IDEA BANK S.A. CAPITAL GROUP

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.12.2019

Warsaw, 18 March 2020

SELECTED FINANCIAL DATA

01.01.2019- 01.01.2018- 01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 31.12.2019 31.12.2018 Data on consolidated income statement (restated) (restated) PLN thousand PLN thousand EUR thousand EUR thousand Net interest income 549 295 526 025 127 691 123 280 Net fee and commission income 107 857 -247 767 25 073 -58 067 Profit (loss) before income tax -90 665 -1 451 575 -21 076 -340 193 Net profit (loss) -37 275 -1 910 552 -8 665 -447 759 Net profit (loss) attributable to shareholders of parent company -37 275 -1 910 552 -8 665 -447 759 Comprehensive income for the period -26 011 -1 925 417 -6 047 -451 243 Net cash flows -178 585 754 154 -41 514 176 744

31.12.2019 31.12.2018 31.12.2019 31.12.2018

Data on consolidated statement of financial position (restated) (restated) PLN thousand PLN thousand EUR thousand EUR thousand Total assets 17 323 307 20 389 564 4 067 936 4 741 759 Total equity 155 970 190 638 36 626 44 334 Equity attributable to shareholders of parent company 155 970 190 638 36 626 44 334 Share capital 156 804 156 804 36 821 36 466 Number of shares 78 401 981 78 401 981 78 401 981 78 401 981 Capital adequacy ratio 1,5% 2,1% 1,5% 2,1%

Selected financial data containing basic items of the consolidated financial statements have been converted into euro according to the following rules: • Individual items of assets, liabilities and equity were converted at the average exchange rates published by National Bank of Poland as at 31 December 2019: 1 EUR = PLN 4.2585 and as at 31 December 2018 1 EUR = PLN 4.3000. • Individual items of the income statement and items related to statement of cash flows were converted at exchange rates representing the arithmetic mean of average exchange rates set by the National Bank of Poland on the last day of each month for the 12-month periods ended 31 December 2019 and 2018 (respectively 4.3018 PLN and 1 EUR = 4. 2669 PLN).

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CONTENT

I. CONSOLIDATED FINANCIAL STATEMANTS ...... 4 1. CONSOLIDATED INCOME STATEMENT ...... 4 2. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ...... 5 3. CONSOLIDATED STATEMENT OF FINANCIAL POSITION ...... 6 4. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...... 7 5. CONSOLIDATED STATEMENT OF CASH FLOWS ...... 9 II. ADDITIONAL NOTES AND EXPLANATIONS TO THE CONSOLIDATED FINANCIAL STATEMENTS ...... 10 1. General information ...... 10 2. Composition of the Group and associates ...... 11 3. Composition of the Parent's Management Board and Supervisory Board ...... 14 4. Approval of the consolidated financial statements ...... 15 5. Major accounting policies ...... 15 6. Capital Requirements...... 47 7. Risk management in the Idea Bank Group ...... 51 8. Segment reporting ...... 85 9. Interest income and expenses ...... 89 10. Fee and commission income and expense...... 90 11. Dividend income ...... 90 12. Result on financial instruments ...... 90 13. Foreign exchange result ...... 91 14. Other operating income and expenses ...... 91 15. General administrative costs ...... 92 16. Employee benefits ...... 92 17. Impairment losses ...... 93 18. Income tax ...... 95 19. Earnings per share ...... 97 20. Dividend paid and proposed for payment ...... 98 21. Cash and balances with Central Bank ...... 98 22. Assets measured at amortised cost other than amounts due from clients ...... 99 23. Derivative financial instruments ...... 99 24. Hedge accounting ...... 100 25. Amounts due from clients ...... 101 26. Finance lease receivables ...... 103 27. Other loans and receivables ...... 103 28. Financial assets measured at fair value through other comprehensive income ...... 103 29. Investments in associates ...... 104 30. Intangible assets ...... 105 31. Property, plant and equipment ...... 108 32. Investment property ...... 109 33. Other assets ...... 110 34. Assets pledged as collateral ...... 110 35. Financial liabilities measured at amortized cost ...... 111 36. Other financial liabilities measured at fair value through profit or loss ...... 113 37. Other liabilities ...... 114 38. Provisions ...... 114 39. Off-balance sheet liabilities ...... 114 40. Share capital ...... 116 41. Other capital ...... 117 42. Additional information to cash flow statement ...... 117 43. Other comprehensive income ...... 120 44. Seasonal or cyclical nature of business ...... 120 45. Transactions with related entities ...... 120 46. Discontinued operations ...... 121 47. Remuneration of Management and Supervisory Board members, share based payments ...... 122 48. Information on significant pending court and administrative proceedings regarding the Group's liabilities or receivables and significant settlements due to court cases ...... 124 49. Events after the reporting period ...... 128

3/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

I. CONSOLIDATED FINANCIAL STATEMANTS

1. CONSOLIDATED INCOME STATEMENT

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Note (restated) PLN thousand PLN thousand Continued operations

I. Interest income and other of similar nature 9 1 022 855 986 158 Income calculated using effective interest rate method: 957 862 930 482 - instruments measured at amortized cost 917 078 870 964 - instruments measured at fair value through other comprehensive income 40 784 59 518 Income of similar nature to interest from instruments measured at fair value through 64 993 55 676 profit or loss

II. Interest expenses 9 -473 560 -460 133 III. Net interest income 549 295 526 025

IV. Fee and commission income 10 173 937 246 294

V. Fee and commission expenses 10 -66 080 -494 061 VI. Net fee and commission income 107 857 -247 767 VII. Dividend income 11 7 176 7 360 VIII. Result on financial assets measured at fair value 12 -67 054 -7 040 IX. Result on debt instruments valued at fair value through other comprehensive 12 -4 204 19 280 income X. Result on the sale of an associate/subsidiary 4 522 14 683 XI. Foreign exchange result 13 16 753 12 815

XII. Other operating income 14 65 086 90 315

XIII. Other operating expenses 14 -123 296 -680 751 XIV. Net other operating income and expenses -101 017 -543 338

XV. Impairment losses 17 -313 644 -776 709 XVI. General administrative costs 15 -345 394 -436 011 XVII. Result from operating activity -102 903 -1 477 800 XVIII. Share in profits (losses) of associates 12 238 26 225 XIX. Profit (loss) before income tax -90 665 -1 451 575

XX. Income tax 18 55 433 -383 025 XXI. Net profit (loss) of continued operations -35 232 -1 834 600 XXII. Net profit (loss) of discontinued operations 46 -2 043 -75 952 XXIII. Net profit (loss) -37 275 -1 910 552 1. Attributable to shareholders of parent company -37 275 -1 910 552 - continued activity -35 232 -1 834 600 - discontinued activity -2 043 -75 952 Weighted average number of ordinary shares in the period 78 401 981 78 401 981 Basic earnings of continued operations per share (PLN per share) 19 -0,45 -23,40 Diluted earnings of continued operations per share (PLN per share) 19 -0,45 -23,40 Basic earnings per share (PLN per share) 19 -0,48 -24,37 Diluted earnings per share (PLN per share) 19 -0,48 -24,37

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 4/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

2. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Note (restated) PLN thousand PLN thousand Profit (loss) for the period -37 275 -1 910 552 Items that may be reclassified to the profit and loss: 2 623 -19 280 Gains and losses on investments in debt instruments measured at fair value through other -701 -18 689 comprehensive income Change in fair value resulting from the change in the credit risk of a financial liability measured 49 -1 836 at fair value through the profit and loss Effect of cash flow hedge accounting 4 330 -2 641 Income tax on other comprehensive income -1 055 3 886 Items that won't be reclassified to the profit and loss: 8 641 4 415 Gains and losses on investments in equity instruments measured at fair value through other 11 087 6 732 comprehensive income Income tax on other comprehensive income -2 446 -2 317

Other comprehensive net income 43 11 264 -14 865

Comprehensive income for the period -26 011 -1 925 417 1. Attributable to shareholders of the parent company -26 011 -1 925 417 - continued activity -23 968 -1 849 465 - discontinued activity -2 043 -75 952

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 5/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

3. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31.12.2019 31.12.2018 01.01.2018 Note (restated) (restated) PLN thousand PLN thousand PLN thousand ASSETS Cash and balances with Central Bank 21 623 493 884 679 138 061 Derivative hedging instruments 23 24 154 10 289 63 594 Derivative financial instruments at fair value through profit or loss 23 50 086 21 593 77 961 Financial assets measured at fair value through other comprehensive income 28 1 994 277 1 924 027 4 268 404 - Debt instruments 1 900 365 1 841 203 4 189 375 - Equity instruments 93 912 82 824 79 029 Amounts due from clients 25 13 324 912 16 097 864 16 657 345 - Loans and advances to clients at amortized cost 13 324 836 16 097 662 16 656 885 - Financial assets at fair value through profit or loss 76 202 460 Finance lease receivables 26 98 763 103 387 57 489 Other loans and receivables measured at amortized cost 27 13 145 0 163 288 Assets measured at amortised cost other than amounts due from clients 22 507 728 402 628 191 847 - Receivables from banks and financial institutions 359 730 204 681 191 847 - Other debt instruments valued at amortized cost 147 998 197 947 0 Investments in associates 29 236 716 298 575 396 554 Intangible assets 30 147 103 167 646 673 397 Tangible fixed assets 31 104 877 137 089 143 884 Investment property 32 30 912 41 363 51 086 Fixed assets held for sale 1 306 1 357 1 487 Income tax assets 18 6 442 9 209 290 179 - Current tax assets 2 671 6 497 1 220 - Deferred tax assets 3 771 2 712 288 959 Other assets 33 159 393 289 858 452 538 TOTAL ASSETS 17 323 307 20 389 564 23 627 114 LIABILITIES AND EQUITY Liabilities Derivative hedging instruments 23 2 880 22 247 0 Derivative financial instruments at fair value through profit or loss 23 0 0 5 375 Financial liabilities measured at amortized cost 35 15 943 055 18 522 703 18 725 488 - Amounts due to the Central Bank 0 834 319 0 - Amounts due to other banks and financial institutions 21 632 78 724 678 193 - Amounts due to clients 15 508 490 17 082 836 17 520 161 - Debt securities in issue 374 883 523 739 521 869 - Other liabilities measured at amortized cost 38 050 3 085 5 265 Financial liabilities measured at fair value through profit or loss 36 1 035 512 1 278 680 1 989 613 Tax liabilities 18 0 47 183 318 - Income tax liability 0 10 85 - Deferred tax liabilities 0 47 173 233 Provisions 38 23 513 29 171 10 535 Other liabilities 37 162 377 298 942 436 839 TOTAL LIABILITIES 17 167 337 20 198 926 21 168 168 Equity (attributable to shareholders of parent company) 155 970 190 638 2 458 946 Share capital 40 156 804 156 804 156 804 Retained earnings -1 282 037 -985 014 -496 408 Net profit (loss) -37 275 -1 910 552 192 844 Other capital 41 1 318 478 2 929 400 2 605 706 Total equity 155 970 190 638 2 458 946 TOTAL LIABILITIES AND EQUITY 17 323 307 20 389 564 23 627 114

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 6/64 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

4. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for 12-month period ended 31 December 2019

Attributable to shareholders of parent company Other capital Retained Net profit Share capital Total equity Note earnings Supplementary Revaluation Exchange Other (loss) capital reserve differences reserves

PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand As at 1.01.2019 156 804 -921 734 2 411 881 1 666 315 515 538 -1 891 816 272 654 Correction of errors 0 -82 016 0 0 0 0 0 -82 016 As at 1.01.2019 (restated) 156 804 -1 003 750 2 411 881 1 666 315 515 538 -1 891 816 190 638 Gains and losses on investments in debt instruments measured at fair 43 0 0 0 -924 0 0 0 -924 value through other comprehensive income Change in fair value resulting from the change in the credit risk of a 43 0 0 0 -51 0 0 0 -51 financial liability measured at fair value through the profit and loss Gains and losses on investments in equity instruments measured at fair 43 0 0 0 8 641 0 0 0 8 641 value through other comprehensive income Hedge accounting 43 0 0 0 3 598 0 0 0 3 598 Other comprehensive income 0 0 0 11 264 0 0 0 11 264 Net profit (loss) 0 0 0 0 0 0 -37 275 -37 275 Comprehensive income for the period 0 0 0 11 264 0 0 -37 275 -26 011 Transfer of net result from previous period to undistributed profit 0 -1 891 816 0 0 0 0 1 891 816 0 Previous period loss coverage 0 1 614 369 -1 614 369 0 0 -7 817 0 -7 817 Other 0 -840 0 0 0 0 0 -840 As at 31.12.2019 156 804 -1 282 037 797 512 12 930 315 507 721 -37 275 155 970

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 7/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) for 12-month period ended 31 December 2018

Attributable to shareholders of parent company Other capital Retained Net profit Share capital Total equity earnings Supplementary Revaluation Exchange Other (loss) (restated) capital reserve differences reserves

PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand As at 1.01.2018 156 804 -258 145 2 410 868 16 385 315 178 138 230 799 2 735 164 Correction of errors 0 -276 218 0 0 0 0 0 -276 218 As at 1.01.2018 (restated) 156 804 -534 363 2 410 868 16 385 315 178 138 230 799 2 458 946 Changes resulting from the implementation of IFRS 9 0 -340 022 0 1 466 0 0 0 -338 556 As at 1.01.2018 (adjusted) 156 804 -874 385 2 410 868 17 851 315 178 138 230 799 2 120 390 Gains and losses on investments in debt instruments measured at fair 0 0 0 -15 654 0 0 0 -15 654 value through other comprehensive income Change in fair value resulting from the change in the credit risk of a 0 0 0 -1 397 0 0 0 -1 397 financial liability measured at fair value through the profit and loss Gains and losses on investments in equity instruments measured at fair 0 0 0 4 415 0 0 0 4 415 value through other comprehensive income Hedge accounting 0 0 0 -2 229 0 0 0 -2 229 Other comprehensive income 0 0 0 -14 865 0 0 0 -14 865 Net profit (loss) 0 0 0 0 0 0 -1 910 552 -1 910 552 Comprehensive income for the period 0 0 0 -14 865 0 0 -1 910 552 -1 925 417 Transfer of profit of previous period to undistributed profit 0 230 799 0 0 0 0 -230 799 0 Distribution of net profit (loss) 0 -339 517 1 013 0 0 338 504 0 0 Other 0 -1 911 0 -1 320 0 -1 104 0 -4 335 As at 31.12.2018 156 804 -985 014 2 411 881 1 666 315 515 538 -1 910 552 190 638

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 8/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5. CONSOLIDATED STATEMENT OF CASH FLOWS

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018

(restated) PLN thousand PLN thousand Cash flows from operating activities Net profit (loss) -37 275 -1 910 552 Total adjustments: 815 419 1 790 573 Depreciation and amortization 61 957 42 225 Share in profits (losses) of associates -12 238 -26 225 Foreign exchange (gain) loss -16 753 -12 815 (Profit) loss on investing activities 0 -2 871 Interest and dividend -2 340 -42 168 Changes in receivables from banks and financial institutions -72 448 -16 171 Changes in derivative financial instruments (assets) -38 028 107 032 Changes in loans and credits to customers 2 772 952 248 937 Change in receivables due to finance leases 5 305 -45 970 Change in other receivables measured at amortized cost -13 145 163 288 Change in investments securities -11 397 2 133 908 Change in deferred income tax assets -1 059 350 477 Change in other assets 130 465 229 723 Changes in receivables from banks and financial institutions -56 529 -598 828 Change in derivative financial instruments (liability) -19 367 16 872 Change in other financial liabilities at fair value through profit or loss -243 168 -710 933 Change in amounts due to customers -1 574 346 -437 325 Change in debt securities in issue -725 1 870 Change in provisions and provisions for deferred income tax -52 831 52 547 Change in other liabilities -172 310 -140 077 Other adjustments 127 608 471 875 Income tax paid 7 516 9 428 Current income tax (P&L) -3 700 -4 226 Net cash from operating activities 778 144 -119 979 Cash flows from investing activities Investing activity inflows 110 796 166 063 Sale of shares in associates 33 028 25 000 Proceeds from sale of intangible assets and tangible fixed assets 40 749 72 247 Interest received 37 019 61 456 Other investing inflows 0 7 360 Investing activity outflows -51 037 -98 960 Purchase of associates 0 -4 590 Purchase of intangible assets and tangible fixed assets -51 037 -94 370 Net cash from investing activities 59 759 67 103 Cash flows from financing activities Debt instruments in issue repayment -148 131 0 Repayment of loans -833 678 0 Interest paid -34 679 -26 648 Other financing inflows/outflows 0 833 678 Net cash from/ (used in) financing activities -1 016 488 807 030 Increase (decrease) net cash and cash equivalents -178 585 754 154 Cash and cash equivalents at the beginning of the period 1 056 206 302 052 Cash and cash equivalents at the end of the period 877 621 1 056 206

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 9/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

II. ADDITIONAL NOTES AND EXPLANATIONS TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information

The Idea Bank S.A. Capital Group (“the Group”) consists of the parent company - Idea Bank S.A. (“the Bank", “the parent company”), and its subsidiaries. Idea Bank S.A. is located in Poland, with its registered office in Warsaw, Przyokopowa 33, registered in the District Court for Warsaw, XII Economic Unit of the National Court Registry under 0000026052 number. The Bank was also assigned National Official Business Register number (REGON): 011063638. The duration of the Bank and its subsidiaries is unlimited. The legal basis for the Bank’s operations is its statutes drawn up in the form of notarial act of 23 March 1992. The Group’s operations include banking services provided by the parent company and financial and insurance agency services, sale of real estate and lease provided by the subsidiaries. Activities of the parent company include: • accepting cash deposits payable on demand or on the due date; maintaining respective accounts, • maintaining other bank accounts, • granting loans and advances, • issuing and confirming bank guarantees; L/C opening and confirmation, • issuing bank securities, • cash settlements, • providing borrowings, • transactions on cheques and bills of exchange; warranty operations, • acquisition and disposal of receivables, • custody services, bank safe services, • issuing and confirming sureties, • representing investors in transactions in securities, • issuing and servicing payment cards, • forward and futures transactions, • purchasing and selling foreign currencies, • intermediary services in cash transfers and FX transactions, • issuing e-money instruments.

The Group’s operations also include:

• acquiring and purchasing shares, rights, other legal entity’s interests and investment funds’ share units, • incurring liabilities related to the issue of securities, • debt for asset swap, as agreed upon with the debtor, with the Bank’s obligation to sell the assets not later than 5 (five) years following the date of the acquisition for real estate and not later than 3 (three) years following the date of acquisition for other assets. The obligation

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 10/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

mentioned above does not apply to assets which the Bank will use to conduct its own banking activities, • financial advisory and consulting services, • financial services related to insurance and pension and disability funds, • finance leases, • purchasing and selling real estate, • trading in securities, • managing securitized debts in securitization funds, • insurance agency, • performing, permanently or periodically, on behalf of and for the account of an investment firm, agency services in the scope of activities conducted by this investment company, • performing the function of the representative bank and keeping the bond records within the meaning of the act on bonds, • suppling of the following other financial services: • brokerage services for the conclusion of factoring agreements, forfaiting agreements and for the sale of financial leasing services, • brokerage services in the field of lending, • brokerage services in the field of conclusion of acquiring contracts. • performing the non-brokerage activities consisting in: a) acquiring and transferring purchase or sell orders of financial instruments in the form of participation units in collective investment undertakings, b) offering financial instruments in the form of investment certificates and bonds with the reservation that the subject of the activities referred to in point a) - b) above, is limited to the bonds issued by the State Treasury or the National Bank of Poland or financial instruments referred to in point a) – b) not quoted on active markets and bonds referred to in Art. 39p par. 1 of the Act of 27 October 1994 on toll motorways and on the National Road Fund. The Group's parent company is Getin Holding S.A., with its registered office in Wrocław (Poland), Gwiaździsta 66. The ultimate parent is dr Leszek Czarnecki.

2. Composition of the Group and associates

The Bank conducted an analysis of the nature of its involvement in investments held to identify the entities over which the Bank exercises control and to determine the structure of the Group in accordance with the criteria resulting from IFRS 10 Consolidated Financial Statements.

All significant balances and transactions between Group’s entities, including unrealized gains arising from Group transactions, have been fully eliminated. Unrealized losses are eliminated unless they are an impairment indicator.

Changes in the shareholding structure of the parent company, which do not lead to a loss of control over a subsidiary are stated as equity transactions. In such cases, in order to reflect the changes in shares in a subsidiary, the Group adjusts the carrying amount of the controlling and non-controlling shares. Any differences between the adjustment amount of non-controlling shares and the fair value of the amount paid or received are referred to equity and assigned to shareholders of parent company.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 11/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

As at 31 December 2019 and 31 December 2018 the Idea Bank S.A. Capital Group consisted of the following entities:

* In connection with submission of bankruptcy petition to the District Court for the Capital City of Warsaw on 30 July 2019 by the company Tax Care S.A., Idea Bank decided that it had lost control over the company and ceased its consolidation.

In addition, as at 31 December 2019 in the consolidated statements of the Idea Bank S.A. Capital Group the following associates have been identified: • Idea Getin Leasing S.A. – share 49.99%, • Open Finance S.A. – share 17.72%, • Idea Box Alternatywna Spółka Inwestycyjna S.A. - share 40.05%.

From 01.01.2019 to 31.12.2019 the following significant events took place within the Group: 1. On 14 January 2019, the Bank made a full early repayment of the refinancing loan granted by the National Bank of Poland. The Bank's LCR index calculated and set on 15 January 2019 was at the level of 112.16% as at 14 January 2019, i.e. it remained in line with the requirements specified in Art. 412 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No. 648/2012. 2. On 17 January 2019, the Bank's Management Board and the Management Board of Getin Noble Bank S.A. agreed and signed the Connection Plan for Idea Bank S.A. based in Warsaw and Getin Noble Bank S.A. ("GNB") with its registered office in Warsaw prepared in accordance with Art. 498 and 499 of the Act of 15 September 2000 - Code of Commercial Companies (consolidated text Journal of Laws of 2017, item 1577, as amended). On 31 May 2019, the Bank received the PFSA's decision to refuse to issue a permit to merge the Bank with Getin Noble Bank S.A. 3. On 1 February 2019, the Bank's Management Board decided to allow selected private equity funds for the due diligence process from 4 February 2019 and to start negotiations with them regarding the transaction structure. 4. On 5 March 2019, to Idea Money S.A. there was delivered the summons of DNLD L.P. based in Jersey (being the parent company of DNLD Holdings S.à.r.-majority shareholder GetBackS.A.) to start settlement talks aimed at satisfying indefinite damage DNLD L.P. resulting from the concluded on 15 March 2016 between Emest Investment sp. o.o. and Idea Investment S.a.r.l. with its registered office in Luxembourg, the sales agreement for all shares in GetBack S.A. Idea Money S.A. is the legal successor of Idea Investment S.a.r.l. after the cross-border merger of both companies. 5. On 18 March 2019, the Bank sent a notification to the Polish Financial Supervision Authority and the Bank Guarantee Fund about the threat of violation of the requirements set out in Art. 92 par. 1 lit. c CRR. due to identified methodological flaws in the loss estimation model used by the Bank to calculate write-offs and provisions for impairment of loan exposures. On 27 March 2019, the Bank's Management Board adopted resolutions regarding changes in the "Methodology of calculating write- offs for expected credit losses pursuant to IFRS 9", amendments to "Accounting procedure for recognition of commission income from the sale of insurance and investment-insurance products in Idea Bank S.A." and approval of changes to the documentation and backtesting of LGD model. In particular, the changes in the LGD model concerned data on historically realized debt sale used for

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 12/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

model learning, as well as the possibility of such transactions in the future (so-called residual recovery). As a consequence of the changes made to the models and adopted procedures in accordance with the calculations, at the consolidated level, the Bank created impairment allowances and provisions for loan exposures in the amount of PLN 407 million and provisions for the expected level of return on remuneration for sale of insurance products in the amount of approx. PLN 48 million. The effects of the above events have been already accounted for in the Group's consolidated financial statements and the Bank's standalone financial statements for 2018. 6. On 27 March 2019, the Bank informed the Polish Financial Supervision Authority and the Bank Guarantee Fund about a violation of the total capital ratio, as referred to in Art. 92 of the CRR Regulation and updated the notification pursuant to Art. 157f paragraph Banking Law. 7. On 8 May 2019, the rating agency EuroRating Sp. z o.o. lowered the rating granted to the Bank from the B + level to the CCC level. The negative rating outlook has been maintained. 8. On 15 May 2019, the Polish Financial Supervision Authority appointed a curator to improve the Bank's situation and entrusted the Bank Guarantee Fund with the function of a curator. 9. On 5 June 2019, the EuroRating Sp. z o.o. has lowered the credit rating assigned to the Bank from CCC to CC. The negative rating outlook was maintained. 10. On 19 June 2019, the Management Board of the Bank adopted a resolution on the intention to carry out group redundancies and to begin the consultation procedure regarding group redundancies. The intention of the Bank's Management Board is to terminate employment contracts with a maximum of 750 employees of the Bank by 31 December 2019. The reason for the planned layoffs is the need to restructure operating costs, including a reduction in the level and costs of employment at the Bank. The Bank estimated the cost of employment reduction at approx. PLN 9.2 million, and a corresponding provision was created in the Bank's accounting books. In the results of the first half of 2019, the Bank also included a provision related to the restructuring of the branch network in the amount of PLN 25.9 million. 11. On 16 July 2019, the Bank received a notification about the initiation by the PFSA of an administrative proceeding pursuant to Art. 61 §4 of the Act of 14 June 1960 Code of Administrative Procedure in connection with Art. 11 paragraph 5 of the Act of 21 July 2006 on supervision of the financial market regarding the imposition of a financial penalty referred to in Art. 138 section 3 point 3a of the Banking Law of 29 August 1997. 12. On 30 July 2019, the company Tax Care S.A. filed for bankruptcy with the District Court for the capital city of Warsaw. The submission of the application by the company was carried out in performance of obligations arising from the provisions of the Bankruptcy Law. Submission of the application and preparation of the restructuring application is part of the remedial actions of the Idea Bank Group. As a result of filing for bankruptcy, Idea Bank decided that it lost control of the company and deconsolidated it. As a result of losing control over Tax Care S.A. and deconsolidation of the Company, the Group recognized a positive result of approx. PLN 21.8 million net on a consolidated basis. 13. On 14 August 2019, the company Tax Care S.A. filed a request to open a restructuring procedure with the District Court for the capital city of Warsaw. 14. On 16 August 2019, the Bank received a notification of initiation ex officio by the PFSA pursuant to Art. 61 § 1 and § 4 of the Act of 14 June 1960 Code of Administrative Procedure in connection with Art. 11 paragraph 5 and 12 paragraph 1 of the Act of 21 July 2006 on financial market supervision over administrative proceedings regarding the application of the supervisory measure referred to in Art. 138 section 3 point 3 of the Banking Law of 29 August 1997. 15. On 10 September 2019, a temporary court supervisor was appointed by the interim court in proceedings regarding the declaration of bankruptcy of Tax Care. At the same time, the court decided to refuse to open the accelerated arrangement proceedings. 16. On 28 October 2019, the Bank received from a transaction advisor representing the Bank in the process of acquiring a financial investor information that a private equity fund, after conducting a due diligence audit, informed about resignation from participation in a potential transaction of purchase of the Bank's shares. 17. On 11 December 2019, the Bank received the results of the customs and fiscal control carried out by the customs and fiscal control authority in the scope of checking the reliability of the declared tax bases and the correctness of calculating and paying corporate income tax for 2016. Details on the results of the controls are presented in Note 48 to these consolidated financial statements. 18. By decisions of 30 December 2019, the President of the Office for Competition and Consumer Protection ("OCCP") initiated two proceedings regarding suspected use of practices by the Bank that infringed the collective interests of consumers referred to in Art. 24 paragraph 1 and item 2 point 3

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 13/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

of the Act of 16 February 2007 on competition and consumer protection. Details of the proceedings initiated are presented in Note 48 to these consolidated financial statements.

From 01.01.2019 to 31.12.2019 the following significant events took place within the associates: 1. On 3 January 2019, the Management Board of Open Finance S.A. decided to start activities aimed at preparing the process of merging the Company's shares (reducing the total number of the Company's shares with simultaneous increase of their nominal value in accordance with the agreed exchange ratio while maintaining the unchanged share capital).The shares were merged on 30 April 2019. The number of securities to be merged was 58,560,636 shares, and their number after consolidation was 9,760,106. 2. On 4 March 2019, the District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register, registered the change of the company's name Idea Box S.A. to Idea Box Alternatywna Spółka Inwestycyjna S.A. 3. On 26 April 2019, Idea Money sold all of its shares in MuSE Finance Ltd. 4. On 28 June 2019, Idea Money S.A. signed a conditional share sale agreement in relation to all shares held in Idea 24/7 Inc. Conditions precedent fulfilled on 30 July 2019. The sale price was set at USD 1.2 million and will be payable in two tranches: USD 250 thousand within 14 days of meeting the conditions precedent, and USD 950 thousand within 7 months from the date of signing the sales contract. 5. On 21 August 2019, the increase in the share capital of Idea Box ASI S.A., in which the Group did not participate, was registered in the National Court Register, due to which the share in the company's capital decreased from 41.73% to 40.05%.

3. Composition of the Parent's Management Board and Supervisory Board

Composition of the Bank's Supervisory Board as at 31.12.2019 and as at the date of approval of the report for publication:

Supervisory Board Supervisory Board Chairman dr Leszek Czarnecki Supervisory Board Deputy Chairman Remigiusz Baliński Supervisory Board Members: Dariusz Krawczyk Piotr Kamiński Krzysztof Bielecki Artur Gabor Izabela Lubczyńska

Composition of the Bank's Management Board as at 31.12.2019 and as at the date of approval of the report for publication:

Management Board acting Management Board President Jerzy Pruski Management Board Members: Jaromir Frankowicz Artur Kubiński Piotr Miałkowski Marek Kempny

On 31 May 2019 Mr Tomasz Górski resigned from the position of the Management Board Member with effect as of the date of resignation.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 14/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

On 31 May 2019 Mr Piotr Petelewicz resigned from the position of the Management Board Member with effect as of the date of resignation. On 31 May 2019 Mr Dariusz Daniluk resigned from the position of the Management Board Member with effect as of the date of resignation. On 30 July 2019 the Supervisory Board of the Bank appointed Mr Marek Kempny to the position of the Bank's Management Board Member with effect from 5 August 2019.

4. Approval of the consolidated financial statements

These consolidated financial statements were approved for issue by the Management Board on 18 March 2020.

5. Major accounting policies

5.1 Period covered by the statements

These consolidated financial statements cover the period of 12 months ended 31 December 2019 for the income statement, statement of changes in equity, statement of comprehensive income and cash flow statement together with comparative data for the period of 12 months ended 31 December 2018 and data as at 31 December 2019 for the statement of financial position together with comparative data as at 31 December 2018 and 1 January 2018.

These consolidated financial statements were audited by an independent auditor. The entity authorized to audit the consolidated financial statements is Grant Thornton Polska Spółka z ograniczoną odpowiedzialnością Spółka komandytowa.

5.2 Basis for preparation of the consolidated financial statements

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards approved by the European Union ("IFRS"), according to a historical cost basis except for financial assets measured at fair value through other comprehensive income and at fair value through profit or loss and financial liabilities measured at fair value through profit or loss and also investment property. Non-current assets or groups of assets classified as held for sale are recognized at the lower of the two: carrying amount or fair value less costs to sell.

Comparative data were prepared on a historical cost basis except for financial assets measured at fair value, financial liabilities measured at fair value and investment property. Non-current assets or groups of non-financial assets classified as held for sale are recognized at the lower of the two: carrying amount or fair value less costs to sell.

These consolidated financial statements have been prepared in accordance with the materiality principle. In the Group's opinion, omission or distortion of the items of the financial statements is material if they may, individually or collectively, affect the economic decisions taken by the users of the Group's financial statements. Significance depends on the size and type of omission or distortion of items in the financial statements and on the combination of both. The Group presents separately each significant category of similar items. Positions different in terms of type or function are presented separately by the Group, unless they are insignificant.

5.3 Going concern

As a result of the high loss recorded at the end of 2018 and the reduction of capital in 2019, despite the fact that since the second quarter of 2019 the Group has been profitable and has recorded a gradual

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 15/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) increase in net profit, capital ratios of the Bank and the Group as at 31 December 2019 were below the requirements specified in Art. 92 of the CRR, as shown in the table below:

The Bank’s and the Group’s capital adequacy ratios as at 31.12.2019.

Ratio Limit Standalone level of the Bank Consolidated level of the Group Achieved level Difference Achieved level Difference CET 1 10.00% 2.49% -7.51% 0.65% -9.35% TIER 1 11.50% 2.49% -9.01% 0.65% -10.85% TCR 13.50% 3.34% -10.16% 1.46% -12.04%

As already presented in the financial statements for 2018, The Management Board of the Bank on 18 March 2019 referred to the Polish Financial Supervision Authority and the Bank Guarantee Fund notifications pursuant to Art. 142 para. 1 point 1 of the Act of 29 August 1997 - Banking Law (Journal of Laws of 1997 No. 140 item 939, as amended) ("Banking Law") on the occurrence of danger of violation of the total capital ratio referred to in Art. 92 of the CRR Regulation. At the same time, the Bank notified the PFSA following the Art. 157f. para. 3 of the Banking Law in conjunction with Art. 101 para. 3 point 1 of the Act of 10 June 2016 on the Bank Guarantee Fund, deposit guarantee system and forced restructuring (Journal of Laws of 2016, item 996, as amended) on fulfilment of the premise of bankruptcy risk arising from violation of legal provisions in the scope of capital standards and related to their formation below the requirements set out in Art. 92 CRR. Then, on 27 March 2019 the Bank referred to the Polish Financial Supervision Authority and the BFG on the basis of Art. 142 para. 1 point 1 of the Banking Law on occurrence of a violation of the total capital ratio referred to in Art. 92 of the CRR Regulation. Therefore, in accordance with Art. 138 sec. 3 of the Banking Law, the PFSA may, inter alia, based on Art. 138 section 3 point 4 of the Banking Law, revoke the authorization to create the Bank. This in turn implies the possibility of applying Art. 101 of the Act on the BFG. Under this rule and in the assessment of the PFSA that the Bank is in danger of bankruptcy, the Bank could be forced to restructure due to the possibility of revoking the permit. The Bank indicates that as at 31 December 2019, the sum of guaranteed funds held by depositors in accordance with Art. 24 of the Act of 10 June 2016 on the Bank Guarantee Fund, deposit guarantee system and forced restructuring (Journal of Laws of 2016, item 996, as amended) amounted to PLN 15,874 million.

