1Q 2018 Financial Results of Bank Pekao S.A. Warsaw, 10th of May 2018

Transcription

1 1Q 2018 Financial Results of Bank Pekao S.A. Warsaw, 10th of May 2018

2 Key achievements in 1Q Q 2018 summary financial results Detailed financial performance Business development 1

3 Summary Financial results Business development Key achievements in 1Q 2018 Consistent progress on our 2020 strategy 1 Profitability 1Q 18 net profit of PLN 392m +12% y/y on reported figures and +9% y/y compared to pro-forma results, with a consecutive quarter of NIM expansion Improved RoE despite cost pressure from regulatory and tax burdens 2 Lending activity Another quarter of record sales volumes in key retail products outpacing volume growth of the sector Pricing discipline coupled with selective approach to origination in corporate banking 3 Business development Tangible benefits of our new current account offering supporting customer acquisition Milestone of 100k of new accounts Przekorzystne reached in 3 months since launch of the campaign Ongoing operational transformation benefiting sales in our digital and electronic channels Initiatives targeted at cost efficiency 4 Balance sheet resilience Strong capital position with capacity for generous dividend payout (up to 100% of profits) Industry-leading risk management practice with robust funding and liquidity profile 5 Dividend Dividend proposal of PLN 7.90 per share representing 99.3% payout from 2017 profit, in line with the Bank s guidance 2

4 Key achievements in 1Q Q 2018 summary financial results Detailed financial performance Business development 3

5 Consistent progress on our 2020 strategy Profitability 1Q 2018 ΔY/Y (1) Net profit 392m 12% (2) /9% RoE 8.7% (3) 35 bps NIM 2.82% 6 bps Growth levers Growth in profits by 12% y/y in nominal terms and 9% y/y compared to pro-forma results, thanks to better core income generation across segments Y/y improvement in profitability. Seasonally higher regulatory costs weight on RoE Continued expansion into higher-margin products supported by pricing discipline Efficiency and risk C/I 46.0% 40 bps Operating costs dynamic in the quarter influenced by higher marketing budget CoR 41bps Cost of risk in 1Q 18 materially below 4Q 17 Business development Key retail loans volumes m 14.3% Mobile banking Customers (4) 1m 40.0% Commercial bank revenues 7% Another quarter of strong growth in PLN mortgage and consumer loan products New functionalities and ongoing improvement in mobile banking penetration Strong revenue dynamic achieved across commercial bank 4 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method 2) dynamics based on reported figure of PLN 350m in 1Q 17 3) based on split of annual BFG costs equally across quarters. Reported ROE 6.9% as at 1Q 18 4) unique Customers with at least 1 login in the last 3 months

6 Key achievements in 1Q Q 2018 summary financial results Detailed financial performance Business development 5

7 Higher profits leading to RoE uplift Net profit growth Comment m PLN + 8.9% +12.2% -39.5% -0.8% Net profit growth +12.2% based on reported data (4) Net profit growth +8.9% y/y in 1Q18 compared to the pro-forma result achieved in 1Q 2017 Better profitability despite higher banking tax cost in 1Q 2018 relative to 1Q Q 17 (1) 4Q 17 (1)(2) 1Q 18 - NPL Quarterly dynamic adversely impacted by positive one-off items in 4Q 17 as well as seasonality in 1Q 18 Value for investors Improvement in ROE to 8.7% (3), achieved with TCR of 17.1% and T1 of 16.0% 6 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method 2) net income excluding impact of the Pekao Investment Management S.A. and Xelion transaction: 414m PLN xx% xx% - Net profit growth based on reporter data (350m PLN for 1Q 17 and 392m for 1Q 18) 3) based on split of annual BFG costs equally across quarters. Reported ROE 6.9% as at 1Q ) reported net profit for 1Q 2017 amounted to 350m PLN - dynamic excl. NPL portfolio sale (108 m PLN) and incl. the cost of annual contribution to the resolution fund in 4Q17 at the same level as in 1Q 18 for comparison basis (145 m PLN)

