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Notes to the consolidated financial statements

46.1. Credit risk

Download note 46.1 in XLS

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 its 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 adopted the following principles for the credit risk management process:

  • analyzing credit risk of individual exposures, the entire portfolio and the capital requirement related to credit risk;
  • applying internal and external limits arising from risk appetite in various areas of the credit portfolio and from the Banking Law and implemented recommendations of PFSA, respectively;
  • functions related to direct analysis of applications, risk assessment and credit related decision making are separated from those focused on client attraction (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;
  • the financial and economic standing of each insurance company supplying credit collateral, as well as delivery of insurance policies and assignment of rights related thereto by clients are monitored on a regular basis;
  • 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 policies and procedures defining methods of identification, measurement, monitoring, limiting and reporting of credit risk. 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 (PD);
  • recovery rate (RR);
  • loss given default (LGD);
  • loss identification period (LIP);
  • share and structure of impaired loans (NPL);
  • coverage of impaired loans with impairment losses (NPL coverage);
  • Scoring model efficiency measures (among others GINI, PSI Ratio);
  • cost of risk.

The Group carries out regular review of implementation of the adopted credit risk management policy. The review and modification includes mostly:

  • internal regulations regarding client’s credit risk assessment and monitoring, as well as verification of the value of legal security, which are adjusted to changing market conditions, business specifics of each client type (group), loan purpose and determination of the minimum requirements regarding the obligatory forms of legal security;
  • internal system of limiting credit activities and determining decision-making powers regarding loans;
  • a system of identifying, assessing and reporting credit risk to Credit Committees, Management and Supervisory Board of the Bank;
  • maximum adequacy levels of ratios used to assess credit risk and acceptable forms of own contribution for retail housing loans;
  • scoring models and IT tools used in the credit risk management process.

The Group’s reporting system includes among others:

  • reporting on credit risk level, to include vintage analyses, information regarding the use of limits, quality and efficiency of credit processes;
  • reports on stress tests, limit review and back-test analyses for impairment losses;
  • analyses of real property market and verification of the current value of security for credit exposures;
  • review of implemented credit risk policy.

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 (by classes of financial instruments)

  Net carrying amount
  Balance as at
31 December 2014		 Balance as at
31 December 2013
  PLN’000 PLN’000
Cash in hand and deposits with the Central Bank 757,643 327,242
Receivables from other banks 158,269 36,329
Financial assets held for trading 1,336 1,369
Loans and advances granted to clients, including: 5,151,777 5,055,712
     - individuals 4,296,942 4,053,210
     - institutional clients 551,538 645,912
      - local authorities 303,297 356,590
Investment assets available for sale: 1,100,547 1,455,018
      - quoted 620,592 615,185
      - not quoted 479,955 839,833
Investment assets held to maturity: 418,719 387,018
      - quoted 393,688 372,080
      - not quoted 25,031 14,938
Other assets 29,274 27,074
Total 7,617,565 7,289,762


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 40.

In order to prevent overly concentration of exposure, the Group applies internal and external limits arising from risk appetite in various areas of the credit portfolio and from the Banking Law and implemented recommendations of PFSA. Limit types and levels applied by the Group with regard to credit operations are determined by internal regulations regarding the limiting of credit operations related among others to large exposures, industrial concentration, exposure concentration by type of collateral or product.

The Group operates only in Poland. The following tables present balance sheet and off-balance sheet exposure regarding loans and advances granted to clients in each province.

