V. Financial results of the Alior Bank SA Group - NoCash

[pic] Management Board Report of the Alior
Bank S.A. Group
for 2015
Management Board Report of the Alior Bank S.A. Group for 2015 1 Table
of contents
Letter from the CEO 4 Letter from the President of the Supervisory Board 6 I. Summary of Alior Bank's operations in 2015 7
Major events and business initiatives carried out in 2015 7 Distribution network and employment level 11 Key financial data 12 II. Alior Bank at the Warsaw Stock Exchange 15
Quotations of Alior Bank's shares on the WSE in 2015 15 Ratings 17 Investor relations 17 III. External environment of the Bank's operations 18
IV. Main structural and financial data of Polish banking sector 21
V. Financial results of the Alior Bank S.A. Group 24
Income statement 24 Balance sheet 29 Financial forecasts 36 VI. Operations of Alior Bank S.A 36
VII. Business overview of the Alior Bank S.A. Group companies 49
VIII. Events and contracts significant to the business operations of the
Bank's Group 51
Information on the planned change of the strategic investor 51 Significant events relating to the merger with Meritum Bank ICB S.A
52 Other significant events 56 IX. Report on the risk exposure of Alior Bank 64
X. Contingent liabilities 88
XI. Internal control system 89
XII. Corporate social responsibility 90
XIII. Controls applied in the process of preparing financial statements
94
XIV. Corporate governance 96
Shareholders of Alior Bank S.A 98 Alior Bank S.A.'s bodies 100 Remuneration policy 113 XV. Assessment of Alior Bank's operations and perspectives for 2016
123
XVI. Management representations 126
Appointing the registered auditor 126 Policies adopted in the preparation of the financial statements 126
Material contracts 126
Court proceedings in progress 127 Letter from the CEO Dear Sirs,
In 2015, despite the unfavourable environment, Alior Bank consistently
reinforced its position on the market and continued its growth along all
the key business lines; it also successfully pursued strategic
initiatives aimed at increasing its scale of operations and
profitability.
On 26 October 2015, only four months after the legal merger, and eight
months after concluding the transaction, the operational business
combination between Meritum Bank and Alior Bank was effected.
I am proud to inform everyone that this was the fastest and most efficient
merger ever carried out in the Polish banking sector. Both in operational
and technological terms, this attests to Alior Bank's readiness to
actively participate in further consolidations.
The integration with Meritum Bank was accompanied by changes in the
organizational structure of Alior Bank which will enable maximizing the
use of the potential of the merged banks and achieving significant
synergies in terms of costs and revenues. In effect we have created a
solid foundation for further dynamic organic growth.
In 2015 Alior Bank actively developed strategic cooperation with the
global telecommunications operator, T-Mobile. The joint project,
completed under the brand TMobile Us?ugi Bankowe (banking services)
provided by Alior Bank, brings exceedingly better business results,
which, among other things, is the result of intensifying sales of credit
products and increasing the possibilities of financing the operator's
equipment. This allows us to have an optimistic view of the future and
confirms that cooperation with TMobile will be an important element of
building Alior Bank's growth.
One of the effects of the successful cooperation with T-Mobile Polska was
the expansion of the strategic alliance with the global
telecommunications operator by another important and large Central
European market - in August 2015 Alior Bank signed an agreement with the
Romanian operator Telekom Romania Mobile Communications from the Deutsche
Telekom Group. The project is of strategic importance for Alior Bank as
it is the first step towards the Bank's expansion on foreign markets.
After obtaining the decision of the local regulator of the branch of
Alior Bank as a foreign credit institution in record time, preparations
for the operational start of the project planned for the third quarter of
2016 are in progress.
I would like to emphasize that one of the aims of Alior Bank is developing
current and entering into new strategic alliances with lead global
companies. An example of such action is the conclusion of an agreement
with the British hypermarket chain Tesco for the continuation of
cooperation on the Polish market in August 2015.
The prior year was a difficult period for banks, as they had to operate in
an environment of low interest rates. Reducing interchange rates and the
increase in contributions to the Bank Guarantee Fund related to the
deterioration in the position of the SKOK sector and cooperative banks
had a negative impact on the industry's returns.
However, all this constituted a prelude to the challenges that await banks
in 2016. For the first time in history, Polish banks will have to deal
simultaneously with many factors directly affecting their condition.
On the one hand, these comprise: the tax on assets, the contribution to
the Mortgage Loan Restructuring Fund (Fundusz Restrukturyzacji Kredytów
Hipotecznych) and the unresolved issue of loans denominated in Swiss
francs, and on the other: more stringent capital requirements, new
regulations for the sale of financial products and growing competitive
pressure in the industry, in particular with reference to credit
products.
However, I would like to ensure you that Alior Bank does not intend to
stray off the growth path and will make every effort to meet the
expectations of its customers, investors and shareholders. I have much
hope in sector consolidations which should further grow in the new
reality. Alior Bank has all the necessary assets to play a lead role in
these processes.
I kindly invite you to read the report.
Yours faithfully,
Wojciech Sobieraj
CEO
Letter from the President of the Supervisory Board Dear Sirs,
The previous year was a period of serious challenges both for Alior Bank
and for the whole banking sector. Banks had to face unfavourable external
conditions resulting from the prevailing low interest rates,
administrative decisions to reduce interchange rates, and the need to
provide additional finance to the SKOK and cooperative banks sector. Despite the unfavourable market conditions, the Management Board
effectively pursued the adopted strategy and continued the key
initiatives aimed at further reinforcing the market position of Alior
Bank. The Supervisory Board carefully monitors Alior Bank's strategic
initiatives and supports the Management Board in their pursuit. The merger with Meritum Bank, completed in record time, is a model
transaction for the whole sector. Using the best experiences of both
institutions as well as the changes in the organizational structure which
accompanied the merger will enable the Bank to improve its effectiveness
and offer its current and potential customers even more attractive
modern products and services. Alior Bank proved that it is ready to
actively participate in further consolidation of the Polish financial
sector. The Supervisory Board was pleased to receive information about the Bank's
expanding cooperation with the global telecommunications operator T-
Mobile on another European market. Commencing operational activities by
the Bank's branch in Romania will be an important step on the way to
building Alior Bank's strong position on the international market. In the prior year four changes were made to the composition of the Bank's
Management
Board. In June 2015 Ms Joanna Krzy?anowska joined Alior Bank's Management
Board. In
October 2015 Mr Micha? Huca? resigned from the Board and Ms Ma?gorzata
Bartler and Ms Barbara Smalska were appointed to the Management Board. As
Chair of the Supervisory
Board I would like to cordially greet the new Management Board Members and
thank Mr Micha? Huca? for his commitment and substantial input into the
development of Alior Bank.
In 2015 the composition of the Supervisory Board also underwent some
changes. I would like to warmly thank Mr Stanis?aw Popów for his
significant input into the work of the Board and to wish him further
professional success. In December 2015 Mr Przemys?aw D?browski and Mr
S?awomir Niemierka joined the Supervisory Board. I am certain their
competencies will contribute to the efficient operation of the
Supervisory Board in the future.
On behalf of the Supervisory Board I would like to cordially thank the
Management Board and all the employees for their commitment and I wish
them continued successes in 2016.
Your faithfully,
Helene Zaleski
President of the Supervisory Board I. Summary of Alior Bank's operations in 2015
Major events and business initiatives carried out in 2015 Undoubtedly, the most important events in 2015 included the following:
. A legal