Raport.

ALIOR BANK SA Raport okresowy roczny za 2017 R

WYBRANE DANE FINANSOWE w tys. z? w tys. EUR 2017 2016 2017 2016 Wynik z tytu?u odsetek 2 832 992 1 941 874 667 419 443 786 Wynik z tytu?u op?at i prowizji 436 871 334 357 102 922 76 412 Wynik handlowy i pozosta?y 403 838 392 060 95 139 89 599 Wynik z odpis?w aktualizuj?cych z tytu?u utraty warto?ci -920 466 -794 733 -216 851 -181 624 Koszty dzia?ania -1 788 003 -1 543 456 -421 232 -352 734 Zysk brutto 764 715 664 214 180 158 151 796 Zysk netto 538 895 589 024 126 957 134 613 Przep?ywy pieni??ne netto -95 439 -495 059 -22 484 -113 138 Nale?no?ci od klient?w 51 244 093 46 248 623 12 286 100 10 454 029 Zobowi?zania wobec klient?w 57 655 618 51 404 848 13 823 304 11 619 541 Kapita? w?asny 6 805 243 6 179 812 1 631 601 1 396 883 Aktywa razem 69 382 178 61 162 795 16 634 822 13 825 225 Wybrane wska?niki Zysk/strata na jedn? akcj? zwyk?? (w z?) 4,17 5,76 0,98 1,32 Wsp??czynnik wyp?acalno?ci 15,33% 13,67% 15,33% 13,67% Tier 1 12,22% 11,32% 12,22% 11,32%

Lista plików:

  • Załącznik nr: 1

    Pobierz plik
  • Załącznik nr: 2

    Pobierz plik
  • Załącznik nr: 3

    Pobierz plik
  • Załącznik nr: 4

    Pobierz plik
  • Załącznik nr: 5

    Pobierz plik

    Financial statements of Alior Bank Spółka Akcyjna
    for the year ended 31 December 2017
    This version of our report is a translation from the original, which was prepared in Polish language. All possible care has been taken to
    ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of infor mation, views or
    opinions, the original language version of our report takes precedence over this translation.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    2
    Selected financial data concerning the financial statements
    PLN
    01.01.2017 – 31.12.2017 01.01.2016 - 31.12.2016
    %
    (A-B)/B
    A B C
    Net interest income 2 832 992 1 941 874 45.9%
    Net fee and commission income 436 871 334 357 30.7%
    Trading and revaluation result 403 838 392 060 3.0%
    Net impairment allowance s and write -downs -920 466 -794 733 15.8%
    General administrative expenses -1 788 003 -1 543 456 15.8%
    Gross profit 764 715 664 214 15.1%
    Net profit 538 895 589 024 -8.5%
    Net cash flows -95 439 -495 059 -80.7%
    Loans and advances to customers 51 244 093 46 248 623 10.8%
    Amounts due to customers 57 655 618 51 404 848 12.2%
    Equity 6 805 243 6 179 812 10.1%
    Total assets 69 382 178 61 162 795 13.4%
    Selected ratios
    Profit per ordinary share (PLN) 4,17 5,76 -27.7%
    Capital adequacy ratio 15.33% 13.67% 12.1%
    Tier 1 12.22% 11.32% 8.0%
    EUR
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    %
    (AJB)/B
    A B C
    Net interest income 667 41V 443 78S 50K4%
    Net fee and commission income 102 92O 76 412 34K7%
    Trading and revaluation result 95 139 89 599 SK2%
    Net impairment allowance s and write Jdowns J216 85N J181 624 19K4%
    General administrative expenses J421 23O J352 734 19K4%
    Gross profit 180 15U 151 79S 18K7%
    Net profit 126 95T 134 61P JRK7%
    Net cash flows J22 484 J113 13U J80K1%
    Loans and advances to customers 12 286 100 10 454 029 17K5%
    Amounts due to customers 13 823 304 11 619 541 19K0%
    Equity 1 631 60N 1 396 88P 16K8%
    Total assets 16 634 822 13 825 225 20K3%
    Selected ratios
    Profit per ordinary share (EUR) MK98 NK32 J25K4%
    Capital adequacy ratio 15.33% 13.67% 12.1B
    Tier 1 12K22B 11K32B UK0%
    Selected items of the financial statements were translated into EUR at the following exchange rates 31.12.2017 31.12.2016
    NBP's avarage exchange rate as at 31 December of the year 4.1709 4.4240
    NBP's avarage exchange rates as at the last day of each month 4.2447 4.3757



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    3
    Table of Contents
    Income statement ................................ ................................ ................................ ................................ ................................ ................................ ........ 5
    Statement of comprehensive income ................................ ................................ ................................ ................................ ................................ ..... 5
    Statement of financial position ................................ ................................ ................................ ................................ ................................ ................. 6
    Statement of changes in equity ................................ ................................ ................................ ................................ ................................ ................ 7
    Cash flow statement ................................ ................................ ................................ ................................ ................................ ................................ .... 8
    Notes to t he financial statements ................................ ................................ ................................ ................................ ................................ ............ 9
    1 Information about the Bank ................................ ................................ ................................ ................................ ............................... 9
    2 Basis of preparation of the financial statements ................................ ................................ ................................ ......................... 11
    3 Description of the material accounting principles ................................ ................................ ................................ ...................... 12
    4 Changes in accounting principles ................................ ................................ ................................ ................................ .................. 14
    5 Operating segments ................................ ................................ ................................ ................................ ................................ .......... 24
    Notes to income statement ................................ ................................ ................................ ................................ ................................ ..................... 27
    6 Net interest income ................................ ................................ ................................ ................................ ................................ ........... 27
    7 Net fee and commission income ................................ ................................ ................................ ................................ .................... 29
    8 Trading and revaluation result ................................ ................................ ................................ ................................ ........................ 30
    9 Net r esult realized on other financial instruments ................................ ................................ ................................ ...................... 31
    10 Result on other operating income and expenses ................................ ................................ ................................ ....................... 31
    11 General administrative expenses ................................ ................................ ................................ ................................ .................... 32
    12 Net impairment allowances and wrtite -downs ................................ ................................ ................................ ............................ 33
    13 Banking Tax ................................ ................................ ................................ ................................ ................................ ......................... 34
    14 Income tax ................................ ................................ ................................ ................................ ................................ ........................... 34
    15 Profit per share ................................ ................................ ................................ ................................ ................................ ................... 37
    Additional information to the statement of financial position ................................ ................................ ................................ ......................... 37
    16 Cash and balances with the central bank ................................ ................................ ................................ ................................ ..... 37
    17 Available -for -sale financial assets and investment securities held to maturity ................................ ................................ ..... 38
    18 Financial assets and liabilities held for trading ................................ ................................ ................................ ............................. 40
    19 Hedge accounting ................................ ................................ ................................ ................................ ................................ ............. 43
    20 Loans and advances to customers ................................ ................................ ................................ ................................ ................. 45
    21 Amounts due from banks ................................ ................................ ................................ ................................ ................................ 52
    22 Property, plant and equipment and intangible assets ................................ ................................ ................................ ............... 53
    23 Other assets ................................ ................................ ................................ ................................ ................................ ........................ 58
    24 Amounts due to customers ................................ ................................ ................................ ................................ ............................. 59
    25 Amounts due to banks ................................ ................................ ................................ ................................ ................................ ..... 60
    26 Provisions ................................ ................................ ................................ ................................ ................................ ............................. 61
    27 Other liabilities ................................ ................................ ................................ ................................ ................................ .................... 63
    28 Subordinated liabilities ................................ ................................ ................................ ................................ ................................ ...... 64
    29 Equity ................................ ................................ ................................ ................................ ................................ ................................ .... 65
    30 Off -balance sheet items ................................ ................................ ................................ ................................ ................................ ... 68
    31 Assets pledged as colleteral ................................ ................................ ................................ ................................ ............................ 69
    32 Additional information to the cash flow statement ................................ ................................ ................................ .................... 69
    33 Fair value hierarchy ................................ ................................ ................................ ................................ ................................ ............ 71
    34 Transactions with related entities ................................ ................................ ................................ ................................ ................... 77
    35 Benefits for the for senior executives ................................ ................................ ................................ ................................ ............. 81
    36 Offsetting of financial assets and liabilities ................................ ................................ ................................ ................................ ... 87
    37 Legal claims ................................ ................................ ................................ ................................ ................................ ......................... 89
    Explanatory notes concerning risk ................................ ................................ ................................ ................................ ................................ ......... 89
    38 Credit Risk ................................ ................................ ................................ ................................ ................................ ............................ 91
    39 Interest rate risk ................................ ................................ ................................ ................................ ................................ ................ 105
    41 Liquidity risk ................................ ................................ ................................ ................................ ................................ ....................... 112


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    4
    42 Operational Risk ................................ ................................ ................................ ................................ ................................ ............... 115
    43 Capital Management ................................ ................................ ................................ ................................ ................................ ....... 117
    Other………… ………………………………………………………………………………………………………………………………………………………………………………… 119
    44 Acquisition of the demerged business of Bank BPH SA ................................ ................................ ................................ .......... 119
    45 Significant events after the end of the reporting period ................................ ................................ ................................ ......... 123



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    5
    Income statement
    Note number 01.01.2017 – 31.12.2017
    01.01.201 6 – 31.12.201 6*
    Restated
    Interest income 3 590 604 2 639 265
    Interest expense -757 612 -697 391
    Net interest income 6 2 832 992 1 941 874
    Dividend income 31 68
    Fee and commission income 801 738 592 337
    Fee and commission expense -364 867 -257 980
    Net fee and commission income 7 436 871 334 357
    Trading and revaluation result 8 369 314 319 779
    Net gain (realized) on other financial instruments 9 6 908 21 919
    Other operating income 105 805 102 014
    Other operating expenses -78 220 -51 720
    Net other operating income and expenses 10 27 585 50 294
    Profit from acquisition of the demerged business of Bank BPH 0 465 005
    General administrative expenses 11 -1 788 003 -1 543 456
    Net impairment allowance s and write -downs 12 -920 466 -794 733
    Banking Tax 13 -200 517 -130 893
    Gross profit 764 715 664 214
    Income tax 14 -225 820 -75 190
    Net profit 538 895 589 024
    Weighted average number of ordinary shares 129 259 754 102 218 667
    Net profit per share (PLN) 15 4,17 5,76
    Diluted profit per ordinary share (PLN) 15 4,09 5,62
    *clarification in Note 4.2
    Statement of comprehensive income
    Note number 01.01.2017 – 31.12.2017
    01.01.2016 – 31.12.2016* Restated
    Net profit 538 895 589 024
    Items that may be reclassified to the income statement after certain conditions are satisfied 86 175 -86 852
    Foreign currency translation differences 616 -22
    Results of the measurement of available -for-sale financial assets(net) 85 861 -56 068
    Profit/loss on fair valuation of available -for-sale financial assets 17 105 625 -69 220
    Deferred tax 14 -19 764 13 152
    Results of the measurement of hedging instruments (net) -302 -30 762
    Gains/losses on hedging instruments 19 -373 -37 978
    Deferred tax 14 71 7 216
    Total net comprehensive income 625 070 502 172
    *clarification in Note 4.2


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    6
    Statement of financial position
    ASSETS Note number 31.12.2017 31.12.2016 Restated
    Cash and balances with Central Bank 16 965 391 1 082 991
    Financial assets held for trading 18 452 551 419 551
    Available -for-sale financial assets 17 12 072 324 9 374 646
    Investment securities held to maturity 17 1 117 894 1 954
    Derivative hedging instruments 19 87 785 71 684
    Amounts due from banks 21 898 977 1 364 226
    Loans and advances to customers 20 51 244 093 46 248 623
    Assets pledged as collateral 31 408 911 366 984
    Property, plant and equipment 22 466 958 483 520
    Intangible assets 22 510 106 480 913
    Investments in subsidiaries 102 025 72 359
    Non -current asset held for sale 357 679
    Income tax assets 14 530 759 532 570
    Deferred 530 759 532 570
    Other assets 23 524 047 662 095
    Total assets 69 382 178 61 162 795
    LIABILITIES AND EQUITY Note number t 31.12.2017 31.12.2016 Restated
    Financial liabilities held for trading 18 435 878 298 314
    Amounts due to banks 25 743 911 381 235
    Amounts due to customers 24 57 655 618 51 404 848
    Derivative hedging instruments 19 5 419 6 119
    Provisions 26 90 433 286 791
    Other liabilities 27 1 628 318 1 427 757
    Income tax liabilities 102 382 13 125
    Current 102 382 13 125
    Subordinated loans 28 1 914 976 1 164 794
    Total liabilities 62 576 935 54 982 983
    Share capital 1 292 636 1 292 578
    Supplementary capital 4 817 331 4 184 953
    Revaluation reserve 13 944 -71 615
    Other reserves 184 894 184 894
    Foreign currency translation differences 594 -22
    Accumulated losses -43 051 0
    Profit for the year 538 895 589 024
    Equity 29 6 805 243 6 179 812
    TOTAL LIABILITIES AND EQUITY 69 382 178 61 162 795
    *clarification in Note 4.2



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    7
    Statement of changes in equity
    01.01.2017 - 31.12.2017 Share capital Supplementary capital Other reserves Revaluation reserve
    Exchange differences on revaluation of foreign units
    Retained earnings Total equity
    01 January 2017 1 292 578 4 184 953 184 894 -71 615 -22 589 024 6 179 812
    Transfer of last year's profit 0 632 075 0 0 0 -632 075 0
    Comprehensive income 0 0 0 85 559 616 538 895 625 070
    net profit 0 0 0 0 0 538 895 538 895
    other comprehensive income – valuations 0 0 0 85 559 616 0 86 175
    incl. available -for-sale financial assets 0 0 0 85 861 0 0 85 861
    incl.hedging instruments 0 0 0 -302 0 0 -302
    incl.currency translation differences 0 0 0 0 616 0 616
    Share issue 58 303 0 0 0 0 361
    31 December 2017 1 292 636 4 817 331 184 894 13 944 594 495 844 6 805 243
    01.01.2016 - 31.12.2016 * Restated Share capital Supplementary capital Other reserves Revaluation reserve
    Exchange differences on revaluation of foreign units
    Retained earnings Total equity
    01 January 2016 727 075 2 280 668 184 894 15 215 0 311 415 3 519 267
    Transfer of last year's profit 0 311 415 0 0 0 -311 415 0
    Comprehensive income 0 0 0 -86 830 -22 589 024 502 172
    net profit 0 0 0 0 0 589 024 589 024
    other comprehensive income – valuations 0 0 0 -86 830 -22 0 -86 852
    incl. available -for-sale financial assets 0 0 0 -56 068 0 0 -56 068
    incl.hedging instruments 0 0 0 -30 762 0 0 -30 762
    incl.currency translation differences 0 0 0 0 -22 0 -22
    Share issue 565 503 1 592 870 0 0 0 0 2 158 373
    31 December 2017 1 292 578 4 184 953 184 894 -71 615 -22 589 024 6 179 812
    *clarification in Note 4.2


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    Cash flow statement
    Note number 01.01.2017 – 31.12.2017
    01.01.2016 31.1 2.2016 * restated
    Operating activities
    Profit before tax for the year 764 71R 664 214
    Adjustments: 198 69R 397 89V
    Unrealized foreign exchange gains/losses 79U J7 404
    Dividends 31 68
    Amortization/depreciation of tangible and intangible assets 172 14R 101 83O
    Change in impairment loss of tangible fixed and intangible assets 25 721 26 413
    Gross profit after adjustments and before changing balances 963 41M 1 06O 11P
    Change in loans and receivables 32 J4 508 06M J15 884 350
    Change in financial assets available for sale J2 697 67U J5 121 52T
    Change in investment securities held to maturity J1 115 94M J1 954
    Change in financial assets held for trading J33 00M J28 982
    Change in assets pledged as collateral J41 927 261 34U
    Change in hedging asset derivatives J16 101 67 894
    Change in non Jcurrent assets held for sale 32O 20V
    Change in other assets 32 138 04U J350 46M
    Change in deposits 6 160 52O 16 890 060
    Change in issued debt 489 914 509 44O
    Change in financial liabilities held for trading 137 564 J11 866
    Change in hedging liabilities derivative J70M 6 11V
    Change in other liabilities and other comprehensive income 32 312 45U 690 16V
    Change in provisions J196 35U 276 99M
    Net cash flow from operating activities before income tax J407 52S J1 911 78R
    Income tax paid J153 93N J267 20S
    Net cash flow from operating activities J561 45T J2 178 99N
    Investing activities
    OutflowsW J225 37P J697 18O
    Purchase of property, plant and equipment 32 J100 44U J317 754
    Purchase of intangible assets 32 J95 259 J154 34V
    Investments in subsidiaries J29 666 J50 384
    The acquisition of demerged BPH business, net of cash acquired M J174 69R
    Inflows: 5 98M 5 10O
    Disposal of tangible fixed assets 5 98M 5 10O
    Net cash flow from investing activities J219 39P J692 08M
    Financing activities
    OutflowsW J64 647 J59 189
    Interest expense – subordinated loan J64 64T J59 189
    Inflows: 750 05U 2 435 20N
    Inflows from share issue 58 2 158 37P
    Inflows from the issuance of subordinated liabilities 750 00M 276 82U
    Net cash flow from financing activities 685 41N 2 376 01O
    Total net cash flow J95 439 J495 05V
    incl. exchange gains/(lossesF J72 877 22 147
    Balance sheet change in cash and cash equivalents J95 439 J495 05V
    Cash and cash equivalents, opening balance 1 707 15P 2 202 21O
    Cash and cash equivalents, closing balance 32 1 611 714 1 707 15P
    Additional disclosures on operating cash flows
    Interests received 2 485 26U 2 844 31P
    Interests paid J639 85V J984 454
    *clarification in Note 4.2


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    9
    Notes to the financial statements
    1 Information about the Bank
    1.1 General information, duration, and the scope of business of Alior Bank SA
    Alior Bank Spółka Akcyjna with its registered office in Warsaw, Poland, ul. Łopuszańska 38D, was entered to the
    register of entrepreneurs maintained by the District Court for the Capital City of of Warsaw, 13th C ommercial
    Division of the National Court Register under KRS number: 0000305178. Bank was assigned the tax identification
    number NIP: 107 -001 -07 -31 and the statistical number REGON: 141387142.
    Since 14 December 2012 the Bank has been listed on the Warsaw Stock Exchange (ISIN number: PLALIOR00045).
    On 18 April the Polish Financial Supervision Authority (“PFSA”) issued its licence to establish the bank under the
    name of Alior Bank SA, and on 1 September 2008 it issued a licence to the Bank to commence operations. On
    5 September 2008, PFSA granted a li cence to the Bank to perform stock broking activities. The duration of
    business of the Bank is unrestricted.
    On 4 November 2016, the District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division of
    the National Court Register, enter ed in the register of entrepreneurs an increase of the share capital of Alior Bank
    from PLN 1 292 577 120.00 to PLN 1 292 577 630.00 by way of an issue of 51 ordinary series J bearer shares with
    a nominal value of PLN 10.00 in connection with the demerger of Bank BPH pursuant to Art. 529.1.4 of the Code
    of Commercial Companies. In compliance with Art. 530.2 of the Code of Commercial Companies, along with the
    registration of the capital increase, the District Court made an entry of the merger of Alior Bank SA with the
    demerged part of Bank BPH SA, covering all assets and liabilities specified in the Demerger Plan, constituting the
    core business of Bank BPH. Thus, the demerger has become effective and the Core Business of Bank BPH has
    formally become part of Alior Bank. The transaction is described in Note 44.
    Alior Bank is a universal deposit and credit bank, providing services to natural and legal persons, and other
    entities that are domestic and foreign persons. The Bank's core business covers maintenance o f bank accounts,
    granting loans, issue of bank securities, and purchase and sale of foreign currencies. The Bank is also involved in
    stock broking activity, financial advisory, and intermediation services, and provides other financial services. In
    accordan ce with the provisions of its Articles of Association, Alior Bank has been operating in the territory of the
    Republic of Poland and the European Economic Area. The Bank provides its services primarily to customers from
    Poland. The number of customers in th e overall number of the Bank's customers is negligible. As part of its retail
    banking, in 2016 a foreign branch of Alior Bank was opened in Romania.
    1.2 Information on the composition of the Bank’s Management Board and the Bank’s Supervisory
    Board
    In compariso n to the previous reporting period ended on 31 December 2016, the composition of the Bank’s
    Management Board changed. Pursuant to the resolutions approved by 9 June, 14 June, and 6 July 2017, the
    Bank's Supervisory Board entrusted the following persons wit h the functions of Vice Presidents of the
    Management Board of Alior Bank S A.
    Additionally, the Supervisory Board entrusted to Mr Michał Jan Chyczewski management of the work of the
    Management Board until approval of his appointment from the Polish Financial Supervision Authority to the
    position of the President of the Bank's Manage ment Board.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    10
    Composition of the Bank's Management Board as at 31 December 2017
    First and last name Function Date when the position was assumed
    Michał Jan Chyczewski, acting President of the Management Board 29 June 2017
    Filip Gorczyca Vice President of the Management Board 29 June 2017
    Sylwester Grzebinoga Vice President of the Management Board 01 August 2017
    Urszula Krzyżanowska -Piękoś Vice President of the Management Board 29 June 2017
    Katarzyna Sułkowska Vice President of the Management Board 29 June 2017
    Celina Waleśkiewicz Vice President of the Management Board 29 June 2017
    Composition of the Bank's Management Board as at 31 December 2016
    First and last name Function
    Wojciech Sobieraj President of the Management Board
    Małgorzata Bartler Vice President of the Management Board
    Krzysztof Czuba Vice President of the Management Board
    Joanna Krzyżanowska Vice President of the Management Board
    Witold Skrok Vice President of the Management Board
    Barbara Smalska Vice President of the Management Board
    Katarzyna Sułkowska Vice President of the Management Board
    The composition of the Bank’s Supervisory Board as at 31 December 2017 was as follows:
    First and last name Function
    Tomasz Kulik Chairman of the Supervisory Board
    Małgorzata Iwanicz -Drozdowska Deputy Chairperson of the Supervisory Board
    Dariusz Gątarek Member of the Supervisory Board
    Mikołaj Handsche Member of the Supervisory Board
    Artur Kucharski Member of the Supervisory Board
    Sławomir Niemierka Member of the Supervisory Board
    Maciej Rapkiewicz Member of the Supervisory Board
    On 21 April 2017, the Bank's Extraordinary Meeting approved resolutions on modifications to the composition of
    the Supervisory Board – a resolution dismissing Mr Stanisław Ryszard Kaczoruk from the Supervisory Board and a
    resolution appointing Mr Roman Pałac to the Supervisory Board.
    On 14 June 2017, Mr Michał Krupiński , Chairman of the Bank's Supervisory Board, filed his resignation from the
    Supervisory Board, including his function as the Chairman of the Supervisory Board, effective on 14 June 2017.
    On 29 June 2017, Mr Roman Pałac, Member of the Supervisory Board, fil ed his resignation from the Bank's
    Supervisory Board, effective on 29 June 2017.
    On 29 June 2017, the Bank's General Meeting appointed Mr Tomasz Kulik to the Supervisory Board and
    appointed Mr Eligiusz Krześniak to the Supervisory Board, effective on 30 Ju ne 2017.
    On 5 July 2017, the Supervisory Board elected Mr Eligiusz Krześniak as Chairman of the Supervisory Board of
    Alior Bank.
    On 18 July 2017, Mr Marek Michalski, Member of the Supervisory Board, filed his resignation from the Bank's
    Supervisory Board, effective on 18 July 2017.
    On 29 September 2017 Mr Eligiusz Krześniak, Chairman of the Supervisory Board notified of his resignation from
    the function of Chairman of the Supervisory Board of Alior Bank SA. Mr Eligiusz Krześniak remained a Member of
    the Sup ervisory Board of Alior Bank SA until 31 October 2017, when he filed his resignation from being a
    Member of the Supervisory Board, effective on that day.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    11
    On 29 September 2017, Mr Tomasz Kulik was elected the new Chairman of the Supervisory Board of Alior B ank
    SA.
    On 31 October 2017, the Bank's Extraordinary General Meeting appointed Mr Artur Kucharski and Mr Mikołaj
    Handschke to the composition of the Bank's Supervisory Board.
    The composition of the Bank's Supervisory Board as at 31 December 2016 was as f ollows:
    First and last name Function
    Michał Krupiński - Chairman of the Supervisory Board
    Małgorzata Iwanicz -Drozdowska - Deputy Chairperson of the Supervisory Board
    Dariusz Gątarek - Member of the Supervisory Board
    Stanisław Ryszard Kaczoruk - Member of the Supervisory Board
    Marek Michalski - Member of the Supervisory Board
    Sławomir Niemierka - Member of the Supervisory Board
    Maciej Rapkiewicz - Member of the Supervisory Board
    Paweł Szymański - Member of the Supervisory Board
    2 Basis of prepa ration of the financial statements
    2.1 Coverage and comparable data
    These financial statements cover the year ended on 31 December 2017 and contain comparable data for the
    year ended on 31 December 2016. The financial statements were made in PLN and all the numbers presented
    herein are in PLN thousand, unless specified otherwise .
    2.2 Compliance statement
    These financial statements of Alior Bank Spółka Akcyjna were made in line with the International Financial
    Reporting Standards IFRS) applied on a continuous basis, as approved by the European Union on
    31 December 2017.
    2.3 Going conc ern
    The se financial statements of Alior Bank were made under a going concern assumption of the Bank for minimum
    12 months after the balance sheet date, i.e. after 31 December 2017.
    As of the approval date hereof, the Bank's Management Board did not find any facts or circumstances that would
    indicate to a threat to the continued activity of the Bank over 12 months of the publication hereof as a result of
    an intended or enforced discontinuation of material reduction of the existing activity by the Bank.
    In 2017 and 2016 the Bank had no discontinued operations.
    2.4 Presentation of the financial statements
    In its statement of financial position, the Bank discloses assets and liabilities according to the liquidity criterion.
    The principles of ne tting off of fin ancial assets and liabilities are described in Note 36.1. The Bank does not set off
    income and expenses, unless so required by law or permitted by standards or interpretation.
    2.5 Approval of the financial statements
    These financial statements of Alior Bank Sp ółka Akcyjna were approved for publication by the Bank’s
    Management Board on 6 March 2018.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    12
    3 Description of the material accounting principles
    The most important accounting principles, as well as estimates and assumptions applied in the preparation of
    these financial statements are presented in the Notes and below. The principles were applied on a continuous
    basis in all presented years. Below there is a specification of accounting principles and major estimates and
    assu mptions for the specific items of the income statement and the statement of financial position.
    Income statement Note number Accounting policies*
    Interest income and expense 6 Y
    Fee and commission income and expense 7 Y
    Trading and revaluation result 8 Y
    Net gain (realized) on other financial instruments 9 Y
    Other operating income and expenses 10 Y
    Profit from acquisition of the demerged business of Bank BPH 44 Y
    General administrative expenses 11 Y
    Net impairment allowances and write -downs 12 Y
    Income tax 14 Y
    Statement of financial position Note number Accounting policies*
    Major estimates and assessments*
    Cash and balances with the Central Bank 16 Y
    Financial assets held for trading 18 Y Y
    Available -for-sale financial assets 17 Y Y
    Investment securities held to maturity 17 Y
    Derivative hedging instruments 19 Y Y
    Amounts due from banks 21 Y
    Loans and advances to customers 20 Y Y
    Assets hedging liabilities 31 Y
    Property, plant & equipment 22 Y
    Intangible assets 22 Y Y
    Income tax assets 14 Y
    Other assets 23 Y
    Financial liabilities held for trading 18 Y Y
    Amounts due to banks 25 Y
    Amounts due to customers 24 Y
    Derivative hedging instruments 19 Y
    Provisions 26 Y
    Other liabilities 27 Y
    Subordinated liabilities 28 Y
    The Bank’s equity and shareholding structure 29 Y
    * Letter Y means that the financial statements contain important information about the selected accounting policy and signifi cant estimates
    3.1 Transactions in foreign currencies
    Functional currency and reporting currency
    The financial statements were made in PLN which is the functional currency of the Bank The amounts in these
    financial statements are presented in PLN thousand, unless specified otherwise.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    13
    Foreign cur rency denominated transactions and balances
    Foreign currency denominated transactions are initially recognised in the functional currency at the exchange rate
    of the National Bank of Poland prevailing on the transactional date. On the last day of each re porting period, the
    Bank translates:
     foreign currency denominated monetary assets and liabilities at NBP's mid exchange rate prevailing on the
    day;
     non -monetary items measured according to historic cost in foreign currencies at the exchange rates effectiv e
    as at the date the transaction was initially recognised.
     non -monetary items valued according to the fair value in foreign currency at the exchange rate effective as on
    the date of fair value determination.
    Foreign exchange gains and losses resulting from the settlement of transactions and from the year -end
    translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income
    statement. Foreign exchange gains and losses on items such as equity instruments classif ied as available for sale
    are included in the revaluation reserve of available -for -sale financial assets.
    The results and balances of foreign operations (including branches) that have a functional currency other than
    PLN, and are measured to PLN as follow s:
     assets and liabilities as at the balance sheet date are measured at NBP's avarage exchange rate prevailing on
    that day,
     income and expenses are measured at the arithmetic avarage exchange rates published by NBP, prevailing as
    at the end of each day
     FX gains/losses on measurement of foreign operations are recognised as a separate equity item. This is
    incorporated in the financial result when such foreign operation is disposed of.
    RON 2017 2016
    FX rate prevailing on the last day of period 0.8953 0.9749
    FX rate being an arithmetic avarage FX rates prevailing on the last day of each period 0.9282 0.97 39
    3.2 Combination of business e ntities
    Acquisitions of subsidiaries by the Bank are recognised with the acquisition method in compliance with IFRS 3.
    In accordance with the accounting policies approved by the Bank, with reference to IAS 8 item 10, when
    accounting for a combination under common control, the accounting principle applied is the predecessor
    accounting method i.e. recognition of the acquired entity at the carrying value of the assets and liabilities
    disclosed in the consolidated financial statements of a higher level entity, including goodwill that is generated as a
    result of such acquisition.
    3.3 Recognition of finan cial assets and liabilities in books
    The Bank recognises financial assets or liabilities in its statement of financial position, when it becomes a party to a
    contract covering such instrument. Standard purchase and sale transactions of financial assets (s ecurities) are
    recognised as at the settlement date.
    At the initial recognition, all financial instruments are measured at fair value.
    The Bank classifies financial assets and liabilities at the initial recognition, subject to the purpose, characteristic s,
    and intention vis -a-vis the acquired financial instrument.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    14
    Financial assets are classified by the Bank to the following categories: financial assets measured at fair value
    through profit and loss account; financial assets available for sale; loans and receivables and financial assets kept
    until maturity; financial liabilities to the following categories: financial liabilities measured at fair value through
    profit and loss account and other financial liabilities.
    3.4 Derecognition of financial assets and l iabilities from the statement of financial position
    Financial assets
    The Bank derecognises financial assets from the balance sheet when:
     contractual rights expire to cash flows from such financial assets;
     such financial assets are transferred to another entity.
    When transferring financial assets, the Bank assesses to what extent it retains the risks and benefits related to
    holding such financial assets. In such case:
     if it transfers basically all risks and all benefits related to holding such financial as sets, the Bank derecognises
    such financial assets from its statement of financial position;
     if it retains basically all risks and benefits related to holding such fina ncial assets, the Bank continue s to
    recognise such financial assets in its statement of financial position;
     if it neither transfers nor retains basically all risks and benefits related to holding such financial assets, the Bank
    determines if it continues to control such financial assets; when control is retained, such financial assets
    contin ue to be recognised in the balance sheet, and when there is no control, such financial assets are
    derecognised from the balance sheet in the amount resulting from the retained exposure.
    If financial assets are proven to be uncollectible, the Bank writes -down the receivables against the impairment
    allowance. The amounts of such written -off receivables that may be recovered in the future reduce the value of
    the impairment allowances in the income statement .
    Financial liabilities
    The Bank derecognises fi nancial liabilities (in whole or in part) from the balance sheet if a contractual duty has
    been discharged or redeemed or has expired.
    4 Changes in accounting principles
    4.1 Changes in accounting standards
    Modifications to the existing accounting standards and interpretations that became effective on 1 January 2017
     Amendments to IAS 7 Statement of Cash Flows – initiative concerning disclosures
    They were published by the International Accounting Standards Board on 29 January 2016 and apply to annual
    periods beginning on or after 1 January 2017. The amendments to IAS 7 introduce the requirement to disclose
    changes to liabilities resulting from financing activities in the cash flow statement, including changes that are
    actual cash flows and non -cash changes. In order to comply with the requirement, the standard requires
    reconciliation of opening balances and closing balances of the liabilities disclosed in the statement of financial
    position that are classified as financing activity in the cash flow statement.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    15
     Amendments to IAS 12 Recognition of deferred tax assets from unrealized losses
    They were published by the International Accounting Standards Board on 19 January 2016 and apply to annual
    periods beginning on or after 1 January 201 7. The amendments to IAS 12 provide details of the requirements to
    disclose deferred income tax asset on unrealised losses on debt instruments measured at fair value. The
    amendments provide guidelines as to identification of temporary negative differences . In particular, the standard
    confirms that a drop of the carrying value of fixed rate debt instruments measured at fair value, below the cost,
    where the tax base remains at the cost level, results in temporary negative differences, irrespective of the fac t if
    the holder of the instrument intends to hold or sell it.
    New standards and interpretations that have been published and approved by EU, but are not yet effective
     IFRS 9 Financial Instruments
    On 24 July 2014, the International Accounting Standards Board (IASB) published a new International Financial
    Reporting Standard – IFRS 9, Financial Instruments, applying for annual periods starting on or after 1 January
    2018, which will replace the existin g International Accounting Standard 39, Financial Instruments: Recognition and
    Measurement. By Regulation no. 2016/2067 of 22 November 2016, the European Commission adopted the
    International Financial Reporting Standard 9, Financial Instruments (IFRS 9) in the version published by IASB on 24
    July 2014.
    IFRS 9 introduces new accounting principles regarding financial instruments in the following areas:
     classification and valuation ,
     impairment (expected credit losses) ,
     hedge accounting .
    Implementation status
    Alior Bank completed implementation related to the opening balance as of 1 January 2018.
    The disclosed effect of the application of IFRS 9 as of 1 January 2018 may change, in particular due to:
     are expected from the PF SA recommendations regarding the inte rpretation of the classification and
    measurement of financial instruments and impairment, in particular in relation to the expected amendment to
    Recommendation R of the Polish Financial Supervision Authority,
     there are discussions in the banking sector in Poland in connection with the letter from the PF SA's Chairman
    dated on 12 of December 2017 regarding the classification of consumer credit products with an interest
    formula based on a multiplier of more than 1 and the Bank is in the process of determining the type, the
    scope and timing of actions to change the contractual provisions in question in order to meet the contractual
    cash flow test requirements enabling the classification of these loans to the category of financial assets
    measured at amortized cos t.
    Classification and measurement of financial instruments
    Financial assets
    According to IFRS 9, upon initial recognition, financial assets are classified to the following measurement
    categories:
     financial assets measured at amortized cost;
     financial asse ts measured at fair value through other comprehensive income;
     financial assets measured at fair value through profit or loss.
    Financial assets are classified to one of the above measurement categories based on: the Bank’s business model
    for financial asset management and contractual cash flows.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    16
    Business model
    The business model is a method for financial assets management. Its assessment depends on the intentions as to
    how the cash flows arising from these financial assets will be realized, i.e. whether the y will be realized by
    obtaining cash flows in accordance with contractual terms, whether through the sale of these assets or from both
    sources.
    For the assessment of the business model is significant why deciision was made about realising the cash flows as a
    result of sales. There Is distinction between the sale of financial assets with a deteriorated credit quality due to
    credit risk management, the sale of assets for the purposes of managing financial liquidity r isk and financial risk,
    and sales undertaken to generate financial profits. Other factors are also important in identifying the business
    model, in particular the criteria for assessing the financial results of given assets portfolio , eg interest margin,
    changes in fair value, realized sales results.
    Contractual cash flows
    The purpose of the contractual cash flow characteristics assessment of a financial asset is whether the terms of the
    contract realise cash flows according to schedule, which are only rep ayment of the principal and interest on the
    principal amount still to be repaid (the so -called SPPI criterion - solely payments of principal and interest).
    As the main amount for the purposes of the SPPI test is the fair value of the financial asset at th e moment of
    initial recognition .
    As interest on the principal is the payment for the value of money in time, remuneration for credit risk and other
    risks, administrative costs and profit margin.
    Classification principle
    Financial assets whose cash flows only have the characteristics of repayment of the principal and interest on the
    principal are classified in the category of measurement:
     according to amortized cost, if they are maintained in a business model whose purpose is to realize cash flows
    in acco rdance with contractual terms,
     at fair value through other comprehensive income if they are maintained in a business model whose purpose
    is to realize cash flows in accordance with contractual terms or through sale.
    Financial assets whose cash flows are modified in such a way that they have features other than just repayment of
    the principal and interest on the principal are classified to the category of measurement at fair value through the
    financial result regardles s of the business model. This category also classifies financial assets managed in
    accordance with the business model, which involves the sale of assets to generate financial profits, assessment of
    results based on changes in fair value and sales results.
    This category also always includes derivative instruments that are not hedging instruments.
    As at 1 January 2018, i.e. the date of the first application of IFRS 9, Alior Bank maintains a portfolio of financial
    assets resulting from credit cards and used ov erdraft facilities whose interest rate is based on the formula of a
    specific multiplier of the NBP reference rate. For the purpose of preparing the opening balance as at 1 January
    2018, these financial assets were classified to the category of measurement at amortized cost due to ongoing
    discussions in the banking sector in Poland in connection with the letter from the Chairman of the Polish Financial
    Supervision Authority dated on 12 December 2017 regarding the classification of consumer credit products w ith
    an interest rate formula based on a multiplication factor of more than 1 and the expectations of the Polish
    Financial Supervision Authority in the scope of amending the contractual provisions that result in failure to test the
    contractual cash flows. T aking above into account Alior Bank is in the process of determining the type, scope and
    timing of actions in the field of, changes of doubts from the point of view of the classification according to IFRS 9
    of contractual provisions in order to meet the re quirements of the contractual cash flow test enabling the


