Annual report 2019

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Statement of financial position

Assets

The total assets of the Bank as at the end of December 2019 amounted to PLN 106,592,130 thousand and were lower by PLN 219,528 thousand, i.e. by 0.2% as compared to the end of December 2018.

The scale of change in the total assets was influenced i.a. by the conclusion on 28 June 2019 of the transaction of sale of the organised part of the Bank’s enterprise conducting the factoring activity to BGŻ BNP Paribas Faktoring Sp. z o.o. (Factoring Company), in consequence of which the Bank transferred to the Factoring Company assets in the amount of PLN 1,658,174 thousand (detailed description of the transactions in Chapter 2.7. Sale of the organised part of enterprise of Separate financial statements of the BNP Paribas Bank Polska S.A. for the year ended 31 December 2019).

The second factor influencing the size of the Bank’s assets is the balance sheet optimization process related to, among others, a significant change (improvement) in the liquidity position as a result of the acquisition of the Core Business of Raiffeisen Bank Polska S.A. on 31 October 2018. The optimisation of the Bank’s deposit base allows for the improvement of the realised interest margin.

XLS
change
PLN’000 31.12.2019 31.12.2018 PLN’000 %
Cash and balances at Central Bank 4,658,142 2,897,113 1,761,029 60.8%
Amounts due from banks 526,595 791,071 (264,476) (33.4%)
Derivative financial instruments 800,886 715,671 85,215 11.9%
Fair value adjustment of hedged item 228,120 130,405 97,715 74.9%
Loans and advances to customers measured at amortised cost 68,651,562 68,870,918 (219,356) (0.3%)
Loans and advances to customers measured at fair value through profit or loss 1,974,396 2,416,249 (441,853) (18.3%)
Debt securities measured at amortised cost 17,916,645 11,939,238 5,977,407 50.1%
Financial instruments measured at fair value through profit or loss 241,427 203,813 37,614 18.5%
Debt securities measured at fair value through other comprehensive income 7,953,358 15,875,339 (7,921,981) (49.9%)
Investments in subsidiaries 152,512 142,258 10,254 7.2%
Intangible assets 519,124 520,108 (984) (0.2%)
Property, plant and equipment 1,214,434 499,307 715,127 143.2%
Deferred tax assets 844,049 920,286 (76,237) (8.3%)
Other assets 910,880 889,882 20,998 2.4%
Total assets 106,592,130 106,811,658 (219,528) (0.2%)

The structure of the Bank’s assets has changed slightly compared to the end of 2018. The most important is decrease in the share of loans and advances to customers (sum of portfolios measured at amortised cost and measured at fair value through profit or loss) by -0.5 p.p. and decrease in share of debt securities and financial instruments by -1.7 p.p. The decrease in the share concerned mainly the portfolio of securities measured at fair value through other comprehensive income (-7.4 p.p.) with a simultaneous increase in the share of securities measured at amortised cost (+5.6 p.p.).

The structure of assets is dominated by loans and advances to customers, the value of which accounted for 66.3% of all assets at the end of 2019 as compared to 66.7% at the end of 2018. In value terms, the volume of net loans and advances decreased by PLN 661,209 thousand, i.e. by 0.9% (without taking into account the above-mentioned sales of factoring activities, the dynamics would be +1.1%).

The second largest asset item was securities and financial instruments, which accounted for 24.5% of the balance sheet total at the end of 2019 (at the end of 2018: 26.7%). In 2019, their value decreased by PLN 1,906,960 thousand, i.e. by 6.8%, mainly as a result of a decrease in the portfolio of treasury bonds issued by central government institutions classified as securities at fair value through other comprehensive income.

At the same time, there was an increase from 2.7% to 4.4% of the cash and balances in the Central Bank, which increased in value by PLN 1,761,048 thousand, i.e. by 60.8%, mainly in the item NBP account.

