8. Information on business segments and geographical areas
Segment reporting
The PKO Bank Polski SA Group conducts business activities within segments offering specific products and services addressed to specific groups of customers. The manner in which the business segments are divided ensures consistency with the sales management model and offers customers a comprehensive product mix comprising both traditional banking products and more complex investment products, as well as services provided by the PKO Bank Polski SA Group entities. The segment note presented below is included in the internal reporting system, i.e. information presented to the Management Board of PKO Bank Polski SA, used to assess the achieved results and allocate resources. The segment report presented below reflects the internal organizational structure of the PKO Bank Polski SA Group.
2018
The PKO Bank Polski SA Group comprises three basic segments: retail, corporate and investment, and transfer & other activities centre:
- The retail segment offers a full range of services to individuals as part of retail, private and mortgage banking. It also comprises transactions concluded with legal persons, i.e. firms and enterprises. The products and services offered to the customers in this segment comprise: current and savings accounts, term deposits, private banking services, combined investment and insurance products, credit and debit cards, electronic banking services. With regard to financing, this segment offers consumer loans, mortgage loans, including those offered by PKO Bank Hipoteczny SA, as well as business loans for firms and enterprises, developers, cooperatives and property managers, and leases and factoring offered by the PKO Leasing SA Group. In addition, the results of the retail segment comprise the results of the following companies: PKO TFI SA, PKO BP BANKOWY PTE SA, PKO Życie Towarzystwo Ubezpieczeń SA, PKO Towarzystwo Ubezpieczeń SA, the PKO BP Finat sp. z o.o. and ZenCard sp. z o.o
- The corporate and investment segment includes transactions concluded with large corporate clients and financial institutions. This segment offers the following products and services: maintaining current accounts and term deposits, safekeeping of securities, currency products and derivatives, business loans, leasing and factoring offered by the PKO Leasing SA Group. In this segment, PKO Bank Polski SA also concludes, on its own or as part of syndicates with other banks, agreements for the financing of large projects in the form of loans and issues of non-treasury securities. Moreover, the segment comprises own operations, i.e. investing activities, brokerage activities, interbank transactions, transactions in derivatives and debt securities. The results of the corporate and investment segments also comprise the results of the companies operating in Ukraine, mainly KREDOBANK SA, and companies conducting IT services, real estate development and real estate management activities as well as funds investing money collected from investment fund participants.
- The transfer & other activities centre comprises the result on internal settlements related to funds transfer pricing, the result on long-term sources of financing and the result on positions classified for hedge accounting, as well as the results not allocated to any other segment. Internal funds transfer is based on arm’s length transfer pricing. Long-term external financing includes issuing securities, including covered bonds, subordinated liabilities and loans received from financial institutions. As part of this segment, the results of PKO Finance AB are presented.
The PKO BP SA Group accounts for transactions between the segments as if they were transactions between unrelated entities – using internal settlements rates. Transactions between the segments are conducted on an arm’s length basis.
The accounting principles used in segment reporting are in compliance with the accounting policies described in these financial statements.
Disclosed assets and liabilities are operating assets and liabilities used by the segment in its operating activities. The values of assets, liabilities, income and expenses of the particular segments are based on internal management information. Assets and liabilities as well as income and costs related to these assets and liabilities are assigned to particular segments.
The income tax expense in respect of the presentation of the financial result, and deferred income tax assets, current income tax receivables, current income tax liabilities and deferred income tax provision in respect of the presentation of the statement of financial position were recognized at Group level.
