Disclosure of delayed confidential information on factors affecting the Bank's financial position

Getin Noble Bank S.A. (the “Bank”), pursuant to Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (“MAR”), makes publicly available the confidential information for which the Bank’s Management Board has made a decision to delay its disclosure to the public pursuant to Article 17(5) of the MAR (“Delayed Confidential Information”) and therefore, it submitted relevant requests to the Polish Financial Supervision Authority (the “Authority”) for consent to the delays in question, pursuant to Article 17(5)(d) of the MAR.

Below, the Bank publishes the Delayed Confidential Information as at 17 March 2020 and 24 March 2020, i.e. in accordance with the Bank’s knowledge at that time and the state of the facts on the date of the decision on its identification and delay.

“Getin Noble Bank Spółka Akcyjna (the “Issuer”, “Bank”) hereby discloses to the public the contents of Confidential Information identified on 17 March 2020, relating to:

a breach of the level of the total capital ratio referred to in Article 92 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (“CRR”), increased by an additional requirement in respect of own funds above the value resulting from the requirements calculated in accordance with the detailed principles set out in the CRR, as referred to in Article 138(1)(2a) of the Act of 29 August 1997 – Banking Law, whose value, according to the Bank’s estimates of 16 March 2020, was approx. 8.9%, i.e. almost 0.4 percentage points below the legally required level of 9.32%.
This is a result of only external factors which are independent of the operating activities of the Issuer and stem from the measures taken to minimise the effects of the spread of the COVID-19 pandemic.

In the case of this Bank, the reason for the breach of the level of the capital standard should primarily be identified as the unfavourable changes in the prices of Polish Treasury bonds, resulting from the decisions of the US Central Bank (FED) of 15 March 2020 (e.g. a reduction of the key interest rate to 0.0-0.25%), and a significant scale of the recently observed appreciation of Swiss franc as compared to Polish zloty, which translates to the increasing level of capital requirements in connection with the portfolio of mortgage loans held by the Bank in this currency with a risk weight of 150%.

In addition, the Bank points out that the macro scale of disturbances resulting from the spread of COVID-19 translates to an unprecedented volatility of the financial markets, including a volatility of currency rates and profitability of financial instruments. The scale of this volatility is of such significance that in the near future it may be decisive in respect of the high variability of the level of the capital ratio of the Bank.

The Bank is of the opinion that a medium-term scenario may reasonably be expected, where, following a response to the shock reactions on the financial markets, the valuation of debt instruments and currency rates would have a tendency to return to a state resembling the levels observed before the occurrence of the above-mentioned destabilising factors. This will take place, if the situation on the financial market in Poland is not affected by other factors of discrete nature, specifically related to the economic situation in our country.

With respect to the above-mentioned confidential information relating to the capital requirement, it should be underlined that the Issuer believes that both the revaluation of the portfolio of Treasury bonds and the depreciation of Polish zloty, as well as the resulting increase in the carrying amount of foreign currency mortgage loans will be reversible.

In addition, the Bank advises that in the course of the audit of the Bank’s financial statements for 2019, the Bank identified confidential information including issues related to the establishment/increase of provisions and write-offs in connection with:

1. the establishment of a portfolio provision for legal risk associated with mortgage and housing loan agreements indexed to CHF, in the amount of PLN 158.2 million, which will decrease the Bank’s result for Q4 of 2019 on a consolidated and non-consolidated basis;
2. the establishment of an additional provision for the costs related to the judgment of the Court of Justice of the European Union of 11 September 2019 in case C-383/18 concerning the right of the consumer to reduce the total cost of the loan in the event of its repayment before the time limit specified in the agreement, in the amount of PLN 101.6 million, which will decrease the Bank’s result for Q4 of 2019 on a consolidated and non-consolidated basis;
3. the creation of an additional write-off for the Bank’s investment in associates, in the amount of PLN 49.2 million, which will decrease the Bank’s result for Q4 of 2019 on a consolidated and non-consolidated basis.

These values are a result of the negotiations and arrangements between the Management Board of the Bank and the representatives of the auditor who examined the Bank’s financial statements for 2019, following which a final agreement was reached on 24 March 2020 as to the methodology assumptions and the results of evaluation of provisions and write-offs for the risks referred to above.

Until the end of the audit, the financial statements for 2019 may be changed. The planned date of publication of the interim report for 2019 is 3 April 2020.

Legal basis: Article 17(1) of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (MAR).

As a consequence of the Delayed Confidential Information, the estimated level of the capital requirement referred to above, calculated as on 27 March 2020, was: approx. 8.6%, i.e. almost 0.7 percentage points below the level of 9.32% required by law.

In addition, bearing in mind the consequences of the COVID-19 pandemic, the Bank advises that it will maintain its operational continuity and that all key processes and functions are uninterrupted. Solutions have been implemented to mitigate the epidemic risk for the employees and for the clients who use the network branches. At the moment, a significant number of the Bank’s employees carry out their duties on a remote basis or are dispersed across the offices of the Bank, which allows them to maintain safe working conditions. In addition, the Bank actively encourages its clients to use mobile applications and online banking.

The Bank monitors the current economic situation on an ongoing basis and makes decisions aimed to ensure the security and safety of all of its stakeholders, in particular its clients. The Bank takes active measures to adapt its functions to the changing environment as best as possible. However, it should be remembered that currently it is not possible to precisely assess the impact of the situation resulting from the COVID-19 pandemic, and that its scale largely depends on external factors which are beyond the control of the Bank.

With respect to the value of established provisions and write-offs, the Bank advises that these remain unchanged on the date of publication of this report.

Until the publication of this report, the applications submitted by the Bank pursuant to Article 17(5)(d) of the MAR have not been considered by the Commission.

Legal basis: Article 17(1), (5) of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 (MAR).