Letter of the Chairwoman of the Supervisory Board

Ladies and gentlemen,

The past year was marked by a gradual recovery of economic activity and improvement in customer sentiment, which was reflected in a strong improvement in Bank Pekao’s profitability. The economic recovery, tight labour market and tensions in the commodity and energy markets prompted the Monetary Policy Council to start a cycle of interest rate increases. It was a favourable environment for a bank which was put to good use.

2021 is the starting year of two Pekao Group strategies until 2024 – financial strategy and sustainable development. The project that involved a large part of the staff was also the integration of the acquired assets of ex-Idea Bank, a transaction made out of concern for the security of the Polish financial sector. However, this did not change the Bank’s operating philosophy, i.e. striving to improve profitability, increase operational efficiency and even greater emphasis on the safety of employees and customers. The bank showed a significant increase in the scale of operations, while ensuring that it was focused on the segments most resistant to the changes in the economic cycle. We have intensified cost-effectiveness to support profitability. Traditionally, Bank Pekao has remained a leader among large Polish banks in the field of credit and legal risk management. Referring to its strategic ambitions, the Bank has implemented a number of innovative solutions, thanks to which it strengthened its position as one of the leaders in the digital transformation of the sector. In the era of the pandemic and digital revolution, the solutions introduced by the Bank have a real impact on business development by continuing the record-breaking pace of customer acquisition, as well as a rapid increase in customer activity in remote channels.

Further tightening of cooperation between Bank Pekao and the remaining PZU Group companies allowed for the realization of tangible benefits in key strategic areas: bancassurance and assurbanking. At the same time, we see great potential in the development of the product offer and the use of distribution channels as well as expanding the customer base. In the face of the digital transformation of the financial sector, we are also constantly striving to identify and implement operational synergies. Cooperation and possible synergies in the field of sustainable development and banking and insurance solutions for clients of the entire Group in the field of ESG are becoming particularly important.

From a financial sector perspective, 2021 was a year of recovery, testing the diversification of business models, the degree of digitization and the balance sheet strength of banks. Despite the gradual recovery of the banking sector’s results, it was still struggling with open risks, such as foreign currency housing loans. Due to the negligible balance sheet exposure of Pekao, also the scale of provisions for the CHF portfolio was smaller compared to its key competitors, and at the same time the level of provisions created by the Bank allowed to significantly reduce the cost of legal risk in the future, regardless of the scenarios of further development of this issue in the sector. The bank maintained a conservative approach to risk management in the face of persistent high uncertainty in the functioning of the economy. At the same time, the Bank undertook a number of operational activities allowing to limit the negative effects of the difficult environment on financial results thanks to high operational efficiency and additional strategic activities optimizing the cost base. The pandemic highlighted the tangible value of the implemented digital transformation. Thanks to its effects, the Bank was able to quickly adapt to operating remotely and also remain close to customers thanks to remote distribution channels. I am convinced that the operating environment in a pandemic situation will be an impulse for further changes in the banking sector, not only in Poland, but all over the world, and the use of this potential will be the key to success in a competitive financial services environment.

Together with the Supervisory Board, we attach great importance to the sustainable development and responsible activities of Bank Pekao supporting the implementation of its business goals and the positive and stabilizing effect that the Bank, thanks to its scale, can have on the environment in which it operates. I would also like to emphasize the consistent development based on ESG factors (Environment, Social Responsibility and Corporate Governance), strongly in line with the responsible business strategy of the entire PZU Group, which, as the largest financial institution in Poland and the entire region of the Central and Eastern Europe, can actively support the energy transformation Polish economy. As the Supervisory Board, we will support Bank Pekao in further enhancement of competences in the ESG area and even stronger emphasis on the sustainable development policy in both commercial and operational activities in the new strategy of the Bank.

In conclusion, on behalf of ourselves and the Supervisory Board, we are convinced that Bank Pekao will continue to strengthen its leading position in the banking industry in Poland. I am also sure that with all stakeholders in mind, the Bank will continue to care for the sustainable growth of the company’s value. I trust that the bank’s shareholders welcomed not only the doubling of profit last year, but also the return to the stable dividend policy, which is proof of Pekao’s capital strength also in the perception of regulators.

This year, the external conditions seem to be good for Bank Pekao – the environment of rising interest rates and good dynamics of customer volumes indicate a continuation of the positive trends. However, the environment is not without geopolitical risks, increased inflation and – decreasing though present – uncertainty related to the coronavirus epidemic. 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 the Ukrainian citizens and entrepreneurs, free of charge and language-adapted. We also express our readiness to provide further necessary assistance.

On behalf of the Supervisory Board, I would like to thank the management board and all employees of Bank Pekao Group for their great commitment, implementation of business and transformation goals in this environment that is demanding for everyone. I would also like to thank all the bank’s stakeholders for their trust. I would also like to emphasize that the supervisory board will exercise all due diligence to ensure that all decisions of the management board are made with a view to building the Bank’s value for shareholders and that Pekao’s activities are carried out in accordance with the highest regulatory, corporate and ethical standards.