48. Prudential consolidation

According to 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 investment firms and amending Regulation (EU) No 648/2012 (“CRR Regulation”), mBank (“the Bank”) is a significant subsidiary of EU parent institution, responsible for the preparation of the consolidated prudentially financial data to fulfil the requirement of disclosures described in IAS 1.135 Presentation of Financial Statements.

Financial information presented below does not represent IFRS GAAP measures as defined by the standards.

mBank S.A. Group (“the Group”) consists of entities defined in accordance with the rules of prudential consolidation, specified by the CRR Regulation.

Basis of the preparation of the consolidated financial data

mBank S.A. Group consolidated financial data based on the rules of prudential consolidation specified by the CRR Regulation (“Consolidated prudentially financial data”) have been prepared for the 12-month period ended 31 December 2014.

The consolidated prudentially financial data have been prepared according to the provisions of CRR Regulation, based on the rules of prudential consolidation stipulated in the CRR Regulation. The consolidated interim profit presented in the consolidated prudentially financial data may be included in consolidated Common Equity Tier 1 for the purpose of the calculation of consolidated Common Equity Tier 1 capital ratio, consolidated Tier 1 capital ratio and consolidated total capital ratio with the prior permission of the Polish Financial Supervisory Authority or after approval by the General Meeting of shareholders.
The accounting policies applied for the preparation of the Group consolidated prudentially financial data are identical to those, which have been applied to the mBank S.A Group consolidated financial data for the year 2014, prepared in compliance with International Financial Reporting Standard (“IFRS”), except for the consolidation standards presented below.

Consolidation

The condensed consolidated prudentially financial data includes the Bank and the following entities:

 

 
  31.12.2014 31.12.2013
Company Share in voting rights (directly and indirectly) Consolidation method Share in voting rights (directly and indirectly) Consolidation method
Dom Maklerski mBanku S.A. 100% full 100% full
mBank Hipoteczny S.A. 100% full 100% full
mCentrum Operacji Sp. z o.o.  100% full 100% full
mFaktoring S.A.  100% full 100% full
mLeasing Sp. z o.o.  100% full 100% full
MLV 45 Sp. z o.o. spółka komandytowa  100% full 100% full
Transfinance a.s. 100% full 100% full
mFinance France S.A. 99.98% full 99.98% full
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Entities included in the scope of prudential consolidation are defined in the Regulation CRR – institutions, financial institutions or ancillary services undertakings, which are subsidiaries or undertakings in which a participation is held, except for entities in which the total amount of assets and off-balance sheet items of the undertaking concerned is less than the smaller of the following two amounts:

a) EUR 10 million;

b) 1 % of the total amount of assets and off-balance sheet items of the parent undertaking or the undertaking that holds the participation.

The consolidated financial data combine items of assets, liabilities, equity, income and expenses of the parent with those of its subsidiaries eliminating the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary. Thus arises goodwill. If goodwill has negative value, it is recognised directly in the income statement. The profit or loss and each component of other comprehensive income is attributed to the Group’s owners and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. If the Group loses control of a subsidiary, it shall account for all amounts previously recognised in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Group had directly disposed of the related assets or liabilities

Intra-group transactions, balances and unrealised gains on transactions between companies of the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Consolidated prudentially income statement

 

 
  Period from 01.01.2014to 31.12.2014 Period from 01.01.2013 to 31.12.2013
Interest income 3 930 574 3 933 430
Interest expense (1 468 315) (1 723 667)
Net interest income 2 462 259 2 209 763
Fee and commission income 1 358 468 1 263 563
Fee and commission expense (482 126) (464 578)
Net fee and commission income 876 342 798 985
Dividend income 30 133 34 045
Net trading income, including: 366 232 340 614
Foreign exchange result 233 341 281 780
Other net trading income and result on hedge accounting 132 891 58 834
Gains less losses from investment securities, investments in subsidiaries and associates 29 205 78 816
Other operating income 137 734 177 019
Net impairment losses on loans and advances (515 903) (477 778)
Overhead costs (1 500 946) (1 419 426)
Amortisation (186 251) (184 569)
Other operating expenses (141 986) (119 161)
Operating profit 1 556 819 1 438 308
Profit before income tax 1 556 819 1 438 308
Income tax expense (333 587) (294 953)
Net profit 1 223 232 1 143 355
Net profit attributable to:
 - Owners of mBank S.A. 1 223 232 1 143 355
 - Non-controlling interests - -
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Prudentially consolidated statement of financial position

 
ASSETS 31.12.2014 31.12.2013
Cash and balances with the Central Bank 3 054 548 1 650 466
Loans and advances to banks 3 727 309 3 452 330
Trading securities 1 156 450 680 902
Derivative financial instruments 4 865 517 2 349 585
Loans and advances to customers 74 697 423 68 298 858
Hedge accounting adjustments related to fair value of hedged items 461 970
Investment securities 27 906 260 25 589 670
Non-current assets held for sale 291 829 -
Intangible assets, including: 456 522 445 202
 - goodwill - 1 196
Tangible assets 708 103 700 646
Current income tax assets 61 336 7 332
Deferred income tax assets 238 980 336 999
Other assets 509 114 620 400
T o t a l   a s s e t s 117 673 852 104 133 360
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LIABILITIES AND EQUITY
L i a b i l i t i e s
Amounts due to the Central Bank - -
Amounts due to other banks 13 383 829 19 224 182
Derivative financial instruments 4 719 056 2 459 715
Amounts due to customers 72 615 316 61 892 621
Debt securities in issue 10 341 742 5 430 524
Hedge accounting adjustments related to fair value of hedged items 103 382 (4 349)
Liabilities held for sale 91 793 -
Other liabilities 1 301 051 1 161 826
Current income tax liabilities 1 441 2 877
Provisions for deferred income tax 1 980 2 954
Provisions 176 881 141 060
Subordinated liabilities 4 127 724 3 762 757
T o t a l   l i a b i l i t i e s 106 864 195 94 074 167
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E q u i t y
Equity attributable to Owners of mBank S.A. 10 809 655 10 059 191
Share capital: 3 523 903 3 512 338
- Registered share capital 168 840 168 696
- Share premium 3 355 063 3 343 642
Prudentially consolidated statement of financial position
- Profit from the previous years 5 512 997 5 085 431
- Profit for the current year 1 223 232 1 143 355
Other components of equity 549 523 318 067
Non-controlling interests 2 2
T o t a l   e q u i t y 10 809 657 10 059 193
T o t a l   l i a b i l i t i e s   a n d   e q u i t y 117 673 852 104 133 360
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