Loan portfolio

Structure and the quality of the loan portfolio

As at the end of 2019 gross value of loans and advances to customers (sum of portfolios measured at amortised cost and at fair value through profit or loss) amounted to PLN 73,921,953 thousand and was higher by PLN 504,434 thousand, i.e. by 0.7% as compared to the end of 2018.

XLS
31.12.2019 31.12.2018
PLN’000 PLN’000 share % PLN’000 share %
Business entities with the exception of farmers 31,117,618 43.3% 33,521,398 46.6%
Farmers 8,732,840 12.2% 8,681,538 12.1%
Retail customers 29,997,525 41.8% 27,000,114 37.6%
mortgage loans 18,526,757 25.8% 16,054,648 22.3%
in PLN 13,634,997 19.0% 10,828,584 15.1%
in foreign currencies 4,891,760 6.8% 5,226,064 7.3%
cash loans 7,404,864 10.3% 7,150,386 9.9%
other retail loans 4,065,904 5.7% 3, 795,080 5.3%
Lease receivables 1,250,960 1.7% 1,805,600 2.5%
Public sector 129,915 0.2% 190,073 0.3%
Other financial entities 576,531 0.8% 687,244 1.0%
Gross loans and advances 71,805,389 100.0% 71,885,967 100.0%

As regards the portfolio measured at amortized cost, the share of loans and advances to business entities excluding farmers (PLN 31,117,618 thousand at the end of 2019) decreased by 3.3 p.p. and is at the level of 43.3%. Loans for retail customers (PLN 29,997,525 thousand) account for 41.8%, with more than half of this portfolio being mortgage loans (PLN 18,526,757 thousand), which account for 25.8% of the entire portfolio measured at amortized cost (share increase by 3.5 p.p. compared to the end of 2018). Ranked third are loans for farmers (PLN 8,732,840 thousand) with the share in the entire portfolio (12.1%) comparable to the end of 2018 (12.1%).

Gross loans and advances measured at amortised cost – structure at 31.12.2019 r.

Gross loans and advances measured at amortised cost – structure at 31.12.2018 r.

XLS
31.12.2019 31.12.2018
PLN’000 gross total of which:
impaired 		share % gross total of which:
impaired 		share %
Institutional entrepreneurs, excluding farmers 31,824,064 1,960,187 6.2% 34,398,715 2,205,492 6.4%
Farmers 8,732,840 768,651 8.8% 8,681,538 586,234 6.8%
Retail customers 29,997,525 1,332,616 4.4% 27,000,114 1,222,939 4.5%
mortgage loans 18,526,757 523,852 2.8% 16,054,648 528,972 3.3%
in PLN 13,634,997 218,053 1.6% 10,828,584 206,162 1.9%
in other currencies 4,891,760 305,799 6.3% 5,226,064 322,810 6.2%
cash loans 7,404,864 607,222 8.2% 7,150,386 515,816 7.2%
other retail loans 4,065,904 201,542 5.0% 3,795,080 178,151 4.7%
Lease receivables 1,250,960 169,340 13.5% 1,805,600 120,690 6.7%
Gross loans and advances 71,805,389 4,230,794 5.9% 71,885,967 4,135,355 5.8%

The ratio of impaired exposures in gross loans and advances to customers measured at amortized cost amounted to 5.9% at the end of 2019 as compared to 5.8% at the end of 2018.

XLS
change
PLN’000 31.12.2019 31.12.2018 PLN’000 %
Total gross loans and advances to customers 71,805,389 71,885,967 (80,578) (0.1%)
Impairment allowances (3,153,827) (3,015,049) (138,778) 4.6%
Total net loans and advances to customers 68,651,562 68,870,918 (219,356) (0.3%)
Exposures without impairment triggers
Gross balance sheet exposure 67,574,595 50,852,116 16,722,479 32.9%
Allowance (896,674) (278,626) (618,048) 221.8%
Net balance sheet exposure 66,677,921 50,573,490 16,104,431 31.8%
Impaired exposures (stage 3)
Gross balance sheet exposure 4,230,794 4,135,355 95,439 2.3%
Impairment allowance (2,257,153) (2,027,337) (229,816) 11.3%
Net balance sheet exposure 1,973,641 2,108,018 (134,377) (6.4%)
Ratios
Share of impaired exposures in gross portfolio 5.9% 5.8% 0.1 p.p.
Coverage with impairment allowances (53.4%) (49.0%) (4.3 p.p.)

