61. Concentration of credit risk at the Group
The Group defines credit concentration risk as the risk arising from a considerable exposure to single entities or groups of entities whose repayment capacity depends on a common risk factor. The Group analyses the risk of concentration towards:
2018
- the largest entities;
- the largest groups;
- industry sectors;
- geographical regions;
- currencies;
- exposures secured with a mortgage.
Concentration by the largest entities
The Polish Banking Law sets the limits of the maximum exposure of the Bank which are translated to the Group. The risk of concentration of exposures to individual customers and groups of related customers is monitored in accordance with Regulation of the European Parliament and the Council (EU) No. 575/2013 on prudential requirements for credit institutions and investment firms (CRR), according to which the Group shall not assume an exposure to a customer or a group of related customers whose value exceeds 25% of the value of its eligible capital.
As at 31 December 2018 and 31 December 2017, concentration limits were not exceeded. As at 31 December 2018, the largest exposure to a single entity accounted for 7,6% of the recognized consolidated capital (8,6% as at 31 December 2017).
The Group’s exposure to the 20 largest non-banking customers:
| 31.12.2018 | 31.12.2017 | ||||
|---|---|---|---|---|---|
| No. | Credit exposures include loans, advances, purchased debt, discounted bills of exchange, realized guarantees, interest receivable and off-balance sheet and capital exposures1 | Share in the loan portfolio, including off-balance sheet and capital exposures | No. | Credit exposures include loans, advances, purchased debt, discounted bills of exchange, realized guarantees, interest receivable and off-balance sheet and capital exposures* | Share in the loan portfolio, including off-balance sheet and capital exposures |
| 1. | 2 859 | 0.96% | 1. | 2 936 | 1.06% |
| 2. | 2 777 | 0.93% | 2. | 2 856 | 1.03% |
| 3. | 2 710 | 0.91% | 3. | 2 450 | 0.88% |
| 4. | 2 450 | 0.82% | 4. | 2 332 | 0.84% |
| 5. | 2 274 | 0.76% | 5. | 1 895 | 0.68% |
| 6. | 2 169 | 0.73% | 6. | 1 747 | 0.63% |
| 7. | 1 899 | 0.64% | 7. | 1 602 | 0.58% |
| 8. | 1 898 | 0.64% | 8. | 1 566 | 0.56% |
| 9. | 1 669 | 0.56% | 9. | 1 322 | 0.48% |
| 10. | 1 539 | 0.52% | 10. | 1 101 | 0.40% |
| 11. | 958 | 0.32% | 11. | 819 | 0.30% |
| 12. | 783 | 0.26% | 12. | 796 | 0.29% |
| 13. | 776 | 0.26% | 13. | 746 | 0.27% |
| 14. | 747 | 0.25% | 14. | 724 | 0.26% |
| 15. | 746 | 0.25% | 15. | 708 | 0.26% |
| 16. | 743 | 0.25% | 16. | 682 | 0.25% |
| 17. | 740 | 0.25% | 17. | 655 | 0.24% |
| 18. | 721 | 0.24% | 18. | 650 | 0.23% |
| 19. | 708 | 0.24% | 19. | 636 | 0.23% |
| 20. | 705 | 0.24% | 20. | 566 | 0.20% |
| Total | 29 871 | 10.03% | Total | 26 789 | 9.66% |
1 Off-balance sheet exposure includes the liability arising from derivative transactions in the amount equal to their balance sheet equivalent.
Concentration by the largest groups
The largest concentration of the PKO Bank Polski SA’s Group to a group of related borrowers amounted to 1,24 of the Group’s loan portfolio (1,13% as at 31 December 2017). Only the clients of PKO Bank Polski SA are included in the five largest group.
As at 31 December 2018, the largest concentration of the Group’s exposures to the group amounted to 9,7% of the eligible capital (9,2% as at 31 December 2017).
The Group’s exposure to the 5 largest capital groups:
| 31.12.2018 | 31.12.2017 | ||||
|---|---|---|---|---|---|
| No. | Credit exposures include loans, advances, purchased debt, discounted bills of exchange, realized guarantees, interest receivable and off-balance sheet and capital exposures1 | Share in the loan portfolio, including off-balance sheet and capital exposures | No. | Credit exposures include loans, advances, purchased debt, discounted bills of exchange, realized guarantees, interest receivable and off-balance sheet and capital exposures* | Share in the loan portfolio, including off-balance sheet and capital exposures |
| 1. | 3 683 | 1.24% | 1. | 3 122 | 1.13% |
| 2. | 3 160 | 1.06% | 2. | 3 064 | 1.11% |
| 3. | 2 863 | 0.96% | 3. | 2 336 | 0.84% |
| 4. | 2 446 | 0.82% | 4. | 2 169 | 0.78% |
| 5. | 2 280 | 0.77% | 5. | 1 989 | 0.72% |
| Total | 14 432 | 4.85% | Total | 12 680 | 4.57% |
1 Off-balance sheet exposure includes the liability arising from derivative transaction in the amount equal to their balance sheet equivalent.
