2009 Annual Report Make it simple. It’s easy with Bank Pekao S.A. 2009 Annual Report WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Bank Pekao S.A. Mission We, Bank Pekao and UniCredit employees, are committed to generating value for our customers. As a leading bank in Poland, we are dedicated to the development of the communities in which we live, and to being a great place to work. We aim for excellence and we consistently strive to be easy to deal with. These commitments allow us to create sustainable value for all shareholders. Graphic development and Composition: Mercurio S.r.l. Studi di promozione pubblicitaria – Milan Graphic Design: No Hau Studio, Cracow Translation: Corporate Services Sp. z o.o. Pictures in the Annual Report and in the insert: Sebastian Oleksik, Artur Oleszczuk, Bank Pekao S.A. Archives. Courtesy of: Foundation Opera, Foundation Theatrum Gedanense, National Museum in Warsaw, National Theater in Warsaw, Polish P.E.N. Club, Stary Theater in Cracow. Printed on wood-free paper, consistent with European Parliament and Council Directive 94/62/EC, produced with fiber from well-managed forests. WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Times change, but our commitments do not. We emerged from 2009 with a renewed sense of purpose and direction. What was important to us before is even more important today. Namely, our customers. Accordingly, Bank Pekao together with UniCredit Group developed a new mission statement to reinforce those principles and practices that we believe to be drivers of greater customer centricity. Emphasized in this mission is the desire to make banking as easy as possible for our customers by offering the kind of simple, straightforward solutions that can assist them in achieving their financial goals reliably and efficiently. This is what we call “real-life banking”. It means providing our clients with more than just financial services by giving them the right support at the right time and in the right way. It is about looking our customers in the eye, working closely with them to assess their real-life needs, and then using our expertise to deliver effective solutions through smooth and easy interactions. We believe that our rigorous dedication to simplicity and transparency will continue to advance excellence in all that we do. It will also maintain and grow the trust of our customers – a trust that is exemplified in the following pages. This year’s report features photographs and personal stories from Bank Pekao’s and other UniCredit Group customers across Europe, highlighting the concrete role that our company has played in their lives. Each of these individuals, who represent the foundation upon which UniCredit Group is structuring our shared future, has told us about a time we made their life easier. 2009 Annual Report WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Jerzy Owsiak, The Great Orchestra of Christmas Charity Foundation Corporate Banking Client – Poland «When the climax of the Great Orchestra of Christmas Charity gets under way, some 120,000 volunteers take to the streets of cities, towns and villages. Their donation boxes fill up in an absolutely magical way. Everybody knows we raise money to buy life-saving medical equipment. Sometimes people wonder if their spare change can really help. But of course that is exactly how millions of Poles join to make this happen. In the day of the Finale we collected almost EUR 11 million But before we can put that spare change to use, it all has to be counted and deposited to our accounts. Sorting, counting, balancing and managing our accounts – by doing these things, Bank Pekao S.A. helps us immensely and makes our job that much easier.» It’s easy with Bank Pekao S.A. WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Contents Highlights 4 Supervisory Board and Management Board of Bank Pekao S.A. 5 Chairman’s Message to the Shareholders 6 CEO’s Letter 8 External Environment 11 Major Developments and Internal Factors 19 Information for Investors 27 Activity of the Bank Pekao S.A. Capital Group in 2009 33 Balance Sheet and Financial Results 57 Other Information 77 Corporate Governance 81 Corporate Social Responsibility 103 Representations of the Bank’s Management Board 117 Statement of Bank Polska Kasa Opieki Spółka Akcyjna on Application of Corporate Governance Standards in 2009 121 Consolidated Financial Statements of Bank Pekao S.A. Capital Group for the year ended on 31 December 2009 131 UniCredit Group Profile 265 Bank Pekao S.A. · Annual Report 2009 WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Highlights 