Bank BPH Group Financial Report. 3 quarters

Transcription

1 Bank BPH Group Financial Report 3 quarters

2 SELECTED FINANCIAL DATA 3 quarters in accruals (current year) from to PLN'000 3 quarters in accruals (previous year) from to quarters in accruals (current year) from to EUR quarters in accruals (previous year) from to I. Interest income II. Fee and commission income III. Net operating income IV. Gross profit (loss) from continued operations V. Net profit (loss) from continued operations attributable to equity holders of the Company VI. Net operating cash flow VII. Net investment cash flow VIII. Net financial activity cash flow IX. Total net cash flows X. Total assets XI. Amounts owed to banks XII. Amounts owed to customers XIII. Minority interests XIV. Shareholders' equity XV. Share capital XVI. Number of shares XVII. Book value per share (PLN/EUR) XVIII. Diluted book value per share (PLN/EUR) XIX. Capital adequacy ratio XX. Earnings (losses) from continued operations per ordinary share attributable to equity holders of the Company (PLN / EUR) XXI. Diluted earnings (losses) from continued operations per ordinary share attributable to equity holders of the Company (PLN / EUR) XXII. Dividend paid per ordinary share (PLN / EUR) Individual positions of the consolidated financial statement of Bank BPH SA were converted into EURO according to the following principles: Selected consolidated balance positions and book value per share translated using the average EURO exchange rate in PLN announced by the Central Bank on the balance sheet day: ; Selected consolidated profit and loss account amounts and consolidated cash flow statement translated using the average rate of exchange, which is an arithmetic mean of the average rates announced by the Central Bank and at the end of each month of three quarters; ,

3 INTERIM FINANCIAL STATEMENTS OF THE BANK BPH GROUP CONSOLIDATED INCOME STATEMENT CONTINUED OPERATIONS 3 rd quarter Notes 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept. 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept. Interest income Interest expenses Net interest income Impairment charge Net interest income incl. impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on operating income and expenses Result on operating activity Result on other income and expenses Gross profit (loss) from continued operations Income tax expense Net profit (loss) from continued operations DISCONTINUED OPERATIONS 9 Gross profit (loss) from discontinued operations Income tax expense Net profit (loss) from discontinued operations Net profit (loss) from continued and discontinued operations: Attributable to minority interest Attributable to equity holders of the Company Net profit (loss) from continued operations: Attributable to minority interest Attributable to equity holders of the Company Net profit (loss) (PLN) from continued operations attributable to equity holders of the Company Weighted average number of ordinary shares Earnings (losses) per ordinary share from continued operations (PLN) Net profit (loss) (PLN) from continued and discontinued operations Earnings (losses) per ordinary share from continued and discontinued operations (PLN) Diluted weighted average number of ordinary shares Diluted earnings (losses) per ordinary share from continued operations (PLN) Diluted earnings (losses) per ordinary share from continued and discontinued operations (PLN) Bank BPH Group Financial Report 3Q 3/26

4 CONSOLIDATED INCOME STATEMENT By quarter 3Q 2Q 1Q 3Q 2Q 1Q CONTINUED OPERATIONS Interest income Interest expenses Net interest income Impairment charge Net interest income incl. impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on operating income and expenses Result on operating activity Result on other income and expenses Gross profit (loss) from continued operations Income tax expense Net profit (loss) from continued operations DISCONTINUED OPERATIONS Gross profit (loss) from discontinued operations Income tax expense Net profit (loss) from discontinued operations Net profit (loss) from continued and discontinued operations: Attributable to minority interest Attributable to equity holders of the Company Net profit (loss) from continued operations: Attributable to minority interest Attributable to equity holders of the Company The table above presents comparative quarterly data to illustrate a change of reporting refinancing costs the Bank made in the Semi - annual Consolidated Financial Statements of the Bank BPH SA Group in 1H. Bank BPH Group Financial Report 3Q 4/26

5 CONSOLIDATED BALANCE SHEET A s s e t s Cash and balances with the Central Bank Notes Sept. June As at 31 Dec. Sept. ** June ** Trading assets Hedging derivates Loans and advances to and placements with banks incl.: loan impairment Loans and advances to customers incl.: loan impairment 14a Investments financial assets Property and equipment Intangible assets Assets and disposal groups held for sale Other assets incl.: deferred tax assets T o t a l a s s e t s L i a b i l i t i e s Notes Sept. June As at 31 Dec. Sept. ** June ** Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Provisions incl.: deferred tax liability Trading liabilities Hedging derivates Other liabilities Total Equity: incl.: minority interests incl.: shareholders equity T o t a l e q u i t y a n d l i b i l i t i e s Capital adequacy ratio * Book value (in PLN) Number of shares Book value per share (in PLN) Diluted number of shares Diluted book value per share (in PLN) *Capital Adequacy ratio disclosed in Bank s Group Annual Consolidated Financial Statements and in the Second Quarter Financial Statements changed due refinement of calculation method. **Balance- sheet data as 30 June and 30 September are reported for the Bank before the spin - off. Bank BPH Group Financial Report 3Q 5/26

6 STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY SHARE CAPITAL Equity attributable to equity holders of the Bank OTHER CAPITAL REVALUATI ON RESERVE RETAINED PROFITS SHAREHO LDERS' EQUITY MINORITY INTERESTS TOTAL SHAREHO LDERS' EQUITY Opening balance of shareholders' equity on 1 January Charge for supplementary capital Charge for reserve capital General risk fund charge Reclasification due to Bank s spin off Increases due to revaluation of securities available for sale (net of tax) Net income of hedging derivatives (net of tax) Net income Closing balance on 30 September Opening balance of shareholders' equity on 1 January Payment for 2006 dividend Charge for supplementary capital SHARE CAPITAL Equity attributable to equity holders of the Bank OTHER CAPITAL REVALUA TION RESERVE RETAINED PROFITS SHAREHOL DERS' EQUITY MINORITY INTEREST S TOTAL SHAREHOL DERS' EQUITY Charge for reserve capital General risk fund charge Increases due to revaluation of securities available for sale (net of tax) Net income on sale of securities available for sale Net income of hedging derivatives (net of tax) Divestment of fixed assets Other increases/decreases Change after Bank BPH S.A. spin-off Net income from continued and discontinued operations Closing balance on 31 December Bank BPH Group Financial Report 3Q 6/26

7 Equity attributable to equity holders of the Bank SHARE CAPITAL OTHER CAPITAL REVALUA TION RESERVE RETAINED PROFITS SHAREHOL DERS' EQUITY MINORITY INTEREST S TOTAL SHAREHOL DERS' EQUITY Opening balance of shareholders' equity on 1 January Payment for 2006 dividend Charge for supplementary capital Charge for reserve capital General risk fund charge Decreases due to revaluation of securities available for sale (net of tax) Net income on sale of securities available for sale Net income of hedging derivatives (net of tax) Divestment of fixed assets Other increases/decreases Fx differences from recalculation Net income income from continued and discontinued operations Closing balance on 30 September Bank BPH Group Financial Report 3Q 7/26

8 I. Net cash flow from operating activities - indirect method CONSOLIDATED CASH FLOW STATEMENT 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept. 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept II. Net cash flow from investing activities III. Net cash flow from financing activities IV. Total net cash flows Bank BPH Group Financial Report 3Q 8/26

9 NOTES TO THE QUARTERLY FINANCIAL STATEMENTS OF THE BANK BPH GROUP (1) Changes in respect of consolidated companies in Q4 The number of consolidated companies presented in the Group report dit not change. The full consolidation method covered the subsidiaries: BPH PBK Zarządzanie Funduszami Sp. z o.o. (2) NET INTEREST INCOME 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Interest income incl. on: loans and money market transactions other Interest expenses for: deposits, loans received and money market transactions other Net income from leasing business income expenses NET INTEREST INCOME NET INTEREST INCOME 1 April - 30 June 1 Jan March 1 April - 30 June 1 Jan March Interest income incl. on: loans and money market transactions other Interest expenses for: deposits, loans received and money market transactions other Net income from leasing business income expenses NET INTEREST INCOME (3) IMPAIRMENT CHARGES 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Increase revaluation of loans and advances and other provisions for contingent liabilities Decrease revaluation of loans and advances and other Bank BPH Group Financial Report 3Q 9/26

