CONSOLIDATED FINANCIAL STATEMENTS OF THE BANK … · consolidated financial statements of the bank...
Transcript of CONSOLIDATED FINANCIAL STATEMENTS OF THE BANK … · consolidated financial statements of the bank...
CONSOLIDATED FINANCIAL STATEMENTS OF THE
BANK OCHRONY ŚRODOWISKA S.A. GROUP FOR THE FIRST QUARTER 2017
MAY 2017
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Contents SUMMARY RESULTS OF THE BOŚ S.A. GROUP ...................................................................................................... 3 1. MACROECONOMIC SITUATION .............................................................................................................................. 4 2. FINANCIAL RESULTS OF THE GROUP .................................................................................................................... 6 2.1. The balance sheet................................................................................................................................................. 6 2.2. Group assets ......................................................................................................................................................... 9 2.3. Equity and liabilities............................................................................................................................................. 12 3. Ratios ................................................................................................................................................................... 13 4. Selected operational data of the Group ................................................................................................................ 15 5. The Bank development lines ................................................................................................................................ 15 6. Significant events in Q1 2017 ............................................................................................................................... 16 7. Factors likely to affect performance at least in the next quarter .......................................................................... 20 8. Segment reporting................................................................................................................................................ 21 9. Non-standard factors and events affecting performance ...................................................................................... 23 11. Seasonal or cyclical developments ....................................................................................................................... 24 12. Issuance, redemption and payment of debt securities or equity securities .......................................................... 24 13. Dividends .............................................................................................................................................................. 24 14. Transactions with related entities ......................................................................................................................... 24 15. Loan or cash advance sureties or guarantees granted, where the total of running sureties or guarantees is
equivalent to not less than 10% of issuer’s equity ............................................................................................... 24 16. Judicial or administrative proceedings under way ................................................................................................ 24 17. Shareholders holding directly or indirectly, through subsidiaries, at least 5% of the total number of votes at
Issuer’s General Meeting ...................................................................................................................................... 24 18. BOŚ S.A. shares held by members of executive and supervisory bodies .............................................................. 25 19. Other information issuer deems necessary for assessments of its human resources, assets, financial
position, financial performance, and changes thereof, and information relevant to issuer .................................. 25 20. The Bank Supervisory Board ................................................................................................................................ 25 21. The Bank Management Board .............................................................................................................................. 25 22. Important events past publication date of this report .......................................................................................... 26 BOŚ S.A. GROUP INTERIM FINANCIAL STATEMENTS .................................................................................................. 27 Interim consolidated income statement ....................................................................................................................... 27 Interim consolidated comprehensive income statement .............................................................................................. 27 Interim consolidated financial position statement ........................................................................................................ 28 Interim consolidated changes in equity statement ...................................................................................................... 29 INTERIM FINANCIAL STATEMENTS OF BOŚ S.A. ........................................................................................................ 32 Interim income statement of the Bank ........................................................................................................................ 32 Interim comprehensive income of the Bank ................................................................................................................ 32 Interim statement of financial position of the Bank ..................................................................................................... 33 Interim statement of changes in equity of the Bank .................................................................................................... 34 I. Information on accounting principles (policy) adopted in preparing the consolidated financial statements ........ 36 II. Comparative data ................................................................................................................................................ 36 III. Adjustment of prior period errors ........................................................................................................................ 36 IV. Financial assets and liabilities at fair value .......................................................................................................... 37 V. Changes in consolidated contingent liabilities and assets .................................................................................... 38 VI. Group structure, entities covered by consolidation .............................................................................................. 38
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SUMMARY RESULTS OF THE BOŚ S.A. GROUP As at 31 March 2017, the Bank Ochrony Środowiska S.A. Group is composed of Bank Ochrony Środowiska S.A., the parent entity to its subsidiaries: Dom Maklerski BOŚ S.A. brokerage service, BOŚ Eko Profit S.A., BOŚ Invest Management sp. z o.o., BOŚ Capital sp. z o.o., BOŚ Ekosystem sp. z o.o., as well as MS Wind sp. z o.o., an indirect subsidiary entity.
The firm commitment to restructuring of the Bank and the companies in the BOŚ S.A. Group in Q1 2017 resulted in a noticeable rise in earnings and a reduction of employee benefits. Raising the Bank’s profit rate above the average level in the banking sector is, as before, a priority goal in the BOŚ S.A. strategy for the years 2016−2020.
BOŚ S.A. Group reported Q1 2017 net profit at PLN 20.0 m, up from the PLN 12.9 m loss in the same period last year. It may be recalled that the Q1 2017 result had been reduced by a one-off yearly contribution for 2017to a mandatory Polish bank restructuring fund launched by the Bank Guarantee Fund [BFG]. The BOŚ S.A. contributed PLN 24.7 m to the mandatory undertaking. Had the contribution payment been spread out over the four quarters last year the Q1 2017 profit would have been recorded at PLN 38.5 m.
A selection of balance sheet positions and financial ratios:
Item Q1 2017 Q1 2016 Change % PLN 000
Net interest and similar income [1] 99 123 70 677 40.2
Net fee and commission income [2] 29 920 26 607 12.5 Net impairment result -10 553 -21 502 -50.9
Administrative expense [3] -111 032 -106 371 4.4
Net profit / loss 19 953 -12 916 x
Item Q1 2017 2016 Change PLN 000 in p.p.
Return on equity (ROE) -1.7 -3.7 2.0
Return on assets (ROA) -0.1 -0.3 0.2
Interest margin on total assets [4] 1.9 1.5 0.4
Cost of risk [5] -1.4 -1.5 0.1
Loans and advances qualifying for posting as impaired and actually impaired 11.0 11.0 0.0
Cost / income, C/I [6] 72.4 74.6 -2.2 Aggregate capital adequacy ratio (solvency ratio)
14.65 14.28 2.37
For ratio definitions see point 3.
[1] BOŚ S.A. Group improved net interest by PLN 28.4 m, i.e., 40.2%, on the Q1 2016 figure, primarily in result of shrinking, in line with its strategy, the proportion of high-cost bonds on the liabilities side (repurchase of eurobonds and series G subordinate bonds) and substituting instead cheaper financing in form of investments and deposits and effectively reducing cost levels of investments and deposits taken by the Bank’s outlets,
[2] BOŚ S.A. Group reported its net fee and commission result PLN 3.3 m, i.e., 12.5%, above the previous year, as fee and commission earnings increased PLN 4.0 m, i.e., by 11.8%, primarily because of growing earnings on securities operations.
[3] Administrative expense of the Group grew PLN 4.7 m, or 4.4%, on the same period last year. The cost increase is attributable mainly to the circumstance that the above-mentioned BFG contribution was recognised in its entirety with Q1 2017 expenses. Employee benefit expense was lower by 10.3%, as employment at the BOŚ S.A. Group dropped 9.4%.
[4] Interest margin on total assets increased, primarily owing to a 40.2% increase in the BOŚ S.A. Group net interest result in Q1 2017.
[5] The ratio of net impairment write-downs for the last 12 months to average loans and advances balance in that period. A key factor in the upward move of the cost of risk was the posting of PLN 97.9 m in impairment write-downs on the portfolio of wind farm loans for 2016.
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[6] BOŚ S.A. Group posted an improved cost/income (C/I) ratio, and that despite the recognition of the above-mentioned all-year BFG contribution with Q1 2017 costs. Had the contribution payment been spread out over the four quarters of the year, C/I for Q1 2017 profit would have been recorded at 60.3%.
BOŚ S.A. expanded its pro-ecology project market operations as it sought to enhance, in line with its strategy, the share of loans granted to finance actions contributing to environmental protection in its entire loan portfolio. Pro-ecology loan balance was at PLN 4.8 bn on 31 March 2017, accounting for 34.2% of the Bank’s total lending balance.
The value of contracts concluded in Q1 2017 to finance pro-ecology projects amounted to PLN 208.6 m. The vast majority of new pro-ecology loans were addressed to corporate clients. Such loans were assigned to support primarily projects in the area of sustainable construction, including both investment loans and working capital loans to entities putting in place buildings with high energy efficiency levels or pro-ecology solutions.
As in previous quarters, the loan portfolio structure continued to change as the share of loans to corporate clients in total lending was growing. At end Q1 this year their share in the total was 54.1%, compared with 52.3% at end Q1 2016. The share of the retail segment in total loans dropped to 32.7%. Balance sheet value of loans and advances to clients of the Group was PLN 13.6 bn at 31 March 2017.
The structure of liabilities changed in Q1 2017 as well. The share of high-cost subordinate liabilities was reduced by 0.5 p.p. compared with the Q1 2016 figure. The share of equity, on the other hand, increased 0.3 p.p. In the structure of liabilities to clients, the retail segment increased its share, with the share of deposits of the corporate segment dropping. Retail deposits balance was PLN 10.6 bn at end of Q1 2017. Total balance sheet value of the Group was PLN 20.4 bn on 31 March 2017.
In Q1 2017, Fitch Ratings Ltd affirmed their value ratings for the Bank: Long-term Foreign Currency IDR rating at B+ with stable perspective, Short-term Foreign Currency IDR rating at B, Viability rating at b+, Support Rating at 4, Support Rating Floor at B, and National Short-term Rating at BB+(pol) with stable perspective, and National Short-term Rating at B(pol). 1. MACROECONOMIC SITUATION In Q1 2017, data released in month-on-month publication frequency showed business activity in Poland clearly rising, following a slowdown in 2016. In Q1 2017, manufacturing output rose (to 7.1 y/y, from 1.5% y/y in Q4 last year), as construction output increased (to 4.6% y/y, from a 13.2% y/y slide in Q4 last year), as did retail sales, (to 7.6% y/y, up from 6.5% y/y in the previous quarter).
In Q1 2017, the labour market continued to pick up, as employment in the enterprise sector rose and registered unemployment dropped to 8.1% at end of the quarter, from 11.5%, compared with 9.9% in the same period the previous year, with the number of people out of job 275 000 at end Q1 below the figure in the same period last year.
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CPI kept at adverse levels for most of the year in 2016. Early in 2017 inflation continued to soar as commenced towards the end of 2016. The upward move resulted in CPI reaching 2.2% in February (the highest level in more than 4 years). The main factor behind the process was the continuing growth in fuel prices, looking back at a very low level of statistical reference base of the year before. Along with that, the upward trend of inflation was temporarily boosted by a marked increase in food prices, especially of vegetables, following bad weather conditions in Europe. The upward trend of CPI was further spurred by high levels of administered prices, including electric energy tariffs, for retail consumers. Towards the end of the quarter a weakening vegetable price growth resulted in inflation dropping to 2.0% in March.
In Q1 2017, the Monetary Policy Council (RPP) upheld interest rates at stable levels, keeping the NBP reference rate at 1.5%. The RPP resolved to follow the previous line of stabilising the parameters of monetary policy in the nearest quarters. As NBP rates were stable, lending interest rates on the interbank market was stable as well, with WIBOR 3M at 1.73% at the end of the year.
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Following a weakening of demand for financial assets of emerging markets towards the end of 2016 (attributable, among other things, to uncertainties over U.S. economic policies after Donald Trump was elected president and an anticipation of early tightening of Fed monetary policy), Q1 2017 brought with it a return of capital to emerging markets. The process was spurred by fears of the new American administration possibly embarking on a protectionist course in economic policy gradually attenuating and news of a series of positive developments coming from China.