Geographical structure of the credit portfolio (net carrying amounts)
  Loans and advances granted to clients, including:  
Total		  
Net share in the loan portfolio
  individuals institutional clients local authorities
Balance as at
31 December 2014		 overdraft facilities consumer loans real estate loans credit card debt
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 %
Mazowieckie 2,759 170,239 405,864 1,575 67,911 13,807 662,155  12.9%
Wielkopolskie 5,365 217,087 313,678 2,089 64,589 30,977 633,785  12.3%
Kujawsko-pomorskie 4,226 142,540 321,838 1,154 45,372 28,108 543,238  10.5%
Dolnośląskie 1,349 197,412 236,999 1,082 54,880 36,802 528,524  10.3%
Śląskie 3,670 246,760 137,499 1,847 31,102 24,912 445,790  8.7%
Pomorskie 1,890 130,742 215,618 1,064 58,188 7,931 415,433  8.1%
Łódzkie 1,563 107,717 156,638 809 56,742 17,140 340,609  6.6%
Warmińsko-mazurskie 1,212 82,025 129,312 656 41,008 55,332 309,545  6.0%
Zachodniopomorskie 2,593 119,415 115,494 1,219 53,005 5,324 297,050  5.8%
Małopolskie 2,222 118,363 119,321 1,123 15,708 32,836 289,573  5.6%
Lubuskie 1,038 73,929 75,422 724 26,963 9,134 187,210  3.6%
Lubelskie 1,880 76,174 66,710 627 28,340 10,943 184,674  3.6%
Podkarpackie 783 57,802 39,155 467 3,858 29,601 131,666  2.6%
Opolskie 520 37,225 23,353 316 1,241 450 63,105  1.2%
Świętokrzyskie 610 34,104 22,636 440 1,356 0 59,146  1.1%
Podlaskie 690 25,577 30,426 333 1,143 0 58,169  1.1%
Not assigned 0 1,971 0 2 132 0 2,105  0.0%
Total 32,370 1,839,082 2,409,963 15,527 551,538 303,297 5,151,777  100.0%
  Loans and advances granted to clients, including:  
Total		  
Net share in the loan portfolio
  individuals institutional clients local authorities
Balance as at
31 December 2013		 overdraft facilities consumer loans real estate loans credit card debt
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 %
Mazowieckie 3,068 155,154 400,893 1,222 90,759 16,358 667,454  13.2%
Wielkopolskie 5,870 201,417 311,279 1,905 83,720 35,436 639,627  12.7%
Kujawsko-pomorskie 4,601 139,811 309,928 1,112 54,293 32,236 541,981  10.7%
Dolnośląskie 1,332 149,411 215,008 888 66,809 51,835 485,283  9.6%
Śląskie 3,659 224,186 136,240 1,497 31,087 28,157 424,826  8.4%
Pomorskie 2,057 124,415 207,071 955 67,571 8,653 410,722  8.1%
Łódzkie 1,701 101,319 151,041 723 64,674 19,288 338,746  6.7%
Warmińsko-mazurskie 1,284 76,540 122,882 561 44,514 63,031 308,812  6.1%
Małopolskie 2,421 110,616 113,127 918 20,314 40,424 287,820  5.7%
Zachodniopomorskie 2,810 106,945 113,162 1,075 55,235 6,149 285,376  5.6%
Lubuskie 1,075 66,745 77,411 597 30,026 9,756 185,610  3.7%
Lubelskie 2,092 67,966 65,649 557 24,409 11,826 172,499  3.4%
Podkarpackie 766 48,349 38,922 413 5,881 31,643 125,974  2.5%
Podlaskie 780 26,356 31,272 306 4,152 0 62,866  1.2%
Opolskie 525 32,535 20,937 262 1,258 500 56,017  1.1%
Świętokrzyskie 595 28,829 22,806 358 1,206 1,298 55,092  1.1%
Not assigned 41 6,907 0 55 4 0 7,007  0.1%
Total 34,677 1,667,501 2,337,628 13,404 645,912 356,590 5,055,712  100.0%

 
Geographical structure of the credit portfolio (net off-balance sheet amounts)

The net value of off-balance sheet exposure regarding loans and advances includes the amount of provisions for off-balance sheet exposures, presented in Note 34.

