RNS Number:0642S
Bank Pekao SA
13 November 2003
Additional information to the consolidated quarterly report for the third quarter of 2003
1 Summary
2 Standards applied in preparation of this report
3 Adjustments for provisions, deferred tax provisions and assets
4 Write-off for revaluation of assets
5 Description of the Group
6 Description of Bank Pekao S.A. achievements
6.1 Restructuring process of the Bank
6.2 Market activity
7 Description of activities of the related entities
7.1 Pioneer Pekao TFI S.A. (PP TFI)
7.2 Centralny Dom Maklerski Pekao S.A.
7.3 Pekao Pioneer PTE S.A.
8 Results achieved in three quarters of 2003 and the factors that have
influenced these results
8.1 Results of the Group
8.2 Structure of the net profit
8.3 Results of Bank Polska Kasa Opieki S.A.
8.4 Results of selected subsidiaries
9 Events after the balance sheet date
10 Registration of the share capital increase of Bank Pekao S.A.
11 The position of the Management Board regarding a possible achievement of
previously published forecasts
12 Information on the shareholders who hold at least 5% of the total number
of voting rights at Bank Pekao S.A. General Meeting of Shareholders
13 Management of Bank Pekao S.A.
14 Information on the numbers of shares or share options held by the members
of the managing and supervising staff
15 Information on legal proceedings in progress
16 Transactions of the related entities
17 Loan or credit sureties and guarantees given
18 Financial credibility of Bank Pekao S.A.
19 Factors that influence the results at least in the next quarter
1 Summary
Consolidated pre-tax profit after three quarters of 2003 amounted to PLN 1,054.6 million and was higher by 54.5% than
in the previous year.
Consolidated net profit after three quarters of 2003 amounted to PLN 757.8 million, 72.3% more in comparison with the
previous year.
Net interest income after three quarters of 2003 was lower by 20.8% than in the previous year and amounted to PLN
1,775.5 million. In the third quarter the declining trend of net interest income, that has been continuing in
previous quarters, was restrained.
Net commission income after three quarters of 2003 amounted to PLN 1,033.7 million and was higher by 15.6% than in
the previous year. Net commission income has been increasing systematically.
Operating costs after three quarters of 2003 were higher by 5.6% compared to the previous year. The main driver of
increase was depreciation costs due to initiation of depreciating the integrated IT system.
Negative balance of provisions after three quarters of 2003 was at the level of
PLN -320.0 million, i.e. 71.8% less than in the previous year.
During three quarters of 2003 the structure of the Group's income changed in comparison with three quarters of 2002.
The share of net interest income in total income decreased from 65.3% to 57.6%. On the contrary, the share of net
commission income in total Group's income increased from 26.0% to 33.5%. Also the structure of net commission income
was changed. The most dynamic growth was noted in commission from distribution of the investment funds units.
As a result of macroeconomic conditions and conservative credit policy of the Group, increase of provisions was
significantly lower than in previous year. Although the share of non-performing loans in total loans increased during
nine months of 2003 by 2.0 p.p., the volume of non-performing loans decreased and the provisions coverage ratio
increased. In the third quarter of 2003 alone the quality ratio remained unchanged.
Like in the whole banking system, in nine months of 2003 the total deposits decreased, mainly retail deposits.
Decrease is connected with a change of saving preferences of households - instead of traditional banking deposits
they prefer more profitable alternative products such as investment funds or banks' bonds. The total savings of the
households accumulated within the Group increased during nine months of 2003 by PLN 3.3 billion.
2 Standards applied in preparation of this report
The quarterly consolidated report for the third quarter of 2003 has been prepared in accordance with the SAB-QS
quarterly report item description defined by the Polish Securities and Exchange Commission (KPWiG). The basic
accounting principles employed by the Bank for the purpose of asset and liability valuation and the measurement of
the financial results were discussed in detail in the SAB-RS consolidated report for the year 2002 published on 12
March 2003.
During the third quarter of the year 2003 there have been no changes to the applied accounting principles of the
Group. In the issued report a transformation of the previous periods has been done comparatively.
In comparison to the data reported previously for the third quarter of the year 2002 the changes include opening
balance adjustments related to the valuation of stocks and shares in the Group subordinated companies. The changes
relate to the introduction of goodwill on consolidation of Pekao Fundusz Kapitalowy Sp. z o.o. companies and negative
goodwill of Jupiter NFI S.A. - resulting from non-amortised own shares repurchase - into both balance sheet and
profit and loss account for the third quarter of the year. Moreover, stocks and shares of the companies available for
sale were reclassified into the subordinated companies' portfolio. The amendments related to the principles of
recognition, valuation, disclosure and presentation of financial instruments were captured on the 1 January 2002.
Second quarter 2002 amendments have been described in the SAB QS 2/2003 report, published on 8 August 2003.
The effects of the above-mentioned amendments to the selected positions of the balance sheet and profit and loss
account as at 30.09.2002 are shown below in PLN thousand.:
BALANCE SHEET 30.09.02 Presentation change 30.09.02
quarter end presented according
/2002 to a new layout
ASSETS
IV. Amounts due to customer 29,505,136 136 29,505,272
VII. Debt securities 22,745,872 (10,240) 22,735,632
IX. Shares in subsidiaries valued under 42,608 54,759 97,367
the equity method
X. Shares in joint-ventures valued under 8,085 1,566 9,651
the equity method
XI . Shares in associates valued under 126,828 13,538 140,366
the equity method
XII. Shares in other entities 108,685 (52,241) 56,444
XV. Goodwill on subordinated entities 2,559 3,992 6,551
XVII. Other assets
3. Other 906,325 (136) 906,189
XVIII. Prepayments and accrued income
1. Deferred tax 114,484 (22,236) 92,248
Total changes (10,862)
LIABILITIES AND EQUITY
VII. Other amounts due to financial
instruments 187,727 16,611 204,338
X. Accruals and deferred income
3. Other deferred income 1,762,118 19,131 1,781,249
XI. Negative goodwill on consolidation 16,293 19,051 35,344
XIX. Revaluation reserve 243,354 (20,726) 222,628
XXI. Foreign exchange differences on foreign
investments (2,013) 2,326 313
XXII. Profit (loss) from previous years (97,454) (46,771) (144,225)
XXIII. Net profit (loss) 440,391 (484) 439,907
Total changes (10,862)
PROFIT & LOSS ACCOUNT 01.01-30.09.02 Presentation change 01.01-30.09.02
(presented according
to a new layout)
II. Interest cost (1,973,374) (4,402) (1,977,776)
IV. Commission income 1,005,449 12,641 1,018,090
V. Commission expense (113,061) (10,762) (123,823)
XI. Income from shares and other 7,416 (2,815) 4,601
securities
XII. Result from financial operations 4 194 4,402 8,596
XV. Other operating income 134,139 (12,641) 121,498
XVI. Other operating expenses (122,741) 10,762 (111,979)
XXIV. Amortisation of goodwill (562) (1,165) (1,727)
XXV. Amortisation of negative 7,616 4,024 11,640
goodwill
XXVI. Gross profit (loss) 682,772 44 682,816
XXVII. Taxation (239,399) 2,022 (237,377)
1. Corporate income tax (376,464) (376,464)
2. Deferred tax 137,065 2,022 139,087
XXIX. Share in profit (loss) of (8,366) (2 550) (10,916)
companies valued under the equity
method
XXXI. Net profit (loss) 440,391 (484) 439,907
Moreover, the quarterly abbreviated report of the Bank for the third quarter of 2003 has been prepared in accordance
with the basic accounting principles employed by the Bank for the purpose of asset and liability valuation and the
measurement of the financial results which were discussed in detail in the SAB-R report for the year 2002 published
on 12 March 2003.
During the third quarter of the year 2003 there have been no changes to the applied accounting principles of the Bank
but for comparability reasons presentation reclassifications were introduced concerning the data presented for the
previous quarters of the year 2002.
The amendments to the third quarter of the year 2002 refer to including in the valuation of stock and shares in the
subordinated companies valued under the equity method the goodwill and negative goodwill on consolidation calculated
on the date of acquisition of control or significant influence. The amounts of goodwill and negative goodwill in the
non-consolidated report reflect the amounts, which were applied in the consolidated report of the Bank. This change
concerns companies Jupiter NFI S.A. (amortised amount) and Access Sp. z o.o. Moreover, in case of the company Pekao
Pioneer PTE S.A. - alike in the consolidated report - the method of amortising over time the acquisition cost of the
company running the opened pension funds as well as acquisition cost of the management rights to these funds was
applied. Moreover, valuation of companies held by Pekao Fundusz Kapitalowy Sp. z o. o. was applied. Also, stocks and
shares of the companies available for sale were reclassified into the subordinated companies' portfolio. Moreover we
have included the effect of the amendments to the principles of recognition, valuation, disclosure and presentation
of financial instruments made on the 1 January 2002.
