1H 2018 Financial Results of Bank Pekao S.A. Warsaw, 8th of August 2018

Transcription

1 1H 2018 Financial Results of Bank Pekao S.A. Warsaw, 8th of August 2018

2 Key achievements in 2Q 18 and 1H 18 2Q 18 summary financial results Detailed financial performance Business development 1

3 Summary Financial results Business development Key achievements in 2Q 18 and 1H 18 Continued momentum in executing on our 2020 Strategy 1 Profitability Delivered net profit of PLN 932 m in 1H 18 representing +7.3% y/y underlying growth 1 supported by NII expansion, +8.4% y/y, and healthy revenue momentum across all commercial segments 2 Lending activity Double-digit y/y volume growth in key retail and SME products coupled with a relentless focus on cross-sell and pricing for new sales In corporate banking pricing discipline combined with a selective deployment of loan capacity in sectors with a highest revenue-growth potential 3 4 Business development Operational excellence Tangible benefits of our new client acquisition model being delivered: 200k milestone of new current accounts Przekorzystne and Świat Premium reached in early August New accounts for affluent Świat Premium and micro segments Przekorzystne Biznes, expanding suite of investment products, dedicated offer for expats Consistent growth in mobile banking penetration (44% y/y) on the back of our ongoing digital innovation Ongoing automatisation: Latest operational initiatives in accounting, controlling and real estate management Digital transformation of retail banking supported by 70 technologically advanced initiatives Introduced Pekao 360 one-stop omnichannel application with best-in-class current account opening process 5 Balance sheet resiliance Strong capital position with capacity for generous dividend pay-out (up to 100% of profits) Industry-leading risk management practice reflected in COR with a robust funding and liquidity profile 2 1) Excluding pre-tax cost of voluntary retirement program of PLN 50m in 1H 18, of which PLN 47m in Q2 18

4 Key achievements in 2Q 18 and 1H 18 2Q 18 summary financial results Detailed financial performance Business development 3

5 Continued momentum in executing on our 2020 Strategy 1H 2018 ΔY/Y Growth levers Profitability Net profit 932m 2.9%/7.3 (1) % RoE 8.2% 24 bps NIM 2.82% 5 bps 7.3% y/y profit growth on a comparable basis driven by business growth and pricing discipline Y/y improvement in profitability amid stable and robust capital position in 1H 18 Continued margin expansion reflecting pricing discipline and ongoing retail expansion Efficiency and risk C/I 45.1% (1) 42 bps Improvement in C/I ratio amid operating costs affected by one-off cost of voluntary retirement program CoR 35bps 1 bps Decrease in CoR y/y from a low point in the cycle in 1H 17 Business development Key retail loans volumes m 14.1% Mobile banking Customers 1.1m 44% Commercial bank revenues 9% Another quarter of strong sales dynamic for PLN mortgage and consumer loan products Digitalisation high on the agenda coupled with consistent growth in mobile banking penetration Strong revenue dynamics achieved across all segments of the commercial bank 1) Excluding pre-tax cost of voluntary retirement program of PLN 50m in 1H 18 4

6 Key achievements in 2Q 18 and 1H 18 2Q 18 summary financial results Detailed financial performance Business development 5

7 Improvement in ROE supported by a strong underlying profit dynamic Net profit growth Comment m PLN +2.9% +7.3% % +5.7% % +46.2% 540 1H 18 underlying net profit growth y/y of 7.3% supported by strong revenue momentum and ongoing cost of risk discipline +5.7% y/y underlying net profit growth achieved in 2Q 18 Quarterly net profit dynamic in 2Q 18 affected by the cost of the voluntary retirement program Higher ROE achieved amid strong capital position on a T1 and TC levels 1H 17 1H 18 (1) (1) 2Q 17 1Q 18 2Q 18 Value for investors Improvement in ROE to 8.2%, achieved with TCR of 17.4% and T1 of 16.3% 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method 6 % dynamic excluding impact of the cost of voluntary retirement program of PLN 50m in 1H 2018

8 Continued positive dynamic in operating result Gross operating profit Operating income m PLN +4.0% +6.6% % +9.2% +2.7% +7.0% 3 47 m PLN +5.8% % +4.2% (1) 1H 17 1H 18 2Q 17(1) 1Q 18 2Q 18 1H 17 (1) 1H 18 2Q 17(1) 1Q 18 2Q 18 Operating costs Gross operating profit in Q2 18 above 1bn PLN with a +9.2% y/y on a comparable basis reflecting better operating income generation (+7.2% y/y) m PLN +7.9% +4.8% % +4.8% Growth in operating profit accelerated in 2Q 18 helped by a strong, +4.2% q/q, expansion in operating income Operating cost position led to underlying C/I ratio of 45.1% excluding one-off cost impact of voluntary retirement program % +0.9% ) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method % dynamic excluding impact of the cost of voluntary retirement program of PLN 50m in 1H H 17(1) 1H 18 (1) 2Q 17 1Q 18 2Q 18 Quarterly cost of voluntary retirement program