With prospects of emerging markets improving, in connection with the positive effect of the weakening uncertainty over domestic economic policies, assets on the Polish market financial recovered. Over the period of Q1 2017 the local WIG share index grew more than 15%, return rates of domestic Treasury bonds dropped, and the Polish currency strengthened. In Q1 2017 the Polish złoty gained against the U.S. dollar (5.6%), the euro (4.6%) and the Swiss franc (4.2%).
2. FINANCIAL RESULTS OF THE GROUP 2.1. The balance sheet
Item Q1 2017 Q1 2016
Change % PLN 000
Continued operations Interest and similar income 170 386 176 332 -3.4
Interest expense and similar charges -71 263 -105 655 -32.6 Net interest income 99 123 70 677 40.2 Fee and commission income 38 364 34 323 11.8 Fee and commission expense -8 444 -7 716 9.4 Net fee and commission income 29 920 26 607 12.5 Dividend income 13 5 160.0 Net trading income 8 068 15 013 -46.3
Result on investment securities 6 816 - x
Net hedge accounting 838 300 179.3 Foreign exchange result 7 439 2 603 185.8 Other operating income 5 259 3 128 68.1 Other operating expense -4 121 -3 116 32.3 Net impairment gains / losses -10 553 -21 502 -50.9 Administrative expenses -111 032 -106 371 4.4 Operating income 31 770 -12 656 x Profit before tax 31 770 -12 656 x Income tax expense -11 817 -260 4 445.0 NET PROFIT / LOSS 19 953 -12 916 x
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BOŚ S.A. Group reported a net profit of PLN 20.0 m in Q1 2017, compared with a PLN 12.9 m loss in Q1 2016. The Q1 2017 result was encumbered by a one-off contribution, to be paid in the entire amount, to the Bank Guarantee Fund [BFG] mandatory bank restructuring scheme in the year 2017. The contribution amounted to PLN 24.7 m.
BOŚ S.A. Group improved its net interest figure by PLN 28.4 m, or 40.2%, on the Q1 2016 figure, in effect of substantial reduction of interest expense. Item Q1 2017 Q1 2016 Change %
PLN 000 Total interest and similar income, on account of: 170 386 176 332 -3.4 Loans and advances, of which from: 136 946 140 409 -2.5 − Banks 336 202 66.3 − Clients, of which: 136 610 140 207 -2.6
− corporate 81 733 81 570 0.2 − retail 40 363 41 685 -3.2 − public finance entities 14 466 16 859 -14.2 − other 48 93
Financial instruments 33 440 35 438 -5.6
Hedging transactions - 485 -100.0
Total interest and similar expense, on account of: 71 263 105 655 -32.6
Investments taken, deposits and bank accounts, 60 964 71 597 -14.9 − Banks 360 661 -45.5 − Clients 60 604 70 936 -14.6 − corporate 11 681 18 709 -37.6 − retail 45 748 48 174 -5.0 − public finance entities 3 174 4 050 -21.6 − pro-ecology funds 1 3 -66.7
Loans and advances 503 1 015 -50.4 Funds entrusted to use for lending 154 75 105.3 Financial instruments – debt securities from own issue 7 274 32 968 -77.9
Hedging transactions 2 368 - x
Net interest income 99 123 70 677 40.2
Total interest and similar income decreased PLN 5.9 m, or 3.4%, in Q1 2017, from the same period last year, primarily because of the dropping volume of lending.
Interest and similar expense, on the other hand, decreased PLN 34.4 m, or 32.6%. What contributed most to that decrease was a PLN 25.7 m, or 77.9%, drop in the cost of financial instruments following the May 2016 repurchase of high-cost eurobonds and the February 2017 repurchase of the Bank’s own series G subordinate bonds. In Q1 2017, the early repurchase of series G own bonds did also have a one-off effect on the improvement of net interest, to the tune of PLN 6 m. The series was designed to bring about an increase of margin five years from issue date, which was posted in the books with current expense as adjustments of interest value determined by the effective interest rate method. Given the series G redemption and no further necessity of entering a margin rise period, the 5-year-old adverse net interest adjustment by the amount of PLN 6 m was derecognised in the books in February this year.
Investments taken, deposits and current accounts expense dropped PLN 10.6 m, or 14.6%. Average basic interest rate on PLN deposits taken by the Bank outlets was 1.69% in Q1 2017, down from 2.00% in Q1 2016.
The Group increased its net fee and commission income by PLN 3.3 m, or 12.5%, in Q1 2017 from the same period in 2016, as earnings growth outpaced fee and commission expense growth rate. Earnings increased by PLN 4.0 m, or 11.8%, primarily from increased earnings on securities operations. Fee and commission expense grew 9.4%, mainly in effect of growing brokerage service costs.
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Item Q1 2017 Q1 2016 Change %
PLN 000
Total fee and commission income 38 364 34 323 11.8 Client account maintenance fees, other settlement operations in domestic and international transactions 9 037 9 873 -8.5 Commissions on loans 7 063 6 876 2.7 Commissions on guarantees and letters of credit 997 1 225 -18.6 Fees for operations on securities 20 924 15 263 37.1 Commissions on BFG contributions 169 993 -83.0 Portfolio management fees and other management fees 174 91 91.2 Other fees - 2 -100.0
Total fee and commission expense 8 444 7 716 9.4 Brokerage service fees 5 826 4 662 25.0 Payment card fees 1 448 1 579 -8.3 Commissions paid to other banks in cash operations 120 156 -23.1 Fees on current accounts 296 333 -11.1 Euronet service fees 204 327 -37.6 Commissions paid for loans and advances 118 337 -65.0
Other expense 432 322 34.2
Net fee and commission income 29 920 26 607 12.5
Net trading income the BOŚ S.A. Group posted in Q1 2017 was PLN 8.1 m, compared with PLN 15.0 m the year before, mostly because the Bank noted a lower result on FX swap and IRS transactions and also because Dom Maklerski BOŚ S.A. brokerage posted lower earnings on CFD contracts for difference operations, and on other financial derivative instruments.
The Group’s net investment securities was PLN 6.8 m, after a subsidiary of the Bank disposed of stocks of a GPW [Warsaw stock exchange] listed company while also releasing previous write-downs.
Net foreign exchange was PLN 7.4 m, a 186% increase the same period last year, mainly following positive revaluations of forward and spot instruments and a decreased net result of client transactions.
Net impairment result, at −PLN 10.6 m in Q1 2017, was improved on the same period last year when it was −PLN 21.5 m.
Administrative expenses of the Group grew by PLN 4.7 m, or 4.4%, compared with the same period last year, primarily because the Bank’s BFG contribution had increased by PLN 20.0 m. The BFG contribution on the mandatory bank restructuring fund which was set to the amount of PLN 24.7 m for the whole year of 2017, was recognised with Q1 2017 costs. Item Q1 2017 Q1 2016 Change %
PLN 000
Employee benefits 41 496 46 254 -10.3 Administrative expense, of which: 58 794 48 511 21.2 – material costs 28 302 27 907 1.4
– taxes and duties 1 349 10 757 -87.5 – contribution and payments to Bank Guarantee Fund
(BFG) 28 731 8 686 230.8
– contribution and payments to Polish Financial Supervision Authority (KNF) 331 1 092 -69.7
– contribution to covering expenses of the Financial Ombudsman 37 - x
– contribution to support the Chamber of Brokerage Houses 23 23 0.0
– other 21 46 -54.3
Amortisation and depreciation 10 742 11 606 -7.4
Total 111 032 106 371 4.4
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Employee benefits expense of the BOŚ S.A. Group in Q1 2017 were 10.3% below the same period the year before, as employment was reduced 10.1% at BOŚ S.A. and 9.4% at the Group.
Item
31 Mar 2017 31 Dec 2016 31 Mar 2016 Change %
jobs 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016
Employment, BOŚ S.A. 1 380 1 431 1 535 -3.5 -10.1 Employment, subsidiaries 236 245 249 -3.7 -5.2
Total employment, BOŚ S.A. Group 1 616 1 676 1 784 -3.6 -9.4
2.2. Group assets
The Group balance sheet total was PLN 20 374.4 million at 31 March 2017, 2.2% down from 31 December 2016.
2.2.1. Changes to the structure of Group assets
Item 31 Mar 2017 31 Dec 2016
Change % PLN 000
Cash and balances with the Central Bank 671 692 513 754 30.7
Amounts due from other banks 183 395 154 668 18.6
Trading securities 83 429 59 524 40.2
Derivative instruments 15 2867 126 915 20.4
Hedging derivative instruments 1 306 4 840 -73.0
Loans and advances to clients 13 556 904 13 965 259 -2.9
Investment securities: 5 232 538 5 419 369 -3.4
– available for sale 4042 744 4 233 279 -4.5
– held to maturity 1189 794 1 186 090 0.3
Intangible assets 126 335 131 310 -3.8
Property and equipment 72142 81 723 -11.7
Income tax assets 69 640 73 371 -5.1
Other assets 22 4106 298 756 -25.0
Total assets 20 374 354 20 829 489 -2.2
Loans and advances to clients, at 66.5%, was the largest position in the assets of the Group at 31 March 2017. Their share in total assets decreased by 0.5 percentage points from the beginning of 2017. What increased in the same period were the positions cash and balances with the Central Bank, amounts due from other banks and trading securities. 2.2.2. Loans and cash advances to clients
Item
31 Mar 2017 31 Dec 2016 31 Mar 2016 Change %
w PLN 000 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016 Loans to retail clients 4 437 686 4 615 541 4 718 869 -3.9 -6.0
Loans to corporate clients 7 328 813 7 496 711 7 459 711 -2.2 -1.8
Loans extended to public finance 1 789 322 1 853 003 2 095 056 -3.4 -14.6
Loans to other clients 1 080 - - x x
Total loans and advances 13 556 901 13 965 255 14 273 636 -2.9 -5.0
Other receivables 3 4 11 -25.0 -72.7
NET LOANS AND ADVANCES TO CLIENTS
13 556 904 13 965 259 14 273 647 -2.9 -5.0
Loans and advances to clients of the Group had a book value of PLN 13 556.9 m at end Q1 2017, 2.9% less than on 31 December 2016.
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By end Q1 2017, loans and advances volume had decreased 3.9% in the retail segment, 2.2% in the corporate segment, and 3.4% in the public finance segment, from 31 December 2016.
Loans and cash advances to clients: by segment
The corporate segment held its biggest share in total loans, at 54.1%, compared with 52.3% at end Q1 2016. Loans in the retail segment dropped to 32.7% of total loans, at PLN 4 437.7 m at end Q1 2017, from PLN 4 615.5 m at end 2016. Housing loans accounted for the biggest position in total loans, with balance sheet value of PLN 3 538.2 m at end Q1 2017, compared with PLN 3 697.7 m at end 2016 and PLN 3 757.5 m at end Q1 2016.
