Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
1
2024 Report on activities
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
2
This document is a translation from the original Polish version. In case of any discrepancies between the Polish and English versions, the Polish version shall prevail.
In accordance with § 71 item 8 of the Ordinance of the Minister of Finance on current and periodical information provided by issuers of securities and the conditions for regarding information required by the law of non-member state as equivalent dated 29 March 2018 (Journal of Laws of 2018, item 757, as amended), report on activities of the Bank and the Group was prepared in the single report. The information in the report refer to the Group (including the Bank) or only to the Bank as specified in the individual chapters, tables or descriptions.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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CONTENTS
I. Basic information about the Capital Group of Bank Handlowy w Warszawie S.A. ........................................... 5
1. H ISTORY OF THE C APITAL G ROUP OF B ANK H ANDLOWY W W ARSZAWIE S.A. .................................................................. 5
2. O WNERSHIP STRUCTURE ............................................................................................................................................. 5
3. B USINESS PROFILE OF B ANK H ANDLOWY W W ARSZAWIE S.A. ....................................................................................... 5
4. S TRATEGY 2025-2027 - DEVELOPMENT PROSPECTS FOR THE B ANK H ANDLOWY W W ARSZAWIE S.A. ............................ 6
5. M AJOR RESULTS AND DEVELOPMENTS IN 2024 ............................................................................................................ 8
6. A WARDS AND HONORS .............................................................................................................................................. 10
II. Poland’s economy in 2024 ................................................................................................................................... 12
1. M AIN MACROECONOMIC TRENDS ............................................................................................................................... 12
2. M ONEY AND FOREX MARKETS ..................................................................................................................................... 13
3. C APITAL MARKET ....................................................................................................................................................... 14
4. B ANKING SECTOR ...................................................................................................................................................... 15
5. F ACTORS WITH AN IMPACT ON THE FINANCIAL RESULTS OF THE B ANK ’ S G ROUP IN 2025 ................................................ 17
III. The organizational structure of the Capital Group of Bank Handlowy w Warszawie S.A. ............................ 19
IV. Selected financial data of the Capital Group of Bank Handlowy w Warszawie S.A. .................................... 20
1. F INANCIAL RESULTS OF THE B ANK AND THE G ROUP IN 2024 ....................................................................................... 20
2. I NTEREST RATES ....................................................................................................................................................... 32
3. I NSTITUTIONAL B ANKING S EGMENT ........................................................................................................................... 33
4. C ONSUMER B ANKING S EGMENT ................................................................................................................................ 41
5. D EVELOPMENT OF DISTRIBUTION CHANNELS .............................................................................................................. 43
6. C HANGES IN IT TECHNOLOGIES ................................................................................................................................. 45
7. E QUITY INVESTMENTS ............................................................................................................................................... 47
V. Significant risks related to the activities of the Capital Group of Bank Handlowy w Warszawie S.A. ........ 49
1. S IGNIFICANT RISKS AND THREATS RELATED TO THE G ROUP ’ S OPERATING ENVIRONMENT ............................................... 49
2. S IGNIFICANT RISKS AND THREATS RELATED TO THE G ROUP AND ITS ACTIVITY ................................................................ 66
VI. Sustainability Statement of Bank Handlowy w Warszawie S.A. and Capital Group of Bank Handlowy w Warszawie S.A. ...................................................................................................................................................... 77
1. G ENERAL INFORMATION ............................................................................................................................................ 77
2. C HAPTER ON THE ENVIRONMENT ............................................................................................................................. 103
3. C HAPTER ON THE SOCIAL MATTERS .......................................................................................................................... 154
4. B USINESS CONDUCT ............................................................................................................................................... 189
VII. Cultural patronage and sponsorship ................................................................................................................ 195
VIII. Investor information ........................................................................................................................................... 196
1. O WNERSHIP STRUCTURE AND STOCK PRICES ON THE W ARSAW S TOCK E XCHANGE ...................................................... 196
2. I NFORMATION ON OWN SHARES BUY - BACK ............................................................................................................... 197
3. D IVIDEND PAYMENT HISTORY ................................................................................................................................... 198
4. R ATING .................................................................................................................................................................. 199
5. I NVESTOR RELATIONS .............................................................................................................................................. 199
IX. Statements of Bank Handlowy w Warszawie S.A. concerning application of corporate governance standards in 2024 .............................................................................................................................................. 200
1. C ORPORATE GOVERNANCE STANDARDS APPLIED BY B ANK H ANDLOWY W W ARSZAWIE S.A. ........................................ 200
2. I NFORMATION ON THE APPLICATION OF C ORPORATE G OVERNANCE P RINCIPLES FOR S UPERVISED I NSTITUTIONS .......... 200
3. D ESCRIPTION OF MAIN FEATURES OF INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IMPLEMENTED IN THE B ANK WITH RESPECT TO THE PROCESS OF PREPARATION OF FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS . 201
4. S IGNIFICANT SHAREHOLDINGS ................................................................................................................................ 202
5. H OLDERS OF ALL SECURITIES WITH SPECIAL CONTROL RIGHTS TOGETHER WITH A DESCRIPTION OF THOSE RIGHTS .......... 202
6. R ESTRICTIONS ON THE EXERCISE OF VOTING RIGHTS ................................................................................................. 202
7. R ESTRICTIONS ON THE TRANSFER OF OWNERSHIP OF THE SECURITIES ........................................................................ 202
8. R ULES GOVERNING THE APPOINTMENT AND DISMISSAL OF M EMBERS OF THE M ANAGEMENT B OARD AND THEIR POWERS ...... 202
9. A MENDMENTS TO THE A RTICLES OF A SSOCIATION .................................................................................................... 204
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10. G ENERAL M EETING PROCEDURE , DESCRIPTION OF ITS FUNDAMENTAL POWERS AS WELL AS SHAREHOLDER RIGHTS AND METHODS OF EXERCISING THEM .............................................................................................................................. 204
11. C OMPOSITION OF AND CHANGES TO THE M ANAGEMENT B OARD AND THE S UPERVISORY B OARD OF THE B ANK IN 2024, RULES OF PROCEDURE OF THE B ANK ’ S MANAGING AND SUPERVISORY BODIES ............................................................. 208
12. D IVERSITY P OLICY .................................................................................................................................................. 228
X. Other information about the authorities of Bank Handlowy w Warszawie S.A. and corporate governance rules ...................................................................................................................................................................... 229
1. I NFORMATION REGARDING THE REMUNERATION POLICY ............................................................................................ 229
2. S ALARIES AND AWARDS , INCLUDING BONUSES FROM PROFIT , PAID TO PERSONS MANAGING AND SUPERVISING THE B ANK ..... 231
3. T OTAL NUMBER AND NOMINAL VALUE OF THE B ANK ’ S SHARES AND SHARES IN AFFILIATED COMPANIES OF THE B ANK HELD BY MEMBERS OF THE M ANAGEMENT B OARD AND THE S UPERVISORY B OARD ................................................................... 235
4. A GREEMENTS BETWEEN THE B ANK AND MEMBERS OF THE M ANAGEMENT B OARD THAT PROVIDE FOR COMPENSATION IN CASE OF THEIR RESIGNATION OR DISMISSAL WITHOUT REASON OR AS A RESULT OF THE B ANK ’ S TAKEOVER ..................... 235
5. M ANAGEMENT POLICY ............................................................................................................................................ 235
XI. Information on pending court proceedings ..................................................................................................... 236
XII. Agreements concluded with the registered audit company ......................................................................... 236
XIII. Subsequent events ............................................................................................................................................ 236
XIV. Statement of the Bank’s Management Board ................................................................................................. 237
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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I. Basic information about the Capital Group of Bank Handlowy w Warszawie S.A.
1. History of the Capital Group of Bank Handlowy w Warszawie S.A.
Founded in 1870, Bank Handlowy w Warszawie S.A. is the oldest commercial bank in Poland today and one of the oldest continuously operating banks in Europe. After 150 years in the market, Bank Handlowy has developed a strong brand. Since 2001, the Bank has been a part of Citigroup, a global financial institution, and has since operated in Poland under the brand name of Citi Handlowy.
Today, under the brand name Citi Handlowy, Bank Handlowy w Warszawie SA offers a broad and modern range of products and services of corporate, investment and retail banking. Affiliation with Citi, the leading global financial institution, ensures that clients of Citi Handlowy have access to financial services in almost 100 countries. For more information, please visit https://www.citibank.pl/poland/homepage/english/history.htm
2. Ownership structure
The majority and strategic shareholder of the Bank is Citibank Europe Plc based in Dublin, Ireland – a company in the Citi group that brings together foreign investments.
Citi is a leading global provider of a wide range of financial services and products for corporations, institutional investors, public administration and individual clients, operating in more than 160 countries and jurisdictions. Citi provides services to business entities with international ambitions and is also a global leader in the field of wealth management services. Also, Citi offers banking services for individual clients in the United States. For more information, please visit website: https://www.citigroup.com/global/about-us
The Citi Capital Group in numbers for 2024 (Citi financial data for 2024)
Detailed information on the Bank's shareholding structure and changes in the shareholding structure made in 2024 can be found in Chapter VII Investor Information.
3. Business profile of Bank Handlowy w Warszawie S.A.
Bank Handlowy w Warszawie S.A. (‘Bank’,’Citi Handlowy’) is strategically focused on its defined target market.
In the institutional client segment, Citi Handlowy focuses on fostering its leading position among banks which provide services to international corporations and the largest local companies. Small and medium enterprises sector (SME) especially enterprises with international needs and aspirations, are another group of significant clients. In addition, the bank focuses on the acquisition of new clients (including so-called new economics participants – software producing companies) and active strengthening relations with the existing clients from selected industries. These elements are the key for further building the market advantage of the Capital Group of Bank Handlowy w Warszawie S.A.
The Group's objective is to play the role of Strategic Partner to Polish enterprises, who actively supports the expansion of the Polish industry. This is tangibly reflected in the Bank's product offer with foreign exchange transactions and products associated with trade finance and secure trade transactions being its important and inextricable part. Furthermore, the Bank strives to maintain the status of one of the safest venue for keeping institutional clients' savings, which delivers many state-of-the art and useful solutions in operational accounts and day-to-day cash management.
Report on Activities of the Bank Handlowy w Warszawie S.A.
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The Bank's sound capital position and its landmark network of international connections, is also appreciated by consumer banking clients. The Bank uses its competitive edge in this regard to foster its leader position in net worth clients banking. Aim-driven, the Bank is constantly developing its offer for Citigold clients and a unique offer - Citigold Private Client, which was launched at the end of 2015 for the most affluent clients. In the retail segment, the Bank focuses on investment products and special rewards for clients who decide to use the Bank's online wealth management products. The Bank's geographic breadth thanks to its international connections, makes the offer for individual clients more attractive and a unique experience in global banking.
Moreover, Citi Handlowy is an undisputed industry leader in credit cards with access to products from Citi global product range, accepted worldwide and providing exceptional value to the client, such as, among other rewards, loyalty reward schemes.
The Brokerage Department of Bank Handlowy (“DMBH”) is one of the most active actors in Poland’s capital market among local members of a stock exchange and provides a wide range of brokerage services to both individual and institutional clients.
The structure of the Group's revenues in 2024 (the product view presents the management view).
4. Strategy 2025-2027 - development prospects for the Bank Handlowy w Warszawie S.A.
4.1 Bank's competitive position
The Bank is in the group of 10 largest banks in Poland in terms of balance sheet total and it holds a special strong competitive position in institutional client banking and, specifically in:
• providing services to global enterprises and Polish enterprises with international aspirations;
• foreign exchange products and trade finance products;
• securitization transactions;
• cash management;
• custody and brokerage services.
In consumer banking, the Bank retains its strong market position:
• on the credit card market ;
• in a complex Wealth Management offer for affluent clients (Citi Private Client - CPC, Citigold segments).
The group is characterized by above-average strong capital position, high liquidity and good-quality credit portfolio, which offers a convenient environment for the Group to take actions aimed at driving increases in key areas. Moreover, its global reach and unique offer for institutional clients running international business activity give the Bank a crucial competitive edge. The strong position of the Bank also results from its unique experience in handling even the most complex transactions and top-quality technology solutions, which ensure smooth and solid provision of services to demanding businesses.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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The year 2024 was the last year of the 2022-2024 Strategy execution. The table below presents the implementation of the main objectives:
Strategy for 2022-2024 – financial goals:
Goal
Implementation
(2024)
Client revenue compound annual growth rate including:
CAGR +9%
+15%
institutional clients
+8%
+8%
Individual clients
+12%
+26%
Return on equity (ROE in 2024)
>12%
21,1%
Maintaining cost discipline (C/I ratio)
<50%
35%
Customer assets compound annual growth rate (% in three years)
+6%
0%
Green asset portfolio
PLN 1 billion
PLN 1.3 MM
Continuation of dividend payment , subject to regulatory approvals (% of net profit)
min. 75%
65%
(of net profit for 2023)
4.2 Development prospects
In December 2024, the Bank adopted a new Strategy for 2025-2027 assuming the development of business activities and the achievement of the following financial objectives:
• Return on equity (ROE) >15% over the entire period covered by the Strategy
• Maintained cost discipline (C/I < 45%)
• Increase in institutional client’s assets by an average of 7% annually over 3 years
• Continued dividend payout of at least 75% of net profit, subject to regulatory approval.
In connection with the ongoing process of exiting the Consumer Banking Segment and the absence of final decisions in this regard as at the date of adoption of the Strategy, it assumes the continuation of the Bank's operations based on two business segments – Institutional Banking and Consumer Banking.
The business activities will be developed based on the competitive advantages of Institutional Banking by, including but not limited to, using a global network (the implementation of modern payment solutions that meet the requirements of clients referred to as Digital Natives, dynamic growth in the area of trade finance and products optimizing the use of working capital). The Bank focuses on dynamic development in the Commercial Banking segment through, including but not limited to, the development of the offer for clients conducting cross-border operations. In addition, the Bank will develop initiatives that are in line with the national strategic priorities, such as energy transition and growing defense investments resulting from the geopolitical situation. The Bank will support enterprises in their pursuit of a more sustainable business model and participate in clients’ transactions in investment banking. An important element will also be the acquisition of new clients, specifically in the segment of international companies and Commercial Banking. Invariably, the Bank wants to maintain its leading position in the segment of global companies.
In the Consumer Banking Segment, the Bank will continue to offer clients the best service and products. The Bank will focus on maintaining the value and profitability of this segment.
At the same time, an integral part of the Bank's Strategy is the sustainable development strategy. As part of the implementation of activities in this area, the Bank will focus on supporting its clients in the process of sustainable transformation (by, among other things, providing PLN 2 billion of financing classified as sustainable), improving ESG risk management processes and continuing the transformation of its own operations.
4.3 Institutional banking
The Bank is invariably focused on the largest international corporations, capital groups investing in Poland and Polish enterprises actively participating in international transactions, or operating or planning to move some of their operations abroad. At the same time, financial sector entities, central institutions of the public sector, as well as local governments play an important role in the Bank's client portfolio. In terms of sectors, the Bank is particularly interested in cooperation with enterprises involved in Poland’s energy transition, modern services in the digital sector and e-commerce.
Taking advantage of the global reach of the Citi Group, extensive experience and a wide range of modern solutions, the Bank strives to establish extensive cooperation with clients, offering them not only comprehensive services in the financial domain (by, among other things, offering products in the field of treasury and trade solutions, trade finance, cash and working capital management, risk-hedging financial instruments, ending with the most complex transactions on the capital and debt markets), but also partnership in the transformation of the business model, enabling development in a dynamically changing operational and regulatory environment. Being aware of
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a number of regulatory and business challenges faced by companies operating in Poland, the Bank wants to share its expertise with regard to obtaining financing, operating on global markets, and last but not least a deep understanding of ESG topics, with both private and public entities in order to enhance their innovation and competitiveness.
Through the Brokerage Department, the Bank plans to develop long-term cooperation with institutional clients interested in transactions on domestic and foreign capital markets, by actively participating in conducting initial public offerings (IPOs), secondary public offerings (SPOs), accelerated equity offerings (AEOs) and tender offers to subscribe for the sale or exchange of shares. The Group provides its customers with access to foreign capital through Citi's global distribution network and enables them to conclude investment banking transactions and offers its clients a wide range of capital market transactions, both in terms of products and geography, which is an unquestionable competitive advantage. The Group aims to further support its institutional clients and develop cooperation regarding products of investment banking and capital markets.
As part of efforts taken to enhance the attractiveness of the Bank's offer, further investments are planned in digitization and automation of processes, as well as leveraging new technologies, such as artificial intelligence and data analytics – to enable the deepest possible integration of the Bank's infrastructure with clients' systems and to provide easy-to-use solutions while maintaining the highest level of cybersecurity.
4.4 Consumer banking
In accordance with the Strategy for 2025-2027, the Bank will continue to offer services to individual clients broken down into the segment of affluent clients (Citigold and Citigold Private Client), mass banking clients and card clients, or those who only use unsecured products.
Taking into account the current market conditions in Poland, namely the high level of competition, high supply of banking services on the mass market, characterized by an aggressive pricing policy, the Bank will remain focused on segments in which it can achieve an advantage. The Consumer Banking Segment will strive to leverage its competitive advantages, specifically in wealth management and customer experience. Further growth of the market share in the Citigold and Citigold Private segments is planned, supported by a wealth management offering based on an expanded open platform and advisory in a high-trust and commitment model. In addition, the Bank plans to maintain the highest quality of customer service in all channels and segments in order to continuously improve the Bank's reputation as the best institution in terms of service quality. At the same time, timely and effective handling of all types of complaints and issues that can affect the Bank's reputation will be ensured.
Where possible, it is planned to introduce intuitive, digital solutions that embrace customer self-service in order to provide them with free access to the Bank's products and services anywhere and at any time. At the same time, the highest standards of security and fraud prevention will be ensured. The Bank also plans to develop brokerage services provided under an integrated model within the Bank, providing access to the global market as well as to the domestic market.
5. Major results and developments in 2024
5.1 Summary financial data of the Bank and the Group in 2024
In 2024 the Group recorded net profit amounting to PLN 1,760,5 million, which was lower by PLN 495,9 million (i.e. 22.0%) comparing to the profit for 2023. The decrease in net profit resulted mainly from the impairment losses on assets in the Consumer Banking segment in the total amount of PLN 432.5 million, which consists of impairment loss reducing goodwill by PLN 180 million and impairment loss reducing the value of non-current assets by PLN 252 million. At the same time, the Bank recorded higher operating costs, which increased by PLN 107.8 million (i.e. 7.5% YoY) due to wage and inflation pressures.
The stand-alone net profit of the Bank (distributable) for 2024 amounted to PLN 1,792.0 million and was lower by PLN 463.2 million than the profit for 2023.
At the same time, in 2024, the Group maintained a strong and safe capital position, achieving a total capital ratio of 21.2% and TLAC TREA ratio of 24.4% as at the end of December 2024. TLAC TREA ratio is 3.2 p.p. above the TLAC capital requirement.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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Bank
Capital Group
PLN million
2024
2023
2024
2023
Total assets
72,569.2
72,664,8
72,478.1
72,573.3
Equity
9,855.5
9,668,0
9,868.5
9,729.5
Amounts due from customers*
21,367.2
20,054,5
21,367.2
20,054.5
Deposits *
53,542.8
53,347.3
53,437.2
53,192.8
Net profit
1,792.0
2,255.2
1,760.5
2,256.3
Capital adequacy ratio
20.9%
23.2%
21.2%
23.6%
* Amounts due from and deposits of non-banking entities of the financial sector, entities of the non-financial sector, including the public sector.
5.2 Key achievements in 2024
2024 was the year of implementing the growth strategy in the key areas for the Group, which is confirmed by the following achievements and events:
• The Bank granted a total of PLN 5.2 billion in financing for clients of Institutional Banking , of which PLN 2.2 billion for Global Clients, PLN 2.2 billion for Commercial Banking Clients and PLN 0.8 billion for Corporate Clients;
• The volume of loans granted to Institutional Banking clients increased by 8.5% compared to 2023 ;
• The Bank organized a bond issues for international financial institution in the total amount of PLN 3.6 billion and and the issue of Eurobonds for BGK in the total amount of €1.05 billion;
• The Bank carried out an Accelerated Share Sale transactions in the company Allegro.eu S.A. in the amount of PLN 1.9 billion and Santander Bank Polska S.A. with a value of PLN 2.46 billion - DMBH acted as the Global Coordinator in this transactions;
• The Bank granted sustainable financing in the amount of PLN 1.3 billion and thus achieved its strategic goal for 2022–2024, which was set at PLN 1 billion;
• Also, the Bank supported initiatives in the area of sustainable growth , among others by signing a factoring agreement with a company from the retail sales industry, based on the implementation of goals in the area of responsible business and sustainable growth;
• The Bank developed its platforms and conducted extensive commercialization of the CitiDirect electronic banking system - as a result, an increase in transactions processed electronically by 3% YoY was recorded;
• The Bank's focus on automating processes and settlements in real time resulted in increase in the volumes of Express Elixir instant payments by 25% compared to 2023;
• In the Consumer Banking area, the Group continued its growth in the Wealth Management area, as evidenced by an increase in the number of affluent clients (Citigold Private Client) by 7% YoY and number of CitiGold Clients by 9% YoY ;
• Deposits from individual customers increased by 5% YoY, while the balances of savings accounts and term deposits increased by 12% YoY, which shows that the Bank has built an attractive offer for it’s strategic group of clients;
• Increases were also observed in the area of investment products - the total value of funds managed in investment products purchased by individual clients through the Bank was 16% higher than the value at the end of the corresponding period in 2023;
• The observed return of customer interests in cash loans resulted in an increase in sales of these products by 27% YoY , while the continuing demand on the real estate market resulted in an increase in sales of mortgage products by 34% YoY;
• The Bank also focused on improving customer experience, incl. digital tools such as CitiKantor. In the Consumer Banking segment the number of FX transactions processed via CitiKantor increased by 12% YoY.
Report on Activities of the Bank Handlowy w Warszawie S.A.
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6. Awards and honors
In 2024, Citi Handlowy was recognized for its business activities and ESG activities. The Bank received many prestigious awards and distinctions:
Citi Handlowy with the award from Krajowy Depozyt Papierów Wartościowych (the Central Securities Depository)
The Bank was awarded by KDPW for its activity on the regulated spot market – active support for investors, flexible approach to changing market conditions and high quality of customer service. The awards were granted during the ceremony summarizing the 30th anniversary of the Central Securities Depository.
Citi Handlowy wins “ESG Eagles” award from “Rzeczpospolita” daily
The jury awarded the Bank for diversity and equal participation of women and men on the Management Board and Supervisory Board of Citi Handlowy. Citi Handlowy was among the first companies listed on the Warsaw Stock Exchange that achieved a parity on its most important corporate bodies. The jury also appreciated actions for equality and diversity, activities of employee networks, including the Citi Women Network, Disability Network, and Citi Pride, charitable activities and joint sports activities as part of Live Well at Citi, and many years of activities in cooperation with the Polish Paralympic Committee to support a more integrated society. It was also emphasized that the “pay gap” ratio at the Bank is 93%, and the Bank's credit policy takes into account environmental and social factors in its lending processes.
Citi Handlowy with the Ethical Company title
For another year in a row, Citi Handlowy was awarded the title of Ethical Company by Puls Biznesu. The award promotes the principles of ethical business and distinguishes the best practices on the market. The awards are given to companies that can boast an untarnished reputation, transparency of business activities, fairness and responsibility.
WELCOME! social project wins Diversity Charter Award
The second edition of the WELCOME! Program, which supports Polish and Ukrainian women, was recognized in the 2023 Diversity Charter Awards of the Responsible Business Forum for projects that promote diversity at work. WELCOME! is a project that supports the professional development of Polish and Ukrainian women, both in effectively searching for a stable job, raising their competences, building a mutual support network and/or developing their own business. 308 women from Poland and Ukraine took part in this edition of the program. The project was implemented by the “Work, Mom” Foundation with professional and financial support from the Citi Handlowy Foundation and the Citi Foundation.
Citi Olsztyn with the Diamond Laurel from the Region’s Marshal
The Diamond Laurel was awarded to Citi Olsztyn for special contribution to promotion of the Warmia and Mazury region in Poland and abroad in 2023. “The Best of the Best” Laurels awarded by the Warmia-Mazury Marshal is a plebiscite to select the most committed ambassadors of the region.
Citi Group named Employer of the Year by “Gazeta Olsztyńska” daily
Citi Group – Citi Handlowy and Citi Solutions Center – is the Employer of the Year 2023 according to Gazeta Olsztyńska . Citi has been developing its operations in the city of Olsztyn for nearly 25 years, including involvement in projects and activities that are important to the local community.
Citi Handlowy makes the Forbes ranking “Poland's Best Employers 2024”
Citi Handlowy was among the companies recognized in the Forbes magazine's ranking of top employers in 2024. It was ranked 4th in the “Banks and Financial Services” category. It was the fourth edition of this ranking of the best employers in Poland. According to the jury, the awarded institutions moved swiftly from managing people in a crisis environment to operating in a market where technologies are gaining strength and employees are becoming more and more empowered. The report covered several hundred best employers from 25 industries.
Citi Handlowy Cash Loan in Top 3 in the Golden Banker contest
Citi Handlowy took the third place in the Golden Banker contest. The Bank performed very well in financing cost comparisons in almost every scenario and achieved an excellent result in terms of the process and e-service.
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Citi Handlowy once again with the maximum score in the Cashless.pl ranking of financial institutions that care about LGBT+ professional and social equality. In the ranking featuring companies caring about professional and social equality of LGBT+ people, prepared by Cashless.pl, Citi Handlowy together with Citi Solutions Center received the maximum result of 100 points. The ranking is part of the Cashless for Equality project, during which surveys are sent out to dozens of companies in the financial industry. Surveys include questions about initiatives supporting the LGBT+ community, such as anti-discrimination training, additional social benefits and advertising activities.
Honorary distinction from the Polish Bank Association “Leaders and Partners of Management and Finance of Local Government Entities”
For many years, Citi Handlowy acting as a partner has been supporting local governments in building modern solutions in the field of finance. The Polish Bank Association awarded the Bank with the honorary distinction “Leaders and Partners of Management and Finance of Local Government Entities” for the effects of activities on the banking and local government market, building cross-sectoral dialogue and facilitating access to banking finance for local government entities. The Badge of Honor was awarded by the Polish Bank Association to Citi Handlowy’s employees for their outstanding contribution to the development of Polish banking, work for the development of the local government organization of Polish banks, implementation of the latest technological solutions and raising the economic knowledge in the society.
Citi Handlowy headquarters were distinguished during the World Architecture Festival in the office space category
The renovated Citi Handlowy office in the Jabłonowski Palace at 16 Senatorska Street in Warsaw was recognized as one of the most beautiful office spaces in the world during the World Architecture Festival 2024. The Bank's headquarters were appreciated for innovation and successful combination of modern solutions with the architectural spirit of the premises. The result of the revitalization are spaces fully adapted to the dynamic nature of work of a financial institution, ensuring comfort for both employees and customers.
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II. Poland’s economy in 2024
1. Main macroeconomic trends
1.1 External environment
Economic growth in 2024, despite elevated inflation and higher interest rates, remained close to the long-term trend in many economies. Global GDP in 2024 is likely to have slowed down slightly to around 2.7% YoY compared to a 2.8% YoY increase in 2023.
In 2024, inflationary pressures gradually eased, which allowed major central banks to start easing monetary policy. The European Central Bank, in response to receding inflation and economic woes in the largest economies of the eurozone, ended the year with a refinancing rate of 3.15% compared to 4.5% at the beginning of 2024. The Federal Reserve rate at the end of 2024 stood at 4.25 – 4.5%.
In 2025, global economic growth is likely to be around 2.6% of the GDP. In the eurozone, growth is likely to accelerate slightly, but it is likely to remain below the long-term average. We expect that there will be room for further interest rate cuts. A factor that raises uncertainty for global economic activity is the foreign policy of the new US administration and the possible consequences of the imposition of import tariffs. In the United States itself, this could result in intensified inflationary pressures and therefore a more restrictive monetary policy of the Federal Reserve, while for the rest of the world it poses a risk of lower growth.
1.2 Gross Domestic Product („GDP”)
Contribution to GDP growth (%) – forecast of January 31, 2025
Source: Chief Statistical Office, Citi Handlowy forecasts
Gross Domestic Product rose 2.9% in 2024, as compared to 0.1% in 2023. The GDP data turned out to be slightly weaker than the forecasts made at the beginning of 2024, but at the same time were above expectations from the end of the year. Private consumption increased by 3.1% YoY vs. a 0.3% YoY decline in 2023, while fixed capital formation increased by 1.3% YoY vs. a 12.6% YoY increase a year earlier. The annual GDP data are the harbinger of a better-than-expected growth in the fourth quarter of 2024. The biggest surprise turned out to be inventories, with a better result of fixed capital formation and consumption at the same time. The unemployment rate at the end of 2024 did not change compared to 2023 and levelled at 5.1%. Employment, on the other hand, declined by 0.4% YoY during 2024.
The year 2024 was characterized by a strong labor market. Average nominal salary in the enterprise sector grew at a double-digit rate and only slowed down to 9.8% YoY in December compared to 9.6% YoY at the end of 2023. The relatively large minimum pay raise in January 2024 contributed to the strong salary growth. Industrial output growth rose slightly to 0.9% YoY from -2% YoY in 2023, and construction output slowed down to -7.4% YoY from 4.3% YoY in 2023.
Economic growth in 2025 in Poland will be boosted by an increase in investments as a result of the inflow of EU funds and private consumption.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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1.3 Inflation
CPI vs Unemployment
Source: NBP, Chief Statistical Office, Citi Handlowy
Price levels of consumer goods and services in 2024 rose on average by 3.6%, as compared with 11.5% in 2023. In the first six months, inflation turned out to be lower than forecast and ran close to the inflation target of the National Bank of Poland, on average levelling at 2.7% YoY. The partial deregulation of energy prices in July resulted in an increase in the consumer price index in the second half of the year to around 5%. The year-average net inflation went up to 4.3% in 2024 from 10.1% in 2023. We expect inflation to peak at around 5% in the first few months of 2025, partly due to the planned hikes in indirect taxes. From the second quarter of 2025, the inflation rate is likely to start to gradually fall to around 3.5% by the end of the year, thus approaching the upper limit of deviations from the target set by the National Bank of Poland.
Since October 2023, the Monetary Policy Council has not decided to change interest rates. As a result, the reference rate stayed at 5.75% throughout 2024.
2. Money and forex markets
2.1 Exchange rates
Source: Reuters, Citi Handlowy
In 2024, the Polish zloty appreciated by about 1.8% versus the euro but declined by about 3.9% to the U.S. dollar (vs. the end of 2023). The overwhelming part of 2024 was characterized by a strong zloty, which was related, among other things, to the start of interest rate cut cycles by the world's major central banks, while interest rates in Poland remained unchanged. The EUR/PLN rate decreased from 4.34 as at the end of December 2023 to around 4.28 as at the end of the year 2024 and the USD/PLN rate increased from 3.94 to 4.10.
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The money market rates were marked by low volatility in 2024. The WIBOR 3M rate was 5.84% at the end of December 2024, compared to 5.88% at the end of December 2023. In 2024, the yield on 2-year T-bonds increased to 5.10% as at the end of 2024 from 5.06% as at the end of 2023. The yield on 10-year bonds increased by 64 bps, to 5.89% as at the end of 2024 from 5.25% as at the end of 2023.
3. Capital market
The year 2024 was marked by stabilizing inflation and the continuation of prudent policy of central banks. In Poland, after the 2023 election, the market reacted with big optimism, expecting quick reforms and an improvement in the economic situation. In 2024, when it turned out that it was more difficult to deliver on promises than expected, sentiment stalled and indices saw their lows.
In such an environment, some of the main GPW (WSE) indices showed single-digit losses, while others showed gains. In 2024, the broadest market index, WIG, gained 1.4% YoY. The index of the biggest companies, WIG20, recorded the most significant fall by 6.4% YoY. The highest growth was seen in the dividend companies index WIG-div, with its value change hitting 10.8% YoY. The mWIG40 index recorded the second highest growth, ending 2024 at a level by 5.8% higher than the end of 2023.
In terms of sectors, the following sub-indices showed the largest gains: The WIG-Odzież (WIG-Clothes) gained 23.4% YoY, the WIG-Spożywczy (WIG-Food) grew by 22.3% YoY and the WIG-Informatyka (WIG-Info) rose by 22.9% YoY. On the other hand, the greatest depreciation was recorded by WIG-Chemia (WIG-Chemistry), which lost 26.8% YoY. In addition, pressure on the quotations was observed in WIG-Paliwa (WIG-Fuel) (-22.0% YoY) and in WIG-Media (-17.6% YoY).
2024 saw a low activity level in the IPO market. Over the last 12 months, stocks of 1 company went public on the main floor of the WSE (as in 2023), but 8 companies were moved from the New Connect market. The value of the offering amounted to PLN 6.45 billion, which makes it one of the largest offerings completed on the WSE in recent years. Simultaneously, the delisting of companies from the WSE also continued. In 2024, the shares of 10 companies were removed from the WSE main floor (against 12 in 2023). Consequently, at the end of December 2024, 409 companies were traded on the WSE (compared to 413 a year before), including 43 foreign ones. Total capitalization of companies listed on the main floor reached PLN 1,496.6 billion (+3.9% YoY), 48.6% of which was represented by domestic companies (PLN 727.3 billion in nominal terms).
Stock market indices, as at 31 December 2024
Index
2024
(1)
2023
(2)
Change (%)
(1)/(2)
2022
(3)
Change (%)
(2)/(3)
WIG
79,577.32
78,459.91
1.4%
57,462.68
38.5%
WIG-PL
83,145.56
81,539.59
2.0%
58,864.46
41.2%
WIG-div
1,712.82
1,545.59
10.8%
1,088.23
57.4%
WIG20
2,192.01
2,342.99
(6.4%)
1,792.01
22.3%
WIG20TR
4,615.99
4,678.55
(1.3%)
3,465.54
33.2%
WIG30
2,805.76
2,907.55
(3.5%)
2,187.63
28.3%
mWIG40
6,122.32
5,785.21
5.8%
4,154.32
47.4%
sWIG80
23,594.64
22,904.49
3.0%
17,496.16
34.9%
Sector sub-indices
WIG-Banks
12,345.94
11,062.01
11.6%
6,251.97
97.5%
WIG- Construction
6,786.32
7,628.56
(11.0%)
4,081.96
66.3%
WIG- Chemicals
7,642.64
10,434.67
(26.8%)
10,887.39
(29.8%)
WIG-Energy
2,491.54
2,806.75
(11.2%)
2,108.92
18.1%
WIG-Games
14,000.06
15,669.10
(10.7%)
16,816.67
(16.7%)
WIG- Mining
3,822.78
4,315.32
(11.4%)
4,612.64
(17.1%)
WIG-IT
5,673.05
4,616.29
22.9%
3,974.54
42.7%
WIG-Medicines
3,134.33
2,768.40
13.2%
2,923.20
7.2%
WIG-Media
6,863.45
8,328.80
(17.6%)
6,032.39
13.8%
WIG-Automotive
7,946.26
9,254.33
(14.1%)
6,485.02
22.5%
WIG- Developers
4,148.98
3,545.06
17.0%
2,624.35
58.1%
WIG-Clothing
11,063.68
8,962.90
23.4%
5,889.48
87.9%
WIG- Oil & Gas
5,222.62
6,697.89
(22.0%)
6,010.43
(13.1%)
WIG- Food
2,692.89
2,202.63
22.3%
2,016.48
33.5%
Source: WSE, Dom Maklerski Banku Handlowego S.A.
Report on Activities of the Bank Handlowy w Warszawie S.A.
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Value of trading in shares and bonds, volume of trading in derivatives on WSE, as at 31 December 2024
2024
(1)
2023
(2)
Change (%)
(1)/(2)
2022
(3)
Change (%)
(2)/(3)
Shares (PLN million)*
689,516
564,122
22.2%
586,221
17.6%
Bonds (PLN million)
9,659
8,071
19.7%
11,802
(18.2%)
Futures (‘000 contracts)
26,733
28,835
(7.3%)
30,560
(12.5%)
Options (‘000 contracts)
423
520
(18.6%)
628
(32.6%)
Source: WSE, Brokerage Department of Bank Handlowy, *data including session and block transactions.
4. Banking sector
Net profit of the banking sector (PLN billion)
4.1 Financial results
According to data published by the Polish Financial Supervision Authority (“KNF”), the banking sector generated a net profit of PLN 42.2 billion in 2024, i.e. higher by +51% YoY, or PLN 14.2 billion, than in the previous year. Such a significant increase was due to, above all, record-high revenues, which exceeded PLN 131.2 billion (+22% YoY, or PLN 23.6 billion). On the one hand, they resulted from a steady increase in the net interest income (+12% YoY, or PLN 11.6 billion, up to PLN 107.1 billion) driven by both growing interest income and declining interest expenses. On the other hand, other revenues had a similar impact (nearly PLN 4.5 billion in revenues in 2024 vs. a loss of PLN -6.6 billion posted for 2023), having been under strong pressure from legal costs related to the ongoing CHF loan litigations in 2023. Meanwhile, net commission income recorded a much lower increase (+5% YoY, or PLN 862 million, to PLN 19.6 billion).
In 2024, the banking sector significantly improved its cost effectiveness (cost/income ratio of 39%). While the cost dynamic reached a double-digit value (+11% YoY), it was half the revenue dynamic. Administrative costs reached almost PLN 45.2 billion (+11% YoY, PLN 4.5 billion), driven by the continuously high wage pressure, which was reflected in the rising personnel costs (+13% YoY, with employment growth of 1% YoY), and inflation-related costs. The zero contribution to the Bank Guarantee Fund collected by the BFG for a second consecutive year was a visible relief, despite the simultaneous increase in the contribution to the Compulsory Resolution Fund (+7% YoY). Depreciation and amortization expenses also increased significantly (+10% YoY, or PLN 485 million, to nearly PLN 5.5 billion).
Meanwhile, higher net impairment write-offs and provisions posted in 2024 (+16% YoY, or PLN 2.6 billion, up to PLN 18.8 billion) had a negative impact on the result. The estimated amount of the bank levy paid by the banking sector amounted to PLN 5.8 billion, which also marks a significant increase (+10% YoY or PLN 544 million). At the same time, the banking sector paid PLN 13.4 billion on account of income tax.
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and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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In 2024, a rebound in the dynamics of the volume of loans in the non-financial sector was seen, amounting to - 1.9% YoY at the end of December 2023, and as much as +3.9% YoY a year later (an increase by PLN 51 billion). The improvement in growth was possible both thanks to higher growth rates in loans to households (+2.9% YoY, PLN 22 billion at the end of 2024 to PLN 789 billion, compared to -1.3% YoY at the end of 2023) and to non-financial enterprises (+4.9% YoY, PLN 18 billion at the end of 2024 to PLN 391 billion, compared to -0.7% YoY at the end of 2023). At the same time, while the segment of loans to households still showed a significant decline in the volume of loans in foreign currencies, and an improvement was recorded only in the area of PLN loans, in the segment of loans to non-financial enterprises the growth rate was almost identical for both loans in the domestic currency and in foreign currencies. In terms of loan category, the highest growth rate in loans to non-financial enterprises was seen in the current loans category (+6.9% YoY, PLN 11 billion), but a high growth rate was also recorded in investment loans (+5.8% YoY, PLN 9 billion), while volumes contracted only in the real estate loans category (-2.2% YoY, PLN 1 billion). In terms of the maturity structure, the highest growth rate was seen in the group of loans with the shortest maturity (up to one year) amounting to +7.9% YoY, PLN 8 billion, followed by long-term loans with maturities above 5 years (+5.2% YoY, PLN 9 billion), while the volume of loans with a maturity of 1 to 5 years grew with a relatively low growth rate by 3.5% YoY (PLN 4 billion).
In the consumer segment, there was a visible recovery in demand for mortgage loans. The volume of PLN- denominated mortgage loans increased by 8.4%, or PLN 34 billion, year over year as at the end of December 2024, while foreign currency loans fell by 23.4% YoY (PLN 18 billion). Growth was also observed in the segment of consumer loans, with their volume increased by 6.0% YoY (PLN 12 billion). However, negative dynamics occurred for the portfolio of current loans to sole proprietor firms and private farmers (by -5.0%, or PLN 3 billion, YoY), as well as in the category of investment loans (by -13.6%, or PLN 2 billion, YoY). In terms of time to maturity, the largest growth was in the segment of loans with time to maturity between 1 and 5 years (by +11.7%, or PLN 10 billion, YoY). The volume of loans with maturities above 5 years was growing much less dynamically (+2.3% YoY, PLN 15 billion), while in loans granted for less than a year a decrease of 7.2% YoY (PLN 3 billion) was recorded.
Data related to quality of the loan portfolio as at the end of December 2024 show further improvement in the ability of customers to service their debts in most portfolios. The share of Stage 3 loans of non-financial clients together with public sector (more than 90 days past due) fell from 5.0% at the end of 2023 to the all-time low of 4.7%. The greatest improvement (-1.6 p.p. YoY) was recorded in the portfolio of household consumer loans, which accounted for 6.4% of Stage 3 loans at the end of December. The same indicator for mortgage loans fell to merely 1.6%, primarily due to improvement in FX loans, and also due to a positive trend in PLN loans. Meanwhile, we saw an unprecedented event of this indicator being the same for loans to big companies and to SMEs, at 6.9%. As much as in the latter category it resulted from a long-term positive trend (-1.3 p.p. YoY), in the category of loans to big companies Q4 2024 saw events that contributed to a higher share of NPLs (+3.5% YoY).
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
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In 2024, the rate of inflow of deposits from non-financial entities increased from +8.9% YoY (PLN 162 billion) as at the end of 2023 to +10.3% YoY (PLN 204 billion) as at the end of December 2024. This was mainly due to an increase in the volume of public sector deposits (both central government institutions and local government institutions and social security funds), which increased by a total of +35.1% YoY (PLN 64 billion). At the same time, the growth rate of household deposits slightly waned levelling at +9.9% YoY, PLN 121 billion, while in absolute terms it mainly concerned current deposits (+12.1% YoY, PLN 101 billion), while the increase in the volume of term deposits was significantly weaker (+5.2% YoY, PLN 20 billion). The entire portfolio reached PLN 1,339 billion.