9 Strong growth momentum in all our businesses Operating income Comment m PLN +5.8% ΔY/Y% Strong revenue dynamics across commercial activity % Retail & Private SME Corporate Total Commercial 9% 9% 9% 14% Operating income growth of +5.8% y/y in 1H 18 Strong commercial performance by all businesses underpinned by better net interest income and F&C delivery in 2Q 18 1H 17 (1) 1H 18-4% ALM and Others Core income Other income Effect of obligatory reserves and lower bond yield 8 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method

10 Growth in net interest income coupled with margin expansion Net interest income Comment m PLN +8.4% % +2.5% Net interest income in upward trajectory with a 8.4% y/y growth in 1H 18 against negative effects of lowered rate on obligatory reserves placed with the Central Bank (1) 1H 17 1H 18 +5bps Net interest margin 2Q 17(1) 1Q 18 2Q 18 +5bps +1bps Continued NIM expansion, +5bps y/y, supported by a continued strong growth dynamic of higher-margin products and pricing discipline across segments 2,77% 2,82% 2,78% 2,82% 2,83% Maturity of high-yielding securities in the portfolio having a negative effect on NIM in 2Q H 17 1H 18 (1) (1) 2Q 17 1Q 18 2Q 18 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method

11 Loan origination concentrated on most profitable segments Retail loans Corporate loans 1 Comment m PLN +14.1% +3.3% +5.1% +1.2% Sound growth in stock of key retail loans +14.1% y/y with a solid growth dynamics of +3.3% q/q achieved in 2Q Slower pace of growth in corporate banking driven by optimisation of the lending portfolio and concentration on relationships with the highest crosssell and profitability potential Jun 17 Mar 18 Jun 18 Jun 17 Mar 18 Jun 18 Key retail loans Other retail loans Corporates Other corporate loans 10 1) excl. BSB and reverse repo transactions

12 Stable growth in deposit base reflecting asset growth dynamics Retail savings Corporate deposits 1 Comment m PLN % +2.0% % % Total deposit growth of +8.7% y/y with a relatively stable cost of funding in 2Q 18 Retail deposits growth dynamic at a healthy level of +8.3% y/y coupled with ongoing migration of client monies from term deposits to current accounts Jun 17 Mar 18 Jun Jun 17 Mar 18 Jun 18 Corporate deposits growing +9.2% y/y and stabilised in 2Q 18 Growth of mutual fund assets at +10.2% y/y to PLN 19.2bn despite higher market volatility in 1H 18 Retail deposits Mutual funds 11 1)excl. BSB and repo transactions

13 Net fee and commission income Net fee and commission income Comment m PLN -2.6% % +5.0% Strong increase in level of FX commercial fees in 2Q 18 thanks to higher client transactionality Better loan origination fees in 2Q 18 recovery driven by both retail and corporate activity Rebound in card fees in 2Q 18 thanks to higher customer activity Capital market fees driven by a favourable performance of asset management despite capital market headwinds (1) (1) 1H 17 1H 18 2Q 17 1Q 18 2Q 18 Better penetration of loan-related bancassurance products Cards Capital markets FX commercial fees Loans Other 12 1) pro-forma, 2017 financial data include results of the Pekao Investment Management S.A. and Xelion consolidated under full method direction incl. shift between F&C and NII starting from 1Q 18

14 Cost actions affecting operating cost dynamics BGF + banking tax m PLN Costs incl. BGF, banking tax 1H 17 1H 18 Operating costs +7.9% +4.8% +10.5% +4.8% +5.9% +0.9% (1) (1) 2Q 17 1Q 18 2Q Comment 1H 18 and 2Q 18 operating costs growth of +4.8% y/y on comparable basis Stable salary costs amid higher variable compensation PLN 50m one-off cost impact of voluntary retirement program on personal costs in 1H 18, of which ca. PLN 47m in 2Q 18 Increase in non-personnel expenses y/y primarily driven by higher marketing budget as well as strategic projects realised across the bank Higher D&A costs driven by amortisation of the share of intangible realised under acquisition of PPIM/Xelion stake Depreciation and Amortisation Non-personnel costs Personnel costs One-off cost of voluntary leave program 13 1) pro-forma, 2017 financial data include results of the Pekao Investment Management S.A. and Xelion consolidated under full method % dynamic excluding impact of the cost of voluntary retirement program of PLN 50m in 1H 2018

