Powszechna Kasa Oszczędności Bank Polski SA Group - PDF

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Powszechna Kasa Oszczędności Bank Polski SA Group Opinion and Report of the Independent Auditor Financial Year ended 31 December KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. a Polish

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Powszechna Kasa Oszczędności Bank Polski SA Group Opinion and Report of the Independent Auditor Financial Year ended 31 December KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. a Polish limited partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation. OPINION OF THE INDEPENDENT AUDITOR To the General Meeting of Powszechna Kasa Oszczędności Bank Polski SA Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of the Group, whose parent entity is Powszechna Kasa Oszczędności Bank Polski SA with its registered office in Warsaw, ul. Puławska 15 ( the Group ), which comprise the consolidated statement of financial position as at 31 December 2016, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and notes comprising a summary of significant accounting policies and other explanatory information. Management s and Supervisory Board s Responsibility Management of the Parent Entity is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with other applicable regulations. Management of the Parent Entity is also responsible for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. According to the Accounting Act dated 29 September 1994 (Official Journal from 2016, item 1047 with amendments) ( the Accounting Act ), Management of the Parent Entity and members of the Supervisory Board are required to ensure that the consolidated financial statements are in compliance with the requirements set forth in the Accounting Act. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with section 7 of the Accounting Act and International Standards on Auditing as adopted by the resolution dated 10 February 2015 of the National Council of Certified Auditors as National Standards on Assurance. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management of the Parent Entity, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the accompanying consolidated financial statements of Powszechna Kasa Oszczędności Bank Polski SA Group: give a true and fair view of the financial position of the Group as at 31 December 2016 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union; and comply, in all material respects, with applicable regulations that apply to the consolidated financial statements of the Group. Specific Comments on Other Legal and Regulatory Requirements Report on the Group s Activities Management of the Parent Entity is responsible for the report on the Group s activities. Our opinion on the consolidated financial statements does not cover the report on the Group s activities. As required by the Accounting Act and the Decree of the Ministry of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent of information required by the laws of a non-member state (Official Journal from 2014, item 133 with amendments) (the Decree ) we report that the accompanying report on the Group s activities includes the information required by Art. 49 of the Accounting Act and the Decree and the information is consistent, in all material respect, with the consolidated financial statements. Furthermore, based on our knowledge about the Group and its environment obtained in the audit, we have not identified material misstatements in the report on the Group s activities. 2 As required by the Accounting Act and the Decree we report that the statement of corporate governance, which is a separate part of the report on the Group s activities, includes the information required by paragraph 91 subparagraph 5 point 4 letter a, b, j and k of the Decree. Furthermore we report that the information identified in paragraph 91 subparagraph 5 point 4 letter c, d, e, f, h and i of the Decree included in the statement of corporate governance, in all material respects: has been prepared in accordance with the applicable regulations; and is consistent with the information contained in the consolidated financial statements. On behalf of KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. Registration No ul. Inflancka 4A Warsaw Signed on the Polish original... Marcin Podsiadły Key Certified Auditor Registration No Limited Liability Partner with power of attorney Signed on the Polish original... Stacy Ligas Member of the Management Board of KPMG Audyt Sp. z o.o., entity which is the General Partner of KPMG Audyt Spółka z ograniczoną odpowiedzialnośćią sp.k. 2 March Powszechna Kasa Oszczędności Bank Polski SA Group Report on the audit of the consolidated financial statements Financial Year ended 31 December KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. a Polish limited partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation Contents 1. General Identification of the Group Name of the Group Registered office of the Parent Entity of the Group Registration of the Parent Entity in the National Court Register Management of the Parent Entity Key Certified Auditor and Audit Firm Information Key Certified Auditor information Audit Firm information Prior period consolidated financial statements Audit scope and responsibilities 4 2. Financial information of the Group Financial data included in the consolidated financial statements Consolidated statement of financial position Consolidated income statement Consolidated statement of comprehensive income Selected financial ratios 8 3. Detailed report Accounting principles Basis of preparation of the consolidated financial statements Method of consolidation Goodwill arising on consolidation Consolidation of equity