10 provisions for contingent liabilities IMPAIRMENT CHARGES (4) NET FEE AND COMMISSION INCOME 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Income from: securities and custodian business loans and advances domestic payments foreign payments net transactional exchange rate result investment fund managment and distribution of participation units other Expenses on: securities and custodian business loans and advances domestic payments foreign payments investment fund managment and distribution of participation units other NET FEE AND COMMISSION INCOME NET FEE AND COMMISSION INCOME 1 April - 30 June 1 Jan March 1 April - 30 June 1 Jan March Income from: securities and custodian business loans and advances domestic payments foreign payments net transactional exchange rate result investment fund managment and distribution of participation units other Expenses on: securities and custodian business loans and advances domestic payments foreign payments investment fund managment and distribution of participation units other NET FEE AND COMMISSION INCOME Bank BPH Group Financial Report 3Q 10/26

11 (5) NET TRADING INCOME AND REVAULATION 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Result on fixed income instruments Exchange gain (loss) NET TRADING INCOME AND REVALUATION NET TRADING INCOME AND REVAULATION 1 April - 30 June 1 Jan March 1 April - 30 June 1 Jan March Result on on equity instruments Result on fixed income instruments Exchange gain (loss) NET TRADING INCOME AND REVALUATION (6) NET INCOME FROM INVESTMENTS 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Profit on sales of available for sale portfolio Loss on sales of available for sale portfolio Net result on financial instruments designated as at fair value through profit or loss (FVO) NET INCOME FROM INVESTMENTS (7) GENERAL ADMINISTRATIVE EXPENSES 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Salaries and employee benefits Building maintenance and rents Other expenses Depreciation Allocation of costs* GENERAL ADMINISTRATIVE EXPENSES *Costs are allocated for transactions between the continued and discontinued operations introduced as part of an internal cost allocation system. Details are presented in note 9 Discontinued operation. (8) RESULT ON OTHER OPERATING INCOME AND EXPENSES 1 July - 30 Sept. 1 Jan Sept. 1 July - 30 Sept. 1 Jan Sept. Other operating income Other operating expenses RESULT ON OTHER OPERATING INCOME AND EXPENSES Bank BPH Group Financial Report 3Q 11/26

12 (9) DISCONTINUED OPERATIONS Discontinued operation In, the discontinued operation encompassed an organised part of Bank BPH business covering both assets and liabilities and consisted of 285 branches and a portion of the Head Office, which were transferred to Bank Pekao on the spin-off 29 November. The discontinued operation included all customers of the Corporate Banking Division and a portion of customers of the Retail Banking Division and of the International Markets Division. Details of the sale of the discontinued operation On Oct. 3,, the Commission of Banking Supervision approved Bank BPH spin-off and the incorporation of the spin-off part (285 branches) into Pekao, pursuant to the Bank BPH SA Spin-off Plan adopted on Nov. 15, 2006 and approved by the Band BPH General Meeting on April 27,. Bank BPH spin-off became effective on Nov. 29,, when the Court registered a Pekao equity increase linked to the Bank BPH spin-off performed under Art. 529 (1) (4) of the Code of Commercial Companies, i.e. by a transfer to Pekao of a portion of Bank BPH assets in the form of an organised business in exchange of Pekao shares assumed by Bank BPH shareholders (so called Spin-off Issue shares). The Bank s shareholders relieved Pekao Spin-off Issue shares on Dec. 18,, at the 1:3.3 allocation parity, which meant that the Bank s shareholders, for each Bank BPH share, received 3.3 Pekao Spin-off Issue shares, while retaining the same number of Bank BPH shares. The spin-off transaction was a consequence of the take-over, in November 2005, by UniCredit Group (strategic investor of Pekao) of HVB Group (the then strategic investor of Bank BPH), and of a subsequent agreement between UniCredit and the Polish State Treasury, concluded on April 19, In connection with the Bank s spin off, executed on 29 November, the Bank presents its profit and loss account for the 9 months. Income and expense with discontinued operation from 1 July to 30 Sept. from 1 Jan. to 30 Sept. Interest income Interest expenses Net interest income Impairment charges Net interest income incl. impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on operating income and expenses Result on operating activity Result on other income and expenses Gross profit (loss) from discontinued operations Income tax expense Net profit (loss) from discontinued operations Attributable to minority interest Attributable to equity holders of the Company Bank BPH Group Financial Report 3Q 12/26

13 Basic and diluted weighted average number of ordinary shares from discontinued operation. from 1 July to 30 Sept. PLN from 1 Jan. to 30 Sept. Net profit from discountinued operation Weighted average number of ordinary shares Earnings per ordinary share (PLN) from discintinued operation Weighted average number of ordinary shares Diluted earnings per ordinary share (PLN) from discountinued operation Prior to the spin-off, the Bank separated its assets into those intended to be transferred to Pekao (discontinued operation) and those to remain with Bank BPH (continued operation). Until the spin-off day certain specialized Bank units continued to provide support necessary to ensure the continued functioning of both the continued and discontinued operation, although being assigned to one of those operations. As a consequence responsibilities of those units were redefined to enable servicing both continued and discontinued operations. In addition a system was introduced to allocate the cost of services provided by units located in one operation to the other regardless of their organisational assignment (Service Level Agreement). In case of the unit, which in accordance to the Spin-off Plan was assigned to continued operations and serviced also discontinued operations, in compliance with the Service Level Agreement, the related costs were allocated to discontinued operations and vice-versa. Following the separation of the discontinued business, the Group modified its the first nine months of profit and loss account to show the continued and discontinued sections. The impact of the breaking down of the Bank s activity into the continued and discontinued businesses on the 30 September P&L comparable data is summarised in the table below. CONTINUED OPERATIONS 1 Jan. 30 Sept. (unadjusted) Separation of discontinued operation Modified refinancing cost presentation 1 Jan. 30 Sept. (adjusted) Interest income Interest expenses Net interest income Impairment charge Net interest income incl. impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on operating income and expenses Result on operating activity Result on other income and expenses Gross profit (loss) from continued operations Bank BPH Group Financial Report 3Q 13/26

14 Income tax expense Net profit (loss) from continued operations DISCONTINUED OPERATIONS Gross profit (loss) from discontinued operations Income tax expense Net profit (loss) from discontinued operations Net profit (loss) from continued and discontinued operations: Attributable to minority interest Attributable to equity holders of the Company Bank BPH Group Financial Report 3Q 14/26

15 (10) CASH AND BALANCES WITH THE CENTRAL BANK DETAILED DATA - BALANCE SHEET Sept. June As at 31 Dec. Sept. June Cash Balances with the Central Bank Debt securities and bills issued by the State Treasury and other public issuers eligible for discounting at the Central Bank T - bills BOE eligible for rediscounting CASH AND BALANCES WITH THE CENTRAL BANK (11) TRADING ASSETS Debt securities and other fixed-income securities Sept. June As at 31 Dec. Sept. June Bonds Eurobonds Other Positive market value of derivatives Derivaties hedging the portfolio of financial assets priced at fair value with the pricing recognized on the P & L account (FVO) TRADING ASSETS (12) LOANS AND ADVANCES TO AND PLACEMENTS WITH BANKS BY TYPE Sept. June As at 31 Dec. Sept. June Money market placements Loans and advances Other including current accounts accounts for special purpose funds buy - sell back transactions loans and advances under cash collateral received but not booked loans and advances with banks other Gross total Adjustments to EIR Discount on purchased loans Loan loss provision Interest LOANS AND ADVANCES TO AND PLACEMENTS WITH BANKS (13) LOANS AND ADVANCES TO CUSTOMERS BY TYPE Sept. June As at 31 Dec. Sept. June Deposits Bank BPH Group Financial Report 3Q 15/26

16 Loans and advances: from financial institutions from non-financial institutions from government institutions Other: buy sell back transactions received but not booked loans and advances to customers other Financial lease receivables GROSS TOTAL Adjustments to EIR Discount on purchased loans Loan loss provision Interest LOANS AND ADVANCES TO CUSTOMERS (14) IMPAIRMENT CHARGES FOR BANKS Sept. June As at 31 Dec. Sept. June Opening balance allocations to impairment charges release of impairment charges used revaluation change after Bank BPH spin-off other CLOSING BALANCE a) IMPAIRMENT CHARGES FOR CUSTOMERS Sept. June As at 31 Dec. Sept. June Opening balance allocations to impairment charges release of impairment charges used revaluation change after Bank BPH spin-off other CLOSING BALANCE (15) INVESTMENTS FINANCIAL ASSETS Sept. June As at 31 Dec. Sept. June Assets available for sale Debt instruments bonds Treasury bills others Equity instruments Bank BPH Group Financial Report 3Q 16/26

