One Bank, One Team, One UniCredit....13.1 per cent as at the end of 2019, equivalent to a pro forma1 MDA buffer of 300 basis points, above our 200 to 250 basis point target range 1

www.unicreditbank.cz

Paperlessbank

Capital and balancesheet management

Disciplined riskmanagement

Growthengines

“Go-to” bank for SMEs

Grow and strengthenclient franchise

Processoptimisation

Enhancedservice model

Compliance

Ethics and Respect

“Do the right thing!”

Sustainableresults

Customerexperience

Team 23

Transform

Sustainability

One Bank,One Team,One UniCredit.

Annual Report2019

2019 Annual Report

UniCreditBank•2018AnnualReport 1

Our strategy is clear and long-term: UniCredit is a simple successful Pan European Commercial Bank, with a fully plugged in CIB, delivering a unique Western, Central and Eastern European network to its extensive and growing client franchise.

One Bank,One UniCredit.

4 2019AnnualReport•UniCreditBank

We always favour long-term sustainable outcomes over short-term solutions. This is a key pillar of our new plan, Team 23, which will deliver €16bn of value creation.

Jean Pierre Mustier Chief Executive Officer

UniCredit S.p.A.

Dear Shareholders,2019 was a very important milestone for UniCredit, although tinged with sadness for all of us in the Group. Our chairman Fabrizio Saccomanni, who was integral to the success of the Group, suddenly passed away this summer. Fabrizio was a friend of great intelligence and humanity, highly competent with a fi ne sense of culture and wit. His premature death was a great loss for us all and he is much missed. In September Cesare Bisoni was elected chairman and I am extremely grateful to him for leading the continuing constructive work of the board.

Chief ExecutiveOfficer's message


We successfully concluded our three year strategic plan, Transform 2019, launched in 2016, exceeding many of our initial targets. This success is thanks to the drive and unwavering commitment from all our team members and the support you, our shareholders, have shown us throughout the plan. This is a great achievement and I am proud of the results and the truly transformative work that has been done. To share our success and show appreciation to our shareholders, we are pleased to propose an increased capital distribution for 2019, returning 40 per cent – 30 per cent as a cash dividend and 10 per cent through a proposed share buyback. This is double the target we set ourselves in 2016. We have shown that, no matter what, at UniCredit we say what we do and do what we say. We will apply the same mindset and dedication to our new plan, Team 23.

Although Transform 2019 was based on conservative assumptions, there were some challenges faced by the financial services sector over the past few years that could not have been foreseen. Headwinds from unexpected geopolitical tensions, macroeconomic volatility and higher regulatory pressure added to an already testing environment.

At UniCredit, we took a series of decisive actions to counter these unforeseen events, enabling us to successfully execute our business strategy, delivering on our key targets.

• Acceleration of Non Core run-off• BTP portfolio reduction• Intragroup exposure decrease

• Further cost reduction vs initial 2019 target

• Trasparent disclosure of regulatory impacts• Disposal of non-strategic assets*

Interest rate impact

Acceleration of balance sheetde-risking

Additional cost optimisation

Strong capital position

USsanctions

Regulatory headwinds

Deteriorationof economic environment

in Turkey

BTP-Bondspread

volatility

Slowdown of economic

growth

* Fineco, Mediobanca, Ocean Breeze, selected real estate.

Decisive actions

2016-2019 headwinds


Transform 2019: a strategic plan delivered as promisedTransform 2019 was about restructuring and reshaping the Group, with an emphasis on strengthening capital and improving asset quality. We also strengthened our corporate governance in line with best-in-class European companies. We are the only large listed Italian company where the board of directors presents its own list of candidates. We also lifted voting restrictions and converted savings shares into common shares.

Our hard work was acknowledged by the ECB that, at the end of 2019, lowered our SREP pillar 2 requirement by a further 25 basis points, to 175. This is 75 basis points lower than in 2016, an achievement we are very proud of and another recognition of the outstanding work done by the team over these last three years.

Gross NPEs down by more than €50bn since 2015, to

€25bnwith an end 2019Gross NPE ratio of 5.0 per cent and a Net NPE ratio 1.8 per cent

More than doubled our profitability with underlying RoTE in 2019 of

9.2 per cent up from 4 per cent in 2015

€2.3bn net cost reductionsince 2015 with C/I ratio reduced by more than 7 percentage points to 52.7 per cent in 2019

Pro forma1 CET1 ratio of

13.1 per cent as at the end of 2019, equivalent to a pro forma1 MDA buffer of 300 basis points, above our 200 to 250 basis point target range

1 Pro forma 2019 CET1 ratio and MDA buffer including deduction of share buyback of €467m, subject to supervisory and AGM approval.

SIGNIFICANT DE-RISKING

IMPROVED ROTE

MATERIAL COST REDUCTION

STRONG CAPITAL POSITION


While Transform 2019 represented a strong cost efficiency and de-risking effort, Team 23 focuses on strengthening and growing our customer base. All our key strategic initiatives focus on customer experience, which we will monitor precisely while making sure we increase our process optimisation. We will also continue to manage the business with tight cost discipline, focusing on high assetquality and ensuring we maintain a very strong capital level at all times. We work on this from a po-sition of strength, thanks to Transform 2019. We will deliver a recurring dividend with a mix of cash and share buybacks.

Team 23: a new strategic plan, further building on our pan European strengths

Grow and strengthen client

franchise

Disciplined risk management

& controls

Transformand maximise productivity

Capital andbalance sheet management

UniCredit is a simplesuccessful Pan European Commercial Bank,

with a fully plugged in Corporate & Investment Banking (CIB), delivering a unique Western, Central

and Eastern European network to its extensive and growing client franchise

Truly local with 13 leading commercial banks* and a unique reachthrough our fully plugged in CIB and international branch network

Provide “banking that matters” for all our 16 million clients acrossEurope. UniCredit is:

• Supporting our individual clients and the European mid-market corporate clients, that are the backbone of the European economy, as the second largest corporate lender in Continental Europe

• Ranked in the top three by assets in Italy, Germany and Austria and first by assets in CEE, on a consolidated basis

• We have a well-diversified business with a third of our lending coming from Italy, a third from Germany and Austria, and a third from CEE and CIB

Our strategy remains unchanged

* Assuming full regulatory deconsolidation of Yapi.

A fully plugged-in CIB business, focused on supporting the Group’s clients, with top of the league tables rankings, demonstrates our strong product offer and our ability to create significant cross-selling and synergies across the Bank

As “One Bank, One UniCredit” we will continueto build on our existing competitive advantages

8 2018AnnualReport•UniCreditBank8 2019AnnualReport•UniCreditBank

Commercial banks

International branches and representative offi ices*

Unique network: pan European footprint

Well-diversifi ed business

16

>430

#2#3 #1

m clients

Commercial loans, bn

for loans to corporates in Europe

ranking for assets in IGA

by total assets in CEE

Western Europe CEE CIB

** Italy including Non Core and Group Corporate Centre.

* Including UC Luxembourg and UC Ireland. Other International branches and representative offi ces In Asia and Oceania, North and South America, Middle East and Africa.

Source: Dealogic, period: 1 Jan-31 Dec 2019.

Italy**

GermanyAustria

“Banking that matters” for our clients

• Most active player in EUR Bonds since 2013 (cumulative)

• #1 in EUR Bonds in Italy, Germany, Austria

Market-leading CIB

• #1 All Covered Bonds in EUR

• #1 EMEA Corporate Loans EUR denominated

• #1 Syndicated Loans in Italy, Austria and CEE; #2 in Germany

UniCreditBank•2018AnnualReport 9 UniCreditBank•2019AnnualReport 9

At UniCredit, our corporate culture is based on two core values: Ethics and Respect. Our commitment to always “Do the right thing!” is our guiding principle for interactions with all our stakeholders: investors, customers, colleagues and communities.

In the fourth quarter of 2019, we announced new ESG targets as part of our long-term commitmentto sustainability – part of our Group’s DNA and a key component of our business model. Building a sustainable future is an important challenge for both people and businesses. Every company has to do more than ‘business as usual’ – it is time to act and make an impact.

How we achieve results inUniCredit: Do the right thing!

“Do the right thing!” to generate sustainable results

We adhere to the highest standards and principles with external monitoring and recognition.This include the Task Force on Climate-Related Financial Disclosures, Principles for Responsible Banking and OECD Business for Inclusive Growth Coalition. Our commitment to ESG places us in the 99th percentile of the FTSE Russell ESG ratings, a constituent of the FTSE4Good Index Series. Standard Ethics identifi ed us as the only bank in Italy with an EE+ rating, strong compliance and the ability to manage key reputational risks.

Dothe right

thing!

Communities

Investors

Colleagues Customers

Environment


Environment

Every team member of UniCredit is committed to protect the environment: the entire UniCredit team was involved in “Climate day” on Friday September 20th, submitting more than 1,200 new ideas on what UniCredit can do concretely. All these suggestions will be implemented, under the leadership of the Group “millennial board”, made of 10 millennial team members, who bring a tremendous energy and vision to our Group to “Do the right thing!”. We are committed to reducing our direct environmental impact by further cutting greenhouse gas emissions. By 2023 all electricity consumption in Western Europe will come from renewable energy sources, by when we will also remove all single-use plastic from all our headquarters. We are working to make an ever bigger difference through our indirect emissions, partnering with our customers in the shift to a low carbon economy. As already announced, we will fully exit thermal coal mining projects by 2023 and not fi nance any new projects in thermal coal mining or coal fi red power generation. We will increase our renewable energy sector exposure, granting more energy effi ciency loans to our customers.

Social

We have committed € 1 billion to Social Impact Banking (SIB) initiatives throughout the Group between now and end 2023. This builds on our success in Italy, where we have already disbursed over 100 million euros. The programme is now being rolled out in 10 more markets. Art4Future is supporting SIB with the sale of a limited number of expensive pieces to provide the capital to extend more social loans and buy art pieces of young artists from our different countries. In addition, we will continue to promote culture through important associations and our UniCredit Foundation will carry on addressing important social needs, while supporting study and research.

Governance

All companies looking to grow and thrive must also focus on diversity and inclusion. Different perspectives help improve processes and behaviours, bringing more sustainable organisations. Creating a positive and inclusive workplace is key to innovation and growth. This is why UniCredit is working on different initiatives to ensure diversity and inclusion is at the forefront throughout the Group, to increase the active participation by women and minorities at all levels of the bank.

UniCredit Leadership Team Meeting, Millennial Board presentation, Dec 2019


The future: what lies ahead

Jean Pierre MustierChief Executive Officer

UniCredit S.p.A.

UniCredit clearly shows that pan European banking is the future for our industry to support the growth of our clients, and of Europe. We are passionate Europeans, "One Bank, One UniCredit" across all our countries, combining central support and local excellence.

With Transform 2019, we have shown we always favour long-term sustainable outcomes over short-term solutions, and this is also one of the key pillars of Team 23. This is how we will deliver €16bn of value creation during our new plan, €8bn via capital distribution and €8bn from increased tangible equity. Beyond purely economic goals serving our shareholders, we will continue to “Do the right thing!” for all our other stakeholders, from our clients, our team members, to our communities and the environment.

Let me conclude by reiterating how immensely proud I am of all my UniCredit colleagues who work so hard to achieve the success of our Group, making sure we can continue to support the real economy, serve our clients, encourage growth across all our markets, transform our Group, and deliver recurring value to all our stakeholders.

Thank you!


I am immensely proud of all my UniCredit colleagues, who work so hard to achieve the success of our Group.

Jean Pierre Mustier Chief Executive Officer

UniCredit S.p.A


Our new plan is called Team 23, in recognition of the outstanding work done together for Transform 2019. Team 23 is based on four strategic pillars:• Grow and strengthen client franchise• Transform and maximise productivity• Disciplined risk management & controls• Capital and balance sheet management

Team 23


UniCredit Bank Czech Republic and Slovakia, a.s.

Contents

Introduction from the Board of Directors 16

Consolidated financial highlights 20Separate financial highlights 22

Report of the Board of Directors 31Report of the Supervisory Board 37Basis for calculating the contribution to the Guarantee Fund 37

Consolidated financial statements 39Consolidatedstatementofcomprehensiveincomefor2019 39Consolidatedstatementoffinancialpositionasof31December2019 40Consolidatedstatementofcashflowsfor2019 41Consolidatedstatementofchangesinequityfor2019 42Notestotheconsolidatedfinancialstatements 43

Separate financial statements 117Statementofcomprehensiveincomefor2019 117Statementoffinancialpositionasof31December2019 118Statementofcashflowsfor2019 119Statementofchangesinequityfor2019 120Notestotheseparatefinancialstatements 121

Auditor’s report on the annual report 191

Supplementary information 199Report on relations between the controllingand controlled entities 220Organizational structure of UniCredit Group 228List of branches 230


The year 2019 was one of the most successful years ever. We took advantage of interesting business opportunities on the market and achieved excellent business results.

Jakub Dusílek Chairman of the Board of Directors and CEO UniCredit Bank Czech Republic and Slovakia, a.s.

Chairman’sStatement

Dear Shareholders, Ladies, and Gentlemen,Let us take a look together in this 2019 Annual Report at the past year, which has been exceptional and very successful for me personally as well as for our Bank. UniCredit Bank Czech Republic and Slovakia, a.s., is part of the pan-European UniCredit banking group, which operates directly in 14 markets, includ-ing the Czech Republic and Slovakia, where we are one of the leading banks in both markets. The trust


shown to us by our clients, as much as the provision of simple, innovative products and services, is a key part of our DNA, which was also the case last year.

Economic growth experienced a slight slowdown

But let us first look back at the overall economic situation. Last year, economic growth continued, although with signs of slowdown, and the financial sector in the Czech Republic and Slovakia was par-tially affected by this slowdown. Lending in both countries continued to grow, but the growth dynamics decelerated slightly, especially in the second half of the year. As regards corporate loans, the decline in demand was associated with a weakening of investment activity; as regards loans to households, the previous tightening of regulatory rules was responsible for weaker growth. Retail lending dynamics in Slovakia remained slightly ahead of the Czech Republic.

UniCredit Bank reported dynamic growth

From the perspective of our Bank, 2019 has been one of the most successful years ever. We took advan-tage of attractive business opportunities on the market to achieve excellent business results. At the same time, we defended our leading positions in UniCredit Group in the region of Central and Eastern Europe.

With a record profit of CZK 10.1 billion, which represents a 13.0% year-on-year increase in consolidated net profit, we successfully accomplished the Transform 2019 Group programme. The increasing volume of client transactions, consistent management of the cost of credit risk, optimisation of operating costs and, last but not least, management of the bank’s balance sheet structure particularly contributed to the double-digit increase. Loans to clients reported a 7.0 % year-on-year growth and deposits from cli-ents increased by 10.7 % in 2019.

In the Retail Division, we place emphasis on the quality of our services and products, as well as on cli-ent satisfaction. The key to growth in retail banking has been simple products and regular innovations in our offer, including the introduction of the Apple Pay and Google Pay mobile wallets. The volume of lending rose, with mortgages exceeding the year-on-year growth of 9 % and 7 % as regards consumer credit.

In 2019, the Bank continued to fulfil its long-term strategic objectives. As regards corporate and invest-ment banking, these objectives are in line with the confirmation of our position as a key player in the segment of financing large multinational and national corporations while also focusing on increasing market share. We witnessed another very successful year in the key SME segment. In the segment of international enterprises, we achieved a double-digit growth rate in revenues and volume of loans granted.

Another of the Bank’s long-term strategic goals is the constant improvement of customer experience and the strengthening of the Bank’s leadership in the Czech and Slovak market. We are on track to meet this goal by focusing on clients’ needs, further streamlining and the digitisation of internal processes.

We are a leader in providing sophisticated and individual solutions and also maintained this position in the area of real estate development project financing. The Bank also reported a very successful year in the field of structured and acquisition financing through the conclusion of several large and complex transactions.

The very successful cooperation with UniCredit Leasing in the Czech Republic and Slovakia continued, with a record volume of intermediated loans in the Corporate and Investment Banking Division.

The offer of factoring products to Bank clients was fully enforced and several new products and services were developed for this purpose, such as reverse factoring or consultancy in the area of managing our clients’ working capital.


Product simplicity and growth

We want to continue being a simple and universal bank for our clients. Therefore, 2020 will primarily be a year of continued digitisation and further simplification of processes and product offers for us. We want our clients across segments to continue to have full confidence in the products and services that help them succeed in their personal financial lives and businesses in the long run.

Prestigious awards for UniCredit Bank

The enduring quality of our banking products and services, valued by our clients and partners, is evi-denced by the number of annual awards at home and abroad. We confirmed our leading position in cor-porate banking by defending our position as award-holder for best corporate bank in the Czech Republic, which is given by the magazine Global Banking & Finance. At the same time, we won first place in the Finparáda competition in the Mortgages category and second place for the PRESTO Loan – Loan Transfer product. We are also the best private bank according to Global Finance. Euromoney’s Trade Finance award was also a prestigious accomplishment.

Helping where it makes sense

At UniCredit Bank, we pride ourselves on our long-term support for socially responsible activities, educa-tion, the arts and sports. Thanks to the Social Impact Banking initiative, we can help wherever it matters through available funding for municipalities, charitable and non-profit organisations, micro-credit for start-up entrepreneurs, as well as support for financial education and volunteering.

We care about our clients and the environment in which they live, finding joy and moments in life to share with their loved ones, families and friends. That is why we have decided to fulfil their biggest wish through the “Záleží nám na tom (We Care)” project.

In cooperation with the Embassy of the Republic of Italy, we organised educational sailing trips on the Mediterranean Sea for disadvantaged children and children with cancer as part of the project “On Board with Nave Italia”.

We are a partner of Poradna při finanční tísni (Debt Advisory Centre) and help people avoid financial constraints. We actively support the improvement of gender equality in the financial services sector and continue to be a proud partner of the Karlovy Vary International Film Festival and the prestigious RunCzech series of running events.

Thank you for your trust

The long-term trust shown by you, UniCredit Bank’s clients, helps us to achieve excellent economic results, which we sincerely appreciate. We would like to extend our special thanks to UniCredit Bank’s employees, who are a key pillar of our Bank. Your efforts throughout the year are an acknowledgement as well as an obligation to us in the upcoming years.

March 2020 Jakub DusílekChairman of the Board of Directors and CEO



Financial Highlights – Consolidated

(IFRSaudited)

31 Dec 2019 31 Dec 2018UniCredit Bank Czech Republic and Slovakia, a.s. MCZK MCZKOperating resultsNetinterestincome 14578 14231Netfeeandcommissionincome 4002 3892Administrativeexpenses (6949) (7487)Profitbeforeincometax 12605 11033Netprofitaftertax 10122 8957 Statement of financial position figures Totalassets 686593 671615Receivablesfromclients–netvalue 440760 412036Depositsfromclients 414953 374745Issuedcapital 8755 8755 Alternative performance indicators* Returnonaverageassets(ROAA) 1,5% 1,3%Returnonaverageequity(ROAE) 14,7% 13,9%Assetsperemployee 211,3 206,6Administrativeexpensesperemployee 2,1 2,3Netprofitperemployee 3,1 2,8 Information about capital and capital adequacy Tier1 71100 66369Tier2 5 1415Capital 71 105 67 784 Capital requirement for credit risk under the standardised approach: 6 727 6 152Capitalrequirementsforexposuretocentralgovernmentorcentralbanks 164 147Capitalrequirementsforexposuretoregionalgovernmentorlocalauthorities 16 6Capitalrequirementsforexposuretoinstitutions – –Capitalrequirementsforexposuretobusinesses 2388 2453Capitalrequirementsforretailexposures 2600 2186Capitalrequirementsforexposuressecuredbyrealestate 942 913Capitalrequirementsforexposuresatdefault 62 79Capitalrequirementsforhighriskexposures 88 –Capitalrequirementsforequityexposures 160 123Capitalrequirementsforotheritems 307 245 Capital requirement for credit risk under the IRB approach: 19 430 18 865Capitalrequirementsforexposuretocentralgovernmentorcentralbanks 213 289Capitalrequirementsforexposuretoinstitutions 632 740Capitalrequirementsforexposuretobusinesses 16369 15884Capitalrequirementsforretailexposures 1929 1781Capitalrequirementsforothernoncredit-obligationassets 287 171 Capitalrequirementsforpositionrisk 367 333Capitalrequirementsforcurrencyrisk – –Capitalrequirementsforsettlementrisk – –Capitalrequirementsforcommodityrisk 1 1Capitalrequirementsforoperationalrisk 2044 1841Capitalrequirementsforcreditvaluationadjustment 38 70Capitalrequirementforotherriskexposures 108 – CET1capitalratio 19,81% 19,48%Tier1capitalratio 19,81% 19,48%Totalcapitalratio 19,81% 19,89% Averagenumberofemployees 3249 3251Numberofbranches 126 130


Reconciliationofequitytoregulatorycapital(consolidated)

31 Dec 2019 31 Dec 2018UniCredit Bank Czech Republic and Slovakia, a.s. MCZK MCZKData from the Statement of Financial Position:Sharecapital 8755 8755Sharepremium 3495 3495Valuationreserves (263) 912Retainedearnings,reservefundsandothercapitalfunds 56504 53530Profitfortheyear 10122 9047Total equity 78 613 75 739 CET1capitaladjustments: Profitfortheyear (5061) (6070)Reservefromrevaluationofhedginginstruments 798 (203)Reservefromrevaluationofavailable-for-salesecurities – –Intangibleassets (2345) (2179)Creditriskadjustmentsfornon-defaultedexposures 1549 1375Anticipatedlossesfornon-defaultedexposures (2302) (2175)Effectofcompaniesnotincludedintheprudentialconsolidationgroup (90) (23)Otheradjustments (62) (77)Total CET 1 71 100 66 369Total Tier 1 (T1) 71 100 66 369 Creditriskadjustmentsforexposuresatdefault 6477 7233Anticipatedlossesforexposuresatdefault (6472) (3850)Non-deductiblesurplusabovetherisk-weightedassetslimit – (1968)Total Tier 2 (T2) 5 1 415 Capital 71 105 67 784

* Definition of used alternative performance indicators

UniCredit Bank Czech Republic and Slovakia, a.s. publishes Alternative performance indicators in Annual Report according to the Annex 14 to the Decree No 163/2014 Coll.ROAA(Rentabilityofaverageassets)standsforaneffectiveassets

baseutilisationrateROAE(RentabilityofaverageTier1Capital)standsforaneffective

equityutilisationrateAssetsperemployeeAdministrativeExpensesperemployeeNetprofitperemployeeTheBankstatestheseAlternativeperformanceindicatorstocomparewithotherbanksonthemarket,whichhavethesameobligationtopublishtheseindicators.

Average total assets:(TotalassetsattheendoftheyearX+TotalassetsattheendoftheyearX-1)dividedby2

Average tier 1 equity:(Tier1equityintheyearX+Tier1equityintheyearX-1)dividedby2

Average number of employees:ThesumofemployeesattheendofeachmonthintheyearXdividedby12

Return on average assets (ROAA):NetprofitintheyearXdividedbytheaveragetotalassets

Return on average tier 1 equity (ROAE):NetprofitintheyearXdividedbytheaveragetier1equity

Assets per employee:TotalassetsattheendoftheyearXdividedbytheaveragenumberoftheemployees

Net profit per employee:NetprofitattheendoftheyearXdividedbytheaveragenumberoftheemployees

WhereX=2019andX-1=2018


Financial Highlights – Separate

(IFRSaudited)

31 Dec 2019 31 Dec 2018UniCredit Bank Czech Republic and Slovakia, a.s. MCZK MCZKOperating resultsNetinterestincome 13253 13084Netfeeandcommissionincome 3600 3458Administrativeexpenses (6433) (6961)Profitbeforeincometax 11595 10866Netprofitaftertax 9433 8923 Statement of financial position figures Totalassets 672552 660140Receivablesfromclients–netvalue 427803 401589Depositsfromclients 415017 374904Issuedcapital 8755 8755 Alternative performance indicators* Rentabilityofaverageassets(ROAA) 1,4% 1,4%RentabilityofaverageTier1Capital(ROAE) 14,2% 14,1%Assetsperemployee 221,8 226,0GeneralAdministrativeExpensesperemployee 2,1 2,4Netprofitperemployee 3,1 3,1 Information about capital and capital adequacy Tier1 68522 64400Tier2 5 1603Capital 68 527 66 003 Capital requirement for credit risk under the standardised approach: 3049 2610Capitalrequirementsforexposuretocentralgovernmentorcentralbanks 133 147Capitalrequirementsforexposuretoregionalgovernmentorlocalauthorities 16 5Capitalrequirementsforexposuretoinstitutions – –Capitalrequirementsforexposuretobusinesses 314 318Capitalrequirementsforretailexposures 1230 901Capitalrequirementsforexposuressecuredbyrealestate 882 865Capitalrequirementsforexposuresatdefault 27 27Capitalrequirementsforhighriskexposures 88 –Capitalrequirementsforequityexposures 359 347Capitalrequirementsforotheritems – – Capital requirement for credit risk under the IRB approach: 22 078 21 374Capitalrequirementsforexposuretocentralgovernmentorcentralbanks 213 289Capitalrequirementsforexposuretoinstitutions 632 740Capitalrequirementsforexposuretobusinesses 19017 18392Capitalrequirementsforretailexposures 1929 1781Capitalrequirementsforothernoncredit-obligationassets 287 171 Capitalrequirementsforpositionrisk 367 333Capitalrequirementsforcurrencyrisk – –Capitalrequirementsforsettlementrisk – –Capitalrequirementsforcommodityrisk 1 1Capitalrequirementsforoperationalrisk 1872 1681Capitalrequirementsforcreditvaluationadjustment 38 70Capitalrequirementforotherriskexposures 108 – CET1capitalratio 19,92% 19,76%Tier1capitalratio 19,92% 19,75%Totalcapitalratio 19,93% 20,25% Averagenumberofemployees 3032 2921Numberofbranches 126 130


Reconciliationofequitytoregulatorycapital(separate)

31 Dec 2019 31 Dec 2018UniCredit Bank Czech Republic and Slovakia, a.s. MCZK MCZKData from the Statement of Financial Position:Sharecapital 8755 8755Sharepremium 3495 3495Valuationreserves (261) 913Retainedearnings,reservefundsandothercapitalfunds 54344 51496Profitfortheyear 9433 8923Total equity 75 766 73 582 CET1capitaladjustments: Profitfortheyear (5061) (6070)Reservefromrevaluationofhedginginstruments 796 (204)Reservefromrevaluationofavailable-for-salesecurities – –Intangibleassets (2097) (1950)Creditriskadjustmentsfornon-defaultedexposures 1590 1396Anticipatedlossesfornon-defaultedexposures (2410) (2277)Otheradjustments (62) (77)Total CET 1 68 522 64 400Total Tier 1 (T1) 68 522 64 400 Creditriskadjustmentsforexposuresatdefault 6477 7233Anticipatedlossesforexposuresatdefault (6472) (3850)Non-deductiblesurplusabovetherisk-weightedassetslimit – (1780)Total Tier 2 (T2) 5 1 603 Capital 68 527 66 003

* Definition of used alternative performance indicators

UniCredit Bank Czech Republic and Slovakia, a.s. publishes Alternative performance indicators in Annual Report according to the Annex 14 to the Decree No 163/2014 Coll.ROAA(Rentabilityofaverageassets)standsforaneffectiveassets

baseutilisationrateROAE(RentabilityofaverageTier1Capital)standsforaneffective

equityutilisationrateAssetsperemployeeAdministrativeExpensesperemployeeNetprofitperemployeeTheBankstatestheseAlternativeperformanceindicatorstocomparewithotherbanksonthemarket,whichhavethesameobligationtopublishtheseindicators.

Average total assets:(TotalassetsattheendoftheyearX+TotalassetsattheendoftheyearX-1)dividedby2

Average tier 1 equity:(Tier1equityintheyearX+Tier1equityintheyearX-1)dividedby2

Average number of employees:ThesumofemployeesattheendofeachmonthintheyearXdividedby12

Return on average assets (ROAA):NetprofitintheyearXdividedbytheaveragetotalassets

Return on average tier 1 equity (ROAE):NetprofitintheyearXdividedbytheaveragetier1equity

Assets per employee:TotalassetsattheendoftheyearXdividedbytheaveragenumberoftheemployees

Net profit per employee:NetprofitattheendoftheyearXdividedbytheaveragenumberoftheemployees

WhereX=2019andX-1=2018


TheCzecheconomydeceleratedforthesecondconsecutiveyear,reportinga2.4%growth.Theprimarycauseoftheslowdownwasadeteriorationinforeigndemand,underminedbythetradedisputesbetweentheUSandChina,andtheturmoilsurroundingtheUKleavingtheEU.Thereductioninexportopportunitieswasgraduallyreflectedinweakerfixedcapitalformationfordomesticenterprisesandpartlyalsoinadecreaseinthegrowthrateofprivateconsumption.Forthefirsttimeinsixyears,industrialproductionreportedayear-on-yeardecline.Constructionproductioncontinuedtogrow,yetsignificantlylowerthaninthepreviousyear.Theeconomicslowdownledtoaslightlydelayedhaltinemploymentgrowthwhilenotincreasingtheunemploymentrate.Thefocusoflabourshortagesshiftedfromtheindustrytosomeservices.

Tensionsinthelabourmarketcontinuedtopushinflationup.Itsannualaverage,supportedbyrisingfoodprices,reportedasix-yearhigh(2.8%)anditsyear-on-yearvalueexceeded3%beforetheendoftheyear.TheCzechNationalBankfolloweditspreviousstepsoftighteningmonetarypolicyandincreaseditsreporateby25bpto2.0%.However,higherinterestratesontheCzechkorunadidnottriggeratrendappreciationofitsexchangerate.Itappreciatedagainsttheeurobyonly1.2%attheendoftheyear.

Thebankingsector‘sprofitexceededthepreviousyear‘svaluebyalmost12%owingtohigherinterestincomeandlimitedcostofrisk.Intheareaoffinancialpolicy,thecountercyclicalcapitalbufferdoubledto1.5%basedontheCNB’s2018decision.ThenexttwostepsannouncedbytheCNBduringtheyearwilltakeeffectduring2020,whenthisbufferwillamountto2.0%.Onthemortgagemarket,thevolumeofnewlygrantedloansfellby16.6%year-on-year,followingtheearliertighteningofregulation.Realestatepricescontinuedtorise,whichmoderatedtoyear-on-yearsingle-digitvaluesaccordingtomostindicators.

Inthepublicsector,socialexpendituresacceleratedfollowingtheapprovedincreaseinpensionsbeyondtheirstatutoryindexation.FastergrowthingovernmentexpenditureascomparedtorevenuesprovidedtheCzecheconomywithanoticeablefiscalimpulse.TheestablishmentoftheNationalDevelopmentFundbecameamilestoneforfuturecooperationbetweenthepublicsectorandbanksintheareaofinfrastructureinvestments.Ameasureabolishingthewaitingperiodforsick-leavepaycameintoeffectfromthemiddleoftheyear,whichburdenedthecorporatespherewithnewcosts.

ThegrowthoftheSlovakeconomysloweddownfrom4.0%to2.3%in2019duetoweakeningforeigndemand.Expectationsofastrongcompensatoryeffectofsupplyshockintheformofanewcarplantinthecountrydidnotfullymaterialiseasweakeningforeigndemandsloweddownitsstart,whilethesecondaryeffectsonthesubcontractingchainpartiallyspilledoverintoneighbouringcountries.Theweakeningforeigndemandhassofarhadonlyalimitedimpactonthedomesticeconomy.

Thelabourmarketremainedstrong,withunemploymentatahistoricallow.Combinedwiththeapproachingelections,itexertedpressureonwagegrowth,whichhasreportedthefastestgrowthinthelastdecade.Thestrongwagegrowthalsotranslatedintoinflation,mainlythroughtheservicesector.Inflationthusroseupto3%attheendoftheyear.Towardstheendoftheyear,thedecliningindustryandacceleratinginflationdidbegintoerodeconsumerconfidenceandalsocontributedtotheslowdownofhouseholdconsumption.

LowinflationintheeurozonedidnotgivetheEuropeanCentralBankareasontotightenitsmonetarypolicystance.Onthecontrary,growthrisksledtheECBtolowerthesterilisationinterestratefrom–0.4%to–0.5%andtorestoreitsAssetPurchaseProgramme.ThispushedinterestratesontheinterbankmarketevenmoreintonegativeterritoryandstoppedtherecoveryofSlovakbanks‘interestincome.Netinterestincomereturnedtoadecline(-2.8%),despitepersistingassetgrowth(5.8%).Nevertheless,thegrowthdynamicsofloansdiddecelerate.Afterfiveyears,stricterregulationpushedthegrowthofhouseholdloanstothesingle-digitlevel(8.0%)andthegrowthincorporateloansreporteda5-yearlow(3.6%).Decelerationwasalsoreportedbythegrowthdynamicsofdeposits,especiallyofenterprises,andthevolumeofloanscontinuedtoexceedthevolumeofdeposits.Thebankingsector’sprofitwasalsoboostedbyhigherfeeanddividendincome,aswellasbylowercostofrisk.Despitedeclininginterestincome,tradingincomeandrisinglabourcostsandregulatoryfees,banks‘profitaftertaxincreasedslightlyby0.5%in2019.

Inthepoliticalarena,2019wasmarkedbytheupcomingparliamentaryelections.Fiscaltighteningeasedandthegovernmentmovedawayfromtheirgoalofabalancedbudget.TheyaretryingtokeeppublicbudgetsinlinewithbothdomesticandEuropeanrulesinthecomingyearsthroughadditionalincreasesinbudgetrevenue,forexamplebyextendingandincreasingthebanklevy.

Macroeconomic situation

CzechRepublic Slovakia


Corporate and investment banking

2019representedanothersuccessfulyearfortheCorporateandInvestmentBankingDivision.WecontinuedtoreinforceourstrongpositionintheCzechandSlovakmarkets.Wedidwellintheacquisitionofnewclientsowingtotheprovisionofcomprehensiveservicesandhighflexibilityforourclients.Revenuesfromtheprovisionofservicestocorporateclientsrosebymorethan5%comparedto2018,andweacquiredmorethan3,100newclients.

Asforprimarysources,wecontinuedtoincreasethevolumeofdeposits.ThevolumeoftermdepositsincreasedbymorethanCZK25billion.TheDivision‘sprioritywasalsotostrengthentheportfolioofCZKdepositsin2019,wherewereportedasignificantincreaseinthesecondhalfof2019.Thetotalvolumeofprimarysourcesincreasedbymorethan9%year-on-year.

Asregardslending,2019sawanincreaseinlendingvolumeofmorethanCZK6billion.Weachievedgreatresultsespeciallyintheareaoffinancingofinternationalclients,whereweincreasedthevolumeofloansbymorethan11%andrevenuesrosebymorethan8%.Wewerealsoverysuccessfulintherealestatefinancingsegment,wherewereportedanincreaseinloansofmorethan12%.Excellentresultswerealsoreportedinthesegmentoflargecorporates,wherewefurtherstrengthenedthetraditionallystrongportfoliowithintheGroup,benefitingfromthepan-EuropeanpresenceoftheUniCreditbankinggroup–thetotalyear-on-yeargrowthinrevenuesamountedto24%here.Ourgoalwasalsotostrengthenourpositionintheareaofoperationalfinancing,whereweextendedourproductofferbyreversefactoring,whichprovidescomprehensivefinancingofthecustomer-supplierchain.

Thegrowthinlendingwasalsodrivenbycooperationwithexternalentitiesgrantingbankguaranteestosmallandmedium-sizedenterprises,orprovidingtheBankwithcheapersourcesoffinancingandthusmakingfinancingavailabletoalargerrangeofclients.Onalong-termbasis,thoseentitiesincludeČeskomoravskázáručníarozvojovábanka(ČMZRB),theEuropeanInvestmentFund(EIF),theEuropeanBankforReconstructionandDevelopment(EBRD)andtheNationalDevelopmentFundII(NDFII./SZRB).WeweretheonlybankontheSlovakmarkettopossessthe“FirstLossPortfolioGuarantee”fromNDFII.

In2019,theCorporateandInvestmentBankingDivisionreinforceditsuniquepositiononthemarketofstructuredfinanceandsyndicatedloans,whichwasprovedbythenumberofmandatesarrangedandtheclosingofstructurallyattractivetransactions.Wesupported,forexample,MacquarieintheacquisitionofadominantgasdistributorintheCzechRepublic,whereUniCreditactedasunderwriterandleadarranger.AnothersignificanttransactionwastheacquisitionofCMEbyPPFGroup,whereUniCreditactedasunderwriterandleadarranger.ThetotalfundingamountedtoEUR1.15billion.Wealsoactedasarranger,forexample,intheclub

holdingfinanceforCPIGroupintotalvolumeofEUR510million.AlargenumberoftransactionswasalsocarriedoutintheSMEandMIDsegment,where,asaresultofgenerationalturnover,eitherentirecompaniesorpartoftheirbusinesssharesaresold.

InSlovakia,inadditiontostandardprojecttransactions,UniCreditBankcontinuedtoincreaseitsmarketshareinthefinancingofrenewableenergysources.Themostsignificanttransactioninthissegmentin2019wasaEUR51millionloanfora34.5MWphotovoltaicpowerplant(PVP)portfolio.Owingtothistransaction,theBankalsostrengtheneditsleadingpositioninPVPfinancinginSlovakia.

OurBankalsomaintainsanimportantpositioninthefinancingofcommercialrealestateintheCzechRepublicandSlovakiainallmajorsegmentsoftherealestatemarket–office,retailandindustrialrealestate,aswellasinresidentialconstruction.InCzechia,newfinancingofrealestateprojectsintotalvolumeofCZK15billionwasconcludedin2019.Thisvolumewaslargelyduetoloansintheofficeandretailsegment.

Themostsignificanttransactionin2019wasasyndicatedloanofEUR1.9billionforCTPGroup,whichconstitutedthelargestrealestatetransactionintheCEEregion.UniCreditGroupactedasoneofthreeleadarrangerswhojointlysubscribedandsuccessfullysyndicatedtheentirevolumeoffunding.

Asregardsresidentialprojects,wemanagedtoconcludeanumberoftransactionsforexistingandnewclientsfromamongdevelopersandinvestmentgroups.

InSlovakia,wefinancedseveralacquisitionsfornewclientsintheindustrialrealestateandofficespacesegment.Ourcooperationwithmajorforeignanddomesticinvestorscontinued.WeareafinancingbankandalsoanagentofaconsortiumofbankswhichprovidedaloanfortheconstructionoftheStanicaNivybusstationinBratislavaforHBReavisGroup.Asregardsresidentialprojects,in2019weexpandedouractivitiestoincludecooperationwithnewpartners.

Earlyin2019,theIndustryExpertizeCenterwasestablishedtoconsolidateandmaintainknow-howinthesectorsinwhichtheBankwantstobepresentanddevelopinthelongrun.Theseincludemostlyfinancingofenergyandrenewableresources,agriculture,publicandmunicipalsectors,healthcareandchurchentitiesintheCzechRepublicandSlovakia.

Inthelongterm,theBankmaintainsitsleadingmarketpositioninthefinancingofrenewableresourcesandenergy.

Intheareaofhealthcare,in2019wefocusedonsupportinglargehealthcarefacilitiesbyfinancinginvestmentandoperationalneeds,aswellasthepurchaseofreceivables(forfaiting).


TheBankalsostartedtofocusintensivelyonthemunicipalsector,bothintermsofdirectfinancing(infrastructureandsocialprojects)andintermsofadministrationandappreciationofdepositsofregions,citiesandmunicipalities.

UniCreditBankhaslongbeenpresentintheagriculturalsector.IntheCzechRepublic,itcontinuestoboostourmarketsharegrowththroughthecreationofsimpleandfastcreditproductsandlandfinancing.InSlovakia,UniCreditmaintainsitsleadingpositioninfinancingtheagriculturalsectorwithamarketshareofapproximately40%inthenumberofservicedclients.

In2019,theBankcontinuedtofinanceprojectsimplementedundertheEuropeanStructuralFunds.Thismainlyincludedrealestaterenovationsorpurchasesoftechnologies.TheBankalsoprovidedadviceoninvestmentincentives.InSlovakia,wealsofocusedontheSlovSEFFprogrammeoftheEuropeanBankforReconstructionandDevelopment.

Transactionbankingreportedpositiverevenuegrowthin2019tothelevelofmacroeconomicresults.Moreproductlinescontributedtotheyear-on-yeargrowth,inparticularthedevelopmentinclientdeposits,securitiesmanagementservices,transactionsinthePOSterminalnetworkandtradefinance.

Wesupportedourclients‘exportswithseveralimportantbusinesstransactions,includingthefirstbuyercreditfromtheCzechRepublictoUzbekistan,insuredbythestateinsuranceagencyEGAP.

Productsupportanddevelopmentweredirectednotonlytoareaswithhighsalespotential,suchaspaymentsorworkingcapitalfinancing,butalsotoareaswithapositivesocialimpactonsociety.Agoodexampleisthecombinationofdigitisationtrendsandaccessibilitytocharity.UniCreditBankwasthefirstintheCzechRepublicandSlovakiatoprovideselectnon-profitorganisationsandchurcheswitha“charitykiosk”.Thedeviceenableseasypaymentswithcontactlesscardsormobilewallets.

Theopinionsofourclientsandprofessionalsareakeyindicatorofourchoiceofdirectionandthequalityofourproductsolutionsintransactionbanking.Forthesereasons,weareproudtohaveearnedanumberofleadingawards:

Securitiesmanagementproductsandservices–GlobalFinance:•(#1)BestSub-custodianBanks2019intheCzechRepublic

Tradefinanceproductsandservices–EuromoneyTradeFinanceSurvey2020:•(#1)MarketLeaderintheCzechRepublicandSlovakia•(#1)BestServiceintheCzechRepublicandSlovakia

Cashflowandliquiditymanagementproductsandservices–EuromoneyCashManagementSurvey2019:•(#1)BestServiceProviderinSlovakia•(#3)MarketLeaderintheCzechRepublic

Cardacceptanceproductsandservices:•MASTERCARDAWARD2020Charitykiosk

UniCredit Factoring and UniCredit Leasing Comparedtothepreviousyears,whentheentirefactoringmarketgrewatadouble-digitrateannually,itdeceleratedto+5.5%year-on-yearin2019.Thepositivenewsisthatthetraditionalgrowthdynamicsoftheturnoverremainedverystronginthelastquarter,whenthefactoringmarketgrewby14.7%comparedtothethirdquarter,whileoursubsidiaryUniCreditFactoringgrewby40%inthesameperiod.TheOctoberturnoverisworthmentioning,whenUniCreditFactoringsurpassedtheCZK3billionthresholdforthefirsttime.Attheendof2018and2019,thetotalexposureofthefactoringmarketwasessentiallythesame.Oursubsidiaryreportedaroughly4%increaseinthisindicator.InDecember2019,itreacheditshistoricallyhighestexposure,namelyCZK3.49billionofrefinancedreceivables.

In2019,UniCreditLeasingcontinuedinthebusinessstrategysetoutwithinits2017-2019three-yearplan.Thelong-termfocusofthecompanyasauniversalleasingplayerwasagainconfirmedastherightdirection,whenin2019(for1-3Q/2019)thecompanymaintaineditspositionasleaderoftheCzechleasingmarketandrankedfirstinfinancedvalueontherelevantleasingmarket.UniCreditLeasingSlovakiaalsoperformedverywellontheSlovakleasingmarketandincreaseditsmarketsharefor1-3Q/2019to14.7%(versus14.0%for1-3Q/2018),expressedinacquisitioncost.Asregardsfinancingofnewpassengercars,whichisacorebusinessforUCL,UniCreditLeasingmanagednotonlytosuccessfullysupportdistributionofexistingcarbrandsthroughfinancialservices,butalsotoacquirenewpartnershipsfortheCzechRepublicandSlovakia,especiallyNISSAN(newlydistributedbyprivateimporterGrandAutomotiveofTaavuraHoldings)andnewbrandfinancingforpremiummotorcycleswithHarleyDavidsonFinancialServices.Lastbutnotleast,the2019strategyalsoincludedthestrengtheningofinnovativesystemsolutionsandthecompanylauncheditsowne-shop,www.ucleshop.cz,www.ucleshop.sk,atthebeginningof2019.


Retail banking

TheretailbankingmarketintheCzechRepublicwascharacterisedbyhigherinterestratesfollowingtheirsignificantgrowthinthepreviousyear.CompetitionintheareaofhouseholdandentrepreneurdepositsincreasedandthemortgagemarketwassignificantlyaffectedbytheimpactoftheCNBregulationrestrictingtheavailabilityofmortgagestohouseholds.ThesituationinSlovakiawasdifferent,withextremelylowratesoneurodepositsandloansprevailing,whichcontinuedtofallduringtheyear.Theenvironmentofexceptionallylowratesstimulatedtheconsumercreditmarketandespeciallythemortgagemarket.

UniCreditBankCzechRepublic&Slovakia’sRetailandPrivateBankingDivisioniscontinuouslyimprovingthequalityofservicesforitsclients.Customerexperienceisanabsolutepriorityforus,evidencedalsobyourNetPromoterScoreresults,wherewescoredexceptionallygoodresultsasregardsindividualclientswithintheCzechandSlovakMarketintheUniCreditCEEDivisionin2019.

Bank activities in retail and private bankingIn2019,theBankcontinuedtopursueitsstrategicgoalofreinforcingitspositionofuniversalproviderofbankingandfinancialservicesandofbecomingaleadingbankonbothmarkets.Wewanttoachieveamajorincreaseinmarketsharenotonlybyconcentratingonselectperspectivesegmentsoftheretailmarket,butmainlyowingtoinnovationsinavailabilitythroughalternativedistributionchannelsandproductoffer.

Ontheretailmarket,theBankprovidesafullrangeofbankingproducts–currentandsavingsaccounts,savingsandinvestmentproducts,paymentcards,housingfinancingproducts,andconsumercredit.Incooperationwithourstrategicpartners,weareincreasinglyfocusingoninvestmentproductsaswellasbancassurance.Withalltheseproducts,theBankaimstoprovideinnovativeproductsandmakemaximumuseofelectronicdistributionchannels.

Ourorientationongrowthis,ononehand,basedmainlyonfullyusingthepotentialandactivationofourexistingclients,andontheother,theacquisitionofnewclientsfromtargetsegments.In2019,theBankpaidattentiontoacquisitionincooperationwithcompaniesoutsidefinancesandbankingandtoinnovativeoffersfornewclients.Clientgrowthcontinued,withnearly100thousandnewclientsstartingtousethemodernbankingservicesandproductsprovidedbyUniCreditBank.

Inspiteofever-increasingcompetitivepressureandanumberofnewregulationsinthefieldofcreditproducts,theBankmanagedtoincreasethevolumeofretailloansbymorethan8%.Thegrowthdriverwasmortgageloans,withayear-on-yeargrowthof8.4%.

Intheprivatebankingsegment,theBankmanagedtoattractmorethan1,000newclientsandincreasetheamountofassetsunderitsmanagementbynearlyCZK4.5billion.

Loans

In2019,thePRESTOLoanwitharewardforduerepaymentwasourflagshipproductbothintheCzechRepublicandinSlovakia,whereallclientscanachieveaneffectiveinterestrateof3.89%whentheyshortentheirmaturity,subjecttotheconditionsofduerepayment.Asastandard,weofferfourcategoriesofloansinbothcountries:refinancingortransferofloans,simpleandfastgeneral-purposeloansunderspecialconditionsforexistingclients,general-purposeloansingeneralandPRESTOLoansforHousing.Attheendoftheyear,inordertoimproveourportfolioquality,wedefinedstricterconditionsformaximummaturityand,inmostcases,wereducedthemaximummaturityto84to96months.

Ourflagshipproduct,thePRESTOLoan–LoanTransfer,isverypopularandwasrecognizedasoneofthebestfinancialproductsof2019byanawardfromtheFinparada.czportal.

Ourfocusonproductswithexcellentconditionsforclientswithgoodcredithistoryislong-termand,therefore,thislow-riskclientsegmentwasagainthestrongestsegmentwithinalldisbursedloans.Weextendedproductavailabilityin2019bylaunchingpilotend-to-endprocessesthroughmobilebankingandthroughathird-partyplatform,thuscomplementingthelong-functioningprocessthroughinternetbanking.

Mortgages

2019wasstillaffectedbycontinuedregulationbytheCNBandNBS.Intermsofthedevelopmentofinterestrates,2019wasmorefavourableforclientsduetoslightlydecreasinginterestrates.

IntheCzechRepublic,owingtoourattractiveoffer,wereportedverystrongsalesinthefirstandsecondquarter,whenweconductedabout60%ofannualmortgagedeals.Clientscontinuedtopreferinterestrateswithlongerfixationperiods,especiallyten-yearfixations.InSlovakia,weachievedrecordsalesinthethirdandespeciallyinthefourthquarter,whenwewereoneofthefirstbankstosignificantlycuttheinterestrateonnewmortgageswithten-yearfixations.

Wecontinuetoincreasethesimplicityandtransparencyofourprocesses,forexample,wehavereducedtheMortgageApplicationbyonepage,andwesendourexternalpartnersnotificationsonthestatusoftheirapplicationprocess.Wearealsoexpandingourproductrange.InSlovakia,weintroducedmonthlypaidinsurance


orthepossibilityoftakingoutaloanwithoutprovidingaparticularproperty;weannulledtheneedtosubmitproofofincomeforemployedclientswhoseincomecanbeverifiedintheSocialInsuranceAgency’sregisterinSlovakia.IntheCzechRepublic,weestablishedstrongerlinksbetweenescrowaccountsandmortgagesandsimplifiedanumberofinternalprocesses.

Current accountsIn2019,Ukontoremainedourkeyacquisitionproduct,which,despiteextraordinarycompetition,remainsoneofthebestproductsonthemarket.

Wecontinuedtoimplementinnovativecampaigns,whetherinwell-establishedcooperationwithafoodchainorintheunusualconnectionofthebankingandfilmworldthroughdesignpaymentcards.Wealsorewardednewclientsforopeningaccountswithpaymenttransfers.

Investments and depositsDespiteincreasinginterestrates,investmentproductsarestilloneofthemainpillarsofourproductoffer.ThebasisofourofferstillconsistsofthreeAmundiFundSolutionsfunds(conservative,balancedanddynamic),i.e.stronglydiversifiedinvestmentsolutionstogetherwithactiveandflexiblemanagement,whereeachofthesefundsrepresentsacomprehensiveportfoliosolutionforaclient’srelevantriskprofile.ThesefundsarealsousedasthecornerstoneofourUinvestproduct–aprogrammeofregularinvestmentwhichprovidesourclientswithflexiblesolutionstogrowtheirassetsinasimpleandsystematicway,whilespreadingtheinvestmentovertimestronglyeliminatestheriskofpotentialwrongtimingforpurchases.Regularinvestmentisanevermorepopularwayofincreasingthevalueofclients’funds.

Moreover,lastyearwefirstofferedfourAmundiBuyandWatchfundstoclientsintheCzechRepublicandSlovakia.ThesefundsinvestinaportfolioofseveraltenstohundredsofparticularbondswithamaturityapproximatelyequaltothepredefinedmaturityoftheBuyandWatchfund(5-6years).Thefundmanager‘sgoalistoholdthesebondsuntiltheirmaturity.BuyandWatchsolutionsprovideinvestorswithmorerevenuepredictabilitythanconventionalbondfunds.Comparedtodirectinvestmentinasinglebond,itofferssimilarrevenuesand,duetoitswideportfoliodiversification,lowerriskassociatedwiththeinvestment.

DigitalIn2019,weagainsignificantlyincreasedthenumberofactiveSmartBankingandOnlineBankingusers.IncompliancewiththeEuropeanregulationPSD2,newfortransactionauthorisationandopenAPIruleswereimplementedsuccessfully.Intheautumn,digitalservicesforSmartBankingandOnlineBankingretailclientsweretransferredtoanew,moremoderninfrastructurethatenablesapplicationdevelopmentinlinewithcurrenttrendsandclientrequirements.WelaunchedanentirelynewBusinessSmartBankingforSMEsandcorporateclients.Weareworkinghardtostreamlineanddigitiseprocessesforthesaleofproductsinthefieldofaccounts,consumercreditandmortgages.

Small BusinessIntheSmallBusinesssegment,wereliedonthesimplicityofourofferandthetransparencyofourproductsin2019.Inthesecondhalfoftheyear,wesignificantlyimprovedourproductofferfortheAssociationofHousingOwnersandHousingCooperatives,offeringthemanincreaseinvaluefortheirsavingsaswellasfavourableaccounts.

Inthesegmentofliberalprofessions,wefocusedonbankers’professionalismwithanemphasisontheunderstandingoftheindividualneedsofeachclientgroup.Oureffortshaveresultedinourgrowingmarketshare,especiallyinthelegalfield.

Payment cardsDuring2019,wetookanumberofstepstoboostourclients‘transactionalactivities,especiallyincooperationwithourpartnerMastercard.Inthesecondhalfoftheyear,welaunchedApplePayandGooglePaymobilepaymentsforbothourdebitandcreditcardportfoliosinbothmarkets.

Private bankingIn2019,UniCreditBankPrivateBankingcontinuedthetrendofpreviousyearsandreportedafurtherincreaseinthenumberofclientsservedandthevolumeofclientassetsundermanagement.Oureffortsfocusedonmaximisingourcooperationwithclientsandaddressingawiderangeoftheirneedsinprivatefinance.OuraimwastoprovideclientswithcomprehensivecareusingallproductsandservicesofferedbyourBankandpartnerorganisations(e.g.UniCreditLeasingorAllianzpojišťovna).Wepaygreatattentiontoclientsatisfaction,whichisevaluatedthroughregularclientsurveys.


Markets

Throughouttheyear,wefocusedonourclients’financialneedsinallmajorareas–investment,transactions,financingandinsurance.Throughouttheyear,clientsmadeuseofourofferoftermdepositsandourwiderangeofinvestmentsolutions.Interestinfinancingwasstablethroughouttheyear,withdemandformortgagesdominating.Theverypositivedevelopmentoncapitalmarketstranslatedintoincreasedclientinterestininvestmentinmutualfundsandassetmanagementduring2019.ThevolumeofclientfundsinvestedinAssetsunderManagement(AuM)roseby12%year-on-year.

Inthefieldofinvestment,privatebankingintheCzechRepublicandSlovakiaisbasedonacontrolledopenfundarchitecture,whichisstillauniqueconceptonbothmarkets.Thus,theBankprovidesitsclientswithaccesstonotonlyhigh-qualityinvestmentsolutionsfromthewholeUniCreditGroup,butalsotothebestfundsingivencategoriesofferedbypartnercompanies,whichareanalysedandselectedfortheBank’sprivateclientsbyateamofinternationalexperts.

In2019,theBanksuccessfullyextendeditsofferofmutualfundsfrompartnercompanies.ThekeyeventintheseactivitieswasthepresentationoftheuniqueinvestmentsolutionsofAmundiUniCreditPremiumPortfolio.ThesecompleteinvestmentstrategiesaremanagedjointlybyAmundiandUniCreditWealthManagementteamexclusivelyforPrivateBankingclients.TheBankcontinuedtodeepenitscooperationwithUniCreditBankAGMunichintheimplementationofothertypesofstructuredproductsandtoincreasethenumberofunderlyingassetsforthissisterbank‘suniquesoftwaresolution.

ThecomprehensiveofferofservicesfurtherincludedsuccessfulcooperationwiththeconservativeAustrianprivatebankSchoellerbankAG,amemberofUniCreditGroup.Inresponsetotheinterestexpressedbyourclients,theBankintermediatedtheplacementofseveralcorporatebondissuesofselectissuersduringtheyear,bothinCZKandEUR.During2019,wealsoofferedprivateclientsinvestmentsolutionsrelatedtoinsuranceprotection(investmentlifeinsurance).

PrivateBankingissuccessfullybuildingonthetraditionofUniCreditcorporatebanking.Thus,wefocusonprovidingprivateservicestoownersofsmallandmedium-sizedenterprises,wherewetodayperceiveahighaddedvalueforourservicesandproducts.Cooperationbetweencorporateandprivateclientssignificantlycontributedtothetotalnumberofnewlyacquiredclientsbothinprivateandcorporatebankingin2019.

Lastyear,theMarketsDivisionwasagainoneoftheBank’skeyprofit-makingpillars.TheMarketsDivisionasawholesignificantlysurpasseditsyear-longplan.Intheareaoftradingintreasuryproductswithendclients,UniCreditBankachievedrecord-breakingresultswithrespecttotheentireperiodofitsexistence.AverysolidcontributiontoMarketsrevenueswasalsoreportedbytradingontheBank’sownaccount.

Thankstoouracquisitioninitiatives,wehaveincreasedboththevolumeandtheprofitabilityofdealsfocusedondailycash-flowmanagementandhedgingofallmarketrisks(foreignexchange,interest,andcommodityrisks)intradingwithcorporateclients.ThesteadilygrowingCzechandSlovakeconomiesandthesharingofexperienceandbestpracticeswithintheCEEregionalsocontributedtotheexcellentresult.

DebtCapitalMarketsalsorepresentanintegralpartoftheMarketssection,whereUniCreditBankoperatesinthelongrun,whetherthroughitsownissuanceactivitiesorthearrangementanddistributionofcorporatebonds.In2019,UniCreditBankstrengtheneditspositionasoneoftheleadersincorporatebondissues.Theseissuesweresuccessfullyplacedbothamongfinancialinstitutionsandcorporateclients,oramongclientsoftheprivatebankingsegment.Lastyear,theBankmanagedtorepeatedlyplaceitsownstructuredbondandinvestmentcertificateissuesinthissegment,owingtostrategiccooperationintheareaofbancassurancewithAllianzGroupintheCzechRepublicandSlovakia.


Sponsoring and charity

Promotionofsociallyresponsibleactivities,sportsandeducation

In2019,UniCreditBankintheCzechRepublicandSlovakiawassignificantlyinvolvedinthesupportofsolidarityprojectsinaccordancewiththevaluesofUniCreditGroup,alsoinvolvingitsemployeesinthissupporttoalargeextent.InthetraditionalgroupGiftMatchingProgram,theBanksupportedover400employeesbydoublingtheirdonationstoatotalof17non-profitorganisationsandprojects,whichtotalledoverCZK1.8million.

During2019,employeeshadtheopportunitytoengageinarangeofvolunteeractivitieswithinteambuildingaswellassupporteventsorganisedbytheBank–blooddonation,charityChristmasmarketsforagoodcauseoraChristmasbazaarwhereemployeeshadtheopportunitytopurchasethehandmadeproductsofshelteredworkshops.Withtheirpurchase,theysupportedtheoperationofseveralnon-profitorganisationswhoseaimitistohelpdisadvantagedpeopleordisabledchildreninparticular.

Throughouttheyear,theBankcontinuedtosupportlong-termprojectssuchastheCharter77Foundation–BarriersAccount,DebtAdvisoryCenter-CounsellinginStringency,andcooperationwiththeItalianEmbassyontheNaveItaliaproject,whichallowschildrenwithcancerandotherdisabilitiestovisitbeautifulItaliandestinations.CooperationwiththeVáclavandDagmarHavelFoundationandtheLíviaandVáclavKlausFoundationisalsotraditional,supportingvariouseducationalprogrammes.

ResearchsupportintheformofcooperationwiththeInstituteofMicrobiologymustalsobementioned.InSlovakia,wecontinuedtosupportnon-profitorganisationsthathelpmostlyterminallyillchildrenandalsochildren‘steachinghospitaldepartmentsincooperationwiththeTelevíziaMarkízaFoundation.

Fulfilled Wishes and charity kiosks

Inearly2019,weprovidedourclientstheopportunitytohelpintheCzechRepublicandSlovakiathroughtheFulfilledWishesproject.Wefulfilled100clientwishes,mostofwhomwantedtohelpsomeoneelsewithafinancialormaterialgift.Assistancewasdirectedmainlytoorganisationshelpingsickchildrenorchildreninneed(KrtekFoundation,Klokánek-TheFundofEndangeredChildren,regionalchildren‘shomes,children‘shospitalwards)andwealsosupportedanimalsintheformofdonationstodogsheltersorfinancialassistancetotheProtectingSeaTurtlesorganisation.Inthesecondhalfoftheyear,thankstoinnovativetechnologyandincooperationwithanexternalcompany,theBanklaunchedcharitykiosksintendedforallorganisationsfullyorpartiallydependentonthird-partysupport.Thesekioskswillbeusedinchurchinstitutions,

charityandhumanitarianorganisationsandassociationsfortherestorationofculturalmonuments.Thisisaproductthatenablesdonationstoathirdpartyusingcontactlesstechnology.DonorscanseetheamountofthedonationandaconfirmationofthecompletedtransactionthankstotheintelligentLEDsystem.Inthisunusualway,theBankalsoparticipatedinsupportingthethirdsectorinaccordancewiththeUniCreditGroup‘svalues.

Environmental protection

Wedonotforgetaboutsustainablegrowthandenvironmentalprotection.Wecomplywithgloballydefinedenvironmentalrulesinallourbuildingstominimisetheirloadontheenvironment.TheGrouphasalreadysignedtheUnitedNationsEnvironmentProgrammeFinanceInitiative(UNEPFI),basedonwhichtheBankincorporatedenvironmentalprotectiongoalsintoitsinternalprocesses.Thosegoalsinclude,forinstance,thereductionofemissions,involvementintheCarbonDisclosureproject,thefinancingofrenewableenergysources,orthegrantingofloansforrenovationaimedatenergysavings.WeregularlyparticipateintheEarthHourinitiative.

Employment relations

UniCreditBankranksamongthemostattractiveemployersintheCzechRepublicandSlovakia,notonlybecauseofitsofferofresponsibleanddemandingworkinthebankingsector,butalsothankstothecareitgivesitsemployees.Employeesareentitledtomealvouchers,freshwaterintheworkplace,sickdaysandrecoverydays,andcanalsouseUniCreditBankproductswithspecialbenefits,orusethecompanycottageinHorníMaláÚpa.TheyalsoappreciateanextraweekofholidayortheopportunitytopurchaseemployeesharesinUniCreditBank.Theofferofflexiblebenefits,whichallowemployeestochoosefromalargenumberofvariousactivitiestheyconsiderbestforthem,isalsowide.

Theexistingbenefitprogramsgrantallemployeesequalaccesstoemployeebenefitsandofferthemfreedomofchoice.Themostfavouredbenefitsincludecontributionstopensionfundsorlifeinsurance,languagecourses,culturalandsportingeventsorallowancesforholiday.UniCreditBankrespectsitsemployeesandstrivestosupporttheminallsituationsandlifestages.Therefore,theBankalsooffersaseriesofsupportprogramsandacontributionsystemthatincludebonuses/contributionsforlifeorworkjubilees,aretirementbonus,acontributionwhilefacingdifficultlifesituations,programstosupportparentsintheirreturnfrommaternity/parentalleave,massculturalandsportingevents,andeventsforseniorsandfamilieswithchildren.


OntheBusinessActivityandthePropertyStatusofUniCreditBankCzechRepublicandSlovakia,a.s.,for2019

Report of the Board of Directors

Vision, Mission and Corporate Values

UniCreditBankCzechRepublicandSlovakia,a.s.,isauniversalcommercialbankcoveringallthefinancialneedsofitsclients.Weofferourclientsthebestexpertiseunderpinnedbylongtraditionandleadershipincorporateandprivatebanking,aswellasaninnovativeapproachtoretailbanking.

Wearethebankoffirstchoiceinbothourtraditionalandnewstrategicsegments.WehavebeenoneofthetopthreebanksintheCzechandSlovakmarketintermsofcustomersatisfactionformanyyearsandwearealsoanattractiveemployer.

WeareapartoftheinternationalUniCreditGroup.AsapartoftheGroup,UniCreditBankCzechRepublicandSlovakia,a.s.,standsamongthekeycountriesoftheCentralandEasternEuropeanregion.TheGroupperceivesourBanktobeanexampleofsuccessfuldynamicgrowthinthecorporateclientsegmentandinparticularinthesegmentofindividualclients.Atthesametime,withinUniCreditGroupweareabankwhereheavyinvestmentsaremadeandabankwithsubstantialpotentialforfurthergrowth.

“Ethics&respect:Dotherightthing!”EthicsandrespectarecorporatevaluessharedthroughoutUniCreditGroupwhichdefineourcorporatecultureandhowweputourdecisionsintopractice.Tokeepinmindthesustainabilityofourbusinessineverysituation,wefollowasimpleprinciplethathelpsustranslatethesevaluesintoeverydaylife:Dotherightthing!

Economic Development of the Market in the Czech Republic and in Slovakia in 2019

GrowthoftheCzecheconomydeceleratedslightlyto2.4%.TheSlovakeconomyreportedasimilargrowthrateof2.3%,butwithamorepronouncedslowdowncomparedtothepreviousyear.Botheconomiesstruggledwithweakeningforeigndemandforthesecondconsecutiveyear,whichindirectlylimitedcompanies’incentivetoinvestintheirfixedassets.Privateconsumptionwasthemaindriverofgrowthinbotheconomies.BoththeCzechRepublicandSlovakiareportednewlowsintheunemploymentrate;thereweretensionsinthelabourmarketsandtheslowdowninindustrialproductioninthelastpartoftheyeardidnotmoderatemuch.Year-on-yearinflationroseinbothcountries,exceeding3%intheCzechRepublicattheendoftheyearandamountingtothesaidvalueinSlovakia.TheCzechbankingsectorwasaffectedbyonefurtherincreaseintheCNB‘sreporateby25bpstoafinal2.00%.

Ontheotherhand,theSlovakbankingsectorremainedundertheinfluenceoftheECB‘sloosemonetarypolicy,characterisedbyadeclineinthedepositrateto-0.50%andaresumptionofbond-buyingonthesecondarymarket.Attheendoftheyear,theCZKtoEURexchangeratewashigherby1.2%year-on-year.

Evaluation of the Results of UniCredit Bank Czech Republic and Slovakia, a.s.

In2019UniCreditBankCzechRepublicandSlovakia,a.s.,achievedanotherall-timehighresult.Revenuesgrewyear-on-yearinallcategories,butmainlyinnetinterestincomeandtradingincome.Themaindriverofgrowthinnetinterestincomewasgrowthinclientdepositsandclientloans,aswellasthepositiveeffectofrisinginterestrates.Clientloansanddepositsreportedayear-on-yeargrowthinretailandcorporatebankingaswellasinleasing,andtheGroupcontinuestoincreaseitsnumberofclientsinallsegments.

Operatingcostsarefallingyear-on-yearduetothesuccessfulimplementationoftheGroup’sTransform2019programmeactivities,focusingondigitisation,processoptimizationandreductionofdistributioncosts.Owingtotheincreasingincomeandeffectivecostmanagement,thecost-to-incomeratioimprovedonayear-on-yearbasis.Thepositivedevelopmentintermsofcostofriskcontinuedin2019owingtotheBank‘sabilitytosuccessfullyhandlepastdueloansand,despitetheslowdownineconomicgrowth,thecostofriskremainedwellbelowbudget.

Financial Results of UniCredit Bank Czech Republic and Slovakia, a.s., for 2019

TheconsolidatednetprofitofUniCreditBankCzechRepublicandSlovakiawentupby13.0%year-on-year,namelyfromCZK8,956millionasof31December2018toCZK10,122millionasof31December2019.In2019,UniCreditBankCzechRepublicandSlovakiatherebyconfirmeditsexcellentconditionandlong-termgrowth.

Statement of Comprehensive IncomeComparedtotheendof2018,netinterestincomeroseby2.4%toCZK14,578millionin2019(CZK14,231millionasof31December2018).Comparedto2018,therewasnosuchriseinmarketinterestratesontheCzechmarketin2019,buttheBankcontinuedtooptimiseitscompositionofdepositswithaviewtoreducinginterestcosts.


Netincomefromfeesandcommissionsbytheendof2019wasatCZK4,002million(CZK3,892millionasof31December2018),whichrepresentsagrowthof2.8%.

Netincomefromthesaleoffinancialassetsandliabilitiesasof31December2019increasedtoCZK489million(CZK239millionasof31December2018).Ingeneral,incomefromthesaleoffinancialassetsandliabilitiesisnottheprimarysourceofprofitforUniCreditBankCzechRepublicandSlovakia,butthisyear‘sgrowthwasdrivenbyachangeinstrategyasregardsholdingsecuritieswithlongermaturities.

Incomefromtradingroseby7.0%fromCZK1,761millionasof31December2018toCZK1,885millionasof31December2019.

TotaloperatingincomeamountedtoCZK21,086million,risingby4.4%comparedtoCZK20,202millionasof31December2018.Operatingincomereportedgrowthinalltheabovecategories.

AdministrativeexpenseswerereportedatCZK6,949million(CZK7,487millionasof31December2018),whichrepresentsadeclineof7.2%.Strictcostmanagement,rigorousimplementationoftheTransform2019objectivesandreductionintheBank‘scontributiontotheResolutionFundarethemainreasonsfortheexcellentresultinadministrativeexpenses.

Impairmentlossesonloansandreceivablesroseby114.6%year-on-year(fromCZK610millionasof31December2018toCZK1,309millionasof31December2019).AlthoughgrowthisreportedinthisitemoftheStatementofComprehensiveIncome,thisresultisstillbetterwhencomparedtothe2019Groupbudget.

DepreciationandimpairmentofpropertyandequipmentrosefromCZK908millionasof31December2018toCZK992millionasof31December2019andamortisationandimpairmentofintangibleassetsincreasedfromCZK302millionasof31December2018toCZK540millionasof31December2019.Thisincreaseislinkedtothecapitalisationofnewintangibleassetsandtheamortisationofexistingintangibleassets.

Statement of Financial Position

AssetsTotalassetsofUniCreditBankCzechRepublicandSlovakiaasof31December2019amountedtoCZK686.6billion,representinganincreaseof2.2%comparedtotheendof2018,whenthebalancesheetsumwasatCZK671.6billion.

Fromtheendof2018,thefinancialassetsatfairvaluethroughprofitandlossroseby21.6%fromCZK10billiontoCZK12.2billion.Thevalueofsecuritiesrecognisedatfairvaluethroughprofitorloss

droppedby20.6%toCZK23.2billion(asoftheendof2018,thisvaluewasCZK29.2billion).Inthisportfolio,theBankhasinparticularthehighlyliquidsovereignbonds.Thefallinvalueisduetothefailuretorenewthepurchaseofnewvolumesintheeventofmaturityoftherelevantbondorsalesmadeduring2019.

RetailBankingcontinuedtofocusonthegrowthofitsclientbaseandvolumesofloansanddeposits.Themaingrowthproductasregardscreditwere,asusual,mortgageloans,wherethetotalportfolioincreasedbynearly11.5%.Thetotalvolumeofclientdepositsexceededtheyear-on-yeargrowthof7%.

Receivablesfrombanksdecreasedby7%(CZK186.0billionasof31December2019comparedtoCZK200.1billionattheendof2018).

Growthinthevalueofpropertyandequipment,fromCZK4.7billionasof31December2018comparedtoCZK6.8billionattheendof2019,wasaffectedmostlybytheimplementationofthenewIFRS16accountingstandard(Leases)from1January2019.

LiabilitiesBytheendof2019,liabilitiestobanksdroppedby18%toatotalofCZK141.1billionfromCZK172.2billionasof31December2018.

Comparedtotheendof2018,clientdepositsincreasedby10.7%toatotalofCZK415.0billionfromCZK374.7billionasof31December2018.Comparedtotheendof2018,issueddebtsecuritiesdroppedby9.9%toCZK20.6billion(CZK22.8billionasof31December2018).

EquityAsof31December2019,theGroup’sequityamountedtoCZK78.6billion,whichrepresentsayear-on-yeargrowthof3.8%(fromCZK75.7billionasof31December2018).In2019UniCreditBankCzechRepublicandSlovakia,a.s.,paidadividendofCZK6,070millionfromthe2018profittothesoleshareholderUniCreditSpA.

Expected Economic and Financial Situation of UniCredit Bank Czech Republic and Slovakia, a.s., in 2020

The2020planisbasedontheorganicgrowthofclienttransactionsandfurthergrowthoftheclientbaseinallbusinesssegments.Greatemphasiswillremainonoptimisationandefficientutilisationofoperatingcosts,whosegrowthisplannedtobebelowexpectedinflationlevels.In2020,theGroupwillmaintainhighprofitability,returnoncapitalandwillcontinuetoplaceemphasisonmaintaining


ahighcapitaladequacy.Thedevelopmentofclientloansandclientdepositswillbebalanced,therebyensuringtheGroup‘sgrowthwithouttheneedforobtainingexternalsourcesoffinance.Despitefurtherexpectedslowdownineconomicgrowth,botheconomieswillcontinuetobeingoodshape,leadingtoayear-on-yearincreaseinthecostofrisk,whichwill,however,remainlow.

Current development on COVID-19 impact and adopted measuresThecurrentdevelopmentoftheworldeconomymaybeinfluencedbyseveralfactors,suchasthespreadofvariouspandemicviruses,orvolatilityincommodityprices,especiallyinoilprices.FollowingtheCOVID-19spreadacrossmainlandChinaandbeyond,whichhascauseddisruptionstobusinessesandeconomicactivity,UniCreditBankCzechRepublicandSlovakia,a.s.ismonitoringthesituationcarefullyincooperationwithUniCreditGroupandtakingallnecessaryprecautionsinlinewiththerecommendationsoftheWorldHealthOrganizationandlocalauthorities.

ThesetofadoptedmeasuresconsistofhomeofficeforemployeeswhoarevulnerableduetohealthconditionsaswellasquarantineforthosewhohavereturnedfromareasheavilyaffectedbytheCOVID-19spread.Furthermeasuresappliedtoensureanormallevelintermsofoperationalactivitiesrepresentreplacingthestandardface-to-facemeetingswithon-linemeetingsasmuchaspossible,physicalseparationofteams,aswellasstrictrulesofhygiene,increasedintensityofcleaninganddisinfectionofspaces,andothermeasures.

TheeconomicimpactwilldependupontheintensityanddurationofthecoronavirusepidemicspreadingwhichiscausingtheCovid-19illness.Themainimpactofthecoronavirus,thatatthemomentcannotbequantified,relatestoaneconomicslowdown,limitedinvestmentactivityleadingtoadecreaseinthefairvalueoffinancialassets,lowerdemandforloans,uncertaintiesingeneratingfuturerevenues,judgmentsappliedindevelopingaccountingestimates.

Uncertainties for year 2020During2020,UniCreditBankCzechRepublicandSlovakiaa.s.willcarefullymonitorthesituationandwillupdateonaregularbasis: i.IFRS9provisioningmodels,takingintoaccountthecurrent

assumptionsandoutlook, ii.provisioningofclientsthatareassessedindividually.

Duetohighuncertaintyregardingfurthereconomicdevelopments,CzechNationalBankexpectsinthecurrentsituationthatbankswill,withimmediateeffectanduntilbothacuteandlonger-termconsequencesofthenewcoronavirusepidemicfadeaway,refrainfromanydecisionsthatmightjeopardizeindividualbanks’resilience.WeareawareofthestabilizingmeasuresproposedbyCzechNationalBankinconnectionwiththecoronavirusepidemic,andwillensuretotakeallthenecessarystepsnottojeopardizeinanywaytheresilienceofthebank.

Strategic Plan of UniCredit Group – Transform 2019 and Team 23Attheendof2019,UniCreditsuccessfullycompletedthefinalyearofitsthree-yearstrategicplan,Transform2019,bymeetingthefinancialprofittargetandalsomeetingorexceedingitstargetsinallfivepillarsoftheplan:•Strengthencapitalandoptimiseitsallocation•Focusonassetquality•Transformtheoperationalmodel•Maximisecommercialvalue•CreatealeanbutstrongGroupmanagementstructure

ThesuccessoftheTransform2019strategicplanshowedthatweareabletomeetourgoals,andthatwearetransparentandpreferlong-termsustainableresultsovershort-termsolutions.

In2019,UniCreditBankCzechRepublicandSlovakia,a.s.,alsoconfirmeditscoremarketpositionfortheCentralandEasternEuropeDivision.Besidesexcellentfinancialresults,theBankalsomanagedtosuccessfullyimplementanumberofinitiativeswithinthestrategicprogramme,forexample:•TheFulfilledWishescampaign,wherewefulfilled100wishes

forclientsintheCzechRepublicandSlovakiatohelptheirfamilies,sickpeople,children‘shomes,homelesspeople,animals,etc.

•Mobilephonecardpayments•Developmentofrobotization,whichincreasestheproductivity

ofbankingoperations•IB2020andCrossArchitectureprojects,whichwillallowthe

digitisationanddevelopmentofonlinechannelsinthecomingyears

•DevelopmentoftheEzYsystemusingtheagiledevelopmentmethod•ProjectsrelatedtoregulationandEuropeanregulationsPSD2,

PAD,GDPR

WhilethegoalsofTransform2019focusedontherestructuringandtransformationofUniCreditGroup,fromthenewyearthewholeGroupandUniCreditBankCzechRepublicandSlovakia,a.s.,willfullyfocusonanewplan,entitledTeam23,whichwasintroducedtothefinancialmarketsinDecember2019andwhichfocusesprimarilyonthestrengtheningandgrowthoftheclientbase.

Bank Activities in Corporate Banking

In2019,theBankcontinuedtofulfilitslong-termstrategicgoals,whichintheareaofcorporateandinvestmentbankingrepresenttheconfirmationofthepositionofkeyplayersinthesegmentoffinancinglargemultinationalandnationalcorporationswhilealsofocusingonincreasingmarketshare.


Inthekeysegmentsofsmallandmedium-sizedcompanies,wereportedanotherverysuccessfulyear;inthesegmentofinternationalenterprises,weachievedadouble-digitgrowthrateinrevenuesandvolumeofloansprovided.

Anotherlong-termstrategicgoaloftheBankistheconstantimprovementofthecustomerexperienceandthesustainabilityofitsleadershipintheCzechandSlovakmarket.Wewereabletomeetthisgoalbyfocusingonclients’needs,strengtheninghumanresourcesaswellasbytheconstantstreamlininganddigitisationofinternalprocesses.

In2019,wecontinuedtorelyonourtraditionalstrongcompetenceinprovidingindividualsolutionstoclientsandconfirmedourleadingpositioninrealestatefinance.Wesawaverysuccessfulyearinstructuredandacquisitionfinance,asevidencedbyanumberofarrangermandatesandthesuccessfulconclusionofmanylargeandcomplextransactionsforourclients.

TheBankcontinueditsverysuccessfulcooperationwithUniCreditLeasingintheCzechRepublicandSlovakia,witharecordvolumeofintermediatedloansintheCorporateandInvestmentBankingDivision.

In2019,theofferoffactoringproductsfortheBank‘sclientswasfullystrengthenedandseveralnewproductsandservicesweredevelopedtothisend,suchasreversefactoringorconsultancyintheareaofmanagingourclients‘workingcapital.

Bank Activities in Retail and Private Banking

Retail BankingIn2019,theBankcontinuedtomeetitsstrategicgoalsinretailbanking,whicharetoincreaseitsclientbaseandstrengthenitspositionasauniversalproviderofbankingandfinancialservices.Wewanttoachieveamajorincreaseinmarketsharenotonlybyconcentratingonselectedperspectivesegmentsoftheretailmarket,butmainlyowingtoinnovationsinavailabilitythroughalternativedistributionchannelsandproductoffer.

TheBankprovidesafullrangeofbankingproductsintheretailmarketandwereportedsignificantgrowthinallmajorproductlinesin2019:retailloansgrewbyalmost9%year-on-year,mainlyduetothegreatsuccessintheprovisionofmortgageloans,retaildepositproductsincreasedbymorethan7%year-on-year,andmorethan100thousandnewclientsbegantomakeuseoftheproductsandservicesofUniCreditBankCzechRepublicandSlovakia,a.s.Incooperationwithourstrategicpartners,weareincreasinglyfocusingoninvestmentproductsandbancassurance.

Private BankingThePrivateBankingsegmentcontinuedtotakecareofitsexistingclientportfoliowhileworkinghardtoacquirenewclientswhowouldappreciatethehighqualityofourservicesandalsoenableanincreaseinprofitinthePrivateBankingsegmentinthecomingyears.WeacquirednewclientsowingtoourveryintensivecooperationwithcolleaguesfromCorporateBanking,withtheaimtocomprehensivelyserveBankclientswhoareownersandmanagersofcompanies,aswellasbasedonrecommendationsobtainedfromexistingclients.Throughout2019,wepaidgreatattentiontoexpandingourofferofinvestmentsolutions,whichledtoanincreaseinthevolumeofclientinvestmentsmanagedbytheBank.Duringtheyear,weofferedPrivateBankingclientsanumberofcorporatebondIPOs,whichwasmetwithgreatinterestfromourprivateclients.

UniCreditBankCzechRepublicandSlovakia,a.s.,RetailandPrivateBankingDivisioniscontinuouslyimprovingthequalityofservicesforitsclients;customerexperienceisanabsolutepriorityforus,evidencedalsobytheNetPromoterScoreresults,wherewescoredexceptionallygoodresultsasregardsindividualclientswithintheCzechandSlovakMarketintheUniCreditCEEDivisionin2019.

Bank Activities in the Area of Support Structures Risk ManagementIntheriskmanagementarea,emphasisisplacedonthoroughseparationofincompatiblefunctionswithintheBank’sorganisationalstructure.TheBank’sriskstrategies,toolsandprocessesarechosentobestcorrespondwiththebusinessstrategyandatthesametimewiththebeststateofknowledgeregardingriskappetitemanagement.Withinthemanagementofitsrisks,theBankthoroughlymonitorsandadherestothesetsofparametersmakingupitsRiskAppetiteFramework.

TheBankmanagesitscreditriskbothatthelevelofindividualbusinesstransactionsandatthewhole-portfoliolevel,inparticularincompliancewiththebasicprinciplesdefinedintheBank’screditpolicyandinordertoadheretotheriskparameterssetoutinthecreditstrategyfortheparticularyear.Forthepurposesofcalculatingthecapitalrequirementforcreditrisk,theBankusesanadvancedapproachbasedonitsownestimatesofriskparameters(AdvancedIRB)formostofitsportfolio(basedontheCNB’sapproval).TheBankregularlymonitorsandevaluatesexpectedlossestoitscreditportfolioandexpectedlossestonewlyconcludeddeals,aswellasactuallyrealisedlossesarisingfromimpairedassets.

Basedonregulatoryapproval,theBankappliesanadvancedapproachtotheoperationalriskcapitalrequirement(AMA),whichhasbeenusedsince2008.In2019theBankdidnotsufferanysignificantlossesresultingfromoperationalrisk.


TheCNBcarriedoutstresstestsoftheBank‘scapitalin2019.TheresultsconfirmedthattheBankhassufficientcapitalintheeventofacrisis.TheregulatoryauthorityevaluatedtheBank‘seffortstocontinuallyincreaseitscapitalreserves,aswellasitseffortstoresolvetheBank‘sproblematicassets.Atthesametime,thisresultenablestheBanktofurtherdevelopitsbusinessactivities.Intheareaofmarketriskmanagement,theBankmanagestherisksconnectedwithbusinessactivitiesatthelevelofindividualrisksaswellasindividualtypesoffinancialinstruments.Alllimitsaremonitoredbrokendownintotradingportfolio(RegulatoryTradingBook)andbankingbook(IRRBB).

Thebasicmanagementtoolcompriseslimitsforvolumesofindividualtransactions,limitsforportfoliosensitivity(BPV,CPV),stoplosslimits(maximumlosslimitsLWL)andValueatRisk(VaR)limits.In2019theBankdidnotrecordanysignificanteventsleadingtoarevaluationofthestrategyorsignificantresetoftheapplicablelimits.

ServicesAfterchangingtheservicemodelinOperationsin2018,2019wasmarkedbyintensiveworkondeeperinterconnectionbetweenthebusinessandtheoperationalpartofprocesses.Wefocusedonimprovingthecustomerexperience,aswellasimprovingtheefficiencyofprocessesassuch.Arobotizationandautomationprogrammewasfullyinstitutedandwewillcontinueinthisprogrammenextyear.TheBankhascontinuedtopromoteabalancedapproach,i.e.theachievementofcostsavingsthankstothecentralisationandspecialisationofoperationalstructureswithconcurrentpreservationoftheavailabilityandqualityofservicesprovidedtoclients.CentralisationandspecialisationleadtobettercontroloverthefulfilmentofregulatoryrequirementsregardingcontractualarrangementsandthequalityofdocumentprocessingbetweentheBankanditsclients.

Asinpreviousyears,ITservicesareprovidedtotheBankbyitssistercompanywithinUniCreditGroup,UniCreditServicesS.C.p.A.In2019,theimplementationofregulatoryprojectsinGDPR,PSD2andpaymentaccountdirectiveregulationwascompleted.Retaildirectandmobilebankingweremigratedtoanewtechnologyplatform,providingopportunitiesforfurtherdevelopmentandaprojecttofullydigitiseselectedproductswaslaunched.Robotizationforselectedprocessesisalsobeingimplemented.

Besidesprojectsfocusingondigitisationandrobotization,securityprojectsaimedatmitigatingriskandpreventingdataleakageandprotectionwerealsounderway.

Assets and Liabilities ManagementIn2019,despitethegrowthinthevolumeofloans,theBankmaintainedahighCZKliquiditysurplusfrominternalandclientfundsoverCZKfinancialassets.TheBankplacedthatsurplusmostly

intheformofreverserepurchasetransactionsintheCzechNationalBankanduseditpartiallytofinanceitssubsidiaries.AstrongliquiditypositioninCZKallowedtheBanktomaintainlowcostsofCZKliquidity.

FinancialandclientassetsdenominatedinEURarerefinancedbytheBanklargelythroughclientandinternalfundsandpartiallythroughinterbankfunds,wherethemostimportantonesincludedepositsprovidedbytheparentcompanyaswellasadvantageousfinancingfromtheEuropeanCentralBankwithinthesocalledTLTROprogramme,towhichtheBankhasaccessthroughitsSlovakbranch.Subsidiariesalsousefinancingfrommultinationaldevelopmentbanks,suchastheEuropeanInvestmentBank.

Theliquiditysurplusintheparentcompanyand,consequently,acrosstheeurozonemadeitpossibletomaintainlowcostsofEUrefinancingaswell.

TheBankregularlymonitorsandreportsboththeregulatoryliquidityratioLCRandtheplannedratioNSFR.SufficientdistanceoftheseratiosfromtheminimumthresholdprovesthestrongandsustainableliquiditypositionoftheBank.

Human ResourcesOuremployeeshaveacrucialroleinimplementingthecompany‘sstrategy,aswellasinmanagingrisksandensuringthelong-termsustainablegrowthofthecompany.Bothbankemployeeswhoareindirectcontactwithclientsandback-officeemployeesconsiderablyinfluenceourservicequalityandtherebyalsothesatisfactionandloyaltyofourclientsandouroverallbusinessresult.

Wepromoteacultureofethicsandrespect,diversityandinclusionandcontributetoimportantattributessuchasleadership,friendlyatmosphereinteams,self-fulfilment,positivityandrecognition,careergrowthandwork-lifebalance.

Wepaymaximumattentiontothehiring,compensation,educationanddevelopmentofouremployeesintheareasofprofessionalknowledge,communicationskillsandtotalprofilingofthecorporatecultureinordertoenforcethepersonalintegrityofallouremployees.In2019,wefocusedondigitisationofourkeyHRprocesses,whichpositivelycontributestothespeedandqualityofcommunicationbothtowardscandidatesandinternallywithinthecompany.

