2017 annual report - unicredit bank · central and eastern european network to our extensive...

2017 Annual Report

Annual Report

www.unicreditbank.cz

2017

UniCreditBank•Výročnízpráva2016 1

We are a simple, successful Pan European Commercial Bank, with a fully plugged-in CIB, delivering a unique Western, Central and Eastern European network to our extensive franchise of 25 million clients. Our strategy is long-term. We are transforming the Group through decisive actions to lay the groundwork for the future, changing the way we work to anticipate our clients’ medium-term evolution. Everything we do is designed to make UniCredit a true Pan European Winner.

One Bank, One UniCredit.

4 2017AnnualReport•UniCreditBank

Dear Shareholders,After six years as Chairman of UniCredit,I will be stepping down at the next Annual General Meeting, confident in the knowledge that UniCredit today is a much changedand stronger Group, poised for future growthand success. During my time here, thewhole banking sector has faced unparalleledchallenges and undergone a significant evolution.UniCredit has seized on this and taken the opportunity to undertake an in-depth long-term transformation of the Group, in order to createa true pan-European winner.

Having worked closely with all the UniCredit teams, I have developed an enormous respect and appreciation for the people within the Group. Thanks to them, UniCredit will be able to achieve its remarkable potential. The work of UniCredit’s teams, under the strong leadership of our CEO Jean Pierre Mustier has made our Group one of Europe’s most solid financial institutions. I would like to sincerely thank Jean Pierre for accelerating the transformation of our business model at a time when every company, including banks, must evolve. I greatly appreciate his constructive work

Chairman’smessage

Today, UniCredit is a leading pan-European bank, well-equippedto address the future,and I thank all those who helped us achieve this result.

Giuseppe Vita Chairman

UniCreditBank•2017AnnualReport 5

with the board to define a clear long-term strategy, which has been well-received by investors and all other stakeholders.

The past year saw an improved economic situation at both global and European level, and although interest rates remained persistently low, UniCredit experienced positive dynamics across the Group. Thanks to decisive actions, the Group is now significantly better positioned to address the future.

In 2017, UniCredit launched and began implementing its Transform 2019 plan, the start of a long-term process to ensureUniCredit becomes a true pan-European winner. I am pleased that the plan is already delivering tangible results by improving both our Group’s profitability and capital base, by changing the way we work and by allowing our teams to focus even more on our customers.We redefined UniCredit's perimeter, while remaining one of the few true pan-European banks with a global reach. At the same time, we greatly reduced our portfolio of impaired loans, significantly improving our risk profile. The Group is making decisive strides forward in the area of technology, thanks to a series of key investments that will allow us to stay ahead of our customers’ evolving behaviors and needs.

UniCredit’s decisive actions benefitted all the Group’s stakeholders and the entire Italian banking system as well as Italy as a whole.

Our progress has allowed us to announce a gradual increase of our dividend as of financial year 2019. In our dividend policy, we have taken into account the evolving regulatory framework, current monetary policies and the changing competitive scenario. Even as these factors have exerted greater pressure on the profitability of our sector, we are confident we have taken the best decisions for our investors, especially all our long-term shareholders.

We have charted a clear course toward change, and our progress was accelerated in 2017 by two extraordinary shareholders’ meetings, which lay the groundwork for a new, stronger UniCredit.

The first meeting, in January 2017, saw the approval of the largest capital increase in history by a company based in Italy. I thank you for this act of trust in the bank, which helped us plan for the future with rigor and determination.

The second meeting, in December 2017, allowed for the improvement of UniCredit’s governance, delivering far-reaching positive implications for the bank. The decision at that December meeting to empower the Board of Directors to submit its own list of candidates, to increase the number of board members drawn from the second list of candidates from one to two, to eliminate the 5 percent limit on voting rights, and to convert savings shares into ordinary shares aligned the Group with international best practices.

Among other notable changes was the cooptation of Fabrizio Saccomanni to our Board of Directors. I warmly welcome him to the board and I am certain that UniCredit will greatly benefit from his outstanding experience in the banking sector and his in-depth knowledge of European regulatory regimes.

These changes, like the others we have made in recent years, bring us closer to our ultimate goal: to make UniCredit a more efficient, more flexible and more profitable bank, able to seize opportunities to create sustainable value.

In light of what we have achieved and what we intend to accomplish, I am confident that the future will bring benefits to our shareholders and to all UniCredit’s stakeholders. Thanks to our people, our bank possesses extraordinary strengths. Together, we will successfully ensure UniCredit is and remains a true pan-European winner.

Sincerely,

Giuseppe VitaChairman

UniCredit S.p.A.


Dear Shareholders,I would like to thank you for your ongoing support during our transformation. At UniCredit, we are taking decisive actions to become more competitive and build a strong, sustainableBank, poised for future growth. We haveexecuted on all our commitments in 2017, including a successful €13bn capital increaseand the disposals of Pioneer Investmentsand Bank Pekao stakes. We concluded FINOPhase 1, with the sale of a €17.7bn portfolio.Everything we do is designed to make UniCredita true pan European Winner.

Our strategy is to be One Bank, One UniCredit: a simple, successful, pan European commercial bank, with a fully plugged in CIB, deliveringa unique Western, Central and Eastern European network to our extensive client franchise.

This strategy is long-term. What we are doing today to implement Transform 2019 – our strategic plan – is laying the groundwork for the future success. It is changing the way we work to anticipate our clients’ medium-term evolution, including their use of multiple channels.

Chief ExecutiveOffi cer’smessage

We are transforming through decisiveactions. Everythingwe do is designedto make UniCredita true pan European Winner.

Jean Pierre Mustier Chief Executive Officer

Chief ExecutiveOffi cer’smessage

* FINO: Faliure Is Not An Option


Our investments in digital aim to improve the customer experience as we continue to optimise our processes and our cost base. New commercial dynamics are driving how we train and develop our people.

Our management is clear on this vision and their actions are underpinned by a strict long-term incentives structure based on the plan’s key performing indicators. All our people are focused on the ongoing execution of Transform 2019. It is their energy, commitment and hard work which allow UniCredit to deliver tangible results.

As presented to investors at the 2017 Capital Markets Day in December, our performance is fully on track and we have confirmed all the Transform 2019 key targets, with a betterrisk profile and an improved dividend payout.

We have strengthened our capital position, resulting in a lower SREP Pillar 2 Requirement and an S&P upgrade to a BBB rating with a stable outlook. We have confirmed our 2019 CET1 ratio target whilst anticipating additional regulatory headwinds during the plan period. Post 2019, the CET1 ratio will remain above 12.5 per cent, thanks to organic capital generation that will fully absorb the expected regulatory impacts.

In terms of asset quality, we signed binding agreements to reduce our stake in FINO to below 20 per cent. A more disciplined risk management strategy and underwriting processes are driving significant improvements in all our asset quality metrics. Finally, as announced, we are improving on our original Group Gross NPEs' target, cutting a further €4.0bn by the end of 2019. The full rundown of the Non Core portfolio, which will occur by the end 2025, is entirely self-funded.

In terms of transforming our operating model, we have confirmed our overall revenues and cost targets. Our FTE and branch reductions are ahead of schedule and our digital and IT transformation is fully on track.

We continue to maximise commercial bank value, with the ongoing transformation resulting in higher productivity. Our activities in Western Europe continue to benefit from the revamped

network with new service models for retail and SME customers as well as a strong multichannel strategy. Cost reductions are progressing according to plan. In two other core divisions, CEE and CIB, we have further strengthened our leadership positions while keeping a strong focus on risk.

Finally, In terms of adopting a lean but steering centre, decisions taken at our latest EGM concerning, for example, a simplified share structure, position us as best in class in terms of European corporate governance.

Finally, on behalf of the Board of Directors and the whole Group, I would like to extend a special thanks to Giuseppe Vita, whose successful tenure as the Chairman of UniCredit is coming to a close. Giuseppe's significant contributions over the past six years have been very precious to our development. His vision and support have enabled UniCredit to grow into one of the few truly pan European commercial banks.

Sincerely,

Jean Pierre MustierChief Executive Officer

UniCredit S.p.A.


Dear Shareholders,our compensation policies are an integralpart of our strategy, our remunerationpractices are therefore designed to enable the achievement of business targets and to ensure full alignment to our risk management framework, in compliance to national and international regulatory requirements.

We are consequently committed to design compensation systems that reflect the group’s and individual performance sustainability and to set pay levels, aligned to market benchmarks, capable of attracting, rewarding and retaining the best people.

Since the end of 2016, all our colleagueshave been focused on the execution of our

Letter fromthe Chairman

In 2017, we implemented all the changes to our

compensation framework, announced at the same time as the Strategic Plan presentation, underpinning a strong alignment between management and shareholders. In 2018, we confirm our policy main pillars together with a compensation framework substantially unchanged, furtherly emphasizing the importance of compliance culture and individual conduct vis-à-vis the remuneration approach.

Alessandro CaltagironeChairman of the Remuneration Commitee


2016-2019 Strategic Plan, Transform 2019, which encompasses all the major areas of the Bank. Our Plan is fully on track and is delivering tangible results, all the 2019 key targets have been confirmed, with an improved risk profile.In this context, in 2017, we implemented all the changes to our compensation framework, announced at the same time as the Strategic Plan presentation, underpinning a strong alignment between management and shareholders.

In particular, among others, we reviewed the variable compensation structure, envisaging, for group senior management, a wider long term component, represented by the Long-Term Incentive Plan (LTIP), based on the Transform 2019 key performance indicators and combined with the Strategic Plan horizon.

In 2018, we confirm our policy main pillars together with a compensation framework substantially unchanged, furtherly emphasizing the importance of compliance culture and individual conduct vis-à-vis the remuneration approach.

Moreover, we re- affirm the relevance of effective and clear communication with our shareholders, by providing, with the support of different tools, both comprehensive disclosure on our practices and more concise information on the main important elements of our policy.On this point, I would like to thank once again our investors for being available to constructively exchange views with us, aiming at understanding and addressing mutual needs.

In closing, let me express my gratitude to my fellow members of the Remuneration Committee for their cooperation and their contribution to our common activities during the past years. Also on their behalf, I would like to convey our best wishes to our successors.

Sincerely,

Alessandro CaltagironeChairman of the

Remuneration Committee

10 Výročnízpráva2016•UniCreditBank

Nejdůležitější konsolidované hospodářské výsledky

(IFRS auditované)


20

20

36

13

8 3

24

46

20

10

UniCredit is a simple successful Pan European Commercial Bank, with a fully plugged in CIB, delivering a unique Western, Central and Eastern European network to our extensive client franchise: 25 million clients.UniCredit offers local expertise as well as an international one reaching and supporting its clients globally, providing them with unparalleled access to leading banks in its 14 core markets as well as in another 18 countries worldwide. UniCredit European banking network includes Italy, Germany, Austria, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Romania, Russia, Serbia, Slovakia, Slovenia and Turkey.

Highlights

Revenues1 (%)

Commercial Banking Italy

CEE Division

CIB

Commercial Banking Germany

Commercial Banking Austria

Asset Gathering

Italy

Germany

CEE

Austria

1. Data as of December 31, 2017. In accordance with IFRS5, the profit/loss of Bank Pekao S.A., Pioneer Global Asset Management S.p.A. and their subgroups’ companies till the date of the deconsolidation, were recognized in Income Statement under item “Profit (loss) after tax from discontinued operation”.Disposals were finalized during 2017.* Fully loaded CET1 ratio.

Financial Highlights1

Operating income

€ 19,619 mNet profit (loss)

€ 5,473 mShareholders' equity

€ 59,331 m

Total assets

€ 836,790 m

Common Equity Tier 1 ratio*

13.60%

byBusiness

Linesby

Regions

UniCreditBank•Výročnízpráva2016 11 UniCreditBank•2017AnnualReport 11

2. Market Shares in terms of Total Loans as of November 2017.* Data as of October 2017.Source Company data, National Central Banks.

Market Shares2 (%)

14.0

23.0

19.7

27.3

8.5

2.5

9.0

Germany

Hungary

Czech Republic

Croatia*

Bulgaria

Bosnia and Herzegovina

Austria11.1

9.5

1.5

11.3

8.5

7.5

9.1

Slovenia

Turkey

Slovakia

Serbia

Russia

Romania

Italy

0.5x

1 x

Croatia SerbiaRomania

Turkey

Slovakia

Hungary

Germany

Italy

Austria

Slovenia

CzechRepublic

Bosnia andHerzegovina Bulgaria

RussiaUniCredit European Banking Network


Transform 2019 MilestonesTransform 2019 – our strategic plan – is yielding tangible results.

Our strategy is to be One Bank, One UniCredit: a simple, successful, Pan European Commercial Bank, with a fully plugged in CIB, delivering a unique Western, Central and Eastern European network to our extensive client franchise.

2016 CAPITAL MARKETS DAY

Strengthen andOptimise Capital


TransformOperating Model


ImproveAsset Quality

ImproveAsset Quality

Adopt Lean but SteeringCorporate Center

STRENGTHEN CAPITALDisposal of Pioneer Investments to Amundi

FINO PHASE 1 SUCCESSFULLY CLOSEDFINO Phase 1 definitive agreements signed with Pimco and Fortress for the sale of €17.7bn portfolio

CAPITAL INCREASESuccessful €13bn capital increase

CORPORATE GOVERNANCE SIMPLIFICATIONStrengthened corporate governance and simplifiedshare capital structure to position UniCredit as best in class in terms of European corporate governance

STRENGTHEN RISK CONTROLSNew Risk Management structure in place to further strengthen the effectiveness of risk controls

UBIS REORGANISATIONUBIS reorganisation brings improved accountability and simplified processes to further improve customer experience

STRENGTHEN CAPITALDisposal of 32.8% stake in Bank Pekao

02.03

07.06

01.07

03.07

17.07

21.09

04.12




Improve Asset QualityThe banking industry is evolving but our core business will always be to support client growth with a unique proposition linked to credit. It is our responsibility to provide advice and support so that companies can develop and globalise – while ensuring sustainable growth. This also means looking beyond purely economic returns, to drive investments with a positive impact on society.

In UniCredit, “Improve Asset Quality” is a key pillar of our strategic plan. We are focused on the proactive de-risking of our balance sheet A strong risk discipline safeguards the quality of future origination A new risk management structure further strengthens the effectiveness of our risk controls.

Key Asset Quality Metrics

FINO Phase 1 concluded

with € 17.7bn

FINO Phase 1 signed in

December 2016

FINO Phase 2 signed tosell down

below 20%

55.6%

11.8%

56.2%

10.2%

>54%

7.8%

2016 2017 2019

Coverageratio

Group GrossNPEs ratio

FINO portfolio disposal

Banking that matters.

In this era of unprecedented change customers are looking for companies they can trust and that can play a tangible positive role in their everyday lives. UniCredit has a simple and successful Pan European Commercial banking model delivering relevant solutions to the real needs and wants of today’s customers.


Contents

Consolidatedfinancialhighlights 16Separatefinancialhighlights 18

IntroductionfromtheBoardofDirectors 20ReportoftheBoardofDirectors 29ReportoftheSupervisoryBoard 35BasisforcalculatingthecontributiontotheGuaranteeFund 35

Consolidatedfinancialstatements 37Consolidatedstatementofcomprehensiveincomefor2017 37Consolidatedstatementoffinancialpositionasof31December2017 38Consolidatedstatementofcashflowsfor2017 39Consolidatedstatementofchangesinequityfor2017 40Notestotheconsolidatedfinancialstatements 41

Separatefinancialstatements 97Statementofcomprehensiveincomefor2017 97Statementoffinancialpositionasof31December2017 98Statementofcashflowsfor2017 99Statementofchangesinequityfor2017 100Notestotheseparatefinancialstatements 101

Auditor’sreportontheannualreport 154

Supplementaryinformation 161Reportonrelationsbetweenthecontrollingandcontrolledentities 181OrganizationalstructureofUniCreditGroup 191Listofbranches 194


FinancialHighlights–Consolidated

(IFRSaudited)

31Dec2017 31Dec2016UniCreditBankCzechRepublicandSlovakia,a.s. MCZK MCZKOperatingresultsNetinterestincomeandsimilarincome 11218 10145Netfeeandcommissionincome 3465 3823Administrativeexpenses (7752) (7854)Profitbeforeincometax 9289 7713Netprofitaftertax 7626 6045 Statementoffinancialpositionfigures Totalassets 672078 635042Receivablesfromclients–netvalue 386672 385572Depositsfromclients 360473 371163Issuedcapital 8755 8755

Alternativeperformanceindicators* Returnonaverageassets(ROAA) 1,2% 1,0%Returnonaverageequity(ROAE) 12,7% 11,2%Assetsperemployee 204,3 190,8Administrativeexpensesperemployee 2,4 2,4Netprofitperemployee 2,3 1,8 Informationaboutcapitalandcapitaladequacy Tier1 63941 56464Tier2 1424 1575Capital 65365 58039 Capitalrequirementforcreditriskunderthestandardisedapproach: 5481 6466Capitalrequirementsforexposuretoregionalgovernmentorlocalauthorities 6 6Capitalrequirementsforexposuretoinstitutions 4 13Capitalrequirementsforexposuretobusinesses 2152 2709Capitalrequirementsforretailexposures 1986 2055Capitalrequirementsforexposuressecuredbyrealestate 842 774Capitalrequirementsforexposuresatdefault 124 255Capitalrequirementsforequityexposures 82 77Capitalrequirementsforotheritems 285 577 CapitalrequirementforcreditriskundertheIRBapproach: 18993 20996Capitalrequirementsforexposuretocentralgovernmentorcentralbanks 398 463Capitalrequirementsforexposuretoinstitutions 901 880Capitalrequirementsforexposuretobusinesses 15522 17735Capitalrequirementsforretailexposures 1781 1918Capitalrequirementsforothernoncredit-obligationassets 391 – Capitalrequirementsforpositionrisk 313 527Capitalrequirementsforcurrencyrisk 61 67Capitalrequirementsforsettlementrisk – –Capitalrequirementsforcommodityrisk 55 39Capitalrequirementsforoperationalrisk 1939 1800Capitalrequirementsforcreditvaluationadjustment 85 111 CET1capitalratio 19.00% 15.05%Tier1capitalratio 19.00% 15.05%Totalcapitalratio 19.42% 15.47%

Averagenumberofemployees 3289 3328Numberofbranches 132 161


Reconciliationofequitytoregulatorycapital(consolidated)

31Dec2017 31Dec2016UniCreditBankCzechRepublicandSlovakia,a.s. MCZK MCZKDatafromtheStatementofFinancialPosition:Sharecapital 8755 8755Sharepremium 3495 3495Valuationreserves 1874 4782Retainedearnings,reservefundsandothercapitalfunds 49746 43814Profitfortheyear 7626 6045Totalequity 71496 66891 CET1capitaladjustments: Profitfortheyear (3732) (6045)Reservefromrevaluationofhedginginstruments (539) (1880)Reservefromrevaluationofavailable-for-salesecurities – –Foreignexchangeratedifferencesfromtheforeignbranch 49 (1)Intangibleassets (1936) (1384)Creditriskadjustmentsfornon-defaultedexposures 1181 1839Anticipatedlossesfornon-defaultedexposures (2152) (2462)Effectofcompaniesnotincludedintheprudentialconsolidationgroup (510) (452)Otheradjustments 84 (42)TotalCET1 63941 56464TotalTier1(T1) 63941 56464 Creditriskadjustmentsforexposuresatdefault 7048 7363Anticipatedlossesforexposuresatdefault (5039) (5067)Non-deductiblesurplusabovetherisk-weightedassetslimit (585) (721)TotalTier2(T2) 1424 1575 Capital 65365 58039

*Definitionofusedalternativeperformanceindicators

Averagetotalassets:(TotalassetsattheendoftheyearX+TotalassetsattheendoftheyearX-1)dividedby2

Averagetier1equity:(Tier1equityintheyearX+Tier1equityintheyearX-1)dividedby2

Averagenumberofemployees:ThesumofemployeesattheendofeachmonthintheyearXdividedby12

Returnonaverageassets(ROAA):NetprofitintheyearXdividedbytheaveragetotalassets

Returnonaveragetier1equity(ROAE):NetprofitintheyearXdividedbytheaveragetier1equity

Assetsperemployee:TotalassetsattheendoftheyearXdividedbytheaveragenumberoftheemployees

Netprofitperemployee:NetprofitattheendoftheyearXdividedbytheaveragenumberoftheemployees

WhereX=2017andX-1=2016


FinancialHighlights–Separate

(IFRSaudited)

31Dec2017 31Dec2016UniCreditBankCzechRepublicandSlovakia,a.s. MCZK MCZKOperatingresultsNetinterestincomeandsimilarincome 9990 8947Netfeeandcommissionincome 3095 3521Administrativeexpenses (7220) (7296)Profitbeforeincometax 10277 6812Netprofitaftertax 8821 5319 Statementoffinancialpositionfigures Totalassets 659333 615595Receivablesfromclients–netvalue 374426 367298Depositsfromclients 360839 371304Issuedcapital 8755 8755

Alternativeperformanceindicators* Rentabilityofaverageassets(ROAA) 1,4% 0,9%RentabilityofaverageTier1Capital(ROAE) 15,1% 10,2%Assetsperemployee 223,8 205,7GeneralAdministrativeExpensesperemployee 2,5 2,4Netprofitperemployee 3,0 1,8 Informationaboutcapitalandcapitaladequacy Tier1 62499 54243Tier2 1584 1820Capital 64083 56063 Capitalrequirementforcreditriskunderthestandardisedapproach: 2444 3199Capitalrequirementsforexposuretoregionalgovernmentorlocalauthorities 5 6Capitalrequirementsforexposuretoinstitutions 3 3Capitalrequirementsforexposuretobusinesses 352 553Capitalrequirementsforretailexposures 757 1117Capitalrequirementsforexposuressecuredbyrealestate 842 670Capitalrequirementsforexposuresatdefault 28 67Capitalrequirementsforequityexposures 339 337Capitalrequirementsforotheritems 118 446 CapitalrequirementforcreditriskundertheIRBapproach: 21120 24263Capitalrequirementsforexposuretocentralgovernmentorcentralbanks 397 463Capitalrequirementsforexposuretoinstitutions 901 880Capitalrequirementsforexposuretobusinesses 17649 21002Capitalrequirementsforretailexposures 1781 1918Capitalrequirementsforothernoncredit-obligationassets 392 Capitalrequirementsforpositionrisk 313 527Capitalrequirementsforcurrencyrisk 68 44Capitalrequirementsforsettlementrisk – –Capitalrequirementsforcommodityrisk 55 39Capitalrequirementsforoperationalrisk 1686 1518Capitalrequirementsforcreditvaluationadjustment 85 111 CET1capitalratio 19.40% 14.61%Tier1capitalratio 19.40% 14.61%Totalcapitalratio 19.89% 15.10%

Averagenumberofemployees 2946 2993Numberofbranches 132 161


Reconciliationofequitytoregulatorycapital(separate)

31Dec2017 31Dec2016UniCreditBankCzechRepublicandSlovakia,a.s. MCZK MCZKDatafromtheStatementofFinancialPosition:Sharecapital 8755 8755Sharepremium 3495 3495Valuationreserves 1878 4792Retainedearnings,reservefundsandothercapitalfunds 46493 41174Profitfortheyear 8821 5319Totalequity 69442 63535 CET1capitaladjustments: Profitfortheyear (3732) (5319)Reservefromrevaluationofhedginginstruments (543) (1890)Reservefromrevaluationofavailable-for-salesecurities – –Foreignexchangeratedifferencesfromtheforeignbranch 49 (1)Intangibleassets (1743) (1227)Creditriskadjustmentsfornon-defaultedexposures 1181 1839Anticipatedlossesfornon-defaultedexposures (2239) (2652)Otheradjustments 84 (42)TotalCET1 62499 54243TotalTier1(T1) 62499 54243 Creditriskadjustmentsforexposuresatdefault 7048 7363Anticipatedlossesforexposuresatdefault (5039) (5067)Non-deductiblesurplusabovetherisk-weightedassetslimit (425) (476)TotalTier2(T2) 1584 1820 Capital 64083 56063

*Definitionofusedalternativeperformanceindicators

Averagetotalassets:(TotalassetsattheendoftheyearX+TotalassetsattheendoftheyearX-1)dividedby2

Averagetier1equity:(Tier1equityintheyearX+Tier1equityintheyearX-1)dividedby2

Averagenumberofemployees:ThesumofemployeesattheendofeachmonthintheyearXdividedby12

Returnonaverageassets(ROAA):NetprofitintheyearXdividedbytheaveragetotalassets

Returnonaveragetier1equity(ROAE):NetprofitintheyearXdividedbytheaveragetier1equity

Assetsperemployee:TotalassetsattheendoftheyearXdividedbytheaveragenumberoftheemployees

Netprofitperemployee:NetprofitattheendoftheyearXdividedbytheaveragenumberoftheemployees

WhereX=2017andX-1=2016


Dear Shareholders, Ladies, and Gentlemen,You are now holding the 2017 Annual Report of UniCredit Bank Czech Republic and Slovakia, a.s. (hereinafter referred to as UniCredit Bank), in your hands. Last year, we celebrated a ten-year anniversary of the UniCredit Bank brand on the Czech and Slovak market, however, our roots go much deeper. During the last decade, we have created a strong financial group in the Czech Republic and Slovakia.Our Bank is a part of a leading European banking group with more than 25 million clients across fourteen markets. Owing to unique services, customer-focus and an extensive branch network across the Western, Central and Eastern Europe, we help our clients grow both on European markets and worldwide.In 2017, the banking sector and the financial market in the Czech Republic and Slovakia were both affected by the positive development and fast growth of both economies. The increasing household consumption positively translated mainly into the segment of consumer loans and housing loans, as well as into bank deposits of both households and companies.

The major event on the Czech financial market was the termination of a nearly four-year intervention regime of the Czech National Bank and the first interest-rate hike in Europe as regards the Czech koruna in April.In Slovakia, more stringent conditions for lending slowed down the dynamics of its year-on-year growth, nevertheless, the volume of lending to households reported a double-digit increase. Higher household income positively affected investments, in particular in the field of unit funds. The profitability of commercial banks in Slovakia remained under pressure of the low, even negative interest rates. Despite the dynamic growth of balance sheets of banks, net interest income in the bank sector dropped. Lower cost of risk partially subdued the decline in overall profitability. At the same time, there was increased demand for hedging foreign exchange risk following the termination of foreign exchange interventions in the appreciation of the Czech koruna.Last year, UniCredit Bank did a great deal of work and together we have achieved excellent results in accordance with the objectives of the Group’s

The consolidated net profit on both markets grew by 26.2%, amounting to CZK 7.6 billion.

Jiří Kunert Chairman of the Board and CEO of UniCredit Bank Czech Republic and Slovakia

Chairman’sStatement


Transform 2019 programme. The consolidated net profit on both markets grew by 26.2%, amounting to CZK 7.6 billion.The increasing volume of client transactions, consistent management of credit risk cost, optimisation of operating costs and management of the bank’s balance sheet structure particularly contributed to the strong year-on-year increase.In the Retail Division, we place emphasis on the quality of our services and products, as well as on client satisfaction. Simple products and regular innovations in our offer are the key to growth in this segment. With a 4.5% year-on-year increase, the total number of our clients in both countries surpassed 700 thousand. The volume of lending was rising, too, with mortgages reporting a year-on-year increase by 11% and consumer loans nearly 3%. Deposits in the retail segment rose by 15.1% last year.Excellent results were also reported by the Corporate and Investment Banking Division. The average annual volume of the loan portfolio grew by 5.1% and double-digit increase in the volume of loans was reported in the segment of small and medium-sized enterprises, as well as increase in the number of international clients. We are proud to have participated in financing a nearly EUR 2 billion loan for EP Infrastructure, which represented one of the highest loans granted in the Czech Republic and Slovakia last year. In the leasing segment, we provided financing of movable assets and real estate in total of almost CZK 22.5 billion, with a 4.2% increase. The fastest growth, 4.7% year-on-year, was reported by the segment of vehicles below 3.5 tonnes.The offer of complex financing, quality advisory, professional know-how and synergy with UniCredit Leasing CZ, a.s. (hereinafter referred to as UniCredit Leasing) a UniCredit Factoring Czech Republic and Slovakia, a.s. (hereinafter referred to as UniCredit Factoring) makes us one of the major players on both markets. Last year, excellent results were also achieved in all key factors. We maintain a solid quality of assets and return on capital. The Bank thus strengthens its capital position, which allows us to finance other development plans of our clients in the Czech Republic and Slovakia. Last year, we also accomplished a cross-border integration of our internal banking system, owing to which we are able to further innovate our services.In 2018, we will continue in transforming our Bank in order to achieve the vision of being a simple universal commercial bank. In line with the UniCredit Group’s priorities, we will focus on improving the efficiency of our operating model, streamlining our internal processes or efficient cost management.

We will also continue in digitisation of our services and distribution channels. One of our major objectives for this year is the increase in the number of active clients of the Bank across all segments as well as a continued growth of corporate lending.Owing to the hard work of our employees, our products, services and achievements are regularly valued in domestic and international terms. Last year, we scored in the Czech Republic in the Golden Crown competition with our Smart Banking, mortgage loan and micro-instalment loan, and in the Financial Product of the Year competition with our PRESTO Loan, PRESTO – Consolidation of Loans and mortgage loan. In Slovakia, we received an award for the best private banking. According to the prestigious Euromoney magazine, we are the Best Bank in Cash Management in the Czech Republic and Slovakia. These results show that our products are appreciated not only by professionals, but also by our clients in particular.UniCredit Bank pursued socially responsible activities also in 2017. Last year, we supported scientific institutions and charitable organisations which help sick and disadvantaged children overcome barriers. We also participated in projects promoting cultural heritage in order to maintain legacy for the next generations. An important activity for our employees is the annual Gift Matching Program, owing to which they can support a non-profit organisation at their own discretion. This initiative has become a tradition in our bank and within UniCredit Group we have the best results given the number of activated projects, which are beneficial to the whole society. Last year, the Bank continued its partnership with the Advisory Service for People in Financial Distress, helping to prevent financial distress and resolve problems with making payments.We are proud of being an important partner of the Karlovy Vary International Film Festival for several years already. We also support sporting events. Now, it is our second year of being a partner of the RunCzech series.Thanks to the long-term trust of you, our clients in UniCredit Bank, as well as to the efforts and commitment of our employees, we can achieve excellent results. For that, I would like to express my great appreciation and sincere thank-you for the successful year of 2017 to all UniCredit Bank employees and our retail and corporate banking clients.

April 2018Jiří Kunert

Chairman of the Boardand CEO


Macroeconomicsituation

intheCzechRepublic inSlovakia

In2017,theCzecheconomywasdoingwell,approachingthepeakofthebusinesscyclewitha4.5%growth.Itsgrowthwasdrivenbyallcomponentsoftheaggregatedemand.Householdconsumptionwasdrivenbythedecliningunemployment,whichgraduallyreporteditslowestlevelseverduringtheyear,andincombinationwithrecordnumbersofvacantpositions,itputpressureonwageacceleration.Businessesincreasinglylistedlackofemployeesasthemainobstacletobusinessdevelopment.Formationoffixedcapitalrecoveredfromthepreviousyearmostlyowingtotheactivityofprivateentities.Theenvironmentconcernedwasconducivetothecreationofdemandinflationpressures,whichkepttheyear-on-yearinflationabove2%throughouttheyear.Averageinflationwasat2.5%,thehighestlevelinfiveyears.

TheinflationenvironmentpromptedtheCNBtostarttighteningthemonetaryconditions.First,thepolicyofforeign-exchangeinterventionswasabandonedinApril,wherebytheCNBceasedtokeeptheCzechkorunafromappreciating.Bytheendoftheyear,CZKappreciatedagainstEURby5.5%.Atthesametime,inordertotightenitsmonetarypolicy,theCNBalsousedtheinterestratechannel,increasingthereporatetwiceduringtheyear,withthereporateat0.5%fortheyear.Ontheforeign-exchangemarket,theterminationofinterventionswasprecededbyaperiodofextremelystrongdemandforCZKbyexportersandforeigninvestors,whichresultedintheCNBincreasingitsforeignreserveassetstoanequivalentofnearlytwothirdsoftheannualGDP.

AsideeffectofthegrowthofCZKpositionsofforeignentitieswastheincreaseddemandforCzechgovernmentbonds,whichtemporarilyreducedtheirrevenuestothatoftheGermanones.TheshareofCZKbondsheldbynon-residentsgrewfrom32%attheendof2016to42%inDecember2017,evenbrieflyexceeding50%duringtheyear.ThetotalvolumeofloansintheCzecheconomysloweddownto5.6%year-on-year,duetotheslowergrowthincorporatelending.Onthecontrary,householdlendingslightlysteppedupto7.5%year-on-year.Thedemandforrealestateforhousingboostedtheaccelerationoftheirpricestodouble-digitvalues,promptingtheCNBtoattempttohampersuchdevelopmentsbyadoptingmacroprudentialpolicytools.

Inthebusinesssector,saveforthefinancialsector,animportantchangewasthelaunchofthesecondstageofelectronicrecordsofsalesconcerningbusiness.Implementationofotherstages,whichwereplannedforthefollowingyear,wasterminatedbyadecisionoftheConstitutionalCourt.Therewerenootherlegislativechangesmaterialtothebusinessenvironment,giventheelectioncycle.Tariffwagesinthepublicsectorwereincreasedtoanunusualextentbygovernmentdecrees.Also,minimumwagegrewbyconsiderable11%.

In2017,thegrowthoftheSlovakeconomyslightlyaccelerated(from3.3%to3.4%),inparticularduetotheincreasingdomesticconsumptionandrecoveringprivateinvestments.GrowthofthedomesticeconomywasalsoboostedbythecyclicalrecoveryofthesurroundingEuropeaneconomies.Onthecontrary,economywasheldbackbylowpublicinvestmentsandstagnatingautomotiveindustry,whichwasinatransitionalphaseofpreparationfornewproduction.GDPgrowthinSlovakiathusslightlytrailedbehindthesurroundingcountriesoftheregion.

Unemploymentmovedtoanewhistoriclowandthelackoflabourforcestartedtoworsen,inparticularinthesouth-westofthecountry.Thepressureonwagesaccentuated.Thestronglabourmarketcontributedtotheimprovementofconsumerconfidenceandboosteddomesticconsumption,whichhadnotbeenhamperedbyinflationsofar.Throughouttheyear,itremainedrelativelysubdued,approachingthe2%thresholdattheendoftheyear.

InflationintheeurozonewasinlinewiththeECB’sobjective,givingtheECBnoreasontochangethesettingofitsmonetarypolicystance.ECBkeptthekeyinterestratesunchangedandcontinuedinitsassetpurchaseprogramme,whichwasextendeduntilSeptember2018.Itseemsthatthekeyinterestrateswillnotbeincreaseduntil2019.Theinterestratesthusremainclosetotheirhistoriclows,whichadverselyaffectsthenetinterestincomeoftheSlovakbankingsector.Itkeptfallingyear-on-year(-4.0%),despitethedynamicgrowthinlending.Lendingwasincreasedmostlyintheretailsegment.Duetothetighteningoftheconditions,however,thedynamicsofitsgrowthstartedtoslowdown.Theupwardtrendwasmaintainedbycorporateloansanddeposits.Onthecontrary,thedynamicsofgrowthofdepositsofthepublicwasslowingdown.Theincreasinghouseholdincometranslatedmainlyintoincreasedconsumptionaswellasintoagrowingriskappetiteofhouseholds,whichinvestedmoreoftheirfundsinmutualfunds.Comparedtothepreviousyear,banks’profitswentdownalsoduetosignificantlylowerone-offrevenues.Onthecontrary,theywere,atleastpartially,increasedbylowercostofrisk.Mostofthesetrendsshouldcontinuein2018.

Despiteseveralaffairsandturbulences,thegovernmentcoalitionremainsrelativestable,however,itssupportwasgraduallyfalling.Thistrendwasalsoconfirmedbytheregionalelectionsinautumn,whichweakenedthepositionofthestrongestpartyinthecountry–Smer-SD.Inthefirsthalfoftheelectionperiod,thegovernmentmanagedtoreducepublicfinancedeficits,alsoowingtolowerpublicinvestments;however,theplantobalancethepublicbudgetwasagainpostponedfrom2019to2020.


Corporate,investment,andprivatebanking

2017representedanothersuccessfulyearfortheCorporateandInvestmentBankingDivision.WecontinuedtoreinforceourstrongpositionincorporatebankingintheCzechandSlovakmarket.Wedidwellintheacquisitionofnewclients,owingtotheprovisionofcomprehensiveservicesandhighflexibilityforourclients.Revenuesinthecorporatedivisiongrewonbothmarketsbymorethan6%comparedto2016,andweacquiredmorethan4,600newclients.

Asforprimarysources,wefocusedonoptimisationofsourcesontheCzechandSlovakmarket,whichresultedinacontrolleddeclineofunstabledepositsintheamountofCZK18billion,whichcorrespondstoa7%declinecomparedto2016.Inlending,despitecompanies’decliningdemandforloans,weincreasedthevolumeofloansbyCZK13billion,i.e.by5%comparedto2016.

In2017,asin2016,wefocusedonimprovingouroverallpositionwithinthesegmentofsmallandmedium-sizedenterprisesinaccordancewiththelong-termstrategyoftheCorporateandInvestmentBankingDivision.

2017wasonceagainaverysuccessfulyearinthesegmentofsmallandmedium-sizedenterprises,whenthevolumeoflendingincreasedbymorethan17%year-on-yearandrevenueswererisingbymorethan10%onbothmarketscomparedto2016.Thegrowthinlendingwasalsodrivenbycooperationwithexternalentitiesgrantingbankguaranteestosmallandmedium-sizedenterprises,orprovidingtheBankwithcheapersourcesoffinancingandthusmakingfinancingavailabletoalargerrangeofclients.Onalong-termbasis,thoseentitiesincludeČeskomoravskázáručníarozvojovábanka(ČMZRB),theEuropeanInvestmentFund(EIF),theEuropeanInvestmentBank(EIB),theEuropeanBankforReconstructionandDevelopment(EBRD),andSlovenskázáručnáarozvojovábankaAssetManagement(SZRBAM).Additionally,weeffectivelyprovidedourSlovakclientswithfinancingusingTLTROfundsfromtheEuropeanCentralBank(ECB).

In2017,theBankreinforceditsleadingpositiononthemarketofstructuredfinanceandsyndicatedloans,whichwasprovedbythenumberofmandatesarrangedandtheclosingofstructurallyattractivetransactions.ThelargestandmostprominenttransactionsincludedarrangingofrefinancingforEPInfrastructure,refinancingofSellier&BellotbondsandfinancingofTrelleborgGroup.Intermsofprojectfinance,theyearof2017wassimilarlysuccessful,withseveralmajortransactionsaccomplished.Thesemajortransactionsincludedawindpowerplantprojectandfinancingofabiomassbasedcombinedheatandpowergeneration.

Intermsofstructuredandprojectfinance,2017wasanothersuccessfulyearontheSlovakmarket.TheBankconfirmeditsleadingpositionwhenfinancinginfrastructureintheformofaPPP,forexamplebyprovidingasyndicatedinvestmentloanforthe

constructionoftheNationalFootballStadiuminBratislavatoNFŠ,a.s.TheBankcontinuedtoprovideacquisitionloansandthemostprominenttransactioninthisareawasthefinancingofacquisitionofanagribusinessenterpriseforamajorSlovakfinancialgroup,along-termclientofourBank.TheBankalsoprovidedalong-terminvestmentloanforrefinancingofequitytoaprominentinternationalgroupoperatinginretail.

ThebankalsomaintainsanimportantpositioninthefinancingofcommercialrealestateintheCzechRepublicandSlovakiainallmajorsegmentsoftherealestatemarket–office,retailandindustrialrealestate,aswellasinresidentialconstructionandthehotelsegment.Thelargesttransactionsof2017wereconcludedinthesegmentofindustrialrealestateandoffices.

Intermsofindustrialrealestate,themostprominenttransactionwasrefinancingoftheCTPportfolio;intermsofofficebuildings,itwasfinancingofrenovationofbuildingswithintheBBCentreinPragueandfinancingofconstructionofofficeprojectsinBrno.ThissegmentinSlovakiareportedfinancingofacquisitionoftheWestendTowerandRedingTowerbuildingsinBratislava.

Asregardsresidentialprojects,financingwasprovided,amongothers,todevelopmentprojectsofFINEPandSATPOGroupsinPragueandtoaresidentialcomplexinBratislavawithplannedconstructionofmorethan300flats.In2017,theBankconcludedseveraltransactionsintheretailsegment,including,inparticular,refinancingoftheBoryMallprojectinBratislava,acquisitionfinancingofaportfolioofretailparksforalocalfinancialgroupanddevelopmentoffinancingoflocalmalls.

Intransactionbanking,2017wasayeartypicalofpositivebusinessgrowthandimplementationofstrategicprojects.

ThepositivemacroeconomicdevelopmentofbotheconomieswasconsiderablyoutperformedinCashManagement(payments),GlobalSecuritiesServices(servicesofadepositoryandsecuritiesmanagement)andfactoring.

Thetransactionactivitymeasuredthroughthenumberandvolumeofpaymenttransactionsorthroughthevolumeofclientassetsundermanagementgrewatarateof20%.Inparticular,inthefieldofacceptanceofpaymentcardsatPOSterminalsoftheBank,newclientacquisitionsandtheBank’ssignificantpositioninretailsectorwereshown.Factoringcontributedtotheresultswithanearly60%year-on-yearincreaseinthevolumeoffinancing.

TerminationoftheCNB’sinterventionpolicy,theBank’ssolidpositioninthesegmentofinternationalclientsandforeignpaymentsrepresentedanothermomentumtogrowthofthetransactionbanking’sprofitability.


Cashmanagement,mainlypaymentsanddirectelectronicchannels,requireconstantmajorinvestmentstomaintainthequalityoftheservicesandproductsprovided.Newregulations(SEPA,PSD2,GDPR),emphasisondigitisation,accelerationofinnovationcycles,standardisationandnewbusinessrequirementsweresuccessfullyincorporatedinourclientoffer,whichwasalsoappreciatedintherenownedEuromoneyCashManagementSurvey2017,which,basedonanswersofmorethan25,000companiesand2,500financialinstitutions,awardedUniCreditGrouptheBestBankinCashManagementin11countries.IthasbeenthefirsttimeeverforCzechiaandSlovakiatoreceivesuchanaward.

Thestrategicdevelopmentwithcorrespondinginvestmentswasalsochannelledintootherproductfieldsoftransactionbankingandbankinginfrastructure.Throughthesuccessfulimplementation,weachievedbetterconditionsforsustainablebusinessgrowth,reductionofoperationalriskandcostintradefinance,factoringandservicesprovidedinsecuritiesmanagement.