17 shares interests Debt securities designated as at fair value through profit or loss (FVO) bonds Treasury bills eurobonds money market bills other Investments certificates designated as at fair value through profit or loss (FVO) INVESTMENTS FINANCIAL ASSETS (16) PROPERTY AND EQUIPMENT BY TYPE Sept. June As at 31 Dec. Sept. June Land (including perpetual usufruct) Buildings, premises Other property and equipment Property and equipment under construction PROPERTY AND EQUIPMENT (17) INTANGIBLE ASSETS BY TYPE Sept. June As at 31 Dec. Sept. June Goodwill Other intangible assets INTANGIBLE ASSETS (18) AMOUNTS OWED TO BANKS BY TYPE Sept. June As at 31 Dec. Sept. June Account balances Money market placements Loans and advances received Other: amounts owed under cash collateral accounts for special purpose funds buy sell back transactions other GROSS TOTAL Adjustments to EIR Interest TOTAL AMOUNTS OWED TO BANKS Bank BPH Group Financial Report 3Q 17/26

18 (19) AMOUNTS OWED TO CUSTOMERS BY TYPE Sept. June As at 31 Dec. Sept. June Account balances Deposits Loans and advances received Other: buy sell back transactions amounts owed under cash collateral other GROSS TOTAL Adjustments to EIR Interest TOTAL AMOUNTS OWED TO CUSTOMERS (20) LIABILITIES EVIDENCED BY CERTIFICATES Sept. June As at 31 Dec. Sept. June Bonds Certificates Other GROSS TOTAL Adjustments to EIR Discount Interest TOTAL LIABILITIES EVIDENCED BY CERTIFICATES (21) PROVISIONS Sept. June As at 31 Dec. Sept. June Deferred tax liability Provisions for retirement benefits and similar obligations Provision for holidays Provisions for contingent liabilities Other TOTAL PROVISIONS (22) TRADING LIABILITIES Sept. June As at 31 Dec. Sept. June Negative fair values of derivatives Liabilities from short sales Bank BPH Group Financial Report 3Q 18/26

19 Derivatives hedging the portfolio of financial assets priced at fair value with pricing recognized on the P&L account (FVO) TOTAL TRADING LIABILITIES (23) CONTINGENT LIABILITIES I. Contingent liabilities granted and received Sept. June As at 31 Dec. Sept. June Contingent liabilities granted: a) financing b) guarantee Contingent liabilities received: a) financing b) guarantee II. Liabilities connected with the execution of buy/ sell transactions III. Other: securities issued as guarantees securities received as guarantees and other collateral deducted from riskweighed assets transactions in securities liabilities under transactions in financial instruments TOTAL OFF BALANCE ITEMS (24) Segment reporting CONSOLIDATED INCOME STATEMENT CONTINUED OPERATIONS Interest income external income internal income Interest expenses external expenses Retail Corporate Segments Internationa l markets* Other (not allocated to segments)) Exclusions Consolidat ed value ( ) 1Q Q Q Q x x 2Q x x 3Q x x 1Q x 2Q x 3Q x 1Q Q Q Q x x 2Q x x 3Q x x internal expenses 1Q x Bank BPH Group Financial Report 3Q 19/26

20 Net interest income Impairment charges Net interest income incl. permanent impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net traiding income and revaluation Net income from investments General administrative expenses Net income from other operating costs and revenues Operating profit Net income from other costs and revenues Gross profit (loss) from continued operations Income tax Net profit (loss) from continued operations Minority interest net income 2Q x 3Q x 1Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Bank BPH Group Financial Report 3Q 20/26

21 Net profit (loss) (PLN) from continued operations attributable to equity holders of the Company 1Q Q Q * Excluding treasury product sales by International Market Division that are fully reported under either the Corporate or the Retail Segment. The segment performance of the INM does not include the performance of the INM's Sales and Capital Markets. The retail segment boosted its interest margin by 11,879 thousand zlotys (or by 11.30%) compared to Q2. The net fee and commission income dropped by 14,580 thousand zlotys (or by 15.91%). The cost of operation and general administration shrunk compared to Q2 by 13,655 thousand zlotys (or by 7.69%). The retail segment s net operating income rose by 12,869 thousand zlotys (or by %) on the Q2 figure, which was primarily driven by the better net interest income and lower cost of operation and general administration. The corporate segment lost 456 thousand zlotys in the margin income (or 10.61%). The net commission income grew by 10,874 thousand zlotys (or by %). The cost of operation and general administration dropped by 7,615 thousand zlotys (or by 21.20%). The segment s overall net operating income gained 29,132 thousand zlotys (or %), primarily as a result of the improved commission income. The International Markets Segment generated a pre-tax profit of 1.57 million zlotys, which was million zlotys (or %) more than in Q2 (this excludes the Sales and Capital Markets Area fully allocated to the Retail and Corporate segments) INM s sales of treasury and investment products are fully reported under the Corporate and Retail segments. In Q3, this business netted an income of million zlotys, or 2.23 million zlotys (or 18 %) more than in Q2. The net interest income stood at million zlotys and was up by 5.38 million zlotys (or 31.16%) on Q2. The net trading income stood at million zlotys after growing by million zlotys (or %) on the Q2 figure. A s s e t s T o t a l a s s e t s Retail Corporate Internal Markets Other (not assigned to segments) Total assets L i a b i l i t i e s T o t a l l i a b i l i t i e s Retail Corporate Internal Markets Other (not assigned to segments) Total liabilities Bank BPH Group Financial Report 3Q 21/26

22 ABRIDGED FINANCIAL STATEMENTS OF BANK BPH SA FOR THE 3 QUARTERS OF INCOME STATEMENT OF BANK BPH SA CONTINUED OPERATIONS 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept. 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept. Interest income Interest expenses Net interest income Impairment charges Net interest income incl.: impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on other operating income and expenses Result on operating activity Result on other income and expenses Gross profit (loss) from continued operations Income tax expense Net profit (loss) from continued operations DISCONTINUED OPERATIONS Gross profit (loss) from discontinued operations Income tax expense Net profit (loss) from discontinued operations Net profit (loss) from continued and discontinued operations Net profit (loss) (PLN) from continued operations Weighted average number of ordinary shares Earnings (losses) per ordinary share from continued operations (PLN) Net profit (loss) (PLN) from continued and discontinued operations Earnings (losses) per ordinary share from continued and discontinued operations (PLN) Weighted average diluted number of ordinary shares Diluted earnings (losses) per ordinary share from continued operations (PLN) Diluted earnings (losses) per ordinary share from continued and discontinued operations (PLN) Bank BPH Group Financial Report 3Q 22/26

23 INCOME STATEMENT OF THE BANK BPH FOR THE 3 QUARTERS OF By quarter 3Q 2Q 1Q 3Q 2Q 1Q CONTINUED OPERATIONS Interest income Interest expenses Net interest income Impairment charge Net interest income incl. impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on operating income and expenses Result on operating activity Result on other income and expenses Gross profit (loss) from continued operations Income tax expense Net profit (loss) from continued operations DISCONTINUED OPERATIONS Gross profit (loss) from discontinued operations Income tax expense Net profit (loss) from discontinued operations Net profit (loss) from continued and discontinued operations: The table above presents comparative quarterly data to illustrate a change of reporting refinancing costs the Bank made in the Abbreviated Interim Financial Statements of Bank BPH SA in 1H. Bank BPH Group Financial Report 3Q 23/26

24 BALANCE SHEET OF BANK BPH SA A s s e t s Cash and balances with the Central Bank Sept. June As at 31 Dec. Sept. ** June ** Trading assets Hedging derivates Loans and advances to and placements with banks incl.: loan impairment Loans and advances to customers incl.: loan impairment Investments financial assets Property and equipment Intangible assets Assets and disposal groups held for sale Other assets incl.: deferred tax assets T o t a l a s s e t s L i a b i l i t i e s Sept. June As at 31 Dec. Sept. ** June ** Amounts owed to banks Amounts owed to customers Liabilities evidenced by certificates Provisions incl. deferred tax liability Trading liabilities Hedging derivates Other liabilities Shareholders' equity T o t a l e q u i t y a n d l i a b i l i t i e s Capital adequacy ratio * Book value (in PLN) Number of shares Book value per share (in PLN) Diluted number of shares Diluted book value per share (in PLN) *Capital Adequacy ratio disclosed in Bank BPH Solo Financial Statements and in the Second Quarter Financial Statements changed as calculation method was made more precise. **Balance-sheet data as of 30 June and 30 September are reported for the Bank before the spin off. Bank BPH Group Financial Report 3Q 24/26

