On March 14, 2018 the Polish Financial Supervision Authority („KNF”), published statement regarding principles of dividend policy for commercial banks in the medium-term perspective which was updated by the position with respect to commercial bank dividend policy in the second half of 2021 adopted by the Polish Financial Supervision Authority on June 24, 2021

The dividend up to 50% of the profit from 2020 can only be paid by the bank:

1. not in the middle of recovery program or recovery plan,

2. having overall BION rate not worse than 2.5,

3. having a leverage ratio (LR) at above 5%,

4. having Common Equity Tier 1 (“CET1”) ratio not lower than the required minimum: 4.5% + 56% * add-on + combined buffer requirement, taking into account the systemic risk buffer at the level of 3%,

5. having Tier 1 (“T1”) ratio not lower than the required minimum: 6% + 75% * add-on + combined buffer requirement, taking into account the systemic risk buffer at the level of 3%,

6. having Total Capital Ratio (“TCR”) not lower than the required minimum: 8% + add-on + combined buffer requirement, taking into account the systemic risk buffer at the level of 3%

The above criteria should be met by the bank at the end of March 2021 and on the date of the resolution of the bank's general meeting on dividend payment, both on an individual and consolidated level.

A dividend of up to 75% of the 2020 net profit may be paid only by a bank that meets all the criteria for a dividend payment of up to 50% of profit, with the additional incorporation within capital criteria the bank's sensitivity to an adverse macroeconomic scenario ("ST1 parameter"), measured by supervisory stress tests. The sensitivity level is captured as the difference between TCR in the reference scenario and the TCR in the shock scenario at the end of the forecast period (2021), taking into account supervisory adjustments. According to the Supervisory Letter, after the above adjustments, the ST1 parameter for the Bank was set at the level of 0.9 percentage point

The dividend up to 100% of the net profit for 2020 may be paid only by the bank that meets all the criteria for the payment of the dividend up to 50% of the profit, while additionally taking into account the level of the bank's sensitivity to an unfavorable macroeconomic scenario ("ST2 parameter"), measured by supervisory stress tests. The sensitivity level is calculated as the difference between the TCR in the reference scenario and the TCR in the shock scenario at the end of the forecast period (2021), taking into account supervisory adjustments, with the reservation that the T1 and T2 capital issues assumed by the bank are not taken into account in the shock scenario. According to the said Supervisory Letter, after the above adjustments, the ST2 parameter for the Bank was set at the level of 2.28 percentage points.

Bank is obligated to meet the above criteria both on an individual and consolidated level.

KNF highlighted that the information presented was prepared taking into account ceteris paribus clause and has remained valid unless significant changes occur in macro or regulatory environment in the Polish banking sector. 

Minimum regulatory capital levels as well as capital levels required to meet criteria of up to 50%, up to 75% and up to 100% of net profit payout are presented in the table below

The Bank and the capital group of the Bank aim at maintaining own funds at a level ensuring solvency under normal conditions and in an event of extraordinary high losses.

When determining future net profit payout levels, both in the long and short-term, the Bank considers:

• planned development targets (strategic targets) of the Bank as well as of the capital group of the Bank,
• macroeconomic and financial markets conditions in Poland and globally,
• current capital adequacy ratios of the Bank at the individual and consolidated level (both under Pillar 1 and also Pillar 2),
• combined buffer requirement at the individual and consolidated level,
• planned or possible changes to legislation that have or could have an impact on capital adequacy,
• the stance of the KNF with regards to principles of dividend policy,
• investor expectations.

Guidelines regarding distribution of the net profit

In the first place, the Bank's Management Board, when recommending payments from profits, will take into account the recommendations regarding profit distribution of the supervisory authorities, in particular the KNF and the EBA.

On 29th March 2021, Bank's Management Board adopted a resolution specifying the following guidelines regarding distribution of the Bank's net profit for the years 2021-2024:

• allocation of 50% -75% of the Bank's profit for 2021 to the dividend for 2021,
• allocation of 50% -75% of the Bank's profit for 2022 to the dividend for 2022,
• allocation of 50% -75% of the Bank's profit for 2023 to the dividend for 2023,
• allocation of 50% -75% of the Bank's profit for 2024 to the dividend for 2024.

Guidelines regarding the distribution of the Bank's profit for the years 2021-2024 received positive opinion from the Bank’s Supervisory Board.

Guidelines regarding the distribution of the Bank's profit for the years 2021-2024 may change, and the Management Board may recommend the distribution of net profit for a given year during this period that is different than the payout indicated above, in particular depending on:

• recommendations of the KNF regarding the distribution of net profit or stance of the KNF regarding the distribution of net profit,
• restrictions resulting from legal regulations, in particular the Act on macroprudential supervision over the financial system and crisis management in the financial system, the Act on the Bank Guarantee Fund, the deposit guarantee system and resolution, the Banking Law Act
• significant change in risk-weighted asset growth,
• significant deterioration of the macroeconomic and financial markets conditions in Poland or globally,
• introduction of legislation that have or could have a significant impact on the capital adequacy of the Bank or the capital group of the Bank,
• imposition of additional capital buffers on the Bank.
   

In accordance with the resolution of the Ordinary General Meeting of Shareholders held on June 11, 2021, the payment of the dividend for 2020 by the Bank will depend on: (i) the position of the Polish Financial Supervision Authority regarding the dividend policy of commercial banks in the second half of 2021 and (ii)  the supervisory recommendation of the PFSA regarding the Bank's dividend policy in the second half of 2021. The Bank's intention is to pay out 75% of the Bank's net profit for 2020, i.e. PLN 3.21 / share, if the KNF's recommendation allows it.