Inthelatter,wemanagedtodefendourdominantpositionbybeingawardedthe“BestSubCustodianBankintheCzechRepublicin2017”bytheestablishedGlobalFinancemagazine.

In2017,thefactoringmarketreportedayear-on-yearincreaseinthetotalturnoverofreceivablesby19%*,whichisaverysolidresultgiventheliquiditysurplusintheeconomyandmarketdownturnin2015and2016.ItislargelyalsoowingtooursubsidiaryUniCreditFactoring,whichreporteda55%year-on-yeargrowthinthisfactor.

Owingtothedynamicallyincreasingclientportfolio,largerfinancingvolume,aswellasprudentialriskmanagement,wemanagedtoincreasethecompany’sgrossoperatingprofitby160%andprofitaftertaxbymorethan100%comparedto2016.Themarketsharerosefrom11.1%to14.5%**year-on-year.

Inordertoincreasethecompetitivenessofourproductoffer,webuiltupabrand-newITinfrastructureinourfactoringcompanyand,atthesametime,weimplementedanewversionofourkeysystem.Thisallowsustoextendourproductportfoliobyamoduleprovidingautomaticconnectionofthesuppliers’chainwithmajorcustomer,i.e.reversefactoring.

AtUniCreditBank,wealsoprovideourclientswithcomplexsubsidyconsultingservicesonalong-termbasis.ThismainlyinvolvesconsultingrelatedtoEuropeanstructuralfunds,butalsoincludesfurthernationalsubsidies,investmentincentivesorotherpan-Europeanfunds.Theyear2017wasmainlycharacterisedbythefinancingofprojectsofthe2014–2020programmingperiod.Thismainlyincludedrealestaterenovationsorpurchasesofnewtechnologies.UniCreditBankcontinuestobeaveryactivememberoftheCzechBankingAssociation’sworkinggroupforcohesionpolicy.

Animportantactivityofthecorporatecompetencecentreisthefinancingofagricultureandchurchentities.In2017,thenumberofservicedclientswasincreasedinbothsegments,confirmingtheBank’spositiononthesemarkets.

*Source:CzechLeasingandFinancialAssociation**Source:AssociationofFactoringCompanies


Retailbanking

Inrecentyears,theretailbankingmarkethasbeenshapedbythelowestinterestratesever.Sincethesecondhalfof2017wesee,onthecontrary,agradualratehike;in2018,theincreasingrateswillconsiderablyaffectthemarketofmortgages,consumerfinanceanddeposits.

Thereisanincreasingpressureandvolumeofregulationaswellastheintensityofcompetition.ImplementationofMiFID2Directiveconsiderablyaffectsthesaleofinvestmentproducts,PSD2Directivechangestherulesofthegameinpayments,andGDPRDirectivelaysdownnewstandardsforprotectionofourclients’personaldata.

Technologyisgeneratinganewwayofrelatingtooneanotherandalsoofthebanking,wheredigitisationiskeyforadaptingtothenewformofrelationshipswithclients.Ourgoalfor2018isnotonlytocontinueattractingnewclientsandsuccessfullysellingthenewproductlinetoexistingclients,butalsoboostingofdigitalbankingservices.Wewouldalsoliketocontinuethetrendofmoresalesmadethroughonlinechannels.Thenumberofdigitalclientsreflecttheboostprovidedbythemultichannelstrategy.Wemadesignificantprogressinthisdirectionandarerecognisedinthesectoraspioneersinthelaunchofvariousappsandservices.

Basedonathoroughanalysisoflong-termefficiencyofourbranchesandchangesinthebehaviourofretailclientsoftheBank,westartedtooptimisetheretailbranchnetworkin2017,mergingatotalof30pointsofsale(19branchesand3franchisesintheCzechRepublicand8branchesinSlovakia).Selectedbranches,inparticularinlocationswiththehighestconcentrationofUniCreditBankpointsofsale,weremergedwiththenextotherbranch.Thisdecisionwillensuresustainabledevelopmentofretailbanking,itcorrespondstothecurrentneedsandrequirementsofclientsandallowsustomaintainourpresenceinalltownsinbothcountries.Ourmainpriorityremainsthemaximumsatisfactionofourclients.Lastyear,wereconstructedandredesignedatotalof12branchesand2franchises.

Bymodifyingthegeographicalcoverageofthebranchnetwork,wefocusonlong-termimprovementoftheBank’sefficiencyintheprovisionofservicestoourclients,withtheaimtoreducecostsandachievesustainabilityintermsofdistancebetweenpointsofsaleandthesizeofbranchesinrelationtothenumberoftheservicedclients.OurbranchnetworkintheCzechRepublicandSlovakiaisstillcrucialtouswithinretailactivities.Despitetheever-increasingtrendsinprovidingservicesandsaleonline,tousabranchcontinuestobethecrucialpointofcontactwithclientsandthemostimportantpointforretaininganddevelopingourrelationshipwiththem.

Bank’sactivitiesinretailandprivatebankingIn2017,theBankcontinuedtopursueitsstrategicgoalofreinforcingitspositionofauniversalproviderofbankingandfinancialservicesandbecomingaleadingbankonbothmarkets.Wewanttoachievemajorincreaseinthemarketsharenotonlybyconcentratingonselectedperspectivesegmentsoftheretailmarket,butmainlyowingtotheinnovationsinavailabilitythroughalternativedistributionchannelsandproductoffer.

Ontheretailmarket,theBankprovidesafullrangeofbankingproducts–currentandsavingaccounts,savingandinvestmentproducts,paymentcards,housingfinancingproducts,andconsumerloans.Withallthoseproducts,theBankaimstoprovideinnovativeproductsandmakemaximumuseofelectronicdistributionchannels.Thiseffortwasclearlyvisibleintheimplementationofournewwebsitesandinternetbanking.

Ourorientationongrowthis,ononehand,basedmainlyonfullyusingthepotentialofourexistingclients,andontheotherhand,theacquisitionofnewclientsfromtargetsegments.In2017,theBankcontinuedtopayspecialattentiontoacquisitionsincooperationwithotherretailinstitutionswhicharenotourdirectcompetitors,suchasleasingcompanies,insurancecompanies,etc.

In2017,thegrowthofclientsofourBankcontinued,with96thousandnewclientsstartingtousetheservicesandproductsofmodernbankingprovidedbyUniCreditBank.

Inspiteoftheever-increasingcompetitivepressureonnewlyprovidedloansandonrefinancingofexistingportfolios,theBankmanagedtoincreasethevolumeofretailloansby9.7%.Themaindriverweremortgageloanswithayear-on-yeargrowthof10.8%.Intheprivatebankingsegment,theBankmanagedtoattractmorethan1,000newclientsandincreasetheamountofassetsundertheBank’smanagementbynearlyCZK3billion.

TheBankcontinuestofocusonsegmentswhereitisexceptionallysuccessfulinthelongrun,suchasliberalprofessionsorchurchesinCZ.InSlovakia,theBankmainlyfocusesonservicingagribusinessclients.

LoansIn2017,weextendedourproductofferofconsumerloansinSlovakiabyPRESTOLoanforHousing,whichwasalreadyofferedtoourclientsintheCzechRepublicin2016andwhichimmediatelyreceivedtheGoldenCrownaward.Inbothcountries,weofferfour


categoriesofloans:refinancingortransferofloans,simpleandfastloansforexistingclientsapprovedinadvance,general-purposeloansandPRESTOLoansforHousing.

2017wasanattractiveyearalsoforclientswhousedourflag-shipproductoftransferringandrefinancingofloan,whichoffersclientsarewardforduerepaymentandwhichreceived,togetherwiththegeneral-purposeconsumerloan,anawardoftheFinparada.czportal.

Ourfocusonproductswithexcellentconditionsforclientswithgoodcredithistoryislong-termand,therefore,thislow-riskclientsegmentwasagainthestrongestsegmentwithinalldisbursedloans.

Mortgages2017wasaffectedbygrowingregulationbytheCNBandNBS,aswellasbythecommencinghikesininterestrates.

Wetookadvantageofthelowinterestratesearlyintheyearandmademostoursalesatthatperiod.Clientsprimarilydemandedfixed-ratemortgagesandpartoftheclientsalsousedoffersoflowfloat-ratemortgages.

Wesimplifiedourpricingconsiderably.Togetherwithauniqueone-timeinsurance,weofferedourclientsareallyattractiveinsurancepaidonamonthlybasis.Wecontinuedtostreamlineourproductofferandprocesses,withemphasisoncustomerexperience.Wereceivedawardforourspecial-purposeU-MortgagefromtheFinparada.czportalintheFinancialProductoftheYear2017category.

CurrentaccountsIn2017,too,wefocusedonexpandingourclientportfoliowithregardtoourkeyproductUKonto.WeintroducedtheUKontocurrentaccountinApril2014,nevertheless,itremainsNo.1ontheCzechandSlovakmarketasregardscustomer-friendliness.

InNovember2017,werepeatedoursuccessfulcampaigninsupportofnewclientacquisition,offeringnewUKontoclientsanopportunitytoobtainadiscountvoucherforaHuaweismartphoneatadiscountedprice.

InvestmentsanddepositsIntheongoingenvironmentofextremelylowdepositinterestrates,in2017wecontinuedtofocusonprovidingourclientswithanofferofalternativeinvestmentsolutions.

ThebasisofourofferconsistedonthreeAmundiFundSolutionsfunds(conservative,balancedanddynamic),i.e.stronglydiversifiedinvestmentsolutionstogetherwithanactiveandflexiblemanagement,whereeachofthesefundsrepresentsacomprehensivesolutionoftheportfoliofortherelevantriskprofileoftheclient.

Regularinvestmentremainsverypopular,providingourclientswithflexiblesolutionstogrowtheirassetsinasimplyandsystematicway,whilespreadingoftheinvestmentovertimestronglymitigatestheriskofpotentialwrongtimingofpurchase.Inparticular,duetothenewUInvestPlusregularinvestmentscheme,thesalesofregularinvestmentsmorethantripledcomparedto2016.

DirectbankingIn2017,directbankingenjoyedfurthergrowthinpopularity,whichwasclearlyseenfromtheconsiderablegrowthinthenumberofOnlineBankingandSmartBankingusers.Atthesametime,theshareofactiveusersinbothapplicationswasgrowingstrongly.

InOnlineBanking,weallowedourclientsintheCzechRepublictoapplyforanddrawinapre-approvedPRESTOLoanonline.Clientscanalsoapplyforabankoverdraftoritsincreaseinthesameway.In2017,welaunchedOnlineBankingwithmoderndesignandinnovativefunctionsinSlovakia.InSmartBanking,wemodifiedtheapplication’sdesigninSlovakia,withaverypositiveresponsefromclients.

SmallBusinessInrelationtotheadoptedstrategicdecisiontofocusonsmallenterprisesandentrepreneurs,weaccomplishedmajormodificationstotheservicemodelandproductofferofourBank.Ourgoalistoprovideclientswithbestserviceswithsimpleandtransparentproductsthatcannowbeofferedandquicklyprocessedbyanybranch.

Inthesegmentofliberalprofessions,wefocusonthebankers’professionalismwithanemphasisontheunderstandingofindividualneedsofeachclientgroup.Oureffortshaveresultedinthegrowingmarketshare,especiallyinlegalprofessions.

PaymentcardsDuring2017,therewerenomaterialchangesintheportfolioofdebitandcreditcardsintermsofproductinnovation.Activitieswerefocusedonreviewinginternalprocesses,towardsincreasedtransactionactivityofcashlesspaymentsofthedebitportfolio.


Markets

Privatebanking2017forthePrivateBankingsegmentwasayearofstabilisationanddevelopmentofbusiness,followingaconsiderableexpansionofthesegmentin2016.

Asastrategicstep,theBankdecidedtoofferitsexcellentprivatebankingservicestoalargernumberofclientsandreducedthe“TFA”(TotalFinancialAssets)thresholdfromCZK10milliontoCZK3million(EUR100,000inSlovakia).Ourgoalistodevelopclients’potentialjustinthesegmentfromCZK3millionoffinancialassetsthroughtheprivatebankingservices,whichrelyonpersonalisedapproach,tailor-madesolutionsandanextendedportfolioofinvestmentsolutionsnotonlyfortheoriginallylargestaffluentclientsbutalsoformembersoftheirfamilies.

PrivateBankingissuccessfullybuildingonthetraditionofcorporatebanking.Thus,wefocusonprovidingPrivateBankingservicestoownersofsmallandmedium-sizedenterprises,whereweperceivehighvalue-addedofourserviceseventoday.

Ininvesting,privatebankingintheCzechRepublicandSlovakiaisbasedoncontrolledopenfundarchitecture,whichisstillauniqueconceptonbothmarkets.Thus,theBankprovidesitsclientswithaccessnotonlytohigh-qualityinvestmentsolutionsfromthewholeUniCreditGroup,butalsotothebestfundsingivencategoriesofferedbypartnercompanies,whichareanalysedandselectedfortheBank’sprivateclientsbyateamofinternationalexperts.

In2017,theBanksuccessfullydevelopedanewconceptofmyNextfundsbyAmundi.IncooperationwithUniCreditBankAGMunich,theBankalsocontinuedtosuccessfullyofferissuesoftailoredinvestmentcertificatesusingauniquesoftwaresolutionofitsfellowsubsidiary.ThecomprehensiveofferofservicesfurtherincludedsuccessfulcooperationwiththeconservativeAustrianprivatebankSchoellerbankAG,amemberofUniCreditGroup.

Lastyear,theMarketsDivisionwasoneofthekeyprofit-makingpillarsoftheBank.TheMarketsDivisionasawholesignificantlysurpasseditsyear-longplan.Intheareaoftradingintreasuryproductsonthebank’sownaccount,theBankachievedrecord-breakingresultsfortheperiodofexistenceofUniCreditBank.Theincreaseofrevenueswasmorethandoublecomparedtoanalreadysuccessfulyearof2016.Exceptionalgrowthwasalsoreportedintradingwithendclients.

Thankstoouracquisitioninitiatives,wehaveincreasedboththevolumeandtheprofitabilityofdealsfocusedondailycash-flowmanagementandhedgingofallmarketrisks(foreignexchange,interest,andcommodityrisks)intradingwithcorporateclients.TheexcellentresultswerealsodrivenbytheincreasedtradingactivityofclientstogetherwiththeexpectedterminationoftheCNB’sforeign-currencyinterventions.

TheMarketsDivisionfocusesinthelongrunontheissuanceofdebtsecurities,whicharesuccessfullysoldnotonlytocorporateclientsandfinancialinstitutions,butalsotoclientsorretailandprivatebanking.In2017,ourinternalissuanceactivitywasstillsubduedandtheBankonlyfocusedontheissuanceofeurobonds.Animportantpartofthisfieldisalsoarranginganddistributionofcorporatebonds,whereUniCreditBankwasinvolvedinseveralmajormandateslastyear.


Sponsoringandcharity

Weareproudtobeabletosupportin2017scientificinstitutionsandcharitableorganisationswhichconstantlystriveforbetterandhealthierlivesofchildren.Wealsoparticipatedinprojectspromotingculturalheritageinordertomaintainvalueandlegacyforthenextgenerations.

AnotherimportantinitiativeforouremployeesistheannualGiftMatchingProgram,owingtowhichtheycansupportanon-profitorganisationattheirowndiscretion.ThisinitiativehasbecomeatraditioninourbankandwithinUniCreditGroupwehavethebestresultsgiventhenumberofactivatedprojects,whicharebeneficialtooursociety.Thisyear,morethan700employeessupported32projects,donatingatotalofalmostCZK1.1millioninfavourofnon-profitorganisationsandwiththeUniCreditFoundationdoublingthisamount.

OurBankhasbeeninvolvedwithhelpingchildrenforalongtime.InSlovakia,theBankassignsaportionofitsincometaxtosupportcivicassociationsandfoundationswhichprimarilyhelpchildrenfromorphanages,childpatientsorchildrenfromdevelopingcountries.

Lastyear,theBankcontinueditspartnershipwiththeAdvisoryServiceforPeopleinFinancialDistress,helpingtopreventfinancialdistressandresolveproblemswithmakingpayments.Additionally,incooperationwiththeCzechBankAssociation,theBankalsosupportsotherprojectsfocusedonimprovingfinancialliteracy,suchasthe“BankerstoSchools”project.IncooperationwithpartnersinSlovakia,wealsosupportfreeblooddrivesandcharitableChristmasMarketsforagoodcause.

Forafewyearsnow,theBankhasbeenamajorpartnertotheKarlovyVaryInternationalFilmFestival.TheFestivalranksamongsuchprestigiousfilmfestivalsastheinternationalfilmfestivalsinCannes,BerlinorVenice.EveryyearinKarlovyVary,well-deservedinternationalattentionisgiventonewfilmsfromCentralandEasternEurope,i.e.theregionwhereUniCreditGroupconcentratesitsoperations.

TogetherwithUniCreditGroup,weareanofficialbankoftheUEFAChampionsLeague,includingUEFAEuropaLeague,whichoffersopportunitiesforanumberofCzechandSlovakfootballclubs.ThesponsoringoffootballhelpsUniCreditGroupstrengthenitspositionasoneoftheleadingEuropeanbanks.

EnvironmentalprotectionWedonotforgetaboutsustainablegrowthandenvironmentalprotection.Wecomplywithgloballydefinedenvironmentalrulesinallourbuildingstominimisetheloadontheenvironment.TheGrouphasalreadysignedtheUnitedNationsEnvironmentProgrammeFinanceInitiative(UNEP-FI),basedonwhichtheBankincorporatedenvironmentalprotectiongoalsinitsinternalprocesses.Thosegoalsinclude,forinstance,thereductionofemissions,involvementintheCarbonDisclosureproject,thefinancingofrenewableenergysources,orthegrantingofloansforrenovationaimedatenergysavings.WeregularlyparticipateintheEarthHourinitiative.

EmploymentrelationsUniCreditBankranksamongthemostattractiveemployersintheCzechRepublicandSlovakia,notonlybecauseofitsofferofresponsibleanddemandingworkinthebankingsector,butalsothankstothecareitgivesitsemployees.Employeesareentitledtomealvouchers,freshwaterintheworkplace,sickdaysandrecoverydays,andcanalsouseUniCreditBankproductswithspecialbenefits,orusethecompanycottageinHorníMaláÚpa.TheyalsoappreciateanextraweekofholidayortheopportunitytopurchaseemployeesharesinUniCreditBank.Theareaofflexiblebenefits,whichallowemployeestochoosefromalargenumberofvariousactivitiestheyconsiderbestforthem,isalsowide.

Theexistingbenefitprogramsgrantallemployeesequalaccesstoemployeebenefitsandofferthemfreedomofchoice.Themostfavouredbenefitsincludecontributionstopensionfundsorlifeinsurance,languagecourses,culturalandsportingeventsorallowancesforholiday.UniCreditBankrespectsitsemployeesandstrivestosupporttheminallsituationsandlifestages.Therefore,theBankalsooffersaseriesofsupportprogramsandacontributionsystemthatincluderemunerations/allowancesforlifeorworkjubilees,aretirementallowance,anallowancewhileindifficultlifesituations,programstosupportparentsintheirreturnfrommaternity/parentalleave,massculturalandsportingevents,andeventsforseniors.


OntheBusinessActivityandthePropertyStatusofUniCreditBankCzechRepublicandSlovakia,a.s.for2017

ReportoftheManagementBoard

Vision,MissionandCorporateValuesUniCreditBankCzechRepublicandSlovakia,a.sisauniversalcommercialbankcoveringallthefinancialneedsofitsclients.Wearethebankoffirstchoicebothinourtraditionalandinnewstrategicsegments.WearethebankwiththemostsatisfiedclientsontheCzechandSlovakmarketaswellasanattractiveemployer.

WeareapartoftheinternationalUniCreditGroup.AsapartoftheGroup,webelongtothestrategiccountriesoftheCentralandEasternEuropeanregion.TheGroupperceivesourBankasanexampleofsuccessfulanddynamicgrowthinthecorporateclientandretailclientsegments.

ThecorporatevalueswebelieveinandwefollowinoureverydaypracticeemphasiseRespect,Trust,Decency,Freedom,MutualityandTransparency.

EconomicdevelopmentofthemarketintheCzechRepublicandSlovakiain2017Followingthegrowthslowdownin2016,theCzecheconomypickedupagainwithGDPexceeding4%.AlmostallGDPcomponentscontributedtothegrowthsinceinvestmentactivity,netexportsaswellashouseholdconsumptiongrew.Thiswassupportedbyaverylowunemploymentlevel.Theexcellentconditionoftheeconomyaccompaniedbynaturalinflationgrowthbeyond2%enabledtheCzechNationalBanktoputanendtotheinterventionregimeontheforeignexchangemarketandatthesametimeincreaseinterestratesandstarttheirnormalisation.Thecentralbank’sincreaseofinterestrateswasalsoexpressedinstatebondrevenues,whichmanagedtobreakoutfromnegativevaluesalongtheentirelengthoftherevenueyieldcurve.Thegrowthofinterestrateswasaccompaniedbyadditionalgrowthinthevolumesofloansanddepositsofhouseholds,whichwas,however,notreflectedinthegrowthofthenetinterestrevenuesofbanks.Unlikein2016,thesaleofassetsdidnotcontributetobankprofitabilityinasignificantway.Ontheotherhand,thelowriskcostshadapositiveimpact.

In2017thegrowthoftheSlovakeconomyremainedunderthelevelof3percent,thesameasin2016.ThebankingsectorinSlovakiaalsoprofitedfromthegrowthoftheeconomy.Astrongdouble-digitgrowthwasrecordedmainlyinloanstoindividuals,eveninspiteofthefactthatnewstricterconditionssloweddownthedynamicsofyearonyeargrowthslightly.Thegrowthofindividualdepositssloweddown,withthegrowingincomesofhouseholds

beingreflectedmainlyinincreasedconsumption.Moreover,theriskappetiteofhouseholdsalsogrew,withsourcesbeingdirectedintomutualfunds.Thus,thevolumeofloansanddepositswasalmostbalancedovertheyear.Thebankprofitin2017remainedunderthepressureoflow(negative)interestrates.Inspiteofthestilldynamicgrowthofthebank’sbalance,netinterestrevenuesofthebankingsectorcontinuedtodecrease.Unlikelastyear,thisgrowthwasnolongercompensatedbyincreasedone-offdividendyieldsoryieldsfromthesaleofassets.Thedropinprofitabilitywasatleastpartiallyabsorbedbylowerriskcosts.Thegoodconditionoftheeconomycontributedtoadditionalimprovementintherateoffailureofloansandsubsequentlyalowergenerationofadjustments.

EvaluationoftheResultsofUniCreditBankCzechRepublicandSlovakia,a.s.

Intermsofnetprofit,in2017UniCreditBankCzechRepublicandSlovakia,a.s.achievedexcellentresults.Netprofitin2017significantlyexceededboththeambitiousplanandtheresultsof2016,inparticularthankstoextremelylowriskcostsandthegrowthofnetinterestrevenues.

Theinterestratesremainedlowthroughouttheyear,however,theincreaseinthesecondhalfoftheyearenabledapartialgrowthofinterestmargins.TerminationoftheinterventionregimefortheCzechCrownexchangeratecontributedtoasignificantexceedingofthebudgetintheTradingonownaccountandTradingforclientsitems.Feerevenueswereunderthepressureofthepersistingstrongcompetitiveenvironment,therefore,theyexceededtheplannedvalueonlyslightly.Intheupcomingperiod,weareexpectingfurtherpressureonthedecreaseofbankfees,whichhastobecompensatedbygrowthinthevolumeoftransactionsandproductsandservicessold.

TheresultwasalsohelpedbythesynergiesresultingfromthemergerofUniCreditBankCzechRepublic,a.s.withUniCreditBankSlovakia,a.s.Aconsiderablerolewasalsoplayedbyeffectiveandefficientoperatingcostmanagement.


FinacialresultsofUniCreditCzechRepublicandSlovakiaGroupfor2017TheeconomicresultsoftheUniCreditBankCzechRepublicandSlovakiaGroupaftertaxeshasgrownyearonyearby26.2%,namelyfromCZK6,045mil.asof31December2016toCZK7,626mil.asof31December2017.In2017theUniCreditBankCzechRepublicandSlovakiaGroupachievedanexcellenteconomicresult,whichconfirmstherightnessofthestrategybasedonthegrowthofourclientbasisandimplementationofinnovationsacrossallbusinessdivisions.

StatementofComprehensiveIncomeNetinterestrevenuesgrewcomparedtotheendof2016by10.6%toCZK11,218mil.(CZK10,145mil.asof31December2016).ThisyearUniCreditBankCzechRepublicandSlovakiaGroupreportedpositivegrowthinthenetinterestrevenuelevel,whichwasdeterminedbybothbytheoptimisationoftherefinancebasisinallGroupentitiesandbythegrowthofCZKinterestratesstartedbytheincreaseoftheCNBreporate.

Netrevenuesfromfeesandcommissionsbytheendof2017amountedtoCZK3,465mil.(asof31December2016CZK3,823mil.),whichisadecreaseby9.4%.

NetprofitfromsellingfinancialassetsandliabilitiesdroppedtoCZK508mil.(asof31December2016CZK1,053mil.).However,itshouldbenotedthatthehigherresultin2016wasinfluencedbytheinternationaltransactioninvolvingthetransformationofVisaEurope,wheretheBankhaditspropertyshare.

TheGroupalsostrengtheneditspositionintrading,i.e.tradingprofitgrewby26.0%,fromCZK2,129mil.asof31December2016toCZK2,682mil.asof31December2017.Thisresultintradingwascausedmainlybythesuitablestrategyfortheinterestratedevelopmentandforeignexchangetrading.

OperatingrevenuesachievedCZK17,846mil.,growingby4.1%comparedtoCZK17,152mil.asof31December2016,whichreflectsthedynamicallygrowingclientbasisandhighertransactionvolumesaswellasothereffectsdescribedabove.

AdministrationcostswerereportedintheamountofCZK7,752mil.(asof31December2016CZK7,854mil.),whichrepresentsadecreaseby1.3%.

Thelossesfromdecreasedloanandreceivablevaluesdecreasedyearonyearby69.31%(fromCZK1,499mil.asof31December2016toCZK460mil.asof31December2017).Itshouldbe

notedthatthispositivetrendalreadyrepresentedabovefurtherconfirmstheresponsibleapproachoftheGroupintheareaofriskmanagement.

ThedepreciationsandlossesfromthetangibleassetvaluedropincreasedfromCZK768mil.asof31December2016toCZK960mil.asof31December2017.

StatementofFinancialPosition

AssetsTotalUniCreditBankCzechRepublicandSlovakiaGroupassetsasof31December2017achievedthevalueofCZK672.1bil.,whichrepresentsagrowthof5.8%comparedtotheendof2016,whenthebalanceamountwasCZK635bil.Thefinancialassetsatfairvalueratiotoexpenseandgainaccountdecreasedfromtheendof2016by10.1%fromCZK9bil.toCZK8.1bil.Thevalueofrealizablesecuritiesdecreasedby40.7%toCZK47.5bil.(asoftheendof2016,thisvaluewasCZK80.2bil.).Thebankkeepsmostlystatebondsinthisportfolio,whichrepresent63%ofthisitem.Thedecreaseinthevolumeofthesesecuritieswasinfluencedmainlybythematurityofthesecurityandcessationoftheinvestmentorthesaleitself.

Receivablesforclientsincreasedby0.3%toatotalCZK386.7bil.comparedtotheendof2016(CZK385.6bil.).

Retailbankingcontinuedthestrategyofgrowingtheclientbasis,inparticularthankstotheUKontowithaten-yearguaranteeofconditionsandfreewithdrawalsfromanyATMathomeorabroad.Thesegmentrecordedsignificantgrowthinallmainproductlines–loans,mainlymortgageloans,depositsandinvestments.Yearonyeartheloanstoclientsgrewbyalmost10%,withdepositandinvestmentproductsgrowingbymorethan14%.Theprioritiesoftheretaildivisionincludedthepenetrationofdigitaldistributionchannels.Inthisareathenumberofmobilebankingusersgrewby50%.

Inthecorporatesegment,theUniCreditBankCzechRepublicandSlovakiaGroupcontinueditssignificantgrowthofloansgrantedtosmallandmediumcompanies(yearonyeargrowthbymorethan16%),increasingthesignificanceofthisstrategicallyimportantgroupofclientsinthetotalsegmentresult.CorporatecreditingusesthesynergiesbetweentheBank,leasingcompaniesandthefactoringcompanyand,thankstotheuniquepositionoftheUniCreditBankCzechRepublicandSlovakiaGroupintheregion,canofferuniquesolutionsforinternationalcompanies.

Amongtheleasingcompanies,brandvehiclefinancinggrewaswellasfinancingofcorporateloansandoperationalleasingforcompaniesandindividuals.Intotal,thefinancedvaluefor2017grewby10.8%


comparedto2016.Asignificantyearonyeargrowthwasachievedintwomaincommodities,namelymachinesandequipmentby17.2%andvehiclesupto3.5tonsby12.8%.Receivablesfrombanksgrewby50.2%(CZK210.2bil.asof31December2017comparedtoCZK139.9bil.bytheendof2016),mainlyduetothegrowthofreceivablesfromthereverserepooperations.

ThegrowthofthevalueofintangibleassetsfromCZK1,387mil.asof31December2016toCZK1,940mil.CZKbytheendof2017wascausedbytheimplementationofthecommonITsystemarchitectureoftheCzechHeadOfficeandtheSlovakbranch,whichcompletedthealignmentofbothbanksfollowingthemergerof2013.ThecommonarchitecturewillenableadecreaseinthecostofITinvestmentsandmaintenance.

LiabilitiesBytheendof2017,liabilitiestobanksincreasedby50.9%toatotalofCZK174.3bil.fromCZK115.5bil.asof31December2016.

Comparedtotheendof2016,clientdepositsdecreasedby2.9%toatotalofCZK360.5bil.fromCZK371.2bil.asof31December2016.

Comparedtotheendof2016,issueddebtsecuritiesdroppedby33.5%toCZK40bil.(asof31December2016CZK60.1bil.).

BoththedropofclientdepositsandthedecreaseofissueddebtsecuritiesisconnectedwiththeoptimisationoftheGrouprefinance,aimedatachievingpositiveeffectsonthepartofnetinterestrevenues.

CapitalAsof31December2017,theGroup’sequityamountedtoCZK71.5bil.,whichrepresentsagrowthyearonyearof6.9%(fromCZK66.9bil.asof31December2016).TheUniCreditBankCzechRepublicandSlovakiaGroupdidnotpaydividendsin2017.Theconsolidatedcapitaladequacyasof31December2017was19.42%.

ExpectedeconomicandfinancialsituationofUniCreditBankin2018

Theoutlookfor2018andfortheupcomingyearsisbasedontheassumptionthatbotheconomieswillhaveanenvironmentofsolidandstableeconomicgrowth,which,however,willnotreachthelevelsof2017.Inflationwillgetclosertothelevelspreferredbythecentralbanksandunemploymentwillstopdecreasing.Netrevenuewillrangearoundthelevelof2017withexpectedfurthergrowthin2019.Therevenuegenerationwillbeinfluencedbymanycontradictingfactors.Growthinthenumberofactiveclients,transactionvolume,

costdecreasesandgrowthininterestrateswillhaveapositiveimpactonnetinterestrevenues.Ontheotherhand,thedecreaseofmarginsduetogrowingcompetitivepressurewillhaveanegativeimpact.Anothernegativefactorwillbethegradualincreaseofriskcoststothelevelspriortotheextraordinaryyearsof2015to2017.Thankstothebalancedgrowthofloansanddeposits,itwillnotbenecessarytoadoptanysignificantmeasurestoadjustthebalanceamount.

StrategicplanoftheUniCreditGroup–Transform20192017wasthefirstfullfiscalyearoftheGroupTransform2019plan.

TheTransform2019strategicdevelopmentplanisbasedonthefollowingpillars:•Strengthencapitalandoptimiseitsallocation•Improvecreditportfolioquality•Transformtheoperatingmodel•Maximisecommercialbankingvalue•CreatealeanbutstrongmanagementstructureoftheGroup

corporatecentre

TheGroupstatedthatfulfilmentoftheplanwasverysuccessfulin2017,towhichalltheregionstheGroupoperatesincontributed.TheregionofCentralandEasternEurope,includingUniCreditBankCzechRepublicandSlovakiaGroup,wasasignificantcontributortothefulfilmentofthefirstthirdoftheplan.Undertheconditionsofourcountries,theTransform2019planwasimplementedthroughprogramsaimedmainlyatimprovingandtransformingbusinessactivities.

TheprogramsimplementingtheTransform2019planmaybeclassifiedinthefollowingcategories:•“Onebank”formultinationalclients•UseofBigDatatechnologiesinthecorporatesegment•Increaseofclientacquisition•Digitalisationofsaleschannels•Regionalcoverage

In2017wemanagedtocompleteawholerangeofinitiatives,suchas:•Mergerof27brancheswhilepreservingtheefficiencyofregional

coverage•Launchofanewmobilebankingversion•Launchofaplatformforsupportingsalesincorporatebanking•Implementationofcross-bordercooperationwithmanycompanies

fromWesternandSouthernEurope

TheprogramwillcontinueintheupcomingyearsandwillbegraduallyextendedbyadditionalinitiativessupportingthefulfilmentoftheTransform2019plan.


Bankactivityinthecorporatebankingarea

In2017theBankcontinuedtofulfilitslong-termstrategicgoals,whichintheareaofcorporatebankingrepresenttheconfirmationofthepositionofkeyplayerinthesegmentoffinancinglargemultinationalandnationalcorporationswhilealsofocusingonincreasingthemarketshareintheSMEsegment.TheSMEsegmentrecordedaverysuccessfulyearasbothrevenuesandvolumeofloansgrantedgrewonbothmarketsatadouble-digitpace.ThisisevidenceofthecorrectnessofthedecisiontoextendtheSMEsegmenttocompanieswithanannualturnoveroverCZK10mil.

AnotheroftheBank’slong-termstrategicgoalsisthestrengtheningofitspositioninthefieldofprovidingsophisticatedandindividualsolutionsforclients,maintainingthepositionofnumberoneintherealestatefinancing(developerprojectfinancing)area.Fromaclients’pointofview,theBankwantstobethebestbankintheareasofcashmanagement,foreignpaymentsystems,treasuryservices,foreigntradefinancingorprojects,andstructuredandacquisitionfinancing.

Wewanttobaseourfuturegrowthmainlyonthefulluseofexistingclientpotential,newclientacquisitionandtheextensionofcooperationwithinUniCreditBankonthemarketsofbothcountries.Greatattentionispaidtocross-bordercooperationinservingclientswithaninternationalbackground.ExtensionoftheSMEsegmentenablesthestrengtheningofacquisitionactivitythroughabetterallocationofhumanresourcesintheregions.

In2017thesuccessfulcooperationwithUniCreditLeasingintheCzechRepublicandSlovakiaandwithUniCreditFactoringcontinued.CooperationintheofferoffactoringproductstoBankclientswasenforcedandforthispurpose,severalnewfactoringproductsweredeveloped,e.g.reversefactoring.AlongwithimplementationofanewversionofthekeyUniCreditFactoringITsystem,thisenabledtheimplementationofapositiononthefactoringmarketandtoachieveamarketshareof14.5%.

•Thenumberofactiveclientsinthecorporatebankingsegmentincreasedbymorethan4,600.

•Thevolumeofloansgrewyearonyearby5%,however,marginsremainunderhugepressure,dueamongotherthingstothelowinterestrateenvironment.

•Depositvolumewasinfluencedbytheefforttodisposeofunstableprimarysources,thereforedroppingpurposefullybyCZK18bill.

•TheBankhasconfirmeditsleadingpositiononthemarketintheLargeCorporates,StructuredFinance,FinancialInstitutionsandRealEstatesegments.

BankactivityintheretailandprivatebankingareaTheBank’sstrategicgoalsintheretailandprivatebankingarearemainedinvalidityfor2017also.Wewanttokeepstrengtheningourpositionofuniversalproviderofbankingandotherfinancialservices,achievingasignificantmarketshareonbothmarkets.Throughcombiningatopproductofferandabroadscaleofdistributionchannels,includingelectronicandalternativedistributionchannels,wewanttokeepincreasingourretailmarketpresence.

OurofferintheCzechRepublicandSlovakiaincludesthecompleterangeofretailbankingproductsfromcurrentandsavingsaccounts,throughinvestmentproductsandpaymentcardsuptomortgageandconsumerloans.Weaccommodatethemixtureofdistributionchannelstothemoderntrendsandneedsofourclients.Therefore,weemphasiseelectronicchannels.Inthetraditionalchannels,weareoptimisingtheirstructure.Indistributingourproducts,wealsocooperatewithinsurancecompaniesandleasingcompanies.

Theaforementionedenablesustoobtainnewclientsandweareproudthatlastyear96thousandnewclientschooseusastheirfinancialpartner.

Wearemaintainingourtraditionallystrongpositioninthesegmentoffree-lanceprofessionsandintheagriculturalsegmentinSlovakia.

ThePrivateBankingsegmentcontinuedtoevaluatethestrategicdecisiontodecreasetheTFAsegmentlimittoCZK3mil.Thus,wecouldofferourpremiumservices,includingabroadrangeofinvestmentinstruments,toawidergroupofourclients.

BankactivityinthesupportunitareaRiskmanagementIntheriskmanagementarea,emphasisisplacedonthoroughseparationofincompatiblefunctionswithintheBank’sorganizationalstructure.TheBank’sriskstrategies,toolsandprocessesarechosentobestcorrespondwiththebusinessstrategyandatthesametimewiththebeststateofknowledgeregardingriskappetitemanagement.Atthesametime,in2017theBankincreaseditsemphasisonthemonitoringandadherencetothesetofparametersmakingupitsRiskAppetiteFramework.

TheBankmanagesitscreditriskbothatthelevelofindividualbusinesstransactionsandatthewholeportfoliolevel,inparticularincompliancewiththebasicprinciplesdefinedintheBank’screditpolicyandinordertoadheretotheriskparameterssetoutin


thecreditstrategyfortheparticularyear.Tocalculatethecapitalrequirementforthecreditrisk,theBankuses(basedonapprovalgrantedbytheCNB)anadvancedapproachbasedonitsownestimatesofriskparameters(AdvancedIRB)forthewholeportfoliointheCzechRepublicandforthecorporateportfolioinSlovakia.In2017theBankintensifiedtheregularmonitoringandevaluationofexpectedlossesofthewholecreditportfolioaswellasexpectedlossesofnewlyconcludeddeals.

Basedontheregulatoryapproval,theBankappliesanadvancedapproachtotheoperationalriskcapitalrequirement(AMA),whichhasbeenusedsince2008.In2017theBankdidnotsufferanysignificantlossesresultingfromoperationalrisk.

Inthemarketriskmanagementarea,theBankmanagestherisksconnectedwithbusinessactivitiesatthelevelofindividualrisksaswellasindividualtypesoffinancialinstruments.Thebasictoolcompriseslimitsforvolumesofindividualtransactions,limitsforportfoliosensitivity(BPV),stoplosslimits(maximumlosslimits)andValueatRisk(VaR)limits.In2017theBankdidnotrecordanysignificanteventsleadingtoarevaluationofthestrategyorsignificantresetoftheapplicablelimits.

ServicesIntheITservicesandOperationsservicesarea,theBankcontinuedcooperatingwiththeUniCreditBusinessIntegratedSolutionsS.C.p.A.(hereinafterreferredtoasUBIS),whichisapartofUniCredit.

IntheITareain2017,theBankfollowedastrategyleadingtotheachievementofintegrationbetweentheCzechandSlovakpartoftheBank,thesimplificationofprocessesandareductioninthecostsofadministrationandsystemadjustment.InOctober2017weunifiedtheITenvironmentinbothcountriesbyimplementingtheSlovaksolutionandadditionalimprovementsaswellassystemswehavebeenworkingatinthepastfewyears.ThecommonITenvironmentwillleadtoaconsiderablereductionofIToperatingcosts,moreefficientimplementationoffuturechangesandfurtherunificationandoptimisationofprocesses.ThecommonITplatformwillbethebasisfordigitalisationandstrengtheningoftheon-linecommunicationelementswithBankclients,includingtheon-lineofferofBankservicesandproducts.

IntheOperationsarea,theBank,incooperationwithUBIS,promotesabalancedapproach,i.e.theachievementofcostsavingsthankstocentralisationandspecialisationwithconcurrentpreservationoftheavailabilityandqualityofservicesprovidedtoclients.ThiscentralisationandspecialisationleadstobettercontroloverthefulfilmentofregulatoryrequirementsregardingcontractualarrangementsandthequalityofdocumentprocessingbetweentheBankanditsclients.

AssetsandLiabilitiesManagementIn2017theBankkeptaverystrongliquiditypositioninCZKandabalancedliquiditypositioninEUR.Thetotalvolumeofclientloanswasapproximatelythesameasthetotalvolumeofclientdeposits.EventhisyeartheliquiditysurplusinUniCreditBankintheCzechRepublicwasusedtofinancethesubsidiariesandtheSlovakbranch.OurBank’spresenceinSlovakiaenabledaccesstoadvantageousfinancingfromtheEuropeanCentralBankwithinthesocalledTLTROprogram.Streamliningliquiditymanagementinthemergedbankandcentralisationofthetreasuryfunctionkeepsbringingcostsynergies,improvementofcapitalsourcesandsupportforthegrowthofbusinessactivities.TheorganisationalintegrationdirectlyunderUniCreditSpA,whichtookplacein2016,facilitatedtheuseoftheparentcompany’sstrongliquidityposition.

HumanresourcesTheprincipalfactorforthesuccessofabusinessstrategyistheachievementofahighlevelofserviceandconsultingquality.Akeyroleinimplementingthebankingbusinessstrategyisplayednotonlybythebankemployeeswhoareindirectcontactwithclientsbutalsothebackofficeemployeeswhoinfluencetheservicequalityandtherebyalsotheloyaltyoftheclientsandtheoverallbusinessresult.

Therefore,theBankpaysmaximumattentiontotheselection,educationanddevelopmentofitsemployeesintheareasofprofessionalknowledge,communicationskillsandtotalprofilingofthecorporatecultureinordertoenforcethepersonalintegrityofallitsemployees.

Humanresourcesplaysakeyroleinachievingthebankingstrategyaswellasriskmanagementandtheprovisionoflong-termandsustainablegrowthforthecompany.Astrongandcomplexstrategyforworkingwithhumancapitalandaconsistentcorporateculturearethekeyfactorsforachievingresultsinthelongterm.

Therefore,themainprioritiesinthehumanresourcesareaaredirectedataligningtheworkwiththepeopleandthebusinessstrategy,morespecifically,attalentsearchanddevelopment,leadership,successionplanning,motivationandincentivesystems,diversityandcommitment.

During2017ouractivitieswithintheDevelopmentProgramcontinued,withmorethan180ofourcolleaguesparticipating.Wehavetrainedmorethan1,700employeesintheoperationofthenewITapplications.