25 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY OF BANK BPH SA Opening balance of shareholders' equity on 1 January SHARE CAPITAL OTHER CAPITAL REVALUATIO N RESERVE RETAINED PROFITS TOTAL Charge for supplementary capital Charge for reserve capital General risk fund charge Reclasification due to Bank BPH s spin-off Increases due to revaluation of securities available for sale (net of tax) Net income of hedging derivatives (net of tax) Net income BALANCE on 30 September Opening balance of shareholders' equity on 1 January SHARE CAPITAL OTHER CAPITAL REVALUATIO N RESERVE RETAINED PROFITS TOTAL Payment of 2006 dividend Charge for reserve capital General risk fund charge Increases due to revaluation of securities available for sale (net of tax) Net income on sale of securities available for sale Net income of hedging derivatives (net of tax) Divestment of fixed assets Other increases/decreases Change after Bank BPH S.A. spin-off Net income from continued and discontinued operations BALANCE on 31 December Opening balance of shareholders' equity on 1 January SHARE CAPITAL OTHER CAPITAL REVALUATIO N RESERVE RETAINED PROFITS TOTAL Payment of 2006 dividend Charge for reserve capital General risk fund charge Decreases due to revaluation of securities available for sale (net of tax) Net income on sale of securities available for sale Net income of hedging derivatives (net of tax) Divestment of fixed assets Other increases/decreases Net income income from continued and discontinued operations BALANCE on 30 September Bank BPH Group Financial Report 3Q 25/26

26 I. Net cash flow from operating activities - indirect method CASH FLOW STATEMENT OF BANK BPH SA 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept. 3 rd quarter 1 July - 30 Sept. 3 quarters in accruals 1 Jan Sept II. Net cash flow from investing activities III. Net cash flow from financing activities IV. Total net cash flows Bank BPH Group Financial Report 3Q 26/26

27 Comments to Consolidated Report of Bank BPH Group For 3 Quarter

28 List of contents 1. Executive summary Principles applied in the consolidated quarterly report and their changes Bank BPH SA stock performance Macroeconomic conditions and market situation in Q Discontinued activity Bank BPH Group profit and loss account (continuing activity) Net interest income Impairment charges Net fee and commission income Net trading result and revaluation General administrative expenses Asset impairment charges Other operating income and expenses Bank BPH Group balance sheet Assets Loans and advances Liabilities Deferred income tax provisions and assets Business segmentation Important actions of Bank BPH Group and list of key developments Important details on the Bank s human resources, assets and financial standing and its financial performance Intended integration of Bank BPH SA and GE Money Bank SA Strategy for the Merged Bank Changes in the Bank s governing bodies Developments after the quarterly report date with potential impact on future financial performance Factors affecting performance in quarter ahead and beyond Shareholders controlling directly or indirectly 5 per cent or more of votes at the Bank s GM Bank BPH shares held by the Management and Supervisory Boards members New proceedings before courts and other public administration bodies Management Board s position on actual performance against published annual forecasts Transactions with related companies Information on loan underwriting or guarantees Additional information Dividend for Seasonality or operational cycles Comments to the Consolidated Report of Bank BPH Group for Q3 2

29 1. Executive summary Items 3Qs 08 3Qs 07 Change Income Statement (PLN 000) Continuing operations - Net interest income % - Net fee and commission income % - Net trading income and revaluation % - Net income from investments % - Total net revenue* % - Impairment charges % - General administrative expenses % - Pre-tax profit % - Profit after tax % Balance Sheet (PLN 000) Sept. 30, Dec. 31, Change - Total assets % - Net amounts due from customers** % - Risk weighted assets % - Amounts due to customers % - Shareholders' funds % Ratios (%) 3Qs 08 Change - Return on equity before tax (ROE pre-tax) pp. - Return on equity after tax (ROE net) pp. - Return on assets (ROA) pp. - Interest margin on total assets pp. - Cost income ratio (CIR) pp. - Capital adequacy ratio (CAR) pp. */ Net interest income + Net F&C + Net trading income and revaluation + Net income from investments; **/ excluding impairment charges 164M ZLOTYS IN CONSOLIDATED GROSS AND 111M ZLOTYS NET PROFIT FROM THE CONTINUING OPERATIONS AT THE END OF Q million zlotys in Q3 gross profit and million zlotys gross profit after 3 quarters; net figures respectively: 36.3 million and million zlotys; Gross ROE after three quarters 14.4%, down by 4.60 percentage points from ; net ROE 9.74%, down by 2.18 pp.; Fast Q3 deposit growth: by 1,322 million zlotys or 19.6%; loan increase by 800 million zlotys, or by 11.2% from Q2. After three quarters, deposits up by 43.7% and loans by 28.8%; Improved credit portfolio quality: non-performing loans dropped from 5.2% in to 3.9% in September; Customer base recovery: after three quarters the number of Retail Banking Division s customers rose by 5.9%, or more than 41 thousand, to the total of 734 thousand; the Corporate Banking Division acquired 800 businesses; Dynamic expansion of the distribution network integrated with the alternative channels: 221 branches, 103 franchise agents (partner outlets), 11 Corporate Centers and 59% retail customers using the Sez@m on-line account. The Bank continued rebuilding its market potential it had lost after the spin-off on November 29,. Only in Q3, we opened 13 new branches bringing the overall number of this year s additions to 21. During Q3, our agents added 14 new outlets raising the overall number to 103. In, the Bank hired 865 new employees and the total headcount at the end of September stood at 4,037. Q3 was a good business period with customer deposits topping 8.1 billion zlotys after a nearly 20% improvement over June and 44% over the figure. Loans reached 7.9 billion zlotys, up by 11.2% over Q2 and by 28.8% over. The Bank considerably boosted its liquidity position due to a faster growth of deposits relative to loans. The loan to deposit ratio changed from 109.7% in to 98.3% in September. The business high performance translated into better revenues. During the first three quarters, the Bank generated million zlotys of net interest income, up by 23.5% y/y and by 3% over Q2. The net income from fees and commissions reached million zlotys and bettered the Q3 figure by 2.8%, while the net trading income stopped at 65 million zlotys, after improving by 57% y/y. The Bank closed the three quarters with 702 million zlotys consolidated net income from banking, which was 16% better than in September. Our consolidated operating costs equaled 600 million zlotys, up by 48.8% y/y overall, but when the cost allocation effect is taken into account this increase shrinks to just 12%. During the first three quarters, the Group generated a consolidated gross income of million zlotys, which was 8.9% less than in September. The consolidated net income figure of million zlotys is 2.2% lower. Our performance suffered mainly as a result of no outsourcing revenues booked in Q3 and from an increased spending on rebuilding our market potential. The drop in profits affected our performance indicators. Indeed, after the first three quarters, the gross ROE stood at 14.4%, or 4.6 pp. lower than in, while the net ROE stood at 9.7%, or 2.2 pp. down. 3 Comments to the Consolidated Report of Bank BPH Group for Q3

30 Retail Banking Division Retail was consistently winning back individual customers and small and medium enterprises. The most spectacular growth figures were recorded in deposits and personal accounts. During Q3, we attracted 43 thousand new term deposits of individual customers bringing the total number to 672 thousand. During the same period, the number of personal accounts increased by 11 thousand to 468 thousand. SMEs purchased three thousand new Harmonium packages and this number stood at 68 thousand (25% growth y/y) at the end of September. Our new savings product offering was a resounding success with 42% y/y growth in retail deposits and 12% growth over Q2. In September, the Division showed 7.4 billion zlotys in deposits. On the deposit front our efforts focused on improving a range of traditional products, including: the 14 day Lok@ta internetowa, INTRATA PLUS, Lokata Lojalnościowa and, for SMEs, the e-lokata. The Retail credit portfolio closed the period at 6.8 billion zlotys, which accounted for 86% of the total loans granted by the Bank and represented 17% growth y/y and 4.6% growth over Q2. The two main contributors to this performance included our quick loan Pożyczka od ręki that grossed 0.49 billion zlotys overall (17% y/y growth) and cash loans (9% growth) that reached 0.56 billion zlotys. Mortgages rose by 9% y/y to 3.72 billion zlotys, with the zloty-denominated loans increasing by 37%. Our mortgage portfolio quality sported a rather commendable figure of just 2.2% non-performing loans. The average granted loan was worth 85 thousand zlotys and matured after 19.7 years. The average LTV was 44% after factoring-in updated values of the mortgaged real estates. The proportion of zloty-denominated loans continued rising after July 2006, when the Bank limited its FX mortgage lending, and reached 48% in September. Other Retail priorities included efforts to develop a comprehensive offer for SMEs and rebuilding our business customer base. In the latter segment our credit portfolio grew by 40% y/y to 2.2 billion zlotys, while the new one-month on-line term deposit product helped boost deposits by 30%. Corporate Banking and Real Estate Finance Division The Bank was gradually rebuilding its corporate business. Only in Q3, we acquired 267 new customers boosting the total to 827. This success owes much to a re-established nationwide sales network, 11 new Corporate Centers and an attractive range of products supported by modern transaction banking technology. With one thousand new sales locations our TransKasa system processed 600 thousand transactions worth the total of 85 million zlotys. The on-line banking BusinessNet platform delivered it services to 600 large corporate and 400 individual business customers. The advanced DealingNet application served 214 customers and only in September it accounted for 46% of deposit transactions and 22% of FX transactions. Corporate loans and deposits are growing fast. At the end of September, customers borrowed 1,189 million zlotys, or 78% more than in Q2 (669 million zlotys in June) and placed deposits worth 1,302 million zlotys, a staggering 128% more than in June (571.5 million zlotys). International Markets Division (INM) INM was working on treasury products for all customer segments. Following the roll-out of the new DealingNet application in April, INM started recording growing transaction volumes with corporate and business customers and boosted its revenues. During, net proceeds from treasury and investment products (including securities) increased by 64%. The Division also met its target for the new structured investment product program, which grossed 233 million zlotys during the three quarters. Additionally, a three-year structured insurance policy sold for 73 million zlotys. The product s success rested on its three pillars, including tax efficiency, guarantee of principal and a coupon linked to stock performance scenarios of the five largest companies in the WIG20 index. Selected operational data Sept. 30, Dec. 31, Change (%) Outlets Partner outlets Own ATMs* Employment (in FTEs)** 4,037 3, Retail Clients (in ths), including: Private Individuals Small Enterprises Corporate Clients ,494.4 Retail banking cards (in ths), including: Credit cards (active) Debit cards Charge cards */ Bank BPH customers have free of charge access to Euronet machines; **/ without unpaid, maternity and child care leaves Comments to the Consolidated Report of Bank BPH Group for Q3 4