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    17
    classification of these loans to the category of financial assets measured at amortized cost. This portfolio
    amounted to about PLN 800 M equil 1.54% of total receivables from customers.
    Classificat ion
    As at 1 January 2018, Alior Bank reviewed the portfolio of financial assets of the IFRS 9 classification principles.
    The review included:
     identification of business models used by the Bank based on the method of reporting and assessment of
    financial results, the method of remuneration of the management staff,
     assigning individual portfolios of financial assets to relevant business models,
     assessment of contractual cash flow characteristics for particular financial assets.
     analysis of sales of financia l assets along with the business case for sales and its frequency
     analysis of contractual clauses used by B ank that may affect cash flows.
    In addition, the Bank identified purchased financial assets with impairment due to credit risk. These types of
    finan cial assets have been recognized in connection with acquisition demerged business of Bank BPH in 2016
    and Meritum Bank in 2015.
    As a result, loans and advances to customers and debt securities (investment bonds) were included in the
    category of measuremen t at amortized cost. In accordance with the principles of IAS 39 applied until 31
    December 2017, those items were classified in the categories of loans and receivables and financial assets
    available for sale and held to maturity.
    Debt securities, which unt il 31 December 201 7 are classified as available -for -sale financial assets, were included
    into the category of fair value measurement for other comprehensive income. These items mainly include a
    portfolio of securities that secures financial liquidity (main ly government bonds, corporate bonds shares that do
    not meet the definition of a capital instrument ).
    The category of measurement at fair value through the financial result includes derivative instruments that are not
    hedging instruments in accordance with hedge accounting principles and commercial securities portfolio
    (Treasury bonds and corporate bonds). Until 31 December 201 7, in line with IAS 39, these items were classified as
    financial assets held for trading.
    Financial liabilities
    The application of IFRS 9 does not have a material impact on changing the classification of financial liabilities to
    the category of financial liabilities. Derivatives and financial liabilities due to short sales are valued as at 1 January
    2018 at fair value through profit o r loss. Other items of financial liabilities are measured at amortized cost.
    In addition, financial guarantees are valued at the higher of the impairment loss for expected credit losses and the
    amount initially recognized less the accumulated amount of inc ome.
    Impairment
    In accordance with IFRS 9, the Bank estimates impairment losses for expected credit losses. for all financial assets
    at amortized cost or at fair value through other comprehensive income.
    IFRS 9 replaces the impairment model introduced by the provisions of IAS 39 which is based on the “incurred
    loss” concept, and introduces a new model based on the expected credit loss (ECL) concept.
    Loss Identification Period
    Expected losses are estimated at a 12 -month or in a life -time, according to the following rule:
     Bucket 1 - assets for which there was no significant increase of credit risk from the initial recognition => 12
    months


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    18
     Bucket 2 - assets for which there was a significant increase of credit risk, however, there are no indications of
    impair ment => life -time
     Bucket 3 - assets for which there are premises for impairment => life -time .
    Identification of the credit risk deterioration
    The principles of recognizing impairment triggers remain unchanged versus the principles applied in IAS 39. The
    Bank applies the full cross -default principle, ie the identification of the premise on any customer involvement
    results in the classification of the portfolio with indications of impairment of all its exposures. The rules for
    identifying a significant i ncrease of credit risk from the initial recognition are based on a combination of:
    • qualitative criterias,
    • quantitative criterias .
    The Bank includes for qualitative criteria:
    • occurrence of overdue exceeding 30 days ,
    • classification of the client on the list of higher risk ("watch list" ,)
    • forbearance (ie customer staying in the post -restructuring period probabation) .
    The Bank includes for quantitative criteria :
    • increase above defined thresholds, of the cumulative probability of default in the pe riod to maturity determined
    between the date of the engagement and the date of the valuation.
    • m ateriality thresholds are defined at the level of homogeneous segments, taking into account the credit quality
    of individual populations.
    Identification of cri terias of significant credit risk deterioration is performed at the single exposure level.
    Estimation of expected losses
    The estimated losses expected for exposures designated for Bucket 1 or Bucket 2 are based on:
    • estimated exposure value at the time of default (EAD model)
    • estimated distribution of risk of default within the lifetime of the exposure (life -time PD model)
    • estimated level of loss in case of default of the client (LGD model).
    The estimate horizon covers the period of the next 12 months (or the maturity if shorter) for Bucket 1 and the
    estimated horizon covers the period up to the expected maturity for Bucket 2.
    The EAD model shows the expected distribution of exposure of a given credit exposure in the period to maturity.
    The model for products with repayment schedules is based on contract flows modified by the effec t of
    prepayment / underpayment. The model for products without repayment schedules is based on the average
    expected use of the credit limit granted.
    The life -time PD model us ed to estimate credit losses is the same as the model used to assess the occurrence of a
    significant deterioration in credit quality.
    The LGD model illustrates the expected level of loss from the exposure where the customer defaults. It includes all
    possib le recovery paths / scenarios, including the pricing of individual colleteral for each transaction.
    The expected losses in the life -time horizon are estimated taking into account future macroeconomic conditions
    in the multi -scenario option.
    The estimation of expected credit losses for exposures designated in Bucket 3 remains unchanged against the
    principles of IAS 39.
    The process of estimating expected losses
    Estimation of expected credit losses, including the transfer of exposures between b uckets, is made in a fully
    automated, dedicated system which on a daily basis, illustrates the status and valuation for each of the exposures.
    The process of accounting enteres of valuation results has been fully automated.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    19
    Validation
    All models used in the estimation of impairment according to IFRS 9 have been subjected to the process of
    independent internal validation, which ended with a positive result.
    Exposures acquired in impairment (POCI)
    The Bank estimates the expected credit losses over the life -tim e horizon for exposures purchasef or originated
    credit impaired financial assets , irrespective of current credit quality. The valuation of these exposures is carried
    out using standardized models, including credit risk adjusted effective interest rates (so -called CEIR). The CEIR
    rate is the rate used to measure to the fair value of the exposure at the acquisition date.
    For POCI exposures, a write -off is a cumulative change in expected credit losses between their current estimate
    and the level set at the date of acquisition of the exposure. In the case of a drop in the estimated credit losses,
    the write -down takes the form of a correction increasing the gross value of the exposure (the so -called over -
    write ).
    Hedge accounting
    Pursuant to the provision of I FRS 9 7.2.21, Alior Bank has decided to continue to apply the hedge accounting
    principles under IAS 39. Therefore, in the area of hedge accounting, the accounting policies have not been
    changed.
    Comparative data
    In accordance with IFRS 9, Alior Bank decid ed to use the exemption of the obligation to restate comparative data
    for previous periods presented in financial statements for periods beginning on 1 January 2018 or later due to the
    first application of IFRS 9. Changes in the carrying amount of assets and financial liabilities resulting from the
    application of IFRS 9 are recognized in equity as at 1 January 2018 as a result of previous years.
    Summary of the impact of the implementation of IFRS 9 on the statement of financial position as at 1 January
    2018 in comparison to the data in IAS 39 as at 31 December 2017
    Carrying amount in accordance with IAS 39 as at 31.12.2017
    Estimated impact of implementing IFRS 9 on 01.01.2018 New carrying amount in accordance with IFRS 9 as at 01.01.2018
    ASSETS Classification according to IAS 39 Classification according to IFRS 9
    impact of changing classification and valuation (1)
    impact of impairment (2)
    Total impact (1)+(2)
    Cash and balances with the Central Bank Loans and advances to customers Financial assets measured at amortized cost 965 391 0 0 0 965 391
    Financial assets held for trading Financial assets measured at amortized cost
    Financial assets measured at fair value through profit or loss 452 551 0 0 0 452 551
    Available -for-sale financial assets Available -for-sale financial assets
    Financial assets measured at fair value through other comprehensive income 9 649 751 105 105 9 649 856
    Financial assets measured at amortized cost 2 384 004 4 538 -1 946 2 592 2 386 596
    Financial assets measured at fair value through profit or loss 38 569 0 0 0 38 569
    Investment securities held to maturity Financial assets held to maturity Financial assets measured at amortized cost 1 117 894 0 -1 018 -1 018 1 116 876
    Derivative hedging instruments
    Financial liabilities measured at fair value through other comprehensive income
    Financial liabilities measured at fair value through other comprehensive income
    87 785 0 0 0 87 785
    Amounts due from banks Loans and advances to customers Financial assets measured at amortized cost 898 977 0 -4 -4 898 973


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    20
    Carrying amount in accordance with IAS 39 as at 31.12.2017
    Estimated impact of implementing IFRS 9 on 01.01.2018 New carrying amount in accordance with IFRS 9 as at 01.01.2018
    ASSETS Classification according to IAS 39 Classification according to IFRS 9
    impact of changing classification and valuation (1)
    impact of impairment (2)
    Total impact (1)+(2)
    Loans and advances to customers Loans and advances to customers Financial assets measured at amortized cost 51 244 093 0 -905 284 -905 284 50 338 809
    Assets pledged as collateral Available -for-sale financial assets/ Financial assets held to maturity
    Financial assets measured at amortized cost / Financial assets measured at fair value through other comprehensive income
    408 911 0 0 0 408 911
    Income tax asset 530 759 264 290 795 049
    Other assets 524 047 0 564 564 524 611
    TOTAL ASSETS 68 302 732 4 643 -907 688 -638 755 67 663 977
    Carrying amount in accordance with IAS 39 as at 31.12.2017
    Estimated impact of implementing IFRS 9 on 01.01.2018 New carrying amount in accordance with IFRS 9 as at 01.01.2018
    lLIABILITIES Classification according to IAS 39 Classification according to IFRS 9
    impact of changing classification and valuation (1)
    impact of impairment (2)
    Total impact (1)+(2)
    Financial liabilities held for trading
    Financial liabilities measured at fair value through profit or loss
    Financial liabilities measured at fair value through profit or loss 435 878 0 0 0 435 878
    Amounts due to banks Financial liabilities measured at amortized cost
    Financial liabilities measured at amortized cost 743 911 0 0 0 743 911
    Amounts due to customers Financial liabilities measured at amortized cost
    Financial liabilities measured at amortized cost 57 655 618 0 0 0 57 655 618
    Derivative hedging instruments
    Financial liabilities measured at fair value through other comprehensive income
    Financial liabilities measured at fair value through other comprehensive income
    5 419 0 0 0 5 419
    Provisions 90 433 0 118 669 118 669 209 102
    Income tax liabilities 102 382 68 576 170 958
    Total liabilities 59 033 641 0 118 669 187 245 59 220 886
    Share capital 1 292 636 0 1 292 636
    Supplementary capital 4 817 331 0 4 817 331
    Revaluation reserve 13 944 10 629 24 573
    Other reserves 184 894 0 184 894
    Foreign currency translation differences 594 0 594
    Accumulated losses 495 844 -836 629 -340 785
    Totak equity 6 805 243 -826 000 5 979 243
    TOTAL LIABILITIES AND EQUITY 65 838 884 0 118 669 -638 755 65 200 129
    In respect of loans and advances to customers also due to the implementation of IFRS 9 (without affecting the net
    value):
    - implementation of changes in the definition of the gross carrying amount in range of the interest for impaired
    exposures, which as of 1 January 2018 symmetrically increase the gross exposures value and impairment
    allo wance in the amount of PLN 193.8 M,
    - transformation of purchased or iginal credit impaired assets (POCI) in the balance sheet by adjusting the gross
    value and write -offs in the amount of PLN 629.8 M .


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    21
    Impact on capital requirements
    On 12 December 2017, the European Parliament and the EU Council adopted Regulation No. 2017/2395
    amending Regulation (EU) No 575/2013 regarding transitional arrangements to mitigate the impact of the
    introduction of IFRS 9 on own funds and on the treatment of large exposures to entities in the sector publicly
    denomina ted in the national currency of any Member State. This Regulation entered into force on the day
    following its publication in the Official Journal of the European Union and has been applicable since 1 January
    2018. The European Parliament and the Council (E U) have recognized that the application of IFRS 9 may lead to a
    sudden increase in write -downs for expected credit losses, and hence, the fall in Tier 1 capital.
    The Regulation on the amortization of the impact of IFRS 9 on Tier I predicts primarily the po ssibility of applying
    appropriate multipliers in subsequent years of the transition period from 2018, which are respectively: 95%, 85%,
    70%, 50%, 25%. when the opening balance as of the date of first application of IFRS 9 reflects a decrease in Tier 1
    Comm on Equity as a result of increased provisions for expected credit losses, including a write -off for expected
    credit losses over the entire life of financial assets affected by credit risk impairment, compared to with closing
    balance.
    Alior Bank SA, after a nalyzing the requirements of Regulation No. 2017/2395, decided to apply the transitional
    provisions provided for in this Regulation, which means that the full impact of implementing the IFRS will not be
    taken into account for the purpose of assessing the B ank's capital adequacy.
    The Bank settles in addition deferred tax asset arising from the entry into force of IFRS 9 in ca lculation of capital
    adequacy. In connection with this settlement, a position deducted from Tier 1 capital arises in accordance with art.
    36 par. 1 lit c of th e CRR Regulation and negatively affects on effect of the implementation of IFRS 9.
    The table below presents the impact of the application of IFRS 9 for the first time on capital adequacy including
    and without taking into account t he transition period :
    Impact of IFRS 9 including the transition period Impact of IFRS 9 without considering the transition period
    Total capital (TIER 1, TIER 2) 7 661 523 6 608 156
    The total capital requirement 4 033 552 3 952 180
    Total capital ratio 15,20% 13,38%
     IFRS 15 Revenue from contracts with customers
    Applies to annual periods beginning on or after 1 January 2018 .
    The amendments provided in IFRS 15 will apply to all contracts that generate income. The fundamental principle
    of the new standard is to recognise income at transfer of goods or services to customers, in the amount of the
    transactional price. All goods or services sold in packets that may be identified within the packet, are to be
    recognised separately; additionally, all discounts and rebates off the transactional price, as a rule, should be
    allocated to each element of the packet. When the income is varia ble, then in accordance with the new standard,
    the variable amounts are recognised as income as long as it is highly likely that the income will not be reversed as
    a result of revaluation. Additionally, in compliance with IFRS 15, any costs incurred to ac quire and secure hedging
    of the contract with the customer shall be capitalised and recognised over time throughout the time the benefits
    from the contract are consumed. The Bank assessed all elements of the income recognition model in compliance
    with IFR S 15. As a result, the Bank did not identify material differences in income recognition between the
    requirements of IAS 18 and IFRS 15. Therefore, the implementation of IFRS 15 did not affect the Bank's equity.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    22
     IRFS 16 Leases
    Applies to annual periods beginning on 1 January 2019. The new standard sets the rules of recognition,
    presentation, and disclosures concerning leases. All lease transactions result in the lessee gaining the right to use
    the asset and a liability to make payments. Thus, IFRS 16 cancels lease classification into operational and financial
    lease in compliance with IAS 17 and introduces one model for accounting recognition of leases by the lessee.
    The lessees shall be obliged to recognise: (a) assets and liabilities for all lease tr ansactions concluded for over 12
    months, unless this is a low value asset; and (b) depreciation of leased asset separately from interest on the lease
    liability in the income statement.
    The Bank is of the opinion that the application of the new standard wil l affect recognition, presentation,
    measurement, and disclosure of operational lease assets and the corresponding liabilities in the Bank's financial
    statements as a lessee.
    Standards and interpretations that have not been approved by the European Union yet:
     Other changes(a)
    Amendments to IFRS 10 and IAS 28 concerning sale or contribution of assets by investors to a joint venture or an
    affiliated entity. Amendments to IFRS 4, Insurance contracts with respect to the implementation of IFRS 9 and
    amendments to IFRS 2 Share -based Payments – the Bank is of the opinion that the application of the amended
    standards will have no material impact on the financial statements when initially applied.
    Amendments to IAS 40 and amendments to IFRS 2014 -2016 (IFR S 1, IAS 28) will have no impact on the financial
    statements of the Bank .
    4.2 Changes to presentation and clarification of differences versus the financial statements published
    earlier
    Restatement of comparative data in connection with settlement of the acquisition of the demerged business of
    Bank BPH SA
    Due to the completion of the process of final settlement of the acquisition of the demerged business of Bank
    BPH, mentioned in note 1.1, the data as of 31 December 2016 was retrospectively restated.
    In th e notes presented below, the data restat ed versus the published version is clearly marked as restat ed. Non -
    transformed data is not marked as above. Additional information related to the settlement is provided in Note 44.
    ASSETS 31.12.2016 approved adjustment 31.12.206 restated
    Cash and balances with the Central Bank 1 082 991 0 1 082 991
    Financial assets held for trading 419 551 0 419 551
    Available -for-sale financial assets 9 357 734 16 912 9 374 646
    Investment securities held to maturity 1 954 0 1 954
    Derivative hedging instruments 71 684 0 71 684
    Amounts due from banks 1 364 226 0 1 364 226
    Loans and advances to customers 46 279 849 -31 226 46 248 623
    Assets pledged as collateral 366 984 0 366 984
    Property, plant and equipment 483 520 0 483 520
    Intangible assets 480 913 0 480 913
    Investments in subsidiaries 72 359 0 72 359
    Non -current assets held for sale 679 0 679
    Income tax asset 523 371 9 199 532 570
    Deferred 523 371 9 199 532 570
    Other assets 706 034 -43 939 662 095
    TOTAL ASSETS 61 211 849 -49 054 61 162 795


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    23
    LIABILITIES AND EQUITY 31.12.2016 approved adjustment 31.12.2016 restate d
    Financial liabilities held for trading 298 314 0 298 314
    Amounts due to banks 381 235 0 381 235
    Amounts due to customers 51 404 848 0 51 404 848
    Derivative hedging instruments 6 119 0 6 119
    Provisions 286 791 0 286 791
    Other liabilities 1 433 760 -6 003 1 427 757
    Income tax liabilities 13 125 0 13 125
    Current 13 125 0 13 125
    Subordinated loans 1 164 794 0 1 164 794
    Share capital 1 292 578 0 1 292 578
    Supplementary capital 4 184 953 0 4 184 953
    Revaluation reserve -71 615 0 -71 615
    Other reserves 184 894 0 184 894
    Foreign currency translation differences -22 0 -22
    Current year's profit/loss 632 075 -43 051 589 024
    TOTAL LIABILITIES AND EQUITY 61 211 849 -49 054 61 162 795
    01.01.2016 - 31.12.2016 approved adjustment 01.01.2016 – 31.12.2016 restated
    Intrest income 2 639 265 0 2 639 265
    Interest expense -697 391 0 -697 391
    Net interest income 1 941 874 0 1 941 874
    Dividend income 68 0 68
    Fee and commission income 592 337 0 592 337
    Fee and commission expense -257 980 0 -257 980
    Net fee and commission income 334 357 0 334 357
    Trading and revaluation result 319 779 0 319 779
    Net gain (realized) on other financial instruments 21 919 0 21 919
    Other operating income 102 014 0 102 014
    Other operating costs -51 720 0 -51 720
    Net other operating income 50 294 0 50 294
    Profit from acquisition of the demerged business of Bank BPH 508 056 -43 051 465 005
    General administrative expenses -1 543 456 0 -1 543 456
    Net impairment allowance s and write -downs -794 733 0 -794 733
    Banking tax -130 893 0 -130 893
    Profit before tax 707 265 -43 051 664 214
    Income tax -75 190 0 -75 190
    Net profit 632 075 -43 051 589 024
    Changes to presentation
    As compared to the financial statements made as at 31.12.2016, the presentation of interest income and expense
    concerning derivative instruments has been modified in order to reflect better the economic nature of such
    transactions.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    24
    Income statement’s item
    Data from the statements Modification Restated
    01.01.2016 - 31.12.2016 01.01.2016 - 31.12.2016 01.01.2016 - 30.09.2016
    Interest income 2 933 858 -294 593 2 639 265
    Interest income from financial instruments measured at amortized cost including the effective interest rate method 2 482 318 0 2 482 318
    term deposits 1 494 0 1 494
    loans 2 329 825 0 2 329 825
    financial assets available for sale 128 274 0 128 274
    receivables acquired 11 564 0 11 564
    other 11 161 0 11 161
    Other interest income 451 540 -294 593 156 947
    current accounts 18 958 0 18 958
    over night deposits 1 185 0 1 185
    derivative hedging instruments 431 397 -294 593 136 804
    Interest expense -991 984 294 593 -697 391
    Interest expense from financial instruments measured at amortized cost including the effective interest rate method -544 329 0 -544 329
    term deposits -400 454 0 -400 454
    repo transactions in securities -13 837 0 -13 837
    cash deposits -3 446 0 -3 446
    own issues -124 139 0 -124 139
    other -2 453 0 -2 453
    Other interest expenses -447 655 294 593 -153 062
    current deposits -48 402 0 -48 402
    derivative hedging instruments -399 253 294 593 -104 660
    Net interest income 1 941 874 0 1 941 874
    5 Operating segments
    Segment description
    Alior Bank SA pursues its business activity within segments offering specific products and services addressed to
    specified customer groups. The split of business segments provides for consistency with the sale management
    model and for providing customers with a comprehensive product offer, covering both traditional banking
    products and more complex investment products.
    Banking operations cover three core business segments:
     retail segment;
     business segment;
     treasury activities;
    The core products for natural persons are as follows:
     credit products: cash loans, credit cards, current account overdraft facilities, mortgage loans;
     deposit products: term deposits, savings deposits;
     brokerage products and investment funds;
     personal accounts;
     transactional se rvices: cash deposits and withdrawals, transfers;
     currency exchange transactions.
    The core products for business customers are as follows:
     credit products: overdraft limits in current accounts, working capital loans, investment loans, credit cards;


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    25
     deposit products: term deposits;
     current and subsidiary accounts;
     transactional services: cash deposits and withdrawals, transfers;
     treasury products: FX exchange transactions (also term FX transactions), derivative instruments;
    The analysis covers the profitabil ity of the retail and business segments. Profitability covers:
     margin income decreased by the funding costs (a rate at which the branch acquires funding from the Treasury
    Department);
     fee and commission income;
     income from treasury transactions and FX transactions by customers;
     other operating income and expenses.
    Income of the retail segment cover also income from sales of brokerage products (e.g. income for the
    maintenance of brokerage accounts, brokerage services in securities trading and income from distribution of
    investment fund units).
    The income from the business segment also covers income from a car loan portfolio.
    The item Treasury activity covers management effects of the global position – liquidity and FX position, resulting
    from the activity of the Bank's units.
    The profit and loss accounts presented below, split by segment, contain a reconciliation item. The items cover:
     internal interest result accruing on the balance on net impairment allowances;
     commission costs not allocated to any busine ss units (e.g. cash handling costs, ATM use costs, costs of
    domestic and foreign transfers);
     other operational expenses and income, not related directly to the operation of business segments.
    Results and volumes split by segment for the year ended on 31 December 2017
    Retail customers Corporate customers Treasury Total business segments Reconciliation items Total Bank
    External interest income 1 830 336 1 011 814 -9 158 2 832 992 0 2 832 992
    external income 2 173 382 1 289 199 128 023 3 590 604 0 3 590 604
    external expense -343 046 -277 385 -137 181 -757 612 0 -757 612
    Internal interest income -16 042 -263 953 279 995 0 0 0
    internal income 843 894 186 031 2 789 704 3 819 629 0 3 819 629
    internal expense -859 936 -449 984 -2 509 709 -3 819 629 0 -3 819 629
    Net interest income 1 814 294 747 861 270 837 2 832 992 0 2 832 992
    Fee and commission income 355 914 408 185 -969 763 130 38 608 801 738
    Fee and commission expense -213 862 -158 512 -12 179 -384 553 19 686 -364 867
    Net fee and commission income 142 051 249 674 -13 148 378 577 58 294 436 871
    Dividend income 0 0 0 0 31 31
    Trading and revaluation result 4 181 49 819 315 314 369 314 0 369 314
    Net gain (realized) on other financial instruments 117 006 174 518 -284 616 6 908 0 6 908
    Other operating income 171 457 22 886 -60 194 284 -88 479 105 805
    Other operating expenses -53 612 -44 133 1 330 -96 416 18 196 -78 220
    Net other operating income 117 845 -21 247 1 270 97 868 -70 283 27 585
    Total result before impairment losses 2 195 377 1 200 625 289 657 3 685 659 -11 958 3 673 701
    Net impairment allowances and write - downs -485 800 -413 500 0 -899 300 -21 166 -920 466
    Total result after impairment losses 1 709 577 787 125 289 657 2 786 359 -33 124 2 753 235
    General administrative expenses -1 464 041 -519 328 -5 151 -1 988 520 0 -1 988 520


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    26
    Retail customers Corporate customers Treasury Total business segments Reconciliation items Total Bank
    Profit before tav 245 536 267 797 284 506 797 839 -33 124 764 715
    Tax income 0 0 0 0 -225 820 -225 820
    Income tax 245 536 267 797 284 506 797 839 -258 944 538 895
    Depreciation 0 0 0 0 0 -172 145
    Assets 41 122 931 27 683 132 45 356 68 851 419 530 759 69 382 178
    Liabilities 40 078 781 22 383 286 12 486 62 474 553 102 382 62 576 935
    Results and volumes split by segment for the year ended on 31 December 2016
    Transformed data Retail customers Corporate customers Treasury Total business segments Reconciliation items Total Bank
    External interest income 1 299 671 546 502 93 684 1 939 857 2 017 1 941 874
    external income 1 640 530 895 476 101 242 2 637 248 2 017 2 639 265
    external expense -340 859 -348 974 -7 558 -697 391 0 -697 391
    Internal interest income -43 001 -12 581 61 793 6 211 -6 211 0
    internal income 532 717 256 492 1 259 074 2 048 283 25 2 048 308
    internal expense -575 718 -269 073 -1 197 281 -2 042 072 -6 236 -2 048 308
    Net interest income 1 256 670 533 921 155 477 1 946 068 -4 194 1 941 874
    Fee and commission income 239 210 290 809 517 530 536 61 801 592 337
    Fee and commission expense -122 886 -56 587 -34 954 -214 427 -43 553 -257 980
    Net fee and commission income 116 324 234 222 -34 437 316 109 18 248 334 357
    Dividend income 0 0 0 0 68 68
    Trading and revaluation result 3 885 53 031 262 863 319 779 0 319 779
    Net gain (realized) on other financial instruments 105 447 133 596 -217 124 21 919 0 21 919
    Other operating income 138 825 17 551 5 161 161 537 -59 523 102 014
    Other operating expenses -13 859 -64 -1 686 -15 609 -36 111 -51 720
    Net other operating income 124 966 17 487 3 475 145 928 -95 634 50 294
    Total result before impairment losses 1 607 292 972 257 170 254 2 749 803 -81 512 2 668 291
    Net impairment allowance s and write - downs -479 566 -288 937 0 -768 503 -26 232 -794 733
    Total result after impairment losses 1 127 727 683 322 170 253 1 981 302 -107 744 1 873 558
    Profit from acquisition of the demerged business of Bank BPH 0 0 0 0 465 005 465 005
    General administrative expenses -1 240 676 -429 420 -4 254 -1 674 350 1 -1 674 349
    Gross profit/loss -112 949 253 902 165 999 306 952 357 262 664 214
    Income tax 0 0 0 0 -75 190 -75 190
    Net profit/loss -112 949 253 902 165 999 306 952 282 072 589 024
    Depreciation 0 0 0 0 0 -101 832
    Assets 36 446 241 24 156 038 37 145 60 688 478 523 371 61 162 795
    Liabilities 34 664 532 20 296 073 9 253 54 975 861 13 125 54 982 983
    Income and expenses are generated primarily in Poland. Opened in 2017, the branch in Romania generated a
    gross loss amounted to PLN 30 219 thousand and amounted to PLN 6 166 thousand in 2016.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    27
    Notes to income statement
    6 Net interest income
    6.1 Accounting principles
    Interest income and expenses cover interest on financial instruments measured at amortised cost and instruments
    measured at fair value with the exception of hedging derivative instruments classified as available for trading. Net
    interest also includes fees and commissions directly related to the origination of financial instruments (both
    income, including the portion of fees received from insurance companies for distribution of insurance, and costs,
    including external and internal incremental costs) constit uting the integral part of the effective interest rate.
    The effective interest rate method consists in accruing the amortised cost of financial assets or financial liabilities
    and allocation of interest income or expense. The effective interest rate is t he rate to discount estimated future
    cash flows to the net carrying value of financial assets or liabilities. In case of financial assets or a group of similar
    financial assets for which an impairment allowance was recognised, interest income accrues on th e current value
    of receivables (the value reduced by the impairment allowance), at the effective interest rate.
    Interest income and expense on derivative instruments, classified as held for trading, is disclosed as interest
    income and expense along with the effective part of the cash flow hedges. Accrued interest receivable and
    payable is presented in the items of the statement of financial condition to which it refers.
    6.2 Financial data
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    Interest income 3 590 604 2 639 265
    Interest income from financial instruments measured at amortized cost including the effective interest rate method 3 417 540 2 482 318
    term deposits 1 045 1 494
    loans 3 193 562 2 329 825
    financial assets available for sale 165 562 128 274
    receivables acquired 38 859 11 564
    repo transactions in securities 7 823 4 554
    investment securities held to maturity 9 281 768
    other 1 408 5 839
    Other interest income 173 064 156 947
    current accounts 25 156 18 958
    over night deposits 1 558 1 185
    derivative hedging instruments 146 350 136 804
    Interest expense -757 612 -697 391
    Interest expense from financial instruments measured at amortized cost including the effective interest rate method -508 435 -544 329
    term deposits -345 977 -400 454
    repo transactions in securities -136 979 -124 139
    cash deposits -15 999 -13 837
    own issues -3 300 -3 446
    other -6 180 -2 453
    Other interest expenses -249 177 -153 062
    current deposits -121 372 -48 402
    derivative hedging instruments -127 805 -104 660
    Net interest income 2 832 992 1 941 874



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    28
    Interest income primarily covers interest on loans, derivative instruments and interest and discount on bonds.
    Interest expense primarily covers interest on term own issues .
    In 2017 and 2016 the amount of interest income on loans with re cognised impairment amounted to PLN 24 3 769
    thousand and PLN 142 974 thousand.
    6.3 Significant estimates and assumptions – recognition of bancassurance income
    The Bank allocates the received remuneration for distribution of insurance products related to the sale of loans –
    in accordance with the economic content of the transaction – as remuneration constituting:
     an integral part of the remuneration received for the offered financial instruments;
     remuneration for agency services;
     remuneration for the provision of additional activities performed during the insurance contract (recognised by
    the Bank over a period when the services are provided).
    The economic title of the received remuneration determines the way it is disclosed in the Bank's books.
    The model of “relative fair value” is applied to determine the split of the remuneration related to insu rance
    offered in connection with cash and mortgage loans and insurance sold without any relationship to financial
    instruments.
    The “relative fair value” model approved by the Bank consists in estimating the fair value of each element of the
    overall servic e of loan sale with insurance in order to determine the proportion of fair value of both services. In
    accordance with such proportion of fair value, remuneration under the joint loan and insurance transaction is
    allocated to each component. Additionally, in order to determine the correct amount of income to be
    recognised over time as interest income, the model provides for the establishment and update of provisions for
    remuneration refund for insurance agency services when the customer resigns from insuran ce. The provision due
    to the uncertainty related to the customers’ option to resign from the insurance cover at any time during the term
    of the contract is verified periodically by each credit product group. The Bank's remuneration for insurance
    distribu tion is reduced by uncertain income related to estimated refunds due to the customers’ resignation from
    insurance.
    The remuneration for sale of insurance products offered to the Bank's customers in combination with credit
    products in line with the period ically updated “loan relative fair value” model is recognised after deferral of a part
    of the remuneration to cover the anticipated refunds of remuneration due to the customers resigning or
    withdrawing from insurance contracts.
    Additionally, in its profi t and loss account, the recognises income on the sale of insurance distributed jointly with
    the offered car loans and loans with legal protection coverage that are fully accounted for over time at the
    effective interest rate.
    Additionally, the Bank provides customers with the insurance cover under other insurance products than related
    to credit products, including accident insurance, motor, housing, travel insurance and investment products
    (insurance capital funds).
    Income fro m the distribution of those products are recognised as follows:
     insurance products based on monthly settlements with insurance companies and customers are recognised in
    the profit and loss account on a monthly basis;
     on sale of insurance not related to sa les of banking products, including: Unit Linked and Insurance with
    Capital Fund are recognised in full amounts in the profit and loss account when the operation is performed in
    the part related to the completed sale agency service, and in the part concern ing remuneration for
    subsequent services is recognised over time with a straight -line method . Like in the case of loan -related


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    29
    insurance products, the model for unrelated insurance also covers the establishment and updates of provision
    for insurance remune ration refunds should customers resign from insurance.
    6.4 Sensitivity analysis of significant estimates and assumptions
    In 2017 and 2016 the Bank recognised over time remuneration for insurance offered in connection with cash and
    mortgage loans based on the “relative fair value” model, reflecting the economic content of the transaction in the
    most appropriate way. Details in Note 6.3.
    An estimated sensitivity analysis of changes of the income recognised by the Bank in 2017 with reference to
    bancassurance is as follows:
    Type of scenario 2017 2016
    increased provision for resignations by 5pp PLN -9.86 M – reduced net interest PLN -15.19 M – reduced net interest
    decreased provision for resignations by 5pp PLN +9.86 M – increased net interest PLN +15.19 M – increased net interest
    increased income recognised all at once by 1pp PLN +1.27 M – increased net fees and commissions PLN +661 thousand – increased net fees and commissions
    decreased income recognised all at once by 1pp PLN -1.27 M – decreased net fees and commissions PLN -661 thousand – decreased net fees and commissions
    7 Net fee and commission income
    7.1 Accounting principles
    Net fee and commission income is recognised basically on the accrual basis when the service is performed. The
    income is generated as a result of financial services offered by the Bank. Fees and commissions that do not
    constitute an integral part of the effective interest rate, including fees for handling bank accounts and credit cards,
    are accounted for with a straight -line method in the profit and loss account and presented as income or costs.
    The other fees and c ommissions related to financial services offered by the Bank, such as cash management,
    brokerage services, investment consulting, financial planning, investment banking services, and asset
    management services – if received periodically, are recognised in t he profit and loss account when the service is
    performed.
    7.2 Financial data
    01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Fee and commission income 801 738 592 337
    payment and credit cards service 212 606 114 232
    maintaining bank accounts 133 827 110 958
    brokerage commissions 124 272 77 782
    loans and advances 88 927 63 727
    transfers 63 418 41 609
    revenue from bancassurance activity 62 238 74 079
    cash operations 46 030 27 368
    guarantees, letters of credit, collection, commitments 14 407 14 261
    receivables acquired 13 847 8 970
    for custody services 10 617 3 761
    other commissions 31 549 55 590


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    30
    01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Fee and commission expenses -364 867 -257 980
    costs of card and ATM transactions, including costs of cards issued -154 842 -83 610
    commissions paid to agents -39 846 -35 011
    commissions for access to ATMs -28 316 -22 336
    commissions paid under contracts for performing specific operations -27 919 -12 112
    insurance of bank products -19 398 -25 956
    costs of awards for customers -19 388 -24 191
    brokerage commissions -5 038 -3 699
    for custody services -3 158 -847
    other commissions -66 962 -50 218
    Net fee and commission income 436 871 334 357
    As a result of the merger of Alior Bank SA with the demerged part of Bank BPH SA, the acquired assets included
    custody services which are continued.
    The Bank provides the following custody services:
     safekeeping of customers’ assets,
     transaction settlement and clearing,
     disbursement of benefits under securities.
     reporting of balances of holdings,
     acting as depository.
    8 Trading and revaluation result
    8.1 Accounting principles
    The trading and revaluation result covers the results on: FX transactions, on interest rate transactions, hedge, and
    other instruments. The result on FX transactions covers the following: FX exchange, SWAP transactions (FX swap
    and CIRS with capital exchange); FX forward; FX options and on revaluation of FX denominated assets and
    liabilities. The result on interest rate transactions covers: interest rate swap contracts; FRA and interest rate
    options (CAP/FLOOR). The result does not cover interest income and expenses under IRS and CI RS transactions.
    The result on other financial instruments covers results on commodity derivative instruments (including forward,
    futures), options on stock indices, index baskets and commodities and results on trading in equity securities.
    8.2 Financial data
    01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    FX transactions 9 283 274 109
    Revaluation result 313 740 -42 265
    Interest rate transactions 24 086 75 266
    Ineffective portion of hedge accounting 871 -899
    The result on other instruments includes the result on trading in debt securities classified as held for trading with interest 21 334 13 568
    Total 369 314 319 779



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    31
    9 Net r esult realized on other financial instruments
    9.1 Accounting principles
    The realised result on other financial instruments contains profit and loss on disposal of financial instruments
    classified as available for sale and profit and loss as a result of redemption of the Bank's issues.
    9.2 Financial data
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    Available -for-sale financial assets 5 750 20 970
    Own issue 1 403 971
    repurchase income 1 405 1 011
    repurchase losses -2 -40
    Investment certificates -245 -22
    Net gain realized on other financial instruments 6 908 21 919
    10 Result on other operating income and expenses
    10.1 Accounting principles
    The other operating income and expenses include income and expenses not related directl y to core business
    activities. T he other operating income covers primarily income from managing third party assets, damages
    received, penalties and fines, remuneration under contracts with various counterparties, refunded costs rela ted to
    pursuance of claims. The other operating expenses include primarily costs of incidents related to the operational
    risk, pursuant of claims and third party asset management. Income is recognised in the profit and loss account in
    full amounts. In the case of income for third party asset management, monthly accoun ting periods are decisive
    for full recognition in the profit and loss account.
    10.2 Financial data
    01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Other operating income from: 105 805 102 014
    fees paid by counterparts 42 517 21 465
    reimbursement of litigation costs 25 371 21 440
    operating risk 6 734 2 032
    management of third party assets 4 704 6 921
    refunding costs of Banking Guarantee Fund 23 17 881
    acquisition of receivables 0 9 119
    other 26 456 23 156
    Other operating expenses due to: -78 220 -51 720
    litigation costs -28 393 -18 501
    operating risk -24 990 -7 344
    paid compensations, fines and penalties -10 829 -3 665
    management of third party assets -2 112 -1 417
    awards given to customers -1 776 -1 689
    other -10 120 -19 104
    Net other operating income and expense 27 585 50 294



