On 21 June 2023, the Annual General Meeting of PKO Bank Polski S.A. (The Bank’s AGM) passed a resolution on distribution of profit of PKO Bank Polski S.A. for 2022, in accordance with which:
At the same time, the Bank’s AGM passed a resolution to leave PKO Bank Polski S.A.’s retained earnings from the previous years, in the amount of PLN 7,808,836,372, undistributed.
The above resolutions are compliant with the individual recommendation of the PFSA received on 17 March 2023, in which the PFSA confirmed that the Bank fulfils the requirements for the payment of dividends at a level of up to 50% of the net profit for 2022 but, at the same time, recommended that the Bank mitigate the risks present in its operations
The distribution of profit for 2022 adopted by the AGM did not preclude the Bank’s Management Board from deciding to distribute profit to shareholders in the form of an interim dividend and to use the reserve capital for this purpose.
In 2023, the Bank consulted the PFSA on two occasions relating to the possibility of the Bank distributing part of its profit from reserve capital in the form of an interim dividend. On 21 July 2023, the Bank received a negative opinion from the PFSA Office in this respect, and on 11 December 2023, the Bank received a positive opinion from the PFSA Office.
In its letter dated 11 December 2023, the PFSA stated that having analysed the current economic and financial standing of the Bank and the arguments presented by the Bank, the PFSA did not raise any concerns to the potential payment of interim dividend by the Bank in the amount of PLN 1.6 billion or less from the profit earned in the period between 1 January 2022 and 31 December 2022 allocated to the reserve capital in line with resolution No 7 of the Annual General Meeting of 21 June 2023 with regard to the distribution of profit earned by PKO Bank Polski S.A. in 2022. The PFSA noted that all decisions affecting the Bank’s capital position, including those relating to the distribution of generated profit, should be made taking into account not only the provisions of law and the supervisory authority’s positions and guidelines, but also the principles of prudent and stable management of the Bank, and in particular – the need to ensure that the Bank is equipped with own funds to cover all risks occurring in its operations, as well as its further sustainable development.
On 19 December 2023, the Bank’s Management Board, acting on the authorisation of the General Meeting (Resolution No 7/2023), decided to pay an interim dividend for the financial year 2023 and to earmark PLN 1,600,000,000 for this purpose. On the same day, the Supervisory Board approved the payment of the interim dividend.
The interim dividend was paid out only of the reserve capital created for dividend payment, including interim dividends. 1,250,000,000 shares (series A, B, C, D) gave entitlement to the Interim Dividend. The interim dividend per share was PLN 1.28 gross. The record date for the interim dividend was 25 January 2024. The interim dividend was paid on 1 February 2024.
On 28 November 2022, PKO Bank Polski adopted a dividend policy for the Bank and the Group (“Dividend policy”). The Dividend policy takes into account the Bank’s intention to provide stable dividend payments in the long term, in accordance with the principle of prudent management of the Bank and the Bank’s Group, in compliance with the law and the PFSA position on the dividend policy assumptions of commercial banks. The objective of the Dividend policy is to optimize the capital structure of the Bank and the Group, while considering the return on equity, the cost of capital and the capital needs for development, and maintaining an appropriate level of the capital adequacy ratios and meeting the minimum requirement for own funds and eligible liabilities (MREL). The repurchase of own shares for redemption is an additional tool for capital redistribution. The General Meeting gives its consent to the acquisition of own shares by the Bank, after prior approval of the Supervisory Board, specifying the terms of the acquisition, including the maximum number of shares to be acquired, the period of authorization to acquire shares, which may not exceed five years and the maximum and minimum amount of consideration for the acquired shares, if the acquisition takes place for consideration. Purchase of own shares for redemption in each case requires the Bank to obtain the prior consent of the Polish Financial Supervision Authority.
where:
The criteria set out in points 1 and 2 should be met by the bank both at the individual and consolidated level, as at the end of 2023 and on the date of the decision of the General Shareholders’ Meeting to distribute dividends. The maximum possible level of dividend to be distributed from profit earned in 2023 is limited to 75% in connection with the expectation of strengthening the capital base in order to absorb the possible materialisation of risks accumulated in the environment of the Polish banking sector.
Additionally, the PFSA indicated that the banks which have considerable portfolios of foreign currency housing loans should adjust the rate of dividend distribution based on two additional criteria:
The PFSA recommended that appropriate adjustments be applied, depending on the size of the Bank’s portfolio:
whereas the total value of the adjustment (maximum 75%) is the sum of adjustments resulting from both criteria.
The PFSA additionally advised that banks should not undertake other activities, in particular those outside the scope of their current business and operating activities, which could result in a reduction of own funds, without prior consultation with the PFSA. This also applies to dividend payments, if any, from retained earnings and buybacks of own shares. The PFSA expects that any implementation of such operations will be preceded in each case by a consultation with the PFSA and will depend on its outcome.
In a letter dated 13 December 2023, PFSA advised the Bank to mitigate the risks inherent in the Bank’s operations by maintaining own funds to cover an additional capital add-on to absorb potential losses resulting from a stress event, in the amount of 0.48 p.p. at the individual level (the level recommended by the PFSA in 2022 was 0.72 p.p.) and 0.42 p.p. at the consolidated level (the level recommended by the PFSA in 2022 was 0.66 p.p.) over the value of the total capital ratio.
According to the letter from the PFSA, the Bank will also receive an individual recommendation regarding both the possibility to pay dividends and other actions that may result in a reduction of the capital base. For details of the PFSA’s recommendations to the Bank, see „Events subsequent to the balance sheet date” in Chapter 12.
As at 31 December 2023 the ratios amounted to:
The Bank’s intention is to pay dividend in 2024 from the net profit for 2023. The recommendation of the Bank’s Management Board regarding dividends will be determined after receiving an individual dividend policy recommendation from the PFSA.
Pursuant to Article 395 § 2(2) of the Commercial Companies Code, the decision on profit distribution remains within the competences of the Bank’s Annual General Meeting.
