29. Expected credit losses
Estimates and assessments – applicable as of 1 January 2018
The allowance for expected credit losses is recognized in the financial statements in the following manner:
- Financial assets measured at amortized cost: the allowance reduces the gross carrying amount of the financial asset; changes in the allowances amount are recognized in the income statement;
- Off-balance sheet liabilities in respect of loans and financial guarantees: the allowance is presented as a provision under liabilities; changes in the provisions amount are recognized in the income statement;
- Financial instruments measured at fair value through other comprehensive income: the carrying amount of assets recognized at fair value is not additionally decreased by the allowances; however, each change in the measurement is divided into the impairment component, which is recognized in the income statement, and the component relating to other changes in the fair value measurement, which is recognized in other comprehensive income;
- Financial assets measured at fair value through profit and loss: no allowances for expected credit losses are recognized.
Annual report
2018
2018
Estimates and judgements – impairment allowances
With regard to impairment, the Group applies IFRS 9 which is based on the concept of expected losses. Impairment allowances for exposure reflect 12-month or lifetime expected credit losses on such exposures for a given financial asset.
The Group reviews the exposure on a monthly basis in order to verify evidence of impairment or evidence of a significant increase in the credit risk, and allocates them to one of 3 stages, accordingly:
Stage 1 – exposures in which the credit risk is not significantly higher than upon initial recognition and no evidence of impairment is found;
Stage 2 – exposures in which the credit risk is significantly higher than upon initial recognition, but no evidence of impairment is found;
Stage 3 – assets in respect of which evidence of impairment is recognized, including assets granted or purchased with evidence of impairment recognized (upon being granted or purchased).
With regard to impairment, the Group applies IFRS 9 which is based on the concept of expected losses. The method for estimating allowances for expected credit losses is described in Note 4 “IFRS 9 Financial Instruments”.
| By measurement model (excluding adjustments relating to fair value hedge accounting) 31.12.2018 |
Gross amount – assets with no significant increase in credit risk since initial recognition (stage 1) | Allowances for expected credit losses (stage 1) |
Gross amount – assets with a significant increase in credit risk since initial recognition, but not credit-impaired (stage 2) | Allowances for expected credit losses (stage 2) |
Gross amount – credit-impaired assets (stage 3) |
of which: gross assets with impairment | Allowances for expected credit losses (stage 3) |
Total gross amount | Total allowances for expected credit losses | Total, net |
| Measured at fair value through OCI | ||||||||||
| securities | 51 709 | – | 388 | – | 471 | 471 | (10) | 52 568 | (10) | 52 558 |
| Treasury bonds | 40 363 | – | – | – | – | – | 40 363 | – | 40 363 | |
| other | 11 346 | – | 388 | – | 471 | 471 | (10) | 12 205 | (10) | 12 195 |
| Total | 51 709 | – | 388 | – | 471 | 471 | (10) | 52 568 | (10) | 52 558 |
| of which: purchased or originated credit-impaired assets (POCI) | – | – | – | – | 471 | 471 | (10) | 471 | (10) | 461 |
| Measured at amortized cost | ||||||||||
| amounts due from banks | 7 662 | (1) | – | – | – | – | – | 7 662 | (1) | 7 661 |
| securities | 8 437 | (15) | 59 | (8) | 3 | 3 | (3) | 8 499 | (26) | 8 473 |
| Treasury bonds | 2 361 | (3) | – | – | – | – | – | 2 361 | (3) | 2 358 |
| other | 6 076 | (12) | 59 | (8) | 3 | 3 | (3) | 6 138 | (23) | 6 115 |
