" Bank Pekao will remain the leading financial institution in the Polish banking sector, setting new trends and playing a key role in ensuring the financial security of Polish families and supporting the development of Polish enterprises and economy.
Solid fundamentals, developed competitive advantages and gained business experience, enable the Bank to compete effectively and to achieve sustainable value growth for all the Bank's Stakeholders. It was confirmed by the fact that Bank Pekao S.A. closed the year as the company with the highest market capitalization on the Polish stock exchange."
Dear Ladies and Gentlemen,
The Supervisory Board has made an assessment of the Bank's situation in 2014 in compliance with legal requirements and corporate governance rules set forth i. a. in the "Code of Best Practice for the WSE Listed Companies", adopted by the Warsaw Stock Exchange.
In the Supervisory Board's opinion, the economic and financial situation of the Bank is good. Again the Bank achieved very good results and reinforced its market position in strategic business areas while maintaining top standards of risk management and high cost efficiency, confirming effectiveness of the Bank's business model and creditability of the applied strategy. The development of the Bank was performed in a sustainable way with maintaining high service quality and business social responsibility standards. Strong capital and liquidity position were preserved. All requirements for safe operations were met ensuring the safety of the entrusted funds.
The changes occurring in the banking sector require skills of quick adoption to the new market conditions and flexibility of the business model. Not only does the Bank meet these conditions, but it also sets new directions and standards in the Polish banking sector.
The 2014 results of the Bank and the entire Bank Pekao S.A. Group which were positively assessed by the Supervisory Board, allowed to achieve a return on equity at a level of 11.5%, while maintaining a safe level of capital adequacy ratio Core Tier 1 amounting to 17.3%. The consolidated net profit exceeded PLN 2.7 billion and was close to the previous year result, despite further interest rates cuts and negative impact of regulatory pressures on the Bank's operating results.
The Bank continued its dynamic growth in the scale of operations, significantly increasing lending activity and strengthening its market position in key areas. The volume of loans increased by more than PLN 11 billion and deposits by more than PLN 12 billion, resulting in a double-digit volume growth and enabling further market share gains. The Bank consistently pursued to increase the number of served clients allowing another 370 thousand new customers acquisition.
It was possible also thanks to the further development of product range and investments in innovative and modern solutions such as mobile banking and PeoPay mobile payment system.
The Bank's achievements and performance are recognised on the market, as confirmed by numerous awards and distinctions received. The Bank believes that as one of the largest financial institutions in the Central European region it cannot be only concentrated on the business development, but it also should support society in promoting culture, art and implementation of pro-social projects, such as the Great Orchestra of Christmas Charity long-term engagement.
The Bank's responsibility and concern of the banking sector stability prompt the Bank to take over SKOK Kopernik assuring safety of the funds entrusted by its customers.
Despite high business activity the Bank maintained strict cost control and good loan portfolio quality. For years, the Bank has been paying special attention to cost optimization fostering high operational efficiency. It is one of the competitive advantages developed by the Bank. Also, the cost of risk remained consistently below the sector average.
Bank Pekao S.A. as one of the very few was not involved in the sale of mortgage loans denominated in Swiss franc, which significantly diminished the loan portfolio risk.
In 2014, the Bank launched its 2014-2020 development plan. The plan is based on a customer-centric approach, adjusting product offer and operating model to the changing clients' needs, focused on building long-term relationships with the clients, innovative development and ensuring sustainable growth while maintaining a high level of profitability and cost-efficiency.
The Supervisory Board performed an analysis and assessment of internal control and risk management systems functioning in the Bank and in the Pekao Group.
In the Supervisory Board's opinion, the internal control system functions properly and reliably, providing effective and efficient control of the processes. Internal control is a continuous process carried out at all levels of the organization by the statutory bodies of the Bank, its particular organizational units, supervisors and all Employees. The internal control system is characterized by pursuance to completeness and comprehensive approach. Dedicated organizational structures fully cover the most important risk areas associated with the Bank's operations, whereas control functions in the Bank's subsidiaries are conducted through the Bank's representatives in the supervisory boards of these subsidiaries.
The Supervisory Board positively assessed risk management system. This system is comprehensive and consolidated, covering all units of the Bank and its subsidiaries, adjusted to the Bank's operations and organizational structure, the complexity of the business, the size and profile of risks. Risk management strategy in the form of ICAAP Procedure was adopted by the Management Board in accordance with the regulatory requirements and it was approved by the Supervisory Board.
The high quality of the Bank's management, its resilience and financial strength reflect high ratings assigned by the leading rating agencies: Fitch Ratings, Standard & Poor's Ratings Services and Moody's Investors Service.
Pekao Group's unique capital strength the and resistance to the shock scenarios were also confirmed during the assets quality review (AQR) and stress tests conducted by the Polish Financial Supervision Authority in accordance with the ECB methodology.
The Supervisory Board is convinced that Bank Pekao will remain the leading financial institution in the Polish banking sector, setting new trends and playing a key role in ensuring the financial security of Polish families and supporting the development of Polish enterprises and economy. Solid fundamentals, developed competitive advantages and gained business experience, enable the Bank to compete effectively and to achieve sustainable value growth for all the Bank's Stakeholders. It was confirmed by the fact that Bank Pekao S.A. closed the year as the company with the highest market capitalization on the Polish stock exchange.
On behalf of the Supervisory Board I would like to thank all the Bank's Customers and Stakeholders for their trust. I would also like to thank the Management Board and Employees of the Bank and Group companies for the commitment, hard work and contribution in to achieving very good results.
Warsaw, April 2015
Chairman of the Supervisory Board