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Notes to the consolidated financial statements

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6. Segment reporting

As intended by IFRS 8, financial information on segments is reported on the same basis as is used internally in reports presented to the Management Board of the Bank for the purpose of allocating resources to segments and evaluating their performance.

For management purposes, the Group’s operations have been divided into segments in accordance with products sold, services provided and types of customers. The following operating segments have been identified: consumer, institution, settlement and treasury.

Detailed principles of separating revenue, expenses, assets and liabilities in each segment are described in internal regulations of the Bank. The Group settles inter-segment transactions applying internal transfer rates determined based on market data. Most operations are carried out in the Polish market – the customer base is composed mainly of local individuals and corporations. The Group’s operations are exposed to seasonal fluctuations.

The Bank’s Management Board assesses segment financial performance based on the following figures:

• operating profit after any impairment losses including other operating revenue and expenses;
• general and administrative expenses;
• C/I (cost/income) ratio.

The accounting principles applied to segment reporting comply with the accounting principles discussed in note 5.

As the Management Board of the Bank analyses the aggregate net interest income, no interest income or interest expense has been separated in financial performance of individual segments.

Consumer segment of the Group

From management accounting perspective the consumer segment offers products targeted at individuals and microenterprises (individuals carrying out business activities). The offer consists of saving and settlement accounts, savings accounts, term deposits, consumer loans (including cash loans and overdrafts), mortgage loans (including housing loans and mortgages), debit and credit cards, insurance products and investment funds. It is sold through traditional distribution channels in a countrywide network of branches and sales points (including the sales network of Poczta Polska and financial agents), Pocztowy24 Internet banking, PocztowySMS mobile banking and a Contact Center.

Institutional segment of the Group

For management accounting purposes institutional segment includes operating profit/loss from services provided to business entities with legal personality, individuals and entities with no legal personality carrying out business activities under applicable regulations and central and local administration entities.

Products offered in the institutional segment comprise: credit products (working capital loans including revolving loans, overdrafts, investment loans, loans with thermal improvement and refurbishment premium, mortgage loans and bank guarantees), deposits (current and subsidiary accounts, housing escrow account, standards and individually negotiated deposits including overnights, savings accounts) and settlement services (over-the-counter and sealed cash deposits and payments, Giro Płatność, mass payments). The products are offered through own network of the Group. 

Settlement and treasury segment of the Group

The settlement services offered include comprehensive services related to cash deposits made by customers of Poczta Polska S.A. (cash payments are treated as interbank settlements).  The services include mainly: managing cash payments made in other banks and handling payments made to the Social Insurance Institution and Tax Offices.

Operations of the treasury function include treasury transactions, financial markets, and management of liquidity, interest rate and currency risks. The department concludes transactions in the interbank market (e.g. deposits), buys and sells securities (Treasury bonds, debt instruments issued by the National Bank of Poland, bank bonds) and enters into sell-buy-back and buy-sell-back transactions and derivative transactions such as FRA, IRS or swap. It repurchases customer funds obtained by operating segments at a transfer rate and sells the funds to finance their credit operations.

Unallocated items

Unallocated items comprise revenue and expenses not classified to the above segments, as well as income tax.

Changes in operational segment reporting

Dividend income has been allocated to the settlement and treasury segment in information regarding consolidated income statement for the year ended 31 December 2016.  The performance data for 2015 have been restated to ensure comparability.

In notes regarding assets, liabilities and equity as at 31 December 2016 the following assets have been allocated to the settlement and treasury segment: cash in hand, current accounts in other banks, property, plant and equipment and intangible assets, net deferred tax asset and other assets, as well as the following liabilities and equity items: provisions, current income tax liability, other liabilities and total equity.  The data as at 31 December 2015 have been appropriately restated to ensure comparability.

^* _{The item includes: gain or loss on financial instruments measured at fair value through profit or loss and gain or loss on foreign exchange transactions, gain or loss on other financial instruments and dividend income from non-group companies.}

^* _{The item includes: gain or loss on financial instruments measured at fair value through profit or loss and gain or loss on foreign exchange transactions, gain or loss on other financial instruments and dividend income from non-group companies.}

The consumer and institutional segment assets comprise items directly allocated to the segment, such as net loans and advances granted to customers and the following items allocated to individual segments for management accounting purposes: cash in hand, current accounts in other banks, property, plant and equipment, intangible assets, net deferred tax assets and other assets.

The settlement and treasury segment assets comprise items directly allocated to the segment, such as cash deposited in the Central Bank, receivables from securities purchased under reverse repo and buy-sell-back agreements, financial assets held for trading, hedging financial instruments and investment financial assets, as well as the following assets allocated by the management: cash in hand, current accounts in other banks, property, plant and equipment and intangible assets, net deferred tax asset and other assets.

The equity and liabilities of the consumer and institutional segment comprise liabilities directly allocated to customers, current liabilities to the Central Bank and other banks and the following items of equity and liabilities allocated to the segments for management accounting purposes: provisions, current tax liabilities, other liabilities and total equity.

The settlement and treasury segment liabilities comprise directly allocated fixed-term liabilities to other banks, individually negotiated deposits of Poczta Polska S.A., liabilities arising from securities sold under repo and sell-buy-back agreements, liabilities held for trading, subordinated liabilities, liabilities due to issue of debt securities and financial hedges, as well as the following liabilities allocated by the management: provisions, current income tax liability, other liabilities and total equity.

In 2016, revenue from the key counterparty of the Group disclosed in the value of a payment received amounted to PLN 16,360 thousand, as compared to PLN 17,031 thousand in 2015.