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    32
    11 General administrative expenses
    11.1 Accounting principles
    Cost type description
    Employee benefits
    Apart from salaries and social insurance (including premiums for retirement insurance as detailed in the note on “Provisions” ), employee benefits cover the costs of variable components of remuneration for persons in managerial positions with a part being r ecognised as a payment liability in shares settled in cash in compliance with IFRS 2. Additionally, the Bank establishes a provision for future damages and severance pay due to employees whose employment contracts are terminated for reasons not attributab le to employees, as well as periodic recognition of costs falling for the current period, including bonuses and unutilised annual leaves, including all outstanding holiday days.
    General and administrative costs This item covers the following: maintenanc e and rental costs of fixed assets, IT and telecommunications service costs, administrative expenses, promotion and advertising costs, security services and training costs. Lease fees are recognised with a straight -line method as costs in the profit and loss account.
    Amortisation/depreciation
    Depreciation/amortisation of fixed assets and intangible assets accrues with a straight -line method at the approved amortisation/depreciation rates over their anticipated economic life. Recognised in the profit and loss account. The amount subject to amo rtisation/depreciation shall be understood as the purchase price or manufacturing cost of the asset, net of its residual value. Every year the useful economic life is updated, depreciation rates and the residual value of depreciated fix ed assets.
    Taxes and charges The following items are included: real estate tax, contributions made to the State Fund for the Rehabilitation of Disabled Persons, municipal and administrative fees, perpetual usufruct fees.
    11.2 Financial data
    01.01.2016 – 31.12.2016 01.01.2015 – 31.12.2015*
    Payroll costs -971 148 -877 750
    remuneration due to employment contracts -789 985 -529 629
    remuneration surcharges -157 801 -92 781
    retention programs 0 -56 378
    revaluation of managment option plan – part settled in cash -13 230 -12 075
    costs of bonus for senior executives settled in phantom shares -2 579 -14 126
    restructuring provision 0 -167 000
    other -7 553 -5 761
    General and administrative costs -633 340 -556 882
    lease and building maintenance expenses -157 701 -146 166
    costs of Banking Guarantee Fund -56 164 -86 564
    IT costs -162 028 -73 154
    marketing costs -67 197 -56 773
    cost of advisory services -45 039 -44 652
    external services -41 931 -40 981
    provision for restructuring 0 -32 668
    training costs -26 438 -22 738
    costs of telecommunications services -25 742 -18 983
    costs of lease of property, plant and equipment and intangible assets -6 989 -4 287
    other -44 111 -29 916
    Amortization and depreciation -172 145 -101 832
    property, plant and equipment -105 073 -64 436
    intangible assets -67 072 -37 396
    Taxes and fees -11 370 -6 992
    Total general administrative expenses -1 788 003 -1 543 456


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    33
    11.3 Operational leases – the Bank as a lessee
    The Bank is a party solely to such lease contracts pursuant to which it accepts for use of third party fixed assets for
    a fee over an agreed period, when the entire risk and benefits from the leased assets remain with the lessor.
    The Bank leases cars. Al l those contracts are operational lease contracts. As at 31 December 2017, the Bank had
    784 lease contracts for cars.
    Operational lease contracts for cars by payment dates 31.12.2017 31.12.2016
    up to 1 year 9 981 11 191
    1 to 3 years 5 783 13 557
    Over 3 years 0 51
    Total 15 764 24 799
    The Bank is also a lessee of office space.
    Rental costs constitute a material item of general overheads. When renting premises for its branches, the Bank
    signs contracts for minimum 5 years. The contracts contain clauses concerning changes to the rent amount
    subject to inflation in each year – the clause is available to the lessor.
    Future lease liabilities by payment dates 31.12.2017 31.12.2016
    up to 1 year 150 082 154 786
    1 to 5 years 394 886 205 742
    Above 5 years 5 067 34 790
    Total 550 035 395 318
    12 Net impairment allowance s and wrtite -downs
    12.1 Accounting principles
    The result from impairment allowance and write -downs consists of the creation and reversal of impairment losses
    on loans and advances to customers, debt securities, property, plant and equipment and intangible assets as well
    as the creation and reversal of off -balance provisions .
    12.2 Financial data
    Note 01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    Impairment losses on impaired loans and advances to customers 20 -882 464 -730 640
    retail customers -491 469 -474 733
    corporate customers -390 995 -255 907
    Debt securities – available -for-sale financial assets 17 16 921 -6 975
    BNR for customers without impairment losses -22 895 -32 021
    retail customers -2 793 -10 417
    corporate customers -20 102 -21 604
    Off-balance provision 26 -6 307 -2 382
    Property, plant and equipment and intangible assets 22 -25 721 -22 715
    Net impairment allowance and write -downs -920 466 -794 733



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    34
    In 2017 Bank sold loans for a total gross amount of PLN 673 289 thousand, the provision recorded for the loans
    portfolio amounted to PLN 504 964 thousand and the result on sales amounted to PLN 1 212 thousand. The
    impact of sales of receivables on costs of risk in 2017 amounted to PLN 74 715 thousand after adjusting the risk's
    parameters to the level of impairments to the risk profile of the part remaining in the Bank
    In 2016 Bank sold loans for a total gross amount of PLN 506 468 thousand, the provision recorded for the loans
    portfolio amounted to PLN 401 196 thousand and the result on sales amounted to PLN 1 212 thousand. All the
    benefits and risks were transferred to the buyer.
    13 Banking Tax
    The Act on Tax from Certain Financial Institutions of 15 January 2016 became effective on 1 February 2016 – the
    Act applies to banks and insurance companies. The tax accrues on the sur plus of assets in excess of PLN 4 billion
    as detailed in trial balances as at the end of each month. Banks are entitled to reduce the taxation base by their
    equity, as well as the amounts of Treasury securities and assets acquired from NBP, constituting c ollateral for the
    refinancing loan granted by NBP. The tax is payable monthly (the monthly rate is 0.0366%) by the 25th day of the
    month following the month to which it applies and is recognised in the profit and loss account in the period to
    which it appl ies.
    14 Income tax
    14.1 Accounting principles
    Income tax covers current tax and deferred tax. Income tax is recognised in the profit and loss account, unless the
    tax is related to:
     transactions recognised in other comprehensive income or directly in equity,
     combination of entities.
    Current tax
    Liabilities (receivables) under current income tax for the current and prior periods are measured at the amount
    expected to be paid to tax authorities (or to refunded from tax authorities at the tax rates (and tax laws) enacted
    or substantively enacted at the end of the reporting period.
    Deferred income tax
    Deferred income tax is calculated as a balance sheet liability based on identification of time differences between
    the tax value and the carrying value of assets and liabilities. The Bank establishes a deferred income tax provision
    with reference to all positive temporary differences with the exception of the following:
     when the deferred income tax provision results from the initial recognition of goodwill or initia l recognition of
    an asset or liability coming from a transaction which is not a combination of entities and when the transaction
    is executed, it does not affect the gross financial profit or taxable income (tax loss);
     the parent entity, investor, or partn er in a joint venture are able to control reversal dates of temporary
    differences and it is likely that the temporary differences are not reversed in the foreseeable future.
    With reference to all negative temporary differences, the deferred tax asset is recognised in the amount of
    probable taxable income which will allow for a set -off of negative temporary differences, with the exception of the
    following:
     when the deferred income tax results from the initial recognition of an asset or liability coming fr om a
    transaction which is not a combination of entities and when the transaction is executed, it does not affect the
    gross financial profit or taxable income (tax loss);
     when negative temporary differences result from investments in subsidiaries, branches, affiliated entities, and
    joint ventures outside the extent when it is probable that they will be reversed in the foreseeable future and
    taxable income will be generated from which such temporary differences can be deducted.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    35
    The carrying value of the defe rred income tax asset is verified at the end of each reporting period. The Bank
    reduces its carrying value to the extent it is not probable to generate taxable income sufficient to have it realised
    in full or in part.
    A deferred income tax asset and a d eferred income tax provision are measured according to the tax rates which
    will be applicable when the asset is realised or provision reversed, assuming the tax rates (and tax laws) legally or
    actually effective as at the end of the reporting period.
    Curr ent and deferred income tax is recognised directly in other comprehensive income, if it applies to items that
    have been recognised in other comprehensive income in the same or another period.
    A deferred income tax asset and a deferred income tax provision are offset, if a legally enforceable right exists to
    set off the current income tax receivables or payables and the deferred income tax relates to the same taxable
    entity and the same taxation authority.
    14.2 Financial data
    14.2.1 Tax charge disclosed in the profit and loss account
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    Current tax 243 193 231 011
    current year 243 193 231 011
    Deferred income tax -17 373 -155 821
    origination and reversal of temporary differences -17 373 -155 821
    Accounting tax recognized in the income statement 225 820 75 190
    14.2.2 Effective tax rate calculation
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016 restated
    Gross profit 764 715 664 214
    Income tax at 19% 145 296 126 200
    Non -tax deductible expenses 72 195 61 633
    Entertainment costs 285 219
    PFRON (State Fund for the Rehabilitation of Disabled People) 1 310 1 185
    Impairment losses on loans in the part not covered with deferred tax 19 287 26 617
    Prudency fee for BGF 10 672 4 977
    Tax on Certain Financial Institutions 38 099 24 870
    Donations 41 26
    Other 2 501 3 739
    Non -taxable income -8 617 -98 701
    Release of loan impairment allowances in the part not covered with the deferred tax -6 830 -935
    Profit from acquisition of the demerged business of Bank BPH 0 -88 351
    Other -1 787 -9 415
    Taxable costs that are not book costs 0 -6 540
    Costs related to expenses for capital increase 0 -6 540
    Recognition of tax loss 2 912 141
    Recognition of an asset as contribution of receivables to a collection company 0 643
    Other 14 034 -8 186
    Accounting tax recognized in the income statement 225 820 75 190
    Effective tax rate 29,53% 11,32%



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    36
    14.2.3 Deferred tax asset and liability
    Deferred tax asset 31.12.2016 restated Changes recognised in financial result Changes recognised in equity 31.12.2017
    Commissions collected in advance 293 824 -9 676 0 284 148
    Interest accrued on deposits 23 581 7 824 0 31 405
    Interest / discount accrued on securities 45 057 3 507 0 48 564
    Negative valuation of securities 21 430 -3 541 -14 793 3 096
    Interest accrued on derivative instruments 24 622 22 642 0 47 264
    Negative valuation of derivative instruments 57 956 1 224 605 59 785
    Premium received on options 16 636 8 731 0 25 367
    Provision for deferred expenses 116 752 -52 445 0 64 307
    Impairment allowances on credit receivables 286 321 35 355 0 321 676
    Other provisions -52 443 17 649 0 -34 794
    Recognition of an asset as a contribution of receivables 6 339 -6 339 0 0
    Tax loss 1 030 3 493 -84 4 439
    Deferred tax asset 841 105 28 424 -14 272 855 257
    Deferred tax liability 31.12.2016 restated Changes recognised in financial result Changes recognised in equity 31.12.2017
    Interest accrued on interbank deposits -406 406 0 0
    Interest accrued on loans -79 866 -49 239 0 -129 105
    Interest / discount accrued on securities -15 271 3 297 0 -11 974
    Positive valuation of securities -486 14 -4 256 -4 728
    Interest accrued on derivative instruments -30 455 -28 162 0 -58 617
    Positive valuation of derivative instruments -87 399 17 936 -656 -70 119
    Difference between balance and tax depreciation -33 514 -5 618 0 -39 132
    Accrued not received income -61 138 50 315 0 -10 823
    Deferred income tax provisions -308 535 -11 051 -4 912 -324 498
    Total effect of temporary differences 532 570 17 373 -19 184 530 759
    Deferred tax asset 31.12.2015 Changes recognised in financial result
    Changes recognised in equity
    Changes recognised to goodwill of BPH 31.12.2016 restated
    Commissions collected in advance 144 815 51 391 0 97 618 293 824
    Interest accrued on deposits 26 772 -5 334 0 2 143 23 581
    Interest / discount accrued on securities 29 225 14 838 0 994 45 057
    Negative valuation of securities 5 375 1 288 12 775 1 992 21 430
    Interest accrued on derivative instruments 23 584 699 0 339 24 622
    Negative valuation of derivative instruments 682 754 -614 835 -15 247 5 284 57 956
    Premium received on options 12 760 2 986 0 890 16 636
    Provision for deferred expenses 23 154 75 973 0 17 625 116 752
    Impairment allowances on credit receivables 157 816 38 343 0 90 162 286 321
    Other provisions -423 6 970 0 -58 990 -52 443
    Recognised asset as contribution to Obrót wierzytelnościami Alior Polska sp. z o.o. spółka komandytowo -akcyjna 12 297 -5 958 0 0 6 339
    Tax loss 0 1 030 0 0 1 030
    Deferred income tax asset 1 118 129 -432 609 -2 472 158 057 841 105


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    37
    Deferred tax provisions 31.12.2015 Changes recognised in financial result
    Changes recognised in equity
    Changes recognised to goodwill of BPH 31.12.2016 restated
    Interest accrued on interbank deposits -9 -396 0 -1 -406
    Interest accrued on loans -53 419 -15 115 0 -11 332 -79 866
    Interest / discount accrued on securities -9 612 -4 739 0 -920 -15 271
    Positive valuation of securities -855 -8 377 0 -486
    Interest accrued on derivative instruments -38 177 8 850 0 -1 128 -30 455
    Positive valuation of derivative instruments -709 056 603 411 22 463 -4 217 -87 399
    Difference between balance and tax depreciation -28 107 427 0 -5 834 -33 514
    Accroued income -4 879 -4 000 0 -52 259 -61 138
    Deferred income tax provisions -844 114 588 430 22 840 -75 691 -308 535
    Total effect of temporary differences 274 015 155 821 20 368 82 366 532 570
    15 Profit per share
    15.1 Accounting principles
    In compliance with IAS 33, the Bank calculates diluted profit per share, including shares issued conditionally within
    incentive progra mmes described in Note 35. The calculations do not include those elements of incentive
    programmes that acted against dilution in the reporting periods and which, in the future, may potentially dilute
    profit per share.
    Core profit per share is calculated as the quotient of profit a ttributable to the Bank's shareholders and the
    weighted average number of ordinary shares in the year.
    Diluted profit per share is calculated as a ratio of profit attributable to the Bank's shareholders and the weighted
    average number of ordinary shares adjusted by potential ordinary convertible shares. The Bank has one category
    that may result in dilution of potential ordinary shares: share options.
    15.2 Financial data
    01.01.2017 – 31.12.2017
    01.01.2016 – 31.12.2016 restated
    Net profit 538 895 589 024
    Weighted average number of ordinary shares 129 259 754 102 218 667
    Share options (number) - adjusting instrument 2 547 486 2 568 564
    Adjusted weighted average number of shares 131 807 240 104 787 231
    Net profit per ordinary share (PLN) 4,17 5,76
    Diluted profit per share (PLN) 4,09 5,62
    Additional information to the statement of financial position
    16 Cash and balances with the c entral bank
    16.1 Accounting principles
    The item “Cash and balances with Central Bank” covers cash at nominal value and cash in the current account
    and deposits with the Central Bank measured at amounts payable inclusive of interest on the funds, if any.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    38
    16.2 Financial data
    31.12.2017 31.12.2016
    Current account with the central bank 253 092 16 959
    Term deposit with the central bank 255 010 344 009
    Cash 457 289 722 023
    Cash and balances with central bank 965 391 1 082 991
    During the day the Bank may use funds in the mandatory reserve account for current cash settlements on the
    basis of instructions placed with the National Bank of Poland, however, the Bank has to maintain an average
    monthly balance in the account equivalent to the declared mandatory reserve.
    The mandatory reserve is the PLN part of cash deposited in bank accounts and obtained from sales of securities
    with the exception of funds received from another domestic bank, credit union, Krajowa Spółdzielcza Kasa
    Osz czędnościowo -Kredytowa, and refundable funds received from BGF. The level of the mandatory reserve is
    determined by the Monetary Policy Council. Since 31 December 2010, the mandatory reserve rate has been at
    3.5 percent for all kinds of deposits, with the exception of funds obtained under repo and sell -buy -back
    transactions where the mandatory reserve rate is 0 percent. The entities that calculate the mandatory reserve
    deduct the calculated amount by equivalent of EUR 500 000.
    Funds in the mandatory reserv e account earn interest at 0.9 of the reference rate. As at 31 December 2017 and
    2016 the interest rate was 1.35%.
    17 Available -for -sale f inancial assets and investment securities held to maturity
    17.1 Accounting principles
    Available for sale f inancial assets include financial assets that are not loans and receivables, investments held to
    maturity, financial assets measured at fair value through profit and loss.
    Instruments classified as available for sale are measured at fair value with the me asurement result recognised in
    equity (other comprehensive income). When such instrument is sold, the cumulated profit/loss is recognised in
    the profit and loss account. Interest accrued at the effective interest rate on assets available for sale is reco gnised
    in the profit and loss account.
    In the case of objective evidence of impairment of debt assets available for sale, a cumulated impairment
    allowance is eliminate d from the revaluation reserve and recognised in the profit and loss account.
    At the en d of each reporting period, the Bank assesses if there are objective impairment indications of available
    for sale financial assets, applying the same criteria as used for financial assets measured at amortised cost. If any
    are detected, the Bank determine s the impairment allowances to be applied.
    The amount of an impairment allowance is the cumulated loss that is derecognised from equity and recognised in
    the profit and loss account as a difference between the acquisition price (reduced by any principal r epayments
    and amortisation) and the present fair value, reduced by all impairment losses of the asset previously recognised
    in profit and loss account.
    Interest income on financial assets available for sale for which an impairment has been recognised (calc ulated on
    the reduced present value) is recognised at the effective interest rate.
    If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the
    increase may be objectively related to an event occurring after the impairment allowance has been recognised in
    the profit and loss account, the impairment loss is reversed and recognised in the profit and loss account.
    Impairment losses on investment in equity instruments classified as available for sale are no t reversed through
    profit and loss.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    39
    17.2 Financial data
    Available for sale f inancial assets
    Structure by type 31.12.2017 31.12.2016 restated
    Debt instruments 12 030 778 9 339 005
    Issued by the State Treasury 9 651 360 6 197 981
    Treasury bonds 9 651 360 6 197 981
    Issued by monetary institutions 2 087 331 2 691 128
    Eurobonds 87 665 91 590
    Money bills 1 999 666 2 599 538
    Issued by other financial institutions 91 387 156 746
    Bonds 0 59 880
    Eurobonds 91 387 96 866
    Issued by enterprises 200 700 293 150
    Bonds 200 700 293 150
    Equity instruments 41 546 35 641
    Financial assets available for sale 12 072 324 9 374 646
    By maturity 31.12.2017 31.12.2016 restated
    no specified maturity 41 546 35 641
    ≤ 1M 2 002 613 3 031 043
    > 1M ≤ 3M 0 16 922
    > 3M 10 332 578 434
    > 6M ≤ 1Y 11 195 196 645
    > 1Y ≤ 2Y 1 030 595 1 331 405
    > 2Y ≤ 5Y 4 642 927 3 496 332
    > 5Y ≤ 10Y 2 728 707 688 224
    > 10Y ≤ 20Y 1 604 409 0
    Financial assets available for sale 12 072 324 9 374 646
    Investment securities held to maturity
    31.12.2017 31.12.2016
    Debt instruments 1 117 894 1 954
    issued by the State Treasury 1 117 894 1 954
    Treasury bonds 1 117 894 1 954
    Investment securities kept until maturity 1 117 894 1 954
    By maturity 31.12.2017 31.12.2016
    > 2Y ≤ 5Y 925 292 1 954
    > 5Y ≤ 10Y 192 602 0
    Investment securities held to the maturity date 1 117 894 1 954



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    40
    17.3 Material estimates and assumption s – fair value, impairment allowance s
    Impairment allowance for financial assets available for sale 31.12.2017 31.12.2016
    Gross value of receivables Allowance amount Gross value of receivables Allowance amount
    Bonds issued by enterprises 4 526 4 526 94 861 21 447
    Change to impairment allowances 31.12.2017 31.12.2016
    Opening balance 21 447 14 472
    Change to allowances: -16 921 6 975
    Increases 209 6 975
    Decreases -17 130 0
    Impairment allowances at the end of period for financial assets available for sale 4 526 21 447
    17.4 Sensitivity analysis of material estimates and assumptions
    For the purposes of disclosures in accordance with IFRS 7, the Bank estimates changes to measurements of debt
    instruments available for sale assuming a parallel shift of profitability curves by 50pb. To this end, the Bank
    constructs profitability curves on the basis of market data. The Bank analyses the impact on transaction
    measurement of changes to profitability curves in line with the assumed scenarios:
    Estimated measurement change 31.12.2017 31.12.2016
    scenario scenario scenario scenario
    +50pb -50pb +50pb -50pb
    AFS -56 640 56 640 -46 452 46 452
    18 Financial assets and liabilities held for trading
    18.1 Accounting principles
    Financial assets measured at fair value through profit or loss cover:
     financial instruments held for trading – financial assets and liabilities – are classified as held for trading, if they
    have been acquired for the purpose of re -sale in the near term. The category contains derivative financial
    instruments to which the Bank is a party that as of the date when the hedging has been established have been
    designated as the effective hedging instruments in line with IAS 39 and securities;
     financial instrument s classified initially as financial assets measured at fair value through profit and loss account
    – financial assets and liabilities – may be classified in the category only when:
     the designated financial asset or liability is a joint instrument containin g one or more embedded derivative
    instruments that can be recognised separately and such embedded derivative instrument may not
    materially affect cash flows resulting from the basic contract or such separation of the derivative instrument
    is prohibited;
     such classification of assets or liabilities eliminates or materially reduces the inconsistency in measurement
    or recognition (accounting mismatch as a result of a different measurement of assets or liabilities or a
    different recognition of the related profi t or loss);
     a group of financial assets or liabilities or both categories are managed and the results are assessed on the
    basis of fair value in line with the documented risk management principles or the Bank's investment
    strategy.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    41
    As at 31 December 201 7 and as at 31 December 2016 the Bank held no financial assets or liabilities classified
    initially as financial instruments as measured at fair value through profi t and loss account.
    18.2 Financial data
    The Bank classified derivative instruments and securitie s (shares, bonds) as financial assets and liabilities held for
    trading as at 31 December 2017 and 31 December 2016. Derivative transactions are executed for trading
    purposes and to manage the market risk. The Bank enters into the following types of deriva tive transactions: FX -
    Forward, FX -Swap, IRS, CIRS, FRA, commodity Futures, commodity Forward, term transactions in securities. Every
    day the Bank measures derivative instruments applying the discounted cash flows model. The Bank also enters
    into option tra nsactions that are measured with option measurement models.
    Derivative instruments (nominal value) 31.12.2017 31.12.2016
    Interest rate transactions 55 125 803 21 843 663
    SWAP 52 202 357 20 209 412
    Cap floor options 2 923 446 1 634 251
    FX transactions 8 873 916 9 808 111
    FX Swap 3 663 369 3 655 450
    FX forward 1 963 710 2 630 344
    CIRS 617 238 1 351 094
    FX options 2 629 599 2 171 223
    Other options 6 824 348 5 857 380
    Other instruments 585 182 725 823
    Derivative instruments (nominal value) 71 409 249 38 234 977
    Financial assets held for trading 31.12.2017 31.12.2016
    Shares 294 6 312
    Bonds 85 735 294
    Certificates 89 557
    Interest rate transactions 189 794 189 703
    SWAP 187 694 186 532
    Cap floor options 2 100 3 171
    FX transactions 95 660 174 953
    FX Swap 18 059 32 156
    FX forward 44 851 60 051
    CIRS 15 984 60 669
    FX options 16 766 22 077
    Other options 52 450 28 736
    Other instruments 28 529 18 996
    Financial assets held for trading 452 551 419 551
    By maturity 31.12.2017 31.12.2016
    No specified maturity 22 921 7 163
    ≤ 1W 6 427 8 696
    > 1W ≤ 1M 26 868 33 550
    > 1M ≤ 3M 21 504 44 602
    > 3M ≤ 6M 62 102 22 729
    > 6M ≤ 1Y 29 946 67 523
    > 1Y ≤ 2Y 94 831 52 458
    > 2Y ≤ 5Y 73 287 134 378
    > 5Y ≤ 10Y 114 665 48 452
    Financial assets held for trading 452 551 419 551



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    42
    Financial liabilities held for trading 31.12.2017 31.12.2016
    Bonds 58 333 0
    Interest rate transactions 164 276 159 056
    SWAP 162 185 155 885
    Cap floor options 2 091 3 171
    FX transactions 133 598 92 169
    FX Swap 63 816 22 999
    FX forward 37 675 25 276
    CIRS 16 601 20 948
    FX options 15 506 22 946
    Other options 52 448 28 693
    Other instruments 27 223 18 396
    Financial liabilities held for trading 435 878 298 314
    By maturity 31.12.2017 31.12.2016
    No specified maturity 18 730 0
    ≤ 1W 9 103 4 542
    > 1W ≤ 1M 43 737 30 133
    > 1M ≤ 3M 47 647 36 112
    > 3M ≤ 6M 27 894 25 424
    > 6M ≤ 1Y 29 779 34 911
    > 1Y ≤ 2Y 118 914 54 208
    > 2Y ≤ 5Y 110 142 79 381
    > 5Y ≤ 10Y 29 932 33 603
    Financial liabilities held for trading 435 878 298 314
    18.3 Material estimates and assumptions – BCVA adjustments
    In its measurement of derivative instruments, Alior Bank SA applies adjustments for the counterparty's credit risk.
    The amount of such adjustment is equivalent to a change to the measurement of derivative instruments in the
    case of default of both parties t o the transaction (Bilateral Credit Value Adjustment).
    The adjustment is calculated on the basis of estimates of the following parameters: bilateral likelihood of default,
    PD (Probability of Default), LGD (Loss Given Default), anticipated positive and negative exposure under
    transaction (EE and NEE). PD and LGD are estimated with external models applied by the Bank on the basis of
    market quotations of the credit risk. The counterparty’s exposure is calculated at the present valuation and its
    projectio n calculated on the basis anticipated changes to market conditions. Additionally, credit risk adjustments
    provide for mutual obligations under hedging contracts regulating the relations of the parties.
    The amount of BCVA adjustment to measurement as at 3 1 December 2017 amounted to PLN -7 895 thousand.
    The overall BCVA adjustment amount is composed of the CVA adjustment (reflecting solely the risk of the
    co unterparty’s default) amounted to PLN -8 428 thousand and the DVA adjustment amount ed (reflecting the risk
    of the Bank's default) to PLN 533 thousand. The amount of BCVA adjustment as at 31 December 2016 amounted
    to PLN -12 558 thousand. The overall BCVA adjustment amount is composed of the CVA adjustment (reflecting
    solely the risk of the counterparty’s default) amounted to PLN -13 001 thousand and the DVA adjustment
    amount ed (reflecting the risk of the Bank's default) to PLN 413 thousand.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    43
    18.4 Sensitivity analysis of material estimates and assumptions
    For the purposes of disclosures in accor dance with IFRS 7, the Bank estimates changes to measurements of the
    derivative instruments with a linear risk profile assuming a parallel shift of profitability curves by 50pb. To this end,
    the Bank constructs profitability curves on the basis of market d ata. The Bank analyses the impact on transaction
    profitability of a change of profitability curves for the portfolio of derivative instruments with a linear risk profile,
    not covered with hedge accounting.
    Estimated measurement change 31.12.2017 31.12.2016
    scenario scenario scenario scenario
    +50pb -50pb +50pb -50pb
    IRS 26 749 -26 749 41 063 -41 063
    CIRS -175 175 -511 511
    other instruments -134 134 -198 198
    Total 26 440 -26 440 40 354 -40 354
    19 Hedge accounting
    19.1 Accounting principles
    Hedge accounting is applied for symmetrical recognition in the profit and loss account of compensating changes
    to the fair value of the hedging instruments and the hedged item.
    For the purposes of hedge accounting, the Bank designates hedging instruments so that changes to their fair
    value or cash flows covered in whole or in part the changes to the fair value or future cash flows of the hedged
    item.
    The Bank applies hedge accou nting if all the conditions specified in IAS 39 as listed below are satisfied:
     when the hedge is established, formal documentation is made of the hedging relationship specifying the
    hedging purpose and strategy, the type and identification of the hedged and hedging instrument, the nature
    of the hedged risk and the assessment method of hedging effectiveness;
     high hedging effectiveness is expected – high efficiency in compensating changes to the fair value or cash
    flows, in line with the documented risk management strategy concerning the specific hedging relationship;
     it is possible to reliably assess the hedging effectiveness – reliable measurement of the fair value or cash flows
    of both the hedged item and the hedging item;
     in the case cash flows, a hig h likelihood occurs that a hedged transaction occurs that is exposed to the risk of
    changing cash flows affecting the profit and loss account;
     the hedging is assessed on an ongoing basis and its high effectiveness is confirmed in all reporting periods for
    which the hedging has been established.
    Within hedge accounting, the Bank applies cash flow hedge accounting.
    Cash flow hedges are hedges securing future cash flows fluctuations which can be attributed to a particular kind
    of risk connected with a given item of assets or liabilities or with a highly probable contemplated transaction,
    affecting the profit and loss account.
    Cash flow hedges are recognised in the books as follows:
    a) a part of profit or loss related to the hedging instrument constituting eff ective hedge is recognised in other
    comprehensive income in the lower amount of the following (absolute values):
     cumulated until the profit or loss hedge is established on the hedging instrument;
     cumulated until the establishment of a hedge to fair value changes (present value) of the anticipated future
    cash flows, resulting from the hedger item;


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    44
    b) an ineffective part of profit or loss related to the hedging instrument is recognised in the profit and loss
    account.
    The effective part of the hedge is trans ferred to the profit and loss account in the period or in periods when the
    hedged contemplated transaction affects the profit and loss account.
    The Bank discontinues to apply hedge accounting when at least one of the following events occurs:
     the hedging instrument is sold, expires, is terminated or exercised;
     the above requirements of hedge accounting have not been complied with;
     the Bank cancels the hedge relationship;
     future cash flows are no longer treated as probable.
    In the case any of the above even ts occurs, the result on the hedging instrument when the hedge has been
    effective – continues to be recognised in the revaluation reserve until the contemplated transaction occurs and it
    is recognised in the profit and loss account.
    19.2 Types of hedge strategies
    The Bank applies cash flow hedge accounting. The hedging strategy is aimed at hedging the interest rate risk
    resulting from changing cash flows from assets with variable interest rates using PLN IRS transactions. In the
    establ ished hedging relationships, the hedged items include cash flows from PLN loans with variable interest
    rates, while IRS transactions are the hedging transactions under which the Bank receives fixed interest based on
    fixed interest rates and pays interest b ased on variable interest rates. The hedged items are measured at the
    amortised cost, while the hedging items at fair value.
    19.3 Financial data
    Hedging instruments (nominal value) 31.12.2017 31.12.2016
    Interest rate transactions 8 644 200 6 969 200
    SWAP 8 644 200 6 969 200
    Hedging instruments (nominal value) 8 644 200 6 969 200
    Financial assets held for trading – hedging instruments 31.12.2017 31.12.2016
    Level 2 87 785 71 684
    Interest rate transactions 87 785 71 684
    SWAP 87 785 71 684
    Financial assets held for trading – hedging instruments 87 785 71 684
    By maturity 31.12.2017 31.12.2016
    > 1M ≤ 3M 39 186 13 866
    > 3M ≤ 6M 8 279 21 139
    > 6M ≤ 1Y 334 865
    > 1Y ≤ 2Y 30 084 20 462
    > 2Y ≤ 5Y 9 902 15 352
    Financial assets held for trading – hedging instruments 87 785 71 684
    Financial liabilities held for trading – hedging instruments 31.12.2017 31.12.2016
    Level 2 5 419 6 119
    Interest rate transactions 5 419 6 119
    SWAP 5 419 6 119
    Financial liabilities held for trading – hedging instruments 5 419 6 119


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    45
    By maturity 31.12.2017 31.12.2016
    > 6M ≤ 1Y 0 39
    > 1Y ≤ 2Y 142 0
    > 2Y ≤ 5Y 2 304 3 705
    > 5Y ≤ 10Y 2 973 2 375
    Financial liabilities held for trading – hedging instruments 5 419 6 119
    Other comprehensive income as regards cash flow hedges 31.12.2017 31.12.201 6
    Other gross comprehensive income at the beginning of period -10 769 27 209
    Gains transferred to other comprehensive income in the period -7 442 -52 950
    Amount transferred in the period from comprehensive income to profit and loss account, including: 7 069 -14 972
    - interest income 7 069 14 972
    Accumulated other gross comprehensive income at the end of period -11 142 -10 769
    Tax effect 2 117 2 046
    Accumulated other net comprehensive income at the end of period -9 025 -8 723
    Ineffective part of cash flow hedges recognised in the profit and loss account -872 899
    Impact of other gross comprehensive income in the period -373 -37 978
    Deferred tax under cash flow hedges 71 7 216
    Impact of other net comprehensive income in the period -302 -30 762
    19.4 Sensitivity analysis of material estimates and assumptions
    For the purposes of disclosures in accordance with IFRS 7, the Bank estimates changes to measurements of the
    derivative instruments with a linear risk profile assuming a parallel shift of profitability curves by 50pb. To this end,
    the Bank constructs profitability curves on the basis of market data. The Bank analyses the impact on t ransaction
    profitability of a change of profitability curves for the portfolio of derivative instruments with a linear risk profile,
    covered with hedge accounting.
    Estimated measurement change 31.12.2017 31.12.2016
    scenario scenario scenario scenario
    +50pb -50pb +50pb -50pb
    IRS -43 415 43 415 -66 108 66 108
    20 Loans and advances to customers
    20.1 Accounting principles
    In that category, the Bank includes financial assets that are not derivative instruments with determined or
    determinable payments, not listed in an active market, other than:
     financial assets that the Bank intends to sell immediately or in a short term and that are classified as held for
    trading or such that at the initial recognition were designated as measured at fair value through profit and loss
    account;
     financial assets d esignated by the entity at initial recognition as available for sale;
     financial assets where the holder may not recover the full initial investment amount for reasons other than
    impairment of loan servicing, that are classified as available for sale.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    46
    On 3 1 December 2017 and 31 December 2016 in that category the Bank held receivables from other banks
    (interbank deposits, security deposits and funds in current accounts) and receivables under loans, purchased
    receivables, and other receivables from customers .
    Loans and receivables are measured by the Bank at amortised cost, with the effective interest rate method,
    reduced by impairment allowances.
    The Bank treats re -negotiations of the contractual terms and conditions of loans as an impairment indication,
    un less such re -negotiation of the contractual terms and conditions has not been forced by the debtor's condition
    and has been carried out subject to normal business principles. Afterwards, the Bank assesses if such impairment
    to the loans should be recognise d on an individual or group basis. In the case of re -negotiations not forced by
    the debtor's financial condition, if a change occurs to contractual cash flows, a new effective interest rate is
    calculated.
    In this item, the Bank also discloses securities repurchase transactions following the economic content of the
    transaction. The assessment covers if the securities purchase/sale transaction is combined with transfer of risks
    and benefits under the security. In the transactions so far entered into by the Bank, basically all risks and benefits
    are retained by the seller of the securities since the risk of change of the present value of net assets is not
    materially changed as a result of such transfer. This means that both reverse repo and buy -sell -back transactions,
    as well as repo and sell -buy -back transactions are disclosed in the Bank's balance sheet as: securities placed with
    the securities buyer or deposits received from the securities buyer.
    Securities covered with repo transactions are not exclu ded from the statement of financial position and are
    measured in accordance with the principles applicable to each securities portfolio. A difference between the sale
    price and the repurchase price is recognised as interest expense or income respectively.
    20.2 Material estimates and assumption s – impairment allowances
    As at the end of each reporting period, the Bank assesses whether there is any objective evidence that a financial
    asset or a group of financial assets is impaired. The Bank accepts that a financ ial assets or a group of financial
    assets is impaired and such impairment loss is suffered only when there are objective indications resulting from
    one or more events that have occurred after the initial recognition of such asset (loss generating event) an d the
    loss generating asset affects future anticipated cash flows from such financial asset or a group of financial assets
    that may not be reliably estimated.
    Impairment indications are as follows:
    - concerning the customer:
     a major delay in repayment/unauthorised debit – the premise applies to business customers and individual
    customers; it is recognised by the system when a delay in repayment or unauthorised debit exists for over 90
    days, while the overdue amount meets the materiality crite rion (PLN 500 and 1% of the overall exposure
    amount )) in all the customer's accounts jointly where the customer is the owner/co -owner, or borrower/co -
    borrower;
     proceedings subject to restructuring law – the premise applies to business customers;
     bankruptc y/liquidation – the premise applies to business customers and it is recognised on the basis of
    information in the system that the enterprise has filed for bankruptcy;
     (consumer bankruptcy – the premise applies to individual customers; it is recognised on the basis of
    information in the system that the debtor has filed for bankruptcy (consumer bankruptcy):
     undisclosed assets by the customer – the premise applies to business customers and individual customers; it is
    recognised on the basis of information in the system that the debtor has filed an untrue statement on their
    assets;