The following tables present data on revenues and results of individual operating segments of the PKO Bank Polski SA Group for the 12-month period ended 31 December 2018 and 31 December 2017, as well as assets and liabilities as at 31 December 2018 and as at 31 December 2017.
| For the year ended 31 December 2018 | Continuing operations | |||
| Retail segment | Corporate and investment segment |
Transfer centre and other |
Total activity of the PKO Bank Polski SA Group | |
| Net interest income | 7 427 | 1 536 | 390 | 9 353 |
| Net fee and commission income | 2 523 | 508 | (18) | 3 013 |
| Other net income | 366 | 507 | 108 | 981 |
| Net gain/(loss) on financial instruments measured at fair value through profit or loss | 11 | 22 | (5) | 28 |
| Net foreign exchange gains/(losses) | 161 | 212 | 116 | 489 |
| Gains/(losses) on derecognition of financial assets and financial liabilities not measured at fair value through profit or loss | 6 | 129 | – | 135 |
| Dividend income | – | 12 | – | 12 |
| Net other operating income and expense | 161 | 159 | (3) | 317 |
| Income/(expenses) relating to internal customers | 27 | (27) | – | – |
| Net credit losses | (1 050) | (323) | – | (1 373) |
| Impairment of non-financial assets | (23) | (55) | – | (78) |
| Administrative expenses, of which: | (4 881) | (940) | (84) | (5 905) |
| amortization and depreciation | (703) | (118) | – | (821) |
| Tax on certain financial institutions | (764) | (298) | 112 | (950) |
| Shares in profits (losses) of associates and joint ventures | – | – | – | 37 |
| Segment profit/(loss) before tax | 3 598 | 935 | 508 | 5 078 |
| Income tax expense | – | – | – | (1 336) |
| Profit (loss) attributable to non-controlling shareholders | – | – | – | 1 |
| Net profit attributable to equity holders of the parent company | 3 598 | 935 | 508 | 3 741 |
| As at 31 December 2018 | Retail segment | Corporate and investment segment |
Transfer centre and other |
Total activity of the PKO Bank Polski SA Group |
| Assets | 170 234 | 145 898 | 5 984 | 322 116 |
| Unallocated assets | – | – | – | 2 139 |
| Total assets | 170 234 | 145 898 | 5 984 | 324 255 |
| Liabilities | 184 729 | 64 542 | 35 460 | 284 731 |
| Unallocated liabilities | – | – | – | 423 |
| Total liabilities | 184 729 | 64 542 | 35 460 | 285 154 |
| For the year ended 31 December 2017 | Continuing operations | |||
| Retail segment | Corporate and investment segment |
Transfer centre and other |
Total activity of the PKO Bank Polski SA Group | |
| Net interest income | 6 975 | 1 403 | 228 | 8 606 |
| Net fee and commission income | 2 373 | 602 | (6) | 2 969 |
| Other net income | 447 | 447 | 91 | 985 |
| Net gain/(loss) on financial instruments measured at fair value through profit or loss and net gain/(loss) on investment securities | 5 | 46 | 3 | 54 |
| Net foreign exchange gains/(losses) | 213 | 197 | 42 | 452 |
| Dividend income | – | 12 | – | 12 |
| Net other operating income and expense | 203 | 218 | 46 | 467 |
| Income/(expenses) relating to internal customers | 26 | (26) | – | – |
| Net credit losses | (1 055) | (490) | – | (1 545) |
| Impairment of non-financial assets | (28) | (44) | – | (72) |
| Administrative expenses, of which: | (4 767) | (881) | (136) | (5 784) |
| amortization and depreciation | (727) | (117) | – | (844) |
| Tax on certain financial institutions | (710) | (251) | 29 | (932) |
| Shares in profits (losses) of associates and joint ventures | – | – | – | 22 |
| Segment profit/(loss) before tax | 3 235 | 786 | 206 | 4 249 |
| Income tax expense | – | – | – | (1 140) |
| Profit (loss) attributable to non-controlling shareholders | – | – | – | 5 |
| Net profit attributable to equity holders of the parent company | 3 235 | 786 | 206 | 3 104 |
| As at 31 December 2017 | Retail segment | Corporate and investment segment |
Transfer centre and other |
Total activity of the PKO Bank Polski SA Group |
| Assets | 161 380 | 128 151 | 5 612 | 295 143 |
| Unallocated assets | – | – | – | 1 769 |