I. Actions taken to restore profitability and protect equity

Due to the failure to merge Idea Bank S.A. and Getin Noble Bank S.A. (on 31 May 2019, the Bank received the decision of the Polish Financial Supervision Authority regarding the refusal to issue a permit to merge the Bank with Getin Noble Bank S.A.), and the ineffectiveness of seeking a private equity investor (in current report No. 45/2019 of 1 July 2019, the Bank informed about the commencement of a limited due diligence process conducted with the participation of a private equity investor, which process was extended by a decision of 16 September 2019, about which the Bank announced in current report No. 61/2019. On 28 October 2019, the Bank received from an adviser representing the Bank in the process of acquiring a financial investor information that the private equity fund has announced its resignation from participation in a potential transaction to acquire the Bank's shares), the Bank's activities were focused on the process of autosanation. On 15 May 2019, the Polish Financial Supervision Authority appointed a curator at the Bank in the form of BFG. In the justification of the decision, the PFSA indicated that the purpose of the above measure in the form of establishing a probation officer is "to support the process of developing corrective actions and their implementation by the current Management Board of the Bank, which may contribute to increasing trust in the Bank and its authorities". The choice of a guardian in the form of a Bank Guarantee Fund is dictated by the Fund's experience in restructuring activities and is to enable effective and efficient autosanation.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 16/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The Bank developed and presented to the Polish Financial Supervision Authority a plan of corrective actions based on a significant reduction in costs and a reduction in the scale of operations. The Bank submitted to the Polish Financial Supervision Authority a request to update the Recovery Plan, which has not yet been considered. As previously announced, Idea Bank has completely abandoned investment products and focuses on serving business clients (a wide range of products) and individual clients (attractive savings offer). In 2019, the Bank focused its activities on developing credit and deposit offer as well as financing leasing activities. In the restructuring process, the Bank focuses on a significant reduction of financing costs, the Bank's operating costs, including savings in employment costs as well as reduction and stabilization of cost of risk. Actions taken are accompanied by a significant reduction in the balance sheet total, reconstruction of the business model and transformation of the sales network. As part of cost reduction, a number of comprehensive and at the same time difficult restructuring activities were carried out and the business model was updated, focusing the offer on products for micro, small and medium enterprises. The introduced changes concerned in particular: • ongoing digitization and strengthening of on-line services as the main channels of communication with clients and providing services to them, • changes in the customer service model in branches and reorganization of the sales network. As a result of these actions, it was possible to reduce the number of costly and therefore inefficient traditional branches, • at an extremely fast pace, the Bank developed and signed an agreement with employee representatives regarding employment restructuring. Since the announcement of the group layoffs plan in June 2019, employment has been steadily decreasing; by the end of 2019, the number of employees decreased by 560 employees compared to the end of May 2019, of which 261 employees received dismissals for reasons not related to the employee. The dismissed persons, irrespective of the previous legal form of their cooperation with the Bank, have been covered by the outplacement program which aim was to help them find a new place of employment. Thanks to the consistent and quick implementation of autosanation activities, the Bank ended up with a profit both in the third and fourth quarter of 2019 at both the consolidated and standalone level. It was a continuation of the positive trend that appeared in the results achieved in the second quarter when a small profit was recorded for the first time at the standalone and consolidated levels. Its amount was influenced by such factors as: further consistent cost reduction, decrease in the cost of obtaining deposits and maintaining business activity in accordance with the adopted strategy of operation. In the whole of 2019, the Group's administrative costs decreased by PLN 73.4 million y/y, i.e. by 21.1% in basic terms (i.e. excluding contributions to BFG, tax on assets and restructuring reserves) and PLN 89.2 million, i.e. 20.5% on a balance sheet basis. The annualized target level of cost reduction of approximately PLN 100 million annually should be achieved by mid-2020. Thanks to the implemented changes in the credit risk management model, which lead to more selective sales of products, 2019 is a period of falling risk costs for new loans. After the implementation of the comprehensive restructuring plan of the Bank itself, the Management Board began intensive coordination and supervisory activities regarding the restructuring of subsidiaries of the Idea Bank Group. Despite the objective difficulties, the risk associated with Tax Care S.A. was controlled, in which case the bankruptcy petition was filed, and the company was deconsolidated. In case of other subsidiaries, i.e. Idea Money S.A. and Development System Sp. z o.o. 1 restructuring plans are being finalized. The Bank assumes that in the medium and long term both of these entities will contribute positively to the consolidated result of the Bank Group. The basic goal of the restructuring activities undertaken is to build the basis for long-term, stable profitability of the Bank and the Capital Group. Quick achievement of sustainable profitability is an action necessary to protect the Bank's low capital base. The ability to generate recurring income is also to be a decisive factor in rebuilding and maintaining confidence in the Bank and the Capital Group in the medium and long term. Investors’ confidence is in turn a key factor in the success of the planned increase in the Bank's capital. Under the conditions of restored profitability, the Bank will continue the

1 The Bank has another subsidiary: Idea SPV Sp. z o.o. - the company does not operate

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 17/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) process of seeking an investor to increase capital or merge with another bank. The success of this process would allow, in the medium term, restore capital ratios to the levels required by the CRR and the requirements of the combined buffer requirements. At the same time, the Management Board draws attention to the risk of not achieving the intended business goals. The above risk may relate to internal factors related to the restructuring of the Bank and the Group and the impact of highly volatile market conditions on its financial results. The global pandemic outbreak of the Sars-CoV-2 coronavirus has introduced an unprecedented level of volatility and concern about the state of the economy and the basis for further economic growth both globally and locally. The effects of a pandemic on economics, including in particular the effects on the Polish economy cannot be precisely measured and assessed at this stage. It is difficult at this stage to obtain reliable macroeconomic and sector estimates, and the shape of anti-crisis measures undertaken by the government and financial security network entities is unknown. Nevertheless, the economic slowdown seems to be highly certain, and the recession is quite a real threat. In such a situation, entities such as the Bank and its subsidiaries may become particularly vulnerable to the negative effects of the slowdown. This is due to both idiosyncratic factors, and therefore in particular to the low capital base, as well as sectoral. The micro and small enterprises segment is characterized by a relatively low capital base and profitability ratios. This means that without a comprehensive protective program coordinated at the Polish Government level and by the bodies of the security and financial stability network (PFSA, BFG, NBP), with the participation of commercial and state-owned financial market entities (banks, insurance companies, guarantee funds, export support institutions, advisory companies, etc.), which also involves the support of relevant European Union institutions, the effects of the coronavirus crisis can be deep, persistent and difficult to reverse. This may have a direct negative impact on the profitability of the Bank's operations and its capital base.

II. Actions taken to maintain liquidity

In November 2018, as described in detail in the Group's consolidated financial statements for 2018, the Management Board had to face an unprecedented liquidity crisis initiated by the publication on the Commission website on 13 November 2018 of the "Statement regarding the listing of the entry on the PFSA Public Alert List regarding Idea Bank S.A." During 2019, the Group's liquidity position was stable, and as at 31 December 2019 liquidity standards remained above the required level (for Idea Bank LCR was 155.98% and NSFR 142.46%). Despite offering relatively low interest rates on deposits compared to the level recorded at the beginning of 2019, the Bank maintained a high liquidity position. Compared to 2018, the Bank reduced financing costs by 0.84 bps. This means successfully completing the process of stabilizing the costs of acquiring liabilities, which increased significantly at the turn of 2018 and 2019.

III. Going concern statements of the Idea Bank S.A. Management Board

The Bank's Management Board in the presented disclosure has identified and described in detail the risks related to factors that may affect the going concern assumption. They refer in particular to the failure to meet capital adequacy ratios, profitability and the possibility of starting a forced restructuring procedure. The Management Board presented the activities undertaken to eliminate the identified threats. They are comprehensive and focus on implementation of a strategy, which also leads to the reconstruction of capital ratios and profitability. The presented strategy for positive implementation requires the Bank’s acquisition of external sources of capital and the PFSA's approval for the temporary ability to function under conditions of non-compliance with capital ratios until its recapitalization. The Management Board of the Bank has a strategy and a schedule to rebuild capital to levels that ensure that all capital requirements are met. The presented activities are carried out with the support of professional advisers. The Bank's Management Board, being aware of the material uncertainty presented above, believes that the actions taken by it in the field of, inter alia, restructuring, will allow continuation of the Bank's operations.

In particular, the Management Board notes the growing uncertainty about the effects of the current Sars- CoV-2 coronavirus pandemic. Nevertheless, they are convinced that appropriate protective and

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 18/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) corrective plans and actions will be prepared and implemented, aimed at minimizing the effects of a pandemic on the economy, and thus effectively limiting its possible negative impact on the Bank.

The Management Board, being aware of the existing restrictions and conditionality of some of the adopted assumptions and by presenting these action plans, can reasonably assume that no administrative steps will be taken towards the Bank to revoke the permit for business or forced restructuring in a form that would prevent its continuation in the next 12 months from the balance sheet date.

Therefore, these consolidated financial statements have been prepared on the assumption that the Idea Bank will continue as a going concern in the foreseeable future, i.e. at least one year from the balance sheet date.

5.4 Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards approved by the EU ("IFRS") and in areas not covered by the above standards as required by the Accounting Act of 29 September 1994, subsequent amendments and executive regulations issued thereunder, as well as requirements relating to issuers of securities admitted or being the subject of an application for admission to trading on the official stock exchange market.

IFRS comprise standards and interpretations accepted by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC"). The Group applies "carve out" in IAS 39 approved by the European Union as described in this report in the section on hedge accounting. The Group has not decided to apply earlier any standard, interpretation or amendment that has been published but has not yet come into force.

Some entities of the Group keep their accounting books in accordance with the accounting policy (principles) set out in the Accounting Act of 29 September 1994 (the "Act"), as amended and regulations issued based on it ("Polish Accounting Standards"). In the event of differences between the rules applied by the abovementioned and the principles applied by the Group, the Group makes appropriate adjustments.

5.5 Accounting principles applied

During 2019, the Group applied the same accounting principles as in the preparation of the consolidated financial statements for the year ended 31 December 2018 excluding changes resulting from the implementation of IFRS 16 "Leases" since 1 January 2019 as described further in Note 5.13.

5.6 Data presentation changes

With reference to the information disclosed in Note 46 to these consolidated financial statements, in accordance with International Financial Reporting Standard No. 5, the financial results of Tax Care S.A. for the year ended 31 December 2018 was disclosed as discontinued operations.

The impact of presentation changes was presented together with the impact of correction of errors in the table on pages 21-23 of these consolidated financial statements.

5.7 Corrections of previous periods errors and changes in accounting policy

In the fourth quarter of 2019 the Group corrected errors identified in the following areas:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 19/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5.7.1 Settlement of contracts for additional products, for which delays in the registration of termination have been identified (Correction 1)

In the fourth quarter of 2019, the Group verified the registration process of termination of additional products with their owner (insurer), which resulted in cases in which, despite the termination of the insurance contract by the customer, this fact was not reported by the Group to the product owner to complete it (closing). For the above group of contracts, the Group has converted the commission (remuneration) for reimbursement and settlement considering the actual (correct) date on which the contract should be terminated.

5.7.2 Correction of write-offs relating to individually assessed factoring receivables (Correction 2)

The Group has identified overdue factoring receivables, for which as at 31 December 2018 the appropriate level of the write-offs was not recognized. Due to the above, the Group converted the cost of write-offs as at 31 December 2018.

5.7.3. Correction due to the creation of write-offs for the part of factoring exposures in relation to the amount of VAT receivable (Correction 3)

The basis for calculating write-offs of the Group's factoring receivables did not include VAT due, which was not settled by the Group in the relevant period. Therefore, the Group has written down 100% of the VAT receivable relating to amounts past due and expired.

5.7.4. Change in accounting policy regarding the method of accounting for income from the Liquidity Package product (Correction 4)

The Group verified the accounting policy regarding the recognition of income and expenses related to the liquidity package. As a result, the Group recognizes revenues and costs linearly in the month in which the service was performed.

The impact of error corrections, changes in accounting policies and changes related to discontinued operations on the consolidated statement of financial position and consolidated income statement are presented in the tables below:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 20/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Correction 2 - 31.12.2018 Correction 1 Correction 3 - 31.12.2018 valuation of Correction 4 - delays in write-off for Total individual - Liquidity terminating VAT corrections factoring Package (non-restated) contracts receivable (restated) receivables PLN thousand PLN thousand ASSETS Cash and balances with Central Bank 884 679 0 884 679 Derivative hedging instruments 10 289 0 10 289 Derivative financial instruments at fair value through profit or loss 21 593 0 21 593 Financial assets measured at fair value through other comprehensive income 1 924 027 0 1 924 027 - Debt instruments 1 841 203 0 1 841 203 - Equity instruments 82 824 0 82 824 Amounts due from clients 16 179 880 -20 038 -24 109 -21 083 -16 786 -82 016 16 097 864 - Loans and advances to clients at amortized cost 16 179 678 -20 038 -24 109 -21 083 -16 786 -82 016 16 097 662 - Financial assets at fair value through profit or loss 202 0 202 Finance lease receivables 103 387 0 103 387 Assets measured at amortised cost other than amounts due from clients 402 628 0 402 628 - Receivables from banks and financial institutions 204 681 0 204 681 - Other debt instruments valued at amortized cost 197 947 0 197 947 Investments in associates 298 575 0 298 575 Intangible assets 167 646 0 167 646 Tangible fixed assets 137 089 0 137 089 Investment property 41 363 0 41 363 Fixed assets held for sale 1 357 0 1 357 Income tax assets 9 209 0 9 209 - Current tax assets 6 497 0 6 497 - Deferred tax assets 2 712 0 2 712 Other assets 289 858 0 289 858 TOTAL ASSETS 20 471 580 -20 038 -24 109 -21 083 -16 786 -82 016 20 389 564 LIABILITIES AND EQUITY 0 Liabilities 0 Derivative hedging instruments 22 247 0 22 247 Financial liabilities measured at amortized cost 18 519 618 0 18 519 618 - Amounts due to the Central Bank 834 319 0 834 319 - Amounts due to other banks and financial institutions 78 724 0 78 724 - Amounts due to clients 17 082 836 0 17 082 836

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 21/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

- Debt securities in issue 523 739 0 523 739 Financial liabilities measured at fair value through profit or loss 1 278 680 0 1 278 680 Tax liabilities 47 183 0 47 183 - Income tax liability 10 0 10 - Deferred tax liabilities 47 173 0 47 173 Provisions 29 171 0 29 171 Other liabilities 302 027 0 302 027 TOTAL LIABILITIES 20 198 926 0 0 0 0 0 20 198 926 Equity (attributable to shareholders of parent company) 272 654 -20 038 -24 109 -21 083 -16 786 -82 016 190 638 Share capital 156 804 0 156 804 Retained earnings -921 734 -19 696 -11 027 -15 771 -16 786 -63 280 -985 014 Net profit (loss) -1 891 816 -342 -13 082 -5 312 0 -18 736 -1 910 552 Other capital 2 929 400 0 2 929 400 Total equity 272 654 -20 038 -24 109 -21 083 -16 786 -82 016 190 638 TOTAL LIABILITIES AND EQUITY 20 471 580 -20 038 -24 109 -21 083 -16 786 -82 016 20 389 564

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 22/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

01.01.2018- 01.01.2018-

31.12.2018 31.12.2018 Correction- Total error Correction 1 Correction 2 Correction 2 Correction 4 IFRS 5 corrections (non-restated) (restated) PLN thousand PLN thousand

I. Interest income 1 003 034 -16 876 0 986 158 II. Interest expenses -460 325 192 0 -460 133 III. Net interest income 542 709 -16 684 0 0 0 0 0 526 025 IV. Fee and commission income 311 417 -65 123 0 246 294 V. Fee and commission expenses -533 351 39 632 -342 -342 -494 061 VI. Net fee and commission income -221 934 -25 491 -342 0 0 0 -342 -247 767 VII. Dividend income 7 360 0 7 360 VIII. Result on financial assets measured at fair value -7 040 0 -7 040 IX. Result on debt instruments valued at fair value through other 19 280 0 19 280 comprehensive income X. Result on the sale of an associate/subsidiary 14 683 0 14 683 XI. Foreign exchange result 12 815 0 12 815 XII. Other operating income 87 021 3 294 0 90 315 XIII. Other operating expenses -723 083 42 332 0 -680 751 XIV. Net other operating income and expenses -588 964 45 626 0 0 0 0 0 -543 338 XV. Impairment losses -758 315 -13 082 -5 312 -18 394 -776 709 XVI. General administrative costs -498 346 62 335 0 -436 011 XVII. Result from operating activity -1 524 850 65 786 -342 -13 082 -5 312 0 -18 736 -1 477 800 XVIII. Share in profits (losses) of associates 26 225 0 26 225 XIX. Profit (loss) before income tax -1 498 625 65 786 -342 -13 082 -5 312 0 -18 736 -1 451 575 XX. Income tax -393 191 10 166 0 -383 025 XXI. Net profit (loss) of continued operations -1 891 816 75 952 -342 -13 082 -5 312 0 -18 736 -1 834 600 XXII. Net profit (loss) of discontinued operations 0 -75 952 0 -75 952 XXIII. Net profit (loss) -1 891 816 0 -342 -13 082 -5 312 0 -18 736 -1 910 552

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 23/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5.8 Significant accounting estimates and judgments

5.8.1 Professional judgment

In the process of applying the accounting policies to the issues discussed below, the judgments made by the management are of most significance, besides the accounting estimates made.

Calculation of impairment allowance for expected credit losses

At each reporting date, the Group measures whether there is objective evidence of impairment of credit exposures, evidence of a material increase in risk and it determines the amount of impairment losses on credit exposures. The amount of the impairment loss equals expected credit losses.

The Group recognizes an allowance for expected credit losses compliant with IFRS 9. The method of estimating the allowance for expected credit losses is based on professional judgment in the scope of setting assumptions concerning mainly: • significant increase in credit risk, • choosing the right models and assumptions for calculating the expected credit losses, • economic forecasts, • homogeneous groups of financial assets.

Assessment of estimated credit losses The Group calculates the write-off for expected credit losses in accordance with the principles set out in IFRS 9. The method of estimating the write-off for expected credit losses depends on the change in the level of risk that occurred from the initial recognition. The value of financial assets and credit exposures covered by the expected credit losses model of IFRS 9, that fall within the scope of the impairment model of IFRS 9 (and therefore with the exception of equity instruments and other financial instruments at fair value through profit or loss) is periodically assessed to appropriately classify credit exposures into one of the three credit loss recognition stages described in Note 5.10.8.1 of these financial statements. In order to estimate write-downs on expected credit losses, the Group uses its own estimates of risk parameters based on developed internal models. In the case of debt instruments for which such information is available, the Bank also uses risk parameters from external sources. The expected credit losses were defined as the product of EAD (exposure at default) decreased by the value of collateral and PD (probability of default) and LGD (loss given default). The final value of expected losses is the sum of expected losses in particular periods (within 12 months or in the lifetime horizon of credit exposure) discounted with the effective interest rate.

Insurance commission income The Group reviews the relation of loans with insurance products. In the case of direct linkage between a loan and insurance product without a classification as a complex product, the Group recognizes the whole remuneration based on the effective interest rate. For complex products, for which fair value of the offered financial asset has been separated and the insurance product sold jointly with this asset, the Group allocates based on the proportion of accordingly the fair value of a financial asset and the fair value of the intermediation service to the sum of both those values. Remuneration for intermediation service is settled using the straight-line method based, and the remaining portion is settled based on the effective interest rate over the period of the financial instrument. The Group also estimates part of the remuneration, which will be returned (e.g. due to termination of insurance contracts by clients, prepayments, etc.) in the insurance product post-sales period. The estimated part of the remuneration is deferred in time to the amount of anticipated return.

Impairment of other non-current assets

On each reporting date, the Group assesses whether there are any objective indicators of impairment of any non-current asset. If the Group identifies premises indicating impairment, then it determines whether the current book value of a given asset is higher than the value that can be obtained through

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 24/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) its further use or sale, i.e. the recoverable amount of an asset is estimated. If the recoverable amount is lower than the current carrying amount of a given asset, impairment loss is recognized in the income statement. Impairment of goodwill After initial recognition, goodwill is measured at cost less any accumulated impairment losses. At each reporting date it is assessed whether there is any impairment of goodwill. The impairment test is conducted once a year by comparing the carrying value of cash-generating units, including goodwill, and their recoverable amount. The recoverable amount is estimated on the basis of value in use of cash generating units, which is the estimated value of future cash flows, considering the residual value of cash-generating units. Identified impairment loss is recognized in the financial result.

Impairment of trademark At the moment of settlement of the acquisition of a subsidiary, the Group recognizes the fair value of significant trademarks based on the valuation of independent experts. At the reporting date, the Group assesses whether the useful life of the trademark is specified, or indefinite. Trademarks with an indefinite useful life are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired, by comparing its recoverable amount with the carrying amount. The excess of the carrying amount over the recoverable amount is recognized as an impairment loss. Deferred tax assets The Group recognizes a deferred tax asset assuming relevant future tax profit. Declining future taxable profits could make the assumption unjustified. Discontinued operations As indicated in Note 2 to these consolidated financial statements, in connection with the filing of the bankruptcy petition by Tax Care S.A., the Group recognized that as of 30 July 2019 it lost control over the company and deconsolidated it. The company's financial results for 7 months of 2019 were disclosed as discontinued operations.

Investments in associates As a rule, associates are those entities in which the investor has significant influence. Significant influence is the power allowing participation in decision-making on financial and operating policy of the entity, in which the investment was made, but not referred to the control or joint control. If the Group holds, directly or indirectly (e.g. through subsidiaries), 20% or more of the voting rights in the entity, but less than 50%, in which the investment is made, it is assumed that the Group has significant influence over this entity, unless it can be proved that it is otherwise. If the Group holds, directly or indirectly (e.g. through subsidiaries), less than 20% of the voting rights in the entity in which the investment is made, it can be assumed that the Group does not have significant influence over this entity, unless the significant influence can be easily proved.

As at 31 December 2019, using the professional judgment, the Group recognized the following associates: • Open Finance S.A., in which the Group holds shares representing 17.72% of the share capital of this company, • Idea Getin Leasing S.A., in which the Group holds shares representing 49.99% of the share capital, • Idea Box Alternatywna Spółka Inwestycyjna S.A., in which the Group holds shares representing 40.05% of the share capital.

Recognition of Open Finance S.A. as an associate

The Group considered that the conditions for exercising significant influence over Open Finance S.A. were met primarily due to the fact that one Member of the Supervisory Board of Open Finance S.A. also acts as the Member of the Bank's Supervisory Board.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 25/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5.9 Transactions in foreign currencies

5.9.1 Functional and reporting currency

The functional currency of the Bank (parent company), the reporting currency of the consolidated financial statements and the functional currency of companies from the Group is Polish zloty.

5.9.2 Transactions and balances in foreign currencies

Transactions denominated in currencies other than Polish zloty are converted into Polish zloty using the exchange rate applicable at the date of the transaction.

As at the balance sheet date, assets and liabilities denominated in currencies other than Polish zloty are converted into Polish zloty using the average exchange rate established for a given currency by the National Bank of Poland at the end of the reporting period. Foreign exchange differences are recognized in the financial income (expense) or, in the case of defined accounting policies, capitalized in the value of the assets. Non-monetary assets and liabilities disclosed at historical cost expressed in foreign currency are stated at the historical exchange rate of the transaction date. Non-monetary assets and liabilities measured at fair value in foreign currency are converted at the exchange rate at the date of valuation to fair value.

For the purposes of the balance sheet valuation, the following rates were adopted in the consolidated financial statements: Valuation EUR CHF RUB USD GBP CZK DKK NOK SEK date 31.12.2019 4,2585 3,9213 0,0611 3,7977 4,9971 0,1676 0,57 0,432 0,4073 31.12.2018 4,3000 3,8166 0,0541 3,7597 4,7895 0,1673 0,5759 0,4325 0,4201

5.10 Financial assets and liabilities

5.10.1 Classification and recognition

From 1 January 2018, the Group divides financial assets into the following categories: financial assets measured at fair value through profit or loss (including financial assets irrevocably designated as measures at fair value through profit or loss that would otherwise be measured at amortized cost or at fair value through other comprehensive income), financial assets measured at fair value through other comprehensive income (including equity instruments classified on initial recognition as financial assets at fair value through other comprehensive income that would otherwise be measured at fair value through profit or loss), financial assets measured at amortized cost. Financial liabilities are classified into the following categories: financial liabilities measured at fair value through profit or loss and financial liabilities measured at amortized cost. The Group recognizes a financial asset or financial liability in a financial statement when it becomes bounded to the provisions of the instrument's agreement. Purchase and sale transactions of financial assets, including standardized purchase and sale transactions of financial assets, are recognized in financial statement always on the date of the transaction. Loans and receivables are recognized when the borrower's cash is withdrawn. All financial instruments, except those that are subsequently measured at fair value through profit or loss, at the moment of initial recognition, are measured at fair value adjusted for transaction costs that can be assigned directly to the acquisition or issue of a financial asset or financial liability.

The Group classifies a financial asset as measured after its initial recognition at amortized cost or at fair value through other comprehensive income or at fair value through profit or loss on the basis of: • the Group’s effective business model regarding financial assets management • characteristics of cash flows resulting from the contract for a financial asset.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 26/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Independently from the above, the Group may irrevocably determine a financial asset as an asset measured at fair value through profit or loss if it eliminates or significantly reduces the inconsistency of the valuation or recognition that would otherwise result from the valuation of assets or liabilities or the recognition of related with them profits or losses according to different rules.

In addition, the Group may make an irrevocable decision in relation to certain investments in equity instruments that would otherwise be measured at fair value through profit or loss to recognize subsequent changes in fair value through other comprehensive income. In the case of equity instruments for which the Group made an irrevocable choice regarding the presentation of changes in their fair value in other comprehensive income, the amounts presented in other comprehensive income can not be later transferred to the financial result. However, the Group may transfer accumulated profit or loss into equity.

5.10.1.1 Defining business models

The Group determines the business model to reflect the system in which it jointly manages the groups of financial assets in order to achieve a defined business goal.

The Group's business model regarding financial asset management results from the actions undertaken by the Group to achieve the goal of the business model. To determine the business models the Group analyzes the following elements in the first place: 1) the method of assessing the effectiveness of a given group of assets, i.e. determining whether the Group is expected to obtain specific cash flows resulting from the contract or whether the Group's objective is to achieve a specific level of return on assets through various types of activities, in particular sales, 2) the types of risk and the manner of managing these risks in relation to a given group of assets, 3) assessment of how the managers of a given activity are remunerated, i.e. in particular, determine if their remuneration is based on the fair value of managed assets or on cash flows resulting from the contract), and 4) the reporting method, i.e. how the results of the business model and financial assets held under this business model are assessed and reported to key management personnel of the Group.

Considering the criteria described above, the Group distinguishes three types of business models: 1) the business model assuming the maintenance of financial assets in order to obtain cash flows resulting from the contract. This model includes financial assets that are managed with the intention of realizing cash flows by receiving payments under the contract throughout the life of the instrument, 2) a business model whose purpose is achieved both by obtaining cash flows resulting from the contract and through the sale of financial assets, 3) other business models that do not meet the features of the two models mentioned above.

5.10.1.2 Cash flow characteristics

The Group classifies a financial asset based on the its contractual cash flows specific to this asset, if it is maintained as part of a business model which assumes the maintenance assets to obtain cash flows resulting from a contract or business model, the purpose of which is realized both by obtaining cash flows resulting from the contract, and through the sale of financial assets. To do this, the Group must determine whether the contracted cash flows from this asset are only repayment of the principal and interest on the principal outstanding, including the detailed guidelines in this matter set out in IFRS 9.

Cash flows resulting from the contract are only repayment of principal amount and interest from the principal amount remained to be repaid when interest is determined to cover the following: a) payment for the time value of money, b) credit risk, c) remuneration for liquidity risk, d) remuneration for administrative costs incurred by the Group to maintain a financial asset for a specified period of time, e) profit margin.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 27/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The Group evaluates the contractual cash flows to confirm that these financial assets meet the above conditions for each financial instrument classified to a business model assuming the maintenance of assets to obtain cash flows resulting from a contract or business model, the purpose of which is achieved both by obtaining cash flows resulting from the contract, and through the sale of financial assets.

5.10.1.3 Financial assets measured at fair value through profit or loss

Financial assets are measured at fair value through profit or loss if they are not maintained as part of a business model that assumes maintaining assets to obtain cash flows resulting from the contract or a business model whose purpose is achieved both by obtaining cash flows resulting from the contract, as well as through the sale of financial assets. In addition, all financial assets for which the Group has assessed that contractual cash flows from this asset do not merely repay principal and interest from the principal outstanding are measured at fair value through profit or loss, including detailed guidelines defined by IFRS 9.

As at 31 December 2019, the Group classified derivative instruments to the category of financial assets measured at fair value through profit or loss.

5.10.1.4 Financial assets measured at fair value through other comprehensive income

Financial assets measured at fair value through other comprehensive income are financial assets for which both of the following conditions are met: 1) the financial asset is maintained in accordance with the business model, the aim of which is both to receive cash flows resulting from the agreement and through the sale of financial assets, 2) the contractual terms relating to a financial asset cause cash flows to occur on specified dates, which are only repayment of the principal amount and interest from the principal amount remaining to be repaid.

Financial assets valued at fair value through other comprehensive income are measured in the statement of financial position at fair value. Profit or loss on a financial asset measured at fair value through other comprehensive income, with the exception of impairment loss (profit), exchange gains or losses and interest income and expense, are recognized in other comprehensive income until the financial asset is no longer recognized or it’s reclassified. If the financial asset is ceased to be recognized, the accumulated profits or losses previously recognized in other comprehensive income are reclassified from equity to financial result in the form of an adjustment resulting from reclassification. In the case of equity instruments, changes in fair value will not be reclassified to the financial result at the time they are sold. For debt instruments valued at fair value through other comprehensive income, interest income is recognized by the Group using the effective interest rate (on analogous terms as described in point 5.10.1.5 below).

At the moment of the Group's transition to IFRS 9, the Group decided that the shares in BIK S.A. and Noble Funds TFI will be classified to the category of financial assets measured at fair value through other comprehensive income due to the long-term nature of the investment.

5.10.1.5 Financial assets measured at amortized cost

Financial assets measured at amortized cost are financial assets for which both of the following conditions are met: 1) the financial asset is maintained in accordance with the business model, the purpose of which is to maintain financial assets for obtaining cash flows resulting from the contract, 2) the contractual terms relating to a financial asset cause the occurrence on specified dates of cash flows, which are only the repayment of the principal amount and interest from the principal amount remaining to be repaid.

Financial assets valued at amortized cost are valued in the financial statement at amortized cost using the effective interest rate method, taking into account impairment losses. Accrued interest along with a commission settled in time according to the effective interest rate are recognized in interest income. Commissions that are not part of interest income settled linearly are classified as commission income.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 28/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Impairment losses are recognized in the income statement as a result of impairment losses on loans and advances.

The amortized cost of a financial asset or a financial liability is the amount at which the financial asset or liability is measured at the time of initial recognition less principal repayments and increased or decreased determined by the effective interest rate method accumulated depreciation of any difference between the initial and the amount at maturity, and adjusted for any impairment allowances for expected credit losses.

The effective interest rate is the rate at which are estimated future payments or cash inflows throughout the entire life expectation of a financial asset are discounted exactly to the gross carrying amount of the financial asset.

As at 31 December 2019, the Group classified the following items of the statement of financial position to the category of financial assets measured at amortized cost: cash and funds at the Central Bank, receivables from banks and financial institutions, loans to customers and other loans and receivables.

A specific type of financial assets measured at amortized cost are purchased or originated credit- impaired financial assets that are impaired due to credit risk. Such instruments are measured at amortized cost using the effective interest rate adjusted for credit risk.

5.10.1.6 Financial liabilities measured at fair value through profit or loss

Financial liabilities at fair value through profit or loss are: 1) a liability that meets the definition criteria of a financial instrument held for trading (e.g. a derivative) or 2) a liability designated to the fair value option through the financial result at the moment of the initial recognition.

At the moment of initial recognition, the Group may determine irrevocably the financial liability as measured at fair value through the financial result when it leads to obtaining more useful information, because: 1) it eliminates or significantly reduces the inconsistency in the scope of valuation or recognition (sometimes referred to as "accounting mismatch"), which would otherwise arise from the valuation of assets or liabilities or the recognition of related gains or losses according to different rules, or 2) a group of financial liabilities or financial assets and financial liabilities is managed, and its results are evaluated on the basis of fair value, in accordance with the documented risk management strategy or investment strategy, and information about this group prepared on this basis is transferred within the Group to key management personnel.

At the moment of initial recognition, the Group may also irrevocably designate the liability as measured at fair value through profit or loss in the case of hybrid contracts concluding basic contracts, if the agreement contains one or more embedded derivatives, and the main contract is not a component of financial assets, if: 1) the embedded derivative (embedded derivatives) does not significantly change cash flows that would otherwise be required under the terms of the contract, or 2) it is self-evident without an analysis or after a cursory analysis carried out while considering a similar hybrid instrument for the first time, that separation of the embedded derivative (embedded derivatives) is prohibited, such as the option of early repayment built into the loan and allowing the holder for early repayment of the loan for an amount close to its amortized cost.

5.10.1.7 Financial liabilities measured at amortized cost

Financial liabilities at amortized cost are all financial liabilities except for financial liabilities measured at fair value through profit or loss, financial liabilities resulting from the transfer of a financial asset that does not meet the derecognition criteria, or when is applied the maintenance approach, financial guarantee contracts, loan-giving obligations below the market interest rate and conditional consideration recognized by the acquirer as part of the business combination.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 29/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5.10.2 Reclassification of financial instruments

When and only when the Group changes its business model for managing financial assets it shall reclassify all affected financial assets: 1) if the Group reclassifies a financial asset, it does so prospectively, starting from the date of reclassification. The Group does not restate any previously recognized gains, losses (including impairment gains or losses) or interest, 2) if the Group reclassifies a financial asset out of the amortized cost measurement category and into the fair value through profit or loss measurement category, its fair value is measured at the reclassification date. Any gain or loss arising from a difference between the previous amortized cost of the financial asset and fair value is recognized in profit or loss, 3) if the Group reclassifies a financial asset out of the fair value through profit or loss measurement category and into the amortized cost measurement category, its fair value at the reclassification date becomes its new gross carrying amount, 4) if the Group reclassifies a financial asset out of the amortized cost measurement category and into the fair value through other comprehensive income measurement category, its fair value is measured at the reclassification date. Any gain or loss arising from a difference between the previous amortized cost of the financial asset and fair value is recognized in other comprehensive income. The effective interest rate and the measurement of expected credit losses are not adjusted as a result of the reclassification., 5) if the Group reclassifies a financial asset out of the fair value through other comprehensive income measurement category and into the amortized cost measurement category, the financial asset is reclassified at its fair value at the reclassification date. However, the cumulative gain or loss previously recognized in other comprehensive income is removed from equity and adjusted against the fair value of the financial asset at the reclassification date. As a result, the financial asset is measured at the reclassification date as if it had always been measured at amortized cost. This adjustment affects other comprehensive income but does not affect profit or loss and therefore is not a reclassification adjustment. The effective interest rate and the measurement of expected credit losses are not adjusted as a result of the reclassification., 6) if the Group reclassifies a financial asset out of the fair value through profit or loss measurement category and into the fair value through other comprehensive income measurement category, the financial asset continues to be measured at fair value, 7) if the Group reclassifies a financial asset out of the fair value through other comprehensive income measurement category and into the fair value through profit or loss measurement category, the financial asset continues to be measured at fair value. The cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment at the reclassification date.

The Group does not reclassify its financial liabilities.

In 2019, the Group did not change the business model of managing financial assets and did not reclassify financial assets.

5.10.3 Derecognition of financial instruments

A financial asset is derecognized from the statement of financial position of the Group when the contractual rights to cash flows connected with it expire or when the Group transfers contractual rights to receive cash flows or when the financial asset will be significantly modified (in accordance with the criteria specified in point 5.10.4) or when the Group retains the contractual rights to receive cash flows, but at the same time assumes a contractual obligation to transfer cash flows to one or more recipients, while meeting the following conditions:

1) the Group is not obliged to pay out amounts to final recipients until they receive the corresponding amounts that result from the original asset. Short-term advances made by the Bank with the right to recover the full amount borrowed plus accrued interest based on market rates do not constitute a breach of this condition, 2) pursuant to the transfer agreement, the Group may not sell or pledge the original asset other than as a security for the obligation to transfer cash flows to the final recipients,

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 30/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

3) the Group is required to transfer all cash flows received by it on behalf of final recipients without significant delay.

The Group assesses the extent in which it retains the risks and rewards related to ownership of a financial asset during the transference the rights. In this case: − if the Group transfers substantially all of the risks and benefits associated with holding a financial asset, it ceases to recognize a financial asset and recognizes separately as an asset or liability all rights and obligations arising or retained as a result of the transfer, − if the Group retains substantially all the risks and benefits related to the possession of a financial asset, it continues to recognize a financial asset in the financial statement, − if the Group does not transfer or retain substantially all the risks and benefits associated with holding a financial asset, the Group determines whether it retained control over this financial asset. If control is maintained, the financial asset is still recognized in the statement of financial position of the Group.

If the Group transfers a financial asset that qualifies it to cease to recognize in full and retains the right to charge this financial asset service, then it recognizes assets or liabilities resulting from the service contract. If it is expected that the remuneration due will not be sufficient to compensate for the service provided by the Group, then the liability resulting from the contractual service obligation in the amount of its fair value is recognized. If it is expected that the remuneration due will be greater than sufficient compensation for the service provided by the Group, the asset resulting from the right of servicing is recognized in the amount determined based on the assignment of the carrying amount of the major financial asset.

If, as a result of the transfer, the entire financial asset is removed, but the transfer results in a new financial asset or financial liability for the Group, or the service obligation, the Group recognizes a new financial asset, financial liability or service obligation in the amount of its fair value. At the moment of derecognition of a financial asset as a whole, the difference between: 1) the carrying amount (measured at the date of derecognition), and 2) payment received (taking into account the newly created asset less any new liabilities), is recognized in financial result. The Group derecognizes from the statement of financial positions a financial liability (or its part) when the obligation specified in the contract has been fulfilled, cancelled, expired or when the financial liability is substantially modified.

5.10.4 Modifications of contractual terms of financial assets

The Group adopts the following criteria for recognizing modifications to the terms of a financial asset as significant: 1) for financial assets with a fixed schedule of cash flows - such quantitative modifications which cause a change in the net present value (NPV) of a financial asset calculated on the basis of the original EIR by more than 10% compared to the original gross value of the contract and qualitative modifications: currency conversion, change of the main borrower, change of SPPI test results; 2) for financial assets without a specified schedule of cash flows: currency conversion, change of the main borrower, violation of the SPPI test criteria. In addition, the Group assumes that if the financial asset which the modification relates to is at the time of modification in Stage 3, then cases which meet the criteria of qualitative modifications presented in paragraph 1 above are considered as significant modification and in each case (if possible) the Group determines the result of the insignificant modification.

If the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation or modification does not result in the derecognition of that financial asset, the Group recalculates the gross carrying amount of the financial asset and recognizes the modification gain or loss in profit or loss. The gross carrying amount of the financial asset is recalculated as the present value of renegotiated or modified contractual cash flows that are discounted at the financial asset’s original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit- impaired financial assets) or, when applicable, at the updated effective interest rate. Any costs or fees

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 31/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) incurred adjust the carrying amount of the modified financial asset and are amortized over the remaining term of the modified financial asset.

5.10.5 Write-off

The Group directly reduces the gross carrying amount of a financial asset if it has no reasonable prospects of recovering the financial asset in whole or in part. The write-down of receivables from books to off-balance sheet records is the process of transferring credit exposure, along with the write-off created for that claim from expected credit losses from the balance sheet to off-balance sheet records. Write-off is an event leading to the derecognition.