8 Consistent growth in operating result Operating income Gross operating profit m PLN + 4.3% m PLN + 3.5% -15.2% -3.5% % -2.6% Q 17(1) 4Q 17 (1) 1Q 18 Operating costs (1) (1) 1Q 17 4Q 17 1Q 18 m PLN + 5.2% Gross operating profit in 1Q 2018 at PLN 1bn, +3.5% y/y on comparable basis, reflecting better operating income (+4.3% y/y) -1.4% Q/Q improvement in our operating cost position led to C/I ratio of 46.0% at 1Q impact of NPL sale in 4Q 2017: PLN 143m xx% change excluding impact of NPL sale transaction 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method (1) (1) 1Q 17 4Q 17 1Q 18

9 Positive momentum in all our businesses Operating income Comment m PLN + 4.3% -9.4% -2.6% Strong revenue dynamic across commercial activity Growth of operating income in 1Q 18, +4.3% y/y % Retail & Private ΔY/Y (1) % +6% SME +16% Strong performance by all businesses underpinned by another quarter of better net interest income delivery Corporate +7% Total Commercial +7% Operating income drop q/q after recognition of profit on NPL sale in 4Q 17 and seasonality in 1Q 18 1Q 17 (1) 4Q 17 (1) 1Q 18 ALM and Others -8% 8 Core income Other income Impact of obligatory reserve and maturity of high yielding bonds in Apr 17 xx% 1) pro-forma, 2017 figures include results of Pekao Investment Management S.A. and Xelion under a full consolidation method change excluding impact of NPL sale transaction

10 Growth in net interest income coupled with margin expansion Net interest income Net interest margin Comment m PLN + 8.0% + 6bps +1.2% + 1bps ,81% 2,82% 2,76% (1) (1) (1) (1) 1Q 17 4Q 17 1Q 18 1Q 18 net interest margin evolution 1Q 17 4Q 17 1Q 18 +4bps +4bps -2bps -5bps 2,81% 2,82% Net interest income maintained in upward trajectory with a 1.2% q/q growth against negative effects of shorter day count in 1Q and a lower rate of obligatory reserves placed by the Bank with the Central Bank Continued interest margin expansion supported by a strong origination of higher-margin products and pricing discipline Higher liquidity buffer accumulated during the quarter led to ca. 5 bps negative impact on interest margin 9 Presentation shift Obligatory Higher Commercial 4Q 17 F&C/NII reserve liquidity result 1Q 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 % % % % Sound growth in stock of key retail loans +14.3% y/y with a solid growth dynamic achieved q/q Another quarter of record sales in mortgage and consumer loan products 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 Mar 17 Dec 17 Mar 18 Mar 17 Dec 17 Mar 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 Retail savings Corporate deposits 1 Comment m PLN +7.1% +2.3% +12.7% -7.7% Total deposit growth of +9.6% y/y Retail and corporate deposits growth dynamic at healthy level, respectively +7.1% and +12.7% y/y coupled with ongoing migration of client monies from term deposits to current accounts Growth of mutual fund assets at 10.3% y/y supported by another quarter of robust net sales (103% y/y) (2) despite capital market headwinds in 1Q 18 Mar 17 Dec 17 Mar 18 Mar 17 Dec 17 Mar 18 Retail deposits Mutual funds 11 1) excl. BSB and repo transactions 2) PLN 599m in 1Q 2018 and 295m in 1Q 2017 for Pekao Group incl. third party funds distributed by the Group

13 Net fee and commission income Net fee and commission income Comment m PLN -4.2% % -8.9% % y/y Higher capital market fees driven by a favourable performance of asset management and investment banking Card fees adversely affected by higher commission and incentive costs as well as lower level of rebates Q 17 (1) 4Q 17 (1) 1Q 18 Cards Capital markets FX commercial fees Loans Other y/y growth in loan origination fees on a comparable basis FX commercial fees and cards below our aspiration performance Negative impact on lending origination fees due change in presentation of certain lending fees as interest income. Y/y improvement excluding presentational effects 12 1) pro-forma, 2017 financial data include results of the Pekao Investment Management S.A. and Xelion consolidated under full method xx% - dynamic include presentation shift F&C/NII