Employeecompensationisinaccordancewithmarketconditionsandisbasedontheprinciplesoffairness.Ourgoalisnotonlytosupportouremployees’highperformance,butalsotoensureethicalbehaviourtowardsabalancedapproachtoriskinthelongrunandthebestpossiblecustomerexperience,bothinternallyandexternally.Wegreatlyappreciatethefamiliesofourcolleagues;therefore,weoffermanyopportunitiestobalanceworkandprivatelife,suchas


workfromhomeorteleworking,andvariousthematiceventsforourfamilieswithchildrenthroughouttheyear.Weorganiseregularsportsandrelaxationactivitiesdirectlyintheworkplace,andwecontinuallyinnovatethemtopromotethewell-beingofourcolleagues,respondinginthiswaytotheneedsofthenewgenerationsenteringthelabourmarketinordertobeamoreattractiveemployer.Webelievethatwell-beingactivitiestranslateintostrongerengagementandproductivityforouremployees.

Education,professionaldevelopmentandthetalentsofouremployeesareamongtheBank‘sdevelopmentpriorities.WeareconstantlyinnovatingourofferofeducationalactivitieswithregardtotheBank‘sstrategy,currentculturalchangesortopicsand,lastbutnotleast,withregardtotheneedsofouremployees.Weputemphasisondevelopmentthroughrotations,shortandlong-terminternshipsandtheacquisitionofinternationalexperience.

TheBanksystematicallycaresforthehealthofitsemployees.Thisyear,itfocusedonphysicalandmentalhealththroughHealthDays,whichwereavailableinvariousformstoallemployeesintheCzechRepublic.Notonlypreventivemedicalexaminations(dermatology,sight,bodycomposition,etc.)wereavailabletoemployees,butalsopracticalworkshops,lecturesonvarioustopicsandeducationalstands.

Beginninglastyear,astresspreventionprogrammewaslaunchedforemployeesandthelaunchoftheso-calledanti-stresslineintheCzechRepublicwasfollowedbythesameinitiativeinSlovakiain2019.Thereatrainedpsychologistisavailabletohelpemployeesaddresstheirissues.

Inthelongterm,thecompanyaccommodatesemployeeswhofindthemselvesinextremelydifficultsocialorhealthsituations.Thecompanyprovidesthemwithsocialassistancecontributions.Inthelongrun,theBankalsofocusesonreintegratingemployeesonmaternityandparentalleaveintoworkinglife.TheBankisintouchwiththeseemployeesduringtheirmaternityandparentalleave;theyareinvitedtonetworkingeventsand,inthecaseofmutualinterestandneed,cooperationisestablishedduringtheleaveperiod.Afterreturningfrommaternityorparentalleave,itispossibletoworkpart-timeorfromhome,ortohaveflexibleworkinghourswherethetypeofoperationandthenatureofworksopermits.

Thecompanyhasapolicyofequaltreatmentforallemployeesintermsoftheirworkingconditions,compensationforwork,trainingandopportunityforcareeradvancement.Compliancewiththerulesofequaltreatmentandnon-discriminationisanobligationforallemployees,regardlessoftheiremploymentstatus.

Social ResponsibilitySustainabilitySustainabilityisaneverydaycommitmentofUniCreditGroupaswellasofourlocalconsolidatedGroup.Webelievethatsustainablebankingrequiresustomakeoureverydaydecisionsanddefineourlong-termstrategywitheconomic,socialandenvironmentalresponsibility.Wetrytoachieveall-roundadvantageoussolutionsforallinvolvedinthelongterm.Everythingwedoisbasedonanethicalapproachandrespect.

Anti-Corruption RulesUniCreditCzechRepublicandSlovakiaGroupappliestheprincipleofzerotoleranceforcorruption,i.e.,itwillnottoleratetheinvolvementofitsemployeesorthirdpartiesineitherdirectorindirectcorruptionconduct.

Sponsoring and CharityIn2019,UniCreditBankintheCzechRepublicandSlovakiacontinuedtosupportsolidarityprojectsand,inaccordancewiththevaluesofUniCreditGroup,alsoinvolveditsemployeesinthissupport.BesidesthetraditionalGiftMatchingProgram,theBankalsoencourageditsemployeesinvolunteeringactivitiessuchasblooddonation,theorganisationofChristmasmarketsforagoodcauseandtheThreeKingsFundraiser.

TheBankcontinuedtosupportlong-termprojectsandpartnerorganisations,suchastheCharter77Foundation–BarriersAccount,DebtAdvisoryCenter-CounsellinginStringency,andcooperationwiththeItalianEmbassyontheNaveItaliaproject,whichallowssickandotherwisehandicappedchildrentovisitbeautifulItaliandestinations.CooperationwiththeDagmarandVáclavHavelFoundation,LiviaandVáclavKlausFoundation,supportfortheresearchoftheMicrobiologicalInstituteandcooperationwiththeMarkízaTelevisionFoundationinSlovakiaarealsotraditional.

Inearly2019,weprovidedtheopportunitytohelptoourclientsintheCzechRepublicandSlovakiathroughtheFulfilledWishesproject.Wefulfilled100clientwishes,mostofwhomwantedtohelpsomeoneelsewithafinancialormaterialgift.Inparticular,theassistancewasdirectedtoorganisationshelpingsickandabandonedchildrenoranimals.

Thankstoinnovativetechnologyandincooperationwithanexternalcompany,theBanklaunchedcharitykiosksintendedforallorganisationsfullyorpartiallydependentonthird-partysupport.Throughkiosks,peoplecandonatesimplyusingcontactlesstechnologyto,forexample,projectsofchurchinstitutions,charitableandhumanitarianorganisations,andculturalheritagerestorationassociations.

Tothebestofourknowledge,thisAnnualReportgivesatrueandfairviewofthefinancialsituation,businessactivitiesandresultsofoperationsoftheBankandtheBank’sconsolidationgroupfor2019andoftheoutlookoffuturedevelopmentoffinancialsituation,businessactivitiesandresultsofoperationsoftheBankandtheBank’sconsolidationgroup.

March2020

ThebasisforcalculatingthecontributiontotheGuaranteeFund,pursuanttoSection129ofActNo.256/2004Coll.onCapitalMarketUndertakings,consistsoffeesandcommissionsreceivedforprovidinginvestmentservices.

Asat31December2019,thebasisforcalculatingthecontributiontotheGuaranteeFundwasCZK673,816,021.32.ThecontributiontotheGuaranteeFundis2%ofthisamount,i.e.CZK13,476,320.44.

Report of the Supervisory BoardTheSupervisoryBoardreviewedthestatutoryindividualandconsolidatedfinancialstatementsandthefinancialstatementfortheSlovakbranchofthebankpreparedasat31stDecember2019togetherwiththeAuditor’sReportsbyDeloitteAudits.r.o.,whichistheindependentauditorofUniCreditBankfortheyear2019,andtheproposalfordistributionofprofit.TheSupervisoryBoardacknowledgestheconclusiondrawnintheAuditor’sReportsthattheindividualandconsolidatedfinancialstatementsclearlyevidencethefinancialpositionofUniCreditBankasat31December2019anditsfinancialperformanceforthe2019accountingperiod.TheSupervisoryBoardacknowledgestheconclusionsoftheAuditor’sReportthatthestatutoryfinancialstatementstrulyreflectassets,liabilitiesandtheprofitfortheyearofUniCreditBankinallsubstantialmattersandhavebeenpreparedinaccordancewithrelevantlawsandregulations.Additionally,theproposalfordistributionofprofitcomplieswithrelevantlawsandregulationsandtheArticlesofAssociationofUniCreditBank.

IncompliancewiththeCzechlaws,ProvisionsoftheCNBandtheArticlesofAssociationoftheBank,theSupervisoryBoardhasbeensupervisingtheimplementationoftheBank’sbusinesspolicyandtheexerciseofauthoritiesbytheManagementBoard.TheSupervisoryBoardheldfivesessionsandalwaysaskedforinformationfromallspheresoftheBank’sactivitieswhichhadarelevantimpactonthefinancialpositionandthefinancialmanagementoftheBank.

TheSupervisoryBoardfurtherstatesthat,basedonthestatutoryfinancialstatementsandotherdocumentsprovidedtotheSupervisoryBoardin2019,itdidnotidentifyanymaterialdeficienciesorincorrectnesswhichcouldleadtotheconclusionthattheBank’sbookkeepingwasnotmaintainedinaccordancewithrelevantregulationsordidnotproperlyreflectthesituationofUniCreditBank.

March2020


Statement of the persons responsible for the annual report

Basis for calculating the contribution to the Guarantee FundinlinewithSection129ofActNo.256/2004Coll.onCapitalMarketUndertakings

JakubDusílekPředsedapředstavenstva

LjubišaTešićČlenpředstavenstva

JakubDusílek

Team 23 focuses on strengthening and growing our client franchise across all segments: SMEs, individuals and corporates.Our strategic initiatives focus on the customer experience, to improve customer satisfaction and service quality. This is how we will increase our Net Promoter Score at Group-level.

Grow andstrengthen clientfranchise.


Consolidated financial statements

Consolidatedstatementofcomprehensiveincomefortheyearended31December2019

2019 2018 Note MCZK MCZKInterestincome,ofwhich: 18597 15435 –interestincomecalculatedusingtheeffectiveinterestmethod 18272 14888Interestexpenses (4019) (1204)Net interest income (1) 14 578 14 231 Feeandcommissionincome 5387 5101Feeandcommissionexpenses (1385) (1209)Net fee and commission income (2) 4 002 3 892Dividendincome (3) 5 4Netincome/(loss)fromtrading (4) 1885 1761Netincome/(loss)fromhedgingagainstriskofchangesinfairvalue (5) (12) 2Netincome/(loss)fromthesaleorrepurchaseof: (6) 489 239 Financialassetsatamortisedcost 154 99 Financialassetsatfairvaluethroughothercomprehensiveincome 335 142 Financialliabilities – (2)Netincome/(loss)fromfinancialassets/liabilitiesatfairvaluethroughprofitorloss,ofwhich: (7) 139 73 Mandatorilyatfairvalue 139 73Operating income 21 086 20 202Impairmentlosseson: (8) (1309) (610) Financialassetsatamortisedcost (1310) (619) Financialassetsatfairvaluethroughothercomprehensiveincome 1 9Administrativeexpenses (9) (6949) (7487)Netprovisionsforrisksandcharges: (27) 342 (549) Loancommitmentsandfinancialguaranteesgiven 401 (486) Othernetprovisions (59) (63)Depreciationandimpairmentofproperty,equipmentandrightofuseassets (18) (992) (873)Amortisationandimpairmentofintangibleassets (19) (540) (302)Otheroperatingincomeandexpenses (10) 694 732Operating expenses (7 445) (8 479)Netincome/(loss)onpropertyandinvestmentpropertymeasuredatfairvalue (18) (25) (146)Profit/lossfromequityinvestments 70 66Profit/(loss)fromthesaleofnon-financialassets 228 –Profit before income tax 12 605 11 033Incometax (28) (2483) (2076)Profit after tax 10 122 8 957Net profit attributable to the Group‘s shareholders 10 122 8 957

Items that cannot be subsequently reclassified to profit or loss Reservefromrevaluationofpropertyusedinbusinessmeasuredatfairvalue,ofwhich: 261 n/a Changeinfairvalue 329 n/a Deferredtax (68) n/aItems that can be subsequently reclassified to profit or loss Reservefromrevaluationofhedginginstrumentsincashflowhedges,ofwhich: (1001) (336) Changeinfairvalue (1239) (416) Revaluationreclassifiedtoprofitorloss – 1 Deferredtax 238 79Reservefromrevaluationoffinancialassetsatfairvaluethroughothercomprehensiveincome,ofwhich: (264) (697) Changeinfairvalue (53) (733) Revaluationreclassifiedtoprofitorloss (224) (97) Deferredtax 13 133 Foreignexchangerategainsfromtheconsolidationofaforeignbranch (171) 101Other comprehensive income, net of tax (1 175) (932)Other comprehensive income, net of tax, attributable to the Group‘s shareholders (1 175) (932)Total comprehensive income, net of tax 8 947 8 025Total comprehensive income, net of tax, attributable to the Group‘s shareholders 8 947 8 025

Thenotesonpages43–115formapartofthesefinancialstatements.



Consolidatedstatementoffinancialpositionasof31December2019

2019 2018 Note MCZK MCZKAssets Cashandcashbalances (11) 4634 4842Financialassetsatfairvaluethroughprofitorloss,ofwhich: (12) 12185 10020 Heldfortrading 11698 9674 Mandatorilyatfairvalue 487 346Financialassetsatfairvaluethroughothercomprehensiveincome (13) 23181 29188Financialassetsatamortisedcost,ofwhich: 626735 612101 Loansandadvancestobanks (14) 185975 200065 Loansandadvancestocustomers (15) 440760 412036Positivefairvalueofhedgingderivatives (16) 7198 5636Equityinvestments (17) 372 332Property,equipmentandrightofuseassets (18) 6406 4103Investmentproperty (18) 371 646Intangibleassets (19) 2345 2179Taxreceivables,ofwhich: (28) 1005 889 Currentincometax – 57 Deferredtax 1005 832Non-currentassetsheldforsale 31 –Otherassets (20) 2130 1679Total assets 686 593 671 615 Liabilities Financialliabilitiesatfairvaluethroughprofitorloss,ofwhich: 11537 8714 Heldfortrading (21) 11537 8714Financialliabilitiesatamortisedcost,ofwhich: 576627 569736 Depositsfrombanks (22) 141092 172151 Depositsfromcustomers (23) 414953 374745 Debtsecuritiesissued (24) 20582 22840Negativefairvalueofhedgingderivatives (25) 7624 5657Changesinfairvalueoftheportfolioofhedgedinstruments 1096 608Taxliabilities,ofwhich: (28) 1481 1108 Currentincometax 659 406 Deferredtax 822 702Otherliabilities (26) 8733 8733Provisionsforrisksandcharges (27) 882 1320Total liabilities 607 980 595 876 Equity Issuedcapital (29) 8755 8755Sharepremium (29) 3495 3495Reservefundsfromrevaluation (263) 912Retainedearningsandreservefunds (31) 56504 53620Profitfortheperiod 10122 8957Total shareholder‘s equity 78 613 75 739Total liabilities and shareholder‘s equity 686 593 671 615



Consolidatedstatementofcashflowsfortheyearended31December2019

2019 2018 MCZK MCZKProfit after tax 10 122 8 957Adjustmentsfornon-monetaryitems: Impairmentlossesof: 1309 610 Financialassetsatamortisedcosts 1310 619Financialassetsatfairvaluethroughothercomprehensiveincome (1) (9)Revaluationoffinancialinstruments 637 (1216)Netprovisionsforrisksandcharges: (342) 547 Loancommitmentsandfinancialguaranteesgiven (401) 484 Othernetprovisions 59 63Depreciationandimpairmentofproperty,equipmentandrightofuseassets 992 874Amortisationandimpairmentofintangibleassets 540 302Netincome/(loss)fromthesaleorrepurchaseof: 113 113 Financialassetsatamortisedcost – – Financialassetsatfairvaluethroughothercomprehensiveincome 113 113 Financialliabilities – –Profit/(loss)fromequityinvestments (40) 66Profit/(loss)fromthesaleofnon-financialassets (228) –Taxes 1808 2076Unrealisedforeigncurrencygains/(losses) (171) 101Othernon-monetaryadjustments (3170) (1970)Operating profit before change in operating assets and liabilities 11 570 10 460Financialassetsatfairvaluethroughprofitorloss,ofwhich: (2852) 412 Heldfortrading (2850) 431 Mandatorilyatfairvalue (2) (19)Financialassetsatamortisedcost,ofwhich: (14697) (15640) Loansandadvancestobanks 14091 10120 Loansandadvancestocustomers (28788) (25760)Otherassets (451) 1323Financialliabilitiesatfairvaluethroughprofitorloss,ofwhich: 2733 (170) HeldforTrading 2733 (170)Financialliabilitiesatamortisedcost,ofwhich: 8995 12271 Depositsfrombanks (31127) (1995) Depositsfromcustomers 40122 14266Otherliabilities 233 (1777)Incometaxpaid (2072) (1353)Net cash flows from operating activities 3 459 5 526(Acquisition)/saleandmaturityoffinancialassetsatfairvaluethroughothercomprehensiveincomeandotherfinancialinstruments 5590 16858Gainsfromthesaleofpropertyandequipmentandintangibleassets 1613 1282(Acquisition)ofpropertyandequipmentandintangibleassets (2171) (2170)Dividendsreceived 5 4Net cash flows from investment activities 5 037 15 974Dividendspaid (6070) (3732)Financialliabilitiesatamortisedcost–debtsecuritiesissuedandrepaid (2260) (17024)(Payment)ofLeaseliabilities (374) n/aNet cash flows from financial activities (8 704) (20 756)Cash and cash balances at the beginning of the period 4 842 4 008Cash and cash balances at the end of the period 4 634 4 842Interestreceived 18692 14704Interestpaid (3794) (777)



Consolidatedstatementofchangesinequityfortheyearended31December2019

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Notes to the financial statements (consolidated)

I. IntroductionGeneral InformationTheUniCreditBankCzechRepublicandSlovakia,a.s.group(hereinafterthe“Group”)consistsoftheparentcompanyUniCreditBankCzechRepublicandSlovakia,a.s.,ajointstockcompany(hereinafterthe“Bank”orthe“ParentCompany”)withitsregisteredofficeŽeletavská1525/1,14092,Praha4–Michle,12subsidiariesand1associate.TheBankwasestablishedon1January,1996andisregisteredintheCommercialRegisterinPrague,SectionB,Insert3608.TheidentificationnumberoftheBankis64948242.The“UniCreditGroup”referstothegroupofcompaniescontrolledbytheUniCreditBank’sparentcompanyUniCreditS.p.A.

TheBankwasestablishedthroughthecross-bordermergerofUniCreditBankCzechRepublic,a.s.andUniCreditBankSlovakiaa.s.withUniCreditBankCzechRepublic,a.s.beingthesuccessorcompany.Theeffectivemergerdatewas1July2013.UniCreditBankCzechRepublic,a.s.wasestablishedthroughthemergerbyamalgamationofHVBBankCzechRepublica.s.andŽivnostenskábanka,a.s.asof1October2006.Allrightsandobligationsofthedissolvedcompany,Živnostenskábanka,a.s.,weretransferredtothesuccessor,HVBBankCzechRepublica.s.In2008,theBankassumedthenetassetsofHVBRealityCZ,s.r.o.In2009,theBankpreparedaprojectofitsmergerwithUniCreditFactoring,s.r.o.UniCreditFactoring,s.r.o.wasthedissolvedcompanyandtheBankwasthesuccessorcompany.In2012,theBankpreparedaprojectofitsmergerbyamalgamationwithUniCreditCAIBCzechRepublica.s.ThiscompanywasthedissolvedcompanyandtheBankbecamethesuccessorcompany.

Changesinthebusinessnameandotherfactsrelatedtothecross-bordermergerwererecordedintheCommercialRegisterinPrague,SectionB,Insert3608on1December2013.

AspartofrestructuringinUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.AwhichistheultimateparentcompanyoftheentireUniCreditGroupholding100%oftheBank’sshares.

Followingthecompletionofthecross-bordermerger,theBankhasbeencontinuingtoperformactivitiespreviouslyundertakenbyUniCreditBankSlovakiaa.s.ontheterritoryoftheSlovakRepublicthroughitsorganisationalbranchUniCreditBankCzechRepublicandSlovakia,a.s.,pobočkazahraničnejbanky(branchofaforeignbank).

Thecross-bordermergerwasmadewiththeobjectiveofcreatingastrongerentitycapableofmanagingbusinessactivitiesbothintheCzechandSlovakmarketsthatwillbringsignificantadvantagestoUniCreditGroupsincethemergergaverisetoanentitythatisable

tomoreefficientlyandeffectivelyserveclientsandachievegreaterreturnsinthecontextoftheanticipatedcostsavingsanddynamicgrowthofbusinessinbothcountries.Theintegrationenabledtobenefitfromsynergisticeffectsintermsofcostsandincomewhileachievingamorebalancedcapitalstructureandoptimisedliquiditymanagement.Inaddition,UniCreditGrouphadtheopportunitytoreducethecomplexityofitsorganisationalstructureandthelevelofmanagementeffortsasaresultofestablishingonelocalmanagementteamoverseeingbothmarkets.

TheBankincreaseditssharecapitalforthepurposesofthemerger.AnumberofminorityshareholdersofUniCreditBankSlovakiaa.s.exercisedtheirrighttosellthesharesofthedissolvingbank,otherminorityshareholdersutilisedtherighttoexchangethesharesfornewlyissuedsharesoftheBank.ThesuccessorbanktookoverthecapitalofthedissolvingbankofMCZK11,611andallocatedttothespecial-purposereservefundinEURthatcanbeusedonlytooffsetlosses.

Scope of ActivitiesTheBankisauniversalbankprovidingservicesofretail,commercialandinvestmentbankingservicesinCzechcrownsandforeigncurrenciesfordomesticandforeignclients,mainlyintheCzechRepublicandalsoinotherstatesoftheEuropeanUnion.

TheBank’sprincipalactivitiesinclude:•Receivingdepositsfromthepublic;•Providingloans;•Investinginsecuritiesonitsownbehalf;•Operatingasystemofpaymentsandclearing;•Issuingandadministrationofpaymentproducts;•Providingguarantees;•Openinglettersofcredit;•Administeringcashcollection;•Tradingonitsownbehalforonbehalfofclients: –Inforeign-exchangecurrencyproducts; –Inforwardandcontractoptions,includingforeigncurrency

andinterestratecontracts;and –Withtransferablesecurities;•Participatinginsharesubscriptionsandprovidingrelatedservices;•Issuingmortgagebonds;•Conductingfinancialbrokerage;•Managingsecurities,includingportfoliomanagement,onbehalf

ofclients;•Providingdepositoryservicesandadministrationofsecurities;•Providingdepositoryservicesforinvestmentfunds;•Conductingforeigncurrencyexchangeactivities;•Providingbankinginformation;•Rentingsafe-depositboxes;and•Conductingactivitiesdirectlyconnectedwiththeactivitiesstated

above.

Throughitssubsidiariesandanassociate,theBankadditionallyprovidesthefollowingtypesofservices:•Leaseandinstalmentsaleofmachineryandequipment;•Leasetoown(leasepurchase);•Leaseofcarsandinstalmentsaleofcars;•Consumerandcommercialloansgrantedforthepurchaseofcars,

machineryandequipment;•Mediationofservicesandsales;•Mediationofinsurancepoliciesconclusion;•Purchase,saleandleaseofrealestate;•Realestateactivities;•Realestateadministrationandmaintenance;and•Operationalfinancingbywayoffactoringlocalandforeign

receivables.

II. Basis for the preparation of the financial statements

1. Statement of complianceTheConsolidatedfinancialstatementsoftheGroup(hereinafteralso“FinancialStatements”)for2019andcomparativesfor2018havebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asadoptedbytheEuropeanUnion(“EU”)inCommissionRegulation(EC)no.1126/2008asamendedincludingvalidinterpretationsoftheInternationalFinancialReportingInterpretationsCommittee(“IFRIC”),further“IFRS”.

Purpose of preparationThepurposeofpreparingthesefinancialstatementsintheCzechRepublicistocomplywithActonAccountingNo.563/1991Coll.TheGrouppreparesitsfinancialstatementsandannualreportunderspecialregulation1606/2002oftheEuropeanParliamentandoftheCouncilontheApplicationofInternationalAccountingStandards(IFRS).

Basis of preparationThesefinancialstatementswereauthorisedforissuebytheboardofdirectorsandaresubjecttoapprovalattheGeneralMeetingofShareholders.

TheseconsolidatedfinancialstatementswerepreparedbasedonthegoingconcernassumptionthattheGroupwillcontinuetooperateintheforeseeablefuture.

Theannualseparateandconsolidatedfinancialstatementsfor2018,theAnnualReportfor2018,theprofitdistribution(incl.dividendsintheamountofMCZK6,070),retainedearningsandthedeterminationofroyaltiestotheSupervisoryBoardmembersfor2018wereapprovedbytheParentCompany’sGeneralMeetingheldon19March2019.

Thefinancialstatementsarepreparedontheaccrualbasisofaccountingwherebytheeffectsoftransactionsandothereventsarerecognisedwhentheyoccurandreportedinthefinancialstatementsoftheperiodstowhichtheyrelateandonthegoingconcernassumption.

AllpresentedamountsareinmillionsofCzechcrowns(millionsofCZK)unlessstatedotherwise.

Theconsolidatedfinancialstatementswerepreparedonahistoricalcostbasis,exceptforfinancialassetsatfairvaluethroughothercomprehensiveincome,derivativecontracts,otherfinancialassetsandliabilitiesheldfortrading,financialassetsandliabilitiesatfairvaluethroughprofitorloss,andpropertiesusedinbusiness(reclassifiedfromthecostmodeltotherevaluationmodelasof31December2019)andpropertiesheldforinvestment(reclassifiedretrospectivelyfromthecostmodeltotherevaluationmodelasof1January2018),allofwhichhavebeenmeasuredatfairvalue.ThemethodsfordeterminingfairvaluearepresentedinsectionIII.SignificantAccountingPolicies,point3.FairValueMeasurementPrinciples.Recognisedassetsandliabilitiesthatarehedgedagainsttheriskofchangesinfairvalueandwouldnototherwisebemeasuredatfairvalueareremeasuredatfairvaluetotheextentofthehedgedrisk.

Regulatory requirementsTheGroupissubjecttotheregulatoryrequirementsoftheCzechNationalBank,whichincludelimitsandotherrestrictionspertainingtominimumcapitaladequacyrequirements,provisioningtocovercreditrisk,liquidity,interestratesandforeignexchangepositionoftheGroup.

2. ConsolidationThesefinancialstatementsareconsolidatedfinancialstatementsandincludetheParentcompanyanditssubsidiaries(the“Group”).

TheBank’sultimateownerisUniCreditS.p.A,Milan,whichconsolidatestheentireUniCreditgroupinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion.

CertainsubsidiariesmaintaintheiraccountsunderCzechorSlovakAccountingStandardsandtheGroupmakesreclassificationsandadjustmentstofiguresunderIFRS.



Asof31December2019,theconsolidationgroupincludestheParentCompanyandthefollowingentities(hereinafter„consolidationentities“):

Name of the entity Business activities Registered office Owner Ownership percentage Consoli-dation methodUniCreditFactoringCzechRepublic Factoring Prague UniCreditBankCzechRepublicandSlovakia,a.s. andSlovakia,a.s. 100% FullUniCreditLeasingCZ,a.s. Leases Prague UniCreditBankCzechRepublic andSlovakia,a.s. 100% FullUniCreditFleetManagements.r.o. Leaseofmotorvehicles Prague UniCreditLeasingCZ,a.s. 100% FullUniCredtipojišťovacímakléřskáspol.sr.o. Mediationofservices Prague UniCreditLeasingCZ,a.s. 100% FullRCIFinancialServices,s.r.o.* Financingofmotorvehicles Prague UniCreditLeasingCZ,a.s. 50% EquityALLIBLeasings.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullBACALeasingAlfas.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullCA-LeasingOVUSs.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullHVBLeasingCzechRepublics.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullUniCreditLeasingSlovakia,a.s. Leases Bratislava UniCreditLeasingCZ,a.s. 100% FullUniCreditFleetManagements.r.o. Leaseofmotorvehicles Bratislava UniCreditLeasingSlovakia,a.s. 100% FullUniCreditBroker,s.r.o. Mediationofservices Bratislava UniCreditLeasingSlovakia,a.s. 100% FullUniCreditLeasingInsuranceServices,s.r.o. Mediationofservices Bratislava UniCreditLeasingSlovakia,a.s. 100% Full

*RCIFinancialServices,s.r.o.isanassociatethatisconsolidatedusingtheequitymethodofaccounting.TheGroupholds49.9%ofvotingrightsinthisentityanddoesnotexercisecontroloverthisentity.

Changes in the Group during year 2019TherewerenochangesintheGroupin2019.

Principles of ConsolidationControlisachievedwhentheBankisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwithsubsidiary(theinvestee)andhastheabilitytoaffectthosereturnsthroughitspowertogoverntherelevantactivitiesofthesubsidiary.Relevantactivitiesofthesubsidiaryarethosewhichmostsignificantlyaffectitsvariablereturns.

Non-controllinginterestsrepresentthoseportionsoftotalcomprehensiveincomeandnetassetsthatarenotattributabletotheownersoftheBank.TheBankhasnonon-controllinginterests.

SubsidiariesSubsidiariesareentitiescontrolledbytheGroup.Thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedateofonwhichcontroloriginatestothedateonwhichcontrolceasestoexist.ThefinancialstatementsoftheBank’ssubsidiariesarepreparedforthesamereportingyearasthatoftheBankandusingconsistentaccountingpolicies.Allintra-groupbalances,transactions,incomeandexpensesaswellasunrealisedgainsandlossesanddividendsareeliminatedduringconsolidation.

AssociatesAssociatesareentitiesoverwhichtheGrouphassignificant(butnotcontrolling)influenceonthemanagementoroperationsoftheentity(ietheGroup’spowertoparticipateinthefinancialandoperatingpolicydecisionsoftheinvesteebutnotcontroloverthose

policies).TheconsolidatedstatementofcomprehensiveincomeincludestheGroup’sshareintotalreportedprofitsorlossesofassociatesusingtheequitymethodofaccounting,fromthedateofonwhichsignificantinfluenceoriginatestothedateonwhichsignificantinfluenceceasestoexist.Theconsolidatedstatementoffinancialpositionreflectsthevalueoftheinvestmentinanassociatedeterminedusingtheequitymethodofaccounting.

Transactions under Common ControlAbusinesscombinationbetweenentitiesorcompaniesundercommoncontrolisabusinesscombinationwhereallcombiningentitiesorcompaniesareultimatelycontrolledbythesamepartyorpartiesaspriortoandpostthebusinesscombinationandthiscontrolisnottemporary.ForbusinesscombinationsundercommoncontroltheGrouphasadoptedthepoolingofinterestmethod,i.e.takingoverthecarryingamountsoftheacquiredbusinessandconcurrentlyreportingthesetransactionsprospectively,iewithoutadjustmentsincomparativeperiods,withthedifferenceoftheconsiderationtransferredandthecarryingamountofnetassetsacquiredbeingrecogniseddirectlyinequity.

Disclosure of interests in other entitiesIFRS12requiresdisclosureaboutsignificantjudgmentsandassumptionsusedtodefinethecharacterofaninvestmentinacompanyorinanagreement,investmentsinsubsidiaries,jointagreementsandaffiliatesandinnon-consolidatedstructuredentities.Basedontheanalysisperformedbymanagement,theGroupdoesnothaveanyinterestinconsolidatedstructuredentities,norinunconsolidatedstructuredentities.

3. Foreign Currency and Foreign Currency Translation

TheCzechcrownisthefunctionalcurrencyoftheBankandtheentitiesbasedintheCzechRepublic.EuroisthefunctionalcurrencyoftheSlovakbranchandtheentitiesbasedintheSlovakRepublic.ThepresentationcurrencyofthesefinancialstatementsistheCzechcrown.Assetsandliabilitiesofthebrancharetranslatedintothepresentationcurrencyusingtheforeignexchangerateapplicableasofthefinancialstatementsdate.Theprofitorlossofthebranchistranslatedusingtheaverageexchangerate.Theresultingdifferencearisingfromtheuseofvariousforeignexchangeratesisrecognisedinequityas“Foreignexchangerategainsorlossesfromthebranch”.Figuresinbracketsrepresentnegativeamounts.

Transactionsinforeigncurrencies(ieotherthanthefunctionalcurrency)aretranslatedtothefunctionalcurrencyusingtheforeignexchangeratepromulgatedbythecentralbankatthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedtothefunctionalcurrencyattheclosingforeignexchangerateatthebalancesheetdate.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthatarestatedathistoricalcostaretranslatedtothefunctionalcurrencyattheforeignexchangerateatthedateofthetransaction.Foreignexchangedifferencesarisingontranslationarerecognisedinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesheldfortrading”.

III. Significant accounting policiesTheaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthesefinancialstatementsexcluding:•ImplementationofaccountingpoliciesbasedonIFRS16“Leases”

since1January2019(fordetailsseepoint13.Leases)and•Accountingpolicyforvaluationofownedrealestatesand

investmentproperty(fordetailsseepoint10.PropertyandEquipmentandpoint11.InvestmentProperty).

TerminologyusedintheConsolidatedFinancialStatements(incl.NotestotheConsolidatedFinancialStatements)andthestructureofsomedisclosuretableswererefinedincomparisontotheConsolidatedFinancialStatementsforthecomparativeperiod.Theadjustmentshavenoimpactonthepresentedfigures.

1. Financial InstrumentsAfinancialinstrumentisanycontractthatgivesrisetoafinancialassetofoneentityandafinancialliabilityorequityofanotherentity.

TheGroupclassifiesfinancialinstrumentsinthefollowingcategories:•Financialassetsmeasuredatamortisedcost(“AC”),•Financialassetsmeasuredatfairvaluethroughother

comprehensiveincome(“FVTOCI”),

•Financialassetsmandatorilymeasuredatfairvaluethroughprofitorloss(“FVTPL”),

•Financialassetsheldfortrading(“FVTPL”),•Financialliabilitiesmeasuredatamortisedcost(“AC”)and•Financialliabilitiesmeasuredatfairvaluethroughprofitorloss

(“FVTPL”).

TheGrouphasappliedaIFRS9approachtotheclassificationandmeasurementoffinancialassetsthattakesintoaccount:•Thebusinessmodelformanagingfinancialassetsand•Characteristicsofcontractualcashflowsfromaspecificfinancial

asset.

Afinancialassetisvaluedatamortised cost ifboththefollowingconditionsaremet:•Theassetisheldaspartofabusinessmodelwhoseaimistohold

financialassetsinordertoobtaincontractualcashflows;and•Thecontractualconditionsofthefinancialassetsetspecificdates

ofcashflowscomposedexclusivelyofpaymentsofprincipalandinterestontheunpaidpartoftheprincipal.

Abusinessmodel’sobjectivemaybetoholdfinancialassetstocollectcontractualcashflowsevenwhensomesalesoffinancialassetshaveoccurred,orareexpectedtooccur.

Afinancialassetismeasuredatfair value through other comprehensive incomeifboththefollowingconditionsaremet:•Theassetisheldaspartofabusinessmodelwhoseaimis

achievedbycollectionofcontractualcashflowsaswellasbysaleoffinancialassets;and

•Thecontractualconditionsofthefinancialassetsetspecificdatesofcashflowscomposedexclusivelyofpaymentsoftheprincipalandinterestontheunpaidpartoftheprincipal.

Financialassetsatfairvaluethroughothercomprehensiveincomecanalsoincludeinvestmentsinequityinstrumentiftheyarenotheldfortradingandaredesignatedsooninitialrecognition.

Afinancialassetismeasuredatfair value though profit or lossifitisnotmeasuredatamortisedcostoratfairvaluethroughothercomprehensiveincome,orifitisdesignatedatFVTPLoninitialrecognition.

AllfinancialliabilitiesoftheGroup,exceptforfinancialliabilitiesheldfortrading,financialliabilitiesdesignatedatFVTPLoninitialrecognitionandhedgingderivatives,aremeasuredatamortisedcost.

a) Business Model AssessmentBusinessmodel(“BM”)referstothewaytheGroupmanagesitsfinancialassetsinordertogeneratecashflows.Thebusinessmodeldetermineswhethercashflowswillresultfromcollectingcontractualcashflows,sellingfinancialassetsorboth.


Thefollowingisconsideredasevidencewhenassessingwhichbusinessmodelisrelevant:•Howtheperformanceofthebusinessmodel(andthefinancial

assetsheldwithinthatbusinessmodel)isevaluatedandreportedtotheentity’skeymanagementpersonnel;

•Therisksthataffecttheperformanceofthebusinessmodel(andthefinancialassetsheldwithinthatbusinessmodel)andthewaythoserisksaremanaged;

•HowmanagersoftheGrouparecompensated(egwhethercompensationisbasedonthefairvalueoftheassetsmanagedorthecontractualcashflowscollected);

•Thefrequency,valueandtimingofsalesinpriorperiods,thereasonsforsuchsalesandexpectationsaboutfuturesalesactivity;and

•Whethersalesactivityandthecollectionofcontractualcashflowsareintegralorincidentaltothebusinessmodel

Thebusinessmodelisdeterminedatalevelthatreflectsthewaygroupsoffinancialassetsaremanagedtogethertoachieveaparticularbusinessobjective.TheGroup’sbusinessmodeldoesnotdependonmanagement’sintentionsforanindividualinstrumentbutisdeterminedatahigherlevelofaggregation.

ThebusinessmodelassessmentresultedinthefollowingbusinessmodelsoftheGroup:

Business model “Held to collect”comprisesthebankingbookandwasassignedmainlytothelendingportfolioandtheportfolioofdebtsecuritiesthatareheldwiththeintentiontocollectcontractualcashflows.

Althoughtheobjectiveofthebusinessmodelistoholdfinancialassetsinordertocollectcontractualcashflows,theentityneednotholdallofthoseinstrumentsuntilmaturity.Thusthisbusinessmodelcanbetoholdloansandbondstocollectcontractualcashflowsevenwherelimitedsalesoffinancialassetsoccurorareexpectedtooccurinthefuture.

Salesareconsistentwiththeheld-to-collectbusinessmodelinthefollowingsituations:•Thesalesareduetoanincreaseinthecreditriskofafinancialasset;•Thesalestakeplaceclosetothematurityofthefinancialasset

andtheproceedsfromthesalesapproximatethecollectionoftheremainingcontractualcashflows;

•Thesalesareinfrequent(evenifsignificant),orareinsignificantindividuallyandinaggregate(eveniffrequent).

Thebusiness model “Held to collect and sell”comprisesthebankingbookandwasassignedmainlyto:•Theportfolioofdebtsecuritieswhoseobjectiveisachievedbyboth

collectingcontractualcashflowsandsellingfinancialassets;these

areusedprimarilyforliquidity,interestanddurationmanagement,and

•EquityinstrumentsirrevocablydesignatedatFVTOCIoninitialrecognition.

The“Other” business modelwasassignedtofinancialinstruments(debtsecurities,derivativesandequityinstruments)thatarenotallocatedtoanyoftheabovebusinessmodelsandthemainstrategyis:•Trading: –Torealisecashflowsthroughsaleoftheassetsor –Tomanagetheinstrumentsactivelyonfairvaluebasisin

ordertorealisefairvaluechangesarisingfrommarketfactorchangeslikeyieldcurves,creditspreadsetc.

•ManagingRiskWeightedAssets,or•Liquidityandinterestratemanagementuptooneyear.

b) Analysis of Contractual Cash Flow CharacteristicsFortheclassificationoffinancialassetsbasedonthenewIFRS9categories,theanalysisofthebusinessmodeliscomplementedbytheanalysisofthecontractualcashflows–assessmentwhetherthecontractualtermsofthefinancialassetgiveriseonspecificdatestocashflowsthataresolelypaymentsofprincipalandinterest(“SPPITest”).Thisanalysisisonlyperformedatinitialrecognitionoftheinstrument.

Forthispurpose,interestisdefinedasaconsiderationforthetimevalueofmoney,thecreditriskassociatedwiththeprincipalduringaparticularperiodoftimeandforotherbasiclendingrisksandcosts,aswellasaprofitmargin.

Thisanalysisisperformedforloanproductseitherat“contracttemplate”levelforstandardisedproducts,oratcontractbycontractlevelfortailoredcorporateloancontracts.Forsecurities,theanalysisisperformedatISINlevelusingmainlyanexternaldataprovider.

Modified Time Value of MoneyThetimevalueofmoneyistheelementofinterestthatprovidesconsiderationforthepassageoftime.Itdoesnottakeintoaccountotherrisks(credit,liquidity,etc)orcosts(administrative,etc)associatedwithholdingafinancialasset.

Insomecases,thetimevalueofthemoneyelementmaybemodified(imperfect).Thisisthecase,forexample,ifafinancialasset’sinterestrateisperiodicallyresetbutthefrequencyofthatresetdoesnotmatchthetenoroftheinterestrate.Inthiscase,theGroupmustassessthemodificationtodeterminewhetherthecontractualcashflowsstillrepresentsolelypaymentsofprincipalandinterest,iethemodificationtermdoesnotsignificantlyalterthecashflowsfromaperfectbenchmarkinstrument.Forthisassessment,theGroupusesaBenchmarktooldevelopedatUniCreditGrouplevel.


c) Recognition and Measurement of Financial Assets

Financial assets at amortised cost“Financial assets at amortised cost”arerecognisedintheGroup’saccountingbooksfromthemomentofsettlement.ForeignexchangegainsandlossesandimpairmentlossesarerecognisedintheGroup’sprofitorlossfromthetradedate.

Financialassetsatamortisedcostaremeasuredinitiallyatfairvalue,includingtransactioncosts.Subsequenttoinitialrecognition,thesefinancialassetsaremeasuredatamortisedcostusingtheeffectiveinterestratemethod.

Theeffectiveinterestrate(EIR)istheratethatexactlydiscountsestimatedfuturecashreceiptsduringtheexpectedlifeofthefinancialassetorliabilitytothegrosscarryingamountofthefinancialassetorliability.TheEIR(andtherefore,theamortisedcostofthefinancialasset)iscalculatedbytakingintoaccounttransactioncostsandanydiscountorpremiumontheacquisitionofthefinancialasset,aswellasfeesandcoststhatareanintegralpartoftheEIR.TheGrouprecognisesinterestincomeusinganeffectiveinterestrateovertheexpectedlifeoftheloan.Forfloating-ratefinancialinstruments,periodicre-estimationofcashflowstoreflectthemovementsinthemarketratesofinterestalsoalterstheeffectiveinterestrate.

Financialassetsatamortisedcostrepresentloansandadvancestobanks,loansandadvancestocustomersanddebtsecurities.

“Purchased or originated credit-impaired financial assets” (POCI) arefinancialassetsthatarecredit-impairedoninitialrecognition.TheGrouprecognisesPOCIwhenfreshmoneyisgrantedtoacredit-impairedborrowerorifarestructuringresultsinthe“renewedabilitytodrawexistingunusedcreditlines/commitments”.TheGroupidentifiednoPOCIassetsduring2019,orin2018.

POCIismeasuredatamortisedcostusingcredit-adjustedEIR.Oninitialrecognition,POCIassetsdonotcarryanimpairmentallowance.Instead,lifetimeexpectedcreditlossesareincorporatedintothecalculationofthecredit-adjustedEIR.Thecredit-adjustedEIRiscalculatedusingtheexpectedcashflowsinclusiveoffuturelifetimeexpectedcreditlosses–ietheestimatedcontractualcashflowsarereducedbylifetimeexpectedcreditlosses.Forsubsequentmeasurement,theexpectedcreditlossesforPOCIassetsaremeasuredaslifetimeexpectedcreditlosses.However,onlythecumulativechangesinlifetimeexpectedcreditlossessinceinitialrecognitionarerecognisedasalossallowance,andnotthetotalamountofexpectedcreditlosses.InterestincomeonPOCI,iscalculatedusingthecreditadjustedEIR.

Gainsandlossesarisingfromfinancialassetscarriedatamortisedcostarerecognisedinprofitorlosswhenthefinancialassetis

derecognised(intheitem“Net income/(loss) from the sale or repurchase of: Financial assets at amortised cost”) orimpaired(intheitem“Impairment losses on: Financial assets at amortised cost”),andthroughtheamortisationprocessintheitem“Interest income”usingtheeffectiveinterestratemethod.

Financial assets at fair value through other comprehensive income“Financial assets at fair value through other comprehensive income”arerecognisedintheGroup’saccountingbooksfromthemomentofsettlement.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheGroup’sothercomprehensiveincomesincethetradedate;impairmentlossesarerecognisedsincethetradedate.

FinancialassetsatFVTOCIaremeasuredinitiallyatfairvalue,includingtransactioncosts.Subsequenttoinitialrecognition,thesefinancialassetsaremeasuredatfairvalue.

Gainsandlossesarisingfromachangeinthefairvalueofdebtinstrumentassetsatfairvaluethroughothercomprehensiveincomearerecognisedinothercomprehensiveincomeandbecometheequityitem“Reserve funds from revaluation”,withtheexceptionofexpectedcreditlossesthatarereportedinprofitorlossas“Impairment losses on: Financial assets at fair value through other comprehensive income”.Whenfinancialassetsaresold,transferredorotherwisedisposedof,thecumulativegainorlossrecognisedinequityistransferredtoprofitorlossas“Net income/(loss) from the sale or repurchase of: Financial assets at fair value through other comprehensive income”.InterestincomefromfairvaluethroughOCIdebtsecuritiesisrecognisedintheincomestatementas“Interest income”usingtheeffectiveinterestratemethod.

FinancialassetsatFVTOCIincludedebtinstrumentsandequityinstruments(designatedatFVTOCIoninitialrecognition).

“Equity instruments designated at FVTOCI on initial recognition” – oninitialrecognitionofanequityinstrumentthatisnotheldfortrading,theBankmayirrevocablyelecttopresentsubsequentchangesinfairvalueinothercomprehensiveincome.Thisdecisionismadeonaninvestment–by–investmentbasisforeachinvestmentandcoversstrategicinterests.Subsequentchangesinfairvaluefromrevaluationarerecognisedduringthelifeoftheequityinstrumentintheitem“Reserve funds from revaluation“ and,onitsderecognition,thesubsequentchangesarenotrecognisedinprofitorloss.Afterderecognitionoftheinvestment,thefinalcumulativechangesinfairvaluearerecognisedinretainedearnings.

Dividendincomefromequityinstrumentsisrecognisedintheincomestatementin“Dividend income”onthedatethedividendisdeclared.


Financial assets at fair value through profit and loss“Financial assets at fair value through profit or loss”arerecognisedintheGroup’saccountingbooksfromthemomentofsettlement.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheGroup’sprofitorlosssincethetradedate.

Initialandsubsequentmeasurementofthefinancialassetsatfairvaluethroughprofitorlossisatfairvalue.

FinancialassetsatFVTPLincludefinancialassets:•Held for trading (debtinstrumentsorderivatives)•Mandatorily at fair value•Designated at FVTPL oninitialrecognition.

“Financial assets at fair value through profit or loss: Held for trading”includeinstrumentsheldbytheGroupprincipallyforthepurposeofshort-termprofittaking.Theseinstrumentsincludeinvestmentsindebtandequityinstruments,certainpurchasedreceivablesandderivativecontractsthatarenotdesignatedashedginginstruments.

Againorlossarisingfromsaleorredemption,orachangeinthefairvalueofaheldfortradingfinancialassetisrecognisedinprofitorlossintheitem“Net income/(loss) from trading”,includinggainsorlossesrelatedtoderivativecontractsthatarelinkedtoassetsand/orliabilitiesdesignatedatfairvalue.Interestincomefromfinancialassetsheldfortradingisrecognisedinprofitorlossintheitem“Interest income“.Ifthefairvalueofafinancialinstrumentfallsbelowzero,whichmayhappeninthecaseofderivativecontracts,itisrecognisedintheitem“Financial liabilities at fair value through profit or loss: Held for trading”.

Allpurchasesandsalesthatrequiredeliverywithinthetimeframeestablishedbyregulationormarketconvention(“regular way”)arerecognisedasspot transactions.Regularwaytransactions/spottransactionsarerecognisedatthesettlementdate,whichisthedatewhenafinancialinstrumentisdelivered.Transactionsthatdonotmeettheregularwaysettlementcriteriaaretreatedasderivatives.

Aderivativeisafinancialinstrumentorothercontractthathasallthreeofthefollowingcharacteristics:•Itsvaluechangesinresponsetothechangeinaspecifiedinterest

rate,financialinstrumentprice,commodityprice,foreignexchangerate,indexofpricesorrates,creditratingorcreditindex,orothervariable(usuallycalledthe“underlying”),providedforanon-financialvariablethatthevariableisnotspecifictoapartytothecontract;

•Itrequiresnoinitialnetinvestmentoraninitialnetinvestmentthatissmallerthanwouldberequiredforothertypesofcontractsthatwouldbeexpectedtohaveasimilarresponsetochangesinmarketfactors;

•Itissettledatafuturedate(exceptforregularwaytransactions).

Sometimes,aderivativemaybeacomponentofacombinedfinancialinstrumentthatincludesahostcontractandaderivative(theembeddedderivative)effectingcashflowsorotherwisemodifyingthecharacteristicsofthehostinstrument.Anembeddedderivativemustbeseparatedfromthehostinstrumentandaccountedforasaseparatederivativeif,andonlyif:•ThehostinstrumentisnotafinancialassetpursuanttoIFRS9;•Theeconomiccharacteristicsandrisksoftheembeddedderivative

arenotcloselyrelatedtotheeconomiccharacteristicsandrisksofthehostcontract;

•Aseparatefinancialinstrumentwiththesametermsastheembeddedderivativewouldmeetthedefinitionofaderivativeasastand-aloneinstrument;and

•Thehostinstrumentiseithernotmeasuredatfairvalueoritismeasuredatfairvaluebutchangesinfairvaluearerecognisedinothercomprehensiveincome.

Whenanembeddedderivativeisseparated,thehostcontractisaccountedforaccordingtoitsaccountingclassification.

DerivativesarerecognisedintheGroup’saccountingbooksfromthetradedate.Derivativesarerecordedatfairvalueandcarriedasassetswhenthefairvalueispositiveandasliabilitieswhenthefairvalueisnegative.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheGroup’sprofitorlossintheitem“Net income/(loss) from trading” sincethetradedate.

Derivativesareclassifiedastradingderivativesunlesstheyqualifyashedginginstrumentsineffectivehedging.Forhedgingderivativespolicy,seesectionIII.SignificantAccountingPolicies,point4.HedgingDerivatives.

Financialassetsareclassifiedas“Financial assets at fair value through profit or loss: Mandatorily at fair value”iftheydonotmeettheconditions,intermsofbusinessmodelorcashflowcharacteristics,forbeingmeasuredatamortisedcostoratfairvaluethroughothercomprehensiveincome.Thefollowingassetsareclassifiedinthisportfolio:•Debtinstruments,securitiesandloansforwhichthebusiness

modelisneitherheldtocollectnorheldtocollectandsellbutwhicharenotpartofthetradingbook;

•Debtinstruments,securitiesandloanswithcashflowsthatarenotsolelypaymentofprincipalandinterest;

•Unitsininvestmentfunds;•EquityinstrumentsnotheldfortradingforwhichtheGroupdoes

notapplytheoptiongrantedbythestandardofvaluingtheseinstrumentsatfairvaluethroughothercomprehensiveincome.

Theseassetsareaccountedasfor“Financial assets at fair value through profit or loss: Held for trading”,howevergainsandlosses,whetherrealisedorunrealised,arerecognisedintheitem“Net income/


(loss) from financial assets/liabilities at fair value through profit or loss“.Interestincomefromfinancialassetsmandatorilyatfairvalueisrecognisedinprofitorlossas“Interest income“.

“Financial assets at fair value through profit or loss: Designated at FVTPL”-theGrouphastheoptionatinitialrecognitiontoirrevocablydesignateanon-derivativefinancialassetasatFVTPLifdoingsoeliminatesorsignificantlyreducesameasurementorrecognitioninconsistency,ieanaccountingmismatchthatwouldotherwisearisefrommeasuringassetsorliabilities,orrecognisingthegainsandlossesonthemonadifferentbasis.In2019andin2018theGroupheldnosuchassets.

Theseassetsareaccountedasfor“Financial assets held for trading”howevergainsandlosses,whetherrealisedorunrealised,arerecognisedintheitem“Net income/(loss) from financial assets/liabilities at fair value through profit or loss“.

InterestincomefromfinancialassetsdesignatedatFVTPLisrecognisedinprofitorlossas“Interest income“.

d) Modification and Derecognition of Financial AssetAfinancialassetisderecognisedwhentheGrouplosesthecontractualrightstothecashflowfromanassetortheGrouptransfersthefinancialassetandthetransferqualifiesforderecognition.Thisoccurswhentherightsarerealised,expiredorsurrendered.

Assetsmeasuredatfairvaluethroughothercomprehensiveincomeandassetsatfairvaluethroughprofitorlossthataresoldaregenerallyderecognisedandthecorrespondingreceivablesfromthebuyerarerecognisedatthesettlementdate.

TheGroupalsoderecognisesafinancialasset(derecognitionaccounting)ifitscontractualconditionshavebeenmodifiedtosuchanextentthattherelatedcashflowshavebeenmateriallychanged.Thenewfinancialassetisclassifiedinstage1forthepurposesofECLcalculationunlessitiscreditimpaired,inwhichcaseitisclassifiedasPOCI.

Whenassessingwhetherthechangeisamaterialchangeincontractualcashflows,theGroupconsidersthefollowingfactors:•Changeinthecurrencyoftheloan;•Changeofthedebtor;•ChangecausingfailuretomeettheSPPItest;and•Changeforbusinessreasons(egmaturityextension,change

ininterestrate).

Ifthechangeofcontractualconditionsdoesnotmateriallyaffecttherelatedcashflows,thefinancialassetisnotderecognised.Insuchcase,theGrouprecognisesgainsorlossesfrommodification(modificationaccounting),representingthedifferencebetween:

•Thepresentvalueofmodifiedexpectedcashflows(disregardingthecreditlosses)discountedusingtheoriginalEIRand

•Thecurrentgrosscarryingamount.

Changesincontractualcashflowsduetotheforbearancemeasure(asidefromachangeofdebtor,changeofloancurrencyorchangecausingafailuretomeettheSPPItestasifperformedatthemodificationdate)areconsideredtobechangesthatdonotsignificantlyaffecttherelatedcashflows.

e) Write-offsTheGroupwritesoffafinancialassetorapartthereofwhenithasnoreasonableexpectationsofrecoveringtherespectivecashflows(fromthereceivableitselforthecollateralreceived).Whenperformingawrite-off,thegrosscarryingamountoftheassetisreducedtogetherwiththerelatedlossprovision.Directwrite-offsandrecoveriesonwritten-offloansarereportedinline“Impairment losses on: Financial assets at amortised cost”.

Financialassetswrittenoffwhicharesubjecttofurtherenforcementarerecordedintheoff-balancesheet.IftheGroup,afterwritingoffafinancialasset,collectsadditionalamountsfromtheclient,theadditionalrecoveryisrecognisedintheincomestatementundertheitem“Impairment losses on: Financial assets at amortised cost”.

f) Recognition, Measurement and Derecognition of Financial Liabilities

“Financial liabilities at amortised cost” comprisefinancialinstruments(otherthanliabilitiesheldfortradingorthosedesignatedatfairvalue)representingthevariousformsofthird-partyfunding.Financialliabilitiesatamortisedcostincludedepositsfrombanks,depositsfromcustomersanddebtsecuritiesissued.

Thesefinancialliabilitiesarerecognisedatthesettlementdateinitiallyatfairvalue,whichisnormallytheconsiderationreceivedlesstransactioncostsdirectlyattributabletothefinancialliability.Subsequentlytheseinstrumentsaremeasuredatamortisedcostusingtheeffectiveinterestmethod.Suchinterestisrecognisedintheitem“Interest expenses”.

“Debt securities issued” arerecognisednetofrepurchasedamounts;thedifferencebetweenthecarryingvalueofaliabilityandtheamountpaidtobuyitisrecognisedintheincomestatementintheline“Net income/(loss) from the sale or repurchase of: Financial liabilities”.Subsequentdisposalbytheissuerisconsideredasanewissuewhichdoesnotproducegainsorlosses.

Theitem“Financial liabilities at fair value through profit or loss“includesfinancialliabilitiesheldfortradingandfinancialliabilitiesdesignatedatFVTPLoninitialrecognition.Relatedinterestisrecognisedintheitem“Interest expenses”.


“Financial liabilities at fair value through profit or loss: Held for trading” includefinancialinstrumentsheldbytheGroupprincipallyforthepurposeofshort-termprofittaking.Theseinstrumentsincludeshortsales(obligationstodeliverfinancialassetsborrowedbyashortseller(ieanentitythatsellsfinancialassetsitdoesnotyetown))andderivativesthatarenotdesignatedashedginginstruments.

“Financial liabilities at fair value through profit or loss: Held for trading”,includingderivativescontracts,aremeasuredatfairvalueoninitialrecognition,aswellasduringthelifeofthetransaction.Againorlossarisingfromsaleorredemptionorachangeinthefairvalueofaheldfortradingfinancialliabilityisrecognisedinprofitorlossintheitem“Net income/(loss) from trading”.

“Financial liabilities at fair value through profit or loss: Designated at FVTPL”–financialliabilities,likefinancialassets,mayalsobedesignated,accordingtoIFRS9,oninitialrecognitionasmeasuredatfairvalue,providedthat:•Thisdecisionprovidesmorerelevantinformationas: –Itexcludesorsignificantlyreducesthemeasurementor

accountingmismatchthatcouldotherwiseariseduringthemeasurementofassetsorliabilitiesorrecognitionoftherespectiveprofitsorlossesonadifferentbasis;or

–ThegroupoffinancialliabilitiesorfinancialassetsandfinancialliabilitiesiscontrolledanditsperformanceassessedbasedonfairvalueandinlinewithadocumentedriskmanagementstrategyorinvestmentstrategyandinformationonthisgroupisinternallytransferredtokeymanagersoftheGrouponthisbasis;or

•ThecontractcontainsoneormoreembeddedderivativesandthehostcontractisnotanassetsubjecttoIFRS9,theGroupcanincludetheentirehybridcontractinthiscategory,withtheexceptionofcaseswhere:

–Theembeddedderivativedoesnotsignificantlychangethecashflowsthatwouldotherwiseberequiredbythecontract;or

–Itisclearfromthefirstassessmentofasimilarhybridinstrumentthattheexclusionoftheembeddedderivativeisnotpermitted;

•Thefinancialliabilitythatariseswhenatransferofafinancialassetdoesnotqualifyforderecognitionorwhenthecontinuinginvolvementapproachapplies.

Thiscategorymayalsoincludefinancialliabilitiesrepresentedbyhybrid(combined)instrumentscontainingembeddedderivativesthatotherwiseshouldhavebeenseparatedfromthehostcontract.

Financialliabilitiespresentedinthiscategoryaremeasuredatfairvalueatinitialrecognitionaswellasduringthelifeofthetransaction.Thechangesinfairvaluearerecognisedintheincomestatementintheitem“Net income/(loss) from financial assets/liabilities at fair value through profit or loss”,exceptforthosechangesinfairvaluearisingfromchangesinthecreditworthinessofthesefinancialliabilities.Inthisscenario,thechangesinfairvaluearerecognised

intheitem“Reserve funds from revaluation”relatedtoshareholders’equity.Ifsuchaccountingtreatmentresultsinaninconsistencythatarisesfromtheapplicationofdifferentmethodsofmeasuringassetsandliabilities,andrelatedgainsorlosses,thenthechangesinfairvaluederivingfromchangesincreditworthinessarealsorecordedintheincomestatementintheitem“Net income/(loss) from financial assets/liabilities at fair value through profit or loss“.

In2019andin2018theGroupheldnosuchliabilities.

Afinancialliabilityisderecognisedwhenitissettled.

g) Reclassification of Financial InstrumentsFinancialinstrumentsarenotreclassifiedsubsequenttotheirinitialrecognitionasidefromreclassificationinthereportingperiodafterachangeintherespectivebusinessmodel.

Reclassificationsareexpectedtobeveryinfrequent.SuchchangesmustbedeterminedbytheGroup’sseniormanagementasaresultofexternalorinternalchangesandmustbesignificanttotheGroup’soperationsanddemonstrabletoexternalparties.

Thefollowingexternalorinternalchangesmayresultinabusinessmodelchange:•Changesinlawsandregulationsconcerningcertainassetsthat

obligestheentitytoreviewitsbusinessmodel;•Changesinstrategyconcerningcertainasset’sclass,asset’s

geography,producttype;•Businesscombinationsthatinducetheentitytoreviewitsbusiness

modelconcerningcertainfinancialassets;•TheGroupbeginsorceasestoperformanactivitythatissignificant

toitsoperations.

Thefollowingarenotconsideredtobechangestoabusinessmodel:•Achangeinintentionrelatedtospecificfinancialassets(evenin

circumstancesofsignificantchangesinmarketconditions);•Atemporarydisappearanceofaparticularmarketforfinancial

assets;or•Atransferoffinancialassetsbetweenpartsoftheentitywith

differentbusinessmodels.

AnyreclassificationisappliedbytheGroupprospectively,sotheGroupdoesnotadjustanypreviouslyrecognisedgains,losses(includingimpairmentgainsorlosses)orinterest.

InvestmentsinequityinstrumentsthataredesignatedasatFVTOCIatinitialrecognitionmaynotbereclassified,asadecisiontodesignatethemasatFVTOCIisirrevocable.

h) Day 1 Profit/LossIfthetransactionpricediffersfromthefairvalueofafinancialassetorfinancialliabilitymeasuredatfairvalue,thedifferencebetween


thesevalues(profitorloss)isreportedinprofitorloss,exceptforLevel3fairvaluemeasurement.TheGrouptypicallydoesnotconductthistypeoftransactions.

2. Impairment of Financial InstrumentsTheGrouprecognisesimpairmentlossesonitsdebtfinancialinstruments,otherthanthosemeasuredatFVTPL,itsleasereceivablesanditsoff-balancecreditriskexposuresarisingfromfinancialguaranteesandloancommitments.Theimpairmentisbasedonexpectedcreditlosseswhosemeasurementreflects:•Anunbiasedandprobability-weightedamountthatisdetermined

byevaluatingarangeofpossibleoutcomes;•Thetimevalueofmoney;and•Reasonableandsupportinginformationthatisavailablewithout

unduecostoreffortatthereportingdateaboutpastevents,currentconditionsandforecastsoffutureeconomicconditions.

Forreportingandprovisioningpurposes,theGroupusesathree-stagemodelinlinewithIFRS9thattakesintoaccountchangesincreditrisksinceinitialrecognition(“staging”):•Stage1includesfinancialassetswithacreditriskwhichhasnot

increasedsignificantlysinceinitialrecognition,aswellasassetswithlowcreditriskatthebalancesheetdate.The12-monthexpectedcreditlosses(orshorterdependingonthematurityoftheinstrument)arerecognisedfortheseassets.Interestincomeiscalculatedonthebasisofthegrosscarryingamountofassets.

•Stage2includesfinancialassetswithacreditriskwhichhasincreasedsignificantlysinceinitialrecognitionbutforwhichthereisnoobjectiveevidenceofimpairment.Fulllifetimeexpectedcreditlossesarerecognisedfortheseassets.Interestincomeiscalculatedonthebasisofthegrosscarryingamountofassets.

•Stage3includesfinancialassetsforwhichthereisobjectiveevidenceofimpairment.Fulllifetimeexpectedcreditlossesarerecognisedfortheseassets.Interestincomeiscalculatedonthebasisofthenetcarryingamountofassets.Thiscategoryincludesnon-performingreceivables.

ImpairmentmodelsareadaptedtocomplywiththeaccountingrequirementsstatedinIFRS9,andalsofollowthe“Guidelinesoncreditinstitutions’creditriskmanagementpracticesandaccountingforexpectedcreditlosses”issuedbyEBA.

Subjecttoexpectedlossescalculationarefinancialassetsatamortisedcostandtheapplicableoffbalancesheetexposures(suchasloancommitmentsandfinancialguaranteecontracts),allcreditexposuresassetsclassifiedatFairValuethroughOtherComprehensiveIncomeandLeasereceivables.

Furthermore,specificadjustmentsaredevelopedtotheProbabilityofDefault(PD),LossGivenDefault(LGD)andExposureAtDefault(EAD)parametersusedforregulatoryreportingpurposes(Basel)

tocompoundtheExpectedCreditLoss(ECL),andamodelisdevelopedtoassesstheStageAllocationonunimpairedassets,attransactionlevel,betweenStage1andStage2.

ThemaindifferencebetweenthetwostagesisthetimehorizonwhichtheECLisexpectedtobecalculatedon.

OnLGDandEADspecificadjustmentsareappliedtoparametersalreadycalculatedfor“regulatory”purposes,inordertoensurefullconsistency,netofdifferentregulatoryrequirements,betweenregulatoryandaccountingtreatment.Themainadjustmentsareto:•Removetheconservatismonlyrequiredforregulatorypurposes;•Introducea“pointintime”adjustment,insteadofthe“through

thecycle”adjustmentembeddedintheregulatoryparameters;•Includeforward-lookinginformation;and•Extendthecreditriskparametersinamultiyearperspective.

AsforPDs,dedicatedlifetimePDcurvesaredevelopedforeachmainclientsegmentbasedoncumulateddefaultrates,andarecalibratedtoreflectapointintimeandforward-lookingexpectationregardingportfoliodefaultrates.

TheExpectedCreditLossderivedfromsuchadjustedparametersisalsocompoundedtakingintoconsiderationmacroeconomicforecasts.

AkeyaspectderivingfromthemodelwhencompoundingthefinalExpectedCreditLossisthestageallocationmodel,whichallocatescredittransactionsbetweenStage1andStage2(Stage3beingequivalenttoImpairedassets).Stage1mainlyincludes(i)newlyoriginatedexposures,(ii)exposureswith“nosignificantincreaseincreditrisksinceinitialrecognition”or(iii)“lowcreditrisk”exposuresatthereportingdate.

Stage2allocationassessmentincludesacombinationofrelativeandabsolutetriggers.Themaintriggersinclude:•Therelativecomparison,attransactionlevel,betweenthePD

atoriginationandthePDateachreportingdate,bothcalculatedthroughinternalmodels,withthresholdssettoincludeallthekeyvariablesofeachtransactionthatcouldaffecttheBank’sexpectationaboutPDchangesovertime(egage,maturity,levelofPDatorigination).Thisprocedureassesseswhethertherehasbeenamaterialdeteriorationincreditqualitysinceinitialrecognition;

•Absolutetriggerssuchasbackstopsrequiredbytheregulation(ie30dayspastdue);and

•Otherinternalrelevanttriggers(egnewclassificationstoForborne).

TheGroupusesthe“clientdefault”definitioninlinewithRegulationNo.575/2013oftheEuropeanParliamentandoftheCouncil;specifically,adebtor’sdefaultinvolvessituationswhere:a. Thedebtorisindefaultwithatleastonerepaymentofthe

principalorrelatedinterestonanyofitspayablestothebankforaperiodgreaterthan90days;and/or


b. Itislikelythatthedebtorwillbeunabletosettleitspayablesonatimelybasisandinfullwithoutthebankresortingtorealisingcollateral.

Standardcaseswherethedebtorwillbeunabletosettleitspayables:•Changesincontractualcashflowsduetograntingrelieftothe

debtor(the“forbearancemeasure”);•Theloanhasbeenrestructuredordeferredforalongperiod;•Thedebtorhascommittedcreditfraudorhasviolatedthefinancial

commitmentsoftheloan;•Thedebtorisdeadorinsolvent;•Itisprobablethatthedebtorwillenterintobankruptcyorlegal

restructuringofitsdebts,etc.

Inthisevaluation,expecteddisposalscenariosarealsoconsideredasfarasUniCreditGroupNon-PerformingAssetsStrategyforeseestherecoveryofdefaultedassetsviatheirtransfer.

Whendefiningtheperimeterofimpairedassets,theDefinitionofDefaultcurrentlyappliedbyUniCreditGrouphasbeenadopted,whichincorporatessomeofthekeyprinciplesembeddedintheDefinitionofDefaultguidelinesissuedbyEBA,suchastheassessmentofimpairmentordefaultbyconsideringtheoverallexposuretoagivendebtor(so-called“debtorapproach”).

Financial assets at amortised costFinancialassetsatamortisedcostpredominantlyincludeloansandadvancestobanks,loansandadvancestocustomersandtradereceivablesandarereportednet,iereflectingimpairmentlosses.

Individualimpairmentlossesadjustthenetbookvalueofindividuallyassessedfinancialassetsatamortisedcosttotheirrecoverableamount.Therecoverableamountoffinancialassetsatamortisedcostissetasthepresentvalueofexpectedfuturecashflowsdiscountedwiththeoriginaleffectiveinterestrateofthefinancialinstrument.Expectedcashflowsfromtheindividualassetportfolioswiththesamecharacteristics(basedonthesegment/ratingmodel)aresetbasedonhistoricallosseswhiletakingintoaccounttheanticipatedmacroeconomicdevelopment.Basedonthisinformation,theexpectedlossiscalculatedasofthebalancesheetdate.

Financial assets at fair value through other comprehensive incomeImpairmentofdebtfinancialassetsatfairvaluethroughothercomprehensiveincomeintheamountoftheexpectedcreditlossisreportedinprofitorlossunder“Impairmentlossesonfinancialassets”.Impairmentlossesonequitysecuritiesclassifiedasfinancialassetsatfairvaluethroughothercomprehensiveincomearenotreported.

Trade receivablesTradereceivablesimpairmentiscalculatedusingasimplifiedapproachbasedondayspastdue.

ForadditionalinformationonCreditRiskManagement,pleaserefertosectionV.OtherNotes,point35b).

Loan commitments and financial guaranteesUnderIFRS9,theimpairmentrequirementsalsoapplytoloancommitmentsandfinancialguaranteesoffthestatementoffinancialposition.TheGroupassessesonaforward-lookingbasistheexpectedcreditlossesassociatedwithexposuresfromloancommitmentsandfinancialguaranteecontracts.

Whenestimatinglife-timeExpectedCreditLossforundrawnloancommitments,theGroupestimatestheexpectedportionoftheloancommitmentthatwillbedrawndownoveritsexpectedlife.TheExpectedCreditLossisthenbasedonthepresentvalueoftheexpectedshortfallsincashflowsiftheloanisdrawndown,basedonaprobability-weightingofscenarios.

Forfinancialguarantees,theGroupestimatesExpectedCreditLossesbasedonthepresentvalueoftheexpectedpaymentstoreimbursetheholderforacreditlossthatitincurs.Thecalculationismadeusingaprobability-weightingofscenarios.

TheExpectedCreditLossesrelatedtoloancommitmentsandfinancialguaranteecontractsarerecognisedundertheitem“Provisions for risks and charges”inthestatementoffinancialpositionandundertheitem“Net provisions for risks and charges: Loan commitments and financial guarantees given”intheincomestatement.

3. Fair Value Measurement PrinciplesThefairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.

Thefairvalueoffinancialassetsandfinancialliabilitiesisbasedontheirquotedmarketpriceonanactivemarketatthebalancesheetdatewithoutdeductionfortransactioncosts.Ifaquotedmarketpriceisnotavailable,thefairvalueoftheinstrumentisestimatedusingpricingmodelsordiscountedcashflowtechniquesthatmaximisesmarketobservableinputsandminimizingthoseunobservable.

Wherediscountedcashflowtechniquesareused,estimatedfuturecashflowsarebasedonGroupmanagement’sbestestimatesandthediscountrateisbasedonthemarketrateatthebalancesheetdateforaninstrumentwithsimilartermsandconditions.Wherepricingmodelsareused,inputsarebasedonmarketratesatthebalancesheetdate.

Thefairvalueofderivativesthatarenotexchange-tradedisestimatedastheamountthattheGroupwouldreceiveorpaytoterminatethecontractatthebalancesheetdate,takingintoaccount


currentmarketconditionsandthecurrentcreditworthinessofthecounterpartiesandoftheGroup.

BondsintheGroup’sportfolioarevaluedonadailybasisusingavailablemarketratesquotedbymarketparticipantsusingBloombergservices.Agroupofcontributorswhoprovidereliableandregularbondvaluationsisselectedforeachofthebonds.Thecreditspreadofthebondiscalculatedfromparticularcontributionsanddiscountcurves.

Iftherearesufficientcurrentmarketpricesofcontributionsavailable,thevaluationiscalculatedasanaveragevalue.Topreventpossibleerrorsofparticularcontributions,acomparisonofdailychangesismadeatthesametime.

Ifnomarketpriceisavailableasasourceofvaluationorthenumberofactualcontributionsisnotsufficient,theGroupwillcarryoutthevaluationonthebasisofarisk-freeswaprate,towhichthelastverifiedcreditspreadisapplied.TheGroupcontinuestoapplythismethoduntil:•Marketquotationsareagainavailable;•Thecreditspreadofaparticularbondisadjustedbasedon

acomparisonofcreditspreadsofsimilarbonds;•TheGroupreceivesotherinformationaboutachangeofthespread

applied;•Theissuer’screditratingchanges(changeofinternaland/or

externalrating,evidencefromthemarketthatcreditworthinessisworsening);and

•Theliquidityofthespecificsecuritieshasdeterioratedsignificantly.

Subsequently,theGroupwillcarryoutthevaluationcomprisingnewaspectsofthemarketprice,includinganassessmentofpossibleimpairmentlosses(seesectionIII.SignificantAccountingPolicies,point2.Impairment,namelyimpairmentoffinancialassetsatfairvaluethroughothercomprehensiveincome).

Groupmanagementbelievesthatthefairvalueoftheassetsandliabilitiespresentedinthesefinancialstatementscanbemeasuredreliably.

Financialassetsandfinancialliabilitiesareclassifiedintofairvaluelevelsdependingonthequalityoftheinputusedinthevaluation.Individuallevelsaredefinedasfollows:•Level1input–quoted(unadjusted)pricesonactivemarketsfor

identicalassetsorliabilitiesavailabletotheGroupasofthedateofvaluation;

•Level2input–inputdataotherthanthequotedpricescontainedinlevel1thatareobservableforanassetorliabilityeitherdirectlyorindirectly.Thiscategoryincludestheinstrumentsvaluedat:quotedpricesofsimilarassetsorliabilitiesonactivemarkets;quotedpricesofidenticalorsimilarassetsorliabilitiesonmarketsthat

arenotactive;valuationtechniquesforwhichasignificantinputisobservableonthemarketdirectlyorindirectly;and

•Level3input–unobservableinputdataforanassetorliability.Thiscategoryincludesinstrumentsunderwhichvaluationtechniquescontainaninputnotbasedonobservabledataandtheunobservableinputmayhaveasignificantimpactontheinstrument’svaluation.

TheGroupevaluatesthelevelsateachreportingperiodonaninstrument-by-instrumentbasisandreclassifiesinstrumentswhennecessary,basedonthefactsattheendofthereportingperiod.

Fair Value AdjustmentsFairvalueadjustmentisdefinedastheamounttobeaddedtothemarketobservedmid-priceortothetheoreticalpricegeneratedbyavaluationmodeltoobtainafairvalueoftheposition.ThereforeFVAareaimedatensuringthatthefairvaluereflectstheexitpriceofacertainposition.

Adjustmentsusedareasfollows:•Credit/debitvaluationadjustment(CVA/DVA);•ModelRisk;•Close-outCosts;•OtherAdjustments.

Credit/Debit valuation adjustment (CVA/DVA)Creditvaluationadjustments(CVAs)anddebitvaluationadjustments(DVAs)areincorporatedintoderivativevaluationstoreflecttheimpactonfairvalueofcounterpartycreditriskandUniCreditowncreditqualityrespectively.

GroupCVA/DVAmethodologyisbasedonthefollowinginputs/assumptions–simulationapproach:•Newproductsthatcanbevaluatedareautomaticallyincluded

forCVA,•TwosidedbilateralCVAisused,•EADderivedbysimulationtechniques–thewholeportfolio

oftradesaswellasriskmitigationtechniquessuchasnettingandmarginingwiththiscounterpartistakenintoaccount,

•PD–precisecomputationofcounterpartyexposure –Impliedbycurrentmarketdefaultrates,obtainedfromCredit

DefaultSwaps, –UsesinglenameCDSwhereavailable,usesectorcurve

approximations(basedoninternalratingandsector).

Funding Cost and Benefit Adjustment (FCA/FBA)FundingValuationAdjustment(FundVA)isthesumofaFundingCostAdjustment(FCA)andofaFundingBenefitAdjustment(FBA)thataccountsfortheexpectedfuturefundingcosts/benefitsforderivativesthatarenotfullycollateralised.Mostmaterialcontributorsarein-the-moneytradeswithuncollateralisedcounterparties.


UniCreditFVAmethodologyisbasedonthefollowinginputs:•PositiveandNegativeexposureprofilesderivedfromleveragingon

arisk-neutralspin-offoftheCounterpartyCreditRiskinternalmodel;•PDtermstructureimpliedbycurrentmarketdefaultratesobtained

fromcreditdefaultswaps;•Afundingspreadcurvethatisrepresentativeoftheaverage

fundingspreadofpeerfinancialgroups.

Model RiskFinancialmodelsareusedforthevaluationofthefinancialinstrumentsifdirectmarketquotesarenotreadilyavailable.Ingeneral,modelriskisrepresentedbythepossibilitythatafinancialinstrument’sevaluationissensitivetothechoiceofmodel.Itispossibletovaluethesamefinancialinstrumentbyusingalternativemodelswhichcouldprovidedifferentresultsintermofpricing.Themodelriskadjustmentreferstotheriskthattheactualfairvalueoftheinstrumentdiffersfromthevalueproducedbythemodel.

Close-out CostsThismeasurestheimplicitcostsofclosingan(aggregated)tradingposition.Theshortpositioncouldbeclosedbyalongpositionandviceversa,orbyenteringintoanewtransaction(orseveraltransactions)thatoffsets(hedges)theopenposition.Close-outcostsaretypicallyderivedfromthebid/askspreadsobservedonthemarket.Itaccountsforthefactthatapositionisvaluedatmid,butcanonlybeclosedatbidorask.Thisadjustmentisnotneededwhenthepositionismarkedatbidoraskandalreadyrepresentsanexitprice.Inadditionaclose-outadjustmentoftheNAVisappliedwhentherearepenaltiesrelatingtoapositionwrite-offinaninvestmentfund.

Other AdjustmentsOtherfairvalueadjustmentsnotincludedinthepreviouscategoriesmaybetakenintoconsiderationtoaligntheevaluationtothecurrentexitprice,accordingtothelevelofliquidityofthemarketandvaluationparameters,egadjustmentofequitypriceswhosequotationonthemarketarenotrepresentativeoftheeffectiveexitprice.

ForFairValuedisclosuresseesectionV.OtherNotes,point37.FairValueofFinancialAssetsandFinancialLiabilities.

4. Hedging DerivativesHedgingderivativesarecarriedatfairvalue.Positivefairvalueispresentedintheitem“Positive fair value of hedging derivatives”,negativefairvalueispresentedintheitem“Negative fair value of hedging derivatives”.Themethodofrecognisingfairvaluedependsonthemodelofhedgeaccountingapplied.

Hedgeaccountingcanbeappliedif:•ThehedgeisinlinewiththeGroup’sriskmanagementstrategy;•Thehedgerelationshipisformallydocumentedattheinception

ofthehedge;

•Itisexpectedthatthehedgerelationshipwillbehighlyeffectivethroughoutitslife;

•Theeffectivenessofthehedgerelationshipcanbeobjectivelymeasured;

•Thehedgerelationshipishighlyeffectivethroughouttheaccountingperiod;and

•Forhedgingfutureexpectedtransactions,itishighlyprobablethatthetransactionwilloccur.

Asregardshedgeaccounting,theGroupadditionallyusedtheoptionunderIFRS9tocontinueapplyingtheexistingrequirementsforhedgeaccountingpursuanttoIAS39.

Ifaderivativehedgesanexposuretochangesinthefairvalueofrecordedassetsandliabilitiesoroflegally-enforceablecommitments,thehedgeditemattributabletotheriskbeinghedgedisalsocarriedatfairvalue.Gains(losses)onthere-measurementofaninterest-bearinghedgeditemandhedgingderivativearerecognisedintheincomestatementin“Net income from hedging against risk of changes in fair value”.Realisedinterestincomeandexpensesarereportedonanetbasisin“Interest income”or“Interest expenses”.

Ifaderivativehedgesanexposuretothevariabilityofcashflowsrelatedtorecognisedassetsandliabilitiesorexpectedtransactions,theeffectivepartofthehedge(fairvalueofthehedgingderivative)isrecognisedinothercomprehensiveincomeinequityitem“Reserve funds from revaluation”.Theineffectivepartofthehedgeisrecognisedintheincomestatement.

Ifthehedgingofexpectedtransactionsresultsintherecordingofanassetorliability,thecumulativegainsorlossesfromtherevaluationofthehedgingderivativepreviouslyrecognisedinothercomprehensiveincomearetransferredtoprofitorlossatthesametimeasthehedgeditemaffectsthenetprofitorloss.

Whenahedginginstrumentorhedgerelationshipisterminatedbutthehedgedtransactionisstillexpectedtooccur,thecumulativegainorlossrecognisedinothercomprehensiveincomeremainsinequityandisrecognisedinaccordancewiththeabovepolicy.Ifthehedgedtransactionisnolongerexpectedtooccur,thecumulativegainorlosspreviouslyrecognisedinothercomprehensiveincomeisimmediatelyrecognisedintheincomestatement.

“Macro hedging”–IAS39allowsafair-valueitemhedgedagainstinterestratefluctuationstobenotonlyasingleassetorliabilitybutalsoamonetarypositioncontainedinanumberoffinancialassetsorliabilities(orpartsofthem).Accordingly,agroupofderivativescanbeusedtooffsetfair-valuefluctuationsinhedgeditemsduetochangesinmarketrates.


TheGroupappliesmacrohedgingtosomefinancialliabilities.Netchanges,gainsorlosses,inthefairvalueofthemacro-hedgedliabilitiesattributabletothehedgedriskarerecognisedintheliabilityitem“Changes in fair value of the portfolio of hedged instruments”andoffsettheincomestatementitem“Net income/(loss) from hedging against the risks of changes in fair value”.

5. Repo transactions and reverse repo transactions

Securitiessoldunderanagreementtorepurchasethemataspecifiedfuturedatearealsoknownas“repo transactions”or“sale and repurchase agreements”.Securitiessoldinsuchtransactionsarenotderecognisedfromthestatementoffinancialposition,astheGroupretainssubstantiallyalltherisksandrewardsofownership,asthesecuritiesarerepurchasedatafixedpricewhentherepotransactionends.Financialassetstransferredtoanothercounterpartyunderarepotransactionaremeasuredinaccordancewiththeappropriateaccountingpolicyforsuchfinancialasset.

Securitiessoldunderarepotransactionarerecordedasassetsintheline“Financial assets at fair value through other comprehensive income”orintheline“Financial assets at fair value through profit or loss: Held for trading”,andreceivedloan,includingaccruedinterest,isincludedintheline“Financial liabilities at amortised cost: Deposits from banks”orintheline“Financial liabilities at amortised cost: Deposits from customers”.

Debtsecuritiespurchasedunderagreementstopurchaseandresellataspecifiedfuturedate,alsoknownas“reverse repos”arenotrecordedintheGroup´sstatementoffinancialpositionbutarepresentedintheoff-balancesheet.Theconsiderationpaid(providedloan),includingaccruedinterest,isrecordedintheline“Financial assets at amortised cost: Loans and advances to banks”orintheline“Financial assets at amortised cost: Loans and advances to customers”.

ThedifferencebetweenthesaleandrepurchaseconsiderationsforbothrepoandreverserepotransactionsarerecognisedonanaccrualbasisovertheperiodofthetransactionusingtheEIRandarerecognisedintheincomestatementin“Interest income”or“Interest expenses”.

Forsaleofasecurityacquiredfromreverserepo,theGroupderecognisesthesecuritiesacquiredfromoff-balancesheetandrecordsapayablefroma“short sale”,whichisrevaluedtofairvalue,inthestatementoffinancialposition.Thispayableisreportedunder“Financial liabilities at fair value through profit or loss: Held for trading”withanygainsandlossesrecordedintheitem“Net income/(loss) from trading”.

“Sell-buy”and“Buy-Sell”transactionsareaccountedforinthesamewayas“repo transactions” and “reverse repos”.

6. Borrowing and Lending of SecuritiesFinancialassetslentundersecuritieslendingarrangementscontinuetoberecognisedinthestatementoffinancialpositioniftherisksandrewardsofownershipareretainedbytheGroupandaremeasuredinaccordancewiththeappropriateaccountingpolicyforsuchfinancialassets.

FinancialassetsborrowedundersecuritiesborrowingagreementsarenotrecognisedintheGroup’sstatementoffinancialpositionbutarepresentedinoff-balancesheet.

Forsaleofasecurityacquiredonthebasisofsecuritiesborrowingarrangements,theGroupderecognisesthesecuritiesacquiredfromoff-balancesheetandrecordsapayablefromashort-termsale,whichisrevaluedtofairvalue,inthestatementoffinancialposition.Thispayableisreportedunder“Financial liabilities at fair value through profit or loss: Held for trading”,withanygainsandlossesrecordedintheitem“Net income/(loss) from trading”.

Incomeandexpensesarisingfromtheborrowingandlendingofsecuritiesarerecognisedonanaccrualbasisovertheperiodofthetransactionsintheitem“Fee and commission income”or“Fee and commission expenses”.

7. OffsettingFinancialassetsandliabilitiesmaybeoffsetagainsteachother,andthenetamountisreportedinthestatementoffinancialpositionwhentheGrouphasalegallyenforceablerighttosetofftherecognisedamountsandthetransactionsareintendedtobesettledonanetbasis.Inthecurrentandcomparativeperiod,theGroupdoesnotoffsetanyfinancialassetsandfinancialliabilities.

8. Cash and cash balancesCashcomprisescashinhandandcashintransit.Cashequivalentsareshort-term(withmaturityofthreemonthsorless),highlyliquidinvestmentsthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Cashequivalentsareheldforthepurposeofmeetingshort-termcashcommitmentsratherthanforinvestmentpurposes.

“Cash and cash balances”arenotcarriedatfairvalueonthestatementoffinancialposition,butarecarriedatamountsthatapproximatetofairvalue,duetotheirshort-termnatureandgenerallynegligiblecreditrisk.

Cash,cashbalancesatcentralbanksandotherdemanddepositsconsistofcashbalancesandadvanceswiththeCzechNationalBankandNationalBankofSlovakia.

Theitem“Cash and cash balances” doesnotincludethecompulsoryminimumreservewhichispresentedintheitem“Financial assets at amortised cost: Loans and advances to banks”.


ThecompulsoryminimumreserveheldattheCzechNationalBankandattheNationalBankofSlovakiaisarequireddepositwithrestricteddrawingwhichmustbeheldbyallcommercialbankslicensedintheCzechRepublicandinSlovakiarespectively.

9. Property and EquipmentAccounting policy applied in 2018 and in 2019Propertyandequipmentareassetswhichmaybeusedforaperiodlongerthanoneyear.TheGrouphaspropertyandequipmenttoconductitsactivities.

Propertyandequipmentareinitiallyrecognisedatcostincludingallcostsdirectlyattributabletobringinganassetintouse.

Afterbeingrecognisedasanasset:•Buildingsandlandsusedinthebusinessaremeasuredaccording

tocostmodel;•Tangibleassetsusedinthebusiness,otherthanlands

andbuildings,aremeasuredaccordingtocostmodel.

Inthecostmodel,assetsarestatedathistoricalcostlessaccumulateddepreciationandimpairment.

