BOŚ S.A. Group. Financial results and operations of Bank Ochrony Środowiska S.A. Capital Group in 1st half of 2017

Transcription

1 BOŚ S.A. Group Financial results and operations of Bank Ochrony Środowiska S.A. Capital Group in 1st half of

2 Groups key achievements in 1H2017 Group s net result in 1H2017 totalled 43 million PLN, i.e. 55 million PLN more than in the same period last year. Higher interest margin (1.94% in 2Q2017) versus 1.63% in 4Q2016 and 1.26% in 2Q2016. Better C/I: 67.5% in 2Q2017 versus 74.6% in 4Q2016 and 87.2% in 2Q2016. Personnel costs lower by 6.2 million PLN, or by 7% Y/Y. Successful earlier repurchase of subordinated series G bonds in the amount of 100 million PLN in Feb H2017 sales of retail debt collection portfolios for a total of 150 million PLN. Sales of the debt positively contributed to the Bank s financial results, including release of some loan write-offs. Additionally, the sale of retail debt positively impacts the retail loans in terms of depreciation and by reducing RWA, and consequently, the use of Tier 1 capital. Accomplishment of the issue of the first tranche of own series AA1 bonds for the amount of 34 million PLN. The issue was conducted in early July 2017, and the second tranche will be placed in 4Q

3 Consistent Performance of Strategy and Recovery Operations Plan The Bank is conducting the Remedy Operations Plan and BOŚ SA Framework Development Strategy for through accomplishment of planned remedy options and strategic initiatives. Key actions accomplished in 1H2017 include: Restructuring of network and development of distribution channels The Bank continued actions started in 2016 involving restructuring of the branch network. The lower number of branches will be compensated for by the development of modern multichannel solutions. In 1H2017 development activities were accomplished in the areas of internet banking, tools supporting the loan proces and the front-end system to produce a consistent solution and consequently, provide opportunities for further development of systems supporting sales operations in state-of-the-art omnichannel architecture. Expanding cooperation with shareholders BOŚ more and more closely cooperates with its main shareholders the National and Voivodship Funds for Environment Protection and Water Management on strategic initiatives focused on developing operations in the market of financing pro-ecological projects. Additionally, the Bank cooperates with State Forests National Forest Holding (Lasy Państwowe) and its contractors to expand availability and scope of teh product offer using its potential of cooperation with the partner network and BOŚ Group Companies. Cooperation with the shareholders focuses, among other things, on Bank s undertaking of new business initiatives regarding the launch of teh Prosument II Program, participation in program Polish Wooden Houses live by nature, subsidising Customer s purchases of PV installations and opening Customer Service Points in Forest Division offices and support of the anti-smog policy actions. Improving cost-effectiveness When executing the Strategy and the Remedy Operations Program the Bank conducts actions to optimise costs and at the same time to accomplish initiatives to ensure higher revenues. The C/I ratioreached66.3%,versus74.6%in2016and88.3%in

4 including development of ecological operations and cooperation with shareholders The share of pro-ecological transaction debt in Bank s total loan balance increased by 1 p.p., from 33.5% (30June2016)upto34.5%(30June2017) There has been growth of results on banking operations involving pro-ecological loans up to 40.4 million PLN(by6.0millionPLNcomparedto30June2016). Upon obtaining a new credit line from EIB the Bank became a participant of the Climate Change Action program which is a part of the Investment Plan for Europe, commonly referred to as Juncker Plan, which is one of the line s components. Thanks to the synergy with one of the main shareholders, State Forests, a total of 145 current accounts havebeenopenedforforestdivisionsforatotalamountof139millionpln(asof31aug.2017). As part of cooperation with State Forests, the National Fund for Environment Protection and Water Management(NFOŚiGW) and the Ministry of Environment, this Spetember the Bank initiated market s first process of financing wooden construction of prefabricated timber frame houses. This will significantly strengthen the position of Bank Ochrony Środowiska of a Polish Bank supporting key government initatives. 4

