FINANCIAL HIGHLIGHTS |
PLN k |
EUR k |
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31.12.2024 |
31.12.2023 |
31.12.2024 |
31.12.2023 |
Consolidated financial statements of Santander Bank Polska Group |
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I |
Net interest income |
13 873 216 |
13 115 899 |
3 223 181 |
2 896 365 |
II |
Net fee and commission income |
2 909 464 |
2 717 002 |
675 959 |
599 992 |
III |
Profit before tax |
7 265 661 |
6 850 021 |
1 688 040 |
1 512 680 |
IV |
Net profit attributable to owners of the parent entity |
5 212 731 |
4 831 107 |
1 211 080 |
1 066 846 |
V |
Total net cash flows |
(5 571 687) |
82 154 |
(1 294 477) |
18 142 |
VI |
Total assets |
304 373 920 |
276 651 885 |
71 231 903 |
63 627 388 |
VII |
Deposits from banks |
5 148 660 |
4 156 453 |
1 204 929 |
955 946 |
VIII |
Deposits from customers |
232 028 762 |
209 277 356 |
54 301 138 |
48 131 867 |
IX |
Total liabilities |
269 932 734 |
242 960 867 |
63 171 714 |
55 878 764 |
X |
Total equity |
34 441 186 |
33 691 018 |
8 060 189 |
7 748 624 |
XI |
Non-controlling interests |
1 913 719 |
1 928 373 |
447 863 |
443 508 |
XII |
Profit of the period attributable to non-controlling interests |
32 066 |
116 722 |
7 450 |
25 776 |
XIII |
Number of shares |
102 189 314 |
102 189 314 |
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XIV |
Net book value per share in PLN/EUR |
337,03 |
329,69 |
78,87 |
75,83 |
XV |
Capital ratio |
17,68% |
18,65%* |
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XVI |
Profit per share in PLN/EUR |
51,01 |
47,28 |
11,85 |
10,44 |
XVII |
Diluted earnings per share in PLN/EUR |
51,01 |
47,28 |
11,85 |
10,44 |
XVIII |
Declared or paid dividend per share in PLN/EUR |
44,63** |
23,25 |
10,37 |
5,13 |
*The data includes profits included in own funds, taking into account the applicable EBA guidelines
**Detailed information are described in note 56.
The following rates were applied to determine the key EUR amounts for selected financial statements line items:
· for balance sheet items – average NBP exchange rate as at 31.12.2024: EUR 1 = PLN 4,2730 and as at 31.12.2023: EUR 1 = PLN 4,3480
· for profit and loss items – as at 31.12.2024 - the rate is calculated as the average of NBP exchange rates prevailing as at the last day of each month in 2024: EUR 1 = PLN 4,3042 ; as at 31.12.2023 - the rate is calculated as the average of NBP exchange rates prevailing as at the last day of each month in 2023: EUR 1 = PLN 4,5284
As at 31.12.2024, FX denominated balance sheet positions were converted into PLN in line with the NBP FX table no. 252/A/NBP/2024 dd. 31.12.2024.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
I. Consolidated income statement6
II. Consolidated statement of comprehensive income7
III. Consolidated statement of financial position8
IV. Consolidated statement of changes in equity9
V. Consolidated statement of cash flows10
VI. Additional notes to consolidated financial statements11
1. General information about issuer11
2. Basis of preparation of consolidated financial statements13
3. Operating segments reporting39
7. Net fee and commission income78
9. Net trading income and revaluation79
10. Gains (losses) from other financial securities79
12. Impairment allowances for expected credit losses80
14. General and administrative expenses81
15. Other operating expenses81
18. Cash and balances with central banks82
19. Loans and advances to banks83
20. Financial assets and liabilities held for trading84
22. Loans and advances to customers86
23. Securitisation of assets96
25. Investments in associates99
27. Goodwill102
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
33. Deposits from customers109
34. Subordinated liabilities110
35. Debt securities in issue111
36. Provisions for financial liabilities and guarantees granted112
42. Non - controlling interests117
44. Sale and reverse sale and repurchase agreements128
45. Offsetting financial assets and financial liabilities129
47. Legal risk connected with CHF mortgage loans136
48. Contingent liabilities and litigation and claims142
49. Assets and liabilities pledged as collateral144
50. Information about leases145
51. Consolidated statement of cash flows- additional information147
53. Acquisitions and disposals of investments in subsidiaries and associate151
55. Share based incentive scheme152
57. Events which occurred subsequently to the end of the reporting period155
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
for the period: |
1.01.2024- |
1.01.2023- |
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Interest income and income similar to interest |
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Interest income on financial assets measured at amortised cost |
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Interest income on financial assets measured at fair value through other comprehensive income |
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Income similar to interest on financial assets measured at fair value through profit or loss |
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Income similar to interest on finance leases |
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Interest expense |
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( |
( |
Net interest income |
Note 6 |
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Fee and commission income |
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Fee and commission expense |
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( |
( |
Net fee and commission income |
Note 7 |
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Dividend income |
Note 8 |
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Net trading income and revaluation |
Note 9 |
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Gains (losses) from other financial securities |
Note 10 |
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( |
Gain/loss on derecognition of financial instruments measured at amortised cost |
Note 47 |
( |
( |
Other operating income |
Note 11 |
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Allowances for expected credit losses |
Note 12 |
( |
( |
Cost of legal risk associated with foreign currency mortgage loans |
Note 47 |
( |
( |
Operating expenses incl.: |
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( |
( |
-Staff, operating expenses and management costs |
Note 13,14 |
( |
( |
-Amortisation of property, plant and equipment and intangible assets |
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( |
( |
-Amortisation of right of use assets |
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( |
( |
-Other operating expenses |
Note 15 |
( |
( |
Share in net profits (loss) of entities accounted for by the equity method |
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Tax on financial institutions |
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( |
( |
Profit before tax |
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Corporate income tax |
Note 16 |
( |
( |
Consolidated profit for the period |
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of which: |
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-attributable to owners of the parent entity |
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-attributable to non-controlling interests |
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Net earnings per share |
Note 17 |
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Basic earnings per share (PLN/share) |
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Diluted earnings per share (PLN/share) |
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Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
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for the period: |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Consolidated net profit for the period |
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Items that will be reclassified subsequently to profit or loss: |
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( |
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Revaluation and sales of debt financial assets measured at fair value through other comprehensive income, gross |
Note 24,41 |
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Deferred tax |
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( |
( |
Revaluation of cash flow hedging instruments, gross |
Note 41,49 |
( |
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Deferred tax |
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( |
Items that will not be reclassified subsequently to profit or loss: |
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Revaluation of equity financial assets measured at fair value through other comprehensive income, gross |
Note 24,41 |
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Deferred and current tax |
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( |
( |
Provision for retirement benefits – actuarial gains/losses, gross |
Note 41,54 |
( |
( |
Deferred tax |
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Total other comprehensive income, net |
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TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
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Total comprehensive income attributable to: |
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- owners of the parent entity |
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- non-controlling interests |
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Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
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as at: |
31.12.2024 |
31.12.2023 |
ASSETS |
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Cash and balances with central banks |
Note 18 |
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Loans and advances to banks |
Note 19 |
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Financial assets held for trading |
Note 20 |
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Hedging derivatives |
Note 21 |
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Loans and advances to customers incl.: |
Note 22 |
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- measured at amortised cost |
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- measured at fair value through other comprehensive income |
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- measured at fair value through profit and loss |
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- from finance leases |
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Reverse sale and repurchase agreements |
Note 44 |
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Investment securities incl.: |
Note 24 |
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- debt securities measured at fair value through other comprehensive income |
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- debt securities measured at fair value through profit and loss |
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- debt investment securities measured at amortised cost |
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- equity securities measured at fair value through other comprehensive income |
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- equity securities measured at fair value through profit and loss |
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Assets pledged as collateral |
Note 49 |
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Investments in associates |
Note 25 |
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Intangible assets |
Note 26 |
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Goodwill |
Note 27 |
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Property, plant and equipment |
Note 28 |
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Right of use assets |
Note 29 |
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Deferred tax assets |
Note 30 |
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Non-current assets classified as held for sale |
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Other assets |
Note 31 |
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Total assets |
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LIABILITIES AND EQUITY |
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Deposits from banks |
Note 32 |
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Hedging derivatives |
Note 21 |
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Financial liabilities held for trading |
Note 20 |
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Deposits from customers |
Note 33 |
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Sale and repurchase agreements |
Note 44 |
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Subordinated liabilities |
Note 34 |
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Debt securities in issue |
Note 35 |
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Lease liabilities |
Note 50 |
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Current income tax liabilities |
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Deferred tax liability |
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Provisions for financial liabilities and guarantees granted |
Note 36 |
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Other provisions |
Note 37 |
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Other liabilities |
Note 38 |
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Total liabilities |
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Equity |
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Equity attributable to owners of the parent entity |
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Share capital |
Note 39 |
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Other reserve capital |
Note 40 |
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Revaluation reserve |
Note 41 |
( |
( |
Retained earnings |
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Profit for the period |
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Non-controlling interests |
Note 42 |
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Total equity |
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Total liabilities and equity |
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Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Equity attributable to owners of parent entity |
Consolidated
statement |
Share capital |
Own shares |
Other reserve capital |
Revaluation reserve |
Retained earnings and profit for the period |
Total |
Non-controlling interests |
Total equity |
Note |
39 |
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40 |
41 |
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42 |
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As at the beginning of the period |
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( |
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Total comprehensive income |
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Consolidated profit for the period |
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Other comprehensive income |
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( |
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Share-based incentive scheme |
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Purchase of own shares |
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( |
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( |
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( |
Settlements under share-based incentive scheme |
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( |
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( |
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( |
Profit allocation to other reserve capital |
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( |
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Profit allocation to dividends |
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( |
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( |
( |
( |
( |
Transfer of revaluation of equity financial assets measured at fair value through other comprehensive income |
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( |
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Other changes |
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As at the end of the period |
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( |
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Equity attributable to owners of parent entity |
Consolidated
statement |
Share capital |
Own shares |
Other reserve capital |
Revaluation reserve |
Retained earnings and profit for the period |
Total |
Non-controlling interests |
Total equity |
Note |
39 |
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40 |
41 |
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42 |
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As at the beginning of the period |
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( |
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Total comprehensive income |
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Consolidated profit for the period |
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Other comprehensive income |
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Share-based incentive scheme |
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Purchase of own shares |
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( |
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( |
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( |
Settlements under share-based incentive scheme |
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( |
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Profit allocation to other reserve capital |
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( |
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Interim dividend |
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( |
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( |
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( |
Profit allocation to dividends |
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( |
( |
Other changes |
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( |
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As at the end of the period |
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( |
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Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
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for the period |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Cash flows from operating activities |
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Profit before tax |
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Adjustments for: |
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Share in net profits of entities accounted for by the equity method |
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( |
( |
Depreciation/amortisation |
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Net gains on investing activities |
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Interest accrued excluded from operating activities |
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( |
( |
Dividends |
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( |
( |
Impairment losses (reversal) |
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Changes in: |
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Provisions |
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Financial assets / liabilities held for trading |
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( |
Assets pledged as collateral |
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( |
( |
Hedging derivatives |
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( |
Loans and advances to banks |
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( |
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Loans and advances to customers |
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( |
( |
Deposits from banks |
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Deposits from customers |
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Buy-sell/ Sell-buy-back transactions |
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( |
( |
Other assets and liabilities |
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( |
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Interest received on operating activities |
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Interest paid on operating activities |
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( |
( |
Paid income tax |
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( |
( |
Net cash flows from operating activities |
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Cash flows from investing activities |
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Inflows |
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Sale/maturity of investment securities |
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Sale of intangible assets and property, plant and equipment |
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Dividends received |
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Interest received |
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Outflows |
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( |
( |
Purchase of investment securities |
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( |
( |
Purchase of intangible assets and property, plant and equipment |
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( |
( |
Net cash flows from investing activities |
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( |
( |
Cash flows from financing activities |
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Inflows |
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Debt securities issued |
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Drawing of loans |
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Outflows |
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( |
( |
Debt securities buy out |
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( |
( |
Repayment of loans and advances |
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( |
( |
Repayment of lease liabilities |
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( |
( |
Dividends to shareholders |
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( |
( |
Purchase of own shares |
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( |
( |
Interest paid |
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( |
( |
Net cash flows from financing activities |
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( |
( |
Total net cash flows |
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( |
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Cash and cash equivalents at the beginning of the accounting period |
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Cash and cash equivalents at the end of the accounting period |
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Information regarding liabilities arising from financing activities relating to loans received, subordinated liabilities and the issue of debt securities were presented respectively in notes 32-35.
Consolidated financial statement of Santander Bank Polska Group includes the Bank’s financial information as well as information of its subsidiaries (forming together the “Group”).
The immediate and ultimate parent entity of
Santander Bank Polska is
Santander Bank Polska Group offers a wide range of banking services to individual and business customers and operates in domestic and interbank foreign markets. It also offers the following services:
· intermediation in trading in securities,
· leasing,
· factoring,
· asset/ fund management,
· insurance distribution services,
· trading in shares of commercial companies,
· brokerage services.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Santander Bank Polska Group consists of the following entities:
Subsidiaries:
|
Subsidiaries |
Registered office |
[%] of
votes on AGM |
[%] of
votes on AGM |
1. |
Santander Finanse sp. z o.o. |
Poznań |
100% |
100% |
2. |
Santander Factoring sp. z o.o. |
Warszawa |
100% of AGM votes are held by |
100% of AGM votes are held by |
3. |
Santander Leasing S.A. |
Poznań |
100% of AGM votes are held by |
100% of AGM votes are held by |
4. |
Santander Inwestycje sp. z o.o. |
Warszawa |
100% |
100% |
5. |
Santander F24 S.A. |
Poznań |
100% of AGM votes are held by |
100% of AGM votes are held by |
6. |
Santander Towarzystwo
Funduszy |
Poznań |
50% |
50% |
7. |
Santander Consumer Bank S.A. |
Wrocław |
60% |
60% |
8. |
Stellantis Financial Services Polska Sp. z o.o. 2) |
Warszawa |
50% of AGM votes are held by Santander Consumer Bank S.A. and 50% of AGM votes are held by Stellantis Financial Services S.A . |
50% of AGM votes are held by Santander Consumer Bank S.A. and 50% of AGM votes are held by Stellantis Financial Services S.A . |
9. |
Stellantis Consumer Financial Services Polska Sp. z o.o. 2) |
Warszawa |
100% of AGM votes are held by Stellantis Financial |
100% of AGM votes are held by Stellantis Financial Services Polska Sp. z o.o. |
10. |
Santander Consumer Multirent sp. z o.o. |
Wrocław |
100% of AGM votes are held by Santander Consumer Bank S.A. |
100% of AGM votes are held by Santander Consumer Bank S.A. |
11. |
SCM POLAND AUTO 2019-1 DAC |
Dublin |
subsidiary of Santander Consumer Multirent S.A. |
subsidiary of Santander Consumer Multirent S.A. |
12. |
Santander Consumer Financial Solutions Sp. z o.o. |
Wrocław |
subsidiary of Santander Consumer Multirent S.A. |
subsidiary of Santander Consumer Multirent S.A. |
13. |
S.C. Poland Consumer 23-1 DAC.3) |
Dublin |
subsidiary of Santander Consumer Bank S.A. |
subsidiary of Santander Consumer Bank S.A. |
1. The owners of Santander Towarzystwo Funduszy Inwestycyjnych S.A. (Santander TFI S.A.), i.e. Santander Bank Polska S.A. and Banco Santander S.A., are members of global Santander Group and hold an equal stake of 50% in the company’s share capital.
Santander Bank Polska S.A. exercises control over Santander TFI S.A. within the meaning of the International Financial Reporting Standard 10 (IFRS 10) because it has a practical ability to unilaterally direct the relevant activities of Santander TFI S.A. Furthermore, it significantly affects the company’s operations and returns as the major business partner and distributor of investment products. At the same time, through its ownership interest, Santander Bank Polska S.A. is exposed and has right to variable returns generated by Santander TFI S.A.
Considering the guidance provided in IFRS 10 par. B18, the Bank’s Management Board concluded that, having regard to legal requirements concerning Santander TFI S.A. and its operations, the Bank has a practical ability to unilaterally direct the relevant activities of Santander TFI S.A. even if it does not have a contractual right to do so.
The Bank can have a real impact on the composition of
the Supervisory Board and through it – on the composition of the Management
Board of
Santander TFI S.A. and these governing bodies decide on the relevant activities
of Santander TFI S.A. It should therefore be concluded that by having power and
right to variable returns (benefits), the Bank has control over Santander TFI
S.A
2 As a result of the formation of the automotive manufacturing corporation Stellantis N.V. in 2021 in a merger of the Italian–American conglomerate Fiat Chrysler Automobiles and the French Groupe PSA, on 3 April 2023 PSA Finance Polska Sp. z o.o. and its wholly-owned subsidiary, PSA Consumer Finance Polska Sp. z o.o., were renamed Stellantis Financial Services Polska Sp. z o.o. and Stellantis Consumer Financial Services Polska Sp. z o.o., respectively. Stellantis Financial Services Polska Sp. z o.o. is a subsidiary undertaking for the purposes of consolidated financial reporting as it is controlled by Santander Consumer Bank S.A. (directly) and Santander Bank Polska S.A. (indirectly). Under the terms of the framework agreement, Santander Consumer Bank S.A.(SCB S.A.) has the right to make decisions regarding key areas such as financing and risk management. In practice, the Bank has ability to direct activities that significantly affect investment returns and is exposed to potential risks (losses) and benefits (dividends).
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Associates:
|
Associates |
Registered office |
[%] of votes on AGM |
[%] of votes on AGM |
1. |
POLFUND - Fundusz Poręczeń Kredytowych S.A. |
Szczecin |
50% |
50% |
2. |
Santander - Allianz Towarzystwo Ubezpieczeń S.A. |
Warszawa |
49% |
49% |
3. |
Santander - Allianz Towarzystwo Ubezpieczeń na Życie S.A. |
Warszawa |
49% |
49% |
These consolidated financial statements of Santander Bank Polska S.A. Group were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, which are applied on a consistent basis, as at 31 December 2024, and in the case of matters not governed by the above Standards, in accordance with the provisions of the Accounting Act of 29 September 1994 and related implementing acts as well as the requirements imposed on issuers whose securities are admitted to trading on regulated markets or issuers who have applied to have securities admitted to trading on regulated markets outlined in the Act of 29 July 2005 on Public Offering, on Conditions for the Introduction of Financial Instruments to the Organized Trading System and on Public Companies.
These consolidated financial statements have been approved for publication by the Management Board of Santander Bank Polska S.A. on 24 February 2025.
These consolidated financial statements have been prepared on the assumption that the Group companies will continue as going concern in the foreseeable future, i.e. for a period of at least 12 months from the date on which these financial statements were prepared.
Consolidated financial statements are presented in PLN, rounded to the nearest thousand.
These consolidated financial statements of Santander Bank Polska S.A. Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union. Santander Bank Polska S.A. Group prepared consolidated financial statements in accordance with following measurement rules:
Balance sheet valuation rules |
|
Held-for-trading financial instruments |
Fair value through profit or loss |
Loans and advances to customers which meet the contractual cash flows test |
Amortized cost |
Loans and advances to customers which do not meet the contractual cash flows test |
Fair value through profit or loss |
Financial instruments measured at fair value through other comprehensive income |
Fair value through other comprehensive income |
Share-based payment transactions |
According to IFRS 2 "Share-based payment" requirements |
Equity investment financial assets |
Fair value through other comprehensive income – an option |
Equity financial assets-trading |
Fair value through profit or loss |
Debt securities measured at fair value through profit or loss |
Fair value through profit or loss |
Non-current assets |
The purchase price or production cost reduced by total depreciation charges and total impairment losses |
Right of use assets (IFRS 16) |
Initial measurement reduced by total depreciation charges and total impairment losses |
Non-current assets held for sale and groups of non-current assets designated as held for sale |
Are recognised at the lower of their carrying amount and their fair value less costs of disposal. |
The accounting principles have been applied uniformly by all the entities forming Santander Bank Polska S.A. Group.
The same accounting principles were applied as in the case of the consolidated financial statements for the period ending 31 December 2023, except for changes in accounting standards p. 2.4.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
IFRS |
Nature of changes |
Effective from |
Influence on Santander Bank Polska S.A. Group |
Amendments to IAS 21: Lack of Exchangeability |
Amendments require disclosure of information that enables users of financial statements to understand the impact of a currency not being exchangeable. |
1 January 2025 |
The amendment will not have a significant impact on consolidated financial statements. |
Amendments to the Classification and Measurement of Financial |
Amendments regarding classification and measurement of financial instruments clarify derecognition of a financial liability settled through electronic transfer,present examples of contractual terms that are consistent with a basic lending arrangement,clarify characteristics of non-recourse features and contractually linked instruments and specify new disclosures. |
1 January 2026 |
The amendment may have impact on classification, cash in transits and some of the disclosures in consolidated financial statements.* |
Annual Improvements to IFRS Accounting Standards |
Collection of amendments to IFRS Accounting Standards that will not be a part of any other project and adress necessary, but non-urgent, minor updates. Amendments concern IFRS 7, IFRS 9, IFRS 10, IAS 7. |
1 January 2026 |
The amendment will not have a significant impact on consolidated financial statements.* |
Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature-dependent Electricity |
The amendments made to IFRS 9 include detail on which power purchase agreements (PPAs) contracts can be used in hedge accounting, and the specific conditions allowed in such hedge relationships. The amendments made to IFRS 7 introduce some new disclosure requirements for contracts referencing naturedependent electricity as defined in the amendments to IFRS 9. |
1 January 2026 |
The amendment will not have a significant impact on consolidated financial statements.* |
IFRS 18 Presentation and Disclosure in Financial Statements |
IFRS 18 includes requirements for all entities applying IFRS for the presentation and disclosure of information in financial statements. IFRS 18 replaces IAS 1. |
1 January 2027 |
The amendment may have impact on cash flow statement, some of the disclosures and income statement in consolidated financial statements.* |
IFRS 19 Subsidiaries without Public Accountability: Disclosures |
IFRS 19 specifies reduced disclosure requirements that an eligible entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards. |
1 January 2027 |
The amendment will not have an impact on consolidated financial statements.* |
*New standards and amendments to the existing standards issued by the IASB, but not yet adopted by EU.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
IFRS |
Nature of changes |
Effective from |
Influence on Santander Bank Polska S.A. Group |
Amendments to IAS 1 |
The amendments affect requirements for the presentation of liabilities. Specifically, they clarify one of the criteria for classifying a liability as non-current. |
1 January 2024 |
The amendment doesn`t have a significant impact on consolidated financial statements. |
Amendments to IFRS 16 |
Clarification on the calculation of the leasing liability in sales and leaseback transactions with variable fees. |
1 January 2024 |
The amendment doesn`t have a significant impact on consolidated financial statements. |
Amendments to IAS 7/IFRS 7: Supplier Finance Agreements |
Amendments require an entity to disclose qualitative and quantitative information about its supplier finance programs, such as terms and conditions – including, for example, extended payment terms and security or guarantees provided. |
1 January 2024 |
The amendment doesn`t have a significant impact on consolidated financial statements. |
Preparation of financial statement in accordance with the IFRS requires the management to make subjective judgements and assumptions, which affects the applied accounting principles as well as presented assets, liabilities, revenues and expenses.
The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and assumptions are reviewed on an ongoing basis. Changes to estimates are recognised in the period in which the estimate is changed if the change affects only that period, or in the period of the change and future periods if the change affects both current and future periods.
Key accounting estimates made by Santander Bank Polska S.A. Group
Key estimates include:
· Allowances for expected credit losses
· Fair value of financial instruments
· Estimates of privisions for legal claims
· Estimates of risk arising from mortgage loans in foreign currencies
Allowances for expected credit losses in respect of financial assets
The IFRS 9 approach is based on estimation of the expected credit loss (ECL). ECL allowances reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money; and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. ECL allowances are measured at an amount equal to a 12-month ECL or the lifetime ECL, when it is deemed there has been a significant increase in credit risk since initial recognition (Stage 2) or impairment (Stage 3). Accordingly, the ECL model gives rise to measurement uncertainty, especially in relation to:
· measurement of a 12-month ECL or the lifetime ECL;
· determination of whether/when a significant increase in credit risk occurred;
· determination of any forward-looking information reflected in ECL estimation, and their likelihood.
As a result, ECL allowances are estimated using the adopted model developed using many inputs and statistical techniques. Structure of the models that are used for the purpose of ECL estimation consider models for the following parameters:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
· PD - Probability of Default, i.e. the estimate of the likelihood of default over a given time horizon (12-month or lifetime);
· LGD - Loss Given Default, i.e. the part of the exposure amount that would be lost in the event of default;
· EAD – Exposure at Default, i.e. expectation for the amount of exposure in case of default event in a given horizon 12-month or lifetime.
Changes in these estimates and the structure of the models may have a significant impact on ECL allowances.
In accordance with IFRS 9, the recognition of expected credit losses depends on changes in credit risk level which occur after initial recognition of the exposure. The standard defines three main stages for recognising expected credit losses:
· Stage 1 – exposures with no significant increase in credit risk since initial recognition, i.e. the likelihood of the exposure being downgraded to the impaired portfolio (Stage 3 exposures) has not increased. For such exposures, 12-month expected credit losses are recognised
· Stage 2 – exposures with a significant increase in credit risk since initial recognition, but with no objective evidence of impairment. For such exposures, lifetime expected credit losses are recognised.
· Stage 3 – exposures for which the risk of default has materialised (objective evidence of impairment has been identified). For such exposures, lifetime expected credit losses are recognised
For the purpose of the collective evaluation of ECL, financial assets are grouped on the basis of similar credit risk characteristics that indicate the debtors' ability to pay all amounts due according to the contractual terms (for example, on the basis of the Group’s credit risk evaluation or the rating process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). The characteristics chosen are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated. The rating/scoring systems have been internally developed and are continually being enhanced, e.g through external analysis that helps to underpin the aforementioned factors which determine the estimates of impairment charges.
In the individual approach, the ECL charge was determined based on the calculation of the total probability-weighted impairment charges estimated for all the possible recovery scenarios, depending on the recovery strategy currently expected for the customer.
In the scenario analysis, the key strategies / scenarios used were as follows:
· Recovery from the operating cash flows / refinancing / capital support;
· Recovery through the voluntary realisation of collateral;
· Recovery through debt enforcement;
· Recovery through systemic bankruptcy/recovery proceeding/liquidation bankruptcy;
· Recovery by take-over of the debt / assets / sale of receivables
· Recovery as part of legal restructuring.
In addition, for exposures classified as POCI (purchased or originated credit impaired) - i.e. purchased or orginated financial assets that are impaired on initial recognition, expected credit losses are recognized over the remaining life horizon. Such an asset is created when impaired assets are initially recognized and the POCI classification is maintained over the life of the asset.
A credit-impaired assets
Credit-impaired assets are classified as Stage 3 or POCI. A financial asset or a group of financial assets are impaired if, and only if, there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset or asset was recognized as POCI and that impairment event (or events) had an impact on the estimated future cash flows of the financial asset or group of financial assets that could be reliably estimated.
It may not be possible to identify a single event that caused the impairment, rather the combined effect of several events may have caused the impairment. Objective evidence that a financial asset or group of assets was impaired includes observable data:
· significant financial difficulty of the issuer or debtor;
· a breach of contract, e.g. delay in repayment of interest or principal over 90 days in an amount exceeding the materiality threshold (PLN 400 for individual and small and medium-sized enterprises and PLN 2,000 for business and corporate clients) and at the same time relative thresholds (above 1% of the amount past due in relation to the balance sheet amount);
· the Santander Bank Polska S.A. Group, for economic or legal reasons relating to the debtor's financial difficulty, granting to the debtor a concession that the Santander Bank Polska S.A. Group would not otherwise consider, which fulfil below criteria:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
(1) restructuring transactions classified in the Stage 3 category (before restructuring decision),
(2) transactions restructured in the contingency period that meet the criteria for reclassification to the Stage 3 (quantitative and/or qualitative),
(3) transactions restructured during the contingency period previously classified as non-performing due to observed customer financial difficulties, have been restructured again or are more than 30 days past due,
(4) restructured transactions, where contractual clauses have been applied that defer payments through a grace period for repayment of the principal for a period longer than two years,
(5) restructured transactions including debt write-off, interest grace periods or repaid in installments without contractual interest,
(6) restructured transactions, where there was a decrease in the net present value of cash flows (NPV) of at least 1% compared to the NPV before the application of the forbearance measures,
(7) transactions where there is a repeated failure to comply with the established payment plan of previous forbearances that has led to successive forbearances of the same exposure (transaction),
(8) transactions where:
· in inadequate repayment schedules were applied, which are related to, inter alia, repeated situations of non-compliance with the schedule, changes in the repayment schedule in order to avoid situations of non-compliance with it, or
· a repayment schedule that is based on expectations, unsupported by macroeconomic forecasts or credible assumptions about the borrower's ability or willingness to repay was applied
(9) transactions for which the Group has reasonable doubts as to the probability of payment by the customer.
