Selected financial data

Transcription

1 INTERIIM CONDENSED CONSOLIIDATED FIINANCIIAL STATEMENTS OF THE CAPIITAL GROUP OF BANK HANDLOWY W WARSZAWIIE S..A.. FOR THE FIIRST QUARTER 2010 MAY 2010

2 Selected financial data EUR 000*** First quarter growing First quarter growing First quarter growing First quarter growing period from to period from to period from to period from to Data related to summary condensed consolidated financial statements Interest income 496, , , ,758 Fee and commission income 173, ,357 43,662 32,473 Profit before tax 196,699 66,774 49,585 14,518 Net profit 150,933 46,153 38,048 10,035 Total income 280,867 12,678 70,803 2,756 Increase of net cash (3,327,442) (1,809,181) (838,802) (393,352) Total assets* 37,714,128 37,633,063 9,764,934 9,160,475 Liabilities due to Central Bank* 989, , , ,656 Financial liabilities valued at amortized cost* 25,691,053 26,359,837 6,651,922 6,416,396 Shareholders equity 6,481,090 5,643,114 1,678,082 1,200,331 Share capital 522, , , ,169 Number of shares (in pcs) 130,659, ,659, ,659, ,659,600 Book value per share (PLN / EUR) Capital adequacy ratio (%)* Earnings per ordinary share (PLN / EUR) Diluted net profit per ordinary share (PLN / EUR) Data related to summary condensed financial statements of the Bank Interest income 488, , , ,059 Fee and commission income 154, ,483 38,868 30,109 Profit before tax 184,428 75,065 46,492 16,321 Net profit 141,312 54,651 35,623 11,882 Total income 273,033 17,957 68,828 3,904 Increase of net cash (3,327,563) (1,809,217) (838,832) (393,359) Total assets* 36,258,217 36,455,439 9,387,970 8,873,823 Liabilities due to Central Bank* 989, , , ,656 Financial liabilities valued at amortized cost* 25,136,479 25,761,339 6,508,332 6,270,712 Shareholders equity 6,408,490 5,562,034 1,659,285 1,183,084 Share capital 522, , , ,169 Number of shares (in pcs) 130,659, ,659, ,659, ,659,600 Book value per share (PLN / EUR) Capital adequacy ratio (%)* Earnings per ordinary share (PLN / EUR) Diluted net profit per ordinary share (PLN / EUR) Declared or distributed dividends per ordinary share (PLN / EUR)** * Comparable data according to balance sheet as at 31 December ** The presented ratios are related to declared dividends from the appropriation of the 2009 profit. According to the Management Board of the Bank on the meeting on 18 June 2009, in conformity with Resolution no 26a/2009, no dividend from 2008 profit has been paid. *** The following foreign exchange rates were applied to transfer PLN into EUR: for the balance sheet - NBP mid exchange rate as at 31 March PLN (as at 31 December 2009: PLN ; as at 31 March 2009 PLN ); for the income statement and cash flow- the arithmetic average of month - end NBP exchange rates in first quarter PLN (in first quarter 2009: PLN ). 2

3 CONTENTS Condensed consolidated income statement 4 Condensed consolidated statement of comprehensive income 5 Condensed consolidated balance sheet 6 Condensed consolidated statement of changes in equity 7 Condensed consolidated statement of cash flows 7 Supplementary notes to the condensed consolidated financial statements 8 1. General information about the Bank and Capital Group of the Bank 8 2. Conformity statement 8 3. Principles accepted at composition of report 9 4. Macroeconomic trends and conditions prevailing in money, FX and capital markets 9 5. Banking sector Financial analysis of the Group s Results Segmental reporting Activities of the Group Seasonality or cyclical nature of business activity Issue, buyout and repayment of debt and equity securities Paid or declared dividends Changes in the Group s structure Major events after the balance sheet date not included in the financial statements _ Movements in off-balance sheet commitments Achievement of 2010 forecast results Information about shareholders Ownership of issuer s shares by managing and supervising officers Information on pending proceedings Information about significant transactions with related entities which were deal on other than market terms Information about guarantee agreements Other important information Description of factors and events that might affect the Group s future financial performance 35 Summary interim financial statements of the Bank for first quarter

4 Condensed consolidated income statement First quarter growing First quarter growing period from to period from to Interest and similar income 496, ,815 Interest expense and similar charges (124,155) (160,400) Net interest income 372, ,415 Fee and commission income 173, ,357 Fee and commission expense (23,717) (24,567) Net fee and commission income 149, ,790 Dividend income Net income on financial instruments and revaluation 56,879 39,608 Net gain on investment debt securities 21,960 19,892 Net gain on investment (capital) instruments 2,516 1,440 Other operating income 18,929 28,926 Other operating expenses (23,471) (12,316) Net other operating income (4,542) 16,610 General administrative expenses (307,703) (352,016) Depreciation expense (16,939) (21,726) Profit / (loss) on sale of tangible fixed assets (122) 1,482 Net impairment losses (77,354) (152,493) Operating income 196,821 68,014 Share in profits / (losses) of undertakings accounted for under the equity method (122) (1,240) Profit before tax 196,699 66,774 Income tax expense (45,766) (20,621) Net profit 150,933 46,153 Weighted average number of ordinary shares (in pcs) 130,659, ,659,600 Net profit per ordinary share (in PLN) Diluted net profit per ordinary share (in PLN) Including: Net profit due to shareholders of dominant entity 150,933 46,153 Net profit due to minority shareholders - - 4

