2011 Annual Report

I. 2011 – 25th anniversary of BRE Bank

I.1. From a small corporate bank to a large universal bank

BRE Bank was formed twenty-five years ago. The Resolution of the Council of Ministers setting up Bank Rozwoju Eksportu SA (Export Development Bank, the Bank's original name) was dated June 20, 1986, while the start of operations dates back to January 2, 1987. Since then, from a small specialist, Bank has grown to become the third largest universal bank in Poland in terms of assets value, loans to customers and own funds.

Since its inception, the Bank focussed on providing innovative services and products that would distinguish it from the group of large, incumbent institutions that dominated the market at the time. In the early years, the Bank concentrated on granting foreign currency loans to Polish companies for the purchase of investment goods and technologies. Over time, the product and service offer for companies was expanded to include foreign trade financing, a variety of deposits and loans, derivative instruments or cash management, allowing BRE Bank to become a fully corporate bank capable of competing with the largest and established players on the market.

In 1998, the Bank launched its Private Banking service for high net worth individuals predominantly representing the existing corporate clients of the Bank.   

The Bank’s business profile changed substantially in late 2000 when BRE Bank launched its retail banking arm: mBank, the first Internet bank in Poland for mass clients and micro-enterprises. With time, small outlets called mKiosks, and larger Financial Centres were opened to support the Internet communication channel. In 2001, BRE Bank made another step towards retail banking by launching MultiBank, which targets demanding affluent clients with a strong need for personalised service and advice. MultiBank uses both remote channels and a network of local branches.  

The domestic success of mBank meant that in 2007, the retail banking arm expanded abroad: mBank outlets were set up in the Czech Republic and Slovakia.

Today, BRE Bank is a universal bank. It services large corporations, small and medium-sized enterprises (SMEs), micro-enterprises, and private individuals. In the retail area it serves a wide range of clients, from the most affluent Private Banking clients to students. BRE Bank’s expansion was accompanied by setting-up and by acquisitions of several companies offering financial products and services complementary to the Bank’s offer and catering to the needs of the Bank’s clients. Together with the Bank, they form BRE Bank Group. The most important subsidiaries include: BRE Leasing, BRE Faktoring (formerly Polfactor), Dom Inwestycyjny BRE Banku, BRE Bank Hipoteczny, BRE Ubezpieczenia and BRE Wealth Management.

At the end of 2011, BRE Bank provided its services to about 14 thousand corporate clients and to almost 3.9 million retail clients. Corporate clients are serviced through 29 Corporate Branches and 19 Corporate Bureaus located across the country and through the iBRE Internet platform. Retail clients rely predominantly on the Bank’s integrated Internet platform, telephone and mobile banking channels supported by a network of about 240 outlets.

I.2. Short History of BRE Bank

1986 - founding of the Bank

In June, Bank Rozwoju Eksportu is set up as a joint-stock company; on  December 11, the Bank is registered. The main shareholders of the Bank include: the Foreign Trade Ministry (41% of shares), the Finance Ministry (10%), the National Bank of Poland (10%), and Bank Handlowy w Warszawie S.A., Bank PKO S.A. and Bank Gospodarki Żywnościowej which hold 10% of shares in total.  29% of shares are covered by the first post-war public offering addressed to foreign trade centres, state-owned enterprises, service companies and cooperatives. The Bank's capital amounts to PLN 3,550 million (PLN 355 thousand after denomination).

The Bank's initial activity concentrated on collecting funds in domestic and foreign currencies for the financing of investments for the centrally steered economy. Krzysztof Szwarc is appointed President of the Management Board of the Bank. The first headquarters of the Bank are located in the Ministry of Finance at Świętokrzyska street.

1987 - first operations and contacts

In early January, the Bank starts its operations by offering export loans to selected companies. From May until the end of 1989, the Bank organises currency tenders, thus providing Polish companies with wide access to convertible currencies.  Relations with foreign banks are being established - 30 banks grant the Bank limits for confirming import letters of credit while cooperation with 50 banks involves foreign currency operations.

