CONSOLIDATED FINANCIAL STATEMENTS OF THE BANK OCHRONY ŚRODOWISKA S.A. GROUP FOR THE THIRD QUARTER 2015

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS OF THE BANK OCHRONY ŚRODOWISKA S.A. GROUP FOR THE THIRD QUARTER 2015 November 2015

2 Contents BOŚ S.A. GROUP INTERIM FINANCIAL STATEMENTS... 3 Interim consolidated income statement... 3 Interim consolidated comprehensive income statement... 4 Interim consolidated statement of financial position... 5 Interim consolidated statement of changes in equity... 6 Interim consolidated cash flow statement... 7 INTERIM FINANCIAL STATEMENTS OF BOŚ S.A Interim income statement of the Bank... 9 Interim comprehensive income of the Bank... 9 Interim statement of financial position of the Bank Interim statement of changes in equity of the Bank Interim statement of cash flow of the Bank I. Information on accounting principles (policy) adopted in preparing the consolidated financial statements II. Comparative data III. Adjustment of prior period errors IV. Financial assets and liabilities at fair value V. Change in consolidated contingent liabilities and assets VI. Group structure, entities covered by consolidation ADDITIONAL NOTES TO BOŚ S.A. GROUP FINANCIAL STATEMENTS Macroeconomic situation Financial results of the Group Financial results The Group balance sheet Assets of the Group Total equity and liabilities of the Group Ratios Directions of development of the Bank Selected operational data of the Group Significant events in Q Factors likely to affect performance at least in the next quarter Segment reporting Non-standard factors and events affecting performance Management Board position regarding feasibility of the published forecasts Seasonal or cyclical developments Issuance, redemption and payment of debt securities or equity securities Dividends Transactions with related entities Loan or cash advance sureties or guarantees granted, where the total of running sureties or guarantees is equivalent to not less than 10% of issuer s equity Judicial or administrative proceedings under way Group structure changes Shareholders holding directly or indirectly, through subsidiaries, at least 5% of the total number of votes at Issuer s General Meeting Shares of BOŚ S.A. held by members of executive and supervisory bodies Other information issuer deems necessary for an assessment of its human resources, assets, financial position, financial performance, and changes thereof, as well as information relevant to an assessment of issuer s capacity to meet its liabilities The Bank Supervisory Board The Bank Management Board Important events past publication date of this report... 38

3 BOŚ S.A. GROUP INTERIM FINANCIAL STATEMENTS Interim consolidated income statement Continued operations Q3 1 Jul 2015 to 9 months ended Q3 1 Jul 2014 to 30 Sep months ended 30 Sep 2014 Interest and similar income Interest expense and similar charges Net interest income Fee and commission income Fee and commission expense Net fee and commission income Dividends received Net trading income Result on investment securities Hedge accounting Foreign exchange result Other operating income Other operating expense Net impairment gains / losses Administrative expenses Operating income Profit before tax Income tax expense current deferred Net profit Of which attributable to: equity holders of the Bank non-controlling interests Earnings per share attributable to the Bank s equity holders during the period (in PLN) basic -0,21 2,49 diluted -0,21 2,49 No discontinued operations in the 9 months ended or in

4 Interim consolidated comprehensive income statement Q3 1 Jul 2015 to 9 months ended Q3 1 Jul 2014 to 30 Sep months ended 30 Sep 2014 Net profit Items transferred to income statement Valuation (net) of financial assets available for sale Valuation of derivative instruments securing future cash flows Deferred tax Items not transferred to income statement Total gains and losses Of which attributable to: equity holders of the Bank non-controlling interests

5 Interim consolidated statement of financial position ASSETS 31 Dec 2014 Cash and balances with the Central Bank Deposits with other banks, loans and advances to other banks Trading securities Derivative instruments Hedging derivative instruments Loans and advances to clients Investment securities: available for sale held to maturity Assets available for sale 50 - Intangible assets Property and equipment Income tax assets current deferred Other assets Total assets LIABILITIES 31 Dec 2014 Amounts owed to Central Bank Amounts owed to other banks Derivative instruments Hedging derivative instruments Amounts owed to clients Debt securities issued Subordinate debt Provisions Income tax liabilities current deferred Other liabilities Total liabilities EQUITY Equity attributable to equity holders of the Bank: Core capital share capital own shares supplementary capital from sale of shares above par Revaluation reserve Retained earnings Non-controlling interests - - Total equity Total equity and liabilities

