Financial results

Download note 37.1 in XLS

37.1 Financial instruments which are not measured at fair value in the statement of financial position

The main classes of financial assets and liabilities which are not measured at fair value in the consolidated statement of financial position of the Group are items measured at amortized cost or historical cost, such as:

• originated loans, advances and other receivables not held for trading;
• financial assets held to maturity;
• financial liabilities not held for trading.

Cash in hand, deposits with the Central Bank and receivables from other banks

This item includes the Group’s cash in current accounts with other banks and debt securities of banks classified as loans and receivables.

The fair value of current receivables and term deposits of the Group, maturing within one year, and other receivables is consistent with the carrying amount.

Fair value of debt securities issued by banks, classified as loans and receivables, is measured by discounting future payments from these instruments using spread determined at the transaction date. Debt securities with embedded call option are measured with the assumption that the call option will be realized in the nearest possible term. Call option embedded in a security is measured at the end of the reporting period by way of determining the difference between security measurement assuming the realization of the call option in the nearest possible term and discounted cash flows from the security held to maturity.

 
Receivables due to securities purchased under reverse repo and buy-sell-back agreements/Liabilities due to securities sold under repo and sell-by-back agreements

The fair value of receivables/liabilities due to purchased/sold securities with the received/granted commitment to buy them back is determined using the discounted cash flow method for transaction cash flows.

Loans and advances granted to customers

“Loans and advances granted to customers” include loans and advances as well as debt securities classified as loans and receivables in accordance with IAS 39.

The fair value of loans and advances is determined by calculating the carrying amount - fair value adjustment for each loan. The adjustment was calculated as the difference between the total future cash flows related to such loan, discounted using the market interest rate (in line with the yield curve based on WIBOR, FRA and IRS quoted) increased by the market product markup and the value of the loan not matured as at the end of the reporting period. The said future cash flows included those related to the principal (as specified in the agreement) and those related to interest, calculated on in line with the market yield curve based on WIBOR, FRA and IRS quoted at the end of the reporting period, increased by individual contract markup for each loan. The market product markup has been determined as the average effective principal-weighted markup for a similar group of products extended in the three-month period immediately preceding the end of the reporting period and if no transactions are available – as the most recent markup for a given product. The carrying amount adjustment to the fair value has been determined for facilities, whose future cash flows are predictable, while for other exposures, such as overdrafts, impaired exposures with impairment loss recognized, the adjustment was assumed at zero.

The fair value of corporate debt securities is measured through discounting future payments from these instruments using spread determined at the transaction date. Securities with embedded call option are measured with the assumption that the call option will be realized in the nearest possible term. Call option embedded in a security is measured at the end of the reporting period by way of determining the difference between bond measurement assuming the realization of the call option in the nearest possible term and discounted cash flows from the bond held to maturity.

Investment assets held to maturity

The fair value of treasury bonds is determined directly based on prices quoted on the active market.

The fair value of other debt securities classified as financial assets held to maturity, is measured through discounting future payments from these instruments using spread determined at the transaction date. Debt securities with embedded call option are measured with the assumption that the call option will be realized in the nearest possible term. Call option embedded in a security is measured at the end of the reporting period by way of determining the difference between the debt security measurement assuming the realization of the call option in the nearest possible term and discounted cash flows from the debt security held to maturity.

Other financial assets/liabilities which are not measured at fair value in the statement of financial position

In case of financial assets recognized at the amount due less impairment losses, the Group assumes that the fair value equals the carrying amount due to the nature of such groups of assets, e.g. short term to maturity, unique nature of the instrument. This concerns, in particular, cash and monetary assets, current receivables, current liabilities and liabilities under finance leases. The fair value of term deposits of banks, maturing within one year, and other financial liabilities is equal to the carrying amount.

Liabilities to customers

The fair value of “Liabilities to customers” was determined through calculating the carrying amount - fair value adjustment for each term deposit. The adjustment was calculated as the difference between the total future cash flows related to the principal and interest accrued from the end of the reporting period to the maturity date, discounted using the market interest rate (in line with the yield curve based on WIBOR, FRA and IRS) increased by the applicable product markup and the carrying amount of the deposit balance. The applicable product markup has been determined as the average markup for a similar group of products extended in the three-month period immediately preceding the end of the reporting period as the average difference between the effective interest rate of the deposit and the base rate as of the end of the reporting period. The carrying amount adjustment to the fair value has been determined for deposits, whose future cash flows are predictable, while for other exposures, such as term deposits maturing within up to 3 months of the balance sheet date, the adjustment was assumed at zero.