  Loans and advances granted to clients, including: Total  
Sharein off-balance sheet net exposure
  individuals institutional clients local authorities
Balance as at
31 December 2014		 overdraft facilities consumer loans real estate loans credit card debt
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 %
Mazowieckie 3,353 2,970 5,454 1,415 51,659 0 64,851  37.1%
Śląskie 2,730 2,476 1,083 1,958 13,256 0 21,503 12.3%
Łódzkie 1,389 1,458 1,157 714 15,750 0 20,468 11.7%
Wielkopolskie 4,328 1,339 2,614 1,659 1,401 0 11,341 6.5%
Dolnośląskie 1,010 2,076 3,370 869 2,053 0 9,378 5.4%
Kujawsko-pomorskie 4,075 1,089 1,211 989 350 0 7,714 4.4%
Pomorskie 1,300 1,064 1,647 879 1,781 0 6,671 3.8%
Lubelskie 1,717 1,129 1,059 722 1,771 0 6,398 3.7%
Małopolskie 1,623 1,411 1,045 1,098 225 0 5,402 3.1%
Zachodniopomorskie 1,842 978 657 818 239 0 4,534 2.6%
Warmińsko-mazurskie 886 499 1,708 460 540 0 4,093 2.3%
Lubuskie 1,030 813 330 482 1,187 0 3,842 2.2%
Podkarpackie 916 487 866 623 54 0 2,946 1.7%
Podlaskie 1,210 263 204 285 85 0 2,047 1.2%
Świętokrzyskie 748 223 397 316 67 0 1,751 1.0%
Opolskie 348 545 99 326 14 0 1,332 0.8%
Not assigned 13 564 0 23 0 0 600 0.3%
Total 28,518 19,384 22,901 13,636 90,432 0 174,871  100.0%
  Loans and advances granted to clients, including: Total  
Sharein off-balance sheet net exposure
  individuals institutional clients local authorities
Balance as at
31 December 2013		 overdraft facilities consumer loans real estate loans credit card debt
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 %
Mazowieckie 3,336 2,691 7,197 1,732 85,647 0 100,603 37.6%
Łódzkie 1,333 1,175 2,661 884 35,599 0 41,652 15.6%
Dolnośląskie 1,180 2,213 7,249 1,203 8,420 0 20,265 7.6%
Wielkopolskie 4,281 1,251 4,827 2,167 5,922 0 18,448 6.9%
Kujawsko-pomorskie 4,104 672 4,235 1,267 2,416 0 12,694 4.7%
Lubelskie 1,817 391 1,936 837 6,747 0 11,728 4.4%
Śląskie 2,701 2,916 2,110 1,808 1,961 0 11,496 4.3%
Zachodniopomorskie 1,855 959 2,087 1,237 2,742 0 8,880 3.3%
Pomorskie 1,292 1,087 2,731 1,181 2,525 0 8,816 3.3%
Małopolskie 1,752 719 1,993 923 3,263 0 8,650 3.2%
Lubuskie 972 559 319 664 5,829 0 8,343 3.1%
Warmińsko-mazurskie 937 617 1,988 740 1,965 0 6,247 2.3%
Podkarpackie 928 522 1,144 636 78 0 3,308 1.2%
Podlaskie 1,311 51 285 539 95 0 2,281 0.9%
Świętokrzyskie 712 374 167 478 127 0 1,858 0.7%
Opolskie 391 512 389 320 171 0 1,783 0.7%
Not assigned 9 180 0 42 160 0 391 0.1%
Total 28,911 16,889 41,318 16,658 163,667 0 267,443  100.0%

Industry structure of the credit portfolio

The following table presents the Group’s exposure concentration by industry. The Group’s portfolio is dominated by loans granted to individuals.

            Balance as at
31 December 2014		           Balance as at
31 December 2013
  Net carrying amount Net off-balance sheet amount Total net credit exposure Interest (%) Net carrying amount Net off-balance sheet amount Total net credit exposure Interest (%)
  PLN’000 PLN’000 PLN’000 % PLN’000 PLN’000 PLN’000 %
Individuals 4,296,942 84,439 4,381,381 82.3% 4,053,386 103,776 4,157,162 78.1%
Property market services 330,901 24,023 354,924 6.7% 355,685 49,568 405,253 7.6%
Public administration, national defense, mandatory social insurance 303,297 0 303,297 5.7% 356,367 0 356,367 6.7%
Accommodation 29,779 10,913 40,692 0.8% 25,181 72 25,253 0.5%
Manufacture of paper and paper products 20,851 1,694 22,545 0.4% 16,871 6,608 23,479 0.4%
Wholesale, excluding motor vehicles 16,315 372 16,687 0.3% 31,566 2,534 34,100 0.6%
Education 14,794 14 14,808 0.3% 16,054 634 16,688 0.3%
Retail sale, excluding motor vehicles 14,484 245 14,729 0.3% 14,402 4,593 18,995 0.4%
Financial services, excluding insurance and pension funds 14,142 0 14,142 0.3% 29,395 238 29,633 0.6%
Other activity 110,272 53,171 163,443 3.1% 156,805 99,420 256,225 4.8%
Total 5,151,777 174,871 5,326,648 100% 5,055,712 267,443 5,323,155 100.0%
Group’s gross exposure to ten largest clients

