financial markets (iii) changes in laws or regulations and (iv) general competitive conditions locally, regionally, nationally and/or internationally. The Bank does not undertake to publish any updates, modifications or revisions of the information, data or statements contained herein should there be any change in the strategy or intentions of the Bank, or should facts or events occur that affect the Bank s strategy or intentions, unless such reporting obligations arise under applicable laws and regulations. Neither the Bank, nor any of its representatives shall be responsible for any loss or damage that may arise from the use of the Presentation or of any information contained herein or otherwise arising in connection to this Presentation. This presentation is not for distribution in or into countries where the public dissemination of the information contained herein may be restricted or prohibited by law. 55