6 Interim consolidated statement of changes in equity Core capital Equity attributable to holders of the Bank equity Retained earnings Share capital Own shares Share premium Revaluation reserve Other supplementary capital Other reserve capital General risk fund Accumulated losses Total equity As at 1 Jan Net profit Other total income Total gains and losses Purchase of own shares Share options Distribution of gains and losses, of which: Transfer to other reserves Loss brought forward As at As at 1 Jan Net profit Other total income Total gains and losses Purchase of own shares Variable remuneration components paid out in shares Share options Price differentials Distribution of gains and losses, of which: Transfer to other reserves Loss brought forward As at 30 Sep No non-controlling interest in the 9 months ended 30 September 2015 or in

7 Interim consolidated cash flow statement Indirect method CASH FLOW FROM OPERATING ACTIVITIES 9 months ended 30 Sep 2014 Profit before tax Total adjustment: Amortisation and depreciation Net interest on investing activities Result on investing activities Net interest on financing activities Non-realised foreign exchange differences from financing activities Dividends received Dividends received on shares in trading securities portfolio Dividends received on shares in securities available for sale portfolio Change in the balance of trading securities Change in the balance of assets and liabilities due to valuation of derivative financial and security instruments Change in deposits with other banks and in balance of loans and advances to banks Change in balance of loans and advances to clients Change in balance of investment securities Change in balance of assets available for sale Change in balance of other assets Change in amounts owed to banks and the Central Bank Change in amounts owed to clients Change in provisions Change in other liabilities Income tax paid Net cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Inflows Sale of property, plant and equipment Sale of intangible assets Redemption of securities held to maturity Net interest received from securities held to maturity Outflows Purchase of securities held to maturity Purchase of intangible assets Purchase of property, plant and equipment Net cash flow from investing activities

8 9 months ended Indirect method 30 Sep 2014 CASH FLOW FROM FINANCING ACTIVITIES Inflows Inflows from bonds issued by Group, of which: from subordinate bonds Outflows Redemption of bonds issued by Group Purchase of own shares Interest paid on bonds issued by Group, of which: from subordinate bonds Net cash flow from financing activities TOTAL NET CASH FLOW BALANCE SHEET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, of which: cash and cash equivalents with limited disposability

9 INTERIM FINANCIAL STATEMENTS OF BOŚ S.A. Interim income statement of the Bank Continued operations Q3 1 Jul 2015 to 9 months ended Q3 1 Jul 2014 to 30 Sep months ended 30 Sep 2014 Interest and similar income Interest expense and similar charges Net interest income Fee and commission income Fee and commission expense Net fee and commission income Dividends received Net trading income Result on investment securities Hedge accounting Foreign exchange result Other operating income Other operating expense Net impairment gains / losses Administrative expenses Operating income Profit before tax Income tax expense current deferred Net profit Net profit per Bank share during the period (PLN) basic 0,47 2,93 diluted 0,47 2,93 No discontinued operations in the 9 months ended 30 September 2015 or in Interim comprehensive income of the Bank Q3 1 Jul 2015 to 9 months ended Q3 1 Jul 2014 to 30 Sep months ended 30 Sep 2014 Net profit Items transferred to income statement Valuation (net) of financial assets available for sale Valuation of derivative instruments securing future cash flows Deferred tax Items not transferred to income statement Total gains and losses

10 Interim statement of financial position of the Bank ASSETS 31 Dec 2014 Cash and balances with the Central Bank Deposits with other banks, loans and advances to other banks Trading securities Derivative instruments Hedging derivative instruments Loans and advances to clients Investment securities: available for sale held to maturity Investments in subsidiaries and associates Assets available for sale 50 - Intangible assets Property and equipment Income tax assets current deferred Other assets Total assets LIABILITIES 31 Dec 2014 Amounts owed to Central Bank Amounts owed to other banks Derivative instruments Hedging derivative instruments Loans and advances to clients Debt securities issued Subordinate debt Provisions Current income tax liabilities Other liabilities Total liabilities EQUITY Core capital share capital own shares supplementary capital from sale of shares above par Revaluation reserve Retained earnings Total equity Total equity and liabilities