 

Balance as at
31 December 2014		        
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 %
1. Client 1 Postal and courier services 49,077 0 49,077 0.9%
2. Client 2 Property market services 29,653 16,730 12,923 0.6%
3. Client 3 Public administration, national defense, mandatory social insurance 23,625 23,625 0 0.4%
4. Client 4 Manufacture of paper and paper products 20,746 19,135 1,611 0.4%
5. Client 5

Accommodation

 17,500 6,668 10,832 0.3%
6. Client 6 Accommodation 16,851 16,692 159 0.3%
7. Client 7 Public administration, national defense, mandatory social insurance 14,203 14,203 0 0.3%
8. Client 8 Public administration, national defense, mandatory social insurance 14,200 14,200 0 0.3%
9. Client 9 Public administration, national defense, mandatory social insurance 12,582 12,582 0 0.2%
10. Client 10 Public administration, national defense, mandatory social insurance 11,100 11,100 0 0.2%
      209,537 134,935 74,602 3.9%
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 %
1. Client 1 Postal and courier services 73,753 0 73,753 1.4%
2. Client 2 Public administration, national defense, mandatory social insurance 28,750 28,750

0

 0.6%
3. Client 3 Manufacture of paper and paper products 21,618 15,059 6,559 0.4%
4. Client 4 Property market services 20,736 0 20,736  0.4%
5. Client 5

Accommodation

 17,521 17,472 49 0.3%
6. Client 6 Public administration, national defense, mandatory social insurance 16,003 16,003 0 0.3%
7. Client 7 Public administration, national defense, mandatory social insurance 15,098 15,098 0 0.3%
8. Client 8 Public administration, national defense, mandatory social insurance 14,281 14,281 0 0.3%
9. Client 9 Property market services 13,762 13,375 387 0.3%
10. Client 10 Public administration, national defense, mandatory social insurance 12,930 12,930 0 0.3%
      234,452 132,968 101,484 4.5%

Quality structure

The Group has identified the following quality structure of financial assets:

  • current, no indications of impairment;
  • overdue, no indications of impairment;
  • indications of impairment identified, but no impairment detected;
  • indications of impairment identified, impairment and the related loss recognized.

The following tables present the summary of the above quality classes of each financial assets type as at 31December 2014 and 31 December 2013.


A. Quality structure of receivables from other banks

 

         Balance as at
31 December 2014		          Balance as at
31 December 2013
  Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure
  PLN’000 PLN’000 PLN’000 % PLN’000 PLN’000 PLN’000 %
Current receivables from other banks, no impairment indication 158,269 0 158,269 100.0% 36,329 0 36,329 100.0%
Overdue receivables from other banks, no impairment indication 0 0 0 0.0% 0 0 0 0.0%
Receivables from other banks with indications of impairment identified, but no impairment detected 0 0 0 0.0% 0 0 0 0.0%
Receivables from other banks with indications of impairment identified, impairment and the related loss recognized 0 0 0 0.0% 0 0 0 0.0%
Total 158,269 0 158,269 100.0% 36,329 0 36,329 100.0%
B. Quality structure of investment assets

 

          Balance as at
31 December 2014		           Balance as at
31 December 2013
  Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure
  PLN’000 PLN’000 PLN’000 % PLN’000 PLN’000 PLN’000 %
Current investment assets, no indications of impairment 1,519,266 0 1,519,266 100.0% 1,842,036 0 1,842,036 100.0%
Overdue investment assets, no indications of impairment 0 0 0 0.0% 0 0 0 0.0%
Investment assets, indications of impairment identified, but no impairment detected 0 0 0 0.0% 0 0 0 0.0%
Investment assets, indications of impairment identified, impairment and the related loss recognized 0 0 0 0.0% 0 0 0 0.0%
Total 1,519,266 0 1,519,266 100.0% 1,842,036 0 1,842,036 100.0%
C. Struktura jakościowa kredytów i pożyczek udzielonych klientom

