Integrated Report 2020

Statement of financial position

Assets

The Bank’s total assets as at the end of 2020 amounted to PLN 115,668,150 thousand and were higher by PLN 9,076,020 thousand, or 8.5%, compared to the end of 2019.

The most important change in the Bank’s asset structure compared to the end of 2019 was the increase in the share of the securities portfolio (+4.9 p.p.) with a simultaneous decrease in the share of the loan portfolio (the sum of portfolios measured at amortised cost and at fair value), which decreased by 4.0 p.p. and cash and balances with the Central Bank by 1.4 p.p.

The composition of assets is dominated by loans and advances to Customers (sum of portfolios measured at amortised cost and at fair value), which accounted for 62.2% of total assets at the end of 2020, compared to 66.3% at the end of 2019. The increase in the net volume of loans and advances amounted to PLN 1,360,865 thousand (+1.9%) and related to the retail portfolio (+13.1%) with a decrease in the institutional portfolio (-5.8%). The increase in the value of the portfolio was influenced among other things by the weakening of the PLN against the CHF, EUR and USD, related to the development of the coronavirus pandemic and its impact on the currency markets.

The second largest asset item were securities, which accounted for 29.4% of total assets at the end of 2020. (end of 2019: 24.5%). In 2020, their value increased by PLN 7,850,008 thousand, or 30.1%, primarily as a result of an increase in the portfolio of bonds issued by banks and bonds issued by other financial institutions (including BGK and PFR under programmes related to the so-called anti-crisis shield).

Simultaneously with the above changes, there was a decrease in the share of cash and balances with the Central Bank from 4.4% to 3.0% (in value terms by PLN 1,236,276 thousand, i.e. by 26.5%) and an increase in the share of derivative financial instruments from 0.8% to 1.3% (increase by PLN 730,731 thousand, i.e. by 91.2%).

in PLN’000 31.12.2020 31.12.2019 change
in PLN ‘000 %
Cash and balances at Central Bank 3,421,866 4,658,142 (1,236,276) (26.5%)
Amounts due from banks 555,289 526,595 28,694 5.4%
Derivative financial instruments 1,531,617 800,886 730,731 91.2%
Fair value adjustment of hedged item 531,793 228,120 303,673 133.1%
Loans and advances to customers measured at amortised cost 70,446,975 68,651,562 1,795,413 2.6%
Loans and advances to customers measured at fair value through profit or loss 1,539,848 1,974,396 (434,548) (22.0%)
Debt securities measured at amortised cost 23,361,022 17 916 645 5,444,377 30.4%
Financial instruments measured at fair value through profit or loss 371,856 241,427 130,429 54.0%
Debt securities measured at fair value through other comprehensive income 10,228,560 7,953,358 2,275,202 28.6%
Investment real estate 140,765 152,512 (11,747) (7.7%)
Intangible assets 651,202 519,124 132,078 25.4%
Property, plant and equipment 1,468,673 1,214,434 254,239 20.9%
Deferred tax assets 613,553 844,049 (230,496) (27.3%)
Current tax assets 12,271 12,271
Other assets 792,860 910,880 (118,020) (13.0%)
Total assets 115,668,150 106,592,130 9,076,020 8.5%

Loan portfolio

Structure and quality of loan portfolio

At the end of 2020, gross loans and advances to Customers (sum of portfolios measured at amortised cost and measured at fair value) amounted to PLN 75,256,639 thousand and increased by PLN 1,334,686 thousand, i.e. by 1.8% compared to the end of 2019.

The gross portfolio of loans and advances measured at amortised cost in the period under review amounted to PLN 73,540,959 thousand and increased by PLN 1,735,570 thousand, i.e. by 2.4% compared to the end of 2019.

in PLN ‘000 31.12.2020 31.12.2019
in PLN ‘000 share % in PLN ‘000 share %
Business entities with the exception of farmers 29,989,406 40.8% 31,117,618 43.3%
Farmers 8,118,713 11.0% 8,732,840 12.2%
Retail customers 33,802,097 46.0% 29,997,525 41.8%
– mortgage loans 22,559,727 30.7% 18,526,757 25.8%
in PLN 17,687,284 24.1% 13,634,997 19.0%
in foreign currencies 4,872,443 6.6% 4,891,760 6.8%
– cash loans 7,312,444 9.9% 7,404,864 10.3%
– other retail loans 3,929,926 5.3% 4,065,904 5.7%
Lease receivables 920,944 1.3% 1,250,960 1.7%
Public sector 101,382 0.1% 129,915 0.2%
Other financial entities 608,417 0.8% 576,531 0.8%
Gross loans and advances 73,540,959 100.0% 71,805,389 100.0%