Depreciationiscalculatedusingthestraight-linemethodovertheassets’estimatedusefullives.Thedepreciationperiods(overtherespectiveestimatedusefullives)forindividualcategoriesofpropertyandequipmentareasfollows:•Buildings 20–50years•Technicalimprovementofbuildings

protectedasculturalheritage 15years•Technicalimprovementofrentedpremises 10years

orinaccordancewithcontract•Air-conditioningequipment 5years•Machineryandequipment 3–10years•Bankvaults 20years•Fixturesandfittings 5–10years•Motorvehicles 4–5years•ITequipment 4years•Lowvaluetangibleassets 2–3years

Tangibleassets(includingrightofuseassets)areassessedforpotentialimpairmentorareductioninusefullife.Ifeventsorchangesintheconditionsoccurthatcouldresultinthecarryingamountnotbeingrecoverable,thecarryingamountiswrittendowntotherecoverableamountifthecarryingamountishigherthantheestimatedrecoverablevalue.Therecoverableamountisthehigheroffairvaluelesscostsofdisposalandthevalueinuse.

Thegainsandlossesondisposalaredeterminedbasedonthenetbookvalueandareincludedintheitem“Other operating income and expenses”.Thecostsofrepair,maintenanceand

technicalimprovementareexpensedastheyareincurred.Technicalimprovementsexceedingthelegallimitsarecapitalised.

PropertyandequipmentwhichtheGroupintendstosellwithin12months,isclassifiedas“Non-current assets held for sale”.Suchpropertyandequipmentisreclassifiedatthelowerofitscarryingamountoritssalesvaluelessdisposalcosts.Profitorlossfromthesaleispresentedintheitem“Profit/(loss) from the sale of non-financial assets”.

Change in accounting policy since 31 December 2019Forthepurposesofpreparingthefinancialstatementsat31December2019,theGroupdecidedtochangesubsequentmeasurementofthefollowingassets:•Propertiesusedinbusiness(ruledbyIAS16“Property,plant

andequipment”)beingreclassifiedfromthecostmodeltotherevaluationmodelforthemeasurementsubsequenttoinitialrecognition;

•Propertiesheldforinvestment(ruledbyIAS40“Investmentproperty”)beingreclassifiedfromthecostmodeltothefairvaluemodel.

ThisdecisionwasdrivenbythedecisionoftheultimateparentcompanyUniCreditS.p.A.madebyitsBoardofDirectorsduringameetingheldon2December2019.

TheGroupbelievesthatmeasuringrealestateassetsatfairvalues(insteadofatcost)providesmorereliableandrelevantinformationabouttheGroup’sfinancialpositionandeconomicresultinlinewiththeprovisionsofIAS8“Accountingpolicies,ChangesinAccountingEstimatesandErrors”.

TheGroupbelievesthatthechangeinthemeasurementofpropertieswillprovideamoreaccuraterepresentationofthefinancialposition,asfairvalueswillreflecttheincreaseinthevalueofthepropertieswhichtheGroupexpectstooccurasaresultoftheenhancementofthepropertieswithaviewtopotentialdisposaloftheproperties.In2019,UniCreditGroupadoptedanewstrategyofmanagingitsrealestateportfoliowhichitwillactivelyseektooptimiseinthelightofchangingmarketcircumstancesandchangestoitsoperationalmodels.TheGroupexpectstorealisevaluefromaportionoftheportfoliooverthemediumtermthroughtargeteddisposals.

ThefairvaluemodelallowstheGrouptorepresentthechangesinvalueofthepropertiesatthemomenttheyarise,incompliancewiththeobjectivesofthenewly-adoptedactivemanagementoftherealestateportfolio.Inthisway,therecognitionofcapitalgainsandlossesisnotdeferredatthetimeofsaleoftherealestateassetsandisnotinfluencedbythedifferencebetweenmarketvalue(embeddedinthesaleprice)andcostwhich,asstated,maynolongerbemeaningfuliftheacquisitionofrealestateassetsdidnottakeplacerecently.


Inaddition,theadoptionofafairvaluemodelallowsamoreaccuraterepresentationofthefinancialpositionoftheGroup,asitrepresentsthevalueoftherealestatepropertiesatasinglereferencedate–thedateofpreparationofthefinancialstatements.Thisavoidsheterogeneityinvaluationinherentinthecostmodelwhichreflectsmarketconditionsatdifferenttimes,iethepurchasedates.

Voluntarychangesinaccountingprinciples(accountingpolicies)areregulatedbyIAS8whichestablishes,asageneralrule,thatthesechangesmustbemaderetrospectivelystartingfromthemostremotedatewhenthisisfeasible.

Thismeansthat,basedonthegeneralprinciple,atthedateonwhichthechangetakesplace,theopeningbalancesofthecomparativeyearandthedataofthatyearshowninthefinancialstatementsandinthenotesmustberestated.

However,thisgeneralruleallowsforexceptions.Paragraph17ofIAS8statesthatforthepurposesofthevaluationoftheproperty,plantandmachinery,regulatedbyIAS16,thetransitionfromthecostmodeltotherevaluationmodelmustbemadeprospectively.Asaresult,therevaluationmodelhasbeenappliedprospectivelyandnotretrospectivelyasrequiredbythegeneralprincipleinIAS8.Thereforenoadjustmentoftheopeningbalancesofthecomparativeyearandofthecomparativedatahavebeenmade.

Consequently,forthepropertiesusedinbusiness,underIAS16,thetransitionfromacostvaluationtoavaluationatfairvalue,requiredthedeterminationoftherelatedfairvalueat31December2019.

Thedifferencesbetweenthisvalueandthepreviousvaluedeterminedbyapplyingthe“cost”criterionarerecognised:•Ifnegative,intheincomestatementintheitem“Net income/(loss)

on property and investment property measured at fair value”,•Ifpositive,intheothercomprehensiveincomestatement,and

accumulatedinequityundertheitem“Reserve funds from revaluation”.

The“Reserve funds from revaluation” willbelinearlytransferredtotheitem“Retained earnings and reserve funds”overtheresiduallifeoftheparticularpropertyusedinbusiness.Intheeventofthesaleoftheasset,thereservenotyetreversedwillbereclassifiedtotheitem“Retained earnings and reserve funds”.

Thepayoutoftherevaluationsurplustoshareholdersisrestrictedandiseligibleonlyintheeventofthedisposalofproperty.

Asthechangeinthemeasurementmethodtookplaceattheendoftheyear,thecalculationofthedepreciationforthe2019financialyearwasmadeinlinewithcostmodel.

From2020on,propertiesusedinbusiness,measuredaccordingtotheIAS16revaluationmodel,willcontinuetobedepreciatedusingthestraight-linemethodovertheirusefullifefromthehigherrevaluedamount.

TheGrouphaschosentoapplythe“restatementapproach”whenaccountingforrevaluation.Thisapproachadjuststhegrosscarryingamountsothatitmatchestherevaluationofthecarryingamountofthepropertyusedinbusinessandaconcurrentadjustmentofthecumulateddepreciation(ietherestatementapproachrequiresadjustmentofthegrosscarryingamountandthecumulateddepreciationbytheratiogivenbyFairValue/NetCarryingAmountbeforerevaluation).

ThereisnoexceptionfromretrospectiveapplicationforinvestmentpropertieseitherinIAS8orinIAS40“Investmentproperties”.

Asaresult,exceptforcaseswhereitisnotfeasibletodeterminetherelatedeffects,thechangeinaccountingpolicyisappliedretrospectively.

Thishasdetermined:•Thecarryingamountofthepropertiesheldforinvestmentasof

1.January2018wasadjustedtotheirfairvaluewhilethedifferencebetweencostandfairvaluewasrecognisedinretainedearnings;

•Propertiesheldforinvestmentwererevaluedatfairvalueasof31.December2018and31.December2019withchangesrecognisedintheincomestatement(boththepositiveandnegativedifferences);comparativeinformationasof31.December2018wasrestated.

Startingfrom2020,propertiesheldforinvestmentwillcontinuetobemeasuredatfairvaluewithrecognitionofthedifferencesintheincomestatementandwillnolongerbesubjecttodepreciationand/orimpairment.

Fairvaluewasdeterminedthroughtheuseofexternalindependentexpertvaluations.

Impacts deriving from the change in the valuation criterion for tangible assetsIntheconsolidatedfinancialstatementsasat31December2019,thechangeinthemeasurementmodeloftherealestatepropertiesresultedinanoverallpositivebalancesheeteffectofMCZK425asdetailedbelow:•Forpropertiesusedinbusiness,therecognitionofarevaluation

ofMCZK329grossofthetaxeffect.Thisvalue,netofdeferredtax,intheamountofMCZK261wasattributedtotheitem“Reserve funds from revaluation”inequity.Inadditiontothishighervalue,netlossesofMCZK(1)wererecognisedintheincomestatement


grossofthetaxeffectintheitem“Net income/(loss) on property and investment property measured at fair value”.

•Forpropertiesheldforinvestment:–TherecognitionofarevaluationofMCZK112grossofthetax

effectasare-exposureoftheopeningbalancesofequityasofJanuary1,2018(asareservefromthefirstapplicationofthenewaccountingprinciple).Thisvalue,netofdeferredtax,intheamountofMCZK90wasattributedtotheitem“Retained earnings and reserve funds”intheequityasofJanuary1,2018;

–Therestatementoftheitem“Retained earnings and reserve funds”relatingto31December2018(incl.theitem“Profit for the period”)asaconsequenceofchangesinthefairvalueofpropertiesduringthepreviousyearandthefactthatpropertiesheldforinvestmentarenolongersubjecttodepreciation,foranequalamountMCZK(21)grossofthetaxeffect(MCZK0netofthetaxeffect);

–Therecognitionin2019incomestatementofaresultequaltoMCZK203grossofthetaxeffect(MCZK164netofthetaxeffect);


Thefollowingtablessummarisetheeffectsonthebalancesheetassetsandliabilitiesasof1.Januaryand31.December2018aswellasthechangesintheincomestatementfortheyearendedatthatdatefollowingtheretrospectiveapplicationofthechangeinthemeasurementmodelofthepropertiesheldforinvestment:

1 Jan 2018 31 Dec 2018 Before change After change Before change After changeAssets Investmentproperty 680 792 646 646Total assets 672 056 672 168 671 615 671 615 Liabilities Taxliabilities,ofwhichdeferredtax 606 628 702 702Total liabilities 600 686 600 708 595 876 595 876 Equity Retainedearningsandreservefunds 49650 49740 53530 53620Profitfortheperiod n/a n/a 9047 8957Total shareholder‘s equity 71 370 71 460 75 739 75 739 Total liabilities and shareholder‘s equity 672 056 672 168 671 615 671 615

TheGrouphasevaluatedidiosyncraticriskconnectedtoitssingle-tenantinvestmentpropertiesportfolioandconcludedthatthefairvalueshouldbedecreasedduetotheincreasedriskofthesingletenantleaving.TheinformationaboutthetenantsintentionsonlycametotheGroup’sintentioninduringfinancialyear2018.

31 Dec 2018 Before change After changeDepreciationandimpairmentofproperty,equipmentandrightofuseassets (908) (873)Operating expenses (8 514) (8 479) Netincome/(loss)onpropertyandinvestmentpropertymeasuredatfairvalue n/a (146)Profit before income tax 11 144 11 033 Incometax (2097) (2076)Profit after tax 9 047 8 957Net profit attributable to the Group‘s shareholders 9 047 8 957Total comprehensive income 8 115 8 025Total comprehensive income attributable to the Group‘s shareholders 8 115 8 025

10. Investment PropertyInvestmentpropertyrepresentsassetsheldbytheGroupinordertoearnrentalsorforfurthercapitalappreciation.

Investmentpropertyismeasuredinitiallyatcost,includingtransactioncosts.Subsequenttoinitialrecognition,investmentpropertyismeasuredatfairvalueandchangesinfairvalue(positiveaswellasnegative)arerecognisedinP&Lintheitem“Net income/(loss) on property and investment property measured at fair value”.Fairvalueofinvestmentpropertyisreportedintheitem“Investment property”.Nodepreciationchargesorimpairmentadjustmentsarerecognised.

Rentalincomeisrecognisedintheitem“Other operating income and expenses”.

Thetransitionfromthecostmodeltothefairvaluemodelwascarriedoutretrospectivelysince1January2018.Forthedescriptionofthechangeinaccountingpolicyseepreviouspoint9.PropertyandEquipment.

11. Intangible AssetsIntangibleassetsareassetswhichmaybeusedforaperiodlongerthanoneyear.Intangibleassetsarestatedathistoricalcostlessaccumulateddepreciationandimpairment.

Depreciationiscalculatedusingthestraight-linemethodovertheassets’estimatedusefullives.Thedepreciationperiod(overrespectiveestimatedusefullives)forintangibleassetsisasfollows:•Softwareandintangibleassets 2–7years orinaccordancewiththecontract

Intangibleassetsareassessedforpotentialimpairmentorareductioninusefullife.Ifeventsorchangesintheconditionsoccurthatcouldresultinthecarryingamountnotbeingrecoverable,thecarryingamountiswrittendowntotherecoverableamountifthecarryingamountishigherthantheestimatedrecoverablevalue.Therecoverableamountisthehigheroffairvaluelesscostsofdisposalandthevalueinuse.

12. LeasesAsof1January2019,theGrouphasimplementedthenewstandardIFRS16“Leases”,whichrevisesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonleasingaccounting.

IFRS16,effectivefrom1January2019andendorsedbyEUbyRegulationEU2017/1986of31October2017(publishedon9November2017),modifiesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonleasesand,inparticular,IAS17Leases,IFRIC4DeterminingwhetheranArrangementcontains

aLease,SIC-15OperatingLeases-IncentivesandSIC-27EvaluatingtheSubstanceofTransactionsInvolvingtheLegalFormofaLease.

IFRS16introducesanewdefinitionforleases(iereceivedleases)andconfirmsthecurrentdistinctionbetweentwotypesofleases(operatingandfinance)withreferencetotheaccountingtreatmenttobeappliedbythelessor(ieprovidedleases).Therefore,IFRS16doesnothaveanimpactforleaseswheretheGroupisthelessor.

a) Provided Finance LeaseAleaseisclassifiedasafinanceleaseifittransferstothelesseesubstantiallyalltherisksandrewardsofownership.

Receivablesfromfinanceleasesarereportedasequaltothenetinvestmentintheleaseuponreceiptoftheleasedassetbythecustomer.Thesumoffutureminimumleaseinstalmentsandinitialfeesfortheprovisionoftheleaseequalthegrossinvestmentinthelease(asfinanceleasecontractsincludeaclauseonpurchaseattheendoftheleaseperiod,thereisnounsecurednetbookvalue).Thedifferencebetweenthegrossandnetinvestmentintheleaserepresentsdeferredfinancialincomereportedasinterestincomeovertheleaseperiodwiththeconstantperiodicprofitabilityofthenetinvestmentinthefinancelease.Theamountsreceivedfromthelesseereducethenetinvestment.

Groupreceivablesfromfinanceleasesincludethecostofassetsleasedunderfinanceleasesincontractswheretheassethasbeenalreadyacquired,butthefinanceleasecontractwasnotcapitalisedatthebalancesheetdate.

Significantcontractualconditionsforfinanceleasesareasfollows:•Thesubjectoftheleaseisspecifiedinthetextoftheleasecontract

orintheacceptancecertificate(partoftheleasecontract);•Thedurationoftheleasebeginsonthedayoftheacceptanceof

thesubjectoftheleasebythelesseeandendsupontheexpirationoftheagreedleaseterm;

•Thelesseeisauthorisedtopurchasethesubjectoftheleasefromthelessor;

•Thesubjectoftheleaseremainsintheexclusiveownershipofthelessorthroughoutthedurationofthelease.Theownershipistransferredtothelessee/buyeronthedaythepurchasepriceasperthepurchaseagreementiscreditedtothelessor’saccount;

•ThepurchasepriceandallamountsintheleasecontractarenetofVAT.TheVATrateissetbylawandisindicatedseparatelyininvoices;

•Theconsiderationfortheleaseincludesanextraordinaryleasepayment,contractualflatfee(e.g.theprocessingandadministrationoftheleasecontract)andthenumberofleasepaymentsindicatedbythecontractandcalculatedfromtheacquisitioncost(inCZKoraforeigncurrency);

•Thesubjectoftheleasemustbeinsuredthroughouttheleaseterm;and


•Thelessormayprematurelyterminatetheleasecontractatanytimewithoutanoticeperiodbywithdrawalorbyanoticewithimmediateeffectifthelesseesignificantlybreachesorfailstomeettheobligationsandcommitmentsarisingfromtheleasecontract.Insuchacase,thelesseeisobligedtomakealltheremainingleasepaymentstothelessorinlinewiththepaymentcalendar.Paymentsaredueupontheprematureterminationoftheleasecontract.

Thefinanceleasereceivablesarepresentedintheitem“Financial assets at amortised cost: Loans and advances to customers”.

b) Provided Operating LeasesOtherleasesareclassifiedasoperatingleases.Theleasedassetcontinuestobeownedbytheleasecompanyaftertheterminationoftheleasecontract.

Incomefromoperatingleasesisreportedin“Other operating income and expenses”.

c) Received Operating Leases

Accounting policy applied in 2018Paymentsundercontractsforreceivedoperatingleasesareincludedin“Administrative expenses”evenlyovertheperiodoftheleasecontract.

Intheeventofcontractcancellationbeforetheendoftheleasecontract,allpenaltypaymentsareaccountedforasaperiodcostatthetimeofcancellingthelease.

Accounting policy applied in 2019IFRS16requiresthatalesseerecognisesanasset,representingtherightofuseoftheunderlyingasset,andatthesametime,aliabilityreflectingfuturepaymentsoftheleasecontractforalloftheleasingtypes.

Atinitialrecognition,suchanassetismeasuredonthebasisoftheleasecontractcashflowswhichinclude,inadditiontothepresentvalueofleasepayments,anyinitialdirectcostattributabletothelease,leasepaymentspaidbeforethecommencementdateandanyothercostsrequiredtodismantle/removetheunderlyingassetattheendofthecontractandisdecreasedbyincentivesreceived.Rightofuseassetsarereportedintheitem“Property, equipment and right of use assets”.

Afterinitialrecognition,theright-of-useismeasuredonthebasisoftheprovisionssetfortangibleassetsapplyingthecostmodellessanyaccumulateddepreciationandanyaccumulatedimpairmentlosses.Thedepreciationperiodisequaltothedeterminedleaseterm.Accumulateddepreciationandanyaccumulatedimpairmentlosses

arereportedintheitem“Depreciation and impairment of property, equipment and right of use assets”.

Inthisrespect,theGroupperformedactivitiestoensurecompliancewithIFRS16,especiallyinrelationtothecalculationandinitialrecognitionoftherightofuseandleaseliability,whichrepresenttheprimarydiscontinuitycomparedtotheaccountingmodelrequiredunderIAS17“Leases”.

Theactivitiesfocusedonthedevelopmentofrules,principlesandITsystemstobeusedforassessmentofnewassetsandliabilitiesandthesubsequentcalculationofeconomiceffectshavebeenfinalised.

Tocalculatetheleaseliabilityandrelatedassetsbasedontherightofuse,theGroupdiscountsfutureleasepaymentsusinganappropriatediscountrate.LeasepaymentsaresetfordiscountinginthisrespectbasedoncontractualarrangementsandnetofVAT,astheobligationtopaythistaxoriginatesatthemomentaninvoiceissuedbythelessorandnotasofthedateofcommencementoftheleasecontract.

Toperformthesecalculations,paymentsmustbediscountedusingtheimplicitinterestratebasedontheleasecontractor,ifthisisnotavailable,theincrementalborrowingrate.Thisisdeterminedbasedonthecostsoffinancingaliabilityofsimilardurationandsimilarsecuritytowhatiscontainedintheleasecontract.

Leaseliabilitiesarereportedintheitem“Financial liabilities at amortised cost: Deposits from customers”basedonthecounterparty.Afterinitialrecognition,leaseliabilitiesareincreasedbytheinterestexpensescalculatedusingthesameinterestrateusedforthediscountingoftherelevantleasepaymentsanddecreasedbytheleasepayments.Theinterestexpensesarereportedintheitem“Interest expenses”.

IFRS16“Leases”–Firsttimeadoption(“FTA”)TheGroupelectedtousethetransitionpracticalexpedienttonotreassesswhetheracontractis,orcontains,aleaseat1January2019.Instead,theGroupappliedthestandardonlytocontractspreviouslyidentifiedasleasesapplyingIAS17andIFRIC4atthedateofinitialapplication.

Inlinewiththestandard,theGroupdecidednottoapplyIFRS16forleasesofintangibleassets,short-termleasesshorterthan12monthsandleaseswithlow-valueunderlyingassets.Relatedexpensesarepresentedonanaccrualbasisintheitem“Administrative expenses”.

TheGroupdecidedtouseamodifiedretrospectiveapproachandnottorecalculatethecomparativeinformationforthereportingperiodbefore1January2019.Forthepurposesofinitialrecognitionasof1January2019itrecognisedtherighttouseintheamount


correspondingtotheleaseliabilityadjustedbyprepaidordeferredleasepayments.

UponadoptionofIFRS16,theGrouprecognisedleaseliabilitiesinrelationtoleasespreviouslyclassifiedasoperatingleasesunder

IAS17.Theseliabilitiesweremeasuredatthepresentvalueoftheremainingleasepayments,discountedusingthelessee’sincrementalborrowingrateasof1January2019.Theweightedaveragelessee’sincrementalborrowingrateappliedtotheleaseliabilitieson1January2019was1.00%.


IFRS16FTAimpactinrelationtoConsolidatedStatementofCashFlowsisincludedintheitem“Other non-monetary changes”.

Reconciliation of lease commitments disclosed as at 31 December 2018 to the Lease liability recognised as at 1 January 2019 Operatingleasecommitmentsdisclosedasat31December2018 1455DiscountedusingtheGroup’sincrementalborrowingrateof1.00% 1424(Less):short-termleasesrecognisedonastraight-linebasisasexpenses (13)Add:adjustmentsasaresultofadifferenttreatmentofextensionandterminationoptions 886Lease liability recognised as at 1 January 2019 2 297

Impact of IFRS 16 first time adoption on the statement of financial position (increase/(decrease)) as at 1 January 2019 on balances as at 31 December 2018 Assets Rightofuseassetsintheitem“Property,equipmentandrightofuseassets“ 2213Prepaymentsintheitem“Otherassets” (17)Liabilities Leaseliabilitiesintheitem“Financialliabilitiesatamortisedcost:Depositsfromcustomers” 2297Accruedpaymentsintheitem“Otherliabilities” (101)Net impact on equity –

Thevastmajorityofrightofuseassets/leaseliabilitiesisrelatedtotheGroup’sheadquarteranditsbranches.

AsummaryofamountsinrelationtooperatingleasesreceivedunderIFRS16asof31December2019ispresentedinthefollowingtables:

ConsolidatedStatementofComprehensiveIncome PointinthesectionV.OtherNotes 2019 DepreciationofRightofuseassets 18.Property,equipmentandrightofuseassets (352)Interestexpenses 1.Netinterestincome (21) ConsolidatedStatementofFinancialPosition PointinthesectionV.OtherNotes 31 Dec 2019 Rightofuseassets 18.Property,equipmentandrightofuseassets 1953Leaseliabilities 23.Financialliabilitiesatamortisedcost:Depositsfromcustomers 2047

13. FactoringFactoringrepresentsthepurchaseofshort-termreceivablesatnominalvaluesthatoriginatedonthebasisofsuppliesofgoodsorservicesmadebyasuppliertoacustomerandthatarenotpastdue.

Thefactoringcompanypayspartofthepurchaseprice“pre-financing”tothesupplier.Receivablesfrompurchasedreceivablesarereportedin“Financial assets at amortised cost: Loans and advances to customers”netofthepayablearisingfromthepurchasedreceivables.Oncethecustomermakesthepayment,theremainingpartofthepurchasepriceispaidtothesupplier.

Inreturnforitsservices,theGroupcollectsafeefortheprovidedpre-financing.Thefeeisrecognisedinrevenuesatthepointintimewhenthetransactiontakesplaceandreportedintheitem “Fee and commission income”.Inadditiontothefee,theGroupchargesinterest,theabsoluteamountofwhichdependsontheamountofpre-financingmadeandthelengthofthetimeperiodbetweentheprovisionofpartofthepurchasepriceandcollectionofthepaymentfromthecustomer.Thisinterestisreportedintheitem“Interest income”.

14. Provisions for Risks and ChargesProvisionsforrisksandchargesrelatetoaprobableoutflowofanuncertainamountoveranuncertainperiodoftime.Provisionsforrisksandchargesarerecognisedwhen:•Thereisanobligation(legalorconstructive)asaresultofapast

event;•Itisprobablethatanoutflowofresourceswillberequiredtosettle

theobligation(probablemeanstheprobabilityexceeds50%);and

•Theamountoftheobligationcanbereliablyestimated.

Arestructuringprovisionisrecognisedwhenthefollowingcriteriaaremet:•TheGrouphaspreparedadetailedandformalrestructuringplan;•Thoseaffectedbytherestructuringhavearealisticexpectationthat

therestructuringwilltakeplaceastheimplementationoftheplanhascommencedoritsmainfeatureshavebeenannounced.

Whencreatingprovisionsforoff-balancesheetitems,theGroupproceedsanalogicallyasfortheimpairmentlossesonfinancialassetsatamortisedcostorfinancialassetsatfairvaluethroughothercomprehensiveincome,inlinewithIFRS9requirements.

Theprovisionsforoff-balancesheetitemsarerecordedinthestatementoffinancialpositionintheitem“Provisions for risks and charges”.

15. Deferred BonusesTheGroupaccountsfordeferredbonusesonanaccrualbasis.Relatedliabilityisrecognisedintheitem“Other liabilities”againsttheincomestatementitem“Administrative expenses”.

TheGroupIncentiveSystemandtheLocalIncentiveSystemareappliedtotheidentifiedpositions.Paymentofthebonusforthegivenperiodisspreadoutoveramultiple-yearperiod.

BasedontheGroupIncentiveSystem,thebonuspaymentisspreadover6years(seniormanagement)or4years(otheridentifiedstaff).Ineachyear,thebonuspaymentisconditionaluponcompletionoftheComplianceAssessment,ContinuousEmploymentConditionandClawbackapplication,whichconfirm,reduceorentirelycanceltheentitlementtoabonuspayment.Theincentivesarepaidpartiallyincashandpartiallyinnon-monetaryinstrumentsorshares.

BasedontheLocalIncentiveSystem,thebonuspaymentisspreadover4years.Ineachyear,thebonuspaymentisconditionaluponcompletionoftheComplianceAssessment,ContinuousEmploymentConditionandClawbackapplication,whichconfirm,reduceorentirelycanceltheentitlementtobonuspayment.Theincentivesarepaidpartiallyincashandpartiallyinnon-monetaryinstruments.

16. Contingent Assets and LiabilitiesAcontingentliabilityisapossibleobligationdependingonwhethersomeuncertainfutureeventoccurs,orapresentobligationbutpaymentisnotprobableortheamountcannotbemeasuredreliably.

Acontingentassetisapossibleassetthatarisesfrompastevents,andwhoseexistencewillbeconfirmedonlybytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheentity.

TheGroupdoesnotrecognisecontingentassets/liabilitiesinthestatementoffinancialposition,butregularlyreviewstheirdevelopmenttospecifywhetheraninflow/outflowofresourcesembodyingeconomicbenefitshasbecomeprobable.Wherethelikelihoodofanoutflowofeconomicbenefitsishigherthan50%,theGrouprecognisesaprovision.Wherethelikelihoodofaninflowofeconomicbenefitsisalmost100%,theGrouprecognisesanassetandrevenue.

17. Interest Income and Interest ExpensesInterestincomeandinterestexpensesarerecognisedintheincomestatementintheperiodtowhichtheyrelate,usingtheeffectiveinterestratemethod.Interestincomeisrecognisedusingtheeffectiveinterestrateonfinancialassetsmeasuredatamortisedcost,interestratederivativesforwhichhedgeaccountingisappliedandtherelatedamortisation/recyclingeffectofhedgeaccounting,interestbearingfinancialassetsmeasuredatFVTOCI.Interestexpensesarealsocalculatedusingtheeffectiveinterestratemethodforallfinancialliabilitiesatamortisedcost.

Interestfromloansanddepositsisaccruedonadailybasis.Interestincomeandexpensesincluderelevanttransactioncostsandtheamortisationofanydiscountorpremiumbetweentheinitialcarryingamountofaninterest-bearinginstrumentanditsamountatmaturitycalculatedonaneffectiveinterestratebasis.

InterestincomeonfinancialassetsatamortisedcostoratFVTOCIclassifiedinstage1and2(ieperformingassets)iscalculatedfromthegrosscarryingamount(iebeforeallowances).InterestincomeonfinancialassetsatamortisedcostoratFVTOCIclassifiedinstage3(iecreditimpairedassets)iscalculatedfromthenetcarryingamount(ieafterallowances)using“unwinding”.

InterestonfinancialassetsandliabilitiesatFVTPLiscalculatedusingtheeffectiveinterestratemethod.

Intheenvironmentofnegativeinterestrates,negativeinterestincomeispresentedininterestexpensesandnegativeinterestexpensesarepresentedininterestincome.

Netinterestincomecomprisesinterestincomeandinterestexpensescalculatedusingtheeffectiveinterestmethodandothermethods.


Interestincomecalculatedusingtheeffectiveinterestmethodisdisclosedseparatelyintheincomestatementtoprovidesymmetricalandcomparableinformation.

18. Fee and Commission Income and Expenses

Feeandcommissionincomeandexpensesconsistoffeesandcommissionsreceived/paidbytheGroupforprovidingfinancialservices,otherthanthoserelatedtotheoriginationofafinancialassetorliability,whichformapartoftheeffectiveinterestincome/expenses.

FeesandcommissionsfromfinancialservicesprovidedbytheGroup,includingpaymentservices,brokerageservices,investmentadviceandfinancialplanning,investmentbankingservicesandassetmanagementservices.

FeesandcommissionincomeareaccountedforintheincomestatementastheGroupsatisfiestheperformanceobligationembeddedinthecontract,accordingto“IFRS15RevenuefromContractswithCustomers”rules.

Inparticular:•Iftheperformanceobligationissatisfiedataspecificmoment

(“pointintime”),therelatedrevenueisrecognisedintheincomestatementwhentheserviceisprovided;

•Iftheperformanceobligationissatisfiedover-time,therelatedrevenueisrecognisedintheincomestatementinordertoreflecttheprogressofsatisfactionofsuchobligation.

Transactionfeescomingfromsecuritiestransactionsandpaymentservicesaretypicallybookedatthepointintimewhentheserviceisprovidedandimmediatelywithdrawnfromcustomeraccount.

Feesrelatedtomanagement,administration,depositandcustodyservices,accountadministrationandpaymentcardsarenormallyrecognisedovertimeduringthetermofthecontract.Therevenueismeasuredonstraight-linebasisandisevenlydistributedduringthetermofthecontractasthismethodbestdepictstheGroup’scommitmenttostandreadyforfulfilmentofcustomerrequests.Theseservicesaremostlyinvoicedonregularbasis(typicallymonthly),selectedservicesareinvoicedinadvance.

Feesrelatedtoloansprovided,otherthanthoserelatedtotheorigination,whichformapartoftheeffectiveinterestincome,areeitherbookedatthepointintimewhentheserviceisprovidedorrecognisedovertimeduringthetermofthecontractbasedonthetypeofservicesprovided.

Theamountofrevenueslinkedtofeeandcommissionincomeisdeterminedbasedoncontractualconditions.Variabilitythatwould

haveimpactonamountthattheGroupexpectstoreceiveisnotusuallyforeseenforservicesprovidedbytheGroup.

Ifacontractregardsdifferentgoods/serviceswhicharenotpricedandchargedonthestand-alonepricelevel,therevenueisallocatedamongthedifferentobligationproportionallytothestand-alonepriceofthesingleitemdelivered.Theseamountswillthereforebeaccountedforintheincomestatementonthebasisofthetimingofsatisfactionofeachobligation.

Thiscircumstance,whichisnotsignificant,mighthappenincaseofcustomerloyaltyprogramsthatrequiretoprovidegoodsorservicesforfree,orbycashing-inapricenotatmarketcondition,iftheclientreachesaspecificvolumeoffees,orincaseofprogramstoacquirenewcustomersthatassignabonustothetarget(intheformofaproductoraservice)whenitbecomesanewclient.Thestand-alonesellingpricesforfree-of-chargecustomeroptionsaredeterminedusingtheadjustedmarketassessmentmethod.Contractliabilitygivenbythecustomeroptionsisnotmaterial.

TheGrouphasdecided,aspracticalexpedientpermittedunderIFRS15,nottodisclosetheamountoftransactionpriceallocatedtounsatisfiedperformanceobligationsrelatedtofeesandcommissionsfromfinancialservices.ThisisbecausetheGroupdoesnottypicallycontractrespectiveservicesforperiodthatwouldbeenforceablelongerthan12months.Theonlysignificantcontractwithdeferredrevenueforlongerperiodthan12months(contractwithnon-refundableup-frontfeesnotrelatedtospecificservicestransferredtocustomerandthuslinearlyamortisedtotheitem“Fee and Commission Income”duringliveofthecontract–5and15yearsrespectively)isincludedintheitem“Other liabilities”inamountofMCZK661asof31December2019(asof31December2018MCZK657).

19. Dividend incomeDividendincomeisrecognisedintheincomestatementin“Dividend income”onthedatethedividendisdeclared.

20. TaxationTaxnon-deductibleexpensesareaddedtoandnon-taxableincomeisdeductedfromtheprofitfortheperiodpursuanttoCzechAccountingStandardstoarriveatthetaxableincomebaseintheCzechRepublic,whichisfurtheradjustedbytaxallowancesandrelevantcredits.Thetaxpayable(item“Tax liabilities: Income tax”) orreceivable(item“Tax receivables: Income tax”) iscalculatedusingthetaxratevalidattheyear-endandreportedintheexpectedamountofthesettlementwiththetaxauthorities.

TheincometaxofentitiesbasedinSlovakiaiscalculatedinlinewiththeregulationsapplicableintheSlovakRepublic.


Deferredtaxisprovidedonalltemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialstatementpurposesandtheamountsusedfortaxationpurposesmultipliedbytheexpectedincometaxratefortheperiodoftheassetrecoveryorliabilitysettlement,basedontaxratesthathavebeenenactedorsubstantiallyenacted.Adeferredtaxasset(item“Tax receivables: Deferred tax”)isonlyrecognisedtotheextentthattherearenodoubtsthattherewillbefuturetaxableprofitsavailableagainstwhichthisassetcanbeutilised.Adeferredtaxliability(item“Tax liabilities: Deferred tax”)isrecognisedforalltaxabletemporarydifferences.

CurrentanddeferredtaxesarerecognisedasincometaxbenefitsorexpensesintheincomestatementexceptfortaxrelatedtothefairvalueremeasurementofdebtinstrumentsatfairvaluethroughOCI,foreignexchangedifferencesandthenetmovementoncashflowhedges,whicharechargedorcreditedtoOCI.

TheseexceptionsaresubsequentlyreclassifiedfromOCItotheincomestatement,togetherwiththerespectivedeferredlossorgain.TheBankalsorecognisesthetaxconsequencesofpaymentsandissuingcosts,relatedtofinancialinstrumentsthatareclassifiedasequity,directlyinequity.

TheBankonlyoffsetsitsdeferredtaxassetsagainstliabilitieswhenthereisbothalegalrighttooffsetitscurrenttaxassetsandliabilitiesanditistheBank’sintentiontosettleonanetbasis.

21. Segment ReportingIFRS 8 Operating segmentsstatesthatpresentationandreportingofoperatingsegmentsshallbeinaccordancewithperformancecriteriamonitoredbythechiefoperatingdecision-makerwhoisresponsibleforoperationaldecisions.AttheGroup,thatdecision-makeristheBoardofDirectorsoftheBank.

TheGroup’sprimarysegmentreportingisbrokendownbytypesofcustomers,whichcorrespondtotheGroup’svariousoperations:retailandprivatebanking,corporateandinvestmentbankingandother.

TheperformanceofallthesegmentsismonitoredmonthlybytheBoardofDirectorsandothermembersoftheGroup’smanagement.Thereportingsegmentsgenerateincomeprimarilyfromtheprovisionofloansandotherbankingproducts.

Retail and private banking encompassesinparticularprovidingloans,mortgages,bankaccountmaintenance,paymentservices(includingpaymentcards),termandsavingdeposits,investmentadvisoryservices.

Corporate and investment banking, leasesincludeespeciallythefollowingproductsandservices:providingbankingservices

tocompaniesandpublicinstitutions,includingloans,leasing,factoring,bankguarantees,accountmaintenance,paymentservices,openingdocumentarylettersofcredit,termdeposits,derivativeandforeigncurrencyoperations,andcapitalmarketactivitiesinclusiveofsecuritiesunderwritingforcustomers,investmentadvisory,andconsultingonmergersandacquisitions.

Otherreportingsegmentincludesbankingservicesthatarenotincludedwithintheaforementionedsegments.

22. Standards and Interpretations Effective in the Current Period

Thefollowingnewstandards,amendmentstotheexistingstandardsandnewinterpretationissuedbytheInternationalAccountingStandardsBoard(IASB)andadoptedbytheEUareeffectiveforthecurrentreportingperiod:•IFRS16“Leases”–adoptedbytheEUon31October2017

(effectiveforannualperiodsbeginningonorafter1January2019),•AmendmentstoIFRS9“FinancialInstruments”–Prepayment

FeatureswithNegativeCompensation–adoptedbytheEUon22March2018(effectiveforannualperiodsbeginningonorafter1January2019),

•AmendmentstoIAS19“EmployeeBenefits”–PlanAmendment,CurtailmentorSettlement–adoptedbytheEUon13March2019(effectiveforannualperiodsbeginningonorafter1January2019),

•AmendmentstoIAS28“InvestmentsinAssociatesandJointVentures”–Long-termInterestsinAssociatesandJointVentures–adoptedbytheEUon8February2019(effectiveforannualperiodsbeginningonorafter1January2019),

•Amendmentstovariousstandardsdueto“AnnualImprovementstoIFRSStandards(2015–2017Cycle)”resultingfromtheannualIFRSimprovementproject(IFRS3,IFRS11,IAS12andIAS23)primarilywithaviewtoremovinginconsistenciesandclarifyingwording–adoptedbytheEUon14March2019(effectiveforannualperiodsbeginningonorafter1January2019),

•IFRIC23“UncertaintyoverIncomeTaxTreatments”–adoptedbytheEUon23October2018(effectiveforannualperiodsbeginningonorafter1January2019).

Theadoptionofthesenewstandards,amendmentstotheexistingstandardsandinterpretationhasnotledtoanymaterialchangesintheGroup’sfinancialstatements,exceptfortheadoptionofIFRS16“Leases”,whoseimpactisdescribedinsectionIII.SignificantAccountingPolicies,point12.Leases.

23. Standards and Interpretations Published by the IASB, but not yet Effective or not yet Adopted by the European Union

New and amended IFRS standards issued by IASB and adopted by the EU but not yet effective


Atthedateofauthorisationofthesefinancialstatements,thefollowingamendmentstotheexistingstandardswereissuedbyIASBandadoptedbytheEUandarenotyeteffective:•AmendmentstoIAS1“PresentationofFinancialStatements”

andIAS8“AccountingPolicies,ChangesinAccountingEstimatesandErrors”–DefinitionofMaterial–adoptedbytheEUon29November2019(effectiveforannualperiodsbeginningonorafter1January2020),

•AmendmentstoReferencestotheConceptualFrameworkinIFRSStandards–adoptedbytheEUon29November2019(effectiveforannualperiodsbeginningonorafter1January2020),

•AmendmentstoIFRS9“FinancialInstruments”,IAS39“FinancialInstruments:RecognitionandMeasurement”andIFRS7“FinancialInstruments:Disclosures”–InterestRateBenchmarkReform–adoptedbytheEUon15January2020(effectiveforannualperiodsbeginningonorafter1January2020).

Interest Rate Benchmark ReformAcomprehensivereferenceratesreform(“IBORreform”)iscurrentlytakingplacefollowingtheconcernsraisedinrecentyearsabouttheintegrityandreliabilityofmajorfinancialmarketbenchmarks.InordertoassesstherelevantrisksassociatedwiththeglobalbenchmarkreformsmandatedbytheFinancialStabilityBoard,andtakingappropriateactionstoensureanadequatetransitiontoalternativeorreformedbenchmarkratesaheadofthedeadlineoftheendof2021specifiedintherevisedEUBenchmarkRegulation(“BMR”),UniCreditGrouplaunchedinOctober2018UniCreditGroupwideprojectinordertomanagetheIBORsdiscontinuation.

TheimplicationsofIBORreformonGroup’sfinancialstatementsaredeemedtobeinsignificantasmostoftheGroup’scontractwithvariableinterestratesarebasedoninterestratebenchmarksthatalreadyfulfiltheconditionssetbyBMR,iebasedonPRIBORorEURIBOR.

Possibleuncertainties,involvingotherIBORs,withtimingand/orfallbackrulesappliedtooutstandingstockofassets,liabilitiesandderivativescannotbeexcluded.

Onthisregard,on15January2020theAmendmentstoIFRS9,IAS39andIFRS7–InterestRateBenchmarkReform(“theAmendment”)havebeenendorsedbytheEuropeanCommissionforuseinEU.TheAmendmentsolvesapotentialsourceofuncertaintyontheeffectsofIBORreformonexistingaccountinghedgerelationshipsthatareaffectedbytheIBORreform,clarifyingthatthereformdoesnotrequiretoterminatesuchhedgerelationships.

TheEUeffectivestartdatefortheAmendmentistheannualperiodbeginningonorafter1January2020.Astheearlieradoptionispermitted,theGrouphasadoptedtheAmendmentwithreference

to2019FinancialsforitsexistinghedgeaccountingrelationshipsinvolvingotherIBORs.AdoptingtheAmendmentallowstheBanktocontinuehedgeaccountingduringtheperiodofuncertaintyarisingfromIBORreformastheAmendmentincludesanumberofreliefs,thatapplytoallhedgingrelationshipsdirectlyaffectedbyIBORreform.TheAmendmentpermitscontinuationofhedgeaccountingevenif:•Inthefuturethehedgedbenchmarkinterestratemaynolonger

beseparatelyidentifiable;•Eventhoughthereisuncertaintyaboutthetimingandamount

ofthehedgedcashflowsduetotheinterestratebenchmarkreforms;

•Eventhoughthereisuncertaintyaboutthereplacementofthefloatinginterestratesincludedinitscross-currencyinterestrateswaps;or

•Theretrospectiveassessmentofhedgeeffectivenessfalloutsidethe80%-125%rangewhenthehedgingrelationshipissubjecttointerestratebenchmarkreforms.

Thereliefsceasetoapplyoncecertainconditionsaremet.TheseincludewhentheuncertaintyarisingfromIBORreformisnolongerpresentwithrespecttothetimingandamountofthebenchmark-basedcashflowsofthehedgeditem,ifthehedgingrelationshipisdiscontinuedoronceamountsinthecashflowhedgereservehavebeenreleased.

TheGroup’shedgerelationshipswithinterestratebenchmarkaffectedbyIBORreformarethosewithLIBORwhosenotionalvaluesrepresents2,1%oftotalnotionalvalueofallhedginginstrumentsasof31December2019andthusinsignificant.

DetailsoftheBank’shedgeaccountingrelationshipsaredisclosedinsectionV.OtherNotes,Note33.Contingentliabilities,contingentassetsandfinancialderivativesandNote35Financialriskmanagement,part(c)Marketrisk.

InordertocloselyfollowthedevelopmentsonIBORsandtopropermanagethetransitionandthediscontinuationimpacts,UniCreditGroupwillcontinuouslymonitorthemarket,alsoattendingtheEuropeanWorkingGroups,theindustryworkinggroups(e.g.InternationalSwapsandDerivativesAssociationISDA)andparticipatingtotherelevantpublicconsultations.TheGroupparticipatesattheUniCreditGroupwideprojectandanalysestheIBORreformaffectedcontracts.

NoneoftheGroup’scurrentIBORreformaffectedcontractsincludeadequateandrobustfallbackprovisionsforacessationofthereferencedbenchmarkinterestrate.DifferentworkinggroupsintheindustryareworkingonfallbacklanguagefordifferentinstrumentsanddifferentIBORs,whichtheBankwillconsidertoimplementwhenappropriate.


New and amended IFRS standards issued by IASB but not yet adopted by the EUAtpresent,IFRSasadoptedbytheEUdonotsignificantlydifferfromregulationsadoptedbyIASB,exceptforthefollowingnewstandardsandamendmentstotheexistingstandards,whichwerenotendorsedforuseintheEUasatthedateofpublicationofthesefinancialstatements(theeffectivedatesstatedbelowareforIFRSasissuedbyIASB):•IFRS14“RegulatoryDeferralAccounts”(effectiveforannual

periodsbeginningonorafter1January2016)–theEuropeanCommissionhasdecidednottolaunchtheendorsementprocessofthisinterimstandardandtowaitforthefinalstandard,

•IFRS17“InsuranceContracts”(effectiveforannualperiodsbeginningonorafter1January2021),

•AmendmentstoIFRS3“BusinessCombinations”–DefinitionofaBusiness(effectiveforbusinesscombinationsforwhichtheacquisitiondateisonorafterthebeginningofthefirstannualreportingperiodbeginningonorafter1January2020andtoassetacquisitionsthatoccuronorafterthebeginningofthatperiod),

•AmendmentstoIFRS10“ConsolidatedFinancialStatements”andIAS28“InvestmentsinAssociatesandJointVentures”–SaleorContributionofAssetsbetweenanInvestoranditsAssociateorJointVentureandfurtheramendments(effectivedatedeferredindefinitelyuntiltheresearchprojectontheequitymethodhasbeenconcluded).

TheGroupanticipatesthattheadoptionofthesenewstandardsandamendmentstotheexistingstandardswillhavenomaterialimpactontheGroup’sfinancialstatementsintheperiodofinitialapplication.

HedgeaccountingforaportfoliooffinancialassetsandliabilitieswhoseprincipleshavenotbeenadoptedbytheEUremainsunregulated.

AccordingtotheGroup’sestimates,theapplicationofhedgeaccountingtoaportfoliooffinancialassetsorliabilitiespursuanttoIAS39:“FinancialInstruments:RecognitionandMeasurement”wouldnotsignificantlyimpactthefinancialstatementsifappliedasatthebalancesheetdate.

IV. Critical accounting judgments, estimates and assumptions

Thesedisclosuressupplementthecommentaryonfinancialriskmanagement(seesectionV.OtherNotes,point35.FinancialRiskManagement).

ThepresentationoftheconsolidatedfinancialstatementsinconformitywithIFRSrequiresGroupmanagementtomakejudgments,estimatesandassumptionsthataffectthereported

amountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthebalancesheetdateandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Theseestimates,whichrelatetothedeterminationoffairvaluesoffinancialinstruments(wherenopublicmarketexists),impairmentofassetsandprovisionsandotherareas,arebasedontheinformationavailableatthebalancesheetdate.

Business model assessmentTheclassificationoffinancialassetsisdrivenbythebusinessmodel.Managementappliesjudgmentwhendeterminingthelevelofaggregationandportfoliosoffinancialinstrumentswhenperformingthebusinessmodelassessment.Whenassessingsalestransactions,theGroupconsiderstheirhistoricalfrequency,timingandvalue,reasonsforthesalesandexpectationsaboutfuturesalesactivity.

Assessment of whether cash flows are solely payments of principal and interestJudgmentisrequiredtodeterminewhetherafinancialasset’scashflowsaresolelypaymentsofprincipalandinterestandwhethertheyareinlinewiththeSPPItest.Judgmentisrequiredtoassesswhetherrisksandvolatilityofcontractualcashflowsarerelatedtothebasiclendingarrangement.Featuresthatrequirejudgmentsincludethemodificationoftimevalueofmoney,assessmentofwhetherprepaymentfeesappliedtoloanscanbeconsideredasareasonablecompensationforearlyterminationsorprepayments.

Impairment of financial assetsAssetsaccountedforatamortisedcostandatfairvaluerecognisedthroughothercomprehensiveincome(exceptfortheFVTOCIoption),leasereceivables,tradereceivablesandloancommitmentsandfinancialguarantees(notaccountedatFVTPL)aresubjecttoimpairment.Impairmentisdeterminedintheamountofthe12-month(orshorterdependingontheinstrument’smaturity)expectedcreditlossforassetsthathavenotexperiencedasignificantincreaseincreditrisksinceinitialrecognition,andintheamountoflifetimeexpectedlossesforassetswhichhaveexperiencedasignificantincreaseincreditrisksinceinitialrecognitionorwhichareimpaired.Whenassessingimpairment,thereturnonfinancialassetsisevaluatedseparatelyusingthebestpossibleestimateofthepresentvalueoffuturecashflowsthatareexpectedtobereceived.Whenestimatingthesecashflows,theGroupmanagementmakesjudgmentsaboutthedebtor’sfinancialsituationandthenetrealisablevalueofanyunderlyingcollateral.

ThecreationofimpairmentallowancesforexpectedcreditlossesandidentifiedcontingentliabilitiesinvolvesmanyuncertaintiesconcerningtheoutcomesoftherisksstatedaboveandrequiresGroupmanagementtomakemanysubjectiveassessmentswhenestimatingtheamountoflosses.Measurementofimpairmentallowancesforexpectedcreditlossesforfinancialassetsofamortisedcostand


atfairvaluethroughothercomprehensiveincomerequirestheapplicationofmodelsandsignificantjudgmentsregardingfutureeconomicconditionsandcreditbehaviour.Givencurrenteconomicconditions,theresultofestimatesmaydifferfromtheimpairmentprovisionsrecognisedasat31December2019thatarereportedinitems“Impairment losses on: Financial assets at amortised cost”,“Impairment losses on: Financial assets at fair value through other comprehensive income”and“Net provisions for risks and charges: Loan commitments and financial guarantees given”.

Determining Fair ValuesDeterminingfairvalueoffinancialassetsandliabilitiesforwhichtherearenoobservablemarketpricesrequirestheuseofvaluationtechniquesasdescribedinaccountingpolicy,sectionIII.SignificantAccountingPolicies,point3.FairValueMeasurementPrinciples.Forfinancialinstrumentsthattradeinfrequentlyandhavelowpricetransparency,fairvalueislessobjectiveandrequiresvaryingdegreesofjudgementdependingonliquidity,concentration,uncertaintyofmarketfactors,pricingassumptionsandotherrisksaffectingthespecificinstrument.

Determining lease term – valid since the implementation of IFRS 16 as of 1 January 2019Todeterminethedurationofalease,itisnecessarytotakeintoaccountthenon-cancellableperiodsetinthecontractwhenthelesseeisentitledtousetheunderlyingasset,whiletakingintoaccountthepossibilityofanextensionifthelesseeisreasonablycertaintousethepossibilityofextension.

Especiallyforcontractsthatallowtheextensionoftheleasecontractaftertheendofthefirstperiodwithouttheneedtoexplicitlyexpresstheintentiontousethisextension,theperiodisdeterminedwithrespecttofactorssuchasthelengthofthefirstperiod,existenceofplanstochangetheuseof/abandontheassetandanyothercircumstanceswithanimpactonthereasonablecertaintyoftheextensionoftheleasecontract.

Afterthecommencementdate,theGroupreassessestheleasetermifthereisasignificanteventorchangeincircumstancesthatisunderitscontrolandaffectsitsabilitytoexerciseornotexercisetheoptiontorenewortoterminate.

Hedge AccountingWhendesignatingfinancialinstrumentsasqualifyinghedgerelationships,theGrouphasdeterminedthatitexpectsahedgetobehighlyeffectiveoverthelifeofthehedginginstrument.

Whenaccountingforderivativesascashflowhedges,theGrouphasdeterminedthatthehedgedcashflowexposurerelatestohighlyprobablefuturecashflows.

Provisions for liabilitiesTheamountsrecognisedasprovisionsarebasedonmanagement’sjudgmentandrepresentthebestestimateofexpensesneededtosettlealiabilityofuncertaintimingoruncertainamount.


V. Other notes1. Net interest income

2019 2018Interest income Financialassetsatamortisedcost: Loansandadvancestocentralbanks 5693 3446 Loansandadvancestobanks 613 648 Loansandadvancestocustomers: 11398 10146 financelease 668 670 otherthanfinancelease 10730 9476Financialassetsatfairvaluethroughothercomprehensiveincome 568 648Financialassetsatfairvaluethroughprofitorloss: Heldfortrading 23 18 Mandatorilyatfairvalue – 5Hedgingderivatives 302 511Otherassets – 13Interest income 18 597 15 435 Interest expenses Financialliabilitiesatamortisedcost: Depositsfromcentralbanks (1) (1) Depositsfrombanks (495) (252) Depositsfromcustomers (2013) (356) Debtsecuritiesissued (281) (575)Financialliabilitiesatfairvaluethroughprofitorloss: Heldfortrading (36) (20)Hedgingderivatives (1172) –Leaseliabilities (21) n/aInterest expenses (4 019) (1 204) Net interest income 14 578 14 231

Negativeinterestexpensesfromliabilitiesarereportedininterestincomeinthefollowinglines:•Loansandadvancestocentralbanks–asof31December2019MCZK72(asof31December2018MCZK163)•Loansandadvancestobanks–asof31December2019MCZK462(asof31December2018MCZK436)•Loansandadvancestocustomers–asof31December2019MCZK11(asof31December2018MCZK8)

Negativeinterestincomefromassetsisreportedininterestexpensesinthefollowinglines:•Depositsfromcentralbanks–asof31December2019MCZK(1)(asof31December2018MCZK(1))•Depositsfrombanks–asof31December2019MCZK(7)(asof31December2018MCZK(12))•Depositsfromcustomers–asof31December2019MCZK(-)(asof31December2018MCZK(1))


2. Net fee and commission income

2019 2018Fee and commission income from Securitiestransactions 8 8Management,administration,depositandcustodyservices 723 711Loans 1512 1243Paymentservices 923 1013Accountadministration 548 593Paymentcards 1198 1017Other 475 516Fee and commission income 5 387 5 101 Fee and commission expenses from Securitiestransactions (12) (13)Management,administration,depositandcustodyservices (99) (101)Loans (206) (171)Paymentservices (55) (53)Paymentcards (887) (780)Other (126) (91)Fee and commission expenses (1 385) (1 209)Net fee and commission income 4 002 3 892

3. Dividend income

2019 2018Dividend income Financialassetsatfairvaluethroughprofitorlossnotheldfortradingmandatorilyatfairvalue 3 2Financialassetsatfairvaluethroughothercomprehensiveincome 2 2Total 5 4

4. Net income/(loss) from trading

2019 2018Netrealisedandunrealisedgain/(loss)fromdebtinstrumentsheldfortrading (17) 36Netrealisedandunrealisedgain/(loss)fromderivativesheldfortrading 682 1647Netrealisedandunrealisedgain/(loss)fromFXspottransactionsandfromrevaluationofreceivablesandpayablesdenominatedinFX 1220 78Net income/loss from trading 1 885 1 761

5. Net income/(loss) from hedging against risk of changes in fair value

2019 2018Hedginginstruments 198 698Hedgedinstruments (210) (696)Net income/loss from hedging against risk of changes in fair value (12) 2

MoredetailsonhedgingareincludedinsectionV.OtherNotes,point35.FinancialRiskmanagement.

6. Net income/(loss) from the sale or repurchase

2019 2018Financialassetsatamortisedcost:Loansandadvancestocustomers 154 99Financialassetsatfairvaluethroughothercomprehensiveincome 335 142Financialliabilities:Debtsecuritiesissued – (2)Net income/loss from the sale or repurchase 489 239


7. Net income/(loss) from financial assets/liabilities at fair value through profit or loss

2019 2018Shares 139 73Net income/loss from financial assets and liabilities at fair value through profit or loss 139 73

8. Impairment losses

2019 2018Financial assets at amortised cost, of which: (1 310) (619)Loans and advances to banks 2 (2) Stage1 2 (2)Loans and advances to customers (1 312) (617)Corporate Customers (777) (530) Stage1 142 (39) Stage2 (7) (39) Stage3 (912) (452)Retail Customers (535) (87) Stage1 (126) 55 Stage2 (216) (49) Stage3 (193) (93)Financial assets at fair value through other comprehensive income 1 9 Stage1 1 9Total (1 309) (610)

9. Administrative expenses

2019 2018Personnel expenses Wagesandsalariespaidtoemployees (2557) (2443)Socialcosts (940) (891)Other (190) (178) (3 687) (3 512)Other administrative expenses Rentandbuildingmaintenance (258) (615)Informationtechnologies (1357) (1259)Promotionandmarketing (221) (270)Consumablesused (51) (65)Audit,legalandadvisoryservices (156) (211)Administrativeandlogisticservices (170) (329)Depositsandtransactionsinsurance (540) (734)Otherservices (262) (257)Other (247) (235) (3 262) (3 975)Total (6 949) (7 487)

Asummaryofremunerationtokeymanagersispresentedinthefollowingtable:

2019 2018Short-termemployeebenefits 167 182Post-employmentbenefits 20 8Otherlong-termemployeebenefits 32 29Terminationbenefits – –Share-basedpayments – –Total 219 219


Keymanagersarepersonswithauthorityanddirectorindirectresponsibilitiesasregardsplanning,managingandsupervisingtheGroup’sactivities,includingall(executiveandother)managers.Informationonequity-basedbonusesisincludedinsectionV.OtherNotes,point30.Equity-basedbonuses.

TheGroup’saveragenumberofemployeeswasasfollows:

2019 2018Employees 3249 3251MembersoftheBoardofDirectors 7 7MembersoftheSupervisoryBoard 3 3OtherexecutivesdirectlyreportingtotheBoardofDirectors 30 30

EmployeesincludealltheemployeesoftheGroup.MembersoftheBoardofDirectors,MembersoftheSupervisoryBoardandOtherexecutivesdirectlyreportingtotheBoardofDirectorsincludepersonsrepresentingtheBank.

ThematurityanalysisofleaseliabilitiesinrelationtoleasesreceivedpursuantIFRS16validfrom1January2019ispresentedinLiquidityRisktableinsectionV.OtherNotes,point35.FinancialRiskManagement.

AsummaryofoperatingleasesreceivedpursuantIAS17validuntil31December2018ispresentedinthefollowingtable:

2018 Due within Due in Due in the 1 year 1 – 5 years following yearsMinimumfuturepayments 309 1146 –

10. Other operating income and expenses

2019 2018Incomefromrent 665 656Incomefromrentofinvestmentproperties 79 75Otherincomerelatedtoleases 107 49Otherincome 508 619Total other operating income 1 359 1 399 Othertaxes (43) (12)Finesandpenalties (192) (202)Otherexpensesrelatedtoleases (118) –Other (312) (453)Total other operating expenses (665) (667)Total 694 732

ThefollowingtablesummarisescashflowstobereceivedfromoperatingleaseswheretheGroupisthelessor:

Due within Due in Due in the 1 year 1 – 5 years following years2019 Cashflowstobereceivedfromoperatingleases 428 705 992018 Cashflowstobereceivedfromoperatingleases 295 256 86


11. Cash and cash balances

31 Dec 2019 31 Dec 2018Cashinhand 4400 4601Otherbalanceswithcentralbanks 234 241Total 4 634 4 842

Forcashflowreportingpurposes,cashisdefinedascashandcashequivalents.

12. Financial assets at fair value through profit or loss

(a) Held for Trading

(i) Based on the Type of Financial Instrument

31 Dec 2019 31 Dec 2018Debtsecurities 2392 2236Derivatives 9306 7438Total 11 698 9 674

Fromdebtsecurities,nosecuritiesareprovidedascollateralasof31December2019(asof31December2018:MCZK6).

(ii) Based on the Type of Issuer

31 Dec 2019 31 Dec 2018Debt securities Publicadministration 2392 1246Other – 990Total 2 392 2 236

(b) Mandatorily at fair value


31 Dec 2019 31 Dec 2018Shares 487 346Total 487 346


31 Dec 2019 31 Dec 2018Shares Otherfinancialinstitutions 487 346Total 487 346

13. Financial assets at fair value through other comprehensive income

(a) Based on the Type of Financial Instrument

31 Dec 2019 31 Dec 2018Debtsecurities 23175 29182Shares 6 6Total 23 181 29 188

Fromdebtsecurities,MCZK2360areprovidedascollateral(asof31December2018:MCZK7930).


Debtsecuritiesareincludedinfinancialassetsatfairvaluethroughothercomprehensiveincomepursuanttoparagraph4.1.2.a)ofIFRS9–classifiedbasedonthebusinessmodelandmeetingtheSPPItest.Sharesareincludedinfinancialassetsatfairvaluethroughothercomprehensiveincomepursuanttoparagraph5.7.5.ofIFRS9–FVTOCIoption.

(b) Based on the Type of Issuer

31 Dec 2019 31 Dec 2018Debtsecurities Governmentinstitutions 16099 21244 Creditinstitutions – 909Other 7076 7029Shares Other 6 6Total 23 181 29 188

Alldebtsecuritiesincludedinfinancialassetsatfairvaluethroughothercomprehensiveincomeasof31December2019areclassifiedbycreditqualityinstage1withthetotalallowanceofMCZK5(asof31December2018:MCZK5).

(c) Participation Interests

Name Registered Date Acquisition Net book Net book Share of the Group office of acquisition price value 2019 value 2018 at 31 Dec 2019 at 31 Dec 2018CBCB–CzechBankingCreditBureau,a.s.(bankregister) Prague 10October2001 0.24 0.24 0.24 20% 20%Total 0.24 0.24 0.24

14. Financial assets at amortised cost – loans and advances to banks

(a) Analysis of Receivables from Banks, by Type

31 Dec 2019 31 Dec 2018Currentaccounts 31 30Termdeposits 18907 3385Loans 623 1046Reverserepurchasecommitments(seesectionV,point32) 165823 189921Obligatoryminimumreserveswithcentralbanks 591 5683Total 185 975 200 065

Thevastmajorityoffinancialassetsatamortisedcost–loansandadvancestobanksasof31December2019areclassifiedbycreditqualityatstage1withthetotalallowanceofMCZK2(asof31December2018:MCZK6).

OnlyMCZK5offinancialassetsatamortisedcost–loansandadvancestobanksasof31December2019areclassifiedbycreditqualityatstage2withthetotalallowanceofMCZK0(asof31December2018nofinancialassetsatamortisedcost–loansandadvancestobanksareclassifiedbycreditqualityatstage2).

(b) Analysis of Receivables from Banks, by Geographical Sector

31 Dec 2019 31 Dec 2018CzechRepublic 184030 195730Slovakia 32 47OtherEUcountries 1665 4088Other 248 200Total 185 975 200 065



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31 Dec 2019 31 Dec 2018Performingreceivables–stage1and2 Internalrating1 13422 10529 Internalrating2 34408 17954 Internalrating3 48988 52822 Internalrating4 112384 150187 Internalrating5 116413 68171 Internalrating6 78503 66669 Otherinternalrating 29218 20241 Receivableswithoutinternalrating 6705 24330Total 440 041 410 903Non-performingreceivables–stage3 10405 11282Total 450 446 422 185

(c) Analysis of Net Receivables from Customers, by Sector

31 Dec 2019 31 Dec 2018Financialinstitutions 8642 8253Non-financialinstitutions 289253 280141Governmentsector 5407 3859Individualsandothers 137458 119783Total 440 760 412 036

(d) Analysis of Net Receivables from Customers, by Type of Collateral Provided and Classification

Maximum Bank Mortgage Corporate Movable Other Total Net exposure to and similar guarantee assets security collateral exposure credit risk guarantee 31 Dec 2019 Stage1 411515 3629 104202 4553 7324 51688 171396 240119Stage2 26593 59 5253 154 212 0 5678 20915Stage3 2652 20 1182 43 35 647 1927 725Total 440 760 3708 110637 4750 7 571 52 335 179 001 261 759

31 Dec 2018 Stage1 391511 4496 101676 3825 43479 7083 160559 230952Stage2 17637 43 3964 275 – 211 4493 13144Stage3 2888 10 1679 42 485 153 2369 519Total 412 036 4 549 107 319 4 142 43 964 7 447 167 421 244 615

Theitem“Netexposure”includes,interalia,receivablesfromprojectfundingthataresecuredbyrealestatecollateralinthenominalvalueofMCZK36452(asof31December2018:MCZK36,452).Fortheprojectfundingofcommercialrealestate(IPRE),thecollateralqualityistakenintoaccountwhendeterminingthetransactionrating;inthesecases,thecollateralvalueisstronglycorrelatedwiththesolvencyofthedebtor.

Iftheexposureisfullycollateralised,nolossallowanceiscalculated.

(e) Analysis of Net Receivables from Customers, by Geographical Sector



(f) Analysis of Net Receivables from Customers, by Industry Sector

31 Dec 2019 31 Dec 2018Realestateservices 73267 68846Financialservices 8430 8132Wholesale 31993 31248Households(individuals) 126539 116252Retail(entrepreneurs) 11997 10307Leasingandrental 3815 3797Automotiveindustry 11186 8014Powerindustry 29797 25897Other 143736 139543Total receivables from customers 440 760 412 036

(g) Analysis of Forborne receivablesTheGroup’sapproachtoforbearancereportingisdisclosedinsectionV.OtherNotes,point35.FinancialRiskManagement.

Analysisofforbornereceivablesbysectors:

Gross Gross Total gross Impairment Impairment of Total Net balance performing non-performing forborne of performing non-performing impairment of forborne receivables receivables receivables receivables receivables of forborne receivables receivables31 December 2019 Non-financialinstitutions 13806 2428 16234 (162) (1960) (2122) 14112Individualsandothers 182 90 272 (1) (39) (40) 232Total 13 988 2 518 16 506 (163) (1 999) (2 162) 14 344

Allforborneperformingreceivablesareclassifiedasstage2receivables,whileallforbornenon-performingreceivablesareclassifiedasstage3receivables.

Gross Gross Total gross Impairment Impairment of Total Net balance performing non-performing forborne of performing non-performing impairment of forborne receivables receivables receivables receivables receivables of forborne receivables receivables31 December 2018 Non-financialinstitutions 7486 2055 9541 (124) (1548) (1672) 7869Individualsandothers 114 62 176 (1) (20) (21) 155Total 7 600 2 117 9 717 (125) (1 568) (1 693) 8 024

Netbalanceofforbornereceivablesrepresented3.25%ofthetotalnetreceivablesfromcustomersasof31December2019(2018:1.95%).



Thetablebelowprovidesananalysisofforbornereceivablesbalancebasedonpastduedays:

Gross balance Impairment Net balance of forborne of forborne of forborne receivables receivables receivables31 December 2019 Performingreceivables Beforedue 12969 (137) 12832 Pastdue 1019 (26) 993Totalforborneperformingreceivables 13988 (163) 13825 Non-performingreceivables Upto90dayspastdue 2254 (1836) 418 91to180dayspastdue 60 (11) 49 181daysto1yearpastdue 35 (25) 10 Over1yearpastdue 169 (127) 42Totalforbornenon-performingreceivables 2518 (1999) 519Total 16 506 (2 162) 14 344

Gross balance Impairment Net balance of forborne of forborne of forborne receivables receivables receivables31 December 2018 Performingreceivables Beforedue 6772 (98) 6674 Pastdue 828 (27) 801Totalforborneperformingreceivables 7600 (125) 7475 Non-performingreceivables Upto90dayspastdue 1095 (648) 447 91to180dayspastdue 22 (8) 14 181daysto1yearpastdue 399 (335) 64 Over1yearpastdue 601 (577) 24Totalforbornenon-performingreceivables 2117 (1568) 549Total 9 717 (1 693) 8 024

Thetablebelowshowsmovementsingrossbalanceofforbornereceivables:

Balanceasof1January2018 8588Transfertoforbornereceivablesbalance 5462Additions 351Write-offs (33)Settled (782)Transferfromforbornereceivablesbalance (3942)Other 73Total gross balance of forborne receivables as of 31 December 2018 9 717Balanceasof1January2019 9717Transfertoforbornereceivablesbalance 10604Additions 385Write-offs –Settled (1606)Transferfromforbornereceivablesbalance (2562)Other (32)Total gross balance of forborne receivables as of 31 December 2019 16 506


Thetablebelowshowsmovementsintheimpairmentofforbearance:

Balanceasof1January2018 (1354)Transfertoforbornereceivablesbalance (431)Chargeduringthecurrentyear (435)Releaseduringthecurrentyear 144Receivableswrittenoff–use 33Transferfromforbornereceivablesbalance 386Otherdecreases (36)Total impairment of forborne receivables as of 31 December 2018 (1 693)Balanceasof1January2019 (1693)Transfertoforbornereceivablesbalance (1061)Chargeduringthecurrentyear (190)Releaseduringthecurrentyear 248Receivableswrittenoff–use 0Transferfromforbornereceivablesbalance 536Otherdecreases (2)Total impairment of forborne receivables as of 31 December 2019 (2 162)

(h) Impairment of Receivables from Customers

Movement in Impairment of Receivables from Customers

Corporate Customers Stage 1 Stage 2 Stage 3 TotalBalanceasof1January2019 (942) (468) (7474) (8884)Chargeduringthecurrentyear (723) (517) (2678) (3918)Releaseduringthecurrentyear 865 510 1766 3141Neteffectonprofitorloss 142 (7) (912) (777)Receivableswrittenoff–use 15 1 1613 1629FXdifferences 2 1 2 5Total impairment of receivables from customers as of 31 December 2019 (783) (473) (6 771) (8 027)

ImpactofIFRS9 (18)Balanceasof1January2018 (916) (422) (8086) (9424)Chargeduringthecurrentyear (577) (356) (2777) (3710)Releaseduringthecurrentyear 538 317 2325 3180Neteffectonprofitorloss (39) (39) (452) (530)Receivableswrittenoff–use 16 – 1087 1103FXdifferences (3) (7) (23) (33)Total impairment of receivables from customers as of 31 December 2018 (942) (468) (7 474) (8 884)

Retail Customers Stage 1 Stage 2 Stage 3 TotalBalanceasof1January2019 (195) (150) (920) (1265)Chargeduringthecurrentyear (360) (350) (387) (1097)Releaseduringthecurrentyear 234 134 194 562Neteffectonprofitorloss (126) (216) (193) (535)Receivableswrittenoff–use 9 1 130 140FXdifferences – – 1 1Total impairment of receivables from customers as of 31 December 2019 (312) (365) (982) (1 659)

ImpactofIFRS9 (2)Balanceasof1January2018 (248) (99) (858) (1205)Chargeduringthecurrentyear (91) (122) (301) (514)Releaseduringthecurrentyear 146 73 208 427Neteffectonprofitorloss 55 (49) (93) (87)Receivableswrittenoff–use – – 31 31FXdifferences (2) (2) – (4)Total impairment of receivables from customers as of 31 December 2018 (195) (150) (920) (1 265)

Movement of Gross Amount of Receivables from Customers

Corporate Customers Stage 1 Stage 2 Stage 3 Total2019 TransferofthegrossamountofreceivablesfromStage1 (18165) 15097 3068 –TransferofthegrossamountofreceivablesfromStage2 4533 (5218) 685 –TransferofthegrossamountofreceivablesfromStage3 395 109 (504) – 2018 TransferofthegrossamountofreceivablesfromStage1 (845) 565 280 –TransferofthegrossamountofreceivablesfromStage2 842 (1019) 177 –TransferofthegrossamountofreceivablesfromStage3 404 81 (485) –

Retail Customers Stage 1 Stage 2 Stage 3 Total2019 TransferofthegrossamountofreceivablesfromStage1 (4298) 3870 428 –TransferofthegrossamountofreceivablesfromStage2 1702 (1901) 199 –TransferofthegrossamountofreceivablesfromStage3 318 109 (427) –

2018 TransferofthegrossamountofreceivablesfromStage1 (37) 28 9 –TransferofthegrossamountofreceivablesfromStage2 164 (179) 15 –TransferofthegrossamountofreceivablesfromStage3 34 21 (55) –

i) Receivables Written-Off and Being Subject to EnforcementTheamountofwritten-offreceivablesduefromcustomersstillsubjecttoenforcementasof31December2019wasMCZK3126(asof31December2018:MCZK3118).

j) Receivables from Finance Leases

31 Dec 2019 CashFlowtobereceived (grossreceivablesfromfinancelease)Receivablesfromfinanceleases: Within1year 9403 Fromoneyeartotwoyears 6189 Fromtwoyearstothreeyears 4495 Fromthreeyearstofouryears 3081 Fromfouryearstofiveyears 2298 Morethanfiveyears 915Totalcashflowstobereceivedfromfinanceleases 26381Unearnedfinanceincome (2023)Lease receivables 24 358

31 Dec 2018 Minimum Presentvalue lease oftheminimum payment leaseinstalment(netreceivables fromfinancelease)Receivablesfromfinanceleases: Within1year 8555 7072 Fromoneyeartofiveyears 15583 12488 Morethanfiveyears 3006 2297 27144 21857Minus:unrealisedincome (1833) –Present value of the receivable from the minimum lease instalment 25 311 21 857



16. Positive fair value of hedging derivatives

Based on the Hedging Purpose

31 Dec 2019 31 Dec 2018Fairvaluehedging 1370 837Cashflowhedging 5828 4799Total 7 198 5 636


17. Equity investments

Assets Liabilities Equity Operating Profit/(loss) Net book income value31 December 2019 RCIFinancialServices,s.r.o.(50%) 4080 3401 679 287 140 372Total 372 31 December 2018 RCIFinancialServices,s.r.o.(50%) 3820 3252 568 259 131 332Total 332

Changes in Investments in Associates

2019 2018Balanceat1January 332 398Changeintheincomestatement 70 66Dividend (30) (132)Changeinequity – –Total at 31 December 372 332

18. Property, equipment and right of use assets

31 Dec 2019 31 Dec 2018Property and equipment for operations Buildingsandland 849 558Leaseholdimprovementsofrentbuildings 166 162Fixturesandfittings 23 29ITequipment 38 72Assetsprovidedunderoperatingleases 2882 2985Other 485 297Property and equipment held as an investment Buildingsandland 371 646Right of use assets Buildingsandland 1963 n/aTotal 6 777 4 749

(a) Movements in Property and Equipment Held for Operations

Buildings Leasehold Fixtures IT Operating Other Total and land improvements and equipment leases of rent buildings fittings Cost at 1 January 2018 1573 928 191 685 3970 369 7716Accumulateddepreciationandimpairmentat1January2018 (976) (694) (156) (588) (871) (228) (3513)Net Book Value at 1 January 2018 597 234 35 97 3099 141 4 203 Additions 22 31 1 28 1117 198 1397Disposals – – – – (772) (9) (781)Depreciationcharges (64) (103) (8) (53) (562) (83) (873)OtherandFXrategainsorlosses 3 – 1 0 103 50 157Net Book Value at 31 December 2018 558 162 29 72 2 985 297 4 103 Costat31December2018 1602 960 176 666 4093 540 8037Accumulateddepreciationandimpairmentat31December2018 (1044) (798) (147) (594) (1108) (243) (3934)

Buildings Leasehold Fixtures IT Operating Other Total and land improvements and equipment leases of rent buildings fittings Cost at 1 January 2019 1602 960 176 666 4093 540 8037Accumulateddepreciationandimpairmentat1January2019 (1044) (798) (147) (594) (1108) (243) (3934)Net Book Value at 1 January 2019 558 162 29 72 2 985 297 4 103 RevaluationtoFairvalue–changeofaccountingpolicy 1081 n/a n/a n/a n/a n/a 1081Accumulateddepreciationadjustment(basedonrevaluedamount)–changeofaccountingpolicy (753) n/a n/a n/a n/a n/a (753)Additions 18 41 2 28 1300 183 1572Disposals – – – – (681) (8) (689)Depreciationcharges (19) (32) (5) (59) (492) (33) (640)Transfertotheitem“Non-currentassetsheldforsale” (31) – – – – – (31)OtherandFXrategainsorlosses (5) (5) (3) (3) (230) 46 (200)Net Book Value at 31 December 2019 849 166 23 38 2 882 485 4 443 FairValue(Buildingsandland)/Costat31December2019 2587 994 168 664 4021 729 9163Accumulateddepreciationandimpairmentat31December2019 (1738) (166) (23) (38) (2882) (485) (4443)



(b) Movements in property and Equipment Held as an Investment

Buildings and land TotalNet Book Value at 31 December 2017 680 680Changeinaccountingpolicytorevaluationmodel 112 112Fair Value at 1 January 2018 792 792Disposals – –ChangeinFairValue (146) (146)Fair Value at 31 December 2018 646 646 Fair Value at 1 January 2019 646 646Disposals (251) (251)ChangeinFairValue (24) (24)Fair Value at 31 December 2019 371 371

(c) Movements in Right of Use Assets

Buildings and land TotalNet Book Value at 1 January 2019 2 213 2 213Additions 122 122Disposals (11) (11)Depreciation (352) (352)OtherandFXrategainsorlosses (9) (9)Net Book Value at 31 December 2019 1 963 1 963 Costat31December2019 2315 2315Accumulateddepreciationandimpairmentat31December2019 (352) (352)

19. Intangible assets

Movements in Intangible Assets

Software TotalCost at 1 January 2018 3115 3115Accumulatedamortisationandimpairmentat1January2018 (1175) (1175)Net Book Value at 1 January 2018 1 940 1 940Additions 515 515Amortisationcharges (302) (302)Other 26 26Net Book Value at 31 December 2018 2 179 2 179 Costat31December2018 3514 3514Accumulatedamortisationandimpairmentat31December2018 (1335) (1335)

Cost at 1 January 2019 3 514 3 514Accumulatedamortisationandimpairmentat1January2019 (1335) (1335)Net Book Value at 1 January 2019 2 179 2 179Additions 630 630Amortisationcharges (540) (540)Other 76 76Net Book Value at 31 December 2019 2 345 2 345 Costat31December2019 3747 3747Accumulatedamortisationandimpairmentat31December2019 (1402) (1402)

20. Other assets

31 Dec 2019 31 Dec 2018Deferredexpensesandaccruedincome 1000 476Tradereceivables 175 213Receivablesfromsecurities 6 9Clearingandsettlementaccounts 788 852Other 180 147Total 2 149 1 697 Impairmentlossesonotherassets (19) (18)Net other assets 2 130 1 679

21. Financial liabilities held for trading

Based on the Type of Financial Instrument

31 Dec 2019 31 Dec 2018Liabilitiesfromshortsales 3010 2606Derivatives 8527 6108Total 11 537 8 714

22. Financial liabilities at amortised cost – deposits from banks

Analysis of Deposits from Banks by Type

31 Dec 2019 31 Dec 2018Depositsfromcentralbanks 6631 17945Currentaccounts 5527 3991Loans 10838 10062Termdeposits 106657 110150Saleandrepurchaseagreements(seesectionV,point32) 11433 30003Other 6 –Total 141 092 172 151

TheBankparticipatesintheEuropeanCentralBankTLTROII(TargetedLongTermRefinancingOperation)programme.TheBankborrowedMEUR263.9inMarch2017withamaturityof4years,untilMarch2021.ThefundingobtainedisusedtorefinancecorporateloansinSlovakia.Theinstrumentisreportedintheline“Depositsfromcentralbanks”.TLTROIIhasthecharacteristicsofalong-termrepotransactionandassuchitissecuredbycollateralacceptedbytheEurosystem.

23. Financial liabilities at amortised cost – deposits from customers

Analysis of Deposits from Customers by Type

31 Dec 2019 31 Dec 2018Currentaccounts 354051 350294Termdeposits 55287 20841Saleandrepurchaseagreements(seesectionV,point32) – –LeaseLiabilities 2047 n/aOther 3568 3610Total 414 953 374 745


Lease liability 2019Asat1January 2297Additions 111Accretionofinterest 21Leasepayments (374)OtherandFXrategainsorlosses (8)Total at 31 December 2 047

TheGrouphadtotalcashoutflowsforleasesofMCZK387in2019(incl.thoseleasesthatarenotin-scopeofIFRS16).

24. Financial liabilities at amortised cost – issued debt securities

Analysis of Issued Debt Securities

31 Dec 2019 31 Dec 2018Mortgagebonds 16812 35385Structuredbonds 3329 3834Otherissueddebtsecurities 441 781Total 20 582 40 000

Structuredbonds(includedintheline“Structuredbonds”andpartlyintheline“Mortgagebonds”)includeembeddedoptions–currency,equity,commodityandinterestrateoptions–inthetotalnominalvalueofMCZK4,068(at31December2018:MCZK6,451).ThepositivefairvalueofthesederivativesofMCZK4isreportedunder“Financialassetsheldfortrading”(at31December2018:MCZK34);thenegativefairvalueofthesederivativesofMCZK182isrecognisedunder“Financialliabilitiesheldfortrading”(at31December2018:MCZK234).

25. Negative fair value of hedging derivatives




26. Other liabilities

31 Dec 2019 31 Dec 2018Deferredincomeandaccruedexpenses 1807 1629Tradepayables 715 998Payablestoemployees 618 689Unsettledsecuritytransactions 20 11Clearingandsettlementaccounts 5219 5128Other 354 278Total 8 733 8 733


27. Provisions for risks and charges

Provisionsforrisksandchargesincludethefollowingitems:

31 Dec 2019 31 Dec 2018Provisionsforoff-balancesheetcreditexposures 721 1118 a.Stage1 113 146 b.Stage2 100 43 c.Stage3 508 929Legaldisputes 37 70Provisionforrestructuring 62 12Other 62 120Total 882 1 320

(a) Provisions for Off-Balance Sheet Credit Exposures

Stage 1 Stage 2 Stage 3 TotalBalanceat1January2019 146 43 929 1118Chargeduringtheyear 92 127 244 463Releaseduringtheyear (125) (70) (665) (860)Other–FXrategainsorlosses – – – –Total provisions for off-balance sheet credit items at 31 December 2019 113 100 508 721

ImpactofIFRS9 129Balanceat1January2018 205 109 318 632Chargeduringtheyear 162 38 622 822Releaseduringtheyear (221) (102) (13) (336)Other–FXrategainsorlosses – (2) 2 –Total provisions for off-balance sheet credit items at 31 December 2018 146 43 929 1 118

(b) Other Provisions

Legal disputes Restructuring Other Total provisionBalanceat1January2019 70 12 120 202Chargeduringtheyear 24 59 – 83Usageduringtheyear (35) (5) (56) (96)Releaseofredundantprovisionsandother (22) (4) (2) (28)Total other provisions at 31 December 2019 37 62 62 161

Balanceat1January2018 73 100 179 352Chargeduringtheyear 21 – 60 81Usageduringtheyear (18) (84) (111) (213)Releaseofredundantprovisionsandother (6) (4) (8) (18)Total other provisions at 31 December 2018 70 12 120 202

28. Income tax

(a) Tax in the Income Statement

31 Dec 2019 31 Dec 2018Currenttaxpayable (2386) (2008)Prioryeartax 24 57Deferredtax (121) (125)Total income tax (2 483) (2 076)


TheincometaxoftheGroupdiffersfromthetheoreticaltaxwhichwouldariseifthetaxrateeffectiveintheCzechRepublicwereappliedasfollows:

31 Dec 2019 31 Dec 2018Profit/lossfortheyearbeforetax 12605 11144Taxcalculatedusingthetaxrateof19% (2395) (2117)Impactofprioryearsonthecurrenttaxpayable 132 58Non-taxableincome 43 20Taxnon-deductibleexpenses (239) (203)Impactofprioryearsonthedeferredtax (1) (4)ImpactofahigherSlovaktaxrateonthecurrenttaxpayableanddeferredtax (23) (34)Recognitionofpreviouslyunrecogniseddeferredtax 1 96Other (1) (24)Total income tax (2 483) (2 076)

TheeffectivetaxrateoftheGroupis19.70%(2018:18.63%).

(b) Deferred Tax Asset/LiabilityDeferredincometaxiscalculatedonalltemporarydifferencesusingthebalancesheetliabilitymethodundertheapplicationoftheappropriatetaxrate.

Whencalculatingnettaxassetsandliabilities,theGroupoffsetsdeferredtaxassetsagainstdeferredtaxliabilitiesarisingfromincometaxpaidtothesametaxinstitutioninthesametaxcategory.

GroupManagementbelievesthattheGroupwillbeabletofullyrecoverdeferredtaxassetsreportedasof31December2019basedonthecurrentandanticipatedfutureleveloftaxableprofits.

(i) Deferred Tax Asset

31 Dec 2019 31 Dec 2018Taxnon-deductibleprovisions 144 101Impairmentofloansandoff-balancesheetitems 915 895Differencesarisingfromthenetbookvaluesoftangibleassets 98 73Reservefromrevaluationofhedginginstruments 188 1Other 103 125Offsettingagainstdeferredtaxliability (443) (363)Net deferred tax asset 1 005 832

(ii) Deferred Tax Liability

31 Dec 2019 31 Dec 2018Impairmentofloansandoff-balancesheetitems 835 26Differencesarisingfromthenetbookvaluesoftangibleassets 119 99Differencesarisingfromthenetbookvaluesofintangibleassets 94 52Reservefromrevaluationofhedginginstruments – 49Reservefromrevaluationoffinancialassetsatfairvaluethroughothercomprehensiveincome 149 147Reservefromrevaluationofpropertymeasuredatfairvalue 68 n/aOther – 692Offsettingagainstdeferredtaxasset (443) (363)Net deferred tax liability 822 702

TheGroupadditionallycarriesthefollowingdeferredtaxassetswhicharenotrecognisedonthegroundsofprudence:arisingfromnon-taxdeductibleprovisionsrecognisedbyUniCreditLeasingSlovakia,a.s.ofMCZK18.


29. Issued capital and share premiumTherecorded,issuedandfullypaidcapitaloftheGroupamountedtoMCZK8,755asof31December2018and2019.

(a) Shareholder Structure

Entity Registered Nominal value Share Ownership office of shares premium percentage in MCZK in MCZKAt 31 Dec 2019 UniCreditS.p.A Italy 8755 3495 100.00Total 8 755 3 495 100.00 At 31 Dec 2018 UniCreditS.p.A Italy 8755 3495 100.00Total 8 755 3 495 100.00

(b) Capital Breakdown

31 Dec 2019 31 Dec 2019 31 Dec 2018 31 Dec 2018 Number MCZK Number MCZK of shares of shares OrdinarysharesofCZK16,320,000 100 1632 100 1632OrdinarysharesofCZK13,375,000 200 2675 200 2675OrdinarysharesofCZK10,000 436500 4365 436500 4365OrdinarysharesofCZK7,771,600 10 78 10 78OrdinarysharesofCZK46 106563 5 106563 5Total issued capital 8 755 8 755

Thesharesarefreelytransferrable.OrdinarysharesincludetheentitlementtoparticipateintheGroup’sgovernanceandtheentitlementtoashareonprofit.

Themostsignificanttopicsthatarewithinthescopeofauthorityofthegeneralmeetingandthatashareholdercanthereforemakedecisionsaboutinclude:a. DecisionsaboutchangestotheArticlesofAssociation,unlessitisachangeresultingfromtheincreaseofsharecapitalbytheBoard

ofDirectorsasperSection511etseq.ofActNo.90/2012Coll.,onBusinessCorporations(BCA),orachangethatoccurredbasedonotherlegalfacts;

b. DecisionsontheincreaseinsharecapitaloronauthorisingtheBoardofDirectorsasperSection511etseq.oftheBCA,oraboutthepossibilityofoffsettingacashreceivablefromabankagainstareceivableforthepaymentoftheissuerate;

c. DecisionstodecreasethesharecapitalandtoissuebondsasperSection286etseq.oftheBCA;d. AppointingandrecallingmembersoftheSupervisoryBoard,AuditCommitteeandotherbodiessetbytheArticlesofAssociation;e. Approvingregular,extraordinaryorconsolidatedfinancialstatementsandincasesdefinedbythelawalsointerimfinancialstatements,

decisionsabouttheallocationofprofitandorotherownresourcesoraboutthesettlementoflossandthedeterminationofsharesinprofitforthemembersoftheBoardofDirectorsandtheSupervisoryBoard;

f. DecisionsaboutremunerationofmembersoftheSupervisoryBoardandtheAuditCommittee;g. DecisionsaboutfilingarequestforequitysecuritiesoftheBanktobeacceptedfortradingonaEuropeanregulatedmarketortobe

excludedfromtradingonaEuropeanregulatedmarket;h. AppointingtheBank’sauditorsbasedontherecommendationoftheAuditCommittee;andi. DecisionsaboutestablishingdiscretionaryfundsoftheBankandthemethodsoftheircreationanduse.