5 Condensed consolidated statement of comprehensive income First quarter growing period from 01/01/10 to 31/03/10 First quarter growing Period from 01/01/09 to 31/03/09 Net income 150,933 46,153 Other comprehensive income: Valuation of financial assets available for sale (net) 131,721 (36,694) Difference in exchange rates (1,787) 3,219 Other comprehensive income after tax 129,934 (33,475) Total income 280,867 12,678 Including: Comprehensive income due to shareholders of dominant entity 280,867 12,678 Comprehensive income due to minority shareholders - - 5

6 Condensed consolidated balance sheet State as at ASSETS Cash and balances with Central Bank 748,588 4,113,355 Financial assets held-for-trading 4,868,211 5,397,125 Debt securities available-for-sale 14,460,136 8,290,225 Equity investments valued at equity method 55,887 56,895 Other equity investments 21,668 24,140 Loans and advances 14,308,454 16,777,255 to financial sector 2,728,025 4,802,562 to non-financial sector 11,580,429 11,974,693 Property and equipment 493, ,192 land, buildings and equipment 475, ,884 investment property 18,308 18,308 Intangible assets 1,280,687 1,282,574 Deferred income tax assets 423, ,372 current 79,863 97,657 deffered 343, ,715 Other assets 1,040, ,384 Non-current assets held-for-sale 12,900 19,546 Total assets 37,714,128 37,633,063 LIABILITIES Liabilities due to Central Bank 989, ,446 Financial liabilities held-for-trading 3,148,177 3,108,493 Financial liabilities valued at amortized cost 25,691,053 26,359,837 deposits from 24,149,058 25,307,218 financial sector 5,854,601 4,735,260 non-financial sector 18,294,457 20,571,958 other liabilities 1,541,995 1,052,619 Provisions 41,021 49,390 Income tax liabilities Other liabilities 1,362, ,508 Total liabilities 31,233,038 31,433,674 EQUITY Issued capital 522, ,638 Share premium 3,030,546 3,030,546 Revaluation reserve 50,695 (81,026) Other reserves 2,224,759 2,225,712 Retained earnings 652, ,519 Total equity 6,481,090 6,199,389 Total liabilities and equity 37,714,128 37,633,063 6

7 Condensed consolidated statement of changes in equity Share Share Revaluation Other Retained Minority Total capital premium reserve reserves earnings share equity Balance as at 1 January ,638 3,030,546 (81,026) 2,225, ,519-6,199,389 Total income ,721 (1,787) 150, ,867 Valuation of capital rewards program, including: valuation change , ,420 - income tax respite (586) - - (586) State as at 31 March ,638 3,030,546 50,695 2,224, ,452-6,481,090 Share Share Revaluation Other Retained Minority Total capital premium reserve reserves earnings share equity Balance as at 1 January ,638 3,029,703 (144,110) 1,627, ,886-5,625,809 Total income - - (36,694) 3,219 46,153-12,678 Valuation of capital rewards program, including: , ,627 - valuation change , ,712 - income tax respite (1,085) - - (1,085) State as at 31 March ,638 3,029,703 (180,804) 1,635, ,039-5,643,114 Share Share Revaluation Other Retained Minority Total capital premium reserve reserves earnings share equity Balance as at 1 January ,638 3,029,703 (144,110) 1,627, ,886-5,625,809 Total incomes ,084 (785) 504, ,698 Valuation of capital rewards program, including: , ,937 - valuation change , ,917 - income tax respite (1,980) - - (1,980) Dividend paid (55) - (55) Transfer on capital ,868 (592,711) - - State as at 31 December ,638 3,030,546 (81,026) 2,225, ,519-6,199,389 Condensed consolidated statement of cash flows First quarter growing period from to First quarter growing period from to Cash at the beginning of reporting period 4,133,391 3,607,530 Cash flows from operating activities (3,248,649) (1,770,163) Cash flows from investing activities 2,685 (11,421) Cash flows from financing activities (81,478) (27,597) Cash at the end of reporting period 805,949 1,798,349 Increase / (decrease) in net cash (3,327,442) (1,809,181) 7

8 Supplementary notes to the condensed consolidated financial statements 1. General information about the Bank and Capital Group of the Bank This interim consolidated report shows the results of operations of the Capital Group of Bank Handlowy w Warszawie S.A. ( the Group ), composed of Bank Handlowy w Warszawie S.A. ( the Bank ) as the parent and its subordinated entities. Bank Handlowy w Warszawie S.A. has its registered office in Warsaw at ul. Senatorska 16, Warszawa. The Bank was founded on the strength of a Notarial Deed of 13 April 1870 and is registered in the Register of Entrepreneurs in the National Court Register maintained by the District Court for Warsaw, XII Commercial Department in Warsaw, under KRS number The Bank was given REGON number: and tax identification number NIP: The Bank and the Group were set up for unspecified period of time. Issued capital of the Bank equals PLN 522,638,400 and is divided into 130,659,600 common shares, with nominal value of PLN 4.00 per share. The Bank s shares are quoted at the Warsaw Stock Exchange. The Group is a member of Citigroup Inc. Citibank Overseas Investments Corporation, a subsidiary of Citibank N.A., is the parent of the Bank. The Bank is a universal bank that offers a wide range of banking services for individuals and corporate customers in the domestic and foreign markets. Additionally, the Group conducts the following activities through its subordinated entities: - brokerage operations, - lease services, - investment operations. The Group consists of the following subordinated entities: Subsidiaries Entities fully consolidated Registered office % of votes at the General Meeting of Shareholders Dom Maklerski Banku Handlowego S.A. Warsaw Handlowy-Leasing Sp. z o.o. Warsaw Handlowy Investments S.A. Luxembourg PPH Spomasz Sp. z o.o. under liquidation Warsaw Entities accounted for under the equity method Handlowy Inwestycje Sp. z o.o. Warsaw Handlowy Investments II S.A.r.l. Luxembourg Bank Rozwoju Cukrownictwa S.A. under liquidation Poznań In the first quarter of 2010 there were no changes in structure of the Group s units. 2. Conformity statement These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting, as adopted by European Union and with other applicable regulations. They do not include all of the information required 8