11 Raport Group Kapitałowej BOŚ S.A. za III quarter 2015 w PLN 000 Interim statement of changes in equity of the Bank Core capital Retained earnings Share capital Own shares Share premium Revaluation reserve Other supplementary capital General risk fund Accumulated losses Total equity As at 1 Jan Net profit Other total income Total gains and losses Purchase of own shares Share options Distribution of gains and losses, of which: Transfer to other reserves Loss brought forward As at As at 1 Jan Net profit Other total income Total gains and losses Purchase of own shares Variable remuneration components paid out in shares Share options Distribution of gains and losses, of which: Transfer to other reserves Loss brought forward Transfer to other reserves

12 Interim statement of cash flow of the Bank Indirect method CASH FLOW FROM OPERATING ACTIVITIES 9 months ended 30 Sep 2014 Profit before tax Total adjustment: Amortisation and depreciation Net interest on investing activities Net interest on financing activities Non-realised foreign exchange differences from financing activities Dividends received, of which: dividends received from subsidiary entities Dividends received on shares in securities available for sale portfolio Change in the balance of trading securities Change in the balance of assets and liabilities due to valuation of derivative financial and security instruments Change in deposits with other banks and in balance of loans and advances to banks Change in balance of loans and advances to clients Change in balance of investment securities Change in balance of assets available for sale Change in balance of other assets Change in amounts owed to banks and the Central Bank Change in amounts owed to clients Change in provisions Change in other liabilities Income tax paid Net cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Inflows Redemption of securities held to maturity Net interest received from securities held to maturity Dividends received Outflows Purchase of shares in subsidiary entity Purchase of intangible assets Purchase of property, plant and equipment Purchase of securities held to maturity Net cash flow from investing activities

13 Indirect method 9 months ended 30 Sep 2014 CASH FLOW FROM FINANCING ACTIVITIES Inflows Inflows from bonds issued by Bank, of which: from subordinate bonds Outflows Purchase of own shares Redemption of bonds issued by Bank Interest paid on bonds issued by Bank, of which: from subordinate bonds Net cash flow from financing activities TOTAL NET CASH FLOW BALANCE SHEET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, of which: cash and cash equivalents with limited disposability

14 I. Information on accounting principles (policy) adopted in preparing the consolidated financial statements These interim consolidated financial statements of data for the BOŚ S.A. Capital Group ( Group ) and financial statements for BOŚ S.A. for the 9 months ended 30 September 2015 have been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted for use in the European Union and at the report period, i.e., 30 September 2015, with identical accounting principles applied for each period. These interim consolidated financial statements does not present all disclosures required in yearly financial statements. As at the date this report was signed off for publication, as the IFRS implementation is under way in the European Union and given the activity areas of the Group, the accounting principles applied by the Group show no difference between the IFRS standards that have come into force and the IFRS approved by the EU adjusted for requirements defined in a 11 February 2015 Finance Ministry position statement and a 12 February 2015 Polish Financial Supervision Authority [KNF] position statement regarding recognition of fees banks contribute to the Bank Guarantee Fund. These interim consolidated financial statements of the BOŚ S.A. Group have been prepared according to the historical cost method, except as modified by the revaluation of financial assets available for sale, securities for trading, and any derivative contracts measured at fair value. The accounting principles the Group applies in these interim consolidated financial statements for the 9 months ended 30 September 2015 were described in detail in the yearly Consolidated Financial Statements of the BOŚ S.A. Group for the period of twelve months ended 31 December 2014 in note Standards and interpretations, or changes, that have been used for a first time in 2015 had no significant effect on these financial statements of the Group. The drafting of the financial statements in compliance with IFRS as approved by the EU requires the application of specific estimates significant for accounting. It also requires the Management Board to use its own judgment in applying the accounting policies. The issues in relation to which a greater degree of judgment is required, generally complex issues, or issues involving significant reliance on estimates or judgments for the purpose of the consolidated financial statements in respect of credit impairment, impairment of equity instruments available for sale, debt securities held to maturity, fair value of financial instruments, provisions against future liabilities and claims, provisions for longservice bonuses and retirement bonuses, or assets from deferred tax, were presented in the Consolidated Financial Statements of the BOŚ S.A. Group for the period of twelve months ended 31 December 2014 and they apply in this report as well. These interim financial statements are drafted in Polish złotys (PLN), and, unless specified otherwise, all values are in thousands of złotys (PLN 000s). II. Comparative data The Group has introduced changes to figures presented in its previous consolidated financial statements published to the dates of 30 September Comparative data were presented in note 3. III. Adjustment of prior period errors As at 30 September 2015 the Group had posted adjustments of prior period errors that resulted from incorrect recognition of earnings from fees clients paid under conditions of a special offer programme. Changes made following the adjustments of errors in the previous consolidated financial statements published to the dates of 30 September 2014 are shown in the table below: 14

