Bank BPH SA UK Regulatory Announcement: Half-yearly Report

WARSAW, Poland--(BUSINESS WIRE)--

As a result of the legal merger of Bank BPH S.A. and GE Money Bank S.A. the condensed financial date of the merged Bank BPH represent the continuation of GE Money Bank consolidated carrying values. For details regarding restatement of comparatives please see note 4 of condensed interim consolidated financial statements of Bank BPH SA Capital Group – Principles of preparation of the condensed interim consolidated financial statements, letter c) ‘Comparative Data’.

SELECTED FINANCIAL DATA	PLN'000		EUR’000
	Period from 01	Period from 01	Period from 01	Period from 01
Consolidated income statement	Jan. 2010 to 30	Jan. 2009 to 30	Jan. 2010 to 30	Jan. 2009 to 30
	June 2010	June 2009	June 2010	June 2009
I. Interest income	1 156 583	1 252 681	288 842	277 240
II. Fee and commission income	453 534	465 511	113 265	103 026
III. Profit (loss) before income tax	-266 354	-30 375	-66 519	-6 723
IV. Profit (loss) for the period attributable
to equity holders of the Bank	-224 280	-4 158	-56 011	-920
Consolidated statement of cash flows
V. Net cash flow from operating activities	2 628 478	-625 598	656 430	-138 456
VI. Net cash flow from investing activities	1 675	-123 368	418	-27 303
VII. Net cash flow from financing activities	-1 013 167	774 892	-253 026	171 497
VIII. Total net cash flows	1 616 986	25 926	403 822	5 738
	Period from 01	Period from 01	Period from 01	Period from 01
Ratios	Jan. 2010 to 30	Jan. 2009 to 30	Jan. 2010 to 30	Jan. 2009 to 30
	June 2010	June 2009	June 2010	June 2009
IX. Earnings/losses per ordinary share attributable
to equity holders of the Bank (PLN / EUR)*	-2.93	-0.05	-0.73	-0.01
X. Diluted earnings/losses per ordinary share
attributable to equity holders of the Bank (PLN / EUR)*	-2.93	-0.05	-0.73	-0.01
XI. Number of shares	76 667 911	76 667 911	76 667 911	76 667 911
Ratios	As at 30 June 2010	As at 31 Dec. 2009	As at 30 June 2010	As at 31 Dec. 2009
XII. Book value per share (PLN/EUR)	54.33	57.25	13.11	13.94
XIII. Diluted Book value per share (PLN/EUR)	54.33	57.25	13.11	13.94
XIV. Dividend paid per ordinary share (PLN/EUR)	0.00	0.00	0.00	0.00
Consolidated statement of financial position	As at 30 June 2010	As at 31 Dec. 2009	As at 30 June 2010	As at 31 Dec. 2009
XV. Total assets	39 298 374	35 214 893	9 479 081	8 571 855
XVI. Amounts owed to the Central Bank	184 256	0	44 444	0
XVII. Amounts owed to banks	1 149 052	778 581	277 160	189 519
XVIII. Amounts owed to customers	14 333 877	10 124 695	3 457 445	2 464 509
XIX. Shareholders' equity	4 165 573	4 389 522	1 004 769	1 068 478
XX. Minority interests	105 859	99 752	25 534	24 281
XXI. Share capital	383 340	383 340	92 465	93 311
XXII. Number of shares	76 667 911	76 667 911	76 667 911	76 667 911
Capital adequacy	As at 30 June 2010	As at 31 Dec. 2009	As at 30 June 2010	As at 31 Dec. 2009
XXIII. Capital adequacy ratio (%)	12.07	12.66	12.07	12.66

*To maintain comparability of ratios the number of shares used in these financial statements was the number resulting form the merger of Bank BPH and GE Money Bank and reported as of 31 December 2009. The increased number of shares was used to calculate the figures of profit and diluted profit per one common share for period from 1 January 2009 to 30 June 2009.

Selected financial data were converted into EURO according to the following principles:

- Selected consolidated statement of financial position and book value per share – converted using the average EURO exchange rate in PLN announced by the Central Bank on the balance sheet day: 30.06.2010 – 4.1458; 31.12.2009 – 4.1082;.

- Selected consolidated income statement, condensed consolidated statement of cash flows and earnings per ordinary share – converted using the average rate of exchange, which is an arithmetic mean of the average rates announced by the Central Bank and at the end of each month of first half; 2010 – 4.0042, 2009 – 4.5184.

