Notes to the consolidated financial statements
47a. Credit risk
Credit risk is the risk assumed by the Group under credit transactions and resulting in its inability to recover the amounts disbursed, loss of income or a financial loss. It is the outcome of credit product development and launch as well as the lending process on the one hand and measures employed with a view to reducing the probability of losses, on the other. The Group’s credit risk includes both counterparty and settlement risk.
While developing its current credit risk management policy, the Group aims to maintain the risk appetite defined in its strategy and measured with the NPL ratio and the specified cost of risk as well as an appropriate level of equity, comply with the credit limits set by the Group, analyze both strengths and weaknesses of the Group’s lending process and anticipate the opportunities and threats for its further growth. The Group’s acceptable credit risk policy also takes into account cyclicality of economic processes and changes in the credit portfolio itself.
The Group has reviewed methodologies and all parameters in order to adapt them to changing market conditions.
The following principles have been adopted for the credit risk management process:
- analyzing credit risk of individual exposures, the entire portfolio and the capital requirement related to credit risk;
- using internal and external limits determined by the risk appetite in various areas of the credit portfolio, the Banking Law and recommendations of the Polish Financial Supervision Authority, respectively. The types and levels of the limits used by the Group with regard to lending are determined by internal regulations on credit limits related, among other things, to large exposure concentration, industry concentration, exposure concentration based on type of collateral and product;
- functions related to direct analysis of applications, risk assessment and credit decisions are separated from those focused on acquisition of clients (sales of banking products);
- credit capacity and creditworthiness are the main criteria underlying all credit transactions with clients;
- credit decisions are made in the Group in accordance with procedures and competencies determined in internal regulations on credit risk assessment and credit decision making;
- each credit transaction is monitored from its conclusion to full settlement in terms of utilization, timely repayment, legal security, equity and organizational relationships of the obligor and, in the case of institutional clients, also in terms of their current economic and financial position;
- developments in the real estate market as well as the legal and economic assumptions and framework for valuation of property provided as collateral for credit exposures are monitored on a periodic basis.
Credit risk management in the Group is based on written instructions and procedures defining the methods of identification, measurement, monitoring, limiting and reporting of credit risk. At least once a year, the Group reviews and verifies these instructions, procedures and credit risk limits. The regulations determine the scope of competencies assigned to each unit of the Group in the credit risk management process.
In order to determine the credit risk level, the Group uses the following measures:
- probability of default;
- recovery rates;
- share and structure of impaired loans;
- coverage of impaired loans with impairment losses;
- scoring model efficiency measures;
- cost of risk.
The Group prepares the following cyclical reports on its credit risk exposure:
- monthly report for the Management Board and Credit Committee of the Bank;
- quarterly report for the Supervisory and Management Board.
Maximum credit risk exposure, excluding collateral (by classes of financial instruments)
Net carrying amount | ||
---|---|---|
Balance as at 31 December 2013 |
Balance as at 31 December 2012 (restated) |
|
PLN ‘000 | PLN ‘000 | |
Cash in hand and deposits with the Central Bank | 327,242 | 934,743 |
Receivables from other banks | 36,329 | 29,849 |
Financial assets held for trading | 1,369 | 766 |
Loans and advances granted to clients, including: | 5,055,712 | 4,613,934 |
Overdraft facilities | 71,625 | 64,384 |
Term loans, including: | 4,984,087 | 4,549,550 |
- individuals | 4,018,533 | 3,510,320 |
- institutional clients | 608,964 | 626,210 |
- local authorities | 356,590 | 413,020 |
Investment securities available for sale | 1,455,018 | 1,061,225 |
Quoted | 615,185 | 891,297 |
Unquoted | 839,833 | 169,928 |
Investment securities held to maturity | 387,018 | 392,762 |
Quoted | 372,080 | 392,762 |
Unquoted | 14,938 | 0 |
Other assets | 37,284 | 15,279 |
Total | 7,299,972 | 7,048,558 |
Additionally, the Group is exposed to credit risk arising from concluded transactions recognized as off-balance sheet liabilities. The maximum exposure to credit risk related to the said transactions is expressed by their off-balance sheet value presented in Note 41.