Balance as at
31 December 2014		 Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure
  PLN’000 PLN’000 PLN’000 % PLN’000 PLN’000 PLN’000 %
Current loans and advances, no impairment indication 4,689,905 10,334 4,679,571 90.8% 172,907 389 172,518 98.7%
Overdue loans and advances, no impairment indication 256,774 12,534 244,240 4.7% 1,154 60 1,094 0.6%
Loans and advances with indications of impairment, but no impairment
detected		 53,615 867 52,748 1.0% 496 4 492 0.3%
Loans and advances with indications of impairment, impairment and the
related loss recognized		 325,391 150,173 175,218 3.4% 945 178 767 0.4%
Total 5,325,685 173,908 5,151,777 100.0% 175,502 631 174,871 100.0%
Balance as at
31 December 2013		 Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure Gross carrying amount Allowance Net carrying amount Share in net on-balance sheet exposure
  PLN’000 PLN’000 PLN’000 % PLN’000 PLN’000 PLN’000 %
Current loans and advances, no impairment indication 4,499,939 6,183 4,493,756 88.9% 264,194 816 263,378 98.5%
Overdue loans and advances, no impairment indication 365,669 8,352 357,317 7.1% 2,792 102 2,690 1.0%
Loans and advances with indications of impairment, but no impairment
detected		 37,655 316 37,339 0.7% 1,023 9 1,014 0.4%
Loans and advances with indications of impairment, impairment and the
related loss recognized		 277,241 109,941 167,300 3.3% 559 198 361 0.1%
Total 5,180,504 124,792 5,055,712 100.0% 268,568 1,125 267,443 100.0%

 
Loans and advances to customers, current, no impairment indication
Loans and advances granted to customers, not overdue and without impairment indication, bear an acceptable level of credit risk.
 

  Balance as at
31 December 2014		 Balance as at
31 December 2013
  PLN’000 PLN’000
individuals  3,929,739  3,603,478
      - overdraft facilities  28,280  31,297
      - consumer loans  1,595,544  1,384,710
      - real estate loans  2,293,433  2,176,293
      - credit card debt  12,482  11,178
institutional clients  458,448  546,180
local authorities  301,718  350,281
Total  4,689,905  4,499,939
Allowance  10,334  6,183
Total net amount  4,679,571  4,493,756
Off-balance sheet gross amount  172,907  264,194
Off-balance sheet allowance  389  816
Off-balance sheet net amount  172,518  263,378


Loans and advances to customers, overdue, no impairment indication
The following tables present the ageing analysis of loans and advances granted to customers, overdue, but no impairment detected.
 

 Balance as at
31 December 2014		 1 - 30 days 31 – 60 days 61 – 90 days Total
  PLN’000 PLN’000 PLN’000 PLN’000
individuals  200,482  31,470  14,607  246,559
      - overdraft facilities  1,702  237  160  2,099
      - consumer loans  131,406  25,221  12,274  168,901
      - real estate loans  66,429  5,761  1,986  74,176
      - credit card debt  945  251  187  1,383
institutional clients  6,526  1,410  735  8,671
local authorities  1,544  0  0  1,544
Total  208,552  32,880  15,342  256,774
Allowance  5,315  3,588  3,631  12,534
Total net amount  203,237  29,292  11,711  244,240
Off-balance sheet gross amount  774  230  150  1,154
Off-balance sheet allowance  16  21  23  60
Off-balance sheet net amount  758  209  127  1,094


 Balance as at
31 December 2013		 1 - 30 days 31 – 60 days 61 – 90 days Total
  PLN’000 PLN’000 PLN’000 PLN’000
individuals 314,138  25,364  6,685  346,187
      - overdraft facilities 1,667  347  82  2,096
      - consumer loans 199,783  18,960  5,507  224,250
      - real estate loans 111,926  5,730  962  118,618
      - credit card debt  762  327  134  1,223
institutional clients 13,102  47  0  13,149
local authorities  6,333  0  0  6,333
Total  333,573  25,411  6,685  365,669
Allowance  4,918  2,040  1,394  8,352
Total net amount  328,655  23,371  5,291  357,317
Off-balance sheet gross amount  2,444  271  77  2,792
Off-balance sheet allowance  59 19  24  102
Off-balance sheet net amount  2,385  252  53  2,690


Loans and advances to customers with indications of impairment, but no impairment detected
The following tables present loans and advances granted to customers, with indication of impairment, but with no impairment detected, including the financial effect of collateral
on the impairment loss.