In the corporate segment, a much larger slowdown in deposit growth was recorded (+3.9% YoY, PLN 20 billion at the end of 2024, compared to +8.7% YoY at the end of 2023), with the growth rate in current deposits close to zero, and the volume of term deposits increased by 12.6% YoY (PLN 19 billion). In total, the volume of deposits of non-financial enterprises approached the level of almost PLN 525 billion.
Higher dynamic of deposits than that of loans translated into further increase in liquidity in the banking sector. The loan-to-deposit ratio of non-financial clients fell by 3.7 p.p. YoY, setting its new all-time low at the level of 61%.
5. Factors with an impact on the financial results of the Bank’s Group in 2025
5.1 War in Ukraine
On February 24, 2022, an unprecedented event took place – the invasion of the independent state of Ukraine by Russian troops. The ongoing war in a country neighboring Poland has a significant impact on the economic and operational environment in which the Bank operates. The Management Board of the Bank monitors the situation of the war in Ukraine and its direct impact on the Bank's operational activity, including the quality of the credit portfolio, which was described in the note "Risk management" in the Annual Consolidated Financial Statement of the Capital Group Bank Handlowy w Warszawie S.A. for the financial year ending on December 31, 2024.
The operating activity of the Bank
The Bank's Management Board monitors the situation of the war in Ukraine and its direct impact on lending activities and operational risk (mainly threats in cyberspace). In the case of lending activities, the Bank does not operate in Ukraine, Russia or Belarus, and the Bank's credit exposure to companies significantly involved in these countries is insignificant.
5.2 Trends in the Polish and global economy
The armed conflict between Russia and Ukraine remains the most serious risk factor in the coming quarters. Any escalation or extension of the conflict could lead to a depreciation of the zloty and other emerging market currencies, as well as it could result in raising again commodity prices, predominantly of oil and gas. Such conditions could have a negative impact on the operations of clients in energy-intensive industries. A breakdown of the ceasefire agreement in the Middle East and a possible escalation of the conflict could have similar implications.
A source of substantial risk is the persisting uncertainty regarding the scale and sustainability of the economic recovery in the eurozone, as Poland’s primary trading partner. A sluggish production activity in the western part of Europe could have a negative impact on Polish industry, curbing demand for Polish exports.
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5.3 Legal and regulatory risks
Legal risk related to the portfolio of loans indexed to foreign currencies
The Bank is carefully following the changes of the legal environment arising out of the courts’ case law regarding mortgage loans indexed to foreign currencies . On 15 June 2023, the Court of Justice of the European Union (CJEU) in case C 520/21 ruled that only the consumer may demand additional benefits resulting from the cancellation of the Swiss franc loan agreement. The Bank may only demand the return of the loan capital together with statutory interest for delay without the possibility of demanding remuneration from the customer (consumer) for non- contractual use of capital. It has been held that Directive 93/13 does not directly govern the consequences of the invalidity of a contract concluded between a seller or supplier and a consumer after the unfair terms have been removed. It is for the Member States to determine the consequences of such a finding and the measures which they adopt in that regard must comply with EU law and, in particular, with the objectives of that directive. It will be for the national courts to assess, in the light of all the circumstances of the dispute, whether the acceptance of such consumer claims is compatible with the principle of proportionality.
When estimating the risk resulting from court litigations regarding indexation clauses in mortgage loan agreements, Bank Handlowy w Warszawie S.A. continuously did not factor in receivables under its claims against borrowers for the payment of amounts equivalent to a fee for using the loan capital, therefore, the Bank does not have to revise its assumptions.
As at December 31, 2024, the Bank had receivables under CHF-indexed retail mortgage loans at the gross carrying amount of PLN 27.2 million. In addition to the provisions for individual disputes the Bank maintained a collective provision in the amount of PLN 22.8 million as at December 31, 2024 (compared to PLN 10.2 million as at December 31, 2023). Estimation of the provision assumes the expected level of probability of settlement or litigation resolution and an estimate of the Bank’s loss should a dispute be settled in court. This value, as well as provisions for individual litigation cases, is included in the group’s consolidated semi-annual financial statement under Provisions.
As at December 31, 2024, the Bank was sued in 85 cases relating to a CHF-indexed loan for a total amount of approximately PLN 40.2 million. 42 cases were legally lost, and the Bank decided to file two cassation appeals (one appeal was rejected on formal grounds, as to the second the Supreme Court refused to accept the cassation appeals for consideration). Most of the cases are in the first instance.
Commission refunds on prepaid consumer loans
On September 11, 2019, CJEU passed a ruling in the case C 383/18, indicating the following interpretation of Article 16(1) of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers (Directive): “the right of the consumer to a reduction in the total cost of the credit in the event of early repayment of the credit includes all the costs imposed on the consumer.” Hence, according to the provisions of the Directive, the above-mentioned right of the consumer includes costs both related and not related to the duration of the contract.
Starting from 28 September 2020, the Bank has been reimbursing fees using the “straight-line method” to all the consumers who repaid their consumer loans before the contractual deadline, after 11 September 2019, provided that the fee was charged during the term of the consumer loan act.
On 13 November 2020, the Bank received a decision initiating proceedings by the UOKiK (Office for Competition and Consumer Protection) regarding the practice of non-lowering the total loan cost by the prorated costs (calculated by the straight-line method) attributable to the period by which the term of the consumer loan agreement is reduced in the event of total or partial loan prepayment.
Proceeding has been closed by means of a UOKiK’s binding decision from 6 May 2021 after Bank made commitments to change that practice. In accordance with the decision, consumers who repaid their cash or card loans before contractual maturity date in the period between 18 December 2011 and 10 September 2019 may apply for recalculating the commission indicating the product, agreement and bank account number for which repayment is due. The Bank is obligated to close all the legal proceedings regarding the recalculation of the commission in which consumers are a party, and to inform about the decision as described, in particular through e-mail communication and publication of a statement on the website. Decision is implemented in accordance with its terms.
After the decision was issued, the President of the UOKiK asked the Bank to provide explanations regarding the manner in which the Bank reimburses a proportional part of the commission in the case where customer takes out another loan with the Bank in such a way that it replaces the original agreement (“Increase agreement”). The Bank decided to align its practice with the position of the UOKiK President and decided to settle the proportionate part of the commission in relation to clients who entered into the Increased agreement after 11 September 2019.
The Group constantly monitors and estimates provisions for legal risk resulting from the ruling of the CJEU regarding the reimbursement of commissions for prepaid consumer loans and updates the possible amount of
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cash outflow as reimbursement of consumer loan commissions.
Until December 31, 2024, the Bank was sued in 978 cases concerning the return of a part of commission for granting a consumer credit for the total amount of PLN 4.4 million. At that date, there were 85 pending cases with a total value of PLN 0.4 million.
The above factors may affect the financial performance of the Group in the future.
III. The organizational structure of the Capital Group of Bank Handlowy w Warszawie S.A.
The Capital Group of Bank Handlowy w Warszawie S.A. (the “Group”) consists of a parent company and subsidiaries.
Group entities fully consolidated
Entity
Core business
Capital relationship
% of authorized capital held
Accounting method
Equity (PLN ‘000)
Bank Handlowy w Warszawie S.A.*
Banking
parent
-
-
9 855,5
Handlowy Financial Services Sp. z o. o. (previously Dom Maklerski Banku Handlowego S.A.)**
Investing activity
subsidiary
100.00%
full consolidation
73,335
Handlowy - Leasing Sp. z o.o.**
Leasing
subsidiary
100.00%***
full consolidation
16,404
Handlowy Investments S.A.**
Investing activity
subsidiary
100.00%
full consolidation
4,351
Handlowy-Inwestycje Sp. z o.o.**
Investing activity
subsidiary
100.00%
full consolidation
10,738
* Equity of Bank Handlowy w Warszawie S.A. as per the statement of the financial position of the Bank for 2023
** Pre-audit data
***Including indirect share
Changes in Group’s structure
In the 2024 the structure of the Bank's Capital Group has not changed compared to the end of 2023.
Report on Activities of the Bank Handlowy w Warszawie S.A.
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IV. Selected financial data of the Capital Group of Bank Handlowy w Warszawie S.A.
1. Financial results of the Bank and the Group in 2024
This document presents financial data for both Bank and Group. As activities of the Bank account for the vast majority of operations of the Group (equity of the Bank account for 99.9% of the equity of the Group), both results and financial situation are discussed on the basis of consolidated data, except where it is expressly indicated that the data of the Bank are discussed.
1.1 . Income statement
Selected income statement items
Bank
Capital Group
Change
PLN ‘000
2024
2023
2024
2023
PLN ‘000
%
Net interest income
3,212,064
3,271,208
3,216,967
3,278,718
(61,751)
(1.9%)
Net fee and commission income
571,388
561,774
571,360
561,499
9,861
1.8%
Dividend income
45,970
15,026
11,508
11,410
98
0.9%
Net income on trading financial instruments and revaluation
597,757
796,460
597,877
796,754
(198,877)
(25.0%)
Net gain/(loss) on debt investment financial assets measured at fair value through other comprehensive income
50,652
(147,758)
50,652
(147,758)
198,410
(134.3%)
Net gain/(loss) on equity and other instruments measured at fair value through income statement
31,517
35,351
31,517
35,351
(3,834)
(10.8%)
Net gain on hedge accounting
8,874
(10,067)
8,874
(10,067)
18,941
(188.1%)
Net other operating income
(35,153)
(17,166)
(35,250)
(17,352)
(17,898)
103.1%
Total income
4,483,069
4,504,828
4,453,505
4,508,555
(55,050)
(1.2%)
Overheads and general administrative expenses and depreciation, including
(1,545,984)
(1,437,694)
(1,547,380)
(1,439,548)
(107,832)
7.5%
Overheads and general administrative expenses
(1,426,646)
(1,326,659)
(1,428,042)
(1,328,513)
(99,529)
7.5%
Depreciation/amortization of tangible and intangible fixed assets
(119,338)
(111,035)
(119,338)
(111,035)
(8,303)
7.5%
Net impairment on non-financial assets
(432,512)
-
(432,512)
-
(432,512)
-
Profit/loss on sale of other assets
585
(123)
585
(123)
708
(575.6%)
Net impairment on financial assets and provisions for off–balance sheet commitments
16,522
(18,130)
16,557
(18,006)
34,563
(192.0%)
Tax on some financial institutions
(175,250)
(190,255)
(175,250)
(190,255)
15,005
(7.9%)
Profit before tax
2,346,430
2,858,626
2,315,505
2,860,623
(545,118)
(19.1%)
Income tax expense
(554,451)
(603,436)
(555,048)
(604,275)
49,227
(8.1%)
Net profit
1,791,979
2,255,190
1,760,457
2,256,348
(495,891)
(22.0%)
The impact of individual items of the income statement on net profit is shown on the graph below:
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
21
1.1.1 Revenue
In 2024, revenues from operating activities amounted to PLN 4,453,5 million as compared to PLN 4,508.6 million in 2023, i.e. slightly decreased by PLN 55.0 million, i.e. 1.2%.
The operating result generated by the Group in 2024 was influenced in particular by:
• Net interest income amounted to PLN 3 217.0 million in comparison to PLN 3,278.7 million in 2023, which means a decrease by PLN 61.8 million (which is 1.9% YoY).
Interest income amounted to PLN 4,420.0 million in 2024 and remained almost unchanged (a slight increase of PLN 20.4 million, i.e. 0.5%) compared to 2023. After excluding "interest income from hedge accounting instruments", interest income decreased by PLN 126 million i.e. 2.9% YoY primarily in the line of amounts due from non-financial sector customers (a decrease by 15.2% YoY). Lower interest income in this area is the result of a decrease in average NBP interest rates, as a result of which the average interest rate on amounts due from non-financial sector customers decreased to 7.83% in 2024 from 9.45% in 2023. The above decrease was partially offset by interest income from investment debt financial assets (an increase by 6.1% YoY) inter alia, thanks to the increase in the balance of these assets by 1.8% YoY.
Interest expenses in 2024 amounted to PLN 1,203.0 million and were higher by PLN 82.1 million (i.e. 7.3%) compared to 2023. After excluding “interest expenses on hedge accounting instruments”, interest expenses decreased by 2.7% YoY. The largest share in interest expenses are amounts due to customers, which recorded a slight decrease by 0.7% YoY. Despite the decline in average NBP interest rates, the Bank
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
22
maintained promotional interest rates on term deposits in the Consumer Banking segment in order to increase the customer base in strategic areas.
Net fee and commission income in the amount of PLN 571.4 million compared to PLN 561.5 million in 2023 - an increase by PLN 9.9 million (i.e. 1.8% YoY). The increase in the net fee and commission income was mainly due to the Institutional Banking segment (an increase by PLN 26.4 million, i.e. at 6.6% YoY) and resulted primarily from the Bank's activity in the area of brokerage activities (increase in income by PLN 13.5 MM, i.e. 31.2% YoY) and custody services (increase in income by PLN 10.9 MM, i.e. 9.3% YoY) which is the result of the Bank taking advantage of the strong trends prevailing on the capital market in 2024
In the area of Consumer Banking segment, net fee and commission income decreased by PLN 16.5 million i.e. 10.2% YoY mainly due to higher acquisition costs in the area of payment and credit cards. On the other hand, this decrease was partially offset by higher income from the sale of insurance and investment products (increase by PLN 3.7% million, i.e. 8.4% YoY) due to higher sales of investment products – increase in the investment fund portfolio by 12.7% YoY.
• Other operating income (i.e. non-interest and non-commission income) amounting to PLN 665.2 million in comparison to PLN 668.3 million in 2023 which means maintaining the previous year’s level (a slight decrease of PLN 3.2 million, i.e. 0.5% YoY).
1.1.2 Expenses
General expenses & depreciation
Bank
Capital Group
Change
PLN ‘000
2024
2023
2024
2023
PLN ‘000
%
Personnel costs
(736,648)
(696,694)
(737,381)
(697,495)
(39,886)
5.7%
General administrative expenses, including:
(689,998)
(629,965)
(690,661)
(631,018)
(59,643)
9.5%
Telecommunication fees and IT hardware
(244,227)
(224,276)
(244,292)
(224,344)
(19,948)
8.9%
Bank Guarantee Funds costs
(89,850)
(73,791)
(89,850)
(73,791)
(16,059)
21.8%
Building maintenance and rent
(72,759)
(83,827)
(72,759)
(83,827)
11 068
(13.2%)
Total overheads
(1,426,646)
(1,326,659)
(1,428,042)
(1,328,513)
(99,529)
7.5%
Depreciation
(119,338)
(111,035)
(119,338)
(111,035)
(8,303)
7.5%
Total general expenses & depreciation
(1,545,984)
(1,437,694)
(1,547,380)
(1,439,548)
(107,832)
7.5%
General administrative and depreciation expenses amounted to of PLN 1,547,4 million in 2024, which means an increase in expenses by PLN 107.8 million (i.e. 7.5% YoY). The largest increase was recorded in remuneration costs (increase by PLN 38.5 million, i.e. 7.5% YoY) due to the prevailing inflation pressure and employment growth. Inflation also had an impact on general and administrative costs, including primarily the costs of telecommunications fees and hardware purchase costs (an increase of PLN 19,9 million, or 8.9% YoY), higher costs of advisory, auditing and consulting services (an increase of PLN 24.5 million, or 44.1% YoY). An increase was also recorded in regulatory expenses (an increase of PLN 16.1 million, or 21.8%) due to a higher contribution to the compulsory bank restructuring fund under the Bank Guarantee Fund. The above increases were partially offset by
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
23
a decrease in the costs of building maintenance by PLN 11.1 million, or 13.2% YoY due to the completion of the renovation of the Bank's headquarters.
Employment of the Group*
FTEs
2024
2023
Average employment during the year
3,038
3,002
Employment at the end of the year
3,050
3,023
Headcount
2024
2023
Average employment during the year
3,122
3,077
Employment at the end of the year
3,143
3,107
In 2024 average employment in the Group amounted to 3,038 FTEs, thus being by 1.2% higher than in 2023. The number of FTEs at the end of the period amounted to 3,050 i.e. increased by 0,9% as compared with the same period of 2023.
As of December 31, 2024 employment in the Group (headcount) amounted to 3 143 employees, of which 1,575 in Consumer Banking, 735 in Institutional Banking and 833 in support units.
*In 2024, the Bank changed the methodology for calculating average employment and employment at the end of the period. In previous periodic reports, both average employment and employment at the end of the period were calculated excluding employees absent due to illness, parenthood or unpaid leave. Currently, the Bank does not apply this exclusion. Comparative data has been changed accordingly.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
24
1.1.3 Provision for expected credit losses on financial assets and provisions for off–balance sheet commitments
Net impairment and provisions
Bank
Capital Group
Change
PLN ‘000
2024
2023
2024
2023
PLN ‘000
%
Provision for expected credit losses on receivables, including
15,258
(29,565)
15,258
(29,565)
44,823
(151.6%)
Provision for expected credit losses on financial assets – Stage 1
24,437
31,996
24,437
31,996
(7,559)
(23.6%)
Provision for expected credit losses on financial assets – Stage 2
(8,350)
(21,999)
(8,350)
(21,999)
13,649
(62.0%)
Provision for expected credit losses on financial assets – Stage 3
(2,790)
(42,607)
(2,790)
(42,607)
39,817
(93.5%)
Provision for expected credit losses - assets granted with impairment
1,961
3,045
1,961
3,045
(1,084)
(35.6%)
Provision for expected credit losses for granted off-balance sheet commitments
1,688
9,371
1,688
9,371
(7,683)
(82.0%)
Provision for expected credit losses on equity investments
(35)
(124)
-
-
-
-
Provision for expected credit losses on debt investment financial assets measured at fair value through other comprehensive income
(389)
2,188
(389)
2,188
(2,577)
(117.8%)
Provision for expected credit losses
16,522
(18,130)
16,557
(18,006)
34,563
(191.9%)
Provision for expected credit losses on financial assets and provisions for off-balance sheet commitments amounted to PLN 16.6 million (positive impact on P&L) versus PLN 18.0 million (negative impact on P&L) in 2023. The largest nominal change in the amount of net write-offs concerned the Consumer Banking segment (improvement by PLN 90.0 million YoY), primarily as a result of resolving the management provision (made during the outbreak of the COVID pandemic in the amount of PLN 17 million) and refreshing the model parameters (including, in particular, the LGD parameter due to higher recoveries on the impaired portfolio). The decrease in net write-offs in Consumer Banking was partially offset by their increase in the Institutional Banking segment (deterioration of the provision for expected credit losses by PLN 55.5 million YoY) due to provisions releases in 2023 reflecting the improving macroeconomic situation at that time.
1.1.4 Ratio analysis
The Group’s efficiency ratios
2024
2023
Return on equity (ROE)*
21.1%
29.6%
Return on assets (ROA)**
2.4%
3.1%
Net interest margin (NIM)***
4,4%
4.5%
Margin on interest-bearing assets
4,7%
5.0%
Earnings per share in PLN
13.48
17.27
Cost/income****
35%
32%
Loans/Deposits
40%
38%
Loans/Total assets
29%
28%
Net interest income to total revenue
72%
73%
Net fee and commission income to total revenue
13%
12%
* Net profit to average equity (excluding net profit for the current year) calculated on a quarterly basis;
** Net profit to average total assets calculated on a quarterly basis;
*** Net interest income to average total assets calculated on a quarterly basis;
**** Overheads, general administrative expenses, depreciation and amortization to operating income.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
25
The Bank’s efficiency ratios
2024
2023
Return on equity (ROE)*
20,1%
29.2%
Return on assets (ROA)**
2,4%
3.1%
Net interest margin (NIM)***
4,4%
4.5%
Earnings per ordinary share in PLN
13.72
17.26
Cost/Income****
35%
32%
* Net profit to average equity (including net profit for the current year) calculated on a quarterly basis
** Net profit to average total assets calculated on a quarterly basis
*** Net interest income to average total assets calculated on a quarterly basis
**** Overheads, general administrative expenses, depreciation and amortization to operating income
In 2024, the Group’s returns on equity and assets remained at levels of respectively 21.1% and 2.4% which means a decrease compared to the previous year due to the lower net profit. In turn, in the area of cost-effectiveness, the cost/income ratio was 35% due to higher operating expenses.
* Net profit for 2020 was adjusted by net impairment allowances on non-financial assets in the amount of PLN 215 million.
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
26
1.2 Consolidated statement of financial position
As of December 31, 2024, the total assets of the Group amounted to PLN 72.5 billion and remained at almost the same level as at the end of 2023. Simultaneously, total liabilities amounted to PLN 62.6 billion, slightly down by PLN 234.3 million (or 0.4%) compared to the end of 2023.
The loan-to-deposit ratio increased to 40% at the end of December 2024 (up by 2 percentage points compared to the end of December 2023).
Consolidated statement of financial position
Bank
Capital Group
As at
As at
Change
PLN ‘000
31.12.2024
31.12.2023
31.12.2024
31.12.2023
PLN’000
%
ASSETS
Cash and cash equivalents
5,794,345
1,241,724
5,794,345
1,241,724
4,552,621
366.6%
Amounts due from from banks
8,787,780
15,371,552
8,787,780
15,371,552
(6,583,772)
(42.8%)
Financial assets held for trading
4,436,319
4,061,146
4,436,319
4,061,146
375,173
9.2%
Assets pledged as collateral
-
-
-
-
-
-
Hedging derivatives
54,140
6,731
54,140
6,731
47,409
704.3%
Debt financial assets measured at fair value through other comprehensive income
30,088,771
29,560,292
30,088,771
29,560,292
528,479
1.8%
Assets pledged as collateral
200,309
697,771
200,309
697,771
(497,462)
(71.3%)
Equity investments valued at equity method
91,299
91,639
-
-
-
-
Equity and other instruments measured at fair value through income statement
172,948
141,495
172,948
141,495
31,453
22.2%
Amounts due from customers
21,367,246
20,054,454
21,367,246
20,054,454
1,312,792
6.5%
Tangible fixed assets
521,131
508,403
521,131
508,403
12,728
2.5%
Intangible assets
872,875
1,285,314
872,875
1,285,314
(412,439)
(32.1%)
Current income tax receivables
-
-
-
9
(9)
(100.0%)
Deferred income tax asset
82,273
115,401
82,284
115,413
(33,129)
(28.7%)
Other assets
300,066
217,366
300,264
217,535
82,729
38.0%
Non-current assets held- for-sale
-
9,266
-
9,266
(9,266)
(100.0%)
Total assets
72,569,193
72,664,783
72,478,103
72,573,334
(95,231)
(0.1%)
LIABILITIES
Liabilities due to banks
4,435,817
3,375,687
4,435,817
3,375,687
1,060,130
31.4%
Financial liabilities held for trading
2,755,905
3,522,203
2,755,905
3,522,203
(766,298)
(21.8%)
Hedging derivatives
72,737
92,869
72,737
92,869
(20,132)
(21.7%)
Amounts due to customers
54,090,588
54,343,400
53,985,032
54,188,815
(203,783)
(0.4%)
Provisions
120,529
111,011
120,992
111,689
9,303
8.3%
Current income tax liabilities
99,568
457,871
99,600
457,871
(358,271)
(78.2%)
Deferred tax provision
-
-
13
94
(81)
(86.2%)
Other liabilities
1,138,566
1,093,722
1,139,476
1,094,615
44,861
4.1%
Total liabilities
62,713,710
62,996,763
62,609,572
62,843,843
(234,271)
(0.4%)
EQUITY
Share capital
522,638
522,638
522,638
522,638
-
-
Supplementary capital
2,944,585
2,944,585
3,001,260
3,001,260
-
-
Own shares
(20,577)
-
(20,577)
-
(20,577)
-
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
27
Bank
Capital Group
As at
As at
Change
PLN ‘000
31.12.2024
31.12.2023
31.12.2024
31.12.2023
PLN’000
%
Revaluation reserve
(64,868)
128,406
(64,868)
128,406
(193,274)
(150.5%)
Other reserves
4,039,644
3,191,946
4,039,027
3,190,659
848,368
26.6%
Retained earnings
2,434,061
2,880,445
2,391,051
2,886,528
(495,477)
(17.2%)
Total equity
9,855,483
9,668,020
9,868,531
9,729,491
139,040
1.4%
Total liabilities and equity
72,569,193
72,664,783
72,478,103
72,573,334
(95,231)
(0.1%)
1.2.1 Assets
The largest share in the Group's asset structure at the end of 2024 was held by investment debt financial assets . Their share in total assets amounted to 41.5%. The balance of investment debt financial assets increased by PLN 528.5 million (i.e. 1.8%) compared to the end of 2023, as a result of a higher volume of bonds guaranteed by the State Treasury.
Debt securities portfolio of the Bank
As at
Change
PLN ‘000
31.12.2024
31.12.2023
PLN ‘000
%
Treasury bonds, including:
14,194,980
12,518,748
1,676,232
13.4%
covered bonds in fair value hedge accounting
2,836,707
-
2,836,707
-
Bank bonds, including:
14,846,629
10,737,222
4,109,407
38.3%
covered bonds in fair value hedge accounting
3,225,777
2,595,263
630,514
24.3%
Bonds issued by financial entities
1,849,864
2,099,422
(249,558)
(11.9%)
covered bonds in fair value hedge
505,371
236,733
268,638
113.5%
NBP bills
999,202
4,996,012
(3,996,810)
(80.0%)
Total
31,890,675
30,351,404
1,539,271
5.1%
In turn, the second largest share in the structure of the Group's assets at the end of 2024 was amounts due from customers , their share in total assets was 29.5%. The value of amounts due from customers at the end of 2024 amounted to PLN 21.4 billion and was higher by PLN 1.3 billion (i.e. 6.5%) compared to the end of 2023 as a result of a significant increase in loan volumes in the Institutional Banking segment.
The value of amounts due from clients in the Institutional Banking segment, representing the sum of amounts due from both financial sector and non-financial sector entities (i.e. excluding individual clients), amounted to PLN 15.3 billion, up by PLN 1.2 billion (i.e. 8.5%) compared to the end of 2023. This increase concerned both financial sector clients – mainly short-term loans – and the non-financial sector – including primarily the strategic segment of client asset growth – Commercial Banking.
The volume of amounts due from clients granted to individual customers slightly increased by PLN 109.7 million (i.e. 1.9%) compared to the end of 2023 and amounted to PLN 6.0 billion mainly as a result of increase in the balance of mortgage loans by PLN 134.4 million (i.e. 6.1% YoY) and cash loans (up by PLN 107.9 million, i.e. 7.3% YoY). The above increase was offset by a decrease in unsecured receivables due to lower credit card balances (down by PLN 123.5 million, i.e. 5.6% YoY).
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
28
Net amounts due from clients
Bank
Capital Group
As at
As at
Change
PLN ‘000
31.12.202 4
31.12.2023
31.12.2024
31.12.2023
PLN ‘000
%
Receivables from financial sector entities
5,107,751
4,175,333
5,107,751
4,175,333
932,418
22.3%
loans
4,804,343
3,993,717
4,804,343
3,993,717
810,626
20.3%
Reverse repo
303,408
181,616
303,408
181,616
121,792
67.1%
Receivables from non- financial sector entities, including:
16,259,495
15,879,121
16,259,495
15,879,121
380,374
2.4%
Corporate clients*
10,221,799
9,951,131
10,221,799
9,951,131
270,668
2.7%
Individuals, including:
6,037,696
5,927,990
6,037,696
5,927,990
109,706
1.9%
Unsecured loans
3,691,071
3,715,799
3,691,071
3,715,799
(24,728)
(0.7%)
Mortgage loans
2,346,625
2,212,191
2,346,625
2,212,191
134,434
6.1%
Total net receivables from clients
21,367,246
20,054,454
21,367,246
20,054,454
1,312,792
6.5%
*Corporate clients include enterprises, public sector, state-owned and private companies, co-operatives, individual enterprises, non-commercial institutions acting for the benefit of households
Loans to customers per portfolio with not recognized credit losses vs. portfolio with recognized credit losses
As at
C hange
PLN’000
31 Dec 2024
31 Dec 2023
PLN’000
%
Loans without recognized impairment (Stage 1), including:
18,569,574
17,683,703
885,871
5.0%
financial institutions
5,110,359
4,178,181
932,178
22.3%
non-financial sector entities
13,459,215
13,505,522
(46,307)
(0.3%)
institutional clients*
8,878,518
8,795,125
83,393
0.9%
individual customers
4,580,697
4,710,397
(129,700)
(2.8%)
Loans without recognized impairment (Stage 2), including:
2,702,016
2,286,856
415,160
18.2%
financial institutions
15
25
(10)
(40.0%)
non-financial sector entities
2,702,001
2,286,831
415,170
18.2%
institutional clients*
1,282,206
1,075,188
207,018
19.3%
individual customers
1,419,795
1,211,643
208,152
17.2%
Loans with recognized impairment (Stage 3), including:
622,047
793,882
(171,835)
(21.6%)
financial institutions
-
-
-
-
non-financial sector entities
622,047
793,882
(171,835)
(21.6%)
institutional clients*
280,708
379,303
(98,595)
(26.0%)
individual customers
341,339
414,579
(73,240)
(17.7%)
Purchased or originated credit-impaired loans, including:
19,320
27,205
(7,885)
(29.0%)
financial sector entities
-
-
-
-
non-financial sector entities
19,320
27,205
(7,885)
(29.0%)
institutional clients*
875
8,936
(8,061)
(90.2%)
individual customers
18,445
18,269
176
1.0%
Total gross loans to customers, including:
21,912,957
20,791,646
1,121,311
5.4%
financial institutions
5,110,374
4,178,206
932,168
22.3%
non-financial sector entities
16,802,583
16,613,440
189,143
1.1%
institutional clients*
10,442,307
10,258,552
183,755
1.8%
individual customers
6,360,276
6,354,888
5,388
0.1%
Impairment, including:
(545,711)
(737,192)
191,481
(26.0%)
Total net amounts due from customers
21,367,246
20,054,454
1,312,792
6.5%
Impairment provisions coverage ratio
66.2%
71.3%
institutional clients*
58.9%
68.9%
individual customers
73.7%
75.1%
Non-performing loans ratio (NPL)
2.9%
4.0%
* Institutional clients include enterprises, the public sector, state-owned and private companies, co-operatives, individual
Report on Activities of the Bank Handlowy w Warszawie S.A.
and Capital Group of Bank Handlowy w Warszawie S.A. in 2024
29
enterprises, non-commercial institutions acting for the benefit of households.
Gross loans to customers of the Group
As at
Change
PLN’000
31 Dec 2024
31 Dec 2023
PLN’000
%
Loans in PLN
18,143,952
17,177,473
966,479
5.6%
Loans in foreign currency
3,769,005
3,614,173
154,832
4.3%
Total
21,912,957
20,791,646
1,121,311
5.4%
1.2.2 Liabilities
As of the end of 2024 amounts due to customers were the dominant source of financing of the Group’s activity (they accounted for 74.5% of the Group’s liabilities and equity) and amounted to PLN 54.0 billion at the end of December 2024, which means maintaining the 2023 level (a slight decrease by PLN 203.8 million (i.e. 0.4%) as compared to the end of 2023. At the same time, funds on current accounts were a dominant position in amounts due to customers with a share of 66.1%, however their balance remains at a level similar to the end of last year (a slight decrease by PLN 87.9 million, i.e. 0.2% YoY). The previously observed upward trend for term deposits also slowed down and at the end of 2024 the balance of term deposits increased slightly by PLN 332.4 million or 2.0%) mainly among individual clients due to attractive interest rates on this deposits.
The deposit volumes in the Institutional Banking segment as of the end of 2024 amounted to PLN 33.4 billion, slightly down by PLN 665.2 million (i.e. 2.0%) compared to the end of 2023. The above decrease concerned mainly Global Clients and financial institutions.
The deposit volumes in the Consumer Banking segment amounted to PLN 20.1 billion and increased by PLN 909.7 million (i.e. 4.7%) compared to the end of December 2023 as a consequence of the higher balance of time deposits by 8.8% YoY due to the attractive interest rates on these deposits for clients from the strategic client group (Citigold Private Client and Citigold).
Amounts due to customers
Bank
Capital Group
As at
As at
Change
PLN ‘000
31.12.2024
31.12.2023
31.12.2024
31.12.2023
PLN ‘000
%
Deposits of financial sector entities
4,103,592
3,942,528
3,998,036
3,787,943
210,093
5.5%
Deposits of non- financial sector entities, including
49,439,196
49,404,816
49,439,196
49,404,816
34,380
0.1%
Non-financial sector entities
25,789,871
27,320,481
25,789,871
27,320,481
(1,530,610)
(5.6%)
Non-commercial institutions
337,944
382,432
337,944
382,432
(44,488)
(11.6%)
Individuals
20,079,674
19,169,969
20,079,674
19,169,969
909,705
4.7%
Public sector entities
3,231,707
2,531,934
3,231,707
2,531,934
699,773
27.6%
Other liabilities
547,800
996,056
547,800
996,056
(448,256)
(45.0%)
Total liabilities towards customers
54,090,588
54,343,400
53,985,032
54,188,815
(203,783)
(0.4%)
Deposits of financial and non-financial sector entities, including:
Liabilities in PLN
37,210,932
36,810,244
37,105,376
36,655,659
449,717
1.2%
Liabilities in foreign currency
16,331,856
16,537,100
16,331,856
16,537,100
(205,244)
(1.2%)
Total deposits of financial and non- financial sector entities
53,542,788
53,347,344
53,437,232
53,192,759
244,473
0.5%
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1.2.3 Source and use of funds
Bank
Capital Group
PLN ‘000
31.12.2024
31.12.2023
31.12.202 4
31.12.2023
Source of funds
Funds of banks
4,435,817
3,375,687
4,435,817
3,375,687
Funds of customers
54,090,588
54,343,400
53,985,032
54,188,815
Own funds with net income
9,855,483
9,668,020
9,868,531
9,729,491
Other funds
4,187,305
5,277,676
4,188,723
5,279,341
Total source of funds
72,569,193
72,664,783
72,478,103
72,573,334
Use of funds
Receivables from banks
8,787,780
15,371,552
8,787,780
15,371,552
Receivables from customers
21,367,246
20,054,454
21,367,246
20,054,454
Securities, shares and other financial assets
34,843,477
33,861,303
34,752,178
33,769,664
Other uses of funds
7,570,689
3,377,474
7,570,899
3,377,664
Total use of funds
72,569,192
72,664,783
72,478,103
72,573,334
1.2.4 Equity and the capital adequacy ratio
As compared to 2023, total equity increased by PLN 139.0 million (i.e. 1.4%) mainly due to allocation of PLN 805 million to reserve capital from the net profit reached in 2023.
The capital is fully sufficient to ensure financial security of the institution and client deposits and to support the future growth of the Group.
Group’s equity*
As at
Change
PLN ‘000
31.12.2024
31.12.2023
PLN ‘000
%
Share capital
522,638
522,638
-
-
Supplementary capital
3,001,260
3,001,260
-
-
Own shares
(20,577)
-
(20,577)
-
Revaluation reserve
(64,868)
128,406
(193,274)
(150.5%)
Other reserves
4,039,027
3,190,659
848,368
26.6%
Retained earnings
2,391,051
2,886,528
(495,477)
(17.2%)
Total equity
9,868,531
9,729,491
139,040
1.4%
* Equity net of net profit /(loss)
The following table shows the financial data used for calculation of the capital adequacy ratio on the basis of the consolidated financial statements of the Bank and the Group.
Capital adequacy ratio*
PLN’000
31.12.2024
31.12.2023**
I Common Equity Tier 1 Capital
7,124,915
7,086,384
II Total capital requirements, including :
2,687,736
2,401,607
credit risk capital requirements
1,751,377
1,624,282
counterparty risk capital requirements
101,817
102,614
Credit valuation correction capital requirements
8,688
5,533
excess concentration and large exposures risks capital requirements
0
0
total market risk capital requirements
113,887
105,048
operational risk capital requirements
711,967
564,130
Common Equity Tier 1 Capital ratio
21.2%
23.6%
Total Capital Ratio*
21.2%
23.6%
*Capital Adequacy Ratio was calculated according to the rules stated in the Regulation no 575/2013 of the European Parliament and of the Council (EU) of 26 June 2013 on prudential requirements for credit institutions and investment firms amending Regulation (EU) no 648/2012. Data as at respective reporting dates includes profits included in own funds, taking into account
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the applicable EBA guidelines.
**In connection with the above, the capital ratio presented in the table takes into account the position of the European Banking Authority (EBA) regarding the inclusion of audited financial data and retrospective adjustments (Q&A 2018_4085 and 2018_3969).
The Bank as a resolution entity that is part of a global systemically important institution outside EU (Citigroup) in accordance with the definition contained in Art. 4 (136) of the CRR, shall meet the following requirements for own funds and eligible liabilities in accordance with Art. 92a CRR:
a) a risk-based ratio of 18%, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount (TLAC TREA);
b) a non-risk-based ratio of 6,75 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure (TLAC TEM).
In accordance with the CRR regulations, after increasing by the combined buffer requirement, the required minimum level of TLAC TREA for the Bank as at 31 December 2024 is 20.81% while Bank's TLAC TREA ratio at the consolidated level at the end of December 2024 amounted to 24.39%.
The level of the required Capital ratios encompasses:
• The basic requirement for capital ratios resulting from the CRR Regulation: 8% at the own funds level, 6% at the Tier I level and TLAC TREA at the level of 18%
• The combined buffer requirement - 2.81% on consolidated basis, which consists of:
− The capital conservation buffer – 2.50%
− The other systemically important institution’s buffer – 0.25%
− Countercyclical capital buffer – 0.06%
− Systemic risk buffer – 0.00% (due to the regulation of the Minister of Finance of March 18 on the solution of the systemic risk buffer in order to limit the impact of the coronavirus on the domestic banking sector).
As at 31 December 2024, the capital adequacy ratio of the Group amounted to 21.21% and TLAC TERA ratio amounted to 24.39% and this value enables the Group to develop its lending activities.
The decrease in the total capital ratio in 2024 compared to 2023 was caused by: an increase of total risk-weighted exposure for operational and credit risk. The ratio impact also came from increase of own funds, resulting from a decrease in the value of deductions from own funds and a decrease of revaluation capital were recognized.
The increase in the level of TLAC TREA measures is due to the above-described factors affecting the level of funds and total risk exposure as well as the use of a subordinated loan in the amount of PLN 250 EUR.
On 6 June 2024, Bank concluded a subordinated loan agreement with Citibank Europe PLC with the registered office in Dublin. On 19 November 2024, in in accordance with the information presented in current announcement No. 37/2024 of 19 November 2024, the Management Board of the Bank decided to use EUR 250 million of the subordinated loan from the total amount granted in the framework subordinated loan agreement. Information on
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the implementation of the provisions of the subordinated framework loan agreement was made public in the current announcement. The amount of the loan used is EUR 250 million, its Value of the loan drawn at the equivalent according to the average exchange rate quoted by the National Bank of Poland as at 31 December 2024 is approximately PLN 1,068 million. The loan is classified as eligible liabilities, credited towards meeting the TLAC and MREL requirements. The inclusion of the loan in the TLAC TREA indicator resulted in an increase in the ratio by 3.18 p.p. (to the level of: 24.39%) compared to the situation in which the loan would not be recognized as eligible for TLAC calculation.
01 January 2025 came into force the main changes resulting from Regulation CRR3 (i.e. Regulation (EU) 2024/1623 of the European Parliament and of the Council of 31 May 2024 amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor) which has impact on Group capital adequacy.
These changes of law are intended to make standard methods of calculating requirements more sensitive and to increase the comparability of capital requirements between institutions using different calculation methods (including by using the output floor for credit risk in advanced methods or implement one common method for operational risk). The CRR3 regulations are being implemented in stages, with the largest scope of changes coming into force on 1 January 2025. In some situations, a transitional period has been established for the implementation of the target principles.
The Group estimates that on a consolidated basis, the impact of the new regulations will result in an increase in capital ratios of approximately +1.54 p.p., i.e. an increase in TCR from 21.21% as at 31 December 2024 to 22.75% as at 1 January 2025 (unaudited data). The positive impact results mainly from a change in the method for the capital requirements calculation for operational risk, with a simultaneous increase in the capital requirements for credit risk and CVA.
The change of methods for calculating the capital requirement for market risk will come into force on 1 January 2026.
The banking sector is still waiting for the finalization of legislative changes, including the adoption of regulatory technical standards for selected articles of the CRR regulation and the adoption of guidelines which may have a potential impact on the selected rules interpretation.
2. Interest rates
The table below presents weighted average effective interest rates of receivables and payables by the respective business segments of the Group:
As at 31 December 2024
Institutional Bank
Consumer Bank
in %
PLN
EUR
USD
PLN
EUR
USD
ASSETS
Receivables from banks and customers
- fixed term
7.77
4.42
6.48
8.08
-
-
Debt securities
5.96
3.89
4.48
-
-
-
LIABILITIES
Liabilities towards banks and customers
- fixed term
4.39
0.26
3.62
4.68
0.85
1.49
As at 31 December 2023
Institutional Bank
Consumer Bank
in %
PLN
EUR
USD
PLN
EUR
USD
ASSETS
Receivables from banks and customers
- fixed term
7.64
5.46
7.70
7.64
-
-
Debt securities
6.26
3.47
5.32
-
-
-
LIABILITIES
Liabilities towards banks and customers
- fixed term
4.56
1.56
3.78
5.23
0.80
1.74
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3. Institutional Banking Segment
3.1 Summary of segment’s results
In 2024, the pre-tax profit of the Institutional Banking segment decreased by PLN 95.4 million, i.e. 3.9%. The following factors affected the pre-tax profit of the Institutional Banking segment in 2024 as compared to the previous year:
• Net interest income of PLN 2,109.7 million compared to PLN 2,193.2 million in 2023 - a decrease of PLN 83.5 million, due to lower average NBP interest rates, which resulted in lower interest income from loan receivables;
• Net commission income of PLN 426.8 million compared to PLN 400.4 million in 2023, i.e. upby PLN 26.4 million, i.e. 6.6% YoY) thanks to the good economic situation on the capital market. As a result, high revenue growth was recorded in the area of brokerage and custody services;
• Profit on investment debt financial assets measured at fair value through other comprehensive income in the amount of PLN 50.7 million compared to the loss of PLN 147.8 million in 2023, i.e. improvement by PLN 198.4 million;
• General and administrative expenses and depreciation in the amount of PLN 698.1 million compared to PLN 672.1 million in 2023 - an increase of PLN 26.0 million YoY (i.e. 3.9% YoY) caused by higher technological and regulatory expenses (increase in contributions to the bank restructuring fund within the Bank Guarantee Fund);
• Provision for expected credit losses on financial assets and provisions for off-balance sheet commitments amounted to PLN 18.9 million (negative impact on the P&L) compared to PLN 36.6 million (positive impact on P&L) in 2023, due to the release of model provisions in 2023;
• Decrease in bank levy by PLN 12.4 million as a result of change in Bank’s balance structure.