14 Operating cost position Operating costs Comment m PLN BGF + banking tax Costs incl. BGF, banking tax +5.2% -1.4% (1) 1Q 17 (1) 4Q 17 1Q Quarterly operating costs at PLN 851 m, +5.2% y/y with a q/q reduction of 1.4% Higher variable compensation and associated higher social charges components in the overall cost structure driving increase in personal costs y/y Stable cost of aggregate wages Increase in non-personnel expenses y/y primarily driven by higher marketing budget as well as strategic projects realised across the bank Alignment of marketing budget with the sector levels 13 Depreciation Non-personnel costs Personnel costs 1) pro-forma, 2017 financial data include results of the Pekao Investment Management S.A. and Xelion consolidated under full method

15 Update on cost management initiatives Number of initiatives undertaken Progress 1 Branch network optimisation Closure of 66 least profitable branches in Q4 17 Ongoing focus on profitability of the branch network in light of continued migration of clients into digital channels Initiatives undergoing to streamline back office cost efficiency targeting: 2 Operational efficiency and automation Robotisation of more than 30 process (50+ in total including those already implemented) Simplification and automation of mortgage origination and servicing process Completion by end of 2018 Simplification of credit approval process in micro segment 3 Voluntary retirement program Program open to employees with and acquiring pension entitlement rights by end of 2018 Recent legislative changes reducing minimum age threshold for pension entitlement Program together with automation process will allow for ca 1000 reduction of staffing and consequently cost base during next years Completion by end of Measured actions supporting our strategic objective of efficiency expert underpinned by cost/income ratio <40% in 2020

16 Improvement in cost of risk NPL ratio NPL coverage ratio Comment 5,9% 5,4% 5,0% Mar 17 Dec17 Mar 18 IFRS9 75,1% 74,4% 76,7% Mar 17 Dec17 Mar 18 IFRS9 Reduction in risk provisions led to 41bps in 1Q 18, below the average CoR metric in recent quarters NPL ratio at 5.0% with one of the highest coverage ratios in the Polish banking sector at 76.7% Quarterly cost of risk ratio evolution Limited impact on risk metrics associated with the introduction of IFRS9 in Jan 18 FY % FY % 0,47% 0,47% 0,48% 0,40% 0,37% 0,39% 0,46% 0,50% 0,41% Figures to 4Q 17 according to IFRS39, from 1Q 18 according to IFRS9 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 quarterly average for last 2 years

17 Superior capital and funding position Capital requirements (Tier 1) Liquidity Coverage Ratio (LCR) +4.6pp 11,4% 14,8% 16,0% 122% 114% 110% 121% 135% Min. requirements 2018 Requirements for payment up to 100% of dividend Pekao Group 1Q 18 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Capital requirements (TCR) Loans/Deposits (L/D) (1) +3.7pp 93,8% 92,7% 94,0% 88,5% 90,6% 13,4% 16,8% 17,1% 16 Min. requirements 2018 Requirements for payment up to 100% of dividend Pekao Group 1Q 18 Requirement of combined buffers for payment of 100% of the dividend : (1) Min. requirement according to art. 92 CRR 6% for Tier 1, 8% for TCR (2) Capital conservation buffer 2,5%, (3) Systemic risk buffer 3%, (4) O-SII 0,5%, (5) FX mortgage requirement 0,01%, (6) Art. 142 par. 4 of Banking Law 1,5%, (7) ST 1,27% Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Capital surplus over capital requirements related to 100% dividend payout under both TCR and for Tier 1 criteria Robust LCR position after further strengthening achieved in 1Q 18 Stable NSFR ratio above 120% 1 - 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

