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Management Board position regarding the possibility of achieving previously published forecasts

The Bank has not published the forecast of the financial results for 2014.

 

Management Board and Supervisory Board remuneration

The total amount of remuneration and benefits (in cash, payments in kind or in any form) paid or payable to Management Board Members in 2014:

(in PLN thousand)

 

FIXED REMUNERATION

Part of variable compensation for 2013

Deferred parts of variable compensation for 2012

Other benefits for 2014

Luigi Lovaglio

3,849

1,673

1,487

161

Diego Biondo

2,003

228

212

1

Andrzej Kopyrski

1,325

359

359

117

Grzegorz Piwowar

1,285

390

348

112

Stefano Santini

1,115

107

-

1

Marian Ważyński

884

159

175

32

(in PLN thousand)

 

SETTLEMENT OF VARIABLE COMPENSATION FOR 2011 in PHANTOM SHARES

Luigi Lovaglio

2,090

Diego Biondo

327

Andrzej Kopyrski

525

Grzegorz Piwowar

582

Stefano Santini

-

Marian Ważyński

228

Part of the variable remuneration payable in the form of phantom shares for the Management Board Members, vested but not yet settled, amounted to PLN 2,838 thousand. The final settlement amount will depend on the share price of the Bank.

Within the framework of implementation of the Resolution No. 258/2011 issued by the Financial Supervision Authority on October 4, 2011 on detailed principles for functioning of risk management system and internal control system and detailed terms of estimating internal capital by banks and reviewing the process of estimating and maintaining internal capital, and the principles for determining the variable salary components policy for key management personnel at the bank, the System of Variable Remuneration for Management has been adopted in the Bank.

Participant covered by the system may receive bonus, amount of which depends on the assessment of the effects of the person's work, organizational unit and the Bank's bottom line as well as on the assessment of participant's compliance with generally applicable laws and adopted by the Bank standards. In accordance with the assumptions, at least 50% of variable remuneration constitutes a special incentive for employees to support the long-term welfare of the Bank, part of the premium is deferrable and paid after the end of the evaluation period.

In 2014, the Management Board Members did not receive nor are due any compensation from subsidiaries and associated entities.

The total amount of remuneration (in cash and payments in kind) paid or payable to Supervisory Board Members in 2014:

 

(in PLN thousand)

 

Total

COMMENTS

Jerzy Woźnicki

241

 

Roberto Nicastro

-

Did not receive remuneration according to the Group’s policy

Leszek Pawłowicz

222

 

Alessandro Decio

-

Did not receive remuneration according to the Group’s policy

Małgorzata Adamkiewicz

133

 

Paweł Dangel

196

 

Laura Penna

-

Did not receive remuneration according to the Group’s policy

Wioletta Rosołowska

133

 

Doris Tomanek

-

Did not receive remuneration according to the Group’s policy

In 2014, the Supervisory Board Members did not receive nor are due any compensation from subsidiaries and associated entities.

 

The Incentive Programs

As at December 31, 2014, the following long-term incentive programs are realized in Bank Pekao S.A. Group:

  • the Long-term UniCredit Group Incentive Program 2007 – in terms of the options 34 employees of Bank Pekao S.A. Group have been covered by the program, including 3 members of the Management Board. The options expire in 2017,
  • the Long-term UniCredit Group Incentive Program 2008 - in terms of the options 52 employees of Bank Pekao S.A. Group have been covered by the program, including 3 members of the Management Board. The options expire in 2018.

 

Shares in the Bank and related entities held by the Bank's Directors

According to information available to the Bank as at December 31, 2014, the members of the Bank's management and supervisory bodies held 73,535 shares of Bank Pekao S.A. with face value of PLN 73,535. The number of the Bank's shares held by the members of the Bank's management and supervisory bodies and its face value remained unchanged as the date of submitting of this report.