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    47
     a major deterioration of the internal score/rating – the premise applies to business customers; it is recognised
    by the system when the rating falls by minimum one class and at the same time below the level acceptable by
    the Bank;
     it is a major deterioration of the customer’s economic and financial condition – the premise applies to
    business customers; it is recognised in the system in case of deterioration of the customers’ economic and
    financial condition (in compliance with RMF classification) by minimum one category to a level “sub -standard”,
    “doubtful”, or “loss” ;
     death – the premise applies to individual customers; it is recognised on the basis of information in the sys tem
    that the customer has died.
     no information on the customer's whereabouts – the indicator applies to individual customers;
     job loss – the premise applies to individual customers; it is recognised on the basis of information in the
    system that the cust omer is not able to repay their debt due to job loss;
     customer's financial problems – the premise applies to individual customers; it is recognised on the basis of
    information in the system on the customer's financial problems (on the basis of BIK data).
    - concerning the account:
     commencement of court proceedings – the premise is recognised on the basis of information in the system
    that court proceedings have been initiated ;
     commencement of enforced collection – the premise is recognised on the basis of inf ormation in the system
    that the Bank has initiated enforced collection proceedings;
     effective contract termination – the premise is recognised on the basis of information in the system with the
    date of effective termination, while the materiality criterion of the debt amount is complied with (PLN 500);
     restructuring – the premise is recognised on the basis of information in the system – input as a result of the
    customer's problems with timely debt repayment – on changes to t he loan service rules in the form of an
    annex to the loan agreement or a settlement with the Bank;
     Exposure questioned by the debtor in – the premise is recognised on the basis of information in the system
    that the customer questions the exposure by way o f court litigation;
     identified fraud – the indicator is recognised on the basis of information in the system about a fraud
    confirmed with a court judgement.
    - concerning exposures to banks:
     delay in repayment over 30 days – the premise is recognised on the basis of information on delays in
    repayment in excess of 30 days;
     material deterioration of the external rating of the counterparty bank – the premise is recognised on the basis
    of information in the system that the counterparty bank's rating has fallen f rom an investment to speculation
    grade;
     material deterioration of the external rating of the country of the counterparty bank – the premise is
    recognised on the basis of information in the system that the country rating of the counterparty bank has
    fallen from an investment to speculation grade;
     material deterioration of the bank's financial condition/bank's bankruptcy – the premise is recognised on the
    basis of information on the customer's risk assessed in the periodic monitoring of limits at an unaccepta ble
    level.
    - concerning exposures under bonds:
     no payment under bonds – the premise is recognised on the basis of information on missing payments under
    bonds at the time specified in the bond issue terms and conditions;
     failure by the issuer to comply with other conditions set forth in the bond issue terms and conditions opening
    an option to demand pre -mature bond redemption.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    48
    If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset,
    whether material or not, the asset is included in a group of financial assets with similar credit risk characteristics
    and that group of financial assets is collectively assessed for impairment. The assets assessed individually for
    impairment when the entity recognises an impairment allowance or decides to continue to recognise such
    allowance – are not taken into account in the overall impairment assessment.
    If objective evidence exists that an impairment loss has been suffered, the impairment allowance is a difference
    be tween the carrying value of the asset and the present value of the estimated future cash flows (with the
    exception of future credit losses not yet incurred), discounted at the original effective interest rate of the financial
    instrument (the effective inte rest rate determined at the initial recognition). Interest income is recognised with the
    application of an effective interest rate. Impaired exposures are split into those that are measured individually or
    in groups (collectively).
    Individual measurement applies to exposures that may be impaired (calculated at the customer level) in excess of
    the materiality levels subject to the customer segment. Individual measurement is also applied to exposures that
    may be impaired with respect to which the Bank is not able to identify a group of assets with similar credit risk
    features or does not have an adequate sample to assess group parameters.
    For the purposes of collective measurement, groups are identified with similar credit risk features that are
    assessed col lectively for impairment. Group measurements are based on periods when the affected exposures
    remain at default; they provide for a specific nature of each group in terms of the anticipated recoveries.
    Future cash flows in the group of financial assets f or which impairment is measured collectively are estimated on
    the basis of loss history for assets with similar credit risk features. Adjustments to historic data take into account
    present conditions and non existence of certain factors, if they cease to exist. Estimated changes to future cash
    flows reflect changes to the related available data in each period (such as unemployment rate, commodity prices,
    payment status, and other factors that indicate the losses incurred in the group and volumes thereof) and are
    basically compliant therewith. The methodology and assumptions underlying estimates of future cash flows are
    regularly reviewed to minimise the discrepancies between the estimated and actual losses.
    If in a subsequent period, the impairment loss is reduced as a result of an event that has occurred after the loss
    has been suffered, the previously recognised impairment allowance is reversed by an adjustment to the balance
    of impairment allowances. The amount of the reversal is recognised through pr ofit and loss.
    In case of any event that may constitute an impairment indicator, not covered with the above catalogue, a
    possibility exists for an individual change of the account status to default. It is so marked in the case of
    information on the occurrence of other material events, not covered with the above catalogue that may
    constitute an impairment indicator.
    Impairment indicators of on -balance sheet loan exposures (groups of on -balance sheet loan exposures) are
    recorded in the system at the c ustomer or account level. When an impairment indicator is recorded at the
    account level, all accounts of the customer are marked as impaired. When an impairment indicator is recorded at
    the customer level, the impairment propagates to all accounts in their portfolio. The propagation applies to all
    accounts where the customers is the owner/co -owner or borrower/co -borrower.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    49
    20.3 Financial data (gross value, impairment allowances)
    Loans granted to customers 31.12.2107 31.12.2016 restated
    Gross value Impairment allowance Net value Gross value Impairment allowance Net value
    Retail segment 30 146 687 -1 911 961 28 234 726 27 677 972 -1 792 775 25 885 197
    Consumer loans 18 337 260 -1 795 399 16 541 861 17 905 624 -1 681 060 16 224 564
    Loans for residential properties 9 631 679 -83 893 9 547 786 8 485 561 -77 929 8 407 632
    Consumer finance loans 2 177 748 -32 669 2 145 079 1 286 787 -33 786 1 253 001
    Corporate segment 24 492 381 -1 483 014 23 009 367 21 627 878 -1 264 452 20 363 426
    Working capital loans 13 747 636 -910 661 12 836 975 11 986 001 -871 824 11 114 177
    Investment loans 8 996 753 -371 965 8 624 788 7 693 568 -201 674 7 491 894
    Other business loans 1 747 992 -200 388 1 547 604 1 948 309 -190 954 1 757 355
    Total 54 639 068 -3 394 975 51 244 093 49 305 850 -3 057 227 46 248 623
    Loans granted to customers by method of 31.12.2107 31.12.2016 restated
    allowance calculation Gross value Impairment allowance Net value Gross value Impairment allowance Net value
    individualised method, including: 2 918 516 -773 004 2 145 512 2 345 491 -777 422 1 568 069
    with identified impairment 2 330 379 -773 004 1 557 375 1 829 164 -777 422 1 051 742
    without identified impairment 588 137 0 588 137 516 327 0 516 327
    group method 3 694 718 -2 297 232 1 397 486 3 810 744 -1 976 676 1 834 068
    with identified impairment 3 566 585 -2 297 232 1 269 353 2 983 388 -1 976 676 1 006 712
    without identified impairment 128 133 0 128 133 827 356 0 827 356
    portfolio method (IBNR) 48 025 834 -324 739 47 701 095 43 149 615 -303 129 42 846 486
    Total 54 639 068 -3 394 975 51 244 093 49 305 850 -3 057 227 46 248 623
    Loans granted to customers – exposure 31.12.2107 31.12.2016 restated
    of the Bank to the credit risk Gross value Impairment allowance Net value Gross value Impairment allowance Net value
    with identified impairment, of which: 5 896 964 -3 070 236 2 826 728 4 812 552 -2 754 098 2 058 454
    assessed with individualised method 2 330 379 -773 004 1 557 375 1 829 164 -777 422 1 051 742
    without identified impairment, of which: 48 742 104 -324 739 48 417 365 44 493 298 -303 129 44 190 169
    with recognised individual indication 716 269 0 716 269 573 720 0 573 720
    not overdue 308 668 0 308 668 278 712 0 278 712
    overdue 407 601 0 407 601 295 008 0 295 008
    without recognised individual indication/IBNR 48 025 835 -324 739 47 701 096 43 919 578 -303 129 43 616 449
    not overdue 45 149 893 -167 619 44 982 274 41 113 142 -175 801 40 937 341
    overdue 2 875 942 -157 120 2 718 822 2 806 436 -127 328 2 679 108
    Total 54 639 068 -3 394 975 51 244 093 49 305 850 -3 057 227 46 248 623
    Impairment allowances to loans granted to customers – reconciled transfers in 2017
    Value at the beginning of period
    Established in the period Reversed in the period Assets written -off Other Value at the end of period
    Impact on the profit and loss account
    Retail segment 1 792 775 1 760 648 -1 266 386 -409 611 34 535 1 911 961 494 262
    Corporate segment 1 264 452 1 380 227 -969 130 -219 761 27 226 1 483 014 411 097
    Total 3 057 227 3 140 875 -2 235 516 -629 372 61 761 3 394 975 905 359


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    50
    Impairment allowances to loans granted to customers – reconciled transfers in 2016
    Value at the beginning of period
    Established in the period Reversed in the period Assets written -off
    Other, of which due to purchase of the demerged part of BPH and SKOKs
    Value at the end of period
    Impact on the profit and loss account
    Retail segment 1 086 668 1 290 652 -805 502 -328 775 549 732 1 792 775 485 150
    Corporate segment 850 680 562 202 -284 691 -162 191 298 452 1 264 452 277 511
    Total 1 937 348 1 852 854 -1 090 193 -490 966 848 184 3 057 227 762 661
    By maturity (as at the balance sheet date) 31.12.2017 31.12.2016
    Retail segment 28 234 726 25 885 197
    ≤ 1M 3 202 620 2 910 161
    > 1M ≤ 3M 700 879 633 692
    > 3M ≤ 6M 994 312 853 902
    > 6M ≤ 1Y 1 829 288 1 616 066
    >1Y ≤ 2Y 2 827 282 2 617 666
    >2Y ≤ 5Y 5 928 016 5 712 326
    >5Y ≤ 10Y 5 768 341 5 418 912
    >10Y ≤ 20Y 4 134 633 3 497 105
    >20Y 2 849 355 2 625 367
    Corporate segment 23 009 367 20 363 426
    ≤ 1M 5 806 193 5 537 840
    > 1M ≤ 3M 1 089 246 1 141 897
    > 3M ≤ 6M 1 129 151 1 193 177
    > 6M ≤ 1Y 2 331 002 2 143 239
    >1Y ≤ 2Y 2 495 427 2 174 464
    >2Y ≤ 5Y 5 735 431 4 085 045
    >5Y ≤ 10Y 3 499 583 3 240 797
    >10Y ≤ 20Y 923 334 846 967
    Loans and advances to customers 51 244 093 46 248 623
    By currency 31.12.2017 31.12.2016
    Retail segment 28 234 726 25 885 197
    PLN 26 682 610 24 332 428
    EUR 1 112 805 1 125 543
    GBP 237 003 201 010
    USD 44 068 41 047
    CHF 158 214 184 298
    Other 26 871
    Cprporate segment 23 009 367 20 363 426
    PLN 18 732 017 16 343 057
    EUR 4 022 226 3 756 078
    GBP 71 002 3 778
    USD 132 698 193 329
    CHF 42 390 55 242
    Other 9 034 11 942
    Loans and advances to customers 51 244 093 46 248 623


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    51
    20.4 Sensitivity analysis of material estimates and assumptions
    The Bank reviews all on -balance sheet loan exposures (groups of on -balance sheet loan exposures) to identify
    objective impairment indications, relying on the most recent data when the items are revalued. When estimating
    the amount of an impairment loss, es timates of the amounts and realisation dates of future cash flows are made.
    The estimates rely on assumptions relating to multiple factors so the actual results may differ. As a result, future
    impairment allowances may be changed.
    Impaired exposures are split into those that are measured individually or in groups. Exposures with no identified
    impairment indications are grouped in homogeneous groups in terms of the risk profile and a provision is
    recognised for such group of exposures to cover incurred, bu t not reported losses (IBNR). The IBNR value is
    determined on the basis of the PD, LGD parameters, and collateral (subject to the anticipated recovery rates).
    Individual measurement applies to exposures that may be impaired (calculated at the customer leve l) in excess of
    the materiality levels subject to the customer segment (see the table).
    Customer Segment Threshold amount
    2017 2016
    Individual customers: no threshold no threshold
    Corporate customers 1 000 000 500 000
    Individual measurement is also applied to exposures that may be impaired with respect to which the Bank is not
    able to identify a group of assets with similar credit risk features or does not have an adequate sample to assess
    group parameters.
    Individual assessments are based on an analysis of potential scenarios (business customers). Each scenarios and
    each tree branch are assigned the likelihood of occurrence and anticipated recoveries. The assumptio ns applied
    for individual measurements are described in detail by persons performing analyses. The value o recoveries
    anticipated within individual measurements are compared to the actual recoveries on a quarterly basis.
    Group measurements are based on per iods when the affected exposures remain at default; they provide for a
    specific nature of each group in terms of the anticipated recoveries. The existing collateral is taken into account at
    the exposure level.
    Exposures with no identified impairment indic ations are grouped in homogeneous groups in terms of the risk
    profile and a provision is recognised for such group of exposures to cover incurred, but not reported losses
    (IBNR). IBNR is determined on the basis of the PD, LGD parameters and collateral (sub ject to the anticipated
    recovery rates).
    The impact of increased/decreased cash flows (including flows from execution of collateral) on impairment of the
    loan portfolio measured by the Bank with the individual method is presented in the table below (PLN M ):
    31.12.2017 31.12.2016
    Scenario Scenario
    10% -10% 10% -10%
    The estimated change to the impairment of loans as a result of a changed present value of the estimated cash flows under loans measured by the Bank with the individual method -136.25 216.43 -78.52 141.38



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    52
    The impact of increased/decreased cash flows (including flows from execution of collateral) on impairment of the
    loan portfolio measured by the Bank with the portfolio method is presented in the table below (PLN M):
    31.12.2017 31.12.2015
    scenario scenario
    10% -10% 10% -10%
    The estimated change to the impairment of loans as a result of a changed present value of the estimated cash flo ws under loans measured by the Bank with the group method -125.10 144.82 -72.79 84.15
    The impact of increased/decreased PD parameter on the IBNR provision is presented in the table below (PLN M):
    The detailed description of impairment allowances is provided in Note 38.
    31.12.2017 31.12.2016
    scenario scenario
    10% -10% 10% -10%
    The estimated change of allowances and provisions for incurred, but not reported losses (IBNR) of loans as a result of changes to PD LIP 29.90 -30.09 17.18 -17.19
    21 Amounts d ue from banks
    21.1 Accounting principles
    Receivables from banks include financial assets measured at amortised cost with the effective interest rate
    reduced by potential impairment allowances with the exception of cash in transit tha t is measured at nominal
    value. If no time schedule of future cash flows may be determi ned for receivables and therefore, no effective
    interest rate can be identified, the receivables are measured at the amount payable.
    Securities under buy -sell back transactions are recognised as receivables from banks, if a bank is the counterparty.
    Buy -sell back transactions are measured at amortised cost. A difference between the purchase and re -sale price is
    treated as interest income and accounted for over the term of the contract at the effective interest rate.
    21.2 Financial data
    Structure by type 31.12.2017 31.12.2016
    Current accounts 627 261 386 766
    Overnight deposits (O/N) 10 001 0
    Term deposits 9 061 237 396
    Reverse Repo 58 397 583 012
    Deposits as derivative transactions (ISDA) collateral 163 770 145 141
    Other 30 487 11 911
    Amounts due from banks 898 977 1 364 226
    By maturity (as at the balance sheet date) 31.12.2017 31.12.2016
    ≤ 1M 898 977 1 364 226
    Amounts due from banks 898 977 1 364 226



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    53
    By currency structure 31.12.2017 31.12.2016
    PLN 70 860 600 224
    EUR 355 942 286 143
    GBP 37 193 29 238
    USD 91 347 321 306
    CHF 4 423 8 890
    Other currencies 339 212 118 425
    Amounts due from banks 898 977 1 364 226
    The margin deposits refer to security provided to other banks under CSA agreement (Credit Support Annex).
    22 Property, plant and equipment and intangible assets
    22.1 Accounting principles
    Property, plant and equipment and investment properties
    Property, plant and equipment cover assets with the anticipated useful life of over one year, complete and use for
    service provision. They are initially measured according to their purchase price or construction cost. Following the
    initial recognition, property, plant and equipment are carried at the purchase cost or construction cost, less any
    accumulated depreciation and any cumulated impairment allowances.
    Outlays incurred after the initial recognition of property, plant and equipment are recognised as assets only when
    they increase future economic benefits from the asset. Otherwise, the outlays are recognised in profit and loss as
    expenses when incurred.
    Investment properties include those properties that the Bank treats as a source of economic benefits in terms of
    rental income or increased fair value (or both at the same time). Investment properties are initially measured at
    the pur chase price or construction cost, including transactional costs. Following the initial recognition of
    investment properties, the Bank applies the measurement method at the purchase price or construction cost, less
    accumulated deprecia tion and impairment a llowances.
    Intangible assets
    Intangible assets with a defined useful economic life, including those manufactured internally, following the initial
    recognition are disclosed at the purchase price or construction cost, less depreciation and impairment allowa nces.
    As at each balance sheet date, the Bank reviews assets for impairment indications. Should such indications exist,
    the Bank formally assesses the recoverable value. If the carrying value of an asset is higher than its recoverable
    value, an impairmen t is recognised and an impairment allowance is made to the recoverable value.
    Goodwill is a surplus of the purchase cost over the fair value of the acquired identifiable assets, liabilities, and
    contingent liabilities in a business combination transaction . Following the initial recognition, the goodwill is
    recognised at the purchase cost, less all accumulated impairment allowances. In the case of sale of a subsidiary
    entity, the goodwill recognised at acquisition is included in the financial result settli ng the sale.
    With reference to goodwill, impairment allowances are determined on the basis of an estimated value of each
    cash generating centre to which the goodwill has been allocated. When the recoverable value of a cash
    generating centre is lower than its carrying value, an impairment allowance is recognised. The impairment
    identified in tests is not reversed in subsequent periods. Goodwill is analysed for impairment as at each balance
    sheet date ending each financial year or more frequently – if impai rment indications have been identified.
    The other intangible assets are identifiable assets without tangible form. Initially, they are measured according to
    their purchase price or construction cost. The Bank capitalises:


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    54
     expenses incurred in for the pur chase of licences for software and development of licences or modules for the
    acquired licence;
     internal manufacturing costs of assets covering all outlays, including costs of employee benefits that may
    directly attributed to the manufacturing and preparat ion of the asset for use in line with its intended use.
    The cost of an intangible asset acquired under a separate transaction covers:
     purchase price, including import duties and non -deductible purchase taxes, reduced by commercial rebates
    and discounts;
     outlays directly related to the preparation of an asset for use in line with its intended use.
    Outlays incurred after the initial reco gnition of intangible assets are recognised as assets only when they increase
    future economic benefits from an asset. Internal development costs of a licence or an additional module include
    all outlays which may be directly attributed to creation, producti on, and adaptation of an asset for the use
    intended by the management.
    Otherwise, they are recognised through profit and loss.
    Depreciation
    Depreciation accrues on all fixed assets with a determined useful life, with a straight -line method over the
    estimated useful life of the asset. The approved depreciation method and useful life are verified at least annually.
    Property, plant and equipme nt and intangible assets begin to be depreciated/amortised from the first day of the
    month following the month when such asset has been brought for use, and it ends not later than:
    1) when the depreciation/amortisation charges equal the initial value of the asset, or
    2) when the asset is to be liquidated, or
    3) when it is sold, or
    4) when it is found missing, or
    5) when as a result of verification, it is found that a residual value of the asset is higher than its carrying value (net)
    subject to th e residual value of the asset anticipated at liquidation – the net amount that the Bank expects to
    obtain at the end of use, net of the anticipated sales costs.
    Use of property, plant and equipment and intangible assets
    Item Use period in years
    Property, Plant & Equipment
    Improvements in third party buildings or structures 5-10
    Plant and machinery 1-5
    Equipment 2-10
    Means of transport 2.5-5
    Intangible assets
    Licenses 2-12.5
    Software of IT systems 2-10
    Development Costs 2-12.5
    Copyright and other intangible assets 2-10
    Impairment allowances
    Impairment occurs when the carrying value of an asset is hig her than its realisable value. The resultant impairment
    allowance is recognised in profit and loss.
    The realisable value is the higher of: fair value reduced by sales costs and the value in use of the asset.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    55
    The value in use is determined with a discount of the estimated future cash flows for the asset, at the discount
    rate before taxes. For assets tha t do not generate cash flows on their own, the Bank determines their realisable
    value at the level of the cash generating unit that owns a specific asset.
    Impairment allowances may be reversed through profit and loss to the level at which the book value o f the assets
    is not higher than the book value of the asset, assuming that no impairment allowance has been recognised.
    Impairment allowances relating to goodwill may not be reversed. Otherwise, the allowance may be reversed as
    long as a change has occur red to the estimates used to determine the realisable value. Impairment allowances
    may be reversed only to the level at which the book value does not exceed the book value which – reduced by
    depreciation – would have been determined if no impairment allow ance had been recognised.
    The realisable value is the value in use or fair value reduced by sales costs – whichever is higher when the review
    is made.
    In order to determine the value in use, the estimated future cash flows are discounted to the present v alue at the
    discount rate before taxes that reflects the current expectations on the market as to the value of money and the
    specific risk for such assets.
    22.2 Financial data
    Property, Plant & Equipment
    31.12.2017 Fixed assets under construction
    Plant and machinery (including IT hardware)
    Leasehold improvements Owned buildings Other Total
    Value at the purchase price as at 01.01.2017 23 075 373 984 202 203 144 498 97 066 840 826
    Change, due to: 19 112 46 424 11 466 15 634 16 92 652
    Purchases in 2017 50 818 26 319 18 652 1 800 2 859 100 448
    Sale in 2017 -74 -2 469 0 0 -3 437 -5 980
    Other changes -31 632 22 574 -7 186 13 834 594 -1 816
    Value at the purchase price as at 31.12.2017 42 187 420 408 213 669 160 132 97 082 933 478
    Cumulated depreciation as at 01.01.2017 0 184 227 106 370 1 626 63 503 355 726
    Depreciation for 2017 0 63 097 28 180 6 529 7 267 105 073
    Other changes 0 -2 485 -4 808 0 -1 706 -8 999
    Cumulated depreciation as at 31.12.2017 0 244 839 129 742 8 155 69 064 451 800
    Impairment allowance as at 01.01.2017 0 1 134 347 0 99 1 580
    Changes to allowances in 2017 4 2 957 8 964 0 2 526 14 451
    Other changes 0 -1 028 -287 0 4 -1 311
    Impairment allowances as at 31.12.2017 4 3 063 9 024 0 2 629 14 720
    Net value as at 01.01.2017 23 075 188 623 95 486 142 872 33 464 483 520
    Net value as at 31.12.2017 42 183 172 506 74 903 151 977 25 389 466 958
    31.12.2016 Fixed assets under construction
    Plant and machinery (including IT hardware)
    Leasehold improvements Owned buildings Other Total
    Value at the purchase price as at 01.01.2016 13 112 231 629 176 468 22 775 82 843 526 827
    Change, due to: 9 963 142 355 25 735 121 723 14 223 313 999
    Purchases in 2016 13 009 22 020 11 014 588 1 326 47 957
    Demereged business of BPH 3 379 101 457 17 731 112 541 12 409 247 517
    IFRS 3Fair value measurement 0 15 699 0 4 089 3 372 23 160


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    56
    31.12.2016 Fixed assets under construction
    Plant and machinery (including IT hardware)
    Leasehold improvements Owned buildings Other Total
    Book transfers in 2016 -6 409 4 434 -2 977 763 1 476 -2 713
    Sale in 2016 -16 -1 255 -33 -45 -4 360 -5 709
    Other changes 0 0 0 3 787 0 3 787
    Value at the purchase price as at 31.12.2016 23 075 373 984 202 203 144 498 97 066 840 826
    Cumulated depreciation as at 01.01.2016 0 153 126 86 260 42 58 132 297 560
    Depreciation for 2016 0 33 116 23 025 666 7 629 64 436
    Other changes 0 -2 015 -2 915 918 -2 258 -6 270
    Cumulated depreciation as at 31.12.2016 0 184 227 106 370 1 626 63 503 355 726
    Impairment allowances as at 01.01.2016 0 1 121 494 0 19 1 634
    Changes to allowances in 2016 0 188 2 030 0 168 2 386
    Other changes 0 -175 -2 177 0 -88 -2 440
    Impairment allowances as at 31.12.2016 0 1 134 347 0 99 1 580
    Net value as at 01.01.2016 13 112 77 382 89 714 22 733 24 692 227 633
    Net value as at 31.12.2016 23 075 188 623 95 486 142 872 33 464 483 520
    Intangible assets
    31.12.2017 Goodwill Capital expenditure Software, licences, R&D works Trademark Other Total
    Value at the purchase price as at 01.01.2017 116 288 108 498 435 634 3 667 47 650 711 737
    Changes to intangible assets due to: 0 -25 095 124 700 0 234 99 839
    Purchases in 2017 0 55 082 13 936 0 54 69 072
    Capitalised construction costs 0 11 204 14 983 0 0 26 187
    Other changes 0 -91 381 95 781 0 180 4 580
    Value at the purchase price as at 31.12.2017 116 288 83 403 560 334 3 667 47 884 811 576
    Cumulated depreciation as at 01.01.2017 0 0 196 653 0 6 798 203 451
    Depreciation for 2017 0 0 45 612 0 21 460 67 072
    Other changes 0 0 -2 050 0 0 -2 050
    Cumulated depreciation as at 31.12.2017 0 0 240 215 0 28 258 268 473
    Impairment allowance as at 01.01.2017 11 920 17 12 069 3 367 0 27 373
    Changes to allowances in 2017 0 11 269 1 0 0 11 270
    Other changes 0 -3 058 -2 588 0 0 -5 646
    Impairment allowances as at 31.12.2017 11 920 8 228 9 482 3 367 0 32 997
    Net value as at 01.01.2017 104 368 108 481 226 912 300 40 852 480 913
    Net value as at 31.12.2017 104 368 75 175 310 637 300 19 626 510 106



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    57
    31.12.2016 Goodwill Capital expenditure Software, licences, R&D works Trademark Other Total
    Value at the purchase price as at 01.01.2016 106 036 59 355 408 971 3 667 5 589 583 618
    Changes to intangible assets due to: 10 252 49 143 26 663 0 42 061 128 119
    Purchases in 2016 0 48 991 15 758 0 110 64 859
    Demereged business of BPH 0 51 554 93 385 0 0 144 939
    IFRS 3 fair value measurement 0 -49 556 -47 969 0 42 100 -55 425
    Book transfers in 2016 10 252 -29 887 11 374 0 -149 -8 410
    Capitalised construction costs 0 28 190 4 395 0 0 32 585
    Other changes 0 -149 -50 280 0 0 -50 429
    Value at the purchase price as at 31.12.2016 116 288 108 498 435 634 3 667 47 650 711 737
    Cumulated depreciation as at 01.01.2016 0 0 189 846 0 3 045 192 891
    Depreciation for 2016 0 0 33 552 0 3 844 37 396
    Other changes 0 0 -26 745 0 -91 -26 836
    Cumulated depreciation as at 31.12.2016 0 0 196 653 0 6 798 203 451
    Impairment allowances as at 01.01.2016 1 668 1 630 4 242 3 367 0 10 907
    Changes to allowances in 2016 10 252 913 9 071 0 93 20 329
    Other changes 0 -2 526 -1 244 0 -93 -3 863
    Impairment allowances as at 31.12.2016 11 920 17 12 069 3 367 0 27 373
    Net value as at 01.01.2016 104 368 57 725 214 883 300 2 544 379 820
    Net value as at 31.12.2016 104 368 108 481 226 912 300 40 852 480 913
    22.3 Material estimates and assumption s – impairment test for the balance of goodwill
    Impairment test for the balance of goodwill generated at the acquisition of and merger with Meritum Bank SA
    As at 31 December 2017, the Bank held mandatory impairment tests of goodwill generated from the acquisition
    of Meritum Bank Polska SA in line with the models developed in accordance with IAS 36.
    Such impairment test is carried out by comparing the carryin g value of cash generating units (“CGU”) with their
    realisable value.
    Two CGUs were identified to which the goodwill generated as a result of the acquisition of Meritum Bank Polska
    SA – retail and corporate.
    The realisable value is estimated on the basis of the value in use of CGU. The value in use is the present estimated
    value of future cash flows for 5 years net o residual value of CGU. The residual value of CGU has been calculated
    with the model of theoretical dividend (Gordon model) by extrapolating the projected cash flows beyond the
    projection period, at the growth rate of 3%. The projected cash flows are based on the assumptions incorporated
    in the financial plan for the Alior Bank for 2017 and the Bank ’s strategy for subsequent years. The future cash
    flows have been discounted at the rate of 10.1%, including a risk -free rate and a risk premium.
    The impairment test held as at 31 December 2017 showed a surplus of the realisable value over the carrying
    value of the CGUs and therefore, no impairment of CGUs was determined.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    58
    22.4 Sensitivity anal ysis of material estimates and assumption s
    The impact of the length of the useful life for depreciated assets in the group of land and buildings, affecting
    changes of the profit, is presented in the table below:
    Impact of changes to the length of useful life of assets for depreciation costs
    31.12.2017 31.12.2016
    scenario +5 years scenario -5 years scenario +5 years scenario -5 years
    Plant and machinery -21 776 159 267 -33 838 90 795
    Leasehold improve -ments -13 555 60 300 -17 335 287 151
    -35 331 219 567 -51 173 377 946
    Impact of changes in the growth rate and discount rate on the result of the goodwill impairment test resulting
    from the acquisition of Meritum Bank SA
    The base value of the indicator
    Test's result of impairment if the indicator decreases by 20%
    Test's result of impairment if the indicator increases by 20%%
    discount rate 10.30% No impairment No impairment
    growth rate 3.00% No impairment No impairment
    23 Other assets
    23.1 Accounting principles
    Financial assets in the item are measured at amount payable, covering also potential interest in those assets,
    inclusive of impairment allowances. Non -financial assets are measured in line with the measurement principles
    applicable to specific asset categ ories included in that item.
    23.2 Financial data
    31.12.2017 31.12.2016 Restated
    Sundry debtors 560 836 646 399
    Other settlements 183 567 251 091
    Receivables from the sale of receivables 63 165 0
    Receivables related to sales of services (including insurance) 58 540 86 699
    Guarantee deposits 18 748 12 254
    Settlments of payment cards 142 468 202 007
    Receivables due to settlement of acquisition of the demerged part of BPH 94 348 94 348
    Costs recognised over time 29 264 57 178
    Settlements of rental charges and utilities 1 317 1 797
    Maintenance and support of systems, servicing of plant and equipment 14 100 14 207
    Other deferred costs 13 847 41 174
    Other receivables 5 238 0
    VAT settlements 2 244 20 362
    Other assets (gross) 597 582 723 939
    Write -down -73 535 -61 844
    Other assets (net) 524 047 662 095
    including financial assets (gross) 560 836 646 399


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    59
    24 Amounts d ue to customers
    24.1 Accounting principles
    Amounts due to customers are measured at amortised cost at the effective interest rate. If no time schedule of
    future cash flows may be determined for financial liabilities and therefore, no effective interest rate can be
    identified, the liability is measured at the amount payable.
    24.2 Financial data
    Structure by type and customer segment 31.12.2017 31.12.2016
    Retail segment 36 530 860 32 035 389
    Current deposits 22 584 687 17 264 837
    Term deposits 12 134 722 13 908 933
    Own issue of banking securities 1 574 189 628 246
    Own bond issues 81 500 0
    Other liabilities 155 762 233 373
    Corporate segment 21 124 758 19 369 459
    Current deposits 9 547 369 8 529 185
    Term deposits 9 743 794 8 416 601
    Issue of the Bank's securities 1 454 213 1 910 380
    Own bond issues 148 684 230 046
    Other liabilities 230 698 283 247
    Total amounts due to customers 57 655 618 51 404 848
    By maturity (as at the balance sheet date) 31.12.2017 31.12.2016
    Retail segment 36 530 860 32 035 389
    ≤ 1M 24 966 548 21 811 318
    > 1M ≤ 3M 3 208 322 3 163 975
    > 3M ≤ 1Y 6 697 726 5 878 511
    > 1Y ≤ 5Y 1 651 700 1 017 041
    >5Y 6 564 164 544
    Corporate segment 21 124 758 19 369 459
    ≤ 1M 15 125 237 13 700 922
    > 1M ≤ 3M 3 140 450 1 443 070
    > 3M ≤ 1Y 2 051 232 2 188 383
    > 1Y ≤ 5Y 759 661 2 013 363
    >5Y 48 178 23 721
    Total amounts due to customers 57 655 618 51 404 848



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    60
    By currency structure 31.12.2017 31.12.2016
    Retail segment 36 530 860 32 035 389
    PLN 30 918 837 27 417 980
    EUR 2 367 694 2 324 200
    GBP 597 002 464 471
    USD 2 219 330 1 592 740
    CHF 180 154 104 991
    Other 247 843 131 007
    Corporate segment 21 124 758 19 369 459
    PLN 17 600 725 16 352 164
    EUR 2 557 958 2 009 282
    GBP 74 320 82 434
    USD 562 892 742 870
    CHF 17 489 30 206
    Other 311 374 152 503
    Total amounts due to customers 57 655 618 51 404 848
    In 2017 the Bank issued own securities amounted to PLN 2 035 195 thousand (BPW) and securities purchased
    before maturity amounted to PLN 11 2 682 thousand.
    In 2016 the Bank issued own securities amounted to PLN 1 106 334 thousand (BPW) and and securities
    purchased before maturity amounted to PLN 148 587 thousand.
    25 Amounts d ue to banks
    25.1 Accounting principles
    The liabilities due to banks include financial liabilities measured at amortised cost with the effective interest rate. If
    no time schedule of future cash flows may be determined for financial liabilities and therefore, no effective
    interest rate can be i dentified, the liability is measured at the amount payable.
    As at 31 December 2017 and 31 December 2016, the category covered liabilities due to banks, including the
    received subordinated loan and liabilities due to customers, including deposits and issue d bank securities (BPW)
    and sell -buy back transactions.
    25.2 Financial data
    Structure by type 31.12.2017 31.12.2016
    Current deposits 673 32 304
    Over night deposits 1 949 856
    Term deposits 300 044 0
    Own bond issues 22 766 20 004
    Received loan 120 194 133 549
    Other liabilities 220 749 164 710
    Repo 77 536 29 812
    Total amounts due to banks 743 911 381 235



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    61
    By maturity (as at the balance sheet date) 31.12.2017 31.12.2016
    ≤ 1M 300 907 227 682
    > 1M ≤ 3M 300 044 0
    > 1Y ≤ 5Y 22 766 20 004
    >5Y 120 194 133 549
    Total amounts due to banks 743 911 381 235
    By currency structure 31.12.2017 31.12.2016
    PLN 700 079 304 280
    EUR 43 750 41 366
    USD 65 35 540
    GBP 0 49
    Other 17 0
    Total liabilities to banks 743 911 381 235
    26 Provisions
    26.1 Accounting principles
    Provisions are liabilities with an uncertain payment date or an uncertain amount. The Bank establishes provisions
    when the entity is charged with a (legal or customary) obligation relating to past events, and when it is likely that
    satisfaction of such obligation shall result in a necessity of an outflow of funds containing economic benefits and
    the amount of such obligation may be reliably estimated. If the above conditions are not satisfied, no provision is
    established.
    Provisions for retireme nt benefits
    Provisions for retirement benefits are set up individually for each employee on the basis of actuarial valuation
    made by an independent actuarial company. The provision is determined on the basis of the anticipated amount
    of a retirement benef it that the Bank shall pay in line with the remuneration regulations.
    In compliance with IAS 19, the discount rate to calculate the provisions has been set on the basis of market rates
    of return on Treasury bonds in the currency and with maturity are con gruent with the currency and close to the
    disbursement of such retirement benefit.
    Provisions for disputes
    This is a provision for disputes with employees, counterparties, customers and external institutions (e.g. UOKiK),
    established when information is obtained from a competent person from the Legal Department or another
    person representing Bank before courts and other bodies, providing legal assistance, that the likelihood of losing
    the case is high. Details are specified in note 37.
    Provisions for disputes are established in the amounts of the anticipated outflows of economic benefits.
    Provisions for granted financial and guarantee obligations
    Provisions for off -balance sheet loan exposures are set up in the amounts equivalent to the resultant an ticipated
    loss of economic benefits (that can be estimated). When determining the provisions for off -balance sheet credit
    exposures:
     with respect to loan exposures that are individually material under unconditional liabilities meeting the
    requirements of an individual impairment or concerning debtors whose other exposures meet such premises,