18 Key achievements in 1Q Q 2018 summary financial results Detailed financial performance Business development 17

19 Summary Financial results Business development Retail banking: another quarter of record sales New sales of consumer loans Share of electronic channels in new sales (units) Consumer loan origination Share net/gross m PLN 63% 63% 75% % Q 17 4Q 17 1Q 18 Gross sales (1) Net sales (2) Volume 8% x5.4 11% 14% 25% 28% 18% +10pp 1Q 17 4Q 17 1Q 18 Concentration on net sales and pricing discipline + 6.8% y/y growth in net sales volume Enhancing customer reach to the preapproved electronic quick loan processes, > 1.6m customers with access Continued growth in the sales of loan products with electronic channels > 28% share of total origination by units > 13% share of total origination by volume New sales of mortgage loans Share of new sales market PLN Mortgage origination m PLN +13.8% % pp +1pp 23% 21% 22% Market leader in February Record quarterly sales of PLN 2.8b mortgages Nr 2 mortgage originator in the market consistently closing gap against market leader Focus on product profitability through better margins and insurance cross sell 18 1Q 17 4Q 17 1Q 18 1) Gross sales - includes renewed and rolled sales 2) Net sales new sales only 1Q 17 4Q 17 1Q 18 Ongoing operational improvement: Process simplification and time-to-decision

20 Summary Financial results Business development Retail banking: Sustainable growth across product lines Consumer loans PLN Mortgage loans m PLN +21.6% m PLN +12.8% +3.3% +3.3% Mar 17 Dec 17 Mar 18 Mar 17 Dec 17 Mar 18 Consumer loan growth (y/y) PLN mortgage loan growth (y/y) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 7.7% 7.7% 7.4% 7.3% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 7,8% 7,7% 7,6% 7,5% 7,4% 7,3% 7,2% 7,1% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% 18.1% 18.0% 17.8% 17.7% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 18,2% 18,1% 18,0% 17,9% 17,8% 17,7% 17,6% 17,5% 17,4% 19 Pekao Sector Pekao market share (right axis) xx% Market share

21 Summary Financial results Business development Retail banking: New opening in customer acquisition, development of investment product offering Reshaping investment product proposition Sale of investment products 1 8.3x y/y increase in net sales of investment products m PLN 8x Pekao TFI funds net sales increase of 390 m PLN despite market headwinds in 1Q New offer of structured products (SCD) achieving higher sales by +191 m PLN due to growing number of new subscriptions Successful rebranding of asset management operations following closing of the acquisition 79 1Q 17 4Q 17 1Q 18 New customer acquisition tools established 86% YoY quarterly net sales growth of PLN current accounts due to launch of new Konto Przekorzystne on Jan 25 th resulting in 51% growth in daily gross sales New offer and marketing focused on client acquisition resulting in +123k current accounts y/y Milestone of 100k new Konto Przekorzystne opened since launch of the campaign in January 2018 PLN current account sales Stock and new sales Gross sales 86% +51% +38k +20k Promising start of new savings account sales campaign +PLN 400m since launch 4x higher monthly sales vs. average monthly sales in period 1 net sale of investment funds and net SCD 4Q 16 1Q 17 4Q 17 1Q 18 Before kick-off Kick-off Daily sales 25/01/2018 (last 3M) Konto Przekorzystne

22 Summary Financial results Business development Innovative digital banking Consistent improvement in mobile and internet banking penetration Active clients of mobile banking (1) (ths.) Active clients of electronic banking (1) (ths.) + 40% + 9% Mar 17 Dec 17 Mar 18 Mar 17 Dec 17 Mar 18 28% Continued high growth dynamic in digital sales Nearly third of consumer loan origination on Click New functionalities in mobile service and PeoPay application implemented in 1Q 18: Introduced functionality of investment account Preview of debit cards with PIN setting/changing Function of payments calendar with easy check of Internal pilot of BLIK already started! 244k +45% q/q Leader in contactless payments Number of users with possibility to pay with HCE upcoming and recurring payments Direct contact to bank advisor Unique Customers with at least 1 login in the last 3 months

23 Summary Financial results Business development New solutions and selective growth in corporate banking Ready for split payments Activities preparing companies for changes in the method of VAT transferring and accounting on counterparties accounts: Training for ~1.5 thousand medium and large corporate customers Dedicated helpline for companies and software providers The information service Selected industry awards Best Bank Best Investment Bank A role model for business INNOVATIONS 2018 For Pekao Connect integrating FK-RK systems with electronic banking Investment loans (1) Leasing & Factoring (1) Billing processes m PLN +16.8% m PLN m PLN +19.9% +19.6% % % MID and Large segment Mar 17 Mar 18 Mar 17 Mar 18 1Q 17 1Q 18 Outgoing transfers Incoming transfers

