This document is a translation of a document originally issued in Polish.
The only binding version is the original Polish version.
PKO Bank Hipoteczny SA
Directors’ Report
for the year ended 31 December 2024
Selected financial data for the period from 1 January 2024 to 31 December 2024
|
INCOME STATEMENT IN PLN MILLION |
01.01.2024 – 31.12.2024 |
01.01.2023– 31.12.2023 |
Change y/y |
|
Net interest income |
286.8 |
365.3 |
(78.5) |
|
Net fee and commission income |
(4.6) |
(3.1) |
(1.5) |
|
Net foreign exchange gains / (losses) |
4.0 |
(4.1) |
8.1 |
|
Net allowances for expected credit losses |
5.4 |
(7.6) |
13.0 |
|
Net other operating income and expenses |
0.3 |
0.2 |
0.1 |
|
Administrative expenses |
(47.4) |
(47.4) |
0.0 |
|
Regulatory charges |
(17.4) |
(22.4) |
5.0 |
|
Tax on certain financial institutions |
(51.0) |
(58.0) |
7.0 |
|
Operating profit |
176.1 |
222.9 |
(46.8) |
|
Profit before tax |
176.1 |
222.9 |
(46.8) |
|
Corporate income tax |
(45.8) |
(57.1) |
11.3 |
|
Net profit |
130.3 |
165.8 |
(35.5) |
|
|
|
|
|
|
STATEMENT OF FINANCIAL POSITION IN PLN MILLION |
31.12.2024 |
31.12.2023 |
|
|
Cash and balances with the Central Bank |
0.4 |
0.3 |
|
|
Amounts due from banks |
10.2 |
2.4 |
|
|
Derivative hedging instruments |
0.0 |
55.4 |
|
|
Securities |
749.3 |
945.3 |
|
|
Loans and advances to customers |
16,600.7 |
17,898.7 |
|
|
Other assets[1] |
16.1 |
33.8 |
|
|
TOTAL ASSETS |
17,376.7 |
18,935.9 |
|
|
Amounts due to banks |
5,342.8 |
4,580.7 |
|
|
Derivative hedging instruments |
208.7 |
213.2 |
|
|
Liabilities in respect of mortgage covered bonds issued |
7,233.4 |
10,444.6 |
|
|
Liabilities in respect of bonds issued |
2,721.3 |
1,991.3 |
|
|
Other liabilities and provisions[2] |
127.0 |
67.2 |
|
|
Equity |
1,743.5 |
1,638.9 |
|
|
TOTAL LIABILITIES AND EQUITY |
17,376.7 |
18,935.9 |
|
Table of contents
2. External operating conditions
2.1. Macroeconomic environment
2.2. Residential real estate market
2.4. Mortgage covered bonds market
2.5. Regulatory and legal environment
3. Financial performance and capital adequacy
3.1. Key financial indicators of PKO Bank Hipoteczny SA
3.2. Statement of financial position of PKO Bank Hipoteczny SA
3.3. Income statement of PKO Bank Hipoteczny SA
3.4. Requirements regarding own funds (Pillar I)
3.5. Internal capital (Pillar II)
4. Business of PKO Bank Hipoteczny SA
4.1. Sale of residential mortgage loans under the agency model
4.2. Acquisition of residential mortgage loan receivables
4.3. Structure of the residential mortgage loan portfolio
4.5. Financial market operations
4.6. Bonds – Bond Issue Programme Agreement concluded with PKO Bank Polski SA
5. Internal Operating Conditions
5.1. Lending process and cooperation with PKO Bank Polski SA
5.3. Management of conflicts of interest
5.6. Measurement of residential mortgage loan collaterals
5.7. Cover Pool for Mortgage Covered Bonds
6. Organization and governing bodies of PKO Bank Hipoteczny SA
6.2. Organizational structure of PKO Bank Hipoteczny SA
6.3. Competences of the governing bodies and committees of PKO Bank Hipoteczny SA
6.4. The Management Board of PKO Bank Hipoteczny SA
6.5. The Supervisory Board of PKO Bank Hipoteczny SA
6.6. Remuneration and Human Resources Management Policy
6.7. Benefits for Key Management of PKO Bank Hipoteczny SA
7. Corporate governance and information for investors
7.1. Representation on compliance with the rules for corporate governance
8. Representation of the Management Board of PKO Bank Hipoteczny SA
1. Introduction
PKO Bank Hipoteczny SA (the “Bank”) specializes in granting residential mortgage loans to individual customers and purchasing receivables in respect of such loans. The Bank acquires loans for its portfolio based on strategic cooperation with PKO Bank Polski SA.
PKO Bank Hipoteczny SA is the leader of the Polish mortgage bank market in terms of total assets and the balance of residential mortgage loans. The Bank is Poland’s largest issuer of mortgage covered bonds on the domestic and international markets. It was the only bank in Poland to carry out benchmark issues of EUR-denominated mortgage covered bonds, including the first green covered bond issue in Central and Eastern Europe.
In 2024, the Bank conducted the largest issue of mortgage covered bonds on the Polish market with the total nominal value of PLN 1,000,000 thousand. The value of mortgage covered bonds issued by the Bank exceeds 42% of the total value of outstanding mortgage covered bonds issued by mortgage banks operating in Poland.
At the end of December 2024, the Bank’s total assets amounted to more than PLN 17.4 billion, of which PLN 16.6 billion consisted of a high-quality portfolio of residential loans, whose main sources of funding were mortgage covered bonds and a growing volume of own bonds issued.
Evaluation of PKO Bank Hipoteczny SA’s financial credibility – Rating
The financial credibility of PKO Bank Hipoteczny SA and of the mortgage covered bonds issued by the Bank is assessed by the Moody’s Investors Service Ltd international rating agency (“Moody’s”).
As at 31 December 2024, PKO Bank Hipoteczny SA had the following ratings assigned by Moody’s:
|
|
Rating |
Outlook |
Date of initial rating / rating confirmation date |
|
Long-term issuer rating |
A3 |
Stable |
20.12.2022
|
|
Short-term issuer rating |
P-2 |
n/a |
|
|
Opinion on long-term counterparty risk |
A2(cr) |
n/a |
|
|
Opinion on short-term counterparty risk |
P-1 |
n/a |
|
|
Long-term counterparty risk rating |
A2 |
n/a |
|
|
Short-term counterparty risk rating |
P-1 |
n/a |
The ratings take into account Moody’s assessment of the Bank’s mutual relations with its Parent Company – PKO Bank Polski SA – and reflect a small probability that the Parent Company would consider granting the Bank’s liabilities a lower priority compared to the Parent Company’s liabilities should financial tensions occur within the Group.
As at 31 December 2024, the mortgage covered bonds of PKO Bank Hipoteczny SA had the following ratings assigned by Moody’s:
|
|
Rating |
Rating confirmation date |
|
Mortgage covered bonds denominated in PLN |
Aa1 |
27.12.2024 |
|
Mortgage covered bonds denominated in EUR |
Aa1 |
07.07.2022 |
The rating assigned to the mortgage covered bonds of PKO Bank Hipoteczny SA is the highest rating achievable by Polish securities. The limit for the ratings is the Polish country ceiling[3] for debt instruments, which currently is at the level of Aa1.
Mortgage covered bonds issued
In 2024 PKO Bank Hipoteczny SA conducted four issues of PLN-denominated mortgage covered bonds totalling PLN 2.5 billion, redeemable in 2028. The issues were conducted as part of the International Mortgage Covered Bonds Issue Programme based on a base prospectus.
The value of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA was PLN 7.2 billion as at 31 December 2024.
Borrowers Support
PKO Bank Hipoteczny is continuing its efforts to increase security of its customers.
With respect to borrowers support, in connection with the provisions of the Act on crowdfunding for businesses and aid to borrowers amended by the Polish Parliament on 12 April 2024, the Bank enabled customers who meet the criteria listed in the amendment to suspend their residential loan instalments four times:
• 2 instalments between 1 January and 31 August 2024;
• 2 instalments between 1 September and 31 December 2024.
War in Ukraine and its impact on the Bank’s operations
Due to the ongoing military conflict, the Bank identifies geopolitical risks that have or may have an indirect impact on the operations of the Bank as an issuer.
The Bank is monitoring the developments relating to the conflict in Ukraine and adjusting its actions accordingly.
Current and anticipated financial position of the Bank
In the opinion of the Management Board, the financial position and business outlook of PKO Bank Hipoteczny remain stable. The Bank conducts its operations maintaining a high level of security, both in terms of the quality and level of collateralization of the loan portfolio and in all areas of risk control and supervision. A sound capital base contributes to the security of the Bank’s operations.
PKO Bank Polski SA’s strategy for the years 2023 – 2025
In the first quarter of 2023, the Bank’s Management Board adopted and the Supervisory Board approved an updated Strategy of PKO Bank Hipoteczny SA for the years 2023 – 2025.
The Bank’s strategic goals under the strategy comprise:
Selected projects
Development of a special offer to support sustainable development - mortgage loan
The special offer is being developed as part of ESG sustainability activities. The strategic objective of the initiative is to create an offer that will support sustainable development of the PKO BP Group’s mortgage offer and build the potential to issue ‘green’ covered bonds.
Currently, the Bank, in cooperation with PKO Bank Polski SA, is promoting such an offer and granting preferential price terms in return for the customer providing an energy efficiency certificate confirming the low-carbon performance of the financed property (required to meet a certain EP value, i.e. an indicator defining the building’s annual demand for non-renewable primary energy).
Within the PKO BP Group, the Bank is the leader in creating a comprehensive range of mortgage loans to support sustainable development and is a centre of excellence in this area.
ESG Centre of Excellence in PKO Bank Hipoteczny SA
The ESG Centre of Excellence is another aspect of achieving the Bank’s 2023 - 2025 strategic goal with respect to sustainability activities.
The task of the Centre of Excellence is to ensure that the organization has the necessary, comprehensive and up-to-date ESG knowledge to meet its business objectives in line with the rapidly evolving sustainability regulatory environment.
In 2024, the Bank adopted a Sustainability Policy setting out its approach to sustainability in relation to its operations.
Implementation of external communication to educate customers
In 2024, PKO Bank Hipoteczny continued its customer education activities through the publication of articles on the Bankomania website. By the end of 2024, nine articles have been published on modern technology in construction and mortgage banking issues, among other things.
Links to the articles are published on the website, as well as on the Bank’s profile on the LinkedIn platform, where educational posts on living in harmony with the environment are also published. Behaviours such as household energy conservation, careful waste sorting or choosing environmentally friendly modes of transport – such as commuting to work by bicycle – are promoted. The values promoted in external communication are consistent with the activities carried out within the organization.
Optimization and automation of processes
The strategic goal of the initiative is to digitize and simplify the Bank’s processes.
The bank participates, among other things, in the PKO BP Group’s ‘Digital Mortgage’ project, which aims to optimize and digitize the mortgage lending and servicing process. As part of this project, the following functionalities, among others, have been made available to customers in 2024: automatic notifications after the disbursement of a loan, a new intuitive process for accepting property insurance policies in iPKO and iKO, including a reminder that such a policy must be provided.
As part of the Digital Mortgage project, PKO BP implemented the possibility to service digital mortgage loans. The process was made available for one borrower purchasing a secondary market property with a refurbishment option. Work is underway to enable the servicing two borrowers and the primary market.
PKO BH developed assumptions for the implementation of the agency process in the Digital Mortgage project, to be implemented next year.
In addition, the Bank regularly implements improvements and automation of activities within other processes, including the reporting process.
The Bank’s adaptation to CRR III requirements
Due to the entry into force of the legislation amending Regulation 575/2013 and Directive 2013/36/EU (the so-called CRR III and CRD VI), on 1 January 2025, with the aim of fully implementing the international standards agreed by the Basel Committee on Banking Supervision into European Union legislation, the Bank carried out a gap analysis and an analysis of available data sources and is carrying out adaptation work in this area.
Development of a uniform template for a residential real estate loan agreement
The strategic aim of the project is to develop a template of a mortgage loan agreement clauses in terms of improving legibility and reducing the risks associated with the mortgage product. As part of consultations between the supervisory and regulatory bodies and the representatives of the Polish Bank Association, the Ministry of Finance and the Ministry of Justice, work on the draft of a uniform template of a mortgage loan agreement is underway, in which the Bank is taking an active part.
The Bank’s adaptation to the benchmark reform
In connection with the planned replacement of WIBOR with another benchmark as part of the reform, the WIBOR Benchmark Reform Taskforce (the “Taskforce”) was established within the Bank. The objective of the Taskforce is to prepare the Bank for the implementation of the new interest rate benchmark and to replace the currently used WIBOR benchmark. The Taskforce’s objectives include, in particular:
• adapting contracts with counterparties and customers and changing the product offer;
• adapting valuation and risk management methodologies and tools;
• adapting accounting methodologies and tools (including, among other things, hedge accounting and transfer pricing);
• implementing changes to IT systems;
• estimating the impact of the reform on the Bank’s financial results.
The Steering Committee of the National Working Group (NGR) decided to select a proposed index technically named WIRF, which is based on unsecured deposits of Credit Institutions and Financial Institutions – as a target interest rate benchmark to replace the WIBOR benchmark.
As a next step, the Steering Committee of the NGR will update a Roadmap as part of the existing timetable of activities aimed at replacing the WIBOR benchmark with a target benchmark which will ultimately be called POLSTR (Polish Short Term Rate).
2. External operating conditions
Macroeconomic environment
Residential real estate market
Residential loan market
Mortgage covered bonds market
Regulatory and legal environment
2.1. Macroeconomic environment
The macroeconomic factors which shaped the national economy in 2024 are presented below.
Recovery of the economic growth
|
|
GDP growth rate and decomposition (%, y/y) and its components (p.p.).
2024 brought economic recovery. Its main pillar was consumption, which grew at a rate of around 5% y/y in the first half of the year, supported by a record growth in real income. Investment stagnated throughout the year, with a marked decline in private investment and an increase in public investment, including in defence equipment. The decline in private sector investment was driven by a pause in the use of EU funds and lower inflow of foreign direct investment. In the second half of the year, net exports made a negative contribution to GDP growth, but were offset by inventory growth. For the full year 2024, GDP growth accelerated to 2.9% from 0.1% in 2023, with consumption increasing by 3.1% and investment by 1.3%. During 2024, the external position of the economy became less favourable, with the current account surplus almost completely melting away from 1.8 per cent of GDP at the end of 2023, largely due to the emergence and deepening of the trade deficit.
A cooling labour market with record low unemployment
Unemployment and employment (end of period, %)
The registered unemployment rate in December 2024 was 5.1%, the same as it was at the end of 2023. In June and then in October, it fell to 4.9%, the lowest level since the systemic transition. Labour force participation rates have stabilized at historically high levels – according to the Labour Force Survey in the third quarter of 2024, 56.9% of the population aged 15-89 was working and the labour force participation rate was 58.6%. The number of foreigners on the domestic labour market increased steadily, with the State Insurance Institution (ZUS) data showing that the increase in the number of insured Ukrainians was, as in the previous year, weaker than the increase in the number of workers from other countries. The rate of wage growth throughout the year was influenced by a high increase in the minimum wage, as well as salary increases in the public sector. The rate of wage growth in the economy was clearly in double digits, which, combined with falling inflation at the beginning of the year, resulted in the highest real wage growth since 1997, exceeding 11% y/y in the first half of the year. In 2024, the acceleration in GDP growth was accompanied by a further weakening of labour demand, evident in job cuts, and the reluctance to increase employment was driven, among other things, by a persistently high rate of wage growth in an environment of weakened demand in the economy. The job cuts were mainly concentrated in domestic micro enterprises and SMEs. An increase in employment occurred in large companies, primarily foreign-owned, with higher labour productivity, which partly alleviated the burden of wage increases. The increase in the number of employees also visible the public sector.
Inflation influenced by regulatory factors
Inflation (%, y/y) and reference rate (%, monthly data)
In the first half of 2024, inflation fell to a level close to the central bank’s target, reaching a minimum of 2.0% y/y in March. In July, on the back of a partial unfreezing of household energy prices, inflation rose, exceeding 4% y/y, and remained at an elevated level until the end of the year. On average, prices increased by 3.6% in 2024, following an increase of 11.4% in 2023. Core inflation, excluding food and energy prices, also declined, to 4.0% y/y in December, from 6.2% y/y in January, with the elevated level (relative to the inflation target) being due to stronger growth in services prices reflecting the rise in labour costs.
Public finances under pressure but under control
Public sector deficit and debt
The condition of public finances deteriorated in 2024. The state budget incurred the costs of increased defence expenditure, high indexation of benefits, the maintenance (albeit in a limited form) of anti-inflation shields and countering the effects of flooding. In addition, nominal private consumption grew at a rate slower than assumed in the second half of the year, having a negative impact on tax revenues. The general government deficit after the third quarter of 2024 was 6.2 per cent of GDP, public debt in the third quarter increased to 53.5 per cent of GDP, with the deficit level higher than the average for the EU states, and in terms of debt Poland was positioned in the middle amid EU states. In 2024, the excessive deficit procedure was initiated against Poland and six other countries. In the national medium-term fiscal-structural plan for 2025-2028, Poland adopted a four-year recovery programme aimed at reducing the deficit to below 3% GDP in 2028.
Stable interest rates despite lower inflation
NBP interest rates (at the end of the period)
|
|
Q4 2023 (%) |
Q4 2024 (%) |
|
Reference rate |
5.75 |
5.75 |
|
Rediscount rate |
5.80 |
5.80 |
|
Discount rate |
5.85 |
5.85 |
|
Lombard rate |
6.25 |
6.25 |
|
Deposit rate |
5.25 |
5.25 |
Throughout 2024, the Monetary Policy Council kept interest rates unchanged, with a reference rate of 5.75%. This was despite the fall in inflation compared with 2023 and the realization of a more favourable regulatory scenario for energy prices, which remained partially frozen. With NBP rates stable in nominal terms, the monetary policy in Poland has clearly tightened and was the most restrictive since 2008. Real interest rates are positive in Poland and the highest since 2016. At the end of 2024, the President of the National Bank of Poland, Adam Glapiński, took a more hawkish stance and ruled out interest rate cuts in 2025; statements by other MPC members, however, point to the possibility of a first cut in mid-2025.
2.2. Residential real estate market
Situation on the residential real estate market in Poland
The government’s “Safe Loan 2%” preferential residential loan programme which was operational in the second half of 2023 had a fundamental impact on the residential real estate market in 2024. On the one hand, the popularity of the programme has resulted in a decrease in the number of available finished apartments on the primary market, helping to stimulate new development in 2024, while on the other hand it has triggered a dynamic increase in residential real estate prices in late 2023 and early 2024. The expiration of the “Safe Loan 2%” programme, the continued high level of interest rates and the high level of apartment prices were factors that significantly weakened demand for residential property during 2024.
Stabilization of residential real estate prices combined with a dynamic growth in average wages contributed to a gradual recovery in demand.
Primary market
In 2024, there was no demand-side stimuli to match the “Safe Loan 2%” programme functioning in the second half of the previous year. Some potential purchasers, having lost the option of preferential financing and forced to meet more demanding creditworthiness criteria, held back their decision to buy properties. As a result, the decline in sales of residential real estate in 2024, while noticeable, was not a surprise, but a natural result of reduced systemic support and persistent problems in the macroeconomic environment, which mainly included the high level of interest rates, the slowdown in economic growth following the tightening of the monetary policy and the renewed, albeit limited, increase in inflation compared to previous years as a result of discontinuing successive components of the anti-inflationary shield.