· it becoming probable that the debtor will enter bankruptcy, recovery proceedings, arrangement or other financial reorganisation;
· the disappearance of an active market for that financial asset because of financial difficulties;
Impaired exposures (Stage 3) can be reclassified to Stage 2 or Stage 1 if the reasons for their classification to Stage 3 have ceased to apply (particularly if the borrower’s economic and financial standing has improved) and a probation period has been completed (i.e. a period of good payment behaviour meaning the lack of arrears above 30 days), subject to the following:
· In the case of individual customers, the probation period is 180 days.
· In the case of SME customers, the probation period is 180 days, and assessment of the customer’s financial standing and repayment capacity is required in some cases. However, the exposure cannot be reclassified to Stage 1 or 2 in the case of fraud, client`s death, discontinuation of business, bankruptcy, or pending restructuring/ liquidation proceedings.
· In the case of business and corporate customers, the probation period is 92 days, and positive assessment of the financial standing is required (the Group assesses all remaining payments as likely to be repaid as scheduled in the agreement). The exposure cannot be reclassified to Stage 1 or 2 in the case of fraud, discontinuation of business, or pending restructuring/ insolvency/ liquidation proceedings.
Additionally, if the customer is in Stage 3 and subject to the forbearance process, they may be reclassified to Stage 2 not earlier than after 365 days (from the start of forbearance or from the downgrade to the NPL portfolio, whichever is later) of regular payments, repayment by the client of the amount previously overdue / written off (if any) and after finding that there are no concerns as to the further repayment of the entire debt in accordance with the agreed terms of restructuring.
A significant increase in credit risk
One of the key elements of IFRS 9 is the identification of a significant increase in credit risk which determines the classification to Stage 2. The Group has developed detailed criteria for the definition of a significant increase in credit risk based on the following main assumptions:
· Qualitative assumptions:
· Implementing dedicated monitoring strategies for the customer following the identification of early warning signals that indicate a significant increase in credit risk
· Restructuring actions connected with making concessions to the customers as a result of their difficult financial standing
· Delay in payment as defined by the applicable standard, i.e. 30 days past due combined with the materiality threshold
· Quantitative assumptions:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
· A risk buffer method based on the comparison of curves illustrating the probability of default over the currently remaining lifetime of the exposure based on the risk level assessment at exposure recognition and at reporting date. Risk buffer is set in relative terms for every single exposure based on its risk assessment resulting from internal models and other parameters of exposure impacting assessment of the Group whether the increase might have significantly increased since initial recognition of the exposure (such parameters considered types of the products, term structure as well as profitability). Risk buffer methodology was prepared internally and is based on the information gathered in the course of the decision process as well as in the process of transactions structuring.
· Absolute threshold criterion - a significant increase in risk is considered to have occurred when, over the horizon of the current remaining life of the exposure, the annualised PD at the reporting date exceeds the corresponding PD at the time the exposure was recognised by an amount greater than the threshold.
· In addition, the Bank applies the threefold risk criterion. It is met when, over the horizon of the current remaining life of the exposure, the annualised PD as at the reporting date exceeds three times the corresponding PD at the time the exposure was recognised.
New criteria for a significant increase in risk (absolute threshold and a condition verifying at least a threefold increase in PD) were introduced in 2024 for all credit portfolios. As a result of the changes introduced, credit exposure amounting to PLN 8,107,493 k was reclassified to Stage 2 and the estimated level of loan impairments was changed in the amount of PLN 130,842 k (increase, which charged the current year's result).
The fact that the exposure is supported by the Borrowers' Support Fund is reported as a forborne and a significant increase in credit risk (Stage 2), and in justified cases (previously identified impairment, a delay in repayment over 30 days, subsequent forbearance, no possibility to service the debt according to the current schedule) exposure is classified in Stage 3.
As of 31.12.2024 the thresholds (determining the maximum permissible value of the probability of default (PD) as at the reporting date after the change in relation to the PD value at the moment of initial recognition) for classification into stage 2 are specified individually for each exposure. The table presents the average annual values of the PD thresholds, taking into account the time to maturity of the exposure.
Average threshold (annualized) of the probability of default |
|
mortgage loans |
3.16% |
consumer loans |
13.06% |
business loans |
6.56% |
Bank independently verifies the fulfillment of other quantitative thresholds (the absolute threshold criterion and the threefold risk increase criterion).
In the corporate client segment, Bank identifies exposures with low credit risk in accordance with the rules derived from IFRS 9, which allows for the recognition of expected 12-month losses even with a significant increase in credit risk since initial recognition. As of December 31, 2024, this portfolio was immaterial and constituted 0,0063% of the portfolio classified into stage 1 or 2 in Santander Bank Polska S.A.
Exposure in Stage 2 may be re-classified into Stage 1 without probation period as soon as significant increase in credit risk indicators after its initial recognition end e.g. when the following conditions are met: client`s current situation does not require constant monitoring, no restructuring actions towards exposure are taken, exposure has no payment delay over 30 days for significant amounts, no suspension of the contact due to Shield 4.0, and according to risk buffer method no risk increase occurs.
ECL measurement
Another key feature required by IFRS 9 is the approach to the estimation of risk parameters. For the purpose of estimating allowances for expected losses, Santander Bank Polska S.A. Group uses its own estimates of risk parameters that are based on internal models. Expected credit losses are the sum of individual products for each exposure of the estimated values of PD, LGD and EAD parameters in particular periods (depending on the stage either in the horizon of 12 months or in lifetime) discounted using the effective interest rate.
The estimated parameters are adjusted for macroeconomic scenarios in accordance with the assumptions of IFRS 9.
To this end, the Group determines the factors which affect individual asset classes to estimate an appropriate evolution of risk parameters.
The Group uses scenarios developed internally by the analytical team, which are updated on a monthly basis at least every six months.
The models and parameters generated for the needs of IFRS 9 are subject to model management process and periodic calibration and validation. These tools are also used in the financial planning process.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Determination of forward-looking information and their likelihood
Forward-looking events are reflected both in the process of estimating ECL and when determining a significant increase in credit risk, by developing appropriate macroeconomic scenarios and then reflecting them in the estimation of parameters for each scenario. The final parameter value and the ECL is the weighted average of the parameters weighted by the likelihood of each scenario. Group uses three scenario types: the baseline scenario and two alternative scenarios, which reflect the probable alternative options of the baseline scenario: upside and downside scenario. Scenario weights are determined using the expected GDP path and the confidence intervals for this forecast in such a way that the weights reflect the uncertainty about the future development of this factor.
The Group's models most often indicate the dependence of the quality of loan portfolios on the market situation in terms of the level of deposits, loans, as well as the levels of measures related to interest rates.
Baseline scenario
The scenario predicts GDP of polish economy to grow by 3.5% in 2025 and 3.2% in 2026. 2024 growth was primarily driven by strong private consumption, supported by robust labour market, high indexation of social benefits and strong consumer confidence. Investment will grow stronger in 2025, fuelled by EU funds, after a lull in 2024. Inflation was forecast to go up towards 5% in early 2025, mainly on the back of higher energy prices, before sliding back towards target in late 2026. CPI is expected to average 4.6% in 2025 and 3.4% in 2026.
2023-24 were election years in Poland and this was supportive for a more expansive fiscal policy, with a rich indexation of the social benefits and introduction of new ones. Against this backdrop, a strong labour market, and a moderate rise in inflation, the central bank was expected to be normalising the monetary policy slowly, delivering 125bp of rate cuts in 2025, bringing the NBP reference rate to 4.50% at the end of 2025 and 4.25% at the end of 2026.
There is some short-term appreciation potential for the zloty, given the expected strong inflow of EU funds and slower expected monetary policy easing in Poland than in other countries. In the longer run, however, geopolitical risks as well as purchasing parity will bring EURPLN exchange rate higher, towards 4.40.
The rebounding economy, interest rate cuts delivered in 2023 and state-sponsored mortgage loans benefits have revived the loan market, and this recovery is expected to continue in the upcoming quarters. Deposit growth recorded a high momentum, driven by an uptick in banking sectors’ net foreign assets, but is expected to converge towards growth rate of loans.
Best case scenario
The optimistic scenario was built assuming a quick disbursement of EU funds, strong private consumption and a strong inflow of workers into the economy, which will allow it to record higher long-term growth rates.
The economy was expected to accelerate to 5.7% in 2025 and 5.1% in 2026. Higher growth was expected to contribute to higher CPI inflation, averaging 5.2% in 2025, and 3.6% in 2026.
Strong economic growth and an increased CPI was expected to decrease the MPC’s willingness to cut rates, with NBP rate falling to 5.00% in 2025.
The Polish currency is expected to appreciate in the coming quarters, but the pace of appreciation will be limited by high inflation in Poland. The euro exchange rate is expected to fall to 4.10-4.25 in the coming years.
Accelerating economic activity will have a positive impact on the demand for loans in the banking system, which will also support money creation and the growth of deposits.
Worst case scenario
The pessimistic scenario was built assuming a deterioration in consumer confidence, leading to a decline in private consumption in the short term, accompanied by poor use of EU funds, which translates into lower investment outlays in the economy, as well as a weaker inflow of foreign workers, which will weaken the long-term growth potential in Poland.
In the negative scenario, the economy is expected to grow by 1.6% in 2025 and 1.7% in 2026. Slower growth will translate into somewhat faster disinflation, with CPI amounting to 4.0% in 2025 and 3.1% in 2026.
Weaker growth prospects will encourage the NBP to reduce interest rates and will cause the NBP reference rate to drop to 3.50% by the end of 2025 and remain unchanged in 2026.
Less optimistic economic results and low NBP interest rates will weaken the zloty, and the euro exchange rate will increase towards 4.45.
Lower economic activity will negatively impact demand for loans in the banking system, especially in the household sector, as businesses may need liquidity loans.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
The tables below present the key economic indicators arising from the respective scenarios.
Scenario as at 31.12.2024 |
baseline |
best case |
worst case |
|||||
likelihood |
60% |
20% |
20% |
|||||
|
|
|
2025 |
average, next 3 years |
2025 |
average, next 3 years |
2025 |
average, next 3 years |
GDP |
YoT |
3.5% |
3.1% |
5.7% |
5.1% |
1.6% |
1.7% |
|
WIBOR 3M |
average |
5.2% |
4.5% |
5.6% |
5.3% |
3.9% |
3.7% |
|
unemployment rate |
% active |
2.9% |
2.9% |
2.7% |
2.3% |
3.2% |
3.7% |
|
CPI |
YoY |
4.6% |
2.8% |
5.2% |
3.1% |
4.0% |
2.4% |
|
EURPLN |
period-end |
4,35 |
4,37 |
4,24 |
4,26 |
4,43 |
4,46 |
Scenario as at 31.12.2023 |
baseline |
best case |
worst case |
||||||||
likelihood |
60% |
20% |
20% |
||||||||
|
|
|
2024 |
average, next 3 years |
2024 |
average, next 3 years |
2024 |
average, next 3 years |
|||
GDP |
YoT |
3,3% |
3,3% |
5,7% |
5,7% |
1,1% |
1,1% |
||||
WIBOR 3M |
average |
4,5% |
4,0% |
6,5% |
6,1% |
2,9% |
1,7% |
||||
unemployment rate |
% active |
3,5% |
3,3% |
3,3% |
2,8% |
3,7% |
3,8% |
||||
CPI |
YoY |
7,3% |
3,6% |
8,5% |
5,1% |
6,2% |
2,3% |
||||
EURPLN |
period-end |
4,54 |
4,51 |
4,42 |
4,4 |
4,63 |
4,61 |
||||
Management ECL overlays
In 2024, in addition to the ECL resulting from the complex calculation model implemented in the system, Santander Banka Polska S.A. Group reviewed management overlays, updating the risk level with current and expected future events, which resulted in:
· The management overlay has been released in the amount of PLN 19 600 k for the portfolio of retail loans secured by mortgages, the risk of which might have increased after the cessation of aid measures – payment holidays in force in 2022 and 2023,
· The management overlay for the corporate portfolio, which was created to cover the underestimation of the LGD parameter due to the earlier implementation of the new model in the amount of PLN 15 340 k.
Potential variability of ECL
Significant volatility for the income statement may be reclassifications to Stage 2 from Stage 1. The theoretical reclassification of given percentage of exposures from Stage 1 with the highest risk level to Stage 2 for each type of exposure would result in an increase in allowances according to below table. The above estimates show expected variability of loss allowances as a result of transfers between Stage 1 and Stage 2, resulting in significant changes in the degree to which exposures are covered with allowances in respect of different ECL horizons.
|
additional expected credit loss (mPLN) |
|
|||
reclassification from stage 1 to stage 2 |
individuals |
mortgage loans |
business |
Total 31.12.2024 |
Total 31.12.2023 |
1% |
23,0 |
3,8 |
4,8 |
31,5 |
35,8 |
5% |
108,9 |
13,8 |
28,4 |
151,1 |
174,4 |
10% |
208,9 |
22,9 |
59,9 |
291,7 |
326,3 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Changes in forecasts of macroeconomic indicators may result in significant effects affecting the level of created provisions. Adoption of macroeconomic parameter estimates at only one scenario level (pessimistic or optimistic) will result in a one-off change in ECL at the level below.
in PLN m |
|
|
|
change in ECL level |
|
|
||
scenario |
|
|
|
|
|
31.12.2024 |
31.12.2023 |
|
|
|
|
|
individuals |
mortgage |
business |
Total |
Total |
worst case |
|
|
40,3 |
9,6 |
34,4 |
84,3 |
66,9 |
|
best case |
|
|
|
-42,1 |
-9,8 |
-34,8 |
-86,7 |
-70,4 |
Based on the GDP indicator as the main factor determining the economic condition, Grupa Santander Bank Polska S.A. estimates that a reduction in the target level of gross domestic product by 1b.p. in 2025 would translate into an increase in expected credit losses of PLN 40,161 k PLN. This analysis was conducted assuming the maintenance of the relationship between macroeconomic factors.
Fair value of financial instruments, including instruments which do not meet the contractual cash flows test
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Santander Bank Polska S.A. Group applies a methodology for measuring the fair value of credit exposures and debt instruments.
In the case of the instruments with distinguishable on-balance sheet and off-balance sheet components, the extent of fair value measurement will depend on the nature of the underlying exposure, and:
· the on-balance sheet portion always will be measured at fair value;
· the off-balance sheet portion will be measured at fair value only if at least one of the following conditions is met:
· condition 1: the exposure has been designated as measured at fair value (option) or
· condition 2: the exposure may be settled net in cash or through another instrument or
· condition 3: Santander Bank Polska S.A. Group sells the obligation immediately after its granting or
· condition 4: the obligation was granted below the market conditions.
The fair value is measured with the use of valuation techniques appropriate in the circumstances and for which sufficient data are available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The Group applies following valuation techniques:
· market approach – uses prices and other relevant information generated by market transactions involving identical or comparable (similar) assets, liabilities, or a group of assets and liabilities (e.g. a business unit)
· income approach – converts future amounts (cash flows or income and expenses) to a single current (discounted) date. When the income approach is used, the fair value measurement reflects the current market expectations as to the future amounts.
Santander Bank Polska S.A. Group uses the income approach for fair value measurement relating to debt financial instruments which do not meet contractual cash flows test.
In the case of credit exposures and debt instruments, the present value method within income approach is typically used. In this method, the expected future cash flows are estimated and discounted using a relevant interest rate. In the case of the present value method, Santander Bank Polska S.A. Group uses the following elements in the valuation:
· expectations as to the future cash flows;
· expectations as to potential changes in cash flow amounts and timing (uncertainties are inherent in cash flow estimates);
· the time value of money, estimated using risk-free market rates;
· the price of uncertainty risk inherent in cash flows (risk premium) and
· other factors that market participants would take into account in the circumstances.
The present value measurement approach used by Santander Bank Polska S.A. Group is based on the following key assumptions:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
· cash flows and discount rates reflect the assumptions that market participants would adopt in the measurement of an asset;
· cash flows and discount rates reflect only the factors allocated to the asset which was subject to measurement;
· discount rates reflect the assumptions which are in line with the cash flow assumptions;
· discount rates are consistent with the key economic factors relating to the currency in which the cash flows are denominated.
The fair value determination methodology developed by Santander Bank Polska S.A. Group provides for adaptation of the fair value measurement model to the characteristics of the financial asset subject to measurement. When determining the need for adaptation of the model to the features of the asset subject to measurement, Santander Bank Polska S.A. Group takes into account the following factors:
· approach to the measurement (individual/collective) given the characteristics of the instrument subject to measurement;
· whether a schedule of payments is available;
· whether the asset subject to measurement is still offered by Santander Bank Polska S.A. Group and whether the products recently provided to customers can be a reference group for that asset.
Other significant groups of financial instruments measured at fair value are all derivatives, financial assets held within a residual business model, debt investment financial assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and equity investment financial assets. These financial instruments are either measured with reference to a quoted market price for that instrument or by using a respective measurement model.
Where the fair value is calculated using financial-markets pricing models, the methodology is to calculate the expected cash flows under the terms of each specific contract and then discount these values back to a present value. These models use as their basis independently sourced market parameters including, for example, interest rate yield curves, securities and commodities prices, option volatilities and currency rates. Most market parameters are either directly observable or are implied from instrument prices.
In justified cases, for financial instruments whose carrying amount is based on current prices or valuation models, Santander Bank Polska S.A. Group takes into account the need to identify additional adjustments to the fair value of the counterparty credit risk.
The fair value measurement models are reviewed periodically.
A summary of the carrying amounts and fair values of the individual groups of assets and liabilities is presented in Note 46.
Estimates for legal claims
Santander Bank Polska S.A. Group raises provisions for legal claims in accordance with IAS 37. The provisions have been estimated considering the likelihood of unfavourable verdict and amount to be paid, and their impact is presented in other operating income and cost.
Details on the value of the provisions and the assumptions made for their calculation are provided in notes 36, 47 and 48.
Due to their specific nature, estimates related to legal claims of mortgage loans in foreign currencies are described separately below.
Estimates of risk arising from mortgage loans in foreign currencies
Due to the revolving legal situation related to mortgage loans portfolio denominated and indexed to foreign currencies, and inability to recover all contractual cash flows risk materialisation, Group estimates impact of legal risk on future cash flows.
Gross book value adjustment resulting from legal risk is estimated based on a number of assumptions, taking into account:a specific time horizon and a number of probabilities such as:
· the probability of possible settlements and
· the probability of submitting claims by borrowers, and
· the probability in terms of the number of disputes
which are described in more details in note 47.
In mid-2022, the Group prepared a settlement scenario which reflects the level of losses for future settlements.
Legal risk is estimated individually for each exposure in the event of litigation and in terms of portfolio in the absence of such.
As explained in the accounting policies, Santander Bank Polska Group accounts for the impact of legal risk as an adjustment to the gross book value of the mortgage loans portfolio. If there is no credit exposure or its value is insufficient, the impact of legal risk is presented as a provision according to IAS 37.
The result of changes in legal risk is presented in a separate position in income statement “Cost of legal risk associated with foreign currency mortgage loans” and “Gain/loss on derecognition of financial instruments measured at amortised cost”.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
In 2024, the Group recognized PLN 3,101,330 k as cost of legal risk related to mortgage loans in foreign currencies and PLN 74,122 k as a cost of signed settlements.
The Group will continue to monitor this risk in subsequent reporting periods.
Details presenting the impact of the above-mentioned risk on financial statements, assumptions adopted for their calculation, scenario description and sensitivity analysis are contained in notes 47 and 48, respectively.
When applying the accounting principles, the management of Santander Bank Polska S.A. Group makes various judgements that may significantly affect the amounts recognized in financial statements.
Consolidation scope
The preparation of consolidated financial statements by Santander Bank Polska S.A. as a parent entity of Santander Bank Polska S.A. Group requires an extensive use of judgement and multiple assumptions as to the nature of entities in which the investment is made including, determination of whether Santander Bank Polska S.A. as a parent entity exercises control over the investee.
Santander Bank Polska S.A., being the parent entity, controls directly or indirectly an investee when:
· if has power over the investee;
· if has exposure or rights to variable returns from its involvement with the investee;
· if has the ability to use its power over the investee to affect the amount of it’s own financial results.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The key judgments and assumptions regarding involvement in entities in which it holds half of the voting rights are set out below.
Santander Towarzystwo Funduszy Inwestycyjnych S.A.
The owners of Santander Towarzystwo Funduszy Inwestycyjnych S.A. (Santander TFI S.A.), i.e. Santander Bank Polska S.A. and Banco Santander S.A., are members of global Santander Group and hold an equal stake of 50% in the company’s share capital.
Santander Bank Polska S.A. exercises control over Santander TFI S.A. within the meaning of the International Financial Reporting Standard 10 (IFRS 10) because it has the practical ability to unilaterally direct the appropriate activities of the Santander TFI S.A. Furthermore, it significantly affects the company’s operations and returns as the major business partner and distributor of investment products. At the same time, through its ownership interest, Santander Bank Polska S.A. is exposed and has right to variable returns generated by Santander TFI S.A.
Considering the guidance provided in IFRS 10 par. B18, the Bank’s Management Board concluded that, having regard to legal requirements concerning Santander TFI S.A. and its operations, the Bank has a practical ability to unilaterally direct the relevant activities of Santander TFI S.A. even if it does not have a contractual right to do so.
The Bank can have a real impact on the composition of the Supervisory Board and through it – on the composition of the Management Board of Santander TFI S.A. and these governing bodies decide on the relevant activities of Santander TFI S.A.
It should therefore be concluded that by having power and right to variable returns (benefits), the Bank has control over Santander TFI S.A.
POLFUND - Fundusz Poręczeń Kredytowych S.A
The investment in POLFUND - Fundusz Poręczeń Kredytowych S.A., where 50% of the voting rights are held by the Santander Bank Polska S.A. on Annual General Meeting, in accordance with the best knowledge and judgement was classified, as an investment in an associate as the ownership structure does not allow Santander Bank Polska S.A. to control and to jointly-control the company.
Stellantis Financial Services Polska Sp. z o.o.
According to Santander Bank Polska S.A. Group Management Board, the investment in Stellantis Financial Services Polska Sp. z o.o. is treated as an investment in a subsidiary, due to the fact that Santander Consumer Bank SA has a direct control and Santander Bank Polska S.A. has indirect control over the investment. As a result of the formation of the automotive manufacturing corporation Stellantis N.V. in 2021 in a merger of the Italian–American conglomerate Fiat Chrysler Automobiles and the French Groupe PSA, on 3 April 2023 PSA Finance Polska Sp. z o.o. and its wholly-owned subsidiary, PSA Consumer Finance Polska Sp. z o.o., were renamed Stellantis Financial Services Polska Sp. z o.o. and Stellantis Consumer Financial Services Polska Sp. z o.o., respectively. Stellantis Financial Services
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Polska Sp. z o.o. is a subsidiary undertaking for the purposes of consolidated financial reporting as it is controlled by Santander Consumer Bank S.A. (directly) and Santander Bank Polska S.A. (indirectly). Under the terms of the framework agreement, Santander Consumer Bank S.A. has the right to make decisions regarding key areas such as financing and risk management. In practice, the Bank has ability to direct activities that significantly affect investment returns and is exposed to potential risks (losses) and benefits (dividends).
SC Poland Consumer 23-1
SC Poland Consumer 23-1 Designated Activity Company (DAC) is a special purpose entity (SPE) incorporated in Dublin on 17 June 2022 for the purpose of securitising a part of the retail loan portfolio of Santander Consumer Bank S.A. (SCB S.A.) The SPE does not have any capital connections with SCB S.A., which nevertheless exercises control over the entity in accordance with IFRS 10.7. based on contractual rights. The combined stipulations of Servicing Agreement and Asset Transfer Agreement give SCB S.A. power over the management and operations of the SPE. In addition, the entity relies on SCB S.A. for access to financing and guarantees as well as technology, know-how and other resources, which further enhances the controlling power of the Bank.
The list of fully consolidated subsidiaries is presented in note 1 “Information about the issuer”.
Subsidiaries
Santander Bank Polska S.A. Group applies the acquisition method to account for acquisition of subsidiaries.
Associates
Associates are those entities in which Santander Bank Polska S.A. Group has significant influence, but are not subsidiaries, neither joint ventures.
They are accounted for in accordance with the equity method in consolidated financial statements.
Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or incomes (including dividends) and expenses arising from intragroup transactions, are eliminated in the preparation of consolidated financial statement.
Assessment whether contractual cash flows are solely payments of principal and interest
The key issue for Santander Bank Polska S.A. Group's business, is to assess whether the contractual terms of financial assets indicate the existence of certain cash flow dates, which are only the repayment of the nominal value and interest on the outstanding nominal value.
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition and ‘interest’ is defined as consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, Santander Bank Polska S.A. Group considers the contractual terms of the instrument. This includes assessing whether the financial assets contain a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment the Santander Bank Polska S.A. Group considers:
· contingent events that would change the amount and timing of cash flows,
· leverage features,
· prepayment and extension terms,
· terms that limit Santander Bank Polska S.A. Group’s claim to cash flows from specified assets (e.g. non-recourse asset arrangements),
· features that modify consideration for the time value of money.
A prepayment feature is consistent with the SPPI criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract.
In addition, a prepayment feature is treated as consistent with this criterion if a financial asset is acquired or originated at a premium or discount to its contractual par amount, the prepayment amount substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination), and the fair value of the prepayment feature is insignificant on initial recognition.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Business Model Assessment
Business models at Santander Bank Polska S.A. Group are determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. The business model does not depend on the intentions of the Santander Bank Polska S.A. Group management regarding a particular instrument, which is why the model is assessed at a higher level of aggregation.
All business models, quantitative and qualitative criteria used for business model assessment are described in p.2.7 regarding financial asset classification.
The accounting policies have been applied consistently by Santander Bank Polska S.A. Group entities.
Foreign currency
Foreign currency transactions
The Polish zloty (PLN) is the functional currency of the units which are members of Santander Bank Polska S.A. Group.
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Resulting from these transactions monetary assets and liabilities denominated in foreign currencies, are translated at the foreign exchange rate ruling at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated at the foreign exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the reporting currency at the foreign exchange rates ruling at the dates that the fair values were determined. Foreign exchange differences arising on translation are recognised in profit or loss except for differences arising on retranslation of instruments of other entities measured at fair value through other comprehensive income, which are recognised in other comprehensive income.
Recognition and derecognition
Initial recognition
Santander Bank Polska S.A. Group recognises a financial asset or a financial liability in its statement of financial position when, and only when, it becomes bound by contractual provisions of the instrument.
A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, at the settlement date.
Derecognition of financial assets
Santander Bank Polska S.A. Group derecognises a financial asset when and only when, if:
· contractual rights to the cash flows from that financial asset have expired, or
· Santander Bank Polska S.A. Group transfers a financial asset, and such operation meets the derecognition criteria.
The Group excludes financial assets from the statement of financial position, inter alia, if they are invalidated, settled, written off, overdue, materially modified or uncollectible as a result of a final court judgment. The above-mentioned components are excluded from the statement of financial position as a result of the provisions recognised for them for expected credit losses or losses due to legal risk (in the case of cancellations of CHF loans).
Derecognition of financial liabilities
Santander Bank Polska S.A. Group shall remove a financial liability (or a part of a financial liability) from its statement of financial position when, and only when, it is extinguished — i.e. when the obligation specified in the contract is discharged or cancelled or expires.
Classification of financial assets and financial liabilities
Classification of financial assets
Classification of financial assets which are not equity instruments
Santander Bank Polska S.A. Group classifies financial asset that are not an equity instrument as subsequently measured at amortised cost or at fair value through other comprehensive income or fair value through profit or loss on the basis of both:
· the business model of Santander Bank Polska S.A. Group for managing the financial assets and
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
· the contractual cash flow characteristics of the financial asset (described in point 2.7).