Balance as at
31 December 2014 		 Indications of impairment identified, but no impairment detected, including:
 
 
Gross
carrying
amount		 Gross
off-balance sheet
amount		 Allowance recognized excluding the
financial effect of security		 Financial effect of security included in
the allowance		 Allowance recognized including the
financial effect of security
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals 0 0 0 0 0 0 0 0
     - overdraft
       facilities		 0 0 0 0 0 0 0 0
    - consumer
       loans		 0 0 0 0 0 0 0 0
    - real estate
      loans		 0 0 0 0 0 0 0 0
    - credit card
       debt		 0 0 0 0 0 0 0 0
institutional clients 53,615 496 19,806 348 18,939 344 867 4
local authorities 0 0 0 0 0 0 0 0
Total 53,615 496 19,806 348 18,939 344 867 4
Balance as at
31 December 2013		 Indications of impairment identified, but no impairment detected, including:
 
 
Gross
carrying
amount		 Gross
off-balance sheet
amount		 Allowance recognized excluding the
financial effect of security		 Financial effect of security included in
the allowance		 Allowance recognized including the
financial effect of security
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals 0 0 0 0 0 0 0 0
    - overdraft
       facilities		 0 0 0 0 0 0 0 0
    - consumer
       loans		 0 0 0 0 0 0 0 0
    - real estate
       loans		 0 0 0 0 0 0 0 0
    - credit card
      debt		 0 0 0 0 0 0 0 0
institutional clients 37,655 1,023 17,690 436 17,374 427 316 9
local authorities 0 0 0 0 0 0 0 0
Total 37,655 1,023 17,690 436 17,374 427 316 9

Loans and advances to customers with indications of impairment identified, impairment and the related loss recognized
The following tables present loans and advances granted to customers, with indication of impairment, impairment detected and impairment loss recognized, including the financial effect of collateral on the impairment loss.

Balance as at
31 December 2014		 Indications of impairment identified, impairment and the related loss recognized, including:
 
 
Gross
carrying
amount		 Gross
off-balance sheet
amount		 Allowance recognized excluding the
financial effect of security		 Financial effect of security included in
the allowance		 Allowance recognized including the
financial effect of security
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals 247,265 825 110,177 163 2,913 0 107,264 163
    - overdraft
      facilities		 5,457 10 3,044 3 0 0 3,044 3
    - consumer
      loans		 161,356 0 73,247 0 2,913 0 70,334 0
    - real estate
      loans		 76,414 69 31,768 21 0 0 31,768 21
    - credit card
      debt		 4,038 746 2,118 139 0 0 2,118 139
institutional clients 78,026 120 62,661 15 19,797 0 42,864 15
local authorities 100 0 45 0 0 0 45 0
Total 325,391 945 172,883 178 22,710 0 150,173 178
Balance as at
31 December 2013		 Indications of impairment identified, impairment and the related loss recognized, including:
 
 
wartość
bilansowa
brutto		 Gross
off-balance sheet
amount		 Allowance recognized excluding the
financial effect of security		 Financial effect of security included in
the allowance		 Allowance recognized including the
financial effect of security
On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet On-balance sheet Off-balance sheet
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals 193,465 488 81,235 193 3,091 0 78,144 193
    - overdraft
      facilities		 4,103 9 2,291 3 0 0 2,291 3
    - consumer
      loans		 114,152 4 50,320 1 3,091 0 47,229 1
    - real estate
      loans		 72,761 69 27,347 21 0 0 27,347 21
    - credit card
      debt		 2,449 406 1,277 168 0 0 1,277 168
institutional clients 83,776 71 64,171 28 32,374 23 31,797 5
local authorities 0 0 0 0 0 0 0 0
Total 277,241 559 145,406 221 35,465 23 109,941 198


The financial effect of recovery based on collateral for receivables analyzed on a case-by-case basis amounted to PLN 42.0 million as at 31 December 2014 and PLN 53.3 million as at 31 December 2013. 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 68.6 million as at 31 December 2014 vs. PLN 77.0 million as at 31 December 2013.
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 Group 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 Group may apply for a writ of execution based thereon;
  • blank promissory note with a promissory note agreement for the Group;
  • 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 Group’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 rights arising from participation units in an investment fund management company accepted by the Group;
  • assignment of rights under an insurance policy taken out from an insurance undertaking accepted by the Group;
  • 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 2014 the fair value of mortgage collateral for the related exposures amounted to PLN 4,651.7 million compared to PLN 4,639.5 million as at 31 December 2013.

