71. Dividends and distribution of retained earnings

Pursuant to the Dividend Policy adopted in 2021, the Bank’s intention is to ensure stable dividend distributions to the shareholders in the long term, taking into account the principle of prudent management of the Bank and the Bank’s Group, in compliance with the law and the PFSA position on the dividend policy assumptions of commercial banks.

On 15 of December 2022, the Bank adopted a dividend policy for the Bank and the Group (“Dividend policy”). The Dividend policy takes into account the Bank’s intention to provide stable dividend payments in the long term, in accordance with the principle of prudent management of the Bank and the Group, in compliance with the law and the PFSA position on the dividend policy assumptions of commercial banks. The objective of the Dividend policy is to optimize the capital structure of the Bank and the Group, while considering the return on equity, the cost of capital and the capital needs for development, and maintaining an appropriate level of the capital adequacy ratios and meeting the minimum requirement for own funds and eligible liabilities (MREL). The repurchase of treasury shares for cancellation is an additional tool for capital redistribution. The General Meeting gives its consent to the acquisition of treasury shares by the Bank, after prior approval of the Supervisory Board, specifying the terms of the acquisition, including the maximum number of shares to be acquired, the period of authorization to acquire shares, which may not exceed five years and the maximum and minimum amount of consideration for the acquired shares, if theacquisition takes place for consideration. Purchase of treasury shares for cancellation in each case requires the Bank to obtain the prior consent of the Polish Financial Supervision Authority.

On 12 May 2022, the Annual General Meeting of PKO Bank Polski S.A. (AGM) passed a resolution on distribution of profit of PKO Bank Polski S.A. for 2021, in accordance with which:

• the amount of PLN 2,287,500,000 (i.e. 77% of the Bank’s net profit) was earmarked for the payment of dividend;
• the remaining net profit of PLN 2,308,836,372 was transferred to retained

The gross dividend is PLN 1.83 per share. The AGM set the dividend (record) date as 4 August 2022 and the dividend payment date as 23 August 2022. All 1,250 million shares are eligible for the dividend.

At the same time, the AGM passed a resolution to leave PKO Bank Polski S.A.’s retained earnings, in the amount of PLN 5,500,000,000, undistributed.

The aforementioned resolutions are consistent with the individual recommendation of the Polish Financial Supervision Authority dated 23 February 2022, in which the PFSA recommended that the Bank should mitigate the risk of its operations by:

• refraining from payment of a dividend in excess of 50% of the profit earned in the 2021;
• refraining from any other actions taken without consultation with the supervisory authority, in particular not included in the scope of the current business and operating activities, which could result in a decrease in own funds, including any payment of dividend from retained earnings or redemption of treasury shares.

At the same time, the PFSA confirmed that the Bank met the requirements for payment of dividend at a level of up to 50% of the net profit for 2021, as defined in December 2021 in the PFSA position on dividend policies of supervised institutions for 2022.

On 6 December 2022, the PFSA adopted a position on the 2023 dividend policy of commercial banks, cooperative and associating banks, insurance companies, reinsurance companies, insurance and reinsurance companies, investment fund companies, universal pension companies and brokerage houses.

The dividend payment criteria for commercial banks indicated in the PFSA’s positions are as follows:

1. an amount of up to 50% of the profit for 2022 may only be paid out by banks that fulfil all of the following criteria:
   • not implementing a recovery programme;
   • positively assessed in the supervisory review and assessment process (BION) – final BION score not worse than 5;
   • having a leverage ratio (LR) of more than 5%;
   • having a Tier 1 core capital ratio (CET1) of not less than the required minimum: 4.5% +56%* P2R requirement + combined buffer requirement (including 3% systemic risk buffer);
   • having a Tier 1 capital ratio (T1) not lower than the required minimum: 6% +75%* P2R requirement + combined buffer requirement (including 3% systemic risk buffer);
   • having a total capital ratio (TCR) not lower than the required minimum: 8% + P2R requirement + combined buffer requirement (including 3% systemic risk buffer);
2. An amount of up to 75% of the profit for 2022 may be paid only by banks meeting at the same time the criteria for payment of 50% taking into account, as part of the capital criteria, the bank’s sensitivity to an adverse macroeconomic scenario (P2G recommendation).
3. An amount of up to 100% of the profit for 2022 may be paid only by banks meeting at the same time the criteria for payment of 75% and whose portfolio of receivables from the non-financial sector is characterised by good credit quality (share of NPLs, including debt instruments, not exceeding 5%).

The criteria set out in points 1-3 should be met by the bank both at the individual and consolidated level.

Additionally, the PFSA indicated that the banks which have considerable portfolios of foreign currency housing loans should adjust the rate of dividend distribution based on two additional criteria:

• Criterion 1 – based on the share of foreign currency housing loans for households in the total portfolio of amounts due from the non-financial sector;
• Criterion 2 – based on the share of foreign currency housing loans granted in 2007 and 2008 in the foreign currency housing loans for households’ portfolio.

The PFSA recommended that appropriate adjustments be applied, depending on the size of the Bank’s portfolio:

• Criterion 1:

banks with a share exceeding 5% – adjustment of the dividend rate by 20 p.p.; banks with a share exceeding 10% – adjustment of the dividend rate by 40 p.p.; banks with a share exceeding 20% – adjustment of the dividend rate by 60 p.p.; banks with a share exceeding 30% – adjustment of the dividend rate by 100 p.p.;

• Criterion 2:

banks with a share exceeding 20% – adjustment of the dividend rate by 30 p.p.; banks with a share exceeding 50% – adjustment of the dividend rate by 50 p.p.;

whereas the total value of the adjustment (maximum 100%) is the sum of adjustments resulting from both criteria. The Bank’s intention is to pay dividend in 2023 from the net profit for 2022.

Pursuant to Article 395 § 2(2) of the Commercial Companies Code, the decision on profit distribution remains within the competences of the Bank’s Annual General Meeting.