Report of Bank Pekao S.A. Group for the three quarters of 2011

Transcription

1 Report of Bank Pekao S.A. Group for the three quarters of 2011 Warsaw, November, 2011

2 Selected consolidated financial data INCOME STATEMENT PLN thousand EUR thousand III Quarters 2011 III Quarters 2010 III Quarters 2011 III Quarters 2010 Net interest income Net fee and commission income Profit before income tax Net profit for the period Net profit attributable to equity holders of the Bank Net profit attributable to non-controlling interest Basic earnings per share (in PLN\EUR) Diluted earnings per share (in PLN\EUR) Paid dividend per share (in PLN\EUR) CASH FLOW STATEMENT PLN thousand EUR thousand III Quarters 2011 III Quarters 2010 III Quarters 2011 III Quarters 2010 Net cash flows from operating activities ( ) ( ) Net cash flows from investing activities ( ) ( ) Net cash flows from financing activities ( ) ( ) ( ) ( ) Net change in cash and cash equivalents ( ) ( ) BALANCE SHEET PLN thousand EUR thousand Total assets Amounts due to Central Bank Amounts due to other banks Amounts due to customers Non-controlling interest Equity attributable to equity holders of the Bank Share capital Number of shares Book value per share (in PLN\EUR) Diluted book value per share (in PLN\EUR) CAPITAL ADEQUACY PLN thousand EUR thousand Capital adequacy ratio (%) Risk weighted assets Core funds (Tier I) Supplementary funds (Tier II)

3 Selected unconsolidated financial data INCOME STATEMENT PLN thousand EUR thousand III Quarters 2011 III Quarters 2010 III Quarters 2011 III Quarters 2010 Net interest income Net fee and commission income Profit before income tax Net profit for the period Basic earnings per share (in PLN\EUR) Diluted earnings per share (in PLN\EUR) Paid dividend per share (in PLN\EUR) CASH FLOW STATEMENT PLN thousand EUR thousand III Quarters 2011 III Quarters 2010 III Quarters 2011 III Quarters 2010 Net cash flows from operating activities ( ) ( ) Net cash flows from investing activities ( ) ( ) Net cash flows from financing activities ( ) ( ) ( ) ( ) Net change in cash and cash equivalents ( ) ( ) BALANCE SHEET PLN thousand EUR thousand Total assets Amounts due to Central Bank Amounts due to other banks Amounts due to customers Equity Share capital Number of shares Book value per share (in PLN\EUR) Diluted book value per share (in PLN\EUR) CAPITAL ADEQUACY PLN thousand EUR thousand Capital adequacy ratio (%) Risk weighted assets Core funds (Tier I) Supplementary funds (Tier II) The following exchange rates were used in translation selected financial data from PLN to EUR: for balance sheet items an exchange rate announced by the National Bank of Poland as at 30 September EUR = PLN and an exchange rate announced by the National Bank of Poland and as at 31 December EUR = PLN, for profit and loss account an exchange rate calculated as the arithmetic mean of exchange rates announced by the National Bank of Poland as at the end of each month of III Quarters Half of 2011 and III Quarters of EUR = PLN and 1 EUR = PLN respectively. for cash flows items an exchange rate used for profit and loss account items, for dividends arithmetic average values of exchange rates announced by the National Bank of Poland as at the last day of each month of 2010 and 2009 respectively - 1 EUR = PLN and 1 EUR =

4 This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation. Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 Warsaw, November, 2011

5 Content 1. Highlights of The Bank Pekao S.A. Group Highlights of Bank Pekao S.A Summary of Performance External Environment Internal Factors Achievements of the Bank and the Bank Pekao S.A. Group PJSC UniCredit Bank Awards Description of the Group Changes in the Group s structure Changes in the Statutory Bodies of the Bank The Bank s shareholding structure Assessment of creditworthiness of Bank Pekao S.A Factors which will affect the results of the Group Quarterly Income Statement Consolidated income statement long form Consolidated statement of comprehensive income Consolidated income statement presentation form Statement of Financial Position and Financial Results Structure of the consolidated statement of financial position short form The consolidated income statement presentation form The structure of the net profit Provisions, deferred tax assets and liabilities Impairment losses Off balance sheet items Capital Adequacy Reconciliation of income statement presentation form and long form Other Information Management Board position regarding the possibility of achieving previously published Forecasts The Issuer s shares held by the Management and Supervisory Board Members Related party transactions Accounting principles adopted in the preparation of the report Seasonality or cyclical nature of the Bank s activity Issuance, redemption and repayment of debt securities Pending litigations Subsequent events Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