Forbearance of loans
Forbearance of selected credit exposures means a forced modification of the initial repayment terms as determined in a loan agreement following a motion of the bank or obligor, resulting from inability to repay the loan on the initial terms due to an event that has deteriorated the financial standing of the obligor and resulted in repayment arrears or adversely affected the repayment projections. The purpose of the forbearance procedures is to:

  • adjust the terms of repayment of liabilities arising from a credit transaction to the current solvency level of a debtor;
  • allow the debt restructuring by a debtor without the Group's commencing collection procedures that make the entire debt immediately payable and further reduce debtor’s solvency;
  • improve the collection standing of the Group through acceptance of additional security;
  • allow debtor’s restructuring of the debt following the commencement of collection procedures by the Group;
  • minimize losses incurred by the Group.

The Group applies the following forms of debt forbearance:

  • amending the repayment schedule within the initial repayment period (i.e. temporary reduction in the installment amount to the level proposed by a debtor or determined by its solvency);
  • extending the loan term;
  • change in the installment repayment date;
  • deferred repayment terms;
  • change in interest calculation principles;
  • assuming or accessing the debt by a third party;
  • changing the repayment algorithm from diminishing to equal installments;
  • determining the repayment schedule for current account and revolving loans or a diminishing balance of used loan transaction;
  • changing the repayment manner: principal first, interest later;
  • temporary suspension of interest repayment;
  • capitalizing interest/principal;
  • establishing an additional transaction security;
  • sale of receivables;
  • conversion;
  • assuming collateral and offsetting it with the debt;
  • concluding a new loan agreement/forbearance arrangement;
  • other measures aimed at minimizing Group’s losses.

Restructured transactions are recorded and monitored on an ongoing basis. Correct implementation of terms of a restructuring annex / new agreement / forbearance arrangement is monitored in particular for compliance with the debt repayment with deadlines and amounts determined therein. Should a threat to the implementation of a restructuring annex / new agreement / forbearance arrangement occur, the organizational unit monitoring the restructuring terms initiates measures aimed at renegotiation of these terms or commencement of collection proceedings. The record is built and updated on an ongoing basis based on relevant entries in IT systems of the Bank. Results of monitoring transactions subject to restructuring are presented on a quarterly basis at the Bank’s Credit Committee. At the end of each quarter, review of restructured transactions marking is performed under control procedures.
According to Recommendation R, restructuring is an impairment indication for credit exposure, and each restructured exposure is measured for impairment.

The following tables present amounts of loans and advances subject to restructuring as at 31 December 2014 and 31 December 2013.
  Balance as at
31 December 2014 		 Balance as at
31 December 2013
  PLN’000 PLN’000
Gross loans and advances granted to clients, including: 5,325,685 5,180,504
Gross Loans and advances granted to forbearance clients: 57,772 36,349
individuals: 8,094 254
      - consumer loans 2,416 141
      - real estate loans 5,678 113
institutional clients: 49,678 36,095
      - overdraft facilities 4,262 3,742
      - operating loans 12,342 1,294
      - investment loans 28,140 27,069
      - other loans 4,934 3,990
local authorities 0 0
Impairment losses on loans and advances to forbearance clients: (17,529) (11,553)
Net loans and advances to forbearance clients 40,243 24,796
Gross loans and advances to clients by forbearance changes in
repayment terms* 		 Balance as at
31 December 2014 		 Balance as at
31 December 2013
  PLN’000 PLN’000
       - change in repayment schedule 38,918 31,471
       - extending the loan term 32,246 21,137
       - grace period 22,409 9,761
       - determining the repayment schedule for a limit 650 665
       - change in interest calculation principles 25,827 19,676
       - change of security 422 0
       - accession to debt 249 254

 * Repayment terms of one loan / advance may be changed several times.
 

