Financial ratios

The Bank’s return on equity (ROE) calculated in a normalized approach (in 2019: excluding the impact of integration costs, and in 2018: excluding also additional ECL allowances for loans without impairment and gain on the bargain purchase of the Core Business of RBPL) amounted to 8.8% in 2019 and it was by 2.2 p.p. higher than in 2018. Return on assets (ROA) calculated in the same way amounted to 0.9% and increased as compared to 2018 by 0.3 p.p. The ratios calculated on the basis of the reported amounts amounted to 5.8% and 0.6%, respectively (increase by 0.9 p.p. and 0.1 p.p. y/y).

The Cost/Income ratio (in 2019: excluding the costs of integration and in 2018: excluding gain on the bargain purchase of the Core Business of RBPL) is at the level of 55.2%, lower by 4.4 p.p. as compared to 2018. The ratio calculated on the basis of the reported amounts amounted to 64.3% (level higher by 2.3 p.p. as compared to 2018 due to integration costs in 2019).

The improvement of performance ratios calculated on a comparable basis was possible as a result of the acquisition of the RBPL Core Business and the realisation of the first cost and income synergies in 2019.

Presentation of ratios calculated on the basis of the profit or loss account categories excluding the costs of additional ECL allowances for loans without impairment, gain on the bargain purchase of the Core Business of RBPL and costs of integration (understood as additional costs related to the merger processes) is aimed at providing additional information allowing the assessment of the current potential of the merged banks.

The net interest margin calculated in relation to average assets was 3.0% and increased by 0.3 p.p. compared to 2018.

The cost-of-risk ratio was minimally higher (by 0.04 p.p.) compared to the purified level recorded in 2018 and amounted to 0.57%. Taking into account the costs of additional ECL allowances due to the acquisition of the Core Business of RBPL, the cost of credit risk amounted to 0.95% in 2018.

The value of the ratio constituting the ratio of net and gross loans and advances to deposits and financing sources slightly improved as compared to 2018 due to deposit base optimization processes realised due to favourable liquidity structure of the acquired assets and liabilities of the Core Business of RBPL.

XLS

	31.12.2019	31.12.2018	31.12.2017	change 2019/2018
Return on equity ¹	8.8%*	6.6%*	5.2%*	2.2 p.p.
Return on assets ²	0.9%*	0.6%*	0.5%*	0.3 p.p.
Net interest margin ³	3.0%	2.7%	2.7%	0.3 p.p.
Cost/Income ⁴	55.2%*	59.6%*	60.7%*	(4.4 p.p.)
Cost of credit risk ⁵	(0.57%)	(0.53%)*	(0.61%)	(0.04) p.p.
Net loans and advances/Deposits ⁶	79.9%	79.6%	91.3%	0.3 p.p.
Gross loans and advances/Total source of funding ⁷	81.6%	80.9%	87.1%	0.7 p.p.

* Normalized values calculated excluding: integration costs (2019 – PLN -414,537 thousand, 2018 – PLN -265,804 thousand, 2017 – PLN -35,641 thousand), allowance due to expected credit losses in connection with the acquisition of the Core Business of RBPL (2018: PLN -238,897 thousand) and the gain on the bargain purchase of the Core Business of RBPL (2018: PLN +291,706 thousand). The impact of integration costs and the cost of the allowance due to expected credit losses on the net profit was estimated using the standard 19% income tax rate. In the case of the "costs" category, the amount visible in the financial statements was reduced by the amount of integration costs recorded as general administrative expenses and depreciation. In the case of the "income" category, the amount of the income statement comprising the result from banking activities was adjusted for the integration costs recorded under other operating costs and the gain on bargain purchase of the Core Business of the RBPL.

¹ Net profit in relation to average equity, calculated based on quarter-end balances.
² Net profit in relation to average assets, calculated based on quarter-end balances.
³ Net interest income in relation to average assets, calculated based on quarter-end balances. Due to a significant increase in the balance sheet total as of 31 October 2018 and the prospective recognition of the interest result of the acquired Core Business of RBPL for the last two months of 2018 in the Bank's interest income - for the fourth quarter of 2018 the weighted average number of days was assumed.
⁴ Total general administrative expenses, amortization and depreciation in relation to total net banking income, calculated as the total of net interest income, net fee and commission income, dividend income, net trading income, net investment income, result on hedge accounting and other operating income and expenses.
⁵ Net impairment allowances on loans and advances and provisions for contingent liabilities in relation to the average balance of net loans and advances to customers measured at amortised cost, calculated based on quarter-end balances.
⁶ Net loans and advances to customers in relation to customer deposits, balance at the end of the period.
⁷ Gross loans and advances to customers in relation to total liabilities to customers, debt securities issued, loans from other banks and subordinated liabilities, balance at the end of the period.

Financial ratios

Financial ratios

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