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    62
    and individually material exposures that do n ot meet the requirements of an individual impairment for which a
    provision made in line with portfolio parameters would not be justified – the individualised method is applied,
     With reference to other off -balance sheet loan exposures – the portfolio meth od (if such exposure meets the
    premises of an individual impairment), or a group method (if the exposure does not meet the impairment
    premises).
    The provision is determined as a difference between the anticipated value of the on -balance sheet exposure tha t
    will result from the granted off -balance sheet exposure (from the date as at which the assessment is made to the
    occurrence date of an overdue debt which is treated as a premise of an individual impairment), and the present
    value of the anticipated futur e cash flows to be obtained from the on -balance sheet exposure generated from the
    granted liability.
    When the provision is determined with the individualised method, the anticipated future cash flows are estimated
    for each loan exposure individually.
    When the provision is determined with the portfolio method or group method, portfolio parameters are used
    based of statistical methods on the basis of historic observations of exposures with the same features.
    Restructuring provision
    The restructuring provision is established for disbursement of statutory severance pay for termination of
    employment contracts as a result of group lay -offs and for so -called additional damages resulting from an
    agreement with the trade unions and a provision for restructur ing costs of the branch network and abandonment
    of franchise outlets located too close (the provision covers the costs of damages and expenses related to
    abandoning of the branch and its restoration to the original condition). The restructuring programme was
    published and its implementation by the Bank commenced in December 2016.
    26.2 Financial data
    Provisions for disputes Provisions for retirement benefits Provisions for off -balance sheet liabilities granted Restructuring provision Total provisions
    As at 01 January 2017 8 700 10 730 17 586 249 775 286 791
    Established provisions 8 254 10 453 41 130 0 59 837
    Reversal of provisions -636 -7 825 -34 823 -28 143 -71 427
    Utilized provisions -1 337 -44 0 -184 214 -185 595
    Other changes 1 043 0 -216 0 827
    As at 31 December 2017 16 024 13 314 23 677 37 418 90 433
    Provisions for disputes Provisions for retirement benefits Provisions for off -balance sheet liabilities granted Restructuring provision Total provisions
    As at 01 January 2016 3 219 1 070 5 512 0 9 801
    Change due to demerged part of BPH 4 439 23 594 9 642 54 714 92 389
    Established provisions 1 321 2 273 18 630 199 668 221 892
    Reversal of provisions -360 -16 437 -16 233 -307 -33 337
    Utilized provisions -876 0 0 -4 300 -5 176
    Other changes 957 230 35 0 1 222
    As at 31 December 2016 8 700 10 730 17 586 249 775 286 791



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    63
    Split of the restructuring provision as at 31.12.2017 is presented below :
    31.12.2016 utilisation reversal 31.12.2017
    Severance pay for employees 174 201 154 397 18 989 815
    Reorganisation of the branch network 75 574 29 817 9 154 36 603
    249 775 184 214 28 143 37 418
    26.3 Material estimates and assumption s – actuarial provision
    Provisions for employee benefits are measured with actuarial techniques and assumptions. The calculation covers
    all retirement benefits potentially disbursable in the future. The provision has been established on the basis of a
    list of persons with all the required personal data, including seniority, age, and gender. The accrued provisions
    are equal to the discounted payments to be made in the future subject to staff rotation and apply to the period
    until the end of the reporting period.
    26.4 Sensitivity analysis of material estimates and assumptions
    The Bank updated its estimates as at 31 December 2 017 on the basis of calculations made by an independent
    external actuarial company. The accrued provisions are equal to the discounted payments to be made in the
    future subject to staff rotation and apply to the period until the end of the reporting perio d. The discount rate of
    3.25% applied by the Bank is a major element affecting the amount of the provision. In 2016 the applied
    discount rate was 3.5%.
    The impact of an increased/decreased discount rate and the fundamental actuarial assumptions by 1 pp on the
    increase/decrease of the retirement provision as at 31 December 2017 and as at 31 December 2016 is presented
    in the tables below
    Estimated change of provision as at 31.12.2017
    Financial discount rate Planned growth of basis
    Scenario +1pp Scenario -1pp Scenario +1pp Scenario -1pp
    Provisions for retirement benefits 14 283 12 097 12 033 14 477
    Estimated change of provision as at 31.12.2016
    Financial discount rate Planned growth of basis
    Scenario +1pp Scenario -1pp Scenario +1pp Scenario -1pp
    Provisions for retirement benefits 11 477 9 586 9 537 11 630
    27 Other liabilities
    27.1 Accounting principles
    The liabilities in this item are measured in the amount payable covering potential interest on the liabilities, while
    provisions for future payments in a reliably estimated amount required to comply with the obligation as at the
    end of the reporting period. Non -financial liabilities are measured in line with the measurement principles
    applicable to specific liability categories included in that item.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    64
    27.2 Financial data
    31.12.2017 31.12.2016 restated
    Interbank settlements 723 937 592 835
    taxes, customs duties, social and health insurance and other public law liabilities 35 999 38 380
    Settlements of payment cards 150 699 65 006
    Other settlements, including 170 788 110 710
    Settlements with insurers 16 668 22 755
    Settlements of issues of bank certificates of deposits 91 048 112 858
    Accrued expenses 144 098 150 405
    Income received in advance 81 240 78 286
    Provision for bancassurance resignations 38 679 71 175
    Provision for bonuses 110 473 74 361
    Provision for unutilised annual leaves 28 238 32 169
    Provision for bonuse settled in phantom shares 16 885 14 126
    Provision for retention programs 18 118 56 378
    Revaluation of managment option plan – part settled in cash 6 422 12 075
    Other employee provisions 1 663 870
    Other liabilities 10 031 18 123
    Other liabilities 1 628 318 1 427 757
    including financial liabilities 1 045 424 768 551
    28 Subordinated liabilities
    28.1 Accounting principles
    On 23 August 2017, as requested by the Bank's Management Board, the Bank's Supervisory Board agreed to
    open the Second Public Programme of Bond Issue of Alior Bank SA “Second Public Issue Programme” and
    authorised the Management Board to contract financial liabilities by way of issue of unsecured ordinary
    subordinated bearer bond s by the Bank. Additionally, the Bank's Supervisory Board authorised the Management
    Board to determine the final terms and conditions of each bond series issue under the Second Public Issue
    Programme, to allot the bonds to investors and to take all other actions that may be required to achieve the
    objectives of the Second Public Issue Programme.
    The Bank's Management Board submitted a motion to the Polish Financial Supervision Authority for approval of
    the prospectus. On 6 November 2017, the Polish Financial Supervision Authority approved Annex No. 2 to the
    Prospectus covering the intention of the Bank's Management Board concerning determination of the unit nominal
    value of subordinated bonds to be issued pursuant to the Prospectus. In accordance with the Annex, the Bank's
    Management Board will determine the conditions of each subordinated bond is sue to be issued pursuant to the
    Prospectus so that the nominal unit value of such subordinated bonds is PLN 400 000.
    In line with the proposal of the Bank's Management Board, the Bank's Supervisory Board also approved
    discontinuation of bond issues under the previous Public Programme of Subordinated Bond Issue of Alior Bank
    SA, approved by Resolution No. 407/2015 of the Bank's Management Board of 22 December 2015 and accepted
    by Resolution No. 83/2015 of the Bank's Supervisory Board of 28 December 2015, an d the closure of the First
    Public Issue Programme.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    65
    28.2 Financial data
    Subordinated liabilities are measured at amortised cost at the effective interest rate.
    Nominal value in the currency (PLN '000)
    Status of liabilities
    Currency Term Specific conditions 31.12.2017 31.12.201 6
    Liabilities classified as the Bank's own funds
    Subordinated loan 10 000 EUR 12.10.2011 - 12.10.2019
    The loan may be prepaid subject to a written notification 30 days before the planned repayment. 41 892 44 428
    Series F bonds 321 700 PLN 26.09.2014 - 26.09.2024 325 930 325 915
    Series G bonds 192 950 PLN 31.03.2015 - 31.03.2021 195 560 195 551
    Series I bonds 150 000 PLN 06.12.2015 - 06.12.2021 150 594 150 594
    Series II bonds 33 350 PLN 06.12.2015 - 06.12.2021 33 482 33 482
    Series B bonds (Meritum Bank) 67 200 PLN 29.04.2013 - 29.04.2021 67 796 67 706
    Meritum Bank bonds – series C 80 000 PLN 21.10.2014 - 21.10.2022 80 494 80 401
    Series EUR001 bonds 10 000 EUR 04.02.2016 - 04.02.2022 42 738 45 331
    Series P1A bonds 150 000 PLN 27.04.2016 - 16.05.2022 150 006 150 961
    Series P1B bonds 70 000 PLN 29.04.2016 - 16.05.2024 70 427 70 425
    Series K bonds 400 000 PLN 20.10.2017 - 20.10.2025 403 600 0
    Series K1 bonds 200 000 PLN 20.10.2017 - 20.10.2025 201 800 0
    Series P2A bonds 150 000 PLN 14.12.2017 - 29.12.2025 150 657 0
    Subordinated liabilities 1 914 976 1 164 794
    Both the subordinated bonds and the subordinated loan were – as approved by the Polish Financial Supervision
    Authority – classified as the Bank's supplementary capital.
    29 Equity
    29.1 Accounting principles
    Equity is composed of the share capital, the supplementary capital, the revaluation reserves, other reserves
    (including the reserves for employee benefi ts payable with equity instruments) and profit for the current year and
    retained profit.
    Share capital
    The share capital is disclosed at its nominal value in line with the Articles of Association and the entry to the
    National Court Register.
    Supplementary capital
    The supplementary capital is established from profit allocations, pursuant to resolutions of the General Meeting.
    The supplementary capital also includes the share issue agio, net of the issue costs. The supplementary capital
    may b e applied to cover balance sheet losses that may result from the Bank's operations.
    Revaluation reserve
    The revaluation reserve is established as a result of measurement of:
     financial instruments classified as available for sale,


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    66
     the effective part of hedge for cash flow hedge accounting programme,
     deferred income tax related to the above items.
    The revaluation reserve is not subject to distribution.
    Other reserves
    The other reserves are established from profit allocations. They may be used for the purposes specified in the
    Bank's Articles of Association or in applicable regulations.
    Current profit and retained profit
    Net profit attributable to the parent entity is gross profit in the profit and loss account of the current year adjusted
    with income tax and the profit attributable to non -controlling holdings.
    Dividend
    A dividend for the year, approved by the General Meeting, not disbursed until the balance sheet date, is disclosed
    as a dividend liability in other liabilities.
    29.2 Financial data
    Equity 31.12.2017 31.12.2016
    Share capital 1 292 636 1 292 578
    Supplementary capital 4 817 331 4 184 953
    Other reserves 184 894 184 894
    Retained profit -43 051 0
    Revaluation reserve 13 944 -71 615
    Revaluation reserve from measurement financial assets available for sale 22 969 -62 892
    Revaluation reserve from measurement of hedging instruments -9 025 -8 723
    Exchange rate differences on revaluation of foreign entities 594 -22
    Current year profit 538 895 589 024
    Total equity 6 805 243 6 179 812
    Revaluation reserve 31.12.2017 31.12.2016
    Valuation of financial assets available for sale 22 969 -62 892
    Treasury bonds 27 803 -75 156
    other debt instruments -5 509 -2 489
    equity instruments 5 686 0
    deferred income tax -5 011 14 753
    Valuation of hedging derivatives -9 025 -8 723
    IRS -11 142 -10 769
    deferred income tax 2 117 2 046
    Revaluation reserve 13 944 -71 615



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    67
    29.3 Shareholders of Alior Bank Spółka Akcyjna
    As at 31 December 2017 and 2016 , the shareholders holding 5% or more of the overall number of votes at the
    General Meeting were as follows:
    Shareholder Number of shares Nominal value of shares [PLN] Percentage in the share capital 4 Number of votes Number of votes in the total number of votes
    31.12.2017
    PZU 41 658 850 416 588 500 32.23% 41 658 850 32.23%
    Aviva OFE Aviva BZ WBK 11 562 000 115 620 000 8.94% 11 562 000 8.94%
    Nationale -Nederlanden PTE SA 6 600 000 66 000 000 5.11% 6 600 000 5.11%
    Other shareholders 69 442 774 694 427 740 53.72% 69 442 774 53.72%
    Total 129 263 624 1 292 636 240 100.00% 129 263 624 100.00%
    31.12.2016
    PZU 37 773 265 377 732 650 29.22% 37 773 265 29.22%
    Aviva OFE Aviva BZ WBK 9 262 138 92 621 380 7.17% 9 262 138 7.17%
    Other shareholders 82 222 360 822 223 600 63.61% 82 222 360 63.61%
    Total 129 257 763 1 292 577 630 100.00% 129 257 763 100.00%
    29.4 Share capital structure
    Series Type of shares
    Number of shares Number of shares Nominal value of shares
    Series value at nominal prices (PLN)
    31.12.2017 31.12.2016 31.12.2017 31.12.2016
    Series A Ordinary 50 000 000 50 000 000 10 500 000 000 500 000 000
    Series B Ordinary 1 250 000 1 250 000 10 12 500 000 12 500 000
    Series C Ordinary 12 332 965 12 332 965 10 123 329 650 123 329 650
    Series D Ordinary 413 480 410 704 10 4 134 800 4 107 040
    Series E Ordinary 2 785 0 10 27 850 0
    Series F Ordinary 300 0 10 3 000 0
    Series G Ordinary 6 358 296 6 358 296 10 63 582 960 63 582 960
    Series H Ordinary 2 355 498 2 355 498 10 23 554 980 23 554 980
    Series I Ordinary 56 550 249 56 550 249 10 565 502 490 565 502 490
    Series J Ordinary 51 51 10 510 510
    Total 129 263 624 129 257 763 1 292 636 240 1 292 577 630
    Within the Managerial Option Programme for 2013, 2014, and 2015, in 2017 the Bank commenced the
    procedure to increase the Bank's share capital by way of a conditional capital increase by issue of new series D, E,
    and F ordinary bearer shares with a total nominal value of PLN 58 610.00.
    On 29 August 2017 KDPW registered the above ordinary bearer shares with the nominal value of PLN 10 each,
    marked with the code ISIN “ALIOR00045”:
     2 776 (two thousand seven hundred and seventy six) series D shares;
     2 785 (two thousand seven hundred and eight five) series E shares;
     300 (three hundred) series F shares.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    68
    On the same day, the shares were admitted to trading in an ordinary procedure on the main floor of the stock
    exchange. On 28 November 2017 the District Court entered the increase of the share capital by the above
    amount to the register of entrepreneurs.
    Under the Programme referred to above, in December 2017 the Bank commenced another procedure of the
    Bank's share capital increase by issue of new series D and E ordinary bearer shares with a total nominal value of
    PLN 152 170 by way of a conditional capital increase of the Bank. On 22 December 2017 KDPW decided to
    accept the shares for deposit. On 15 January 2018 KDPW registered the above ordinary bearer shares with the
    nominal value of PLN 10 each, marked with the code ISIN “ALIOR00045”:
     10 905 (ten thousand nine hundred and five) series D shares;
     4 312 (four thousand three hundred and twelve) series E shares.
    Other additional information
    30 Off -balance sheet items
    30.1 Accounting principles
    Within its operations, the Bank enters into transactions that at execution are not disclosed in the statement of
    financial position as assets or liabilities, but they g enerate contingent liabilities. I n compliance with IAS 37,
    contingent liabilities are defined as follows:
     a potential obligation that arises as a result of past events the existence of which is confirmed only at
    occurrence or non -occurrence of uncertain future events that are not fully c ontrolled by the Bank,
     an existing obligation which results from past events, but is not disclosed in the statement of financial position
    since it is not probable that there will be an outflow of cash or other assets may be issued to satisfy the
    obligation or the amount of such obligation may not be reliably estimated.
    The guarantee values as specified in the table above reflect the maximum potential loss that would be disclosed
    on the balance sh eet d ate if all customers defaulted.
    30.2 Financial data
    Off-balance contingent liabilities granted to customers 31.12.2017 31.12.2016
    Granted off -balance liabilities 12 746 826 14 614 625
    Concerning financing 11 329 663 13 054 317
    Guarantees 1 417 163 1 560 308
    Performance guarantees 277 904 457 515
    Financial guarantees 1 139 259 1 102 793
    By maturity – guarantees 31.12.2017 31.12.2016
    ≤ 1W 2 509 14 869
    > 1W ≤ 1M 32 410 217 173
    > 1M ≤ 3M 81 054 93 300
    > 3M ≤ 6M 135 398 60 988
    > 6M ≤ 1Y 305 783 233 649
    > 1Y ≤ 2Y 143 214 365 396
    > 2Y ≤ 5Y 261 531 182 922
    > 5Y ≤ 10Y 441 259 360 120
    > 10Y ≤ 20Y 14 005 31 891
    Off-balance sheet liabilities granted, guarantees 1 417 163 1 560 308


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    69
    By maturity – financial 31.12.2017 31.12.2016
    ≤ 1W 3 248 225 2 378 831
    > 1W ≤ 1M 113 029 731 965
    > 1M ≤ 3M 341 114 423 456
    > 3M ≤ 6M 447 740 682 732
    > 6M ≤ 1Y 1 173 020 2 143 218
    > 1Y ≤ 2Y 2 093 611 1 948 494
    > 2Y ≤ 5Y 2 094 891 2 735 338
    > 5Y ≤ 10Y 1 297 487 1 232 111
    > 10Y ≤ 20Y 319 545 534 040
    > 20Y 201 001 244 132
    Off-balance sheet liabilities granted, concerning financing 11 329 663 13 054 317
    31 Assets pledge d as colleteral
    31.12.2017 31.12.2016
    Treasury bonds blocked for REPO transactions 77 431 29 783
    Reg istered pledge on Treasury bond s 0 118 048
    Deposit as collateral of transactions performed in Alior Trader 723 1 252
    Available -for-sale financial assets for sale securing a loan in the EIB 109 466 0
    Financial assets held to maturity securing the loan from EIB 221 291 217 901
    Total 408 911 366 984
    Apart from assets that secure liabilities that are disclosed separately in the statement of financial position when
    the receiving party may sell or exchange the assets for other security, the Bank additionally held the following
    collateral for the liabilities that did not meet the criterion:
    31.12.2017 31.12.2016
    Treasury bonds blocked with BGF 605 719 204 411
    Deposits as derivative transactions (ISDA) collatera 163 770 145 128
    Total 769 489 349 539
    32 Additional information to the cash flow statement
    32.1 Cash and cash equivalents
    Cash and cash equivalents include cash on hand and cash in the nostro account and the deposit with the
    National Bank of Poland, and receivables from banks in the current account and other funds maturing within 3
    mo nths from acquisition.
    31.12.2017 31.12.2016
    Cash and balances with Central Bank 965 391 1 082 991
    Current accounts with other banks 627 261 386 766
    Term accounts with other banks 19 062 237 396
    Total 1 611 714 1 707 153


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    70
    32.2 Financial data
    The Bank makes its statement of operating cash flows with an indirect method in which the net profit for the
    reporting period is adjusted by the effects of cashless transactions and accruals concerning future or past inflows
    or payments of cash funds conce rning operating activities.
    Operating activity
    Cash flows from the Bank's operating activities cover primarily lending, deposits, FX exchange transactions, and
    purchase and sale of securities.
    Change of balances of loans and other receivables
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016 restated
    Change of receivables from customers – balance sheet -4 995 470 -15 334 633
    Change of receivables from banks – balance sheet 465 249 -721 686
    Carrying value change in cash – nostro accounts 240 495 47 635
    Carrying value change in cash – deposits up to 3 months -218 334 124 334
    Change of balances of loans and other receivables -4 508 060 -15 884 350
    Change of other liabilities
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016 restated
    Change of other liabilities – balance sheet 200 561 901 364
    Change of the revaluation reserve – balance sheet 67 323 -66 462
    Change of other liabilities – measured at amortised cost – balance sheet -36 990 -339 123
    Change of allowance for deferred income tax in the revaluation reserve 18 236 -20 368
    Provision for acquisition costs of fixed assets -8 494 -10 057
    Provision for acquisition costs of intangible assets -12 276 -8 167
    Change of balance due to the purchase of the demerged business of BPH net of cash and cash equivalents 0 174 695
    Other comprehensive income 84 098 58 287
    Change of other receivables 312 458 690 169
    Change in other assets
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016 restated
    Change in other assets – balance sheet 138 048 -350 460
    Change in other assets 138 048 -350 460
    Investing activities
    The Bank's investing activities cover purchase and sale of fixed assets and intangible assets.
    Purchase of property, plant and equipment
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    Change – balance sheet -100 448 -317 754
    Purchase of property, plant and equipment -100 448 -317 754
    Purchase of Intangible assets
    01.01.2017 – 31.12.2017 01.01.2016 – 31.12.2016
    Change – balance sheet -95 259 -154 349
    Purchase of Intangible assets -95 259 -154 349


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    71
    The acquisition of demerged business of Bank BPH, net cash acquired
    01.01.2016 – 31.12.2016
    Price paid for shares in BPH -1 464 933
    Cash and funds with Central Bank 1 043 097
    Current accounts with other banks 73 811
    Term accounts with other banks 173 330
    Total -174 695
    Financial activity
    The Bank includes proceeds and expenses related to the acquisition and repayment of own and external financing
    sources, including inflows and outflows that increase or decrease its equity (fund) as well as inflows from issuing
    long - and short -term debt financial instruments. .
    31.12.2016 Cash flows Non -cash changes , 31.12.2017
    Inflows Outflows Accrued interests Currency differences
    zobowiązania podporządkowane 1 164 794 750 000 -60 867 65 937 -4 889 1 914 976
    33 Fair value hierarchy
    33.1 Accounting principles and estimates and assumptions
    The fair value is a price receivable in the sale of an asset or payable for transfer of a liability in an arm’s length
    transaction in the principal (or most advantageous) market as at the measurement date subject to prevailing
    market conditions (exit price ), irrespective of the fact if such price is directly observable or estimated with another
    measurement technique.
    Depending on the classification category of financial assets and liabilities to a specific hierarchy level, various
    methods to measure fair value are applied.
    Level 1: On the basis of prices quoted in the principal (or most advantageous) market
    Financial assets and liabilities with fair value measured directly on the basis of quoted prices (not adjusted) from
    active markets for identical assets or liabilities. This category includes financial and equity instruments measured
    at fair value through profit and loss and those available for sale for which there is an active market and for which
    the fair value is determined on the basis of market value being the purchase price:
     debt Treasury securities valued at fixing on the Bondspot platform or Bloo mberg information services and
    Reuters,
     debt and equity securities traded in a regulated market, including in the portfolio of the Brokerage House,
     derivative instruments that are traded in a regulated market
    Level 2: On the basis of measurement techniques based on assumptions using information coming from the
    principal (or most advantageous) market;
    Financial assets and liabilities whose fair value is measured with measurement models where all material input
    data is observable in the market directly (as prices) or indirectly (relying on prices). In that category the Bank
    classifies financial instruments for which no active market exists:



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    72
    Measurement method (techniques) Material observable input data
    DERIVATIVE FINANCIAL INSTRUMENTS – CIRS, IRS, FRA, FX, FORWARD, FX SWAP TRANSACTIONS
    The model of discounted future cash flows based on profitability curves.
    Profitability curves are built on the basis of market rates, market data of the money market, F RA, IRS, OIS basis swap transaction market.FX instruments are measured using NBP’s fixing rates and market rates of swap points.
    FX OPTIONS, INTEREST RATE OPTIONS FX options and interest rate options are measured with the use of specific valuation mo dels characteristic for a specific option.
    For option instruments additionally market quotations are used for market variability quotations of currency pairs and interest rates.
    NBP MONEY BILLS Profitability curve method Profitability curves are developed on the basis of money market data.
    COMMODITY FORWARD/SWAP
    Commodity instruments are measured on the basis of future cash flows calculated on the basis of profitability curves characteristic for specific commodities.
    Profitability curves are built on the basis of quoted commodity futures contracts.
    Level 3: For which minimum one factor affecting the price is not observable in the market .
    Financial assets and liabilities with the fair value measured with the measurem ent models where input data is not
    based on observable market data (non -observable input data).
    Such instruments include options embedded in certificates of deposit issued by the Bank and options in the
    interbank market to hedge positions of the embedded o ptions. The fair value is determined on the basis of
    market prices of those options or an internal model subject to both observable parameters (e.g. price of the base
    instrument, secondary quotations of options) and non -observable (e.g. variability, correl ations between base
    instruments in options based on a basket). Model parameters are determined on the basis of a statistical analysis.
    At the end of 2017, a negative change in the measurement of option instruments as a result of changes to prices
    of base instruments by 1% was PLN 6 thousand .
    The group also contains the Bank’s position in commercial debt securities where apart from the parameters
    coming from market quotations are affected by non -observable volume of credit spread. The spread is based on
    the primary market price or at transaction execution. It is updated when reliable market quotations occur or
    when prices are obtained from transactions of comparable volume. The spread is also changed on the basis of
    information of a changed credit standin g of the security issuer. As at the end of 2017, the sensitivity of changed
    measurement of those assets in the case of an increase of the credit spread by 1 basis point was PLN 57
    thousand .
    Measurement method (techniques) Material observable input data
    CORPORATE BONDS Profitability curve model and risk margin Profitability curves are developed on the basis of bond market data.
    EXOTIC OPTIONS
    The prices of exotic options embedded in structured products are determined on the basis of market prices or measured with the internal model subject to both observable parameters (e.g. price of the base instrument, secondary quotations of options) and non - observable (e.g. variability, correlations between base instruments).
    The prices of exotic options embedded in structured products are acquired from the market.
    SHARES VISA INC C SERIES PRIVILEGED
    The current market value of listed ordinary shares of Visa Inc. subject to the conversion ratio and discount, considering changing prices of the shares of Visa Inc.
    Market value of the listed ordinary shares of Visa Inc.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    73
    Transfers of instruments between measurement levels as at the end of the reporting period. Transfers are made
    subject to conditions set forth in the international financial reporting standards, for instance quotation availability
    of instruments from an active market, availability of quotations of pricing factors, or impact of non -observable
    data on the fair value.
    33.2 Financial data
    Below there are carrying values of financial as sets and liabilities split into measurement categories (levels).
    Compared to the previous reporting period, there was no change to the classification and measurement
    principles of the hierarchy levels of the fair value.
    31.12.2017 Level 1 Level 2 Level 3 Total
    Financial assets
    Shares 294 0 0 294
    Bonds 85 735 0 0 85 735
    Certificates 89 0 0 89
    SWAP 0 187 694 0 187 694
    Cap floor options 0 2 100 0 2 100
    FX Swap 0 18 059 0 18 059
    FX forward 0 44 851 0 44 851
    CIRS 0 15 984 0 15 984
    FX options 0 16 766 0 16 766
    Other options 0 730 51 720 52 450
    Other instruments 9 874 18 655 0 28 529
    Financial assets held for trading 95 992 304 839 51 720 452 551
    Money bills 0 1 999 666 0 1 999 666
    Equity instruments 0 0 41 546 41 546
    Treasury bonds 9 651 360 0 0 9 651 360
    Other bonds 179 051 0 200 701 379 752
    Financial assets available for sale 9 830 411 1 999 666 242 247 12 072 324
    Interest rate transactions – SWAP 0 87 785 0 87 785
    Derivative hedging instruments 0 87 785 0 87 785
    31.12.2016 restated Level 1 Level 2 Level 3 Total
    Financial assets
    Shares 6 312 0 0 6 312
    Bonds 294 0 0 294
    Certificates 557 0 0 557
    SWAP 0 186 532 0 186 532
    Cap floor options 0 3 171 0 3 171
    FX Swap 0 32 156 0 32 156
    FX forward 0 60 051 0 60 051
    CIRS 0 60 669 0 60 669
    FX options 0 21 129 948 22 077
    Other options 0 0 28 736 28 736
    Other instruments 7 462 11 534 0 18 996


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    74
    31.12.2016 restated Level 1 Level 2 Level 3 Total
    Financial assets held for trading 14 625 375 242 29 684 419 551
    Money bills 0 2 599 538 0 2 599 538
    Equity instruments 431 0 35 210 35 641
    Treasury bonds 6 197 981 0 0 6 197 981
    Other bonds 188 456 0 353 030 541 486
    Financial assets available for sale 6 386 868 2 599 538 388 240 9 374 646
    Interest rate transactions – SWAP 0 71 684 0 71 684
    Derivative hedging instruments 0 71 684 0 71 684
    31.12.2017 Level 1 Level 2 Level 3 Total
    Financial liabilities
    Bonds 58 333 0 0 58 333
    SWAP 0 162 185 0 162 185
    Cap floor options 0 2 091 0 2 091
    FX Swap 0 63 816 0 63 816
    FX forward 0 37 675 0 37 675
    CIRS 0 16 601 0 16 601
    FX options 0 15 506 0 15 506
    Other options 0 729 51 719 52 448
    Other instruments 20 671 6 552 0 27 223
    Financial liabilities held for trading 79 004 305 155 51 719 435 878
    Interest rate swaps (IRS) 0 5 419 0 5 419
    Derivative hedging instruments 0 5 419 0 5 419
    31.12.2016 restated Level 1 Level 2 Level 3 Total
    Financial liabilities
    SWAP 0 155 885 0 155 885
    Cap floor options 0 3 171 0 3 171
    FX Swap 0 22 999 0 22 999
    FX forward 0 25 276 0 25 276
    CIRS 0 20 948 0 20 948
    FX options 0 21 848 1 098 22 946
    Other options 0 0 28 693 28 693
    Other instruments 12 289 6 107 0 18 396
    Financial liabilities held for trading 12 289 256 234 29 791 298 314
    Interest rate swaps (IRS) 0 6 119 0 6 119
    Derivative hedging instruments 0 6 119 0 6 119



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    75
    Reconciliation of changes at level 3 of fair value hierarch ry
    Movements on financial assets available for sale 31.12.2017 31.12.201 6 restated
    Opening balance 388 240 363 230
    Increases, including 25 047 59 121
    Purchases 6 336 42 029
    Change due to acquisition of demerged business of BPH 0 16 912
    Revenue recognised in income statement 216 170
    Movements on iaccrued nterest 16 921 0
    Fair value adjustment 1 574 10
    Decreases, including -171 040 -34 111
    Sale/redemption -164 046 -20 888
    Other changes recognised in income statement -838 -7 252
    Fair value adjustment -6 156 -5 971
    Financial assets available for sale 242 247 388 240
    Movements of financial assets and liabilities held for trading
    Assets Liabilities
    31.12.2017 31.12.2016 31.12.2017 31.12.2016
    Opening balance 29 684 34 555 25 492 34 555
    Increases, including 42 835 20 342 43 148 16 160
    Valuation 19 365 6 190 19 659 6 336
    Concluded transactions 23 470 14 152 23 489 9 824
    Decreases, of which: -20 799 -25 213 -16 921 -25 223
    Valuation -703 -5 377 -693 -5 370
    Settlement/redemption -20 096 -19 836 -16 228 -19 853
    Financial assets and liabilities held for trading 51 720 29 684 51 719 25 492
    In 2017 the Bank did not reclassify any financial instruments to level 3 of the fair value hierarchy.
    Fair value measurement for disclosure purposes.
    Below is presented the carrying value and fair value of assets and liabilities that are not disclosed in the statement
    of financial position at fair value.
    31.12.2017 Carrying value
    Fair value
    Level 1 Level 2 Level 3 Total
    Assets
    Cash and balances with Central Bank 965 391 965 391 0 0 0
    Amounts due from banks 898 977 0 898 977 0 0
    Loans and advances to customers 51 244 093 0 0 50 226 239 50 226 239
    Retail segment 28 234 726 0 0 27 253 218 27 253 218
    Consumer loans 16 541 861 0 0 16 145 458 16 145 458
    Loans for residential properties 9 547 786 0 0 8 942 186 8 942 186
    Consumer finance loans 2 145 079 0 0 2 165 574 2 165 574
    Corporate segment 23 009 367 0 0 22 973 022 22 973 022
    Working capital loans 12 836 975 0 0 12 863 879 12 863 879
    Investment loans 8 624 788 0 0 8 561 217 8 561 217
    Other 1 547 604 0 0 1 547 926 1 547 926
    Assets pledged as collateral 408 911 408 911 0 0 408 911
    Investment securities held to maturity 1 117 894 1 122 170 0 0 1 122 170
    Other assets 560 836 0 0 560 836 560 836


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    76
    31.12.2017 Carrying value Fair value
    Level 1 Level 2 Level 3 Total
    Liabilities
    Amounts due to banks 743 911 0 743 911 0 743 911
    Current deposits 673 0 673 0 673
    Overnight deposits 1 949 0 1 949 0 1 949
    Term deposits 300 044 300 044 0 300 044
    Own bond issues 22 766 0 22 766 0 22 766
    Received loan 120 194 0 120 194 0 120 194
    Other liabilities 220 749 0 220 749 0 220 749
    Repo 77 536 0 77 536 0 77 536
    Amounts due to customers 57 655 618 0 0 57 656 408 57 656 408
    Current deposits 32 132 056 0 0 32 132 056 32 132 056
    Term deposits 21 878 516 0 0 21 878 516 21 878 516
    Own Bank's securities issued 3 028 402 0 0 3 029 192 3 029 192
    Own bond issues 230 184 0 0 230 184 230 184
    Other liabilities 386 460 0 0 386 460 386 460
    Other liabilities 1 045 424 0 0 1 045 424 1 045 424
    Subordinated liabilities 1 914 976 0 0 1 914 976 1 914 976
    31.12.2016 restated
    Carrying value
    Fair value
    Level 1 Level 2 Level 3 Total
    Assets
    Cash and balances with Central Bank 1 082 991 1 082 991 0 0 1 082 991
    Amounts due from banks 1 364 226 0 1 366 316 0 1 366 316
    Loans and advances to customers 46 248 623 0 0 45 546 620 45 546 620
    Retail segment 25 885 197 0 0 25 378 210 25 378 210
    Consumer loans 16 224 564 0 0 16 258 120 16 258 120
    Loans for residential properties 8 407 632 0 0 7 874 080 7 874 080
    Consumer finance loans 1 253 001 0 0 1 246 010 1 246 010
    Corporate segment 20 363 426 0 0 20 168 410 20 168 410
    Working capital loans 11 114 177 0 0 10 682 290 10 682 290
    Investment loans 7 491 894 0 0 7 365 957 7 365 957
    Other 1 757 355 0 0 2 120 163 2 120 163
    Assets pledged as collateral 366 984 366 984 0 0 366 984
    Investment securities held to maturity 1 954 1 919 0 0 1 919
    Other assets 646 399 0 0 646 399 646 399
    Liabilities
    Amounts due to banks 381 235 0 428 640 0 428 640
    Current deposits 32 304 0 32 304 0 32 304
    Overnight deposits 856 0 856 0 856
    Own Bank's securities issued 20 004 0 20 004 0 20 004
    Received loan 133 549 0 180 954 0 180 954
    Other liabilities 164 710 0 164 710 0 164 710
    Repo 29 812 0 29 812 0 29 812
    Amounts d ue to customers 51 404 848 0 0 51 363 662 51 363 662
    Current deposits 25 794 022 0 0 25 791 089 25 791 089
    Term deposits 22 325 534 0 0 22 288 222 22 288 222
    Own Bank's securities issued 2 538 626 0 0 2 763 633 2 763 633
    Own bond issues 230 046 0 0 230 046 230 046
    Other liabilities 516 620 0 0 520 718 520 718
    Other liabilities 768 551 0 0 768 551 768 551
    Subordinated liabilities 1 164 794 0 0 1 164 794 1 164 794


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    77
    For many instruments, market values are not available, therefore the fair value is estimated with a number of
    measurement techniques. Measurement of the fair value of financial instruments has been made with a model
    based on estimates of the present value of future cash flows by discounting cash flows at appropriate discount
    rates.
    All model calculations contain certain simplifications and are sensitive to the underlying assumptions. Below there
    is a summary of core methods and assumptions used to estimate the fair value of financial instruments that are
    not measured at fair value.
    Receivables from customers :
    In the method applied by the Bank to calculate the fair value of receivables from customers (without overdraft
    facilities), the Bank compares the margins generated on newly granted loans (in the month preceding the
    reporting date) with the margin on the to tal loan portfolio. If the margins on newly granted loans are higher than
    the margins on the portfolio, the loan fair value is lower than its carrying value.
    Due from customers were fully classified to level 3 of the fair value hierarchy due to the appli cation of a
    measurement model with material non -observable input data or current margins generated on newly granted
    loans.
    Financial liabilities measured at amortised cost:
    The Bank assumes that the fair value of customer and bank deposits and other fin ancial liabilities maturing within
    1 year is approximately equal to their carrying value. Deposits are accepted on a daily basis and thus their terms
    and conditions are similar to the prevailing market terms and conditions of identical transactions. The m aturities
    of those items are short and therefore there is no major difference between the carrying value and fair value.
    For disclosure purposes, the Bank determines the fair value of financial liabilities with residual maturities (or
    repricing of the va riable rate) in excess of 1 year. That group of liabilities includes the Bank's own issues and
    subordinated loans. Determining the fair value of that group of liabilities, the Bank determines the present value
    on anticipated payments on the basis of prese nt percentage curves and the original spread of the issue.
    The Bank's own issues and subordinated loans have been fully classified as level 3 of fair value hierarchy due to
    the application of a measurement model with material non -observable input data, in cluding the original spread of
    the issue above the market curve. With reference to issues and subordinated loans with residual maturities (or
    interest rate repricing) under 1 year, the carrying value adequately reflects the fair value of the instrument.
    For other financial instruments, the Bank assumes that the carrying value is close to fair value. This applies to the
    following items: cash and operations with the Central Bank, assets available for sale, other financial assets, and
    other financial liabilit ies.
    34 Transactions with related entities
    The parent company of the Bank is Powszechny Zakład Ubezpieczeń S.A. (PZU S.A.) The related parties of the
    Group PZU SA and its related companies and entities related to members of the Management and Supervisory
    Board. The Bank is indirectly controlled by the Treasury.
    In the following tables show the type and value o f transactions with affiliates and subsidiaries.
    Bank’s subsidiaries are:
    Company’s name 31.12.2017 31.12.2016
    Alior Services sp. z o.o. 100% 100%
    Centrum Obrotu Wierzytelnościami sp. z o.o. 100% 100%
    Alior Leasing sp. z o.o. 100% 100%
    - Serwis Ubezpieczeniowy sp. z o.o. 100% 0%
    Meritum Services ICB SA 100% 100%