5 5 Better financial results of BOŚ Group thou PLN -11,7 Including total Bank Guarantee Fund costs of 17.4 million PLN Net profit/ loss Income tax charges Item IH 2016 IH 2017 Change Net interest income ,9% Net fee and commission income ,4% Dividend income ,0% Net trading income ,0% Result on investment securities ,2% Result on hedge accounting ,6% Foreign exchange result ,4% Banking operations result ,9% Net other operating income ,6% Net impairment loses ,3% General administrative expenses ,6% Gross profit/loss x Net profit/loss x 1,5-192,0 Break down of net profit/loss IH 2016 vs. IH 2017 (m PLN) - 57,8 General Net impairment administrative losses expenses 1H ,5 Total income * +66; +28% * Total income = Banking operations result + other operations result 302,8 Higher interest margin by 41.9%, or 57.9 million PLN Y/Y, as a result of the interest cost drop, both with regard to customer deposits and Bank s own bonds. Better banking operations result, up by 27.9%, or 66.1 million PLN. Decrease of loan risk write-offs by approx. 1/3 R/R (by 18.7 million PLN). -39,1 Total income * Net impairment losses - 200,8 General administrative expenses 1H2017 Including total Bank Guarantee Fund costs of 32.6 million PLN (24.7 million PLN for forced restructuring and 7.9 million PLN for guarantee fund fee) - 19,5 Income tax charges 43,4 Net profit/ loss

6 Financial result volatility determined by impairment write-offs and Bank Guarantee Fund costs Group BOŚ in thou. PLN IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 Net interest income Net fee and commission income Banking operations result Net impairment losses (21 533) (30 575) (47 727) (21 502) (36 292) (25 333) ( ) (10 553) (28 581) General administrative expenses ( ) (95 218) ( ) ( ) (85 646) (91 387) (97 646) ( ) (89 770) Operating profit (6 136) (54 084) (12 656) (626) (81 396) Net profit/ loss (7 395) (46 373) (12 916) (61 058) Net profit/loss before net impairment losses and contribution to Bank Guarantee Fund Net profit/loss of BOŚ Group (m PLN) IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ ,7 20,0 23,4 3,4 1,2-7,4-46,4-12,9-61,1 annual Bank Guarantee Fund contribution related to forced restructuring fund (24.7 million PLN) contribution cost related to bankruptcy of SK Bank in Wołomin (28.2 million PLN) and Borrowers Support Fund (9 million PLN) Wind farm write-offs of 102 million PLN The volatility of BOŚ SA Group s financial results arise mainly from the impairment write-offs and costs of Bank Guarantee Fund fees. Upon deduction of those costs the Group s revenue demonstrate a growing trend. 6

7 Growth of Group s income in all key P&L items 1H2017 vs. 1H2016 Net profit/loss IH ,7 Net interest income Net fee and commission income ,9 0,2 Other operating income 3 8,1 Net impairment losses 4 18,7 General administrative expenses * 5-8,8 Income tax charges * - 21,1 Net profit/loss IH ,4 Growth of BOŚ Group s net financial result by 55.1 million PLN Y/Y, mainly in the areas of interest results, other income and impairment write-offs. Upon excluding the contributions and payments to the Bank Guarantee Fund the Group s costs would be 6.5 millionplnlowerthaninthesameperiodlastyear. 7

8 2% 2% 1% 1% 0% 0% 4% 3% 3% 3% 3% 3% 2% 2% 2% 4% 3% 3% 2% 2% 1% 1% 0% 1 Growing interest results Interest results (million PLN) vs interest margin 1,24% 61,0 1,34% 66,9 1,44% 73,7 1,32% 70,7 1,26% 67,7 1,60% 1,63% 84,9 85,9 1,95% 1,94% 99,1 97,2 As a result of coninuing actions started in 2016to restructure the balance sheet, particularly liabilities, the interest margin is being improved (+0.62 p.p. Y/Y), thanks to which BOŚ margin is getting closer to the banking market s level Interest results in 1-2Q2017 were much higher than in previous quarters. IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 Net interest income Net interest margin Interest revenues (million PLN) vs profitability from assets Interest expense(million PLN) vs costs of liabilities 3,24% 3,24% 159,2 161,7 3,36% 172,6 3,30% 176,3 3,19% 171,2 3,30% 3,28% 3,35% 3,37% 175,0 172,2 170,4 169,1 2,00% 1,90% 1,93% 1,98% 1,93% 105,7 98,2 94,8 98,9 103,4 1,70% 1,64% 90,1 86,3 1,40% 1,43% 71,3* 71, IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 Interest and similar income Interest income margin Interest and similar expense Intgerest expense margin 8 * Lower interest costs partly (6 million PLN) result from one-off booking of negative effective interest rate item following the earlier repurchase of own series G bonds

