Letter from the CEO of
BNP Paribas Bank Polska S.A.

Dear Shareholders, Customers and Employees of BNP Paribas Bank Polska Group,

we bid farewell to a year of challenges that we had not expected and had not predicted even in pessimistic scenarios. An adverse economic situation and difficulties facing the banking sector were, and continue to be, merely a background for the real drama related to uncertainty about health and life. Thanks to the consistency, hard work and talent of our team, we ensured the safety of our Customers and employees, while striving to achieve our targets. Despite all of the restrictions, the Bank’s Group generated PLN 733 million in net profit in 2020, up by 19.3% from the previous year. Given the pandemic and the current macroeconomic situation, I am treating these results as a huge success for us. From the beginning of the pandemic, we actively searched for solutions that could respond to entirely new challenges. First, we took care of elementary safety of our employees and Customers. We introduced split teams, and 95% of the workforce was immediately adapted for remote work. At our branches, we deployed appropriate protective measures and paid attention to social distancing. In effect, 99.4% of Bank BNP Paribas’ branches were and are open to Customers.

We considerably accelerated the digitalisation of our services, going beyond the ordinary and setting completely new standards. From May 2020, everyone can schedule a meeting with an adviser at a branch, to talk about investments or mortgage loans, through the Booksy application, previously associated with beauty and hairdressing services. In collaboration with Autenti, we implemented solutions that make it possible to sign documents without having to exchange paper copies between the bank and the Customer. In combination with the option to open an account using a video verification, we get a modern vision of banking, but one that is no longer out of reach. It became reality thanks to our innovativeness and hard work.

We were not indifferent to the problems of our Customers and the economy as a whole. During the pandemic’s first wave – already in March, even before statutory proposals materialised, as part of the initiative of the Polish banking sector, Bank BNP Paribas offered the possibility to suspend the repayment of principal and interest. Our Customers were able to submit applications for subsidies from the Polish Development Fund (PFR) through the online banking system and had access to two guarantee programs on preferential terms – the de minimis program and the Liquidity Guarantee Fund – provided by the Polish development bank BGK. I have no doubt that we passed the test of solidarity very well in these difficult times.

Uninterrupted financing of flagship investments in the country was of great importance to us. Instead of freezing it, we expanded our Customer portfolio and completed further projects. I say this with great satisfaction – most of the investments that we finance have a positive economic, social and environmental impact.

The emergence of new challenges did not distract us from other topics of fundamental meaning for our planet. We continue to advocate green initiatives and remain the Bank for a Changing World. To further enhance our actions aimed at implementing the Sustainable Development Goals, we established a special unit – the Sustainable Development Council. Its aim is to define our ESG strategy and ensure that its objectives are embedded in our competences and in our product and service offering. In 2021, we will emphasise our social engagement even more. We have many objectives ahead – and we can only achieve them by uniting in common action. I deeply believe that in this way we, as a society, will be able to face global challenges and, as a bank, we will be able to deliver new ambitious ventures.

Sincerely,

Przemek Gdański

President of the Management Board, BNP Paribas Bank Polska

1.          BNP Paribas Bank                         Polska S.A. Group

1.1.    Brief overview of the Capital Group  

The Bank operates within the leading international banking group BNP Paribas, which is present in 71 countries and employs almost 200 thousand people, of which almost 152 thousand in Europe.

In Poland, the BNP Paribas Group operates in many areas of financial services, such as: banking, investment funds, custody services, factoring, leasing, insurance, real estate and car fleet management.

Table 1. Key financial data

* Net values, including loans measured at amortized cost and at fair value.

** Normalized values calculated excluding integration costs incurred in connection with the implementation of the merger processes in 2016-2020. In 2018 the impact of non-recurring events resulting from the adopted method of accounting for the acquisition of RBPL's Core Business, i.e.: the cost of the allowance for expected credit losses in connection with the acquisition of RBPL's Core Business (ECL) and the gain on the bargain purchase of RBPL's Core Business was additionally excluded.    

*** For a portfolio measured at amortized cost.

1.3. Business model

The BNP Paribas Bank Polska Group runs its business based on the following operating segments (the business line's contribution to the Group's banking result is given in %, NBI, for the 12 months of 2020):

§  The Retail and Business Banking encompasses comprehensive services for individual clients, including private banking clients (Wealth Management) and business clients (microenterprises) – with the largest share in the Group's banking activity 47.6%;

§  Corporate Banking offers a wide range of financial services provided to large and medium-sized enterprises, local government units and entities belonging to international capital groups (with its share in the Group's banking activity amounting to 23.2%);

§  The Small and Medium Enterprises Banking includes services for agro and non-agro customers (with 9.4% share in the Group's banking activity)

§  Corporate and Institutional Banking (CIB) supports the sale of the Group's products to the largest Polish enterprises and provides services to strategic customers (6.4% of the Group's banking activity);

§  Other activities including the Asset and Liability Management Division and Corporate Centre (13.4% share in the Group's banking activity).   

The foundations of BNP Paribas Bank Polska Group activity are:

A local bank with global reach

We are a bank with over 100 years of tradition/history on the Polish market. Being a member of the BNP Paribas global financial enables us to use the best international practices to meet the needs of the local market and expectations of the Bank's customers.