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    78
    Company’s name 31.12.2017 31.12.2016
    NewCommerce Services sp. z o.o. 100% 100%
    Money Makers TFI SA 60,16% 58,84%
    Absource sp. z o.o. 100% 100%
    There was a change in the Bank's statement of financial position in line Investments in subsidiaries amounted to
    PLN 26 666 thousand during 2017. This change results from the equity increase in subsidiaries:
    - Alior Leasing sp. O.o. - the amount of PLN 25,000 thousand,
    - NewCommerce Servic es sp. O.o. - the amount of PLN 4,500 thousand,
    - Money Makers TFI SA - the amount of PLN 166 thousand.
    Subsidiaries 31.12.2017 31.12.2016
    Assets
    Loans and advances to customers 1 025 491 370 250
    Other assets 4 540 4 760
    Total assets 1 030 031 375 010
    Liabilities
    Amounts due to customers 55 778 40 267
    Provisions 212 125
    Other liabilities 2 426 854
    Total liabilties 58 416 41 246
    Parent company 31.12.2017 31.12.2016
    Liabilities
    Amounts due to customers 76 24
    Provisions 6 4
    Total liabilities 82 28
    Subsidiaries of the parent company 31.12.2017 31.12.2016
    Assets
    Financial assets held for trading 1 382 0
    Available -for-sale financial assets 80 274 84 961
    Derivative hedging instruments 483 0
    Amounts due from banks 247 0
    Loans and advances to customers 44 41
    Other assets 38 0
    Total assets 82 468 85 002
    Liabilities and equity
    Financial liabilities held for trading 458 0
    Amounts due to customers 183 763 128 703
    Provisions 4 3
    Other liabilities 41 0
    Revaluation reserve 1 306 0
    Total liabilities and equity 185 572 128 706



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    79
    Subsidiaries 31.12.2017 31.12.2016
    Off-balance sheet liabilities granted to customers 248 789 130 972
    Relating to financing 75 801 75 230
    Guarantees 172 988 55 742
    Parent company 31.12.2017 31.12.2016
    Off-balance liabilities granted to customers 15 000 15 000
    Guarantees 15 000 15 000
    Subsidiary of the parent entity 31.12.2017 31.12.201 6
    Off-balance liabilities granted to customers 10 000 9 900
    Guarantees 10 000 9 900
    Joint control by persons related to the Group 31.12.2017 31.12.2016
    Assets
    Loans and advances to customers 7 0
    Total assets 7 0
    Liabilities
    Amounts due to customers 24 386 56 176
    Total liabilities 24 386 56 176
    Joint control by persons related to the Group 31.12.2017 31.12.2016
    Off-balance liabilities granted to customers 0 20
    Relating to financing 0 20
    Subsidiaries 01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Interest income 22 425 5 443
    Interest expense -75 -65
    Fee and commission income 7 636 3 710
    Fee and commission expense -250 0
    Other operating income 369 407
    Other operating costs -1 0
    General administrative expenses -5 677 -3 041
    Net impairment charges and write -downs -795 0
    Total 23 632 6 454
    Parent company 01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Interest income -8 0
    Fee and commission income 4 2
    General administrative expenses 0 -3
    Total -4 -1



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    80
    Subsidiaries of the parent company 01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Interest income 1 747 0
    Interest expense -4 792 -2 686
    Fee and commission income 12 241 30
    Fee and commission expense -7 0
    Trading result 115 0
    General administrative expenses 0 -1
    Total 9 304 -2 657
    Joint control by persons related to the Bank 01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Interest expense -623 -1 425
    Fee and commission income 15 10
    Total -608 -1 415
    Nature of transactions with related entities
    All transactions with related entities are performed in line with relevant regulations concerning banking products
    and at market rates.
    Interest rates on loans granted to related entities ranged from 10% to 14%, while interest rates on deposits
    ranged fro m 0 % to 3.70%.
    Transactions with the State Treasury and related entities
    The Polish Financial Supervision Authority in its communication of 6 December 2016, item 5 univocally accepted
    Poland's State Treasury as the parent entity vis -a-vis Alior Bank S A within the meaning of Art. 4.1.8.b and Art.
    4.1.14 of the Banking Act, stating that it was able to exert material impact on Alior Bank SA via Powszechny
    Zakład Ubezpieczeń SA.
    Below there are material transactions with the State Treasury and its related entities with the exception of IAS
    24.25.
    State Treasury and related entities 31.12.2017 31.12.2016
    Assets
    Financial assets held for trading 85 459 0
    Available -for-sale financial assets 10 022 542 6 586 920
    Investment securities held to maturity 1 339 186 219 855
    Amounts due from banks 293 1 605
    Loans and advances to customers 33 241 47 203
    Total assets 11 480 721 6 855 583
    Liabilities
    Financial liabilities held for trading 58 333 0
    Amounts due to banks 339 798 0
    Amounts due to customers 1 248 970 478 789
    Total liabilities 1 647 101 478 789
    State Treasury and related entities 01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Interest income 151 142 110 958
    Interest expense -18 101 -5 884
    The costs of paid tax -443 710 -366 306
    Total -310 669 -261 232


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    81
    All transactions with the State Treasury and its related entities were concluded at arm’s length.
    35 Benefits for the for senior executives
    35.1 Accounting principles
    Short -term employee benefits are those that are accounted for within 12 months of the end of the annual
    reporting period in which the employees have performed work. Apart from a base salary, short -term employee
    benefits include a non -deferred part of the variable component of cash remuneration and a deferred part of the
    cashed variable remuneration granted in phantom shares.
    Long -term employee benefits include cashed phantom shares granted in previous periods and the value of
    issued tranches of deferred s ubscription warrants in previous periods.
    Principles applicable to the variable components of remuneration of persons in managerial positions at the Bank
    The Bank has a Remuneration Policy covering all employees. The Remuneration Policy of Alior Bank SA w as
    approved by Resolution of the Supervisory Board No. 72/2017. With respect to people in managerial positions
    who affect the risk profile, the Policy has been determined on the basis of the following regulations:
     Commission Delegated Regulation (EU) No 604/2014 of 4 March 2014 supplementing Directive 2013/36/EU
    of the European Parliament and of the Council with regard to regulatory technical standards with respect to
    qualitative and appropriate quantitative criteri a to identify categories of staff whose professional activities have
    a material impact on an institution's risk profile (Text with EEA relevance);
     Regulation of the Minister of Development and Finance of 06 March 2017 on the risk management and
    internal c ontrol system, the remuneration policy, and a detailed manner of internal capital estimation at banks.
    Each person classified as a Material Risk Taker on the basis of material impact of such person on the Bank's risk
    profile within the meaning of the Dele gated Regulation.
    The remuneration of Material Risk Takers is composed of fixed remuneration and variable remuneration. The
    Bank does not grant unidentified retirement benefits to persons in managerial positions. Material Risk Takers
    agree not to use an individual hedging strategies or insurance concerning the remuneration and responsibility in
    order to undermine the effects of risk in the remuneration system applicable to them.
    Except the Persons in Control Functions, the total amount of variable remun eration is based on the assessment of
    performance of the Material Risk Takers and the organisational unit, as well as the Bank's performance in the area
    for which such person is responsible, subject to the performance of the entire Bank.
    Minimum 50% of th e variable remuneration granted to the Material Risk Taker is to serve as an incentive for
    special care for the Bank's long -term interests and is therefore composed of financial instruments related to the
    Bank's shares. The remaining part of the variable r emuneration is disbursed in cash as cash variable remuneration.
    Minimum 40% of the variable remuneration of the Material Risk Takers for each Assessment Period – and if the
    variable remuneration of such persons for the relevant Assessment Period is exceptionally high – minimum 60%
    of the variable remuneration is deferred.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    82
    35.2 Financial data
    All transactions with supervising and managing persons are performed in line with the relevant regulations
    concerning banking products and at market rates.
    Supervising, managing persons Supervisory Board Bank's Management Board
    Assets
    Loans and advances to customers 299 0 299
    Total assets 299 0 299
    Liabilities
    Amounts due to customers 7 089 560 6 529
    Total liabilities 7 089 560 6 529
    Supervising, managing persons Supervisory Board Bank's Management Board
    Off-balance liabilities granted to customers 10 0 10
    concerning financing 10 0 10
    Information on the total remuneration paid or due to the members of the Supervisory Board and Management Board 01.01.2017 - 31.12.2017 01.01.2016 - 31.12.2016
    Management Board
    short -term employee benefits 23 535 13 879
    long -term benefits 7 238 6 701
    Management Board, total 30 773 20 580
    Supervisory Board
    short -term employee benefits 1 024 1 025
    Supervisory Board, total 1 024 1 025
    Post -employment benefits 201 7
    Members of the Management Board who stopped performing their functions in 2016 and earlier 2 166
    Termination benefits 2017
    Members of the Management Board who stopped performing their functions in 201 7 and earlier 5 747
    Number of shares held by the members of the Management Board 31.12.2017 31.12.2016
    Katarzyna Sułkowska 28 612 28 612
    Total 28 612 28 612
    With reference to the Management Board, costs of remuneration also includes the cost of cash installments paid
    in this period of variable remuneration and tranches in phantom shares issued and paid in 2017.
    With the Management Board members of the 4th term of office (appointed in June and August 2017) contracts of
    employment were concluded for an indefinite period of time providing for the following:
     Th e contracts may be terminated by either Party subject to a 3 -9-month notice, effective at the end of a
    calendar month.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    83
     If the Bank terminates a contract of employment before the end of the term of office, some Members of the
    Management Board are entitled t o compensation in the amount not less than 6 times and not more than 12
    times the monthly gross basic remuneration.
     The contracts contain non -competitive clauses, under which the Members of the Management Board, upon
    termination of their employment relati onship with the Bank, must not engage in any competitive activity for
    12 months following termination of their agreements. As a result, the Members of the Management Board
    are entitled to remuneration totalling an equivalent to their gross remuneration for 12 months.
    The Extraordinary General Meeting of 5 December 2017 approved a resolution regulating the principles of
    remuneration of members of the Management Board of Alior Bank. At its meeting of 14 December 2017, the
    Supervisory Board approved new princi ples of remuneration of the Management Board based on managerial
    contracts, relating to the Act of 9 June 2016 on the remuneration of persons managing certain companies and
    individual contracts for individual Members of the Management Board:
     Management Bo ard Member’s contract for the time of performing functions;
     Termination period:
    1 month in case of performing Management Board Member function for less than 12 months effective at
    the end of calendar month;
    3 months in case of performing Management Board M ember function for at least 12 months.
     Severance pay in the amount of three times monthly salary in case of contract termination by both sides
    or termination by the Company in all cases except for negligence to perform basic Management Board
    duties in case of performing Management Board Member function for at least 12 months.
     Non -compete clause based on which Management Board Member is obliged (assuming he performed
    the function for at least 3 months) not to perform any activities deemed competitive with re ference to the
    Company for the period of 6 months since the date of contract termination. As a consequence
    Management Board Members are entitled to severance in the amount of six months salary.
    35.3 Management option scheme
    Pursuant to Resolution No. 28/2012 of the Extraordinary General Meeting of Shareholders of Alior Bank SA dated
    19 October 2012 regarding the conditional increase of the Bank's share capital and issuance of subscription
    warrants and incentive scheme regulations adopted by the resolution of Alior Bank SA Supervisory Boar d of 27
    March 2013, incentive program for 2013 -15. The plan included members of the Management Board and a group
    of Bank’s managers who were not members of the Management Board
    The assumptions of Management Option Scheme anticipated that three tranches of subscription warrants (A, B
    and C -series) and the corresponding three tranches of new shares of the Bank (D, E and F -series) with a total
    nominal value of up to PLN 33 312 500 would be issued, including:
    - up to 1 110 417 A -series subscription warrants, which shall entitle their holders to acquire up to 1 110 417 D -
    series shares of Alior Bank in a period of five years starting from the first anniversary of the first quotation of the
    Shares on the WSE;
    - up to 1 110 416 B -series subscription warrants which will entitle their holders to take up 1 110 416 E -series
    shares of Alior Bank over a period of 5 years starting from the day of the second anniversary of the first quotation
    of the Shares on the WSE;
    - up to 1 110 417 C -series subscription warrants which will entitle their holders to take up 1 110 417 F -series
    shares of Alior Bank over a period of 5 years starting from the day of the third anniversary of the first quotation of
    the Shares on the WSE.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    84
    Detai ls concerning the warrants finally awarded to the Management Board Members are presented in the table
    below:
    Name Number of A -series warrants allocated Number of B -series warrants allocated Number of C -series warrants allocated
    Sobieraj Wojciech 222 086 222 086 222 086
    Bartler Małgorzata 0 27 656 13 784
    Czuba Krzysztof 88 833 88 833 88 833
    Krzyżanowska Joanna 0 0 30 440
    Skrok Witold 71 066 88 833 88 833
    Smalska Barbara 0 0 30 440
    Sułkowska Katarzyna 88 833 88 833 88 833
    Urszula Krzyżanowska - Piękoś 9 445 18 443 36 000
    Celina Waleśkiewicz 18 321 33 312 20 000
    Total 498 584 567 996 619 249
    In connection with the rights issue, on 27 July 2016 the Supervisory Board passed a technical adjustment to the
    Management Option Scheme aimed at ensuring the economic neutrality of the scheme for the eligible persons.
    The adjustment involves calculating the decrease in the notional value of the Management Option Scheme and
    issuing an appropriate number of phantom shares with parameters similar to warrants to the eligible person s.
    The correction of the program is settled in cash.
    Number of subscription warrants
    The average share price for the completed subscription warrants
    Number of phantom shares
    The average share price for the completed phantom shares
    At the beginning of the period (01.01.2017) 2 568 564 - 1 389 832 -
    Granted during the period 0 - 0 -
    Forfeited during the period 0 - 0 -
    Completed during the period 21 078 62,85 1 146 879 52,43
    At end of period (31.12.2017) 2 547 486 - 242 953 -
    Possible to be performed at the end of the period 31.12.2017) 2 084 913 - 0 -
    Subscription warrants Phantom shares
    The average fair value of the instruments at the end of the period (PLN) 18,40 26,37
    The exercise price of the instrument (for instruments outstanding at the end of the period) (PLN) 64,57 53,19
    The average maturity date of the instrument occurring at the end of the period 10.02. 2020 14.06. 2020
    The fair value of phantom shares (as part of the SOP program) was determined based on the Black -Scholes
    option valuation model. It was assumed that stock prices change in time in accordance with the Brown's
    geometric traffic process, assuming long -term volatility of Bank's share prices and the risk -free rate. Volatility
    estimates were ma de based on historical data. The model includes the right to execute phantom shares assigned
    to series A, B and C warrants for a period of 5 years from 1, 2 and 3 years from the original issue date,
    respectively. Deferred tranches are issued in accordance with the Remuneration Policy after confirming that there
    were no events causing their reduction or suspension .



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    85
    35.4 Bonus system f or senior executives
    The Management Board is covered by the Bonus Sch eme from 2016. The objective of the Scheme is to create
    additional incentive stimuli for its participants to effectively perform the duties entrusted to them, in particular,
    managing the Bank and making efforts aimed at the continued stable development of the Bank and its capital
    group, while maintaining appropriate and effective risk management at the Bank, stability of the Bank’s
    management personnel and realization of long -term interests of the shareholders by bringing about a stable
    growth of the stock exc hange valuation of the Bank’s shares, while maintaining an increase in the net assets of the
    Bank and its companies .
    In connection with the changes in the legal and organizational structure of the Bank consisting of an acquisition
    of the demerged business of Bank BPH Spółka Akcyjna with its registered office in Gdańsk comprising the core
    business of Bank BPH excluding operations related to mortgage loans pursuant to art. 529 § 1.4 of the
    Commercial Companies Code on terms specified in the Share Purchase Ag reement, the Supervisory Board
    agreed on 29 June 2016 on the principles for the transaction bonus for the Bank’s Management Board Members
    in order to specially motivate the Bank’s Board Members to actively cooperate in the process of preparing and
    conducti ng the Transaction, to ensure the timely execution of the Transaction in line with the strategic objectives.
    The bonus can be granted and paid once the conditions related to the execution of the Transaction and the
    Operational Merger between the banks hav e been fulfilled. The Bonus was paid out in accordance with the
    provisions of the Variable Salary Component Policy .
    The other members of senior executives, with particular emphasis on those having an Impact on the Risk Profile,
    are covered by an annual bonus. With the exception of persons exercising control functions, the basis for
    determining the total amount of variable remuneration is the assessment of the results of the person having an
    impact on the risk profile and organizational unit and the resul ts of the bank in the area of responsibility of that
    person, taking into account the results of the entire Bank.
    Pursuant to the Policy of variable remuneration components binding at the time of granting remuneration, the
    variables of the Management Board and other Persons having an Impact on the Risk Profile were granted in
    financial instruments in the form of phantom shares.
    The settlement of the phantom shares shall be in cash.
    Number of phantom shares The average share price for the completed phantom shares
    At the beginning of the perid (01.01.2017) 23 446 -
    Granted during the period 325 128 -
    Forfeited during the period - -
    Realized during the period 152 189 0,01
    At the end of the period (31.12.2017) 196 385 -
    Exercisable at end of period (31.12.2017) 0 -
    Phantom shares
    The average fair value of the instrument at the end of the period (PLN) 75,52
    The exercise price of the instrument (for instruments outstanding at the end of the period) (PLN) 0,01
    The average maturity date of the instrument occurring at the end of the period 2020 -06-14
    The fair value of phantom shares is equal to the average current share price.
    Deferred tranches are paid in accordance with the Remuneration Policy after confirming that there were no
    events causing their reduction or suspension.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    86
    35.5 Share subscription program as part of the management option schame at Alior Leasing sp. o.o.
    In March 2017, by the decision of the Management Board of Alior Bank SA, the Supervisory Board and the
    Management Board of Alior Leasing Sp. o.o. was launched in the company Alior Leasing sp.o.o. management
    option schame.
    The aim of the program is to ensure the implementation of financial plans for 2017 -21 by maintaining and
    motivating the Company's management. Program participants include selected managers and members of the
    Management Board of Alior Leasing sp z o.o.
    The program is based on share option subscription agreements signed between the Participant, the Company
    and the Bank as well as share option -purchase agreements between the Participant and the Bank. The program
    assumes the transformation of the company into a joint -stock company. The issue of shares under the contracts
    would take place in the event of budget implementation and fulfillment of the conditions set out in the
    agreements in 2022 -25.
    Then, as a result of the purchase and sale's option of shares the Bank would repurchase shares at the price
    resulting from the valuation of the company according to a given methodology.
    2017 Number of options The average share price for the options performed
    At the beginning of the perid (01.01.2017) 0 -
    Granted during the period 2 799 033 -
    Forfeited during the period - -
    Realized during the period 0 n/d
    At the end of the period (31.12.2017) 2 799 033 -
    Exercisable at end of period (31.12.2017) 0 -
    The settlement of purchase / sale options of shares shall be in cash.
    options
    The average fair value of the instrument at the end of the period * (PLN) 12,ob
    The exercise price of the instrument (for instruments outstanding at the end of the period) (PLN) 1
    The average maturity date of the instrument occurring at the end of the period 2023 -09-09
    *calculated as the value of program divided by the number of options at the end of the period
    The amount of the plan value was determined based on the fair value model. The fair value of share options has
    been determined based on the Black - Scholes option valuation model. It was assumed that the price of shares
    changes in time in accordance with the Brown's geometric movement process, assuming long -term volatility of
    the Alior Leasing sha re price and the risk -free rate. The volatility estimates were made on the basis of historical
    data on the prices of reference shares of listed leasing companies.
    The condition for the implementation of the option is to realize net profit of the company in the years 2017 -2021
    budgeted and specific retention conditions .



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    87
    36 Offsetting of financial assets and liabilities
    36.1 Accounting principles
    The Bank off sets financial assets and liabilities and discloses them in the statement of financial posi tion in net
    value if it is possible to enforce the right to set off the disclosed amounts and an intention to settle them in net
    amounts or the asset and liability may be realised at the same time.
    The Bank enters into off set agreements – ISDA agreements (I nternational Swaps and Derivatives Association
    Master Agreements) and GMRA agreements (Global Master Repurchase Agreement) that provide for: set -off of
    financial assets and liabilities (close out netting) in the case of a default by any party to the agreem ent. The
    agreements are of special importance to mitigating the risk related to derivative instruments since they provide
    for netting of both payable (mitigation of settlement risk) and not yet payable liabilities of the parties (mitigation
    of pre -settlem ent risk). However, those agreements do not meet the requirements specified in IAS 32 concerning
    recognition of the set -off effects in the statement of financial condition since the set -off is subject to the
    occurrence of a specific event in the future (e vents of default).
    The exposures under derivative instruments are additionally secured with depost s placed by the counterparties
    under CSA (Credit Support Annex).
    36.2 Financial data
    31.12.2017 Total financial assets Derivative instruments Repo transactions
    Assets
    Gross value of recognised financial assets 617 767 540 336 77 431
    Gross value of financial liabilities subject to netting 0 0 0
    Net value of financial assets disclosed in the statement of financial position 617 767 540 336 77 431
    Value of financial instruments that are not subject to netting in the financial statements -531 766 -454 230 -77 536
    Received cash margin deposit -179 283 -179 283 0
    Amount of financial liabilities that do not satisfy the netting requirements in the financial statements (under signed ISDA agreements) -352 483 -274 947 -77 536
    Net value of financial assets 86 001 86 106 -105
    31.12.2017 Total financial liabilities Derivative instruments Repo transactions
    Liabilities
    Gross value of financial liabilities 518 833 441 297 77 536
    Gross value of financial assets subject to netting 0 0 0
    Net value of financial liabilities disclosed in the statement of financial position 518 833 441 297 77 536
    Value of financial instruments that are not subject to netting in the financial statements -516 253 -438 717 -77 536
    Received cash margin deposit -163 770 -163 770 0
    Amount of financial liabilities that do not satisfy the netting requirements in the financial statements (under signed ISDA agreements) -352 483 -274 947 -77 536
    Net value of financial liabilities 2 580 2 580 0
    Reconciliation of offsetting and conditionally offsetting items to the statement of financial position


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    88
    31.12.2017 net carrying amount item from the financial statements
    Carrying amount of items from the financial statements
    Carrying amount of items not disclosed in the offsetting note
    Financial assets
    Derivatives 87 785 Derivative hedging instruments 87 785 0
    Derivatives 452 551 Financial assets held for trading 452 551 0
    Repo transactions 77 431 Assets pledged as collateral 408 911 331 480
    Cash collateral received 163 770 Amounts due from banks 898 977 735 207
    Financial liabilities
    Derivatives 5 419 Derivative hedging instruments 5 419 0
    Derivatives 435 878 Financial liabilities held for trading 435 878 0
    Cash collateral received 179 283 Amounts due to banks 743 911 564 628
    31.12.2016 Total financial assets Derivative instruments Repo transactions
    Assets
    Gross value of recognised financial assets 521 018 491 235 29 783
    Gross value of financial liabilities subject to netting 0 0 0
    Net value of financial assets disclosed in the statement of financial position 521 018 491 235 29 783
    Value of financial instruments that are not subject to netting in the financial statements -407 378 -377 566 -29 812
    Received cash margin deposit -164 332 -164 332 0
    Amount of financial liabilities that do not satisfy the netting requirements in the financial statements (under signed ISDA agreements) -243 046 -213 234 -29 812
    Net value of financial assets 113 640 113 669 -29
    31.12.2016 Total financial liabilities Derivative instruments Repo transactions
    Liabilities
    Gross value of financial liabilities 334 245 304 433 29 812
    Gross value of financial assets subject to netting 0 0 0
    Net value of financial liabilities disclosed in the statement of financial position 334 245 304 433 29 812
    Value of financial instruments that are not subject to netting in the financial statements -388 187 -358 375 -29 812
    Received cash margin deposit -145 141 -145 141 0
    Amount of financial liabilities that do not satisfy the netting requirements in the financial statements (under signed ISDA agreements) -243 046 -213 234 -29 812
    Net value of financial liabilities -53 942 -53 942 0



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    89
    Reconciliation of offsetting and conditionally offsetting items to the statement of financial position
    31.12.2016 net carrying amount item from the financial statements
    Carrying amount of items from the financial statements
    Carrying amount of items not disclosed in the offsetting note
    Financial assets
    Derivatives 71 684 Derivative hedging instruments 71 684 0
    Derivatives 419 551 Financial assets held for trading 419 551 0
    Repo transactions 29 783 Assets pledged as collateral 366 984 337 201
    Cash collateral received 145 141 Amounts due from banks 1 364 226 1 219 085
    Financial liabilities
    Derivatives 6 119 Derivative hedging instruments 6 119 0
    Derivatives 298 314 Financial liabilities held for trading 298 314 0
    Cash collateral received 164 332 Amounts due to banks 381 235 216 903
    37 Legal claims
    The v alue of proceedings concerning the Bank’s liabilities or receivables pending in the 2017 did not exceed 10%
    of the Bank’s equity. According to the Bank, none of the single proceedings pending in 2017 before a court,
    arbitration authority, or public administration authority, and all proceedings jointly do not pose any threat to the
    financial liquidity of the Bank.
    In ca ses where the Bank was sued the value of the claims as at 31.12.2017 amounted to PLN 220 598 thousand
    and PLN 167 567 thousand as at 31.12.2016. The amount of provision s for disputed cases was PLN 16 024
    thousand as at the end of 2017 and PLN 8 700 thousan d as at the end of 2016.
    In previous years, the Bank offered as an intermediary investment certificates for Fundusz Inwestycje Rolne FIZAN,
    Lasy Polskie FIZAN, Vivante FIZAN and Inwestycje Selektywny FIZAN. According to the media information, there is
    a pr obability of class action lawsuit by certain clients who have purchased the previously mentioned certificates
    via the Bank. In the Bank's opinion, at the date of the financial statements, the risk a negative outcome for the
    Bank and thus significant losses on this account is lower than average at this stage, therefore, as at December 31,
    2017, the Bank did not create a provision with respect to the above risk. At the same time, a reliable estimate of
    the amount of a possible loss in case of negative outcome is not possible to be reliably estimated at this stage.
    Explanatory notes concerning risk
    Objectives and principles of risk management
    Risk management is one of the major processes in Alior Bank SA. Risk management is to ensure profitability of
    business operations, while assuring control of the risk level and its maintenance within the accepted risk appetite
    and limit system in the changing macroeconomic and legal environment. The supreme objective of the risk
    management policy is to ensure early detection and adequate management of all kinds of risk inherent to the
    pursued activity. The Bank has identified the following risk types subject to management that are inherent in its
    business:
    Risk type Note number
    credit risk 38
    Market risk in the t rading book, including: interest rate risk in the trading book and the FX risk 39.40
    liquidity risk 41
    operational risk 42


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    90
    The objectives of risk management, by applying efforts to maintain risk levels within the approved risk appetite,
    are as follows:
     protection of the shareholders’ equity,
     protection of customers’ deposits,
     support to the Bank in pursuing effective activities.
    Risk is managed within the risk management policies and covers risk identification, measurement, monitoring, and
    reporting. The above also applies to control of Treasury operations by determining and verifying the principles of
    executing, organising, and m easuring such transactions.
    Within each function, there is a clear segregation of duties and responsibilities and the rules set forth in internal
    regulations. The key role is played by the Financial Risk Department which independently drafts periodic repo rts
    using the models and risk measures approved by the Bank, and delivers them to the appropriate units.
    The risk management process is supervised by the Bank's Supervisory Board which is kept informed on the risk
    profile in the Bank and on major activiti es taken with respect to risk management. The Bank's Supervisory Board
    is supported by the following committees: the Remuneration Committee of the Supervisory Board, the Risk
    Committee of the Supervisory Board, and the Audit Committee of the Supervisor y Board. Information on the
    nature and level of risk is provided to the Supervisory Board by the Management Board with the exception of the
    results of internal control of the market risk management system which are provided by the Director of the
    Internal Audit Department.
    With respect to risk management, the Management Board of Alior Bank SA is responsible for strategic risk
    management, including supervising and monitoring the tasks taken by the Bank with respect to risk management.
    It takes major decisio ns that affect the Bank's risk profile and approves internal regulations of the Bank
    concerning risk management. In risk management, the Management Board is supported by the following internal
    committees:
     Credit Risk Committee (ICAAP)
     Asset and Liability Committee (ALCO)
     Bank’s Credit Committee (KKB)
     Operational Risk Committee (KRO)
    ALCO performs daily control over management of the market risk, including the liquidity risk. It takes all related
    decisions, unless previously restrict ed to the sole competences of the Management Board or the Supervisory
    Board.
    The duties of ALCO include, among others:
     ongoing control over management of the market risk related to the trading book and the banking book,
    including decisions in risk management for both books;
     approval of the Bank’s operational limits in money and capital markets;
     ongoing control over liquidity management at the Bank, related to the trading book and the banking book;
     recommending actions related to acquiring funding so urces for the Bank and supervising the progress of the
    funding plan;
     decisions of model portfolio management.
    At the Bank, exposure to the risk is formally mitigated with a system of limits, periodically updated by resolutions
    of the Supervisory Board or A LCO, covering all risk metrics with the levels thereof monitored and reported by the
    Bank's organisational units independent of business. There are three types of limits at the Bank that differ in terms
    of coverage and functioning: core limits (approved by the Supervisory Board), supplementary limits, additional
    limits. Risk management is focused on potential changes to the economic result; with the Bank's quality
    requirements related to the risk management process (internal control system, new product lau nch, analysis of


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    91
    the legal risk, analysis of the operational risk), non -quantifiable risks are mitigated that are related to treasury
    operations.
    The Bank estimates Value -at-Risk in relation to the market risk, using an analytical module of the treasury s ystem.
    The Bank used the parametric VaR model in compliance with JP Morgan's methodology (RiskMetrics). The
    estimated 99% 1 -day VaR may be re -scaled to other times by multiplying the variability by the root of the
    multiple of the 1 -day period (e.g. 10 -Day VaR is calculated by multiplying 1 -day VaR by √10).
    The table below presents a 10 -day VaR for the Bank split into the banking and trading book as at the end of 2017
    and 2016.
    VaR 31.12.2017 31.12.2016
    Banking book 14 430 11 849
    Trading book 928 1 909
    Total 14 985 12 314
    38 Credit Risk
    38.1 Description of the risk
    Definition of the credit risk
    The credit risk is understood as a risk of loss due to the customer's default to the Bank or a risk of decreased
    economic value of the receivables of the Bank as a result of the customer's deteriorated potential to service its
    debt.
    Objective of credit risk management
    The objective credit risk management is to reduce losses in the loan portfolio and to minimise the risk of
    occurrence of impaired credit exposu res, while maintaining the anticipated profitability level and value of loan
    portfolio.
    Management of the credit risk and its maintenance at a safe level is of fundamental importance for a stable
    operation of the Bank and the Bank . The credit risk is controlled with the regulations in force at the Bank, in
    particular lending methodologies and risk measurement models, adjusted to the customer segments, product,
    and transaction types, establishing and monitoring of collateral for loa ns, as well as the processes of monitoring
    and collecting receivables. The Bank takes measures to fully centralise and optimise the processes within the
    systemic infrastructure, while relying on available external and internal information on customers.
    Th e credit risk management system is comprehensive and integrated with the Bank's operational processes. The
    core stages of the credit risk management process include the following:
     identification;
     measurement;
     monitoring;
     reporting and control.
    Such proces s supports effective supervision over the actual and potential risks and the effective application of risk
    management methods and instruments.
    In its credit risk management system, the Bank identifies internal and external credit risk factors with manageme nt
    assigned to the relevant areas of the Bank:
     Customers – verification covers each single customer, groups of related customers, as well as identified
    homogeneous customer groups in terms of the quality of their portfolio;


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    92
     Products – covers all defined r isk types that may be inherent in each product: single instances and entire loan
    portfolios;
     Collateral – verification covers proper approval of collateral; its value and duration; correct preparation of
    documentation establishing collateral and updates of its values. In order to mitigate the credit risk, amended
    regulations are effectively implemented concerning collateral to debt and updated standards are applied in
    the processes of collateral establishment;
     Process and regulations – verification covers t he quality and effectiveness of the lending process, loan
    administration, monitoring, collecting and restructuring, as well as co -operation with external collecting entities
    and compliance with external regulations of banking regulations supporting the pro cesses;
     Systems – monitoring covers systems supporting lending, monitoring, and collecting processes, and their
    effectiveness;
     Distribution channels – verification applies to the effectiveness and loss ratio of the distribution channels
    functioning in the Bank;
     Employees – verification applies to the use of individually assigned credit competences, potential irregularities
    are detected that may occur in the lending process;
     External conditions – monitoring covers in particular: the level of interest rates, FX rates, money supply,
    unemployment rate, changes in the labour market, economic conditions;
     Correctness of the credit risk management system – verification periodically checks if the assumptions made
    with respect to the Bank’s credit risk management poli cy are correct.
    Credit risk measurement and assessment
    The level of the credit risk is limited in line with the restrictions set forth in external and internal regulations, rules
    set by the Bank, in particular concerning restrictions for credit exposures to one customer, a group of customers
    related by capital and organisation and economic sectors.
    The Bank analyses the risk, both on an individual and portfolio basis, and it takes actions aimed at:
     minimising the level of the credit risk of a single loan with an assumed profitability level;
     reducing the overal l credit risk resulting from holding a specific loan portfolio by the Bank.
    In the mitigation process of the risk level of individual exposures, when approving a loan or another credit
    product the Bank:
     assesses the customer's creditworthiness and credit capacity, including for example a detailed analysis of the
    exposure repayment sources;
     assesses the approved collateral, including verification of its formal legal and economic condition, including for
    example LTV adequacy.
    Additionally, in order to reinf orce risk control of individual exposures, the Bank regularly monitors customers by
    taking appropriate actions to mitigate risk, if any increased risk factors are identified.
    In order to mitigate the credit risk level of its portfolio, the Bank:
    1. sets and c ontrols concentration limits;
    2. monitors early warning signals within the EWS system;
    3. regularly monitors the loan portfolio, controlling all material parameters of the credit risk (e.g. PD, LTV, DTI,
    CoR, LGD, NPL, Coverage);
    4. regularly carries out stress tes ts.
    The Bank grants credit products in line with the lending methodologies appropriate for the customer segment
    and product type. The assessment of the customer's creditworthiness preceding credit decisions is performed
    with a system supporting the credit proc ess, scoring or rating tools; external information (e.g. CBD DZ, CBD BR,
    BIK, BIG bases), and internal bases of the Bank. Credit products are granted in line with the Bank's operational


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    93
    procedures, specifying the steps to take in the lending process, the r esponsible units of the Bank, and the tools
    applied.
    Credit decisions are taken in line with the credit approval system prevailing at the Bank (authority levels are suited
    to the risk level related to each customer and transaction).
    In order to regularly a ssess the assumed credit risk and to mitigate potential losses on the existing loan exposures,
    during the lending term the Bank monitors the customer's condition by identifying early warning signals and
    periodic individual reviews of loan exposures.
    The Bank pursues a policy of dividing the functions related to customer acquisition and sale of credit products
    from the functions related to the assessment of the credit risk, approving credit decisions, or monitoring of credit
    exposures.
    Credit risk monitor ing and reporting
    Regular protection of the quality of the loan portfolio is ensured by:
     ongoing monitoring of timely debt servicing;
     periodic reviews, in particular of the customers’ financial and economic condition and the value of the
    accepted collater al;
    The monitoring of individual customers covers the following areas:
     the customer;
     the score assigned to the debtor;
     the agreement that generated the risk exposure;
     the approved collateral;
     the amounts of impairment allowances and provisions, if any.
    Mon itoring of business customers covers in particular:
     the customer and its related entities;
     the sector of its business;
     the score assigned to the debtor;
     verification, if the customer complies with the covenants of the loan agreement that has generated the loan
    exposure;
     the approved collateral (verification of the existence and value of the collateral);
     market conditions affecting the customer's creditworthiness;
     the amounts of impairment allowances and provisions, if any.
    All credit exposures in the busine ss customer segment are additionally subject to portfolio monitoring as follows:
     assessment on the basis of a dedicated model of behavioural assessment; and
     the identification process of early warning signals.
    All loan exposures of individual and busines s customers are subject to monitoring and ongoing classification to
    the appropriate process paths. In order to improve the monitoring and control of the operational risk, adequate
    solutions have been implemented in the Bank's credit systems. Systemic tools have been consolidated to ensure
    the effective use of the monitoring procedures, applicable to all accounts.
    Monitoring of exposures classified as standard and increased risk is applied regularly – such exposures could
    intensify activities at pre -enforcement or collection proceedings. Accounts are subject to the assessment for a
    possibility to restructure the debt in order to mitigate the Bank's losses due to loan obligations not repaid on
    time.
    The monitoring process ends with recommendations concerning the strategy of further co -operation with the
    customer.
    Monthly and quarterly reports on the credit risk are prepared at Alior Bank. Credit risk reporting covers periodic
    information on exposur es of the loan portfolio risk.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    94
    Credit risk managemen t tools
    Credit scoring is a tool supporting credit decisions for individual customers and micro enterprises while credit
    rating is an instrument supporting credit decisions in the segment of SMEs and large enterprises.
    The scoring and rating systems provi de for:
     credit risk control with an assessment of the customers’ creditworthiness;
     unification of the criteria underlying credit decisions ensuring impartiality and objectivity;
     shortened time of credit decisions and guarantee of more effective assessment of loan applications (increased
    productivity and reduced handling costs);
     simplification of the assessment of loan applications due to process automation;
     customer segmentation by risk;
     monitoring and projection of the loan portfolio quality;
     easier assess ment of the credit policy and faster modifications to decision processes serving to assess loan
    applications of business and individual customers.
    The Bank regularly monitors the correct functioning of the scoring and rating models. The objective of the re view
    is to verify if the applied models appropriately differentiate risks and the estimated risk parameters appropriately
    reflect the relevant risk aspects. Additionally, functional controls are applied to verify the correct application of
    models in the cr edit process.
    The scoring models applied now have been developed internally by the Bank. In order to reinforce the risk
    management process of the models applied in the Bank, there is a team acting as an independent validation unit.
    The application of the scoring model results in:
     value of the decision -taking score of relevant customers/applications;
     scoring class with an assigned theoretical PD;
     scoring recommendation to the loan application in the form of: “Approval” or “Rejection”.
    The model type used t o assess individual customers is subject to the type and nature of the requested credit
    product, the credit history, and the history of cooperation with the Bank. The model selected to assess business
    customers is subject to the customer being classified i n a specific segment on the basis of their sales income.
    Scoring/rating results affect the standard risk costs charged on each transaction.
    The knowledge of potential hazards related to exposure concentration at the Bank supports correct asset and
    liabilit y management and development of a safe structure of the loan portfolio. In order to prevent adverse
    events resulting from excessive concentration, the Bank mitigates the concentration risk by setting limits and
    applying concentration standards resulting fr om external regulations and internal concentration standards.
    The Bank has launched:
     identification rules of areas of the concentration risk related to lending activities;
     a process of limit setting and updating;
     a process of limit management with a mode of procedure, if any limit level is exceeded;
     a process to monitor the concentration risk, including reporting;
     control over the concentration risk management process.
    In the process of setting and updating the concentration risk, the Bank takes into accou nt:
     information on the credit risk level of the limited portfolio segments and their impact on compliance with the
    assumptions underlying the risk appetite with respect to the quality of the loan portfolio and the capital
    position of the Bank;
     sensitivit y of the limited portfolio segments to changes in the macroeconomic environment, reviewed regularly
    in the stress tests held;