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3.2 Institutional Bank
In the area of institutional banking, the Group provides comprehensive financial services to the largest Polish companies and strategic companies with a large potential of growth, and also to the largest financial institutions and to companies from the public sector.
A shared characteristic of the institutional banking clients is that they need advanced financing products and advice relating to financial services. In this area, the Group ensures a coordinated offer of investment banking, treasury and cash management products and prepares loan proposals that cover differentiated forms of financing. The innovativeness and competitiveness of offered modern financing structures is achieved by combining the knowledge and experience of the Group and thanks to cooperation within the global structure of Citigroup.
As at the end of 2024, the number of institutional clients (which include strategic clients, global clients and commercial bank clients) stood at slightly below 5,400, i.e which means maintaining the 2023 level.
In terms of client’s acquisition in the Commercial Bank segment the Bank attracted 290 new clients in 2024, including 25 Large Companies, 87 Small and Medium-Sized Companies, 77 International Clients of Commercial Banking Segment, 41 Digital and 60 Public Sector Entities. In the strategic and global client segments, the Bank established 32 new client relationships.
The table below shows the assets and liabilities by segment in the management accounting approach.
Assets
Change
PLN million
31.12.2024
31.12.2023
PLN million
%
Enterprises, including:
4,771
3,984
787
20%
SMEs
1,749
1,749
(0)
(0%)
Large enterprises
3,022
2,235
787
35%
Public Sector
180
1
179
17900%
Global Clients
4,843
5,180
(337)
(7%)
Corporate Clients
3,868
3,193
675
21%
Other*
47
47
0
0%
Total Institutional Bank
13,709
12,405
1,304
11%
Liabilities
Change
PLN million
31.12.2024
31.12.2023
PLN million
%
Enterprises, including:
9,079
8,815
264
3%
SMEs
6,590
5,693
897
16%
Large enterprises
2,489
3,122
(633)
(20%)
Public Sector
3,367
2,765
602
22%
Global Clients
15,314
16,226
(912)
(6%)
Corporate Clients
4,384
5,035
(651)
(13%)
Other*
17
46
(29)
(63%)
Total Institutional Bank
32,162
32,887
(725)
(2%)
* ‘Other’ include, among others, clients subject to restructuring and clients of Handlowy-Leasing Sp. z o.o., who are not clients of the Bank.
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Key transactions and achievements in Institutional Banking in 2024:
Credit activity
Granting new financing or increasing or extending existing ones in the amount
of PLN 5.2 B
• PLN 2.2 billion for Global Clients, among others, for a leading manufacturer of carbonated drinks, for an American company producing corn crisps, crisps and other snacks, for a leading company in the construction industry, for a company supporting financing of car purchases, for a leading manufacturer of lithium-ion batteries for the automotive industry and for a non-profit organization created by the company of the largest Polish breweries to run the Direct Recycling Program for aluminum and glass packaging;
• PLN 2.2 billion for Commercial Banking Clients, among others, for one of the largest operators of terrestrial radio and television infrastructure in Poland, for a large manufacturer of wood-based panels in Poland, for one of the largest industrial construction groups in Poland, for a network of departments of interventional cardiology, cardiac surgery and vascular surgery, for an energy company that is the first electricity seller in Poland to offer its customers a 100% green energy mix from renewable sources such as: sun, wind, water and biogas, and for a dynamically developing company specializing in the production and craft production of foam elements;
• PLN 0.8 billion for Corporate Clients, among others, for a client from the fuel and energy industry, for a leading chemical company on the European market, for the operator of the Armed Forces Support Fund and for two companies from an international capital group operating in the pharmaceutical industry.
Transactional Banking
Increasing shares in banking services and transaction banking
• Winning 25 mandates for comprehensive banking services or extending the Bank's cooperation with its clients;
• Signing agreements for the purchase of trade and service receivables, commitment letters and bank guarantees for a total amount of PLN 1.8 billion.
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3.3 Treasury Activity
The continuation of the implementation of the long-term strategy of the Sales Division brought measurable results in 2024. At the time of constant geopolitical tensions and uncertainty in financial markets, the Sales Division in the Financial Markets and Corporate Banking Sector enjoys the confidence of corporate clients and is constantly improving its offering.
The following activities were particularly appreciated by and popular with clients:
• conducting a series of interactive workshops on the process of managing FX exposure, organized across Poland,
• expanding the product offer by adding solutions combining traditional finance with elements of ESG,
• regular meetings and seminars with the Bank’s economists and financial market experts,
• continuously striving to refine technological solutions enabling automation of FX exchange processes,
• constant access to expertise, market data, economic forecasts and analyses.
Financial Markets and Corporate Banking Sector was also active on the primary market of debt securities by way of orchestrating the following transactions:
• bond issues for an international financial institution in the total amount of PLN 3.6 billion, for general purposes related to operations (including those related to the implementation of sustainable development goals),
• issues of Eurobonds for BGK in the total amount of EUR 1.05 billion to support, including but not limited to, the Ukraine Assistance Fund and the Road Fund,
• participation in public issues for a client from the automotive sector – in the total amount of PLN 950 million.
In 2024, the Bank remained among the top banks in terms of spot trading, being one of the leaders in Treasury BondSpot.
3.4 Transactional banking
In 2024, the Bank actively supported its clients' growth strategy, leveraging the potential of the Citi group, which resulted in significant increases in the Bank's revenues in the Treasury and Trade Solutions area.
Moreover, Citi Handlowy completed the migration of clients to a higher version of the electronic banking system, enhanced the quality of data presented on bank statements, and began the digitization of the process of onboarding new clients and services. Thus, it delivered the assumptions of elevating the comfort and efficiency of using the services. At the same time, initiatives were taken to standardize and streamline the offer, including by the revamping of the Bank's system architecture.
Current account
Citi Handlowy aims to digitize processes and continuously improve customer experience . In 2024, the Bank embarked on the implementation of the CitiDirect® Digital Onboarding platform, which will ultimately allow clients to launch new services directly in a specially developed system module. CitiDirect Digital Onboarding will enable the client to apply for an additional account, treasury and trade products, and to manage a list of persons authorized to act on behalf of the client, through the CitiDirect portal, in a self-service mode. The implementation is divided into phases. In 2024, the Bank completed the first phase, which consisted in automating back-end processes.
The digitization of processes was also reflected in the number of documents signed using a qualified electronic signature . In 2024, it reached 56% of all documents. As a result, the percentage of documents signed in this way increased by 10 percentage points compared to 2023, when documents signed with a qualified electronic signature accounted for 46%. In 2024 (data until the end of November 2024), the share of audit certificates sent by the confirmation.com platform accounted for 14% of all documents issued, the same level as in 2023.
Electronic Banking
In 2024, in the area of electronic banking, the Bank continued the development of its platforms to provide its clients with greater transparency, efficiency and control.
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As part of the commercialization of the modern version of the CitiDirect system, the Bank continued to introduce more intuitive versions of the functionalities for a greater user experience. The new modules save time when entering transfer orders, provide a convenient overview and administration of payments. The updated new start page secures quick access to the main functions and allows the user to customize it. The new release of the system has been made available to all active users. With their comfort in mind, the Bank conducted regular training sessions for users and collected their feedback.
In 2024, the Bank introduced a number of alterations in the area of bank statements and reports, improved the quality of the presented data, ensuring compliance with standards.
Caring about the client’s security and comfort, the Bank actively encouraged clients to self-manage CitiDirect user privileges on their end by designated system administrators. A new Mobile Token was promoted, which, in combination with biometric authentication (fingerprints or facial recognition), is a convenient way to log in to the system. The Bank on a regular basis shared its knowledge and provided practical guidance in the field of cybersecurity.
In 2024, the Bank processed over 36.4 million transactions via electronic channels , which represents an increase by 3% vs. the prior year period.
Payment processing
Payment volumes continued to increase also throughout 2024. In the area of domestic transactions, the Bank recorded a 25% increase in Express Elixir instant payment volumes compared to the prior year. The growing popularity of Express Elixir among the clients corroborates the Bank's strategic assumption to focus its support on the need to automate processes and settlements in real time, in particular from the perspective of entities using the Bank's services in the Banking as a Service (BaaS) model and entities making urgent payments to their consumers.
In 2024, the Bank further strengthened its suite of payment solutions prepared for clients in the Digital Natives segment, as reflected in the 19 percent increase in domestic payment volumes of “new economy” clients versus prior year. Clients from the “new economy” category use the full range of the Bank’s payment solutions, however their demand for domestic payments seems to be greater than for foreign payments when juxtaposed against the Bank's total number of clients, showing that the Bank plays an important role as a local partner in the context of Citi's global knowledge and geographical footprint.
Taking into account the growing needs of clients regarding process automation, agility of transaction execution, access to data at the right time, with the right coverage and structure, the Bank revamped the architecture of its systems. The investments made in the platforms are aimed at standardizing formats, higher bandwidth and compatibility, also in terms of the ISO 20022 requirements.
While pursuing its strategy of providing flexible and intelligent treasury and trade solutions, the Bank offered and developed Citi Payment lnsights , which, among other things, allows for tracking the status of payments or generating confirmations at the beneficiary’s request. The Bank also actively offered Citi Payment Outlier Detection , which, thanks to advanced analytics and algorithms, enables real-time monitoring and control of the company's payments, as well as the identification of transactions that differ significantly from previous trends.
In 2024 the Bank maintained a high share in the Direct Debit market at 36% (data as at the end of December 2024).
Corporate cards
After a very good year in 2023 in the area of corporate cards, in 2024 the number of cards activated at the end of the year was higher by 5% YoY for credit cards and by 4% YoY for debit cards. At the same time, the number of cashless transactions made with credit cards increased by 3% YoY and the number of transactions with debit cards decreased by 18% YoY. The value of cashless transactions increased by 2% for credit cards, and for debit cards it decreased by 6% compared to 2023.
The main reasons for the decrease in the number and value of transactions in debit cards are related to the decrease in the number of transactions involving typical expenses incurred on employees' business trips. This change results from the transition of this type of employee activity to a “remote” meeting mode as well as changes in
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business expense policies.
In the area of product functionality, in 2024 the Bank focused on continuing its efforts to increase the convenience of corporate card service and reducing the formalities, by promoting tools enabling self-management in corporate card programs based on the CitiManager platform . At the same time, the Bank was gearing up for the changes it plans to implement in the next year, which will improve the efficiency of processes and business resilience, taking advantage of the opportunities resulting from the strength of the Citi group.
Trade Finance and Service
To address the clients’ needs in the area of security of trade transactions and smooth settlements, in 2024 the Bank's revenues in the area of trade finance and services were growing while assets in this area hit new highs. Relying on Citi's global knowledge and geographical reach, the Bank shared with clients its knowledge of the mechanisms taking place on the markets and possible scenarios in case of geopolitical turmoil, showing effective tools that allow clients not only to maintain stability, but also to take advantage of new opportunities for business development.
The value of purchased invoices under trade and service receivables purchases in 2024 was higher by more than 30% compared to the previous year, and as at the end of the fourth quarter of 2024, the value of the portfolio of transactions concluded under trade finance products, such as reverse factoring, trade credit or supplier financing, increased by 58% compared to the same period of 2023. The increase in the value of financing granted reflects invariably high interest in the products offered, and the possibility of using Citi's global network further enhances the attractiveness and flexibility of the Bank's offer. The current macroeconomic conditions make the enterprises still look for diversified sources of financing for their day-to-day operations.
In 2024, the value of guarantees granted by the Bank increased by 37% compared to 2023, while the value of open letters of credit increased by nearly 7% compared to 2023. The increased demand for guarantees results primarily from the growing needs of companies to secure transactions and contracts. Clients appreciated the possibility of issuing guaranties electronically, which was reflected in the share of e-guaranties in the total guaranties issued, maintained at more than 72% .
3.5 Custody and depositary services
The Bank runs its custody operations under Polish law and in accordance with international standards of custody services offered to investors and intermediaries active in international securities markets. The Bank can meet the requirements of the largest and most demanding institutional clients.
The Bank provides custody services for domestic and foreign institutional investors and services of a custodian bank for domestic pension and investment funds. For many years, Citi Handlowy has been a leader in the Polish market of depository banks.
As part of its statutory activities, under a license issued by the Polish Securities and Exchange Commission (at present, the Polish Financial Supervisory Authority (KNF)), the Bank maintains securities accounts, settles securities transactions, processes dividend and interest payments, provides valuations of asset portfolios, delivers individual reports and arranges representation at general meetings of shareholders of listed companies. The Bank keeps collective accounts for authorized foreign entities. In addition, the Bank provides services consisting in maintenance of registers of foreign securities, under which it acts as intermediary in settlements of transactions executed by domestic clients in foreign markets.
The Bank also provides services as operator of accounts kept in the name of a client at the KDPW S.A. (Polish central depository and clearing institution), under which the Bank passes client’s orders to KDPW and vice versa, as well as settlement confirmations and statements to accounts opened at KDPW to the client of the Bank. This service is dedicated to foreign financial institutions, in particular depository and settlement ones (financial entities classified as ICSD – International Central Securities Depository) and covers the management of securities accounts and collective accounts of such entities.
The Bank maintained its leading position in the market of securities transaction settlements carried out for remote members of the Warsaw Stock Exchange. In addition, the Bank was still the active participant of settlements of transactions concluded by foreign institutional clients on the Treasury BondSpot Poland debt securities electronic platform, managed by BondSpot S.A.
As at 31 December 2024, the Bank maintained more than 16.8 thousand securities accounts (including collective accounts).
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Simultaneously, the Bank acted as depositary of open-end pension fund Nationale - Nederlanden OFE, two voluntary pension funds: Nationale - Nederlanden DFE, Generali DFE, and the Employee Pension Fund Orange Polska.
The Bank was also the depository of investment funds managed by the following Investment Fund Companies: Santander TFI S.A., PKO TFI S.A., Templeton Asset Management (Poland) TFI S.A., mTFI S.A. and Goldman Sachs TFI S.A.
The Bank continued servicing investment funds and pension funds operating under the Employee Capital Plans program: PKO Emerytura SFIO, Santander PPK SFIO, Nationale - Nederlanden DFE Nasze Jutro and Goldman Sachs Emerytura SFIO.
At the same time, the Bank continued its activities to help refine legal regulations applicable to the securities market. A representative of the Bank was the Chairman of the Steering Committee of the Council of Depository Banks at the Polish Bank Association (“Council”) for the nine consecutive term of office. In the reporting period, the Council was involved in providing opinions on draft regulations affecting activities of domestic custodian banks and depositary activity. With the use of its own resources, experience and competences, employees of the Bank, in cooperation with the Polish Financial Supervision Authority, Ministry of Finance, KDPW, KDPW_CCP and the Warsaw Stock Exchange, participated in consultations about the implementation of new solutions in the Polish capital market, and in projects carried out by market working parties.
3.6 Brokerage Activity
The Group runs brokerage activities in the capital market via Brokerage Departament of Bank Handlowy w Warszawie (“DMBH”).
As at the end of 2024, DMBH was the market maker for 71 companies listed on the Warsaw Stock Exchange (of which 20 from the WIG20 index), i.e. 17.3% of the shares listed in its main equity market.
In 2024, DMBH was the intermediary in in-session transactions accounting for 4.2% of equity turnover in the secondary market. The value of the in-session transactions concluded via DMBH in the equity market on the WSE was PLN 27.5 billion and increased by 29.7% as compared to last year, with increase in turnovers on the WSE by 20.7%.
In 2024, DMBH was on a 10. position in the session trading on the WSE Main Market, and 4. as a local Exchange Member.
The number of investment accounts maintained by DMBH was 15.2 thousand as at the end of 2024 and increased by 15% compared to 2023. The change is a consequence of ongoing acquisition processes in DMBH, taking into account the synergy effect of distribution processes at the Bank.
In 2024, DMBH carried out an Accelerated Share Sale transaction in the company Allegro.eu S.A. in the amount of PLN 1.9 billion – DMBH acted as the Global Coordinator in this transaction (April 2024) and also participated in Accelerated Shares Sale transaction in Santander Bank Polska S.A. with a value of PLN 2.46 billion – DMBH acted as the Global Coordinator in this transaction (September 2024).
Furthermore, DMBH worked on preparing transactions of initial and secondary public offerings.
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Summary financial data as at 31 December 2024*
% of authorized
Capital/votes in GM held by the
Bank
Balance sheet
total
Equity
Net financial
result for 2024
Company
Headquarter
%
PLN ‘000
PLN ‘000
PLN ‘000
Handlowy Financial Services Sp. z o.o.
(previously Dom Maklerski Banku Handlowego S.A.)
Warsaw
100.00
73,987
73,335
2,384
*preliminary data
Summary financial data as at 31 December 2023
% of authorized
Capital/votes in GM held by the
Bank
Balance sheet
total
Equity
Net financial
result for 2023
Company
Headquarter
%
PLN ‘000
PLN ‘000
PLN ‘000
Handlowy Financial Services Sp. z o.o.
(previously Dom Maklerski Banku Handlowego S.A.)
Warsaw
100.00
118,440
117,526
3,573
3.7 Leasing
The leasing products are still offered by the Bank's Group as part of the so-called "open architecture", which is a partnership cooperation with entities not being part of the Bank's Group.
Summary financial data as at 31 December 2024*
% of authorized
Capital/votes in GM held by the Bank
Balance sheet
total
Equity
Net financial
profit/loss for 2024
Company
Headquarter
%
PLN ‘000
PLN ‘000
PLN ‘000
Handlowy-Leasing Sp. z o.o.
Warsaw
100.00**
17,108
16,404
273
*pre-audit data
**Including indirect share
Summary financial data as at 31 December 2023
% of authorized
Capital/votes in GM held by the Bank
Balance sheet
total
Equity
Net financial
profit/loss for 2023
Company
Headquarter
%
PLN ‘000
PLN ‘000
PLN ‘000
Handlowy-Leasing Sp. z o.o.
Warsaw
100.00*
21,662
20,971
574
**Including indirect share
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4. Consumer Banking Segment
4.1 Summary of the segment’s results
The following factors affected the pre-tax profit of the Consumer Bank segment in 2024:
• higher interest income by 2% YoY supported by higher loan and deposit balances in 2024 in an environment of still relatively high interest rates;
• net fee and commission income – lower by 10% mainly due to higher acquisition costs and costs of additional credit card services, lower income on additional fees (including: operational fees for maintaining accounts, ATM withdrawals, currency conversion) and commissions (including the sale of insurance products); additionally, the result was affected by the amount of settlements with card issuers;
• lower net income on financial instruments and revaluation by PLN 7% YoY results largely from historically higher revenues in previous periods, which were supported by greater market volatility, as well as stabilisation of exchange rates in 2024 (strengthening of the PLN in relation to the main currency pairs), which affects the formation of exchange rate differences from revaluation;
• net other operating income lower by 55% YoY mainly caused by provisions for legal proceedings concerning CHF mortgage loans
• an increase in operating expenses by 11% YoY, mainly due to following: increase in remuneration expenses and employee benefits (salaries, commissions, incentive and pension programs), increase in sales agency costs, increase in online sales costs, sales support, as well as higher expenses related to consulting services;
• an increase in depreciation and amortization by 5% YoY due to periodically amortized software-related costs;
• net impairment allowances on non-financial assets - correction as a result of the goodwill impairment test (write-off);
• a decrease in provisions (net) YoY due to: the release of the management provision, the sale of the portfolio, improved customer retention, fewer impaired customers and better loan repayment.
A lower level compared to the previous year is mainly due to higher income on the release of provisions.
4.2 Selected business data
Change
2024
2023
PLN ‘000
%
Number of individual customers
564.5
565.3
(0.8)
(0.1%)
Number of current accounts
529.2
516.0
13.2
2.6%
Number of savings accounts
121.0
117.5
3.5
3.0%
Number of credit cards
461.8
466.4
(4.6)
(1.0%)
Number of debit cards
270.8
264.0
6.8
2.6%
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4.3 Key business achievements
Bank accounts
Current accounts
The total balance on the accounts amounted to PLN 8.7 billion as at the end of 2024, i.e. decreased by 4% as compared to 2023. The decrease in the balance is a consequence of the transfer of funds accumulated on current accounts to the accounts of the time deposits and savings accounts.
The number of personal accounts was 529,000 as at the end of 2024, i.e. increased by 3% as compared to 2023. Of that number, 285,000 were PLN accounts and 244,000 accounts in foreign currencies.
Savings accounts and time deposits
The number of savings accounts was 121,000 as at the end of 2024 and increased by 3% as compared to 2023, with a simultaneous their total balance of PLN 2.4 billion, i.e. up by 12% YoY . The increase in the balance on savings accounts is due to the great interest in the welcome offer for customers opening a Gold or CitiKonto account.
The balance accumulated in time deposit accounts increased by 12% from PLN 5.8 billion at the end of 2023 to nearly PLN 6.5 billion at the end of December 2024.
Changes in the offer
In 2024, the Bank still provided the special offer for deposits up to PLN 20 thousand with an attractive interest rate of up to 5.6% per annum for a 3-month term. In addition, the Bank offered attractive interest rates on term deposits as part of the offer for new Citigold Clients and Citigold Private Clients.
In response to the foreign currency market rates cuts, in October 2024, the Bank changed the interest rate on selected deposits in EUR and USD for individual clients. The standard interest rate on Savings and Super Savings Accounts did not change in 2024. The Bank's mix included numerous special offers with the possibility of obtaining promotional interest on the Savings Account in PLN. Clients who opened a CitiKonto account could obtain interest of up to 7.5% per annum, and Clients who opened a Gold Account up to 7% per annum on the Savings Account.
Awards and Honorable mentions
In the last year edition of the prestigious Euromoney Global Private Banking Awards 2023 , the private banking offered by Citigold Private Client was awarded the title of Best for Digital in Poland . The jury recognized the achievements in the development of the digital channel, such as the innovative Total Wealth Advisor tool and Citibank Global Wallet, as well as the security of clients and their assets.
Credit Cards
As at the end of 2024, the number of credit cards was 461,800 . The total debt on credit cards amounted to PLN 2.0 billion as at the end of 2024 and decreased by 6.2% from the end of 2023. The Bank's share on the credit card market, measured by the value of loans granted on credit cards, was 16.0% according to the data at the end of December 2024.
In 2024, the acquisition of credit cards amounted to approximately 36,100 cards, which means a decrease by 3% as compared to 2023 .
In 2024, the high quality of the acquired cards was maintained, which translates into a high level of activation and usability in transactions by newly acquired clients.
The Bank consistently diversifies its acquisition channels while continuously optimizing its sales processes.
Cash loans and installment products on credit card accounts
In 2024, the bank observed an increase in customer interest in cash loans mainly in high-value loans. As a result, at the end of 2024, the sales volume of unsecured loans (cash loans and loans on credit card) amounted to PLN 906 million and was higher by 27 YoY.
The balance of the above-mentioned cash loans amounted to PLN 1.7 at the end of 2024 billion, which means an increase of 3% compared to the end of 2023.
Mortgage products
As at the end of 2024, the mortgage loan portfolio balance amounted to PLN 2.3
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billion , i.e. up by 6% YoY . This increase was mainly a result of the continuing demand on the real estate market driven by the “2% loan”. The Bank, while maintaining operating liquidity in servicing other clients (not interested in the above-mentioned offer), significantly boosted sales in 2024. In 2024, sales of mortgage products amounted to PLN 490 million , i.e. increased by 34% compared to the sales results recorded in 2023.
Investment and insurance products
As at the end of 2024, the funds under management as part of investment products (including investment insurance products, without dual currency investments) acquired by retail clients via the Bank were 16% higher as compared to the same period in 2023. This increase is attributable mainly to the increase of assets and valuations of stocks and bonds listed on foreign markets, which have the largest share in the asset portfolio, and to an increase in the valuation of investment units in investment funds. The asset portfolio for the local stock and bond market at the end of 2024 grew by 78%, and for investment funds – by 28% compared to the end of 2023.
In 2024, the volume of foreign exchange (FX) transactions in the Consumer Banking segment decreased by 12% compared to 2023, while the number of foreign exchange transactions increased by 2% compared to 2023.
As regards structured products, throughout 2024 the Bank successfully completed the offer of 13 subscriptions for structured bonds denominated in the Polish zloty and 5 subscriptions in the US dollar .
As regards open-end investment funds, in 2024 the Bank added to the offer 12 new investment units in open-end investment funds in various currencies – PLN, USD and EUR, including hedge units against foreign exchange risk.
The Bank still offered insurance in a multi-channel distribution model – both at branches and in remote channels. In the case of Citigold branches, the products were offered under the model where clients are served by insurance specialists who provide their clients with expert support in the area of financial planning using insurance products.
5. Development of distribution channels
5.1 Branch network
Citigold and Citigold Private Client outlets
In 2024, the branch network remained unchanged. As at 31 December 2024, the structure of customer service outlets included 9 Hub Gold branches, 8 Smart branches and 1 corporate branch.
The present structure of the network allows for the effective implementation of sales and operational assumptions and is a well-tailored response to customer needs. As a result of the Bank’s efforts focused on the optimization of internal processes and refining the quality of service, strategic goals were achieved and the adequacy of the structure to the current market requirements was ensured.
In 2024, activities were focused on the maintenance of the ATM network as a key element of support for branch- based operational processes and on the modernization of selected branches, which was an important factor supporting the improvement of the efficiency of the teams' work and building a positive customer experience during the implementation of the sales and operational platform. The most comprehensive renovation works were carried out in the Hub Gold branch located in Warsaw at 16 Senatorska street. The office space in the branch was fully modernized, in accordance with modern standards dedicated to the Bank's headquarters, and the spaces intended for direct customer service were partially refreshed.
A downturn in the number of transactions processed in the branch network continues to be observed. A rising percentage of operations are carried out via remote channels and ATM networks. The changes are attributable to the observed dynamics of service digitization and reflect the ongoing transformation of the service model towards self-service solutions.
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Number of branches (at the end of period)
December 31, 2024
December 31, 2023
Change
Number of branches:
18
18
-
- HUB Gold
9
9
-
- Smart Branches
8
8
-
- Corporation Branches
1
1
-
5.2 Internet and telephone banking
Online banking
The online platform for retail clients is built in a responsive technology, i.e. it can adapt itself to the device used by a client. The design responds to customer expectations, and the extensive functionality means that customers increasingly choose to manage their products themselves via the Internet. One of the improvements is for credit card holders, which can manage their card limit, define transaction limits, convert transactions into installments. The clients can construct and update their investment profile coherent with the MiFID II regulation.
Electronic banking also includes a transaction module for investment funds and a Citi Kantor currency exchange module, enabling, among others, placing a conditional order and setting a currency alert.
The number of active users of Citibank Online , i.e. those who logged in to the online or mobile banking service via a browser or the Citi Mobile application at least once in every 90-day period, was 348,000 as at the end of 2024. The share of active Citibank Online users in the entire client portfolio of the Bank was 64% as at the end of 2024, i.e. down by 1 p.p. as compared to the end of 2023.
At the same time, as at the end of 2024, digital users accounted for 90% of all transactionally active clients, which means an increase by 6 p.p. compared to the end of 2023 .
Mobile Banking
Responsive technology gives the client access to all functionalities in Citibank Online on any device they may use. The mobile application Citi Mobile also has a following features: free Push notifications, which keep the client updated of changes on the account or card, and login activation with the use of a fingerprint or face map, which makes access to the application even easier. The clients also use a simplified and intuitive navigation, a modernized layout and a mobile authorization service - Citi Mobile Token . The application also offers a currency exchange module, Citi Kantor, and a multi-currency service, Citibank Global Wallet, which permits automatic currency account alignment with the transaction currency without manually reassigning the card. The application presents offers of products and services tailored to the needs of customers and enables convenient recommendation of the Bank to friends. It also provides the possibility of updating contact details, including phone number and email address.
As at the end of the 2024, the number of active users of mobile banking , i.e. those who used mobile banking at least once in every 90-day period via the application or Citibank online in responsive technology, amounted to 259,000 , i.e. increased by 2% as compared to the end of 2023.
As at the end of 2024 the share of active users of mobile banking in the retail client portfolio of Citi Handlowy was 48% , i.e . increased by 1 p.p. as compared to the same period in 2023.
At the same time, at the end of 2024, mobile users accounted for 67% of all active transactional customers, which is an increase of 3 p.p. compared to the end of 2023.
With the popularity of mobile applications, electronic payment methods gather momentum. One of the selected payment methods that has been gaining the most popularity recently is BLIK. This service allows clients to make payments in online stores, stationary stores and service points, and to withdraw money from ATMs, as well as instant BLIK Phone Transfers between customers of different banks.
The number of transactions using the BLIK code made by the Bank's clients in 2024 was almost 3 million , which means an increase by 141% compared to 2023. And the number of BLIK transfers by phone was 1,5 million, which is an increase by 164% compared to 2023.
Other payment methods have also enjoyed undiminished popularity, among others: Apple Pay and Google Pay . These are virtual wallets in clients’ phones that give them independence and possibility to make payments anywhere in the world. In 2024, clients made a total of over 23,5 million transactions using these payment methods, which represents a growth by 16% as compared to 2023 (including an increase by 18% YoY for Apple Pay and an increase by 13% YoY for Google Pay).
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Social media
In 2024, Citi Handlowy continued its activities in social media. The platforms on which the Bank has a presence represent an important channel of communication with customers. In 2024, Citi Handlowy conducted active communication in this form regarding products, special offers prepared for the Bank's clients, and educated them on the use of its solutions. Social media also served as one of the new client acquisition channels.
In 2024, the content published by the Bank in social media (Meta) reached 7.2 million unique users, which means an increase in unique reach by 5.8% compared to the previous year. This result is higher, despite a slightly lower number of posts: in 2024, there were 211 publications (namely 12.4% less than in the previous period). The content was viewed 43.7 million times (-6.4% YoY).
Thanks to paid activities, users left 12,457 reactions (+185% YoY), 1,209 comments (+789% YoY) under all of the Bank's publications in 2024, and content was shared by them 330 times (+95% YoY), and links were clicked 80,766 times (-16% YoY). The strong increase in user activity is due to the implementation of additional publications targeted at user engagement.
6. Changes in IT technologies
In 2024, a strategic goal of the Bank in the area of IT technology was to continue increasing the competitiveness of the Bank by providing top quality products and services with the extensive use of innovative solutions, digitization and automation and concurrently with cost optimization. In accordance with prevailing market trends, the technology of the Bank is based, to a large extent, on centralized services and outsourcing. The services centralization processes enable the Bank to generate savings, improve quality, standardize processes and ensure a high level of control and information security. The Technology Division of the Bank focused its activities on the development and implementation of solutions which promote an electronic distribution the channels based on the most advanced online and mobile solutions. Projects supporting the automation and digitization of the Bank's internal processes as well as projects using AI were important.
IT processes of the Bank are executed in accordance with international standards, which was confirmed, in the first half of 2024, by the positive outcome of recertification/supervisory audits of compliance with ISO 20000 (information technology – service management), ISO22301 (continuity of business) and ISO 27001 (information security management).
The most crucial modifications and improvements implemented in 2024 included:
• in institutional banking:
− implementation of reporting within the Central Electronic System of Payment Information (CESOP);
− implementation of solutions supporting digitization and automation of back-office processes. As a result of implementing the automation of subsequent back-office processes, the Bank expects increased reliability and efficiency in the area of automated processes;
− completion of the first phase of implementation of solutions supporting the processing of incoming foreign SWIFT payments in the new ISO 20022 format;
− adaptation of payment systems to changes in the SEPA payment settlement standard.
• in consumer banking:
− implementation of a functionality enabling verification whether the PESEL number is blocked for the purposes of concluding loan agreements or cash withdrawals;
− use of Open API for direct sale of banking products by third party providers (e.g. product comparison websites);
− implementation of a new solution that strengthens client protection against social engineering attacks;
− adaptation of consumer banking systems to the new requirements of the GDPR;
− strengthening the security of debit card transactions.
• in the scope of adaptation of systems of the Bank to ensure their compliance with regulatory requirements:
− adaptation of the Bank to the changed EMIR (Emir Refit) reporting requirements to ensure compliance with regulatory requirements;
− adaptation of the Bank to the changed CRR3 reporting requirements in order to ensure the Bank’s compliance with the regulatory requirements;
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− adaptation of the Bank to the requirements of the DORA regulation in order to ensure the Bank's compliance with the regulatory requirements.
• in the area of information and communication technology infrastructure of the Bank and information security:
− implementation of the Microsoft365 office suite in order to improve the efficiency of the Bank’s employees with the possibility of processing banking data;
− implementation of a new solution to increase the availability and redundancy of mobile phone recordings and recording of short messages (SMS/MMS)
− continued implementation of improvements to increase the security of use of the CitiBank Online platform, including the implementation of additional authentication mechanisms at the server level to secure the systems against possible attacks and manipulation of data of defined customers of the client;
− implementation of improvements in the data leakage prevention (Data Leakage prevention systems), which have significantly mitigated the risks connected with data leaks;
Technology units proactively develop and improve their portfolios of services to fully meet both current and future business needs of the Bank. They deliver to their business partners optimal technology solutions used to build competitive advantage. Technology units actively support initiatives which enable a broader use of information technologies that automate processes at the Bank and increase the services digitization level.
Pending and not completed initiatives and modifications of systems which will affect the operations of the Bank in the near future are presented below:
• in institutional banking:
− integration with the National e-Invoice System;
− implementation of the second phase of the solutions to support SWIFT payments in the new ISO 20022 format – implementation of the solution enables SWIFT payments to be supported in the new global ISO format. As part of the second phase, the Bank is adapting settlements to the exchange of messages in the new format with the Sorbnet 3 system;
− implementation of solutions for robotization and automation of operating processes of the Bank;
− expansion of the ICT environment for financial reporting – by automating current processes, this implementation will ensure greater cost efficiency and reliability of financial and supervisory reporting processes;
− ongoing identification and elimination of safety gaps in used systems;
− optimization of the technology services portfolio through the elimination and consolidation of obsolete IT architecture elements.
• in consumer banking:
− implementation of a number of solutions increasing the security of client transactions and eliminating fraud transactions;
− implementation of solutions for robotization and automation of the Bank's operational processes;
− continuation of automation and digitization of sales processes (straight through processing);
− further improvement of the online and mobile banking platform (addition of new functionalities and products);
− ongoing identification and elimination of security gaps and IT risks in the systems used.
• in the area of information and communication technology infrastructure of the Bank and information security:
− implementation of additional new-generation security solutions in banking systems;
− continued modernization of the architecture of network infrastructure of the Bank’s main locations using SDN technology (software defined network) including the implementation of encryption between the Bank’s main locations in Poland (MACSEC) and logical network segmentation;
− continued migration of the IT infrastructure management system, ServiceNow 3.0, to the cloud;
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− preparation works before using AWS cloud and GCP services for data processing (in the first stage for data classified as internal).
The Bank developed, implemented and has maintained a business continuity management system (BCMS), which is oriented to achieving results reflecting the core principles and values of the Bank in line with the Bank’s strategy. The Bank designed business continuity plans and contingency plans for critical processes, which ensure continuity of processes during an emergency. The plans ensure an efficient and well-balanced continuity of critical services and products of the Bank in the required time. The plans are subject to periodic reviews and tests, and the test results are used to improve the plans and the entire BCMS. The Bank maintains the BCMS in line with the international ISO22301 standard – in the first quarter of 2024 the Bank passed the periodic audit for ISO22301 recertification.
7. Equity investments
The investments of the Bank are divided between the portfolio of strategic companies and the portfolio of companies held for sale. In 2024, the Bank continued the investment policy it had decided to adopt earlier. Its objectives for the strategic companies portfolio were: to maximize profits in the long run, to increase market shares, to develop cooperation with the Bank and to expand the product range of the Bank; and for the portfolio of companies held for sale: to optimize the financial result of capital transactions and to minimize the risk in the areas arising from those transactions.
7.1 Strategic portfolio
Strategic portfolio includes entities which conduct their activities in the financial sector and through which the Bank enlarges its product offer, raises prestige and fosters its competitive position on the Polish financial services market.
Strategic portfolio also includes infrastructural companies which operate for the financial sector. The Bank holds non-controlling interest in such companies but they are of strategic importance for the Bank given their operations and collaboration with the Bank.
For its strategic investments in the so-called infrastructural companies, the Bank is going to retain its share and to participate proactively in decision making to determine strategic directions of their development to the extent of the options the Bank may pursue with the voting rights it holds. As its overriding goal when exercising corporate oversight over those companies, the Bank has chosen to support their growth insofar as the continuation of their current operations utilized by financial market participants, including the Bank, is not put in jeopardy. Simultaneously, in order to ensure that the Bank’s proposal is innovative and comprehensive and that it meets diverse product needs and expectations of clients, the Bank may consider an expansion of its strategic companies portfolio by those which will complement its own proposal and make it more attractive, while ensuring that all offered services are safe. To this end, the Bank may opt for an acquisition, create a new company or use a special purpose investment vehicle it already has in its portfolio.
7.2 Divestment portfolio
Companies held for sale are entities in which the Bank’s involvement is not of strategic nature. They include both companies held by the Bank directly and indirectly as well as special purpose investment vehicles. Some of the companies held for sale are restructuring commitments taken over by the Bank as a result of debt-to-equity conversion.
Strategic assumptions of the Bank regarding companies held for sale provide for gradual reduction of the Group’s exposure in these companies. It is assumed that the individual entities shall be sold at the most favorable moment, determined on the basis of market conditions. The held-for-sale portfolio covers investments without a pre-determined rate of return. The Bank does not plan any new investments that would be held for sale in the future. The portfolio of companies which are held for sale may be enlarged by adding new companies taken over in the course of debt-to-equity conversions or as a result of takeover/enforcement of a pledge established on shares during the lending process or other processes aimed at securing or enforcing receivables of the Bank, and by investments which the Bank may take over in the course of its operations. Investment resulting from restructuring activities will be sold in accordance with the restructuring plan created individually for each company.
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Special purpose investment vehicles companies
As at 31 December 2024, the Group included two investment special purpose vehicles. Their activities were financed with reverse capital contributions of the shareholder and with their profits. As the Bank continues its strategy which assumes that its activities carried out via special purpose vehicles should be trimmed down, it is expected that its special purpose vehicles will be gradually sold or liquidated.
According to information available as the date of preparation of the (preliminary and unaudited) financial statements, the key financials of those companies as at 31 December 2024 were as follows:
Entity
Headquarter
Authorized capital/votes in GM held by the Bank
Balance sheet
Equity
Net financial profit/loss for 2024
%
PLN ‘000
PLN ‘000
PLN ‘000
Handlowy-Inwestycje Sp. z o.o.
Warsaw
100.00
10,801
10,738
278
Handlowy Investments S.A.*
Luxemburg
100.00
4,302
4,351
277
* Financial data of Handlowy Investments S.A. originate from the financial statements prepared as at 28 February 2024 (pre- audit data), which is the entity’s balance sheet date.
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V. Significant risks related to the activities of the Capital Group of Bank Handlowy w Warszawie S.A.
1. Significant risks and threats related to the Group’s operating environment
1.1 Regulatory and legal risks
In 2024 the financial and organizational situation of the Group was affected, among other things, by:
Legal acts / regulations
Effective date and summary of new requirements
Announcement of the UKNF (Office of the Polish Financial Supervision Authority) of 28 February 2022 on supporting solidarity of the financial sector Announcement of the UKNF of 4 March 2022 on the product offer for refugees from the areas of military operations in Ukraine
• Date: February/March 2022
• The UKNF has said it appreciates and supports the ethical and responsible approach as well as the solidarity of many institutions of the Polish financial sector in the face of the ongoing humanitarian crisis caused by the aggression of the Russian Federation against Ukraine,
• The Polish watchdog expects supervised entities to display exceptional business ethics during this difficult time for everyone and to actively counteract any practices consisting in abusing and exploiting the tragedy of the Ukrainian nation to achieve non-standard benefits.
• The UKNF said it expected banks to implement offers addressed to the group of refugees from Ukraine as soon as possible, in order to grant them access to the basic payment services and facilitate the distribution of the financial support among them. The Office also emphasized the need to help them easily satisfy their everyday life needs that require standard payment transactions.
Announcement of the European Banking Authority (EBA) on ensuring compliance with sanctions against Russia following the invasion of Ukraine
• Date: 11 March 2022
• The EBA has called on financial institutions to ensure compliance with sanctions against Russia following the invasion of Ukraine and emphasized that it will continue to closely monitor and assess the situation.
• The EBA underscored that financial institutions are required to assess the adequacy and effectiveness of internal controls and governance to ensure compliance with restrictive measures adopted in response to the above-mentioned crisis. They should also adapt or enhance systems and processes as appropriate.
• Moreover, the EBA called on them to facilitate access to basic payment accounts for refugees.
• The EBA’s announcement was also locally supported by the UKNF through its published stances and communiqués.
Recommendations of the National Working Group for Benchmark Reform (NGR) on new agreements for PLN products
• Date: 2023/2024
• The purpose of the recommendation is to identify best practice for financial market participants in the use of the WIRON (Warsaw Interest Rate Overnight) benchmark or the indices from the WIRON Family of Composite Indices to determine variable interest rates when entering into new contracts with customers for gold products based on the benchmark. The recommendations include recommended interest calculation guidelines,
• The guidelines specified in the recommendations are not mandatory and may be applied voluntarily taking into account the specific characteristics of a financial market participant and of customers with whom agreements are made.
Position of the Polish Financial Supervision Authority (KNF) concerning
• Date: 2024
• The Office of the Polish Financial Supervision Authority ( UKNF ) expects all supervised entities granting consumer credit to
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the application by supervised entities of the provisions and principles regarding non-interest costs of consumer credit
comply with the principle of proportional, rational and justified charging of borrowers with costs related to granting consumer loans.