Comprehensive and accessible offer

The Group offers its customers a full range of financial products and services provided by the Bank and the Group companies (including investment funds, leasing). We also provide customers with direct access to the offer of BNP Paribas Group entities operating in Poland (e.g. factoring, leasing, insurance).

As the Bank close to the customer, we provide services through a network of bank branches. We are constantly developing and transforming our branches, paying particular attention to accessibility and openness to the needs of various groups of customers, including the elderly and people with disabilities.

Our credit products are also available through points in affiliated stores as well as through selected car dealer networks.

Considering technological challenges, we are constantly developing our products and digital service channels: mobile and online banking and new forms of communication using technology.

Responding to civilisation challenges

We constantly analyse and take into account regulatory and economic aspects, as well as the dynamic development of digitalisation and social and climate changes, which affect the national and global economies. We respond to civilisation challenges by developing and adapting our offer to the changing environment and needs of our Clients.

We continue our organizational transformation efforts to strengthen the Bank's market position. We are strengthening the digital competences of our employees and accelerating the digitalization of internal processes to respond to the rapidly changing market environment

Responsible risk management and impact on climate

Culture of compliance and careful risk management is the pillar of our business activity in order to provide top quality services to our customers. The Bank has a risk management system, has implemented and applies appropriate policies and procedures to manage and monitor risks. One of the key elements of this system is the ESG risk management, including climate risk. The Group undertakes strategic activities to combat climate change. To reach this target, climate risks have been defined and opportunities identified in the short, medium and long term.

How do we create value?

Financial capital is the financial value of the Bank and the Capital Group. It comprises funds acquired from customers, shareholders, and profits generated by the Bank and companies belonging to BNP Paribas Bank Polska S.A. Capital Group. As a company listed on the Warsaw Stock Exchange, we aim at a steady growth of shareholder value while respecting the principles of sustainable development.

Human and intellectual capital of the Bank and BNP Paribas Bank Polska SA Capital Group are the employees. Thanks to their knowledge, competence and commitment we provide top quality financial services and ensure professional customer service based on stable relations. We create innovative products and services to respond to customers' current and future needs that affect our market position.

Operating capital creates value for stakeholders thanks to the activity of BNP Paribas Bank Polska SA Group, which consists of BNP Paribas Bank Polska SA as the parent entity and seven subsidiaries. The operating capital is based on resources and developed infrastructure. We continuously work on development and improvement of the service quality through the branch network, Contact Centre and digital channels. We pay particular attention to increasing the availability of products and services for customers representing groups at risk of social exclusion. At the same time we care for our employees and stakeholders, and minimise the negative impact of our operations on the natural environment.

Social capital means relations with stakeholders in our environment: customers, employees, business and institutional partners, local communities and community organizations. As a public trust institution, being part of the socio-economic ecosystem, we are aware of the impact we have on society and our environment. We initiate actions aimed at positive changes in local communities - we support equal opportunities and counteract social exclusion. We develop our offer of responsible products and services with a positive impact, following the principle of sustainable development.

Environmental capital is our contribution to combating climate change and supporting energy transition. As a responsible financial institution we offer our clients environmentally friendly products and services to support the transition to a low-carbon economy that respects the environment. In our day-to-day operations, we make every effort to limit the environmental impact of our activities by implementing eco-efficiency measures. We promote responsible and pro-environmental attitudes among our employees, customers and the environment, and work to raise awareness about climate change.

1.4. HR management  

Headcount

At the end of December 2020, the Capital Group of BNP Paribas Bank Polska S.A. had 9,019 FTEs (including employees on maternity leave, childcare leave and longer sick leave) as compared to 10,219 FTEs at the end of 2019 (decrease by 1,200 FTEs). The YoY decrease in employment was mainly due to the optimization performed after merger of the Bank with the core banking activities of Raiffeisen Bank Polska (Core RBPL) on 31 October 2018.

The table below presents the Capital Group’s employment structure in FTEs.

Table 2. Headcount in the Capital Group of the Bank

* 31.12.2019 – merger of the following subsidiaries of the Bank: BNP Paribas Group Service Center S.A. and BNP Paribas Financial Services Sp. z o.o

Restructuring of employment

At the end of 2020 the process of collective redundancies, planned for 2019 – 2020 in relation to the employment optimization after the acquisition of Core RBPL, was finished. During the two years of the process 1,473 employees left the Bank (including 278 employees under the Voluntary Leave Program) and contracts with another 175 employees will be terminated in 2021.

In response to the change of market situation, dynamic technological growth in the banking sector and projects in the area of digitalization implemented by the Bank, a new program of collective redunadancies was scheduled for the years 2021-2023, in agreement with Trade Unions. It was agreed that the dismissal process will cover no more than 800 employees.

In order to alleviate the social consequences of collective redundancies, the Bank introduced the Voluntary Leave Program and, in agreement with trade unions, decided to pay additional compensation and other elements of social protection, in addition to statutory bonuses for redundant employees.

Employee remuneration policy

The Bank has implemented a reasonable, balanced and controllable remuneration policy and ensures its compliance with the strategy, the acceptable risk level as well as the standards and key values of the Bank. The remuneration policy reflects the Bank’s customer orientation in addition to the Bank’s long term interest as well as socially acceptable remuneration practices. It is in conformity with the applicable laws and regulations.