24 Summary Financial results Business development Another quarter of leadership in investment banking Acquisition of Hortex Group Supporting strategic projects in the Polish corporate sector PLN 495 m Acquisition Finance Pekao: MLA PLN 2.75 bn Tender offer for shares and related products Pekao: Co-financing Bank PIB: Provision of comprehensive transaction support and tender offer broker PLN 1.15 bn Tender offer for shares PIB: Capital Market Advisor and Tender Offer Broker to Goldman Sachs Group in the acquisition of a 100% stake in ROBYG S.A. A successful exit from the WSE The largest takeover of a developer in Poland One of the biggest tender offer for shares in non-financial sector in the history of the WSE Leadership in providing tailored financing solutions for corporates and FIs PLN 300m 5-year bond EUR 50m 7-year bond PLN 45m 4-year bond PLN 30m 2-year bond Leader in corporate bond market issuance in Q with an almost 47% market share* Arranger Arranger Arranger Arranger 23 * Excluding the intercompany bond issues; source: Rating&Rynek (Fitch Polska),

25 Summary Financial results Business development Building momentum in SME banking Achieved milestones Loan sales Primary relationships bank Effective acquiring model Customer focused service model established Mobile advisers Remote channels Product specialists New offer dedicated to SME and tailored to client requirements Package SME STANDARD Package SME PREMIUM m PLN % +48.2% +35.5% New service model with light-touch processes Profitability improvement and cross-sell agenda Simple and convenient financing Extension of the SME offer with new products Revolving credit Dual currency investment Trade financing products Prudent expansion into new sectors with potential (CRE, start-up, innovative companies) New risk framework for SME Development of competences High-class specialists New unified management model, supported by training 1Q 17 1Q 18 Loans Leasing and Factoring Loan volumes +14.2% Tangible results Number of new customers growth 3x y/y New sale of loans up by +40% with strong increase in leasing and factoring products Mar 17 Mar 18 Loans Leasing and Factoring

26 Summary Financial results Business development Prizes and awards Recognition by the market, industry experts and press THE PILLAR OF POLISH ECONOMY: For supporting the majority of investments in both large and medium-sized municipalities and implementing a business policy important for local communities and regions. BANK PEKAO S.A. INNOWCJE 2018 : For package of Connect services KDPW S.A. AWARD: For the highest combined activity in organized turnover in BANK OF THE YEAR Bank Pekao S.A. BEST INVESTMENT BANK - Pekao Investment Banking Bank Pekao S.A. participates in important economic and social initiatives THE SEVENTH EDITION OF THE POLISH ECONOMIC FORUM 2018 IN LONDON CELEBRATION OF THE CENTURY OF REGAINING INDEPENDENCE by Poland with the debate of historians and an exhibition presenting the history of the first decade of the Bank. 25

27 Key achievements in 1Q Q 2018 summary financial results Detailed financial performance Business development 26

28 2018 Outlook Expected solid performance for economy and banking sector Economy Bank sector volumes F GDP, % 3,0 4,6 4,2 Private consumption, % y/y 3,9 4,8 4,5 Investments, % y/y (8,2) 3,4 7,2 Unemployment, % eop 8,2 6,6 5,9 CPI, % avg (0,6) 2,0 1,6 3M Wibor, % eop 1,73 1,72 1,73 Reference rate, % eop 1,50 1,50 1,50 Exchange rate EUR, eop 4,42 4,17 4,12 Exchange rate USD, eop 4,18 3,48 3,49 Public sector balance, % GDP (2,3) (1,7) (2) F (2) Loans, % y/y 4,9 3,6 6,2 Retail, % y/y 5,2 1,8 4,6 Mortgage loans PLN 10,5 10,4 8,8 Consumer loans (1) 6,9 6,5 6,6 Corporate, % y/y 5,5 6,0 8,9 SME loans 4,9 6,0 8,7 Savings (3),% y/y 9,3 5,6 6,5 Deposits, % y/y 9,2 4,4 6,4 Retail, % y/y 9,5 4,1 6,5 Corporate, % y/y 7,9 2,4 6,0 Mutual Funds (4),% y/y 10,5 18,0 7,0 Good start into 2018 as GDP growth in 1Q 2018 estimated to have remained slightly below 5%, maintaining momentum observed in 4Q Household consumption most likely remained buoyant in 1Q 2018 amid robust labour market performance; investment growth accelerated further. In the whole year real GDP growth expected at 4.2% following 4.6% growth achieved in Bank volumes are set to accelerate slightly compared to Pekao Research forecasts as of May 2018 (1) all lnon-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