15 Superior cost of risk position NPL ratio NPL coverage ratio Comment 6,0% 5,6% 5,7% 68% 67% 66% Jun 17(1) Mar 18 Jun 18 Jun 17 Mar 18 Jun 18 Cost of risk (half-year and quarterly basis) (2) -1bps (1) (1) (1) Stable cost of risk ratio at 35bps both in 1H 18 and 2Q 18, reflecting strong quality of retail and corporate book Change in NPL ratio and coverage ratio due to change of approach starting 1H 18. Data for June 2017 and March 2018 restated 0,36% 0,35% 0,35% 0,36% 0,35% 14 1H 17 1H 18 2Q 17 1Q 18 2Q 18 1 restated, methodology unified for all periods. NPL ratio and coverage ratio included restricted interests, which was written off in June including debt securities. CoR of 0.40% for 1H 18 if shown under previous methodology

16 Superior capital and funding position Total capital adequacy ratio Liquidity Coverage Ratio (LCR) 135% +3.8pp 13,6% 17,1% 17,4% 121% 114% 119% 110% Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Min. requirements 2018 (1) 1Q 18 2Q 18 Loans/Deposits (L/D) (2) Tier1 92,7% 94,0% 88,5% 90,6% 90,8% +4.7pp Jun 17 Sep 17 Dec 17 Mar 18 Jun ,6% Min. requirements 2018 (1) 16,0% 16,3% 1Q 18 2Q 18 Large dividend flexibility despite recent OSII buffer increase to 0.75% Dividend paid this year from 2017 profit affected temporarily LCR position Stable NSFR ratio above 120% 1 on 31 of July 2018 the PFSA, increased on a consolidated basis and individual basis, a buffer of another systemically important institution to 0.75% from 0.5% 2 - Loans including debt securities eligible for rediscounting at Central Bank, net investments in financial leases to customers, non-quoted securities and excluding reverse repo transactions/ Deposits include amounts due to customers, debt securities issued and subordinated liabilities

17 Key achievements in 2Q 18 and 1H 18 2Q 18 summary financial results Detailed financial performance Business development 16

18 Summary Financial results Business development Healthy growth in all business lines Retail and Private Corporate SME Loan volume growth (m PLN) and revenue dynamic across commercial segments (%) +9% +10.4% +9% +2.9% % % H 18 Jun 17 Jun 18 1H 18 Jun 17 Jun 18 1H 18 Jun 17 Jun 18 Revenues Loan Volumes Revenues Loan Volumes Revenues Loan Volumes 17 Y/Y revenue growth (%) Loan volume Leasing and Factoring volumes

19 Summary Financial results Business development Retail banking: Focus on growth & profitability in consumer lending m PLN m PLN New sales of consumer net loans +6% Share of electronic channels in new sales (units) Volume 8% 14% % % +4% +50% 2Q 2Q 1H 17 1H 18 1H 17 1H 18 Consumer loan volume growth Consumer loan origination Focus on net sales and new money acquisition dynamics: + 6% y/y growth in net sales volume Improving profitability of new sales supported by tailored pricing initiatives changes in opening fees structure and bancassurance cross-sell Growing customer base with an access to quick loan processes in electronic channels > 1.6m customers % +5% Jun 17 Mar 18 Jun 17 Net sales new sales only 1 dynamic for June 2018 without non performing stock 25% 20% 15% 10% 5% 0% 7.4% 7.7% 7.8% Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Pekao(y/y) (1) Sector (y/y) Pekao market share (right axis) % Market share 7,9% 7,8% 7,7% 7,6% 7,5% 7,4% 7,3% 7,2% 7,1% 7,0% Continuous increase in sales of e-2-e loans in electronic channels > 50% sales growth > 28% share in units > 14% share in volume in 1H 18 > new CPI package in klik process (PZU)

20 Summary Financial results Business development Retail banking: Focus on growth & profitability in mortgage lending m PLN New sales of mortgage loans Mortgage origination +10% Market share % Q +6% 2Q 1H 17 1H 18 +3% Jun 17 Mar 18 Jun 18 21,5% 20,3% New sale PLN mortgage loan volume growth 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 17.7% +0,2 p.p. 17,9% 18,1% Volume 1H H % 18.1% Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 18,2% 18,1% 18,0% 17,9% 17,8% 17,7% 17,6% 17,5% 17,4% Pekao (y/y) Sector (y/y) Pekao market share (right axis) % Market share Strong no 2 position in the mortgage market by volumes and sales Diversified sales contribution from own network and intermediary channels Improvement of product profitability with a growth in bancassurance cross-sell CPI insurance penetration above 40% in June 2018 vs. 9% in June 2017 Development of e-hipoteka digitallyenabled mortgage sales process New PZU insurance products launched in July (real estate insurance, home movables, assistance & civil liability)