The Group's receivables from credit exposures may be charged to write-offs for expected credit losses due to their non-recoverability, in particular when:

1) the costs of further debt recovery will exceed the expected proceeds from debt recovery; 2) ineffectiveness of enforcement of the Group's receivables was confirmed by an appropriate document of the competent enforcement authority; 3) it is not possible to determine the debtor's assets suitable for enforcement and the debtor's whereabouts are unknown; 4) the estate remaining after the deceased debtor does not constitute enforceable property; 5) they have expired and the debtor raised a plea of limitation; 6) they are subject to redemption in connection with the debt restructuring; 7) they are subject to redemption for particularly important reasons other than those listed above.

5.10.6 Derivative instruments

Derivatives transactions are measured at fair value. The fair value of currency futures contracts is determined in relation to parameters such as: forward rates, current exchange rates, transaction parameters, interest rate curves. Fair value of interest rate swap contracts is determined based on a model based on quotes of relevant interest rates. In the fair value measurement of derivative instruments not covered by mutual collateralization in the form of a security deposit, the credit risk component in the form of a revaluation adjustment is also taken into account. The valuation adjustment is estimated individually at the level of a single contractor, taking into account the expected exposures due to the pre-settlement counterparty credit risk and the corresponding risk generated by the Group. This approach assumes the possibility of a risk of not settling future payments on both sides of the transaction. The adjustment of the counterparty credit risk assessment takes into account the probability of its bankruptcy implied from individual CDS (Credit Default Swap) quotes or, if there are none, from CDS quotes for comparable entities. The correction of the Group's credit risk appraisal takes into account the Bank's probability of bankruptcy implied from CDS quotes for comparable financial institutions. In cases where the Group does not apply hedge accounting, gains and losses arising from changes in the fair value of the hedged item and the hedging instrument are recognized directly in the income statement for the reporting period.

Derivative instruments used by the Group to hedge against risks associated with interest rate and foreign currency exchange rate fluctuations (without applying hedge accounting) include primarily currency forwards and interest rate swaps. The Group may classify an instrument comprising one or more embedded derivatives if the following conditions are met:

1. the embedded derivative does not significantly change the cash flows that would be required by the contract, or 2. it is obvious without conducting or after a brief analysis that if a similar hybrid (instrument) was first considered, separation of the built-in instrument would be forbidden.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 32/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5.10.7 Hedge accounting

The Group has adopted the accounting policy related to cash flow hedging accounting of cash flow hedging interest rate risk in compliance with IAS 39 approved by the EU. “Carve out” in IAS 39 approved by the EU enables the company to determine a group of derivative instruments as a hedging instrument and lifts some of the limitations resulting from IAS 39 in the area of deposit hedging and adoption of the strategy for hedging less than 100% of cash flows. According to IAS 39 approved by the EU, hedge accounting can be applied to deposits and ineffective hedges are reported only when the revalued cash flows in a given period of time is lower than the hedged value relating to the relevant period.

Hedges are classified as follows under hedge accounting: • fair value hedges to mitigate the risk of fair value fluctuations of an asset or liability, or • cash flow hedges, hedging against fluctuations of cash flows, which are attributable to particular risk type related to an asset, liability, or forecasted transaction, or • net investment hedges in a foreign unit.

The Group manages foreign exchange risk by extending to change the flow of foreign currency cash flows into cash flows in PLN. Therefore, the Group has applied a cash flow hedging model for its foreign currency loan portfolio generating currency risk by entering into CIRS (Currency Interest Rate Swap) hedging against currency risk. The hedging instrument is the CIRS trading portfolio in which the Group makes payments in foreign currencies and receives cash flows in PLN.

IRS/ CIRS transactions meet the requirements allowing them to be designated as hedging instruments (individually or as a transaction group) since those transactions are carried out with entities from outside the Bank’s group (meeting the external transaction requirements). The effective portion of the fair value change in the IRS/ CIRS hedging instruments is recorded in other comprehensive income of the Group.

At each reporting date the Bank reclassifies from other comprehensive income the amounts of interest expense accrued over the relevant reporting period, compensating for changes in cash flows arising on the hedged items, recognized in a given reporting period in the income statement. The ineffective portion of fair value change of the hedging instrument should be recognized in the Group’s income statement on an ongoing basis.

5.10.8 Impairment of financial assets

At each reporting day, the Group assesses loan loss allowances for the expected credit losses for the financial asset measured at amortized cost and measured at fair value through other comprehensive income (except for investments in equity instruments designated as at the moment of initial recognition as measured at fair value through other comprehensive income).

5.10.8.1 Financial assets measured at amortized cost and financial assets measured at fair value through other comprehensive income

The Group calculates the loan loss allowance for expected credit losses in accordance with IFRS 9. The method of estimating the loan loss allowance for expected credit losses depends on the change in the level of risk that occurred since the initial recognition. The value of granted loans, advances and receivables as well as lease receivables is subject to periodic assessment in order to properly classify credit exposures into three main stages for recognizing expected losses: a) Stage 1 - exposures which at the balance sheet date do not meet the criterion of a significant increase in credit risk and there is no indication of impairment in relation to them. For such exposures, a write-down for expected credit losses is set in a 12-month horizon. b) Stage 2 - exposures which meet the criterion of a significant increase in credit risk at the given balance sheet date and there is no indication of impairment in relation to them. For such exposures, a write-down for expected credit losses is determined in the exposure’s lifetime horizon.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 33/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) c) Stage 3 - exposures for which at least one indication of impairment occurred at the balance sheet date. For such exposures, a write-down for expected credit losses is determined in the exposure’s lifetime horizon.

In addition, for the POCI (purchased or originated credit impaired) exposure, a write-down as at the reporting date is a cumulative change in the expected credit losses in the lifetime horizon of the exposure from the moment of initial recognition. Financial assets that have been classified as POCI at the time of initial recognition are treated as POCI in all subsequent periods, regardless of future changes in estimates generated by cash flow assets. The Group identifies a group of financial assets that are characterized by low credit risk and for this reason they have been qualified to the low risk portfolio. These include Treasury bonds and bills and credit exposures to the Treasury or entities related to the Treasury, in particular exposures to local government units and hospitals. For this group of assets, the Group does not perform the quantitative criterion for a significant increase in credit risk assessment. The carrying amount of an asset measured at amortized cost is reduced by the calculated loan loss allowance. The amount of loss or profit (reversal of loss) is recognized in the income statement. Verification of the existence of indications of impairment and a significant increase in risk takes place at the level of an individual asset. In the case of evidence of impairment of individually significant financial assets, the determination of the level of expected losses is individual. For assets that are not individually significant, the assessment is of a collective nature and uses risk parameters for a group of assets with similar characteristics. If it is determined that there is no objective evidence of impairment of the individually assessed financial asset, irrespective of whether it is significant or not, then this component is included in the group of financial assets with similar credit risk characteristics and jointly assessed in terms of loss of value. Identification of a significant increase in credit risk is based on qualitative and quantitative criteria, which include: − delay in repayment exceeding 30 days, − placing the customer on the list subject to intensified monitoring, − identifying the condition of recovery from the state of insolvency for agreements covered by the settlement agreement or restructuring, − a significant change in the expected probability of insolvency in the life horizon of exposure to the reporting date compared to the estimation of the likelihood of insolvency in the corresponding period at the moment of initial recognition, − identification of impairment at another exposure of the same borrower, where the capital engagement with the identified impairment is less than or equal to 20% of the total capital commitment of the borrower.

Loans, advances and receivables as well as lease receivables not measured at fair value through profit or loss are reviewed for impairment. Impairment of a given loan, advance, receivable or lease receivables is recognized and, consequently, an impairment allowance is recognized for expected credit losses over the lifetime horizon when there are objective indications of impairment as a result of one or more events that will have an impact on future estimated cash flows from these loans, advances or receivables. Such events include: a) delay in repayment exceeding 90 days with regard to capital, ordinary interest or penalty interests regarding the amount of materiality, b) the Group filed an application to initiate enforcement proceedings or got a message about the execution of the debtor, c) the credit exposure is contested by the debtor through court proceedings, d) the debt became due as a whole as a result of the termination of the loan agreement, e) an application has been made for the bankruptcy of the debtor or a request for the institution of recovery proceedings, f) restructuring of the credit exposure, g) a credit exposure agreement, h) there is a high probability of bankruptcy or other financial reorganization resulting in the inability to recover the exposure, i) financial problems of a retail contractor (job loss, income reduction, increase in debt, non- payment of debt in other institutions) resulting in the inability to service debt in the Group, j) unknown location and undisclosed counterparty property, k) significant financial difficulties of the contractor,

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 34/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

l) fraud,

In addition, when impairment is recognized in relation to a single credit exposure of a debtor, all other exposures of a given debtor are also treated as impaired on condition that the capital involvement with the identified impairment exceeds 20% of the borrower's total equity exposure.

An impairment allowance for expected credit losses in the case of a credit (loan, lease receivable) subject to an individual assessment is determined as the difference between the gross carrying amount of the loan/ lease receivable and the present value of estimated future cash flows discounted based on the original effective interest rate on the loan for exposures with fixed interest rate or current effective interest rate, determined in accordance with the contract, for variable interest rate exposures, i.e. the interest rate from the date of the occurrence of the event causing the loss (default dates). In the case of loans or lease receivables for which a hedge has been established, the current value of expected future cash flows includes cash flows that may be obtained from enforcement of the collateral, less the costs of enforcement and sale of the collateral subject if enforcement is probable.

Homogenous groups of loans that are individually insignificant and individually significant loans for which objective evidence of impairment have not been identified are subject to a group assessment. In order to determine group impairment, the Group divides loans into portfolios with similar credit risk characteristics.

The group assessment process consists of two elements: • determination of group loss allowances for expected credit losses for individually insignificant exposures (stage 3), • determining the amount of loss allowances for expected credit losses for exposures for which no indicators of impairment were identified (stage 1 and stage 2). In order to estimate loss allowances for expected credit losses, the Group uses its own estimates of risk parameters based on developed internal models. In the case of debt instruments for which such information is available, the Bank also uses risk parameters from external sources. The expected credit losses were defined as the product of EAD (Exposure at Default) less the value of collateral and PD (Probability of Default) and LGD (Loss Given Default). The final value of expected losses is the sum of expected losses in particular periods (within 12 months or in the lifetime horizon of credit exposure) discounted with the effective interest rate. The Group's internal models used for the purposes of IFRS 9 were built in accordance with the principles of the standard and are subject to the model management process and cyclical backtesting.

5.10.9 Contingent liabilities

As part of its operational activity the Group executes transactions which are not recognized in the financial statement as assets or liabilities but which result in contingent liabilities. A contingent liability is: • a possible obligation that arises as a result of past events, the existence of which will be established only by the occurrence or non-occurrence of one or more uncertain future events that cannot be wholly controlled by the Group, • a present obligation that arises from past events but is not recognized in the financial statement because it is not probable that an outflow of cash or other assets will be required to settle the obligation; or the amount of the liability cannot be measured with sufficient reliability.

Provisions are recorded for off-balance sheet liabilities granted, including unused credit lines. The provision is set as the difference between the expected balance sheet exposure value that will arise from the off-balance sheet liability granted and the present value of estimated future cash flows obtained from the balance sheet exposure arising from the liability given as at the impairment identification date.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 35/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Financial guarantee contracts which are not classified as insurance contracts are initially recognized at fair value and subsequently measured at the higher of the two: impairment loss for expected credit losses and initial recognized amount, if applicable less the accumulated amount of revenue recognized in accordance with IFRS 15.

The Group creates provisions for granted contingent liabilities (financial and guarantee) in accordance with the expected loss model.

5.11 Financial result

5.11.1 Net interest income and net fee and commission income

Interest income and expenses generated by financial assets and liabilities are recognized in the income statement and calculated at amortized cost using the effective interest rate.

The settlement of interest coupons, fee and commissions as well as other costs related to financial instruments (according to the effective interest rate or linear method) depend on the type of financial instrument. Financial instruments with a specified cash flow schedule are valued at the effective interest rate method. The effective interest rate cannot be calculated for financial instruments with an unspecified cash flow schedule and the fee and commissions are settled using the linear method.

Disclosing particular types of fees/commissions settled over time in the income statement as interest or commission income as well as the need to settle them over time instead of as a one-off payment included in the profit or loss depends on the economic nature of the commission/fee.

Fees/commissions settled over time include i.e. fees for accepting a loan application, loan granting commission, loan draw-down commission, additional security fee, etc. These payments are an integral part of the return generated by a particular financial instrument. This category also includes payments and expenses related to amendments in the agreement which result in an adjustment of the initial effective interest rate. Net interest income includes also interest income from accrued and paid interest related to financial assets at fair value through other comprehensive income as well as loans, advances to customers, receivable from lease and other receivables.

5.11.1.1 Fee and commission income

The Group recognizes fee and commission income in accordance with IFRS 15 5-stage model, which consists of:

Step 1: Identification of the contract with the client

In accordance with IFRS 15, in principle, an agreement is a contract between two or more parties that creates enforceable rights and obligations. The Group recognizes a contract with a customer within the scope of IFRS 15 if all the following conditions are met: • the contract has been approved in writing, orally, or in accordance with other customary business practices and the parties are committed to perform their obligations in the contract, • the Group can identify each party’s rights regarding the assets, • the Group can identify payment terms for the assets, • the contract has commercial substance, • it is probable that the Group will collect the consideration to which it will be entitled in exchange for the assets that will be transferred to the customer.

In evaluating whether collectability of the contract consideration is probable, the Group considers only the customer’s ability and intention to pay the consideration when it is due.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 36/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The Group combines two or more contracts entered into at or near the same time with the same customer (or related parties of the customer), and accounts for the contracts as a single contract if one or more of the following criteria are met: • the contracts are negotiated as a package with a single commercial objective, • the amount of consideration to be paid in one contract depends on the price or performance of the other contract, • the assets promised in contracts are a single performance obligation.

Step 2.: Identifying the performance obligations

At this step is necessary to identify performance obligations under the contract which are distinct. An asset is distinct if the customer can benefit from the asset either on its own or together with other resources that are readily available to the customer, and at the same time the asset is separately identifiable from other assets in the contract. In such a case, the Group is dealing with separate performance obligations.

Step 3.: Determining the transaction price

In accordance with IFRS 15, the transaction price is the amount of consideration that the Group expects to be entitled to in exchange for assets promised. It represents the amount of the revenue that will be recognized as a result of performance of the contract. In addition to the amount of consideration, the transaction price should also reflect any highly probable variable consideration (including bonuses or penalties), a discounting factor, amounts paid to customers or noncash consideration.

Step 4.: Allocating the transaction price to the performance obligations

As individual performance obligations may be recognized at different times and in different ways (at a point in time or over time), in the case of multiple performance obligations in a contract, the transaction price needs to be allocated to identified performance obligations. The allocation should be based on the stand-alone selling price.

Step 5.: Recognizing revenue at the moment of satisfying each performance obligation

The Group recognizes revenue when it meets (or is in the process of fulfilling) the obligation to perform the service by transferring the promised good or service (i.e. an asset) to the client. The transfer of an asset takes place when the client obtains control over this asset. The transfer of control may occur over time or at a specific time.

The Group recognizes revenue over time if one or more of the following criteria are met:

1) the client at the same time receives and achieves benefits resulting from the Group’s operations as the commitment progresses and it is not necessary for another entity to perform again the work that the Group has done so far;

2) the effectiveness of the entity results directly or is increased by an asset that is under the control of the client as it is creating and expanding;

3) the result of the entity does not create an alternative asset for the entity, and the Group has the right to enforce the right to pay for the results achieved so far.

In making the assessment of Criterion 1) and determining whether other parties will have to significantly interfere, the Group assumes that another party would not receive benefits from any asset that the entity now controls and will control if this party has taken the obligation to perform.

For each commitment to perform the obligation over time, the Group applies one method of measuring the fulfilment of the obligation and applies it consistently. The goal is to determine the transfer of control of goods or services to the customer.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 37/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Fees and commissions, which are not accounted for using the effective interest rate method, are only spread over the time using the straight-line method or recognized on a one-off basis, are recognized in the net fee and commission income. Revenue from fees and commissions includes revenues from fees and commissions resulting from transaction services for the performance of an important activity. In particular, revenues from intermediation services provided by the Group in connection with the sale of external products are recognized in principle in the commission result at the time of performing the important action (i.e. the Group's sales of the product to the client).

5.11.1.2 Revenues and costs related to sale of insurance products linked to loans

In the case of offering insurance products together with a loan product, the Group recognizes revenues in accordance with the IFRS 15 described above and in accordance with the guidelines resulting from the Recommendation U.

The Group recognizes that fees obtained by the Group from the sale of an insurance product constitute an integral part of remuneration from the offered financial instrument when the insurance product is directly related to the financial instrument.

In order to determine the manner of recognizing transactions in the accounting books, the Group determines the degree of direct link between the insurance product and the financial instrument, taking into account the economic substance of the transaction.

The Group applies the following approach to related transactions: • the remuneration received by or due to the Group for an insurance product directly linked (without extraction of compound financial instrument) to financial assets (loans and advances to clients) measured at amortized cost is accounted for using the effective interest rate method and recognized in interest income, • the remuneration received by or due to the Group for intermediation services which should be evaluated in view of its economic substance should be recognized in commission income at the time the insurance product is sold or renewed with the exception of situations when an analysis of the direct linkage of the insurance product with the financial instrument results in the extraction of a complex product, i.e. separation of the fair value of the financial instrument offered and the fair value of the insurance product sold together with that instrument.

In the above situation the transaction is split into elements to which income is allocated, and the remuneration due to the Group for the sale of the insurance product is divided between a portion constituting an element of the amortized cost of the financial instrument and a portion constituting remuneration for the intermediation services. Received or due to the Group remuneration for offering insurance products for products directly related to financial instruments measured at amortized cost is accounted for using the effective interest rate method and recognized in interest income. The remuneration received or payable to the Group for the provision of an intermediation service, which should be assessed in terms of economic content, is recognized in commission income at the time of sale of the insurance product or renewal, subject to the situation when the analysis of the direct link between the insurance product and the financial instrument results in the division of the combined product, i.e. the separation of the fair value of the offered financial instrument and the fair value of the insurance product sold together with this instrument. The Group analyzes fair value of both the financing transaction and the insurance intermediation service and on this basis, it divides the remuneration in proportion: of the fair value of the financial instrument and the fair value of the intermediation service to the sum of both those values.

Furthermore, part of the remuneration for the sale of insurance products is deferred in time in case the client terminates the agreement before the due date.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 38/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

5.12 New standards and interpretations

Standards and Interpretations applied for the first time in 2019

• IFRS 16 "Leases" - approved in the EU on 31 October 2017 (effective for annual periods beginning on 1 January 2019 or after that date)

IFRS 16 introduces new principles of leases recognition primarily by eliminating the division into operating and financial lease used so far. According to the new standard, in the case of almost any contract that meets the definition of lease, with the exception of contracts lasting less than 12 months and regarding assets of low value, the lessee will be required to recognize the "right to use the asset" in the balance sheet and pay rentals. In addition, the lessee in his income statement will be required to recognize the cost of depreciation of the leased asset in a separate manner from the costs of interest due to the above-mentioned leasing liabilities. With regard to the lessee, this standard should not have a material impact on the accounting treatment applied so far, i.e. the lessor will continue to recognize two types of lease separately, depending on the nature of the lease.

The detailed impact of implementing the standard is presented in Note 5.13 of these financial statements.

• Amendment to IFRS 9 “Financial Instruments” - prepayment right with negative compensation (effective for annual periods beginning on 1 January 2019 or after that date).

Amendments to IFRS 9 introduce reference to contractual prepayment feature, when the lender could be forced to accept the prepayment amount that is substantially less than unpaid amounts of principal and interest. Such a prepayment amount would be a payment to the borrower from the lender, instead of compensation from the borrower to the lender. Such a financial asset would be eligible to be measured at amortized cost or fair value through other comprehensive income (subject to an assessment of the business model under which they are held), however, the negative compensation must constitute a reasonable compensation for early termination of the contract.

• IFRIC 23 Uncertainty over Income Tax Treatments (effective to annual periods beginning on 1 January 2019 or after that date). • Amendments to IAS 28 „Investments in Associates and Joint Ventures”- Long-term Interest in Associates and Joint Ventures (effective to annual periods beginning on 1 January 2019 or after that date), • Annual improvements to IFRS Standard 2015-2017 cycle – changes as part of the procedure of introducing annual amendments to IFRS (IFRS 3, IFRS 11, IAS 12 and IAS 23) mainly focused on solving incompatibilities and clarifying vocabulary (effective to annual periods beginning on 1 January 2019 or after that date), • Amendments to IAS 19 „Employee benefits” – Plan Amendment, Curtailment or Settlement (effective to annual periods beginning on 1 January 2019 or after that date).

New standards and changes to existing standards, which have already been issued by the International Accounting Standards Board (IASB) but have not yet come into force. When approving these financial statements, the following new standards and amendments to standards were issued by the IASB and approved for use in the EU, but have not yet entered into force: • Amendments to References to the Conceptual Framework in IFRS Standards (effective to annual periods beginning on 1 January 2020 or after that date), • Amendments to IAS 1 and IAS 8: Definition of materiality (issued on 31 October 2018, effective to annual periods beginning on 1 January 2020), • Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform (issued on 26 September 2019, effective to annual periods beginning on 1 January 2020).

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 39/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Standards and Interpretations adopted by the IASB, but not yet approved for use in the EU: IFRS in the form approved by the EU does not differ significantly from the regulations adopted by the International Accounting Standards Board (IASB), except for the following standards, amendments to standards and interpretations, which as at 18 March 2020 have not yet been adopted application in the EU (the following dates of entry into force refer to the full version): • Amendments to IFRS 3 „Business Combinations” (effective to annual periods beginning on 1 January 2020 or after that date), • IFRS 17 „Insurance contracts” - introduces a number of changes in relation to the existing requirements of IFRS 4 (effective to annual periods beginning on 1 January 2021 or after that date), • Amendments to IAS 1 “Presentation of Financial Statements: Classification of Liabilities as Current or Non-current” (issued on 23 January 2020).

According to the Group's estimates, the above-mentioned standards, interpretations and amendments to standards would not have significant impact on the Group's financial statements if they had been applied by the Group as at the balance sheet date.

5.13 MSSF 16 „Leases”

General impact of application of IFRS 16 Leases

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements for both lessors and lessees. IFRS 16 became effective for accounting periods beginning on or after 1 January 2019 and superseded the current lease guidance including IAS 17 ‘Leases’ and related interpretations: IFRIC 4 ‘Determining Whether an Arrangement Contains a Lease’, SIC 15 ‘Operating Leases – Incentives’ and SIC 27 ‘Evaluating the Substance of Transactions in the Legal Form of a Lease’.

The purpose of the new standard is to ease the comparability of the financial statements, presenting both financial and operating leases in the statement of financial position of the lessees, and providing corresponding information to the users of the financial statements about the risks associated with the agreements. The date of initial application of IFRS 16 for the Group is 1 January 2019. The Group has chosen the modified retrospective application of IFRS 16 in accordance with IFRS 16:C5(b). Consequently, the Group didn’t restate its comparative figures but recognized the cumulative effect of adopting IFRS 16 as an adjustment to equity (retained earnings) at the date of the initial application.

Impact of the new definition of a lease

IFRS 16 provides a new definition of a lease. However, the Group made use of the provisions of IFRS 16 regarding the transition period not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to apply to those leases entered or modified before 1 January 2019.

The essential element differentiating the definition of a lease under IAS 17 and under IFRS 16 is the concept of control. Pursuant to IFRS 16, an agreement is a lease or contains a lease if it transfers the rights to control the use of an identified asset for a given period in exchange for compensation. Control is considered to exist if the customer has:

• the right to obtain substantially all of the economic benefits from the use of an identified asset; and, • the right to direct the use of that asset.

The Group will apply the new definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or modified on or after 1 January 2019.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 40/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not change significantly the scope of contracts that meet the definition of a lease for the Group.

Impact on lessee accounting

The new standard discontinues the differentiation between operating and finance leases in the lessee’s books and requires recognising a right-of-use asset and lease liability regarding all of the lessee’s lease agreements except for short-term leases and low asset value leases which are subject to exemptions.

On initial application of IFRS 16, for each lease separately, the lease liability is initially measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application. Then, the Group will:

• recognise depreciation of right-of-use assets and interest on lease liabilities in the statement of profit or loss, • separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within operating activities) in the cash flow statement.

At the date of initial application, the Group measures a right-of-use asset in the amount equal to the lease liability, adjusted by the amount of any prepayments or calculated lease payments relating to this lease, recognized in the statement of financial position immediately before the date of initial application.

The Group applies IAS 36 Impairment of assets to determine whether a right-of-use asset has lost value and to recognize any identified impairment loss.

In the case of operational lease agreements active as of 1 January 2019, the Group decided, in accordance with IFRS 16.C10 (c) not to apply the requirements for recognizing assets and liabilities for contracts whose leasing period ends within 12 months from the date of initial application. The Group recognizes these agreements as short-term lease agreements and settles costs using the straight-line method.

The Group did not have operating lease agreements classified as investment properties according to the fair value model and did not make such classification as at the date of initial application.

For the measurement of lease liabilities, the Group adopts an alternative interest rate for the risk-free rate from a curve based on 1Y on interbank deposits to 6M and FRA contracts over 6M and for 1Y to 5Y on IRS contracts and the addition of credit risk margin based on for CDS quoting for the current Bank rating, i.e. B + (for the respective tenor and for linear interpolation of rates for BB and B ratings). In order to estimate the discount rate, the Group considered the duration and currency of the contract. As at 1 January 2019, the discount rates calculated by the Group were within the range (depending on the duration of the contract) from 8.7% to 8.95%.

The impact of the implementation of IFRS 16 on the Group's financial ratios in 2019 was not significant. As at 1 January 2019, the Group recognized a lease liability in the amount of PLN 70,710 thousand, a right-of-use asset in the amount of PLN 70,029 thousand and a sublease receivable in the amount of PLN 681 thousand.

The implementation of IFRS 16 did not affect equity as at 1 January 2019 due to the recognition of right- of-use assets and sublease receivables and lease liabilities in the same amount.

Impact on lessor accounting

For the lessors the recognition and measurement requirements of IFRS 16 are similar, as they were stated in IAS 17. The leases shall be classified as finance and operating leases according to IFRS 16 as well. Compared to IAS 17, IFRS 16 changed the principles on the classification of subleases and requires the lessors to disclose more information about than earlier, in particular regarding how a lessor

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 41/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) manages the risks arising from its residual interest in leased assets. The implementation of IFRS 16 will not change the existing classification of contracts.

5.14 Fair value of assets and liabilities

Valuation at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value valuation is based on the assumption that an asset sale or liability transfer occurs on either the primary market for the asset or liability, or, in the absence of a major market, on the most favorable market for the asset or liability.

The fair value of an asset or liability is measured on the assumption that the market participants, in determining the price of an asset or liability, act in their best economic interest.

The fair value measurement of a non-financial asset recognizes the ability of a market participant to generate economic benefits by making the best and most efficient use of an asset or its disposal to another market participant that ensures the greatest possible and optimal use of the asset.

The Group uses valuation techniques that are appropriate to the circumstances and for which sufficient fair value measurement data are available to maximize the use of relevant observable inputs and minimal use of unobservable input data. All assets and liabilities that are measured at fair value or their fair value disclosed in the financial statements are classified in the fair value hierarchy on the basis of the lowest level of input data that is relevant for the fair value measurement treated as a whole.

At each balance sheet date, the Group assesses whether there has been a transfer between levels of the hierarchy by re-evaluating the classification to the individual levels, guided by the relevance of the input data from the lowest level that is relevant to the fair value measurement treated as a whole.

Independent experts are involved in the valuation of significant assets such as investment properties at each balance sheet date.

The Group has determined the classes of assets and liabilities based on the type, characteristics and risks associated with each asset and liability, and the level of fair value as described above for disclosures of fair value measurements. Amounts due from banks and financial institutions Deposits placed on the interbank market are short-term deposits with maturity up to three months. For this reason, it is estimated that the fair value of amounts due from banks does not significantly differ from their carrying amount. Receivables of over three months are measured at fair value using the discounted cash flow method taking into account information available on the loan margin for a given business partner. Loans, advances and lease receivables The fair value was calculated for loans with a fixed payment schedule. For contracts where such payments have not been defined (e.g. overdrafts) it is estimated that the fair value is equal to the carrying amount (fair value does not significantly differ from the carrying amount). A similar assumption is accepted for due payments and contracts classified as impaired.

In order to calculate the fair value, based on the information stored in the transaction systems, for each contract a schedule of principal and interest cash flows is identified. For fixed interest contracts, the contract flow schedule available in the given transaction system is used. For variable interest contracts a contract schedule is generated based on the current interest and forward rates (for contract currency and interest index) for subsequent interest periods. The cash flow established has been discounted using interest rates to accordingly the contract currency taking into account current margins of residual contract maturity. Comparison of the sum of discounted cash flows attributable to a given contract with its book value allows determining the differences between the fair

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 42/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) value and the carrying amount. The identification of the relevant discount rate is based on the currency of the contract, the product type and cash flow date.

The Group has recognized the portfolio of financial assets whose interest rate structure is based on a multiplier greater than one, at amortized cost. Considering the ongoing discussions in the area of classification and measurement of financial instruments containing a multiplier greater than one in the construction of contractual interest (in terms of test conditions for fulfilment of the requirement of only capital and interest payments by cash flows generated by the instrument - SPPI), the approach may change in the future, which could involve the valuation of a part of the credit card portfolio, where the interest rate structure is based on a multiplier greater than one, at fair value through profit or loss. As at 31 December 2019, the Group had the abovementioned credit card portfolio in the carrying amount of PLN 1.8 million (PLN 3.7 million as at 31 December 2018), and its estimated fair value as at that date was PLN 1.7 million (31 December 2018: PLN 3.4 million). Amounts due to banks and financial institutions Because most liabilities to banks and financial institutions represent short-term liabilities (up to one month), it is estimated that the fair value of these liabilities does not significantly differ from their carrying amount. For amounts due to banks and financial institutions above one month and non-current liabilities, the Group has made a measurement to fair value based on the discounted cash flow method taking into account the information available on the margin received on deposits run. Amounts due to clients Fair value is calculated only for fixed rate deposits with a fixed maturity. It is estimated that fair value of current deposits is equal to their book value. In order to calculate the fair value based on data from the transaction systems future, cash flows of principal and interest are determined. Thus calculated, future cash flows are grouped by currency, the original maturity, the product type and date of cash flows. The calculated cash flows are discounted with the interest rate constructed as the sum of the market interest rate for the currency and margins received on deposits run. The discounted value calculated as mentioned above is compared to the book value. As a result, the difference between the book value and the fair value of the relevant portfolio of contracts is calculated. Liabilities from issue of debt securities The fair value of own bonds has been calculated in accordance with the principles set for the fair value of amounts due to customers.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 43/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

As at 31 December 2019: Excess / deficit of fair value Book value Fair value over the book value

PLN thousand PLN thousand PLN thousand Assets: Cash, receivables from the Central Bank 623 493 623 493 0 Receivables from banks and financial institutions 359 730 359 730 0 Derivative hedging instruments 24 154 24 154 0 Derivative financial instruments at fair value through profit or loss 50 086 50 086 0 Loans and advances to clients 13 324 912 13 659 234 334 322 Finance lease receivables 98 763 98 726 -37 Other loans and receivables measured at amortized cost 13 145 13 145 0 Debt instruments at fair value through other comprehensive income 1 900 365 1 900 365 0 Equity instruments at fair value through other comprehensive income 93 912 93 912 0 Debt instruments at amortised cost 147 998 147 998 0 Liabilities: Amounts due to other banks and financial institutions 21 632 21 629 -3 Derivative hedging instruments 2 880 2 880 0 Financial liabilities measured at fair value through profit or loss 1 035 512 1 035 512 0 Amounts due to clients 15 508 490 15 471 498 -36 992 Debt securities in issue 374 883 345 075 -29 808 Other liabilities measured at amortized cost 38 050 38 050 0

As at 31 December 2018: Excess / deficit of fair value (restated) Book value Fair value over the book value

PLN thousand PLN thousand PLN thousand Assets: Cash, receivables from the Central Bank 884 679 884 679 0 Receivables from banks and financial institutions 204 681 205 160 479 Derivative hedging instruments 10 289 10 289 0 Derivative financial instruments at fair value through profit or loss 21 593 21 593 0 Loans and advances to clients 16 097 864 16 140 246 42 382 Finance lease receivables 103 387 103 533 146 Debt instruments at fair value through other comprehensive income 1 841 203 1 841 203 0 Equity instruments at fair value through other comprehensive income 82 824 82 824 0 Debt instruments at amortised cost 197 947 198 449 502 Liabilities: Amounts due to the Central Bank 834 319 834 319 0 Amounts due to other banks and financial institutions 78 724 77 234 -1 490 Derivative hedging instruments 22 247 22 247 0 Financial liabilities measured at fair value through profit or loss 1 278 680 1 278 680 0 Amounts due to clients 17 082 836 16 967 166 -115 670 Debt securities in issue 523 739 518 818 -4 921 Other liabilities measured at amortized cost 3 085 3 085 0

The Group classifies individual assets and liabilities measured at fair value using the following hierarchy: Level 1 Assets and liabilities are valued based on market quotations available on active markets.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 44/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Level 2 Financial assets and financial liabilities which fair value is measured using valuation techniques based on inputs, which can be directly (as a price) or indirectly (based on prices) observed. In this category the Group classifies financial instruments for which there is no active market.

No. Description Valuation method Inputs Discounted cash flow WIBOR on 1D to 1Y 1 Central Bank bills method Depo, FRA and IRS quotations Discounted cash flow WIBOR from 1D to 1Y method EURIBOR from 1D to 1Y 2 IRS MOSPRIME from 1D to 6M Depo, FRA and IRS quotations Discounted cash flow Average NBP exchange rate method WIBOR from 1D to 1Y EURIBOR from 1D to 1Y 3 CIRS MOSPRIME from 1D to 6M Depo, FRA and IRS quotations SWAP points, CCS quotations Discounted cash flow Average NBP exchange rate method WIBOR from 1D to 1Y EURIBOR from 1D to 1Y 4 FX SWAP MOSPRIME from 1D to 6M Depo, FRA and IRS quotations SWAP points, CCS quotations

Level 3 Financial assets and liabilities whose fair value is measured using valuation models in which the input data is not based on observable market data (unobservable input data).

Structured Deposits are complex financial instruments containing a debt instrument and an embedded derivative. The debt instrument is the Group’s obligation to return the denomination on the deposit maturity date - zero-coupon instrument (term deposit) with a denomination equal to the amount of payment guaranteed by the Group. The embedded derivative is an option acquired by the Group’s client and issued by the Group giving the client the right to additional payment set based on a change in the value of the base instrument. The fair value of the debt instrument deposited in the Group is calculated based on a valuation method taking into account the following factors: • the risk-free rate determined on the basis of the market forward interest rate curve on the money market (IRS / FRA) with the period closest to the maturity date of the valued debt instrument, • credit spread determined as the weighted average of the difference between the risk-free rate and the cost of acquiring deposits from retail clients Idea Bank S.A. acquired within the last 6 months (for the funds covered by the BGF guarantee) and the current value of CDS quotes for the class consistent with the hypothetical rating of the Bank (for funds not covered by the BGF guarantee), • liquidity margin reflecting the Bank's cost of acquiring liquidity in the money market.

The Group also uses the following volatilities for fair value measurements:

No. Name of Structured Deposit Model Volatility

1 Absolute Selection Option model NXSRSAF Index 4,50%

2 Momentum V Option model NXS Momentum Fund Stars ER 3,50%

3 Momentum VI Option model NXS Momentum Fund Stars ER 3,50%

4 Optimum Funds Option model NXS Momentum Fund Stars ER 3,50%

5 Optimum Funds 140% Option model NXS Momentum Fund Stars ER 3,50%

6 Best Funds Option model Best Select Fund Index 4,00%

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 45/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

7 Elite Funds Option model NXS Elite Funds Selection Index 3,50%

8 Elite Funds Go! Option model NXS Elite Funds Selection Index 3,50%

Old Mutual Global Investors Series PLC 4,71% 9 Best of I Option model BlackRock Global Funds – Euro Corporate Bond Fund 1,95% 10 Prime Funds Option model NXS Risk Parity Fund Allocator ER Index 3,00%

HP Inc 12,78% Illumina Inc 16,68% 11 Perfekt II Option model Intuitive Surgical Inc 13,74% NVIDIA Corp 26,06% Splunk Inc 28,43% Boeing Co/The 28,21% Exxon Mobil Corp 18,25% 12 US Blue Chips 12M Option model Pfizer Inc 25,74% Microsoft Corp 25,13% Walt Disney Co/The 28,12%

Boeing Co/The 28,72% Exxon Mobil Corp 17,37% 13 US Blue Chips 24M Option model Pfizer Inc 24,98% Microsoft Corp 20,67% Walt Disney Co/The 23,46%

In this category the Group also classified investment property:

Valuation No. Description (in PLN Model Volatility thousand) Comparative approach Average price of 1m2 usable area of residential Investment PLN 16 838/m2 - 1 30 912 average price adjustment premises on local market based on property PLN 21 600 /m2 method representative sample

In level 3 the Group also classifies BIK S.A. shares, which are measured at fair value based on a valuation model based on the discounted dividends method as well as Noble Funds TFI, for which the Group applied a valuation being the average of two methods: the discounted cash flow method and the comparative method.