15 Position in the interim income statement Net interest and similar income Title Changed presentation of income from fee and commission earnings as recognised under ESP 30 Sep 2014 published data 9 months ended Impact of adjustment 30 Sep 2014 data presented in these statements Net interest income Fee and commission income Net fee and commission income Adjustments to deferred fee and commission earnings Net operating income Profit before tax Income tax expense deferred items Change in deferred income tax liabilities Net profit Position in the interim consolidated income statement Title 30 Sep 2014 published data 9 months ended Impact of adjustment 30 Sep 2014 data presented in these statements Net profit Adjustments to deferred commission earnings Total profit months ended Position in the profit per share attributable to Bank holders in the report period Title 30 Sep 2014 published data 30 Sep Sep 2014 data presented in these statements Net profit Basic profit per share (as expressed in złotys, groszys) IV. Financial assets and liabilities at fair value Deposits with other banks Amounts due from other banks include interbank deposits, nostro accounts and loans and advances. Given the brief maturity (up to 6 months for fixed interbank deposits) interbank deposit at fair value is equal to balance sheet value. Bank bonds have been recognised at fair value adjusted for lending spread determined based on recent comparable issues by other banks. Loans and advances to clients and other banks Loans and advances to clients and other banks have been presented as adjusted for net impairment gains/losses. Balance sheet value is determined at depreciated cost based on the effective interest rate method. Loan at fair value is recognised as the value that results from currently valuated future capital and interest flows (separately for currencies and separately for PLN) as determined by the effective interest rate method applied for each loan (except for loans with unspecified schedules or impaired items for which balance sheet value is taken as fair value) discounted at average effective interest rate of loans extended in the last twelve months. For mortgage loans, prepayments have been taken into account. For foreign currency loans the Bank had ceased granting average effective 15

16 interest rate has been applied of corresponding PLN loans, adjusted for differences in interest rates in the particular currencies and PLN. Liabilities to non-banking entities Balance sheet liabilities are valuated at depreciated cost with the application of effective interest rate. Liabilities are recognised at fair value assuming their value to result from principal and interest for all deposits discounted by weighted average interest rate applicable for deposits taken in September Current accounts, which have no time schedule, have been recognised at balance sheet value. Liabilities (principal and interest) owed to international financial institutions have been discounted by average effective interest rate of liabilities taken in the last 12 months (for EUR) or effective interest rate of the last transaction concluded in the currency in case (for PLN). Subordinate liabilities Subordinate liabilities have been assessed at fair value on adjustments for changed lending spread determined based on an issue the Bank launched in Liabilities on securities issued Liabilities on securities the Bank had issued have been assessed at fair value on adjustments for changed lending spread for bonds denominated in PLN determined on the basis of issues the Bank launched in the years for issues in PLN and on the basis of market listings in the case of Eurobonds. Liabilities owed to other banks Liabilities on repo transactions have been presented at balance sheet value. Interbank deposits, given the short maturities, have been recognised at balance sheet value, as advances (principal and interest) have been discounted by average effective interest rate of liabilities taken in the last 12 months (for EUR) or effective interest rate of the last transaction concluded in the currency in case (for PLN). Balance sheet value at Fair value at Balance sheet value at 31 Dec 2014 Fair value at 31 Dec 2014 FINANCIAL ASSETS Deposits with other banks, loans and advances to other banks Loans and advances to clients, of which: Loans in PLN Loans in foreign currency Investment securities held to maturity Debt securities, of which: Treasury FINANCIAL LIABILITIES Amounts owed to other banks Amounts owed to clients, of which: Corporate clients Retail clients Public finance Environmental funds International financial institutions Other Clients Debt securities issued Subordinate liabilities