Throughout almost all of 2024, there has been a steady increase in the number of apartments on offer from developers. Data published by Otodom Analytics shows that, apart from December, in each of the remaining months of 2024, the number of newly listed apartments exceeded the number of apartments sold. For the full year 2024, developers introduced around 53,300 apartments to their offering on the markets of seven major cities[4] (29% more than in the previous year) and sold just over 37,000 apartments (25% less than in 2023). As a result of the supply exceeding the demand, the number of apartments on offer by developers increased in the analysed segment from 35,000 at the beginning of the year to 55,800 at the end of 2024. The average offer sell-out period in 3 out of 7 analysed cities is shorter than 6 months (a level considered safe), in two more (Poznań, Kraków) it slightly exceeds it, and in two cities it indicates the risk of oversupply (Łódź - 9 quarters and Katowice - 11 quarters).
Data published by the National Bank of Poland shows that transaction prices in the primary market of the 6 largest metropolitan areas[5] were 17% higher in the third quarter of 2024 than a year earlier, while in the segment of 10 medium-sized cities[6] the increase in transaction prices in the same period was 14%. However, it is important to note the waning momentum of the price growth in the subsequent quarters of 2024. In the segment of the six largest metropolitan areas, prices grew by as much as 6% on a quarterly basis in the first quarter of 2024, 3% in the second quarter and just 1% per year in the third quarter. According to the data collected in the Central Real Estate Database of the PKO BP SA Group (CBN),the fourth quarter of 2024 has already brought a slight price correction in the segment in question of -2% on a quarterly basis. The slowdown in the price dynamics from the second quarter of 2024 onwards should be linked to a growing excess of supply over demand, mainly due to the drop in demand described above, accompanied by rebuilding of the offer by developers.
Secondary market
The price and volume trends on the secondary market were to a large extent convergent with those observed on the primary market. In the segment of the 6 largest metropolitan areas, which usually most closely reflects market-wide trends in the domestic residential property market, a gradual weakening of the upward trend was noticeable. According to data from the National Bank of Poland, in the said segment of the secondary market, prices grew by 6% on a quarterly basis in the first quarter of 2024, by 4% in the second quarter and by just 2% in the third quarter. In contrast, data from the CBN’s banking database indicates a price decline of 2% in the fourth quarter of 2024.
The data on offer prices from Otodom Analytics confirms that prices on the secondary market have stabilized since the second quarter of 2024.
Supply and demand on the residential real estate market
In 2024, developers increased their investment activity in an effort to rebuild their portfolio, following its sell-off in the second half of the previous year under the “Safe Loan 2%” programme. Their investment decisions were also to some extent influenced by the expectation of a new preferential loan programme, which, however, was ultimately not introduced. According to the data from Central Statistics (GUS), building permits were issued for 267,000 apartments in the first 11 months of 2024, an increase of 21% compared with the same period of the prior year. The number of apartments whose construction started rose by 27% year-on-year during this period and amounted to 221,000. This means a reversal of the negative trend of the past two years.
The number of apartments commissioned for use in the first 11 months of 2024 was 179,000 and was 10% lower compared with the same period of the prior year, due to lower investment activity in 2022-2023. However, given the fact that apartments are put up for sale by developers after construction has already started, the demand is generally determined by the number of residential constructions started rather than the number of apartments commissioned for use.
Demand was negatively affected by high residential prices and interest rate levels. According to data from the National Bank of Poland, in the third quarter of 2024 the average interest rate on new residential loans was 7.8%, with a slight (-0.05 pp) decrease compared to the previous quarter. In the following quarters of 2024, the deceleration of residential real estate price increases, combined with continued wage growth of more than 10 per cent, contributed to a slow recovery in demand. A synthetic measure of availability of apartments in Poland published by the Polish Bank Association (Centrum Amron), namely the Index of Availability of M3-class Apartments, which amounted to 128.68 at the end of 2023, during 2024 increased to 132.69 in the third quarter. The improvement in the index was mainly due to a higher rate of growth in wages than in residential real estate prices. The index reflects changes in affordability of apartments for a family consisting of 2 working people and an older child, with mortgage funding.
Purchases of residential real estate are financed with mortgages and household savings. According to NBP data, the estimated share of cash purchases of apartments on the primary market in the 7 largest metropolitan areas was around 57% in the third quarter of 2024. The decrease in sales of residential loans during 2024 contributed to a slight decrease of the index from the 59% recorded in the fourth quarter of 2023.
According to Central Statistics (GUS), the nominal value of household deposits in the third quarter of 2024 increased by 8.7% y/y (compared to an increase of 11.5% in 2023). This means that – in view of the drop in inflation to around 3.6% (the average annual total consumer price index in 2024 published by GUS) – the real value of household deposits has increased.
2.3. Residential loan market
Based on NBP data, amounts due to banks in respect of residential loans in Poland were PLN 497.7 billion as at 31 December 2024, up by 3.3% y/y. As at 31 December 2024, PLN-denominated loans amounted to PLN 439.4 billion (88% of the total amounts due to banks in respect of residential loans in Poland), up by 8.3% y/y.
The total balance of residential loans in relation to the Gross Domestic Product, as estimated by PKO Bank Polski, at market prices stood at 14% at the end of 2024. This is significantly below the average for the European Union countries. This shows that the residential loan market in Poland has great potential for further development.
2.4. Mortgage covered bonds market
As at 31 December 2024, five mortgage banks were operating in Poland:
• PKO Bank Hipoteczny SA
• mBank Hipoteczny SA
• Pekao Bank Hipoteczny SA
• ING Bank Hipoteczny SA
• Millennium Bank Hipoteczny SA.
The Polish mortgage covered bond market is relatively small and moderately liquid. As at the end of December 2024, total outstanding mortgage covered bonds issued by the mortgage banks operating in Poland amounted to PLN 17.1 billion, i.e. PLN 1.4 billion less than as at 31 December 2023. As at 31 December 2024, outstanding mortgage covered bonds issued by Polish banks corresponded to 3.64% of the amount of residential loans granted by banks.
PKO Bank Hipoteczny SA is Poland’s largest issuer of mortgage covered bonds on the Polish market. The balance of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA amounted to PLN 7.2 billion as at 31 December 2024 which represents more than 42% of the total outstanding mortgage covered bonds issued by mortgage banks operating in Poland.
2.5. Regulatory and legal environment
The operations of PKO Bank Hipoteczny SA were affected by legal, regulatory and supervisory solutions which entered into force in 2024, in particular those which related to:
|
Digital resilience |
|
In the third and fourth quarter of 2024, the Bank carried out intensive adaptation work in connection with the entry into force (on 17 January 2025) of Regulation of the European Parliament and of the Council on digital operational resilience for the financial sector (the DORA Regulation) which imposed a number of new obligations on financial institutions relating to ICT risk management. The work concerned, among other things, identification of agreements covering ICT services (including providers supporting critical/material functions), a register of such agreements, preparing annexes introducing DORA provisions in the agreements, updating regulations in the area of security, including SIB security (including testing resilience, ICT incident notification procedures, reporting). |
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Mortgage loans |
|
By the Act of 12 April 2024 amending the Act on support for borrowers who have taken out a residential loan and are in financial difficulty and the Act on crowdfunding for businesses and aid to borrowers, the so-called loan repayment holidays were prolonged for 2024 (4 monthly suspensions), and additional availability criteria were introduced, and the conditions for granting support from the Borrowers Support Fund were changed (extending the period of support, increasing amounts and reducing the requirements for obtaining support). |
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By the Act of 7 July 2023 amending certain acts in order to limit certain effects of identity thefts, the possibility of reserving the PESEL number (Polish personal identification number) was introduced for private individuals and an obligation to check PESEL numbers in the database or reserved PESEL numbers before signing a loan agreement was imposed on banks. |
|
By Recommendation S relating to good practices in the management of loan exposures secured with mortgages, a requirement of differentiating the buffer taken into account in the creditworthiness assessment process depending on a bank’s loan offer was introduced and the requirements relating to the provision of information on the risks involved in taking out a mortgage loan were clarified and supplemented. |
|
By the Act of 1 October 2024 amending the Act on special solutions related to the removal of the effects of floods and certain other acts, the possibility of non-refundable use of support from the Borrowers Support Fund was introduced for borrowers affected by the flood that occurred in September 2024, upon fulfilment of certain conditions specified in the Act. |
|
The Act of 26 April 2024 on ensuring that economic operators meet the accessibility requirements to certain products and services defines the accessibility requirements to products and services, the obligations of economic operators to ensure that the accessibility requirements to products and services are met, as well as the system, rules and procedures for market supervision in ensuring that the accessibility requirements to products and services are met. |
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Reporting |
|
By the Act of 6 December 2024 amending the Accounting Act, the Act on Statutory Auditors, Audit Firms and Public Supervision and certain other Acts, the CSRD was implemented with regard to corporate sustainability reporting (reporting of non-financial information) by, among other things, introducing the mandatory application of European Sustainability Reporting Standards, broadening the scope of reported information – specifying the detailed scope of reported information on environmental, social (including human rights) and corporate governance issues. |
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Credit Risk |
|
By Resolution No. 243/2024 of the Financial Supervision Commission of 15.07.2024 on the issuance of the Long-Term Funding Ratio (“WFD”) Recommendation, banks were obliged to refinance a certain portion of their mortgage portfolio with appropriate WFD-eligible items, including, among others, mortgage bonds. In order to support the banks’ mortgage lending activities with fixed or periodically fixed interest rates, a preferential weighting was applied to such loans. In order to support the banks’ activities relating to issuance of green funding instruments, a preferential weighting for green debt instruments meeting the ICMA Green Bond Principles (ICMA GBP) or EU Green Bond Standard (EU GBS) was introduced. |
|
By Recommendation J which the Bank had to comply with by 31 March 2024, the scope of the data collected by the Bank was narrowed to the data representative “for the real estate market financed by the bank” rather than “for the entire real estate market" as before, and banks were allowed to use the amount from the bank’s assessment of the value of the real estate collateral as a reference value. |
|
Personnel Issues |
|
By the Act of 14 June 2024 on the protection of whistleblowers, protection was granted to people working in the private/public sector who report or disclose information or reasonable suspicion of a violation of the law in an entity. |
3. Financial performance and capital adequacy
Key financial indicators of PKO Bank Hipoteczny SA
Statement of financial position of PKO Bank Hipoteczny SA
Income statement of PKO Bank Hipoteczny SA
Requirements regarding own funds (Pillar I)
Internal capital (Pillar II)
Disclosures (Pillar III)
3.1. Key financial indicators of PKO Bank Hipoteczny SA
|
|
31.12.2024 |
31.12.2023 |
|
Total assets (PLN million) |
17,376.7 |
18,935.9 |
|
ROA[7] |
0.7 |
0.8 |
|
ROE[8] |
7.8 |
11.2 |
|
Total capital ratio (TCR) |
22.9% |
20.9% |
|
Leverage ratio (LR) |
9.5% |
8.5% |
|
Cost/income ratio (C/I)[9] |
22.6% |
19.5% |
3.2. Statement of financial position of PKO Bank Hipoteczny SA
|
PLN million |
31.12.2024 |
31.12.2023 |
|
Cash and balances with the Central Bank |
0.4 |
0.3 |
|
Amounts due from banks |
10.2 |
2.4 |
|
Derivative hedging instruments |
0.0 |
55.4 |
|
Securities |
749.3 |
945.3 |
|
Loans and advances to customers |
16,600.7 |
17,898.7 |
|
Other assets[10] |
16.1 |
33.8 |
|
TOTAL ASSETS |
17,376.7 |
18,935.9 |
|
PLN million |
31.12.2024 |
31.12.2023 |
|
Amounts due to banks |
5,342.8 |
4,580.7 |
|
Derivative hedging instruments |
208.7 |
213.2 |
|
Liabilities in respect of mortgage covered bonds issued |
7,233.4 |
10,444.6 |
|
Liabilities in respect of bonds issued |
2,721.3 |
1,991.3 |
|
Other liabilities and provisions[11] |
127.0 |
67.2 |
|
Equity |
1,743.5 |
1,638.9 |
|
TOTAL LIABILITIES AND EQUITY |
17,376.7 |
18,935.9 |
As at 31 December 2024 the total assets of PKO Bank Hipoteczny SA amounted to PLN 17,376.7 million. Residential loans were the key component of the Bank’s assets. Their carrying amount, taking into account allowances for expected credit losses recognized as at 31 December 2024, amounted to PLN 16,600.7 million, of which loans granted by PKO Hipoteczny SA amounted to PLN 9,197.5 million, whereas loans purchased from PKO Bank Polski SA amounted to PLN 7,403.2 million.
As at the end of December 2024, the carrying amount of mortgage covered bonds was PLN 7,233.4 million, i.e. 41.6% of the balance sheet total. This means a drop in their share in total assets of 13.6% compared to the end of 2023 due to the redemption of mortgage covered bonds maturing in 2024 and the impact of the EUR/PLN exchange rate on the measurement of mortgage covered bonds denominated in EUR.
As at 31 December 2024, amounts due to PKO Bank Polski SA constituted a significant item of the Bank’s liabilities and equity. They consisted of liabilities in the form of loans, overdraft facilities under a limit available, liabilities in respect of mortgage covered bonds and unsecured bonds acquired by PKO Bank Polski SA and other amounts due to PKO Bank Polski SA. Their total balance was PLN 6,067.4 million. Unsecured bonds issued by the Bank were another material source of funding the Bank’s operations. As at 31 December 2024, they amounted to PLN 2,721.3 million, which is a 36.7% increase compared with the end of 2023. Equity amounting to PLN 1,743.5 million (PLN 1,638.9 million as at the end of 2023) was also a material item of the funding structure.
3.3. Income statement of PKO Bank Hipoteczny SA
|
PLN million |
01.01.2024 – 31.12.2024 |
01.01.2023– 31.12.2023 |
Change y/y |
|
Net interest income |
286.8 |
365.3 |
(78.5) |
|
Net fee and commission income |
(4.6) |
(3.1) |
(1.5) |
|
Net foreign exchange gains / (losses) |
4.0 |
(4.1) |
8.1 |
|
Net allowances for expected credit losses |
5.4 |
(7.6) |
13.0 |
|
Net other operating income and expenses |
0.3 |
0.2 |
0.1 |
|
Administrative expenses |
(47.4) |
(47.4) |
0.0 |
|
Regulatory charges |
(17.4) |
(22.4) |
5.0 |
|
Tax on certain financial institutions |
(51.0) |
(58.0) |
7.0 |
|
Operating profit |
176.1 |
222.9 |
(46.8) |
|
Profit before tax |
176.1 |
222.9 |
(46.8) |
|
Corporate income tax |
(45.8) |
(57.1) |
11.3 |
|
Net profit |
130.3 |
165.8 |
(35.5) |
In the period under analysis, the Bank generated interest income of PLN 1,321.2, of which interest income on residential loans measured at amortized cost amounted to PLN 1,267.9 million. During this period, the Bank incurred interest expense of PLN 1,034.4 million, including interest on mortgage covered bonds and the cost of hedging transactions. The respective interest expense amounted to PLN 547.3 million in total. Net interest income includes a realized loss on loan repayment holidays.
The realized turnover (understood as interest income and fee and commission income) was generated entirely from the Bank’s operations in Poland.
In 2024, the Bank incurred administrative expenses of PLN 47.4 million. Material costs of PLN 27.0 million were a significant item in the structure of administrative expenses, of which PLN 19.2 million were costs related to services provided by PKO under an outsourcing contract. Employee benefit cost amounted to PLN 18.2 million.
In 2024, regulatory charges amounted to PLN 17.4 million. A contribution to the Bank Guarantee Fund’s resolution fund which amounted to PLN 13.9 million was the main component of this item.
Tax on certain financial institutions of PLN 51.0 million was another material item of the cost of the Bank’s activities in the reporting period.
A high level of costs of regulatory charges and taxes has a material impact on the Bank’s profitability.
The Bank’s net allowances for expected credit losses amounted to PLN 5.4 million in 2024 (a net release of provisions) which translated to a credit risk cost ratio of -0.03%. In 2023, they amounted to PLN 7.6 million and 0.04% respectively. The cost of risk is at a very low level in consequence of maintaining strict control of credit risk, which translates into the very good quality of the loan portfolio.
Dividend paid
On 26 June 2024, the Ordinary General Shareholders’ Meeting of PKO Bank Hipoteczny SA adopted a resolution on the appropriation of the net profit for the financial year 2023 as follows:
• PLN 13.2 million, i.e. 8% of the profit was earmarked for transferring to the Bank’s supplementary capital pursuant to Article 348 and Article 396 of the Commercial Companies Code;
• PLN 66.0 million was allocated to cover accumulated losses;
PLN 86.6 million, i.e. the remaining portion of the profit was earmarked for payment of dividend. On 28 June 2024, the funds for the payment of dividend to PKO Bank Polski SA were transferred to the non-public companies’ shareholders register maintained by the Brokerage Office of PKO BP.
The Bank’s funding structure
The table below presents the structure of the Bank’s funding sources:
|
|
31.12.2024 |
31.12.2023 |
|
Mortgage covered bonds issued |
41.6% |
55.2% |
|
Funds from the Parent Company |
30.8% |
24.2% |
|
Bonds issued |
15.7% |
10.5% |
|
Equity |
10.0% |
8.7% |
|
Other |
1.9% |
1.4% |
|
Total |
100.0% |
100.0% |
As at 31 December 2024 and 31 December 2023, the Bank had no contractual liabilities where it had not met its payment obligations in a timely manner.
Impact of the Act on crowdfunding for businesses and aid to borrowers on the Bank’s performance
On 12 April 2024 the Sejm passed an amendment to the Act on support for borrowers who have taken out a residential loan and are in financial difficulty and the Act on crowdfunding for businesses and aid to borrowers of 7 July 2022. The amendment was passed by the Senate and signed by the President. Pursuant to the said amendment, loan repayment holidays were available to borrowers who meet the following criteria:
• the value of the loan granted does not exceed PLN 1.2 million; and
• the loan instalment exceeds 30% of the household income, calculated as the average household income for the last three months, or the borrower has at least three dependent children (as at the date of submitting a loan application).
In accordance with the said Act, in 2024, 4 instalments of a residential loan could have been suspended – two instalments between 1 June and 31 August 2024 and two between 1 September and 31 December 2024.
The Bank adopted a judgment that the customers’ right to take advantage of the loan repayment suspension constituted a statutory modification of cash flows which occurred on the date of the Act being signed by the President.
The Bank adjusted the gross carrying amount of mortgage loans in May 2024 for an amount of PLN 60.8 million, recognizing it as a reduction in interest income. The adjustment was determined as the difference between the value of estimated cash flows from loan agreements taking into account the suspension of instalment repayment, discounted using the pre-modification effective interest rate and the present gross carrying amount of the loan portfolio. The loss estimate was based on the assumption that 15% of the maximum loss would be realized during the programme (customer participation rate).
By the end of December 2024, 5.2 thousand of the Bank’s customers had applied for a suspension of one or more instalments of the mortgage loan, which amounted to 5.4% of the total number of the Bank’s customers and 8.3% of the value of total gross loans.
In the fourth quarter of 2024, on the basis of empirical data on the actual use of loan repayment holidays by customers, the Bank updated the level of the related loss and reduced the loss accounted for so far, on a pro rata basis. The cumulative effect recognized by the Bank in this respect amounted to PLN 28.3 million (including the reduction of the loss recognized in May 2024 of PLN 29.4 million and the pro rata reduction of the amortization to date of PLN 1.1 million), which translated to an increase in net interest income and a decrease in the adjustment of the gross carrying amount of the loans. The realized loss on statutory loan repayment holidays, excluding the effect of the settlement to date, amounted to PLN 31.4 million.