The table below presents the number of shares held by the Management Board Members:

 

As at the date of submitting the report

 

FOR THE YEAR 2014

For the THIRD QUARTER of 2014

FOR THE YEAR 2013

Luigi Lovaglio

64,035

64,035

64,035

Diego Biondo

9,500

9,500

9,500

Total

73,535

73,535

73,535

Moreover, as at December 31, 2014 UniCredit S.p.A. shares were held by:

Mr. Luigi Lovaglio – 64,290 shares without nominal value,

Mr. Diego Biondo – 4,730 shares without nominal value,

Mr. Andrzej Kopyrski – 1,152 shares without nominal value,

Mr. Roberto Nicastro – 245,364 shares without nominal value,

Ms. Laura Penna – 33,053 shares without nominal value,

Mr. Grzegorz Piwowar – 1,666 shares without nominal value,

Mr. Stefano Santini – 18,655 shares without nominal value and

Mr. Marian Ważyński – 827 shares without nominal value.


Information regarding contracts for post termination benefits

The employment contracts concluded by the Bank with the following Board Members provide compensation equal to 18 fold of monthly base salary for the final month of employment in the case of non-renewal of contract or dismissal:

  • Mr. Andrzej Kopyrski, Vice President of the Management Board,
  • Mr. Grzegorz Piwowar, Vice President of the Management Board,
  • Mr. Marian Ważyński, Vice President of the Management Board.

This does not apply in the case of dismissal pursuant to Art. 52 or Art. 53 of the Labor Code or improper performance of duties, or breach of the Bank's Statute, or Management Board or Supervisory Board resolutions.

Moreover, the above mentioned Management Board Members have signed non – competition agreements with the Bank setting rights and responsibilities of the parties to the contracts concerning competitive activities during and after termination of employment with the Bank.

Employment contracts with the remaining Management Board Members do not cover such compensations.

 

Agreements with companies entitled to auditing of financial reports

On the basis of the agreement concluded on June 17, 2013, Deloitte Polska Spółka z ograniczoną odpowiedzialnością Sp. k. (previously named: Deloitte Audyt Sp. z o.o.) is the company appointed to audit and review the financial statements of Bank Pekao S.A. and Bank Pekao S.A. Group for the years 2013 – 2017.

Audit remuneration for services of Bank Pekao S.A. Group (in PLN thousand)

 

2014

2013

Fee for the audit of annual financial statements

3,397

3,207

Fee for other attestation services, including review of financial statements

1,454

1,602

The amounts above do not include value added tax (VAT).

 

Average interest rates in Bank Pekao S.A. in December 2014

The average nominal interest rates for the basic types of PLN deposits for non-financial sector residents:

PLN retail deposits

1.24% p.a.

PLN corporate clients deposits

1.54% p.a.

The average nominal interest rates for the PLN loans for non-financial sector residents:

Total retail loans

5.06% p.a.

Mortgage

3.68% p.a.

Consumption

10.75% p.a.

Other

6.50% p.a.

Corporate loans

3.89% p.a.

Number and value of titles of execution and value of collaterals

Bank Pekao S.A. has established specific policy with regard to collateral accepted to secure loans and guarantees. This policy is reflected under internal rules and regulations in the Bank. The type of collateral and its value are carefully analyzed and chosen regarding the particular risk of the secured transaction.

The Bank obeys the rule, according to which the value of collateral should relate directly to the value of secured liability, that is cash provided by the Bank to a client (capital or the amount of off-balance sheet commitments granted by the Bank) together with extraneous amounts due, for example, interest or commissions.

The collateral used by the Bank to hedge against risks related to its lending activities includes: bank guarantees, sureties under the Civil Code, blank promissory notes, endorsement on bills, transfer of debts, mortgages, registered pledges, pledges, assignment as collateral, appropriation of assets in bank accounts, deposits.

For corporate clients, the total value of the collateral for impaired transactions as at December 31, 2014 amounted to PLN 2,442.6 million. In 2014, 449 titles of execution were issued on behalf of the Bank in the total amount of PLN 648.5 million.

For retail clients, the total value of the collateral for impaired transactions as at December 31, 2014 amounted to PLN 686.7  million. In 2014, 12,351 titles of execution were issued on behalf of the Bank in the total amount of PLN 240.8 million.