21 Summary Financial results Business development Retail Banking: Customer acquisition on track. Continued growth in investment products Customer acquisition powered by new offers +81% y/y quarterly growth in net sales in 2Q 18 of PLN current accounts due to launch of a new Konto Przekorzystne ; reaching +143k current accounts net y/y +32% y/y growth in current accounts gross sales due to strong marketing campaign and record sales in June (more than 32k accounts in one month) PLN current account sales Number of accounts and net sales Gross sales +81% +32% +44k +24k New initiatives to support growth momentum in 2H 18: (1) Competitive saving account offer, (2) Tailored offer for younger clients, (3) Packages for expats and migrants (e.g. from Ukraine) + 20% y/y increase of number of savings accounts (79k new Konto Oszczędnościowe accounts with >800 mil volume) Positive momentum in investment products 2.7x higher net sales of investment products y/y despite market Reshaping proposition headwinds Q 17 2Q 17 1Q 18 2Q 18 Investment product sales Net sales 2.7x 1H 17 1H 18 Volumes +16% % y/y AuM growth (+2.4bn PLN) Expansion of Pekao TFI and PZU investment product suite to Pekao Retail and Private Banking clients H 17 1H Jun 17 Jun 18

22 Summary Financial results Business development Innovative digital banking New tools and functionalities introduced in 2Q 18 Evolution of PeoPay mobile application responding to client needs 1 On line currency Apple Pay Chat functonality Exchange BLIK Codes Ukrainian version +50% Continued dynamic sales growth in digital channels Nearly third of consumer loan origination on Click (28% share) Consistent growth in mobile and internet banking penetration Active clients of mobile banking (1) (ths.) Active clients of electronic banking (1) (ths.) + 10% + 44% % Leader in contactless payments 336ths of users with possibility to pay with HCE Jun 17 Dec 17 Jun Jun 17 Dec 17 Jun Unique Customers with at least 1 login in the last 3 months

23 Summary Financial results Business development Acceleration of Digital Transformation Program in Retail Banking - 70 technologically advanced initiatives in three streams 11. SALES DEVELOPMENT IN DIGITAL CHANNELS 1. THE LEADER OF 2 SERVICE QUALITY IN DIGITAL CHANNELS > Increased digital sales efficiency > Migration of clients to digital channels > Usage of modern communication channels in origination process > New Pekao24 portal and new digital services > PSD2: Customer Finance Center > Omnichannel: One front-end for all channels New C/A origination process for new customers (less than 10 minutes) All Products in one process (current account, savings, debit card, fx accounts, mobile) Full paperless process (sending documentation by , signing the contract electronically via SMS in branch coming soon) Possibility to use in campaigns outside the Bank s branch 1. 3 CUTTING-EDGE DIGITAL PRODUCTS & SERVICES > PeoPay development > New acquiring strategy (cards acceptance) > Development of modern payments methods > Innovation LAB GOALS 1. Active steering of distribution into digital channels driving meaningful operational efficiencies 2. Quality improvement and broad range of services offered through digital channels 3. Innovation: Design and implementation of solutions: both in-house and available in the market

24 Summary Financial results Business development Corporate Banking: Reshaping business in line with Strategy 1 Corporate loan volumes 2 Improving cross-sell penetration 3 Supporting RoA uplift m PLN +2.9% % +120bps % +14bps +8% ,8% 48,0% 2,74% 2,88% Jun 17 Jun 18 1H 17 1H 18 1H 17 1H 18 Loan volume Leasing and Factoring volumes non-lending revenues % of total revenues revenues/average assets 4 Mid-market becoming a growth engine 5 Financing investment activity of the economy 6 m PLN m PLN m PLN +11.5% +11.0% Sustained growth in Mid leasing &factoring +17.8% % % Jun 17 Jun 18 Mid-market loan volumes 1H 17 1H 18 Investment loan volumes (mid and large segments) Jun 18 Jun 18 Leasing Factoring

25 Summary Financial results Business development Continued Investment Banking leadership Supporting strategic projects in the Polish corporate sector PLN 280m Syndicated loan facility PLN 167m IRS PLN 220m Loan Facility PLN 294m Secondary Public Offer PIB: Global Coordinator and Joint Bookrunner (10% SPO) Breath of solutions Syndicated loans Sole lender Hedging solutions Large-scale equity and financing projects across currencies Leadership in providing tailored financing solutions for corporates and FIs PLN 300m 5yr bond Largest offering by developer in a Polish market EUR 90m 7yr bond offerings PLN 276m Bond issue programme PLN 175m Bond offering Nearly 6bn PLN of arranged and book run bond transaction in 1H`18 across sectors and segments Innovative solutions and market recognition Pekao Samorząd Plus FIZ First fund in the Polish market investing in bond instruments issued by local governments (Joint initiative of Bank Pekao and Pekao TFI) Best Bank Best Investment Bank KDPW CCP Award for Bank Pekao 24 Joint offering for exporters developed by KUKE and Pekao Agreement with BGK regarding participation Export Letter of Credit program Business Inspirers - Innovation 2018 Best Sub-Custodian in Poland for 2018