1988 – towards competitive advantage

The Bank expands its operations by supporting pro-export projects of the Polish economy with loans. Gradually, it becomes a  commercial bank with a comprehensive corporate banking offer.

The Bank has already more than 100 employees who systematically undergo training in Poland and abroad. This gives the Bank a competitive advantage when entering the period of profound social and economic transformations in Poland.

1989 - credit line facilities from the World Bank and IFC

BRE Bank is the first bank in Poland to be granted credit line facilities by the International Finance Corporation and the World Bank, earmarked for the development of exports and the food processing industry in the private and cooperative sectors. The Export Development Fund is also created, and BRE acts as its administrator. The Bank undergoes modernization, including a thorough computerisation. Moreover, the Bank becomes a member of the international settlement system SWIFT (Society for Worldwide Interbank Financial Telecommunication).

1990 - privatization decision

Decision is made regarding the privatization of BRE Bank, the first privatization in the Polish banking sector. BRE shares are offered for sale in a public offering. The Bank opens a branch in Warsaw, and soon after, representative offices and then branches in Łódź and Lublin. BRE Bank becomes the first Polish bank audited by a foreign company, Moore Stephens.  

1991 – beginning of BRE Bank Group

BRE Bank Group begins to form. The following subsidiaries are established: BRE Brokers, a brokerage bureau (currently Dom Inwestycyjny BRE Banku), and BRE Service (currently BRE Leasing). A new Management Board is formed, with a mandate to manage the Bank for the next five years. Once again, Krzysztof Szwarc is appointed President of the Management Board. The branch network continues to expand. There are already 3 branches outside Warsaw (including a new branch in Kraków), 5 additional branches are in the roll-out phase.   

1992 – stock exchange debut

On July 31, BRE Bank’s privatization process is completed. Through a public offering, the shares are sold by the main shareholders, representing the State Treasury and the National Bank of Poland. In total, 950 thousand shares are sold: 400 thousand to institutional investors, 350 thousand to retail investors and 200 thousand to employees. Since October 1992, the shares are listed on the Warsaw Stock Exchange. On its debut, the share price amounts to PLN 203 thousand (PLN 4 after the PLN denomination and share split conducted in 1994).  

1993 - launch of electronic banking

BRE Bank becomes the first bank in Poland to launch IBS-90 integrated IT system. Since June, transactions are executed in real time. The electronic banking systems, BRESOK and BRESOK 2, allow clients to track and execute operations on their accounts. The headcount of the Group reaches nearly 800 people.

1994 - strategic partnership with Commerzbank

An agreement on strategic partnership is signed with Commerzbank AG of Germany. McKinsey, a US company, acts as an advisor on the Bank’s development strategy. BRE Bank Foundation is set up.

1995 - share capital of nearly PLN 60 million

The foundation stone is laid for a new head office of the Bank at Senatorska street in Warsaw. The share capital of the Bank is increased to PLN 58 million. For the first time, BRE Bank is rated by two agencies: Moody’s and Standard & Poor’s. The Bank launches its Private Banking. The Bank employs over 1,000 people.

1996 - still in the lead

The investment banking offer of the Bank continues to expand. BRE Bank joins a group of leading banks arranging issues of debt securities for companies. Commerzbank increases its interest in BRE Bank to 33%. Krzysztof Szwarc and Wojciech Kostrzewa, appointed as Member of the Management Board of BRE Bank, are recognised in the ranking of the best managers in the Poland.

1997 - further rise in share capital

Towarzystwo Funduszy Inwestycyjnych Skarbiec (Investment Funds Association) launches its operations. At the end of the year, Skarbiec has PLN 17 million assets under management. BRE Bank acquires a leading Polish consulting company, Business Management & Finance, which specializes in privatization transactions. A new issue of 4.5 million shares allows Commerzbank to increase its interest in the Bank to 48.7%.  