| loans and advances to customers | 194 391 | (566) | 16 168 | (1 249) | 11 450 | 11 111 | (6 389) | 222 009 | (8 204) | 213 805 |
| housing | 106 561 | (54) | 5 960 | (538) | 2 260 | 2 201 | (1 420) | 114 781 | (2 012) | 112 769 |
| business | 52 638 | (318) | 5 703 | (320) | 6 569 | 6 406 | (3 354) | 64 910 | (3 992) | 60 918 |
| consumer | 23 664 | (160) | 1 786 | (311) | 1 831 | 1 829 | (1 240) | 27 281 | (1 711) | 25 570 |
| receivables in respect of repurchase agreements | 51 | – | – | – | – | – | 51 | – | 51 | |
| finance lease receivables | 11 477 | (34) | 2 719 | (80) | 790 | 675 | (375) | 14 986 | (489) | 14 497 |
| other financial assets | 2 825 | – | – | – | 97 | 97 | (97) | 2 922 | (97) | 2 825 |
| Total | 213 315 | (582) | 16 227 | (1 257) | 11 550 | 11 211 | (6 489) | 241 092 | (8 328) | 232 764 |
| of which: purchased or originated credit-impaired assets (POCI) | – | – | – | – | 674 | 674 | (131) | 674 | (131) | 543 |
| Total | 265 024 | (582) | 16 615 | (1 257) | 12 021 | 11 682 | (6 499) | 293 660 | (8 338) | 285 322 |
| By type of financial assets (excluding adjustments relating to fair value hedge accounting) 31.12.2018 |
Gross amount – assets with no significant increase in credit risk since initial recognition (stage 1) | Allowances for expected credit losses (stage 1) |
Gross amount – assets with a significant increase in credit risk since initial recognition, but not credit-impaired (stage 2) | Allowances for expected credit losses (stage 2) |
Gross amount – credit-impaired assets (stage 3) |
of which: gross assets with impairment | Allowances for expected credit losses (stage 3) |
Total gross amount | Total allowances for expected credit losses | Total, net |
| amounts due from banks | 7 662 | (1) | – | – | – | – | – | 7 662 | (1) | 7 661 |
| securities | 60 146 | (15) | 447 | (8) | 474 | 474 | (13) | 61 067 | (36) | 61 031 |
| Treasury bonds | 42 724 | (3) | – | – | – | – | – | 42 724 | (3) | 42 721 |
| other | 17 422 | (12) | 447 | (8) | 474 | 474 | (13) | 18 343 | (33) | 18 310 |
| loans and advances to customers | 194 391 | (566) | 16 168 | (1 249) | 11 450 | 11 111 | (6 389) | 222 009 | (8 204) | 213 805 |
| housing | 106 561 | (54) | 5 960 | (538) | 2 260 | 2 201 | (1 420) | 114 781 | (2 012) | 112 769 |
| business | 52 638 | (318) | 5 703 | (320) | 6 569 | 6 406 | (3 354) | 64 910 | (3 992) | 60 918 |
| consumer | 23 664 | (160) | 1 786 | (311) | 1 831 | 1 829 | (1 240) | 27 281 | (1 711) | 25 570 |
| receivables in respect of repurchase agreements | 51 | – | – | – | – | – | – | 51 | – | 51 |
| finance lease receivables | 11 477 | (34) | 2 719 | (80) | 790 | 675 | (375) | 14 986 | (489) | 14 497 |
| other financial assets | 2 825 | – | – | – | 97 | 97 | (97) | 2 922 | (97) | 2 825 |
| Total | 265 024 | (582) | 16 615 | (1 257) | 12 021 | 11 682 | (6 499) | 293 660 | (8 338) | 285 322 |
| of which: purchased or originated credit-impaired assets (POCI) | – | – | – | – | 1 145 | 1 145 | (141) | 1 145 | (141) | 1 004 |
| Loan Quality Ratios (excluding adjustments relating to fair value hedge accounting) | 31.12.2018 | 01.01.2018 |
|---|---|---|
| Share of impaired exposures1 | 4.9% | 5.3% |
| Coverage ratio of impaired loans2 | ||
| Share of loans overdue for more than 90 days in gross loans and advances to customers | 3.2% | 3.9% |
1 The share of impaired exposures was determined for loans and securities, excluding Treasury bonds, measured at amortized cost and loans measured at fair value through other comprehensive income, as the gross amount of impaired exposures to the total gross amount of loans and securities, excluding Treasury bonds measured at amortized cost and loans measured at fair value through other comprehensive income, less contractual (non-performing) interest as at 1 January 2018 covered by an impairment allowance for stage 3.