3.4. Requirements regarding own funds (Pillar I)
General information
In accordance with the CRR, the Bank calculates requirements in respect of own funds for the following risk types:
• credit risk – according to the standardized approach;
• credit valuation adjustment (CVA) risk – according to the standardized approach;
• settlement and delivery risk – according to the standardized approach;
• operational risk – according to the Basic Indicator Approach (BIA);
• market risk (foreign exchange risk only) – according to basic methods.
As at 31 December 2024, own fund requirements regarding the risk of credit valuation adjustment, settlement and delivery, and market risk were nil, therefore, the total requirement in respect of own funds comprised the requirements for credit and operational risks.
|
Own funds requirements |
31.12.2024 |
31.12.2023 |
|
Credit risk (in PLN millions) |
531.6 |
570.1 |
|
Operational risk (in PLN millions) |
49.3 |
47.3 |
|
Total own funds requirement (in PLN millions) |
581.0 |
617.5 |
|
Common equity Tier 1 capital ratio (CET1) |
22.9% |
20.9% |
|
Tier 1 capital ratio (T1); |
22.9% |
20.9% |
|
Total capital ratio (TCR) |
22.9% |
20.9% |
The following tables show exposure values, risk-weighted assets (RWA) and own funds requirements, by exposure class:
|
31.12.2024 PLN million |
Gross exposure |
Exposure value[12] |
Risk-weighted assets (RWA) |
Own funds requirement |
|
Retail exposures[13] |
1,996.5 |
1,933.0 |
1,449.8 |
116.0 |
|
Exposures secured by mortgages on real estate |
14,715.0 |
14,669.4 |
5,134.3 |
410.7 |
|
Exposures to central governments or central banks |
749.7 |
749.7 |
- |
- |
|
Exposures to institutions |
74.7 |
74.7 |
- |
- |
|
Exposures in default |
78.3 |
42.3 |
45.4 |
3.6 |
|
Other exposures |
15.8 |
15.8 |
15.8 |
1.3 |
|
Total |
17,629.9 |
17,484.9 |
6,645.2 |
531.6 |
|
31.12.2023 PLN million |
Gross exposure |
Exposure value[14] |
Risk-weighted assets (RWA) |
Own funds requirement |
|
Retail exposures[15] |
2,014.5 |
1,200.0 |
1,466.1 |
117.3 |
|
Exposures secured by mortgages on real estate |
15,996.8 |
15,953.7 |
5,583.7 |
446.7 |
|
Exposures to central governments or central banks |
945.3 |
945.3 |
- |
- |
|
Exposures to institutions |
203.2 |
203.2 |
- |
- |
|
Exposures in default |
72.1 |
41.8 |
44.0 |
3.5 |
|
Other exposures |
33.9 |
33.9 |
32.9 |
2.6 |
|
Total |
19,265.7 |
19,177.8 |
7,126.7 |
570.1 |
Credit risk adjustments
For the purpose of specific credit risk adjustments, the Bank uses impairment loss, which was recognized in the Bank’s Tier 1 capital in accordance with the CRR and implementing legislation.
The approach applied by the Bank to identifying exposures at risk of impairment and methods for estimating allowances for expected credit losses and provisions for financial liabilities granted are described in Note 46.5 “Impairment of credit exposures” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2024.
Use of credit risk mitigation techniques
The Bank uses mortgage collateral to classify exposures to classes of exposures secured by mortgages on real estate and to apply preferential risk weights. Detailed information about the main types of collateral accepted by the Bank and the method of determining the mortgage lending value may be found in Note 46.2 “Credit risk mitigation techniques – hedging” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2024.
3.5. Internal capital (Pillar II)
Internal capital is the estimated amount of capital required to cover all identified material risks in the Bank’s activities, as well as the effect of changes in the business environment, taking into account the expected level of risk.
PKO Bank Hipoteczny SA regularly monitors the materiality of different risks involved in the Bank’s operations.
The Bank separately estimates its internal capital for the following risks considered to be material:
• credit risk;
• liquidity risk;
• operational risk;
• interest rate risk;
• business risk;
• model risk.
The internal capital required to cover particular risks is determined in accordance with the methods set out in the Bank’s internal regulations. The total internal capital is the sum of the internal capital required to cover all the risks material for the Bank.
|
Internal capital structure |
31.12.2024 |
31.12.2023 |
|
For credit risk |
66.1% |
69.8% |
|
For liquidity risk |
6.1% |
5.8% |
|
For operational risk |
5.4% |
3.7% |
|
For interest rate risk |
9.8% |
8.3% |
|
For business risk |
12.4% |
12.2% |
|
For model risk |
0.2% |
0.2% |
|
Total |
100.0% |
100.0% |
As at 31 December 2024, the ratio of the Bank’s own funds to its internal capital remained above both the statutory and internal limits.
In order to estimate the amount of own funds required to operate safely in times of recession, the Bank regularly conducts stress tests.
3.6. Disclosures (Pillar III)
Considering the scale and specific nature of its operations, in the financial statements and in the Directors’ Report the Bank discloses in particular the following information:
• risk management objectives and strategies;
• own funds for capital adequacy purposes;
• capital buffers;
• leverage;
• capital requirements;
• credit risk adjustments;
• credit risk mitigation techniques used;
• the Bank’s remuneration policy, in line with Recommendation Z;
• the main provisions of the Principles for the Management of Conflicts of Interest in line with Recommendation Z;
• the requirements referred to in Article 111a of the Banking Law and Recommendation H;
• operational risk, in line with Recommendation M;
• credit risk and information on impairment of financial assets in line with Recommendation R and IFRS 9;
• liquidity risk management system and liquidity position, in accordance with Recommendation P;
• the impact of applying the transitional arrangements related to the implementation of International Financial Reporting Standard 9 (IFRS 9) on capital adequacy.
The Bank, operating within the PKO Bank Polski Group, also provides information to the Parent Company for inclusion in the consolidated data.
Detailed information on the scope of disclosures, the manner of their verification and publication is contained in the Disclosure Policy of PKO Bank Hipoteczny SA concerning capital adequacy and other reportable information, which is available on the Bank’s website (www.pkobh.pl/en).
4. Business of PKO Bank Hipoteczny SA
Sale of residential mortgage loans under the agency model
Acquisition of residential mortgage loan receivables
Structure of the residential mortgage loan portfolio
Mortgage covered bonds
Financial market operations
Bonds – Bond Issue Programme Agreement concluded with PKO Bank Polski SA
4.1. Sale of residential mortgage loans under the agency model
In 2024 the Bank granted mortgage loans of PLN 559 million.
In accordance with Recommendation S of the Polish Financial Supervision Authority, the Bank only grants loans for which the loan-to-value ratio does not exceed 80%16. Moreover, in compliance with the Polish Act on Mortgage Covered Bonds and Mortgage Banks, the Bank only grants loans whose value in relation to the mortgage lending value of the real estate does not exceed 100%.
The main criteria applied by PKO Bank Hipoteczny SA in the process of granting mortgage-secured loans are shown in the table below:
|
Criteria |
Agency model |
|
Loan amount/market value of the real estate |
Max 80%[16] |
|
Loan amount/mortgage lending value of the real estate |
Max 100% |
|
Legal title to the real estate |
Ownership |
|
Loan collateral |
First mortgage recorded in Section IV of the Land and Mortgage Register |
|
Currency |
PLN |
|
Purpose |
Residential |
4.2. Acquisition of residential mortgage loan receivables
The purchase of residential mortgage loan receivables based on a framework agreement signed in 2015 with PKO Bank Polski SA is an element of the business of PKO Bank Hipoteczny SA.
The following table shows the main criteria used by PKO Bank Hipoteczny SA in the process of acquiring residential mortgage loans.
|
Criteria |
Pooling model |
|
Loan amount/mortgage lending value of the real estate |
Max 100% |
|
Legal title to the real estate |
Ownership |
|
Loan collateral |
First mortgage recorded in Section IV of the Land and Mortgage Register |
|
Currency |
PLN |
|
Days past due or impairment indicators |
None |
|
Purpose |
Residential |
|
Assessment of borrower’s creditworthiness |
Positive |
4.3. Structure of the residential mortgage loan portfolio
Portfolio structure by LtV
The structure of the portfolio of residential mortgage loans in the statement of financial position of PKO Bank Hipoteczny SA by the LtV ratio based on market valuation[17] and the LtV ratio based on the MLV is presented in the tables below.
|
Gross loans granted to customers by LtV based on market valuation |
31.12.2024 |
31.12.2023 |
|
below 50% |
92.7% |
87.9% |
|
51% - 60% |
3.4% |
7.9% |
|
61% - 70% |
1.9% |
2.0% |
|
71% - 80% |
1.3% |
1.7% |
|
81% - 90% |
0.7% |
0.5% |
|
more than 90% |
0.0% |
0.0% |
|
Total, gross |
100.0% |
100.0% |
|
Average LTV based on market valuation |
31.4% |
35.0% |
|
Gross loans granted to customers by LtV based on mortgage lending value |
31.12.2024 |
31.12.2023 |
|
below 50% |
26.00% |
23.9% |
|
51% - 60% |
14.20% |
13.4% |
|
61% - 70% |
17.70% |
17.2% |
|
71% - 80% |
21.10% |
21.8% |
|
81% - 90% |
18.40% |
21.0% |
|
more than 90% |
2.60% |
2.7% |
|
Total, gross |
100.0% |
100.0% |
|
Average LtV based on MLV |
62.4% |
63.8% |
In 2024, the average LtV based on the market valuation of the loan portfolio dropped by 3.6 p.p. (in 2023 it dropped by 2.4 p.p.), which is the effect of the depreciation of the portfolio accompanied by a further growth in the market values of the real estate constituting the collateral for the loans granted by the Bank. With respect to LtV based on MLV, the drop is lower and results exclusively from the amortization of the portfolio. The MLV determined as at the moment of granting the loans did not require updating – in the Bank’s opinion, it is at a safe level, lower than the market value, and meets the requirements of the Rules for Setting the Mortgage Lending Value of Real Estate by PKO Bank Hipoteczny SA.
Interest on loans
The Bank offers loans based on the WIBOR 6M rate and loans bearing interest based on a five-year fixed base rate. It also allows the option of changing the variable rate to fixed-interest rate in a period of five years. In the past, the Bank also offered loans based on WIBOR 3M.
The base reference rates used for the Bank’s loans are the WIBOR 6M and WIBOR 3M and a fixed base rate, which on average amounted to 5.85%, 5.86% and 5.30% respectively in 2024.
4.4. Mortgage covered bonds
The key objective of PKO Bank Hipoteczny SA is to issue mortgage covered bonds which are the main source of the long-term funding for loans secured with real estate.
Mortgage covered bond issues under the Domestic Programme of Mortgage Covered Bonds Issuance
From the beginning of its operations, PKO Bank Hipoteczny SA has issued thirteen series of Polish mortgage covered bonds, including two issues of Green Covered Bonds. These issues were conducted under the Domestic Issues of Mortgage Covered Bond Programme of PKO Bank Hipoteczny SA.
The total value of outstanding mortgage covered bonds issued by PKO Bank Hipoteczny SA for the domestic market (at nominal value) was PLN 790.0 million at the end of 2024.
All series of domestic mortgage covered bonds issued are traded on regulated parallel market of the Warsaw Stock Exchange and on the BondSpot regulated market. They are also accepted in repo transactions by the National Bank of Poland.
The Bank currently only conducts mortgage covered bond issuance activities under the International Programme of Mortgage Covered Bonds Issuance, and issuance activities under the Domestic Programme of Mortgage Covered Bonds Issuance have not been continued.
In 2024, PKO Bank Hipoteczny SA redeemed three series of PLN-denominated mortgage covered bonds issued under the domestic programme with a total nominal value of PLN 1.2 billion.
|
|
Mortgage covered bonds of PKO Bank Hipoteczny SA issued under the Domestic Programme of Mortgage Covered Bonds Issuance and outstanding as at 31 December 2024:
|
Series |
Mortgage covered bond number (ISIN) |
Issue date |
Redemption date |
Series value (in PLN million) |
Interest rate |
Currency |
Rating of the issue |
Listing |
|
9 |
PLPKOHP00090 |
27.07.2018 |
25.07.2025 |
500 |
WIBOR3M +0.62% |
PLN |
Aa1 |
Bondspot, WSE parallel regulated market |
|
10 |
PLPKOHP00108 |
24.08.2018 |
24.08.2028 |
60 |
3.4875% |
PLN |
Aa1 |
Bondspot, WSE parallel regulated market |
|
11 |
PLPKOHP00116 |
26.10.2018 |
28.04.2025 |
230 |
WIBOR3M +0.66% |
PLN |
Aa1 |
Bondspot, WSE parallel regulated market |
Mortgage covered bond issues under the International Programme of Mortgage Covered Bonds Issuance
From the beginning of its operations, PKO Bank Hipoteczny SA has issued fourteen series of mortgage covered bonds under the International Programme of Mortgage Covered Bonds Issuance, including eight issues denominated in EUR and six denominated in PLN.
The total value of issued and outstanding mortgage covered bonds under PKO Bank Hipoteczny SA’s International Programme of Mortgage Covered Bonds Issuance (at nominal value) denominated in EUR and PLN amounted to EUR 500 million and PLN 4,250 million, respectively as at the end of 2024 which, using the average euro exchange rate announced by the National Bank of Poland as at 31 December 2024, gives a total amount of PLN 6,386.5 million.
All series of mortgage covered bonds issued under the International Programme of Mortgage Covered Bonds Issuance, excluding series 13 and 14, are listed on the Luxembourg Stock Exchange. In addition, series 4, 6, 8, 9, 10, 11, 12, 13 and 14 are listed on the parallel regulated market of the Warsaw Stock Exchange. Mortgage covered bonds denominated in EUR are also accepted in repo transactions by the European Central Bank.
In 2024, PKO Bank Hipoteczny SA carried out four issues of PLN-denominated mortgage covered bonds of series 12, 13 and 14 (tranche I and tranche II) with a total nominal value of PLN 2,500 million.
In 2024, PKO Bank Hipoteczny SA redeemed three series of EUR-denominated mortgage covered bonds with a total nominal value of EUR 1,025 million.
Mortgage covered bonds of PKO Bank Hipoteczny SA issued under the International Programme of Mortgage Covered Bonds Issuance and outstanding as at 31 December 2024:
|
Series |
Mortgage covered bond number (ISIN) |
Issue date |
Redemption date |
Series value (in millions) |
Currency |
Coupon |
Rating of the issue |
Listing |
|
8 |
XS2495085784 |
04.07.2022 |
25.06.2025 |
500 |
EUR |
2.125% |
Aa1 |
LuxSE, WSE parallel regulated market |
|
9 |
XS2583335943 |
09.02.2023 |
09.02.2026 |
500 |
PLN |
WIBOR 3M + 0.85% |
Aa1 |
LuxSE, WSE parallel regulated market |
|
10 |
XS2641919639 |
28.06.2023 |
29.06.2026 |
500 |
PLN |
WIBOR 3M + 0.78% |
Aa1 |
LuxSE, WSE parallel regulated market |
|
11 |
XS2711876370 |
02.11.2023 |
02.11.2026 |
750 |
PLN |
WIBOR 3M + 0.78% |
Aa1 |
LuxSE, WSE parallel regulated market |
|
12 |
XS2787873541 |
22.03.2024 |
22.03.2028 |
1,000 |
PLN |
WIBOR 3M + 0.55% |
Aa1 |
LuxSE, WSE parallel regulated market |
|
13 |
XS2854926701 |
05.07.2024 |
04.07.2028 |
500 |
PLN |
WIBOR 3M + 0.55% |
Aa1 |
LuxSE, WSE parallel regulated market |
|
14 |
XS2854926701 |
24.10.2024 |
24.10.2028 |
500 |
PLN |
WIBOR 3M + 0.70% |
Aa1 |
WSE parallel regulated market |
|
14 - 2nd tranche |
PLL219200028 |
27.12.2024 |
24.10.2028 |
500 |
PLN |
WIBOR 3M + 0.70% |
Aa1 |
WSE parallel regulated market |
The funds raised from the issues of mortgage covered bonds have been used by PKO Bank Hipoteczny SA to grant residential loans and to purchase mortgage loan receivables from PKO Bank Polski SA.
Pursuant to Article 7d of the Polish Covered Bonds and Mortgage Banks Act of 29 August 1997, mortgage covered bonds may be labelled as European Covered Bonds or European Covered Bonds (premium). Mortgage covered bonds of PKO Bank Hipoteczny are labelled as European Covered Bonds (premium). The “premium” label allows easy and unequivocal identification of whether the mortgage covered bonds meet the requirements of Article 129 of the CRR, which is to facilitate assessment of their quality by investors and therefore increase their attractiveness as an investment instrument both in the EU and in other countries.
The list of mortgage covered bonds issues which include mortgage covered bonds labelled as European Mortgage Bonds or European Mortgage Bonds (premium) is available on the PFSA website:
https://www.knf.gov.pl/podmioty/Podmioty_sektora_bankowego/Banki_hipoteczne
The Covered Bond Label
On 6 February 2018, PKO Bank Hipoteczny SA as the first issuer of mortgage covered bonds from Poland joined The Covered Bond Label. The Covered Bond Label is a quality certificate, whose purpose is to build awareness of the safety and high quality of assets such as mortgage covered bonds among investors.
The Bank’s details on the website of The Covered Bond Label are available at:
https://coveredbondlabel.com/issuer/132-pko-bank-hipoteczny-spolka-akcyjna
Energy Efficient Mortgage Label
The Energy Efficient Mortgage Label was created by the European Mortgage Federation – European Bond Council (EMF-ECBC) as a clear and transparent quality label for consumers, lenders and investors, aimed at identifying energy-efficient residential mortgage loans.
PKO Bank Hipoteczny SA was the first Polish bank to join the Energy Efficient Mortgage Label in 2021. This initiative is aimed at supporting the Green Deal and climate neutrality by 2050, and at adapting the product portfolio to regulatory changes such as the new EU taxonomy.
The Bank’s details on the website of Energy Efficient Mortgage Label are available at:
https://www.energy-efficient-mortgage-label.org/issuers/directory
Green Covered Bonds
In 2019, PKO Bank Hipoteczny SA for the first time published the Green Covered Bond Framework - GCBF). In June 2022 the GCBF was updated by the Bank in connection with the planned issue of Green Covered Bonds. The GCBF specifies, among other things, the principles for selecting assets to secure the Green Covered Bond issues. Green issues by PKO Bank Hipoteczny SA are secured with mortgages that meet the highest energy efficiency and CO2 emissions standards.
The proceeds from Green Covered Bonds are used exclusively to provide full or partial funding or refunding of new and/or existing projects which have been classified as green assets. Such bonds satisfy the criteria set by the International Capital Market Association (ICMA), which are known as Green Bond Principles (GBP). The GBP are a set of guidelines concerning the purpose of funding, assessment and selection of assets, managing the proceeds from the issue and reporting the allocation of funds.
In June 2019 and then in June 2022, PKO Bank Hipoteczny SA obtained a second party opinion for its Green Covered Bond Framework from Sustainalytics, a specialized and certified international institution. PKO Bank Hipoteczny SA’s Green Covered Bonds are certified by the Climate Bond Initiative (CBI) – the last post-issue certification took place in May 2023. The CBI certificate is awarded to bonds and mortgage covered bonds that meet the highest standards in terms of positive environmental impact.
At least once a year the Bank publishes a report on the allocation and impact of the issues of the Green Covered Bonds on the environment.