Geographical structure of the credit portfolio
Term loans, including: | |||||||
---|---|---|---|---|---|---|---|
Balance as at 31 December 2013 |
Overdraft facilities |
individuals - consumer loans |
individuals - real estate loans |
individuals - credit card debt |
institutional clients |
local authorities | Total |
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Dolnośląskie | 7,884 | 149,411 | 215,008 | 888 | 59,507 | 51,835 | 484,533 |
Kujawsko-pomorskie | 6,980 | 139,811 | 309,928 | 1,112 | 51,375 | 32,236 | 541,442 |
Lubelskie | 4,691 | 67,966 | 65,649 | 557 | 22,030 | 11,826 | 172,719 |
Lubuskie | 1,681 | 66,745 | 77,411 | 597 | 23,474 | 9,756 | 179,664 |
Łódzkie | 8,433 | 101,319 | 151,041 | 723 | 62,118 | 19,288 | 342,922 |
Małopolskie | 3,786 | 110,616 | 113,127 | 918 | 20,003 | 40,424 | 288,874 |
Mazowieckie | 10,370 | 155,154 | 400,893 | 1,222 | 84,027 | 16,358 | 668,024 |
Opolskie | 729 | 32,535 | 20,937 | 262 | 846 | 500 | 55,809 |
Podkarpackie | 829 | 48,349 | 38,922 | 413 | 4,516 | 31,643 | 124,672 |
Podlaskie | 836 | 26,356 | 31,272 | 306 | 1,458 | 0 | 60,228 |
Pomorskie | 2,368 | 124,415 | 207,071 | 955 | 66,965 | 8,653 | 410,427 |
Śląskie | 6,215 | 224,186 | 136,240 | 1,497 | 28,488 | 28,157 | 424,783 |
Świętokrzyskie | 790 | 28,829 | 22,806 | 358 | 1,143 | 1,298 | 55,224 |
Warmińsko-mazurskie | 1,696 | 76,540 | 122,882 | 561 | 44,458 | 63,031 | 309,168 |
Wielkopolskie | 8,788 | 201,417 | 311,279 | 1,905 | 83,516 | 35,436 | 642,341 |
Zachodniopomorskie | 5,504 | 106,945 | 113,162 | 1,075 | 55,040 | 6,149 | 287,875 |
Not assigned | 45 | 6,907 | 0 | 55 | 0 | 0 | 7,007 |
Total | 71,625 | 1,667,501 | 2,337,628 | 13,404 | 608,964 | 356,590 | 5,055,712 |
Term loans, including: | |||||||
---|---|---|---|---|---|---|---|
Balance as at 31 December 2012 (restated) |
Overdraft facilities |
individuals - consumer loans |
individuals - real estate loans |
individuals - credit card debt |
institutional clients |
local authorities | Total |
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Dolnośląskie | 4,537 | 115,304 | 180,242 | 642 | 56,825 | 64,202 | 421,752 |
Kujawsko-pomorskie | 6,461 | 130,361 | 272,991 | 1,008 | 52,502 | 47,098 | 510,421 |
Lubelskie | 5,481 | 60,527 | 62,162 | 444 | 17,665 | 22,452 | 168,731 |
Lubuskie | 1,854 | 59,202 | 73,486 | 422 | 15,833 | 8,936 | 159,733 |
Łódzkie | 6,983 | 87,445 | 127,773 | 543 | 67,502 | 19,201 | 309,447 |
Małopolskie | 3,189 | 84,152 | 102,627 | 725 | 24,094 | 48,080 | 262,867 |
Mazowieckie | 8,919 | 122,686 | 384,039 | 857 | 135,783 | 21,078 | 673,362 |
Opolskie | 638 | 23,606 | 17,550 | 179 | 535 | 0 | 42,508 |
Podkarpackie | 970 | 35,223 | 35,232 | 312 | 4,782 | 32,296 | 108,815 |
Podlaskie | 856 | 21,602 | 29,698 | 237 | 1,530 | 0 | 53,923 |
Pomorskie | 2,109 | 107,664 | 192,416 | 754 | 62,179 | 9,365 | 374,487 |
Śląskie | 5,723 | 149,976 | 125,971 | 1,001 | 20,613 | 26,525 | 329,809 |
Świętokrzyskie | 651 | 21,172 | 20,989 | 265 | 216 | 3,828 | 47,121 |
Warmińsko-mazurskie | 1,893 | 67,311 | 107,703 | 425 | 43,568 | 41,819 | 262,719 |
Wielkopolskie | 8,355 | 178,802 | 290,650 | 1,500 | 66,293 | 60,288 | 605,888 |
Zachodniopomorskie | 5,723 | 89,183 | 100,594 | 808 | 56,274 | 7,852 | 260,434 |
Not assigned | 42 | 7,410 | 0 | 60 | 16 | 0 | 7,528 |
Total | 64,384 | 1,361,626 | 2,124,123 | 10,182 | 626,210 | 413,020 | 4,599,545 |
Industry structure of the credit portfolio