6 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Highlights of The Bank Pekao S.A. Group 3 QUARTERS OF QUARTERS OF INCOME STATEMENT (IN PLN MILLION) SELECTED ITEMS Operating income* 5, , , ,052.6 Operating costs* (2,753.7) (2,723.1) (3,649.1) (3,672.8) Operating profit* 2, , , ,379.8 Profit before income tax* 2, , , ,997.5 Net profit for the period attributable to equity holders of the Bank* 2, , , ,411.7 PROFITABILITY RATIOS Return on average equity (ROE) 13.7% 13.2% 13.1% 14.1% Net interest margin 3.7% 3.6% 3.6% 3.5% Non-interest income / operating income 39.6% 40.0% 40.4% 42.1% Cost / income 47.9% 50.9% 50.6% 52.1% STATEMENT OF FINANCIAL POSITION (IN PLN MILLION) SELECTED ITEMS Total assets 142, , , ,616.1 Net loans and advances to customers** 89, , , ,454.8 Amounts due to customers 103, , , ,250.0 Equity 20, , , ,371.1 STATEMENT OF FINANCIAL POSITION STRUCTURE RATIOS Net loans / total assets 62.7% 61.5% 60.3% 60.8% Securities / total assets 18.2% 23.4% 23.4% 21.0% Deposits ***/ total assets 72.9% 75.0% 74.4% 74.5% Net loans / deposits*** 86.1% 82.0% 81.0% 81.7% Equity / total assets 14.5% 14.6% 15.1% 14.1% Capital Adequacy Ratio 17.1% 18.0% 17.6% 16.2% EMPLOYEES AND NETWORK Total number of employees **** 20,509 20,975 20,783 20,874 Number of outlets (Bank Pekao S.A. and PJSC UniCredit Bank) 1,050 1,075 1,073 1,089 Number of ATMs (Bank Pekao S.A. and PJSC UniCredit Bank) 1,897 1,904 1,910 1,968 * Income statement includes continuing and discontinued operations. ** Including debt securities eligible for rediscounting at Central Bank and net investments in financial leases to customers. *** Deposits include Amounts due to customers. **** Starting from H including Centrum Bankowości Bezpośredniej Sp z o.o. (CBB) as a result of consolidation of the company under the full method since that date. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

7 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Highlights of Bank Pekao S.A. 3 QUARTERS QUARTERS INCOME STATEMENT (IN PLN MILLION) SELECTED ITEMS Operating income 5, , , ,692.6 Operating costs (2,525.8) (2,488.3) (3,336.4) (3,352.5) Operating profit 2, , , ,340.1 Profit before income tax 2, , , ,980.6 Net profit for the period 2, , , ,462.3 PROFITABILITY RATIOS Return on average equity (ROE) 14.4% 13.9% 13.5% 14.7% Net interest margin 3.6% 3.5% 3.5% 3.3% Non-interest income / operating income 37.5% 37.7% 38.6% 39.8% Cost / income 46.6% 49.4% 49.3% 50.1% STATEMENT OF FINANCIAL POSITION (IN PLN MILLION) SELECTED ITEMS Total assets 138, , , ,918.0 Net loans and advances to customers* 85, , , ,042.9 Amounts due to customers 103, , , ,701.3 Equity 20, , , ,967.6 STATEMENT OF FINANCIAL POSITION STRUCTURE RATIOS Net loans / total assets 62.2% 58.8% 59.2% 57.6% Securities / total assets 18.7% 23.9% 24.1% 21.6% Deposits** / total assets 74.8% 76.4% 76.3% 76.2% Net loans / deposits** 83.1% 77.0% 77.6% 75.5% Equity / total assets 14.6% 14.8% 15.2% 14.2% Capital Adequacy Ratio 16.8% 17.7% 17.2% 15.6% EMPLOYEES AND NETWORK Total number of employees 18,102 18,522 18,276 18,912 Number of outlets 1,000 1,016 1,014 1,028 Number of ATMs 1,804 1,794 1,800 1,854 * Including debt securities eligible for rediscounting at Central Bank. ** Deposits include Amounts due to customers. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