A financial asset is measured at amortised cost if both of the following conditions are fulfilled:
· the financial asset is held in a business model whose purpose is to hold financial assets to collect contractual cash flows, and
· the contractual terms of a financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A financial asset is measured at fair value through other comprehensive income if both of the following conditions are fulfilled:
· the financial asset is held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and
· the contractual terms of a financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
If a financial asset is not measured at amortised cost or at fair value through other comprehensive income, it is measured at fair value through profit or loss.
Classification of financial assets which are equity instruments
Santander Bank Polska S.A. Group measures the financial asset that is an equity instrument at fair value through profit or loss, unless Santander Bank Polska S.A. Group made an irrevocable election at initial recognition for particular investments in equity instruments to present subsequent changes in fair value in other comprehensive income.
Business models
Business models at Santander Bank Polska S.A. Group are determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. The business model does not depend on the intentions of the Santander Bank Polska S.A. Group key management regarding a particular instrument.
The business model refers to how Santander Bank Polska S.A. Group manages its financial assets in order to generate cash flows. That is, the business model determines whether cash flows will result from:
· collecting contractual cash flows
· selling financial assets
· or both.
Consequently, the business model assessment is not performed on the basis of scenarios that Santander Bank Polska S.A. Group does not reasonably expect to occur, such as so-called “worst case” or “stress case” scenarios.
Santander Bank Polska S.A. Group determines the business model on the basis of the assessment of qualitative and quantitative criteria.
The qualitative criteria include, m.in, how the risks associated with these assets are managed and the principles of remunerating the persons managing these portfolios.
The quantitative criteria are intended to determine whether the sale of financial assets during the analysed period does not exceed the threshold values set in the internal regulations set in percentage terms. The frequency, value, timing of the sale of assets and reasons for the sale are analysed.
Business model types
The analysis of qualitative and quantitative criteria makes it possible to identify three basic business models applied in the operations of Santander Bank Polska S.A. Group:
· the business model whose objective is to hold assets in order to collect contractual cash flows (hold to collect),
· the business model whose objective is achieved by both collecting contractual cash flows and selling financial assets (hold to collect and sell),
· the other/ residual business model (the business model whose objective is achieved by selling assets).
The predominant business model in the Santander Bank Polska S.A. Group is a business model that involves holding assets for the purpose of generating contractual cash flows, with the exception of:
· debt instruments measured at fair value through other comprehensive income held in the ALM segment and loans and advances subject to the underwriting process described below, for which a business model has been established, the purpose of which is achieved both by generating cash flows arising from the agreement, as well as through the sale of financial assets,
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
· instruments held for trading, including debt instruments and derivatives, for which hedge accounting is not used – the appropriate business model is a different/residual business model.
A business model whose objective is to hold assets in order to collect contractual cash flows
In the hold-to-maturity model, incidental sales are possible. Such sales are each time analyzed in terms of frequency, value and distribution of sales in earlier periods, reasons for these sales and expectations as to future sales operations.
A business model whose objective is to hold assets in order to collect contractual cash flows spans the entire spectrum of credit activity, including but not limited to corporate loans, mortgage and consumer loans, credit cards, loans granted and debt instruments (e.g. treasury bonds, corporate bonds), which are not held for liquidity management purposes. Financial assets on account of trading settlements are substantially also recognised under this model. Such assets are recognised in the books of Santander Bank Polska S.A. Group on the basis of an invoice issued payable within maximum one year.
A business model whose objective is achieved by both collecting contractual cash flows and selling financial assets
A business model whose objective is achieved by both collecting contractual cash flows and selling financial assets includes:
· financial assets acquired for the purpose of liquidity management, such as State Treasury bonds or NBP bond and
· loans and advances subject to underwriting, i.e. portion of credit exposures that are planned to be sold before maturity for reasons other than increase in credit risk.
Other/ residual business model
Other, residual, model is used for classifying assets held by Santander Bank Polska S.A. Group but not covered by the first or second category of the business model. They include assets from the “held for trading” category in the financial statements, such as listed equity instruments, commercial bonds acquired for trading purposes and derivatives (e.g. options, IRS, FRA, CIRS, FX Swap contracts) which are not embedded derivatives.
Changing the business model
Santander Bank Polska S.A. Group reclassifies all affected financial assets when, and only when, it changes its business model for managing financial assets.
If Santander Bank Polska S.A. Group reclassifies a financial asset, it applies the reclassification prospectively from the reclassification date.
Classification of financial liabilities
Santander Bank Polska S.A. Group classifies all financial liabilities as subsequently measured at amortised cost, except for:
· financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
· financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies;
· financial guarantee contracts. After initial recognition , the issuer shall measure contract at the higher of:
(1) amount of the expected credit loss allowance,
(2) initial recognised amount, less respective accumulated income recognised as per IFRS 15;
· commitments to provide a loan at a below-market interest rate. If the liability is not measured at fair value through profit or loss, the issuer shall subsequently measure it at the higher of:
(1) amount of the expected credit loss allowance,
(2) initial recognised amount, less respective accumulated income recognised as per IFRS 15;
· contingent consideration recognised by the acquire under the business combination arrangement governed by IFRS 3. Such contingent consideration shall subsequently be measured at fair value with changes recognised in profit or loss.
Embedded derivatives
For financial assets, that meet the definition of hybrid contracts with an embedded derivative, a derivative that is a component of such a contract is not separated from the host contract which is not a derivative, the entire contract is assessed in terms of the contractual cash flow characteristics.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Measurement of financial assets and financial liabilities
Initial measurement
At initial recognition, Santander Bank Polska S.A. Group measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.
However, if the fair value of the financial asset or financial liability at initial recognition differs from the transaction price, Santander Bank Polska S.A. Group recognises this instrument on that date as follows:
· when the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, then Santander Bank Polska S.A. Group recognises the difference between the transaction price and the fair value at initial recognition as a gain or loss.
· in all other cases, at the measurement adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, Santander Bank Polska S.A. Group recognises that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.
At initial recognition, Santander Bank Polska S.A. Group shall measure trade receivables that do not have a significant financing component (determined in accordance with IFRS 15) at their transaction price (as defined in IFRS 15).
Subsequent measurement of financial assets
After initial recognition, Santander Bank Polska S.A. Group recognises a financial asset:
· at amortised cost, or
· fair value through other comprehensive income, or
· at fair value through profit or loss.
Allowances for expected credit losses are not calculated for financial assets measured at fair value through profit or loss.
Subsequent measurement of financial liabilities
After initial recognition, Santander Bank Polska S.A. Group recognises a financial liability:
· at amortised cost, or
· at fair value through profit or loss.
Liabilities measured at amortised costs include: deposits from banks, deposits from customers, liabilities due to repo transactions, loans and advances obtained, issued debt instruments and subordinated liabilities.
Liabilities are recognised as subordinated liabilities which in the event of liquidation or bankruptcy of Santander Bank Polska S.A. Group are repaid after satisfaction of claims of all other Santander Bank Polska S.A. Group’s creditors. Financial liabilities are classified as subordinated liabilities by the decision of the Polish Financial Supervision Authority issued at the request of Santander Bank Polska S.A. Group.
Amortised cost measurement
Financial assets
Effective interest method
Interest revenue is calculated by applying the effective interest rate to the gross carrying amount of financial assets and presented in “Net interest income”, except for credit-impaired financial assets. At the time a financial asset or a group of similar financial assets is reclassified to stage 3, interest revenue is calculated on the basis of a net value of a financial asset and presented at the interest rate used for the purpose of discounting the future cash flows for the purpose of measurement of impairment.
This does not apply to POCI assets, in the case of which the interest revenue is calculated on the basis of the net carrying amount, applying the effective interest rate adjusted for credit risk over the lifetime of the asset. The credit-adjusted effective interest rate is calculated by taking into account the future cash flows adjusted for the effect of credit risk over the lifetime of the asset.
The gross carrying amount of a financial asset is its amortised cost, before adjusting for any expected credit loss allowances.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Purchased or originated credit-impaired assets (POCI)
Santander Bank Polska S.A Group distinguished the category of purchased or originated credit-risk assets . POCI are assets that are credit-impaired on initial recognition. Financial asset that were classified as POCI at initial recognition should be treated as POCI in all subsequent periods until they are derecognized.
At initial recognition, POCI assets are recognized at their fair value. After initial recognition POCI assets are measured at amortized costs.
Valuation of POCI assets is based on the effective interest rate adjusted for the effect of credit risk .
For POCI assets (purchased or originated credit impaired) expected credit losses are recognised over the lifetime of the asset.
Portfolio of mortgage loans denominated/indexed to foreign currencies
Santander Polska S.A. Group reduces the gross carrying amount of mortgage loans denominated/indexed to foreign currencies in accordance with IFRS 9 by the impact of legal risk for potential and existing disputes. In the absence of gross carrying amount or its insufficient value to cover, it records a provision in accordance with IAS 37.
Modification of contractual cash flows
The concept of modification
Changes to the contractual cash flows in respect of the financial asset are regarded by Santander Bank Polska S.A. Group as modification if made in the form of an annex. Changes to the contractual cash flows arising from performance of the contractual obligations are not considered to be a modification.
If the terms of the financial asset agreement change, the Santander Bank Polska S.A. Group assesses whether the cash flows generated by the modified asset differ significantly from cash flows generated by financial asset before modification of the terms of the asset agreement.
Modification criteria
When assessing whether a modification is substantial or minor, Santander Bank Polska S.A. Group takes into account both quantitative and qualitative criteria. Both criteria groups are each time analyzed together.
Quantitative criteria
To determine the significance of the impact of modifications, the so-called "10% test" is carried out which is based on a comparison of discounted cash flows of the modified financial instrument (using the original effective interest rate) with discounted (also with the original effective interest rate) cash flows of the financial instrument before modification, whose value should correspond to the value of undue capital, increased by the value of undue interest and adjusted for the amount of unsettled commission.
Qualitative criteria
During the qualitative analysis, Santander Bank Polska S.A. Group takes into account the following aspects:
· adding / removing a feature that violates the contractual cash flow test result,
· currency conversion - except for currency conversions resulting from the transfer of the contract for collection,
· change of the main debtor - change of the contractor results in a significant modification of contractual terms and
· consolidation of several exposures into one under an annex.
Substantial modification
Identification of substantial modification resulting in the exclusion of a financial instrument from the statement of financial position is based on qualitative and quantitative criteria described above.
The occurrence of at least one of these quality criteria results in a significant modification. In the case of quantitative criteria, exceeding the "10% test" also indicates a significant modification.
As a result of a significant modification, the existing financial instrument is derecognized. The new instrument is recognized at fair value.
Minor modification
If neither the qualitative criteria, not the quantitative are met ( eg. “10% test” exceeded), the modification is regarded by Santander Bank Polska S.A. Group as insignificant.
The change in the gross carrying amount is recognized in interest income/expense as a modification gain or loss.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Write-off
Santander Bank Polska S.A. Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. A write-off constitutes a derecognition event. Financial asset can be written off partially or in its entirety.
Santander Bank Polska S.A. Group writes off financial assets if at least one of the following conditions apply:
· Santander Bank Polska S.A. Group has documented the irrecoverability of the debt ;
· there are no reasonable expectations of recovering the financial asset in full or in part;
· the debt is due and payable in its entirety and the value of the credit loss allowance corresponds to the gross value of the exposure, while the expected debt recovery proceeds are nil;
· the asset originated as a result of a crime and the perpetrators have not been identified or
· Santander Bank Polska S.A. Group has received:
· a decision on discontinuation of debt enforcement proceedings due to irrecoverability of the debt (in relation to all obligors), issued by a relevant enforcement authority pursuant to Article 824 § 1 (3) of the Polish Code of Civil Procedure, which is recognised by the creditor (Santander Bank Polska S.A. Group) as corresponding to the facts; or
· a court decision:
- dismissing a bankruptcy petition, if the insolvent debtor's assets are insufficient to cover the cost of the proceedings or suffice to cover this cost only; or
- discontinuing the bankruptcy proceedings or
- closing the bankruptcy proceedings.
Financial assets written off are then recorded off balance sheet.
General approach
Santander Bank Polska S.A. Group recognises allowances for expected credit losses in respect of:
· financial assets measured at amortised cost or at fair value through other comprehensive income;
· lease receivables;
· contract assets, i.e. the consideration to which Santander Bank Polska S.A. Group is entitled in exchange for the goods or services transferred to the customer in accordance with IFRS 15 Revenue from Contracts with Customers;
· loan commitments and
· off-balance sheet credit liabilities and financial guarantees.
Details regarding the calculation are described in point 2.6 "Allowances for expected credit losses"
Santander Bank Polska S.A. Group recognises in profit or loss, as an impairment gain or loss, the amount of expected credit losses that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised.
Santander Bank Polska S.A. Group charges interest on exposures classified in Stage 3 on the net exposure value .
Simplified approach for trade receivables and contract assets
In the case of trade receivables and contract assets, Santander Bank Polska S.A.Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables or contract assets that result from transactions that are within the scope of IFRS 15, and that do not contain a significant financing component.
Contingent liabilities
Santander Bank Polska S.A. Group creates provisions for impairment risk-bearing irrevocable contingent liabilities (irrevocable credit lines, financial guarantees, letters of credit, etc.). The value of the provision is determined as the difference between the estimated amount of available contingent exposure set using the Credit Conversion Factor (CCF) and the current value of expected future cash flows under this exposure.
Santander Bank Polska S.A. Group raises provisions for off-balance sheet liabilities subject to credit risk, broken down into 3 stages.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Gains and losses
Financial instruments in amortized cost
A gain or loss on a financial asset that is measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss through the amortisation process or in order to recognise impairment gains or losses. A gain or loss on a financial liability that is measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the financial liability is derecognised and through the amortisation process.
With regard to the financial assets recognised by Santander Bank Polska S.A. Group at the settlement date, any change in the fair value of the asset to be received during the period between the trade date and the settlement date is not recognised for assets measured at amortised cost. For assets measured at fair value, however, the change in fair value is recognised in profit or loss or in other comprehensive income. The trade date means the date of initial recognition for the purposes of applying the impairment requirements.
A gain or loss on a financial asset or liability measured at fair value is recognised in profit or loss unless the asset or liability is:
· a part of a hedging relationship,
· an investment into an equity instrument and Santander Bank Polska S.A. Group has decided to present gains and losses on that investment in other comprehensive income,
· a financial liability designated as measured at fair value through profit or loss and Santander Bank Polska S.A. Group is required to present the effects of changes in the liability's credit risk in other comprehensive income; or
· is a financial asset measured at fair value through other comprehensive income and Santander Bank Polska S.A. Group is required to recognise some changes in fair value in other comprehensive income.
Investments in equity instruments
Investments in equity instruments are measured at fair value through profit or loss unless at their initial recognition Santander Bank Polska S.A. Group makes an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of this policy that is no held for trading.
If Santander Bank Polska S.A. Group has elected to measure equity instruments at fair value through other comprehensive income , dividends from that investment are recognised in profit or loss.
Liabilities designated as measured at fair value through profit or loss
Santander Bank Polska S.A. Group presents a gain or loss on a financial liability that is designated as measured at fair value through profit or loss as follows:
· the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, and
· the remaining amount of change in the fair value of the liability is presented in profit or loss unless the treatment of the effects of changes in the liability's credit risk described in (a) would create or enlarge an accounting mismatch in the profit or loss of Santander Bank Polska S.A. Group.
If the requirements specified above would create or enlarge an accounting mismatch in the profit or loss of Santander Bank Polska S.A. Group, Santander Bank Polska S.A. Group presents all gains or losses on that liability (including the effects of changes in the credit risk of that liability) in profit or loss.
Santander Bank Polska S.A. Group presents in profit or loss all gains and losses on loan commitments and financial guarantee contracts that are designated as measured at fair value through profit or loss.
Assets measured at fair value through other comprehensive income
A gain or loss on a financial asset measured at fair value through other comprehensive income is recognised in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the financial asset is derecognized. If the financial asset is derecognised, Santander Bank Polska S.A. Group accounts for the cumulative gain or loss that was previously recognised in other comprehensive income in profit or loss. Interest calculated using the effective interest method is recognised in profit or loss.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Derivative financial instruments are recognised at fair value without any deduction for transactions costs to be incurred on sale. The best evidence of the fair value of a financial instrument at initial recognition is the transaction price i.e. the fair value of the consideration given or received.
If a hybrid contract contains a host contract that is not an asset within the scope of this IFRS 9, Santander Bank Polska S.A. Group separates the embedded derivative from the host contract and accounts for it as other derivatives if the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract and the host contract is not carried at fair value through profit or loss. Embedded derivatives are measured at fair value with changes recognised in the profit and loss account.
Hedge accounting
Pursuant to paragraph 7.2.21 of IFRS 9, Santander Bank Polska S.A. Group chose to continue to apply the hedge accounting requirements and hedging relationships arising from IAS 39.
The Santander Bank Polska S.A. Group uses derivative financial instruments among others to hedge its exposure to interest rate risks arising from Santander Bank Polska S.A. Group operational, financing and investment activities.
The Santander Bank Polska S.A. Group discontinues hedge accounting when:
· it is determined that a derivative is not, or has ceased to be, highly effective as a hedge;
· the derivative expires, or is sold, terminated, or exercised;
· the hedged item matures or is sold, or repaid,
· the hedging relationship ceases.
Fair value hedge
A fair value hedge is accounted for as follows: the gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) shall be recognised in profit or loss; and the gain or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognised in profit or loss. This rule applies if the hedged item is otherwise measured at amortised cost or is a financial asset measured at fair value through other comprehensive income.
Cash flow hedge
A cash flow hedge is accounted for as follows: the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge shall be recognised directly in other comprehensive income and the ineffective portion of the gain or loss on the hedging instrument shall be recognised in income statement.
Interest income and expenses on hedged and hedging instruments are recognised as net interest income.
Amounts recognised in ‘Other comprehensive income’ are reclassified to profit or loss during the period of time in which the hedged item affects the income statement.
If the hedging instrument expires or is sold or the hedge accounting relationship is terminated, Santander Bank Polska S.A. Group discontinues hedge accounting. All profits or losses on the hedging instrument pertaining to the effective hedge recognised in other comprehensive income remains an element of equity until the forecast transaction occurs, when it is recognised in income statement.
If the transaction is no longer expected to occur, the cumulative gain or loss relating to the hedging instrument recognised in other comprehensive income is reclassified to profit or loss.
Repurchase and reverse repurchase transactions
The Santander Bank Polska S.A. Group also generates/invests funds by selling/purchasing financial instruments under repurchase/reverse repurchase agreements whereby the instruments must be repurchased/resold at the previously agreed price.
Securities sold subject to repurchase agreements (“repo and sell-buy-back transaction”) are not derecognised from the statement of financial position at the end of the reporting period. The difference between sale and repurchase price is treated as interest cost and accrued over the life of the agreement.
Securities purchased subject to resale agreements (“reverse repo and buy-sell-back transactions”) are not recognised in the statement of financial position at the end of the reporting period. The difference between purchase and resale price is treated as interest income and accrued over the life of the agreement.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
The principles described above are also applied by Santander Bank Polska S.A Group to transaction concluded as separate transaction of sale and repurchase of financial instruments but having the economic nature of repurchased and reverse repurchase transactions.
Property, plant and equipment
Owned fixed assets
Property, plant and equipment including those under operating leases, are stated at cost or deemed cost less accumulated depreciation and impairment losses.
Subsequent expenditure
Santander Bank Polska S.A. Group recognises in the carrying amount of property, plant and equipment the cost of replacing part of such an asset when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to Santander Bank Polska S.A. Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.
Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated economic useful lives of each part of an item of property, plant and equipment.
The estimated economic useful lives are as follows:
· buildings: 22-40 years
· IT equipment: 3-5 years
· transportation means: 3-4 years
· other fixed assets: 3-14 years.
Right-of-use assets are depreciated on a straight basis overt the assets’s useful life.
Depreciation rates are verified annually. On the basis of this verification, depreciation periods might be changed.
Goodwill and Intangible assets
Goodwill
Goodwill as of the acquisition date measured as the excess of the consideration transferred over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities, contingent liabilities less impairment. Goodwill value is tested for impairment annually.
Licenses, patents, concessions and similar assets
Acquired computer software licenses are recognized on the basis of the costs incurred to acquire and bring to use the specific software.
Expenditures that are directly associated with the production of identifiable and unique software products controlled by Santander Bank Polska S.A. Group, and that will probably generate economic benefits exceeding expenditures beyond one year, are recognised as intangible assets.
Amortisation
Amortisation is charged to the income statement on a straight-line or degressive method (for intangible assets resulting from business combinations) over the estimated economic useful lives of intangible assets, which for the majority of intangibles equals to three years.
Amortisation rates are verified annually. On the basis of this verification, amortisation periods might be changed.
Leasing
Separating elements of the leasing contract
Lessee
Santander Bank Polska S.A. Group (the lessee) does not separate non-lease components from lease components, and instead accounts for each lease component and any associated non-lease components as a single lease component for each underlying asset class where it is not possible and where the share of non-lease components is not significant compared to total net lease payments.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
For a contract that contains a lease component and one or more additional lease or non-lease components, Santander Bank Polska S.A. Group (the lessor) allocates the consideration in the contract applying the provisions of the accounting policy in respect of revenue from contracts with customers.
Lease term
Santander Bank Polska S.A. Group determines the lease term as the non-cancellable period of a lease, together with both:
· periods covered by an option to extend the lease if the Santander Bank Polska S.A. Group (the lessee) is reasonably certain to exercise that option; and
· periods covered by an option to terminate the lease if the Santander Bank Polska S.A. Group (the lessee) is reasonably certain not to exercise that option.
The lease term is updated upon the occurrence of either a significant event or a significant change in circumstances.
Santander Bank Polska Group as the lessee
Recognition
At the commencement date, Santander Bank Polska Group (the lessee) recognises a right-of-use asset and a lease liability.
Recognition exemptions
Santander Bank Polska Group (the lessee) does not apply the recognition and measurement requirements arising from the accounting policy to:
· leases that have a leasing period of no more than 12 months at the start date; and
· leases for which the underlying asset is of low value (i.e. if the net value of a new asset is lower or equal to PLN 20,000).
In the case of short-term leases or leases for which the underlying asset is of low value, the Santander Bank Polska S.A. Group (the lessee) recognises the lease payments associated with those leases as an expense on a straight-line basis over the lease term.
Santander Bank Polska Group as the lessor
Classification of leases
Santander Bank Polska Group (the lessor) classifies each of its leases as either an operating lease or a finance lease.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.
Lease classification is made at the inception date and is reassessed only if there is a lease modification.
Other items of the statement of financial position
Other trade and other receivables
Trade receivables and other receivables payable within 12 months from the origination are measured at the initial recognition at par due to the immaterial effect of discounting. Trade receivables and other receivables payable within 12 months are at the balance sheet day recognised in the amount of the required payment less impairment loss.
Trade payables and other liabilities
Other liabilities payable within 12 months from the initial recognition are measured at par due to the immaterial effect of discounting. Like other liabilities payable within 12 months, trade payables are recognised at the balance sheet day in the amount of the payment due.
Equity
Equity comprises capital and funds created in accordance with applicable law, acts and the Articless of Association. Equity also includes retained earnings and prior year losses carried forward.
Share capital is stated at its nominal value in accordance with the Articles of Association and the entry in the court register.
Supplementary capital is created from profit allocations and share issue premiums.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Reserve capital is created from profit allocations and may be earmarked for covering balance sheet losses or dividend payment.
The result of valuation of management share-based incentive program is included in reserve capital (IFRS 2.53).
The supplementary, reserve, general banking risk fund and share premium are presented jointly under category “Other reserve funds”.
Revaluation reserve is comprised of adjustments relating to the valuation of financial assets measured at fair value through other comprehensive income and adjustments relating to the valuation of effective cash flow hedges taking into account deferred tax and actuarial gains from estimating provision for retirement. The revaluation reserve is not distributable.
Except for own equity, non-controlling interests are also recognised in Santander Bank Polska S.A. Group capital.
On derecognition of all or part of financial assets measured at fair value through other comprehensive income the total effects of periodical change in the fair value reflected in the revaluation reserve are reversed. The value of a given financial asset measured at fair value through other comprehensive income is increased or decreased by the whole amount or an adequate portion of the impairment allowance made previously. The effects of the fair value changes are removed from the revaluation reserve with a corresponding change in the income statement.
The net financial result for the accounting year is the profit disclosed in the income statement of the current year adjusted by the corporate income tax charge.
Custody services
Income from custody services is an element of the fee and commission income. The corresponding customer assets do not form part of Santander Bank Polska S.A. Group’s assets and as such are not disclosed in the consolidated statement of financial position.
Capital payments (Dividends)
Own dividends for a particular year, which have been approved by the General Meeting of Shareholders but not paid at the at the end of the reporting period are recognised as dividend liabilities in “other liabilities” item.
Provisions
A provision is recognised when Santander Bank Polska S.A. Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the amount is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Santander Bank Polska S.A. Group recognizes provisions for legal risk in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, where the estimated legal risk loss exceeds the gross value of the loan, and for settled loans,
Income statement
Net interest income
Santander Bank Polska S.A. Group presents the interest income recognised at the effective interest rate and credit-adjusted effective interest rate in separate lines of the income statement: “Interest income from financial assets measured at amortised cost” and “Interest income from assets measured at fair value through other comprehensive income”.
In turn, the interest income from financial assets which do not meet the contractual cash flows test is presented in line “Income similar to interest - financial assets measured at fair value through profit or loss”.
Net fee and commission income
Santander Bank Polska S.A. Group recognizes the fee and commission income that is not accounted for using the effective interest rate in such a manner so as to reflect the transfer of the goods or services promised to a customer in an amount reflecting the consideration to which it will be entitled in return for the goods or services in accordance with the 5 -stage model for recognizing income .
The Group identifies separate obligations to perform the service to which it assigns a transaction price. If the amount of remuneration is variable, the transaction price includes part or all of the variable remuneration to the extent that there is a high probability that there will be no refund of previously recognized revenues. Revenues equal to the transaction price are recognized when the service is performed or when it is performed by providing the customer with the promised good or service. The costs leading to the conclusion of the contract and the costs of performing the contract are activated and then systematically depreciated by the Group taking into account the period of transferring goods or services to the customer.
The significant commission income of the Santander Bank Polska S.A. Group includes:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
1. Fee and commission income from loans includes fees charged by Santander Bank Polska Group in respect of reminders, certificates, guarantees, debt collection activities as well as commitment fees. Due to its nature, the majority of such income is taken to profit or loss on a one-off basis, i.e. when a specific operation is performed for a customer. Other income, such as a guarantee fee, is settled over time during the term of an agreement with a customer.
2. Fee and commission income from credit cards includes fees in respect of card issuance, ATM withdrawals, issuance of a new card, generation of a credit card statement or activation of optional credit card-related services. The vast majority of income is recognised at a specific point in time, i.e. when a specific operation is performed for a customer. Fees in respect of additional services related to credit cards are recognised over time.
3. Income from asset management is recognised in accordance with a 5-step model based on the value of assets provided to Santander Bank Polska Group for management. Pursuant to the agreements in place, Santander Bank Polska Group does not receive any upfront fees or additional commissions calculated after the end of the accounting year on the basis of factors beyond the Santander Bank Polska S.A. Group’s control.
Gain/loss on derecognition of financial instruments measured at amortised cost
In the event of derecognition of an asset measured at amortized cost, Santander Bank Polska S.A. Group in this position presents the difference in value between financial instruments. The value of this item for 2024 relates almost entirely to settlements concluded for the portfolio of mortgage loans in foreign currencies. Upon concluding a settlement with a customer, the Group loses its rights to the foreign currency instrument and a new PLN instrument is created. In addition to settlements for the mortgage portfolio, this item presents significant modifications to other instruments like individual and corporate loans.
Costs of legal risk of mortgage loans in foreign currencies
This income statement line presents the total impact of the legal risk of mortgage loans denominated/indexed to foreign currencies and concerns mainly changes in the amount of the adjustment for legal risk reducing the gross carrying amount of the exposure and/or changes in the amount of the provision for legal risk, and court judgments.
Net income on bancassurance
For the selected loan products, where linkage to the insurance product has been identified, the Santander Bank Polska S.A. Group splits realised income into a portion recognised as interest income according to effective interest rate method and a portion recognised as fee income. The Santander Bank Polska S.A. Group qualifies distributed insurance products as linked to loans in particular if the insurance product influences contractual provisions of a loan.