The following table presents the Bank’s exposure concentration by industry. Loans granted to individuals represent the major part of the Bank’s credit portfolio.
Gross value | Net value | Gross value | Net value | |
---|---|---|---|---|
Balance as at 31 December 2013 |
Balance as at 31 December 2012 (restated) |
|||
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Individuals | 4,143,382 | 4,053,386 | 3,602,473 | 3,532,413 |
Property market services on a fee or contract basis | 356,408 | 355,685 | 335,858 | 334,988 |
Public administration, national defense, mandatory social insurance |
356,391 | 356,367 | 413,499 | 413,087 |
Wholesale, excluding motor vehicles | 36,006 | 31,566 | 20,852 | 20,072 |
Other financial services, excluding insurance and pension funds |
29,654 | 29,395 | 26,641 | 26,455 |
Accommodation | 26,681 | 25,181 | 27,564 | 25,266 |
Catering services | 18,327 | 6,824 | 17,858 | 7,410 |
Building construction | 17,194 | 16,007 | 41,243 | 40,628 |
Education | 17,030 | 16,054 | 22,130 | 21,984 |
Retail sale, excluding motor vehicles | 17,028 | 14,402 | 15,100 | 14,007 |
Manufacture of paper and paper products | 17,016 | 16,871 | 8,060 | 8,017 |
Lease and management of own or leased property | 15,341 | 13,399 | 19,362 | 17,495 |
Other activity | 130,046 | 120,575 | 144,014 | 137,726 |
Total | 5,180,504 | 5,055,712 | 4,694,651 | 4,599,545 |
The Group’s gross exposure to ten largest clients (including capital groups)
Balance as at 31 December 2013 | ||||||
---|---|---|---|---|---|---|
No. | Obligor’s name | Industry according to Polish Classification of Activity | Total exposure | Balance sheet exposure (principal) |
Off-balance sheet exposure |
Share in the gross credit portfolio |
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |||
1. | Client 1 | Postal and courier services | 73,753 | 0 | 73,753 | 1.42% |
2. | Client 2 | Public administration, national defense, mandatory social insurance | 28,750 | 28,750 |
0 |
0.55% |
3. | Client 3 | Manufacture of paper and paper products | 21,618 | 15,059 | 6,559 | 0.42% |
4. | Client 4 | Property market services | 20,736 | 0 | 20,736 | 0.40% |
5. | Client 5 | Accommodation | 17,521 | 17,472 | 49 | 0.34% |
6. | Client 6 | Public administration, national defense, mandatory social insurance | 16,003 | 16,003 | 0 | 0.31% |
7. | Client 7 | Public administration, national defense, mandatory social insurance | 15,098 | 15,098 | 0 | 0.29% |
8. | Client 8 | Public administration, national defense, mandatory social insurance | 14,281 | 14,281 | 0 | 0.28% |
9. | Client 9 | Property market services | 13,762 | 13,375 | 387 | 0.27% |
10. | Client 10 | Public administration, national defense, mandatory social insurance | 12,930 | 12,930 | 0 | 0.25% |
234,452 | 132,968 | 101,484 | 4.53% |
Balance as at 31 December 2012 (restated) | ||||||
---|---|---|---|---|---|---|
No. | Obligor’s name | Industry according to Polish Classification of Activity | Total exposure | Balance sheet exposure (principal) |
Off-balance sheet exposure |
Share in the gross credit portfolio |
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |||
1. | Client 1 | Head office activities; management consulting | 40,882 | 40,882 | 0 | 0.90% |
2. | Client 2 | Public administration, national defense, mandatory social insurance | 33,875 | 33,875 | 0 | 0.70% |
3. | Client 3 | Postal and courier services | 28,044 | 0 | 28,044 | 0.60% |