• The limits specified in Article 36a(1) of the Consumer Credit Act apply to the non-interest costs of a consumer loan that is not a payment loan, but is granted by a lending institution that also has the status of an NBPSP (non-bank payment service provider), if, in order to administer funds from this loan, such an entity, acting as an NBPSP, issues a payment instrument in the form of a card.
• In its position, the UKNF also provided an interpretation in relation to interpretative doubts regarding the application of the provisions regulating limits and the principles of determining non-interest costs of a payment loan being a consumer loan granted by an NBPSP in connection with the issuance of a credit card.
Circular of the Polish Financial Supervision Authority (KNF) concerning the obligations of supervisory boards in the event of dismissal of management board members
• Date: 2024
• The KNF, in a letter addressed to banks, reminded them of the obligation imposed on a bank's supervisory board under point 5.6 of Recommendation Z issued by the KNF to notify the KNF of the inclusion in the board's agenda of an item regarding:
 dismissal of the president of the management board,
 dismissal of the member of the management board who oversees the management of risks that are material to the bank's business or the delegation of his/her duties to another member of the management board,
together with the reasons for the proposed decision.
• This information should be provided immediately and in sufficient time to enable the KNF to review it and respond to it, before the supervisory board adopts appropriate resolutions.
Position of the Office of the Polish Financial Supervision Authority (UKNF) concerning limiting certain effects of identity theft (PESEL blocking)
• Date: 2024
• In a letter addressed to the financial market, the UKNF emphasized that on 1 June 2024 the provisions of the Act of 7 July 2023 amending certain acts in order to limit certain effects of identity theft will come into force. It was noted that this is one of the last stages of implementation of the regulation, which is a response to the increasingly common phenomenon of identity theft and the use of personal data in an unlawful manner, including to the detriment of financial market participants and their clients.
• The KNF expects the full implementation of the mechanisms specified in the above-mentioned Act and the proper fulfilment of the obligations imposed therein.
Position of the Office of the Polish Financial Supervision Authority (UKNF) concerning the notification of a change in the share in the total number of votes in connection with an increase or decrease in the share capital of a public company
• Date: 2024
• The position emphasized that the notification obligation may result from a change in the share capital of a public company. Shareholders of public companies should monitor and verify on an ongoing basis whether an increase (both ordinary and conditional) or decrease in the share capital has led to a change in their shares in the total number of votes.
• Shareholders are not released from the obligation to monitor their ownership status, even if a change is the result of activities in which they were not personally involved.
• In the event of a change (increase or decrease) in the share capital of a public company, resulting in a change in the shareholder's share in the total number of votes, leading to reaching or exceeding (up or down) statutory thresholds, such shareholder is obliged to submit a notification to the Polish Financial Supervision Authority within 4 business days from the date of change in the share in the total number of votes.
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Amendment to Recommendation U on good bancassurance practices (KNF’s Resolution No. 243/2023)
The position of the PFSA on uniform rules for the application of point 20 of the U. Recommendation
• Date: 1 July 2024 (deadline for adjusting activity),
• The Polish Financial Supervision Authority (KNF) published an amendment to Recommendation U on good bancassurance practices that will replace the current Recommendation U of 2014.
• The aim of Recommendation U is to improve the standards of bancassurance business and to set the conditions for the stable development of the bancassurance market,
The adopted Recommendation U introduces new provisions concerning in particular:
a) ensuring that the insurance products offered through bancassurance, including in credit or loan repayment insurance (so-called CPI products), provide adequate value for the customer,
b) the way insurance products are offered in bancassurance,
c) the relationship of a bank, operating in the field of bancassurance, with an insurance financier who, on the basis of a contract concluded with the bank, is obliged to cover the costs of the bank’s insurance cover,
d) monitoring, as part of the bank’s internal control and risk management system and by the audit committee, of the processes involved in the offering of insurance products by these entities.
• The UKNF's position refers to Recommendation 20, which contains the Commission's expectation that the insurance products offered will provide adequate value for the client, and that the remuneration of the entity received for insurance intermediation will be determined taking into account the client's interest and the amount of insurance cover costs.
Amendment to Recommendation S on good practices for management of credit exposures secured with mortgages (KNF’s Resolution No. 242/2023)
• Date: 1 July 2024 (deadline for adjusting activity),
• The adoption of the amendment is dictated by the need to adapt Recommendation S to changing legislation and to implement the regulatory and supervisory policy of the Financial Supervision Commission,
• The changes introduced in Recommendation S relate to:
a) the inclusion in Recommendation S of a guaranteed housing loan covered by a government program,
b) the inclusion in Recommendation S of a housing loan covered by the government's interest rate subsidy program,
c) a buffer against rising interest rates, which is taken into account in determining a customer’s creditworthiness,
d) the introduction of new expectations regarding the inclusion of models estimating the risk of early repayment of loans (prepayment models),
• the introduction of new expectations regarding the information on mortgage risks that should be provided to customers.
The ruling of the Court of Justice of the European Union of 11 September 2019 on the interpretation of Article 16.1 of the Directive of the European Parliament and of the Council 2008/48/EC of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, concerning the settlement of cost of borrowing in the case of an earlier repayment.
• Announcement date: 11 September 2019
• The position of the UOKiK (Office of Competition and Consumer Protection) clearly shows how the conclusions from the judgment should be taken into account in activities of lenders.
• The expected response is a proportionate, i.e. in accordance with the so-called straight-line method, return of part of the commission on early repaid consumer loans.
• As revealed in an official communiqué published on the UOKiK’s website, the majority of banks have promised to use practice in line with the UOKiK's expectations.
Judgment of the Court of Justice of the European Union of 3 October 2019 on the interpretation of Article 1(2), Article 4, Article 6(1) and Article 7(1) of Council
• Announcement date: 3 October 2019
• According to the CJEU ruling, if Polish courts find that indexation clauses in foreign currency indexed mortgage loan agreements are abusive:
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Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29) concerning clauses in foreign currency indexed mortgage contracts
1) courts may assume that the contract cannot continue to operate without such clauses because this would change the nature of the contract,
2) as a rule, the consequences of contract invalidation for the consumer must be assessed as at the moment the dispute arose (not as at the time the contract was made),
3) courts cannot freely supplement their terms based on equity principles (e.g. by introducing settlements based on NBP exchange rates into contracts),
4) courts cannot uphold the indexation even if the contract has to be invalidated and such invalidation is disadvantageous to the client if the client does not agree to maintain the indexation.
• As a result of this judgment, a case law unfavorable for banks has developed, affirming the ability to invalidate mortgage loan contracts indexed to a foreign currency.
Regulation of the Minister of Finance of 6 May 2024 on the detailed rules for the organizational separation of the bank's brokerage activities and the activities that may be performed by the organizationally separated unit or other organizational units of the bank
• Effective date: 28 May 2024
• The specification of detailed rules for the organizational separation of the bank's brokerage activities,
• The specification of the scope of activities that may be performed by a brokerage house or organizational units of the bank other than a brokerage house in connection with the bank's brokerage activities and other activities of the bank, and the method of determining the conditions for performing these activities.
The Act of 24 June 2024 on the protection of whistleblowers
• Effective date: 25 September 2024, subject to the external reporting regulations, which are scheduled to enter into force on 25 December 2024.
• The Act specifies, among other things:
a) the scope and definition of reportable breaches of law,
b) the conditions required to provide protection for the reporting persons and protection measures,
c) rules for establishing an internal procedure for reporting violations of law and taking follow-up actions, including the obligation to consult the procedure with trade unions,
d) the rules of public disclosures of violations of law.
EMIR Refit Regulation 2019/834 and the technical standards issued thereunder, approved by the European Parliament on 7 October 2022, concerning the implementation of changes to the EMIR regulatory system specified in EMIR Refit, including in particular:
Commission Delegated Regulation (EU) 2022/1855 of 10 June 2022 supplementing regulation (EU) 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards specifying the minimum details of the data to be reported to trade repositories and the type of reports to be used
Commission Implementing Regulation (EU) 2022/1860 of 10 June 2022 laying down implementing technical standards for the application of Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to the standards, formats, frequency and methods and arrangements for
• These standards came into force at the end of April 2024.
• These standards are to significantly affect the obligations of derivative market participants arising from EMIR, and in particular their reporting requirements.
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reporting
DIRECTIVE (EU) 2022/2464 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (CSRD)
Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU as regards sustainability reporting standards (ESRS)
Act of 29 September 1994 on accounting (consolidated text: Journal of Laws of 2023, item 120, as amended) – in the scope of CSRD implementation
• The CSRD Directive makes, among other things, changes to a bank's existing non-financial reporting by introducing sustainability reporting. Pursuant to the amended regulations, a bank is obliged to present in its activity reports the information necessary for recipients to understand the bank's impact on sustainability issues, as well as to present how the presented information affects the development, results and situation of the bank. The CSRD applies to a bank for financial years beginning on or after 1 January 2024.
• The ESRS Regulation introduces standards as to the information that obliged entities should report as part of sustainability reporting.
The Act of 12 April 2024 amending the Act on Support for Borrowers Who Have Taken a Housing Loan and Are in a Difficult Financial Situation and the Act on Crowdfunding for Business Ventures
• Effective date: 15 May 2024,
• The act envisages an amendment to the existing provisions of the Act of 9 October 2015 on Support for Borrowers Who Have Taken a Housing Loan and Are in a Difficult Financial Situation in terms of, including but not limited to, reducing, as one of the conditions for obtaining support, the size of the Installment to Income ratio, increasing the amount of income entitling to obtain support or a loan for debt repayment, extending the possible period of granting support from 36 to 40 months, increasing the value of the maximum support from the current level of PLN 2,000 to PLN 3,000,
• The draft introduces amendments to the Act of 7 July 2022 on Crowdfunding for Business Ventures and assistance to borrowers by extending the credit holiday mechanism for 2024 for loans amounting up to PLN 1,200,000.00, which provides for a criterion according to which the consumer will be entitled to suspend the repayment of the loan if the arithmetic average of the value of the Installment to Income ratio (the Installment to Income ratio within the meaning of the Act of 9 October 2015 on Support for Borrowers Who Have Taken a Housing Loan and Are in a Difficult Financial Situation), for the period of the last three months preceding the month of submitting the request exceeds 40% or the borrower has at least three dependent children referred to in Article 4(2)(3) of the Act of 5 December 2014 on the Large Family Card.
The Act of 07 July 2023 on the amendment of certain acts to reduce certain effects of identity theft
• Date: 01 June 2024,
• The Act provides for an obligation for banks to check the PESEL register before concluding and amending certain contracts with consumers and an obligation to check the register of blocked PESEL numbers before disbursing funds exceeding three times the minimum wage,
• If a contract is concluded with a consumer with a blocked PESEL number, claims arising from the contract may not be enforced or sold.
Regulation of the Minister of Finance of 12 November 2024 on the procedure and conditions of conduct of investment firms, state-owned banks running brokerage activity, banks referred to in Article 70(2) of the Act on
• Effective date: 27 November 2024
• The new Regulation will replace the current Regulation of the Minister of Finance of 30 May 2018 on the procedure and conditions of conduct of investment firms, banks referred to in Article 70(2) of the Act on Trading in Financial Instruments, and custodian banks,
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Trading in Financial Instruments, and custodian banks
• It specifies the procedure and conditions of conduct in the field of brokerage, custody and banking activities pursuant to Article 70(2) of the Act on Trading in Financial Instruments.
Regulation of the Minister of Finance of 24 September 2024 on the detailed technical and organizational rules for investment firms, state-owned banks running brokerage activity, banks referred to in Article 70(2) of the Act on Trading in Financial Instruments, and custodian banks
• Effective date: 28 September 2024, with the exception of § 21(3), which enters into force on 17 January 2025,
• The new Regulation will replace the current Regulation of the Minister of Finance of 29 May 2018 on the detailed technical and organizational rules for investment firms, banks referred to in Article 70(2) of the Act on Trading in Financial Instruments, and custodian banks,
• It specifies the technical and organizational conditions for conducting brokerage, custody and banking activities pursuant to Article 70(2) of the Act on Trading in Financial Instruments.
Regulation of the Minister of Finance of 20 September 2024 on the submission of information to the Polish Financial Supervision Authority by investment firms, state-owned banks running brokerage activity, banks referred to in Article 70(2) of the Act on Trading in Financial Instruments, and custodian banks
• Effective date: 28 September 2024
• The new Regulation will replace the current regulation of the Minister of Finance of 22 February 2019 on the scope, procedure, form and deadlines for submitting information to the Polish Financial Supervision Authority by investment firms and banks referred to in Article 70(2) of the Act on Trading in Financial Instruments, and custodian banks,
• It specifies the scope, mode and form as well as the deadlines and manner of submitting information to the Polish Financial Supervision Authority by investment firms, banks referred to in Article 70(2) of the Act on Trading in Financial Instruments, and custodian banks.
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) 2017/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises – the so-called “Listing Act”
• Effective date: 24 December 2024 (with exceptions)
• The Regulation has amended the following regulations:
1) Prospectus Regulation (EU 2017/1129)
2) Market Abuse Regulation (“MAR”) (EU 596/2014)
3) Markets in Financial Instruments Regulation (“MiFIR”) (EU 600/2014)
REGULATION (EU) 2024/2987 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 November 2024 amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third- country central counterparties and improve the efficiency of Union clearing markets (EMIR 3.0)
• Its effective date is 24 December 2024,
• Requirements for financial and non-financial counterparties subject to the central clearing obligation, to clear at least some derivatives indicated in the legal act as being of systemic importance in active accounts at Union CCP (CCP – central counterparty), are one of the key changes introduced by EMIR 3.0,
• The above requirement refers to the obligation of counterparties to have the so-called active account, which meets specific requirements, at a Union CCP, and to clear in that account a specific number of interest rate derivatives denominated in EUR and PLN deemed to be of substantial systemic importance.
In addition, the Bank's activity in of 2024 was affected by the following European Banking Authorities’ Guidelines:
AML and Sanctions Risk:
• EBA Guidelines amending Guideline EBA/2021/02 Guidelines on Money Laundering and Terrorist Financing Risk Factors
• EBA Guidelines on Principles and Controls for the Effective Management of Money Laundering and Terrorist Financing Risks when Providing Access to Financial Services
• EBA Guidelines on information requirements in relation to transfers of funds and certain crypto- assets transfers under Regulation (EU) 2023/1113
Product and Customer Relationship Management:
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• ESMA Guidance on Specific Aspects of MiFID II Suitability Requirements
• EBA Guidelines on the Use of Remote Customer Onboarding Solutions
Corporate Governance:
• EBA Guidelines on Improving Resolvability for Institutions and Resolution Authorities (EBA/GL/2022/01)
• EBA guidelines on benchmarking of diversity practices under CRD and IFD
• ESMA guidelines on the EMIR reporting requirements
• EBA Guidelines amending Guideline EBA/GL/2022/01 on Improving Resolvability for Institutions and Resolution Authorities to Introduce a New Section on Resolvability Testing
• EBA Guidelines on Transferability in the Context of the Resolvability Assessment for the Purposes of the Transfer Strategy
• EBA Guidelines on General Resolvability in Recovery and Resolution Planning
• EBA Guidelines on resubmission of historical data under the EBA reporting framework
• EBA, ESMA and EIOPA Guidelines on estimation of aggregated annual costs and losses caused by major ICT-related incidents under regulation (EU) 2022/2554 (DORA)
In 2025, the financial and organizational situation of the Group will be affected, among other things, by:
Legal acts / regulations
Effective date and summary of new requirements
Amendment to Recommendation G concerning interest rate risk management at banks (Resolution of the KNF No. 60/2024)
• Date: 31 December 2024 (deadline for adapting the activities),
• The Polish Financial Supervision Authority (KNF) adopted an amendment to Recommendation G concerning interest rate risk management at banks (Resolution No. 60/2024 of 26 February 2024). The new Recommendation G replaces the Recommendation concerning interest rate risk management at banks issued in 2002.
• The final shape of the new Recommendation G was influenced by both the regulations contained in national law and the recently developed package of EU regulations in the area of interest rate risk management. Recommendation G takes into account, in particular, the provisions of Guidelines on IRRBB and CSRBB, i.e. EBA Guidelines specifying criteria for the identification, evaluation, management and mitigation of the risks arising from potential changes in interest rates and of the assessment and monitoring of credit spread risk, of institutions’ non-trading book activities (EBA/GL/2022/14).
• The new Recommendation G is a set of good practices in managing interest rate risk at banks and maintaining the risk- sensitive variability of financial results and economic value measures within limits that do not threaten the bank's security. The recommendation takes into consideration current conditions for products generating interest rate risk and techniques to manage this risk.
EBA Guidelines on the management of ESG risks
• Date: 11 January 2026
• The guidelines concern management of the environmental, social and governance risks and set out the management rules to be implemented by institutions pursuant to Article 87a (1) and Article 74 of the CRD Directive (Directive 2013/36/EU of the European Parliament and of the Council on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms).
• The EBA Guidelines refine the above provisions of the CRD as regards:
a) the minimum standards and reference methodologies for the identification, measurement, management and monitoring of environmental, social and governance risks (ESG)
b) qualitative and quantitative criteria for the assessment of the impact of ESG risks on the risk profile and solvency of institutions in the short, medium and long term,
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c) the content of plans to be prepared in accordance with Article 76(2) of the CRD by the management body.
UKNF’s position on the application of the DORA by financial entities
• Date: 17 January 2025
• This position specifies, among others, the KNF’s expectations as to compliance resulting from the implementation of the DORA requirements by 17/01/2025 and as to the compliance with the manner and mode of fulfilling disclosure and reporting obligations in accordance with the position, as regards:
 the obligation to have a Legal Entity Identifier (LEI)
 the first reporting obligations
 reporting major ICT-related incidents and significant cyberthreats
 keeping and providing a register of information on contracts with ICT third-party service providers.
• In the position, the KNF again raises the fact of repealing the soft-law regulations, including recommendation D and the cloud communication.
Position of the UKNF on the entry into force of the Listing Act
• In the position, the UKNF points out that on 14 November 2024, the EU published in the Official Journal of the European Union a package of provisions constituting the so-called Listing Act, including Regulation 2024/2809, which enters into force on the twentieth day after its publication in the OJEU, that is, on 4 December 2024. Some of its regulations will be implemented at a later date, that is, on 5 March 2026 and on 5 June 2026.
• The provisions of Regulation 2024/2809, effective since 4 December 2024, include Article 1(1)(A). It repeals Article 1(3) of the Prospectus Regulation (Regulation of the European Parliament and of the Council (EU) 2017/1129).
• The position of the UKNF concerns the consequences of the entry into force of the above-mentioned provision of Regulation 2024/2809 for offers of securities to the public with a total consideration referred to in the repealed Article 1(3) of the Prospectus Regulation, made on or after 4 December 2024.
Resolution no. 243/2024 of the Polish Financial Supervision Authority (KNF) of 15 July 2024 on the issuance of the WFD Recommendation on the Long-Term Financing Ratio (LTF).
• Effective date: 18 July 2024 (applicable from 2026)
• The Recommendation describes the definition of the Long- Term Financing Ratio and refers to the application and level of the LTF requirement and the reporting of the LTF Ratio.
KNF CSIRT good practices concerning preventing and responding to ransomware attacks
• Date: not specified
• The good practices published by the KNF are intended to help protect organizations against ransomware attacks. These good practices include proposals for responding to the possible occurrence of such an incident in the organization.
• The document is intended as help both when preparing for such attacks and in the event of a ransomware incident. However, it should be noted that the scope of activities and the shape of internal procedures should be prepared in accordance with the specific nature of the organization's operations.
• In the announcement regarding the publication of the above- mentioned Good Practices, the KNF emphasizes that each organization should conduct a risk analysis in the area of ransomware attacks on its ICT infrastructure and, based on its results, prepare appropriate processes and procedures and select appropriate tools and technical solutions so that the risk of a ransomware incident is minimized.
Recommendations of the National Working Group for Benchmark Reform (NGR) on new agreements for PLN
• Date: end of 2027
• These recommendations are to present to financial market entities the best practices relating to the use of the WIRON interest rate benchmark (Warsaw Interest Rate
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products
Overnight) or rates from the WIRON composite index family for determination of variable interest rates when concluding new agreements with customers for benchmark-based PLN products. The recommendations include recommended interest calculation guidelines.
• The guidelines specified in the recommendations are not mandatory and may be applied voluntarily taking into account the specific characteristics of a financial market participant and of customers with whom agreements are made.
REGULATION (EU) 2024/1623 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 31 May 2024 amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor
• Effective date: 09 July 2024
• Most changes will apply from 1 January 2025, whereas some of them became effective as early as 9 July 2024.
• The Regulation has a significant impact on the bank's operations, including in the area of calculation of capital requirements, credit, operational and market risk, ESG reporting. the obligation to include in the calculation of capital requirements contracts that have been offered by the institution but have not yet been accepted by the client.
• An important change among the changes applicable since 9 July 2024 was the amendment to Article 500a regarding temporary treatment of public debt issued in the currency of another Member State.
Directive (EU) 2024/1619 of the European Parliament and of the Council of 31 May 2024 amending Directive 2013/36/EU as regards supervisory powers, sanctions, third-country branches, and environmental, social and governance risks (CRD VI)
• Effective date: Member States shall adopt and publish, by 10 January 2026, the laws, regulations and administrative provisions necessary to comply with CRD VI and should apply those measures from 11 January 2026,
• CRD VI introduced an obligation to consider ESG Risks in risk assessment and prudential supervision. Financial institutions are obliged to analyze climate-related risks and risks arising from environmental degradation and biodiversity loss in the short, medium and long term. ESG Risks should be managed in a time horizon of at least 10 years, in compliance with the EU climate objectives, such as achieving climate neutrality by 2050.
The ruling of the Court of Justice of the European Union of 11 September 2019 on the interpretation of Article 16.1 of the Directive of the European Parliament and of the Council 2008/48/EC of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, concerning the settlement of cost of borrowing in the case of an earlier repayment.
• Announcement date: 11 September 2019
• The position of the UOKiK (Office of Competition and Consumer Protection) clearly shows how the conclusions from the judgment should be taken into account in activities of lenders.
• The expected response is a proportionate, i.e. in accordance with the so-called straight-line method, return of part of the commission on early repaid consumer loans.
• As revealed in an official communiqué published on the UOKiK’s website, the majority of banks have promised to use practice in line with the UOKiK's expectations.
Judgment of the Court of Justice of the European Union of 3 October 2019 on the interpretation of Article 1(2), Article 4, Article 6(1) and Article 7(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29) concerning clauses in foreign currency indexed mortgage contracts
• Announcement date: 3 October 2019
• According to the CJEU ruling, if Polish courts find that indexation clauses in foreign currency indexed mortgage loan agreements are abusive:
a. courts may assume that the contract cannot continue to operate without such clauses because this would change the nature of the contract,
b. as a rule, the consequences of contract invalidation for the consumer must be assessed as at the moment the dispute arose (not as at the time the contract was made),
c. courts cannot freely supplement their terms based on equity principles (e.g. by introducing settlements based on NBP exchange rates into contracts),
d. courts cannot uphold the indexation even if the contract has to be invalidated and such invalidation is
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disadvantageous to the client if the client does not agree to maintain the indexation.
• As a result of this judgment, a case law unfavorable for banks may develop, affirming the ability to invalidate mortgage loan contracts indexed to a foreign currency.
Regulation on operational resilience to digital threats (“DORA” – Digital Operational Resilience Act).
• DORA – The regulation will apply to entities such as: investment funds, payment and credit institutions, ASI managers, insurance companies, audit companies, ICT service providers (Information and communication technologies), crypto-asset service providers, securities depositories. The DORA Regulation aims at harmonizing the provisions regarding the digital resilience of the financial sector in the EU and at boosting the digital and operational resilience of the financial sector organizations. The regulation entered into force on January 17, 2025.
Bill amending the Act on crisis management and certain other acts
• Implementation of solutions included in the CER directive,
• The Bill assumes not only that the current level of protection of critical infrastructure will be maintained, but also that protection will be extended to include the protection of “critical infrastructure under construction” and the protection of critical infrastructure that is of key importance for local communities,
• The designed solutions are aimed at strengthening the mechanisms for protecting critical infrastructure, taking into account that it is the core for providing services to the state and citizens. They also result from the analysis of the course of the war in Ukraine and the emerging sabotage and hybrid activities,
• New criteria are planned to enable the identification of facilities, installations and devices as critical infrastructure, and thus the selection of critical infrastructure operators (the owner or holder of such infrastructure). Simultaneously to the criteria, the ministers in charge of government administration departments will be indicated who will be responsible for critical infrastructure in particular sectors,
• A division will be made into critical infrastructure, the destruction or disruption of which will have an adverse impact,
• In order to ensure an appropriate level of critical infrastructure protection, it is planned to introduce minimum standards in the areas of physical, technical, personal, ICT and legal security, as well as business continuity and recovery plans.
• As part of the personal safeguards, it provides for, among others, a possibility for a critical entity to carry out background checks on employees or candidates who hold or might hold sensitive roles in the organizational structures of the critical entity or perform tasks for its benefit, and on persons who are or may be authorized to directly or remotely access its premises, information or control systems, including in connection with the security of the critical entity.
Regulation on Artificial Intelligence (AI Act)
• The regulation is to ensure that AI systems introduced in the EU market and used in the EU are safe and in compliance with the law in the area of fundamental rights and EU values. The regulation introduces comprehensive requirements for the so- called high-risk Artificial Intelligence systems, which include creditworthiness assessment systems for individuals, but also other systems that may be used in the banking system. The regulation defines prohibited AI practices – the AI systems using such practices will be prohibited,
• The regulation was published in the Official Journal of the EU. The regulation comes into force 20 days after publication in the
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Official Journal and will become generally applicable 24 months after its entry into force, with the following exceptions:
a) Chapter I – General Provisions and Chapter II – Prohibited AI Practices will enter into force on February 2, 2025,
b) Section 4 of Chapter III on supervisory authorities, Chapter V on general purpose AI models, Chapter VII on governance at Union level and Chapter XII on penalties for infringements of the regulation (except Article 101) and Article 78 regarding confidentiality will come into force on August 2, 2025,
c) Article 6(1) regarding high-risk systems and the corresponding obligations described in the regulation will enter into force on August 2, 2027.
The Act of 14 April 2023 Amending the Goods and Services Tax Act and Certain Other Acts
• Effective date – 01 January 2024,
• a new requirement for individual payment service providers participating in cross-border transactions to report certain cross-border transactions to the Head of the National Revenue Administration. Data collected at the national level are provided to the Central Electronic System of Payment Information (CESOP); payment service providers are obliged to keep electronic records, on a quarterly basis, of payment recipients and cross-border payments as regards the payment services provided. The obligation arises when the number of services provided by the service provider during a given quarter exceeds 25 cross-border payments to the same recipient.
The Act of 16 June 2023 Amending the Goods and Services Tax Act and Certain Other Acts (implementing the National System of e-Invoices, the so-called KSeF)
• Pursuant to the Act of 9 May 2024 amending the Act amending the Goods and Services Tax Act and certain other acts, the effective date was postponed to 1 February 2026,
• The National System of e-Invoices (KSeF) is a system that enables the generation and sharing of structured invoices. The aim of KSeF is to centralize the process of registering invoices in business transactions by directing them to one central facility,
Bill of 25 April 2024 on top-up taxation of component units of international and domestic groups
• The Bill is an implementation of the EU Directive which introduces the concept of the so-called global minimum tax (Pillar 2),
• Pillar 2 is, in simple terms, a set of rules that impose an obligation on large multinational enterprise groups to pay a top-up tax so that the group's effective tax rate in a given country is not lower than 15%,
• The Act entered into force on 1 January 2025, with the possibility of using the so-called safe harbor until the end of 2026, which, when certain conditions are met, excludes the requirement to calculate the top-up tax.
Resolution of 29 October 2021
amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts (amended by the Act of 26 May 2023)
• On 1 January 2025, an obligation came into effect to maintain accounting books only in electronic form and to send the JPK- CIT structure to the tax authorities on an annual basis.
• The largest CIT taxpayers (with revenues exceeding the equivalent of EUR 50 million) and tax capital groups are the first to be required to submit JPK-CIT for 2025.
The Act of 12 April 2024 Amending the Accounting Act and Certain Other Acts
• The Act implements the EU Directive and obliges large multinational companies to publicly disclose reports related to income tax paid in the countries in which they operate,
• If the parent company in a group is based outside the EEA and certain thresholds are exceeded, the reporting obligation falls on its subsidiaries based in the EEA,
• If the parent company publishes a report and meets certain requirements, subsidiaries will be exempt from this obligation,
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• The first report for 2025 will have to be published by the end of 2026.
Regulation (EU) 2023/1113 of the European Parliament and of the Council of 31 May 2023 on information accompanying transfers of funds and certain crypto-assets and amending Directive (EU) 2015/849
• The Regulation takes effect on 30 December 2024 and Regulation (EU) 847/2015 of the European Parliament and of the Council will cease to apply on the above effective date.
• The draft introduces:
a) amendments to the obligations of payment service providers to provide information on payers and payees accompanying transfers of funds,
b) obligations of crypto-asset service providers involved in the transfer of crypto-assets to provide information on the originators and beneficiaries accompanying transfers of crypto-assets;
c) obligations to implement internal policies, procedures and controls to ensure that restrictive measures are applied.
Draft Act on Credit Servicers and Credit Purchasers
• The act was passed by the Sejm on 20 December 2024. The Senate adopted it on 8 January 2025 without amendments. On 30 January it was signed by the President,
• Regulation of credit management activities (supervision, register, permits, capital requirements, requirements regarding policies and internal procedures),
• The Directive lays down the rules of national supervision over the above-mentioned entities (including but not limited to, supervision of individual categories of entities and establishment of a procedure for granting authorization to credit servicers), including in terms of cross-border trade in receivables,
• Amendment to the Consumer Credit and Mortgage Credit Act with respect to mandatory information provided before the agreement is amended,
• Amendments to the Banking Act consisting in, among others, adding a possibility to divide a bank being a joint-stock company by separation ( podział przez wyodrębnienie ) (apart from the already existing option of partial division ( podział przez wydzielenie ).
Financial data access and payments package (PSR/PSD3/FIDA)
REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on payment services in the internal market (PSR)
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on payment services and electronic money services in the internal market (PSD3)
Regulation of the European Parliament and of the Council on a Framework for Financial Data Access (FIDA)
• Date of entry into force of the PSR: the Regulation enters into force on the twentieth day following its publication in the Official Journal of the European Union. It applies 18 months after the date of entry into force of the Regulation,
• Date of entry into force of PSD3: the Directive enters into force on the twentieth day following its publication in the Official Journal of the European Union and needs to be transposed into national law.
• FIDA effective date: The Regulation is to enter into force on the twentieth day following its publication in the Official Journal, and is to be applied after twenty four months following the date of entry into force, with the proviso that data holders and data users must become members of financial data sharing schemes within eighteen months following the entry into force of the Regulation,
• PSR – the establishment of uniform requirements for the provision of payment services and electronic money services in relation to the following matters:
(a) transparency of the reporting conditions and requirements for payment services and electronic money services;
(b) the rights and obligations of users of payment services and electronic money services and of payment service and electronic money service providers with regard to the provision of payment services and electronic money services.
• PSD3 - the establishment of the provisions concerning:
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(a) the admission of payment institutions to an activity consisting of the provision of payment services and electronic money services within the Union;
(b) supervisory powers and tools for the supervision of payment institutions.
• FIDA - the extension of the "open banking" principle by allowing access to data to which access has not been granted yet under the PSD2 directive. This includes access to data on mortgage loans, loans, savings, non-payment accounts, and even access to data that constitute the basis for assessing a customer's creditworthiness, which is collected as part of a loan application or credit rating.
MP draft act amending the Labor Code
• The draft act is now in the Sejm, and its planned effective date is 6 months after the publication date.
• The draft act should serve as partial implementation of the Directive of the European Parliament and of the Council (EU) 2023/970 of 10 May 2023 to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms, the purpose of which is to reduce the pay gap between men and women and which sets forth the following, among others:
a) pay and pay levels should be transparent during the employment relationship and before establishing such relationship,
b) workers will have the right to obtain information, upon their request, on their individual pay level and on the average pay levels, broken down by sex, for the category of workers performing the same work as them or work of equal value to theirs, provided that they can request the same through their representatives,
c) employers will be obliged to state the minimum and maximum pay for a given position in the vacancy notices. It will be possible to add a note that the amount is negotiable,
d) employers will not be allowed to prohibit their workers from disclosing information about their pay,
e) the failure by the employer to meet the obligations imposed by the act is subject to a fine referred to in Article 281 of the Labor Code (PLN 1,000 – 30,000).
Draft act amending the Labor Code
• The draft act is now in public consultation, it is planned to be adopted by the Council of Ministers in Q3 2025.
• It provides for significant changes in the scope of counteracting mobbing and discrimination, including:
a) introduction of a new definition of mobbing, among others, by recognizing as its primary characteristic the fact of persistent harassment of an employee ,
b) imposition of an obligation on employers to counteract violations of the equal treatment principles and mobbing by applying preventive measures, detection and quick and proper response, as well as by implementing corrective actions and supporting people affected by unequal treatment.
c) employers will be able to be released from the responsibility for mobbing if they can demonstrate that they duly fulfilled their obligation referred to in letter (b), and the questionable behaviors were displayed by a person who did not manage the employee or did not hold a position superior to the employee in the work establishment,
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d) expansion of the catalogue of employer’s obligations by adding counteracting violation of an employee’s dignity and other personal rights,
e) specification of reparation for an employee who has suffered mobbing in the amount not lower than the amount of remuneration for 6 months or compensation.
A package of AML regulations:
Regulation (EU) 2024/1624 of the European Parliament and of the Council of 31 May 2024 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (“AML Regulation”)
Regulation (EU) 2024/1620 of the European Parliament and of the Council of 31 May 2024 establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism and amending Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010 (“AMLA Regulation”)
Directive (EU) 2024/1640 of the European Parliament and of the Council of 31 May 2024 on the mechanisms to be put in place by Member States for the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Directive(EU) 2019/1937, and amending and repealing Directive (EU) 2015/849 (“AML Directive”)
and
draft act amending the Act on Anti- Money Laundering and Combating the Financing of Terrorism (at the moment, only assumptions to the draft act have been published)
• The AML Regulation defines a common legal framework for anti-money laundering and combating financing of terrorism (AML/CFT) for the EU. It specifies, in particular, a catalogue of obliged entities (such that are required to comply with AML/CFT regulations), indicates the scope of procedures, policies and controls to be adopted by obliged entities, and describes the principles of application of financial security measures, such as client identification or verification. Obliged entities will be required to apply EU harmonized rules to identify a client and a beneficial owner and to verify their identity, obtain information about the purpose and nature of business relations, monitor clients’ business relations and transactions, and verify whether a client or a beneficial owner are subject to financial sanctions. The AML Regulation also regulates the rules of applying simplified and enhanced due diligence measures,
• The AML Regulation will come into effect on 10 July 2027.
• The purpose of the AML Regulation is the establishment of the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (“AMLA”), as well as definition of its structure, role, tasks and competences. The AMLA will be based in Frankfurt am Main, Germany, and should begin operations mid-2025.
• In principle, the AML Regulation will be effective from 1 July 2025,
• The AML Directive establishes the provisions regarding, among others, the identification of risk of money laundering and terrorist financing at the level of the EU and Member States, establishment of central registers of beneficial owners, registers of bank accounts and electronic data search and access to information systems kept in these registers, as well as points of access to real estate information. The directive also sets out the obligations and tasks of financial intelligence units (FIUs) and bodies involved in supervising obliged entities,
• According to the AML Directive, Member States have, in principles, 3 years to prepare provisions transposing this directive, with some exceptions.
Amendments to MIFID Directive and MIFIR Regulation
Directive (EU) 2024/790 of the European Parliament and of the Council of 28 February 2024 amending Directive 2014/65/EU on markets in financial instruments
Regulation of the European Parliament and of the Council amending Regulation (EU) No 600/2014 as regards increasing data transparency, removing obstacles to the establishment of systems for the publication of consolidated information, optimizing trading obligations and prohibiting the receipt of payments for order flow
• Local regulations implementing changes to the MIFID Directive have not been prepared yet.
• The initiative is part of the Capital Markets Union package of measures which also includes:
a) legislative proposal to establish a European Single Access Point (ESAP),
b) legislative proposal for the review of the European Long- Term Investment Fund (ELTIF) Regulation,
c) legislative proposal for the review of the Alternative Investment Fund Managers Directive.
• The proposal aims to improve the quality of market data and consolidate market data by amending the market data rules included in MiFIR.
Draft Delegated Regulation amending the MIFIR Regulation (600/2014)
• This initiative will define a unique identifier and additional reference identification data to be used for the purposes of
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transparency requirements for OTC derivatives as set out in the Markets in Financial Instruments Regulation,
• This Delegated Regulation specifies the identification reference data to be used for OTC interest rate swaps and OTC credit default swaps for the purposes of the transparency requirements set out in Articles 8a(2), 10 and 21 MiFIR.
Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third- country central counterparties and improve the efficiency of Union clearing markets
• The proposed changes provide, among other things, that financial or non-financial counterparties that are subject to the clearing obligation under Regulation (EU) No 648/2012 must settle at least part of the contracts (e.g. interest rate derivatives denominated in PLN and EUR) through accounts maintained by a CCP based in the EU.
The Act of 26 April 2024 on ensuring compliance with the requirements of accessibility of certain products and services by business entities
• Effective date: 28 June 2025,
• It introduces a requirement for the accessibility of retail banking products and services to persons with technical difficulties or disabilities, as well as the comprehensibility and provision of information about them at the B2 language level.
Regulation of the European Parliament and of the Council amending Regulation (EU) No 910/2014 as regards establishing a framework for a European Digital Identity (eIDAS 2.0)
• Development of digital identity for citizens throughout the European Union, in particular through the introduction of the European Digital Identity Wallet (EUDI – EU Digital Identity Wallet) and new trust services. EUDI is intended to allow for the secure storage of various digital identity data, such as driving licenses, permits, health cards, diplomas, etc. In addition to identity management, the EUDI wallet is intended to offer a payment solution.
Draft act on instruments of supported decision-making
• The aim of the draft act is to introduce new solutions into the legal system based on replacing guardianship with a supported decision-making model. The draft act provides for introducing the following instruments:
• Legal assistance: Written agreement between the person in need of support and legal assistant to obtain support in performing legal activities.
• Supporting guardian: For a person in need of support the court may appoint a supporting guardian for a maximum period of 5 years. The court will determine the scope of their responsibilities. However, a supporting guardian may not make declarations of intent on behalf of the person they are supporting.
• Representing guardian: Is appointed when the person in need of support is unable to make certain decisions themselves. The court will detail the scope of the guardian’s responsibilities, including the possibility to perform legal activities and give consent to the decisions made by the supported person.
• Registered attorney: This is a type of security for the future. A person may draft a power of attorney in advance in case they lose the ability to handle their own affairs themselves. The draft act also provides for creating a Register of Powers of Attorney to make it easier for institutions and interested parties to confirm the validity and scope of the power of attorney granted.
Regulation (EU) of the European Parliament and of the Council of 13 March 2024 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit
• Obligation for payment service providers (in practice, banks) to offer instant credit transfers (24/7) in EUR.
• Fee for an instant credit transfer in EUR (for non-eurozone countries) – in principle, according to the Regulation on equivalence of fees and charges (Regulation 2021/1230), that is, the same as their equivalent domestic fee in PLN, provided
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transfers in euro (“IPR”)
that it cannot be higher than the fee for a standard transfer in EUR (SEPA).
• Obligation to provide a matching verification service (accompanying the instant credit transfer service) allowing the payer to verify whether the IBAN matches the name of the payee, and allowing the user to resign from such service.
• Introduction of an obligation to check users of payment services, on an ongoing basis (at least daily), against the sanction lists.
• The Regulation shall come into effect on 8 April 2024.
• Pursuant to Article 5a(8) inserted in Regulation 260/2012, the adjustment deadlines for introducing instant credit transfers in EUR by payment service providers outside of the eurozone are as follows:
a) 9 January 2027 – adjustment deadline for offering the payment service of receiving instant credit transfers in euro as laid down in the inserted Article 5a
b) 9 July 2027 – adjustment deadline for offering the payment service of sending instant credit transfers in euro as laid down in the inserted Article 5a.
Draft act on consumer credit and amending the consumer rights act
• Implementation of the Directive of the European Parliament and of the Council (EU) 2023/2225 of 18 October 2023 on credit agreements for consumers and repealing Directive 2008/48/EC, and
• Directive of the European Parliament and of the Council (EU) 2023/2673 of 22 November 2023 amending Directive 2011/83/EU as regards financial services contracts concluded at a distance and repealing Directive 2002/65/EC.
Draft act amending the Act on Public Offering and Terms of Introduction of Financial Instruments to an Organized Trading System and on Public Companies and the Act on Implementing Some EU Regulations Concerning Equal Treatment
• This regulation implements the Directive (EU) 2022/2381 of the European Parliament and of the Council of 23 November 2022 on improving the gender balance among directors of listed companies and related measures,
• The objective of the directive is to facilitate the application of the principle of equal opportunities of women and men in leadership positions, by determining the requirements of the selection process of candidates for these roles,
• The provisions refer to the underrepresented sex in corporate bodies.
Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859 (CSDDD)
• CSDDD establishes companies’ obligations as regards identifying, preventing and mitigating the adverse impacts of their operations on human rights and the environment. Its goal is to promote sustainable and responsible business conduct. It also provides for monitoring the effectiveness of the measures taken and communicating the implemented procedures. The regulation applies to big companies operating in the European Union, regardless of whether they are domiciled in or outside the EU.
Draft act amending certain acts with regard to provision of information to the European Single Access Point (ESAP).
• The draft has been submitted for consultation, planned effective date: 10 July 2025
• The draft act transposes to the national law the ESAP Package (Regulation (EU) 2023/2859 establishing the ESAP, omnibus directive 2023/2864, omnibus regulation 2023/2869), and directive amending MiFID II. The drafted act provides for amendment of a number of legal acts, including the act on trading in financial instruments and banking law.
