Important factors influencing the Group’s activities and results

The activities of Bank Pekao in 2024 were mainly determined by the macroeconomic situation in the country and abroad. Despite the difficulties experienced by the economies of Poland’s key trading partners, with particular emphasis on Germany, the Polish economy achieved a satisfactory GDP growth rate of +2.9%, compared to only 0.2% achieved in the previous year. Inflation remained at an elevated level, reaching +4.7% at the end of the year. In the eurozone and the USA, central banks began interest rate cuts, while the Monetary Policy Council did not decide to make such a move in 2024. The reference rate remained at 5.75% throughout the year.

The moderate pace of economic growth translated only to a limited extent into the demand for credit. The retail banking segment experienced a better economic situation, where both mortgage loans and cash loans recorded good dynamics. In case of mortgages, we were still dealing with the effect of the government program „Safe Credit 2%”, the effects of which in the growth of the volume of loans were visible in the initial part of the year. Cash loans recorded good dynamics. The demand for loans in this segment was supported by the improving consumer situation, low unemployment and improving real wages. The situation was more difficult in the corporate loan segment, where the volume of loans increased slightly. Low demand for investment loans continued, due to stagnation in the largest European economies – the main recipients of Polish export products. Additionally, there were delays in the spending of EU funds, in particular from the National Reconstruction Plan.

Deposits in the banking sector grew at a faster than in 2024 than loans, contributing to a decline in the Loans/Deposits ratio in the sector to the lowest level in years. The environment of high interest rates encouraged bank customers to invest their savings in banks, but a large part of these funds went to current accounts. This allowed banks to reduce their funding costs. Despite interest rates being 100 basis points lower than in 2023, banks were able to improve their already high interest margins, and the sector’s net interest income grew at a double-digit rate.

Growing economic activity translated into an increase in the fee & commission income, which increased at a moderate pace last year. It is worth emphasizing the good result achieved in the area of investment funds and brokerage activities. A large inflow of funds to investment funds (especially to debt products) allowed the sector to record high dynamics of the commission income in this area.

Operating costs in the banking sector grew at a double-digit rate in 2024, due to high inflation and persistent wage pressure. Both salary costs and other operating costs increased. Banks tried to limit cost pressure by further reducing employment and the number of branches. Bank Pekao also continued the process of reducing the number of stationary branches in 2024.

Last year, the sector experienced an increase in regulatory costs compared to 2023. The government introduced a new credit holiday program for mortgage borrowers, but on a much smaller scale than in 2022-2023, by adding an income criterion. Additionally, contributions paid by banks to the Bank Guarantee Fund increased.

Risk costs in the banking sector remained relatively low in 2024. Asset quality remained good, especially in the retail segment, where the macroeconomic situation was favorable to customers. In the corporate sector, we observed an increase in risk costs due to individual credit exposures.

The problem of CHF mortgage loans continued to affect banks, which continued to create additional provisions for this reason. The case law on these loans remained unfavorable for the banking sector. The number of lawsuits from customers was growing, also in the case of loans that had already been repaid. Banks were more active in trying to reach out to customers with settlement proposals. Bank Pekao offered its clients the “Bezpieczna ugoda 2%” program, which was well-received by customers.

Despite rising operating costs and still significant reserves for CHF mortgage loans, the banking sector’s net profit turned out to be a record last year and increased by 52%. The key positive factor was the increase in net interest income, with a visible increase in credit volumes.

In 2024, banks continued processes related to operational and digital transformation, the importance of customer service in remote channels grew, and many banking processes were digitized. New technical solutions were introduced and the functionalities of banking applications were expanded. This was accompanied by a reduction in stationary branches.

600

mln

Senior Preferred

500

mln

Senior Non-Preferred

Bank Pekao, due to MREL requirements, in 2024 issued Senior Preferred instruments (worth PLN 600 million) and Senior Non-Preferred (PLN 500 million on the Polish market and EUR 500 million on the European market).

In terms of capital requirements, in accordance with the law, Bank Pekao S.A. Group should maintain minimum levels of capital ratios at regulatory level of Pillar I resulting from the CRR Regulation, the Pillar II requirement under the Banking Law and the combined buffer requirement resulting from the Act on Macroprudential Supervision.

Important factors influencing the Group’s activities and results

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