Structure of loans and advances measured at amortised cost – subjective structure at 31.12.2020

Structure of loans and advances measured at amortised cost – subjective structure at 31.12.2019

Gross loans and advances to retail Customers at the end of 2020 amounted to PLN 33,802,097 thousand (an increase of PLN 3,804,572 thousand or 12.7% compared to the end of 2019). Their share in the loan portfolio measured at amortised cost in the analysed period was 46.0% (+4.2 p.p.). More than two-thirds (66.7%) of the credit exposure of individual Customers are mortgage loans, which amounted to PLN 22,559,727 thousand at the end of 2020. In the structure of mortgage loans, 78.4% are loans granted in PLN, while 21.4% are loans granted in CHF (compared with the end of December 2019, the share of CHF decreased by 4.7 p.p.).

The gross portfolio of loans and advances to businesses (excluding farmers) amounted to PLN 29 989,406 thousand (down by PLN 1,128,212 thousand, or 3.6%, compared with the end of 2019). Their share in the analysed loan portfolio amounted to 40.8% at the end of 2020 and decreased by 2.6 p.p. compared to the end of 2019. Almost half of this portfolio (46.2%) are current account loans. From the second quarter of 2020, a reduction in the demand for credit from businesses and a decrease in the share of financing of a current nature became apparent (-5.3 p.p. compared to the end of 2019).

The volume of loans granted to individual farmers at the end of 2020 amounted to PLN 8,118,713 thousand, registering a decrease of 7.0%, compared to December 2019.

Lease receivables amounted to PLN 920,944 thousand (decrease by 26.4% compared to the end of 2019). Their share in the loan portfolio measured at amortised cost in the analysed period was 1.3% (1.7% as at the end of 2019).

The volume of loans granted to non-banking financial entities and budget sector institutions amounted to a total of PLN 709,799 thousand, remaining at a level similar to December 2019 (PLN 706,446 thousand).

The ratio of impaired exposures to gross loans and advances to Customers measured at amortised cost amounted to 5.5% at the end of 2020 and decreased slightly (-0.4 p.p.) compared to the end of 2019.

in PLN ‘000 31.12.2020 31.12.2019
Gross
total
of which:
impaired
share % Gross
total
of which:
impaired
share %
Business entities with the exception of farmers 30,699,205 1,675,724 5.5% 31,824,064 1,960,187 6.2%
Farmers 8,118,713 789,395 9.7% 8,732,840 768,651 8.8%
Retail customers 33,802,097 1,444,716 4.3% 29,997,525 1,332,616 4.4%
– mortgage loans 22,559,727 672,458 3.0% 18,526,757 523,852 2.8%
in PLN 17,687,284 275,967 1.6% 13,634,997 218,053 1.6%
in foreign currencies 4,872,443 396,491 8.1% 4,891,760 305,799 6.3%
– cash loans 7,312,444 595,880 8.1% 7,404,864 607,222 8.2%
– other retail loans 3,929,926 176,378 4.5% 4,065,904 201,542 5.0%
Lease receivables 920,944 158,439 17.2% 1,250,960 169,340 13.5%
Gross loans and advances 73,540,959 4,068,274 5.5% 71,805,389 4,230,794 5.9%

in PLN ’000 31.12.2020 31.12.2019 change
PLN’000 %
Total gross loans and advances to customers 73,540,959 71,805,389 1,735,570 2.4%
Impairment allowances (3,093,984) (3 ,153,827) 59,843 (1.9%)
Total net loans and advances to customers 70,446,975 68,651,562 1,795,413 2.6%
Exposures without impairment triggers
Gross carrying value 69,472,685 67,574,595 1,898,090 2.8%
Impairment allowance (1,052,717) (896,674) (156,043) 17.4%
Net balance sheet exposure 68,419,968 66,677,921 1,742,047 2.6%
Impaired exposures (stage 3)
Gross carrying value 4,068,274 4,230,794 (162,520) (3.8%)
Impairment allowance (2,041,267) (2,257,153) 215,886 (9.6%)
Net balance sheet exposure 2,027,007 1,973,641 53,366 2.7%
Ratios
Share of impaired exposures in gross portfolio 5.5% 5.9% (0.4 pp)
Coverage with impairment allowances (50.2%) (53.4%) 3.2 pp

The value of collateral held for Customer loans at the end of 2020 amounted to PLN 2,649,256 thousand. Detailed information on collateral held is included in Note 55.2. of the Stand-alone Financial Statements of BNP Paribas Bank Polska S.A. for the 12-month period ended 31 December 2020.