31 2. Principles applied in the consolidated quarterly report and their changes This report complies with International Financial Reporting Standards (IFRS) including International Accounting Standard (IAS) 34 on Interim Financial Reporting. To the extent not regulated by the above standards financial figures are presented in compliance with the Act of Sept. 29, 1994 on accounting (Journal of Laws of 2002 No. 76. item 694 as amended) and the implementing regulations issued there under and also with the Council of Ministers Ordinance of Oct. 19, 2005 on current and periodic reports by issuers of securities (Journal of Laws of 2005 No. 209 item 1744). This Q3 mid-term report follows the same accounting policies and calculation methods as the latest annual financial statements and as the Consolidated Report of the Bank BPH Group for the year. Based on IFRS 7 and on interpretations of the application of the standard in respect of presenting revenues and expenses from financial assets and liabilities other than valued at fair value through profit or loss the Bank modified its presentation of the refinancing costs of CIRS and FX swap, as well as of trading securities, as of January 1,. The refinancing costs are now reported under interest expense instead of under the net trading income. This change was intended to arrive at a uniform presentation under net interest income of interest revenues and expenses from all financial instruments other than those valued at fair value through profit or loss. Further relevant details can be found in the Consolidated Report of the Bank BPH Group for the 1H. Since June 17,, Bank BPH has belonged to an American corporation General Electric, which via its subsidiary - GE Money Bank possesses 66% shares in Bank BPH. Bank BPH SA is the parent company of Bank BPH Group. Its consolidated report until the spin-off i.e. November 29, included the following subsidiaries: BPH Bank Hipoteczny SA, Warsaw, in whose equity the Bank had a 99.96% interest; BPH PBK Leasing SA, Warsaw, of which the Bank held 80.1%; BPH Finance plc, a London based company, then owned in % by the Bank; BPH PBK Zarządzanie Funduszami Sp. z o.o., then wholly owned by the Bank. Following the spin-off date the Bank s Consolidated Report includes just one wholly owned subsidiary. BPH PBK Zarządzanie Funduszami Sp. z o.o., which remains a majority shareholder with 50.14% shares in BPH Towarzystwo Funduszy Inwestycyjnych SA (BPH TFI an investment fund company). 3. Bank BPH SA 1 stock performance In Q3, the main indices of the Warsaw Stock Exchange had been sliding for the fifth quarter in a row. The persistence of the sub-prime mortgage crisis in the USA and Europe was affecting the sentiments on the world s financial markets. Between the first trading in July and the last trading day of September, WIG (Warszawski Indeks Giełdowy) lost 7.71%, whilst mwig40 and swig80 lost 12.98% and 15.13%, respectively. During the same period, the banking sector s WIG-Banki index gained 0.29%. The main factor affecting stock market performance all around the world was the negative information from the North American and European financial sectors. The nationalization of Freddie Mac and Fannie Mae and the bankruptcy of Lehman Brothers, compounded by the US government s injection of 85 billion dollars in AIG produced even more global risk aversion. Domestically, mass withdrawals from investment funds, including nearly 6.4 billion zlotys net in Q2 alone (more than 20% of the total net placements in the whole of ), again proved to be the crucial factor making the Warsaw indices not just follow, but also to exaggerate the declining trends on the global markets. Between June and September, the Bank s stock lost 1.36% after a clearly stronger performance in comparison to mwig40, but a slightly poorer one to the relatively strong WIG-Banki. At the closing of the first trading day of Q3 on July 1, Bank BPH share cost zlotys and at the final day of the period, on September 30, it fetched zlotys. The stock peaked on July 30 at and toughed on July 7 at zlotys. The average closing price in the period was zlotys, which was 14.7% less than the average price of Q2. Throughout the period, our stock performed in strong correlation with the WIG-Banki and our stock yield beat all of: WIG, mwig and swig indices by the respective figures of 6.4, 11.5 and 13.8 percentage points. The quarterly stock trading volume was thousand shares, or 38.8% less than in Q2. The average daily trading volume in the quarter stood at 11,854 shares. 1 Bank BPH SA has its shares listed on the main floor of the Warsaw Stock Exchange (WSE), in the continuous quoting system. At the end of Q3 they belonged to WIG, mwig40 and WIG-Banki indices. The Bank s Global Depository Receipts (GDRs) are also listed on the London Stock Exchange. 5 Comments to the Consolidated Report of Bank BPH Group for Q3

32 Performance of Bank BPH stock against the WIG mwig-40, swig80 and WIG-Banki indexes on the WSE in Q3 (standardized charts) 85 zł manufacturing (7.7% y/y) and mining (5.7% y/y), partly offset by a reduction in the utilities by 2.3% y/y. 75 zł Bank BPH WIG mwig40 WIG Banki swig80 During the quarter, the Monetary Policy Council (RPP) made no change to the interest rates. The reference rate remained at 6.0%, rediscount rate at 6.25%, Lombard rate at 7.50% and the deposit rate at 4.50% pa. 65 zł 55 zł 07/01/ 07/08/ 07/15/ 07/22/ 07/29/ 08/05/ 08/12/ 08/20/ 4. Macroeconomic conditions and market situation in Q3 08/27/ 09/03/ 09/10/ 09/17/ 09/24/ The M3 aggregate metric of money supply rose by 17.1% y/y in September compared to 16.8% y/y in August. A high growth rate of deposits (23.9% y/y) was accompanied by a continued outflow of cash from investment funds seen as more risky than the safer bank deposits. September also saw acceleration in the growth of corporate deposits by 6.7% y/y, while lending grew by 33.4% y/y in the household sector and by 24.4% y/y in the corporate sector. The faster growth of household borrowing was driven by the weakening zloty, which helped boost the zloty value of FX-denominated loans. An additional factor that played in this direction in September was the expected tighter future lending policies. In Q2, Polish GDP grew by 5.8% in real terms compared to Q2, according to preliminary estimates published by the Household and corporate debt growth (% y/y) Main Statistical Office. The domestic demand remained the main GDP driver and, at 6.2%, continued to exceed the GDP rate. Household consumption contributed 3.4% to the GDP, compared to 3.1% twelve months earlier, while corporate capital expenditure contributed 2.9% compared to 3.3% last year. An offsetting impact of foreign demand (net exports) was weaker than the year before (-0.6% vs. -2.9% in Q2 ) Jan 03 Jun 03 Nov 03 Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Sep After a 3.7% y/y decrease in August, industrial sales rose by 7.0% y/y in September or by 3.5% y/y when a seasonality Households, LA Corporates, RA effect is taken into account. This fluctuation was caused mainly by the performance of manufacturing industry that grew by 7.7% y/y. The construction sector grew by 13.2% y/y (or by 16.7% y/y after the seasonality adjustment). The labor market continued to offer good conditions. In the enterprise sector the average job growth rate was 4.1% y/y in September. In Q3, the inflation rate metrics showed slightly lower growth rates, including: 4.5% annual consumer price index growth rate, compared to 4.6% in June. This development resulted from price increases in a number of sectors: food industry by 5.1% y/y, apartments by 8.4% y/y, rent and bills by 10.1% y/y, transport by 2.6% and restaurants and hotels by 6.7%; In September, prices of industrial goods sold were 2.1% y/y higher. These were a result of price increases in Household and corporate deposit growth (% y/y) Jan 03 Jun 03 Nov 03 Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07 Aug 07 Jan 08 Jun 08 Sep 08 Household, LA Corporates, RA Comments to the Consolidated Report of Bank BPH Group for Q3 6