1998 – merger with Polski Bank Rozwoju (Polish Development Bank)

BRE Bank merges with Polski Bank Rozwoju becoming a leader in investment and electronic banking. Wojciech Kostrzewa is appointed President of the Management Board and General Director of BRE Bank, while Krzysztof Szwarc is elected Chairman of the the Supervisory Board. The Bank’s new head office at Senatorska street in Warsaw is opened. BRE operates 23 branches in 16 voivodships.

1999 – further development of the Group  

The following new entities within BRE Bank Group are established: the first Polish mortgage bank: Rheinhyp-BRE Bank Hipoteczny SA, Powszechne Towarzystwo Emerytalne Skarbiec-Emerytura in which BRE Bank holds a stake of 75%, and Dom Inwestycyjny BRE Banku (formerly BRE Brokers). The Bank is preparing for a merger with Bank Handlowy, which, in the end, does not materialise.

2000 – internet retail banking starts

Anticipating new market trends, BRE Bank starts operations in the retail banking sector, launching, in just one hundred days, mBank, the first Internet Bank in Poland. Commerzbank increases its interest in BRE Bank’s share capital to 50%. BRE Bank is the first bank in Poland to acquire a majority stake in an EU-based bank, namely the Austrian Intermarket Factoring Bank.

2001 – MultiBank - the second retail arm of BRE Bank is launched

BRE Bank launches MultiBank, its second retail arm dedicated to demanding and affluent individuals. BRE Asset Management, offering securities portfolio management, a new service on the Polish market, launches its operations.  

2002 - four companies incorporated in an Asset Management holding

Registration of Skarbiec Asset Management Holding S.A.(SAMH) takes place. The company focusses on asset management, expected to reinforce the position of BRE Bank Group on this market. PTE Skarbiec-Emerytura merges with PTE BIG BG.  

2003 – further development of the Group

Commerzbank increases its interest in BRE Bank to 72.16%. Rheinhyp-BRE Bank Hipoteczny carries out the first post-war public issue of mortgage bonds, worth PLN 200 million. BRE Bank Group adds new entities: Magyar Factor, a factoring company, and Centrum Rozliczeń i Informacji (CERI).  mBank launches the Investment Funds Supermarket which allows clients to buy units in numerous investment products.

2004 – internet banking for companies

Wojciech Kostrzewa steps down as President of the Management Board. He is succeeded by Vice-President Sławomir Lachowski. iBRE, a modern Internet banking system for companies, is launched. The retail banking arm, servicing nearly 1 million clients, builds a 7.0% market share. The Bank’s share capital is increased to PLN 114.8 million.  

2005 - Bank for demanding clients

According to its mission statement, the Bank wants to become the best financial institution for demanding clients. A “BREactivation” project is launched involving a deep restructuring of the corporate banking area, while the retail banking area generates its first profits.  The Management Board declares its intention to withdraw from the asset management business by selling Skarbiec Asset Management Holding and PTE Skarbiec Emerytura and decides to operate an open distribution platform offering products and services from a variety of third-party providers.

2006 – continuation of rapid organic growth and entry into the insurance market

The number of employees  of the Group exceeds 4 000. The number of retail clients exceeds 1.6 million, while the number of outlets approaches 150. The Bank, through its new subsidiary BRE Ubezpieczenia, enters the insurance market.  

2007 - foreign expansion

The Bank's performance improves compared to the previous year, profitability in all strategic areas grows dynamically; BRE is the winner of many prestigious awards. The retail banking launches foreign operations: the first mBank outlets are set up in the Czech Republic and Slovakia.

2008 - PLN 1 billion profit

In this extremely difficult year for the financial industry, BRE Bank manages to meet its targets: the consolidated pre-tax profit of the Group exceeds the previous year's figure and reaches PLN 1 billion. PTE Skarbiec-Emerytura is sold after a merger with Aegon PTE. The new Supervisory Board of BRE Bank appoints Mariusz Grendowicz as President of the Management Board of BRE Bank.  

