Annual report 2019

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Statement of financial position

Assets

The total assets of the Group as at the end of December 2019 amounted to PLN 109,954,142 thousand and were higher by PLN 931,623 thousand, i.e. by 0.9% 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 Consolidated financial statements of the BNP Paribas Bank Polska S.A. Capital Group for the year ended 31 December 2019).

The second factor influencing the size of the Group’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 4,658,171 2,897,123 1,761,048 60.8%
Amounts due from banks 679,308 961,496 (282,188) (29.3%)
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 71,836,643 70,997,701 838,942 1.2%
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 241,754 204,421 37,333 18.3%
Debt securities measured at fair value through other comprehensive income 7,953,358 15,875,339 (7,921,981) (49.9%)
Investment real estate 56,577 55,868 709 1.3%
Intangible assets 519,945 520,767 (822) (0.2%)
Property, plant and equipment 1,226,746 511,275 715,471 139.9%
Deferred tax assets 976,748 1,034,313 (57,565) (5.6%)
Other assets 884,845 762,653 122,192 16.0%
Total assets 109,954,142 109,022,519 931,623 0.9%

The structure of the Group’s assets has changed slightly compared to the end of 2018. The share of debt securities and financial instruments decreased slightly (by 2.0 p.p.). The decrease in the share concerned mainly the portfolio of securities measured at fair value through other comprehensive income (-7.3 p.p.) with a simultaneous increase in the share of securities measured at amortised cost (+5.3 p.p.).

The structure of assets is dominated by loans and advances to customers (sum of portfolios measured at amortised cost and at fair value), the value of which accounted for 67.1% of all assets at the end of 2019 as compared to 67.3% at the end of 2018. In value terms, the volume of net loans and advances increased by PLN 397,088 thousand, i.e. by 0.5% (without taking into account the above-mentioned sales of factoring activities, the dynamics would be +2.6%).

The second largest asset item was securities and financial instruments, which accounted for 23.7% of the balance sheet total at the end of 2019 (at the end of 2018: 25.7%). In 2019, their value decreased by PLN 1,907,240 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 4.2% 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 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 77,181,416 thousand and was higher by PLN 586,334 thousand, i.e. by 0.8% as compared to the end of 2018, despite concluding 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 loans and advances in the gross amount of PLN 1,468,232 thousand (excluding factoring receivables as at December 2018, the dynamics would amount to +2.7%).

XLS
31.12.2019 31.12.2018
PLN’000 PLN’000 share % PLN’000 share %
Business entities with the exception of farmers 31,632,607 42.1% 33,932,209 45.8%
Farmers 8,732,840 11.6% 8,681,538 11.7%
Retail customers 29,997,525 40.0% 27,001,876 36.5%

mortgage loans

 18,526,757 24.7% 16,054,648 21.7%
in PLN 13,634,997 18.2% 10,828,584 14.6%
in foreign currencies 4,891,760 6.5% 5,226,064 7.1%

cash loans

 7,404,864 9.9% 7,150,386 9.7%

other retail loans

 4,065,904 5.4% 3,796,842 5.1%
Lease receivables 3,995,444 5.3% 3,561,739 4.8%
Public sector 129,915 0.2% 190,073 0.3%
Other financial entities 576,521 0.8% 687,227 0.9%
Gross loans and advances 75,064,852 100.0% 74,054,662 100.0%

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

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

As regards the portfolio measured at amortized cost, the share of loans and advances to business entities excluding farmers (PLN 31,632,607 thousand at the end of 2019) decreased by 3.7 p.p. and is at the level of 42.1%. Loans for retail customers (PLN 29,997,525 thousand) account for 40.0%, with more than half (61.8%) of this portfolio being mortgage loans (PLN 18,526,757 thousand), which account for 24.7% of the entire portfolio measured at amortized cost (share increase by 3.0 p.p. compared to the end of 2018). Ranked third are loans for farmers (PLN 8,732,840 thousand) that recorded slight decrease in the share in the entire portfolio by 0.1 p.p., to 11.6% at the end of 2019.

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 32,339,043 1,981,962 6.1% 34,809,509 2,216,156 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% 27,001,876 1,222,984 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% 3,796,842 178,196 4.7%
Lease receivables 3,995,444 196,747 4.9% 3,561,739 132,214 3.7%
Gross loans and advances 75,064,852 4,279,976 5.7% 74,054,662 4,157,588 5.6%

The ratio of impaired exposures in gross loans and advances to customers measured at amortized cost amounted to 5.7% at the end of 2019 as compared to 5.6% at the end of 2018.

XLS
change
PLN’000 31.12.2019 31.12.2018 PLN’000 %
Total gross loans and advances to customers 75,064,852 74,054,662 1,010,190 1.4%
Impairment allowances (3,228,209) (3,056,961) (171,248) 5.6%
Total net loans and advances to customers 71,836,643 70,997,701 838,942 1.2%
Exposures without impairment triggers
Gross balance sheet exposure 70,784,875 69,897,074 887,801 1.3%
Allowance (943,899) (1,019,649) 75,750 (7.4%)
Net balance sheet exposure 69,840,976 68,877,425 963,551 1.4%
Impaired exposures (stage 3)
Gross balance sheet exposure 4,279,976 4,157,588 122,388 2.9%
Impairment allowance (2,284,310) (2,037,312) (246,998) 12.1%
Net balance sheet exposure 1,995,666 2,120,276 (124,610) (5.9%)
Ratios        
Share of impaired exposures in gross portfolio 5.7% 5.6%   0.1 p.p.
Coverage with impairment allowances (53.4%) (49.0%)   (4.4 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 Group’s liabilities amounted to PLN 98,794,759 thousand and was higher by PLN 332,053 thousand, i.e. by 0.3% as compared to the value at the end of 2018.

