Annual report 2019

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PL
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PL
  • 52. Operating segments

52. Operating segments

Segment reporting

The Group has identified the following operating segments for reporting purposes and allocated income and expenses as well as assets and liabilities thereto: Retail and Business Banking, Small and Medium-Sized Enterprises (SME), Corporate Banking, Corporate and Institutional Banking (CIB) as well as Other Operations, including ALM Treasury and the Corporate Centre. Additionally, performance related to Agro customers, i.e. individual farmers and agro-food sector enterprises, as well as the Personal Finance segment has been presented. Although the aforesaid segment performance overlaps with that of the basic operating segments, it is additionally monitored separately for purposes of the Group’s management reporting. The abovementioned segmentation reflects the principles of customer classification to each segment in line with the business model adopted by the Group, which are based on such criteria as the entity, finances and type of business activity. Enterprises are segmented on the basis of activity classification codes.

The Group’s management performance is monitored by considering all items of the statement of profit or loss of the particular segment, to the level of gross profit, i.e. for each segment revenue, expenses and net impairment losses are reported. Management revenue takes into account cash flows between customer segments and the asset liability management unit, measured by reference to internal transfer prices of funds based on market prices and liquidity margins for each maturity and currency. Management expenses of the segments include direct operating expenses and expenses allocated using the allocation model adopted by the Group. Additionally, the management performance of the segments may take into account amounts due to each business line for services between such lines – such information is assigned to the Group’s customers.

The Group’s operations are conducted in Poland only. As no considerable differences in the risks, which might be affected by the geographical location of the Group’s branches, can be identified, no geographical disclosures have been presented.

The Group applies consistent, detailed principles to all identified segments. As regards the revenue, in addition to standard items, components of the net interest income of the segments have been identified, to include external and internal revenue and expenses. As regards operating expenses, the Group’s indirect expenses are allocated to each segment in the Expense allocation (internal) item. Total costs of integration of banks BNP Paribas Bank Polska and Raiffeisen Bank Polska are presented in the Other Operations segment. Considering the profile of the Group’s business, no material seasonal or cyclical phenomena are identified. The Group provides financial services, the demand for which is stable, and the effect of seasonality is immaterial.

Description of operating segments

offers comprehensive services to retail customers, including private banking customers (Wealth Management), i.e. investing in the amount of minimum PLN 1 million through the Group, as well as business clients (microenterprises), including:

  • non-Agro entrepreneurs, not preparing full financial reporting, in accordance with the principles set out in the Accounting Act, meeting the criterion of annual net revenues for the previous financial year below EUR 2 million;
  • Agro entrepreneurs not preparing full financial reporting and who meet the criterion of annual net income for the previous financial year below EUR 2 million, conducting activities classified according to selected PKD 2007 codes;
  • professionals: entrepreneurs not preparing full financial reporting in accordance with the principles set out in the Accounting Act and performing professions defined in a separate document;
  • individual farmers whose credit exposure is less than PLN 3 million;
  • individual farmers whose credit exposure is in the range between PLN 3 million and PLN 4 million, if the collateral on arable lands covers at least 50% of credit exposure;
  • non-profit organizations (e.g. foundations and associations);
  • cooperatives and housing communities.

The scope of financial services offered by the Retail and Business Banking Segment includes maintenance of current and deposit accounts, acceptance of term deposits, granting mortgage loans, cash loans, mortgage advances, overdrafts, loans to microenterprises, issuing debit and credit cards, cross-border cash transfers, foreign exchange transactions, sale of insurance products as well as other services of lesser importance to the Group’s income. Additionally, the performance of the Retail and Business Banking Segment includes: balances and performance of direct banking (BGŻ Optima), performance of brokerage services and distribution of investment fund units.

The Retail and Business Banking customers are served by the Bank’s Branches and alternative channels, i.e. online banking, mobile banking and telephone banking, direct banking channel (BGŻ Optima) and the Personal Banking channel. Selected products are also sold by financial intermediaries active at the country and local level.

is responsible for development of product offering and management of financial services provided to consumers, with three major products, i.e. cash loans, car loans and credit cards. The aforesaid products are distributed through the Retail and Business Banking branch network as well as external distribution channels.