The carrying amount of assets and liabilities measured at fair value as at 31 December 2019 per individual measurement levels:

Level 1 Level 2 Level 3 Total Assets Derivative hedging instruments 0 24 154 0 24 154 Derivative financial instruments at fair value through profit or loss 0 50 086 0 50 086 Investment debt securities measured at fair value through other 1 900 365 0 0 1 900 365 comprehensive income Investment equity securities measured at fair value through other 0 0 93 912 93 912 comprehensive income Liabilities: Derivative hedging instruments 0 2 880 0 2 880 Financial liabilities measured at fair value through profit or loss 0 0 1 035 512 1 035 512

The carrying amount of assets and liabilities measured at fair value as at 31 December 2018 per individual measurement levels:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 46/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Level 1 Level 2 Level 3 Total Assets Derivative hedging instruments 0 10 289 0 10 289 Derivative financial instruments at fair value through profit or loss 0 21 593 0 21 593 Investment debt securities measured at fair value through other 1 841 203 0 0 1 841 203 comprehensive income Investment equity securities measured at fair value through other 0 0 82 824 82 824 comprehensive income Liabilities: Derivative hedging instruments 0 22 247 0 22 247 Financial liabilities measured at fair value through profit or loss 0 0 1 278 680 1 278 680

In the 12-month period ended 31 December 2019 and in 2018, the Group did not make any changes in the classification of assets and liabilities to the different fair value levels.

6. Capital Requirements

The Group's capital adequacy management is implemented at the Bank's level. It is aimed at maintaining the Bank's and the Group's own funds at a level not lower than the established supervisory requirements considering all buffers imposed. In 2019, in accordance with the CRR Regulation, the Act on macro-prudential supervision, and supervisory recommendations, the Institutions were required to maintain additional capital buffers above the minimum levels set out in the CRR Regulation. Buffers must be covered by Tier 1 capital, while supervisory recommendations are covered by Tier 1 and Tier 2 capital.

1. A security buffer that applies to all banks. Pursuant to the CRR Regulation, from 2016 onwards, the buffer is increased to the final, stable level of 2.5% in force from 1 January 2019. 2. The countercyclical buffer imposed in order to limit the systemic risk resulting from the economic cycle (business cycle). It can be introduced, for example, during periods of excessive credit growth and released in the situation of its slowdown. As at 31.12.2019, the countercyclical buffer rate was 0%. 3. Systemic risk buffer whose role is to prevent and limit long-term non-cyclical risk or macroprudential risk, which can cause strong negative consequences for the country's financial system and economy. As at 31.12.2019, the systemic risk buffer rate was 3%. 4. A buffer for systemically important institutions - an additional requirement for institutions that may create systemic risk. The Bank was not recognized as a global systemically important institution, in accordance with Art. 131 of Directive 2013/36 / EU and no requirement for the Bank to maintain the buffer of another systemically important institution.

The main measures of capital adequacy for the Idea Bank S.A. Group in 2019 are: 1. the total capital ratio (TCR) for which, according to the above-mentioned requirements, the minimum level is 13.50%, 2. Tier 1 capital ratio, for which the min. level of the capital ratio is 11.50%, 3. Common Equity Tier 1 (CET1) ratio, with min. 10,00%, 4. the ratio of own funds to internal capital (internal capital must be entirely covered by own funds), 5. financial leverage ratio.

Capital requirements (Pillar I) As part of determining the total capital requirement for regulatory capital, the Group applies methods resulting from the CRR Regulation, including in particular: • the standard method for calculating the capital requirement for credit risk, • the standard method for calculating the capital requirement for operational risk, • the standard method for the credit valuation adjustment risk, • the basic method for calculating the capital requirement for currency risk.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 47/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

In the analysed period, the Group had a capital requirement for credit risk, operational risk, currency risk (as at 31.12.2019, the risk requirement amounted to PLN 11,343 thousand) and credit valuation adjustment risk (adjustment as at 31.12.2019 amounted to PLN 6,556 thousand).

The Group’s total capital ratio, calculated in accordance with the applicable provisions of the CRR/ CRD IV, as at 31 December 2019 was 1.46%. The Group’s Tier 1 capital ratio was 0.65%.

Since mid-2018, the level of supervisory capital adequacy measures has been below the minimum level of the ratio recommended by the PFSA, both for the standalone and consolidated balance sheet. As a result of losses recorded at the end of 2018, the capital ratios of the Bank and the Group dropped below the requirements set out in Art. 92 of the CRR Regulation. The tables below present calculations in the scope of own funds and detailed calculations of basic regulatory capital and capital ratios as at 31 December 2019 and 31 December 2018:

31.12.2019 31.12.2018 Capital adequacy ratio (consolidated) (restated) PLN thousand PLN thousand Tier 1 (core funds) 69 287 90 872 Tier 2 (supplementary funds) 86 599 172 882 Risk-weighted assets and off-balance sheet liabilities 9 322 733 10 955 857 Capital adequacy ratio (CAR) 1,46% 2,13%

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 48/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.12.2019 31.12.2018

Capital adequacy ratio (consolidated) (restated) PLN thousand PLN thousand Core funds 1 659 157 1 524 880 Share capital 155 332 155 543 Supplementary capital 1 189 667 2 864 713 Audited net profit -49 256 -1 893 226 Changes resulting from the implementation of IFRS 9 292 703 327 139 Other reserves 70 711 70 711 Decreases in core funds -1 589 870 -1 434 008 Adjustment for intangibles -145 175 -152 637 Adjustments to core funds for unrealized losses on debt financial instruments classified as available for 24 059 8 909 sale - 100% Adjustment for shares in financial institutions -242 926 -298 576 Correction of AVA -3 364 -3 561 Correction of deferred tax assets -566 -124 Profit (loss) from previous years -1 221 898 -988 019 Total core funds of the bank (Tier 1) 69 287 90 872

Supplementary funds 86 599 172 882 Subordinated debt with the approval of the Polish Financial Supervision Authority 86 599 172 882 Deceases in supplementary funds 0 0 Total supplementary funds (Tier 2) 86 599 172 882 Short-term capital (Tier 3) 0 0 Total own funds 155 886 263 754

Risk-weighted assets Risk exposure at 0% 2 912 525 3 177 219 Risk exposure at 20% 275 090 167 263 Risk exposure at 35% 558 880 814 742 Risk exposure at 50% 285 747 387 612 Risk exposure at 75% 10 882 743 12 588 609 Risk exposure at 100% 2 652 878 3 562 857 Risk exposure at 150% 18 883 13 616 Total risk-weighted assets 9 114 616 10 767 601

Risk-weighted off-balance sheet liabilities Risk exposure at 20% 448 0 Risk exposure at 35% 967 3 131 Risk exposure at 50% 257 170 168 421 Risk exposure at 75% 298 031 427 461 Risk exposure at 100% 64 249 Total liabilities off-balance sheet risk-weighted 208 117 188 256

Total risk-weighted assets and off-balance sheet liabilities 9 322 733 10 955 857 Credit risk 745 819 876 469 Operating risk 87 598 93 117 Other risks 17 898 19 252

Solvency ratio 1,46% 2,13%

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 49/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Internal capital (Pillar II)

The Internal Capital Adequacy Assessment Process (ICAAP) is an integral part of the risk management system. As part of this process, the Bank identifies all risks that exist, and which may potentially occur in its operations. The Bank's risk map prepared in this way includes the following risks: • credit risk, • operational risk, • currency risk, • liquidity risk, • interest rate risk in the banking book, • counterparty risk, • the risk of concentration of large exposures, • risk of concentration of exposures to internal people, • compliance risk, • concentration risk of the loan portfolio, • residual risk, • strategic risk, • legal risk, • business risk - as part of the difficult-to-measure risk, • reputation risk - as part of the difficult-to-measure risk, • IT systems risk (technological), • capital risk, • insurance risk, • country risk, • model risk, • risk of financial leverage.

A key element of the internal capital adequacy process is the assessment of the level of significance of a particular type of risk and the methodology of calculating internal capital. Internal capital is calculated on the basis of internal methodologies approved by the Bank's Management Board and approved by the Supervisory Board. When determining internal capital, the Bank uses a conservative approach to taking into account the risk diversification effect, which means that the total internal capital is the sum of internal capitals for individual types of risk. The Bank also implemented an internal risk assessment methodology.

As a result of the review of the assessment of internal capital adequacy ICAAP process and capital management carried out in 2019, the Bank considered as significant risks: 1. Permanently significant risks 1) credit risk, 2) operational risk, 3) currency risk, 4) liquidity risk, 5) interest rate risk in the banking book, 2. Significant risks 6) counterparty risk, 7) the risk of concentration of large exposures, 8) concentration risk of the loan portfolio, 9) compliance risk, 10) business risk, 11) strategic risk (as part of business risk), 12) reputation risk - difficult-to-measure risk, 13) capital risk, 14) insurance risk.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 50/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The table below presents the Group's internal capital:

Value of the capital requirement calculated - ICAAP Name of risk 31.12.2019 31.12.2018 PLN thousand PLN thousand Credit risk 745 819 883 030 Operational risk 27 964 7 240 Risk of concentration of large exposures 1 449 42 260 Strategic risk 13 771 10 513 Currency risk 228 52 Liquidity risk 0 12 379 Interest rate risk 115 433 89 175 Risks of credit valuation adjustments of derivative (CVA) 6 556 7 533 Compliance risk 397 603 Reputation risk 487 721 Concentration risk of the loan portfolio 30 000 0 Capital risk 0 0 Insurance risk (bancassurance) 31 700 0 Internal capital (in PLN) 973 802 1 053 507

The amount estimated by the Bank, necessary to cover all identified, significant risks occurring in the Bank's operations and changes in the business environment, taking into account the expected level of risk (internal capital), is higher than the Bank's own funds, which means that the Bank does not meet the provisions of Art. 128 of the Banking Law.

7. Risk management in the Idea Bank Group

Objectives and principles of risk management Risk management is one of the most important internal processes within the Group and aims at ensuring the viability of business operations while ensuring the level of risk control and its maintenance under the risk tolerance and limit system adopted by the Group in a changing macroeconomic and legal environment. Risk management in the Group is an integrated process and is based on supervisory requirements and regulations approved by the Supervisory Board and the Bank's Management Board. The Bank integrates risk management within the Group. Internal regulations regarding risk management in the Group have a 3-level structure: • Strategic level: o Idea Bank Strategy and Business Plan (updated annually), • Level of risk management strategies and policies: o Risk management strategies and policies, • Level of internal regulations: o Approved by the Bank's Management Board Internal instructions governing and delegating to the level of Departments and Offices rules of managing the given risk within the framework of the adopted strategy and policy.

In the risk management process participate: • Supervisory Board, • Management Board, • Assets and Liabilities Management Committee, • Bank Credit Committee, • Organizational units managing individual types of risk, • Controlling unit (including internal audit unit and compliance unit), • Selected organizational units of subsidiaries.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 51/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The Supervisory Board supervises the risk management system of the Group. The board accepts the strategy, the key risk management policies, and the amount of acceptable risk. It reviews main areas of risk, hazard identification and the process of setting and monitoring remedial actions. It also assesses whether the actions undertaken by the Management Board are effective. The Bank's Management is responsible for implementing an effective risk management system in line with regulatory requirements and strategic guidelines. This includes activities such as identification, measurement, monitoring and control, reporting, corrective action, and review and verification of the selected risk management process. The Management Board is also responsible for setting up an organizational structure tailored to the size and profile of the risk involved, sharing responsibilities to ensure the independence of the risk measurement and control function from operational activities, introducing and updating the risk management strategy. The Asset and Liability Committee is an advisory and decision-making body established to assist the Management and Supervisory Boards in shaping asset and liability management, monitoring and liquidity risk management, market risk (including currency and interest rate risk), model risk and capital adequacy risk management, assessment of the materiality of the risks incurred and reflected in internal capital formation rules at standalone level and the Capital Group. The Bank's Credit Committee is an opinion-making and decision-making body in matters related to credit risk. The role of the Committee is to support the Bank Management Board's activities in the form of performance of advisory functions in the credit decision-making process or independent decision- making in accordance with the Bank's limit of decision-making powers. Due to the wide aspect and penetration of particular types of risk, each type of risk has a lead unit that is responsible for coordinating the management process of the given risk. These units are responsible for identifying, measuring, monitoring and coordinating remedies for specific risks. It is also the task of the units to develop procedures for the implementation of the various stages of the risk management process. The Bank has an internal audit function that is designed to audit and evaluate, in an independent and objective manner, the adequacy and effectiveness of the internal control system, procedures and internal control mechanisms, and to evaluate the Bank's management system, including the effectiveness of risk management related to the Bank's operations. In order to ensure the Bank's compliance with the applicable laws, regulations and standards, the Bank also operates a separate Compliance cell, whose purpose is also to properly manage compliance risk. As a result of the identification and measurement activities of particular types of risk, it is important to determine which of them are relevant from the Group's point of view, their classification from the point of view of constant materiality assessment (permanent and material risks) and from the point of view of the purpose of covering the given risk with the capital.

Risk management processes In the risk management process, the Group identifies risks and assesses their significance on the basis of accepted materiality assessment factors, based on the division into permanently material, material and non-significant risks. Recognizing each risk involves assessing its impact on the results of the Group's operations, that is, impacts that can have a material and negative impact on the capital or financial result.

As significant risks in 2019 the Group considered the following types of risk: • credit risk, • interest rate risk, • currency risk, • liquidity risk, • operational risk, • counterparty risk, • the risk of concentration of large exposures, • compliance risk, • strategic risk, • reputation risk - difficult-to-measure, • capital risk, • insurance risk • concentration risk of the loan portfolio,

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 52/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

• business risk – difficult-to-measure.

7.1 Credit risk

Credit risk is one of the primary risks associated with the Bank’s business activities. Credit risk is defined as the risk of financial loss resulting from the Bank and Group clients’ default. The default is usually partially or fully caused by the client’s deteriorating financial standing or bankruptcy.

The Group is primarily concerned with maintaining the risk appetite as measured by the share of NPL loans ratio and the cost of risk by establishing the current credit risk management policy via the risk and recovery rates. Other important factors to be considered are: maintaining an adequate level of capital and adherence to credit limits.

The Group's credit risk management is to ensure the security of its credit business, using a rational approach to risk. The Group is guided by the following principles in the risk management process: • It manages credit risk on the basis of formalized regulations (policies, instructions, and procedures) that identify methods for identifying, measuring, monitoring, limiting and reporting credit risk, • It analyzes the credit risk of a single credit exposure in accordance with accepted credit risk assessment methods, • It uses models tailored to customer segments and product for risk assessment, • It limits the level of credit risk by setting internal and external limits for credit exposure limits, including one client, group of entities related by capital and organization and business sectors resulting respectively from the risk appetite, the Banking Law, the recommendations of the Polish Financial Supervision Authority and the Regulation of the European Parliament and of the Council (EU) No 575/2013 from 26 June 2013 on prudential requirements for credit institutions and investment firms, • to ensure objectivity, credit risk separates the sales process (customer acquisition) from the customer credit risk assessment and acceptance process, and manages and controls the risk (application analysis, risk assessment and credit decision making), • The credit decision-making procedure is approved by the Bank's Management Board and credit competencies are allocated to the Bank's employees on an individual basis, depending on their skills, experience and functions, • the primary criterion for concluding credit transactions is the creditworthiness of the client, for which the Bank uses the credit system, scoring tools, external information (e.g. CBD BR, CBD BR, BIK, BIG), • each credit transaction is monitored in terms of credit utilization, repayment timeliness, legal collateral of the loan, capital and organizational relations of the debtor and current economic and financial situation, • the Bank periodically monitors changes occurring on the real estate market and assumptions and legal and economic framework of valuations of properties accepted as collateral for credit exposures, • as part of its proactive credit risk and loan portfolio quality management, it is pursuing early restructuring measures (loan repayment facilities) for customers experiencing financial difficulties, • sets the rules for the establishment and monitoring of legal collateral and debt collection, • regularly performs stress tests to assess the potential impact on the Bank's situation of negative events in the environment.

Internal regulations concerning the assessment and monitoring of client credit risk and legal value verification, internal credit limits, decision powers and the system of credit risk identification, assessment and reporting to the committees, the Bank's Management Board and the Supervisory Board as well as

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 53/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) scoring models and IT tools used in the credit risk management process are review and update periodical. There is a reporting system in the Group. The scope and type of risk reporting and measurement include the following elements: • vintage analysis in this quality and efficiency of credit processes, • use of credit limits, • results of stress test, • back-testing analysis for write-offs, • update of collateral value of credit exposures based on real estate market analyzes.

In order to determine the level of credit risk and profitability of loan portfolios, the Bank uses various methods to measure and evaluate credit risk. The Bank assesses all balance sheet credit exposures to identify objective evidence of impairment based on the most recent data at the date of revaluation. Identification of impairment is made automatically in the central bank system based on system information (delay in repayment) or data entered by users. Impairment allowances for expected credit losses in the Bank are created in accordance with IFRS 9. the Bank uses the value of accepted collateral when estimating write-offs taking into account the applied value limits of collateral resulting from the analyzes of recourses. The basis for estimating the value of a collateral of a material nature is its current market value.

The quality of the portfolio

Credit risk in the Group occurs primarily in the Bank and in the Idea Money subsidiary (factoring transactions). The Bank and companies are examining the quality of the loan/factoring portfolio through the share of impaired exposures (NPL) in the loan/factoring portfolio.

At the end of December 2019, the share of NPL in the Group's portfolio of receivables from clients is 22.59%. In comparison to the end of 2018, the ratio increased by 5.59 percentage points.

The share of NPL in the portfolio of the Group’s/the Bank’s receivables from customers was as follows:

NPL (%) 31.12.2019 31.12.2018

Idea Bank S.A. Group 22.59% 17.00% Idea Bank S.A. 21.05% 17.53%

NPL coverage regarding Group's customers at the end of 2019 amounted to 68.49% and increased by 6.61 percentage points compared to the end of 2018.

NPL coverage presents the table below:

NPL coverage (%) 31.12.2019 31.12.2018 Idea Bank S.A. Group 68.49% 61.89% Idea Bank S.A. 66.82% 58.55%

The table below presents receivables from customers valued using the individual method:

31.12.2019 31.12.2018 Impaired loans and advances assessed individually PLN thousand PLN thousand

- investment loans 203 163 238 884 - operating loans 58 008 58 414 - car loans 5 179 2 320 Total 266 350 299 618

Credit risk management processes The core lending activities of the Bank focus on small and medium enterprises through: • targeted financing – investments, purchases, operational activities;

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 54/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

• working capital financing; • financing of purchased leasing and factoring receivables.

The Bank has developed procedures for particular loan products in various business sectors. Purchase of receivables by Idea Bank – pursuant to the provisions of agreements signed by the parties, in the event of a delay in repayment of purchased debt, the seller of the receivables is unconditionally required to repay the outstanding debt. Security is released after the seller (an individual or a company) repays all the Bank’s claims related to the purchased debt.

Principles of policy of applying collateral and risk reduction The Bank applies a wide range of legally accepted security appropriate to the nature of the products and the scope of activity. Detailed principles of selecting, applying and establishing security are provided in the Bank’s internal regulations and product procedures for particular trading areas. The accepted legal security should ensure that the Bank’s claims are satisfied if threats occur that obstruct or prevent fulfillment of the borrower’s obligations under a loan agreement. The Bank’s basic security limiting its risk, in particular credit risk, is a good financial standing of the borrower and the borrower's creditworthiness. When selecting the security, the Bank considers the type and value of the loan facility, its term, legal status and financial standing of the entity, as well as the Bank’s risk and other threats. Security in a form which guarantees full and quick recovery of the amounts due by means of debt collection is preferred. The Bank monitors the security on the dates of periodic (quarterly or annual) reviews of credit exposures. Idea Bank S.A. requires one or more collateral for the loan to limit credit risk.

Receivables’ collateral allows: • Decrease in impairment allowances and provisions in accordance with IFRS 9 • Application of more favorable risk weights to the calculation of capital requirements

The Bank uses the value of accepted collateral when estimating group exposures. The basis for estimating the value of a collateral of a material nature is its current market value. The following securities are included in the calculation of write-offs: • guarantee or guarantee of the National Bank of Poland or the Bank Guarantee Fund • guarantee of a central bank or government of a member state of the OECD • guarantee of a bank established in an OECD member state where the economic and financial situation of that bank is not a concern • guarantee or suretyship of a state-owned legal entity, excluding banks and insurance undertakings, authorized under separate provisions to grant them in the performance of its state tasks entrusted in cases where the state budget specifies the source of funding of possible commitments • credit transfer from Standing Letter of Credit opened or confirmed by a bank of a member state of the OECD if the economic and financial situation of the bank is not a concern • export insurance contract or insurance guarantee of the Export Credit Insurance Corporation directly or indirectly covered by the State Treasury, concluded or given on the basis of the provisions of the export credit insurance guaranteed by the State Treasury for a specified loan exposure agreement up to the percentage of the product where the risk of occurrence of the event is covered by insurance or guarantee and the sums of insurance or guarantee respectively, if the need to create specific provisions is a consequence of the events covered by that insurance or guarantee • assignment of rights to benefits resulting from export insurance contracts or assignment of rights resulting from insurance guarantees, directly or indirectly covered by the State Treasury, concluded or awarded on the basis of provisions guaranteed by the State Treasury export insurance - up to the percentage of the product in the percentage of the risk of the occurrence of the event is covered by insurance or guarantee and the sum of the insurance or guarantee respectively if the need for specific provisions is a consequence of the events covered by that insurance or the guarantee • a guarantee of the BGK from the funds of the National Credit Guarantee Fund granted on the basis of the provisions on sureties and guarantees granted by the State Treasury and some legal persons

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 55/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

• guarantee of the BGK from the funds of the EU Guarantee Fund • European Investment Fund guarantee provided by the InnovFin guarantee line portfolio • portfolio security under the Trust Fund Guarantee Credit under the JEREMIE Initiative • Guarantee of the local government of the Republic of Poland with good economic and financial standing, the amount of collateral taken into account should be the result of the resolution of the competent authority of the local government unit • guarantee of a good economic and financial entity, other than entities referred to in items 1-4, 6, 8 and 10 • payment of a certain amount in zloty or in another convertible currency to the bank account, meeting the conditions set out in Art. 102 of the Act of 29 August 1997 - Banking Law, the conversion into gold should be made according to the average exchange rate set by the National Bank of Poland on the day of classification • registered pledge on receivables from deposit account filed in: • bank with credit exposure or • bank domiciled in a member country of the OECD if the economic and financial situation of that bank is not a concern - together with a statement of blockade of the deposit and a power of attorney to collect funds from the deposit account • transfer of receivables from the deposit account deposited with a bank other than the bank holding the receivable or an off-balance sheet liability, together with a statement on blockade of the deposit and a power of attorney to collect funds from the deposit account; • block of deposit account deposited with a bank with a credit exposure together with a power of attorney to collect funds from the deposit account • mortgage set up on: • real estate • perpetual usufruct • ownership of a cooperative right to a dwelling • cooperative right to the premises, • right to a single-family home in a housing cooperative, • the right to housing in a house built by a housing cooperative to transfer its ownership to a member • transfer to the bank, until the debt is repaid with due interest and commissions, ownership of: • securities issued by the State Treasury or the National Bank of Poland • securities issued by central banks or governments of member countries of the OECD • bank securities issued by other banks - at their fair value • registered pledge on the securities rights • transfer to a bank, until the debt is repaid with interest and principal, the ownership of securities not mentioned in paragraph 19, traded on the OECD member countries • registered pledge on securities rights referred to in point 19 • pledge on a nautical vessel registered in the naval register (maritime mortgage) • pledge on aircraft registered in the State Register of aircraft with appropriate application of Art. 11 Act of 3 July 2002 - Aviation Law (Journal of Laws of 2006, No. 100, item 696, as amended1)) • transfer to the bank by the debtor, until the debt is repaid with interest and commissions payable, ownership rights to the movable property, under the terms set by the parties in the contract • registered pledge on movable item • a patronage statement containing an obligation of the issuer to take action against the debtor to maintain the timely servicing of the bank's credit exposure and to keep the debtor's economic and financial situation free of prejudice if: • the bank has a legal opinion confirming the possibility and effectiveness of any possible claims against the issuer of the statement • the obligation on the issuer of the statement is included in his books • credit exposure insurance in an insurance company established in an OECD member country where the economic and financial situation of an insurance company is not a concern

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 56/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

• unconditional assignment of receivables from counterparties established in OECD countries where the claim is uncontested and not determined

The Bank applies limits on the value of collateral taken for the purposes of calculating write-downs in the case of: • mortgage, • transfer of ownership of movable property, • transfer of ownership of securities, except those issued by the State Treasury, the National Bank of Poland, central banks or governments of member countries of the Organization for Economic Co-operation and Development and other banks, • pledge on a sea or air ship, • registered pledge on securities rights, • registered pledge on movable item, • the guarantee of Bank Gospodarstwa Krajowego from the funds of the EU Guarantee Fund granted on the basis of the provisions on the EU Guarantee Fund, • guarantee of the entity and the patronage statement.

Where the subject of a transfer or pledge is a fraction of a movable item, the value of the collateral shall be taken as a fraction of the value of the whole security. Bank does not accept collateral value for calculations of write-downs, the that has not been disposed of within 5 years from the beginning of the process of selling the security.

Derivative financial instruments

Credit risk related to derivatives is a potential cost of execution of a new contract on the original terms and conditions if the other party participating in the original contract does not perform its obligation. The Group evaluates contract participants using the same methods as in the case of loan decisions. The Group executes transactions concerning derivatives with domestic banks. The transactions are executed as part of credit limits allocated to particular institutions; the Group determines based on the evaluation of the bank’s financial standing, the limits of maximum exposure for banks and as part of those limits the exposure for particular types of transactions.

Restructured agreements The Bank performs a restructuring process aimed at restructuring loan receivables through debt repayment reliefs, such as: 1) change in repayment schedule for the entire or part of debt; 2) change of installment amounts; 3) change in interest rates; 4) suspension of accruing interest; 5) debt capitalization, excluding collection costs; 6) cancellation of a part of the debt; 7) change in the order of recording repayments; 8) change in legal security; 9) amendments to the provisions regarding fees and commissions; 10) suspension or closing of enforcement proceedings; 11) changing the currency of the risk exposure agreement.

The main risk in the restructuring process is related to the proper assessment of the debtors’ creditworthiness in the new restructured conditions.

Main reasons for restructuring of loan exposures are debtor’s financial difficulties caused by delays in payments from counterparties, liquidity problems and downfall of turnover. Restructuring leads to a change of parameters of an existing loan and not in recognition of a “new” loan. Restructuring is a premise of impairment of the restructured agreement. Restructured exposure may exit the default state if all of the following conditions are met:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 57/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) a) the exposure does not have any other indications of impairment, b) year has passed since restructuring took place, c) At the end of the 12 subsequent balance sheet dates, the delay in repayment of principal, interest, and penalties on assumptions of materiality (PLN 500) decreased to less than 30 days and persisted d) After restructuring, there are no outstanding amounts left over or there are concerns about full repayment of the exposures under the conditions applicable after the restructuring, i.e. if the debtor has paid an amount equal to the amount previously past due (by way of regular payments under the conditions applicable after the restructuring). The existence of overdue amounts) or the amount written off (in the absence of past due amounts) within restructuring operations or if the debtor has otherwise demonstrated its ability to meet the conditions applicable after the restructuring.

The tables below show the value of loans and advances in the restructuring process as at 31 December 2019 and 2018:

Amount of Renegotiated agreements - 31.12.2019 Gross amount Write-off Net amount agreement Loans and advances to clients, including: - investment loans 321 53 503 9 625 43 878 - operating loans 531 41 759 20 553 21 206 - car loans 8 380 102 278 Total 860 95 642 30 280 65 362

Amount of Renegotiated agreements - 31.12.2018 Gross amount Write-off Net amount agreement Loans and advances to clients, including: - investment loans 294 49 256 7 945 41 312 - operating loans 593 46 023 24 999 21 024 - car loans 15 611 270 341 Total 902 95 890 33 214 62 677

Maximum exposure to credit risk The tables below present the division of financial assets by the credit exposure quality class as of 31.12.2019 and 31.12.2018. Low credit risk includes exposures classified to the low risk portfolio. Increased monitoring means credit exposures on the Watch List subject to more frequent monitoring.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 58/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.12.2018 31.12.2019 (restated) Amounts due from clients Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3* POCI* Total

PLN PLN PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand Exposures with low credit risk 287 580 0 0 0 287 580 0 0 0 0 0 Expositions subject to standard monitoring 10 565 271 1 103 694 0 0 11 668 965 13 650 750 1 002 824 381 504 0 15 035 078 Exposures subject to increased monitoring (the so-called 0 452 170 0 0 452 170 0 587 537 0 0 587 537 Watchlist) Impaired exposures 0 0 3 619 588 1 593 3 621 181 0 0 2 737 245 1 916 2 739 161 Gross carrying amount 10 852 851 1 555 864 3 619 588 1 593 16 029 896 13 650 750 1 590 361 3 118 749 1 916 18 361 776 Allowance for impairment -110 679 -114 174 -2 480 207 0 -2 705 060 -182 913 -149 977 -1 931 224 0 -2 264 114 Net carrying amount 10 742 172 1 441 690 1 139 381 1 593 13 324 836 13 467 837 1 440 384 1 187 525 1 916 16 097 662

* The Group transferred 1.6 million write-offs previously disclosed under POCI to Stage 3

31.12.2019 31.12.2018

Receivables from banks and financial institutions Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total

PLN PLN PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand Exposures with low credit risk 0 0 0 0 0 0 0 0 0 0 Expositions subject to standard monitoring 360 885 0 0 0 360 885 205 881 0 0 0 205 881 Exposures subject to increased monitoring (the so-called 0 0 0 0 0 0 0 0 0 0 Watchlist) Impaired exposures 0 0 0 0 0 0 0 0 0 0 Gross carrying amount 360 885 0 0 0 360 885 205 881 0 0 0 205 881 Allowance for impairment -1 155 0 0 0 -1 155 -1 200 0 0 0 -1 200 Net carrying amount 359 730 0 0 0 359 730 204 681 0 0 0 204 681

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

59/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.12.2019 31.12.2018

Finance lease receivables Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total

PLN PLN PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand Exposures with low credit risk 0 0 0 0 0 0 0 0 0 0 Expositions subject to standard monitoring 93 242 0 0 0 93 242 94 986 0 0 0 94 986 Exposures subject to increased monitoring (the so-called 0 4 345 0 0 4 345 0 5 964 0 0 5 964 Watchlist) Impaired exposures 0 0 3 568 0 3 568 0 0 4 559 0 4 559 Gross carrying amount 93 242 4 345 3 568 0 101 155 94 986 5 964 4 559 0 105 509 Allowance for impairment -197 -212 -1 983 0 -2 392 -309 -337 -1 476 0 -2 122 Net carrying amount 93 045 4 133 1 585 0 98 763 94 677 5 627 3 083 0 103 387

31.12.2019 31.12.2018

Other loans and receivables measured at amortized cost Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total

PLN PLN PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand Exposures with low credit risk 0 0 0 0 0 0 0 0 0 0 Expositions subject to standard monitoring 0 0 0 0 0 0 0 0 0 0 Exposures subject to increased monitoring (the so-called 0 13 482 0 0 13 482 0 13 239 0 0 13 239 Watchlist) Impaired exposures 0 0 0 0 0 0 0 0 0 0 Gross carrying amount 0 13 482 0 0 13 482 0 13 239 0 0 13 239 Allowance for impairment 0 -337 0 0 -337 0 -13 239 0 0 -13 239 Net carrying amount 0 13 145 0 0 13 145 0 0 0 0 0

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

60/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.12.2019 31.12.2018

Investment debt securities measured at amortised cost Stage 1 Stage 2 Stage 3 POCI Total Stage 1* Stage 2 Stage 3 POCI* Total

PLN PLN PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand Exposures with low credit risk 0 0 0 0 0 0 0 0 0 0 Expositions subject to standard monitoring 15 108 0 0 0 15 108 97 334 0 0 0 99 184 Exposures subject to increased monitoring (the so-called 0 100 709 0 0 100 709 0 122 082 8 390 0 130 472 Watchlist) Impaired exposures 0 0 45 089 8 087 53 176 0 0 0 1 850 0 Gross carrying amount 15 108 100 709 45 089 8 087 168 993 97 334 122 082 8 390 1 850 229 656 Allowance for impairment -5 -2 288 -12 020 -6 682 -20 995 -42 -22 658 -7 653 -1 356 -31 709 Net carrying amount 15 103 98 421 33 069 1 405 147 998 97 292 99 424 737 494 197 947

* The Group transferred the POCI exposure with a gross value of PLN 1,850 thousand and the write-off of PLN 1,356 thousand previously disclosed in Stage 1

31.12.2019 31.12.2018 Investment debt securities measured at fair value through Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total other comprehensive income PLN PLN PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand thousand thousand Exposures with low credit risk 1 900 365 0 0 0 1 900 365 1 841 203 0 0 0 1 841 203 Expositions subject to standard monitoring 0 0 0 0 0 0 0 0 0 0 Exposures subject to increased monitoring (the so-called 0 0 0 0 0 0 0 0 0 0 Watchlist) Impaired exposures 0 0 0 0 0 0 0 0 0 0 Carrying amount 1 900 365 0 0 0 1 900 365 1 841 203 0 0 0 1 841 203 Allowance for impairment* -441 0 0 0 -441 -813 0 0 0 -813 (*) The impairment allowance for debt securities measured at fair value through other comprehensive income is included in the ‘Revaluation reserve’ item and does not reduce the carrying amount of the securities

Credit risk management in the Group companies significantly exposed to this risk: Group companies include transactions with reputable companies with good creditworthiness. All customers wishing to conclude a lease agreement, are subject to verification procedures. In the process of evaluation of proposals lease in addition to the assessment of the creditworthiness of the applicant are assessed as qualitative aspects of the entity, the truthfulness through institutions of "Economic Information Bureau" and analysed the risks associated with the proposed leased. In addition, due to ongoing monitoring of receivables, the exposure of the Group companies to the risk of bad debts is not significant. In the case of investment leasing credit risk is also limited due to the large number of customers using the services of Group companies and their dispersion across Poland and in various sectors of the economy: industry, commerce and services.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

61/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Impairment of credit exposures The method of calculating the loss allowance for expected credit losses is presented in Note 5.10.8.1 to these consolidated financial statements.