4. | Client 4 | Public administration, national defense, mandatory social insurance | 21,403 | 21,403 | 0 | 0.50% |
5. | Client 5 | Accommodation | 18,161 | 18,158 | 3 | 0.40% |
6. | Client 6 | Public administration, national defense, mandatory social insurance | 18,000 | 18,000 | 0 | 0.40% |
7. | Client 7 | Public administration, national defense, mandatory social insurance | 17,614 | 17,614 | 0 | 0.40% |
8. | Client 8 | General construction work related to the construction of buildings | 17,339 | 3,506 | 13,833 | 0.40% |
9. | Client 9 | Financial services, excluding insurance and pension funds | 16,688 | 16,688 | 0 | 0.40% |
10. | Client 10 | Lease and rental | 14,200 | 14,164 | 36 | 0.30% |
226,206 | 184,290 | 41,916 | 4.80% |
Quality structure
Balance as at 31 December 2013 |
Indications of impairment identified but impairment did not occur and impairment loss is not required, including: |
Indications of impairment identified, impairment and the related loss recognized |
||||||
---|---|---|---|---|---|---|---|---|
No indications of impairment/loss events identified |
net carrying amount |
exposures where the value of collateral has been taken into account in discounted anticipated future cash flows |
financial effect of collateral *) |
exposures with principal or interest delinquencies |
net carrying amount |
financial effect of collateral *) |
Total | |
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Receivables from other banks | 36,329 | 0 | 0 | 0 | 0 | 0 | 0 | 36,329 |
Overdraft facilities | 57,935 | 4,445 | 4,467 | 2,270 | 0 | 9,245 | 2,995 | 71,625 |
Term loans, including: | 4,793,188 | 32,844 | 32,869 | 15,531 | 5,788 | 158,055 | 32,493 | 4,984,087 |
Individuals | 3,905,024 | 0 | 0 | 0 | 0 | 113,509 | 3,091 | 4,018,533 |
- consumer loans |
1,600,578 | 0 | 0 | 0 | 0 | 66,923 | 3,091 | 1,667,501 |
- real estate loans |
2,292,214 | 0 | 0 | 0 | 0 | 45,414 | 0 | 2,337,628 |
- credit card debt |
12,232 | 0 | 0 | 0 | 0 | 1,172 | 0 | 13,404 |
institutional clients | 531,574 | 32,844 | 32,869 | 15,531 | 5,788 | 44,546 | 29,402 | 608,964 |
local authorities | 356,590 | 0 | 0 | 0 | 0 | 0 | 0 | 356,590 |
Investment securities available for sale | 1,455,018 | 0 | 0 | 0 | 0 | 0 | 0 | 1,455,018 |
Quoted | 615,185 | 0 | 0 | 0 | 0 | 0 | 0 | 615,185 |
Unquoted | 839,833 | 0 | 0 | 0 | 0 | 0 | 0 | 839,833 |
Investment securities held to maturity |
387,018 | 0 | 0 | 0 | 0 | 0 | 0 | 387,018 |
Quoted | 372,080 | 0 | 0 | 0 | 0 | 0 | 0 | 372,080 |
Unquoted | 14,938 | 0 | 0 | 0 | 0 | 0 | 0 | 14,938 |
Total | 6,729,488 | 37,289 | 37,336 | 17,801 | 5,788 | 167,300 | 35,488 | 6,934,077 |
*) the financial effect of collateral takes into account impairment losses on on-balance sheet items and provisions for off-balance sheet liabilities
Balance as at 31 December 2012 (restated) |
Indications of impairment identified but impairment did not occur and impairment loss is not required, including: |
Indications of impairment identified, impairment and the related loss recognized |
||||||
---|---|---|---|---|---|---|---|---|
No indications of impairment/loss events identified |
net carrying amount |
exposures where the value of collateral has been taken into account in discounted anticipated future cash flows |
financial effect of collateral *) |
exposures with principal or interest delinquencies |
net carrying amount |
financial effect of collateral *) |
Total | |