Item
31 Mar 2017 31 Dec 2016 31 Mar 2016 Change %
PLN 000 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016 Housing loans in PLN 1 520 821 1 543 254 1 577 292 -1.5 -3.6
Housing loans in CHF 1 205 820 1 286 417 1 300 479 -6.3 -7.3
Housing loans in EUR 755 060 806 542 820 457 -6.4 -8.0
Housing loans in USD 56 491 61 456 59 288 -8.1 -4.7
TOTAL HOUSING LOANS 3 538 192 3 697 669 3 757 516 -4.3 -5.8
Loans denominated in foreign currency account for a majority of housing loans, at 57.0% (58.3% at end 2016). CHF-denominated housing loans accounted for 8.9% of the entire BOŚ S.A. Group loan portfolio (net), down from 9.2% at end 2016. Pro-ecology loans
BOŚ S.A. continued to grow on the environmental project financing market, with its pro-ecology lending balance at PLN 4 841.7 m on 31 March 2017. The share in its portfolio of loans extended to support activities contributing to environmental protection in the total loan portfolio accounted (by principal) to 34.2% the Bank’s total loan portfolio (from 33.9% in Q1 2016). Loans the Bank extended to wind farm development was PLN 2 028.5 m (net) at end Q1 2016.
33,1% 53,7%
13,3%
31.12.2016
Retail clients
CorporateclientsPublic finance
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Pro-ecology loans, by segment (principal value)
Item
31 Mar 2017 31 Dec 2016 31 Mar 2016 Change %
PLN 000 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016
Pro-ecology loans to retail clients 153 302 162 921 155 232 -5.9 -1.2
Pro-ecology loans to corporate clients 4 080 992 4 214 950 4 099 125 -3.2 -0.4
Pro-ecology loans to public finance entities 607 396 635 563 726 100 -4.4 -16.3
PRO-ECOLOGY LOANS 4 841 691 5 013 434 4 980 457 -3.4 -2.8
Contracts concluded in Q1 2017 to finance pro-ecology undertakings was PLN 208.6 m. A clear majority of the new pro-ecology loan contracts were addressed to corporate clients. Such loans were granted primarily to assist in financing projects in the area of sustainable construction, both as investment loans and working capital loans extended to entities putting in place buildings of high energy efficiency or implementing pro-ecology solutions such as, for instance, green roofs or heat pumps. Pro-ecology loan sales, by segment (principal value)
Item
Q1 2017 Q1 2016 Change %
PLN 000 Q1 2017 vs.
Q1 2016
New loans to retail clients in the period 4 052 7 164 -43.4 New loans to corporate clients in the period 198 953 173 307 14.8 New loans to public finance entities in the period 5 570 0 0.0
NEW LOANS TO CLIENTS IN THE PERIOD 208 574 180 471 15.6
2.2.3. Loan portfolio quality
Item 31 Mar 2017 31 Dec 2016
PLN 000 % %
Loans and advances not impaired, of which: 11 470 933 81.2 11 793 879 81.2Loans and advances not past schedule 11 282 202 79.9 11 568 265 79.6Loans and advances past schedule 188 731 1.3 225 614 1.6
Loans and advances qualifying for posting as impaired yet not recognised as impaired because of cash flow estimates, of which:
1 103 810 7.8 1 131 837 7.8
− wind farms 906 188 6.4 938 793 6.5Loans and advances qualifying for posting as impaired and actually impaired, of which: 1 550 042 11.0 1 602 633 11.0
− wind farms 514 632 3.6 528 976 3.6Total loans and advances to clients and other banks before adjustments 14 124 785 100.0 14 528 349 100.0Write-downs on loans and advances extended to clients and other banks, of which: -567 883 -4.0 -563 093 -3.9− wind farms -106 913 -0.8 -107 177 -0.7Other receivables 3 0.0 4 0.0Total loans and advances to clients and other banks, net, of which: 13 556 905 96.0 13 965 260 96.1− clients 13 556 904 96.0 13 965 259 96.1− banks 1 0.0 1 0.0
At end Q1 this year impairment write-downs amounted to PLN 567.9 m, having increased 0.9% (by PLN 4.8 m) from end 2016. The ratio of write-downs to total value of loans and advances extended to clients and banks at 31 March 2017 was, before adjustments, 4.0%, 0.1 p.p. up from end 2016.
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Total loans and advances with impairment accounted for 11.0% of the entire portfolio at 31 March 2017, unchanged from end 2016. 2.3. Equity and liabilities 2.3.1. Changes in total equity and liabilities structure
Amounts owed to clients, at 81.7%, was the biggest position in total assets of the Group at end Q1 2017, their share having shrunk 0.5 p.p. from the 31 December 2016 balance. Subordinate liabilities share decreased 0.5 p.p. over the same period.
Item 31 Mar 2017 31 Dec 2016
Change % PLN 000
Amounts owed to Central Bank and other banks 241 062 115 764 108.2
Derivative financial instruments 84 454 122 382 -31.0 Hedging derivative instruments 30 077 27 406 9.7 Amounts owed to clients 16 648 980 17 123 578 -2.8 Debt securities issued 834 410 829 735 0.6 Subordinate debt 494 441 601 373 -17.8 Provisions 11 759 7 043 67.0 Income tax liabilities 3 263 265 1 131.3 − current 3 225 265 1 117.0 − deferred 38 - x Other liabilities 213 315 220 054 -3.1 Total equity 1 812 593 1 781 889 1.7
Total equity and liabilities 20 374 354 20 829 489 -2.2
2.3.2. Liabilities of the Group
The Group financed its activities mostly with liabilities owed to clients, specifically: • cash deposits taken by the Bank outlets, • loans and advances from international financial institutions, • cash received from external donors to finance lending in the form of direct lines or principal
subsidising: the National Fund for Environmental Protection and Water Resource Management (Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej), Regional Funds for Environmental Protection and Water Resource Management (Wojewódzkie Fundusze Ochrony Środowiska i Gospodarki Wodnej), a European Fund for the Development of Polish Villages (Europejski Fundusz Rozwoju Wsi Polskiej), and JESSICA (Joint European Support for Sustainable Investment in City Areas).
Item 31 Mar 2017 31 Dec 2016 31 Mar 2016
Change % 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016 Corporate clients 3 694 733 4 094 055 4 434 200 -9.8 -16.7 Retail clients 10 577 389 10 796 832 10 148 765 -2.0 4.2 Public finance 1 068 630 830 967 1 153 524 28.6 -7.4 Environmental funds 833 235 2 175 254.5 -61.7 Other clients 61 584 102 070 690 -39.7 8 825.2 Loans and advances received from international financial institutions 1 157 212 1 225 724 1 388 490 -5.6 -16.7 Money supplied by environmental funds for lending purposes
88 599 73 695 94 631 20.2 -6.4
AMOUNTS OWED TO CLIENTS IN TOTAL 16 648 980 17 123 578 17 222 475 -2.8 -3.3
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BOŚ S.A. Group liabilities to clients were at PLN 16 649.0 m on 31 March 2017, 2.8% down from end 2016.
At end Q1 this year, retail deposits amounted to PLN 10 577.4 m, 4.2% up on the end Q1 2016 figure.
At 31 March 2017, amounts owed to corporate clients were at PLN 3 694.7 m. That means such liabilities had been reduced by 16.7% from 31 March 2016. In the public finance segment they had dropped by 7.4% from the end Q1 2016 figure.
Amounts owed to clients, by segment
3. Ratios
Item
Q1 2017 2016 Change in p.p.
% Q1 2017 / 2016
Q1 2017 / 2016
with PFIn *
without PFIn *
with PFIn *
without PFIn *
Return on equity (ROE) 1 -1.7 -3.7 1.9 2.0 -3.6 Return on assets (ROA 2 -0.1 -0.3 0.1 0.2 -0.2 Interest margin on total assets 3 1.9 1.5 1.5 0.4 0.4 Cost of risk 4 -1.4 -1.5 -0.8 0.1 -0.6 Cost / income, C/I 5 72.4 74.6 72.9 -2.2 -0.5 1) net profit of the last four quarters to average equity at beginning and end of the four quarters 2) net profit of the last four quarters to average assets at beginning and end of the four quarters 3) net annualised interest income to average assets at the beginning and end of the period 4) ratio of net impairment write-downs for the last 12 months to averaged loans and advances balance in that period, 5) administrative expense and other operating expense to net interest income, net fee and commission income, dividends received, net trading income, net securities trading, net hedge accounting, net FX income and other operating income.
* PFIn – portfolio wind farms
23,9%
63,1%4,9%
0,6%7,2%
0,4%
31.12.2016
Corporate clients
Retail clients
Public finance
Environmental funds
Loans and advances received from internationalfinancial institutions
Money supplied by environmental funds for lendingpurposes
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Interest margin on total assets, calculated as the (annualised) ratio of net interest income to averaged assets balance at the beginning and end of the period, increased markedly, from a level of 1.3% in Q1 2016 and 1.5% in the year 2016 to a level of 1.9% in Q1 2017, primarily in effect of a 40.2% increase of net interest income at the BOŚ S.A. Group in Q1 2017, as total assets grew only slightly over the period.
C/I ratio amounted to 72.4%, an improvement the Group could post even though it had to recognise the entire BFG contribution for the mandatory bank restructuring fund in the amount of PLN 24.7 m for the year 2017 already with its cost balance for just one quarter, Q1 2017. Had the BFG contribution been spread evenly over the four quarters this year, the Group would have posted its C/I ratio for Q1 2017 at 60.3%.
Under provisions of art. 92 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 (CRR), the Bank is required to maintain at all times a total capital ratio at not less than 8%. Tier 1 capital ratio and Common Equity Tier 1 capital ratio should be kept at least at 6% and 4.5%, respectively.
The Bank posted these capital adequacy requirements at the following levels:
Item
31 Mar 2017
31 Dec 2016
31 Mar 2016
Change, p.p.
% 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016 Aggregate capital adequacy ratio (solvency ratio)
14.65 14.28 12.28 0.37 2.37
Tier1 11.76 11.37 9.12 0.39 2.64
In 2006, in administrative proceedings connected with a request from the NFOŚiGW [National Fund for Environmental Protection and Water Resource Management] to get permission for exercising voting rights from the Bank shares the NFOŚiGW undertook to the KNF [Polish Financial Supervision Authority] to maintain the Bank’s capital adequacy ratio (now referred to as aggregate capital adequacy ratio) at a level not less than 12%. The administrative proceedings in which the NFOŚiGW pledged the promise to the KNF was instituted in connection with the NFOŚiGW buying back the Bank shares from Skandinaviska Enskilda Banken. The Bank keeps to the capital requirements resulting from the KNF instruction in its financial planning and in the Bank strategy.
On 22 October 2015 the KNF advised banks of the establishment of a backing buffer to boost capital requirement ratios by 1.25 p.p. In effect, as of 1 January 2016 the KNF recommended minimum capital requirement levels were rose to 10.25% for Tier I capital and 13.25% for total capital requirement TCR.
On 29 December 2016 the KNF recommended that the BOŚ S.A. Group maintain its own funds to provide for an additional capital requirement against risk resulting from currency-denominated mortgage loans for households, at a level of 0.72 p.p. above the total capital ratio referred to in art. 92 subpara. 1 letter c in the CRR Regulation, which should be composed at least in 75% of Tier I capital (corresponding to capital requirement at a level of 0.54 p.p. above the value of Tier 1 capital ratio referred to in art. 92 subpara. 1 letter b in the CRR Regulation) and at least in 56% of Common Equity Tier 1 capital ratio (corresponding to capital requirement at a level of 0.40 p.p. above the value of Common Equity Tier 1 capital ratio referred to in art. 92 subpara. 1 letter a in the CRR Regulation).
At 31 March 2017, the BOŚ S.A. Group maintained its capital adequacy levels above the respective KNF recommendations.