Condensed Interim Consolidated

1(st) Half of

Financial Statements

2010

of Bank BPH SA Capital Group

Translation of the document originally issued in Polish

Contents
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Condensed consolidated statement of cash flows
Notes to condensed interim consolidated financial statements of Bank BPH Capital Group
1.		Basic information about Bank BPH and Bank BPH Capital Group
2.		Approval of the financial statements
3.		Statement of compliance
4.		Principles of preparation of the condensed interim consolidated financial statements
		a) Significant accounting policies
		b) Changes to accounting policies
		c) Comparative Data
5.		Estimates
6.		Business segment reporting
7.		Net interest income
8.		Impairment charges
9.		Net fee and commission income
10.		Trading result and revaluation
11.		General administrative expenses
12.		Income tax expense
13.		Cash and balances with the Central Bank
14.		Trading assets
15.		Loans and advances to and placements with banks
16.		Loans and advances to customers
17.		Loan impairment
18.		Investment financial assets
19.		Property and equipment
20.		Intangible assets
21.		Assets and disposal group held for sale
22.		Amounts owed to the Central Bank
23.		Amounts owed to banks
24.		Amounts owed to customers
25.		Amounts owed to other institutions
26.		Liabilities evidenced by certificates
27.		Provisions
28.		Trading liabilities
29.		Dividends
30.		Contingent liabilities
31.		Cash and cash equivalents
32.		Related party transactions
33.		Risk management in Bank BPH
		33.1. Risk management
		33.2. Market risk
		33.3. Currency risk
		33.4. Interest rate risk
		33.5. Liquidity risk
		33.6. Credit risk
		33.7. Operating risk
Appendix No. 1 to the Condensed Interim Consolidated Financial Statements of Bank BPH SA Group.

Consolidated income statement

As a result of the legal merger of Bank BPH S.A. and GE Money Bank S.A. the condensed interim consolidated financial statements of the merged Bank BPH represent the continuation of GE Money Bank consolidated carrying values. Consequently, consolidated financial results of the merged Bank BPH for first half 2009 contain combined results of both banks for 6 months ended 30 June 2009 subject to consolidation adjustments. For details regarding restatement of comparatives please see note 4 – Principles of preparation of the condensed interim consolidated financial statements, letter c) ‘Comparative Data’.

PLN’000
	Notes	Period from	Period from	Period from
	Notes	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Interest income		581 140	1 156 583	1 252 681
Interest expenses		-247 115	-478 653	-556 459
Net interest income	7	334 025	677 930	696 222
Impairment charges	8	-263 965	-512 737	-260 568
Net interest income incl. impairment charges		70 060	165 193	435 654
Fee and commission income		229 783	453 534	465 511
Fee and commission expenses		-37 685	-75 684	-82 746
Net fee and commission income	9	192 098	377 850	382 765
Dividends		0	0	3
Trading result and revaluation	10	28 582	44 776	43 123
Result on financial investments		-2 350	-825	-2 251
General administrative expenses	11	-495 208	-854 700	-880 305
Result on other operating income and expenses		3 024	1 352	-9 364
Profit/loss before income tax		-203 794	-266 354	-30 375
Income tax expense	12	36 655	47 310	29 069
Profit/loss for the period		-167 139	-219 044	-1 306
1. Attributable to equity holders of the Bank		-169 924	-224 280	-4 158
2. Attributable to minority interest		2 785	5 236	2 852

Earnings/losses and diluted earnings/losses per ordinary share attributable to equity holders of the Bank (PLN)*		-2.22	-2.93	-0.05
Earnings and diluted earnings/losses per ordinary share (PLN)*		-2.18	-2.86	-0.02

Consolidated statement of comprehensive income

As a result of the legal merger of Bank BPH S.A. and GE Money Bank S.A. the condensed interim consolidated financial statements of the merged Bank BPH represent the continuation of GE Money Bank consolidated carrying values. For details regarding restatement of comparatives please see note 4 – Principles of preparation of the condensed interim consolidated financial statements, letter c) ‘Comparative Data’.

PLN’000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Profit/loss for the period	-167 139	-219 044	-1 306
Other comprehensive income:	-766	275	-12 384
Result from revaluation of securities available for sale (net of tax)	-218	1 598	926
Result from revaluation of hedging derivatives (net of tax)	0	0	-10 832
Amortization of cumulative gains or losses on the hedging instruments which have been discontinued from the hedge accounting (net of tax)	-548	-1 323	-2 478
Total comprehensive income	-167 905	-218 769	-13 690
1. attributable to equity holders of the Bank	-171 254	-224 876	-16 895
2. attributable to minority interest	3 349	6 107	3 205

Consolidated statement of financial position

As a result of the legal merger of Bank BPH S.A. and GE Money Bank S.A. the condensed interim consolidated financial statements of the merged Bank BPH represent the continuation of GE Money Bank consolidated carrying values. For details regarding restatement of comparatives please see note 4 – Principles of preparation of the condensed interim consolidated financial statements, letter c) ‘Comparative Data’.