The Bank has adopted a Remuneration Policy for persons having material impact on the risk profile of BNP Paribas Bank Polska S.A. which was developed in line with guidelines included in Resolution No. 258/2011 of the PFSA and the requirements of CRD IV and which was approved by the Supervisory Board on 9 September 2016. In December 2017, the provisions of the abovementioned Policy were updated in connection with the entry into force of the Regulation of the Minister of Development and Finance of 6 March 2017 on the risk management system and internal control system, remuneration policy and detailed conditions for estimation of internal capital in banks (Journal of Laws of 2017, item 637). In December 2019 there was another policy update related to a change in the limit on the amount to which the deferral period does not apply and a distribution in the form of a financial instrument (shares) for the deferred portion of variable compensation.

The Bank has established a Remuneration Committee and Nominations Committee, which support the Supervisory Board in the fulfilment of its supervisory duties in the respect of human resource management, by monitoring and overseeing the key processes, specifically succession plans, professional development of employees and remuneration policies. The Committees prepare opinions and recommendations for the Supervisory Board, with respect to the terms of employment of members of the Bank’s Management Board, including the variable remuneration determined and granted to such members.

Incentive schemes

The incentive schemes (bonus schemes) are designed to support the Bank’s strategy by rewarding employees for achieving their objectives. The bonus schemes are based on the MbO (Management by Objectives) formula, which means that an employee’s individual bonus depends on his/her goal achievement level, both quantitative and qualitative. Furthermore, a combination of individual and collective goals gives the employee a picture of his/her expected performance, considering the Bank’s risk profile and actions in the interest of the customer.

The Bank has implemented:

§  bonus schemes for direct sales staff, which were brought into line with the tasks assigned to each business line of the Bank as well as to existing regulations;

§  bonus scheme defining the rules for granting and payment of variable remuneration, including bonuses, to managers exerting a considerable influence on the risk profile of the Bank;

§  bonus schemes for specific employee groups, other than direct salesforce.

The bonus scheme rules do not apply to the employees’ share in the share capital of the Bank.

Training and development programs

In 2020, training was carried out in close cooperation with the Bank’s business lines.The total number of training participants was over 125.9 thousand, including 112.8 thousand participants of e-learning courses, 632 participants of external training, 9.4 thousand participants of internal online training (Skype, Webex), 3 thousand participants of internal training in training rooms.

Due to the coronavirus pandemic the majority of trainings carried out in 2020 was held online or in a form of webinars/virtual classes. Since the beginning of the epidemic all training activities conducted by the Bank’s internal trainers have been transformed and are offered in a remote form, giving the Bank’s employees a constant possibility of development.

Major training initiatives in 2020:

§  courses raising the level of product knowledge, dedicated to product offering and use of the operating systems for employees of the sales network

§  introductory training for the newly employed

§  courses for managers increasing their team-leadership competencies and skills related to building authority, motivating and providing feedback

§  soft skills courses for the Bank's employees

§  courses developing key competences of the future

§  webinars supporting managers and employees in goal setting and providing regular feedback basing on goals and individual development plans

§  mandatory courses resulting from legal regulations – e.g. related to the MiFID2, act on insurance distribution

§  e-learning courses regarding actual global situation (the coronavirus epidemic – knowledge pill) and supporting employees in the new reality (organising effective remote work)

§  webinars supporting employees and managers in functioning during the COVID-19: dispersed team management, dealing with difficult emotions, effective remote communication

§  courses supporting the development of a risk culture at the Bank, especially in the areas of operational risk and compliance

§  management and soft skills courses carried out on request of selected teams.

Development programs implemented in the first half of 2020:

§  Leaders for Tomorrow initiative – a development program of the Capital Group of BNP Paribas aimed at the development of leadership skills. Participants can make the most of development sessions conducted online.

§  Well Leading – a development program dedicated to managers and aimed at shaping consistent attitudes and behaviours of leaders. The program focuses on developing competences: strategic thinking, change management, motivating and inspiring.

§  Digital Ambassadors Program – the aim of the program is to build a digital culture at the Bank by equipping employees with digital competences. The key role in this process is performed by the Digital Ambassadors whose task is to: acquire knowledge and skills in the field of both functioning and newly implemented tools, promotion of social tools and digital solutions supporting remote work and business efficiency, transferring knowledge to colleagues, participation in testing and implementing new solutions, promoting new work techniques, gathering and transferring information on the needs of employees to IT, as well as tracking market innovations in order to implement them at the Bank.

§  Inner Labour Market – continuation of the initiative launched in 2014, which aims to strengthen the professional mobility of employees within the organization. Employees have acces to job offers in the Bank and the Group’s companies.

§  Mobility Center – a project aimed at actively supporting employees affected by the process of collective redundancies in navigating the labour market, with particular emphasis on the internal market.

§  Feedback culture building program – two key aspects from amongst the seven foundations of the Bank's organizational culture were selected: cooperation and trust (pulse check). The program aims at developing values based on mutual respect for D&I (diversity and inclusion), as well as care for open, transparent communication and regular feedback.