Loss allowances on loans and advances to customers The table presents the changes in the impairment allowances’ balance in the period:

01.01.2018-31.12.2018 Amounts due from clients 01.01.2019-31.12.2019 (restated)

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3** POCI** Total Provisions for impairment losses at the beginning of the 182 913 149 977 1 931 224 0 2 218 922 821 067 period Change due to the initial application of IFRS 9 0 508 668 Provisions for impairment losses at the beginning of the 182 913 149 977 1 931 224 0 2 264 114 136 612 196 116 997 007 0 1 329 735 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other -11 588 -31 887 176 518 0 133 043 63 748 43 503 503 762 0 611 013 Transfers -60 288 -4 613 266 948 0 202 047 -29 274 -83 180 244 458 0 132 004 Change in net provisions recognized in the income -71 876 -36 500 443 466 0 335 090 34 474 -39 677 748 220 0 743 017 statement Other changes in provisions* -358 697 105 517 0 105 856 11 827 -6 462 185 997 0 191 362 Provisions for impairment losses at the end of the period 110 679 114 174 2 480 207 0 2 705 060 182 913 149 977 1 931 224 0 2 264 114 * relate to impairment allowance for interest and correction of impairment interests

** The Group transferred 1.6 million write-offs previously disclosed under POCI to Stage 3

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

62/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Receivables from banks and financial institutions 01.01.2019-31.12.2019 01.01.2018-31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Provisions for impairment losses at the beginning of the 1 200 0 0 0 1 200 751 period Change due to the initial application of IFRS 9 0 296 Provisions for impairment losses at the beginning of the 1 200 0 0 0 1 200 1 047 0 0 0 1 047 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other -42 0 0 0 -42 254 0 0 0 254 Change in net provisions recognized in the income -42 0 0 0 -42 254 0 0 0 254 statement Other changes in provisions* -3 0 0 0 -3 -101 0 0 0 -101 Provisions for impairment losses at the end of the period 1 155 0 0 0 1 155 1 200 0 0 0 1 200 * relate to impairment allowance for interest and correction of impairment interests

Finance lease receivables 01.01.2019-31.12.2019 01.01.2018-31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Provisions for impairment losses at the beginning of the 309 337 1 476 0 2 122 1 014 period Change due to the initial application of IFRS 9 0 72 Provisions for impairment losses at the beginning of the 309 337 1 476 0 2 122 11 19 1 056 0 1 086 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other -246 109 408 0 271 288 331 417 0 1 036 Transfers 134 -234 100 0 0 10 -13 3 0 0 Change in net provisions recognized in the income -112 -125 508 0 271 298 318 420 0 1 036 statement Other changes in provisions* 0 0 -1 0 -1 0 0 0 0 0 Provisions for impairment losses at the end of the period 197 212 1 983 0 2 392 309 337 1 476 0 2 122 * relate to impairment allowance for interest and correction of impairment interests

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

63/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Off-balance sheet 01.01.2019-31.12.2019 01.01.2018-31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Provisions for impairment losses at the beginning of the 6 182 1 776 1 760 0 9 718 8 099 period Change due to the initial application of IFRS 9 0 13 029 Provisions for impairment losses at the beginning of the 6 182 1 776 1 760 0 9 718 14 321 4 847 1 960 0 21 128 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other -3 157 -463 -160 0 -3 780 -7 429 -1 392 -1 307 0 -10 128 Transfers -177 -510 307 0 -380 -710 -1 679 1 107 0 -1 282 Change in net provisions recognized in the income -3 334 -973 147 0 -4 160 -8 139 -3 071 -200 0 -11 410 statement Other changes in provisions* 0 0 0 0 0 0 0 0 0 0 Provisions for impairment losses at the end of the period 2 848 803 1 907 0 5 558 6 182 1 776 1 760 0 9 718 * relate to impairment allowance for interest and correction of impairment interests

Other loans and receivables measured at amortized cost 01.01.2019-31.12.2019 01.01.2018-31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Provisions for impairment losses at the beginning of the 0 13 239 0 0 13 239 0 period Change due to the initial application of IFRS 9 0 0 Provisions for impairment losses at the beginning of the 0 13 239 0 0 13 239 0 0 0 0 0 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other 0 -5 184 0 0 -5 184 0 13 239 0 0 13 239 Change in net provisions recognized in the income 0 -5 184 0 0 -5 184 0 13 239 0 0 13 239 statement Other changes in provisions 0 -7 718 0 0 -7 718 0 0 0 0 0 Provisions for impairment losses at the end of the period 0 337 0 0 337 0 13 239 0 0 13 239

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

64/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Investment debt securities measured at amortised cost 01.01.2019-31.12.2019 01.01.2018-31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1** Stage 2 Stage 3 POCI** Total Provisions for impairment losses at the beginning of the 42 22 658 7 653 1 356 31 709 0 period Change due to the initial application of IFRS 9 0 565 Provisions for impairment losses at the beginning of the 42 22 658 7 653 1 356 31 709 407 158 0 0 565 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other -37 -29 436 12 020 5 326 -12 127 -365 22 477 -38 736 1 356 -15 268 Transfers 0 0 0 0 0 0 94 46 400 0 46 494 Change in net provisions recognized in the income -37 -29 436 12 020 5 326 -12 127 -365 22 571 7 664 1 356 31 226 statement Other changes in provisions* 0 9 066 -7 653 0 1 413 0 -71 -11 0 -82 Provisions for impairment losses at the end of the period 5 2 288 12 020 6 682 20 995 42 22 658 7 653 1 356 31 709 * relate to impairment allowance for interest and correction of impairment interests ** The Group transferred the POCI exposure with the write-off of PLN 1,356 thousand previously disclosed in Stage 1

Investment debt securities measured at fair value through 01.01.2019-31.12.2019 01.01.2018-31.12.2018 other comprehensive income

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Provisions for impairment losses at the beginning of the 813 0 0 0 813 0 period Change due to the initial application of IFRS 9 0 1 466 Provisions for impairment losses at the beginning of the 813 0 0 0 813 1 466 0 0 0 1 466 period - adjusted Change in provisions recognized in the income statement: Increase/decrease/other -204 0 0 0 -204 -653 0 0 0 -653 Transfers 0 0 0 0 0 0 0 0 0 0 Change in net provisions recognized in the income -204 0 0 0 -204 -653 0 0 0 -653 statement Other changes in provisions* -168 0 0 0 -168 0 0 0 0 0 Provisions for impairment losses at the end of the period 441 0 0 0 441 813 0 0 0 813 * relate to impairment allowance for interest and correction of impairment interests

Gross carrying amounts

The tables below present changes in the gross carrying amounts during the period:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

65/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.12.2018 Amounts due from clients 31.12.2019 (restated)

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Gross balance amounts at the beginning of the period 13 650 750 1 590 361 3 118 749 1 916 18 361 776 13 781 909 1 546 581 2 073 380 3 608 17 405 478 Change due to the initial application of IFRS 9 0 -349 0 198 473 0 198 124 Gross balance amounts at the beginning of the period - 13 650 750 1 590 361 3 118 749 1 916 18 361 776 13 781 560 1 546 581 2 271 853 3 608 17 603 602 adjusted Transfers -1 144 689 540 525 604 164 0 0 -899 674 172 808 756 888 0 30 022 New financial assets originated or purchased 2 976 143 199 706 39 656 0 3 215 505 6 092 901 156 340 63 972 0 6 313 213 Financial assets derecognised during the period other than write- -1 736 006 -528 819 -154 430 0 -2 419 255 -1 802 031 -200 191 -100 502 0 -2 102 724 offs Changes in interest accrual 5 653 2 962 221 298 0 229 913 19 265 3 236 171 575 0 194 076 Write-offs 0 0 -91 985 0 -91985 0 0 -10 228 0 -10 228 Other -2 899 000 -248 871 -117 864 -323 -3 266 058 -3 541 271 -88 413 -34 809 -1 692 -3 666 185 Gross balance amounts at the end of the period 10 852 851 1 555 864 3 619 588 1 593 16 029 896 13 650 750 1 590 361 3 118 749 1 916 18 361 776

Receivables from banks and financial institutions 31.12.2019 31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Gross balance amounts at the beginning of the period 205 881 0 0 0 205 881 191 972 0 0 0 191 972 Change due to the initial application of IFRS 9 0 0 0 0 0 0 Gross balance amounts at the beginning of the period - 205 881 0 0 0 205 881 191 972 0 0 0 191 972 adjusted Transfers 0 0 0 0 0 0 0 0 0 0 New financial assets originated or purchased 198 989 0 0 0 198 989 81 719 0 0 0 81 719 Financial assets derecognised during the period other than write- -57 837 0 0 0 -57 837 0 0 0 0 0 offs Changes in interest accrual 70 0 0 0 70 0 0 0 0 0 Other 13 782 0 0 0 13 782 -67 810 0 0 0 -67 810 Gross balance amounts at the end of the period 360 885 0 0 0 360 885 205 881 0 0 0 205 881

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

66/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Finance lease receivables 31.12.2019 31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Gross balance amounts at the beginning of the period 94 986 5 964 4 559 0 105 509 53 399 3 097 2 007 0 58 503 Change due to the initial application of IFRS 9 0 0 0 0 0 0 Gross balance amounts at the beginning of the period - 94 986 5 964 4 559 0 105 509 53 399 3 097 2 007 0 58 503 adjusted Transfers -1 553 -1 367 2 920 0 0 -1 094 -2 489 3 582 0 0 New financial assets originated or purchased 25 471 424 81 0 25 976 53 073 6 403 909 0 60 385 Financial assets derecognised during the period other than write- -15 194 -555 -453 0 -16 202 -7 152 -916 -140 0 -8 209 offs Other -10 468 -121 -3 539 0 -14 128 -3 240 -131 -1 799 0 -5 170 Gross balance amounts at the end of the period 93 242 4 345 3 568 0 101 155 94 986 5 964 4 559 0 105 509

Other loans and receivables measured at amortized cost 31.12.2019 31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Gross balance amounts at the beginning of the period 0 13 239 0 0 13 239 0 0 0 0 0 Change due to the initial application of IFRS 9 0 0 0 0 0 0 Gross balance amounts at the beginning of the period - 0 13 239 0 0 13 239 0 0 0 0 0 adjusted New financial assets originated or purchased 0 0 0 0 0 0 13 189 0 0 13 189 Changes in interest accrual 0 -451 0 0 -451 0 0 0 0 0 Other 0 694 0 0 694 0 50 0 0 50 Gross balance amounts at the end of the period 0 13 482 0 0 13 482 0 13 239 0 0 13 239

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

67/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Investment debt securities measured at amortised cost 31.12.2019 31.12.2018

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1* Stage 2 Stage 3 POCI* Total Gross balance amounts at the beginning of the period 97 334 122 082 8 390 1 850 229 656 165 526 2 099 11 521 0 179 146 Change due to the initial application of IFRS 9 0 0 0 0 0 0 Gross balance amounts at the beginning of the period - 97 334 122 082 8 390 1 850 229 656 165 526 2 099 11 521 0 179 146 adjusted Transfers -26 061 -20 486 46 547 0 0 -62 980 119 984 0 0 57 004 New financial assets originated or purchased 0 0 0 6 237 6 237 0 0 0 1 850 1 850

Modification of contractual cash flows of financial assets 0 0 -7 996 0 -7 996 0 0 0 0 0 Financial assets derecognised during the period other than write- -55 406 0 0 0 -55 406 0 0 0 0 0 offs Changes in interest accrual 0 868 -1 862 0 -994 -176 -1 -1 127 0 -1 304 Write-offs 0 0 0 0 0 0 0 -2 004 0 -2 004 Other -759 -1 755 10 0 -2 504 -5 036 0 0 0 -5 036 Gross balance amounts at the end of the period 15 108 100 709 45 089 8 087 168 993 97 334 122 082 8 390 1 850 229 656 * The Group transferred the POCI exposure with a gross value of PLN 1,850 thousand previously disclosed in Stage 1

Investment debt securities measured at fair value through 31.12.2019 31.12.2018 other comprehensive income

PLN thousand Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total Balance amounts at the beginning of the period 1 841 203 0 0 0 1 841 203 4 189 752 0 0 0 4 189 752 Change due to the initial application of IFRS 9 0 0 0 0 0 0 Balance amounts at the beginning of the period - adjusted 1 841 203 0 0 0 1 841 203 4 189 752 0 0 0 4 189 752 New financial assets originated or purchased 6 006 211 0 0 0 6 006 211 27 410 101 0 0 0 27 410 101 Changes in interest accrual 1 372 0 0 0 1 372 -22 908 0 0 0 -22 908 Financial assets derecognised during the period other than write- -5 936 571 0 0 0 -5 936 571 0 0 0 0 0 offs Other -11 850 0 0 0 -11 850 -29 735 742 0 0 0 -29 735 742 Balance amounts at the end of the period 1 900 365 0 0 0 1 900 365 1 841 203 0 0 0 1 841 203

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

68/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

7.2 Market risk

Market risk is defined as uncertainty that interest rates, FX rates or prices of securities or other financial instruments held by the Group will reach values different from those that were originally expected, thus resulting in unexpected gains or losses arising from the positions maintained. The asset and liability management policy is aimed at optimizing the structure of the statement of financial position and off-balance sheet items in order to maintain the assumed income to risk ratio. The Management Boards of companies from the Group are responsible for risk management at the strategic level. The Asset and Liability Management Committee (ALCO) supports the Management Board in its activities.

7.2.1 Currency risk

Currency risk management includes both risk management at the Bank level and at the consolidated level. Subsidiaries, depending on the degree of significance of a given risk in their operations, have adequate structures and processes of currency risk management. At the Group level, the Bank provides substantive support for individual subsidiaries. The share of open currency positions of individual Group companies in their balance sheet totals was as at 31 December 2019 as follows:

The share of total assets of Share in total Total position in PLN Company name the Company in the total thousand assets of the Bank assets of a given company

Idea Fleet S.A. 1% 0 0% Idea Money S.A. 3% 132 990 24% Idea Bank S.A. 100% 9 291 0%

The primary objective of currency risk management is to maintain currency positions within the limits of non-compliance with regulatory capital requirements. The Bank's foreign exchange risk management policy is limited to managing the Bank's foreign exchange positions through: • determining and observing the limit of open currency positions, • compilation of the Bank's foreign currency positions in individual currencies and total position, • monitoring and securing operations generating foreign exchange differences.

As part of its operating activity, the Bank aims to minimize currency risk by maintaining the total currency position value at a level lower than the limit adopted in internal regulations, thus limiting possible losses due to adverse exchange rate changes to an acceptable level. The currency risk management in the Bank is based on written internal procedures, including methods for identifying, measuring, monitoring, limiting and reporting currency risk. The basic tool for measuring the currency risk in the Bank is the Value at Risk (VaR) model, which indicates the potential maximum value of the loss that the Bank may incur as part of its open currency position due to changes in exchange rates, in normal market conditions and while maintaining the assumed level confidence and period of maintaining the position.

At the end of December 2019, the Bank's total currency position reached PLN 9,290,757.21 (2.72% of own funds), exceeding the strategic tolerance limit of 2% of own funds. The VaR measure as at the end of December 2019 for currency risk reached the level of PLN 96,945.13.

The maximum losses on the currency portfolio held by the Bank determined on the basis of VaR in the time horizon of 1 day and 10 days, with the assumed confidence level of 99% and 99.9% as at 31.12.2019 and 31.12.2018 are presented in the table below.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

69/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

VaR - 1 day VaR - 10 days FX exposure at 31.12.2019 (PLN thousand) confidence level confidence level confidence level confidence level 99,90% 99,00% 99,90% 99,00% USD 7 572 90,6 68,2 286,6 215,8 EUR 1 719 10,1 7,6 31,8 23,9 CHF 0 0,0 0,0 0,0 0,0 GBP -497 7,2 5,4 22,6 17,0 RUB 0 0,0 0,0 0,0 0,0 CZK 0 0,0 0,0 0,0 0,0 DKK 0 0,0 0,0 0,0 0,0 NOK -6 0,1 0,1 0,2 0,2 SEK 0 0,0 0,0 0,0 0,0 RON 0 0,0 0,0 0,0 0,0 JPY 0 0,0 0,0 0,0 0,0 VAR - 96,9 73,0 306,6 230,8

VaR - 1 day VaR - 10 days FX exposure at 31.12.2018 (PLN thousand) confidence level confidence level confidence level confidence level 99,90% 99,00% 99,90% 99,00% USD -454 7,2 5,4 22,8 17,2 EUR 2 222 13,7 10,3 43,3 32,6 CHF -120 1,5 1,1 4,8 3,6 GBP 158 2,0 1,5 6,5 4,9 RUB 0 0,0 0,0 0,0 0,0 CZK 58 0,5 0,3 1,4 1,1 DKK 22 0,1 0,1 0,4 0,3 NOK 11 0,1 0,1 0,5 0,3 SEK 19 0,2 0,2 0,8 0,6 RON 1 0,0 0,0 0,0 0,0 JPY 109 1,7 1,3 5,4 4,1 VAR - 12,4 9,3 39,2 29,5

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

70/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The tables below show the Group's currency exposure by type of assets, liabilities and off-balance sheet liabilities:

Currency (PLN thousand) As at 31.12.2019 Total PLN EUR CHF RUB USD GBP Other

ASSETS Cash, receivables from the Central Bank 375 886 247 607 0 0 0 0 0 623 493 Receivables from banks and financial institutions 333 484 24 604 883 0 759 0 0 359 730 Amounts due from clients 10 723 721 2 600 728 264 0 199 0 0 13 324 912 Finance lease receivables 98 763 0 0 0 0 0 0 98 763 Other loans and receivables measured at amortized cost 119 0 0 0 13 026 0 0 13 145 Financial and derivative instruments 2 144 801 0 0 0 71 714 0 0 2 216 515 Investments in associates 236 716 0 0 0 0 0 0 236 716 Other 450 033 0 0 0 0 0 0 450 033 TOTAL ASSETS 14 363 523 2 872 939 1 147 0 85 698 0 0 17 323 307

LIABILITIES Amounts due to other banks and financial institutions 21 632 0 0 0 0 0 0 21 632 Amounts due to clients 15 428 070 80 351 0 0 0 69 0 15 508 490 Debt securities in issue 374 883 0 0 0 0 0 0 374 883 Provisions 23 513 0 0 0 0 0 0 23 513 Other 1 238 819 0 0 0 0 0 0 1 238 819 TOTAL LIABILITIES 17 086 917 80 351 0 0 0 69 0 17 167 337

EQUITY 155 970 0 0 0 0 0 0 155 970

TOTAL LIABILITIES AND EQUITY 17 242 887 80 351 0 0 0 69 0 17 323 307

BALANCE SHEET EXPOSURE -2 879 364 2 792 588 1 147 0 85 698 -69 0 0

OFF-BALANCE SHEET ITEMS Assets 2 810 843 0 0 0 0 0 0 2 810 843 Liabilities 0 2 793 952 0 0 0 0 0 2 793 952 GAP -68 521 -1 364 1 147 0 85 698 -69 0 16 891

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

71/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Currency (PLN thousand) As at 31.12.2018 Total (restated) PLN EUR CHF RUB USD GBP Other

ASSETS Cash, receivables from the Central Bank 793 927 90 752 0 0 0 0 0 884 679 Receivables from banks and financial institutions 66 991 50 436 0 0 57 679 29 576 0 204 681 Amounts due from clients 13 064 020 3 022 630 0 0 10 992 222 0 16 097 864 Finance lease receivables 103 387 0 0 0 0 0 0 103 387 Financial and derivative instruments 2 111 976 0 0 0 41 880 0 0 2 153 856 Investments in associates 298 575 0 0 0 0 0 0 298 575 Other 646 522 0 0 0 0 0 0 646 522 TOTAL ASSETS 17 085 398 3 163 817 0 0 110 551 29 798 0 20 389 564

LIABILITIES Amounts due to the Central Bank 834 319 0 0 0 0 0 0 834 319 Amounts due to other banks and financial institutions 59 013 18 879 0 0 0 832 0 78 724 Amounts due to clients 16 999 351 64 586 0 0 9 813 9 086 0 17 082 836 Debt securities in issue 523 739 0 0 0 0 0 0 523 739 Provisions 29 171 0 0 0 0 0 0 29 171 Other 1 645 826 4 311 0 0 0 0 0 1 650 137 TOTAL LIABILITIES 20 091 419 87 776 0 0 9 813 9 918 0 20 198 926

EQUITY 190 638 0 0 0 0 0 0 190 638

TOTAL LIABILITIES AND EQUITY 20 282 057 87 776 0 0 9 813 9 918 0 20 389 564

BALANCE SHEET EXPOSURE -3 196 660 3 076 042 0 0 100 738 19 880 0 0

OFF-BALANCE SHEET ITEMS Assets 3 174 322 0 0 0 0 0 0 3 174 322 Liabilities 250 000 2 935 175 0 0 0 0 0 3 185 175 GAP -272 337 140 867 0 0 100 738 19 880 0 -10 853

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

72/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

7.2.2 Interest rate risk

Interest rate risk management covers both risk management at the Bank level and at the consolidated level. Subsidiaries, depending on the degree of significance of a given risk in their operations, have adequate structures and processes to manage this risk. At the Group level, the Bank provides substantive support for individual subsidiaries. The Bank's primary objective in managing interest rate risk in the banking book is to maintain the volatility of net interest income within the limits that do not jeopardize the implementation of the Bank's financial plan and capital adequacy by limiting possible losses due to changes in market interest rates to an acceptable level through appropriate shaping of the structure of balance sheet and off-balance sheet items. The Bank conducted activities aimed at hedging interest rate risk in asset and liability management, using hedge accounting in 2019. The Bank defines interest rate risk as a risk arising from the exposure of the Bank's current and future financial results and its capital to the adverse effect of interest rate changes. In particular, it is related to the mismatch of the Bank's assets and liabilities (and off-balance sheet items) sensitive to changes in interest rates over a given time horizon. The Bank adjusts interest rate risk management to the type and scale of its operations. At the Bank, the interest rate risk is determined only for the banking book. The Bank does not carry out any commercial activity in this regard.

Types of interest rate risk identified and managed by the Bank:

Risk of mismatch of revaluation dates The analysis of sensitivity to changes in market interest rates is based on the method of managing the revaluation gap, which is the basic method of analyzing the interest rate risk, indicating a potential threat to the Bank's interest income, in the event of adverse changes in interest rates or a significant change in the repricing structure (i.e. the time of adjusting the interest rate to market interest rates) in the balance sheet. Assets and liabilities are divided into sensitive or insensitive due to the possibility of changes in their interest rates in a given future period. Estimating a possible change in the Bank's interest result is calculated for the unfavorable interest rate change scenario and assumes a change in the result for the next 12 months.

The risk of client’s options The risk of the client's options is related to the risk of options implemented by the client into banking products, which in the case of changes in interest rates unfavorable from the client's point of view (often without any sanctions for the client) in the case of loans - pay off before maturity part or all of the receivables, and in for term deposits - withdraw funds before the deposit due date.

The yield curve risk The yield curve risk is the change in the relationship between interest rates relating to different dates and concerning the same index or market. This relation changes when the shape of the yield curve for a given market is flattened, becomes steep or reversed, in the interest rate cycle. The yield curve risk analysis method involves examining the sensitivity of the interest result to changes in the relationship between interest rates for different periods. The analysis is carried out jointly for all currencies based on total revaluation gaps. Interest rate risk management in the Bank is based on internal procedures regarding interest rate risk management and limits limiting the level of interest rate risk.

As at 31 December 2019, the Bank recorded an excess of appetite and interest rate risk tolerance as well as three internal interest rate risk limits set in relation to the Bank's own funds, as well as the sum of the interest result achieved in a given calendar year to the reporting date and planned to be achieved from reporting day to the end of the calendar year. The exceedances resulted from a significant decrease in the Bank's basic funds, which took place in 2018 and which was a consequence of the write-offs and provisions charged to the Bank's financial result.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 73/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Presented below are the Group's assets and liabilities classified according to the interest rate risk criterion (in PLN thousand) - for fixed interest rate, variable interest rate and interest-free interest items:

As at 31 December 2019 for variable and constant rate:

Above 1 month to Above 3 months Up to 1 month Above 1 year to 5 Non-interest Balance sheet items 3 months to 1 year Above 5 years Total (included) years (included) assets/ liabilities (included) (included) Assets: 11 167 538 2 116 043 895 435 1 049 476 952 530 1 142 285 17 323 307 Cash, receivables from the Central Bank 340 832 0 0 0 0 282 661 623 493 Receivables from banks and financial institutions 269 723 0 0 0 0 90 007 359 730 Amounts due from clients 9 173 003 2 109 034 124 881 965 054 952 530 410 13 324 912 Finance lease receivables 98 763 0 0 0 0 0 98 763 Other loans and receivables measured at amortized cost 0 0 0 13 145 0 0 13 145 Financial and derivative instruments 1 285 217 7 009 770 554 71 277 0 82 458 2 216 515 Other 0 0 0 0 0 686 749 686 749 Liabilities: 3 728 951 8 135 743 3 019 828 1 013 628 7 003 1 262 184 17 167 337 Amounts due to other banks and financial institutions -216 944 0 0 216 562 0 22 014 21 632 Amounts due to clients 3 880 852 7 930 162 2 911 389 779 070 7 003 14 15 508 490 Debt securities in issue 52 110 205 320 107 453 10 000 0 0 374 883 Other 12 933 261 986 7 996 0 1 240 156 1 262 332 Equity 0 0 0 0 0 155 970 155 970 Total liabilities and equity 3 728 951 8 135 743 3 019 828 1 013 628 7 003 1 418 154 17 323 307 Gap 7 438 587 -6 019 700 -2 124 393 35 848 945 527 -275 869 0 Off-balance sheet items Interest rate transactions: Assets 738 760 2 072 083 0 0 0 0 2 810 843 Liabilities 732 462 2 061 490 0 0 0 0 2 793 952 Gap 6 298 10 593 0 0 0 0 16 891

Total gap 7 444 885 -6 009 107 -2 124 393 35 848 945 527 -275 869 16 891

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

74/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

As at 31 December 2018 for variable and constant rate:

Above 1 month to Above 3 months Balance sheet items Up to 1 month Above 1 year to 5 Non-interest 3 months to 1 year Above 5 years Total (restated) (included) years (included) assets/ liabilities (included) (included) Assets: 10 747 546 4 146 082 1 035 487 1 274 487 143 461 3 042 501 20 389 564 Cash, receivables from the Central Bank 738 701 0 0 0 0 145 978 884 679 Receivables from banks and financial institutions 186 677 0 0 0 0 18 004 204 681 Amounts due from clients 9 565 052 3 807 533 477 853 1 274 487 143 461 829 478 16 097 864 Finance lease receivables 103 387 0 0 0 0 0 103 387 Financial and derivative instruments 153 729 338 549 557 634 0 0 1 103 944 2 153 856 Other 0 0 0 0 0 945 097 945 097 Liabilities: 2 876 299 12 665 972 2 013 997 744 143 140 452 1 758 063 20 198 926 Amounts due to the Central Bank 0 834 319 0 0 0 0 834 319 Amounts due to other banks and financial institutions 0 0 0 0 0 78 724 78 724 Amounts due to clients 2 764 013 11 525 783 1 918 516 734 042 140 452 31 17 082 836 Debt securities in issue 112 286 305 870 95 481 10 101 0 0 523 739 Other 0 0 0 0 0 1 679 308 1 679 308 Equity 0 0 0 0 0 190 638 190 638 Total liabilities and equity 2 876 299 12 665 972 2 013 997 744 143 140 452 1 948 701 20 389 564 Gap 7 871 247 -8 519 890 -978 510 530 344 3 009 1 093 800 0 Off-balance sheet items Interest rate transactions: Assets 559 833 2 364 490 250 000 0 0 0 3 174 322 Liabilities 559 000 2 376 175 250 000 0 0 0 3 185 175 Gap 833 -11 685 0 0 0 0 -10 853

Total gap 7 872 079 -8 531 576 -978 510 530 344 3 009 1 093 800 -10 853

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

75/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The following scenario shows a sensitivity analysis of changes in interest rates and their impact on the Bank's net interest income (due to the specific nature of subsidiaries' activities, the risk borne by them is insignificant, hence the change in net interest income and the change equity is estimated at the standalone level):

31.12.2019 31.12.2018 Margin changes (PLN thousand) PLN EUR PLN EUR

Margin changes (PLN thousand) Decrease by 1 pp -54 292 1 689 -28 897 -1 272 Increase by 1 pp 22 447 -2 454 -1 013 657 Equity changes (PLN thousand) Decrease by 1 pp -37 652 599 -52 493 2 699 Increase by 1 pp 35 148 -5 790 45 076 -2 678

7.2.3 Liquidity risk

Liquidity risk management covers both risk management at the Bank level and at the consolidated level. Subsidiaries, depending on the degree of significance of a given risk in their operations, have adequate liquidity risk management structures and processes. At the Group level, the Bank provides substantive support for individual subsidiaries. Liquidity risk means the risk of loss due to forced exchange of cash assets or cash equivalents in the event of a restriction/ loss of ability to finance assets and timely fulfillment of liabilities. The purpose of liquidity risk management is to adjust its size and type of business so as to ensure that all monetary obligations are fulfilled in accordance with their maturity and asset financing without having to incur excessive costs. The Bank's primary objective in terms of liquidity management is to prevent the emergence of a crisis and to identify solutions to its survival. The goal thus adopted is to bring liquidity issues to the Bank's sources of funding stability and the ability to liquidate assets at any time without material loss of value. The Bank's liquidity policy is based on maintaining a sufficient level of liquidity by increasing the portfolio of liquid securities and stable sources of finance, in particular the stable deposit base from individuals. In the liquidity risk management process, the Bank is primarily focused on: 1. maintenance of liquid assets designated in accordance with the methodology adopted by the Bank at the level not lower than liquidity risk appetite, 2. maintaining supervisory liquidity standards at a level that exceeds the external limits in this area, 3. acquiring stable and diversified sources of financing, 4. taking current measures to maintain liquidity risk within the Bank's limits.

The Bank measures and manages liquidity risk based on supervisory regulations, risk appetite for liquidity risk, and internal procedures including identification, measurement, monitoring, limiting and reporting liquidity risk. To assess the level of liquidity risk, the Bank uses, among others, the following measures of liquidity risk and analysis: 1. regulatory liquidity measures, 2. liquidity gap analysis, i.e. mismatch between maturities of assets and liabilities, which takes into account all assets and liabilities and off-balance sheet items by maturity dates in contractual and actual terms, 3. liquidity ratios within specified time band according to maturity dates; in contractual and actual terms.

The liquidity management is based on the statement of the Bank’s assets and liabilities by actual maturity (liquidity gap analysis). It allows analysis and control of the liquidity position of the whole Bank in short, medium and long term, which is intended to warn in advance in case of a mismatch between assets and liabilities dangerous for the Bank.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 76/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

In order to limit the liquidity risk, the Bank applies internal liquidity limits imposed on selected liquidity measures (both supervisory and internal) and an additional alert system, serving as indicators of early warning against potential liquidity problems. In addition, the Bank conducts cyclical stress tests of liquidity. Monthly stress tests are carried out as part of the adopted three base scenarios: an internal, external (systemic) and mixed scenario (a combination of an internal and systemic variant) to check whether the level of liquid assets that the Bank has, will ensure the fulfilment of all obligations in the time horizon specified as the horizon of survival.

In addition, the Bank conducts simplified stress tests (sensitivity tests and reverse tests) on a daily basis.

As at 31.12.2019, selected internal liquidity ratios were below the applicable limits limiting the liquidity risk. This was connected with previously described transitional liquidity problems. Above the applicable limits were the LCR and NSFR indicators, which at the end of 2019 amounted to 155.98% and 142.46%, respectively.

The table below presents the calculation of supervisory liquidity measures for Idea Bank (at the standalone level) as at 31 December 2019.

Assets PLN thousand

A1 Basic liquidity reserve 2 157 353 A2 Supplementary liquidity reserve 4 126 A3 Other transactions in the wholesale financial market 3 152 282 A4 Assets with limited liquidity 14 270 027 A5 Non-liquid assets 282 943

Liabilities PLN thousand Own funds reduced by the sum of the capital requirements for market risk and the requirement for B1 330 102 settlement risk and counterparty risk B2 Stable external funds 15 272 652

Liquidity measures Limit (min.) Amount

M3 Ratio of coverage of illiquid assets by own funds (B1 / A5) 1 1.17 Ratio of coverage of illiquid assets and assets with limited liquidity by own funds and M4 1 1.07 stable external funds ((B1 + B2) / (A5 + A4)) LCR Liquidity Coverage Ratio 100% 155.98% NSFR Net Stable Funding Ratio 100%1 142.46% 1 ratio limit does not apply yet; it is given the expected value of the limit at the moment of the planned start of its validity

The table below presents the calculation of supervisory liquidity measures for Idea Bank (at the standalone level) as at 31 December 2018.

Assets PLN thousand

A1 Basic liquidity reserve 2 080 343 A2 Supplementary liquidity reserve 57 181 A3 Other transactions in the wholesale financial market 3 452 147 A4 Assets with limited liquidity 17 489 600 A5 Non-liquid assets 867 040

Liabilities PLN thousand Own funds reduced by the sum of the capital requirements for market risk and the requirement for B1 436 403 settlement risk and counterparty risk B2 Stable external funds 16 688 897

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 77/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Liquidity measures Limit (min.) Amount

M3 Ratio of coverage of illiquid assets by own funds (B1 / A5) 1 0.5 Ratio of coverage of illiquid assets and assets with limited liquidity by own funds and M4 1 0.93 stable external funds ((B1 + B2) / (A5 + A4)) LCR Liquidity Coverage Ratio 100% 121.11% NSFR Net Stable Funding Ratio 100%1 125.79% 1 ratio limit does not apply yet; it is given the expected value of the limit at the moment of the planned start of its validity

The following tables present the liquidity gap analysis for the Group as at 31 December 2019, 31 December 2018 by realignment maturity (in PLN thousand):

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 78/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

As at 31 December 2019

Above 1 Above 3 Above 1 Up to 1 Total less With month to 3 months to 1 year to 5 Above 5 Total over Balance sheet items month than 12 indeterminate Total months year years years 12 months (included) months maturity (included) (included) (included)

Assets: Cash and Central Bank (including mandatory reserve) 563 705 4 753 2 225 570 683 638 1 639 52 171 623 493 Receivables from banks and financial institutions 272 553 0 53 343 325 896 29 464 0 29 464 4 370 359 730 Derivative hedging instruments 0 457 11 675 12 132 12 022 0 12 022 0 24 154 Derivative financial instruments at fair value through profit or loss 0 4 308 19 782 24 090 25 996 0 25 996 0 50 086 Loans and advances to clients 817 682 280 465 1 187 879 2 286 026 8 508 405 2 530 481 11 038 886 0 13 324 912 Finance lease receivables 11 495 6 220 32 466 50 181 48 582 0 48 582 0 98 763 Other loans and receivables measured at amortized cost 0 0 0 0 13 026 0 13 026 119 13 145 Debt instruments valued at fair value through other comprehensive income 1 664 871 0 0 1 664 871 159 384 76 110 235 494 0 1 900 365 Equity instruments valued at fair value through other comprehensive 0 0 0 0 0 0 0 93 912 93 912 income Other debt instruments valued at amortized cost 0 4 004 41 579 45 583 102 415 0 102 415 0 147 998 Investments in associates 0 0 0 0 0 0 0 236 716 236 716 Intangible assets 0 0 0 0 0 0 0 147 103 147 103 Tangible fixed assets 0 0 0 0 0 0 0 104 877 104 877 Investment property 0 0 0 0 0 0 0 30 912 30 912 Assets held for sale 0 0 0 0 0 0 0 1 306 1 306 Income tax assets 0 0 0 0 0 0 0 6 442 6 442 - Current tax assets 0 0 0 0 0 0 0 2 671 2 671 - Deferred tax assets 0 0 0 0 0 0 0 3 771 3 771 Other assets 36 076 26 606 69 173 131 855 156 180 2 094 158 274 -130 736 159 393 Total assets 3 366 382 326 813 1 418 122 5 111 317 9 056 112 2 608 686 11 664 798 547 192 17 323 307 Liabilities: Amounts due to other banks and financial institutions 22 378 24 0 22 403 -771 0 -771 0 21 632 Derivative hedging instruments 0 0 1 528 1 528 1 352 0 1 352 0 2 880 Financial liabilities measured at fair value through profit or loss 23 297 67 764 342 283 433 344 602 168 0 602 168 0 1 035 512 Amounts due to clients 1 782 053 1 157 889 2 417 788 5 357 729 4 346 528 5 804 232 10 150 761 0 15 508 490 Debt securities in issue 0 0 305 905 305 905 24 068 41 686 65 754 3 224 374 883 Other liabilities measured at amortized cost 163 471 8 981 9 615 28 435 0 28 435 0 38 050 Income tax liability 0 0 0 0 0 0 0 0 0 Other liabilities 90 131 10 362 43 946 144 439 16 605 -1 890 14 715 3 223 162 377 Deferred income tax 0 0 0 0 0 0 0 0 0 Provisions 0 0 0 0 0 0 0 23 513 23 513 Total liabilities 1 918 022 1 236 510 3 120 430 6 274 963 5 018 386 5 844 028 10 862 414 29 960 17 167 337 Equity 0 0 0 0 0 0 0 155 970 155 970 Total liabilities and shareholders' equity 1 918 022 1 236 510 3 120 430 6 274 963 5 018 386 5 844 028 10 862 414 185 930 17 323 307 Liquidity gap 1 448 360 -909 698 -1 702 309 -1 163 646 4 037 726 -3 235 342 802 384 361 262 0

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

79/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

As at 31 December 2018

Above 1 Above 3 Above 1 Total less With Balance sheet items Up to 1 month month to 3 months to 1 year to 5 Above 5 Total over than 12 indeterminate Total (restated) (included) months year years years 12 months months maturity (included) (included) (included)

Assets: Cash and Central Bank (including mandatory reserve) 448 336 21 277 5 671 475 284 2 705 446 3 151 406 244 884 679 Receivables from banks and financial institutions 165 641 5 202 0 170 843 33 779 0 33 779 59 204 681 Derivative hedging instruments 1 077 2 497 2 629 6 203 4 086 0 4 086 0 10 289 Derivative financial instruments at fair value through profit or loss 0 77 8 774 8 850 10 421 2 322 12 743 0 21 593 Loans and advances to clients 846 562 282 764 1 468 819 2 598 145 10 158 375 3 341 344 13 499 719 0 16 097 864 Finance lease receivables 5 930 4 127 19 365 29 422 73 965 0 73 965 0 103 387 Debt instruments valued at fair value through other comprehensive income 1 475 001 0 0 1 475 001 116 730 249 472 366 202 0 1 841 203 Equity instruments valued at fair value through other comprehensive 0 0 0 0 0 0 0 82 824 82 824 income Other debt instruments valued at amortized cost 0 0 28 810 28 810 169 137 0 169 137 0 197 947 Investments in associates 0 0 0 0 0 0 0 298 575 298 575 Intangible assets 0 0 0 0 0 0 0 167 646 167 646 Tangible fixed assets 0 0 0 0 0 0 0 137 089 137 089 Investment property 0 0 0 0 0 0 0 41 363 41 363 Assets held for sale 0 0 0 0 0 0 0 1 357 1 357 Income tax assets 0 0 0 0 0 0 0 9 209 9 209 - Current tax assets 0 0 0 0 0 0 0 6 497 6 497 - Deferred tax assets 0 0 0 0 0 0 0 2 712 2 712 Other assets 86 672 19 396 29 352 135 420 77 162 1 049 78 211 76 227 289 858 Total assets 3 029 219 335 340 1 563 420 4 927 978 10 646 360 3 594 633 14 240 993 1 220 593 20 389 564 Liabilities: Amounts due to the Central Bank 0 834 319 0 834 319 0 0 0 0 834 319 Amounts due to other banks and financial institutions 52 248 21 458 5 018 78 724 0 0 0 0 78 724 Derivative hedging instruments 0 0 3 281 3 281 18 966 0 18 966 0 22 247 Financial liabilities measured at fair value through profit or loss 6 927 23 307 214 132 244 366 907 493 126 821 1 034 314 0 1 278 680 Amounts due to clients 2 059 342 1 334 645 2 760 975 6 154 963 4 877 363 6 050 510 10 927 873 0 17 082 836 Debt securities in issue 0 0 148 416 148 416 327 529 42 353 369 882 5 441 523 739 Other liabilities measured at amortized cost 159 315 1 276 1 750 1 335 0 1 335 0 3 085 Income tax liability 10 0 0 10 0 0 0 0 10 Other liabilities 172 002 29 708 57 518 259 228 36 722 507 37 229 2 485 298 942 Deferred income tax 0 0 0 0 0 0 0 47 173 47 173 Provisions 0 0 0 0 0 0 0 29 171 29 171 Total liabilities 2 290 688 2 243 753 3 190 616 7 725 057 6 169 408 6 220 191 12 389 599 84 270 20 198 926 Equity 0 0 0 0 0 0 0 190 638 190 638 Total liabilities and shareholders' equity 2 290 688 2 243 753 3 190 616 7 725 057 6 169 408 6 220 191 12 389 599 274 908 20 389 564 Liquidity gap 738 531 -1 908 413 -1 627 196 -2 797 079 4 476 951 -2 625 558 1 851 394 945 685 0

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

80/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

7.2.4 Counterparty risk due to credit valuation adjustments of derivative instruments (CVA)

Counterparty risk is equated with the credit risk of financial counterparties with which the Bank enters into transactions to buy financial instruments and the credit valuation adjustment risk (CVA). Counterparty risk, according to the adopted definition, does not exist in the Group companies, hence it is managed only at the Bank's standalone level. Credit Value Adjustment (CVA) is the difference between the value of a risk-free portfolio and the real value of a portfolio, including the possibility of default of a counterparty. Under the counterparty credit risk and CVA risk management framework, the Bank sets exposure limits for individual counterparties (including limits on symmetric and asymmetric derivative transactions) and applies advanced methods for measuring the fair value of derivative transactions for interest rate and option transactions.

