Financial and
ESG report 2020

Results of Business Segments

Presented below are data regarding the Profit and Loss Account for the Group’s three key business segments: retail segment, corporate segment and treasury operations, assets/liabilities management and the other segment.

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The retail segment comprises services provided to individual customers on the mass market, affluent customers, sole traders as well as services to small companies (with annual turnover below PLN5mn). The corporate segment involves services to medium and large companies as well as public sector entities. The treasury operations, assets/liabilities management and other business comprises the Group’s treasury investments, interbank market transactions, taking positions in debt securities, brokerage activity as well as other transactions not classified in the first two segments. 

Total operating income of the retail segment in 2020 was PLN2,258mn million, which represents a decrease of -8% y/y. Net interest income of the retail segment fell -11% as a result of market interest rate cuts mentioned earlier in the text, while net commission income grew +8% y/y. Operating costs of the retail segment grew slightly by 2% y/y.  

As a result of the abovementioned evolution of operation income and costs, total retail segment pre-provision income decreased visibly by 21% vs. the level of 2019. The cost of risk of the segment grew strongly by 38% due to higher standard loan loss provisions for Euro Bank’s portfolio taken over on 31 May 2019 (on Group level) and additional provisions resulting from COVID-19 pandemic.  

Operating profit of the retail segment for 2020 – after consideration of the provisions – amounted to PLN357mn and showed a decrease by 50% y/y.  

Retail segment (PLN million)

2020 2019 Change
y/y
Net interest income *  1 635.4  1 836.9  -11.0% 
Net commission income  587.9  545.1  7.8% 
Other income**   34.7  68.5  -49.3% 
Total operating income  2 258.0  2 450.5  -7.9% 
Total operating costs   (1 410.5)  (1 379.2)  2.3% 
Pre-provision income  847.5  1 071.3  -20.9% 
Impairment provisions and other cost of risk**  (490.5)  (354.5)  38.4% 
Operating profit  357.1  716.8  -50.2% 
(*) Part of interest income generated by this segment (so called liquidity premium) has been recognized in the third segment of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)
(**) Fair value adjustment of credit portfolio (PLN 42.9mn in 2020 and PLN23.4mn in 2019) has been moved to pro-forma cost of risk. Cost of risk includes also result from modification.

 

Total operating income for the corporate segment in 2020 stood at PLN 520 million, i.e. 2% lower compared to the level of 2019. This was mostly the result of lower net interest income (-5% y/y), whereas net commission income grew slightly by 1% y/y. Operating costs of the corporate segment saw a 3% increase y/y. As a result of the above pre-provision income fell -6% y/y. Value of net impairment write-offs regarding loans to companies increased considerably by 48% during the year due to additional provisions for COVID-19 impact. Thus operating profit of the corporate segment saw a strong decrease of -25% y/y to the level of PLN173mn in 2020. 

Corporate segment (PLN million)

2020 2019 Change
y/y
Net interest income *  305.7  323.0  -5.4% 
Net commission income  154.2  152.9  0.9% 
Other income   60.1  55.0  9.2% 
Total operating income  520.0  530.9  -2.1% 
Total operating costs   (223.9)  (217.3)  3.0% 
Pre-provision income  296.1  313.6  -5.6% 
Impairment provisions and other cost of risk**  (123.0)  (83.4)  47.6% 
Operating profit  173.1  230.3  -24.8% 
(*) Part of the interest income generated by this segment (so called liquidity premium) has been recognized in the segment of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)
(**) Cost of risk includes also result from modification.

 

Total operating income of the Treasury, ALM and other segments in 2020 was PLN800mn, which represents a strong 63% y/y growth. The main reason for this growth was the increase of net interest income by 119% as a result of higher income from ALM operations including from the bond portfolio. Operating costs decreased -9% y/y. Operating profit of the entire segment grew by 87% y/y and reached PLN674mn for 2020. 

Treasury, ALM and other segment (PLN million)

2020 2019 Change
y/y
Net interest income*   607.6  277.1  119.3% 
Net commission income  3.9  1.1  257.6% 
Other income   188.3  211.9  -11.1% 
Total operating income  799.8  490.1  63.2% 
Total operating costs   (118.4)  (129.6)  -8.6% 
Pre-provision income  681.4  360.5  89.0% 
Impairment provisions and other cost of risk**  (7.8)  (1.2)  550.0% 
Operating profit  673.5  359.4  87.4% 
(*) Part of the interest income generated by other segments (so called liquidity premium) has been recognized in the segment of “Treasury, ALM and other” in accordance to Recommendation P of the Polish regulator (KNF)

 

It should be noted that the provision connected with FX mortgage legal risk of PLN714mn in 2020 and PLN223mn in 2019, were not allocated to the above segments.  

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