§  Development Festival - a local version of International Mobility Days, an annual program held simultaneously in several dozen countries of the BNP Paribas Group. Thanks to this initiative the employees have an opportunity to learn about the development training offer tailored to their needs in the on-line format. During the Development Festival there were organized, among others, inspirational lectures, workshops and webinars on personal and professional development, as well as meetings with Managers, HR Business Partners and recruiters;

§  About Me - BNP Paribas Group's platform for performance, career and employee development management. It supports personal brand building and conscious employee development through the possibility of creating one's own profile available for the entire organization and the Group. The profile can include information about the employee's work experience, strengths and key skills, career development preferences, goal setting, recording regular feedback from the supervisor and planning personal development. From the beginning of 2020, the Bank promotes and encourages employees to actively complete profiles and supports employees in preparing individual development plans with this tool

§  Digital Academy – open trainings for all Bank employees in the area of digital transformation (artificial intelligence, user experience, cyber security and big data). The objective of these trainings is to raise awareness of digitalization, counteract digital exclusion, promote and inspire innovation

§  Corporate wellness – “Well” Program - BNP Paribas Bank Polska S.A. has implemented a new corporate wellness program called "Well", which is an element of the "Bank Close to the Close" program and a part of the "Friendly Work Environment" pillar of the BEneFIT strategy in the area of benefits and well-being. The programme is a response to the needs of the Bank's employees and their relatives... The objectives guiding BNP Paribas Bank Polska SA during the implementation of the "Well " corporate wellness program:

§  Implementing a long-term pro-health policy, especially in the era of COVID-19, which will translate into employee satisfaction and engagement, as well as maintaining a harmonious work-life-balance, especially during home office and epidemic restrictions, which will also translate into work efficiency;

§  strengthening and expanding the wellness activities that are already in place, i.e. flu vaccinations in the workplace, preventive screening tests (blood pressure, cholesterol, glucose, body

§  composition analysis), workplace trainings on healthy lifestyles (nutrition, weight loss, stress reduction), health promotion competitions with the Worksmile application;

§  making changes to company culture, organization, and management style that will ensure high rates of health and capacity/efficiency;

§  enabling contact - now online - with specialists such as a psychologist, nutritionist, coach, sports trainer, mental speaker

§  Total Reward Statement – an annual report presenting total benefits from working at BNP Paribas Bank Polska to the employees, not only those resulting from the received remuneration, but also all additional benefits, such as medical care, insurance or a cafeteria system, non-wage benefits, training, development programs, as well as social benefits, additional financing and PPK (retirement plan).

Internship and partnership programs – cooperation with universities

§  Ambasadorskie Duety (“Ambassador Duo”) is a program directed at students. Participation in the program lasts one year and involves the implementation of various initiatives promoting the Bank at a university. Participation in the program provides additional training, scholarships and a prize for the best Duo. The program is directed to those who show energy, a willingness to act and who have many ideas for promoting the Bank in their university environment. The bank acquaints its ambassadors with the secrets of the Bank’s operations, employer branding, as well as recruitment, social media policy, or personal branding. Ambassadors represent BNP Paribas at their universities. In June 2020 the third edition of Ambassador Duo program was finished and in September another one started, additionally including CSR and ecology-related subjects. As part of the proram, Days of Development with BNP Paribas program was held. It was a series of webinars organised together with the participants of the Ambassador Duo program and with the support of our employees. Thanks to their involvement, students could gain broad knowledge regarding, among others, recruitment, time management, CSR or data science. In the 2020 edition we cooperated with: University of Warsaw, Stanisław Staszic University of Science and Technology in Kraków, University of Economics in Kraków, University of Economics in Poznań, University of Economics in Wrocław, University of Economics in Katowice, University of Gdańsk.

§  BNP Paribas Green Zone on Library for Owls - in January 2020, a promotional stand of the BNP Paribas Bank appeared at the University of Warsaw Library. It was connected with the University of Warsaw Library (BUW) initiative, which allows students who are preparing for exams to use the library's collections until five in the morning. Students who visited the stand could meet the Ambassador Duo and learn more about internships and jobs at the Bank.

§  Days of Development with BNP Paribas – between 2^nd and 4^th June 2020, BNP Paribas Bank Polska, together with the participants of the Ambassador Duos program, organised a series of webinars, which attracted nearly 600 students. Development Days with BNP Paribas is an initiative that enabled the Bank to reach a wide group of students from 10 universities throughout Poland. Thanks to the involvement of employees from various areas of the Bank, the students had an opportunity to gain knowledge on e.g. recruitment, time management, CSR and sustainable development or data science. Apart from the Bank's experts, knowledge was also shared by the special guests of the event, bloggers: Janina Bąk, author of the blog Janina Daily and Kasia Wągrowska, author of the blog I Limit myself - From Excess to Moderation. Participants appreciated the interactive form of webinars – the possibility to communicate with the speakers, participate in surveys and short exercises.

§  Dual Studies - dual studies in Financial Risk Management are offered at the University of Economics in Poznań. These are two-year MA studies run by both Bank experts and lecturers from the University. Currently, in the second edition of the program, 18 students are enrolled.

§   “Focus on Development” - Summer Program - a summer internship program with remuneration, addressed to students of the 2nd and higher years. In the program of the internship we focus on promoting the Bank and try to break stereotypes about working in the banking industry. During the internship, participants had an opportunity to gain knowledge about banking through active participation in tasks and projects of selected department, under the supervision of a dedicated tutor. Due to the epidemic, the internships took place, depending on the localisation, in a stationary, remote and hybrid form. The program included business webinars (led by Bank practitioners), as well as meetings and development workshops on topics such as how to build a personal brand or how to manage time. The summer internships were attended by 35 participants.