TheeffectivedatefortheexerciseoftherighttoadividendisthesameastheeffectivedateforparticipationattheGeneralMeeting;thisdateistheseventhcalendardaybeforetheGeneralMeetingisheld.Therighttoadividendlapsesafterthethree-yearlegalperiodpassesinlinewithSection629ofActNo.89/2012Coll.,CivilCode.



AfterthedissolutionoftheBank,eachshareholderhasarighttoashareintheliquidationproceedsinlinewithSection37oftheBCA;thisshareispaidoutincash.ThedecisiontodissolvetheBankwithliquidation,toappointandrecallaliquidatorincludingthedeterminationofremuneration,andtheapprovaloftheproposeddistributionoftheliquidationproceedsarewithintheauthorityoftheGeneralMeeting.

Bothat31December2019and31December2018,theGroupheldnotreasuryshares.

30. Equity-based bonusesTheGrouphasnotimplementedanyemployeemotivationorstabilisationprogrammeforthepurchaseoftreasurysharesorremunerationintheformoftreasuryshareoptions.

31. Retained earnings and reserve fundsThefollowingtableshowsthebreakdownofthereservefunds:

31 Dec 2019 31 Dec 2018Reservefunds 5243 5240Special-purposereservefund 13240 12423Retainedearnings 38132 36045Exchangeratedifferencesarisingonconsolidation (111) (88)Total 56 504 53 620

TheGroupmaycreatethereservefund(reportedunder“Reservefunds”)fromthenetprofitreportedintheordinaryfinancialstatementspursuanttotheresolutionofthegeneralmeeting.TheestablishedreservefundcanbeusedsolelytocovertheBank’sloss,pursuanttotheresolutionofthegeneralmeeting.

Aspartofthecross-bordermerger,thesharecapitalofUniCreditBankSlovakiaa.s.ofMCZK6,058,thereservefundofUniCreditBankSlovakiaa.s.ofMCZK1,166andretainedearningsofUniCreditBankSlovakiaa.s.ofMCZK4,387weretransferredintoaspecial-purposereservefunddenominatedinEUR.Thisspecial-purposesreservefundcanonlybeusedtosettlethelossoftheBank.In2019,thisfundwasincreasedbyMEUR32(profitoftheSlovakbranchfor2018).

32. Borrowings and lending of securities, repurchase and reverse repurchase transactions

(a) Reverse Repurchase Transactions

31 Dec 2019 31 Dec 2018Loansandadvancestobanks 165823 189922Fairvalueofsecuritiesreceived 162878 186686 Loansandadvancestocustomers – –Fairvalueofsecuritiesreceived – –

Nosecuritiesreceivedascollateralaspartofreverserepurchasetransactionsarefurtherprovidedascollateralunderrepurchasetransactionsasof31December2019andasof31December2018.

(b) Repurchase Transactions

31 Dec 2019 31 Dec 2018Depositsfrombanks 11433 30003Fairvalueofsecuritiesprovided 11193 33443 Depositsfromcustomers – –Fairvalueofsecuritiesprovided – –

33. Contingent liabilities, contingent assets and financial derivatives

Intheordinarycourseofbusiness,theGroupconductsvariousfinancialtransactionsthatarenotreportedtheGroup’sstatementoffinancialpositionandthataredesignatedasoff-balancesheetfinancialinstruments.

Unlessstatedotherwise,theinformationbelowrepresentsthenominalvaluesofoff-balancesheettransactions.

(a) Contingent Liabilities

Legal DisputesAsof31December2019,theGroupassessedthelegaldisputesinwhichitactedasadefendant.TheGrouprecordedprovisionsfortheselegaldisputes(seesectionV,point27).Inadditiontothesedisputes,legalactionsarisingfromordinarybusinessactivitiesweretakenagainsttheGroup.ThemanagementdoesnotanticipatetheresultoftheselegaldisputestohaveamaterialimpactontheGroup’sfinancialposition.

TaxationCzechandSlovaktaxlegislationhassignificantlychangedinrecentyears.Manycomplicatedlegislationareasremainedunresolved,anditmaynotbepossibletodeterminetheinterpretationoftaxationauthoritiesinspecificcasesinadvance.Itisnotpossibletoquantifytheconsequencesofthisuncertainty;theymayberesolvedsolelyundertheconditionthattherelevantlegalregulationsareadoptedinpracticeorintheeventthatofficialinterpretationsareavailable.

Contingent Liabilities arising from Guarantees, Loan Commitments and Other Contingent LiabilitiesContingentliabilitiespredominantlyincludeundrawnamountsofloans.LoancommitmentsissuedbytheGroupincludeissuedcreditandguaranteecommitments,andundrawnamountsofcreditsandoverdraftloanfacilities.RevocablecommitmentsincludeundrawnloansthatmayberevokedbytheGroupatanytimewithoutstatingthereason.Onthecontrary,irrevocablecommitmentsrepresenttheGroup’sliabilitytoprovideacreditorissueaguarantee,theperformanceofwhich,eventhoughboundonmeetingthecontractualtermsbytheclient,istoacertainextentindependentoftheGroup’swill.

ContingentliabilitiesarisingfromfinancialguaranteesincludeirrevocablecommitmentsmadebytheGrouptorepaydebtsinlieuofthedebtorowedtotheguaranteebeneficiaryincasethedebtordefaultsontheirobligationtopaysubjecttotermsandconditionsoftheindividualcontracts.Assuch,commitmentsbearsimilarrisktoloans,theGroupcreatestherelevantprovisionsusingasimilaralgorithmasforprovisions(seesectionV.OtherNotes,point35.FinancialRiskManagement).

DocumentarylettersofcreditrepresentawrittenirrevocablecommitmentoftheGroupissuedbasedonaclient’srequest(orderer),toprovideathirdpartyortoitsorder(recipient,beneficiary),withcertainperformance,undertheconditionthetermsoftheletterofcreditaremetbyaspecifieddeadline.Forthesefinancialinstruments,theGroupcreatesprovisionsusingasimilaralgorithmasappliedforcredits(seesectionV.OtherNotes,point35.FinancialRiskManagement).

TheGrouprecordedprovisionsforoff-balancesheetitemstocoverexpectedcreditlossesandarisingfromtheimpairmentlossesontheoff-balancesheetitemsduetocreditrisk.Asof31December2019,theaggregateprovisionsamountedtoMCZK721(asof31December2018:MCZK1,118),seesectionV.OtherNotes,point27.Provisions(a).


Gross Impairment Net amount losses amount31 Dec 2019 Lettersofcreditandfinancialguarantees 45283 (464) 44819 –Stage1 42116 (64) 42052 –Stage2 2686 (26) 2660 –Stage3 481 (374) 107Othercontingentliabilities(undrawncreditfacilities) 130357 (257) 130100 –Stage1 122373 (49) 122324 –Stage2 7632 (74) 7558 –Stage3 352 (134) 218Total 175 640 (721) 174 919

31 Dec 2018 Lettersofcreditandfinancialguarantees 41136 (881) 40255 –Stage1 39013 (93) 38920 –Stage2 1183 (19) 1164 –Stage3 940 (769) 171Othercontingentliabilities(undrawncreditfacilities) 119957 (237) 119720 –Stage1 116099 (53) 116046 –Stage2 3301 (24) 3277 –Stage3 557 (160) 397Total 161 093 (1 118) 159 975

(b) Contingent AssetsTheBankhasanoptiontodrawacreditlineprovidedbytheEuropeanBankforReconstructionandDevelopment(EBRD)amountingtoMCZK385.9(MEUR15)withmaturityon23February2023.TheBankadditionallyhasanoptiontodrawacreditlinefromTheExport-ImportBankofTheRepublicofChinaofMCZK226.2(MUSD10)withthemaximummaturityoffiveyearsfromthetimeofdrawing.

(c) Financial Derivatives

(i) Nominal and Fair Values of Financial Derivatives

Nominal Positive Negative value fair value fair value31 Dec 2019 Trading instruments – interbank market (OTC) Options 76298 705 701Interestrateswapcontracts 538519 4883 4304Forwardrateagreements(FRA) – – –Crosscurrencyswapcontracts 143887 2289 1777Foreignexchangeforwardsandswaps 40320 145 500Otherinstruments 2310 1249 1245Total 801 334 9 271 8 527 Trading instruments – stock exchange Futures 1880 35 –Total trading instruments 803 214 9 306 8 527 Hedging instruments Interestrateswapcontracts 629060 6719 6761Crosscurrencyswapcontracts 112354 479 863Total hedging instruments 741 414 7 198 7 624


Nominal Positive Negative value fair value fair value31 Dec 2018 Trading instruments – interbank market (OTC) Options 87741 769 781Interestrateswapcontracts 391766 3689 3039Forwardrateagreements(FRA) – – –Crosscurrencyswapcontracts 230178 2281 1917Foreignexchangeforwardsandswaps 49488 532 240Otherinstruments 1562 137 131Total 760 735 7 408 6 108 Trading instruments – stock exchange Futures 1646 30 –Total trading instruments 762 381 7 438 – Hedging instruments Interestrateswapcontracts 585163 5492 4997Crosscurrencyswapcontracts 164358 144 660Total hedging instruments 749 521 5 636 5 657

(ii) Residual Maturity of Financial Derivatives Concluded on the Interbank Market

Up to 1 year 1 – 5 years Over 5 years Total31 Dec 2019 Trading instruments Interestrateinstruments 68763 308187 189506 566456Equityinstruments 3560 4871 – 8431Currencyinstruments 162796 63221 – 226017Other 2226 84 – 2310Total 237 345 376 363 189 506 803 214 Hedging instruments Interestrateinstruments 100548 269524 258988 629060Currencyinstruments 77425 11864 23065 112354Total 177 973 281 388 282 053 741 414

31 Dec 2018 Trading instruments Interestrateinstruments 107122 233947 86522 427591Equityinstruments 5694 7520 – 13214Currencyinstruments 245962 73503 549 320014Other 1549 13 – 1562Total 360 327 314 983 87 071 762 381 Hedging instruments Interestrateinstruments 163500 256394 165269 585163Currencyinstruments 140486 20771 3101 164358Total 303 986 277 165 168 370 749 521

34. Segment reportingTheGrouppresentsthesegmentinformationbasedonperformancecriteriaasdisclosedinsectionIII.SignificantAccountingPolicies,point21.Segmentreporting.


(a) Segment Information by Client Category

Retail Corporate Other Total and private and investment banking banking, leases 31 Dec 2019 Netinterestanddividendincome 3539 8859 2185 14 583Othernetincome 1849 4692 701 7 242 Depreciation/impairmentofpropertyandequipmentandintangibleassets (627) (565) (340) (1 532)Impairmentloss (826) (554) 71 (1 309)Segmentexpenses (3093) (3688) 402 (6 379)Profitbeforetax 842 8744 3019 12 605Incometax – – (2483) (2483)Resultofsegment 842 8 744 536 10 122 Segmentassets 149276 524293 13024 686 593Segmentliabilities 183885 407144 16951 607 980

Retail Corporate Other Total and private and investment banking banking, leases 31 Dec 2018 Netinterestanddividendincome 3503 8112 2620 14 235Othernetincome 1794 4801 24 6 619 Depreciation/impairmentofpropertyandequipmentandintangibleassets (446) (419) (310) (1 175)Impairmentloss (110) (511) 11 (610)Segmentexpenses (3659) (4397) 20 (8 036)Profitbeforetax 1082 7586 2365 11 033Incometax – – (2076) (2076)Resultofsegment 1 082 7 586 289 8 957 Segmentassets 132191 527920 11504 671 615Segmentliabilities 171611 407473 16792 595 876

Theincometaxforallsegmentsispresentedinthesegment“Other”.

TheGroupdoesnothaveacustomeroragroupofcustomersthatwouldcomprisemorethan10percentoftheGroup’sincome.

(b) Information on Geographical Areas

Czech Republic Slovakia Total31 Dec 2019 Netinterestanddividendincome 11793 2790 14 583Othernetincome 5566 1676 7 242 Depreciation/impairmentofpropertyandequipmentandintangibleassets (1061) (471) (1 532)Impairmentloss (538) (771) (1 309)Segmentexpenses (4564) (1815) (6 379)Profitbeforetax 11196 1409 12 605Incometax (2068) (415) (2483)Resultofsegment 9 128 994 10 122 Segmentassets 552651 133942 686 593Segmentliabilities 509338 98642 607 980



Czech Republic Slovakia Total31 Dec 2018 Netinterestanddividendincome 11363 2872 14 235Othernetincome 4724 1895 6 619 Depreciation/impairmentofpropertyandequipmentandintangibleassets (775) (400) (1 175)Impairmentloss (96) (514) (610)Segmentexpenses (5677) (2359) (8 036)Profitbeforetax 9539 1494 11 033Incometax (1844) (232) (2076)Resultofsegment 7 695 1 262 8 957 Segmentassets 539254 132361 671 615Segmentliabilities 484546 111330 595 876

Thetablebelowpresentsthemaximumcreditriskexposurerelatedtobalancesheetassets.Maximumcreditriskexposureexcludesimpactofreceivedcollateral:

2019 2018Cashandcashbalances 4634 4842Financialassetsatfairvaluethroughprofitorloss,of which: 12185 10020 Heldfortrading 11698 9674 Mandatorilyatfairvalue 487 346Financialassetsatfairvaluethroughothercomprehensiveincome 23181 29188Financialassetsatamortisedcost,of which: 626735 612101 Loansandadvancestobanks 185975 200065 Loansandadvancestocustomers 440760 412036Positivefairvalueofhedgingderivatives 7198 5636Otherassets 2130 1679Total 676 063 663 466

35. Financial risk management

(a) Introduction

TheGroupisexposedtothefollowingtypesofrisk:•Creditrisk;•Marketrisk;and•Operationalrisk.

TheBoardofDirectorsisresponsiblefortheoverallriskmanagementstrategywhichitapprovesandassessesonaregularbasis.TheBoardofDirectorshasestablishedtheAssetsandLiabilitiesCommittee(ALCO),theCreditCommitteeandtheCommitteeforOperationalRiskManagement.Thesecommitteesareinchargeofmonitoringandmanagingindividualriskswithregardtoindividualspecificfields.ThecommitteesreporttotheBoardofDirectorsonaregularbasis.

TheprincipalpartoftheGroupistheBank;forthisreason,thebelowdescriptionprimarilyrelatestotheriskmanagementintheBank.RiskmanagementinsubsidiariesisdescribedinsectionV.OtherNotes,point35b(vi).

(b) Credit RiskTheGroupisexposedtocreditriskasaresultofitstrading,lending,hedginginvestmentandbrokerageactivities.

Creditriskismanagedatthelevelofindividualcustomers(transactions)andattheportfoliolevel.

TheCreditUnderwriting,CreditOperationsandStrategicCreditRiskManagementdepartmentsaredirectlyresponsibleforcreditriskmanagement.ThesedepartmentsareorganisationallyindependentofthebusinessdivisionsandreportdirectlytoamemberoftheBoardofDirectorsinchargeoftheRiskmanagementdivision(ChiefRiskOfficer).

Underitscreditriskmanagementpolicy,theGroupdefinesthegeneralprinciples,methodsandtoolsappliedwhenidentifying,measuringandmanagingcreditrisk.TheGroup’screditriskmanagementpolicyissetbytheStrategicCreditRiskManagementdepartment.Thispolicyisreviewedonaregularbasisatleastonceayear.

Initsinternalguidelines,theGroupdefinestheunderwritingapprovalcompetencies,includingthedefinitionofresponsibilitiesandcompetenciesoftheCreditCommittee.


(i) Credit Risk Management at the Level of Individual Customers

Corporate customersCreditriskatthelevelofindividualcustomersismanagedbyanalysingcustomers’financialhealthanddeterminingmaximumcreditriskexposure(creditlimit).Analysisisfocusedonthecustomers’competitivepositionintherelevantmarket,aratingoftheirfinancialstatements,predictionoffutureliquidity,etc.Theresultofthisanalysisis,interalia,aratingthatreflectstheprobabilityofclientdefaultandtakesintoaccountquantitative,qualitativeandbehaviouralfactors.Analysingthefinancialpositionandsettingthelimitsforcreditexposureandratingisundertakenpriortothegrantingofaloan.Subsequentlytheratingisreviewedandcreditworthinessisreassessedatleastannually.

Theinternalratingsystemcomprises26ratinglevels(1to10adding“+”and“–”tocertainratingclasses,suchas:1+;1;1−;2+;etc).Whenclassifyingcustomers,theBankassesses(inadditiontothenumberofdayspastduewithregardtooverduereceivables,ifany)financialindicatorsrelatedtotheclient(suchasthestructureofandproportionbetweenthestatementoffinancialposition,theincomestatement,andthecashflowstatement),managementquality,ownershipstructure,individualcustomers’marketposition,reportingquality,productionequipment,account-usehistory,etc.Customersindefaultareassignedinternalratingsof8-,9or10.

Retail customersForreceivablesfromindividuals,theabilityoftheclienttofulfiltheirobligationsisdeterminedusingastandardisedsystemofcreditscoringbasedonrisk-relevantfeatures(creditapplicationscoring).TheBanksetsandregularlyupdatestheprobabilityofclientdefault,usingthebehaviouralscoringmethod.Aclient’sfinalratingcombinesbothapplicationandbehaviouralcomponents.

Credit registriesTheBankusesinformationprovidedbycreditregistriesasanadditionalsourceofinformationforassessingaclient’sfinancialstandingforbothCorporateandRetailClient

CollateralInaccordancewithitscreditriskmanagementstrategy,priortograntingtheloans,theBankmayrequirethatthecustomerspostcollateralfortheloans.Theamountandtypeofcollateraldepends

ontheclient’sfinancialhealthandthetypeoftheloan.TheBankconsidersthefollowingtobeacceptabletypesofcollateral:cash,investmentgradesecurities,guaranteesissuedbyotherreputableentities(includingbankguarantees),andpledgesinformofmortgageoverrealestateproperty.Whendeterminingtherealisablevalueofcollateral,theBankprincipallytakesintoconsiderationthefinancialhealthofthepartyprovidingthecollateralforpersonalcollateral(egguarantees)andthenominalvalueofthecollateralfornon-personalcollateralssuchaspledgeofproperty.ThecollateralisvaluedbasedonexpertappraisalsmadebyaspecialdepartmentoftheBankorexternalvaluations.Therealisablevalueofcollateralisdeterminedbasedonthisappraisedvaluebyapplyinganadjustingco-efficientthatreflectstheBank’sabilitytorealisethegivencollateral,asandwhenneeded.

(ii) Credit Risk Management at the Portfolio LevelTheBankregularlyanalysesandmonitorstrendsinindividualcreditsub-portfolios

TheBankmonitorsitsoverallcreditriskexposure,ieittakesintoaccountallon-balanceandoff-balancesheetexposuresandquantifiestheexpectedlossesfromitscreditexposureonregularbasis.Theexpectedlossisdeterminedbasedoninternalestimatesofriskparameters,ietheprobabilityofdefault(PD),exposureatdefault(EaD)andlossgivendefault(LGD).

TheBankregularlymonitorsitscreditexposuretoindividualindustries,countries,oreconomically-connectedgroupsofdebtors.

TheBankassessestheconcentrationriskoftheloanportfolioonaregularbasisandestablishesconcentrationlimitsasappropriateinrelationtospecificindustries,countries,oreconomically-connectedgroupsofdebtors.

(iii) Classification of Receivables, Impairment Losses and ProvisionsTheBankcategorisesitsreceivablesarisingfromfinancialactivitiesonaregularbasis,inaccordancewithIFRS9Financialinstruments;inparticular,itdividesitsreceivablesintonon-performingreceivables=receivablesindefault(stage3)andperformingreceivables=receivableswithoutdefault(stages1and2).

Stage2receivablesarereceivableswhichhaveexperiencedsignificantincreaseincreditriskbetweentwosubsequentbalance

Thetablebelowpresentsthemaximumcreditriskexposurerelatedtooff-balancesheetitems.Maximumcreditriskexposureexcludesimpactreceivedcollateral:

2019 2018Lettersofcreditandfinancialguarantees 44819 40255Othercontingentliabilities(undrawncreditfacilities) 130100 119720Total 174 919 159 975

sheetdates.Allreceivablesareregularlymonitoredfordefaultandsignificantincreaseincreditrisk.

Impairment Losses on Non-Performing ReceivablesImpairmentlossesrelatedtoindividualnon-performingreceivables(iestage3underIFRS9FinancialInstruments)arerecognisedifcarryingamountofindividualreceivablesislessthanrecoverableamountandtheBankdoesnotwriteoffsuchreceivables(fullyorpartially).TheBankassessesrecoverableoftheamountofallreceivablesinrespectofwhichthedebtorsareindefault:(i)individuallyiftheamountofthereceivableexceedsanequivalentofMEUR1,(ii)collectivelyusingrecoveryratederivedfromtherelevantmodelwhichreflectshistoricrecoveryexperience.TheBankwritesoffreceivablesifnoincomeisanticipatedonitoronthecollateralreceivedwithregardtothegivenreceivable.

Theimpairmentlossis(i)forindividuallyassessedreceivablesequaltothedifferencebetweenthecarryingamountofthereceivableandthediscountedvalueofestimatedfuturecashflows;(ii)forcollectivelyassessedreceivablesequaltothelifetimeexpectedcreditlossdeterminedonportfoliobasis.

Impairment Losses on Performing ReceivablesForperformingreceivablesthathaveexperiencednosignificantincreaseincreditrisksinceorigination(iestage1),theBankdeterminestheimpairmentlossastheexpectedcreditlossuntilmaturityofthereceivable,butnomorethanthenext12months(1-yearexpectedloss).ForPerformingreceivablesthathaveexperiencedasignificantincreaseincreditrisksinceorigination,butarestillperformingreceivables(iestage2),theBankdeterminestheimpairmentlossastheexpectedlossuntilthefinalmaturityofthereceivable(lifetimeexpectedcreditloss).

Provisions for Off-Balance Sheet ItemsTheBankrecognisessuchprovisionsusingthesamemethodsasareusedindeterminingimpairmentlossesonreceivableportfolioswhiletakingintoaccountconversionfactorsrelatedtothespecifictypeoftheoff-balanceexposure.

(iv) ForbearanceTheBankclassifiesloanreceivablesasforborneiftheoriginallyagreedpaymentconditionswerechangedsincetheloanprovisionduetocustomers’financialdifficulties(changespredominantlyincludepaymentdeferral,temporarypaymentreduction,postponementoftheultimateduedate,etc).Theseitemsarerecognisedinthestatementoffinancialpositioneitherasnon-performingloanreceivablesorperformingloanreceivables.Loanreceivableswithachangeintheoriginally-agreedpaymentconditionsaregenerallyclassifiedasnon-performingloanreceivables.Followingarobustassessment,theBankmaycategorise

individualreceivablesasperformingreceivables,despiteachangeintheconditions.ThisapproachisappliedifthereasonsforthechangeofthepaymentconditionsarenotseriousandtheBankdoesnotanticipateincurringalossfromthefuturecollectionofsuchloanreceivables.

Performingreceivablesalsoincludereceivablesoriginallyclassifiedasnon-performingreceivablesuponthechangeofpaymentconditionsandwhichweresubsequentlytransferredintothecategoryofPerformingloanreceivablesbecausethedebtorcompliedwithnewly-agreedconditionsinlinewiththeBank’sinternalrules.Thisgroupaccountsforthemajorityofloanreceivablesreportedasforborne–performingreceivables.

LoanreceivableswithchangedpaymentconditionsaremanagedbyCreditRestructuring&WorkoutDepartmentandaresubjecttostandardrestructuringandworkoutproceduresandmonitoring.Theexceptionisreceivablesthatarenotassessedasnon-performingreceivablesuponachangeofthepaymentconditions.TheseloansareonlymanagedbyCreditRestructuring&WorkoutDepartmentafterathoroughassessmentoftheneedtousetheknow-howofthisspecialisedunit.Whenreleasingreceivablesfromthemanagementofthisunit,thestatuesofindividualcasesandtheneedtousetheknow-howoftheCreditRestructuring&Workoutstaffisalsocarefullyreviewed.

Theperiodforwhichtheclientisdesignatedasforborneisreferredtoastheprobationperiodandlastsaminimumoftwoyearsfromtheclientdefault/forbearanceiftheforbearancewaswithoutclientdefault.Inaddition,thisperiodcanonlybeterminatediftheclientfulfilstheagreedconditionsdulyandtimely,isnotindelayinexcessof30days.Foramortizingloans,thedebtmustbereducedbyatleast10%duringprobationperiod.

Duetothesizeoftheforborneportfolioandtheaboveproceduresandpractices,wehavenotidentifiedanyseriousthreatsfortheBankresultingfromthisportfolio.Thisissupportedbythefactthataportionofreceivableswithchangedpaymentconditionsinordertoovercomethedebtor’sdeterioratedfinancialpositionisreclassifiedoncemoreasnon-performing(recognisedintheBank’sstatementoffinancialpositionasnon-performingforbornereceivable–seeabove).

(v) Recovery of ReceivablesTheBankhasestablishedtheCreditWorkout&RestructuringDepartmentwhichmanagesthereceivableswhoserecoverabilityisatrisk(bothNon-performingandPerforming).Thepurposeofthisunitinvolvesachievingoneoranumberofthefollowinggoalsinrespectofrisk-bearingcreditreceivables:a) “Revitalisation”ofthecreditarrangement,restructuringand

subsequentreclassificationintostandardreceivables;



b) Fullrepaymentofthecredit;c) Minimisationofthelossfromthecredit(realisationofcollateral,

saleofthereceivablewithadiscount,etc);and/ord) Preventionofadditionallossesfromtheloan(comparisonof

futureexpensesversusincome).

(vi) Risk Management in SubsidiariesTheriskmanagementinsubsidiariesfollowssimilarprinciplesastheriskmanagementintheBanktakingintoaccountspecificfeaturesofproductsprovidedbysubsidiariesandtheirportfolios.

Thesespecificfeaturesprimarilyincludethefollowing:– Determinationofthefairvalueoffinancedassetswhendeciding

ontheprovisionoffunding;– Managementofriskofamarketvaluechangeoffinancedassets

duringfinancing;– Valuationandsellingactivitiesafteranextraordinarytermination

ofacontract(ordueterminationofacontractinrespectofoperatingleases)andmanagementoftheriskarisingfromtheseoperations;

– Controlactivitiestoprovetheconnectionofthepurposeoffinancingwiththeexistenceofthefinancedassetbeforetheconclusionofthecontractandduringthecontractperiod(includingthepreventionagainstfraudulentactivities);and

– Managementoftheriskofconcentrationinrelationtotypesoffinancedassets(classesofassets).

Theorganisationalstructureofriskmanagement,riskdecision-makingcommitteesandsystemfortheallocationofauthoritiesareadjustedtoreflectthespecificfeaturesorproductsandrisksofsubsidiaries.Thisensuresboththeindependenceofriskmanagementfrombusinessactivitiesandindependenceofthepersonsparticipatinginthevaluationofassetsandtheirrealisationfromthepersonshavingthedecision-makingauthorityintheprovisionoffunding.

(c) Market Risk

(i) TradingTheGroupholdstradingpositionsinvariousfinancialinstruments,includingfinancialderivatives.ThemajorityoftheGroup’sbusinessactivitiesaredrivenbytherequirementsoftheGroup’scustomers.Dependingonthepredicteddemandofitscustomers,theGroupholdsasupplyoffinancialinstrumentsandmaintainsaccesstothefinancialmarketsthroughquotingofthebidandofferpricesandbytradingwithothermarketmakers.ThesepositionsarealsoheldforthepurposeofshorttermprofittakingontheexpectedfuturedevelopmentoffinancialmarketsandtheinstrumentsareclassifiedinlinewithIFRS9Financialinstrumentsasheldfortrading.TheGroup’sbusinessstrategyisthusaffectedbyshorttermprofittakingandmarket-makinganditsgoalistomaximisenetincomefromtrading.

TheGroupmanagesrisksassociatedwithitstradingactivitiesatthelevelofindividualtypesofriskandtypesoffinancialinstruments.Thebasictoolsusedformarketriskmanagementarelimitsonthevolumesapplicabletoindividualtransactions,limitsforportfoliosensitivity(basispointvalue,orBPV),stoplosslimits,andvalueatrisk(VaR)limits.Thedescriptionquantitativemethodsappliedinriskmanagementareincludedinthefollowingsection“Marketriskmanagement”.

ThemajorityofderivativesarenegotiatedontheOTCmarketduetothenon-existenceofapublicmarketforfinancialderivativesintheCzechRepublic.

(ii) Market Risk ManagementBelowaredescribedselectedtypesofrisktowhichtheGroupisexposedthroughitstradingactivitiesaswellasmanagingthepositionsresultingfromtheseactivitiesandmanagingtheserisks.ThereisalsomarketriskexposureintheGroup’sbankingbookwhichcorrespondstoportfoliosoffinancialinstrumentsnotheldfortrading.MarketRiskismeasuredfortheTradingandBankingbookseparatelyandalsocollectively.TheproceduresappliedbytheGrouptomeasureandmanagetheserisksaredescribedindetailinthefollowingparagraphs.

TheGroupisexposedtomarketriskarisingfromitsopenpositionsininterestrate,equityandforeigncurrencyinstrumenttransactionsthataresensitivetochangesinthesituationonthefinancialmarket.

TheGroup’sriskmanagementfocusesonmanagingthetotalnetexposuretointerestrateriskresultingfromtheGroup’sstructureofassetsandliabilities.TheGroupmonitorsinterestrateriskbymeasuringthesensitivityofparticularassetsandliabilitieswhichmature/repriceinspecifictimeinterval.Thissensitivityisexpressedbythechangeinthevaluesofassetsandliabilitiesifinterestratesincreasebyonebasispoint(BPV).Forhedgeaccountingpurposes,theGroupidentifiesspecificassets/liabilitiescausingthismismatchsothattheaccountingcriteriafortheapplicationofhedgeaccountingaremet.

Value at RiskValueatRiskrepresentsthemainmethodformanagingmarketrisksarisingfromtheGroup’sopenpositions.ValueatRiskrepresentsthepotentiallossfromanunfavourablemovementonthemarketwithinacertaintimeperiodatacertainconfidencelevel.ValueatRiskismeasuredbasedona1-dayholdingperiodandaconfidencelevelof99%.TheGroup’sValueatRiskmodelcalculationshavethefollowinglimitations:– Theone-dayholdingperiodassumesthatallpositionscanbe

closedduringasingleday.Thisassumptiondoesnotnecessarilyapplytomarketswithlowerliquidity.

– The99%confidenceleveldoesnotreflectallpossiblelossesthatcanoccuratthisconfidencelevel.

– VaRiscalculatedfromthepositionsattheendofthetradingdayanddoesnotconsiderthepositionswhichcanbeopenedonan“intra-day”basis.

– Usinghistoricaldataasabasisfordeterminingpossiblefuturedevelopmentsdoesnotnecessarilycoverallpossiblefuturescenarios,especiallycrisisscenarios.

TheGroupusesVaRtomeasureinterestraterisk,foreigncurrencyrisk,equityriskandothertypesofriskconnectedwiththenegativemovementsinthepricesofmarketfactors(spreadrisk,optionrisk,etc).TheaggregatestructureofVaRlimitsisapprovedbytheAssetsandLiabilitiesCommittee(ALCO).Atleastonceayear,thestructureandamountoflimitsarerevisedinaccordancewiththeGroup’sneedsanddevelopmentsonthefinancialmarkets.TheresultsoftheVaRcalculationarepublisheddailyforselectedusers(BoardofDirectors,selectedemployeesoftheFinancialMarketsDepartment,theMarketRiskDepartment,theAssets&LiabilitiesManagementUnit,andtheMARSdepartmentoftheparentbank/sub-holding).

TheVaRcalculationdividesthecalculatedriskintointerestrateandcreditportions.ThecreditportionofVaRiscalculatedbasedonthevolatilityofthecreditspreadbetweensecuritiesandtheriskfreeinterestrate.Forthispurpose,theyieldcurvesofparticularissuers,industries,orgroupsofissuerswithidenticalratingaredownloadedintothesystemformarketriskmanagement.Specificsecuritiesaremappedtotheseyieldcurvesandthevolatilityofthecreditspreadiscalculated.TheBankregularlyreassessesthemappingofdebtsecuritieswiththerelevantyieldcurvesand,ifnecessary,thedebtsecuritiesarere-mappedtocurvesthatreliablyreflectthecreditriskofthespecificdebtsecurities

TheoutputsoftheVARcalculationmodelareback-testedandcomparedwiththeresultsofthechangestointerestratesonthefinancialmarketsonadailybasis.IftheGroupidentifiesanyinaccuracies,themodelisadjustedtocorrespondwiththecurrentdevelopmentonthefinancialmarkets.


ThetablebelowshowstheValuesatRisk:

At 31 Dec Average At 31 Dec Average 2019 for 2019 2018 for 2018AggregateVaR 247.5 193.7 210.6 248.9VaRofcurrencyinstruments 2.4 5.6 4.8 4.2VaRofequityinstruments – – – –

Interest Rate RiskTheGroupisexposedtointerestrateriskbecauseofmismatchininterest-bearingassetsandliabilitiesmaturities,re-pricingperiodsandnotionalsindefinedtimebuckets(gapormismatchrisk).Intheeventofachangeininterestrates,theGroupisalsoexposedtointerestrateriskasaresultofthedifferentmechanismortimingofadjustmentstoparticulartypesofinterestrates(suchasPRIBOR),declaredinterestratesondeposits(basisriskandyieldcurverisk).InterestriskmanagementisfocusedonoptimisingtheGroup’snetinterestincomeinaccordancewiththestrategiesapprovedbytheBoardofDirectors.

TheGroup’soverallinterestratepositionasof31December2019ischaracterisedbysensitivitytoadecreaseinrates–thisisreflectedinthenegativeaggregatebasispointvalue(BPV)–iftheinterestratesinindividualcurrenciesincreasedinparallel,therewouldbeadecreaseinmarketrevaluation.TheGroup’sinterestratepositionisdiversifiedintoindividualtimeperiods,duetowhichthesensitivitytointerestratevolatilityisnotnecessarilyidentical(positive,negative),andtoanumberofcurrencies,throughwhichthedifferentinterestraterisksrelatedtoindividualcurrenciesarecompensatedundertheaggregateassetandliabilityportfolio.ThemajorsensitivityisconnectedtoCZKandEUR.

Interestratederivativesaregenerallyusedtomanagethemismatchbetweentheinterestsensitivityofassetsandliabilities.ThesetransactionsarecarriedoutinaccordancewiththeinternalLiquidityManagementPolicyandtheinternalFundsTransferPricingPolicyandbytheStrategyofInterestRateRiskManagementintheBankingBookapprovedbytheBoardofDirectors.PartoftheGroup’sincomeisgeneratedbytheintentionalmismatchbetweentheassetsandliabilitiesthatareinterestrate-sensitive.

TheGroupappliesa“BasisPointValue(BPV)”approachformeasuringinterestsensitivityofassetsandliabilities.BPVrepresentsthechangeinthepresentvalueofcashflowsderivedfromindividualinstrumentsifinterestratesincreasebyonebasispoint(0.01%),ieitrepresentsthesensitivityofinstrumentstointerestraterisks.

TheGrouphassetupinterestraterisklimitstorestrictoscillationofnetinterestincomeresultingfromchangesofinterestratesby0.01%(the“BPVlimit”).

Stress Testing of Interest Rate RiskTheGroupcarriesoutweeklystresstestingofinterestratesensitivitybysimulatingimpactonNetinterestincomeunderofhistoricalscenariosofsignificantmovementsinfinancialmarkets,internallydefinedlowprobabilityscenariosandUniCreditGroupmacroscenarios.

Thestandardstressscenariocorrespondstoaparallelshiftintheyieldcurveby200basispointsformajorcurrencies(CZK,EUR,USD),andthemainalternativescenario(moneymarketstresstest)correspondstoaparallelshiftintheshorttailoftheyieldcurveby250basispointsformajorcurrencies(CZK,EUR,USD),withamaturityofuptotwoyears.

ThefollowingtableshowstheimpactoftheparallelshiftoftheyieldcurveontheGroup’sresults.TheGroupusestheeuroasthebasecurrencyforstresstesting.AllvaluesaretranslatedtoCZKusingtheCzechNationalBank’sexchangerateasoftherespectivedate.


Basic stress test MM stress test –200bp +200bp +250bp*) Value at 31 December 2019 7498 (4822) (1928)Averagefortheperiod 8429 (4471) (2075)Maximumvalue 12141 (2633) (302)Minimumvalue 4593 (6220) (3391) Value at 31 December 2018 10870 (5485) (2414)Averagefortheyear 7248 (4806) (1384)Maximumvalue 14909 (1580) 1007Minimumvalue 1244 (6929) (2635)

On7December2015,stressscenariosfornegativemarketinterestrateswereintroduced.

Asalargeportionofthemarketinterestratecurveshowsnegativeratesandafurtherdecreasecannotbeexcluded,theGroupappliesastressscenariotoreflectapossibleNetinterestincomeeffectofafurtherdecreaseinthemarketinterestrates.Thisapproachisappliedtotheentireportfolioofassetsandliabilities,includingproductsforwhichadecreaseofthemarketinterestrates(asanelementofclientrates)intonegativevaluesisrestrictedincontracts(aswellasinthegeneralbusinesstermsandconditions).

Usingthisapproach,theGroupalsoreflectsthepossibleriskofprofit/lossforproductswherethemarketinterestratescannotachievenegativevaluesaccordingtocontracts.

Hedge AccountingAspartofitsmarketriskmanagementstrategy,theGrouphedgesagainstinterestraterisk.TheGroup’shedgestrategyusesbothfairvaluehedgesandcashflowhedges.

Fairvaluehedgesareusedforreducingthepriceinterestrateriskofissuedbonds,purchasedsecurities,loansordeposits.CashflowhedgesareusedtoeliminateuncertaintyinfuturecashflowsinordertostabiliseNetinterestincome;inotherwordstomanagereinvestmentrisk.

Fair Value HedgingHedgedinstrumentsincludefinancialassetsandliabilitiesrecognisedatamortisedcostanddebtfinancialassetsatfairvaluethroughothercomprehensiveincome.Hedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).

Attheinceptionofthehedgerelationship,theGroupperformsaprospectivefairvaluehedgeeffectivenesstestonthebasisoffuturechangesinfairvaluesofhedgedandhedginginstrumentsandofexpectedinterestratesmovements(the“prospectivetest”).Onthebasisofactualinterestratedevelopments,atestofeffectivenessiscarriedoutmonthly.TheBankundertakesmonthlyeffectivenesstestingtobeabletodetectpossiblenon-effectivenessofthehedgerelationships.

Forparticularhedgeditemsandhedgingtransactions(loans,deposits,securities,interestrateswaps,etc),specificdatesandamountsofcashflowsaredeterminedfromtheinceptionofahedgerelationshipuntilthematurityofthehedgedinstrument.Thepresentvaluesofparticularcashflowsfortherelevantdate(dateofeffectivenessmeasurement)aredeterminedonthebasisofthediscountfactorsforspecificcurrencies.Thefairvalueofatransactionisthesumofdiscountedcashflowsfromtherelevanttradeatthegiventime.Thecumulativechangeofthefairvalueisdeterminedbycomparingthefairvalueinthegiventimewiththefirstrevaluation.Thesecumulativechangesarefurthernettedforrealisedcashflowsbyaddingthembackorsubtracting.Thehedgeeffectivenessismeasuredusingthecomparisonofthecumulativechangeinthefairvalueofthehedgedandhedginginstrument.Thehedgeisconsideredeffectiveiftheproportionofcumulativefairvaluechangesofhedgedandhedginginstrumentsisbetween80%and125%.

Inthetablebelow,theGroupsetsouttheaccumulatedfairvalueadjustmentsarisingfromthecorrespondingcontinuinghedgerelationships,irrespectiveofwhetherornottherehasbeenachangeinhedgedesignationduringtheyear.

31 Dec 2019 Carrying amount of hedged items Accumulated amount (excluding the accumulated fair of fair value adjustments value hedge adjustment) on the hedged items Assets Liabilities Assets LiabilitiesFair Value Hedge Micro fair value hedges Interestraterisk–see“A”below 18590 (6706) (112) (28)Portfolio fair value hedges Interestraterisk–see“B”below – (35280) – (1097)

31 Dec 2018 Carrying amount of hedged items Accumulated amount (excluding the accumulated fair of fair value adjustments value hedge adjustment) on the hedged items Assets Liabilities Assets LiabilitiesFair Value Hedge Micro fair value hedges Interestraterisk–see“A”below 15626 (40513) 46 (47)Portfolio fair value hedges Interestraterisk–see“B”below – (30690) – (608)

ThecorrespondingConsolidatedStatementofFinancialPositionlineitems,wherethehedgeditemandthecumulativefairvaluechangesarerecorded,include:“A”representshedgingof” –Loanspresentedintheline“Financial assets at amortised cost, of which: Loans and advances to customers”, –Purchasedbondspresentedintheline“Financial assets at fair value through other comprehensive income”, –Money-marketstradespresentedintheline“Financial liabilities at amortised cost, of which: Deposits from banks”and –Issuedbondspresentedintheline“Financial liabilities at amortised cost, of which: Debt securities issued”.“B”representshedgingofcurrentsaccountspresentedintheline“Financial liabilities at amortised cost, of which: Deposits from customers”.

ThetablebelowsetsouttheoutcomeoftheGroup’shedgingstrategy,inparticular,tochangesinthefairvalueofthehedgeditemsandhedginginstrumentsinthecurrentyearandthecomparativeyear,usedasthebasisforrecognisingineffectiveness:

31 Dec 2019 Gains/(losses) attributable Hedge to the hedged risk ineffectiveness Hedged Hedging items instrumentsFair Value Hedge Micro fair value hedges Interestraterisk 282 (292) (10)Portfolio fair value hedges Interestraterisk (489) 489 –

31 Dec 2018 Gains/(losses) attributable Hedge to the hedged risk ineffectiveness Hedged Hedging items instrumentsFair Value Hedge Micro fair value hedges Interestraterisk (88) 88 –Portfolio fair value hedges Interestraterisk (608) 610 2


Cash Flow HedgingTheGroupusesthecashflowhedgingtoeliminateinterestrateriskonanportfoliobasis.Hedgeditemsarefutureforecastedtransactionsintheformofinterestincomeandexpenseswhichissensitivetochangesinmarketinterestrates.Futureforecastedtransactionsarisefromconcludedcontractsandfutureforecastingtransactionsestablishedonthebasisofportfolioreplicationmodels.Thehedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).

TheeffectivenessofacashflowhedgeisdeterminedinaccordancewithUniCreditGroupstandards,basedonanapprovedmethodology.First,thenominalvalues(dividedintoassetsandliabilities)ofexternaltradesbycurrencyareidentified,forwhichtheinterestcashflow(establishedonthebasisofthere-financing–the“funding”rate)maybeconsideredvariable(hedgedcashflows).Secondly,forthesesamecurrenciesthenominalinterestcashflowsofvariablehedginginstrumentpartsareidentifiedandaremonitoredonanetbasis(ienetcashin/outflows).

TheGroupmonitorswhethertheabsolutevalueoffuturevariableinterestcashflowsfromhedgeddealsforspecifictimeperiodsexceedstheabsolutevalue(havingtheoppositesign,plusorminus)ofnetvariablecashflowsfromhedgingderivatives.

Thetimeperiodsaredefinedasfollows:upto2yearsbymonths,subsequentlybyindividualyears,10-15years,andmorethan15years.Thehedgeisjudgedeffectiveiftheaggregatevolumeofvariableinterestcashflowsfromhedgeddealsisgreaterthanthenetvariableinterestcashflowsfromhedgeddeals(designatedwithanopposite–positive/negativesign)ineachofthetimeperiods,measuredseparatelyforeachmonitoredcurrency.

ThetablebelowsetsouttheGroup’sfinancialassetsandfinancialliabilitiesdesignatedashedgeditemsincontinuingcashflowhedgerelationshipsandtheoutcomeoftheGroup’shedgingstrategy:

Cash flow hedge reserve Changes in fair value of hedging instruments used for measuring hedge ineffectiveness in total Effective Hedge portion ineffectiveness Continuing Discontinued recognised recognised hedges hedges inOCI intheincome statementinnet tradingincome31 Dec 2019Cash Flow Hedge Portfolio cash flow hedges Interestraterisk–see“A”below (1196) 212 (1238) (1238) –

31 Dec 2018Cash Flow Hedge Portfolio cash flow hedges Interestraterisk–see“A”below (123) 376 (418) (418) –

ThecorrespondingConsolidatedStatementofFinancialPositionlineitems,wherethehedgeditemandthecumulativefairvaluechangesarerecorded,include:“A”compriseshedgingof: –Loanspresentedintheline“Financial assets at amortised cost, of which: Loans and advances to customers” andline “Financial assets

at amortised cost, of which: Loans and advances to banks”, –Purchasedfloatbondspresentedintheline“Financial assets at fair value through other comprehensive income”, –Depositspresentedintheline“Financial liabilities at amortised cost, of which: Deposits from customers”andline“Financial liabilities

at amortised cost, of which: Deposits from banks”and –Issuedbondspresentedintheline“Financial liabilities at amortised cost, of which: Debt securities issued”.

ThematurityprofileofhedginginstrumentsisincludedinsectionV.OtherNotes,point33.Contingentliabilities,contingentassetsandfinancialderivatives.


Currency RiskAssetsandliabilitiesdenominatedinforeigncurrencies,includingoff-balancesheetexposures,comprisetheGroup’sexposuretocurrencyrisks.Bothrealisedandunrealisedforeignexchangegainsandlossesarereporteddirectlyintheincomestatement.

TheGrouphasestablishedasystemofcurrencyrisklimitsbasedonitsnetcurrencyexposureinindividualcurrencies.

Thefollowingtableshowsthestructureofassetsandliabilitiesbycurrency:

CZK EUR USD CHF Other TotalAt 31 Dec 2019 Cashandcashbalances 2168 2233 115 22 96 4634Financialassetsatfairvaluethroughprofitorloss,of which: 11070 628 487 – – 12185 Heldfortrading 11070 628 – – – 11698 Mandatorilyatfairvalue – – 487 – – 487Financialassetsatfairvaluethroughothercomprehensiveincome 11527 11654 – – – 23181Financialassetsatamortisedcost 390966 232348 2026 21 1374 626735of which: Loansandadvancestobanks 184316 1329 200 13 117 185975 Loansandadvancestocustomers 206650 231019 1826 8 1257 440760Positivefairvalueofhedgingderivatives 7198 – – – – 7198Equityinvestments 372 – – – – 372Property,equipmentandrightofuseassets 4235 2171 – – – 6406Investmentproperty 371 – – – – 371Intangibleassets 1914 431 – – – 2345Taxreceivables 263 742 – – – 1005Non-currentassetsheldforsale – 31 – – – 31Otherassets 1230 820 74 – 6 2130Totalassets 431314 251058 2702 43 1476 686593 Financialliabilitiesatfairvaluethroughprofitorloss,of which: Heldfortrading 11535 2 – – – 11537Financialliabilitiesatamortisedcostof which: 287236 269704 15828 637 3222 576627 Depositsfrombanks 7093 131629 2367 – 3 141092 Depositsfromcustomers 270426 127210 13461 637 3219 414953 Debtsecuritiesissued 9717 10865 – – – 20582Negativefairvalueofhedgingderivatives 7624 – – – – 7624Changesinfairvalueoftheportfolioofhedgedinstruments 672 424 – – – 1096Taxliabilities 1272 209 – – – 1481Otherliabilities 4917 3523 209 5 79 8733Provisionsforrisksandcharges 386 403 62 9 22 882Equity 62264 16266 170 1 (88) 78613Totalliabilitiesandequity 375906 290531 16269 652 3235 686593Gap 55408 (39473) (13567) (609) (1759) –


CZK EUR USD CHF Other TotalAt 31 Dec 2018 Cashandcashbalances 2382 2162 111 26 161 4842Financialassetsatfairvaluethroughprofitorloss,of which: 8197 1477 346 – – 10020 Heldfortrading 8197 1477 – – – 9674 Mandatorilyatfairvalue – – 346 – – 346Financialassetsatfairvaluethroughothercomprehensiveincome 11555 17498 135 – – 29188Financialassetsatamortisedcost 399598 208281 2059 16 2147 612101of which: Loansandadvancestobanks 196117 3489 315 5 139 200065 Loansandadvancestocustomers 203481 204792 1744 11 2008 412036Positivefairvalueofhedgingderivatives 5636 – – – – 5636Equityinvestments 332 – – – – 332Propertyandequipment 3082 1667 – – – 4749Intangibleassets 1833 346 – – – 2179Taxreceivables 161 728 – – – 889Non-currentassetsheldforsale – – – – – –Otherassets 877 710 84 2 6 1679Totalassets 433653 232869 2735 44 2314 671615 Financialliabilitiesatfairvaluethroughprofitorloss,of which: Heldfortrading 8714 – – – – 8714Financialliabilitiesatamortisedcostof which: 259319 294597 12221 589 3010 569736 Depositsfrombanks 19076 153044 29 – 2 172151 Depositsfromcustomers 228864 130092 12192 589 3008 374745 Debtsecuritiesissued 11379 11461 – – – 22840Negativefairvalueofhedgingderivatives 5657 – – – – 5657Changesinfairvalueoftheportfolioofhedgedinstruments 500 108 – – – 608Taxliabilities 1070 38 – – – 1108Otherliabilities 4579 3597 370 5 182 8733Provisionsforrisksandcharges 531 688 81 – 20 1320Equity 60593 15338 (124) – (68) 75739Totalliabilitiesandequity 340963 314366 12548 594 3144 671615Gap 92690 (81497) (9813) (550) (830) –


Equity RiskEquityriskistheriskofmovementinthepricesofequityinstrumentsheldintheGroup’sportfolioandoffinancialderivativesderivedfromtheseinstruments.Themainsourceofthisriskistradinginequityinstruments,althoughequityriskalsoarisesasaresultoftheGroup’snon-tradingactivities.Therisksassociatedwithequityinstrumentsaremanagedusingtradinglimits.Themethodsusedtomanagetheserisksaredescribedabove.

Liquidity RiskLiquidityriskarisesduetothewaytheGroup’sfinancesitsactivitiesandmanagesitspositions.ItincludestherisktheGroupwouldbeunabletofinanceitsassetsusinginstrumentswithappropriatematurityandtheriskthattheGroupwouldbeunabletodisposeofitsassetsforanappropriatepricewithinthenecessarytimeperiod.

TheGrouphasaccesstodiversifiedsourcesoffunds,whichcomprisedepositsandothersavings,securitiesissued,loanstaken

(includingsubordinatedloans)anditsownequitycapital.ThisdiversificationmakestheGroupflexibleandlimitsitsdependencyonasinglefundingsource.TheGroupregularlyevaluatestheliquidityrisk,inparticularbymonitoringchangesinthestructureoffundingandcomparingthesechangeswiththeGroup’sliquidityriskmanagementstrategy,whichisapprovedbytheBoardofDirectors.Aspartofitsliquidityriskmanagementstrategy,theGroupholdsaproportionofitsassetsinhighlyliquidfunds,suchasstatetreasurybillsandsimilarbonds.

LiquidityriskisevaluatedregularlybytheGroupbyanalysingofdifferencesbetweentheresidualmaturityofassetsandliabilitiesacrosstimebuckets.Twoapproachesareused:short-termandlong-term(structural).Intheshort-termapproach,theGroupdailymonitorsandindetailthedifferencebetweenliquidityinflowsandoutflows.Limitsaresetforcumulativeinflowsandoutflowswithanoutlookofseveralweeks.Iflimitsarebreached,theGrouptakesactiontoreducetheliquidityrisk.Inthelong-term(structural)

perspective,theGroupmonitorsthedifferencebetweenthematurityofassetsandliabilitiesforperiodslongerthanoneyear.TheGroupsetslimitsandappropriateactionistakeniftheyarebreached(egbyacquiringlong-termsourcesofrefinancing).

TheGrouphasacontingencyplanintheeventofaliquiditycrisis.Thisplandefinestheroles,responsibilitiesandprocessofcrisismanagement.Italsodefinesthepossiblemeasureswhichshouldbeconsideredintheeventofanemergencysituation.

Stresstestsofshort-termliquidityareperformedbytheGrouponaweeklybasis.ThestresstestsverifytheGroup’sabilitytoovercomeextremesituations,suchassystemicinterruptionoftheinter-bankmoneymarket,adecreaseintheGroup’screditrating,ITsystembreakdowns,andreputationrisktotheGroup.Thestressscenarios’resultsarepresentedtotheALCO.


Thefollowingtableshowsundiscountedcashflowsofassetsandliabilities,issuedguaranteesandprovidedloanfacilities:

Carrying Net cash Up to 3 months 1-5 year Over Unspecified. amount flow 3 months – 1 year 5 years At 31 Dec 2019 Cashandcashbalances 4634 4634 4634 – – – –Financialassetsatfairvaluethroughprofitorloss,of which: 12185 12735 938 1949 5071 4773 4 –heldfortrading 11698 12248 938 1949 5071 4286 4 –mandatorilyatfairvalue 487 487 – – – 487 –Financialassetsatfairvaluethroughothercomprehensiveincome 23181 25471 139 2290 19870 3172 –Financialassetsatamortisedcostof which: 626735 663993 234598 66442 188653 169586 4714 Loansandadvancestobanks 185975 190582 184647 1861 3238 823 13 Loansandadvancestocustomers 440760 473411 49951 64581 185415 168763 4701Positivefairvalueofhedgingderivatives 7198 7198 93 457 2296 4352 0Equityinvestments 372 372 – – – – 372Property,equipmentandrightofuseassets 6406 6406 – – – – 6406Investmentproperty 371 371 – – – – 371Intangibleassets 2345 2345 – – – – 2345Taxreceivables 1005 1005 (66) – 1071 – –Non-currentassetsheldforsale 31 31 – 31 – – –Otherassets 2130 2130 1395 735 – – – Financialliabilitiesatfairvaluethroughprofitorloss,of which: Heldfortrading 11537 11537 4153 1525 3604 2252 3Financialliabilitiesatamortisedcostof which: 576627 578512 516936 33432 20745 7235 164Depositsfrombanks 141092 141113 119915 6427 12877 1733 161Depositsfromcustomers,of which: 414953 415255 393174 17261 3827 990 3 Leaseliabilities 2047 2150 100 319 1229 502 – Otherthanleaseliabilities 412906 413105 393074 16942 2598 488 3Debtsecuritiesissued 20582 22247 82 10361 6321 5483 –Negativefairvalueofhedgingderivatives 7624 7624 155 854 2346 4269 –Changesinfairvalueoftheportfolioofhedgedinstruments 1096 1096 1096 – – – –Taxliabilities 1481 1481 570 911 – – –Otherliabilities 8733 8733 6960 1772 – 1 –Provisionsforrisksandcharges 882 882 – – – – 882Equity 78613 78613 – – – – 78613 Undrawnloanfacilities 130357 130357 6169 27829 25169 66489 4701Bankguarantees 45283 45283 4801 10596 24741 5142 3

Carrying Net cash Up to 3 months 1-5 year Over Unspecified. amount flow 3 months – 1 year 5 years At 31 Dec 2018 Cashandcashbalances 4842 4842 4842 – – – –Financialassetsatfairvaluethroughprofitorloss,of which: 10020 10343 1416 1493 5045 2389 – –heldfortrading 9674 9997 1416 1493 5045 2043 – –mandatorilyatfairvalue 346 346 – – – 346 –Financialassetsatfairvaluethroughothercomprehensiveincome 29188 33046 134 2496 24888 5528 –Financialassetsatamortisedcostof which: 612101 638264 252926 58719 179547 141515 5557 Loansandadvancestobanks 200065 200132 199488 462 – – 182 Loansandadvancestocustomers 412036 438132 53438 58257 179547 141515 5375Positivefairvalueofhedgingderivatives 5636 5636 75 212 2822 2527 –Equityinvestments 332 332 – – – – 332Propertyandequipment 4749 4749 – – – – 4749Intangibleassets 2179 2179 – – – – 2179Taxreceivables 889 889 17 – 872 – –Non-currentassetsheldforsale – – – – – – –Otherassets 1679 1679 1373 306 – – – Financialliabilitiesatfairvaluethroughprofitorloss,of which: Heldfortrading 8714 8714 2979 966 3773 996 –Financialliabilitiesatamortisedcostof which: 569736 572561 456688 67531 39491 8851 – Depositsfrombanks 172151 172159 87081 59806 22894 2378 – Depositsfromcustomers 374745 375557 368992 5195 1011 359 –Debtsecuritiesissued 22840 24845 615 2530 15586 6114 –Negativefairvalueofhedgingderivatives 5657 5657 128 477 2427 2625 –Changesinfairvalueoftheportfolioofhedgedinstruments 608 608 608 – – – –Taxliabilities 1108 1108 – 1108 – – –Otherliabilities 8733 8733 6813 1920 – – –Provisionsforrisksandcharges 1320 1320 – – – – 1320Equity 75739 75739 – – – – 75739 Undrawnloanfacilities 119957 119957 6134 30235 22359 54856 6373Bankguarantees 41136 41136 4950 10392 20778 5016 –


(d) Operational RiskOperationalriskistheriskoflossduetodeficienciesorfailuresofinternalprocesses,peopleandsystemsorexternalevents.Thisdefinitionincludeslegalrisk,however,itdoesnotincludestrategicorreputationrisk.Legalriskincludes,interalia,theriskoffines,sanctionsorpunitivedamagesresultingfromsupervisionmeasuresandprivatesettlement.

TheBank’sorganisationalstructureanditsinternalrulesfullyrespectthesegregationofincompatibledutiestopreventconflictofinterests.Internalrulesunambiguouslydefinetheobligationsandcompetenciesofemployees,includingmanagement,andregulatetheworkingprocessesandcontrolactivities.TheOperationalRiskManagementCommitteeisthemaincontrolanddecisionbodyregardingoperationalrisk.AllmembersoftheBoardofDirectorsarepermanentmembersofthecommittee.TheOperationalRisk

DepartmentisanindependentbodyreportingdirectlytoamemberoftheBoardofDirectorsinchargeofriskmanagement.TheOperationalRiskDepartmentisauthorisedtosecureunifiedandcoordinatedoperationalriskmanagementinaccordancewiththeapplicableregulationsandthestandardsoftheparentcompany.

Operationalriskmanagementandmonitoringisperformedbyauthorisedemployeesofindividualdepartments.TheInternalAuditDepartmentidentifiesextraordinarytrendsandbreachofornon-compliancewithdirectivesandassessesthecontrolandmanagementsystem’sfunctionality.

TheGrouphascontinueddevelopingandsettingupitscomprehensivesystemfortheidentification,monitoringandmanagementofoperationalrisk.Inlinewiththe2019OperationalRiskManagementStrategy,theGroupdefineditsprioritieswith

respecttomitigatingoperationalriskexposurethatareconsistentwiththeriskprofileandriskappetiteoftheGroupandtheBank.TheoperationalriskappetiteistheoperationalrisklevelacceptabletotheBankandismeasuredusingELOR(ExpectedLossonRevenue),whichistheproportionofanticipatedlossesarisingfromoperationalrisk(estimatebasedonhistoricaldata)toincome(budgetedincomeonaquarterlybasis).SettingtheELORlimitanditsmonitoringwasperformedinlinewiththeGroup’spolicies.

Toensureeffectivecollectionofoperationalriskeventsanddata,theBankusesanon-lineinformationsystemdevelopedbyUniCreditGroup.ThesystemcomplieswiththerequirementsforcapitaladequacymanagementpursuanttoBaselIII.Thedataacquiredthroughthesystemistakenintoaccountwhencalculatingthecapitalrequirementandwhenmanagingoperationalrisk.Itservesasthebasisfordesigningprocessesthatreducethenumberofparticulareventsandmitigatetheconsequences(egwhenpreparingprocessmitigationmeasuresortheGroup’sstrategicinsuranceplan).Thedataisalsousedforreviewingthereliabilityofproposedmeasuresforoperationalriskmitigation.ThedataiscollectedonacontinuousbasisincooperationwithindividualdepartmentsoftheBank(allsignificanteventsarereportedandresolvedimmediately).Basedonthecollecteddata,aquarterlyconsolidatedreportisprepared,whichispresentedtotheOperationalRiskManagementCommitteeanddistributedwithintheBank.TheBoardofDirectors,theInternalAuditDepartmentandtheparentcompanyareinformedaboutthemostsignificantcasesofoperationalriskonaweeklybasis,orimmediatelyifnecessary.Thedataisregularlyreconciledwiththeaccountingrecordsandothersourcesinordertoensuredatacompletenessandaccuracy.

In2019,theGroupanalysedthescenarios,andconfiguredandanalysedtheriskindicators.Anotherimportantelementoftheoperationalriskmanagementsystemismanagingthecontinuityofoperations(emergencyplanning,crisismanagement).TheBankhasupdatedandtestedtherecoveryplans(forcrisissituations)inordertoensuretheirfullusefulnessandeffectivenessundercurrentconditions.Inaddition,theOperationalRiskDepartmentenhancesoverallawarenessofoperationalriskwithintheGroupandtrainstheGroup’sstaffviatrainingsessionsande-learningcourses.

Basedontheconsentobtainedfromtheregulatorybody,theGroupcalculatesthecapitalrequirementforoperationalriskundertheadvancedmeasurementapproach(AMA).Underthisapproach,theUniCreditGroupmodelbasedoninternalandexternaldata,theresultsofscenarioanalysesandriskindicatordataisused.

(e) Capital ManagementManagementoftheGroupmonitorsthedevelopmentoftheGroup’scapitaladequacyonaconsolidatedbasisanditscapitalposition.Theregulatorofthebankingmarket,theCzechNationalBank,establishedrulesforthecalculationofcapitalrequirementsandmonitorstheirdevelopment.Since1January2014,theGrouphasmettherequirementsofBaselIII(Regulation(EU)No.575/2013of26June2013onprudentialrequirementsforcreditinstitutionsandinvestmentfirms)thatwasimplementedbytheCzechNationalBankthroughDecreeNo.163/2004Coll.ontheperformanceoftheactivityofbanks,creditunionsandinvestmentfirms.TheBaselIIIruleswereestablishedinresponsetothefinancialcrisisandintroducerequirementsforincreasedcapitalquality,requirementforanincreasedcoverageofrisks,theminimumstandardforliquiditymanagement,rulesfortheleverageratioandimproveriskmanagementandcorporategovernance.

TheBank’sregulatorycapitalconsistsofthefollowing:•CommonEquityTier1(CET1)capitalwhichcomprisesregistered

capital,sharepremium,reservefunds,retainedearnings,accumulatedothercomprehensiveincomefromrevaluationofavailable-for-salesecurities,post-taxprofitfortheperiodifauditedatthetimeofreporting;minusintangibleassetsandgapsinthecoverageofanticipatedlossesthroughadjustmentsforcreditriskusingtheinternalratingbasedapproach;

•Tier1(T1)capitalcreatingCET1;and•Tier2(T2)capitalwhichistheexcessinthecoverageof

anticipatedcreditlosseswhenusingtheinternalratingbasedapproach.

TheGroupcomplieswiththedefinedminimumrequirementsofBaselIIIrulesforcapitaladequacy,includingcapitalbuffers.


StatementofcapitalfortheGroup’scapitaladequacycalculationonaconsolidatedbasisasreportedtotheregulatorinaccordancewithapplicablerulesasof31December2019andasof31December2018:

2019 2018Tier1capital 71100 66369Totalcapital 71106 67784Exposuretocreditrisk 326971 312713Exposuretomarketrisk 5076 5053Exposuretooperationalrisk 25546 23006Total risk exposure 357 593 340 772Capital adequacy ratio for the year (Tier 1 ratio) 19,81 % 19,48 %Capital adequacy ratio for the year (Total capital ratio) 19,81 % 19,89 %

36. Related party transactionsEntitiesaredeemedtoberelatedpartiesintheeventthatoneentityisabletocontroltheactivitiesofanother,orisabletoexercisesignificantinfluenceovertheotherentity’sfinancialoroperationalpolicies.Aspartofitsordinarybusiness,theGroupentersintotransactionswithrelatedparties.Thesetransactionsprincipallycompriseloans,depositsandothertypesoftransactionsandareconcludedunderarm’slengthconditionsandatarm’slengthpricesinordertopreventanydetrimenttoanyparty.

RelatedpartiesprincipallyincludetheBank’sparentcompany,Bank’sfellowsubsidiariesandothercompaniescontrolledbyUniCreditGrouporwhereUniCreditGroupexercisessignificantinfluencethe,theBank’ssubsidiariesandaffiliates,membersoftheBoardofDirectorsandothermembersoftheBank’smanagement.

UniCreditGrouphaspreparedanequityprogrammefortheemployeesofUniCreditGroupunderwhichtheemployeesmaypurchasesharesofUniCreditGroupparentatadiscountedprice.TheDiscountedemployeesharesmaynotbesoldduringthevestingperiod.Vestedsharesareforfeitediftherespectiveemployee’semploymentbytheUniCreditGroupends.TheprovideddiscountisallocatedtoindividualUniCreditGroupcompaniesinvolvedintheprogrammeandthesecompaniesrecogniseanddeferthediscountoverthevestingperiod.

(a) Transactions with the parent company

31 Dec 2019 31 Dec 2018Assets Loansandadvancestobanks 928 2474 Financialassetsheldfortrading 1836 598 Financialassetsatfairvaluethroughothercomprehensiveincome – 774 Positivefairvalueofhedgingderivatives 925 996Total 3 689 4 842 Liabilities Depositsfrombanks 118092 123403Financialliabilitiesheldfortrading 1656 312Negativefairvalueofhedgingderivatives 1417 859Total 121 165 124 574 Off-balancesheetitems Issuedguarantees 1490 963 Irrevocablecreditfacilities 311 132Total 1 801 1 095

2019 2018Interestincome 296 442Interestexpenses (193) (54) Feeandcommissionincome 1 –Feeandcommissionexpenses (1) (4) Netprofit/lossfromfinancialassetsandliabilitiesheldfortrading 201 308Netprofit/lossfromhedgingoftheriskofchangeinfairvalues (3) 1Administrativeexpenses (13) (9)Total 288 684


(b) Transactions with key management members

31 Dec 2019 31 Dec 2018Assets Loansandadvancestocustomers 114 98 of which: BoardofDirectors 17 8 Othermanagementmembers 97 90Total 114 98Liabilities Payablestocustomers 169 223 of which: BoardofDirectors 85 113 Othermanagementmembers 84 109Total 169 223Off-balancesheetitems Irrevocablecreditfacilities 3 4 of which: BoardofDirectors 1 1 Othermanagementmembers 2 3Total 3 4

(c) Transactions with other related parties

31 Dec 2019 31 Dec 2018Assets Financialassetsheldfortrading 1654 1020 of which: UniCreditBankAG 1654 1020 Loansandadvancestobanks 166 991 of which: UniCreditBankAG 1 823 UniCreditBankAustriaAG 79 95 YapiveKrediBankasiAS 54 31 UniCreditBankHungaryZrt. 16 6 AOUniCreditBank 1 20 Loansandadvancestocustomers 801 724 of which: UCTAMCzechRepublics.r.o. 398 404 UCTAMSVK,s.r.o 403 320 Positivefairvalueofhedgingderivatives 4139 1915 of which: UniCreditBankAG 4139 1915Total 6 760 4 650


31 Dec 2019 31 Dec 2018Liabilities Depositsfrombanks 3800 20626 of which: UniCreditBankAustriaAG 2973 19933 UniCreditBankAG 750 649 UniCreditBankHungaryZrt. 55 5 Depositsfromcustomers 339 501 of which: UniCreditServicesS.C.p.A. 110 80 Financialliabilitiesheldfortrading 2563 2378 of which: UniCreditBankAG 2563 2378 Negativefairvalueofhedgingderivatives 3310 1500 of which: UniCreditBankAG 3310 1500Total 10 012 25 005

31 Dec 2019 31 Dec 2018Off-balancesheetitems Issuedguarantees 2348 1240 of which: UniCreditBankAG 1853 311 UniCreditBankAustriaAG 325 623 UniCreditBankHungaryZrt. 12 19 AOUniCreditBank 53 102 Irrevocablecreditfacilities 534 287 of which: UniCreditBankAG 433 119Total 2 882 1 527


2019 2018Interestincome 109 717of which: UniCreditBankAG 2 239 UniCreditBankAustriaAG 90 442 Interestexpenses (452) (191)of which: UniCreditBankAG (175) (4) UniCreditBankAustriaAG (268) (178) Feeandcommissionincome 129 96of which: UniCreditBankAG 12 14 UniCreditBankHungaryZrt. 2 1 UniCreditBankAustriaAG 111 75 Feeandcommissionexpenses (8) (16)of which: UniCreditBankAustriaAG (4) (5) Netprofit/lossfromfinancialassetsandliabilitiesheldfortrading (303) (2452)of which: UniCreditBankAG (302) (2400) UniCreditBankAustriaAG – (52) Netprofit/lossfromhedgingagainstriskofchangesinfairvalue 50 28of which: UniCreditBankAG 50 29 Administrativeexpenses (909) (1086)of which: UniCreditServicesS.C.p.A. (900) (1090)Total (1 384) (2 904)

37. Fair value of financial assets and financial liabilities

Based on the Quality of the Input Data Used for Valuation at Fair Value

Financial assets at fair value through profit or loss

Held for trading

Level 1 Level 2 Level 3 Total31 Dec 2019 Debtsecurities 2392 – – 2392Derivatives 35 9159 112 9306Total 2 427 9 159 112 11 698 31 Dec 2018 Debtsecurities 1246 – 990 2236Derivatives 30 6067 1341 7438Total 1 276 6 067 2 331 9 674


Mandatorily at fair value

Level 1 Level 2 Level 3 Total31 Dec 2019 Shares – – 487 487Total – – 487 487

31 December 2018 Shares – – 346 346Total – – 346 346

Financial assets at fair value through other comprehensive income

Level 1 Level 2 Level 3 Total31 Dec 2019 Debtsecurities 19829 3281 65 23175Shares – – 6 6Total 19 829 3 281 71 23 181

31 Dec 2018 Debtsecurities 24889 4229 64 29182Shares – – 6 6Total 24 889 4 229 70 29 188

Positive fair value of hedging derivatives

Level 1 Level 2 Level 3 Total31 Dec 2019Fairvaluehedging – 1370 – 1370Cashflowhedging – 5828 – 5828Total – 7 198 – 7 19831 Dec 2018 Fairvaluehedging – 837 – 837Cashflowhedging – 4799 – 4799Total – 5 636 – 5 636

Financial liabilities held for trading

Level 1 Level 2 Level 3 Total31 Dec 2019 Liabilitiesfromshortsales 3010 – – 3010Derivatives – 8442 85 8527Total 3 010 8 442 85 11 537

31 Dec 2018 Liabilitiesfromshortsales 2606 – – 2606Derivatives – 4804 1304 6108Total 2 606 4 804 1 304 8 714


Negative fair value of hedging derivatives

Level 1 Level 2 Level 3 Total31 Dec 2019 Fairvaluehedging – 360 – 360Cashflowhedging – 7264 – 7264Total – 7 624 – 7 624

31 Dec 2018 Fairvaluehedging – 525 – 525Cashflowhedging – 5132 – 5132Total – 5 657 – 5 657

ThefollowingtableshowsthecarryingamountsandfairvaluesoffinancialassetsandliabilitiesthatarenotreportedatfairvaluesintheGroup’sbalancesheet(thefairvalueiscalculatedusingdiscountedfuturecashflowsundertheapplicationofarm’slengthmarketratestowhichcreditmark-upsderivedfrominternalratingcategoriesofindividualcustomersareadded):

Carrying Fair amount value Level 1 Level 2 Level 331 Dec 2019 Financial assets Loansandadvancestobanks 185975 185972 – 168194 17778Loansandadvancestocustomers 440760 437534 – 139136 298398 Financial liabilities Depositsfrombanks 141092 141569 – 125423 16146Depositsfromcustomers 414953 414960 – 1758 413202Debtsecuritiesissued 20582 20798 – 20374 424 Carrying Fair amount value Level 1 Level 2 Level 331 Dec 2018 Financial assets Loansandadvancestobanks 200065 201392 – 19 201373Loansandadvancestocustomers 412036 386988 174 144280 242534 Financial liabilities Depositsfrombanks 172151 157215 – 77164 80051Depositsfromcustomers 374745 374072 – 11432 362640Debtsecuritiesissued 22840 23194 – 23121 73

ThefollowingtableshowstransfersoffinancialassetsandliabilitiesatfairvaluebetweenLevels1and2.

FinancialassetsatfairvaluebasedonLevels1and2:

Financial assets at fair value through Financial Hedging Total profit or loss assets at fair derivatives Held for Other than value through trading held for trading other mandatorily comprehensive at fair value income 31 Dec 2018 TransferfromLevel1toLevel2 – – – – –TransfersfromLevel2toLevel1 13 – – – 13


Fortheyearended31December2019,nofinancialassetsreportedatfairvalueweretransferredbetweenLevels1and2.

Fortheyearsended31December2019and31December2018,nofinancialliabilitiesreportedatfairvalueweretransferredbetweenLevels1and2.

ThefollowingtablesshowtransfersoffinancialassetsreportedatfairvaluefromandtoLevel3.

Financial assets at fair value through Financial Hedging Property Total profit or loss assets at fair derivatives measured Held for Other than value through at fair value trading held for trading other mandatorily comprehensive at fair value income ImpactofIFRS9 – 254 (254) – – –Impactofimplementationofinvestmentpropertyrevaluation – – – – 112 –Opening balance at 1 Jan 2018 – 254 6 – 792 1 052Revaluationgainsandlosses Intheincomestatement – 73 – – (146) (73)Inothercomprehensiveincome – – – – – –Purchases 2290 – – – – 2290Sales/maturity – – – – – –Transfersfrom/tootherlevels 77 – 65 – – 142Other (36) 19 (1) – – (18)Closing balance at 31 Dec 2018 2 331 346 70 – 646 3 393 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: (73)Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend (73)

Financial assets at fair value through Financial Hedging Property Total profit or loss assets at fair derivatives measured Held for Other than value through at fair value trading held for trading other mandatorily comprehensive at fair value income Opening balance at 1 Jan 2019 2 331 346 70 – 646 3 393Revaluationgainsandlosses Intheincomestatement – 139 – – (24) 115Inothercomprehensiveincome – – – – – –Purchases 43 – – – – 43Sales/maturity (2178) – – – (251) (2429)Transfersfrom/tootherlevels (122) – – – – (122)Other 38 2 1 – 849 890Closing balance at 31 Dec 2019 112 487 71 – 1 220 1 890 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: 115Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend 115


Thefollowingtablecontainsthetransfersoffinancialliabilitiesatfairvaluetoandfromlevel3.

Financial liabilities at fair value through Hedging profit or loss held for trading derivatives TotalOpening balance at 1 Jan 2018 – – –Revaluationgainsandlosses Intheincomestatement – – –Inothercomprehensiveincome – – –Issue 1291 – 1291Sales/maturity – – –Transfersfrom/tootherlevels 14 – 14Other (1) – (1)Closing balance at 31 Dec 2018 1 304 – 1 304 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: –Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend –

Financial liabilities at fair value through Hedging profit or loss held for trading derivatives TotalOpening balance at 1 Jan 2019 1 304 – 1 304Revaluationgainsandlosses Intheincomestatement – – –Inothercomprehensiveincome – – –Issue 30 – 30Sales/maturity (1173) – (1173)Transfersfrom/tootherlevels (75) – (75)Other (1) – (1)Closing balance at 31 Dec 2019 85 – 85 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: –Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend –

38. Offseting of financial assets and financial liabilities

TheGroupdoesnotoffsetfinancialassetsandfinancialliabilities.

ThebelowtableshowsassetswhicharesubjecttonettingagreementsaccordingtoCreditriskmanagementarrangementsincludedintheDerivativeFrameworkagreementssuchasISDAorsimilar.Theassetsaresubjecttonettingonsettlement(performancenetting)andonpositioncloseout.

Gross Gross Net Potential amounts available reported offset reported for offset Net financial financial financial Financial Obtained amount assets liabilities assets instruments cash collateral 31Dec2019 Derivatives 14361 – 14361 12079 – 2282 31Dec2018 Derivatives 10569 – 10569 8479 – 2090


Financialliabilitiesthataresubjecttooffset,recoverableframeworkcontractsforoffsetandsimilararrangements:

Gross Gross Net Potential amounts available reported offset reported for offset Net fi nancial fi nancial fi nancial Financial Provided amount liabilities assets liabilities instruments cash collateral 31Dec2019 Derivatives 13348 – 13348 12079 – 1269 31Dec2018 Derivatives 10480 – 10480 8479 – 2001

39. Subsequent Events

TheGroup’smanagementisnotawareofanypostbalancesheeteventsthatwouldrequireadjustmenttotheGroup’sfinancialstatements.

ThefinancialstatementswereapprovedbytheBoardofDirectorsoftheBankandauthorisedforissueon4February2020.

UniCreditBank •2019AnnualReport 115

Mgr.JakubDusílek,MBAChairmanoftheBoard

ofDirectors

LjubišaTešićMemberoftheBoard

ofDirectors

Ing.JiříHouška Mgr.MichaelaMrštíková

ThefinancialstatementsweresignedonbehalfoftheBoardofDirectorsby:

Individualinchargeoftheaccountingrecords

Individualinchargeofthefinancialstatements

Transform and MaximiseProductivity.

Our customer focus drives the right process optimisation, leading to new ways of working. We will continue to maximise productivity across the value chain, improving processes and products while minimising operational risk.A great example of our transformation is the paperless bank, currently being rolled out across our networks.


Separate financial statements

Statementofcomprehensiveincomefortheyearended31December2019

2019 2018 Note MCZK MCZKInterestincome,ofwhich: 17138 14173 –interestincomecalculatedusingtheeffectiveinterestmethod 16813 13639Interestexpenses (3885) (1089)Net interest income (1) 13 253 13 084 Feeandcommissionincome 4877 4582Feeandcommissionexpenses (1277) (1124)Net fee and commission income (2) 3 600 3 458Dividendincome (3) 455 703Netincome/(loss)fromtrading (4) 1888 1765Netincome/(loss)fromhedgingagainstriskofchangesinfairvalue (5) (12) 2Netincome/(loss)fromthesaleorrepurchaseof: (6) 471 236 Financialassetsatamortisedcost 136 96 Financialassetsatfairvaluethroughothercomprehensiveincome 335 142 Financialliabilities – (2)Netincome/(loss)fromfinancialassets/liabilitiesatfairvaluethroughprofitorloss,ofwhich: (7) 139 73 Mandatorilyatfairvalue 139 73Operating income 19 794 19 321Impairmentlosseson: (8) (1128) (503) Financialassetsatamortisedcost (1129) (512) Financialassetsatfairvaluethroughothercomprehensiveincome 1 9Administrativeexpenses (9) (6433) (6961)Netprovisionsforrisksandcharges: (27) 308 (551) Loancommitmentsandfinancialguaranteesgiven 371 (499) Othernetprovisions (63) (52)Depreciationandimpairmentofproperty,equipmentandrightofuseassets (18) (473) (243)Amortisationandimpairmentofintangibleassets (19) (491) (258)Otheroperatingincomeandexpenses (10) 18 61Operating expenses (7 071) (7 952)Netincome/(loss)onpropertymeasuredatfairvalue (18) (1) n/aProfit/(loss)fromthesaleofnon-financialassets 1 –Profit before income tax 11 595 10 866Incometax (28) (2162) (1943)Profit after tax 9 433 8 923 Items that cannot be subsequently reclassified to profit or loss Reservefromrevaluationofpropertymeasuredatfairvalue,ofwhich: 261 n/a Changeinfairvalue 329 n/a Deferredtax (68) n/aItems that can be subsequently reclassified to profit or loss Reservefromrevaluationofhedginginstrumentsincashflowhedges,ofwhich: (1000) (339) Changeinfairvalue (1238) (418) Revaluationreclassifiedtoprofitorloss – – Deferredtax 238 79Reservefromrevaluationoffinancialassetsatfairvaluethroughothercomprehensiveincome,ofwhich: (264) (697) Changeinfairvalue (53) (733) Revaluationreclassifiedtoprofitorloss (224) (97) Deferredtax 13 133Foreignexchangerategainsfromtheconsolidationofaforeignbranch (171) 101Other comprehensive income, net of tax (1 174) (935)Total comprehensive income, net of tax 8 259 7 988



Statementoffinancialpositionasof31December2019

2019 2018 Note MCZK MCZKAssets Cashandcashbalances (11) 4633 4841Financialassetsatfairvaluethroughprofitorloss,ofwhich: (12) 12185 10024 Heldfortrading 11698 9678 Mandatorilyatfairvalue 487 346Financialassetsatfairvaluethroughothercomprehensiveincome (13) 23181 29188Financialassetsatamortisedcost,ofwhich: 613747 601624 Loansandadvancestobanks (14) 185944 200035 Loansandadvancestocustomers (15) 427803 401589Positivefairvalueofhedgingderivatives (16) 7199 5636Equityinvestments (17) 3979 3979Property,equipmentandrightofuseassets (18) 2955 828Intangibleassets (19) 2097 1950Taxreceivables,ofwhich: (28) 853 703 Currentincometax – 17 Deferredtax 853 686Non-currentassetsheldforsale 31 –Otherassets (20) 1692 1367Total assets 672 552 660 140 Liabilities Financialliabilitiesatfairvaluethroughprofitorloss,ofwhich: 11537 8714 Heldfortrading (21) 11537 8714Financialliabilitiesatamortisedcost,ofwhich: 567206 561744 Depositsfrombanks (22) 132031 164072 Depositsfromcustomers (23) 415017 374904 Debtsecuritiesissued (24) 20158 22768Negativefairvalueofhedgingderivatives (25) 7624 5657Changesinfairvalueoftheportfolioofhedgedinstruments 1096 608Taxliabilities,ofwhich: (28) 570 386 Currentincometax 570 386 Deferredtax – –Otherliabilities (26) 7884 8172Provisionsforrisksandcharges (27) 869 1277Total liabilities 596 786 586 558 Equity Issuedcapital (29) 8755 8755Sharepremium (29) 3495 3495Reservefundsfromrevaluation (261) 913Retainedearningsandreservefunds (31) 54344 51496Profitfortheperiod 9433 8923Total shareholder‘s equity 75 766 73 582 Total liabilities and shareholder‘s equity 672 552 660 140



Statementofcashflowsfortheyearended31December2019

2019 2018 MCZK MCZKProfit after tax 9 433 8 923Adjustmentsfornon-monetaryitems: Impairmentlossesof: 1128 503 Financialassetsatamortisedcosts 1129 512 Financialassetsatfairvaluethroughothercomprehensiveincome (1) (9)Revaluationoffinancialinstruments 637 (1216)Netprovisionsforrisksandcharges: (303) 550 Loancommitmentsandfinancialguaranteesgiven (371) 498 Othernetprovisions 68 52Depreciationandimpairmentofproperty,equipmentandrightofuseassets 473 243Amortisationandimpairmentofintangibleassets 491 258Netincome/(loss)fromthesaleorrepurchaseof: 113 113 Financialassetsatamortisedcost – – Financialassetsatfairvaluethroughothercomprehensiveincome 113 113 Financialliabilities – –Profit/(loss)fromthesaleofnon-financialassets (1) –Taxes 2162 1943Unrealisedforeigncurrencygains/(losses) (171) 101Othernon-monetaryadjustments (3448) (1360)Operating profit before change in operating assets and liabilities 10 514 9 056 Financialassetsatfairvaluethroughprofitorloss,ofwhich: (2848) 413 Heldfortrading (2846) 432 Mandatorilyatfairvalue (2) (19)Financialassetsatamortisedcost,ofwhich: (12002) (17363) Loansandadvancestobanks 14092 10085 Loansandadvancestocustomers (26094) (27448)Otherassets 125 853Financialliabilitiesatfairvaluethroughprofitorloss,ofwhich: 2733 (170) HeldforTrading 2733 (170)Financialliabilitiesatamortisedcost,ofwhich: 7918 13854 Depositsfrombanks (32109) (204) Depositsfromcustomers 40027 14058Otherliabilities (55) (1798)Incometaxpaid (1953) (1728)Net cash flows from operating activities 4 432 4 119 (Acquisition)/saleandmaturityoffinancialassetsatfairvaluethroughothercomprehensiveincomeandotherfinancialinstruments 5268 16853Gainsfromthesaleofpropertyandequipmentandintangibleassets 1 1(Acquisition)ofpropertyandequipmentandintangibleassets (865) (1016)Dividendsreceived 5 1705Net cash flows from investment activities 4 409 17 543Dividendspaid (6070) (3732)Financialliabilitiesatamortisedcost–debtsecuritiesissuedandrepaid (2612) (17096)(Payment)ofLeaseliabilities (367) n/aNet cash flows from financial activities (9 049) (20 828) Cash and cash balances at the beginning of the period 4 841 4 007Cash and cash balances at the end of the period 4 633 4 841 Interestreceived 17233 13442Interestpaid (3660) (662)



Statementofchangesinequityfortheyearended31December2019


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Yearended31December2019

I. IntroductionGeneral InformationUniCreditBankCzechRepublicandSlovakia,a.s.(hereinafterthe“Bank”)wasestablishedthroughthecross-bordermergerofUniCreditBankCzechRepublic,a.s.andUniCreditBankSlovakiaa.s.withUniCreditBankCzechRepublic,a.s.beingthesuccessorcompany.Theeffectivemergerdatewas1July2013.UniCreditBankCzechRepublic,a.s.wasestablishedthroughthemergerbyamalgamationofHVBBankCzechRepublica.s.andŽivnostenskábanka,a.s.asof1October2006.Allrightsandobligationsofthedissolvedcompany,Živnostenskábanka,a.s.,weretransferredtothesuccessor,HVBBankCzechRepublica.s.In2008,theBankassumedthenetassetsofHVBRealityCZ,s.r.o.In2009,theBankpreparedaprojectofitsmergerwithUniCreditFactoring,s.r.o.UniCreditFactoring,s.r.o.wasthedissolvedcompanyandtheBankwasthesuccessorcompany.In2012,theBankpreparedaprojectofitsmergerbyamalgamationwithUniCreditCAIBCzechRepublica.s.ThiscompanywasthedissolvedcompanyandtheBankbecamethesuccessorcompany.

Changesinthebusinessnameandotherfactsrelatedtothecross-bordermergerwererecordedintheCommercialRegisterinPrague,SectionB,Insert3608on1December2013.

AspartofrestructuringinUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.AwhichistheultimateparentcompanyoftheentireUniCreditgroupholding100%oftheBank’sshares.

