Impact of the coronavirus COVID-19 epidemic on activity of Bank Polska Kasa Opieki S.A. and its capital group

Bank Polska Kasa Opieki Spółka Akcyjna (the “Bank”) hereby informs about the impact of the coronavirus COVID-19 epidemic on operating activity, financial results and outlook for the Bank and its capital group (the “Group”).

The Bank and the Group maintain full business continuity. The Bank and subsidiaries of the Group have implemented a number of actions in order to ensure business continuity and reduce the risk of epidemic, with regards to both its employees and clients using the branch network. A significant proportion of the Bank’s and the Group’s workforce perform their duties remotely while customer activity gradually shifts to electronic channels.

The Bank on an individual and consolidated basis maintains good capital and liquidity position at a level significantly exceeding the minimum regulatory requirements and currently does not see the impact of the coronavirus epidemic on its liquidity and capital adequacy.

As of the date of the publication of this current report, the Bank identifies factors that will have a negative impact on the financial results of the Bank and the Group in the next quarters of 2020. Recent decisions of central banks to reduce interest rates, including the decision of the Monetary Policy Council in Poland to reduce interest rates, will lower the net financial result of the Group in 2020 by about PLN 200-250 million as a result of lowering the interest margin by about 15 basis points. This impact will materialize gradually in the next quarters.

The Bank assumes that as a consequence of the epidemic of the coronavirus COVID-19 economic activity in Poland and globally can decrease, which in turn can affect customer activity, both retail and corporate, including those active in international markets, and lower sales dynamic of financial products by the Bank and the Group. The Bank expects financial and liquidity situation of part of its clients to worsen in the next months and, as a consequence, an increase in costs of risk for the Group, and scale of the increase is currently difficult to estimate. The above elements will reduce the net financial results and associated financial indicators. At the same time, the Bank plans to implement measures to reduce the impact of the above factors on the net financial results of the Bank and the Group related, among others, to the level of risk appetite and reduction of operating costs. The Bank continues to implement a number of operational activities under the strategy “The Strength of the Polish Bison”, including the digital and operational transformation.

The National Bank of Poland established a package of measures aimed at maintaining liquidity of financial markets and liquidity of banks, which in the Bank’s assessment will positively impact liquidity position of the Bank and banking sector. With regards to the Polish banking sector, the Minister of Finance waived the systemic risk buffer. As a consequence, the minimum capital requirements for the Bank at the individual and consolidated levels decreased by 2.9 pp, further increasing the capital buffers of the Bank and the Group above regulatory capital requirements.

The Bank indicates that the above assessment of the impact of the COVID-19 coronavirus epidemic on the activities, financial results and prospects of the Bank and the Group has been based on the best knowledge of the Bank as at the date of publication of this current report. Precise estimation of such impact is not possible at this stage, and its scale depends to a large extent on external factors that are beyond control of the Bank.

Legal basis:

Article 17 (1) MAR – inside information