§  Internship programs #StażJużCzas – they are addressed to students of the third and fourth year. The aim of the program is to prepare students to join the organisation. The opportunity to participate in projects that end with a result defined at the beginning gives a unique opportunity to gain business

§  experience. It also helps to understand the relationships, structures and principles accompanying functioning in a large organization. In 2020 we launched two projects in the IT area. The first one concerns the creation of a voice assistant, while the second one involves the construction of an application for estimating infrastructure costs. We invited 6 trainees to cooperation. The products which will be developed after the completion of the program will be a real support for the business and clients in 2021.

§ 

Investor obligation of BNP Paribas concerning the liquidity of the Bank’s shares

As declared by BNP Paribas SA – the main Bank’s shareholder -  to the Polish Financial Supervision Authority on 14 September 2018, the number of the Bank’s shares that are in free float should have been increased to at least 25% plus one share by the end of 2023, at the latest.

BNP Paribas Group

Key shareholder of the Bank is leading international banking group BNP Paribas,

which operates in the following key areas:

§  Retail Banking & Services, which includes Domestic Markets and International Financial Services; and

§  Corporate & Institutional Banking.

The BNP Paribas Group supports its clients (retail customers, local authorities, entrepreneurs, SME, corporate customers and institutions) in the implementation of various projects, offering a broad range of financial, investment and savings products along with insurance.

BNP Paribas Group operates on four European domestic markets (Belgium, France, Italy, and Luxembourg) and is a leader regarding consumer loans (BNP Paribas Personal Finance). The BNP Paribas Group develops its model of integrated retail banking in Mediterranean countries, Turkey, Eastern Europe and through a well-developed branch network in western United States. In Corporate and Institutional Banking and International Financial Services, BNP Paribas is also among European leaders, holds a strong position in the Americas and has seen a fast growth in the Asia-Pacific region.

Share prices of BNP Paribas Bank Polska S.A.

During the session on 30 December 2020, the share closing price amounted to PLN 63.60 and was 6.47% lower than on 30 December 2019. In the same period, the WIG Banks index fell by 29.59%. The main reason was the development of the coronavirus pandemic, freezing the economy and concerns about the necessity of making reserves and deterioration of banks’ results related to it. A significant decrease of share prices occurred in mid-March 2020 (on 10 March 2020 the share price was PLN 60.40, on 20 March 2020 it was PLN 48.00). The second and third quarter did not bring any improvement and an annual minimum was observed on 30 October (PLN 33.10), following an increase in the number of coronavirus cases and the uncertainty regarding the scale and duration of introduced sanitary restrictions. A durable reverse of the trend came in November and lasted until the end of the year. It almost allowed the Bank to recover from the losses, unlike the industry index, which closed the year at nearly a third lower than at the end of last year.

A relatively better development of the Bank’s share price was positively influenced by a consistent implementation of the strategy and visible in 2020 increase of financial results, made possible by a successful integration with Core  Business of Raiffeisen Bank Polska S.A. and adjustment measures aimed at neutralizing the negative impact of the coronavirus pandemic on the Bank’s results.

While in the first quarter of 2020 an average daily share price remained on a relatively high level (PLN 66.24), the second quarter brought a noticeable decrease of an average share price (to PLN 49.87) and in the third quarter that decrease deepened (PLN 46.13). October was the worst month with an average price of PLN 38.12. An increase of share price in November and October allowed a slight increase of quarterly average to PLN 46.49.

Average daily volumes of trading in the first, second and third quarter of 2020 reamined at a relatively low level (2,258.25 shares, 2,079.48 shares and 2,473.15 shares respectively). Combined with a noticeable decrease of an average share price in the second quarter of 2020, it was also reflected in changes of an average daily value of trading, which in the first three quarters of 2020 amounted to, respectively: PLN 145.09 thousand, PLN 104.98 thousand and 109.46 thousand. During the session on 18 September 2020 an annual maximum of trading volume (84,909 shares) and value of trading (PLN 3,582.45 thousand) were observed. A reverse of the negative trend recorded in the fourth quarter of 2020 brought a rebound of an average daily volume of trading to 5,784.13 shares and an average daile value of trading to PLN 261.45 thousand.

Despite share prices’ slump, reflected in the decrease of the Bank’s average daily share price from PLN 58.90 in 2019 to PLN 52.23 in 2020; there was a noticeable growth of investors’ interest, which translated into the growth of an average daily volume of trading by 70.07% and an average daily value of trading of the Bank’s shares by 31.86% (from 1,860.55 shares and PLN 118.26 thousand in 2019 to 3,164.17 shares and PLN 155.94 thousand in 2020 respectively).

2.2.                     Ratings

The Bank’s ratings have been assigned by Moody’s Investors Service Ltd.

On 5 May 2020 Moody’s Investors Service Ltd. (“the Agency”) made an updated assessment of the Bank as a result of which it maintained the long-term deposit rating of the Bank at Baa1 while changing the outlook from positive to stable. This change is due to the appearance of the COVID-19 epidemic risks. The short-term deposit rating was maintained at Prime-2.