The Bank’s registered office:Želetavská1525/1,14092,Praha4–Michle

Followingthecompletionofthecross-bordermerger,theBankhasbeencontinuingtoperformactivitiespreviouslyundertakenbyUniCreditBankSlovakiaa.s.ontheterritoryoftheSlovakRepublicthroughitsorganisationalbranchUniCreditBankCzechRepublicandSlovakia,a.s.,pobočkazahraničnejbanky(branchofaforeignbank).

Thecross-bordermergerwasmadewiththeobjectiveofcreatingastrongerentitycapableofmanagingbusinessactivitiesbothintheCzechandSlovakmarketsthatwillbringsignificantadvantagestoUniCreditGroupsincethemergergaverisetoanentitythatisabletomoreefficientlyandeffectivelyserveclientsandachievegreaterreturnsinthecontextoftheanticipatedcostsavingsanddynamicgrowthofbusinessinbothcountries.Theintegrationenabledtobenefitfromsynergisticeffectsintermsofcostsandincomewhileachievingamorebalancedcapitalstructureandoptimisedliquiditymanagement.Inaddition,UniCreditGrouphadtheopportunitytoreducethecomplexityofitsorganisationalstructureandthelevelofmanagementeffortsasaresultofestablishingonelocalmanagementteamoverseeingbothmarkets.

TheBankincreaseditssharecapitalforthepurposesofthemerger.AnumberofminorityshareholdersofUniCreditBankSlovakiaa.s.exercisedtheirrighttosellthesharesofthedissolvingbank,otherminorityshareholdersutilisedtherighttoexchangethesharesfornewlyissuedsharesoftheBank.ThesuccessorbanktookoverthecapitalofthedissolvingbankofMCZK11,611andallocatedittothespecial-purposereservefundinEURthatcanbeusedonlytooffsetlosses.

Scope of ActivitiesTheBankisauniversalbankprovidingservicesofretail,commercialandinvestmentbankingservicesinCzechcrownsandforeigncurrenciesfordomesticandforeignclients,mainlyintheCzechRepublicandalsoinotherstatesoftheEuropeanUnion.

TheBank’sprincipalactivitiesinclude:•Receivingdepositsfromthepublic;•Providingloans;•Investinginsecuritiesonitsownbehalf;•Operatingasystemofpaymentsandclearing;•Issuingandadministrationofpaymentproducts;•Providingguarantees;•Openinglettersofcredit;•Administeringcashcollection;•Tradingonitsownbehalforonbehalfofclients: –Inforeign-exchangecurrencyproducts; –Inforwardandcontractoptions,includingforeigncurrency

andinterestratecontracts;and•Withtransferablesecurities;•Participatinginsharesubscriptionsandprovidingrelatedservices;•Issuingmortgagebonds;•Conductingfinancialbrokerage;•Managingsecurities,includingportfoliomanagement,onbehalf

ofclients;•Providingdepositoryservicesandadministrationofsecurities;•Providingdepositoryservicesforinvestmentfunds;•Conductingforeigncurrencyexchangeactivities;•Providingbankinginformation;•Rentingsafe-depositboxes;and•Conductingactivitiesdirectlyconnectedwiththeactivitiesstated

above.

II. Basis for the preparation of the separate financial statements

1. Statement of complianceTheSeparatefinancialstatementsoftheBank(hereinafteralso“FinancialStatements”)for2019andcomparativesfor2018havebeenpreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”)asadoptedbytheEuropeanUnion


Notes to the financial statements (separate)

(“EU”)inCommissionRegulation(EC)no.1126/2008asamendedincludingvalidinterpretationsoftheInternationalFinancialReportingInterpretationsCommittee(“IFRIC”),further“IFRS”.

Purpose of preparationThepurposeofpreparingthesefinancialstatementsintheCzechRepublicistocomplywithActonAccountingNo.563/1991Coll.TheBankpreparesitsfinancialstatementsandannualreportunderspecialregulation1606/2002oftheEuropeanParliamentandoftheCouncilontheApplicationofInternationalAccountingStandards(IFRS).

Basis of preparationThesefinancialstatementswereauthorisedforissuebytheboardofdirectorsandaresubjecttoapprovalattheGeneralMeetingofShareholders.

ThesefinancialstatementswerepreparedbasedonthegoingconcernassumptionthattheBankwillcontinuetooperateintheforeseeablefuture.

Theannualseparateandconsolidatedfinancialstatementsfor2018,theAnnualReportfor2018,theprofitdistribution(incl.dividendsintheamountofMCZK6,070),retainedearningsandthedeterminationofroyaltiestotheSupervisoryBoardmembersfor2018wereapprovedbytheParentCompany’sGeneralMeetingheldon19March2019.

Thefinancialstatementsarepreparedontheaccrualbasisofaccountingwherebytheeffectsoftransactionsandothereventsarerecognisedwhentheyoccurandreportedinthefinancialstatementsoftheperiodstowhichtheyrelateandonthegoingconcernassumption.AllpresentedamountsareinmillionsofCzechcrowns(millionsofCZK)unlessstatedotherwise.

Thefinancialstatementswerepreparedonahistoricalcostbasis,exceptforfinancialassetsatfairvaluethroughothercomprehensiveincome,derivativecontracts,otherfinancialassetsandliabilitiesheldfortrading,financialassetsandliabilitiesatfairvaluethroughprofitorloss,andpropertiesusedinbusiness(reclassifiedfromthecostmodeltotherevaluationmodelasof31December2019),allofwhichhavebeenmeasuredatfairvalue.ThemethodsfordeterminingfairvaluearepresentedinsectionIII.SignificantAccountingPolicies,point3.FairValueMeasurementPrinciples.Recognisedassetsandliabilitiesthatarehedgedagainsttheriskofchangesinfairvalueandwouldnototherwisebemeasuredatfairvalueareremeasuredatfairvaluetotheextentofthehedgedrisk.

Regulatory requirementsTheBankissubjecttotheregulatoryrequirementsoftheCzechNationalBank,whichincludelimitsandotherrestrictionspertainingtominimumcapitaladequacyrequirements,provisioningtocover

creditrisk,liquidity,interestratesandforeignexchangepositionoftheBank.

2. Foreign Currency and Foreign Currency Translation

TheCzechcrownisthefunctionalcurrencyoftheBank.EuroisthefunctionalcurrencyoftheSlovakbranchandtheentitiesbasedintheSlovakRepublic.ThepresentationcurrencyofthesefinancialstatementsistheCzechcrown.Assetsandliabilitiesofthebrancharetranslatedintothepresentationcurrencyusingtheforeignexchangerateapplicableasofthefinancialstatementsdate.Theprofitorlossofthebranchistranslatedusingtheaverageexchangerate.Theresultingdifferencearisingfromtheuseofvariousforeignexchangeratesisrecognisedinequityas“Foreignexchangerategainsorlossesfromthebranch”.Figuresinbracketsrepresentnegativeamounts.

Transactionsinforeigncurrencies(ieotherthanthefunctionalcurrency)aretranslatedtothefunctionalcurrencyusingtheforeignexchangeratepromulgatedbythecentralbankatthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedtothefunctionalcurrencyattheclosingforeignexchangerateatthebalancesheetdate.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthatarestatedathistoricalcostaretranslatedtothefunctionalcurrencyattheforeignexchangerateatthedateofthetransaction.Foreignexchangedifferencesarisingontranslationarerecognisedintheincomestatementas“Netincome/lossfromfinancialassetsandliabilitiesheldfortrading”.

III. Significant accounting policies

Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthesefinancialstatementsexcluding:•ImplementationofaccountingpoliciesbasedonIFRS16“Leases”

since1January2019(fordetailsseepoint12.Leases)and•Accountingpolicyforvaluationofownedrealestates

andinvestmentproperty(fordetailsseepoint10.PropertyandEquipment).

TerminologyusedintheSeparateFinancialStatements(incl.NotestotheSeparateFinancialStatements)andthestructureofsomedisclosuretableswererefinedincomparisontotheSeparateFinancialStatementsforthecomparativeperiod.Theadjustmentshavenoimpactonthepresentedfigures.

1. Financial InstrumentsAfinancialinstrumentisanycontractthatgivesrisetoafinancialassetofoneentityandafinancialliabilityorequityofanotherentity.


TheBankclassifiesfinancialinstrumentsinthefollowingcategories:•Financialassetsmeasuredatamortisedcost(“AC”),•Financialassetsmeasuredatfairvaluethroughother

comprehensiveincome(“FVTOCI”),•Financialassetsmandatorilymeasuredatfairvaluethroughprofit

orloss(“FVTPL”),•Financialassetsheldfortrading(“FVTPL”),•Financialliabilitiesmeasuredatamortisedcost(“AC”)and•Financialliabilitiesmeasuredatfairvaluethroughprofitorloss

(“FVTPL”).

TheBankhasappliedIFRS9approachtotheclassificationandmeasurementoffinancialassetsthattakesintoaccount:•Thebusinessmodelformanagingfinancialassetsand•Characteristicsofcontractualcashflowsfromaspecificfinancial

asset.

Afinancialassetisvaluedatamortisedcostifboththefollowingconditionsaremet:•Theassetisheldaspartofabusinessmodelwhoseaimistohold

financialassetsinordertoobtaincontractualcashflows;and•Thecontractualconditionsofthefinancialassetsetspecificdates

ofcashflowscomposedexclusivelyofpaymentsofprincipalandinterestontheunpaidpartoftheprincipal.

Abusinessmodel’sobjectivemaybetoholdfinancialassetstocollectcontractualcashflowsevenwhensomesalesoffinancialassetshaveoccurredorareexpectedtooccur.

Afinancialassetismeasuredatfairvaluethroughothercomprehensiveincomeifboththefollowingconditionsaremet:•Theassetisheldaspartofabusinessmodelwhoseaimis

achievedbycollectionofcontractualcashflowsaswellasbysaleoffinancialassets;and

•Thecontractualconditionsofthefinancialassetsetspecificdatesofcashflowscomposedexclusivelyofpaymentsoftheprincipalandinterestontheunpaidpartoftheprincipal.

Financialassetsatfairvaluethroughothercomprehensiveincomecanalsoincludeinvestmentsinequityinstrumentiftheyarenotheldfortradingandaredesignatedsooninitialrecognition.

Afinancialassetismeasuredatfair value though profit or lossifitisnotmeasuredatamortisedcostoratfairvaluethroughothercomprehensiveincomeorifitisdesignatedatFVTPLoninitialrecognition.

AllfinancialliabilitiesoftheBank,exceptforfinancialliabilitiesheldfortrading,financialliabilitiesdesignatedatFVTPLoninitialrecognitionandhedgingderivatives,aremeasuredatamortisedcost.

a) Business Model AssessmentBusinessmodel(“BM”)referstothewaytheBankmanagesitsfinancialassetsinordertogeneratecashflows.Thebusinessmodeldetermineswhethercashflowswillresultfromcollectingcontractualcashflows,sellingfinancialassetsorboth.

Thefollowingisconsideredasevidencewhenassessingwhichbusinessmodelisrelevant:•Howtheperformanceofthebusinessmodel(andthefinancial

assetsheldwithinthatbusinessmodel)isevaluatedandreportedtotheentity’skeymanagementpersonnel;

•Therisksthataffecttheperformanceofthebusinessmodel(andthefinancialassetsheldwithinthatbusinessmodel)andthewaythoserisksaremanaged;

•HowmanagersoftheBankarecompensated(egwhethercompensationisbasedonthefairvalueoftheassetsmanagedorthecontractualcashflowscollected);

•Thefrequency,valueandtimingofsalesinpriorperiods,thereasonsforsuchsalesandexpectationsaboutfuturesalesactivity;and

•Whethersalesactivityandthecollectionofcontractualcashflowsareintegralorincidentaltothebusinessmodel

Thebusinessmodelisdeterminedatalevelthatreflectsthewaygroupsoffinancialassetsaremanagedtogethertoachieveaparticularbusinessobjective.TheBank’sbusinessmodeldoesnotdependonmanagement’sintentionsforanindividualinstrumentbutisdeterminedatahigherlevelofaggregation.

ThebusinessmodelassessmentresultedinthefollowingbusinessmodelsoftheBank:Business model “Held to collect”comprisesthebankingbookandwasassignedmainlytothelendingportfolioandtheportfolioofdebtsecuritiesthatareheldwiththeintentiontocollectcontractualcashflows.

Althoughtheobjectiveofthebusinessmodelistoholdfinancialassetsinordertocollectcontractualcashflows,theentityneednotholdallofthoseinstrumentsuntilmaturity.Thusthisbusinessmodelcanbetoholdloansandbondstocollectcontractualcashflowsevenwherelimitedsalesoffinancialassetsoccurorareexpectedtooccurinthefuture.

Salesareconsistentwiththeheld-to-collectbusinessmodelinthefollowingsituations:•Thesalesareduetoanincreaseinthecreditriskofafinancialasset;•Thesalestakeplaceclosetothematurityofthefinancialassetand

theproceedsfromthesalesapproximatethecollectionoftheremainingcontractualcashflows;

•Thesalesareinfrequent(evenifsignificant),orareinsignificantindividuallyandinaggregate(eveniffrequent).


Thebusinessmodel„Held to collect and sell“comprisesthebankingbookandwasassignedmainlyto:•Theportfolioofdebtsecuritieswhoseobjectiveisachievedbyboth

collectingcontractualcashflowsandsellingfinancialassets;theseareusedprimarilyforliquidity,interestanddurationmanagement,and

•EquityinstrumentsirrevocablydesignatedatFVTOCIoninitialrecognition.

The “Other” business modelwasassignedtofinancialinstruments(debtsecurities,derivativesandequityinstruments)thatarenotallocatedtoanyoftheabovebusinessmodelsandthemainstrategyis:•Trading: –Torealisecashflowsthroughsaleoftheassetsor –Tomanagetheinstrumentsactivelyonfairvaluebasisin

ordertorealisefairvaluechangesarisingfrommarketfactorchangeslikeyieldcurves,creditspreadsetc.

•ManagingRiskWeightedAssets,or•Liquidityandinterestratemanagementuptooneyear.

b) Analysis of Contractual Cash Flow CharacteristicsFortheclassificationoffinancialassetsbasedonthenewIFRS9categories,theanalysisofthebusinessmodeliscomplementedbytheanalysisofthecontractualcashflows–assessmentwhetherthecontractualtermsofthefinancialassetgiveriseonspecificdatestocashflowsthataresolelypaymentsofprincipalandinterest(“SPPITest”).Thisanalysisisonlyperformedatinitialrecognitionoftheinstrument.

Forthispurpose,interestisdefinedasaconsiderationforthetimevalueofmoney,thecreditriskassociatedwiththeprincipalduringaparticularperiodoftimeandforotherbasiclendingrisksandcosts,aswellasaprofitmargin.

Thisanalysisisperformedforloanproductseitherat“contracttemplate”levelforstandardisedproducts,oratcontractbycontractlevelfortailoredcorporateloancontracts.Forsecurities,theanalysisisperformedatISINlevelusingmainlyanexternaldataprovider.

Modified Time Value of MoneyThetimevalueofmoneyistheelementofinterestthatprovidesconsiderationforthepassageoftime.Itdoesnottakeintoaccountotherrisks(credit,liquidity,etc)orcosts(administrative,etc)associatedwithholdingafinancialasset.

Insomecases,thetimevalueofthemoneyelementmaybemodified(imperfect).Thisisthecase,forexample,ifafinancialasset’sinterestrateisperiodicallyresetbutthefrequencyofthatresetdoesnotmatchthetenoroftheinterestrate.Inthiscase,theBankmustassessthemodificationtodeterminewhetherthecontractualcashflowsstillrepresentsolelypaymentsofprincipalandinterest,iethemodificationtermdoesnotsignificantlyalterthecashflows

fromaperfectbenchmarkinstrument.Forthisassessment,theBankusesaBenchmarktooldevelopedonUniCreditGrouplevel.

c) Recognition and Measurement of Financial Assets

Financial assets at amortised cost“Financial assets at amortised cost”arerecognisedintheBank’saccountingbooksfromthemomentofsettlement.ForeignexchangegainsandlossesandimpairmentlossesarerecognisedintheBank’sprofitorlossfromthetradedate.

Financialassetsatamortisedcostaremeasuredinitiallyatfairvalue,includingtransactioncosts.Subsequenttoinitialrecognition,thesefinancialassetsaremeasuredatamortisedcostusingtheeffectiveinterestratemethod.

Theeffectiveinterestrate(EIR)istheratethatexactlydiscountsestimatedfuturecashreceiptsduringtheexpectedlifeofthefinancialassetorliabilitytothegrosscarryingamountofthefinancialassetorliability.TheEIR(andtherefore,theamortisedcostofthefinancialasset)iscalculatedbytakingintoaccounttransactioncostsandanydiscountorpremiumontheacquisitionofthefinancialasset,aswellasfeesandcoststhatareanintegralpartoftheEIR.TheBankrecognisesinterestincomeusinganeffectiveinterestrateovertheexpectedlifeoftheloan.Forfloating-ratefinancialinstruments,periodicre-estimationofcashflowstoreflectthemovementsinthemarketratesofinterestalsoalterstheeffectiveinterestrate.

Financialassetsatamortisedcostrepresentloansandadvancestobanks,loansandadvancestocustomersanddebtsecurities.

“Purchased or originated credit-impaired financial assets” (POCI) arefinancialassetsthatarecredit-impairedoninitialrecognition.TheBankrecognisesPOCIwhenfreshmoneyisgrantedtoacredit-impairedborrowerorifarestructuringresultsinthe“renewedabilitytodrawexistingunusedcreditlines/commitments”.TheBankidentifiednoPOCIassetsduring2019,orin2018.

POCIismeasuredatamortisedcostusingcredit-adjustedEIR.Oninitialrecognition,POCIassetsdonotcarryanimpairmentallowance.Instead,lifetimeexpectedcreditlossesareincorporatedintothecalculationofthecredit-adjustedEIR.Thecredit-adjustedEIRiscalculatedusingtheexpectedcashflowsinclusiveoffuturelifetimeexpectedcreditlosses–ietheestimatedcontractualcashflowsarereducedbylifetimeexpectedcreditlosses.Forsubsequentmeasurement,theexpectedcreditlossesforPOCIassetsaremeasuredaslifetimeexpectedcreditlosses.However,onlythecumulativechangesinlifetimeexpectedcreditlossessinceinitialrecognitionarerecognisedasalossallowance,andnotthetotalamountofexpectedcreditlosses.InterestincomeonPOCI,iscalculatedusingthecreditadjustedEIR.


Gainsandlossesarisingfromfinancialassetscarriedatamortisedcostarerecognisedintheincomestatementwhenthefinancialassetisderecognised(intheitem“Net income/(loss) from the sale or repurchase of: Financial assets at amortised cost”)orimpaired(intheitem“Impairment losses on: Financial assets at amortised cost”),andthroughtheamortisationprocessintheitem“Interest income”usingtheeffectiveinterestratemethod.

Financial assets at fair value through other comprehensive income“Financial assets at fair value through other comprehensive income”arerecognisedintheBank’saccountingbooksfromthemomentofsettlement.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheBank’sothercomprehensiveincomesincethetradedate;impairmentlossesarerecognisedsincethetradedate.

FinancialassetsatFVTOCIaremeasuredinitiallyatfairvalue,includingtransactioncosts.Subsequenttoinitialrecognition,thesefinancialassetsaremeasuredatfairvalue.

Gainsandlossesarisingfromachangeinthefairvalueofdebtinstrumentassetsatfairvaluethroughothercomprehensiveincomearerecognisedinothercomprehensiveincomeandbecometheequityitem“Reserve funds from revaluation”,withtheexceptionofexpectedcreditlossesthatarereportedintheincomestatementas“Impairment losses on: Financial assets at fair value through other comprehensive income”.Whenfinancialassetsaresold,transferredorotherwisedisposedof,thecumulativegainorlossrecognisedinequityistransferredtoprofitorlossas“Net income/(loss) from the sale or repurchase of: Financial assets at fair value through other comprehensive income”.InterestincomefromfairvaluethroughOCIdebtsecuritiesisrecognisedintheincomestatementas“Interest income”usingtheeffectiveinterestratemethod.

FinancialassetsatFVTOCIincludedebtinstrumentsandequityinstruments(designatedatFVTOCIoninitialrecognition).

“Equity instruments designated at FVTOCI on initial recognition” – oninitialrecognitionofanequityinstrumentthatisnotheldfortrading,theBankmayirrevocablyelecttopresentsubsequentchangesinfairvalueinothercomprehensiveincome.Thisdecisionismadeonaninvestment–by–investmentbasisforeachinvestmentandcoversstrategicinterests.Subsequentchangesinfairvaluefromrevaluationarerecognisedduringthelifeoftheequityinstrumentintheitem“Reserve funds from revaluation“ and,onitsderecognition,thesubsequentchangesarenotrecognisedintheincomestatement.Afterderecognitionoftheinvestment,thefinalcumulativechangesinfairvaluearerecognisedinretainedearnings.

Dividendincomefromequityinstrumentsisrecognisedintheincomestatementin“Dividend income”onthedatethedividendisdeclared.

Financial assets at fair value through profit and loss“Financial assets at fair value through profit or loss”arerecognisedintheBank’saccountingbooksfromthemomentofsettlement.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheBank’sprofitorlosssincethetradedate.

Initialandsubsequentmeasurementofthefinancialassetsatfairvaluethroughprofitorlossisatfairvalue.

FinancialassetsatFVTPLincludefinancialassets:•Held for trading (debtinstrumentsorderivatives)•Mandatorily at fair value•Designated at FVTPLoninitialrecognition.

“Financial assets at fair value through profit or loss: Held for trading”includeinstrumentsheldbytheBankprincipallyforthepurposeofshort-termprofittaking.Theseinstrumentsincludeinvestmentsindebtandequityinstruments,certainpurchasedreceivablesandderivativecontractsthatarenotdesignatedashedginginstruments.

Againorlossarisingfromsaleorredemption,orachangeinthefairvalueofaheldfortradingfinancialasset,isrecognisedintheincomestatementintheitem“Net income/(loss) from trading”,includinggainsorlossesrelatedtoderivativecontractsthatarelinkedtoassetsand/orliabilitiesdesignatedatfairvalue.Interestincomefromfinancialassetsheldfortradingisrecognisedintheincomestatementintheitem“Interest income“.Ifthefairvalueofafinancialinstrumentfallsbelowzero,whichmayhappeninthecaseofderivativecontracts,itisrecognisedintheitem“Financial liabilities at fair value through profit or loss: Held for trading”.

Allpurchasesandsalesthatrequiredeliverywithinthetimeframeestablishedbyregulationormarketconvention(“regular way”)arerecognisedasspot transactions.Regularwaytransactions/spottransactionsarerecognisedatthesettlementdate,whichisthedatewhenafinancialinstrumentisdelivered.Transactionsthatdonotmeettheregularwaysettlementcriteriaaretreatedasderivatives.

A derivativeisafinancialinstrumentorothercontractthathasallthreeofthefollowingcharacteristics:•Itsvaluechangesinresponsetothechangeinaspecifiedinterest

rate,financialinstrumentprice,commodityprice,foreignexchangerate,indexofpricesorrates,creditratingorcreditindex,orothervariable(usuallycalledthe“underlying”),providedforanon-financialvariablethatthevariableisnotspecifictoapartytothecontract;

•Itrequiresnoinitialnetinvestmentoraninitialnetinvestmentthatissmallerthanwouldberequiredforothertypesofcontractsthatwouldbeexpectedtohaveasimilarresponsetochangesinmarketfactors;

•Itissettledatafuturedate(exceptforregularwaytransactions).


Sometimes,aderivativemaybeacomponentofacombinedfinancialinstrumentthatincludesahostcontractandaderivative(theembeddedderivative)effectingcashflowsorotherwisemodifyingthecharacteristicsofthehostinstrument.Anembeddedderivativemustbeseparatedfromthehostinstrumentandaccountedforasaseparatederivativeif,andonlyif:•ThehostinstrumentisnotafinancialassetpursuanttoIFRS9;•Theeconomiccharacteristicsandrisksoftheembeddedderivative

arenotcloselyrelatedtotheeconomiccharacteristicsandrisksofthehostcontract;

•Aseparatefinancialinstrumentwiththesametermsastheembeddedderivativewouldmeetthedefinitionofaderivativeasastand-aloneinstrument;and

•Thehostinstrumentiseithernotmeasuredatfairvalueoritismeasuredatfairvaluebutchangesinfairvaluearerecognisedinothercomprehensiveincome.

Whenanembeddedderivativeisseparated,thehostcontractisaccountedforaccordingtoitsaccountingclassification.

DerivativesarerecognisedintheBank’saccountingbooksfromthetradedate.Derivativesarerecordedatfairvalueandcarriedasassetswhenthefairvalueispositiveandasliabilitieswhenthefairvalueisnegative.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheBank’sprofitorlossintheitem“Net income/(loss) from trading” sincethetradedate.

Derivativesareclassifiedastradingderivativesunlesstheyqualifyashedginginstrumentsineffectivehedging.ForhedgingderivativespolicyseesectionIII.SignificantAccountingPolicies,point4.HedgingDerivatives.

Financialassetsareclassifiedas “Financial assets at fair value through profit or loss: Mandatorily at fair value”iftheydonotmeettheconditions,intermsofbusinessmodelorcashflowcharacteristics,forbeingmeasuredatamortisedcostoratfairvaluethroughothercomprehensiveincome.Thefollowingassetsareclassifiedinthisportfolio:•Debtinstruments,securitiesandloansforwhichthebusiness

modelisneitherheldtocollectnorheldtocollectandsellbutwhicharenotpartofthetradingbook;

•Debtinstruments,securitiesandloanswithcashflowsthatarenotsolelypaymentofprincipalandinterest;

•Unitsininvestmentfunds;•EquityinstrumentsnotheldfortradingforwhichtheBankdoes

notapplytheoptiongrantedbythestandardofvaluingtheseinstrumentsatfairvaluethroughothercomprehensiveincome.

Theseassetsareaccountedasfor“Financial assets at fair value through profit or loss: Held for trading”,howevergainsandlosses,whetherrealisedorunrealised,arerecognisedintheitem“Net

income/(loss) from financial assets/liabilities at fair value through profit or loss“.Interestincomefromfinancialassetsmandatorilyatfairvalueisrecognisedintheincomestatementas“Interest income“.

“Financial assets at fair value through profit or loss: Designated at FVTPL”-theBankhastheoptionatinitialrecognitiontoirrevocablydesignateanon-derivativefinancialassetasatFVTPLifdoingsoeliminatesorsignificantlyreducesameasurementorrecognitioninconsistency,ieanaccountingmismatchthatwouldotherwisearisefrommeasuringassetsorliabilities,orrecognisingthegainsandlossesonthemonadifferentbasis.In2019andin2018theBankheldnosuchassets.

Theseassetsareaccountedasfor“Financial assets held for trading”howevergainsandlosses,whetherrealisedorunrealised,arerecognisedintheitem“Net income/(loss) from financial assets/liabilities at fair value through profit or loss“.

InterestincomefromfinancialassetsdesignatedatFVTPLisrecognisedintheincomestatementas“Interest income“.

d) Modification and Derecognition of Financial AssetAfinancialassetisderecognisedwhentheBanklosesthecontractualrightstothecashflowfromanassetortheBanktransfersthefinancialassetandthetransferqualifiesforderecognition.Thisoccurswhentherightsarerealised,expiredorsurrendered.

Assetsmeasuredatfairvaluethroughothercomprehensiveincomeandassetsatfairvaluethroughprofitorlossthataresoldaregenerallyderecognisedandthecorrespondingreceivablesfromthebuyerarerecognisedatthesettlementdate.

TheBankalsoderecognisesafinancialasset(derecognitionaccounting)ifitscontractualconditionshavebeenmodifiedtosuchanextentthattherelatedcashflowshavebeenmateriallychanged.Thenewfinancialassetisclassifiedinstage1forthepurposesofECLcalculationunlessitiscreditimpaired,inwhichcaseitisclassifiedasPOCI.

Whenassessingwhetherthechangeisamaterialchangeincontractualcashflows,theBankconsidersthefollowingfactors:•Changeinthecurrencyoftheloan;•Changeofthedebtor;•ChangecausingfailuretomeettheSPPItest;and•Changeforbusinessreasons(egmaturityextension,change

ininterestrate).

Ifthechangeofcontractualconditionsdoesnotmateriallyaffecttherelatedcashflows,thefinancialassetisnotderecognised.Insuchcase,theBankrecognisesgainsorlossesfrommodification(modificationaccounting),representingthedifferencebetween:


•Thepresentvalueofmodifiedexpectedcashflows(disregardingthecreditlosses)discountedusingtheoriginalEIRand

•Thecurrentgrosscarryingamount.

Changesincontractualcashflowsduetotheforbearancemeasure(asidefromachangeofdebtor,changeofloancurrencyorchangecausingafailuretomeettheSPPItestasifperformedatthemodificationdate)areconsideredtobechangesthatdonotsignificantlyaffecttherelatedcashflows.

e) Write-offsTheBankwritesoffafinancialassetorapartthereofwhenithasnoreasonableexpectationsofrecoveringtherespectivecashflows(fromthereceivableitselforthecollateralreceived).Whenperformingawrite-off,thegrosscarryingamountoftheassetisreducedtogetherwiththerelatedlossprovision.Directwrite-offsandrecoveriesonwritten-offloansarereportedintheline“Impairment losses on: Financial assets at amortised cost”.

Financialassetswrittenoffwhicharesubjecttofurtherenforcementarerecordedintheoff-balancesheet.IftheBank,afterwritingoffafinancialasset,collectsadditionalamountsfromtheclient,theadditionalrecoveryisrecognisedintheincomestatementundertheitem“Impairment losses on: Financial assets at amortised cost”.

f) Recognition, Measurement and Derecognition of Financial Liabilities

“Financial liabilities at amortised cost” comprisefinancialinstruments(otherthanliabilitiesheldfortradingorthosedesignatedatfairvalue)representingthevariousformsofthird-partyfunding.Financialliabilitiesatamortisedcostincludedepositsfrombanks,depositsfromcustomersanddebtsecuritiesissued.

Thesefinancialliabilitiesarerecognisedatthesettlementdateinitiallyatfairvalue,whichisnormallytheconsiderationreceivedlesstransactioncostsdirectlyattributabletothefinancialliability.Subsequentlytheseinstrumentsaremeasuredatamortisedcostusingtheeffectiveinterestmethod.Suchinterestisrecognisedintheitem“Interest expenses”.

“Debt securities issued” arerecognisednetofrepurchasedamounts;thedifferencebetweenthecarryingvalueofaliabilityandtheamountpaidtobuyitisrecognisedintheincomestatementintheline“Net income/(loss) from the sale or repurchase of: Financial liabilities”.Subsequentdisposalbytheissuerisconsideredasanewissuewhichdoesnotproducegainsorlosses.

Theitem“Financial liabilities at fair value through profit or loss“includesfinancialliabilitiesheldfortradingandfinancialliabilitiesdesignatedatFVTPLoninitialrecognition.Relatedinterestisrecognisedintheitem“Interest expenses”.

“Financial liabilities at fair value through profit or loss: Held for trading” includefinancialinstrumentsheldbytheBankprincipallyforthepurposeofshort-termprofittaking.Theseinstrumentsincludeshortsales(obligationstodeliverfinancialassetsborrowedbyashortseller(ieanentitythatsellsfinancialassetsitdoesnotyetown))andderivativesthatarenotdesignatedashedginginstruments.

“Financial liabilities at fair value through profit or loss: Held for trading”,includingderivativescontracts,aremeasuredatfairvalueoninitialrecognition,aswellasduringthelifeofthetransaction.Againorlossarisingfromsaleorredemptionorachangeinthefairvalueofaheldfortradingfinancialliabilityisrecognisedintheincomestatementintheitem“Net income/(loss) from trading”.

“Financial liabilities at fair value through profit or loss: Designated at FVTPL”–financialliabilities,likefinancialassets,mayalsobedesignated,accordingtoIFRS9,oninitialrecognitionasmeasuredatfairvalue,providedthat:•Thisdecisionprovidesmorerelevantinformationas: –Itexcludesorsignificantlyreducesthemeasurementor

accountingmismatchthatcouldotherwiseariseduringthemeasurementofassetsorliabilitiesorrecognitionoftherespectiveprofitsorlossesonadifferentbasis;or

–ThegroupoffinancialliabilitiesorfinancialassetsandfinancialliabilitiesiscontrolledanditsperformanceassessedbasedonfairvalueandinlinewithadocumentedriskmanagementstrategyorinvestmentstrategyandinformationonthisgroupisinternallytransferredtokeymanagersoftheBankonthisbasis;or

•ThecontractcontainsoneormoreembeddedderivativesandthehostcontractisnotanassetsubjecttoIFRS9,theBankcanincludetheentirehybridcontractinthiscategory,withtheexceptionofcaseswhere:

–Theembeddedderivativedoesnotsignificantlychangethecashflowsthatwouldotherwiseberequiredbythecontract;or

–Itisclearfromthefirstassessmentofasimilarhybridinstrumentthattheexclusionoftheembeddedderivativeisnotpermitted;

•Thefinancialliabilitythatariseswhenatransferofafinancialassetdoesnotqualifyforderecognitionorwhenthecontinuinginvolvementapproachapplies.

Thiscategorymayalsoincludefinancialliabilitiesrepresentedbyhybrid(combined)instrumentscontainingembeddedderivativesthatotherwiseshouldhavebeenseparatedfromthehostcontract.

Financialliabilitiespresentedinthiscategoryaremeasuredatfairvalueatinitialrecognitionaswellasduringthelifeofthetransaction.Thechangesinfairvaluearerecognisedintheincomestatementintheitem“Net income/(loss) from financial assets/liabilities at fair value through profit or loss”,exceptforthosechangesinfair


valuearisingfromchangesinthecreditworthinessofthesefinancialliabilities.Inthisscenario,thechangesinfairvaluearerecognisedintheitem“Reserve funds from revaluation”relatedtoshareholders’equity.Ifsuchaccountingtreatmentresultsinaninconsistencythatarisesfromtheapplicationofdifferentmethodsofmeasuringassetsandliabilities,andrelatedgainsorlosses,thenthechangesinfairvaluederivingfromchangesincreditworthinessarealsorecordedintheincomestatementintheitem“Net income/(loss) from financial assets/liabilities at fair value through profit or loss“.

In2019andin2018theBankheldnosuchliabilities.

Afinancialliabilityisderecognisedwhenitissettled.

g) Reclassification of Financial InstrumentsFinancialinstrumentsarenotreclassifiedsubsequenttotheirinitialrecognitionasidefromreclassificationinthereportingperiodafterachangeintherespectivebusinessmodel.

Reclassificationsareexpectedtobeveryinfrequent.SuchchangesmustbedeterminedbytheBank’sseniormanagementasaresultofexternalorinternalchangesandmustbesignificanttotheBank’soperationsanddemonstrabletoexternalparties.

Thefollowingexternalorinternalchangesmayresultinabusinessmodelchange:•Changesinlawsandregulationsconcerningcertainassetsthat

obligestheentitytoreviewitsbusinessmodel;•Changesinstrategyconcerningcertainasset’sclass,asset’s

geography,producttype;•Businesscombinationsthatinducetheentitytoreviewitsbusiness

modelconcerningcertainfinancialassets;•TheBankbeginsorceasestoperformanactivitythatissignificant

toitsoperations.

Thefollowingarenotconsideredtobechangestoabusinessmodel:•Achangeinintentionrelatedtospecificfinancialassets(evenin

circumstancesofsignificantchangesinmarketconditions);•Atemporarydisappearanceofaparticularmarketforfinancial

assets;or•Atransferoffinancialassetsbetweenpartsoftheentitywith

differentbusinessmodels.

AnyreclassificationisappliedbytheBankprospectively,sotheBankdoesnotadjustanypreviouslyrecognisedgains,losses(includingimpairmentgainsorlosses)orinterest.

InvestmentsinequityinstrumentsthataredesignatedasatFVTOCIatinitialrecognitionmaynotbereclassified,asadecisiontodesignatethemasatFVTOCIisirrevocable.

h) Day 1 Profit/LossIfthetransactionpricediffersfromthefairvalueofafinancialassetorfinancialliabilitymeasuredatfairvalue,thedifferencebetweenthesevalues(profitorloss)isreportedintheincomestatement,exceptforLevel3fairvaluemeasurement.TheBanktypicallydoesnotconductthistypeoftransactions.

2. Impairment of Financial InstrumentsTheBankrecognisesimpairmentlossesonitsdebtfinancialinstruments,otherthanthosemeasuredatFVTPL,itsleasereceivablesanditsoff-balancecreditriskexposuresarisingfromfinancialguaranteesandloancommitments.Theimpairmentisbasedonexpectedcreditlosseswhosemeasurementreflects:•Anunbiasedandprobability-weightedamountthatisdetermined

byevaluatingarangeofpossibleoutcomes;•Thetimevalueofmoney;and•Reasonableandsupportinginformationthatisavailablewithout

unduecostoreffortatthereportingdateaboutpastevents,currentconditionsandforecastsoffutureeconomicconditions.

Forreportingandprovisioningpurposes,theBankusesathree-stagemodelinlinewithIFRS9thattakesintoaccountchangesincreditrisksinceinitialrecognition(“staging”):•Stage1includesfinancialassetswithacreditriskwhichhasnot

increasedsignificantlysinceinitialrecognition,aswellasassetswithlowcreditriskatthebalancesheetdate.The12-monthexpectedcreditlosses(orshorterdependingonthematurityoftheinstrument)arerecognisedfortheseassets.Interestincomeiscalculatedonthebasisofthegrosscarryingamountofassets.

•Stage2includesfinancialassetswithacreditriskwhichhasincreasedsignificantlysinceinitialrecognitionbutforwhichthereisnoobjectiveevidenceofimpairment.Fulllifetimeexpectedcreditlossesarerecognisedfortheseassets.Interestincomeiscalculatedonthebasisofthegrosscarryingamountofassets.

•Stage3includesfinancialassetsforwhichthereisobjectiveevidenceofimpairment.Fulllifetimeexpectedcreditlossesarerecognisedfortheseassets.Interestincomeiscalculatedonthebasisofthenetcarryingamountofassets.Thiscategoryincludesnon-performingreceivables.

ImpairmentmodelsareadaptedtocomplywiththeaccountingrequirementsstatedinIFRS9,andalsofollowthe“Guidelinesoncreditinstitutions’creditriskmanagementpracticesandaccountingforexpectedcreditlosses”issuedbyEBA.

Subjecttoexpectedlossescalculationarefinancialassetsatamortisedcostandtheapplicableoffbalancesheetexposures(suchasloancommitmentsandfinancialguaranteecontracts),allcreditexposuresassetsclassifiedatFairValuethroughOtherComprehensiveIncomeandLeasereceivables.


Furthermore,specificadjustmentsaredevelopedtotheProbabilityofDefault(PD),LossGivenDefault(LGD)andExposureAtDefault(EAD)parametersusedforregulatoryreportingpurposes(Basel)tocompoundtheExpectedCreditLoss(ECL),andamodelisdevelopedtoassesstheStageAllocationonunimpairedassets,attransactionlevel,betweenStage1andStage2.

ThemaindifferencebetweenthetwostagesisthetimehorizonwhichtheECLisexpectedtobecalculatedon.

OnLGDandEADspecificadjustmentsareappliedtoparametersalreadycalculatedfor“regulatory”purposes,inordertoensurefullconsistency,netofdifferentregulatoryrequirements,betweenregulatoryandaccountingtreatment.Themainadjustmentsareto:•Removetheconservatismonlyrequiredforregulatorypurposes;•Introducea“pointintime”adjustment,insteadofthe“through

thecycle”adjustmentembeddedintheregulatoryparameters;•Includeforward-lookinginformation;and•Extendthecreditriskparametersinamultiyearperspective.

AsforPDs,dedicatedlifetimePDcurvesaredevelopedforeachmainclientsegmentbasedoncumulateddefaultrates,andarecalibratedtoreflectapointintimeandforward-lookingexpectationregardingportfoliodefaultrates.

TheExpectedCreditLossderivedfromsuchadjustedparametersisalsocompoundedtakingintoconsiderationmacroeconomicforecasts.

AkeyaspectderivingfromthemodelwhencompoundingthefinalExpectedCreditLossisthestageallocationmodel,whichallocatescredittransactionsbetweenStage1andStage2(Stage3beingequivalenttoImpairedassets).Stage1mainlyincludes(i)newlyoriginatedexposures,(ii)exposureswith“nosignificantincreaseincreditrisksinceinitialrecognition”or(iii)“lowcreditrisk”exposuresatthereportingdate.

Stage2allocationassessmentincludesacombinationofrelativeandabsolutetriggers.Themaintriggersinclude:•Therelativecomparison,attransactionlevel,betweenthePD

atoriginationandthePDateachreportingdate,bothcalculatedthroughinternalmodels,withthresholdssettoincludeallthekeyvariablesofeachtransactionthatcouldaffecttheBank’sexpectationaboutPDchangesovertime(egage,maturity,levelofPDatorigination).Thisprocedureassesseswhethertherehasbeenamaterialdeteriorationincreditqualitysinceinitialrecognition;

•Absolutetriggerssuchasbackstopsrequiredbytheregulation(ie30dayspastdue);and

•Otherinternalrelevanttriggers(egnewclassificationstoForborne).

TheBankusesthe“clientdefault”definitioninlinewithRegulationNo.575/2013oftheEuropeanParliamentandoftheCouncil;specifically,adebtor’sdefaultinvolvessituationswhere:a. Thedebtorisindefaultwithatleastonerepaymentofthe

principalorrelatedinterestonanyofitspayablestothebankforaperiodgreaterthan90days;and/or

b. Itislikelythatthedebtorwillbeunabletosettleitspayablesonatimelybasisandinfullwithoutthebankresortingtorealisingcollateral.

Standardcaseswherethedebtorwillbeunabletosettleitspayables:•Changesincontractualcashflowsduetograntingrelieftothe

debtor(the“forbearancemeasure”);•Theloanhasbeenrestructuredordeferredforalongperiod;•Thedebtorhascommittedcreditfraudorhasviolatedthefinancial

commitmentsoftheloan;•Thedebtorisdeadorinsolvent;•Itisprobablethatthedebtorwillenterintobankruptcyorlegal

restructuringofitsdebts,etc.

Inthisevaluation,expecteddisposalscenariosarealsoconsideredasfarasUniCreditBankNon-PerformingAssetsStrategyforeseestherecoveryofdefaultedassetsviatheirtransfer.

Whendefiningtheperimeterofimpairedassets,theDefinitionofDefaultcurrentlyappliedbyUniCreditGrouphasbeenadopted,whichincorporatessomeofthekeyprinciplesembeddedintheDefinitionofDefaultguidelinesissuedbyEBA,suchastheassessmentofimpairmentordefaultbyconsideringtheoverallexposuretoagivendebtor(socalled“debtorapproach”).

Financial assets at amortised costFinancialassetsatamortisedcostpredominantlyincludeloansandadvancestobanks,loansandadvancestocustomersandtradereceivablesandarereportednet,iereflectingimpairmentlosses.

Individualimpairmentlossesadjustthenetbookvalueofindividuallyassessedfinancialassetsatamortisedcosttotheirrecoverableamount.Therecoverableamountoffinancialassetsatamortisedcostissetasthepresentvalueofexpectedfuturecashflowsdiscountedwiththeoriginaleffectiveinterestrateofthefinancialinstrument.

Expectedcashflowsfromtheindividualassetportfolioswiththesamecharacteristics(basedonthesegment/ratingmodel)aresetbasedonhistoricallosseswhiletakingintoaccounttheanticipatedmacroeconomicdevelopment.Basedonthisinformation,theexpectedlossiscalculatedasofthebalancesheetdate.

Financial assets at fair value through other comprehensive incomeImpairmentofdebtfinancialassetsatfairvaluethroughothercomprehensiveincomeintheamountoftheexpectedcreditloss


isreportedintheincomestatementunder“Impairment losses on financial assets”.Impairmentlossesonequitysecuritiesclassifiedasfinancialassetsatfairvaluethroughothercomprehensiveincomearenotreported.

Trade receivablesTradereceivablesimpairmentiscalculatedusingasimplifiedapproachbasedondayspastdue.

ForadditionalinformationonCreditRiskManagementpleaserefertosectionV.OtherNotes,point35b).

Loan commitments and financial guaranteesUnderIFRS9,theimpairmentrequirementsalsoapplytoloancommitmentsandfinancialguaranteesoffthestatementoffinancialposition.TheBankassessesonaforward-lookingbasistheexpectedcreditlossesassociatedwithexposuresfromloancommitmentsandfinancialguaranteecontracts.

Whenestimatinglife-timeExpectedCreditLossforundrawnloancommitments,theBankestimatestheexpectedportionoftheloancommitmentthatwillbedrawndownoveritsexpectedlife.TheExpectedCreditLossisthenbasedonthepresentvalueoftheexpectedshortfallsincashflowsiftheloanisdrawndown,basedonaprobability-weightingofscenarios.

Forfinancialguarantees,theBankestimatesExpectedCreditLossesbasedonthepresentvalueoftheexpectedpaymentstoreimbursetheholderforacreditlossthatitincurs.Thecalculationismadeusingaprobability-weightingofscenarios.

TheExpectedCreditLossesrelatedtoloancommitmentsandfinancialguaranteecontractsarerecognisedundertheitem“Provisions for risks and charges”inthestatementoffinancialpositionandundertheitem“Net provisions for risks and charges: Loan commitments and financial guarantees given”intheincomestatement.

3. Fair Value Measurement PrinciplesThefairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.

Thefairvalueoffinancialassetsandfinancialliabilitiesisbasedontheirquotedmarketpriceonanactivemarketatthebalancesheetdatewithoutdeductionfortransactioncosts.Ifaquotedmarketpriceisnotavailable,thefairvalueoftheinstrumentisestimatedusingpricingmodelsordiscountedcashflowtechniquesthatmaximisesmarketobservableinputsandminimizingthoseunobservable.

Wherediscountedcashflowtechniquesareused,estimatedfuturecashflowsarebasedonBankmanagement’sbestestimatesand

thediscountrateisbasedonthemarketrateatthebalancesheetdateforaninstrumentwithsimilartermsandconditions.Wherepricingmodelsareused,inputsarebasedonmarketratesatthebalancesheetdate.

Thefairvalueofderivativesthatarenotexchange-tradedisestimatedastheamountthattheBankwouldreceiveorpaytoterminatethecontractatthebalancesheetdate,takingintoaccountcurrentmarketconditionsandthecurrentcreditworthinessofthecounterpartiesandoftheBank.

BondsintheBank’sportfolioarevaluedonadailybasisusingavailablemarketratesquotedbymarketparticipantsusingBloombergservices.Agroupofcontributorswhoprovidereliableandregularbondvaluationsisselectedforeachofthebonds.Thecreditspreadofthebondiscalculatedfromparticularcontributionsanddiscountcurves.

Iftherearesufficientcurrentmarketpricesofcontributionsavailable,thevaluationiscalculatedasanaveragevalue.Topreventpossibleerrorsofparticularcontributions,acomparisonofdailychangesismadeatthesametime.

Ifnomarketpriceisavailableasasourceofvaluationorthenumberofactualcontributionsisnotsufficient,theBankwillcarryoutthevaluationonthebasisofarisk-freeswaprate,towhichthelastverifiedcreditspreadisapplied.TheBankcontinuestoapplythismethoduntil:•Marketquotationsareagainavailable;•Thecreditspreadofaparticularbondisadjustedbased

onacomparisonofcreditspreadsofsimilarbonds;•TheBankreceivesotherinformationaboutachangeofthespread

applied;•Theissuer’screditratingchanges(changeofinternaland/or

externalrating,evidencefromthemarketthatcreditworthinessisworsening);and

•Theliquidityofthespecificsecuritieshasdeterioratedsignificantly.

Subsequently,theBankwillcarryoutthevaluationcomprisingnewaspectsofthemarketprice,includinganassessmentofpossibleimpairmentlosses(seesectionIII.SignificantAccountingPolicies,point2.Impairment,namelyimpairmentoffinancialassetsatfairvaluethroughothercomprehensiveincome).

Bankmanagementbelievesthatthefairvalueoftheassetsandliabilitiespresentedinthesefinancialstatementscanbemeasuredreliably.

Financialassetsandfinancialliabilitiesareclassifiedintofairvaluelevelsdependingonthequalityoftheinputusedinthevaluation.Individuallevelsaredefinedasfollows:


•Level1input–quoted(unadjusted)pricesonactivemarketsforidenticalassetsorliabilitiesavailabletotheBankasofthedateofvaluation;

•Level2input–inputdataotherthanthequotedpricescontainedinlevel1thatareobservableforanassetorliabilityeitherdirectlyorindirectly.Thiscategoryincludestheinstrumentsvaluedat:quotedpricesofsimilarassetsorliabilitiesonactivemarkets;quotedpricesofidenticalorsimilarassetsorliabilitiesonmarketsthatarenotactive;valuationtechniquesforwhichasignificantinputisobservableonthemarketdirectlyorindirectly;and

•Level3input–unobservableinputdataforanassetorliability.Thiscategoryincludesinstrumentsunderwhichvaluationtechniquescontainaninputnotbasedonobservabledataandtheunobservableinputmayhaveasignificantimpactontheinstrument’svaluation.

TheBankevaluatesthelevelsateachreportingperiodonaninstrument-by-instrumentbasisandreclassifiesinstrumentswhennecessary,basedonthefactsattheendofthereportingperiod.

Fair Value AdjustmentsFairvalueadjustmentisdefinedastheamounttobeaddedtothemarketobservedmid-priceortothetheoreticalpricegeneratedbyavaluationmodeltoobtainafairvalueoftheposition.ThereforeFVAareaimedatensuringthatthefairvaluereflectstheexitpriceofacertainposition.

Adjustmentsusedareasfollows:•Credit/debitvaluationadjustment(CVA/DVA);•ModelRisk;•Close-outCosts;•OtherAdjustments.

Credit/Debit valuation adjustment (CVA/DVA)Creditvaluationadjustments(CVAs)anddebitvaluationadjustments(DVAs)areincorporatedintoderivativevaluationstoreflecttheimpactonfairvalueofcounterpartycreditriskandUniCreditowncreditqualityrespectively.

BankCVA/DVAmethodologyisbasedonthefollowinginputs/assumptions–simulationapproach:•Newproductsthatcanbevaluatedareautomaticallyincluded

forCVA,•TwosidedbilateralCVAisused,•EADderivedbysimulationtechniques–thewholeportfolio

oftradesaswellasriskmitigationtechniquessuchasnettingandmarginingwiththiscounterpartistakenintoaccount,

–PD–precisecomputationofcounterpartyexposure –Impliedbycurrentmarketdefaultrates,obtainedfromCredit

DefaultSwaps,UsesinglenameCDSwhereavailable,usesectorcurveapproximations(basedoninternalratingandsector).


Funding Cost and Benefit Adjustment (FCA/FBA)FundingValuationAdjustment(FundVA)isthesumofaFundingCostAdjustment(FCA)andofaFundingBenefitAdjustment(FBA)thataccountsfortheexpectedfuturefundingcosts/benefitsforderivativesthatarenotfullycollateralised.Mostmaterialcontributorsarein-the-moneytradeswithuncollateralisedcounterparties.

UniCreditFVAmethodologyisbasedonthefollowinginputs:•PositiveandNegativeexposureprofilesderivedfromleveraging

onarisk-neutralspin-offoftheCounterpartyCreditRiskinternalmodel;

•PDtermstructureimpliedbycurrentmarketdefaultratesobtainedfromcreditdefaultswaps;

•Afundingspreadcurvethatisrepresentativeoftheaveragefundingspreadofpeerfinancialgroups.

Model RiskFinancialmodelsareusedforthevaluationofthefinancialinstrumentsifdirectmarketquotesarenotreadilyavailable.Ingeneral,modelriskisrepresentedbythepossibilitythatafinancialinstrument’sevaluationissensitivetothechoiceofmodel.Itispossibletovaluethesamefinancialinstrumentbyusingalternativemodelswhichcouldprovidedifferentresultsintermofpricing.Themodelriskadjustmentreferstotheriskthattheactualfairvalueoftheinstrumentdiffersfromthevalueproducedbythemodel.

Close-out CostsThismeasurestheimplicitcostsofclosingan(aggregated)tradingposition.Theshortpositioncouldbeclosedbyalongpositionandviceversa,orbyenteringintoanewtransaction(orseveraltransactions)thatoffsets(hedges)theopenposition.Close-outcostsaretypicallyderivedfromthebid/askspreadsobservedonthemarket.Itaccountsforthefactthatapositionisvaluedatmid,butcanonlybeclosedatbidorask.Thisadjustmentisnotneededwhenthepositionismarkedatbidoraskandalreadyrepresentsanexitprice.Inadditionaclose-outadjustmentoftheNAVisappliedwhentherearepenaltiesrelatingtoapositionwrite-offinaninvestmentfund.

Other AdjustmentsOtherfairvalueadjustmentsnotincludedinthepreviouscategoriesmaybetakenintoconsiderationtoaligntheevaluationtothecurrentexitprice,accordingtothelevelofliquidityofthemarketandvaluationparameters,egadjustmentofequitypriceswhosequotationonthemarketarenotrepresentativeoftheeffectiveexitprice.

ForFairValuedisclosuresseesectionV.OtherNotes,point37.FairValueofFinancialAssetsandFinancialLiabilities.

4. Hedging DerivativesHedgingderivativesarecarriedatfairvalue.Positivefairvalueispresentedintheitem“Positive fair value of hedging derivatives”,negativefairvalueispresentedintheitem“Negative fair value of hedging derivatives”.Themethodofrecognisingfairvaluedependsonthemodelofhedgeaccountingapplied.

Hedgeaccountingcanbeappliedif:•ThehedgeisinlinewiththeBank’sriskmanagementstrategy;•Thehedgerelationshipisformallydocumentedattheinception

ofthehedge;•Itisexpectedthatthehedgerelationshipwillbehighlyeffective

throughoutitslife;•Theeffectivenessofthehedgerelationshipcanbeobjectively

measured;•Thehedgerelationshipishighlyeffectivethroughouttheaccounting

period;and•Forhedgingfutureexpectedtransactions,itishighlyprobablethat

thetransactionwilloccur.

Asregardshedgeaccounting,theBankadditionallyusedtheoptionunderIFRS9tocontinueapplyingtheexistingrequirementsforhedgeaccountingpursuanttoIAS39.

Ifaderivativehedgesanexposuretochangesinthefairvalueofrecordedassetsandliabilitiesoroflegally-enforceablecommitments,thehedgeditemattributabletotheriskbeinghedgedisalsocarriedatfairvalue.Gains(losses)onthere-measurementofaninterest-bearinghedgeditemandhedgingderivativearerecognisedintheincomestatementin“Net income from hedging against risk of changes in fair value”.Realisedinterestincomeandexpensesarereportedonanetbasisin“Interest income”or“Interest expenses”.

Ifaderivativehedgesanexposuretothevariabilityofcashflowsrelatedtorecognisedassetsandliabilitiesorexpectedtransactions,theeffectivepartofthehedge(fairvalueofthehedgingderivative)isrecognisedinothercomprehensiveincomeinequityitem“Reserve funds from revaluation”.Theineffectivepartofthehedgeisrecognisedintheincomestatement.

Ifthehedgingofexpectedtransactionsresultsintherecordingofanassetorliability,thecumulativegainsorlossesfromtherevaluationofthehedgingderivativepreviouslyrecognisedinothercomprehensiveincomearetransferredtoprofitorlossatthesametimeasthehedgeditemaffectsthenetprofitorloss.

Whenahedginginstrumentorhedgerelationshipisterminatedbutthehedgedtransactionisstillexpectedtooccur,thecumulativegainorlossrecognisedinothercomprehensiveincomeremainsinequityandisrecognisedinaccordancewiththeabovepolicy.Ifthehedgedtransactionisnolongerexpectedtooccur,

thecumulativegainorlosspreviouslyrecognisedinothercomprehensiveincomeisimmediatelyrecognisedintheincomestatement.

“Macro hedging”–IAS39allowsafair-valueitemhedgedagainstinterestratefluctuationstobenotonlyasingleassetorliabilitybutalsoamonetarypositioncontainedinanumberoffinancialassetsorliabilities(orpartsofthem).Accordingly,agroupofderivativescanbeusedtooffsetfair-valuefluctuationsinhedgeditemsduetochangesinmarketrates.

TheBankappliesmacrohedgingtosomefinancialliabilities.Netchanges,gainsorlosses,inthefairvalueofthemacro-hedgedliabilitiesattributabletothehedgedriskarerecognisedintheliabilityitem“Changes in fair value of the portfolio of hedged instruments”andoffsettheincomestatementitem“Net income/(loss) from hedging against the risks of changes in fair value”.

5. Repo transactions and reverse repo transactionsSecuritiessoldunderanagreementtorepurchasethemataspecifiedfuturedatearealsoknownas“repo transactions”or“sale and repurchase agreements”.Securitiessoldinsuchtransactionsarenotderecognisedfromthestatementoffinancialposition,astheBankretainssubstantiallyalltherisksandrewardsofownership,asthesecuritiesarerepurchasedatafixedpricewhentherepotransactionends.Financialassetstransferredtoanothercounterpartyunderarepotransactionaremeasuredinaccordancewiththeappropriateaccountingpolicyforsuchfinancialasset.

Securitiessoldunderarepotransactionarerecordedasassetsintheline“Financial assets at fair value through other comprehensive income”orintheline“Financial assets at fair value through profit or loss: Held for trading”,andreceivedloan,includingaccruedinterest,isincludedintheline“Financial liabilities at amortised cost: Deposits from banks”orintheline“Financial liabilities at amortised cost: Deposits from customers”.

Debtsecuritiespurchasedunderagreementstopurchaseandresellataspecifiedfuturedate,alsoknownas“reverse repos”arenotrecordedintheBank´sstatementoffinancialpositionbutarepresentedintheoff-balancesheet.Theconsiderationpaid(providedloan),includingaccruedinterest,isrecordedintheline“Financial assets at amortised cost: Loans and advances to banks”orintheline“Financial assets at amortised cost: Loans and advances to customers”.

ThedifferencebetweenthesaleandrepurchaseconsiderationsforbothrepoandreverserepotransactionsarerecognisedonanaccrualbasisovertheperiodofthetransactionusingtheEIRandarerecognisedintheincomestatementin“Interest income”or“Interest expenses”.


Forsaleofasecurityacquiredfromareverserepo,theBankderecognisesthesecuritiesacquiredfromoff-balancesheetandrecordsapayablefroma“short sale”,whichisrevaluedtofairvalue,inthestatementoffinancialposition.Thispayableisreportedunder“Financial liabilities at fair value through profit or loss: Held for trading”,withanygainsandlossesrecordedintheitem“Net income/(loss) from trading”.

“Sell-buy”and“Buy-Sell”transactionsareaccountedforinthesamewayas“repo transactions” and “reverse repos”.

6. Borrowing and Lending of SecuritiesFinancialassetslentundersecuritieslendingarrangementscontinuetoberecognisedinthestatementoffinancialpositioniftherisksandrewardsofownershipareretainedbytheBankandaremeasuredinaccordancewiththeappropriateaccountingpolicyforsuchfinancialassets.

FinancialassetsborrowedundersecuritiesborrowingagreementsarenotrecognisedintheBank’sstatementoffinancialpositionbutarepresentedinoff-balancesheet.

Forsaleofasecurityacquiredonthebasisofsecuritiesborrowingarrangements,theBankderecognisesthesecuritiesacquiredfromoff-balancesheetandrecordsapayablefromashort-termsale,whichisrevaluedtofairvalue,inthestatementoffinancialposition.Thispayableisreportedunder“Financial liabilities at fair value through profit or loss: Held for trading”,withanygainsandlossesrecordedintheitem“Net income/(loss) from trading”.

Incomeandexpensesarisingfromtheborrowingandlendingofsecuritiesarerecognisedonanaccrualbasisovertheperiodofthetransactionsintheitem“Fee and commission income”or“Fee and commission expenses”.

7. OffsettingFinancialassetsandliabilitiesmaybeoffsetagainsteachother,andthenetamountisreportedinthestatementoffinancialpositionwhentheBankhasalegallyenforceablerighttosetofftherecognisedamountsandthetransactionsareintendedtobesettledonanetbasis.InthecurrentandcomparativeperiodtheBankdoesnotoffsetanyfinancialassetsandfinancialliabilities.

8. Cash and cash balancesCashcomprisescashinhandandcashintransit.Cashequivalentsareshort-term(withmaturityofthreemonthsorless),highlyliquidinvestmentsthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Cashequivalentsareheldforthepurposeofmeetingshort-termcashcommitmentsratherthanforinvestmentpurposes.

“Cash and cash balances”arenotcarriedatfairvalueonthestatementoffinancialposition,butarecarriedatamountsthatapproximatetofairvalue,duetotheirshort-termnatureandgenerallynegligiblecreditrisk.

Cash,cashbalancesatcentralbanksandotherdemanddepositsconsistofcashbalancesandadvanceswiththeCzechNationalBankandNationalBankofSlovakia.

Theitem“Cash and cash balances” doesnotincludethecompulsoryminimumreservewhichispresentedintheitem“Financial assets at amortised cost: Loans and advances to banks”.

ThecompulsoryminimumreserveheldattheCzechNationalBankandattheNationalBankofSlovakiaisarequireddepositwithrestricteddrawingwhichmustbeheldbyallcommercialbankslicensedintheCzechRepublicandinSlovakiarespectively.

9. Equity InvestmentsEquityinvestmentsareequityinstrumentsandconsequentlydefinedasfinancialinstrumentsunderIAS32.Thesearepresentedintheitem “Equity investments”andaremeasuredatcost.

Theitem“Equityinvestments”includesequityinvestmentinanassociateRCIFinancialServices,s.r.o.wheretheBankholds49.9%ofvotingrightsanddoesnotexercisecontroloverthisentity.

Ifthereisevidencethatanequityinvestmentmayhavebecomeimpaired,itscarryingvalueiscomparedwithitsrecoverablevalue.Iftherecoverablevalueislessthanthecarryingvalue,thedifferenceisrecognisedthroughprofitorlossintheitem“Profit/(Loss) from equity investments”.Ifthereasonsforimpairmentareremovedfollowingasubsequenteventoccurringaftertherecognitionofimpairment,write-backsaremadethroughsameprofitorlossitem.

Equityinvestmentsconsideredstrategicinvestmentsnotcoveredbytheabovedefinitionsandnotrecognisedintheitem“Non-current assets held for sale”areclassifiedasassetsatfairvaluethroughothercomprehensiveincomeorfinancialassetsmandatorilyatfairvalueandaccordinglytreated.

10. Property and Equipment

Accounting policy applied in 2018 and in 2019

Propertyandequipmentareassetswhichmaybeusedforaperiodlongerthanoneyear.TheBankhaspropertyandequipmenttoconductitsactivities.

Propertyandequipmentareinitiallyrecognisedatcostincludingallcostsdirectlyattributabletobringinganassetintouse.


Afterbeingrecognisedasanasset:•Buildingsandlandsusedinthebusinessaremeasuredaccording

tocostmodel;•Tangibleassetsusedinthebusiness,otherthanlandsand

buildings,aremeasuredaccordingtocostmodel.

Inthecostmodel,assetsarestatedathistoricalcostlessaccumulateddepreciationandimpairment.

Depreciationiscalculatedusingthestraight-linemethodovertheassets’estimatedusefullives.Thedepreciationperiods(overtherespectiveestimatedusefullives)forindividualcategoriesofpropertyandequipmentareasfollows:•Buildings 20–50years•Technicalimprovementofbuildings–

protectedasculturalheritage 15years•Technicalimprovementofrentedpremises 10years

orinaccordancewithcontract•Air-conditioningequipment 5years•Machineryandequipment 4–6years•Bankvaults 20years•Fixturesandfittings 5–6years•Motorvehicles 4years•ITequipment 4years•Lowvaluetangibleassets 2–3years

Tangibleassets(includingrightofuseassets)areassessedforpotentialimpairmentorareductioninusefullife.Ifeventsorchangesintheconditionsoccurthatcouldresultinthecarryingamountnotbeingrecoverable,thecarryingamountiswrittendowntotherecoverableamountifthecarryingamountishigherthantheestimatedrecoverablevalue.Therecoverableamountisthehigheroffairvaluelesscostsofdisposalandthevalueinuse.

Thegainsandlossesondisposalaredeterminedbasedonthenetbookvalueandareincludedintheitem“Other operating income and expenses”.Thecostsofrepair,maintenanceandtechnicalimprovementareexpensedastheyareincurred.Technicalimprovementsexceedingthelegallimitsarecapitalised.

PropertyandequipmentwhichtheBankintendstosellwithin12months,isclassifiedas“Non-current assets held for sale”.Suchpropertyandequipmentisreclassifiedatthelowerofitscarryingamountoritssalesvaluelessdisposalcosts.Profitorlossfromthesaleispresentedintheitem“Profit/(loss) from the sale of non-financial assets”.

Change in accounting policy since 31 December 2019Forthepurposesofpreparingthefinancialstatementsat31December2019,theBankhasdecidedtochangesubsequentmeasurementofthefollowingassets:

•Propertiesusedinbusiness(ruledbyIAS16“Property,plantandequipment”)beingreclassifiedfromthecostmodeltotherevaluationmodelforthemeasurementsubsequenttoinitialrecognition.

ThisdecisionwasdrivenbythedecisionoftheultimateparentcompanyUniCreditS.p.A.madebyitsBoardofDirectorsduringameetingheldon2December2019.

TheBankbelievesthatmeasuringrealestateassetsatfairvalues(insteadofatcost)providesmorereliableandrelevantinformationaboutBank’sfinancialpositionandeconomicresultinlinewiththeprovisionsofIAS8“Accountingpolicies,ChangesinAccountingEstimatesandErrors”.

TheBankbelievesthatthechangeinthemeasurementofpropertieswillprovideamoreaccuraterepresentationofthefinancialposition,asfairvalueswillreflecttheincreaseinthevalueoftheproperties,whichtheBankexpectstooccurasaresultoftheenhancementofthepropertieswithaviewtopotentialdisposaloftheproperties.In2019,UniCreditGroupadoptedanewstrategyofmanagingitsrealestateportfoliowhichitwillactivelyseektooptimiseinthelightofchangingmarketcircumstancesandchangestoitsoperationalmodels.TheBankexpectstorealisevaluefromaportionoftheportfoliooverthemediumtermthroughtargeteddisposals.

ThefairvaluemodelallowstheBanktorepresentthechangesinvalueofthepropertiesatthemomenttheyarise,incompliancewiththeobjectivesofthenewly-adoptedactivemanagementoftherealestateportfolio.Inthisway,therecognitionofcapitalgainsandlossesisnotdeferredatthetimeofsaleoftherealestateassetsandisnotinfluencedbythedifferencebetweenmarketvalue(embeddedinthesaleprice)andcostwhich,asstated,maynolongerbemeaningfuliftheacquisitionofrealestateassetsdidnottakeplacerecently.

Inaddition,theadoptionofafairvaluemodelallowsamoreaccuraterepresentationofthefinancialpositionoftheBank,asitrepresentsthevalueoftherealestatepropertiesatasinglereferencedate–thedateofpreparationofthefinancialstatements.Thisavoidsheterogeneityinvaluationinherentinthecostmodelwhichreflectsmarketconditionsatdifferenttimes,iethepurchasedates.

Voluntarychangesinaccountingprinciples(accountingpolicies)areregulatedbyIAS8whichestablishes,asageneralrule,thatthesechangesmustbemaderetrospectivelystartingfromthemostremotedatewhenthisisfeasible.

Thismeansthat,basedonthegeneralprinciple,atthedateonwhichthechangetakesplace,theopeningbalancesofthecomparativeyearandthedataofthatyearshowninthefinancialstatementsandinthenotesmustberestated.


However,thisgeneralruleallowsforexceptions.Paragraph17ofIAS8statesthatforthepurposesofthevaluationoftheproperty,plantandmachinery,regulatedbyIAS16,thetransitionfromthecostmodeltotherevaluationmodelmustbemadeprospectively.Asaresult,therevaluationmodelhasbeenappliedprospectivelyandnotretrospectivelyasrequiredbythegeneralprincipleinIAS8.Thereforenoadjustmentoftheopeningbalancesofthecomparativeyearandofthecomparativedatahavebeenmade

Consequently,forthepropertiesusedinbusiness,underIAS16,thetransitionfromacostvaluationtoavaluationatfairvalue,requiredthedeterminationoftherelatedfairvalueat31December2019.

Thedifferencesbetweenthisvalueandthepreviousvaluedeterminedbyapplyingthe“cost”criterionarerecognised:•Ifnegative,intheincomestatementintheitem“Net income/(loss)

on property and investment property measured at fair value”,•Ifpositive,intheothercomprehensiveincomestatement,and

accumulatedinequityundertheitem“Reserve funds from revaluation”.

The“Reserve funds from revaluation” willbelinearlytransferredtotheitem“Retained earnings and reserve funds”overtheresiduallifeoftheparticularpropertyusedinbusiness.Intheeventofthesaleoftheasset,thereservenotyetreversedwillbereclassifiedtotheitem“Retained earnings and reserve funds”.

Thepayoutoftherevaluationsurplustoshareholdersisrestrictedandiseligibleonlyintheeventofthedisposalofproperty.

Asthechangeinthemeasurementmethodtookplaceattheendoftheyear,thecalculationofthedepreciationforthe2019financialyearwasmadeinlinewithcostmodel.

From2020on,propertiesusedinbusiness,measuredaccordingtotheIAS16revaluationmodel,willcontinuetobedepreciatedusingthestraight-linemethodovertheirusefullifefromthehigherrevaluedamount.

TheBankhaschosentoapplythe“restatementapproach”whenaccountingforrevaluation.Thisapproachadjuststhegrosscarryingamountsothatitmatchestherevaluationofthecarryingamountofthepropertyusedinbusinessandaconcurrentadjustmentofthecumulateddepreciation(ietherestatementapproachrequiresadjustmentofthegrosscarryingamountandthecumulateddepreciationbytheratiogivenbyFairValue/NetCarryingAmountbeforerevaluation).

Fairvaluewasdeterminedthroughtheuseofexternalindependentexpertvaluations.

Impacts deriving from the change in the valuation criterion for tangible assetsInthefinancialstatementsasat31December2019,thechangeinthemeasurementmodeloftherealestatepropertiesresultedinanoverallpositivebalancesheeteffectofMCZK329asdetailedbelow:•Forpropertiesusedinbusiness,therecognitionofarevaluationof

MCZK329grossofthetaxeffect.Thisvalue,netofdeferredtax,intheamountofMCZK261wasattributedtotheitem“Reserve funds from revaluation”inequity.Inadditiontothishighervalue,netlossesofMCZK(1)wererecognisedintheincomestatementgrossofthetaxeffectintheitem“Net income/(loss) on property and investment property measured at fair value”.

11. Intangible AssetsIntangibleassetsareassetswhichmaybeusedforaperiodlongerthanoneyear.Intangibleassetsarestatedathistoricalcostlessaccumulateddepreciationandimpairment.

Depreciationiscalculatedusingthestraight-linemethodovertheassets’estimatedusefullives.Thedepreciationperiod(overrespectiveestimatedusefullives)forintangibleassetsisasfollows:•Softwareandintangibleassets 2–7years

orinaccordancewiththecontract

Intangibleassetsareassessedforpotentialimpairmentorareductioninusefullife.Ifeventsorchangesintheconditionsoccurthatcouldresultinthecarryingamountnotbeingrecoverable,thecarryingamountiswrittendowntotherecoverableamountifthecarryingamountishigherthantheestimatedrecoverablevalue.Therecoverableamountisthehigheroffairvaluelesscostsofdisposalandthevalueinuse.

12. LeasesAsof1January2019,theBankhasimplementedthenewstandardIFRS16“Leases”,whichrevisesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonleasingaccounting.

IFRS16,effectivefrom1January2019andendorsedbyEUbyRegulationEU2017/1986of31October2017(publishedon9November2017),modifiesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonleasesand,inparticular,IAS17Leases,IFRIC4DeterminingwhetheranArrangementcontainsaLease,SIC-15OperatingLeases-IncentivesandSIC-27EvaluatingtheSubstanceofTransactionsInvolvingtheLegalFormofaLease.

IFRS16introducesanewdefinitionforleases(iereceivedleases)andconfirmsthecurrentdistinctionbetweentwotypesofleases(operatingandfinance)withreferencetotheaccountingtreatmenttobeappliedbythelessor(ieprovidedleases).Therefore,IFRS16doesnothaveanimpactforleaseswheretheBankisthelessor.


Provided Finance LeaseAleaseisclassifiedasafinanceleaseifittransferstothelesseesubstantiallyalltherisksandrewardsofownership.

Receivablesfromfinanceleasesarereportedasequaltothenetinvestmentintheleaseuponreceiptoftheleasedassetbythecustomer.Thesumoffutureminimumleaseinstalmentsandinitialfeesfortheprovisionoftheleaseequaltothegrossinvestmentinthelease(asfinanceleasecontractsincludeaclauseonpurchaseattheendoftheleaseperiod,thereisnounsecurednetbookvalue).Thedifferencebetweenthegrossandnetinvestmentintheleaserepresentsdeferredfinancialincomereportedasinterestincomeovertheleaseperiodwiththeconstantperiodicprofitabilityofthenetinvestmentinthefinancelease.Theamountsreceivedfromthelesseereducethenetinvestment.

Bankreceivablesfromfinanceleasesincludethecostofassetsleasedunderfinanceleasesincontractswheretheassethasbeenalreadyacquired,butthefinanceleasecontractwasnotcapitalisedatthebalancesheetdate.

Significantcontractualconditionsforfinanceleasesareasfollows:•Thesubjectoftheleaseisspecifiedinthetextoftheleasecontract

orintheacceptancecertificate(partoftheleasecontract);•Thedurationoftheleasebeginsonthedayoftheacceptanceof

thesubjectoftheleasebythelesseeandendsupontheexpirationoftheagreedleaseterm;

•Thelesseeisauthorisedtopurchasethesubjectoftheleasefromthelessor;

•Thesubjectoftheleaseremainsintheexclusiveownershipofthelessorthroughoutthedurationofthelease.Theownershipistransferredtothelessee/buyeronthedaythepurchasepriceasperthepurchaseagreementiscreditedtothelessor’saccount;

•ThepurchasepriceandallamountsintheleasecontractarenetofVAT.TheVATrateissetbylawandisindicatedseparatelyininvoices;

•Theconsiderationfortheleaseincludesanextraordinaryleasepayment,contractualflatfee(egtheprocessingandadministrationoftheleasecontract)andthenumberofleasepaymentsindicatedbythecontractandcalculatedfromtheacquisitioncost(inCZKoraforeigncurrency);

•Thesubjectoftheleasemustbeinsuredthroughouttheleaseterm;and

•Thelessormayprematurelyterminatetheleasecontractatanytimewithoutanoticeperiodbywithdrawalorbyanoticewithimmediateeffectifthelesseesignificantlybreachesorfailstomeettheobligationsandcommitmentsarisingfromtheleasecontract.Insuchacase,thelesseeisobligedtomakealltheremainingleasepaymentstothelessorinlinewiththepaymentcalendar.Paymentsaredueupontheprematureterminationoftheleasecontract.

Thefinanceleasereceivablesarepresentedintheitem“Financial assets at amortised cost: Loans and advances to customers”.

a) Provided Operating LeasesOtherleasesareclassifiedasoperatingleases.Theleasedassetcontinuestobeownedbytheleasecompanyaftertheterminationoftheleasecontract.

Incomefromoperatingleasesisreportedin“Other operating income and expenses”.

b) Received Operating Leases

Accounting policy applied in 2018Paymentsundercontractsforreceivedoperatingleasesareincludedin“Administrative expenses”evenlyovertheperiodoftheleasecontract.

Intheeventofcontractcancellationbeforetheendoftheleasecontract,allpenaltypaymentsareaccountedforasaperiodcostatthetimeofcancellingthelease.

Accounting policy applied in 2019IFRS16requiresthatalesseerecognisesanasset,representingtherightofuseoftheunderlyingasset,andatthesametime,aliabilityreflectingfuturepaymentsoftheleasecontractforalloftheleasingtypes.

Atinitialrecognition,suchanassetismeasuredonthebasisoftheleasecontractcashflowswhichinclude,inadditiontothepresentvalueofleasepayments,anyinitialdirectcostattributabletothelease,leasepaymentspaidbeforethecommencementdateandanyothercostsrequiredtodismantle/removetheunderlyingassetattheendofthecontractandisdecreasedbyincentivesreceived.Rightofuseassetsarereportedintheitem“Property, equipment and right of use assets”.

Afterinitialrecognition,theright-of-useismeasuredonthebasisoftheprovisionssetfortangibleassetsapplyingthecostmodellessanyaccumulateddepreciationandanyaccumulatedimpairmentlosses.Thedepreciationperiodisequaltothedeterminedleaseterm.Accumulateddepreciationandanyaccumulatedimpairmentlossesarereportedintheitem“Depreciation and impairment of property, equipment and right of use assets”.

Inthisrespect,theBankperformedactivitiestoensurecompliancewithIFRS16,especiallyinrelationtothecalculationandinitialrecognitionoftherightofuseandleaseliability,whichrepresenttheprimarydiscontinuitycomparedtotheaccountingmodelrequiredunderIAS17“Leases”.


Theactivitiesfocusedonthedevelopmentofrules,principlesandITsystemstobeusedforassessmentofnewassetsandliabilitiesandthesubsequentcalculationofeconomiceffectshavebeenfinalised.

Tocalculatetheleaseliabilityandrelatedassetsbasedontherightofuse,theBankdiscountsfutureleasepaymentsusinganappropriatediscountrate.LeasepaymentsaresetfordiscountinginthisrespectbasedoncontractualarrangementsandnetofVAT,astheobligationtopaythistaxoriginatesatthemomentaninvoiceissuedbythelessorandnotasofthedateofcommencementoftheleasecontract.

Toperformthesecalculations,paymentsmustbediscountedusingtheimplicitinterestratebasedontheleasecontractor,ifthisisnotavailable,theincrementalborrowingrate.Thisisdeterminedbasedonthecostsoffinancingaliabilityofsimilardurationandsimilarsecuritytowhatiscontainedintheleasecontract.

Leaseliabilitiesarereportedintheitem“Financial liabilities at amortised cost: Deposits from customers”basedonthecounterparty.Afterinitialrecognition,leaseliabilitiesareincreasedbytheinterestexpensescalculatedusingthesameinterestrateusedforthediscountingoftherelevantleasepaymentsanddecreasedbytheleasepayments.Theinterestexpensesarereportedintheitem“Interest expenses”.

IFRS16“Leases”–Firsttimeadoption(“FTA”)TheBankelectedtousethetransitionpracticalexpedienttonotreassesswhetheracontractis,orcontains,aleaseat1January2019.Instead,theBankappliedthestandardonlytocontractspreviouslyidentifiedasleasesapplyingIAS17andIFRIC4atthedateofinitialapplication.

Inlinewiththestandard,theBankdecidednottoapplyIFRS16forleasesofintangibleassets,short-termleasesshorterthan12monthsandleaseswithlow-valueunderlyingassets.Relatedexpensesarepresentedonanaccrualbasisintheitem“Administrative expenses”.

TheBankdecidedtouseamodifiedretrospectiveapproachandnottorecalculatethecomparativeinformationforthereportingperiodbefore1January2019.Forthepurposesofinitialrecognitionasof1January2019itrecognisedtherighttouseintheamountcorrespondingtotheleaseliabilityadjustedbyprepaidordeferredleasepayments.

OponadoptionofIFRS16,theBankrecognisedleaseliabilitiesinrelationtoleasespreviouslyclassifiedasoperatingleasesunderIAS17.Theseliabilitiesweremeasuredatthepresentvalueoftheremainingleasepayments,discountedusingthelessee’sincrementalborrowingrateasof1January2019.Theweightedaveragelessee’sincrementalborrowingrateappliedtotheleaseliabilitieson1January2019was1.02%.


IFRS16FTAimpactinrelationtoStatementofCashFlowsisincludedintheitem“Other non-monetary changes”.

Reconciliation of lease commitments disclosed as at 31 December 2018 to the Lease liability recognised as at 1 January 2019 Operatingleasecommitmentsdisclosedasat31December2018 1513DiscountedusingtheBank’sincrementalborrowingrateof1.02% 1481(Less):short-termleasesrecognisedonastraight-linebasisasexpense (12)Add:adjustmentsasaresultofadifferenttreatmentofextensionandterminationoptions 686Lease liability recognised as at 1 January 2019 2 155

Impact of IFRS 16 first time adoption on the statement of financial position (increase/(decrease)) as at 1 January 2019 on balances as at 31 December 2018 Assets Rightofuseassetsintheitem“Property,equipmentandrightofuseassets“ 2088Prepaymentsintheitem“Otherassets” (14)Liabilities Leaseliabilitiesintheitem“Financialliabilitiesatamortisedcost:Depositsfromcustomers” 2155Accruedpaymentsintheitem“Otherliabilities” (81)Net impact on equity –

Thevastmajorityofrightofuseassets/leaseliabilitiesisrelatedtotheBanks’sheadquarteranditsbranches.

AsummaryofamountsinrelationtooperatingleasesreceivedunderIFRS16asof31December2019ispresentedinthefollowingtables:

StatementofComprehensiveIncome PointinthesectionV.OtherNotes 2019 DepreciationofRightofuseassets 18.Property,equipmentandrightofuseassets (327)Interestexpenses 1.Netinterestincome (21) StatementofFinancialPosition PointinthesectionV.OtherNotes 31 Dec 2019 Rightofuseassets 18.Property,equipmentandrightofuseassets 1851Leaseliabilities 23.Financialliabilitiesatamortisedcost:Depositsfromcustomers 1911


13. Provisions for Risks and ChargesProvisionsforrisksandchargesrelatetoaprobableoutflowofanuncertainamountoveranuncertainperiodoftime.Provisionsforrisksandchargesarerecognisedwhen:•Thereisanobligation(legalorconstructive)asaresultofapast

event;•Itisprobablethatanoutflowofresourceswillberequiredtosettle

theobligation(probablemeanstheprobabilityexceeds50%);and•Theamountoftheobligationcanbereliablyestimated.

Arestructuringprovisionisrecognisedwhenthefollowingcriteriaaremet:•TheBankhaspreparedadetailedandformalrestructuringplan;•Thoseaffectedbytherestructuringhavearealisticexpectation

thattherestructuringwilltakeplaceastheimplementationoftheplanhascommencedoritsmainfeatureshavebeenannounced.

Whencreatingprovisionsforoff-balancesheetitems,theBankproceedsanalogicallyasfortheimpairmentlossesonfinancialassetsatamortisedcostorfinancialassetsatfairvaluethroughothercomprehensiveincome,inlinewithIFRS9requirements.

Theprovisionsforoff-balancesheetitemsarerecordedinthestatementoffinancialpositionintheitem“Provisions for risks and charges”.

14. Deferred BonusesTheBankaccountsfordeferredbonusesonanaccrualbasis.Relatedliabilityisrecognisedintheitem“Other liabilities”againsttheincomestatementitem“Administrative expenses”.

TheBankIncentiveSystemandtheLocalIncentiveSystemareappliedtotheidentifiedpositions.Paymentofthebonusforthegivenperiodisspreadoutoveramultiple-yearperiod.

BasedontheBankIncentiveSystem,thebonuspaymentisspreadover6years(seniormanagement)or4years(otheridentifiedstaff).Ineachyear,thebonuspaymentisconditionaluponcompletionoftheComplianceAssessment,ContinuousEmploymentCondition

andClawbackapplication,whichconfirm,reduceorentirelycanceltheentitlementtoabonuspayment.Theincentivesarepaidpartiallyincashandpartiallyinnon-monetaryinstrumentsorshares.

BasedontheLocalIncentiveSystem,thebonuspaymentisspreadover4years.Ineachyear,thebonuspaymentisconditionaluponcompletionoftheComplianceAssessment,ContinuousEmploymentConditionandClawbackapplication,whichconfirm,reduceorentirelycanceltheentitlementtobonuspayment.Theincentivesarepaidpartiallyincashandpartiallyinnon-monetaryinstruments.

15. Contingent Assets and LiabilitiesAcontingentliabilityisapossibleobligationdependingonwhethersomeuncertainfutureeventoccurs,orapresentobligationbutpaymentisnotprobableortheamountcannotbemeasuredreliably.

Acontingentassetisapossibleassetthatarisesfrompastevents,andwhoseexistencewillbeconfirmedonlybytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheentity.

TheBankdoesnotrecognisecontingentassets/liabilitiesinthestatementoffinancialposition,butregularlyreviewstheirdevelopmenttospecifywhetheraninflow/outflowofresourcesembodyingeconomicbenefitshasbecomeprobable.Wherethelikelihoodofanoutflowofeconomicbenefitsishigherthan50%,theBankrecognisesaprovision.Wherethelikelihoodofaninflowofeconomicbenefitsisalmost100%,theBankrecognisesanassetandrevenue.

16. Interest Income and Interest ExpenseInterestincomeandinterestexpensesarerecognisedintheincomestatementintheperiodtowhichtheyrelate,usingtheeffectiveinterestratemethod.Interestincomeisrecognisedusingtheeffectiveinterestrateonfinancialassetsmeasuredatamortisedcost,interestratederivativesforwhichhedgeaccountingisappliedandtherelatedamortisation/recyclingeffectofhedgeaccounting,interestbearingfinancialassetsmeasuredatFVTOCI.Interestexpensesarealsocalculatedusingtheeffectiveinterestratemethodforallfinancialliabilitiesatamortisedcost.

Interestfromloansanddepositsisaccruedonadailybasis.Interestincomeandexpensesincluderelevanttransactioncostsandtheamortisationofanydiscountorpremiumbetweentheinitialcarryingamountofaninterest-bearinginstrumentanditsamountatmaturitycalculatedonaneffectiveinterestratebasis.

InterestincomeonfinancialassetsatamortisedcostoratFVTOCIclassifiedinstage1and2(ieperformingassets)iscalculatedfromthegrosscarryingamount(iebeforeallowances).InterestincomeonfinancialassetsatamortisedcostoratFVTOCIclassifiedinstage3(iecreditimpairedassets)iscalculatedfromthenetcarryingamount(ieafterallowances)using“unwinding”.

InterestonfinancialassetsandliabilitiesatFVTPLiscalculatedusingtheeffectiveinterestratemethod.

Intheenvironmentofnegativeinterestrates,negativeinterestincomeispresentedininterestexpensesandnegativeinterestexpensesarepresentedininterestincome.

Netinterestincomecomprisesinterestincomeandinterestexpensescalculatedusingtheeffectiveinterestmethodandothermethods.Interestincomecalculatedusingtheeffectiveinterestmethodisdisclosedseparatelyintheincomestatementtoprovidesymmetricalandcomparableinformation.

17. Fee and Commission Income and Expenses

Feeandcommissionincomeandexpensesconsistoffeesandcommissionsreceived/paidbytheBankforprovidingfinancialservices,otherthanthoserelatedtotheoriginationofafinancialassetorliability,whichformapartoftheeffectiveinterestincome/expenses.

FeesandcommissionsfromfinancialservicesprovidedbytheBank,includingpaymentservices,brokerageservices,investmentadviceandfinancialplanning,investmentbankingservicesandassetmanagementservices.

FeesandcommissionincomeareaccountedforintheincomestatementastheBanksatisfiestheperformanceobligationembeddedinthecontract,accordingto“IFRS15RevenuefromContractswithCustomers”rules.