Second quarter 2002 amendments have been described in the SAB QS 2/2003 report, published on 8 August 2003.
The effects of the above-mentioned amendments (in PLN thousand) to the data published for the third quarter of the
year 2002 are shown below:
BALANCE SHEET 30.09.02 Presentation change 30.09.02
quarter end presented according
/2002 to a new layout
ASSETS
VII. Debt securities 22,664,579 (10,240) 22,654,339
VIII. Shares in subsidiaries 386,029 66,850 452,879
X. Shares in associated companies 148,717 (19,833) 128,884
XI. Shares in other entities 31,848 (14,947) 16,901
XV. Other assets
2. Other 915,221 (35) 915,186
XVI. Prepayments and accrued income
1. Deferred tax 81,537 (23,301) 58,236
Total changes (1,506)
LIABILITIES AND EQUITY
VII. Other amounts due to financial instruments 187,727 16,611 204,338
IX. Accruals and deferred income
3. Other deferred income 1,777,136 19,131 1,796,267
XVI. Revaluation reserve 252,796 (18,400) 234,396
XVIII. Profit (loss) from previous years 114,188 (15,710) 98,478
XIX. Net profit (loss) 456,138 (3,138) 453,000
Total changes (1,506)
PROFIT & LOSS ACCOUNT 01.01-30.09.02 Presentation change 01.01-30.09.02
(presented according
to a new layout)
II. Interest cost (1,954,397) (4,402) (1,958,799)
VII. Income from shares and other 19,788 (2,510) 17,278
securities
VIII. Result from financial 36,458 4,402 40,860
operations
XX. Gross profit (loss) 716 451 (2 510) 713 941
XXI. Taxation (230,212) 2,022 (228,190)
1. Corporate income tax (365,105) (365,105)
2. Deferred tax 134,893 2,022 136,915
XXIII. Share in profit (loss) of (30,101) (2,650) (32,751)
companies consolidated under the
equity method
XXIV. Net profit (loss) 456,138 (3,138) 453,000
The foreign exchange rates used in the financial statement
The selected financial data shown in EUR were translated at the following exchange rates:
The balance sheet items - at the average exchange rate of EUR published by the NBP on the balance sheet day, i.e. on
30 September 2003 (PLN 4.6435).
The balance sheet items - at the average exchange rate of EUR published by the NBP on the balance sheet day, i.e. on
30 September 2002 (PLN 4.0782).
The profit and loss account items - at the arithmetic mean of the average exchange rates of EUR published by the NBP
on the last days of each of the months in three quarters of 2003 (PLN 4.3618).
The profit and loss account items - at the arithmetic mean of the average exchange rates of EUR published by the NBP
on the last days of each of the months in three quarters of 2002 (PLN 3.8284).
The net earnings per share - at the arithmetic mean of the average exchange rates of EUR published by the NBP on the
last days of each of the twelve months ending on 30 September 2003 (PLN 4.2697).
The net earnings per share - at the arithmetic mean of the average exchange rates of EUR published by the NBP on the
last days of each of the twelve months ending on 30 September 2002 (PLN 3.7756).
The paid dividends for the year 2002 - at the arithmetic mean of the average exchange rates of EUR published by the
NBP on the last days of each of the twelve months of the year 2002 (PLN 3.8697).
The paid dividends for the year 2001 - at the arithmetic mean of the average exchange rates of EUR published by the
NBP on the last days of each of the twelve months of the year 2001 (PLN 3.6509).
The data in the financial statements of the foreign branch of the Bank in Paris and in the foreign consolidated
companies were recalculated in the following manner:
The balance sheet items were translated at the average exchange rates published by the NBP on 30 September 2003, i.e.:
PLN 3.9799 per USD 1,
PLN 4.6435 per EUR 1,
PLN 0.9081 per ILS 1,
PLN 0.7460 per UAH 1.
The profit and loss account items were translated at the arithmetic mean of the average exchange rates published by
the NBP on the last days of each of the months in three quarters of the year 2003, i.e.:
PLN 3.8974 per USD 1,
PLN 4.3618 per EUR 1,
PLN 0.8480 per ILS 1,
PLN 0.7306 per UAH 1.
The information concerning the Branch in New York, in relation to its close-down was presented using the following
exchange rates:
The balance sheet items were translated at the exchange rate published by NBP at the end of July 2003 - 3.8721 per
USD 1.
The profit and loss statement items were translated at the arithmetic mean of the average exchange rates published by
the NBP on the last days of each of the first 7 months of 2003 - 3.8717 per USD 1.
3 Adjustments for provisions, deferred tax provisions and assets
(PLN million)
Group Bank Pekao S.A.
30.09.2003 31.12.2002 30.09.2003 31.12.2002
Total provisions 439.6 487.3 398.3 622.1
of which:
provision for off-balance sheet liabilities 62.3 69.7 62.3 69.7
general risk provision (Art. 130) 248.5 248.5 248.5 248.5
provision for liabilities to employees 55.6 81.1 49.6 77.2
provision for Pekao Leasing - - - 172.3
other provisions 73.2 88.0 37.9 54.4
provision for deferred tax 0.0 0.0 0.0 0.0
Deferred tax assets 253.6 154.0 197.0 125.9
4 Write-off for revaluation of assets
(PLN million)
Group Bank Pekao S.A.
3Q 2003 3Q 2002 3Q 2003 3Q 2002
Provisions for receivables, off-balance sheet liabilities and (336.5) (1,152.2) (288.3) (1,123.1)
other
Revaluation of financial assets (8.5) (9.9) (8.5) (2.2)
General provisions in Bank Pekao S.A. 25.0 26.6 25.0 26.6
Total (320.0) (1,135.5) (271.8) (1,098.7)
5 Description of the Group
Description of the related parties
As at 30 September 2003 the related parties comprised of 35 companies: the Bank (parent company / major investor), 21
subsidiary companies, 2 co-subsidiary companies and 11 associated companies.
The structure of the related parties (excluding the parent company / major investor) was as follows:
30.09.2003 Change 31.12.2002
Number Number Number
Subsidiary companies
Consolidated 18 (1) 19
Not consolidated 3 3
Total subsidiary 21 (1) 22
Co-subsidiary companies
Consolidated 2 0 2
Total co-subsidiary 2 0 2
Associated companies
Consolidated 10 (1) 11
Not consolidated 1 1
Total associated 11 (1) 12
Total 34 (2) 36
Explanation: "consolidated" include companies consolidated using full method and companies presented under equity
method.
The change in the number of related parties as at 30 September 2003 compared with 31 December 2002 was caused by:
Subsidiary companies
- the transfer of shares in consolidated under equity method company Masters S.A. to associated companies according
to the changes in the structure of the ownership of this entity,
- the transfer of shares in consolidated under equity method company Xelion. Doradcy Finansowi Sp. z o.o. (previously
Pekao Informatyka Sp. z o.o.) to associated companies according to the changes in the structure of the ownership of
this entity, which occurred after the share capital increase and assumption of the 50% of shares by an other
shareholder.
* the pourchase of 100% of shares in the Centrum Kart S.A. consolidated using the equity method.
Associated companies
- the sale of shares in consolidated under equity method companies Wytwornia Aparatury Wtryskowej PZL Mielec Sp. z
o.o., Wytwornia Silnikow PZL Mielec Sp. z o.o. and Pollena Ewa S.A.,
* the transfer of shares in consolidated under equity method companies Masters S.A. and Xelion. Doradcy Finansowi Sp.
z o.o. from subsidiary companies according to the changes in the structure of the ownership of the entities.
* The consolidated companies as at 30 September 2003:
No. Name of the company Type of activity Bank's Pekao S.A. % Status Consolidation
share* method
1. Bank Pekao S.A. banking - parent -
2. Bank Polska Kasa banking 99.99% subsidiary full
Opieki Tel-Aviv Ltd.
(Bank Pekao) Ltd.
3. Bank Pekao (Ukraine) banking 100.00% subsidiary full
Ltd. in Luck*
4. Centralny Dom brokerage house 100.00% subsidiary full
Maklerski Pekao S.A.
5. Pekao Fundusz financial services 100.00% subsidiary full
Kapitalowy Sp. z o.o.
6. Pekao Leasing Sp. z leasing 100.00% subsidiary full
o.o.
7. Pekao Faktoring Sp. z financial services 100.00% subsidiary full
o.o.
8. Pekao Pioneer financial services 65.00% subsidiary full
Powszechne
Towarzystwo
Emerytalne S.A.
9. Leasing Fabryczny Sp. leasing 100.00% subsidiary full
z o.o.