9 2 Volatility of P&L regarding commissions and fees P&L on commissions and fees split by segments (million PLN) 55,4 +0,2 55,6 30,0 28,7 28,8 28,8 29,9 27,4 26,6 25,0 25,7 10,3 13,7 13,2 10,2 11,6 10,6 13,1 10,0 11,2 4,5 6,6 6,3 6,3 5,5 6,0 4,1 4,8 4,4 15,3 9,1 10,3 11,2 10,7 11,3 11,8 9,6 11,7-0,2-0,3-0,4-0,1-0,2-0,1-0,2-0,2-0,8 IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ ,2 Change in million PLN Q/Q Y/Y -0,3-1,9 +0,3-2,2-3,6 +5,0-0,6-0,7 Corporate and public sector customers Retail customers Brokerage Operations Other (not placed in segments) Corporate and public sector customers Retail customers Brokerage operations Others Floating commissions P&L figures apply mainly to the Brokerage operations due to changing situation on Warsaw Stock Exchange. 9

10 3 Growth of other income Banking operations P&L, excluding interest and commissions and P&L on other operations Other income change 1H 2017 vs. IH 2016 (m PLN) 42,7 0,1 6,2 2,4-0,7 0,2 50,9 Actual IH 2016 Dividend income Net trading income and on hedge accounting Result on investment securities Foreign exchange result Net other operating income Actual IH 2017 The P&L on other banking operations largely depends on one-off income items. The figures higher than in 1H2016 result mainly from commercial operations and generating income on investment securities i.e. sale of stocks. 10

11 Growing banking operations results Group s quarterly results on banking operations (million PLN) ,4 118,7 118,0 140,2 115,2 121,7 134,7 150,1 152,2 150,8 Banking operations result stabilised at the level similar to the previous quarter. Growing share of the interest results in banking operations results (64% in 2Q2017). IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ

12 4 Lower credit risk costs Quaterly net impairment losses - BOŚ Group (m PLN) IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ ,0-1,4-3,8-0,8-1,3-5,0-0,4-3,0-10,6-21,5-30,6-47,7-21,5-36,3-25,3-90,8-28, Net impairment losses on wind farms Net impairment losses before wind farm losses -125,6 +19 After reporting higher costs of write-offs for depreciation of loans and credits in 4Q2016, mainly as a result of poorer quality of the portfolio of loans financing wind farms (result of regulatory changes causing decrease of green certificate prices), in 1H2017 the costs of write-offs for depreciation froze, mainly due to lower loss ratio of the corporate portfolio. 12

13 5 Optimisation of general administration cost Administrative cost by type (million PLN) 101,9 95,2 13,6 13,1 10,7 7,2 32,8 33,9 138,0 11, ,0 106,4-21,2 97,6 11,6 91,4 10,7 85,6 89,8 37,2 11,0 20,5 11,4 11,4 12,1 10,6 49,0 1,4 10,2 6,0 24,7 29,9 11,8 28,0 28,4 29,1 32,7 5,8 28,3 30,5 30,1 44,7 41,1 47,2 46,3 44,4 40,7 41,9 41,5 43,0 IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IV 2016 IQ 2017 IIQ Change in % Q/Q Y/Y -1% -7% -80% +67% +6% +4% +4% -7% Depreciation Taxes and fees (incl. Bank Guarantee Fund & KNF) Material costs Personnel costs 13 Amortization/ depreciation Taxes and charges (incl. Bank Guarantee Fund and KNF) Administrative expenses Employee benefits Impact of one-off expenses: in 4Q2015 the Bank Guarantee Fund contribution regarding bankruptcy of SK Bank Wołomin (28.2M PLN) and Borrowers Support Fund(9M PLN) in 1Q2017 one-off booking of annual Bank Guarantee Fund contribution regarding forced restructuring of 24.7M PLN. Growth by 9M PLN of the total costs in 1H2017 Y/Y as a result of 15.3M PLN higher Bank Guarantee Fund costs (one-off booking of annual contribution of 24.7M PLN to Bank Guarantee Fund for forced restructuring of banks). Thanks to the introduced HR optimisation personel costs dropped by 6.2 million PLN Y/Y. The growth of material costs Y/Y results mainly from advertising and training.