Personal Finance provides strong support in acquisition of retail customers, generating income and increasing profitability.

provides services to:

  • individual farmers, whose credit exposure is in the range between PLN 3 million and PLN 4 million, and at the same time the collateral on arable lands covers less than 50% of credit exposure;
  • individual farmers, whose credit exposure is between PLN 4 million and PLN 25 million;
  • Agro-SME clients preparing full financial reporting in relation to net sales revenues for the previous financial year below PLN 60 million and credit exposure of up to PLN 25 million, as well as agricultural producer groups;
  • non-Agro-SME clients including: (i) companies preparing full financial reporting, with net sales revenues for the previous financial year below PLN 60 million and loan exposures lower than PLN 25 million; (ii) public finance sector entities with a budget of up to PLN 60 million, which were included in the tender procedure or the request for proposals;
  • small Agro-SME clients including: Agro entrepreneurs, preparing full financial reporting, with net revenues from sales for the previous financial year below PLN 10 million and with credit exposure below PLN 25 million;
  • Small Agro-SME clients including: non-Agro entrepreneurs, preparing full financial reporting, with net sales revenues for the previous financial year below PLN 10 million and credit exposure below PLN 25 million.

The SME sales network has been divided into 7 SME Regions with 44 SME Business Centres dedicated solely to provision of services to Small and Medium-Sized Enterprises.

offers a wide variety of financial services to large and medium-sized enterprises as well as local government entities with annual turnover exceeding PLN 60 million or with the credit exposure above PLN 25 million, in addition to entities operating in multinational capital groups.

Clients of Corporate Banking are divided into:

  • Polish mid corporates (i.e. with annual revenues between PLN 60 and 600 million);
  • international clients (companies belonging to international capital groups);
  • large Polish corporations (with annual turnover over PLN 600 million, listed on the stock exchange and with potential in the area of investment banking services);
    • currency exchange offices;
  • public sector entities and financial institutions.

Within the above groups there are sub-segments of clients from the agro and non-agro areas.

Services are provided by 8 Business Centres located in large cities across Poland, which are separate from the Bank’s branch network. Operating services are provided to all institutional segment customers by the Bank’s Branches, via telephone and online. Selected products are also sold by financial intermediaries active both at the country and local level.

The basic products and services provided to Corporate Customers include cash management and global trade finance services – comprehensive services related to import and export LCs, bank guarantees and documentary collection, supply chain and exports financing, acceptance of deposits (from overnight to term deposits), corporate finance services which involve provision of overdraft facilities, revolving and investment loans as well as agro-business loans), financial market products, to include foreign exchange and derivative transactions for the account of customers, lease and factoring products as well as specialized services such as financing real estate, structured finance services to mid-caps and investment banking.

supports sales of products of the BNP Paribas Group, an international institution, dedicated to the largest Polish enterprises. It offers world-class quality expertise to customers by combining theknowledge of the Polish market with experience gained on international markets as well as top-class industry experts’ competence. It supports development of Polish enterprises and implementation of projects of strategic importance to Poland, to include construction of power plants, green energy or fuel sector funding or securing financing for cross-border acquisitions of listed companies. The Segment includes also financial institutions.

Other Banking Operations are performed mainly through the ALM Treasury, the main objective of which is ensuring an appropriate and stable level of funding to guarantee the security of the Bank’s operations and compliance with the standards defined in the applicable laws.

The AML Treasury assumes responsibility for liquidity management at the Bank, setting internal and external reference prices, management of the interest rate risk inherent in the Group’s statement of financial position as well as the operational and structural currency risk. The AML Treasury focuses on both prudential (compliance with external and internal regulations) and optimization aspects (financing cost management and generating profit on management of the Group’s items from the statement of financial position).

The Other Operations segment includes also direct costs of the support functions, which have been allocated to segments in the Expense allocation (internal) item, as well as results that may not be assigned to any of the aforementioned segments (to include equity investment, gains/losses on own accounts and customer accounts not allocated to a specific segment). The segment also includes significant non-recurring costs, including the acquisition of the core business of Raiffeisen Bank Polska by BNP Paribas S.A..