10. Drukbank Sp. z o.o. does not operate 100.00% subsidiary full
11. BDK Consulting Sp. z consulting , hotel, 99.99% subsidiary full**
o.o. transportation
12. Pekao Financial financial services 100.00% subsidiary equity
Services Sp. z o.o.
13. Pekao Development Sp. real estate management 100.00% subsidiary equity
z o.o.
14. Pekao Access Sp. z business advisory 55.26% subsidiary equity
o.o.
15. Central Poland Fund financial intermediary 53.19% subsidiary equity
LLC
16. Centrum Kart S.A. auxiliary financial 100.00% subsidiary equity
services
17. Fabryka Maszyn manufacturing of spare 86.68% subsidiary equity***
w Janowie Lubelskim parts to building
Sp. z o.o. machinery
18. Polonit Sp. z o.o. chemistry industry 80.85% subsidiary equity***
19. Zaslaw Zaklad manufacturing of 86.20%/90.72% subsidiary equity***
Przyczep i Naczep Sp. trailers
z o.o.
20. Trinity Management fund management 55.00% co-subsidiary equity
Sp. z o.o.
21. Anica Systems S.A. IT 34.52%/13.60% co-subsidiary equity***
22. Xelion. Doradcy auxiliary, financial 50.00% associated equity
Finansowi Sp. z o.o. and insurance
23. Pioneer Pekao financial intermediary 49.00% associated equity
Investment Management
S.A.
24. Jupiter NFI S.A. financial advisory 37.43% associated equity
25. Krajowa Izba chamber of settlement 22.96% associated equity
Rozliczeniowa S.A.
26. Grupa Inwestycyjna financial advisory 24.60% associated equity
NYWIG S.A.
27. Hotel Jan III hotel 37.50% associated equity
Sobieski Sp. z o.o.
28. MASTERS S.A. textile industry 33.81% associated equity***
29. Tomtex S.A. textile industry 30.64% associated equity***
30. Fabryka Sprzetu manufacturing of ship 23.81% associated equity***
Okretowego "Meblomor" equipment
S.A.
31. ZPC Swidnik Sp. z o.o. manufacturing of 20.63%/25.42% associated equity***
trailers
* direct and indirect,
** consolidated by Bank Pekao (Ukraine) Ltd.,
*** consolidated by Pekao Fundusz Kapitalowy Sp. z o.o.
The companies, which meet the requirements, stated in the Act on Accounting of 29 September 1994 with further
amendments (Art. 58) were not included in the consolidation. The basis for not including the companies presented
below in consolidation is the fact, that the financial data of these companies are not relevant for the financial
situation of the Group.
6 Description of Bank Pekao S.A. achievements
6.1. Restructuring process of the Bank
The tasks performed during nine months of 2003 included:
- Continuation of works on mass implementation of the new integrated IT system in the Bank's branches. As at 30
September 2003 the new system was installed in 222 outlets. The electronic access channel systems ("Multichannel")
have been enhanced. The next phase of the foreign transactions handling centralisation project has been implemented.
As far as the IT infrastructure is concerned, the extension and reliability improvement of the central processing
systems of the Bank have been continued.
- Continuation of efforts aiming at implementation of the integrated ERP system in the Bank. It will enable a further
improvement of the monitoring of non-personnel costs, capital expenditures and the Bank's property management.
- Increasing the availability of "Pekao24" service. As a result of the conversion of the subsequent branches of the
Bank into the new, centralised IT system, the new clients gained access to "Pekao24" service, which is an integral
part of the "Eurokonto" package. The service is now available in the following voivodships: mazowieckie, malopolskie,
wielkopolskie, lodzkie, swietokrzyskie, pomorskie, kujawsko-pomorskie, warminsko-mazurskie and lubelskie where it has
replaced the previously used "Teleserwis". At the end of September 2003 the access to "Pekao24" was available to 693
thousand clients, which accounts for approximately 35% of the clients with "Eurokonto" account. The number of clients
actively using this service was at the level of 98.5 thousand.
- Carrying the efforts on improving the credit risk evaluation procedures and tools. In the third quarter of 2003 the
works on the electronic system supporting the decision-making process related with corporate clients was continued,
while the automated system of processing the loan applications of the micro-size and small business entities
implemented in October 2003 was tested.
- As at 30 September 2003 the headcount of Bank Pekao S.A. was 15,875 persons, i.e. less by 1,012 persons than at the
end of 2002. The headcount of the Group decreased by 1,005 persons and was 16,944 persons as at 30 September 2003.
6.2. Market activity
The results of the market activities in nine months of 2003 include:
30.09.2003 31.12.2002 Change
Total number of PLN current accounts (in thousand) 2,990.9 3,037.4 (46.5)
retail clients 2,754.3 2,772.2 (17.9)
corporate clients 236.6 265.2 (28.6)
Payment cards (in thousand)* 2,553.4 2,673.3** (119.8)
credit 24.1 18.9 5.2
charge 303.0 335.2 (32.2)
debit (including Maestro) 2,226.4 2,319.2 (92.8)
Total number of outlets (in items) 805 827 (22)
Total number of ATMs (in items) 1,174 1,117 57
* number of the cards is calculated according to the definition used by international payment organizations Visa and
MasterCard (definition: number of valid cards in use in particular month).
** according to a new definition, data for 2002 was transformed for comparability purposes.
A decrease of the number of current accounts resulting mainly from the process of verification and closing of so
called inactive accounts run by the Bank.
In the third quarter of 2003 the products and services introduced in the Bank's offer include the following:
- Small and micro-size companies have been offered with a possibility of leasing the means of transportation based on
a simplified leasing procedure of "AutoLeasing" package. The package is an operating lease that enable to finance the
purchase of the new vehicles freely chosen by the client. "AutoLeasing" package is addressed to the individuals that
perform the business activity, civil partnerships and the incorporated entities.
- The offer of the Bank was extended in August with the new fund - Pioneer Bond Plus Investment Fund classified into
the safe funds group. The investment policy of this fund is focused mainly on debt securities issued by the
enterprises with good prospects. As a result of a thorough selection the fund enables to outperform the long-term
profits achieved by bond funds investing in securities issued by the State Treasury. Moreover, the fund is able to
invest in attractive instruments available only to the large institutional investors.
- In September the new "Zysk" deposit was offered. It is the PLN fixed-interest term deposit with interest rate of 2%
during the first three years of saving. The interest rate in the last fourth year of the deposit is conditioned upon
the changes of the value of so called Pioneer investment fund basket during the whole maturity period of the deposit.
The basket consists of the values of the units of participation of the following investment funds: Pioneer Equity
Investment Fund (with 35%-stake in the basket); Pioneer American Equity Investment Fund (with 50%-stake in the
basket); and Pioneer Bond Investment Fund (with 15%-stake in the basket). The subscription period lasted from 15
September 2003 till 15 October 2003.
- A new "Pekao/Orkiestra" credit card was introduced on 4 September 2003. It provides a non-interest credit for
financing non-cash transactions over the period of up to 51 days. The holders of the card support the Great Christmas
Orchestra of Charity initiative. On each transaction made by the card the Bank makes a donation of PLN 2 to the Great
Christmas Orchestra of Charity for financing the charity activities (PLN 1 on behalf of the card holder and PLN 1 on
own behalf). Moreover, it transfers to the Great Christmas Orchestra of Charity 50% of the annual fee for each card.
- In the third quarter of 2003 Bank Pekao S.A. issued the series B and C bonds in the second Issue Programme. The aim
issuing the bonds is to acquire funds for financing the Bank's operations. The number of bonds allocated within this
issue is at the level of 411.9 thousand of bonds with the nominal value of PLN 100 each.
The total value of all bonds allocated in the first and the second Issue Programmes amounted to PLN 1.9 billion.
7 Description of activities of the related entities
7.1. Pioneer Pekao TFI S.A. (PP TFI)
During nine months of 2003 the net assets of Pioneer Pekao TFI S.A. (the company managed by Pioneer Pekao Investment
Management S.A., in which the Bank holds a 49% share) increased by PLN 4,474.8 million (by 82.3%) and reached the
value of PLN 9,914.1 million.
As at 30 September 2003 the company had 385.7 thousand of the open accounts (an increase by 139.0 thousand since the
beginning of 2003), credited with the total value of PLN 9,733.4 million (excluding "third pillar" funds).