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4. Selected operational data of the Group
Item
31 Mar 2017 31 Dec 2016 31 Mar 2016 Change %
000 31 Mar 2017
vs. 31 Dec 2016
31 Mar 2017 vs.
31 Mar 2016
BANK OCHRONY ŚRODOWISKA S.A. Number of clients 240.1 257.1 256.8 -6.6 -6.5 Number of retail clients 234.4 251.3 251.0 -6.7 -6.6 Number of clients in the corporate and public finance segments 5.7 5.8 5.8 -1.7 -1.7
Number of clients using electronic channels 132.8 133.2 125.8 -0.3 5.6 Number of client accounts * 263.7 264.3 260.5 -0.2 1.2 Payment and credit cards in total 102.4 101.5 101.7 0.9 0.7 Number of outlets 76 85 92 -10.6 -17.4
DOM MAKLERSKI BOŚ S.A.
Number of securities accounts 92.4 90.2 85 2.4 8.7
– of which online accounts 85.3 83.1 77.9 2.6 9.5
Number of outlets 13 13 13 0.0 0.0 * including savings accounts
5. The Bank development lines On 20 April 2016, the Bank Supervisory Board approved a “Framework Strategy of Development of BOŚ S.A. for the years 2016−2020”. With the Strategy approved, work was started on its operationalisation. Towards the end of June 2016 the Bank Management Board gave its general approval of the envisaged strategic initiatives. The approved list of strategic initiatives features undertakings designed to raise the effectiveness of functioning of the Bank, specifically:
• cost optimisation oriented activities conducive both to a restructuring of the Bank and to the provision of financial backing of efforts connected with boosting earnings. Initiatives connected with cost optimisation include efforts to ensure, among other things, cost optimisation in personnel expense management, service contract reduction or renegotiation, consolidation and optimisation of infrastructure and IT&N licences, and renegotiation of rental costs of sales network facilities;
• moves ensuring development of the Bank, which implies endeavours to win new clients as well as to boost earnings. Development of the Bank is to be warranted by activities in areas such as: − expanding co-operation with of the Bank with Lasy Państwowe national forest management
authority and its partners by improving the product offer for availability and diversity, taking advantage of the co-operation potential of companies in the BOŚ S.A. Group,
− boosting sales of the Bank offer to well-off clients by setting up a separate business segment of well-off clients and establishing a structure of dedicated advisers offering suitable quality service and individual approach adequate to needs and potentials of well-to-do clients,
− modernising the online and mobile banking services by adapting them to market standards and, as a next step, implementing innovative solutions,
− developing a comprehensive offer of products for corporate clients, by adjusting the product offer to needs of selected industries and segments through the identification of product gaps and subsequently their elimination while highlighting the specialisation of the Bank in financing and supporting of specific industries which are prioritised in the approved Strategy,
− developing the offer of pro-ecology products in co-operation with the National Fund of Environmental Protection and Water Resource Management (NFOŚiGW) and its counterparts in the regions,
− boosting sales by broadening the Bank offer for institutional clients in the Retail Market Area, with special attention to micro businesses, by making changes to the Bank’s client segmentation pattern and reaching out within the retail component to groups which BOŚ S.A. has not yet approached with its offer,
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− implementing a new lending process, among other things by designing and implementing a comprehensive management pattern for the lending process in its entirety with responsibilities for the successive steps in the process precisely assigned and with effectiveness measures clearly defined, the automation of the process and designing new processes dedicated to identified micro segments (e.g., in the particular industries),
− changing the business model of the call centre.
In Q1 2017, the Bank continued to put in place the assumptions underlying the adopted strategic initiatives.
6. Significant events in Q1 2017 Awards and special mentions:
• EKOprofit savings account ranked best in a Totalmoney.pl evaluation of 10 March 2017
• “Byki and Niedźwiedzie” [Bulls and Bears], a distinction awarded to Best Brokerage House by Gazeta Giełdy Parkiet stock market journal, was won in its 23rd edition by best broker 2016, on 15 March 2017
• EKOprofit BOŚ account was runner-up in a ranking of savings accounts of the portal Bankser.pl, on 21 March 2017
• EKOlokata z Bonusem deposit product ranked 3rd on a best deposit products list published on the portal Bankser.pl of 28 March 2017
• 8 projects of BOŚ S.A. Group won special mentions in a report called “Responsible Business in Poland 2016”: “Postaw na słońce” [Go for the sun], “Zielona ławeczka” [Green bench], “Sklepiki szkolne – zdrowa reaktywacja” [School shops, reactivate your health], “Zdrowo jem, więcej wiem” [Eating healthy, knowing better], #BrudnoTu [Muddy here], Pożyczka SCHROnisko oprocentowana [Interest bearing cash advance SHELTER], #Psyzdobywajabank [#Dogswinbank], Raport ekologiczny [Ecology report], of 31 March 2017
• BOŚ economists Łukasz Tarnawa and Aleksandra Świątkowska runners-up in a ranking of economist teams Gazeta Giełdy Parkiet stock market journal arranged to order such teams by accuracy of their macroeconomic and financial market forecasts in 2016, of 10 January 2017
BOŚ S.A. ratings affirmed
On 16 February 2017 (current report No. 7/2017) Fitch Ratings Ltd affirmed their ratings of the Bank: Long-term Foreign Currency IDR at B+ with stable outlook, Short-term Foreign Currency IDR at B, Viability Rating at b+, Support Rating at 4, Support Rating Floor at B, and National Short-term Rating at BB+(pol), National Short-term Rating at B(pol). Fitch further affirmed their ratings for the Bond Issue Programme to a cap value of PLN 2 billion: senior unsecured bond programme at BB+(pol), and senior unsecured bond programme at B(pol). Also, for series R1 subordinate bonds worth PLN 83 m Fitch affirmed their rating at BB-(pol).
The current level of rating results from the view of the Agency regarding an only limited probability of extraordinary support for the Bank from the Polish sovereign, mostly due to the Bank Recovery and Resolution Directive (BRRD). The Agency expressed its belief that state institutions could endeavour to act pre-emptively to avoid the Bank breaching regulatory capital adequacy requirements due to the state’s indirect ownership of the Bank and its role in financing Poland’s environmental protection projects. Fitch named a successful completion of a rehabilitation programme and easing the present credit risk concentration among factors that may induce it to raise their rating of Poland. Expanding the offer for corporate clients
As before, BOŚ S.A. looks on the small and medium enterprises sector (SME) as a major market segment for its operations. In expanding its array of settlement, deposit and loan products the Bank operates a base for each client to avail themselves of individual bank products best fitting their specific needs.
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The Bank’s settlement products offer includes standard current accounts which record settlement operations and deposits and are used for domestic and international payments. Such accounts can be maintained in the following currencies: PLN, USD, EUR, GBP, CHF, SEK, HUF, RUB, CZK and DKK. The Bank offer provides a possibility of using settlement services in modular form. We offer clients Business Exceptional Accounts [Konta Wyjątkowe Biznes] in three variants adjusted to Client’s transaction level with extra modules: a settlements module and an optional FX module depending on Client’s business profile.
In Q1 2017: • the Bank expanded its electronic banking system by adding functionalities making possible the
electronic processing of more applications, and streamlining client instructions. At this stage the Bank system processes 48 electronic applications but more are being added;
• new solutions were implemented at the Corporate Client Support Centre to provide multichannel remote control of client instructions. As of 1 January this year a specialist team has been working to provide all-embracing after-sales support services to Corporate clients.
The Bank continued to sell loans designed to assist the financing of current operations and investment undertakings, including pro-ecology projects, adjusting terms and conditions of credit transactions to client needs on a case-to-case basis. Brokerage services
In Q1 2017, Dom Maklerski BOŚ S.A. brokerage service strengthened its investment activities on the regulated stock market. The Company nearly redoubled its trade volume (+97.6%) in session transactions on the stock market compared with the Q1 2016 level. That came at a time all other GPW market participants on the Warsaw stock exchange GPW increased their respective business volume by 50%. The Company also increased business on the futures market (by 25.7% y/y) and on the NewConnect market (by 30.7% y/y).
On the GPW market, Dom Maklerski BOŚ S.A. strengthened its position in Q1 2017. The Company held a 5.56% share of the market in session transactions, which was more than 30% above the Q1 2016 figure (4.22%). On the futures market, the BOŚ S.A. brokerage service held its lead position with its 23.56% share of the market (an increase of 9.8% y/y). The Company also held its runner-up position on the NewConnect market, with its share of 16.09% (an increase of 4.4% y/y).
Its strong market position and high quality of service earned Dom Maklerski BOŚ S.A. once again recognition and industry awards. In Q1 this year, Dom Maklerski BOŚ was awarded the “Byki and Niedźwiedzie” [Bulls and Bears] distinction as the Best Brokerage House by Gazeta Giełdy Parkiet stock market journal, won GPW share market distinctions for its highest share of local animator in trading on the Main Market in 2016 and for its highest share in the volume of futures contracts for shares in 2016, as well as a KDPW Group award for its high quality of reporting transactions to KDPW_TR [Trade Repository] in 2016. The monthly Home&Market in turn awarded Dom Maklerski BOŚ S.A. its Financial Order for an application called bossaMobile+ for use on tablets in the Product Investment category. Factoring
Bank Ochrony Środowiska S.A. operates a dedicated net device, BOŚ Faktor, to manage factoring services. The system gives Clients full control of their accounts and direct round-the-clock contact to the Bank 7 days a week. The system provides automatic processing of factoring transactions. In Q1 2017, factoring transactions at BOŚ reached a total of PLN 754.7 m. The Bank’s share of the market was approximately 2%.
In Q1 2017, BOŚ S.A. factoring service managed a total of 103 factoring contracts, 6 500 partners, and purchased a total of 18 000 invoices. Expanding the offer for retail clients
The Bank’s retail market area comprises the segments: natural persons, micro businesses, housing communities, and nongovernment organisations and other non-commercial institutions (NGOs).
BOŚ S.A. has for retail clients, which the biggest the Bank clients group, an all-embracing offer
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featuring all basic products and services available on Poland’s banking market (bank accounts, settlement products, payment cards, services and products for investing surplus cash, electronic banking services and loan products, plus a broad range of pro-ecology products available for financing environment-friendly solutions.
In Q1 2017, the Bank continued to work on improving its offer, both by modifying products already present in the offer and introducing new and innovative solutions.
In Q1 2017, the Bank continued its activity in respect of: • optimising its financial results in the retail market area; • changing its deposit offer to respond to the dynamically changing trading environment and to
warrant realisation of adopted business and liquidity targets; • further strengthening of the role of the Bank’s pro-ecology offer in loan product sales; • raising competency levels of sales staff at the Bank in offering clients loan products and deposit
products for businesses, savings and savings-with-investment products, as well as insurance products, in particular protective products attached optionally to settlement and loan products, and also products offered separately.
Amounts owed to retail clients
The policies the Bank launched in area of deposit offer in Q1 2017 were designed, on the one hand, to accommodate to the fast-changing external conditions over time, and, on the other, to meet the Bank’s business and liquidity targets, all the time seeking to minimise cost levels of the deposit portfolio and to adjust to the changing macroeconomic environment, as well as reinforcing the current funding potential.
In Q1 2017, the following deposit products for retail clients were most essential from the point of view of balance management: • current accounts, including savings accounts, in particular the EKOprofit,
• promotional deposits: Ekolokata Korzystna, EKOlokata SUPERprocentująca, EKOlokata Wysoko Procentująca, EKOlokata z Bonusem and EKOlokata na Lata (a two-year deposit, launched to replace the EKOlokata Urodzinowa).