8 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Summary of Performance The Bank Pekao S.A. Group reported solid financial results for the three quarters of 2011, with net profit attributable to equity holders amounting to PLN 2,128.9 million, i.e. an increase of PLN million (13.1%) in comparison to the three quarters of Sound results for the three quarters of 2011 with the operating profit increased by 13.9% in comparison with the three quarters of 2010 were driven mainly by higher operating income with operating costs kept under control, growing only by 1.1%, well below infaltion. The strength of the capital and liquidity structure of the Bank Pekao S.A. Group is reflected by a capital adequacy ratio of 17.1% and net loans to deposits ratio at the level of 86.1% at the end of September This enables for further sound and stable development of the Group s activities. The Bank continued its policy of offering only PLN mortgage loans. The residual stock of mortgage loans denominated in foreign currencies, almost entirely acquired as a result of the merger of the spun-off part of Bank BPH SA, represents 7.0% of total loans of the Bank. In the three quarters of 2011, the Group s operating income amounted to PLN 5,744.4 million, an increase of PLN million (7.4%) in comparison with the three quarters of 2010 with growth in total net interest income, dividend income and income from equity investments as well as net fee and commission income. Total net interest income, dividend income and income from equity investments in the three quarters of 2011 amounted to PLN 3,469.9 million and increased by PLN million (8.1%) in comparison with the three quarters of The increase was driven mainly by higher volumes and efficient management of interest margin. The Group s net non-interest income in the three quarters of 2011 amounted to PLN 2,274.5 million, an increase of PLN million (6.3%) in comparison with the three quarters of 2010, mainly as a result of an increase in net fee and commission income as well as an increase in trading result. In the three quarters of 2011, the operating costs were kept under control and amounted to PLN 2,753.7 million. They were higher than the operating costs in comparable period of 2010 only by PLN 30.6 million (1.1%), well below inflation. The Group s net impairment losses on financial assets and off-balance sheet commitments amounted to PLN million in the three quarters of 2011, a decrease of PLN 4.1 million (1.0%) compared with the three quarters of As at September 30, 2011, the ratio of impaired receivables to total receivables amounted to 6.5% and was better by 0.2 pp than that reported as at the end of As at the end of September 2011, the total amounts due to the Group s customers (including customer deposits, repo and sell-buy-back transactions, structured certificates of deposits, certificates of deposits) amounted to PLN 104,681.5 million, an increase of PLN 4,615.4 million (4.6%) in comparison to the end of The total volume of retail customers deposits and structured certificates of deposits amounted to PLN 47,606.9 million at the end of September 2011, an increase of PLN 1,268.8 million (2.7%) in comparison to the end of The value of net assets of investment funds managed by Pioneer Pekao TFI S.A. amounted to PLN 14,514.7 million at the end of September 2011, a decrease of PLN 3,544.1 million (19.6%) in comparison to the end of 2010 as a result of unfavourable situation on capital markets. The total volume of corporate customers deposits, repo and sell-buy-back transactions and certificates of deposits amounted to PLN 57,074.6 million at the end of September 2011, an increase of PLN 3,346.6 million (6.2%) as compared to the end of As at the end of September 2011, the volume of retail loans amounted to PLN 35,743.2 million, an increase of PLN 4,197.5 million (13.3%) in comparison to the end of The growth of volume of retail loans was achieved thanks to high dynamic in sales of key lending products. Thanks to commercial focus, in the three quarters of 2011 the Bank s sales of consumer loans increased by 22.8% and sales of PLN mortgage loans increased by 50.1% compared with the three quarters of The volume of corporate loans, non quoted securities, reverse repo transactions and securities issued by local governments increased by PLN 5,126.0 million (9.6%) as compared to the end of 2010 and amounted to PLN 58,779.4 million at the end of September Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

9 Report on the activities of the Bank Pekao S.A. Group for the third quarter of External Environment GDP growth rate Polish macroeconomic situation to the end of September 2011 was characterized by relatively high economic growth (4.3% in the first half, estimates for the third quarter indicate slightly lower growth rate - around 4.1% year-on-year), that was a continuation of the recovery which started at the beginning of the second half of In consecutive quarters, however, slowdown in economic growth may be observed due to declining external demand, followed by lower growth in domestic demand. However, the factors supporting the growth are trade relations between Poland and Germany, which is in relatively good economic situation compared to other euro zone countries and an increase in competitiveness of the export sector due to weakening of the złoty. An important element of the growth will be also a high level of EU funds spending, accelerated by the upcoming European Football Championship - EURO Net export (contribution, pp) Gross fixed capital formation (contribution, pp) Individual consumption (contribution, pp) GDP (%, yoy) Q I 2007 Q II 2007 Q III 2007 Q IV 2008 Q I 2008 Q II 2008 Q III 2008 Q IV 2009 Q I 2009 Q II 2009 Q III 2009 Q IV 2010 Q I 2010 Q II 2010 Q III 2010 Q IV 2011 Q I 2011 Q II Inflation and monetary policy CPI inflation rate this year after reaching the peak equal to 5.0% year-on-year in May 2011, fell to 3.9% in September In the fourth quarter inflation is expected to decline further. Increasing inflation since September 2010, prompted the Monetary Policy Council (MPC) to four interest rate hikes in the first half of 2011, with the total effect of 100 bp increase and at the end of the June 2011 the reference rate amounted to 4.5%. The MPC signaled that due to the outlook for lower inflation and its return to the area of permissible deviations from the NBP inflation target in 2012 together with forecast of slowdown in the global economy and in Poland there is no need for further interest rates hikes. At the same time, inflation still exceeding the upper limit of the target and depreciation of the złoty reduces the likelihood of early interest rate cuts. CPI inflation (%, yoy) Core inflation (excl. food and energy) (%, yoy) NBP reference rate (% ) Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

10 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 FX rates After a period of stable quotations of the złoty in the first half of 2011, in the third quarter the złoty weakened significantly against euro, dollar and Swiss franc. In September the EUR/PLN rate exceeded the level of 4.5. To prevent further weakening of the złoty the National Bank of Poland together with the Ministry of Finance have taken steps to strengthen domestic currency. Interventions on the foreign exchange market stopped the short-term trend of the złoty depreciation. It is expected that the złoty may appreciate against euro to around 4.15 to the end of the year. This scenario, however, is burdened with a high risk associated with external problems of excessive debt in the euro zone countries EUR/PLN USD/PLN CHF/PLN / / / / / / / /2011 Budget and public debt It is very likely that the budget deficit this year will be lower than PLN 40.2 billion planned in the budget act. The Ministry of Finance estimates that the public debt to GDP ratio will be at the level of 53.8% at the end of the year. The likelihood of exceeding prudential threshold for the ratio at the level of 55% is low due to significant liquidity reserve of the Ministry of Finance, which allows to reduce borrowing needs this year. In 2011, the Government introduced a program of centralized management of the budgetary units funds, which from the standpoint of the state budget resulted in the consolidation effect of over PLN 23 billions, while for the banking sector brought a decline in deposits from the local governments sector. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