In December 2017, the Bank performed a securitization transaction of the portfolio of cash and car loans. The transaction is a traditional securitization involving the transfer of ownership of the securitized receivables to SPV (BGŻ Poland ABS1 DAC based in Ireland). The revolving period is 24 months.

SPV issued bonds with a total value of PLN 2,180,850 thousand on the basis of securitized assets, and received a loan of PLN 119,621 thousand, which were secured by a registered pledge on the rights to cash flows from securitized assets.

As a result of securitization, the Bank obtained financing in exchange for the transfer of rights to future cash flows resulting from the securitized loan portfolio in a value of PLN 2,300,471 thousand as of 22 November 2017 (the cut-off date). The maximum deadline for full redemption of bonds and repayment of the loan is 27 April 2032.

The main benefit of the performed transaction is a positive impact on capital adequacy ratios and improvement of liquidity and diversification of financing sources.

In the light of the provisions of IFRS 9, the contractual terms of the securitization do not fulfil the conditions for derecognition of securitized assets. In connection with the above, the Bank recognizes securitized assets in “Loans and advances to customers” as at 31 December 2019 at net value of PLN 2,247,024 thousand.

Liabilities and equity

As at the end of December 2019, the total value of the Bank’s liabilities amounted to PLN 95,407,828 thousand and was lower by PLN 832,268 thousand, i.e. by 0.9% as compared to the value at the end of 2018.

The share of liabilities in total liabilities and equity of the Group amounted to 89.5% in the analysed period and decreased by 0.6 p.p. as compared to the end of the previous year.

The most significant change in the structure of liabilities in 2019 was a decrease in the share of amounts due to customers with a simultaneous increase in the share of amounts due to banks and separating lease liabilities in accordance with IFRS 16.

The most significant item in the structure of liabilities are amounts due to customers. As at the end of 2019, their share in total liabilities was 92.7% which constituted a decrease by 0.3 p.p. compared to the end of 2018. In terms of value, the volume of these liabilities decreased by PLN 1,061,230 thousand, i.e. by 1.2% compared to December 2018 and amounted to PLN 88,445,327 thousand. The decrease is a result of an optimization policy with reference to the liquidity position of the Group.

Amounts due to banks also decreased in the analysed period, which resulted in the decrease of their share in total liabilities by 0.6 p.p. to the level of 1.1%. Amounts due to banks totalled PLN 1,018,776 thousand and were lower by PLN 571,159 thousand (i.e. by 35.9%) than at the end of 2018, mainly due to the decrease of loans and advances received from banks and withdraw of bank deposits.

Total equity as at 31 December 2019 amounted to PLN 11,184,302 thousand and increased as compared to 31 December 2018 by 5.8%, i.e. by PLN 612,770 thousand. The share of total equity in total liabilities and equity of the Group at the end of December 2019 was at the level of 10.5% (as compared to 9.9% at the end of 2018).

XLS
change
PLN’000 31.12.2019 31.12.2018 PLN’000 %
Amounts due to banks 1,018,776 1,589,935 (571,159) (35.9%)
Fair value adjustment of hedging instruments and hedged items 224,218 123,600 100,618 81.4%
Derivative financial instruments 815,637 783,818 31,819 4.1%
Amounts due to customers 88,445,327 89,506,557 (1,061,230) (1.2%)
Securities issued 1,882,064 1,875,769 6,295 0.3%
Subordinated liabilities 1,852,051 1,801,154 50,897 2.8%
Other liabilities 601,157 0 601,157 x
Current income tax liabilities 38,061 123,464 (85,403) (69.2%)
Provisions 530,537 435,799 94,738 21.7%
Total liabilities 95,407,828 96,240,096 (832,268) (0.9%)
Share capital 147,419 147,419 0 0.0%
Supplementary capital 9,110,976 9,111,033 (57) (0.0%)
Other reserve capital 1,572,757 1,208,018 364,739 30.2%
Revaluation reserve 125,240 141,139 (15,899) (11.3%)
Retained earnings 227,910 (36,047) 263,957 (732.3%)
previous years result (400,786) (400,786) 0 0.0%
net profit for the period 628,696 364,739 263,957 72.4%
Total equity 11,184,302 10,571,562 612,740 5.8%
Total liabilities and equity 106,592,130 106,811,658 (219,528) (0.2%)

