BANK PEKAO SA Delivering sustainable profitability on the back of scale and market leadership Bank of America Merrill Lynch Banking & Insurance CEO Conference London, 26.09.2012
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AGENDA Macro highlights Bank Pekao in its context Business overview Conclusion 2
STRUCTURALLY SOUND POLISH ECONOMY HAS PROVIDED A FAVORABLE ENVIRONMENT FOR PEKAO S DEVELOPMENT Real GDP 2004=100 Inward FDIs EUR bln Unemployment rate** - % Bank loans*** - % of GDP With 38 mln inhabitants and GDP equal to EUR 370 bln Poland is the 8th largest economy in the EU, The only country in Europe which avoided recession in 2009 - favorable GDP mix: big domestic market and Germany lead export, Competitive labour costs (average salary at 35% of Germany) attracting FDIs, Steady progress in financial deepening 3 *Including Bulgaria, Czech Rep., Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia ** Labour Force Survey statistics, *** loans to households and enterprises Source: Eurostat, NBP, ECB
AT PRESENT THE ECONOMY IS COOLING DUE TO THE PROTRACTED CRISIS IN THE EU, AND BANKING SECTOR ECONOMICS ARE NOT IMMUNE FROM THESE DEVELOPENTS Real GDP growth y/y in % Loan volumes y/y in % Labour market y/y in % Spreads over/to 3M WIBOR in p.p. 4 Poland still among the Europe s top performers, but pace of expansion has decelerated, also due to suspension of EU funds inflows Deteriorating profits increase restructuring pressure in enterprise sector (with adverse consequences for the labour market), Gradual recovery likely from mid-2013 but quick return to 4% growth rather impossible Source: GUS, Coface Polska, NBP, Pekao Research Growth in loans slowing down (may slightly recover in 2013 on more favorable base) Margins remain under pressure on heavy competition for deposits and limited demand for loans Increased Corporate NPLs are adding to the profitability challenge of the banking sector * Adjusted for FX movements Source: NBP, KNF, Pekao Research
AGENDA Macro highlights Bank Pekao in its context Business overview Conclusion 5
SUMMARY MARKET POSITION EUR (1) IH 2012 Ranking RETAIL CLIENTS 4.3m 2 CORPORATE & SME CLIENTS 260ths. 1 54 65 34 27 30 ASSETS 34.8 bl 2 LOANS 23.4 bl 2 Retail PLN loans 6.9 bl 2 Corporate loans 14.3 bl 1 DEPOSITS 25.8 bl 2 20 Position of Pekao (3) 48 67 19 79 25 80 102 201 76 74 Retail deposits 12.0 bl 2 Corporate deposits 13.8 bl 1 1 2 <=3 IMPORT / EXPORT 26,5% / 35,5% 1 MUTUAL FUNDS 3.3 bl 1 1001 ROE # of branches ROE @ 10% CAR Pekao 12.9% 18.9% 11.7% 13.0% MARKET CAP (2) 9.4 bl 2 Core Tier I 18.7% 12.3% SHARE OF BANKING PROFIT 18.8% 2 C/I 48.1% 50.5% 6 : KNF or NBP data All financial data for June 31th, 2012 or IH 2012 (1)1Euro = 4.26 on June 30th, 2012 and 4.18 on August 31th, 2012 (2)As at August 31th, 2012 (3)As at June 30, 2012. Commercial banks only excluding agencies
TODAY S PROFITABILITY IS UNDERPINNED BY HIGH QUALITY REVENUE GENERATION ON CORE BUSINESS NII / RWA 6% 5% 4,6% 4,3% 4% OPERATING INCOME* / RWA 3% Pekao 10% F&C / RWA 3% 8% 7,6% 6,8% 2% 2,2% 1,8% 5% Pekao 1% Pekao OTHER OPERATING INCOME* / RWA 1,2% 0,8% 0,7% 0,6% 0,0% Pekao 7 * Consolidated data including results on investments All data for IH 2012 : Major listed Polish banks
ACHIEVED WITH THE COMFORT OF HIGH CAPITALIZATION, STRONG LIQUIDITY AND WITHOUT COMPROMISES ON RISK MANAGEMENT CAPITAL ADEQUACY RATIO 18,7% 13,6% L/D RATIO* Pekao 86% 104% Pekao * COST OF RISK 0,7% Pekao 1,1% PROVISION COVERAGE RATIO 67,5% 59,0% OPERATING INCOME** / PROVISIONS Pekao 12,8 Pekao 6,3 8 * Only Bank for better comparison purpose ** On the sector comparable basis All data for June 2012 : NBP or KNF data
AGENDA Macro highlights Bank Pekao in its context Business overview Conclusion 9