In its deposit policy the Bank kept to the following line:
1) diversifying the risk of excessive cumulation of maturing balances with a possible outflow of funds at a short time by maintaining 4, 6, 9, 12 and 24-month products in the offer,
2) promoting multi-product Clients: in the course of designing its offer of term deposits the Bank introduced solutions allowing for offering higher prices to Clients taking advantage of the Bank offer over and above the term deposits (with emphasis on active accounts, which are conducive to Client establishing strong ties to the Bank),
3) establishing standing relations with Clients through actions likely to boost deposit renewability levels,
4) seeking to ensure a regular rise in level and growth of deposits of current retail clients, 5) increasing balances of funds kept on current accounts, which helped lower the cost level of the
balance as a whole, 6) keeping the cost level possibly low by changing from time to time interest rates on term deposits
and savings accounts.
Along with that, with a view to reducing the currency mismatch the Bank continued to work on the German market by starting to co-operate with a German brokerage service. Under an agreement in that respect since December 2016 the Bank has been taking deposits in EUR from the German market.
Along the same line, in February 2017 the Bank introduced in its offer a new deposit offer in CHF, the EKOlokata z Frankiem, for the purpose of easing the currency mismatch against the Swiss currency at the Bank.
The offer of deposits for the institutional clients segment (micro businesses, housing communities and NGOs) was likewise modified. Even while such deposits account for a mere 6.2% of total retail
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deposits and do not affect significantly its net interest result, the Bank nonetheless changed its rates on current accounts and deposits in March 2017. Interest rates were lifted on accounts under administration, and instead the Bank launched a promotional action to advertise its current offer of accounts by introducing interest rates on them. Additionally, interest on current accounts in CHF was raised.
In Q1 this year, too, the Bank launched promotional actions for accounts for micro businesses, housing communities and NGOs (the actions are expected to be under way through to 31 December 2017), offering marketing support and additional distribution channels.
In Q1 2017, in the area of bank accounts the Bank aimed at the following:
• in checking accounts, i.e., savings-and-settlements accounts, the Bank focused on offering two savings-and-settlements accounts: EKOkonto bez Kosztów and EKOkonto VIP; in respect of savings accounts the Bank focused on the EKOprofit, including its Regular Savings Programme Systematycznego Oszczędzania encouraging clients to take advantage and use savings-and-settlements accounts;
• in current accounts, the Bank aimed at winning new clients in the micro businesses segment, partnerships and capital companies alike, and in the housing communities segment – through promotional actions primarily for mass incoming transfer payments (under the Polish acronym MPP services), in the two accounts in the Bank offer: the accounts Wspólnota and Wspólnota Plus.
Investment products
Aware of current tendencies on the market financial, in particular the falling attractiveness of banking investments in an environment of dwindling interest rates and a likely reappearance of Clients’ interest in products alternative to investments, the Bank was busy developing an offer of investment products.
In Q1 2017, in its capacity as agent of Dom Maklerski BOŚ S.A.’s investment arm (AFI DM BOŚ) the Bank collected subscriptions for investment certificates of two investment societies: Altus Towarzystwo Funduszy Inwestycyjnych S.A. and AGIO Towarzystwo Funduszy Inwestycyjnych S.A. Also as AFI DM BOŚ S.A. agent, the Bank was offering acquisition of FIO participation units in more than 20 investment fund societies. The Q1 2017 offer comprised nearly 300 different funds. Insurance products
In Q1 2017, the Bank within the framework of its bancassurance service offered Clients in the retail segment protective insurance products. The Bank business activity in that area focused on sales of life assurance and deferred annuity products called “Moja Ochrona ze zwrotem” of Nationale-Nederlanden Towarzystwo Ubezpieczeń na Życie S.A. which was offered as a standalone product, and on insurance policies on mortgage products and on photovoltaic installations for clients taking advantage of the product Ekoloan PV. Persons buying cash advance products were offered a possibility of buying insurance policies covering protection of life, incapacity for work, serious illness, accidents, and loss of job.
In selling insurance products the Bank operated as agent of insurance societies. Insurance product sales boosted multiproduct engagement of Clients and generated commission earnings. The Bank regularly raised the level of competency of its staff of advisers in respect of insurance sales.
Aware of the enduring black PR regarding investment product protection the Bank chose not to offer such products in Q1 2017. Loan products: individual Clients, micro businesses, housing communities, NGOs
The most important loan products in Q1 2017 include: • pro-ecology loans, • cash advance, • credit cards, • pro-ecology mortgage loan, • mortgage cash advance,
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• loans assisting the financing of current operations for micro businesses.
In its policy of step-by-step enhancement of involvement in financing pro-ecology solutions, in Q1 2017 the Bank focused on the continuation of its effort to make the offer more attractive by modifying the functioning of products assisting the financing of environment-friendly solutions.
Along with that, intent on boosting its lending balance and stepping up cash advance sales, the Bank reshuffled its price pattern for cash advance loan sales to make that type of product more competitive on the market.
In Q1 2017, the Bank continued to sell mortgage products to individual clients, along with its standard offer of mortgage products. The Bank now has in its offer a mortgage loan with the programme MDM, which gives clients a chance to get part support to their own contribution from the Housing Loan Subsidising Fund as well as a mortgage cash advance. Furthermore, the Bank launched promotional action for its mortgage cash advance product called “Dreams to Come True” [Marzenia do spełnienia], the idea being that such actions can help the Bank win high-margin products and to get its offer well-positioned in rankings of mortgage products.
In Q1 2017, the Bank focused its efforts on further streamlining the central lending process for micro businesses, housing communities and NGOs.
Lastly, the Bank: − made changes to the list of documents a micro business is required to present on submitting a
loan application if such business works on simplified bookkeeping rules. The changes effectively reduce the number of requisite documents for submission,
− changed its approach to the product offer of working-capital current-account loan, dropping the requirement of setting a cap on the loan amount depending on the volume of business operations.
7. Factors likely to affect performance at least in the next quarter
Environmental Protection Act
On 7 April 2017, the Polish parliament approved a Senate amendments package to a draft law called Environmental Protection Act and on 11 April submitted it to the Polish President for signature. The amendments change the election procedure of directing bodies of regional environmental protection and water resource management authorities (WFOŚiGWs), as it shifts responsibility for electing members of supervisory bodies of regional authorities from local government to the central administration. When the new regulation has come into force the WFOŚiGWs will have had their status changed from being a local government legal person to being an administrative unit reporting to the Minister of Environmental Protection and the NFOŚiGW. EU sponsored programmes
Implementation of solutions comprised under EU sponsored programmes in the Polish legal and institutional systems is still under way. EU promoted policies include, first and foremost, supporting the switchover to low-emission economy and climate change and efficient resource utilisation. Funding will be provided, among other things, to the Operating Programme Infrastructure and Environment and Regional Operating Programmes: for these first application invitations have been called. With the onset of investment activities in that respect demand for bank investment lending is likely to grow, to supplement the EU provided funding.
Other factors likely to impact the Group’s performance in the coming quarters include:
• Effects of a possible regulatory solution of the problem of housing loans denominated in CHF or other foreign currencies
At the time of publication of this report the final shape of regulatory solution of the problem of housing loans denominated in foreign currencies is not known. Should present redenomination
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proposals in respect of mortgage loans extended in foreign currencies be enacted financial results of the banking sector at large, and of BOŚ S.A., would be affected adversely.
• Risk of PLN weakening against CHF and EUR
Should the Polish złoty weaken markedly against the CHF or EUR one development in consequence of such weak rate sustaining for a time would be a tendency for currency loans to grow in volume. Such a situation would strengthen the pressure on capital requirements in respect of foreign currency loans, and, on the other hand, a need of increased financing would result inevitably. Any substantial depreciation of PLN against foreign currencies, in particular against CHF, enduring for a long time would certainly have an adverse effect on the quality of the portfolio of foreign currency mortgage loans.
• Risk of growing volatility on global financial markets and of lowering ratings of Poland and of the Bank
Financial market volatility risk may result, among other things, in growing costs to the Bank of external financing, a more complicated access to international financing sources, or difficulties in handling transactions in respect of foreign currency and interest rate risk management.
• Possible additional contribution to the Borrower Support Fund
Additional mandatory contributions to the Borrower Support Fund cannot be ruled out.
• IFRS 9 comes into force
With International Financial Reporting Standard 9 coming into force as of 1 January 2018 changes at least three work areas will be affected: the impairment measurement model, the financial instrument classification and valuation model, and hedge accounting. From the economic point of view, implementation of the new model of impairment measurement as of 1 January 2018 may necessitate adjustments to equity value or financial result in the amount of difference between impairment write-downs calculated according to IFRS 9 and the now binding model according to IAS 39. The new classification and valuation of assets may result in corrections to capital ratios at the moment of switching over to IFRS 9 and greater volatility of financial result in successive periods than might be necessary in valuation of part of the assets in hand at fair value by virtue of the financial result. At this point, the potential effect the IFRS 9 may have on the financial situation and own funds is impossible to gauge; work on that is under way.
• Risk of enduring low interest rates or further interest cuts in PLN and foreign currency products
Any further interest rate cuts, if put in place, would curtail the net interest margin now in effect and would push down net interest result, as regulatory restrictions already put caps on rates, any further lowering of interest rates on current accounts is no longer possible, and contracts providing for wholesale financing in foreign currencies contain provisions that forbid application of adverse interest rates in any case.
• Coverage of impaired exposures with impairment write downs
Given the specifics of its business (its involvement in pro-ecology projects) the Bank has to engage in relatively high-priced transactions, so it necessarily seeks to maximise security against risk on its exposures. Any provision the Bank establishes to update the gross value of an exposure always reflects the corresponding security received.
8. Segment reporting In keeping with IFRS 8 regulations operating segments are defined based on internal management reports on components of an entity that are reviewed regularly by the entity's chief operating decision maker. The rules of reporting by reportable operating segments as applied herein were presented under point 46 in the Annual Consolidated Financial Statements of the Capital Group of BOŚ S.A. for the period of twelve months ended 31 December 2016.
As of 2017, in connection with the servicing character of treasury dealings and investment operations to the corporate and public finance and retail segments, for presentation purposes net interest and similar income figures recorded in the area of treasury dealings and investment operations are
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allocated to the respective business area segments. Such allocations are based on keys reflecting the scale of lending and deposit activities. Results subject to allocation reflect:
• net results on wholesale financing and on securities, including: net income on investment securities and loans to banks and debt securities (except for municipal and corporate bonds), costs of interbank deposits and of ALM [Automatic License Manager] clients, loans from banks and international financial institutions, liabilities on debt securities,
• net result on foreign currency position, i.e., net FX SWAP transactions,
• income from regulatory provisions, i.e., from cash and balances with the Central Bank [NBP],
• net result on transfer settlements, i.e., difference between ALM earnings on financing activities of the business areas and ALM expenses on repurchase of deposit funds taken by the business areas.
Results for the operating segments for the same period of the previous year were rendered comparable.
The tables below show consolidated financial results of the BOŚ S.A. Group for the 3-month periods ended 31 March 2017 and 31 March 2016, respectively, as attributable to the particular segments.