The increase of the net assets of Pioneer Pekao TFI S.A. investment funds is shown in the following table:
(PLN million)
30 September 31 December Change
2003 2002
Pioneer Bond Investment Fund 3,347.5 3,045.4 9.9%
Pioneer Stable Growth Investment Fund (former Balanced Plus 1,714.7 61.2 2,701.8%
Investment Fund)
Pioneer US High Yield Bond Investment Fund 1,074.3 44.1 2,336.1%
Pioneer Dollar Plus Bond Investment Fund 943.4 256.8 267.4%
Pioneer Balanced Investment Fund 890.0 570.9 55.9%
Pioneer Bond 2 Investment Fund 518.0 518.8 (0.2%)
Pioneer Bond Plus Investment Fund (former Debt Securities 314.7 322.7 (2.5%)
Investment Fund)
Pioneer Money Market Investment Fund 264.0 198.5 33.0%
Pioneer Aggressive Investment Fund 233.7 190.5 22.7%
Pioneer European Bond Plus Investment Fund 165.7 - -
Pioneer Equity Investment Fund 122.6 20.9 486.6%
Pioneer Arbitrage Investment Fund 65.7 63.4 3.6%
Pioneer American Equity Investment Fund 31.9 17.4 83.3%
Pioneer Service Sector Investment Fund 22.1 22.8 (3.1%)
Pioneer Index Investment Fund 16.2 8.0 102.5%
Pioneer Treasury Bonds Investment Fund 8.9 - -
Other (III Pilar) 180.7 97.9 84.6%
Net assets value of Pioneer Pekao TFI 9,914.1 5,439.3 82.3%
Net assets value of TFI (market) 35,306.9 22,772.2 55.0%
Share of Pioneer Pekao TFI in market 28.1% 23.9% 4.2 p.p.
As at 30 September 2003 the net asset value of Pioneer Pekao TFI S.A. acquired through Bank Pekao S.A. and CDM Pekao
S.A. was PLN 8,457.7 million (85.3% of the total assets) in comparison with PLN 4,128.7 million at the end of 2002
(75.9%).
Since August 2003 the offer of Pioneer Pekao TFI S.A. has been increased with a new fund - Pioneer Treasury Bonds
Investment Fund. It aims at the medium- and long-term risk-averse investors. It is especially recommended to the
investors that expect constant and foreseeable income. The fund invests the assets in Polish Treasury securities.
7.2 Centralny Dom Maklerski Pekao S.A.
During nine months of 2003 the company managed to achieve:
43.4% stake in the bond trading volume at WSE (38.6% during nine months of 2002).
14.0% stake in the stock trading volume at WSE (13.7% during nine months of 2002).
12.2% stake in the futures trading volume at WSE (12.8% during nine months of 2002).
At the end of September 2003 CDM managed 151.6 thousand investment accounts, thus achieving 16.5% stake in the
market. Moreover, CDM also offered electronic handling of the investment accounts enabling purchase and sale of all
instruments listed at WSE and CeTO through Internet. At the end of September 2003 CDM managed 8.1 thousand Internet
accounts.
7.3 Pekao Pioneer PTE S.A.
At the end of September 2003 the assets managed by the company increased to PLN 674.1 million (from PLN 517.0 million
at the end of 2002). The stake in the open-end pension fund market as at 30 September 2003 was 1.6% and did not
change in comparison with December 2002.
As at 30 September 2003 the number of clients, members of Pekao open-end pension fund was 300.2 thousand (in
comparison with 300.9 thousand at the end of 2002), including 201.5 thousand bearing the accounts credited with at
least one premium payment (in comparison with 195.0 thousand at the end of 2002).
On 6 October 2003 the Insurance and Pension Fund Supervision Commission (KNUiFE) informed, that the average weighted
rate of return of all open-end pension funds for the period from 28 September 2001 through 30 September 2003 was
38.829%, and the minimum required rate of return was 19.415%. During this period of time Pekao open-end pension fund
managed to achieve the rate of return at the level of 29.654%.
The change of the net assets and the number of members of the OFE Pekao (open-end pension fund) is shown in the table
below:
30 September 2003 31 December 2002 Change
Net assets (PLN million) 674.1 517.0 30.4%
Total number of accounts (thousand) 300.2 300.9 (0.2%)
Non-zero accounts* (thousand) 201.5 195.0 3.3%
% of non-zero accounts 67.1% 64.8% 2.3 p.p.
Active accounts** (thousand) 154.4 155.6 (0.8)%
% of active accounts 51.4% 51.7% (0.3) p.p.
* Accounts credited with at least one premium payment,
** Accounts credited with min. PLN 50 within 12 months.
8 Results achieved in three quarters of 2003 and the factors that have influenced these results
8.1 Results of the Group
A slight economic upturn, which begun on the turn of the third quarter of 2002, was continued in the third quarter of
2003. The GDP in the third quarter increased by 4%, and the forecasted growth of GDP for the whole 2003 is at the
level of 3.3%. After the six decreases of the interest rates in the first half of 2003 the Monetary Policy Board has
not decided to make any further decreases. The unemployment rate at the labour market has slightly dropped.
A changing preferences in the direction of the household savings investment has continued. During three quarters of
2003 the deposits of this group of the banking system clients decreased by PLN 5.6 billion in nominal terms,
including a decrease of PLN 1.3 billion in the third quarter of 2003 alone. Alike in 2002, the surpluses of
household's cash resources were invested primarily in the investment funds units and the bank's bonds. During three
quarters of 2003 the assets under management of investment fund companies increased by PLN 12.5 billion, and the
liabilities of the banks on the issues of bonds increased by PLN 2.2 billion. At the same time the loans granted to
households have been systematically growing - during three quarters of 2003 they increased by PLN 8.9 billion,
including the rise of PLN 4.5 billion in the third quarter alone.
Results of the Group were under the influence of the macro-economic conditions and the activities of the households.
The quality of the Group's assets in the third quarter of 2003 remained unchanged; however, it was accompanied by a
decrease of the non-performing loans volume.
During three quarters of 2003 the structure of the Group's income changed in comparison with the previous year. Net
interest income was at a lower level than a year before; however, the declining trend of net interest income, that
had been continuing in previous quarters, was restrained in the third quarter. At the same time net commission income
has been systematically growing (primarily due to the distribution of the products alternative to the bank deposits).
After three quarters of 2003 pre-tax profit amounted to PLN 1,054.6 million (higher by PLN 371.8 million than in the
previous year) and net profit amounted to PLN 757.8 million (higher by PLN 317.9 million).
In comparison with three quarters of 2002 the results achieved in three quarters of 2003 were significantly driven by:
- Lower negative balance of provisions (by PLN 815.5 million), resulting from a need to create high provisions in the
first half of 2002 (including the provisions for Szczecin Shipyard).
- Lower net interest income (by PLN 466.2 million).
- Higher other income (by PLN 114.2 million).
- Higher tax charges (by PLN 65.7 million).
The consolidated profit and loss account for three quarters of 2003 in comparison with three quarters of 2002 is
shown in the following table:
(PLN mil.)
3Q 2003 3Q 2002 Change
Net interest income * 1,775.5 2,241.7 (20.8%)
Net commission income 1,033.7 894.3 15.6%
Other non-interest income 275.1 288.8 (4.7%)
Revenues on shares 69.9 4.6 x
Gains from financial operations (26.9) (82.9) (67.6%)
FX income 232.1 367.1 (36.8%)
Other operating income (2.0) 9.5 x
Total income 3,082.3 3,434.3 (10.2%)
Operating costs (including depreciation) (1,717.7) (1,625.9) 5.6%
Operating income before provisions 1,364.6 1,808.4 (24.5%)
Net provisions (320.0) (1,135.5) (71.8%)
Net extraordinary gains (losses) 0.0 0.0 x
Amortization of goodwill on subordinated entities (0.9) (1.7) (47.1%)
Amortization of negative goodwill on subordinated entities 10.8 11.6 (6.9%)
Pre-tax profit 1,054.6 682.8 54.5%
Tax charge (303.1) (237.4) 27.7%
Share in net profit (loss) of the units valued under the equity method 1.8 (10.9) x
(Profit) loss of the minority shareholders 4.5 5.4 (16.5%)
Net profit 757.8 439.9 72.3%
*Including income from SWAP transactions.
During three quarters of 2003 the income of the Group, consisting primarily of net interest income (57.6% of the
total income) and net commission income (33.5% of the total income), amounted to PLN 3,082.3 million and was lower by
10.2% than in three quarters of 2002.
Net interest income after three quarters of 2003 amounted to PLN 1,775.5 million and was lower by 20.8% than in the
previous year.
Lower net interest income was driven by the following factors:
- Eight consecutive decreases of the NBP interest rates during the last twelve months (from 1 October 2002 to 30
September 2003) by the total of: 275 base points in case of the rediscount interest rate; 325 base points in case of
the lombard interest rate; and 225 base points in case of the reference interest rate. This resulted in decreasing
market interest rates: 3-M WIBOR rate decreased from 7.73% at the end of September 2002 to 5.24% at the end of
September 2003.