For more detailed information concerning Green Covered Bonds issued by the Bank, please visit:
https://www.pkobh.pl/en/covered-bond/green-covered-bonds
4.5. Financial market operations
PKO Bank Hipoteczny SA executes treasury transactions on the wholesale financial market. The purpose of the transactions is to manage liquidity (over short-, mid- and long-term time horizons) and the Bank’s foreign-currency position. Additionally, the Act on Mortgage Covered Bonds and Mortgage Banks imposes an obligation on PKO Bank Hipoteczny SA to mitigate the risk caused by fluctuations in exchange rates.
For the purpose of funding the granting of residential loans and the purchase of receivables for residential loans granted by PKO Bank Polski SA, PKO Bank Hipoteczny SA issues mortgage covered bonds and unsecured bonds, utilizes credit lines and assumes liabilities for purchased receivables.
In the Management Board’s opinion, as at 31 December 2024, there were no indications of a risk of late payment of the liabilities incurred by the Bank. As at 31 December 2024, the Bank complied with all internal and regulatory liquidity limits. Details of the levels of the Bank’s liquidity limits are provided in Note 47 “Liquidity risk management” to the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2024.
As far as the issue of EUR-denominated mortgage covered bonds is concerned, for the purpose of hedging interest rate risk and foreign exchange risks, PKO Bank Hipoteczny SA entered into Cross-Currency Interest Rate Swap (CIRS) transactions, under which the Bank pays a coupon in PLN based on a variable interest rate, and receives a coupon based on a fixed interest rate for EUR. If PKO Bank Hipoteczny SA is declared bankrupt by the court, the CIRS transactions will be automatically extended by 12 months on the terms and conditions set on the transaction date. Additionally, the Bank has executed a series of FX-Forward contracts, which hedge currency exposures with maturities on the payment dates of the coupons for the EUR-denominated mortgage covered bonds.
As far as the issue of fixed-interest rate mortgage covered bonds in PLN is concerned, PKO Bank Hipoteczny SA entered into IRS transactions under which it pays a coupon based on a floating PLN rate, and receives a coupon based on a fixed PLN rate.
4.6. Bonds – Bond Issue Programme Agreement concluded with PKO Bank Polski SA
On 30 September 2015, PKO Bank Hipoteczny SA concluded an Own Bonds Issue Programme Agreement with PKO Bank Polski SA, based on which zero coupon bonds, variable coupon bonds and fixed coupon bonds with maximum tenors up to 36 months may be issued.
In 2024, the Bank issued bonds with a total nominal value of PLN 5,910.5 million under this Programme. At the same time, the Bank redeemed bonds with a total nominal value of PLN 5,175.0 million. The balance of bonds issued under the Programme was PLN 2,760.5 million as at 31 December 2024. The Bank intends to continue raising funds under this Programme.
5. Internal Operating Conditions
Lending process and cooperation with PKO Bank Polski SA
Internal governance
Management of conflicts of interest
Internal control system
Risk management
Measurement of residential mortgage loan collaterals
Cover Pool for Mortgage Covered Bonds
Cover Pool Monitor
Statutory limits
5.1. Lending process and cooperation with PKO Bank Polski SA
PKO Bank Hipoteczny SA purchases residential mortgage loans for its portfolio as part of its strategic cooperation with PKO Bank Polski SA. The banks work together under two models:
• agency model;
• pooling model.
Cooperation with PKO Bank Polski SA is governed in detail by an outsourcing agreement concluded on 16 January 2015. The agreement governs the scope of the cooperation and describes in detail the method of performing the outsourced functions, first and foremost in the area of offering and administering residential loans and performing support functions for PKO Bank Hipoteczny SA. Additionally, PKO Bank Polski SA committed in the agreement to properly perform the functions entrusted to it, as well as to the reporting and controlling activities for PKO Bank Hipoteczny SA.
On 17 November 2015, the Receivables Sale Framework Agreement was signed with PKO Bank Polski SA. On the basis thereof, the Bank has been acquiring portfolios of receivables in respect of residential mortgage loans from PKO Bank Polski SA since December 2015.
5.2. Internal governance
An effective and transparent internal governance system is operative in the Bank, as specified in PKO Bank Hipoteczny SA’s Articles of Association and the adopted internal regulations which comprise, in particular:
• the Bank’s management system;
• the Bank’s organization; and
• operating principles, rights, duties and responsibilities, and mutual relationships between the Bank’s particular authorities and organizational units, including the Supervisory Board, Management Board and key employees.
The key elements of internal governance, its goals and relationships between them and the basic principles of the Bank’s organization are defined in the Bank’s Management Strategy.
The Bank’s Management System covers all the aspects of the Bank’s functioning, and in particular strategic planning and managing of the Bank’s strategy, the internal control system, the risk management system, ethical principles, whistleblowing procedures for anonymous notification of violations of the law and the ethical procedures and standards binding in the Bank, capital adequacy, the manner of shaping products, managing human resources and the remuneration policy.
The Bank conducts its activities in a responsible manner, taking into consideration the principles of internal governance, guided by the need to maintain the highest diligence, professionalism and ethics. The Bank discharges its duties under the binding legal regulations, complies with the requirements for regulated institutions imposed by the Polish Financial Supervision Authority in the form of recommendations and good practices for the banking sector, the Corporate Governance Framework for supervised institutions, and guidelines specified by the European Banking Authority to be adopted pursuant to the supervisory practice in the Member States in the scope relating to the Bank’s operations and the adopted business model, in consideration of the scale, specificity and nature of the Bank’s operations. The above rules support the Bank in its endeavours to reinforce operating transparency and maintain safety of its operations.
The Bank’s Management Board is responsible for designing, implementing, and ensuring the compliance with and the proper functioning of the internal governance, taking into account all their components. The Bank’s Management Board regularly informs the Bank’s Supervisory Board of the state of implementation of the Bank’s management strategy and its risk management strategy, and of the most important related issues; if necessary, it also immediately notifies of events and circumstances material for the assessment of the Bank’s position and its management.
The Bank’s Supervisory Board oversees the implementation and functioning of the internal governance and assesses its adequacy and effectiveness. The assessment takes into account primarily all the elements comprising internal governance and potential material changes in internal and external factors which may have an impact on the Bank’s operations.
Taking into account the recommendation of the Management Board and the results of periodical reviews and evaluations of particular fields comprising the Bank’s internal governance disclosed in the comprehensive “Report on the assessment of the functioning of internal governance in PKO Bank Hipoteczny SA for the year 2024”, the Supervisory Board has assessed the internal governance implemented in the Bank as satisfactory, which means that it is adequate to the business model adopted by the Bank and functions effectively with respect to its particular components.
5.3. Management of conflicts of interest
The Bank has the “Policies for managing conflicts of interests in PKO Bank Hipoteczny SA” adopted by the Management Board and approved by the Supervisory Board.
The objective of managing conflicts of interest at the Bank is to ensure that all customers, the Bank’s related parties, suppliers and bidders are treated professionally, fairly and honestly.
The Bank manages conflicts of interest by preventing situations that may give rise to conflicts of interest, taking steps to identify, disclose and control conflicts of interest and to eliminate or limit their negative impact on the Bank’s functioning and its relations with customers and other entities.
Given the scope and the specific nature of its operations as a mortgage bank, the Bank identifies potential situations of conflicts of interest which may arise in the relationship between:
• the Bank or its related entity and the Bank’s customer;
• a related entity and the Bank;
• the Bank or its related entity and a supplier or bidder or their related parties;
• the Bank and its Parent Company.
5.4. Internal control system
PKO Bank Hipoteczny SA’s internal control system is one of the elements of managing the Bank. The objective of the internal control system is to support the Bank’s decision-making processes to ensure:
• effectiveness of the Bank’s operations;
• reliability and accuracy of financial reporting, administrative and accounting procedures, and reliable internal and external reporting;
• compliance with the risk management policy;
• compliance of the Bank’s operations with the generally applicable laws, internal regulations and market standards adopted by the Bank, taking into account regulatory recommendations.
The Bank’s internal control system includes:
• the control function designed to ensure compliance with controls relating, in particular, to risk management; this function covers all of the Bank’s business units which are responsible for carrying out the tasks assigned to this function;
• the compliance function, which, together with the business units, is responsible for identifying, assessing, controlling and monitoring the risk of the Bank’s non-compliance with the generally applicable laws and with the Bank’s internal regulations and market standards adopted by the Bank, taking into account regulatory recommendations;
• the independent internal audit function to evaluate and assess, independently and objectively, the adequacy and effectiveness of the risk management system, the internal control system, and corporate governance, except for the aspects relating to the internal audit function itself.
The Bank’s internal control system is arranged on three independent levels:
• the first level consists of organizational structures that perform operational tasks to manage exposure to risks, which operate under the internal regulations;
• the second level comprises operations of the compliance function and identifying, measuring or estimating, controlling, monitoring and reporting the Bank’s material risks, and the identified threats and irregularities – these tasks are performed by specialized organizational structures operating under applicable policies, methodologies and procedures. The purpose of such structures is to ensure that actions at the first level are properly designed and effectively mitigate risks, support risk measurement and analysis, and ensure the effectiveness of operations;
• the third level is internal audit, which carries out independent audits of elements of the Bank’s management system, including the risk management system and the internal control system. Internal audit operates separately from the first and second levels.
The Bank’s Management Board ensures the continuity of the internal control system’s operation and proper cooperation of all business units within the implemented internal control system. The Management Board also identifies corrective actions to be taken to remedy any irregularities identified by the internal control system, including specific corrective and disciplinary measures. The Bank’s Management Board approves the list of material processes and their links to the objectives of the internal control system on the basis of the criteria set out in an internal regulation adopted by the Bank’s Management Board, taking into account, as a minimum, the Bank’s strategy, the Bank’s business model, the impact of a process on the Bank’s net profit or loss and capital adequacy, the risk management strategy, the risk appetite and the critical and key processes identified by the Bank.
Supervision over the internal control system is exercised by the Supervisory Board with the support of the Audit and Finance Committee of the Bank’s Supervisory Board. The Supervisory Board approves, in particular, the principles of operation of the internal control system and assesses the adequacy and effectiveness of the system. The Audit and Finance Committee supports the Supervisory Board by monitoring and reviewing the adequacy and effectiveness of the internal control system based on the reports obtained from compliance, internal audit and the control function matrix coordinator, as well as by reviewing draft resolutions of the Management Board in terms of the internal control system, the approval of which falls within the competence of the Supervisory Board.
The Supervisory Board assesses the adequacy and effectiveness of the internal control system annually, taking into account in particular:
• the compliance of the structure and operating principles of the internal control system with applicable laws, supervisory recommendations and market standards adopted by the Bank, taking into account the scale and nature of the Bank’s operations;
• the formal solutions of the internal control system, including the correct definition of the tasks and objectives of individual components of the internal control system;
• the mechanisms designed to ensure independence of the compliance unit and the internal audit unit;
• ensuring that adequate human resources are available to carry out the tasks of the internal control system effectively;
• the correctness of the reporting of irregularities identified within the internal control system, including the materiality of the irregularities identified;
• the correctness and timeliness of the implementation of improvement or corrective actions resulting from the activities carried out by individual elements of the internal control system, recommendations following external audits and recommendations from external supervisory and control bodies;
• the level of risk of not achieving the objectives of the internal control system resulting from a combined assessment of the key controls.
5.5. Risk management
The risk management process is a key process in PKO Bank Hipoteczny SA. Its purpose is to ensure the Bank’s financial stability, protect the values and safety of the mortgage covered bonds issued and to ensure that the funds derived from the issue of mortgage covered bonds and bonds and the Bank’s other funding sources are secure by striving to maintain the risk level within the adopted tolerance level. The risk management system is also intended to ensure that information on the risk is appropriate and as comprehensive as possible when making decisions, and to effectively embed risk management in the Bank’s organizational culture. The assumed level of risk is an important element of the planning and decision-making processes.
Risk management in the Bank is based in particular on the following principles:
• the Bank manages all identified types of risk associated with its operations;
• the risk management process is appropriate to the scale of the operations and to the significance, scale and complexity of a given risk and tailored to new risk factors and sources of risk as they emerge;
• the risk management methods (in particular, models and assumptions for models) and risk measurement and assessment systems are adjusted to the scale and complexity of the risk, the operations currently conducted and planned, and the environment in which the Bank operates, and are periodically verified and validated;
• the risk management area retains organizational independence from the business;
• the risk management is integrated with planning and controlling systems;
• the Bank monitors and controls the level of risk on an ongoing basis;
• the risk management process supports the execution of the Bank’s strategy in compliance with the risk management strategy, in particular with respect to the risk tolerance level;
• the risk management process is consistent with the principles of risk management of the PKO Bank Polski SA Group, including the application of group risk models, modified to reflect the nature of activities of PKO Bank Hipoteczny SA and approved by the adequate authorities of PKO Bank Hipoteczny SA.
PKO Bank Hipoteczny SA identifies and manages the following types of risk:
|
Material risks |
• Credit risk • Liquidity risk, including funding risk • Interest rate risk • Model risk • Business risk, including macroeconomic risk • Operational risk |
|
Monitored risks |
• Concentration risk • Residual risk • Foreign exchange risk • Derivative instruments risk • Compliance risk • Reputation risk • Capital adequacy risk, including excessive leverage risk |
While determining the criteria for considering certain risks to be material, the impact of such risks on the Bank’s activities is taken into account, and three levels of risk are distinguished:
• material risks – which are subject to active management;
• monitored risks – which are monitored for materiality;
• other risks which have not been identified in the Bank’s operations (immaterial and unmonitored).
For monitored risks, PKO Bank Hipoteczny SA performs periodic monitoring of whether they should be designated as material. The Bank has defined materiality criteria, which when exceeded, determine that a risk will be recognized as material.
In its Risk Management Strategy, the Bank has defined a number of strategic limits which define the tolerance for different risks. The Bank monitors these limits on an ongoing basis. None of the limits were exceeded in 2024.
A detailed description of the Bank’s risk management objectives and methods is provided in the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2024, in the chapter “Objectives and principles of risk management”. These financial statements also provide important information on the level of financial risk in the Bank’s operations, together with the methods of hedging significant types of planned transactions for which hedge accounting is applied.
5.6. Measurement of residential mortgage loan collaterals
PKO Bank Hipoteczny SA’s policy concerning loan collaterals and their measurement is based on the provisions of the following legal acts:
• the Polish Covered Bonds and Mortgage Banks Act;
• the Land and Mortgage Registers and Mortgage Act;
• the Banking Law.
Additionally, the question of loan collaterals is addressed by:
• the recommendations of the PFSA, including Recommendations F, S and J;
• the Bank’s internal regulations.
The Bank has in place and applies the Rules for Setting the MLV of Real Estate, approved by the PFSA. The Rules take into account the provisions of Recommendation F concerning the basic criteria applied by the Polish Financial Supervision Authority in approving rules for setting the mortgage lending value of real estate issued by mortgage banks.
The MLV of real estate is the value determined by a mortgage bank which, in the Bank’s opinion, reflects the level of risk associated with the real estate as the loan collateral. The MLV is used to determine the maximum amount of a loan that can be secured by a mortgage on given real estate, and to decide whether a receivable secured by particular real estate can be purchased by the Bank. The mortgage lending value of real estate is determined prudently, taking into consideration long-term parameters.
PKO Bank Hipoteczny SA determines MLV on the basis of expert opinions on the mortgage lending value of real estate. Such opinions are prepared with due diligence and prudence. They take into account only those real estate characteristics and expenditures necessary for its development which will be of a permanent nature and which any real estate holder will be able to obtain assuming rational exploitation. An expert opinion, prepared as at a specific date, documents assumptions and parameters underlying the analysis, the process of determining the MLV and the resulting MLV proposal. The expert opinion takes into account analyses and forecasts concerning specific parameters for a given real estate, which affect the evaluation of credit risk, as well as factors of a general nature, e.g. population growth, the unemployment rate and urban development planning.
The process of determining the MLV is carried out in the Bank by a dedicated team of experts in property valuation.
In the agency model, the process of setting the mortgage lending value of real estate comprises three stages:
|
Preparation of the MLV expert opinion |
Property appraiser with appropriate experience and the ability to estimate banking risk in connection with securing residential mortgage loans or a dedicated organizational unit of the Bank – the Collateral Valuation Team, based on the report from the inspection of the real estate prepared by a property appraiser |
|
Verification of the MLV expert opinion |
PKO Bank Polski SA under the Outsourcing Agreement, or a dedicated business unit of the Bank: the Collateral Valuation Team |
|
Determining the mortgage lending value of the real estate |
A dedicated organizational unit of the Bank: the Collateral Valuation Team |
In the case of the purchase of a receivable, the process of setting the mortgage lending value of real estate comprises four stages:
|
Confirmation of the real estate’s legal status |
PKO Bank Polski SA, under the outsourcing agreement |
|
Preparation of a report from the inspection of the estate, including market research |
Appraiser with appropriate experience and the ability to estimate banking risk in the area of securing residential mortgage loans |
|
Preparation of the MLV expert opinion |
A dedicated organizational unit of the Bank: the Collateral Valuation Team |
|
Determining the mortgage lending value of the real estate |
A dedicated organizational unit of the Bank: the Collateral Valuation Team |
The processes of preparing an MLV expert opinion and setting the mortgage lending value of real estate described above are executed by two independent individuals.
5.7. Cover Pool for Mortgage Covered Bonds
PKO Bank Hipoteczny SA maintains a cover pool for its mortgage covered bonds.
The manner of maintaining the cover pool is governed by:
• the Polish Covered Bonds and Mortgage Banks Act of 29 August 1997 (Journal of Laws of 2003, No 99, item 581, as amended) (hereinafter: the “Act”)
• Resolution No. 633/2015 of the Polish Financial Supervision Authority dated 1 December 2015 on defining the form of the cover pool;
• Recommendation K of the PFSA of 9 February 2016 concerning the principles for maintaining a cover pool by mortgage banks.
The Cover Pool Monitor and his/her Deputy are responsible for supervising the cover pool on an ongoing basis.
In the cover pool, the Bank includes residential loan receivables secured with the first mortgage entered in the Land and Mortgage Register, and rights and funds that constitute the basis for issuing mortgage covered bonds, as well as additional funds that constitute the excess to cover interest on outstanding mortgage covered bonds which is due in the following six months. The mortgage covered bonds are secured by the first mortgage. The following Bank’s funds can also constitute the basis for issuing mortgage covered bonds:
• invested in securities issued or guaranteed by the National Bank of Poland, the European Central Bank, governments and central banks of Member States of the European Union and/or the Organization for Economic Cooperation and Development, with the exception of countries that are restructuring or have restructured their foreign debt in the past five years;
• deposited with the National Bank of Poland;
• deposited with domestic banks or with a credit institution referred to in Article 18. 3 of the Act.
The nominal value of loans entered in the Bank’s cover pool representing collateral for the mortgage covered bonds issued totalled PLN 15,292.4 million as at 31 December 2024. The nominal value of the over-collateralization in the form of securities issued by the State Treasury, denominated in PLN, stood at PLN 80 million[18]. The Mortgage Covered Bonds Cover Pool also included CIRS transactions hedging the currency and interest rate risk of mortgage covered bonds denominated in EUR and IRS transactions hedging the interest rate risk of fixed rate mortgage covered bonds denominated in PLN.
In 2024 and in the previous years the cover pool did not include asset-backed securities (ABS), which do not meet the requirements specified in paragraph 1 of Article 80 of the Guideline (EU) 2015/510 of the European Central Bank of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60) (recast).