Intheincentivesarea,wehaveimplementedstandardssupportingnotonlytheachievementofhighperformancebutalsoethicalbehaviourandconductdirectedatabalancedattitudetoriskinthelongterm.


SocialresponsibilitySustainabilitySustainabilityistheeverydaycommitmentofUniCredit.Webelievethatsustainablebankingrequiresustomakeoureverydaydecisionsanddefineourlong-termstrategywithaneconomic,socialandenvironmentalresponsibility.Wetrytoachieveall-roundadvantageoussolutionsforallinvolvedinthelongterm.

Anti-corruptionrulesUniCreditBankappliestheprincipleofzerotoleranceforcorruption.TheBankwillnottoleratetheinvolvementofitsemployeesorthirdpartiesinanyrelationtotheBankineitherdirectorindirectcorruption.

SponsoringandCharityIn2017,asinpreviousyears,UniCreditBankfocusedonactivitieswithanoverlapintosocialresponsibility.

WeappreciatethatwecouldmakedonationslastyeartoseveralcharitableorganisationshelpingsickandvulnerablechildrennotonlyintheCzechandSlovakRepublics,butalsoindevelopingcountries.Wealsosupportedscientificinstitutionsengaginginresearchandinnovationsintheareaofoncology.

WecontinuedourpartnershipwithPoradnapřifinančnítísni(DebtAdvisoryCenter)andincooperationwithourpartnersinSlovakia,wealsosupportedvoluntaryblooddonationsandcharitableChristmasmarketsforagoodcause.OursignificantactivitiesalsoincludetheGiftMatchingProgram,thankstowhichouremployeescansupportanon-profitorganisationoftheirownchoice.

Wevalueourlong-termcooperationwithandsupportoftheKarlovyVaryInternationalFilmFestival.

Anotherareawedon’tforgetaboutissport.Foranumberofyears,theUniCreditGrouphasbeentheofficialbankandpartneroftheUEFAChampionsLeague.Forthesecondyear,wesupportedtheseriesofrunningeventscalledRunCzech.

Tothebestofourknowledge,thisAnnualReportgivesatrueandfairviewofthefinancialsituation,businessactivitiesandresultsofoperationsoftheBankandtheBank’sconsolidationgroupfor2017andoftheoutlookoffuturedevelopmentoffinancialsituation,businessactivitiesandresultsofoperationsoftheBankandtheBank’sconsolidationgroup.

April2018

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

Asat31December2017,thebasisforcalculatingthecontributiontotheGuaranteeFundwasCZK784,040,502.60.ThecontributiontotheGuaranteeFundis2%ofthisamount,i.e.,CZK15,680,810.04.

ReportoftheSupervisoryBoardTheSupervisoryBoardreviewedthestatutoryindividualandconsolidatedfinancialstatementsandthefinancialstatementfortheSlovakbranchofthebankpreparedasat31stDecember2017togetherwiththeAuditor’sReportsbyDeloitteAudits.r.o.,whichistheindependentauditorofUniCreditBankfortheyear2017,andtheproposalfordistributionofprofit.TheSupervisoryBoardacknowledgestheconclusiondrawnintheAuditor’sReportsthattheindividualandconsolidatedfinancialstatementsclearlyevidencethefinancialpositionofUniCreditBankasat31December2017anditsfinancialperformanceforthe2017accountingperiod.TheSupervisoryBoardacknowledgestheconclusionsoftheAuditor’sReportthatthestatutoryfinancialstatementstrulyreflectassets,liabilitiesandtheprofitfortheyearofUniCreditBankinallsubstantialmattersandhavebeenpreparedinaccordancewithrelevantlawsandregulations.Additionally,theproposalfordistributionofprofitcomplieswithrelevantlawsandregulationsandtheArticlesofAssociationofUniCreditBank.

IncompliancewiththeCzechlaws,ProvisionsoftheCNBandtheArticlesofAssociationoftheBank,theSupervisoryBoardhasbeensupervisingtheimplementationoftheBank’sbusinesspolicyandtheexerciseofauthoritiesbytheManagementBoard.TheSupervisoryBoardheldfivesessionsandalwaysaskedforinformationfromallspheresoftheBank’sactivitieswhichhadarelevantimpactonthefinancialpositionandthefinancialmanagementoftheBank.TheSupervisoryBoardfurtherstatesthat,basedonthestatutoryfinancialstatementsandotherdocumentsprovidedtotheSupervisoryBoardin2017,itdidnotidentifyanymaterialdeficienciesorincorrectnesswhichcouldleadtotheconclusionthattheBank’sbookkeepingwasnotmaintainedinaccordancewithrelevantregulationsordidnotproperlyreflectthesituationofUniCreditBank.

April2018


Statementofthepersonsresponsiblefortheannualreport

BasisforcalculatingthecontributiontotheGuaranteeFundinlinewithSection129ofActNo.256/2004Coll.onCapitalMarketUndertakings

Ing.JiříKunertChairmanoftheBoardofDirectors

LjubišaTešićMemberoftheBoardofDirectors

Following a € 13 billion capital increase, we confirmed a 2019 fully loaded CET1 ratio target above 12.5 percent and an organic capital generation that will fully absorb the expected regulatory impacts: our capital position is stronger and in line with best in class G-SIFIs.

Strengthen and optimise capital.


Consolidatedfinancialstatements

Consolidatedstatementofcomprehensiveincomefortheyearended31December2017

2017 2016 Note MCZK MCZKInterestincomeandsimilarincome 5 12327 11832Interestexpenseandsimilarcharges 5 (1109) (1687)Netinterestincomeandsimilarincome 11218 10145 Feeandcommissionincome 6 4660 5018Feeandcommissionexpenses 6 (1195) (1195)Netfeeandcommissionincome 3465 3823 Dividendincome 7 4 3Netincome/lossfromfinancialassetsandliabilitiesheldfortrading 8 2682 2129Netincome/lossfromhedgingagainstriskofchangesinfairvalue 9 (31) (4)Netincome/lossfromthesaleoffinancialassetsandliabilities 10 508 1053Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading 11 – 3Operatingincome 17846 17152 Impairmentlossesonfinancialassetsandoff-balancesheetitems 12 (460) (1499) Administrativeexpenses 13 (7752) (7854)Creationandreleaseofprovisions (160) (304)Depreciationandimpairmentofpropertyandequipment (960) (768)Amortisationandimpairmentofintangibleassets (89) (43)Otheroperatingincomeandexpenses 14 775 790Operatingexpenses (8186) (8179) Profit/lossfrominvestmentsinassociates 94 60Profit/lossfromthesaleofnon-financialassets (5) 179Profitbeforeincometax 9289 7713 Incometax 33 (1663) (1668)Profitaftertax 7626 6045NetprofitattributabletotheGroup‘sshareholders 7626 6045Netprofitattributabletominorityshareholders – – Othercomprehensiveincome Itemsthatmaybesubsequentlyreclassifiedtoprofitorloss Reservefromrevaluationofhedginginstruments: (1341) 126 Changesinnetfairvaluesofderivativesincashflowhedges (1304) 206 Netfairvalueofderivativesincashflowhedgestransferredtoprofitorloss (37) (80)Reservefromrevaluationofavailable-for-salesecurities (857) (786) Changeinrevaluationofavailable-for-salesecurities (566) (164) Revaluationofavailable-for-salesecuritiestransferredtoprofitorloss (291) (622)Foreignexchangerategainsfromtheconsolidationofaforeignbranch (710) (2)Othercomprehensiveincome (2908) (662)OthercomprehensiveincomeattributabletotheGroup‘sshareholders (2908) (662)Othercomprehensiveincomeattributabletominorityshareholders – – Totalcomprehensiveincome 4718 5383TotalcomprehensiveincomeattributabletotheGroup‘sshareholders 4718 5383Totalcomprehensiveincomeattributabletotheminorityshareholders – –

Thenotesonpages41–95formapartofthesefinancialstatements.



Consolidatedstatementoffinancialpositionasof31December2017

31Dec2017 31Dec2016 Note MCZK MCZKASSETS Cashinhandandcashbalances 15 4008 4192

Financialassetsatfairvaluethroughprofitorlossincluding 8115 9027

–heldfortrading 16 8115 9027

–notheldfortrading 16 0 0

Available-for-salesecurities 17 47522 80192

Securitiesheldtomaturity 18 175 186

Receivablesfrombanks 19 210188 139900

Receivablesfromclients 20 386672 385572

Positivefairvalueofhedgingderivatives 22 4441 5163

Equityinvestmentsinassociates 21 398 401

Propertyandequipment 23 4883 5016

Intangibleassets 24 1940 1387

Taxreceivables,including: 731 921

–currentincometax 33 24 294

–deferredtax 33 707 627

Non-currentassetsheldforsale 2 4

Otherassets 25 3003 3081

Totalassets 672078 635042

LIABILITIES Depositsfrombanks 26 174274 115524

Depositsfromclients 27 360473 371163

Debtsecuritiesissued 28 40000 60107

Financialliabilitiesheldfortrading 29 8199 6569

Negativefairvalueofhedgingderivatives 30 4876 3417

Taxliabilities,including: 926 1523



Otherliabilities 31 10979 8879

Provisions 32 855 969

Totalliabiliites 600582 568151

EQUITY Issuedcapital 34 8755 8755

Sharepremium 34 3495 3495

Reservefundsfromrevaluationoffinancialinstruments 1874 4782

Retainedearnings,reservefundsandothercapitalfunds 36 49746 43814

Profitfortheperiod 7626 6045

Totalshareholder‘sequity 71496 66891

Totalliabilitiesandshareholder’sequity 672078 635042



Consolidatedstatementofcashflowsfortheyearended31December2017

2017 2016 MCZK MCZKNetprofitfortheperiod 7626 6045

Adjustmentsfornon-cashitems

Impairmentofloansandreceivablesandfinancialinvestments 460 1499

Revaluationofsecuritiesandderivatives (361) 398

Creationandreleaseofotherprovisions (64) 304

Depreciationandamortisationofpropertyandequipment,andintangibleassets 1049 811

Profit(loss)fromsecuritiesavailableforsale (308) (1085)

Profit(loss)frompropertyandequipmentandintangibleassetssold 5 (179)

Taxes 1663 1668

Othernon-monetarychanges (775) 541

Operatingprofitbeforechangeinoperatingassetsandliabilities 9295 10002

Financialassetsandliabilitiesheldfortrading 2548 (1855)

Receivablesfrombanks (70284) (34002)

Loansandreceivablesfromclients (1820) (36271)

Otherassets 78 (83)

Depositsfrombanks 58768 55846

Depositsfromclients (10668) 7317

Otherliabilities 2050 2153

Incometaxpaid (1499) (1720)

Netcashflowsfromoperatingactivities (11532) 1387

Changesinsecuritiesavailableforsaleandotherfinancialinvestments 32848 4241

Acquisitionofasubsidiary - -

Gainsfromthesaleofpropertyandequipmentandintangibleassets 886 1573

Acquisitionofpropertyandequipmentandintangibleassets (2330) (2630)

Dividendsreceived 4 3

Netcashflowsfrominvestmentactivities 31408 3187

Dividendspaid 0 –

Debtsecuritiesissued (20060) (4827)

Netcashflowsfromfinancialactivities (20060) (4827)

Cashandotherhighlyliquidfundsatthestartoftheperiod 4192 4445Netcashflowsfromoperatingactivities (11532) 1387



Cashandotherhighlyliquidfundsattheendoftheperiod 4008 4192

Interestreceived 12978 11679

Interestpaid (1196) (1939)



Consolidatedstatementofchangesinequityfortheyearended31December2017

Re

serv

efr

om

Reta

ined

ear

ning

s

reva

luat

ion

rate

gai

nso

r

FX

Issu

ed

Shar

ehe

dgin

gse

curit

ies

loss

eso

fRe

serv

efu

nd

Spec

ial-

diffe

renc

es

capi

tal

prem

ium

in

stru

-av

aila

ble

afo

reig

nan

dot

her

-pur

pose

fr

om

Reta

ined

Pr

ofitf

or

MCZ

K

m

ents

fo

rsal

ebr

anch

cap

italf

unds

res

erve

fund

con

solid

atio

nea

rnin

gs

the

perio

dEq

uity

Bala

nce

asa

t31

Dece

mbe

r201

58

755

3

495

1

754

3

198

4

92

51

90

11

611

(2

)2

137

3

56

40

61

506

Tr

ansa

ctio

nsw

itho

wne

rs,c

ontri

butio

nsfr

oma

ndd

istri

butio

nsto

ow

ners

Allo

catio

nof

the

2015

pro

fit

1

0

56

30

(56

40)

–

Divid

end

paym

ent

–

Cons

olid

atio

nim

pact

2

2

To

talc

ompr

ehen

sive

inco

me

fort

hep

erio

d

Ne

tpro

fitfo

r201

6

60

45

60

45

Ot

herc

ompr

ehen

sive

inco

me

Chan

gein

reva

luat

ion

ofa

vaila

ble-

for-

sale

sec

uriti

es

Chan

gein

reva

luat

ion

ofa

vaila

ble-

for-s

ale

secu

ritie

sre

porte

din

oth

erc

ompr

ehen

sive

inco

me

(215

)

(2

15)

Reva

luat

ion

ofa

vaila

ble-

for-

sale

sec

uriti

estr

ansf

erre

dto

pro

fito

rlos

s

(7

68)

(768

)De

ferre

dta

x

197

1

97

Chan

ges

inn

etfa

irva

lues

ofd

eriva

tives

inc

ash

flow

hed

ges

Chan

ges

inn

etfa

irva

lues

ofd

eriva

tives

inc

ash

flow

hed

ges

re

porte

din

oth

erc

ompr

ehen

sive

inco

me

255

255

Ne

tfai

rval

ueo

fder

ivativ

esin

cas

hflo

wh

edge

stra

nsfe

rred

top

rofit

orl

oss

(9

5)

(9

5)De

ferre

dta

x

(3

4)

(3

4)Fo

reig

nex

chan

gera

teg

ains

orl

osse

sfro

mth

eco

nsol

idat

ion

ofa

fore

ign

bran

ch

(2)

(2

)To

talc

ompr

ehen

sive

inco

me

fort

hep

erio

d

1

26

(786

)(2

)

(662

)Ba

lanc

eas

at3

1De

cem

ber2

016

87

55

34

95

18

80

24

12

490

5

200

1

161

1

–

27

003

6

045

6

689

1

Tran

sact

ions

with

ow

ners

,con

tribu

tions

from

and

dis

tribu

tions

too

wne

rs

Al

loca

tion

ofth

e20

16p

rofit

17

6

028

(6

045

)–

Di

viden

dpa

ymen

t

–

Co

nsol

idat

ion

impa

ct

(9

9)

(14)

(113

)

Tota

lcom

preh

ensi

vein

com

efo

rthe

per

iod

Netp

rofit

for2

017

7

626

7

626

Othe

rcom

preh

ensi

vein

com

e

Ch

ange

inre

valu

atio

nof

ava

ilabl

e-fo

r-sa

les

ecur

ities

Ch

ange

inre

valu

atio

nof

ava

ilabl

e-fo

r-sal

ese

curit

ies

repo

rted

ino

ther

com

preh

ensiv

ein

com

e(7

88)

(788

)Re

valu

atio

nof

ava

ilabl

e-fo

r-sa

les

ecur

ities

tran

sfer

red

top

rofit

orl

oss

(358

)

(3

58)

Defe

rred

tax

2

89

289

Ch

ange

sin

net

fair

valu

eso

fder

ivat

ives

inc

ash

flow

hed

ges

Chan

ges

inn

etfa

irva

lues

ofd

eriva

tives

inc

ash

flow

hed

ges

re

porte

din

oth

erc

ompr

ehen

sive

inco

me

(16

13)

(1

613

)Ne

tfai

rval

ueo

fder

ivativ

esin

cas

hflo

wh

edge

stra

nsfe

rred

top

rofit

orl

oss

(4

4)

(4

4)De

ferre

dta

x

3

16

3

16

Fore

ign

exch

ange

rate

gai

nso

rlos

ses

from

the

cons

olid

atio

nof

afo

reig

nbr

anch

(7

10)

(7

10)

Tota

lcom

preh

ensi

vein

com

efo

rthe

per

iod

(13

41)

(857

)(7

10)

(2

908

)Ba

lanc

eas

at3

1De

cem

ber2

017

87

55

34

95

539

1

555

(2

20)

52

17

11

611

(9

9)

33

017

7

626

7

149

6

and

rese

rve

fund

sex

chan

ge


Notestothefinancialstatements(consolidated)

1.IntroductionUniCreditBankCzechRepublicandSlovakia,a.s.(hereinafterthe“Bank”)wasestablishedthroughthecross-bordermergerofUniCreditBankCzechRepublic,a.s.andUniCreditBankSlovakiaa.s.withUniCreditBankCzechRepublic,a.s.beingthesuccessorcompany.Theeffectivemergerdatewas1July2013.UniCreditBankCzechRepublic,a.s.wasestablishedthroughthemergerbyamalgamationofHVBBankCzechRepublica.s.andŽivnostenskábanka,a.s.asof1October2006.Allrightsandobligationsofthedissolvedcompany,Živnostenskábanka,a.s.,weretransferredtothesuccessor,HVBBankCzechRepublica.s.In2008,theBankassumedthenetassetsofHVBRealityCZ,s.r.o.In2009,theBankpreparedaprojectofitsmergerwithUniCreditFactoring,s.r.o.UniCreditFactoring,s.r.o.wasthedissolvedcompanyandtheBankwasthesuccessorcompany.In2012,theBankpreparedaprojectofitsmergerbyamalgamationwithUniCreditCAIBCzechRepublica.s.ThiscompanywasthedissolvedcompanyandtheBankbecamethesuccessorcompany.Changesinthebusinessnameandotherfactsrelatedtothecross-bordermergerwererecordedintheCommercialRegisterinPrague,SectionB,Insert3608on1December2013.AspartofrestructuringintheUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.Awhichistheultimateparentcompanyoftheentiregroupholding100%oftheBank’sshares.

The Bank’s registered office:Želetavská1525/114092,Praha4–Michle

Followingthecompletionofthecross-bordermerger,theBankhasbeencontinuingtoperformactivitiespreviouslyundertakenbyUniCreditBankSlovakiaa.s.ontheterritoryoftheSlovakRepublicthroughitsorganisationalbranchUniCreditBankCzechRepublicandSlovakia,a.s.,pobočkazahraničnejbanky(branchofaforeignbank).Thecross-bordermergerwasmadewiththeobjectiveofcreatingastrongerentitycapableofmanagingbusinessactivitiesbothintheCzechandSlovakmarketsthatwillbringsignificantadvantagestotheUniCreditGroupsincethemergergaverisetoanentitythatisabletomoreefficientlyandeffectivelyserveclientsandachievegreaterreturnsinthecontextoftheanticipatedcostsavingsanddynamicgrowthofbusinessinbothcountries.Theintegrationenabledtobenefitfromsynergisticeffectsintermsofcostsandincomewhileachievingamorebalancedcapitalstructureandoptimisedliquiditymanagement.Inaddition,theUniCreditGrouphadtheopportunitytoreducethecomplexityofitsorganisationalstructureandthelevelofmanagementeffortsasaresultofestablishingonelocalmanagementteamoverseeingbothmarkets.TheBankincreaseditssharecapitalforthepurposesofthemerger.AnumberofminorityshareholdersofUniCreditBankSlovakiaa.s.exercisedtheirrighttosellthesharesofthedissolvingbank,other

minorityshareholdersutilisedtherighttoexchangethesharesfornewlyissuedsharesoftheBank.ThesuccessorbanktookoverthecapitalofthedissolvingbankofMCZK11,611andallocatedittothespecial-purposereservefundinEURthatcanbeusedonlytooffsetlosses.TheBankisauniversalbankprovidingservicesofretail,commercialandinvestmentbankingservicesinCzechcrownsandforeigncurrenciesfordomesticandforeignclients,mainlyintheCzechRepublicandalsoinotherstatesoftheEuropeanUnion.

TheBank’sprincipalactivitiesinclude:•Receivingdepositsfromthepublic;•Providingloans;•Investinginsecuritiesonitsownbehalf;•Operatingasystemofpaymentsandclearing;•Issuingandadministrationofpaymentproducts;•Providingguarantees;•Openinglettersofcredit;•Administeringcashcollection;•Tradingonitsownbehalforonbehalfofclients: 1.Inforeign-exchangecurrencyproducts; 2.Inforwardandcontractoptions,includingforeigncurrency

andinterestratecontracts;and 3.Withtransferablesecurities;•Participatinginsharesubscriptionsandprovidingrelatedservices;•Issuingmortgagebonds;•Conductingfinancialbrokerage;•Managingsecurities,includingportfoliomanagement,onbehalf

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

above.

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

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

receivables.

2.Basisforthepreparationofthefinancialstatements

TheseconsolidatedfinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)asadoptedbytheEuropeanUnion.CertainsubsidiariesmaintaintheiraccountsunderCzechAccountingStandardsandtheGroupmakesreclassificationsandadjustmentstofiguresunderIFRS.Theseconsolidatedfinancialstatementswerepreparedbasedonthegoingconcernassumption.AllpresentedamountsareinmillionsCzechcrowns(CZKmillion)unlessstatedotherwise.Thefinancialstatementswerepreparedonthefairvalueprincipleforfinancialderivatives,financialassetsandliabilitiesmeasuredatfairvaluethroughprofitorlossandavailable-for-salefinancialassets,exceptforthosewhosefairvaluemeasurementcannotbereliablydetermined.ThemethodsfordeterminingfairvaluearepresentedinNote3(b)(v).Recognisedassetsandliabilitiesthatarehedgedagainsttheriskofchangesinfairvaluearestatedatfairvaluebyvirtueofhedgedrisk.Otherfinancialassetsandliabilitiesandnon-financialassetsandliabilitiesaremeasuredatamortisedcostorathistoricalcost.

(a) ConsolidationThesefinancialstatementsareconsolidatedfinancialstatementsandincludetheparentcompanyanditssubsidiaries(the“Group”).AspartofrestructuringintheUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.Awhichistheultimateparentcompanyoftheentiregroupholding100%oftheBank’sshares.TheBank’sultimateownerisUniCreditS.p.A,Milan,whichconsolidatestheentireUniCreditgroupinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion.On14February2014,theBanksignedacontractforthepurchaseofthe100%equityinvestmentinUniCreditLeasingCZ,a.s.ofMCZK3,211anda71.3%equityinvestmentinUniCreditLeasingSlovakia,a.s.withthecostofMEUR16.Principalactivitiesofbothentitiesincludeleasesandinstalmentsale.ThecontractsweresignedbetweentheBankandUniCreditLeasingSpA.;thesearetransactionsundercommoncontrol.Atthesametime,bothleasecompaniespurchasedCzechandSlovakrealestateprojectcompaniesfromtheiroriginalownerUniCreditLeasingSpA,thesearealsotransactionsundercommoncontrol.BothentitiesweresoldwithintheUniCreditGroupduetothereorganisationoftheequityinvestmentsintheUniCreditGroupinordertocreateastrongfinancialgrouponlocalmarketswithastrongersalespotential.TheBanksubsequentlytransferreda91.2%equityinvestmentinUniCreditLeasingSlovakia,a.s.(thepurchasedequityinvestment

of71.3%andtheequityinvestmentof19.9%thatwasheldbytheBankalreadyattheendof2013andreportedaspartof‘Available-for-salesecurities’)asanon-cashinvestmentinthesharecapitalofUniCreditLeasingCZ,a.s.andtheinvestmentoftheBankinUniCreditLeasingCZ,a.s.consequentlyincreasedbyMCZK570on18April2014.Aspartofthepurchaseofrealestateprojectcompanies,UniCreditLeasingCZ,a.s.acquiredCA-LeasingPrahas.r.o.andCACIMMO,s.r.o.thatweremergedwithHVBLeasingCzechRepublics.r.o.on1November2014.On8October2014,UniCreditLeasingInsuranceServices,s.r.o.wasestablished,whichisfullyownedbyUniCreditLeasingSlovakia,a.s.Thecompany’sprincipalbusinessactivityismediationofservices.UniCreditLeasingRealEstates.r.o.,whichwasacquiredbyUniCreditLeasingSlovakia,a.s.aspartofthepurchaseofrealestateprojectcompanies,mergedwithUniCreditLeasingSlovakia,a.s.on8January2015.On20January2015,theacquisitionofthe100%equityinvestmentinTransfinance,a.s.wascompleted.TheentitywasacquiredfromanowneroutsidetheUniCreditGroupandtheinvestmentamountedtoMCZK198.Theprincipalactivitiesoftheacquiredentityincludethefinancing,collectionandsecuringofshort-termreceivablesofclientsfromvariousindustrysegments.TheobjectiveofthisacquisitionfortheBankprimarilyinvolvesfurtherextendingtherangeofproductsandservicesofcorporatebankingtoincludefactoringthatisintendedprimarilyforsmallandmediumsizedcompanies.ThenameoftheacquiredentitychangedtoUniCreditFactoringCzechRepublicandSlovakia,a.s.inMay2015.CACRealEstate,s.r.o.ownedbyUniCreditLeasingCZ,a.s.wassoldoutsidetheUniCreditGroupinJune2015.InFebruary2016,INPROXPoprad,spol.sr.o.andINPROXSRI.,spol.sr.o.mergedwithUniCreditLeasingSlovakia,a.s.witheffectfrom1January2016.BACALeasingGamas.r.o.ownedbyUniCreditLeasingCZ,a.s.wassoldoutsidetheUniCreditGroupinMarch2016.InAugust2016,INPROXChomutov,s.r.o.andINPROXKladno,s.r.o.mergedwithUniCreditLeasingCZ,a.s.witheffectfrom1January2016.CA-LeasingEURO,s.r.o.,ownedbyUniCreditLeasingCZ,a.s.,wassoldinFebruary2017outsideoftheUniCreditGroup.


Asof31December2017,theconsolidationgroupincludesthefollowingentities:

Nameoftheentity Businessactivities Registered Owner Ownership Consolidation office percentage methodUniCreditFactoringCzechRepublic Factoring Prague UniCreditBankCzechandSlovakia,a.s. RepublicandSlovakia,a.s. 100% FullUniCreditLeasingCZ,a.s. Leases Prague UniCreditBankCzech RepublicandSlovakia,a.s. 100% FullUniCreditFleetManagements.r.o. Leaseofmotorvehicles Prague UniCreditLeasingCZ,a.s. 100% FullUniCredtipojišťovacímakléřskáspol.sr.o. Mediationofservices Prague UniCreditLeasingCZ,a.s. 100% FullRCIFinancialServices,s.r.o. Financingofmotorvehicles Prague UniCreditLeasingCZ,a.s. 50% EquityALLIBLeasings.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullBACALeasingAlfas.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullCA-LeasingOVUSs.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullHVBLeasingCzechRepublics.r.o. Realestateprojectcompany Prague UniCreditLeasingCZ,a.s. 100% FullUniCreditLeasingSlovakia,a.s. Leases Bratislava UniCreditLeasingCZ,a.s. 100% FullUniCreditFleetManagements.r.o. Leaseofmotorvehicles Bratislava UniCreditLeasingSlovakia,a.s. 100% FullUniCreditBroker,s.r.o. Mediationofservices Bratislava UniCreditLeasingSlovakia,a.s. 100% FullUniCreditLeasingInsuranceServices,s.r.o. Mediationofservices Bratislava UniCreditLeasingSlovakia,a.s. 100% Full

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


3.Significantaccountingpolicies

Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthesefinancialstatements.

(a) ForeignCurrencyandForeignCurrencyTranslationTheCzechcrownisthefunctionalcurrencyoftheBankandtheentitiesbasedintheCzechRepublic.EuroisthefunctionalcurrencyoftheSlovakbranchandtheentitiesbasedintheSlovakRepublic.ThepresentationcurrencyofthesefinancialstatementsistheCzechcrown.Assetsandliabilitiesofthebrancharetranslatedintothepresentationcurrencyusingtheforeignexchangerateapplicableasofthefinancialstatementsdate.Theprofitorlossofthebranchistranslatedusingtheaverageexchangerate.Theresultingdifferencearisingfromtheuseofvariousforeignexchangeratesisrecognisedinequityas“Foreignexchangerategainsorlossesfromthebranch”.Figuresinbracketsrepresentnegativeamounts.Transactionsinforeigncurrencies(ieotherthanfunctionalcurrency)aretranslatedtothefunctionalcurrencyusingtheforeignexchangeratepromulgatedbythecentralbankandrulingatthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedtothefunctionalcurrencyattheclosingforeignexchangeraterulingatthebalancesheetdate.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthatarestatedathistoricalcostaretranslatedtothefunctionalcurrencyattheforeignexchangeraterulingatthedateofthetransaction.Foreignexchangedifferencesarisingontranslationarerecognisedinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesheldfortrading”.

(b) FinancialAssetsandFinancialLiabilities

(i) ClassificationFinancial assets and financial liabilities at fair value through profit or loss includeinstrumentsclassifiedasheldfortradingandinstrumentsdesignatedbytheGroupasatfairvaluethroughprofitorlossuponinitialrecognition.TradingfinancialassetsandfinancialliabilitiesareheldbytheGroupprincipallyforthepurposeofshort-termprofittaking.Theseincludeinvestmentsindebtinstrumentsandshares,certainpurchasedloansandderivativecontractsthatarenotdesignatedashedginginstruments.Theseinstrumentsarereportedas“Financialassetsheldfortrading”oras“Financialliabilitiesheldfortrading”.FinancialinstrumentsdesignatedbytheGroupuponinitialrecognitionasatfairvaluethroughprofitorlossareincludedwithin“Financialassetsnotheldfortrading”.Loans and receivables arenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedonmarkets.LoansandreceivablesaremainlythosecreatedbytheGroupprovidingmoneytoaborrowerotherthanthosecreatedforthepurposeofshort-termprofittaking.Loansandreceivablescompriseloansandadvancestobanksandnon-bankcustomersandunquotedbondspurchaseduponprimaryissue.Held-to-maturity assetsarefinancialassetswithfixedorpre-definedincomeandfixedmaturitythattheGrouphastheintentandabilitytoholdtomaturity.Theseincludecertainquotedbondspurchaseduponprimaryissueandpurchaseddebtsecurities.Held-to-maturityassetsareincludedin“Held-to-maturityassets”.Available-for-sale assetsarefinancialassetsthatarenotclassifiedasfinancialassetsrecognisedatfairvaluethroughprofitorloss,

loansandreceivables,orheldtomaturity.Available-for-saleinstrumentsincludedebtandequityinvestmentsandcertainquotedbondspurchaseduponprimaryissue.Available-for-saleassetsareincludedin“Available-for-salesecurities”.

(ii) RecognitionofFinancialAssetsFinancialassetsatfairvaluethroughprofitorlossarerecognisedonthesettlementdate.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheGroup’sprofitorlossonthetradedate.Available-for-salefinancialassetsarerecognisedonthesettlementdateintheGroup’saccountingbooks.Anygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedinothercomprehensiveincomefromthetradedate.Held-to-maturityassetsarerecognisedonthesettlementdateintheGroup’saccountingbooks.TheGroupinitiallyrecognisesloansandreceivablesontheiroriginationdates.

(iii)MeasurementofFinancialAssetsandFinancialLiabilitiesFinancialassetsaremeasuredinitiallyatfairvalue,including(inthecaseoffinancialassetsnotatfairvaluethroughprofitorloss)transactioncosts.Subsequenttoinitialrecognition,allfinancialassetsandfinancialliabilitiesatfairvaluethroughprofitorlossandallavailable-for-saleassetsaremeasuredatfairvalue,withtheexceptionofanyinstrumentthatdoesnothaveaquotedmarketpriceonanactivemarketandwhosefairvaluecannotbereliablymeasured,inwhichcasesuchinstrumentisstatedatcost,includingtransactioncosts,lessimpairmentlosses.Allloansandreceivablesandheld-to-maturityassetsaremeasuredatamortisedcost,includingthealiquotpartofdiscountorsharepremiumslessimpairmentlosses.Sharepremiumsanddiscounts,includingtherelevantinitialtransactioncosts,areincludedinthecarryingamountoftherelatedinstrumentandamortisedbasedontheeffectiveinterestrateoftheinstrument.Uponinitialrecognition,depositsfrombanksandclientsandsecuritiesissuedarerecognisedatfairvalue.Theyaresubsequentlyreportedatamortisedcost.

(iv)Day1Profit/LossIntheeventthatthetransactionpricediffersfromthefairvalueofafinancialassetorfinancialliabilitymeasuredatfairvalue,thedifferencebetweenthesevalues(profitorloss)isreportedinprofitorloss.TheGrouptypicallydoesnotconductthistypeoftransaction.

(v) FairValueMeasurementPrinciplesThefairvalueoffinancialassetsandfinancialliabilitiesisbasedontheirquotedmarketpriceatthebalancesheetdatewithoutanydeductionfortransactioncosts.Ifaquotedmarketpriceisnotavailable,thefairvalueoftheinstrumentisestimatedusingpricingmodelsordiscountedcashflowtechniques.

Wherediscountedcashflowtechniquesareused,estimatedfuturecashflowsarebasedontheGroupmanagement’sbestestimatesandthediscountrateisbasedonthemarketrateatthebalancesheetdateforaninstrumentwithsimilartermsandconditions.Wherepricingmodelsareused,inputsarebasedonmarketratesatthebalancesheetdate.Thefairvalueofderivativesthatarenotexchange-tradedisestimatedastheamountthattheGroupwouldreceiveorpaytoterminatethecontractatthebalancesheetdate,takingintoaccountcurrentmarketconditionsandthecurrentcreditworthinessofthecounterparties.ThevaluationofbondsintheGroup’sportfolioiscarriedoutonadailybasisusingavailablemarketratesquotedbymarketparticipantsbymeansofBloombergservices.Agroupofcontributorswhoprovidereliableandregularbondvaluationsisselectedforeachofthebonds.Thecreditspreadofthebondiscalculatedfromparticularcontributionsanddiscountcurves.Iftherearesufficientcurrentmarketpricesofcontributionsavailable,thevaluationiscalculatedasanaveragevalue.Topreventpossibleerrorsofparticularcontributions,acomparisonofdailychangesismadeatthesametime.Ifthereisnomarketpriceavailableasasourceofvaluationorthenumberofactualcontributionsisnotsufficient,theGroupwillcarryoutthevaluationonthebasisofarisk-freeswaprate,towhichthelastverifiedcreditspreadisapplied.TheGroupcontinuestoapplythismethoduntil:– Marketquotationsareagainavailable;– Thecreditspreadofaparticularbondisadjustedbased

onacomparisonofcreditspreadsofsimilarbonds;– TheGroupreceivesotherinformationaboutachangeofthe

spreadapplied;– Theissuer’screditratingchanges(changeofinternaland/or

externalrating,evidencefromthemarketthatcreditworthinessisworsening);and

– Theliquidityofthespecificsecuritieshasdeterioratedsignificantly.

Subsequently,theGroupwillcarryoutthevaluationcomprisingnewaspectsofthemarketprice,includinganassessmentofpossibleimpairmentlosses(seeNote3(g)(ii)).TheGroup’smanagementbelievesthatthefairvalueoftheassetsandliabilitiespresentedinthesefinancialstatementscanbemeasuredreliably.Financialassetsandfinancialliabilitiesarerecognisedatfairvaluedependingonthequalityoftheinputusedinthevaluation.Individuallevelsaredefinedasfollows:•Level1input–quoted(unadjusted)pricesonactivemarketsfor

identicalassetsorliabilitiesavailabletotheGroupasofthedateofvaluation;

•Level2input–inputdataotherthanthequotedpricescontainedinlevel1thatareobservableforanassetorliabilityeitherdirectly


orindirectly.Thiscategoryincludestheinstrumentsvaluedat:quotedpricesofsimilarassetsorliabilitiesonactivemarkets;quotedpricesofidenticalorsimilarassetsorliabilitiesonmarketsthatarenotactive;valuationtechniquesforwhichasignificantinputisobservableonthemarketdirectlyorindirectly;and

•Level3input–unobservableinputdataforanassetorliability.Thiscategoryincludesinstrumentsunderwhichvaluationtechniquescontainaninputnotbasedonobservabledataandtheunobservableinputmayhaveasignificantimpactontheinstrument’svaluation.

FairValueAdjustmentsTheGrouputilisesotherfairvalueadjustmentsforthefairvaluesoffinancialassetsandfinancialliabilitiestoreflectrealityasfaithfullyaspossible:

CreditValuationAdjustmentTheCreditValuationAdjustment(CVA)isreflectedinthevaluationofderivativessuchthattheresultingfairvalueofderivativestakesintoaccountthecounterpartyriskandtheBank’screditquality.TheBankusesthesamegroupstandardforcalculatingCVAonthebasisoftheinputsasfollows:•Anticipatedprofileoftheexposurefromderivativesisestimated

onthebasisofthestochasticMonteCarlosimulation;•SimulatedexposuresfromderivativestakeintoaccountSpecific

WrongWayRisk;•Dependingonthetypeofthederivativecounterparty,CVAis

calculatedas: –UnilateralCVA–thecalculationisbasedonhistoricalPD

andPGD(thisrelatestonon-financialcounterpartiesandcounterpartiesthatdonothaveownCDStradableonthemarket);

–BilateralCVA–thecalculationisbasedonPDandLGDderivedfromquotedCDS;and

•CVAisnotcalculatedforcounterparties/clientsforwhichPD=1(ietheclientisindefault)topreventthecostsofcreditriskfrombeingincludedtwiceinanalready-recognisedprovision.

OISAdjustmentTheGroupappliestheOIS(overnightindexswap)effecttocollateralisedexposuresinfinancialinstruments(derivatives,repoetc)denominatedinEUR.TheOISeffectisaddedtotheyieldcurveinEURsothattheresultingfairvalueoftherespectivefinancialinstrumentstakesintoaccounttheactualvalueofOIS.ThisadjustmentisrecognisedintheGroup’sprofitandlossaccount.

FVA/AVAQuotedmarketexchangerates,yieldcurves,spreadsetc(“marketfactors”ingeneral)donotneedtoaccuratelyreflect,ateverymoment,theconditionsunderwhichtheGroupmayliquidateitspositionsinfinancialinstruments.Thismayresultfromlargerthan

standardtradedvolumeswhichtheGroupwouldliketorealiseonfinancialmarkets,stressperiodsonfinancialmarkets,periodswithbelow-averagemarketliquidityetc.Inthesesituationstherealisedfairvaluecouldbelowerthanimpliedbyquotedmarketfactors.Therefore,inlinewithIFRSandCRR,theGroupappliesFVAwhichaddsasurchargetoquotedmarketfactorsarisingfrom:•Liquidity;•Uncertaintyregardingprice/valuationmodelappliedtothefinancial

instrument;and•Creditrisk.

TheGrouprecognisesthedeterminedFVAvalueintheprofitandlossaccount.InadditiontoFVA,additionalvaluationadjustment(AVA)isalsodeterminedbytheGroupwithrespecttomarketfactors.AVAisdefinedasadifferencebetweenthefairvaluereportedintheGroup’sbalancesheetincludingFVAandprudentvaluation(PV).PVrepresentsahighlyunlikely(butfair)valueofmarketfactorswhichmayoccuronthemarketuponthesaleoffinancialassetsduetostressonfinancialmarkets.

(vi)GainsandLossesonSubsequentMeasurementGainsandlossesarisingfromachangeinthefairvalueoffinancialassetsheldfortradingarerecogniseddirectlyinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesheldfortrading”.Interestincomefromfinancialassetsheldfortradingisrecognisedinprofitorlossas“Interestincomeandsimilarrevenues”.Gainsandlossesarisingfromachangeinthefairvalueofotherfinancialassetsandfinancialliabilitiesdesignateduponinitialrecognitionatfairvaluethroughprofitorlossnotheldfortradingarerecogniseddirectlyinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading”.Theinterestincomefromfinancialassetsandfinancialliabilitiesatfairvaluethroughprofitorlossnotheldfortradingisrecognisedinprofitorlossas“Interestandsimilarincome”.Gainsandlossesarisingfromachangeinthefairvalueofavailable-for-saleassetsarerecognisedinothercomprehensiveincomeandbecometheequityitem“Reservesfromrevaluationofavailable-for-salesecurities”.Whenthefinancialassetsaresold,transferredorotherwisedisposedof,thecumulativegainorlossrecognisedinequityistransferredtoprofitorlossas“Netincomefromthesaleoffinancialassetsandliabilities”.Interestincomefromavailable-for-saledebtsecuritiesisrecognisedintheincomestatementas“Interestincomeandsimilarrevenues”.Theaccountingforimpairmentofavailable-for-saleassetsisdescribedinNote3(g).Gainsandlossesarisingfromfinancialassetsandfinancialliabilitiescarriedatamortisedcostarerecognisedinprofitorlosswhenthefinancialassetorfinancialliabilityisderecognisedorimpaired(seeNote3(g)),andthroughtheamortisationprocess.

(vii)DerecognitionAfinancialassetisderecognisedwhentheGrouplosesthe


contractualrightstothecashflowfromanassetortheGrouptransfersthefinancialassetandthetransferqualifiesforderecognition.Thisoccurswhentherightsarerealised,expiredoraresurrendered.Afinancialliabilityisderecognisedwhenitissettled.Available-for-saleassetsandassetsrecognisedatfairvaluethroughprofitorlossthataresoldarederecognisedandthecorrespondingreceivablesfromthebuyerarerecognisedatthesettlementdate.TheGroupusesaccountingmethodstodeterminethegainorlossonderecognition.Held-to-maturityinstrumentsandloansandreceivablesarederecognisedonthematuritydate,onthedaytheyaretransferredtoanotherportfoliooronthedayofsale.

(c) PrinciplesofConsolidation

SubsidiariesSubsidiariesareentitiescontrolledbytheGroup.AnentityiscontrolledwhentheGrouphasthepower(directorindirect)togovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedateofonwhichcontroloriginatestothedateonwhichcontrolceasestoexist.

AssociatesAssociatesareentitiesoverwhichtheGrouphassignificant(butnotcontrolling)influenceonthemanagementoroperationsoftheentity(ietheGroup’spowertoparticipateinthefinancialandoperatingpolicydecisionsoftheinvesteebutnotcontroloverthosepolicies).TheconsolidatedstatementofcomprehensiveincomeincludestheGroup’sshareintotalreportedprofitsorlossesofassociatesusingtheequitymethodofaccounting,fromthedateofonwhichsignificantinfluenceoriginatestothedateonwhichsignificantinfluenceceasestoexist.Theconsolidatedstatementoffinancialpositionreflectsthevalueoftheinvestmentinanassociatedeterminedusingtheequitymethodofaccounting.