To determine what part of income is an integral part of the credit agreement recognised as interest income using effective interest rate, the Santander Bank Polska S.A. Group separates the fair value of the financial instrument offered and the fair value of the intermediation service of insurance product sold together with such instrument. The portion that represents an element of the amortised cost of the financial instrument and the portion that represents remuneration for the agency services are split in proportion to the fair value of the financial instrument and the fair value of the agency service cost, respectively, relative to the sum of the two values.
The portion of income that is considered an agency fee for sales of an insurance product linked to a loan agreement is recognised by the Santander Bank Polska S.A. Group as fee income when the fee is charged for sales of an insurance product.
The Santander Bank Polska S.A. Group verifies the accuracy of the assumed allocation of different types of income at least annually.
Employee benefits
Short-term employee benefits
The Santander Bank Polska S.A. Group’s short-term employment benefits which include wages, bonuses, holiday pay and social insurance payments are recognised as an expense as incurred.
Long-term employee benefits
The Santander Bank Polska S.A. Group’s obligation in respect of long-term employee benefits is the amount of future benefits that employees have earned in return for their service in the current and prior periods. The accrual for retirement bonus is estimated using actuarial valuation method. The valuation of those provisions is updated at least once a year.
Equity-settled share-based payment transactions
For equity-settled share-based payment transactions, the entity measures the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the Santander Bank Polska S.A. Group cannot estimate reliably the fair value of the goods or services received, the Santander Bank Polska
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
S.A. Group measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.
Vesting conditions included in the terms of the grant are not taken into account in estimating fair value except where those terms are dependent on market conditions. Non-market vesting conditions are taken into account by adjusting the number of awards included in the measurement of the cost of employee services so that ultimately, the amount recognised in the income statement reflects the number of vested awards.
The expense related to share based payments is credited to shareholder’s equity. Where the share based payment arrangements give rise to the issue of new shares, the proceeds of issue of the shares are credited to share capital (nominal amount) and share premium (if any) when awards are exercised.
Incentive Program
The Group has implemented an incentive program (Incentive Program VII) for selected groups of Group employees (in particular material risk takers - MRT and management staff not eligible for this MRT group), under which remuneration is paid to eligible employees through the free transfer of own shares of Santander Bank Polska S.A. The program is classified in accordance with IFRS 2 as a share-based payment program settled in equity instruments. Employees acquire the right to remuneration in the form of own shares of Santander Bank Polska S.A. depends on conditions not directly related to the market price of these shares. Detailed conditions are described in note 55. The Group recognizes the cost of the program during the vesting period in correspondence with equity. During the vesting period, it recognizes an amount for the goods or services received, using the best available estimate of the number of equity instruments that will vest. The Group adjusts these estimates, if necessary, if subsequent information indicates that the number of equity instruments that will vest differs from previous estimates.
In order to implement the program in the above formula, the Group, after an appropriate decision at the General Meeting, purchases an appropriate number of own shares from the market from investors and at the market price for the needs of a given settlement cycle of the incentive program.
Cash-settled share-based payment transactions
For cash-settled share-based payment transactions, the Santander Bank Polska S.A. Group measures the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Santander Bank Polska S.A. Group remeasures the fair value of the liability at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period. The Santander Bank Polska S.A. Group recognises the services received, and a liability to pay for those services, as the employees render the service. The liability is measured, initially and at each reporting date until settled, at the fair value of the share appreciation rights, by applying an option pricing model, taking into account the terms and conditions on which the share appreciation rights were granted, and the extent to which the employees have rendered the service to that date.
Net trading income and revaluation
Net trading income and revaluation include profits and losses resulting from changes in fair value of financial assets and liabilities classified as held for trading that are measured at fair value through profit and loss. Interest cost and income related to the debt instruments are also reflected in the net interest income.
Dividend income
Dividends are taken to the income statement at the moment of acquiring rights to them by shareholders provided that it is probable that the economic benefits will flow to the Santander Bank Polska S.A. Group and the amount of income can be measured reliably.
Gain on disposal of subsidiaries, associates and joint ventures
Gain or loss on the sale of shares in subsidiaries is determined as the difference between the subsidiary’s net asset value adjusted for unwritten-off portion of goodwill and the sale price.
Gains or loss on other financial instruments
Gains or loss on other financial instruments include:
· gains and losses on disposal of equity instruments and debt instruments classified to the portfolio of financial assets measured at fair value through other comprehensive income; and
· changes in the fair value of hedged and hedging instruments, including ineffective portion of cash flow hedges.
Santander Bank Polska S.A. Group uses fair value hedge accounting and cash flow hedge accounting. Details are presented in Note 43 “Hedge accounting”.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Other operating income and other operating costs
Other operating income and cost include the cost of provisions for legal risk, as well as operating cost and income not directly related to the statutory activity of Santander Bank Polska S.A. Group, including i.e. revenues and cost from the sale and liquidation of fixed assets, revenues from the sale of other services, received and paid damages, penalties and fines.
Impairment losses on loans and advances
The line item “Net impairment losses on loans and advances” presents impairment losses on balance sheet and off-balance sheet exposures and the gains/losses on the sale of credit receivables.
Staff and general and administrative expenses
The “Staff expenses” line item presents the following costs:
· remuneration and social insurance (including pension benefit contributions);
· provisions for unused leaves;
· pension provisions;
· bonus provisions;
· the programme for variable components of remuneration paid to individuals holding managerial positions, a part of which is recognised as an obligation on account of share-based payment in cash, in accordance with IFRS 2 Share-Based Payment; and
· employee training and other salary and non-salary benefits for employees.
The line item “General and administrative expenses” presents the following costs:
· maintenance and lease of fixed assets;
· IT and telecommunication services;
· administrative activity;
· promotion and advertising;
· property protection;
· short term lease costs and low-value assets lease cost
· charges paid to the Bank Guarantee Fund, the Financial Supervision Authority, the National Depository of Securities;
· taxes and fees (property tax, payments to the National Fund for the Rehabilitation of the Disabled, municipal and administrative fees, perpetual usufruct fees);
· insurance;
· repairs not classified as fixed asset improvements.
Tax on financial institutions
Introduced by an act implemented on 1 February 2016, the tax on financial institutions is calculated on the excess of the entity’s total assets over the PLN 4 billion level; in the case of banks the excess results from the statement of turnover and balances at the end of each month. Banks are permitted to reduce the tax base by e.g. the value of own funds and the value of treasury securities. In addition, banks reduce the tax base by the value of assets purchased from the National Bank of Poland held as collateral for a refinancing credit facility granted by the latter. The tax rate for all tax payers is 0.0366% per month, and the tax is paid monthly by the 25th day of the month following the month it relates to.
Santander Bank Polska S.A. Group reports the tax charge under “Tax on financial institutions”, separately from the income tax charge.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Presentation of information about business segments in Santander Bank Polska Group bases on management information model which is used for preparing of reports for the Management Board, which are used to assess performance of results and allocate resources. Operational activity of Santander Bank Polska Group has been divided into five segments: Retail Banking, Business & Corporate Banking, Corporate & Investment Banking, ALM (Assets and Liabilities Management) and Centre, and Santander Consumer. They were identified based on customers and product types.
Profit before tax is a key measure which Management Board of the Bank uses to assess performance of business segments activity.
Income and costs assigned to a given segment are generated on sale and service of products or services in the segment, according to description presented below. Such income and costs are recognized in the profit and loss account for Santander Bank Polska Group and may be assigned to a given segment either directly or based on reasonable assumptions.
Interest and similar income split by business segments is assessed by Management Board of the Bank on the net basis including costs of internal transfer funds and without split by interests income and costs.
Settlements among business segments relate to rewarding for delivered services and include:
· sale and/or service of customers assigned to a given segment, via sale/service channels operated by another segment;
· sharing of income and costs on transactions in cases where a transaction is processed for a customer assigned to a different segment;
· sharing of income and cost of delivery of common projects.
Income and cost allocations are regulated by agreements between segments, which are based on single rates for specific services or breakdown of total income and/or cost.
Assets and liabilities of a given segment are used for the operational activity and may be assigned to the segment directly or on a reasonable basis.
Santander Bank Polska Group focuses its operating activity on the domestic market.
In 2024 customer resegmentation between business segments was introduced. Once a year, Santander Bank Polska Group carries out the resegmentation / migration of customers between operating segments which results from the fact that customer meets the criteria of assignment for different operating segment than before. This change is intended to provide services at the highest level of quality and tailored to individual needs or the scale of customer operations.
Comparable data are adjusted accordingly.
In the part regarding Santander Bank Polska, the cost of legal risk connected with the portfolio of FX mortgage were presented in Retail Banking segment. Simultaneously, in the part regarding Santander Consumer Bank, the cost of legal risk connected with the portfolio of FX mortgage loans were presented in the Santander Consumer segment. More details regarding the above provisions are described in the note 47.
The principles of income and cost identification, as well as assets and liabilities for segmental reporting purposes are consistent with the accounting policy applied in Santander Bank Polska Group
Retail Banking
Retail Banking generates income from the sale of products and services to personal customers and small companies. In the offer for customers of this segment there are a wide range of savings products, consumer and mortgage loans, credit and debit cards, insurance and investment products, clearing services, brokerage house services, GSM phones top-ups, foreign payments and Western Union and private-banking services. For small companies, the segment provides, among others, lending and deposit taking services, cash management services, leasing, factoring, letters of credit and guarantees. Furthermore, the Retail Banking segment generates income through offering asset management services within investment funds and private portfolios.
Business & Corporate Banking
Business & Corporate Banking segment covers products and activities targeted at business entities, local governments and the public sector, including medium companies. In addition to banking services covering lending and deposit activities, the segment provides services in the areas of cash management, leasing, factoring, trade financing and guarantees. It also covers insourcing services provided to retail customers based on mutual agreements with other banks and financial institutions.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 In thousands of PLN |
Corporate & Investment Banking
In the Corporate & Investment Banking segment, Santander Bank Polska Group derives income from the sale of products and services to the largest international and local corporations, including:
· transactional banking with such products as cash management, deposits, leasing, factoring, letters of credit, guarantees, bilateral lending and trade finance;
· lending, including project finance, syndicated facilities and bond issues;
· FX and interest rate risk management products provided to all the Bank’s customers (segment allocates revenues from this activity to other segments, the allocation level may be subject to changes in consecutive years);
· underwriting and financing of securities issues, financial advice and brokerage services for financial institutions.
Through its presence in the interbank market, segment also generates revenues from interest rate and FX risk positioning activity.
ALM and Centre
The segment covers central operations such as financing of other Group’s segments, including liquidity, interest rate risk and FX risk management. It also includes managing the Bank’s strategic investments and transactions generating income and/or costs that cannot be directly or reasonably assigned to a given segment.
Santander Consumer
This segment includes activities of the Santander Consumer Group. Activities of this segment focus on selling products and services addressed to both individual and business customers. This segment focuses mainly on loans products, i.e. car loans, credit cards, cash loans, installment loans and lease products. In addition, Santander Consumer segment includes term deposits and insurance products (mainly related to loans product.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Consolidated income statement by business segments
1.01.2024-31.12.2024 |
Segment Retail Banking * |
Segment Business and Corporate Banking |
Segment
Corporate& |
Segment ALM and Centre |
Segment Santander Consumer |
Total |
Net interest income |
8 211 150 |
2 339 366 |
774 474 |
943 455 |
1 604 771 |
13 873 216 |
incl. internal transactions |
(3 629) |
(8 521) |
28 760 |
68 660 |
(85 270) |
- |
Fee and commission income |
2 155 087 |
686 182 |
527 196 |
- |
220 532 |
3 588 997 |
Fee and commission expense |
(473 161) |
(58 092) |
(52 594) |
- |
(95 686) |
(679 533) |
Net fee and commission income |
1 681 926 |
628 090 |
474 602 |
- |
124 846 |
2 909 464 |
incl. internal transactions |
392 579 |
207 611 |
(597 083) |
- |
(3 107) |
- |
Net other income |
(47 198) |
71 100 |
287 832 |
(47 565) |
69 012 |
333 181 |
incl. internal transactions |
33 458 |
55 661 |
(84 548) |
147 |
(4 718) |
- |
Dividend income |
10 481 |
- |
5 187 |
- |
143 |
15 811 |
Operating costs |
(2 637 005) |
(693 108) |
(515 180) |
(61 874) |
(543 656) |
(4 450 823) |
incl. internal transactions |
- |
- |
- |
2 458 |
(2 458) |
- |
Depreciation/amortisation |
(421 964) |
(78 762) |
(41 267) |
- |
(72 211) |
(614 204) |
Impairment losses on loans and advances |
(400 854) |
(239 651) |
(83 516) |
1 774 |
(261 145) |
(983 392) |
Cost of legal risk associated with foreign currency mortgage loans |
(2 252 561) |
- |
- |
- |
(848 769) |
(3 101 330) |
Share in net profits (loss) of entities accounted for by the equity method |
100 443 |
- |
- |
1 854 |
- |
102 297 |
Tax on financial institutions |
(445 445) |
(180 501) |
(152 039) |
- |
(40 574) |
(818 559) |
Profit before tax |
3 798 973 |
1 846 534 |
750 093 |
837 644 |
32 417 |
7 265 661 |
Corporate income tax |
|
|
|
|
|
(2 020 864) |
Consolidated profit for the period |
|
|
|
|
|
5 244 797 |
of which: |
|
|
|
|
|
|
attributable to owners of the parent entity |
|
|
|
|
|
5 212 731 |
attributable to non-controlling interests |
|
|
|
|
|
32 066 |
* Includes individual customers, small companies and Wealth Management (private banking and Santander TFI SA)
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
1.01.2024-31.12.2024 |
Segment Retail Banking * |
Segment Business and Corporate Banking |
Segment Corporate& |
Segment ALM and Centre |
Segment Santander Consumer |
Total |
Fee and commission income |
2 155 087 |
686 182 |
527 196 |
- |
220 532 |
3 588 997 |
Electronic and payment services |
193 166 |
72 248 |
30 159 |
- |
- |
295 573 |
Current accounts and money transfer |
271 240 |
107 757 |
21 003 |
- |
1 270 |
401 270 |
Asset management fees |
291 063 |
556 |
595 |
- |
- |
292 214 |
Foreign exchange commissions |
397 482 |
205 738 |
267 836 |
- |
- |
871 056 |
Credit commissions incl. factoring commissions and other |
129 089 |
162 988 |
90 859 |
- |
76 552 |
459 488 |
Insurance commissions |
232 126 |
14 643 |
1 191 |
- |
83 916 |
331 876 |
Commissions from brokerage activities |
99 743 |
177 |
55 730 |
- |
- |
155 650 |
Credit cards |
88 780 |
- |
- |
- |
39 748 |
128 528 |
Card fees (debit cards) |
418 217 |
20 970 |
2 267 |
- |
- |
441 454 |
Off-balance sheet guarantee commissions |
2 942 |
97 542 |
41 920 |
- |
- |
142 404 |
Finance lease commissions |
11 072 |
2 271 |
182 |
- |
19 046 |
32 571 |
Issue arrangement fees |
- |
1 292 |
15 454 |
- |
- |
16 746 |
Distribution fees |
20 167 |
- |
- |
- |
- |
20 167 |
* Includes individual customers, small companies and Wealth Management (private banking and Santander TFI SA)
Consolidated statement of financial position by business segments
31.12.2024 |
Segment Retail Banking * |
Segment Business and Corporate Banking |
Segment
Corporate& |
Segment ALM and Centre |
Segment Santander Consumer |
Total |
Loans and advances to customers |
91 962 332 |
43 021 156 |
20 920 878 |
- |
18 871 915 |
174 776 281 |
Investments in associates |
917 135 |
- |
- |
50 074 |
- |
967 209 |
Other assets |
10 237 155 |
2 638 887 |
13 990 910 |
94 873 199 |
6 890 279 |
128 630 430 |
Total assets |
103 116 622 |
45 660 043 |
34 911 788 |
94 923 273 |
25 762 194 |
304 373 920 |
Deposits from customers |
149 506 043 |
49 858 414 |
15 572 278 |
1 034 835 |
16 057 192 |
232 028 762 |
Other liabilities |
2 039 413 |
445 779 |
7 891 161 |
22 133 957 |
5 393 662 |
37 903 972 |
Equity |
8 476 341 |
5 321 716 |
3 075 074 |
13 256 715 |
4 311 340 |
34 441 186 |
Total equity and liabilities |
160 021 797 |
55 625 909 |
26 538 513 |
36 425 507 |
25 762 194 |
304 373 920 |
* includes individual customers, small companies and Wealth Management (private banking and Santander TFI SA)
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Consolidated income statement by business segments
1.01.2022-31.12.2023 |
Segment Retail Banking * |
Segment Business and Corporate Banking |
Segment
Corporate& |
Segment ALM and Centre |
Segment Santander Consumer |
Total |
Net interest income |
7 595 121 |
2 358 885 |
884 682 |
935 904 |
1 341 307 |
13 115 899 |
incl. internal transactions |
(1 435) |
(6 222) |
9 840 |
109 075 |
(111 258) |
- |
Fee and commission income |
1 984 382 |
633 694 |
506 815 |
- |
206 670 |
3 331 561 |
Fee and commission expense |
(449 601) |
(45 284) |
(35 960) |
- |
(83 714) |
(614 559) |
Net fee and commission income |
1 534 781 |
588 410 |
470 855 |
- |
122 956 |
2 717 002 |
incl. internal transactions |
331 594 |
187 765 |
(516 308) |
- |
(3 051) |
- |
Net other income |
(296 738) |
79 320 |
225 594 |
84 397 |
55 334 |
147 907 |
incl. internal transactions |
13 303 |
61 161 |
(70 298) |
(4 173) |
7 |
- |
Dividend income |
10 109 |
- |
1 298 |
- |
64 |
11 471 |
Operating costs |
(2 556 071) |
(584 286) |
(465 560) |
(55 576) |
(484 025) |
(4 145 518) |
incl. internal transactions |
- |
- |
- |
3 336 |
(3 336) |
- |
Depreciation/amortisation |
(401 897) |
(64 598) |
(35 507) |
- |
(67 477) |
(569 479) |
Impairment losses on loans and advances |
(673 917) |
(159 804) |
(140 161) |
(3 120) |
(172 375) |
(1 149 377) |
Cost of legal risk associated with foreign currency mortgage loans |
(2 081 557) |
- |
- |
- |
(510 769) |
(2 592 326) |
Share in net profits (loss) of entities accounted for by the equity method |
95 449 |
- |
- |
1 488 |
- |
96 937 |
Tax on financial institutions |
(429 324) |
(182 154) |
(139 684) |
- |
(31 333) |
(782 495) |
Profit before tax |
2 795 956 |
2 035 773 |
801 517 |
963 093 |
253 682 |
6 850 021 |
Corporate income tax |
|
|
|
|
|
(1 902 192) |
Consolidated profit for the period |
|
|
|
|
|
4 947 829 |
of which: |
|
|
|
|
|
|
attributable to owners of the parent entity |
|
|
|
|
|
4 831 107 |
attributable to non-controlling interests |
|
|
|
|
|
116 722 |
* Includes individual customers, small companies and Wealth Management (private banking and Santander TFI SA)
1.01.2023-31.12.2023 |
Segment Retail Banking * |
Segment Business and Corporate Banking |
Segment Corporate& |
Segment ALM and Centre |
Segment Santander Consumer |
Total |
Fee and commission income |
1 984 381 |
633 695 |
506 815 |
- |
206 670 |
3 331 561 |
Electronic and payment services |
187 477 |
72 145 |
26 137 |
- |
- |
285 759 |
Current accounts and money transfer |
267 399 |
104 636 |
17 581 |
- |
1 515 |
391 131 |
Asset management fees |
235 052 |
397 |
602 |
- |
- |
236 051 |
Foreign exchange commissions |
328 010 |
190 622 |
242 587 |
- |
- |
761 219 |
Credit commissions incl. factoring commissions and other |
136 806 |
146 173 |
114 311 |
- |
64 882 |
462 172 |
Insurance commissions |
194 658 |
12 433 |
1 325 |
- |
73 337 |
281 753 |
Commissions from brokerage activities |
100 701 |
275 |
38 968 |
- |
- |
139 944 |
Credit cards |
90 732 |
- |
- |
- |
47 671 |
138 403 |
Card fees (debit cards) |
413 719 |
19 258 |
2 242 |
- |
- |
435 219 |
Off-balance sheet guarantee commissions |
4 080 |
83 626 |
43 450 |
- |
- |
131 156 |
Finance lease commissions |
10 473 |
2 230 |
239 |
- |
19 265 |
32 207 |
Issue arrangement fees |
- |
1 900 |
19 373 |
- |
- |
21 273 |
Distribution fees |
15 274 |
- |
- |
- |
- |
15 274 |
* Includes individual customers, small companies and Wealth Management (private banking and Santander TFI SA)
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Consolidated statement of financial position by business segments
31.12.2023 |
Segment Retail Banking * |
Segment Business and Corporate Banking |
Segment
Corporate& |
Segment ALM and Centre |
Segment Santander Consumer |
Total |
Loans and advances to customers |
84 893 427 |
38 330 970 |
19 132 818 |
- |
17 162 792 |
159 520 007 |
Investments in associates |
919 294 |
- |
- |
48 220 |
- |
967 514 |
Other assets |
8 641 898 |
1 831 172 |
11 036 611 |
88 140 779 |
6 513 904 |
116 164 364 |
Total assets |
94 454 619 |
40 162 142 |
30 169 429 |
88 188 999 |
23 676 696 |
276 651 885 |
Deposits from customers |
134 149 686 |
43 948 874 |
14 368 922 |
3 121 993 |
13 687 881 |
209 277 356 |
Other liabilities |
1 817 793 |
877 596 |
7 300 332 |
18 105 609 |
5 582 181 |
33 683 511 |
Equity |
7 142 735 |
4 630 300 |
3 022 436 |
14 488 913 |
4 406 634 |
33 691 018 |
Total equity and liabilities |
143 110 214 |
49 456 770 |
24 691 690 |
35 716 515 |
23 676 696 |
276 651 885 |
* includes individual customers, small companies and Wealth Management (private banking and Santander TFI SA).
Santander Bank Polska Group is exposed to a variety of risks in its ordinary business activities. The objective of risk management is to ensure that the Group takes risk in a responsible and controlled manner when maximising the value for shareholders. Risk is a possibility of materialisation of events impacting the achievement of the Group’s strategic goals.
Risk management policies are designed to identify and measure risk, define the most profitable return within the accepted risk level (risk-reward), and to continually set and verify appropriate risk mitigation limits. Santander Bank Polska Group modifies and develops risk management methods on an ongoing basis, taking into consideration changes in the Group’s risk profile, economic environment, regulatory requirements and best market practice.
The Management Board and Supervisory Board set the business direction and actively support the risk management strategies. This is achieved by defining the risk management and risk appetite strategy, as well as approving the key risk management policies, participation of the Management Board Members in the risk management committees, reviewing and signing off on the key risks and risk reports.
The Supervisory Board continuously oversees the risk management system. The Supervisory Board approves the strategy, key risk management policies and risk appetite, and monitors the use of internal limits in relation to the current business strategy and macroeconomic environment. It conducts the reviews of the key risk areas, the identification of threats and the process of defining and monitoring remedial actions. The Supervisory Board assesses if the control activities performed by the Management Board are effective and aligned with the Supervisory Board’s policy. The assessment also includes the risk management system.
The Audit and Compliance Committee supports the Supervisory Board in fulfilment of its oversight obligations. The Committee performs annual reviews of the Group’s financial controls, and receives reports from the independent audit function and the compliance function. The Committee also receives regular quarterly reports on the degree of implementation of post-audit recommendations, and on that basis evaluates the quality of the actions taken. The Committee assesses the effectiveness of internal control system and risk management system. Moreover, the Audit Committee monitors financial audits, in particular inspections carried out by the audit company, controls, monitors and assesses independence of the chartered auditor and audit company, and reports the outcomes of inspections to the Supervisory Board. In addition, the Committee develops the policy and procedure for selecting the audit company and to present to the Supervisory Board the recommendations on election, re-election and recalling of External Auditor and on the External Auditor’s fee.
The Risk Committee supports the Supervisory Board in assessing the effectiveness of the internal control and risk management systems and measures adopted and planned to ensure an effective management of material risks.
Moreover, the Supervisory Board in the Bank is also supported by the Remuneration Committee and the Nominations Committee, however outside the risk management area.
The Management Board is responsible for the effectiveness of risk management. In particular, it introduces the organisational structure aligned with the level and profile of the risk being undertaken, split of the responsibilities providing the separation of the risk measurement and control function from the operational activity, implements and updates the written risk management strategies, and
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
ensures transparency of the activities. The Management Board reviews the financial results of the Group. It established a number of committees which are directly responsible for the development of the risk management methodology and monitoring of risk levels in particular areas.
The Bank’s Management Board also manages the risk through its committees: the Risk Management Committee and the Risk Control Committee.
The Risk Management Committee (RMC) ratifies the key credit decisions (above specific decision-making thresholds), approves annual limits for securities trading and ALM transactions, and signs-off on the risk assessment models plan.
The Risk Control Committee monitors the risk level across different areas of the bank’s operations and supervises the activities of lower-level risk management committees set up by the Management Board. These committees, acting within the respective remits defined by the Management Board, are directly responsible for developing risk management methods and monitoring risk levels in specific areas.
The Risk Control Committee supervises the activities of the below-listed committees operating in the risk management field:
Credit Risk Committee, which approves and supervises the risk management policy and risk measurement methodology as well as monitors credit risk of cpnsolidated credit portfolio or in cases pertaining to more than one business segment;
Credit Policy Forum for Retail Portfolios/ SME Portfolios/ Business and Corporate Loans Portfolios, which are authorised to approve and supervise the the risk measurement policy and methodology, and monitoring credit risk only in relation to their respective business segments.
The Credit Committee takes credit decisions within the assigned lending discretions.
The Provisions Committee which takes decisions on impairment charges in an individual and collective approachfor credit exposures, as well as other financial instruments and assets and on legal risk provisions. Moreover, the Committee monitors credit loss allowances, reviews the adequacy of parameters applied when setting the impairment in an individual and collective approach for Santander Bank Polska Group, excluding Santander Consumer Bank S.A., and takes decisions about debts sales.
The Recovery Committee takes decisions as to the dealing with borrowers in distress, including with respect to the relationship management strategy, approval of the causes of loss analysis and monitoring of the portfolio and effectiveness of recovery processes.
Market and Investment Risk Committee, which approves and supervises the risk management policy and risk measurement methodology as well as monitors market risk in the banking book, market risk in the trading book, structural risk for the balance sheet, liquidity risk and investment risk;
Model Risk Management Committee, which is responsible for model risk management as well as supervises the methodology of models used in Santander Bank Polska S.A. Group;
The Information Management Committee is responsible for the quality and organisation of data related to risk management and other areas of the bank’s operations.
The Operational Risk Management Committee (ORMCo) monitors the level, sets the direction for strategic operational risk actions in Santander Bank Polska Group in the area of business continuity, information security and fraud prevention.
Suppliers Panel establishes standards and carries out monitoring regarding providers and services, incl. outsourcing; main forum for discussion on risk resulting from the cooperation with suppliers.
The Assets and Liabilities Management Committee supervises the activity on the bank’s and the Group’s banking book, manages liquidity and interest rate risk in the banking book and is responsible for the funding and balance sheet management, including for the pricing policy.
Liquidity Forum monitors liquidity position of the Bank, with a special focus on the dynamics of deposit and credit volumes, the Bank’s needs for financing and the general market situation.
The Capital Committee is responsible for capital management, in particular the ICAAP.
The Disclosure Committee verifies if the financial information published by Santander Bank Polska Group meets the legal and regulatory requirements.
The Local Marketing and Monitoring Committee approves new products and services to be implemented in the market, taking into account the reputation risk analysis.
The Compliance Committee is responsible for setting standards with respect to the management of compliance risk and the codes of conduct adopted by the Group.
The Anti-Money Laundering and Counter-Terrorism Financing Committee approves the bank’s policy on prevention of money laundering and the financing of terrorism. It approves and monitors the Group’s activities in this area.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
The ESG Committee is the main forum to discuss issues concerning responsible banking, sustainable development, ESG and corporate culture. It sets the direction of strategic activities and monitors the related objectives. As part of the Committee, the ESG Forum has been established to analyse challenges, opportunities and risks related to the EU Sustainable Finance agenda, including ESG risks, plan activities and coordinate their implementation at the Bank, and to submit regular reports to the Responsible Banking and Corporate Culture Committee and the Bank’s Management Board.