The following table presents basic data on the cover pool as at 31 December 2024 and 31 December 2023:
|
|
31.12.2024 |
31.12.2023 |
|
Total cover pool, including (in PLN million) |
15,372.4 |
16,973.2 |
|
loans secured by mortgages (in PLN million) |
15,292.4 |
16,768.2 |
|
other assets[19] (in PLN million) |
80.0 |
205.0 |
|
Liquidity buffer[20] (in PLN million) |
275.7 |
232.9 |
|
Nominal value of hedging transactions[21] (in PLN million) |
2,196.1 |
6,685.9 |
|
Number of loans |
91,385 |
98,681 |
|
Average loan value (in PLN thousand) |
167.3 |
169.9 |
|
Average weighted time since loan issuance (seasoning) (months) |
93.5 |
84.3 |
|
Average maturity (months) |
231.4 |
239.6 |
|
Average LtV (loan amount to market value) (%) |
30.2 |
34.0 |
|
Average weighted loan to mortgage lending value of real estate (%) |
62.0 |
63.5 |
|
Over-collateralization[22] (%) |
111.3 |
63.0 |
5.8. Cover Pool Monitor
The purpose of the Cover Pool Monitor is to ensure protection of the financial interests of the holders of mortgage covered bonds. The Covered Bonds and Mortgage Banks Act guarantees protecting the independence of the Cover Pool monitor and his/her deputy. Cover Pool Monitors are appointed by the Polish Financial Supervision Authority, upon request of the Bank’s Supervisory Board, for a period of six years.
Due to the lapse of the six-year period referred to above, on 5 March 2021 the PFSA appointed the Cover Pool Monitor and the Deputy Cover Pool Monitor for PKO Bank Hipoteczny SA, and the same persons were reappointed:
|
|
Function |
Date of appointment |
Date of dismissal / resignation |
|
Tadeusz Swat |
Cover Pool Monitor |
05.03.2021 |
- |
|
Grzegorz Kędzia |
Deputy Monitor |
05.03.2021 |
- |
5.9. Statutory limits
Acting under the Covered Bonds and Mortgage Banks Act, PKO Bank Hipoteczny SA is obliged to monitor and comply with designated limits related to the operations of a mortgage bank.
On 8 July 2022 the amended Covered Bonds and Mortgage Banks Act came into force. By that date, the Bank made the necessary changes to its internal regulations to ensure compliance with the amended wording of the Act.
The statutory limits and the level of their utilization as at 31 December 2024 and 31 December 2023 were as follows:
|
Limit |
Legal basis |
Limit level |
Actual level |
|
|
31.12.2024 |
31.12.2023 |
|||
|
Ratio of the funds received from the issue of mortgage covered bonds designated for refinancing loans secured by mortgages or receivables in respect of such loans acquired from other banks to the lower of 80% of the mortgage lending value of the residential property (within the meaning of Article 4(1)(75) of Regulation (EU) No 575/2013) pledged as collateral for the receivable and the current balance of the receivable |
Article 14 |
≤100% |
44.4% |
59.4% |
|
Ratio of the total value of acquired shares in other entities to the Bank’s own funds |
Article 15(1)(5) |
≤10% |
0.0% |
0.0% |
|
Ratio of the total amount of loans and advances taken out and bonds issued to the Bank’s own funds |
Article 15(2) |
≤1000% |
485.2% |
408.1% |
|
Ratio of the total amount of loans and advances taken out and bonds issued to the amount designated for refinancing of activities referred to in Article 12 of the Act, i.e. granting loans secured and unsecured by mortgages, acquiring receivables from other banks on loans granted by them and secured or unsecured by mortgage |
Article 15(2) |
≤100% |
48.6% |
36.9% |
|
Ratio of the nominal value of mortgage covered bonds outstanding to the sum of the Bank’s own funds and the general risk provision |
Article 17 |
≤4000% |
431.7% |
642.1% |
|
Ratio of the sum of nominal amounts of mortgage-secured receivables and amounts of the Bank’s rights and additional funds entered to the cover pool which constitute the basis for issuing mortgage covered bonds to the total nominal value of outstanding mortgage covered bonds (including hedging instruments) |
Article 18(1) |
≥105% |
211.3% |
163.0% |
|
Ratio of the sum of nominal amounts of mortgage-secured receivables which constitute the basis for issuing mortgage covered bonds to the total nominal value of outstanding mortgage covered bonds |
Article 18(1) |
≥85% |
213.1% |
161.7% |
|
Ratio of interest expense on outstanding mortgage covered bonds (overnight interest as at the date of account transfer) to interest income on mortgage-secured receivables and amounts of the Bank’s rights and additional funds entered to the cover pool (overnight interest as at the date of transfer of the account), with the exception of assets in default within the meaning of Article18.2a of the Act |
Article 18(2) |
≤100% |
37.1% |
48.8% |
|
Ratio of the Bank’s funds constituting the excess referred to in Articles 18.3a and 18.3c of the Act to the maximum cumulative outflows of net liquidity over the following 180 days. Outflow of net liquidity constitutes outflows of payments maturing on a given payment date including payments of the nominal value of mortgage covered bonds plus interest and payments with respect to derivative instruments under the mortgage covered bonds programme, after deducting inflows of payments from assets securing the mortgage covered bonds maturing on the same date. To calculate the amount of payment of the nominal value of a mortgage covered bond, the period to maturity of the mortgage covered bonds extended by 12 months is used |
Article 18(3a), (3aa), (3b) and (3d) |
≥100% |
N/A |
2839.5% |
|
Ratio of the value of receivables secured on mortgages established during the execution of a construction project to the total value of mortgage-secured receivables constituting the basis for issuing mortgage covered bonds |
Article 23 (1) sentence 1 |
≤10% |
1.3% |
1.4% |
|
Ratio of receivables secured on mortgages established on real estate earmarked for development in a local zoning plan to the value of receivables secured on mortgages established during the execution of a construction project constituting the basis for issuing mortgage covered bonds |
Article 23 (1) sentence 2 |
≤10% |
0.0% |
0.0% |
The Bank obtained positive results of the liquidity tests and coverage balance tests conducted as at the end of 2024 and at the end of 2023.
6. Organization and governing bodies of PKO Bank Hipoteczny SA
Qualified staff
Organizational structure of PKO Bank Hipoteczny SA
Competences of the governing bodies and committees of PKO Bank Hipoteczny SA
The Management Board of PKO Bank Hipoteczny SA
The Supervisory Board of PKO Bank Hipoteczny SA
Remuneration and Human Resources Management Policy
Benefits for Key Management of PKO Bank Hipoteczny SA
6.1. Qualified staff
The Bank implements tools and procedures to ensure that staff employed by the Bank have the highest qualifications in the Bank’s key business areas. The Bank systematically raises the qualifications of its staff and is committed to ensuring stability of its workforce. These factors have a significant impact on the pursuit of the Bank’s strategy and its business objectives, and therefore on its operations and performance.
6.2. Organizational structure of PKO Bank Hipoteczny SA
PKO Bank Hipoteczny SA is managed on the basis of the organizational structure presented in the chart below and within the framework of the duties of the Bank’s Governing Bodies, described in the following section of this chapter.
6.3. Competences of the governing bodies and committees of PKO Bank Hipoteczny SA
The competences of the General Shareholders’ Meeting of the Bank include in particular:
• appointing and dismissing members of the Supervisory Board and determining the principles for remunerating them and covering the costs related to the performance of the function of a Supervisory Board member by the Bank;
• determining the procedures for redeeming shares, the compensation for such redeemed shares and granting consent for the purchase of the Bank’s treasury shares for redemption purposes;
• creating and dissolving special funds accumulated from net profit;
• adopting resolutions on the issue of bonds convertible into shares or other instruments entitling the holder to acquire or take up shares in the Bank;
• adopting resolutions on the liquidation, disposal or lease of the enterprise of the Bank or its organized part and establishing limited property rights over them;
• adopting resolutions on the settlement of claims for damage caused at the establishment of the Bank, or by the exercise of management or supervision;
• granting consent to investing and disinvesting in companies and granting consent for the purchase and sale of bonds or other securities convertible into shares;
• assessing whether the Bank’s remuneration policy contributes to the development and safety of the Bank’s operations;
• granting consent to dispose of intangible fixed assets, property, plant and equipment, including making contributions to a company or cooperative if the market value of the assets exceeds 5% of total assets determined on the basis of the latest approved financial statements, and offering these assets for use to another entity, for a period longer than 180 days in a calendar year, based on a legal transaction, if the market value of the subject matter of the legal transaction exceeds 5% of total assets;
• granting consent to purchase fixed assets with a value exceeding PLN 100,000,000 or 5% of total assets determined based on the latest approved financial statements;
• assessing the adequacy of internal regulations concerning the functioning of the Supervisory Board and evaluating the effectiveness of the Supervisory Board’s actions.
The competences of the Bank’s Supervisory Board include, in particular:
• approving the Bank’s annual financial plan and long-term development plans (in particular the Bank’s strategy);
• approving the Bank’s compliance policy, and the rules of procedure for the compliance unit;
• approving the Bank’s management strategy, the risk management strategy, including the general level of risk at the Bank, the policy for estimating internal capital and capital management and reviewing the internal capital assessment strategies and procedures and capital management procedures;
• approving the policies for creating and changing the Bank’s products;
• approving the audit charter, the internal audit function’s strategy, the annual and long-term internal audit plans and the principles for cooperation with the internal audit function at PKO Bank Polski SA and the statutory auditor;
• approving the policy for remunerating Material Risk Takers;
• approving the operating principles of internal controls, the criteria for assessing the adequacy and effectiveness of the internal control system and the principles for classifying irregularities discovered by the internal controls;
• approving the Management Board Rules;
• approving Regulations for Setting the Mortgage Lending Value of real estate, which take effect after the approval by the PFSA;
• approving the Code of Ethics and Rules for the Management of Conflicts of Interest;
• approving the Bank’s framework organizational structure, adjusted to the scale and profile of the risk taken on by the Bank;
• approving the results of reviews of the performance of the cooperation agreements concluded with PKO Bank Polski SA;
• adopting the Supervisory Board Rules;
• appointing and dismissing individual members of the Management Board, specifying the detailed principles and procedures of conducting qualification procedures for Management Board members, determining terms and conditions of employment, including remuneration, of members of the Management Board and representing the Bank in agreements with members of the Management Board;
• if there are important reasons, suspending individual or all members of the Management Board in their functions and delegating members of the Supervisory Board to temporarily perform the functions of the members of the Management Board who were suspended, resigned or cannot perform their functions for other reasons, for a period of no longer than three months;
• giving consent to a member of the Management Board to conduct competitive activities or participate in a competing company as a partner in a civil law partnership or general partnership, or as a member of the authorities of a commercial company, or to participate in another competing legal person as a member of its governing bodies;
• giving consent to creating and winding up the Bank’s branches and other organizational units of the Bank in Poland and abroad;
• granting prior permission to the Management Board to acquire, encumber or sell real estate, interest in real estate or the right of perpetual usufruct therein; the permit is not required if the acquisition of the real estate, interest in the real estate or its perpetual usufruct being sold is conducted under executory, bankruptcy, composition proceedings or another type of arrangement with the Bank’s debtor;
• giving opinions on entertainment expenses and expenses on legal, marketing, PR and social communication, and management advisory services, incurred during the year;
• giving consent for the Bank to conclude a contract for legal, marketing, public relations, social communication and management advisory services: (i) if the amount of the total fee stipulated with respect to the provision of such services in the given contract or in other contracts concluded with the same entity exceeds PLN 500,000 net during one year (ii) increasing the fee above the aforesaid amount, and (iii) in which the maximum fee has not been specified;
• giving consent for the conclusion of a donation agreement or another agreement with a similar effect exceeding PLN 20,000 or 0.1% of the value of total assets determined based on the latest approved financial statements;
• giving consent for the conclusion of a loan forgiveness agreement or another agreement with a similar effect exceeding PLN 50,000 or 0.1% of the value of total assets determined based on the latest approved financial statements;
• giving opinions on the application of good practices;
• approving the policy and procedures for selecting an audit firm responsible for auditing the Bank’s financial statements and the policy for providing permitted non-audit services by the audit firm performing the audit, its related entities and members of its network;
• selecting an audit firm to conduct an audit or review of the Bank’s separate or consolidated financial statements;
• assessing the Directors’ Report on the Bank’s activities and the financial statements for the previous financial year in terms of their consistency with the books of account and documents and the factual situation, and the proposals of the Management Board concerning the distribution of profit or the offsetting of losses and preparing and presenting a written annual report of the Supervisory Board to the General Shareholders’ Meeting;
• assessing the adequacy and effectiveness of the internal governance, internal control system, including the control function of the compliance unit and the internal audit unit, as well as assessing the adequacy and effectiveness of the risk management system;
• assessing the effectiveness of the Bank’s compliance risk management;
• assessing the adequacy and effectiveness of the whistleblowing procedure with respect to violations of the law and of the procedures and ethical standards in force at the Bank;
• overseeing the implementation of the management system and assessing its adequacy and effectiveness;
• applying to the PFSA for consent to appoint two members of the Management Board, including the President of the Management Board and the member of the Bank’s Management Board responsible for managing risks material to the Bank’s operations, and to entrust the function of the member of the Management Board responsible for supervising the management of risks material to the Bank’s operations to an appointed member of the Management Board;
• informing the PFSA about including on the agenda of a Supervisory Board meeting items concerning: (i) dismissing the President of the Management Board; (ii) dismissing the member of the Management Board supervising material risk management or entrusting his/her duties to another member of the Board;
• applying to the PFSA for consent to the appointment of the Bank’s Cover Pool Monitor and Deputy Cover Pool Monitor;
• granting consent to appointing and dismissing the person managing the compliance and internal audit units;
• approving the remuneration of the managers of the compliance and internal audit units;
• granting consent to changing the registered office or location (address) of the Bank;
• assessing the functioning of the Bank’s remuneration policy and submitting relevant reports to the General Shareholders’ Meeting;
• assessing the application of the Principles of Corporate Governance for Supervised Institutions by the Bank.
In 2024, the Supervisory Board committees which operated in the Bank had, in particular, the following competences:
|
Audit and Finance Committee
|
• monitoring and periodically expressing opinions on: (i) the adequacy and effectiveness of the internal control system, risk management system and internal audit, including financial reporting; (ii) the effectiveness of the Bank’s compliance risk management and the adequacy of the compliance unit; (iii) the application of the Principles of Corporate Governance for Supervised Institutions and implementation and application of internal governance, and its adequacy and effectiveness; (iv) the adequacy and effectiveness of the whistleblowing policy and the ethical procedures and standards in force at the Bank, using the information obtained from the Bank, the Risk Committee, independent statutory auditor and from other sources; • giving opinions on the proposed annual and tri-annual internal audit plans; • giving opinions on Management Board information relating to the operation of the internal control system, the manner of ensuring independence of the internal audit and the compliance units, and ensuring funds for the purpose of performing tasks and improving the qualifications and skills of the units’ staff; • monitoring the financial reporting process, including the review of the Bank’s interim and annual financial statements, and expressing opinions on them; • monitoring the performance of audit work, in particular the audits performed by external audit firms, in consideration of all the conclusions and findings of the Audit Supervision Committee from the inspection of the audit firm; • controlling and monitoring the independence of the statutory auditor and the audit firm, including an evaluation of independence risks and safeguards, in particular when other, non-audit services are provided to the Bank by the audit firm; • obtaining a representation confirming the independence of the audit firm and of the auditors performing the audit of the Bank’s financial statements annually; • developing a policy for selecting an audit firm to conduct the audit and providing the Supervisory Board with recommendations as to the policy adopted; • developing a procedure for selecting the audit firm and providing the Supervisory Board with recommendations as to the procedure adopted; • developing a policy for providing permitted non-audit services by the audit firm which conducts the audit, its related entities, and by a member of the audit firm’s network, and presenting recommendations on adopting the policy to the Supervisory Board; • providing the Supervisory Board with recommendations as to the appointment of the audit firm to conduct the audit of the Bank’s financial statements; • giving consent for the provision of permitted non-audit services by the auditor, the audit firm which conducts the audit, and in the event that the auditor or audit firm are part of a network – for every member of such a network; • assessing the reasons for terminating a contract with the audit firm conducting the audit; • agreeing the policies for conducting audit activities by the audit firm performing the audit, in consideration of the proposed audit plan; • informing the Supervisory Board of the audit results and explaining how the audit contributed to the fairness of the Bank’s financial reporting and what was the role of the Committee in the audit process; • analysing the effectiveness of functioning of the internal controls and credit risk management system with respect to the correct determination of the allowances for expected credit losses; • ensuring compliance with all the requirements relating to the independence of a statutory auditor by external audit firms participating in the development of the IFRS 9 models and the processes of estimating allowances for expected credit losses; • submitting an additional audit report referred to in Article 11 of the Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 to the Management and Supervisory Boards; • submitting recommendations aimed at ensuring the fairness of the Bank’s financial reporting to the Supervisory Board; • giving opinions on the Bank’s strategic and financial plans; • giving opinions on Management Board resolutions with respect to the internal control system, the approval of which is the responsibility of the Supervisory Board; • analysing information and periodic reports in the area of particular internal control components; • meeting with the manager of the finance and accounting function at least once a year; • meeting with the manager of the internal audit unit and the manager of the compliance unit at least once a year – without the participation of members of the Bank’s Management Board; • giving opinions on appointing and dismissing, as well as on the remuneration of the manager of the internal audit unit and of the compliance unit. |
|
Risk Committee |
• giving opinions on the Bank’s overall current and future risk appetite; • giving opinions on the risk management strategy developed by the Management Board and the information on the said strategy submitted by the Management Board; • supporting the Supervisory Board in overseeing the implementation of the Bank’s operational risk management strategy by top management; • reviewing the prices of liabilities and assets offered to customers to check whether they are fully compliant with the Bank’s business model and its risk management strategy, and if they do not appropriately reflect the types of risk consistent with this model and strategy, presenting proposals to ensure the adequacy of the prices of liabilities and assets with respect to risk to the Bank’s Management Board; • monitoring conformity of the Bank’s risk-taking policy with the strategy and the financial plan; • analysing periodic risk reports, including the utilization of strategic risk tolerance limits and developing relevant guidelines on their basis; • issuing opinions about capital adequacy, the rules of evaluation of creditworthiness, the risk measurement models, the impairment model; • giving opinions on the disclosure policies regarding capital adequacy, the management of capital adequacy, liquidity risk, operational risk, model risk, and impairment measurement risk; • giving opinions on the draft Regulations for Setting the Mortgage Lending Value of real estate; • submitting information relevant for monitoring the effectiveness and adequacy of the Bank’s risk management system to the Audit and Finance Committee; • assessing the information received on potential non-compliance with the management strategy adopted by the Bank, its risk management strategy, adopted risk appetite and other policies approved by the Bank’s Management Board. |
|
Remuneration and Nomination Committee |
• annually assessing the structure, size, composition and effectiveness of the Bank’s Management Board and recommending potential changes in this respect to the Supervisory Board; • annually assessing the knowledge, competences and experience of the Management Board as a whole, and of particular members of the Board, and informing the Management Board of the results of the assessment; • periodically reviewing the Policy on assessing the suitability of candidates for members of the Management Board and key employees, and presenting respective recommendations to the Management Board; • recommending candidates for members of the Management Board and the scope of their responsibilities; • submitting proposals relating to appropriate forms of contracts with members of the Bank’s Management Board to the Supervisory Board; • preparing opinions on the Code of Ethics and the Principles for the Management of Conflicts of Interest; • preparing opinions on requests concerning the consent for a member of the Management Board to engage in competitive activities or to participate in a competing company as a partner in a civil law partnership or general partnership, or as a member of the authorities of a commercial company, or to participate in another competing legal person as a member of its governing bodies; • giving opinions on and performing periodic reviews, subject to the approval of the Supervisory Board, of the general principles of the policy for remunerating Material Risk Takers; • supporting the Supervisory Board in the process of giving opinions on the functioning of the Bank’s remuneration policy and respective reporting to the General Shareholders’ Meeting; • giving opinions on and monitoring the variable remuneration components of Material Risk Takers, second-level risk management, the compliance unit manager and the internal audit unit manager; • giving opinions on the amount of fixed remuneration for the manager of the internal audit unit and of the compliance unit; • giving opinions on the detailed rules and procedures for recruiting members of the Bank’s Management Board and assessing the suitability of members of the Bank’s Management Board; • preparing and carrying out, with potential support from external independent entities, the programme for raising the qualifications of members of the Supervisory Board. |
|
Commercial Committee |
• evaluating the results of reviews of the performance of the cooperation agreements concluded with PKO Bank Polski SA; • giving opinions on material changes to the criteria for qualifying products for the Bank; • giving opinions on products to be introduced to the Bank’s offer and the directions of changes in the Bank’s product offer; • monitoring and supervising the outsourcing of internal processes. |
The competences of the Bank’s Management Board include, in particular:
• defining the Bank’s strategy, taking into account the operational risk and the principles of prudent and stable management of the Bank;
• determining the risk management strategy and the general level of the Bank’s risk tolerance;
• determining the annual financial plan of the Bank, including the conditions for its implementation;
• creating and dissolving the Bank’s standing committees and determining their responsibilities;
• adopting Regulations: (i) for managing special funds accumulated from net profit, (ii) organizational regulations and the principles for the division of competences, (iii) of the Management Board, (iv) for setting the Mortgage Lending Value of real estate;
• appointing proxies and determining the principles for their appointment in the Bank;
• approving the operating principles of the internal control system, the criteria for assessing the adequacy and effectiveness of the internal control system and the principles for classifying irregularities detected by the internal control system;
• approving the audit charter, the principles of cooperation between the internal audit unit and its counterpart in PKO BP and the statutory auditor, giving opinions on the operating strategy of the internal audit unit and on the annual and multi-annual internal audit plans;
• creating, transforming and winding up the Bank’s branches and other organizational units in Poland and abroad;
• deciding on issues of mortgage covered bonds;
• determining the operating principles of the management system, including in particular: (i) the principles of capital adequacy information policy, (ii) the assumptions of the compliance risk management policy, (iii) the principles of managing capital adequacy and equity which relate to the estimation of internal capital, capital management, capital planning and dividend policy, (iv) the rules for managing particular risks;
• periodically assessing and verifying compliance with the Bank’s internal governance, including assessing the adequacy of the Bank’s internal regulations governing the operations of the Management Board and their effectiveness;
• determining accounting policies;
• approving the Bank’s annual financial statements;
• developing a remuneration policy,
• specifying banking products,
• determining the principles of the Bank’s participation in companies and other organizations;
• deciding on payment of interim dividend to the shareholders;
• deciding on the Bank’s conclusion of contracts with third parties the value of which equals or exceeds PLN 500,000.00 (in words: five hundred thousand zlotys) on an annual basis or the total value of which equals or exceeds PLN 2,000,000.00 (in words: two million zlotys);
• convening the General Shareholders’ Meetings, making the required announcements in the manner specified in legal regulations and notifying of circumstances which have to be entered to the National Court Register;
• making decisions on issues requested by a member of the Management Board or submitted for consideration by the Supervisory Board.