Inparticular:•Iftheperformanceobligationissatisfiedataspecificmoment

(“pointintime”),therelatedrevenueisrecognisedintheincomestatementwhentheserviceisprovided;

•Iftheperformanceobligationissatisfiedover-time,therelatedrevenueisrecognisedintheincomestatementinordertoreflecttheprogressofsatisfactionofsuchobligation.

Transactionfeescomingfromsecuritiestransactionsandpaymentservicesaretypicallybookedatthepointintimewhentheserviceisprovidedandimmediatelywithdrawnfromcustomeraccount.

Feesrelatedtomanagement,administration,depositandcustodyservices,accountadministrationandpaymentcardsarenormallyrecognisedovertimeduringthetermofthecontract.Therevenueismeasuredonstraight-linebasisandisevenlydistributedduringthetermofthecontractasthismethodbestdepictstheBank’scommitmenttostandreadyforfulfilmentofcustomerrequests.Theseservicesaremostlyinvoicedonregularbasis(typicallymonthly),selectedservicesareinvoicedinadvance.

Feesrelatedtoloansprovided,otherthanthoserelatedtotheorigination,whichformapartoftheeffectiveinterestincome,areeitherbookedatthepointintimewhentheserviceisprovidedorrecognisedovertimeduringthetermofthecontractbasedonthetypeofservicesprovided.

Theamountofrevenueslinkedtofeeandcommissionincomeisdeterminedbasedoncontractualconditions.VariabilitythatwouldhaveimpactonamountthattheBankexpectstoreceiveisnotusuallyforeseenforservicesprovidedbytheBank.

Ifacontractregardsdifferentgoods/serviceswhicharenotpricedandchargedonthestand-alonepricelevel,therevenueisallocatedamongthedifferentobligationproportionallytothestand-alonepriceofthesingleitemdelivered.Theseamountswillthereforebeaccountedforintheincomestatementonthebasisofthetimingofsatisfactionofeachobligation.

Thiscircumstance,whichisnotsignificant,mighthappenincaseofcustomerloyaltyprogramsthatrequiretoprovidegoodsorservicesforfree,orbycashing-inapricenotatmarketcondition,iftheclientreachesaspecificvolumeoffees,orincaseofprogramstoacquirenewcustomersthatassignabonustothetarget(intheformofaproductoraservice)whenitbecomesanewclient.Thestand-alonesellingpricesforfree-of-chargecustomeroptionsaredeterminedusingtheadjustedmarketassessmentmethod.Contractliabilitygivenbythecustomeroptionsisnotmaterial.

TheBankhasdecided,aspracticalexpedientpermittedunderIFRS15,nottodisclosetheamountoftransactionpriceallocatedtounsatisfiedperformanceobligationsrelatedtofeesandcommissionsfromfinancialservices.ThisisbecausetheBankdoesnottypicallycontractrespectiveservicesforperiodthatwouldbeenforceablelongerthan12months.Theonlysignificantcontractwithdeferredrevenueforlongerperiodthan12months(contractwithnon-refundableup-frontfeesnotrelatedtospecificservicestransferredtocustomerandthuslinearlyamortisedtotheitem“Fee and Commission Income”duringliveofthecontract–5and15years


respectively)isincludedintheitem“Other liabilities”inamountofMCZK661asof31December2019(asof31December2018MCZK657).

18. Dividend incomeDividendincomeisrecognisedintheincomestatementin“Dividend income”onthedatethedividendisdeclared.

19. TaxationTaxnon-deductibleexpensesareaddedtoandnon-taxableincomeisdeductedfromtheprofitfortheperiodpursuanttoCzechAccountingStandardstoarriveatthetaxableincomebaseintheCzechRepublic,whichisfurtheradjustedbytaxallowancesandrelevantcredits.Thetaxpayable(item“Tax liabilities: Income tax”) orreceivable(item“Tax receivables: Income tax”) iscalculatedusingthetaxratevalidattheyear-endandreportedintheexpectedamountofthesettlementwiththetaxauthorities.

TheincometaxofentitiesbasedinSlovakiaiscalculatedinlinewiththeregulationsapplicableintheSlovakRepublic.

Deferredtaxisprovidedonalltemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialstatementpurposesandtheamountsusedfortaxationpurposesmultipliedbytheexpectedincometaxratefortheperiodoftheassetrecoveryorliabilitysettlement,basedontaxratesthathavebeenenactedorsubstantiallyenacted.Adeferredtaxasset(item“Tax receivables: Deferred tax”)isonlyrecognisedtotheextentthattherearenodoubtsthattherewillbefuturetaxableprofitsavailableagainstwhichthisassetcanbeutilised.Adeferredtaxliability(item“Tax liabilities: Deferred tax”)isrecognisedforalltaxabletemporarydifferences.

CurrentanddeferredtaxesarerecognisedasincometaxbenefitsorexpensesintheincomestatementexceptfortaxrelatedtothefairvalueremeasurementofdebtinstrumentsatfairvaluethroughOCI,foreignexchangedifferencesandthenetmovementoncashflowhedges,whicharechargedorcreditedtoOCI.

TheseexceptionsaresubsequentlyreclassifiedfromOCItotheincomestatement,togetherwiththerespectivedeferredlossorgain.TheBankalsorecognisesthetaxconsequencesofpaymentsandissuingcosts,relatedtofinancialinstrumentsthatareclassifiedasequity,directlyinequity.

TheBankonlyoffsetsitsdeferredtaxassetsagainstliabilitieswhenthereisbothalegalrighttooffsetitscurrenttaxassetsandliabilitiesanditistheBank’sintentiontosettleonanetbasis.

20. Segment ReportingIFRS 8 Operating segmentsstatesthatpresentationandreportingofoperatingsegmentsshallbeinaccordancewithperformance

criteriamonitoredbythechiefoperatingdecision-makerwhoisresponsibleforoperationaldecisions.AttheBank,thatdecision-makeristheBoardofDirectorsoftheBank.

TheBank’sprimarysegmentreportingisbrokendownbytypesofcustomers,whichcorrespondtotheBank’svariousoperations:retailandprivatebanking,corporateandinvestmentbankingandother.

TheperformanceofallthesegmentsismonitoredmonthlybytheBoardofDirectorsandothermembersoftheBank’smanagement.Thereportingsegmentsgenerateincomeprimarilyfromtheprovisionofloansandotherbankingproducts.

Retail and private banking encompassesinparticularprovidingloans,mortgages,bankaccountmaintenance,paymentservices(includingpaymentcards),termandsavingdeposits,investmentadvisoryservices.

Corporate and investment bankingincludeespeciallythefollowingproductsandservices:providingbankingservicestocompaniesandpublicinstitutions,includingloans,leasing,factoring,bankguarantees,accountmaintenance,paymentservices,openingdocumentarylettersofcredit,termdeposits,derivativeandforeigncurrencyoperations,andcapitalmarketactivitiesinclusiveofsecuritiesunderwritingforcustomers,investmentadvisory,andconsultingonmergersandacquisitions.

Other reportingsegmentincludesbankingservicesthatarenotincludedwithintheaforementionedsegments.

21. Standards and Interpretations Effective in the Current Period

Thefollowingnewstandards,amendmentstotheexistingstandardsandnewinterpretationissuedbytheInternationalAccountingStandardsBoard(IASB)andadoptedbytheEUareeffectiveforthecurrentreportingperiod:•IFRS16“Leases”–adoptedbytheEUon31October2017

(effectiveforannualperiodsbeginningonorafter1January2019),•AmendmentstoIFRS9“FinancialInstruments”–Prepayment

FeatureswithNegativeCompensation–adoptedbytheEUon22March2018(effectiveforannualperiodsbeginningonorafter1January2019),

•AmendmentstoIAS19“EmployeeBenefits”–PlanAmendment,CurtailmentorSettlement–adoptedbytheEUon13March2019(effectiveforannualperiodsbeginningonorafter1January2019),

•AmendmentstoIAS28“InvestmentsinAssociatesandJointVentures”–Long-termInterestsinAssociatesandJointVentures–adoptedbytheEUon8February2019(effectiveforannualperiodsbeginningonorafter1January2019),

•Amendmentstovariousstandardsdueto“AnnualImprovementstoIFRSStandards(2015–2017Cycle)”resultingfromtheannual


IFRSimprovementproject(IFRS3,IFRS11,IAS12andIAS23)primarilywithaviewtoremovinginconsistenciesandclarifyingwording–adoptedbytheEUon14March2019(effectiveforannualperiodsbeginningonorafter1January2019),

•IFRIC23“UncertaintyoverIncomeTaxTreatments”–adoptedbytheEUon23October2018(effectiveforannualperiodsbeginningonorafter1January2019).

Theadoptionofthesenewstandards,amendmentstotheexistingstandardsandinterpretationhasnotledtoanymaterialchangesintheBank’sfinancialstatements,exceptfortheadoptionofIFRS16“Leases”,whoseimpactisdescribedinsectionIII.SignificantAccountingPolicies,point12.Leases.

22. Standards and Interpretations Published by the IASB, but not yet Effective or not yet Adopted by the European Union

New and amended IFRS standards issued by IASB and adopted by the EU but not yet effectiveAtthedateofauthorisationofthesefinancialstatements,thefollowingamendmentstotheexistingstandardswereissuedbyIASBandadoptedbytheEUandarenotyeteffective:•AmendmentstoIAS1“PresentationofFinancialStatements”

andIAS8“AccountingPolicies,ChangesinAccountingEstimatesandErrors”–DefinitionofMaterial–adoptedbytheEUon29November2019(effectiveforannualperiodsbeginningonorafter1January2020),

•AmendmentstoReferencestotheConceptualFrameworkinIFRSStandards–adoptedbytheEUon29November2019(effectiveforannualperiodsbeginningonorafter1January2020),

•AmendmentstoIFRS9“FinancialInstruments”,IAS39“FinancialInstruments:RecognitionandMeasurement”andIFRS7“FinancialInstruments:Disclosures”–InterestRateBenchmarkReform–adoptedbytheEUon15January2020(effectiveforannualperiodsbeginningonorafter1January2020).

Interest Rate Benchmark ReformAcomprehensivereferenceratesreform(“IBORreform”)iscurrentlytakingplacefollowingtheconcernsraisedinrecentyearsabouttheintegrityandreliabilityofmajorfinancialmarketbenchmarks.InordertoassesstherelevantrisksassociatedwiththeglobalbenchmarkreformsmandatedbytheFinancialStabilityBoard,andtakingappropriateactionstoensureanadequatetransitiontoalternativeorreformedbenchmarkratesaheadofthedeadlineoftheendof2021specifiedintherevisedEUBenchmarkRegulation(“BMR”),UniCreditGrouplaunchedinOctober2018UniCreditGroupwideprojectinordertomanagetheIBORsdiscontinuation.

TheimplicationsofIBORreformonBank’sfinancialstatementsaredeemedtobeinsignificantasmostoftheBank’scontractwith

variableinterestratesarebasedoninterestratebenchmarksthatalreadyfulfiltheconditionssetbyBMR,iebasedonPRIBORorEURIBOR.

Possibleuncertainties,involvingotherIBORs,withtimingand/orfallbackrulesappliedtooutstandingstockofassets,liabilitiesandderivativescannotbeexcluded.

Onthisregard,on15January2020theAmendmentstoIFRS9,IAS39andIFRS7–InterestRateBenchmarkReform(“theAmendment”)havebeenendorsedbytheEuropeanCommissionforuseinEU.TheAmendmentsolvesapotentialsourceofuncertaintyontheeffectsofIBORreformonexistingaccountinghedgerelationshipsthatareaffectedbytheIBORreform,clarifyingthatthereformdoesnotrequiretoterminatesuchhedgerelationships.

TheEUeffectivestartdatefortheAmendmentistheannualperiodbeginningonorafter1January2020.Astheearlieradoptionispermitted,theBankhasadoptedtheAmendmentwithreferenceto2019FinancialsforitsexistinghedgeaccountingrelationshipsinvolvingotherIBORs.AdoptingtheAmendmentallowstheBanktocontinuehedgeaccountingduringtheperiodofuncertaintyarisingfromIBORreformastheAmendmentincludesanumberofreliefs,thatapplytoallhedgingrelationshipsdirectlyaffectedbyIBORreform.TheAmendmentpermitscontinuationofhedgeaccountingevenif:•Inthefuturethehedgedbenchmarkinterestratemaynolonger

beseparatelyidentifiable;•Eventhoughthereisuncertaintyaboutthetimingandamountof

thehedgedcashflowsduetotheinterestratebenchmarkreforms;•Eventhoughthereisuncertaintyaboutthereplacementofthe

floatinginterestratesincludedinitscross-currencyinterestrateswaps;or

•Theretrospectiveassessmentofhedgeeffectivenessfalloutsidethe80%-125%rangewhenthehedgingrelationshipissubjecttointerestratebenchmarkreforms.

Thereliefsceasetoapplyoncecertainconditionsaremet.TheseincludewhentheuncertaintyarisingfromIBORreformisnolongerpresentwithrespecttothetimingandamountofthebenchmark-basedcashflowsofthehedgeditem,ifthehedgingrelationshipisdiscontinuedoronceamountsinthecashflowhedgereservehavebeenreleased.

TheBank’shedgerelationshipswithinterestratebenchmarkaffectedbyIBORreformarethosewithLIBORwhosenotionalvaluesrepresents2,1%oftotalnotionalvalueofallhedginginstrumentsasof31December2019andthusinsignificant.

DetailsoftheBank’shedgeaccountingrelationshipsaredisclosedinsectionV.OtherNotes,Note33.Contingentliabilities,contingent


assetsandfinancialderivativesandNote35Financialriskmanagement,part(c)Marketrisk.

InordertocloselyfollowthedevelopmentsonIBORsandtopropermanagethetransitionandthediscontinuationimpacts,UniCreditGroupwillcontinuouslymonitorthemarket,alsoattendingtheEuropeanWorkingGroups,theindustryworkinggroups(e.g.InternationalSwapsandDerivativesAssociationISDA)andparticipatingtotherelevantpublicconsultations.TheBankparticipatesattheUniCreditGroupwideprojectandanalysestheIBORreformaffectedcontracts.

NoneoftheBank’scurrentIBORreformaffectedcontractsincludeadequateandrobustfallbackprovisionsforacessationofthereferencedbenchmarkinterestrate.DifferentworkinggroupsintheindustryareworkingonfallbacklanguagefordifferentinstrumentsanddifferentIBORs,whichtheBankwillconsidertoimplementwhenappropriate.

New and amended IFRS standards issued by IASB but not yet adopted by the EUAtpresent,IFRSasadoptedbytheEUdonotsignificantlydifferfromregulationsadoptedbyIASB,exceptforthefollowingnewstandardsandamendmentstotheexistingstandards,whichwerenotendorsedforuseintheEUasatthedateofpublicationofthesefinancialstatements(theeffectivedatesstatedbelowareforIFRSasissuedbyIASB):•IFRS14“RegulatoryDeferralAccounts”(effectiveforannual

periodsbeginningonorafter1January2016)–theEuropeanCommissionhasdecidednottolaunchtheendorsementprocessofthisinterimstandardandtowaitforthefinalstandard,

•IFRS17“InsuranceContracts”(effectiveforannualperiodsbeginningonorafter1January2021),

•AmendmentstoIFRS3“BusinessCombinations”–DefinitionofaBusiness(effectiveforbusinesscombinationsforwhichtheacquisitiondateisonorafterthebeginningofthefirstannualreportingperiodbeginningonorafter1January2020andtoassetacquisitionsthatoccuronorafterthebeginningofthatperiod).

TheBankanticipatesthattheadoptionofthesenewstandardsandamendmentstotheexistingstandardswillhavenomaterialimpactontheBank’sfinancialstatementsintheperiodofinitialapplication.

HedgeaccountingforaportfoliooffinancialassetsandliabilitieswhoseprincipleshavenotbeenadoptedbytheEUremainsunregulated.

AccordingtotheBank’sestimates,theapplicationofhedgeaccountingtoaportfoliooffinancialassetsorliabilitiespursuanttoIAS39:“FinancialInstruments:RecognitionandMeasurement”wouldnotsignificantlyimpactthefinancialstatementsifappliedasatthebalancesheetdate.

IV. Critical accounting judgments, estimates and assumptions

Thesedisclosuressupplementthecommentaryonfinancialriskmanagement(seesectionV.OtherNotes,point35.FinancialRiskManagement).

ThepresentationofthefinancialstatementsinconformitywithIFRSrequiresBankmanagementtomakejudgments,estimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthebalancesheetdateandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Theseestimates,whichrelatetothedeterminationoffairvaluesoffinancialinstruments(wherenopublicmarketexists),impairmentofassetsandprovisionsandotherareas,arebasedontheinformationavailableatthebalancesheetdate.

Business model assessmentTheclassificationoffinancialassetsisdrivenbythebusinessmodel.Managementappliesjudgmentwhendeterminingthelevelofaggregationandportfoliosoffinancialinstrumentswhenperformingthebusinessmodelassessment.Whenassessingsalestransactions,theBankconsiderstheirhistoricalfrequency,timingandvalue,reasonsforthesalesandexpectationsaboutfuturesalesactivity.

Assessment of whether cash flows are solely payments of principal and interestJudgmentisrequiredtodeterminewhetherafinancialasset’scashflowsaresolelypaymentsofprincipalandinterestandwhethertheyareinlinewiththeSPPItest.Judgmentisrequiredtoassesswhetherrisksandvolatilityofcontractualcashflowsarerelatedtothebasiclendingarrangement.Featuresthatrequirejudgmentsincludethemodificationoftimevalueofmoney,assessmentofwhetherprepaymentfeesappliedtoloanscanbeconsideredasareasonablecompensationforearlyterminationsorprepayments.

Impairment of financial assetsAssetsaccountedforatamortisedcostandatfairvaluerecognisedthroughothercomprehensiveincome(exceptfortheFVTOCIoption),leasereceivables,tradereceivablesandloancommitmentsandfinancialguarantees(notaccountedatFVTPL)aresubjecttoimpairment.Impairmentisdeterminedintheamountof12-month(orshorterdependingontheinstrument’smaturity)expectedcreditlossforassetsthathavenotexperiencedasignificantincreaseincreditrisksinceinitialrecognition,andintheamountoflifetimeexpectedlossesforassetswhichhaveexperiencedasignificantincreaseincreditrisksinceinitialrecognitionorwhichareimpaired.Whenassessingimpairment,thereturnonfinancialassetsisevaluatedseparatelyusingthebestpossibleestimateofthepresentvalueoffuturecashflowsthatareexpectedtobereceived.Whenestimating


thesecashflows,theBankmanagementmakesjudgmentsaboutthedebtor’sfinancialsituationandthenetrealisablevalueofanyunderlyingcollateral.

ThecreationofimpairmentallowancesforexpectedcreditlossesandidentifiedcontingentliabilitiesinvolvesmanyuncertaintiesconcerningtheoutcomesoftherisksstatedaboveandrequiresBankmanagementtomakemanysubjectiveassessmentswhenestimatingtheamountoflosses.Measurementofimpairmentallowancesforexpectedcreditlossesforfinancialassetsofamortisedcostandatfairvaluethroughothercomprehensiveincomerequirestheapplicationofmodelsandsignificantjudgmentsregardingfutureeconomicconditionsandcreditbehaviour.Givencurrenteconomicconditions,theresultofestimatesmaydifferfromtheimpairmentprovisionsrecognisedasat31December2019thatarereportedinitems“Impairment losses on: Financial assets at amortised cost”,“Impairment losses on: Financial assets at fair value through other comprehensive income”and“Net provisions for risks and charges: Loan commitments and financial guarantees given”.

Determining Fair ValuesDeterminingfairvalueoffinancialassetsandliabilitiesforwhichtherearenoobservablemarketpricesrequirestheuseofvaluationtechniquesasdescribedinaccountingpolicy,sectionIII.SignificantAccountingPolicies,point3.FairValueMeasurementPrinciples.Forfinancialinstrumentsthattradeinfrequentlyandhavelowpricetransparency,fairvalueislessobjectiveandrequiresvaryingdegreesofjudgementdependingonliquidity,concentration,uncertaintyofmarketfactors,pricingassumptionsandotherrisksaffectingthespecificinstrument.

Determining lease term – valid since the implementation of IFRS 16 as of 1 January 2019Todeterminethedurationofalease,itisnecessarytotakeintoaccountthenon-cancellableperiodsetinthecontractwhenthelesseeisentitledtousetheunderlyingasset,whiletakingintoaccountthepossibilityofanextensionifthelesseeisreasonablycertaintousethepossibilityofextension.

Especiallyforcontractsthatallowtheextensionoftheleasecontractaftertheendofthefirstperiodwithouttheneedtoexplicitlyexpresstheintentiontousethisextension,theperiodisdeterminedwithrespecttofactorssuchasthelengthofthefirstperiod,existenceofplanstochangetheuseof/abandontheassetandanyothercircumstanceswithanimpactonthereasonablecertaintyoftheextensionoftheleasecontract.

Afterthecommencementdate,theBankreassessestheleasetermifthereisasignificanteventorchangeincircumstancesthatisunderitscontrolandaffectsitsabilitytoexerciseornotexercisetheoptiontorenewortoterminate.

Hedge AccountingWhendesignatingfinancialinstrumentsasqualifyinghedgerelationships,theBankhasdeterminedthatitexpectsahedgetobehighlyeffectiveoverthelifeofthehedginginstrument.

Whenaccountingforderivativesascashflowhedges,theBankhasdeterminedthatthehedgedcashflowexposurerelatestohighlyprobablefuturecashflows.

Provisions for liabilitiesTheamountsrecognisedasprovisionsarebasedonmanagement’sjudgmentandrepresentthebestestimateofexpensesneededtosettlealiabilityofuncertaintimingoruncertainamount.


V. Other notes1. Net interest income

2019 2018Interest income Financialassetsatamortisedcost: Loansandadvancestocentralbanks 5693 3446 Loansandadvancestobanks 610 648 Loansandadvancestocustomers 9942 8897Financialassetsatfairvaluethroughothercomprehensiveincome 568 648Financialassetsatfairvaluethroughprofitorloss: Heldfortrading 23 18 Mandatorilyatfairvalue – 5 Hedgingderivatives 302 511Interest income 17 138 14 173 Interest expenses Financialliabilitiesatamortisedcost: Depositsfromcentralbanks (1) (1) Depositsfrombanks (365) (249) Depositsfromcustomers (2011) (363) Debtsecuritiesissued (279) (456)Financialliabilitiesatfairvaluethroughprofitorloss: Heldfortrading (36) (20)Leaseliabilities (21) n/aHedgingderivatives (1172) –Interest expenses (3 885) (1 089)Net interest income 13 253 13 084

Negativeinterestexpensesfromliabilitiesarereportedininterestincomeinthefollowinglines:•Loansandadvancestocentralbanks–asof31December2019MCZK72(asof31December2018MCZK163)•Loansandadvancestobanks–asof31December2019MCZK462(asof31December2018MCZK436)•Loansandadvancestocustomers–asof31December2019MCZK11(asof31December2018MCZK8)

Negativeinterestincomefromassetsisreportedininterestexpensesinthefollowinglines:•Depositsfromthecentralbanks–asof31December2019MCZK(1)(asof31December2018MCZK(1))•Depositsfrombanks–asof31December2019MCZK(7)(asof31December2018MCZK(12))•Depositsfromcustomers–asof31December2019MCZK–(asof31December2018MCZK(1))


2. Net fee and commission income

2019 2018Fee and commission income from Securitiestransactions 8 8Management,administration,depositandcustodyservices 746 723Loans 1274 1034Paymentservices 945 1034Accountadministration 549 593Paymentcards 1193 1007Other 162 183Fee and commission income 4 877 4 582 Fee and commission expenses from Securitiestransactions (11) (13)Management,administration,depositandcustodyservices (99) (101)Loans (207) (171)Paymentservices (43) (43)Paymentcards (887) (780)Other (30) (16)Fee and commission expenses (1 277) (1 124)Net fee and commission income 3 600 3 458

3. Dividend income

2019 2018Dividendincome Ownershipinterests 450 699Financialassetsatfairvaluethroughprofitorlossnotheldfortradingmandatorilyatfairvalue 3 2Financialassetsatfairvaluethroughothercomprehensiveincome 2 2Total 455 703

4. Net income/(loss) from trading

2019 2018Netrealisedandunrealisedgain/(loss)fromdebtinstrumentsheldfortrading (17) 35Netrealisedandunrealisedgain/(loss)fromderivativesheldfortrading 682 1647Netrealisedandunrealisedgain/(loss)fromFXspottransactionsandfromrevaluationofreceivablesandpayablesdenominatedinFX 1223 83Net income/loss from trading 1 888 1 765

5. Net income/(loss) from hedging against risk of changes in fair value

2019 2018Hedginginstruments 198 698Hedgedinstruments (210) (696)Net income/loss from hedging against risk of changes in fair value (12) 2


6. Net income/(loss) from the sale or repurchase

2019 2018Financialassetsatamortisedcost:Loansandadvancestocustomers 136 96Financialassetsatfairvaluethroughothercomprehensiveincome 335 142Financialliabilities:Debtsecuritiesissued – (2)Net income/loss from the sale or repurchase 471 236


7. Net income/(loss) from financial assets/liabilities at fair value through profit or loss

2019 2018Shares 139 73Net income/loss from financial assets and liabilities at fair value through profit or loss 139 73

8. Impairment losses

2019 2018Financial assets at amortised cost, of which: Loans and advances to banks 3 (1) Stage1 3 (1)Loans and advances to customers (1 132) (511)Corporate Customers (744) (397) Stage1 37 – Stage2 30 (99) Stage3 (811) (298)Retail Customers (388) (114) Stage1 (75) 29 Stage2 (197) (52) Stage3 (116) (91)Financial assets at fair value through other comprehensive income 1 9 Stage1 1 9Total (1 128) (503)

9. Administrative expenses

2019 2018Personnel expenses Wagesandsalariespaidtoemployees (2318) (2219)Socialcosts (858) (813)Other (175) (158) (3 351) (3 190)Other administrative expenses Rentandbuildingmaintenance (235) (569)Informationtechnologies (1302) (1208)Promotionandmarketing (204) (249)Consumablesused (44) (59)Audit,legalandadvisoryservices (132) (184)Administrativeandlogisticservices (136) (283)Depositsandtransactionsinsurance (540) (733)Otherservices (239) (257)Other (250) (229) (3 082) (3 771)Total (6 961)

Asummaryofremunerationtokeymanagersispresentedinthefollowingtable:

2019 2018Short-termemployeebenefits 167 182Post-employmentbenefits 20 8Otherlong-termemployeebenefits 32 29Terminationbenefits – –Share-basedpayments – –Total 219 219


Keymanagersarepersonswithauthorityanddirectorindirectresponsibilitiesasregardsplanning,managingandsupervisingtheBank’sactivities,includingall(executiveandother)managers.Informationonequity-basedbonusesisincludedinsectionV.OtherNotes,point30.Equity-basedbonuses.

TheBank’saveragenumberofemployeeswasasfollows:

2019 2018Employees 3032 2921MembersoftheBoardofDirectors 7 7MembersoftheSupervisoryBoard 3 3OtherexecutivesdirectlyreportingtotheBoardofDirectors 33 30

EmployeesincludealltheemployeesoftheBank.MembersoftheBoardofDirectors,MembersoftheSupervisoryBoardandOtherexecutivesdirectlyreportingtotheBoardofDirectorsincludepersonsrepresentingtheBank.

ThematurityanalysisofleaseliabilitiesinrelationtoleasesreceivedpursuantIFRS16validfrom1January2019ispresentedinLiquidityRisktableinsectionV.OtherNotes,point35.FinancialRiskManagement.

AsummaryofoperatingleasesreceivedpursuantIAS17validuntil31December2018ispresentedinthefollowingtable:

2018 Due within Due in Due in the 1 year 1–5 years following yearsMinimumfuturepayments 337 1176 –

10. Other operating income and expenses

2019 2018Incomefromrent 43 32Otherincome 36 70Total other operating income 79 102Othertaxes (24) (12)Finesandpenalties (13) (3)Other (24) (26)Total other operating expenses (61) (41)Total 18 61

11. Cash and cash balances

31 Dec 2019 31 Dec 2018Cashinhand 4400 4600Otherbalanceswithcentralbanks 233 241Total 4 633 4 841

Forcashflowreportingpurposes,cashisdefinedascashandcashequivalents.


12. Financial assets at fair value through profit or loss

(a) Held for Trading


31 Dec 2019 31 Dec 2018Debtsecurities 2392 2236Derivatives 9306 7442Total 11 698 9 678

Fromdebtsecurities,nosecuritiesareprovidedascollateralasof31December2019(asof31December2018:MCZK6).


31 Dec 2019 31 Dec 2018Debtsecurities Publicadministration 2392 1246Other – 990Total 2 392 2 236

(b) Mandatorily at fair value


31 Dec 2019 31 Dec 2018Shares 487 346Total 487 346


31 Dec 2019 31 Dec 2018Shares Otherfinancialinstitutions 487 346Total 487 346

13. Financial assets at fair value through other comprehensive income

(a) Based on the Type of Financial Instrument

31 Dec 2019 31 Dec 2018Debtsecurities 23175 29182Shares 6 6Total 23 181 29 188

Fromdebtsecurities,MCZK2360areprovidedascollateral(asof31December2018:MCZK7930).

Debtsecuritiesareincludedinfinancialassetsatfairvaluethroughothercomprehensiveincomepursuanttoparagraph4.1.2.a)ofIFRS9–classifiedbasedonthebusinessmodelandmeetingtheSPPItest.Sharesareincludedinfinancialassetsatfairvaluethroughothercomprehensiveincomepursuanttoparagraph5.7.5.ofIFRS9–FVTOCIoption.


(b) Based on the Type of Issuer

31 Dec 2019 31 Dec 2018Debtsecurities Governmentinstitutions 16099 21244 Creditinstitutions – 909 Other 7076 7029Shares Other 6 6Total 23 181 29 188

Alldebtsecuritiesincludedinfinancialassetsatfairvaluethroughothercomprehensiveincomeasof31December2019areclassifiedbycreditqualityinstage1withthetotalallowanceofMCZK5(asof31December2018:MCZK5).

(c) Participation Interests

Registered Date of Acquisition Net book Net book Share of the BankName office acquisition price value 2019 value 2018 at 31 Dec 2019 at 31 Dec 2018CBCB–CzechBankingCreditBureau,a.s.(bankregister) Prague 10October2001 0.24 0.24 0.24 20% 20%Total 0.24 0.24 0.24

14. Financial assets at amortised cost – loans and advances to banks

(a) Analysis of Receivables from Banks, by Type

31 Dec 2019 31 Dec 2018Currentaccounts – –Termdeposits 18907 3385Loans 623 1046Reverserepurchasecommitments(seesectionV,point32) 165823 189921Obligatoryminimumreserveswithcentralbanks 591 5683Total 185 944 200 035

Thevastmajorityoffinancialassetsatamortisedcost–loansandadvancestobanksasof31December2019areclassifiedbycreditqualityatstage1withthetotalallowanceofMCZK2(asof31December2018:MCZK4).

OnlyMCZK5offinancialassetsatamortisedcost–loansandadvancestobanksasof31December2019areclassifiedbycreditqualityatstage2withthetotalallowanceofMCZK0(asof31December2018nofinancialassetsatamortisedcost–loansandadvancestobanksareclassifiedbycreditqualityatstage2).

(b) Analysis of Receivables from Banks, by Geographical Sector



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(b) Classification of Gross Receivables from Customers according to Internal Rating

31 Dec 2019 31 Dec 2018Performingreceivables–stage1and2 Internalrating1 13422 10524 Internalrating2 31917 17409 Internalrating3 47959 52053 Internalrating4 151823 145037 Internalrating5 103078 102400 Internalrating6 60352 55966 Otherinternalrating 18829 16535 Receivableswithoutinternalrating 75 732Total 427 455 400 656Non-performingreceivables–stage3 8472 9484Total 435 927 410 140

(c) Analysis of Net Receivables from Customers, by Sector

31 Dec 2019 31 Dec 2018Financialinstitutions 41322 51334Non-financialinstitutions 253537 230391Governmentsector 5375 3837Individualsandothers 127569 116027Total 427 803 401 589

(d) Analysis of Net Receivables from Customers, by Type of Collateral Provided and Classification

Maximum Bank Mortgage Corporate Other Total Net exposure and similar guarantee security collateral exposure to credit risk guarantee 31 Dec 2019 Stage1 403248 3629 101875 4553 7324 117381 285867Stage2 28336 59 5253 154 212 5678 16980Stage3 3069 20 1074 43 35 1172 725Total 427 803 3 708 108 202 4 750 7 571 124 231 303 572

31 Dec 2018 Stage1 383497 4496 97878 3825 7083 113282 270215Stage2 15811 43 3964 275 211 4493 11318Stage3 2281 10 1458 42 153 1663 618Total 401 589 4 549 103 300 4 142 7 447 119 438 282 151

Theitem“Netexposure”includes,interalia,receivablesfromprojectfundingthataresecuredbyrealestatecollateralinthenominalvalueofMCZK38,653(asof31December2018:MCZK36,452).Fortheprojectfundingofcommercialrealestate(IPRE),thecollateralqualityistakenintoaccountwhendeterminingthetransactionrating;inthesecases,thecollateralvalueisstronglycorrelatedwiththesolvencyofthedebtor.Iftheexposureisfullycollateralised,nolossallowanceiscalculated.

(e) Analysis of Net Receivables from Customers, by Geographical Sector



(f) Analysis of Net Receivables from Customers, by Industry Sector

31 Dec 2019 31 Dec 2018Realestateservices 70990 66570Financialservices 53145 51251Wholesale 21129 19674Households(individuals) 124025 112506Retail(entrepreneurs) 11997 10307Leasingandrental 3815 3797Automotiveindustry 11186 8014Powerindustry 29797 25897Other 101719 103573Total receivables from customers 427 803 401 589

(g) Analysis of Forborne receivablesTheBank’sapproachtoforbearancereportingisdisclosedinsectionV.OtherNotes,point35.FinancialRiskManagement.

Analysisofforbornereceivablesbysectors:

Gross Gross Total gross Impairment Impairment of Total Net balance performing non-performing forborne of performing non-performing impairment of forborne receivables receivables receivables receivables receivables of forborne receivables receivables 31 December 2019 Non-financialinstitutions 13322 2127 15449 (155) (1762) (1917) 13532Individualsandothers 62 52 114 – (20) (20) 94Total 13 384 2 179 15 563 (155) (1 782) (1 937) 13 626

Allforborneperformingreceivablesareclassifiedasstage2receivables,whileallforbornenon-performingreceivablesareclassifiedasstage3receivables.

Gross Gross Total gross Impairment Impairment of Total Net balance performing non-performing forborne of performing non-performing impairment of forborne receivables receivables receivables receivables receivables of forborne receivables receivables 31 December 2018 Non-financialinstitutions 6934 1652 8586 (121) (1293) (1414) 7172Individualsandothers 108 59 167 (1) (18) (19) 148Total 7 042 1 711 8 753 (122) (1 311) (1 433) 7 320

Netbalanceofforbornereceivablesrepresented3.19%ofthetotalnetreceivablesfromcustomersasof31December2019(2018:1.82%).



Thetablebelowprovidesananalysisofforbornereceivablesbalancebasedonpastduedays:

Gross balance Impairment Net balance of forborne of forborne of forborne receivables receivables receivables31 December 2019 Performingreceivables Beforedue 12575 (133) 12442 Pastdue 809 (22) 787Totalforborneperformingreceivables 13 384 (155) 13 229 Non-performingreceivables Upto90dayspastdue 2066 (1745) 321 91to180dayspastdue 31 – 31 181daysto1yearpastdue 17 (17) – Over1yearpastdue 65 (20) 45Totalforbornenon-performingreceivables 2 179 (1 782) 397Total 15 563 (1 937) 13 626

Gross balance Impairment Net balance of forborne of forborne of forborne receivables receivables receivables31 December 2018 Performingreceivables Beforedue 6551 (97) 6454 Pastdue 491 (25) 466Totalforborneperformingreceivables 7 042 (122) 6 920 Non-performingreceivables Upto90dayspastdue 860 (533) 327 91to180dayspastdue 1 – 1 181daysto1yearpastdue 374 (322) 52 Over1yearpastdue 476 (456) 20Totalforbornenon-performingreceivables 1 711 (1 311) 400Total 8 753 (1 433) 7 320

Thetablebelowshowsmovementsingrossbalanceofforbornereceivables:

Balanceasof1January2018 8315Transfertoforbornereceivablesbalance 4883Additions 211Write-offs –Settled (710)Transferfromforbornereceivablesbalance (3938)Other (8)Total gross balance of forborne receivables as of 31 December 2018 8 753Balanceasof1January2019 8753Transfertoforbornereceivablesbalance 10263Additions 156Write-offs –Settled (1124)Transferfromforbornereceivablesbalance (2483)Other (2)Total gross balance of forborne receivables as of 31 December 2019 15 563

Thetablebelowshowsmovementsintheimpairmentofforbornereceivables:

Balanceasof1January2018 (1152)Transfertoforbornereceivablesbalance (431)Chargeduringthecurrentyear (314)Releaseduringthecurrentyear 79Receivableswrittenoff–use –Transferfromforbornereceivablesbalance 386Otherdecreases (1)Total impairment of forborne receivables as of 31 December 2018 (1 433)Balanceasof1January2019 (1433)Transfertoforbornereceivablesbalance (1061)Chargeduringthecurrentyear (139)Releaseduringthecurrentyear 160Receivableswrittenoff–use –Transferfromforbornereceivablesbalance 536Otherdecreases –Total impairment of forborne receivables as of 31 December 2019 (1 937)

(h) Impairment of Receivables from Customers

Movement in Impairment of Receivables from Customers

Corporate Customers Stage 1 Stage 2 Stage 3 TotalBalanceasof1January2019 (633) (389) (6296) (7318)Chargeduringthecurrentyear (501) (384) (2221) (3106)Releaseduringthecurrentyear 538 414 1410 2362Neteffectonprofitorloss 37 30 (811) (744)Receivableswrittenoff–use – 1 1422 1423FXdifferences 1 1 – 2Total impairment of receivables from customers as of 31 December 2019 (595) (357) (5 685) (6 637)

ImpactofIFRS9 (22)Balanceasof1January2018 (632) (288) (6828) (7748)Chargeduringthecurrentyear (261) (287) (2337) (2885)Releaseduringthecurrentyear 261 188 2039 2488Neteffectonprofitorloss – (99) (298) (397)Receivableswrittenoff–use – – 835 835FXdifferences (1) (2) (5) (8)Total impairment of receivables from customers as of 31 December 2018 (633) (389) (6 296) (7 318)

Retail Customers Stage 1 Stage 2 Stage 3 TotalBalanceasof1January2019 (178) (148) (907) (1233)Chargeduringthecurrentyear (257) (322) (275) (854)Releaseduringthecurrentyear 182 125 159 466Neteffectonprofitorloss (75) (197) (116) (388)Receivableswrittenoff–use – 1 133 134FXdifferences – – – –Total impairment of receivables from customers as of 31 December 2019 (253) (344) (890) (1 487)

ImpactofIFRS9 (3)Balanceasof1January2018 (206) (95) (846) (1147)Chargeduringthecurrentyear (84) (121) (292) (497)Releaseduringthecurrentyear 113 69 201 383Neteffectonprofitorloss 29 (52) (91) (114)Receivableswrittenoff–use – – 31 31FXdifferences (1) (1) (1) (3)Total impairment of receivables from customers as of 31 December 2018 (178) (148) (907) (1 233)


Movement of Gross Amount of Receivables from Customers

Corporate Customers Stage 1 Stage 2 Stage 3 Total2019 TransferofthegrossamountofreceivablesfromStage1 (15676) 13392 2284 –TransferofthegrossamountofreceivablesfromStage2 3637 (4104) 467 –TransferofthegrossamountofreceivablesfromStage3 126 80 (206) – 2018 TransferofthegrossamountofreceivablesfromStage1 (569) 381 188 –TransferofthegrossamountofreceivablesfromStage2 411 (453) 42 –TransferofthegrossamountofreceivablesfromStage3 5 59 (64) –

Retail Customers Stage 1 Stage 2 Stage 3 Total2019 TransferofthegrossamountofreceivablesfromStage1 (4150) 3784 366 –TransferofthegrossamountofreceivablesfromStage2 1558 (1726) 168 –TransferofthegrossamountofreceivablesfromStage3 263 97 (360) –

2018 TransferofthegrossamountofreceivablesfromStage1 (31) 26 5 –TransferofthegrossamountofreceivablesfromStage2 147 (160) 13 –TransferofthegrossamountofreceivablesfromStage3 18 21 (39) –

i) Receivables Written-Off and Being Subject to Enforcement

Theamountofwritten-offreceivablesduefromcustomersstillsubjecttoenforcementasof31December2019wasMCZK3126(asof31December2018:MCZK3118).

16. Positive fair value of hedging derivatives




17. Equity investments

Registered Date of Acquisition Net book Net book Share of the Bank Share of the Bank office acquisition price value 2019 value 2018 at 31 Dec 2019 at 31 Dec 2018UniCreditLeasingCZ,a.s. Prague 14Feb2014 3211 3781 3781 100% 100%UniCreditFactoringCzechRepublicandSlovakia,a.s. Prague 20Jan2015 198 198 198 100% 100%Total 3 409 3 979 3 979

EquityinvestmentsarereportedatcostinlinewithIAS27,par.10a.



18. Property, equipment and right of use assets

31 Dec 2019 31 Dec 2018Property and equipment for operations Buildingsandland 849 718Leaseholdimprovementsofrentbuildings 164 160Fixturesandfittings 16 21ITequipment 27 61Other 48 28Right of use assets Buildingsandland 1811 n/aOther 40 n/aTotal 2 955 828

(a) Movements in Property and Equipment Held for Operations

Buildings Leasehold Fixtures IT Other Total and land improvements and equipment of rent buildings fittings Cost at 1 January 2018 1573 926 176 553 220 3488Accumulateddepreciationandimpairmentat1January2018 (976) (693) (150) (467) (175) (2461)Net Book Value at 1 January 2018 597 233 26 86 45 987 Additions 21 31 1 24 3 80Depreciationcharges (63) (104) (7) (49) (20) (243)OtherandFXrategainsorlosses 3 – 1 – – 4Net Book Value at 31 December 2018 558 160 21 61 28 828 Costat31December2018 1602 957 162 531 215 3467Accumulateddepreciationandimpairmentat31December2018 (1044) (797) (141) (470) (187) (2639)

Buildings Leasehold Fixtures IT Other Total and land improvements and equipment of rent buildings fittings Cost at 1 January 2019 1602 957 162 531 215 3467Accumulateddepreciationandimpairmentat1January2019 (1044) (797) (141) (470) (187) (2639)Net Book Value at 1 January 2019 558 160 21 61 28 828 RevaluationtoFairvalue–changeofaccountingpolicy 1081 n/a n/a n/a n/a 1081Accumulateddepreciationadjustment(basedonrevaluedamount)–changeofaccountingpolicy (753) n/a n/a n/a n/a (753)Additions 18 41 2 24 25 110Depreciationcharges (19) (36) (4) (61) (5) (125)Transfertotheitem“Non-currentassetsheldforsale” (31) 0 0 0 0 (31)OtherandFXrategainsorlosses (5) (1) (3) 3 0 (6)Net Book Value at 31 December 2019 849 164 16 27 48 1 104 FairValue(Buildingsandland)/Costat31December2019 2587 991 154 529 236 4497Accumulateddepreciationandimpairmentat31December2019 (1738) (827) (138) (502) (188) (3393)

(b) Movements in Right of Use Assets

Buildings and land Other TotalNet Book Value at 1 January 2019 2 045 43 2 088Additions 105 18 123Disposals (11) – (11)Depreciation (327) (21) (348)OtherandFXrategainsorlosses (1) – (1)Net Book Value at 31 December 2019 1 811 40 1 851 Costat31December2019 2138 61 2199Accumulateddepreciationandimpairmentat31December2019 (327) (21) (348)

19. Intangible assets

Movements in Intangible Assets

Software TotalCost at 1 January 2018 2570 2570Accumulatedamortisationandimpairmentat1January2018 (827) (827)Net Book Value at 1 January 2018 1 743 1 743Additions 438 438Amortisationcharges (258) (258)Other 27 27 Net Book Value at 31 December 2018 1 950 1 950Costat31December2018 3071 3071Accumulatedamortisationandimpairmentat31December2018 (1121) (1121)

Software TotalCost at 1 January 2019 3071 3071Accumulatedamortisationandimpairmentat1January2019 (1121) (1121)Net Book Value at 1 January 2019 1 950 1 950Additions 561 561Amortisationcharges (491) (491)Other 77 77 Net Book Value at 31 December 2019 2 097 2 097Costat31December2019 3698 3698Accumulatedamortisationandimpairmentat31December2019 (1601) (1601)

20. Other assets

31 Dec 2019 31 Dec 2018Deferredexpensesandaccruedincome 284 305Tradereceivables 180 213Receivablesfromsecurities 6 9Clearingandsettlementaccounts 788 851Dividendprepayment 450 –Other 2 7Total 1 710 1 385 Impairmentlossesonotherassets (18) (18)Net other assets 1 692 1 367

DividendprepaymentrepresentsadividendreceivablefromthesubsidiaryUniCreditLeasingCZ,a.s.,whichis100%ownedbytheCompany.


21.Financial liabilities held for trading

Based on the Type of Financial Instrument

31 Dec 2019 31 Dec 2018Liabilitiesfromshortsales 3010 2606Derivatives 8527 6108Total 11 537 8 714

22. Financial liabilities at amortised cost – deposits from banks

Analysis of Deposits from Banks by Type

31 Dec 2019 31 Dec 2018Depositsfromcentralbanks 6631 17945Currentaccounts 5527 3972Loans 1778 2000Termdeposits 106657 110152Saleandrepurchaseagreements(seesectionV,point32) 11433 30003Other 5 –Total 132 031 164 072

TheBankparticipatesintheEuropeanCentralBankTLTROII(TargetedLongTermRefinancingOperation)programme.TheBankborrowedMEUR263.9inMarch2017withamaturityof4years,untilMarch2021.ThefundingobtainedisusedtorefinancecorporateloansinSlovakia.Theinstrumentisreportedintheline“Depositsfromcentralbanks”.TLTROIIhasthecharacteristicsofalong-termrepotransactionandassuchitissecuredbycollateralacceptedbytheEurosystem.

23. Financial liabilities at amortised cost – deposits from customers

Analysis of Deposits from Customers by Type

31 Dec 2019 31 Dec 2018Currentaccounts 354091 350342Termdeposits 55643 21230Saleandrepurchaseagreements(seesectionV,point32) – –LeaseLiabilities 1911 n/aOther 3372 3332Total 415 017 374 904

Lease liability 2019Asat1January 2155Additions 112Accretionofinterest 21Leasepayments (367)OtherandFXrategainsorlosses (10)Total at 31 December 1 911

TheBankhadtotalcashoutflowsforleasesofMCZK379in2019(incl.thoseleasesthatarenotin-scopeofIFRS16).



24. Financial liabilities at amortised cost – issued debt securities

Analysis of Issued Debt Securities

31 Dec 2019 31 Dec 2018Mortgagebonds 16812 18677Structuredbonds 3329 3918Otherissueddebtsecurities 17 173Total 20 158 22 768

Structuredbonds(includedintheline“Structuredbonds”andpartlyintheline“Mortgagebonds”)includeembeddedoptions–currency,equity,commodityandinterestrateoptions–inthetotalnominalvalueofMCZK4,068(at31December2018:MCZK6,451).ThepositivefairvalueofthesederivativesofMCZK4isreportedunder“Financialassetsheldfortrading”(at31December2018:MCZK34);thenegativefairvalueofthesederivativesofMCZK182isrecognisedunder“Financialliabilitiesheldfortrading”(at31December2018:MCZK234).

25. Negative fair value of hedging derivatives




26. Other liabilities

31 Dec 2019 31 Dec 2018Deferredincomeandaccruedexpenses 1228 1292Tradepayables 640 939Payablestoemployees 609 679Unsettledsecuritytransactions 20 11Clearingandsettlementaccounts 5221 5129Other 166 122Total 7 884 8 172

27. Provisions for risks and charges

Provisionsforrisksandchargesincludethefollowingitems:

31 Dec 2019 31 Dec 2018Provisionsforoff-balancesheetcreditexposures 719 1095 a.Stage1 113 141 b.Stage2 98 42 c.Stage3 508 912Legaldisputes 30 55Provisionforrestructuring 60 8Other 60 119Total 869 1 277

(a) Provisions for Off-Balance Sheet Credit Exposures

Stage 1 Stage 2 Stage 3 TotalBalanceat1January2019 141 42 912 1095Chargeduringtheyear 90 125 244 459Releaseduringtheyear (117) (68) (645) (830)Other–FXrategainsorlosses (1) (1) (3) (5)Total provisions for off-balance sheet credit items at 31 December 2019 113 98 508 719

ImpactofIFRS9 106Balanceat1January2018 193 100 303 596Chargeduringtheyear 168 44 622 834Releaseduringtheyear (220) (102) (13) (335)Other–FXrategainsorlosses 1 – – 1Total provisions for off-balance sheet credit items at 31 December 2018 141 42 912 1 095

(b) Other Provisions

Legal Restructuring Other Total disputes provisionBalanceat1January2019 55 8 119 182Chargeduringtheyear 22 57 – 79Usageduringtheyear (32) (4) (59) (95)Releaseofredundantprovisionsandother (15) (1) – (16)Total other provisions at 31 December 2019 30 60 60 150

Balanceat1January2018 67 100 174 341Chargeduringtheyear 8 – 57 65Usageduringtheyear (21) (85) (105) (211)Releaseofredundantprovisionsandother (1) (7) (7) (13)Total other provisions at 31 December 2018 55 8 119 182

28. Income tax

(a) Tax in the Income Statement

31 Dec 2019 31 Dec 2018Currenttaxpayable (2178) (1903)Prioryeartax 24 33Deferredtax (8) (73)Total income tax (2 162) (1 943)

TheincometaxoftheBankdiffersfromthetheoreticaltaxwhichwouldariseifthetaxrateeffectiveintheCzechRepublicwereappliedasfollows:

31 Dec 2019 31 Dec 2018Profit/lossfortheyearbeforetax 11595 10866Taxcalculatedusingthetaxrateof19% (2203) (2065)Impactofprioryearsonthecurrenttaxpayable 24 33Non-taxableincome 128 153Taxnon-deductibleexpenses (72) (70)Impactofprioryearsonthedeferredtax (9) (4)ImpactofahigherSlovaktaxrateonthecurrenttaxpayableanddeferredtax (29) (22)Unrecognisedtemporarydifferencesindeferredtax – –Recognitionofpreviouslyunrecogniseddeferredtax – 30ImpactofachangeintheSlovaktaxrate – –Other (1) 2Total income tax (2 162) (1 943)

TheeffectivetaxrateoftheBankis18.6%(2018:17.9%).


(b) Tax in the Statement of Financial PositionTheBankmadeincometaxprepaymentsintheamountofMCZK1,609(2018:MCZK1,449),madeanadditionalpaymentofMCZK377(at31December2018:theBankmadeanadditionalpaymentofMCZK357)andreportsanincometaxliabilityofMCZK418tothetaxauthorityintheCzechRepublic(at31December2018:aliabilityofMCZK386)andaliabilityofMCZK152fromthetaxauthorityintheSlovakRepublic(at31December2018:areceivableofMCZK17).

(c) Deferred Tax Asset/LiabilityDeferredincometaxiscalculatedonalltemporarydifferencesusingthebalancesheetliabilitymethodundertheapplicationoftheappropriatetaxrate.

Whencalculatingnettaxassetsandliabilities,theBankoffsetsdeferredtaxassetsagainstdeferredtaxliabilitiesarisingfromincometaxpaidtothesametaxinstitutioninthesametaxcategory.

BankManagementbelievesthattheBankwillbeabletofullyrecoverdeferredtaxassetsreportedasof31December2019basedonthecurrentandanticipatedfutureleveloftaxableprofits.

(i) Net Deferred Tax Asset

31 Dec 2019 31 Dec 2018 Deferred tax Deferred tax Deferred tax Deferred tax asset liability asset liabilityTaxnon-deductibleprovisions 137 – 161 –Impairmentofloansandoff-balancesheetitems 689 – 680 –Differencesarisingfromthenetbookvaluesoftangibleassets 59 – 58 –Differencesarisingfromthenetbookvaluesofintangibleassets – (93) – (52)Reservefromrevaluationofhedginginstruments 188 – – (49)Reservefromrevaluationoffinancialassetsatfairvaluethroughothercomprehensiveincome – (134) – (147)Reservefromrevaluationofpropertymeasuredatfairvalue – (68) n/a n/aOther 75 – 35 –Deferredtaxliability/asset 1148 (295) 934 (248)Net deferred tax asset 853 686

29. Issued capital and share premiumTherecorded,issuedandfullypaidcapitaloftheBankamountedtoMCZK8,755asof31December2018and2019.

(a) Shareholder Structure

Nominal value Share Registered of shares premium OwnershipEntity office in MCZK in MCZK percentageAt 31 Dec 2019 UniCreditS.p.A Italy 8755 3495 100.00Total 8 755 3 495 100.00 At 31 Dec 2018 UniCreditS.p.A Italy 8755 3495 100.00Total 8 755 3 495 100.00


(b) Capital Breakdown

31 Dec 2019 31 Dec 2019 31 Dec 2018 31 Dec 2018 Number MCZK Number MCZK of shares of shares OrdinarysharesofCZK16,320,000 100 1632 100 1632OrdinarysharesofCZK13,375,000 200 2675 200 2675OrdinarysharesofCZK10,000 436500 4365 436500 4365OrdinarysharesofCZK7,771,600 10 78 10 78OrdinarysharesofCZK46 106563 5 106563 5Total issued capital 8 755 8 755

Thesharesarefreelytransferrable.OrdinarysharesincludetheentitlementtoparticipateintheBank’sgovernanceandtheentitlementtoashareonprofit.

Bothat31December2019and31December2018,theBankheldnotreasuryshares.

30. Equity-based bonusesTheBankhasnotimplementedanyemployeemotivationorstabilisationprogrammeforthepurchaseoftreasurysharesorremunerationintheformoftreasuryshareoptions.

31. Retained earnings and reserve fundsThefollowingtableshowsthebreakdownofthereservefunds:

31 Dec 2019 31 Dec 2018Reservefunds 3372 3372Special-purposereservefund 13240 12423Retainedearnings 37732 35701Total 54 344 51 496

Aspartofthecross-bordermerger,thesharecapitalofUniCreditBankSlovakiaa.s.ofMCZK6,058,thereservefundofUniCreditBankSlovakiaa.s.ofMCZK1,166andretainedearningsofUniCreditBankSlovakiaa.s.ofMCZK4,387weretransferredintoaspecial-purposereservefunddenominatedinEUR.Thisspecial-purposesreservefundcanonlybeusedtosettlethelossoftheBank.In2019,thisfundwasincreasedbyMEUR32(profitoftheSlovakbranchfor2018).

32. Borrowings and lending of securities, repurchase and reverse repurchase transactions

(a) Reverse Repurchase Transactions

31 Dec 2019 31 Dec 2018Loansandadvancestobanks 165823 189922Fairvalueofsecuritiesreceived 162878 186686 Loansandadvancestocustomers – –Fairvalueofsecuritiesreceived – –

Nosecuritiesreceivedascollateralaspartofreverserepurchasetransactionsarefurtherprovidedascollateralunderrepurchasetransactionsasof31December2019andasof31December2018.



(b) Repurchase Transactions

31 Dec 2019 31 Dec 2018Depositsfrombanks 11433 30003Fairvalueofsecuritiesprovided 11193 33443 Depositsfromcustomers – –Fairvalueofsecuritiesprovided – –

33. Contingent liabilities, contingent assets and financial derivatives

Intheordinarycourseofbusiness,theBankconductsvariousfinancialtransactionsthatarenotreportedintheBank’sstatementoffinancialpositionandthataredesignatedasoff-balancesheetfinancialinstruments.

Unlessstatedotherwise,theinformationbelowrepresentsthenominalvaluesofoff-balancesheettransactions.

(a) Contingent Liabilities

Legal DisputesAsof31December2019,theBankassessedthelegaldisputesinwhichitactedasadefendant.TheBankrecordedprovisionsfortheselegaldisputes(seesectionV,point27).Inadditiontothesedisputes,legalactionsarisingfromordinarybusinessactivitiesweretakenagainsttheBank.ThemanagementdoesnotanticipatetheresultoftheselegaldisputestohaveamaterialimpactontheBank’sfinancialposition.

TaxationCzechandSlovaktaxlegislationhassignificantlychangedinrecentyears.Manycomplicatedlegislationareasremainedunresolved,anditmaynotbepossibletodeterminetheinterpretationoftaxationauthoritiesinspecificcasesinadvance.Itisnotpossibletoquantifytheconsequencesofthisuncertainty;theymayberesolvedsolelyundertheconditionthattherelevantlegalregulationsareadoptedinpracticeorintheeventthatofficialinterpretationsareavailable.

Contingent Liabilities arising from Guarantees, Loan Commitments and Other Contingent LiabilitiesContingentliabilitiespredominantlyincludeundrawnamountsofloans.LoancommitmentsissuedbytheBankincludeissuedcreditandguaranteecommitments,andundrawnamountsofcreditsandoverdraftloanfacilities.RevocablecommitmentsincludeundrawnloansthatmayberevokedbytheBankatanytimewithoutstatingthereason.Onthecontrary,irrevocablecommitmentsrepresenttheBank’sliabilitytoprovideacreditorissueaguarantee,theperformanceofwhich,eventhoughboundonmeetingthecontractualtermsbytheclient,istoacertainextentindependentoftheBank’swill.

ContingentliabilitiesarisingfromfinancialguaranteesincludeirrevocablecommitmentsmadebytheBanktorepaydebtsinlieuofthedebtorowedtotheguaranteebeneficiaryincasethedebtordefaultsontheirobligationtopaysubjecttotermsandconditionsoftheindividualcontracts.Assuch,commitmentsbearsimilarrisktoloans,theBankcreatestherelevantprovisionsusingasimilaralgorithmasforprovisions(seesectionV.OtherNotes,point35.FinancialRiskManagement).

DocumentarylettersofcreditrepresentawrittenirrevocablecommitmentoftheBankissuedbasedonaclient’srequest(orderer),toprovideathirdpartyortoitsorder(recipient,beneficiary),withcertainperformance,undertheconditionthetermsoftheletterofcreditaremetbyaspecifieddeadline.Forthesefinancialinstruments,theBankcreatesprovisionsusingasimilaralgorithmasappliedforcredits(seesectionV.OtherNotes,point35.FinancialRiskManagement).

TheBankrecordedprovisionsforoff-balancesheetitemstocoverexpectedcreditlossesandarisingfromtheimpairmentlossesontheoff-balancesheetitemsduetocreditrisk.Asof31December2019,theaggregateprovisionsamountedtoMCZK719(asof31December2018:MCZK1,095),seesectionV.OtherNotes,point27.Provisions(a).


Gross Impairment Net amount losses amount31 Dec 2019 Lettersofcreditandfinancialguarantees 45297 (464) 44833 –Stage1 42130 (64) 42066 –Stage2 2686 (26) 2660 –Stage3 481 (374) 107Othercontingentliabilities(undrawncreditfacilities) 125656 (255) 125401 –Stage1 117997 (49) 117948 –Stage2 7316 (72) 7244 –Stage3 343 (134) 209Total 170 953 (719) 170 234

31 Dec 2018 Lettersofcreditandfinancialguarantees 41210 (881) 40329 –Stage1 39087 (93) 38994 –Stage2 1183 (19) 1164 –Stage3 940 (769) 171Othercontingentliabilities(undrawncreditfacilities) 114131 (214) 113917 –Stage1 110372 (48) 110324 –Stage2 3244 (23) 3221 –Stage3 515 (143) 372Total 155 341 (1 095) 154 246

(b) Contingent AssetsTheBankhasanoptiontodrawacreditlineprovidedbytheEuropeanBankforReconstructionandDevelopment(EBRD)amountingtoMCZK385.9(MEUR15)withmaturityon23February2023.TheBankadditionallyhasanoptiontodrawacreditlinefromTheExport-ImportBankofTheRepublicofChinaofMCZK226.2(MUSD10)withthemaximummaturityoffiveyearsfromthetimeofdrawing.

(c) Financial Derivatives

(i) Nominal and Fair Values of Financial Derivatives

Nominal Positive Negative value fair value fair value31 Dec 2019 Trading instruments – interbank market (OTC) Options 76298 705 701Interestrateswapcontracts 538519 4883 4304Forwardrateagreements(FRA) – – –Crosscurrencyswapcontracts 143887 2289 1777Foreignexchangeforwardsandswaps 40320 145 500Otherinstruments 2310 1249 1245Total 801 334 9 271 8 527 Trading instruments – stock exchange Futures 1880 35 –Total trading instruments 803 214 9 306 8 527 Hedging instruments Interestrateswapcontracts 631855 6720 6761Crosscurrencyswapcontracts 112354 479 863Total hedging instruments 744 209 7 199 7 624

Nominal Positive Negative value fair value fair value31 Dec 2018 Trading instruments – interbank market (OTC) Options 87741 769 78Interestrateswapcontracts 391801 3692 3039Forwardrateagreements(FRA) – – –Crosscurrencyswapcontracts 230178 2281 1917Foreignexchangeforwardsandswaps 49515 532 240Otherinstruments 1562 138 131Total 760 797 7 412 6 108Trading instruments – stock exchange Futures 1646 30 –Total trading instruments 762 443 7 442 6 108Hedging instruments Interestrateswapcontracts 585163 5492 4997Crosscurrencyswapcontracts 164358 144 660Total hedging instruments 749 521 5 636 5 657

(ii) Residual Maturity of Financial Derivatives Concluded on the Interbank Market

Up to 1 year 1 – 5 years Over 5 years Total31 Dec 2019 Trading instruments Interestrateinstruments 68763 308187 189506 566456Equityinstruments 3560 4871 – 8431Currencyinstruments 162796 63221 – 226017Other 2226 84 – 2310Total 237 345 376 363 189 506 803 214 Hedging instruments Interestrateinstruments 100547 269524 261784 631855Currencyinstruments 77425 11864 23065 112354Total 177 972 281 388 284 849 744 209

31 Dec 2018 Trading instruments Interestrateinstruments 107122 233981 86522 427625Equityinstruments 5694 7520 – 13214Currencyinstruments 245990 73503 549 320042Other 1549 13 – 1562Total 360 355 315 017 87 071 762 443 Hedging instruments Interestrateinstruments 163500 256394 165269 585163Currencyinstruments 140486 20771 3101 164358Total 303 986 277 165 168 370 749 521

34. Segment reporting

TheBankpresentsthesegmentinformationbasedonperformancecriteriaasdisclosedinsectionIII.SignificantAccountingPolicies,point20.Segmentreporting.



(a) Segment Information by Client Category

Retail Corporate Other Total and private and investment banking banking31 Dec 2019 Netinterestanddividendincome 3660 7790 2258 13 708Othernetincome 1725 3724 654 6 103 Depreciation/impairmentofpropertyandequipmentandintangibleassets (451) (268) (245) (964)Impairmentloss (883) (321) 76 (1 128)Segmentexpenses (3196) (3344) 416 (6 124)Profitbeforetax 855 7581 3159 11 595Incometax (2162) (2162)Resultofsegment 855 7 581 997 9 433 Segmentassets 139097 519185 14270 672 552Segmentliabilities 183921 398111 14754 596 786

Retail Corporate Other Total and private and investment banking banking31 Dec 2018 Netinterestanddividendincome 3837 8084 1866 13 787Othernetincome 1452 3994 149 5 595 Depreciation/impairmentofpropertyandequipmentandintangibleassets (217) (117) (167) (501)Impairmentloss (100) (413) 10 (503)Segmentexpenses (3659) (3873) 20 (7 512)Profitbeforetax 1313 7675 1878 10 866Incometax (1943) (1943)Resultofsegment 1 313 7 675 (65) 8 923 Segmentassets 124023 523001 13116 660 140Segmentliabilities 171559 399552 15447 586 558

Theincometaxforallsegmentsispresentedinthesegment“Other”.

TheBankdoesnothaveacustomeroragroupofcustomersthatwouldcomprisemorethan10percentoftheBank’sincome.

(b) Information on Geographical Areas

Czech Republic Slovakia Total31 Dec 2019 Netinterestanddividendincome 11249 2459 13 708Othernetincome 4835 1268 6 103 Depreciation/impairmentofpropertyandequipmentandintangibleassets (756) (208) (964)Impairmentloss (400) (728) (1 128)Segmentexpenses (4468) (1656) (6 124)Profitbeforetax 10460 1135 11 595Incometax (1811) (351) (2162)Resultofsegment 8 649 784 9 433 Segmentassets 543839 128713 672 552Segmentliabilities 501713 95073 596 786


Czech Republic Slovakia Total31 Dec 2018 Netinterestanddividendincome 11181 2606 13 787Othernetincome 4071 1524 5 595 Depreciation/impairmentofpropertyandequipmentandintangibleassets (347) (154) (501)Impairmentloss 20 (523) (503)Segmentexpenses (5321) (2191) (7 512)Profitbeforetax 9604 1262 10 866Incometax (1723) (220) (1943)Resultofsegment 7 881 1 042 8 923 Segmentassets 532456 127684 660 140Segmentliabilities 478548 108010 586 558

35. Financial risk management

(a) IntroductionTheBankisexposedtothefollowingtypesofrisk:•Creditrisk;•Marketrisk;and•Operationalrisk.

TheBoardofDirectorsisresponsiblefortheoverallriskmanagementstrategywhichitapprovesandassessesonaregularbasis.TheBoardofDirectorshasestablishedtheAssetsandLiabilitiesCommittee(ALCO),theCreditCommitteeandtheCommitteeforOperationalRiskManagement.Thesecommitteesareinchargeofmonitoringandmanagingindividualriskswithregardtoindividualspecificfields.ThecommitteesreporttotheBoardofDirectorsonaregularbasis.

(b) Credit RiskTheBankisexposedtocreditriskasaresultofitstrading,lending,hedginginvestmentandbrokerageactivities.

Creditriskismanagedatthelevelofindividualcustomers(transactions)andattheportfoliolevel.

TheCreditUnderwriting,CreditOperationsandStrategicCreditRiskManagementdepartmentsaredirectlyresponsibleforcreditriskmanagement.ThesedepartmentsareorganisationallyindependentofthebusinessdivisionsandreportdirectlytoamemberoftheBoardofDirectorsinchargeoftheRiskmanagementdivision(ChiefRiskOfficer).

Underitscreditriskmanagementpolicy,theBankdefinesthegeneralprinciples,methodsandtoolsappliedwhenidentifying,measuringandmanagingcreditrisk.TheBank’screditriskmanagementpolicyissetbytheStrategicCreditRiskManagementdepartment.Thispolicyisreviewedonaregularbasisatleastonceayear.

Initsinternalguidelines,theBankdefinestheunderwritingapprovalcompetencies,includingthedefinitionofresponsibilitiesandcompetenciesoftheCreditCommittee.

Thetablebelowpresentsthemaximumcreditriskexposurerelatedtobalancesheetassets.Maximumcreditriskexposureexcludesimpactofreceivedcollateral:

2019 2018Cashandcashbalances 4633 4841Financialassetsatfairvaluethroughprofitorloss,of which: 12185 10024 Heldfortrading 11698 9678 Mandatorilyatfairvalue 487 346Financialassetsatfairvaluethroughothercomprehensiveincome 23181 29188Financialassetsatamortisedcost,of which: 613747 601624 Loansandadvancestobanks 185944 200035 Loansandadvancestocustomers 427803 401589Positivefairvalueofhedgingderivatives 7199 5636Otherassets 1692 1367Total 662 637 642 656

Thetablebelowpresentsthemaximumcreditriskexposurerelatedtooff-balancesheetitems.Maximumcreditriskexposureexcludesimpactreceivedcollateral:

2019 2018Lettersofcreditandfinancialguarantees 44833 40329Othercontingentliabilities(undrawncreditfacilities) 125401 113917Total 170 234 154 246


(i) Credit Risk Management at the Level of Individual Customers

Corporate customersCreditriskatthelevelofindividualcustomersismanagedbyanalysingcustomers’financialhealthanddeterminingmaximumcreditriskexposure(creditlimit).Analysisisfocusedonthecustomers’competitivepositionintherelevantmarket,aratingoftheirfinancialstatements,predictionoffutureliquidity,etc.Theresultofthisanalysisis,interalia,aratingthatreflectstheprobabilityofclientdefaultandtakesintoaccountquantitative,qualitativeandbehaviouralfactors.Analysingthefinancialpositionandsettingthelimitsforcreditexposureandratingisundertakenpriortothegrantingofaloan.Subsequentlytheratingisreviewedandcreditworthinessisreassessedatleastannually.

Theinternalratingsystemcomprises26ratinglevels(1to10adding“+”and“–”tocertainratingclasses,suchas:1+;1;1−;2+;etc).Whenclassifyingcustomers,theBankassesses(inadditiontothenumberofdayspastduewithregardtooverduereceivables,ifany)financialindicatorsrelatedtotheclient(suchasthestructureofandproportionbetweenthestatementoffinancialposition,theincomestatement,andthecashflowstatement),managementquality,ownershipstructure,individualcustomers’marketposition,reportingquality,productionequipment,account-usehistory,etc.Customersindefaultareassignedinternalratingsof8–,9or10.

Retail customersForreceivablesfromindividuals,theabilityoftheclienttofulfiltheir

obligationsisdeterminedusingastandardisedsystemofcreditscoringbasedonrisk-relevantfeatures(creditapplicationscoring).TheBanksetsandregularlyupdatestheprobabilityofclientdefault,usingthebehaviouralscoringmethod.Aclient’sfinalratingcombinesbothapplicationandbehaviouralcomponents.

Credit registriesTheBankusesinformationprovidedbycreditregistriesasanadditionalsourceofinformationforassessingaclient’sfinancialstandingforbothCorporateandRetailClient

CollateralInaccordancewithitscreditriskmanagementstrategy,priortograntingtheloans,theBankmayrequirethatthecustomerspostcollateralfortheloans.Theamountandtypeofcollateraldependsontheclient’sfinancialhealthandthetypeoftheloan.TheBankconsidersthefollowingtobeacceptabletypesofcollateral:cash,investmentgradesecurities,guaranteesissuedbyotherreputableentities(includingbankguarantees),andpledgesinformofmortgageoverrealestateproperty.Whendeterminingtherealisablevalueofcollateral,theBankprincipallytakesintoconsiderationthefinancialhealthofthepartyprovidingthecollateralforpersonalcollateral(egguarantees)andthenominalvalueofthecollateralfornon-personalcollateralssuchaspledgeofproperty.ThecollateralisvaluedbasedonexpertappraisalsmadebyaspecialdepartmentoftheBankorexternalvaluations.Therealisablevalueofcollateralisdeterminedbasedonthisappraisedvaluebyapplyinganadjustingco-efficientthatreflectstheBank’sabilitytorealisethegivencollateral,asandwhenneeded.

(ii) Credit Risk Management at the Portfolio LevelTheBankregularlyanalysesandmonitorstrendsinindividualcreditsub-portfolios.

TheBankmonitorsitsoverallcreditriskexposure,ieittakesintoaccountallon-balanceandoff-balancesheetexposuresandquantifiestheexpectedlossesfromitscreditexposureonregularbasis.Theexpectedlossisdeterminedbasedoninternalestimatesofriskparameters,ietheprobabilityofdefault(PD),exposureatdefault(EaD)andlossgivendefault(LGD).

TheBankregularlymonitorsitscreditexposuretoindividualindustries,countries,oreconomically-connectedgroupsofdebtors.

TheBankassessestheconcentrationriskoftheloanportfolioonaregularbasisandestablishesconcentrationlimitsasappropriateinrelationtospecificindustries,countries,oreconomically-connectedgroupsofdebtors.

(iii) Classification of Receivables, Impairment Losses and Provisions

TheBankcategorisesitsreceivablesarisingfromfinancialactivitiesonaregularbasis,inaccordancewithIFRS9Financialinstruments;inparticular,itdividesitsreceivablesintonon-performingreceivables=receivablesindefault(stage3)andperformingreceivables=receivableswithoutdefault(stages1and2).

Stage2receivablesarereceivableswhichhaveexperiencedsignificantincreaseincreditriskbetweentwosubsequentbalancesheetdates.Allreceivablesareregularlymonitoredfordefaultandsignificantincreaseincreditrisk.

Impairment Losses on Non-Performing ReceivablesImpairmentlossesrelatedtoindividualnon-performingreceivables(iestage3underIFRS9FinancialInstruments)arerecognisedifcarryingamountofindividualreceivablesislessthanrecoverableamountandtheBankdoesnotwriteoffsuchreceivables(fullyorpartially).TheBankassessesrecoverableoftheamountofallreceivablesinrespectofwhichthedebtorsareindefault:(i)individuallyiftheamountofthereceivableexceedsanequivalentofMEUR1,(ii)collectivelyusingrecoveryratederivedfromtherelevantmodelwhichreflectshistoricrecoveryexperience.TheBankwritesoffreceivablesifnoincomeisanticipatedonitoronthecollateralreceivedwithregardtothegivenreceivable.

Theimpairmentlossis(i)forindividuallyassessedreceivablesequaltothedifferencebetweenthecarryingamountofthereceivableandthediscountedvalueofestimatedfuturecashflows;(ii)forcollectivelyassessedreceivablesequaltothelifetimeexpectedcreditlossdeterminedonportfoliobasis.

Impairment Losses on Performing ReceivablesForperformingreceivablesthathaveexperiencednosignificantincreaseincreditrisksinceorigination(iestage1),theBankdeterminestheimpairmentlossastheexpectedcreditlossuntilmaturityofthereceivable,butnomorethanthenext12months(1-yearexpectedloss).ForPerformingreceivablesthathaveexperiencedasignificantincreaseincreditrisksinceorigination,butarestillperformingreceivables(iestage2),theBankdeterminestheimpairmentlossastheexpectedlossuntilthefinalmaturityofthereceivable(lifetimeexpectedcreditloss).

Provisions for Off-Balance Sheet ItemsTheBankrecognisessuchprovisionsusingthesamemethodsasareusedindeterminingimpairmentlossesonreceivableportfolioswhiletakingintoaccountconversionfactorsrelatedtothespecifictypeoftheoff-balanceexposure.

(iv) ForbearanceTheBankclassifiesloanreceivablesasforborneiftheoriginallyagreedpaymentconditionswerechangedsincetheloanprovisionduetocustomers’financialdifficulties(changespredominantlyincludepaymentdeferral,temporarypaymentreduction,postponementoftheultimateduedate,etc).Theseitemsarerecognisedinthestatementoffinancialpositioneitherasnon-performingloanreceivablesorperformingloanreceivables.Loanreceivableswithachangeintheoriginally-agreedpaymentconditionsaregenerallyclassifiedasnon-performingloanreceivables.Followingarobustassessment,theBankmaycategoriseindividualreceivablesasperformingreceivables,despiteachangeintheconditions.ThisapproachisappliedifthereasonsforthechangeofthepaymentconditionsarenotseriousandtheBankdoesnotanticipateincurringalossfromthefuturecollectionofsuchloanreceivables.

Performingreceivablesalsoincludereceivablesoriginallyclassifiedasnon-performingreceivablesuponthechangeofpaymentconditionsandwhichweresubsequentlytransferredintothecategoryofPerformingloanreceivablesbecausethedebtorcompliedwithnewly-agreedconditionsinlinewiththeBank’sinternalrules.Thisgroupaccountsforthemajorityofloanreceivablesreportedasforborne–performingreceivables.

LoanreceivableswithchangedpaymentconditionsaremanagedbyCreditRestructuring&WorkoutDepartmentandaresubjecttostandardrestructuringandworkoutproceduresandmonitoring.Theexceptionisreceivablesthatarenotassessedasnon-performingreceivablesuponachangeofthepaymentconditions.TheseloansareonlymanagedbyCreditRestructuring&WorkoutDepartmentafterathoroughassessmentoftheneedtousetheknow-howofthisspecialisedunit.Whenreleasingreceivablesfromthemanagement


ofthisunit,thestatuesofindividualcasesandtheneedtousetheknow-howoftheCreditRestructuring&Workoutstaffisalsocarefullyreviewed.

Theperiodforwhichtheclientisdesignatedasforborneisreferredtoastheprobationperiodandlastsaminimumoftwoyearsfromtheclientdefault/forbearanceiftheforbearancewaswithoutclientdefault.Inaddition,thisperiodcanonlybeterminatediftheclientfulfilstheagreedconditionsdulyandtimely,isnotindelayinexcessof30days.Foramortizingloans,thedebtmustbereducedbyatleast10%duringprobationperiod.

Duetothesizeoftheforborneportfolioandtheaboveproceduresandpractices,wehavenotidentifiedanyseriousthreatsfortheBankresultingfromthisportfolio.Thisissupportedbythefactthataportionofreceivableswithchangedpaymentconditionsinordertoovercomethedebtor’sdeterioratedfinancialpositionisreclassifiedoncemoreasnon-performing(recognisedintheBank’sstatementoffinancialpositionasnon-performingforbornereceivable–seeabove).

(v) Recovery of ReceivablesTheBankhasestablishedtheCreditWorkout&RestructuringDepartmentwhichmanagesthereceivableswhoserecoverabilityisatrisk(bothNon-performingandPerforming).Thepurposeofthisunitinvolvesachievingoneoranumberofthefollowinggoalsinrespectofrisk-bearingcreditreceivables:a) “Revitalisation”ofthecreditarrangement,restructuringand

subsequentreclassificationintostandardreceivables;b) Fullrepaymentofthecredit;c) Minimisationofthelossfromthecredit(realisationofcollateral,

saleofthereceivablewithadiscount,etc);and/ord) Preventionofadditionallossesfromtheloan(comparisonof

futureexpensesversusincome).

(c) Market Risk

(i) TradingTheBankholdstradingpositionsinvariousfinancialinstruments,includingfinancialderivatives.ThemajorityoftheBank’sbusinessactivitiesaredrivenbytherequirementsoftheBank’scustomers.Dependingonthepredicteddemandofitscustomers,theBankholdsasupplyoffinancialinstrumentsandmaintainsaccesstothefinancialmarketsthroughquotingofthebidandofferpricesandbytradingwithothermarketmakers.ThesepositionsarealsoheldforthepurposeofshorttermprofittakingontheexpectedfuturedevelopmentoffinancialmarketsandtheinstrumentsareclassifiedinlinewithIFRS9Financialinstrumentsasheldfortrading.TheBank’sbusinessstrategyisthusaffectedbyshorttermprofittakingandmarket-makinganditsgoalistomaximisenetincomefromtrading.

TheBankmanagesrisksassociatedwithitstradingactivitiesatthelevelofindividualtypesofriskandtypesoffinancialinstruments.Thebasictoolsusedformarketriskmanagementarelimitsonthevolumesapplicabletoindividualtransactions,limitsforportfoliosensitivity(basispointvalue,orBPV),stoplosslimits,andvalueatrisk(VaR)limits.Thedescriptionquantitativemethodsappliedinriskmanagementareincludedinthefollowingsection“Marketriskmanagement”.

ThemajorityofderivativesarenegotiatedontheOTCmarketduetothenon-existenceofapublicmarketforfinancialderivativesintheCzechRepublic.

(ii) Market Risk ManagementBelowaredescribedselectedtypesofrisktowhichtheBankisexposedthroughitstradingactivitiesaswellasmanagingthepositionsresultingfromtheseactivitiesandmanagingtheserisks.ThereisalsomarketriskexposureintheBank’sbankingbookwhichcorrespondstoportfoliosoffinancialinstrumentsnotheldfortrading.MarketRiskismeasuredfortheTradingandBankingbookseparatelyandalsocollectively.TheproceduresappliedbytheBanktomeasureandmanagetheserisksaredescribedindetailinthefollowingparagraphs.

TheBankisexposedtomarketriskarisingfromitsopenpositionsininterestrate,equityandforeigncurrencyinstrumenttransactionsthataresensitivetochangesinthesituationonthefinancialmarket.

TheBank’sriskmanagementfocusesonmanagingthetotalnetexposuretointerestrateriskresultingfromtheBank’sstructureofassetsandliabilities.TheBankmonitorsinterestrateriskbymeasuringthesensitivityofparticularassetsandliabilitieswhichmature/repriceinspecifictimeinterval.Thissensitivityisexpressedbythechangeinthevaluesofassetsandliabilitiesifinterestratesincreasebyonebasispoint(BPV).Forhedgeaccountingpurposes,theBankidentifiesspecificassets/liabilitiescausingthismismatchsothattheaccountingcriteriafortheapplicationofhedgeaccountingaremet.

Value at RiskValueatRiskrepresentsthemainmethodformanagingmarketrisksarisingfromtheBank’sopenpositions.ValueatRiskrepresentsthepotentiallossfromanunfavourablemovementonthemarketwithinacertaintimeperiodatacertainconfidencelevel.ValueatRiskismeasuredbasedona1-dayholdingperiodandaconfidencelevelof99%.TheBank’sValueatRiskmodelcalculationshavethefollowinglimitations:– Theone-dayholdingperiodassumesthatallpositionscanbe

closedduringasingleday.Thisassumptiondoesnotnecessarilyapplytomarketswithlowerliquidity.

– The99%confidenceleveldoesnotreflectallpossiblelossesthatcanoccuratthisconfidencelevel.



– VaRiscalculatedfromthepositionsattheendofthetradingdayanddoesnotconsiderthepositionswhichcanbeopenedonan“intra-day”basis.

– Usinghistoricaldataasabasisfordeterminingpossiblefuturedevelopmentsdoesnotnecessarilycoverallpossiblefuturescenarios,especiallycrisisscenarios.

TheBankusesVaRtomeasureinterestraterisk,foreigncurrencyrisk,equityriskandothertypesofriskconnectedwiththenegativemovementsinthepricesofmarketfactors(spreadrisk,optionrisk,etc).TheaggregatestructureofVaRlimitsisapprovedbytheAssetsandLiabilitiesCommittee(ALCO).Atleastonceayear,thestructureandamountoflimitsarerevisedinaccordancewiththeBank’sneedsanddevelopmentsonthefinancialmarkets.TheresultsoftheVaRcalculationarepublisheddailyforselectedusers(BoardofDirectors,selectedemployeesoftheFinancialMarketsDepartment,theMarketRiskDepartment,theAssets&LiabilitiesManagementUnit,andtheMARSdepartmentoftheparentbank/sub-holding).

TheVaRcalculationdividesthecalculatedriskintointerestrateandcreditportions.ThecreditportionofVaRiscalculatedbasedonthevolatilityofthecreditspreadbetweensecuritiesandtheriskfreeinterestrate.Forthispurpose,theyieldcurvesofparticularissuers,industries,orgroupsofissuerswithidenticalratingaredownloadedintothesystemformarketriskmanagement.Specificsecuritiesaremappedtotheseyieldcurvesandthevolatilityofthecreditspreadiscalculated.TheBankregularlyreassessesthemappingofdebtsecuritieswiththerelevantyieldcurvesand,ifnecessary,thedebtsecuritiesarere-mappedtocurvesthatreliablyreflectthecreditriskofthespecificdebtsecurities

TheoutputsoftheVARcalculationmodelareback-testedandcomparedwiththeresultsofthechangestointerestratesonthefinancialmarketsonadailybasis.IftheBankidentifiesanyinaccuracies,themodelisadjustedtocorrespondwiththecurrentdevelopmentonthefinancialmarkets.

ThetablebelowshowstheValuesatRisk:

At 31 Dec Average At 31 Dec Average 2019 for 2019 2018 for 2018AggregateVaR 238.7 188.9 207.4 245.3VaRofcurrencyinstruments 2.3 5.4 4.7 4.2VaRofequityinstruments – – – –

Interest Rate RiskTheBankisexposedtointerestrateriskbecauseofmismatchininterest-bearingassetsandliabilitiesmaturities,re-pricingperiodsandnotionalsindefinedtimebuckets(gapormismatchrisk).Intheeventofachangeininterestrates,theBankisalsoexposedtointerestrateriskasaresultofthedifferentmechanismortimingofadjustmentstoparticulartypesofinterestrates(suchasPRIBOR),declaredinterestratesondeposits(basisriskandyieldcurverisk).InterestriskmanagementisfocusedonoptimisingtheBank’snetinterestincomeinaccordancewiththestrategiesapprovedbytheBoardofDirectors.

TheBank’soverallinterestratepositionasof31December2019ischaracterisedbysensitivitytoadecreaseinrates–thisisreflectedinthenegativeaggregatebasispointvalue(BPV)–iftheinterestratesinindividualcurrenciesincreasedinparallel,therewouldbeadecreaseinmarketrevaluation.TheBank’sinterestratepositionisdiversifiedintoindividualtimeperiods,duetowhichthesensitivitytointerestratevolatilityisnotnecessarilyidentical(positive,negative),andtoanumberofcurrencies,throughwhichthedifferentinterestraterisksrelatedtoindividualcurrenciesarecompensatedundertheaggregateassetandliabilityportfolio.ThemajorsensitivityisconnectedtoCZKandEUR.

Interestratederivativesaregenerallyusedtomanagethemismatchbetweentheinterestsensitivityofassetsandliabilities.ThesetransactionsarecarriedoutinaccordancewiththeinternalLiquidityManagementPolicyandtheinternalFundsTransferPricingPolicyandbytheStrategyofInterestRateRiskManagementintheBankingBookapprovedbytheBoardofDirectors.PartoftheBank’sincomeisgeneratedbytheintentionalmismatchbetweentheassetsandliabilitiesthatareinterestrate-sensitive.

TheBankappliesa“BasisPointValue(BPV)”approachformeasuringinterestsensitivityofassetsandliabilities.BPVrepresentsthechangeinthepresentvalueofcashflowsderivedfromindividualinstrumentsifinterestratesincreasebyonebasispoint(0.01%),ieitrepresentsthesensitivityofinstrumentstointerestraterisks.

TheBankhassetupinterestraterisklimitstorestrictoscillationofnetinterestincomeresultingfromchangesofinterestratesby0.01%(the“BPVlimit”).

Stress Testing of Interest Rate RiskTheBankcarriesoutweeklystresstestingofinterestratesensitivitybysimulatingimpactonNetinterestincomeunderofhistoricalscenariosofsignificantmovementsinfinancialmarkets,internallydefinedlowprobabilityscenariosandUniCreditGroupmacroscenarios.

Thestandardstressscenariocorrespondstoaparallelshiftintheyieldcurveby200basispointsformajorcurrencies(CZK,EUR,USD),andthemainalternativescenario(moneymarketstresstest)correspondstoaparallelshiftintheshorttailoftheyieldcurveby250basispointsformajorcurrencies(CZK,EUR,USD),withamaturityofuptotwoyears.

ThefollowingtableshowstheimpactoftheparallelshiftoftheyieldcurveontheBank’sresults.TheBankusestheeuroasthebasecurrencyforstresstesting.AllvaluesaretranslatedtoCZKusingtheCzechNationalBank’sexchangerateasoftherespectivedate.