Quality structure of loans and advances subject to restructuring as at 31 December 2014 and 31 December 2013:

 
Balance as at
31 December 2014		 Loans and advances
to clients (gross)		 Impairment allowance Loans and advances granted to clients
(net)
impaired not impaired impaired not impaired impaired not impaired Total
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals: 7,984 110 2,205 0 5,779 110 5,889
     - consumer loans 2,416 0 441 0 1,975 0 1,975
     - real estate loans 5,568 110 1,764 0 3,804 110 3,914
institutional clients: 25,298 24,380 14,926 398 10,372 23,982 34,354
     - overdraft facilities 3,891 371 1,747 6 2,144 365 2,509
     - operating loans 5,996 6,346 3,450 103 2,546 6,243 8,789
     - investment loans 10,477 17,663 7,718 289 2,759 17,374 20,133
     - other loans 4,934 0 2,011 0 2,923 0 2,923
local authorities 0 0 0 0 0 0 0
Total 33,282 24,490 17,131 398 16,151 24,092 40,243
 Balance as at
31 December 2014		 Loans and advances
to clients (gross)		 Impairment allowance Loans and advances granted to clients
(net)
impaired not impaired impaired not impaired impaired not impaired Total
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals: 141 113 21 0 120 113 233
     - consumer loans 141 0 21 0 120 0 120
     - real estate loans 0 113 0 0 0 113 113
institutional clients: 35,910 185 11,530 2 24,380 183 24,563
     - overdraft facilities 3,557 185 1,358 2 2,199 183 2,382
     - operating loans 1,294 0 304 0 990 0 990
     - investment loans 27,069 0 7,952 0 19,117 0 19,117
     - other loans 3,990 0 1,916 0 2,074 0 2,074
local authorities 0 0 0 0 0 0 0
Total 36,051 298 11,551 2 24,500 296 24,796
The following tables present changes in carrying amounts of loans and advances subject to restructuring process for each reporting period.
 

 

  Net value
as at
1 January 2014		 Gross value of
exposures
recognized in the
period		 Gross value of
exposures
eliminated in the
period		 Repayment of
receivables
in the period		 Change in impairment
losses
in the period		 Net value
as at
31 December
2014
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals: 233 7,889 0 (49) (2,184) 5,889
     - consumer loans 120 2,321 0 (46) (420) 1,975
     - real estate loans 113 5,568 0 (3) (1,764) 3,914
institutional clients: 24,563 16,699 0 (3,116) (3,792) 34,354
     - overdraft facilities 2,382 1,013 0 (493) (393) 2,509
     - operating loans 990 11,268 0 (220) (3,249) 8,789
     - investment loans 19,117 1,507 0 (436) (55) 20,133
     - other loans 2,074 2,911 0 (1,967) (95) 2,923
local authorities 0 0 0 0 0 0
Total 24,796 24,588 0 (3,165) (5,976) 40,243
  Net value
as at
1 January 2013		 Gross value of
exposures
recognized in the
period		 Gross value of
exposures
eliminated in the
period		 Repayment of
receivables
in the period		 Change in impairment
losses
in the period		 Net value
as at
31 December
2013
  PLN’000 PLN’000 PLN’000 PLN’000 PLN’000 PLN’000
individuals: 0 254 0 0 (21) 233
     - consumer loans 0 141 0 0 (21) 120
     - real estate loans 0 113 0 0 0 113
institutional clients: 30,388 8,441 0 (12,238) (2,028) 24,563
     - overdraft facilities 1,022 3157 0 (751) (1,046) 2,382
     - operating loans 1,602 1,294 0 (1,607) (299) 990
     - investment loans 27,764 0 0 (9,880) 1,233 19,117
     - other loans 0 3,990 0 0 (1,916) 2,074
local authorities 0 0 0 0 0 0
Total 30,388 8,695 0 (12,238) (2,049) 24,796
rest income on loans and advances subject to restructuring in 2014 and 2013:

 

  Period
from 1 January 2014
to 31 December 2014		 Period
from 1 January 2013
to 31 December 2013
  PLN’000 PLN’000
individuals: 227 4
     - consumer loans 103 1
     - real estate loans 124 3
institutional clients: 1,228 1,289
     - overdraft facilities 45 180
     - operating loans 226 23
     - investment loans 791 860
     - other loans 166 226
local authorities 0 0
Total 1,455 1,293

 

Annual Report 2014 - Bank Pocztowy