2 The coverage ratio for impaired loans was determined as the ratio of total allowances for expected credit losses for loans and securities, excluding Treasury bonds measured at amortized cost and loans measured at fair value through other comprehensive income, less contractual (non-performing) interest as at 1 January 2018 covered by an impairment allowance for stage 3, to the gross amount of impaired exposures from these portfolios.
| By measurement model (excluding adjustments relating to fair value hedge accounting) 01.01.2018 |
Gross amount – assets with no significant increase in credit risk since initial recognition (stage 1) | Allowances for expected credit losses (stage 1) |
Gross amount – assets with a significant increase in credit risk since initial recognition, but not credit-impaired (stage 2) | Allowances for expected credit losses (stage 2) |
Gross amount – credit-impaired assets (stage 3) |
of which: contractual (non-performing) interest subject to allowance | of which: assets with impairment, gross, net of contractual (non-working) interest covered by an allowance | Allowances for expected credit losses (stage 3) |
Total gross amount | Total allowances for expected credit losses | Total, net |
| Measured at fair value through OCI | |||||||||||
| securities | 46 765 | – | – | – | 473 | 2 | 473 | (15) | 47 238 | (15) | 47 223 |
| Treasury bonds | 33 740 | – | – | – | – | – | – | – | 33 740 | – | 33 740 |
| other | 13 025 | – | – | – | 473 | 2 | 473 | (15) | 13 498 | (15) | 13 483 |
| Total | 46 765 | – | – | – | 473 | 2 | 473 | (15) | 47 238 | (15) | 47 223 |
| of which: purchased or originated credit-impaired assets (POCI) | – | – | – | – | 473 | 2 | 473 | (15) | 473 | (15) | 458 |
| Measured at amortized cost | |||||||||||
| amounts due from banks | 5 233 | – | – | – | – | – | – | – | 5 233 | – | 5 233 |
| securities | 6 194 | (14) | – | – | – | – | – | 6 194 | (14) | 6 180 | |
| Treasury bonds | 1 812 | – | – | – | – | – | – | – | 1 812 | – | 1 812 |
| other | 4 382 | (14) | – | – | – | – | – | – | 4 382 | (14) | 4 368 |
| loans and advances to customers | 180 561 | (490) | 14 830 | (1 078) | 14 656 | 2 250 | 11 341 | (9 085) | 210 047 | (10 653) | 199 394 |
| housing | 100 206 | (55) | 5 016 | (435) | 3 616 | 733 | 2 812 | (2 540) | 108 838 | (3 030) | 105 808 |
| business | 47 757 | (278) | 5 870 | (369) | 7 857 | 1 153 | 5 959 | (4 496) | 61 484 | (5 143) | 56 341 |
| consumer | 21 661 | (135) | 1 608 | (210) | 2 391 | 364 | 2 014 | (1 717) | 25 660 | (2 062) | 23 598 |
| receivables in respect of repurchase agreements | 902 | – | – | – | – | – | – | – | 902 | – | 902 |
| finance lease receivables | 10 035 | (22) | 2 336 | (64) | 792 | – | 556 | (332) | 13 163 | (418) | 12 745 |
| other financial assets | 2 378 | (1) | – | – | 99 | – | 99 | (99) | 2 477 | (100) | 2 377 |
| Total | 194 366 | (505) | 14 830 | (1 078) | 14 755 | 2 250 | 11 440 | (9 184) | 223 951 | (10 767) | 213 184 |
| of which: purchased or originated credit-impaired assets (POCI) | – | – | – | – | 363 | – | 363 | (115) | 363 | (115) | 248 |
| Total | 241 131 | (505) | 14 830 | (1 078) | 15 228 | 2 252 | 11 913 | (9 199) | 271 189 | (10 782) | 260 407 |
| BY TYPE OF FINANCIAL ASSETS (excluding adjustments relating to fair value hedge accounting) 01.01.2018 |