14 Bank s HR restructuring BOŚ employees - FTEs Personnel costs incurred by the Bank in 2Q2017 are 3.1M PLN lower than this cost category in 2Q2016. The target decrease of FTEs and pesonnel costs resulting from actions performed in 2016 and in 1H2017 will be noticeable in subsequent periods IIQ IIQ 2017 In 2017 the Bank is going to decrease personel costs by 10.5M PLN compared to The number of employees in the Bank in 2Q2017 versus 2Q2016 dropped by 181 FTEs and until 2014-end by a total of 279 FTEs (of which by 86 FTEs in 2016 and by 99 FTEs in 1H2017). The HR restructuring process is being continued in

15 Range of BOŚ Group s operations Item IIQ 2016 IVQ 2016 IIQ 2017 in thou. PLN % Change Change Structure IIQ 2017 vs. IIQ 2017 vs. IVQ 2016 IIQ 2016 IIQ 2016 IVQ 2016 IIQ 2017 Loans and advances to customers ,8% -8,9% 67,6% 67,0% 65,4% Investment securities ,0% 0,8% 23,9% 26,0% 25,6% Cash and balances at Central Bank ,4% -21,5% 3,8% 2,5% 3,2% Receivables from other banks ,0% 90,6% 1,2% 0,7% 2,4% Other assets ,4% -7,7% 3,6% 3,7% 3,5% Total assets ,4% -5,9% 100,0% 100,0% 100,0% Amounts due to customers ,1% -8,3% 82,9% 82,2% 80,7% Amounts due to the Central Bank and other banks ,9% 106,6% 0,7% 0,6% 1,6% Debt securities issued ,5% -19,4% 7,8% 6,9% 6,6% Other liabilities ,9% -9,7% 1,8% 1,8% 1,7% Total equity ,4% 27,7% 6,8% 8,6% 9,3% Total equity and liabilities ,4% -5,9% 100,0% 100,0% 100,0% Loans / deposits 81,5% 81,6% 81,0% -0,6 p.p. -0,5 p.p. The drop of the balance sheet amount in 2017 related to the conducted asset optimisation, by focusing on the sale of lowamount loans to generate higher interest margin and reduce concentration. Transitional growth of the balance sheet amount in 1Q2016 as a result obtaining funds for Eurobonds repurchase. Reduced demand for financing (asset optimisation) allows reducing interest rates on selected liabilities and giving up the most costly items Total assets (m PLN) IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017

16 0% - 1% - 1% - 2% - 2% - 3% 0% - 5% - 10% - 15% - 20% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Effectiveness ratio ROA(incrementally 12 months) vs total assets (billion PLN) 0,17% 0,02% 19,9 19,8-0,25% -0,30% -0,13% -0,22% -0,32% -0,29% 22,1 20,9 21,1 21,0 20,8 20,4-0,02% 19,9 The Group reports systematic improvement of C/I ratio starting from 2Q2016, after a period of deteriorating cost-effectiveness in Growth of return and capital ratios in thee first 2 quarters IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 Total assets ROA ROE (incrementally 12 months) vs equity (billion PLN) 2,3% 0,3% -0,3% -1,7% -2,7% -3,4% -4,2% -4,4% -3,7% 1,9 1,8 1,8 1,5 1,5 1,8 1,5 1,5 1,4 C/I (incrementally 12 months) vs total income (million PLN) 88,3% 89,5% 87,2% 84,2% 79,4% 76,1% 74,6% 70,3% 67,5% 141,9 153,4 149,5 126,7 131,6 132,5 119,7 115,2 121,3 IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 IIQ 2015 IIIQ 2015 IVQ 2015 IQ 2016 IIQ 2016 IIIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 Equity ROE Total income C/I 16