PLN’000
	Notes	As at 30 June 2010	As at 31 Dec. 2009
Assets
Cash and balances with Central Bank	13	2 329 289	1 243 425
Trading assets	14	749 780	595 615
Loans and advances to and placements with banks	15	559 462	514 181
Loans and advances to Customers	16	30 698 017	29 095 698
incl.: loan impairment	17	-2 527 278	-2 115 641
Investment financial assets	18	2 822 753	1 624 236
Property and equipment	19	442 548	474 899
Intangible assets	20	1 114 814	1 135 751
Assets and disposal groups held for sale	21	0	19 317
Other assets		581 711	511 771
incl.: deferred tax assets		366 231	313 576
Total assets		39 298 374	35 214 893

PLN’000
	Notes	As at 30 June 2010	As at 31 Dec. 2009
Liabilities
Amounts owed to Central Bank	22	184 256	0
Amounts owed to banks	23	1 149 052	778 581
Amounts owed to Customers	24	14 333 877	10 124 695
Amounts owed to other institutions	25	16 241 925	17 212 999
Liabilities evidenced by certificates	26	578 821	597 300
Provisions	27	243 911	102 216
Trading liabilities	28	868 173	576 735
Other liabilities		752 720	658 882
Subordinated debt		674 207	674 211
Total Equity:		4 271 432	4 489 274
incl.: shareholders’ equity		4 165 573	4 389 522
incl.: minority interests		105 859	99 752
Total equity and liabilities		39 298 374	35 214 893

Book value per share (in PLN)		54.33	57.25

Consolidated statement of changes in equity

As a result of the legal merger of Bank BPH S.A. and GE Money Bank S.A. the condensed interim consolidated financial statements of the merged Bank BPH represent the continuation of GE Money Bank consolidated carrying values. For details regarding restatement of comparatives please see note 4 – Principles of preparation of the condensed interim consolidated financial statements, letter c) ‘Comparative Data’.

PLN’000
	Equity attributable to equity holders of the Bank							Minority interests	TOTAL SHAREHOLDERS' EQUITY
	Share capital	Retained profits	Revaluation reserve	Supplementary capital	Risk fund charge	Other Reserves	SHAREHOLDERS' EQUITY	Minority interests	TOTAL SHAREHOLDERS' EQUITY
Opening balance of shareholders' equity on 1 January 2010	383 340	120 100	38 006	2 605 372	308 338	934 366	4 389 522	99 752	4 489 274
Profit/loss for the period	0	-224 280	0	0	0	0	-224 280	5 236	-219 044
Other comprehensive income
Result from revaluation of securities available for sale (net of tax)	0	0	727	0	0	0	727	871	1 598
Amortization of cumulative gains or losses on the hedging instruments which have been discontinued from the hedge accounting (net of tax)	0	0	-1 323	0	0	0	-1 323	0	-1 323
Total other comprehensive income	0	0	-596	0	0	0	-596	871	275
Transactions with shareholders with its effect on equity
Appropriation for supplementary capital	0	129 280	0	-129 280	0	0	0	0	0
Transactions due to share based payments	0	0	0	0	0	1 091	1 091	0	1 091
Other	0	0	0	-164	0	0	-164	0	-164
Closing balance on 30 June 2010	383 340	25 100	37 410	2 475 928	308 338	935 457	4 165 573	105 859	4 271 432

PLN’000
	Equity attributable to equity holders of the Bank								Minority interests	TOTAL SHAREHOLDERS' EQUITY
	Share capital	Retained profits	Revaluation reserve	Supplementary capital*	Risk fund charge	Other Reserves	Own shares	SHAREHOLDERS' EQUITY	Minority interests	TOTAL SHAREHOLDERS' EQUITY
Opening balance of shareholders' equity on 1 January 2009	143 581	343 859	57 654	4 652 897	273 064	773 941	-1 886 047	4 358 949	90 863	4 449 812
Profit/loss for the period	0	-85 937	0	81 779	0	0	0	-4 158	2 852	-1 306
Other comprehensive income
Result from revaluation of securities available for sale (net of tax)	0	0	573	0	0	0	0	573	353	926
Result from revaluation of hedging derivatives (net of tax)	0	0	-10 832	0	0	0	0	-10 832	0	-10 832
Amortization of cumulative gains or losses on the hedging instruments which have been discontinued from the hedge accounting (net of tax)	0	0	-2 478	0	0	0	0	-2 478	0	-2 478
Total other comprehensive income	0	0	-12 737	0	0	0	0	-12 737	353	-12 384
Transactions with shareholders with its effect on equity
Appropriation for supplementary capital	0	-17 291	0	17 291	0	0	0	0	0	0
Appropriation for reserve capital	0	-65 133	0	0	0	65 133	0	0	0	0
Appropriation for general risk fund	0	-35 274	0	0	35 274	0	0	0	0	0
Share transactions from payments	0	0	0	501	0	251	0	752	0	752
Sale of own share	0	0	0	-2 183	0	0	2 806	623	0	623
Other	0	0	0	-9	0	0	0	-9	0	-9
Closing balance on 30 June 2009	143 581	140 224	44 917	4 750 276	308 338	839 325	-1 883 241	4 343 420	94 068	4 437 488

* The balances and equity changes involved in the merger with GE Money Bank are reported under supplementary capital. Details of the relevant transformation are reported in Note 4, Principles of preparation of the condensed interim consolidated financial statements, letter c) Comparative data.