2009 - sound performance amid an unprecedented financial crisis

Despite the global financial crisis, BRE Bank increased its core income maintaining strong growth of clients’ base. The functionalities of iBRE, the innovative Internet corporate platform, continue to develop dynamically.   

2010 - successful new share issue

The Bank conducts a highly successful issue of shares, raising nearly PLN 2 billion and significantly bolstering its solvency ratios. A “Cross Border” project is launched to facilitate cooperation in servicing international clients within Commerzbank Group. The Bank wins the title of the best corporate Internet bank in Central and Eastern Europe. Cezary Stypułkowski is appointed as new President of the Management Board

2011 – organic growth and record profit  

Total client number reaches nearly 4 million and record high pre-tax profit of the Group exceeds PLN 1.4 billion. The Bank focuses on increasing its core revenues (net interest and fee and commission income) by enhancing the product usage by its existing retail and corporate clients. It upgrades its investment banking product offer and continues to expand its client base. The Bank takes over 100% of BRE Leasing Sp. z o.o., becomes the sole owner of BRE Faktoring (formerly Polfactor) and Transfinance, the leading factoring companies in Poland and the Czech Republic, and sells its shares in Intermarket Bank AG (Austria) and Magyar Factor (Hungary), thus aligning its product and service offering with its physical banking presence. Five new corporate branches are established including a branch in Koszalin which as a pilot branch provides services also to retail clients. Last but not least, in 2011 BRE Bank is named the Best Bank in Poland by the prestigious Euromoney Magazine in the Euromoney for Excellence contest.

I.3. Composition of BRE Bank Group as of 31.12.2011

Along with the development of its operations, BRE Bank established or acquired companies offering products and services complementary to its banking offer to meet needs of BRE Bank Group’s customers. The main subsidiaries include: BRE Leasing, BRE Bank Hipoteczny, Dom Inwestycyjny BRE Banku, BRE Faktoring (former Polfactor) as well as the insurance company BRE Ubezpieczenia. In total, 15 companies were consolidated at the end of December 2011.

The composition of BRE Bank Group by business segments and areas was as follows:

BRE Bank Group
Segment Corporates & Financial Markets Retail Banking
Corporates & Institutions Trading & Investment Activity
  • Corporations
  • Large Companies
  • SMEs
  • Structured &
    Mezzanine Finance
  • Risk and Liquidity
  • Financial Markets
  • Financial Institutions
  • mBank
    (retail customers and
  • MultiBank
    (affluent retail customers)
  • Private Banking
    (high net worth individuals)
Consolidated subsidiaries
  • BRE Leasing Sp. z o.o.
  • BRE Faktoring SA
  • Transfinance a.s.
  • BRE Holding Sp. z o.o.
  • BRE Gold FIZ Aktywów
  • Garbary Sp. z o.o.
  • Dom Inwestycyjny BRE Banku SA
  • BRE Bank Hipoteczny SA
  • BRE Finance France SA
  • BRE Wealth
    Management SA
  • Aspiro SA
  • BRE Ubezpieczenia TUiR SA
  • BRE Ubezpieczenia
    Sp. z o.o.
  • BRE.locum SA
  • Centrum Rozliczeń i Informacji CERI Sp. z o.o.

Compared to the end of 2010, two subsidiaries were sold: Intermarket Bank AG and Magyar Factor zRt. (more details under "Major transactions in BRE Bank Group in 2011") The transaction was closed on 28 July 2011. Under IFRS, all above subsidiaries are consolidated using acquisition accounting. Their business is briefly described in sections on relevant business lines.