Interim consolidated income statement segments for 3 months ended 31 March 2017
PU
BLI
C F
INA
NC
E
EN
TIT
IES
&
CO
RP
OR
AT
E C
LIE
NT
S
RE
TA
IL
INT
ER
BA
NK
MA
RK
ET
AN
D I
NV
ES
TME
NT
A
CT
IVIT
IES
BR
OK
ERA
GE
AC
TIV
ITIE
S
OT
HER
(U
NA
SS
IGN
ED
TO
SE
GM
EN
T)
GR
OU
P
Net interest income: 46 571 27 514 23 372 1 675 -9 99 123 Interest income 126 536 100 840 -56 390 2 306 312 173 604 - sale to external clients 99 258 40 317 30 578 233 - 170 386 - sale to other segments 27 278 60 523 -86 968 2 073 312 3 218 Interest expense -79 965 -73 326 79 762 -631 -321 -74 481 - sale to external clients -14 445 -45 587 -11 001 -230 - -71 263 - sale to other segments -65 520 -27 739 90 763 -401 -321 -3 218
Net fee and commission income 10 285 4 530 -39 15 272 -128 29 920 Dividends received - - - 13 - 13
Net trading income (SWAP) - - 2 970 5 098 - 8 068 Hedge accounting - - 838 - - 838 Net income on investment securities - - - - 6 816 6 816
Net income on foreign exchange 3 221 984 4 039 -721 -84 7 439 Result on banking activities 60 077 33 028 31 180 21 337 6 595 152 217 Net income on other operating income and expenses -1 242 207 - -232 2 405 1 138
Net impairment gains / losses on loans and advances -4 266 -6 359 71 - 1 -10 553
Result on financing activities 54 569 26 876 31 251 21 105 9 001 142 802 Direct costs -8 611 -10 742 -1 295 -14 754 -456 -35 858
Result after direct costs 45 958 16 134 29 956 6 351 8 545 106 944 Indirect costs and mutual services -13 721 -17 568 -2 650 - - -33 939 Result after direct costs and indirect costs 32 237 -1 434 27 306 6 351 8 545 73 005
Amortisation and depreciation -3 840 -4 238 -601 -1 500 -563 -10 742
Other costs (taxes, BFG, KNF) -14 716 -14 718 -52 -884 -123 -30 493 Financial result prior to net ALM result allocation 13 681 -20 390 26 653 3 967 7 859 31 770
ALM result allocated 10 085 15 010 -25 095 - - -
Financial profit (loss) before tax 23 766 -5 380 1 558 3 967 7 859 31 770 Income tax expense - - - - - -11 817
Net financial profit - - - - - 19 953 Segment assets 9 497 015 4 433 834 6 042 774 272 990 127 741 20 374 354 Segment liabilities 4 679 885 10 050 585 4 708 887 781 217 153 780 20 374 354 Capital expenditure 1 071 1 253 121 1 310 1 3 756
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Interim consolidated income statement segments for 3 months ended 31 March 2016
PU
BLI
C F
INA
NC
E
EN
TIT
IES
&
CO
RP
OR
AT
E C
LIE
NT
S
RE
TA
IL
INT
ER
BA
NK
MA
RK
ET
AN
D I
NV
ES
TME
NT
A
CT
IVIT
IES
BR
OK
ERA
GE
AC
TIV
ITIE
S
OT
HER
(U
NA
SS
IGN
ED
TO
SE
GM
EN
T)
GR
OU
P
Net interest income: 43 214 22 437 3 679 1 047 300 70 677 Interest income 131 266 99 601 -38 395 1 469 632 194 573 - sale to external clients 101 906 41 897 32 021 173 335 176 332 - sale to other segments 29 360 57 704 -70 416 1 296 297 18 241 Interest expense -88 052 -77 164 42 074 -422 -332 -123 896 - sale to external clients -20 077 -48 055 -37 384 -139 - -105 655 - sale to other segments -67 975 -29 109 79 458 -283 -332 -18 241 Net fee and commission income 10 562 5 487 -25 10 692 -109 26 607
Dividends received - - - 5 - 5 Net trading income (SWAP) - - 7 373 7 640 - 15 013 Hedge accounting - - 300 - - 300 Net income on investment securities - - - - - - Net income on foreign exchange 3 487 1 004 -1 556 -332 - 2 603 Result on banking activities 57 263 28 928 9 771 19 052 191 115 205 Net income on other operating income and expenses
-343 -428 - 136 647 12
Net impairment gains / losses on loans and advances
-15 514 -6 019 31 - - -21 502
Result on financing activities 41 406 22 481 9 802 19 188 838 93 715 Direct costs -8 718 -11 859 -1 524 -12 963 -432 -35 496
Result after direct costs 32 688 10 622 8 278 6 225 406 58 219
Indirect costs and mutual services -15 188 -19 702 -3 075 - - -37 965 Result after direct costs and indirect costs 17 500 -9 080 5 203 6 225 406 20 254
Amortisation and depreciation -4 077 -4 722 -588 -1 656 -563 -11 606
Other costs (taxes, BFG, KNF) -7 650 -7 244 -4 847 -1 469 -94 -21 304 Financial result prior to net ALM result allocation 5 773 -21 046 -232 3 100 -251 -12 656
ALM result allocated -4 220 4 783 -563 - - - Financial profit (loss) before tax 1 553 -16 263 -795 3 100 -251 -12 656
Income tax expense - - - - - -260 Net financial profit - - - - - -12 916 Segment assets 9 991 183 4 717 444 6 980 394 232 188 147 805 22 069 014 Segment liabilities 5 483 416 9 733 466 6 125 123 657 962 69 047 22 069 014 Capital expenditure 2 087 2 552 594 500 1 5 734
9. Non-standard factors and events affecting performance In connection with Bank Guarantee Fund [BFG] notice (current report No. 12/2017 of 26 April 2017) setting the BOŚ S.A. yearly contribution to the BFG mandatory Polish bank restructuring fund for 2017 to the amount of PLN 24.7 m, the Bank resolved to recognise that contribution in its entirety with its total expense for Q1 2017. In total, the Q1 2017 expense figure amounts to PLN 28.7 m, of which PLN 4.0 m is the BFG imposed BOŚ S.A. contribution to the bank guarantee fund payable for the first quarter of 2017.
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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10. Management Board position on the feasibility of the published forecasts The BOŚ S.A. Group published no financial forecast in Q1 2017.
11. Seasonal or cyclical developments No trends of seasonal or cyclical nature are known to occur in the business of the Bank. The performance of the Dom Maklerski BOŚ S.A. brokerage depends on the situation on the Warsaw Stock Exchange (GPW).
12. Issuance, redemption and payment of debt securities or equity securities
In Q1 2017, the Bank launched no issue of long-term, subordinate or short-term bonds. The Bank completed early repurchase of 100 000 of its series G bonds to a total value of PLN 100 m plus the interest accrued. On redemption, the repurchased bonds were redeemed (current report No. 8/2017 of 28 February 2017).
13. Dividends The Bank disbursed or declared no dividend in Q1 2017.
14. Transactions with related entities From 1 January 2017 to 31 March 2017 the Bank and its subsidiaries effected no transaction or transactions with related entities such as in their own value or on aggregate would be significant transactions or transactions concluded on conditions other than market conditions. 15. Loan or cash advance sureties or guarantees granted,
where the total of running sureties or guarantees is equivalent to not less than 10% of issuer’s equity
By 31 March 2017, the Bank had granted no surety or guarantee such as the total thereof would be equivalent to not less than 10% of issuer’s equity. 16. Judicial or administrative proceedings under way At 31 March 2017 Bank Ochrony Środowiska S.A. was involved: • as plaintiff: in 1 565 judicial cases, to a total amount of: PLN 108.5 m, • as defendant: in 43 judicial cases, to a total amount of: PLN 38.0 m.
At 31 March 2017 the Bank conducted no judicial proceedings in excess of 10% of the equity of the Bank.
17. Shareholders holding directly or indirectly, through subsidiaries, at least 5% of the total number of votes at Issuer’s General Meeting
The following Shareholders held at least 5% of the total number of votes: •••• Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej [National Fund for Environmental
Protection and Water Resource Management, NFOŚiGW] held a total of 32 951 960 shares, which represents 52.41% of equity of the Bank and of total votes at the General Meeting,
•••• Fundusz Inwestycji Polskich Przedsiębiorstw Fundusz Inwestycyjny Zamknięty Aktywów Niepublicznych held a total of 6 000 000 shares, which represents 9.54% of equity of the Bank and of total votes at the General Meeting,
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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•••• Dyrekcja Generalna Lasów Państwowych [Directorate General of State Forests authority] held a total of 4 273 547 shares, which represents 6.80% of equity of the Bank and of total votes at the General Meeting.
Total number of votes attaching to all shares issued by BOŚ S.A. is 62 873 245. All shares are ordinary bearer shares of PLN 10 nominal value per share. 18. BOŚ S.A. shares held by members of executive and
supervisory bodies Based on the statements provided by members of the Bank Management and Supervisory Boards, the following executives held the following amounts of BOŚ S.A. shares or rights, and changes thereto from the previous report, as follows:
Name, surname Position 31 March 2017
31 Dec 2016
Change (in number of shares held)
BANK MANAGEMENT BOARD
Stanisław Kluza President of the Management Board 1 500 1 500 -
Other members of the Bank Management and Supervisory Boards are holding no BOŚ S.A. shares or rights thereto.
19. Other information issuer deems necessary for assessments of its human resources, assets, financial position, financial performance, and changes thereof, and information relevant to issuer
In Q1 2017, In Q1 2016, no other events occurred at BOŚ S.A. that would be relevant for an assessment of its human resources, assets, financial position, financial performance, and changes thereof, or for an assessment of the issuer’s capacity to meet its liabilities.
20. The Bank Supervisory Board In Q1 2017, there was no change to the Bank Supervisory Board. At 31 March 2017 the Bank Supervisory Board was as follows: 1) Wojciech Piotr Wardacki, Chairman 2) Andrzej Grzegorz Matysiak, Deputy Chairman 3) Emil Stanisław Ślązak, Secretary 4) Janina Kazimiera Goss 5) Oskar Marek Kowalewski 6) Paweł Wojciech Mzyk 7) Piotr Sadownik 8) Marian Szołucha 21. The Bank Management Board On 16 February 2017 the Supervisory Board dismissed Mr Stanisław Kolasiński and Mr Paweł Pitera as members of the Management Board and appointed Mr Dariusz Grylak member of the Management Board.
At 31 March 2017, the Bank Management Board was as follows: 1) Stanisław Kluza, President of the Management Board, 2) Anna Milewska, Vice-President of the Management Board,
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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3) Dariusz Grylak, Vice-President of the Management Board.
22. Important events past publication date of this report • On 25 April 2017 BOŚ S.A. was advised of a Polish Financial Supervision Authority [KNF]
decision to approve the prospectus BOŚ S.A. submitted as part of its application for the admission and release for trading on the regulated market (the main market) maintained by Giełda Papierów Wartościowych w Warszawie S.A. stock exchange in Warsaw of 40 000 000 (forty million) series U shares of the Bank. Information on the completed private subscription of series U shares was released by the Bank in its current report No. 41/2016 on 24 June 2016.
• On 26 April 2017, following receipt of a Bank Guarantee Fund [BFG] notice, the Management Board of Bank Ochrony Środowiska S.A. released a public notice stating that the BFG-imposed yearly contribution of the Bank to the BFG mandatory bank restructuring fund for 2017 was PLN 24.7 m and that its contributions to BFG to be recognised in costs of Q1 2017 amounted to a total of PLN 28.7 m.