Unconsolidated Subsidiaries and AssociatesUnconsolidatedsubsidiariesandassociatesarereportedinthebalancesheetatcostlessimpairmentlosses.MutualbalancesandtransactionsamongtheentitiesintheGroupandunrealisedprofitsarisingfromintragrouprelationsareeliminateduponthepreparationoftheconsolidatedfinancialstatements.UnrealisedprofitsarisingfromtransactionswithassociatesareeliminatedintheamountoftheGroup’sshareintheentityandareeliminatedagainsttheinvestmentsinassociates.

Transactions under Common ControlAbusinesscombinationbetweenentitiesorcompaniesundercommoncontrolisabusinesscombinationwhereallcombiningentitiesorcompaniesareultimatelycontrolledbythesamepartyorpartiesaspriortoandpostthebusinesscombinationandthis

controlisnottemporary.ForbusinesscombinationsundercommoncontroltheGrouphasadoptedthemethodofcarryingamountsoftheacquiredbusinessandconcurrentlyreportsthesetransactionsprospectively,iewithoutadjustmentsincomparativeperiods.

(d) Derivatives

(i) HedgingDerivativesHedgingderivativesarecarriedatfairvalue.Themethodofrecognisingfairvaluedependsonthemodelofhedgeaccountingapplied.

Hedgeaccountingcanbeappliedif:•ThehedgeisinlinewiththeGroup’sriskmanagementstrategy;•Thehedgerelationshipisformallydocumentedattheinception

ofthehedge;•Itisexpectedthatthehedgerelationshipwillbehighlyeffective

throughoutitslife;•Theeffectivenessofthehedgerelationshipcanbeobjectively

measured;•Thehedgerelationshipishighlyeffectivethroughouttheaccounting

period;and•Inthecaseofhedgingfutureexpectedtransactions,itishighly

probablethatthetransactionwilloccur.

Ifaderivativehedgesanexposuretochangesinthefairvalueofrecordedassetsandliabilitiesoroflegally-enforceablecommitments,thehedgeditemattributabletotheriskbeinghedgedisalsocarriedatfairvalue.Gains(losses)onthere-measurementofaninterest-bearinghedgeditemandhedgingderivativearerecognisedinprofitorlossin“Netincomefromhedgingagainstriskofchangesinfairvalue”.Realisedinterestincomeandexpensesarereportedonanetbasisin“Interestincomeandsimilarrevenues”or“Interestexpenseandsimilarcharges”.Ifthederivativehedgesanexposuretothevariabilityofcashflowsrelatedtorecognisedassetsandliabilitiesorexpectedtransactions,theeffectivepartofthehedge(fairvalueofthehedgingderivative)isrecognisedinothercomprehensiveincomeandbecomestheequityitem“Reservesfromrevaluationofhedginginstruments”.Theineffectivepartofthehedgeisrecognisedinprofitorloss.Ifthehedgingofexpectedtransactionsresultsintherecordingofanassetorliability,thecumulativegainsorlossesfromrevaluationofthehedgingderivativepreviouslyrecognisedinothercomprehensiveincomearetransferredtoprofitorlossatthesametimeasthehedgeditemaffectsthenetprofitorloss.Whenahedginginstrumentorhedgerelationshipisterminatedbutthehedgedtransactionisstillexpectedtooccur,thecumulativegainorlossrecognisedinothercomprehensiveincomeremainsinequityandisrecognisedinaccordancewiththeaforementionedpolicy.Ifthehedgedtransactionisnolongerexpectedtooccur,thecumulativegainorlosspreviouslyrecognisedinothercomprehensiveincomeisimmediatelyrecognisedinprofitorloss.


(ii) EmbeddedDerivativesSometimes,aderivativemaybeacomponentofacombinedfinancialinstrumentthatincludesahostcontractandaderivative(theembeddedderivative)effectingcashflowsorotherwisemodifyingthecharacteristicsofthehostinstrument.Anembeddedderivativemustbeseparatedfromthehostinstrumentandaccountedforasaseparatederivativeif,andonlyif:•Theeconomiccharacteristicsandrisksoftheembeddedderivative

arenotcloselyrelatedtotheeconomiccharacteristicsandrisksofthehostcontract;

•Aseparatefinancialinstrumentwiththesametermsastheembeddedderivativewouldmeetthedefinitionofaderivativeasastand-aloneinstrument;and

•Thehostinstrumentisnotmeasuredatfairorismeasuredatfairvaluebutchangesinfairvaluearerecognisedinothercomprehensiveincome.

(e) BorrowingandLendingofSecuritiesFinancialassetslentundersecuritieslendingarrangementsorsoldunderrepurchaseagreementscontinuetoberecognisedinthebalancesheetandaremeasuredinaccordancewiththeaccountingpolicyforsuchfinancialassetsasappropriate.Asaresultofthecashcollateralreceivedinrespectofsecuritieslent/soldunderrepurchaseagreements,theGrouprecognisesaliabilitytoeitherbanksorcustomersintheamountofthiscompensation.FinancialassetsborrowedundersecuritiesborrowingagreementsorpurchasedsubjecttocommitmentstoresellthematfuturedatesarenotrecognisedintheGroup’sstatementoffinancialposition.Asaresultofthecashcollateralprovidedinrespectofsecuritiesborrowed/purchasedundersecuritieslendingarrangementsorresaleagreements,theGrouprecognisesloansandadvancestoeitherbanksorcustomers.Thereceivablesarerecordedascollateralisedbytheunderlyingsecurity.Inthecaseofthesaleofasecurityacquiredonthebasisofsecuritieslendingarrangementsorrepurchaseagreements,theGroupderecognisesthesecuritiesacquiredinsuchmannerfromoff-balancesheetandrecordsapayablefromashort-termsale,whichisrevaluedtofairvalue,inthebalancesheet.Thispayableisreportedunder“Financialliabilitiesheldfortrading”.Incomeandexpensesarisingfromtheborrowingandlendingofsecurities,aswellasthedifferencebetweenthesaleandrepurchaseconsiderationsarerecognisedonanaccrualbasisovertheperiodofthetransactionsandarerecognisedinprofitorlossin“Interestincomeandsimilarrevenues”or“Interestexpenseandsimilarcharges”.

(f) OffsettingFinancialassetsandliabilitiesmaybeoffsetandthenetamountisreportedinthestatementoffinancialpositionwhentheGrouphasalegallyenforceablerighttosetofftherecognisedamountsandthetransactionsareintendedtobereportedinthestatementoffinancial

positiononanetbasis.TheGroupdoesnotoffsetanyfinancialassetsandfinancialliabilities.

(g) ImpairmentAssetsareassessedateachbalancesheetdatetodeterminewhetherthereisanyobjectiveevidenceofimpairment.Ifanysuchindicationexists,theasset’srecoverableamountisestimatedandtheimpairmentoftheassetisrecognisedinprofitorloss.

(i) LoansandReceivablesandHeld-to-MaturityAssetsLoansandreceivablesandheld-to-maturityassetsarepresentedatamortisedcost,ienetofimpairmentlosses.Specificimpairmentlossesaremadeagainstthecarryingamountofloansandreceivablesandheld-to-maturityassetsinordertoreducetheseassetstotheirrecoverableamounts.Therecoverableamountofloansandreceivablesandheld-to-maturityassetsiscalculatedasthepresentvalueoftheestimatedfuturecashflows,discountedattheinstrument’soriginaleffectiveinterestrate.Collectiveimpairmentlossesofportfoliosofstandardloans,forwhichnoobjectiveevidenceofimpairmenthasbeenidentifiedonanindividualbasis,aremaintainedtoreducethecarryingamountoftheportfoliosoffinancialassetswithsimilarcreditriskcharacteristicstotheirestimatedrecoverableamountsatthebalancesheetdate.Theexpectedcashflowsforportfoliosofsimilarassetsareestimatedbasedonhistoricallossexperienceandconsideringthecreditratingoftheunderlyingcustomers.Historicallossexperienceisthebasisforcalculatingtheexpectedloss,whichisadjustedbythelossconfirmationperiod,whichrepresentstheaveragetimelagbetweenoccurrenceofalosseventandconfirmationoftheloss.Thisconceptenablesrecognitionofthoselossesthathaveoccurredintheportfolioatthebalancesheetdate.Whenaloanisknowntobeuncollectible,allthenecessarylegalstepshavebeentakenandthefinallosshasbeendetermined,theloaniswrittenoffdirectlyandanypreviouslyunrecognisedlossisrecognisedinprofitorlossunder“Impairmentlossesonfinancialassets”.Anyconsiderationreceivedinrespectofaloanwrittenoffisrecognisedinprofitorlossunder“Otheroperatingincome”.Ifinasubsequentperiodtheamountofimpairmentlossdecreasesandthedecreasecanbelinkedobjectivelytoaneventoccurringaftertheimpairmentloss,theimpairmentlossisreversedthroughprofitorlossin“Impairmentofloansandreceivables”.

(ii) Available-for-saleFinancialAssetsWhereanavailable-for-saleassetisimpaired,andadeclineinthefairvaluewaspreviouslyrecognisedinothercomprehensiveincome,thecumulativelossisreclassifiedtoprofitorlossandrecognisedin“Impairmentlossesonfinancialassets”.Whereadebtinstrumentclassifiedasanavailable-for-saleassetisimpaired,andanincreaseinthefairvalueoftheassetwaspreviouslyrecognisedinequity,theincreaseinfairvalueoftheassetrecognisedinothercomprehensiveincomeisreversedtotheextentoftheimpairment.Anyadditional


impairmentlossisrecognisedinprofitorloss.Impairmentlossesrecognisedinprofitorlossarisingfrominvestmentinequityinstrumentsclassifiedasavailable-for-salearenotreversedthroughprofitorloss.

(h) PropertyandEquipmentandIntangibleAssetsPropertyandequipmentandintangibleassetsareassetswhichmaybeusedforaperiodlongerthanoneyear.TheBankhaspropertyandequipmenttoconductitsactivitiesaswellaspropertyandequipmentheldasaninvestment.Bothtypesofpropertyandequipmentandintangibleassetsarestatedathistoricalcostlessaccumulateddepreciationandimpairment.Depreciationiscalculatedusingthestraight-linemethodovertheassets’estimatedusefullives.

Thedepreciationperiods(overrespectiveestimatedusefullives)forindividualcategoriesofpropertyandequipmentandintangibleassetsareasfollows:•Buildings 20–50years•Technicalimprovementofbuildingsprotected

asculturalheritage 15years•Technicalimprovementofrentedpremises 10years

orinaccordance withthecontract

•Air-conditioningequipment 5years•Machineryandequipment 3–10years•Bankvaults 20years•Fixturesandfittings 5–10years•Motorvehicles 4–5years•ITequipment 4years•Softwareandintangibleassets 2–6years

orinaccordancewiththecontract•Lowvaluetangibleassets 2–3years

Bothtangibleandintangibleassetsareassessedforpotentialimpairmentorareductioninusefullife.Ifeventsorchangesintheconditionsoccurthatcouldresultinthecarryingamountnotbeingrecoverable,thecarryingamountiswrittendowntotherecoverableamountifthecarryingamountishigherthantheestimatedrecoverablevalue.Therecoverableamountisthehigheroffairvaluelesscostsofdisposalandthevalueinuse.Thegainsandlossesondisposalaredeterminedbasedonthenetbookvalueandareincludedinotheroperatingincomeorexpenses.Thecostsofrepair,maintenanceandtechnicalimprovementareexpensedastheyareincurred.Technicalimprovementsexceedingthelegallimitsarecapitalised.Propertyandequipment,whichtheGroupintendstosellwithin12months,isclassifiedas“Non-currentassetsheldforsale”.Suchpropertyandequipmentisreclassifiedatthelowerofitscarryingamountoritssalesvaluelessdisposalcosts.

(i) Leases

Provided Finance LeaseAleaseisclassifiedasafinanceleaseifittransferstothelesseesubstantiallyalltherisksandrewardsincidenttoownership.Receivablesarisingfromfinanceleasesarereportedasequaltothenetinvestmentintheleaseuponthereceiptoftheleasedassetbythecustomer.Thesumoffutureminimumleaseinstalmentsandinitialfeesfortheprovisionoftheleaseequatetothegrossinvestmentinthelease(giventhatfinanceleasecontractsincludeaclauseonthepurchaseattheendoftheleaseperiod,thereisnounsecurednetbookvalue).Thedifferencebetweenthegrossandnetinvestmentintheleaserepresentsdeferredfinancialincomewhichisreportedasinterestincomeovertheleaseperiodwiththeconstantperiodicprofitabilityofthenetinvestmentinthefinancelease.Theamountsreceivedfromthelesseereducethenetinvestment.ReceivablesoftheGrouparisingfromfinanceleasesalsoincludethecostofassetsleasedunderfinanceleasesincontractswheretheassethasbeenalreadyacquiredbutthefinanceleasecontractwasnotcapitalisedatthebalancesheetdate.

Thedescriptionofsignificantcontractualconditionsforfinanceleasescanbecharacterisedasfollows:•Thesubjectoftheleaseisspecifiedinthetextoftheleasecontract

orintheacceptancecertificate(partoftheleasecontract);•Thedurationoftheleasebeginsonthedayoftheacceptanceof

thesubjectoftheleasebythelesseeandendsupontheexpirationoftheagreedleaseterm;

•Thelesseeisauthorisedtopurchasethesubjectoftheleasefromthelessor;

•Thesubjectoftheleaseremainsintheexclusiveownershipofthelessorthroughoutthedurationofthelease.Theownershipistransferredtothelessee/buyeronthedaywhenthepurchasepriceasperthepurchaseagreementiscreditedtothelessor’saccount;

•Thepurchasepriceandallamountsintheleasecontractarenetofvalueaddedtax,theVATrateissetbylawanditisindicatedseparatelyintheinvoices;

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

•Thesubjectoftheleasemustbeinsuredthroughouttheleaseterm;and

•Thelessormayprematurelyterminatetheleasecontractatanytimewithoutanoticeperiodbywithdrawalorbyanoticewithimmediateeffectifthelesseesignificantlybreachesorfailstomeettheobligationsandcommitmentsarisingfromtheleasecontract.Insuchacase,thelesseeisobligedtomakealltheremainingleasepaymentstothelessorinlinewiththepaymentcalendar;thepaymentsaredueupontheprematureterminationoftheleasecontract.


Provided Operating LeasesOtherleasesareclassifiedasoperatingleases,theleasedassetremainstobeownedbytheleasecompanyaftertheterminationoftheleasecontract.Incomefromoperatingleasesisreportedin“Otheroperatingincome”.

Received Operating LeasesPaymentsundercontractsforreceivedoperatingleasesareincludedin“Generaladministrativeexpenses”evenlyovertheperiodoftheleasecontract.Inthecaseofcontractcancellationbeforetheendoftheleasecontract,allrequiredpenaltypaymentsareaccountedforasaperiodcostatthetimeofcancellingthelease.

(j) FactoringFactoringrepresentsthepurchaseofshort-termreceivablesatnominalvaluesthatoriginatedonthebasisofsuppliesofgoodsorservicesmadebyasuppliertoacustomerandarenotpasttheirduedates.Thefactoringcompanypayspartofthepurchaseprice(‘prefinancing’)tothesupplier.Receivablesfrompurchasedreceivablesarereportedin“Receivablesfromclients”netofthepayablearisingfromthepurchasedreceivables.Oncethecustomermakesthepayment,theremainingpartofthepurchasepriceispaidtothesupplier.Inreturnforitsservices,theGroupcollectsafeefortheprovidedprefinancingcomprisingtwobasiccomponents–theriskcomponentandthecostcomponent.TheriskcomponentrepresentstheGroup’sremunerationfortakingoncreditriskandisprincipallyaffectedbythecustomers’financialhealthandpaymentdiscipline.Indeterminingthecostcomponent,otherfactorsaretakenintoaccount,suchasthecostsincurredinkeepingtherecordsofreceivables,thecostofconductingthedunningprocess,informationservices,assistanceinthecomplaintshandlingprocedure,othercostsinvolvedinblockingthefundsrequiredtofinancethereceivables.Thecurrentpriceisderivedfromthespecificlevelofturnover,numberandsolvencyofcustomers,etc.Inadditiontothefee,theGroupchargesinterest,theabsoluteamountofwhichdependsontheamountofprefinancingmadeandthelengthofthetimeperiodbetweentheprovisionofpartofthepurchasepriceandcollectionofthepaymentfromthecustomer.

(k) ProvisionsProvisionsrelatetoaprobableoutflowofanuncertainamountoveranuncertainperiodoftime.Provisionsarerecognisedwhen:•Thereisanobligation(legalorconstructive)asaresultofapast

event;•Itisprobablethatanoutflowofresourceswillberequired

tosettletheobligation(probablemeanstheprobabilityexceeds50%);and

•Theamountoftheobligationcanbereliablyestimated.

Arestructuringprovisionisrecognisedwhenthefollowingcriteriaaremet:•TheGrouphaspreparedadetailedandformalrestructuringplan;•Thoseaffectedbytherestructuringhavearealisticexpectation

thattherestructuringwilltakeplaceduethefactthattheimplementationoftheplanhascommencedoritsmainfeatureshavebeenannounced.

(l) InterestIncomeandExpenseInterestincomeandexpensesarerecognisedinprofitorlossintheperiodtowhichtheyrelate,usingtheeffectiveinterestratemethod.Interestfromloansanddepositsareaccruedonadailybasis.Interestincomeandexpensesincluderelevanttransactioncostsandtheamortisationofanydiscountorpremiumbetweentheinitialcarryingamountofaninterest-bearinginstrumentanditsamountatmaturitycalculatedonaneffectiveinterestratebasis.Inthecurrentenvironmentofnegativeinterestrates,negativeinterestincomeispresentedinincomewiththenegativesign.Negativeinterestexpenseispresentedininterestexpensewiththeoppositesign.Unlessamanagementdecisionismadetothecontrary,accruedinterestincomeisalsorecognisedinprofitorlossforimpairedloansandreceivables(exceptforloansandreceivablesinbankruptcyproceedings).Insuchcases,theinterestincomerepresentsapartoftheamortisedcostwhichformsabasisfortheimpairmentlosscalculation.

(m)FeeandCommissionIncomeandExpenseFeeandcommissionincomeandexpenseconsistoffeesandcommissionsreceived/paidbytheBankforprovidingfinancialservicesotherthanthoserelatedtotheoriginationofafinancialassetorliability,whichformapartoftheeffectiveinterestincome/expense.FeesandcommissionsariseonfinancialservicesprovidedbytheBank,includingpaymentservices,brokerageservices,investmentadviceandfinancialplanning,investmentbankingservicesandassetmanagementservices.Feeandcommissionincomeisrecognisedwhenthecorrespondingserviceisprovidedorcompleted.

(n) DividendincomeDividendincomeisrecognisedinprofitorlossin“Dividendincome”onthedatethatthedividendisdeclared.

(o) DeferredBonusesTheGroupaccountsfordeferredbonusesontheaccrualbasisofaccounting

(p) TaxationTaxnon-deductibleexpensesareaddedtoandnon-taxableincomeisdeductedfromtheprofitfortheperiodpursuanttoCzechAccountingStandardstoarriveatthetaxableincomebaseintheCzechRepublic,whichisfurtheradjustedbytaxallowancesandrelevantcredits.Thetaxpayableorreceivableiscalculatedusingthetaxratevalidatthe


year-endandreportedintheexpectedamountofthesettlementwiththetaxauthorities.TheincometaxofentitiesbasedinSlovakiaiscalculatedinlinewiththeregulationsapplicablein theSlovakRepublic.Deferredtaxisprovidedonalltemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialstatementpurposesandtheamountsusedfortaxationpurposesmultipliedbytheexpectedincometaxratefortheperiodoftheassetrecoveryorliabilitysettlement.Adeferredtaxassetisrecognisedonlytotheextentthattherearenodoubtsthattherewillbefuturetaxableprofitsavailableagainstwhichthisassetcanbeutilised.

(q) ContingentAssetsandLiabilitiesAcontingentasset/liabilityisapotentialasset/liabilitythatarisesfrompasteventsandwhoseexistencewillbeonlyconfirmedbytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheentity.TheGroupdoesnotrecognisecontingentassets/liabilitiesinthebalancesheetbutregularlyreviewstheirdevelopmenttospecifywhetheraninflow/outflowofresourcesembodyingeconomicbenefitshasbecomeprobable.Wherethelikelihoodofanoutflowofeconomicbenefitsishigherthan50%,theGroupwillrecogniseaprovision.Wherethelikelihoodofaninflowofeconomicbenefitsisalmost100%,theGroupwillrecogniseanassetandrevenue.

(r) SegmentReportingIFRS 8 Operating segmentsstatesthatpresentationandreportingofoperatingsegmentsshallbeinaccordancewithperformancecriteriamonitoredbythechiefoperatingdecision-makerwhoisresponsibleforoperationaldecisions.AttheGroup,thatdecision-makeristheBoardofDirectorsoftheBank.In2016,thestructureofinternalorganisationandthecompositionofreportedsegmentschanged.TheGroup’sprimarysegmentreportingisbrokendownbytypesofclients,whichcorrespondtotheGroup’svariousoperations:retailandprivatebanking,corporateandinvestmentbankingandother.TheperformanceofallthesegmentsismonitoredmonthlybytheBoardofDirectorsandothermembersoftheGroup’smanagement.Thereportingsegmentsgenerateincomeprimarilyfromtheprovisionofloansandotherbankingproducts.Retail and private banking encompassesinparticularprovidingloans,mortgages,bankaccountmaintenance,paymentservices(includingpaymentcards),termandsavingdeposits,investmentadvisoryservices.Corporate and investment bankingtakesinespeciallythefollowingproductsandservices:providingbankingservicestocompaniesandpublicinstitutions,includingloans,bankguarantees,accountmaintenance,paymentservices,openingdocumentarylettersofcredit,termdeposits,derivativeandforeigncurrencyoperations,andcapitalmarketactivitiesinclusiveofsecuritiesunderwritingforclients,investmentadvisory,andconsultingonmergersandacquisitions.Otherincludesbankingservicesthatarenotincludedwithintheaforementionedsegments.

(s) StandardsandInterpretationsEffectiveintheCurrentPeriod

•AmendmentstoIAS7Disclosure Initiative(effectiveforannualperiodsbeginningonorafter1January2017);

•AmendmentstoIAS12Recognition of Deferred Tax Assets for Unrealised Losses(effectiveforannualperiodsbeginningonorafter1January2017);and

•AmendmentstoIFRS12duetoImprovements to IFRSs (cycle 2014–2016)(amendmentstoIFRS12aretobeappliedforannualperiodsbeginningonorafter1January2017,buttheydonotaffecttheBank’sseparatefinancialstatements.

(t) StandardandInterpretationsIssuedbytheIASBandAdoptedbytheEUthatareNotYetEffective

TheGrouphasevaluatedtheimpactofstandards,interpretationsandamendmentstovalidstandardswhicharenotyetinforceandwerenotusedinpreparingthesefinancialstatementsbutwhicharealreadyapprovedandwillhaveanimpactontheGroup’sfinancialstatementsinthefuture.TheGroupiscurrentlyanalysingtheimpactsarisingfromtheadoptionofthesestandards.TheGroupplanstoimplementthesestandardsatthedatetheybecomeeffective.

•IFRS 9 “Financial Instruments”iseffectiveforannualperiodsbeginningonorafter1January2018andreplacesIAS 39 “Financial Instruments: Recognition and Measurement”.

IFRS9•willintroducesignificantchanges,comparedtoIAS39,tothe

classificationandmeasurementofloansanddebtinstrumentsbasedonthe“businessmodel”andonthecharacteristicsofthecashflowsofthefinancialinstrument(SPPI–SolelyPaymentsofPrincipalandInterestcriteria);

•requiresthemeasurementoftheequityinstrumentsatfairvalueeitherthroughprofitorlossorthrough“othercomprehensiveincome”.Inthissecondcase,unlikepreviousrequirementsforavailable-for-saleassetssetbyIAS39,IFRS9haseliminatedtherequesttorecogniseimpairmentlossesandprovidefor,incaseofderecognitionoftheinstruments,thegainorlossesfromdisposalshallberecycledtootherequityreservesandnottoprofitandlossaccounts;

•willintroduceanewaccountingmodelforimpairment,basedon(i)theexpectedlossesapproachsubstitutingthecurrentapproachbasedontheincurredlosses,and(ii)willintroducetheconceptof“lifetime”expectedlosses,andconsequentlyananticipatedstructuralincreaseofprovisioningwithparticularreferencetocreditlosses;

•worksonthehedgeaccountingmodelrewritingtherulesforthedesignationofahedgeaccountingrelationshipandfortheverificationofitseffectivenessinordertoachieveastrongeralignmentbetweenthehedgeaccountingtreatmentandtheunderlyingriskmanagementmethod.ItshouldbenotedthattheprincipleallowstheentitytomakeuseofthepossibilitytocontinuetoapplyIAS39hedge


accountingrulesuntiltheIASBhascompletedtheprojectonthedefinitionofportfoliohedgingrules;and

•changestheaccountingtreatmentof“owncreditrisk”,inotherwords,changesinthefairvalueofissueddebtliabilitiesthataredesignatedatfairvaluenotattributabletochangesoftheowncreditrisk.Thenewaccountingstandardrequiresthesechangesshallberecognisedinaspecificequityreserve,ratherthantotheincomestatement,asrequestedunderIAS39,thereforeremovingavolatilitysourcefromtheeconomicresults.

Inordertoensurepromptcompliancewiththerequirementssetbytheaccountingprinciples,theGrouphasactivatedaprojectthatisinitsfinalphasewiththeaimofcreatingaccountingandriskmonitoringmethodologiesharmonisedacrossGroupLegalEntities.

MirroringthemainchangesrequiredbyIFRS9,theGroupwideprojecthasbeenorganisedthroughwork-streamsspecifically:•ClassificationandMeasurementwork-stream,aimedatreviewing

theclassificationofthefinancialinstrumentsaccordingtonewIFRS9criteria,;and

•Impairmentwork-stream,aimedatdevelopingandimplementingmodelsandmethodologiesforimpairmentcalculation.

TheBankhasparticipatedintheGroupwideprojectprimarilybyperformingtheimpactanalysisandimplementingallchangesinlinewiththeGrouprequirements.

Withreferencetothe“ClassificationandMeasurement”work-stream,theGrouphas:•identifiedthecriteria,basedonthenewbusinessmodeland

onthefeaturesoftheassociatedcontractualcashflows,fortheclassificationoffinancialinstrumentsinthenewcategoriesforeseenbytheaccountingstandard;and

•appliedthecriteriaidentifiedfortheclassificationoftheexistingportfolio.

TheanalysisofthebusinessmodelhasbeenperformedbymappingthebusinessareascomprisingtheGroupandbyattributingthemaspecificbusinessmodel.Inthisregard,a“heldtocollect”or“heldtocollectandsell”businessmodelhasbeenattributedtothebusinessareascomprisingthebankingportfoliooftheGroupinrelationtothereasonswhytheinstrumenthasbeenacquiredororiginatedandtotheexpectedsalesoffinancialinstruments.Inthiscontext,salesoffinancialinstrumentsmaybecompliantwiththe“heldtocollect”businessmodelincaseof(i)securitisationtransactionsthatdonotachievethederecognitionoftheunderlyingloans,(ii)salesdeterminedbyanadversechangeinthecreditriskofthecounterparty,(iii)salesthatareinfrequentornotsignificant,whicharetobeevaluatedcasebybase.Abusinessmodel“other”hasbeenassignedtothebusinessareascomprisingthetradingportfoliooftheGroupsotoreflecttheintenttoachieveprofitfromshort-termpricemovements.

FortheclassificationoffinancialassetsinthenewIFRS9categories,theanalysisofthebusinessmodeliscomplementedbytheanalysisofthecontractualcashflows(“SPPITest”).Inthisregard,theGrouphasdevelopedprocessesandsystemsaimedatanalysingtheportfolioofsecuritiesandloanssotoassesswhetherthefeaturesoftheircontractualcashflowsallowtheirmeasurementatamortisedcost(“heldtocollect”portfolio)oratfairvaluethroughcomprehensiveincome(“heldtocollectandsell”portfolio”).Thisanalysiswasperformedonthelocalleveleithercontractbycontractorbyclusters,definedonthebasisofthefeaturesoftheasset,andusingaspecifictoolinternallydeveloped(SPPITool)inordertoanalysethefeatureofthecontractsincomparisonwithIFRS9requirementsormakinguseofanexternaldataprovider.Basedontheanalysis,noneedforreclassificationoffinancialassetsduetofailingtheSPPITestwasidentified.Equityinstrumentswillbemeasuredatfairvaluethroughprofitorlossorcomprehensiveincomedependingontheirfeaturesandthereasonsforwhichtheyhavebeenacquired.Unitsininvestmentsfundswillbemeasuredatfairvaluethroughprofitorlossfollowingregulatoryrequirementsthatexcludethepossibilitytoconsidertheseinstrumentsasequityinstruments.Withreferencetothe“Impairment”work-stream,newimpairmentmodelshavebeenadaptedtocomplywiththenewaccountingrequirements,alsofollowingthe“Guidelinesoncreditinstitutions’creditriskmanagementpracticesandaccountingforexpectedcreditlosses”issuedbytheEBA.Theapplicableassetperimetersubjecttoexpectedlossescalculationhavebeenextendedinordertoinclude,inadditiontofinancialassetsatAmortisedCostandtheapplicableoffbalancesheetexposures,allcreditexposuresassetsclassifiedatFairValuethroughOtherComprehensiveIncome.Furthermore,specificadjustmentshavebeenmadeonProbabilityofDefault(PD),LossGivenDefault(LGD)andExposureAtDefault(EAD)parameterstodeterminetheExpectedCreditLoss(ECL),andanewmodelhasbeendevelopedtoassesstheStageAllocationonunimpairedassets,attransactionlevel,betweenStage1andStage2.ThemaindifferencebetweenthetwostagesisreferredtothetimehorizonwhichtheECLisexpectedtobecalculatedon.

InthecaseofLGDandEAD,specificadjustmentsareappliedtoparametersalreadycalculatedfor“regulatory”purposes,duetodifferingrequirementsoftheregulatoryandaccountingmethodologies,inordertoensurefullconsistency.Themainadjustmentsaresuchsoasto:•removetheconservatismrequiredforregulatorypurposesonly;•introduceanadjustmentofriskparameterstocurrent(“pointin

time”)estimates,insteadofcalibrationfortheentireeconomiccycle(“throughthecycle”)embeddedintheregulatoryparameters;

•includeforward-lookinginformation;and•extendthecreditriskparameterstoamultiyearperspective.


AsforwhatconcernsPDs,dedicatedlifetimePDcurveshavebeendevelopedforeachmainclientsegmentbasedoncumulateddefaultrates,andcalibratedtoreflectaspreciselyaspossiblethefutureportfoliodefaultrateanditsanticipateddevelopment.RecoveryratesembeddedintheregulatoryLGDmodelshavebeenadjustedtoremoveallmarginsofconservatismandtoreflecttheexpectationaboutfuturedevelopmentofrecoveryrates.ThelifetimeEADhasbeenobtainedbyextendingthe1Yregulatoryormanagerialmodel,removingallmarginsofconservatismandcalculatingadedicatedadditionalparameterrepresentingexpectedcreditlineutilisation.TheExpectedCreditLossderivedfromsuchadjustedparametersalsotakesintoconsiderationmacroeconomicforecasts.AkeyaspectderivingfromthenewmodelincompoundingthefinalExpectedCreditLossisrepresentedbytheStageallocationmodel,aimedtoallocatecredittransactionsbetweenStage1andStage2(Stage3beingequivalenttoImpairedassets),whereasStage1mainlyincludes(i)newlyoriginatedexposures,(iii)exposureswith“nosignificantdeteriorationincreditqualitysinceinitialrecognition”or(iii)“lowcreditrisk”exposuresatthereportingdate.

IntheUnicreditGroupthestageallocationassessmentincludesacombinationofrelativeandabsolutetriggers.Themaintriggersinclude:•therelativecomparisonbetweenthePDatfirstrecognitionand

thePDateachreportingdate,bothcalculatedthroughinternalmodelsattransactionlevel,withthresholdssetinsuchawaytoconsiderallthekeyvariablesofeachtransactionthatcouldaffecttheBank’sexpectationaboutPDchangesovertime(e.g.timesinceacquisition,maturity,levelofPDatacquisition,etc.);

•absolutetriggerssuchasbackstopsrequiredbytheregulation(i.e.30dayspastdue);and

•otherinternalrelevanttriggers(e.g.newclassificationstoForborne).

Onassetsrepresentedbydebtsecurities,theUnicreditGrouphasopted,fullyincompliancewiththeapplicablestandard,toapplythe“lowcreditriskexemption”oninvestmentgradesecurities.AlsothedeterminationofImpairmentcalculatedon“ImpairedAssets”hasbeenadjustedasrequiredbythenewregulation,inordertoinclude(i)adjustmentsonbothcollectivelyandindividuallyassessedtransactions,takingintoaccountasaccuratelyaspossibletheestimateofanticipatedfuturedevelopment,and(ii)multipledevelopmentscenariosapplicabletothisclassofassets.Inthisevaluation,alsoexpectedsalescenariosareconsideredsincetheGroupNon-PerformingAssetManagementStrategyforeseestherecoveryofdefaultedassetsalsothroughtheirsale.Inclassifyingimpairedassets,theDefinitionofDefaultcurrentlyappliedwithintheUnicreditGrouphasbeenadopted,alreadyincorporatingsomeofthekeyprinciplesembeddedintheDefinitionofDefaultguidelinesissuedbytheEBA,suchastheassessment

ofimpairmentordefaultbyconsideringtheoverallexposuretoagivendebtor(socalled“debtorapproach”).WithreferencetohedgeaccountingtheGroupoptedtokeepapplyingtheexistinghedgeaccountingrequirementsinIAS39forallhedgeaccountinguntiltheIASBcompletesitsprojectonaccountingforportfoliohedging.WithreferencetotheimplementationofthemethodologicalframeworkandtoolsdescribedaboveinthedailyoperationstheBank,inlinewiththeprojecttimeline,hasdesignedthefinalITarchitecture,andisfinalisingthedevelopmentoftheorganisationalprocessesandprocedures.Inthetransitiontothenewstandard,theGroupplanstousethetransitionalreliefallowedbythestandardandwillnotpublishcomparativesfiguresinthe2018financialreports.TheUniCreditGroupIFRS9projectispartoftheEuropeanCentralBankThematicReview.InadditionthemethodologicalapproachesadoptedbytheUniCreditGroupinthecontextoftheIFRS9projecthavebeensubjecttostructuredreviewbyExternalAuditorsthatarecurrentlyperformingareviewoftheimplementations.Inthisregard,wehighlightthatfromtheanalysisperformedsofarnocriticalitieshavearisenthatmaycastdoubtsontheoveralladequacyofthementionedmethodologicalapproaches,pursuanttotherequirementsofthenewstandard.Atthedateoffirsttimeapplication,themainimpactsofIFRS9ontheUniCreditGroupareexpectedtocomefromtheapplicationofthenewmodelforimpairmentbasedontheexpectedlossesapproach,whichisexpectedtocauseanincreaseinallowancesforfinancialassets(especiallyloansandreceivableswithcustomers),aswellastheapplicationofthenewtransferlogicbetweenthedifferentStagesprovidedforbythenewstandard.Inparticular,greatervolatilityisexpectedtobegeneratedinthefinancialresultsbetweendifferentreportingperiodsduetothedynamicchangesbetweendifferent“Stages”ofthefinancialassetsrecognisedinthefinancialstatements(especiallybetween“Stage1”,whichwillincludethenewpositionsoriginatedaswellasallperformingloans,and“Stage2”whichwillincludepositionsinfinancialinstrumentsthathavesufferedasignificantcreditriskdeteriorationsinceinitialrecognition).AdjustmentstothecarryingvalueoffinancialinstrumentsduetoIFRS9transitionwillbeaccountedforthroughEquityasofJanuary1,2018andtheywillhaveanimpactonCET1–grossoftaxeffectisexpectedtobeadecreaseofuptoCZK200million,i.e.theestimatedimpactontheTier1ratiotobeadecreaseofupto5bps.Withreferenceto“ClassificationandMeasurement”,nosignificantreclassificationsofloansanddebtinstrumentsatfairvaluethroughprofitorlossduetothecharacteristicsofthecashflows(SPPIcriterion)areexpected.Consequently,theeffectonCET1grossoftaxeffecttobeanincreaseofuptoCZK63million,i.e.theestimatedimpactonTier1ratiotobeanincreaseofupto2bps.FollowingtheentryintoforceofIFRS9,areviewoftheregulatorytreatmentforthecalculationofthecapitalabsorptionofexpectedcreditlossesinthecalculationofregulatorycapital(CRD/CRR)isforeseen.


Inthatregard,EURegulationNo.2017-2395,issuedon27December2017,allows,asanoption,financialinstitutionstoadoptatransitionalregimewheretheadditionalLoanLossProvisionscouldbeincludedinCET1witha“phase-in”mechanismover5yearsstartingfrom2018.TheBankwillnotadoptthetransitionalregime.

•IFRS15“Revenue from Contracts with Customers”(effectiveforannualperiodsbeginningonorafter1January2018).

IFRS15,effectivestartingfrom1January2018,hasbeenendorsedbytheEuropeanUnionwithRegulationEU2016/1905of22September2016(publishedon29October2016),modifiesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonrevenuerecognitionand,inparticular,IAS18Revenue.

IFRS15providesfor:•twoapproachesfortherevenuerecognition(“atpointintime”

or“overtime”);•anewmodelfortheanalysisofthetransactions(“Fivesteps

model”)focalisedonthetransferofcontrol;and•therequestforamoredetaileddisclosuretobeincludedinthe

explanatorynotestothefinancialstatements.

Theadoptionofthenewaccountingstandardcoulddetermine(i)reclassificationbetweenlinesofincomestatementusedforpresentingrevenues,(ii)changeinthetimingrecognitionofsuchrevenue,whenthecontractwiththecustomercontainsseveralperformanceobligationthatmustbeaccountedforseparatelyundertheaccountingstandard,(iii)differentmeasureoftherevenuesotoreflecttheirvariability.BasedontheanalysisperformedsofarnomajorimpactsareforeseenbytheadoptionofIFRS15.

•IFRS16“Leases”(effectiveforannualperiodsbeginningonorafter1January2019)

IFRS16,effectivestartingfrom1January2019,hasbeenendorsedbytheEuropeanUnionwithRegulationEU2017/1986of31October2017(publishedon9November2017),modifiesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonleasesand,inparticular,IAS17.IFRS16introducesanewdefinitionforleasesandconfirmsthecurrentdistinctionbetweentwotypesofleases(operatingandfinance)withreferencetotheaccountingtreatmenttobeappliedbythelessor.Withreferencetotheaccountingtreatmenttobeappliedbythelessee,thenewaccountingstandardsets,foralltheleasingtypologies,therecognitionasanasset,representingtherightofuseoftheunderlyingassetand,atthesametime,aliabilityreflectingthefuturepaymentsoftheleasecontract.Attheinitialrecognitionsuchassetismeasuredonthebasisoftheleasecontractcashflows,whichincludeinadditiontothepresentvalueofleasepayments,anyinitialdirectcostattributabletotheleaseandanyothercostsrequiredforthedismantling/removingthe

underlyingassetattheendofthecontract.Aftertheinitialrecognitiontheright-of-usewillbemeasuredonthebasisoftheprevisionssetfortangibleassetsapplyingthecostmodellessanyaccumulateddepreciationandanyeventualaccumulatedimpairmentlosses,therevaluationmodelorthefairvaluemodelsetbyIAS16orbyIAS40.Animpactanalysisonthelocallevelwasperformedwithnosignificantimpactidentified,includinganimpactoncapitaladequacyratio.

•AmendmentstoIAS28dueto“Improvements to IFRSs (cycle 2014-2016)”resultingfromtheannualimprovementprojectofIFRS(IFRS1,IFRS12andIAS28)primarilywithaviewtoremovinginconsistenciesandclarifyingwording(amendmentstoIAS28aretobeappliedforannualperiodsbeginningonorafter1January2018).TheamendmentstoFIRS1andIFRS12havenoimpactontheBank’sseparatefinancialstatements.

•AmendmentstoIFRS4Applying IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts”(effectiveforannualperiodsbeginningonorafter1January2018).TheamendmenttoIFRS4donotimpacttheBank.

(u)StandardsandInterpretationsPublishedbytheIASB,butnotyetAdoptedbytheEuropeanUnion

•IFRS14Regulatory Deferral Accounts(effectiveforannualperiodsbeginningonorafter1January2016)–theEuropeanCommissionhasdecidednottolaunchtheendorsementprocessofthisinterimstandardandtowaitforthefinalstandard;

•IFRS17Insurance Contracts(effectiveforannualperiodsbeginningonorafter1January2021);

•AmendmentstoIFRS2Classification and Measurement of Share-based Payment Transactions”(effectiveforannualperiodsbeginningonorafter1January2018);

•AmendmentstoIFRS9Financial Instruments – Prepayment Features with Negative Compensation(effectiveforannualperiodsbeginningonorafter1January2019);

•AmendmentstoIFRS10andIAS28–Sale or Contribution of Assets between an Investor and its Associate or Joint Venture(effectivedatedeferredindefinitelyuntiltheresearchprojectontheequitymethodhasbeenconcluded);

•AmendmentstoIAS19Plan Amendment, Curtailment or Settlement(effectiveforannualperiodsbeginningonorafter1January2019);

•AmendmentstoIAS28Investments in Associates and Joint Ventures–Long-term Interests in Associates and Joint Ventures(effectiveforannualperiodsbeginningonorafter1January2019);

•AmendmentstoIAS40Transfers of Investment Property(effectiveforannualperiodsbeginningonorafter1January2018);

•Amendmentstovariousstandardsdueto“Improvements to IFRSs (cycle 2015-2017)”resultingfromtheannualimprovementprojectofIFRS(IFRS3,IFRS11,IAS12andIAS23)primarilywithaview


toremovinginconsistenciesandclarifyingwording(effectiveforannualperiodsbeginningonorafter1January2019);

•IFRIC22Foreign Currency Transactions and Advance Consideration(effectiveforannualperiodsbeginningonorafter1January2018);and

•IFRIC23Uncertainty over Income Tax Treatments(effectiveforannualperiodsbeginningonorafter1January2019).

4.Criticalaccountingestimatesandjudgements

Thesedisclosuressupplementthecommentaryonfinancialriskmanagement(seeNote40).ThepresentationoftheconsolidatedfinancialstatementsinconformitywithIFRSrequirestheGroup’smanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthebalancesheetdateandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Theseestimates,whichspecificallyrelatetothedeterminationoffairvaluesoffinancialinstruments(wherenopublicmarketexists),impairmentofassetsandprovisions,arebasedontheinformationavailableatthebalancesheetdate.