FINANCIAL PERFORMANCE JUNE 2012 Net Profit at 1 415 mln PLN, +3.8% y/y supported by Q2 performance, resilient in a slowing down environment Pekao s resilient revenue base was also augmented thanks to strong commercial performance delivering growth on key target drivers: +12% y/y deposits growth +15% y/y loans growth Operating Profit up 1.8% y/y (+6.4% on sector comparable basis) offset increased provisions driven by sector-wide pressure on construction industry which thanks to our risk management approach remain below peers levels 10 10
SOLID ROE 12.9% DELIVERED ON STRONG CAPITAL BASE 18.7% CORE TIER 1 NET PROFIT (PLN mil.) OPERATING PROFIT (PLN mil.) +3,8% +1,8% 1 363 1 415 1 947 1 982 IH 11 IH 12 IH 11 IH 12 11
SOLID YoY GROWTH IN KEY RETAIL (+21.4%) AND CORPORATE (+8.3%) LENDING RETAIL (PLN mil.) CORPORATE (PLN mil.) +15,1% +14,9% 61 082 33 704 9 355 38 725 9 158 53 053 32 011 38 287 24 349 +21,4% 29 567 21 042 22 795 +8,3% Jun 11 Jun 12 Jun 11 Jun 12 Mortgage PLN, Cash Other MID & SME Other* (*) Pekao Group - gross loans and loans equivalents excluding PJSC UniCredit Bank in Ukraine 12 (**) Including non quoted debt securities and securities issued by local governments classified as AFS
POSITIVE DEVELOPMENT ON RETAIL DEPOSITS AND DOUBLE DIGIT GROWTH ON CORPORATE RETAIL (PLN mil.) CORPORATE (PLN mil.) +10,9% +12,5% 46 140 51 150 52 393 6 062 58 965 7 115 17 421 14 133 46 331 51 850 Jun 11 Jun 12 Retail Deposits MF Jun 11 Jun 12 Commercial deposits + Repo + SBB Public sector Deposits volume excluding OJSC UniCredit Bank in Ukraine 13
CONSTANT, SUSTAINABLE IMPROVEMENT IN MARKET POSITION PLN MORTGAGES & CONSUMER LOANS PLN MORTGAGE LOANS 25,0 20,0 15,0 VOLUMES PLN bil 15,9 16,7 17,8 19,0 20,0 20,8 22,2 17,2% MARKET SHARE (%) 18% Key underpinnings: Strengthen distribution to capture growth in attractive micro-markets 10,0 5,0 16,3% 16,4% 16,4% 16,6% 16,8% 16,9% 17% Increase sales force by approx 650 FTEs 0,0 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 CONSUMER LOANS VOLUMES PLN bil 8,0 7,6 7,2 6,8 6,4 6,0 6,6 8,4% 6,7 8,6% 6,9 8,8% 7,3 9,2% 7,4 9,5% 7,5 9,7% 7,8 9,9% 16% MARKET SHARE (%) 11% 10% 9% Successful marketing campaigns supporting acquisition of the new clients, & key products Streamline credit process and improve time to decision Further development of CRM capabilities and sales & advisory tools Building the image of innovative bank leveraging on mobile banking solutions 5,6 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 8% 14
ASSETS QUALITY (*) NPL 6,9% 6 281 6,7% 6 834 7,3% 7 514 84 639 94 958 95 810 COST OF RISK Jun 11 Mar 12 Jun 12 Performing NPL NPLratio (%) 0,65% 0,65% 0,65% 0,58% 0,72% PROVISION COVERAGE RATIO 74,4% 72,1% 67,5% IH 11 IH 12 2Q 11 1Q 12 2Q 12 Jun 11 Mar 12 Jun 12 Increased NPL ratio to 7.3% due to pressure from construction sector. Coverage ratio kept at high level of 67.5% Cost of risk confirmed at 65bp of last year level, despite increase in the second quarter (*) Pekao Group - gross receivables and loans equivalents incl. PJSC UniCredit Bank in Ukraine 15
PEKAO VS. SECTOR IN IH 12 NET PROFIT YOY DYNAMIC IN IH 2012 TOTAL ASSETS GROWTH YOY IN IH 2012 8% 20% 5,0% 15% 13,4% 4% 3,4% 10% 7,4% 5% 0% Pekao * ** 0% Pekao * ** 16 * Bank Pekao unconsolidated ** KNF data, unconsolidated
AGENDA Macro highlights Bank Pekao in its context Business overview Conclusion 17
CONCLUSION Solid business model focused on sustainable revenues and excellence in cost and risk management High profitability combined with strong capital and funding base Advanced mobilization to address emerging challenges and tap into new revenue generating projects, balance sheet strengths, scale benefits and excellent market position give us confidence to face current uncertainty, even if persisting 18