Due to the systematic improvement of the Bank's financial the basic BCA (Baseline Credit Assessment) was maintained at ba1 level. The Adjusted Baseline Credit Assessment and Counterparty Risk Assessments were maintained at their current levels (baa3 and A3(cr)/Prime-2(cr) respectively).

A positive assessment of the Bank's financial standing results from:

§  improving profitability and operations efficiency,

§  moderate level of credit risk and strengthening of the equity situation,

§  financing assets with funds from the outside of the interbank market,

§  high level of liquid assets,

§  optimization of funding costs.

The Bank's rating was maintained following the Agency's analysis in the fourth quarter of 2020. The credit opinion report and rating was published by the Agency on 15 December 2020.

The macroeconomic situation in Poland, despite the COVID-19 pandemic, has a positive impact on maintaining Bank's assessment.

2.3.                     Investor relations

BNP Paribas Bank Polska S.A. pursues a transparent information policy to ensure high communication standards taking into account information needs of capital market participants.

When providing information, the Bank, as a public company and a supervised institution, follows the corporate governance rules, in compliance with the binding provisions of law, and provides capital market participants with equal access to information about the current activity of the company, its activities or its financial results, fulfilling information obligations in a manner that enables a reliable valuation of the Bank's shares.

A dedicated organisational unit in the Bank - the Investor Relations Bureau – is responsible for relations with shareholders, investors and other capital market participants. Relevant information for investors, Bank shareholders and analysts is available on a dedicated Investor Relations website https://www.bnpparibas.pl/investor-relations.  

In 2020, the Bank published a digital version of its annual report for 2019 for the first time. The report under the motto “Bank of Green Changes” is available on the website: https://raportroczny.bnpparibas.pl/en.

In 2020, recommendations for BNP Paribas Bank Polska shares were issued by 8 domestic financial institutions. At the end of 2020, the Bank had 8 recommendations, of which 4 “Buy”, 1 “Accumulate” and 3 “Hold”. The median of target prices from the recommendations amounted to PLN 63.2, i.e. it was lower than the share price as at 30 December 2020 (PLN 63.6) by 0.6%.

Any changes in the composition of the Bank's Management Board and the Supervisory Board that took place in 2020 are described in Chapter 10.3. of the herein Report – Statutory bodies of the Bank.

3.2.                     Awards and distinctions

3.3.                     Impact of the COVID-19 pandemic on the activity and results of the Bank and the Group in 2020

Since mid-March 2020, BNP Paribas Bank Polska has been actively involved in actions supporting the fight against the pandemic, taking steps to ensure continuity of services, while caring for the health of employees and customers, as well as safety of funds entrusted to the Bank. Simultaneously, the Bank actively supports customers and initiatives aiming at restoring economic recovery.

Work organisation - protecting employees and customers

§  enabling remote working on a mass scale (both for employees of the headquarters and branches), if the nature of the work allows it; Over the course of 2020, since mid-March, a basic and recommended form of work organisation in the Bank was remote working; in organisational units, in which such form of work was not possible for whole teams, work organisation was based on an interchangeable system (split-team), where teams were divided to separate people executing the same duties; at the end of 2020 about 90% of the headquarters’ employees worked remotely. On average 85% of the headquarters’ employees worked remotely since the beginning of the pandemic.

§  providing tools for remote work, among others replacement of desktops and terminals in branches with laptops, increase of the Internet limit in company mobile phones

§  equipping the Bank’s branches with protective plexiglass, masks, gloves, disinfectants;

§  In order to ensure the safety of employees and customers, in the period from 18 March to 8 May, the number of people in the branches was reduced, opening hours were shortened, a dedicated service hour for seniors was introduced, and selected branches, including the cashiers, were temporarily excluded from service due to employees' child care responsibilities. As of 11th May this year, standard customer service hours were restored in the branches. At the end of 2020, 7 branches were excluded from service. Since the outbreak of the pandemic, an average of 99% of the branches were accessible to customers with appropriate safety rules;

§  enabling employees to carry out PCR test in ALAB diagnostic laboratories, at the Bank's expense tests - if there is a reasonable suspicion that the employee may have had contact with another employee or customer who was diagnosed with COVID-19 infection;

§  preparation of online educational materials for employees' children to support them in organising children's time;

§  remote recruitment of new employees, virtual welcome training #NiceToSeeYou for new employees;

§  providing telephone psychological support and mental health materials on the Worksmile Wellbeing Platform (formerly Fitqbe);

§  all educational and pro-employee initiatives have been transferred to an online platform, i.e. organisation of CSR Days, Children's Day, training offers, webinars (including remote work organisation, COVID-19 pandemic);

§  a special section in the internal Echonet network dedicated to information about the coronavirus;

§  marketing campaigns of #stayhome - promoting the Bank's personal account, without leaving home.

Business activity, supporting customers

From the beginning of April 2020, the Bank has provided its customers with the possibility of deferring the repayment of principal and interest or principal only repayments (the so-called "loan moratoria", “non-statutory/private moratoria”) in a convenient remote process. Since 1 October 2020 only statutory moratoria have been available. As at the end of 2020, the number of loans and advances subject to moratoria was 43.3 thousand with the Group’s total gross balance sheet exposure value of PLN 7,251,102 thousand, of which PLN 3,374,952 thousand related to individual customers, PLN 3,095,593 thousand to business entities and PLN 780,557 thousand to leasing and other receivables. Total gross value of loans and advances subject to statutory moratoria was PLN

135,935 thousand. The balance of expired moratoria at the end of 2020 amounted to PLN 6,949,777 thousand, and the balance of active moratoria - PLN 301,325 thousand.