26 Summary Financial results Business development SME Banking: Building momentum SME initiatives implemented 1 Loan sales 1 SME Business Model 2 Wide SME product offer m PLN New segmentation focused on Customer potential and needs 61 dedicated SME Business Centers located on high potential markets Mobile relationship managers and product specialists supported by dedicated direct channels Credit products Leasing Factoring Transaction Banking (Packages) Cash Management Treasury Trade Finance +17.0% H 17 1H 18 3 New risk framework for SME 4 Development of competences Loans Leasing and Factoring Simplified process for renewals Faster decision for new clients (up to 5 days) New perspective industries (CRE, start-ups, innovative companies) Comprehensive trainings program for all sales forces: sales competences risk assessment industry analysis Employee incentive programs 2 m PLN Loan volumes +9.7% Targeted 2018 commercial goals Acquisition of new customers with yearly turnover above 5m PLN Cross-sell Loan volume growth Increase the share of transactions via electronic channels Jun 17 Jun 18 Loans Leasing and Factoring

27 Summary Financial results Business development Prizes and awards Recognition by the market, industry experts and press MICHAŁ KRUPIŃSKI- BANKING MANAGER OF THE YEAR BY GAZETA BANKOWA For achieving solid results and implementing a new strategy. BANK PEKAO S.A. "BEST SUB-CUSTODIAN BANK AWARD Global Finance s editorial board considered market research, input from expert sources to select the institutions that reliably provide the best services TOP INFOLINIA: Best bank s call center in Poland by ARC Rynek i Opinia 4 AWARDS IN CONTEST MADE BY DZIENNIK GAZETA PRAWNA DAILY AND PWC Banking Star, Star of Growth, Star of Stability, Star of Effectiveness. Bank Pekao: an active participant in influential economic and social initiatives 26 THE EIGHTH EDITION OF THE EUROPEAN FINANCIAL CONGRESS On the century - for an innovative and secure future of the financial sector THE GLOBAL ASSOCIATION OF THE FINANCIAL INDUSTRY Michal Krupinski, as a panellist in session Views from the C-suite: Global Markets and Macro THE EIGHTH EDITION OF THE CONGRESS POLAND GREAT PROJECT Debates on strategic development challenges facing Poland in the coming decades.

28 Summary Financial results Business development We support ambitious goals and execute on them Bank Pekao: Proud sponsor of the first ski descent of K2 by Andrzej Bargiel 27

29 Key achievements in 2Q 18 and 1H 18 2Q 18 summary financial results Detailed financial performance Business development 28

30 2018 Outlook Expected solid performance for economy and banking sector Economy F GDP, % 3,0 4,6 4,5 Private consumption, % y/y 3,9 4,8 4,5 Investments, % y/y (8,2) 3,4 8,7 Unemployment, % eop 8,2 6,6 5,8 CPI, % avg (0,6) 2,0 1,8 3M Wibor, % eop 1,73 1,72 1,72 Reference rate, % eop 1,50 1,50 1,50 Exchange rate EUR, eop 4,42 4,17 4,2 Exchange rate USD, eop 4,18 3,48 3,75 Public sector balance, % GDP (2,3) (1,7) (1,9) Bank sector volumes F (2) Loans, % y/y 4,9 3,6 6,2 Retail, % y/y 5,2 1,8 4,9 Mortgage loans PLN 10,5 10,4 10,2 Consumer loans (1) 6,9 6,5 5,6 Corporate, % y/y 5,5 6,0 8,4 SME loans 4,9 6,0 8,1 Savings (3), % y/y 9,3 5,4 6,5 Deposits, % y/y 9,2 4,4 6,4 Retail, % y/y 9,5 4,1 6,3 Corporate, % y/y 7,9 2,4 5,6 Mutual Funds (4), % y/y 10,5 15,4 7,0 Good start into 2018 as GDP growth in the first half of the year stood around 5% y/y Household consumption remains the key source of economic growth amid robust labour market performance; investment growth recovering gradually For the full year real GDP growth expected at 4.5%, near 4.6% growth level achieved in 2017 Bank volumes are set to accelerate slightly compared to Pekao Research forecasts as of May 2018 (1) all non-housing loans (2) internal macroeconomic scenario, fixed exchange rates (3) deposits + retail customers assets in investment funds units (4) retail customers assets in investment funds units