and calculation of non-controlling interest Consolidation eliminations Compliance with prudential regulatory norms 10 2 1. General 1.1. Identification of the Group Name of the Group Powszechna Kasa Oszczędności Bank Polski SA Group Registered office of the Parent Entity of the Group ul. Puławska Warsaw Registration of the Parent Entity in the National Court Register Registration court: District Court for the Capital City of Warsaw in Warsaw, XIII Commercial Department of the National Court Register Date: 12 July 2001 Registration number: KRS Share capital as at the end of reporting period: PLN 1,250,000, Management of the Parent Entity The Management Board is responsible for management of the Parent Entity. As at 31 December 2016, the Management Board of the Parent Entity was comprised of the following members: Zbigniew Jagiełło Janusz Derda Bartosz Drabikowski Maks Kraczkowski Mieczysław Król Piotr Mazur Jakub Papierski Jan Emeryk Rościszewski President of the Management Board, Vice President of the Management Board, Vice President of the Management Board, Vice President of the Management Board, Vice President of the Management Board, Vice President of the Management Board, Vice President of the Management Board, Vice President of the Management Board. On 21 March 2016 Mr. Jacek Obłękowski resigned from the position of Vice President of the Management Board of the Bank effective from 21 March On 22 March 2016 Mr. Jarosław Myjak resigned from the position of Vice President of the Management Board of the Bank effective from 22 March On 2 June 2016 the Supervisory Board of the Bank appointed Mr. Mieczysław Król for the position of Vice President of the Management Board of the Bank effective from 6 June On 30 June 2016 the Supervisory Board of the Bank appointed Mr. Maks Kraczkowski for the position of Vice President of the Management Board of the Bank effective from 4 July On 14 July 2016 the Supervisory Board of the Bank appointed Mr. Jan Emeryk Rościszewski for the position of Vice President of the Management Board of the Bank effective from 18 July On 5 October 2016 r. Mr. Piotr Alicki resigned from the position of Vice President of the Management Board of the Bank effective from 30 October On 3 November 2016 the Supervisory Board of the Bank appointed Mr. Janusz Derda for the position of Vice President of the Management Board of the Bank effective from 1 December Key Certified Auditor and Audit Firm Information Key Certified Auditor information Name and surname: Marcin Podsiadły Registration number: Audit Firm information Name: KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. Address of registered office: ul. Inflancka 4A, Warsaw Registration number: KRS Registration court: District Court for the Capital City of Warsaw in Warsaw, XII Commercial Department of the National Court Register NIP number: KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. is entered in the register of audit firms, maintained by the National Council of Certified Auditors, under number Prior period consolidated financial statements The consolidated financial statements for the financial year ended 31 December 2015 were audited by KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. and received an unmodified opinion. The consolidated financial statements were approved at the General Meeting of the Parent Entity on 30 June The consolidated financial statements were submitted to the Registration Court on 6 July Audit scope and responsibilities The Parent Entity prepares its consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union on the basis of the decision of Ordinary General Shareholders Meeting dated 19 May The consolidated financial statements were audited in accordance with the contract dated 10 April 2015, concluded on the basis of the resolution of the Supervisory Board dated 11 March 2015 on the appointment of the auditor. We conducted our audit in accordance with section 7 of the Accounting Act dated 29 September 1994 (Official Journal from 2016, item 1047 with amendments) ( the Accounting Act ) and International Standards on Auditing as adopted by the resolution dated 10 February 2015 of the National Council of Certified Auditors as National Standards on Assurance. In accordance with Article 111a paragraph 3 of the Banking Act dated 29 August 1997 (Official Journal from 2016, item 1988 with amendments) ( Banking Act ) our responsibility was to audit 4 financial information, described in Article 111a paragraph 2 of the Banking Act presented in the report on the Group s activities. The audit was performed in accordance with the scope presented in the paragraph Auditor s Responsibility of the opinion of the independent auditor. We audited the consolidated financial statements at the Group entities during the period from 7 November 2016 to 2 March Management of the Parent Entity is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with other applicable regulations. Management of the Parent Entity is also responsible for the report on the Group s activities. Our responsibility is to express an opinion and to prepare a report on the audit of the consolidated financial statements. The Management Board of the Parent Entity submitted a statement, dated as at the same date as this report, as to the preparation of the consolidated financial statements that give a true and fair view, which confirmed that there were no undisclosed matters which could significantly influence the information presented in the consolidated financial statements. All required statements, explanations and information were provided to us by Management of the Parent Entity and all our requests for additional documents and information necessary for expressing our opinion and preparing the report