Condensed consolidated statement of cash flows

PLN’000
	Notes	Period from	Period from
	Notes	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
I. Net cash flow from operating activities		2 628 478	-625 598
II. Net cash flow from investing activities		1 675	-123 368
III. Net cash flow from financing activities		-1 013 167	774 892
Total net cash flows		1 616 986	25 926
OPENING BALANCE OF CASH AND CASH EQUIVALENTS	31	1 646 382	1 612 442
CLOSING BALANCE OF CASH AND CASH EQUIVALENTS	31	3 263 368	1 638 368
CHANGE OF CASH AND CASH EQUIVALENT IN THE BALANCE SHEET		1 616 986	25 926

Notes to condensed interim consolidated financial statements of Bank BPH Capital Group

1. Basic information about Bank BPH and Bank BPH Capital Group

Bank BPH Spolka Akcyjna is a bank with its registered address in Poland, Al. Pokoju 1, 31-548 Krakow. The Bank is registered with the District Court for Krakow – Srodmiescie, Krakow, 11^th Commercial Department of the National Court Register, under No. KRS 0000010260. Tax identification code (NIP) – 675-000-03-84.

On 31 December 2009, the District Court for Krakow-Srodmiescie in Krakow, 11^th Commercial Department of the National Court Register registered the merger between Bank BPH SA (acquiring company), and GE Money Bank SA, with its registered address in Gdansk, Elzbietanska 2 (acquired company).

The Bank is a member of the General Electric Capital Corporation Group, registered in USA.

The core business line of Bank BPH SA includes receiving financial deposits, maintaining bank accounts, extending loans, executing bank monetary payments and conducting banking activities under the Banking Law. The business objectives are described in the Bank’s Articles of Association.

Bank BPH SA is the parent entity of Bank BPH SA Capital Group (hereinafter referred to as Bank BPH Capital Group, Bank BPH Group, the Capital Group or the Group).

As at 30 June 2010, the condensed interim consolidated financial statements of Bank BPH Group include BPH PBK Zarzadzanie Funduszami Sp z o.o., its subsidiary in which the Bank holds 100% shares and votes at the Shareholders’ Meeting, together with BPH Towarzystwo Funduszy Inwestycyjnych SA., in which the Bank holds directly 50.14% shares and votes at the General Shareholders’ Meeting.

The organisational structure is as follows as at 30 June 2010.

Company	Registered address	Bank’s share of GSM/SM votes


Parent
Bank BPH Społka Akcyjna	Krakow
Consolidated subsidiaries
BPH PBK Zarzadzanie Funduszami Sp. z o.o.	Warsaw	100.00%
Indirect subsidiaries, subsidiaries of BPH PBK Zarzadzanie Funduszami Sp. z o. o.
BPH Towarzystwo Funduszy Inwestycyjnych SA	Warsaw	50.14%

2. Approval of the financial statements

These condensed interim consolidated financial statements were approved by the Management Board of Bank BPH SA on 20 August 2010.

3. Statement of compliance

The condensed interim consolidated financial statements of Capital Group have been prepared in accordance with International Accounting Standard IAS 34 Interim Financial Reporting, as adopted by the European Union and other applicable regulations.

In accordance with Decree of the Ministry of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent information required by the law of a non-Member State (Official Journal from 2009, No 33, item 259), the Group is required to publish the financial results for the six months ended 30 June 2010.

4. Principles of preparation of the condensed interim consolidated financial statements

Condensed interim consolidated financial statements have been prepared in Polish Zloty, and all amounts, unless indicated otherwise, are stated in thousand zlotys.

This report does not contain all the information required in the annual consolidated financial statements; therefore it should be read together with the consolidated financial statements of Bank BPH Group for the financial year concluded on 31 December 2009.

The Bank BPH Group consolidated financial statements for the financial year concluded on 31 December 2009 are available for inspection in the District Court for Krakow-Srodmiescie, 11 Commercial Section of the National Court Register, Krakow, 7 Przy Rondzie street and on the Bank’s internet page: www.bph.pl.

a) Significant accounting policies

The accounting policies adopted by the Group in these condensed interim consolidated financial statements are the same as those approved by the Group in its consolidated financial statements as at and for the year ended 31 December 2009.

b) Changes to accounting policies

During the period covered by the financial statements the Group has made the changes to presentation of mid-year financial results. Starting since 2010 in the condensed interim consolidated financial statements for first half of the year the Group presents consolidated income statement and consolidated statement of comprehensive income together with the respective notes to the financials for the period of half year and second quarter of respective year.