Basic stress test MM stress test –200bp +200bp +250bp*) Value at 31 Dec 2019 7030 (4704) (1976)Averagefortheperiod 8003 (4237) (1948)Maximumvalue 11843 (2417) (174)Minimumvalue 4265 (5999) (3763) Value at 31 Dec 2018 10583 (5276) (2308)Averagefortheyear 7067 (4664) (1324)Maximumvalue 14537 (1516) 1054Minimumvalue 1173 (6735) (2530)

On7December2015,stressscenariosfornegativemarketinterestrateswereintroduced.

Asalargeportionofthemarketinterestratecurveshowsnegativeratesandafurtherdecreasecannotbeexcluded,theBankappliesastressscenariotoreflectapossibleNetinterestincomeeffectofafurtherdecreaseinthemarketinterestrates.Thisapproachisappliedtotheentireportfolioofassetsandliabilities,includingproductsforwhichadecreaseofthemarketinterestrates(asanelementofclientrates)intonegativevaluesisrestrictedincontracts(aswellasinthegeneralbusinesstermsandconditions).Usingthisapproach,theBankalsoreflectsthepossibleriskofprofit/lossforproductswherethemarketinterestratescannotachievenegativevaluesaccordingtocontracts.

Hedge AccountingAspartofitsmarketriskmanagementstrategy,theBankhedgesagainstinterestraterisk.TheBank’shedgestrategyusesbothfairvaluehedgesandcashflowhedges.

Fairvaluehedgesareusedforreducingthepriceinterestrateriskofissuedbonds,purchasedsecurities,loansordeposits.CashflowhedgesareusedtoeliminateuncertaintyinfuturecashflowsinordertostabiliseNetinterestincome;inotherwordstomanagereinvestmentrisk.

Fair Value HedgingHedgedinstrumentsincludefinancialassetsandliabilitiesrecognisedatamortisedcostanddebtfinancialassetsatfairvaluethroughothercomprehensiveincome.Hedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).

Attheinceptionofthehedgerelationship,theBankperformsaprospectivefairvaluehedgeeffectivenesstestonthebasisoffuturechangesinfairvaluesofhedgedandhedginginstrumentsandofexpectedinterestratesmovements(the“prospectivetest”).Onthebasisofactualinterestratedevelopments,atestofeffectivenessiscarriedoutmonthly.TheBankundertakesthemonthlyeffectivenesstestingtobeabletodetectpossiblenon-effectivenessofthehedgerelationships.

Forparticularhedgeditemsandhedgingtransactions(loans,deposits,securities,interestrateswaps,etc),specificdatesandamountsofcashflowsaredeterminedfromtheinceptionofahedgerelationshipuntilthematurityofthehedgedinstrument.Thepresentvaluesofparticularcashflowsfortherelevantdate(dateofeffectivenessmeasurement)aredeterminedonthebasisofthediscountfactorsforspecificcurrencies.Thefairvalueofatransactionisthesumofdiscountedcashflowsfromtherelevanttradeatthegiventime.Thecumulativechangeofthefairvalueisdeterminedbycomparingthefairvalueinthegiventimewiththefirstrevaluation.Thesecumulativechangesarefurthernettedforrealisedcashflowsbyaddingthembackorsubtracting.Thehedgeeffectivenessismeasuredusingthecomparisonofthecumulativechangeinthefairvalueofthehedgedandhedginginstrument.Thehedgeisconsideredeffectiveiftheproportionofcumulativefairvaluechangesofhedgedandhedginginstrumentsisbetween80%and125%.

Inthetablebelow,theBanksetsouttheaccumulatedfairvalueadjustmentsarisingfromthecorrespondingcontinuinghedgerelationships,irrespectiveofwhetherornottherehasbeenachangeinhedgedesignationduringtheyear.

31 Dec 2019 Carrying amount of hedged items Accumulated amount (excluding the accumulated of fair value adjustments fair value hedge adjustment) on the hedged items Assets Liabilities Assets LiabilitiesFair Value Hedge Micro fair value hedges Interestraterisk–see“A”below 18590 (6706) (112) (28)Portfolio fair value hedges Interestraterisk–see“B”below – (35280) – (1097)

31 Dec 2018 Carrying amount of hedged items Accumulated amount (excluding the accumulated of fair value adjustments fair value hedge adjustment) on the hedged items Assets Liabilities Assets LiabilitiesFair Value Hedge Micro fair value hedges Interestraterisk–see“A”below 15626 (40513) 46 (47)Portfolio fair value hedges Interestraterisk–see“B”below – (30690) – (608)

ThecorrespondingStatementofFinancialPositionlineitems,wherethehedgeditemandthecumulativefairvaluechangesarerecorded,include:“A”representshedgingof” –Loanspresentedintheline“Financial assets at amortised cost, of which: Loans and advances to customers”, –Purchasedbondspresentedintheline“Financial assets at fair value through other comprehensive income”, –Money-marketstradespresentedintheline“Financial liabilities at amortised cost, of which: Deposits from banks”and –Issuedbondspresentedintheline“Financial liabilities at amortised cost, of which: Debt securities issued”.“B”representshedgingofcurrentsaccountspresentedintheline“Financial liabilities at amortised cost, of which: Deposits from customers”.

ThetablebelowsetsouttheoutcomeoftheBank’shedgingstrategy,inparticular,tochangesinthefairvalueofthehedgeditemsandhedginginstrumentsinthecurrentyearandthecomparativeyear,usedasthebasisforrecognisingineffectiveness:

31 Dec 2019 Gains/(losses) Hedge attributable to the hedged risk ineffectiveness Hedged Hedging items instruments Fair Value Hedge Micro fair value hedges Interestraterisk 282 (292) (10)Portfolio fair value hedges Interestraterisk (489) 489 –

31 Dec 2018 Gains/(losses) Hedge attributable to the hedged risk ineffectiveness Hedged Hedging items instruments Fair Value Hedge Micro fair value hedges Interestraterisk (88) 88 –Portfolio fair value hedges Interestraterisk (608) 610 2


Cash Flow HedgingTheBankusesthecashflowhedgingtoeliminateinterestrateriskonanportfoliobasis.Hedgeditemsarefutureforecastedtransactionsintheformofinterestincomeandexpenseswhichissensitivetochangesinmarketinterestrates.Futureforecastedtransactionsarisefromconcludedcontractsandfutureforecastingtransactionsestablishedonthebasisofportfolioreplicationmodels.Thehedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).

TheeffectivenessofacashflowhedgeisdeterminedinaccordancewiththeUniCreditGroupstandards,basedonanapprovedmethodology.First,thenominalvalues(dividedintoassetsandliabilities)ofexternaltradesbycurrencyareidentified,forwhichtheinterestcashflow(establishedonthebasisofthere-financing–the“funding”rate)maybeconsideredvariable(hedgedcashflows).Secondly,forthesesamecurrenciesthenominalinterestcashflowsofvariablehedginginstrumentpartsareidentifiedandaremonitoredonanetbasis(ienetcashin/outflows).

TheBankmonitorswhethertheabsolutevalueoffuturevariableinterestcashflowsfromhedgeddealsforspecifictimeperiodsexceedstheabsolutevalue(havingtheoppositesign,plusorminus)ofnetvariablecashflowsfromhedgingderivatives.

Thetimeperiodsaredefinedasfollows:upto2yearsbymonths,subsequentlybyindividualyears,10-15years,andmorethan15years.Thehedgeisjudgedeffectiveiftheaggregatevolumeofvariableinterestcashflowsfromhedgeddealsisgreaterthanthenetvariableinterestcashflowsfromhedgeddeals(designatedwithanopposite–positive/negativesign)ineachofthetimeperiods,measuredseparatelyforeachmonitoredcurrency.

ThetablebelowsetsouttheBank’sfinancialassetsandfinancialliabilitiesdesignatedashedgeditemsincontinuingcashflowhedgerelationshipsandtheoutcomeoftheBank’shedgingstrategy:

31 Dec 2019 Cash flow hedge reserve Changes in fair value of hedging instruments used for measuring hedge ineffectiveness in total Effective Hedge portion ineffectiveness Continuing Discontinued recognised recognised hedges hedges inOCI intheincome statementinnet tradingincomeCash Flow Hedge Portfolio cash flow hedges Interestraterisk–see“A”below (1196) 212 (1238) (1238) – 31 Dec 2019 Cash flow hedge reserve Changes in fair value of hedging instruments used for measuring hedge ineffectiveness in total Effective Hedge portion ineffectiveness Continuing Discontinued recognised recognised hedges hedges inOCI intheincome statementinnet tradingincomeCash Flow Hedge Portfolio cash flow hedges Interestraterisk–see“A”below (123) 376 (418) (418) –

ThecorrespondingStatementofFinancialPositionlineitems,wherethehedgeditemandthecumulativefairvaluechangesarerecorded,include:“A”compriseshedgingof: –Loanspresentedintheline“Financial assets at amortised cost, of which: Loans and advances to customers” andline “Financial assets

at amortised cost, of which: Loans and advances to banks”, –Purchasedfloatbondspresentedintheline“Financial assets at fair value through other comprehensive income”,


–Depositspresentedintheline“Financial liabilities at amortised cost, of which: Deposits from customers”andline“Financial liabilities at amortised cost, of which: Deposits from banks”and

–Issuedbondspresentedintheline“Financial liabilities at amortised cost, of which: Debt securities issued”.

ThematurityprofileofhedginginstrumentsisincludedinsectionV.OtherNotes,Note33.Contingentliabilities,contingentassetsandfinancialderivatives.

Currency RiskAssetsandliabilitiesdenominatedinforeigncurrencies,includingoff-balancesheetexposures,comprisetheBank’sexposuretocurrencyrisks.Bothrealisedandunrealisedforeignexchangegainsandlossesarereporteddirectlyintheincomestatement.

TheBankhasestablishedasystemofcurrencyrisklimitsbasedonitsnetcurrencyexposureinindividualcurrencies.

Thefollowingtableshowsthestructureofassetsandliabilitiesbycurrency:

CZK EUR USD CHF Other TotalAt 31 Dec 2019 Cashandcashbalances 2167 2233 115 22 96 4633Financialassetsatfairvaluethroughprofitorloss,of which: 11070 628 487 – – 12185 Heldfortrading 11070 628 – – – 11698 Mandatorilyatfairvalue – – 487 – – 487Financialassetsatfairvaluethroughothercomprehensiveincome 11527 11654 – – – 23181Financialassetsatamortisedcost 390197 220129 2026 21 1374 613747of which: Loansandadvancestobanks 184288 1326 200 13 117 185944 Loansandadvancestocustomers 205909 218803 1826 8 1257 427803Positivefairvalueofhedgingderivatives 7199 – – – – 7199Equityinvestments 3979 – – – – 3979Property,equipmentandrightofuseassets 2024 931 – – – 2955Intangibleassets 1753 344 – – – 2097Taxreceivables 238 615 – – – 853Non-currentassetsheldforsale 0 31 – – – 31Otherassets 917 695 74 – 6 1692Totalassets 431071 237260 2702 43 1476 672552 Financialliabilitiesatfairvaluethroughprofitorloss,of which: 11537 – – – – 11537 Heldfortrading 11537 – – – – 11537Financialliabilitiesatamortisedcostof which: 283317 264202 15828 637 3222 567206 Depositsfrombanks 3830 125831 2367 0 3 132031 Depositsfromcustomers 270194 127506 13461 637 3219 415017 Debtsecuritiesissued 9293 10865 – – – 20158Negativefairvalueofhedgingderivatives 7624 – – – – 7624Changesinfairvalueoftheportfolioofhedgedinstruments 672 424 – – – 1096Taxliabilities 418 152 – – – 570Otherliabilities 4208 3383 209 5 79 7884Provisionsforrisksandcharges 379 397 62 9 22 869Equity 60001 15682 170 1 (88) 75766Totalliabilitiesandequity 368156 284240 16269 652 3235 672552Gap 62915 (46980) (13567) (609) (1759) –


CZK EUR USD CHF Other TotalAt 31 Dec 2018 Cashandcashbalances 2381 2162 111 26 161 4841Financialassetsatfairvaluethroughprofitorloss,of which: 8201 1477 346 – – 10024 Heldfortrading 8201 1477 – – – 9678 Mandatorilyatfairvalue – – 346 – – 346Financialassetsatfairvaluethroughothercomprehensiveincome 11555 17498 135 – – 29188Financialassetsatamortisedcost 392898 204504 2059 16 2147 601624of which: Loansandadvancestobanks 196093 3483 315 5 139 200035 Loansandadvancestocustomers 196805 201021 1744 11 2008 401589Positivefairvalueofhedgingderivatives 5636 – – – – 5636Equityinvestments 3979 – – – – 3979Propertyandequipment 284 544 – – – 828Intangibleassets 1688 262 – – – 1950Taxreceivables 109 594 – – – 703Non-currentassetsheldforsale – – – – – –Otherassets 651 624 84 2 6 1367Totalassets 427382 227665 2735 44 2314 660140 Financialliabilitiesatfairvaluethroughprofitorloss,of which: 8714 – – – – 8714 Heldfortrading 8714 – – – – 8714Financialliabilitiesatamortisedcost 255884 290040 12221 589 3010 561744of which: Depositsfrombanks 15818 148223 29 – 2 164072 Depositsfromcustomers 228759 130356 12192 589 3008 374904 Debtsecuritiesissued 11307 11461 – – – 22768Negativefairvalueofhedgingderivatives 5657 – – – – 5657Changesinfairvalueoftheportfolioofhedgedinstruments 500 108 – – – 608Taxliabilities 386 – – – – 386Otherliabilities 4145 3470 370 5 182 8172Provisionsforrisksandcharges 503 673 81 – 20 1277Equity 59230 14544 (124) – (68) 73582Totalliabilitiesandequity 335019 308835 12548 594 3144 660140Gap 92363 (81170) (9813) (550) (830) –


Equity RiskEquityriskistheriskofmovementinthepricesofequityinstrumentsheldintheBank’sportfolioandoffinancialderivativesderivedfromtheseinstruments.Themainsourceofthisriskistradinginequityinstruments,althoughequityriskalsoarisesasaresultoftheBank’snon-tradingactivities.Therisksassociatedwithequityinstrumentsaremanagedusingtradinglimits.Themethodsusedtomanagetheserisksaredescribedabove.

Liquidity RiskLiquidityriskarisesduetothewaytheBank’sfinancesitsactivitiesandmanagesitspositions.ItincludestherisktheBankwouldbeunabletofinanceitsassetsusinginstrumentswithappropriatematurityandtheriskthattheBankwouldbeunabletodisposeofitsassetsforanappropriatepricewithinthenecessarytimeperiod.

TheBankhasaccesstodiversifiedsourcesoffunds,whichcomprisedepositsandothersavings,securitiesissued,loanstaken(includingsubordinatedloans)anditsownequitycapital.ThisdiversificationmakestheBankflexibleandlimitsitsdependencyonasinglefundingsource.TheBankregularlyevaluatestheliquidityrisk,inparticularbymonitoringchangesinthestructureoffundingandcomparingthesechangeswiththeBank’sliquidityriskmanagementstrategy,whichisapprovedbytheBoardofDirectors.Aspartofitsliquidityriskmanagementstrategy,theBankholdsaproportionofitsassetsinhighlyliquidfunds,suchasstatetreasurybillsandsimilarbonds.

LiquidityriskisevaluatedregularlybytheBankbyanalysingofdifferencesbetweentheresidualmaturityofassetsandliabilitiesacrosstimebuckets.Twoapproachesareused:short-termandlong-term(structural).Intheshort-termapproach,theBankdailymonitorsandindetailthedifferencebetweenliquidityinflowsandoutflows.Limitsaresetforcumulativeinflowsandoutflowswith

anoutlookofseveralweeks.Iflimitsarebreached,theBanktakesactiontoreducetheliquidityrisk.Inthelong-term(structural)perspective,theBankmonitorsthedifferencebetweenthematurityofassetsandliabilitiesforperiodslongerthanoneyear.TheBanksetslimitsandappropriateactionistakeniftheyarebreached(egbyacquiringlong-termsourcesofrefinancing).

TheBankhasacontingencyplanintheeventofaliquiditycrisis.Thisplandefinestheroles,responsibilitiesandprocessofcrisis

management.Italsodefinesthepossiblemeasureswhichshouldbeconsideredintheeventofanemergencysituation.

Stresstestsofshort-termliquidityareperformedbytheBankonaweeklybasis.ThestresstestsverifytheBank’sabilitytoovercomeextremesituations,suchassystemicinterruptionoftheinter-bankmoneymarket,adecreaseintheBank’screditrating,ITsystembreakdowns,andreputationrisktotheBank.Thestressscenarios’resultsarepresentedtotheALCO.


Thefollowingtableshowsundiscountedcashflowsofassetsandliabilities,issuedguaranteesandprovidedloanfacilities:

Carrying Net Up to 3 months 1–5 Over Unspe- amount cash flow 3 months – 1 year year 5 years cified.At 31 Dec 2019 Cashandcashbalances 4633 4633 4633 – – – –Financialassetsatfairvaluethroughprofitorloss, of which: 12185 12735 938 1949 5071 4773 4 Heldfortrading 11698 12248 938 1949 5071 4286 4 Mandatorilyatfairvalue 487 487 – – – 487 –Financialassetsatfairvaluethroughothercomprehensiveincome 23181 25471 139 2290 19870 3172 –Financialassetsatamortisedcost 613747 650927 232084 61486 178826 173817 4714of which: Loansandadvancestobanks 185944 190551 184616 1861 3238 823 13 Loansandadvancestocustomers 427803 460376 47468 59625 175588 172994 4701Positivefairvalueofhedgingderivatives 7199 7199 94 457 2296 4352 –Equityinvestments 3979 3979 – – – – 3979Property,equipmentandrightofuseassets 2955 2955 – – – – 2955Intangibleassets 2097 2097 – – – – 2097Taxreceivables 853 853 (66) – 919 – –Non-currentassetsheldforsale 31 31 – 31 – – –Otherassets 1692 1692 957 735 – – – Financialliabilitiesatfairvaluethroughprofitorloss,of which: 11537 11537 4153 1525 3604 2252 3 Heldfortrading 11537 11537 4153 1525 3604 2252 3Financialliabilitiesatamortisedcost 567206 569228 515115 32098 14977 6874 164of which:Depositsfrombanks 132031 132046 118103 5070 7325 1387 161Depositsfromcustomers,of which: 415017 415455 395112 16965 2902 473 3 Lease liabilities 1 911 2 007 93 298 1 147 469 – Other than lease liabilities 413 106 413 448 395 019 16 667 1 755 4 3Debtsecuritiesissued 20158 21823 82 10361 5897 5483 –Negativefairvalueofhedgingderivatives 7624 7624 155 854 2346 4269 –Changesinfairvalueoftheportfolioofhedgedinstruments 1096 1096 1096 – – – –Taxliabilities 570 570 570 – – – –Otherliabilities 7884 7884 6111 1772 – 1 –Provisionsforrisksandcharges 869 869 – – – – 869Equity 75766 75766 – – – – 75766 Undrawnloanfacilities 125656 125656 6169 27829 25169 66489 –Bankguarantees 45297 45297 4801 10596 24755 5142 3

Carrying Net Up to 3 months 1–5 Over Unspe- amount cash flow 3 months – 1 year year 5 years cified.At 31 Dec 2018 Cashandcashbalances 4841 4841 4841 – – – –Financialassetsatfairvaluethroughprofitorloss, 10024 10343 1416 1493 5045 2389 –of which: Heldfortrading 9678 9997 1416 1493 5045 2043 – Mandatorilyatfairvalue 346 346 – – – 346 –Financialassetsatfairvaluethroughothercomprehensiveincome 29188 33046 134 2496 24888 5528 –Financialassetsatamortisedcost 601624 625493 245884 56963 157791 157973 6882of which: Loansandadvancestobanks 200035 200102 199458 462 – – 182 Loansandadvancestocustomers 401589 425391 46426 56501 157791 157973 6700Positivefairvalueofhedgingderivatives 5636 5636 75 212 2822 2527 –Equityinvestments 3979 3979 – – – – 3979Propertyandequipment 828 828 – – – – 828Intangibleassets 1950 1950 – – – – 1950Taxreceivables 703 703 17 – 686 – –Non-currentassetsheldforsale – – – – – – –Otherassets 1367 1367 1061 306 – – – Financialliabilitiesatfairvaluethroughprofitorloss,of which: 8714 8714 2979 966 3773 996 – Heldfortrading 8714 8714 2979 966 3773 996 –Financialliabilitiesatamortisedcost 561744 563936 454971 66220 34899 7846 –of which: Depositsfrombanks 164072 164079 85471 58473 18574 1561 – Depositsfromcustomers 374904 375012 368885 5217 739 171 – Debtsecuritiesissued 22768 24845 615 2530 15586 6114 –Negativefairvalueofhedgingderivatives 5657 5657 128 477 2427 2625 –Changesinfairvalueoftheportfolioofhedgedinstruments 608 608 608 – – – –Taxliabilities 386 386 – 386 – – –Otherliabilities 8172 8172 6252 1920 – – –Provisionsforrisksandcharges 1277 1277 – – – – 1277Equity 73582 73582 – – – – 73582 Undrawnloanfacilities 114131 114131 6159 30245 22359 55368 –Bankguarantees 41210 41210 4952 10392 20850 5016 –


(d) Operational RiskOperationalriskistheriskoflossduetodeficienciesorfailuresofinternalprocesses,peopleandsystemsorexternalevents.Thisdefinitionincludeslegalrisk,however,itdoesnotincludestrategicorreputationrisk.Legalriskincludes,interalia,theriskoffines,sanctionsorpunitivedamagesresultingfromsupervisionmeasuresandprivatesettlement.

TheBank’sorganisationalstructureanditsinternalrulesfullyrespectthesegregationofincompatibledutiestopreventconflictofinterests.Internalrulesunambiguouslydefinetheobligationsandcompetenciesofemployees,includingmanagement,andregulatetheworkingprocessesandcontrolactivities.TheOperationalRiskManagementCommitteeisthemaincontrolanddecisionbody

regardingoperationalrisk.AllmembersoftheBoardofDirectorsarepermanentmembersofthecommittee.TheOperationalRiskDepartmentisanindependentbodyreportingdirectlytoamemberoftheBoardofDirectorsinchargeofriskmanagement.TheOperationalRiskDepartmentisauthorisedtosecureunifiedandcoordinatedoperationalriskmanagementinaccordancewiththeapplicableregulationsandthestandardsoftheparentcompany.

Operationalriskmanagementandmonitoringisperformedbyauthorisedemployeesofindividualdepartments.TheInternalAuditDepartmentidentifiesextraordinarytrendsandbreachofornon-compliancewithdirectivesandassessesthecontrolandmanagementsystem’sfunctionality.

TheBankhascontinueddevelopingandsettingupitscomprehensivesystemfortheidentification,monitoringandmanagementofoperationalrisk.Inlinewiththe2019OperationalRiskManagementStrategy,theBankdefineditsprioritieswithrespecttomitigatingoperationalriskexposurethatareconsistentwiththeriskprofileandriskappetiteoftheBank.TheoperationalriskappetiteistheoperationalrisklevelacceptabletotheBankandismeasuredusingELOR(ExpectedLossonRevenue),whichistheproportionofanticipatedlossesarisingfromoperationalrisk(estimatebasedonhistoricaldata)toincome(budgetedincomeonaquarterlybasis).SettingtheELORlimitanditsmonitoringwasperformedinlinewiththeBank’spolicies.

Toensureeffectivecollectionofoperationalriskeventsanddata,theBankusesanon-lineinformationsystemdevelopedbyUniCreditGroup.ThesystemcomplieswiththerequirementsforcapitaladequacymanagementpursuanttoBaselIII.Thedataacquiredthroughthesystemistakenintoaccountwhencalculatingthecapitalrequirementandwhenmanagingoperationalrisk.Itservesasthebasisfordesigningprocessesthatreducethenumberofparticulareventsandmitigatetheconsequences(egwhenpreparingprocessmitigationmeasuresortheBank’sstrategicinsuranceplan).Thedataisalsousedforreviewingthereliabilityofproposedmeasuresforoperationalriskmitigation.ThedataiscollectedonacontinuousbasisincooperationwithindividualdepartmentsoftheBank(allsignificanteventsarereportedandresolvedimmediately).Basedonthecollecteddata,aquarterlyconsolidatedreportisprepared,whichispresentedtotheOperationalRiskManagementCommitteeanddistributedwithintheBank.TheBoardofDirectors,theInternalAuditDepartmentandtheparentcompanyareinformedaboutthemostsignificantcasesofoperationalriskonaweeklybasis,orimmediatelyifnecessary.Thedataisregularlyreconciledwiththeaccountingrecordsandothersourcesinordertoensuredatacompletenessandaccuracy.

In2019,theBankanalysedthescenarios,andconfiguredandanalysedtheriskindicators.Anotherimportantelementoftheoperationalriskmanagementsystemismanagingthecontinuityofoperations(emergencyplanning,crisismanagement).TheBankhasupdatedandtestedtherecoveryplans(forcrisissituations)inordertoensuretheirfullusefulnessandeffectivenessundercurrentconditions.Inaddition,theOperationalRiskDepartmentenhances

overallawarenessofoperationalriskwithintheBankandtrainstheBank’sstaffviatrainingsessionsande-learningcourses.

Basedontheconsentobtainedfromtheregulatorybody,theBankcalculatesthecapitalrequirementforoperationalriskundertheadvancedmeasurementapproach(AMA).Underthisapproach,theUniCreditGroupmodelbasedoninternalandexternaldata,theresultsofscenarioanalysesandriskindicatordataisused.

(e) Capital ManagementManagementoftheBankmonitorsthedevelopmentoftheBank’scapitaladequacyanditscapitalposition.Theregulatorofthebankingmarket,theCzechNationalBank,establishedrulesforthecalculationofcapitalrequirementsandmonitorstheirdevelopment.Since1January2014,theBankhasmettherequirementsofBaselIII(Regulation(EU)No.575/2013of26June2013onprudentialrequirementsforcreditinstitutionsandinvestmentfirms)thatwasimplementedbytheCzechNationalBankthroughDecreeNo.163/2004Coll.ontheperformanceoftheactivityofbanks,creditunionsandinvestmentfirms.TheBaselIIIruleswereestablishedinresponsetothefinancialcrisisandintroducerequirementsforincreasedcapitalquality,requirementforanincreasedcoverageofrisks,theminimumstandardforliquiditymanagement,rulesfortheleverageratioandimproveriskmanagementandcorporategovernance.

TheBank’sregulatorycapitalconsistsofthefollowing:•CommonEquityTier1(CET1)capitalwhichcomprisesregistered

capital,sharepremium,reservefunds,retainedearnings,accumulatedothercomprehensiveincomefromrevaluationofavailable-for-salesecurities,post-taxprofitfortheperiodifauditedatthetimeofreporting;minusintangibleassetsandgapsinthecoverageofanticipatedlossesthroughadjustmentsforcreditriskusingtheinternalratingbasedapproach;

•Tier1(T1)capitalcreatingCET1;and•Tier2(T2)capitalwhichistheexcessinthecoverageofanticipated

creditlosseswhenusingtheinternalratingbasedapproach.

TheBankcomplieswiththedefinedminimumrequirementsofBaselIIIrulesforcapitaladequacy,includingcapitalbuffers.


StatementofcapitalfortheBanks’scapitaladequacycalculationonastand-alonebasisasreportedtotheregulatorinaccordancewithapplicablerulesasof31December2019andasof31December2018:

2019 2018Tier1capital 68521 64400Totalcapital 68526 66003Exposuretocreditrisk 314085 299811Exposuretomarketrisk 4605 5051Exposuretooperationalrisk 23396 21011Total risk exposure 342 086 325 873Capital adequacy ratio for the year (Tier 1 ratio) 19,92 % 19,76 %Capital adequacy ratio for the year (Total capital ratio) 19,93 % 20,25 %

36. Related party transactionsEntitiesaredeemedtoberelatedpartiesintheeventthatoneentityisabletocontroltheactivitiesofanother,orisabletoexercisesignificantinfluenceovertheotherentity’sfinancialoroperationalpolicies.Aspartofitsordinarybusiness,theBankentersintotransactionswithrelatedparties.Thesetransactionsprincipallycompriseloans,depositsandothertypesoftransactionsandareconcludedunderarm’slengthconditionsandatarm’slengthpricesinordertopreventanydetrimenttoanyparty.

RelatedpartiesprincipallyincludetheBank’sparentcompany,Bank’sfellowsubsidiariesandothercompaniescontrolledbyUniCreditGrouporwhereUniCreditGroupexercisessignificantinfluencethe,theBank’ssubsidiariesandaffiliates,membersoftheBoardofDirectorsandothermembersoftheBank’smanagement.

UniCreditGrouphaspreparedanequityprogrammefortheemployeesofUniCreditGroupunderwhichtheemployeesmaypurchasesharesofUniCreditGroupparentatadiscountedprice.TheDiscountedemployeesharesmaynotbesoldduringthevestingperiod.Vestedsharesareforfeitediftherespectiveemployee’semploymentbytheUniCreditGroupends.TheprovideddiscountisallocatedtoindividualUniCreditGroupcompaniesinvolvedintheprogrammeandthesecompaniesrecogniseanddeferthediscountoverthevestingperiod.

(a) Transactions with the parent company

31 Dec 2019 31 Dec 2018Assets Loansandadvancestobanks 928 2474 Financialassetsheldfortrading 1836 598 Financialassetsatfairvaluethroughothercomprehensiveincome – 774 Positivefairvalueofhedgingderivatives 925 996Total 3 689 4 842 Liabilities Depositsfrombanks 118092 123403 Financialliabilitiesheldfortrading 1656 312 Negativefairvalueofhedgingderivatives 1417 859Total 121 165 124 574 Off-balancesheetitems Issuedguarantees 1490 963 Irrevocablecreditfacilities 311 132Total 1 801 1 095

2019 2018Interestincome 296 442Interestexpenses (100) (54) Feeandcommissionincome 1 –Feeandcommissionexpenses (1) (4) Netprofit/lossfromfinancialassetsandliabilitiesheldfortrading 200 308Netprofit/lossfromhedgingoftheriskofchangeinfairvalues (3) 1Administrativeexpenses (12) (8)Total 381 685


(b) Transactions with subsidiaries

31 Dec 2019 31 Dec 2018Assets Loansandadvancestocustomers 44743 43200 of which: UniCreditLeasingCZ,a.s. 29858 28750 UniCreditLeasingSlovakia,a.s. 11401 11107 UniCreditFleetManagement,s.r.o.(CZ) 74 – UniCreditFactoringCzechRepublicandSlovakia,a.s. 2408 2319 HVBLeasingCzechRepublics.r.o. 649 637Total 44 743 43 200Liabilities Depositsfromcustomers 439 437 of which: UniCreditLeasingSlovakia,a.s. 360 400 UniCreditpojišťovacímakléřskáspol.sr.o. 13 19Total 439 437Off-balancesheetitems Issuedguarantees 14 74 of which: UniCreditFactoringCzechRepublicandSlovakia,a.s. 14 74 Irrevocablecreditfacilities 1053 541 of which: UniCreditLeasingCZ,a.s. 117 151 UniCreditFleetManagement,s.r.o.(CZ) 1 – UniCreditFactoringCzechRepublicandSlovakia,a.s. 170 35 UniCreditLeasingSlovakia,a.s. 575 174Total 1 067 615

2019 2018Interestincome 439 318 of which: UniCreditLeasingCZ,a.s. 362 221 UniCreditLeasingSlovakia,a.s. 49 53Interestexpenses (9) (10) of which: UniCreditLeasingCZ,a.s. – – UniCreditLeasingSlovakia,a.s. (9) (10)Feeandcommissionincome 48 39 of which: UniCreditLeasingCZ,a.s. 30 18 UniCreditLeasingSlovakia,a.s. 15 18Generaladministrativeexpenses (3) (25) of which: UniCreditFleetManagement,s.r.o.(CZ) (6) (21) UniCreditFleetManagement,s.r.o.(SK) (2) (9)Total 475 322


(c) Transactions with key management members

31 Dec 2019 31 Dec 2018Assets Loansandadvancestocustomers 114 98 of which: BoardofDirectors 17 8 Othermanagementmembers 97 90Total 114 98Liabilities Depositsfromcustomers 169 223 of which: BoardofDirectors 85 113 Othermanagementmembers 84 109Total 169 223Off-balancesheetitems Irrevocablecreditfacilities 3 4 of which: BoardofDirectors 1 1 Othermanagementmembers 2 3Total 3 4

(d) Transactions with other related parties

31 Dec 2019 31 Dec 2018Assets Financialassetsheldfortrading 1654 1020 of which: UniCreditBankAG 1654 1020 Loansandadvancestobanks 165 977 of which: UniCreditBankAG 1 823 UniCreditBankAustriaAG 78 81 YapiveKrediBankasiAS 54 31 UniCreditBankHungaryZrt. 16 6 AOUniCreditBank 1 20 Loansandadvancestocustomers 801 724 of which: UCTAMCzechRepublics.r.o. 398 404 UCTAMSVK,s.r.o 403 320 Positivefairvalueofhedgingderivatives 4139 1915 of which: UniCreditBankAG 4139 1915Total 6 759 4 636


31 Dec 2019 31 Dec 2018Liabilities Depositsfrombanks 1338 17603 of which: UniCreditBankAustriaAG 511 16910 UniCreditBankAG 750 649 UniCreditBankHungaryZrt. 55 5 Depositsfromcustomers 248 399 of which: UniCreditServicesS.C.p.A. 110 80 Financialliabilitiesheldfortrading 2495 2373 of which: UniCreditBankAG 2495 2373 Negativefairvalueofhedgingderivatives 3310 1450 of which: UniCreditBankAG 3310 1450Total 7 391 21 825

31 Dec 2019 31 Dec 2018Off-balancesheetitems Issuedguarantees 2348 1240 of which: UniCreditBankAG 1853 623 UniCreditBankAustriaAG 325 311 UniCreditBankHungaryZrt. 12 19 AOUniCreditBank 53 102 Irrevocablecreditfacilities 534 287 of which: UniCreditBankAG 433 119Total 2 882 1 527


2019 2018Interestincome 109 715of which: UniCreditBankAG 2 442 UniCreditBankAustriaAG 90 239Interestexpenses (353) (86)of which: UniCreditBankAG (268) (4) UniCreditBankAustriaAG (83) (80)Feeandcommissionincome 128 96of which: UniCreditBankAG 111 75 UniCreditBankHungaryZrt. 2 1 UniCreditBankAustriaAG 12 14Feeandcommissionexpenses (8) (15)of which: UniCreditBankAustriaAG (4) (5)Netprofit/lossfromfinancialassetsandliabilitiesheldfortrading (303) (2452)of which: UniCreditBankAG (303) (2400) UniCreditBankAustriaAG – (52)Netprofit/lossfromhedgingagainstriskofchangesinfairvalue 50 28of which: UniCreditBankAG 50 29Administrativeexpenses (900) (1005)of which: UniCreditServicesS.C.p.A. (900) (1015)Total (1 277) (2 719)

37. Fair value of financial assets and financial liabilities

Based on the Quality of the Input Data Used for Valuation at Fair Value

Financial assets at fair value through profit or loss

Held for trading

Level 1 Level 2 Level 3 Total31 Dec 2019 Debtsecurities 2392 – – 2392Derivatives 35 9159 112 9306Total 2 427 9 159 112 11 698 31 Dec 2018 Debtsecurities 1246 – 990 2236Derivatives 30 6071 1341 7442Total 1 276 6 071 2 331 9 678


Mandatorily at fair value

Level 1 Level 2 Level 3 Total31 Dec 2019 Shares – – 487 487Total – – 487 487

31 Dec 2018 Shares – – 346 346Total – – 346 346

Financial assets at fair value through other comprehensive income

Level 1 Level 2 Level 3 Total31 Dec 2019 Debtsecurities 19829 3281 65 23175Shares – – 6 6Total 19 829 3 281 71 23 181

31 Dec 2018 Debtsecurities 24889 4229 64 29182Shares – – 6 6Total 24 889 4 229 70 29 188

Positive fair value of hedging derivatives

Level 1 Level 2 Level 3 Total31 Dec 2019 Fairvaluehedging – 1370 – 1370Cashflowhedging – 5829 – 5829Total – 7 199 – 7 199 31 Dec 2018 Fairvaluehedging – 837 – 837Cashflowhedging – 4799 – 4799Total – 5 636 – 5 636

Financial liabilities held for trading

Level 1 Level 2 Level 3 Total31 Dec 2019 Liabilitiesfromshortsales 3010 – – 3010Derivatives – 8442 85 8527Total 3 010 8 442 85 11 537

31 Dec 2018 Liabilitiesfromshortsales 2606 – – 2606Derivatives – 4804 1304 6108Total 2 606 4 804 1 304 8 714


Negative fair value of hedging derivatives

Level 1 Level 2 Level 3 Total31 Dec 2019 Fairvaluehedging – 360 – 360Cashflowhedging – 7264 – 7264Total – 7 624 – 7 624

31 Dec 2018 Fairvaluehedging – 525 – 525Cashflowhedging – 5132 – 5132Total – 5 657 – 5 657

ThefollowingtableshowsthecarryingamountsandfairvaluesoffinancialassetsandliabilitiesthatarenotreportedatfairvaluesintheBank’sstatementoffinancialposition(thefairvalueiscalculatedusingdiscountedfuturecashflowsundertheapplicationofarm’slengthmarketratestowhichcreditmark-upsderivedfrominternalratingcategoriesofindividualclientsareadded):

Carrying Fair amount value Level 1 Level 2 Level 331 Dec 2019 Financial assets Loansandadvancestobanks 185944 185941 – 168194 17747Loansandadvancestocustomers 427803 425043 – 167902 257141 Financial liabilities Depositsfrombanks 132031 132087 – 125423 6664Depositsfromcustomers 415017 414988 – 1758 413230Debtsecuritiesissued 20158 20374 – 20374 –

Carrying Fair amount value Level 1 Level 2 Level 331 Dec 2018Financial assets Loansandadvancestobanks 200035 200036 – 19 200017Loansandadvancestocustomers 401589 391387 174 166316 224897 Financial liabilities Depositsfrombanks 164072 163263 – 77337 85926Depositsfromcustomers 374904 374716 – 11470 363246Debtsecuritiesissued 22768 23121 – 23121 –

ThefollowingtableshowstransfersoffinancialassetsandliabilitiesatfairvaluebetweenLevels1and2.

FinancialassetsatfairvaluebasedonLevels1and2:

Financial assets at fair value through Financial Hedging Total profit or loss assets at fair derivatives Held for Other than value through trading held for trading other mandatorily comprehensive at fair value income 31 Dec 2018 TransferfromLevel1toLevel2 – – – – –TransfersfromLevel2toLevel1 13 – – – 13


Fortheyearended31December2019,nofinancialassetsreportedatfairvalueweretransferredbetweenLevels1and2.

Fortheyearsended31December2019and31December2018,nofinancialliabilitiesreportedatfairvalueweretransferredbetweenLevels1and2.

ThefollowingtablesshowtransfersoffinancialassetsreportedatfairvaluefromandtoLevel3.

Financial assets at fair value through Financial Hedging Total profit or loss assets at fair derivatives Held for Other than value through trading held for trading other mandatorily comprehensive at fair value income ImpactofIFRS9 – 254 (254) – –Opening balance at 1 Jan 2018 – 254 6 – 260Revaluationgainsandlosses Intheincomestatement – 73 – – 73Inothercomprehensiveincome – – – – –Purchases 2290 – – – 2290Sales/maturity – – – – –Transfersfrom/tootherlevels 77 – 65 – 142Other (36) 19 (1) – (18)Closing balance at 31 Dec 2018 2 331 346 70 – 2 747 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: 73Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend 73

Financial assets at fair value through Financial Hedging Property Total profit or loss assets at fair derivatives measured Held for Other than value through at fair value trading held for trading other mandatorily comprehensive at fair value income Opening balance at 1 Jan 2019 2 331 346 70 – n/a 2 747Revaluationgainsandlosses Intheincomestatement – 139 – – – 139Inothercomprehensiveincome – – – – – –Purchases 43 – – – – 43Sales/maturity (2178) – – – – (2178)Transfersfrom/tootherlevels (122) – – – – (122)Other 38 2 1 – 849 890Closing balance at 31 Dec 2019 112 487 71 – 849 1 519 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: 139Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend 139


Thefollowingtablecontainsthetransfersoffinancialliabilitiesatfairvaluetoandfromlevel3.

Financial liabilities at fair value Hedging through profit or loss held for trading derivatives TotalOpening balance at 1 Jan 2018 – – –Revaluationgainsandlosses Intheincomestatement – – –Inothercomprehensiveincome – – –Issue 1291 – 1291Sales/maturity – – –Transfersfrom/tootherlevels 14 – 14Other (1) – (1)Closing balance at 31 Dec 2018 1 304 – 1 304 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: –Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend –

Financial liabilities at fair value Hedging through profit or loss held for trading derivatives TotalOpening balance at 1 Jan 2019 1 304 – 1 304Revaluationgainsandlosses Intheincomestatement – – –Inothercomprehensiveincome – – –Issue 30 – 30Sales/maturity (1173) – (1173)Transfersfrom/tootherlevels (75) – (75)Other (1) – (1)Closing balance at 31 Dec 2019 85 – 85 Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiod: –Of which:Totalrevaluationgainsandlossesincludedintheincomestatementfortheperiodarisingfromfinancialassetsheldattheperiodend –

38. Offseting of financial assets and financial liabilities

TheBankdoesnotoffsetfinancialassetsandfinancialliabilities.

ThebelowtableshowsassetswhicharesubjecttonettingagreementsaccordingtoCreditriskmanagementarrangementsincludedintheDerivativeFrameworkagreementssuchasISDAorsimilar.Theassetsaresubjecttonettingonsettlement(performancenetting)andonpositioncloseout.

Gross Gross Net Relating amounts available for offset reported offset reported Financial Obtained Net financial financial financial instruments cash amount assets liabilities assets collateral 31Dec2019 Derivatives 14361 – 14361 12079 – 2282 31Dec2018 Derivatives 10569 – 10569 8479 – 2090


Financialliabilitiesthataresubjecttooffset,recoverableframeworkcontractsforoffsetandsimilararrangements:

Gross Gross Net Relating amounts available for offset reported reported reported Financial Provided Net fi nancial fi nancial fi nancial instruments cash amount liabilities assets liabilities collateral 31Dec2019 Derivatives 13348 – 13348 12079 – 1269 31Dec2018 Derivatives 10480 – 10480 8479 – 2001

39. Subsequent events

TheBank’smanagementisnotawareofanypostbalancesheeteventsthatwouldrequireadjustmenttotheBank’sfinancialstatements.

ThefinancialstatementswereapprovedbytheBoardofDirectorsoftheBankandauthorisedforissueon4February2020.


Mgr.JakubDusílek,MBAChairmanoftheBoard

ofDirectors

LjubišaTešićMemberoftheBoard

ofDirectors

Ing.JiříHouška Mgr.MichaelaMrštíková

ThefinancialstatementsweresignedonbehalfoftheBoardofDirectorsby:

Individualinchargeoftheaccountingrecords

Individualinchargeofthefinancialstatements

We run the business with disciplined origination, enhanced business accountability and in-depth monitoring by control functions. Our reinforced governance and steering ensure targeted actions wherever necessary.A Group culture driven by the principle: “Do the right thing!” means that each employee is part of the first line of defense.

Disciplined riskmanagement. &controls

Auditor’s report on the annual report



INDEPENDENT AUDITOR’S REPORTTo the Shareholders of UniCredit Bank Czech Republic and Slovakia, a.s.Having its registered office at: Želetavská 1525/1, 140 92, Prague 4 – Michle

Report on the Audit of the Consolidated and Separate Financial Statements

Opinion

We have audited the accompanying consolidated financial statements of UniCredit Bank Czech Republic and Slovakia, a.s. and its subsidiaries (hereinafter also the “Group”) and separate financial statements of UniCredit Bank Czech Republic and Slovakia, a.s. (hereinafter also the “Company”) prepared on the basis of International Financial Reporting Standards (“IFRS”) as adopted by the EU.

The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2019, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information (the “Consolidated Financial Statements”).

The separate financial statements comprise the separate statement of financial position as at 31 December 2019, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including a summary of significant accounting policies and other explanatory information (the “Separate Financial Statements”).

In our opinion:

• The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2019, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

• The accompanying separate financial statements give a true and fair view of the financial position of the Company as at 31 December 2019, and of its financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with the Act on Auditors, Regulation (EU) No. 537/2014 of the European Parliament and the Council and Auditing Standards of the Chamber of Auditors of the Czech Republic, which are International Standards on Auditing (ISAs), as amended by the related application guidelines. Our responsibilities under this law and regulation are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Company in accordance with the Act on Auditors and the Code of Ethics adopted by the Chamber of Auditors of the Czech Republic and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Consolidated and Separate Financial Statements of the current period. These matters were addressed in the context of our audit of the Consolidated and Separate Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Deloitte Audit s.r.o.Churchill IItalská 2581/67120 00 Prague 2 – VinohradyCzech Republic

Tel: +420 246 042 500Fax: +420 246 042 [email protected]

Registered by the Municipal Court in Prague, Section C, File 24349ID. No.:49620592Tax ID. No.: CZ49620592


Key audit matter Related audit procedures

Impairment of receivables from clients

(Please refer to Note 15 to the Consolidated and Separate Financial Statements for the details)

At 31 December 2019, gross receivables from clients (hereinafter “receivables”) were CZK 450446 million and CZK 435 927 million for the Group and the Company respectively against which impairment of receivables from clients (hereinafter “impairment”) of CZK 9 686 million and CZK 8 124for the Group and the Company respectively were recorded. The directors exercise significant judgment when determining both when and how much to record as impairment.

The assessment of loan loss provisions for loans to clients requires Bank management to exercise a significant level of judgment, especially with regards to identifying impaired receivables and quantifying loan impairment. To assess the amount of provisions for expected losses, the Bank applies statistical models with input parameters from internal and external sources.

We assessed the adequacy of the methodology used by the Bank to identify loan impairment and calculate provisions for the selected significant loan portfolios.

We tested the design and operating effectiveness of key controls management of the Bank has established over the impairment assessment processes.

In accordance with the requirements of IFRS 9 Financial Instruments, the Bank distinguishes three stages of impairment, where the criteria for classification to individual stages are based on an assessment of the objective characteristics of loans and the relevant debtors and subjective judgments of the Bank.

The assessment of classification to impairment stages includes the combination of relative and absolute factors:

• Relative comparison between the probability of default at the initial recognition of the receivable and at each reporting date,

• Absolute factors such as limits set by related regulations (ie 30 days past due),

• Other factors with internal relevance for the Bank (eg new classifications as forbearance receivables).

Where no repayment difficulties have been identified for a particular receivable, the Bank creates a provision using the statistical model for a homogeneous group of loans (Stage 1 and Stage 2). The expected loan loss provision is calculated using available historical data and anticipated future development determined using macroeconomic indicators.

The statistical model used is based on the probability of default and the estimated amount of the loss given default. Input data for the model and the calculation logic and its comprehensiveness depend on judgment of Bank management.

When determining the provision level for impaired loans (Stage 3):

1) With respect to receivables with exposure of over EUR 1.0 million, Bank management considers the following factors:a) The Bank’s estimated rate of success of

recovering debt;

For receivables regarding which the Bank has not identified any difficulties likely to prevent the full repayment of receivables (Stage 1 and Stage 2), the testing focused on controls related to timely identification of potential difficulties with receivablerepayment and correct classification of receivables to corresponding impairment stages.

Our credit risk experts assessed the amounts of provisions for Stage 1 and Stage 2 and reviewed the adequacy of management judgments as regards the probability of loan default and the estimated amount of loss given default.

For provisions for loan losses at Stage 3, the testing included controls related to creation and period review of watch-lists, regular client creditworthiness review processes, approval of experts’ collateral valuation and management review and approval of the impairment evaluation results.

On a sample of exposures, we evaluated appropriateness of provisioning methodologies and their application. We formed an independent view on the levels of provisions required by examining available external and internal information. This work involved assessing the work performed by experts used by the Bank to value the collateral or to assess the estimates of future cash flows.

For loan receivables with exposure of over EUR 1.0 million we also verified correctness of discounted cash flows calculations applied in deriving the recoverable amount of the loan. Where we determined that a more appropriate assumption or input in provision measurement could be made, we recalculated the provision on that basis and compared the results in order to assess whether there was any indication of error or management bias.


b) Amount and timing of expected future cash flows;

c) Collateral value.2) With respect to receivables with exposure of less

than EUR 1.0 million the provision is calculated using models based on expected recovery.

The loan loss provisions for expected losses for loans at Stage 1 and Stage 2 represent CZK 1 933 million and CZK 1 549 million for the Group and for the Company respectively. The loan loss provision for impaired loans at Stage 3 represents CZK 7 753 million and CZK 6 575 for the Group and for the Company respectively, out of the total recognised amount of CZK 9 686 million and CZK 8 124 million for the Group and for the Company respectively as at 31 December 2019.

Interest Income and Fee and Commission Income Recognition

(Please refer to Note 1 and Note 2 to the Consolidated and Separate Financial Statements for the details)

For the year ended 31 December 2019 the interest income represents CZK 18 597 million and CZK 17 138 million for the Group and for the Company respectively, and fee and commission income represents CZK 5 387 million and CZK 4 877 million for the Group and for the Company respectively, the main source being loans to customers and payment cards. These transactions are the main contributors to the operating income of the Bank affecting the Bank’s profitability.

While interest income is accrued over the expected life of the financial instrument, the recognition of fee income depends on the nature of the fees as follows:

• Fees that are directly attributable to the financial instrument are recognised over the expected life of such an instrument and are presented as interest income.

• Fees for services provided are recognised when service is provided and are presented as fee and commission income.

• Fees for the execution of an act are recognisedwhen the act has been completed and are presented as fee and commission income.

Revenue recognition specifics, high volume of individually small transactions dependent on data quality of interest and fee inputs and on IT solutions for their recording, resulted in this matter being identified as a key audit matter.

We have tested the design and operating effectiveness of the key internal controls and focused on:

• Inputs on interest/fee related to customer loans and deposits, including authorisation of the changes in the interest rates and fees and authorisation of non-standard interest rates/fees;

• Recording of fee and interest income and management oversight; and

• IT controls relating to access rights and change management of relevant IT applications with theassistance of our IT specialists.

We also performed the following procedures with regard to interest and fee income recognition:

1) We evaluated the accounting treatment applied by the Bank to determine whether the methodology complies with the requirement ofthe relevant accounting standard.

We have focused our testing on verification of the correct classification of:• Fees that are identified as directly

attributable to the financial instrument;• Fees that are not identified as directly

attributable to the financial instrument.•

2) We evaluated the correctness of mathematical formula used for recognising the relevant income over the expected loan life.

We have analysed correctness of the recorded amount of interest income and fee and commission income using substantive analytical tests. These tests included determination of expected volumes of income based on the observed historical development over past years and the actual development of the market, which was compared to the related amount recorded by the Bank.


Other Information in the Annual Report

In compliance with Section 2(b) of the Act on Auditors, the other information comprises the information included in the Annual Report other than the Consolidated and Separate Financial Statements and auditor’s report thereon. The Board of Directors is responsible for the other information.

Our opinion on the Consolidated and Separate Financial Statements does not cover the other information. In connection with our audit of the Consolidated and Separate Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Consolidated and Separate Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. In addition, we assess whether the other information has been prepared, in all material respects, in accordance with applicable law or regulation, in particular, whether the other information complies with law or regulation in terms of formal requirements and procedure for preparing the other information in the context of materiality, i.e. whether any non-compliance with these requirements could influence judgments made on the basis of the other information.

Based on the procedures performed, to the extent we are able to assess it, we report that:

• The other information describing the facts that are also presented in the Consolidated and Separate Financial Statements is, in all material respects, consistent with the Consolidated and Separate Financial Statements; and

• The other information is prepared in compliance with applicable law or regulation.

In addition, our responsibility is to report, based on the knowledge and understanding of the Group and the Company obtained in the audit, on whether the other information contains any material misstatement of fact. Based on the procedures we have performed on the other information obtained, we have not identified any material misstatement of fact.

Responsibilities of the Company’s Board of Directors and Supervisory Board for the Consolidated and Separate Financial Statements

The Board of Directors is responsible for the preparation and fair presentation of the Consolidated and Separate Financial Statements in accordance with International Financial Reporting Standards as adopted by the EU and for such internal control as the Board of Directors determines is necessary to enable the preparation of Consolidated and Separate Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Consolidated and Separate Financial Statements, the Board of Directors is responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or the Company or to cease operations, or has no realistic alternative but to do so.

The Supervisory Board is responsible for overseeing the Group and Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements

Our objectives are to obtain reasonable assurance about whether the Consolidated and Separate Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Consolidated and Separate Financial Statements.

As part of an audit in accordance with the above law or regulation, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Consolidated and Separate Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

• Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw


attention in our auditor’s report to the related disclosures in the Consolidated and Separate Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the Consolidated and Separate Financial Statements, including the disclosures, and whether the Consolidated and Separate Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group and the Company to express an opinion on the Consolidated and SeparateFinancial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors, the Supervisory Board and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, the Supervisory Board and the Audit Committee, we determine those matters that were of most significance in the audit of the Consolidated and Separate Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Report on Relations between the Controlling and Controlled Entities (the “Report on Relations”)

We have reviewed the factual accuracy of the information included in the accompanying Report on Relations of UniCredit Bank Czech Republic and Slovakia, a.s. for the year ended 31 December 2019 which is includedin this annual report on pages 220 to 227. This Report on Relations is the responsibility of the Company’s Statutory Body. Our responsibility is to express our view on the Report on Relations based on our review.

We conducted our review in accordance with Auditing Standard 56 issued by the Chamber of Auditors of the Czech Republic. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the Report on Relations is free of material factual misstatements. A review is limited primarily to inquiries of the Company’s personnel and analytical procedures and examination, on a test basis, of the factual accuracy of information, and thus provides less assurance than an audit. We have not performed an audit of the Report on Relations and, accordingly, we do not express an audit opinion.

Nothing has come to our attention based on our review that indicates that the information contained in the Report on Relations of UniCredit Bank Czech Republic and Slovakia, a.s. for the year ended 31 December 2019 contains material factual misstatements.

The Company has decided not to disclose amounts under related party contracts citing business secrecy restrictions.

Report on Other Legal and Regulatory Requirements

In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament and the Council, we provide the following information in our independent auditor’s report, which is required in addition to the requirements of International Standards on Auditing:

Appointment of the Auditor and the Period of Engagement

We were appointed as the auditors of the Company by the General Meeting of Shareholders on 19 March 2019 and our total uninterrupted engagement including previous renewals has lasted for 7 years.

Consistence with the Additional Report to the Audit Committee

We confirm that our audit opinion on the financial statements expressed herein is consistent with the additional report to the Audit Committee of the Company, which we issued on 25 March 2020 in accordance with Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and the Council.


Provision of Non-audit Services

We declare that no prohibited non-audit services referred to in Article 5 of Regulation (EU) No. 537/2014 of the European Parliament and the Council were provided. In addition, there are no other non-audit services which were provided by us to the Company and its controlled undertakings and which have not been disclosed in the annual report.

Non-financial information report

As stated in Section 23 on page 219 of the annual report/notes to the financial statements, the Company does not prepare non-financial information since the relevant information is to be presented in the consolidated annual report or separate report of the consolidating entity. As a result, we do not report on the preparation of non-financial information.

In Prague on 25 March 2020

Audit firm: Statutory auditor:

Deloitte Audit s.r.o.registration no. 079

Diana Rádl Rogerováregistration no. 2045

We will continue to take decisive actions to increase our flexibility, with a proactive approach to capital allocation, both top down and bottom up. In Team 23, one key commitment is to maintain a CET1 MDA buffer between 200 to 250 basis points.

Capital andbalance sheetmanagement.

publishedpursuanttoSection118ofActNo.256/2004Coll.,onCapitalMarketUndertakings,asamended

1. Basic data

Businessname: UniCreditBankCzechRepublicandSlovakia,a.s.Registeredoffice: Želetavská1525/1,14092Prague4, CzechRepublicCompanyIDNo.: 64948242Companiesregister: recordedintheCompaniesRegistermaintained bytheMunicipalCourtinPrague,SectionB, file3608TaxIDNo.: CZ64948242Dateofincorporation:1January1996,foranindefiniteperiodLegalform: joint-stockcompanyInternetaddress: www.unicreditbank.czE-mail: [email protected]: +420955911111Fax: +420221112132LEI: KR6LSKV3BTSJRD41IF75

UniCreditBankCzechRepublicandSlovakia,as(hereinafterreferredtoas„UniCreditBank“or„Issuer“)isajoint-stockcompanyincorporatedaccordingtoCzechlaw.

UniCreditBankfulfilsallofitsobligationsinadueandtimelymanner.Nochangeshaveoccurredinthepastthatcouldbeofmaterialsignificanceinevaluatingtheissuer’ssolvency.

IncarryingoutitsactivitiesintheCzechmarket,UniCreditBankisgovernedbyCzechlegalregulations,inparticulartheBankingAct,theCivilCode,theActonBusinessCorporationsandregulationsgoverningoperationsinthebankingandcapitalmarkets.IntheSlovakmarket,whereUniCreditBankhasoperatedsince1December2013throughitsorganisationalunit,theBankisalsogovernedbyapplicableSlovaklegalregulations.

2. Persons responsible for the audit of the financial statements

Personincharge: DianaRádlRogerováLicenseNo.: 2045Domicile/Placeofbusiness: ChurchillI,Italská2581/67, 12000Prague2–VinohradyAuditor: DeloitteAudits.r.o.LicenseNo.: 079Registeredoffice: ChurchillI,Italská2581/67, 12000Prague2–Vinohrady

3. Information about UniCredit Bank as an issuer of registered securities

3.1 History and development of the issuerUniCreditBankCzechRepublicandSlovakia,a.s.,launcheditsactivitiesintheCzechmarketon5November2007.ItsnamewaschangedafteritmergedwiththeSlovakUniCreditBankSlovakia,a.s.,asat1December2013.UniCreditBankCzechRepublic,a.s.,itselfwasestablishedthroughthemergerofHVBBankCzechRepublic,a.s.,andŽivnostenskábanka,a.s.TheassetsofthedissolvedcompanyŽivnostenskábanka,a.s.,havingitsregisteredofficeinPrague1,NaPříkopě858/20,PC11380,CompanyIDNo.:00001368,recordedintheCompaniesRegistermaintainedbytheMunicipalCourtinPrague,SectionB,FileNo.1350,wereassumedbythesuccessorcompany,HVBBankCzechRepublic,a.s.,asaresultofthemerger.

HVBBankCzechRepublic,a.s.,wasestablishedbythemergerofHypoVereinsbankCZ,a.s.,andBankAustriaCreditanstaltCzechRepublic,a.s.,withoutliquidation,on1October2001.AllrightsandobligationsofthedissolvedcompanyBankAustriaCreditanstaltCzechRepublic,a.s.,wereassumedbyHVBBankCzechRepublica.s.Thechangeofname,amountofissuedcapitalandotherfactsconnectedwiththemergerwererecordedon1October2001intheCompaniesRegistermaintainedbytheMunicipalCourtinPrague,SectionB,File3608.

Živnostenskábankawasestablishedin1868asabankorientedtowardfinancingsmallandmedium-sizedCzechenterprises.ItwasthefirstbankfoundedinAustria-HungaryexclusivelywithCzechcapital.In1945,itwasnationalised,aswereotherbanks.From1950to1956,itstillexistedasalegalentitybutitsactivitiesweresignificantlyrestricted.SomeofŽivnostenskábanka’sassetratioswereadjustedbyDecreeNo.36/1956Coll.,anditslegalcontinuitywassubsequentlyconfirmedbySection27ofActNo.158/1989Coll.,onBanksandSavingsBanks.OnthedayofitsentryintheCompaniesRegistermaintainedbytheMunicipalCourtinPragueinSectionB,FileNo.1350,i.e.on1March1992,ŽivnostenskábankaassumedauthorisationtooperateasabankonthebasisofBankingActNo.21/1992Coll.,furthertoActNo.92/1991Coll.andGovernmentResolutionNo.1from9January1992,bywhichtheprivatisationofŽivnostenskábankawasapproved.InFebruary2003,thebankUniCreditoItalianoSpAcompletedtheacquisitionofan85.16%shareintheissuedcapitalofŽivnostenskábanka,a.s.,fromBankgesellschaftBerlinAG,andthustheoldestCzechbankbecamepartoftheUniCreditoItalianoGroup.

AspartofrestructuringinUniCreditGroup,theBank‘sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.A.,whichistheultimateparentcompanyoftheentireGroup(hereinafterthe“Group”)holding100%oftheBank’sshares.UniCreditBankCzechRepublicandSlovakia,a.s.,isastrongand

Supplementary information



rapidlydevelopingbankofferingawiderangeofqualityproductstobothcorporateandprivateclientsintheCzechRepublicandSlovakia.Itisoneofthestrongestbanksinbothmarketsintheareaofproject,structuredandsyndicatedcorporatefinance.Thebankhasalsobuiltanextraordinarilystrongpositioninacquisitionfinancingandranksfirstincommercialrealestatefinancing.Amongotherservices,UniCreditBank’sclientscanutiliseservicestoobtainprojectfinancingfromtheEUstructuralfundsofferedthroughUniCreditBank’sEuropeanCompetenceCentre.Intheareaofservicesforprivateclients,UniCreditBankplaysasignificantroleinthemarketofprivatebankingorsecuritiesand,intheretailsegment,itisasignificantplayerinthefieldofconsumerloans,mortgages,andcreditcards.Itisdoingverywellinservingclientsinfreelanceprofessions(doctors,judges,attorneys-at-law,notaries,etc.).TheBank’sCompetenceCentreforFreelanceProfessionsisdevotedtotheseclients.

UniCreditBankCzechRepublicandSlovakia,a.s.,operatesinallregionalcitiesinbothcountriesandcurrentlyhas122branchesand420ATMs.ThemergedBankholds9%ofthemarketsharewithitsbalancesheetsumtotallingmorethanCZK672billion(non-consolidateddata)andisthefourthlargestbankintheCzechRepublicandthelargestinSlovakia.TheBankisauniversalbank,providingtheservicesofsmall,commercialandinvestmentbankinginCzechcrownsaswellasinforeigncurrenciestolocalandforeignclientsmainlyintheCzechRepublic,inSlovakiaand,further,inotherEUcountries.

3.2 Issued share capitalTheBank’ssharecapitalamountstoCZK8,754,617,898dividedasfollows:a)100registeredshares,eachwithanominalvalueofCZK16,320,000;b)200registeredshares,eachwithanominalvalueofCZK13,375,000;c)436,500registeredshares,eachwithanominalvalueofCZK10,000;d)10registeredshares,eachwithanominalvalueofCZK7,771,600;e)106,563book-entryregisteredshareswithanominalvalueofCZK46.

Alltheaforementionedsharesareregisteredtotheshareholder’saccountmaintainedbyCentralSecuritiesDepositoryPrague(Centrálnídepozitářcennýchpapírů,a.s.).

UniCreditBank’ssharecapitalhasbeenfullypaidup.InaccordancewiththeCommercialCodeandtheBank’sArticlesofAssociation,UniCreditBank’ssharesentitletheshareholdertoparticipateinthecompany’smanagementandtoshareinitsprofitaswellasinitsliquidationbalanceupondissolutionofthecompany.UniCreditBankhasissuednosharesgivingtheirholderstherighttoexchangesuchsharesforothersharesortherighttoprioritysubscriptionofothershares.UniCreditBankdoesnotholdanyofitsownparticipatingsecuritiesnordoesanyentityinwhichUniCreditBankhasadirectorindirectownershipinterestexceeding50%ofthatentity’ssharecapitalorvotingrightsholdanysuchsecurities.

TheBank’ssharesarefreelytransferableandnoconsentofanyBank’sbodyisrequiredforthetransferorpledgethereoftobeeffective.ThesoleshareholderofUniCreditBankisUniCreditS.p.A.,havingitsregisteredofficeatPiazzaGaeAulenti3,TowerA–20154Milan,RepublicofItaly,Reg.No.:00348170101.

InaccordancewithUniCreditBank’sArticlesofAssociation,thesoleshareholdermayonlyinfluencetheBank’sactivitiesusingtheweightofitsvotes.Thecompanyusesstandardstatutorymechanismstopreventtheshareholder’spotentialmisuseofitsposition.UniCreditBankisnotpartytoacontrollingcontractoracontractfortransferofprofit.Thenatureofthecontrolbythecontrollingentity,whichisUniCreditS.p.A.,resultsfromthedirectlyownedportionoftheissuer’sshares.

Topreventmisuseofthecontrolandcontrollinginfluenceofthecontrollingentity,UniCreditBankusesthestatutoryinstrumentofthereportonrelationsbetweenthecontrollingandcontrolledentitiesandtheReportonRelationsbetweenthecontrolledentityandotherentitiescontrolledbythesamecontrollingentity(ReportonRelationsbetweentherelatedentities).Noagreementsthatcouldleadtoachangeofcontrolovertheissuerareknown.

3.3 Additional informationInaccordancewiththeBank’sArticlesofAssociation,themembersoftheBoardofDirectorsareelectedanddismissedbytheSupervisoryBoard.UniCreditBankhasnospecialrulesforchangingtheArticlesofAssociation.

CurrentlythereexistnoauthorisationsorspecialpowersoftheBoardofDirectorsintermsofSection118,par.5h)ofActNo.256/2004Coll.,onCapitalMarketUndertakings,asamended.UniCreditBankhasconcludednoagreementswithmembersoftheBoardofDirectorsoritsemployeesthatwouldobligetheBanktotheirfulfilmentinthecaseofterminationoftheirfunctionsoremploymentinrelationtoatakeoverbid.

TherearenoprogrammesinUniCreditBankthatallowtheBank’semployeesormembersoftheBoardofDirectorstoacquireparticipatingsecuritiesoftheBank,optionsforsuchsecurities,orotherrightstheretounderadvantageousconditions.UniCreditBankhasconcludednosignificantcontractsthatwilltakeeffect,changeorexpireincaseofachangeinthecontroloftheissuerasaresultofatakeoverbid.

4. Summary of business activities

4.1 Scope of business activities:Thecompany’sbusinessactivitiesincludebankingtransactionsandprovisionoffinancialservicesfullyinaccordancewithBankingActNo.21/1992Coll.,asamended,andActNo.219/1995Coll.,theForeignExchangeAct,asamended,i.e.

a) receivingdepositsfromthepublic;b) grantingloans;c) investinginsecuritiesonitsownaccount;d) financelease;e) operatingasystemofpaymentsandclearing;f) issuingandadministeringpaymentproducts;g) grantingguarantees;h) openinglettersofcredit;i) administeringcashcollection;j) providinginvestmentservices:– maininvestmentservicepursuanttoSection8,par.2a)ofAct

No.591/1992Coll.,onSecurities,asamended(hereinafter“theSecuritiesAct”),receiptofandconveyinginstructionsrelatedtoinvestmentinstrumentsonacustomer’saccount,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2b)oftheSecuritiesAct,executinginstructionsrelatedtoinvestmentinstrumentsontheaccountofanotherparty,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)and1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2c)oftheSecuritiesAct,tradingininvestmentinstrumentsonatrader’sownaccount,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,maininvestmentservicepursuanttoSection8,par.2d)oftheSecuritiesAct,managementofindividualportfoliosatitsowndiscretionwithinthetermsofacontractualcovenantwithaclient,ifinvestmentinstrumentsformapartofsuchportfolioandwithrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2e)oftheSecuritiesAct,underwritingorplacingissuesofinvestmentinstruments,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1b)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3a)oftheSecuritiesAct,custodyandmanagementofoneormoreinvestmentinstruments,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1c)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3c)oftheSecuritiesAct,provisionofcreditsorloanstoacustomerforthepurposeofexecutingatransactionwithinvestmentinstruments,iftheprovideroftheloanorcreditisaparticipantinthistransaction,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1d)and1g)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3d)oftheSecuritiesAct,consultingservicesrelatedtothecapitalstructure,industrystrategyandrelatedissues,andtheprovisionofadviceandservicesrelatedtomergersandacquisitionsofcompanies,

– supplementaryinvestmentservicepursuanttoSection8,par.3e)oftheSecuritiesAct,servicesrelatedtounderwritingofissuespursuanttoSection8,par.2e)oftheSecuritiesAct,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1b)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3f)oftheSecuritiesAct,consultingservicesrelatedtoinvestmentininvestmentinstruments,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,and

– supplementaryinvestmentservicepursuanttoSection8,par.3g)oftheSecuritiesAct,executingofforeigncurrencyoperationsrelatedtotheprovisionofinvestmentservices,

k) issuingmortgagebonds;l) financialbrokerage;m) depositoryservices;n) foreigncurrencyexchangeservices(purchaseofforeign

currencies);o) providingbankinginformation;p) tradingforeigncurrenciesandgoldonitsownaccountoron

behalfofclients;q) rentingsafe-depositboxes;andr) otheractivitiesdirectlyrelatedtotheactivitiesspecifiedabove.

4.2 Key activities Corporate & Investment BankingCorporateandinvestmentbanking•Corporateandinvestmentbanking;•Credittransactions;•Financingcommercialrealestate;•Projectfinancingandstructuredfinancing;•Tradeandexportfinancing;•Documentarytransactions;•Treasury&custodyservices;•Assetmanagement;•EUfunds(consultingandpayment);•Maintainingaccountsanddeposits;•Paymentsystems;•Electronicbanking;•Directbanking;•SWIFTservices;•Cashpooling;•Paymentcards;•Cardacquiring;•EuropeanCommodityClearing;•Comprehensivemanagementofclientassets,includingportfolio

management;•Comprehensivefactoringservices–domesticfactoring,

exportfactoring,invoicediscounting,reversefactoring,creditcover,salesledgermanagement;

•GlobalInvestmentStrategy–strategicadvisoryforcapitalmarketinvestments;

•Openarchitectureofinvestmentproducts.



Launching new products or activitiesIn2019,weexpandedourportfolioofproductsandlaunchedanewserviceforcorporatebankingclientsfocusedonworkingcapitalfinancing.Withinthescopeofspecialisedadvisoryforourclients,weanalyseselectfinancialindicatorsand,atthesametime,ourexpertsevaluateanddesignthefinancingstructurepreciselyaccordingtoourclients’needsandbusinessmodel.

Fromabusinessperspective,anewagreementwiththeEIFwassignedin2019,increasingtheoveralllimittosupportthefinancingoftheneedsofSMEsintheCzechRepublicandSlovakiauptoEUR205million.

Aspartoftheoperationalsetupofthedivision,2019wasmarkedbycontinuedsimplification,automationanddigitisationofinternalprocesses.Anumberofchangesweremade,bothwithintheapprovalofcredittransactions,creditreviewsandcreditmonitoring,aswellasintheareaofautomatedclientdocumentationpreparationorthetransitiontodigitaldocumenttransmissionandstorage.Intheareaofsalessupport,whichiscrucialformanagingabusinessrelationship,anewCRMsolutionandanadvancedmarketdataanalysissystembasedonBigDataprincipleswerelaunchedintheCzechRepublicandSlovakia.Ourongoingobjectiveandpriorityareimprovingthequalityandavailabilityofservicesforourclientsandtherebyenhancingthepositivecustomerexperienceonbothmarkets,inallsegments,whichisourDNA.

Retail banking•Accountsforindividualclients,theUkontoaccount,Dětskékonto

account,UkontoPremiumaccount,UkontoTANDEMaccount,Ukontopromladéaccount,andaccountsforsmallenterprises;

•Mortgageloansandconsumercredit,includingthePRESTOLoan,andoverdraftsforindividualclients;

•Operating,investmentandmortgageloansforcorporateclients;•Paymentcards,includinginsurance(debit,creditandpartner

cards);•Deposit,savingsandinvestmentproducts(theBank’sown

orincooperationwithAmundi);•Insuranceproducts(propertyinsurance,lifeinsurance,

carinsurance,travelinsurance,CPI);•Internetandmobilebanking;•Cashandmoneychangingoperationsandsupplementary

services.

Launching new products and activitiesAsregardsmortgageloansforindividuals,wefocusedonthefurtherimprovementofourproductoffer,suchasfree-of-chargeescrowaccountsformortgages,mortgageswithoutprovidinginformationontheparticularpropertywiththeobligationtospecifyitaccordingtotheBank‘srequirementswithinacertaintime-limit.Furtheraccelerationandstreamliningofthecreditprocesswereourpriorityaswell.

Accounts Asregardsaccountsforindividuals,wefocusedonthedevelopmentoftheU-šetřeteloyaltyprogramme,whichisconnectedtoanaccount’spaymentcard.Withinthedevelopment,weengagednewpartnersandincreasedthenumberofregisteredusers.

Investments and depositsWecontinuedtofocusonactivelymanagedandflexibleinvestmentsolutionsincooperationwithAmundi.Thisappliestobothone-offandregularinvestments.

InsuranceIn2019,thecooperationwithourstrategicpartnersAllianzandGeneralidevelopeddynamically,entailingtheexpansionandoptimisationofourproductofferoflifeandnon-lifeinsuranceandinsuranceoftheabilitytopay.

Payment cardsIn2019,weintroducedApplePayandGooglePaymobilepaymentsforVISAandMastercardpaymentcards.

Small enterprises and entrepreneursIn2019,wefocusedonfurtherstreamlininginternalprocessesforextendingloanstoentrepreneurs.

Branch networkTheUniCreditBankbranchnetworkhas122branchesandatotalof178branchesincludingitsfranchisedistributionnetwork.Themaximumsatisfactionofourclientsremainsourmainpriority,therefore,lastyearwecontinuedinthereconstructionandmodernisationofmanyofourbranchesandalsoinstalled15newATMs.

4.3 Competitive position of the issuerAllchartsbelowprovidenon-consolidateddata.

(i) Profit after tax

Profit after tax (MCZK) 2019BankingsectorCZ 90,896UCBCZ&SK 9,433

nOtherbanksnUCB CZ & SK

Otherbanks 89.62%UCB CZ & SK 10.38 %Non-consolidateddata

(ii) Total net assets

(iii) Gross receivables from clients in CZ*

(iv) Gross receivables from clients in SK***

(v) Liabilities to clients in CZ*

(vi) Liabilities to clients in SK***

5. Organisational structure

TheBankispartoftheUniCreditBankingGroup(hereinafterreferredtoasthe“Group”).AsamemberoftheGroup,theBankmustcomply,withtheexceptionofcertainrelevantlegalregulations,withdirectivesissuedbyUniCreditS.p.A,astheparentcompany(hereinafterthe“ParentCompany”).TheParentCompanyshallmonitortheproperimplementationandobservationofthedirectives(hereinafterthe“HoldingGuidelines”)issuedbytheParentCompany(hereinafterthe“HoldingCompany”)intheBank.TheHoldingGuidelinesarerulesthatdefinethemanagement,organisationalstructureandmanagerialresponsibilitieswithinkeyprocessesintheGroupthatareissuedinexercisingitspowerstosuperviseandco-ordinatetheGroupinaccordancewiththeinstructionsissuedbytheItaliansurveillanceauthority,withtheaimtomaintaintheGroup’sstability.

History of the GroupWhilethebankinggroup’shistorydatesasfarbackas1473,theyearinwhichRoloBancawascreated,thecontemporaryhistoryofUniCreditGroupbeginswiththemergerofnineleadingItalianbanks,thesubsequentintegrationwiththeGermanHVBGroupand,mostrecently,withtheItalianCapitalia.In1999,acquisitionofBankPekaoofPolandmeantthebeginningoftheGroup’sexpansion(atthattimeunderthenameUniCreditoItaliano)intoCentralandEasternEurope(CEE).

GrowthcontinuedoverthenextfewyearswithpurchaseofthePioneerInvestmentsgroup,thesubsequentformationofPioneerGlobalAssetManagement,andthenfurtherstrategicacquisitionsgraduallycarriedoutinBulgaria,Slovakia,Croatia,Romania,theCzechRepublic,andTurkey.In2005,UniCreditmergedwiththeGermangroupHVB,whichhaditselfbeenformedin1998bythejoiningoftwoBavarianbanks:BayerischeVereinsbankandBayerischeHypotheken-undWechsel-Bank.Theresultwasasingle,majorEuropeanbank.

IntegrationwiththeHVBGroup–reinforcedbyitsownmergerin2000withBankAustriaCreditanstalt,whichwasstronglyrepresentedinmanyareasofpost-communist“new”Europe–createsabasisforUniCreditGrouptocontinuestrengtheningitsEuropeanfocus.Bymergingin2007withCapitalia,thethird-largestItalianbankinggroup,UniCreditGroupfurtherconsolidatedandstrengtheneditspositioninoneofitsmostimportantmarkets,Italy.Capitaliahadbeenestablishedin2002fromtheintegrationoftwopreviouslyindependententities,theBancaromaGroup(itselftheresultofamergerbetweensomeoftheoldestRomanbanks:BancodiSantoSpirito,CassadiRisparmiodiRomaandBancodiRoma)andtheBipop-CarireGroup.

UniCreditisnowasimpleandsuccessfulpan-EuropeancommercialbankwithafullypluggedinCorporate&InvestmentBank,delivering


*PursuanttotheCNBmethod,receivablesfromclientsandliabilitiestoclientsareonlyincludedfortheCzechpartofthebank.

**Convertedusingtheexchangerate25,41CZK/EURasat31December2019.***DataforSKbranch

Total assets (MCZK) as at 31 Dec 2019BankingsectorCZ 7,544,709UCBCZ&SK 672,552


Otherbanks 91.09%UCB CZ & SK 8.91 %Non-consolidateddata

Receivables from clients (MCZK) as at 31 Dec 2019BankingsectorCZ 3,160,894UCBCZ&SK 279,379

nOstatníbankynUCB CZ & SK

Ostatníbanky 91.16%UCB CZ & SK 8.84 %Non-consolidateddata,residents

Receivables from clients (MCZK) as at 31 Dec 2019BankingsectorSK 61138mil.EUR** 1,553,522UCBCZ&SK 119,204


Otherbanks 92.33%UCB CZ & SK 7.67 %Non-consolidateddata,residents

Liabilities to clients CZ (MCZK) as at 31 Dec 2019BankingsectorCZ 4,500,012UCBCZ&SK 311,183



Liabilities to clients SK (MCZK) as at 31 Dec 2019BankingsectorSK MEUR59,688** 1,516,672UCBCZ&SK 75,494




itsuniqueWestern,CentralandEasternEuropeannetworktoitsextensive26-million-strongclientfranchise*.UniCreditofferslocalexpertiseaswellasinternationalreach.Wesupportourclientsglobally,providingthemwithunparalleledaccesstoourleadingbanksin14coremarkets*aswellastoanother18countriesworldwide.UniCredit’sEuropeanbankingnetworkincludesItaly,Germany,Austria,BosniaandHerzegovina,Bulgaria,Croatia,CzechRepublic,Hungary,Romania,Russia,Slovakia,Slovenia,Serbia,andTurkey*.*Statusasat31December2019priortothedeconsolidationoftheTurkishYapiKredi.

6. Information on trends

Sincethedateofpresentingthelastfinancialstatements,nosubstantialnegativechangeshaveoccurredtotheissuer’soutlook.

7. Competence of UniCredit Bank’s bodies, composition of the Board of Directors, Supervisory Board, and Audit Committee, and description of their decision-making procedures

7.1 General MeetingTheGeneralMeetingofShareholdersistheBank’ssupremebody.ItdecidesonallaffairsoftheBankfallingunderitscompetencebylaworundertheseArticlesofAssociation.

ThefollowingactivitiesfallundertheGeneralMeeting’sexclusivecompetence:a) decidingonchangesintheArticlesofAssociationunlessthe

changeresultsfromanincreaseinsharecapitalbytheBoardofDirectorsunderSec.511etseq.oftheActonBusinessCorporationsorinconsequenceofotherlegalfacts,

b) decidingonanincreaseordecreaseinthesharecapital,oronauthorisingtheBoardofDirectorstheretounderSec.511etseq.oftheActonBusinessCorporations,oronthepossibilitytosetofffinancialclaimsfromtheBankagainstaclaimforpaymentofanissueprice,

c) decidingaboutthesharecapitaldecreaseandbondissuingunderSec.286etseq.oftheActonBusinessCorporations,

d) electinganddismissingmembersoftheSupervisoryBoard,membersoftheauditcommittee,andotherbodiesestablishedbytheArticlesofAssociation,

e) approvingtheannual,extraordinaryorconsolidatedfinancialstatementsand,incasesdefinedbylaw,alsointerimfinancialstatements;decidingondistributingprofitsorotherequityfunds,oronsettlementoflossesanddeterminingtheamountofprofitsharingformembersoftheBoardofDirectorsandSupervisoryBoard,

f) decidingonremunerationofmembersoftheSupervisoryBoardandtheauditcommittee,

g) decidingonapplyingforthelistingoftheBank’sparticipatingsecuritiesfortradingontheEuropeanregulatedmarketorwithdrawalofthesecuritiesfromtradingontheEuropeanregulatedmarket,

h) decidingonwindinguptheBankwithliquidation,appointinganddismissingaliquidator,includingtoestablishtheleveloftheliquidator’sremunerationandapprovingthedraftdistributionofliquidationbalance,

i) approvingatransferordiscontinuationofanoperationofaplantoranysuchpartthereofwhichwouldresultinasubstantialchangeinthebank’sscopeofbusinessoractivities,

j) approvingagreementsonsilentpartnerships,amendmentstheretoandterminationthereof,

k) appointingauditorsoftheBankbasedontherecommendationoftheAuditCommittee,

l) decidingontheestablishmentofnon-compulsoryfundsoftheBankandonproceduresfortheircreationandutilisation,and

m) decidingonotherissuesthattheActonBusinessCorporations,otherlegalregulationsortheArticlesofAssociationdefineasfallingunderthecompetenceoftheGeneralMeeting.

7.2 Board of Directors of UniCredit BankTheBoardofDirectorsisthestatutorybodyofUniCreditBankandasat31December2019ithadsevenmembers.MembersoftheBoardofDirectorsexercisetheirfunctionsinperson.MembersoftheBoardofDirectorsareelectedbytheSupervisoryBoardforaperiodofthreeyears.TheSupervisoryBoardmayatanytimedismissanyofthemembersoftheBoardofDirectors,irrespectiveoftheirtermofoffice.

OnlypersonsmeetingtherelevantlegalrequirementsmaybeappointedasmembersoftheBoardofDirectors.TheBoardofDirectorsmakesdecisionsintheformofresolutions,usuallyadoptedatitsmeetings.TheBoardofDirectorsshallhaveaquorumifanabsolutemajorityofallitsmembersispresent.TheapprovalofanabsolutemajorityoftheBoardmemberspresentisrequiredforaresolutiontobevalid.Intheeventofaparityofvotes,thepresidingmemberofthemeetingshallhavethedecidingvote.Ifallmemberssoagree,theBoardofDirectorsmayadoptresolutionsatthecompany’sregisteredofficeorelsewherebyanymeansofcommunicationthatenablesallitsmemberstosimultaneouslyhearoneanotherduringthemeeting(i.e.viateleconference)orinwritingwithoutholdingameeting(perrollam).Insuchcase,thevotingpersonsshallberegardedaspresent.

ThecompetenceoftheBoardofDirectorsincludesespeciallythefollowing:a) toorganisetheBank’sday-to-dayactivitiesanddirectitsbusiness

activities,b) toconvenetheGeneralMeetingandimplementitsdecisions,c) tosubmittotheGeneralMeeting

–atleastonceayearareportonbusinessactivities,thestateoftheBank’sproperty;thereportformsapartoftheBank’sannualreport,

–regular,extraordinary,consolidatedorinterimfinancialstatementsalongwithaproposalforthedistributionofprofitsorsettlementofloss,andtoprocessthesedocuments,

d) topublishthekeydatafromthefinancialstatements(suchastotalassets,totalliabilities,equity,profitbeforetax,profitaftertax)andthereportofthebank’sbusinessactivitiesandthestateofthebank’spropertyinawayapplicabletoconveningaGeneralMeeting,nolaterthan30daysbeforethedateoftheannualGeneralMeeting,includinginformationastowherethefinancialstatementsareavailableforinspection,orpublish,usingtheprocedureapplicabletoconveningaGeneralMeeting,informationastowhereonthebank’swebsitethefinancialstatementsareavailableinaccordancewithSec436,par.1,secondsentenceoftheActonBusinessCorporations,

e) todecideontheestablishmentandcancellationofthebank’sbranches,

f) toappointanddismisstheBank’smanagers,g) toexercisetherightsofanemployer,h) toissue,ifitdeemsfit,rulesofprocedurefortheBoardofDirectors,

whichmaynotcontradicttheArticlesofAssociation;anyrulesofprocedurefortheBoardofDirectorsissubjecttopriorapprovalbytheSupervisoryBoard,

i) tograntandwithdrawauthorisationstoactonbehalfoftheBankandthepowersofattorneytotheBank’srepresentatives,

j) inaccordancewithgenerallybindinglegalregulations,toestablishmandatoryfundsoftheBankincooperationwiththeSupervisoryBoardanddefinehowsuchfundsaretobecreatedandused,

k) tosignthecontractonthestatutoryauditwiththeauditorappointedbytheGeneralMeeting,

l) toestablishcommitteesoftheBankanddefinetheirtasks,m) toappointanddismisstheBank’sproxieswiththepriorapproval

oftheSupervisoryBoard,andn) todischargeotherresponsibilitiesstipulatedbylaworbythe

ArticlesofAssociation.

Mgr. JAKUB DUSÍLEK, MBAChairmanoftheBoardofDirectors,responsiblefortheBank’soverallresultsandformanagingtheChiefOperatingOfficerandtheChiefRiskOfficer.HealsoreportstotheBank’sBoardofDirectorsforthemanagementoffinance,humanresourcesandlegalissues.Workaddress:Želetavská1521/1,Prague4Domicile:Měsíční1366/10,Uhříněves,10400Prague10Born:17December1974

PAOLO IANNONEVice-ChairmanoftheBoardofDirectorsandCEO,responsibleformanagingandsupervisingtheBank’sbusinessactivitiesandcoordinatingtheactivitiesoftheBank’sotherdepartments,sothattheycontributetoachievingtheBank’sbusinessresultstoasgreat

anextentaspossible,whetherdirectlyorindirectlyWorkaddress:Želetavská1521/1,Prague4Domicile:Prague4–Michle,Baarova1540/48Born:15December1960

Ing. ALEŠ BARABASMemberoftheBoardofDirectorsandChiefRiskOfficer,responsibleforpreparingtheBank’screditpolicy,maintainingthequalityoftheloanportfolio,managingallactivitiesintheareaofcreditrisksandadheringtothelimitssetbybankingregulations,aswellasformanagingactivitiesintheareaofmarketandoperationalrisks.Workaddress:Želetavská1521/1,Prague4Domicile:UDubu1371,Prague4Born:28March1959

Ing. SLAVOMÍR BEŇAMemberoftheBoardofDirectorsandDirectoroftheCorporateandInvestmentBankingDivision,responsibleformanagingandsupervisingtheBank’sbusinessactivitiesintherelevantbusinesssegment.Workaddress:Želetavská1521/1,Prague4Domicile:Mliekárenská3,82109Bratislava,SlovakRepublicBorn:22April1976

Mgr. TOMÁŠ DRÁBEKMemberoftheBoardofDirectorsandDirectoroftheRetailandPrivateBankingDivisionWorkaddress:Želetavská1521/1,Prague4Domicile:Bílkova863/17,StaréMěsto,11000Prague1Born:14January1978

LJUBIŠA TEŠIĆMemberoftheBoardofDirectorsandChiefFinancialOfficerWorkaddress:Želetavská1521/1,Prague4Domicile:Udětskéhohřiště743/13,Jinonice,15800Prague5Born:6August1976

Ing. MIROSLAV ŠTROKENDLMemberoftheBoardofDirectorsandHeadofBranchSlovakiaWorkaddress:Šancová1/A,81333BratislavaDomicile:Charkovská7,Bratislava,84107,SlovakRepublicBorn:12November1958

ChangesintheBoardofDirectorsin2019Asat1April2019,thetermofofficeofIng.JiříKunertexpiredandMgr.JakubDusílek,MBA,wasappointedasat2April2019.

