Bank Polska Kasa Opieki S A : The acquisition by Bank Polska Kasa Opieki S.A. of the enterprise and liabilities of Idea Bank S.A. as a result of the application of the resolution tool

UNOFFICIAL TRANSLATION

The acquisition by Bank Polska Kasa Opieki S.A. of the enterprise and liabilities of Idea Bank S.A. as a result of the application of the resolution tool

Legal basis: Article 17(1) of the MAR - inside information

Reference is made to current report No. 50/2020 of 31 December 2020. Bank Polska Kasa Opieki S.A. (the 'Bank') hereby announces that on 31 December 2020, the Bank received a declaration of the Bank Guarantee Fund (the 'BGF') concerning the acceptance of the binding offer submitted by the Bank on 21 December 2020 for the acquisition of the assets and rights of Idea Bank S.A. comprising the enterprise within the meaning of Article 551 of the Civil Code of 23 April 1964 (the 'Enterprise') and the liabilities of Idea Bank S.A. (the 'Liabilities'), except for certain assets, rights and liabilities (the 'Acquired Business'), following the application by the BGF of a resolution tool, as referred to in Article 174(1)(1) and 174(1)(2) of the Act of 10 June 2016 on the Bank Guarantee Fund, the Deposit Guarantee Scheme and Resolution (the 'BGF Act') (the 'Binding Offer').

As stated in current report of the Bank No. 50/2020 of 31 December 2020, the Binding Offer was submitted by the Bank in the manner specified in the BGF Act. Prior to the submission of the Binding Offer by the Bank, it was approved by the Management Board and the Supervisory Board of the Bank.

Moreover, the Bank hereby states that on 31 December 2020, it received the decision of the BGF of 30 December 2020 regarding the commencement of the resolution of Idea Bank S.A. and the application by the BGF of the resolution tool in the form of the Bank's acquisition of the Acquired Business referred to in Article 174(1)(1) and 174(1)(2) of the BGF Act (the 'Decision').

In accordance with the Decision, the Bank will acquire the Acquired Business on 3 January 2021 (the 'Acquisition Date').

Based on the Decision, in reliance on the submitted Binding Offer, the Bank will acquire the Acquired Business except for, inter alia, the following assets, rights and liabilities:
1. assets, rights and liabilities associated with actions, legal acts or unlawful activities connected with:
(a) activities related to trading in financial instruments and other activities concerning (i) financial instruments issued by GetBack S.A. and its related parties; (ii) investment certificates, in particular the investment certificates issued by Lartiq (formerly: Trigon) (Profit XXII NS FIZ, Profit XXIII NS FIZ, Profit XXIV NS FIZ) represented by Lartiq TFI S.A. (formerly: Trigon TFI S.A.); Universe NS FIZ, Universe 2 NS FIZ and other investment funds represented by Altus TFI S.A.,
(b) providing insurance coverage, performing insurance intermediation, performing insurance distribution with regard to the distribution of unit-linked insurance and life insurance where the benefit of the insurance undertaking is determined on the basis of defined indices or other base values,
(c) the rendering services as an agent of an investment firm,
(d) the business of Idea Bank S.A. in terms of the activities that may be incompatible with the Bank's scope of business presented in the Bank's articles of association,
and any claims or obligations that result, or could result, therefrom, including those that are subject to civil law and administrative proceedings, regardless of the date of the commencement thereof;
2. the shares in the subsidiaries and affiliates of Idea Bank S.A.; and
3. the corporate bonds issued by GetBack S.A.

The detailed scope of the assets, rights and liabilities excluded from the Acquired Business is presented in detail in the Decision.

The Bank will acquire the Acquired Business by: (i) acquiring the assets and rights in the form of the Enterprise; and (ii) simultaneously assuming the Liabilities. Based on an assessment prepared by the Bank as at 31 August 2020, the value of the Liabilities being assumed amounts to PLN 14,628.10 million.

Given the fact that the value of the Liabilities being assumed exceeds the value of the acquired assets, rights and liabilities in the form of the Enterprise, the BGF will grant a subsidy to the Bank, as referred to in Article 112(3)(2) of the BGF Act, in order to cover the difference between the value of the Liabilities being assumed and the value of the acquired assets and rights (the 'Subsidy').

As required under Article 174(5) of the BGF Act, the payment of compensation for the Acquired Business will be effected through the assumption of the Liabilities corresponding to the value of the acquired Enterprise, subject to the provided Subsidy.

