Dividends

Dividend amounted to PLN 1.33 gross per share. The annual General Shareholders’ Meeting of PKO Bank Polski set the dividend date (date of vesting rights to dividend) at 31 July 2019, and the dividend payment date at 14 August 2019. The dividend was distributed on all 1 250 million shares.

The Resolution of the bank’s Annual General Shareholders’ Meeting on the appropriation of the bank’s profit for 2018 complies with the individual recommendation of the Polish Financial Supervision Authority of 25 February 2019 to increase own funds by leaving at least 50% of the profit earned in the period from 1 January to 31 December 2018 unappropriated. At the same time, the PFSA confirmed that the bank met the requirements to pay dividend at the level of 50% of net profit earned in 2018.

The dividend policy of the bank and the Group is specified in the “Principles for management of capital adequacy and equity in PKO Bank Polski SA and in the PKO Bank Polski SA Group”.

The dividend policy assumes stable dividend payments in the long-term in accordance with the binding provisions of the law and the position of the Office of the Polish Financial Supervision Authority on the assumptions for dividend policies in commercial banks. The bank can pay dividend if it has a surplus of own funds above the minimum capital adequacy ratios defined in Art. 92 (1) of CRR,*Art. 55 (4) of the Act on macro-prudential supervision** and Art. 138 (1) (2a) of the Banking Law. The dividend policy pursued by the bank also includes assumptions as to the optimum equity structure, return on equity and its cost, as well as capital needs related to the development of the bank and the Group.

*Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (EU OJ L 176/1).
**Act on macro prudential supervision over the financial system and on crisis management in the financial system.

On 3 December 2019, the PFSA took a stand on the dividend policy of commercial banks.

The PFSA recommends that only those banks that meet all the criteria specified below should distribute dividend from their 2019 profits:

• those that do not pursue the recovery plan,
• are positively assessed under the supervisory review and evaluation process (SREP) – final SREP grade no lower than 2.5,
• with a leverage ratio (LR) higher than 5%,
• with Tier 1 ratio (CET1) no lower than the required minimum: 4.5% + 56%*add-on + combined buffer requirement,
• with Tier 1 ratio (T1) no lower than the required minimum: 6% + 75%*add-on + combined buffer requirement,
• with total capital ratio (TCR) no lower than the required minimum: 8% + add-on + combined buffer requirement.

The PFSA recommends that the banks that simultaneously meet all of the above criteria pay out up to 50% of the profit earned in 2019.

Moreover, the PFSA recommended that the following payments are possible:

• up to 75% of the profit earned in 2019 by banks which meet all the above criteria, taking into account an additional buffer of 1.5 p.p. as part of the capital criteria,
• up to 100% of the profit earned in 2019 by banks which meet all the above criteria, taking into account the bank’s sensitivity to an unfavourable macroeconomic scenario, as part of the capital criteria.

Additionally, the PFSA indicated that the banks exposed to foreign currency loans should adjust the rate of dividend distribution based on two additional criteria:

• Criterion 1- based on the share of currency housing loans for households in the entire portfolio of receivables from the non-financial sector:
  • banks with a share exceeding 10% – adjustment of the dividend rate by 20 p.p.
  • banks with a share exceeding 20% – adjustment of the dividend rate by 30 p.p.
  • banks with a share exceeding 30% – adjustment of the dividend rate by 50 p.p.

• Criterion 2 – based on the share of foreign currency housing loans granted in 2007 and 2008 in the foreign currency housing loans for households portfolio:
  • banks with a share exceeding 20% – adjustment of the dividend rate by 30 p.p.
  • banks with a share exceeding 50% – adjustment of the dividend rate by 50 p.p.

whereas the total value of the adjustment is the total of the adjustments resulting from both criteria.

The above criteria should be met by banks both at the separate and at the consolidated level.

At the same time, in the case of distribution of prior year profits, banks should take into account Art. 77 and 78 of CRR and Art. 129 of the Banking Law. The PFSA expects banks to obtain approval to decrease own capital by undistributed profits from the prvious years devoted to dividend. In bank’s opinion, it fulfills CRR criteria that define the conditions of granting such approval by PFSA.

The level of capital ratios to be observed by the bank in the distribution of up to 100% out of the profit earned as stated by the PFSA is as follows:

• at the consolidated level:
  • Core Tier 1 capital ratio (CET1) = 12.69%
  • Tier 1 capital ratio T1 = 14.26%
  • total capital ratio TCR = 16.35%

• at the separate level:
  • Core Tier 1 capital ratio (CET1) = 12.75%
  • Tier 1 capital ratio T1 = 14.32%
  • total capital ratio TCR = 16.42%

As at 31 December 2019 the ratios amounted to:

• at the consolidated level:
  • Tier 1 capital ratio T1 and basic capital ratio T1 (CET1) = 17.16%
  • total capital ratio TCR = 18.42%
  • Criterion 1 = 10.51%
  • Criterion 2 = 45.15%

• at the separate level:
  • Tier 1 capital ratio T1 and basic capital ratio T1 (CET1) = 19.21%
  • total capital ratio TCR = 20.66%
  • Criterion 1 = 13.09%
  • Criterion 2 = 45.53%

After accounting for adjustments to the dividend ratio by Criteria 1 and 2, according to the data as at 31 December 2019, the bnank meets the requirements for the distribution of dividend up to 50% of the net profit for 2019.