In addition, the Bank's activities in the second half of 2025 may be affected by the following EBA Guidelines:
Ryzyko AML i Sankcji
• EBA Guidelines on information requirements in relation to transfers of funds and certain crypto- assets transfers under Regulation (EU) 2023/1113
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• EBA Guidelines on internal policies, procedures and controls to ensure the implementation of Union and national restrictive measures
• EBA Guidelines on internal policies, procedures and controls to ensure the implementation of Union and national restrictive measures under Regulation (EU) 2023/1113
Corporate Governance:
• EBA Guidelines on Improving Resolvability for Institutions and Resolution Authorities (EBA/GL/2022/01)
• EBA Guidelines amending Guideline EBA/GL/2022/01 on Improving Resolvability for Institutions and Resolution Authorities to Introduce a New Section on Resolvability Testing
• EBA Guidelines on Transferability in the Context of the Resolvability Assessment for the Purposes of the Transfer Strategy
• EBA Guidelines on General Resolvability in Recovery and Resolution Planning
• EBA Guidelines on resubmission of historical data under the EBA reporting framework
• EBA Guidelines on arrears and foreclosure (amending Guidelines EBA/GL/2015/12)
• EBA, ESMA and EIOPA Guidelines on estimation of aggregated annual costs and losses caused by major ICT-related incidents under regulation (EU) 2022/2554 (DORA)
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2. Significant risks and threats related to the Group and its activity
2.1 Risk management principles
The Group carries out risk management by implementing cohesive rules, controls and tools through the Group, taking into account supervisory requirements and best market practices.
The risk management system used in the Group, which is based on the shared responsibility concept, is arranged on three independent levels (“three lines of defense”):
• Level 1, i.e. organizational units responsible for the activity which results in taking risks and responsible for risk management in the Bank’s operational activity, as well as for risk identification and reporting to the second-line units,
• Level 2, i.e. risk management at organizational units, regardless of the first-line risk management, and the activity of the compliance unit – units or persons responsible for setting risk management standards in identifying, measuring or assessing, limiting, controlling, monitoring and reporting and for supervising control mechanisms applied by other organizational units of the Bank to mitigate risk – organizational units of the Risk Management Sector, Compliance Department, Finance Management Sector, Legal Division, Human Resources Division;
• Level 3, i.e. Audit Department which ensures independent assessment of both risk management processes and internal control system.
When organizing its risk management processes, the Group takes into account its risk profile, strategic and business objectives, available capital and liquidity resources, macroeconomic environment and regulatory requirements – these factors make up the framework of the risk control and management system.
Risk management processes are implemented on the basis of documented policies and rules relating to identification, measurement, mitigation, control, monitoring and reporting of risks to which the Group is exposed, approved by: the Management Board, authorized persons in accordance with the rules of issuance of legislative acts at the Bank or duly established Committees, including:
• Asset and Liability Committee (ALCO);
• Risk and Capital Management Committee, supervising the Risk Models Commission, the Consumer Bank Risk Commission and Sustainable Products Commission;
• New Products Committee;
• Operational Risk, Control and Compliance Committee.
The risks connected with activities of the Group are mitigated by a system of limits arising from risk appetite and the management information system used by the Bank enables it to monitor risk levels by providing management with portfolio information on a regular basis.
The Group carries out the management of all significant risk families arising from the execution of its business strategy. As part of the process initiated in 2024 to identify key risk families, the Management Board of the Bank concluded that the following risk families were significant for the purposes of risk management and the internal capital estimation and maintenance process:
• Credit risk (consumer and corporate);
• Counterparty credit risk;
• Market risk for the trading portfolio;
• Market risk for non-trading portfolio
• Liquidity risk;
• Operational risk;
• Compliance risk;
• Capital risk;
• Environmental and climate risks for strategic, credit and compliance risks.
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Credit risk (consumer and corporate) and counterparty risk
Definition
• Credit risk is a potential loss resulting from the breach of a contract by the client or their insolvency, taking into account loss reduction methods used for a product or given funding.
• Counterparty credit risk is the risk of loss resulting from deterioration of credit quality (downgrade) or a breach of contract by the counterparty.
Risk management strategy
• The primary objective of credit risk management is to support the long- term plan of stable growth of the credit portfolio, while maintaining appropriate quality. The credit process is based on a number of fundamental principles, such as:
– Business and independent risk management units share responsibility for quality of the credit portfolio and credit process and for any credit losses;
– Conduct must be in compliance with the guidelines on the portfolio structure to ensure its diversification and to keep balance between risk and capital;
– A system of credit-related authorizations must be implemented which assumes that authorization to make credit decisions may only be granted to properly trained and experienced employees of Risk Management Sector and Operation Division, taking into account their track record and risk assessment skills and abilities;
– Acceptance level must depend on assumed risk – higher-risk exposures (defined taking into account both amount and level of risk) require higher-level approval;
– Diversified and adequate risk assessment standards must be used for each borrower and each commitment, including as part of corrective actions;
– A consistent rating process is required, which is based, inter alia , on results produced by rating or scoring models;
– Periodic, regular monitoring of results of a client’s activities and identification of adverse changes in their situation which require immediate activities to classify receivable or corrective actions are necessary;
– External environment must be monitored to ensure early detection of economic threats which may adversely affect particular portfolios;
– The credit policy rules must be complied with and, in special cases, approval of exceptions to the Credit Policy is required at higher organizational levels in order to ensure control of implementation of its principles in compliance with internal regulations applicable at the Bank, generally applicable laws and regulations and regulations issued by competent regulators.
Risk measurement
• Risk measurement is carried out using: rating models, scoring models and scorecards at the level of a client and provision models for portfolio risk assessment and an integrated ICAAP process, both at aggregate level and by business line.
Monitoring
• Credit risk exposures are monitored and managed at two levels: client level and portfolio level. Tools used to monitor the current creditworthiness of a borrower include:
– annual comprehensive review of limits, exposures, financial situation of and cooperation with borrowers,
– reports generated in the Early Warning process,
– periodic financial reviews of borrowers,
– periodic reviews of negatively classified credit exposures,
– periodic visits to clients,
– reports on ongoing contacts of employees of business units/bankers with clients,
– analysis and assessment of external information (rating reports, analytical reports, press, sector sources, etc.),
– internal classification system.
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• Portfolio-level monitoring
– monitoring of utilization of risk concentration limits in the credit portfolio on the basis of appropriate reports,
– regular periodic reviews of the credit portfolio,
– “ad hoc” portfolio reviews triggered by an external risk factor that may potentially have a negative impact on the portfolio.
– monitoring of indicators determined for the retail exposure portfolio.
• The monitoring of portfolio performance and the identification of trends in the portfolio are carried out using regular management information and control reports taking into account, inter alia , analysis of pace of changes in value and segmentation (sectors) of the credit portfolio, client risk (rating), quality of credit exposure collateral and exposures affected by non-performance, departures from applicable risk acceptance rules and limit utilization level.
• The package of control reports for each portfolio is prepared on a regular basis and delivered to unit heads responsible for the client segment in question, the Risk and Capital Management Committee and the Management Board of the Bank.
Market risk for the trading portfolio
Definition
• The market risk of a trading portfolio is defined as the risk of loss resulting from a potential change in the market value of the exposure due to changes in market factors such as interest rates, stock and commodity prices or currency or credit spreads. Market (trading portfolio) risk is based on mark- to-market risk indicators rather than the AOCI, EVE and NIR indicators associated with non-trading portfolios.
Risk management strategy
• Market risk management is to ensure that the amount of risk accepted in the Group is consistent with the level acceptable for the shareholders and banking supervision authorities and to ensure that all market risk exposures are adequately reflected in calculated risk measures notified to relevant managers and governing bodies.
• Adopted market risk measures and limits should prevent excessive concentrations of exposures to a single risk factor or a group of related risk factors and should enable determination of the maximum level of the risk accepted in the trading book or the banking book.
• Market risk management at the Bank is based on:
– applicable Polish laws and regulations, in particular the Banking Act,
– applicable EU regulations, in particular the 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 (CRR),
– requirements of Polish and EU regulatory institutions and especially resolutions of the Polish Financial Supervision Authority (KNF),
– principles of prudent and stable risk management at the Group and the general risk level accepted by the Supervisory Board of the Bank, taking into account best practices applied in the market.
• Market risk management covers all portfolios that generate incomes which are exposed to an adverse impact of market factors, such as interest rates, currency rates, stock prices, commodity prices and parameters of volatility of those factors.
• Trading portfolio includes transactions in financial instruments (on- and off-balance sheet ones) the purpose of which is to earn income connected with a change of market parameters in a short period. Trading portfolios cover on-balance sheet items, such as debt securities, categorized as held for trading, i.e. purchased for trading purposes and meeting specified liquidity criteria, and any positions in derivative instruments, provided that in this case portfolios are divided into those acquired for purely trading purposes and those created as hedging against the risk of positions included in a banking portfolio (so-called economic hedge). Valuation of trading portfolios is carried out either directly on the basis of market prices or by using valuation models that make use of price parameters quoted in
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the market. Activities on trading portfolios are carried out by the Interbank Transaction Division in the Financial Markets and Corporate Banking Sector for those portfolios which cover interest rate risk and currency risk. Trading portfolios also include options, including currency option transactions, interest rate options and option structures, which reflect the economic nature and risk arising from products offered to clients of the Bank. The operations of the Bank in that area are carried out so that they ensure the simultaneous (each time and immediate) conclusion of a counter transaction having the same parameters, as a result of which the option transaction portfolio generates no open market risk exposure. The only factor connected with the conclusion of option transactions which is taken into account in measurement of market risk, and specifically currency risk, is the amount of the premium paid/received in the foreign currency.
Risk measurement
• The following risk measurement methods are applied to trading portfolios: factor sensitivity (DV01) method, value at risk (VaR) method and stress tests.
• Sensitivity factors measure the change in the value of the position in a given underlying instrument in the case of a specified change of the market risk factor (for example a change of the interest rate in a given point on the interest rate curve by 1 basis point or a change of the currency rate or stock price by 1%).
– For interest rates, the sensitivity measure is DV01;
– For currency risk the sensitivity factor is equal in value to the position in a given currency;
– For positions in equity securities, the sensitivity factor is equal in value to the net position in a given instrument (stocks, index, participation unit).
• The integrated measure of market risk for trading portfolio, which combines the impact of the positions in particular risk factors and takes into account the correlation effect between volatilities of individual factors, is value at risk (VaR). VaR is used to estimate the potential decline in value of a position or portfolio in normal market conditions, for a fixed confidence level and in a specified period. For positions opened in a trading portfolio of the Bank, VaR is calculated using the 99% confidence level and one-day holding period.
• Both DV01 and VaR for a trading portfolio are calculated as net amounts without any economic hedging of the portfolio of securities available for sale, i.e. excluding any derivative instruments which are to secure the fair value of the portfolio. The risk exposure of such transaction is controlled by using appropriate risk measurement methods and mitigated with risk limits adopted for banking portfolios.
• On a daily basis, the analysis of stress test scenarios is carried out, while assuming risk factor changes higher than those adopted for VaR measurement and ignoring any observed historical correlations between those factors.
• The Bank has market risk exposures of trading portfolios in more than twenty currencies, both for currency positions and exposures to interest rate risk, but only exposures to a few currencies are significant. For a large group of currencies, exposures arise from the imperfect match of the transactions concluded upon the client’s order and the counter transactions with other counterparties from wholesale markets. Significant exposures to market risk are opened for PLN, developed market currencies (mainly USD and EUR and less frequently GBP, CHF or JPY) and even currencies from Central European countries.
Monitoring
• The Market Risk Department by the dedicated IT system provides the relevant executives and managers, on a regular basis, with reports on portfolio sensitivity, value at risk (VAR), securities positions, stress test results for market risk, allocation of capital requirements relating to market risk and utilization of Trading MAT and Trading Stop Loss limits.
• In addition, market risk analyses are presented systematically to the following committees: the Asset and Liability Committee, the Risk and
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Capital Management Committee and the Risk and Capital Committee of the Supervisory Board.
Market risk for non-trading portfolios
Definition
• Market risk associated with non-trading portfolios (banking book portfolios) is the risk of the potential negative impact of changes in market factors such as interest rates, exchange rates, credit spreads and stock prices on net interest income (NIR), economic value of equity (EVE) or accumulated other comprehensive income (AOCI). Changes in the value of other comprehensive income are generally influenced by available-for-sale (AFS) securities investment portfolios and related hedges used under a hedge accounting program.
• Interest rate risk for the banking book is the risk of an adverse impact of interest rate changes on the interest income and capital of the Group.
• Interest rate risk may occur if assets and liabilities (including capital and derivative instruments that meet the requirements of hedge accounting) have different maturity dates or if their interest rates change on different dates or their interest rates are connected with different interest rate curves (basis risk), or if they include options.
Risk management strategy
• The purpose of managing market risk related to non-trading portfolios is primarily to minimize the risk connected with the possibility of occurrence of adverse changes in market interest rates and with a negative impact of those changes on the net interest rate and, subsequently, financial result of the Group.
• Market risk management at the Bank is based on: the requirements of Polish and European regulatory institutions, and especially resolutions of the Polish Financial Supervision Authority (KNF) and the EBA; and the principles of prudent and stable risk management at the Group and the general risk level accepted by the Supervisory Board of the Bank, taking into account best practices applied in the market.
• Management of market risk related to non-trading portfolios is carried out both at strategic and operational level. Division into particular risk management levels depends on the nature and type of decisions made by particular decision-making fora at the Bank which affect the profile and level of interest rate risk.
– The strategic risk management perspective is covered by the decision- making powers of the Asset and Liability Committee (ALCO) of the Bank. which carries out interest rate management by setting risk limits for banking portfolios and by conducting monthly reviews of exposures and results of management of those portfolios.
– The operational management of market risk related to non-trading portfolios is carried out by the Asset and Liability Management Department, which is authorized to open risk positions within the framework of adopted limits.
Risk measurement
• The following risk measurement methods apply to non-trading portfolios (banking book portfolios): net interest income measures, economic value measures, interest rate gap analysis, Interest Rate Exposure (IRE) method, stress tests
• Net interest income (NII) measures are measures of changes in expected future profitability within a given time horizon resulting from interest rate movements or from credit spread changes; they encompass interest income and interest expenses.
• Economic value (EV) measures are measures of changes in the net present value of interest rate sensitive instruments over their remaining life resulting from interest rate movements, in case of IRRBB, or from credit spread movement, in case of CSRBB.
• The Bank calculates:
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– SOT_NII, which means a decline in the one-year net interest income from Tier 1 Capital, resulting from a sudden and unexpected movement in interest rates specified in any of the two supervisory shock scenarios referred to in Article 1(2) of the Commission Delegated Regulation (EU) 2024/856 of 1 December 2023.
– SOT_EVE, which means a decline in the economic value of equity from Tier 1 Capital, resulting from a sudden and unexpected movement in interest rates specified in any of the six supervisory shock scenarios referred to in Article 1(1) of the Commission Delegated Regulation (EU) 2024/856 of 1 December 2023.
• The interest rate gap analysis uses the schedule of maturity or revaluation of on-balance sheet positions and derivatives recognized using hedge accounting or categorized as economic hedge in order to determine differences between positions whose maturity date or interest rate update date is in the subject time interval.
• As a general rule applied in the interest rate gap analysis, transactions are allocated to particular bands of revaluation of positions in banking portfolios on the basis of contractual or assumed dates of change of transaction interest rates.
• The Interest Rate Exposure (IRE) method, based on the revaluation gap method, is used for measurement of the potential impact of a pre- determined parallel shift of interest rate yields on pre-tax interest income on the banking book which may be earned in a specified time interval. This is a prospective measure. In addition, it is assumed that in standard conditions interest rate moves are identical for each currency and equal to 100 basis points up. The IRE measure is calculated separately for the position in each currency over a 10-year time horizon, provided, however, that 1-year and 5-year IRE measures are mainly used for the purposes of day-to-day monitoring and limitation of interest rate risk positions for banking portfolios. Additionally, the Bank measures the interest rate risk using the income method (cash flow net interest revenue NIR/IRE). This measure, like the IRE calculated using the gap method, determines the potential pre-tax impact on net interest income for banking book items due to specific changes in interest rates over a specific reporting period – generally 12 months. NIR is the difference between accrued interest income earned on assets (e.g. loans to customers) and the cost of interest paid on liabilities (e.g. customer deposits). NIR/IRE is the delta between the Baseline NIR and NIR in the interest rate shock scenario (e.g. + 100 bp, + 200 bp, -100 bp, -200 bp)
• Stress tests measure a potential impact of significant changes in the level or shape of interest rate yields on the positions opened in a banking portfolio.
• The Bank carries out stress tests for pre-defined scenarios of movements of interest rates, which are combinations of moves of market factors, both defined as significant changes (large move) and crisis changes (stress move), which occur both in Poland and abroad. The extent of assumed shifts of market factors are reviewed at least annually and adjusted as appropriate to changes in the market conditions in which the Bank operates.
• The Asset and Liability Management Department in the Interbank Transaction Division carries out activities relating to securities available for sale. Three key objectives have been adopted for activities relating to the portfolio of securities available for sale:
– carrying out financial liquidity management,
– hedging against the risk taken over by the Interbank Transaction Division from other organizational units of the Bank
– opening own interest rate risk positions in portfolios of the Bank by the Interbank Transaction Division.
• In order to avoid excessive fluctuations of capital funds of the Bank, caused by revaluation of assets held for sale, maximum limits are set for the DV01 (Dollar Value of 1 basis point) position, which determines the potential change in the value of risk position for a given interest rate curve on a specified nodal point (to which all cash flows in a given period are brought) caused by a shift of the market interest rate by 1 basis point up for such
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portfolios. Limits also cover open derivative instrument positions (for example interest rate swaps) established to hedge the fair value of a portfolio.
Monitoring
• The Market Risk Department and a dedicated reporting unit in the Risk Management Sector provide the relevant executives and managers with reports on portfolio sensitivity, securities positions, stress test results for interest rate risk of the banking book.
• In addition, market risk analyses are presented systematically to the following committees: the Asset and Liability Committee and the Risk and Capital Committee of the Supervisory Board.
Liquidity risk
Definition
• Liquidity risk is the risk of the Bank's inability to meet its obligations in a timely manner and without incurring financial losses if such inability results from a mismatch of cash flows (flow gap), limited marketability of assets or market changes.
Risk management strategy
• The overriding goal of liquidity risk management is to ensure that the Bank and other companies from the Group have access to liquid funds sufficient to meet their financial liabilities when due (also in the event of probable extreme crisis situations).
• Liquidity risk management is based on:
– applicable polish laws and regulations, in particular the Banking Act;
– applicable provisions of EU law, in particular 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 (CRR),
– requirements of Polish regulatory institutions and especially resolutions of the Polish Financial Supervision Authority (KNF);
– principles of prudent and stable risk management at the Group and the general risk level accepted by the Supervisory Board of the Bank;
– taking into account best practices applied in the market.
• The Group analyses and manages liquidity risk in different time horizons and, to this end, distinguishes between current, short term, medium term and long term liquidity and applies adequate risk measurement and limitation methods. The adopted measures and limits are to limit excessive concentrations with respect to the assumed structure of the balance sheet or sources of funding.
• The management of long-term liquidity is a task of Assets & Liabilities Committee (ALCO) and is covered by the strategy of the Bank. It is carried out on the basis of monitoring of structural relations of the balance sheet and on the basis of long-term liquidity measures (incl. regulatory) , and covers the liquidity gap analysis and the possibilities of obtaining sufficient financing sources in the future, as well as the analysis of funding costs in the context of the impact on the profitability of business operations.
• The management of medium-term liquidity, within the 1-year time horizon, is a task of Assets & Liabilities Committee and is carried out on the basis of annual financing plans, which determine the levels of internal limits, plans prepared by business units of the Bank concerning changes in assets and liabilities, elaborated within the framework of financial plans for the next budget year.
• The management of short-term liquidity, within the 3-month time horizon, is a task of the Financial Markets Sector and Corporate Banking Sector, and is carried out on the basis of both regulatory measures of short-term liquidity and internal limits. The Bank also analyses the liquidity level in emergency situations, assuming, as a must, that there will be no negative gap in all time brackets in a 12-month time horizon.
• Current liquidity management is a task of the Financial Markets and Corporate Banking Sector and is carried out on the basis of nostro
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accounts of the Bank, including in particular the mandatory reserve account with the National Bank of Poland, using available products offered by the money market and the central bank.
Risk measurement
• Liquidity risk measurement is carried out by using external supervisory measures (M3-M4, LCR/NSFR and additional liquidity monitoring indicators – ALMM) and additional measures and tools developed internally:
– gap analysis – MAR/S2
– crisis/stress scenarios,
– structural liquidity ratios,
– market warning signals,
– significant sources of financing,
– emergency financing plan,
– intra-day liquidity management process,
– short-term liquidity gap – M1,
– short-term liquidity ratio – M2,
– illiquid assets with own funds coverage ratio - M3,
– illiquid assets and assets of limited liquidity with own funds and stable external funds coverage ratio - M4.
Monitoring
• Liquidity risk monitoring and management are carried out using: supervisory liquidity risk limits determined by the Office of the Polish Financial Supervision Authority and internal prudential limits and thresholds determined for liquidity risk by the Asset and Liability Committee (ALCO):
– limits for the S2 Report – for pre-determined currencies and time ranges;
– warning thresholds for structural liquidity ratios;
– warning threshold for tests of stress scenarios.
• On a regular basis, the Market Risk Department and a dedicated reporting unit in the Risk Management Sector provide the relevant executives and managers with reports on the liquidity position, stress test results for liquidity risk and allocation of capital requirements relating to liquidity risk.
• In addition, liquidity risk analyses are presented systematically to the following committees: the Asset and Liability Committee, and the Risk and Capital Committee of the Supervisory Board.
Operational risk
Definition
• Operational risk should be understood as a possibility of loss as a result of application of inappropriate or defective internal processes, human, systems or external events. The definition of operational risk also includes legal risk, i.e. the risk of loss (including litigation costs, settlements and penalties imposed by the regulator) resulting from non-compliance with the law, prudent ethical standards and contractual obligations in every aspect of the Bank’s business, excluding strategic and reputational risk. The Bank recognises the impact of operational risk on the possibility of loss of reputation associated with its business activities;
• For the purposes of the ICAAP process, the compliance risk is also included in the operational risk (i.e. the risk of negative effects of non- compliance with legal provisions, supervisory regulations, internal normative acts of the bank and the practices and standards available on the market).
Risk management strategy
• In terms of operational risk, the strategic goal of operational risk management is to ensure a permanent and effective approach to identification, measurement/assessment, limitation, control, monitoring and reporting of risk, as well as effective reduction of the level of exposure to operational risk, and as a consequence limiting the number and scale
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of events of an operational risk (policy of low level of tolerance to operational losses).
• The main assumptions of the operational risk strategy focus on increasing the Group’s capacity to early identifying areas of increased system risk and reduction of exposure areas resulting from the risk resulting from human errors.
• When organizing the operational risk management process the Group takes into account the business strategy, risk profile of the Group, macroeconomic environment, available capital and liquidity resources and regulatory requirements, which make up the framework of preparation of the system used to control and manage operational risk at the Group.
• The Group's operational risk management system is built to ensure proper risk management at every stage, i.e. identification, assessment/measurement, mitigation, monitoring and reporting.
Risk measurement
• In the risk assessment process, the Group uses combinations of various risk measurement or estimation methods.
– Risk assessment is to determine the probability of occurrence and the amount of future losses attributable to operational risk. To this end both quantitative and qualitative indicators are used (such as risk appetite, capital requirements, KRIs, data about losses and operational risk events, control issues and corrective actions, self- assessment process, risk concentration areas and rising-risk areas, scenario analysis, stress tests, changes in processes and products, information from internal and external reviews and audits and information reported to Commissions and Committees).
– Such assessment also includes an analysis of both internal and external threats. A correct assessment of operational risk enables the Group to properly determine and manage the risk profile.
Monitoring
• As part of consolidated supervision, operational risk data relating to the Bank and subsidiaries are presented to Commissions and Committees that support the Management Board and Supervisory Board of the Bank in the operational risk management process.
• The ongoing monitoring of operational risk is the responsibility of the Operational Risk Committee, the Control and Compliance System, the Risk and Capital Management Committee, the New Products Committee and the various Commissions supporting the Committees.
• Quality of the operational risk management process (including the self- assessment process) in particular units of the Group is checked and assessed by the Internal Audit function.
• The Supervisory Board oversees the operational risk management system and assesses its adequacy and effectiveness. The Supervisory Board is supported by its committees: Audit Committee, Risk and Capital Committee and Remuneration Committee.
• On the basis of synthetic reports which present the scale and types of operational risk to which the Group is exposed, risk concentration areas, operational risk management methods, probability of occurrence of operational risk events, assessment of potential adverse impact of the operational risk management methods, results of operational risk profile monitoring and operational risk appetite, submitted by the Management Board at least semiannually, the Supervisory Board, supported by the Audit Committee and the Risk and Capital Committee, assesses the implementation of the assumptions of the strategy by the Management Board (including with respect to the operational risk management principles) and may order a review of the strategy if it deems it necessary.
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Capital risk
Definition
• Risk arising from failure to provide sufficient capital to absorb unexpected losses.
Management strategy
• Capital management covers ensuring the level of capital that is adequate to the risk of the business, as well as the strategy in terms of planning, structure and sources of capital acquisition, and the risk of its improper implementation (including failure to achieve an appropriate financial result).
• The formal framework of the capital risk management process supports the Risk and Capital Management Committee (RCMC) and the Bank's Management Board in the allocation, measurement, management, monitoring and control of the Bank's capital position.
• The level of own funds and qualifiable liabilities should provide coverage for risks identified as significant in the Bank's operations, while meeting supervisory standards in terms of total capital ratio (TCR) and the requirement for own funds and qualifiable liabilities (TLAC).
• The bank mitigates capital risk by implementing a process for assessing internal capital adequacy, which combines elements of internal capital estimation, capital planning and capital management, and constitutes an integral part of BHW's management process. The Group has a number of capital planning tools, applied depending on the adopted scenario.
• Capital risk management also includes the management of the risk of excessive financial leverage. The Group manages the risk of excessive financial leverage as part of a coherent risk management policy, which also covers capital risk management, including the risk of excessive financial leverage.
• The key elements of capital management and the directional definition of capital needs are specified in the Bank's Strategy. Information on capital goals and the expected capital structure is also included in the ICAAP document.
Risk measurement
• TCR, LR, MREL TEM, MREL TREA and TLAC TEM, and TLAC TREA are regulatory measures of capital. The TLAC TREA requirement was designated as a strategic limit due to its most severe impact and as it is, in the Bank's opinion, the first requirement that can adversely affect the strategic assumptions of the Bank.
• Capital risk is measured using, among other things, processes such as assessment of internal capital adequacy, stress tests and reverse stress tests in BHW’s capital planning activities.
Monitoring
• The Bank's capital ratios are monitored at least monthly and reported quarterly by the Financial Reporting, Control and Tax Department to the Risk and Capital Strategy Department.
• In addition, the results of capital risk monitoring are presented systematically to the following committees: the Assets and Liabilities Committee, the Risk and Capital Committee and the Risk and Capital Management Committee.
• All results of stress tests, reverse stress tests and capital adequacy assessment are presented to dedicated committees.
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Climate and Environmental (C&E) Risks
Definition
• Climate and environmental (C&E) risk is a type of ESG risk (environmental, social and governance risk).
• Climate and environmental risk should be understood as the risk of adverse financial effects resulting from climate change and environment degradation on clients, contractors or assets of the Bank. There are two main risk factors:
– Physical risk – the consequences of a changing climate, including the increased occurrence of extreme weather conditions, gradual climate change and environment degradation (i.e. air, water and soil pollution, drinking water shortages and deforestation).
– Transition risk – losses resulting from the process of adapting to a low-emission and more environment friendly economy.
• C&E risk is considered a cross-cutting risk that may manifest itself within traditional risk categories (i.e. credit risk, market risk, strategic risk, etc.). As part of the process of assessing the materiality of risks in 2024, in the short term (1-3 years), materiality was indicated for three types of risks – strategic risk, credit risk and compliance risk.
Management strategy
• The main objective of climate and environmental risk management is to effectively integrate these risk factors into existing risk management processes to ensure the effectiveness of the Group's risk profile in the short, medium and long term.
• Due to the cross-cutting nature of ESG risks and the dynamic development of regulatory expectations and good practices, the Group has developed the document - Principles of ESG Risk Management in the Capital Group of Bank Handlowy w Warszawie S.A. “Principles of ESG Risk Management”, which is one of the documents describing the risk management strategy of the Group. This document:
– describes the key elements of the organizational structure and processes used by the Bank to identify, measure, monitor, control and report ESG risk;
– clarifies the roles and responsibilities in the area of ESG risk management at the levels of the Bank's Management Board and each of the three Lines of Defense.
• ESG risk management is consistently developed within the framework of policies and procedures that govern the management of particular risk categories.
• A detailed description of the ESG Risk Management Principles can be found in the Sustainability Statement of Bank Handlowy w Warszawie S.A. and the Bank Handlowy w Warszawie S.A. Group for the year 2024.
Risk measurement
• In the risk assessment process, the Group applies a combination of various methods of risk measuring or estimating using a number of measures adapted to the risk category for which ESG risk is measured, including:
– determining KRI indicators as part of the risk appetite covering priority portfolios, as well as types of risks having a significant impact of ESG factors,
– monitoring credit exposure to transactions with increased environmental and social risk,
– using an industry climate risk map at the portfolio and client level to identify and measure these risks,
– conducting stress tests for credit exposures (sensitivity analysis) and compliance risk (analysis of operational risk scenarios).
Monitoring
• Monitoring the correctness and ensuring the effectiveness of ESG risk management, and ensuring appropriate consideration of ESG risks in the Bank's risk profile and risk appetite are the tasks of the Risk and Capital Management Committee of the Bank's Management Board.
• A package of ESG risk analysis reports is prepared periodically and submitted to the Bank's Management Board, including the Risk and Capital Management Committee, and the Supervisory Board, including the Risk and Capital Committee.
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VI. Sustainability Statement of Bank Handlowy w Warszawie S.A. and Capital Group of Bank Handlowy w Warszawie S.A.
1. General information
1.1 About Bank Handlowy w Warszawie S.A.
1.1.1 General presentation of the Group [SBM-1]
Bank Handlowy w Warszawie S.A., operating under the brand name of Citi Handlowy (“Bank” or “Citi Handlowy Bank”) is Poland’s oldest commercial bank and one of the oldest banks continuously operating in Europe. The Bank offers banking and investment products and services to businesses, local governments and the central government sector, as well as to individual customers, micro-enterprises and sole proprietors. The Bank operates in accordance with applicable laws and supervisory regulations.
The Bank’s registered office is located in Warsaw with part of operational processes carried out also in operational centers located in Olsztyn and Łódź. At the end of 2024, the Bank had 3,143 employees. For more information on the employees, see the Employees section of this Statement.
The Bank wants to be a strategic partner of Polish companies by proactively supporting the foreign expansion of Poland's economy. With its diverse product range, the Bank supports entrepreneurs, including those with international needs and aspirations. The Bank is a leader in providing banking services to global companies operating in Poland in the area of investment banking, including brokerage, custody and cash management services. At the same time, the Bank serves as a Treasury Securities Dealer (DSPW) and is among the leading banks as regards trading in the Treasury BondSpot cash market. The Bank is also a depositary for investment and pension funds. In the consumer banking segment, it is the leader in the areas of credit cards and wealth management services. Citi Handlowy Bank also strives to maintain its status as one of the safest venues for keeping institutional clients' savings – it provides state-of-the art solutions that cover operational accounts and day-to-day cash management.
In 2024, the Bank provided services to:
• Financial institutions – domestic and foreign;
• Multinational corporations and largest domestic companies;
• SME companies, especially those with international needs and aspirations;
• Public sector entities;
• Consumer banking clients, including primarily the affluent customer segment.
In 2021, the Bank's majority shareholder (Citigroup Inc.) decided to change its consumer banking strategy, including an exit from consumer banking in several markets, including Poland. The divestment process for consumer banking in Poland is still ongoing.
1.1.2 B usiness model [SBM-1]
The business model of Citi Handlowy Bank is built on dedicated employees who, through their knowledge and experience, support clients in meeting their financial needs and creating stakeholder value. The bank strengthens its market position by continuously developing its employees, fostering innovation and leveraging technology to enhance the customer experience and maintain flexibility in an ever-changing financial environment.
Citi Handlowy Bank runs its operations in Poland and has no branches or subsidiaries abroad. The Bank offers its products and services to clients through:
• A network of 18 branches in nine major Polish cities;
• Online and mobile banking;
• Telephone banking;
• A network of 35 own ATMs (including 28 multi-currency ATMs) and approximately 21,000 ATMs of other operators nationwide, including more than 3,300 deposit machines owned by Euronet Poland.
In the area of Institutional Banking, the Bank provides comprehensive financial services to the largest Polish companies and strategic companies with a large potential of growth, and also to the largest financial institutions and to companies from the public sector.
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The Bank’s offer for institutional clients includes:
• deposits and current accounts,
• credits, loans,
• cross border (international) transfers,
• card products,
• liquidity management products,
• payments and receivables management,
• currency exchange on the CitiFX Pulse platform available 24/7,
• electronic banking via the CitiDirect BE platform,
• cash products,
• European Advisory Program,
• trade finance products,
• transaction activity on financial instruments,
• custody activities,
• depositary activities for investment funds and pension funds,
• brokerage activities.
The Bank's competitiveness, resulting from its network of international connections, allows it to build a leading position in the area of banking services for affluent clients. The proposal for Citi Private Client and Citigold clients is continuously being developed.
The Bank’s offer for individual customers includes:
• wealth management services,
• intermediation in the sale of investment and insurance products,
• credit cards,
• deposits and current accounts,
• cash loans,
• mortgage products,
• online and mobile banking.
Net revenues of the Group
Capital Group
Change
2024
2023
In PLN ’000
%
Net revenues 1
5,331,255
4,805,579
525,676
10.9%
The Bank also offers financial products that address sustainability issues and help implement the Bank's sustainability strategy (see Sustainability Strategy ):
• Green loan – a loan granted through cooperation with Bank Gospodarstwa Krajowego and financed by the European Funds for a Modern Economy program. This product is intended for, among others, small and medium-sized enterprises, which can apply for a redeemable subsidy for carrying out certain ecological investments to modernize their infrastructure and reduce primary energy consumption.
• Technology loan – a loan granted through cooperation with Bank Gospodarstwa Krajowego and financed by the European Funds for a Modern Economy program. This product is intended for, among others, small and medium-sized enterprises, which can apply for a redeemable subsidy for the purchase and implementation of a new, breakthrough technology or the implementation of their own new technology to produce new or significantly improved goods, processes or services. The technology loan allows clients to implement ecological innovations and to invest in renewable energy sources and processes to improve the energy efficiency of businesses.
The European Advisory Program is a wide range of advisory products that help clients obtain funding and implement and manage such a project. The Program is dedicated to entrepreneurs who intend to make good use of development opportunities created by the European Union.
1 Net revenues was calculated as a sum of: 1) Net interest income, 1) Net fee and commission income, 3) Dividend income, 4) Net income on trading financial instruments and revaluation (excluding Net income on FX operations ), 5) Net gain/(loss) on debt investment financial assets measured at fair value through other comprehensive income, 6) Net gain/(loss) on equity and other instruments measured at fair value through income statement, 7) Net gain on hedge accounting, 8) Net other operating income,
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In 2024, the Bank introduced a Policy defining a framework for the classification of sustainable products in the Bank Handlowy w Warszawie S.A. Group, used by the Bank to classify transactions concluded on the products it offers based on three possible classification paths:
• Path A. Financing for clients carrying out activities having a positive environmental impact;
• Path B. Financing of pro-environmental investments;
• Path C: Financing of client transformation based on ESG key performance indicators (KPIs).
Individual transactions are classified as sustainable by business and credit decision-makers taking into consideration the opinion of the Sustainability Product Commission (ESG Commission).
1.1.3 Value Chain [SBM-1]
Upstream
Own operations
Downstream
Entities positioned upstream in relation to the entity (e.g. suppliers) provide products or services that are used to develop the entity's products or services.
Significant activities, resources and relationships within the entity's own operations, such as human resources
Entities positioned downstream in the value chain in relation to the entity (e.g. distributors, customers) receive products or services from the entity.
• Purchase of products (e.g. paper and office furniture) and services (professional services, marketing communications, bodyleasing , IT, etc.
• Logistics – storage and transportation of purchased products to the bank's branches and head office
• Real estate (including certification of facilities accessible to persons with special needs) and ATMs of other operators
• Operations at the bank's headquarters
• Sales of services at branches
‒ Operations within two areas of banking services: consumer and institutional
• Business partnerships (industry organizations)
• Activities within the initiatives Citi Women, Citi Pride, Families Matter and Citi DisAbility Network Poland
• Regulatory environment
• Customer service (after-sales activities)
‒ Individual client service
‒ Institutional client service
• Clients’ activities (within the Bank’s portfolio)
‒ Investment projects
‒ Loans granted (financing the economy and the needs of individual clients)
‒ Securitization, syndications, etc.
Stakeholders (value chain actors)
• Employees of vendors, certification bodies
• Employment agencies/ bodyleasing
• Employees (persons employed under employment contracts) and non-employees (B2B, contracts of mandate, etc.).
• Social and business partners (investors, institutional environment)
• Citigroup
• Individual and institutional clients
• Local communities (around own and partner facilities)
• Shareholders
• Citigroup
1.1.4 Sustainability Strategy [SBM-1]
The Bank recognizes its role as a supporter of global and domestic efforts to fuel the transformation towards sustainability, the importance of which is constantly growing. As a public trust institution, the Bank is obliged not only to act transparently and in accordance with evolving ESG standards, but also to actively participate in transforming the economy to make it environmentally neutral.
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Sustainability Strategy for 2022-2024
In recent years, the Bank was implementing the Sustainability Strategy for 2022-2024 , which was an integral part of its business strategy. The Bank's main ambition was to support clients in transforming their business models to make them sustainable, and to integrate social and environmental aspects into funding-related decisions. To achieve this goal, the Bank carried out activities on three levels (pillars). It was:
1. offering ESG products and solutions to clients to support them in their quest for low carbon,
2. managing ESG risks and, in particular, incorporated environmental and social factors into lending processes,
3. reducing its carbon footprint and supporting activities towards social responsibility so that the Bank’s activities are sustainable.
Sustainability Strategy for 2025-2027
The Bank continues its sustainability efforts and in December 2024 adopted a new strategy for 2025-2027. It expands on the goals set in the Bank's previous strategy and expands its strategic directions. By including a long- term horizon of new ESG regulations, business strategy goals, results of the double materiality assessment, material ESG topics, as well as the results of the dialogue with stakeholders, the new Sustainability Strategy will strengthen the resilience of the Bank's business model, and will help it seize new business opportunities and manage risks and impacts.
The Sustainability Strategy for 2025-2027 is based on three pillars:
Pillar 1: Sustainable Finance
The Bank wants to improve sustainable finance solutions, increase the share of green assets in the portfolio, share its knowledge and experience with clients to support them in their transformation, expand sustainability to include social aspects and support the development of new technologies.
To this end, the Bank will focus on three main strategic directions:
• continuing development of sustainable financial services,
• using its knowledge and experience to support clients in their sustainable transformation,
• including social aspects in credit decisions.
Progress in implementing the strategy will be measured by the following indicators:
• PLN 2 billion in financing classified as sustainable until 2027,
• At least 10% of the share of sustainable financing in the loan portfolio of institutional clients,
• 100% of ESG sales and consulting employees will complete ESG training by 2027.
Pillar 2: ESG Risk Management
The Bank wants to integrate ESG risk management across the organization, better understand and assess the physical and transition risks associated with the financed loan portfolio, and reduce the financing of high- emission projects.
To this end, the Bank will focus on three main strategic directions:
• developing a transition plan for climate change mitigation,
• reduction of the share of financing related to greenhouse gas emissions in the Bank's own loan portfolio,
• improving ESG risk management.
Progress in implementing the strategy will be measured by the following indicators:
• Collecting information for at least 60% of the credit exposure on their Scope 1 and 2 emission reduction targets and transformation plans and using this data in the credit process.
Pillar 3: Sustainable Own Operations
The Bank wants to reduce its own emissions and effectively manage resources, support employees and initiate socially responsible activities.
To this end, the Bank will focus on four main strategic directions:
• achieving climate neutrality of own operations by 2030 while reducing indirect emissions among others by switching to 100% renewable energy,
• including ESG aspects comprehensively in own operations mainly through the implementation of the CSDDD directive,
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• continuing support for the development and well-being of employees among others by obtaining a level of employee engagement in the VOE survey of at least 80%,
• continuing socially responsible activities among others through the engagement of employees and other stakeholders of the Bank in the employee volunteering program.
The main assumptions of the current strategy, including the sustainability strategy , is available on the Bank's website: https://www.citibank.pl/poland/homepage/english/files/strategy_of_the_bank.pdf
1.1.5 Dialogue with stakeholders [SBM-2]
The Bank works closely with key stakeholders, and tailors the frequency, channels and topics of communication to their needs. The Bank wants, first and foremost, to provide stakeholders with information about its operations, market environment, regulatory requirements and future challenges, but also to listen to their voices – to study their needs, receive feedback and look for areas for improvement.
Stakeholder involvement
Key stakeholder group
Form of dialogue
Specific objectives
Building on the results of dialogue
Investors and shareholders
• individual and group meetings with the President of the Management Board or the Vice President for Finance,
• teleconferences related to the publication of results,
• conferences with investors organized by other banks or brokerage firms, or by investors and advisory firms themselves,
• answering questions from investors and shareholders,
• learning the opinions of investors and shareholders on issues that are important to them and related to the Bank’s activities.
The Bank takes investors' expectations into account when determining its dividend policy and relevant topics for non-financial reporting or setting strategic goals.
Employees
• internal intranet network,
• newsletters “Puls Citi Handlowy’”,
• emails,
• letters from the President of the Management Board to employees,
• town hall meetings with employees,
• survey Voice of the Employee ,
• People Board activities – representatives elected by employees who present proposals, ideas and other issues raised by employees to the Management Board and implement them,
• HR newsletters: “Manager Monthly” and “Employee Monthly”,
• orientation training for new employees.