(a) KeySourcesofEstimationUncertainty

(i) ImpairmentAssetsaccountedforatamortisedcostareevaluatedforimpairment.Thespecificcounterpartycomponentoftheimpairmentappliestoclaimsevaluatedindividuallyforimpairmentandisbaseduponmanagement’sbestestimateofthepresentvalueofthecashflowsthatareexpectedtobereceived.Inestimatingthesecashflows,managementmakesjudgementsaboutthecounterparty’sfinancialsituationandthenetrealisablevalueofanyunderlyingcollateral.Collectivelyassessedimpairmentcoverscreditlossesinherentinportfoliosofclaimswithsimilareconomiccharacteristicswhenthereisobjectiveevidencetosuggestthattheycontainimpairedclaimsbuttheindividualimpaireditemscannotyetbeidentified.Inassessingtheneedforcollectiveimpairment,managementconsidersfactorssuchascreditquality,portfoliosize,concentrationsofcreditrisk,andothereconomicfactors.Inordertoestimatetherequiredimpairment,assumptionsaremadetodefinethewayinherentlossesaremodelledandtodeterminetherequiredinputparametersbaseduponhistoricalexperienceandcurrenteconomicconditions.TheaccuracyinquantifyingtheimpairmentdependsuponhowwelltheGroupisabletoestimatethesefuturecashflowsforspecificcounterpartiesandthequalityinestablishingthemodels’parameters.

(ii) DeterminingFairValuesThedeterminationoffairvalueforfinancialassetsandliabilities

forwhichtherearenoobservablemarketpricesrequirestheuseofvaluationtechniquesasdescribedinaccountingpolicy3(b)(v).Forfinancialinstrumentsthattradeinfrequentlyandhavelowpricetransparency,fairvalueislessobjectiveandrequiresvaryingdegreesofjudgementdependingonliquidity,concentration,uncertaintyofmarketfactors,pricingassumptionsandotherrisksaffectingthespecificinstrument.

(b) CriticalAccountingJudgementsinApplyingtheGroup’sAccountingPolicies

(i) FinancialAssetandLiabilityClassificationTheGroup’saccountingpoliciesprovidescopeforassetsandliabilitiestobedesignatedoninceptionintodifferentaccountingcategoriesincertaincircumstances;theGroupconfirmsthattheassumptionsdisclosedinNote3(b)(i)havebeenmet.

(ii) HedgeAccountingIndesignatingfinancialinstrumentsasqualifyinghedgerelationships,theGrouphasdeterminedthatitexpectsahedgetobehighlyeffectiveoverthelifeofthehedginginstrument.Inaccountingforderivativesascashflowhedges,theGrouphasdeterminedthatthehedgedcashflowexposurerelatestohighlyprobablefuturecashflows.

(iii)ChangeinAccountingPolicyTherewerenochangesinaccountingpoliciesduringtheyearsended31December2017and31December2016.

(iv)EffectoftheChangesinAccountingStandardsintheseFinancialStatementsIntheyearsended31December2017and31December2016,theGroupdidnotidentifyanychangesoffinancialreportingstandardsthatwouldsignificantlyaffecttheGroup’sfinancialstatements.


5.NetinterestincomeandsimilarincomeMCZK 2017 2016Interestincomeandsimilarrevenues Balanceswithcentralbanks 410 56 Receivablesfrombanks 112 157 Receivablesfromclients 9795 9774 Available-for-salesecurities 1019 1312 Securitiesheldtomaturity 9 9 Financialassetsatfairvaluethroughprofitorlossheldfortrading 5 17 Financialassetsatfairvaluethroughprofitorlossnotheldfortrading – – Netinterestincomefromhedgingderivatives 977 507Interestincomeandsimilarrevenues 12327 11832 Interestexpenseandsimilarcharges Depositsfromcentralbank – (5) Depositsfrombanks 8 (197) Depositsfromclients (174) (516) Debtsecuritiesissued (940) (969) Financialliabilitiesheldfortrading (3) –Interestexpenseandsimilarcharges (1109) (1687)Netinterestincomeandsimilarincome 11218 10145

In2017theBankfocusedonrefinancingoptimisationinbothmarkets,i.e.onobtainingcheapsourcesforlending.Thisresultedinadecreaseininterestexpensesarisingfromdepositsfromclients.Amongotherthings,clientstransferredpartofthevolumeoftermdepositstocurrentaccountswithaverylowinterestrateinordertoensurehigherliquidity.

6.NetfeeandcommissionincomeMCZK 2017 2016Feeandcommissionincomefrom Securitiestransactions 1 5 Management,administration,depositandcustodyservices 738 692 Loans 1231 1885 Paymentservices 855 789 Accountadministration 529 511 Paymentcards 944 856 Other 362 280Feeandcommissionincome 4660 5018 Feeandcommissionexpensesfrom Securitiestransactions (25) (8) Management,administration,depositandcustodyservices (99) (72) Loans (220) (364) Paymentservices (37) (31) Paymentcards (719) (577) Other (95) (143)Feeandcommissionexpenses (1195) (1195)Netfeeandcommissionincome 3465 3823


7.DividendincomeMCZK 2017 2016Dividendincome Sharesclassifiedasavailable-for-salesecurities 4 3Totaldividendincome 4 3

8.Netincome/lossfromfinancialassetsandliabilitiesheldfortradingMCZK 2017 2016Netrealisedandunrealisedgain/(loss)fromsecuritiesheldfortrading (42) 87Netrealisedandunrealisedgain/(loss)fromderivativesheldfortrading (3402) 698Netrealisedandunrealisedgain/(loss)fromFXspottransactionsandfromrevaluationofreceivablesandpayablesdenominatedinFX 6126 1344Nettradingincome(loss) 2682 2129

9.Netincome/lossfromhedgingagainstriskofchangesinfairvalueMCZK 2017 2017Hedginginstruments 435 (158)Hedgedinstruments (466) 154Netincome/lossfromhedgingagainstriskofchangesinfairvalue (31) (4)

10.Netincome/lossfromthesaleoffinancialassetsandliabilitiesMCZK 2017 2016Receivablesfromclients 204 3Available-for-salesecurities 308 1085Debtsecuritiesissued (4) (35)Netincome/lossfromthesaleoffinancialassetsandliabilities 508 1053

Intheyearended31December2016,theincomefromfinancialassetsavailableforsalepredominantlyincludesincomearisingfromaninternationaltransaction–transformationofVisaEuropeinwhichtheGroupheldanequityinterest.

11.Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading

MCZK 2017 2016Debtsecurities(assets) – 3Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading – 3

12.Impairmentlossesonfinancialassetsandoff-balancesheetitemsMCZK 2017 2016Receivablesfromclients (515) (1431)Provisionforoff-balancesheetitems 55 (65)Available-for-salesecurities – (3)Totalimpairmentlossesonfinancialassetsandoff-balancesheetitems (460) (1499)


13.AdministrativeexpensesMCZK 2017 2016Personnelexpenses Wagesandsalariespaidtoemployees (2342) (2431) Socialcosts (863) (840) Other (209) (119) (3414) (3390)Otheradministrativeexpenses Rentandbuildingmaintenance (612) (681) Informationtechnologies (1455) (1241) Promotionandmarketing (301) (471) Consumablesused (53) (76) Audit,legalandadvisoryservices (191) (183) Administrativeandlogisticservices (485) (547) Depositsandtransactionsinsurance (744) (532) Otherservices (258) (273) Other (239) (460) (4338) (4464)Totaladministrativeexpenses (7752) (7854)

Asummaryofremunerationtokeymanagersispresentedinthefollowingtable.Keymanagersarepersonswithauthorityanddirectorindirectresponsibilitiesasregardsplanning,managingandsupervisingtheGroup’sactivities,includingall(executiveandother)managers.

MCZK 2017 2016Short-termemployeebenefits 180 185Post-employmentbenefits – –Otherlong-termemployeebenefits 30 34Terminationbenefits – –Share-basedpayments – –Total 211 219

Informationonequity-basedbonusesisincludedinNote35.

TheGroup’saveragenumberofemployeeswasasfollows:

2017 2016Employees 3289 3328MembersoftheBoardofDirectors 7 7MembersoftheSupervisoryBoard 3 3OtherexecutivesdirectlyreportingtotheBoardofDirectors 33 33

Thelineitem“Employees”includesallemployeesoftheGroup.Thelineitems“MembersoftheBoardofDirectors”,“MembersoftheSupervisoryBoard”and“OtherexecutivesdirectlyreportingtotheBoardofDirectors”includetheBank’spersonnel.

Asummaryofoperatingleasesispresentedinthefollowingtable:

2017 Duewithin Duein DueintheMCZK 1year 1–5years followingyearsMinimumfuturepayments 307 1142 –



14.OtheroperatingincomeandexpensesMCZK 2017 2016Incomefromrent 736 696Otherincomerelatingtolease 84 68Otherincome 529 535Totalotheroperatingincome 1349 1299 Taxes (6) (2)Finesandpenalties (22) (15)Otherexpensesrelatingtolease (113) (96)Other (433) (396)Totalotheroperatingexpenses (574) (509)Totalotheroperatingincomeandexpenses 775 790

Asummaryofreceivablesfromoperatingleasesispresentedinthefollowingtable:

2017 Duewithin Duein DueintheMCZK 1year 1–5years followingyearsMinimumfuturepayments 414 829 206

2016 Duewithin Duein DueintheMCZK 1year 1–5years followingyearsMinimumfuturepayments 305 383 84

15.CashinhandandcashbalancesMCZK 31Dec2017 31Dec2016Cashinhand 3964 4083Otherbalanceswithcentralbanks 44 109Total 4008 4192

Forcashflowreportingpurposes,cashisdefinedascashinhandandhighly-liquidfunds.

16.Financialassetsatfairvaluethroughprofitorloss(a) HeldforTrading

(i) BasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Debtsecurities 1228 58 – 1286Shares – – – –Derivatives 36 3793 – 6829Total 1264 6851 – 8115 31Dec2016 Debtsecurities 2803 13 – 2816Shares – – – –Derivatives 39 6172 – 6211Total 2842 6185 – 9027


(ii) SecuritiesbyTypeofIssuer

MCZK 31Dec2017 31Dec2016Debtsecurities Governmentsector 1283 2816 Other 3 – Shares Financialservices – – Other – –Total 1286 2816

17.Available-for-salesecurities(a) BasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Debtsecurities 38170 9092 – 47262Shares – – 260 260Total 38170 9092 260 47522 31Dec2016 Debtsecurities 65539 14424 – 79963Shares – – 229 229Total 65539 14424 229 80192

(b) SecuritiesbyTypeofIssuer

MCZK 31Dec2017 31Dec2016Debtsecurities Banking 7501 12240 Governmentsandcentralbanks 29615 57759 Otherpublicsector 2032 2185 Other 8114 7779 Shares Investmentfunds – – Other 260 229Total 47522 80192

(c) ParticipationInterests

MCZK Registered Dateof Acquisition Netbook Netbook ShareoftheGroupName office acquisition price value2017 value2016 at31Dec2017 at31Dec2016CBCB–CzechBankingCreditBureau,a.s.(bankregister) Prague 10October2001 0.24 0.24 0.24 20% 20%Total 0.24 0.24 0.24


18.Securitiesheldtomaturity(a) Bytypeofsecurity

MCZK 31Dec2017 31Dec2016Debtsecurities 175 186Total 175 186

(b) Securitiesbyactivitiesofissuers

MCZK 31Dec2017 31Dec2016Debtsecurities Governmentsandcentralbanks 175 186Other – –Total 175 186

19.Receivablesfrombanks(a) AnalysisofReceivablesfromBanks,byType

MCZK 31Dec2017 31Dec2016Currentaccounts 1328 1204Termdeposits 648 6830Loans 4946 7977Reverserepurchasecommitments(seeNote37) 199020 117501Obligatoryminimumreservesatcentralbanks 4246 6388Total 210188 139900

(b) AnalysisofReceivablesfromBanks,byGeographicalSector

MCZK 31Dec2017 31Dec2016CzechRepublic 203457 127946Slovakia 431 350OtherEUcountries 1842 5150Other 4458 6454Totalreceivablesfrombanks 210188 139900

20.Receivablesfromclients(a) AnalysisofNetReceivablesfromClients,byType

MCZK Non-default Default Total31Dec2017 Currentaccounts(overdrafts) 36698 475 37173Reverserepurchasetransactions(seeNote37) 378 – 378Residentmortgageloans 94797 611 95408Othermortgageloans 39200 761 39961Leases 24189 671 24860Creditcardsandconsumerloans 11400 172 11572Factoring 6571 116 6687Otherloans 168905 1728 170633Total 382138 4534 386672


MCZK Non-default Default Total31Dec2016 Currentaccounts(overdrafts) 34441 474 34915Reverserepurchasetransactions(seeNote37) – – –Residentmortgageloans 90932 696 91628Othermortgageloans 62473 1902 64375Leases 26676 643 27319Creditcardsandconsumerloans 11723 107 11830Factoring 6087 144 6231Otherloans 147065 2209 149274Total 379397 6175 385572

TheGroupusesthe‘clientdefault’definitioninlinewiththeCNB’sRegulation163/2014Coll./RegulationNo.575/2013oftheEuropeanParliamentandoftheCouncil;specifically,adebtor’sdefaultinvolvessituationswhere:(a) Thedebtorisindefaultwithatleastonerepaymentoftheprincipalorrelatedinterestonanyofitspayablestothebankforaperiodgreater

than90days;and/or(b) Itislikelythatthedebtorwillbeunabletosettleitspayablesonatimelybasisandinfullwithoutthebankresortingtorealisingcollateral.

(b) ClassificationofReceivablesfromClientsandImpairment

MCZK Impairment Impairment Gross ofindividual ofportfolios Net value receivables ofreceivables value31Dec2017 Standard 378765 – (1397) 377368Watch 4935 – (165) 4770Substandard 5643 (2966) – 2677Doubtful 1689 (1041) – 648Loss 6249 (5040) – 1209Total 397281 (9047) (1562) 386672 31Dec2016 Standard 374717 – (1746) 372971Watch 6695 – (269) 6426Substandard 6190 (3140) – 3050Doubtful 1884 (1093) – 791Loss 8364 (6030) – 2334Total 397850 (10263) (2015) 385572

Thefollowingtablepresentsasummaryofgrossreceivablesaccordingtointernalrating:

MCZK 31Dec2017 31Dec2016Receivableswithoutdefault Internalrating1 5690 6573 Internalrating2 13080 10232 Internalrating3 39394 44861 Internalrating4 106493 102911 Internalrating5 110700 105750 Internalrating6 67601 67537 Otherinternalrating 19236 23922 Receivableswithoutinternalrating 21506 19626Total 383700 381412Receivableswithdefault 13581 16438Total 397281 397850


TheGroupregularlyclassifiesitsreceivables.ThecategoriesusedforclassificationconsidertheGroup’sanalysisastotheprobabilityofrepaymentandanalysisoftheborrower’sbehaviour(numberofdayspaymentsarepastdue,financialperformance,paymentdiscipline,etc.).TheGroupassesseswhetherthereisevidenceofimpairmentofloansandreceivables.Ifsuchevidencehasbeenidentified,theamountofthelossismeasuredasthedifferencebetweenthereceivables’carryingamountandthepresentvalueofestimatedfuturecashflows(includingcashflowsfromrealisedcollateral);inrespectofclientsindefaultwithexposureaboveMEUR1onanindividualbasis,otherclientsusingtherelevantmodel.

Thefollowingtablesummarisesthegrossamountsofnon-defaultloanreceivablesbasedonthenumberofdayspastdue.

MCZK 31Dec2017 31Dec2016Non-defaultreceivables,gross Duereceivables 377515 375502 1–30dayspastdue 5600 5148 31–90dayspastdue 551 762 91–180dayspastdue 12 – Morethan180dayspastdue – –Total 383678 381412

(c) AnalysisofNetReceivablesfromClientsbySector

MCZK 31Dec2017 31Dec2016Financialinstitutions 6033 9797Non-financialinstitutions 265459 268668Governmentsector 2712 1669Individualsandothers 112648 105438Total 386852 385572

(d) AnalysisofGrossReceivablesfromClients,byTypeofCollateralProvidedandClassification

MCZK Standard Watch Substandard Doubtful Loss Total31Dec2017 Bankandsimilarguarantee 9792 32 1 – – 9825Realestate 93003 1295 881 169 589 95937Corporateguarantee 3039 15 – – 3 3057Movableassets 43479 – 968 302 625 45374Othersecurity 6944 88 12 257 41 7342Unsecured 222508 3505 3781 961 4991 235746Total 378765 4935 5643 1689 6249 397281

31Dec2016 Bankandsimilarguarantee 8483 26 3 1 – 8513Realestate 89417 1799 1122 366 864 93568Corporateguarantee 2728 15 – – – 2743Movableassets 42003 – 141 747 1099 43990Othersecurity 5762 460 121 47 171 6561Unsecured 226324 4395 4803 723 6230 242475Total 374717 6695 6190 1884 8364 397850

Theitem“Unsecured”includes,amongotherthings,receivablesarisingfromprojectfundingthataresecuredbyrealestatecollateralinthenominalvalueofMCZK46,869(asof31December2016:MCZK53,723).Inthecaseoftheprojectfundingofcommercialrealestate(IPRE),thecollateralqualityistakenintoaccountindeterminingthetransactionrating;inthesecases,thecollateralvalueisstronglycorrelatedwiththesolvencyofthedebtor.


(e) AnalysisofNetReceivablesfromClientsbyRegion

MCZK 31Dec2017 31Dec2016CzechRepublic 246970 238771Slovakia 120609 127130OtherEUcountries 13868 14800Other 5225 4871Total 386672 385572

(f) AnalysisofNetReceivablesfromClientsbyBusinessActivity

MCZK 31Dec2017 31Dec2016Realestateservices 64000 77794Financialservices 5943 9747Wholesale 32792 27679Householdservices 109336 102455Retail 8456 7243Leasingandrental 6343 5842Automotiveindustry 8807 8775Powerindustry 28499 27237Other 122496 118800Totalreceivablesfromclients 386672 385572

(g) AnalysisofForbearanceTheGroup’sapproachtoforbearancereportingisdisclosedinNote40((b)(iv))–FinancialRiskManagement.

Analysisofforbornereceivablesbysectors:

MCZK Gross Gross Total Impairment Impairment Total non-default default gross ofnon-default ofdefault impairmentof Net receivables receivables forbearance receivables receivables forbearance forbearance31December2017 Non-financialinstitutions 6595 1739 8334 (72) (1253) (1325) 7009Otherfinancialinstitutions 129 – 129 – – – 129Individualsandothers 37 88 125 – (29) (29) 96Total 6761 1827 8588 (72) (1282) (1354) 7234

31December2016 Non-financialinstitutions 8360 2728 11088 (143) (1425) (1568) 9520Otherfinancialinstitutions 8 – 8 – – – 8Individualsandothers 61 68 129 (4) (17) (21) 108Total 8429 2796 11225 (147) (1442) (1589) 9636

Netforbearancerepresented1.9%ofthetotalreceivablesfromclientsasof31December2017(2016:2.5%).


Thetablebelowprovidesananalysisofforbornereceivablesbydaysaftertheduedate:

MCZK Gross Impairment Net forbearance offorbearance forbearance31December2017 Non-defaultreceivables Beforedue 6205 (55) 6150 Pastdue 556 (17) 539Totalnon-defaultforbearance 6761 (72) 6689 Defaultreceivables 0to90dayspastdue 943 (495) 448 91to180dayspastdue 131 (100) 31 181daysto1yearpastdue 296 (238) 58 Over1yearpastdue 457 (449) 8Totaldefaultforbearance 1827 (1282) 545Total 8588 (1354) 723431Dec2016 Non-defaultreceivables Beforedue 7054 (88) 6966 Pastdue 1375 (59) 1316Totalnon-defaultforbearance 8429 (147) 8282 Defaultreceivables 0to90dayspastdue 1985 (794) 1191 91to180dayspastdue 299 (147) 152 181daysto1yearpastdue 106 (66) 40 Over1yearpastdue 406 (435) (29)Totaldefaultforbearance 2796 (1442) 1354Total 11225 (1589) 9636

Thetablebelowshowsmovementsingrossforbearance:

MCZKBalanceat1January2016 5257Transfertoforbearance 8254Additions 24Write-offs (157)Settled (408)Transferfromforbearance (1091)Other (654)Totalforbearanceasof31December2016 11225Balanceat1January2017 11225Transfertoforbearance 3426Additions 73Write-offs (141)Settled (2568)Transferfromforbearance (3314)Other (113)Totalforbearanceasof31December2017 8588

During2016,theGroupundertookaone-offretroactivereviewofitsactivitiesperformedoverthelasttwoyearsthatcouldmeetthecharacteristicsforclassificationasnon-defaultforbearance.Thisresultedinamajorincreaseinthecategoryofsuchreceivables.


Thetablebelowshowsmovementsintheimpairmentofforbearance:

MCZKBalanceat1January2016 (1787)Transfertoforbearance (655)Chargeduringthecurrentyear (146)Releaseduringthecurrentyear 179Receivableswrittenoff–use 132Transferfromforbearance 517Other 171Totalimpairmentforbearanceasof31December2016 (1589)

Balanceat1January2017 (1589)Transfertoforbearance (249)Chargeduringthecurrentyear (397)Releaseduringthecurrentyear 195Receivableswrittenoff–use 65Transferfromforbearance 533Other 88Totalimpairmentforbearanceasof31December2017 (1354)

(h)ImpairmentofReceivablesfromClients

MCZKBalanceasof1Jan2016 (12501)Creationduringtheperiod (3834)Releaseduringtheperiod 2403Neteffectonprofitorloss (1431)Receivableswrittenoff–use 1541FXdifferences 113Totalimpairmentofreceivablesfromclientsasof31Dec2016 (12278)

Balanceasof1Jan2017 (12278)Creationduringtheperiod (3547)Releaseduringtheperiod 3032Neteffectonprofitorloss (515)Receivableswrittenoff–use 1217FXdifferences 967Totalimpairmentofreceivablesfromclientsasof31Dec2017 (10609)

(i) ReceivablesfromFinanceLeases

Minimumlease Presentvalueoftheminimum payment leaseinstalmentMCZK 31Dec2017 31Dec2016 31Dec2017 31Dec2016Receivablesfromfinanceleases: Within1year 8524 9201 7783 7969Fromoneyeartofiveyears 15128 15213 13840 14684Morethanfiveyears 3406 5099 3237 4666 27058 29513 24860 27319Minus:unrealisedincome (2198) (2194) – –Presentvalueofthereceivablefromtheminimumleaseinstalment 24860 27319 24860 27319


21.Equityinvestments Operating Profit/ NetbookMCZK Assets income (loss) Equity value31December2017 RCIFinancialServices,s.r.o.(50%) 3587 217 115 714 398Total 398

31December2016 RCIFinancialServices,s.r.o.(50%) 3042 202 120 719 401Total 401

ChangesinInvestmentsinAssociates

MCZKBalanceat1January2016 401Changeinprofitorloss 60Dividend (60)Changeinequity –Total 401Balanceat1January2017 401Changeinprofitorloss 57Dividend (60)Changeinequity –Total 398

22.PositivefairvalueofhedgingderivativesBasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Fairvaluehedging – 248 – 248Cashflowhedging – 4193 – 4193Total – 4441 – 4441 31Dec2016 Fairvaluehedging – 122 – 122Cashflowhedging – 5041 – 5041Total – 5163 – 5163

23.PropertyandequipmentMCZK 31Dec2017 31Dec2016Propertyandequipmentforoperations Buildingsandland 831 1094Fixturesandfittings 35 39ITequipment 97 134Assetsprovidedunderoperatingleases 3099 2863Other 141 174 Propertyandequipmentheldasaninvestment Buildingsandland 680 712Total 4883 5016


(a) MovementsinPropertyandEquipmentHeldforOperations

MCZK Buildings Fixtures IT Operating andland andfittings equipment leases Other TotalCostat1Jan2016 2927 443 709 2868 165 7112Accumulateddepreciationandimpairmentat1Jan2016 (1151) (368) (524) (637) (61) (2741)NetBookValueat1Jan2016 1776 75 185 2231 104 4371 Additions 99 8 47 2093 56 2303Disposals (661) – – (697) (14) (1372)Depreciationcharges (146) (10) (60) (483) (36) (735)Transferstoassetsheldforsale (4) – – – – (4)OtherandFXrategainsorlosses 30 (34) (38) (281) 64 (259)NetBookValueat31Dec2016 1094 39 134 2863 174 4304 Costat31Dec2016 2047 212 734 3500 480 6973Accumulateddepreciationandimpairmentat31Dec2016 (953) (173) (600) (637) (306) (2669)

Costat1Jan2017 2047 212 734 3500 480 6973Accumulateddepreciationandimpairmentat1Jan2017 (953) (173) (600) (637) (306) (2669)NetBookValueat1Jan2017 1094 39 134 2863 174 4304 Additions 30 6 25 1739 26 1826Disposals – – – (882) (11) (893)Depreciationcharges (246) (11) (65) (559) (46) (927)Transferstoassetsheldforsale – – – – – –OtherandFXrategainsorlosses (47) 1 3 (62) (2) (107)NetBookValueat31Dec2017 831 35 97 3099 141 4203 Costat31Dec2017 1807 191 685 3970 369 7022Accumulateddepreciationandimpairmentat31Dec2017 (976) (156) (588) (871) (228) (2819)

InFebruary2016,managementoftheGroupapprovedthesaleandleasebackofabuildingwiththenetbookvalueofMCZK629,whichwassubsequentlytransferredto“Non-currentassetsheldforsale”.Thebuildingwassoldbeforetheendof2016.

(b) ChangesinpropertyandEquipmentHeldasanInvestment

MCZK Buildingsandland TotalCostat1Jan2016 982 982Accumulateddepreciationandimpairmentat1Jan2016 (237) (237)NetBookValueat1Jan2016 745 745 Additions – –Disposals – –Depreciationcharges (33) (33)Transferstoassetsheldforsale – –OtherandFXrategainsorlosses – –NetBookValueat31Dec2016 712 712 Costat31Dec2016 982 982Accumulateddepreciationandimpairmentat31Dec2016 (270) (270)


MCZK Buildingsandland TotalCostat1Jan2017 982 982Accumulateddepreciationandimpairmentat1Jan2017 (237) (237)NetBookValueat1Jan2017 712 712 Additions 1 1Disposals – –Depreciationcharges (33) (33)Transferstoassetsheldforsale – –OtherandFXrategainsorlosses – –NetBookValueat31Dec2017 680 680 Costat31Dec2017 984 984Accumulateddepreciationandimpairmentat31Dec2017 (304) (304)

ThefairvalueofassetsheldasinvestmentsisMCZK791(2016:MCZK712).

24.IntangibleassetsMovementsinIntangibleAssets

MCZK Software Other TotalCostat1Jan2016 1901 27 1928Accumulatedamortisationandimpairmentat1Jan2016 (1129) (7) (1136)NetBookValueat1Jan2016 772 20 792 Additions 622 – 622Disposals – – –Amortisationcharges (43) – (43)Other 36 (20) 16 NetBookValueat31Dec2016 1387 – 1387Costat31Dec2016 2556 – 2556Accumulatedamortisationandimpairmentat31Dec2016 (1169) – (1169)

Costat1Jan2017 2556 – 2556Accumulatedamortisationandimpairmentat1Jan2017 (1169) – (1169)NetBookValueat1Jan2017 1387 – 1387 Additions 656 – 656Disposals – – –Amortisationcharges (89) – (89)Other (14) – (14) NetBookValueat31Dec2017 1940 – 1940Costat31Dec2017 3115 – 3115Accumulatedamortisationandimpairmentat31Dec2017 (1175) – (1175)

Theincreaseinthevalueofsoftwarein2017and2016wascausedbytheacquisitionofassetsespeciallywithrespecttotheimplementationofanewbankingsystem.Theseassetswereputintousein2017.


25.OtherassetsMCZK 31Dec2017 31Dec2016Deferredexpensesandaccruedincome 439 368PrepaymentsmadeinrelationtocashadditionstoATMsandcashregisters 1004 1151Tradereceivables 199 426Receivablesfromsecurities 10 201Othertaxes 106 125Suspenseaccounts 748 472Other 513 354Total 3019 3097Impairmentofotherassets (16) (16)Netotherassets (3003) 3081

26.DepositsfrombanksAnalysisofDepositsfromBanksbyType

MCZK 31Dec2017 31Dec2016Depositsfromcentralbanks 17978 11889Currentaccounts 9146 7033Loans 22942 16380Termdeposits 123830 39210Repurchasecommitments(seeNote37) 378 41012Total 174274 115524

TheGroupcurrentlyusestheEuropeanCentralBank’scurrencyinstrumentTLTROII(“TargetedLong-termRefinancingOperation”)intheamountofMEUR703.9whichwasdrawnintwotranches.TheBankdrewthefirsttrancheofMEUR440inJune2016anditwillmatureinJune2020.TheBankdrewthesecondtrancheofMEUR263.9inMarch2017anditwillmatureinMarch2021.Bothtranchesarereportedintheline“Depositsfromcentralbanks”.TLTROIIhasthecharacteristicsofalong-termrepotransactionandassuchitissecuredbycollateralacceptedbytheEurosystem.ThefundingobtainedthroughthisinstrumentisusedtorefinancelargelycorporateloansinSlovakia.

27.DepositsfromclientsAnalysisofDepositsfromClientsbyType

MCZK 31Dec2017 31Dec2016Currentaccounts 336392 322479Termdeposits 21023 40411Repurchasecommitments(seeNote37) – 4653Other 3058 3620Total 360473 371163

28.IssueddebtsecuritiesAnalysisofIssuedDebtSecurities

MCZK 31Dec2017 31Dec2016Mortgagebonds 35385 49183Structuredbonds 3834 8170Zerocouponbonds – 1664Otherissueddebtsecurities 781 1090Total 40000 60107


Structuredbondsincludeembeddedoptions–currency,equity,commodityandinterestrateoptions–inthetotalnominalvalueofMCZK7,331(at31December2016:MCZK8,512).ThepositivefairvalueofthesederivativesofMCZK7isreportedunder“Financialassetsheldfortrading”(at31December2016:MCZK17);thenegativefairvalueofthesederivativesofMCZK370isrecognisedunder“Financialliabilitiesheldfortrading”(at31December2016:MCZK293).

29.FinancialliabilitiesheldfortradingBasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Liabilitiesfromshortsales 1533 – – 1533Derivatives – 6666 – 6666Total 1533 6666 – 8199 31Dec2016 Liabilitiesfromshortsales 1033 – – 1033Derivatives – 5536 – 5536Total 1033 5536 – 6569

30.NegativefairvalueofhedgingderivativesBasedontheQualityoftheInputDataUsedforValuationatFairValue


31.OtherliabilitiesMCZK 31Dec2017 31Dec2016Deferredincomeandaccruedexpenses 970 1118Tradepayables 1275 944Payablestoemployees 741 739Unsettledsecuritytransactions 65 89Suspenseaccounts 7642 5677Other 286 312Totalotherliabilities 10979 8879


32.ProvisionsProvisionsincludethefollowingitems:

MCZK 31Dec2017 31Dec2016Provisionsforoff-balancesheetcredititems 503 553Legaldisputes 73 81Provisionforrestructuring 100 23Other 179 312Totalprovisions 855 969

(a) ProvisionsforOff-BalanceSheetCreditItems

MCZKBalanceat1Jan2016 1128Chargeduringtheperiod 300Usageduringtheperiod (650)Releaseduringtheperiod (235)Other–foreignexchangerategainsorlosses 10Totalprovisionsforoff-balancesheetcredititemsat31Dec2016 553Balanceat1Jan2017 553Chargeduringtheperiod 311Usageduringtheperiod –Releaseduringtheperiod (366)Other–foreignexchangerategainsorlosses 5Totalprovisionsforoff-balancesheetcredititemsat31Dec2017 503

(b) OtherProvisions

MCZK Legal Restructuring disputes provision Other TotalBalanceat1Jan2016 84 21 3 108Chargeduringtheperiod 11 3 313 327Useduringtheperiod (3) (1) (1) (5)Releaseofredundantprovisionsandother (11) – (3) (14)Totalotherprovisionsat31Dec2016 81 23 312 416 Balanceat1Jan2017 81 23 312 416Chargeduringtheperiod 5 169 10 184Useduringtheperiod (1) (60) (152) (213)Releaseofredundantprovisionsandother (12) (32) 9 (35)Totalotherprovisionsat31Dec2017 73 100 179 352

33.Incometax(a) TaxinProfitorLoss

MCZK 2017 2016Currenttaxpayable (1718) (1488)Taxofprioryear 39 73Deferredtax 16 (253)Totalincometax (1663) (1668)


TheincometaxoftheGroupdiffersfromthetheoreticaltaxwhichwouldariseifthetaxrateeffectiveintheCzechRepublicwereappliedasfollows:

MCZK 2017 2016Profit/lossfortheyearbeforetax 9289 7713Taxcalculatedusingthetaxrateof19% (1765) (1465)Impactofprioryearsonthecurrenttaxpayable 39 73Non-taxableincome 87 107Taxnon-deductibleexpenses (106) (169)Impactofprioryearsonthedeferredtax – (86)ImpactofahigherSlovaktaxrateonthecurrenttaxpayableanddeferredtax (37) (58)Unreportedtemporarydifferencesindeferredtax 28 (80)Recognitionofanoriginallyunrecogniseddeferredtax 97 43ImpactofachangeintheSlovaktaxrate – (31)Other (4) (2)Totalincometax (1661) (1668)

TheeffectivetaxrateoftheGroupis17.9%(2016:21.6%).

(b) DeferredTaxAsset/LiabilityDeferredincometaxiscalculatedonalltemporarydifferencesusingthebalancesheetliabilitymethodundertheapplicationoftheappropriatetaxrate.Incalculatingnettaxassetsandliabilities,theGroupoffsetsdeferredtaxassetsagainstdeferredtaxliabilitiesarisingfromincometaxpaidtothesametaxinstitutioninthesametaxcategory.ManagementoftheGroupbelievesthattheGroupwillbeabletofullyrecoverdeferredtaxassetsreportedasof31December2017basedonthecurrentandanticipatedfutureleveloftaxableprofits.

(i) DeferredTaxAsset

MCZK 31Dec2017 31Dec2016Taxnon-deductibleprovisions 137 105Impairmentofloansandoff-balancesheetitems 823 854Differencesarisingfromthenetbookvaluesofassets 49 41Reservefromrevaluationofhedginginstruments 1 –Reservefromrevaluationofavailable-for-salesecurities – –Taxloss 42 46Other 166 204Offsettingagainstdeferredtaxliability (511) (623)Netdeferredtaxasset 707 627

(ii) DeferredTaxLiability

MCZK 31Dec2017 31Dec2016Taxnon-deductibleprovisions – –Impairmentofloansandoff-balancesheetitems 46 643Differencesarisingfromthenetbookvaluesofassets 125 86Reservefromrevaluationofhedginginstruments 128 445Reservefromrevaluationofavailable-for-salesecurities 242 531Taxloss – –Other 576 43Offsettingagainstdeferredtaxasset (511) (623)Netdeferredtaxasset 606 1125

TheGroupadditionallycarriesthefollowingdeferredtaxassetswhicharenotrecognisedandaccountedforonthegroundsofprudence:arisingfromnon-taxdeductibleprovisionsrecognisedbytheCzechBankofMCZK21,non-taxdeductibleprovisionsrecognisedbytheSlovakbranchofMCZK10,provisionsrecognisedbyUniCreditLeasingSlovakia,a.s.ofMCZK81andunutilisedtaxlossesofUniCreditLeasingSlovakia,a.s.ofMCZK2.



34. Issued capital and share premiumTherecorded,issuedandfullypaidcapitaloftheGroupamountedtoMCZK8,755asof31December2017(MCZK8,755asof31December2016).

(a) Shareholder Structure of the Group

Nominal value Share Registered of shares premium OwnershipEntity office in MCZK in MCZK percentageAt 31 Dec 2017 UniCreditS.p.A Italy 8755 3495 100.00Total 8 755 3 495 100.00 At 31 Dec 2016 UniCreditS.p.A Italy 8755 3495 100.00Total 8 755 3 495 100.00

AspartofrestructuringintheUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.Awhichistheultimateparentcompanyoftheentiregroupholding100%oftheBank’sshares.

(b) Capital Breakdown of the Group

31 Dec 2017 31 Dec 2017 31 Dec 2016 31 Dec 2016 Number MCZK Number MCZK of shares of sharesOrdinarysharesofCZK16,320,000 100 1632 100 1632OrdinarysharesofCZK13,375,000 200 2675 200 2675OrdinarysharesofCZK10,000 436500 4365 436500 4365OrdinarysharesofCZK7,771,600 10 78 10 78OrdinarysharesofCZK46 106563 5 106563 5Total issued capital 8 755 8 755

Thesharesarefreelytransferrable.OrdinarysharesincludetheentitlementtoparticipateintheGroup’sgovernanceandtheentitlementtoashareonprofit.Themostsignificanttopicsthatarewithinthescopeofauthorityofthegeneralmeetingandthatashareholdercanthereforemakedecisionsaboutinclude:•DecisionsaboutchangestotheArticlesofAssociation,unlessitis

achangeresultingfromtheincreaseofsharecapitalbytheBoardofDirectorsasperSection511etseq.ofActNo.90/2012Coll.,onBusinessCorporations(BCA),orachangethatoccurredbasedonotherlegalfacts;

•DecisionsontheincreaseinsharecapitaloronauthorisingtheBoardofDirectorsasperSection511etseq.oftheBCA,oraboutthepossibilityofoffsettingacashreceivablefromabankagainstareceivableforthepaymentoftheissuerate;

•DecisionstodecreasethesharecapitalandtoissuebondsasperSection286etseq.oftheBCA;

•AppointingandrecallingmembersoftheSupervisoryBoard,AuditCommitteeandotherbodiessetbytheArticlesofAssociation;

•Approvingregular,extraordinaryorconsolidatedfinancialstatementsandincasesdefinedbythelawalsointerimfinancialstatements,

decisionsabouttheallocationofprofitandorotherownresourcesoraboutthesettlementoflossandthedeterminationofsharesinprofitforthemembersoftheBoardofDirectorsandtheSupervisoryBoard;

•DecisionsaboutremunerationofmembersoftheSupervisoryBoardandtheAuditCommittee;

•DecisionsaboutfilingarequestforequitysecuritiesoftheBanktobeacceptedfortradingonaEuropeanregulatedmarketortobeexcludedfromtradingonaEuropeanregulatedmarket;

•AppointingtheBank’sauditorsbasedontherecommendationoftheAuditCommittee;and

•DecisionsaboutestablishingdiscretionaryfundsoftheBankandthemethodsoftheircreationanduse.

TheeffectivedatefortheexerciseoftherighttoadividendisthesameastheeffectivedateforparticipationattheGeneralMeeting;thisdateistheseventhcalendardaybeforetheGeneralMeetingisheld.Therighttoadividendlapsesafterthethree-yearlegalperiodpassesinlinewithSection629ofActNo.89/2012Coll.,CivilCode.AfterthedissolutionoftheBank,eachshareholderhasarighttoashareintheliquidationproceedsinlinewithSection37oftheBCA;thisshareispaidoutincash.ThedecisiontodissolvetheBankwith

liquidation,toappointandrecallaliquidatorincludingthedeterminationofremuneration,andtheapprovaloftheproposeddistributionoftheliquidationproceedsarewithintheauthorityoftheGeneralMeeting.Bothat31December2017and31December2016,theGroupheldnotreasuryshares.

35.Equity-basedbonusesTheGrouphasnotimplementedanyemployeemotivationorstabilisationprogrammeforthepurchaseoftreasurysharesorremunerationintheformoftreasuryshareoptions.

36.RetainedearningsandreservefundsThefollowingtableshowsthebreakdownofthereservefunds:

MCZK 31Dec2017 31Dec2016Reservefunds 5217 5200Special-purposereservefund 11611 11611Retainedearnings 33017 27003Foreignexchangerategainsorlossesfromconsolidation (99) –Total 49746 43814

TheGroupmaycreatethereservefund(reportedunder“Reservefunds”)fromthenetprofitreportedintheordinaryfinancialstatementspursuanttotheresolutionofthegeneralmeeting.TheestablishedreservefundcanbeusedsolelytocovertheBank’sloss,pursuanttotheresolutionofthegeneralmeeting.Aspartofthecross-bordermerger,thesharecapitalofUniCreditBankSlovakiaa.s.ofMCZK6,058,thereservefundofUniCreditBankSlovakiaa.s.ofMCZK1,166andretainedearningsofUniCreditBankSlovakiaa.s.ofMCZK4,387weretransferredintoaspecial-purposereservefunddenominatedinEUR.Thisspecial-purposesreservefundcanonlybeusedtosettlethelossoftheGroup.

37.Borrowingsandlendingofsecurities,repurchaseandreverserepurchasetransactions

(a) ReverseRepurchaseTransactions

MCZK 31Dec2017 31Dec2016Receivablesfrombanks 199020 117501Fairvalueofsecuritiesreceived 195204 116305Receivablesfromclients 378 –Fairvalueofsecuritiesreceived 420 –

SecuritiesreceivedascollateralaspartofreverserepurchasetransactionsofMCZK420arefurtherprovidedascollateralunderrepurchasetransactions(asof31December2016:atotalofMCZK12,786).

(b) RepurchaseTransactions

MCZK 31Dec2017 31Dec2016Depositsfrombanks 378 41012Fairvalueofsecuritiesprovided 420 44596Depositsfromclients – 4653Fairvalueofsecuritiesprovided – 4653


38.Contingentliabilities,contingentassetsandfinancialderivatives

Intheordinarycourseofbusiness,theGroupconductsvariousfinancialtransactionsthatarenotreportedonthefaceoftheGroup’sbalancesheetandthataredesignatedasoff-balancesheetfinancialinstruments.Unlessstatedotherwise,theinformationbelowrepresentsthenominalvaluesoftheoff-balancesheettransactions.

(a) ContingentLiabilities

LegalDisputesAsof31December2017,theGroupassessedthelegaldisputesinwhichitactedasadefendant.TheGroupestablishedprovisionsfortheselegaldisputes(seeNote32).Inadditiontothesedisputes,legalactionsarisingfromordinarybusinessactivitiesweretakenagainsttheGroup.ThemanagementdoesnotanticipatetheresultoftheselegaldisputestohaveamaterialimpactontheGroup’sfinancialposition.

TaxationTheCzechandSlovaktaxlegislationhassignificantlychangedoverthelastyears.Assuch,manycomplicatedlegislationareasremainedunresolved,duetowhichtheinterpretationoftaxationauthoritiesinspecificcasesmaynotbeanticipated.Itisnotpossibletoquantifytheconsequencesofthisuncertainty;theymayberesolvedsolelyundertheconditionthattherelevantlegalregulationsgetadoptedinpracticeorintheeventthatofficialinterpretationsareavailable.