7.2.5 Large exposures concentration risk and exposures to internal people concentration risk

The large exposures concentration risk is the risk resulting from excessive concentrations due to exposures to individual clients or groups of connected clients, characterized by the potential to generate losses large enough to jeopardize the financial condition of the Bank or the ability to conduct core business or lead to a significant change in the Bank's risk profile. A large exposure is the Bank's exposure to the client or a group of connected clients, if its value is equal to or higher than 10% of the Bank's Recognized Capital and the limits limiting the large exposures concentration risk are determined pursuant to Art. 395 para. 1 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No. 648/2012. Pursuant to Article 395 of the CRR, the Bank should not accept exposure to a client or group of connected clients whose value, considering the effect of limiting credit risk, exceeds 25% of the value of its recognized capital. If such a client is an institution or if the group of connected clients includes at least one institution, this value should not exceed 25% of the institution's authorized capital or EUR 150 million, whichever is higher, provided that the total exposure value to all related non-institutional customers, taking into account the effect of limiting credit risk, does not exceed 25% of the value of the institution's authorized capital. The Bank, in accordance with the Regulation of the Minister of Finance of 1 July 2016 on the types of banks exposures excluded from the limits of large exposures, does not include exposures for the parent, subsidiaries of this parent or own subsidiaries, including shares equity and other types of shares, to the extent that these entities are covered by the supervision of the Polish Financial Supervision Authority on a consolidated basis, as referred to in Art. 493 paragraph 3 lit. c CRR.

The Bank identifies one large exposure, i.e. exposure to a client or group of connected clients, exceeding or equal to 10% of the Recognized Capital value. The Bank does not meet the requirements specified in Art. 395 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No 648/2012 in relation to one large exposure, which is a group of entities associated by capital or organization with the Bank's shareholder Mr. Leszek Czarnecki. Due to the fact that there are institutions in the above-mentioned group, the Bank has adopted the Bank's exposure limit to this group at the level of EUR 150 million, while the value of exposure to all related clients who are not institutions in this group, after considering the effect of limiting credit risk, should not exceed 25% of the Bank's recognized capital.

The utilization of the Limit for a group of entities related by capital or organization with the Bank's shareholder Mr. Leszek Czarnecki as at 31 December 2019 was 22.42%, and the limit based on 25% of the recognized capital for related entities in this group which are not institutions was exceeded by 21.34% and amounted to 121.34%. On 5 April 2019, the Management Board of the Bank addressed to the Supervisory Commission a notification of non-compliance with the requirements set out in Art. 395 Regulation (EU) No 575/2013 of the European Parliament and the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, amending Regulation (EU) No. 648/2012. The reason for not

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

81/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) complying with the indicated article of the Regulation was the reduction of the Bank's basic funds as a consequence of write-offs and provisions in 2018.

The exposures to internal people concentration risk - the risk of internal debt concentration resulting from granting loans, bank guarantees or sureties to members of the Board and persons holding managerial positions at the Bank.

As at 31 December 2019, the bank did not meet the limit resulting from Art. 79a paragraph 4 point 1) of the Banking Law, i.e. the sum of loans, cash loans, bank guarantees and sureties towards members of the Management Board or the Bank's Supervisory Board or a person holding a managerial position at the Bank, as well as entities related by capital or organization with the abovementioned people ("Limit from Article 79a (4) ", exceeded 10% of the core capital. The limit was exceeded by 119.79%. Exceeding the Limit from Art. 79 paragraph 4, results from a significant decrease in the Bank's core funds, which took place in 2018 and which was a consequence of the write-offs and provisions recognized in the Bank's financial result.

7.3 Operational risk

At Idea Bank S.A. operational risk is the second (after credit risk) basic risk in operations. The Operational Risk Department manages this risk in the Bank.

The Bank manages operational risk in accordance with the Policy of Operational Risk Management approved by the Management Board and approved by the Supervisory Board at Idea Bank S.A., which includes: • taking into account prudence regulations resulting from the banking law and appropriate resolutions and recommendations of the national institution of the supervisory bodies; • defining the level of risk appetite and risk tolerance for individual identified risks; • regulating the risk management rules identified in the Bank and subsidiaries of the Group; • defining the principles and definitions in the area of risk management and assumes continuous improvement of operational risk management processes.

Internal regulations define the principles of operational risk management, defined as: the possibility of occurrence of a loss due to non-compliance or failure of internal processes, people and systems or external events, also includes legal risk. The definition does not include credit risk, market risk, strategic risk and reputation but refers to the processes used to control those risks.

The objective of operational risk management is to increase the security of operations conducted by the Bank by limiting the risk of operational losses and striving to minimize them. Operational risk management is a process that includes actions in the area of: identification (registration of events), assessments (verification of event data, data replenishment, approval, reviewing new products and contracts), monitoring (analysis of actual losses, potentials and incidents, KRI system, self-assessment operational risk), hedging and transfer of operational risk together with a defined scope of responsibility within the operational risk management system. Operational risk management covers all processes and systems related to the performance of banking activities that provide clients with financial services provided as part of the Bank's business. All organizational units of the Bank and the Operational Risk Committee actively participate in the operational risk management system as an advisory and consultative body for the Bank's Management Board. The Bank has an operating risk reporting and measurement system supported by an IT system.

Depending on the level and profile of operational risk, appropriate corrective and preventive actions are applied, adequate to the diagnosed risk and ensuring the selection and implementation of measures is effective to modify the risk. The effectiveness of the collateral used in the Bank and the methods of limiting operational risk is monitored by: • continuous tracking, collecting and analysing operational events and observation of the operational risk profile; • analysis of the reasons for occurrence;

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

82/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

• corrective actions taken after operational events; • control, hedging and risk mitigation mechanisms; • control procedures adapted to the specifics of processes at the Bank; • binding recommendations in the area of operational risk issued by the Operational Risk Department to appropriate organizational units responsible for their implementation; • controlling quantitative and qualitative changes in operational risk.

The Bank also supervises operational risk in Idea Bank Group - Idea Bank Group companies provide information on events / incidents to the Bank's Operational Risk Department and apply, as far as possible, the principles of operational risk management consistent with the Bank. Aspects of operational risk management are included in the management information system in the Bank and include reports for internal purposes - management and external - supervisory. The quality and effectiveness of operational risk management is verified by the Internal Audit Department.

In 2019, the Bank focused mainly on: • ongoing identification, assessment, monitoring and hedging of the Bank's operational risk; • activities related to the restructuring process carried out at the Bank, including: ongoing monitoring of selected processes implemented at the Bank, review and update of the list of significant processes in force at the Bank and control matrices of individual organizational units (as part of the control function), issuing opinions on changes in processes and internal regulations; • undertaking activities aimed at raising awareness in the Bank about operational risk (including through employee training, transfer of information on operational events and operational risk at the Bank to a higher level); • continued risk measurement using the Key Risk Indicators "KRI"; • introducing changes and sealing in the outsourcing process by adjusting the regulations to the changes introduced in the regulations (including national and European supervisory authority guidelines); • updating regulations and streamlining processes related to Business Continuity Management (also in terms of changes related to the Bank's restructuring process); • further improvement of the operational risk management system in line with the implementation of recommendations issued by the regulator and internal audit; • introduction of awareness raising activities in Subsidiaries through additional employee training; • undertaking activities in the area of applying uniform principles consistent with the operational risk management principles applied at the Bank through consistent with the Bank's principles of operational risk management included in the internal regulations of Subsidiaries.

In 2019, organizational units carried out control activities on the basis of the Internal Control System Regulations in force in the Bank, which determines, among others, a clear division into three lines of defence (in accordance with the guidelines of Recommendation H). Pursuant to the position adopted by the Bank, every organizational unit of the Bank should be included in the control function, with the reservation that the third line of defence of the control solution is documented in a different way.

As part of strengthening the supervision over the control function, Monitoring Control Office separated in the organizational structure of the Bank in cooperation with relevant organizational units has made (and if necessary) updates of the control matrices on the basis of which tests are performed within the first line of defence. In addition, the competence of the above-mentioned cell is monitoring of testing performed by organizational units indicated in the second line of defence. In order to more effectively monitor the reported control results, the Bank developed the system tool implemented in 2018, which reports the results of tests performed by both the first and second line of defence.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

83/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Pursuant to the guidelines of Recommendation H, as well as internal regulations of the Bank, irregularities identified in the framework of testing (both within the I and II defence lines) are assessed for significant and critical irregularities for the Bank, and subsequently, along with the recovery plan, they are reported to the Management Board Bank/Supervisory Board. The competences of the Monitoring Control Office also include monitoring the implementation of recovery plans by organizational units. Additionally, after each reporting period, the status of control performance is presented to the managers of the given organizational unit and supervising Members of the Bank's Management Board.

7.3.1 Investments in subsidiaries – risk management

Supervision over the subsidiaries is the responsibility of the Management Board Members according to the allocation of responsibilities approved by the Bank’s Supervisory Board. Supervision is performed by the Office of Supervision over Subsidiaries reporting to the relevant Management Board Members at Idea Bank, who are in charge of supervision over the Subsidiaries. The Bank established detailed internal regulations for both investment risk management and supervision binding for all the Group companies, in particular: • principles governing supervision over companies in which the Bank is financially involved, • principles of risk management in subsidiaries and in the Idea Bank Group including credit risk, interest rate risk, currency risk, liquidity risk and operating risk, • principles for internal audit in subsidiaries, • reporting obligations imposed on subsidiaries, • principles for creating and monitoring the Idea Bank Group’s budget based on the data included in the subsidiaries’ budgets and developing rules for internal settlements Corporate governance in a company is aimed at protecting the interests of the Bank by satisfying the Bank’s objectives related to the company, in particular the execution of the agreed financial plan. The purpose of control over investment risk in subsidiaries is to secure the Bank’s interests arising from the company’s business activities by ensuring that the established business targets and/or financial targets are achieved. The Management Board of the Bank is responsible for managing investment risk at the strategic level; the following committees were appointed for the purpose of operational management: the Loan Committee, Operating Risk Committee and Asset and Liability Management Committee. It is the committees’ responsibility to manage risks under their control on the operating level, monitor the level of risk exposure and outline current policies in line with the strategy related to internal limits and mandatory regulations approved by the Bank's Management Board. The Bank monitors, records and manages particular consolidated risk areas, i.e. from the Bank’s and the Group’s perspective.

7.3.2 Other risks

7.3.2.1 Risk associated with derivative financial instruments

The main risks associated with derivative instruments are: market risk and credit risk (described in Note 7.1 Credit risk). On initial recognition, derivative financial instruments generally do not have any or have an insignificant market value (except options). This is due to the fact that derivatives require no initial net investment or require only a small initial net investment compared with other types of contracts which respond similarly to changing market conditions.

Derivatives obtain a positive or negative value with the changes in a specified interest rate, security price, commodity price, foreign currency exchange rate, index of prices, credit standing or credit index, or another market parameter.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

84/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

7.3.2.2 Models risk

Model risk means the risk of incurring losses as a result of making incorrect business decisions based on the models operating at the Bank. Models risk is not identified by the Bank as a material risk, however due to the implementation of the Recommendation W regarding the models risk management in banks implemented by the Polish Financial Supervision Authority in July 2015, the Bank: • implemented regulations regarding models risk management, which define the principles and organization of the models risk management process in a manner allowing for proper identification of models risk, its reliable assessment, proper control mechanisms and tools for active control of exposure to models risk and effective reporting process and effective process reporting, • carries out regular reviews of the models existing at the Bank and updates the register of models, considering their significance, • carries out an assessment of models risk at the individual level (in the scope of a single model) and aggregated risk (risk assessment of all models operating at the Bank).

7.3.2.3 Compliance risk

In accordance with the definition adopted in the Group, compliance risk is understood as the risk of the consequences of non-compliance with legal provisions, internal regulations and market standards in the processes functioning in the Group. Compliance risk indicates the possibility of financial losses, loss of company reputation or credibility, or other non-financial legal sanctions. Ensuring compliance should be one of the goals of the internal control system in the Group, the implementation of which will ensure compliance of the Group's operations with the generally applicable provisions of law, recommendations or guidelines of supervisory authorities and accepted market standards. The purpose of compliance is to prevent the Group's companies from engaging in activities that are not in line with the law; preventing the occurrence of financial losses, non-financial legal sanctions, loss of their reputation or credibility in the Group's entities; counteracting the occurrence of damages on the clients of the Group's companies, which may be the consequence of improper conduct or abandonment by the companies within the Group and their employees, in particular in the processes of offering and selling products and services offered by the company, as well as consolidating among shareholders, stakeholders, clients, business partners and the public, the Group's entities image as credible, reliable and honest and operating in accordance with the law and market standards. All employees in the Group, irrespective of their position, function, form of employment or cooperation, members of the statutory bodies of the Group's companies and persons through whom the company performs activities within the scope of its statutory activity while performing the tasks and duties entrusted to them, in under joint responsibility, strive to ensure compliance in the operations of a given company within the Group.

8. Segment reporting

The Group’s reporting by business segments was prepared in accordance with IFRS 8.11 and IFRS 8.12 based on the financial data for combined business lines and units due to the similarity of economic characteristics, products and services, process services, type or category of client, distribution model and the nature of the regulatory environment. The Management monitors the operating results of the segments separately in order to make decisions regarding the allocation of resources, the assessment of the effects of this allocation and results of operations. The basis for the assessment of operating results is profit or loss on operating activities. The operating activities of the Capital Group have been divided into four segments: Banking: covering services in the field of granting loans and advances, guarantees and sureties, as well as accepting deposits provided by Idea Bank S.A.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

85/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Financial brokerage: covering its activities in the field of financial planning and consultancy as well as distribution of investment and credit products provided by Tax Care S.A. Leasing: includes services provided by Idea Fleet S.A. within the scope of temporary transfer of the subject of leasing by one entity to another in exchange for periodic payments. The remaining: includes revenues and costs of the Group, which due to their nature can not be assigned to any of the above four segments of the Group's operations, including factoring activities (Idea Money S.A., Development System Sp. z o.o., Idea SPV Sp. z o.o.). Revenues and costs of segment revenue and expenses derived from sales to external customers or from transactions with other segments of the Group. They can be, directly or on a reasonable basis, allocated to the segment. Segment results are presented after attributable to segment and intersegment consolidation. In distinguishing transactions between segments, we applied accounting principles for preparing the financial statements of the Group companies, the amounts of eliminations of internal derived from consolidated companies and internal prices in transactions between segments do not differ significantly from market prices. The activities of the Group companies show no regional differentiation in terms of risk and return on investment. Consolidated income statement for the 12 months ended 31.12.2019 by segments:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

86/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Financial 01.01.2019-31.12.2019 Banking Lease Other Adjustments Total intermediation

Interest income and other of similar nature 1 003 389 0 7 893 1 670 9 903 1 022 855 external 1 034 630 0 7 893 -19 668 0 1 022 855 internal -31 241 0 0 21 338 9 903 0 Interest expenses -474 634 0 -7 060 -17 999 26 133 -473 560 external -474 629 0 2 205 -1 136 0 -473 560 internal -5 0 -9 265 -16 863 26 133 0 Net interest income 528 755 0 833 -16 329 36 036 549 295 external 560 001 0 10 098 -20 804 0 549 295 internal -31 246 0 -9 265 4 475 36 036 0 Fee and commission income 99 186 0 2 119 0 72 632 173 937 external 99 186 -982 2 119 73 614 0 173 937 internal 0 982 0 -73 614 72 632 0 Fee and commission expenses -61 895 0 -138 -179 -3 868 -66 080 external -58 620 0 -138 -7 322 0 -66 080 internal -3 275 0 0 7 143 -3 868 0 Net fee and commission income 37 291 0 1 981 -179 68 764 107 857 external 40 566 -982 1 981 66 292 0 107 857 internal -3 275 982 0 -66 471 68 764 0 Dividend income 78 675 0 0 0 -71 499 7 176 external 7 176 0 0 0 0 7 176 internal 71 499 0 0 0 -71 499 0 Result on financial instruments measured at fair value -67 054 0 0 0 0 -67 054 external -67 054 0 0 0 0 -67 054 internal 0 0 0 0 0 0 Result on debt instruments measured at fair value through -4 204 0 0 0 0 -4 204 other comprehensive income external -4 204 0 0 0 0 -4 204 internal 0 0 0 0 0 0 Result on the sale of an associate/subsidiary 0 0 0 0 4 522 4 522 external 0 0 0 4 522 0 4 522 internal 0 0 0 -4 522 4 522 0 FX gains (losses) 12 146 0 0 0 4 607 16 753 external 12 146 0 0 4 607 0 16 753 internal 0 0 0 -4 607 4 607 0 Other operating income 29 122 0 -2 163 7 770 30 357 65 086 external 29 122 0 -2 163 38 127 0 65 086 internal 0 0 0 -30 357 30 357 0 Other operating expenses -113 391 0 -2 058 -3 619 -4 228 -123 296 external -113 391 0 -2 058 -7 847 0 -123 296 internal 0 0 0 4 228 -4 228 0 Net other operating income and expenses -64 706 0 -4 221 4 151 -36 241 -101 017 external -136 205 0 -4 221 39 409 0 -101 017 internal 71 499 0 0 -35 258 -36 241 0 The result on investments in portfolios of receivables and -239 589 0 -271 -6 609 -67 175 -313 644 impairment losses of loans and advances external -298 885 0 -271 -14 488 0 -313 644 internal 59 296 0 0 7 879 -67 175 0 General administrative costs -291 355 0 -4 420 -10 148 -39 471 -345 394 external -291 355 0 -4 420 -49 619 0 -345 394 internal 0 0 0 39 471 -39 471 0 Result from operating activities -29 604 0 -6 098 -29 114 -38 087 -102 903 external -125 878 -982 3 167 20 790 0 -102 903 internal 96 274 982 -9 265 -49 904 -38 087 0 Share in profits (losses) of associates 0 0 0 0 12 238 12 238 external 0 0 13 991 -1 753 0 12 238 internal 0 0 -13 991 1 753 12 238 0 Profit (loss) before income tax -29 604 0 -6 098 -29 114 -25 849 -90 665 external -125 878 -982 17 158 19 037 0 -90 665 internal 96 274 982 -23 256 -48 151 -25 849 0 Income tax 4 375 0 1 288 -58 49 828 55 433 external 4 375 -10 698 1 288 60 468 0 55 433 internal 0 10 698 0 -60 526 49 828 0 Net profit (loss) of continued operations -25 229 0 -4 810 -29 172 23 979 -35 232 external -121 503 -11 680 18 446 79 505 0 -35 232 internal 96 274 11 680 -23 256 -108 677 23 979 0 Net profit (loss) of discontinued operations 0 -2 043 0 0 0 -2 043 external 0 -6 962 0 0 0 -6 962 internal 0 4 919 0 0 0 4 919 Net profit (loss) -25 229 -2 043 -4 810 -29 172 23 979 -37 275 external -121 503 -18 642 18 446 79 505 0 -42 194 internal 96 274 16 599 -23 256 -108 677 23 979 4 919

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

87/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Consolidated income statement for the 12 months ended 31.12.2018 by segments:

01.01.2018-31.12.2018 Financial Banking Lease Other Adjustments Total (restated) intermediation Interest income and other of similar nature 972 337 0 9 750 17 458 -13 387 986 158 external 989 650 0 9 750 -13 242 0 986 158 internal -17 313 0 0 30 700 -13 387 0 Interest expenses -471 002 0 -6 708 -687 18 264 -460 133 external -470 849 0 2 155 8 561 0 -460 133 internal -153 0 -8 863 -9 248 18 264 0 Net interest income 501 335 0 3 042 16 771 4 877 526 025 external 518 801 0 11 905 -4 681 0 526 025 internal -17 466 0 -8 863 21 452 4 877 0 Fee and commission income 153 304 0 4 432 373 88 185 246 294 external 132 672 0 5 002 108 619 0 246 294 internal 20 632 0 -570 -108 246 88 185 0 Fee and commission expenses -487 235 0 -163 -841 -5 822 -494 061 external -483 808 0 -163 -10 090 0 -494 061 internal -3 427 0 0 9 249 -5 822 0 Net fee and commission income -333 931 0 4 269 -468 82 363 -247 767 external -351 136 0 4 839 98 530 0 -247 767 internal 17 205 0 -570 -98 998 82 363 0 Dividend income 86 705 0 0 0 -79 345 7 360 external 6 705 0 0 655 0 7 360 internal 80 000 0 0 -655 -79 345 0 Result on financial instruments measured at fair value -7 040 0 0 -42 929 42 929 -7 040 external -7 040 0 0 0 0 -7 040 internal 0 0 0 -42 929 42 929 0 Result on debt instruments measured at fair value through 19 280 0 0 0 0 19 280 other comprehensive income external 19 280 0 0 0 0 19 280 internal 0 0 0 0 0 0 Result on the sale of an associate/subsidiary 73 785 0 0 0 -59 102 14 683 external 14 683 0 0 0 0 14 683 internal 59 102 0 0 0 -59 102 0 FX gains (losses) 12 819 0 0 -924 920 12 815 external 12 819 0 0 -4 0 12 815 internal 0 0 0 -920 920 0 Other operating income 58 845 0 478 4 490 26 502 90 315 external 58 796 0 478 31 041 0 90 315 internal 49 0 0 -26 551 26 502 0 Other operating expenses -557 697 0 -628 -9 995 -112 431 -680 751 external -557 697 0 -628 -122 426 0 -680 751 internal 0 0 0 112 431 -112 431 0 Net other operating income and expenses -313 303 0 -150 -49 358 -180 527 -543 338 external -452 454 0 -150 -90 734 0 -543 338 internal 139 151 0 0 41 376 -180 527 0 The result on investments in portfolios of receivables and -855 598 0 -1 036 -18 394 98 319 -776 709 impairment losses of loans and advances external -647 017 0 -1 036 -128 656 0 -776 709 internal -208 581 0 0 110 262 98 319 0 General administrative costs -379 151 0 -5 607 -11 538 -39 715 -436 011 external -379 151 0 -5 607 -51 253 0 -436 011 internal 0 0 0 39 715 -39 715 0 Result from operating activities -1 380 648 0 518 -62 987 -34 683 -1 477 800 external -1 310 957 0 9 951 -176 794 0 -1 477 800 internal -69 691 0 -9 433 113 807 -34 683 0 Share in profits (losses) of associates 0 0 0 0 26 225 26 225 external 0 0 73 283 -47 058 0 26 225 internal 0 0 -73 283 47 058 26 225 0 Profit (loss) before income tax -1 380 648 0 518 -62 987 -8 458 -1 451 575 external -1 310 957 0 83 234 -223 852 0 -1 451 575 internal -69 691 0 -82 716 160 865 -8 458 0 Income tax -234 063 0 -354 -1 626 -146 982 -383 025 external -241 384 0 -2 848 -138 793 0 -383 025 internal 7 321 0 2 494 137 167 -146 982 0 Net profit (loss) of continued operations -1 614 711 0 164 -64 613 -155 440 -1 834 600 external -1 552 341 0 80 386 -362 645 0 -1 834 600 internal -62 370 0 -80 222 298 032 -155 440 0 Net profit (loss) of discontinued operations 0 -75 952 0 0 0 -75 952 external 0 -84 197 0 0 0 -84 197 internal 0 8 245 0 0 0 8 245 Net profit (loss) -1 614 711 -75 952 164 -64 613 -155 440 -1 910 552 external -1 552 341 -84 197 80 386 -362 645 0 -1 918 797 internal -62 370 8 245 -80 222 298 032 -155 440 8 245

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

88/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Data from the statement of financial position by business segments as of 31.12.2019 and 31.12.2018:

31.12.2019 31.12.2018

Assets by segment (restated) PLN thousand PLN thousand Banking 17 300 658 20 944 968 Financial intermediation 0 30 799 Lease 165 703 195 978 Other 635 695 1 767 693 Adjustments -778 749 -2 549 874 Total 17 323 307 20 389 564

9. Interest income and expenses

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018* Interest income and other of similar nature (restated) PLN thousand PLN thousand Income from financial instruments measured at amortized cost: 917 078 870 964 - income from deposits and receivables from other banks 7 841 4 317 - income from loans and advances to clients 588 548 535 083 - interest on finance lease 299 883 284 381 - interest on mandatory reserve 1 613 3 365 - income from debt instruments 6 153 8 370 - other interest 13 040 35 448 Income of similar nature to interest from financial assets measured at fair value through profit or loss 64 993 55 676 Income from financial assets measured at fair value through other comprehensive income 40 784 59 518 Total 1 022 855 986 158 * in order to unify the 2018 data presentation, the amount of PLN 11,801 thousand was transferred from the line Interest - financial leasing, the amount of 8,939 from the line Income from debt instruments, the amount of 15,388 from the line Other interest to the line Income from loans and advances to clients, as well as the amount of PLN 35,453 thousand from the line Interest - financial leasing to the line Other interest

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018* Interest expenses (restated) PLN thousand PLN thousand Cost of other banks' deposits 153 1 644 Costs of amounts due to clients 443 740 423 004 Cost of debt securities in issue 26 610 29 344 Interest on lease 217 97 Interest on loans 1 204 5 128 Other interest 1 636 916 Total 473 560 460 133

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

89/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

10. Fee and commission income and expense

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Fee and commission income (restated) PLN thousand PLN thousand Loans and advances granted 44 687 69 237 Intermediation in the sale of insurance and investment products 6 635 20 110 Finance leases 401 368 Factoring services 65 403 93 976 Current accounts and credit cards 43 633 42 791 Other 13 178 19 812 Total 173 937 246 294

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Fee and commission expenses (restated) PLN thousand PLN thousand Debit and credit cards services 16 011 18 399 Loans and advances 21 245 Commissions paid to agents, including: 36 031 451 985 - costs due to the returned commission from the sales of insurance products 8 285 238 568 - costs due to the returned commission from the sales of investment products -3 182 158 486 Factoring services 4 056 6 499 Other 9 961 16 933 Total 66 080 494 061

11. Dividend income

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Dividend income PLN thousand PLN thousand Dividend from BIK S.A. 7 176 6 705 Dividend from Noble Funds TFI S.A. 0 655 Total 7 176 7 360

12. Result on financial instruments

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Net income on financial assets and liabilities at fair value through profit or loss PLN thousand PLN thousand Derivative financial instruments 21 899 -56 270 Deposits - structured products -88 953 49 230 Total -67 054 -7 040

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Net income on other financial instruments PLN thousand PLN thousand Debt financial instruments -4 204 19 280 Total -4 204 19 280

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

90/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

13. Foreign exchange result

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Foreign exchange result PLN thousand PLN thousand Exchange differences on financial assets and liabilities measured at fair value through profit and loss 11 879 11 562 Exchange differences on loans and deposits 267 333 Other exchange differences 4 607 920 Total 16 753 12 815

14. Other operating income and expenses

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Other operating income (restated) PLN thousand PLN thousand Rental income 4 198 2 670 Revenues from sale of products and services 2 960 5 946 Reversal of write-downs against other assets 12 196 51 058 Profit from the sale of non-financial fixed assets 852 645 Release of provisions 15 723 1 356 Income from sale of goods and materials 149 0 Income from lease -2 636 406 Other operating income* 31 644 28 234 Total 65 086 90 315 * the position includes the result on deconsolidation of Tax Care S.A.

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Other operating expenses (restated) PLN thousand PLN thousand Penalties, compensation and fines paid 495 6 056 Costs of sale of products and services 521 251 Debt collection and monitoring 20 628 16 163 Impairment losses for bad debts 235 770 Loss on sale of non-financial fixed assets 0 21 229 Provisions for liabilities 4 428 55 537 Impairment loss for impaired other assets 80 404 573 073 Reserve costs for potential claims 426 707 Other costs 16 159 6 965 Total 123 296 680 751

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

91/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

15. General administrative costs

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 General administrative costs (restated) PLN thousand PLN thousand Employee benefits 142 555 159 854 Materials and energy consumption 4 666 7 792 External services, including: 78 398 130 484 - marketing, entertainment and advertising 14 955 14 855 - IT services 18 627 17 592 - rent 23 142 56 094 - security and cash processing 2 411 6 163 - service, maintenance and repairs 1 560 3 008 - telecommunication and mail services 6 191 7 483 - legal services 3 931 4 181 - consulting services 2 964 15 559 - insurance 1 370 1 586 - other external services 3 247 3 963 Other material costs 650 1 587 Taxes and charges 7 929 8 632 Tax on assets 0 44 265 Contribution and contributions to the Bank Guarantee Fund and the Polish Financial Supervision 48 235 44 408 Authority* Depreciation and amortization 61 957 37 514 Other 1 004 1 475 Total 345 394 436 011 * In 2019, the amount includes PLN 22.1 million provision for BGF fee costs for the Compulsory Restructuring Fund in accordance with IFRIC 21 "Levies".

16. Employee benefits

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Employee benefits (restated) PLN thousand PLN thousand Salaries 121 313 133 457 Insurance and other social benefits 21 242 26 397 Total 142 555 159 854

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

92/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

17. Impairment losses

01.01.2019-31.12.2019 Loans and advances to clients Debt Other loans instruments Receivables Other debt and valued at fair from banks Finance lease instruments Off-balance Total receivables value through and financial receivables valued at sheet liabilities purchased measured at other investment operational car factoring institutions amortized cost Total debt amortized cost comprehensive income

PLN thousand Provisions for impairment losses at the beginning 505 813 1 520 091 43 803 9 945 184 462 2 264 114 1 200 2 122 13 239 31 709 9 718 813 2 322 915 of the period - 01.01.2019

Increase 141 064 571 025 7 282 7 910 42 653 769 934 234 271 673 22 255 11 052 1 043 805 462

Decrease -79 970 -337 990 -5 959 -10 925 0 -434 844 -276 0 -5 857 -34 382 -15 212 -1 247 -491 818

Result on impairment losses on loans, advances 61 094 233 035 1 323 -3 015 42 653 335 090 -42 271 -5 184 -12 127 -4 160 -204 313 644 and lease receivables

Write-offs -61 351 -24 799 -3 613 0 0 -89 763 0 0 0 0 0 0 -89 763

Other increases* 62 270 151 975 4 568 -142 596 219 267 7 0 0 9 030 0 0 228 304

Other decreases* -9 600 -10 223 -646 -46 -3 133 -23 648 -10 -1 -7 718 -7 617 0 -168 -39 162

Exchange differences 0 0 0 0 0 0 0 0 0 0 0 0 0

Provisions for impairment losses at the end of the 558 226 1 870 079 45 435 6 742 224 578 2 705 060 1 155 2 392 337 20 995 5 558 441 2 735 938 period - 31.12.2019 * "Other increases" and "Other decreases" mainly include changes in impairment allowances for impairment interest

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 93/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

01.01.2018-31.12.2018 Loans and advances to clients Debt Other loans instruments Receivables Other debt and valued at fair from banks Finance lease instruments Off-balance Total receivables value through and financial receivables valued at sheet liabilities purchased measured at other investment operational car factoring institutions amortized cost Total debt amortized cost comprehensive income (restated) PLN thousand Provisions for impairment losses at the beginning 166 701 532 058 25 545 3 811 92 952 821 067 751 1 014 0 0 8 099 0 830 931 of the period - 01.01.2018

Changes resulting from the implementation of IFRS 9 177 190 299 746 14 782 441 16 509 508 668 296 72 0 565 13 029 1 466 524 096

Provisions for impairment losses at the beginning 343 891 831 804 40 327 4 252 109 461 1 329 735 1 047 1 086 0 565 21 128 1 466 1 355 027 of the period - 01.01.2018 (adjusted)

Increase 231 273 895 757 13 484 10 894 85 276 1 236 684 630 1 036 13 239 31 292 22 984 1 040 1 306 905

Decrease -126 379 -348 401 -13 374 -5 513 0 -493 667 -376 0 0 -66 -34 394 -1 693 -530 196

Result on impairment losses on loans, advances 104 894 547 356 110 5 381 85 276 743 017 254 1 036 13 239 31 226 -11 410 -653 776 709 and lease receivables

Write-offs 0 0 0 0 0 0 0 0 0 0 0 0 0

Other increases* 66 909 149 114 4 381 342 -10 275 210 471 2 0 0 170 0 0 210 643

Other decreases* -9 881 -8 183 -1 015 -30 0 -19 109 -103 0 0 -252 0 0 -19 464

Exchange differences 0 0 0 0 0 0 0 0 0 0 0 0 0

Provisions for impairment losses at the end of the 505 813 1 520 091 43 803 9 945 184 462 2 264 114 1 200 2 122 13 239 31 709 9 718 813 2 322 915 period - 31.12.2018

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 94/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

18. Income tax

Reconciliation of income tax on pre-tax profit at the statutory tax rate, with income tax calculated at the effective tax rate for the 12 months ended 31 December 2019 and 31 December 2018:

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Components of income tax expense (restated) PLN thousand PLN thousand Profit (loss) before income tax -90 665 -1 451 575 Current income tax -3 700 -4 226 Current tax charge 9 10 940 Adjustments for current tax from previous years -8 464 -16 629 Other taxes (e.g. tax at the source) 4 755 1 463 Deferred income tax -51 733 387 251 Related to arising and reversal of temporary differences 8 903 428 179 Charge caused by partial or complete write-down or reversal of a previous write-downs of deferred tax 0 10 327 assets related to the probability of realization of taxable income Current year tax loss -60 636 -51 255 Tax charge recognized in consolidated income statement -55 433 383 025 Consolidated equity 0 Deferred income tax 3 501 -1 569 Related to arising and reversal of temporary differences, including: 3 501 -1 569 - related to financial instruments valued at fair value through other 2 769 -1 157 comprehensive income - related to hedge accounting 732 -412 - other 0 0 Tax charge recognized in the consolidated equity 3 501 -1 569 Total tax charge in income statement and equity -51 932 381 456

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018

(restated) PLN thousand PLN thousand Profit (loss) gross -90 665 -1 451 575 - for 19% tax rate -90 665 -1 472 889 - for 29% tax rate 0 2 518 - tax free 0 18 796 Tax at 19% rate -17 226 -279 849 Tax at 29% rate 0 730 Non-taxable income -47 790 -65 873 Non-deductible costs 28 743 151 054 Unrecognised tax losses 0 63 697 Adjustments to current tax of prior years 550 2 Other items affecting tax charge -19 710 513 264 Total tax charge -55 433 383 025

*tax rate paid by Idea Investment Sarl (Luxembourg).

Tax regulations in force in Poland are subject to frequent changes, causing significant differences in their interpretation and significant doubts in their application. The tax authorities have control instruments enabling them to verify the tax base (in most cases during the previous 5 financial years), and imposing fines and fines. From 15 July 2016, the Tax Code will also take into account the provisions of the General Fraud Prevention Clause (GAAR), which is intended to prevent the creation and use of artificial legal structures created to avoid taxation. The GAAR clause should be applied to both transactions after its entry into force and transactions that were carried out prior to the entry into force

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 95/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) of the GAAR clause, but for which, after the date of entry into force, the benefits were or are still being achieved. As a consequence, the determination of tax liabilities may require significant judgment, regarding transactions that have already occurred, and the amounts of tax charges presented and disclosed in the financial statements may change in the future as a result of an audit of tax authorities.

Idea Bank S.A. together with subsidiaries concluded an agreement signed on 29 September 2016 regarding the rules of settlements for corporate income tax (hereinafter: "PDOP") as part of the Tax Capital Group ("PGK"), which was to apply from 1 January 2016 until 31 December 2019. Due to the fact that PGK no longer met the criteria set out in the Corporate Income Tax Act in March 2018, PGK lost its taxpayer status. Therefore, as at 31 December 2019, the Bank and its subsidiaries are obliged to independently calculate, collect and deposit into the appropriate Tax Office’s account the advance on corporate income tax and annual income tax from legal persons.