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Receivables from other banks | 29,849 | 0 | 0 | 0 | 0 | 0 | 0 | 29,849 |
Overdraft facilities | 53,514 | 513 | 513 | 964 | 0 | 10,357 | 3,259 | 64,384 |
Term loans, including: | 4,367,142 | 36,862 | 36,866 | 20,036 | 13,698 | 131,157 | 19,134 | 4,535,161 |
Individuals | 3,392,894 | 4,797 | 4,800 | 3,332 | 4,797 | 98,240 | 0 | 3,495,931 |
- consumer loans |
1,296,432 | 4,797 | 4,800 | 3,332 | 4,797 | 60,397 | 0 | 1,361,626 |
- real estate loans |
2,086,858 | 0 | 0 | 0 | 0 | 37,265 | 0 | 2,124,123 |
- credit card debt |
9,604 | 0 | 0 | 0 | 0 | 578 | 0 | 10,182 |
institutional clients | 561,228 | 32,065 | 32,066 | 16,704 | 8,901 | 32,917 | 19,134 | 626,210 |
local authorities | 413,020 | 0 | 0 | 0 | 0 | 0 | 0 | 413,020 |
Investment securities available for sale | 1,061,225 | 0 | 0 | 0 | 0 | 0 | 0 | 1,061,225 |
Quoted | 891,297 | 0 | 0 | 0 | 0 | 0 | 0 | 891,297 |
Unquoted | 169,928 | 0 | 0 | 0 | 0 | 0 | 0 | 169,928 |
Investment securities held to maturity | 392,762 | 0 | 0 | 0 | 0 | 0 | 0 | 392,762 |
Quoted | 392,762 | 0 | 0 | 0 | 0 | 0 | 0 | 392,762 |
Unquoted | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Total | 5,904,492 | 37,375 | 37,379 | 21,000 | 13,698 | 141,514 | 22,393 | 6,083,381 |
*) the financial effect of collateral takes into account impairment losses on on-balance sheet items and provisions for off-balance sheet liabilities
Collateral and other credit risk mitigation forms
Collateral and other items improving the loan terms:
- mortgage placed in the land and mortgage register as a senior lien or junior lien (if the total value of all liens does not exceed 50% of the market value of the property). Liens representing 100% of the transaction value are recorded to collateralize principal increased by at least 60% of the transaction value to secure payment of interest, fees and charges as well as the Bank’s costs related to the obligor’s delinquencies;
- assignment of rights under property insurance policies covering fire and other accidents;
- statement of submission to enforcement proceedings by the obligor (and/or guarantor) up to 150% of the gross loan amount, with the date by which the Bank may apply for a writ of execution;
- statement of submission to enforcement proceedings by the property owner up to the amount of the mortgage lien(s) created on the owned property (properties), with the date by which the Bank may apply for a writ of execution based thereon. The aforesaid date may not be earlier that three years of the last day of the calendar month of the loan term;
- blank promissory note with a promissory note agreement for the Bank;
- for construction of a house/premises – assignment of receivables under the construction contract concluded with the property developer/housing cooperative;
- transfer of the obligor’s cash to the Bank’s account pursuant to Article 102 of the Banking Law (deposits);
- registered pledge blocking the rights attached to securities issued by the State Treasury and the National Bank of Poland (treasury bills and bonds);
- assignment of units in an investment fund management company accepted by the Bank;
- assignment of rights under an insurance policy taken out from an insurance undertaking accepted by the Bank;
- financial pledge, registered pledge, assignment, deposit or blocking of other investment products approved on a case-by-case basis when making the loan decision.