33 GDP growth (same period of previous year = 100) in % ,4 104,0 104,2 104,7 106,9 106,0 104,8 104,0 103,2 102,4 104,4 104,3 105,4 106,3 106,6 106,6 107,2 106,4 106,4 106,1 120,8 106,1 105,8 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 4Q'04 1Q'05 2Q'05 3Q'05 4Q'05 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 2Q'08 GDP Investments Domestic demand Exchange rates vis-à-vis reference rate and inflation Income and expense with discontinued operation () Jan. 1, - Profit & Loss Account September 30, Interest income Interest expenses Net interest income Impairment charges Net interest income incl. impairment charges Fee and commission income Fee and commission expenses Net fee and commission income Net trading income and revaluation Net income from investments General administrative expenses Result on operating income and expenses Result on operating activity Result on other income and expenses Gross profit from discontinued operations Income tax expense Net profit from discontinued operations Attributable to minority interests Attributable to equity holders of the Company EUR/PLN USD/PLN 5,0 4,5 4,0 3,5 3,0 2,5 2,0 Jan-04 Mar-04 May-04 Jul-04 Oct-04 Dec-04 Feb-05 May-05 Jul-05 Sep-05 Dec-05 Feb-06 Apr-06 Jun-06 Sep-06 Nov-06 Jan-07 Apr-07 Jun-07 Aug-07 Nov-07 Jan-08 Mar-08 May-08 Aug-08 Sep Inflation Reference rate 6. Bank BPH Group profit and loss account (continuing activity) 6.1 Net interest income Net interest income () USD/PLN (LA) Reference rate (RA) 5. Discontinued activity EUR/PLN (LA) Inflation - CPI (RA) Interest income Interest expense Net income from leasing business Net interest income Q3 Q3 Change (1/2) 3Qs 3Qs Change (5/6) PLN 000 % PLN 000 % In view of the Bank BPH spin-off described in detail in note 9 of the Statement, the profit and loss account is broken-down into the so called: discontinued operations (a portion transferred to Bank Polska Kasa Opieki SA, Pekao) and continuing operations (remaining at Bank BPH). The discontinued operations cover the period from January 1, until the spin-off date i.e. November 29, inclusive and refers to 285 branches, Corporate Centers and part of the Head Office as well as the consolidated subsidiaries (BPH Bank Hipoteczny SA mortgage bank, BPH PBK Leasing SA, BPH Finanse plc). To ensure comparability of the results a similar recognition of continuing and discontinued operations has been also adopted in the P&L account for the period of January 1 and September 30,. Bank BPH Group generated the net interest income of million zlotys in Q3 and was higher by 25.3% (or by 24,478 thousand zlotys) from a comparable period of. The net interest income for three quarters of increased up to 354,393 thousand zlotys, or 23.5% y/y, which can be attributed mainly to higher loan and deposit volumes. The Bank s net interest income for three quarters is higher than the consolidated figure because of a dividend of 27.8 million zlotys paid by the subsidiary BPH PBK Zarządzanie Funduszami. In the Bank s financial statements this amount raised the net interest income, whilst in the consolidated statements it is included in the net mutual exclusions within the Group. 6.2 Impairment charges In Q3, the balance of impairment charges was positive at 1.2 million zlotys, as impairment reductions more than fully offset impairment increases. This was achieved through large sums recovered from work-out. The cumulative figure after three 7 Comments to the Consolidated Report of Bank BPH Group for Q3

34 quarters was, however, negative at 15.8 million zlotys, or 29.5% lower y/y. Provisioning is set up under legal regulations binding in Poland and also in line with the Bank s prudential credit risk policy. Impairment charges () Q3 Q3 Change (1/2) 3Qs Change (5/6) PLN 000 % 3Qs PLN Increase Revaluation of loans and advances Provisions for offbalance sheet liabilities Decrease Revaluation of loans and advances Provisions for offbalance sheet liabilities Impairment charges % sions on foreign payments grew by 32% y/y (i.e. 2,819 thousand zlotys) while net transactional exchange rate position rose by 62% y/y (or 16,484 thousand zlotys). Result on BPH TFI commission in Q3 amounted to 15 million zlotys, and to 58.2 million zlotys during the whole nine-month period (drop of 66.8% and 47.7%, respectively), what had a negative impact on net fees and commissions of Bank BPH Group. In Q3, result on fees on commission covered 47.2% of Bank BPH Group operating costs (in the same period last year, the ratio was 63.6%). 6.4 Net trading income and revaluation Net trading income and revaluation () Result on fixed income instruments Exchange gain Net trading income and revaluation Q3 Q3 Change (1/2) 3Qs Change (5/6) PLN 000 % 3Qs PLN % 6.3 Net fee and commission income Breakdown of net fee and commission income () Securities and custody business Loans and advances Domestic payments International payments Net transactional exchange rate position Investment fund management and distribution of participation units Q3 Q3 Change (1/2) Change (5/6) 3Qs 3Qs PLN PLN % % Other Net fee and commission income When compared to Q3, the net fee and commission income rose by 10.5% (or 9,021 thousand zlotys) and stood at 95,288 thousand zlotys, while for cumulative three quarters this year, the income was up by 2.8% (or 7,614 thousand zlotys). The biggest contributors were fees on commission on domestic payments, which swelled by 57.2% y/y during nine months (or 36,556 thousand zlotys), primarily due to an increased number of bank accounts as well as volumes and amount of payment card transactions. Fees and commis- The Bank modified its reporting of the net trading income and of the net interest income and interest costs. The cost of refinancing the trading portfolio (interest on IRS designated as hedges under the hedge accounting) allocated to the net trading income is now reported under interest revenue and expense (resulting in a reduction of the net interest income and an increase of the net trading income by the same amount). Net trading income and revaluation in Q3 amounted to 23,984 thousand zlotys and during 9 months of to 65,035 zlotys, what means an increase in comparison to the similar periods of the previous year by 40.4% and 57.4% respectively. It was caused by high jump in exchange gain (by 60.3% and 87.6% respectively). 6.5 General administrative expenses Changes in general administrative expenses () Q3 Q3 Change (1/2) 3Qs Change (5/6) PLN 000 Comments to the Consolidated Report of Bank BPH Group for Q3 8 % 3Qs PLN Salaries and employee benefits Building maintenance and rents Other expenses Depreciation Allocated cost* TOTAL *Costs are allocated in reference with transactions between the continuing and discontinued operations introduced as part of an internal cost allocation system. Details are presented in note 9 Discontinued operation of Bank BPH Group Mid-year Financial Report. %