The modifications to the IFRS standards and interpretations effective on 1 January 2010 did not affect these mid-year consolidated financial statements.

Financial statements do not include changes in the Standards and Interpretations mentioned below, which will be subject to the approval of the European Union, or have been approved by the European Union but have been or will be in force subsequent to the balance sheet date (Appendix No. 1 to the Condensed Interim Consolidated Financial Statements of Bank BPH SA Group).

In our view the implementation of the standards and interpretations approved and published by the EU, but effective after the balance-sheet date, as well as of the standards and interpretations still awaiting an EU’s approval will have no significant influence on the Group’s condensed interim consolidated financial statements with the exception of the IFRS 9 Financial Instruments standard. The impact of an implemented IFRS 9 on the condensed interim consolidated financial statements of the Group has not yet been assessed. The Group is planning to implement standards and interpretations mentioned in Appendix No. 1 to the Condensed Interim Consolidated Financial Statements of Bank BPH SA Group in accordance with the timing indicated in the standards and interpretations without their prior application.

c) Comparative Data

Correspondingly to comparatives’ changes described in the consolidated financial statements as at and for the year ended 31 December 2009 the Group made the following restatements to the comparative amounts as of and for the six months ending 30 June 2009:

1) As the result of the merger with GE Money Bank, Bank BPH Group data has been adjusted for the results and cash flows of GE Money Bank for the period from 1 January 2009 to 30 June 2009.

The other merger- adjustments include:

- elimination of investment in Bank BPH shares,

- goodwill arising due to purchase of Bank BPH Group by GE Money Bank on 17 June 2008

- fair value adjustments to the identifiable assets and liabilities of Bank BPH Group together with its amortization,

- elimination of mutual transactions (e.g. interest income and expense on interbank deposits or fee income and expense related to intermediary of Bank BPH in granting the loans of GE Money Bank),

- presentation of financial statements alignment adjustments.

In addition, consolidated statement of changes in equity for the period from 1 January to 30 June 2009 has been retroactively restated. For presentation purposes, opening balance as of 1 Januray 2009 and changes in equity of GE Money Bank during 1H2009 were presented in the category of supplementary capital (except for revaluation reserve of GE Money which was presented in the category of revaluation reserve).

2) Changes in presentation relating specifically to Bank BPH Group as of and for the six months ending 30 June 2009, as follows:

- reclassification of expenses related to impairment of fixed and intangible assets previously reported in general administration expenses to result on other operating income and expenses,

- change of definition of cash and cash equivalents.

PLN’000
	Period from 01 Jan. 2009 to 30 June 2009 (unadjusted)	Presentation changes	Merger adjustments		Period from 01 Jan. 2009 to 30 June 2009 (adjusted)
		Presentation changes	Results of GE Money Bank from 01 Jan. 2009 to 30 June 2009	Other merger adjustments	Period from 01 Jan. 2009 to 30 June 2009 (adjusted)
Interest income	411 332	0	845 226	-3 877	1 252 681
Interest expenses	-226 697	0	-341 915	12 153	-556 459
Net interest income	184 635	0	503 311	8 276	696 222
Impairment charges	-43 481	0	-217 087	0	-260 568
Net interest income incl. impairment charges	141 154	0	286 224	8 276	435 654
Fee and commission income	253 513	0	215 634	-3 636	465 511
Fee and commission expenses	-50 724	0	-32 806	784	-82 746
Net fee and commission income	202 789	0	182 828	-2 852	382 765
Dividends	3	0	0	0	3
Trading result and revaluation	40 333	0	20 807	-18 017	43 123
Result on financial investments	-2 251	0	-2 183	2 183	-2 251
General administrative expenses	-482 411	4 796	-390 814	-11 876	-880 305
Result on other operating income and expenses	1 704	-4 796	-6 318	46	-9 364
Profit/loss before income tax	-98 679	0	90 544	-22 240	-30 375
Income tax expense	17 047	0	7 372	4 650	29 069
Profit/loss for the period	-81 632	0	97 916	-17 590	-1 306
1. Attributable to equity holders of the Bank	-85 937	0	97 916	-16 137	-4 158
2. Attributable to minority interest	4 305	0	0	-1 453	2 852

