CEO Letter

Dear Shareholders,

I am pleased to present to you the annual report of the Capital Group of Bank Pekao S.A. for 2022.

The past year was full of challenges, most of which were caused by Russia’s aggression in Ukraine. Since the end of February last year, the energy crisis has sharply escalated; Poland has become a frontline state, and the Capital Group of Bank Pekao S.A. engaged strongly in the help towards the war refugees from Ukraine. In the economic sphere, the direct effect of the Russian aggression was a strong inflationary pressure caused by a supply shock on the commodity market, a large number of one-off and unusual events affecting the results of Bank Pekao and the entire banking sector, and further unfavorable developments regarding foreign currency mortgage loans took place. In these demanding conditions, the Pekao Group did well, demonstrating its balance sheet strength, lower-than-sector risk exposure and resilient business model.

Let me start with the customers who are always at the center of our strategy. Pekao continued its digital transformation, increasing the digitization rate from 50% to 69%. Our digital banking offer convinced additional 0.4 million new customers, which led to an increase in the total number of active mobile banking customers by 15% to 2.8 million. Since the Russian aggression, we have introduced an offer for Ukrainian citizens, free of charge. As the bank of first choice for corporate clients, we offered flexible solutions tailored to the challenges of the past year in terms of providing financing. We modified the credit policy in order to ensure financing of the energy sector in the light of successive packages of sanctions imposed by the European Union on the Russian Federation. In addition, we took an active part in costly assistance programs for retail clients in the area of mortgage loan repayment moratoriums, strengthening the Borrower Support Fund, as well as the creation of a voluntary SOBK support system, which allowed for the safe elimination of systemic risk.

Bank Pekao approaches its role in the economic environment in a responsible manner as an institution that cares for our other stakeholders. In 2022, we were again at the forefront of the largest Polish payers of corporate income tax, sectoral tax on financial institutions, and a significant contributor to the Bank Guarantee Fund and the voluntary SOBK support system. In addition, we made a significant contribution to the Borrower Support Fund.

From the very beginning of the aggression, Bank Pekao began its involvement in helping the victims of the war in Ukraine, and our first activities are humanitarian aid, including to refugees coming to Poland. We have also introduced a special offer for Ukrainian citizens and entrepreneurs, free of charge and linguistically adapted. We also express our readiness to provide further necessary assistance. As a systemically important bank, we will continue to ensure the security of banking services and the financial security of our clients.

The challenges of the past year resulted in a decrease in the annual consolidated net profit from PLN 2.2 to PLN 1.7 billion. A large part of negative events is of a one-off nature, which allows us to look into the future with optimism. We have a significant capital surplus above regulatory minima, including dividend criteria ones. The liquidity position is also characterized by large buffers above regulatory minima.

Last year was the second year of operationalization of two strategies – business and sustainable development. As for the main goals of the first one – we are on the path to achieving the goals for 2024 (ROE at least 10%, C/I 42%, 3.2 million active mobile customers and a digitization rate close to 100%). In terms of ESG, last year saw a further increase in green financing to 4.6% of the balance sheet, from 4.1% a year earlier. We reduced the Pekao Group’s carbon footprint (Scope 1+2) from 72 kt CO2 to 47 kt CO2 according to GHG, mainly through the purchase of green energy. Hours of volunteer work increased dynamically, to over 8.4 thousand. We also continued to close the gender pay gap.

We enter 2023 with cautious optimism. The resilience to macroeconomic shocks of the Pekao Group remains consistently high and gives us the comfort of calm reactions to the dynamically changing environment, which has provided many „black swans” in recent years. Under these conditions, our goal is to mitigate these shocks for our key stakeholders.

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