17 V. Change in consolidated contingent liabilities and assets 31 Dec 2014 Contingent liabilities: Financial, of which: open credit lines, of which: revocable irrevocable open import letters of credit promises of loan, of which: irrevocable Guarantees, of which: loan payment endorsements and guarantees performance guarantees Issue underwritings Securities to receive Contingent assets: Financial, of which: open credit lines other Guarantees Other Total contingent liabilities and assets VI. Group structure, entities covered by consolidation As at 30 September 2015, the Bank Ochrony Środowiska S.A. Group is composed of Bank Ochrony Środowiska S.A., the parent entity to subsidiaries: Dom Maklerski BOŚ S.A. brokerage service, BOŚ Eko Profit S.A., BOS Finance AB, BOŚ Invest Management sp. z o.o., BOŚ Ekosystem sp. z o.o., BOŚ Nieruchomości sp. z o.o., BOŚ Nieruchomości sp. z o.o. spółka komandytowo-akcyjna, and indirect subsidiary (direct subsidiary of BOŚ Eko Profit S.A.) MS Wind sp. z o.o. As at 30 September 2015 the Bank holds 100% of equity and votes at the general meeting of the above companies, except for: BOŚ Nieruchomości sp. z o.o. S.K.A., where the Bank holding is %, with the remaining % of equity and votes at the general meeting held by BOŚ Nieruchomości sp. z o.o. These statements comprise data of Dom Maklerski BOŚ S.A., BOŚ Eko Profit S.A., MS Wind sp. z o.o., BOS Finance AB, BOŚ Invest Management sp. z o.o., BOŚ Ekosystem sp. z o.o., BOŚ Nieruchomości sp. z o.o., and BOŚ Nieruchomości sp. z o.o. S.K.A., which are consolidated by the full coverage method. 17

18 Structure of BOŚ S.A. Capital Group 100% BOS Finance AB BOŚ Ekosystem sp. z o.o. 100% Bank Ochrony Środowiska S.A. 100% BOŚ Eko Profit S.A 100% BOŚ Invest Management Sp. z o.o. 100% MS Wind Sp. z o.o. 100% 100% % Dom Maklerski Banku Ochrony Środowiska S.A. BOŚ Nieruchomości Sp. z o.o % BOŚ Nieruchomości Sp. z o.o. SKA ADDITIONAL NOTES TO BOŚ S.A. GROUP FINANCIAL STATEMENTS 1. Macroeconomic situation In Q3 2015, the economy stabilised, following a GDP drop to 3.3% y/y in Q2 from 3.6% y/y in Q1 this year. Industrial output grew slightly in Q3 (to 4.3% y/y, from 3.9% y/y in Q2), as construction dropped to 0.5% y/y, from 1.9% y/y in Q2, and retail sales to 2.6% y/y, from 3.5% in Q2. 6 % YoY GDP consumption investment (right axis) % YoY In Q3 2015, the labour market slightly improved, with registered unemployment dropping to 9.7% at end Q3, from 11.5% in the same period last year, and jobless number in September 2014 to September 2015 shrinking by more than In Q3 2015, the adverse price growth held on, with deflation rate nonetheless diminishing. Consumer price index averaged 0.7% y/y, compared with 0.9% y/y in the previous quarter. The flagging deflation resulted above all from a diminishing y/y adverse food price development, a combined effect of fruit and vegetable price rise following the drought-induced bad harvest in 2015 and, on the other hand, of the flagging impact of very low prices at the turn of 2014 and 2015 following a 2014 Russian embargo on food imports from the European Union. A major factor slowing the disappearance of 18

19 deflation in Q3 was a return of a downward tendency in oil prices, which sent eventually fuel prices down in the domestic market as well. Another factor contributing to low inflation was a moderate level of demand and cost pressure in the economy. 6 % YoY 4 CPI core inflation Following a drop by 50 basis points of National Bank of Poland interest rates in March this year and the announcement of ending its monetary policy easing line, the NBP Monetary Policy Council kept interest rates at stable levels in Q2 and Q3 this year. NBP reference rate was kept at 1.5%, deposit rate at 0.50%, and Lombard rate at 2.50%. In a situation where NBP interest rates were stable and markets expected the NBP to continue its policies at least through to end 2015, in Q3 interbank lending rates remained stable, with WIBOR 3M at 1.73% at end September, compared with 1.72% at end June this year. 7 % 5 3 NBP reference rate WIBOR 3M 5y bond yield 1 Global financial markets continued to be volatile in Q Following a remarkable rise of risk aversion at the turn of Q1 to Q2 in reaction to the escalating Greek crisis, and a short-lived relief in reaction to the eventual prevention of the crisis (after creditors managed to reach agreement with the Greek authorities on financial assistance to Greece), the latter half of Q3 brought a resurgence of uncertainty on global financial markets. The main concern was the uncertainty about prospects of growth in the emerging markets (in particular the Chinese economy) and growing fears that those developments may have a strong negative impact on the advanced markets. The widespread uncertainty showed in strong drops of listings on many stock exchanges feeling and in falling raw material prices, notably oil prices. Growing fears about global economic prospects along with dropping oil prices had the effect of low market expectations of any early rate rises by the U.DS. Federal Reserve Board and nourished hopes for the European Central Bank to ease its monetary policy moves. As a result, Q3 this year brought with it a lowering of bond yields in reference markets (USA, Germany), following a clear rise thereof in Q2. 19