The Bank’s Management Board appointed the following standing committees with the following competences as at 31 December 2024:
|
Asset and Liability Committee |
• supporting the management of liquidity, interest rate and business risks – including macroeconomic, currency, capital risks – including leverage risk – and the related risk of models for their measurement; • managing the Bank’s capital adequacy; • reviewing documents concerning capital adequacy, equity, internal capital, stress testing, the aforementioned risks and the tolerance limits for those risks; • making decisions concerning the Bank’s operations, particularly in relation to risk measures and limits, risk management, result of the validation of risk models, stress-test assumptions, hedging strategies under hedge accounting and recommendations for the Management Board with regard to launching emergency measures relating to capital, and emergency measures relating to liquidity; • giving recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
|
Credit Committee |
• supporting the management of credit, concentration and residual risks, as well as the risk of the models used to measure such risks; • reviewing documents concerning the risks mentioned above, the profile and quality structure of the loan portfolio, impairment allowances, acquisition of loan portfolios and the real estate market; • making decisions concerning the Bank’s operations, particularly in relation to risk measures and limits, results of the validation of risk models, methodologies for and models of calculation of impairment allowances in respect of credit assets, cut-offs used in the assessment of credit risk, loan receivables purchased by the Bank and individual loan transactions; • giving recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
|
Operational Risk and Data Quality Committee
|
• effective management of operational risk, improving the safety of the Bank’s operating activities; • outsourcing risk management; • determining the directions of development of operational risk management; • supervising the functioning of operational risk management, including tasks relating to ensuring the Bank’s business continuity and the security of the IT and ICT environment; • setting tasks in the event of emergencies putting the Bank’s image at risk, which could lead to operating losses; • determining the directions of operations in the area of managing the quality of data and data architecture in the Bank, in the context of the Data Management System (DMS); • supervising the Data Management System, including assessing its effectiveness and actions of the Bank’s particular business units; • issuing recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
|
Strategy and Business Initiatives Committee |
• determining the directions of the strategic planning and managing the Bank’s strategy and the IT strategy; • determining the directions and monitoring the implementation of initiatives related to the pursuit of the Bank’s strategy and the IT strategy; • determining the directions of changes in the product offer and in the lending process; • determining the directions of work on the products’ profitability; • managing the reputation and compliance risks; • issuing recommendations for the relevant governing bodies of the Bank, organizational units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences. |
|
Green Covered Bonds Committee |
• supervising the issuance of Green Covered Bonds, including determining the directions of changes in the principles of issuing Green Covered Bonds and assessing and selecting assets eligible for funding with the Green Covered Bonds; • examining materials relating to the guidelines and principles set by the International Capital Markets Association (ICMA) for the Green Covered Bonds market, domestic regulations on the binding energy efficiency standards, reporting on the allocation of funds earned on emissions and the impact on the funding environment gained by issuing the Green Covered Bonds, in accordance with the rules for issuing the Green Covered Bonds in force at the Bank, investor information with respect to the Green Covered Bonds; • making decisions relating to the Bank’s operations, among other things, in the scope of assessing and selecting qualified loans according to the methodology adopted by the Bank and adopting the rules for issuing the Green Covered Bonds by the Bank pursuant to appropriate guidelines; • giving recommendations for the relevant governing bodies of the Bank, business units, members of the Bank’s Management Board, project teams or task forces – within the scope of its competences.. |
6.4. The Management Board of PKO Bank Hipoteczny SA
In 2024, the composition of the Supervisory Board of PKO Bank Hipoteczny SA was as follows:
|
|
Function |
Position holding period |
|
Wojciech Papierak |
President of the Management Board
Vice-President of the Management Board responsible for managing the work of the Management Board |
06.12.2024 – to date
10.08.2024 - 05.12.2024 |
|
Katarzyna Kurkowska-Szczechowicz |
President of the Management Board
Vice-President of the Management Board |
27.01.2023 – 09.08.2024
10.08.2024 – to date |
|
Piotr Jaworski |
Vice-President of the Management Board |
01.07.2023 – 09.08.2024 |
|
Piotr Kochanek |
Vice-President of the Management Board |
01.01.2019 – to date |
|
Stanisław Skoczylas |
Vice-President of the Management Board |
06.10.2022 – 29.02.2024 |
On 1 August 2024, the Supervisory Board appointed Mr Wojciech Papierak as President of the Bank’s Management Board for the current joint term of office of the Bank’s Management Board, subject to the approval of the appointment by the Financial Supervision Authority and as of the date of such approval. Pending the approval, from 10 August 2024, Mr Wojciech Papierak acted as Vice-President of the Management Board responsible for managing the work of the Management Board.
On 6 December 2024 the Polish Financial Supervision Authority gave its consent to appoint Mr Wojciech Papierak President of the Management Board for the current four-year term of office on the Bank’s Management Board.
On 26 June 2024, the Annual General Shareholders’ Meeting:
• approved the Directors’ Report for the financial year ended 31 December 2023 and the Financial Statements for the financial year ended 31 December 2023;
• gave a vote of approval to: (i) Ms Katarzyna Kurkowska-Szczechowicz for the performance of her duties as a member of the Management Board, performing the function of Vice-President of the Management Board in charge of the Management Board’s work in the period from 1 January 2023 to 26 January 2023 and the function of President of the Management Board in the period from 27 January 2023 to 31 December 2023; (ii) Mr Piotr Kochanek for the performance of his duties as a member of the Management Board, performing the function of Vice-President of the Management Board in the period from 1 January 2023 to 31 December 2023; (iii) Ms Katarzyna Surdy for the performance of her duties as a member of the Management Board, acting as Vice-President of the Management Board, in the period from 1 January 2023 to 31 August 2023; (iv) Mr Stanisław Skoczylas for the performance of his duties as a member of the Management Board, acting as Vice-President of the Management Board, in the period from 1 January 2023 to 31 December 2023; and (v) Mr Piotr Jaworski for the performance of his duties as a member of the Management Board, acting as Vice-President of the Management Board, in the period from 1 July 2023 to 31 December 2023.
On 23 February 2024, Mr Stanislaw Skoczylas resigned from membership on the Bank’s Management Board and from his position as Vice-President of the Bank’s Management Board, as of 29 February 2024.
On 9 August 2024, the Supervisory Board of PKO Bank Hipoteczny S.A. dismissed Mr Piotr Jaworski from the position of Vice President of the Bank’s Management Board and at the same time from the Bank’s Management Board with effect as at the end of 9 August 2024.
By Resolution No. 52/2024 of 9 August 2024, the Bank’s Supervisory Board defined the following internal segregation of key competences within the Bank’s Management Board, which as at 31 December 2024 was as follows:
|
WOJCIECH PAPIERAK |
President of the Management Board responsible for overseeing the internal audit function and the performance of the control function, the management of: compliance risk, reputation risk, legal services, human resources, the process of outsourcing services to external parties and matters in the area of anti-money laundering and terrorist financing as well as financial planning and control. |
|
Other functions performed: |
Chairperson of the Strategy and Business Initiatives Committee Chairperson of the Asset and Liability Committee Chairperson of the Green Covered Bonds Committee Deputy Chairperson of the Operational Risk and Data Quality Committee |
|
KATARZYNA KURKOWSKA-SZCZECHOWICZ |
Vice-President of the Management Board responsible for overseeing the issuance of securities, raising funding, communication and the creation and development of the product offering, activities relating to coordination of the sale of products and the acquisition of loan receivables and the process of their further servicing, the functioning and efficiency of IT resources. |
|
Other functions performed: |
Deputy Chairperson of the Strategy and Business Initiatives Committee Member of the Asset and Liability Committee Member of the Credit Committee Member of the Operational Risk and Data Quality Committee Member of the Green Covered Bonds Committee |
|
Piotr Kochanek |
Vice-President of the Management Board responsible for overseeing the management of all risks relating to the Bank’s activities, with the exception of compliance and reputation risks, overseeing the creditworthiness assessment process and the determination of the Mortgage Lending Value of real estate and the restructuring and recovery process, as well as accounting and financial reporting matters, and settling and confirming treasury transactions. |
|
Other functions performed: |
Chairperson of the Credit Committee Chairperson of the Operational Risk and Data Quality Committee Deputy Chairperson of the Asset and Liability Committee Deputy Chairperson of the Green Covered Bonds Committee Member of the Strategy and Business Initiatives Committee |
Other management functions of the members of the Management Board
|
|
Function |
Position holding period |
|
Wojciech Papierak |
TOYA S.A. with its registered office in Wrocław - Member of the Supervisory Board |
During the period of holding the position |
|
Katarzyna Kurkowska-Szczechowicz |
Did not perform additional functions as a member of the Management Board or Supervisory Board or held any other positions as director |
Throughout the reporting period |
|
Piotr Kochanek |
Did not perform additional functions as a member of the Management Board or Supervisory Board or held any other positions a director |
Throughout the reporting period |
|
Stanisław Skoczylas |
Did not perform additional functions as a member of the Management Board or Supervisory Board or held any other positions a director |
During the period of holding the position |
|
Piotr Jaworski |
Smartbeta Piotr Jaworski - owner Institute for Sustainable Transformation - Foundation - Member of the Foundation Board |
During the period of holding the position |
Recruitment policy for appointing Management Board members and their evaluation
The process of selecting and evaluating candidates for members of the Management Board in PKO Bank Hipoteczny SA is carried out by the Remuneration and Nomination Committee of the Bank’s Supervisory Board. The Committee takes into consideration the guidelines of the European Banking Authority of 21 March 2018 on the assessment of the suitability of members of the management body and key function holders (EBA Guidelines), the Regulation of the Minister of Development and Finance of 10 March 2017 on information and documents concerning the founders and the management board of the bank to be submitted to the PFSA, as well as the methodology for assessing the appropriateness of members of the bodies of entities supervised by the PFSA. In selecting candidates, the Committee takes into account the profile, scope and scale of PKO Bank Hipoteczny SA’s operations. When assessing a candidate, the Committee also verifies that the candidate’s experience and knowledge will reinforce the skills possessed by the other members of the Bank’s Management Board and complement them, so as to ensure that all areas managed at the Bank are covered. The examination of the above criterion is intended to ensure differentiation with regard to the selection of members of the governing body, its objectives, tasks and scope of action.
Before their appointment, all members of the Management Board of PKO Bank Hipoteczny SA were evaluated in terms of their suitability, in accordance with the EBA and PFSA guidelines.
Members of the Management Board are subject to a continuous evaluation by the Supervisory Board’s Remuneration and Nomination Committee and the Supervisory Board, starting from the moment of their recruitment and continuing through their entire term of office. Moreover, pursuant to Article 395 § 2(3) of the Commercial Companies Code, each year the Annual General Shareholders’ Meeting grants each individual member of the Management Board a vote of approval. The granting of this vote of approval constitutes an evaluation of the Management Board members, which is independent of the approval of the Bank’s Directors’ Report by the General Shareholders’ Meeting.
The process described above for appointments to perform functions on the Management Board and the positive evaluation of members of the Bank’s Management Board constitutes confirmation of the proper performance of their duties, based on adequate knowledge, abilities and experience, in accordance with the requirements of Article 22aa of the Banking Law.
6.5. The Supervisory Board of PKO Bank Hipoteczny SA
In 2024, the composition of the Supervisory Board of PKO Bank Hipoteczny SA was as follows:
|
|
Function on the Supervisory Board |
Date of appointment |
Date of dismissal / resignation |
||||||
|
Mieczysław Król |
Chairman |
27.08.2021 |
22.02.2024 |
√ |
|
|
|
|
|
|
Marek Radzikowski |
Member of the Supervisory Board, Chairman |
19.08.2024 23.08.2024 |
22.08.2024 |
√ |
|
|
|
C |
C |
|
Maciej Brzozowski |
Deputy Chairman |
05.05.2022 |
14.02.2024 |
√ |
|
|
|
|
|
|
Tomasz Baum |
Member of the Supervisory Board |
06.12.2022 |
28.05.2024 |
√ |
√ |
|
|
|
|
|
Iwona Brzozowska-Poniedzielska |
Member of the Supervisory Board |
29.05.2024 |
|
√ |
√ |
C |
M |
|
|
|
Robert Ciborowski |
Member of the Supervisory Board |
29.05.2024 |
|
√ |
√ |
M |
|
|
|
|
Lucyna Kopińska |
Member of the Supervisory Board |
01.09.2019 |
|
√ |
|
|
D |
|
M |
|
Jadwiga Lesisz |
Member of the Supervisory Board |
01.09.2019 |
13.06.2024 |
√ |
√ |
|
|
|
|
|
Paweł Metrycki |
Member of the Supervisory Board |
05.05.2022 |
|
√ |
|
|
C |
|
|
|
Jakub Niesłuchowski |
Member of the Supervisory Board Deputy Chairman |
28.04.2022 22.02.2024 |
21.02.2024
|
√ |
|
D |
|
D |
M |
C - Chairman of the Committee, D - Deputy Chairman of the Committee, M - Member of the Committee
*The composition of the Committees is shown as at 31 December 2024.
There were eight meetings of the Supervisory Board in 2024.
On 24 May 2024, the Extraordinary General Shareholders’ Meeting:
• dismissed Mr Tomasz Baum from his position as a member of the Company’s Supervisory Board effective from the end of the day on 28 May 2024;
• appointed: (i) Ms Iwona Brzozowska-Poniedzielska and (ii) Mr Robert Ciborowski members of the Supervisory Board for a joint term of office effective from 29 May 2024.
On 26 June 2024, the Annual General Shareholders’ Meeting:
• gave a vote of approval to: (i) Mr Mieczysław Król for the performance of his duties as a member of the Supervisory Board, acting as Chairman of the Supervisory Board in the period from 1 January 2023 to 31 December 2023 , (ii) Mr Paweł Metrycki for the performance of his duties as a member of the Supervisory Board in the period from 1 January 2023 to 31 December 2023, (iii) Ms Lucyna Kopińska for the performance of her duties as a member of the Supervisory Board in the period from 1 January 2023 to 31 December 2023, (iv) Ms Jadwiga Lesisz for the performance of her duties as a member of the Supervisory Board in the period from 1 January 2023 to 31 December 2023, (v) Ms Ilona Wołyniec for the performance of her duties as a member of the Supervisory Board in the period from 1 January 2023 to 30 June 2023, (vi) Mr Maciej Brzozowski for the performance of his duties as Deputy Chairman of the Supervisory Board in the period from 1 January 2023 to 31 December 2023, (vii) Mr Jakub Niesłuchowski for the performance of his duties as a member of the Supervisory Board in the period from 1 January 2023 to 31 December 2023, (viii) Mr Tomasz Baum for the performance of his duties as a member of the Supervisory Board in the period from 1 January 2023 to 31 December 2023, (ix) Mr Piotr Jaworski for the performance of his duties as a member of the Supervisory Board in the period from 13 February 2023 to 30 June 2023.
Pursuant to Article 395 § 2(3) of the Commercial Companies Code, the Annual General Shareholders’ Meeting gives a vote of approval to each member of the Supervisory Board separately once a year. The vote of approval is an evaluation of individual members of the Supervisory Board, independent of the Annual General Shareholders’ Meeting’s appraisal of the Supervisory Board’s activity report.
The above confirms that the members of the Supervisory Board duly performed their duties based on adequate knowledge, skills and experience as required by Article 22aa of the Banking Law.
Information concerning the Audit and Finance Committee
In 2024, the composition of the Audit and Finance Committee of PKO Bank Hipoteczny SA was as follows:
|
|
Function in the Audit and Finance Committee |
Date of appointment |
Date of dismissal / resignation
|
|||
|
Paweł Metrycki |
Deputy Chairperson of the Committee |
07.10.2019 |
29.02.2024 |
|
√ |
√ |
|
Jadwiga Lesisz |
Chairperson of the Committee |
05.05.2022 |
13.06.2024 |
√ |
√ |
√ |
|
Tomasz Baum |
Member of the Committee |
15.12.2022 |
28.05.2024 |
√ |
√ |
√ |
|
Iwona Brzozowska-Poniedzielska |
Chairperson of the Committee |
21.06.2024 |
|
√ |
√ |
√ |
|
Jakub Niesłuchowski |
Member of the Committee Deputy Chairperson of the Committee |
05.04.2024 21.06.2024 |
20.06.2024
|
|
√ |
√ |
|
Robert Ciborowski |
Member of the Committee |
21.06.2024 |
|
√ |
√ |
√ |
In 2024, six meetings of the Audit and Finance Committee took place.