• On 28 April 2017, the Bank Management Board announced that an Annual General Meeting will be held on 31 May 2017.
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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BOŚ S.A. GROUP INTERIM FINANCIAL STATEMENTS Interim consolidated income statement
Continued operations 3 months ended
31 March 2017 31 March 2016
Interest and similar income 170 386 176 332
Interest expense and similar charges -71 263 -105 655
Net interest income 99 123 70 677
Fee and commission income 38 364 34 323
Fee and commission expense -8 444 -7 716
Net fee and commission income 29 920 26 607
Dividends received 13 5
Net trading income 8 068 15 013
Result on investment securities 6 816 -
Hedge accounting 838 300
Foreign exchange result 7 439 2 603
Other operating income 5 259 3 128
Other operating expense -4 121 -3 116
Net impairment gains / losses -10 553 -21 502
Administrative expenses -111 032 -106 371
Operating income 31 770 -12 656
Profit before tax 31 770 -12 656
Income tax expense -11 817 -260
– current -11 118 -770
– deferred -699 510
Net profit 19 953 -12 916 of which attributable to:
– equity holders of the Bank 19 953 -12 916
– non-controlling interests - - Earnings per share attributable to the Bank’s equity holders during the period (in PLN)
– basic 0.32 -0.57
– diluted 0.32 -0.57
No discontinued operations in the 3 months ended 31 March 2017 or in 2016.
Interim consolidated comprehensive income statement
Item 3 months ended
31 March 2017 31 March 2017 Net profit 19 953 -12 916
Positions transferred to income statement 10 747 -4 502
Valuation (net) of financial assets available for sale 13 418 -2 895
Valuation of derivative instruments securing future cash flows - -2 831
Deferred tax -2 671 1 224
Positions not transferred to income statement - -
Total gains and losses 12 529 -17 418
Of which attributable to:
– equity holders of the Bank -17 418
– non-controlling interests -
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Interim consolidated financial position statement
ASSETS 31 March 2017 31 March 2016
ASSETS 671 692 513 754
Cash and balances with the Central Bank 183 395 154 668
Deposits with other banks, loans and advances to other banks 83 429 59 524
Trading securities 152 867 126 915
Hedging derivative instruments 1 306 4 840
Loans and advances to clients 13 556 904 13 965 259
Investment securities: 5 232 538 5 419 369
– available for sale 4 042 744 4 233 279
– held to maturity 1 189 794 1 186 090
Intangible assets 126 335 131 310
Property and equipment 72 142 81 723
Income tax assets 69 640 73 371
– current 1 019 1 422
– deferred 68 621 71 949
Other assets 224 106 298 756 Total assets 20 374 354 20 829 489
LIABILITIES
31 March 2017 31 Dec 2016
Amounts owed to Central Bank and other banks 241 062 115 764
Derivative instruments 84 454 122 382
Hedging derivative instruments 30 077 27 406
Amounts owed to clients 16 648 980 17 123 578
Debt securities issued 834 410 829 735
Subordinate debt 494 441 601 373
Provisions 11 759 7 043
Income tax liabilities 3 263 265
– current 3 225 265
– deferred 38 -
Other liabilities 213 315 220 054 Total liabilities 18 561 761 19 047 600
EQUITY Equity attributable to equity holders of the Bank:
Core capital 1 160 291 1 160 291
– share capital 628 732 628 732
– own shares -1 292 -1 292 – supplementary capital from sale of shares above par 532 851 532 851
Revaluation reserve -12 087 -21 950
Retained earnings 664 389 643 548 Total equity 1 812 593 1 781 889 Total equity and liabilities 20 374 354 20 829 489
Interim consolidated changes in equity statement
Item
Equity attributable to holders of the Bank equity
Core capital Revaluation
reserve
Retained earnings
Total equity Share capital
Own shares
Share premium
Other supplementary
capital
Other reserve capital
General risk fund
Accumulated losses
As at 1 Jan 2017 628 732 -1 292 532 851 -21 950 652 828 23 605 48 302 -81 187 1 781 889
Net profit - - - - - - - 19 953 19 953
Other total income - - - 9 863 - - - 884 10 747
Total gains and losses - - - 9 863 - - - 20 837 30 700
Liquidation of subsidiary - - - - -23 - - 27 4
As at 31 Mar 2017 628 732 -1 292 532 851 -12 087 652 805 23 605 48 302 -60 323 1 812 593 As at 1 Jan 2016
228 732
-1 292
532 851
1 421
690 901
23 646
48 302
-56 005
1 468 556
Net profit - - - - - - - -12 916 -12 916
Other total income - - - -4 502 - - - - -4 502
Total gains and losses - - -4 502 - - - -12 916 -17 418
Transfer to retained profits - - - -2 502 - - - 2 500 -2
Foreign exchange differences - - - - - - - -2 -2
As at 31 Mar 2016 228 732 -1 292 532 851 -5 583 690 901 23 646 48 302 -66 423 1 451 134
No non-controlling interest in the 3 months ended 31 March 2017 or in 2016.
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Interim consolidated cash flow statement
Indirect method 3 months ended 31 March 2017 31 March 2016
CASH FLOW FROM OPERATING ACTIVITIES
Profit before tax 31 770 -12 656
Total adjustment: -490 252 1 450 094
Amortisation and depreciation 10 742 11 606
Net interest on investing activities -9 745 -9 729
Gains / losses on investment activities - -10
Net interest on financing activities 7 264 73 167 Realised and non-realised foreign exchange differences from financing activities - -39 057
Change in the balance of trading securities -23 905 66 300
Change in the balance of assets and liabilities due to valuation of derivative financial and hedging instruments
-57 675 -1 837
Change in the balance of accounts receivable from other banks 27 509 -15 558
Change in the balance of loans and advances to clients 408 353 69 911
Change in the balance of investment securities -575 936 5 275
Change in the balance of other assets and tax income 82 584 -4 513
Change in amounts owed to the Central Bank and other banks 125 298 36 376
Change in amounts owed to clients -474 598 1 254 312
Change in provisions 4 716 -9 487
Change in the balance of other liabilities and tax income -7 265 14 843
Income tax paid -7 594 -1 505
Net cash flow from operating activities
-458 482 1 437 438
CASH FLOW FROM INVESTING ACTIVITIES
Inflows 6 041 2 722
Sale of property, plant and equipment - 37
Net interest received from securities held to maturity 6 041 2 685
Outflows -3 753 -5 734
Acquisition of securities held to maturity -2 131 -619
Purchase of intangible assets -1 622 -5 115
Net cash flow from financing activities 2 288 -3 012
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Indirect method 3 months ended 31 March 2017 31 March 2016
CASH FLOW FROM FINANCING ACTIVITIES
Inflows - -
Outflows -109 521 -181 155
Repurchase of bonds issued by Group -100 000 -170 000
Interest paid on bonds issued by Group, of which: -9 521 -11 155
– subordinate bonds -7 228 -7 274
Net cash flow from financing activities -109 521 -181 155
TOTAL NET CASH FLOW -565 715 1 253 271
BALANCE SHEET CHANGE IN CASH AND CASH EQUIVALENTS -565 715 1 253 271
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
2 619 420 2 451 132
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, of which: 2 053 705 3 704 403
– cash and cash equivalents with limited disposability 557 505 565 574
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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INTERIM FINANCIAL STATEMENTS OF BOŚ S.A.
Interim income statement of the Bank
Continued operations 3 months ended 31 March 2017 31 March 2016
Interest and similar income 170 367 175 651
Interest expense and similar charges -73 202 -106 980
Net interest income 97 165 68 671
Fee and commission income 17 818 20 198
Fee and commission expense -2 619 -3 053
Net fee and commission income 15 199 17 145
Net trading income 3 045 7 689
Hedge accounting 838 300
Foreign exchange result 8 244 2 937
Other operating income 1 235 1 255
Other operating expense -2 021 -2 723
Net impairment gains / losses -11 263 -21 502
Administrative expense -91 847 -88 260
Operating income 20 595 -14 488
Profit before tax 20 595 -14 488
Income tax expense -9 762 -1
– current -10 093 -
– deferred 331 -1
Net profit 10 833 -14 489
Net profit per Bank share during the period (PLN)
– basic 0.17 -0.63
– diluted 0.17 -0.63 No discontinued operation in the 3 months ended 31 March 2017 or in 2016.
Interim comprehensive income of the Bank
Item 3 months ended
31 March 2017 31 March 2017
Net profit 10 833 -14 489
Positions transferred to income statement 11 441 -3 787
Valuation (net) of financial assets available for sale 14 124 -1 845
Valuation of derivative instruments securing future cash flows - -2 831
Deferred tax -2 683 889
Positions not transferred to income statement - -
Total gains and losses 22 274 -18 276
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Interim statement of financial position of the Bank
ASSETS 31 March 2017 31 Dec 2016
Cash and balances with the Central Bank 671 679 513 730
Deposits with other banks, loans and advances to other banks 168 436 141 522
Trading securities 69 059 48 976
Derivative instruments 142 928 117 177
Hedging derivative instruments 1 306 4 840
Loans and advances to clients 13 603 541 14 038 283
Investment securities: 5 231 928 5 408 792
– available for sale 4 042 134 4 222 702
– held to maturity 1 189 794 1 186 090
Investments in subsidiaries and associates 76 605 76 605
Intangible assets 116 937 121 511
Property and equipment 28 640 30 541
Income tax assets 61 518 64 472
– current - 602
– deferred 61 518 63 870
Other assets 31 932 36 117
Total assets 20 204 509 20 602 566
LIABILITIES
31 March 2017 31 Dec 2016
Amounts owed to Central Bank and other banks 241 062 115 764
Derivative instruments 82 388 119 253
Hedging derivative instruments 30 077 27 406
Amounts owed to clients 16 656 174 17 097 212
Debt securities issued 834 383 829 702
Subordinate debt 494 441 601 373
Provisions 11 309 6 593
Other liabilities 2 909 -
Total liabilities 88 024 63 795
Amounts owed to clients 18 440 767 18 861 098
EQUITY
Core capital 1 159 619 1 159 619
– share capital 628 732 628 732
– own shares -1 294 -1 294
– share premium
532 181 532 181
Revaluation reserve -12 163 -23 603
Retained earnings 616 286 605 452
Total equity 1 763 742 1 741 468
Total equity and liabilities 20 204 509 20 602 566
Interim statement of changes in equity of the Bank
Item
Core capital
Revaluation reserve
Retained earnings
Total equity
Share capital
Own shares
Share premium
Other reserve capital
General risk
fund
Accumulated losses
As at 1 Jan 2017 628 732 -1 294 532 181 -23 603 631 031 48 302 -73 881 1 741 468
Net profit - - - - - - 10 833 10 833
Other total income - - - 11 441 - - - 11 441
Total gains and losses - - - 11 441 - - 10 833 22 274
As at 31 March 2017 628 732 -1 294 532 181 -12 162 631 031 48 302 -63 048 1 763 742
As at 1 Jan 2016 228 732 -1 294 532 181 -9 938 676 156 48 302 -45 125 1 429 014
Net profit - - - - - - -14 489 -14 489
Other total income - - - -3 787 - - - -3 787
Total gains and losses - - - -3 787 - - -14 489 -18 276
As at 31 March 2016 228 732 -1 294 532 181 -13 725 676 156 48 302 -59 614 1 410 738
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Interim cash flow statement of the Bank
Indirect method 3 months ended
31 March 2017 31 March 2016
CASH FLOW FROM OPERATING ACTIVITIES Profit before tax 20 595 -14 488
Total adjustment: -480 198 1 459 270
Amortisation and depreciation 8 698 9 406
Net interest on investing activities -9 745 -9 729
Net interest on financing activities 7 270 73 477 Realised and non-realised foreign exchange differences from financing activities
- -39 360
Change in the balance of trading securities -20 083 65 647 Change in the balance of assets and liabilities due to valuation of derivative financial and hedging instruments -56 411 -4 815
Change in the balance of accounts receivable from other banks 29 500 -14 716
Change in the balance of loans and advances to clients 434 742 76 042
Change in the balance of investment securities -585 197 5 277
Change in the balance of other assets and tax income 5 007 6 983
Change in amounts owed to banks and the Central Bank 125 298 36 376
Change in amounts owed to clients -441 038 1 245 939
Change in provisions 4 716 -9 073
Change in the balance of other liabilities and tax income 23 627 18 158
Income tax paid -6 582 -342
Net cash flow from operating activities -459 603 1 444 782
CASH FLOW FROM INVESTING ACTIVITIES
Inflows 6 041 2 685
Net interest received from securities held to maturity 6 041 2 685
Outflows -2 443 -5 234
Purchase of intangible assets -1 881 -582
Purchase of property, plant and equipment -562 -4 652
Net cash flow from investing activities 3 598 -2 549
Indirect method 3 months ended 31 March 2017 31 March 2016
CASH FLOW FROM FINANCING ACTIVITIES Inflows - -
Outflows -109 521 -181 155
Repurchase of bonds issued by the Bank -100 000 -170 000
Interest paid on bonds issued by the Bank, of which: -9 521 -11 155
– subordinate bonds -7 228 -7 274
Net cash flow from financing activities -109 521 -181 155
TOTAL NET CASH FLOW -565 526 1 261 078
BALANCE SHEET CHANGE IN CASH AND CASH EQUIVALENTS -565 526 1 261 078
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 2 615 751 2 439 294
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD of which: 2 050 225 3 700 372
– cash and cash equivalents with limited disposability 557 505 565 574
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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I. Information on accounting principles (policy) adopted in preparing the consolidated financial statements
These interim consolidated financial statements of data for the BOŚ S.A. Group (“Group”) and financial statements for BOŚ S.A. for the 3 months ended 31 March 2017 have been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted for use in the European Union and at the report period, i.e., 31 March 2017, with identical accounting principles applied for each period.