Concentration by industry
An increase in the Group’s exposure to business entities has been observed. Entities operating in the “Financial and insurance activities” industry prevail in the Group’s structure by industry.
The structure of exposure to industry sectors as at 31 December 2018 and 31 December 2017 is shown in the table below:
| Section | Section name | 31.12.2018 | 31.12.2017 | ||
|---|---|---|---|---|---|
| Exposure | Number of entities | Exposure | Number of entities | ||
| K | Financial and insurance activities | 16.77% | 2.07% | 15.01% | 2.07% |
| C | Industrial processing | 15.92% | 11.40% | 14.76% | 11.31% |
| L | Real estate administration | 10.48% | 14.45% | 10.61% | 16.61% |
| G | Wholesale and retail trade, repair of motor vehicles | 11.61% | 23.00% | 12.82% | 23.33% |
| O | Public administration and national defence, obligatory social security | 12.93% | 0.26% | 12.56% | 0.32% |
| Other exposures | 32.29% | 48.82% | 34.24% | 46.36% | |
| Total | 100.00% | 100.00% | 100.00% | 100.00% | |
Concentration by geographical regions
The Group’s loan portfolio is diversified in terms of geographical concentration.
The structure of the loan portfolio by geographical regions is identified by the Group depending on the customer type – it is different for the Retail Market Area (ORD) and for the Corporate and Investment Banking Area (OKI).
In 2018, the largest concentration of the ORD loan portfolio was in the Warsaw region and Katowice region (these two regions account for around 27% of the total ORD portfolio) (26% as at 31 December 2017).
| Concentration of credit risk by geographical region for retail customers | 31.12.2018 | 31.12.2017 |
| Warsaw region | 15.55% | 15.09% |
| Katowice region | 11.22% | 10.98% |
| Poznań region | 9.84% | 9.85% |
| Kraków region | 8.82% | 8.94% |
| Łódź region | 8.20% | 8.36% |
| Wrocław region | 9.62% | 9.30% |
| Gdańsk region | 8.36% | 8.50% |
| Bydgoszcz region | 6.96% | 7.17% |
| Lublin region | 6.80% | 6.90% |
| Białystok region | 6.42% | 6.45% |
| Szczecin region | 6.14% | 6.11% |
| Head Office | 0.55% | 0.81% |
| other | 0.56% | 0.76% |
| foreign countries | 0.96% | 0.78% |
| Total | 100.00% | 100.00% |
Both in 2018 and 2017, the largest concentration of the OKI loan portfolio was in the central macroregion which accounted for 44% of the OKI portfolio.
| Concentration of credit risk by geographical region for corporate customers | 31.12.2018 | 31.12.2017 |
| Head Office | 1.34% | 0.28% |
| central macroregion | 43.71% | 44.09% |
| northern macroregion | 10.33% | 10.69% |
| western macroregion | 11.18% | 10.99% |
| southern macroregion | 9.51% | 10.08% |
| south-eastern macroregion | 10.25% | 11.60% |
| north-eastern macroregion | 5.08% | 4.99% |
| south-western macroregion | 7.72% | 6.59% |
| other | 0.00% | 0.00% |
| foreign countries | 0.88% | 0.69% |
| Total | 100.00% | 100.00% |
Concentration of credit risk by currency
As at 31 December 2018 the share of exposures in convertible currencies other than PLN in the whole of the Group’s portfolio amounted to 19% and was the same as in 2017.
Exposures in CHF relating to the Bank’s loan portfolio represent the largest part of the Group’s currency exposure. The share of loans in CHF accounted for approx. 52% of the Group’s loan portfolio as at the end of 2018, which represents a decrease of approx. 5 p.p. compared with the end of 2017. Loans in EUR are the second largest group of loans denominated in foreign currencies. As at the end of 2018, their share in the entire loan portfolio was 8%, and 42% in the foreign currency portfolio.
| Concentration of credit risk by currency | 31.12.2018 | 31.12.2017 |
|---|---|---|
| PLN | 81.06% | 80.77% |
| Foreign currencies, of which: | 18.94% | 19.23% |
| CHF | 9.80% | 10.94% |
| EUR | 7.99% | 6.92% |
| USD | 1.05% | 0.88% |
| UAH | 0.02% | 0.39% |
| GBP | 0.04% | 0.04% |
| Total | 100.00% | 100.00% |
Other types of concentration
The Group analyses the structure of its housing loan portfolio by LTV levels. Both in 2018 and in 2017, the largest concentration was in the LTV range of 61%–80%.
| Loan portfolio structure by LTV | 31.12.2018 | 31.12.2017 |
|---|---|---|
| 0% – 40% | 20.72% | 19.07% |
| 41%-60% | 26.03% | 22.72% |
| 61% – 80% | 38.55% | 33.80% |
| 81% – 90% | 10.25% | 16.21% |
| 91% – 100% | 1.95% | 4.02% |
| powyżej 100% | 2.50% | 4.18% |
| Total | 100.00% | 100.00% |
The average LTV of the portfolio of home loans amounted to 59.22% as at 31 December 2018 and 62.38% as at 31 December 2017.