Detailed information on moratoria provided by the Bank and the Group in 2020 were presented in Credit Risk Note in the Stand-alone and Consolidated Financial Statements for the year ended 31 December 2020.

In the middle of January 2021 non-statutory moratoria were reintroduced. Moratorium assistance facilities will be provided to customers until March 31, 2021.

In addition, the Bank actively joined the Polish Development Fund's (PFR’s) fundraising program for the execution of the PFR Financial Shield Program for micro, small and medium-sized enterprises in relation to the effects of the COVID-19 epidemic in Poland as part of the government's anti-crisis shield. Under the program the Bank purchased on 27 April the PFR0324 bonds for PLN 1 billion, on 8 May the PFR0325 bonds for PLN 1 billion, on 25 May the PFR0925 bonds for PLN 1 billion and on 5 June the PFR0627 bonds for PLN 1 billion. Thus, the Bank's total exposure to the Polish Development Fund (PFR) bonds amounted to PLN 4 billion. Additionally, the Bank acquired PLN 6.38 billion of bonds issued by Bank Gospodarstwa Krajowego (BGK) for the COVID-19 Counteraction Fund.

In the GOonline and BiznesPl@net internet banking systems, the Bank enabled entrepreneurs to submit applications under the anti-crisis shield and the financial shield of the Polish Development Fund (PFR). The Bank’s clients, who benefitted from the PFR  Financial Shield 1.0 for micro, small and medium-sized enterprises received support in the form of financial subsidies for the total amount of PLN 5.05 billion. The total amount paid out by the PFR to enterprises under Shield 1.0 was PLN 60.5 billion.

In the middle of January, the Bank’s clients were provded with the possibility of benefit from Financial Shield 2.0 through the Bank.

Other activities for customers are described below:

Retail Banking

§  possibility of remote document processing for customers,

§  creating a GOmobile account remotely with video verification technology to confirm customer’s identity,

§  honouring documents submitted by registered mail or courier service as well as by scans,

§  possibility of remote disbursement of a loan tranche,

§  remote cash loan disbursement process - from the moment of application to the agreement signing and disbursement of funds,

§  remote handling of dispositions for cash loans, credit cards and the Allegro limit,

§  encouraging payments with cards, BLIK, Apple Pay and Google Pay,

§  increasing the limit for contactless payments (up to PLN 100) without the need to provide a PIN number for Mastercard and Visa cards,

§  enabling to open a bank account without leaving home by video-verification (using the GOmobile application and a mobile phone equipped with a camera),

§  a series of webinars, addressed to microentrepreneurs, on how to run and promote small business on the Internet,

§  enabling the arranging of visits to all branches of the Bank via the Booksy booking application, and from November 2020 the possibility of making appointments also through the Bank's website. The new possibility can be used by both individual customers and micro companies, as well as people who are not yet customers of the bank but would like to take advantage of its offer,

§  implementation of the Autenti e-signature service in Wealth Management,

§  facilitating safe parking and travel with the GOmobile application (possibility of remote purchase of city card and parking fee).

§  possibility to deposit cash outside the bank branches in Planet Cash and Euronet cash machines all over the country,

§  under the Bank's Misja Edukacja (Mission: Education) program, the Bank prepared a series of educational webinars, offering tips on how to easily and safely manage your finances without leaving home. The first workshop was held in October 2020.

Corporate Banking

§  Total limit of loan repayment guarantees under the BGK: PLN 12 billion, including: de minimis guarantee scheme (since the beginning of April): PLN 4 billion (of which PLN 2.1 billion available), liquidity guarantees (since the beginning of May): PLN 8 billion (of which PLN 6.8 billion available) and the Agricultural Guarantee Fund guarantees (since the end of July): PLN 0.12 billion (of which PLN 0.06 billion available),

§  customer support within the framework of the anti-crisis shield and the financial shield of the Polish Development Fund (PFR),

§  a personalised approach to the renewal of credit lines for micro-enterprises,

§  possibility of remote submission of applications and orders through the Business Service Centre and Business Service Zone,

§  possibility of remote processing of documents for customers, including honouring documents submitted by registered mail or courier service, as well as scans,

§  possibility of remote disbursement of a loan tranche,

§  organisation of webinars in the field of labour law (including subsidies to employees' salaries) and regarding the financial subsidy program for companies, and in cooperation with the SPCG Law Firm also a series of webinars on legal aspects of other support solutions proposed by the government during the epidemic

§  enabling entrepreneurs to sign documents electronically on the Autenti platform, as well as to conclude a lease agreement in a car dealership by using an e-signature,

§  supporting entrepreneurs by co-financing their advertisements on OLX.

§  declaration of participation in the PFR 2.0 Financial Shield. By providing access to electronic banking systems, the Bank helps clients quickly and securely access financial subsidies offered to companies in nearly 40 industries that have had to curtail or suspend operations in response to the COVID-19 outbreak. Applications for subsidies under the Shield 2.0 will be accepted by the Bank starting January 15, 2021, and from January 18, 2021 the Bank will be accepting applications for the possibility of deferring loan repayments for up to 3 or 6 months.