11 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 Banking sector According to the Polish Financial Supervision Authority financial results of the banking sector in the first eight months of 2011 have improved compared to the same period in the previous year. This is mainly related to the relatively stable macroeconomic situation. Banks have recorded higher net interest income than the last year. In terms of volumes, a steady growth of the banks deposit base was observed. Lending to households was characterized by an increase in housing loans and stagnation in consumer loans mainly due to the introduction of new supervisory regulations restricting access to such loans. Positive developments were observed in case of corporate loans as well, which can be attributed to the first signs of investment recovery in the private sector. Forecast of economic slowdown may break growth trends in investment activity. Loans/Deposits (%, right axis) Deposits of non-financial sector (%, yoy, left axis) Loans to non-financial sector (%, yoy, left axis) Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

12 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Internal Factors 5.1 Achievements of the Bank and the Bank Pekao S.A. Group Bank Pekao S.A. is a universal commercial bank providing a full range of banking services to individual and institutional clients, both in Poland and abroad. The Bank Pekao S.A. Group includes financial institutions operating in banking, asset management, pension funds, brokerage services, leasing and factoring markets. The Bank offers to its clients a broad distribution network with ATMs and outlets conveniently located throughout Poland Total number of outlets 1,000 1,014 Total number of own ATMs 1,804 1,800 As at the end of September 2011, the Bank maintained 4,801.5 thousand PLN-denominated current accounts, thousand mortgage loan accounts and thousand consumer loan accounts. (in thousand) Total number of PLN current accounts* 4, ,743.0 of which packages 3, ,489.2 Number of mortgage loans accounts** of which PLN mortgage loans accounts Number of consumer loan accounts *** * Number of accounts including accounts of pre-paid cards. ** Retail customers accounts. *** Express Loan. Individual clients Loans The Bank offers to its customers a wide range of lending products, including above all PLN mortgage loan and consumer loan Express Loan. The Bank continued its policy of offering only PLN mortgage loans. The mortgage loans offer is systematically updated and adjusted to changing market conditions and customers needs. Intensified commercial activities allowed to keep high dynamic in sales and strengthen the Bank s position with outstanding product offer on the housing loans market. In the third quarter of 2011, the Bank s loans sales reached a record high level allowing for an increase of the market share in sales of PLN mortgage loans to the level of 19%. In the three quarters of 2011, a 50.1% increase in PLN mortgage loans sales was noted in comparison with the same period of The Bank is still actively involved in the sale of preferential subsidized loans within the framework of the governmental program Rodzina na swoim (Family on their own). The Bank s sales of these loans remained substantial and accounted for nearly half of all housing loans granted by the Bank in the three quarters of In the third quarter of 2011, the Bank was consequently strengthening its position in consumer goods financing market through product offer development and marketing communication. In the three quarters of 2011, the Bank s sales of consumer loans increased by 22.8% compared with the three quarters of 2010 and it allowed for faster than the market development of volume of cash loans portfolio, which resulted in the Bank s market share increase in this area. The most important initiatives of the third quarter of 2011 included extension of special offers of Express Loan by seasonal offers and intensified sales activities. The Bank was also focused on more effective use of customers base through Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

13 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 increasing frequency of contacts, launching of new sales campaigns and strengthening relations with customers through individual loans offers distributed via electronic channels. Carried out activities were supported by the strong marketing communication in nation-wide and local media. Payment cards In the third quarter of 2011, within the project of implementation of pay-pass functionality for debit and credit cards, the Bank provided clients also with Visa cards equipped with this functionality. Currently all cards issued or renewed by the Bank can be used for payments in pay-pass technology. Saving and investment products In the third quarter of 2011, the Bank developed an offer of innovative investment products. In August, the Bank in cooperation with Pioneer TFI extended the Super Basket Program by a new portfolio Portfel ZrównowaŜony Europy Wschodniej. In September, a new absolute return type fund - Pioneer Elastycznego Inwestowania SFIO has been introduced for the first time to the Bank s offer. It is characterized by an investment strategy focused on nominal, positive return rate irrespective of the situation on capital markets. In addition, in the third quarter of 2011, the Bank conducted four new issues of bank securities in a form of structured deposit certificates with capital protection: Certyfikat Blask Złota 2, Certyfikat Blask Złota 3, Certyfikat Siła Orientu i Certyfikat Siła Orientu 2. New issues attracted client s attention and total subscription amount reached the level above PLN 276 million. In the third quarter of 2011, the Bank in the co-operation with the insurance company introduced a new insurance product Grupowe Ubezpieczenie na śycie - Creditor Protector Insurance (CPI) addressed to business clients (SME) applying for new investment loans. Pioneer Pekao Investment Management S.A. As at September 30, 2011, the net asset value of investment funds under the management of Pioneer Pekao TFI S.A. (a company managed by Pioneer Pekao Investment Management S.A. in which the Bank holds a 49% share), amounted to PLN 14,514.7 million, a decrease of PLN 3,544.1 million (19.6%) as compared to the end of 2010 as a result of unfavourable situation on capital markets. As at the end of September 2011, the company maintained 1,065.0 thousand open customer accounts (decrease by 3.4% in comparison to the end of 2010), managing portfolios of 36 investment funds and sub-funds. The value of net assets of investment funds managed by Pioneer Pekao TFI S.A. is presented in the table below. (in PLN million) Net asset value 14, ,058.8 bond and money market funds 6, ,548.8 equity funds 2, ,590.6 balanced funds 4, ,919.4 Brokerage Activity The Group offers a wide range of capital market products and services through retail brokerage entities: Dom Maklerski Pekao (Dom Maklerski) and Centralny Dom Maklerski Pekao S.A. (CDM) which is a subsidiary of Bank Pekao S.A. As at the end of September 2011, the both brokerage entities of the Group maintained thousand investment accounts, i.e thousand more than as at the end of The Group also offers to its clients an electronic service of investment accounts allowing to buy and sell all instruments listed on the Warsaw Stock Exchange and on the BondSpot market via the Internet. As at the end of September 2011, the both brokerage entities handled thousand on-line accounts, an increase of 25.4 thousand (18.5%) since the end of Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