31 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 18 3Q 18e Achievements Main trends GDP growth around 5% the first half of 2018 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 17 1Q 18e 2Q 18e 3Q 18e 4Q 18e 2,7% 4,4% 4,0% 5,2% 4,9% 5,2% 4,9% 3,8% 4,3% Inv estments -10,2% 1,4% 1,3% 3,6% 5,4% 8,1% 12,0% 7,0% 8,0% Priv ate consumption 4,7% 4,5% 4,9% 4,7% 5,0% 4,8% 4,5% 4,3% 4,2% In 2Q 2018 growth in fixed investments has been expected to accelerate amid growth in private investments still lagging behind public investments Growth in household consumption probably slowed somewhat in 2Q 2018 Manufacturing PMI index points to stable expansion in industry 30 Source: GUS, Pekao Research forecasts

32 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 18 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 18 3Q 18e Achievements Main trends Strong job market but labour supply constraints increasingly visible Labour market Wages (Corporate Sector) m, avg %, eop 6, % 6 6,4 6,2 6, , ,6 5,4 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% 7,5% CPI (%, av g.) 3,7% 0,9% 0,0% -0,9% -0,6% 2,0% 1,8% Wage growth in corporate sector above 7% in 1H 2018 Employment growth maintained momentum in 2Q 2018 despite supply side constraints Registered unemployment stabilised at 5.9% at the end of 2Q Source: GUS, Pekao Research

33 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 18 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 18 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 18 3Q 18e Achievements Main trends Recent CPI reads below NBP target Inflation, interest rates Government bond yields % % Base rate Jun ,5% Y 5Y 10Y 3M WIBOR (% eop) CPI (% y/y) Base rate NBP (%) Exchange rates NBP reference interest rate stood at 1.5%, lombard rate at 2.5% and deposit rate at 0.5% in 2Q eop 5,0 4,5 32 CPI accelerated to 2.0% yoy at the end of 2Q 2018, moving closer to the NBP target of 2.5%. CPI is expected to run below the NBP target (2.5%) until the end of 2018 and the Monetary Policy Council is likely to maintain policy rates unchanged this year Source: NBP, GUS, Pekao Research 4,0 3,5 3,0 2,5 2,0 Dec 17 Jun 18 y /y q/q EUR 4,17 4,34 2,6% 3,1% USD 3,48 3,74 1,0% 9,7% CHF 3,57 3,77-2,5% 5,3% EUR/PLN USD/PLN CHF/PLN

34 Key trends Upward pressure on input costs but first rate hikes is still distant PMI input and output prices NBP rate vs. CPI PMI, output prices, pts PMI, input prices, pts 6,0 5,0 NBP rate, % CPI, % y/y 70 4,0 65 3,0 60 2,0 55 1,0 50 0,0 45-1, pts Q 18 2Q 18 PMI, input prices 50,7 50,9 49,9 46,3 66,2 63,6 63,6 67,5-2, % E 2019E NBP rate, % 4,25 2,50 2,00 1,50 1,50 1,50 1,50 1,75 PMI, output prices 49,2 48,2 47,7 46,6 56,1 56,7 54,8 57,8 CPI, % y /y 2,4 0,7-1,0-0,5 0,8 2,1 1,8 2,6 Purchasing managers report sharp increase in input prices and declare to hike output prices Mounting cost pressure may initially shrink profit margins and eventually start fuelling into consumer inflation CPI inflation remains moderate, but is expected to increase towards the NBP target and trigger 25bp rate hike in 4Q18 33

35 Main trends Growth pace of loan and deposit volumes remains moderate albeit accelerating Loans and advances to households and institutional clients Deposits of households and institutional clients bl PLN bl PLN Q18 2Q Q18 2Q18 Households* Corporate** Households* Corporate** % y /y Q 18 2Q 18 Households 0,3 4,6 5,5 6,6 5,2 1,8 3,3 4,8 Corporate 3,8 2,5 7,3 7,0 4,5 6,2 5,8 6,7 % y /y Q 18 2Q 18 Households 7,8 6,5 9,2 9,4 9,5 4,1 4,8 6,4 Corporate 2,9 4,5 7,7 3,8 8,5 4,9 7,7 6,4 In 2Q 2018, adjusted for FX effects growth in loans and advances to households remained moderate (~4.5-5%), but in some segments (PLN mortgages) it was strong (>10%) In corporate segment the strongest growth in 2Q 2018 was observed in loans and advances in real estate sector Growth in household deposits gradually accelerating. Rebound in institutional segment driven by the situation in the public sector (growth in corporate deposits remained moderate) 34 * Households and non-profit institutions serving households ** Enterprises, non-bank financial institutions & public sector Source: NBP