• providing information about employees, including benefits, goals, evaluation process, remuneration policy, development, training, etc.,
• answering employees' questions, including anonymously,
• learning the opinions of employees on issues that are important to them and related to the Bank’s activities ,
• familiarizing new employees joining the organization with the organizational culture, company values and key employee-related processes.
The Bank takes into account the expectations of employees by setting strategic goals regarding labor issues and determining, among other things:
• expense budget,
• employee work model (flexible conditions, hybrid work),
• the amount and method of distribution of funds from the Company Social Benefits Fund,
• employee benefits,
• relevant topics for non- financial reporting.
• activities for diversity, work-life balance, training, employee development, equal rights for men and women and minority rights.
Clients
• surveys,
• individual meetings between relationship managers and clients,
• contact form on the website,
• social media,
• branch network,
• Citi Handlowy magazine,
• group meetings, workshops and webinars,
• client advocates,
• presenting the offered product,
• acquiring new clients,
• expanding current banking services,
• improving the clients’ knowledge of secure banking, cybersecurity, data protection and financial education,
• answering questions,
The Bank takes into account the expectations of clients by setting strategic goals and determining, among other things:
• product offering,
• new services or changes to existing processes,
• relevant topics for non- financial reporting.
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• learning the opinions of clients on issues that are important to them and related to the Bank’s activities.
Regulators and central administration
• meetings with representatives of authorities and regulators,
• regulatory reporting,
• written and electronic correspondence,
• responses to surveys sent by regulators,
• learning about the expectations of the authorities and regulators regarding the Bank’s activities.
The Bank takes into account the expectations of authorities and regulators by setting strategic goals and determining, among other things:
• dividend policy,
• how to implement legal and supervisory regulations,
• relevant topics for sustainability reporting.
Banking sector
• participation in joint working groups, including within the framework of the Polish Bank Association.
• maintaining relationships with other banks and working together to develop and implement sector solutions for banking.
The Bank monitors the activities of the Polish banking sector, and solutions developed during the joint activities of banking working groups are implemented in the activities of Citi Handlowy Bank.
Vendors and business partners
• meetings with vendors at the business unit level,
• vendor manager function for each vendor contract,
• annual reviews of collaboration with vendors,
• internal regulations regarding vendors,
• maintaining relationships with vendors and business partners,
• establishing new business relationships,
• providing information on procurement policy,
• learning the opinions of vendors on issues that are important to them and related to the Bank’s activities.
When defining its procurement policy, vendor management policy or relevant topics for sustainability reporting, the Bank takes into account the expectations of its business partners and the Bank’s strategy, as well as the capabilities of its vendors.
Community
• activities of the Citi Handlowy Leopold Kronenberg Foundation,
• maintaining relationships with local communities,
• help for those in need,
• promoting volunteering among employees,
• learning the opinions of local communities on issues that are important to them and related to the Bank’s activities.
The Citi Handlowy Foundation, being the Bank's platform for dialogue with local communities, takes into account the expectations of such communities when planning the projects in the field of corporate social responsibility.
When determining relevant topics for sustainability reporting, the Bank takes into account the expectations of local communities.
Non- governmental organizations
• activities of the Citi Handlowy Leopold Kronenberg Foundation,
• maintaining relationships with the local communities and non-governmental organizations,
• helping those in need jointly with non-governmental organizations,
• encouraging social engagement among employees, building a culture of community
The Citi Handlowy Foundation, being the Bank's platform for dialogue with non-governmental organizations, takes into account the expectations of such organizations when planning CSR partnerships and projects.
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involvement and volunteer activity,
• learning the opinions of non-governmental organizations on issues that are important to them and related to the Bank’s activities.
When determining relevant topics for sustainability reporting, the Bank takes into account the expectations of non- governmental organizations.
Understanding the interests and views of key stakeholders and how they relate to the strategy and business model
The views and opinions of stakeholders, both internal and external, as well as the feedback they provide, are an important part of the process of identifying important topics (see Topics relevance analysis ) and of defining the
strategic areas and objectives for the Bank's operations and day-to-day planning and management.
The Management Board and Supervisory Board are informed of the opinions and interests of key stakeholders through the Bank's organizational units that have direct contact with key stakeholders. These units take into account, among other things, their opinions and demands when setting strategic goals for individual business areas.
The new Sustainability Strategy of the Bank for 2025-2027 (see Sustainability Strategy) ) has been designed
taking into account the results of the double materiality assessment, including the opinions of the Bank's key stakeholders. The stakeholders' opinions were presented to the Management Board and Supervisory Board as part of the presentation of the results of the double materiality assessment. Their content influenced the design and ambitions for the Bank's sustainable growth.
Citi Handlowy Bank treats its employees as key stakeholders. In order to take into account their opinions on its efforts, the Bank conducts a Voice of Employee (VOE) survey every year, in which employees can speak freely and anonymously on topics related to creating a work environment where every employee can be themselves. In the VOE, employees rate their involvement, the processes that affect them, ethical issues, managerial effectiveness and other areas that have an impact on employee-related issues. The VOE results are analyzed by the Bank's management and can influence decisions taken by the Bank's management bodies on the strategy, changes to the business model, remuneration policy, benefits or employee development. An important voice that management takes into account in various projects implemented in the Bank are the demands submitted by trade unions operating in the Bank. In 2024, there was an initiative at the bank called People Board – representatives elected by employees supported communication on labor issues between the Management Board and employees.
Citi Handlowy Bank's clients are also a very important group of stakeholders. In order to consider their opinions on initiated activities, the Bank regularly conducts an NPS (Net Promoter Score) survey to measure individual clients' satisfaction with banking services. Individual clients can also comment anonymously commenting, among others, in mobile application stores on the service model they would like to see or provide other comments and suggestions, which are then analyzed by the Bank's management. In this way, they can influence the decisions of the Bank's management bodies regarding the strategy or business model, in particular the functionalities of mobile tools and the service model in remote channels.
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1.2 Sustainability management
1.2.1 Struc ture of the Management Board and Supervisory Board [GOV-1]
Management Board of the Bank
Executive members 2
7
Non-executive members
0
Representatives of employees and other work providers
0
Female
3 (43%)
Male
4 (57%)
Supervisory Board of the Bank
Executive members
0
Non-executive members 3
8
Representatives of employees and other work providers
0
Female
3 (38%)
Male
5 (62%)
Independent members
3 (38%)
Other aspects of diversity
Age
Management Board of the Bank
Supervisory Board of the Bank
30 – 50 years
2
2
50 – 60 years
4
4
Over 60 years
1
2
When describing the experience and responsibilities of members of the Management Board and Supervisory Board [ESRS 2 GOV-1 21c], incorporation by reference was used, i.e. they are described in section 11 of Chapter VIII of the Report on the Activities of Bank Handlowy w Warszawie S.A. and Bank Handlowy w Warszawie S.A. Group in 2024.
2 All members of Citi Handlowy's Management Board are executive directors.
3 All members of the Supervisory Board are non-executive directors
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1.2.2 Role of the Management Board and Supervisory Board [GOV-1]
Management Board of the Bank
The Bank's Management Board consists of seven persons and is the executive body responsible for representing the Bank and managing its affairs, including sustainability matters. The Management Board makes decisions on matters that are not within the exclusive powers of other bodies of the Bank. In accordance with relevant regulations applicable at the Bank, including the order Internal division of powers within the Management Board of Bank Handlowy w Warszawie S.A. , particular members of the Management Board have been assigned specified roles within the body, including roles related to sustainability matters. With regard to sustainability matters, Members of the Bank's Management Board perform, in particular, the following roles:
• The President of the Bank's Management Board oversees the development and implementation of the Bank's strategy, including a sustainability strategy covering environmental, social and corporate governance issues, oversees the Bank's compliance risk with regard to laws, internal regulations and market standards, supervises the assurance of corporate governance, and oversees the Bank's security function for the protection of persons and property;
• The Vice President of the Bank's Management Board in charge of Management of Significant Risks is responsible for the risk management system that covers ESG risks and for coordinating activities related to the implementation of the Bank's requirements arising from regulations in the area of risk management, including recommendations of supervisory authorities, providing the Bank's Management Board and Supervisory Board with comprehensive information on risk, and is responsible for adjusting the Bank's organizational structure to the size and profile of risks incurred by the Bank, accepts anonymous reports of violations of the law or violations of the Bank's ethical procedures and standards, and is responsible for the ongoing functioning of the anonymous reporting procedures, including providing the Supervisory Board with information, at least once every six months, on significant ethical issues occurring in the Bank, takes the required actions to implement the Bank's strategy, including the sustainability strategy; and actively participates in the activities of the ESG Steering Committee;
• The Vice President of the Bank’s Management Board in charge of Finance oversees the area of sustainability reporting, takes the required actions to implement the Bank’s strategy, including the sustainability strategy, and actively participates in the activities of the ESG Steering Committee;
• The Vice President of the Management Board in charge of Financial Markets and Corporate Banking is responsible for the day-to-day operation of anonymous violation reporting procedures in the Brokerage Department of Bank Handlowy and for receiving anonymous reports of violations of the law or the procedures and ethical standards in force in the Brokerage Department of Bank Handlowy, takes the required actions to implement the Bank's strategy, including the sustainability strategy, and actively participates in the activities of the ESG Steering Committee;
• The Vice President in charge of Operations and Technology oversees the Bank's information security management, implementation and security in the area of operations and technology, management and effective use of the Bank's real estate, assurance of optimal working conditions, including environmental and energy initiatives, selection of service and product vendors that meet the criteria required by the Bank, and also supervises matters of occupational health and safety, ensures the implementation of operational risk management principles in supervised business units in relation to their activities, takes the required actions to implement the Bank's strategy, including the sustainability strategy, and actively participates in the activities of the ESG Steering Committee;
• The Vice President in charge of Consumer Banking is responsible for the standard of quality of banking services for consumers, as well as for ensuring the implementation of appropriate principles of operational risk management in the supervised units, taking the required actions to implement the Bank's strategy, including the sustainability strategy, and actively participating in the activities of the ESG Steering Committee;
• The Member of the Management Board in charge of the Transactional Banking Sector is responsible for overseeing services, products and operations related to the sector's activities, and takes the required actions to implement the Bank's strategy, including the sustainability strategy, and actively participates in the activities of the ESG Steering Committee.
The Management Board of Citi Handlowy Bank reviews relevant topics arising from the analysis of the Bank's impacts, risks and opportunities related to environmental, social and corporate governance topics, and prepares a plan for related activities and periodically carries out their evaluations and reviews. The above powers of the Management Board are reflected in the Regulations of the Management Board of Bank Handlowy w Warszawie S.A. The materiality of an issue within the ESG topics is determined through a double materiality assessment based on an assessment of ESG impacts, risks and opportunities. In the process of overseeing relevant ESG topics resulting from the double materiality assessment, the Management Board is supported by the Bank's Strategy and Investor Relations Department, which manages the process of preparing and providing information that is
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necessary for the Management Board to properly conduct verifications and evaluations and prepare relevant plans, as well as provides the required analyses and undertakes actions necessary for the verification and creation of the Bank's sustainability strategy, among other things. The Bank's Management Board also prepares, approves and monitors the implementation of transformation plans that take into account ESG factors.
All members of the Bank's Management Board are on the Steering Committee that oversees and makes decisions in the process of implementing the Bank's key project covering the following areas of sustainability: strategy, risk, corporate governance and sustainability disclosures. The project was established on 15 December 2023, and its initiator and sponsor is the President of the Bank’s Management Board. During regular meetings of the ESG Steering Committee, members of the Management Board and representatives of the Bank's senior management select the tasks to be performed in the area of sustainability. In 2024, the ESG Steering Committee, among other things:
• defined the scope of work and responsibility for their implementation within the project (ESG Governance Model ),
• discussed and approved the results of the double materiality assessment,
• identified the activities and resources needed to prepare the sustainability report,
• performed regulatory analyses for the ESG area,
• discussed and defined a new way for the Bank to finance sustainability activities – product classification,
• discussed and took further steps to prevent the occurrence of greenwashing risk at the Bank,
• discussed the required ESG training and made decisions in this regard,
• defined roles and responsibilities in the area of sustainability reporting,
• analyzed and set the direction of the Bank’s long-term ESG activities,
• discussed the issue of necessary resources to properly address the ESG matters at the Bank and made decisions in this regard,
• analyzed the results of the review and classification of selected transactions from the loan portfolio in accordance with the adopted sustainable finance criteria,
• discussed the impact of ESG regulations on the Bank's vendors ( vendor management ),
• discussed the Bank's sustainability strategy and approved the strategy, which is an integral part of the Bank's business strategy for 2025-2027.
The key project dedicated to ESG implementation at the Bank and the ESG Steering Committee operate on the basis of the Bank's Project Management Procedure , under which the project has the special “key project” status, as it relates to the Bank's strategic goals. The ESG Steering Committee makes binding decisions on the implementation of the project and ESG at the Bank. Important decisions require the involvement of managers from various areas/units of the Bank, and some matters are decided by the Bank's corporate bodies.
The Management Board is responsible for the design and implementation of the Bank's organization, including the establishment of the organizational structure and the division of responsibilities, including with regard to sustainability and ESG risk aspects. Members of the Management Board are appointed by the Supervisory Board, which takes into account the criteria set out in the Policy for Assessment of Qualifications of Members of the Management Board and Persons Holding Key Functions in Bank Handlowy w Warszawie S.A.” , and one of the criteria it assesses is competence in managing ESG risks understood as risks related to environmental, social and corporate governance factors. All members of the Bank's Management Board have appropriate qualifications in the field of sustainability and, as a result, can independently set goals and develop strategies in this area. These include education, titles, professional certificates, many years of practical professional experience and skills acquired while performing specific functions and holding various positions, and training. The Supervisory Board considered the qualifications and experience of the Management Board as a whole sufficient for the collective management of the Bank.
In addition, in accordance with the Training Program for the Management Board of Bank Handlowy w Warszawie S.A., the Bank provides sustainability training to members of the Management Board. Such training courses are designed to support the Management Board in managing significant sustainability-related impacts, risks and opportunities. In 2024, members of the Bank's Management Board participated in a series of “ESG Training for Management Boards” provided by a third party advisor. The training was completed by all members of the Management Board and covered the following topics: the roles and responsibilities of the Management Board under the new ESG regulations and requirements, in particular: aspects of reporting in accordance with the EU Directive on Corporate Sustainability Reporting (so-called “CSRD”) , the management of ESG risks, current ESG risk requirements under Pillar III, current responsibilities under the EU Regulation on the Establishment of a Framework to Facilitate Sustainable Investment and the EU Regulation on Sustainability-related Disclosures in the Financial Services Sector, CSRD due diligence requirements, roles and responsibilities related to ESG aspects in employment, addressing greenwashing risk, and green bond topics. The Management Board also benefits from the substantive support of the Bank's ESG Working Group. The Group consists of individuals (so-called ESG Champions) representing all key organizational units of the Bank, and its purpose is to implement ESG initiatives and popularize ESG issues through employee conferences and training.
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Supervisory Board
The Bank's Supervisory Board is composed of eight persons and exercises continuous supervision over all areas of the Bank's operations, including sustainability. The supervisory duties of the Board are also performed by its dedicated committees: Audit Committee, Nomination and Remuneration Committee, Risk and Capital Committee and Strategy and Management Committee.
In order to efficiently monitor and oversee the Bank's activities in the area of sustainability, the Supervisory Board uses information provided by the Strategy and Investor Relations Department. It includes the results of the double materiality assessment of sustainability impacts, risks and opportunities, as well as the implementation of the key project dedicated to ESG implementation. Members of the Supervisory Board are appointed by the General Meeting of Shareholders on the basis of the Qualification Assessment Policy for Members of the Supervisory Board at Bank Handlowy w Warszawie S.A. , and one of the criteria it assesses is competence in managing ESG risks understood as risks related to environmental, social and corporate governance factors. In addition, given the Supervisory Board's role in the process of overseeing the Bank's sustainability-related activities, the Bank provides sustainability training to Supervisory Board members. In 2024, members of the Supervisory Board participated in the “ESG Training: Social & Governance Risk Trends” and “ESG Training: Citi ESG Report”, which are part of the Training Program for Members of the Supervisory Board of Bank Handlowy w Warszawie S.A.
1.2.3 Processes for managing material sustainability issues
Responsibilities and roles [GOV-1]
Management Board of the Bank
All members of the Bank's Management Board collectively manage important issues resulting from the analysis of the Bank's impacts, risks and opportunities in the area of environmental, social and governance topics. The Management Board is additionally supported in this respect by the Strategy and Investor Relations Department (Financial Management Sector), which, among other things, manages the process of preparing and providing the Management Board with information necessary for proper management of the area of sustainability, supervising and assuming responsibility for that area, as well as for making the right decisions in this area. In order to ensure the highest quality of support, the Strategy and Investor Relations Department collaborates with the Bank's organizational units dealing with significant sustainability-related issues and selected ESG-related issues.
ESG Steering Committee
The ESG Steering Committee of the Bank is an important element of the management structure for material sustainability topics within the key project dedicated to ESG implementation, which was initiated by the Bank's President in December 2023. That key ESG project, managed and supervised by the ESG Steering Committee, was divided into four modules - risk, strategy, corporate governance and sustainability reporting (CSRD). At the end of 2024, in connection with the approval of the Bank's new strategy, the tasks carried out under the project were reorganized, which will continue to be implemented in the following modules: E - environmental issues, S - social issues, G - corporate governance issues and sustainability reporting development (CSRD). The ESG Steering Committee, which includes all members of the Management Board and representatives of the Bank's senior management, meets regularly to oversee the implementation of and make decisions related to the project.
Sustainable Products Commission
In 2023, the Management Board established the Sustainability Products Commission (ESG), which develops rules for the classification of sustainable products at the Bank, issues opinions on the classification of the Bank's products as sustainable products, and provides support on other sustainability issues. The Commission performs consultative, opinion-giving, monitoring and advisory functions for the Bank's organizational units that create, implement and sell sustainable products. The tasks carried out by the Commission are supervised by the Risk and Capital Management Committee.
Supervisory Board
The Supervisory Board oversees the operation of the Bank's risk management system, including processes related to ESG risk management. In particular, it supervises whether ESG risks are taken into account in the development of the Bank's business model and strategy. When creating the Bank's strategy and then monitoring its implementation, the Supervisory Board takes into account the impacts, risks and opportunities identified in the double materiality assessment process.
The Bank sets its business objectives, including those related to significant impacts, risks and opportunities, during the preparation and approval of its three-year strategy. This process includes approval by the Management Board and the recommendation by the Strategy and Management Committee of the Supervisory Board and then the Supervisory Board. A report on progress in achieving the strategy objectives is presented quarterly at
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Supervisory Board meetings. The Risk and Capital Committee operates at the Supervisory Board and verifies whether the Bank's risk-taking policy is consistent with the adopted strategy and financial plan.
The Management Board, the Supervisory Board and their committees also have certain advisory, decision-making or supervisory roles with respect to specific topics described in this Statement, e.g. diversity policy, ethical issues or corporate governance.
Particular units of the Bank perform specific, important tasks related to sustainability, including:
• Strategy and Investor Relations Department:
- manages the process of preparing and providing information that is necessary for the Management Board to oversee and make decisions on important sustainability issues,
- leads and manages the work carried out within the framework of the key project dedicated to ESG implementation,
- monitors the status of projects related to ESG goals,
- develops a sustainable development strategy that is an integral part of the Bank's strategy. As part of the sustainable development strategy, it implements and monitors goals over the period of the strategy,
- develops long-term goals reflecting the Bank's ambitions in the area of counteracting climate change and develops a path to achieve these goals,
- regularly reviews the Policy setting out the principles for classifying sustainable products to ensure that it is aligned with the Bank's business profile and scale of operations, external regulations and the macroeconomic environment,
- manages the preparation of the sustainability report and the double materiality assessment process,
- prepares sectoral analyses and participates in interbank forums in order to improve ESG process management at the Bank.
• Risk Management Sector:
- manages ESG risks,
- develops and implements internal regulations for the management of environmental and social risks for clients to ensure the effective identification, assessment and management of potential social and environmental risks associated with the Bank's clients,
- prepares regular updates for the Risk and Capital Management Committee necessary to monitor the Bank's risk profile at the aggregate level, including the profiles of individual risk categories.
• Human Resources Management Division implements human resources policies in accordance with the ESG Strategy adopted by the Bank's Management Board – the HR Division develops HR procedures and practices, actively participates in or supports activities promoting diversity, work-life balance, employee training and development and ensuring that compensation policies are consistent with the Bank's approach to ESG risks.
• Procurement Department is responsible for compliance with the vendor selection principles described in the Purchasing Policy, including the use of environmental criteria in the evaluation of offers.. The Vendor Management Unit is responsible for coordinating processes related to monitoring the implementation of contracts and cooperation with suppliers.
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Informing the Management Board and Supervisory Board about ESG issues [GOV-2]
The Strategy and Investor Relations Department (Finance Management Sector) manages the process of preparing and providing the Management Board and Supervisory Board with sustainability-related information to enable them to monitor, manage and oversee these issues at the Bank. Sustainability-related issues are regularly presented to the ESG Steering Committee, which includes all members of the Management Board, and, when necessary, appropriate decisions are made.
As part of the main topics related to the ESG Key Project presented and discussed in 2024 in relation to its decisions, the ESG Steering Committee:
• defined the scope of project-related activities and management (ESG Governance Model ),
• discussed and approved the results of the double materiality assessment,
• identified the activities and resources required to prepare the sustainability report,
• performed regulatory analyses for the ESG area,
• discussed and defined a new way for the Bank to finance sustainability activities – product classification,
• discussed the status and further activities to prevent greenwashing risk at the Bank,
• discussed the required ESG training and made decisions in this regard,
• defined the roles and responsibilities in the area of sustainability reporting,
• reviewed and set the direction of the Bank’s long-term ESG activities,
• discussed the issue of necessary resources to properly address the ESG matters at the Bank and made decisions in this regard,
• carried out a review of the loan portfolio for sustainable financing,
• discussed the impact of ESG regulations on vendors of the Bank ( vendor management ),
• discussed the Bank's sustainability strategy.
The Management Board, Supervisory Board, Risk and Capital Management Committee and Risk and Capital Committee receive regular summaries from the Bank's Risk Management Sector regarding monitored KRIs established within the strategic limits of the Bank's risk appetite covering climate risk factors deemed material. The Audit Department provides the Management Board, Supervisory Board and Audit Committee with independent, objective and relevant information on the effectiveness of ESG risk management and related controls.
When creating the Bank's strategy and then monitoring its implementation, the Management Board and Supervisory Board take into account the impacts, risks and opportunities identified in the double materiality assessment process. The Bank assesses climate risk, among other things. To carry out this process, among other things, a map of environmental risk factors has been prepared for various industries to which the Bank has credit exposures.
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Management Body
Selected resolutions of the Supervisory Board and the Management Board relating to sustainability issues adopted in 2024:
Supervisory Board
• Approval of the Bank Handlowy Group Strategy for 2025-2027,
• Information about the sustainability reporting process,
• Resolution on the Overall Risk Appetite (including strategic limits for significant risks) together with supplementary Risk Appetite measures for 2024,,
• Resolution on approval of the ESG Risk Management Framework in the Capital Group of Bank Handlowy w Warszawie S.A.,
• Resolution on the evaluation of implementation by the Bank of the rules contained in the Principles of Corporate Governance for Supervised Institutions, issued by the Polish Financial Supervision Authority,
• Resolution on the evaluation of functioning of the Procedure for Anonymous Reporting of Violations by Employees and Assessment of Compliance with the Code of Conduct in 2023,
• Information on the summary of material notifications concerning violations of ethical standards at the Bank in 2023,
• Resolution on approval of amendments to the Code of Conduct for Employees of Bank Handlowy w Warszawie S.A. and the Policy for Managing Conflicts of Interest,
• Resolution on periodic assessment of compliance with internal governance rules at the Bank,
• Information on the status of implementation of the Bank’s management strategy and the key related issues, in particular the information on the progress in pursuit of the set growth directions of the Bank’s activities and departures from the previously set directions, with statement of grounds,
• Information on grievances and complaints processed at Bank Handlowy w Warszawie S.A. in 2023;
Management Board
• Resolution on the evaluation of the Bank's application of the Principles of Corporate Governance for Supervised Institutions,
• Resolution on the Overall Risk Appetite (including strategic limits for significant risks) together with supplementary Risk Appetite measures for 2024,
• Resolution on the evaluation of functioning of the Procedure for Anonymous Reporting of Violations by Employees and acceptance of the information on the verification of the assessment of Bank's Management Board with respect to compliance with the Code of Conduct in 2023.
• Resolution on acknowledging the information on complaints and claims handled at the Bank,
• Resolution on approval of the ESG Risk Management Framework in the Capital Group of Bank Handlowy w Warszawie S.A. ,
• Resolution on approval of the Policy defining a framework for the classification of sustainable products in the Bank Handlowy w Warszawie S.A. Group ,
• Information on significant ethical issues in January – June 2024,
• Resolution on approval of amendments to the Rules of Conduct for Employees of Bank Handlowy w Warszawie S.A. (“Code of Conduct”),
• Report on significant ethical issues,
• Resolution on approval of the program and financial activities of the Citi Handlowy Leopold Kronenberg Foundation for the period from 1 January to 31 December 2023, and program and financial assumptions for 2024.
1.2.4 Sustainability-related incentive schemes [GOV-3].
The Bank has not implemented any incentive systems in the form of variable remuneration directly related to sustainability or climate. In 2024, it was not required to include sustainability goals in employee assessment, but such goals were set for senior managers. Depending on the area, such goals were related to client or employee satisfaction as measured by the Voice of Employee survey, ESG risk reporting and measuring, strengthening an organizational culture based on responsibility and self-reliance, and developing a diverse talent pool within the organization. The assessment result therefore indirectly affects the variable remuneration of employees, including senior management. In December 2024, the Bank added a requirement to its remuneration policy that at least one ESG-related objective would be taken into account in the annual evaluation of the President of the Management Board. This new requirement came into force in 2025. Remuneration policies are adopted by the Bank's Management Board, reviewed by the Nomination and Remuneration Committee of the Supervisory Board and approved by the Bank's Supervisory Board.
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1.2.5 ESG risk management [GOV-1]
Citi Handlowy Bank identifies, measures, monitors, controls and reports ESG risks, and the key elements of the organizational structure and processes used for this purpose are described in the ESG Risk Management Framework . The document was adopted by the Management Board and approved by the Supervisory Board in 2024, with a 12-month transition period before full implementation.
The Bank's Management Board is responsible for implementing the ESG risk management processes. As part of these activities, the Management Board:
• Integrates ESG risks into the overall business strategy and risk management principles,
• Assigns clearly defined roles and responsibilities for ESG risk management to Board members or committees,
• Ensures a clear and consistent allocation of responsibilities related to ESG risks,
• Develops the business model and business strategy of the Bank taking into account short-, medium- and long-term ESG risks,
• Ensures the accuracy of reports and disclosures containing sustainability-related information and their compliance with regulatory requirements,
• Sets measurable targets, develops specific plans and processes to monitor and address financial risks generated by ESG risks in the short, medium and long term, including risks arising from transition to a low-carbon economy as defined by EU and national targets and regulations, and particularly by European climate law,
• Decides on the materiality of risks and monitors exposure to ESG risks,
• Monitors progress of activities carried out to integrate ESG risks into standard risk management processes,
• Monitors the misconduct, litigation and reputational risks associated with lending to and investing in companies whose activities may be controversial from an ESG perspective or which use greenwashing .
The ESG Risk Management Framework also describes the roles of the Supervisory Board, which, among other things, approves the strategy and oversees the implementation of the risk management system, including processes related to ESG risk management. In particular, this includes consideration of ESG risks in the Bank's work on its business model and business strategy.
The Bank's Management Board may delegate ESG risk management tasks to individual committees appointed by the Management Board, in particular to the Risk and Capital Management Committee, the Business Risk, Compliance and Controls Committee (BRCC) of Bank Handlowy w Warszawie S.A. and the New Products Committee.
To manage ESG risks, Citi Handlowy Bank uses three lines of defense:
• The first line of defense – the organizational units responsible for carrying out operational activities. They:
o Identify, measure, monitor, control and report ESG risks and risks relating to the business operations of the organizational unit,
o Ensure compliance with rules arising from regulatory ESG requirements, policies and standards, including the ESG Risk Management Framework ,
o Implement the sustainability strategy,
o Develop and offer sustainable products and cooperate with customers on sustainability- related issues,
o Identify clients' sustainability needs and financing options,
o Support communication activities so that employees of the Bank and investors receive transparent and reliable information about sustainable products and services.
• Second line of defense:
o Risk Management Sector:
 Develops frameworks, policies, standards and procedures for effective ESG risk management and integrates them into the existing risk management system,
 Independently identifies, measures, monitors and controls ESG risks and reports them to the Bank's Management Board and relevant committees,
 Determines the level of ESG risk appetite and limits, and submits them to the Bank's Management Board for approval,
 Provides independent information, analysis and expertise on ESG risk exposures,
 Incorporates ESG risks into capital and liquidity planning processes in cooperation with the Finance Management Sector,
 Ensures compliance with ESG regulations.
o Compliance Division:
 Identifies and provides information on regulatory requirements for ESG risks, advises on regulatory changes at the Bank and the implementation of these changes,
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 Complements the compliance risk management framework and monitors the alignment of the Bank's operations with ESG regulations,
 Assesses the risk of non-compliance with ESG regulations, recommends corrective actions, and reports the assessment results to the Management Board and relevant committees,
 Ensures compliance with ESG regulations,
 Supports the Risk Management Sector in managing reputational risks arising from ESG risks (in particular, greenwashing risks),
 Participates in the approval process for sustainable products.
o Legal Division:
 Identifies and provides information on changes in ESG regulations,
 Prepares opinions and legal advice on ESG issues,
 Reports on the ESG-related legal risks,
 Manages and supervises litigation.
• The third line of defense – audit units:
o Conduct independent and objective assessments of the adequacy and effectiveness of the risk management and internal control system in managing ESG risks, and integrate ESG risks into strategic planning,
o Provide the Management Board, Supervisory Board and Audit Committee and banking supervision authorities with independent, objective and relevant information on the effectiveness of ESG risk management and related controls,
o Provide support in identifying ESG risks and establishing an effective internal control system for ESG risks, with the nature and scope of support agreed with the Bank's units and approved by the Supervisory Board.
The Strategy and Investor Relations Department systematically monitors the degree to which ESG goals set in the Bank's Strategy are achieved. It reports the results to the Management Board, which reports them to the Supervisory Board. Managers in individual areas implementing the strategy manage opportunities within their units and report their activities to the Strategy and Investor Relations Department and committees operating in the Bank.
1.2.6 Management of the risk of the sustainability reporting process [GOV-5]
The process of preparing sustainability information (previously: reports on non-financial information) is covered by the Bank's internal control system, which ensures the effectiveness and efficiency of the Bank's operations, the reliability of reporting, compliance with risk management principles, and compliance with laws, internal regulations and market standards.
Formalized work on the sustainability statement of Citi Handlowy Bank was conducted by the ESG Working Group. The group met periodically, and was composed of the so-called ESG Champions representing both business units and the Finance Management Sector, Strategy and Investor Relations Department, Risk Management Sector, Corporate Communications and Marketing Department, Legal Division, Compliance Division, Support Division, Services Division, Human Resources Management Division, Citi Handlowy Leopold Kronenberg Foundation and Client Advocates.
The main risk in the area of sustainability reporting at Citi Handlowy Bank is the risk of not disclosing some of the data subject to mandatory disclosure due to difficulties in obtaining the data or the lack of adequate experience in preparing comprehensive sustainability disclosures and the time needed to implement ESG guidelines into the Bank's business model. To mitigate these risks, the Bank has launched a key project relating to ESG implementation, which is overseen by a Steering Committee. At monthly meetings, the Committee monitors the various phases of the project's implementation, checks the prepared gap analyses, decides on the order of implementation of the necessary changes at the Bank, and appoints the persons responsible for their implementation.
Data collection for the 2024 Statement was managed in a structure that reflects the stages of control. The key roles in this process included:
• Accountable Executives – those members of the Management Board and direct reports to the President of the Management Board who make final decisions and final approval of disclosures,
• Accountable Executives Delegates – persons who verify disclosures for their areas,
• Data Owner Checkers – persons who check data accuracy,
• Data Owner Makers – persons who prepare data.
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The ESG reporting preparation process is subject to self-assessment (MCA), and the results are reported to the Operational Risk, Control System and Compliance Committee and approved by the Board member in charge of finance. If irregularities are identified in the sustainability reporting process, a corrective action plan is prepared, the implementation of which is monitored at the Management Board level.
This statement has been approved by the Bank's Management Board, presented to the Supervisory Board, and will be subject to approval by the General Meeting of Shareholders as part of the Bank's annual report for 2024.
1.3 Statement on due diligence [GOV-4]
The Bank runs its business in a responsible manner, taking into account due diligence risk, following the principles specified in the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct and other regulations. As part of conducting responsible business, the Bank implements and executes appropriate risk- based due diligence procedures by, among other things, appropriately considering due diligence risks in the Bank's risk management systems, in order to identify, mitigate and prevent actual and potential negative effects, and to be accountable for how it deals with such effects. When creating procedures, the Bank works with relevant stakeholders to ensure that their views can be taken into account. The procedures and processes performed by the Bank to conduct responsible business define the approach, among other things, in the following areas:
• Identifying and assessing actual and potential negative effects related to the Bank's activities, products or services;
• Stopping, preventing or mitigating negative effects;
• Monitoring the implementation of processes and achieved results;
• Providing information on how to proceed in the event of negative effects and, where appropriate, enabling appropriate remedial action or cooperation in remedial action.
The due diligence process for individual issues related to conducting responsible business (e.g., Employment and Employee Relations, Products and Services, Consumer Interest, Environment) is overseen within the Bank's units dedicated to the respective issues, while significant issues related to the due diligence process in each area are reported to the Management Board and the Supervisory Board as appropriate.
Elements of the distributed due diligence process and their disclosure in this report are presented in the table below
Element of the due diligence process
Disclosure
Integrating due diligence in corporate governance, strategy and business model
ESRS 2 GOV-1,GOV-2, ESRS 2 GOV-3, ESRS 2 SBM-3
Collaborating with affected stakeholders at all key stages of the organization's due diligence process
ESRS 2 GOV-2, ESRS 2 SBM-2, ESRS 2 IRO-1, ESRS 2 MDR-P
Identifying and assessing negative impacts
ESRS 2 IRO-1, ESRS 2 SBM-3
Taking actions to mitigate identified negative impacts
ESRS 2 MDR-A
Monitoring the effectiveness of these efforts and providing relevant information in this regard
ESRS 2 MDR-M, ESRS 2 MDR-T
1.4 Basis for preparation of the statement [BP-1]
This Sustainability Statement of Bank Handlowy w Warszawie S.A. has been prepared in consolidated form 4 . The Bank has taken the opportunity to prepare the report on activities and the consolidated report on activities as a single document.
The statement covers the entire value chain of the Bank, both the Bank's own operations and the upstream and downstream value tiers.
4 Bank Handlowy w Warszawie S.A. is the parent company of the Group. The Bank’s subsidiaries, whose activity is influenced by the Bank as their parent company, do not carry out any active operations. Those subsidiaries will be successively sold or liquidated. The Bank has no control over the operating activities of companies in which it is a minority shareholder.
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The Bank has exercised its option to omit information regarding intellectual property, know-how or innovation results. The Bank has exercised its exemption from disclosure of information regarding expected events or matters covered by ongoing negotiations.
1.5 Special circumstances affecting disclosures [BP-2]
For reporting purposes, the Bank does not depart from the definition of time perspectives specified in ESRS 1 5 standard. The short-term time perspective at the Bank means a one-year reporting horizon. The medium-term, three-year perspective is used for strategy and financial planning. The long-term perspective, for the Bank's business model transformation plans that take into account ESG risk factors, is at least five years.
Information on value chain estimation is described in the Environmental Chapter, Disclosures E1-6, Gross Scope 1, 2 and 3 GHG Emissions and Total GHG Emissions.
The Bank does not identify in this Statement quantitative measures and amounts that are subject to a high level of measurement uncertainty, apart from those resulting from estimating the value chain, i.e. the value of scope 3 greenhouse gas emissions.
In this Statement, the Bank has included the information referred to in Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on establishing a framework to facilitate sustainable investments. These disclosures are included in the Taxonomy-Related Disclosures section.
1.5.1 Incorporation by reference
Information point incorporated by reference
Location
ESRS 2 GOV-1 21c
The report on activities of Bank Handlowy w Warszawie S.A. and the Group of Bank Handlowy w Warszawie S.A. for 2024.
Chapter IX, section 11
1.5.2 Taking advantage of gradually implemented regulations
The ESRS standard allows disclosure of certain information as part of gradually implemented regulations. The Bank benefited from progressive disclosure regarding the breakdown of total revenues into ESRS sectors (ESRS 2 SMB-1 40b, 40c); expected financial effects of significant risks and opportunities, including those related to climate (ESRS 2 SMB-3 48e, ESRS E1 E1-9) and to the characteristics of non-employees constituting own employee resources (ESRS S1 S1-7).
1.6 Topics materiality analysis
1.6.1 Double materiality assessment process [IRO-1]
The double materiality assessment process was conducted for the first time at the Bank in 2024, to identify material impacts, risks and opportunities related to sustainability issues.
Introduction to double materiality assessment
Citi Handlowy conducted a double materiality assessment to identify material sustainability issues upstream and downstream its value chain and in its own operations. Sustainability issues include topics, sub-topics and sub- sub-topics related to the environment, social matters and corporate governance, which are defined in ESRS 1, in Appendix A, as well as organization-specific topics.
Citi Handlowy's approach to identifying significant sustainability issues is based on the concept of “double materiality” in accordance with the European Sustainability Reporting Standards. The double materiality perspective consists of two dimensions: impact materiality (the perspective of the Bank's impact on external factors) and financial materiality (the impact of external factors causing financial implications for the Bank). According to the ESRS, sustainability issues can be material for the Bank from an impact materiality perspective, a financial materiality perspective or both perspectives simultaneously.
The process included consultation with the stakeholders impacted by the Bank. Through internal and external research, and drawing on experience from previous reports on non-financial information, the Bank identified key
5 European Sustainability Reporting Standard (ESRS) included in the framework of Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU of the European Parliament and of the Council with regard to sustainability reporting standards.
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stakeholder groups divided into proprietary operations and upstream and downstream in the value chain. Additionally, when defining the upstream value chain, the Bank used internal vendor selection procedures and policies to identify indirect impacts between the value chain and the organization. For the downstream value chain, the Bank conducted a qualitative analysis based on the experience of the first line of defense, which is working with clients on a daily basis. Information from specialist reports and publications from international institutions (including the UN) on the specifics of particular industries was also used. Therefore, the double materiality assessment included both the Bank's own operational activities and its value chain (described in subchapter 1.3. Value chain ), including the specifics of location (mainly in Poland) and the sector and nature of the
business (described in subchapter 1.2. Business model ).
To assess the impact of external factors and their materiality in relation to the identified impacts, Citi Handlowy defined qualitatively the scale, scope, reversibility and probability in the short, medium and long term. The impacts were rated on a scale of 1 to 4 using the criteria defined by the ESRS:
Scale
Scope
Reversibility
Probability
1
Minimum
Restricted
Easy to repair
Very unlikely
2
Low
Distributed
Repairable
Rather likely
3
Average
Widespread
Difficult to repair
Likely
4
High
Global
Irreversible
Very likely
Impact of the Bank's portfolio
In order to meet the requirements of the ESRS standard, which stipulate that a double materiality assessment must be conducted for the Group's entire value chain, a portfolio materiality analysis was conducted as the second dimension of the impact materiality analysis. For this purpose, the United Nations Environment Programme Finance Initiative (UNEP FI) methodology was used, using the Portfolio Impact Analysis Tool for Banks. The UNEP FI - ESRS Conversion Tool module was then used to translate the results of the analysis into a preliminary mapping to particular ESRS topics and sub-topics. In the analysis, the tool uses a 4-point scale (Low, Medium, High, Very High) and preliminarily identifies topics material for the actual impact (positive and negative). The results of the analysis were evaluated by the Bank in terms of assigning sectors from the portfolio and the actual impact. The analysis was based on financial data for 2023.
Financial materiality analysis
To assess the impact of external factors and their materiality in relation to risks and opportunities, Citi Handlowy defined qualitatively the probability and potential scale of financial effects in the short, medium and long term. Risks and opportunities were rated on a scale of 1 to 4:
Financial effects
Probability
1
Negligible – negligible negative/positive impact on the Bank's operations
Very unlikely
2
Low – limited negative/positive impact on the Bank's operations
Rather likely
3
Medium – moderate impact that may worsen/improve the Bank's operating results
Likely
4
High – strong impact that may jeopardize the resilience of the Bank's business model / strong impact that may significantly improve the Bank's operating results
Very likely
In its internal risk identification processes, the Bank identifies climate risk as a cross-cutting risk that materializes in traditional risk categories (i.e. credit risk, market risk, strategic risk, reputational risk, operational risk, liquidity risk and compliance risk). In addition, the materiality of climate and environmental risks was assessed in the internal capital adequacy assessment process in 2024.
Climate scenarios, including a high emissions scenario and a scenario consistent with limiting global warming to 1.5 ° C, were not used in the process of identifying climate-related risks and opportunities for 2024. The Bank did not analyze climate risks taking into account spatial data specific to locations and supply chains. As part of building its Transition Plan, the Bank plans gradually enhance its approach to scenario analysis in the following years, including conducting more detailed analyses that take into account the perspective of physical risks and transition events to better identify and manage climate-related risks and opportunities.
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Materiality assessment
Impacts, risks and opportunities were analyzed and assessed against all thematic standards, including pollution, water and marine resources, biodiversity and ecosystems, resource use and circular economy and business conduct. Based on the assessment of impact and financial significance, the materiality threshold was set in the next step. To supervise, control, calibrate and approve the double materiality assessment process, the Bank used the expertise of employees representing all areas of the Bank involved in the implementation of ESG at the Bank.
The results of the double materiality assessment were appropriately presented to and approved by the Steering Committee (which also includes members of the Bank's Management Board).