20 The prevailing drift on the global financial market in Q had a decisive effect on developments on the Polish financial market. Amidst a global rise of risk aversion in Q3 the Polish currency lost to the euro more than 1.0% (to PLN 4.24 for EUR 1 at end September). As the Swiss franc in turn weakened to the euro, the złoty strengthened to the Swiss franc by more than 4% (to PLN 3.88 for CHF 1 at end September). Along with that, as bond yields dropped in USA and in Germany PLN bonds fell as well, after rising in Q2: 10-year bond yields had dropped below 2.80% by the end September, from more than 3.20% listed at end June this year. 2. Financial results of the Group 2.1. Financial results Item Q Q PLN 000 Q Q Q / Q Change Q3 2015/ Q Continued operations Interest and similar income Interest expense and similar charges Net interest income Fee and commission income Fee and commission expense Net fee and commission income Dividends received Net trading income x Result on investment securities Hedge accounting x x Foreign exchange result Other operating income Other operating expense Net impairment gains / losses Administrative expenses Operating income x x Profit before tax x x Income tax expense x NET PROFIT x x Over the three quarters 2015 the BOŚ S.A. Group posted a net loss to the tune of PLN 4.7 million, from a PLN 56.9 million net profit it posted in the same period last year. In Q alone, the BOŚ S.A. Group posted a PLN 7.4 million net profit, up from PLN 3.4 million in Q Over the three quarters 2015 the BOŚ S.A. Group posted a worse net interest figure than in the same period last year, as amidst falling market rates income expense increased stronger than income earnings. Interest income dropped PLN 79.2 million, even though average client loans balance grew effectively 12.7%, by PLN 0.9 billion. Interest expense dropped to a lesser degree, by PLN 43.7 million. That was to do with a second stage of public finance consolidation policies. As environmental funds and corporate and public finance entities withdrew their deposits the Bank stared, from mid-2014, expanding its retail deposits base (average liabilities in the retail segment in three quarters this year increased by PLN 1.4 billion from the figure posted for the same three quarters last year). More retail funds were taken also because the Bank had its sources of financing and had met Basel III requirements. Net fee and commission income for the three quarters of 2015 grew by 15.4% on the same period last year, mainly owing to a 31% increase in commission earnings on brokerage services, by 20

21 PLN 9.7 million, and 11.5% higher fees on deferred loan costs, by PLN 1.5 million, as earnings settled on time decreased 7.1%, by PLN 4.1 million. Fee and commission expense, on the other hand, was 5.0%, or PLN 1.2 million, less than before, mainly owing to lower payment card fees (which had dropped by PLN 1.3 million, i.e., 22%). Net trading income the BOŚ S.A. Group posted for the three quarters of 2015 was PLN 16.8 million, compared with PLN 44.2 million in the same period last year. That was due to worse results the Bank posted from FX forward contracts and from IRS transactions, and a worse net trading income reported by Dom Maklerski BOŚ S.A. Net investment securities was PLN 11.9 million, down from PLN 12.6 million in the same period last year. The good result on net investment securities last year was attributable to operations taking advantage of Treasury paper price changes and to the Bank disposing bonds from its portfolio available for trading. Net foreign exchange increased PLN 17.2 million, mainly on revaluations of forward and spot instruments. Net impairment result (PLN 66.4 mn) was worse in the three quarters of 2015 than in the same period previous year (PLN 39.3 mn). This impairment figure was mainly due to higher write-downs (by PLN 51.2 mn) on loans extended to clients in the retail segment. Administrative expenses of the Group increased 5.4% on the three quarters last year, mainly because the Bank had to pay a higher contribution to the Bank Guarantee Fund [BFG] (an increase of PLN 11.0 million y/y). The PLN 4.2 million increase in amortisation and depreciation is attributable to the development of IT systems and applications introduced with running BOŚ S.A. projects. Material costs the Group posted grew by PLN 5.1 million, i.e., 5.9%. Q Q Q Q Change Item PLN 000 Q / Q Q3 2015/ Q Employee benefits Administrative expense, of which: material costs taxes and duties contribution and payments to Bank Guarantee Fund (BFG) contribution and payments to Polish Financial Supervision Authority (KNF) x other Amortisation and depreciation fixed assets intangibles TOTAL ADMINISTRATIVE EXPENSE Employee benefits in the BOŚ S.A. Group decreased 4.2% over the three quarters 2015 from the same period last year. Total employment in the Group dropped to 1 777, i.e., by 3.4% in comparison to the end of