	PLN’000
		Period from 01 Jan. 2009 to 30 June 2009 (unadjusted)	Merger adjustments		Period from 01 Jan. 2009 to 30 June 2009 (adjusted)
			Cash flows of GE Money Bank from 01 Jan. 2009 to 30 June 2009	Other merger adjustments	Period from 01 Jan. 2009 to 30 June 2009 (adjusted)
	1) Net cash flow from operating activities	-628 818	-805 312	808 532	-625 598
	2) Net cash flow from investing activities	-122 937	-431	0	-123 368
	3) Net cash flow from financing activities	-37 983	812 875	0	774 892
Total net cash flows		-789 738	7 132	808 532	25 926
OPENING BALANCE OF CASH AND CASH EQUIVALENTS		2 615 443	5 374	-1 008 375	1 612 442
CLOSING BALANCE OF CASH AND CASH EQUIVALENTS		1 825 705	12 506	-199 843	1 638 368
CHANGE OF CASH AND CASH EQUIVALENTS IN THE BALANCE SHEET		-789 738	7 132	808 532	25 926

3) Changes in presentation of land perpetual usufruct – the transfer of the perpetual usufruct reported by the Bank BPH Group under tangible fixed assets into other assets.



PLN'000
	As of 31.12.2009 (unadjusted)	Presentation changes	As of 31.12.2009 (adjusted)
Assets
Cash and balances with Central Bank	1 243 425	0	1 243 425
Trading assets	595 615	0	595 615
Hedging derivatives	0	0	0
Loans and advances to and placements with banks	514 181	0	514 181
Loans and advances to Customers	29 095 698	0	29 095 698
incl.: loan impairment	-2 115 641	0	-2 115 641
Investment financial assets	1 624 236	0	1 624 236
Property and equipment	499 435	-24 536	474 899
Intangible assets	1 135 751	0	1 135 751
Assets and disposal groups held for sale	19 317	0	19 317
Other assets	487 235	24 536	511 771
incl.: deferred tax assets	313 576	0	313 576
Total assets	35 214 893	0	35 214 893

5. Estimates

In accordance with IFRS the Group has adopted certain estimates and made certain assumptions that have an impact on the amounts found in the financial statements.

The estimates and assumptions, subject to ongoing monitoring by the Group management, are based on historic experiences and other factors, such as expected future events that are justified at a point in time. The results provide the basis for estimating the value of balance-sheet assets and liabilities. While the estimates are based on the best knowledge of the current environment and the Bank business, the actual results may differ from those estimated. Adjustments of estimates are recognized in the reporting period during which the estimate is revised provided that such adjustment related only to that period or in the following periods as well if the adjustment affects both the current and future periods.

During the six months ended 30 June 2010 management reassessed its estimates in respect of:

impairment of financial assets and provision for contingent liabilities (notes 14, 17 and 27)
fair value of derivatives (notes 14, 28)
provisions for restructuring (note 27).

6. Business segment reporting

Division into business segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s management to make decisions about resources to be allocated to the particular segment.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly EIR settlement and result of re-investing of other assets and liabilities. Moreover unallocated items include profit and loss items that cannot be attributed to other segments.

Bank BPH Group’s business segmentation is key to management policies. The Group manages its operations under strategic customer segments. Strategic customer segments include: Retail Banking, Corporate Banking and Financial Institutions. Under retail banking segment two subsidiaries’ activities are being recognised: BPH PBK Zarzadzanie Funduszami Sp. z.o.o and BPH indirect subsidiary BPH Towarzystwo Funduszy Inwestycyjnych SA. The results for the Retail and Corporate segments include the outcome from the sale of treasury and investment products. Financial Institution segment includes the result generated by the Bank on selling banking products to financial institutions as well as the result from the Bank’s assets and liabilities management. As at the end of 2009, the Financial Institutions segment was known as the International Markets segment.