9 for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the financial year ended 31 December In accordance with Decree of the Ministry of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent information required by the law of a non-member State (Official Journal from 2009, No. 33, item 259 with further changes) the Bank is required to publish the financial results for the 3 months ended 31 March 2010 which is deemed to be the current interim financial reporting period. 3. Principles accepted at composition of report The condensed interim consolidated financial statements of the Group for the first quarter of 2010 have been prepared in accordance with accounting principles adopted and summarized in the annual consolidated financial statements of the Group for the period ended 31 December The condensed interim consolidated financial statements of the Group have been prepared for the period from 1 January 2010 to 31 March Comparable financial data is presented for the period from 1 January 2009 to 31 March 2009 and for Balance sheet as at 31 December The financial statements are presented in PLN, rounded to the nearest thousand. 4. Macroeconomic trends and conditions prevailing in money, FX and capital markets In the first quarter of 2010 the Polish economy saw more indications of progressing recovery. In the period January-February industrial production grew on average by 8.9% YOY, compared to 5.3% YOY in the fourth quarter of The growth industrial production was stimulated by a gradual revival in the Eurozone economies, which increased export demand for Polish goods. At the same time unfavorable weather conditions in the first two months of 2010 had negative impact on the performance in the construction sector, whose production in the period January-February went down by 19.9% YOY, compared to a growth of 5.3% YOY in the fourth quarter of Despite the economic revival the situation in the labor market did not change significantly compared to the previous months. Average employment in the enterprise sector declined in the period January-February by 1.3% YOY, compared to a decrease of 2.1% YOY in the fourth quarter of Constantly weak demand for work and growing unemployment were the main factors of limited pay rise pressures. Average wage in the enterprise sector rose on average by only 1.7% YOY in the period January-February while in the previous quarter it grew on average by 3.6% YOY. Relatively weak economic growth, no pay rise pressures and much stronger Polish zloty helped to limit the rate of growth in consumer prices. Average inflation in the period January-February was 3.2% YOY, which was close to the inflation target (2.5% +/ 1 percentage point). In the first quarter 2010 the selection of new members of the Polish Monetary Policy Council was completed, however, changes in the membership of the Council did not have any effect on the current directions of the monetary policy. In the period January-March the Polish Monetary Policy Council decided to keep interest rate at a historically low level of 3.5%. Monetary authorities also decided to reduce the feed to the banking system with Polish zloty and foreign currency liquidity. Lower aversion to risk in the global markets had a positive effect on the exchange rate of the Polish zloty and other currencies in the CEE region. Stable fundamentals of the Polish economy and continued privatization of Polish enterprises facilitated further appreciation of the Polish zloty, due to which at the end of March 2010 the exchange rate of EUR/PLN was PLN 3.86 compared to PLN 4.11 at the end of At the same time the Polish currency weakened slightly against U.S. dollar and the exchange rate of USD/PLN grew from PLN 2.85 at the end of December 2009 to PLN 2.87 at the end of the first quarter of

10 As the Polish Monetary Policy Council held interest rates low and the high risk premium was decreasing gradually, the market rates in the first quarter of 2010 declined accordingly. Bigger interest of both domestic and foreign investors in the Polish bonds and the perspective of not changing the interest rates by the National Bank of Poland in the next months added to a decreased yield of bonds. As a result, in the first quarter of 2010 the two-year bond yields declined from 5.19% to 4.55% while 10-year bond yields went down from 6.26% to 5.53%. The 3M WIBOR interbank rates persisted visibly above the reference rate of the National Bank of Poland. Despite the flood of negative global information (about the condition of economies in the Eurozone, plans for more stringent monetary policy in China and intended reduction of investing activities of banks in the U.S.), in the first quarter of 2010 the sentiment in the domestic equity market improved. All the main indices of the Warsaw Stock Exchange (WSE) rose while companies with the lowest capitalization (+12.1% QOQ) had the highest rate of return. At the same time WIG20 was close to 2,500 points, recording a growth by +4.5% compared to the end of Looking at the respective market sectors, the growth leaders were companies of the food sector (+21.7% QOQ) and WIG-Media (growth by almost 20% compared to the end of 2009). On the other hand, the lowest growth rates in the first quarter were achieved by IT companies (decline by 2.5%) and Developers (decline by 0.4% QOQ). On an annual basis, all indices recorded a significant growth (from 65.1% to 80.7%). From among sector indices definitely the lowest growth rates were achieved by telecommunication companies (mainly TPSA) while Banks and the Food Sector rose at triple-digit rates (by 120% and 164.9%, respectively). As regards public offers, the first quarter of 2010 was weak. In the above period, only two companies were floated on the main floor of WSE i.e. Eko-Holding (offered value: PLN 88.2 million) and Fast Finance (transfer from New Connect) while three were withdrawn from market trading. There was the total of 377 companies (including 24 foreign ones) traded on WSE, with combined market capitalization of PLN 757 billion (of which 59% were domestic entities). Warsaw Stock Exchange Equity Indices, as at 31 March 2010 Index QOQ Percentage Change YOY Percentage Change WIG 42, , % 24, % WIG-PL 41, , % 23, % WIG20 2, , % 1, % mwig40 2, , % 1, % swig80 12, , % 6, % Sector specific sub-indices WIG-Banks 6, , % 2, % WIG-Construction 5, , % 4, % WIG-Chemicals 3, , % 2, % WIG-Developers 2, , (0.4%) 1, % WIG-IT 1, , (2.5%) % WIG-Media 3, , % 2, % WIG-Fuel industry 2, , % 1, % WIG-Food industry 3, , % 1, % WIG-Telecommunications 1, , % 1, % Source: WSE, Dom Maklerski Banku Handlowego S.A. 10