PlannedchangestotheBoardofDirectorsin2020ThemandateofPaoloIannoneexpireson31March2020.MarcoIannacconewasappointedViceChairmanoftheBoardofDirectorsandwillassumethisroleon1April2020.ThemandateofIng.AlešBarabasexpiresonMarch31,2020.



AlenDobrićwasappointedamemberoftheBoardofDirectorsandwilltakeoverthisroleonApril1,2020.ThemandateofLjubišaTešićexpireson31March2020.MassimoFrancesehasbeenappointedamemberoftheBoardofDirectorsandwillassumethisroleon1April2020.

7.3 Supervisory Board of UniCredit BankTheSupervisoryBoardhasninemembers,ofwhichsixareelectedanddismissedbytheGeneralMeetingandthreeareelectedanddismissedbythecompany’semployeesinaccordancewiththeActonBusinessCorporationswithreferencetotheActonTransformationsofCommercialCompaniesandCooperatives.MembersoftheSupervisoryBoardexercisetheirfunctionsinperson.MembersoftheSupervisoryBoardareelectedfortheperiodofthreeyearsandmaybere-elected.TheSupervisoryBoardshallhaveaquorumifanabsolutemajorityofallitsmembersispresentorotherwiseparticipating(forexample,viateleconference).TheapprovalofanabsolutemajorityofallmembersoftheSupervisoryBoardisrequiredforaresolutiontobevalid.Intheeventofaparityofvotes,theChairmanshallcastthedecidingvote.IfthemajorityofSupervisoryBoardmemberssoagrees,theSupervisoryBoardmayadoptresolutionsatthecompany’sregisteredofficeorelsewherebyanymeansofcommunicationthatenablesallmembersoftheSupervisoryBoardtosimultaneouslyhearoneanotherduringthemeeting(i.e.viateleconference)orinwritingwithoutholdingameeting(perrollam).Insuchcase,thevotingpersonsshallberegardedaspresent.

TheSupervisoryBoardestablishedtheRemunerationCommittee,whichconsistsofthreemembersoftheSupervisoryBoard(JiříKunert,HeinzMeidlingerandMilošBádal).ThecompetenceoftheRemunerationCommitteeincludespreparationofdraftresolutionsonremuneration,includingthoseadoptedbytheBank’sSupervisoryBoardandhavinganimpactontheobligor’srisksandriskmanagement.Whenpreparingthoseresolutions,theRemunerationCommitteetakesintoconsiderationthelong-terminterestsoftheBank’sshareholders,investorsandotherstakeholdersandthepublicinterest.TheRemunerationCommitteehasunderitsdirectsupervisiontheremunerationofmanagersresponsibleforriskmanagement,internalauditandcompliancefunctions.

TheSupervisoryBoardfurtherestablishedtheAppointmentCommittee,whichconsistsofthreemembersoftheSupervisoryBoard(JiříKunert,HeinzMeidlingerandAndreaDiamanti).ThecompetenceoftheAppointmentCommitteeincludestheselectionofcandidatesforvacanciesintheBank’sBoardofDirectorsandsubmittingthemforapprovaltotheSupervisoryBoard.Indischargeofthistask,theAppointmentCommitteeassesses,interalia,properproportionincompetence,skillsanddiversityincompositionofthebank’sbodyasawhole.TheAppointmentCommitteedevelopsdraftjobdescriptionsincludingskillsrequiredforthepositionandestimatedtimescheduleformeetingthegoalsrelatedtoexerciseoftheoffice.Additionally,theAppointmentCommitteerecommendsthe

targetgenderproportionintheBoardofDirectorsandtheprinciplesastohowtheshareofthelessrepresentedgenderintheBoardofDirectorscanbeincreasedtomatchthetargetgoal;a) regularly,atleastonanannualbasis,evaluatesthestructure,

size,compositionandactivitiesoftheBoardofDirectorsandsubmitsrecommendationstotheSupervisoryBoardregardingamendments,ifany,

b) regularly,atleastonanannualbasis,evaluatestheintegrity,professionalcompetenceandskillofeachmemberoftheBoardofDirectorsandtheBoardofDirectorsasawholeandsubmitstheevaluationreportstotheSupervisoryBoard,

c) regularlyreviewspoliciesoftheBoardofDirectorsastotheselectionandappointmentofacandidatetotopmanagementandsubmitsrecommendationstotheSupervisoryBoard.

TheSupervisoryBoardfurtherestablishedtheRiskManagementCommittee,whichconsistsofthreemembersoftheSupervisoryBoard(WolfgangSchilk,HeinzMeidlingerandAndreaDiamanti).ThecompetenceoftheRiskManagementCommitteeincludes,inparticular,thefollowingactivities:a) regularly,atleastonanannualbasis,evaluatestheintegrity,

professionalcompetenceandskillofeachmemberoftheBoardofDirectorsandtheBoardofDirectorsasawholeandsubmitstheevaluationreportstotheSupervisoryBoard,

b) examineswhetherthevaluationofassets,liabilitiesandoff-balancesheetitemsreflectedintheoffertoclientsfullycomplieswiththeBank’sbusinessmodelanditsriskmanagementstrategy.Iftheexistingrisksarenotproperlyreflectedinpricesinaccordancewiththeexistingbusinessmodel,thentheRiskManagementCommitteesubmitsacorrectiveplantotheSupervisoryBoard.

The Supervisory Board:a) reviewsthespecificdirectionsoftheBank’sactivitiesandbusiness

policyandsupervisesitsimplementation,b) isauthorisedtoverifyanystepstakenintheBank’saffairs,c) reviewsregular,extraordinaryandconsolidatedfinancial

statements,and,asthecasemaybe,theinterimfinancialstatements,aswellastheproposalfordistributionofprofitsorsettlementoflossandpresentsitsopiniontotheGeneralMeeting,

d) isauthorised,throughanyofitsmembers,toinspectanydocumentsandrecordsregardingtheBank’sactivities,

e) monitorswhetheraccountingrecordsareproperlymaintainedinaccordancewithrealityandwhethertheBank’sbusinessactivitiescomplywithlegalregulationsandtheArticlesofAssociation,

f) convenestheGeneralMeetingiftheBank’sinterestssorequireandproposesthenecessarymeasurestobetakenbytheGeneralMeeting,

g) appointsoneofitsmemberstorepresenttheBankinproceedingsheldbeforecourtsandotherauthoritiesagainstamemberoftheBoardofDirectors,

h) issues,ifitisdeemedappropriate,rulesofprocedureforthe

SupervisoryBoard,whichmaynotcontradicttheArticlesofAssociation,

i) approvestherulesofprocedure(ifany)fortheBoardofDirectors,j) electsanddismissesmembersoftheBoardofDirectors.New

membersoftheBoardofDirectorsareelectedfromamongcandidateswhomaybenominatedbyanymemberoftheSupervisoryBoard.RemovalofmembersoftheBoardofDirectorsfromtheirofficeisalsodecidedbytheSupervisoryBoarduponmotionofanymemberoftheSupervisoryBoard,

k) nominatescandidatesforChairmanandVice-ChairmanoftheBoardofDirectors,

l) stipulatesgeneraltermsandconditionsfortheBank’sactivitiesandtermsandconditionsformaintainingitscreditriskexposureinaccordancewithdecreesoftheCzechNationalBankandlegalnormspublishedintheCollectionofLawsoftheCzechRepublic,

m) approvestheestablishmentanddissolutionoftheBank’ssubsidiariesandtheirtransfertootherentities,

n) approvesmanagementagreementsconcludedbetweentheBankandmembersofitsBoardofDirectorsandanypaymentstobemadebytheBanktothemembersofitsBoardofDirectorspursuanttoSection61,par.1oftheActonBusinessCorporations,

o) decidesonremunerationofmembersoftheBoardofDirectorsandstipulatesrulesforremuneratingtheDirectoroftheInternalAuditDepartment,

p) establishescommitteesoftheSupervisoryBoardanddefinestheirresponsibilities,

q) overseestheeffectivenessandefficiencyoftheBank’smanagementandcontrolsystem,

r) givespriorapprovaltotheappointmentanddismissaloftheBank’sproxies,

s) canasktheChairmanoftheAuditCommitteetoconveneameetingoftheAuditCommittee,and

t) dischargesfurtherresponsibilitiesstipulatedbylaw,theArticlesofAssociationandtheGroup’srules.

ING. JIŘÍ KUNERTChairmanoftheSupervisoryBoardDomicile:Čerchovská1981/6,Vinohrady,12000Prague2Born:31January1953

HEINZ MEIDLINGERVice-ChairmanoftheSupervisoryBoardDomicile:Vienna,Kalmusweg46/Haus107,1220,RepublicofAustriaBorn:6September1955

BENEDETTA NAVARRA Domicile:00187Rome,ViadelGambero23,ItalyBorn:24March1967

EVA MIKULKOVÁ Domicile:Kladno,Kročehlavy,Dlouhá512Born:29January1957

Ing. JANA SZÁSZOVÁDomicile:Bratislava,HanyMeličkovej2989/18,84105,SlovakiaBorn:17January1963

Mgr. MILOŠ BÁDALDomicile:Prague5–Motol,Podhorská88/19Born:11April1970

WOLFGANG SCHILK Domicile:2603Felixdorf,Steinfeldgasse36,RepublicofAustriaBorn:16March1967

ANDREA DIAMANTIDomicile:1090Vienna,Wasagasse6/20,RepublicofAustriaBorn:1June1973

ANDREA VINTANIDomicile:21013Gallarate(Va),ViaColdiLana8,RepublicofItalyBorn:5May1979

ChangesintheSupervisoryBoardin2019Asat1July,SimoneMarcucciresignedfromofficeandIng.JiříKunertwaselectedinsteadasatthisdate.Asat20July,IvanVlahoresignedfromofficeandAndreaVintaniwaselectedinsteadasat31October.

7.4 Audit CommitteeTheAuditCommitteeisanindependentcommitteewiththetaskofoverseeing,monitoringandadvisinginmattersofconcernregardingaccountingandfinancialreporting,internalcontrol,auditingandriskmanagement,externalauditing,andmonitoringcompliancewithlaws,theBank’sregulationsandtheCodeofConduct.TheAuditCommitteeconsistsofthreemembersappointedanddismissedbytheGeneralMeetingforatermofthreeyearsfromamongtheSupervisoryBoardmembersorthirdpersons.TheChairmanandamajorityofthemembersoftheAuditCommitteemustbeindependentfromtheBankandcompetent.

TheAuditCommitteecanorderinspectionsandspecificallyfocusedauditinvestigationoftheBank’sfunctions,otherBankunitsandtheirsubsidiaries.Additionally,theAuditCommitteecanbeaskedtoassessinterbanktransactionsandintragrouptransactionsandothertransactionsinvolvingdirectorindirectconflictofinterests.Uponconductofitsbusiness,theAuditCommitteecanasktheGroupAuditfunctionforconsulting.Insuchcase,theGroupAuditstaffwillbeobligedtocomplywithallnon-disclosureprovisions.MeetingsoftheAuditCommitteeshallhaveaquorumifattendedinpersonorviateleconferencebyamajorityofitsmembers.DecisionsoftheAuditCommitteearepassedbyasimplemajorityofvotesoftheattendingmembersoftheAuditCommittee,unlessthedecisionsaretaken“perrollam”,whichmustbeapprovedbyallAuditCommitteemembers.



TheAuditCommitteeappointsanddismissesachairmanfromamongitsmembers.TheChairmancoordinatesandplansactivitiesoftheAuditCommittee,convenesmeetingsandchairsmeetings.

MARCO RADICEChairmanoftheAuditCommitteeDomicile:ViaS.Simpliciano,5-20121Milan,RepublicofItalyBorn:28August1957

HEINZ MEIDLINGERDomicile:Vienna,Kalmusweg46/Haus107,1220,RepublicofAustriaBorn:6September1955

BENEDETTA NAVARRA Domicile:00187Rome,ViadelGambero23,RepublicofItalyBorn:24March1967

ChangesintheAuditCommitteein2019TherewerenochangesintheAuditCommitteein2019.

7.5 Conflicts of interest at the level of management and supervisory bodies:

Theissuerisnotawareofanypossibleconflictsofinterestbetweenthedutiestotheissueroftheaforementionedpersonsandtheirprivateinterestsorotherduties.UniCreditBankhaspreparedanEthicsCodethatstipulateshowtoproceedincaseofaconflictofinterest.Themain

activitiescarriedoutbythemembersofmanagingandcontrolbodiesoftheissueroutsidetheissuerarenotsignificantfortheissuer.

7.6 Information on company management and administration codes

TheBankadoptednocompanymanagementandadministrationcode.

8. Legal and arbitration proceedings

Asat31December2019,theBankreviewedthependinglegaldisputesagainsttheBankandcreatedprovisionsforthelitigation.Inadditiontothosedisputes,theBankwasalsosubjecttootherclaimsresultingfromtheBank’sregularbusinessactivities.TheBankisnot,andduringthepast12monthswasnot,involvedinanyjudicial,administrativeorarbitrationproceedingswhich,intheBank’sopinion,couldhave,orinthepast12monthshad,amaterialimpactontheBank’sfinancialsituationorprofitability.

9. Material change in the issuer’s financial situation

Sincethepublishingdateoftheauditedfinancialstatementsfortheyearended31December2019,nosignificantchangehasoccurredinthefinancialsituationoftheissuer.

10. Received Loans from multilateral development banks and international organizations

Creditor: Council of Europe Development BankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 4286Thous.EURInterestrate: 3MEURIBOR+0,33%Loanoriginationdate: 28.7.2014Maturitydate: 28.7.2021Collateral: BondsCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 8571Thous.EURInterestrate: 3MEURIBOR+0,03%Loanoriginationdate: 16.11.2015Maturitydate: 16.11.2022Collateral: BondsCreditor: Council of Europe Development BankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 5000Thous.EURInterestrate: 6MEURIBOR+0,40%Loanoriginationdate: 30.10.2017Maturitydate: 23.2.2023Collateral: Nocollateral

Creditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 3750Thous.EURInterestrate: 3MEURIBOR+0,06%Loanoriginationdate: 30.6.2017Maturitydate: 28.6.2024Collateral: BillofExchangeCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 2707Thous.EURInterestrate: 3MEURIBOR+0,25%Loanoriginationdate: 31.5.2019Maturitydate: 28.6.2024Collateral: BillofExchange

Creditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 18148Thous.EURInterestrate: 0,80%Loanoriginationdate: 31.08.2015Maturitydate: 31.03.2028Collateral: PledgeofRecievablesCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 478Thous.EURInterestrate: 0,80%Loanoriginationdate: 31.08.2015Maturitydate: 31.03.2028Collateral: BillofExchangeCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 21802Thous.EURInterestrate: 0,90%Loanoriginationdate: 30.12.2015Maturitydate: 29.09.2028Collateral: PledgeofRecievablesCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 574Thous.EURInterestrate: 0,90%Loanoriginationdate: 31.03.2016Maturitydate: 29.09.2028Collateral: BillofExchangeCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 1635Thous.EURInterestrate: -0,153%Loanoriginationdate: 04.04.2017Maturitydate: 30.06.2021Collateral: PledgeofRecievables



Creditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 1290Thous.EURInterestrate: 0,686%Loanoriginationdate: 31.10.2018Maturitydate: 29.06.2029Collateral: PledgeofRecievablesCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 34Thous.EURInterestrate: 0,686%Loanoriginationdate: 31.10.2018Maturitydate: 29.06.2029Collateral: BillofExchange

Creditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 10443Thous.EURInterestrate: 0,426%Loanoriginationdate: 10.04.2017Maturitydate: 29.06.2029Collateral: PledgeofRecievablesCreditor: Oesterreichische KontrollbankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.LoanAmount: 275Thous.EURInterestrate: 0,426%Loanoriginationdate: 10.04.2017Maturitydate: 29.06.2029Collateral: BillofExchangeCreditor: Česká spořitelna a.s.Debtor: UniCreditLeasingCZ,a.s.LoanAmount: 387750,0Thous.CZKInterestrate: 2,47%Loanoriginationdate: 2.11.2018Maturitydate: 2.11.2023Collateral: LetterofComfortCreditor: Česká spořitelna a.s.Debtor: UniCreditLeasingCZ,a.s.LoanAmount: 450000,0Thous.CZKInterestrate: 2,25%Loanoriginationdate: 29.3.2019Maturitydate: 29.3.2022Collateral: LetterofComfort

Creditor: Raiffeisenbank a.s.Debtor: UniCreditLeasingCZ,a.s.LoanAmount: 600000,0Thous.CZKInterestrate: 2,24%Loanoriginationdate: 2.12.2019Maturitydate: 2.1.2020Collateral: LetterofComfort


Creditor: Council of Europe Development BankDebtor: UniCreditLeasingCZ,a.s.LoanAmount: 45000,0Thous.EURInterestrate: 0,000%Loanoriginationdate: 14.6.2019Maturitydate: 14.6.2024Collateral: BondsCreditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingCZ,a.s.LoanAmount: 27680,0Thous.CZKInterestrate: 0,188%Loanoriginationdate: 26.02.15Maturitydate: 26.02.20Collateral: Bonds

Creditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingCZ,a.s.LoanAmount: 1000,0Thous.EURInterestrate: 0,177%Loanoriginationdate: 26.02.15Maturitydate: 26.02.20Collateral: BondsCreditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingCZ,a.s.LoanAmount: 37500,0Thous.EURInterestrate: 0,110%Loanoriginationdate: 10.09.18Maturitydate: 10.09.23Collateral: BondsCreditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.LoanAmount: 1000,0Thous.EURInterestrate: 0,170%Loanoriginationdate: 26.02.15Maturitydate: 26.02.20Collateral: BondsCreditor: Council of Europe Development BankDebtor: UniCreditLeasingSlovakia,a.s.LoanAmount: 45000,0Thous.EURInterestrate: 0,000%Loanoriginationdate: 06.06.19Maturitydate: 14.06.24Collateral: BondsCreditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.LoanAmount: 1500,0Thous.EURInterestrate: 0,326%Loanoriginationdate: 29.06.15Maturitydate: 30.06.20Collateral: Bonds


Creditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.LoanAmount: 18750,0Thous.EURInterestrate: 0,123%Loanoriginationdate: 26.09.18Maturitydate: 02.10.23Collateral: BondsCreditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.LoanAmount: 18750,0Thous.EURInterestrate: 0,036%Loanoriginationdate: 20.11.18Maturitydate: 30.11.22Collateral: Bonds

Creditor: Evropská investiční banka, LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.LoanAmount: 6060,3Thous.EURInterestrate: 3MEURIBOR+0,559%Loanoriginationdate: 30.09.11Maturitydate: 29.09.23Collateral: BondsTotal loans as at 31 December 2019 7 908 219 Thous. CZK

11. Material contracts

UniCreditBankhasnotconcludedanysuchcontractswhichcouldgiverisetoanobligationoraclaimofanymemberoftheGroupthatwouldbematerialtotheBank’sabilitytosettleitsliabilitiestosecuritiesholdersbasedontheissuedsecurities.

12. Third party information and experts’ opinions and declarations of any interests

Theannualreportdoesnotincludeanyrepresentationsorreportofanentityactingasanexpert.Additionally,itdoesnotincludeanyinformationfromathirdparty,unlessexpresslystatedotherwise.

13. Total amount of outstanding bond issues

Totalamountofoutstandingbondissues,includingEURandUSDbondsconvertedusingtheCNBexchangeratevalidasat31December2019:CZK20,158,216,105.

13.1 Information on the number of shares issued by the issuer which are under the ownership of the issuer’s managers, including persons close to these persons

Thenumberofsharesissuedbytheissuerundertheownershipofmanagersorpersonsclosetothesepersonsiszero.Thereare

nooptionsorcomparableinvestmentinstruments,thevaluesofwhichrelatetosharesorsimilarsecuritiesrepresentinganownershipinterestintheissuer.

14. Principles of remunerating the issuer’s managers

Remuneration policyTheremunerationpolicyformanagersisestablishedinaccordancewith“UniCreditGroup’sRemunerationPolicy”andwithDecreeNo.163/2014Coll.andconsistsofthebasicsalariespolicy,the“GroupIncentiveSystem”,andthebenefitssystem.Thekeypillarsoftheremunerationpolicyare:clearandtransparentgovernance,compliancewithregulatoryrequirements&ethicalrules,continuousmonitoringofmarkettrends&practices,sustainablepayforsustainableperformanceandmotivation&retentionofallemployeeswithparticularfocusonpromisingstaffmembersandthosewhoarecriticalforfulfillingthecompanymission.

Board of DirectorsTheRemunerationCommitteeoftheSupervisoryBoardofUniCreditBankCzechRepublicandSlovakia,a.s.(hereinafterthe“RemunerationCommittee”)approvestheremunerationforeachcalendaryearformembersoftheBoardofDirectorsonthebasisofthesupportingmaterialssubmittedbytheHumanResourcesDepartmentandpreparedincooperationwiththeHumanResources


DepartmentofUniCreditGroup.In2019,theRemunerationCommitteeconsistedofSimoneMarcucci,whowasreplacedbyJiříKunertbasedontheRemunerationCommittee’sdecisionof30July2019,andothermembersincludedHeinzMeidlingerandMilošBádal.StartingMay2014,inlinewiththenewcivilcode,membersoftheBoardofDirectorsperformworkaccordingtotheAgreementontheDischargeofOfficeofMembersoftheBoardofDirectorsandreceiveremunerationthatissetasafixedamountpaidmonthly,anannualvariablebonus,andtheyaregrantedcertainadditionalbenefits.ForeignmembersoftheBoardofDirectorsarenotentitledtolocalremunerationforexecutingtheiroffices;remunerationtotheBank’sforeignexecutivemanagers(membersoftheBoardofDirectors)isprovidedbytheparentcompany.Theseremunerationcostsareaccountedforbytheparentcompanyandincludedintheremunerationsummary.

Contractual salaries of the Bank’s executive managers ContractualsalariesaredefinedonthebasisofthevalueofapositionwithintheclassificationsystemoftopmanagementpositionsinUniCreditGroup(“GlobalJobModel”),thekeyabilitiesoftheexecutivemanagerandamarketcomparisonwithotherentitiesonthefinancialandbankingmarketsintheCzechRepublic,withinUniCreditGroup,andinCentralandEasternEurope.

ChangesinthecontractualsalariesoftheBank’smembersoftheBoardofDirectors,HeadofCompliance,andHeadofInternalAuditareapprovedbytheRemunerationCommitteeeachyearonthebasisofthesupportingmaterialssubmittedbytheHumanResourcesDepartmentandpreparedincooperationwiththeHumanResourcesDepartmentofUniCreditGroup.

Variable annual bonuses for the Bank’s executive managersThetargetvariablebonusfortheBank’smembersoftheBoardofDirectorsisapprovedbytheRemunerationCommitteeonthebasisofthesupportingmaterialssubmittedbytheHumanResourcesDepartmentandpreparedincooperationwiththeHumanResourcesDepartmentofUniCreditGroup.Thetargetvariablebonusofeachexecutivemanagerisdeterminedindividuallyandcomprises50–100%ofhisorherannualcontractualsalary.Aportionoftheremunerationisintheformofsharesandnon-monetaryinstruments.

UniCreditGroup’s“2019GroupIncentiveSystem”(hereinafterthe“System”)wasapprovedbytheRemunerationCommitteeofUniCredit

BankCzechRepublic,a.s.,asabindingregulationforthevariablebonusesofexecutivemanagers.

ThevariablebonusamountthereofandmethodofpaymentareestablishedinaccordancewiththeSystemusingthefollowingcomponents:1. “Bonus Pool”;2. “Entry Conditions”;3. “Group and Local Risk Adjustments”;4. “Performance Screen”;5. “Bonus Cap”;6. “Compliance Assessment”, “Continuous Employment

Condition”, “Claw Back” and “Personal Hedging”.

Ad 1.ThebonuspoolisbasedonCountryrisk-adjustedresults.ThebonuspoolisdefinedinthebudgetphaseforeachCountryasapercentageoftherespectivefundingKPI,considering:historicaldataanalysis,expectedprofitability,businessstrategyandmarketcontext/externalbenchmarking.

Ad 2.Specificindicatorsaresetas“EntryConditions”,measuringannualprofitability,solidityandliquidityresults.The“EntryConditions”arethemechanismthatverifiesthepossibleapplicationofthemaluscondition(ZeroFactor)basedonthelevelofachievementoftheindicators.Inordertoalignwithregulatoryrequirements,incasethe“EntryConditions”arenotmet,aZeroFactorwillapplytotheExecutives/IdentifiedStaffpopulation.

IftheEntryConditionsaremet,theZeroFactorisnotactivated,andfurtheradjustmentsareperformedpursuanttothePerformance&RiskFactorAdjustments.

Ad 3.Applicationofthe“GroupandLocalRiskAdjustments”parametersaffirms,reducesorentirelyterminatesanexecutivemanager’sbonuspayment.

Inaccordancewithapplicableregulatoryrequirements,finalevaluationofsustainableperformanceparametersandrisk-rewardalignmentisreviewedbytheRemunerationCommitteeanddefinedundertheresponsibilityandgovernanceoftheBoardofDirectors.

In2019,EntryConditionsweredefinedusingthefollowingparameters:

Group CEE Division LocalNetOperatingProfit(NOP) NetOperatingProfit(NOP) NetOperatingProfit(NOP)NetProfit(NP) NetProfit(NP)Capitaladequacyindicator(CommonEquityTier1RatioTransitional)Short-termliquidityindicator(LiquidityCoverageRatio)NetStableFundingRatio(NSFR)


ZeroFactorisappliedintheyearsofthedeferredbonus.ZeroFactorconfirmsorentirelycancelspaymentofdeferredportionsofthebonus.TheRemunerationCommitteeapprovestheleveloffulfilmentoftheZeroFactorconditionseachyearandthereleaseorcancellationofdeferredbonuspaymentbasedonaproposalfromUniCreditGroup’sBoardofDirectors.

Ad 4.The“PerformanceScreen”isatableoftheexecutivemanagers’performanceobjectivesseteachyearbytheRemunerationCommittee.TheperformanceobjectivesarecloselyrelatedtotheBank’sstrategicplan.TheRemunerationCommitteeapprovestheleveloftheirfulfilmentbasedontheproposaloftheexecutivemanagers’directsuperiorsforeachcalendaryearandeachexecutivemanagerseparately.

The“PerformanceScreen”shouldcontainatleast4performancegoals(itisrecommendedtousenomorethan6),ofwhichatleasthalfaresustainable.Theexecutivemanagersmayhaveothergoalsassignedinadditiontoperformancegoals.Suchadditionaltargetsmayrangefromindividualtasks,projects,activitiesoranyothergoalsorbehaviours.

“PerformanceScreen”parametersapprovedbytheRemunerationCommitteeforexecutivemanagersfor2019included,forexample:– ROAC/EVA,– ExpectedLoss,– OPEX,– RevenueSharing,– Netnewclients.

Othergoalswerequantitativeandqualitativeanddifferedforeachindividualexecutivemanagerdependingontheprioritiesofthesegmentforwhichtheparticularexecutivemanagerisresponsible.

Ad 5.TheCapitalRequirementsDirective(CRDIV)approvedbytheEuropeanParliamentintroducedacaponbonuseswithaneffectivedateof1January2014.Thebonuscaphasbeensetataone-timeyearlyfixedcompensation,withthepossibilitytoincreaseittotwo-timestheyearlyfixedcompensation,ifallowedbylocalregulatorsandsubjecttoshareholders’approvalwithaqualifiedmajority.ForthecompanyControlFunctions,amoreconservativeapproachapplies,providingforthebonuscapsetat80%oftheyearlyfixedcompensation.

Ad 6.Anypaymentofthevariablecomponentofremunerationforanexecutivemanagerissubjecttothe“ComplianceAssessment”,whichconfirms,reducesorentirelycancelsthepaymenttowhichanemployeeisentitledineachyearofdeferredremuneration.Anexecutivemanager’sdirectsuperiorshallassesswhetherduringtheevaluatedperiodtheexecutivemanageractedinaccordancewiththeprinciplesofUniCreditGroup’sIntegrityCharterandArticlesofAssociation;whetherheorshecommittedseriouserrors,includingerrorswhichcouldhaveatangible

impactonbankingriskorthebalancesheet;aswellaswhetherornotheorshebreachedlegalnorms,UniCreditGroup’srulesorUniCreditBank’sinternalregulations,regardlessofwhetheradisciplinaryhearingistakingplaceorotherdisciplinarysanctionshavealreadybeenimposed.Thisevaluationiscarriedoutbytheexecutivemanager’sdirectsuperiorandapprovedbytheRemunerationCommittee.

Aswiththeevaluationofindividualperformanceobjectives,thisassessmentmayreduceorentirelycancel(dependingonthegravityoftheviolation)thepotentialvariableremuneration.

InordertostrengthenthecomplianceculturewithintheGroup,abonusentitlement“gateway”isintroducedwhereanemployee’srateofcompletingmandatorycompliance-relatedtrainingsis90%orlessasat30September2019.ThelistoftrainingscoveredbythisprovisionisdeterminedbyCompliancebasedonlocalandGrouprequirementsandemployeesareinformedofthesame.The“gateway”envisagesautomaticdeletionoftheannualbonuspayment(paymentbeforehandaswellasfuturepayment)towhichanemployeewouldotherwisehavebeenentitledintherelevantassessmentyearanditautomaticallyhasnoimpactondeferredpaymentsofpreviousyears.

Inordertofurtherstrengthenthepreventionoftheriskofmoneylaunderingandterroristfinancing,theGrouphasalsointroducedanecessaryconditionfortheentitlementtothe2019bonusrelatedtoperiodicdatarecoveryinKYC(KnowYourClient)questionnaires.Accordingtothiscondition,theemployeesresponsibleforcompletingthesequestionnairesmusthavecompletedatotalof99%ofthequestionnairesintheclientportfolioundertheirdirectmanagementasat30September2019inordertobeentitledtothebonus.

The“ContinuousEmploymentCondition”stipulatesthatanemployeeisentitledtopaymentofthevariableremunerationcomponentoritsdeferredpartonlyifheorsheisanemployeeoftheBankoranothercompanywithinUniCreditGroupatthetimeofpayment.

AnyremunerationthataworkercangetinanyyearpursuanttotheSystemaresubjecttotheClawbackapplicationincompliancewithlegislationinforce,includingpaymentofremunerationseffectedonabasislaterprovedtobeincorrect.

Executivemanagersarerequiredtoundertakenottousepersonalhedgingstrategiesonremunerationandliability-relatedinsurancetounderminetheriskalignmenteffectsembeddedintheirremunerationarrangements.InvolvementinanyformofhedgingtransactionshallbeconsideredabreachofCompliancepoliciesandthereforeanyrighttoreceivevariableremunerationpursuanttotheSystemshallexpire.

Bonus PlanAccordingtothe“2019GroupIncentiveSystem”rules,paymentofthebonusforthegivenperiod(2019)isspreadoutoveramultiple-yearperiod:


ExecutiveVice-PresidentsandSeniorPositionswithvariableremunerationoverEUR430,000– Thefirstpart(2020)ispayableonehalfincashandonehalf

innon-monetaryinstruments,comprising40%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thesecondpart(2022)ispayableonehalfincashandonehalfinnon-monetaryinstruments,comprising24%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thethirdpart(2023)ispayableinnon-monetaryinstruments,comprising12%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefourthpart(2024)ispayableinnon-monetaryinstruments,comprising12%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefifthpart(2025)ispayableincashandcomprises12%ofthebonusestablishedforthegivenperiod.

– In2020-2025,eachbonuspaymentissubjecttotheZeroFactorapplication.

– Ineachyear,thebonuspaymentisconditionaluponcompletingtheComplianceAssessment,ContinuousEmploymentConditionandClawbackapplication,whichconfirm,reduceorentirelycanceltheentitlementtobonuspayment.

ExecutiveVice-PresidentsandSeniorPositionswithvariableremunerationbelowEUR430,000– Thefirstpart(2020)ispayableonehalfincashandonehalf


– Thesecondpart(2022)ispayableonehalfincashandonehalfinnon-monetaryinstruments,comprising20%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.


– Thefourthpart(2024)ispayableinnon-monetaryinstruments,comprising10%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefifthpart(2025)ispayableincashandcomprises10%ofthebonusestablishedforthegivenperiod.



SeniorVice-Presidents&OtherIdentifiedStaffwithvariableremunerationoverEUR430,000– Thefirstpart(2020)ispayableonehalfincashandonehalf


– Thesecondpart(2021)ispayableas5%ofthebonusestablishedforthegivenperiodincashand15%ofthebonusestablishedforthegivenperiodinnon-monetaryinstruments;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thethirdpart(2022)ispayableas5%ofthebonusestablishedforthegivenperiodincashand15%ofthebonusestablishedforthegivenperiodinnon-monetaryinstruments;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefourthpart(2023)ispayableincashandcomprises20%ofthebonusestablishedforthegivenperiod.



SeniorVice-Presidents&OtherIdentifiedStaffwithvariableremunerationbelowEUR430,000– Thefirstpart(2020)ispayableonehalfincashandonehalf


– Thesecondpart(2021)ispayableinnon-monetaryinstruments,comprising10%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.


– Thefourthpart(2023)ispayableincashandcomprises20%ofthebonusestablishedforthegivenperiod.



TheRemunerationCommitteeapprovesthefulfilmentofthepaymentconditionsineachyearandthereleaseofthedeferredbonuspaymentonthebasesofaproposalfromUniCreditGroup’sBoardofDirectors.


Benefits of the Bank’s executive managersBenefitsaredefinedinaccordancewiththeprioritiesofUniCreditGroup’shumanresourcesstrategyandtheclassificationofthemanager’spositionintoapre-definedemployeebenefitscategory.– Thefollowingbenefitsareprovidedtoexecutivemanagersby

virtueoftheirAgreementonthedischargeofofficeofmembersoftheBoardofDirectorswiththeBank:contributiontosupplementarypensioninsurance,contributiontocapitallifeinsurance.

– Byvirtueoftheirmanagerialposition,executivemanagersareprovidedacompanycarforbusinessaswellasprivatepurposes.

– InaccordancewiththestandardsforrelocatingtopmanagersinUniCreditGrouptoaforeigncountry,andbyvirtueoftheirtemporaryrelocationtotheCzechRepublicfromothercompanieswithinUniCreditGroup,foreignexecutivemanagersreceivebenefitsconnectedwiththeirlong-termstayabroad.

Theaforementionedbenefitsareprovidedintheformofnon-monetaryfulfilment,andtheiraggregateamountisincludedintheremunerationsummary.

Supervisory BoardTheSupervisoryBoardconsistsofninepersons,ofwhichthreeareemployedbytheissuerandreceiveasalaryforactivitiesperformedfortheissueronthebasisofanemploymentcontractinaccordancewiththeLabourCode.MembersoftheSupervisoryBoard,iftheyareatthesametimeemployedbyanycompanyofUniCreditGroup(includingtheissuer),arenotentitledtoremunerationforexecutingtheiroffices.FixedcontractualremunerationmayonlybeagreedonwiththosemembersoftheSupervisoryBoardwhodonotatthesametimeholdexecutivepositionswithinUniCreditGroupbyvirtueofanemploymentcontract.TheremunerationisvalidfortheentireperiodofofficeoftheSupervisoryBoardmember,andisapprovedbasedontheBank’sBoardofDirectorsproposalbythegeneralmeetingofUniCreditBankCzechRepublicandSlovakia,a.s.

TheremunerationtomembersoftheSupervisoryBoardstatedintheremunerationsummarycomprisestheincomesreceivedbythreemembersoftheSupervisoryBoardwhoareemployedwiththeBankandwhoreceivedthepaymentsbyvirtueoftheiremploymentcontractsinaccordancewiththeLabourCode,bytwoforeignmembersoftheSupervisoryBoardwithwhomtheshareholderagreedfixedcontractualremunerationbasedontheaforementionedregulations,andwhowerejoinedbyonelocalmemberoftheSupervisoryBoard,MrJiříKunert,whowaselectedasasuccessortoSimoneMarcucciattheheadoftheSupervisoryBoardasat30July2019.TheremainingmembersoftheSupervisoryBoardarenotremuneratedbytheissuer.

TheremunerationpolicyinthecaseofSupervisoryBoardmemberswhoareemployedwithUniCreditBankCzechRepublicandSlovakia,a.s.,isapprovedbytheBank’sBoardofDirectorsattheproposaloftheBank’sHumanResourcesDepartment,andthebenefitsare

providedinaccordancewiththevalidCollectiveAgreementsconcludedbetweentheBankanditstradeunionsinparticularcountries.

TheprinciplesofremunerationtomembersoftheSupervisoryBoardemployedwithintheBankandthecomponentsoftheirremunerationwhicharepaidtothembyvirtueoftheiremploymentcontractsincludingvariableremunerationaredefinedbytheBank’sinternalregulation.Thevariableannualbonuspaymentisdeterminedforemployeesasapercentageofthetargetvariableannualbonus(0–150%)onthebasisoffulfillingquantitativeandqualitativeperformanceindicatorswhicharedefinedinthe“GoalCard”,whichispartofthesystemofvariableremunerationoftheBank’semployeesbasedonanevaluationofindividualandteamtargets.Theperformanceparametersinthe“GoalCard”forSupervisoryBoardmemberswhoareemployedwiththeissueraredependentonthejobstheyperformbyvirtueoftheiremploymentcontractsinaccordancewiththeLabourCodeandinnowayrelatetotheexecutionoftheofficeofSupervisoryBoardmember.TheamountsofthefinalannualvariablebonusespaidtomembersoftheSupervisoryBoardwhoareemployedwiththeissuerareproposedandapprovedbytheirdirectsuperiorsaccordingtotheissuer’sorganizationalstructure.

Audit CommitteeTheAuditCommitteeconsistsofthreepersons,noneofwhomareemployedbytheissuer.FixedcontractualremunerationmaybeagreedforexecutingtheofficeofAuditCommitteemember.TheremunerationisvalidfortheentireperiodofofficeoftheAuditCommitteemember,andisapprovedbasedontheBank’sBoardofDirectorsproposalbythegeneralmeetingofUniCreditBankCzechRepublicandSlovakia,a.s.In2019,theaforementionedfixedcontractualremunerationwasagreedwiththreemembersoftheAuditCommittee,andthetotalamountthereofisstatedintheremunerationsummary.

15. Diversity Policy

FocusingondiversityandinclusivecultureisanessentialpartoftheBank‘sandGroup‘sstrategy.Wepromoteequalopportunitiesanddiversityinitsmanyways-fromgender,age,nationalitytosexualorientationordisability.

Initiativestofosteracultureofdiversityandinclusionconcern:– recruitmentandtalentacquisition– professionaldevelopmentandcareergrowth– remuneration– work-lifebalance– and,lastbutnotleast,education.

In2019,wefocusedprimarilyonstrengtheninggenderdiversity.Although40%ofmanagerialpositionsarerepresentedbywomen,ourgoalistocontinuetostrengthenthepresenceofwomeninmiddleandtopmanagement.


Managerialpositionsarefilledmostlybyinternalsources,therefore,weputemphasisonequalopportunitiesandagender-balancedsuccessionplanning.Womenidentifiedassuccessorstomanagerialpositionsaresupportedbeyondthestandardeducationalopportunitiesintheformoftheinspiringinteractiveseminar“Womeninleadership”.Themaintopicsinclude,forexample,confidence-building,effectivecommunication,andbuildingofone’sownauthenticleadershipstyle.Womenwiththepotentialandambitionfortoppositionsaresupportedbyexternalmentoring.

Ourgoalistobuildstrong,effectiveandcollaborativeteamsofwomenandmenatalllevelsofmanagement.InOctober,theCzechRepublicparticipatedintheGroup-wideDiversity

andInclusionWeekandcontributedsignificantlytoraisingawarenessofvariousformsofdiversityandhowtoworkproperlywithdiversity.Allemployeeshadtheopportunitytoattendlecturesledbyexpertsonvariousaspectsofdiversity.

Topromotework-lifebalance,theBankprovidesflexibleworkingconditions,whetherthroughworkfromhomeorflexibleworkinghours.Weorganiseregularsportsandrelaxationactivitiesdirectlyintheworkplace,andwecontinuallyinnovatethemtopromotethewell-beingofourcolleagues,respondinginthiswaytotheneedsofthenewgenerationsenteringthelabourmarketinordertobeamoreattractiveemployer.Webelievethatwell-beingactivitiestranslateintostrongerengagementandproductivityforouremployees.

16. Information on all monetary and in-kind income accepted by executive managers and members of the Supervisory Board and the Audit Committee from the issuer

Amounts in CZKMembers of the Board of Directors Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 58,511,595 17,191,982 16,108,599 3,847,353 95,659,529 Members of the Supervisory Board Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 4,248,931 0 0 4,248,931

Members of the Audit Committee Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 895,898 0 0 895,898

Other executive managers Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 108,491,125 3,507,830 1,556,147 113,555,103

Note:Thementioneddatacontainamountsactuallypaidduring2019,ascomparedtothefinancialstatements,whichcontaininformationoncostsconcerning2019.

17. Information on remuneration to auditors recognised in the reporting period

(CZK thousand) Bank Consolidated Total companies consol. groupAudit 24,089 7,280 31,369Taxadvisory – – –Otheradvisoryservices – – –Total 24,089 7,280 31,369


18. Major future investments other than financial investments (planned for 2019)

TotalinvestmentsofUniCreditBankfor2020,excl.financialinvestments,areplannedintheamountofCZK2.4billion,ofwhichCZK1.9billionisfortheplannedpurchaseofassetsforrentforUniCreditLeasing.AnothermajoritemisinvestmentinIT(hardwareandsoftware)totallingCZK317million,whichisprimarilyintendedforthedevelopmentoftheBank’sinformationsystems,withanemphasisondigitisation,automationandstreamliningofprocesses,aswellasforcomplyingwiththerequirementsofaregulatoryandoperatingnature.ItisonlypartoftotalITinvestmentbecauseITservicesonthepartoftheBankareprimarilysuppliedonanoutsourcingbasisandrecognisedinoperatingcosts.Investmentsinfixedcapital,includingrentedbuildings,intheamountofCZK48millionarefocusedmostlyonthedevelopmentandrenovationofthedistributionnetwork.

19. Guarantees provided by the insurer

(CZK thousand) 31 Dec 2019 31 Dec 2018Grantedguaranteesandcollaterals 44,141,617 38,445,233GuaranteesgrantedunderL/Cs 691,593 1,883,057Total 44,833,210 40,328,290

20. Internal audit policy and procedures and rules for the issuer’s approach to risks associated with financial reporting

AllinternalprocesseswitheitheradirectorindirectinfluenceontheBank’sreportinghavebeendescribedintheUniCreditCzechRepublicandSlovakiaGroupincludingtherisksconnectedwiththeseprocesses.Controlswithvaryingperiodicityhavebeensetupinordertoeliminatetheserisks.Allprocessesareevaluatedandupdatedtwiceayear,andthecontrolssetuptoeliminatethedescribedrisksareinspected.

Thegoaloftheaforementionedeffortwastoestablishcorrespondinginternalcontrolsthatguaranteetheaccuracyofthefinancialreporting,achievebroaderawarenessoftherisksconnectedwithcreatingfinancialreportsandkeeptheserisksundercontrolandatanacceptablelevel.TheentireprocessisinaccordancewithItalianActNo.262/2005andlegalregulationNo.303/2006,whichwereinspiredbytheAmericanSarbanes-OxleyAct.

TheUniCreditBankCzechRepublicandSlovakiaGrouphaspreparedinternalregulationsrelatingtoparticularareasoftheGroup’sactivitiesthatinfluencetheGroup’saccounting.Thevaluationproceduresappliedtothestatementoffinancialpositionandstatementofcomprehensiveincomeitemsaredescribedinthenotestotheindividualandconsolidatedannualfinancialstatements,whichformapartofthisannualreport.Theseannualfinancialstatementsaresubmittedforreviewbyauditorandfinancialdataintendedforconsolidationoftheparentcompanyarealsosubmittedforreviewbyauditortwiceayear(mid-yearandatyear-end).

21. Licences and trademarks

UniCreditBankusesdozensoftrademarksforidentificationandprotectionofitsproductsonbankingmarketsintheCzechRepublicandSlovakia.TheBank,asowner,hasthetrademarksregisteredwiththeIndustrialPropertyOfficeoftheCzechRepublicandtheIndustrialPropertyOfficeoftheSlovakRepublic.

22. Information on regulated markets and rating of the issuer or its debt securities

Theissuerhasbeenassignednorating.On5December2019,theratingagencyMoody‘sInvestorService,Inc.(hereinafterreferredtoas“Moody‘s”)increasedtheratingofselecteddebtsecuritiesissuedbytheissuer(referredtointhesummarybelow)byonenotchfromtheoriginalAa3toAa2.

Moody‘scarriesonitsactivitiesintheEuropeanUnionandisregisteredinlinewithRegulation(EC)No1060/2009oftheEuropeanParliamentandoftheCouncilasamended(hereinafterreferredtoasthe“RegulationonCreditRatingAgencies”).ItisincludedinthelistofcreditagenciespublishedbytheEuropeanSecuritiesandMarketAuthority(ESMA)onitswebpages(http://www.esma.europa.eu/page/List-registered-and-certified-CRAs)inlinewiththeRegulationonCreditRatingAgencies.

Theissuerhasnotcontractedanyotherratingagencytoissuearatingofidenticalissuesordebtsecuritiesreferredtointhesummarybelow.Ifsuchapossibilityoccursinthefuture,theissuershallactinlinewithArticle8doftheRegulationonCreditRatingAgencies.


Summary of issued and outstanding debt securities of the Issuer admitted to trading on a regulated market

AlistofoutstandingdebtsecuritiesoftheissueradmittedtotradingonthePragueStockExchangeispresentedinthefollowingtable.Thedataarevalidasat31December2019.

Name of the issue ISIN Date Due Date when Rating of the issue date trading begins (Moody’s) HZLHVB5.00/25 CZ0002000680 23Nov2005 15Nov2025 23Nov2005 –UCBHZL10YFLOAT/37 CZ0002001910 21Dec2007 21Dec2037 21Dec2007 Aa2UCBHZL2.00/2020 CZ0002003080 3June2013 3June2020 19Aug2013 Aa2UCBHZL3.04/2028 CZ0002003114 7June2013 7June2028 19Aug2013 Aa2UCBHZL6MVAR/2020 CZ0002003148 18July2013 18July2020 26Aug2013 –

AlistofoutstandingdebtsecuritiesoftheissueradmittedtotradingontheLuxembourgStockExchangeispresentedinthefollowingtable.Thedataarevalidasat31December2019.

Name of the issue ISIN Date Due Date when Rating of the issue date trading begins (Moody’s) UCBHZL3MFLOAT/23 XS1206759406 20March2015 15Sept2023 20March2015 Aa2UCBHZL3MFLOAT/21 XS1206761139 20March2015 16March2021 20March2015 Aa2UCBHZL0.625/20 XS1225180949 30April2015 30April2020 30April2015 Aa2UCBHZL0.75/22 XS1559750671 3Feb2017 3Feb2022 3Feb2017 Aa2UCBHZLII0.75/22 XS1643471250 11July2017 11July2022 11July2017 Aa2UCBHZL1.00/24 XS1892859577 16Oct2018 16Oct2024 16Oct2018 Aa2

AlistofoutstandingdebtsecuritiesoftheissueradmittedtotradingontheBratislavaStockExchangeispresentedinthefollowingtable.Thedataarevalidasat31December2019.

Name of the issue ISIN Date Due Date when Rating of the issue date trading begins (Moody’s) UCBHZL1.55/2021 SK4120010208 28Aug2014 30Aug2021 22Dec2014 –UCBHZL1.20/2022(UCBHZL14H) SK4120010752 25May2015 25May2022 20Jan2016 Aa2UCBHZLEUR1,40/2024 SK4120011131 15Oct2015 15Oct2024 20Jan2016 –UCBHZLEUR1,80/2025 SK4120011123 15Oct2015 15Oct2025 20Jan2016 –UCBHZLEUR0,65/2021 SK4120011305 10Dec2015 10Dec2021 20Jan2016 Aa2

23. Non-Financial Information

UniCreditBankCzechRepublicandSlovakia,a.s.usestheexemptionunderSection32g(7)oftheActonAccountingandthenon-financialinformationispublishedbyparentcompanyUniCreditSpA.UniCreditSpApublishednon-financialinformationfor2019inEnglishathttps://www.unicreditgroup.eu/en/a-sustainable-bank/.

A report on relations


A report on relations between controlling and controlled entity and on relations between controlled entities and other entities controlled by the same controlling entity

PursuanttoArticle82etseq.ofActNo.90/2012Coll.onCommercialCorporations,theBoardofDirectorsofUniCredit Bank Czech Republic and Slovakia, a.s. havingitsregisteredofficeatPrague4,Želetavská1525/1,14092,Reg.No.64948242,registeredintheCommercialRegistermaintainedbythePragueMetropolitanCourt,SectionB,Insertion3608(“UniCreditBank“),forthe period from 1. 1. 2019 to 31. 12. 2019 (hereinafterreferredtoasthe“Period“)preparedareportonrelations.

1. Structure of Relations between UniCredit Bank and the Controlling Entity and Entities Controlled by the same Controlling Entity

Overthisperiod,UniCreditBankwasdirectlycontrolledbyUniCredit, S.p.A.havingitsregisteredofficeatPiazzaGaeAulenti3–TowerA-20154Milan,Italy.UniCreditBankitselfcontrolledduringtheperiodthecompaniesUniCredit Leasing CZ, a.s.,Reg.No.15886492,Želetavská1525/1,14010Prague4, UniCredit Factoring Czech Republic and Slovakia, a.s.Reg.No.:15272028,Želetavská1525/1,Michle,14000Prague4.UniCredit Leasing CZ, a.s. duringtheperiod,wasthesoleshareholderofthefollowingcompanies:UniCredit Leasing Slovakia, a.s., Reg.No.:35730978,Šancová1/A,81499Bratislava,UniCredit Fleet Management, s.r.o., Reg.No.:62582836,Želetavská1525/1,Michle,14000Prague4, UniCredit pojišťovací makléřská spol. s r.o., Reg.No.:25711938,Želetavská1525/1,Michle,14000Prague4,HVB Leasing Czech Republic s.r.o.,Reg.No.:62917188,Želetavská1525/1,Michle,14000Prague4,BACA Leasing Alfa s.r.o.,Reg.No.:25751841,Želetavská1525/1,Michle,14000Prague4,CA-Leasing OVUS s.r.o.,Reg.No.:25714538,Želetavská1525/1,Michle,14000Prague4,ALLIB Leasing, s.r.o.,Reg.No.:25708376,Prague4–Michle,Želetavská1525/1,14010.

UniCredit Leasing Slovakia, a.s. isthesoleshareholderofthefollowingcompanies:UniCredit Leasing Insurance Services, s. r. o.,Reg.No.:47926481,Šancová1/A,Bratislava81499,UniCredit Broker, s. r. o.,Reg.No.:35800348,Šancová1/A,Bratislava81411aUniCredit Fleet Management, s.r.o.,Reg.No.:35820381,Šancová1/A,Bratislava81499.ThestructureoftheUniCreditGroupisdescribedindetailinAnnexNo.1ofthisReport.

2. UniCredit Bank’s Role within UniCredit Group:TheCzechandtheSlovakRepublicsareamongtheleadingcountrieswithintheCEEdivision.ThemergedentityUniCreditBankisatthe

sametimethelargestbankwithintheCEEregionintermsofconsolidatedprofits(datafrom2019).

UniCreditBankperformstheroleofauniversalbankinSlovakandCzechmarkets;withintheCEEregionitoftenhasaroleofproductinnovator.UniCreditBanksupportsgroup-widesolutionsintheareaofproducts,processesorsaleschannels,whichpilotedwithindifferentcountriesandincasetheyareconfirmedassuccessful,theyarelaterimplementedinotherUniCreditbanksintheCentralandEasternEuropedivisions.UniCreditBankisveryactiveinthisarea.

Intheareaofstandardbankingactivities,inadditiontothecontractsprovidedbelow,thecontrolledentityconcludedwiththecontrollingentityandwithrelatedparties,interbank,derivativeandotherbankingtransactions,andtheseentitiescooperatedintheissueofbonds,andalsoenteredintoclientoperations(paymentcards,currentaccounts,depositproducts,cashpaymentsystem,etc.),allthisinstandardmarketconditions.Withinstandardbankingrelations,somelendingbusinessofcontrolledentitiesisbackedbybankguaranteesprovidedbyUniCreditS.p.A.,UniCreditBankAustriaAGandUniCreditBankAG.

WithintheGroup,thereisalsotheprovisionofcreditproductsandguaranteesbyUniCreditBank,onstandardconditions.

3. Method and Means of ControlThegeneralmeetingisthesupremebodyofUniCreditBank.UniCreditBankS.p.A.manifestsitswillthroughexercisingtheauthorityofthegeneralmeetingthroughbysoleshareholder’sresolutionsactingincapacityoftheGeneralMeeting.

AccordingtoUniCreditBankArticlesofAssociation,alsotheelectionofSupervisoryBoardmembersfallswithinthecompetenceofthegeneralmeeting.TheSupervisoryBoardmonitorstheconductofBankbusinessandtheexerciseofBoardofDirectorsresponsibilities.TheSupervisoryBoardalsoelectsandremovesthemembersoftheBoardofDirectorsandrecommendscandidatesfortheChairmanandVice-ChairmanoftheBoardofDirectors.However,themembersoftheBoardofDirectorsarenotboundbysucharecommendationintheirelection.

ThecontrollingentityhasitsrepresentativesbothintheBankSupervisoryBoardandintheBoardofDirectors.

UniCreditBankasamemberoftheUniCreditGroupmust,subjecttorelevantlegalregulations,performtheregulationsissuedbyUniCreditS.p.A(the“HoldingCompany“)withintheBankandallcompaniescontrolledbyitthroughitsdirectives(the“DirectivesoftheHolding”).TheDirectivesoftheHoldingmeansrulesdefiningthemanagement,theorganisationchartandresponsibilitiesofthemanagerswithinkey

betweencontrollingandcontrolledentityandonrelationsbetweencontrolledentitiesandotherentitiescontrolledbythesamecontrollingentity


processesintheUniCreditGroup,whichareissuedintheexerciseofHoldingCompany’spowersintheareaofsupervisionoftheUniCreditGroupandcoordinationoftheUniCreditGroup,allthisaccordingtoinstructionsissuedbyItaliansupervisorybodyinordertomaintainthestabilityoftheUniCreditGroup.

UniCreditBankperformsitsinfluenceonitssubsidiarycompaniesthroughtheexerciseofitsshareholderrightsandalsothroughitsrepresentativesinthebodiesofsomeofthesecompanies,inparticularintheirsupervisoryboards.

4. An overview of mutual contracts between UniCredit Bank and the controlling entity or between controlled entities

4.1.BetweenUniCreditBankandUniCredit S.p.A., PiazzaGaeAulenti3,TowerA–20154Milan,Italy

Contract name Subject-matter of contract Contract concluded onInteradvisoryAgreement AdvisoryservicesrelatedtoM&Aadvisoryforspecificclientsforspecificacquisition 2.2.2015 withrespecttotheCzechRepublic(jointlywithUniCreditBankAustriaAG)Intercompanyservicesagreement Advisoryservicesintheareaofmethodologicalgroupmanagement 11.12.2015ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 29.6.2016GMRAMasterAgreement Ageneralcreditcontractforsecuredbyatransferofsecurities 12.8.2016DepositNettingAgreement Agreementconcerningthereciprocalset-offofpayablesandreceivables 22.9.2016 frominterbankdepositsintheeventofdefault.AgreementonAntimoneylaundering AMLmonitoringprokorespondenčníbanky 28.1.2018transactionofCorrespodentBankingmonitoringGMSLAMasterAgreement Securitieslendingframeworkagreement 5.6.2019

4.2.BetweenUniCreditBankandUniCredit Bank Austria AG, Rothschildplatz1,1020Vienna,theRepublicofAustria

Contract name Subject-matter of contract Contract concluded onSubcustodyAgreement Custodyandadministrationofsecurities(abranchinSlovakia) 24.11.1995SubcustodyAgreement storage,managementandsettlementofsecurities 1.8.1997BrokerageAgreement Securitiestrading 2.1.2002ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 24.5.2012ConsultancyServiceAgreement LearningandDevelopmentConsultancyServicesintheareaofspecialprofessionalskills, 2012 softskillstraininganddevelopmentandtalentmanagementServiceLevelAgreement ManagementandassessmentofrisksNettingAgreements 5.9.2008RiskSharingInstrument(RSI) TripartiteagreementwiththeEuropeanInvestmentFundfortheprovision 24.6.2014GuaranteeAgreement ofguaranteeswithintheRSIprogramme(RiskSharingInstrument)AgreementFundsAdvisory PurchaseandsaleoffundunitsthroughtheplatformUCBankAustria 25.3.2005SwapclearDealerClearingAgreement Contractforsettlementofswaptransactionswithcentralcounterparties 7.7.2014SubcustodyAgreement Managementandcustodyofforeignsecurities 10.11.2014InteradvisoryAgreement AdvisoryservicesrelatedtoM&Aadvisoryforspecificclientsforspecificacquisition 27.2.2015 withrespecttotheCzechRepublicIntercreditorAgreement Settingofrelationsbetweencreditorswithrespecttoasyndicatedloanextended 16.7.2015IntercreditorAgreement Settingofrelationsbetweencreditorswithrespecttoasyndicatedloanextended 11.12.2015MandateAgreement TripartiteagreementwithCYRRUSCORPORATEFINANCE,Inc.regardingactivities 25.5.2016 relatedtothesqueeze-outAgreementforFairValue Calculationofthefairvalueandfairvaluehierarchy 25.1.2017


4.3.BetweenUniCreditBankandUniCredit Bank AG,Arabellastrasse12,81925Munich,Germany

Contract name Subject-matter of contract Contract concluded onSubcustodyAgreement Managementandcustodyofsecurities 1.7.2004SecuritiesAccountandCustodyAgreement Managementandcustodyofsecurities 19.9.2007Brokerageagreement ProcurementofpurchasesandsaleofforeignsecuritiesforBankclients 6.7.2009ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 3.3.2010MasterAgreement–GlobalDebt Conditionsofcooperationofbothbanksineurobondissuesofclients. 30.6.2011CapitalMarketsAgreementontheapplicationservice Provisionofservicesforcashpooling 9.5.2012providingforthecashpoolengineSubcustodyAgreement Custody,managementandsettlementofsecurities(theLondonbranch) 17.5.2012Agreementonreportingtoatraderepository PerformanceofdutytoreportaccordingtoEMIR 20.3.2014inaccordancewithArt.9EMIRDistributionagreement DistributionofinvestmentvehiclesissuedbyUniCreditBankAGthroughtheBank 10.4.2014Agreementonreportingtoatraderepository PerformanceofdutytoreportaccordingtoEMIR 15.4.2014inaccordancewithArt.9EMIRAgreement DistributionofinvestmentvehiclesissuedbyUniCreditBankAGthroughtheBank 3.11.2014 usingelectronicplatformSLAforcertainco-operativeactivities Thesubjectiscooperationinthedevelopmentanddistributionofanalyticalsourcematerials. 1.10.2015GMRAMasterAgreement Ageneralcreditcontractforsecuredbyatransferofsecurities 21.9.2016SLASophis„Risque“Sub-LicensingAgreement SupportfortheuseofSWMurexandSophisRisque(forOTCderivatives) 16.9.2016MandateAgreement mandatingUnicreditBankAGasanarrangerforthebondprogramupdate(Frederick2019) 23.5.2019 andanagreementonremunerationforexternallegaladvisors(Allen&Overy).RETServiceLevelAgreementNo.001 UCtradertradingplatformforFXtrades–costsharing 29.3.2019

4.4.BetweenUniCreditBank,Unicredit S.p.AandUniCredit Bank Austria AG

Contract name Subject-matter of contract Contract concluded onAgreementforDataFlowandReporting AgreementforDataFlowandReportinginconnectionwiththereorganizationoftheGroup 30.9.2016

4.5.BetweenUniCreditBank,Unicredit S.p.A,UniCredit Bank AGandUniCredit Bank Austria AG

Contract name Subject-matter of contract Contract concluded onUniCreditGroup–MasterCost Costallocationforsecondedemployees 19.5.2010SharingAgreement


4.6.BetweenUniCreditBankandUniCredit Services S.C.p.A. (until30.6.2018Business Integrated Solutions S.C.p.A.),ViaLivioCambi1,20151Milan,Italy

Contract name Subject-matter of contract Contract concluded onNon-residentialLeaseAgreementNo. Leaseofnon-residentialpremisesinŠancovaStreetBratislava 31.12.2010018/PP-2010/3560AgencyContract SharingoftheprovisionofservicesofBanksuppliers 1.1.2012Subleasecontract Subleaseofpremisesinthebuildingno.1525,Želetavská1,Prague4 29.6.2012Non-residentialPremisesLeaseAgreement LeaseofcommercialspaceatSvätoplukovaSt.inBratislava 1.8.2016ConfidentialityAgreement ConfidentialityAgreement 1.11.2017DataProcessingAgreement Dataprocessingandsecurityagreement,protectionandconfidentiality 26.6.2018 ofconfidentialinformation–CZDataProcessingAgreement Dataprocessingandsecurityagreement,protectionandconfidentiality 26.6.2018 ofconfidentialinformation–SKProjectagreements DeliveryofindividualprojectsprimarilyinthefieldofSWdevelopment Contractsvalidin2018 (eg.GDPR,MIFID,AnaCredit,SWIFT,…)Purchasecontractforfurnituresales Purchaseofusedfurniture 19.12.2018AgreementonOutsourcingofICTServices AgreementAgreementforOutsourcingoftheInformationSystemandforProvision 1.12.2017 ofITservices(thisagreementreplacespreviousOutsourcingAgreement)–CZAgreementonOutsourcingofICTServices AgreementAgreementforOutsourcingoftheInformationSystemandforProvision 1.12.2017 ofITservices(thisagreementreplacespreviousOutsourcingAgreement)–SKSettlementagreement Agreementonsettlementofadisputedclaim 11.12.2018MutualAgreement AgreementontheabolitionofthetaxgroupbetweenUniCreditBankCzechRepublic 20.12.2019 andSlovakiaandUniCreditServices.

4.7.BetweenUniCreditBankaUniCredit Leasing CZ, a.s.,Reg.No.:15886492,Prague4–Michle,Želetavská1525/1,14010

Contract name Subject-matter of contract Contract concluded onContractonleaseofpremises Leaseofpremisesinthebuildingno.28,Široká5,Liberec 28.7.2015forbusinesspurposesContractonsub-leaseofnon-residential Subleaseofpremisesinthebuildingno.1176-1177,Dr.DavidaBechera26,KarlovyVary 23.3.2010premisesincl.supplementsContractforLeaseofSecurityEquipment LeaseofsystemownedbyBankinstalledonleasedpremisesofUniCreditLeasingCZ,a.s. 1.4.2012andCameraSystemAgencyContract SharingoftheprovisionofservicesofBanksuppliers 2.4.2012Subleasecontract Subleaseofparkingspacesinbuildingno.1525,Želetavská1,Prague4 13.3.2013Non-residentialLeaseAgreement Leaseofpremisesinthebuildingno.545,Divadelní2,Brno 30.5.2013ContractforRighttoPositionforLogo Useofapositionforlogoonthebuildingno.1525,Želetavská1,Prague4 3.6.2013ContractforSearchforProspectiveClients ContractformediationofconsumerloansforUCB 1.3.2014Contractonsubleaseofpremises Subleaseofpremisesforbusinesspurposesinbuildingno.3348,28.října65,Ostrava 1.3.2014forbusinesspurposesContractfortheProvisionofServices UCLCZoutsourcedcertainitsactivitiesintotheBank 6.8.2014andContractofMandateContractforProcessingofPersonalData ProcessingofpersonaldataofUCLCZbytheBankwithrespecttooutsourcing 6.8.2014Contractonsubleaseofpremises Subleaseofpremisesforbusinesspurposesinbuildingno.Subleaseofcommercialspace 29.3.2016forbusinesspurposes at457,28.října15,OlomoucContractonsubleaseofpremises Subleaseofpremisesforbusinesspurposesinbuildingno.36,Revoluční2,Chomutov 24.1.2017forbusinesspurposesContractonsubleaseofspaceserving Subleaseofbusinesspremisesinbuildingno.1222MasarykSquare,Jihlava 26.6.2019business


4.8.BetweenUniCreditBankandUniCredit Factoring Czech Republic and Slovakia,Reg.No.:15272028,Prague4–Michle,Želetavská1525/1,14000

Contract name Subject-matter of contract Contract concluded onContractforLoanandOtherBankingServices Bankingservices 25.6.2010ProvidedintheFormofMulti-PurposeLineGeneralContractforTradinginFinancialMarket Tradinginfinancialmarket 21.1.2015ContractforExchangeofParkingPlaces MutualexchangeofparkingspacesinbuildingFiladelfie,Želetavská1525/1,Prague4 4.6.2015ContractfortheProvisionofServices Provisionofbankingservices 4.1.2016andContractofMandateAgreementonMutualbrokerage Mutualbrokerageofbusinesscases 4.1.2016 businesscasesContractforRighttoPositionforLogo Useofapositionforlogoonthebuildingno.1525,Želetavská1,Prague4 21.1.2016Riskparticipationcontract Participationintheriskofreceivablenon-payment 29.3.2017(participationcontract)Agreementdated30thofOctober2018 ZeroBalancing 30.10.2018onZeroBalancing

4.9.BetweenUniCreditBankandUCTAM Czech Republic s.r.o.,Reg.No.:24275671,Prague1–NovéMěsto,NáměstíRepubliky2090/3a,11000

Contract name Subject-matter of contract Contract concluded onSubleasecontract Subleaseofpremisesforbusinesspurposesinbuildingno.2090,náměstíRepubliky3a,Prague1 22.3.2016

4.10.BetweenUniCreditBankandUniCredit Leasing Slovakia, a.s.,Reg.No.:35730978,Šancová1/A,Bratislava,81416,SlovakRepublic

Contract name Subject-matter of contract Contract concluded onNon-residentialLeaseAgreement Leaseofnon-residentialpremisesinNitrainŠtefánikovaStreet 27.6.2011No.301/3563/2011Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinKošiceinRooseveltovaStreet 27.6.2011No.302/3563/2011Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŽilinainNárodnaStreet 15.6.2012No.214/3563/2012ContractfortheProvisionofServices UCLSKoutsourcedcertainitsactivitiesintotheBank 6.8.2014 andContractofMandateContractforProcessingofPersonalData ProcessingofpersonaldataofUCLSKbytheBankwithrespecttooutsourcing 6.8.2014Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŠancova1/ABA(from1.11.2014) 31.10.2014dated31.10.2014AgreementonLeaseofCommercialSpace LeaseofCommercialSpaceSvätoplukovaSt.vBratislava 1.8.2016Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŠtefánikovaSt.inTrnava 15.1.2017Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŽelezničnáSt.inLučenec 15.1.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinHlavnáSt.InDunajskáStreda 15.1.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinMajzonovonám.inNovéZámky 15.1.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinNám.s.AnnyinTrenčín 15.1.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinGarbiarskaSt.inLiptovskýMikuláš 15.1.2017Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinPrešovinHlavnaStreet(from1.11.2017) 25.10.2017Contractsforrentingnon-residentialpremises SubleaseofcommercialpremisesinPopradonPopradskenabrezi18 12.4.2019 (contractvalidfrom01.05.2019)Contractsforrentingnon-residentialpremises CommercialpremisesforRentinZvolen,nám.SNP50 1.1.2019


4.11.BetweenUniCreditBankandHVB Leasing Czech Republic s.r.o,Reg.no:62917188,Želetavská1525/1,Michle,14000Prague4

Contract name Subject-matter of contract Contract concluded onFrameworkContractonFinancialMarket FinancialMarketTrading 7.2.2014TradingAgreementontheprovisionofadvisory AdvisoryservicesinconnectionwiththesaleofrealestateinChrudim, 2.9.2019services Přerov,SvitavyandÚstínadOrlicí

4.12.BetweenUniCreditBankandUniCredit Bank Hungary Zrt.,Szabadságtér5–6,Budapest,1054,Hungary

Contract name Subject-matter of contract Contract concluded onSubcustodyAgreement Storage,managementandsettlementofsecurities 9.1.1999SubcustodyAgreement Managementandcustodyofsecurities(abranchinSlovakia) 23.1.2003ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 23.5.2007SubcustodyAgreement Managementandcustodyofforeignsecurities 21.12.2007

4.13.BetweenUniCreditBankandUniCredit banka Slovenija d.d.,Šmartinskacesta140,1000Ljubljana,Slovenia

Contract name Subject-matter of contract Contract concluded onSubcustodyAgreement Managementandcustodyofforeignsecurities 10.11.2014

4.14.BetweenUniCreditBankandUniCredit Broker, s.r.o.,Reg.No.:35800348,Šancová1/A,81411Bratislava

Contract name Subject-matter of contract Contract concluded onCooperationAgreement Mediationofclients 1.1.2011

4.15.BetweenUniCreditBankandUniCredit Fleet Management, s.r.o.,Reg.No.:62582836,Prague4–Michle,Želetavská1525/1,14010

Contract name Subject-matter of contract Contract concluded onGeneralContractforHireofVehicles SpecificationofgeneralconditionsformakingindividualLeaseagreement 4.3.2013 andAgreementtoAmendSLAContractforHireofTransportFacility Contractsforhireofvehicles–266cars Contractsvalidin2019

4.16.BetweenUniCreditBankandUniCredit Fleet Management, s.r.o.,Reg.No.:35820381,Šancová1/ABratislava81499,SlovakRepublic

Contract name Subject-matter of contract Contract concluded onOperatingLeaseContract Conditionsforoperatingleaseofmotorvehicles 30.8.2007ContractforHireofTransportFacility Contractsforhireofvehicles–101cars Contractsvalidin2019

4.17.BetweenUniCreditBankandUniCredit Bank SA,SediulCentralBd.,ExpozitieiNr.1F,Sect1,Bucharest,012101,Romania

Contract name Subject-matter of contract Contract concluded onServiceAgreement TemporaryadvisoryactionsandsupportinbankingservicesrelatedtoCEE2020 26.1.2015 TradeFinanceBackandProjectRiskparticipationagreement ParticipationintheloantoaclientinRomania 25.4.2017

4.18.BetweenUniCreditBankandSchoellerbank AG,Renngasse3,Vienna,Austria

Contract name Subject-matter of contract Contract concluded onCooperationagreement OfferandmediationofservicesofSchoellerbankthroughUniCreditBank 23.11.2012


Nejdůležitější konsolidované hospodářské výsledky

4.19.BetweenUniCreditBankandDiners Club CS, s.r.o., organizační složka(abranch),Reg.No.:24768669Prague1,Široká36/5,11000

Contract name Subject-matter of contract Contract concluded onIntermediationContract+Contract ThecontentiscooperationconcerningthemediationoftheissueofchargecardsDinersClub. 21.10.2009forProcessingofPersonalData

4.20.BetweenUniCreditBankandUniCredit Services GmbH,Rothschildplatz4,1020Vienna,Austria

Contract name Subject-matter of contract Contract concluded onProjectFrameworkAgreement FrameworkagreementcoveringtheimplementationofITprojectsmanagedonthebasis 25.11.2019 ofi)Waterfallmethodsandii)Agilemethods(CZ)ProjectFrameworkAgreement FrameworkagreementcoveringtheimplementationofITprojectsmanagedonthebasis 25.11.2019 ofi)Waterfallmethodsandii)Agilemethods(SK)ProjectFrameworkAgreement FrameworkcontractcoveringtheimplementationofITprojectsmanagedunder 26.2.2018 theWaterfallmethod.(CZ)ProjectFrameworkAgreement FrameworkcontractcoveringtheimplementationofITprojectsmanagedunder 26.2.2018 theWaterfallmethod.(SK)StandardTermsandConditions StandardcontracttermsandconditionsforprovisionofITservices 18.12.2015Agreementonimplementation CooperationinimplementationofITprojects 18.12.2015ofCEE2020projectsStandardTermsandConditions StandardcontracttermsandconditionsforprovisionofITservices(abranchinSlovakia) 18.12.2015Agreementonimplementation CooperationinimplementationofITprojects(abranchinSlovakia) 18.12.2015ofCEE2020projectsDataProcessing,DataSecurity, DataProcessing,DataSecurity,DataProtectionandSecurity 9.6.2016DataProtectionandSecurity

4.21.BetweenUniCreditBankaUniCredit Bank AG, London Branch,London,120Londonwall,UnitedKingdom

Contract name Subject-matter of contract Contract concluded onFeeSplitAgreement ConsultingservicesrelatedtoM&A/ECMconsultingservicesforspecificclients 11.8.2016 tospecificacquisitionrelatedtotheCzechRepublic

4.22.BetweenUniCreditBankaUniCredit Bulbank ADSofia,7SvetaNedelyaSq,Bulgaria

Contract name Subject-matter of contract Contract concluded onSubcustodyAgreement Storage,managementandsettlementofsecurities 25.11.2015

4.23.BetweenUCBCSandUniCredit Consumer Financing EAD14Gyueshevostr.1303Sofia,Bulgaria

Contract name Subject-matter of contract Contract concluded onConfidentialInformationProtectionContract ConfidentialInformationProtection 24.10.2018

4.24.Inadditiontotheabovestatedcontracts,inthelastfinancialyear,alsoothercontractswereeffectivebetweenUniCreditBankandsomeothercompaniesoftheGroup,which,however,aresubjecttotheobligationofbankingsecrecy.Thesecontractsrelatetointerbank,derivativeandotherbankingtransactions.UniCreditBankcooperatedwithsuchcompaniesintheissueofbonds,andalsoenteredintoclientbankingtransactions(paymentcards,currentaccounts,depositproducts,cashpaymentsystem,etc.),allthisinstandardmarketconditions.Withinstandardbankingrelations,somelendingbusinessofUniCreditBankisbackedbybankguaranteesprovidedbyUniCreditBankAustriaAGandUniCreditBankAG.WithintheGroup,thereisalsotheprovisionofcreditproductsandguaranteesbyUniCreditBank,onstandardconditions.

5. Acts occurring in the last financial year, which were made on the initiative of or in the interest of the controlling entity or its controlled entities, if such acts related to assets exceeding 10% of equity of the controlled entity ascertained according to the most recent financial statements,

Thelimitof10%ofUniCreditBankequity,accordingtothefinancial

statementsattheendof2018,was75.766mil.CZK,exceededin2019thefundingprovidedbyUniCreditBanktoUniCreditLeasingCZ,a.s.andUniCreditLeasingSlovakia,a.s.(andtotheirsubsidiaries).Inthecourseof2019,thecontrollingentityand/oritscontrolledentitiesdepositedamountsonitsaccountskeptatUniCreditBank

exceeding10%ofUniCreditBankequity.Thedepositswereprovidedonconditionswhicharestandardintheinterbankmarketfortherelevantcurrencyandmaturity.

6. Evaluation of whether any loss was caused to the controlled entity, and assessment of the compensation pursuant to Articles 71 and 72 of Act on Commercial Corporations

TheUniCreditBankBoardofDirectorsdeclaresthatnolosswascausedtoUniCreditBankCzechRepublicandSlovakia,a.s.undertheconcludedcontractsandarrangements.

7. Evaluation of advantages and disadvantages arising from relationships between entities under paragraph 82 par. 1 of Act on Commercial Corporations

AdvantagesofintegrationofUniCreditBankintothestructureoftheUniCreditGroup:AbrandknowninternationallyandreputationalbenefitresultingfromtheintegrationoftheUniCreditGroupintoSIFI(SystemicallyImportantFinancialInstitution).

SharingofITinfrastructure,development,maintenancewithintheUniCreditGroupandresultingeconomiesofscaleinthefollowingareas:Sharingofknow-howofamajorEuropeanbankandoneofthemostactiveandmostsignificantbanksinCentralandEasternEuropeinthecommercialarea,i.e.inthedevelopmentofproducts,introductionofbusinessinnovationsandmanagementofsalesnetwork.PossibleinvolvementingrowthinitiativesoftheUniCreditGroup,e.g.,Transform2019,providingUniCreditBankwithsupportandknow-howintheareaofdevelopmentofastrongpositionofauniversalbankintheCzechandSlovakmarkets.

HumanResourcesDevelopmentassociatedwithsharingtheUniCreditGroup‘sexperienceinEuropeanmarkets,possibleforemployeestogainpracticalexperienceinotherbanksorHolding‘smanagementstructures,careeropportunitieswithintheUniCreditGroup.Possibletoapply,inlocalconditions,theSponsoringandMarketingoftheUniCreditGroupontheEuropeanlevel.

ParticipationofUniCreditBankinasophisticatedsystemofservicesforinternationalclientsthroughInternationaldesk/InternationalclientsUnitsinrelevantcountries,andmutualcooperationoftheseUnitsinhandlinganddealingwiththeneedsofinternationalclients.

WecanincludethefollowinginpossibledisadvantagesofintegrationofUniCreditBankintothestructureoftheUniCreditGroup:Acomprehensiveorganisationalstructureofatransnationalbankinggroup.

Possiblemutualinfluencefromothercountries,mainlyintheareaofreputationandperceptionoftheUniCreditbrand(Cross-bordersentiment).WhenassessingatotalinfluenceoftheintegrationofUniCreditBankintotheUniCreditGroup,theadvantagesresultingfromthispositionsignificantlyoutweighthedisadvantages.TheBankpreventsactivelythepossibleabovestateddisadvantagesbothintheformofoperationalmeasuresinlocalmanagementofUniCreditBankandcommunication,andbybuildingastrong‘brand’onthelocallevel.

InPrague,on10March2020

OnbehalfoftheBoardofDirectorsofUniCreditBankCzechRepublicandSlovakia,a.s.

Ing.Mgr.JakubDusílek,MBA LjubišaTešićChairmanoftheManagement MemberoftheManagement Board Board

Annexes:1. OrganisationChartoftheUniCreditGroup


Ing.Mgr.JakubDusílek,MBAChairmanoftheManagement MemberoftheManagement

LjubišaTešić

StructureofUniCreditGroup


#

Uni

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dit I

nter

natio

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agem

ent o

f hed

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nds

100

%Bu

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bank

ing

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%

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greb

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nkin

g - 8

4,47

5%

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ich

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king

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PAI (

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(a

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#

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ed


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EXPRES PARTNERS ŠTERNBERKRadniční87/478501Šternberktel.:[email protected]

COMMERCIAL CENTERS

PRAHA – BANKOVNÍ DŮMnáměstí[email protected]

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BRNOTrnitá491/360200Brnotel.:[email protected]

ČESKÉ BUDĚJOVICEnám.PřemyslaOtakaraII.122/3537021ČeskéBudějovicetel.:[email protected]

HRADEC KRÁLOVÉUlrichovonáměstí85450002HradecKrálovétel.:[email protected]

CHOMUTOVHusovonáměstí/Revoluční3643001Chomutovtel.:[email protected]

JIHLAVAMasarykovonáměstí5458601Jihlavatel.:[email protected]



KARLOVY VARYDr.DavidaBechera2636001KarlovyVarytel.:[email protected]

LIBERECŠiroká5/2846001Liberectel.:[email protected]

OLOMOUC28.října1577200Olomouctel.:[email protected]

OSTRAVA28.října3348/6570200Ostravatel.:[email protected]

PARDUBICEČechovonábřeží179053003Pardubicetel.:[email protected]

PLZEŇRiegrova130100Plzeňtel.:[email protected]

ÚSTÍ NAD LABEMMírovénám.35A40001ÚstínadLabemtel.:[email protected]

ZLÍNBartošova553276001Zlíntel.:[email protected]

Slovak Republic

RETAIL BRANCHES UNICREDIT BANK

REGION BRATISLAVA

AUPARKEinsteinova1885101Bratislavatel.:+421908721045fax:+42102/[email protected]

HRONDudvážska582107Bratislavatel.:+421918501735fax:+42102/[email protected]

KRÍŽNAKrížna5082108Bratislavatel.:+421918501736fax:+42102/[email protected]

MOSTOVÁMostová681102Bratislavatel.:+421918861192fax:+42102/[email protected]

PARK ONENám.1.Mája1881106Bratislavatel.:+421918501670fax:+42102/[email protected]

PLYNÁRENSKÁPlynárenská7/A82109Bratislavatel.:+421911407170fax:+42102/[email protected]

POLUS CCVajnorská10083104Bratislavatel.:+421903205107fax:+42102/[email protected]

RUSTICASaratovská6B84102Bratislavatel.:+421905479930fax:+42102/[email protected]

ŠANCOVÁŠancová1/A81333Bratislavatel.:+421918501728fax:+42102/[email protected]

REGION SLOVAKIA WEST

BÁNOVCE NAD BEBRAVOUJesenského561/395701BánovcenadBebravoutel.:+421918501702fax:+421038/[email protected]

HLOHOVECM.R.Štefánika492001Hlohovectel.:+421918501635fax:+421033/[email protected]

MALACKYZáhorácka5190101Malackytel.:+421918501679fax:+421034/[email protected]

MYJAVAM.R.Štefánika581/29A90701Myjavatel.:+421907984291fax:+421034/[email protected]

NOVÉ MĚSTO NAD VÁHOMČsl.armády491501NovéMěstonadV.tel.:+421905479912fax:+421032/[email protected]

PEZINOKHolubyho2790201Pezinoktel.:+421918861191fax:+421033/[email protected]

PIEŠŤANYNitrianska592101Piešťanytel.:+421908721069fax:+421033/[email protected]

POVÁŽSKÁ BYSTRICAM.R.Štefánika161/401701PovažskáBystricatel.:+421905455880fax:+421042/[email protected]

SENECLichnerova3090301Senectel.:+421908764266fax:+42102/[email protected]

SENICAHviezdoslavova6190501Senicatel.:+421907988026fax:+421034/[email protected]

SKALICAŠkarniclovská190901Skalicatel.:+421908721039fax:+421034/[email protected]

TRENČÍNNám.SvätejAnny391101Trenčíntel.:+421908793817fax:+421032/[email protected]

TRNAVAŠtefánikova4891701Trnavatel.:+421915913940fax:+421033/[email protected]

REGION SLOVAKIA WEST II

DUNAJSKÁ STREDAHlavná5599/3B92901DunajskáStredatel.:+421908721102fax:+421031/[email protected]

GALANTARevolučná192401Galantatel.:+421911407569fax:+421031/[email protected]

LEVICESv.Michala4(blokATOM2)93401Levicetel.:+421908721058fax:+421036/[email protected]

KOMÁRNOPalatínova3994505Komárnotel.:+421908721158fax:+421035/[email protected]

NITRAŠtefánikovatr.1394901Nitratel.:+421918501674fax:+421037/[email protected]

NOVÉ ZÁMKYMajzonovonám.294001NovéZámkytel.:+421918868118fax:+421035/[email protected]

PRIEVIDZAG.Švéniho3A97101Prievidzatel.:+421905899853fax:+421046/[email protected]

SEREĎDionýzaŠtúra101292601Sereďtel.:+421915786004fax:+421031/[email protected]

ŠALAHlavná12A92701Šalatel.:+421905231101fax:+421031/[email protected]

ŠAMORÍNGazdovskýrad49/B93101Šamoríntel.:+421905400990fax:+421031/[email protected]

TOPOLČANYŠtúrova4914/1895501Topolčanytel.:+421908721098fax:+421038/[email protected]

REGION CENTRAL SLOVAKIA

BANSKÁ BYSTRICA SC EUROPASCEUROPA,NaTroskách2597401BanskáBystricatel.:+421918501631fax:+421048/[email protected]



BREZNOČSA1797701Breznotel.:+421908721038fax:+421048/[email protected]

ČADCAPalárikova8502201Čadcatel.:+421908788703fax:+421041/[email protected]

LIPTOVSKÝ MIKULÁŠGarbiarska441703101LiptovskýMikuláštel.:+421908794213fax:+421044/[email protected]

LUČENECŽelezničná1598401Lučenectel.:+421908721114fax:+421047/[email protected]

MARTINM.R.Štefánika103601Martintel.:+421905455828fax:+421043/[email protected]

RUŽOMBEROKMostová203401Ružomberoktel.:+421918501626fax:+421044/[email protected]

ZVOLENNám.SNP5096001Zvolentel.:+421908788698fax:+421045/[email protected]

ŽIAR NAD HRONOMŠ.Moyzesa42796501ŽiarnadHronomtel.:+421918501709fax:+421045/[email protected]

ŽILINANárodná1201001Žilinatel.:+421911094773fax:+421041/[email protected]

ŽILINA AUPARKVeľkáokružná59A01001Žilinatel.:+421918501629fax:+421041/[email protected]

REGION SLOVAKIA EAST

BARDEJOVDlhýrad1708501Bardejovtel.:+421908721134fax:+421054/[email protected]

HUMENNÉMierová64/206601Humennétel.:+421907735669fax:+421057/[email protected]

KEŽMAROKHlavnénám.306001Kežmaroktel.:+421917912790fax:+421052/[email protected]

KOŠICE ROOSEVELTOVARooseveltova1004001Košicetel.:+421918501647fax:+421055/[email protected]

KOŠICE TORYSKÁToryská1/C04011Košicetel.:+421905899851fax:+421055/[email protected]

LEVOČANám.MajstraPavla1905401Levočatel.:+421911991444fax:+421053/[email protected]

MICHALOVCENám.Osloboditeľov107101Michalovcetel.:+421905444157fax:+421056/[email protected]

POPRADPopradskénábr.1805801Popradtel.:+421907735648fax:+421052/[email protected]

PREŠOVHlavná2908001Prešovtel.:+421903205143fax:+421051/[email protected]

ROŽŇAVANám.Baníkov3304801Rožňavatel.:+421907831639fax:+421058/[email protected]

SPIŠSKÁ NOVÁ VESZimná5605201SpišskáNováVestel.:+421908721139fax:+421053/[email protected]


TREBIŠOVM.R.Štefánika2007501Trebišovtel.:+421917225445fax:+421056/[email protected]

COMMERCIAL CENTERS

BRATISLAVA – KRÍŽNAKrížna5082108Bratislava

BRATISLAVA – ŠANCOVÁŠancová1/A81333Bratislava

DUNAJSKÁ STREDAHlavná5599/3B92901DunajskáStreda

GALANTARevolučná192401Galanta

KOŠICERooseveltova1004001Košice

NITRAŠtefánikovatr.1394901Nitra

POPRADPopradskénábr.1805801Poprad

PREŠOVHlavná2908001Prešov

TRENČÍNNám.SvätejAnny391101Trenčín

TRNAVAŠtefánikova4891701Trnava

ZVOLENNám.SNP5096001Zvolen

ŽILINANárodná1201001Žilina


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Annual Report2019

2019 Annual Report

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One Bank, One Team, One UniCredit....13.1 per cent as at the end of 2019, equivalent to a pro forma1 MDA buffer of 300 basis points, above our 200 to 250 basis point target range 1