LiabilitiesarisingfromGuarantees,CreditCommitmentsandOtherContingentLiabilitiesContingentliabilitiespredominantlyincludeamountsofundrawncreditcommitments.CreditcommitmentsissuedbytheGroupincludeissuedcreditandguaranteecommitments,andundrawnamountsofcreditsandoverdraftloanfacilities.RevocablecommitmentsincludecreditsandguaranteesthatmayberevokedbytheGroupatanytimewithoutstatingthereason.Onthecontrary,irrevocablecommitmentsrepresenttheGroup’sliabilitytoprovideacreditorissueaguarantee,theperformanceofwhich,eventhoughboundonmeetingthecontractualtermsbytheclient,istoacertainextentindependentoftheGroup’swill.LiabilitiesarisingfromfinancialguaranteesincludeirrevocableconfirmationsmadebytheGrouptoperformpayments,undertheconditionthatthetermsdefinedunderindividualguaranteecertificatesaremet.Assuchconfirmationsbearsimilarriskascredits,theGroupcreatestherelevantprovisionsusingasimilaralgorithmasforcredits(seeNote40).DocumentarylettersofcreditrepresentawrittenirrevocablecommitmentoftheGroupissuedbasedonaclient’srequest(orderer),toprovideathirdpartyortoitsorder(recipient,beneficiary),withcertainperformance,undertheconditionthatthetermsoftheletterofcreditaremetbyaspecifieddeadline.Forthesefinancialinstruments,theGroupcreatesprovisionsusingasimilaralgorithmasappliedforcredits(seeNote40).TheGroupcreatedprovisionsforoff-balancesheetitemstocoverlossesincurredandarisingfromtheimpairmentoftheoff-balancesheetitemsduetocreditrisk.Asof31December2017,theaggregateprovisionsamountedtoMCZK503(asof31December2016:MCZK553),seeNote32(a).


MCZK 31Dec2017 31Dec2016Lettersofcreditandfinancialguarantees 39636 41499Othercontingentliabilities(undrawncreditfacilities) 113165 115291Total 152801 156790

ValuesTakenintoAdministrationandManagement

MCZK 31Dec2017 31Dec2016Bonds 537325 474869Shares 192514 205853Depositorynotes 17305 21489Totalvaluestakenintoadministrationandmanagement 747144 702211

(b) ContingentAssetsTheGrouphasanoptiontodrawacreditlineprovidedbytheEuropeanBankforReconstructionandDevelopment(EBRD)amountingtoMCZK383.1(MEUR15)withmaturityon23February2023.TheBankadditionallyhasanoptiontodrawacreditlinefromOesterreichischeKontrollbankAGBankofMCZK594.8(MEUR23.3)withthemaximummaturityon30June2029dependingonthematurityofloansrefinancedfromthiscreditlineandacreditlinefromTheExport-ImportBankofTheRepublicofChinaofMCZK194.4(MUSD9.1)withthemaximummaturityoffiveyearsfromthetimeofdrawing.


(c) FinancialDerivatives

(i) NominalandFairValuesofFinancialDerivatives

MCZK Nominal Positive Negative value fairvalue fairvalue31Dec2017 Tradinginstruments–interbankmarket(OTC) Options 69633 829 843Interestrateswapcontracts 375555 3182 2753Forwardrateagreements(FRA) 10000 – –Crosscurrencyswapcontracts 211237 2584 2561Termcurrencytransactions 34417 55 369Otherinstruments 1432 143 140Total 702274 6793 6666 Tradinginstruments–stockexchange Futures 1379 36 –Totaltradinginstruments 703653 6829 6666 Hedginginstruments Interestrateswapcontracts 334078 4232 4153Crosscurrencyswapcontracts 156542 209 723Totalhedginginstruments 490620 4441 4876

31Dec2016 Tradinginstruments–interbankmarket(OTC) Options 91312 863 (833)Interestrateswapcontracts 306961 3157 (3024)Forwardrateagreements(FRA) – – –Crosscurrencyswapcontracts 43043 1457 (1242)Termcurrencytransactions 77574 589 (334)Otherinstruments 1357 106 (103)Total 520247 6172 (5536) Tradinginstruments–stockexchange Futures 1587 39 –Totaltradinginstruments 521834 6211 (5536) Hedginginstruments Interestrateswapcontracts 265428 4383 (3328)Crosscurrencyswapcontracts 43864 780 (89)Termcurrencytransactions 46 – –Totalhedginginstruments 309338 5163 (3417)


(ii) ResidualMaturityofFinancialDerivativesConcludedontheInterbankMarket

MCZK Upto1year 1–5years Over5years Total31Dec2017 Tradinginstruments Interestrateinstruments 128862 203368 72731 404961Equityinstruments 2711 12170 – 14881Currencyinstruments 223161 54591 3248 281000Other 1381 51 – 1432Total 356115 270180 75979 702274 Hedginginstruments Interestrateinstruments 31086 213112 89880 334078Currencyinstruments 92729 63272 541 156542Total 123815 276384 90421 490620

31Dec2016 Tradinginstruments Interestrateinstruments 58023 203316 85783 347122Equityinstruments 1420 14129 874 16423Currencyinstruments 104804 44111 6430 155345Other 1241 116 – 1357Total 165488 261672 93087 520247 Hedginginstruments Interestrateinstruments 17071 173026 75330 265428Currencyinstruments 11333 25047 7531 43910Total 28404 198073 82861 309338

39.SegmentreportingTheGrouppresentsthesegmentinformationbasedonperformancecriteriaasdisclosedinNote3(r).

(a) SegmentInformationbyClientCategory

MCZK Retail Corporateand andprivate investment banking banking, leasing Other TotalAt31Dec2017 Netinterestanddividendincome 2977 5403 2842 11222Othernetincome 1430 5279 4 6713 Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (102) (873) (74) (1049)Impairmentofassetsandprovisions 597 (1176) (41) (620)Segmentexpenses (3723) (3359) 105 (6977)Profitbeforetax 1179 5274 2836 9289Incometax (1663) (1663)Resultofsegment 1179 5274 1173 7626 Segmentassets 122462 538305 11311 672078Segmentliabilities 157624 411211 31747 600582

Theincometaxforallsegmentsispresentedinthesegment“Other”.

TheGroupdoesnothaveaclientoragroupofclientsthatwouldcomprisemorethan10percentoftheGroup’sincome.

MCZK Retail Corporateand andprivate investment banking banking, leasing Other TotalAt31Dec2016 Netinterestanddividendincome 2824 7447 (123) 10148Othernetincome 1587 4216 1201 7045 Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (90) (667) (54) (811)Impairmentofassetsandprovisions 78 (1823) (58) (1803)Segmentexpenses (3816) (2815) (194) (6825)Profitbeforetax 583 6358 772 7713Incometax (1668) (1668)Resultofsegment 583 6358 (896) 6045 Segmentassets 102196 521589 11257 635042Segmentliabilities 147830 379517 40804 568151

(b) InformationonGeographicalAreas

MCZK CzechRepublic Slovakia TotalAt31Dec2017 Netinterestanddividendincome 8332 2890 11222Othernetincome 5012 1701 6713 Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (551) (498) (1049)Impairmentofassetsandprovisions (116) (504) (620)Segmentexpenses (5080) (1897) (6977)Profitbeforetax 7597 1692 9289Incometax (1375) (288) (1663)Resultofsegment 6222 1404 7626 Segmentassets 541835 130243 672078Segmentliabilities 491346 109239 600582

At31Dec2016 Netinterestanddividendincome 7406 2742 10148Othernetincome 6137 867 7004 Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (447) (364) (811)Impairmentofassetsandprovisions (881) (922) (1803)Segmentexpenses (4797) (2028) (6825)Profitbeforetax 7418 295 7713Incometax (1395) (273) (1668)Resultofsegment 6023 22 6045 Segmentassets 494759 140283 635042Segmentliabilities 454817 113334 568151



40.Financialriskmanagement(a) IntroductionTheGroupisexposedtothefollowingtypesofrisk:•Creditrisk;•Marketrisk;and•Operationalrisk.

TheBoardofDirectorsisresponsiblefortheoverallriskmanagementstrategywhichitapprovesandassessesonaregularbasis.TheBoardofDirectorshasestablishedtheAssetsandLiabilitiesCommittee(ALCO),theCreditCommitteeandtheCommitteeforOperationalRiskManagement.Thesecommitteesareinchargeofmonitoringandmanagingindividualriskswithregardtoindividualspecificfields.ThecommitteesreporttotheBoardofDirectorsonaregularbasis.TheprincipalpartoftheGroupistheBank;forthisreason,thebelowdescriptionprimarilyrelatestotheriskmanagementintheBank.RiskmanagementinsubsidiariesisdescribedinNote40b(vi).

(b) CreditRiskTheGroupisexposedtocreditrisksasaresultofitstradingactivities,providingcredits,hedgingtransactions,andinvestmentandmediationactivities.Creditriskismanagedbothonthelevelofindividualclients(transactions)andontheportfoliolevel.TheCreditUnderwriting,CreditOperationsandStrategicCreditRiskManagementdepartmentsaredirectlyresponsibleforcreditriskmanagement.AllthesedepartmentsareorganisationallyindependentofthebusinessdivisionsandaredirectlyaccountabletoamemberoftheBoardofDirectorsinchargeoftheriskmanagementdivision.Underitscreditpolicy,theBankdefinesthegeneralprinciples,methodsandinstrumentsappliedinidentifying,measuringandmanagingcreditrisk.ThedefinitionoftheBank’screditpolicyisrenderedbytheStrategicCreditRiskManagementdepartment.Thepolicyisreviewedbythisdepartmentonaregularbasis,minimallyonceayear.TheBankdefinesinitsinternalguidelinestheapprovalcompetenciesforcreditdeals,includingthedefinitionofresponsibilitiesandcompetenciesoftheCreditCommittee.

(i) CreditRiskManagementontheLevelofIndividualClientsThecreditriskonthelevelofindividualclientsismanagedbyanalysingclients’financialhealthanddeterminingthelimitsofcreditexposure.Theanalysisisfocusedonclients’positionintherelevantmarket,ratingoftheirfinancialstatements,predictionoffutureliquidity,andthelike.Theresultofthisanalysisis,amongotherthings,toestablisharatingthatreflectstheprobabilityofclients’defaultandtakesintoaccountquantitative,qualitativeandbehaviouralfactors.Analysingthefinancialpositionandsettingthelimitsforcreditexposureandratingisrenderedbothpriortograntingacreditandduringthecreditarrangementswithclients.

Theinternalratingsystemcomprises26ratinglevels(1to10adding“+”and“–”tocertainratingclasses,suchas:1+;1;1−;2+;etc).Toclassifyclientsintoindividualratingclasses,theBankassesses(apartfromthenumberofdayspastduewithregardtooverduereceivables,ifany)thefinancialindicatorsrelatedtotheclient(suchasthestructureofandproportionbetweenthebalancesheet,theincomestatement,andthecashflowstatement),managementquality,ownershipstructure,individualclients’marketposition,reportingquality,productionequipment,account-usehistory,etc.Clientswithdefaultreceivablesarealwaysassignedtooneoftheclassesfrom8–,9or10.Forreceivablesfromindividuals,theabilityoftheclienttofulfilhisorherobligationsisdeterminedusingastandardisedsystemofcreditscoringbasedonrisk-relevantfeatures(creditapplicationscoring).TheBanklikewisesetsandregularlyupdatestheprobabilityofclientdefault–naturalentities,usingthebehaviouralscoringmethod.Aclient’sfinalratingcombinesbothapplicationandbehaviouralcomponents.Asanadditionalsourceofinformationforassessingaclient’sfinancialstanding,theBankusesinformationprovidedbycreditregistries.Inaccordancewithitscreditriskmanagementstrategy,priortoprovidingcredits,theBankrequirescollateralforitscreditreceivables(accordingtotheclient’sfinancialhealthandthecharacterofthegiventransaction).TheBankconsidersthefollowingtobeacceptabletypesofcollateral:cash,first-classsecurities,guaranteesissuedbyotherreputableentities(includingbankguarantees),andpledgesinformofproperty.Indeterminingtherealisablevalueofcollateral,theBankprincipallytakesintoconsiderationthefinancialhealthofthepartyprovidingcollateralandthenominalvalueofthecollateral,ieexpertappraisalsmadebyaspecialdepartmentoftheBank.Therealisablevalueofcollateralisdeterminedbasedonthisvaluebyapplyingtheadjustingco-efficientthatreflectstheBank’sabilitytorealisethegivencollateral,asandwhenneeded.

(ii) CreditRiskManagementonthePortfolioLevelThislevelofcreditriskmanagementprincipallyincludesreportingonthecreditportfolioincludinganalysesandmonitoringoftrendsinindividualcreditsub-portfolios.TheBankmonitorsitsoverallcreditriskexposure,ieittakesintoaccountallon-balanceandoff-balancesheetexposuresandquantifiestheanticipatedlossesfromitscreditexposure.Theexpectedlossisdeterminedbasedoninternalestimatesofriskparameters,ietheprobabilityofdefault(PD),exposureatdefault(EaD)andlossgivendefault(LGD).TheBankregularlymonitorsitscreditexposuretoindividualindustries,countries,oreconomically-connectedgroupsofdebtors.TheBankassessestheconcentrationriskoftheloanportfolioonaregularbasisandestablishesconcentrationlimitsasappropriateinrelationtospecificindustries,countries,oreconomically-connectedgroupsofdebtors.

(iii)ClassificationofReceivables,ImpairmentLossesandProvisions

TheBankcategorisesitsreceivablesarisingfromfinancialactivitiesonamonthlybasis,inaccordancewiththeapplicabledecreeoftheCzechNationalBank.TheBankassessesonaregularbasiswhetheranyimpairmentofreceivableshasoccurred.Ifanysuchimpairmentisidentified,theBankreportsimpairmentlossesforindividualaccountsreceivableorreceivableportfolios,inaccordancewithIFRS.

ImpairmentLossesonIndividualReceivablesImpairmentlossesrelatedtoindividualreceivablesindefaultarerecognisedintheeventthatthecarryingamountofindividualreceivablesisimpairedandtheBankdoesnotwriteoffsuchreceivables,oraportionthereofthatequalsthebalancesheetimpairment.TheBankassessestheimpairmentofthecarryingamountofallreceivablesinrespectofwhichthedebtorsareindefault:(i)individuallyiftheamountofthereceivableexceedsanequivalentofMEUR1,(ii)usingtherelevantmodelreflectingtheexpectedreturnontherelevantreceivableforotherreceivables.TheBankwritesoffreceivablesintheeventthatnoincomeisanticipatedonthegivenreceivablesoronthecollateralreceivedwithregardtothegivenreceivable.TheBankdeterminesimpairmentlossesarisingfromindividualreceivables;(i)forindividuallyassessedreceivables,lossesfromtheimpairmentareequaltothedifferencebetweenthecarryingamountofareceivableandthediscountedvalueofestimatedfuturecashflows;(ii)forreceivablesassessedusingmodels,lossesfromtheimpairmentareequaltothemultipleofthereceivableamountandlossgivendefault.

ImpairmentLossesonthePortfolioReceivablesTheBankrecognisesimpairmentlossesonstandardreceivableportfoliosbasedonanassessmentoftheportfolio’scarryingamount;impairmentlossesaredeterminedinanamountequallingtheimpairedcarryingamountofthestandardreceivableportfolioduetoeventsindicatingareductioninanticipatedfuturecashflowsfromtherelevantportfolio.Impairmentlossesareassignedtoindividualportfoliosandarenotdividedorassignedtoindividualreceivablesincludedinthegivenportfolio.Inreportingtheimpairmentlossesrelatedtoindividualreceivableportfolios,theBanktakesintoaccountthetimedelaybetweenanimpairmentevent’soccurrenceandthetimetheBankobtainsinformationontheimpairmentevent(i.e.whenaclient’sdefaultisidentified)–the“incurredloss”concept.

ProvisionsforOff-BalanceSheetItemsTheBankrecognisesprovisionsforselectedoff-balancesheetitems,asfollows:(i) Provisionsforoff-balancesheetitemsinrespectoftheBank’s

clientsonwhomtheBankcurrentlyrecognisesindividual

balance-sheetreceivablesmeetingtheconditionsforbeingclassifiedasreceivableswithdebtor’sdefault.TheBankrecognisestheimpairmentlossesrelatedtosuchindividualreceivables.

(ii) Provisionsforselectedoff-balancesheetitemsinrespectoftheBank’sclientsonwhomtheBankrecordsnobalancesheetreceivablesinthegivenperiod;eventhough,intheeventthatsuchreceivableexisted,theconditionsforclassificationunderreceivableswithadebtor’sdefaultwouldbefulfilled.

(iii) Provisionsforselectedoff-balancesheetitemsofnon-defaultclients.

TheBankrecognisessuchprovisionsinthesamemethodasusedinreportingimpairmentlossesonreceivableportfolios.

(iv)ForbearanceUnderforbearance,theBankclassifiesloanreceivablesthepaymentconditionsofwhichchangedafterthelending(thechangespredominantlyincludepaymentdeferral,temporarypaymentreduction,postponementoftheultimateduedate,etc.).Theseitemsarerecognisedinthebalancesheetunderloanreceivableswithoutadebtor’sdefaultandloanreceivableswithadebtor’sdefault.Loanreceivableswithachangeintheoriginally-agreedpaymentconditionsaregenerallyclassifiedasreceivableswithadebtor’sdefault.Followingarobustassessment,theBankmaycategoriseindividualreceivablesasreceivableswithoutadebtor’sdefaultdespiteofthechangeintheconditions.ThisapproachisappliedifthereasonsforthechangeofthepaymentconditionsarenotseriousaccordingtotheBank’sthoroughconsiderationandtheBankdoesnotanticipateincurringlossarisingfromthefuturecollectionofsuchloanreceivables.Thereceivableswithoutadebtor’sdefaultalsoincludereceivablesthatwereclassifiedasreceivableswithadebtor’sdefaultuponthechangeofthepaymentconditionsandweresubsequentlytransferredintothecategoryofloanreceivableswithoutadebtor’sdefaultconsideringthefulfilmentofthenewly-agreedconditionsinlinewiththeBank’sinternalrules.ThisgroupaccountsforthemajorityofloanreceivablesreportedasForbearance–receivableswithoutadebtor’sdefault.LoanreceivableswithchangedpaymentconditionsaremanagedbyCreditRestructuring&Workoutandaresubjecttostandardrestructuringandworkoutproceduresandmonitoring.Theexceptionrepresentsreceivablesthatarenotassessedaswithadebtor’sdefaultuponthechangeofthepaymentconditions,whichareonlytreatedbyCreditRestructuring&Workoutafterathoroughassessmentoftheneedforusingtheknow-howofthisunit.Releasingreceivablesfromtheadministrationofthisunitisalsoconsideredwithrespecttothedevelopmentofindividualcasesandtheneedforusingtheknow-howoftheCreditRestructuring&Workoutstaff.Theperiodforwhichtheclientisdesignatedasforborneisreferredtoastheprobationperiodandlastsnolessthantwoyears,counted



fromtheclientdefaultend/forbearanceiftheforbearancewaswithouttheclient’sdefault.Inaddition,thisperiodcanbeterminatedonlyiftheclientfulfilstheagreedconditionsdulyandtimely,isnotindelayinexcessof30daysandifthecaseinvolvesaninstalmentproduct,thedebtmustbereducedbyatleast10%duringthisperiod.Duetothesizeoftheforbearanceportfolioandtheabove-specifiedproceduresandpractices,wedonotidentifyseriousthreatsfortheBankresultingfromthisportfolio.Thisissupportedbythefactthataportionofreceivableswithchangedpaymentconditionsinordertoovercomethedebtor’sdeterioratedfinancialpositionisreclassifiedagainasnon-default(recognisedintheBank’sbalancesheetasnon-defaultforbearance–refertoabove).

(v)RecoveryofReceivablesTheBankhasestablishedtheCreditWorkout&RestructuringUnitwhichadministersthereceivableswhoserecoverabilityisatrisk.Thepurposeofthisunitinvolvesachievingoneoranumberofthefollowinggoalsinrespectofrisk-bearingcreditreceivables:a) “Revitalisation”ofthecreditarrangement,restructuringand

subsequentreclassificationintostandardreceivables;b) Fullrepaymentofthecredit;c) Minimisationofthelossfromthecredit(realisationofcollateral,

saleofthereceivablewithadiscount,etc);and/ord) Preventionofadditionallossesfromthecredit(comparison

offutureexpensesversusincome).

(vi)RiskManagementinSubsidiariesTheriskmanagementinsubsidiariesfollowssimilarprinciplesastheriskmanagementintheBanktakingintoaccountspecificfeaturesofproductsprovidedbysubsidiariesandtheirportfolios.

Thesespecificfeaturesprimarilyincludethefollowing:– Determinationofthefairvalueoffinancedassetswhendeciding

ontheprovisionoffunding;– Managementofriskofamarketvaluechangeoffinancedassets

duringfinancing;– Valuationandsellingactivitiesafteranextraordinarytermination

ofacontract(ordueterminationofacontractinrespectofoperatingleases)andmanagementoftheriskarisingfromtheseoperations;

– Controlactivitiestoprovetheconnectionofthepurposeoffinancingwiththeexistenceofthefinancedassetbeforetheconclusionofthecontractandduringthecontractperiod(includingthepreventionagainstfraudulentactivities);and

– Managementoftheriskofconcentrationinrelationtotypesoffinancedassets(classesofassets).

Theorganisationalstructureofriskmanagement,riskdecision-makingcommitteesandsystemfortheallocationofauthoritiesareadjustedtoreflectthespecificfeaturesorproductsandrisksofsubsidiaries.

Thisensuresboththeindependenceofriskmanagementfrombusinessactivitiesandindependenceofthepersonsparticipatinginthevaluationofassetsandtheirrealisationfromthepersonshavingthedecision-makingauthorityintheprovisionoffunding.

(c) MarketRisks

(i) TradingTheGroupholdstradingpositionsinvariousfinancialinstruments,includingfinancialderivatives.ThemajorityoftheGroup’sbusinessactivitiesareperformedinlinewiththerequirementsoftheGroup’scustomers.Dependingontheestimateddemandofitscustomers,theGroupholdsacertainsupplyoffinancialinstrumentsandmaintainsaccesstothefinancialmarketsthroughquotingofthebidandofferpricesandbytradingwithothermarketmakers.Thesepositionsarealsoheldforthepurposeofspeculationontheexpectedfuturedevelopmentoffinancialmarkets.TheGroup’sbusinessstrategyisthusaffectedbyspeculationandmarket-makinganditsgoalistomaximisethenetincomefromtrading.TheGroupmanagestherisksassociatedwithitstradingactivitiesatthelevelofindividualrisksandindividualtypesoffinancialinstruments.Thebasicinstrumentsusedforriskmanagementarelimitsonthevolumesapplicabletoindividualtransactions,limitsforportfoliosensitivity(basispointvalue,orBPV),stoplosslimits,andvalueatrisk(VaR)limits.Thequantitativemethodsappliedinriskmanagementareincludedinthefollowingsectionentitled“Marketriskmanagement”.ThemajorityofderivativesarenegotiatedontheOTCmarketduetothenon-existenceofapublicmarketforfinancialderivativesintheCzechRepublic.

(ii)MarketRiskManagementBelowaredescribedselectedriskstowhichtheGroupisexposedthroughitstradingactivities,managingthepositionsresultingfromtheseactivities,andalsomanagingtheserisks.TheproceduresappliedbytheBanktomeasureandmanagetheserisksaredescribedindetailinthefollowingparagraphs.TheGroupisexposedtomarketrisksarisingfromitsopenpositionsininterestrate,equityandforeigncurrencyinstrumenttransactionsthataresensitivetochangesinthesituationonthefinancialmarket.TheGroup’sriskmanagementfocusesonmanagingthetotalnetexposureresultingfromtheGroup’sstructureofassetsandliabilities.TheGroupmonitorsinterestraterisksbyobservingthesensitivityofparticularassetsandliabilitiesinindividualtimeperiods,asexpressedbythechangeintheactualvaluesofassetsandliabilitiesifinterestratesincreasebyonebasispoint(BPV).Forhedgeaccountingpurposes,theGroupidentifiesspecificassets/liabilitiescausingthisincongruitysothattheaccountingcriteriafortheapplicationofhedgeaccountingaremet.

ValueatRiskValueatRiskrepresentsthemainmethodformanagingthemarketrisksarisingfromtheBank’sopenpositions.ValueatRiskrepresentsthepotentiallossfromanunfavourablemovementonthemarketwithinacertaintimeperiodatacertainconfidencelevel.ValueatRiskismeasuredbasedona1-dayholdingperiodandaconfidencelevelof99%.Thepre-conditionsfortheValueatRiskmodelhavethefollowinglimitations:– Theone-dayholdingperiodpre-supposesthatallthepositions

canbeclosedduringasingleday.Thisassumptiondoesnotnecessarilyapplytomarketswithlowerliquidity.

– The99%confidenceleveldoesnotreflectallpossiblelossesthatcanoccuratthisconfidencelevel.

– VaRiscalculatedfromthepositionsattheendofthetradingdayanddoesnotconsiderthepositionswhichcanbeopenedonan“intra-day”basis.

– Usinghistoricaldataasabasicdeterminantofpossiblefuturedevelopmentdoesnotnecessarilycoverallpossiblefuturescenarios,especiallycrisisscenarios.

TheVaRcalculationdividesthecalculatedriskintointerestrateandcreditportions.ThecreditportionofVaRiscalculatedbasedonthevolatilityofthecreditspreadbetweensecuritiesandthezero-riskinterestrate.Forthispurpose,theyieldcurvesofparticularissuers,industries,orgroupsofissuerswithidenticalratingaredownloaded

intothesystemformarketriskmanagement.Specificsecuritiesaremappedtotheseyieldcurvesandthevolatilityofthecreditspreadiscalculated.TheBankregularlyreassessesthemappingofdebtsecuritieswiththerelevantyieldcurvesand,ifnecessary,thedebtsecuritiesarere-mappedtocurvesthatreliablyreflectthecreditriskofthespecificdebtsecuritiesTheGroupusesVaRtomeasureinterestraterisk,foreigncurrencyrisk,equityriskandothertypesofriskconnectedwiththenegativemovementsinthepricesofmarketfactors(spreadrisk,optionrisk,etc).TheaggregatestructureofVaRlimitsisapprovedbytheAssetsandLiabilitiesCommittee(ALCO);atleastonceayearthestructureandtheamountoflimitsarerevisedinaccordancewiththeGroup’sneedsanddevelopmentsonthefinancialmarkets.TheresultsoftheVaRcalculationarepublisheddailyforselectedusers(BoardofDirectors,selectedemployeesoftheFinancialMarketsDepartment,theMarketRiskDepartment,theAssets&LiabilitiesManagementUnit,andtheMARSdepartmentoftheparentbank/sub-holding).

BackTesting–ValueatRiskTheresultsofthismodelareback-testedandcomparedwiththeresultsoftheactualchangesintheinterestratesonthefinancialmarketsonadailybasis.IftheGroupidentifiesanyinaccuracies,themodelisadjustedtocorrespondwiththecurrentdevelopmentonthefinancialmarkets.


ThetablebelowshowstheValuesatRisk:

At31Dec Average At31Dec AverageMCZK 2017 for2017 2016 for2016AggregateVaR 147.4 132.1 115.9 128.2VaRofcurrencyinstruments 4.3 2.7 3.27 6.3VaRofequityinstruments 0 0 0 0

InterestRateRiskTheGroupisexposedtointerestrateriskasaresultofthefactthatinterest-bearingassetsandliabilitieshavedifferentmaturitiesorinterestratere-pricingperiodsanddifferentvolumesduringtheseperiods.Intheeventofachangeininterestrates,theGroupisexposedtoariskasaresultofthedifferentmechanismortimingofadjustmentstoparticulartypesofinterestrates(suchasPRIBOR),declaredinterestratesondeposits,etc.TheactivitiesintheareaofinterestriskmanagementarefocusedonoptimisingtheGroup’snetinterestincomeinaccordancewiththestrategyapprovedbytheBoardofDirectors.Giventhedevelopmentofthemarketinterestratesandthepotentialdecreasetonegativevalues,theGrouphasalreadytakenmeasuresforcertainproductstoeliminatethedecreaseinthemarketinterestrate(asthekeyelementoftheclientrate)tonegativevalues.TheGroupherebyreconcilesclientratesrelatingtoassetsandliabilitiesofnon-financialclients.

TheGroup’soverallinterestratepositionasof31December2016ischaracterisedbygreaterinterestratesensitivityontheassetssideascomparedtotheliabilitiesside.Thiscanbeseeninthenegativeaggregatebasispointvalue(BPV)–iftheinterestratesunderindividualcurrenciesincreasedinparallel,therewouldbeadecreaseinmarketrevaluation.TheGroup’sinterestratepositionisdiversifiedintoindividualtimeperiods,duetowhichthesensitivitytointerestratevolatilityisnotnecessarilyidentical(positive,negative),andtoanumberofcurrencies,throughwhichthedifferentinterestraterisksrelatedtoindividualcurrenciesarecompensatedundertheaggregateassetandliabilityportfolio.ThemajorsensitivityisconnectedtoCZKandEUR.Interestratederivativesaregenerallyusedtomanagethemismatchbetweentheinterestsensitivityofassetsandliabilities.ThesetransactionsarecarriedoutinaccordancewiththeGroup’sstrategyformanagingtheassetsandliabilitiesapprovedbytheBoardofDirectors.PartoftheGroup’sincomeisgeneratedbytheintentional

incongruitybetweentheassetsandliabilitiesthatareinterestrate-sensitive.TheGroupappliesa“BasisPointValue(BPV)”approachformeasuringinterestsensitivityofassetsandliabilities.BPVrepresentsthechangeinthepresentvalueofcashflowsderivedfromindividualinstrumentsifinterestratesincreasebyonebasispoint(0.01%),i.e.itrepresentsthesensitivityofinstrumentstointerestraterisks.TheGroupsetuptheinterestraterisklimitstorestrictoscillationofnetinterestincomeresultingfromchangesofinterestratesby0.01%(the“BPVlimit”).

Stress Testing of Interest Rate RiskTheGroupcarriesoutweeklystresstestingofinterestratesensitivitybyapplyinghistoricalscenariosofsignificantmovementsonfinancial

markets,internallydefinedimprobablescenarios,andgroupmacroscenariosandsimulatestheirimpactontheGroup’sfinancialresults.Thestandardstressscenariocorrespondstoaparallelshiftintheyieldcurveby200basispointsformajorcurrencies(CZK,EUR,USD),andthemainalternativescenario(moneymarketstresstest)correspondstoaparallelshiftintheshorttailoftheyieldcurveby250basispointsformajorcurrencies(CZK,EUR,USD),withamaturityofuptotwoyears.

ThefollowingtableshowstheimpactoftheparallelshiftoftheyieldcurveontheGroup’sresults.TheGroupusestheeuroasthebasecurrencyforstresstesting.AllvaluesaretranslatedtoCZKusingtheCzechNationalBank’sexchangerateasoftherespectivedate.


Basicstresstest MMstresstestMCZK –200bp +200bp +250bpValueat31Dec2017 1717 (2092) (914)Averagefortheperiod 1389 (1839) (824)Maximumvalue 2181 (882) (26)Minimumvalue 340 (2525) (1407) Valueat31Dec2016 1282 (1878) (844)Averagefortheyear 1742 (2237) (1124)Maximumvalue 2334 (1878) (844)Minimumvalue 1282 (2465) (1361)

On7December2015,stressscenariosfornegativemarketinterestrateswereintroduced.

Asalargeportionofthemarketinterestratecurveshowsnegativeratesandafurtherdecreasemaynotbeexcluded,theGroupappliesastressscenariotoreflectapossibleprofit/losseffectofafurtherdecreaseinthemarketinterestrates.Thisapproachisappliedtotheentireportfolioofassetsandliabilities,includingproductsforwhichadecreaseofthemarketinterestrates(asanelementofclientrates)intonegativevaluesisrestrictedincontracts(aswellasinthegeneralbusinesstermsandconditions).Usingthisapproach,theGroupalsoreflectsthepossibleriskofprofit/lossforproductswherethemarketinterestratescannotachievenegativevaluesaccordingtocontracts.

HedgeAccountingAspartofitsmarketriskmanagementstrategy,theGrouphedgesagainstinterestraterisk.TheGroup’shedgestrategyusesbothfairvaluehedgesandcashflowhedges.

Fair Value HedgingHedgedinstrumentsincludefinancialassetsandliabilitiesrecognisedattheircarryingamounts(exceptforsecuritiesheldtomaturity)andsecuritiesavailableforsalerecognisedattheirfairvalues,withchangesinfairvaluerecognisedinequity.Hedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).

Attheinceptionofthehedgedarrangement,theGroupperformsafairvaluehedgeeffectivenesstestonthebasisoffuturechangesinfairvaluesofhedgedandhedginginstrumentsandofexpectedinterestratesmovements(the“prospectivetest”).Onthebasisoftheactualinterestratedevelopments,thetestofeffectivenessiscarriedoutatthelastdayofeachmonth.TheBankhasselectedthemonthlyfrequencyofeffectivenesstestingtobeabletodetectpossiblenon-effectivenessofthehedgearrangements.Forparticularhedgeditemsandhedgingtrades(loans,deposits,securities,interestrateswaps,etc),specificdatesandamountsofcashflowsaredeterminedfromtheinceptionofahedgedarrangementuntilthematurityofthehedgedinstrument,oruntiltheendofthehedgearrangement.Thepresentvaluesofparticularcashflowsfortherelevantdate(dateofeffectivenessmeasurement)aredeterminedonthebasisofthediscountfactorsforspecificcurrencies.Thefairvalueofatransactionisthetotalofdiscountedcashflowsfromtherelevanttradeatthegiventime.Thecumulativechangeofthefairvalueisdeterminedbycomparingthefairvalueinthegiventimewiththefirstrevaluation.Thesecumulativechangesarefurthernettedforrealisedcashflowsbyaddingthembackorsubtracting.Thehedgeeffectivenessismeasuredusingthecomparisonofthecumulativechangeinthefairvalueofthehedgedandhedging

instrument.Thehedgeisconsideredeffectiveiftheproportionofcumulativefairvaluechangesofhedgedandhedginginstrumentsisbetween80%and125%.

Cash Flow HedgingTheGroupusestheconceptofcashflowhedgingtoeliminateinterestrateriskonanaggregatebasis.Thehedgedinstrumentsarefutureforecastedtransactionsintheformofinterestincomeandexpensessensitivetochangesinmarketinterestrates.Futureanticipatedtransactionsarisefromconcludedcontractsandfuturetransactionsestablishedonthebasisofreplicationmodels.Thehedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).TheeffectivenessofacashflowhedgeisdeterminedinaccordancewiththeBAGroupstandards,basedonanapprovedmethodology.First,thenominalvalues(dividedintoassetsandliabilities)ofexternaltradesbycurrencyareidentified,forwhichtheinterestcashflow(establishedonthebasisofthere-financing–the“funding”rate)maybeconsideredvariable(hedgedcashflows).Second,forthesesamecurrenciesthenominalinterestcashflowsofvariablehedging

instrumentpartsareidentifiedandaremonitoredonanetbasis(i.e.netcashin/outflows).TheGroupmonitorswhethertheabsolutevalueoffuturevariableinterestcashflowsfromhedgeddealsforspecifictimeperiodsexceedstheabsolutevalue(havingtheoppositesign,plusorminus)ofnetvariablecashflowsfromhedgingderivatives.Thetimeperiodsaredefinedasfollows:upto2yearsbymonths,furtherbyindividualyears,10-15years,andmorethan15years.Thehedgeisjudgedeffectiveiftheaggregatevolumeofvariableinterestcashflowsfromhedgeddealsisgreaterthanthenetvariableinterestcashflowsfromhedgeddeals(designatedwithanopposite–positive/negativesign)ineachofthetimeperiods,measuredseparatelyforeachmonitoredcurrency.

CurrencyRiskAssetsandliabilitiesdenominatedinforeigncurrencies,includingoff-balancesheetexposures,comprisetheGroup’sexposuretocurrencyrisks.Bothrealisedandunrealisedforeignexchangegainsandlossesarereporteddirectlyinprofitorloss.TheGrouphasestablishedasystemofcurrencyrisklimitsbasedonitsnetcurrencyexposureinindividualcurrencies.


Thefollowingtableshowsthestructureofassetsandliabilitiesbycurrency:

MCZK CZK EUR USD CHF Other TotalAt31Dec2017 Cashinhandandcashbalances 1667 2159 7 32 143 4008Financialassetsatfairvaluethroughprofitorloss 4722 3062 295 – 36 8115including: –heldfortrading 4722 3062 295 – 36 8115 –notheldfortrading – – – – –Available-for-salesecurities 19011 28035 476 – – 47522Securitiesheldtomaturity – 175 – – – 175Receivablesfrombanks 203784 5698 255 96 355 210188Receivablesfromclients 192967 190375 1252 14 2064 386672Positivefairvalueofhedgingderivatives 3146 1292 3 – – 4441Investmentsinassociates 398 – – – – 398Propertyandequipment 3323 1560 – – – 4883Intangibleassets 1672 268 – – – 1940Taxreceivables 79 652 – – – 731Non-currentassetsheldforsale – 2 – – – 2Otherassets 2266 495 181 13 48 3003Totalassets 433035 233773 2469 155 2646 672078 Depositsfrombanks 14298 152759 7198 – 19 174274Depositsfromclients 229126 117581 10731 608 2427 360473Debtsecuritiesissued 15961 23914 125 – – 40000Financialliabilitiesheldfortrading 4209 1982 347 – 1661 8199Negativefairvalueofhedgingderivatives 3118 1596 162 – – 4876Taxliabilities 790 136 – – – 926Otherliabilities 5022 5341 432 12 172 10979Provisions 451 394 5 – 5 855Equity 52421 18843 35 191 6 71496Totalliabilitiesandequity 325396 322546 19035 811 4290 672078Gap 107639 (88773) (16566) (656) (1644) –

MCZK CZK EUR USD CHF Other TotalAt31Dec2016 Cashinhandandcashbalances 1865 1954 160 45 168 4192Financialassetsatfairvaluethroughprofitorloss 3109 4494 563 3 858 9027including: –heldfortrading 3109 4494 563 3 858 9027 –notheldfortrading – – – – – –Available-for-salesecurities 40896 38808 488 – – 80192Securitiesheldtomaturity – 186 – – – 186Receivablesfrombanks 129422 9141 823 79 435 139900Receivablesfromclients 185190 193596 2793 2046 1947 385572Positivefairvalueofhedgingderivatives 2736 2424 – 3 – 5163Investmentsinassociates 401 – – – – 401Propertyandequipment 3126 1890 – – – 5016Intangibleassets 1171 216 – – – 1387Taxreceivables 56 865 – – – 921Non-currentassetsheldforsale – 4 – – – 4Otherassets 1548 1090 380 12 51 3081Totalassets 369520 254668 5207 2188 3459 635042 Depositsfrombanks 22969 86787 5439 293 36 115524Depositsfromclients 233353 123006 10755 1075 2974 371163Debtsecuritiesissued 28782 31058 267 – – 60107Financialliabilitiesheldfortrading 3883 1385 350 3 948 6569Negativefairvalueofhedgingderivatives 1105 2295 17 – – 3417Taxliabilities 1498 25 – – – 1523Otherliabilities 3548 4820 462 7 42 8879Provisions 488 468 8 – 5 969Equity 52458 14436 (4) – 1 66891Totalliabilitiesandequity 348084 264280 17294 1378 4006 635042Gap 21436 (9612) (12087) 810 (547) –


EquityRiskEquityriskistheriskofmovementinthepricesofequityinstrumentsheldintheGroup’sportfolioandoffinancialderivativesderivedfromtheseinstruments.Themainsourceofthisriskistradinginequityinstruments,althoughsomeequityriskalsoarisesasaresultoftheGroup’snon-tradingactivities.Therisksassociatedwithequityinstrumentsaremanagedthroughtradinglimits.Themethodsusedtomanagetheserisksaredescribedabove.

LiquidityRiskLiquidityriskarisesasaresultofthemanneroffinancingtheGroup’sactivitiesandmanagingitspositions.ItincludesboththeriskthattheGroupwouldbeunabletofinanceitsassetsusinginstrumentswithappropriatematurityandtheriskthattheGroupwouldbeunabletodisposeofitsassetsforanappropriatepricewithinthenecessarytimeperiod.TheGrouphasaccesstodiversesourcesoffunds,whichcomprisedepositsandothersavings,securitiesissued,loanstaken(includingsubordinatedloans)anditsownequitycapital.ThisdiversificationmakestheGroupflexibleandlimitsitsdependencyonanysinglefundingsource.TheGroupregularlyevaluatestheliquidityrisk,inparticularbymonitoringchangesinthestructureoffundingandcomparingthesechangeswiththeGroup’sliquidityrisk

managementstrategy,whichisapprovedbytheGroup’sBoardofDirectors.TheGroupalsoholds,aspartofitsliquidityriskmanagementstrategy,aproportionofitsassetsinhighlyliquidfunds,suchasstatetreasurybillsandsimilarbonds.LiquidityriskisevaluatedregularlybytheGroupusingtheanalysisofdifferencesbetweentheresidualmaturityofassetsandliabilities.Twoapproachesareused:short-termandlong-term(structural).Intheshort-termapproach,theGroupmonitorsdailyandindetailwithaviewtothenextseveralweeksthedifferencebetweenliquidityinflowsandoutflows.Limitsaresetforcumulativeinflowsandoutflows.Iflimitsarebreached,theGrouptakesactiontoreducetheliquidityrisk.Inthelong-term(structural)perspective,theGroupmonitorsthedifferencebetweenthematurityofassetsandliabilitiesinperiodslongerthanoneyear.Forproductswithnon-specifiedmaturity(i.e.currentaccounts)theGrouphasdevelopedamodelfortheirexpectedresidualmaturity.TheGroupagainsetslimits,andappropriateactionistakeniftheyarebreached(e.g.byacquiringlong-termsourcesofrefinancing).TheGrouphasdrawnupacontingencyplanfortheeventofaliquiditycrisis.Thisplandefinestheroles,responsibilitiesandprocessofcrisismanagement.Italsodefinesthepossiblemeasureswhichshouldbeconsideredintheeventofanemergencysituation.Stresstestsofshort-termliquidityareperformedbytheGroup

onaweeklybasis.ThestresstestsverifytheGroup’sabilitytoovercomeextremesituationssuchassystemicinterruptionoftheinter-bankmoneymarket,adecreaseintheBank’screditrating,ITsystembreakdowns,andreputationrisktotheGroup.Thestressscenarios’resultsarepresentedtotheALCO.

