On December 3, 2019, the Polish Financial Supervision Authority ("KNF") adopted the assumptions of the dividend policy of commercial banks in 2020, which are in line with the KNF position presented in March 2018 regarding the dividend policy of commercial banks in the medium term.
The PFSA recommends that dividends from the profit for the year preceding the decision should be paid only by banks that meet the following criteria at the same time:

• do not carry out the recovery program,
• are positively evaluated as part of the Supervisory Review and Evaluation Process (BION) and achieve the final rate not lower than 2.5,
• maintain leverage ratio (LR) above 5%,
• maintain Common Equity Tier 1 (CET1) ratio not lower than the required minimum: 4.5% + 56%*add-on + combined buffer requirement,
• maintain Tier 1 (T1) ratio not lower than the required minimum: 6% + 75%*add-on + combined buffer requirement,
• maintain Total Capital Ratio (TCR) ratio not lower than the required minimum: 8% + add-on + combined buffer requirement.

The PFSA recommends that banks that simultaneously meet the above criteria can pay out up to 50% of generated profit for the year preceding the decision. In addition, the the PFSA recommends the possibility of paying:

• up to 75% of profit generated for the year preceding the decision by banks meeting all of the above criteria, taking into account, as part of capital criteria, an additional buffer of 1.5 pp,
• up to 100% from the profit generated for the year preceding the decision by banks meeting all of the above criteria, taking into account, as part of capital criteria, the bank's sensitivity to an adverse macroeconomic scenario.

For banks involved in foreign currency loans (banks with more than 5% share of foreign currency housing loans for households in the portfolio), the dividend rate should be further adjusted in accordance with the following criteria:

The total value of the correction is the sum of corrections resulting from both criteria.

The correction criteria will lose their importance as the currency loan portfolio continues to depreciate.

The abovementioned criteria relating to the payment of profit from the year preceding the decision should be met by banks at both individual and consolidated levels. At the same time, in the event of payment of profit from previous years, banks should take into account the provisions of Article 77 and 78 of CRR and Article 129 of the Banking Act.

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 of the Bank for 2018-20

On 19th November 2018, Bank's Management Board adopted a resolution specifying the following guidelines regarding distribution of the Bank's net profit for the years 2018-2020. These guidelines were updated on February 25, 2019, due to PFSA’s individual recommendation to increase the own funds of the Bank by retaining at least 25% of the Bank’s profit for the period from 1 January to 31 December 2018.

Taking into a consideration the abovementioned factors, the guidelines regarding distribution of the Bank’s net profit for the years 2018-20 are as follows:

• allocation of PLN 1 732 302 224.4 to the dividend for 2018, implying dividend payout ratio of 75% of the stand-alone net profit
• allocation of 60% -80% of the Bank's profit for 2019 to the dividend for 2019,
• allocation of 50% -75% of the Bank's profit for 2020 for the dividend for 2020.

The guidelines regarding distribution of the Bank’s net profit for the years 2018-20 obtained positive opinion of the Bank’s Supervisory Board on November 19, 2018 and on February 25, 2019 (evaluation of the Management Board's motion regarding the payment of 75% of the Bank's net profit generated in the period from January 1 to December 31, 2018).

Guidelines regarding the distribution of the Bank's profit for the years 2018-2020 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,
• 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.

On June 21st, 2018 the Ordinary General Meeting of the Bank made the resolution regarding the distribution of net profit of Bank for 2017, following the resolution GM made a decision on dividend payment for year 2017. The value of dividend paid in the amount of 7,90 PLN per one share.