Social activity

§  financing 2,000 tests for the presence of SARS-CoV-2 in cooperation with Warsaw Genomics, Diagnostic Group and ALAB company,

§  donating 20,000 protective masks to health care,

§  fighting against digital exclusion – over PLN 1 million for a purchase of over 500 laptops with routers and Internet access and donating 250 refurbished and prepare for usage bank laptops to students in need of support in education and on-line activities,

§  donation to support the development of a tool to manage public fundraising for hospitals: www.wsparciedlaszpitala.pl - a free-of-charge platform that helps hospitals to communicate their needs and support those who want to help them find out what is most needed,

§  support of the Association of Little Brothers of the Poor (PLN 15 thousand donation for a basket for an Easter basket for the Senior Citizen)

§  The Bank, as a strategic partner of the Wiosna (Spring) Association’s Noble Parcel action, supported the organisation in its assistance activities, especially by promoting the "Good Words - Help for Seniors" info-line project, which aims to help the elderly during the COVID-19 pandemic. Thanks to the action, seniors can count on the support of specialists - psychologists, therapists and volunteers,

§  financial support for the Alivia Oncological Foundation, a social partner of the BNP Paribas Foundation, to purchase protective gear for oncological patients. The BNP Paribas Foundation supported the organisation with a sum of PLN 20 thousand,

§  financial support for the Itaka Foundation Anti-Depression Trust Line action, allowing for the extension of the on-call time from 4 to 15 hours per week for 12 months. The helpline operates within the framework of the "Stop Depression" program of the Foundation and is an important aid in the fight against depression, especially in times of pandemic. Thanks to our initiative, the Foundation was able to offer 750 additional duty hours of specialists working at Itaka Foundation Anti-Depression Trust Line,

§  delivering meals for the medical personnel of Wolski Hospital from the Paribar bank canteen and for the medical personnel of Sochaczew Hospital from the Leszno palace’s restaurant, which belongs to the Bank’s subsidiary - Campus Leszno Sp z o. o. Total value of the meals donated by BNP Paribas Bank Polska S.A. to the medics from Wolski Hospital in Warsaw and Sochaczew Hospital amounted to PLN 155 thousand,

§  a group of employees-volunteers from the PF Operations Division made 450 masks, which were donated to two orphanages with which the Bank’s volunteers cooperate and to the Centre for the Advancement of Women Foundation,

§  involvement in the national aid action #hot16challenge2 - the action was accompanied by a fundraising organised via the siepomaga.pl portal, the funds from which were entirely donated to help the healthcare staff in the fight against the coronavirus,

§  an information campaign #stayhome, encouraging safe banking and leaving home only when necessary, including a dedicated section on coronavirus on the Bank's website,

§  The Bank constantly monitors the situation and engages in assistance activities for groups most affected by the pandemic.

Impact on the financial results

§  net interest income: in 2020 the Monetary Policy Council cut interest rates three times (decisions of of 17 March 2020, 8 April 2020 and 28 May 2020 to reduce the reference interest rate from 1.5% to 0.1% and of 17 March 2020 to increase the interest rate on the mandatory reserve from 0.5% to 1.0% as of 30 April 2020). According to the Bank's estimates – published by the Bank on 2 and 15 April and 2 June 2020 (Current Reports 13/2020, 15/2020, 20/2020) – a total negative impact of interest rates cuts on the Bank's and the Group's net interest income for 2020 was estimated in the range from PLN 195 to 230 million with the caveat that the actual impact will depend on the profitability curve and the implementation of business assumptions. As a result of price revision of the products offered by the Bank and significant reduction in the cost of funding as well as changes in the structure and value of the balance sheet, the negative impact of the rate cuts was partially neutralized and net interest income in 2020 recorded a decrease by PLN 108.7 million or 3.4% y/y.

§  financial assets net impairment losses and provisions for contingent liabilities: in 2020, the Group created PLN 236 million provisions for unrealized losses related to the general economic situation and the consequences of COVID-19. Significantly worsened macroeconomic forecasts caused a deterioration of the parameters for creating provisions (PD/LGD), which reflect unrealized losses. Additionally, PLN 62 million provisions was created against exposures with a moratorium, which secures the Bank against problems with servicing loans after the moratorium expires. Consequently, the total cost of risk in 2020 was significantly higher than in the comparable period of the previous year, i.e. by 36.1% y/y. On the other hand, the generally good behavior of the loan portfolio, particularly in terms of timeliness of repayments, has partially neutralized the negative impact of additional provisions related to COVID-19.

Impact on liquidity, capital situation and business volumes

§  The Bank monitors and assesses the impact of the coronavirus epidemic on the Bank's liquidity and capital situation, which remains good. The liquidity of the banking sector was positively affected by the Monetary Policy Council's decision of 17 March 2020 to reduce the mandatory reserve rate from 3.5% to 0.5% (which means that more funds were left at banks' disposal) and by the decisions of the National Bank of Poland regarding the purchase of treasury bonds, a bill-of-exchange loan and repo operations (increasing banks' ability to manage current liquidity),