6.6. Remuneration and Human Resources Management Policy
Number of employees
As at 31 December 2024, PKO Bank Hipoteczny SA employed 59 people. This is an increase of one employee compared with the end of 2023.
Remuneration Policy
The basic internal regulation with regard to the remuneration policy is the Remuneration Policy of PKO Bank Hipoteczny SA approved by the Supervisory Board. This policy specifies:
• the functions of particular structures and bodies within the Bank in the implementation and application of the Policy and the identification of positions of Material Risk Takers (MRT);
• the functioning of fixed and variable components of remuneration of the members of the Bank’s Management Board, Material Risk Takers (MRT) and employees other than members of the Management Board and MRT;
• benefits other than remuneration available to the employees.
In addition, the Bank complies with the Remuneration Regulations of PKO Bank Hipoteczny SA implemented on the order of the President of the Management Board. According to the Regulations, the Bank’s employees are entitled to the following remuneration components:
• basic salary;
• bonuses and awards for special achievements in their work;
• additional remuneration for overtime work and night work.
The remuneration policy of PKO Bank Hipoteczny SA is consistent with the principles of proper and effective risk management.
The Bank has no employee share programme.
Basic Salary
The Bank has a gender-neutral remuneration policy. Fixed remuneration is calculated with regard to the complexity of the tasks performed in a given organizational structure, the level of responsibility related to a given position, the work results achieved and the evaluation of an employee’s competences.
Variable Remuneration
The Bank regulates the process of granting variable remuneration in the Bank Hipoteczny SA Remuneration Policy, the Principles for employing and remunerating members of the Bank’s Management Board and the Principles for granting bonuses to Bank employees whose actions have a material impact on Bank Hipoteczny SA’s risk profile – Material Risk Takers – and the Principles of granting bonuses to the Bank’s employees.
The targets assigned are aimed at ensuring that the risk associated with the Bank’s operations is taken into account. All targets result from target grids approved by the Bank’s Management Board, which are cascaded to the employees of the individual structures. MRTs are additionally responsible for special projects aimed at executing the Bank’s strategy.
MRTs, who have significant influence on the safety level and stable development of the Bank, are subject to additional remuneration restrictions. Variable remuneration components are granted to MRTs, including the Management Board members, for a particular bonus year (calendar year) following the settlement of bonus targets in non-deferred and deferred form. In order to ensure that the results are sustainable, deferred variable remuneration components can be reduced if the Bank’s financial results have deteriorated, the Bank incurred a loss or other variables deteriorated.
Moreover, part of the value of each component is payable in the form of an instrument linked to the carrying amount of the Bank’s net assets. Measurement of the instrument takes into account the Bank’s situation and the market benchmarks of the financial sector.
With regard to the award and payment of variable remuneration components to members of the Management Board or MRTs, the limited scope provisions referred to in Article 9 ca(1b) of the Banking Law apply, i.e. variable remuneration components paid for a given bonus period are not subject to deferral and are paid in full in cash, in the event that the following conditions are cumulatively met:
1) the base amount of the variable remuneration does not exceed the PLN equivalent of EUR 50,000, calculated according to the mid EUR exchange rate announced by the National Bank of Poland on the last working day of the preceding year;
2) the base amount of variable remuneration does not exceed one-third of the total annual remuneration for the bonus period concerned.
The Supervisory Board had rights to approve bonus parameters for the Management Board, and the Management Board for MRTs and other employees.
Irrespective of the bonus system, an employee awards system functions in the Bank, as part of which an award fund is created, designated for individual discretionary awards for employees who achieve distinctive results in their professional work or for achievements as a result of which important outcomes are achieved for the Bank.
Employee benefits
|
Extra medical care |
The Bank provides its employees with extra medical care (in addition to occupational medical care provided in accordance with the Labour Code). Different medical packages are assigned to specific job categories. |
|
Group Insurance |
The Bank’s employees and members of the Bank’s Management Board have the possibility of joining group insurance, which is paid for by the employees through the Bank. |
|
MyBenefit cafeteria system |
Under this system, every employee of the Bank can manage the funds assigned to him/her from the Company Social Fund as he/she chooses via an internet platform. |
|
Multisport Plus card |
Every employee of the Bank has the opportunity to order through an online platform a Multisport Plus card, which is paid for by the employer. |
|
Employee Pension Scheme (PPE) |
Employees have the possibility of joining the Employee Pension Scheme where the base premium is fully funded by the employer. |
|
“Training zone” platform |
Employees have the opportunity to use the Training Zone platform, where training is available in a number of categories including programming, website development, computer graphics, using office software (MS Office, Google), psychology, graphics-photography, managerial skills, etc. |
Principles for remunerating members of the Bank’s Management Board
On 30 October 2024 the Policy for employing and remunerating members of the Management Board of the Bank was adopted by Resolution of the Supervisory Board No. 65/2024. Based thereon, members of the Bank’s Management Board are entitled to:
• fixed remuneration, whose level is set by the Bank’s Supervisory Board in a resolution, separately for each of the members of the Management Board;
• variable remuneration – additional remuneration granted and payable after the bonus period, in particular in the form of bonuses, rewards for special achievements at work, severance pay (other than fixed remuneration and benefits granted based on the applicable laws).
The information on remuneration components and other benefits payable to Management Board members in the reporting period is presented in Chapter 6.7.
Variable remuneration components for members of the Management Board and Material Risk Takers (MRT)
In accordance with the requirements of the CRD, i.e. Commission Delegated Regulation (EU) 2021/923 (as amended) supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards with respect to qualitative and appropriate quantitative criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile, referred to in Article 92 (3) of the Directive, as well as in connection with the Regulation of the Minister of Finance, Funds and Regional Policy of 8 June 2021 on the risk management system, the internal control system, and the remuneration policy in banks, the following regulations laying down the principles of determining variable remuneration components are in force in the Bank:
• The Policy for employing and remunerating members of the Management Board of the Bank, adopted by a Resolution of the Supervisory Board;
• The principles of remunerating persons whose professional activities significantly affect the Bank’s risk profile (MRTs);
• The list of positions where professional activities have a significant impact on the institution’s risk profile and identification of key functions in the Bank (the list of MRTs).
As at 31 December 2024 the policy on variable remuneration components for Management Board members and MRTs was applicable to three Management Board members, four former Management Board members and thirteen MRT positions.
Variable remuneration components are awarded for the purpose of the achievement of objectives assigned as part of the Management by Objectives (MbO) system.
Variable salary components are awarded and paid in the following forms:
• non-deferred;
• deferred.
In 2024 variable remuneration components were paid out based on resolutions passed in previous periods. In connection with the continued state of the COVID-19 epidemic in Poland, in particular the temporary extraordinary administrative restrictions relating to business operations and the potential economic consequences of this state and their expected impact on the financial sector, taking into consideration the statement of the European Banking Authority dated 15 December 2020 and of the PFSA dated 17 April 2020 on the expectations with respect to banks’ actions relating to paying out variable remuneration components, the decision was taken to temporarily limit the amount of funds for the variable portion of remuneration of members of the Management Board and key managers for 2020.
Both non-deferred and deferred remuneration is granted in cash and in the form of instruments (i.e. phantom shares) converted into cash after the bonus period, and in the case of deferred remuneration – after the period of deferral.
Each of the accrued components of variable remuneration may be reduced as a consequence of:
• material violations of duties following from the employment contract or contract for services;
• irregularities in the performance of the assigned professional duties;
• material non-compliance with the legal regulations or customer service standards;
• material violation of the principles of community life in relation to other employees and co-workers.
For members of the Management Board, variable remuneration may only be assigned and paid provided that the Directors’ Report and the financial statements for the previous financial year have been approved and the Management Board member has been granted a discharge in respect of his/her duties. Variable remuneration may be reduced by the Supervisory Board up to total deprivation of the right to such remuneration in the event that up to the date of payment (in particular within the last three years) a member of the Management Board was responsible for the irregularities referred to above.
A member of the Management Board is entitled to severance pay as a result of the termination of his/her contract for services if he/she ceases to perform the functions of a Management Board member, in an amount equal to three times the fixed portion of remuneration on condition that the function of Management Board member was performed for at least twelve months before the termination of the contract; the period of performing a function on the Management Board includes a period of constant performance of the function directly before the date of concluding the management contract. A member of the Management Board is entitled to compensation in respect of the ban to engage in competitive activities over a period of six months after termination of the management contract, in the amount of 100% of the fixed portion of remuneration for providing managerial services, following from the contract for services, as at the date of its termination. A member of the Management Board is entitled to contributions to the Employee Pension Fund over a period of performing the duties of member of the Management Board, which are accrued on the fixed and variable components of remuneration and which are not included in the fixed and variable remuneration; the amount of the contributions is the same as for the Bank’s employees.
In 2024, none of the members of the Management Board or employees at PKO Bank Hipoteczny SA received total remuneration of at least EUR 1 million.
The policy on variable remuneration components for members of the Management Board and Material Risk Takers is reviewed annually by the Internal Audit Office, the Remuneration and Nomination Committee of the Bank’s Supervisory Board and by the Supervisory Board of PKO Bank Hipoteczny SA.
In the reporting period, five meetings of the Remuneration and Nomination Committee of the Supervisory Board of PKO Bank Hipoteczny SA were held.
Contracts Concluded by and Between the Bank and management Board Members
Within the meaning of the provisions of § 2(1)(30)(a) of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information to be reported by issuers of securities and the conditions for treating information required by the laws of a state other than a Member State as equivalent, the persons managing the Bank are the Management Board members.
In 2024 each of the members of the Bank’s Management Board performed their functions based on the contracts for providing management services concluded with the Bank, which determined – among other things – the terms and conditions relating to remuneration and the ban on performing competitive activities.
6.7. Benefits for Key Management of PKO Bank Hipoteczny SA
Benefits for members of the Supervisory Board
Pursuant to the Resolution of the Extraordinary General Shareholders’ Meeting of the Bank of 31 October 2024, members of the Supervisory Board, with the exception of members of the Supervisory Board who are employed by PKO Bank Polski SA or a company of the PKO Bank Polski SA Group or who receive, upon termination of such employment, non-competition compensation from PKO Bank Polski SA or a company of the PKO Bank Polski SA Group, are entitled to a monthly remuneration for performing the function of member of the Supervisory Board in an amount equivalent to one time the basis of assessment referred to in Article 1.3(11) of the Act of 9 June 2016 on the principles of determining the salaries of persons managing certain companies. The remuneration is increased by 10% when a member of the Supervisory Board participates in at least one standing committee of the Supervisory Board.
|
Benefits for independent members of the Supervisory Board (PLN ‘000) |
01.01.2024 – 31.12.2024 |
01.01.2023– 31.12.2023 |
|
Tomasz Baum |
50 |
90 |
|
Iwona Brzozowska-Poniedzielska |
51 |
- |
|
Robert Ciborowski |
51 |
- |
|
Elżbieta Bugaj |
- |
5 |
|
Mieczysław Król |
23 |
12 |
|
Jadwiga Lesisz |
54 |
91 |
|
Total* |
229 |
198 |
*Gross benefits excluding surcharges.
Benefits for members of the Management Board received, receivable and potentially receivable
|
BENEFITS FOR MEMBERS OF THE MANAGEMENT BOARD (PLN ‘000) |
01.01.2024- 31.12.2024 |
|||||
|
Short-term employee benefits |
Other long-term employee benefits – variable cash remuneration[25] |
Short-term employee benefits |
||||
|
Remuneration 01.01.2024-31.12.2024[26] |
Other received 01.01.2024- 31.12.2024 |
Received 01.01.2024-31.12.2024 |
Potentially receivable as at 31.12.2024 |
Received 01.01.2024-31.12.2024 |
Potentially receivable as at 31.12.2024 |
|
|
Wojciech Papierak |
292.0
|
- |
- |
- |
- |
- |
|
Piotr Kochanek |
496.0 |
- |
106.1 |
115.2 |
100.6 |
182.4 |
|
Katarzyna Kurkowska-Szczechowicz |
596.4
|
- |
85.6 |
63.5 |
- |
149.1 |
|
Piotr Jaworski |
255.1 |
- |
105.0 |
- |
- |
- |
|
Stanisław Skoczylas |
70.0 |
- |
106.1 |
- |
- |
- |
|
Members of the Management Board who have not performed their functions in 2024 |
0 |
- |
174.2 |
95.8 |
79.2 |
124.2 |
|
Total benefits for members of the Management Board* |
1,709.5 |
- |
577.0 |
274.5 |
179.8 |
455.7 |
*Gross benefits excluding surcharges.
|
BENEFITS FOR MEMBERS OF THE MANAGEMENT BOARD (PLN ‘000) |
01.01.2023 - 31.12.2023 |
|||||
|
Short-term employee benefits |
Other long-term employee benefits – variable cash remuneration[27] |
Short-term employee benefits |
||||
|
Remuneration 01.01.2023-31.12.2023[28] |
Other received 01.01.2023- 31.12.2023 |
Received 01.01.2023-31.12.2023 |
Potentially receivable as at 31.12.2023 |
Received 01.01.2023-31.12.2023 |
Potentially receivable as at 31.12.2023 |
|
|
Katarzyna Kurkowska-Szczechowicz |
596.4
|
- |
74.6 |
- |
- |
- |
|
Piotr Jaworski |
210.0 |
- |
- |
- |
- |
- |
|
Piotr Kochanek |
480.0 |
- |
178.0 |
60.7 |
33.1 |
176.8 |
|
Stanisław Skoczylas |
412.3 |
- |
49.7 |
- |
- |
- |
|
Katarzyna Surdy |
280.0 |
- |
245.4 |
- |
- |
- |
|
Members of the Management Board who have not performed their functions in 2023 |
- |
- |
443.1 |
67.8 |
86.8 |
259.4 |
|
Total benefits for members of the Management Board* |
1,978.7 |
- |
990.7 |
128.5 |
119.9 |
436.1 |
*Gross benefits excluding surcharges.
Benefits after the term of the contract for services
In 2024, post-employment benefits with respect to the ban on competition were paid to:
• Piotr Jaworski, in the amount of PLN 130 thousand;
• Stanisław Skoczylas, in the amount of PLN 210 thousand;
• Katarzyna Surdy, in the amount of PLN 105 thousand.
Severance benefits
In the period from 1 January to 31 December 2024 severance benefits were paid to:
• Piotr Jaworski, in the amount of PLN 105 thousand;
• Stanisław Skoczylas, in the amount of PLN 105 thousand;
• Agnieszka Krawczyk, in the amount of PLN 11.2 thousand.
7. Corporate governance and information for investors
Representation on compliance with the rules for corporate governance
Audit firm
Other information
7.1. Representation on compliance with the rules for corporate governance
The general rules for corporate governance adopted by the Bank, i.e. the internal regulations for managing the Bank and controlling its operations, follow from the generally binding legal regulations, in particular the Commercial Companies Code and the Banking Law, as well as the rules issued by the PFSA, i.e. the Principles of Corporate Governance for Supervised Institutions and Recommendation Z concerning the rules of internal governance.
The Bank has adopted the Principles of Corporate Governance for Supervised Institutions, as issued by the Polish Financial Supervision Authority, on the basis of the following decisions by the Bank’s bodies:
• the Resolution of the Bank’s Management Board of 15 December 2014 – in relation to the powers and duties of the Management Board, i.e. conducting the Bank’s affairs and its representation, in accordance with the generally applicable laws and the Bank’s Articles of Association;
• the Resolution of the Bank’s Supervisory Board of 18 December 2014 – in relation to the powers and duties of the Supervisory Board, i.e. supervising the conduct of the Bank’s affairs, in accordance with the generally applicable laws and the Bank’s Articles of Association;
• the Resolution of the General Shareholders’ Meeting of 22 December 2015 – in relation to the powers reserved for the General Shareholders’ Meeting.
Pursuant to and to the extent arising from the aforementioned decisions, the Bank opted out of the following provisions of the Principles of Corporate Governance for Supervised Institutions:
• the provisions referring to the principles of cooperation with and rights of multiple shareholders (§ 8 (4), § 9 (1) and (6), § 10 (3), § 11 (3) and § 31 (3)), which are not applied because the Bank only has a single shareholder;
• chapter 9, concerning the management of assets at the customer’s risk, because the Bank does not conduct operations in this area;
• the principle described in § 22. 1, concerning the independence of Supervisory Board members, manifesting itself primarily in the lack of direct and indirect ties to the supervised institution, members of the management and supervisory bodies, significant shareholders and related parties; it should be added that two members meeting the independence requirements set out in the Act of 11 May 2017 on statutory auditors, audit firms and public oversight were appointed as members of the Bank’s Supervisory Board (Journal of Laws, item 1089 as amended).
As required by § 27 of the Corporate Governance Principles for Supervised Institutions the “Principles”), on 28 February 2024, the Bank’s Supervisory Board assessed the application of the Principles at the Bank in 2023. The Supervisory Board positively assessed the application of the Principles at the Bank, finding that the Bank and its bodies applied the Principles to the extent adopted by the Bank, adequate to the scale, nature of the Bank’s activities and the specific nature of the Bank.
The text of the Principles can be found on the Polish Financial Supervision Authority’s website at:
The Bank applies Recommendation Z relating to internal governance in banks pursuant to the principle of proportionality and adequacy which follow from the scale, nature of operations and specific character of the Bank.
The Bank represents that when the scope of Recommendation Z covers the same subjects as the Principles of Corporate Governance for Supervised Institutions, the provisions of Recommendation Z prevail. To the extent not governed by Recommendation Z, the Principles of Corporate Governance for Supervised Institutions apply.
The text of Recommendation Z on corporate governance principles in banks can be found on the website of the Polish Financial Supervision Authority:
https://www.knf.gov.pl/knf/pl/komponenty/img/Rekomendacja_Z_70998.pdf
Diversity Policy
Diversity management at the Bank concerns all employees, key managers and the Bank’s authorities. Diversity activities affect many aspects of the Bank’s operations and are aimed at respecting other persons, equal treatment of the employees and making use of their potential. Diversity means that people are important regardless of their gender, age, health, sexual orientation, religion, marital status or country of origin. Therefore, the following solutions were implemented in the form of regulations, processes and HR policies:
• The Code of Ethics, the Code of Ethics for suppliers, service providers and bidders cooperating with PKO Bank Hipoteczny in procurement procedures, and the Rules and regulations of the Bank’s operations concerning, among other things, preventing discrimination due to gender, age, disability, race, religion, nationality, political views, trade union membership, ethnicity, religion or sexual orientation, as well as due to employment for a specified or unspecified period or full- or part-time. In addition, the aforementioned documents identify the values, principles, standards of conducting and ethical attitudes in relationships with Customers, in the Bank’s business operations, and in the Bank’s relations with the environment;
• The Bank observes the principles of equal treatment during the recruitment process and at work; the candidate selection processes are based on objective criteria, and their individual stages follow the established procedures;
• The Bank unconditionally reacts to and prevents mobbing, harassment and discrimination, and other forms of unequal and inappropriate treatment.