2007 ** 2009 2008 COMBINED DATA 2007 2006 2005 2004 * INCOME STATEMENT (PLN MIllION) Operating income *** 7,053 7,834 8,355 5,398 4,658 4,413 4,059 Operating costs *** (3,673) (3,787) (3,822) (2,754) (2,347) (2,346) (2,333) Operating profit *** 3,380 4,046 4,533 2,645 2,311 2,067 1,726 Profit before income tax *** 2,998 4,346 4,366 2,605 2,180 1,874 1,466 Net profit attributable to the Bank’s equity holders 2,412 3,528 3,547 2,156 1,788 1,538 1,253 PROFITABILITY RATIOS Return on average equity (ROE) 14.1% 23.5% 24.7% 23.7% 21.1% 19.2% 17.4% Net interest margin 3.5% 4.1% 3.9% 4.1% 4.2% 4.4% 3.8% Non-interest income 42.1% 39.3% 48.0% 49.3% 48.7% 46.9% 47.5% / operating income Cost / income ratio 52.1% 48.3% 45.7% 51.0% 50.4% 53.2% 57.5% BalaNCE SHEET (PLN MIllION) Total assets 130,616 131,941 124,096 124,096 67,704 61,972 59,536 Loans and receivables from customers **** 79,455 82,512 69,699 69,699 32,747 28,976 26,305 Amounts due to customers 97,250 90,889 89,944 89,944 51,794 46,848 45,845 Shareholders’ equity 18,371 16,036 14,747 14,747 8,893 8,423 7,831 BalaNCE SHEET STRUCTURE RATIOS Net loans / total assets 60.8% 62.5% 56.2% 56.2% 48.4% 46.8% 44.2% Securities / total assets 21.0% 17.1% 19.8% 19.8% 25.1% 30.3% 32.9% Deposits / total assets 74.5% 68.9% 72.5% 72.5% 76.5% 75.6% 77.0% Loans / deposits 81.7% 90.8% 77.5% 77.5% 63.2% 61.9% 57.4% Equity / total assets 14.1% 12.2% 11.9% 11.9% 13.1% 13.6% 13.2% Capital Adequacy Ratio 16.2% 12.2% 12.1% 12.1% 16.5% 19.5% 21.7% EMplOYEES AND NETWORK Total number of employees 20,874 21,992 22,926 22,926 15,647 15,942 16,408 Number of outlets (Bank Pekao S.A. 1,089 1,102 1,100 1,100 795 780 784 and OJSC UniCredit Bank) Number of ATMs (Bank Pekao S.A. 1,968 2,004 1,885 1,885 1,262 1,244 1,211 and OJSC UniCredit Bank) In order to assure better comparability, selected data for 2007 income statement are presented as combined data of the Bank Pekao S.A. Group and Pekao285, i.e. the part of Bank BPH SA merged with Bank Pekao S.A. as a result of the merger of the spun-off part of Bank BPH SA as registered on November 29, 2007. Income statement items for 2005 – 2007 are in line with those published for these periods respectively. The presentation of items in the income statement for 2008 and 2009 is in line with the presentation of short version of income statement used in UniCredit Group. * Data restated according to IFRS included in the Report on the activities for the year 2005. ** Data were not audited/reviewed by the independent auditor. *** 2008 and 2007 income statement include continuing and discontinued operations. **** Including debt securities eligible for rediscounting at the Central Bank and net investments in financial leases to customers. Annual Report 2009 · Bank Pekao S.A. WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Supervisory Board and Management Board of Bank Pekao S.A. Supervisory Board Jerzy Woźnicki Chairman Paolo Fiorentino Deputy Chairman and Secretary Federico Ghizzoni Deputy Chairman Members: Paweł Dangel Oliver Greene Enrico Pavoni Leszek Pawłowicz Krzysztof Pawłowski Management Board Jan Krzysztof Bielecki President CEO (until 11 January 2010) Alicja Kornasiewicz Acting President CEO (since 15 February 2010) Luigi Lovaglio First Vice President and GM Vice Presidents: Diego Biondo Marco Iannaccone Andrzej Kopyrski Grzegorz Piwowar Marian Ważyński Bank Pekao S.A. · Annual Report 2009 WorldReginfo - 8726ad61-3812-49f9-b8b0-e4f54728e657 Chairman’s Message to the Shareholders To the Shareholders of Bank Polska Kasa Opieki S.A. On behalf of the Supervisory Board of Bank Polska Kasa Opieki S.A. The Supervisory Board has a positive view of the risk management sys- (Bank Pekao S.A.), I would like to present to the Shareholders the results tem in place at the Bank, which is characterised by a comprehensive and of the evaluation of the Bank’s standing in 2009 made in compliance consolidated approach and covers all the Bank’s units and subsidiaries. with the requirements prescribed by the document entitled Best Practices The Bank’s Management Board is responsible for meeting the strategic for WSE Listed Companies, adopted by the Warsaw Stock Exchange and objectives of risk management, whereas the Supervisory Board oversees brought into effect as of January 1st 2008. the risk assumption policy in terms of its consistency with the Bank’s overall strategy and budget. Additionally, a number of committees set up In the Supervisory Board’s opinion, the economic and financial stand- within the Bank’s Head Office (the Credit Committee, the Assets, Liabili- ing of Bank Pekao S.A.