11 Volumes of trade in shares, bonds and derivative instruments on WSE in the first quarter of 2010 Q Q QOQ Percentage Change Q YOY Percentage Change Shares (PLN million) 104, , % 65, % Bonds (PLN million) (6.7%) 843 (34.1%) Futures contracts (thousand units) 7,767 6, % 5, % Option contracts (thousand units) % % Source: WSE, Dom Maklerski Banku Handlowego S.A. Despite positive sentiment towards the equities market in the first quarter of 2010, equities trading was not different than in the fourth quarter of 2009 (over PLN 104 billion). Investors activity in the debt securities market declined significantly. Compared to the previous quarter bond trading went down by 6.7%, and by 34.1% on an annual basis. The futures and options market also gained from significantly increased investor interest in the first quarter of The total volume of futures contracts reached 7,76 million units and it rose by 19.1% compared to the fourth quarter of 2009 and by 31.2% compared to the equivalent period a year earlier. Options contract trading recorded even higher rates of growth (by 47.9% and 102.5%, respectively). 5. Banking sector The year 2009 was certainly one of the most difficult periods for the banking sector. Following such events as a sudden depreciation of the Polish zloty, the problem of currency options, lower liquidity of the interbank market and a need of high provisioning connected with a deteriorating quality of the credit portfolio, it seems that in the year 2010 the situation should improve gradually, which will translate into better performance of financial institutions operating in the Polish market. In the first quarter of 2010 the volume of corporate loans declined by 10% compared to the first quarter of 2009, which resulted from appreciation of the Polish currency (by nearly 20% against euro and U.S. dollar), tightened lending policies pursued by banks and postponement of investment plans by Polish companies. At the same time household loans increased during the last 12 months by 6%, mainly owning to mortgage loans in PLN (growth by 30% YOY) and consumer loans (growth by 9% YOY) while the volume of mortgage loans in foreign currencies declined by 9% YOY (increase by around 5% net of exchange losses). Margins on new consumer loans to households remained unchanged for the last 12 months while margins on mortgage loans increased slightly. Margins on new corporate loans in PLN increased as well. In February 2010 the Polish Financial Supervision Authority issued Recommendation T regarding best practices for retail credit exposure risk management. The purpose of the recommendation is to reduce credit risk connected among other things with excessive debts of individuals as well as debs incurred in foreign currencies, which is connected with exchange risk. Recommendations of the Polish Financial Authority may reduce the growth in credit volumes, however, they should add to security of the sector by way of risk cost reduction. Corporate deposits grew by 10% compared to the end of March 2009 while household deposits reached the value of PLN 385 billion, which translated to a growth of 9% YOY. Margins on new term deposits made by households were still negative, although they approached zero. Margins on current deposits went down significantly as well. The situation in new corporate deposits was similar: margins on term deposits went up while they declined slightly on current deposits. 11

12 6. Financial analysis of the Group s Results Balance sheet At the end of the first quarter of 2010 total assets amounted to PLN 37.7 billion as compared with PLN 37.6 billion at the end of 2009 and increased by PLN 81.0 million (or 0.2%). The biggest impact on the change had an increase of AFS debt securities portfolio (up by PLN 6.2 billion, or 74%), primarily as a effect of higher balance of cash bonds of the National Bank of Poland and higher bonds portfolio as at the end of the first quarter 2010 comparing to the end of At the same time the balance of Cash and balances with the Central Bank recorded a decrease (down by PLN 3.4 billion, or 82%), which is driven by reserve requirement management. The balance of loans, advances and other receivables recorded a decrease as well (drop by PLN 2.5 billion, or 64%). Decrease of loans to non-financial sector was driven mainly by the lower balance of corporate loans (down by PLN 0.3 billion, or 4%). Loans and advances, net Change % Loans and advances to non-financial sector Corporate customers* 6,092,414 6,361,327 (268,913) (4.2%) Individual customers, including: 5,488,015 5,613,366 (125,351) (2.2%) Credit cards 2,350,570 2,406,703 (56,133) (2.3%) Cash loans to customers 2,846,807 2,918,866 (72,059) (2.5%) Total 11,580,429 11,974,693 (394,264) (3.3%) Loans and advances to financial sector Banks and other monetary financial institutions 1,240,537 3,477,729 (2,237,192) (64.3%) Non-banking financial institutions 1,487,488 1,324, , % Total 2,728,025 4,802,562 (2,074,537) (43.2%) Total loans and advances 14,308,454 16,777,255 (2,468,801) (14.7%) * Corporate customers include enterprises, public sector, public and private entities, cooperatives, individual enterprises, non-commercial institutions operating for households. Loans and advances to non-banking sector, gross Change % Not at risk of impairment, including: 12,288,922 12,502,809 (213,887) (1.7%) Non-financial sector corporate customers 5,392,850 5,637,988 (245,138) (4.3%) individual customers 5,409,452 5,540,852 (131,400) (2.4%) At risk of impairment, including 2,129,288 2,120,333 8, % Non-financial sector corporate customers 1,380,366 1,460,258 (79,892) (5.5%) individual customers 726, ,658 88, % Dues related to matured derivative transactions 131, ,373 (5,599) (4.1%) Total 14,549,984 14,760,515 (210,531) (1.4%) Impairment, including: 1,482,067 1,460,989 21, % Dues related to matured derivative transactions 103, ,360 (2,800) (2.6%) Loans and advances to non-banking sector, net 13,067,917 13,299,526 (231,609) (1.7%) Provision coverage ratio 65% 64% 12