Bank BPH Group												PLN’000
INCOME STATEMENT	Business segments						Other (not assigned to segments)		Eliminations		Total
INCOME STATEMENT	Retail		Corporate		Financial Institutions		Other (not assigned to segments)		Eliminations		Total
1	2		3		4		5		6		(2+3+4+5+6)
	1 Jan.2010-30 June 2010	1 Jan.2009-30 June 2009	1 Jan.2010-30 June 2010	1 Jan.2009-30 June 2009	1 Jan.2010-30 June 2010	1 Jan.2009-30 June 2009	1 Jan.2010-30 June 2010	1 Jan.2009-30 June 2009	1 Jan.2010-30 June 2010	1 Jan.2009-30 June 2009	1 Jan.2010-30 June 2010	1 Jan.2009-30 June 2009
Interest income	1 262 149	1 357 568	97 306	68 268	622 339	300 210	74 042	67 826	-899 253	-541 191	1 156 583	1 252 681
External income	1 030 305	1 136 263	37 148	32 246	77 191	70 136	11 939	14 036	0	0	1 156 583	1 252 681
Internal income	231 844	221 305	60 158	36 022	545 148	230 074	62 103	53 790	-899 253	-541 191	0	0
Interest expense	-636 758	-673 765	-67 547	-46 429	-635 626	-334 937	-37 975	-42 519	899 253	541 191	-478 653	-556 459
External expense	-153 867	-510 525	-43 265	-22 114	-281 521	-23 820	0	0	0	0	-478 653	-556 459
Internal expense	-482 891	-163 240	-24 282	-24 315	-354 105	-311 117	-37 975	-42 519	899 253	541 191	0	0
Net interest income	625 391	683 803	29 759	21 839	-13 287	-34 727	36 067	25 307	0	0	677 930	696 222
Impairment charges	-514 701	-260 678	1 908	96	56	14	0	0	0	0	-512 737	-260 568
Fee and commission income	406 734	430 298	38 916	28 679	7 884	6 534	0	0	0	0	453 534	465 511
Fee and commission expense	-71 793	-78 554	-3 221	-3 285	-670	-907	0	0	0	0	-75 684	-82 746
Net fee and commission income	334 941	351 744	35 695	25 394	7 214	5 627	0	0	0	0	377 850	382 765
Trading result and revaluation	4 117	2 333	4 773	2 034	41 703	47 662	-5 817	-8 906	0	0	44 776	43 123
General administrative expense	-739 380	-801 716	-105 217	-57 054	-10 103	-27 245	0	5 710	0	0	-854 700	-880 305
Other*	2 274	-11 020	-371	-1 175	-2 490	-1 076	1 114	1 659	0	0	527	-11 612
Profit (loss) before income tax	-287 358	-35 534	-33 453	-8 866	23 093	-9 745	31 364	23 770	0	0	-266 354	-30 375
Income tax	0	0	0	0	0	0	47 310	29 069	0	0	47 310	29 069
Profit (loss) for the period	-287 358	-35 534	-33 453	-8 866	23 093	-9 745	78 674	52 839	0	0	-219 044	-1 306
Profit (loss) for the period attributable to equity holders of the Bank	-292 594	-38 386	-33 453	-8 866	23 093	-9 745	78 674	52 839	0	0	-224 280	-4 158
Profit (loss) for the period attributable to minority interest	5 236	2 852	0	0	0	0	0	0	0	0	5 236	2 852

*Dividends + Result on financial investments + Net income from other operating costs and revenues.

PLN’000

Assets

Retail

Corporate

Financial Institutions

Other (not assigned to segments)

Total assets

30 June 2010

29 433 089

1 759 804

5 040 136

3 065 345

39 298 374

31 December 2009

28 822 828

1 472 794

2 657 516

2 261 755

35 214 893

PLN’000

Liabilities

Retail

Corporate

Financial Institutions

Other (not assigned to segments)

Total Liabilities

30 June 2010

29 963 850

3 113 999

1 340 688

4 879 837

39 298 374

31 December 2009

30 085 682

1 587 957

1 073 240

2 468 014

35 214 893

7. Net interest income

PLN ‘000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Interest income on:	581 140	1 156 583	1 252 681
Central Bank	3 151	5 802	6 889
banks	2 557	5 525	6 614
other financial institutions	5 064	8 081	4 676
non-financial institutions / individuals	529 213	1 065 451	1 176 026
government institutions	379	761	857
hedging derivatives	1 222	2 648	4 971
securities	39 554	68 315	52 648
Interest expenses:	-247 115	-478 653	-556 459
Central Bank	-1 768	-3 116	-296
banks	-5 622	-11 472	-16 841
other financial institutions	-122 596	-260 790	-329 279
non-financial institutions / individuals	-105 264	-182 074	-193 144
government institutions	-6 368	-10 084	-6 182
hedging derivatives	-330	-656	-1 291
securities issued by Bank BPH	-5 167	-10 461	-9 426
NET INTEREST INCOME	334 025	677 930	696 222

Interest income is inclusive of interest on securities reported at fair value through profit or loss (FVO), which amounts to PLN 55,188 ths for first half 2010 (first half 2009: PLN 34,530 ths). The interest income on trading securities is reported under trading result and revaluation.

Interest income includes PLN 18,406 ths for first half 2010 (first half 2009: PLN -13,109 ths) as the settlement of fees and commissions directly linked to financial assets or liabilities (both income and direct incremental expense) that are settled at amortised cost with effective interest rate.

The net interest income on impaired financial assets (i.e. impaired loans) amounts to PLN 47,779 ths (first half 2009: PLN 21,332 ths).