29 Main trends GDP growth close to 5% in early 2018 GDP composition PMI Index % yoy pts Q 12 % y /y GDP 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14 1Q 15 Private consumption Public consumption Investments Export net Change in inventories GDP (% y/y) 3Q 15 1Q 16 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% 4,8% 4,3% 4,0% 3,9% Inv estments -10,2% 1,4% 1,3% 3,6% 5,4% 9,0% 8,0% 7,0% 6,1% Priv ate consumption 4,7% 4,5% 4,9% 4,7% 5,0% 4,8% 4,4% 4,3% 4,3% 3Q 16 1Q 17 3Q 17 1Q 18e 3Q 18e In 1Q 2018 growth in fixed investment is forecast to have accelerated, with private investment gradually joining public investment Household consumption expanded at a rate close to 5% in 1Q 2018 Manufacturing PMI index points to further expansion in industry 28 Source: GUS, Pekao Research forecasts

30 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 1Q 12 3Q 12 Employ ment (mln people) Unemploy ment rate (eop) 1Q 13 3Q 13 1Q 14 3Q 14 1Q 15 3Q 15 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18e 3Q 18e Corporate employment Unemployment rate (right) 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% 5,9% 0 (2) 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 Salaries (ths avg.) right CPI (% y/y) Salaries (% y/y, avg.) 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% 1,6% 0 Wage growth in corporate sector remained around 7% in 1Q 2018 Employment growth slowed down slightly in 1Q 2018 amid supply side constraints Registered unemployment moderated to 6.6% at the end of 1Q Source: GUS, Pekao Research

31 Main trends Recent CPI reads point to softening in inflation trends Inflation, interest rates Government bond yields % % Base rate Mar ,5% Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 3M WIBOR (% eop) CPI (% y/y) Base rate NBP (%) 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 2Y 5Y 10Y Exchange rates 3Q 18e eop NBP reference interest rate stood at 1.5%, lombard rate at 2.5% and deposit rate at 0.5% in 1Q ,0 4,5 CPI moderated to 1.3% yoy at the end of 1Q 2018, declining blow the lower bound around the NBP target (2.5% +/- 1 percentage point). 4,0 3,5 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 3,0 2,5 2,0 dec-17 mar-18 y /y q/q EUR 4,17 4,21-0,3% 0,9% USD 3,48 3,41-13,5% -1,9% CHF 3,57 3,58-9,2% 0,4% 30 Source: NBP, GUS, Pekao Research 1Q 12 3Q 12 1Q 13 3Q 13 1Q 15 3Q 15 1Q 15 3Q 15 EUR/PLN USD/PLN CHF/PLN 1Q 16 3Q 16 1Q 17 3Q 17 1Q 18

32 Main trends Moderate growth pace of loan and deposit volumes in Q Loans and advances to households and institutional clients Deposits of households and institutional clients B PLN B PLN Q Q18 Households* Corporate** Households* Corporate** % y /y Q 18 Households 0,3 4,6 5,5 6,6 5,2 1,8 3,3 Corporate 3,8 2,5 7,3 7,0 4,5 6,2 5,8 % y /y Q 18 Households 7,8 6,5 9,2 9,4 9,5 4,1 4,8 Corporate 2,9 4,5 7,7 3,8 8,5 4,9 7,7 In 1Q 2018, adjusted for FX effects growth in loans and advances to households remained moderate (~4-4.5%). Expansion in non-housing loans was faster than mortgages In corporate segment the fastest growth in 1Q 2018 was observed in loans and advances for financing real estates Growth in household deposits gradually accelerating. Rebound in institutional segment driven by the situation in the public sector 31 * Households and non-profit institutions serving households ** Enterprises, non-bank financial institutions & public sector Source: NBP