22 Item 30 Jun Dec 2014 Change % full-time jobs vs. 31 Dec 2014 vs. 30 Jun 2015 Employment, BOŚ S.A Employment, subsidiaries Total employment, BOŚ S.A. Group The Group balance sheet The Group balance sheet total was PLN million as at 30 September 2015, 0.5% up from 31 December Assets of the Group Change in structure Loans and advances to clients, at 68.8%, was the largest position in the assets of the Group as at 30 September Their share in total assets increased by 5.3 percentage points from the beginning of 2015, as the share of investment securities dropped by 6.7 percentage points over the same period. Item Cash and balances with the Central Bank Deposits with other banks, loans and advances to other banks 30 Jun Dec 2014 Change % PLN 000 vs. 31 Dec 2014 vs. 30 Jun Trading securities Derivative instruments Hedging derivative instruments Loans and advances to clients Investment securities: available for sale held to maturity Assets available for sale x 0.0 Intangible assets Property and equipment Income tax assets current x 59.4 deferred Other assets TOTAL ASSETS Loans and advances to clients Loans and advances to clients of the Group had a book value of PLN mn at the end of Q3 2015, 8.9% up from 31 December

23 Item 30 Jun Dec 2014 Change % PLN 000 vs. 31 Dec 2014 vs. 30 Jun 2015 Loans extended to retail clients Loans extended to corporate clients Loans extended to public finance Total loans and advances Other receivables NET LOANS AND ADVANCES TO CLIENTS At the end of Q3 2015, compared with 31 December 2014, lending had increased strongest, by PLN 1.46 billion, or 28.0%, in the corporate segment. The strongest decrease in volume of loans and advances was posted in the public finance segment, by PLN mn. The change in these positions reflected the Bank s policy of lending against higher margins. 30 Sep Net loans and advances to clients: segment structure 31 Dec Retail cliets 34.0% Corporate clients 49.1% Retail clients 37.5% Corporate clients 41.8% Public finance 16.9% Public finance 20.7% The corporate segment held its biggest share in total loans, at 49.1%. The retail segment dropped to 34.0%. Loans in the retail segment amounted to a total PLN million at end Q3 2015, compared with PLN million at end Housing loans accounted for the biggest position in total loans, with balance sheet value of PLN million at end Q3 2015, compared with PLN million at the end of Loans denominated in foreign currency account for a majority of housing loans, at 59% (58% at end 2014). CHF-denominated housing loans accounted for 9.9% of the entire loan portfolio (net), down from 10.4% at the end of Other loans in the retail segment (including cash advances) amounted to PLN million at the end of Q3 2015, down from PLN million at the end of the previous year. Pro-ecology loans In line with its Strategy, BOŚ S.A. continued its expansion efforts on the environmental project financing market, to boost the share in its portfolio of loans extended to support activities contributing to environmental protection and sustainable development. As at 30 September 2015, the pro-ecology loans balance was at PLN 4.5 billion, 32.2% of the Bank s total loan portfolio, up from 25.8% at the end of Q