14 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 As at September 30, 2011, the value of assets deposited on investment accounts ran by Dom Maklerski and CDM amounted to c.a. PLN 20 billion. After the three quarters of 2011, the following shares on the Warsaw Stock Exchange were achieved by Dom Maklerski and CDM: a 16.1% share in the bond trading volume, a 5.4% share in the futures trading volume, a 3.8% share in the stock trading volume. Within the framework of offer development, in the third quarter of 2011 both the brokerage entities offered to its clients the possibility of short sale formula orders. Private Banking In the third quarter of 2011, Private Banking continued its commercial activities with the aim at improvement of attractiveness of the Bank s offer dedicated to the most wealthy clients, increase of products sales, acquisition of new clients (mainly thanks to co-operation with other business divisions) and clients relations enhancement. Within the framework of these activities special offers were prepared for Private Banking clients with favourable investments conditions (with promotional interest rates for negotiated term deposits and deposits on saving accounts) as well as financing conditions (with favourable pricing for Express loans and mortgage loans). In September 2011, structured deposit Indeks na Zysk based on FX rate USD/PLN was settled. Deposit interests paid were at the level of 7% per annum. Favourable conditions of this deposit, with return rate exceeding average interest rate of banks deposits, supported investing of significant funds by the clients. Corporate clients In the third quarter of 2011, the Bank enhanced the offer for corporate clients by implementing new products and enriching functionality of existing products. In the electronic banking system PekaoBIZNES 24 new functionality AutoDealing enabling immediate FX transactions and deposit transaction in złoty and foreign currencies has been implemented. AutoDealing module significantly enhanced the process of settlement of FX transactions and deposits placements and eliminated the necessity of phone contact of a client with the Bank. In the area of transactional services, in the third quarter of 2011 a 23% increase in the number of transactions executed in the Pekao Collect service has been noted in comparison with the same period of previous year. The Bank extends and enhances its offer for correspondent banking clients. In the third quarter of 2011, the Bank expanded its cooperation with five banks in złoty and EUR clearing settlements. As regards the transactional products dedicated to correspondent banking clients the Bank consequently reaches a very high level of STP (straight through processing) rate amounting for almost 100% of accomplished interbank and client transactions. In the area of the commercial real estate, the Bank continues the strategy of financing construction projects, which create tangible value for the economy and enable cross-selling opportunities for the Bank. The important segment in the group of new loans is financing of shopping centers. In the third quarter of 2011, the Bank participated in a consortium financing the shopping center construction with a share of above EUR 130 million. The total amount of new loan agreements signed in the three quarters of 2011 increased by 73% in this area in comparison with the same period of In the third quarter of 2011, Bank Pekao S.A. obtained the status of Treasury Debt Securities Dealer for 2012 as a result of completion the subsequent Treasury Debt Securities Dealer contest organized by the Ministry of Finance. The Bank holds high position in this contest and is one of the key participants on the treasury debt securities market. Bank Pekao S.A. maintains a leading position in the corporate bonds market. In the third quarter of 2011, the Bank signed the corporate debt securities issue agreements for the total amount of PLN 5.3 billion. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