36 Key trends Loan and deposit growth accelerating in Q Bank loans and receivables to households* Household deposits* % Ytd 7% % Ytd 11% 6% 9% 5% 4% 7% 3% 5% 2% 3% 1% 0% 1% -1% XII' I II III IV V VI VII VIII IX X XI XII Bank loans and receivables to institutional clients** -1% XII' I II III IV V VI VII VIII IX X XI XII Institutional client deposits** % Ytd % Ytd 11% 15% 9% 7% 10% 5% 5% 3% 0% 1% 35-1% XII' I II III IV V VI VII VIII IX X XI XII * Households and non-profit institutions serving households ** Enterprises, non-bank financial institutions & public sector Source: NBP -5% XII' I II III IV V VI VII VIII IX X XI XII

37 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 18 2Q 18** 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 18 2Q 18** Achievements Key trends NPL statistics distorted by the recent changes in methodology 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 - total SME Corporate Q 18 V'2018** Total 7,4% 7,1% 6,5% 6,2% 6,1% 6,1% 6,6% 6,5% Mortgage 2,8% 3,1% 3,1% 2,9% 2,9% 2,8% 2,9% 2,9% Cash 17,3% 14,7% 12,8% 12,3% 11,9% 11,5% 11,8% 11,7% Q 18 V'2018** Total 11,7% 11,6% 11,3% 10,0% 9,2% 8,2% 9,8% 9,7% SME 13,0% 13,0% 12,8% 11,7% 11,1% 10,0% 11,8% 11,9% Corporate 9,8% 9,6% 9,3% 7,7% 6,8% 5,8% 7,1% 6,9% Households: one-off increase at the beginning of the year due to changes in methodology, declining trend afterwards Corporate sector: significant increase at the beginning of the year due to changes in methodology, stabilization in the next months 36 Fom the beginning of 2018 data according to the changed methodology * - Share of non-performing loans in portfolio ** - last available data, at the end of May 2018 Source: NBP, KNF

38 Selected data 37

39 Consolidated balance sheet mln PLN Jun 17 Mar 18 Jun 18 Q/Q % Y/Y % Cash and amounts due from Central Bank % 19% Loans and advances to banks % 6% Loans and advances to customers* % 6% Investment securities % 13% Assets held for sale % 0% Intangible assets % 151% Tangible fixed assets % -2% TOTAL ASSETS ,4% 7,6% Amounts due to the Central Bank % 0% Amounts due to other banks % 21% Financial liabilities held for trading % 47% Amounts due to customers % 6% Debt securities issued % 195% Total liabilities ,5% 8,9% 38 Total Shareholders' equity ,8% -1,2% (*) Including loans and advances from customers and receivables from finance leases

40 Consolidated income statement mln PLN 2Q 17 1Q 18 2Q 18 Q/Q % Y/Y % Net interest income (1) ,1% 7,7% Net fee and commission ,0% 6,0% Operating income ,2% 9,2% Operating costs (2) ,9% 12,7% OPERATING PROFIT ,7% 6,2% Provisions ,4% 7,9% Guarantee funds charges ,8% 33,2% Banking tax ,2% 8,7% PROFIT BEFORE INCOME TAX ,7% 3,0% Income tax ,7% 10,0% GROUP NET INCOME (3) ,6% 0,9% Cost/Income Ratio (%) 45,4% 46,0% 46,8% 1,6% 3,1% Cost of Risk (%) 0,35% 0,36% 0,35% -3,0% -1,3% ROA (%) 1,3% 0,9% 1,2% 37,3% -7,9% NIM (%) 2,78% 2,82% 2,83% 0,3% 1,9% 39 (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

41 Selected data Bank Jun 17 Mar 18 Jun 18 Q/Q % Y/Y % Outlets ,0% -7,3% ATM's ,3% -2,3% Employees ,2% -3,1% No of PLN current accounts (ths)* ,2% 4,9% No of mortgage loan accounts (ths)** ,7% 7,3% No of clients holding a consumer loan accounts (ths)*** ,4% 8,5% Number of individuals acitive users electronic banking Pekao24 (ths) ,1% 9,7% Number of individuals with an access to mobile banking (ths) ,3% 24,4% Group Jun 17 Mar 18 Jun 18 Q/Q % Y/Y % Employees ,9% -1,2% Outlets ,0% -7,3% ATM's ,3% -2,3% Number of MF accounts (ths) ,2% -2,8% Number of Brokerage accounts (ths) ,5% -18,0% (*) Number of accounts including pre-paid card accounts 40 (**) Retail clients accounts (***) Pożyczka Ekspresowa (Express Loan)

42 Activity by segments mln PLN Retail Banking Private Banking Corporate&Investment Banking SME Banking Assets&Liabilities Management & Others Group 6M 17 6M 18 Y/Y % 6M 17 6M 18 Y/Y % 6M 17 6M 18 Y/Y % 6M 17 6M 18 Y/Y % 6M 17 6M 18 Y/Y % 6M 17 6M 18 Y/Y % Net interest income (1) % % % % % % Non-interest income % % % % % % Operating income % % % % % % Operating costs (2) % % % % 2,7-3,4-226% % OPERATING PROFIT % % % % % % Net write-downs/provision % % % % % % Guarantee funds charges % 0 0-7% % % % % Banking tax % % PROFIT BEFORE INCOME TAX % 6,4 1,0-84% % % % ,7% 41 (1) Total net interest income, dividends and other income from equity investments (2) Operating cost excluding guarantee funds charges