Gross amount – assets with no significant increase in credit risk since initial recognition (stage 1) | Allowances for expected credit losses (stage 1) |
Gross amount – assets with a significant increase in credit risk since initial recognition, but not credit-impaired (stage 2) | Allowances for expected credit losses (stage 2) |
Gross amount – credit-impaired assets (stage 3) |
of which: contractual (non-performing) interest subject to allowance | of which: assets with impairment, gross, net of contractual (non-working) interest covered by an allowance | Allowances for expected credit losses (stage 3) |
Total gross amount | Total allowances for expected credit losses | Total, net |
| amounts due from banks | – | – | – | – | |||||||
| securities | 52 959 | (14) | – | – | 473 | 2 | 473 | (15) | 53 432 | (29) | 53 403 |
| Treasury bonds | 35 552 | – | – | – | – | – | – | – | 35 552 | – | 35 552 |
| other | 17 407 | (14) | – | – | 473 | 2 | 473 | (15) | 17 880 | (29) | 17 851 |
| loans and advances to customers | 180 561 | (490) | 14 830 | (1 078) | 14 656 | 2 250 | 11 341 | (9 085) | 210 047 | (10 653) | 199 394 |
| housing | 100 206 | (55) | 5 016 | (435) | 3 616 | 733 | 2 812 | (2 540) | 108 838 | (3 030) | 105 808 |
| business | 47 757 | (278) | 5 870 | (369) | 7 857 | 1 153 | 5 959 | (4 496) | 61 484 | (5 143) | 56 341 |
| consumer | 21 661 | (135) | 1 608 | (210) | 2 391 | 364 | 2 014 | (1 717) | 25 660 | (2 062) | 23 598 |
| receivables in respect of repurchase agreements | 902 | – | – | – | – | – | – | – | 902 | – | 902 |
| finance lease receivables | 10 035 | (22) | 2 336 | (64) | 792 | – | 556 | (332) | 13 163 | (418) | 12 745 |
| other financial assets | 2 378 | (1) | – | – | 99 | – | 99 | (99) | 2 477 | (100) | 2 377 |
| Total | 241 131 | (505) | 14 830 | (1 078) | 15 228 | 2 252 | 11 913 | (9 199) | 271 189 | (10 782) | 260 407 |
| of which: purchased or originated credit-impaired assets (POCI) | – | – | – | – | 836 | 2 | 836 | (130) | 836 | (130) | 706 |
| Changes in allowances for expected credit losses on financial assets by measurement model | As at 31.12.2017 |
Changes due to IFRS 9 implementation1 | Fair value as at 01.01.2018 (changed) |
Increase due to recognition and purchase | Decrease due to derecognition | Changes due to changes in credit risk, net | Changes due to lengthening the loss recognition horizon from 12 months to period to maturity | Changes due to shortening the loss recognition horizon from 12 months to period to maturity | Changes due to modification without derecognition, net | Decrease of impairment allowances due to write-off | Changes due to in foreign exchange differences on translation of foreign entities | Other changes, including foreign exchange differences | As at 31.12.2018 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Available-for-sale investment securities | 326 | (326) | – | – | – | – | – | – | – | – | – | – | – |
| Measured at fair value through OCI | |||||||||||||
| amounts due from banks | – | – | – | – | – | – | – | – | – | – | – | – | – |
| securities | – | 15 | 15 | 4 | (10) | 1 | 5 | – | – | (3) | – | (2) | 10 |
| Total | – | 15 | 15 | 4 | (10) | 1 | 5 | – | – | (3) | – | (2) | 10 |