The chart below presents the corporate governance in relation to the risk management process.
.
The Bank has dedicated committees which are convened in crisis situations:
Gold Committee, which takes decisions in crisis situations affecting Santander Bank Polska Group: it recommends the Management Board to activate the Recovery Plan, activates liquidity and capital contingency plans, and activates business continuity plans and the communication plan (if not already implemented).
Silver Committee, the main special situations governance body following the activation of the contingency situation, which assesses the impact of that situation and coordinates activities as part of the special situation management, activates action plans (e.g. business continuity plans) and BAU restoration procedures, and draws lessons learned after the special situation is resolved.
Bronze Group, which is responsible for the identification of and prompt response to threats or events that may pose a risk to the normal functioning of the Subsidiary and/or the Group. It identifies new threats in cooperation with the committees which manage risks on a daily basis.
Risk management is in line with the risk profile resulting from risk. At Santander Bank Polska Group, risk appetite is expressed as quantitative limits and captured in the “Risk Appetite Statement” adopted by the Management Board and approved by the Supervisory Board. Those limits are used to set watch limits and shape risk management policies.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
The Group continuously analyses the risks, identifies their sources, creates the relevant risk management mechanisms including among others the measurement, control, mitigation and reporting. The key risks the Group is exposed to include:
· credit risk
· concentration risk
· market risk in the banking book and trading book
· liquidity risk
· operational risk,
· compliance risk.
The key rules, roles and responsibilities of the Group companies are set out in relevant internal policies relating to the management of individual risk types.
Santander Bank Polska Group pays special attention to the consistency of risk management processes across the Group, which ensures adequate control of the risk exposure. The subsidiaries implement risk management policies and procedures reflecting the principles adopted by Santander Bank Polska Group.
Acting under the applicable law, the bank exercises oversight of risk management in Santander Consumer Bank S.A. in line with the same oversight rules as applied to other Santander Bank Polska Group companies. The bank’s representatives on the Supervisory Board of Santander Consumer Bank S.A. are: the Management Board member in charge of the Risk Management Division and the Management Board member in charge of the Retail Banking Division they are responsible for supervision over Santander Consumer Bank S.A. and they ensure, together with the company’s Supervisory Board, that the company operates in line with adopted plans and operational security procedures. The bank monitors the profile and level of Santander Consumer Bank S.A. risk via risk management committees of Santander Bank Polska S.A.
From the point of view of negative impact of those risks on society, environment, employees, human rights and anti-corruption measures, particular importance is attached to operational risk, compliance risk and reputational risk. In addition, the bank has identified social and environmental risks (including climate risks) related to financing customers from sensitive sectors.
Credit risk
Santander Bank Polska Group’s credit activities focus on growing a high quality loan book with a good quality, a good yield and customer satisfaction.
Credit activity includes all products subject to credit risk (credit facilities), originated by the Bank or its leasing and factoring subsidiaries.
Credit risk is defined as the possibility of suffering a loss as a result that a borrower will fail to meet its credit obligation, including interest and fees. Credit risk arises from the impairment of credit assets and contingent liabilities, resulting from worsening of the borrower’s credit quality. Credit risk measurement is based on the estimation of credit risk weighted assets, with the relevant risk weights representing both the probability of default and the potential loss given default of the borrower.
Credit risk in Santander Bank Polska Group arises mainly from lending activities on the retail, SME, business, corporate segments and interbank markets. This risk is manager as part of the policy approved by the Management Board on the basis of the adopted credit procedures as well as on the basis of discretionary limits allocated to individual credit officers based on their knowledge and experience. The Group’s internal system of credit grading and monitoring allows for an early identification of likely defaults that might impair the loan book. Additionally the Group uses large set of credit risk mitigation tools, both collaterals (financial and non-financial) and specific credit provisions and clauses (covenants).
The Group continues to develop and implement risk based methods of grading loans, allocating capital and measuring returns. Risk valuation models are used for all credit portfolios.
The Group regularly reviews processes and procedures for measurement, management and monitoring of the Bank’s credit portfolio risk, adjusting them to the amended laws and regulatory requirements, especially to the KNF recommendations and the EBA guidelines.
Impact of the geopolitical situation (including the conflict in Ukraine) on credit risk measurement
In 2024, the Group continued to thoroughly analyse developments in the macroeconomic environment and monitored credit exposures in individual customer segments and sectors in order to promptly and duly align the credit policy parameters where required.
In 2024, the Group focused on the analysis of potential impact of the geopolitical situation and the changing macroeconomic environment on customers’ standing. The analysis of macroeconomic factors covered in particular inflation and interest rates, exchange rates, as well as gas and energy prices. The Group closely monitored risk indicators of individual credit portfolios and analysed the sensitivity of customers’ risk profile to changes in the economic and geopolitical environment. In addition, credit portfolios were stress tested in terms of the impact of individual factors and their combination. The Group closely monitored the portfolio of customers doing business in Ukraine, Russia, Belarus or Israeli and/or cooperating with companies from those countries, as well as the credit portfolio of
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
customers affected by the negative effects of the flood. These risks were reflected through modifications to the ratings of entities, which directly translated into the level of provisions for expected credit losses. An appropriate strategy was applied to identified clients.
The overall quality of the credit portfolio is still assessed as satisfactory.
As part of regular reviews of ECL parameter models, the Group takes into account the latest macroeconomic projections, using its predictive models based on historical observations of relationships between those variables and risk parameters. ECL parameters were last updated in Q4 2024 to account for the impact of the geopolitical situation on the current economic situation and macroeconomic projections. The values of macroeconomic indicators included in the calculation of ECLs are presented in section ‘Allowances for expected credit losses in respect of financial assets’.
Credit risk management committees
Consolidated credit risk oversight at Santander Bank Polska Group is performed by the Credit Risk Committee (CRC). Its key responsibilities include development and approval of the best sectoral practice, industry analyses, credit policies, individual credit discretion systems and risks grading systems. The CRC also receives advanced credit portfolio analyses and recommends to the Management Board credit risk appetite limits to ensure balanced and safe growth of the credit portfolio.
The Bank also has three committees referred to as Credit Policy Forums, which deal with the key customer segments: retail segment, SME segment and the business/ corporate segment. These committees are responsible for shaping the credit policy and processes within their respective segments. If needed, their decisions may be escalated to the Credit Risk Committee.
In turn, oversight over credit risk models and the risk valuation methodology is the responsibility of the Models Risk Management Committee.
Risk Management Division
The Risk Management Division is responsible for a consolidated credit risk management process, including management and supervision of credit delivery, defining credit policies, providing decision-making tools and credit risk measurement tools, quality assurance of the credit portfolio and provision of reliable management information on the credit portfolio.
Credit Policies
Credit policies refer to particular business segments, loan portfolios and banking products. They contain guidelines for the identification of the areas where specific types of risks manifest themselves, specifying the methods of their measurement and mitigation to the level acceptable to the bank (e.g. “Loan-to-Value” ratios, FX risk in the case of foreign currency loans).
The Group reviews and updates its credit policies on a regular basis, aiming to bring them in line with the Group’s strategy, current macroeconomic situation, legal developments and changes in regulatory requirements.
Credit Decision Making Process
As part of risk management, the credit decision making process is based upon individual credit discretions commensurate with employees’ knowledge and experience in relation to individual business segments. Exposures in excess of PLN 50m are referred to the Credit Committee composed of senior managers. Transactions above stated thresholds (from PLN 115m to PLN 460m), depending on the transaction type) are additionally signed off by the Management Board’s Risk Management Committee.
The Group strives to provide credit service of the highest quality while satisfying the borrowers’ expectations and ensuring security of the credit portfolio. To this end, the existing system of credit discretions ensures segregation of the credit risk approval function from the sales function.
Credit Grading
Santander Bank Polska Group develops its credit risk assessment tools, adapting them to the KNF’s guidelines, International Accounting Standards/ International Financial Reporting Standards (IAS/IFRS) and best market practice.
The Group uses credit risk grading models for most credit portfolios, including corporate customers, SMEs, home loans, property loans, cash loans, credit cards and personal overdrafts.
The Group monitors credit grading in accordance with the rules described in the lending manuals. Additionally, for selected models, credit grade is automatically verified based on the number of days past due or an analysis of behavioural factors. Credit grade is also verified at subsequent credit assessments.
Credit Reviews
The Group performs regular reviews to determine the actual quality of the credit portfolio, confirm that adequate credit grading and provisioning processes are in place, verify compliance with the procedures and credit decisions and to objectively assess professionalism
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
in credit management. The reviews are performed by the two specialised units: Credit Review Department and the Control Department, which are independent of the risk-taking units.
Collateral
In the Group’s security model, the Collateral and Credit Agreements Department is the central unit responsible for creation and maintenance of securities. The Security Manual as a procedure describing legal standards for the application of collateral security is managed by the Legal and Compliance Division. The Collateral and Credit Agreements Department is the owner of the security contract templates.
The role of the department is to ensure that security covers are duly established and held effective in line with the lending policy for all business segments. The unit is also responsible for developing standardised internal procedures with respect to perfecting and maintaining validity of collateral as well as ensuring that establishment, monitoring and release of security covers is duly effected.
Furthermore, the Collateral and Credit Agreements Department provides assistance to credit units in credit decision making and development of credit policies with respect to collateral. The unit gathers data on collateral and ensures appropriate management information. The tables below show types of collateral that can be used to secure loans and advances to customers from non-banking sector.
Retail customers
Type of loan/receivables |
Type of collateral |
Cash loan |
bills, guarantees, credit insurance |
Credit on liquid assets |
guaranty deposit, amounts frozen on account, investment funds |
Student loan |
sureties |
Housing loan |
mortgage, credit insurance, transfer of claim |
Leasing |
bills, guarantees, transfer of rights to bank’s account; court registered pledge on movables; transfer of ownership, mortgage, obligation of the leased asset supplier to buy the asset back (buy-back guarantee) |
Business customers
Type of loan/receivables |
Type of collateral |
Commercial credit |
guaranty deposit, registered pledge, bills |
Revolving credit |
assignment of credit, bills, guarantees, registered pledge |
Building credit |
mortgage |
Investment credit |
mortgage, sureties, warranty |
Granted and with supplements |
guarantees, warranty |
Leasing |
bills, guarantees, transfer of rights to bank’s account; court registered pledge on movables; transfer of ownership, mortgage, obligation of the leased asset supplier to buy the asset back (buy-back guarantee) |
Collateral management process
Before a credit decision is approved, in the situations provided for in internal regulations, the Collateral and Credit Agreements Department assesses the collateral quality and value, a process that includes:
· verification of the security valuation prepared by external valuers, and assessment of the security value for business loans,
· assessment of the legal status of the security for business loans,
· assessment of the investment process for the properties,
· seeking legal advises on the proposed securities.
The Collateral and Credit Agreements Department actively participates in credit processes, executing tasks including:
· verification of signed collateral documentation received from law firms, whether complete and compliant with the Bank’s internal procedures (verification carried out before or immediately after disbursement);
· registration and verification of the data in information systems,
· collateral monitoring and reporting,
· reporting on the status of collateral by segments
· releasing of the security.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
In managing its receivables, Santander Bank Polska Group carries out the process of collateral execution. Selection of proper action towards execution of specific collateral depends on the type of the collateral (personal or tangible). In principle the Group aims at voluntary proceedings in the course of collateral execution. When there is no evidence of cooperation with a collateral provider, the Group’s rights are fulfilled in compliance with the law and internal regulations in the bankruptcy and enforcement proceedings.
Financial effect of the collateral
The financial effect of the accepted collateral was calculated as a change in the credit loss allowance as a result of exclusion of the cash flow from collateral (non-performing exposures are assessed on an case-by-case basis). For other portfolios (mortgage, SME and corporate loans), this effect was calculated by adjusting the LGD parameter to the level observed for particular clients on unsecured products.
The table below present financial effect of collateral of Santander Bank Polska Group as at 31.12.2024:
31.12.2024 |
|
|
|
Financial effect of collateral |
Gross Amount |
Allowance for impairment |
Financial effect of collateral |
Loans and advances to customers |
|
|
|
individuals |
32 819 721 |
(2 397 731) |
( 5 244) |
housing loans |
55 931 181 |
(416 229) |
( 871 300) |
business |
69 736 432 |
(2 214 157) |
(1 284 473) |
Total balance sheet |
158 487 334 |
(5 028 117) |
(2 161 017) |
Total off-balance sheet |
46 005 445 |
(93 919) |
(46 047) |
The table below present financial effect of collateral of Santander Bank Polska Group as at 31.12.2023:
31.12.2023 |
|
|
|
Financial effect of collateral |
Gross Amount |
Allowance for impairment |
Financial effect of collateral |
Loans and advances to customers |
|
|
|
individuals |
29 953 235 |
(2 394 403) |
( 9 396) |
housing loans |
53 014 143 |
(508 248) |
( 735 737) |
business |
64 802 496 |
(2 261 980) |
(1 333 152) |
Total balance sheet |
147 769 874 |
(5 164 631) |
(2 078 285 |
Total off-balance sheet |
41 675 422 |
(123 085) |
(43 769) |
Credit risk stress testing
Stress testing is a part of the credit risk management process used to evaluate potential effects of specific events or movement of a set of financial and macroeconomic variables or change in risk profile on Santander Bank Polska Group’s condition. Stress tests are composed of assessment of potential changes in credit portfolio quality when faced with adverse conditions. The process also delivers management information about adequacy of agreed limits and internal capital allocation.
Impairment calculation
Santander Bank Polska Group makes impairment allowances in accordance with International Financial Reporting Standard 9 (IFRS 9). IFRS 9 introduced a new approach to the estimation of allowances for credit losses. The approach is based on estimation of the expected credit loss (ECL). ECL allowances reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money; and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. ECL allowances are measured at an amount equal to a 12-month ECL or the lifetime ECL, when it is deemed there has been a significant increase in credit risk since initial recognition. Accordingly, the ECL model gives rise to measurement uncertainty, especially in relation to:
· measurement of a 12-month ECL or the lifetime ECL;
· determination of when a significant increase in credit risk occurred;
· determination of any forward-looking events reflected in ECL estimation, and their likelihood.
In accordance with IFRS 9, the recognition of expected credit losses will depend on changes in risk after recognition of the exposure. The standard introduces three main stages for recognising expected credit losses:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
· Stage 1 – exposures with no significant increase in risk since initial recognition, i.e. the likelihood of the exposure being downgraded to the impaired portfolio (Stage 3 exposures) has not increased. For such exposures, 12-month expected credit losses will be recognised.
· Stage 2 – exposures with a significant increase in risk since initial recognition, but with no objective evidence of default. For such exposures, lifetime expected credit losses will be recognised.
· Stage 3: exposures for which the risk of default has materialised (indications of impairment have been identified). For such exposures, lifetime expected credit losses will be recognised.
The basis for classification into stages are described in Note 2.5, including the changes introduced by the Bank in 2024 (introduction of new grounds for a significant increase in risk).
Lifetime expected losses are recognised also for the exposures classified as POCI (purchased or originated credit-impaired). Such an asset is created when an impaired asset is recognized, and the POCI classification is maintained throughout the life of the asset.
In the case of classification into stage 3, the Group applies objective indications of impairment, as defined in accordance with the Basel Committee’s recommendations and Recommendation R from KNF and EBA.
The rules for including past due in the identification of default are in line with the EBA Guidelines on the application of the definition of default and with the Regulation of the Minister of Finance, Investments and Development on the materiality level of past due credit obligations.
The Group estimates ECL using both an individual approach (for individually significant exposures with objectively evidenced impairment [stage 3]) and collective approach (individually insignificant exposures with objectively evidenced impairment, and incurred but not reported losses).
The Group on a regular basis recalibrates its models and updates the forward-looking information used for estimating ECL, taking into account the impact of changes in economic conditions, modifications of the Group’s credit policies and recovery strategies, which is designed to ensure appropriate level of impairment allowances.
The tables below present Santander Bank Polska Group’s exposure to credit risk.
Assets have been classified into respective risk grades based on the one-year probability of default arising from current credit rating (business customers) or score (personal customers) used for the purpose of business processes or, if not available, based on the one-year probability of default used for calculation of expected credit losses.
The tables below present the quality of financial assets of Santander Bank Polska Group broken down into risk groups as at 31.12.2024 and in the comparative period. The portfolio consists of loans and advances to clients and leasing portfolio.
31.12.2024 |
|
Loans and advances to individuals |
Loans and advances to individuals- mortgage loans |
Loans and advances to enterprises and lease receivables |
|||
|
PD range |
Balance sheet exposures gross |
Off-balance sheet exposures |
Balance sheet exposures gross |
Off-balance sheet exposures |
Balance sheet exposures gross |
Off-balance sheet exposures |
Stage 1 |
from 0,00% to <0,15% |
1 961 649 |
1 610 453 |
37 307 470 |
950 346 |
4 932 665 |
16 373 562 |
from 0,15% to <0,25% |
753 113 |
239 679 |
945 813 |
275 |
5 274 593 |
5 461 705 |
|
from 0,25% to <0,50% |
1 708 288 |
1 500 293 |
6 031 833 |
125 450 |
21 088 545 |
10 079 884 |
|
from 0,50% to <0,75% |
3 232 817 |
137 640 |
1 502 744 |
12 051 |
11 305 826 |
9 170 744 |
|
from 0,75% to <2,50% |
14 482 562 |
870 276 |
1 668 626 |
13 943 |
22 333 410 |
11 409 471 |
|
from 2,50% to <10,0% |
6 417 351 |
168 543 |
407 340 |
1 675 |
6 447 148 |
1 625 465 |
|
from 10,0% to <45,0% |
534 552 |
22 505 |
390 |
- |
688 592 |
7 419 |
|
|
from 45,0% to <100,0% |
21 267 |
775 |
- |
- |
15 893 |
5 |
|
Total Stage 1 |
29 111 598 |
4 550 165 |
47 864 215 |
1 103 739 |
72 086 672 |
54 128 253 |
Stage 2 |
from 0,00% to <0,15% |
203 767 |
34 137 |
4 406 928 |
- |
44 034 |
413 |
from 0,15% to <0,25% |
79 802 |
52 300 |
118 328 |
- |
308 213 |
25 709 |
|
from 0,25% to <0,50% |
123 675 |
3 290 |
1 025 842 |
- |
788 704 |
29 663 |
|
from 0,50% to <0,75% |
439 943 |
231 265 |
303 405 |
65 |
881 107 |
117 879 |
|
from 0,75% to <2,50% |
1 918 405 |
43 620 |
369 376 |
12 263 |
2 212 084 |
400 544 |
|
from 2,50% to <10,0% |
842 649 |
38 497 |
139 781 |
107 974 |
1 539 169 |
608 241 |
|
from 10,0% to <45,0% |
195 069 |
152 |
5 162 |
60 |
1 190 857 |
23 586 |
|
from 45,0% to <100,0% |
184 756 |
- |
311 |
- |
35 702 |
- |
|
|
Total Stage 2 |
3 988 067 |
403 260 |
6 369 133 |
120 362 |
6 999 870 |
1 206 035 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Default period |
EAD after credit risk mitigation and credit conversion factor applied |
|||
|
Loans and advances to individuals |
Loans and advances to individuals- mortgage loans |
Loans and advances to enterprises and lease receivables |
|
Stage 3 |
up to 12 months |
1 384 235 |
257 024 |
2 014 155 |
from 13 to 24 months |
659 224 |
213 725 |
809 536 |
|
from 25 to 36 months |
260 624 |
142 901 |
362 361 |
|
from 37 to 48 months |
123 784 |
61 197 |
181 042 |
|
from 49 to 60 months |
79 438 |
29 065 |
157 914 |
|
from 61 to 84 months |
118 384 |
63 345 |
196 976 |
|
|
above 84 months |
79 059 |
61 449 |
316 165 |
POCI |
up to 12 months |
43 591 |
7 028 |
67 204 |
from 13 to 24 months |
28 909 |
5 604 |
76 020 |
|
from 25 to 36 months |
20 560 |
13 223 |
75 148 |
|
from 37 to 48 months |
9 022 |
10 449 |
58 894 |
|
from 49 to 60 months |
3 506 |
2 721 |
18 887 |
|
from 61 to 84 months |
6 063 |
6 806 |
149 182 |
|
|
above 84 months |
24 273 |
45 934 |
32 912 |
31.12.2023 |
|
Loans and advances to individuals |
Loans and advances to individuals- mortgage loans |
Loans and advances to enterprises and lease receivables |
|||
|
PD range |
Balance sheet exposures gross |
Off-balance sheet exposures |
Balance sheet exposures gross |
Off-balance sheet exposures |
Balance sheet exposures gross |
Off-balance sheet exposures |
Stage 1 |
from 0,00% to <0,15% |
2 495 584 |
2 609 449 |
35 296 301 |
798 710 |
6 239 392 |
8 259 836 |
from 0,15% to <0,25% |
1 165 681 |
678 513 |
1 504 114 |
70 |
6 181 256 |
3 018 705 |
|
from 0,25% to <0,50% |
1 580 956 |
63 665 |
7 447 713 |
116 796 |
20 192 995 |
8 828 527 |
|
from 0,50% to <0,75% |
3 895 229 |
386 626 |
1 986 711 |
56 034 |
11 311 276 |
5 935 325 |
|
from 0,75% to <2,50% |
12 612 568 |
499 931 |
2 053 314 |
37 048 |
18 516 398 |
8 189 153 |
|
from 2,50% to <10,0% |
4 544 646 |
156 112 |
553 110 |
23 627 |
4 744 457 |
1 035 759 |
|
from 10,0% to <45,0% |
443 959 |
17 327 |
319 |
- |
2 221 942 |
10 321 |
|
|
from 45,0% to <100,0% |
6 940 |
38 |
- |
- |
10 549 |
111 |
|
Total Stage 1 |
26 745 563 |
4 411 661 |
48 841 581 |
1 032 285 |
69 418 265 |
35 277 737 |
Stage 2 |
from 0,00% to <0,15% |
43 576 |
2 140 |
513 720 |
- |
33 931 |
3 841 |
from 0,15% to <0,25% |
39 765 |
1 951 |
66 665 |
- |
244 102 |
442 |
|
from 0,25% to <0,50% |
61 564 |
2 819 |
375 898 |
- |
372 648 |
- |
|
from 0,50% to <0,75% |
174 905 |
4 358 |
83 966 |
- |
732 369 |
45 873 |
|
from 0,75% to <2,50% |
720 081 |
15 066 |
198 449 |
1 755 |
1 602 264 |
149 682 |
|
from 2,50% to <10,0% |
636 139 |
26 888 |
148 452 |
7 391 |
1 302 235 |
332 752 |
|
from 10,0% to <45,0% |
224 469 |
155 |
5 127 |
73 |
973 412 |
63 264 |
|
|
from 45,0% to <100,0% |
87 266 |
- |
115 |
- |
62 462 |
- |
|
Total Stage 2 |
1 987 765 |
53 377 |
1 392 392 |
9 219 |
5 323 423 |
595 854 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Default period |
EAD after credit risk mitigation and credit conversion factor applied |
|||
|
Loans and advances to individuals |
Loans and advances to individuals- mortgage loans |
Loans and advances to enterprises and lease receivables |
|
Stage 3 |
up to 12 months |
1 290 376 |
377 525 |
1 320 400 |
from 13 to 24 months |
509 085 |
222 302 |
668 876 |
|
from 25 to 36 months |
293 707 |
106 263 |
333 250 |
|
from 37 to 48 months |
186 950 |
61 573 |
259 957 |
|
from 49 to 60 months |
118 220 |
72 601 |
264 164 |
|
from 61 to 84 months |
87 848 |
88 878 |
123 776 |
|
|
above 84 months |
27 342 |
76 695 |
387 568 |
POCI |
up to 12 months |
54 136 |
13 007 |
78 844 |
from 13 to 24 months |
46 547 |
38 899 |
240 088 |
|
from 25 to 36 months |
13 273 |
16 563 |
64 252 |
|
from 37 to 48 months |
4 465 |
4 241 |
24 935 |
|
from 49 to 60 months |
2 080 |
5 409 |
126 528 |
|
from 61 to 84 months |
19 050 |
14 099 |
42 867 |
|
|
above 84 months |
47 821 |
71 340 |
50 913 |
The tables below present the quality of ‘Loans and advances to business customers measured at fait value through other comprehensive income’ broken down into stages as at 31.12.2024 and in the comparative period:
Loans and advances to customers measured at fair value through OCI |
|||||
31.12.2024 |
PD range |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
|
|
|
|
|
|
from 0,00 do <0,15% |
446 198 |
- |
- |
446 198 |
|
from 0,15 do <0,25% |
391 709 |
- |
- |
391 709 |
|
from 0,25 do <0,50% |
1 359 639 |
- |
- |
1 359 639 |
|
from 0,50 do <0,75% |
812 642 |
126 106 |
- |
938 748 |
|
from 0,75 do <2,50% |
1 089 030 |
- |
- |
1 089 030 |
|
from 45,0 do <100% |
- |
- |
164 690 |
164 690 |
Gross amount |
|
4 099 218 |
126 106 |
164 690 |
4 390 014 |
|
|
|
|
|
|
Impairment |
|
(10 919) |
(19 109) |
(69 990) |
(100 018) |
Net amount |
|
4 088 299 |
106 997 |
94 700 |
4 289 996 |
Loans and advances to customers measured at fair value through OCI |
|||||
31.12.2023 |
PD range |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
from 0,00 do <0,15% |
445 835 |
- |
- |
445 835 |
|
from 0,15 do <0,25% |
151 691 |
- |
- |
151 691 |
|
from 0,25 do <0,50% |
878 181 |
139 881 |
- |
1 018 062 |
|
from 0,50 do <0,75% |
346 910 |
150 493 |
- |
497 403 |
|
from 0,75 do <2,50% |
777 218 |
- |
- |
777 218 |
Gross amount |
2 599 835 |
290 374 |
- |
2 890 209 |
|
|
|
|
|
|
|
Impairment |
|
(10 551) |
(81 464) |
- |
(91 975) |
Net amount |
|
2 589 324 |
208 910 |
- |
2 798 234 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
The tables below present the quality of financial assets of Santander Bank Polska Group broken down into stages and by ratings as at 31.12.2024 and in the comparative period:
Stage 1 |
|
|
|
|
|
31.12.2024 |
Loans and advances to banks |
Debt securities measured at fair value through other comprehensive income |
Debt investment securities measured at amortised cost |
Debt securities measured at fair value through profit or loss |
Debt securities held for trading |
Credit quality step * |
|
|
|
|
|
1(AAA to AA-) |
270 337 |
1 160 381 |
3 030 738 |
1 247 |
- |
2(A+ to A-) |
8 496 194 |
39 682 700 |
32 566 260 |
|
1 505 030 |
3(BBB+ to BBB-) |
26 031 |
- |
- |
- |
- |
4(BB+ to BB-) |
1 376 |
- |
- |
- |
- |
5(B+ to B-) |
- |
- |
- |
- |
- |
6(<B-) |
- |
- |
- |
- |
- |
no external rating |
19 050 |
- |
- |
- |
1 572 |
Total Stage 1 |
8 812 988 |
40 843 081 |
35 596 998 |
1 247 |
1 506 602 |
* according to Fitch;
There are no instruments classified to Stage 2 as at 31.12.2024.