- The decrease of the market USD rates, the 6-M LIBOR rate decreased from 1.71% at the end of September 2002 to 1.18%
at the end of September 2003.
- The scale of the deposit/loan operations that did not offset the decrease of the interest rates.
Net interest margin after three quarters of 2003 was 4.0% and was lower by 0.9 p.p. than in the previous year.
Net commission income after three quarters of 2003 was higher by PLN 139.4 million than in the previous year. The
share of commission in generating the income of the Group continues to increase. After three quarters of 2003 it was
at the level of 33.5% in comparison with 26.0% in the previous year. In the third quarter of 2003 net commission
income was higher by PLN 69.9 million than in the second quarter of 2003 and higher by PLN 99.4 million than in the
first quarter of 2003.
A higher net commission income after three quarters of 2003 was influenced primarily by PLN 137.8 million higher net
commission income at Bank Pekao S.A., where an important shift of the commission income structure occurred. The
decrease of stake of commission from credit activities from 19.4% to 15.8% was accompanied by a significant increase
of share of commission on investment funds units of participation distribution (from 2.9% to 14.4%). Net commission
income of the Group was also influenced by higher commissions at CDM (by PLN 5.0 million), which resulted mainly from
the distribution of the investment funds units of participation and a higher transaction volume at WSE.
Revenues on shares of PLN 69.9 million comprise primarily the income of sales of PolCard SA shares.
Gains from financial operations (excluding income from SWAP operations included in net interest income) after nine
months of 2003 were negative and amounted to PLN -26.9 million. The result consisted primarily of: income from sales
of securities (PLN 60.3 million), costs of valuation of securities (PLN -60.9 million) and the result from valuation
and operations in financial derivatives (PLN -25.0 million). Gains from financial operations were primarily driven by
the result of Bank Pekao S.A. (PLN -35.9 million). Positive result from the sale of securities was achieved by Pekao
Leasing (PLN 6.0 million) and CDM (PLN 2.9 million).
FX income after three quarters of 2003 was PLN 232.1 million (i.e. lower by PLN 135.0 million than in the previous
year). It was primarily driven by the result of Bank Pekao S.A. (PLN +261.2 million) and Pekao Leasing (PLN -24.2
million). FX income resulted mainly from transaction differences achieved in the growing variability of exchange
rates, and from the revaluation of provisions for FX receivables.
Operating costs (including depreciation) after three quarters of 2003 were at the level of PLN 1,717.7 million and
were higher by PLN 91.8 million than in the previous year. The increase of operating costs in the Group was mainly
driven by a higher actual costs in Bank Pekao S.A. (by PLN 85.6 million).
Depreciation is an item that increased by the highest amount (i.e. by PLN 43.8 million). This increase was associated
with planned increase of depreciation in Bank Pekao S.A. due to initiation of depreciating the integrated IT system.
Personnel costs after three quarters of 2003 increased by PLN 27.4 million. This includes the increase of personnel
costs in Bank Pekao S.A. by PLN 23.1 million. The increase of personnel costs of the Bank results mainly from
increase of provisions for incentive components of the wages and salaries accompanied by the decrease of wages and
salaries resulting from headcount decrease.
Non-personnel costs after three quarters of 2003 increased by PLN 18.9 million. This includes the increase of PLN
15.9 million in Bank Pekao S.A. The increase of non-personnel costs was driven primarily by IT costs and postal
services costs.
The Group was improving the property management methods and optimising incurred expenses. The co-operation with
management of the subsidiary companies connected with the effective cost management in the companies was also
continued.
(PLN million)
Operating costs (including depreciation) 3Q 2003 3Q 2002 Change %
Total (1,717.7) (1,625.9) 5.6%
Personnel (862.1) (834.7) 3.3%
Non-personnel (625.7) (606.8) 3.1%
Bank Guarantee Fund (11.2) (9.5) 17.9%
Depreciation (218.7) (174.9) 25.0%
After three quarters of 2003 the Costs/Income ratio in the Group amounted to 55.7%, higher by 8.4 p.p. than in the
previous year. It resulted from achieving a lower income than in the previous year (by 10.2 %), accompanied by higher
total costs (by 5.6%).
Negative balance of provisions after three quarters of 2003 amounted to PLN -320.0 million and resulted primarily
from the provision balance in Bank Pekao S.A. (PLN -271.8 million) and Pekao Leasing (PLN -50.4 million). In the
third quarter of 2003 negative provisions balance in the Group was PLN -73.6 million.
The share of the non-performing loans in total loans at the end of September 2003 was 23.2% and it was higher by 2.0
p.p. in comparison with the end of 2002. In the third quarter of 2003 the quality ratio did not change. It is a
continuation of the trend of a decreasing volume of the non-performing loans portfolio observed in the second
quarter. Improvement of the loan quality ratio in the third quarter became visible in Pekao Factoring and Leasing
Fabryczny, but in Bank Pekao S.A. the ratio remained unchanged. On the contrary, the quality of loans in Pekao
Leasing and in the foreign banks has slightly deteriorated.
All non-performing loans are covered with specific provisions at the adequate level to the transaction risk. The
specific provisions to non-performing loans coverage ratio increased from 53.6% at the end of 2002 to 56.8% at the
end of September 2003, and the coverage of non-performing loans with specific and general provisions increased from
57.7% to 60.6% adequately.
In order to hedge against risk, Bank Pekao S.A. maintains general provisions, which at the end of September 2003
covered 1.30% of the normal loans. This is in accordance with the policy of maintaining general provisions at the
level of approximately 1% of the normal loans approved by the Bank. In three quarters of 2003 the Bank decreased the
level of general provisions by PLN 25.0 million. It was primarily driven by the decrease of volume of retail loans
classified as normal.
At the end of September 2003 receivables from clients accounted for 43.0% of assets.
During three quarters of 2003 the gross loan portfolio decreased by PLN 2,113.4 million (by 6.7%), which mainly
resulted from the decrease of corporate loans, including the decrease caused by the liquidation of the loan portfolio
in the New York branch (PLN 651.8 million) and a decrease associated with the repayment of central investment loan
(by PLN 136.7 million). The components of the portfolio that decreased include retail loans in current accounts,
loans for purchase of the means of transportation and cash loans. On the contrary, the mortgage loans increased by
PLN 227.3 million during three quarters of 2003, including the rise of PLN 154.4 million in the third quarter alone.
(PLN million)
30.09.03 31.12.02
Gross loans 29,349.3 31,462.7
Interests 2,064.4 1,790.6
Due in transit 238.2 268.3
Total gross amounts 31,651.9 33,521.6
Provisions (3,780.7) (3,596.3)
Net loans 27,871.2 29,925.3
At the end of September 2003 liabilities to clients accounted for 72.4% of liabilities.
Like in the whole banking system, in three quarters of 2003 the total deposits decreased by PLN 1,680.8 million, what
was mainly driven by a decrease of retail deposits. However, in the third quarter of 2003 the total deposits
increased by PLN 336.9 million what resulted from an increase of PLN corporate deposits.
The level of retail deposits is connected with persisting unfavourable financial situation of households. On the
other hand, it is driven by a change of customers' saving preferences and a shift towards investment fund or banks'
bonds, that are the alternative to bank deposits.
During three quarters of 2003 retail clients purchased the bonds of Bank Pekao S.A. for the amount of PLN 537.8
million. At the same time the net asset value of Pioneer Pekao TFI S.A. investment funds continued to grow. Their
units of participation are distributed mainly through Bank Pekao S.A. network. These assets increased by PLN 4,474.8
million during three quarters of 2003, including PLN 4,078.9 million of units sold through the Bank's network. The
total savings of the clients accumulated within the Group (deposits, bonds and investment funds) were increased
during three quarters of 2003 by PLN 3,331.8 million to the level of PLN 58,444.5 million.
(PLN million)
30.09.03 31.12.02
Deposits 46,670.0 48,350.8
Interests 165.9 282.0
Due in transit 57.9 76.5
Total liabilities 46,893.8 48,709.3
Bank's bonds 1,942.4 1,322.6*
Incl. capital 1,860.4 1,322.6
Total Group's liabilities 48,836.2 50,031.9
Investment funds 9,914.1 5,439.3
Incl. sold in Bank's network 7,337.9 3,259.0
* Incl. liabilities due to paid but not allotted bonds.
8.2 Structure of the net profit
As a result of approaching the valuation of subsidiary companies under the equity method in non-consolidated
statement of the Bank, the net financial result of the Bank and the Group was at the same level and was PLN 757.8
million.
The main categories of the consolidated profit and loss account and the main items of the Group's balance sheet for
entities that had the most significant influence on the Group's result are presented in Appendices to thus report.