8. Impairment charges

PLN’000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Net of loan impairment charge	-215 538	-433 954	-270 577
Charge for incurred but not reported losses on loans and advances	-56 355	-90 965	-23 331
Recoveries from written-off receivables	23 406	29 945	36 475
Net off-balance sheet liabilities impairment charges	-15 478	-17 763	-3 135
IMPAIRMENT CHARGES	-263 965	-512 737	-260 568

9. Net fee and commission income

PLN’000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Income from:	229 783	453 534	465 511
securities and custodian business	6 384	12 035	11 582
loans and advances	19 101	38 861	28 618
credit cards	40 161	78 610	76 157
domestic payments	54 566	104 459	96 140
foreign payments	4 333	8 353	8 034
transactional exchange rate result	22 784	55 165	55 963
investment fund management and distribution of participation units	26 031	49 923	39 789
insurance intermediary	55 557	104 767	147 483
other	866	1 361	1 745
Expenses on:	-37 685	-75 684	-82 746
securities and custodian business	-790	-1 953	-3 165
loans, advances and account administration	-7 834	-9 476	-10 506
credit cards	-12 665	-23 848	-11 769
domestic payments	-7 640	-22 726	-38 200
foreign payments	-308	-606	-614
investment fund management and distribution of participation units	-1 309	-2 415	-1 410
insurance intermediary	-5 984	-10 307	-14 097
other	-1 155	-4 353	-2 985
NET FEE AND COMMISSION INCOME	192 098	377 850	382 765

Net fee and commission income includes PLN 117,471 ths of commission income from financial assets and liabilities reported on a pro-rata basis depending on their maturity dates (first half 2009: PLN 104,775 ths) and PLN 33,324 ths in costs (first half 2009: PLN 22,275 ths).

10. Trading result and revaluation

PLN’000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Result on fixed income instruments	-5 853	-6 830	-4 268
Exchange gain	34 435	51 606	47 391
TRADING RESULT AND REVALUATION	28 582	44 776	43 123

The result on fixed-income securities includes PLN 1,168 ths in interest income from trading securities (first half 2009: PLN 1,246 ths).

11. General administrative expenses

PLN’000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Employment costs	-296 731	-480 930	-462 294
Salaries and other compensations	-274 392	-432 300	-412 501
Retirement and other benefits	5 136	962	2 445
Obligatory social security charges	-27 475	-49 592	-52 238
Building maintenance and rents	-56 019	-86 495	-98 123
Other expense	-110 077	-220 776	-240 909
Depreciation	-32 381	-66 499	-78 979
GENERAL ADMINISTRATIVE EXPENSES	-495 208	-854 700	-880 305

‘Salaries and other compensations’ for first half 2010 includes costs of employment restructuring in the amount of PLN 125,839 ths (first half 2009 PLN 85,556 ths).

‘Other expenses’ for first half 2010 include costs of employment restructuring in the amount PLN 9,518 ths (first half 2009 – PLN 0).

‘Building maintenance and rents’ and ‘other expense’ include the provisions in the amount of PLN 7,701 ths for first half 2010 for costs of restructuring connected with the optimisation of the distribution network (first half 2009: PLN 18,647 ths).

12. Income tax expense

PLN’000
	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Current tax	-3 492	-5 774	-11 463
Current year	-2 136	-4 418	-10 545
Adjustments of previous years	-1 356	-1 356	-918
Deferred tax	40 147	53 084	40 532
INCOME TAX	36 655	47 310	29 069

Reconciliation of tax expense

	Period from	Period from	Period from
	01 April 2010 to 30 June 2010	01 Jan. 2010 to 30 June 2010	01 Jan. 2009 to 30 June 2009
Profit/loss before income tax	-203 794	-266 354	-30 375
Statutory income tax at 19% tax rate	38 721	50 607	5 771
Tax-exempt revenue	520	1 043	1 179
Income of House Savings & Loan Office	520	1 043	1 179
Adjustments of previous years	-1 356	-1 356	-918
Non tax-deductible expense	-54	-1 022	-3 980
Revenues excluded from taxation	280	845	198
Taxable revenues not reported in accounting result	-1 306	-1 334	-29
Other items impacting tax charge	-150	-1 473	-1 991
Benefit from participation in a Tax Group	0	0	28 839
INCOME TAX	36 655	47 310	29 069

13. Cash and balances with the Central Bank

PLN’000
	As at 30 June 2010	As at 31 Dec. 2009
Cash	455 129	593 650
Balances with the Central Bank	350 984	649 095
Debt securities and bills issued by the State Treasury and other public
issuers eligible for discounting at the Central Bank	1 523 176	680
Securities with original maturity up to three months	1 519 713	0
Bills of exchange eligible for rediscounting	3 463	680
CASH AND BALANCES WITH THE CENTRAL BANK	2 329 289	1 243 425

The item ‘Securities with orginal maturity up to three months comprises securities classified in category ‘Debt securities designated as at fair value through profit or loss (FVO)’.

14. Trading assets

PLN’000
	As at 30 June 2010	As at 31 Dec. 2009
Debt securities (by type and issuer)	48 683	43 889
issued by central government institutions	48 683	43 889
- Treasury bonds	48 581

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