33 Key trends Moderate growth pace of loan and deposit volumes in Q Bank loans and receivables to households* Household deposits* % Ytd 7% % Ytd 11% 6% 9% 5% 7% 4% 3% 5% 2% 3% 1% 0% -1% XII' I II III IV V VI VII VIII IX X XI XII Bank loans and receivables institutional clients** 1% -1% XII' I II III IV V VI VII VIII IX X XI XII Institutional client deposits** % Ytd 11% % Ytd 15% 9% 7% 10% 5% 5% 3% 1% 0% 32-1% 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

34 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% 10% 8% 6% 4% 2% 0% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 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 Retail loans Mortgage Cash (right) Retail loans Mortgage Cash (right) 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 in 2017 amid improvement in two main categories: mortgage and consumer loans Corporate sector: significant improvement in headline figure in 2017 thanks to improvement in both SME as well as in large corporate sectors 1Q 2018 data not available at the time of the presentation due to changes in methodology and the resulting delay in the publication of current statistics 33 * Share of non-performing loans in portfolio Source: NBP

35 Selected data 34

36 Consolidated balance sheet mln PLN Mar 17 Dec 17 Mar 18 Q/Q % Y/Y % Cash and amounts due from Central Bank % 98% Loans and advances to banks % 25% Loans and advances to customers* % 6% Investment securities % 6% Assets held for sale % 3% Intangible assets % 145% Tangible fixed assets % -1% TOTAL ASSETS ,5% 8,0% Amounts due to the Central Bank % 0% Amounts due to other banks % 4% Financial liabilities held for trading % -13% Amounts due to customers % 8% Debt securities issued % 165% Total liabilities ,5% 9,6% Total Shareholders' equity ,1% -1,7% 35 (*) Including loans and advances from customers and receivables from finance leases

37 Consolidated income statement mln PLN 1Q 17 4Q 17 1Q 18 Q/Q% Y/Y% Net interest income (1) ,6% 7,2% Net fee and commission ,7% 2,5% Operating income ,4% 6,2% Operating costs (2) ,4% 7,3% OPERATING PROFIT ,3% 5,2% Provisions ,9% 10,3% Guarantee funds charges ,0% -13,3% Banking tax ,4% 10,5% PROFIT BEFORE INCOME TAX ,1% 11,8% Income tax ,3% 11,1% GROUP NET INCOME (3) ,8% 12,2% Cost/Income Ratio (%) 45,5% 42,3% 46,0% 3,7% 0,5% Cost of Risk (%) 0,40% 0,50% 0,41% -0,1% 0,0% ROA (%) 0,8% 2,4% 0,9% -1,5% 0,1% NIM (%) 2,76% 2,81% 2,82% 0,0% 0,1% 36 (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

38 Selected data Bank Mar 17 Dec 17 Mar 18 Q/Q % Y/Y % Outlets ,0% -7,7% ATM's ,3% -1,9% Employees ,3% -2,6% No of PLN current accounts (ths)* ,2% 4,4% No of mortgage loan accounts (ths)** ,4% 7,7% No of clients holding a consumer loan accounts (ths)*** ,7% 8,8% Number of individuals with an access to electronic banking Pekao24 (ths) ,6% 8,8% Number of individuals with an access to mobile banking (ths) ,3% 22,7% Group Mar 17 Dec 17 Mar 18 Q/Q % Y/Y % Employees ,7% -1,0% Outlets ,0% -7,7% ATM's ,3% -1,9% Number of MF accounts (ths) ,7% -2,2% Number of Brokerage accounts (ths) ,6% -10,7% (*) Number of accounts including pre-paid card accounts 37 (**) Retail clients accounts (***) Pożyczka Ekspresowa (Express Loan)

39 Activity by segments mln PLN Retail Banking Private Banking Corporate&Investment Banking SME Banking Assets&Liabilities Management & Others Group 3M 17 3M 18 Y/Y % 3M 17 3M 18 Y/Y % 3M 17 3M 18 Y/Y % 3M 17 3M 18 Y/Y % 3M 17 3M 18 Y/Y % 3M 17 3M 18 Y/Y % Net interest income (1) % % % % % % Non-interest income % % % % % % Operating income % % % % % % Operating costs (2) % % % % 1,2-1,2-200% % OPERATING PROFIT % % % % % % Net write-downs/provision % % % % % % Guarantee funds charges % 0 0-3% % % % % Banking tax % % PROFIT BEFORE INCOME TAX % 3,2 0,8-77% % % % ,8% 38 (1) Total net interest income, dividends and other income from equity investments (2) Operating cost excluding guarantee funds charges