The structure of the consolidated profit and loss account of the related entities for three quarters of 2003 and for
three quarters of 2002 is presented in the following table:
(PLN million)
3Q 2003 3Q 2002
Net profit of Bank Pekao S.A. 757.8 453.0
Net profit (loss) of entities consolidated under full method (29.4) (23.0)
Centralny Dom Maklerski Pekao S.A. 29.2 (1.7)
Pekao Fundusz Kapitalowy Sp. z o.o.* 2.3 (6.8)
Leasing Fabryczny Sp. z o.o. 0.7 (1.2)
Pekao Faktoring Sp. z o.o. 1.7 2.5
Drukbank Sp. z o.o. 0.1 0.0
Pekao Pioneer PTE S.A. (0.2) (2.7)
Bank Pekao (Ukraine) Ltd. in Luck (0.6) 0.0
Bank Polska Kasa Opieki Tel-Aviv (Bank Pekao) Ltd. (3.6) (0.5)
Pekao Leasing Sp. z o.o. (58.8) (12.6)
Adjustments relating to year 2002 (0.3) -
Net profit (loss) of entities included under equity method** 1.8 (10.9)
Pioneer Pekao Investment Management S.A. 13.6 6.5
Krajowa Izba Rozliczeniowa S.A. 4.5 -
Pekao Financial Services Sp. z o.o. 4.1 3.6
Pekao Development Sp. z o.o. 1.6 0.6
Grupa Inwestycyjna Nywig S.A. 0.0 -
Hotel Jan III Sobieski Sp. z o.o. 0.0 -
Pekao Access Sp. z o.o. 0.0 0.0
Central Poland Fund LLC (0.1) -
Trinity Management Sp. z o.o. (1.0) 1.5
Subsidiaries of Pekao Fundusz Kapitalowy Sp. z o.o. (2.3) 0.0
Xelion. Doradcy Finansowi Sp. z o.o. (prev. Pekao Informatyka Sp. z o.o.) (3.3) 0.0
NFI Jupiter S.A. (15.2) (23.1)
Centrum Kart S.A. 0.0 -
Adjustments relating to year 2002 (0.1) -
Exclusion of results of companies valued under the equity method from the net profit of Bank 27.4 32.8
Pekao S.A.
Other exclusions and adjustments *** 0.2 (12.0)
Net profit (loss) of subsidiary companies 757.8 439.9
* Net result does not include the valuation of subsidiaries under equity method which is included in item "Net profit
(loss) of entities included under equity method" and in item "other exclusions and adjustments",
** According to share in net profit/ loss,
*** This item relates to: write-off in respect of goodwill, negative goodwill on consolidation and remaining
consolidation adjustments.
8.3 Results of Bank Polska Kasa Opieki S.A.
Net profit of Bank Pekao S.A. in the third quarter of 2003 amounted to PLN 252.0 million, and was at the level
similar to the first and the second quarters. After three quarters of 2003 the net profit was higher by PLN 304.8
million than in the previous year.
The basic figures from the profit and loss account achieved by the Bank after three quarters of 2003 in comparison
with three quarters of 2002 are as follows:
(PLN million)
3Q 2003 3Q 2002 Change %
Net interest income* 1,707.6 2,181.1 (21.7%)
Net commission income 950.3 812.5 17.0%
Other non-interest income 301.4 339.4 (11.2%)
Total income 2,959.3 3,332.9 (11.2%)
Operating costs (1,605.9) (1,520.3) 5.6%
Operating income before provisions 1,353.5 1,812.7 (25.3%)
Net provisions (271.8) (1,098.7) (75.3%)
Pre-tax profit 1 081.7 713.9 51.5%
Net profit 757.8 453.0 67.3%
Costs / Income ratio 54.3% 45.6% 8.7 p.p.
Net interest margin 3.9% 4.8% (0.9 p.p.)
* including income from SWAP transactions
In comparison with three quarters of 2002 the results achieved in three quarters of 2003 were primarily driven by:
- Lower balance of provisions (by PLN 826.9 million), resulting from the necessity to create high provisions in the
second quarter of 2002 (including the provisions for receivables from Szczecin Shipyard).
- Lower net interest income (by PLN 473.5 million). However, it should be noted that a declining trend of net
interest income that has been continuing for a number of quarters was restrained in the third quarter of 2003.
- Higher net commission income (by PLN 137.8 million), mainly commissions from the distribution of investment funds'
units.
- Lower FX income (by PLN 87.0 million).
Main figures from the balance sheet of the Bank at the end of September 2003 in comparison with the end of December
2002 are as follows:
30.09.2003 31.12.2002 Change
Total gross loans (capital) in PLN mil. 28,551.4 30,705.1 (7.0%)
Non-performing loans to total loans in % 21.8 19.9 1.9 p.p.
Provision coverage ratio in % 58.6 56.9 1.7 p.p.
Total deposits (capital) in PLN mil. 46,604.9 48,322.3 (3.6%)
Liabilities due to issuing of own bonds (capital) in PLN mil. 1,860.4 1,322.6* 40.7%
Total assets in PLN mil. 64,537.4 64,738.7 (0.3%)
Investment funds sold in Bank's network in PLN mil. 7,337.9 3,259.0 125.2%
ROE in % 14.4 11.9 2.5 p.p.
Capital adequacy ratio in % 15.5 16.6 (1.1 p.p.)
* including liabilities due to paid but not allotted bonds.
At the end of September 2003 the balance sheet amount of Bank Pekao S.A. was PLN 64,537.4 million.
The gross loans decreased during three quarters of 2003 by PLN 2,153.7 million, which was significantly driven by the
liquidation of operations in the New York branch and the repayments of the loan for central investment. The quality
of loans in the Bank in three quarters of 2003 deteriorated by 1.9 p.p.; however, it remained unchanged in the third
quarter of 2003.
The deposits decreased in three quarters of 2003 by PLN 1,717.4 million; however, in the third quarter of 2003 they
increased mainly due to PLN corporate deposits.
At the same time, during three quarters of 2003 the liabilities of the Bank on own bonds issue (capital) increased by
PLN 537.8 million, and the value of investment funds units of participation sold in the Bank's network increased by
PLN 4,078.9 million.
8.4 Results of selected subsidiaries
Centralny Dom Maklerski Pekao S.A. (CDM)
Net profit of CDM in nine months of 2003 amounted to PLN 29.2 million (including PLN 12.5 million in third quarter)
in comparison with the loss of PLN -1.7 million in the same period of the previous year driven primarily by a
negative result from valuation of securities portfolio held as own investment. Very good results were achieved in
retail client sector. The highest growth was associated with commissions from the current sale of investment funds
(an increase by 122%). Substantially better market conditions resulted in increased gross margin on brokerage
commissions (by 19% in comparison with nine months of 2002). Decrease of gross margin on Treasury bonds issue agent
activity by 44% results from withdrawal from this activity since the end of July 2003 due to the extinction of the
agreement with the Ministry of Finance.
Pioneer Pekao Investment Management S.A. (PPIM)
Consolidated net profit of the PPIM Group in nine months of 2003 was PLN 27.7 million and was more than twice higher
in comparison with the same period of 2002. The share of the Bank in net profit amounted to PLN 13.6 million (PLN 5.6
million in third quarter). Improvement of profit was driven by consistently growing value of assets under management
(during nine months of 2003 the Pekao TFI S.A. assets grew by PLN 4.5 billion), maintaining the ratio of variable
costs to income at the constant level and an efficient control of the fixed costs.
Pekao Financial Services Sp. z o.o. (PFS)
Net profit of the company in nine months of 2003 amounted to PLN 4.1 million (PLN 1.4 million in 3rd quarter)and was
higher by 15.1% than in the same period of the previous year. An improvement of the net result of the company was
primarily driven by an increased income on handling a growing number of accounts in the investment funds and tight
control of the operating costs.
Bank Pekao Tel-Aviv Ltd. (Pekao Tel-Aviv)
During nine months of 2003 Pekao Tel-Aviv incurred the net loss of PLN -3.6 million (including PLN -1.5 million in
third quarter), in comparison with the loss of PLN -0.5 million incurred in the same period of the previous year. The
deterioration of the result of the company was mainly caused by a lower FX income and a necessity to establish
provisions for the employee bonuses in connection with the sale of the shares of Pekao Tel-Aviv by Bank Pekao S.A. to
Bank Hapoalim B.M.
NFI Jupiter S.A. (Jupiter)
During three quarters of 2003 the company incurred the net loss of PLN -40.7 million mainly as a result of the
obligatory participation in the negative financial results of subsidiary companies (primarily ProFuturo and Mega
Plus) as well as the necessity to create provisions and revaluation write-offs for other investments of the Fund. The
majority of provisions was associated with Mega Plus and was related with lodging a petition in insolvency of the
company. The Bank's stake in net loss was PLN -15.2 million (including PLN -2.8 million in third quarter).