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    95
     reliable economic and market information concerning each concentration of exposures, in particular
    macroeconomic, sectoral ratios, information on economic trends, subject to projected interest rates, FX rates,
    analysis of political risk, sovereign and financial institutions ratings;
     reliable information on the economic condition of entities, industries, sectors, general economic info rmation,
    including the economic and political situation of countries, as well as other information required to assess the
    concentration risk inherent in the Bank;
     interactions between various risk types – credit, market, liquidity, and operational risks.
    Application of risk mitigation techniques – collateral
    The Bank establishes collateral in a manner adequate to the credit risk to which the Bank is exposed and flexible
    vis JaJvis customers’ potential. No collateral releases the Bank from its obligation to verify the customer's
    creditworthiness.
    Loan collateral is to secure that the Bank will have the loan repaid along with interest and expenses due should
    the borrower fail to repay on the contractual dates and any restructuring activities fail to generate the anticipated
    effects.
    In particular, the Bank accepts the following collateral:
     guarantees, re -guarantees, and sureties;
     blocked items;
     registered pledge;
     transfer of title;
     assignment of receivables;
     assignment of loan insurance;
     bill of exchange;
     mortgages;
     powers of attorney to the bank account;
     security deposits (as a specific form of collateral).
    Collateral is verified in the credit process for its effectiveness to secure the Bank, its market value is measured as
    its realisable value in a potent ial enforcement process.
    38.2 Financial data
    Maximum credit risk exposure
    Items in the statement of financial position 31.12.2017 31.12.2016 restated
    Current account with the central bank 253 092 16 959
    Financial assets held for trading 452 257 413 239
    Bonds 85 735 294
    Certificates 89 557
    Interest rate transactions 189 794 189 703
    FX transactions 95 660 174 953
    Other options 52 450 28 736
    Other instruments 28 529 18 996
    Financial assets available for sale 12 030 778 9 339 005
    Debt instruments 12 030 778 9 339 005
    issued by the State Treasury 9 651 360 6 197 981
    issued by other state institutions 0 0
    issued by monetary institutions 2 087 331 2 691 128


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    96
    Items in the statement of financial position 31.12.2017 31.12.2016 restated
    issued by other financial institutions 91 387 156 746
    issued by enterprises 200 700 293 150
    Derivative hedging instruments 87 785 71 684
    Amounts due from banks 898 977 1 364 226
    Loans and advances to customers 51 244 093 46 248 623
    Retail segment 28 234 726 25 885 197
    Consumer loans 16 541 861 16 224 564
    Loans for residential properties 9 547 786 8 407 632
    Consumer finance loans 2 145 079 1 253 001
    Corparate segment 23 009 367 20 363 426
    Working capital loans 12 836 975 11 114 177
    Investment loans 8 624 788 7 491 894
    Other 1 547 604 1 757 355
    Assets pledged as collateral 408 911 366 984
    Other financial assets 560 697 646 399
    Total 65 936 590 58 467 119
    Off-balance sheet items 31.12.2017 31.12.2016
    Granted off -balance liabilities 12 468 922 14 157 110
    Concerning financing 11 329 663 13 054 317
    Financial guarantees 1 139 259 1 102 793
    Financial assets not overdue
    Internal rating classes
    The rating system covers, among others, the business customer segment which contains one common rating
    scale of PD composed of 25 classes (Q01 -Q25) that replaced the previous scoring scale for micro enterprises that
    do not have comprehensive accounting systems (classes B1 -B10) and five rating scales for enterprises with ful l
    reporting systems (classes A -J).
    In the individual customer segment, two scoring classes are used: (i) scale M1 – M10 for mortgage loans and (ii)
    scale K1 – K10 for l oans other than mortgage loans.
    Risk class 31.12.2017 31.12.2016
    Overdue receivables and without impairment
    Retail segment
    Mortgage loans, cash loans, credit cards, overdraft in ROR
    (1 – best class, 6 – worst class) 1 506 668 601 987
    2 527 016 603 978
    3 648 291 736 933
    4 734 377 828 111
    5 41 667 47 857
    6 3 458 6 424
    Loans, credit cards, overdraft in ROR – standard process
    (K1 – best class, K10 – worst class) K1 1 466 149 662 345
    K2 1 047 917 641 286
    K3 2 011 931 1 170 940
    K4 1 855 704 1 466 667


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    97
    Risk class 31.12.2017 31.12.2016
    K5 1 902 177 1 570 465
    K6 1 625 734 1 456 033
    K7 768 509 676 328
    K8 144 778 218 700
    K9 16 943 33 041
    K10 1 414 3 206
    Mortgage loans
    (M1 – best class, M10 – worst class) M1 3 970 3 586
    M2 29 638 28 188
    M3 155 952 138 149
    M4 591 155 510 387
    M5 1 530 739 1 287 607
    M6 2 106 103 1 720 101
    M7 1 665 908 1 323 442
    M8 1 097 608 865 187
    M9 443 864 346 980
    M10 98 662 81 616
    No scoring 4 291 879 1 936 711
    Total retail segment 25 318 211 18 966 255
    Corporate segment
    Expiring portfolio covered with obsolete models
    (1 – best class, 6 – worst class) 1 585 1 048
    2 1 416 7 029
    3 2 638 2 573
    4 903 3 474
    5 0 0
    Models for micro enterprises with incomplete accounting systems and Models for entities using books of account, car dealers and developers
    (Q01 – best class, Q25 – worst class)
    Q01 8 095 0
    Q02 22 334 896
    Q03 54 502 20 147
    Q04 112 595 104 890
    Q05 41 278 212 485
    Q06 1 447 330 402 232
    Q07 399 118 575 500
    Q08 616 210 1 058 323
    Q09 909 396 509 064
    Q10 1 234 773 497 794
    Q11 1 579 233 1 035 165
    Q12 1 655 822 1 706 950
    Q13 2 037 405 1 148 374
    Q14 2 289 747 1 955 724
    Q15 1 211 772 900 742
    Q16 1 380 704 990 141
    Q17 1 106 316 657 114
    Q18 814 952 517 857
    Q19 575 489 417 234


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    98
    Risk class 31.12.2017 31.12.2016
    Q20 436 462 248 403
    Q21 274 312 214 957
    Q22 215 459 252 574
    Q23 128 625 55 150
    Q24 118 513 85 344
    Q25 40 472 36 340
    No rating 1 256 275 1 108 199
    Total corporate customers 19 972 731 14 725 722
    Overdue receivables and without impairment 45 290 942 33 691 977
    Not overdue receivables with impairment 988 015 294 948
    Retail segment 68 199 59 976
    Corporate segment 919 816 234 972
    Total receivables from customers not overdue 46 278 957 33 986 925
    Financial assets available for sale
    issued by non -financial entities 115 194 219 735
    issued by other financial entities 91 387 96 868
    Financial assets available for sale, not overdue and without impairment 206 581 316 603
    Financial assets available for sale or not overdue with impairment 85 506 73 415
    Total financial assets available for sale, not overdue 292 087 390 018
    Financial assets held for trading
    Derivative instruments Q01 15 0
    (Q01 – best class, Q25 – worst class) Q02 0 5 802
    Q03 6 504 29
    Q04 988 8 075
    Q05 480 1 400
    Q06 3 653 8 585
    Q07 714 4 107
    Q08 2 348 24 995
    Q09 9 743 11 283
    Q10 12 234 8 375
    Q11 14 226 13 611
    Q12 15 737 13 858
    Q13 18 223 9 510
    Q14 3 540 23 737
    Q15 8 051 8 860
    Q16 3 873 12 287
    Q17 13 245 8 605
    Q18 4 755 4 416
    Q19 4 433 4 655
    Q20 4 309 3 204
    Q21 6 038 4 320
    Q22 1 257 1 277
    Q23 2 283 516
    Q24 2 078 8 830
    Q25 300 309
    No scoring 5 618 15 451
    Shares 294 6 312
    Bonds 85 735 294
    Certificates 89 557
    Total financial assets held for trading 230 763 213 260



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    99
    Due to a different rating model in the demerged part of Bank BPH acquired by Alior Bank SA, th e data is
    disclosed separately.
    Risk group average PD 31.12.2016
    Retail segment
    1-3 0.10% 4 648
    4 (4+, 4, 4 -) 0.50% 145 292
    5 (5+, 5, 5 -) 1.30% 736 766
    6 (6+, 6, 6 -) 3.20% 2 497 289
    7 (7+, 7, 7 -) 8.20% 501 771
    8 (8+, 8) above 20% 149 013
    Impaired portfolio (8 -, 9, 10) 4
    No rating 19 029
    Total retail segment 4 053 812
    Corporate segment
    1-3 0.10% 184 068
    4 (4+, 4, 4 -) 0.50% 903 654
    5 (5+, 5, 5 -) 1.30% 1 349 918
    6 (6+, 6, 6 -) 3.20% 695 052
    7 (7+, 7, 7 -) 8.20% 159 273
    8 (8+, 8) above 20% 18 556
    Impaired portfolio (8 -, 9, 10) 96 116
    No rating 63 627
    Total corporate segment 3 470 264
    Overdue receivables and without impairment 7 524 076
    Not overdue receivables with impairment 200 186
    Retail segment 47 044
    Corporate segment 153 142
    Total receivables from customers, not overdue 7 724 262
    Financial assets held for trading
    1-3 0,1% 1 409
    4 (4+, 4, 4 -) 0,5% 4 418
    5 (5+, 5, 5 -) 1,3% 12 728
    6 (6+, 6, 6 -) 3,2% 6 846
    7 (7+, 7, 7 -) 8,2% 150
    8 (8+, 8) above 20% 1 464
    No rating 88
    Total financial assets held for trading 27 103



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 0
    External rating classes
    Portfolio/Rating AAA AA- to AA+ A- to A+ BBB - to BBB+ BB- to BB+ B- to B+ Without rating 31.12.2017
    Due from banks 0 117 650 568 505 6 544 14 585 0 191 693 898 977
    Available for sale, of which: 0 0 11 946 993 0 0 0 91 387 12 038 380
    Debt securities 0 0 11 925 588 0 0 0 91 387 12 016 975
    issued by the Central Bank 0 0 1 999 666 0 0 0 0 1 999 666
    Issued by the State Treasury 0 0 9 838 257 0 0 0 0 9 838 257
    issued by banks 0 0 87 665 0 0 0 0 87 665
    Issued by other financial entities 0 0 0 0 0 0 91 387 91 387
    Equity instruments 0 21 405 0 0 0 0 21 405
    Issued by other financial entities 0 0 21 405 0 0 0 0 21 405
    Investment securities kept until maturity 0 0 1 117 894 0 0 0 0 1 117 894
    Assets hedging liabilities 0 0 408 188 0 0 0 723 408 911
    Derivative instruments 0 25 202 732 9 019 0 0 10 012 221 788
    Total 0 117 675 14 244 312 15 563 14 585 0 293 815 14 685 950
    Portfolio/Rating AAA AA- to AA+ A- to A+ BBB - to BBB+ BB- to BB+ B- to B+ Without rating 31.12.2016
    Due from banks 0 88 791 1 124 622 84 655 3 394 64 854 1 366 316
    Available for sale, of which: 0 0 8 906 021 0 0 0 78 607 8 984 628
    Debt securities 0 0 8 889 109 0 0 0 59 880 8 922 933
    issued by the Central Bank 0 0 2 599 538 0 0 0 0 2 599 538
    issued by the State Treasury 0 0 6 197 981 0 0 0 0 6 197 981
    issued by banks 0 0 91 590 0 0 0 0 91 590
    issued by other financial entities 0 0 0 0 0 0 59 880 0
    Equity instruments 0 0 16 912 0 0 0 0 16 912
    issued by other financial entities 0 0 16 912 0 0 0 16 912
    Investment securities kept until maturity 0 0 1 954 0 0 0 0 1 954
    Assets hedging liabilities 0 0 365 732 0 0 0 1 252 366 984
    Derivative instruments 0 33 143 001 15 288 0 0 20 866 179 188
    Total 0 88 824 10 541 330 99 943 3 394 0 165 579 10 899 070
    Overdue loans and advances to customers
    31.12.2017 up to 1 month 1 to 3 months, 3 months to 1 year 1 to 5 years above 5 years Total
    Receivables, without impairment 2 080 147 714 088 119 320 197 063 15 805 3 126 422
    Retail segment 1 487 219 472 567 8 479 15 142 1 408 1 984 814
    Business segment 592 928 241 520 110 842 181 922 14 396 1 141 608
    Impaired receivables 79 040 132 754 668 644 865 626 92 650 1 838 713
    Retail segment 36 012 72 653 316 053 423 481 15 303 863 502
    Business segment 43 028 60 100 352 591 442 145 77 347 975 211
    Total receivables 2 159 187 846 841 787 964 1 062 689 108 455 4 965 135



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 1
    31.12.2016 up to 1 month 1 to 3 months, 3 months to 1 year 1 to 5 years above 5 years Total
    Receivables, without impairment 2 184 687 536 693 119 183 130 302 3 250 2 974 116
    Retail segment 1 519 443 404 861 12 907 33 458 539 1 971 208
    Business segment 665 244 131 832 106 276 96 844 2 711 1 002 908
    Impaired receivables 172 862 137 040 521 439 718 336 13 644 1 563 320
    Retail segment 51 155 81 415 289 363 360 680 4 289 786 902
    Business segment 121 707 55 625 232 076 357 656 9 355 776 418
    Total receivables 2 357 548 673 733 640 623 848 637 16 894 4 537 436
    Loans subject to forbearance
    As forbearance the Bank treats actions aimed at modifying contractual terms and conditions as agreed with the
    debtor or issuer, due to their difficult financial condition (restructuring introducing easements that would not have
    been accepted otherwise). The objective of forbearance efforts is to restore the debtor’s or issuer's potential to
    meet their obligations vis -a-vis the Bank and to maximise the effectiveness of irregular loan manag ement –
    obtaining maximum recoveries, while minimising the related costs.
    In the restructuring process of Individual Customers, the Bank applies the following tools:
     extension of the lending period. Extended lending periods result in reduced monthly princ ipal and interest
    instalments and it is possible up to 120 months (for unsecured products), irrespective of the original lending
    period. If within such restructuring, the lending period is extended once to the maximum period, the tool may
    not be used again in the future. When the lending period is extended, certain restrictions are taken into
    account as specified in the product features, e.g. the borrower's age.
     granting a grace period in repayment (of an instalment in full or in part). During the grace per iod in
    repayment of the principal and interest instalments, the borrower is not obliged to make any payments under
    the agreement. The loan repayment period may be extended by the term of a grace period (this is not
    identical to the extension of the lending period). A grace period of a full instalment may be applied by up to 3
    months and a grace period of the principal part of instalment – up to 6 months. The maximum grace period
    may be 6 months within 2 consecutive years (24 months) of the date of the restr ucturing annex;
     consolidation of several obligations at w Alior Bank, including modifications to limit in LOR
    accounts/unauthorised debit in ROR/KK, into an instalment loan. Such consolidation converts a number of
    obligations under various contracts into o ne obligation. The product resulting from consolidation is repaid in
    monthly instalments on the basis of an agreed repayment schedule. The parameters of the product activated
    as a result are compliant with the features of cash loans/consolidation loans.
    In specific instances, other tools may be used.
    In the restructuring process of business customers no restrictions have been made as to the applied
    forbearance practices. due to the specific nature of the customers, the most frequently applied tools include:
     agreement by modifying the repayment schedule of the overdue exposures (after the repayment date or
    termination). This consists in transfer of the debt from one or more exposures to a non -revolving account with
    potential repayment schedules: settling the entire debt over time or settling a part of the debt over time with
    the remaining part repayable at the end of period;
     an annex reducing the limit in revolving loans. This consists in a systematic reduction of the credit limit (most
    often on a monthly basi s) by an amount specified in the annex;
     An annex modifying the repayment period/instalment amount or grace period for the principal/interest.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 2
    Reporting of the quality of the restructured loan portfolio covers reporting at the levels of individual overdue
    baskets when a restructuring decision has been taken, or at an aggregated level. Calendar months are the core
    reporting periods.
    With respect to the exposures subject to forbearance, the bank applies stricter criteria to identify impairment
    indicators. Apart from a standard catalogue of the indicators, with respect to such exposures, additional criteria
    are applied, defined as the occurrence of one of the following situations at the time the forbearance decision is
    made:
     delay in excess of 30 days;
     other impairment indications;
     assessment by an analyst that hazards exist to timely repayment (in case of individual customers);
     assessment of the cus tomer's economic and financial condition as sub -standard or worse (in case of business
    customers).
    In 2014 the Bank implemented a mechanism of marking the entry and exist in the forbearance status, in
    compliance with “EBA FINAL draft Implementing Technical Standards On Supervisory reporting on forbearance
    and non -performing exposures under article 99(4) of Regulation (EU) No 575/2013”. The modifications did not
    affect the method to identify impairment and the conditions to reverse losses. Having identified impairment
    indicators to exposures subject to forbearance practices, the Bank applies the principle that 3 consecutive timely
    repayments incompliance with the new schedule are accepted as disappearance of impairment indicators.
    The Bank does not different iate its approach to identifying impairment on the type of forbearance granted to
    customers. All types of forbearance are subject to additional stricter criteria of impairment identification.
    Loans to customers subject to forbearance 31.12.2017 31.12.2016
    Retail segment 139 173 183 788
    without identified impairment 42 547 66 287
    with identified impairment 203 210 293 305
    IBNR -229 -655
    impairment allowances -106 355 -175 149
    assessed individually 0 0
    assessed as a portfolio -106 355 -175 149
    Corporate segment 484 955 615 948
    without identified impairment 231 164 188 735
    with identified impairment 442 811 635 651
    IBNR -203 -1 856
    impairment allowances -188 817 -206 582
    assessed individually -141 409 -156 462
    assessed as a portfolio -47 408 -50 120
    Total net receivables 624 128 799 736
    Loans to customers subject to forbearance 31.12.2017 31.12.2016
    with identified impairment 350 849 547 225
    of which: collateral value 204 822 339 707
    without identified impairment 273 279 252 511
    of which: collateral value 206 068 143 256
    not overdue 105 620 109 180
    overdue 167 659 143 331
    Total 624 128 799 736


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 3
    Loans granted to customers subject to forbearance by geographical region 31.12.2017 31.12.2016
    dolnośląski 25 915 20 609
    kujawsko -pomorski 36 477 16 068
    lubelski 18 510 25 208
    lubuski 52 510 24 605
    łódzki 40 351 38 465
    małopolski 112 763 135 912
    mazowiecki 156 129 125 188
    opolski 13 149 12 924
    podkarpacki 10 734 14 014
    podlaski 8 109 7 041
    pomorski 30 521 272 732
    śląski 43 813 45 803
    świętokrzyski 5 028 3 836
    warmińsko -mazurski 16 587 10 888
    wielkopolski 48 167 39 828
    zachodniopomorski 5 365 6 615
    Total net receivables 624 128 799 736
    Change of carrying value of loans to customers that are subject to forbearance 31.12.2017 31.12.2016
    Net carrying value at the beginning of period 799 736 356 019
    change due to acquisition of the demerged part of BPH 0 307 878
    Impairment allowances 86 559 -34 609
    Gross carrying value of loans and borrowings derecognised in the period -398 100 -46 103
    Gross carrying value of loans and borrowings newly recognised in the period 196 655 235 434
    Other changes -60 722 -18 883
    Net carrying value at the end of period 624 128 799 736
    In 2017 and 2016 the amount of interest income on loans were subject to forbearance amounted to PLN 34 977
    thousand and PLN 30 114 thousand, respectively.
    Concentration
    Ten largest borrowers Currency 31.12.2017 Currency 31.12.2016
    Company 1 EUR,PLN 932 642 EUR,PLN 365 461
    Company 2 PLN 240 000 EUR,PLN 240 607
    Company 3 PLN 234 010 EUR 145 992
    Company 4 PLN 229 973 EUR 142 639
    Company 5 PLN 223 184 PLN 124 800
    Company 6 EUR,PLN 216 398 EUR 121 210
    Company 7 PLN 199 979 PLN 115 853
    Company 8 PLN 145 032 EUR 114 255
    Company 9 EUR 136 358 PLN 106 047
    Company 10 EUR 132 064 PLN 104 703
    The table below presents the exposures to the business customers of Alior Bank split by sector.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 4
    Section by PKD 2007 Section name 31.12.2017 31.12.2016
    Section A Agriculture, forestry, hunting, and fishery 577 801 464 692
    Section B Mining and quarrying 208 747 224 400
    Section C Manufacturing 5 900 601 6 876 624
    Section D: Electricity, gas, steam and air conditioning supply 1 582 734 2 115 382
    Section E Water supply, sewage and waste management, and remediation 142 655 153 724
    Section F Construction. 5 738 267 5 223 464
    Section G Wholesale and retail trade; repair of motor vehicles and motorcycles 6 073 200 5 931 545
    Section H: Transportation and storage 1 392 438 946 704
    Section I Accommodation and food service activities 1 789 713 1 696 535
    Section J Information and communication 1 241 417 1 059 039
    Section K Financial and insurance activities 3 171 579 1 864 667
    Section L Real estate activities 5 831 925 4 730 084
    Section M Professional, scientific and technical activities 1 030 381 1 058 141
    Section N: Administrative and support service activities 744 037 615 039
    Section O: Public administration and defence; compulsory social security 6 297 1 753
    Section P: Education 121 337 120 375
    Section Q: Human health and social work activities 638 378 619 156
    Section R Arts, entertainment, and recreation 512 359 358 481
    Section S Other service activities 147 915 100 285
    Section U: Activities of extraterritorial organisations and bodies 4 3 349
    Total 36 851 785 34 163 439
    The above exposures to business customers include:
     loan amount (on - and off -balance sheet exposure, net of interest and charges and without any write -offs)
    reduced by provided security deposits;
     unauthorised current account overdraft;
     treasury limits are reduced by provided security deposits, including debt securities in the Bank's books issued
    by an entity in the relevant section.
    As at the end of 2017, the amount of exposures falling within internal concentration limits was amounted to PLN
    67 637 686 thousand, of which PLN 36 85 1 735 thousand were exposures t o business customers and PLN 3 0 785
    901 thousand to individual customers. As at the end of 2016, the amount of exposures falling within internal
    concentration limits wa s amounted to PLN 61 908 393 thousand, of which PLN 34 163 439 thousand were
    exposures t o business customers and PLN 27 744 954 thousand to individual customers.
    Country 31.12.2017 31.12.2016
    Poland 66 603 948 60 987 815
    United Kingdom 220 924 298 043
    Luxembourg 464 062 228 971
    Cyprus 101 683 118 813
    Sweden 85 564 87 117
    Hungary 59 581 78 068
    Switzerland 23 557 27 013
    Germany 19 387 19 948


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 5
    Country 31.12.2017 31.12.2016
    Ireland 20 242 18 806
    The Netherlands 12 293 13 884
    Other countries 26 445 29 915
    TOTAL 67 637 686 61 908 393
    39 Interest rate risk
    39.1 Description of the risk
    Definition of the interest rate risk
    The interest rate risk is defined (including the interest rate risk in the banking book) as a risk of adverse impact of
    market interest rates on the current results or the net present value of the Bank's equity. Due to its policy to
    mitigate the risks in the trading book, the Bank attaches special importance to specific interest rate risk aspects
    related to the banking book, such as:
     mismatch risk of repricing periods;
     base risk, or the impact of non -parallel change of various reference indices with a similar repricing time on the
    Bank's re sults;
     risk of profitability curve;
     risk of customers’ options.
    Additionally, with respect to the interest rate risk, the Bank pays special attention to modelling accounts with
    unspecified maturities and interest rates set by the Bank (e.g. for current deposits), as well as the impact of non -
    interest items in the risk (e.g. equity, fixed assets).
    Objective of interest rate risk management
    The objective of interest rate risk management is to mitigate potential losses due to changes of market interest
    rate s to the acceptable level with an appropriate structure of on - and off -balance sheet items.
    In order to manage the interest rate risk, the Bank differentiates between trading activity covering securities and
    derivative instruments, concluded for commercial purposes, and banking activity covering other securities, own
    issues, loans, deposits, and derivative transactions uses to hedge the risk of the banking book risk.
    Measurement and assessment of the interest rate risk
    Interest rate of the banking portfolio is measured and assessed by limiting the volatility of net interest income (NII)
    and by l imiting changes to the economic value of the Bank's equity (EVE). Apart from NII and EVE, in its interest
    rate measurements the Bank applies BPV and VaR and stress tests.
    BPV identifies the estimated change to the measurement of a transaction/position as a result of a shift of the
    profitability curve at the relevant point by 1bp. The BPV value is measured on a daily basis at each point of the
    curve with reference to each currency.
    VaR identifies the potential loss on the existing positions, related to chan ges of interest rates, while maintaining
    the assumed confidence level position maintenance period. In order to calculate VaR, the Bank applied a
    variance -covariance method with the confidence level of 99% The value is determined daily for each area
    respon sible for risk assumption and management, individually and jointly.
    Monitoring and reporting of the interest rate risk
    Regular reports are made at Alior Bank of the following:
     Interest rate risk measurement level,
     utilisation degree of the internal capital allocated to the interest rate risk,


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 6
     utilisation degree of internal limits and threshold values for the interest rate risk,
     results of stress tests.
    Reports concerning the interest rate risk are made on a daily , weekly, monthly, and quarterly basis.
    Tools for interest rate risk management
    The core of interest rate risk management tools at Alior Bank are as follows:
     internal procedures relating to interest rate risk management;
     interest rate risk metrics like NII, EVE, VaR, BPV;
     limits and threshold values for each interest rate risk metric;
     stress tests (including scenario analyses covering, among other, the impact of specified changes to interest
    rates on future net interest income and the economic value of equity).
    39.2 Financial data
    Sensitivity metrics
    BPV estimates as at 31 December 2017 and 31 December 2016 are presented in the tables below:
    BPV at the end of 2017 split into tenors:
    Currency Up to 6 months 6 months to 1 year 1-3 years 3-5 years 5-10 years Total
    PLN 3.4 192.5 195.7 95.1 -90 396.7
    EUR -0.5 -8.1 61.3 90 -4.5 138.2
    USD 1 8.1 -2.2 -0.2 -1 5.6
    CHF -1 0.1 -1 0 0 -1.8
    GBP -4 2 0 0 0 -2
    Other -1 2.1 -1 -0.2 0 -0.3
    Total -1.8 196.7 253 184.7 -96 536.5
    BPV at the end of 2016 split into tenors:
    Currency Up to 6 months 6 months to 1 year 1-3 years 3-5 years 5-10 years Total
    PLN -19 305.4 605 111.3 -434 568.9
    EUR -16 0.3 -29 -43.7 -35 -123.1
    USD 13 11.1 -13 -0.2 -1 9.9
    CHF -1 -0.3 -2 -0.2 0 -2.7
    GBP 0 2.5 0 0 0 2.8
    Other -2 -5 3 -0.1 0 -3.9
    Total -25 314 565 67 -469 452
    BPV statistics
    01.01.2017 -31.12.2017 01.01.2016 -31.12.2016
    Book Minimal Medium Maximum Minimal Medium Maximum
    Banking book -1,298.3 -575 138.8 -2,459 -753.75 -375
    Trading book -75.6 5.9 70 -49 -11.39 33
    ALCO 419,6 1440,6 2 225,1 499 969.52 1,814
    Total 212 872 1,611 -771 204 583
    VaR values in 2017 and 2016 are presented in the table below (99% VaR with a horizon of 10 days).


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 7
    01.01.2017 -31.12.2017 01.01.2016 -31.12.2016
    Book Minimal Medium Maximum Minimal Medium Maximum
    Banking book 6 346 18 123 31 068 3 493 10935 32 883
    Trading book 870 2 208 4 009 588 1650 5 485
    Total 6 046 19 398 32 043 3 733 11 687 38 120
    Change to the economic value of capital
    Use of the change of economic value of equity with a parallel shift of interest rate curves by +/ - 200bps and non -
    parallel shifts with scenarios of +/ - 100/400bps (in tenors 1M/10Y, between them – linear interpolation of the
    shift) as at the end of December 2017 and 2016 are presented below:
    Scenario (1M/10Y) Change to the economic value of equity 31.12.2017
    Change to the economic value of equity 31.12.2016
    +400 /+ 100 188 906 233 976
    +100 / - 400 67 831 30 853
    +200 /+ 200 102 857 106 191
    -200 / – 200 -84 863 -108 574
    - 100 / – 400 -42 814 -44 898
    - 400 / – 100 -94 591 -107 990
    Net interest volatility
    Net interest volatility over 1 -year horizon with a change of interest rates by 100bps (inactive scenario) as at the
    end of 2017 and as at the end of 2016 was presented after
    31.12.2017 31.12.2016
    NII 6.96% 9.49%
    Revaluation gap
    The re valuation gap presents a difference between the present value of assets and liabilities exposed to the
    interest rate risk, subject to re evaluating within the time interval, and the items are recognised on the transaction
    date.
    The revaluation gap in PLN, EUR and U SD as at the end of 2017 is presented below.
    Revaluation gap in PLN
    2017 1M 3M 6M 1Y 2Y 5Y >5Y Total
    Periodic gap 38 164 862 -12 742 445 -12 304 074 1 030 872 -27 62148 -3 889 341 -753 042 6 744 685
    Cumulated gap 38 164 862 25 422 417 13 118 343 14 149 214 11 387 067 7 497 726 6 744 685
    Revaluation gap in USD
    2017 1M 3M 6M 1Y 2Y 5Y >5Y Total
    Periodic gap -45 709 205 957 233 420 135 286 60 501 -16 291 -3 865 569 300
    Cumulated gap -45 709 160 248 393 668 528 955 589 456 573 165 569 300
    Revaluation gap in EUR
    2017 1M 3M 6M 1Y 2Y 5Y >5Y Total
    Periodic gap 839 042 -479 932 -519 347 50 862 33 404 -75 741 -16 156 -167 869
    Cumulated gap 839 042 359 109 -160 237 -109 375 -75 972 -151 713 -167 869



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 8
    40 Foreign exchange risk (FX risk)
    40.1 Description of the risk
    Definition of the foreign exchange risk
    The FX risk is defined as a risk of a loss resulting from changing FX rates. Additionally, the Bank identifies the
    impact of FX rates on its results over a long -time perspective as a result of conversion of future FX -denominated
    income and expenses at potentially disadvantageous FX rates. The risk related to future results may be managed
    within the FX model portfolio.
    The objective of foreign exchange risk management
    The core objective of FX risk management is to identify those areas of the Bank's business that may be exposed
    to the risk and to take measures to mitigate potential related losses as much as possible. The Bank's Management
    Board identifies the FX risk profile which must be compli ant with the Bank's applicable financial plan.
    Foreign exchange risk measurement and assessment
    The FX risk is measured and assessed by limiting the FX positions opened by the Bank. In order to measure the FX
    risk, the Bank uses VaR and stress tests.
    VaR identifies the potential loss on existing positions, related to changes of FX rates, while maintaining the
    assumed confidence level and the position maintenance period. In order to calculate VaR, the Bank applied a
    variance -covariance method with the conf idence level of 99%. The value is determined daily for each area
    responsible for risk assumption and management, individually and jointly.
    Foreign exchange risk monitoring and reporting
    Alior Bank regularly monitors and reports:
     FX risk measure levels,
     utilisation degree of the internal limits and threshold values for the FX risk,
     results of stress tests.
    Reports concerning the FX risk are made on a daily, weekly, monthly, and quarterly basis.
    FX risk limits are set so that the risk remains at a restricted level.
    The Bank may also execute transactions to hedge future FX cash flows with adequate realisation certainty (e.g.
    rental costs, FX currency denominated net interest income). The objective is to mitigate volatility of the results in
    the curre nt financial year by no more than 60%.
    Foreign exchange risk management tools
    The core FX risk management tools at Alior Bank are as follows:
     internal procedures relating to FX risk management;
     internal FX risk models and metrics;
     limits and threshold values for the FX risk;
     limitations to allowable FX transactions;
     stress tests.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 0 9
    40.2 Financial data
    Sensitivity metrics
    As at the end of December 2017, the maximum loss on the FX portfolio held by the Bank (managed within the
    trading book), determined on t he basis of VaR over a time horiz on of 10 days, could be amounted to PLN 157
    474.83, with the assumed confidence level of 99%.
    31.12.2017 31.12.2016
    Horizon [days] 10 10
    VaR [PLN] 157 474.83 279 628.70
    VaR statistics in the Bank’s FX portfolio in 2017 and 2016
    VaR 31.12.2017 31.12.2016
    Minimum 29.26 21.48
    Medium 309.69 310.62
    Max 1 648.53 4 748.08
    An assumed normal distribution of the values of risk factors in the VaR model may in practice result in
    underestimation of losses in stress scenarios (the phenomenon of “the long tail” ). As a result, the Bank performs
    stress tests.
    In order to measure its exposure to the FX risk, the Bank carries out stress tests. Below are p resented the results of
    stress tests of changes to FX rates versus PLN by +/ - 20%.
    31.12.2017 31.12.2016
    FX rates + 20% 29 930.08 -1 969.58
    FX rates -20% 15 521.79 1 969.58
    Foreign exchange position
    The amounts of FX positions in the Alior Bank are presented in the table below:
    31.12.2017 Balance sheet item Off -balance sheet item Net position
    Fx position Long Short Long Short Long Short
    EUR 4 147 141 -3 394 589 4 841 224 -5 578 618 15 158
    USD 58 657 -2 500 921 3 453 122 -1 040 447 -29 589
    CHF 224 426 -192 012 52 536 -85 856 -906
    GBP 337 222 -628 890 382 798 -90 771 360
    Other 301 809 -491 210 465 151 -286 307 -10 556
    Total 5 069 255 -7 207 622 9 194 831 -7 081 999 15 518 -41 051
    31.12.2016 Balance sheet item Off -balance sheet item Net position
    Fx position Long Short Long Short Long Short
    EUR 6 401 193 -5 245 105 4 611 697 -5 763 740 4 045 0
    USD 515 816 -2 195 077 2 935 074 -1 262 827 0 -7 014
    CHF 267 170 -134 993 80 543 -212 648 72
    GBP 311 588 -577 859 372 433 -106 208 0 -46
    Other 230 337 -354 362 382 330 -265 210 0 -6 905
    Total 7 726 104 -8 507 396 8 382 077 -7 610 633 4 117 -13 965



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 0
    The volume of FX positions (apart from FX rate volatility) is the core factor determining the FX risk level to which
    the Bank are exposed. All concluded FX transactions, both on - and off -balance sheet ones, affect the level of FX
    positions. The Bank's ex posure to the FX risk is low (with reference to equity, the 10 -day VaR for the Bank's FX
    position as at 31 December 2017 was about 0.0023% and as at 31 December 2016 – 0.0045%, respectively.
    Currency structure
    Currency in PLN – 31.12.2017
    Assets PLN EUR USD Other
    Cash and funds with Central Bank 661 251 139 371 83 488 81 281
    Financial assets held for trading 405 808 43 457 3 157 129
    Financial assets available for sale 11 756 707 279 607 36 010 0
    Investment securities kept until maturity 1 117 894 0 0 0
    Derivative hedging instruments 87 785 0 0 0
    Due from banks 70 860 355 942 91 347 380 828
    Loans and advances to customers 45 414 627 5 135 031 176 766 517 669
    Assets hedging liabilities 408 911 0 0 0
    Property, Plant & Equipment 465 025 0 0 1 933
    Intangible assets 503 011 0 0 7 095
    Investments in subsidiaries 102 025 0 0 0
    Assets held for sale 357 0 0 0
    Income tax assets 526 320 0 0 4 439
    Deferred 526 320 0 0 4 439
    Other assets 496 774 25 980 612 681
    Total assets 62 017 355 5 979 388 391 380 994 055
    LIABILITIES AND EQUITY PLN EUR USD Other
    Financial liabilities held for trading 409 705 23 127 2 522 524
    Due to banks 700 079 43 750 65 17
    Due to customers 48 519 562 4 925 652 2 782 222 1 428 182
    Derivative hedging instruments 5 419 0 0 0
    Provisions 87 407 2 978 38 10
    Other liabilities 1 428 868 136 279 49 102 14 069
    Income tax liabilities 102 382 0 0 0
    Current 102 382 0 0 0
    Subordinated liabilities 1 830 346 84 630 0 0
    Total liabilities 53 083 768 5 216 416 2 833 949 1 442 802
    Share capital 1 292 636 0 0 0
    Supplementary capital 4 817 331 0 0 0
    Revaluation reserve 5 156 10 421 -305 -1 328
    Other reserves 184 894 0 0 0
    Exchange rate differences on revaluation of foreign entities 0 0 0 594
    Retained profit -43 051 0 0 0
    Current year's profit 538 895 0 0 0
    Equity 6 795 861 10 421 -305 -734
    TOTAL LIABILITIES AND EQUITY 59 879 629 5 226 837 2 833 644 1 442 068