Stage 3 |
|
|
|
|
|
31.12.2024 |
Loans and advances to banks |
Debt securities measured at fair value through other comprehensive income |
Debt investment securities measured at amortised cost |
Debt securities measured at fair value through profit or loss |
Debt securities held for trading |
Credit quality step * |
|
|
|
|
|
1(AAA to AA-) |
- |
- |
- |
- |
- |
2(A+ to A-) |
- |
- |
- |
- |
- |
3(BBB+ to BBB-) |
- |
- |
- |
- |
- |
4(BB+ to BB-) |
- |
- |
- |
- |
- |
5(B+ to B-) |
- |
- |
- |
- |
- |
6(<B-) |
- |
- |
- |
- |
- |
no external rating |
- |
394 |
- |
- |
- |
Total Stage 3 |
- |
394 |
- |
- |
- |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Stage 1 |
|
|
|
|
|
31.12.2023 |
Loans and advances to banks |
Debt securities measured at fair value through other comprehensive income |
Loans and advances to customers - Debt securities measured at amortised cost |
Debt investment securities measured at amortised cost |
Debt securities held for trading |
Credit quality level * |
|
|
|
|
|
1(AAA to AA-) |
418 664 |
2 155 447 |
964 018 |
2 005 |
- |
2(A+ to A-) |
8 993 366 |
45 442 729 |
18 675 450 |
|
1 517 534 |
3(BBB+ to BBB-) |
92 159 |
- |
- |
- |
- |
4(BB+ to BB-) |
2 020 |
- |
- |
- |
- |
5(B+ to B-) |
132 |
- |
- |
- |
- |
6(<B-) |
- |
- |
- |
- |
- |
no external rating |
27 499 |
- |
- |
- |
1 657 |
Total Stage 1 |
9 533 840 |
47 598 176 |
19 639 468 |
2 005 |
1 519 191 |
* according to Fitch |
There are no instruments classified to Stage 2 as at 31.12.2023.
Stage 3 |
|
|
|
|
|
31.12.2023 |
Loans and advances to banks |
Debt securities measured at fair value through other comprehensive income |
Loans and advances to customers - Debt securities measured at amortised cost |
Debt investment securities measured at amortised cost |
Debt securities held for trading |
Credit quality level * |
|
|
|
|
|
1(AAA to AA-) |
- |
- |
- |
|
- |
2(A+ to A-) |
- |
- |
- |
|
- |
3(BBB+ to BBB-) |
- |
- |
- |
|
- |
4(BB+ to BB-) |
- |
- |
- |
|
- |
5(B+ to B-) |
- |
- |
- |
|
- |
6(<B-) |
- |
- |
- |
|
- |
no external rating |
- |
394 |
- |
|
- |
Total Stage 3 |
- |
394 |
- |
|
- |
* according to Fitch |
Loans and advances to banks are assessed using ratings. The assessment method was set out in the Group’s internal regulations. Each institutional client (exposure) is assigned a rating by one of the reputable rating agencies (Fitch, Moody’s, S&P), in accordance with the CRR. Then, a relevant grade is allocated to the client. There are no overdue or impaired loans and advances to banks.
Financial instruments are assessed in accordance with the sovereign rating (treasury bonds, securities issued by the National Bank of Poland [NBP], Bank Gospodarstwa Krajowego [BGK]). The sovereign rating is the same as the NBP/BGK rating. All have the same rating as Poland, according to Fitch it is A-.
For all instruments presented above (including also loans and advances to customers measured at fair value through other comprehensive income), there is no overdue or impairment, therefore they are classified to Stage 1. In accordance with its definition- as exposures with no significant increase in risk since initial recognition, i.e. the likelihood of the exposure being downgraded to the impaired portfolio (Stage 3)has not increased. For such exposures, 12-month expected credit losses will be recognized.
Credit risk concentration
Santander Bank Polska Group adheres to the standards provided for in the Banking Law with regard to the concentration of risk bearing exposures to a single entity or a group of entities connected in terms of capital or organisation. As at 31.12.2024, pursuant to art. 71 of the Banking Law Act, the maximum limits for the Group amounted to:
· PLN 6,530,143 k (25% of Group’s own funds).
As at 31.12.2023, pursuant to art. 71 of the Banking Law Act, the maximum limits for the Group amounted to:
· PLN 6,551,441 k (25% of Group’s own funds).
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
The policy pursued by the Group aims at minimising the credit concentration risk, by for example applying more rigorous than regulatory rules in this respect. The effect of this policy is maintenance of high level of diversification of exposures towards individual customers.
The analysis of the Group’s exposures in terms of sector concentrations, proved that the Group does not have any exposures in excess of the limits imposed by the regulator in 2024.
A list of the 20 largest borrowers (or capital-related group of borrowers) of Santander Bank Polska Group (performing loans) as at 31.12.2024.
Industry code(PKD) |
Industry description |
Total credit exposure |
Balance sheet exposure incl. towards subsidiaries |
Committed credit lines, guarantees, treasury limits and capital investments |
64 |
OTHER FINANCIAL SERVICES |
7 179 046 |
500 000 |
6 679 046 |
84 |
PUBLIC ADMINISTRATION |
3 062 051 |
- |
3 062 051 |
35 |
POWER INDUSTRY |
2 985 584 |
- |
2 985 584 |
64 |
OTHER FINANCIAL SERVICES |
2 144 930 |
- |
2 144 930 |
19 |
RAFINERY |
2 087 742 |
450 091 |
1 637 652 |
47 |
RETAIL SALES |
1 747 852 |
- |
1 747 852 |
61 |
TELECOMMUNICATION |
1 570 772 |
1 153 108 |
417 664 |
35 |
POWER INDUSTRY |
1 480 252 |
28 125 |
1 452 127 |
64 |
OTHER FINANCIAL SERVICES |
1 400 000 |
1 400 000 |
- |
47 |
RETAIL SALES |
1 393 940 |
579 531 |
814 409 |
65 |
REINSURANCE |
1 311 669 |
- |
1 311 669 |
64 |
OTHER FINANCIAL SERVICES |
1 307 485 |
- |
1 307 485 |
64 |
OTHER FINANCIAL SERVICES |
1 269 604 |
- |
1 269 604 |
64 |
OTHER FINANCIAL SERVICES |
1 253 526 |
- |
1 253 526 |
64 |
OTHER FINANCIAL SERVICES |
1 201 319 |
1 148 000 |
53 319 |
61 |
TELECOMMUNICATION |
1 127 397 |
431 275 |
696 122 |
70 |
OPERATIONS OF HEAD OFFICES |
1 052 330 |
- |
1 052 330 |
64 |
OTHER FINANCIAL SERVICES |
1 011 265 |
529 098 |
482 167 |
20 |
CHEMICAL INDUSTRY |
954 534 |
938 023 |
16 511 |
64 |
OTHER FINANCIAL SERVICES |
905 080 |
22 204 |
882 876 |
|
36 446 378 |
7 179 455 |
29 266 923 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
A list of the 20 largest borrowers (or capital-related group of borrowers) of Santander Bank Polska Group (performing loans) as at 31.12.2023.
Industry code(PKD) |
Industry description |
Total credit exposure |
Balance sheet exposure incl. towards subsidiaries |
Committed credit lines, guarantees, treasury limits and capital investments |
84 |
PUBLIC ADMINISTRATION |
3 252 671 |
- |
3 252 671 |
19 |
RAFINERY |
2 149 725 |
222 615 |
1 927 110 |
64 |
OTHER FINANCIAL SERVICES |
2 104 833 |
- |
2 104 833 |
47 |
RETAIL SALES |
1 558 713 |
1 357 790 |
200 923 |
35 |
POWER INDUSTRY |
1 545 378 |
270 001 |
1 275 377 |
47 |
RETAIL SALES |
1 508 554 |
771 577 |
736 977 |
64 |
OTHER FINANCIAL SERVICES |
1 496 559 |
1 444 460 |
52 099 |
61 |
TELECOMMUNICATION |
1 307 635 |
420 688 |
886 947 |
35 |
POWER INDUSTRY |
1 299 494 |
257 475 |
1 042 019 |
06 |
MINING |
1 264 590 |
- |
1 264 590 |
64 |
OTHER FINANCIAL SERVICES |
1 254 499 |
- |
1 254 499 |
64 |
OTHER FINANCIAL SERVICES |
1 196 880 |
1 196 880 |
- |
64 |
OTHER FINANCIAL SERVICES |
1 093 960 |
- |
1 093 960 |
64 |
OTHER FINANCIAL SERVICES |
1 064 928 |
527 888 |
537 040 |
35 |
POWER INDUSTRY |
1 027 815 |
974 020 |
53 795 |
64 |
OTHER FINANCIAL SERVICES |
997 676 |
- |
997 676 |
35 |
POWER INDUSTRY |
960 808 |
922161 |
38 647 |
64 |
OTHER FINANCIAL SERVICES |
850 000 |
- |
850 000 |
61 |
TELECOMMUNICATION |
849 844 |
828 346 |
21 498 |
64 |
OTHER FINANCIAL SERVICES |
779 051 |
- |
779 051 |
|
27 563 613 |
9 193 901 |
18 369 712 |
Industry concentration
The credit policy of Santander Bank Polska Group assumes diversification of credit exposures. Risk of particular industry affects value of the exposure limit. In order to ensure adequate portfolio diversification and control the risk of overexposure to a single industry, the Group provides funding to sectors and groups or capital units representing a variety of industries.
As at 31.12.2024, the highest concentration level was recorded in the “manufacturing” sector (9.2% of the Santander Bank Polska Group exposure), “trade” (9%) and “real estate” (5%).
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Breakdown of non-trading business loans and advances by NACE codes:
NACE sector |
Gross exposure |
||
31.12.2024 |
31.12.2023 |
||
|
Agriculture, forestry and fishing |
4 127 031 |
3 820 094 |
|
Mining and quarrying |
1 519 721 |
1 419 015 |
|
Manufacturing |
16 543 709 |
14 910 478 |
|
Electricity, gas, steam and air conditioningsupply |
3 318 010 |
2 990 334 |
|
Water supply |
538 740 |
372 536 |
|
Construction |
4 074 926 |
3 449 603 |
|
Wholesale and retail trade |
16 247 843 |
14 313 937 |
|
Transport and storage |
6 290 895 |
6 098 496 |
|
Accomodation and food service activities |
2 149 170 |
1 968 191 |
|
Information and communication |
3 533 052 |
3 171 499 |
|
Financial and insurance activities |
1 797 899 |
1 355 784 |
|
Real estate activities |
9 751 160 |
9 482 855 |
|
Professional, scientific and technical activities |
7 457 722 |
6 659 463 |
|
Administrative and support service activities |
3 703 141 |
3 328 385 |
|
Public administration and defence, .compulsory social security |
33 352 |
3 417 |
|
Education |
402 401 |
339 013 |
|
Human health services and social work activities |
1 921 629 |
1 656 984 |
|
Arts, entertainment and recreation |
507 090 |
433 291 |
|
Other services |
5 104 277 |
5 088 339 |
A |
Total Business Loans |
89 021 769 |
80 861 714 |
B |
Retail (including mortgage loans) |
88 814 191 |
83 052 466 |
C |
Loans to public sector |
2 439 265 |
1 223 168 |
A+B+C |
Santander Bank Polska SA portfolio |
180 275 225 |
165 137 348 |
D |
Other receivables |
70 339 |
74 521 |
A+B+C+D |
Total Santander Bank Polska SA |
180 345 564 |
165 211 869 |
Climate related risk
At Santander Bank Polska Group environmental matters are embedded in decision-making processes. The ESG (environmental, social, governance) guidelines are used for evaluating the assets to be financed by the Bank.
More broadly, issues related to climate goals, climate policy and initiatives and actions undertaken by the Bank and the Group are described in the "Consolidated Sustainability Statement of Santander Bank Polska Group for 2024" which is part of the Management Board Report on the activities of Santander Bank Polska Group in 2024. This document also contains quantitative disclosures.
The Bank and the Group entities considered the climate-related risks when preparing the financial statements in accordance with International Financial Reporting Standards, and where necessary, the Standards were applied in a manner that takes this into account.
The subject of the considerations was, in particular, the impact of environmental issues on the Bank and the Group's entities in the context of the application of:
- IAS 1: Presentation of Financial Statements
- IAS 12: Income Taxes
- IAS 36: Impairment of Assets
- IFRS 9: Financial Instruments
- IFRS 13: Fair Value
- IAS 37: Provisions, Contingent Liabilities and Contingent Assets
At the same time, based on the conducted analysis, no significant impact of environmental issues on the financial statements as a whole was found.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
In 2024, stress tests were conducted on credit risk parameters of credit portfolios, taking into account transformation risk, and their result was taken into account in the process of assessing the adequacy of allocated internal capital. The results obtained do not indicate a significant dependence of portfolio parameters in the time horizon analyzed in the stress tests. In the following year, it is planned to expand the analyses performed as part of the stress tests, including the impact of physical risks on the considered scenario.
At the same time, the Group performed the further iterations of analyzes aimed at identification and of transformational and physical risks in a systemic and quantitative manner. By estimating the emissivity of all business entities and retail mortgage products, the Group assess transformational risks and deliberate actions in key parts of the portfolio. It will also allow for the inclusion of environmental aspects in standard portfolio analysis processes, setting targets and limits at appropriate levels.
ESG risk management as part of the risk management framework
Effective identification of risks and opportunities related to climate change allows Santander Bank Polska S.A. to take measures to ensure reliance to key threats, accelerate growth, improve financial results, and build reputation.
Risks related to social and environmental issues, including climate, are taken into account in the risk management system developed and implemented by the Management Board. This system operates on the basis of three lines of defense, covers all significant types of risk and the interdependencies of individual risks.
In accordance with the recommendations, the Bank performs analyzes of physical and transformational risk, including them in the taxonomy of risks typical for the Bank. The Group does not separate ESG risk as a separate material risk, but indicates its transmission channels into: credit, market and liquidity, compliance, reputation, business and operational risks.
A methodology for assessing the level of climate risks – physical and transition for individual climate sectors and real estate (introducing a taxonomy of climate sectors to the Bank) has been introduced, which allowed for a portfolio analysis of the significance of climate risks for the credit portfolio. The reports in question are already presented to selected committees, and this information is used in the assessment of credit risk of clients and transactions.
The Social, Environmental and Climate Change Risk Management Policy is in force at Bank, approved by the Bank's Management Board. It specifies the criteria for the Bank's ability to cooperate with clients operating in selected sensitive sectors. The document defines areas of activity divided into two categories: prohibited activities and activities subject to additional analysis. In connection with the adjustment of credit processes to the provisions of the Policy, some exposures characterized by too high and unmanaged transformation risk are not accepted.
Concentration limits have been defined:
• for sectors that contribute the most to climate change, which are also most exposed to transformation risks.
• for business and mortgage-secured exposures in locations assessed as highly exposed to physical risks
and measures of the acceptable level of risk regarding the Bank's declarations included in the Environmental, Social and Climate Change Risk Management Policy.
Depending on the level of climate risk assessment for individual sectors, elements influencing the estimation of the level of credit risk are added to the credit process. For selected clients from business segments, an individual ESCC (Environmental Social & Climate Change) risk analysis is performed for clients / transactions operating in sectors defined in the Bank's policies. The conducted ESCC risk analysis and recommendation is included in the client's credit application, and if it affects the assessment of credit risk parameters, it is included in the client's rating assessment.
In 2024, the requirements for the valuation of mortgage collateral were strengthened in terms of taking into account ESG factors. The analyses carried out showed that in the case of transition risk approximated by the level of energy efficiency of buildings, there is already a visible differentiation of valuations from the level of this risk.
In 2024, the Bank refreshed an analysis of the portfolio's sensitivity to climate risks, taking into account the sensitivity assessment of the most exposed sectors included in it. The analysis was carried out in three time horizons - short (2030), medium (2040) and long (2050). It was decided to use climate scenarios defined by a group of central banks and supervisory institutions, which brings together over 130 institutions (including the largest ones, such as the European Central Bank, the Bank of England and the United States Federal Reserve System) determined to act for better understanding and management of climate risks (Network for Greening the Financial System, NGFS). For physical risk, the analysis was based on external data defining the level of physical risks for over 15 climate phenomena (sudden and chronic) at the municipal level, using RCP (representative concentration pathways) scenarios. These are four scenarios of changes in carbon dioxide concentration that were accepted by the Intergovernmental Panel on Climate Change in the project of comparing global climate models.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Responsibility for ESG risk management
The responsibility for managing climate risk and leveraging climate-related opportunities rests with the Management Board and the Supervisory Board. They support risk management strategies by approving key policies, sitting on dedicated committees, participating in reviews and approving risks and reports. The member of the Management Board supervising ESG risk management is the member managing the Risk Management Division.
Since 2023, the ESG Risk Management Office was established within the Risk Management Division, whose responsibility is to ensure the appropriate organization of the ESG Risk management function.
The Bank’s Management Board is responsible for defining long-term action plans and approving the responsible banking strategy, including the climate strategy and its main objectives (in a short, medium and/or long term), and as part of the risk management framework. ESG direction has become one of the 3 pillars of Group's strategy for 2024-2026, it is the TOTAL Responsibility pillar, creating the strategy together with the TOTAL Experience and TOTAL Digitalization pillars.
The Supervisory Board verifies the Bank’s management strategy and ESG risk management strategy, also in terms of the Bank’s long-term interest.
There is also the ESG Committee, which provides support to the Bank’s Management Board in the performance of oversight over the responsible banking and sustainability strategy both locally and at the level of Santander Bank Polska Group. The Committee, which is chaired by the President of the Management Board, defines the strategy and annual goals related to ESG and ensures compliance with environmental and social policies of Santander Bank Polska S.A. The Committee is supported by the ESG Forum composed of senior managers representing all Divisions. The Forum analyses challenges, opportunities and risks related to the EU Sustainable Finance agenda (including ESG risks), plans activities and coordinates their implementation at the Bank, and submits regular reports to the Responsible Banking and Corporate Culture Committee and the Bank’s Management Board.
The Bank finalises implementation of the Greenwashing Risk Management Model covering the following areas of activity: ESG strategy and policies, financial products and activities, credit granting process, communication and marketing, reporting and disclosure of information, suppliers.
Market risk
Introduction
Market risk is defined as an adverse earnings impact of changes in interest rates, FX rates, share quotations, stock exchange indices, etc. It arises both in trading and banking activity (FX products, interest rate products, equity linked trackers).
Santander Bank Polska Group is exposed to market risk arising from its activity in money and capital markets and services provided to customers. Additionally, the Group undertakes the market risk related to the active management of balance sheet structure (assets and liabilities management).
The activity and strategies on market risk management are directly supervised by the Market and Investment Risk Committee and are pursued in accordance with the framework set out in the Market Risk Policy and the Structural Risk Policy approved by the Management Board and the Supervisory Board.
Risk management structure and organisation
The key objective of the market risk policy pursued by the Group is to reduce the impact of variable market factors on the Group’s profitability and to grow income within the strictly defined risk limits while ensuring the Group’s liquidity and market value.
The market risk policies of Santander Bank Polska Group establish a number of risk measurement and mitigation parameters in the form of limits and metrics. Risk limits are periodically reviewed to align them with the Group’s strategy.
Interest rate and FX risks linked to the banking business are managed centrally by the Financial Management Division. The Division is also responsible for acquiring funding, managing liquidity and making transactions on behalf of ALCO. This activity is controlled by the measures and limits approved by the Market and Investment Risk Committee, the bank’s Management Board and the Supervisory Board.
The debt securities and the interest rate and FX hedging portfolio is managed by ALCO Committee, which takes all decisions on the portfolio’s value and structure.
The market risk on the trading portfolio is managed by the Corporate and Investment Banking Department. The Group’s trading activity is subject to a system of measures and limits, including Value at Risk, stop loss, position limits and sensitivity limits. These limits are approved by the Market and Investment Risk Committee, the bank’s Management Board and the Supervisory Board.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
The Financial Risk Department within the Risk Management Division is responsible for ongoing risk measurement, implementation of control procedures and risk monitoring and reporting. The Department is also responsible for shaping the market risk policy, proposing risk measurement methodologies and ensuring consistency of the risk management process across the Group. Owing to the fact that the Department is a part of the Risk Management Division, the risk measurement and monitoring processes are separate from the risk-taking units.
The market risk of equity instruments held by Santander Brokerage Poland (shares, index-linked securities) is managed by Santander Brokerage Poland itself and supervised by the Market and Investment Risk Committee of Santander Bank Polska S.A.
The bank’s Market and Investment Risk Committee, chaired by the Management Board member in charge of the Risk Management Division, is responsible for independent control and monitoring of market risk in the banking and trading books.
Risk identification and measurement
The trading book of Santander Bank Polska Group contains securities and derivatives held by the Corporate and Investment Banking Division for trading purposes. The instruments are marked to market each day, and any changes in their value are reflected in the profit and loss. Market risk in the trading book includes interest rate risk, currency risk and repricing risk.
The interest rate risk in the Group’s banking book is the risk of adverse impact of interest rate changes on the Group’s income and the value of its assets and liabilities. Interest rate risk arises primarily on transactions entered in the bank’s branches and in the business and corporate centres, as well as the transactions made in the wholesale market by the Financial Management Division. Additionally, interest rate risk can be generated by transactions concluded by other units, e.g. through acquisition of municipal/ commercial bonds or the bank’s borrowings from other sources than the interbank market.
Santander Bank Polska Group uses several methods to measure its market risk exposure. The methods employed for the banking portfolio are the MVE and NII sensitivity measures, stress tests and Value at Risk (VaR), while the methods used for the trading portfolio include: VaR and stressed VaR, stop loss, sensitivity measures (PV01) and stress tests. The risk measurement methodology is subject to an independent initial and periodic validation, the results of which are presented for approval to the Market and Investment Risk Committee.
At Santander Bank Polska Group, the VaR in the trading portfolio is determined using a historical method as a difference between the mark-to-market value of positions and the market values based on the most severe movements in market rates from a determined observation window. VaR is calculated separately for interest rate risk, FX risk and the two risks at the same time. VaR is also calculated for the repricing risk of the equity instruments portfolio of Santander Brokerage Poland.
Due to the limitations of the VaR methodology, the Group additionally performs sensitivity measurement (showing how position values change in reaction to price/profitability movements), Stressed VaR measurement and stress tests.
Risk reporting
The responsibility for reporting market risk rests with the Risk Management Division, specifically the Financial Risk Department.
Each day, the Financial Risk Department controls the market risk exposure of the trading book in accordance with the methodology laid down in the Market Risk Policy. It verifies the use of risk limits and reports risk levels to units responsible for risk management in the trading book, to Santander Group and to the Market and Investment Risk Committee.
Once a month, the Financial Risk Department provides information about the risk exposure of the trading book and selected measures to the Market and Investment Risk Committee and prepares the Risk Dashboard (in cooperation with other units of the Risk Management Division), which is presented to the Risk Management Committee.
The results of market risk measurement with regard to the banking book are reported by the Financial Risk Department to persons responsible for operational management of the bank’s balance sheet structure and to persons in charge of structural risk management on a daily basis (information about the ALCO portfolio) or on a monthly basis (interest rate gap, NII and MVE sensitivity measures, stress test results, VaR). This information is also reported each month to the bank’s senior executives (Market and Investment Risk Committee, ALCO). The selected key interest rate risk measures, including risk appetite measures defined for the Group’s banking book, are reported to the bank’s Management Board and Supervisory Board.
Risk prevention and mitigation
The Bank has adopted a conservative approach to risk-taking both in terms of the size of exposures and the types of products. A large portion of the Financial Market Area activity revolves around mitigating the risk related to customer transactions at the retail and corporate level. In addition, flows from customer transactions are generally for amounts and tenors not quoted on the market directly and thus risk capacity is required to manage these mismatches with wholesale transactions.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
From the Bank’s perspective, the market risk limits are at safe level and are in place to allow sufficient capacity and time to neutralise interest rate risk and foreign exchange risks, while at the same time allowing the Financial Market Area to hold some of portfolio positions opened to add value to the organisation.
There is a greater emphasis placed on market making over pure mark to market trading and this is reflected in both limit utilisation and budgetary targets of Financial Market Area.
The combination of transactions made by the Financial Market Area and positions transferred from the bank arising from customers’ FX and derivative activity create the overall interest rate and currency risk profiles, which are managed under the policy and operational limits in place. The Financial Market Area subsequently decides either to close these positions or keep them open in line with market view and approved limits. The return earned is a mix of flow management and market making. However, there is no intention to keep aggressive trading positions.
The interest rate and currency risk of the Financial Market Area is managed via the trading book in accordance with the Market Risk Policy approved by the Management Board. Accounting and risk systems help to ensure allocation of each position into appropriate books. The relevant desks are responsible for suitable risk activity (interest rate or currency risk).
To ensure that the trading book positions are marketable, the bank controls the gross value of the positions (separately long and short positions) versus the entire market. This is to check if it is technically possible to close an open position one way, without taking into account other closings. The control is performed by the Financial Risk Department separately for currency positions and interest rate positions. The control results are reported to the Financial Market Area.
As regards market risk in the banking book, all positions that generate repricing risk are transferred for management to the Financial Management Division, responsible for shaping the bank’s balance sheet structure, including by entering into transactions in the interbank market so as to manage the interest rate risk profile according to the approved risk strategy and in compliance with the allocated risk limits.
The bank’s subsidiaries also mitigate their exposure to interest rate and FX risk. If there is a mismatch between the repricing of assets and liabilities, the company enters into appropriate transactions via the standard bank accounts held with the bank or makes derivative transactions with the bank, which from the transaction date manages the risk as part of the global limit of Santander Bank Polska Group and can also make standard currency exchange transactions with the Bank.
The interest rate risk in the banking book is managed based on the following limits:
· NII sensitivity limit (the sensitivity of net interest income to a parallel shift of the yield curve by 100 bp);
· MVE sensitivity limit (the sensitivity of the market value of equity to a parallel shift of the yield curve by 100 bp).
|
NII Sensitivity |
MVE Sensitivity |
||
1 day holding period |
31.12.2024 |
31.12.2023 |
31.12.2024 |
31.12.2023 |
|
|
|
|
|
Santander Bank Polska |
(313) |
(130) |
(963) |
(665) |
Santander Bank Polska Group |
(376) |
(188) |
(1 143) |
(819) |
The levels of interest rate risk limit utilization for both interest income sensitivity and economic capital sensitivity increased compared to 2023. There were no exceedances of RED operational limits. The increase in MVE exposure was caused by the implementation of the interest income sensitivity hedging strategy, which consequently increased the duration of the banking book portfolio. The implementation of the aforementioned hedging strategy was mainly based on concluding cash flow hedging transactions under hedge accounting (Cash-Flow Hedge Accounting) and increasing the ALCO portfolio with fixed-coupon debt securities. Additionally, the increase in NII exposure was caused by a change in the treatment of new sales for current accounts.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
VaR in the banking portfolio is calculated separately as a combined effect of EaR (Earnings-at-Risk) and EVE VaR (value at risk of the economic value of equity).
The key methods of measurement of the interest rate risk in the trading book include the VaR methodology, stop loss, PV01 sensitivity measurement and stress tests.
The VaR is set for open positions of the Financial Market Area using the historical simulations method. Under this method the bank estimates the portfolio value of 520 scenarios generated on the basis of historically observable changes in market parameters. VaR is then estimated as the difference between the current valuation and the valuation of the 99th percentile of the lowest valuations.
The stop-loss mechanism is used to manage the risk of loss on positions subject to fair value measurement through profit or loss.
Stress tests are used in addition to these measures by providing an estimate of the potential losses in the event of materialisation of the stressed conditions in the market. The assumptions of stress scenarios are based on sensitivity reports and on extreme market rate movement scenarios set using the highest daily and monthly changes in interest rates.
The table below shows risk measures at the end of 2024 and 2023 for 1-day position holding period (in PLN k):
Interest rate risk |
VAR |
||
1 day holding period |
31.12.2024 |
31.12.2023 |
|
Average |
8 203 |
7 443 |
|
Maximum |
12 892 |
14 049 |
|
Minimum |
3 913 |
3 258 |
|
as at the end of the period |
3 913 |
6 952 |
|
Limit |
16 036 |
13 812 |
|
FX risk is the risk that adverse movements in foreign exchange rates will have an impact on performance (and result in losses). This risk is managed on the basis of the VaR limit for the open currency positions in the Group’s trading portfolio and the portfolio of Santander Brokerage Poland which manages open positions linked to the market maker activity. Stress tests are used in addition to this measure by providing an estimate of the potential losses in the event of materialisation of the stressed conditions in the market. Stress tests use the currency exposure and the scenarios of extreme movements in currency rates based on historical data. Furthermore, the stop-loss mechanism is used for managing the risk of losses on trading positions.
In accordance with its policy, the Group does not maintain open positions on currency options. Transactions made with customers are immediately closed in the interbank market thus limiting the Group’s exposure to the market risk on the currency options portfolio.
Open FX positions of subsidiaries are negligible and are not included in the daily risk estimation.
The table below illustrates the risk measures at the end of December 2024 and 2023 (in PLN k).