Pekao Leasing Sp. z o.o. (Pekao Leasing)
In three quarters of 2003 the company incurred net loss of PLN -58.8 million (including profit of PLN 2.3 million in
third quarter) in comparison with the loss of PLN -12.6 million incurred in the same period of the previous year. The
loss in nine months of 2003 was primarily driven by a necessity to create provisions for receivables (mainly doubtful
and lost) of the net value of PLN 50.4 million and the negative FX income resulting from valuation of provisions for
foreign currency receivables.
Exclusions and consolidation adjustments
The exclusions and consolidation adjustments amounted to PLN +0.2 million and they resulted from:
- settlement of goodwill and negative goodwill of the subsidiary entities of the Bank and the subsidiary entities of
the PFK that were included in the consolidated statement: PLN +10.0 million.
- amortisation of costs associated with purchase of Epoka, Pioneer and Rodzina open-end pension funds acquired by
Pekao Pioneer PTE in 2001 as well as by the costs associated with purchase of PTE shares by the Bank in 2000:
PLN -9.7 million.
- share of the minority shareholder in Pekao Pioneer PTE S.A. result: PLN +0.1 million (the company is consolidated
under the full method by Bank Pekao S.A.).
- elimination of valuation of Bank Pekao (Ukraine) Ltd. in the results of Pekao Faktoring Sp. z o.o. and Drukbank Sp.
z o.o.: PLN -0.1 million - Bank Pekao (Ukraine) Ltd. is consolidated under the full method by Bank Pekao S.A.
- change of exposure in shares of Xelion. Doradcy Finansowi Sp. z o.o. (previously Pekao Informatyka Sp. z o.o.) as a
result of acquiring 50% of shares in the increased equity by UniCredito Italiano S.p.A.: PLN -0.1 million.
9 Events after the balance sheet date
Execution of the agreement to transfer the shares of Jarocinskie Fabryki Mebli S.A.
On 15 October 2003 Pekao Fundusz Kapitalowy Sp. z o.o. (the subsidiary company of the Bank), acting in accordance
with the agreement to sale the shares of Jarocinskie Fabryki Mebli S.A. based in Jarocin signed on 8 May 2003 by
Pekao Fundusz Kapitalowy Sp. z o.o. and Swarzedzka Fabryka Mebli Sp. z o.o. based in Swarzedz, transferred all
702,988 shares of Jarocinskie Fabryki Mebli S.A. to Swarzedzka Fabryka Mebli Sp. z o.o. based in Swarzedz.
The Bank informed about making this agreement in its current report No 47/2003 dated 8 May 2003.
Repayment of the returnable charge by Pekao Leasing Sp. z o.o.
On 20 October 2003 Bank Pekao S.A. received the repayment of the returnable charge of PLN 75.0 million contributed to
Pekao Leasing Sp.z o.o. (the subsidiary company of the Bank). The repayment has been made in accordance with
Resolution of the General Shareholders Meeting of Pekao Leasing Sp. z o.o. No 4/2003 dated 9 June 2003.
The Bank informed about this charge in the current report No 36/2002 dated 8 August 2002.
Extraordinary General Meeting of the Bank Polska Kasa Opieki S.A. - amendments in the Statute of Bank Pekao S.A.
On 4 November 2003 the Extraordinary General Meeting of Bank Pekao S.A. made certain amendments in the Statute of the
Bank. The amendments are aimed at introducing the principles of the Bank's representation based on the rule of joint
acting of two authorised persons, used in other Polish banks and companies of UniCredito Italiano Group, and
clarifying the competencies of the Chairman of the Supervisory Board to sign agreements with Members of the
Management Board.
10 Registration of the share capital increase of Bank Pekao S.A.
On 29 August 2003 the District Court in Warsaw, 19th Commercial Department of the National Court Registry has entered
in the National Court Registry - The Enterprise Registry the increase of the share capital of Bank Polska Kasa Opieki
Spolka Akcyjna from PLN 165,748,203 to PLN 166,121,847, i.e. by the amount of PLN 373,644, through the issue of
373,644 Series E ordinary bearer shares with the nominal value of PLN 1 each. All the newly issued shares have been
properly taken up and duly paid by the Members of the Management Board of Bank Pekao S.A. and by selected members of
the managerial staff in accordance with the Management Options Programme.
11 The position of the Management Board regarding a possible achievement of previously published forecasts
The Bank has not published the forecast of financial results for 2003.
12 Information on the shareholders who hold at least 5% of the total number of voting rights at Bank Pekao S.A.
General Meeting of Shareholders
Shareholders of Bank Pekao S.A. owning directly or indirectly through their subsidiaries at least 5% of the total
number of voting rights at Bank Pekao S.A. General Meeting of the Shareholders are listed as follows:
Shareholder name # of shares and Share in total equity and # of shares Share in total equity and
votes at the total number of votes at and votes at the total number of votes at
General the General Shareholders General the General Shareholders
Shareholders Meeting in % Shareholders Meeting in %
Meeting Meeting
30 September 2003 30 June 2003
UniCredito 88,121,725 53.05% 88,121,725 53.17%
Italiano S.p.A.
EBOiR 10,985,803 6.61% 10,985,803 6.63%
Others 67,014,319 40.34% 66,640,675 40.20%
Total 166,121,847 100.00% 165,748,203 100.00%
According to the Bank's information, no significant changes of the shareholders occurred by the publication date of
this report.
13 Management of Bank Pekao S.A.
In its current reports the Bank informed about changes in its Supervisory Board and Management Board.
As at the publication date of this report the Supervisory Board and the Management Board of the Bank consist of the
following persons:
Supervisory Board
1. Alessandro Profumo - President of Supervisory Board
2. Paolo Fiorentino - Vice-President, Secretary of Supervisory Board
3. Jerzy Woznicki - Vice-President of Supervisory Board
4. Pawel Dangel
5. Fausto Galmarini
6. Kurt Geiger
7. Enrico Pavoni
8. Leszek Pawlowicz
9. Jerzy Starak
Management Board
1. Jan Krzysztof Bielecki - President of the Management Board, CEO
2. Luigi Lovaglio - Vice-President of the Management Board, COO
3. Janusz Dedo - Vice-President of the Management Board
4. Sabina Olton - Vice-President of the Management Board, Chief Accountant
5. Przemyslaw Figarski - Member of the Management Board
6. Cezary Smorszczewski - Member of the Management Board
14 Information on the numbers of shares or share options held by the members of the managing and supervising staff
According to the information available to the Bank, as at the preparation date of this report the number of shares of
Bank Pekao S.A. held by the members of the managing and supervising staff amounts to 4,201. These shares are solely
in possession of the persons managing the operations of the Bank.
In the period from publication of the previous quarterly report the number of shares owned by the members of the
managing and supervising staff has been increased by 2,521 as a result of the implementation of the Management
Options Programme.
As at the publication date of this report the members of the managing and supervising staff held the call options for
99,817 shares which has been issued within the Management Options Programme that was related to Programme for the
year 2001. At the same time members of the managerial staff (who are not members of the management staff) owned the
call options for 291,047 shares.
On 25 July 2003 the Extraordinary General Meeting of the Bank approved a resolution on establishing the incentive
scheme for the members of the management bodies, members of the managerial staff and the employees of the Pekao S.A.
Group, who are of key importance for implementation of the Bank's strategy. The incentive scheme aims at the persons
included in the MBO programme.
In order to execute the rights to purchase the shares of Bank, Extraordinary General Meeting approved resolution on
the issue of 1,660,000 registered bonds with the right of priority to take up the Bank's shares of the new issue and
the resolution on the contingent increase of the share capital with the exclusion of the right of priority of the
current shareholders. The persons participating in the incentive scheme will be entitled to purchase the bonds in the
amount equal to the number of shares to the taking of which they shall be entitled. The issue price of one bond will
be equal its nominal value and shall amount at PLN 0.01 (one grosz).
According to the resolution of the Management Board of the Bank, the list of the persons participating in the
incentive scheme starting from the year 2003 was created on 2 September 2003. Apart from the names the list contains
the number of the Bank's shares issued within the contingent increase of the share capital, to the purchase of which
individual persons participating in the scheme shall be entitled. As at the publication date of this report the
incentive scheme included 58 persons for the total amount of 830,000 shares. The members of the management staff had
the right to purchase 308,151 shares, the members of the executive staff (who are not members of Management Board)
had the right to purchase 483,685 shares, and the employees of the Group had the right to purchase 38,164 shares.
15 Information on legal proceedings in progress
In the third quarter of 2003 the number of legal proceedings in courts, adequate bodies of arbitration or public
administration, concerning the liabilities of the Group was 526. The total value of them was PLN 371.7 million.