The share of liabilities in total liabilities and equity of the Group amounted to 89.9% in the analysed period as compared to 90.3% at 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 87.2% which constituted a decrease by 1.4 p.p. compared to the end of 2018. In terms of value, the volume of these liabilities decreased by PLN 1,056,724 thousand, i.e. by 1.2% compared to December 2018 and amounted to PLN 86,134,984 thousand. The decrease is a result of an optimization policy with reference to the liquidity position of the Group.

Amounts due to banks increased in the analysed period, which resulted in the increase of their share in total liabilities by 0.5 p.p. to the level of 4.5%. Amounts due to banks totalled PLN 4,485,264 thousand and were higher by PLN 508,795 thousand (i.e. by 12.8%) than at the end of 2018.

Total equity as at 31 December 2019 amounted to PLN 11,159,383 thousand and increased as compared to 31 December 2018 by 5.7%, i.e. by PLN 599,570 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 10.1% (as compared to 9.7% at the end of 2018).

XLS
change
PLN’000 31.12.2019 31.12.2018 PLN’000 %
Amounts due to banks 4,485,264 3,976,469 508,795 12.8%
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 86,134,984 87,191,708 (1,056,724) (1.2%)
Securities issued 2,179,052 2,179,424 (372) (0.0%)
Subordinated liabilities 1,882,064 1,875,769 6,295 0.3%
Lease liabilities 602,192 0 602,192 x
Other liabilities 1,893,414 1,711,641 181,773 10.6%
Current income tax liabilities 38,338 174,589 (136,251) (78.0%)
Deferred tax 8,533 8,276 257 3.1%
Provisions 531,061 437,412 93,649 21.4%
Total liabilities 98,794,759 98,462,706 332,053 0.3%
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 125,251 141,179 (15,928) (11.3%)
Retained earnings 202,980 (47,836) 250,816 (524.3%)
previous years result (411,714) (408,214) (3,500) 0.9%
net profit for the period 614,694 360,378 254,316 70.6%
Total equity 11,159,383 10,559,813 599,570 5.7%
Total liabilities and equity 109,954,142 109,022,519  931,623 0.9%

Amounts due to customers

At the end of December 2019, amounts due to customers amounted to PLN 86,134,984 thousand and were lower by PLN 1,056,724 thousand, i.e. by 1.2% compared to the end of 2018, which is the result of the policy of optimization of the Group’s deposit base.

The decrease was noted mainly in the volume of deposits of retail customers (balance at the end of 2019: PLN 42,350,458 thousand), that decreased by PLN 2,402,920 thousand, i.e. by 5.4% y/y (mainly term deposits). Share of this segment in the total amounts due to customers decreased to 49.2% as compared to 51.3% 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 1,608,334 thousand (i.e. by 39.7% to the level of PLN 2,443,792 thousand) and volume of public sector entities by PLN 44,912 thousand (decrease by 4.3% to the level of PLN 1,001,948 thousand).

The volume of deposits of business entities amounted to PLN 40,338,786 thousand and increased by PLN 2,999,442 thousand, i.e. by 8.0%. Simultaneously, the share of this segment in the structure of total amounts due to customers increased to 46.8% vs. 42.8% as at the end of December 2018.

Structure of amounts due to customers at 31.12.2019

Structure of amounts due to customers at 31.12.2018

The share of current accounts in the structure of amounts due to customers in total amounted to 67.0% at the end of December 2019, recording an increase by 3.4 p.p. as compared to the end of 2018. The funds deposited on current accounts amounted to PLN 57,678,417 thousand and increased by PLN 2,187,466 thousand, i.e. by 3.9%. 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 773,927 thousand)

The share of term deposits in the structure of amounts due to customers in the analysed period amounted to 31.8% and decreased by 2.9 p.p. as compared to the end of 2018. Value of term deposits decreased by PLN 2,867,339 thousand, i.e. by 9.5% as compared to December 2018 and reached PLN 27,371,789 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 821,999 thousand respectively).

The share of other liabilities in the structure of amounts due to customers amounted to 1.2% (decrease by 0.5 p.p. as compared to December 2018). Their volume amounted to PLN 1,084,778 thousand.

XLS
31.12.2019 31.12.2018
PLN’000 PLN’000 share % PLN’000 share%
Current accounts 57,678,417 67.0% 55,490,951 63.6%
Term deposits 27,371,789 31.8% 30,239,128 34.7%
Other liabilities 1,084,778 1.2% 1,461,629 1.7%
Amounts due to customers 86,134,984 100.0% 87,191,708 100.0%

Equity

As of the end of December 2019, the Group’s equity amounted to PLN 11,159,384 thousand, and was by PLN 599,571 thousand, i.e. by 5.7% 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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