Subordinated liabilities and liabilities arising from issue of debt securities

The fair value of the subordinated loan and liabilities arising from issued debt securities is measured through discounting future payments from these instruments using spread determined at the transaction date.

The tables below present the differences between the carrying amount (carrying amount of interest-bearing financial assets and liabilities has been presented with interest accrued) and the estimated fair value of financial assets and liabilities of the Group as well as fair value hierarchy classification of financial assets and liabilities which are not measured at fair value in the consolidated statement of financial position of the Group.

As compared to the consolidated financial statements for the year ended 31 December 2014, in these consolidated financial statements the Group has made presentation changes through a more detailed presentation of loans and advances to individuals and separation of item “Cash and instalment loans” and “Mortgages”.

	Balance as at		Balance as at
	31 December 2015		31 December 2014
	Carrying amount	Fair value	Carrying amount	Fair value
	PLN’000	PLN’000	PLN’000	PLN’000
Cash in hand and deposits with the Central Bank	426 875	426 875	757 643	757 643
Receivables from other banks	45 346	45 369	158 269	164 343
Receivables from securities purchased under reverse repo and buy-sell-back agreements	19 794	19 792	0	0
Loans and advances granted to customers, including:	5 312 882	5 404 635	5 151 777	5 101 071
individuals	4 534 691	4 596 689	4 296 942	4 285 668
- overdraft facilities	28 609	28 609	32 370	32 370
- cash loans and instalment loans	1 910 037	1 837 630	1 604 037	1 520 074
- mortgage loans	215 079	240 159	235 046	253 393
- real estate loans	2 366 652	2 475 977	2 409 962	2 464 304
- credit card debt	14 314	14 314	15 527	15 527
institutional customers	525 366	554 876	551 538	512 111
local authorities	252 825	253 070	303 297	303 292
Investment financial assets held to maturity	444 690	453 051	418 719	431 636
Other assets	38 189	38 189	29 274	29 274
Liabilities to the Central Bank	10	10	11	11
Liabilities to other banks	34 440	34 440	4 020	4 020
Liabilities from securities sold under repo and sell-buy-back agreements	154 017	154 003	177 701	177 683
Liabilities to customers	5 742 377	5 753 962	6 492 023	6 506 449
Liabilities arising from issue of debt securities	503 500	505 187	358 256	359 920
Subordinated liabilities	141 887	140 631	142 090	140 563
Other liabilities	90 333	90 333	99 366	99 366

 

Balance as at
31 December 2015	Level I	Level II	Level III	Total
	PLN’000	PLN’000	PLN’000	PLN’000
Cash in hand and deposits with the Central Bank	0	426 875	0	426 875
Receivables from other banks	0	5 155	40 214	45 369
Receivables from securities purchased under reverse repo and buy-sell-back agreements	0	19 792	0	19 792
Loans and advances granted to customers, including:	0	74 785	5 329 850	5 404 635
individuals	0	42 923	4 553 766	4 596 689
- overdraft facilities	0	28 609	0	28 609
- cash loans and instalment loans	0	0	1 837 630	1 837 630
- mortgage loans	0	0	240 159	240 159
- real estate loans	0	0	2 475 977	2 475 977
-  credit card debt	0	14 314	0	14 314
institutional customers	0	31 862	523 014	554 876
local authorities	0	0	253 070	253 070
Investment finanical assets held to maturity	403 002	0	50 049	453 051
Other assets	0	0	38 189	38 189
Liabilities to the Central Bank	0	10	0	10
Liabilities to other banks	0	34 440	0	34 440
Liabilities from securities sold under repo and sell-buy-back agreements	0	154 003	0	154 003
Liabilities to customers	0	3 158 496	2 595 466	5 753 962
Liabilities arising from issue of debt securities	0	0	505 187	505 187
Subordinated liabilities	0	0	140 631	140 631
Other liabilities	0	0	90 333	90 333