1.6.2 Selected material topics [SBM-3]
The material impacts, risks and opportunities identified as a result of the double materiality assessment were mapped to the corresponding material topics (within the ESRS listed below: E1, S1, S4 and G1), which influenced the shape and content of this Statement. Descriptions of particular impacts, risks and opportunities, as well as information on the corresponding stages of the value chain, are included in the thematic chapters:
• Chapter on the environment (ESRS E1)
o Climate in own operations
o Climate in the financed loan portfolio ,
o Energy
• Chapter on the social matters – Employees (ESRS S1)
o Work-life balance
o Training and skills development
o Diversity
• Chapter on the social matters – Clients (ESRS S4)
o Cybersecurity and information security
o Client inclusiveness
o Client education
o Responsible market practices
• Chapter on corporate governance (ESRS G1)
o Business conduct and corporate culture
o Whistleblower protection
o Combating corruption and money laundering .
An integral part of the Bank's business strategy is its sustainability strategy. In its activities in this area, the Bank will focus on supporting its clients in their sustainable transformation, improving its ESG risk management processes and continuing the transformation of its own operations. The impacts identified by the Bank result from the business strategy and sustainability strategy, and from the adopted business model, and occur in the short, medium and long term.
The Bank believes that the financial effects of the risks and opportunities are difficult to estimate, however their transmission channels can be identified. In the case of risks, these are primarily higher costs related to financing clients with a high risk of transition to the zero-emission economy or other operating costs related to the costs of court proceedings. Higher costs of risk have a negative impact on the Bank's financial result, which in turn is related to the inability to build the Bank's capital base.
The identified risks are not treated as a separate type of risk, but as so-called cross-cutting risks that affect the Bank's existing financial and non-financial risks to varying degrees and through different transmission channels. Transmission channels are cause-and-effect chains that explain how sustainability risks can materialize within the existing risks present at the Bank. The identified sustainability risks were integrated into the risk management framework, including strategic planning, risk appetite setting, and risk identification, measurement, monitoring, control and management.
Information on the resilience of the strategy and business model with respect to significant risks related to climate change is included in the subchapter Climate risks and Citi Handlowy's strategy . Material negative impacts of the
Bank were identified in the area of climate change. Information on the Bank's approach to counteracting its significant negative impacts on the loan portfolio and on energy consumption in its own operations is described in the Climate in the financed loan portfolio and Energy subsections. The Bank intends to capitalize on the opportunities identified in the double materiality assessment, primarily through the implementation of newly adopted ESG Strategy for 2025-2027, which takes into account opportunities in the area of climate change (Climate in the financed loan portfolio), employee training (Training and skills development) and diversity (Diversity). The opportunity related to financial education of customers will be developed through the continuation of the Bank's comprehensive activities in this area (Customer education).
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Material topics based on ESG impacts, opportunities and risks, analyzed through the lens of ESRS standards, are considered by Citi Handlowy as an integral part of the topics related to its core business activities.
1.6.3 Disclosure requirements in ESRS covered by the undertaking’s sustainability statement [IRO-2].
In this Statement for 2024, the Bank has met the requirements for disclosing information required for the sustainability statement in accordance with the Act of 6 December 2024 amending the Accounting Act, the Act on Statutory Auditors, Audit Firms and Public Supervision and certain other acts (Journal of Laws of 2024, item 1863).
The list of the disclosure requirements fulfilled when preparing the sustainability statement is presented below.
Disclosure requirement
Page
ESRS 2 General disclosures
BP-1
Basis for preparation of the statement [BP-1]
BP-2
Special circumstances affecting disclosures [BP-2]
GOV-1
Structure of the Management Board and Supervisory Board [GOV-1]
Role of the Management Board and Supervisory Board [GOV-1]
Responsibilities and roles [GOV-1]
GOV-2
Informing the Management Board and Supervisory Board about ESG issues [GOV-2]
GOV-3
Sustainability-related incentive schemes [GOV-3]
GOV-4
Statement on due diligence [GOV-4]
GOV-5
Management of the risk of the sustainability reporting process [GOV-5]
SBM-1
General presentation of the Group [SBM-1]
Business model [SBM-1]
Value Chain [SBM-1]
Sustainability Strategy [SBM-1]
SBM-2
Dialogue with stakeholders [SBM-2]
SBM-3
Selected material topics [SBM-3]
Climate-related risks, opportunities and impacts [SBM-3]
Climate risk and Citi Handlowy’s strategy [SBM-3]
The Group's impact and opportunities in the employee area and strategic approach [SBM-3]
Impacts of the Bank on clients and strategic approach [SBM-3]
Impacts related to business conduct [SBM-3]
IRO-1
Double materiality assessment process [IRO-1]
IRO-2
Disclosure requirements in ESRS covered by the undertaking’s sustainability statement [IRO-2]
ESRS E1 Climate change
ESRS 2 GOV-3
Sustainability-related incentive schemes [GOV-3]
E1-1
Transition plan for climate change mitigation [E1-1]
ESRS 2 SBM-3
Climate-related risks, opportunities and impacts [SBM-3]
Climate risk and Citi Handlowy’s strategy [SBM-3]
ESRS 2 IRO-1
Double materiality assessment process [IRO-1]
E1-2
Policies related to own operations [E1-2 MDR-P]
Policies related to climate change in the loan portfolio [E1-2 MDR-P]
Policy related to energy use in the Bank [E1-2 MDR-P]
E1-3
Activities related to own operations [E1-3 MDR-A]
Activities related to the financed loan portfolio [E1-3 MDR-A]
Actions to manage impacts related to the use of energy at the Bank [E1-3 MDR-A]
E1-4
Targets related to own operations [E1-4 MDR-T]
Targets related to the financed loan portfolio [E1-4 MDR-T]
E1-5
Energy consumption and mix indicators [E1-5]
E1-6
Gross Scopes 1, 2, 3 and Total GHG emissions [E1-6]
E1-7
GHG removals and GHG mitigation projects financed through carbon credits [E1- 7]
E1-8
Internal carbon pricing [E1-8]
ESRS S1 Own workforce
ESRS 2 SBM-2
Dialogue with stakeholders [SBM-2]
ESRS 2 SBM-3
The Group's impact and opportunities in the employee area and strategic
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approach [SBM-3]
S1-1
Employees and human rights [S1-1]
Work-life balance policies [S1-1 MDR-P]
Training and development policies [S1-1 MDR-P]
Diversity Policies [S1-1 MDR-P]
S1-2
Work-life balance collaboration [S1-2]
S1-4
Work-life balance activities [S1-4 MDR-A]
Training and skills development activities [S1-4 MDR-A]
Activities in the area of diversity [S1-1 MDR-A]
S1-5
Work-life balance targets [S1-5, MDR-T]
Goals for training and skills development [S1-5, MDR-T]
Diversity targets [S1-5, MDR-T]
S1-6
Characteristics of employees [S1-6]
S1-9
Diversity at Citi Handlowy in figures [S1-9]
S1-13
Employee training and development figures [S1-13]
S1-15
Citi Handlowy work-life balance figures [S1-15]
S1-16
Pay indicators [S1-16]
S1-17
Incidents and complaints [S1-17]
ESRS S4 Consumers and end users
ESRS 2 SBM-2
Dialogue with stakeholders [SBM-2]
ESRS 2 SBM-3
Impacts of the Bank on clients and strategic approach [SBM-3]
S4-1
Cybersecurity Management Policies [S4-1 MDR-P]
Client inclusiveness policies [S4-1 MDR-P]
Policies related to increasing financial knowledge of clients through education [S4-1 MDR-P]
Policies related to responsible market practices [S4-1 MDR-P]
S4-2
Cooperation for cybersecurity [S4-2]
Collaboration for Inclusiveness [S4-2]
Cooperation for responsible market practices [S4-2]
S4-3
Channels for reporting irregularities and the complaint handling process [S4-3]
S4-4
Cybersecurity activities [S4-4 MDR-A]
Client inclusiveness actions [S4-4 MDR-A]
Actions taken to increase financial knowledge of clients through education [S4-4 MDR-A]
Activities related to responsible market practices [S4-4 MDR-A]
S4-5
Cybersecurity targets [S4-5, MDR-T]
Client inclusiveness targets [S4-5, MDR-T]
Client education targets [S4-5, MDR-T]
Targets for responsible market practices [S4-5, MDR-T]
ESRS G1 Business conduct
ESRS 2 GOV-1
Role of the Management Board and Supervisory Board [GOV-1]
Responsibilities and roles [GOV-1]
ESRS 2 IRO-1
Double materiality assessment process [IRO-1]
G1-1
Business conduct and corporate culture [G1-1 MDR-P]
G1-3
Prevention and detection of corruption and bribery [G1-3 MDR-A]
G1-4
Cases of corruption or bribery [G1-4]
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Below is a list of data points that arise from other EU legislation
List of all data points that are derived from other EU regulations used in the sustainability statement, based on Appendix B of ESRS 2
Disclosure Requirement and related datapoint
Reference to the Sustainable Finance Disclosure Regulation (SFDR)
Reference to Pillar 3
Reference to the Benchmark Regulation
Reference to the EU Climate Law
Page
ESRS 2 GOV-1 Management Board's gender diversity paragraph 21 (d)
Indicator 13 of Table # 1 of Annex I
Annex II of Commission Delegated Regulation (EU) 2020/1816
Structure of the Management Board and Supervisory Board [GOV-1]
ESRS 2 GOV-1 Percentage of board members who are independent paragraph 21 (e)
Annex II of Delegated Regulation (EU) 2020/1816
Structure of the Management Board and Supervisory Board [GOV-1]
ESRS 2 GOV-4 Statement on due diligence paragraph 30
Indicator 10 of Table # 3 of Annex I
Statement on due diligence [GOV-4]
ESRS 2 SBM-1 Involvement in activities related to fossil fuels activities paragraph 40 (d) (i)
Indicator 4 of Table # 1 of Annex I
Article 449a of Regulation (EU) No. 575/2013; Commission Implementing Regulation (EU) 2022/2453, Table 1: Qualitative information on Environmental risk and Table 2: Qualitative information on Social risk
Annex II of Delegated Regulation (EU) 2020/1816
not applicable
ESRS 2 SBM-1 Involvement in activities related to chemical production paragraph 40 (d) (ii)
Indicator 9 of Table # 2 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816
not applicable
ESRS 2 SBM-1 Involvement in activities related to controversial weapons paragraph 40 (d) (iii)
Indicator 14 of Table # 1 of Annex I
Article 12(1) of Delegated Regulation (EU) 2020/1818, Annex II of Delegated Regulation (EU) 2020/1816
not applicable
ESRS 2 SBM-1 Involvement in activities related to cultivation and production of tobacco paragraph 40 (d) (iv)
Article 12(1) of Delegated Regulation (EU) 2020/1818, Annex II of Delegated Regulation (EU) 2020/1816
not applicable
ESRS E1-1 Transition plan to reach climate neutrality by 2050 paragraph 14
Article 2(1) of Regulation (EU) 2021/1119
Transition plan for climate change mitigation [E1-1]
ESRS E1-1 Undertakings excluded from Paris-aligned Benchmarks paragraph 16 (g)
Article 449a of Regulation (EU) No. 575/2013; Commission Implementing Regulation (EU) 2022/2453, Template 1: Banking book – Climate Change transition risk: Credit quality of exposures by sector, emissions and residual maturity
Article 12(1) (d)-(g) and Article 12(2) of Commission Delegated Regulation (EU) 2020/1818
Transition plan for climate change mitigation [E1-1]
ESRS E1-4 GHG emission reduction targets paragraph 34
Indicator 4 of Table # 2 of Annex I
Article 449a of Regulation (EU) No. 575/2013; Commission Implementing Regulation (EU) 2022/2453, Template 3: Banking book – Climate change transition risk: alignment metrics
Article 6 of Delegated Regulation (EU) 2020/1818
Transition plan for climate change mitigation [E1-1]
Targets related to own operations [E1-4 MDR-T]
Targets related to the financed loan portfolio [E1-4 MDR- T]
ESRS E1-5 Energy consumption from fossil sources disaggregated by sources (only high climate impact sectors) paragraph 38
Indicator no. 5 in Table # 1 and indicator no 5 in Table # 2 of Annex I
not applicable
ESRS E1-5 Energy consumption and mix paragraph 37
Indicator 5 of Table # 1 of Annex I
Energy consumption and mix indicators [E1-5]
ESRS E1-5 Energy intensity associated with activities in high climate impact sectors paragraphs 40–43
Indicator 6 of Table # 1 of Annex I
not applicable
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ESRS E1-6 Gross Scope 1, 2, 3 and Total GHG emissions paragraph 44
Indicators number 1 and 2 in Table #1 of Annex I
Article 449a of Regulation (EU) No. 575/2013; Commission Implementing Regulation (EU) 2022/2453, Template 1: Banking book – Climate change transition risk: Credit quality of exposures by sector, emissions and residual maturity
Article 5(1), Article 6 and Article 8(1) of Delegated Regulation (EU) 2020/1818
Gross Scopes 1, 2, 3 and Total GHG emissions [E1-6]
ESRS E1-6 Gross GHG emissions intensity paragraphs 53–55
Indicator 3 of Table # 1 of Annex I
Article 449a of Regulation (EU) No. 575/2013; Commission Implementing Regulation (EU) 2022/2453, Template 3: Banking book – Climate change transition risk: alignment metrics
Article 8(1) of Delegated Regulation (EU) 2020/1818
Gross Scopes 1, 2, 3 and Total GHG emissions [E1-6]
ESRS E1-7 GHG removals and carbon credits paragraph 56
Article 2(1) of Regulation (EU) 2021/1119
GHG removals and GHG mitigation projects financed through carbon credits [E1-7]
ESRS E1-9 Exposure of the benchmark portfolio to climate-related physical risks paragraph 66
Annex II of Delegated Regulation (EU) 2020/1818, Annex II of Delegated Regulation (EU) 2020/1816
The option of gradual disclosure was used
ESRS E1-9 Disaggregation of monetary amounts by acute and chronic physical risk paragraph 66 (a) ESRS E1-9 Location of significant assets at material physical risk paragraph 66 (c)
Article 449a of Regulation (EU) no. 575/2013; paragraphs 46 and 47 of Commission Implementing Regulation (EU) 2022/2453; Template 5: Banking book – Climate change physical risk: Exposures subject to physical risk.
The option of gradual disclosure was used
ESRS E1-9 Breakdown of the carrying value of its real estate assets by energy-efficiency classes paragraph 67 (c)
Article 449a of Regulation (EU) no. 575/2013; paragraph 34 of Commission Implementing Regulation (EU) 2022/2453; Template 2: Banking book – Climate change transition risk: Loans collateralized by immovable property – Energy efficiency of the collateral
The option of gradual disclosure was used
ESRS E1-9 Degree of exposure of the portfolio to climate-related opportunities paragraph 69
Annex II of Delegated Regulation (EU) 2020/1818
The option of gradual disclosure was used
ESRS E2-4 Amount of each pollutant listed in Annex II of the E-PRTR Regulation (European Pollutant Release and Transfer Register) emitted to air, water and soil, paragraph 28
Indicator number 8 in Table # 1 of Annex I, indicator number 2 in Table #2 of Annex I, indicator number 1 in Table # 2 of Annex I and indicator number 3 in Table # 2 of Annex I
Topic deemed irrelevant
ESRS E3-1 Water and marine resources paragraph 9
Indicator 7 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E3-1 Dedicated policy paragraph 13
Indicator 8 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E3-1 Practices related to sustainable oceans and seas paragraph 14
Indicator 12 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E3-4 Total water recycled and reused paragraph 28 (c)
Indicator 6.2 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E3-4 Total water consumption in m3 per net revenue on own operations paragraph 29
Indicator 6.1 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS 2 SBM 3-E4 paragraph 16 (a) (i)
Indicator 7 of Table # 1 of Annex I
Topic deemed irrelevant
ESRS 2 SBM 3-E4 paragraph 16 (b)
Indicator 10 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS 2 SBM 3-E4 paragraph 16 (c)
Indicator 14 of Table # 2 of Annex I
Topic deemed irrelevant
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ESRS E4-2 Sustainable land / agriculture practices or policies paragraph 24 (b)
Indicator 11 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E4-2 Sustainable oceans / seas practices or policies paragraph 24 (c)
Indicator 12 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E4-2 Policies to address deforestation paragraph 24 (d)
Indicator 15 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E5-5 Non-recycled waste paragraph 37 (d)
Indicator 13 of Table # 2 of Annex I
Topic deemed irrelevant
ESRS E5-5 Hazardous waste and radioactive waste paragraph 39
Indicator 9 of Table # 1 of Annex I
Topic deemed irrelevant
ESRS 2 SBM-3-S1 Risk of incidents of forced labor paragraph 14 (f)
Indicator 13 of Table # 3 of Annex I
Employees and human rights [S1-1]
ESRS 2 SBM-3-S1 Risk of incidents of child labor paragraph 14 (g)
Indicator 12 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S1-1 Human rights policy commitments paragraph 20
Indicator no. 9 in Table # 3 and indicator no 11 in Table # 1 of Annex I
Topic deemed irrelevant
ESRS S1-1 Due diligence policies on issues addressed by the fundamental International Labor Organization Conventions 1 to 8 paragraph 21
Annex II of Delegated Regulation (EU) 2020/1816
Employees and human rights [S1-1]
ESRS S1-1 Processes and measures for preventing trafficking in human beings paragraph 22
Indicator 11 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S1-1 Workplace accident prevention policy or management system paragraph 23
Indicator 1 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S1-3 Grievance/complaints handling mechanisms paragraph 32 (c)
Indicator 5 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S1-14 Number of fatalities and number and rate of work- related accidents paragraph 88 (b) and (c)
Indicator 2 of Table # 3 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816
Topic deemed irrelevant
ESRS S1-14 Number of days lost to injuries, accidents, fatalities or illness paragraph 88 (e)
Indicator 3 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S1-16 Unadjusted gender pay gap paragraph 97 (a)
Indicator 12 of Table # 1 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816
Pay indicators [S1-16]
ESRS S1-16 Excessive CEO pay ratio paragraph 97 (b)
Indicator 8 of Table # 3 of Annex I
Pay indicators [S1-16]
ESRS S1-17 Incidents of discrimination paragraph 103 (a)
Indicator 7 of Table # 3 of Annex I
Incidents and complaints [S1-17]
ESRS S1-17 Non-respect of UNGPs on Business and Human Rights and OECD guidelines paragraph 104 (a)
Indicator no. 10 in Table # 1 and indicator no 14 in Table # 3 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816, Article 12(1) of Delegated Regulation (EU) 2020/1818
Incidents and complaints [S1-17]
ESRS 2 SBM-3-S2 Significant risk of child labor or forced labor in the value chain paragraph 11 (b)
Indicators number 12 and 13 in Table # 3 of Annex I
Topic deemed irrelevant
ESRS S2-1 Human rights policy commitments paragraph 17
Indicator no. 9 in Table # 3 and indicator no 11 in Table # 1 of Annex I
Topic deemed irrelevant
ESRS S2-1 Policies related to value chain workers paragraph 18
Indicators number 11 and 4 in Table #3 of Annex I
Topic deemed irrelevant
ESRS S2-1 Non-respect of UNGPs on Business and Human Rights principles and OECD guidelines paragraph 19
Indicator 10 of Table # 1 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816, Article 12(1) of Delegated Regulation (EU) 2020/1818
Topic deemed irrelevant
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ESRS S2-1 Due diligence policies on issues addressed by the fundamental International Labor Organization Conventions 1 to 8 paragraph 19
Annex II of Delegated Regulation (EU) 2020/1816
Topic deemed irrelevant
ESRS S2-4 Human rights issues and incidents connected to its upstream and downstream value chain paragraph 36
Indicator 14 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S3-1 Human rights policy commitments paragraph 16
Indicator number 9 in Table # 3 of Annex I and indicator number 11 in Table # 1 of Annex I
Topic deemed irrelevant
ESRS S3-1 Non-respect of UNGPs on Business and Human Rights, ILO principles or OECD guidelines paragraph 17
Indicator 10 of Table # 1 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816, Article 12(1) of Delegated Regulation (EU) 2020/1818
Topic deemed irrelevant
ESRS S3-4 Human rights issues and incidents paragraph 36
Indicator 14 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS S4-1 Policies related to consumers and end-users paragraph 16
Indicator no. 9 in Table # 3 and indicator no 11 in Table # 1 of Annex I
Cybersecurity Management Policies [S4-1 MDR-P]
Client inclusiveness policies [S4-1 MDR-P]
Policies related to increasing financial knowledge of clients through education [S4-1 MDR-P]
Policies related to responsible market practices [S4-1 MDR- P]
ESRS S4-1 Non-respect of UNGPs on Business and Human Rights and OECD guidelines paragraph 17
Indicator 10 of Table # 1 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816, Article 12(1) of Delegated Regulation (EU) 2020/1818
Policies related to responsible market practices [S4-1 MDR- P]
ESRS S4-4 Human rights issues and incidents paragraph 35
Indicator 14 of Table # 3 of Annex I
Topic deemed irrelevant
ESRS G1-1 United Nations Convention against Corruption paragraph 10 (b)
Indicator 15 of Table # 3 of Annex I
not applicable
ESRS G1-1 Protection of whistle-blowers paragraph 10 (d)
Indicator 6 of Table # 3 of Annex I
not applicable
ESRS G1-4 Fines for violation of anti- corruption and anti-bribery laws paragraph 24 (a)
Indicator 17 of Table # 3 of Annex I
Annex II of Delegated Regulation (EU) 2020/1816
Cases of corruption or bribery [G1-4]
ESRS G1-4 Standards of anti-corruption and anti-bribery paragraph 24 (b)
Indicator 16 of Table # 3 of Annex I
Cases of corruption or bribery [G1-4] ]
The ratings of sustainability issues analyzed for materiality were in the range of 1 to 4. The materiality threshold was adopted as a result of numerous internal consultations at the Bank as part of a comprehensive double materiality assessment process, taking into account the views and interests of external stakeholders. The impacts, risks and opportunities that were assessed as material were those that were rated at or above the threshold of 3.5 in the materiality assessment.
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2. Chapter on the environment
2.1 Climate change
Society around the world is increasingly understanding and analyzing global climate change and its consequences. The scientific community agrees that human activities (including the exploitation of fossil fuels) increase greenhouse gas emissions and directly contribute to the gradual destabilization of the climate, which is already manifested by extreme weather phenomena, among other things.
Humans and organizations they create play a key role in efforts to overcome the global challenge of climate change. In order to minimize its negative impact, mitigate its risks, and take advantage of emerging opportunities, a company must first identify the stages of its value chain and their emissions. Financial institutions, including banks, affect the climate mainly through their loan portfolios, which carry both financial risks and opportunities.
As a responsible financial institution, Citi Handlowy Bank supports clients in achieving their sustainability goals. An effective response to the global climate crisis requires collaboration and a long-term approach. The Bank engages in dialogue, adapts its product offerings and invests in reducing emissions, thereby supporting the commitment of Citigroup Inc. to achieve net zero emissions in 2050. The Bank adopted the ESG Strategy of Bank Handlowy w Warszawie S.A. in December 2024. It sets out key targets for the Bank's own sustainable operations and for its financed loan portfolio. The Bank is also working on a comprehensive decarbonization strategy covering all three emissions scopes according to the GHG Protocol 6 . This strategy will set measurable targets and actions to achieve the Paris Agreement goals.
2.1.1 Transition plan for climate change mitigation [E1-1]
Citi Handlowy Bank is taking a responsible approach to transformation of its business and had taken the first significant steps in 2024 to develop a transition plan until the end of 2027. At the time this Statement was prepared, the Bank did not have a transition plan that would take into account the transition to a sustainable economy and limiting global warming to 1.5 ° C.
In 2024, the Bank took significant steps to support its efforts to prepare a transition plan: it started calculating greenhouse gas emissions in three scopes according to the GHG Protocol, began work on a comprehensive decarbonization strategy, and strengthened its governance over the area of the ESG risk area (see ESG risk management). These activities are feasible under the policies described below and due to the tasks assigned internally to senior managers and executives.
6 https://ghgprotocol.org/sites/default/files/ghgp/standards_supporting/Diagram%20of%20scopes%20and%20emissions%20across%20the %20value%20chain.pdf
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2.1.2 Climate-related risks, opportunities and impacts [SBM-3]
Significant climate risks
The Bank conducted a double materiality assessment , in which it deemed climate risks to be material from the perspective of both its own operations and value chain. As a result of the double materiality assessment , the following climate risks were identified:
Material topic
Material risk description
Place of concentration
Type
Time perspective
Climate in the
financed loan
portfolio
Credit risk – the transition to a low-carbon economy is connected with significant challenges for the Bank's clients as it affects regulatory compliance costs, creditworthiness and access to capital. Climate-related factors affect the value of collateral (including primarily environmental and atmospheric factors), default risk and losses on default (higher capital requirements), access to and cost of capital and reduced liquidity.
Downstream value chain
Transition risk and physical risk
Short-, medium- and long-term
Climate in own
operations
and
Climate in the
financed loan
portfolio
Compliance risk – increased compliance risk is associated with changing environment and climate- related regulations. This may have significant financial consequences for the Bank in the form of legal or regulatory sanctions, financial losses and reputational damage.
The entire value chain
Transition risk
Short-, medium- and long-term
Climate in own
operations
and
Climate in the
financed loan
portfolio
Strategic risk – the possibility of strategic risk arising from various sources related to climate change and affecting Citi Handlowy's market position, operating costs and business model. Regulatory changes, technological risks, stakeholder concerns and social trends must be taken into account in a comprehensive strategic approach to ensure financial stability and strong financial performance. The described risk may negatively affect the Bank's financial position, for example by increasing operating or regulatory costs or capital expenditures.
The entire value chain
Transition risk
Short-, medium- and long-term
Materiality was indicated for three types of risk – strategic, credit and compliance. In all cases, this was determined by factors related to transition risk:
• materiality for credit risk involves large credit exposure to industries with a high and medium climate risk indicator, which may increase the probability of default and the expected loss from such default,
• materiality for compliance risk arises from the Bank's need to comply with numerous and complex ESG regulations,
• materiality for strategic risk stems from the increasing regulatory pressure on financial institutions and their clients, and from the peculiarities of Poland’s economy – high energy intensity and greenhouse gas emission intensity – as a result of which high expenditures will be required to achieve climate policy goals.
Each identified significant climate risk was categorized as a physical risk and a transition risk:
• physical risk – the consequences of a changing climate, including the increased occurrence of extreme weather conditions, gradual climate change and environment degradation,
• transition risk – losses resulting from the process of adapting to a low-emission and more environment friendly economy.
In its internal analyses to date, including its double materiality assessment , the Bank has not performed a process to identify assets and business activities that are incompatible with a climate-neutral economy.
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Significant climate-related opportunities
In the double materiality assessment , the Bank considered climate-related opportunities to be significant from the perspective of both its own operations and the entire value chain. The Bank discerns the following opportunities for its operations:
Material topic
Description of a significant opportunity
Place of concentration
Time perspective
Climate in the
financed loan
portfolio
Opportunity to adapt the strategy of investing, financing and supporting industries and companies that are an integral part of the low-carbon economy . Smart financing mechanisms thanks to which the Bank has the opportunity to develop transformation can contribute to the growth of revenues.
Downstream value chain
Short-, medium- and long-term
Climate in the
financed loan
portfolio
Opportunity to finance low-carbon products due to changing customer preferences . The Bank has an opportunity to increase revenues related to environmental services within banking: sustainable finance, renewable energy financing, and ESG consulting and financial solutions.
Downstream value chain
Short-, medium- and long-term
Climate in the
financed loan
portfolio
Opportunity to help clients achieve net zero emissions, identify opportunities and allocate capital to achieve sustainability goals . By working with clients in areas where they need support, the Bank has the opportunity to increase its market share and revenues, and ensure responsible growth.
Downstream value chain
Short-, medium- and long-term
Climate in the
financed loan
portfolio
Opportunity to invest in industries, companies and technologies for a low-carbon economy, such as renewable energy, water conservation and sustainable transportation, which support innovation and collective action. By increasing its participation in the financing of low-carbon products, the Bank reduces emissions financing and can move closer to achieving the UN Sustainable Development Goals (SDGs) and meeting the requirements of the European Banking Authority (EBA).
Downstream value chain
Short-, medium- and long-term
Climate in the
financed loan
portfolio
Opportunity to assess and mitigate risks by regularly assessing climate change risks and integrating them into risk management programs. This will enable early detection of climate-related risks or opportunities that would affect revenues, operating costs and other expenses. This may also affect the ability to create and develop analytical tools exploring sustainability and climate issues, including portfolio management, quantitative modelling, climate exposure analysis as part of client reporting.
Downstream value chain
Short-, medium- and long-term
Climate in the
financed loan
portfolio
Opportunity to finance disruptive low-carbon technologies , such as renewable energy, battery storage or hydrogen. The Bank can leverage increased revenues related to the financing of products and solutions in the area of energy demand resulting from increased demand, regulatory pressure related to new energy sources and other solutions.
Downstream value chain
Short-, medium- and long-term
Climate in the
financed loan
portfolio
Opportunity to support clients committed to energy transformation and sustainability with products, services and advisors that facilitate capital raising, implementation of business plans and scaling.
Downstream value chain
Short-, medium- and long-term
Climate in own
operations
Opportunity to align transition pathways with governmental climate policies to obtain fiscal incentives, including subsidies, tax credits or grants.
Own operations
Short-, medium- and long-term
Climate in own
operations
Opportunity to improve reputation by demonstrating commitment to addressing climate change and other environmental issues, which can result in new partnerships, lower costs and increased revenue in the long term.
Own operations
Short-, medium- and long-term
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Significant climate-related impacts
In the double materiality assessment , the Bank also identified impacts related to climate change. They concern the energy area at the Bank:
Material topic
Description of a significant impact
Place of concentration
Type
Time perspective
Climate in the
financed loan
portfolio
The Bank's positive impact on climate change mitigation is driven by clients who, through their activities, can have a direct and indirect impact on the green transition and climate stability.
Downstream value chain
Real positive impact
Short-, medium- and long-term
Climate in the
financed loan
portfolio
The Bank's loan portfolio is partially linked to sectors that have a negative impact on climate stability.
Downstream value chain
Real negative impact
Short-, medium- and long-term
Energy
The bank is working toward the goal set by Citigroup Inc.: to source 100% of the energy used in its own buildings from renewable sources , thereby reducing greenhouse gas emissions associated with electricity generated from fossil fuels.
Own operations
Real positive impact
Long-term
Energy
The Bank's facilities (offices, branches, data centers and operational centers) require energy for lighting, heating, cooling and operating electronic equipment, which contributes to greenhouse gas emissions.
Own operations
Real negative impact
Long-term
2.1.3 Climate risk and Citi Handlowy’s strategy [SBM-3]
To assess the resilience of its business strategy and business model to climate change, the Bank conducted stress tests for climate risks in 2024. The exposure of loan portfolios to climate risk was assessed using climate risk indicators, which separately assess transition risk and physical risk at the industry level, taking into account relevant industry factors, including but not limited to greenhouse gas emission intensity, availability of low- carbon substitutes or technologies, and dependence on weather and chain vulnerability to disruptions related to climate change. Loan portfolio exposures as of the end of December 2023 were divided into groups of industries exposed to transition risk and physical risk, as well as ultimate climate risk. For industries susceptible to the effects of climate risk, the impact of climate risk factors on clients' credit ratings in the short-, medium- and long- term horizons was analyzed using projected migrations of indicators. In addition, with the expertise of risk managers, individual exposures were reviewed to take into account individual and client-specific factors, and, where necessary, individual assessments were made for potential impact on ratings.
The results of the stress tests showed that the Bank's portfolio is resilient to climate factors. It was assessed that in 2024 and 2025 climate risk will not have a significant impact on the level of clients’ ratings, and thus on the expected losses and internal capital requirements related to climate risk. A deterioration in clients’ ratings as a result of the materialization of climate risk is expected in 2026 and in the medium and long term.
For all risk categories for which climate risk factors are deemed significant, the Bank has set strategic limits within the Bank's risk appetite and established KRIs. The indicators are monitored and reported on a regular basis. Reports are submitted to the Bank's Management Board, the Risk and Capital Management Committee, and to the Supervisory Board, including the Risk and Capital Committee.
The resilience assessment of the business strategy and model did not use scenario analyses assuming high emissions or a climate scenario consistent with limiting global warming to 1.5 ° C. The bank focused on the analysis of significant climate risks for the loan portfolio (downstream value chain), without taking into account the perspective of the upstream value chain and its own operations. As the Bank prepares to develop its Transition Plan for climate change mitigation, it will conduct a more comprehensive resilience analysis that incorporates the conclusions from scenario analyses for its value chain.
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2.1.4 Anticipated financial effects from climate-related risks and opportunities [E1-9]
In the Sustainability Statement for 2024 , the Bank is taking the opportunity to gradually disclose information on the anticipated financial effects of climate-related risks and opportunities.
2.2 Climate in own operations
The Bank identifies climate-related risks and opportunities in its own operations (section Climate-related risks,
opportunities and impacts ). In order to properly manage them, the Bank has implemented special policies, set
targets and takes appropriate actions.
2.2.1 Policies related to own operations [E1-2 MDR-P]
Environmental policy
The Environmental Policy defines the Bank's objectives related to the environmental impact of its activities (the areas of climate change mitigation, adaptation to climate change, energy efficiency, and responsible resource and waste management). In accordance with the Policy , the Bank:
• reduces greenhouse gas emissions:
o strives to decarbonize (offset) its operations and to maximize the use of renewable energy,
o operates in facilities with a multi-criteria certification system (BREEAM),
• manages utilities consumption, in particular energy, as efficiently as possible,
• minimizes its consumption of natural resources,
• conducts rational waste management in accordance with the hierarchy of procedures:
o waste prevention,
o proper waste selection,
o transfer of waste for recycling or recovery,
• controls noise emissions,
• predicts trends and implements innovative solutions in the area of pro-environmental management.
The Environmental Policy is compliant with ISO 14001 and covers the four buildings owned by the Bank – three in Warsaw and one in Olsztyn. Monitoring the effectiveness of the activities covered by the Policy involves monitoring environmental activities, including:
• waste management,
• consumption and cost of utilities,
• internal audits,
• assessments of compliance with legal requirements and regulations,
• analysis of the carbon footprint of the Bank's operations.
The provisions of the Environmental Policy were consulted with internal stakeholders from selected units – its co- authors. The document is available on Citi Handlowy Bank's website and intranet. The Citi Realty Services Department is responsible for implementing this regulation.
In the Environmental Policy , approved by the Bank's management, the Bank made a commitment that it will:
• minimize its environmental impact by identifying and measuring the direct and indirect environmental impact of its activities,
• disseminate knowledge about ecology – by conducting educational and awareness-raising activities for its employees,
• reduce greenhouse gas emissions and electricity consumption by taking actions to obtain renewable energy in the Bank's facilities and by implementing good energy conservation practices,
• properly segregate waste, manage it responsibly and strive to achieve a circular economy,
• control noise emissions with regular measurements,
• obtain BREEAM certifications at certain levels,
• strive to achieve emission reduction targets for the entire organization, and ISO targets only for its own buildings.
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Sustainability Strategy for 2025-2027
The Sustainability Strategy for 2025–2027 , which is described in the general information part (see Sustainability
Strategy ) is focused on issues relevant to climate change in the Bank's own operations and sets directions in the
areas of climate change mitigation, energy efficiency or renewable energy use. In the new Strategy , the Bank has committed itself to making its own operations climate neutral by 2030. The Bank intends to reduce direct emissions (Scope 1) and indirect emissions (Scope 2 and 3, categories 1-14) and compensate for emissions through so-called offsets 7 .
Responsibility for implementation of the Strategy , which takes into account emission reductions in Scope 1 and 2, will rest with the Citi Realty Services Department, and in Scope 3 (categories 1-14) with the relevant business units. The indicator monitoring process will also be handled by the Citi Realty Services Department and relevant business units. The provisions of the Strategy are available to employees in the Bank's intranet system.
2.2.2 Targets related to own operations [E1-4 MDR-T]
The Bank has set the following goals for sustainable own operations under the Environmental Policy:
• reduce the Bank's CO 2 emissions (Scope 1 and Scope 2) by at least 50% between 2022 and 2024 (vs. base year 2019),
• maintain noise below acceptable levels and conduct noise monitoring every two years,
• reduce electricity consumption by 40% in 2022–2024 (vs. base year 2012),
• BREEAM certification – currently held certificates: Warsaw, Traugutta – Very Good , Warsaw, Senatorska 16 – Good , Olsztyn, Pstrowskiego 16 – Very Good , Warsaw, Goleszowska 6 – Pass.
In 2022, the Bank reduced its own Scope 1 and Scope 2 greenhouse gas emissions by 64% compared to 2019 and reduced electricity consumption in its own buildings by 42% compared to 2012, thus achieving 100% of its target adopted in the emission reduction strategy and 100% of its electricity consumption reduction target.
Citi Handlowy Bank monitors targets in accordance with ISO 14001 requirements and strategy goals, and results are recorded and monitored as part of an internal system.
As part of the newly adopted Sustainability Strategy for 2025-2027, the Bank has also set the following targets for sustainable own operations:
• gradual optimization of electricity consumption: in particular by 2027 energy consumption in own properties is to be reduced by 20% (base year – 2022, base value – 7829 MWh),
• by 2030, 100% of the electricity used is to be from renewable energy sources (planned progress: 2021 – 50%, 2025 – 75%, 2026 – 80%).
The greenhouse gas emission reduction targets for own operations in absolute values (in tons of CO 2 equivalent) will be set in the following years as part of the Bank's Decarbonization Strategy. An additional level of ambition in the area of sustainable own operations is to ensure compliance with ESG regulations by making the necessary changes to internal policies. The Bank's internal stakeholders were involved in setting the adopted targets.
2.2.3 Activities related to own operations [E1-3 MDR-A]
In order to reduce its emissions, in 2024 the Bank gradually improved the energy efficiency of its buildings, increased the share of renewable energy and purchased guarantees of origin.
In 2023-2024, the Bank upgraded its headquarters building at 16 Senatorska Street in Warsaw and carried out projects that have increased the energy efficiency of that building:
• Construction of bio-adaptive LED lighting throughout the building,
• Upgrade of the air conditioning system and replacement of 400 fan coil units,
• Replacement of air handling units with heat recovery,
• Expansion of the automation system in own buildings (by more than four thousand measurement points).
The above projects were not analyzed in terms of the amount of GHG emission reduction.
In line with the new Sustainability Strategy for 2025–2027, in the coming years the Bank will in particular implement projects that will allow it to improve energy efficiency and fully switch to renewable energy by 2030. In
7 A term describing a voluntary mechanism used by organizations to offset their emissions by investing in projects that reduce or remove an equivalent amount of emissions outside the company's value chain.
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addition, the Bank will support the decarbonization of its business operations and will take into account indirect emissions from business travel and the supply chain. The Bank will gradually optimize electricity consumption, in particular to reduce its use of electricity in its own buildings by 20% by 2027 (compared to 2022).
The implementation of the above plans will depend on the technical capabilities of the buildings to implement innovative technologies, the adaptation and optimization of specific processes, the availability of services to implement compensatory measures and the availability of skilled workforce in the relevant fields.
The implemented and planned activities do not involve the need to incur operating expenses or capital expenditures that the Bank considers significant.
2.3 Climate in the financed loan portfolio
The Bank, as a financial institution, has an impact on the climate mainly through its loan portfolio. The Bank has implemented policies, set targets and is conducting activities to mitigate risks, minimize negative impact, develop positive impact and seize opportunities related to the sustainable transformation of its clients ( Climate-related
risks, opportunities and impacts section).
2.3.1 Policies related to climate change in the loan portfolio [E1-2 MDR-P]
ESG Risk Management Framework in the Capital Group of Bank Handlowy w Warszawie S.A.
The ESG Risk Management Framework (also described in the ESG Risk Management section of this Statement )
promote a consistent and effective approach to the management of ESG risks at the Bank, including risks related to climate change (areas: climate change mitigation and adaptation). That document is part of the Bank's risk management strategy and describes key elements of the organizational structure and processes used to identify, measure, monitor, control and report ESG risks. The ESG Risk Management Framework also clarify the roles and responsibilities of the Bank's Management Board and employees with respect to ESG risk management – including climate risk – across three lines of defense.
The ESG Risk Management Framework apply throughout the Bank and apply to those business units and employees of the Bank that identify, measure, monitor, control and report ESG risks across all lines of defense. The document – as an element of the risk management strategy – was approved by the Bank's Management Board and Supervisory Board. The Bank has entrusted the Vice President in charge of the Risk Management Sector with responsibility for the risk management system covering ESG risks. The ESG Risk Management Manager, acting as a representative of the Risk Management Process Quality Assurance Department within the Risk Management Sector, is responsible for overseeing the implementation of the Framework . The provisions of the Policy are available to employees in the Bank's intranet system.
Environmental and Social Risk Management Regulations for Corporate Banking Clients
The Environmental and Social Risk Management Regulations for Corporate Banking Clients (“ESRM Regulations”) are intended to provide the effective identification, assessment and management of potential social and environmental risks (focusing primarily on the area of climate change mitigation) associated with the Bank's clients. The Regulations provide guidelines for working with clients and allow for mitigation of environmental and social risks associated with the financial activities of the organization. The document creates a framework for managing the impacts and risks associated with financing high-emission industries or industries exposed to transition risk, such as coal mining, coal-fired power generation and oil and gas.
The document assigns a special role in monitoring environmental and social risks to the Risk and Capital Management Committee, which monitors the Bank's risk profile at an aggregate level, including the profile of individual risk categories, to ensure compliance with the approved risk appetite. Violations, i.e. any instance of non-compliance with that policy, must be reported and escalated in accordance with the internal regulations of the Bank.
The Regulation applies to business units and Risk Management Sector employees that prepare, review and approve client transactions, manage such transactions and perform their periodic reviews. Prior to engaging with clients, employees in the first and second line of defense of business units conduct preliminary analyses to identify transactions and clients subject to the Environmental and Social Risk Management Regulations. This is to identify the need for additional due diligence analyses. Some industries are particularly sensitive to environmental and social risks and therefore require an in-depth analysis that takes into account industry specifics:
• agriculture – crops, livestock and processing, among others in terms of forestry subsector
• coal mining,
• coal-fired power generation,
• non-coal mining,
• oil and gas,
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• defence sector.