35 As compared to Q3 last year, general administrative and management expenses went up by 48.8% (or 66,278 thousand zlotys), reaching the amount of 202,001 thousand zlotys (during the first nine months of the year they stood at 599,876 thousand zlotys, up by 48.3%, or 195,330 thousand y/y). Excluding the item Cost allocation amounting to 56.2 million zlotys in Q3 and 130.5m zlotys during first nine months of (which related to settlements of mutual services rendered between two separated Bank BPH parts, one intended for integration with Pekao and the second one remaining in Bank BPH after the spin-off and lasted until the Bank s spin-off), costs would increase by 5.2% and 12.1%. Remuneration costs in Bank BPH Group grew by 43.4% in Q3 against the same period of last year and by 31.9% y/y during nine months of. This resulted from the increased employment by 865 FTEs as compared with the end of, what was connected with a dynamic business rebuilding, as well as the policy of key staff retention. Building maintenance and lease costs grew by 57.9% (Q3 vs. Q3 ), i.a. in relation to opening of new branches and lease of Headquarters. Depreciation dropped by 26.1% and other costs decreased by 32%. 6.6 Asset impairment charges During Q3,, fixed assets impairment charges amounted to 5,866 thousand zlotys. 6.7 Other operating income and expenses Other operating income and expenses () Other operating income Other operating expenses Q3 Q3 Change (1/2) 3Qs Change (5/6) PLN 3Qs % PLN % Total The net other costs and revenues stood at 10.3 million zlotys, up by 5.4 million zlotys from Q3 (after three quarters of they were equal to 78.3 million zlotys, growth by 76.7 million zlotys y/y). The dominating component of this item was revenue from services outsourced to Pekao, of which 33 million zlotys to Q1, 22.4 million zlotys to Q2 (no impact in Q3 as the services were finalized in May ). These revenues in Q3 were recognized as costs of mutual transactions between the continuing and discontinued operations and effectively reduced the general and administrative expenses under the Cost allocation item. Other operating revenues contain a positive net result of 19.4 million zlotys on the sale of the building located Marynarska Street in Warsaw, which took place in Q2. 7. Bank BPH Group balance sheet A major development in the balance sheet was reduction in other liabilities, due to concluded migration of accounts that were transferred to Pekao under the Bank s spin-off process. This resulted in significant reduction in the balance of accounts used for recording settlements with Pekao. Thus the ratio: other assets to other liabilities went back to neutral levels, in line with the Bank s plans. 7.1 Assets Although amounts due from customers grew by 1,777.3 million zlotys (28.8%) in Q3, Bank BPH Group balance sheet decreased by million zlotys (3.9%) as compared to end of, reaching 12,515.5 million zlotys. Drop in the value of assets was mostly attributable to reduced item Investment financial assets (which went down by million zlotys, or 42.2%), which in turn followed a settlement of the Bank s spin-off. Changes to asset breakdown (PLN 000) Assets Cash and balances with central bank Sept. As at 31 Dec. Change (1/2) Sept. Change (1/5) PLN 000 % PLN 000 % Trading assets Hedging derivates Amounts due from banks Including impairment write-offs Amounts due from customers Including impairment write-offs Other financial assets Property and equipment Intangibles Assets and disposal groups held for sale Other assets Total assets Loans and advances Despite the spin-off of Bank BPH the quality of its credit portfolio continued to improve. At the end of September impaired loans constituted 3.9% of the portfolio. Bank BPH Group loan portfolio including discount loans reported in Note 9 Cash and cash in central bank (PLN 000) Impaired loans* September % June % As at 31 December % September % June Nonimpaired loans* Total *nominal amount % 9 Comments to the Consolidated Report of Bank BPH Group for Q3

36 7.3 Liabilities The main reason behind changes in assets funding sources was drop in inter-bank deposits (by 2,970 million zlotys, or 92% against the end of which was related the settlement of Bank s spin-off. Amounts due to customers increased by 43.7% compared to the end of, mainly due to rising deposits of individuals and businesses. Changes to assets financing sources () Liabilities Sept. As at 31 Dec. Change (1/2) Sept. Change (1/5) PLN 000 % PLN 000 % Amounts due to banks Amounts due to customers Liabilities evidenced with certificates Provisions Trading financial liabilities Hedging derivates Other liabilities Minority interests Equity Total liabilities Deferred income tax provisions and assets The balance of assets and provisions under deferred income tax is reported in the balance sheet. The change observed from the previous quarter is proportional to the time lapse. Timing differences are differences between taxable profit and gross accounting profit that originate in one period and reverse in subsequent periods. Balance of deferred income tax reserve and assets (PLN 000) As at September 30, As at Dec. 31, As at September 30, Deferred tax assets Deferred tax liability Business segmentation The Bank s business is segmented strictly along its organizational lines. The Bank is organized and managed under strategic customer segments, including Retail Banking and Corporate Banking with profit centre competences, and the International Markets segment. The latter is mainly responsible for the development and sales of treasury and investment products and for capital market and custodian services, but also for the management of interest rate, currency and Selected items of the Income Statement and the Balance Sheet by business segments over Q3 (PLN 000) Consolidated income statement Business segments Other (not allocated to segments) liquidity risks, as well as for the segment of Financial Institutions. Consolidated value ( ) Retail Corporate INM* CONTINUING OPERA- TIONS Q Net interest income Q Impairment charges Net fee and commission Q Q Q Q Q Q income Q Net trading income and revaluation Q Q Q General Q administrative expenses Q Q Gross operating profit Q Q Q Balance sheet Total assets Total assets Total assets Total liabilities Total liabilities Total liabilities * Excluding treasury product sales by the International Markets Division that are fully reported under either the Corporate or the Retail Segment. The segment performance of the INM does not include the performance of the INM s Sales and Capital Markets. 9. Important actions of Bank BPH Group and list of key developments Bank BPH Group as at September 30, Since the spin-off, Bank BPH Group includes two entities: BPH PBK Zarządzanie Funduszami Sp. z o.o. (direct subsidiary) and BPH TFI SA (indirect subsidiary, held via BPH PBK Zarządzanie Funduszami Sp. z o.o.). The remaining shares in BPH TFI SA belong to General Electric Capital Corporation based in Stamford, USA. GE Capital Corporation purchased BPH TFI shares on June 18,. Selected financial data of Bank BPH Group companies (company data based on preliminary financial statements ) Company Dominant entity Bank BPH Spółka Akcyjna Consolidated subsidiaries BPH PBK Zarządzanie Funduszami Sp. z o.o. Indirect subsidiary BPH Towarzystwo Funduszy Inwestycyjnych SA Registered address Krakow Bank s % of votes at Shareholders equity the company s GM Assets Warsaw % Warsaw 50.14% Comments to the Consolidated Report of Bank BPH Group for Q3 10

37 Considering the unfavorable condition on international and domestic financial markets our investment fund management company, BPH TFI, continued its efforts to retain the existing asset volume. A variety of new closed-ended funds are awaiting roll-out. At the end of the period, BPH TFI managed 11 investment funds, including one open-ended fund (BPH FIO Parasolowy) with 10 individual sub-funds. The deepening global financial crisis and the high volatility of the financial markets drove investors to reduce new placements and increase redemptions. As a result, BPH TFI lost 3.6 billion zlotys in assets under administration, but retained its 4.2% market share. 10. Important details on the Bank s human resources, assets and financial standing and its financial performance 10.1 Intended integration of Bank BPH SA and GE Money Bank SA Bank BPH and GE Money Bank belong to the same capital group of General Electric Company. By merging Bank BPH with GE Money Bank General Electric Company will consolidate its banking activity in Poland. On September 23,, the Management Boards of Bank BPH SA and GE Money Bank SA signed and the Supervisory Boards of both banks accepted the Merger Plan of Bank BPH and GE Money Bank. It is assumed that the merger of Bank BPH and GE Money Bank will take place under Art and 3 of the Banking Law, in connection with Art section 1 of the Companies Commercial Code (CCC), by transferring all of GE Money Bank s assets and liabilities to Bank BPH with a simultaneous increase in Bank BPH s share capital by an issue of the merger issue shares, which Bank BPH shall issue to the shareholders of GE Money Bank (the Merger Issue Shares ). The effect of the merger will be that GE Money Bank s shareholders will become direct shareholders in Bank BPH. Taking into consideration that GE Money Bank is currently a 66% shareholder of Bank BPH, the merger shall cause two significant effects, all occurring on the day of the merger: according to Art of the CCC, on the day of the merger, Bank BPH will become the legal successor of all rights and obligations of GE Money Bank. As a result, Bank BPH shall become the owner of the treasury shares (Treasury Shares) together with other assets of GE Money Bank and immediately thereafter, Bank BPH shall allocate the Treasury Shares to GE Money Bank s shareholders, GE Money Bank s shareholders shall acquire Merger Issue Shares in return for their shares in GE Money Bank. According to the Merger Plan, the share exchange ratio of shares in GE Money Bank for the Merger Issue Shares and the Treasury Shares is This means that for each 1 (one) GE Money Bank share, the shareholders of GE Money Bank will receive of Bank BPH share. For 81,080,688 shares in GE Money Bank, the shareholders of GE Money Bank will receive 47,938,856 Merger Issue Shares and 18,952,711 Treasury Shares. Goldman Sachs International advised GE Money Bank. The correctness of the established share exchange ratio was confirmed by a Fairness Opinion issued by JPMorgan plc as at September 23,. Additionally the independent auditor appointed by court confirmed that the Merger Plan was correct and reliable. As a consequence of the merger, Bank BPH s share capital will be increased from 143,581,150 zlotys by 239,694,280 zlotys to 383,275,430 zlotys, by way of issuing 47,938,856 series "E" shares in Bank BPH with a nominal value of 5 zlotys each. In line with the timetable, the legal merger of Bank BPH and GE Money Bank should be completed after receiving relevant consents and adopting resolutions by both banks EGMs, by the end of Q Strategy for the Merged Bank On September 23, a middle-term development strategy for for the Merged Bank was adopted. In line with the strategy, the goal is to create a universal bank with an edge in consumer finance (i.e. financing of individual customers needs) and to assume top five market position in the most attractive market segments. Its universal character shall be maintained by providing comprehensive services to private individuals, small and medium-sized enterprises. The aspiration is to become the Bank of first choice for medium-sized companies. The strategy also assumes multi-channel access to banking offers and services. The Merged Bank will aim to open 220 own branches (thus reaching the total of 530) as well as 450 franchise outlets. Additionally, the goal is that distribution network will comprise 450 mobile sales representatives, 4,000 agents and 2,300 car dealers, as well as an internet platform and a Call Center. Sales of banking products and services shall be assisted by sophisticated tools of customer relation management. 11 Comments to the Consolidated Report of Bank BPH Group for Q3