As a result of the analysis of feasibility of the Idea Bank S.A. tax asset there was a need to recognize impairment of this asset to the level of deferred tax liability. The estimate of the recoverability of the tax asset may change in the future, causing a reversal of the write-down.

As at Changes in financial period As at

01.01.2019 Referred to 31.12.2019 Referred to Referred to (restated) financial capital capital result

Provisions for deferred tax Revenue receivable from securities and derivatives 15 412 -3 952 0 0 11 460 Revenues to receive on loans and deposits 29 119 -1 505 0 -66 27 548 Depreciation (fixed assets financed by investment credit) 3 124 0 0 0 3 124 Fee and commission expenses paid in advance 2 004 0 0 0 2 004 Other costs paid in advance -11 6 438 0 -454 5 973 Cost of credit/loan commissions paid in advance 0 0 0 0 0 Surplus of tax depreciation -27 0 0 -273 -300 Valuation of fixed asset 0 0 0 -2 -2 Exchange differences -7 972 0 0 0 -7 972 Other 19 608 -36 802 0 0 -17 194 Provisions for deferred tax 61 257 -35 821 0 -795 24 641

Provision for deferred tax liabilities inclusion in directly associated with assets classified as held for 0 0 0 0 0 sale

Deferred tax assets Interest on deposits, debt securities in issue, derivatives 30 477 -12 415 0 0 18 062 and interest on the bonds Revenue taxed in advance 73 376 -20 097 0 0 53 279 Provisions for expected liabilities and costs 56 087 -20 511 0 -5 373 30 203 Provisions for impairment 7 175 0 0 0 7 175 Impairment of credit receivables 239 208 18 037 0 -777 256 468 Tax loss from previous years 51 418 61 252 0 0 112 670 Valuation of securities at fair value through other -2 399 0 -3 501 0 -5 900 comprehensive income Exchange differences -23 150 0 0 0 -23 150 Surplus of balance sheet depreciation 2 136 845 0 0 2 981 Finance lease receivables 71 0 0 0 71 Other -12 358 8 460 0 5 355 1 457 Gross deferred tax assets 422 041 35 571 -3 501 -795 453 316

Impairment of deferred income tax -405 245 -19 659 0 0 -424 904 Net deferred tax assets -44 461 51 733 -3 501 0 3 771

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 96/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

As at Impact of the As at Changes in financial period As at implementation 01.01.2018 of IFRS 9 01.01.2018 31.12.2018 (restated) (restated) (adjusted) Referred to Referred to financial capital result

Provisions for deferred tax Revenue receivable from securities and derivatives 31 818 0 31 818 -16 406 0 15 412 Revenues to receive on loans and deposits 28 035 0 28 035 1 084 0 29 119 Depreciation (fixed assets financed by investment credit) 3 124 0 3 124 0 0 3 124

Fee and commission expenses paid in advance 2 004 0 2 004 0 0 2 004

Other costs paid in advance 4 568 0 4 568 -4 579 0 -11

Cost of credit/loan commissions paid in advance 0 0 0 0 0 0

Surplus of tax depreciation 216 0 216 -243 0 -27

Exchange differences -7 972 0 -7 972 0 0 -7 972

Other 38 318 0 38 318 -18 710 0 19 608

Provisions for deferred tax 100 111 0 100 111 -38 854 0 61 257

Provision for deferred tax liabilities inclusion in directly associated with assets classified as held for 0 0 0 0 0 0 sale

Deferred tax assets

Interest on deposits, debt securities in issue, derivatives 28 401 0 28 401 2 076 0 30 477 and interest on the bonds

Revenue taxed in advance 185 501 0 185 501 -112 125 0 73 376

Provisions for expected liabilities and costs 23 850 0 23 850 32 237 0 56 087

Provisions for impairment 7 175 0 7 175 0 0 7 175

Impairment of credit receivables 93 018 62 661 155 679 83 529 0 239 208

Tax loss from previous years 68 820 0 68 820 -17 402 0 51 418 Valuation of securities at fair value through other -3 968 0 -3 968 0 1 569 -2 399 comprehensive income Exchange differences -23 150 0 -23 150 0 0 -23 150

Surplus of balance sheet depreciation 1 451 0 1 451 685 0 2 136

Finance lease receivables 71 0 71 0 0 71

Other 7 668 0 7 668 -20 026 0 -12 358

Deferred tax assets 388 837 62 661 451 498 -31 026 1 569 422 041

Impairment of deferred income tax 0 0 0 0 0 -405 245

Net deferred tax assets 288 726 62 661 351 387 7 828 1 569 -44 461

Due to the forecasted inability to realize tax losses from previous years, the Group decided not to create a deferred tax asset for tax losses from previous years.

19. Earnings per share

Basic earnings per share Basic earnings per share are calculated based on the profit or loss attributable to ordinary shareholders of Idea Bank S.A. by dividing this profit or loss by the weighted average number of ordinary shares outstanding during a given period.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 97/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Earnings per share (restated) Net profit attributable to shareholders of Idea Bank S.A. (PLN thousand) -37 275 -1 910 552 Net profit attributable to shareholders of Idea Bank S.A. used for calculation of diluted earnings per share -37 275 -1 910 552 (PLN thousand)

Net profit of continued operations attributable to shareholders of Idea Bank S.A. (PLN thousand) -35 232 -1 834 600 Net profit of continued operations attributable to shareholders of Idea Bank S.A. used for calculation of -35 232 -1 834 600 diluted earnings per share (PLN thousand)

Weighted average number of ordinary shares (in pcs) 78 401 981 78 401 981 Effect of dilution: Weighted average number of ordinary shares (in pcs) 78 401 981 78 401 981

Earnings per ordinary share (PLN thousand) -0,48 -24,37 Diluted earnings per ordinary share (PLN thousand) -0,48 -24,37

Earnings of continued operations per ordinary share (PLN thousand) -0,45 -23,40 Diluted earnings of continued operations per ordinary share (PLN thousand) -0,45 -23,40

Diluted earnings per share

In the reporting period there were no factors diluting earnings per share. In the reporting periods, Idea Bank S.A Group did not issue convertible bonds nor stock options. There were also no preferred shares as a dividend payment. Thus, the diluted earnings per share are equal to basic earnings per share.

20. Dividend paid and proposed for payment

The parent company - Idea Bank S.A. did not pay nor proposed any dividends to shareholders out of profits earned for the 12 months ended 31 December 2019 and 31 December 2018.

21. Cash and balances with Central Bank

31.12.2019 31.12.2018 Cash and balances with Central Bank PLN thousand PLN thousand Cash 10 550 37 582 Current account in Central Bank 612 943 847 097 Total 623 493 884 679

The Bank may use during the day cash deposited on the mandatory reserve account for ongoing payments based on an instruction provided to the National Bank of Poland (the “NBP”). However, the Bank is required to ensure that the average monthly balance on the mandatory reserve account is appropriate to the mandatory reserve requirements. Mandatory reserve funds bear interest equal to 0.5% in 2019 and 2018.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 98/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

22. Assets measured at amortised cost other than amounts due from clients

Receivables from banks and financial institutions

31.12.2019 31.12.2018 Receivables from banks and financial institutions PLN thousand PLN thousand Current accounts 104 258 143 742 Deposits in other banks 173 820 28 280 Granted loans 33 730 33 800 Other 49 077 59 Total 360 885 205 881 Impairment losses on receivables (-) -1 155 -1 200 Total net amount 359 730 204 681

31.12.2019 31.12.2018 Receivables from banks and financial institutions by maturity PLN thousand PLN thousand Current accounts and O/N 104 258 143 742 Term deposits with maturity period: 256 627 62 080 up to 1 month 173 820 23 099 above 1 month to 3 months 0 5 202 above 3 months to 1 year 53 343 0 above 1 year to 5 years 29 464 33 779 Other 0 59 Total 360 885 205 881 Impairment losses on receivables (-) -1 155 -1 200 Total net amount 359 730 204 681

Other debt instruments valued at amortized cost

31.12.2019 31.12.2018 Other debt instruments valued at amortized cost PLN thousand PLN thousand Other debt instruments valued at amortized cost 168 993 229 656 Impairment of financial instruments (-) -20 995 -31 709 Total net amount 147 998 197 947

23. Derivative financial instruments

The table below presents the nominal value of underlying instruments and the fair value of derivative financial instruments by original maturity at 31 December 2019 (PLN thousand):

above 1 above 3 above 1 up to 1 above 5 Fair value Fair value month to months year to 5 Total month years (negative) (positive) 3 months to 1 year years Derivative financial instrument at fair value through profit or loss Foreign currency transactions Currency swaps 0 0 639 0 0 639 0 12 Purchase 0 0 0 0 0 0 0 0 Sale 0 0 639 0 0 639 0 12 Other transactions Options on indexes and commodities 6 964 97 028 580 112 708 420 0 1 392 524 0 50 074 Purchase 6 964 97 028 580 112 708 420 0 1 392 524 0 50 074 Sale 0 0 0 0 0 0 0 0

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 99/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Hedging derivative instruments Foreign currency transactions CIRS 0 72 771 1 311 618 1 409 563 0 2 793 952 2 880 24 154 Purchase 0 0 0 0 0 0 0 0 Sale 0 72 771 1 311 618 1 409 563 0 2 793 952 2 880 24 154 Total 6 964 169 799 1 892 369 2 117 983 0 4 187 115 2 880 74 240

The table below presents the nominal value of underlying instruments and the fair value of derivative financial instruments by original maturity at 31 December 2018 (PLN thousand):

above 1 above 3 above 1 up to 1 above 5 Fair value Fair value month to months year to 5 Total month years (negative) (positive) 3 months to 1 year years Derivative financial instrument at fair value through profit or loss Foreign currency transactions Currency swaps 1 720 0 75 779 0 0 77 499 0 439 Purchase 0 0 0 0 0 0 0 0 Sale 1 720 0 75 779 0 0 77 499 0 439 FX/purchase/sale 8 222 0 0 0 0 8 222 0 0 Purchase 735 0 0 0 0 735 0 0 Sale 7 487 0 0 0 0 7 487 0 0 Other transactions Options on indexes and commodities 0 114 530 231 333 1 222 588 141 718 1 710 169 0 21 154 Purchase 0 114 530 231 333 1 222 588 141 718 1 710 169 0 21 154 Sale 0 0 0 0 0 0 0 0 Hedging derivative instruments Foreign currency transactions CIRS 51 600 172 000 459 312 2 252 263 0 2 935 175 19 592 10 289 Purchase 0 0 0 0 0 0 0 0 Sale 51 600 172 000 459 312 2 252 263 0 2 935 175 19 592 10 289 Interest rate transactions IRS Swap 0 0 0 250 000 0 250 000 2 655 0 Purchase 0 0 0 250 000 0 250 000 2 655 0 Sale 0 0 0 0 0 0 0 0 Total 53 320 286 530 766 424 3 724 851 141 718 4 972 843 22 247 31 882

24. Hedge accounting

In 2019, the Group had:

1. cash flow hedges related to leasing and loan receivables through CIRS transactions, the purpose of which was to hedge the risk of changes in the exchange rate, 2. cash flow hedges related to interest on deposits using IRS transactions, aimed at hedging the risk of changes in interest rates (until May 2019).

Cash flow hedges related to lease receivables and loans consisted in concluding CIRS transactions in which the Bank paid cash flows in PLN and interest in EUR according to the EURIBOR rates and received cash flows in EUR and interest in PLN at WIBOR rates.

The positive fair value of CIRS derivatives, being a cash flow hedge against currency risk as at 31.12.2019 amounted to PLN 2,880 thousand for EUR/ PLN transactions, the negative fair value: PLN

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 100/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

24,154 thousand (the nominal value of EUR liabilities converted to PLN at the average NBP exchange rate was: PLN 2,793,952 thousand for transactions within the maturity range from 1 month to 5 years).

Assuming a short position in a CIRS (cross-currency swap) instrument in the EURPLN currency pair, also known as a basis Hedging strategy swap (EURIBOR vs. WIBOR) and a short position in an FX Swap instrument

Acquisition of financing in foreign currency (EUR) at the instrument's currency date by receiving payments in a foreign currency in the amount of the fixed nominal value in exchange for the equivalent in Description of hedging relationship national currency (PLN) to the other party. During the lifetime of the instrument, the Bank receives periodic payments in PLN based on the WIBOR (3M) rate in exchange for payments based on the EURIBOR (3M) rate.

Hedged risk FX risk (in EUR) and closing the currency position in EUR The CIRS transaction, in which Idea Bank pays interest based on the Hedging instrument EURIBOR rate (3M), and receives PLN interest payments based on the WIBOR (3M) rate.

Hedged item Lease and loan portfolio Periods when the Group expects impact of cash flows that should September 2014 - December 2022 be hedged Monthly prospective and retrospective test of effectiveness of Test of effectiveness of hedging relationship hedging strategy

The table below shows the change in fair value of cash flow hedges recognized in other comprehensive income. 31.12.2019 31.12.2018 Results recognized in income statement and revaluation reserve related to cash flow hedging PLN thousand PLN thousand Revaluation reserve (Fair value changes of effective hedging instruments) - gross amounts 2 223 -6 553 Deferred tax item related to hedge accounting -422 1 149 Interest income on hedging derivatives 64 993 55 368 Fair value changes on non-effective hedging instruments recognized in the income statement -446 985

01.01.2019- 01.01.2018- Changes in revaluation reserve related to cash flow hedging 31.12.2019 31.12.2018

Opening balance -5 397 -3 168 Changes in fair value of hedging instruments in the part recognized as an effective hedge 3 383 -2 229 Amounts transferred from revaluation reserve to the income statement, including: -214 0 - amortization of revaluation reserve after cessation of hedge accounting (early termination of CIRS -214 0 and IRS) Closing balance -1 800 -5 397 Net impact on other comprehensive income 3 597 -2 229

25. Amounts due from clients

31.12.2019 31.12.2018

Loans and advances to clients (restated) PLN thousand PLN thousand Loans and advances 7 226 213 8 157 290 Factoring receivables 512 887 612 958 Purchased debt 8 080 161 9 383 982 Debit card receivables 210 635 207 546 Financial assets at fair value through profit or loss 76 202 Total 16 029 972 18 361 978 Impairment losses on receivables (-) -2 705 060 -2 264 114 Total net amount 13 324 912 16 097 864

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 101/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Impairment Impairment Impairment provisions for provisions for provisions for Impairment Gross Value Gross Value Gross Value POCI loans and loans and loans and provisions for Total net value Stage 1 Stage 2 Stage 3 As at 31 December 2019 advances in advances in advances in POCI Stage 1 Stage 2 Stage 3

PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand - investment loans 1 508 426 299 969 1 128 229 572 -14 080 -21 056 -523 090 0 2 378 970 - operating loans 1 850 417 399 559 2 140 109 1 021 -93 093 -86 255 -1 690 731 0 2 521 027 - car loans 38 970 8 642 60 934 0 -292 -711 -44 432 0 63 111 - factoring loans 12 442 214 977 285 468 0 -616 -5 516 -218 446 0 288 309 - purchased debt 7 442 596 632 717 4 848 0 -2 598 -636 -3 508 0 8 073 419 Total 10 852 851 1 555 864 3 619 588 1 593 -110 679 -114 174 -2 480 207 0 13 324 836

Impairment Impairment Impairment provisions for provisions for provisions for Impairment Gross Value Gross Value Gross Value POCI loans and loans and loans and provisions for Total net value As at 31 December 2018 Stage 1 Stage 2 Stage 3 advances in advances in advances in POCI* (restated) Stage 1 Stage 2 Stage 3*

PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand - investment loans 2 093 960 411 134 1 085 732 604 -37 224 -21 619 -446 970 0 3 085 617 - operating loans 2 318 070 547 785 1 743 747 1 312 -136 569 -114 898 -1 268 624 0 3 090 823 - car loans 79 940 22 511 60 041 0 -731 -1 947 -41 125 0 118 689 - factoring loans 27 711 359 391 225 856 0 -1 357 -11 197 -171 908 0 428 496 - purchased debt 9 131 069 249 540 3 373 0 -7 032 -316 -2 597 0 9 374 037 Total 13 650 750 1 590 361 3 118 749 1 916 -182 913 -149 977 -1 931 224 0 16 097 662

* The Group transferred 1.6 million write-offs previously disclosed under POCI to Stage 3

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements

102/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

26. Finance lease receivables

Present value Gross lease Finance lease receivables as at 31 December 2019 (PLN thousand) of minimum investment lease payments

Up to 1 year 56 575 52 493 Above 1 year to 5 years 51 846 48 662 Above 5 years 0 0 Total 108 421 101 155 Unrealized finance income (-) -7 266 0 Present value of minimum lease payments 101 155 101 155 Impairment losses on receivables (-) -2 392 Carrying amount 98 763 Including unguaranteed residual value to the lessor 0

Present value Gross lease Finance lease receivables as at 31 December 2018 (PLN thousand) of minimum investment lease payments

Up to 1 year 36 613 31 544 Above 1 year to 5 years 78 588 73 965 Above 5 years 0 0 Total 115 201 105 509 Unrealized finance income (-) -9 692 0 Present value of minimum lease payments 105 509 105 509 Impairment losses on receivables (-) -2 122 Carrying amount 103 387 Including unguaranteed residual value to the lessor 0

27. Other loans and receivables

31.12.2019 31.12.2018 Other loans and receivables measured at amortized cost PLN thousand PLN thousand Other loans and receivables 13 482 13 239 Total 13 482 13 239 Impairment (-) -337 -13 239 Total net value of other loans and receivables 13 145 0

28. Financial assets measured at fair value through other comprehensive income

31.12.2019 31.12.2018 Financial assets measured at fair value through other comprehensive income PLN thousand PLN thousand Debt securities measured at fair value through other comprehensive income, including: - issued by Central Bank 699 942 949 881 - issued by Polish State Treasury 1 200 423 891 322 Equity instruments measured at fair value through other comprehensive income 93 912 82 824 Total 1 994 277 1 924 027 Impairment of financial instruments (-) 0 0 Total net amount 1 994 277 1 924 027

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 103/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The Group has designated equity financial instruments - BIK and Noble Funds TFI shares - as financial assets measured at fair value through other comprehensive income due to the long-term nature of these investments. In 2019, the Group did not stop recognizing any of the capital financial instruments.

Fair value as at Dividends 31.12.2019 received in the Equity instruments measured at fair value through other comprehensive income period

PLN thousand PLN thousand BIK S.A. shares 85 694 7 176 Noble Funds TFI shares 8 218 0

Fair value as at Dividends 31.12.2018 received in the Equity instruments measured at fair value through other comprehensive income period

PLN thousand PLN thousand BIK S.A. shares 72 824 6 705 Noble Funds TFI shares 10 000 655

29. Investments in associates

Value of investments in associates as at 31 December 2019:

Purchased Share in net Purchase Purchase Date of Carrying Name of associate share in net assets after price (PLN price paid in Write-offs acquisition amount assets transaction thousand) cash

Idea Getin Leasing S.A. 28.09.2017 75,00% 49,99% 4 859 4 859 0 232 036 Idea Box Alternatywna Spółka Inwestycyjna S.A. 23.11.2015 44,90% 40,05% 6 084 6 084 -738 2 614 Open Finance S.A. 31.12.2015 17,72% 17,72% 93 962 93 962 -91 896 2 066

Value of investments in associates as at 31 December 2018:

Purchased Share in net Purchase Purchase Date of Carrying Name of associate share in net assets after price (PLN price paid in Write-offs acquisition amount assets transaction thousand) cash

Idea Getin Leasing S.A. 28.09.2017 49,99% 49,99% 4 859 4 859 0 289 545 Idea Box S.A. 23.11.2015 44,90% 41,73% 6 084 6 084 0 5 736 Idea 24/7 03.04.2017 49,99% 49,99% 4 281 4 281 -4 281 0 Open Finance S.A. 31.12.2015 17,72% 17,72% 93 962 93 962 -90 668 3 294 Muse Finance 17.05.2018 47,49% 49,99% 4 590 4 590 -4 590 0

31.12.2019 31.12.2018 Changes in investments in associates PLN thousand PLN thousand Investment in associates - opening balance 298 575 396 554 Acquisition 0 4 788 Disposal of the entity 0 -60 317 Dividend received -71 499 0 Share in profits (losses) 11 607 70 793 Result on dilution of shares 0 9 778 Impact of IFRS 9* 0 -68 754 Impact of deconsolidation -1 0 Impairment losses -1 966 -54 267 Investment in associates - closing balance 236 716 298 575

* applies to the implementation of IFRS 9 regarding the impairment of leasing portfolios

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 104/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

On 26 April 2019, Idea Money S.A. sold shares in MuSE Finance Ltd., and on 28 June 2019, signed a conditional share sale agreement in relation to the shares held in Idea 24/7 Inc. The conditions precedent to the sales contract were met on 30 July.

As at 31.12.2019, the Group carried out an impairment test for Idea Box Alternative Spółka Inwestycyjna S.A. due to the fact that in relation to this investment, premises for impairment were identified regarding the level of net assets in relation to the value of the Group's investment in this company. As a result of the test, the Group recognized a cumulative write-off of the investment in the amount of PLN 738 thousand.

As at 31.12.2019, the Group carried out an impairment test of investments in Open Finance S.A. based on the recoverable amount, which was determined on the basis of the market price. As a result of the test, the Group recognized a cumulative write-off of the investment in the amount of PLN 91,896 thousand.

Details of the rules for classifying the above instruments to the Investment in associates’ group are presented in Note 5.8 of these consolidated financial statements.

30. Intangible assets

31.12.2019 31.12.2018 Intangible assets PLN thousand PLN thousand Patents and licenses 124 220 124 080 Goodwill, including: 12 965 12 965 - Goodwill from the merger of Idea Money and Idea Expert 12 965 12 965 Trademark 5 619 20 402 Other including Data bases 4 299 10 199 Intangible assets 147 103 167 646

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 105/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Other Development Patents and Trademark Goodwill including Total costs licenses Changes in intangible assets for the period of 12 months Data bases ended 31 December 2019 PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand Gross value Opening balance as at 1 January 2019 774 210 984 81 240 423 543 19 135 735 676 Increases: 0 28 532 0 0 21 703 50 235 Purchase 0 5 633 0 0 21 703 27 336 Transfer from investment 0 22 899 0 0 0 22 899 Decreases: 0 -14 211 0 0 -33 785 -47 996 Transfer from investment 0 0 0 0 -22 899 -22 899 Other 0 -14 211 0 0 -10 886 -25 097 Closing balance as at 31 December 2019 774 225 305 81 240 423 543 7 053 737 915

Depreciation Opening balance as at 1 January 2019 774 75 437 313 0 8 924 85 448

Increases: 0 24 109 1 692 0 1 183 26 984 Depreciation for the period 0 24 109 181 0 852 25 142 Other 0 0 1 511 0 331 1 842 Decreases: 0 -12 492 0 0 -7 353 -19 845 Liquidation and sale 0 0 0 0 134 134 Other 0 -12 492 0 0 -7 487 -19 979 Closing balance as at 31 December 2019 774 87 054 2 005 0 2 754 92 587

Impairment losses Opening balance as at 1 January 2019 0 11 467 60 525 410 578 12 482 582 Increases 0 2 564 13 091 0 0 15 655 Decreases 0 0 0 0 -12 -12 Closing balance as at 31 December 2019 0 14 031 73 616 410 578 0 498 225

Net value Opening balance as at 1 January 2019 0 124 080 20 402 12 965 10 199 167 646 Closing balance as at 31 December 2019 0 124 220 5 619 12 965 4 299 147 103

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 106/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Other Development Patents and Trademark Goodwill including Total costs licenses Changes in intangible assets for the period of 12 months Data bases ended 31 December 2018 PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand Gross value

Opening balance as at 1 January 2018 774 164 631 81 240 456 084 41 213 743 942

Increases: 0 62 948 0 0 29 663 92 611 Increase of own development works 0 0 0 0 3 364 3 364 Purchase 0 19 710 0 0 26 035 45 745 Transfer from investment 0 31 043 0 0 0 31 043 Other 0 12 195 0 0 264 12 459

Decreases: 0 -16 595 0 -32 541 -51 741 -100 877

Transfer from investment 0 0 0 0 -29 326 -29 326 Liquidation and sale, donation 0 -16 595 0 -32 541 -7 957 -57 093 Other 0 0 0 0 -14 458 -14 458

Closing balance as at 31 December 2018 774 210 984 81 240 423 543 19 135 735 676

Depreciation

Opening balance as at 1 January 2018 774 61 106 635 19 7 999 70 533

Increases: 0 22 138 2 0 925 23 065

Depreciation for the period 0 18 454 2 0 798 19 254 Other 0 3 684 0 0 127 3 811

Decreases: 0 -7 807 -324 -19 0 -8 150

Liquidation and sale 0 -7 807 0 -19 0 -7 826 Other 0 0 -324 0 0 -324

Closing balance as at 31 December 2018 774 75 437 313 0 8 924 85 448

Impairment losses

Opening balance as at 1 January 2018 0 0 0 0 12 12

Increases 0 11 467 60 525 410 578 0 482 570

Closing balance as at 31 December 2018 0 11 467 60 525 410 578 12 482 582

Net value

Opening balance as at 1 January 2018 0 103 525 80 605 456 065 33 202 673 397

Closing balance as at 31 December 2018 0 124 080 20 402 12 965 10 199 167 646

As at 31.12.2019, the Group performed impairment tests for all cash generating units to which it was allocated and in relation to which impairment indicator was identified. The recoverable amount of these units was determined based on their value in use, for which a plan of cash flows generated by them was prepared, covering periods up to 5 years. The valuation also includes the residual value of these units. In order to calculate free operating flows before tax, the operating result of subsidiaries in individual years covered by the forecast was adjusted for material non-cash items and planned investment expenditures. Cash flow plans have been prepared based on the financial plans of the parent company and subsidiaries for 2019-2021. Key assumptions in the financial plans relate to the level of product sales and margins achieved on these products, administrative costs and sales costs.

The discount rate was established using the CAPM model where the risk-free rate was based on yields to redeem 10-year government bonds, while the risk premium and beta were determined based on data on comparable companies.

As at 31 December 2019, the Group did not identify the need to increase impairment losses on goodwill.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 107/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31. Property, plant and equipment

31.12.2019 31.12.2018 Tangible fixed assets PLN thousand PLN thousand Land and buildings 21 041 903 Machinery and equipment 23 585 27 402 Vehicles 45 506 83 861 Other fixed assets, including investments in foreign assets 14 673 24 821 Fixed assets under construction 72 102 Total 104 877 137 089

Others, Machinery including Fixed assets Land and and Vehicles investments under Total buildings Changes in fixed assets for the period of 12 months equipment in foreign construction ended 31 December 2019 assets

PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand Gross value

Opening balance as at 1 January 2019 2 016 69 151 108 789 88 323 129 268 408 Identification of the asset due to the right of use in 62 731 0 7 298 0 0 70 029 accordance with IFRS 16 Opening balance as at 1 January 2019 - adjusted 64 747 69 151 116 087 88 323 129 338 437

Increases: 2 771 4 604 16 269 944 1 884 26 472

Purchase 1 855 2 753 16 269 940 1 884 23 701 Transfer from tangible assets under construction 0 1 851 0 4 0 1 855 Other 916 0 0 0 0 916

Decreases: -15 396 -10 630 -54 661 -21 237 -1 941 -103 865

Liquidation and sale, donation -4 459 -734 -45 754 -18 417 -86 -69 450 Transfer from tangible assets under construction 0 0 0 0 -1 855 -1 855 Other -10 937 -9 896 -8 907 -2 820 0 -32 560

Closing balance as at 31 December 2019 52 122 63 125 77 695 68 030 72 261 044

Depreciation

Opening balance as at 1 January 2019 1 113 41 188 24 917 63 502 27 130 747

Increases: 19 809 7 342 11 704 6 354 0 45 209

Depreciation for the period 19 809 7 342 11 704 6 354 0 45 209

Decreases: -943 -8 990 -13 803 -16 499 -27 -40 262

Liquidation and sale -876 -721 -12 381 -14 696 -27 -28 701 Other -67 -8 269 -1 422 -1 803 0 -11 561

Closing balance as at 31 December 2019 19 979 39 540 22 818 53 357 0 135 694

Impairment losses

Opening balance as at 1 January 2019 0 561 11 0 0 572

Increases 11 102 0 1 424 0 0 12 526 Decreases 0 -561 -11 0 0 -572 Classification as assets item held for trade 0 0 7 947 0 0 7 947

Closing balance as at 31 December 2019 11 102 0 9 371 0 0 20 473

Net value

Opening balance as at 1 January 2019 - adjusted 63 634 27 402 91 159 24 821 102 207 118

Closing balance as at 31 December 2019 21 041 23 585 45 506 14 673 72 104 877

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 108/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Others, Machinery including Fixed assets Land and and Vehicles investments under Total buildings Changes in fixed assets for the period of 12 months equipment in foreign construction ended 31 December 2018 assets

PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand Gross value

Opening balance as at 1 January 2018 1 802 62 719 101 175 110 034 2 391 278 121

Increases: 229 9 080 40 682 3 620 708 54 319

Purchase 145 8 542 36 591 2 639 708 48 625 Transfer from tangible assets under construction 0 0 0 740 0 740 Other 84 538 4 091 241 0 4 954

Decreases: -15 -2 648 -33 068 -25 331 -2 970 -64 032

Liquidation and sale, donation -15 -2 648 -32 841 -21 606 0 -57 110 Transfer from tangible assets under construction 0 0 0 0 -740 -740 Other 0 0 -227 -3 725 -2 230 -6 182

Closing balance as at 31 December 2018 2 016 69 151 108 789 88 323 129 268 408

Depreciation

Opening balance as at 1 January 2018 1 018 35 618 26 710 70 717 0 134 063

Increases: 110 8 155 12 515 11 547 27 32 354

Depreciation for the period 110 8 129 11 013 11 547 0 30 799 Other 0 26 1 502 0 27 1 555

Decreases: -15 -2 585 -14 308 -18 762 0 -35 670

Liquidation and sale -15 -2 585 -14 296 -17 234 0 -34 130 Other 0 0 -12 -1 528 0 -1 540

Closing balance as at 31 December 2018 1 113 41 188 24 917 63 502 27 130 747

Impairment losses

Opening balance as at 1 January 2018 0 163 11 0 0 174

Classification as assets item held for trade 0 398 0 0 0 398

Closing balance as at 31 December 2018 0 561 11 0 0 572

Net value

Opening balance as at 1 January 2018 784 26 938 74 454 39 317 2 391 143 884

Closing balance as at 31 December 2018 903 27 402 83 861 24 821 102 137 089

32. Investment property

The Group applies the fair value model to value investment property. A positive valuation of investment property is recognized as other operating income in the income statement in item “Valuation of investment property”. There are no restrictions on the right to sell the investment property and rights to transfer the proceeds and gain on this sale. The fair value of investment property was determined based on the valuation performed by independent experts.

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Changes in value of investment property PLN thousand PLN thousand Carrying amount Opening balance 41 363 51 086 Decreases -10 451 -9 723 Sale -173 -9 531 Valuation -10 261 -192 Other changes -17 0 Closing balance 30 912 41 363

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 109/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

33. Other assets

31.12.2019 31.12.2018 Other assets PLN thousand PLN thousand Deferred costs 22 759 27 826 Receivables from various debtors 90 014 206 422 Receivables from taxes, subsidies and social security 28 825 62 162 Cash cards settlements 3 424 2 112 Revenues to receive 81 3 255 Inventory 13 637 5 795 Advances 1 325 4 677 Regresses and deposits 1 529 1 191 Other assets 22 164 9 594 Total other gross assets 183 758 323 034 Impairment of other assets (-) -24 365 -33 176 Total other net assets 159 393 289 858

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Impairment of other assets PLN thousand PLN thousand Value of impairment losses on other assets at the beginning of period 33 176 2 518 Impact of IFRS 9 0 7 957 Value of impairment losses on other assets at the beginning of period - adjusted 33 176 10 475 Increases included in the profit and loss account -23 539 22 892 Decreases included in the profit and loss account 15 203 -191 Other increases 2 315 0 Other decreases -2 790 0 The value of impairment losses / reserves at the end of the period 24 365 33 176

34. Assets pledged as collateral

The following table presents the carrying amounts of assets pledged as collateral as at 31 December 2019:

Value of collateralized Value of assets Type of assets pledged as collateral Type of liabilities liabilities pledged as collateral

Mandatory reserve Current accounts 17 469 501 340 832 Total: 17 469 501 340 832

The following table presents the carrying amounts of assets pledged as collateral as at 31 December 2018:

Value of collateralized Value of assets Type of assets pledged as collateral Type of liabilities liabilities pledged as collateral

Receivables from clients NBP refinancing loan 834 319 3 873 522 Mandatory reserve Current accounts 20 354 175 738 701 Total: 21 188 494 4 612 223

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 110/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

35. Financial liabilities measured at amortized cost

Amounts due to the Central Bank

31.12.2019 31.12.2018 Amounts due to the Central Bank PLN thousand PLN thousand Received credits 0 833 678 above 1 month to 3 months 0 833 678 Interest 0 641 Total 0 834 319

Amounts due to other banks and financial institutions

31.12.2019 31.12.2018 Amounts due to other banks and financial institutions PLN thousand PLN thousand Current accounts 5 925 32 075 Deposits form banks 6 094 27 036 Loans and advances received 9 878 19 606 Other liabilities to other banks -265 7 Total 21 632 78 724

31.12.2019 31.12.2018 Liabilities due to banks and financial institutions by maturity period PLN thousand PLN thousand Current accounts 5 925 32 075 Liabilities with maturity period: 15 707 46 649 up to 1 month 16 453 20 173 above 1 month to 3 months 24 21 458 above 3 months to 1 year 0 5 018 Total 21 632 78 724

Amounts due to clients

31.12.2019 31.12.2018 Amounts due to clients PLN thousand PLN thousand Liabilities due to corporates 1 297 242 1 325 549 Current accounts and O/N deposits 1 148 559 1 114 365 Term deposits 148 669 211 153 Other 14 31 Liabilities due to government and local authorities 297 8 935 Current accounts and O/N deposits 297 8 493 Term deposits 0 442 Liabilities due to individuals 14 210 951 15 748 352 Current accounts and O/N deposits 910 021 741 649 Term deposits 13 300 053 15 006 703 Other 877 0 Total 15 508 490 17 082 836

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 111/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.12.2019 31.12.2018 Liabilities due to clients by maturity period PLN thousand PLN thousand Current accounts and O/N deposits 2 058 877 1 864 507 Liabilities with maturity period: 13 448 722 15 218 298 up to 1 month 4 505 035 3 586 295 above 1 month to 3 months 6 098 908 9 050 304 above 3 months to 6 months 1 918 024 1 393 882 above 6 months to 1 year 721 157 891 589 above 1 year to 5 years 132 381 228 198 above 5 years 73 217 68 030 Other 891 31 Total 15 508 490 17 082 836

Debt securities in issue

31.12.2019 31.12.2018 Debt securities in issue PLN thousand PLN thousand Debt securities in issue 371 559 518 298 Interest 3 324 5 441 Total liabilities arising from debt securities 374 883 523 739

31.12.2019 31.12.2018 Carrying Carrying Debt securities in issue by maturity period amount amount

PLN thousand PLN thousand Debt securities in issue with maturity period: 371 559 518 298 above 3 months to 1 year 305 805 148 416 above 1 year to 5 years 24 068 327 529 above 5 years 41 686 42 353 Interest 3 324 5 441 Total 374 883 523 739

Issues and redemptions of securities

In the reporting period, there were no issues of securities in the Group, nor were financial covenants broken. The following redemptions took place in 2019:

Value Redemption Date PLN thousand Idea Bank S.A. Redemption of A series bonds 25.07.2019 77 500 Redemption of E series bonds 20.11.2019 12 921 Redemption of B series bonds 19.12.2019 57 710

Other liabilities measured at amortized cost

31.12.2019 31.12.2018 Other liabilities measured at amortized cost PLN thousand PLN thousand Lease liabilities 36 750 3 085 Other 1 300 0 Total 38 050 3 085

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 112/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Present value Gross leasing of minimum investment Net leases liabilities as at 31 December 2019 lease payments

PLN thousand PLN thousand

Up to 1 year 17 508 16 331 Above 1 year to 5 years 21 292 20 419 Above 5 years 0 0 Total 38 800 36 750 Unrealized finance costs (-) -2 050 Net leasing investment 36 750

Present value of minimum lease payments 36 750

Present value Gross leasing of minimum investment Net leases liabilities as at 31 December 2018 lease payments

PLN thousand PLN thousand

Up to 1 year 1 904 1 750 Above 1 year to 5 years 1 792 1 335 Above 5 years 0 0 Total 3 696 3 085 Unrealized finance costs (-) -611 Net leasing investment 3 085

Present value of minimum lease payments 3 085

36. Other financial liabilities measured at fair value through profit or loss

31.12.2019 31.12.2018 Financial liabilities measured at fair value through profit or loss PLN thousand PLN thousand Deposits from clients 1 035 512 1 278 680 Total 1 035 512 1 278 680