FX risk |
VAR |
|
1 day holding period |
31.12.2024 |
31.12.2023 |
Average |
679 |
749 |
Maximum |
1 742 |
2 411 |
Minimum |
234 |
81 |
as at the end of the period |
356 |
648 |
Limit |
3 691 |
3 542 |
The tables below present the Group’s key FX positions as at 31 December 2024 and in the comparable period.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
31.12.2024 |
PLN |
EUR |
CHF |
USD |
Other |
Total |
ASSETS |
||||||
Cash and balances with central banks |
9 410 544 |
844 570 |
30 143 |
118 318 |
171 532 |
10 575 107 |
Loans and advances to banks |
1 171 432 |
5 789 220 |
18 400 |
1 618 555 |
215 381 |
8 812 988 |
Loans and advances to customers |
147 298 313 |
25 094 119 |
394 980 |
1 833 642 |
155 227 |
174 776 281 |
Investment securities |
71 938 741 |
4 456 849 |
- |
517 065 |
- |
76 912 655 |
Selected assets |
229 819 030 |
36 184 758 |
443 523 |
4 087 580 |
542 140 |
271 077 031 |
LIABILITIES |
|
|
|
|
|
|
Deposits from banks |
2 453 600 |
2 473 078 |
557 |
219 742 |
1 683 |
5 148 660 |
Deposits from customers |
189 591 445 |
30 566 962 |
965 744 |
9 168 360 |
1 736 251 |
232 028 762 |
Subordinated liabilities |
1 118 875 |
1 110 023 |
- |
- |
- |
2 228 898 |
Selected liabilities |
193 163 920 |
34 150 063 |
966 301 |
9 388 102 |
1 737 934 |
239 406 320 |
31.12.2023 |
PLN |
EUR |
CHF |
USD |
Other |
Total |
ASSETS |
||||||
Cash and balances with central banks |
6 956 993 |
977 508 |
58 997 |
146 384 |
277 637 |
8 417 519 |
Loans and advances to banks |
1 280 971 |
7 206 043 |
26 333 |
793 695 |
226 798 |
9 533 840 |
Loans and advances to customers |
132 253 696 |
23 411 744 |
2 154 107 |
1 592 194 |
108 266 |
159 520 007 |
Investment securities |
63 386 625 |
3 223 918 |
- |
1 074 040 |
- |
67 684 583 |
Selected assets |
203 878 285 |
34 819 213 |
2 239 437 |
3 606 313 |
612 701 |
245 155 949 |
LIABILITIES |
|
|
|
|
|
|
Deposits from banks |
2 489 169 |
1 645 426 |
311 |
19 536 |
2 011 |
4 156 453 |
Deposits from customers |
166 002 155 |
30 893 667 |
1 000 857 |
9 500 127 |
1 880 550 |
209 277 356 |
Subordinated liabilities |
1 118 250 |
1 568 093 |
- |
- |
- |
2 686 343 |
Selected liabilities |
169 609 574 |
34 107 186 |
1 001 168 |
9 519 663 |
1 882 561 |
216 120 152 |
The gap in the currency position in CHF changed in 2024 from a surplus of mortgage loans over deposits in CHF to a surplus of deposits over mortgage loans in CHF. This transition results from new legal risk provisions, settlements between banks and borrowers and gradual decrease of mortgage portfolio due to repayment. On the liabilities side, significant level of foreign currency deposits, mainly in EUR is observed.
The risk attached to the prices of equity instruments listed in active markets is managed by Santander Brokerage Poland, which operates within the Corporate and Investment Banking Division. This risk is generated by own trades of Santander Brokerage Poland concluded in regulated markets (spot market instruments and futures).
It is measured using a Value at Risk model based on the historical analysis method.
The market risk management in Santander Brokerage Poland is supervised by the Market and Investment Risk Committee of Santander Bank Polska S.A. This Committee sets the VaR limit for Santander Brokerage Poland, approves changes in the risk measurement methodology and oversees the risk management process.
The table below presents the risk measures in 2024 and 2023 (in PLN k).
Equity risk |
VAR |
|
1 day holding period |
31.12.2024 |
31.12.2023 |
Average |
761 |
379 |
Maximum |
2 059 |
759 |
Minimum |
439 |
112 |
as at end of the period |
2 059 |
424 |
Limit |
1 638 |
1 574 |
In 2024, there was 1 exceedance of the VAR limit for equity risk. It resulted from high volatility of prices in the last session, which resulted in a significant increase in the VAR value in line with the methodology without a simultaneous material change in the portfolio structure.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Interest Rate Benchmark reform
Santander Bank Polska S.A. has been running the IBOR Programme from 2022 to mid-2023, aimed at adapting the Bank and its subsidiaries to the decision of the ICE Benchmark Administration to gradually discontinue calculating LIBOR indices. After the establishment of the National Working Group for the reform of benchmarks in Poland (NGR), the Bank adjusted the scope of work and composition of the previously operating Programme in order to introduce products based on the so-called RFR (risk-free rate) indicators to the offer. The work at the Bank is carried out in accordance with the decisions and recommendations of the NGR Steering Committee and the assumptions of the Road Map for the process of replacing the WIBOR and WIBID reference indicators. In December 2024, NGR selected an index to replace the WIBOR and WIBID reference indices, and in January 2025, it selected the name POLSTR for this index proposal. According to the announcements, the final moment of conversion of the historical portfolio is planned for the end of 2027.
The reform work is being carried out by a wide group of experts representing the Bank's key business lines, supported by a renowned consulting firm under the supervision of the Steering Committee, which includes members of the Management Board and top management. In addition, the work is being coordinated with the preparations underway both in subsidiaries and at the level of the entire Banco Santander Group.
The tables present break down of assets and liabilities of Santander Bank Polska Group as at 31 December 2024 and in comparative period:
31.12.2024 |
Nominal value |
|
Assets and liabilities exposed to PLN WIBOR |
Assets |
Liabilities |
Cash and balances at central banks |
- |
- |
Loans and advances to/deposits from banks |
190 000 |
2 045 353 |
Loans and advances to/deposits from customers |
80 007 019 |
13 784 606 |
Reverse repurchase/repurchase agreements |
2 781 400 |
734 473 |
Debt securities/ in issue |
15 972 764 |
10 429 812 |
Lease receivables/liabilities |
5 444 401 |
- |
Total value of assets and liabilities exposed to PLN WIBOR |
104 395 584 |
26 994 244 |
Trading Derivatives (notional) |
681 987 048 |
668 633 740 |
Hedging Derivatives (notional) |
8 057 930 |
39 037 500 |
31.12.2023 |
Nominal value |
|
Assets and liabilities exposed to PLN WIBOR |
Assets |
Liabilities |
Cash and balances at central banks |
- |
- |
Loans and advances to/deposits from banks |
100 000 |
1 707 791 |
Loans and advances to/deposits from customers |
76 253 292 |
11 638 718 |
Reverse repurchase/repurchase agreements |
846 300 |
111 200 |
Debt securities/ in issue |
18 366 000 |
7 486 000 |
Lease receivables/liabilities |
3 468 440 |
- |
Total value of assets and liabilities exposed to PLN WIBOR |
99 034 032 |
20 943 709 |
Trading Derivatives (notional) |
437 292 000 |
387 549 000 |
Hedging Derivatives (notional) |
11 383 000 |
30 102 000 |
In connection with the IBOR and WIBOR Reform, the Group is exposed to the following risks:
Business Risk:
Switching to alternative benchmarks may lead to a risk of abuse or misconduct towards clients, resulting in customer complaints, penalties or reputational damage. Possible risks include: risk of misleading customers, risk of market abuse (including insider dealing and market manipulation), risk of anti-competitive practices, both during and after the transition (e.g. collusion and exchange of information) and risks caused by conflicts of interest. The Group has strong transition management structures in place to ensure risk mitigation.
Price risk:
The transition to alternative benchmarks and the discontinuation of the use of interest rate benchmarks may affect the pricing mechanisms applied by the Group for certain transactions, including the establishment of a Standard Variable Rate applicable to mortgage loans. For some financial instruments, it will be necessary to develop new pricing models.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Risk associated with the interest rate base:
This risk consists of two components:
– if bilateral negotiations with the Group's counterparties are not successful before the IBOR ceases to apply, there is significant uncertainty as to the future interest rate. This situation leads to additional interest rate risk, which was not taken into account at the time of entering into contracts and is not the subject of our interest rate risk management strategy. For example, in some cases, provisions on the use of other indicators in contracts where the IBOR rate is applied, may result in the remaining period maintaining a fixed interest rate at the level of the last IBOR rate The Group works closely with all counterparties to avoid such a situation, but if it occurs, the interest rate risk management policy applied in the Group will be applied as standard and may result in liquidation of the interest rate swaps or the conclusion of new swaps to maintain the combination of variable and fixed interest rates for the debt held.
– interest rate risk may also arise where the transition to alternative benchmarks for non-derivatives and derivatives held to manage the interest rate risk associated with the non-derivative occurs at different times. This risk may also occur if you switch to different rates for back-to-back derivatives at different times. The Group will monitor that the risk management referred to above is carried out in accordance with the applicable risk management principles, updated to allow for a temporary mismatch not exceeding 12 months and to establish an additional basis for interest rate swaps, if required.
Hedge Accounting:
If the transition to alternative benchmarks for certain contracts does not allow the application of the exemptions provided for by the Phase 2 amendments, then the effect may be to terminate the hedging relationship and, consequently, increased volatility in the income statement. This may happen if the newly designated hedging relationships are not carried out or if the non-derivative financial instruments are amended or removed from the financial statements.
The Bank did not decide to change the existing hedging relationships with WIBOR. However, due to the expected replacement of the benchmark, the Bank identifies that hedging relationships in which this benchmark is present may be exposed to the risk described above related to the effectiveness of the relationship.
In the case of credit agreements referring to the CHF LIBOR rate, the Bank switched to RFR indicators in accordance with the decision of the European Commission, and in the case of derivative instruments that hedge this portfolio, the CHF LIBOR rate switched to the SARON rate, in accordance with the ISDA Protocol standard.
Based on the conducted efficiency test based on the new rates for CHF - both for the credit portfolio and the hedging instrument - the Bank assessed that there is a high probability of meeting the efficiency requirement of the established hedging relationships in the future.
In connection with the above, in the case of strategies hedging the CHF credit portfolio, the Bank decided to continue the established hedging relationships based on the existing instruments.
Risk of legal proceedings:
In the absence of agreement on the implementation of the Interest Rate Benchmark Reform for existing contracts (e.g. due to different interpretations of the applicable provisions on the use of other benchmarks), there is a risk of litigation and protracted disputes with counterparties, which may result in additional costs, e.g. legal costs. The Group works closely with all contractors to avoid such a situation.
Regulatory risk:
Regulatory models and methodologies are currently being updated (e.g. to take account of new market data). There is a risk that full updates, testing and acceptance of models by regulators will not take place on time.
Operational risk:
We are updating our IT systems to fully manage the transition to alternative benchmarks. There is a risk that such updates will not be fully on time, resulting in additional manual procedures involving operational risk.
Liquidity risk
Introduction
Liquidity risk is the risk that the bank fails to meet its contingent and non-contingent obligations towards customers and counterparties as a result of a mismatch of financial cash flows.
The activity and strategies on liquidity risk management are directly supervised by the Market and Investment Risk Committee and are pursued in accordance with the framework set out in the Liquidity Risk Policy approved by the Management Board and the Supervisory Board.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Risk management structure and organisation
The objective of the Liquidity Risk Policy of Santander Bank Polska Group is to:
· ensure the ability to finance assets and satisfy claims, both current and future, in a timely manner and at an economic price;
· manage the maturity mismatch between assets and liabilities, including the intraday mismatch of cash flows; under normal and stress conditions;
· set a scale of the liquidity risk in the form of various internal limits;
· ensure proper organisation of the liquidity management process within the whole Santander Bank Polska Group;
· prepare the organisation for emergence of adverse factors, either external or internal;
· ensure compliance with regulatory requirements, both qualitative and quantitative.
The general principle adopted by Santander Bank Polska Group in its liquidity management process is that all expected outflows occurring within one month in respect of deposits, current account balances, loan drawdowns, guarantee payments and transaction settlements should be at least fully covered by the anticipated inflows or available High Quality Liquid Assets (HQLA) assuming normal or predictable conditions for the Group’s operations. The HQLA category substantially includes: cash on hand, funds held in the nostro account with the NBP (National Bank of Poland) in excess of the minimum reserve requirement and securities which may be sold or pledged under repo transactions or NBP lombard loans. As at 31 December 2024, the value of the HQLA buffer was PLN 83.7 bn for the Bank and PLN 88.7 bn for the Group.
The purpose of this policy is also to ensure an adequate structure of funding in relation to the growing scale of the Group’s business by maintaining structural liquidity ratios at pre-defined levels.
The Group uses a suite of additional watch limits and thresholds with respect to the following:
· loan-to-deposit ratio;
· ratios of reliance on wholesale funding, which are used to assess the concentration of foreign currency funding from the wholesale market;
· concentration of deposit;
· level of encumbered assets;
· ratios laid down in CRD IV/CRR – LCR and NSFR;
· survival horizon under stressed conditions;
· the HQLA buffer;
· the buffer of assets which might be liquidated over an intraday horizon.
The internal liquidity limits, including the limits established in the Risk Appetite Statement, are set on the basis of both historical values of the selected liquidity ratios as well as their future values which are estimated against a financial plan. The limits also take into account the results of stress tests.
At least once a year, Santander Bank Polska Group carries out the Internal Liquidity Adequacy Assessment Process (ILAAP), which is designed to ensure that the Group can effectively control and manage liquidity risk. In particular, the ILAAP ensures that the Group:
· maintains sufficient capacity to meet its obligations as they fall due;
· reviews the key liquidity risk drivers and ensures that stress testing reflects these drivers and that they are appropriately controlled;
· provides a record of both the liquidity risk management and governance processes;
· carries out assessment of counterbalancing capacity.
The ILAAP results are subject to approval by the Management Board and the Supervisory Board to confirm adequacy of the liquidity level of Santander Bank Polska Group in terms of liquid assets, prudent funding profile and the Group’s liquidity risk management and control mechanisms.
Risk identification and measurement
The responsibility for identification and measurement of liquidity risk rests with the Risk Management Division, specifically the Financial Risk Department.
The role of the Department is to draft liquidity risk management policies, carry out stress tests and to measure and report on risk on an ongoing basis.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Liquidity is measured by means of the modified liquidity gap, which is designed separately for the PLN and currency positions. The reported future contractual cash flows are subject to modifications based on: statistical analyses of the deposit and credit base behaviour and assessment of product/ market liquidity – in the context of evaluation of the possibility to liquidate Treasury securities by selling or pledging them in repo transactions or using liquidity support instruments with NBP, as well as the possibility of transaction rolling in the interbank market.
When measuring liquidity risk, the bank additionally analyses the degree of liquidity outflows arising from potential margin calls due to changes in the value of derivative transactions and collateral needs related to secured financing transactions resulting from the downgrade of the bank’s credit rating, among other things.
Concurrently, liquidity is measured in accordance with the CRD IV/ CRR package and in their implementing provisions.
In order to establish a detailed risk profile, the Group conducts stress tests using the nine following scenarios:
· baseline scenario, which assumes non-renewability of wholesale funding;
· idiosyncratic liquidity crisis scenarios (specific to the bank);
· local systemic liquidity crisis scenario;
· global systemic liquidity crisis scenario;
· combined liquidity crisis scenarios (idiosyncratic crisis with local systemic crisis and seperately idiosyncratic crisis withglobal systemic crisis);
· deposit outflows in a one-month horizon;
· scenario of accelerated deposit withdrawals via electronic channels
· ESG liquidity crisis scenario.
For each of the above scenarios, the bank estimates the minimum survival horizon. For selected scenarios, the bank sets survival horizon limits which are subsequently included in the liquidity risk appetite.
In addition, the bank performs stress tests for intraday liquidity as well as reverse stress tests.
Risk reporting
The responsibility for reporting liquidity risk rests with the Risk Management Division, specifically the Financial Risk Department.
The results of liquidity risk measurement are reported by the Financial Risk Department on a daily basis to persons in charge of operational management of the bank’s liquidity and to persons responsible for liquidity risk management (information about intraday and current liquidity, including FX funding ratios and LCR) and – on a monthly basis – to senior executives (other liquidity ratios, including regulatory ratios).
Risk prevention and mitigation
The responsibility for supervision over the liquidity risk management process rests with the Assets and Liabilities Committee (ALCO), which also provides advice to the Management Board. ALCO prepares management strategies and recommends to the Management Board appropriate actions with regard to strategic liquidity management, including strategies of funding the bank’s activity. Day-to-day management of liquidity is delegated to the Financial Management Division. The Assets and Liabilities Management Department, which is a part of the Division, is responsible for developing and updating the relevant liquidity management strategies.
The bank has a liquidity contingency plan approved by the Management Board and Supervisory Board to cater for unexpected liquidity problems, whether caused by external or internal factors.
The plan, accompanied by stress tests, includes different types of scenarios and enables the bank to take adequate and effective actions in response to unexpected external or internal liquidity pressure through:
· identification of threats to the bank’s liquidity on the basis of a set of early warning ratios which are subject to ongoing monitoring;
· effective management of liquidity/ funding, using a set of possible remedial actions and the management structure adjusted to the stressed conditions;
· communication with customers, key market counterparties, shareholders and regulators.
In 2024, Santander Bank Polska Group focused on maintaining an optimal financing structure. The decline and subsequent stabilisation of market interest rates and the increase in liquidity surplus resulted in reduced competition for customer deposits in the banking sector. As at 31 December 2024, the loan-to-deposit ratio was 75% compared to 76% as at 31 December 2023, the consolidated Liquidity Coverage Ratio was 216%, and 218% as at 31 December 2023. The Bank also ensured proper diversification of financing sources by limiting funds obtained from the wholesale market and from the strategic investor. The concentration ratios of financing from the
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
wholesale market for the Bank as at 31 December 2024 amounted to 33.7% compared to 31.6% at the end of 2023, while the financing ratio from the strategic investor amounted to 0% (all financing was repaid) compared to 0.3% for the comparable period.
The tables below show the cumulated liquidity gap for Santander Bank Polska S.A. Group as at 31 December 2024 and in the comparable period (by nominal value).
31.12.2024 |
A'vista |
up to 1 month |
from 1 to 3 months |
from 3 to 6 months |
from 6 to 12 months |
from 1 to 2 years |
from 2 to 5 years |
above 5 years |
TOTAL |
Assets, |
30 472 121 |
24 809 518 |
18 000 451 |
15 931 558 |
23 836 286 |
31 931 701 |
67 395 754 |
69 108 307 |
281 485 696 |
including: |
|
|
|
|
|
|
|
|
|
-Cash and balances with central banks |
10 240 318 |
328 684 |
- |
- |
- |
- |
- |
- |
10 569 002 |
-Loans and advances to banks |
2 106 871 |
3 456 738 |
1 709 200 |
1 281 900 |
- |
- |
- |
290 000 |
8 844 709 |
-Loans and advances to customers |
18 124 932 |
7 013 126 |
10 833 113 |
10 323 920 |
13 585 426 |
21 458 086 |
38 002 003 |
54 650 305 |
173 990 911 |
-Investment securities |
- |
6 118 980 |
2 504 989 |
3 095 378 |
10 250 859 |
10 473 616 |
29 393 751 |
14 168 002 |
76 005 576 |
Liabilites |
159 022 784 |
36 776 904 |
31 404 140 |
8 131 225 |
7 269 350 |
4 332 119 |
5 155 407 |
110 757 |
252 202 687 |
including: |
|
|
|
|
|
|
|
|
|
- Sell-buy-back transactions |
- |
1 198 068 |
- |
- |
- |
- |
- |
- |
1 198 068 |
- Deposits from banks |
2 101 134 |
423 790 |
1 466 046 |
235 342 |
248 328 |
348 350 |
416 438 |
- |
5 239 427 |
- Deposits from customers |
156 921 651 |
34 953 553 |
29 441 940 |
6 778 802 |
2 766 088 |
343 276 |
216 599 |
12 285 |
231 434 194 |
- Debt securities in issue |
- |
200 000 |
459 933 |
1 079 332 |
4 179 391 |
3 068 637 |
2 653 794 |
98 472 |
11 739 559 |
- Subordinated liabilities |
- |
- |
- |
- |
- |
512 760 |
1 685 828 |
- |
2 198 588 |
- Lease liabilities |
- |
1 493 |
36 222 |
37 749 |
75 542 |
59 096 |
182 749 |
- |
392 851 |
Contractual liquidity mismatch/ gap |
(128 550 664) |
(11 967 387) |
(13 403 689) |
7 800 333 |
16 566 936 |
27 599 582 |
62 240 347 |
68 997 551 |
29 283 009 |
Cumulative liquidity gap |
(128 550 664) |
(140 518 050) |
(153 921 740) |
(146 121 407) |
(129 554 471) |
(101 954 888) |
(39 714 542) |
29 283 009 |
- |
Off balance positions Total |
59 628 874 |
6 285 776 |
934 587 |
587 866 |
761 252 |
371 504 |
633 572 |
23 |
69 203 453 |
-guarantees & letters of credits |
21 341 713 |
- |
- |
- |
- |
- |
- |
- |
21 341 713 |
-credit lines |
11 604 307 |
6 250 765 |
555 289 |
158 801 |
- |
- |
- |
- |
18 569 162 |
* The vast majority of other financial liabilities are within the range of 1 month
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
31.12.2023 |
A'vista |
up to 1 month |
from 1 to 3 months |
from 3 to 6 months |
from 6 to 12 months |
from 1 to 2 years |
from 2 to 5 years |
above 5 years |
TOTAL |
Assets, |
27 646 495 |
26 337 668 |
18 283 025 |
14 355 897 |
16 334 676 |
34 129 582 |
60 250 981 |
59 787 882 |
257 126 204 |
iIncluding: |
|
|
|
|
|
|
|
|
|
-Cash and balances with central banks |
8 228 594 |
140 172 |
|
- |
- |
- |
- |
- |
8 368 766 |
-Loans and advances to banks |
3 564 839 |
3 429 515 |
2 174 000 |
- |
55 000 |
- |
- |
250 000 |
9 473 354 |
-Loans and advances to customers |
15 853 062 |
6 165 386 |
10 316 861 |
9 370 163 |
12 696 480 |
19 772 096 |
35 764 965 |
49 021 044 |
158 960 057 |
-Investment securities |
- |
7 218 494 |
2 117 726 |
4 776 607 |
4 491 444 |
13 979 853 |
23 972 602 |
10 345 621 |
66 902 346 |
Liabilites |
146 588 595 |
28 296 845 |
25 946 462 |
9 755 926 |
5 496 759 |
5 839 626 |
3 407 570 |
165 547 |
225 497 330 |
including: |
|
|
|
|
|
|
|
|
|
- Sell-buy-back transactions |
- |
273 388 |
- |
- |
- |
- |
- |
- |
273 388 |
- Deposits from banks |
2 547 232 |
317 989 |
373 215 |
280 332 |
239 671 |
- |
329 787 |
- |
4 088 227 |
- Deposits from customers |
144 041 364 |
27 705 468 |
25 245 227 |
7 244 800 |
3 862 891 |
454 570 |
447 174 |
5 047 |
209 006 542 |
- Debt securities in issue |
- |
- |
300 000 |
2 193 505 |
1 319 678 |
4 924 215 |
373 203 |
- |
9 110 600 |
- Subordinated liabilities |
- |
- |
- |
- |
- |
434 800 |
2 217 871 |
- |
2 652 671 |
- Lease liabilities |
- |
- |
28 020 |
37 289 |
74 518 |
26 041 |
39 535 |
160 500 |
365 903 |
Contractual liquidity mismatch/ gap |
(118 942 101) |
(1 959 177) |
(7 663 436) |
4 599 971 |
10 837 917 |
28 289 955 |
56 843 411 |
59 622 334 |
31 628 875 |
Cumulative liquidity gap |
(118 942 101) |
(120 901 278) |
(128 564 714) |
(123 964 743) |
(113 126 826) |
(84 836 871) |
(27 993 460) |
31 628 875 |
- |
Off balance positions Total |
48 805 527 |
6 070 637 |
1 070 736 |
491 057 |
411 334 |
493 731 |
423 367 |
23 |
57 766 412 |
-guarantees & letters of credits |
15 162 702 |
- |
- |
- |
- |
- |
- |
- |
15 162 702 |
-credit lines |
7 482 642 |
6 028 728 |
618 372 |
185 372 |
- |
- |
- |
- |
14 315 113 |
* The vast majority of other financial liabilities are within the range of 1 month
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
The tables below show maturity analysis of financial liabilities and receivables for Santander Bank Polska Group as at 31 December 2024 and in the comparable period (the undiscounted cash flow – capital and interests).
31.12.2024 |
A'vista |
up to 1 month |
from 1 to 3 months |
from 3 to 6 months |
from 6 to 12 months |
from 1 to 2 years |
from 2 to 5 years |
above 5 years |
TOTAL |
Assets |
30 477 174 |
25 641 342 |
20 017 555 |
18 752 049 |
28 824 575 |
40 125 437 |
83 963 411 |
106 217 329 |
354 018 872 |
including: |
|
|
|
|
|
|
|
|
|
-Cash and balances with central banks |
10 240 318 |
328 736 |
- |
- |
- |
- |
- |
- |
10 569 055 |
-Loans and advances to banks |
2 022 557 |
3 456 742 |
1 709 200 |
1 281 900 |
- |
- |
- |
290 000 |
8 760 399 |
-Loans and advances to customers |
18 214 300 |
7 781 987 |
12 826 369 |
13 033 378 |
18 406 702 |
29 414 137 |
54 123 807 |
91 736 827 |
245 537 506 |
-Investment securities |
- |
6 138 980 |
2 504 989 |
3 181 549 |
10 417 874 |
10 711 300 |
29 839 604 |
14 190 502 |
76 984 798 |
Liabilities |
159 352 101 |
37 065 862 |
31 872 614 |
8 579 705 |
7 744 425 |
4 763 633 |
5 399 352 |
110 832 |
254 888 525 |
including: |
|
|
|
|
|
|
|
|
|
- Repurchase agreement transactions |
- |
1 199 153 |
- |
- |
- |
- |
- |
- |
1 199 153 |
- Liabilities to banks |
2 101 179 |
425 401 |
1 484 091 |
236 642 |
249 372 |
348 633 |
418 868 |
- |
5 264 186 |
- Liabilities to customers |
157 250 922 |
35 228 086 |
29 803 984 |
6 938 959 |
2 857 089 |
371 299 |
239 969 |
12 360 |
232 702 668 |
- Own emissions |
- |
211 521 |
570 219 |
1 354 142 |
4 545 466 |
3 490 311 |
2 834 540 |
98 472 |
13 104 670 |
- Subordinated liabilities |
- |
- |
- |
3 778 |
3 799 |
520 337 |
1 697 183 |
- |
2 225 097 |
- Lease liabilities |
- |
1 702 |
14 320 |
46 184 |
88 700 |
33 052 |
208 792 |
- |
392 750 |
Contractual liquidity gap |
(128 874 927) |
(11 424 520) |
(11 855 059) |
10 172 344 |
21 080 150 |
35 361 804 |
78 564 059 |
106 106 497 |
99 130 348 |
Cummulated contractual liquidity gap |
(128 874 927) |
(140 299 447) |
(152 154 506) |
(141 982 162) |
(120 902 012) |
(85 540 208) |
(6 976 149) |
99 130 348 |
- |
Off Balance positions Total |
59 628 874 |
6 285 776 |
934 587 |
587 866 |
761 252 |
371 504 |
633 572 |
23 |
69 203 453 |
-guarantees & letters of credits |
21 341 713 |
- |
- |
- |
- |
- |
- |
- |
21 341 713 |
-credit lines |
11 604 307 |
6 250 765 |
555 289 |
158 801 |
- |
- |
- |
- |
18 569 162 |
* The vast majority of other financial liabilities are within the range of 1 month
The table below presents cash flows from derivative financial instruments whose valuation was negative at the reporting date. The cash flows include IRS, FRA, CIRS, Fx Swap, Fx Forward and options transactions. The data below include undiscounted cash flow amounts from these transactions according to the contract dates. In the case of options, the valuation amount at the reporting date is included:
31.12.2024 |
up to 1 month |
from 1 to 3 months |
from 3 to 6 months |
from 6 to 12 months |
from 1 to 2 years |
from 2 to 5 years |
above 5 years |
Total |
Inflows |
33 273 299 |
27 603 603 |
24 327 140 |
34 704 267 |
20 832 004 |
14 126 634 |
22 084 033 |
176 950 981 |
Outflows |
34 846 335 |
30 872 689 |
29 358 326 |
32 504 710 |
23 822 273 |
15 672 159 |
24 800 934 |
191 877 424 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
31.12.2023 |
A'vista |
up to 1 month |
from 1 to 3 months |
from 3 to 6 months |
from 6 to 12 months |
from 1 to 2 years |
from 2 to 5 years |
above 5 years |
TOTAL |
Assets |
27 652 426 |
27 080 393 |
20 116 606 |
16 845 620 |
20 556 056 |
41 097 642 |
74 281 860 |
90 288 272 |
317 918 875 |
including: |
|
|
|
|
|
|
|
|
|
-Cash and balances with central banks |
8 228 594 |
140 192 |
- |
- |
- |
- |
- |
- |
8 368 785 |
-Loans and advances to banks |
3 565 148 |
3 429 525 |
2 174 000 |
- |
55 000 |
- |
- |
250 000 |
9 473 673 |
-Loans and advances to customers |
15 858 684 |
6 731 469 |
12 029 500 |
11 627 103 |
16 597 154 |
25 904 869 |
48 186 592 |
79 443 589 |
216 378 959 |
-Investment securities |
- |
7 241 059 |
2 137 295 |
4 902 833 |
4 598 948 |
14 315 591 |
24 687 966 |
10 480 954 |
68 364 646 |
Liabilities |
146 820 538 |
28 628 049 |
26 417 667 |
10 334 648 |
6 003 299 |
6 358 466 |
3 700 364 |
165 619 |
228 428 650 |
including: |
|
|
|
|
|
|
|
|
|
- Repurchase agreement transactions |
- |
273 607 |
- |
- |
- |
- |
- |
- |
273 607 |
- Liabilities to banks |
2 547 370 |
318 701 |
373 417 |
280 791 |
239 671 |
- |
329 787 |
- |
4 089 738 |
- Liabilities to customers |
144 273 167 |
28 021 217 |
25 656 525 |
7 465 300 |
4 017 453 |
511 197 |
481 264 |
5 119 |
210 431 242 |
- Own emissions |
- |
14 305 |
326 301 |
2 480 703 |
1 573 215 |
5 228 720 |
381 915 |
- |
10 005 159 |
- Subordinated liabilities |
- |
- |
29 714 |
65 887 |
89 283 |
578 804 |
2 450 182 |
- |
3 213 869 |
- Lease liabilities |
- |
220 |
31 710 |
41 967 |
83 677 |
39 745 |
57 215 |
160 500 |
415 035 |
Contractual liquidity gap |
(119 168 112) |
(1 547 656) |
(6 301 061) |
6 510 972 |
14 552 757 |
34 739 176 |
70 581 496 |
90 122 653 |
89 490 225 |
Cummulated contractual liquidity gap |
(119 168 112) |
(120 715 768) |
(127 016 829) |
(120 505 858) |
(105 953 100) |
(71 213 925) |
( 632 428) |
89 490 225 |
- |
Off Balance positions Total |
48 805 527 |
6 070 637 |
1 070 736 |
491 057 |
411 334 |
493 731 |
423 367 |
23 |
57 766 389 |
-guarantees & letters of credits |
15 162 702 |
- |
- |
- |
- |
- |
- |
- |
15 162 702 |
-credit lines |
7 482 642 |
6 028 728 |
618 372 |
185 372 |
- |
- |
- |
- |
14 315 113 |
In the tables above, the liquidity gap analysis does not take into account the effect of uncertainty related to flows related to CHF-indexed mortgage loans. Due to the risks described in note 48, cash flows may occur in terms, currencies and amounts other than currently included in In the opinion of the bank, however, this should not cause problems related to compliance with the liquidity regulations of the Group.