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 1
    Currency in PLN – 31.12.2016 restated
    Assets PLN EUR USD Other
    Cash and funds with Central Bank 666 223 200 624 120 644 95 500
    Financial assets held for trading 335 560 80 739 1 974 1 278
    Financial assets available for sale 9 038 388 291 005 45 253 0
    Investment securities kept until maturity 1 954 0 0 0
    Derivative hedging instruments 71 684 0 0 0
    Due from banks 600 224 286 143 321 306 156 553
    Loans and advances to customers 40 675 485 4 881 621 234 376 457 141
    Assets hedging liabilities 366 984 0 0 0
    Property, Plant & Equipment 482 533 987 0 0
    Intangible assets 476 771 4 142 0 0
    Investments in subsidiaries 72 359 0 0 0
    Assets held for sale 679 0 0 0
    Income tax assets 532 570 0 0 0
    Deferred 532 570 0 0 0
    Other assets 624 790 25 005 981 11 319
    Total assets 53 946 204 5 770 266 724 534 721 791
    LIABILITIES AND EQUITY PLN EUR USD Other
    Financial liabilities held for trading 258 037 36 487 2 982 808
    Due to banks 304 280 41 366 35 540 49
    Due to customers 43 770 144 4 333 482 2 335 610 965 612
    Derivative hedging instruments 6 119 0 0 0
    Provisions 285 483 1 238 56 14
    Other liabilities 1 272 054 107 711 29 399 18 593
    Income tax liabilities 13 125 0 0 0
    Current 13 125 0 0 0
    Subordinated liabilities 1 075 034 89 760 0 0
    Total liabilities 46 984 276 4 610 044 2 403 587 985 076
    Share capital 1 292 578 0 0 0
    Supplementary capital 4 184 953 0 0 0
    Revaluation reserve -69 557 2 489 -73 -4 474
    Other reserves 184 894 0 0 0
    Exchange rate differences on revaluation of foreign entities 0 0 0 -22
    Current year's profit 589 024 0 0 0
    Equity 6 181 892 2 489 -73 -4 496
    TOTAL LIABILITIES AND EQUITY 53 166 168 4 612 533 2 403 514 980 580



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 2
    41 Liquidity risk
    41.1 Description of risk
    Definition of liquidity risk
    The liquidity risk means a risk of failure by the Bank to meet – subject to comfortable conditions and at adequate
    prices – its payment obligations resulting from the Bank's on - and off -balance sheet items.
    Objective of liquidity risk management
    Thus, the policy of liquidity risk management at the Bank consists in maintaining its own liquidity positions so that
    payment ob ligations can be met at any time with the available cash on hand, proceeds from transactions with
    specific maturities or with sales of marketable assets while minimising the costs of liquidity maintenance.
    Within liquidity risk management, the Bank pursues the following objectives:
     ensuring its ability to pay all its obligations when they fall due;
     maintaining liquid assets at an adequate level – that is a buffer of unencumbered high quality liquid assets in
    the case of a sudden deterioration of the liquidi ty position;
     determination of the scale of the Bank's exposure to the liquidity risk by setting internal liquidity limits, a
    survival horizon in stress conditions
     and minimising the risk of trespassing on the liquidity limits defined at the Bank;
     monitori ng the Bank's liquidity condition in order to maintain liquidity and activate contingency plans in case
    of emergencies;
     ensuring compliance of the processes functioning at the Bank with regulatory requirements concerning
    liquidity risk management.
    Liquidi ty risk measurement and assessment
    Among the applied liquidity management metrics, the Bank identifies indicators and related limits to the following
    liquidity types:
     payment liquidity – ability to fund assets and timely perform obligations during the Bank 's normal business or
    in other foreseeable conditions, without suffering a loss; within payment liquidity management, the Bank
    focuses on analysing intraday and current liquidity (up to 7 days);
     short -term liquidity – ability to comply with all financial l iabilities falling due within a period of the next 30 days;
     medium -term liquidity – ability to comply with all financial liabilities falling due within a period of 1 to 12
    months;
     long -term liquidity – ability to comply with all financial liabilities falli ng due within a period of over 12 months.
    Monitoring and reporting of the liquidity risk
    Assets and liabilities at Bank are managed by the dedicated ALCO. A liquidity risk strategy, including the
    acceptable risk level, the assumed balance sheet structure and the funding plan, is approved by the Bank's
    Management Board and further validated by the Bank's Supervisory Board. Interbank treasury transactions are
    concluded by the Treasury Department, transactions are settled and booked in the Operations Division and the
    liquidity risk is monitored and measured in the Financial Risk Management Section. The competences related to
    liquidity risk management are segregated in a transparent manner up to the Management Board level which
    ensures complete independence of operation. In 2017, treasury operations and liquidity risk management were
    fully centralised at the lev el of Alior Bank S A.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 3
    Liquidity risk management tools
    Within the liquidity management process, the Bank applies the following tools:
     liquidity procedur es and policies, including a funding plan for subsequent years of the Bank's operations;
     contingency liquidity plans;
     liquidity limits and early warning indicators identifying adverse trends that may result in an increased liquidity
    risk;
     periodic report s from analyses of categories and factors affecting the current and future liquidity level;
     stress tests for the liquidity risk,
    41.2 Financial data
    Contractual flows
    Specification of maturity/payment dates of contractual flows of the Bank's assets and liabilities as at 31 December
    2017 (PLN M):
    31.12.201 7 1D 1M 3M 6M 1Y 2Y 5Y 5Y+ Total
    ASSETS 6 707 3 545 2 216 2 795 5 512 8 822 22 619 33 150 85 366
    Cash & Nostro 1 366 0 0 0 0 0 0 0 1 366
    Amounts due from banks 0 332 0 0 0 164 0 0 496
    Loans and advances to customers 0 2 045 1 59 208 1 289 6 480 4 898 14 980
    Securities 5 341 1 168 2 215 2 736 5 304 7 369 16 139 27 154 67 426
    Other assets 0 0 0 0 0 0 0 1 098 1 098
    LIABILITIES AND EQUITY -34 113 -8 139 -6 728 -5 133 -3 861 -1 714 -2 087 -8 296 -70 071
    Amounts due to banks -4 -136 -300 -2 -16 -238 -45 -56 -797
    Amounts due to customers -34 109 -5 580 -6 244 -4 760 -3 151 -258 -195 -65 -54 362
    Own issues 0 -100 -184 -371 -694 -1 218 -1 847 -1 280 -5 694
    Equity 0 0 0 0 0 0 0 -6 805 -6 805
    Other liabilities 0 -2 323 0 0 0 0 0 -90 -2 413
    Balance sheet gap -27 406 -4 594 -4 512 -2 338 1 651 7 108 20 532 24 854 15 295
    Cumulated balance sheet gap -27 406 -32 000 -36 512 -38 850 -37 199 -30 091 -9 559 15 295
    Derivative instruments – inflows 0 5 029 1 594 1 600 701 364 307 43 9 638
    Derivative instruments – outflows 0 -5 048 -1 618 -1 588 -707 -363 -324 -42 -9 690
    Derivative instruments – net 0 -19 -24 12 -6 1 -17 1 -52
    Guarantee and financing lines -11 960 -8 -32 -108 -200 -113 -6 -321 -12 748
    Off-balance sheet gap -11 960 -27 -56 -96 -206 -112 -23 -320 -12 800
    Total gap -39 366 -4 621 -4 568 -2 434 1 445 6 996 20 509 24 534 2 495
    Total cumulated gap -39 366 -43 987 -48 555 -50 989 -49 544 -42 548 -22 039 2 495
    Specification of maturity/payment dates of contractual flows of the Bank's assets and liabilities as at 31 December
    2016 (PLN M):
    31.12.2016 1D 1M 3M 6M 1Y 2Y 5Y 5Y+ Total
    ASSETS 11 580 3 860 1 662 2 804 4 739 7 958 18 107 26 061 76 771
    Cash & Nostro 1 470 0 0 0 0 0 0 0 1 470
    Amounts due from banks 1 501 0 0 0 145 0 0 0 1 646
    Loans and advances to customers 8 609 805 1 643 2 154 4 186 6 376 14 378 22 404 60 555
    Securities 0 3 055 19 650 408 1 582 3 729 901 10 344
    Other assets 0 0 0 0 0 0 0 2 756 2 756


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 4
    31.12.2016 1D 1M 3M 6M 1Y 2Y 5Y 5Y+ Total
    LIABILITIES AND EQUITY -29 558 -7 401 -4 911 -4 179 -3 527 -3 353 -1 550 -7 014 -61 493
    Amounts due to banks -63 0 -1 -2 -16 -182 -92 -71 -427
    Amounts due to customers -29 495 -5 287 -4 771 -4 026 -3 004 -1 870 -219 -43 -48 715
    Own issues 0 -76 -139 -151 -507 -1 301 -1 239 -677 -4 090
    Equity 0 0 0 0 0 0 0 -6 223 -6 223
    Other liabilities 0 -2 038 0 0 0 0 0 0 -2 038
    Balance sheet gap -17 978 -3 541 -3 249 -1 375 1 212 4 605 16 557 19 047 15 278
    Cumulated balance sheet gap -17 978 -21 519 -24 768 -26 143 -24 931 -20 326 -3 769 15 278 0
    Derivative instruments – inflows 0 5 473 1 894 671 1 215 740 423 63 10 479
    Derivative instruments – outflows 0 -5 474 -1 875 -669 -1 181 -735 -411 -62 -10 407
    Derivative instruments – net 0 -1 19 2 34 5 12 1 72
    Guarantee and financing lines 13 873 7 12 19 119 107 13 8 14 157
    Off-balance sheet gap 13 873 5 31 20 153 113 25 9 14 229
    Total gap -4 104 -3 537 -3 217 -1 354 1 366 4 717 16 582 19 056 29 509
    Total cumulated gap -4 104 -7 638 -10 855 -12 209 -10 843 -6 126 10 455 29 509 0
    Regulatory liquidity measures and sensitivity measures
    Regulatory liquidity measures 31.12.2017 31.12.2016
    M1 7 891( PLN M ) 5 714(PLN M)
    M2 2.30 1.95
    M3 5.09 4.20
    M4 1.15 1.14
    LCR 123 % 127%
    NSFR 114% 97%
    Between 31 December 2016 and 31 December 2017, the regulatory liquidity measures were above the regulatory
    limits.
    Name of sensitivity measures 31.12.2017 31.12.2016
    Surplus reserve against liquidity loss (PLN M) 2 454 2 328
    The Bank holds a surplus reserve against a liquidity loss understood as a surplus potential to cover liquidity needs
    for a period stress conditions of 30 days.
    Deposit balance
    As at 31 December 2017 the balance of deposits over a 30 -day horizon was about 95% of the Bank's deposit
    base (apart from the interbank market) and 99.6% for the Bank's own issues.
    Concentration
    On a monthly basis, the Bank analyses concentration of its de posit base in order to identify a potential risk of the
    Bank's excessive dependence on funding sources characterised with a low diversification level. In order to
    estimate the concentration level, the Bank identifies the WWK ratio (High Concentration Rati o), calculated as a
    ratio of the funds from the largest depositories to the overall deposit base. As at 31 December 2017, WWK was
    at 2.18% which shows no concentration. As at 31 December 2016, the ratio was at 1.70%.
    WWK statistics for 2017 and 2016 are p resented in the tables.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 5
    Minimal Medium Maximum
    31.12.2017 1.55% 2.19% 2.79%
    31.12.2016 1.66% 2.07% 2.35%
    In order to mitigate the concentration risk, the Bank diversifies the structure of its deposit base split by retail,
    business, financial customers, central government, and local government institutions, by monitoring and reporting
    the share of each group i n the overall deposit base on a monthly basis.
    Currency 31.12.2017 Currency 31.12.2016
    Company 1 EUR, PLN 333 684 EUR, PLN, USD 375 748
    Company 2 PLN 295 056 EUR, PLN, USD 221 481
    Company 3 PLN 278 036 PLN, USD 156 883
    Company 4 PLN 266 347 PLN 100 056
    Company 5 PLN 244 195 PLN 100 053
    Company 6 EUR, PLN, USD 238 127 CZK, EUR, PLN 98 910
    Company 7 EUR, PLN, USD 177 883 EUR,PLN,USD 93 721
    Company 8 PLN 171 190 PLN 91 909
    Company 9 PLN, USD 144 364 EUR, PLN 85 421
    Company 10 CZK, EUR, PLN 143 924 PLN 79 992
    In 2017 the Bank’s liquidity condition was at a safe level. The situation was closely monitored and maintained at
    an adequate level by adjusting the level of the deposit base and disbursing financing subject to growth of lending
    and other liquidity needs.
    42 Operational Risk
    42.1 Description of risk
    Definition of the operational risk
    The operational risk is a risk of a potential loss occurrence due to inappropriateness or failure of internal
    processes, humans, and systems or external events. The operational risk covers the legal risk, but does not include
    the reputational risk and the business risk.
    The objectives of operational risk management
    The objective of operational risk management in the Bank is to maintain the operational risk at a safe and
    adequate level for the Bank's business, objectives, strategy and development, as well as acceptable by the Bank's
    Management Board and Supervisory Board.
    Operational risk measurement and assessment
    The Bank has a formalised operational risk managemen t system within which it prevents the occurrence of
    operational events and incidents and mitigates losses should the risk materialise.
    Operational risk management covers identification, measurement, and assessment of the operational risk,
    management activities and risk monitoring and control at all levels – organisational units responsible for
    operational risk management in their respective areas, operational risk Coordinators, Operational Risk
    Management Section, Operational Risk Committee to the Ba nk's Management Board and Supervisory Board.
    Within its identification of operational risk, the Bank collects data on events and losses in the Bank and its
    subsidiaries. The operational risk is measured and assessed with quantitative metrics (including c alculation of the
    internal capital for the operational risk with the AMA model) and qualitative metrics (e.g. self -assessment of the


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 6
    operational risk). The AMA model relies on internal and external data on the operational risk, economic
    environment, and in ternal factors, as well as results of scenario analyses.
    Operational risk measurement and assessment include:
     Key Risk Indicators (KRIs),
     calculation of equity requirement for the operational risk – the Bank applies the standard method; since
    01.01.20 18 the Bank has been calculating equity requirements for the operational risk in line with the
    advanced method (AMA) for the Bank, while excluding the acquired demerged part of Bank BPH and the
    Brand in Romania for which the standard method applies (TSA),
     internal capital for the operational risk is estimated with the AMA model,
     stress tests,
     scenario analyses,
     self -assessment of the operational risk,
     identification of limit utilisation for the operational risk,
     measurement of actual and potential losses related to identified operational events,
     calculation on internal capital for the Alior Bank.
    Monitoring and reporting of operational risk
    The Operational Risk Management Section exercises daily control and monitoring of the operational risk at the
    Bank. The unit is, among others, responsible for:
     development and implementation of appropriate methodologies and instruments of operational risk control;
     monitoring of the internal capital requirement for the operational risk in compliance with the standard method
    (TSA) concerning the acquired demerged part of Bank BPH and the Branch in Romania and in compliance
    with the advanced method (AMA) for the Bank's remaining business;
     consulting of operational risk assessment in projects, products, and procedures (ne w and modified);
     monitoring of the utilisation level of internal limits and appetite for the operational risk and taking
    management actions related to the occurrence of an increased or high level of the operational risk;
     collection of high quality data on operational events and effects;
     monitoring of internal and external events;
     monitoring of the Bank's operational risk level with the use of the following tools: key risk indicators (KRIs), self -
    assessment, and stress tests;
     development of regular reports on the operational risk level at the Bank.
    The duty to monitor and mitigate operational risk in daily work applies to all employees and organisational units
    of the Bank. On an ongoing basis, the Bank's employees control the level of the operational risk in their processes
    and actively mitigate the risk, taking actions to avoid/mitigate operational losses. They are responsible for
    ongoing registration of events and financial operational effects concerning their areas of operation, they define
    and rep ort the values of Key Risk Indicators (KRIs) versus the tolerance level for processes exposes to the
    operational risk and they are involved in the self -assessment process.
    Operational risk management tools
    Operational risk management at Alior Bank is supported with the IT system – OpRisk which, among others,
    registers operational events and losses and records the results of scenario analyses.
    The Bank holds records of operational events and effects that supports effective analysis and monitoring of th e
    operational risk. The operational risk and its changes are monitored with key risk indicators (KRIs) of which
    tolerance levels are identified.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 7
    Internal capital for the operational risk is measured with the AMA method. On the basis of the AMA method, Ali or
    Bank has internally developed a statistical model used to estimate the operational risk level on the basis of the
    Loss Distribution Approach (LDA) method.
    In June 2017, the Bank filed a request to PFSA for consent to apply the standard method (TSA) with reference to
    the demerged part of Bank BPH acquired in November 2016 and the Branch in Romania, and the advanced
    method (AMA) for the other part of the Bank's business in order to calculate the equity requirement for the
    operational risk.
    In December 201 7 the Bank received PFSA's consent to use the advanced method (AMA) and the standard
    method (TSA) to calculate equity requirements for the operational risk from 1 January 2018 with a duty to keep
    the requirement at a minimum level of 80% of the value calcu lated with the standard method.
    43 Capital Management
    Definition of the capital adequacy
    The capital adequacy is a process aimed at ensuring that the risk level that the Bank accept as a result of its
    growing business activity, may be covered with the existing equity considering the determined risk tolerance level
    and the time horizon. The ca pital adequacy management process covers in particular compliance with the
    existing regulations of the supervisory and control bodies, and the risk tolerance determined in the Bank and the
    capital planning process , including policies concerning sources of capital.
    The objective of capital management in the Bank is to maintain appropriate levels of equity and Tier 1 capital at
    any time to cover the risks at appropriate levels, in line with the assumed risk appetite.
    Within its risk appetite, the Bank dete rmines the anticipated coverage levels of an potential unexpected loss for
    various risks, with equity and tier 1 capital, as specified in Regulation (EU) No 575/2013 of the European
    Parliament and of the Council of 26 June 2013 on prudential requirements f or credit institutions and investment
    firms (CRR Regulation), as well as individual risk types identified within the internal capital adequacy assessment
    process (ICAAP). The potential unexpected loss is determined with the regulatory capital with the met hodology
    specified in the CRR Regulation and with the internal capital determined with the methods specified below.
    The process of capital management is supervised by the Bank's Supervisory Board, Management Board, Risk
    Committee of the Supervisory Board and the Risk Management and the ICAAP Committee.
    Capital adequacy metrics
    The core tools used in the Bank for capital management are as follows:
     total capital ratio and Tier 1 capital ratio
     analysis of regulatory capital requirement
     internal capital (ICAAP) and a coverage ratio of the internal capital with equity.
    Capital adequacy ratio
    As at 31 December 2017, the capital adequacy ratio and Tier 1 ratio were calculated in accordance with the
    Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential
    requirements for credit institutions and inve stment firms and amending Regulation (EU) No 648/2012 (CRR
    Regulation) and other regulations implementing “national options”, among other, the Banking Act of 29 August
    1997 and the Regulation of the Minister of Development and Finance on higher weight ris k for mortgage -backed
    exposures.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 8
    Equity for the purposes of the capital adequacy
    31.12.2017 31.12.2016
    Total equity for the capital adequacy ratio 7 696 605 6 354 996
    Tier I core capital (CET1) 6 133 605 5 261 611
    Supplementary Tier II capital 1 563 000 1 093 385
    Paid -up capital 1 292 636 1 292 578
    Supplementary capital 4 817 483 4 184 953
    Other reserves 184 894 184 894
    Current year's reviewed by auditor 385 197 168 419
    Accumulated losses -43 051 0
    Revaluation reserve – unrealised losses -14 357 -80 043
    Intangible assets measured at carrying value -510 106 -480 913
    Revaluation reserve – unrealised profit 42 337 1 867
    Subordinated liabilities 1 563 000 1 093 385
    Additional value adjustments -21 428 -10 144
    Capital requirements 4 015 093 3 717 843
    Total capital requirements for the credit, counterparty risk, adjustment to credit measurement, dilution and deliver of instruments to be settled at a later date 3 526 540 3 234 976
    Total capital requirements for prices of equity securities, prices of debt securities, prices of commodities and FX risk. 4 826 2 687
    Capital requirement relating to the general interest rate risk 46 612 65 760
    Total capital requirements for the operati onal risk 437 115 414 420
    Tier 1 ratio 12.22% 11.32%
    Total capital adequacy ratio 15.34% 13.67%
    In accordance with PFSA's recommendation for the sector for 2017 and 2016, the Bank has been maintaining
    capital adequacy ratios at minimum 10.25% TIER1 and total adequacy ratio minimum of 13.25% TCR.
    Analysis of regulatory capital requirement
    In the calculation process of its capital adequacy ratio, the Bank analyses the level of regulatory capital
    requirement and the relation of equity to internal capital. The analysis consists in a comparison of actual values
    with the budgeted values and iden tification of reasons of potential differences (the scale of operations of the Bank
    other than planned , in particular the volume of the loan portfolio or an assets risk profile other than planned).
    The equity of the Bank exceeded the total capital requir ement throughout 2017.
    Internal capital
    Within the ICAAP process, the Bank identifies and assesses the materiality of all types of risk to which it is exposed
    in connection with its business.
    Material risk types as at 31 December 2017:
     Credit risk – insolvency
     Credit risk – sectoral concentration
     Credit risk – concentration to customers
     Credit risk – currency concentration
     Operational Risk
     Liquidity risk
     Interest rate risk in the banking book
     Market risk


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 1 9
     Settlement/delivery risk with a deferred se ttlement date
     Model risk
     Reputational risk
     Business risk
     Capital risk
     Compliance risk
    For each risk identified as material, the Bank allocates the internal capital with the use of the internal risk
    estimation models.
    The internal capital is estimated:
     for the credit risk using the CreditRisk+ method on the basis of the value of the 99.95th quantile of loss
    distribution in the loan portfolio;
     on the basis of the VaR methodology in the banking book for the market risk and the interest rate risk ;
     on the b asis of a liquidity gap model for the liquidity risk assuming a stress scenario;
     on the basis of the AMA model for the operational risk.
    The designated total internal capital is secured with the value of the available capital subject to appropriate
    securit y buffers.
    CRD IV/ CRR packet
    As at 31 December 2017, the Bank fully complied with the CRR Regulation in the sphere of capital management,
    including the calculations of equity and capital requirements for each type of risks.
    Other
    44 Acquisition of the de merged business of Bank BPH SA
    On 31 March 2016, the Bank signed with the sellers of Bank BPH, namely GE Investments Poland sp. z o.o., DRB
    Holdings B.V. and Selective American Financial Enterprises, Inc. – a Share Sale and Demerger Agreement
    concerning e xecuting the transaction (in aggregate “the Transaction”) comprising:
    - acquisition of shares by the Bank from the Sellers of Bank BPH through an invitation to subscribe for the sale or
    conversion of shares in Bank BPH;
    - the demerger of Bank BPH pursuan t to art. 529 § 1.4 of the Commercial Companies Code carried out by
    transferring the Core Activities of Bank BPH to Alior Bank (demerger by spin -off) on terms discussed in the
    demerger plan ;
    - issuing new shares of Alior Bank for the shareholders of Bank BPH indicated in the Demerger Plan (i.e. with the
    exception of Alior Bank, the Sellers of Bank BPH and their related entities).
    The core business of Bank BPH will constitute a business unit comprising all the assets and liabilities of Bank BPH,
    with the exception of the Mortgage Operations of Bank BPH.
    On 4 November 2016. Alior Bank SA acquired all the primary activities of Bank BPH. In the report dated 2 August
    2016, the Bank informed that the price for acquiring the Core Business of Bank BPH was adjusted to PLN 1 159
    645 000. The Adjusted Price has been determined in accordance with the Share Purchase and Demerger
    Agreement, based o n the book value of tangible assets of the Core Business of Bank BPH as at 30 June 2016.
    As part of the Invitation and Compulsory Redemption Bank paid the amount of 305 298 thousand PLN for
    minority shareholders. The acquisition of the core business of Ba nk BPH is in line with the development strategy
    of Alior Bank which envisages development based on organic growth and acquisitions, in association with
    achieving a high rate of return from capital.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 2 0
    The transaction was settled under the acquisition method i n accordance with IFRS 3, Business Combinations, the
    application of which requires, among other things, the recognition and measurement of identifiable assets and
    liabilities acquired, which were measured at fair value as at the date of acquisition and all non -controlling interests
    in the acquiree, and recognition and measurement of goodwill or gain on bargain purchase.
    A detailed description of th ose transactions is specified in Note 30 to the Financial Statements of Alior Bank SA as
    at 31 December 2016.
    In Financial Statements dated on 31.12.2016 r. Bank made the initial accounting for this business combination in
    connection with the acquisition of a demerged part of Bank BPH SA and calculated bargain purchase amounted
    to PLN 508 056 thousand. In the valu ation period, further adjustments were made to the fair value . Below are
    presented the mentioned adjustments and description of fair value measurement methods :
    ASSETS As at 4.11.2016 Measurement adjustments to fair value and exclusions
    Adjustments iden tified in the valuation period Identifiable acquired assets measured at fair value
    Cash and balances with the Central Bank 1 043 097 0 0 1 043 097
    Financial assets measured at fair value through profit or loss 3 691 205 0 0 3 691 205
    Amounts d ue from banks 398 537 0 0 398 537
    Loans and advances to customers 8 844 623 364 995 -31 226¹ 9 178 392
    including, loan impairments -782 145 0 0 -782 145
    Available -for-sale financial assets 301 110 0 16 912² 318 022
    Property, plant and equipment 247 517 23 160 0 270 677
    Intangible assets 144 939 -55 425 0 89 514
    Income tax assets 137 394 -63 218 9 199³ 83 375
    Other assets 197 158 0 66 694 203 827
    Total assets 15 005 580 269 512 1 554 15 276 646
    LIBILITIES As at 4.11.2016 Measurement adjustments to fair value and exclusions
    Adjustments identified in the valuation period Identifiable acquired liabilities measured at fair value
    Amounts d ue to banks 369 631 0 0 369 631
    Amounts d ue to customers 12 534 361 0 0 12 534 361
    Debt securities issued 223 813 0 0 223 813
    Provisions 101 326 0 0 101 326
    Financial liabilities measured at fair value through profit and loss 38 249 0 0 38 249
    Other liabilities 136 721 20 100 -6 003 5 150 818
    TOTAL LIABILITIES 13 404 101 20 100 -6 003 13 418 198
    1 The adjustment amount is due to the final determination of the fair value of the debt portfolio of Bank BPH.
    2 The adjustment amount is due to the final determination of the fair value of shares in VISA.
    3 The adjustment amount is due to the determination of a deferred income tax asset concerning the measurement of debt receivables and the recognised liability under disadvantageous
    rental contracts (generating charges).
    4 The adjustment amount is due to the final determination of the fair value of the deferred VISA payment.
    5 The adjustment amount is due to the final determination of the liability under disadvantageous rental contracts (generating charges).
    BPH Changes to accounting principles
    Measurement adjustments to fair value and exclusions
    Adjustments identified in the valuation period Identifiable net assets measured at fair value
    Fair value of the net assets 1 601 479 -22 849 249 412 7 557 1 835 599



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 2 1
    Amounts due from customers
    The fair value measurement of the loan portfolio was performed based on the following assumptions:
    1. Fair value was calculated separately for the loan portfolio without indications of impairment (performing)
    and with indications of impairment (non -performing). This resulted from different characteristics of cash flows for
    the two portfolios. In the case of performing loans the calculation was based on contractual cash flows adjusted
    for credit risk and early repayments, where they were material. In the case of non -performing loans the
    calculation was based o n expected recoveries.
    2. For products without contractual maturity dates in the portfolio of performing loans (with the exception of
    credit cards of retail customers) it was adopted that fair value is equal to book value. This resulted from the
    assumption concerning possible immediate repayment of these liabilities. This applies to the following products:
    bank overdrafts, credit cards of commercial customers, renewable commercial loans and factoring.
    3. Loans with a repayment schedule (and credit cards of retail customers) were measured using the
    discounted cash flows model.
    a. Contractual cash flows adjusted for credit risk and early repayments were discounted. The discount rate
    comprised: the market ra te, liquidity margin used in the system of transfer funds (STF), margin on cost of capital
    and margin on costs of servicing the loan portfolio.
    b. The adjustment for credit risk consisted of multiplying the cash flows by the value (1 -PD*LGD), where PD is
    the probability of the customer’s default from the cash flow date and LGD is loss given default at the cash flow
    date.
    c. Market interest rates were taken from the yield curve built based on the money market rates (for example,
    WIBOR for PLN) and FRA contra cts for the short end of the curve and the IRS rate for the long end of the curve A
    different yield curve was used for each currency (PLN, EUR, USD, CHF, GBP, SEK) that was appropriate to it.
    d. The liquidity margin has been assigned according to the trans fer price system currently binding in Alior
    Bank. The margin depends on the currency and the payment date of a given cash flow. The margin levels binding
    at Alior Bank are higher than those in former BPH and have been considered consistent with those commo nly
    used on the market.
    e. The cost of capital has been calculated using the CAPM model and amounted to 8.76%. The margin on
    the cost of capital at discount has been calculated by multiplying the cost of capital by the proportion of capital in
    total assets / total equity and liabilities of Core BPH (9.62%) and amounted to 0.8423%.
    f. The margin on the cost of servicing the portfolio has been estimated by the business units. Its amount
    depends on the customer segment.
    4. Commercial and retail loans have been modelled separately.
    Customer relationships in the area of deposits
    Customer relationships in the area of deposits were analysed for two main products:
    • current accounts;
    • term deposits and savings accounts.
    The valuation of customer relationships was performed on the basis of an analysis of core deposits.
    Core deposits represent the hypothetical savings for the Bank arising from the fact that the Bank’s customers
    maintain their cash on low -interest current accounts for a long time, instead of higher -interest term deposits. This
    enables the Bank to limit the higher -interest rate financing from the market and effectively reduce interest
    expense.
    Fair value estimation of customer relationships based on core deposits is based on the assumption that their
    value is gradually reduced. Due to difficulties in assessing customer behaviour it was prudently adopted in the
    estimate that the pace of the core deposits withdrawal will be from 1 to 3 years.


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 2 2
    As a result of acquiring the spun off business of Bank BPH, a s at 4 November 2016 customer relationships were
    recognized in an amount of PLN 42.1 million. They are amortized over a period of 2 years. The carrying value of
    customer relations as at 31 Decem ber 2016 was PLN 40.3 million.
    IT systems
    The IT systems of B ank BPH SA have been divided into four groups, depending on the value in use of those
    systems.
    In the case of the purchased systems (external systems), the gross value was established as the sum of financial
    outlays incurred on their purchase. In the case of internally developed systems, their gross value constituted the
    sum of capitalized expenditure incurred on their manufacture. The above system values have been adjusted for
    the remaining horizon of their operational use, which has been specified as a p ercentage parameter of the length
    of the system’s economic life cycle compared with the assumed period of operational use. The remaining horizon
    of the system’s use has been established individually for each system and is a ratio of the expected period of the
    system’s use from the measurement date to the system’s age calculated from the implementation period until the
    measurement date.
    In the case of systems in the course development, a similar model was adopted as for the purchased and
    internally develope d systems.
    Additionally, the fair value of systems in the course of development was adjusted for expenditure incurred on
    functionalities with respect to which development works have not been completed or which have not been tested
    and are not ready to be c ommissioned.
    Property, plant and equipment
    The valuation of property (buildings) of the acquired company has been performed under the income method.
    This approach comprises determining the property’s value on the assumption that the price that a buyer will pay
    for the property depends on the expect ed income that can be obtained from the property.
    The valuation of land was carried out under the comparative approach using the comparison in pairs method or
    the average price adjustment method. Under the method of comparison in pairs, property subject t o valuation,
    the characteristics of which are known, is compared to similar properties which were traded on the market and
    their transaction prices, transaction terms and prices of these properties are known.
    Lease agreement
    IFRS 3 requires the recognitio n of the identifiable assets, liabilities and contingent liabilities that meet the
    recognition criteria at their fair values at the acquisition date. With regard to onerous contracts and other
    identifiable liabilities of the acquiree, the acquirer uses the present value of amounts due in order to meet its
    obligations, determined using appropriate current interest rates. For purposes of the above calculation, the
    following assumptions:
    - rents defined in the agreements concluded by Bank BPH compared with mar ket values, based also on the
    experience of their own at selected locations,
    - in order to calculate the value of rents to the end of the contract for permanent contracts assumed duration of
    one year from the date of the legal merger or dates speci fied in the restructuring plan.



    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 2 3
    The calculation of bargain purchase (negative goodwill)
    The calculation of gain on bargain purchase including adjustments identified in the valuation period, as well as the
    final setellments with the Bank BPH Sellers is presen ted in the table below:
    calculation of a bargain purchase 31.12.2016 adjustments in the valuation period 30.09.2017
    the price paid to BPH shareholders of the GE Group 1 159 645 0 1 159 645
    The price paid to other BPH shareholders 305 298 0 305 298
    receivable from BPH due to adjustments of net assets to a level corresponding to the CET 1 ratio 13.25% 52 194 -31 470 * 20 724
    receivable from GE Group shareholders arising from the adjustment of the purchase price 92 762 -19 138 73 624
    the fair value of the net assets of the acquiree 1 828 042 7 557 1 835 599
    Gain on a bargain purchase 508 056 -43 051 465 005
    * this adjustment includes: VISA -20 508 and settlement -10 962
    According to Demerger Plan and the terms of the agreement of 17 October 2016 concluded between Bank BPH
    and Alior Bank concerning the distribution and co -operation after the demerger (org. Demerger Implementation
    And Post Demerger Cooperation Agreement), the net assets resulting from the demerger of Bank BPH calculated
    on the basis of risk -weighted assets should provide a CET 1 level equal to 13.25%. According to the initial
    calculation made by AliorBank in the financial statements for 2016, the amount of mismatch to outstanding level
    of CET 1 is 52 194 thousand PLN.
    Th e amount of 92 762 thousand PLN was calculated by Alior Bank based on Share Purchase Agreement
    according to algorithm used in the calculation of the initial purchase price (paid on August 24, 2016.).
    The Bank communicated in the annual report prepared as at 31 December 2016 that the final settlement of the
    purchase price will be subject to further reconciliations between Alior Bank and the Sellers of Bank BPH Core
    Business. It was agreed that the final settlement of the acquisition and some other claims (i ncluding the
    maintenance of the capital adequacy ratio of Bank BPH Core Business at 13.25%), costs and payments related to
    the Transaction will be closed in the total amount of PLN 94 300 thousand. In connection with the above, the
    purchase price and claim for maintaining the capital adequacy ratio of Bank BPH Core Business at 13.25% were
    adjusted as follows:
     adjustment due to establishing that VISA's shares and the right to deferred payment as a result of the
    Transaction are the property of Alior Bank in t he amount of PLN 20 508 thousand.
     adjusment of a claim for maintaining the capital adequacy ratio of the Bank BPH Core Business at the level of
    13.25% in the amount of PLN 10 962 thousand.
     adjustment of the purchase price in the amount of PLN 19 138 thousand .
    On 9 January 2018, the Sellers paid the Bank PLN 94 300 thousand.
    45 Significant events after the end of the reporting period
    On 5 February 2018 Fitch Ratings Ltd agency maintained the rating attributed to Alior Bank at the BB level,
    changing the outlook from stable to positive. The change of the Bank's outlook was influenced, among others, by
    improved profitability ratios (in relation to the assumed risk) and a more mature and tested business model.
    The full rating assigned by the Agency is as fol lows:
    1. Long -term rating of the entity (Long -Term Foreign Currency IDR): BB perspective
    positive
    2. Short -Term Foreign Currency IDR: B
    3. Long -term national rating (National Long -Term Rating): BBB + (pol), perspective
    positive


    F i n a n c i a l S t a t e m e n t s o f A l i o r B a n k SA
    f o r t h e y e a r e n d e d 3 1 D e c e m b e r 2 0 1 7
    ( i n P L N ‘ 0 0 0 )
    1 2 4
    4. Short -term national ratin g (National Short -Term Rating): F2 (pol)
    5. Viability Rating (VR): bb
    6. Support Rating: 5
    7. Minimum support rating (Support Rating Floor): 'No Floor'
    Definitions of Fitch ratings are available on the Agency's website at www.fitchratings.com, where rating s, criteria
    and methodologies are also published .



    Treść w podglądzie może zawierać błędy powstałe podczas konwersji plików pdf.
  • Załącznik nr: 6

    Pobierz plik

Źródło: strona internetowa spółki, relacje inwestorskie, raporty bieżące i okresowe.

Oceń raport:


Pozytywny

Neutralny

Negatywny

WSZYSTKIE KOMUNIKATY SPÓŁKI
Informacje o spółce
Nazwa:Alior Bank SA
ISIN:PLALIOR00045
NIP:1070010731
EKD: 65.12 działalność bankowa
Adres: ul. Łopuszańska 38D 02-232 Warszawa
Telefon:+48 22 5552222
www:www.aliorbank.pl
Kalendarium raportów
2020-04-29Raport za I kwartał
2020-08-06Raport półroczny
2020-11-04Raport za III kwartał
Komentarze o spółce ALIOR BANK
2018-03-27 15:52:12
taktak
ładny wałek
Odpowiedzialność
prawna

Zgłoś moderatorowi
Copyright © 2017 tu Inwestor
PiriBit Sebastian Urbański
ul. Okopowa 113/19 p.1
91-849 Łódź
NIP: 888-28-35-649