| amounts due from banks | – | – | – | – | – | – | – | – | – | – | 1 | 1 | |
| securities | – | 14 | 14 | 10 | – | – | – | – | – | – | 1 | 1 | 26 |
| loans and advances to customers | 7 823 | 2 830 | 10 653 | 617 | (1 563) | 1 958 | 743 | (535) | 72 | (3 674) | 19 | (86) | 8 204 |
| housing | 1 972 | 1 058 | 3 030 | 35 | (477) | 534 | 212 | (148) | 9 | (1 081) | 4 | (106) | 2 012 |
| business | 3 705 | 1 438 | 5 143 | 331 | (527) | 744 | 202 | (296) | 58 | (1 749) | 11 | 75 | 3 992 |
| consumer | 1 686 | 376 | 2 062 | 106 | (426) | 640 | 312 | (75) | 5 | (830) | 3 | (86) | 1 711 |
| securities | 10 | (10) | – | – | – | – | – | – | – | – | – | – | – |
| finance lease receivables | 450 | (32) | 418 | 145 | (133) | 40 | 17 | (16) | – | (14) | 1 | 31 | 489 |
| other financial assets | 100 | – | 100 | 1 | – | – | – | – | (5) | – | 1 | 97 | |
| Total | 7 923 | 2 844 | 10 767 | 628 | (1 563) | 1 958 | 743 | (535) | 72 | (3 679) | 20 | (83) | 8 328 |
| Total allowances for expected credit losses on financial assets | 8 249 | 2 533 | 10 782 | 632 | (1 573) | 1 959 | 748 | (535) | 72 | (3 682) | 20 | (85) | 8 338 |
| Changes in allowances for expected credit losses on financial assets by asset type | As at 31.12.2017 |
Changes due to IFRS 9 implementation1 | Fair value as at 01.01.2018 (changed) |
Increase due to recognition and purchase | Decrease due to derecognition | Changes due to changes in credit risk, net | Changes due to lengthening the loss recognition horizon from 12 months to period to maturity | Changes due to shortening the loss recognition horizon from 12 months to period to maturity | Changes due to modification without derecognition, net | Decrease of impairment allowances due to write-off | Changes due to in foreign exchange differences on translation of foreign entities | Other changes, including foreign exchange differences | As at 31.12.2018 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| amounts due from banks | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
| securities | 326 | (297) | 29 | 14 | (10) | 1 | 5 | – | – | (3) | 1 | (1) | 36 |
| loans and advances to customers | 7 823 | 2 830 | 10 653 | 617 | (1 563) | 1 958 | 743 | (535) | 72 | (3 674) | 19 | (86) | 8 204 |
| housing | 1 972 | 1 058 | 3 030 | 35 | (477) | 534 | 212 | (148) | 9 | (1 081) | 4 | (106) | 2 012 |
| business | 3 705 | 1 438 | 5 143 | 331 | (527) | 744 | 202 | (296) | 58 | (1 749) | 11 | 75 | 3 992 |
| consumer | 1 686 | 376 | 2 062 | 106 | (426) | 640 | 312 | (75) | 5 | (830) | 3 | (86) | 1 711 |
| securities | 10 | (10) | – | – | – | – | – | – | – | – | – | – | – |
| finance lease receivables | 450 | (32) | 418 | 145 | (133) | 40 | 17 | (16) | – | (14) | 1 | 31 | 489 |
| other financial assets | 100 | – | 100 | 1 | – | – | – | – | – | (5) | – | 1 | 97 |
| Total allowances for expected credit losses on financial assets | 8 249 | 2 533 | 10 782 | 632 | (1 573) | 1 959 | 748 | (535) | 72 | (3 682) | 20 | (85) | 8 338 |
1 In respect of impairment recognized for loans of PLN 777 million, in respect of non-performing interest recognized in the gross carrying amount of PLN 2 480 million, in respect of decreasing write-downs on initial loss for POCI assets of PLN 437 million, and in respect of releasing write-downs on securities of PLN 287 million.