15 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 In September 2011, nation-wide campaign under advertising slogan Miej oko na biznes ( Keep an eye on your business ) promoting trade finance services, in particular L/C s, guarantees, efinancing and forfaiting, was launched. Its aim was to present a wide range of services and modern solutions available through the Internet platform. Alternative distribution channels The number of retail and business clients using alternative distribution channels such as Internet banking platform and Contact Center is growing systematically. Pekao24 service (for retail clients), PekaoFIRMA 24 (for SME clients) and PekaoBiznes 24 (for corporate clients) facilitate the management of financial assets, and the range of available operations is being steadily extended. Pekao24 Pekao24 is a comprehensive system dedicated to retail customers that allows to manage the funds accumulated on the accounts through the Internet, fixed-line or mobile telephone in a convenient and safe way. In the third quarter of 2011, a new version of PekaoToken application has been offered for clients using mobile phones with Android operational system. PekaoToken is a safe, convenient and modern application installed in mobile phones for transaction authorization in Pekao24 service. As at the end of September 2011 the number of Pekao24 clients totaled 1,903.5 thousand. In the third quarter of 2011, 1,092.5 thousand of clients logged into the electronic banking services and online transactions represented 92% of total transactions executed through the Pekao24 platform. (in thousand) Number of individuals with an access to electronic banking Pekao24 as at the end of period 1, ,711.3 Number of individuals actively using electronic banking Pekao24* 1, ,021.0 Number of individuals using mobile banking * A customer actively using electronic banking is a customer who logged in to the system at least once during the last quarter. PekaoFIRMA 24 PekaoFIRMA 24 is a system dedicated to small and medium sized enterprises. High flexibility of modules and access control management in PekaoFIRMA 24 enables an adjustment to individual needs of clients. At the end of September 2011, thousand companies use PekaoFIRMA 24 platform, of which thousand are active clients. The number of PekaoFIRMA 24 platform users increased by 17.5 thousand compared to the end of (in thousand) Number of business clients (SME) with an access to electronic banking PekaoFIRMA 24 as at the end of period Number of business clients (SME) actively using electronic banking PekaoFIRMA 24 * * A customer actively using electronic banking is a customer who logged in to the system at least once during the last quarter. The number of transactions carried through PekaoFIRMA 24 platform in the three quarters of 2011 exceeded 17 million, while the value of PLN transactions amounted nearly PLN 79.5 billion. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

16 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 In the third quarter of 2011, new functionalities into PekaoFIRMA 24 platform were introduced: introduction of dealing module which enables efficient process of FX transactions and eliminates the necessity of phone contact of the client with the Bank, introduction of POS module, allowing clients to review, sort and generate reports on transactions executed through their own terminal. This facility supplements the Bank s offer Mój Biznes płatniczy which allows the clients to use both the Bank s and other suppliers POS terminals. Contact Center The number of all serviced calls in the three quarters of 2011 amounted to 9,405.8 thousand. The number of outbound calls initiated by the Contact Center amounted to 7,402.3 thousand, while the number of outbound calls initiated by the consultants within the framework of telemarketing campaign amounted to 2,399.5 thousand, an increase of 17.5% compared to three quarters of The increase of outbound calls resulted from engagement of Contact Center in sales activities of the Bank. Cash loan was the most promoted product in telemarketing campaigns in the three quarters of The number of inbound calls handled by Contact Center in the three quarters of 2011 amounted to 2,003.5 thousand. The most calls concerned the payment cards service. (in thousand) 3 QUARTERS OF QUARTERS OF 2010 Total number of outbound calls initiated by Contact Center 7, ,930.8 of which number of commercial outbound calls initiated by Contact Center supporting sales activities of the Bank 2, ,041.5 Number of inbound calls served by Contact Center 2, ,232.3 Total number of inbound and outbound calls served by Contact Center 9, , PJSC UniCredit Bank PJSC UniCredit Bank operates in Ukrainian market as 100% subsidiary of Bank Pekao S.A. It pursues its activity through a network of 50 branches developed as a green field project and as a result of the merger with HVB Bank Ukraine, it provides services for 91.8 thousand individual customers and 3.7 thousand corporate clients (including SME). In the three quarters of 2011, PJSC UniCredit Bank generated net profit of PLN 35.5 million. The bank maintains a sound capital structure with a capital adequacy ratio (Basel II) at the level of 29.7% as at the end of September Performance of the bank is under continuous monitoring, specifically with the use of reinforced credit risk monitoring procedures. The Bank Pekao S.A. Group plans to concentrate its activities on local market and in connection with this a process aiming at disposal of the whole exposure of Bank Pekao S.A. in PJSC UniCredit has been started. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