In December 2017, the Bank performed a securitization transaction of the portfolio of cash and car loans. The transaction is a traditional securitization involving the transfer of ownership of the securitized receivables to SPV (BGŻ Poland ABS1 DAC based in Ireland). The revolving period is 24 months. Transaction is subject to amortisation since January 2020.

As a result of securitization, the Bank obtained financing in exchange for the transfer of rights to future cash flows resulting from the securitized loan portfolio in a value of PLN 2,300,471 thousand as of 22 November 2017 (the cut-off date). The maximum deadline for full redemption of bonds and repayment of the loan is 27 April 2032.

SPV issued bonds with a total value of PLN 2,180,850 thousand on the basis of securitized assets, and received a loan of PLN 119,621 thousand, which were secured by a registered pledge on the rights to cash flows from securitized assets. As at the end of December 2020, the value of bonds and loans amounted to PLN 1,390,318 thousand.

The main benefit of the performed transaction is a positive impact on capital adequacy ratios and improvement of liquidity and diversification of financing sources.

In the light of the provisions of IFRS 9, the contractual terms of the securitization do not fulfil the conditions for derecognition of securitized assets. In connection with the above, the Bank recognizes securitized assets in “Loans and advances to Customers” as at 31 December 2020 at net value of PLN 1,393,049 thousand.

The Bank acts as a servicer in the transaction.

The transaction is affected by factors related to the effects of the coronavirus epidemic. On the one hand, the value of flows and future flows in the transaction are affected by the deferrals of credit instalments granted by the Bank since 19 March 2020 in order to mitigate possible negative effects related to the coronavirus pandemic, and currently in particular those resulting from the Act of 19 June 2020 on interest rate subsidies on bank loans granted to entrepreneurs affected by COVID-19 and simplified procedure for approval of the agreement in connection with COVID-19.

On the other hand, the decisions of the Monetary Policy Council to reduce the NBP base interest rates, in particular the reference rate to 0.1% on 29 May 2020, which resulted in a reduction of the maximum interest rate on loans and advances and a decrease in the market WIBOR rates also have an impact.

At present, it is not possible for the Bank to precisely estimate the impact of the coronavirus pandemic on this transaction, in particular in relation to a possible long-term deterioration of borrowers’ situation.

Liabilities and equity

As at 31 December 2020, the Bank’s total liabilities amounted to PLN 103,614,612 thousand and were PLN 8,206,784 thousand or 8.6% higher than at the end of 2019. The share of liabilities in the Bank’s total liabilities and equity was 89.6% in the analysed period (+0.1 p.p. compared to the end of 2019).

The biggest changes in the structure of liabilities in 2020 were a decrease in the share of amounts due to Customers, as well as an increase in the share of items such as subordinated liabilities, amounts due to banks, fair value adjustments of hedged and hedging items and derivative financial instruments.

The structure of liabilities is dominated by amounts due to Customers. Their share amounted to 88.3% at the end of 2020 and decreased by 4.4 p.p. compared to the end of 2019. In value terms, the volume of these liabilities increased by PLN 3,021,224 thousand, i.e. by 3.4% compared to December 2019 and amounted to PLN 91,466,551 thousand. This increase took place despite the reduction of the NBP interest rates almost to zero, resulting in a reduction of interest rates on bank deposits.

in PLN ’000 31.12.2020 31.12.2019 change
in PLN ’000 %
Amounts due to Central Bank 84,675 0 84,675 0.0%
Amounts due to banks 2,831,538 1,018,776 1,812,762 177.9%
Derivative financial instruments 1,521,148 815,637 705,511 86.5%
Fair value adjustment of hedging instruments and hedged items 542,719 224,218 318,501 142.0%
Amounts due to customers 91,466,551 88,445,327 3,021,224 3.4%
Subordinated liabilities 4,306,539 1,882,064 2,424,475 128.8%
Lease liabilities 968,592 601,157 367,435 61.1%
Other liabilities 1,234,157 1,852,051 (617,894) (33.4%)
Current income tax liabilities 0 38,061 (38,061) (100.0%)
Provisions 658,693 530,537 128,156 24.2%
Total liabilites 103,614,612 95,407,828 8,206,784 8.6%
Share capital 147,419 147,419 0 0.0%
Supplementary capital 9,110,976 9,110,976 0 0.0%
Other reserve capital 2,208,982 1,572,757 636,225 40.5%
Revaluation reserve 255,887 125,240 130,647 104.3%
Retained earnings 330,274 227,910 102,364 44.9%
– previous years result (400,786) (400,786) 0 0.0%
– net profit for the period 731,060 628,696 102,364 16.3%
Total equity 12,053,538 11,184,302 869,236 7.8%
Total liabilities and equity 115,668,150 106,592,130 9,076,020 8.5%

Compared to the end of 2019, the largest increase in the share of total liabilities was recorded for subordinated liabilities (+2.2 p.p., to 4.2%). At the end of 2020, they amounted to PLN 4,306,539 thousand (an increase of PLN 2,424,475 thousand, i.e. by 128.8% mainly as a result of the non-revolving subordinated loan agreement concluded on 7 December 2020 with BNP Paribas S.A. in the amount of PLN 2,300,000 thousand).