Thefollowingtableshowsundiscountedcashflowsofassetsandliabilities,issuedguaranteesandprovidedloanfacilities:

MCZK Carrying Cash Upto 3months 1–5 Over Unspe- amount flow 3months –1year year 5years cified.At31Dec2017 Cashinhandandcashbalances 4008 4008 4008 – – – –Financialassetsatfairvaluethroughprofitorloss 8115 8418 1085 693 4487 2153 –including: –heldfortrading 8115 8418 1085 693 4487 2153 – –notheldfortrading – – – – – – –Available-for-salesecurities 47522 51982 486 4568 24431 22497 –Securitiesheldtomaturity 175 228 2 34 192 – –Receivablesfrombanks 210188 210216 208012 2157 47 – –Receivablesfromclients 386672 410555 36666 64756 171261 128862 9010Positivefairvalueofhedgingderivatives 4441 4441 77 189 2764 1411 –Investmentsinassociates 398 398 – – – – 398Propertyandequipment 4883 4883 – – – – 4883Intangibleassets 1940 1940 – – – – 1940Taxreceivables 731 731 – 731 – – –Non-currentassetsheldforsale 2 2 2 – – – –Otherassets 3003 3003 2840 162 – – 1 Depositsfrombanks 174274 174301 82376 2238 87033 2564 –Depositsfromclients 360473 361330 352647 6445 906 1332 –Debtsecuritiesissued 40000 42653 1267 7115 24509 6762 –Financialliabilitiesheldfortrading 8199 8199 2707 1032 3432 1028 –Negativefairvalueofhedgingderivatives 4876 4876 133 352 2119 2272 –Taxliabilities 926 926 – 926 – – –Otherliabilities 10979 10979 9670 1309 – – –Provisions 855 855 – – – – 855Equity 71496 71496 – – – – 71496 Undrawnloanfacilities 113165 113165 8323 31129 20876 52837 –Bankguarantees 39636 39636 4788 9001 16702 1650 7495



MCZK Carrying Cash Upto 3months 1–5 Over Unspe- amount flow 3months –1year year 5years cified.At31Dec2016 Cashinhandandcashbalances 4192 4192 4192 – – – –Financialassetsatfairvaluethroughprofitorloss 9027 9391 507 714 4720 3577 (127)including: –heldfortrading 9027 9391 507 714 4720 3577 (127) –notheldfortrading – – – – – – –Available-for-salesecurities 80192 84371 4642 12534 36599 30365 231Securitiesheldtomaturity 186 208 2 7 199 – –Receivablesfrombanks 139900 140018 135621 3400 906 – 91Receivablesfromclients 385572 410132 61523 60735 152653 124710 10511Positivefairvalueofhedgingderivatives 5163 5163 48 172 2698 2249 (4)Investmentsinassociates 401 401 – – – – 401Propertyandequipment 5016 5016 – – – – 5016Intangibleassets 1387 1387 – – – – 1387Taxreceivables 921 921 – 921 – – –Non-currentassetsheldforsale 4 4 4 – – – –Otherassets 3081 3067 1 – – – 3066 Depositsfrombanks 115524 115533 57627 31827 22628 3446 5Depositsfromclients 371163 372157 351981 15081 1285 773 3037Debtsecuritiesissued 60107 63765 1600 13035 37287 11797 46Financialliabilitiesheldfortrading 6569 6570 342 536 3329 2363 –Negativefairvalueofhedgingderivatives 3417 3417 29 88 1933 1367 –Taxliabilities 1523 1523 – 1523 – – –Otherliabilities 8879 8879 1 – – – 8878Provisions 969 969 – – – – 969Equity 66891 66891 – – – – 66891 Undrawnloanfacilities 115291 115291 27955 41111 18160 28065 –Bankguarantees 41499 41499 3470 9456 18774 1884 7915

(d) OperationalRiskTheoperationalriskisdefinedasariskoflossduetodeficienciesorfailuresofinternalprocesses,peopleandsystemsorexternalevents.Thisdefinitionincludesthelegalrisk,however,itdoesnotincludethestrategicorreputationrisk.Thelegalriskincludes,amongotherthings,theriskoffines,sanctionsorpunitivedamagesresultingfromsupervisionmeasuresaswellasprivatesettlement.

TheBank’sorganisationalstructureanditsinternalrulesfullyrespectthesegregationofincompatibledutiesandpreventanyconflictofinterests.Internalrulesunambiguouslydefinetheobligationsandcompetenciesofemployees,includingmanagement,andregulatetheworkingprocessesandcontrollingactivities.TheOperationalRiskManagementCommitteeisthemaincontrolanddecisionbodyregardingoperationalrisk.AllmembersoftheBoardofDirectorsarepermanentmembersofthecommittee.TheOperationalRiskDepartmentisanindependentbodyreportingdirectlytoamemberoftheBoardofDirectorsinchargeofriskmanagement.TheOperationalRiskDepartmentisauthorisedtosecureunifiedandcoordinated

operationalriskmanagementinaccordancewiththeapplicableregulationsandthestandardsoftheparentcompany.Operationalriskmanagementandmonitoringassuchisperformedbyauthorisedemployeesofindividualdepartments.TheInternalAuditDepartmentidentifiesextraordinarytrendsandbreachofornon-compliancewithdirectivesanditassessesthecontrolandmanagementsystem’sfunctionality.TheGroupcontinueddevelopingandsettingupthecomprehensivesystemfortheidentification,monitoringandmanagementofoperationalrisk.Inlinewiththe2017OperationalRiskManagementStrategy,theBankdefineditsprioritiesasregardsmitigatingoperationalriskexposurethatareconsistentwiththeriskprofileandriskappetiteoftheGroupandtheBank.TheoperationalriskappetiteastheoperationalrisklevelacceptablebytheBankwasmeasuredbymeansofELOR(ExpectedLossonRevenue)whichisanindicatordefinedasaproportionofanticipatedlossesarisingfromoperationalrisk(statisticalestimationbasedonhistoricaldata)toincome(budgetedincomeonaquarterlybasis).SettingtheELORlimitanditsmonitoringwasperformedinlinewiththeGroup’spolicies.

Toensureeffectivecollectionofoperationalriskeventsanddata,theBankusesanon-lineinformationsystemdevelopedbytheUniCreditGroup.Thesystemcomplieswiththerequirementsforcapitaladequacymanagement,inaccordancewiththeBaselIIIregulation.Thedataacquiredthroughthesystemistakenintoaccountincalculatingthecapitalrequirementaswellasinmanagingoperationalrisk.Itservesasabasisfordesigningprocessesthatreducethenumberofparticulareventsandmitigatetheconsequences(e.g.inpreparingprocessmitigationmeasuresorstrategicinsuranceplanfortheBank).Thedataisalsousedforreviewingthereliabilityofproposedmeasuresforoperationalriskmitigation.ThedataiscollectedonacontinuousbasisincooperationwithindividualdepartmentsoftheBank(allsignificanteventsarereportedandresolvedimmediately).Basedonthecollecteddata,aquarterlyconsolidatedreportisprepared,whichispresentedtotheOperationalRiskManagementCommitteeanddistributedwithintheBank.TheBoardofDirectors,theInternalAuditDepartmentandtheparentcompanyareinformedaboutthemostsignificantcasesofoperationalriskonaweeklybasis,orimmediatelyifnecessary.Thedataisregularlyreconciledwiththeaccountingrecordsandothersourcesinordertoensuredatacompletenessandaccuracy.In2016,theGroupanalysedthescenarios,andconfiguredandanalysedtheriskindicators.Anotherimportantelementoftheoperationalriskmanagementsystemismanagingthecontinuityofoperations(emergencyplanning,crisismanagement).TheGrouphasupdatedandtestedtherecoveryplans(forcrisissituations)inordertoensuretheirfullusefulnessandeffectivenessundercurrentconditions.Inaddition,theOperationalRiskDepartmentenhancestheoverallawarenessofoperationalriskwithintheGroupandtrainstheGroup’sstaffbothbymeansoftrainingsessionsande-learningcourses.Basedontheconsentobtainedfromtheregulatorybody,theBankcalculatesthecapitalrequirementforoperationalriskundertheadvancedmeasurementapproach(AMA).Underthisapproach,thegroupmodelisusedbasedoninternalandexternaldata,theresultsofscenarioanalysesandriskindicatordata.

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

liquiditymanagement,rulesfortheleverageratioandimproveriskmanagementandcorporategovernance.ThetransfertotheBaselIIIrulesdidnothaveasignificantimpactonthecapitaladequacy.Theoriginalcapital(Tier1)iscurrentlypartofTier1commoncapital(CET1)whichisthesupremequalitycapital.TheGrouphasnewlyincludedthecapitalrequirementrelatingtotheriskofthecreditvaluationadjustmentinthecapitaladequacy;thishasnosignificantimpactonthetotalcapital.Severalnewrequirementswereintroducedinrelationtorisk-weightedassetswhich,inaggregate,hadnosignificantimpactonrisk-weightedassets.Theimpactoftheincreaseinthecorrelationcoefficientinexposurestolargeentitiesinthefinancialsectorandunregulatedfinancialentitieswasbalancedbytheimpactofthereductionfactorforexposurestosmallandmedium-sizedcompanies.

TheBank’sregulatorycapitalconsistsofthefollowing:•CommonEquityTier1(CET1)capitalwhichcomprisesregistered

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

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

anticipatedcreditlosseswhenusingtheinternalratingbasedapproach.

TheGroupcomplieswiththedefinedminimumrequirementsofBaselIIIrulesforcapitaladequacy,includingcapitalbuffers.

(f) MarketDevelopmentin2017TheCzecheconomywassuccessfulin2017andwithagrowthof4.5%itwasnearthepeakoftheeconomiccycle.Itsgrowthwassupportedbyallcomponentsofaggregatedemand.Householdconsumptionwasstimulatedbythedecreasingunemploymentrate,whichreacheditshistoricallylowestlevelduringtheyear,andincombinationwitharecordnumberofavailablejobpositionsitcreatedpressureonsalarygrowthacceleration.Enterprisescitedlackofworkersasthemainobstacleinbusinessdevelopmentwithincreasingfrequency.Thecreationoffixedcapitalrecoveredfromthepreviousyear’sdroppredominantlythankstotheinvestmentactivityofprivateentities.Theenvironmentdescribedwassuitableforthecreationofdemandinflationpressuresthatmaintainedyear-on-yearinflationabovethelevelof2%throughouttheyear.Averageinflationamountedto2.5%,thehighestlevelinfiveyears.TheinflationaryenvironmentpromptedtheCzechNationalBanktotightenitsmonetaryconditions.First,inAprilitabandoneditsforeignexchangeinterventions,thusceasingtopreventthecrownfromstrengthening.Bytheendoftheyear,thecrownstrengthened


by5.5%withrespecttotheeuro.Atthesametime,theCzechNationalBanktighteneditsmonetarypolicyalsothroughtheinterestratechannelanditincreasedthereporatetwotimesduringtheyear,withthefinalvalueoftheyearbeing0.5%.Theendoftheinterventionsontheforeignexchangemarketwasprecededbyaperiodofextremelyhighdemandforcrownsfromexportersandforeigninvestors,whichledtoanincreaseintheCzechNationalBank’sforeignexchangereservesequallingalmosttwothirdsofannualGDP.AsecondaryeffectofthegrowthofcrownpositionsofforeignentitieswastheincreaseddemandforCzechgovernmentbonds,whichtemporarilydecreasedtheiryieldtotheleveloftheGermanones.Theshareofcrownbondsheldbynon-residentsthereforegrewfrom32%inlate2016to42%inDecember2017andduringtheyearitevenbrieflyexceeded50%.ThetotalvolumeofloansintheCzecheconomyacceleratedslightlyto7.3%year-on-yearthankstoastrongerhouseholddemandalongwiththeslowingdownofthegrowthofcorporateloans.Thedemandforresidentialrealestatefuelledtheaccelerationofthepricestotwo-figurevaluesandpromptedtheCzechNationalBanktoendeavourtoslowdownthisdevelopmentusingmacroprudentialinstruments.Inthebusinessenvironmentoutsideofthefinancesector,asignificantchangeoccurredintheformofthelaunchofthesecondstageofelectronicsalesrecords,affectingtheareaoftrade.Theimplementationofthefollowingstages,plannedfornextyear,washaltedbytheConstitutionalCourt.Nootherlegislativechangesrelevantforthebusinessenvironmentoccurredduetotheelectioncycle.Governmentregulationsincreasedtariffsalariesinthepublicsectortoanunusualextent.Minimalwagealsogrewbyasignificant11%.In2016,theBankimplementedanewstressscenariorelatingtotheimpactsofBrexit.FollowingtheBrexitdecision,theBankstoppedcalculatingthescenariobutkeepsmonitoringthesituationonfinancialmarketsandevaluatestheimpactsofBrexit-relatedreportsonitsriskprofile.InviewoftheminimalexposuretoGBP-denominatedassets,theBankconsidersthatthedirectimpactofnegativedevelopments(inrespectofBrexit)ontheBank’sfinancialperformancewouldbeminimal.

During2017,theGroupcontinuouslyenhanceditssystemsandprocessesunderfinancialriskmanagementasfollows:(i) CreditRisk– Updateofspecificcreditpoliciesforclientsoperatingin

selectedindustries(financingofcommercialrealestate,energy,automotive,construction,engineering,etc);

– Adjustmentofselectedproductparametersandcreditproductsinretailbanking;

– Strengtheningoftheprocedureforcreditfraudidentification,monitoringtheprocessrelatedtotheloanportfolio(timelyidentificationofthewarningsignals)andoftheprocessforrecoveryofloanreceivables);

– ContinuousimprovementoftheBank’sownestimatesofriskparametersusedintheadvanced(IRB)approachtothecalculationofthecapitalrequirementsforcreditriskforthebankingportfolio.

(ii) MarketRisk– TheinternalplatformforthecalculationofVaRandBPVwas

improvedandrecalibratedonanongoingbasistoreflectthecurrentbehaviouroffinancialtimeseriesusedincalculatingmarketriskindicators.

(iii) Liquidity– TheBankcontinuedtofine-tunethecalculationmethodology

fortheBaselIIILCRindicatorsandimplementednewinternalliquidityindicatorsforamoreaccuratequantificationoftheliquidityrisk.TheBankalsoimplementednewliquiditystressteststhatbetterreflectthecurrentmacroandmicroeconomicconditionsinwhichtheBankoperates.

41.Relatedpartytransactions

Entitiesaredeemedtobeentitiesunderspecialarrangementsintheeventthatoneentityisabletocontroltheactivitiesoftheotherorisabletoexercisesignificantinfluenceovertheotherentity’sfinancialoroperationalpolicies.Aspartofitsordinarybusiness,theBankentersintotransactionswithrelatedentities.Thesetransactionsprincipallycompriseloans,depositsandothertypesoftransactionsandareconcludedunderarm’slengthconditionsandatarm’slengthpricesinordertopreventanydetrimenttoanyparty.RelatedpartiesprincipallyincludetheparentcompaniesandfellowsubsidiariesaspartoftheUCI/HVB/BAGroup,subsidiariesandaffiliates,membersoftheBoardofDirectorsandothermembersoftheBank’smanagement.TheGrouphaspreparedanequityprogrammefortheemployeesoftheUniCreditGroupunderwhichtheemployeesmaypurchaseinvestmentsharesofthegroupatadiscountedpriceintheformofdiscountshares.Discountsharesmaynotbesoldoverthetyingperiod.Tiedshareswillbeforfeitediftherespectiveemployeeterminateshis/heremploymentinthegrouporsellshis/herinvestmentsharesbeforetheendofthetyingperiod.Theprovideddiscountisallocatedtoindividualgroupcompaniesthatareinvolvedintheprogrammeandthesecompaniesrecogniseanddeferthediscountoverthetyingperiod


(a) Transactionswiththeparentcompany

MCZK 31Dec2017 31Dec2016Assets Receivablesfrombanks 145 3451 Securitiesavailableforsale 1814 1929Total 1959 5380 Liabilities Depositsfrombanks 112590 16534Total 112590 16534 Off-balancesheetitems Issuedguarantees 273 347 Irrevocablecreditfacilities 96 101Total 369 448MCZK 2017 2016Interestandsimilarincome 35 65Interestandsimilarexpenses (14) (4)Incomefromfeesandcommissions 4 21Expensesforfeesandcommissions (35) (20)Generaladministrativeexpenses (10) 13Total (20) 75

(b) Transactionswithkeymanagementmembers

MCZK 31Dec2017 31Dec2016Assets Receivablesfromclients 106 89 of which: BoardofDirectors – 2 Othermanagementmembers 106 87Total 106 89Liabilities Payablestoclients 225 170 of which: BoardofDirectors 120 88 Othermanagementmembers 105 82Total 225 170Off-balancesheetitems Irrevocablecreditfacilities 13 11 of which: BoardofDirectors 1 1 Othermanagementmembers 12 10Total 13 11


(c)Transactionswithotherrelatedparties

MCZK 31Dec2017 31Dec2016Assets Financialassetsheldfortrading 1626 1036 of which: UniCreditBankAG 1247 1036 Receivablesfrombanks 5360 7331 of which: UniCreditBankAG 256 287 UniCreditBankAustriaAG 732 723 YapiveKrediBankasiAS 4102 5524 UniCreditBankHungaryZrt. 70 25 AOUniCreditBank 142 730 Receivablesfromclients 766 270 of which: UCTAMCzechRepublics.r.o. 407 – UCTAMSVK,s.r.o. 265 269 Positivefairvalueofhedgingderivatives 1883 2078 of which: UniCreditBankAG 1274 2023Total 9635 10715

MCZK 31Dec2017 31Dec2016Liabilities Depositsfrombanks 27373 69338 of which: UniCreditLuxembourgS.A. – 11 UniCreditBankAustriaAG 25869 54766 UniCreditBankAG 1431 10288 UniCreditBankHungaryZrt. 32 4233 Depositsfromclients 361 1342 of which: UniCreditLeasing(Austria)GmbH 112 121 PioneerAssetManagementa.s. – 897 PioneerInvestmentCompany – 95 UniCreditBusinessIntegratedSolutionsS.p.A. 59 84 Financialliabilitiesheldfortrading 1801 2086 of which: UniCreditBankAG 1625 2025 Negativefairvalueofhedgingderivatives 2010 2105 of which: UniCreditBankAG 1211 2072Total 31545 74871


MCZK 31Dec2017 31Dec2016Off-balancesheetitems Issuedguarantees 1251 3916 of which: UniCreditBankAG 546 656 UniCreditBankAustriaAG 488 2949 UniCreditBankHungaryZrt. 51 112 AOUniCreditBank 13 20 Irrevocablecreditfacilities 164 276 of which: UniCreditBankAG 102 108Total 1415 4192

MCZK 2017 2016Interestincomeandsimilarrevenues 514 407 of which: UniCreditBankAG 359 288 UniCreditBankAustriaAG 76 21 Interestexpensesandsimilarcharges 53 (136) of which: UniCreditLeasing(Austria)GmbH (9) (9) UniCreditBankAG 16 (3) UniCreditBankAustriaAG 41 (123) Feeandcommissionincome 120 69 of which: UniCreditBankAG 72 40 UniCreditBankHungaryZrt. 4 6 UniCreditBankAustriaAG 26 15 Feeandcommissionexpenses (9) (32) of which: UniCreditBankAustriaAG (4) (27) Netincome/(loss)fromfinancialassetsandliabilitiesheldfortrading 458 553 of which: UniCreditBankAG 246 578 UniCreditBankAustriaAG 206 (24) Netincome/(loss)fromhedgingagainstriskofchangesinfairvalue 112 (174) of which: UniCreditBankAG 109 (174) Generaladministrativeexpenses (1436) (1478) of which: UniCreditBusinessIntegratedSolutionsS.p.A. (1438) (1475)Total (188) (791)


42.FairvalueoffinancialassetsandfinancialliabilitiesThefollowingtableshowsthecarryingamountsandfairvaluesoffinancialassetsandliabilitiesthatarenotreportedatfairvaluesintheGroup’sbalancesheet(thefairvalueiscalculatedusingdiscountedfuturecashflowsundertheapplicationofarm’slengthmarketratestowhichcreditmark-upsderivedfrominternalratingcategoriesofindividualclientsareadded):

MCZK 31Dec2017 31Dec2016 Carrying Fair Carrying Fair amount value amount valueFinancialassets Receivablesfrombanks 210188 210198 139900 139946Receivablesfromclients 386672 392909 385572 389729 Financialliabilities Depositsfrombanks 174274 174226 115524 115229Depositsfromclients 360473 360486 371163 371187Debtsecuritiesissued 40000 40436 60107 61637

ThefollowingtableshowstransfersoffinancialassetsandliabilitiesatfairvaluebetweenLevels1and2.

FinancialassetsatfairvaluebasedonLevels1and2:

MCZK Financialassetsatfairvalue throughprofitorloss Securities Hedging Total Heldfor Notheld available derivatives trading fortrading forsale 31Dec2017 TransferfromLevel1toLevel2 – – – – –TransfersfromLevel2toLevel1 – – – – –

31Dec2016 TransferfromLevel1toLevel2 13 – 609 – 622TransfersfromLevel2toLevel1 3 – 2712 – 2715

Fortheyearsended31December2017and31December2016,nofinancialliabilitiesreportedatfairvalueweretransferredbetweenLevels1and2.


ThefollowingtablesshowtransfersoffinancialassetsandliabilitiesreportedatfairvaluefromandtoLevel3.

MCZK Financialassetsatfairvalue throughprofitorloss Securities Hedging Total Heldfor Notheld available derivatives trading fortrading forsale Openingbalanceat1Jan2016 – – 635 – 635Additionarisingfromthemerger – – –Revaluationgainsandlosses –Inprofitorloss – – – – –Inothercomprehensiveincome – – 11 – 11Purchases – – 195 – 195Sales/maturity – – (626) – (626)Transfersfrom/tootherlevels – – (2) – (2)Other – – 16 – 16Closingbalanceat31Dec2016 229 229Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiod: – Of which:Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiodarisingfromfinancialassetsheldattheperiodend – Openingbalanceat1Jan2017 – – 229 – 229Additionarisingfromthemerger – – – Revaluationgainsandlosses –Inprofitorloss – – – – –Inothercomprehensiveincome – – 33 – 33Purchases – – – – –Sales/maturity – – (2) – (2)Transfersfrom/tootherlevels – – – – –Other – – – – –Closingbalanceat31Dec2017 260 260 Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiod: – Of which:Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiodarisingfromfinancialassetsheldattheperiodend –

Intheyearsended31December2017and2016,theGroupdidnotrecordanytransfersfromandtoLevel3withrespecttofinancialliabilitiesstatedatfairvalue.

43.OffsetoffinancialassetsandfinancialliabilitiesTheGroupdoesnotoffsetfinancialassetsandfinancialliabilities.Thebelowtablesprovideinformationonpotentialoffsetoffinancialassetsandfinancialliabilities.

Financialassetsthataresubjecttooffset,recoverableframeworkcontractsforoffsetandsimilararrangements:

MCZK Gross Gross Net Relatingamountsthatarenotoffset reported offset reported Financial Obtained Net financial financial financial instruments cash amount assets liabilities assets collateral31Dec2017 Derivatives 8799 – 8799 7524 – 1275 31Dec2016 Derivatives 3545 – 3545 1674 – 1871


Financialliabilitiesthataresubjecttooffset,recoverableframeworkcontractsforoffsetandsimilararrangements:

MCZK Gross Gross Net Relatingamountsthatarenotoffset reported reported reported Financial Provided Net financial financial financial instruments cash amount liabilities assets liabilities collateral31Dec2017 Derivatives 9998 – 9998 7524 – 2474 31Dec2016 Derivatives 2157 – 2157 1674 – 483

44.SubsequenteventsTheGroup’smanagementisnotawareofanyothersubsequenteventsthatwouldrequireadjustmenttothesefinancialstatementsoftheBank.


Approvaldate: Stampandsignature Individualincharge Individualinchargeofthe ofthestatutorybody: oftheaccountingrecords extraordinaryfinancialstatements (name,signature): (name,signature): Ing.JiříKunert ChairmanoftheBoard ofDirectors

LjubišaTešić27March2018 MemberoftheBoardofDirectors Ing.JiříHouška Mgr.MichaelaMrštíková

We addressed Italian legacy issues through the sale of a € 17 billion portfolio (FINO) and proactive bad loans management. A more disciplined risk management strategy and underwriting processes are driving significant improvements in all our asset quality metrics.

Improveasset quality.


Separatefinancialstatements

Statementofcomprehensiveincomefortheyearended31December2017

2017 2016 Note MCZK MCZKInterestincomeandsimilarincome 5 10936 10384

Interestexpenseandsimilarcharges 5 (946) (1437)

Netinterestincomeandsimilarincome 9990 8947

Feeandcommissionincome 6 4214 4645

Feeandcommissionexpenses 6 (1119) (1124)

Netfeeandcommissionincome 3095 3521

Dividendincome 7 2105 3

Netincome/(loss)fromfinancialassetsandliabilitiesheldfortrading 8 2684 2133

Netincome/(loss)fromhedgingagainstriskofchangesinfairvalue 9 (31) (4)

Netincome/(loss)fromthesaleoffinancialassetsandliabilities 10 508 1049

Netincome/(loss)fromfinancialassetsandliabilitiesatfairvaluethrough

profitorlossnotheldfortrading 11 – 3

Operatingincome 18351 15652

Impairmentlossesonfinancialassets 12 (318) (1213)

Administrativeexpenses 13 (7220) (7296)

Creationandreleaseofprovisions (161) (312)

Depreciationandimpairmentofpropertyandequipment (342) (228)

Amortisationandimpairmentofintangibleassets (56) (16)

Otheroperatingincomeandexpenses 14 28 46

Operatingexpenses (7751) (7806)

Profit/(loss)fromthesaleofnon-financialassets (5) 179

Profitbeforeincometax 10277 6812

Incometax 33 (1456) (1493)

Profitaftertax 8821 5319

Othercomprehensiveincome Itemsthatcanbesubsequentlyderecognisedtoprofitorloss

Reservefromrevaluationofhedginginstruments: (1347) 123

Changesinnetfairvaluesofderivativesincashflowhedgesreported

inothercomprehensiveincome (1310) 203

Netfairvalueofderivativesincashflowhedgestransferredtoprofitorloss (37) (80)

Reservefromrevaluationofavailable-for-salesecurities (857) (786)

Changeinrevaluationofavailable-for-salesecuritiesreportedinothercomprehensiveincome (566) (164)

Revaluationofavailable-for-salesecuritiestransferredtoprofitorloss (291) (622)

Foreignexchangerategainsfromtheconsolidationofaforeignbranch (710) (2)

Othercomprehensiveincome (2914) (665) Totalcomprehensiveincome 5907 4654



Statementoffinancialpositionasof31December2017

31Dec2017 31Dec2016 Note MCZK MCZKASSETS Cashinhandandcashbalances 15 4007 4192

Financialassetsatfairvaluethroughprofitorloss,includingFA 8120 9035

–heldfortrading 16 8120 9035

–notheldfortrading 16 0 0

Available-for-salesecurities 17 47522 80192

Securitiesheldtomaturity 18 175 186

Receivablesfrombanks 19 210122 139849

Receivablesfromclients 20 374426 367298

Positivefairvalueofhedgingderivatives 22 4441 5163

Equityinvestments 21 3979 3979

Propertyandequipment 23 987 1316

Intangibleassets 24 1743 1227

Taxreceivables,including: 586 756



Non-currentassetsheldforsale 2 4

Otherassets 25 3223 2398

Totalassets 659333 615595

LIABILITIES Depositsfrombanks 26 164404 100473

Depositsfromclients 27 360839 371304

Debtsecuritiesissued 28 40000 60107

Financialliabilitiesheldfortrading 29 8199 6569

Negativefairvalueofhedgingderivatives 30 4876 3417

Taxliabilities,including: 303 958



Otherliabilities 31 10439 8296

Provisions 32 831 936

Totalliabilities 589891 552060

EQUITY Issuedcapital 34 8755 8755

Sharepremium 34 3495 3495

Reservefundsfromrevaluationoffinancialinstruments 1878 4792

Retainedearningsandreservefunds 36 46493 41174

Profitfortheperiod 8821 5319

Totalshareholder‘sequity 69442 63535 Totalliabilitiesandshareholder‘sequity 659333 615595



Statementofcashflowsfortheyearended31December2017

2017 2016 MCZK MCZKNetprofitfortheperiod 8821 5319

Adjustmentsfornon-cashitems

Impairmentofloansandreceivablesandfinancialinvestments 318 1213

Revaluationofsecuritiesandderivatives (361) 398

Creationandreleaseofotherprovisions (53) 315

Depreciationandamortisationofpropertyandequipment,andintangibleassets 398 243

Profit(loss)fromsecuritiesavailableforsale (308) (1085)

Profit(loss)frompropertyandequipmentandintangibleassetssold 5 (179)

Taxes 1456 1493

Othernon-monetarychanges 4704 600

Operatingprofitbeforechangeinoperatingassetsandliabilities 14980 8317

Financialassetsandliabilitiesheldfortrading 2551 (1852)

Receivablesfrombanks (70269) (33987)

Loansandreceivablesfromclients (13109) (40147)

Otherassets 177 (168)

Depositsfrombanks 63949 60260

Depositsfromclients (10443) 7204

Otherliabilities 2094 2237

Incometaxpaid (1392) (1720)

Netcashflowsfromoperatingactivities (11462) 144

Acquisition/saleandmaturityofsecuritiesavailableforsaleandotherfinancialinvestments 30741 4240

Acquisitionofasubsidiary – –

Gainsfromthesaleofpropertyandequipmentandintangibleassets – 833

Acquisitionofpropertyandequipmentandintangibleassets (507) (645)

Dividendsreceived 1103 3


Dividendspaid 0 0

Debtsecuritiesissued (20060) (4827)


Cashandotherhighlyliquidfundsatthestartoftheperiod 4192 4135Netcashflowsfromoperatingactivities (11462) 144



Cashandotherhighlyliquidfundsattheendoftheperiod 4007 4192

Interestreceived 11587 10231

Interestpaid (1033) (1689)



Statementofchangesinequityfortheyearended31December2017


Re

serv

efr

om

Reta

ined

ear

ning

s

re

valu

atio

nra

teg

ains

Is

sued

Sh

are

hedg

ing

secu

ritie

sor

loss

es

Sp

ecia

l-

capi

tal

prem

ium

in

stru

-av

aila

ble

ofa

fore

ign

Rese

rve

-pur

pose

Re

tain

ed

Profi

tfor

Eq

uity

M

CZK

men

ts

fors

ale

bran

ch

fund

sre

serv

efu

nd

earn

ings

th

epe

riod

Ba

lanc

eas

of3

1De

cem

ber2

015

87

55

34

95

17

67

31

98

492

3

372

1

161

1

21

158

5

033

5

888

1

Tr

ansa

ctio

nsw

itho

wne

rs,c

ontri

butio

nsfr

oma

ndd

istri

butio

nsto

ow

ners

Allo

catio

nof

the

2015

pro

fit

5

033

(5

033

)–

Di

viden

dpa

ymen

t

–

Tota

lcom

preh

ensi

vein

com

efo

rthe

per

iod

Ne

tpro

fitfo

r201

6

5

319

5

319

Ot

herc

ompr

ehen

sive

inco

me

Ch

ange

inre

valu

atio

nof

ava

ilabl

e-fo

r-sa

les

ecur

ities

Chan

gein

reva

luat

ion

ofa

vaila

ble-

for-s

ale

secu

ritie

sre

porte

din

oth

erc

ompr

ehen

sive

inco

me

(2

15)

(2

15)

Reva

luat

ion

ofa

vaila

ble-

for-

sale

sec

uriti

estr

ansf

erre

dto

pro

fito

rlos

s

(768

)

(768

)De

ferre

dta

x

197

197

Ch

ange

sin

net

fair

valu

eso

fder

ivativ

esin

cas

hflo

wh

edge

s

Chan

ges

inn

etfa

irva

lues

ofd

eriva

tives

inc

ash

flow

hed

ges

repo

rted

in

oth

erc

ompr

ehen

sive

inco

me

252

2

52

Netf

airv

alue

ofd

eriva

tives

inc

ash

flow

hed

ges

trans

ferre

dto

pro

fito

rlos

s

(9

5)

(95)

Defe

rred

tax

(34)

(3

4)Fo

reig

nex

chan

gera

teg

ains

orl

osse

sfro

mth

eco

nsol

idat

ion

ofa

fore

ign

bran

ch

(2

)

(2

)Ot

herc

ompr

ehen

sive

inco

me

fort

hep

erio

d

1

23

(786

)(2

)

(6

65)

Bala

nce

aso

f31

Dece

mbe

r201

68

755

3

495

1

890

2

412

4

90

33

72

11

611

2

619

1

53

19

63

535

Tran

sact

ions

with

ow

ners

,con

trib

utio

nsfr

oma

ndd

istr

ibut

ions

too

wne

rs

Al

loca

tion

ofth

e20

16p

rofit

53

19

(53

19)

–

Divid

end

paym

ent

–

To

talc

ompr

ehen

sive

inco

me

fort

hep

erio

d

Netp

rofit

for2

017

88

21

88

21

Othe

rcom

preh

ensi

vein

com

e

Chan

gein

reva

luat

ion

ofa

vaila

ble-

for-

sale

sec

uriti

es

Ch

ange

inre

valu

atio

nof

ava

ilabl

e-fo

r-sal

ese

curit

ies

repo

rted

ino

ther

com

preh

ensiv

ein

com

e

(788

)

(788

)Re

valu

atio

nof

ava

ilabl

e-fo

r-sa

les

ecur

ities

tran

sfer

red

top

rofit

orl

oss

(3

58)

(3

58)

Defe

rred

tax

2

89

2

89

Chan

ges

inn

etfa

irva

lues

ofd

eriv

ativ

esin

cas

hflo

wh

edge

s

Chan

ges

inn

etfa

irva

lues

ofd

eriva

tives

inc

ash

flow

hed

ges

repo

rted

in

oth

erc

ompr

ehen

sive

inco

me

(16

20)

(16

20)

Netf

airv

alue

ofd

eriva

tives

inc

ash

flow

hed

ges

trans

ferre

dto

pro

fito

rlos

s

(4

4)

(44)

Defe

rred

tax

317

3

17

Fore

ign

exch

ange

rate

gai

nso

rlos

ses

from

the

cons

olid

atio

nof

afo

reig

nbr

anch

(710

)

(7

10)

Othe

rcom

preh

ensi

vein

com

efo

rthe

per

iod

(13

47)

(857

)(7

10)

(29

14)

Bala

nce

aso

f31

Dece

mbe

r201

78

755

3

495

5

43

15

55

(220

)3

372

1

161

1

31

510

8

821

6

944

2

and

rese

rve

fund

s

Yearended31December2017

1.IntroductionUniCreditBankCzechRepublicandSlovakia,a.s.(hereinafterthe“Bank”)wasestablishedthroughthecross-bordermergerofUniCreditBankCzechRepublic,a.s.andUniCreditBankSlovakiaa.s.withUniCreditBankCzechRepublic,a.s.beingthesuccessorcompany.Theeffectivemergerdatewas1July2013.UniCreditBankCzechRepublic,a.s.wasestablishedthroughthemergerbyamalgamationofHVBBankCzechRepublica.s.andŽivnostenskábanka,a.s.asof1October2006.Allrightsandobligationsofthedissolvedcompany,Živnostenskábanka,a.s.,weretransferredtothesuccessor,HVBBankCzechRepublica.s.In2008,theBankassumedthenetassetsofHVBRealityCZ,s.r.o.In2009,theBankpreparedaprojectofitsmergerwithUniCreditFactoring,s.r.o.UniCreditFactoring,s.r.o.wasthedissolvedcompanyandtheBankwasthesuccessorcompany.In2012,theBankpreparedaprojectofitsmergerbyamalgamationwithUniCreditCAIBCzechRepublica.s.ThiscompanywasthedissolvedcompanyandtheBankbecamethesuccessorcompany.Changesinthebusinessnameandotherfactsrelatedtothecross-bordermergerwererecordedintheCommercialRegisterinPrague,SectionB,Insert3608on1December2013.AspartofrestructuringintheUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.Awhichistheultimateparentcompanyoftheentiregroup(hereinafterthe“Group”)holding100%oftheBank’sshares.

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

Followingthecompletionofthecross-bordermerger,theBankhasbeencontinuingtoperformactivitiespreviouslyundertakenbyUniCreditBankSlovakiaa.s.ontheterritoryoftheSlovakRepublicthroughitsorganisationalbranchUniCreditBankCzechRepublicandSlovakia,a.s.,pobočkazahraničnejbanky(branchofaforeignbank).Thecross-bordermergerwasmadewiththeobjectiveofcreatingastrongerentitycapableofmanagingbusinessactivitiesbothintheCzechandSlovakmarketsthatwillbringsignificantadvantagestotheUniCreditGroupsincethemergergaverisetoanentitythatisabletomoreefficientlyandeffectivelyserveclientsandachievegreaterreturnsinthecontextoftheanticipatedcostsavingsanddynamicgrowthofbusinessinbothcountries.Theintegrationenabledtobenefitfromsynergisticeffectsintermsofcostsandincomewhileachievingamorebalancedcapitalstructureandoptimisedliquiditymanagement.Inaddition,theUniCreditGrouphadtheopportunitytoreducethecomplexityofitsorganisationalstructureandthelevelofmanagementeffortsasaresultofestablishingonelocalmanagementteamoverseeingbothmarkets.TheBankincreaseditssharecapitalforthepurposesofthemerger.AnumberofminorityshareholdersofUniCreditBankSlovakiaa.s.

exercisedtheirrighttosellthesharesofthedissolvingbank,otherminorityshareholdersutilisedtherighttoexchangethesharesfornewlyissuedsharesoftheBank.ThesuccessorbanktookoverthecapitalofthedissolvingbankofMCZK11,611andallocatedittothespecial-purposereservefundinEURthatcanbeusedonlytooffsetlosses.TheBankisauniversalbankprovidingservicesofretail,commercialandinvestmentbankingservicesinCzechcrownsandforeigncurrenciesfordomesticandforeignclients,mainlyintheCzechRepublicandalsoinotherstatesoftheEuropeanUnion.

TheBank’sprincipalactivitiesinclude:•Receivingdepositsfromthepublic;•Providingloans;•Investinginsecuritiesonitsownbehalf;•Operatingasystemofpaymentsandclearing;•Issuingandadministrationofpaymentproducts;•Providingguarantees;•Openinglettersofcredit;•Administeringcashcollection;•Tradingonitsownbehalforonbehalfofclients: 1.Inforeign-exchangecurrencyproducts; 2.Inforwardandcontractoptions,includingforeigncurrency

andinterestratecontracts;and 3.Withtransferablesecurities;•Participatinginsharesubscriptionsandprovidingrelatedservices;•Issuingmortgagebonds;•Conductingfinancialbrokerage;•Managingsecurities,includingportfoliomanagement,onbehalf

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

above.

2.Basisforthepreparationofthefinancialstatements

ThesefinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)asadoptedbytheEuropeanUnion.Thesefinancialstatementswerepreparedbasedonthegoingconcernassumption.ThesefinancialstatementsareseparatefinancialstatementspreparedinaccordancewiththerequirementsofAct563/1991Coll.,onAccounting.TheBank’sultimateownerisUniCreditS.p.A,Milan,whichconsolidatestheentiregroupinaccordancewithInternational


Notestothefinancialstatements(separate)

FinancialReportingStandardsasadoptedbytheEuropeanUnion.AllpresentedamountsareinmillionsCzechcrowns(CZKmillion)unlessstatedotherwise.Thefinancialstatementswerepreparedonthefairvalueprincipleforfinancialderivatives,financialassetsandliabilitiesmeasuredatfairvaluethroughprofitorlossandavailable-for-salefinancialassets,exceptforthosewhosefairvaluemeasurementcannotbereliablydetermined.ThemethodsfordeterminingfairvaluearepresentedinNote3(b)(v).Recognisedassetsandliabilitiesthatarehedgedagainsttheriskofchangesinfairvaluearestatedatfairvaluebyvirtueofhedgedrisk.Otherfinancialassetsandliabilitiesandnon-financialassetsandliabilitiesaremeasuredatamortisedcostorathistoricalcost.TheBankalsopreparestheconsolidatedfinancialstatements.On14February2014,theBanksignedacontractforthepurchaseofthe100%equityinvestmentinUniCreditLeasingCZ,a.s.ofMCZK3,211anda71.3%equityinvestmentinUniCreditLeasingSlovakia,a.s.withthecostofMEUR16.ThecontractsweresignedbetweentheBankandUniCreditLeasingSpA.;thesearetransactionsundercommoncontrol.BothentitiesweresoldtotheBankduetothereorganisationoftheequityinvestmentsintheGroup.Principalactivitiesofbothentitiesincludeleaseandinstalmentsale.TheBanksubsequentlytransferreda91.2%equityinvestmentinUniCreditLeasingSlovakia,a.s.(thepurchasedequityinvestmentof71.3%andtheequityinvestmentof19.9%thatwasheldbytheBankalreadyattheendof2013andreportedaspartof‘Available-for-salesecurities’)asanon-cashinvestmentinthesharecapitalofUniCreditLeasingCZ,a.s.andtheinvestmentoftheBankinUniCreditLeasingCZ,a.s.consequentlyincreasedbyMCZK570on18April2014(refertoNote21).On20January2015,theacquisitionofthe100%equityinvestmentinTransfinance,a.s.wascompleted.TheentitywasacquiredfromanowneroutsidetheUniCreditGroupandtheinvestmentamountedtoMCZK198.Theprincipalactivitiesoftheacquiredentityincludethefinancing,collectionandsecuringofshort-termreceivablesofclientsfromvariousindustrysegments.TheobjectiveofthisacquisitionfortheBankprimarilyinvolvesfurtherextendingtherangeofproductsandservicesofcorporatebankingtoincludefactoringthatisintendedprimarilyforsmallandmediumsizedcompanies.ThenameoftheacquiredentitychangedtoUniCreditFactoringCzechRepublicandSlovakia,a.s.inMay2015.

3.Significantaccountingpolicies

Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedintheseseparatefinancialstatements.

(a) FunctionalCurrencyandForeignCurrencyTranslationTheCzechcrownisthefunctionalcurrencyinthesefinancialstatements.EuroisthefunctionalcurrencyoftheSlovakbranch.

ThepresentationcurrencyofthesefinancialstatementsistheCzechcrown.Assetsandliabilitiesofthebrancharetranslatedintothepresentationcurrencyusingtheforeignexchangerateapplicableasofthefinancialstatementsdate.Theprofitorlossofthebranchistranslatedusingtheaverageexchangerate.Theresultingdifferencearisingfromtheuseofvariousforeignexchangeratesisrecognisedinequityas“Foreignexchangerategainsorlossesfromthebranch”.Figuresinbracketsrepresentnegativeamounts.Transactionsinforeigncurrencies(ieotherthanfunctionalcurrency)aretranslatedtothefunctionalcurrencyusingtheforeignexchangeratepromulgatedbythecentralbankandrulingatthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesaretranslatedtothefunctionalcurrencyattheclosingforeignexchangeraterulingatthebalancesheetdate.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthatarestatedathistoricalcostaretranslatedtothefunctionalcurrencyattheforeignexchangeraterulingatthedateofthetransaction.Foreignexchangedifferencesarisingontranslationarerecognisedinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesheldfortrading”.