43 Group net profit structure mln PLN cumulative Group's share in capital % 6M 17 6M 18 Y/Y % Bank Pekao S.A. Banking - Poland 980, ,9 10,6% Entities - consolidated under full method 51,0 81,8 60% of which: Pekao Leasing Sp. z o.o. Leasing 100% 17,2 18,6 8% Centralny Dom Maklerski Pekao S.A. Brokerage 100% 17,4 14,6-16% Pekao Bank Hipoteczny S.A. Mortgage Bank 100% 2,6 0,8-69% Pekao PTE S.A. in liquidation Pension Fund 100% 0,6 2,4 300% Pekao Faktoring Sp. z o.o. Factoring 100% 5,4 5,9 9% Pekao Investment Banking S.A. Brokerage 100% 2,1 6,1 190% Centrum Bankowości Bezpośredniej Sp. z o.o. Call Centre 100% 1,7 2,7 59% Pekao Financial Services Sp. z o.o. Servicing MF/PF 66,5% 3,0 2,5-17% Centrum Kart S.A. Cards 100% 0,3-0,4 Pekao Fundusz Kapitałowy Sp. z o.o. in liquidation Business consulting 100% 0,2 0,2 0% Pekao Property S.A. Real estate development 100% 0,2 0,1-50% FPB "MEDIA" Sp. z o.o. - indirect Real estate development 100% 0,3-15,2-5167% Dom Inwestycyjny Xelion Sp. z o.o. Financial Advisory 100% 0,0 2,5 Pekao Investment Management S.A. Mutual Funds 100% 0,0 41,0 Entities - valued under the equity method 20,5 0,0-100% Pekao Investment Management S.A* Mutual Funds 19,1 0,0-100% Dom Inwestycyjny Xelion Sp. z o.o. ** Financial Advisory 1,4 0,0-100% Exclusions and consolidation adjustments -166,9-233,6 40% Group Net Profit (**) 884,8 932,1 5,3% 42 (*) 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

44 Breakdown of customer financing mln PLN Jun 17 Mar 18 Jun 18 Q/Q % Y/Y % Loans* ,4% 7,6% retail % 10% corporate % 5% Non quoted securities ,1% -3,4% Other % 60% Nominal value adjustment Impairment losses % 10% Net loans and advances % 6% TOTAL CUSTOMERS FINANCING** % 7% 43 (*) Including debt securities eligible for rediscounting at Central Bank, net investments in financial leases to customers (**) Total customers financing includes loans and advances at nominal value and reverse repo transactions.

45 Mutual funds Pekao Investment Management S.A. Mutual funds volumes Pekao Investment Management SA mln PLN +9.6% +2.3% 11% % % Jun 17 Mar 18 Jun 18 Third party funds distributed by the Group Pekao Investment Management SA ( PPIM before) Equity funds Balance funds Money and bonds funds 44

46 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 Positive 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 45

47 Shareholders: diversified shareholder base Banku Pekao S.A. shareholders Largest investors PZU SA 34% PFR SA 19% Unicredit 5% 6% 13% 20% 3% Nationale Nederlanden PTE Other 1 Pension Funds 2 MF PZU Group is the largest financial group in CEE Nearly 300 bn PLN of assets under management More than 22 million clients in 5 countries 46 Geographical structure 67% ISIN: PLPEKAO00016 Bloomberg: PEO PW Reuters: PEO.WA 12% 7% 13% 1,3% Poland USA Global Depositary Receipes; Underlying shares ratio 1:1 Reg S CUSIP: A CUSIP: Source: Polish Pension Funds annual reports dated 30th of June, Source : Analizy online, as at 31st of December, 2017 UK Europe 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 Listed on the Warsaw Stock Exchange since 30th June 1998 Bank Pekao SA is listed on WSE and London Stock Exchange (GDRs program) The third largest bank on WSE in terms of market capitalisation (29.7 bl zł) Member of several indices: WIG Banki, WIG 20, WIG 30, MSCI, CEERIUS Sustainability Index, FTSE4Good More than PLN 15 bl dividend paid out since 2011 P/BV 18: 1,26x, P/E 18: 13,0x

48 Investor relations team: contact and calendar CONTACT DETAILS FINANCIAL CALENDAR Q&A related to the presentation: Paweł Rzeźniczak Head of IR and Group Strategy ph.: Dorota Faszczewska-Ward ph.: Iwona Milewska ph.: February April May July 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 47 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

49 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. 48