Equity as at 31 December 2020 amounted to PLN 12,053,538 thousand and increased by 7.8% or PLN 869,236 thousand compared to 31 December 2019. The share of total equity in Bank’s total liabilities and equity was at the end of 2020 10.4% (against 10.5% at the end of last year).

Amounts due to Customers

At the end of 2020, amounts due to Customers amounted to PLN 91,466,551 thousand and were higher by PLN 3,021,224 thousand, i.e. by 3.4% compared to the end of 2019, despite the significant decrease in interest rates on bank deposits as a result of the reductions in interest rates to a level close to zero.

By entity, the increase was mainly in amounts due to business entities (balance at the end of 2020: PLN 43,657,049 thousand), the volume of which increased by PLN 3,365,759 thousand, i.e. by 8.4% compared to the balance at the end of 2019 (including mainly in current deposits, an increase of PLN 11,030,816 thousand, i.e. by 37.7%, with a decrease in term deposits). The share of this segment in the structure of total amounts due to Customers increased to 47.7% compared to 45.6% at the end of December 2019.

An increase in volumes was also recorded in the case of retail Customer deposits, which amounted to PLN 43,578,012 thousand at the end of 2020, an increase of PLN 1,296,423 thousand, or 3.1%, compared to the balance at the end of 2019. At the same time, the share of retail Customer deposits in the structure of amounts due to total Customers decreased to 47.6% compared to 47.8% at the end of 2019.

A decrease was recorded in the case of deposits of non-bank financial entities (at the end of 2020 they amounted to PLN 2,965,519 thousand, i.e. by PLN 1,904,981 thousand or 39.1% less than at the end of 2019).

The volume of deposits of public sector institutions increased by PLN 264,023 thousand (i.e. by 26.4%, to PLN 1,265,971 thousand at the end of 2020).

Structure of amounts due to Customers – subjective structure at 31.12.2020

Structure of amounts due to Customers – subjective structure at 31.12.2019

The share of current accounts in the structure of total amounts due to Customers amounted to 85.9% at the end of 2020, recording an increase of 20.6 p.p. compared to the end of 2019. Funds deposited in current accounts amounted to PLN 78,590,037 thousand and increased by PLN 20,813,897 thousand, or 36.0%. This increase concerned all Customer groups: business entities (+ PLN 11,030,816 thousand, i.e. by 37.7%), retail Customers (+ PLN 8,551,216 thousand, i.e. by 31.4%), non-bank business entities (+ PLN 908,323 thousand, i.e. by 192.0%) and public sector institutions (+ PLN 323,542 thousand, i.e. by 41.1%)

The share of term deposits in the structure of amounts due to Customers in the analysed period amounted to 11.4% and decreased by 19.6 p.p. compared to the end of 2019. In value terms, term deposits decreased by PLN 17,018,100 thousand or 62.1% compared to December 2019 and amounted to PLN 10,384,101 thousand. This decrease mainly concerned business entities and retail Customers (by: PLN 7,613,148 thousand and PLN 7,426,320 thousand, respectively).

The share of other liabilities in the structure of amounts due to Customers amounted to 1.2% (increase by 0.1 p.p. compared to December 2019) Their volume amounted to PLN 1,101,862 thousand.

31.12.2020 31.12.2019
PLN’000 share % PLN’000 share %
Current accounts 78,590,037 85.9% 5, 776,140 65.3%
Term deposits 10,384,101 11.4% 27,402,201 31.0%
Securitisation settlement 1,390,551 1.5% 2,298,573 2.6%
Other liabilities 1,101,862 1.2% 968,413 1.1%
Total amounts due to customers 91,466,551 100.0% 88,445,327 100.0%

Equity

As at the end of 2020, the Bank’s equity amounted to PLN 12,053,538 thousand and was by PLN 869,236 thousand or 7.8% higher than at the end of 2019.

Pursuant to the Resolution of the Ordinary General Shareholders’ Meeting of BNP Paribas Bank Polska S.A. of 29 June 2020, the entire profit of the Bank for 2019, in the amount of PLN 628,696 thousand, was allocated to reserve capital. In addition, the increase in equity was influenced by the improvement in the revaluation reserve (by PLN 130,582 thousand compared to the end of 2019).

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