17 Loan portfolio quality Stable level of risk and high quality of collaterals in Bank s portfolio excluding wind farms Lost-value loans Results on net impairment write-offs (mln zł) 12% 9% 6% 3% 0% IQ 2017 IIQ 2017 Share of lost-value loans Share of lost-value loans without wind farms Source: BOŚ SA Group s consolidated financial statements Reserve* coverage of lost-value loans ,2 68,2 0,5% 0,5% 60,2 68,2 114,1 0,8% 114,1 110, IIQ 2017 Q2 write-offs on wind farm loans write-offs cost of risk incl. wind farm loans write-offs Źródło: Skonsolidowane costof Sprawozdania risk Finansowe Grupy BOŚ S.A. 208,8 97,9 1,4% 0,8% 39,1 39,1 1,3% 0,016 0,014 0,012 0,01 0,008 0,006 0,004 0, % 40% 30% 20% 10% 0% IQ 2017 IIQ 2017 Share oflost-valueloans, excluding wind farms, is slightly lower than at the end of Reserve coverage of lost-valueloans is demonstrating the growing tendency. Low costs of risk in 2H2017 results from lower loss ratio of the corporate loan portfolio. coverage of lost-value loans coverage of lost-value loans exclud. wind farms 17 Source: BOŚ SA Group s Consolidated Financial Statements *reserves are total impairment losses plus IBNR reserves

18 Adekwatność i kapitały Secure level of capital adequacy BOŚ SA Capital Group is reporting growths of capital ratios in Capital adequacy measures remain on secure levels. KNF recommendation to maintain additional requirement related to FX mortgage loans portfolio Capital adequacy ratios According to KNF letter dated 29 Dec the additional capital requirement for covering the risk posed by FXmortgage loans for householdswasset, for BOŚ SA Capital Group, to 0.72 p.p. for total TCR and 0.54p.p.forTier1capitalratio. From among banks subjected to the additional capital requirement to cover the risk of FX mortgage loans for households, BOŚ SA Capital Group was granted one of the lowest possible additional requirements. The limit was set individually to each bank holding such exposures. Further, KNF identified some banks as other systemic institutions and imposed, on an individual and consolidated basis, buffers of other systemic institutions onto them. BOŚ SA was not subjected to the other systemic institution buffer. 12,37% 9,24% 14,28% 14,65% 14,71% 11,37% 11,76% 11,89% IIQ 2016 IVQ 2016 IQ 2017 IIQ 2017 TCR Tier1 BOŚ S.A. Capital Group consolidated in terms of prudence, as of the end of 2Q2017 fulfills the capital ratio levels recommended by KNF. Source: BOŚ SA Group s Consolidated Financial Statement 18

19 Liquidity situation LCR in Q % 120% 123% 80% IVQ 2015 IIQ 2016 IVQ 2016 IIQ Maintain share of liquid assets (liquidity surplus) in total assets on secure level Purposes of securing Bank s liquidity 2. Maintain share of retail deposits in balance sheet total on stable level 3. Continue reducing the foreign currency share in the balance sheet total 19

20 Development of BOŚ SA Brokerage House Operations Total number of investment accounts maintained as at period-end (in thousand PLN) +9.1% Source: DM BOŚ 94,3 90,2 86,4 IH IH 2017 At the end of 1H2017 BOŚ Brokerage House (DM BOŚ) increased the number of maintained accounts up to 94.3K PLN, which represents 9. 1% growth compared to the same period of The total number of accounts opened in this period totalled 7.9K. DM BOŚ shares in WSE stock market (session transactions) +21.0% 20 Source: Warsaw Stock Exchange 4,77% 5,19% 4,29% IH IH 2017 On the stock market of the Warsaw Stock Exchange (WSE), which is the primary area of operations, DM BOŚ is gradually improving its market position. In 1H2017 the share of DM BOŚ in this market segment increased by 21.0% compared to the same period last year.

21 Macroeconomic environment in 2Q2017 8,0 % r/r 4,0 0,0-4,0 Stable GDP growth in 2Q -8,0 1q10 1q11 1q12 1q13 1q14 1q15 1q16 1q17 źródło: GUS 5,00 % 2,50 0,00 GDP Private consumption Investment (P) Slowdown of inflation growing trend -2,50 Jan 10 Mar 11 Maj 12 Jun 13 Sep 14 Nov 15 Jan 17 źródło:gus, NBP CPI (r/r) Inflation excluding fuel and food prices (y/y) NBP interest rate 20,0 % r/r 10,0 0,0-10,0-20,0 5,00 % 2,50 0,00-2,50 After a clear growth of GDP dynamics in 1Q up to 4.0% Y/Y, in 2Q the growth of economic activity was frozen at a raised level of 3.9% Y/Y. The main factor of economic growth was private consumption, with slightly positive increase of investments in the economy. In 2Q improvement of the situation in the labour market continued with the decreasing unemployment rate (down to 7.1%), icnreaseof salary dynamics and the hiring dynamics in the private sector stabilised at a raised level. After a sudden growth of inflation in 1Q up to around 2.0% following the growth of dynamics of fuel and food prices, in 2Q teh slowdown of these tendencies resulted in the drop of CPI down below 2.0% Y/Y. The Monetary Policy Council upheld a clear stance on stabilising NBP interest rates at least until the end of