13 Loans to non-banking sector gross, in division to performing vs. non-performing (reverse repo transactions included) Change % Performing loans 12,636,745 12,892,154 (255,409) (2.0%) including non-financial sector corporate customers 5,652,237 5,950,278 (298,041) (5.0%) individual customers 5,497,888 5,617,907 (120,019) (2.1%) Non-performing loans 1,781,465 1,730,988 50, % including non-financial sector corporate customers 1,120,979 1,147,968 (26,989) (2.4%) individual customers 638, ,603 77, % Dues related to matured derivative transactions 131, ,373 (5,599) (4.1%) Total 14,549,984 14,760,515 (210,531) (1.4%) Non-performing loans ratio (NPL) 12.4% 11.8% On liabilities side, the biggest change (down by PLN 0.7 billion, or 3%) was recorded in liabilities valued at amortized cost. This change was primarily due to lower balance of current accounts of corporate customers (down by PLN 1.1 billion, or 19%) as at 31 March 2010 as well as term deposits of these customers (down by PLN 0.9 billion, or 11%), although average balances of corporate deposits remained stable in the first quarter of At the same time deposits of banks and other financial institution as at the end of the first quarter 2010 increased by PLN 1.1 billion, or 65% as compared to the end of Deposits Change % Non-financial sector Current accounts, including: 9,330,983 10,611,552 (1,280,569) (12.1%) corporate customers 4,920,696 6,066,200 (1,145,504) (18.9%) individual customers 4,410,287 4,545,352 (135,065) (3.0%) Deposits, including: 8,943,923 9,939,698 (995,775) (10.0%) corporate customers 7,239,074 8,148,746 (909,672) (11.2%) individual customers 1,704,849 1,790,952 (86,103) (4.8%) Accrued interest 19,551 20,708 (1,157) (5.6%) Total 18,294,457 20,571,958 (2,277,501) (11.1%) Financial sector Banks and other monetary financial institutions 2,705,946 1,643,480 1,062, % Non-banking financial institutions 3,148,655 3,091,780 56, % Total 5,854,601 4,735,260 1,119, % Total deposits 24,149,058 25,307,218 (1,158,160) (4.6%) 13

14 Income statement In the first quarter of 2010 the Group reported consolidated net income of PLN million, up by PLN million (or 227%) compared to the first quarter of At the same period, the Group s revenue increased by PLN 6.2 million (or 1%) to PLN million. The main determinants of the Group s operating result for the first quarter of 2010 as compared to the corresponding period of 2009 were: net interest income amounting to PLN million in comparison with PLN million recorded in the first quarter of 2009 (down by PLN 18 million, or 5%), stemming mainly from lower income from nonfinancial sector loans (decrease of National Polish Bank reference rates and decrease of volumes), at the same time cost of non-financial sector deposits was lower as well as income from debt securities was higher (primarily increase the portfolio of AFS securities); Interest income Change % Interest and similar income from: Central Bank 7,263 13,755 (6,492) (47.2%) Placements in banks 6,643 31,579 (24,936) (79.0%) Loans and advances, of which: 303, ,726 (43,248) (12.5%) Financial sector 13,909 7,888 6, % Non-financial sector, including: 289, ,838 (49,269) (14.5%) on credit cards 95,269 94, % Debt securities available-for-sale 146, ,931 13, % Debt securities held-for-trading 32,802 25,824 6, % Total 496, ,815 (54,029) (9.8%) Interest expense and similar charges on: Operations with Central Bank (9,419) - (9,419) - Deposits from banks (3,779) (7,632) 3,853 (50.5%) Deposits from financial sector (excl. banks) (14,856) (25,098) 10,242 (40.8%) Deposits from non-financial sector (93,721) (120,796) 27,075 (22.4%) Loans and advances received (2,380) (6,874) 4,494 (65.4%) Total (124,155) (160,400) 36,245 (22.6%) Net interest income 372, ,415 (17,784) (4.6%) net fee and commission income amounting to PLN million in comparison with PLN reported in the first quarter of primarily due to higher income from payment and credit cards in retail banking as well as from higher commissions on brokerage and custody operations; Fee and commission income Change % Fee and commission income Insurance and investment products 28,214 32,360 (4,146) (12.8%) Payment and credit cards 54,508 38,114 16, % Transaction services 30,357 29, % Custody services 16,984 14,596 2, % 14