I.4. BRE Bank Group – Key Data

BRE Bank Group's Key Data 2007 2008 2009 2010 2011
Balance sheet total (PLN M) 55,983.0 82,605.2 81,023.9 90,038.8 98,875.6
Credit and loans granted to customers (PLN M) 33,682.7 52,142.5 52,468.8 59,374.1 67,851.5
Liabilities to customers (PLN M) 32,401.9 37,750.0 42,791.4 47,151.0 54,244.4
Book value (PLN M) 3,324.5 3,894.5 4,120.2 6,909.3 8,048.8
Pre-tax profit from continued and discontinued activities 954.5 1,000.1 209.4 872.5 1,467.1
Net profit from continued and discontinued activities attributable to the Bank's shareholders 710.1 857.5 128.9 641.6 1,135.0
Capital adequacy ratio (%) 10.16 10.04 11.50 15.90 14.96
ROE before tax (%) 35.9 30.8 5.1 15.6 21.0
Cost/Income ratio (%) 55.5 55.1 54.2 51.8 48.3
Headcount YE (FTE) 5,426 6,133 5,566 6,018 6,294
Number of BRE Bank corporate units, YE          
branches 23 24 24 24 29
offices 4 21 21 21 19
Number of retail branches, YE          
mBank (Poland) 103 161 142 115 97
MultiBank 109 131 134 133 135
BRE Bank Group's Key Stock Exchange Figures 2007 2008 2009 2010 2011
Number of shares. YE 29,660,668 29,690,882 29,690,882 42,086,674 42,102,746
Profit from continued and discontinued activities per share (PLN) 21.08 24.49 4.34 17.49 26.96
BV/PS (PLN) 112.08 131.17 138.77 164.17 191.17
P/E 21.15 7.08 52.89 17.38 9.12
P/BV 3.98 1.32 1.65 1.85 1.29
Share price at the year's last trading session (PLN; for 2005 -2009 adjusted by 0.88275 ratio due to new issue of shares in 2010) 446 173 230 304 246

I.5. Authorities of BRE Bank

Supervisory Board of BRE Bank SA

As of December 2011, the Supervisory Board was composed of the following persons:

1. Maciej Leśny - Chairman of the Supervisory Board (independent Member)
2. Ulrich Sieber - Deputy Chairman of the Supervisory Board
3. Andre Carls – Member of the Supervisory Board
4. Thorsten Kanzler – Member of the Supervisory Board
5. Teresa Mokrysz - Member  of the Supervisory Board (independent Member)
6. Sascha Klaus – Member of the Supervisory Board
7. Waldemar Stawski - Member of the Supervisory Board (independent Member)
8. Eric Strutz – Member of the Supervisory Board
9. Jan Szomburg – Member of the Supervisory Board 
10. Marek Wierzbowski - Member of the Supervisory Board (independent Member)

On February 13, 2012 BRE Bank received a notice of Eric Strutz who resigned from his position as Member of the Supervisory Board as of March 30, 2012.

Management Board of BRE Bank SA

In 2011, the composition of the Management Board of BRE Bank was unchanged:

1. Cezary Stypułkowski - President of the Management Board, Chief Executive Officer 
2. Karin Katerbau – Vice - President of the Management Board, Chief Financial Officer 
3. Wiesław Thor – Vice - President of the Management Board, Chief Risk Officer
4. Przemysław Gdański - Member of the Management Board, Head of Corporate Banking
5. Hans-Dieter Kemler – Member of the Management Board, Head of Investment Banking
6. Jarosław Mastalerz - Member of the Management Board, Head of Retail Banking
7. Christian Rhino - Member of the Management Board, Head of Operations and IT

On December 9, 2011, Ms Karin Katerbau, Vice-President of the Management Board announced her intention of resignation from the position at BRE Bank in the first half of 2012. Following her departure from BRE Bank, Ms Karin Katerbau will become a Member of the Management Board of Oldenburgische Landesbank.

After the end of 2011, on January 27, 2012, Mr. Christian Rhino, Member of the Management Board, Head of Operations and IT, informed the Bank, that he intends to hand in his resignation as of March 31, 2012. Mr. Rhino plans to assume a position of Managing Director at Commerzbank AG.

The detailed profiles of the Members of the Supervisory Board and the Management Board are presented in the chapter entitled “Statement of BRE Bank on Application of Corporate Governance Principles”.