XLS
Retail and Business Banking SME Banking Corporate Banking CIB Other Operations Total including Agro customers including Personal Finance
31.12.2019*
Statement of profit or loss
Net interest income 1,812,522 303,548 593,204 35,729 423,756 3,168,759 446,425 673,028
external interest income 2,086,840 376,468 748,970 58,702 917,103 4,188,083 709,246 974,158
external interest expenses (508,971) (70,577) (154,040) (7,292) (278,444) (1,019,324) (60,488) (41,158)
internal interest income 1,094,742 190,434 386,784 13,918 (1,685,878) – 150,288 2
internal interest expenses (860,089) (192,777) (388,510) (29,599) 1,470,975 – (352,621) (259,974)
Net fee and commission income 418,889 121,395 253,248 33,563 (7,158) 819,937 147,333 108,039
Dividend income – – 230 – 5,778 6,007 – 8,192
Net trading income 89,531 64,849 231,278 183,904 112,854 682,415 48,352 571
Result on investment activities 14 – 2,468 – (34,319) (31,836) 5 –
Result on hedge accounting – – – – (4,385) (4,385) – –
Other operating income and expenses (95,271) (4,541) (1,684) 903 (22,184) (122,779) (6,885) (79,678)
Net impairment losses on financial assets and contingent iabilities (321,477) (75,005) (51,986) 10,081 (3,503) (441,890) (115,199) (157,596)
Total operating expenses (1,131,058) (146,594) (258,488) (66,701) (865,096) (2,467,937) (15,272) (313,200)
Depreciation and amortization (80,760) (3,101) (12,943) (5,829) (351,515) (454,147) (617) (13,020)
Expense allocation (internal) (573,069) (141,920) (77,858) (3,617) 796,464 – – (114,280
Operating result 119,321 118,631 677,469 188,033 50,692 1,154,144 504,142 112,056
Tax on financial institutions (141,437) (35,122) (89,731) (10,681) (4,218) (281 ,89) – (39)
Profit before income tax (22,116) 83,509 587,738 177,352 46,474 872,955 504,142 112,017
Income tax expense (258,261)
Profit before income tax 614,694
Statement of financial positiona as at 31.12.2019
Segment assets 40,123,368 8,741,944 23,057,600 1,774,768 36,256,463 109,954,142 16,202,431 11,791,620
Segment liabilities 50,751,268 10,594,643 24,650,077 1,109,955 11,688,816 98,794,759 8,447,870 –

 

* As the figures have been rounded and presented in PLN ‘000, in some cases their total may not correspond to the exact grand total.
XLS
Retail and Business Banking SME Banking Corporate Banking CIB Other Operations Total including Agro customers including Personal Finance
31.12.2018*
Statement of profit or loss
Net interest income 1,309,474 257,471 327,363 15,219 197,323 2,106,851 402,347 500,167
external interest income 1,570,048 373,928 440,366 27,071 572,416 2,983,829 680,145 732,696
external interest expenses (378,009) (71,038) (148,112) (2,876) (276,944) (876,978) (64,131) (34,291)
internal interest income 794,131 158,664 280,440 4,965 (1,238,201) – 138,455 –
internal interest expenses (676,697) (204,083) (245,331) (13,941) 1,140,051 – (352,122) (198,239)
Net fee and commission income 333,211 84,085 147,724 5,061 (2,692) 567,390 131,245 87,953
Dividend income – – – – 4,861 4,860 – –
Net trading income 42,416 33,378 104,589 80,999 69,392 330,773 26,300 5
Result on investment activities – – 452 – 48,386 48,838 – –
Result on hedge accounting – – – – (9,997) (9,997) – –
Other operating income and expenses 2,824 (5,687) (1,908) (841) 245,983 240,371 (6,468) (6,247)
Net impairment losses on financial assets and contingent liabilities (178,961) (45,777) (57,601) (12,941) (262,402) (557,682) (95,644) (40,501)
Total operating expenses (861,274) (110,994) (148,488) (31,883) (707,032) (1,859,672) (13,051) (265,696)
Depreciation and amortization (80,097) (3,527) (9,189) (4,646) (92,256) (189,714) (161) (12,412)
Expense allocation (internal) (358,383) (84,802) (63,946) (8,583) 515,714 – – (87,815)
Operating result 209,211 124,147 298,996 42,385 7,281 682,018 444,567 175,453
Tax on financial institutions (115,647) (32,765) (54,660) (2,495) (7,557) (213,122) – (29,029)
Profit before income tax 93,564 91,383 244,336 39,890 (276) 468,896 444,567 146,424
Income tax expense (108,518)
Profit before income tax 360,378
Statement of financial positiona as at 31.12.2018
Segment assets 36,076,966 10,345,141 24,142,069 1,243,322 37,215,022 109,022,519 16,806,772 9,512,330
Segment liabilities 52,327,625 10,595,532 22,219,643 2,107,495 11,212,410 98,462,706 8,234,852 –
* As the figures have been rounded and presented in PLN ‘000, in some cases their total may not correspond to the exact grand total.
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Annual report 2019

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