15 Change % Cash loans 3,347 3,983 (636) (16.0%) Brokerage operations 19,223 10,908 8, % Other 20,568 19, % Total 173, ,357 23, % Fee and commission expense Payment and credit cards (14,654) (14,756) 102 (0.7%) Brokerage operations (4,658) (5,379) 721 (13.4%) Other (4,405) (4,432) 27 (0.6%) Total (23,717) (24,567) 850 (3.5%) Net fee and commission income Insurance and investment products 28,214 32,360 (4,146) (12.8%) Payment and credit cards 39,854 23,358 16, % Transaction services 30,357 29, % Custody services 16,984 14,596 2, % Cash loans 3,347 3,983 (636) (16.0%) Brokerage operations 14,565 5,529 9, % Other 16,163 15, % Total 149, ,790 24, % net income on financial instruments and revaluation amounting to PLN 56.9 million as compared to PLN 39.6 million in the first quarter of 2009 (up by PLN 17.3 million) stemming mainly from counterparty credit risk adjustment (FX options), which decreased the income in first quarter of 2009; net income in the area of investment debt securities amounting to PLN 22.0 million as compared to PLN 19.9 million in the first quarter of 2009 as a result of higher level of turnover on AFS securities portfolio; net other operating loss amounting to PLN 4.5 million as compared to PLN 16.6 million profit in the first quarter of 2009 (PLN 21.2 million of the negative difference), primarily as a result of provision s creation on redemption of bonds of Lehman Brothers bank, which were bought by clients from Bank as agent; in comparison to the first quarter of 2009, in the first quarter of 2010 the Group reported decrease in general administrative expenses and overheads together with depreciation expenses (down by PLN 49.1 million, or 13%) due to lower staff expenses, advisory services expenses as well as other external services expenses, technology and depreciation expenses. General administrative expenses and depreciation expense Change % Staff expenses 157, ,118 (13,449) (7.9%) Remuneration costs 138, ,363 1, % Perks and rewards 19,412 34,755 (15,343) (44.1%) Administrative expenses 150, ,898 (30,864) (17.1%) Telecommunication fees and hardware purchases 34,406 40,365 (5,959) (14.8%) Advisory, audit, consulting and other services 35,538 46,020 (10,482) (22.8%) 15

16 Change % Building maintenance and rent 28,860 32,969 (4,109) (12.5%) Marketing 7,753 7,839 (86) (1.1%) Transaction costs 13,301 14,038 (737) (5.3%) Postal services 7,972 9,298 (1,326) (14.3%) Training and education 1,017 2,001 (984) (49.2%) Banking supervision 1,915 2,182 (267) (12.2%) Other expanses 19,272 26,186 (6,914) (26.4%) Depreciation/amortization of tangible and intangible assets 16,939 21,726 (4,787) (22.0%) Total 324, ,742 (49,100) (13.1%) Net impairment losses of PLN 77.3 million compared to the PLN million in the first quarter of The lower net impairment losses were caused by significant improvement of the propotion between the amount of provisions released and created on loans at risk of impairment in the Corporate Banking Sector- due to lasting recovery in the economy and stabilization of clients financial situation the risk of irregular debt settlement by borrowers was lower. At the same time in the Consumer Banking Sector net impairment losses were higher as a result of quality s deterioration of credits cards and consumer loans portfolios. Ratios In the first quarter of 2010 basic financial ratios present as follows: Financial ratios Q Q ROE * 10.6% 9.1% ROA 1.6% 1.1% Cost / Income 54% 63% Loans to non-financial sector / Deposits from non-financial sector** 63% 58% Loans to non-financial sector/ Total assets ** 31% 32% Net interest income / Revenue 62% 66% Net fee and commission income / Revenue 25% 21% *Sum of net profit for four quarters to average equity for four quarters (excluding net profit for the current year). ** Comparable balance sheet data as of 31 December Group employment In full time job equivalents (FTE) Change FTEs % Average employment in the period 5,234 5,404 (170) (3%) Average employment at the term end 5,214 5,401 (187) (4%) As of March 31, 2010, capital adequacy ratio of the Group amounted to 18.37% and was 1.66 percentage points higher compared to the end of 2009, which was mainly caused by increase of own funds and decrease of total capital requirement (primarily due to lower total market risk requirement). 16