17 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Awards Bank Pekao S.A. secured the fourth position on the TOP10 safest banks in CEE region and the first position among the Polish financial institutions in the World s Safest Banks 2011 ranking published by Global Finance magazine in August The evaluation criteria of the winners included the long-term credit rating assessment assigned by leading rating agencies and total assets. High position secured in the ranking confirmed the Bank s solid capital position and superior risk management capabilities. In the third quarter of 2011, the Bank was announced double winner of NajwyŜsza Jakość Quality International 2011 competition organised by Forum Biznesu editorial board, receiving Gold Emblem for the Pekao Integrated Agreement Packages for corporate clients and for electronic banking service Pekao24 for individual clients. The judging panel appreciated the Pekao Integrated Agreement Packages for comprehensive solutions, which enable clients to choose the Bank s products and services individually and use them effectively with simplified procedures and influence favourably a long-term relation with the Bank. Gold Emblem for electronic banking service Pekao24 for individual clients is a recognition for the Bank s activities related to implementing the best quality solutions in electronic banking and development of the Internet service for clients while assuring the highest standard of services in other forms of contact with the Bank. The Bank was awarded Best Integrated Corporate Bank Site title for electronic banking service PekaoBIZNES 24 which was recognized as the best integrated banking internet platform for corporate clients in CEE in the competition World s Best Internet Banks 2011 organized by the international financial magazine Global Finance. The judging panel appreciated the efficiency of gaining new on-line clients, on-line service, range of products and services available on-line and comprehensive approach to services dedicated to corporate clients. In the first edition of Call Center Awards competition organized by Institute for International Research Sp. z o.o., the team of Bank Pekao S.A. s Contact Center received the distinction in the category Call Center Team in recognition of its consistent goals realization policy, expertise and persistency in self-development. In addition to the awards for the Bank, other companies of the Bank Pekao S.A. Group also met with the market s appreciation. Pekao Leasing was honoured Firma Przyjazna MSP 2011 title as the only leasing company in the competition organized by Maison Institute. Moreover, in a research performed by Manager magazine, offer of Pekao Leasing was selected by the clients as the Best Product for SME. 5.4 Description of the Group The Group s structure is presented in the Notes to the Condensed Consolidated Interim Financial Statements of the Bank Pekao S.A. Group for the three quarters of Changes in the Group s structure Change of name, legal form and business place of the company On February 8, 2011, the legal form of OJSC UniCredit Bank Ukraine was changed from Open Joint Stock Company into Public Joint Stock Company and currently the bank s full name is Public Joint Stock Company UniCredit Bank. The seat of the bank was moved from Luck to Kiev. Liquidation of the company On October 20, 2010, the Extraordinary General Meeting of the company Holding Sp. z o.o. in liquidation took the resolution to commence the process of liquidation of the company, business activity of which has been already discontinued. The process of liquidation is continued in Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

18 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Changes in the Statutory Bodies of the Bank Supervisory Board Mr. Sergio Ermotti, Member of the Supervisory Board of the Bank, resigned from position held in the Supervisory Board effective from February 23, On April 14, 2011, Mr. Federico Ghizzoni, Deputy Chairman, Secretary of the Supervisory Board has submitted a resignation from his positions in the Supervisory Board of the Bank, effective from April 30, The Ordinary General Meeting of the Bank held on April 19, 2011, has appointed into the composition of the Supervisory Board of the Bank Mrs. Alicja Kornasiewicz effective from May 1, 2011 and Mr. Alessandro Decio effective from April 19, The Supervisory Board of the Bank at the meeting held on June 1, 2011 appointed Mrs. Alicja Kornasiewicz as Chairwoman of the Supervisory Board, Mr. Jerzy Woźnicki, who has submitted his resignation from the position of the Chairman of the Supervisory Board, as Deputy Chairman of the Supervisory Board and Mr. Alessandro Decio as Secretary of the Supervisory Board. Composition of the Supervisory Board: SEPTEMBER 30, 2011 DECEMBER 31, 2010 Alicja Kornasiewicz Chairwoman of the Supervisory Board Roberto Nicastro Deputy Chairman of the Supervisory Board Jerzy Woźnicki Deputy Chairman of the Supervisory Board Alessandro Decio Secretary of the Supervisory Board Paweł Dangel Member of the Supervisory Board Oliver Greene Member of the Supervisory Board Enrico Pavoni Member of the Supervisory Board Leszek Pawłowicz Member of the Supervisory Board Krzysztof Pawłowski Member of the Supervisory Board Jerzy Woźnicki Chairman of the Supervisory Board Federico Ghizzoni Deputy Chairman, Secretary of the Supervisory Board Roberto Nicastro Deputy Chairman of the Supervisory Board Paweł Dangel Member of the Supervisory Board Sergio Ermotti Member of the Supervisory Board Oliver Greene Member of the Supervisory Board Enrico Pavoni Member of the Supervisory Board Leszek Pawłowicz Member of the Supervisory Board Krzysztof Pawłowski Member of the Supervisory Board Management Board of the Bank On April 14, 2011, Mrs. Alicja Kornasiewicz, President of the Management Board of the Bank has resigned from her position, effective on April 30, On April 14, 2011, according to the Supervisory Board unanimous decision, which entered into force on May 1, 2011, Mr. Luigi Lovaglio has been appointed the President of the Management Board of the Bank, CEO for the current common term of office of the Bank's Management Board. The appointment is effective as of the date of obtaining the approval of the Polish Financial Supervision Authority. On July 19, 2011, the Polish Financial Supervision Authority unanimously gave its consent to appoint Mr. Luigi Lovaglio as President of the Management Board of the Bank. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

