Financial and
ESG report 2020

Credit risk

Credit risk means uncertainty about the Client’s compliance with the financing agreements concluded with the Group i.e. repayment of the principal and interest in the specified time, which may cause a financial loss to the Group.

The credit policy pursued in the Group is based on a set of principles such as: 

  • centralization of the credit decision process; 
  • using specific scoring/rating models for each Client segment/type of products; 
  • using IT information (workflow) in order to support the credit process at all stages; 
  • existence of specialized credit decisions departments for particular Client segments; 
  • regular credit portfolio monitoring, both at the level of each transaction in the case of major exposures, and at credit sub-portfolio level (by the Client segment, type of product, distribution channels, etc.); 
  • using the structure of limits and sub-limits for credit exposure in order to avoid credit concentration and promote the effects of credit portfolio diversification; 
  • separate unit responsible for granting rating to corporate Client, thus separating the credit capacity assessment and credit transaction granting from his creditworthiness assessment. 

In the area of credit risk, the Group focused in 2020 year on adjustment of credit policy to changing economic conditions and improved the tools and credit risk management frameworks, in particular: 

  • updated the Risk Strategy, for the years 2021-2023; 
  • adapting the Group’s activities to changed conditions caused by the COVID-19 coronavirus pandemic; 
  • optimised the methodology, tools and processes of credit risk management for retail and corporate clients; 
  • updated sector risk classification and limits. 

In the retail segment, special attention was paid to the implementation of changes in the area of credit policy consisting in adapting to the market situation during the COVID-19 coronavirus pandemic and further digitization of credit processes. At the same time, the focus was on development in the area of mortgage loans. 

In the corporate segment, the Group initially focused on activities aimed at improving and accelerating credit processes, including decision-making processes. As in previous periods, work continued on improving IT tools supporting the credit process. The outbreak of the COVID-19 coronavirus pandemic led the Group to take several risk measures. In the corporate segment in the first half of year the Group has focused on portfolio and industry analyses to identify major risks, namely focusing on the top 250 clients with the highest exposures and on the economic sectors more exposed to impacts of the COVID-19 pandemic. The other area of Bank’s interest was analyses of legal regulations, as well as adaptation of internal regulations, credit processes and monitoring to changed credit conditions for clients.   

In the corporate segment, the sector and credit policy was updated. The group offered credit holidays to corporate clients who had temporary financial problems resulting from the COVID-19 coronavirus pandemic and allowed corporate clients to take advantage of support measures introduced by local authorities (BGK guarantees, interest subsidies). In the second half of the year, the Group continued strict monitoring of the credit portfolio as well as individual monitoring of the largest exposures. Work on the improvement of monitoring and credit processes, including decision-making processes, was continued – in particular, credit competencies were verified and updated. The Group has also adapted regulations, processes and IT systems to service entrepreneurs – consumers. 

All of the above changes in both the retail and corporate segment enabled the Group to maintain the risk at an acceptable level defined in the Risk Strategy as well as prepared the Group to new challenges and to act in changed conditions. 

Loan portfolio quality

Share of impaired loans, including stage 3 portfolio and POCI Assets (Purchased or Originated Credit Impaired) in default, in total loan portfolio was at the end of December 2020 on the level of 4.95%. This means a slight increase from 4.56% a year ago, but when looking into its evolution during this year in the scope 4.7% – 4.85% we can observe stabilisation in this area including significant growth just in December due to reclassification of significant exposures from corporate sector to stage 3. Thus, the Group still enjoys one of the best asset quality among Polish banks. Share of loans past-due more than 90 days in total portfolio has increased slightly during last year from 2.69% in 2019 to 2.74% in December 2020. 

Coverage ratio of impaired loans, now defined as relation of all risk provisions for stage 3 loans and POCI in default, has increased during the year from 62% in December 2019 to 66%. Coverage by total provisions of loans past-due more than 90 days also increased from 106% one year ago to 119% now. 

The evolution of main indicators of the Group’s loan portfolio quality is presented below: 

Group loans quality indicators

31.12.2020 31.12.2019
Total impaired loans (PLN million)  3 792  3 276 
Total provisions (PLN million)  2 489  2 046 
Impaired over total loans ratio (%)  4.95%  4.56% 
Loans past-due over 90 days /total loans (%)  2.74%  2.69% 
Total provisions/impaired loans (%)  65.7%  62.45% 
Total provisions/loans past-due (>90d) (%)  118.8%  105.8% 


Impaired loan ratios by segment show an upward trend both in the retail portfolio from 4.7% to 4.9% (only mortgage portfolio had a decreasing characteristics from 2.53% to 2.48%), as well as in the corporate portfolio, in which the ratio increased during the year from 4.1% to 5.1% (in leasing portfolio reported growth equalled to 0.35pp while for other corporate portfolio it was +1.31pp). Last year, the value of foreign currency mortgage loans decreased by app. 3% year-on-year (in PLN terms). Additionally, it should be noted that ex-Euro Bank mortgage portfolio, in amount app PLN1 billion, enjoys a guarantee and indemnity from Société Genéralé. Excluding this portfolio, the share of FX mortgage loans in the total loan portfolio fell from 19.2% to 17.4%. The improvement in the currency structure of the mortgage loan portfolio was supported by a significant increase in sales of loans in PLN. 

The evolution of the Group’s loan portfolio quality by main products groups: 

Portfolio quality by products: Loans past-due
> 90 days ratio
Impaired loans
31.12.2020 31.12.2019 31.12.2020 31.12.2019
Mortgage  1.00%  1.19%  2.48%  2.53%% 
Other retail*  7.30%  6.31%  10.70%  9.51% 
Total retail clients*  2.86%  2.79%  4.90%  4.71% 
Leasing  2.16%  2.28%  4.47%  4.12% 
Other loans to companies  2.44%  2.51%  5.46%  4.15% 
Total companies   2.34%  2.42%  5.11%  4.14% 
Total loan portfolio  2.74%  2.69%  4.95%  4.56% 
(*) incl. Microbusiness, annual turnover below PLN5 million


The Group’s portfolio is characterized by appropriate diversification, both due to the concentration of the largest exposures and due to the concentration in sectors of the economy. Participation of The 10 largest exposures remain at a safe, low level of 5.0% (increase in 2020 from 4.1%). 

The share of main sectors in the Group’s portfolio is presented in the chart below: 

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