17 Capital adequacy ratio* I Own funds for the calculation of capital adequacy ratio. including: 4,465,637 4,329,257 Less in core and supplementary funds - interests in subordinated financial entities 55,887 56,895 - intangible assets. including: 1,280,688 1,282,574 goodwill 1,245,976 1,245,976 II Risk-weighted assets and off-balance sheet liabilities (bank portfolio) 17,061,763 17,536,963 III Total capital requirements. of which: 1,945,223 2,072,351 - credit risk capital requirements (II*8%) 1,364,941 1,402,957 - counterparty risk capital requirements 112, ,142 - excess concentration and large exposures risks capital requirements 36,336 54,387 - total market risk capital requirements 41, ,772 - operational risk capital requirements 361, ,885 - other capital requirements 28,193 31,208 Capital adequacy ratio (I/III*12.5) 18.37% 16.71% * Capital Adequacy Ratio was calculated according to the rules stated in Resolution No 380/2008 of the Commission for Banking Supervision dated 17 December 2008 regarding the extent and detailed rules of calculation of capital requirements in respect of particular risks ( ) (KNF Official Journal No. 8. item 34). 7. Segmental reporting Since 1 January 2009 the Group has applied International Financial Reporting Standards (IFRS) 8 Operating segments. According to the Standard operating segment is a separable component of the Group that engages in business activities from which it earns revenues and incurs expenses (including intragroup transactions between segments), whose operating results are regularly reviewed by the Management Board, as chief operating decision maker of the Group, in order to allocate resources and assess its performance. The Group is managed in respect of two operating segments Corporate Bank and Consumer Bank. The valuation of segment assets and liabilities, income and segment results is based on the Group s accounting policies, including intragroup transactions between segments. The allocation of assets, liabilities, revenues and expenses to operating segments was performed based on internal information prepared for the purpose of management reporting. Transfer of funds between the Group segments is based on prices derived from market prices. The transfer prices are calculated using the same rules for both segments and any difference result only from maturity and currency structure of assets and liabilities. - Corporate Bank Within the Corporate Bank segment the Group offers products and renders services to business entities, selfgovernment units and the public sector. Apart from traditional banking services covering lending and deposit activities, the segment provides services in the areas of cash management, trade financing, leases, brokerage and custody services in respect of securities and offers treasury products on financial and commodity markets. In addition, the segment offers a wide range of investment banking services on the local and international capital markets, including advisory services and obtaining and underwriting financing via public and non-public issue of financial instruments. The activities also comprise proprietary transactions in 17

18 the capital, debt and derivative instruments market. The products and services are available through distribution channels tailored to client needs, both through the branch network, direct contact with customers and modern and effective remote channels such as telephone and electronic banking. - Consumer Bank Within the Consumer Bank segment the Group provides products and financial services to individuals and also to micro enterprises and individual entrepreneurs through the Citibusiness offer. Apart from maintaining bank accounts and providing an extensive lending and deposit offer, it also offers cash loans, mortgage loans and credit cards, as well as provides asset management services and acts as agent in the sale of investment and insurance products. Customers of the Consumer Bank have the branch network, ATMs, telephone services, and electronic banking services at their disposal and a network of financial agents offering products of this segment. The Group conducts its operations solely in the territory of Poland. Consolidated income statement of the Geoup by business segment For the period Corporate Consumer Corporate Consumer Bank Bank Total Bank Bank Net interest income 178, , , , , ,415 Internal interest income, including: 4,391 (4,391) - 9,064 (9,064) - Internal income 4,391-4,391 9,064-9,064 Internal expenses - (4,391) (4,391) - (9,064) (9,064) Net commission income 72,537 76, ,484 55,118 69, ,790 Internal commission income, including: ,864 (1,864) - Internal income ,864-1,864 Internal expenses (1,864) (1,864) Dividend income Net income on traded financial instruments and revaluation Net gain on investment (deposit) securities Net gain on investment (capital) instruments Total 51,214 5,665 56,879 27,925 11,683 39,608 21,960-21,960 19,892-19, ,239 2,516 1,440-1,440 Net other operating income 10,837 (15,379) (4,542) 19,430 (2,820) 16,610 General administrative expenses (142,269) (165,434) (307,703) (154,822) (197,194) (352,016) Depreciation expense (7,775) (9,164) (16,939) (13,937) (7,789) (21,726) Profit / (loss) on sale of tangible fixed assets (43) (79) (122) 1, ,482 Net impairment losses 4,198 (81,552) (77,354) (114,868) (37,625) (152,493) Operating income 189,907 6, ,821 22,669 45,345 68,014 Share in profits (losses) of undertakings accounted for under the equity method (122) - (122) (1,240) - (1,240) Profit before tax 189,785 6, ,699 21,429 45,345 66,774 Income tax expense (45,766) (20,621) Net profit 150,933 46,153 18

19 State as at: Corporate Consumer Corporate Consumer Bank Bank Total Bank Bank Total Assets, including 31,798,925 5,915,203 37,714,128 31,608,909 6,024,154 37,633,063 Assets valuated by the equity method 55,887-55,887 56,895-56,895 Non-current assets heldfor-sale 2,999 9,901 12,900 2,999 16,547 19,546 Liabilities, including: 28,549,475 9,164,653 37,714,128 28,370,043 9,263,020 37,633,063 Obligations 24,415,118 6,817,920 31,233,038 24,369,661 7,064,013 31,433, Activities of the Group 1. Corporate Bank Summary segmental results PLN 000 Q Q Change PLN 000 % Net interest income 178, ,164 (2,204) (1%) Net fee and commission income 72,537 55,118 17,419 32% Dividend income (1) (8%) Net income on traded financial instruments and revaluation 51,214 27,925 23,289 83% Net gain on debt investment securities 21,960 19,892 2,068 10% Net gain on investment capital instruments 277 1,440 (1,163) (81%) Net other operating income 10,837 19,430 (8,593) (44%) Total income 335, ,981 30,815 10% General administrative expenses and depreciation (150,044) (168,759) 18,715 (11%) Profit / (loss) on sales of tangible fixed assets (43) 1,315 (1,358) (103%) Net impairment losses 4,198 (114,868) 119,066 (104%) Share in profits / (losses) of undertakings accounted for under the equity method (122) (1,240) 1,118 (90%) Profit before tax 189,785 21, , % Cost / Income 45% 55% The main factors that determined the gross profit of the Corporate Banking for the first quarter of 2010 as compared to the corresponding period of 2009: Slight decrease in net interest income lower income from loans (decrease of National Polish Bank reference rates and decrease of volumes) was partially compensated by lower cost of deposits as well as higher income from debt securities (primarily increase the AFS portfolio); Increase in net fee and commission income caused by higher income on brokerage and custody services; Increase of net income on traded financial instruments and revaluation steaming mainly from counterparty credit risk adjustment (FX options), which decreased the income in first quarter of 19