As at 31 December 2013, the fair value of mortgage set up as collateral for the related exposures was to PLN 4.639.5 million compared to PLN 4.469.3 million as at 31 December 2012. The financial effect of recovery based on collateral for receivables analyzed on a case-by-case basis amounted to PLN 53.3 million as at 31 December 2013 and PLN 43.4 million as at 31 December 2012. This amount would increase the required impairment losses if cash flows related to the collateral were not included in the calculation. For receivables analyzed on a case-by-case basis, impairment losses not including the financial effect of recovery based on collateral would be PLN 77.0 million as at 31 December 2013 vs. PLN 60.2 million as at 31 December 2012.
Ageing analysis of past-due financial assets with no impairment losses recognized (by classes of financial instruments)
31 December 2013 | up to 30 days | 31 – 60 days | 61 – 90 days | over 90 days | Total |
---|---|---|---|---|---|
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Overdraft facilities | 2,318 | 389 | 82 | 0 | 2,789 |
Term loans, including: | 337,100 | 25,022 | 6,603 | 0 | 368,725 |
individuals | 312,475 | 25,017 | 6,603 | 0 | 344,095 |
- consumer loans | 199,787 | 18,960 | 5,507 | 0 | 224,254 |
- real estate loans | 111,926 | 5,730 | 962 | 0 | 118,618 |
- credit card debt | 762 | 327 | 134 | 0 | 1,223 |
institutional clients | 18,292 | 5 | 0 | 0 | 18,297 |
local authorities | 6,333 | 0 | 0 | 0 | 6,333 |
Total | 339,418 | 25,411 | 6,685 | 0 | 371,514 |
31 December 2012 (restated) |
up to 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total |
---|---|---|---|---|---|
PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | PLN ‘000 | |
Overdraft facilities | 2,044 | 313 | 160 | 0 | 2,517 |
Term loans, including: | 310,620 | 28,727 | 8,399 | 7,242 | 354,988 |
individuals | 247,393 | 28,402 | 8,399 | 4,703 | 288,897 |
- consumer loans | 141,878 | 17,285 | 4,972 | 4,703 | 168,838 |
- real estate loans | 104,977 | 10,921 | 3,308 | 0 | 119,206 |
- credit card debt | 538 | 196 | 119 | 0 | 853 |
institutional clients | 30,661 | 325 | 0 | 2,539 | 33,525 |
local authorities | 32,566 | 0 | 0 | 0 | 32,566 |
Total | 312,664 | 29,040 | 8,559 | 7,242 | 357,505 |
Annual Report 2013 - Bank Pocztowy
Corporate Governance
- Corporate governance: principles and scope of application
- Control system in the process of preparing financial statements
- Entity authorized to audit financial statements
- Shareholding structure and share capital
- Key information regarding Poczta Polska S.A.
- Cooperation with Poczta Polska S.A.
- Investor relations
- By-laws amending principles
- Activities of the corporate bodies of the Bank