 

Pending litigations

In 2014, the number of the legal proceedings pending before courts, arbitration bodies or public administration authorities in respect of the Group's liabilities was 726 with the total value amounting to PLN 1,205.6 million. The number of legal proceedings in respect of receivables was 14,441 with the total value of PLN 1,262.4 million.

In 2014, there were no legal proceedings relating to the liabilities and/or receivables of the Group in which asserted claims accounted for at least 10% of the Bank's own funds.

In the opinion of the Bank none of the individual pending proceedings before any courts, arbitration bodies or public administration authorities during 2014, nor the proceedings in aggregate pose any threat to the Bank's financial liquidity.

 

Related party transactions

In 2014, the Bank and its subsidiaries have not concluded any significant transactions (single or aggregate) with related entities other than those executed on arm's length.

In 2014, the Bank and its subsidiaries did not provide any sureties or guarantees in respect of loans or advances to an entity or a subsidiary of such entity, as a result of which the total value of existing sureties and guarantees would have equaled or exceeded 10% of the Bank's equity.

 

Information on significant agreements

In 2014, there have been no significant agreements concluded by the Bank.

 

Information on derivative financial instruments and hedge accounting

Information on derivative financial instruments and hedge accounting is included in the Note 27 and 30 to the Consolidated Financial Statements of Bank Pekao S.A. Group for the period ended on 31 December 2014.

 

Accounting principles adopted in the preparation of the report

Accounting principles adopted in the preparation of the report are described in the Note 5 to the Consolidated Financial Statements of Bank Pekao S.A. Group for the period ended on 31 December 2014.

 

Issuance, redemption and repayment of debt securities

  • Structured Certificates of Deposit

Structured Certificates of Deposit are investment products for the Bank's clients that form an alternative to traditional banks' deposits. The total value of the Bank's liabilities relating to these products amounted to PLN 203.7 million (principal value) as at the end of December 2014. There are 3 issues of Structured Certificates of Deposit open in PLN with the maximum maturity date set at March 24, 2016. Those liabilities that mature in 2015 and 2016 account for 34.3%, and 65.7% of its total value, respectively.

  • Certificates of Deposit

Certificates of Deposit are investment products denominated in PLN that guarantee 100% protection of invested funds also in case of termination before redemption date. The total value of the Bank's liabilities under these products amounted to PLN 2,594.7 million (principal value) as at the end of December 2014. There are 22 issues of Certificates of Deposit, and the maturity date up to 3 months accounts for 48.9%, up to 6 months accounts for 23.1% and up to 1 year accounts for 28.0% of its total value.

  • Pekao Leasing Sp. z o.o. bonds

The total value of the company's liabilities under bonds amounted to PLN 48.2 million as at December 31, 2014 with the maturity date up to 1 month.

  • Pekao Bank Hipoteczny S.A. covered bonds

The total value of liabilities due to covered bonds amounted to PLN 1,101.9 million as at December 31, 2014. The liabilities under covered bonds with maturity date up to 1 year account for 0.7%, with maturity date from 3 up to 5 years account for 34.7% and with maturity date from 5 up to 10 years account for 64.6% of the total nominal value.

 

Subsequent events

On January 1, 2015, the Bank acquired 100% of the share capital of UniCredit CAIB Poland S.A. and obtained control over the entity. UniCredit CAIB Poland S.A. specializes in corporate finance, in particular referring to mergers and acquisitions, public and private offering, as well as securities trading on secondary market. As a result of the acquisition, the Group extends the portfolio of services provided to the customers from corporate banking segment.

The detailed information concerning acquisition of 100% of the share capital of UniCredit CAIB Poland S.A. is presented in the Note 56 of the Consolidated Financial Statements of Bank Pekao S.A. Group for the period ended on 31 December 2014.

In the current report No. 1/2015 dated January 23, 2015, the Management Board of Bank Pekao S.A. informs that it received a ruling of the Local Court for the Capital City of Warsaw in Warsaw concerning the deletion as at January 8, 2015 from the National Court Register of the Bank's subsidiary, Pekao Telecentrum Sp. z o.o. in liquidation. The Bank informed of the winding-up of Pekao Telecentrum Sp. z o.o. in the current report No. 34/2013 dated December 2, 2013.