Moreover, the BGF will grant to the Bank a loss-coverage guarantee covering the losses resulting from the risk associated with the assets, rights and liabilities of the entity under resolution as referred to in Article 112(3)(1) of the BGF Act (the 'Loss-Coverage Guarantee').

In accordance with the provisions of the Loss-Coverage Guarantee agreement, the Loss-Coverage Guarantee provides for: (i) a guarantee covering the losses resulting from the credit risk associated with the acquired loan assets (the 'CRM Guarantee') and a guarantee covering the losses (other than the losses resulting from credit risk) associated with the Acquired Business (the 'Guarantee covering other risks').

Such acquisition will involve the acquisition of credit assets constituting part of the Acquired Business and will result in an increase in the amount of risk-weighted exposures (which are calculated by multiplying the amounts of exposure and the risk weights specified in applicable laws). An increase in the level of such risk-weighted exposures will have an impact on the capital requirements applicable to the Bank.

Consequently, the CRM Guarantee will be used by the Bank as 'eligible unfunded credit protection' within the meaning 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 and amending Regulation (EU) No. 648/2012 (the 'CRR'). This will enable, with regard to credit risk, the assignment of the assumed exposures of the relevant risk weights applicable with respect to exposures to the entity providing coverage, i.e. the BGF, which qualifies as a public sector entity, in accordance with the opinion referred to in Article 116(4) of the CRR. Consequently, obtaining the opinion referred to in Article 116(4) of the CRR, and in the case the CRM Guarantee meets the conditions for 'unfunded credit protection', the exposures covered by the Loss-Coverage Guarantee agreement will qualify as exposures to the central government, thus resulting in a significant reduction of the capital requirements of the Bank on account of the credit risk.

In accordance with the Binding Offer, the Bank committed to acquiring the Acquired Business subject to, inter alia, the satisfaction of the following conditions:

1. the BGF's confirmation that the public aid granted under the Loss-Coverage Guarantee agreement and the Subsidy agreement is compatible with the internal market in accordance with Article 107 of the Treaty on the Functioning of the European Union;
2. the conclusion of a Loss-Coverage Guarantee agreement;
3. the conclusion of a Subsidy agreement; and
4. the conclusion of a cooperation agreement concerning the acquisition of the Enterprise.

On 31 December 2020, the conditions precedent concerning the acquisition of the Acquired Business were satisfied as a consequence of the BFG's confirmation that the public aid granted under the Loss-Coverage Guarantee agreement and the Subsidy agreement was compatible with the internal market in accordance with Article 107 of the Treaty on the Functioning of the European Union, the conclusion of the Loss-Coverage Guarantee agreement, and the conclusion of the cooperation agreement regarding the acquisition of the Enterprise. The Subsidy agreement is to be concluded prior to the Acquisition Date.

The Loss-Coverage Guarantee agreement and the Subsidy agreement will come into force as of the Acquisition Date.

The Bank has the financial and organisational resources so as to enable it to acquire the business of Idea Bank S.A. and continue its operations. Specifically, the Bank is able to ensure the safety of both the guaranteed assets being acquired and the guaranteed funds accumulated in the Bank.
The submission of the Binding Offer, which, in connection with the acceptance thereof by the BGF and the issuance of the Decision, will result in the Bank's acquisition of the Acquired Business, was consistent with the Bank's announced and pursued strategy, which, while based on organic growth, does not preclude acquisition initiatives consistent with the Bank's operating profile, to the extent such acquisitions may lead to the growth of the scale of the operations of the Bank's key growth areas. In connection with the acquisition and integration of the Acquired Business, the Bank estimates that over a ten-year period, cumulative cost synergies will be achieved at the level of approximately PLN 300 million on a net present value ('Net Present Value', 'NPV') basis (before tax, taking into account the positive cost synergy effects and the costs of integration). The one-time costs of integration resulting in the achievement of the planned synergies will be incurred in years 2021 and 2022, with the majority thereof being incurred in 2021.

The commencement of a resolution process has the effect of mitigating the risk of the potential bankruptcy of Idea Bank S.A., and, as a result, mitigating any adverse impact on the banking sector in the event of such potential bankruptcy should it eventuality occur.

The acquisition of the Acquired Business will not have a material impact on the Bank's financial profile or, in particular, the capital and liquidity parameters of the Bank and the Bank's capital group, which will remain significantly above the required regulatory levels.