| Total assets | 161 380 | 128 151 | 5 612 | 296 912 |
| Liabilities | 172 240 | 59 181 | 28 611 | 260 032 |
| Unallocated liabilities | – | – | – | 624 |
| Total liabilities | 172 240 | 59 181 | 28 611 | 260 656 |
Information on geographical areas
Additionally, the PKO Bank Polski SA Group divides its operations into geographical areas. The PKO Bank Polski SA Group conducts activities in the Republic of Poland and in Ukraine through the KREDOBANK SA Group, ‘‘Inter-Risk Ukraina’’ spółka z dodatkową odpowiedzialnością. (company with additional liability) and Finansowa Kompania ‘‘Prywatne Inwestycje’’ sp. z o.o., in Sweden through subsidiaries: PKO Finance AB and PKO Leasing Sverige AB, in Ireland through the subsidiary: ROOF Poland Leasing 2014 DAC, as well as through a corporate branch of PKO Bank Polski SA (PKO Bank Polski Niederlassung Deutschland) in the Federal Republic of Germany and through a corporate branch in the Czech Republic. For presentation purposes, the results of companies operating in Sweden and Ireland and the results of the branches operating in Germany and the Czech Republic, which from the point of view of the scale of operations of the PKO Bank Polski SA Group are not significant, are included in the segment of Poland The results of the companies recognized in the “Ukraine” area include mutual transactions performed with other companies of the PKO Bank Polski SA Group operating in Ukraine. The mutual transactions with the other companies from the PKO Bank Polski SA Group and the consolidation adjustments have been presented in the results of the “Poland” area.”
| For the year ended 31 December 2018 | Poland | Ukraine | Total |
|---|---|---|---|
| Net interest income | 9 178 | 175 | 9 353 |
| Net fee and commission income | 2 955 | 58 | 3 013 |
| Other net income | 976 | 5 | 981 |
| Administrative expenses | (5 760) | (145) | (5 905) |
| Net credit losses | (1 366) | (7) | (1 373) |
| Impairment of non-financial assets | (78) | – | (78) |
| Tax on certain financial institutions | (950) | – | (950) |
| Shares in profits (losses) of associates and joint ventures | – | – | 37 |
| Segment profit/(loss) before tax | 4 955 | 86 | 5 078 |
| Income tax expense | – | – | (1 336) |
| Profit (loss) attributable to non-controlling shareholders | – | – | 1 |
| Net profit attributable to equity holders of the parent company | 4 955 | 86 | 3 741 |
| As at 31 December 2018 | Poland | Ukraine | Total |
|---|---|---|---|
| Assets, of which: | 321 984 | 2 271 | 324 255 |
| non-financial non-current assets | 6 021 | 120 | 6 141 |
| investments in subsidiaries, associates and joint ventures | 344 | – | 344 |
| deferred income tax assets and current income tax receivable | 2 132 | 7 | 2 139 |
| Liabilities | 283 130 | 2 024 | 285 154 |
| For the year ended 31 December 2017 | Poland | Ukraine | Total |
|---|---|---|---|
| Net interest income | 8 453 | 153 | 8 606 |
| Net fee and commission income | 2 915 | 54 | 2 969 |
| Other net income | 972 | 13 | 985 |
| Administrative expenses | (5 660) | (124) | (5 784) |
| Net credit losses | (1 520) | (25) | (1 545) |
| Impairment of non-financial assets | (72) | – | (72) |
| Tax on certain financial institutions | (932) | – | (932) |
| Shares in profits (losses) of associates and joint ventures | – | – | 22 |
| Segment profit/(loss) before tax | 4 156 | 71 | 4 249 |
| Income tax expense | – | – | (1 140) |
| Profit (loss) attributable to non-controlling shareholders | – | – | 5 |
| Net profit attributable to equity holders of the parent company | 4 156 | 71 | 3 104 |
| As at 31 December 2017 | Poland | Ukraine | Total |
|---|---|---|---|
| Assets, of which: | 295 133 | 1 779 | 296 912 |
| non-financial non-current assets | 6 202 | 93 | 6 295 |
| investments in subsidiaries, associates and joint ventures | 393 | – | 393 |
| deferred income tax assets and current income tax receivable | 1 764 | 5 | 1 769 |
| Liabilities | 259 048 | 1 608 | 260 656 |