Diversity policy concerning the management and supervisory staff as at 31 December 2024
Diversity management also concerns the PKO Bank Hipoteczny SA’s Supervisory Board and Management Board members and the key managers. The management and supervisory staff includes persons of different gender, age and experience.
|
Gender |
Female |
Male |
|
Supervisory Board |
2 |
4 |
|
Management Board |
1 |
2 |
|
Key managers |
6 |
7 |
|
Age |
30 – 40 years |
41 – 50 years |
51 – 60 years |
over 60 years |
|
Supervisory Board |
- |
4 |
2 |
- |
|
Management Board |
- |
1 |
2 |
- |
|
Key managers |
3 |
6 |
4 |
- |
|
Period of employment with PKO Bank Hipoteczny SA |
up to 1 year |
1 – 5 years |
over 5 years |
|
Supervisory Board |
3 |
- |
3 |
|
Management Board |
1 |
1 |
1 |
|
Key managers |
2 |
4 |
7 |
Main features of the internal control and risk management systems in relation to the process of preparing the financial statements
In order to ensure the integrity and correctness of the financial reporting process, the Bank has designed and implemented a number of controls embedded in the reporting systems and the internal regulations of the process. These controls involve, among other things, the use of continuous verification and reconciliation of reporting data with the accounting, analytical and other documents that form the basis for the preparation of the financial statements.
The process of preparing the financial statements is reviewed periodically, in particular with regard to the correctness of the accounting reconciliations, substantive analysis and reliability of the information. In accordance with internal regulations, the financial statements are adopted by the Management Board of PKO Bank Hipoteczny SA. They are subject to the opinion of the Audit and Finance Committee of the Supervisory Board of PKO Bank Hipoteczny SA appointed by the Supervisory Board. The annual financial statements are furthermore subject to evaluation by the Supervisory Board of PKO Bank Hipoteczny SA.
The Director of the Finance and Accounting Office is responsible for ensuring compliance with the controls in financial reporting, while Internal Audit, as part of its assurance activity, assesses the adequacy and effectiveness of the risk management system and the internal control system at the first and second levels respectively.
Identification of shareholders who directly or indirectly hold substantial blocks of shares, with an indication of the number of shares held and the resulting number of votes
As at 31 December 2024 the share capital of PKO Bank Hipoteczny SA amounted to PLN 1,611.3 million and comprised 1,611,300,000 shares of PLN 1 nominal value each. The shares are fully paid up. The amount of share capital has not changed compared to the end of 2023. The issued shares of PKO Bank Hipoteczny SA are non-preferred shares. No special control rights arise for the holders of shares in PKO Bank Hipoteczny SA from these securities. 100% of the shares of PKO Bank Hipoteczny SA are held by Powszechna Kasa Oszczędności Bank Polski Spółka Akcyjna.
The share capital structure of PKO Bank Hipoteczny SA:
|
Series |
Type of shares |
Number of shares |
Nominal value per share |
Number of votes at the GSM |
Amount paid in for the shares |
|
A |
Ordinary registered shares |
300,000,000 |
PLN 1 |
300,000,000 |
PLN 300,000,000.00 |
|
B |
Ordinary registered shares |
200,000,000 |
PLN 1 |
200,000,000 |
PLN 200,000,000.00 |
|
C |
Ordinary registered shares |
200,000,000 |
PLN 1 |
200,000,000 |
PLN 200,000,000.00 |
|
D |
Ordinary registered shares |
100,000,000 |
PLN 1 |
100,000,000 |
PLN 100,000,000.00 |
|
E |
Ordinary registered shares |
150,000,000 |
PLN 1 |
150,000,000 |
PLN 150,000,000.00 |
|
F |
Ordinary registered shares |
150,000,000 |
PLN 1 |
150,000,000 |
PLN 150,000,000.00 |
|
G |
Ordinary registered shares |
100,000,000 |
PLN 1 |
100,000,000 |
PLN 100,000,000.00 |
|
H |
Ordinary registered shares |
95,000,000 |
PLN 1 |
95,000,000 |
PLN 95,000,000.00 |
|
I |
Ordinary registered shares |
100,000, 000 |
PLN 1 |
100,000, 000 |
PLN 100,000,000.00 |
|
J |
Ordinary registered shares |
131,500, 000 |
PLN 1 |
131,500, 000 |
PLN 131,500,000.00 |
|
K |
Ordinary registered shares |
84,800, 000 |
PLN 1 |
84,800, 000 |
PLN 84,800,000.00 |
|
|
TOTAL |
1,611,300, 000 |
|
1,611,300, 000 |
PLN 1,611,300,000.00 |
|
Shareholder |
31.12.2024 |
31.12.2023 |
||
|
Number of shares |
Number of votes at GSM |
Number of shares |
Number of votes at GSM |
|
|
Powszechna Kasa Oszczędności |
1,611,300, 000 |
100% |
1,611,300, 000 |
100% |
Description of the rules for appointing and dismissing managers
Members of the Management Board are appointed and dismissed by resolution of the Supervisory Board. When appointing Management Board members, the Supervisory Board determines their number. The appointment of two members of the Management Board, including the President and the member whose competences include risk management, requires the consent of the Polish Financial Supervision Authority. The terms of office of members of the Management Board expire on the date on which the General Shareholders’ Meeting approves the financial statements for the last full financial year during which a member served, at the latest. Additionally, the term of office of a Management Board member also expires as a result of his/her death, resignation or dismissal from the Management Board, as of the date of the event causing the expiration, unless the resolution on dismissal provides a different date of expiration. Management Board members may be dismissed before the end of their term of office at any time.
The Supervisory Board notifies the Polish Financial Supervision Authority of the composition of the Management Board and of any changes in the composition thereof immediately after its appointment or after any changes in the composition thereof. The Supervisory Board also notifies the Polish Financial Supervision Authority of the members of the Management Board who, as a result of the segregation of duties, are in charge of the risk management and the internal audit unit. The Supervisory Board notifies the Polish Financial Supervision Authority of its intention to dismiss, and the reasons for dismissal of, a member of the Management Board whose competences include risk management or the internal audit unit, immediately after the relevant item has been placed on the agenda of the Supervisory Board meeting.
Additional information on the powers of the managers is provided in Chapter 6. Organization and governing bodies of PKO Bank Hipoteczny SA.
Description of powers to decide on share issues or redemptions
The powers of the General Shareholders’ Meeting include adopting resolutions on establishing the share redemption procedures and the level of compensation for redeemed shares, approving the acquisition of the Bank’s treasury shares for redemption, and approving the issue of bonds convertible into shares or other instruments giving the right to purchase or take up shares in the Bank.
Indication of any limitations on the transfer of ownership rights to the issuer’s securities
There are no limitations on the transfer of ownership rights to the issuer’s securities.
Principles for amending the Bank’s Articles of Association
Amendments to the Bank’s Articles of Association require a resolution of the General Shareholders’ Meeting and must be entered in the Register of Businesses of the National Court Register. To the extent defined by Article 34.2 of the Banking Law, an amendment to the Articles of Association requires the consent of the Polish Financial Supervision Authority.
Composition and changes during the last financial year and description of the operation of the Issuer’s management, supervisory or administrative bodies and their committees
Information concerning the description of the management, supervisory and administrative bodies of the Issuer, their committees and their composition and changes during the last financial year is presented in Chapter 6. Organization and governing bodies of PKO Bank Hipoteczny SA.
General Shareholders’ Meeting and relations with shareholders
The method of operation of the General Shareholders’ Meeting and its key powers as well as a description of the shareholder rights and the method of their execution follow directly from the applicable laws and the Bank’s Articles of Association. In consideration of the fact that all shares in the Bank’s share capital are held by a single shareholder, i.e. PKO Bank Polski SA, the resolutions of the General Shareholders’ Meeting are adopted without formally convening a General Shareholders’ Meeting, in accordance with the principles arising from Article 405 of the Polish Commercial Companies Code.
7.2. Audit firm
In accordance with the policy for selecting an audit firm to perform an audit of the Bank’s financial statements, the Supervisory Board conducts an open tender procedure to commission an audit of the financial statements. The Audit and Finance Committee of the Bank’s Supervisory Board recommends an audit firm to be appointed to the Supervisory Board. Unless it concerns renewing an existing audit contract, the recommendation contains at least two suggestions with justifications and indicates the preferred firm. The Bank’s Supervisory Board appoints the audit firm based on the recommendation of the Audit and Finance Committee of the Bank’s Supervisory Board. Transparent and non-discriminatory selection criteria are used in the evaluation of bids submitted by the audit firms.
In accordance with the policy for providing permitted non-audit services to the Bank by the audit firm conducting the audit, its related entities and members of its network, the provision of non-audit services by the audit firm conducting the audit, its related entities and members of its network to the Bank requires the consent of the Audit and Finance Committee of the Bank’s Supervisory Board and of the Audit Committee of the Supervisory Board of PKO Bank Polski SA.
In accordance with the Policy and Procedures for selecting an audit firm to perform an audit of the Bank’s financial statements, on 1 March 2023 the Supervisory Board of PKO Bank Hipoteczny SA, based on § 18. 1 (4) of the Bank’s Articles of Association and in accordance with the recommendation of the Audit and Finance Committee of the Supervisory Board, appointed KPMG Audyt Sp. z ograniczoną odpowiedzialnością sp. k. as the audit firm to conduct audits and reviews of the Bank’s financial statements for the years 2024-2026. KPMG Audyt Sp. z ograniczoną odpowiedzialnością sp. k. with its registered office in Warsaw, ul. Inflancka 4A, is registered on the list of audit firms maintained by the National Council of Statutory Auditors with the number 3546.
The audit and review of the Bank’s financial statements for 2023 was conducted by PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k.
The following table presents the services provided by the audit firm and the fees for such services, as specified in the Contracts:
|
Net fee of the audit firm (PLN’000) |
2024 |
2023 |
|
Audit of the financial statements |
319.8 |
213.3 |
|
Review of the financial statements, audit and review of group packages |
147.6 |
132.8 |
7.3. Other information
Changes in the holding of shares and rights to shares in PKO Bank Hipoteczny SA by individuals in management and supervisory roles
In 2024, there were no changes in the holding of shares and rights to shares in PKO Bank Hipoteczny SA by individuals in management and supervisory roles. 100% of the shares are held by PKO Bank Polski SA.
Information required pursuant to Article 111A(1)(1) of the Banking Law
PKO Bank Hipoteczny SA has its registered office in Warsaw, 15 Pulawska Street and operates solely in the territory of Poland. The Bank has no subsidiaries.
ESG reporting
ESG reporting is realized at the consolidated level of the Parent Company, i.e. PKO Bank Polski SA with its registered office in Warsaw. In connection with the above, PKO Bank Hipoteczny SA as a subsidiary took advantage of the exemption from ESG reporting.
The consolidated Directors’ Reports of the PKO Bank Polski Group are available under the following link:
https://www.pkobp.pl/relacje-inwestorskie/wyniki-finansowe-i-prezentacje/#category=154443
Significant and material agreements with the Central Bank and/or regulatory bodies
PKO Bank Hipoteczny SA is obliged to report on all agreements that meet the definition of inside information as defined in the Regulation (EU) No 596/2014 of the European Parliament and of the Council on market abuse. In 2024, the Bank did not conclude any significant or material agreements with the Central Bank or with supervisory bodies.
Financial and guarantee commitments granted
Financial liabilities in respect of loans granted but not disbursed as at 31 December 2024 amounted to PLN 100.3 million, an increase of PLN 9.4 million compared with 31 December 2023.
In 2024 PKO Bank Hipoteczny SA did not issue any guarantees.
Off-balance sheet liabilities granted to related parties
In 2024 and in 2023, PKO Bank Hipoteczny SA did not grant any off-balance sheet liabilities to its related parties.
Loans taken out and loan and guarantee agreements unrelated to the Bank’s operating activities
In 2024, PKO Bank Hipoteczny SA did not take out any loans nor entered into any loan, guarantee or warranty agreements unrelated to the Bank’s operations.
Information on defaults on loans or advances or infringement of material covenants with respect to which no corrective measures were adopted by the end of the reporting period
PKO Bank Hipoteczny SA does not identify outstanding loans or advances or breaches of material contractual provisions of loans or advances in which it acts as borrower or lender.
Underwriting agreements
In 2024 PKO Bank Hipoteczny SA did not conclude any underwriting agreements.
Other information relevant to the assessment of the issuer’s human resources, assets, financial position, net profit or loss and their changes
In 2024, PKO Bank Hipoteczny S.A. did not experience any other significant events relevant to the assessment of its human resources, assets, financial position and net profit or loss.
Identification of proceedings pending before courts, arbitration bodies or public-administration authorities
As at 31 December 2024, no material proceedings were pending before courts, arbitration bodies or public administration bodies concerning liabilities or receivables of PKO Bank Hipoteczny SA.
Factors which will influence future financial performance over the horizon of at least one quarter
PKO Bank Hipoteczny SA recognizes the growing risks arising from macroeconomic and regulatory changes.
The following external conditions may affect the Bank’s operations and future performance.
In the global economy:
• increased geopolitical risk, the war in Ukraine, the risk of escalating conflicts around Taiwan and in the Middle East, and their impact on supply chains and commodity prices;
• changes in the climate policy, including the accelerating energy transition and the increasing stringency and importance of environmental requirements in Europe in the context of deceleration of transition activities in the USA;
• the persistence of relatively low global growth rates, including a slowdown in the US economy and recessionary phenomena in Germany;
In the Polish economy:
• the expected further economic recovery, driven mainly by investments, including due to an inflow of EU funds, but also in the area of private consumption;
• the path of further changes in NBP interest rates and reserve requirements, including the risk of maintaining a markedly tight monetary policy;
• the expected recovery in demand for mortgage loans, in view of the expected interest rate cuts;
• the design and timing of introduction of the borrowers support programmes for the mortgage loan market announced by the government;
• the risks associated with the implementation of the new WIRF benchmark and its impact on the financial market;
• the introduction of the Long-Term Funding Ratio and its impact on the long-term funding market;
• possible further court decisions as to the PLN-denominated loans based on WIBOR rates.
Seasonality or cyclicality of activities during the reporting period
The activities of PKO Bank Hipoteczny SA show no significant seasonal or cyclical characteristics.
PKO Bank Hipoteczny SA has not published forecasts of its financial results for 2024. The Bank provides information on significant events that affect the Bank’s performance in current reports.
Information on loan guarantees or other guarantees issued by the Bank or its subsidiary – in aggregate to a single entity or its subsidiary, if the total amount of the existing guarantees is equivalent to at least 10% of the issuer’s equity
In 2024, PKO Bank Hipoteczny SA did not grant any loan guarantees or other guarantees to a single entity or a subsidiary of such an entity with a total value equivalent to at least 10% of the Bank’s equity.
Information on loan and advance agreements concluded or terminated during the financial year
On 28 June 2024, PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded an annex to the contract for a revolving working capital loan in the current account dated 10 July 2019, as amended, decreasing the amount of the limit to PLN 3,100 million and extending the loan utilization period until 30 June 2028.
On 22 October 2024, PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded an annex to the contract for a revolving working capital loan in the current account dated 29 October 2015, as amended, extending the lending period until 27 October 2028.
On 30 December 2024, PKO Bank Hipoteczny SA and PKO Bank Polski SA concluded Annex 2 to the contract for a non-revolving working capital loan in PLN dated 3 January 2023, as amended, increasing the amount of the limit from PLN 600 million to PLN 900 million and extending the loan utilization period until 3 January 2026. As at 31 December 2024, the provisions of Annex 2 had not yet entered into force.
Information on transaction(s) with related parties concluded by the Issuer or its subsidiary, if material and not concluded on an arm’s length basis
PKO Bank Polski SA and the PKO Bank Polski SA Group entities are the Bank’s related parties.
In 2024, PKO Bank Hipoteczny SA did not conclude any material non-arm’s length transactions with related parties.
Information on changes in the key principles of managing the Bank’s enterprise
In 2024 there were no changes in the key principles of managing the Bank’s enterprise in PKO Bank Hipoteczny SA.
Funding support agreements
PKO Bank Hipoteczny SA did not conclude funding support agreements with other entities subject to consolidated supervision operating within the same holding, or with closely related parties.
Deposits, and guarantees and sureties issued
PKO Bank Hipoteczny SA does not accept deposits or issue any guarantees or sureties.
Information on the value of security established on the accounts or assets of borrowers
In 2024 PKO Bank Hipoteczny SA did not set up any security on the borrowers’ accounts.
As at 31 December 2024, the value of collateral in respect of residential mortgage loans secured with real estate was PLN 69.6 billion compared with PLN 66.2 billion as at 31 December 2023.
Statement on non-financial information
PKO Bank Polski SA with its registered office in Warsaw at Puławska 15 is the Parent Company preparing the statement on non-financial information covering PKO Bank Hipoteczny SA.
Events after the end of the reporting period
• On 30 January 2025, the Bank and PKO Bank Polski SA concluded an Annex to the Contract for a revolving working capital loan in the current account dated 2 February 2017, extending the lending period until 2 February 2029.
• On 20 February 2025, the Bank subscribed to series 15 mortgage covered bonds issued with a nominal value of PLN 800,000 thousand, for which the issue date was set at 27 February 2025 and the maturity date at 27 February 2029. The securities bear interest at a floating interest rate of WIBOR 3M + 0.80 p.p. margin.
• On 27 February 2005, the international rating agency Moody's Investors Service Ltd published information in which it confirmed the existing ratings and assessments of PKO Bank Hipoteczny SA. Detailed information on the level of the Bank's ratings can be found in Chapter 1. of PKO Bank Hipoteczny SA Directors’ Report for the year ended 31 December 2024 in the section ‘Evaluation of PKO Bank Hipoteczny SA’s financial credibility – Rating’.
• On 28 February 2025, the Bank's Supervisory Board appointed Mr Michał Stępniewski to the Bank's Management Board as Vice-President of the Bank's Management Board, effective 1 March 2025, within the current joint term of office of the Bank's Management Board.
8. Representation of the Management Board of PKO Bank Hipoteczny SA
The Management Board of PKO Bank Hipoteczny SA represents that, to the best of their knowledge:
• the financial statements of the PKO Bank Hipoteczny SA for the year ended 31 December 2024 have been prepared in accordance with the applicable accounting principles, and give a true, fair and clear view of the economic and financial position of PKO Bank Hipoteczny SA, and of its financial result;
• the Directors’ Report on the activities of PKO Bank Hipoteczny SA in the year ended 31 December 2024 includes a true reflection of the development and achievements, and of the position of PKO Bank Hipoteczny SA, including a description of the basic risks and threats.
The Management Board of PKO Bank Hipoteczny SA represents that the audit firm which conducted the audit of the financial statements of PKO Bank Hipoteczny SA for the year ended 31 December 2024 was selected in compliance with the applicable laws, and that both the entity and the statutory auditor who conducted the audit fulfilled all the criteria for providing an unbiased and independent audit report on the financial statements, in compliance with the applicable laws and professional standards.
This Directors’ Report on the activities of PKO Bank Hipoteczny SA for the year ended 31 December 2024 comprises 59 sequentially numbered pages.
Signatures of all members of the Bank’s Management Board
|
07.03.2025 |
Wojciech Papierak |
President of the Management Board |
|
Signed on Polish original
...................................................... (signature) |
|
07.03.2025 |
Katarzyna Kurkowska-Szczechowicz |
Vice-President of the Management Board |
|
Signed on Polish original
...................................................... (signature) |
|
07.03.2025 |
Piotr Kochanek |
Vice-President of the Management Board |
|
Signed on Polish original
...................................................... (signature) |
|
07.03.2025 |
Michał Stępniewski |
Vice-President of the Management Board |
|
Signed on Polish original
...................................................... (signature) |
|
|
|
|
|
|