19 Report on the activities of the Bank Pekao S.A. Group for the third quarter of 2011 Composition of the Management Board: SEPTEMBER 30, 2011 Luigi Lovaglio President of the Management Board, CEO Diego Biondo Vice President of the Management Board Marco Iannaccone Vice President of the Management Board Andrzej Kopyrski Vice President of the Management Board Grzegorz Piwowar Vice President of the Management Board Marian WaŜyński Vice President of the Management Board DECEMBER 31, 2010 Alicja Kornasiewicz President of the Management Board Luigi Lovaglio F.V.P. of the Management Board, General Manager Diego Biondo Vice President of the Management Board Marco Iannaccone Vice President of the Management Board Andrzej Kopyrski Vice President of the Management Board Grzegorz Piwowar Vice President of the Management Board Marian WaŜyński Vice President of the Management Board 5.7 The Bank s shareholding structure As at September 30, 2011, the share capital of Bank Pekao S.A. amounted to PLN 262,367,367 and was divided into 262,367,367 shares. At the date of submitting the report, the share capital of the Bank amounts to PLN 262,367,367. Since the beginning of the year until the date of submitting the report, the share capital of the Bank increased by the total amount of PLN 3,041 as a result of issue of 3,041 series G ordinary bearer shares which have been taken up by participants of the Incentive Program realized in the Bank Pekao S.A. Group. The share of UniCredit S.p.A. in the share capital and the total number of votes at the General Meeting amounts for 59.24% while the share of other shareholders amounts for 40.76%. All existing shares are ordinary bearer shares. There are no special preferences or limitations connected with the shares, or differences in the rights attached to them. The rights and obligations related to the shares are defined by the regulations of the Polish Commercial Companies Code and other applicable laws. The shareholders of Bank Pekao S.A. owning directly or indirectly through their subsidiaries at least 5% of the total number of voting rights at the General Meeting of Bank Pekao S.A. are as follows: SHAREHOLDER S NAME NUMBER OF SHARES AND VOTES AT THE GENERAL MEETING SHARE IN SHARE CAPITAL AND TOTAL NUMBER OF VOTES AT THE GENERAL MEETING NUMBER OF SHARES AND VOTES AT THE GENERAL MEETING SHARE IN SHARE CAPITAL AND TOTAL NUMBER OF VOTES AT THE GENERAL MEETING SEPTEMBER 30, 2011 DECEMBER 31, 2010 UniCredit S.p.A. 155,433, % 155,433, % Other shareholders 106,933, % 106,930, % Total 262,367, % 262,364, % Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of

20 Report on the activities of the Bank Pekao S.A. Group for the third quarter of Assessment of creditworthiness of Bank Pekao S.A. As at September 30, 2011, Bank Pekao S.A. s creditworthiness was rated as follows: FITCH RATINGS BANK PEKAO S.A. POLAND Long-term rating (IDR) A- A- Short-term rating F2 F2 Individual rating B/C - Viability rating* a- - Support rating 1 - Rating outlook Stable Stable STANDARD AND POOR S** BANK PEKAO S.A. POLAND Long-term rating A- A- Short-term rating A-2 A-2 Rating outlook Stable Stable MOODY S INVESTORS SERVICE LTD. (UNSOLICITED RATING) BANK PEKAO S.A. POLAND Long-term foreign-currency deposit rating A2 A2 Short-term deposit rating Prime-1 Prime-1 Financial strength C- C-*** Rating outlook Stable Negative*** * On July 20, 2011, Fitch Ratings added Viability rating to ratings of all financial institutions rated by them. This Viability rating, similar to actual Individual rating, constitutes assessment of the quality of financial institution management, what determines its intrinsic viability and financial credibility. These ratings are assigned within similar to the 19-point long-term rating scale, starting from aaa as the highest up to f as the lowest with the possibility to add + or -. Individual rating and Viability rating will run in parallel until December 31, Individual rating will be withdrawn on the beginning of year ** The latest research analysis of Bank Pekao S.A. by Standard and Poor s agency has been published on the Bank s website: *** Average for the Polish banking sector. On October 11, 2011, Fitch Ratings agency confirmed long-term, short-term and viability ratings of Bank Pekao S.A. as unaffected and affirmed Support Rating of the Bank at 1 placed it at the same time on Rating Watch Negative. Review of Bank Pekao S.A. s ratings was effectuated in connection with revising support rating and assigning negative outlook to other ratings of UniCredit S.p.A., the Bank s parent company. 5.9 Factors which will affect the results of the Group Slowdown in the economic growth is expected in the next few quarters. This would result in deterioration of the situation on the labor market and, therefore, in slowdown of private consumption growth. The recovery in private sector investment observed in the first half of 2011 may be stopped. However, strong growth can be still expected in public sector investment, financed from European funds. Throughout 2011, GDP is expected to grow by ca. 4.0%. Economic slowdown will affect hardly investment decisions made by large companies, among which optimism level is the highest. Companies in manufacturing and construction sectors, especially that focused on domestic consumer, may react particularly negatively on the economic downturn. According to data published by the National Bank of Poland, dynamic of growth in loans for corporates reached in September 2011 the level of 12.2% year on year, after being negative for the whole Maintaining such a dynamics in the coming quarters could be difficult due to poor outlook for investment demand. Private consumption growth may somewhat weaken due to expected deterioration of the situation in the labor market. In the third quarter of 2011, employment growth in the enterprise sector lowered compared to levels recorded in the first half. Lower demand for labor was not reflected in wages growth, which during summer remained at the level exceeding 5% year on year. Bank Pekao S.A. - Report of Bank Pekao S.A. Group for the three quarters of