These consolidated shortened financial statements do not comprise all disclosures that are required in yearly financial statements.
As at the date this report was signed off for publication, as the IFRS implementation is under way in the European Union and given the activity areas of the Group, the accounting principles applied by the Group do not diverge from the IFRS standards that have come into force and the IFRS approved by the EU.
The IFRS comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC).
These interim consolidated financial statements of the BOŚ S.A. Group have been prepared according to the historical cost method, except as modified by the revaluation of financial assets available for sale, securities for trading, and any derivative contracts measured at fair value. The accounting principles the Group applies and which have also been applied in these interim consolidated financial statements prepared for the period of the 3 months ended 31 March 2017 were described in detail in the yearly Consolidated Financial Statements of the BOŚ S.A. Group for the period of twelve months ended 31 December 2016 in note2 2.3−2.30. None of the standards and interpretations or changes introduced for a first time in 2017 had any significant effect on these interim consolidated financial statements of the Group.
The drafting of the financial statements in compliance with IFRS as approved by the EU requires the application of specific estimates significant for accounting. It also requires the Management Board to use its own judgment in applying the accounting policies. The issues in relation to which a greater degree of judgment is required, generally complex issues, or issues involving significant reliance on estimates or judgments for the purpose of the consolidated financial statements in respect of credit impairment, impairment of equity instruments available for sale, debt securities held to maturity, fair value of financial instruments, provisions against future liabilities and claims, provisions for employee benefits, or assets from deferred tax, were presented in the Consolidated Financial Statements of the BOŚ S.A. Group for the period of twelve months ended 31 December 2016 and they apply to this report as well.
These interim financial statements are drafted in Polish złotys (PLN), and, unless specified otherwise, all values are in thousands of złotys (PLN 000s).
II. Comparative data
The Group has introduced no change to its presentations from the previous consolidated financial statements published to the date of 31 March 2016.
III. Adjustment of prior period errors
At 31 March 2017 and for the period of three months ended 31 March 2017 the Group made no correction to previous financial reports released to the dates of 31 December 2016 and 31 March 2016, respectively.
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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IV. Financial assets and liabilities at fair value
Balance sheet value at
31 March 2017
Fair value at 31 March 2017
Balance sheet value at
31 Dec 2016
Fair value at 31 Dec 2016
FINANCIAL ASSETS
Amounts due from other banks 183 395 181 601 154 668 152 628
Loans and advances to clients, of which: 13 556 904 13 364 323 13 965 259 13 783 992
– Loans in Polish złotys 10 421 257 10 296 153 10 477 950 10 371 259
– Loans in foreign currencies 3 135 647 3 068 170 3 487 309 3 412 733
Securities held to maturity 1 189 794 1 220 310 1 186 090 1 208 008
Debt securities, of which: 1 189 794 1 220 310 1 186 090 − 208 008
– Treasury paper 1 189 794 1 220 310 1 186 090 1 208 008
FINANCIAL LIABILITIES Amounts owed to Central Bank and other banks 241 062 241 085 115 764 115 854
Amounts owed to clients, of which: 16 648 980 16 641 569 17 123 578 17 137 128
– Corporate clients 3 694 733 3 694 381 4 094 055 4 093 924
– Retail clients 10 577 389 10 567 664 10 796 832 10 807 137
– Public finance 1 068 630 1 068 619 830 967 831 030
– Pro-ecology funds and other funds 89 432 89 432 73 930 73 930
– International financial institutions 1 157 212 1 159 889 1 225 724 1 229 037
– Other Clients 61 584 61 584 102 070 102 070
Liabilities on account of securities issued 834 410 845 611 829 735 841 498
Subordinate debt 494 441 468 265 601 373 568 385
Amounts due from other banks Amounts due from other banks include nostro accounts and loans and cash advances. Interbank deposits at fair value as short-term products (fixed rate interbank deposits run for up to 6 months) are the same as their balance sheet value. Bonds issued by banks were recognised at fair value adjusted for loan spreads determined based on recent comparable issues launched by similar banks. Loans and advances extended to clients and other banks
Loans and cash advances extended to clients and other banks were presented after deducing impairment write-offs. At balance sheet level they are valued at depreciation cost on effective interest rate. Fair value of loans is assumed to reflect their value resulting from current valuation of future principal and interest flows (separately for loans in foreign currencies and for those in PLN) determined based on effective interest rate for each loan (except for loans with unspecified time frames or non-performing receivables for which their balance sheet value is taken to be their fair value) discounted at averaged effective interest rate of loans extended over the last twelve months. For mortgage loans, advance payments were taken into account. For loans in foreign currencies that Bank has ceased selling, averaged effective interest rate for corresponding loans extended in PLN adjusted for the difference between rate levels in the particular currencies and in PLN, were used. Amounts owed to non-banking entities
Liabilities in the balance sheet are valued at depreciation cost on effective interest rate. As fair value of such items is taken their value resulting from discounting principal and interest for all deposits by averaged weighted interest rate applicable to deposits taken in March 2017. As no specified time frames for current accounts are available these items are presented at their balance sheet value.
Amounts (of principal and of interest) owed to international financial institutions were discounted by averaged effective interest rate for liabilities arising in 2015 (for EUR) or else the latest transaction concluded in the currency (for PLN).
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Subordinate debt
Subordinate debt at fair value was presented as adjusted for changing load spread determined based on the issue the Bank launched in 2015. Liabilities on account of securities issued
Liabilities on account of securities issued were priced at fair value adjusted for changing load spreads for bonds in PLN determined based on issue in PLN the Bank launched in 2015. Amounts owed to Central Bank and other banks
Amounts owed to the Central Bank and liabilities arising on repurchase transactions were presented at balance sheet value. Liabilities arising on repurchase transactions were presented at balance sheet value as no market data are available to calculate the basic repo transaction of the Bank with the counterparty at fair value.
Interbank deposits, as short-term products, were presented at balance sheet value, as cash advances (principal and interest) were discounted by averaged effective interest rate for liabilities arising in 2015.
V. Changes in consolidated contingent liabilities and assets
Item 31 Mar 2017 31 Dec 2016 Change %
PLN 000
Contingent liabilities: 2 154 152 2 085 735 3.3
Financial, of which: 1 888 791 1 856 169 1.8
– open credit lines, of which: 1 847 759 1 803 925 2.4
– revocable 1 618 588 1 534 961 5.4
– irrevocable 229 171 268 964 -14.8
– open import letters of credit 25 727 19 423 32.5
– promises of loan, of which: 15 305 32 821 -53.4
– irrevocable 15 305 32 821 -53.4
Guarantees, of which: 192 821 216 531 -10.9
– loan payment endorsements and guarantees 22 453 22 953 -2.2
– performance guarantees 170 368 193 578 -12.0
Issue underwritings 13 035 13 035 0.0
Securities to receive 59 505 - x
Contingent assets: 1 767 978 1 518 228 16.5
Financing 159 414 - x
Guarantees 1 599 074 1 509 041 6.0
Other 9 490 9 187 3.3
Total contingent assets and liabilities 3 922 130 3 603 963 8.8
VI. Group structure, entities covered by consolidation
At 31 March 2017, Bank Ochrony Środowiska S.A. worked as the parent entity to Dom Maklerski BOŚ S.A., BOŚ Eko Profit S.A., BOŚ Invest Management sp. z o.o., BOŚ Capital sp. z o.o. and BOŚ Ekosystem sp. z o.o., as well as MS Wind sp. z o.o.
The National Fund for Environmental Protection and Water Resource Management worked as the dominant entity to BOŚ S.A.
Bank Ochrony Środowiska S.A. Group First Quarter 2017 Report PLN 000
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Activity profiles of BOŚ S.A. subsidiary companies:
• Dom Maklerski BOŚ S.A. is a brokerage firm;
• BOŚ Eko Profit S.A. manages capital investment in pro-ecology projects and financial and advisory services supplementary to the services offer of Bank;
• BOŚ Invest Management sp. z o.o. provides financial services, financing entities in the BOŚ S.A. Group and realising their needs in respect of office space hire and services venue hire, plus leasing operations for local government entities;
• BOŚ Capital sp. z o.o. (formerly: BOŚ Nieruchomości sp. z o.o. limited joint-stock partnership) deals in rentals and administration of property, own or leased) ;
• BOŚ Ekosystem sp. z o.o. offers leasing services to Corporate Clients;
• MS Wind sp. z o.o. is responsible for wind farm management.
In Q1 2017: − BOŚ Nieruchomości sp. z o.o. in liquidation was cancelled from the KRS (National Court
Register) list of companies. − the Bank ordered the merger of the companies BOŚ Eko Profit S.A. and BOŚ Ekosystem sp. z
o.o., with the companies adopting the same decisions respectively, on 30 December 2016.
In Q1 2017, no change was reported in management rules binding at the Bank or in the BOŚ S.A. Group.