22 Effective accomplishment of Group structure simplification policy BOŚ Group 4,29% 4,77% 5,19% Bank Ochrony Środowiska S.A. BOŚ S.A. Brokerage House 100% BOŚ Eko Profit S.A. 100% Ekosystem Sp. z o.o. 100% BOŚ Invest Management Sp. z o.o. 100% BOŚ Capital Sp. z o.o. 100% company intended for sale MS Wind Sp. z o.o. 100% Merger of BOŚ EkoProfit and BOŚ Ekosystemnow being registered in National Court Register Merger of BOŚ Invest Management and BOŚ Capital now being registered in National Court Register (as of 30 June). Companies merged on 5 July. 3,89% Q Q 2017 Growth of DM BOŚ market share in WSE turnover Development of leasing activities within merged companies -BOŚ EkoProfit and BOŚ Ekosystem 22

23 Threats to BOŚ Group In 1H2017 BOŚ Group improved results generated on core operations, curbed costs of impairment write-offs and managable administrative costs. At teh same time, external threats are identified that have a negative impact on further development and profitability of BOŚ. Consequences of regulatory changes in the area of renewable renergy sources An amendment of the Renewable Energy Sources act introducing a mechanism that relates the replacement fee with market prices of RES certificates of origin, signed by the President in August 2017 which will contribute to lowering the replacement fee and the dynamics of green certificate price growth. Statutory resolution of housing loans in CHF and other foreign currences As of the publication date hereof the final form of statutory resolution of housing loans is not yet known. Implementation of initiatives proposed so far with regard to currency conversion of FX mortage loans or payback of spreads would negatively affect the financial resultsoftehbankingsectorandofbośsa. Consequences of introducing new reporting standars IFRS 9 Implementation, as of 1 Jan of the International Financial Reporting Standard 9 (IFRS 9) will result in changes in at least the following three areas: model of measuring the depreciation, model of classification and pricing of financial instruments and accounting of security. From the economic perspective, these changes may affect, upon introduction, the Bank s financial results or equity and may result in increased volatility of the financial results in subsequent period given the potential necessity to price some assets according to their fair value with reference to the financial results. Implementation of IFRS 9 may affect small and specialist banks to a larger extent. 23

24 Attachments

25 1. Significant events in BOŚ Group operations in 1H2017 On 16 February 2017 Fitch Ratings Ltd confirmed its rating for the Bank: Longterm Foreign Currency IDR at the level of B+ outlook stable, Short-term Foreign Currency IDR at B. BOŚ S.A. developed its operations in the market of financing pro-ecological projects. The balance of pro-ecological loans as of 30 June 2017 totalled 4.7 bilion PLN, which equalled 34.5% of the Bank s total loan balance. On the Warsaw Stock Exchange Market in 1H2017 DM BOŚ improved its market position. In session transactions DM BOŚ had a market share of 5.19% and was 21% higher than in 1H2016 (4.29%). Therefore, DM BOŚ moved from the 8th position to the 7th position in terms of the market share. In the forward contracts market DM BOŚ remains the market leader with the share of about 22.8%. Interest costs dropped by 65.9 million PLN, i.e. by 31.5%, mainly as a result of repurchase, this May, of high-value eurobonds and repurchase, this February, of subordinated own bonds of the series G, and also as a result of dropping costliness of deposits. The Bank acquires retail deposits in EUR from the German market. Additionally, in February 2017 the Bank included in its offer, a new deposit offer in CHF EKOlokata z Frankiem term deposit the purpose of which is to reduce the Bank s balance sheet CHF mismatch. 25

