CEO Letter

Dear Shareholders,

I am pleased to present to you the annual report of the Bank Pekao S.A. Group for the year 2021

We can consider the past year successful for the Polish economy, the banking sector and for Bank Pekao. It was a period of gradual recovery of the Polish economy from the Covid-19 pandemic in economic and social terms. Despite the ongoing pandemic restrictions, Polish companies and households coped well with the adaptation to the new conditions, which resulted in an almost 6% increase in GDP, one of the strongest labour markets in the European Union and a growing demand for our products and services. Trying to cope with them as much as possible, we increased the scale of our operations by about 10%, at the same time accelerating the acquisition of new customers. The outlook for the Polish economy for 2022 is strong, although the risks associated with the tightening of monetary policy and Russia’s aggression in Ukraine, and the related impact on the economy, make us forecast cautiously.

Customers are at the heart of our new strategy for 2021-2024. In the first year of its implementation, we continued the process of digitizing our offer, so that now more than half of banking activities can be performed in a convenient digital self-service model. The new PeoPay Kids offer has gained international award recognition for its support in introducing children to the world of finance. We are expanding the functionality of our mobile application, which is becoming more and more popular. As the bank of first choice for corporate clients, we often accompany our clients in their business successes on the Polish market and through dynamically growing exports. In particular, we are pleased with the very rapid growth in the segments of smaller and medium-sized companies, where we reap the fruits of a significant improvement in the customer service process. Market requirements are changing and we plan to keep up with them and further expand our offer for customers. New standards of sustainability (ESG) lead to new investment projects in the segment of corporate clients and the corporate sector, and the processes of energy transformation, automation and robotization give us a room for a new client business that we plan to utilise.

Our success would not be possible without our most valuable resource – our employees. Their diligence, expert knowledge, dedication and flexibility enable us to meet our clients’ needs. Bank Pekao makes every effort to fairly reward this work on a market basis, flexibly adjust work standards to the pandemic reality and ensure that our bank continues to be a valued employer. Employment issues are also at the heart of our own sustainability strategy for 2021-2024. As part of this strategy, we care about the high working standards, close the salary and development opportunity gaps between women and men, and we increase our commitment to volunteering. We also conduct a continuous dialogue with the social side and trade unions operating in the Pekao Group.

Bank Pekao takes a responsible approach to its role in the economic environment as an institution that cares for our other stakeholders. In 2021, we were at the forefront of the largest Polish corporate income tax payers, sector tax on financial institutions, as well as an important contributor to the Bank Guarantee Fund. Working with the BGF, we carried out the process of purchasing Idea Bank under resolution procedure, which secured the banking sector and offered Idea Bank clients the possibility of continuing the banking relationship. This transaction was carried out with responsibility for the stability of the financial sector and engaged several hundred employees in an IT merger, which was successfully completed in the fourth quarter of last year.

Bank Pekao has already started its involvement in helping victims of the war in Ukraine, and our first activities are humanitarian aid, including for refugees coming to Poland. We are also introducing a special offer for Ukrainian citizens and entrepreneurs, free of charge and language-adapted. We also express our readiness to provide further necessary assistance. As a systemically important bank, we will continue to care for the security of banking services and the financial security of our clients.

Our activity has been appreciated by the shareholders of Bank Pekao, who will consider 2021 a successful year. We managed to pay the dividend for 2020 after the pandemic restrictions imposed by the Polish Financial Supervision Authority expired, confirming our long-standing dividend credibility that stands out on the market. The valuation of the Pekao Group more than doubled, following the improving profitability outlook. We have rebuilt our consolidated net profit to pre-pandemic levels despite significantly lower market interest rates. It was possible thanks to the increased activity of our clients in terms of both transactions and financing, which positively influenced our result – commission and interest, respectively. Of course, the balance of risk provisions also improved significantly in the past year, even though we conservatively maintain a large buffer of precautionary provisions in the initial phase of the pandemic.

Bank Pekao has already started its involvement in helping victims of the war in Ukraine, and our first activities are humanitarian aid, including for refugees coming to Poland. We are also introducing a special offer for Ukrainian citizens and entrepreneurs, free of charge and language-adapted. We also express our readiness to provide further necessary assistance. As a systemically important bank, we will continue to care for the security of banking services and the financial security of our clients.

Our activity has been appreciated by the shareholders of Bank Pekao, who will consider 2021 a successful year. We managed to pay the dividend for 2020 after the pandemic restrictions imposed by the Polish Financial Supervision Authority expired, confirming our long-standing dividend credibility that stands out on the market. The valuation of the Pekao Group more than doubled, following the improving profitability outlook. We have rebuilt our consolidated net profit to pre-pandemic levels despite significantly lower market interest rates. It was possible thanks to the increased activity of our clients in terms of both transactions and financing, which positively influenced our result – commission and interest, respectively. Of course, the balance of risk provisions also improved significantly in the past year, even though we conservatively maintain a large buffer of precautionary provisions in the initial phase of the pandemic.

I would like to thank all employees, clients, shareholders and other stakeholders of the Pekao Capital Group