Number of legal proceedings concerning the receivables amounted to 3,717 and their total value amounted to PLN 703.4
million. These amounts did not exceed 10% of the Bank's equity.
According to the issuer's opinion no single proceeding that was in progress in courts, adequate bodies of arbitration
or public administration bodies in the third quarter of 2003, as well as all proceedings together do not create any
threat to financial liquidity of the Bank.
16 Transactions of the related entities
All transactions between the entities of the Pekao S.A. Group are made on market terms and conditions and result from
ongoing operations. The listed below are the most crucial transactions made within related entities.
Increase of the share capital of Wschodni Bank Cukrownictwa S.A.
On 2 July 2003 the District Court in Lublin has registered the increase of the share capital of Wschodni Bank
Cukrownictwa S.A. based in Lublin (WBC S.A.) from the amount of PLN 19,079,137 to the amount of PLN 200,190,793
through the issue of 200,000,000 Series G preferred registered shares and the decrease of the share capital by the
amount of PLN 18,888,344. The nominal value of each share in this series is PLN 1, and each Series G share grants the
right to execute two votes on the general shareholder meeting of WBC SA.
Bank Pekao S.A. took up 39,679,600 Series G shares for the total amount of PLN 39,679,600, what accounts for 19.82%
stake in the share capital of WBC S.A. and 19.83% of the votes on the Shareholders' Meeting of WBC S.A.
Transaction with Pekao Leasing Sp. z o.o.
On 25 July 2003 the Bank made the agreement with Pekao Leasing Sp. z o.o. based in Warsaw (the entity fully owned by
the Bank) to arrange and service a non-public issue of short- and long-term bonds with the total nominal value not
exceeding PLN 341.3 million.
Transactions with UniCredito Italiano New York Branch
As a result of liquidation process of Bank Pekao S.A. branch in New York, Bank Pekao S.A. has entered the agreement
to sell its loan portfolio of which the nominal value amounted to USD 114.4 million, to UniCredito Italiano New York
Branch.
In connection with this transaction Bank Pekao S.A. signed with UniCredito Italiano New York Branch Guarantee
Agreement which covers the whole above mentioned loan portfolio.
Guarantee Agreement has been secured by cash deposit of USD 116 million placed by Bank Pekao S.A. in UniCredito
Italiano New York Branch.
Registration of the capital increase in Pekao Leasing Sp. z o.o.
On 4 August 2003 the District Court in Warsaw has registered the increase of the share capital of Pekao Leasing Sp. z
o.o. from the amount of PLN 106,973,000 to the amount of PLN 356,973,000, i.e. by the amount of PLN 250,000,000.
The increase of the share capital was paid in cash. The increase was accomplished through the issue of new 250
thousand shares with the nominal value of PLN 1,000 each. All the new shares were taken up by Bank Pekao S.A., which
holds 356,973 shares granting the right to execute 100% of the votes on the Shareholders' Meeting of Pekao Leasing
Sp. z o.o.
Transaction with UniCredito Italiano (Singapore Branch)
On 3 September 2003 the Bank made the agreement with UniCredito Italiano (Singapore Branch) to purchase certificate
deposits issued by UniCredito Italiano (Singapore Branch belonging to the parent company for the Bank, i.e.
UniCredito Italiano S.p.A.), of the value of PLN 600,000,000. The settlement date for this transaction was set on 3
September 2003 and the maturity date was set for 2 December 2003.
Registration of the increase of share capital of Centrum Kart S.A.
On 12 September 2003 the Bank received a decision of the District Court in Warsaw, 19th Commercial Department of the
National Court Registry, that on 2 September 2003 the Court registered in the Enterprise Registry a joint-stock
company "Centrum Kart Spolka Akcyjna" with the code KRS 0000169260. Share capital of Centrum Kart S.A. is PLN
500,000. As a sole shareholder the Bank acquired 500,000 shares with a nominal value of PLN 1.00 that give the Bank
100% voting rights on the Shareholders' Meeting.
Registration of the statutory capital change of Leasing Fabryczny Sp. z o.o.
On 11 September 2003 the District Court in Lublin, 11th Commercial Department of the National Court Registry has
registered the following amendments of the statute of Leasing Fabryczny Sp. z o.o. (the subsidiary company of the
Bank):
Write-off of 5,659 shares of the purchase value of PLN 4,261,819.73, made from the reserve fund created for this
purpose.
Change the nominal value of one share from PLN 1,100 to PLN 2,200.
Following the registration of the amendments the statutory capital remained at unchanged level of PLN 12,449,800. The
Bank holds 5,659 equal and non-divisible shares with nominal value of PLN 2,200 each, which account for 100% stake in
the share capital and grant the right to 100% of voting rights at the General Shareholders' Meeting.
Sale of financial assets by Pekao Fundusz Kapitalowy Sp. z o.o.
On 25 September 2003 Pekao Fundusz Kapitalowy Sp. z o.o. (100% stake of the Bank) signed the agreement with WAW
Handel Sp. o.o. based in Mielec, to sell all 1,154 shares owned in Zaklad Produkcji Cywilnej Sp. z o.o. The shares
account for 20.63% stake in the share capital of the company and grant the right to execute 1,954 votes on the
Shareholder Meeting, which account for 25.42% of the total number of votes.
As a result of this transaction Pekao Fundusz Kapitalowy Sp. z o.o. is no longer a shareholder of Zaklad Produkcji
Cywilnej Sp. z o.o. based in Swidnik.
Sale of the shares of Bank Polska Kasa Opieki Tel-Aviv (Bank Pekao) Ltd.
On 25 September 2003 Bank Pekao S.A. signed the agreement with Bank Hapoalim B.M., 50 Rothschild Blvd., Tel-Aviv,
Israel, to sale 370,209 shares of Bank Polska Kasa Opieki Tel-Aviv (Bank Pekao) Ltd. (Pekao Tel-Aviv) accounting for
99.99% of the share capital of Pekao Tel-Aviv and granting the right to execute 99.99% of the total number of votes
on the General Shareholder Meeting of Pekao Tel-Aviv. The sale price of the shares will be at least NIS 29 million.
The agreement is of a contingent nature. The conditions that have to be met for the transfer of ownership to occur
include: receiving the appropriate permissions to execute this transaction from the Bank of Israel and from the
Israeli Office for Competition Protection by the Bank Hapoalim B.M. and purchasing a mutually agreed credit portfolio
by Bank Pekao S.A. from Pekao Tel-Aviv. Moreover, Bank Hapoalim B.M. may withdraw from the agreement in the case if
Pekao Tel-Aviv incurs a loss that exceeds the amount set in the agreement in the period until the date of the
transfer of ownership or in the case if the value of the bonuses paid to employees exceeds the amount set in the
agreement.
In nine months of 2003 the Bank and its subsidiary entities did not enter into other transactions with related
entities, that could not be described as typical or routine, and that would exceed the value equivalent to EUR 500
thousand.
17 Loan or credit sureties and guarantees given
In the third quarter of 2003 the Bank and its subsidiaries did not give the loan or credit sureties or guarantees to
a single entity or a unit subsidiary to that entity, as a result of which the total value of the existing sureties
and guarantees would exceed 10% of the Bank's equity.
18 Financial credibility of Bank Pekao S.A.
By the publication date of this report Bank Pekao S.A. was granted the following ratings:
Moody's Investors Service Ltd.
Long-term rating A2
Short-term rating P-1
Outlook Stable
Standard & Poor's
Long-term rating BBB
Short-term rating A-2
Outlook Stable
Fitch Ratings Ltd.
Long-term rating BBB+
Short-term rating F2
Outlook Positive
Individual rating C
Support rating 2
19 Factors that influence the results at least in the next quarter
The predominant part of Bank Pekao S.A. and its subsidiaries assets is located in the Republic of Poland. Therefore,
the results of the Bank in the fourth quarter of 2003 will be driven by economic events occurring in this country and
worldwide events that influence domestic economy.
Change of mandatory reserve requirements
The results in fourth quarter of 2003 and the subsequent quarters will be influenced by the decrease of mandatory
reserve from 4.5% to 3.5%. Funds released in the result of this decision will bring additional interest income
effective from November 2003.
Packet of new regulations in the banking system
The results of Bank Pekao S.A. and its subsidiaries may be influenced by the agreement signed on 30 October 2003 by
the representatives of the government, the President of NBP and the President of Polish Banks Association and
accompanied by Presidents of Polish banks. The agreement concerned the packet of the new regulations in banking
system: changes regarded to the rules of provisioning banking risk, changes in particular banks' accounting
standards, changes in tax regulations and regulations relating to the interest of obligatory reserve and establishing
Fundusz Poreczen Unijnych (Guarantee Fund).
This information is provided by RNS
The company news service from the London Stock Exchange
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