26 2. Awards and prizes for BOŚ Group in 1H2017 EKOkonto bez Kosztów account won the first award in the category of Accounts for Individuals in a prestigeous ranking Poland s 50 Largest Banks 2017 organised by the Finansowy Bank Monthly. EKOkontoVIPtookthethirdposition inthissameranking 20June2017. EKOprofit savings account the first place in Totalmoney.pl ranking 12May2017. BOŚawardedBiałyListekCSRAwardbyPolitykaweeklymagazine 25April2017. EKOprofit BOŚ account 2nd place in the ranking of savings accounts organised by Bankier.pl web site 21March2017. EKOlokata z Bonusemtermdeposit on the thirdplace of the ranking of term deposits of Bankier.pl website 29March2017. BOŚ Group s 8 projects awarded honorary mentions in report Responsible Business In Poland 2016 Postaw na słońce (Bet on the Sun), Zielona ławeczka (Green Bench), Sklepiki szkolne zdrowa reaktywacja (School shops healthy reactivation), Zdrowo jem, więcej wiem (I eat healthy, I eat more), #BrudnoTu (here s dirty), interest-bearing SCHROnisko loan, #Psyzdobywajabank (#dogswinningbank), Ecological report - 31 March In 1Q2017 BOŚ Brokerage House (DM BOŚ) was awarded the Byk i Niedźwiedź Prize (Bull and bear) by Gazeta Giełdy Parkiet (Warsaw Stock Exchange Gazette) in the category of the Best Brokerage House 2016, WSE awards for the highest share of a local animator in stock turnover in the Main Market in 2016 and for the highest share in the forward contracts for stocks in 2016 as well as the KDPW Group (National Depository for Securities) for high quality of transaction reporting to KDPW_TR in Home&Market monthly magazine granted DM BOŚ a Financial Order for bossa amike in the Investment Product category. 26

27 3. BOŚ S.A. Group s Financial Results thou. PLN IH 2016 IH 2017 Change Interest income and similar income ,3% Interest expense and similar charges ,5% Net interest income ,9% Fee and commission income ,9% Fee and commission expense ,8% Net fee and commission income ,4% Dividend income ,0% Net trading income ,0% Result on investment securities ,2% Result on hedge accounting ,6% Foreign exchange result ,4% Other operating income ,7% Other operating expenses ,2% Net impairment gains/ losses ,3% Administrative expenses ,6% Operating profit x Profit/loss before tax x Income tax expense x 27 Net profit/loss x

28 4. BOŚ S.A. Group s Balance Sheet thou PLN IH 2016 IH 2017 Change Cash and deposits with the Central Bank ,5% Deposits with other banks, loans and advances to other banks ,6% Held-for-trading securities ,3% Derivative financial instruments ,6% Hedging derivatives x Loans and advances to customers ,9% Investment securities ,8% - available for sale ,7% -held-to-maturity ,6% Intangible assets ,0% Property, plant and equipment ,5% Income tax assets ,8% Other assets ,5% Total assets ,9% 28 Amounts due to the Central Bank and other banks ,6% Derivative financial instruments ,5% Hedging derivatives ,9% Deposits from customers ,3% Liabilities under banking securities issued ,3% Subordinated debt ,8% Provisions ,4% Income tax liabilities x Other liabilities ,6% Equity ,7% Total equity and liabilities ,9%

29 Disclaimers Thismaterialdoesnotconstituteanditisnotanelementofaninvitationtosellisnotanyencouragementtomakeapurchaseoffer. None of its part and the fact of distributing it shall not constitute any grounds for any contract and it shall not be referenced in relations to such a contract. This material has been drawn solely for promotional purposes and by no means should it constitute any grounds for a decision to buy the Compnay s securities. Some information contained herein may constitute forward-looking statements, meaning statements containing phrases like: may, will, plan, anticipate, aim, estimate, assume, intend, forecast, the purpose of which is to, intention, negations or other forms thereof or similar expressions. Forward-looking statements apply to known and unknown issues encumbered by risk and uncertainties or other important factors which may make the Company s actual results, achievements and development grossly diverge from the results, achievements and development anticipated in those forward-looking statements or arising from those statements. The Company is not formally obligated to publicise updates or verifications of the forward-looking statements contained herein upon the disclosure of new information, occurrence of future events or other circumstances. Neither the Company nor any persons acting on its behalf shall bear any liability whatsoever for any damage that may potentially be caused by using this material or any information contained herein or for any damage that may be caused in another manner in relations to the information contained herein. This material or information contained herein are not published and may not be distributed in the territories of the United States of America, Canada, Japan or Australia. 29

30 Contacts for Investors: Web site: BOŚ Bank S.A. Investor Relations Team Żelazna Warszawa 30