have been fulfilled. The scope of the work planned and performed has not been limited in any way. The method and scope of our audit is detailed in working papers prepared by us and retained in the offices of the Audit Firm. The Key Certified Auditor and the Audit Firm are independent of the entities within the Group in accordance with the Code of Ethics for Professional Accountants of the International Ethics Standards Board for Accountants as adopted by the resolution of National Council of Certified Auditors dated 13 June 2011 ( IESBA Code ) and the impartiality and independence requirements as described in Art. 56 points 3 and 4 of the Act on Certified Auditors and their Self-Governance, Audit Firms authorized to Audit Financial Statements and Public Oversight dated 7 May 2009 (Official Journal from 2016, item 1000) and have fulfilled other ethical responsibilities in accordance with these regulations and the IESBA Code. 5 2. Financial information of the Group 2.1. Financial data included in the consolidated financial statements Consolidated statement of financial position ASSETS % of total % of total PLN mln assets PLN mln assets Cash and balances with the Central Bank 13, , Amounts due from banks 5, , Trading assets excluding derivative financial instruments Derivative financial instruments 2, , Financial assets designated upon initial recognition at fair value through profit and loss 13, , Loans and advances to customers 200, , Investment securities available for sale 36, , Investment securities held to maturity Investments in associates and joint ventures Non-current assets held for sale Inventories Intangible assets 3, , Tangible fixed assets 3, , Current income tax receivables Deferred income tax assets 1, Other assets 3, , TOTAL ASSETS 285, , EQUITY AND LIABILITIES Liabilities PLN mln % of total % of total equity and equity and liabilities PLN mln liabilities Amounts due to the Central Bank Amounts due to banks 19, , Derivative financial instruments 4, , Amounts due to customers 205, , Liabilities due to insurance operations 2, , Debt securities in issue 14, , Subordinated liabilities 2, , Other liabilities 3, , Current income tax liabilities Deffered income tax liabilities Provisions TOTAL LIABILITIES 253, , Equity - Share capital 1, , Other capital 28, , Currency translation differences from foreign operations (221.5) (0.1) (216.5) (0.1) Undistributed profits (18.6) - 1, Net profit for the period 2, , Capital and reserves attributable to equity holders of the parent company 32, , Non-controlling interest (16.2) - (18.3) - TOTAL EQUITY 32, , TOTAL EQUITY AND LIABILITIES 285, , Consolidated income statement PLN mln PLN mln Interest and similar income 9, ,657.8 Interest expense and similar charges (2,209.6) (2,629.2) Net interest income 7, ,028.6 Fee and commission income 3, ,598.3 Fee and commission expense (886.2) (747.7) Net fee and commission income 2, ,850.6 Dividend income Net income from other financial instruments measured at fair value Gains and losses from investments securities Net foreign exchange gains (losses) Other operating income Other operating expense (330.0) (235.6) Net other operating income and expense Net impairment allowance and write-downs (1,622.7) (1,475.9) Administrative expences (5,590.4) (6,036.2) Tax on certain financial institutions (828.9) - Operating result 3, ,152.6 Share in profit (loss) of associates and joint ventures Profit before income tax Income tax expense Net profit (including non-controlling shareholders) Profit (loss) attributable to non-controlling shareholders Net profit attributable to equity holders of the parent company , ,190.7 (907.1) (589.5) 2, , (8.3) 2, , Consolidated statement of comprehensive income PLN mln PLN mln Net profit (including non-controlling shareholders) 2, ,601.2 Other comprehensive income (572.4) 48.1 Items that may be reclassified to the income statement (574.4) 51.7 Cash flow hedges (gross) (62.7) (77.6) Deffered tax on cash flow hedges Cash flow hedges (net) (50.8) (62.9) Unrealised net gains on financial assets available for sale (gross) (636.1) Deffered tax on unrealised net gains on financial assets available for sale (31.7) Unrealised net gains on financial assets available for sale (net) (518.0) Currency translation differences from foreign operations (5.0) (23.8) Share in other comprehensive income of associates and joint ventures (0.6) (1.2) Items that may not be reclassified to the income statement 2.0 (3.6) Actuarial gains and losses (gross) 2.4 (4.5) Deffered tax (0.4) 0.9 Actuarial gains and losses (net) 2.0 (3.6) Total net comprehensive income 2, ,649.3 Total net comprehensive income, of which attributable to: 2, ,649.3 equity holders of PKO Bank Polski SA 2, ,657.6 non-controlling shareholders 2.1 (8.3) 2.2. Selected financial ratios Total assets (PLN mln) 285, , ,700.6 Profit before income tax (PLN mln) 3, , ,034.6 Net profit attributable to equity holders of the parent company (PLN mln) 2, , ,254.1 Equity (PLN mln) 1 29, , ,371.4 Return on equity % 9.43% 13.35% Return on assets % 0.98% 1.31% Cost to income ratio % 56.60% 47.06% Capital adequacy ratio 15.81% 14.61% 12.96% Loan to deposit ratio % 97.27% % Share of impaired loans % 6.59% 6.92% Coverage ratio of impaired loans % 58.81% 56.83% 1 excluding current year net profit and non-controlling interest 2 net profit attributable to equity holders of the parent company for the period / total equity excluding net profit for the year and noncontrolling interest as at the end of the period 3 net profit attributable to equity holders of the parent company for the period / total assets as at the end of the period 4 administrative expenses / result on business activities (opera
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