The table below presents cash flows from derivative financial instruments whose valuation was negative at the reporting date. The cash flows include IRS, FRA, CIRS, Fx Swap, Fx Forward and options transactions. The data below include undiscounted cash flow amounts from these transactions according to the contract dates. In the case of options, the valuation amount at the reporting date is included:
31.12.2023 |
up to 1 month |
from 1 to 3 months |
from 3 to 6 months |
from 6 to 12 months |
from 1 to 2 years |
from 2 to 5 years |
above 5 years |
Total |
Inflows |
17 716 271 |
14 779 734 |
8 465 640 |
14 793 387 |
9 754 676 |
6 183 001 |
12 547 323 |
84 240 031 |
Outflows |
17 766 264 |
15 493 896 |
8 793 234 |
19 273 790 |
15 696 779 |
15 339 883 |
16 380 765 |
108 744 611 |
The Group uses secured instruments to fund its activity to a limited degree only. However, in accordance with the existing contractual provisions, if the Group’s rating is reduced by three notch, the maximum potential additional security on account of those instruments would be PLN 19.0 m. At the same time, it should be noted that this potential obligation is not unconditional and its final value would depend on negotiations between the bank and its counterparty concerning the transactions.
Introduction
It is the policy of Santander Bank Polska Group to maintain a level of capital adequate to the type and scale of operations and the level of risk.
The level of own funds required to ensure safe operations of the bank and Santander Bank Polska Group and capital requirements estimated for unexpected losses is determined in accordance with:
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
· The so-called CRD IV / CRR package, which consists of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (CRR) and Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (CRD IV), which became effective on 1 January 2014 by the decision of the European Parliament and the European Banking Authority (EBA).
· Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012
· Regulation (EU) 2019/630 of the European Parliament and of the Council of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures.
· Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic,
· These requirements include the recommendations of the KNF regarding the use of national options and higher risk weight for exposures secured by real estate mortgages, including: residential real estate, for which the amount of principal or interest installment depends on changes in exchange rates or currencies other than the currencies of revenue achieved by the debtor, where a risk weight of 150% is assigned, and office premises or other commercial real estate located in the Republic of Poland, where a risk weight of 100% is assigned, except for exposures secured on commercial real estates which are used by borrower to conduct his own business and do not generate income by rent or proceeds from their sale where a risk weight of 50% is assigned,
· The Act of 5 August 2015 on macroprudential supervision over the financial system and crisis management in the financial system (“Macroprudential Supervision Act”), implementing CRD IV into the Polish law with regard to, among other things, additional capital buffers to be maintained by banks.
· Recommendations of the KNF regarding an additional capital requirement relating to the portfolio of FX mortgage loans for households.
The Management Board is accountable for capital management, calculation and maintenance processes, including the assessment of capital adequacy in different economic conditions and the evaluation of stress test results and their impact on internal and regulatory capital and capital ratios. Responsibility for the general oversight of internal capital estimation rests with the Supervisory Board.
The Management Board has delegated ongoing capital management to the Capital Committee which conducts a regular assessment of the capital adequacy of the bank and Santander Bank Polska Group, including in extreme conditions, the monitoring of the actual and required capital levels and the initiation of transactions affecting these levels (e.g. by recommending the value of dividends to be paid). The Capital Committee is the first body that defines the capital policy, principles of capital management and principles of capital adequacy assessment. All decisions regarding any increase or decrease in capital are taken ultimately by relevant authorities within the bank in accordance with the applicable law and the bank’s Statutes.
Pursuant to the bank’s information strategy, details about the level of own funds and capital requirements are presented in the separate report entitled “Information on capital adequacy of Santander Bank Polska Group as at 31 December 2024”.
According to information provided internally to the bank's key management, in 2024 the Bank and Santander Bank Polska Group met all regulatory requirements regarding capital management.
On 12 December 2017, the European Parliament and the Council adopted Regulation No 2017/2395 amending Regulation (EU) No 575/2013 as regards transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds and for the large exposures treatment of certain public sector exposures denominated in the domestic currency of any Member State. This Regulation entered into force on the next day following its publication in the Official Journal of the European Union and has been applicable since 1 January 2018.
Having analysed Regulation No. 2017/2395, Santander Bank Polska Group has decided to apply the transitional arrangements provided for therein, which means that the full impact of the introduction of IFRS 9 will not be taken into account for the purpose of capital adequacy assessment of Santander Bank Polska Group.
Since June 2020, the Group applied the updated rules for transitional arrangements related to IFRS 9 in accordance with the Regulation of the European Parliament and of the Council (EU) 2020/873 of 24 June 2020. Based on the changes resulting from the above-mentioned Regulation and Art. 473a (7a) since June 2020 the Group uses a derogation in the form of assigning a risk weight equal to 100% to the adjustment value included in own funds.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
As at 31 December 2024, the total own funds of Santander Bank Polska Group were PLN 69 881 k higher than the Group’s total own funds which would have otherwise been calculated if the transitional arrangements for mitigating the introduction of IFRS 9 had not been applied.
The Group’s total capital ratio is 4 bps higher than the total capital ratio if no transitional arrangements were applied for mitigating the impact of the introduction of IFRS 9.
The Group’s Tier I ratio is 4 bps higher than the Tier I ratio if no transitional arrangements were applied for mitigating the impact of the introduction of IFRS 9.
Santander Bank Polska Group has disclosed own funds, risk-weighted assets, capital ratios, as well as the leverage ratio, both including and excluding application of transitional solutions stemming from Article 473a of Regulation (EU) No 575/2013.
For details see the Information on capital adequacy of Santander Bank Polska Group as at 31 December 2024 (Chapter III, Section 3 “Transitional arrangements for mitigating the impact of the introduction of IFRS 9 on own funds”). {to be removed}
Capital Policy
As at 31 December 2024, the minimum capital ratios satisfying the provisions of the CRR and the Macroprudential Supervision Act as well as regulatory recommendations regarding additional own funds requirements under Pillar 2 at the level of Santander Bank Polska S.A. were as follows:
· Tier 1 capital ratio of 9.52%;
· total capital ratio of 11.52%;
for Santander Bank Polska Group, those ratios were as follows:
· Tier 1 capital ratio of 9,530%;
· total capital ratio of 11,533%.
To mitigate the risk of credit crunch arising from the Covid-19 pandemic, on 18 March 2020 the Minister of Finance, issued a regulation based on the recommendation of the Financial Stability Committee removing banks’ obligation to keep the systemic risk buffer of 3%.
The aforementioned capital ratios take into account:
· The minimum capital ratios as required by the CRR: Common Equity Tier 1 ratio at 4.5%, Tier 1 capital ratio at 6.0% and total capital ratio at 8.0%.
· The KNF’s decision of 5 November 2019, under which the previous recommendations issued on 15 October 2018 and 28 November 2018 regarding an additional capital requirement for Santander Bank Polska S.A. relating to the portfolio of FX mortgage loans for households have expired: the decision followed the process of annual identification of banks with material exposure in respect of FX mortgage-backed loans which concluded that Santander Bank Polska S.A. had not reached the materiality threshold in relation to such loans. Accordingly, the KNF did not impose an additional buffer at the bank level to mitigate the risk arising from mortgage loans for individuals.
· The additional capital requirement was set at the level of Santander Bank Polska Group in accordance with the KNF’s decision of 21 December 2023. As at 31 December 2024, the buffer related to the portfolio of FX mortgage loans for households was 0.013 p.p for the total capital ratio, 0.010 p.p. for the Tier 1 capital ratio and 0.007 p.p. for the Common Equity Tier 1 ratio.
· The capital buffer for Santander Bank Polska S.A. as other systemically important institution: according to the letter of 19 December 2017, the KNF identified Santander Bank Polska S.A. as other systemically important institution and imposed on it an additional capital buffer. Pursuant to the KNF’s decision of 16 December 2022, Santander Bank Polska S.A. maintains additional own funds of 1 p.p. Santander Bank Polska Group keeps the capital buffer at the same level.
· The capital conservation buffer maintained in accordance with the Macroprudential Supervision Act: following adaptation to the CRR requirements, in 2019 the buffer reached the maximum level of 2.50 p.p.
· The countercyclical buffer implemented by the Macroprudential Supervision Act and amended by the Minister of Finance by a way of regulation: Since 1 January 2016, the countercyclical buffer has been set at 0% for credit exposures in Poland. At the meeting held on 14 June 2024, the Financial Stability Committee passed a resolution on the recommendation for setting the countercyclical capital buffer at:
• 1% – after 12 months;
• 2% – after 24 months
from the date when the Minister of Finance has issued a relevant regulation in this area. Regulation of the Minister of Finance on the countercyclical capital buffer (dated 18 September 2024) came into force on 24 September 2024.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
· An institution-specific counter-cyclical buffer for exposures from other countries as at 31.12.2024 at the Santander Bank Polska Group level (i.e. consolidated) is 0.02%. Santander Bank Polska Group calculates the countercyclical buffer specific for a given institution as per the Act of 5 August 2015 on macroprudential supervision over the financial system and crisis management in the financial system.
· On 17 December 2024, the Management Board of Santander Bank Polska S.A. received a letter from the KNF stating that the Bank’s sensitivity to the possible materialisation of stress scenarios (affecting the level of own funds and risk exposure) was assessed as low in the supervisory review and evaluation process. The total capital add-on recommended under Pillar 2 offset by the capital conservation buffer is 0.00 p.p. on a standalone and 0.00 p.p. on a consolidated basis. Consequently, the KNF does not set an additional P2G add-on to absorb potential losses caused by a stress event.
Components of the minimum capital requirement |
31.12.2024 |
31.12.2023 |
|
Minimal capital ratios |
Common Equity Tier 1 capital ratio |
4.5% |
4.5% |
Tier 1 capital ratio |
6% |
6% |
|
Total capital ratio |
8% |
8% |
|
Additional capital requirement for Santander Bank Polska relating to the portfolio of FX mortgage loans for households |
Santander Bank Polska |
no requirement |
no requirement |
Santander Bank Polska Capital Group: |
|
|
|
· for total capital ratio: |
ü 0.013 p.p. |
ü 0.013 p.p. |
|
· Tier 1 capital ratio: |
ü 0.010 p.p. |
ü 0.010 p.p. |
|
· for Common Equity Tier 1 capital ratio: |
ü 0.007 p.p |
ü 0.007 p.p |
|
The capital buffer for Santander Bank Polska as other systemically important institution |
ü 1 p.p. |
ü 1 p.p. |
|
The capital conservation buffer maintained in accordance with the Macroprudential Supervision Act |
ü 2.5 p.p. |
ü 2.5 p.p. |
|
The systemic risk buffer(SRB) |
ü 0 p.p. |
ü 0 p.p. |
|
The institution specific countercyclical buffer(BRS) |
ü 0.02 p.p. |
ü 0.02 p.p |
|
The bank's sensitivity to an unfavorable macroeconomic scenario measured using the supervisory stress tests results (P2G) |
Santander Bank Polska |
ü 0 p.p. |
ü 0.37 p.p. |
Santander Bank Polska Capital Group: |
ü 0 p.p. |
ü 0.37 p.p. |
Regulatory Capital
The capital requirement for Santander Bank Polska Group is determined in accordance with Part 3 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (CRR), as amended, inter alia, by Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic, which was the official legal basis as as at the reporting date, i.e. 31 December 2024.
Santander Bank Polska Group uses the standardised approach to calculate the capital requirement for credit risk, market risk and operational risk. According to this approach, the total capital requirement for credit risk is calculated as the sum of risk-weighted exposures multiplied by 8%.
The exposure value for these assets is equal to the carrying amount, while the value of off-balance sheet liabilities corresponds to their balance sheet equivalent. Risk-weighted exposures are calculated by means of applying risk weights to all exposures in accordance with the CRR.
The table below presents the calculation of the capital ratio for Santander Bank Polska Group as at 31 December 2024 and in the comparative period.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
|
|
31.12.2024 |
31.12.2023* |
I |
Total Capital requirement (Ia+Ib+Ic+Id+Ie), of which: |
11 817 712 |
11 241 537 |
Ia |
- due to credit risk & counterparty credit risk |
9 589 194 |
9 584 405 |
Ib |
- due to market risk |
255 220 |
155 375 |
Ic |
- due to credit valuation ajdustment risk |
77 264 |
52 630 |
Id |
- due to operational risk |
1 785 453 |
1 392 796 |
Ie |
- due to securitisation |
110 581 |
56 331 |
II |
Total own funds* |
28 614 676 |
28 927 564 |
III |
Reductions |
2 494 103 |
2 721 799 |
IV |
Own funds after reductions (II-III) |
26 120 573 |
26 205 765 |
V |
CAD [IV/(I*12.5)] |
17,68% |
18,65% |
VI |
Tier I ratio |
16,78% |
17,27% |
* data for the relevant periods include profits included in own funds in accordance with the applicable EBA guidelines
Internal Capital
Notwithstanding the regulatory methods for measuring capital requirements, Santander Bank Polska S.A. carries out an independent assessment of current and future capital adequacy as part of the internal capital adequacy assessment process (ICAAP). The purpose of the process is to ensure that the level and nature of own funds guarantee the solvency and stability of the bank’s and the Group’s operations.
The capital adequacy assessment is one of the fundamental elements of the bank’s strategy, the process of defining risk appetite and the process of planning.
In the ICAAP the Group uses assessment models based on the statistical loss estimation for measurable risks, such as credit risk, market risk and operational risk, plus its own assessment of capital requirements for other material risks not covered by the model, e.g. reputational risk and compliance risk.
The internal capital for the credit risk is estimated on the basis of risk parameters including the probability of default (PD) by Santander Bank Polska S.A. customers and the loss given default (LGD).
The Group performs an internal assessment of capital requirements, including under stressed conditions, taking into account different macroeconomic scenarios.
Internal capital estimation models are assessed and reviewed annually to adjust them to the scale and profile of the business of Santander Bank Polska S.A. and to take account of any new risks and the management’s judgement.
The review and assessment is the responsibility of the bank’s risk management committees, including: the Capital Committee and the Models and Methodology Panel, which is part of the Risk Management Forum.
Subordinated Liabilities
As part of the strategy to increase the Tier 2 capital, on 2 December 2016 Santander Bank Polska issued own bonds of EUR 120m, allocating them to Tier 2 in accordance with the KNF’s decision of 24 February 2017. Since 3 December 2021, it is subject to amortization due to the final 5 years of the loan maturity according to Art. 64 CRR.
On 22 May 2017, the bank issued additional subordinated bonds with a nominal value of EUR 137.1m and by the KNF’s decision of 19 October 2017 was authorised to allocate them to the Tier 2 capital. Since 22 May 2022, it is subject to amortization due to the final 5 years of the loan maturity according to Art. 64 CRR.
On 12 June 2018, Santander Bank Polska S.A. obtained the KNF’s approval for allocating series F subordinated bonds with a total nominal value of PLN 1bn, issued on 5 April 2018, to Tier 2 capital instruments. Since 5 April 2023, it is subject to amortization due to the final 5 years of the loan maturity according to Art. 64 CRR. For more information on subordinated liabilities, see note 34.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Interest income and income similar to interest |
1.01.2024- |
1.01.2023- |
Interest income on financial assets measured at amortised cost |
16 005 671 |
14 925 201 |
Loans and advances to enterprises |
4 878 243 |
4 913 564 |
Loans and advances to individuals, of which: |
8 018 021 |
8 077 851 |
Home mortgage loans |
3 813 317 |
4 094 335 |
Loans and advances to banks |
905 333 |
815 574 |
Loans and advances to public sector |
108 816 |
87 356 |
Reverse repo transactions |
667 909 |
605 690 |
Debt securities |
1 490 592 |
443 136 |
Interest recorded on hedging IRS |
(63 243) |
(17 970) |
Interest income on financial assets measured at fair value through other comprehensive income |
2 004 322 |
2 472 065 |
Loans and advances to enterprises |
283 496 |
224 159 |
Loans and advances to public sector |
16 790 |
24 846 |
Debt securities |
1 704 036 |
2 223 060 |
Income similar to interest - financial assets measured at fair value through profit or loss |
68 300 |
82 910 |
Loans and advances to enterprises |
- |
1 420 |
Loans and advances to individuals |
15 191 |
27 001 |
Debt securities |
53 109 |
54 489 |
Income similar to interest on finance leases |
1 049 094 |
929 582 |
Total income |
19 127 387 |
18 409 758 |
The impact of payment deferrals on the Group’s net interest income in 2024 totalled PLN 134,500 k (31.12.2023: PLN 49,298k).
It was recognised as an adjustment to the gross carrying amount of mortgage loans due to the change of expected cash flows and a decrease in interest income.
Interest expenses |
1.01.2024- |
1.01.2023- |
Interest expenses on financial liabilities measured at amortised cost |
(5 254 171) |
(5 293 859) |
Liabilities to individuals |
(1 970 168) |
(2 167 759) |
Liabilities to enterprises |
(1 433 304) |
(1 695 634) |
Repo transactions |
(271 950) |
(230 261) |
Liabilities to public sector |
(416 988) |
(369 161) |
Liabilities to banks |
(211 973) |
(208 181) |
Lease liability |
(22 160) |
(18 602) |
Subordinated liabilities and issue of securities |
(927 628) |
(604 261) |
Total costs |
(5 254 171) |
(5 293 859) |
Net interest income |
13 873 216 |
13 115 899 |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Fee and commission income |
1.01.2024- |
1.01.2023- |
Electronic and payment services |
295 573 |
285 759 |
Current accounts and money transfer |
401 270 |
391 131 |
Asset management fees |
292 214 |
236 051 |
Foreign exchange commissions |
871 056 |
761 219 |
Credit commissions incl. factoring commissions and other |
459 488 |
462 172 |
Insurance commissions |
331 876 |
281 753 |
Commissions from brokerage activities |
155 650 |
139 944 |
Credit cards |
128 528 |
138 403 |
Card fees (debit cards) |
441 454 |
435 219 |
Off-balance sheet guarantee commissions |
142 404 |
131 156 |
Finance lease commissions |
32 571 |
32 207 |
Issue arrangement fees |
16 746 |
21 273 |
Distribution fees |
20 167 |
15 274 |
Total |
3 588 997 |
3 331 561 |
Fee and commission expenses |
1.01.2024- |
1.01.2023- |
Electronic and payment services |
(94 229) |
(82 827) |
Current accounts and money transfer |
(42 085) |
(27 324) |
Distribution fees |
(10 693) |
(9 180) |
Commissions from brokerage activities |
(15 293) |
(13 666) |
Credit cards |
(20 737) |
(21 752) |
Card fees (debit cards) |
(130 269) |
(119 362) |
Credit commissions paid |
(85 684) |
(110 196) |
Insurance commissions |
(11 988) |
(14 089) |
Finance lease commissions |
(49 991) |
(48 209) |
Asset management fees and other costs |
(3 313) |
(4 849) |
Commissions paid to other banks |
(15 454) |
(13 052) |
Off-balance sheet guarantee commissions |
(88 717) |
(75 467) |
Brokerage fees |
(21 050) |
(12 334) |
Other |
(90 030) |
(62 252) |
Total |
(679 533) |
(614 559) |
Net fee and commission income |
2 909 464 |
2 717 002 |
Included above is fee and commission income on credits, credit cards, off-balance sheet guarantees and leases of PLN 762 ,991 k (31.12.2023: PLN 763 ,938 k) and fee and commission expenses on credit cards, leases and paid to credit agents of PLN (156,412) k (31.12.2023: PLN (180 ,157k) other than fees included in determining the effective interest rate, relating to financial assets and liabilities not carried at air value through profit and loss.
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Dividend income |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Dividends income from investment securities measured at fair value through other comprehensive income |
10 624 |
9 693 |
Dividends income from investment securities measured at fair value through profit or loss |
- |
480 |
Dividends income from equity financial assets held for trading |
5 187 |
1 298 |
Total |
15 811 |
11 471 |
Net trading income and revaluation |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Derivative instruments |
190 492 |
(9 726) |
Interbank FX transactions and other FX related income |
(82 346) |
231 166 |
Net gains on sale of equity securities measured at fair value through profit or loss |
(5 882) |
24 004 |
Net gains on sale of debt securities measured at fair value through profit or loss |
90 111 |
50 440 |
Change in fair value of loans and advances mandatorily measured at fair value through profit or loss |
182 |
10 735 |
Total |
192 557 |
306 619 |
The amounts include CVA and DVA adjustments which in 2024 and 2023 totalled PLN 227k and PLN (6 800)k respectively.
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
|
Net gains on sale of debt securities measured at fair value through other comprehensive income |
15 012 |
5 842 |
Net gains on sale of debt securities measured at fair value through profit or loss |
1 |
- |
Net gains on sale of equity securities measured at fair value through profit and loss |
- |
2 887 |
Change in fair value of financial securities measured at fair value through profit or loss |
1 808 |
13 084 |
Impairment losses on securities |
- |
(2 016) |
Total profit (losses) on financial instruments |
16 821 |
19 797 |
Change in fair value of hedging instruments |
(28 641) |
(419 312) |
Change in fair value of underlying hedged positions* |
37 583 |
394 394 |
Total profit (losses) on hedging and hedged instruments |
8 942 |
(24 918) |
Total |
25 763 |
(5 121) |
* details in note 43
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
Other operating income |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Income from services rendered |
27 609 |
38 390 |
Release of provision for legal cases and other assets |
51 782 |
31 050 |
Recovery of other receivables (expired, cancelled and uncollectable) |
69 |
194 |
Received compensations, penalties and fines |
2 282 |
6 782 |
Gains on lease modifications |
3 332 |
9 168 |
Settlements of leasing agreements |
8 487 |
7 891 |
Income from claims received from the insurer |
6 210 |
3 979 |
Income from additional charges for leasing contracts |
12 914 |
11 020 |
Other |
72 356 |
60 427 |
Total |
185 041 |
168 901 |
Impairment allowances for expected credit losses on loans and advances measured at amortised cost |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Charge for loans and advances to banks |
245 |
(259) |
Stage 1 |
245 |
(259) |
Stage 2 |
- |
- |
Stage 3 |
- |
- |
POCI |
- |
- |
Charge for loans and advances to customers |
(1 057 394) |
(1 124 593) |
Stage 1 |
(22 436) |
(153 481) |
Stage 2 |
(571 843) |
(573 916) |
Stage 3 |
(581 177) |
(468 711) |
POCI |
118 062 |
71 515 |
Recoveries of loans previously written off |
45 545 |
38 869 |
Stage 1 |
- |
- |
Stage 2 |
- |
- |
Stage 3 |
45 545 |
38 869 |
POCI |
- |
- |
Off-balance sheet credit related facilities |
28 212 |
(63 394) |
Stage 1 |
7 816 |
(9 385) |
Stage 2 |
4 214 |
(37 617) |
Stage 3 |
16 182 |
(16 392) |
POCI |
- |
- |
Total |
(983 392) |
(1 149 377) |
Employee costs |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Salaries and bonuses |
(1 983 539) |
(1 889 786) |
Salary related costs |
(340 301) |
(316 485) |
Cost of contributions to Employee Capital Plans |
(16 494) |
(14 199) |
Staff benefits costs |
(64 869) |
(51 114) |
Professional trainings |
(14 381) |
(14 630) |
Retirement fund, holiday provisions and other employee costs |
1 273 |
(8 169) |
Restructuring provision |
- |
10 088 |
Total |
(2 418 311) |
(2 284 295) |
Consolidated Financial Statements of Santander Bank Polska Group for 2024 |
General and administrative expenses |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Maintenance of premises |
(140 889) |
(131 444) |
Cost of short-term lease, low-value assets lease and other payments |
(10 815) |
(10 693) |
Non-tax deductible VAT - lease |
(38 379) |
(34 562) |
Marketing and representation |
(180 856) |
(196 232) |
IT systems costs |
(497 849) |
(500 894) |
Cost of BFG, KNF and KDPW |
(294 010) |
(211 380) |
Postal and telecommunication costs |
(58 939) |
(56 015) |
Consulting and advisory fees |
(85 052) |
(73 191) |
Cars, transport expenses, carriage of cash |
(46 121) |
(59 477) |
Other external services |
(275 414) |
(201 659) |
Stationery, cards, cheques etc. |
(16 393) |
(20 417) |
Sundry taxes and charges |
(47 665) |
(41 945) |
Data transmission |
(22 641) |
(29 907) |
KIR, SWIFT settlements |
(44 287) |
(33 104) |
Security costs |
(15 631) |
(15 749) |
Costs of repairs |
(13 155) |
(5 158) |
Other |
(31 301) |
(28 702) |
Total |
(1 819 397) |
(1 650 529) |
Other operating expenses |
1.01.2024-31.12.2024 |
1.01.2023-31.12.2023 |
Charge of provisions for legal cases and other assets |
(94 786) |
(63 447) |
Impairment loss on property, plant, equipment, intangible assets covered by lease agreements and ot |