Dear Sir/Madam

 

I am pleased to present the Annual Report of PKO Bank Hipoteczny SA for 2020.

This specific and challenging year was marked by the COVID-19 pandemic. We are proud that in the face of market challenges PKO Bank Hipoteczny maintained the high profitability of the loan portfolio and excellent operating effectiveness.

In connection with the COVID-19 pandemic, the Bank took measures to enhance employee security, by enabling them to work remotely to the full extent since March 2020. Jointly with the PKO Bank Polski Group we have also introduced solutions to support borrowers, both with respect to the possibility of suspending the repayment of loan instalments, and in the area of operational improvements, so as to more effectively, and to a large extent remotely, conduct the lending process.

PKO Bank Hipoteczny remained the undisputed leader amongst the Polish mortgage banks in 2020, both in terms of the value of outstanding mortgage covered bonds issued and in terms of the volume of its mortgage loan portfolio.

The total value of the outstanding mortgage covered bonds issued by the Bank amounted to PLN 17.2 billion as at the end of December, which corresponds to approximately two-thirds of the total value of all mortgage covered bonds issued by Polish banks. In 2020, PKO Bank Hipoteczny did not issue any mortgage covered bonds, providing however the PKO Bank Polski Group with constant readiness to issue Green Covered Bonds, and thus confirming the importance of sustainable development for pursuing the Bank’s strategy.

The high security of our mortgage covered bonds was confirmed by Moody’s Investor Service which increased their rating from Aa3 to Aa1 in December 2020. This is the highest rating achievable by Polish debt securities.

The Bank’s total assets amounted to PLN 27.3 billion, which is the same as in 2019. Almost PLN 25 billion in total assets referred to the highest quality residential loan portfolio. The quality of our portfolio, despite the ongoing pandemic, remains very high. This is confirmed by a small number of non-performing loans – as at the end of the year there were only 130 such loans. However due to the uncertainties relating to the impact of the pandemic on the macroeconomic conditions and the banking sector we accounted for a COVID-19 allowance set up due to the forecast deterioration in the quality of the loan portfolio in the Bank’s results for 2020.

However, this additional charge had no negative impact on the Bank’s ability to achieve a stable profit. In 2020, our net profit amounted to PLN 81.5 million. In addition, we maintained a good liquidity and equity position, significantly exceeding the respective regulatory and internal limits.

In this difficult period, we continuously monitored the macroeconomic situation and the financial markets, adapting the Bank’s operations to the changing conditions. The temporary turbulences on financial markets required that we actively manage the funding structure, in particular, adjusting the level of unsecured bonds issued. We closed 2020 with a bond balance of PLN 4.3 billion, which is a two-hundred million increase compared with the level in December 2019.

On behalf of the Bank’s Management Board, I would like to thank both our Investors and our Customers for their confidence for the Bank which allowed us to further reinforce our market position. I extend my special gratitude to the Bank’s and the PKO Group’s employees for their continued enthusiasm and commitment.

 

I hope you will enjoy reading the Annual Report.

Paulina Strugała

President of the Management Board of PKO Bank Hipoteczny S.A.