40 Group net profit structure mln PLN cumulative Group's share in capital % 3M 17 3M 18 Y/Y % Bank Pekao S.A. Banking - Poland 457,2 434,7-4,9% Entities - consolidated under full method 27,3 54,1 98% of which: Pekao Leasing Sp. z o.o. Leasing 100% 8,8 8,6-2% Centralny Dom Maklerski Pekao S.A. Brokerage 100% 11,0 7,6-31% Pekao Bank Hipoteczny S.A. Mortgage Bank 100% 0,4 0,3-25% Pekao PTE S.A. Pension Fund 100% 0,2 1,8 800% Pekao Faktoring Sp. z o.o. Factoring 100% 2,4 3,1 29% Pekao Investment Banking S.A. Brokerage 100% 1,4 7,5 436% Centrum Bankowości Bezpośredniej Sp. z o.o. Call Centre 100% 1,2 1,5 25% Pekao Financial Services Sp. z o.o. Servicing MF/PF 100% 1,4 1,5 7% Centrum Kart S.A. Cards 100% 0,0-0,3 Pekao Fundusz Kapitałowy Sp. z o.o. in liquidation Business consulting 100% 0,1 0,1 0% Pekao Property S.A. Real estate development 100% 0,1 0,1 0% FPB "MEDIA" Sp. z o.o. - indirect Real estate development 100% 0,3 0,3 0% Dom Inwestycyjny Xelion Sp. z o.o. Financial Advisory 100% 0,0 1,1 Pekao Investment Management S.A. Mutual Funds 100% 0,0 20,9 Entities - valued under the equity method 10,1 0,0-100% Pekao Investment Management S.A* Mutual Funds 49% 9,5 0,0-100% Dom Inwestycyjny Xelion Sp. z o.o. ** Financial Advisory 50% 0,6 0,0-100% Exclusions and consolidation adjustments -144,9-96,5-33% Group Net Profit (**) 349,7 392,3 12,2% 39 (*) 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

41 Customers financing mln PLN Mar 17 Dec 17 Mar 18 Q/Q % Y/Y % Loans* ,6% 6,7% retail % 10% corporate % 3% Non quoted securities ,5% -2,4% Other % 590% Nominal value adjustment % -100% Impairment losses % 66% Net loans and advances % 6% TOTAL CUSTOMERS FINANCING** % 6% 40 (*) 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.

42 Mutual funds Pekao Investment Management S.A. Mutual funds volumes Pekao Investment Management SA mln PLN +9.3% +1.2% 12% % 74% Mar 17 Dec 17 Mar 18 Third party funds distributed by the Group Pekao Investment Management SA ( PPIM before) Equity funds Balance funds Money and bonds funds 41

43 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 42 On 13th of April, 2018 S&P Global Ratings has revised Outlook of Poland s long-term rating to Positive

44 Shareholders: diversified shareholder base Banku Pekao S.A. shareholders Largest investors 42% PZU SA PFR SA 6% 13% 20% 16% 2% Unicredit Other Pension Funds 2 MF 1 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 Geographical structure Poland 6% 10% 14% US 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 13% UK 56% Other European countries Other 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 (30.6 bl zł) 43 ISIN: PLPEKAO00016 Bloomberg: PEO PW Reuters: PEO.WA Global Depositary Receipes; Underlying shares ratio 1:1 Reg S CUSIP: A CUSIP: Source : Analizy online, as at 30th of June, Source: Polish Pension Funds annual reports dated 31st of December, Excluding dividend proposal from 2017YE profit Member of several indices: WIG Banki, WIG 20, WIG 30, MSCI, CEERIUS Sustainability Index More than PLN 13b dividend paid out since 2011 (3) P/BV 18: 1.32x, P/E 18: 13.3x

45 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 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 44 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

46 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. 45