Companies from the Group offered its clients structured deposits, which are hybrid financial instruments, containing a debt instrument (zero-coupon instrument with a nominal value equal to the amount guaranteed by the Bank) and an embedded option which gives the client the right to additional payments determined based on the changes in the value of the underlying instrument (in this case - specific indexes). As at the date of initial recognition and as at each subsequent reporting date, the Group measures the whole structured deposit at fair value and recognizes gains/losses on the change in this measurement in the income statement. The fair value of structured deposits is determined based on a valuation method taking into account the IRSFRA curve rates (Interest Rate Swap Forward Rate Agreement) of a period closest to the maturity period of the measured instrument and the cost of obtaining the deposit from retail clients of the Group for a period closest to the maturity period of the measured instrument.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 113/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

37. Other liabilities

31.12.2019 31.12.2018 Other liabilities PLN thousand PLN thousand Deferred income 2 734 4 926 Other costs to be paid 7 409 29 407 Other creditors 19 196 96 760 Interbank settlements 42 791 59 187 Provision for liabilities 41 463 66 818 Credit card settlements 16 861 182 Liabilities to the budget 15 517 26 485 Provisions for pensions and similar 2 271 3 543 Other 14 135 11 634 Total other liabilities 162 377 298 942

38. Provisions

Provision for Restructuring Provisions for Other off-balance Total reserve litigations provisions 12 months period ended 31 December 2019 sheet liabilities

PLN thousand PLN thousand PLN thousand PLN thousand PLN thousand As at 1 January 2019 0 9 718 15 854 3 599 29 171 Creation / actualization of reserves 20 108 11 052 659 795 32 614 Use of reserves -11 631 0 -8 123 -865 -20 619 Release of provisions 0 -15 212 -124 -2 317 -17 653 As at 31 December 2019 8 477 5 558 8 266 1 212 23 513

Provision for Provisions for Other off-balance Total litigations provisions 12 months period ended 31 December 2018 sheet liabilities

PLN thousand PLN thousand PLN thousand PLN thousand As at 1 January 2018 8 099 1 604 832 10 535 Change due to the initial application of IFRS 9 13 029 0 0 13 029 As at 1 January 2018 (adjusted) 21 128 1 604 832 23 564 Creation / actualization of reserves 22 984 15 616 2 530 41 130 Use of reserves 0 -1 356 -108 -1 464 Release of provisions -34 394 -10 0 -34 404 Other changes 0 0 345 345 As at 31 December 2018 9 718 15 854 3 599 29 171

39. Off-balance sheet liabilities

Investment liabilities

In the current and comparative period, the Group did not enter into any material agreements with contractors for the execution of planned capital expenditure on property, plant and equipment and intangible assets.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 114/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Off-balance sheet items

31.12.2019 31.12.2018 Off-balance sheet liabilities and other off-balance sheet items PLN thousand PLN thousand 1. Off-balance sheet liabilities granted 338 728 494 956 a) financial 333 349 487 621 b) guarantees 5 379 7 335 2. Other off-balance sheet items 920 953 1 047 183 Total 1 259 681 1 542 139

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 115/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

40. Share capital

As at 31 December 2019 and 31 December 2018:

STRUCTURE OF SHARE CAPITAL (PLN)

Type restriction Right to Series / Number of Issued nominal Surplus Date of Type of shares Type of preference of rights to Capital coverage dividend (start emission shares amount (PLN) share registration shares date)

voting rights - each share entitled to 2 votes; as to the dividend - the maximum amount resulting from Art. 353 § 1 of the registered A Commercial Companies Code; as to none 1 051 200 2 102 400 cash contribution 24.04.1992 24.04.1992 shares priority coverage of the company's assets remaining after satisfaction of creditors in the event of liquidation of the Bank B bearer shares none none 2 500 000 5 000 000 cash contribution 14.04.1994 14.04.1994 C bearer shares none none 1 250 000 2 500 000 cash contribution 20.09.1994 01.01.1994 D bearer shares none none 2 500 000 5 000 000 cash contribution 27.03.1997 01.01.1997 E bearer shares none none 1 500 000 3 000 000 cash contribution 29.12.1998 01.01.1999 F bearer shares none none 1 071 429 2 142 858 cash contribution 07.01.2000 01.01.2000 G bearer shares none none 8 385 968 16 771 936 cash contribution 05.08.2011 01.01.2011 H bearer shares none none 8 385 967 16 771 934 cash contribution 21.09.2011 01.01.2011 I bearer shares none none 12 028 594 24 057 188 cash contribution 19.06.2012 01.01.2012 J bearer shares none none 9 794 872 19 589 744 cash contribution 03.10.2012 01.01.2012 K bearer shares none none 4 744 526 9 489 052 cash contribution 18.06.2014 01.01.2014 L bearer shares none none 14 598 541 29 197 082 cash contribution 27.08.2014 01.01.2014 M bearer shares none none 10 590 884 21 181 768 cash contribution 17.04.2015 01.01.2015

Total number of shares 78 401 981 Total share capital (PLN) 156 803 962 Nominal value 1 share = 2 PLN

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 116/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The following table presents the shareholding structure as at 31 December 2019 and 31 December 2018:

share of the share of the Number of total number of voting rights total number of shares Shareholding structure shares votes PLN % amount % GETIN Holding S.A. 42 677 443 54,43% 43 728 643 55,04% Getin Noble Bank S.A. 7 836 172 9,99% 7 836 172 9,86% Dr Leszek Czarnecki (direct) 7 717 725 9,84% 7 717 725 9,71% Other 20 170 641 25,74% 20 170 641 25,39% Total 78 401 981 100,00% 79 453 181 100,00%

41. Other capital

31.12.2019 31.12.2018 Other capital PLN thousand PLN thousand Supplementary capital 797 512 2 411 881 From the sale of shares above their nominal value 624 370 1 362 580 Other 173 142 1 049 301 Revaluation reserve 12 930 1 666 Gains and losses on investments in debt instruments measured at fair value through other 2 324 3 024 comprehensive income Gains and losses on investments in equity instruments measured at fair value through other 20 669 9 582 comprehensive income Change in fair value resulting from the change in the credit risk of a financial liability measured at fair -1 787 -1 836 value through the profit and loss Effect of cash flow hedge accounting -2 223 -6 553 Deferred tax -6 053 -2 551 General banking risk reserve 9 080 9 080 Other reserves 498 641 506 458 Exchange differences 315 315 Total 1 318 478 2 929 400

42. Additional information to cash flow statement

Cash and cash equivalents:

31.12.2019 31.12.2018

Balance sheet items (restated) PLN thousand PLN thousand Cash and balances with Central Bank 623 493 884 679 Current receivables from banks 254 128 171 527 Cash and cash equivalents presented in cash flow statement 877 621 1 056 206

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 117/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Explanation of differences between statement of financial position balance changes and changes reported in the statement of cash flows for 2019:

Explanation of differences

Change in the Change in Cash flow Current balance of the Difference Impact of the valuation statement receivables from Demonstration in Redemption of balance sheet implementation of recognized in the banks and short- financial flows bonds IFRS 16 revaluation term deposits reserve

Change in investments securities -11 397 -20 301 8 904 0 8 904 0 0 0

Change in receivables from banks and financial institutions -72 448 -155 049 -82 601 0 0 -82 601 0 0

Change in deferred income tax assets 1 059 1 059 0 0 0 0 0 0

Changes in derivative financial instruments (assets) 38 028 42 358 -4 330 0 -4 330 0 0 0

Changes in loans and credits to customers -2 772 952 -2 772 952 0 0 0 0 0 0

Change in receivables due to finance leases -5 305 -4 624 -681 -681 0 0 0 0

Change in other loans and receivables 13 145 13 145 0 0 0 0 0 0

Change in other assets -130 465 -130 465 0 0 0 0 0 0

Change in debt securities in issue -725 -148 856 148 131 0 0 0 0 148 131

Changes in receivables from banks and financial institutions -56 529 -57 092 563 0 0 0 563 0 Change in derivative financial instruments (liability) and financial liabilities at fair -262 535 -262 535 0 0 0 0 0 0 value through profit or loss Change in other liabilities -172 310 -101 600 -70 710 -70 710 0 0 0 0

Change in provisions and provisions for deferred income tax -52 831 -52 831 0 0 0 0 0 0

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 118/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Explanation of differences between statement of financial position balance changes and changes reported in the statement of cash flows for 2018:

Explanation of differences

Change in the Change in Cash flow Current balance of the Difference Impact of the valuation statement receivables from Demonstration in Sale of Idea balance sheet implementation of recognized in the banks and short- financial flows Leasing S.A. IFRS 9 revaluation term deposits reserve

Change in investments securities 2 133 908 2 146 430 -12 522 -565 -11 957 0 0 0 Change in receivables from banks and financial institutions -16 171 -12 834 -3 337 296 0 -3 633 0 0 Change in deferred income tax assets -350 477 -286 247 -64 230 -62 661 -1 569 0 0 0 Changes in derivative financial instruments (assets) -107 032 -109 673 2 641 0 2 641 0 0 0 Changes in loans and credits to customers -230 201 -540 745 310 544 310 544 0 0 0 0 Change in receivables due to finance leases 45 970 45 898 72 72 0 0 0 0 Change in other loans and receivables -163 288 -163 288 0 0 0 0 0 0 Change in other assets -229 723 -162 680 -67 043 7 957 0 0 0 -75 000 Change in debt securities in issue 1 870 1 870 0 0 0 0 0 0 Changes in receivables from banks and financial institutions -598 828 -599 469 641 0 0 0 641 0 Change in derivative financial instruments (liability) and financial liabilities at fair -694 061 -694 061 0 0 0 0 0 0 value through profit or loss Change in other liabilities -140 077 -140 077 0 0 0 0 0 0 Change in provisions and provisions for deferred income tax 52 547 65 576 -13 029 -13 029 0 0 0 0

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 119/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

43. Other comprehensive income

01.01.2019- 01.01.2018- Other comprehensive income 31.12.2019 31.12.2018

PLN thousand PLN thousand Effect of cash flow hedge accounting 3 598 (2 229) Gains and losses on investments in debt instruments measured at fair value through other (924) (15 654) comprehensive income Gains and losses on investments in equity instruments measured at fair value through other 8 641 4 415 comprehensive income Change in fair value resulting from the change in the credit risk of a financial liability measured at fair (51) (1 397) value through the profit and loss Total 11 264 (14 865)

01.01.2019- 01.01.2018- 31.12.2019 31.12.2018 Income tax relating to components of other comprehensive income PLN thousand PLN thousand Effect of cash flow hedge accounting 3 598 (2 229) - Amount before income tax 4 330 (2 641) - Income tax amount (732) 412 Gains and losses on investments in debt instruments measured at fair value through other (924) (15 653) comprehensive income - Amount before income tax (701) (18 689) - Income tax amount (223) 3 036 Gains and losses on investments in equity instruments measured at fair value through other 8 641 4 414 comprehensive income - Amount before income tax 11 087 6 732 - Income tax amount (2 446) (2 318) Change in fair value resulting from the change in the credit risk of a financial liability measured at fair (51) (1 397) value through the profit and loss - Amount before income tax 49 (1 836) - Income tax amount (100) 439 Total of income tax relating to other comprehensive income (3 501) 1 569

44. Seasonal or cyclical nature of business

In the Group's operations there are no significant events subject to seasonal or cyclical fluctuations, therefore the presented results of the Group do not show significant fluctuations during the year.

45. Transactions with related entities

The parent company of Idea Bank S.A. Group is Getin Holding S.A. The ultimate parent is Dr Leszek Czarnecki. As part of its lending to related parties, the Group applies standard credit terms, which means that the Group's transactions with related entities are held on market terms: • transactions are concluded in accordance with internal terms and conditions, • assessment of the credibility of the subsidiaries, is based on the principles governing assessment of the creditworthiness of customers, • principles of securing financing transactions are in line with the instructions of legal security force in the Group. The following tables represent the total amounts of transactions concluded with related parties for the financial years ended 31 December 2019 and 31 December 2018:

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 120/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Off-balance Income statement Balance sheet 31.12.2019 sheet items 01.01.2019-31.12.2019 31.12.2019

Transactions of Idea Bank S.A. Group with related parties Contingent financial (PLN thousand) Gross Impairment Fee and Fee and Interest Interest liabilities value of Liabilities of unpaid commission commission income expenses and receivables receivables income expenses guarantees granted

PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand Key management personnel 22 479 1 064 0 1 134 37 0 0 0 Parent company 35 915 0 -52 2 197 0 0 0 0 Associates 99 163 5 385 -4 15 465 322 1 451 673 0 Other entities 225 807 6 517 -3 692 50 966 789 -22 502 157 0

Off-balance Income statement Balance sheet 31.12.2018 sheet items 01.01.2018-31.12.2018 31.12.2018 Transactions of Idea Bank S.A. Group with related parties Contingent financial (PLN thousand) Gross Impairment Fee and Fee and Interest Interest liabilities value of Liabilities of unpaid commission commission income expenses and receivables receivables income expenses guarantees granted

PLN PLN PLN PLN PLN PLN PLN PLN thousand thousand thousand thousand thousand thousand thousand thousand Key management personnel 50 000 142 0 550 25 0 0 0 Parent company 22 003 0 0 1 236 31 1 0 0 Associates 636 899 23 144 91 30 517 352 1 745 6 724 900 Other entities 486 000 12 186 0 56 346 1 314 -75 603 333 0

46. Discontinued operations

The Group, in connection with submission of bankruptcy petition to the District Court for the Capital City of Warsaw on 30 July 2019 by the company Tax Care S.A., decided that it had lost control over the company as of that day and ceased its consolidation. The company's financial results for the 7-month period ended on 31 July 2019 and 12-month period ended on 31 December 2018 were disclosed as discontinued operations. Below are presented key financial information about the income statement and cash flow statement of Tax Care S.A. for the 7-month period ended on 31 July 2019 together with comparative data for the 12- month period ended on 31 December 2018 and the statement of financial position of Tax Care S.A. as at 31 July 2019 together with comparative data as at 31 December 2018.

01.01.2019- 01.01.2018- 31.07.2019 31.12.2018

PLN thousand PLN thousand I. Interest income and other of similar nature 23 485 II. Interest expenses -14 -192 III. Net interest income 9 293 IV. Fee and commission income 21 727 72 260 V. Fee and commission expenses -2 721 -40 135 VI. Net fee and commission income 19 006 32 125 VII. Other operating income 67 320 VIII. Other operating expenses -2 657 -42 332 IX. Net other operating income and expenses -2 590 -42 012 X. Impairment losses 0 0 XI. General administrative costs -23 387 -66 371 XII. Result from operating activity -6 962 -75 965 XIII. Profit (loss) before income tax -6 962 -75 965 XIV. Income tax 0 -8 232 XV. Net profit (loss) of discontinued operations* -6 962 -84 197 * The values disclosed in the consolidated income statement of the Idea Bank Group in the line 'Net profit (loss) of discontinued operations' also include consolidation adjustments for Tax Care S.A.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 121/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

31.07.2019 PLN thousand ASSETS Assets measured at amortised cost other than amounts due from clients 1 740 - Receivables from banks and financial institutions 1 740 Investments in associates 1 Intangible assets 5 370 Tangible fixed assets 11 122 Other assets 10 268 TOTAL ASSETS 28 501 LIABILITIES AND EQUITY Liabilities Other liabilities 44 552 TOTAL LIABILITIES 44 552 Equity (attributable to shareholders of parent company) -16 051 Share capital 6 000 Retained earnings -84 197 Net profit (loss) -6 962 Other capital 69 108 Total equity -16 051 TOTAL LIABILITIES AND EQUITY 28 501

01.01.2019- 01.01.2018- 31.07.2019 31.12.2018 Cash flow PLN thousand PLN thousand From operating activities -6 962 -79 486 From investing activities 0 0 From financial activities 0 0 Net cash flow from discontinued operations -6 962 -79 486

47. Remuneration of Management and Supervisory Board members, share based payments

01.01.2019- 01.01.2018- Remuneration 31.12.2019 31.12.2018

PLN thousand PLN thousand Management Board members 8 258 9 538 Supervisory Board members 1 428 1 619

The Bank's Supervisory Board with Resolution No. 86/2011 of 23 December 2011, implemented the provisions of KNF Resolution No. 258/2011 adopting the "Policy of remuneration of persons having material impact on the risk profile in the Idea Bank S.A. Capital Group". The next updates of the Policy were implemented by resolutions of the Supervisory Board: Resolution No. 106/2013 of 9 October 2013, Resolution No. 107/2015 of 2 September 2015, Resolution No. 107/2017 of 4 September 2017, Resolution 3/2018 of 29 January 2018, Resolution 75/2018 of 25 June 2018, and Resolution 18/2019 of 31 January 2019. Updates of the above policies, concerned, among others adaptation to the internal organization, risk associated with its operations and the nature of its operations. At the same time, due to the supervision exercised by the Bank over the risk related to the operations of subsidiaries of the Bank, consistent principles were established and implemented, accepting the abovementioned policy in the Idea Bank S.A. Capital Group" (hereinafter "Policy").

As a result of the analysis, persons who have a significant impact on the risk of the Bank and Idea Bank S.A. Capital Group were identified (hereinafter "Persons in managerial positions"). The remuneration of these people consists of fixed remuneration and variable remuneration components. Pursuant to the provisions of the Policy, variable remuneration is accounted for in a transparent manner ensuring its effective implementation. The ratio between fixed remuneration and variable remuneration was

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 122/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) determined in a manner ensuring a flexible remuneration policy, including stable and prudent management of the Bank. and subsidiaries of the Bank. Variable remuneration components awarded for work results in a given financial year may not exceed 100% of fixed remuneration received by Risk Takers this year, provided that the Bank may apply a higher maximum ratio of variable remuneration components to fixed remuneration components, however not higher than 200%, with the consent of the General Meeting of Shareholders and providing information to the Polish Financial Supervision Authority on the recommended level of increase.

The basis for determining the amount of variable remuneration is the assessment of the performance of persons who have a significant impact on the risk profile for a period of not less than 3 years, so that the variable remuneration depends on the results of the business cycle of the Bank or subsidiary, the financial results of the given organizational unit, and financial results of the Bank.

The financial and non-financial criteria are taken into account in assessing the individual effects of work that determine the payment of variable remuneration.

Financial criteria should be understood, in particular: a. obtainment by the Bank / a subsidiary of a certain share of net profit and/or sales and/or costs of operations established in the financial plan approved by the Supervisory Board of the Bank/ subsidiary undertaking for a given financial year; b. a loan/ leasing portfolio quality/ cost risk of the Bank/ subsidiary; c. a measure of the Bank's capital adequacy; d. the Bank's liquidity measures.

However, non-financial criteria should be understood in particular: a. periodic employee evaluation; b. participation in projects of material importance for the Bank/ subsidiary; c. no record of a breach by the Management Board member of the Code of Good Practices of the Idea Bank S.A. Capital Group; d. no comments from the Compliance Department to the way the unit operates; e. no recommendation of an internal audit unit of high or/and critical importance and open recommendations for which the deadline for their implementation has expired.

Variable remuneration of persons who have a material impact on the risk profile at the Bank and in selected subsidiaries performing control functions related to risk management at the second level, compliance with the law, HR issues and internal audit is independent of financial results obtained in controlled areas of the Bank's operations.

The policy in force at the Bank in 2019 as regards variable remuneration implies, among others: - payment of 50% of the variable remuneration in cash, - payment of 50% of the agreed remuneration in the amount calculated as the equivalent of the Idea Bank S.A. - the payment, in principle, of 60% of the bonus granted for a given year in the next year and 40% in subsequent years, including the relevant assessment period, for a period not shorter than 3 years, - assessment of the results of the work, taking into account the relevant time horizon, for a period of at least 3 years, so that the variable performance-based remuneration takes into account the business cycle of the Bank / subsidiary and the risks related to the business activity conducted by the Bank and its subsidiaries.

The Bank has the right to reduce or not to pay deferred portion of variable remuneration in situations which could have a significant impact on the Bank's financial result.

The Bank's results adopted to determine the variable remuneration components take into account, among others, the Bank's cost of risk, the cost of capital and liquidity risk in the long-term perspective.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 123/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

If the Bank does not meet the combined buffer requirement within the meaning of the Act of 5 August 2015 on macro-prudential supervision of the financial system and crisis management in the financial system, it is not possible to pay variable components of remuneration before calculating the MDA, i.e. the maximum distributable amount. After calculating the MDA, the Bank may not make payments of variable components of remuneration in the amount exceeding MDA.

In 2019, financial and non-financial goals for 2018 were settled to persons identified in the Policy as having a significant impact on the Bank's risk profile. Due to the Bank's financial result and the failure to meet the combined buffer requirement referred to above, the Bank decided not to pay variable remuneration components for persons having a significant impact on the risk profile. Also deferred parts of the variable remuneration awarded in previous years were not paid.

The Bank did not create a provision for variable remuneration for 2019 due to the inability to pay variable remuneration in the event of a negative financial result.

48. Information on significant pending court and administrative proceedings regarding the Group's liabilities or receivables and significant settlements due to court cases

1. By the decision of 10 October 2018, the President of the OCCP initiated proceedings against the Bank regarding the suspicion of the Bank's application of practices violating collective consumer interests.

Five charges have been made to the Bank, which are essentially divided into two groups and concern: 1) Misleading consumers that GetBack bonds will bring guaranteed profit on a yearly basis or that they are as secure as a bank deposit or treasury bonds and give misleading information to clients that access to GetBack bonds is limited and the offer is unique and that they will be only sold for a short time to put pressure on their immediate purchase. 2) Offering GetBack bonds to people for whom they were inappropriate in terms of acceptable investment risk. This concerned both bank deposit holders, structured deposits, life insurance with UFK, as well as new customers of Idea Bank.

On 1 August 2019, the OCCP issued a partial decision in the matter, stating that practices that violate collective consumer interests, i.e. the dissemination of false or misleading information about GetBack bonds (their characteristics or availability), should be applied. The partial decision did not involve the imposition of a financial penalty on the Bank.

On 2 September 2019, the Bank appealed against the decision to the Court of Competition and Consumer Protection. In the course of further proceedings, on 3 February 2020, the OCCP issued a decision confirming the practices that violate the collective interests of consumers, i.e. proposing the acquisition of GetBack bonds to consumers when the terms of the issue of these bonds regarding investment risk did not suit those consumers. In the decision, the OCCP imposed on the Bank the obligation to remove the ongoing infringements in accordance with the following principles: 1) payment of public compensation in the amount of 20% of invested funds in the amount of PLN 50,000 - i.e. a maximum of PLN 10,000 in relation to a single client, excluding clients who as at the date of submission of their application for compensation concluded a settlement with the Bank, obtained a final judgment of a court, arbitral tribunal or other institution authorized to conduct proceedings on the out-of-court settlement of consumer disputes, based on other events obtained a full refund or partial refund, in such an amount that the refund together with the amount of compensation would exceed the amount of invested funds; 2) inform the bondholders about the readiness to pay compensation in the manner specified in the decision, 3) publication of a statement with the content indicated in the decision.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 124/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

On 3 March 2020, the Bank appealed against the decision to the Court of Competition and Consumer Protection. The Bank raises a number of objections to the decision, in particular regarding the incorrect determination of the Bank's role in the distribution process of GetBack S.A., in the assessment of the Bank's unjustified recognition that the bonds of GetBack S.A. were a product that did not meet the clients' needs in terms of risk, unjustified recognition that bonds constitute a complicated financial instrument and unjustified recognition (and ordering the Bank to provide such information to clients) that the decision of the President of the OCCP is a preliminary ruling. Considering the above circumstances, the Bank decided not to create a provision for the payment of compensation.

The issuance of the second, partial decision means that the administrative proceedings conducted by the OCCP against Idea Bank regarding the offering of GetBack S.A. bonds have been completed, however, both decisions are not final. The Bank initially estimates that if the decision of 3 February 2020 becomes final, which will result in the Bank meeting its obligations, the amount of public compensation may amount to approximately PLN 42 million.

2. In the letter of 18 June 2019, the President of the Office of Competition and Consumers Protection announced the initiation of proceedings regarding the recognition of the provisions of standard contracts used by the Bank as prohibited. The provisions challenged by the OCCP concern modification clauses in the regulations and contracts used by the Bank in relations with consumers, i.e.: (i) Regulations on lending to consumers; (ii) Credit card regulations for individual customers; (iii) Regulations for maintaining bank accounts, providing electronic banking services and issuing and using debit cards at Idea Bank S.A. for individual customers; (iv) Regulations for maintaining bank accounts, providing electronic banking services and issuing and using debit cards at Idea Bank S.A. Lion’s Bank branch in Warsaw for individual clients; (v) Credit Limit Agreement in the account for financial assets; (vi) Loan agreement "Financial loan”; (vii) Financial Loan Agreement.

The Bank does not agree with the allegations presented and responded to them in a letter sent to OCCP. In the course of further exchange of letters, both the OCCP and the Bank maintained their position. The proceedings are pending.

3. With the letter of 16 July 2019, the Polish Financial Supervision Authority notified the Bank of the initiation of an administrative procedure ex officio regarding the imposition of a financial penalty referred to in Art. 138 section 3 point 3a of the Act of 29 August 1997 Banking Law (the "Act"). The proceedings were initiated in relation to the suspected violation by the Bank of the provisions of the Statute and the provisions of:

1) The Act, 2) Regulations of the Minister of Development and Finance of 6 March 2017 on the risk management system and the internal control system, remuneration policy and a detailed method of estimating internal capital in banks, 3) Ordinance of the Minister of Finance of 24 September 2012 regarding the procedure and terms of procedure for investment companies and banks referred to in Art. 70 item 2 of the Act on trading in financial instruments and custodian banks, 4) Ordinance of the Minister of Development and Finance of 25 April 2017 on detailed technical and organizational conditions for investment companies and banks referred to in Art. 70 item 2 of the Act on trading in financial instruments and custodian banks and in connection with the creation by the Bank of a threat to the interests of participants in trading in financial instruments.

If the PFSA finds the above violations, the Commission has the right to impose on the Bank a financial penalty of up to 10% of the revenue shown in the last audited financial statements, and in the absence of such a report - a financial penalty of up to 10% of the forecasted revenue determined on the basis of the economic and financial situation of the Bank. When setting the amount of a financial penalty, the Polish Financial Supervision Authority shall, in particular, take into account the gravity of the violation and its duration, the reasons for the violation, the financial situation of the Bank on which the fine is imposed, and previous infringements by the Bank.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 125/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

The proceedings are currently pending, and the Bank provides all required information and materials at the PFSA 's request.

4. In the letter of 16 August 2019, the Polish Financial Supervision Authority notified the Bank of the initiation of an administrative procedure ex officio regarding the application of the supervisory measure referred to in Art. 138 section 3 point 3 of the Banking Law of 29 August 1997. The subject of administrative proceedings will be an assessment of whether the possible use of a supervisory measure in the form of the possibility of limiting the scope of the Bank's activities may contribute to reducing the risk of conducted operations and thus support the remedial actions carried out by the Bank. This type of measure may relate to the Bank's ability to perform certain activities as well as the conditions for their performance. The proceedings are pending.

5. In a letter of 30 December 2019, the OCCP informed the Bank about the initiation by the President of the OCCP of proceedings regarding practices infringing collective consumer interests as a result of previous explanatory proceedings aimed at preliminary determination whether in connection with the issue or offering to consumers of investment certificates of investment funds created, managed or represented by Trigon Towarzystwo Funduszy Inwestycyjnych S.A., there has been a violation of legal provisions justifying the initiation of proceedings on the application of practices violating the collective interests of consumers or taking action specified in separate laws. The OCCP accused the Bank of activities of informing about product features in a way that could mislead consumers, and proposing to consumers buying Trigon Profit NS FIZ certificates despite the fact that the terms of issuing these certificates in terms of acceptable investment risk did not meet the needs of these consumers. The Bank, disagreeing with the allegations, responded to them in a letter to the OCCP. The proceedings are pending.

The Bank cannot exclude that in the future an unfavourable for the Bank decision of the OCCP ending the abovementioned proceedings may have an impact on the Bank's financial results, but at this stage it is not possible to forecast any amounts in this respect.

6. In a letter of 30 December 2019, the OCCP informed the Bank about the initiation by the President of the OCCP of proceedings regarding practices infringing collective consumer interests as a result of previous explanatory proceedings regarding the Bank's offering of insurance with an insurance capital fund. The OCCP accused the Bank of actions involving unreliable information on risks arising from investing funds, related to the possibility of losing funds, delays in redemption, as well as not making a profit. The alleged practices relate to offering insurance with an insurance capital fund whose funds were invested in certificates of non-standardized closed-end investment funds. The Bank, disagreeing with the allegations, responded to them in a letter to the OCCP. The proceedings are pending.

The Bank cannot exclude that in the future an unfavourable for the Bank decision of the OCCP ending the abovementioned proceedings may have an impact on the Bank's financial results, but at this stage it is not possible to forecast any amounts in this respect.

7. On 4 March 2020, the Bank received a letter from the President of the OCCP with a request to provide a number of new information and documents in the course of the proceeding conducted since 2017 regarding the suspicion of the Bank applying practices infringing collective consumer interests related to structured deposits. The OCCP's allegations concerned the content of product documentation and focus on allegations that: (i) the deposit terms presented in the documents provided to the client before the conclusion of the contract may differ from the final terms of the contract, (ii) the Bank's documents do not show that the client may not receive interest and the risks related to deposits are not properly displayed, (iii) The Bank excluded the Bank's liability for information provided and the results of deposits, (iv) The Bank misled customers as to the scope of guarantees of the Bank Guarantee Fund for deposits, (v) The Bank obliged the customer to seeking information on tax issues from a tax advisor. The Bank, disagreeing with the allegations, responded to them in a letter to the OCCP. The proceedings are pending.

The Bank notes that the information and documents requested from the Bank in that letter of March this year go beyond the issues examined so far, which, in the Bank's opinion, may lead to the President of the OCCP commencing an examination of other than before aspects of structured deposits.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 126/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

8. During 2019, the Bank was not a party to any single significant court proceeding regarding the Bank's liabilities or receivables. However, the value of the subject of the dispute in court cases to which the Bank was a party, as at 31.12.2019, totalled PLN 71.4 million, of which PLN 64 million was the value of the subject of the dispute in civil cases for payment, brought against the Bank by customers who purchased GetBack S.A. bonds. As at the date of approval of these financial statements, these amounts accounted for approximately PLN 98 million in total, of which PLN 87 million was related to GetBack S.A. bonds. At their current stage (the vast majority of cases are at the stage of the first instance proceedings) and taking into account the evidence presented in them and the validity of the arrangement concluded by GetBack S.A. with creditors, the Bank decided not to create any provisions for any of the above-mentioned case. In ongoing court proceedings, the Bank always verifies the entire facts of the case and on this basis individually estimates the likelihood of an unfavourable decision and the related need to create a provision. In the ongoing proceedings, the Bank considers the fact that, in principle, the facts of each case are different and result from both the circumstances related to the product purchase process and the individual characteristics of the person purchasing the instrument. The Bank monitors the status of all matters related to GetBack S.A. bonds and in the event of a change in circumstances, will analyse the need to create reserves. The Bank also conducts court proceedings against an appeal against decisions of administrative bodies, i.e. an appeal against the decision of the President of the OCCP No. RKT - 17/2015 of 17 December 2015 imposing a fine of PLN 412,960 on the Bank and complaints against the decision of the Financial Ombudsman No. RF / WBK / PA / 1/19 of 1 July 2019 imposing a fine of PLN 100,000 on the Bank. The above data do not include debt-collection proceedings.

9. The Head of the Lower Silesian Customs and Tax Office in Wrocław initiated by authorization on 19 April 2018 control over the Idea Bank S.A. Tax Group (hereinafter: PGK Idea Bank) regarding the reliability of the declared tax bases and the correctness of calculating and paying corporate income tax for the 2016 tax year (hereinafter: Control).

The Control applies to PGK Idea Bank existing in 2013-2016. The composition of PGK Idea Bank was Idea Bank S.A. and Idea Money S.A. (formerly Idea Expert S.A.), Tax Care S.A., Idea Leasing S.A. Idea SPV Sp. z o.o. (formerly Ellisa Investment Sp. z o.o. and Carlise Investment Sp. z o.o.), Development System Sp. z o.o. (formerly Lion’s House Sp. z o.o. and LC Corp Sky Tower Sp. z o.o.). Idea Bank was the Representing Company of PGK Idea Bank.

On 11 December 2019, Idea Bank S.A. received the result of the customs and tax control from the Head of the Lower Silesian Customs and Tax Office. The Control included materials from customs and tax audits carried out by the Authority regarding the reliability of declared tax bases and the correctness of calculating and paying corporate income tax for 2016 against entities that are part of the PGK Idea Bank. As a result of audits carried out on all entities constituting PGK Idea Bank, irregularities were found in the scope of corporate income tax for PGK Idea Bank for 2016. According to the Authority's position, the amount of revenues, incomes and losses that should have been transferred to PGK Idea Bank by individual entities constituting PGK Idea Bank should change, and these amounts constitute the basis for preparing the CIT-8A declaration. Therefore, the corporate income tax settlement of PGK Idea Bank for 2016 should change. The amount of the difference between the income tax disclosed in the tax return for 2016 by PGK Idea Bank and the tax due according to the Authority is PLN 26.9 million.

Management Board of Idea Bank S.A. with its registered office in Warsaw, as the entity representing PGK Idea Bank and other entities included in PGK Idea Bank, after conducting legal and tax analyses, did not exercise the right to submit an adjustment of the CIT-8A declaration, i.e. testimony of the amount of income achieved (loss suffered), by PGK Idea Bank for the tax year lasting from 1 January 2016 to 31 December 2016. The entities that were part of the PGK Idea Bank do not agree with the findings contained in the Control Results, and therefore intend to question the findings of the Control in tax proceedings. The Bank does not exclude that in the future the Control Results, with an unfavourable decision for PGK Idea Bank, may affect the financial results of the Bank. However, as at 31.12.2019, the Bank does not identify grounds for creating a provision for possible negative settlement of the dispute with tax authorities. Until now, PGK Idea Bank has not received the decision of the Director of the Tax and Administration Chamber determining the amount of PGK's tax liability for 2016.

In 2019 at Idea Bank S.A. and in companies included in the Idea Bank S.A. Capital Group the Head of the Lower Silesian Customs and Tax Office in Wrocław, by authorization of 30 August 2019, initiated customs and tax control in respect of compliance with the provisions of the tax law in corporate income

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 127/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand) tax for 2018 against Idea Bank S.A., Idea Money S.A., Idea SPV Sp. z o.o. and Development System Sp. z o.o. These controls have not been completed by the date of preparation of the financial statements.

On 19 July 2019, the Bank applied to the Head of the Second Masovian Tax Office in Warsaw for a statement and reimbursement of PDOP overpayment for the tax year from 1 November 2013 to 31 January 2014, and submitted a correction to the CIT-8A declaration on behalf of the Idea Bank S.A. Tax Group for the above billing period. The Head of the Second Masovian Tax Office (Body of the first instance) and the Director of the Tax Administration Chamber in Warsaw (Body of the second instance), refused to initiate tax proceedings regarding the finding and return of an overpayment in PDOP for 2013/2014. Disagreeing with the abovementioned decision on 13 February 2020, the Bank submitted a complaint to the Provincial Administrative Court. Notwithstanding the above, in parallel, on 23 December 2019, to the Body of First Instance, the Bank together with other companies forming PGK in this period, again applied for the confirmation and reimbursement of PDOP overpayment for the tax year from 1 November 2013 to 31 January 2014. Based on the application, the Head of the Second Masovian Tax Office in Warsaw initiated tax proceedings. As at the date of preparation of the financial statements, the tax proceedings were not completed.

49. Events after the reporting period

1. On 31 January 2020, a company from the Idea Bank S.A. Capital Group, Idea SPV Sp. z o.o. ("Idea SPV"), sold to Idea Getin Leasing S.A. ("IGL") all shares of Idea Fleet S.A. ("The Company") representing 99.99% of the share capital of the Company. In addition, as part of the transaction, the Bank directly sold to IGL one share in the Company. The value of the transaction was PLN 11,250,000 (sale of shares held by Idea SPV) and PLN 14 (sale of one share held by the Bank). As a result of the above the only shareholder of the Company was the associated company of the Group, IGL, while Idea Fleet S.A. ceased to be part of the Idea Bank S.A. Group. The Group's result on the Company's sale transaction amounted to approx. PLN 6.3 million gross. 2. On 3 February 2020, the Bank received the decision of the President of the OCCP No. on the application of the Bank's practices that infringe collective consumer interests. Details on the conduct of supervisory authorities are presented in Note 48 to these financial statements. 3. In connection with the SARS-COV 2 coronavirus pandemic, which is likely to have negative consequences for the economy and thus for the borrowers of the Group, the Group has introduced additional assistance instruments for clients, especially those affected by the effects of the pandemic. The implemented measures are primarily the possibility of taking advantage of credit holidays for a period of up to 6 months (with simultaneous extension of the repayment period by an analogous period) as well as the option of renewing the credit line limit by 6 months.

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 128/129 Idea Bank S.A. Capital Group Consolidated Financial Statements for the year ended 31 December 2019 (in PLN thousand)

Jerzy Pruski acting Management Board President

Piotr Miałkowski Management Board Member

Jaromir Frankowicz Management Board Member

Artur Kubiński Management Board Member

Marek Kempny Management Board Member

Warsaw, 18 March 2020

The additional notes and explanations presented on pages 10 to 129 constitute an integral part of the consolidated financial statements 129/129