20 2009; Increase in net income in the area of investment debt securities as a result of higher level of turnover on treasury bonds portfolio; Decrease of general administrative expenses, overheads and depreciation expense primarily due to lower staff costs, depreciation (the consolidation of the branch network) and external services expenses, Decrease of net impairment losses (PLN 4.2 million recoveries in the first quarter 2010 vs. PLN million losses in the first quarter 2009) - as a result of significant improvement of the propotion between the amount of provisions released and created on loans at risk of impairment. Due to lasting recovery in the economy and stabilization of clients financial situation the risk of irregular debt settlement by borrowers was lower; Decrease in net other operating income. a) Transaction Services The Bank offers comprehensive, differentiated and modern products in the area of trade and transaction services to corporate customers. In parallel with traditional banking services, such as current bank accounts, domestic and international money transfers or accepting deposits, it delivers modern liquidity management solutions as well as mass payments and receivables management products. By combining the traditional with the best of modern banking solutions, the Bank has pursued with effective consistency the strategy of broadening its product offer, through inclusion of truly innovative services. The Bank is a leader in delivery of innovative transaction services to the market and the products recently implemented in this area have further strengthened its position. In the beginning of 2010 the Bank announced a new strategy for the years The main pillars of the strategy are new service models: Platinum, Gold, Blue and White, high quality services and innovation of all service segments. Those are to distinguish the Bank from the competition. By implementing the new strategy the Bank wants to win the leading position in the financial market as the most effective user of its resources. By pursuing the new strategy, in the first quarter of 2010 the Transaction Bank accepted a new customer segmentation a division into four service models. The new segmentation was followed by the new operational rules for transaction product sales teams, customer service teams and implementation teams. Actions were taken to separate operational units dedicated to serve particular segments. New rules were implemented, making the offer of the Bank even more attractive. Action plan was prepared providing for further steps to continue implementation of the strategy of the Bank. Liquidity and Cash Management Products The Bank supplies innovative corporate liquidity management solutions. It continues to expand its offer of such liquidity and cash management products with the aim of meeting the expectations of its clients. The liquidity and cash management product range includes among others: virtual cash pooling; actual cash pooling; and actual cash pooling without reverse bookings. By using these cash pooling structures, clients benefit as they reduce their overall debt vis-à-vis the Bank and manage their funds more effectively. Drawing on its extensive experience, the Bank can deliver effective liquidity management services of consistently high quality. 20

21 Payments and Receivables Unikasa Unikasa is a mass payments market brand of high recognition. It is perceived as a modern product that facilitates servicing of the Bank clients receivables while allowing payers settlement of their bills for products and services in the most frequently visited locations, such as hyper- and supermarket chains throughout the country. The Bank s counterparties can also choose to use the Unikasa Network infrastructure to form their own branded networks. Unikasa is now present in over 250 cities throughout Poland, in close to 470 locations. In parallel to processes of establishing new service points, the Bank has continued to acquire new invoice issuers from the beginning of 2010 the Unikasa Network accepts payments to three new issuers. That results in a constant increase in the number of transactions made in the Unikasa Network. Foreign Bank Transfers The Bank has continued the work on automation of foreign bank transfer payments, which translates directly to the quality and speed of the services provided to our clients. The automated bank transfer payment module implemented last year is continually enhanced and expanded by new functionalities. It is expected that those enhancements will further improve the quality and speed of services. Domestic Bank Transfers The process of settlement of domestic payments was subject to significant changes. Owing to that the Bank optimized the mode of transmitting payments with low amounts to the National Clearing Chamber for settlement. That improved effectiveness of utilization of Bank s resources. Direct Debit With its 38% market share, the Bank is a leader of the Polish market in servicing Direct Debit transactions. In the first quarter of 2010 the Bank in co-operation with the leader in unit-linked (insurance with capital fund) insurance market AEGON TU na śycie S.A., has launched an innovative Comfort Direct Debit. Clients of AEGON are reminded about the approaching date of a direct debit transaction with an SMS. MicroPayments In the first quarter of 2010 the Bank continued to strengthen its position of leadership in the market segment in which it offers the MicroPayments product. MicroPayments are used by institutions and entities which accept cash deposits from various payers and have the obligation of returning these together with accrued interest. Courts and prosecution administrations are the clients which use that product. The number of institutions using the solutions offered by the Bank continues to grow and at the end of the first quarter of 2010 it stood at 83. Card Products The Bank occupies the position of the leader in the pre-paid payment cards market in Poland estimated market share of the Bank stood at 51.5%. The Bank s pre-paid charge cards are most frequently used under loyalty, promotional and incentive programs and they have proven an excellent instrument of social benefit distribution. At the end of the first quarter of 2010 the number of actively used pre-paid cards stood at over 367 thousand. The Bank has sought to strengthen its position in the business cards segment. At the end of the first quarter of 2010 the number of active cards of that type stood at almost 18 thousand, which represents near 2% growth compared to equivalent period in A novelty in the first quarter of 2010 was implementation of a new service debit card linked to currency accounts (EUR, USD). The Bank offers to its clients the choice of a currency in the account to settle debit 21