24 Pro-ecology loans, by segment (principal value) Item 30 Jun Dec 2014 Change % PLN 000 vs. 31 Dec 2014 vs. 30 Jun 2015 Pro-ecology loans to retail clients Pro-ecology loans to corporate clients Pro-ecology loans to public finance entities PRO-ECOLOGY LOANS New pro-ecology loan contracts concluded in the period from 1 January to 30 September 2015 amounted close to PLN 2.1 billion. The bulk of such contracts, worth PLN 1.9 billion, were concluded with corporate clients (93.6% of total pro-ecology lending). The value of new loan contracts was 28.2% up on the same period last year, with loans to clients in the corporate segment growing strongest, by 33.7%. Most loans were granted to undertakings designed to mitigate air pollution, mainly on renewable energy sources. New pro-ecology loan contracts, by segment (principal value) Item Q Q Change % PLN 000 New loans to retail clients in the period New loans to corporate clients in the period New loans to public finance entities in the period NEW LOANS TO CLIENTS IN THE PERIOD Loan portfolio quality Item 31 Dec 2014 PLN 000 % PLN 000 % Loans and advances not impaired, of which: Loans and advances not past schedule Loans and advances past schedule Loans and advances qualifying for posting as impaired yet not recognised as impaired because of cash flow estimates Loans and advances qualifying for posting as impaired and actually impaired Total loans and advances to clients and other banks before adjustments Write-downs on loans and advances extended to clients and other banks Other receivables Total loans and advances to clients and other banks, net, of which: clients banks In the three quarters this year impairment write-downs amounted to PLN million, 14.1% (PLN 44.5 million) up on the figure posted at the end of The ratio of write-downs to total value of loans and advances extended to clients and banks was 2.6% at 30 September 2015, with an 0.1 percentage point change from the figure posted at the end of Impairments amounted to PLN million in the corporate segment at end Q3 2015, compared with PLN million at the 24

25 end of 2014, and to PLN million in the retail segment, from PLN million at the end of last year. Write-downs in the public finance segment dropped from PLN 1.8 million at the end of 2014 to PLN 0.2 million at the end of Q Impaired loans and advances in total accounted for 6.8% of total portfolio as at 30 September 2015, compared with 7.2% at the end of The share of impaired loans and advances in the retail segment was 8.7% (6.4% of that in mortgages, 18.4% in other retail contracts) and 5.7% in the corporate and public finance (including banks) segments, as at 30 September Total equity and liabilities of the Group Change in total equity and liabilities structure Liabilities owed to clients, at 73.2%, was the biggest position in total assets of the Group, over the three quarters of 2015, their share 0.8 percentage points down on the figure posted at 31 December Liabilities on bonds issued by the Bank decreased by 0.5 percentage points, over the same period. Item 30 Jun Dec 2014 Change % PLN 000 vs. 31 Dec 2014 vs. 30 Jun 2015 Amounts owed to Central Bank Amounts owed to other banks Derivative instruments Hedging derivative instruments Amounts owed to clients Debt securities issued Subordinate debt Provisions Income tax liabilities Other liabilities Total equity TOTAL EQUITY AND LIABILITIES Liabilities of the Group The Group financed its activities mostly with liabilities owed to clients, specifically: cash deposits taken by the Bank outlets, loans and advances from international financial institutions, cash received from external donors to finance lending in the form of direct lines or principal subsidising: the National Fund for Environmental Protection and Water Resource Management (Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej), Regional Funds for Environmental Protection and Water Resource Management (Wojewódzkie Fundusze Ochrony Środowiska i Gospodarki Wodnej), a European Fund for the Development of Polish Villages (Europejski Fundusz Rozwoju Wsi Polskiej), and JESSICA (Joint European Support for Sustainable Investment in City Areas). As at 30 September 2015, the BOŚ S.A. Group owed clients a total of PLN million and were higher by 1.7% in comparison to the end of

26 Item 30 Jun Dec 2014 Change (%) PLN 000 vs. 31 Dec 2014 vs. 30 Jun 2015 Corporate clients Retail clients Public finance Environmental funds Other clients Loans and advances received from international financial institutions Money supplied by environmental funds for lending purposes TOTAL LIABILITIES OWED TO CLIENTS Under an amendments package to the Public Finance Act (stage two in a public finance consolidation move) which came into force as of 1 January 2015, a number of entities in the public finance sector, including the Regional Funds for Environmental Protection and Water Resource Management, were directed to place any disposable funds they had as deposits with the Finance Minister. As a result environmental funds with drew their deposits from the Bank. At end Q3 this year, retail deposits amounted to PLN million, 3.1% up on the end 2014 figure. As at 30 September 2015, amounts owed to corporate clients were at PLN million, 10.7% up on the end 2014 figure. The 14.7% increase in liabilities in the public finance segment was posted after the Bank took deposits from entities not covered by regulations of the amendments package to the consolidation public finance process. Amounts owed to clients, by segment ,4% 31,6% 0,4% 8,8% 6,3% 0,01% Corporate clients 50,0% 1,9% 9,1% 0,2% 2,2% 5,6% 49,4% Retail clients Public finance Environmental funds Other clients Loans and advances received from international financial institutions Money supplied by environmental funds for lending purposes 26