38 The financial targets for 2011 defined in the strategy are presented in the announcement No. 52/, which is to be found at the Bank s website in the Investor Relations section. ( ontent_news_24232) 10.3 Changes in the Bank s governing bodies Bank BPH has been notified that Robert Stefanowski had resigned from function as a member of the Supervisory Board effective from October 13,. 11. Developments after the quarterly report date with potential impact on future financial performance No developments have taken place in the Bank BPH Group after the report date that could potentially affect the Bank s financial performance. 12. Factors affecting performance in quarter ahead and beyond A number of factors may affect the Group s performance in the quarter ahead and beyond, including: The Monetary Policy Council kept its interest rates at the June level, when the last increase of 25 bps. was made. Considering a further deterioration of the world s financial markets and the plans to join the Euro zone in 2011 announced by the government the Council may decide to leave the rates unchanged until the end of the year. The first cut might be expected in Q The continued slump on the Warsaw Stock Exchange may further increase the volumes of redeemed units of participation in investment funds and affect fee and commission income from these products. The current low sales of BPH TFI precipitation units may continue into Q4. The stock market may also adversely affect the turnover and income of the Bank s Brokerage Office. The suffering stock market combined with growing wage income of the population favors household deposits; on the other hand, a deteriorating corporate performance is already slowing down the deposit growth. During the coming months, deposit developments will be crucial because in the face of limited alternative sources of financing deposits will determine the amount of credit available to the economy. Any reduction in the lending volume will have an adverse impact on capital expenditure and, to a lesser extent, household consumption leading to slower economic growth. The latter will also slow down due to weaker exports, as many Western European markets, where Polish companies place most of their exported goods, are or soon will find themselves in recession. The world financial crisis and liquidity crunch on the inter-bank market, fuelled by a lack of mutual confidence, prevents optimum use of cash. Banks with surplus cash find themselves unable to place it on the interbank market, while those that need to borrow have to curb their lending business. This situation may lead to reduced interest incomes generated in the banking sector. A restricted lending activity of banks, achieved by higher margins and tighter granting policies, may have a particularly adverse impact on the residential property market. The recent boom in this sector was mainly driven by the readily available credit and when this ends prices could start falling. This development would affect the value of collateral accepted against existing loans. The deteriorating condition of certain sectors, especially those relying on export and global trends, may affect the quality of corporate credit portfolios. Any continued depreciation of the zloty would undermine the quality of FX-denominated mortgage loan portfolios. The current crisis features considerable volatilities on financial markets (bond yield, market interest rates, exchange rates, etc.), that may affect the banking sector s performance and the quality of credit portfolios. A further crisis escalation in the US and/or Western Europe could drive some customers to modify their savings structures by for example including T-bonds. Our operation will also be affected by the planned merger with GE Money Bank. Additionally the Bank BPH has designated for sale a property in Krakow at 80A Bohaterów Września Street. The property is worth 20 million zlotys at book value and 18 million thousand zlotys at fair value, which is also designated as the expected sales price. In recognition of the adopted fair value measurement the Bank recognized an impairment charge of 2 million thousand zlotys. The sale is expected to be complete by the end of. Comments to the Consolidated Report of Bank BPH Group for Q3 12

39 13. Shareholders controlling directly or indirectly 5 per cent or more of votes at the Bank s GM Since the previous report the ownership structure of Bank BPH has changed. Bank BPH shareholding structure as at the last quarterly report date (July 30, ) Item Shareholder Shares GSM votes Number % Number % 14. Bank BPH shares held by the Management and Supervisory Boards members Among all the member of Bank BPH Supervisory Board and Management Board, only Mirosław Boniecki, Deputy President of the Management Board held 131 shares in the Bank both as at September 30, and June 30,. 1 GE Money Bank (General Electric Company), including: Indirectly via HoldCo77 B.V Directly New proceedings before courts and other public administration bodies 2 UniCredito Italiano S.p.A Combined: Arka BZ WBK Akcji Fundusz Inwestycyjny Otwarty, Arka BZ WBK Akcji Środkowej i Wschodniej Europy Fundusz Inwestycyjny Otwarty, Arka BZ WBK Stabilnego Wzrostu Fundusz Inwestycyjny Otwarty, Arka BZ WBK Zrównoważony Fundusz Inwestycyjny Otwarty oraz Lukas Fundusz Inwestycyjny Otwarty State Treasury In Q3,, Bank BPH Group was not engaged in any court proceedings, proceedings before the authority competent for arbitration or public administration authorities, pertaining to obligations or claims of the Bank or its subsidiary worth at least 10% of the Bank s shareholders funds, nor in two or more proceedings pertaining to obligations and claims whose total value represented at least 10% of the Bank s own funds. 5 Other shareholders including The Bank of New York Total On September 11,, Bank BPH was notified by GE Money Bank that it had directly purchased, on September 8,, 65.9% of the stock of Bank BPH. The transaction involved a transfer to GE Money Bank SA all of the assets of HoldCo77 B.V (HoldCo), a company in liquidation. As the sole owner GE Money Bank absorbed all of HoldCo s assets, which included Bank BPH stock. Currently, GE Money Bank holds directly 66% of the General Meeting votes in the Bank. Subject to receiving required permits, GE Money Bank intends to merge with Bank BPH in near future, which means that the latter s ownership structure will change. Bank BPH shareholding structure as at at the date of this report (November 5, ) Item Shareholder Shares GSM votes Number % Number % 16. Management Board s position on actual performance against published annual forecasts Bank BPH SA Management Board did not publish any forecasts of financial results. 17. Transactions with related companies Transactions concluded with related companies in Q3 were typical and routine, and were performed at arms length. 1 GE Money Bank SA (General Electric Company) UniCredito Italiano S.p.A Combined: Arka BZ WBK Akcji Fundusz Inwestycyjny Otwarty, Arka BZ WBK Akcji Środkowej i Wschodniej Europy Fundusz Inwestycyjny Otwarty, Arka BZ WBK Stabilnego Wzrostu Fundusz Inwestycyjny Otwarty, Arka BZ WBK Zrównoważony Fundusz Inwestycyjny Otwarty oraz Lukas Fundusz Inwestycyjny Otwarty State Treasury Other shareholders including The Bank of New York TOTAL Comments to the Consolidated Report of Bank BPH Group for Q3

40 Transactions with related entities from Jan. 1 Sept. 30, () Dominant entity Other Group companies Consolidated companies FX transactions Forwards and FX swaps IRS/CIRS FRA Options Extended off-balance sheet guarantee commitments Off-balance financing commitments granted Placements Loans Deposits Securities Other assets Other liabilities Total Transactions with the parent company and group members reported for the UCI Group span the period from January 1 to June 16, and for the GE Group span the period from June 17 to September 30, in the amount of 50 billion USD should constitute a significant support for Bank BPH development program. On March 27,, BPH PBK Zarządzanie Funduszami Sp. z o.o., the Bank s subsidiary, paid 27,754 thousand zloty to the Bank as dividend from profit Seasonality or operational cycles There are no material items that would be subject to seasonality or cyclic patterns in Bank BPH Group. 18. Information on loan underwriting or guarantees There were no transactions referred to in 91 (6)(9) of the Ordinance of the Finance Minister dated Oct. 19, 2005 in Bank BPH Group. 19. Additional information 19.1 Dividend for On June 24,, Bank BPH General Meeting adopted a resolution of the Management Board (with positive opinion of the Supervisory Board issued on April 23 this year) on the proposal not to pay out dividend for. The Bank s Management Board suggested to the General Meeting that the whole net profit should be used for own funds. In argumentation of the motion, the Bank s Management Board accounted for the fact that the Bank s spin-off, which took place in November last year significantly reduced its scope of operations, whereas ambitious development plans adopted for this year require significant investment outlays, for instance for the restoration of outlet network all around Poland in order to ensure broader access to the Bank s offer. Net profit remaining within the Bank together with investments declared by GE Money, the strategic investor for Comments to the Consolidated Report of Bank BPH Group for Q3 14