| Changes in gross carrying amounts of financial instruments | Carrying amount, gross as at 31.12.2017 |
Changes due to IFRS 9 implementation at gross carrying amount | Carrying amount, gross as at 01.01.2018 (restated) |
Changes on financial instruments originated or purchased | Increase due to utilization of a limit or disbursement of tranches | Decrease due to repayment | Changes on modification resulting from financial assets cash flows agreements nor resulting in derecognition of the financial instruments | Changes due to derecognition of financial instruments, including sale | Decrease due to write-off | Decrease due to impairment in connection with a write-down | Changes for exposures with the loss recognition horizon lengthened from 12 months to period to maturity | Changes for exposures with loss recognition horizon shortened from period to maturity to 12 months | Other changes, including foreign exchange differences | Carrying amount, gross as at 31.12.2018 |
| Available-for-sale investment securities | 43 675 | (43 675) | – | – | – | – | – | – | – | – | – | – | – | |
| Measured at fair value through OCI | ||||||||||||||
| securities | – | 47 238 | 47 238 | 269 204 | – | (266 385) | – | (445) | – | (3) | (2) | 2 961 | 52 568 | |
| Total | – | 47 238 | 47 238 | 269 204 | – | (266 385) | – | (445) | – | (3) | (2) | – | 2 961 | 52 568 |
| Measured at amortized cost | ||||||||||||||
| amounts due from banks | 5 233 | – | 5 233 | 6 006 | 831 | (4 230) | – | (185) | – | – | – | – | 7 | 7 662 |
| securities | – | 6 194 | 6 194 | 3 033 | – | (925) | – | (150) | – | – | – | – | 347 | 8 499 |
| loans and advances to customers (excluding adjustments relating to fair value hedge accounting) | 213 452 | (3 405) | 210 047 | 45 364 | 21 340 | (50 898) | (626) | (4 677) | (1 682) | (1 980) | (202) | (2 518) | 7 841 | 222 009 |
| housing | 108 163 | 675 | 108 838 | 14 194 | 3 966 | (16 233) | 80 | (960) | (566) | (515) | (120) | (374) | 6 471 | 114 781 |
| business | 60 497 | 987 | 61 484 | 15 072 | 14 868 | (22 572) | (19) | (1 554) | (583) | (1 154) | (9) | (1 916) | 1 293 | 64 910 |
| consumer | 26 276 | (616) | 25 660 | 9 580 | 2 506 | (8 636) | 13 | (785) | (519) | (311) | (73) | (228) | 74 | 27 281 |
| securities | 4 378 | (4 378) | – | – | – | – | – | – | – | – | – | – | – | |
| receivables in respect of repurchase agreements | 902 | – | 902 | 51 | (902) | – | – | – | – | – | – | – | 51 | |
| finance lease receivables | 13 236 | (73) | 13 163 | 6 467 | (2 555) | (700) | (1 378) | (14) | 3 | 14 986 | ||||
| other financial assets | 2 377 | 100 | 2 477 | 2 924 | (2 477) | – | – | – | – | – | (2) | 2 922 | ||
| Total | 221 062 | 2 889 | 223 951 | 57 327 | 22 171 | (58 530) | (626) | (5 012) | (1 682) | (1 980) | (202) | (2 518) | 8 193 | 241 092 |
| Total changes in gross carrying amounts of financial instruments | 264 737 | 6 452 | 271 189 | 326 531 | 22 171 | (324 915) | (626) | (5 457) | (1 682) | (1 983) | (204) | (2 518) | 11 154 | 293 660 |
The total amount of purchased or originated credit-impaired financial assets as at 31 December 2018 amounted to PLN 1 004 million (PLN 706 million as at 1 January 2018).
Principles of classifying financial assets in POCI categories are described in Note 4.
| Purchased or originated credit-impaired financial assets (POCI) – 31.12.2018 | Gross amount | Impairment allowances | Net amount |
| Securities | 471 | (10) | 461 |
| measured at fair value through other comprehensive income | 471 | (10) | 461 |
| Loans and advances to customers | 674 | (131) | 543 |
| measured at amortized cost | 674 | (131) | 543 |
| Total | 1 145 | (141) | 1 004 |
| Purchased or originated credit-impaired financial assets (POCI) – 01.01.2018 | Gross amount | Impairment allowances | Net amount |
| Securities | 473 | (15) | 458 |
| measured at fair value through other comprehensive income | 473 | (15) | 458 |
| Loans and advances to customers | 363 | (115) | 248 |
| measured at amortized cost | 363 | (115) | 248 |
| Total | 836 | (130) | 706 |
| Changes in impairment allowances for purchased or originated credit-impaired financial assets (POCI) in 2018 | As at 01.01.2018 | Increase due to recognition and purchase | Decrease due to derecognition | Zmiany wynikające ze zmiany ryzyka kredytowego (netto) | Decrease in impairment allowances due to write-off | Other adjustments | Wartość na 31.12.2018 roku |
| Securities | 15 | – | – | (3) | – | (2) | 10 |
| measured at fair value through other comprehensive income | 15 | – | – | (3) | – | (2) | 10 |
| Loans and advances to customers | 115 | 2 | (50) | 77 | (26) | 13 | 131 |
| measured at amortized cost | 115 | 2 | (50) | 77 | (26) | 13 | 131 |
| Total | 130 | 2 | (50) | 74 | (26) | 11 | 141 |