The Policy refers to global standards and initiatives, including the Washington Convention and the International Finance Corporation (IFC) Performance Standards.
ESRM regulations must be approved by the member of the Management Board in charge of the Risk Management Sector, acting as the owner of the document. The provisions of the Policy are available to employees in the Bank's intranet system.
Policy defining the framework for the classification of sustainable products in the Capital Group of Bank Handlowy w Warszawie S.A.
The Policy defining the framework for the classification of sustainable products in the Capital Group of Bank Handlowy w Warszawie S.A. is a set of principles for identifying, assessing, classifying and monitoring sustainable products (products that support, among others, the areas of climate change mitigation, climate change adaptation, energy efficiency or renewable energy use). The document contains, including but not limited to:
• sustainable finance definition applied by the Bank,
• rules for classifying products as sustainable,
• client eligibility conditions and criteria for financing,
• monitoring requirements for the financing provided,
• scope of duties, responsibilities and roles of the Bank’s organizational units in assessing the classification and monitoring of products qualified as sustainable.
The Policy applies to all products that can be classified as sustainable. The provisions of the Policy are available to employees in the Bank's intranet system.
Currently, the Bank has implemented an operational process according to which it classifies transactions into credit products, receivables and liquidity financing products, and trade finance products. 8
Opinions on the classification of sustainable products are provided by the Sustainability Products Committee, which also monitors product compliance with the Policy . Monitoring results are reported to the Risk and Capital Management Committee. The Policy refers to international standards and regulations, including the European Union Taxonomy, LMA Sustainability-Linked Loan Principles, LMA Green Loan Principles and LMA Social Loan Principles.
The Bank may classify financing as sustainable based on the client's business or a specific investment project. It uses three paths for this purpose:
A. Financing clients who conduct activities that have a positive environmental impact
B. Financing clients' environment-friendly investments
C. Financing a client's transformation based on ESG KPIs
8 The product range includes overdrafts; revolving loans; long-term loans; bridge loans, syndicated loans, income-generating property financing loans, trade service products (bank guarantees, documentary letters of credit), factoring, and trade credit.
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Overall scheme for the classification of sustainable finance in accordance with the Bank's Sustainability Strategy
A. Financing clients who conduct activities having a positive environmental impact
The Bank attaches great importance to promoting and supporting businesses that conduct activities that have a positive impact on the environment. In accordance with its Sustainability Strategy, the Bank provides financing to clients that meet the following criteria:
1a. the company derives at least 90% of its revenues from activities that meet the criteria of a substantial contribution or activities that comply with the EU Taxonomy 9 ; or
1b. at least 90% of the company's revenues, within one year from the date financing is granted, will come from activities that meet the criteria of a substantial contribution or activities compliant with the EU Taxonomy 1 and
2. the company does not operate in sectors excluded from financing under the ESRM Regulations.
B. Financing pro-environmental investments
In a situation where the client does not meet the requirements specified for financing any activities that have a positive environmental impact, but the purpose of financing can be precisely defined and concerns investments that have a positive environmental impact, the financing is classified as sustainable on the basis of environmental criteria coinciding with the criteria for substantial contribution specified for environmental purposes in the EU Taxonomy. The investment assessment process is based on widely recognized market standards for green loans – Green Loan Principles.
C. Financing a client's transformation based on ESG KPIs
In line with its Sustainability Strategy, the Bank supports clients in transforming their businesses. One form of such support is sustainability-linked financial products, which the Bank offers in accordance with generally accepted market standards ( sustainability-linked loans ).
To determine whether a client's transformation is sustainable, the Bank analyzes ESG KPIs.
In accordance with the provisions of the Policy, the clients have developed a plan to transform their activities (or part of their activities) in terms of improving energy efficiency, reducing carbon footprint or adapting to the criteria set out in the EU Taxonomy. ESG KPIs measure the effectiveness of the transformation process and are:
1. material for the client's business activities;
2. measurable and comparable to best market practices;
9 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment.
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3. compliant with generally recognized environmental science initiatives and standards (e.g. decarbonization pathways established under the Paris Agreement).
The cost of financing incurred by the client is dependent on the extent to which the client has achieved the agreed ESG KPIs related to its transformation. In addition, to ensure the credibility and transparency of transformation activities, the achievement of KPIs is confirmed by independent third parties.
By the end of 2024, thanks to the implementation of the Policy , the Bank had provided sustainable financing in the amount of PLN 1.3 billion (of which PLN 1.0 billion under Path C and PLN 0.3 billion under Path A) and thus achieved its target for 2022-2024, which was set at PLN 1 billion.
Sustainability Strategy for 2025-2027
The Sustainability Strategy for 2025–2027 , which is described in the general information part (see Sustainability
Strategy ) is focused on issues relevant to climate change in the Bank's financed loan portfolio and sets directions
in the areas of climate change mitigation, energy efficiency or renewable energy. In line with the new Strategy , the Bank will continue to use its knowledge and experience to be a trusted partner for its clients in the ESG transformation process. The Bank wants to improve sustainable finance solutions, create products to support clients in their sustainable transformation and meet their individual needs, expand its product offering with additional sustainable products (FX, deposits) and classify new products as sustainable, increase the share of green assets in the portfolio, use its extensive knowledge to support clients in their transformation, refine the principles of sustainable finance and support the development of new technologies.
The responsibility for the implementation and monitoring of the implementation of the Strategy in the area of the financed loan portfolio will belong to the Strategy and Investor Relations Department. The provisions of the Strategy are available to employees in the Bank's intranet system.
2.3.2 Targets related to the financed loan portfolio [E1-4 MDR-T]
The Bank has set the following quantitative targets for the sustainable loan portfolio as part of its newly adopted Sustainability Strategy for 2025-2027:
Goal
Base value
Base year
Result
Allocating PLN 2 billion to finance the sustainability of its clients by 2027 10
PLN 0
2025
Goal effective from the beginning of 2025
At least 10% share of sustainable finance in the institutional client loan portfolio by 2027 11
5.3%
2025
Goal effective from the beginning of 2025
Obtaining information on the Scope 1 and 2 emission reduction targets and transition plans of at least 60% of borrowers and using this data in the lending process 12
27%
2025
Goal effective from the beginning of 2025
Completion of ESG training by 100% of employees responsible for ESG sales and consulting by 2027 13
0
2025
Goal effective from the beginning of 2025
An additional level of ambition in the area of the sustainable loan portfolio is to set a decarbonization path for the Bank's portfolio by 2027 and put in place measures to effectively reduce the share of Scope 3 emissions in the Bank's portfolio. GHG reduction targets in absolute value (in tons of CO 2 equivalent and as a percentage of base year emissions) will be set in subsequent years as part of the Bank's Decarbonization Strategy. The Bank's internal stakeholders were involved in setting the adopted targets.
10 In 2022–2024, the Bank allocated PLN 1.3 billion for the green transformation of its clients and exceeded the previously applicable goal set in the Sustainability Strategy for 2022–2024 by almost PLN 300 million. The current goal means allocating an additional PLN 2 billion for sustainable financing in line with the definition contained in the Policy defining the framework for the classification of sustainable products in the Capital Group of Bank Handlowy w Warszawie S.A. described earlier. The target is not based on specific scientific evidence.
11 The total value of sustainable finance granted in 2025-2027 in relations to the institutional client loan portfolio at the end of 2027. The goal does not include any specific milestones and is not based on specific scientific evidence.
12 Obtaining from the clients transition plans or at least GHG emissions reduction plans. The goal is supposed to be achieved at the end of 2027. The goal is not based on specific scientific evidence .
13 The bank has been taking action in the field of ESG training, but the new goal concerns directly dedicated and structured training for all sales department employees, so that all units present the same information to potential customers in a uniform manner. The goal is not based on specific scientific evidence.
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2.3.3 Activities related to the financed loan portfolio [E1-3 MDR-A]
Citi Handlowy Bank is taking steps to reduce emissions from its financed loan portfolio, which constitute the largest part of the Bank's greenhouse gas emissions. This is the central tenet of the Sustainability Strategy for 2025-2027 .
In 2022-2024, the Bank allocated PLN 1.3 billion for the green transformation of its clients and exceeded the target set in the Strategy by almost PLN 300 million. In 2024, the Bank began calculating emissions from its loan portfolio for the first time (Scope 3, Category 15 of the GHG Protocol). The Bank's emissions analysis will be performed on a cyclical basis, which will allow the Bank to assess the reduction of financed emissions in subsequent years.
The bank has included the climate change finance initiatives in its new Sustainability Strategy for 2025-2027 , in Pillar 1 “Sustainable Finance” and Pillar 2 “ESG Risk Management.” In the coming years, Citi Handlowy will continue to offer products and services that promote sustainability, encourage its clients to take sustainable actions, and work with them to accelerate the transformation of their business models and reduce greenhouse gas emissions. To achieve this goal, the Bank will take greater account of ESG risks and factors in its analysis of clients, while supporting them with dedicated financial products and its extensive expertise. In particular, the Bank will:
• establish portfolio decarbonization pathways and reduce Scope 3 emissions by 2027,
• refine the Bank's climate risk analysis and scenario-based portfolio assessment,
• collect information on Scope 1 and 2 emission reduction targets and transformation plans of at least 60% of borrowers and use this data in the lending process,
• work with clients from the Bank's portfolio to accelerate their sustainable transformation and GHG emissions,
• provide ESG training to sales and consulting staff,
• maintain reviews and updates of policies and procedures to support the implementation of sustainable products and services.
The implementation of these activities by the Bank will largely depend on the needs and goals established in this regard by the Bank's clients.
2.3.4 Gross Scopes 1, 2, 3 and Total GHG emissions [E1-6]
Methodology
The calculations of greenhouse gas (GHG) emissions, which include carbon dioxide (CO 2 ), methane (CH 4 ) and nitrous oxide (N 2 O), are based on the global GHG Protocol standards developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). The GHG Protocol methodology distinguishes greenhouse gas emissions divided into:
− Scope 1 – direct emissions associated with the combustion of energy carriers in stationary and mobile sources owned or managed by the organization,
− Scope 2 – indirect emissions related to the consumption of purchased electricity, steam, heat and cooling,
− Scope 3 – other indirect emissions in the value chain.
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Potential sources of corporate emissions as defined by the GHG Protocol
Scope 3 category numbers that are appropriate for the Bank are marked in blue.
Scope 3 category 15 calculations are additionally prepared in accordance with the Global GHG Accounting and Reporting Standard for the Financial Industry , developed by the international organization Partnership for Carbon Accounting Financials (PCAF). PCAF has created a standard for calculating the carbon footprint resulting from portfolio and investment activities for financial institutions. This approach ensures consistency, transparency and compliance with best practices in terms of data on financed emissions.
In order to determine the scope of calculations of direct and indirect emissions that will be reported as the Bank’s emissions, it is necessary to define the organizational boundaries of the activities in accordance with the GHG Protocol methodology. The operational control criterion was adopted as the method of determining the organizational boundaries according to which the organization accounts for 100% of the GHG emissions resulting from the Bank's activities and the functioning of the assets that the Bank can influence by making decisions, e.g. decisions on investments in a given building or decisions on the use of a given asset in a specific way.
The calculations of Scope 1 and 2 GHG emissions were based on the consumption of individual energy carriers used by Citi Handlowy in 2024, i.e. fuels for heating purposes (natural gas), liquid fuels for the car fleet and generators (petrol and diesel fuel), electricity and heat, and the size of refrigerant leaks.
Scope 3 emissions arise throughout a company's value chain and include both upstream and downstream activities. For financial institutions, the most significant source of Scope 3 emissions are financed emissions that result from investments, loans and other financial services. These emissions are classified as Scope 3 category 15 under the GHG Protocol and represent the largest share of the Bank 's total emissions. The calculations of the Scope 3 category 15 GHG emissions included significant assets for which PCAF provides a calculation methodology, as well as assets covered by Article 449a of the Capital Requirements Regulation (CRR) 14 : corporate loans and equity other than those held for trading or held for sale.
Categories 1, 2, 4, 5, 6, 8, 9, 10, 11, 12, 13, 14 of scope 3 were considered inadequate or immaterial. The Bank considered categories 3, 7, 15 as material:
− category 3 - fuel and energy-related activities (not included in Scope 1 or 2) – material category due to the reduction possibilities and the real impact on the consumption of energy and fuel in own operations;
− category 7 - employee commuting - material category due to the necessity to assure human resources to perform the fundamental activities of the Bank;
− category 15 - investments - material category due to the scope of activities of the Bank as a financial institution.
14 Commission Implementing Regulation (EU) 2022/2453 of 30 November 2022 amending the implementing technical standards set out in Implementing Regulation (EU) 2021/637 with regard to disclosure of environmental, social and corporate governance risks.
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Input data description by GHG Protocol scope and category
Scope of the GHG Protocol
Input data description
Scope 1
The calculations of Scope 1 GHG emissions were based on the consumption of individual energy carriers used by Citi Handlowy in 2024, i.e. fuels for heating purposes (natural gas), liquid fuels for the car fleet and generators (petrol and diesel fuel), and the size of refrigerant leaks.
To calculate the emissions, the values of GWP-100 factors ( Global Warming Potential ) were used from the latest report of the Intergovernmental Panel on Climate Change (IPCC), Climate
Change 2021: IPCC Sixth Assessment Report (AR6) , and factors published in the DEFRA
database: Greenhouse gas reporting: conversion factors 2024 .
Scope 2
The calculations of Scope 2 GHG emissions were based on the consumption of electricity from the power grid and heating from the district heating network, the values of which were determined based on relevant invoices. In the event that invoices for last months of 2024 were not available, consumption was estimated based on consumption levels in previous months . For those energy consumption points for which consumption was not known, an estimate was made based on surface area.
The emissions resulting from electricity consumption were calculated using the location-based and market-based method. The location-based calculations of GHG emissions used the emission factor published by KOBIZE: CO 2 , SO 2 , NOx, CO and total dust emission factors for
electricity based on information contained in the National database on emissions of greenhouse
gases and other substances for 2023 . For calculations using the market-based method, factors
made available on the websites of electricity producers whose services are used by a given energy consumption point were applied, as well as documents confirming the origin of the purchased energy from renewable sources. For consumption points for which the producer of the purchased electricity was unknown or the factor from the producer was not available, the “Residual mix” factor designated by the Association of Issuing Bodies was used: European
Residual Mixes Results of the calculation of Residual Mixes for the calendar year 2023 .
CO 2 emission factors for district heating were adopted in accordance with the information published on the websites of heating companies distributing heat in individual locations. In a case where the producer of purchased heat energy was unknown or the factor from the producer was not available, the factor published in the following URE report was used: Thermal energy in
numbers – 2022 .
Scope 3 category 3
Fuel and energy- related activities (not included in Scope 1 or 2)
In category 3, emissions related to the production and supply of fuels (diesel fuel, petrol, natural gas) and electricity used by the Bank were analyzed. To avoid double counting, emissions resulting from losses in the transmission and distribution of purchased electricity were not included in the calculations, because these losses were included in the factor published by KOBiZE, used to calculate Scope 2 emissions.
Emission factors for diesel fuel, petrol and natural gas were adopted based on the DEFRA database: Greenhouse gas reporting: conversion factors 2024 . The CO 2 e emission factor for
electricity was adopted based on the online CaDI database. The percentage of the emissions
that were calculated on the basis of actual data for category 3 is 94.84%.
Scope 3 category 7
Employee commuting
Within category 7, emissions related to employees’ commuting to work by means of transport such as bus, private car, train, taxi, tram, motorcycle, electric scooter and subway were analyzed. Data on employees’ commuting were obtained from a survey completed by 905 employees (29% of the annual average employee headcount). The results from the sample were extrapolated to the total annual average headcount.
CO 2 e emission factors for a given means of transport were adopted based on the DEFRA database: Greenhouse gas reporting: conversion factors 2024 . For electric scooters, our own
emission factor was used, obtained on the basis of the electric energy consumption factor for the scooter available on the vendor's website and the emission factor for electricity published by
KOBIZE: CO 2 , SO 2 , NOx, CO and total dust emission factors for electricity based on information
contained in the National database on emissions of greenhouse gases and other substances for
2023 . 100% of emissions in this category were estimated.
Scope 3 category 15
Investments
The Bank calculated absolute financed emissions in accordance with the Global GHG
Accounting and Reporting Standard for the Financial Industry , developed by the Partnership for
Carbon Accounting Financials (PCAF). In this work, the calculations focused on business loans and unlisted equity, listed equity and corporate bonds, as these asset classes within the assets
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covered by Article 449a of the Capital Requirements Regulation (CRR) constitute the core business of the Bank.
Category 15 emissions were calculated using customer-provided emissions data, where available (16.26% of the calculated category 15 emissions) or, where not available, a sector expenditure approach, using NAICS ( North American Industry Classification System ) codes associated with the company's activities and the relevant sector emission factors from the PCAF database (83.74% of the calculated category 15 emissions). Share of the actual data and the calculations made on the basis of expenditure has an impact on the assessment of data quality according to the PCAF methodology (tier 1 includes verified data on a client's emissions with available financial data of the client, and tier 5 includes emissions estimated on the basis of sector factors). The average data quality score according to the PCAF approach for the analysis performed is 3.39.
Considering that a significant part of the selected assets (46.11%) is short-term financing for fewer than 365 days, an approach proportionate to the financing duration was applied for these financings. This method takes into account the financing duration when calculating emissions. Given that emissions data are typically reported on an annual basis, the emissions resulting from financing granted for a period shorter than one year were included pro rata to the financing duration.
Loans and unlisted equity
The calculation of absolute financed emissions related to loans or equity is based on the Bank’s loan portfolio and the statement of equity investments as at the end of the year. The Bank decided to expand the scope of the calculation beyond standard loans to include other financial products such as credit cards, factoring, credit lines and revolving finance.
Emissions were estimated based on the breakdown of loan credit portfolio by industry, using emission factors from the PCAF database. In such cases, a data quality score of 4 was assigned, in line with the PCAF methodology. Where business-reported emissions were available, these were used as the most accurate representation of the entity’s environmental impacts – for such cases a data quality score of 2 was assigned. Emission calculations include Scope 1 and 2 emissions and, where possible, Scope 3 emissions, in the upstream value chain.
Equity investments – listed and unlisted equity
Absolute emissions financed from equity investments, including listed and unlisted equity, were calculated based on the Bank’s ownership interest in other entities, including subsidiaries in which the Bank holds equity interests.
For listed equity, GHG emissions data from Refinitiv and company reports (e.g. non-financial or sustainability reports) were used. In these cases, a data quality score of 2 was assigned. For unlisted equity, emission factors were sourced from the PCAF database, and a data quality score of 4 was assigned. Emission calculations include Scope 1 and 2 emissions and, where possible, Scope 3 emissions in the upstream value chain.
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Gross Scopes 1, 2, 3 and Total GHG emissions
Greenhouse gas emissions
(in tons of CO 2 eq) 15
Comparative information – 2023 16
2024
% 2024 / 2023
Scope 1
Gross Scope 1
566.81
795.15
40%
Scope 2
Scope 2 by location-based method
6,604.95
6,239.08
-6%
Scope 2 by market-based method
4,017.00
3,603.41
-10%
Scope 3
Gross Scope 3
-
3,251,268.84
-
1 222,331 182,79-3%-1 272,94- 3 Fuel and energy- related activities (not included in Scope 1 or 2)
1,222.33
1,182.79
-3%
-3 251 268,84- 1 222,331 182,79-3%-1 272,94- 7 Employee commuting
-
1,272.94
-
-3 251 268,84- 1 222,331 182,79-3% 15 Investments
-
3,248,813.11
-
Total GHG emissions
Total GHG emissions by location-based method
-
3,258,303.07
-
Total GHG emissions by market-based method
-
3,255,667.40
-
GHG intensity per net revenue 17
(tons of CO 2 eq/PLN 1,000)
2024
Total GHG emissions (location-based) per net revenue
0.6112
Total GHG emissions (market-based) per net revenue
0.6107
15 Tonne of carbon dioxide equivalent (t CO 2 e) is the standard unit used to compare emissions of different greenhouse gases based on their global warming potential.
16 The differences in the emission data for 2023 compared to the data provided in the 2023 report result from the recalculation of emissions due to the increase in certain media noted by the Bank on the basis of invoices after the date of publication of the non-financial data report for 2023.
17 It is not possible to present complete comparative data for 2023 due to the full emission calculation being made for the first time in 2024.
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Gross Scopes 1, 2, 3 and Total GHG emission [t CO 2 e]
Total emissions of the Bank and their intensity
In 2024, total GHG emissions amounted to 3, 258,303.07 tCO 2 e for the location-based method and 3,255,667.40 tCO 2 e for the market-based method.
The GHG emission intensity, expressed as emissions per net revenues (net revenues: 5,331,255 thousand PLN) , was 0.6112 tCO 2 e/PLN 1,000 for the location-based method and 0. 6107 tCO 2 e/PLN 1,000 for the market-based method.
Emissions from own operations
The Bank's direct GHG emissions result from its operational activities, including the use of company cars, power generators and fire pumps, gas boilers, and refrigeration and air conditioning systems, and are calculated under Scope 1. In 2024, the Bank's own Scope 1 GHG emissions amounted to 795.15 tCO 2 e. An analysis of the Scope 1 emissions structure showed that the percentage of direct emissions increased by 40% compared to 2023. This increase in emissions is a consequence of refrigerant leaks in refrigeration and air conditioning systems at the Bank's locations and the recorded gas consumption for heating purposes in the newly leased space.
Indirect emissions related to electricity consumption and district heating are calculated under Scope 2. Indirect emissions related to energy use under Scope 2 amounted to 6,239.08 tCO 2 e for the location-based method and 3,603.41 tCO 2 e for the market-based method. By comparing the Scope 2 carbon footprint result in 2024 versus 2023, it can be seen that the Bank's emissions decreased by approximately 6% for the location-based method and 10% for the market-based method, which can be explained by a change in its demand for energy (electricity and heat) and by an update of energy suppliers with emission factors.
In 2024, biogenic emissions resulting from the combustion or biodegradation of biomass amounted to 35.64 tCO 2 . These emissions resulted from the combustion of biocomponents contained in petrol and diesel fuel used for the needs of the Bank's car fleet, power generators and fire pumps.
Emissions from relevant categories for the value chain
In 2024, the Bank made for the first time calculations or modifications to the current calculation methodology in all relevant Scope 3 categories. Of the relevant categories, three categories were deemed material, including two – categories 3 and 7 – related to the value chain outside the financed loan portfolio and investments which are covered by category 15. The emissions in categories 3 and 7 totaled 2,455.73 tCO2e in 2024.
The decrease in category 3 emissions (Fuel and energy-related activities) in 2024 versus 2023 can be explained by an update of sources used to obtain relevant factors.
Emissions from the financed loan and investment portfolios
The Bank's total carbon footprint is dominated by Scope 3 category 15, which is related to activities in the area of financed loan and investment portfolios. In 2024, these emissions amounted to 3,248,813.11 tCO 2 e, constituting 99.79% of the Bank's total emissions from 3 scopes.
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Emissions from financed loan and investment portfolios (tCO 2 e) :
Scope 1
Scope 2
Scope 3
Total Scope
Emissions from financed loan and investment portfolios (tCO 2 e)
1,822,265.31
286,183.66
1,140,364.14
3,248,813.11
Additional contextual information
Government bonds
In addition, The Bank calculated financed emissions from government bonds held, excluding the trading portfolio. In accordance with the PCAF standard, the absolute emissions financed from investments in government bonds were calculated based on the carrying value of the Bank's position for a given country, divided by the adjusted purchasing power parity (PPP) Gross Domestic Product (GDP). Then, the obtained value was multiplied by the reported emmissions for the corresponding country. The calculation took into account exposures to countries, excluding supranational entities.
The carbon footprint calculations of government bonds include only emissions from Scope 1 so called production emissions, i.e. greenhouse gas emissions occurring within a given country's borders, covering both domestic consumption and exports. This definition is consistent with the approach to territorial emissions used by the United Nations Framework Convention on Climate Change (UNFCCC) in its annual national inventories and is widely used by governments in their Nationally Determined Contributions (NDCs) 18 . Emissions from scopes 2 and 3 are not taken into consideration due to the lack of unified and reliable data.
The reported GHG emissions from government bonds are presented both including and excluding LULUCF 19 (emissions resulting from land use, land use change and forestry). Emissions from financed government bonds amounted to 1,020,623.60 t CO2e (excluding LULUCF) and 968,946.15 t CO2e (including LULUCF). In case of this category the data quality assessment at the level of 1 was assigned. All data regarding the emissions reported by the countries comes from UNFCCC 20 and are based on the most recent available data. The data related to the GDP adjusted by PPP GDP comes from the World Bank database 21 .
Total greenhouse gas emissions including government bonds are as follows:
G reenhouse gas emissions
(tCO 2 e)
excluding LULUCF
including LULUCF
Total GHG emissions including government bonds (location- based)
4,278,926.67
4,227,249.22
Total GHG emissions (market-based)
4,276,291.00
4,224,613.55
18 See more: Nationally Determined Contributions (NDCs): https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-
determined-contributions-ndcs.
19 LULUCF sector is related to land use, land use change and forestry https://unfccc.int/topics/land-use/workstreams/land-use--land-use- change-and-forestry-lulucf.
20 Greenhouse Gas Inventory Data - GHG Profiles - Annex I . The most recent available data covering the year 2021 were taken into account when
preparing the statement.
21 World Development Indicators | DataBank . GDP adjusted by PPP (current international $). The most recent available data covering the year 2023
were taken into account when preparing the statement.
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2.3.5 GHG removals and GHG mitigation projects financed through carbon credits [E1-7]
In 2024, the Bank did not engage in GHG removals and GHG mitigation projects financed through carbon credits.
2.3.6 Internal carbon pricing [E1-8]
In 2024, the Bank did not use internal carbon pricing and did not assign a specific financial value to its CO 2 emissions as part of its decision-making processes.
2.4 Energy
The Bank affects the climate through the use of energy in its own operations (section Climate-related risks,
opportunities and impacts ). The policies implemented, targets set and activities carried out support the Bank in
its own energy transformation.
2.4.1 Policy related to energy use in the Bank [E1-2 MDR-P]
Energy Policy
The Energy Policy governs the Bank's use and management of energy in its own operations, focusing on the areas of energy efficiency and the use of renewable energy. The Policy sets the following tasks for the organization:
• strive for the most efficient energy management,
• minimize the consumption of energy and non-renewable energy resources,
• support the purchase of energy-efficient products and services and ensure an improved energy performance,
• reduce GHG emissions among others thanks to decarbonization and the greatest possible use of energy from renewable sources,
• conduct business in facilities with a multi-criteria certification system (BREEAM),
• anticipate trends and implement innovative energy solutions.
The Energy Policy provisions are compliant with ISO 50001 standard and, like the Environmental Policy, apply to the Bank's four own buildings.
The Bank's compliance with the regulations is monitored through:
• control of energy consumption and costs,
• monitoring energy performance,
• gradual transition to energy from renewable sources,
• monitoring the condition of buildings in accordance with BREEAM certification,
• projects aimed at improving the energy efficiency of buildings,
• internal audits,
• annual supervision by the accreditation body,
• assessments of compliance with legal requirements and regulations.
The provisions of the Energy Policy were consulted with internal stakeholders from selected units – its co-authors. The document is available on Citi Handlowy Bank's website and intranet. The Citi Realty Services Department is responsible for implementing this regulation.
Sustainability Strategy for 2025-2027
The Sustainability Strategy for 2025-2027 , which is described in the general information part (see Sustainability
Strategy ), also refers to energy used by the Bank (the areas of energy efficiency and renewable energy use). The
implementation of appropriate goals and their monitoring will be a responsibility of the Citi Realty Services Department. The provisions of the Strategy are available to employees in the Bank's intranet system.
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2.4.2 Targets related to energy use [E1-4 , MDR-T]
The Bank has set the following quantitative targets for energy use as part of its newly adopted Sustainability Strategy for 2025-2027:
Goal
Base value
Base year
Result
Gradual optimization of electricity consumption, in particular by 2027 energy consumption in own properties is to be reduced by 20% 22
7,829 MWh
2022
6,972MWh (2024)
-11% (2024/2022)
By 2030, 100% of the electricity used will be from renewable sources (according to the progress: 2025 – 75%, 2026 – 80%, 2027 – 85%) 23
0%
2020
60% (2024)
The Bank's internal stakeholders were involved in setting the adopted targets. The goals were set based on the Bank's internal analysis and forecasting of possible reduction in the value and are not based on specific scientific evidence.
2.4.3 Actions to manage impacts related to the use of energy at the Bank [E1-3 MDR-A]
Starting in 2021, 50% of the total energy the Bank uses in its own buildings comes from renewable sources. For 2025, renewable energy has been contracted for own buildings covering 75% of their needs. By 2030, the Bank plans to purchase 100% of its energy from renewable sources.
In 2024, 75% of the energy contracted by the Bank for its own buildings was produced by renewable electricity generation units . The contract covers the period from 1 January to 31 December 2025. The Bank also implemented projects to build photovoltaic installations in buildings in Warsaw (ul. Senatorska and ul. Traugutta), and also started a project to build a photovoltaic installation in its building in Olsztyn, to be completed in 2025.
The implementation of energy projects will depend on the technical capabilities of buildings to implement innovative technologies and the availability of green energy on the market.
The implemented and planned activities do not involve the need to incur operating expenses or capital expenditures that the Bank considers significant.
22 Monitoring of the target will be the responsibility of the Citi Realty Services Department . Electricity consumption will be calculated for the properties owned by the Bank in accordance with the methodology adopted for the purposes of disclosing indicators on energy consumption and energy mix [E1-5].
23 Data regarding the progress are based on the value of contracted electricity from renewable sources. Monitoring of the target will be the responsibility of the Citi Realty Services Department . The share of energy from renewable sources will be calculated in accordance with the methodology adopted for the purposes of disclosing indicators on energy consumption and energy mix [E1-5].
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2.4.4 Energy consumption and mix indicators [E1-5]
The table below presents data on energy consumption in the Bank's own operations for 2024 24 .
Energy consumption
Value
Fuel consumption from coal and coal products (MWh)
0
Fuel consumption from crude oil and petroleum products (MWh)
2,423
Fuel consumption from natural gas (MWh)
810
Fuel consumption from other fossil sources (MWh)
0
Consumption of purchased or acquired electricity, heat, steam and cooling from fossil sources (MWh)
8,801
Total energy consumption from fossil sources (MWh)
12,035
Share of fossil sources in total energy consumption (%)
74
Energy consumption from nuclear sources (MWh)
0
Share of energy consumption from nuclear sources in total energy consumption (%)
0
Consumption of purchased or acquired electricity, heat, steam and cooling from renewable sources (MWh)
4,209
Consumption of self-generated non-fuel renewable energy (MWh)
46
Total consumption of renewable and low-carbon energy (MWh)
4,256
Share of fossil sources in total energy consumption (%)
26%
Total energy consumption [kWh]
16,291
Production of own energy from non-renewable sources (MWh)
0
The greatest use is made of electricity to power own premises, branches and ATMs, the consumption of which accounts for 47.08% of the total consumption of energy carriers. The second largest use is district heat, used for heating own premises and branches, the share of which is 33.02%. Also important are the consumption of gasoline in the company's car fleet, accounting for 14.59% of the total consumption, and natural gas used for heating several departments, the consumption of which accounts for 4.99% of the structure. Diesel fuel consumption is low and amounts to 0.32% in total.
Energy consumption split by sources [MWh]
24 For the purposes of presentation in this table, individual data on energy consumption in own operations have been rounded to whole numbers.
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2.5 Taxonomy-related disclosures
Pursuant to Art. 8 sec. 1 of Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment ( „Taxonomy” ), undertaking which is subject to an obligation to publish non-financial information shall include in its non-financial statement on how and to what extent the undertaking’s activities are associated with economic activities that qualify as „environmentally sustainable” („Taxonomy”).
In the light of Taxonomy, an economic activity shall qualify as „environmentally sustainable” if all of the following conditions are met: (i) contributes substantially to one or more of the environmental objectives set out in Taxonomy, (ii) does not significantly harm any of the environmental objectives set out in Taxonomy, (iii) is carried out in compliance with the minimum safeguards i.e. procedures implemented by an undertaking that is carrying out an economic activity to ensure the alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights and (iv) complies with technical screening criteria that have been indicated in the relevant regulations delegated to taxonomy. In this respect, at the end of 2024, the following European Commission regulations were in force, which specified the scope of taxonomic disclosures:
• Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021, as amended by Commission Delegated Regulation (EU) 2023/2485;
• Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021, as amended by Commission Delegated Regulation (EU) 2022/1214 and 2023/2486;
• Commission Delegated Regulation (EU) 2023/2486 of 27 June 2023
Bank Handlowy w Warszawie S.A. is obliged to publish a non-financial statements in accordance with the requirements of Directive 2022/2464/EU (Corporate Sustainable Reporting Directive - "CSRD"). Bank is obliged to report taxonomic disclosures as a credit institution.
The detailed scope and dates of presentation of information on environmentally sustainable economic activities, which should be disclosed under the Taxonomy, are indicated in the Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 ("Regulation 2021/2178"): delegated act specifying taxonomy reporting obligations.
Pursuant to Art. 10 sec. 7 of Regulation 2021/2178, from 1 January 2024 to 31 December 2025 credit institutions are obliged to report information on financed Taxonomy non-eligible and Taxonomy-eligible economic activities for all Taxonomy aligned environmental purposes for climate change mitigation and adaptation purposes. The scope and structure of the disclosure of the above information are defined in Annexes V, VI and XII (quantitative information) and Annex XI (qualitative information).
In order to meet the above regulatory obligation, the Bank made quantitative disclosures in accordance with templates 0-5 (for the purposes of disclosing key indicators - "KPIs") included in Annex VI of Regulation 2021/2178 for the state of the Bank's assets as at the balance sheet date of December 31, 2024 and the Bank's assets flow in the financial year ended December 31, 2024. At the same time, in accordance with Annex XII of Regulation 2021/2178, the Bank disclosed information related to nuclear energy and natural gas.
Description of the methodology for preparing disclosures according to Annex VI of Regulation 2021/2178
Disclosures required by the Taxonomy were prepared on the basis of data provided by the Credit Information Bureau in terms of turnover KPI and capital expenditure KPI (CAPEX) reported by enterprises obliged to disclose non-financial information in accordance with the NFRD Directive for 2023, which includes:
1. Financial enterprises: asset managers, credit institutions, investment companies, insurance and reinsurance companies;
2. Non-financial enterprises;
3. Households: only loans granted for residential properties and consumer loans for the purchase of cars;
4. Financing of local governments: only financing of public housing and other types of specialized lending for local governments.
When preparing taxonomic disclosures, the Bank used consolidated data, both in the case of credit exposures that the Bank had and taxonomic disclosures of its clients.
Quantitative disclosure tables 1, 2 and 3 (in accordance with templates 0-5) contain information according to the number of loans held, table 4 contains flows in the scope of granting new loans, while table 5 in terms of off- balance sheet exposures in accordance with the indicated regulator's template includes information in terms of state and flow. At the same time, the Bank does not report a table of disclosures regarding revenues from fees and commissions from services other than lending and asset management (template 6) and the trading portfolio (template 7 25 ), because it will be reported from January 1, 2026.
25 For the trading portfolio, the Bank is not subject to the exception resulting from Article 94 section 1 of the CRR Regulation. The Bank is not subject to the so-called "small trading activity".
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In order to determine the amount of the Bank's exposures eligible and ineligible for the taxonomy for financial and non-financial enterprises, the Bank identified its clients subject to the obligation to disclose non-financial information in accordance with the CSRD Directive.
Financial companies
The analysis included financial enterprises that published the green assets ratio in relation to turnover and capital expenditure at consolidated level.
Non-financial companies
For non-financial enterprises, in the field of general financing, the analysis in terms of assigning identified exposures as eligible and compliant with the Taxonomy was determined by multiplying the exposure value with the percentage indicators of eligibility and compliance to the Taxonomy in relation to turnover and capital expenditure based on information provided by the Credit Information Bureau based on all goals specified in the Taxonomy, i.e. climate change mitigation, adaptation to climate change, t he sustainable use and protection of water and marine resources, transition to a circular economy and pollution prevention and control. Additionally, the above analysis takes into account only general financing, excluding special-purpose loans.
H ouseholds
The Bank has limited credit exposure to housing loans (they constitute 11% of all net loans of the Bank as at the end of 2024). Additionally, on April 15, 2021, the Bank received information from the strategic shareholder - Citigroup about a change in the strategy in the area of Consumer Banking i.e. sale of this business. As a result, the Bank is focusing on adapting the Wealth Management offer (distribution of investment products) and maintaining the first position in terms of the value of loans granted on credit cards, as a result, the Bank decided not to test Taxonomy-alignment for mortgage loans.
Exposures to local government units
The Bank did not identify exposures to local government units that could be recognized as eligible or consistent with the Taxonomy, as a result, in the completed tables, the Bank entered 0 for activities qualifying for the Taxonomy.
Description of the methodology for preparing disclosures according to Annex XI of Regulation 2021/2178
The Bank prepared Green Asset Ratio disclosures using indicators reported by the Bank's clients, excluding environmental purposes loans defined in the Taxonomy concerning climate change mitigation and adaptation. Taxonomic goals were not taken into account when designing products for the Bank's clients and implementing the Sustainable Strategy. On the other hand, in order to increase customer engagement and promote taxonomic goals among them, the Bank developed a questionnaire in the sustainable financing criteria (in accordance with the Policy defining the framework for the classification of sustainable products in the Capital Group of Bank Handlowy w Warszawie S.A.) that facilitates the identification of a given financing that may be Taxonomy-eligible or Taxonomy-aligned . Thanks to this tool, the Bank will be able to disclose Taxonomy-eligible and Taxonomy- aligned special purposes loans defined in the Taxonomy in subsequent Sustainable Statements.
Description of the methodology for preparing disclosures according to Annex XII of Regulation 2021/2178
The analysis of activity indicators related to nuclear energy and natural gas took into account the exposures of Bank customers that were covered by NFRD reporting for 2023. For this purpose, data from the Credit Information Bureau were used. As a result of the above taxonomic KPI analysis, the Bank identified insignificant exposures to the fossil gas business. Exposures are presented based on turnover and capital expenditure (CAPEX) metrics, which qualify for the taxonomy but do not meet the technical criteria. Therefore, the Bank only discloses tables based on template 4 in accordance with Annex XII. The Bank does not disclose the remaining formulas set out in Annex XII because in each of them the exposure related to the financing of nuclear energy and natural gas activities would be 0.
The tables below present data as of December 31, 2024.
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0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation (2024)
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0. Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation (2023)
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1. Assets for the calculation of GAR - Turnover based (2024)
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1. Assets for the calculation of GAR - (turnover KPI ) - 2023
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1. Assets for the calculation of GAR - CAPEX based - 2024
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1. Assets for the calculation of GAR - CAPEX based - 2023
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2. GAR sector information (turnover) - 2024
2. GAR sector information (CAPEX) – 2024
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3. GAR KPI stock (turnover ) – 2024
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3. GAR KPI stock (turnover) - 2023
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3.GAR KPI stock (CAPEX) – 2024
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3.GAR KPI stock (CAPEX) - 2023
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4.GAR KPI flow (% turnover KPI) – 2024 r.
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4. GAR KPI flow (% CAPEX) – 2024
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5. KPI off-balance sheet exposures Turnover based - 2024
5. KPI off-balance sheet exposures - Capex based - 2024
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5. KPI off-balance sheet flow exposures - Turnover based
5. KPI off-balance sheet flow exposures - CAPEX based
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1.Nuclear and fossil gas related activities (turnover) – 2024
Nuclear Energy Activities
1
The company conducts research, development, demonstration, and deployment of innovative power generation facilities that produce energy through nuclear processes with minimal fuel cycle waste, finances such activities, or has exposure to them
No
2
The company engages in the construction and safe operation of new nuclear facilities for electricity or industrial heat production, including district heating systems or processes such as hydrogen production, as well as their safetyoriented modernisation using best available technologies, finances such activities, or has exposure to them.
No
3
The company engages in the safe operation of existing nuclear facilities generating electricity or industrial heat, including district heating systems or processes such as hydrogen production from nuclear energy, as well as their safety-oriented modernisation, finances such activities, or has exposure to them.
No
Natural Gas Activities
4
The company engages in the construction or operation of power generation facilities using gaseous fossil fuels, finances such activities, or has exposure to them.
Yes
5
The company engages in the construction, modernisation, and operation of cogeneration plants producing heat/cooling and electricity using gaseous fossil fuels, finances such activities, or has exposure to them.
Yes
6
.The company engages in the construction, modernisation, and operation of heat production facilities generating thermal/cooling energy using gaseous fossil fuels, finances such activities, or has exposure to them.
Yes
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1.Nuclear and fossil gas related activities (CAPEX) – 2024
Nuclear Energy Activities
1
The company conducts research, development, demonstration, and deployment of innovative power generation facilities that produce energy through nuclear processes with minimal fuel cycle waste, finances such activities, or has exposure to them
No
2
The company engages in the construction and safe operation of new nuclear facilities for electricity or industrial heat production, including district heating systems or processes such as hydrogen production, as well as their safetyoriented modernisation using best available technologies, finances such activities, or has exposure to them.
No
3
The company engages in the safe operation of existing nuclear facilities generating electricity or industrial heat, including district heating systems or processes such as hydrogen production from nuclear energy, as well as their safety-oriented modernisation, finances such activities, or has exposure to them.
No
Natural Gas Activities
4
The company engages in the construction or operation of power generation facilities using gaseous fossil fuels, finances such activities, or has exposure to them.
Yes
5
The company engages in the construction, modernisation, and operation of cogeneration plants producing heat/cooling and electricity using gaseous fossil fuels, finances such activities, or has exposure to them.
Yes
6
.The company engages in the construction, modernisation, and operation of heat production facilities generating thermal/cooling energy using gaseous fossil fuels, finances such activities, or has exposure to them.
Yes
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2: Taxonomy-Aligned Business Activities (Denominator) [PLN million] - (turnover)
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2: Taxonomy-Aligned Business Activities (Denominator) [PLN million] – (CAPEX)