Amounts due to customers

At the end of December 2019, amounts due to customers amounted to PLN 88,445,327 thousand and were lower by PLN 1,061,230 thousand, i.e. by 1.2% compared to the end of 2018, which is the result of the policy of optimization of the Bank’s deposit base.

The decrease was noted mainly in the volume of deposits of retail customers that decreased by PLN 2,399,464 thousand, i.e. by 5.4% y/y (mainly term deposits). Share of this segment in the total amounts due to customers decreased to 47.8% as compared to 49.9% as at the end of December 2018.

The decrease has been recorded also in the volume of deposits of non-banking financial entities by PLN 1,626,143 thousand (i.e. by 25%) and volume of public sector entities by PLN 44,912 thousand (decrease by 4.3%).

The volume of deposits of business entities amounted to PLN 40,291,290 thousand and increased by PLN 3,008,289 thousand, i.e. by 8.1%. Simultaneously, the share of this segment in the structure of total amounts due to customers increased to 45.6% vs. 41.7% as at the end of December 2018.

Structure of amounts due to customers at 31.12.2019 r.

Structure of amounts due to customers at 31.12.2018 r.

The share of current accounts in the structure of amounts due to customers in total amounted to 65.3% at the end of December 2019, recording an increase by 3.1 p.p. as compared to the end of 2018. The funds deposited on current accounts amounted to PLN 57,776,140 thousand and increased by PLN 2,140,667 thousand, i.e. by 3.8%. This was a result of a increase in the volume of the business entities segment (by PLN 3,241,496 thousand, i.e. 12.5% compared to the end of 2018). This increase covered the decreased volume of funds deposited in retail customer accounts (by PLN 346,991 thousand) and deposits of non-banking financial entities (by PLN 820,726 thousand)

The share of term deposits in the structure of amounts due to customers in the analysed period amounted to 31.0% and decreased by 2.8 p.p. as compared to the end of 2018. Value of term deposits decreased by PLN 2,836,927 thousand, i.e. by 9.4% as compared to December 2018 and reached PLN 27,402,201 thousand. This decrease was mainly related to the segments of retail customers and non-banking financial entities (decrease in volume by PLN 2,024,896 thousand and PLN 791,587 thousand respectively).

The share of other liabilities in the structure of amounts due to customers amounted to 1.1% (decrease by 0.4 p.p. as compared to December 2018). Their volume amounted to PLN 968,413 thousand.

XLS
31.12.2019 31.12.2018
PLN’000 share % PLN’000 share %
Current accounts 57,776,140 65.3% 55,635,473 62.1%
Term deposits 27,402,201 31.0% 30,239,128 33.8%
Loans and advances received 2,298,573 2.6% 2,298,995 2.6%
Other liabilities 968,413 1.1% 1,332,961 1.5%
Amounts due to customers 88,445,327 100.0% 89,506,557 100.0%

Equity

As of the end of December 2019, the Bank’s equity amounted to PLN 11,184,302 thousand, and was by PLN 612,740 thousand, i.e. by 5.8% higher than at the end of 2018.

In accordance with the Resolution of the Ordinary General Shareholders’ Meeting of BNP Paribas Bank Polska S.A. of 27 June 2019, the entire Bank’s net profit for 2018, in the amount of PLN 364,739 thousand was allocated to reserve capital.

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