(b) FinancialAssetsandLiabilities

(i) ClassificationFinancial assets and liabilities at fair value through profit or loss includeinstrumentsclassifiedasheldfortradingand/orinstrumentsdesignatedbytheBankasatfairvaluethroughprofitorlossuponinitialrecognition.TradingfinancialassetsandliabilitiesarethoseheldbytheBankprincipallyforthepurposeofshort-termprofittaking.Theseassetsandliabilitiesincludeinvestmentsindebtinstrumentsandshares,certainpurchasedloansandderivativecontractsthatarenotdesignatedashedginginstruments.Theseinstrumentsarereportedas“Financialassetsheldfortrading”oras“Financialliabilitiesheldfortrading”.FinancialassetsdesignatedbytheBankuponinitialrecognitionasatfairvaluethroughprofitorlossareincludedwithin“Financialassetsnotheldfortrading”.Loans and receivables arenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedonmarkets.LoansandreceivablesaremainlythosecreatedbytheBankprovidingmoneytoaborrowerotherthanthosecreatedforthepurposeofshort-termprofittaking.Loansandreceivablescompriseloansandadvancestobanksandnon-bankcustomersandunquotedbondspurchaseduponprimaryissue.Held-to-maturity assetsarefinancialassetswithfixedorpre-definedincomeandfixedmaturitythattheBankhastheintentandabilitytoholdtomaturity.Theseincludecertainquotedbondspurchaseduponprimaryissueandpurchaseddebtsecurities.Held-to-maturityassetsareincludedin“Held-to-maturityassets”.Available-for-sale assetsarefinancialassetsthatarenotclassifiedasfinancialassetsrecognisedatfairvaluethroughprofitorloss,


loansandreceivables,orheldtomaturity.Available-for-saleinstrumentsincludedebtandequityinvestmentsandcertainquotedbondspurchaseduponprimaryissue.Available-for-saleassetsareincludedin“Available-for-salesecurities”.

(ii) RecognitionofFinancialAssetsFinancialassetsatfairvaluethroughprofitorlossarerecognisedonthesettlementdate.AnygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedintheBank’sprofitorlossonthetradedate.Available-for-salefinancialassetsarerecognisedonthesettlementdateintheBank’saccountingbooks.Anygainsorlossesarisingfromchangesinthefairvalueoftheassetsarerecognisedinothercomprehensiveincomefromthetradedate.Held-to-maturityassetsarerecognisedonthesettlementdateintheBank’saccountingbooks.TheBankinitiallyrecognisesloansandreceivablesontheiroriginationdates.

(iii)MeasurementofFinancialAssetsandLiabilitiesFinancialassetsaremeasuredinitiallyatfairvalue,including(inthecaseoffinancialassetsnotatfairvaluethroughprofitorloss)transactioncosts.Subsequenttoinitialrecognition,allfinancialassetsandliabilitiesatfairvaluethroughprofitorlossandallavailable-for-saleassetsaremeasuredatfairvalue,withtheexceptionofanyinstrumentthatdoesnothaveaquotedmarketpriceonanactivemarketandwhosefairvaluecannotbereliablymeasured,inwhichcasesuchinstrumentisstatedatcost,includingtransactioncosts,lessimpairmentlosses.Allloansandreceivablesandheld-to-maturityassetsaremeasuredatamortisedcost,includingthealiquotpartofdiscountorsharepremiumslessimpairmentlosses.Sharepremiumsanddiscounts,includingtherelevantinitialtransactioncosts,areincludedinthecarryingamountoftherelatedinstrumentandamortisedbasedontheeffectiveinterestrateoftheinstrument.Uponinitialrecognition,depositsfrombanksandclientsandsecuritiesissuedarerecognisedatfairvalue.Theyaresubsequentlyreportedatamortisedcost.

(iv)Day1Profit/LossIntheeventthatthetransactionpricediffersfromthefairvalueofafinancialassetorliabilitymeasuredatfairvalue,thedifferencebetweenthesevalues(profitorloss)isreportedinprofitorloss.TheBanktypicallydoesnotconductthistypeoftransaction.

(v) FairValueMeasurementPrinciplesThefairvalueoffinancialassetsandliabilitiesisbasedontheirquotedmarketpriceatthebalancesheetdatewithoutanydeductionfortransactioncosts.Ifaquotedmarketpriceisnotavailable,thefairvalueoftheinstrumentisestimatedusingpricingmodelsordiscountedcashflowtechniques.

Wherediscountedcashflowtechniquesareused,estimatedfuturecashflowsarebasedonthemanagement’sbestestimatesandthediscountrateisbasedonthemarketrateatthebalancesheetdateforaninstrumentwithsimilartermsandconditions.Wherepricingmodelsareused,inputsarebasedonmarketratesatthebalancesheetdate.Thefairvalueofderivativesthatarenotexchange-tradedisestimatedastheamountthattheBankwouldreceiveorpaytoterminatethecontractatthebalancesheetdate,takingintoaccountcurrentmarketconditionsandthecurrentcreditworthinessofthecounterparties.TherevaluationofbondsintheBank’sportfolioiscarriedoutonadailybasisusingavailablemarketratesquotedbymarketparticipantsbymeansofBloombergservices.Agroupofcontributorswhoprovidereliableandregularbondvaluationsisselectedforeachofthebonds.Thecreditspreadofthebondiscalculatedfromparticularcontributionsanddiscountcurves.Iftherearesufficientcurrentmarketpricesofcontributionsavailable,thevaluationiscalculatedasanaveragevalue.Topreventpossibleerrorsofparticularcontributions,acomparisonofdailychangesismadeatthesametime.Ifthereisnomarketpriceavailableasasourceofvaluationorthenumberofactualcontributionsisnotsufficient,theBankwillcarryoutthevaluationonthebasisofarisk-freeswaprate,towhichthelastverifiedcreditspreadisapplied.TheBankcontinuestoapplythismethoduntil:– Marketquotationsareagainavailable;– Thecreditspreadofaparticularbondisadjustedbasedon

acomparisonofcreditspreadsofsimilarbonds;– TheBankreceivesotherinformationaboutachangeofthe

spreadapplied;– Theissuer’screditratingchanges(changeofinternaland/or

externalrating,evidencefromthemarketthatcreditworthinessisworsening);and

– Theliquidityofthespecificsecuritieshasdeterioratedsignificantly.

Subsequently,theBankwillcarryoutthevaluationcomprisingnewaspectsofthemarketprice,includinganassessmentofpossibleimpairmentlosses(seeNote3(g)(ii)).TheBank’smanagementbelievesthatthefairvalueoftheassetsandliabilitiespresentedinthesefinancialstatementscanbemeasuredreliably.Financialassetsandliabilitiesarerecognisedatfairvaluedependingonthequalityoftheinputusedinthevaluation.Individuallevelsaredefinedasfollows:•Level1input–quoted(unadjusted)pricesonactivemarketsfor

identicalassetsorliabilitiesavailabletotheBankasofthedateofvaluation;

•Level2input–inputdataotherthanthequotedpricescontainedinlevel1thatareobservableforanassetorliabilityeitherdirectlyorindirectly.Thiscategoryincludestheinstrumentsvaluedat:


quotedpricesofsimilarassetsorliabilitiesonactivemarkets;quotedpricesofidenticalorsimilarassetsorliabilitiesonmarketsthatarenotactive;valuationtechniquesforwhichasignificantinputisobservableonthemarketdirectlyorindirectly;and

•Level3input–unobservableinputdataforanassetorliability.Thiscategoryincludesinstrumentsunderwhichvaluationtechniquescontainaninputnotbasedonobservabledataandtheunobservableinputmayhaveasignificantimpactontheinstrument’svaluation.

FairValueAdjustmentsTheBankutilisesotherfairvalueadjustmentsforthefairvaluesoffinancialassetsandfinancialliabilitiestoreflectrealityasfaithfullyaspossible:

CreditValuationAdjustmentTheCreditValuationAdjustment(CVA)isreflectedinthevaluationofderivativessuchthattheresultingfairvalueofderivativestakesintoaccountthecounterpartyriskandtheBank’screditquality.TheBankusesthesamegroupstandardforcalculatingCVAonthebasisoftheinputsasfollows:•Anticipatedprofileoftheexposurefromderivativesisestimated

onthebasisofthestochasticMonteCarlosimulation;•SimulatedexposuresfromderivativestakeintoaccountSpecific

WrongWayRisk;•Dependingonthetypeofthederivativecounterparty,CVAis

calculatedas:–UnilateralCVA–thecalculationisbasedonhistoricalPDandPGD

(thisrelatestonon-financialcounterpartiesandcounterpartiesthatdonothaveownCDStradableonthemarket);

–BilateralCVA–thecalculationisbasedonPDandLGDderivedfromquotedCDS;and

•CVAisnotcalculatedforcounterparties/clientsforwhichPD=1(ietheclientisindefault)topreventthecostsofcreditriskfrombeingincludedtwiceinanalready-recognisedprovision.

OISAdjustmentTheBankappliestheOIS(overnightindexswap)effecttocollateralisedexposuresinfinancialinstruments(derivatives,repoetc)denominatedinEUR.TheOISeffectisaddedtotheyieldcurveinEURsothattheresultingfairvalueoftherespectivefinancialinstrumentstakesintoaccounttheactualvalueofOIS.ThisadjustmentisrecognisedintheBank’sprofitandlossaccount.

FVA/AVAQuotedmarketexchangerates,yieldcurves,spreadsetc(“marketfactors”ingeneral)donotneedtoaccuratelyreflect,ateverymoment,theconditionsunderwhichtheBankmayliquidateitspositionsinfinancialinstruments.ThismayresultfromlargerthanstandardtradedvolumeswhichtheBankwouldliketorealiseonfinancialmarkets,stressperiodsonfinancialmarkets,periodswith

below-averagemarketliquidityetc.Inthesesituationstherealisedfairvaluecouldbelowerthanimpliedbyquotedmarketfactors.Therefore,inlinewithIFRSandCRR,theBankappliesFVAwhichaddsasurchargetoquotedmarketfactorsarisingfrom:•Liquidity;•Uncertaintyregardingprice/valuationmodelappliedtothefinancial

instrument;and•Creditrisk.

TheBankrecognisesthedeterminedFVAvalueintheprofitandlossaccount.InadditiontoFVA,additionalvaluationadjustment(AVA)isalsodeterminedbytheBankwithrespecttomarketfactors.AVAisdefinedasadifferencebetweenthefairvaluereportedintheBank’sbalancesheetincludingFVAandprudentvaluation(PV).PVrepresentsahighlyunlikely(butfair)valueofmarketfactorswhichmayoccuronthemarketuponthesaleoffinancialassetsduetostressonfinancialmarkets.

(vi)GainsandLossesonSubsequentMeasurementGainsandlossesarisingfromachangeinthefairvalueoffinancialassetsandliabilitiesheldfortradingarerecogniseddirectlyinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesheldfortrading”.Interestincomefromfinancialassetsheldfortradingisrecognisedinprofitorlossas“Interestincomeandsimilarincome”.Gainsandlossesarisingfromachangeinthefairvalueofotherfinancialassetsandliabilitiesdesignateduponinitialrecognitionatfairvaluethroughprofitorlossnotheldfortradingarerecogniseddirectlyinprofitorlossas“Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading”.Theinterestincomefromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortradingisrecognisedinprofitorlossas“Interestandsimilarincome”.Gainsandlossesarisingfromachangeinthefairvalueofavailable-for-saleassetsarerecognisedinothercomprehensiveincomeandbecometheequityitem“Reservesfromrevaluationofavailable-for-salesecurities”.Whenthefinancialassetsaresold,transferredorotherwisedisposedof,thecumulativegainorlossrecognisedinequityistransferredtoprofitorlossas“Netincomefromthesaleoffinancialassetsandliabilities”.Interestincomefromavailable-for-saledebtsecuritiesisrecognisedintheincomestatementas“Interestincomeandsimilarincome”.Theaccountingforimpairmentofavailable-for-saleassetsisdescribedinNote3(g).Gainsandlossesarisingfromfinancialassetsandliabilitiescarriedatamortisedcostarerecognisedinprofitorlosswhenthefinancialassetorliabilityisderecognisedorimpaired(seeNote3(g)),andthroughtheamortisationprocess.

(vii)DerecognitionAfinancialassetisderecognisedwhentheBanklosesthecontractualrightstothecashflowfromanassetortheBanktransfersthe


financialassetandthetransferqualifiesforderecognition.Thisoccurswhentherightsarerealised,expiredoraresurrendered.Afinancialliabilityisderecognisedwhenitissettled.Available-for-saleassetsandassetsrecognisedatfairvaluethroughprofitorlossthataresoldarederecognisedandthecorrespondingreceivablesfromthebuyerarerecognisedatthesettlementdate.TheBankusesaccountingmethodstodeterminethegainorlossonderecognition.Held-to-maturityinstrumentsandloansandreceivablesarederecognisedonthematuritydate,onthedaytheyaretransferredtoanotherportfoliooronthedayofsale.

(c) ParticipationInterestsControllinginterestmeansaparticipationinterestwheretheBankfactuallyorlegallyhasadirectorindirectcontrollinginterestinthegovernanceofthecompany(thismeanstheBank’sabilitytoparticipateinthefinancialandoperationalmanagementofthecompanyandtogainbenefitsfromtheactivities).Thisparticipationinterestresultsfromashareintheregisteredcapitalorfromcontractorstatuteswithoutregardtothetotalsizeoftheparticipationinterest.SubstantialinterestmeansaparticipationinterestwheretheBankfactuallyorlegallyhasadirectorindirectsubstantialinterestinthecompany’sgovernanceandoperations(thismeanstheBank’sabilitytoparticipateinfinancialandoperationalguidanceofthecompanybutwithoutacontrollinginterest).Thisparticipationinterestresultsfromashareintheregisteredcapital(morethan20%)orfromcontractorstatuteswithoutregardtothetotalsizeoftheparticipationinterest.Controllingandsubstantialinterestsarevaluedatacquisitionpricelesslossesarisingfromtheimpairmentoftheseparticipationinterests.Participationinterestsareshownwithin“Participationinterests”.

(d) Derivatives

(i) HedgingDerivativesHedgingderivativesarecarriedatfairvalue.Themethodofrecognisingfairvaluedependsonthemodelofhedgeaccountingapplied.

Hedgeaccountingcanbeappliedif:•ThehedgeisinlinewiththeBank’sriskmanagementstrategy;•Thehedgerelationshipisformallydocumentedattheinception

ofthehedge;•Itisexpectedthatthehedgerelationshipwillbehighlyeffective

throughoutitslife;•Theeffectivenessofthehedgerelationshipcanbeobjectively

measured;•Thehedgerelationshipishighlyeffectivethroughouttheaccounting

period;and•Inthecaseofhedgingfutureexpectedtransactions,itishighly

probablethatthetransactionwilloccur.

Ifaderivativehedgesanexposuretochangesinthefairvalueofrecordedassetsandliabilitiesoroflegally-enforceablecommitments,thehedgeditemattributabletotheriskbeinghedgedisalsocarriedatfairvalue.Gains(losses)onthere-measurementofaninterest-bearinghedgeditemandhedgingderivativearerecognisedinprofitorlossin“Netincomefromhedgingagainstriskofchangesinfairvalue”.Realisedinterestincomeandexpensesarereportedonanetbasisin“Interestincomeandsimilarincome”or“Interestexpenseandsimilarcharges”.Ifthederivativehedgesanexposuretothevariabilityofcashflowsrelatedtorecognisedassetsandliabilitiesorexpectedtransactions,theeffectivepartofthehedge(fairvalueofthehedgingderivative)isrecognisedinothercomprehensiveincomeandbecomestheequityitem“Reservesfromrevaluationofhedginginstruments”.Theineffectivepartofthehedgeisrecognisedinprofitorloss.Ifthehedgingofexpectedtransactionsresultsintherecordingofanassetorliability,thecumulativegainsorlossesfromrevaluationofthehedgingderivativepreviouslyrecognisedinothercomprehensiveincomearetransferredtoprofitorlossatthesametimeasthehedgeditemaffectsthenetprofitorloss.Whenahedginginstrumentorhedgerelationshipisterminatedbutthehedgedtransactionisstillexpectedtooccur,thecumulativegainorlossrecognisedinothercomprehensiveincomeremainsinequityandisrecognisedinaccordancewiththeaforementionedpolicy.Ifthehedgedtransactionisnolongerexpectedtooccur,thecumulativegainorlosspreviouslyrecognisedinothercomprehensiveincomeisimmediatelyrecognisedinprofitorloss.

(ii) EmbeddedDerivativesSometimes,aderivativemaybeacomponentofacombinedfinancialinstrumentthatincludesahostcontractandaderivative(theembeddedderivative)effectingcashflowsorotherwisemodifyingthecharacteristicsofthehostinstrument.Anembeddedderivativemustbeseparatedfromthehostinstrumentandaccountedforasaseparatederivativeif,andonlyif:•Theeconomiccharacteristicsandrisksoftheembeddedderivative

arenotcloselyrelatedtotheeconomiccharacteristicsandrisksofthehostcontract;

•Aseparatefinancialinstrumentwiththesametermsastheembeddedderivativewouldmeetthedefinitionofaderivativeasastand-aloneinstrument;and

•Thehostinstrumentisnotmeasuredatfairorismeasuredatfairvaluebutchangesinfairvaluearerecognisedinothercomprehensiveincome.

(e) BorrowingandLendingofSecuritiesFinancialassetslentundersecuritieslendingarrangementsorsoldunderrepurchaseagreementscontinuetoberecognisedinthebalancesheetandaremeasuredinaccordancewiththeaccountingpolicyforsuchfinancialassetsasappropriate.Asaresultofthecashcollateralreceivedinrespectofsecuritieslent/soldunderrepurchase


agreements,theBankrecognisesaliabilitytoeitherbanksorcustomersintheamountofthiscompensation.FinancialassetsborrowedundersecuritiesborrowingagreementsorpurchasedsubjecttocommitmentstoresellthematfuturedatesarenotrecognisedintheBank’sstatementoffinancialposition.Asaresultofthecashcollateralprovidedinrespectofsecuritiesborrowed/purchasedundersecuritieslendingarrangementsorresaleagreements,theBankrecognisesloansandadvancestoeitherbanksorcustomers.Thereceivablesarerecordedascollateralisedbytheunderlyingsecurity.Inthecaseofthesaleofasecurityacquiredonthebasisofsecuritieslendingarrangementsorrepurchaseagreements,theBankderecognisesthesecuritiesacquiredinsuchmannerfromoff-balancesheetandrecordsapayablefromashort-termsale,whichisrevaluedtofairvalue,inthebalancesheet.Thispayableisreportedunder“Financialliabilitiesheldfortrading”.Incomeandexpensesarisingfromtheborrowingandlendingofsecurities,aswellasthedifferencebetweenthesaleandrepurchaseconsiderationsarerecognisedonanaccrualbasisovertheperiodofthetransactionsandarerecognisedinprofitorlossin“Interestincomeandsimilarincome”or“Interestexpenseandsimilarcharges”.

(f) OffsettingFinancialassetsandliabilitiesmaybeoffsetandthenetamountisreportedinthestatementoffinancialpositionwhentheBankhasalegallyenforceablerighttosetofftherecognisedamountsandthetransactionsareintendedtobereportedinthestatementoffinancialpositiononanetbasis.TheBankdoesnotoffsetanyfinancialassetsandfinancialliabilities.

(g) ImpairmentAssetsareassessedateachbalancesheetdatetodeterminewhetherthereisanyobjectiveevidenceofimpairment.Ifanysuchindicationexists,theasset’srecoverableamountisestimatedandtheimpairmentoftheassetisrecognisedinprofitorloss.

(i) LoansandReceivablesandHeld-to-MaturityAssetsLoansandreceivablesandheld-to-maturityassetsarepresentedatamortisedcost,ienetofimpairmentlossesforuncollectibility.Specificimpairmentlossesaremadeagainstthecarryingamountofloansandreceivablesandheld-to-maturityassetsinordertoreducetheseassetstotheirrecoverableamounts.Therecoverableamountofloansandreceivablesandheld-to-maturityassetsiscalculatedasthepresentvalueoftheestimatedfuturecashflows,discountedattheinstrument’soriginaleffectiveinterestrate.Collectiveimpairmentlossesofportfoliosofstandardloans,forwhichnoobjectiveevidenceofimpairmenthasbeenidentifiedonanindividualbasis,aremaintainedtoreducethecarryingamountoftheportfoliosoffinancialassetswithsimilarcreditriskcharacteristicstotheirestimatedrecoverableamountsatthebalancesheetdate.Theexpectedcashflowsforportfoliosofsimilarassetsareestimated

basedonhistoricallossexperienceandconsideringthecreditratingoftheunderlyingcustomers.Historicallossexperienceisthebasisforcalculatingtheexpectedloss,whichisadjustedbythelossconfirmationperiod,whichrepresentstheaveragetimelagbetweenoccurrenceofalosseventandconfirmationoftheloss.Thisconceptenablesrecognitionofthoselossesthathaveoccurredintheportfolioatthebalancesheetdate.Whenaloanisknowntobeuncollectible,allthenecessarylegalstepshavebeentakenandthefinallosshasbeendetermined,theloaniswrittenoffdirectlyandanypreviouslyunrecognisedlossisrecognisedinprofitorlossunder“Impairmentlossesonfinancialassets”.Anyconsiderationreceivedinrespectofaloanwrittenoffisrecognisedinprofitorlossunder“Otheroperatingincome”.Ifinasubsequentperiodtheamountofimpairmentlossdecreasesandthedecreasecanbelinkedobjectivelytoaneventoccurringaftertheimpairmentloss,theimpairmentlossisreversedthroughprofitorlossin“Impairmentofloansandreceivables”.

(ii) Available-for-saleFinancialAssetsWhereanavailable-for-saleassetisimpaired,andadeclineinthefairvaluewaspreviouslyrecognisedinothercomprehensiveincome,thecumulativelossisreclassifiedtoprofitorlossandrecognisedin“Impairmentlossesonfinancialassets”.Whereadebtinstrumentclassifiedasanavailable-for-saleassetisimpaired,andanincreaseinthefairvalueoftheassetwaspreviouslyrecognisedinequity,theincreaseinfairvalueoftheassetrecognisedinothercomprehensiveincomeisreversedtotheextentoftheimpairment.Anyadditionalimpairmentlossisrecognisedinprofitorloss.Impairmentlossesrecognisedinprofitorlossarisingfrominvestmentinequityinstrumentsclassifiedasavailable-for-salearenotreversedthroughprofitorloss.

(h) PropertyandEquipmentandIntangibleAssetsPropertyandequipmentandintangibleassetsareassetswhichareheldinordertopursuebankingactivitiesandwhichmaybeusedforaperiodoflongerthanoneyear.Propertyandequipmentandintangibleassetsarestatedathistoricalcostlessaccumulateddepreciationandimpairment.Depreciationiscalculatedusingthestraight-linemethodovertheassets’estimatedusefullives.Thedepreciationperiods(overrespectiveestimatedusefullives)forindividualcategoriesofpropertyandequipmentandintangibleassetsareasfollows:•Buildings 20–50years•Technicalimprovementofbuildings protectedasculturalheritage 15years•Technicalimprovementofrentedpremises 10years

orinaccordancewiththecontract•Air-conditioningequipment 5years•Machineryandequipment 4–6years•Bankvaults 20years•Fixturesandfittings 5–6years


•Motorvehicles 4years•ITequipment 4years•Softwareandintangibleassets 2–7yearsorinaccordance withthecontract•Lowvaluetangibleassets 2–3years

Bothtangibleandintangibleassetsareassessedforpotentialimpairmentorareductioninusefullife.Ifeventsorchangesintheconditionsoccurthatcouldresultinthecarryingamountnotbeingrecoverable,thecarryingamountiswrittendowntotherecoverableamountifthecarryingamountishigherthantheestimatedrecoverablevalue.Therecoverableamountisthehigheroffairvaluelesscostsofdisposalandthevalueinuse.Thegainsandlossesondisposalaredeterminedbasedonthenetbookvalueandareincludedinotheroperatingincomeorexpenses.Thecostsofrepair,maintenanceandtechnicalimprovementareexpensedastheyareincurred.Technicalimprovementsexceedingthelegallimitsarecapitalised.Propertyandequipment,whichtheBankintendstosellwithin12months,isclassifiedas“Non-currentassetsheldforsale”.Suchpropertyandequipmentisreclassifiedatthelowerofitscarryingamountoritssalesvaluelessdisposalcosts.

(i) LeasesTheBankconcludedmainlyoperatingleasecontracts.Totalpaymentsrelatedtothesecontractsareincludedin“Administrativeexpenses”evenlyovertheperiodoftheleasecontract.Inthecaseofcontractcancellationbeforetheendoftheleasecontract,allrequiredpenaltypaymentsareaccountedforasaperiodcostatthetimeofcancellingthelease.

(j) ProvisionsProvisionsrelatetoaprobableoutflowofanuncertainamountoveranuncertainperiodoftime.Provisionsarerecognisedwhen:•Thereisanobligation(legalorconstructive)asaresultofapast

event;•Itisprobablethatanoutflowofresourceswillberequiredtosettle

theobligation(probablemeanstheprobabilityexceeds50%);and•Theamountoftheobligationcanbereliablyestimated.

Arestructuringprovisionisrecognisedwhenthefollowingcriteriaaremet:•TheBankhaspreparedadetailedandformalrestructuringplan;•Thoseaffectedbytherestructuringhavearealisticexpectation

thattherestructuringwilltakeplaceduethefactthattheimplementationoftheplanhascommencedoritsmainfeatureshavebeenannounced.

(k) InterestIncomeandExpenseInterestincomeandexpensesarerecognisedinprofitorlossintheperiodtowhichtheyrelate,usingtheeffectiveinterestratemethod.

Interestfromloansanddepositsareaccruedonadailybasis.Interestincomeandexpensesincluderelevanttransactioncostsandtheamortisationofanydiscountorpremiumbetweentheinitialcarryingamountofaninterest-bearinginstrumentanditsamountatmaturitycalculatedonaneffectiveinterestratebasis.Inthecurrentenvironmentofnegativeinterestrates,negativeinterestincomeispresentedinincomewiththenegativesign.Negativeinterestexpenseispresentedininterestexpensewiththeoppositesign.

(l) FeeandCommissionIncomeandExpenseFeeandcommissionincomeandexpenseconsistoffeesandcommissionsreceived/paidbytheBankforprovidingfinancialservicesotherthanthoserelatedtotheoriginationofafinancialassetorliability,whichformapartoftheeffectiveinterestincome/expense.FeesandcommissionsariseonfinancialservicesprovidedbytheBank,includingpaymentservices,brokerageservices,investmentadviceandfinancialplanning,investmentbankingservicesandassetmanagementservices.Feeandcommissionincomeisrecognisedwhenthecorrespondingserviceisprovidedorcompleted.

(m)DividendincomeDividendincomeisrecognisedinprofitorlossin“Dividendincome”onthedatethatthedividendisdeclared.

(n) DeferredBonusesTheBankaccountsfordeferredbonusesontheaccrualbasisofaccounting.

(o) TaxationTaxnon-deductibleexpensesareaddedtoandnon-taxableincomeisdeductedfromtheprofitfortheperiodpursuanttoCzechAccountingStandardstoarriveatthetaxableincome,whichisfurtheradjustedbytaxallowancesandrelevantcredits.Thetaxpayableorreceivableiscalculatedusingthetaxratevalidattheyear-endandreportedintheexpectedamountofthesettlementwiththetaxauthorities.Deferredtaxisprovidedonalltemporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialstatementpurposesandtheamountsusedfortaxationpurposesmultipliedbytheexpectedincometaxratefortheperiodoftheassetrecoveryorliabilitysettlement.Adeferredtaxassetisrecognisedonlytotheextentthattherearenodoubtsthattherewillbefuturetaxableprofitsavailableagainstwhichthisassetcanbeutilised.

(p) ContingentAssetsandLiabilitiesAcontingentasset/liabilityisapotentialasset/liabilitythatarisesfrompasteventsandwhoseexistencewillbeonlyconfirmedbytheoccurrenceornon-occurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheentity.TheBankdoesnotrecognisecontingentassets/liabilitiesinthebalancesheetbutregularlyreviewstheirdevelopmenttospecifywhetheraninflow/outflowofresourcesembodyingeconomicbenefitshasbecome


probable.Wherethelikelihoodofanoutflowofeconomicbenefitsishigherthan50%,theBankwillrecogniseaprovision.Wherethelikelihoodofaninflowofeconomicbenefitsisalmost100%,theBankwillrecogniseanassetandrevenue.

(q) SegmentReportingIFRS 8 Operating segmentsstatesthatpresentationandreportingofoperatingsegmentsshallbeinaccordancewithperformancecriteriamonitoredbythechiefoperatingdecision-makerwhoisresponsibleforoperationaldecisions.AttheBank,thatdecision-makeristheBoardofDirectors.In2016,thestructureofinternalorganisationandthecompositionofreportedsegmentschanged.TheBank’sprimarysegmentreportingisbrokendownbytypesofclients,whichcorrespondtotheBank’svariousoperations:retailandprivatebanking,corporateandinvestmentbankingandother.TheperformanceofallthesegmentsismonitoredmonthlybytheBoardofDirectorsandothermembersoftheBank’smanagement.Thereportingsegmentsgenerateincomeprimarilyfromtheprovisionofloansandotherbankingproducts.Retail and private banking encompassesinparticularprovidingloans,mortgages,bankaccountmaintenance,paymentservices(includingpaymentcards),termandsavingdeposits,investmentadvisoryservices.Corporate and investment bankingtakesinespeciallythefollowingproductsandservices:providingbankingservicestocompaniesandpublicinstitutions,includingloans,bankguarantees,accountmaintenance,paymentservices,openingdocumentarylettersofcredit,termdeposits,derivativeandforeigncurrencyoperations,andcapitalmarketactivitiesinclusiveofsecuritiesunderwritingforclients,investmentadvisory,andconsultingonmergersandacquisitions.Otherincludesbankingactivitiesthatarenotincludedwithintheaforementionedsegments.

(r) StandardsandInterpretationsEffectiveintheCurrentPeriod•AmendmentstoIAS7Disclosure Initiative(effectiveforannual

periodsbeginningonorafter1January2017);•AmendmentstoIAS12Recognition of Deferred Tax Assets for

Unrealised Losses(effectiveforannualperiodsbeginningonorafter1January2017);and

•AmendmentstoIFRS12duetoImprovements to IFRSs (cycle 2014–2016)(amendmentstoIFRS12aretobeappliedforannualperiodsbeginningonorafter1January2017,buttheydonotaffecttheBank’sseparatefinancialstatements.

(s) StandardandInterpretationsIssuedbytheIASBandAdoptedbytheEUthatareNotYetEffective

TheBankhasevaluatedtheimpactofstandards,interpretationsandamendmentstovalidstandardswhicharenotyetinforceandwerenotusedinpreparingthesefinancialstatementsbutwhicharealreadyapprovedandwillhaveanimpactontheBank’sfinancialstatementsinthefuture.TheBankiscurrentlyanalysingtheimpacts

arisingfromtheadoptionofthesestandards.TheBankplanstoimplementthesestandardsatthedatetheybecomeeffective.

•IFRS 9 “Financial Instruments”iseffectiveforannualperiodsbeginningonorafter1January2018andreplacesIAS 39 “Financial Instruments: Recognition and Measurement”.

IFRS9•willintroducesignificantchanges,comparedtoIAS39,tothe

classificationandmeasurementofloansanddebtinstrumentsbasedonthe“businessmodel”andonthecharacteristicsofthecashflowsofthefinancialinstrument(SPPI–SolelyPaymentsofPrincipalandInterestcriteria);

•requirestheclassificationoftheequityinstrumentsatfairvalueeitherthroughprofitorlossorthrough“othercomprehensiveincome”.Inthissecondcase,unlikepreviousrequirementsforavailable-for-saleassetssetbyIAS39,IFRS9haseliminatedtherequesttorecogniseimpairmentlossesandprovidefor,incaseofdisposaloftheinstruments,thegainorlossesfromdisposalshallberecycledtootherequityreservesandnottoprofitandlossaccounts;

•willintroduceanewaccountingmodelforimpairment,basedon(i)theexpectedlossesapproachsubstitutingthecurrentapproachbasedontheincurredlosses,and(ii)willintroducetheconceptof“lifetime”expectedlosses,andconsequentlyananticipationandastructuralincreaseofprovisioningwithparticularreferencetocreditlosses;

•worksonthehedgeaccountingmodelrewritingtherulesforthedesignationofahedgeaccountingrelationshipandfortheverificationofitseffectivenessinordertoachieveastrongeralignmentbetweenthehedgeaccountingtreatmentandtheunderlyingriskmanagementlogic.ItshouldbenotedthattheprincipleallowstheentitytomakeuseofthepossibilitytocontinuetoapplyIAS39hedgeaccountingrulesuntiltheIASBhascompletedtheprojectonthedefinitionofmacro-hedgingrules;and

•changestheaccountingtreatmentof“owncreditrisk”,inotherwords,changesinthefairvalueofissueddebtliabilitiesthataredesignatedatfairvaluenotattributabletochangesoftheowncreditprice.Thenewaccountingstandardrequiresthesechangesshallberecognisedinaspecificequityreserve,ratherthantotheincomestatement,asrequestedunderIAS39,thereforeremovingavolatilitysourcefromtheeconomicresults.

Inordertoensurepromptcompliancewiththerequirementssetbytheaccountingprinciples,theGrouphasactivatedaprojectthatisinitsfinalphasewiththeaimofcreatingaccountingandriskmonitoringmethodologiesharmonisedacrossGroupLegalEntities.MirroringthemainchangesrequiredbyIFRS9,theGroupwideprojecthasbeenorganisedthroughwork-streamsspecifically:•ClassificationandMeasurementwork-stream,aimedatreviewing

theclassificationofthefinancialinstrumentsaccordingtonewIFRS9criteria,;and

•Impairmentwork-stream,aimedatdevelopingandimplementingmodelsandmethodologiesforimpairmentcalculation.


TheBankhasparticipatedontheGroupwideprojectbyperformingtheimpactanalysisandimplementingallchangesinlinewiththeGrouprequirements.Withreferencetothe“ClassificationandMeasurement”work-stream,theGrouphas:•identifiedthecriteria,basedonthenewbusinessmodeland

onthefeaturesoftheassociatedcontractualcashflows,fortheclassificationoffinancialinstrumentsinthenewcategoriesforeseenbytheaccountingstandard;and

•appliedthecriteriaidentifiedfortheclassificationoftheexistingportfolio.

TheanalysisofthebusinessmodelhasbeenperformedbymappingthebusinessareascomprisingtheGroupandbyattributingthemaspecificbusinessmodel.Inthisregard,a“heldtocollect”or“heldtocollectandsell”businessmodelhasbeenattributedtothebusinessareascomprisingthebankingportfoliooftheGroupinrelationtothereasonswhytheinstrumenthasbeenacquiredororiginatedandtotheexpectedturnoveroffinancialinstruments.Inthiscontext,possiblesalesoffinancialinstrumentsareconsideredascompliantwiththe“heldtocollect”businessmodelincaseof(i)securitisationtransactionsthatdonotachievethederecognitionoftheunderlyingloans,(ii)salesdeterminedbyanadversechangeinthecreditriskofthecounterparty,(iii)salesthatareinfrequentornotsignificanttobeevaluatedcasebybase.Abusinessmodel“other”hasbeenassignedtothebusinessareascomprisingthetradingportfoliooftheGroupsotoreflectthetradingintent.FortheclassificationoffinancialassetsinthenewIFRS9categories,theanalysisofthebusinessmodeliscomplementedbytheanalysisofthecontractualcashflows(“SPPITest”).Inthisregard,theGrouphasdevelopedprocessesandsystemsaimedatanalysingtheportfolioofsecuritiesandloanssotoassesswhetherthefeaturesoftheircontractualcashflowsallowtheirmeasurementatamortisedcost(“heldtocollect”portfolio)oratfairvaluethroughcomprehensiveincome(“heldtocollectandsell”portfolio”).Thisanalysiswasperformedonthelocalleveleithercontractbycontractorbyclusters,definedonthebasisofthefeaturesoftheasset,andusingaspecifictoolinternallydeveloped(SPPITool)inordertoanalysethefeatureofthecontractsincomparisonwithIFRS9requirementsormakinguseofanexternaldataprovider.Basedontheanalysis,noneedforreclassificationoffinancialassetsduetofailingtheSPPITestwasidentified.Equityinstrumentswillbemeasuredatfairvaluethroughprofitorlossorcomprehensiveincomedependingontheirfeaturesandthereasonsforwhichtheyhavebeenacquired.Unitsininvestmentsfundswillbemeasuredatfairvaluethroughprofitorlossfollowingregulatoryrequirementsthatexcludethepossibilitytoconsidertheseinstrumentsasequityinstruments.

Withreferencetothe“Impairment”work-stream,newimpairmentmodelshavebeenadaptedtocomplywiththenewaccountingrequirements,alsofollowingthe“Guidelinesoncreditinstitutions’creditriskmanagementpracticesandaccountingforexpectedcreditlosses”issuedbytheEBA.Theapplicableassetperimetersubjecttoexpectedlossescalculationhavebeenextendedinordertoinclude,inadditiontofinancialassetsatAmortisedCostandtheapplicableoffbalancesheetexposures,allcreditexposuresassetsclassifiedatFairValuethroughOtherComprehensiveIncome.Furthermore,specificadjustmentshavebeendevelopedonProbabilityofDefault(PD),LossGivenDefault(LGD)andExposureAtDefault(EAD)parameterstocompoundtheExpectedCreditLoss(ECL),andanewmodelhasbeendevelopedtoassesstheStageAllocationonunimpairedassets,attransactionlevel,betweenStage1andStage2.ThemaindifferencebetweenthetwostagesisreferredtothetimehorizonwhichtheECLisexpectedtobecalculatedon.

OnLGDandEADspecificadjustmentsareappliedtoparametersalreadycalculatedfor“regulatory”purposes,inordertoensurefullconsistency,netofdifferentregulatoryrequirements,betweenregulatoryandaccountingtreatment.Themainadjustmentsaresuchsoasto:•removetheconservatismrequiredforregulatorypurposesonly;•introducea“pointintime”adjustment,insteadofthe“throughthe

cycle”adjustmentembeddedintheregulatoryparameters;•includeforward-lookinginformation;and•extendthecreditriskparametersinamultiyearperspective.

AsforwhatconcernsPDs,dedicatedlifetimePDcurveshavebeendevelopedforeachmainclientsegmentbasedoncumulateddefaultrates,andcalibratedtoreflectapointintimeandforward-lookingexpectationabouttheportfoliodefaultrates.RecoveryratesembeddedintheregulatoryLGDmodelshavebeenadjustedtoremoveallmarginsofconservatismandtoreflecttheexpectationaboutfuturetrendinrecoveryrates.ThelifetimeEADhasbeenobtainedbyextendingthe1Yregulatoryormanagerialmodel,removingallmarginsofconservatismandcalculatingadedicatedadditionalparameterrepresentingexpectedcreditlineutilisation.TheExpectedCreditLossderivedfromsuchadjustedparametershasbeencompoundedalsotakingintoconsiderationmacroeconomicforecasts.AkeyaspectderivingfromthenewmodelincompoundingthefinalExpectedCreditLossisrepresentedbytheStageallocationmodel,aimedtoallocatecredittransactionsbetweenStage1andStage2(Stage3beingequivalenttoImpairedassets),whereasStage1mainlyincludes(i)newlyoriginatedexposures,(iii)exposureswith“nosignificantdeteriorationincreditqualitysinceinitialrecognition”or(iii)“lowcreditrisk”exposuresatthereportingdate.


IntheUnicreditGroupthestageallocationassessmentincludesacombinationofrelativeandabsolutetriggers.Themaintriggersinclude:•therelativecomparison,attransactionlevel,betweenthePD

atoriginationandthePDateachreportingdate,bothcalculatedthroughinternalmodels,withthresholdssetinsuchawaytoconsiderallthekeyvariablesofeachtransactionthatcouldaffecttheBank’sexpectationaboutPDchangesovertime(e.g.age,maturity,levelofPDatorigination);

•absolutetriggerssuchasbackstopsrequiredbytheregulation(i.e.30dayspastdue);and

•otherinternalrelevanttriggers(e.g.newclassificationstoForborne).

OnassetsrepresentedbySecurities,theUnicreditGrouphasopted,fullyincompliancewiththeapplicablestandard,toapplythe“lowcreditriskexemption”oninvestmentgradesecurities.AlsoImpairmentcalculatedon“ImpairedAssets”hasbeenadjustedasrequiredbythenewregulation,inordertoinclude(i)adjustmentsonbothcollectivelyandindividuallyassessedtransactions,intermsofpointintime,forwardlookingadjustmentsand(ii)multiplescenariosapplicabletothisclassofassets.Inthisevaluation,alsoexpecteddisposalscenariosareconsideredasfarasGroupNon-PerformingAssetsStrategyforeseestherecoveryofdefaultedassetsalsothroughtheirtransfer.Indefiningtheperimeterofimpairedassets,theDefinitionofDefaultcurrentlyappliedwithintheUnicreditGrouphasbeenadopted,alreadyincorporatingsomeofthekeyprinciplesembeddedintheDefinitionofDefaultguidelinesissuedbyEBA,suchastheassessmentofimpairmentordefaultbyconsideringtheoverallexposuretoagivendebtor(socalled“debtorapproach”).WithreferencetohedgeaccountingtheGroupoptedtokeepapplyingtheexistinghedgeaccountingrequirementsinIAS39forallhedgeaccountinguntiltheIASBcompletesitsprojectonaccountingformacrohedging.WithreferencetotheimplementationofthemethodologicalframeworkandtoolsdescribedaboveinthedailyoperationstheBank,inlinewiththeprojecttimeline,hasdesignedthefinalITarchitecture,andisfinalisingthedevelopmentoftheorganisationalprocessesandprocedures.TheGroupplanstousethetransitionalreliefallowedbythestandardandwillnotpublishcomparativesfiguresinthe2018financialreports.TheUniCreditGroupIFRS9projectispartoftheEuropeanCentralBankThematicReview.InadditionthemethodologicalapproachesadoptedbytheUniCreditGroupinthecontextoftheIFRS9projecthavebeensubjecttostructuredreviewbyExternalAuditorsthatarecurrentlyperformingareviewoftheimplementations.Inthisregard,wehighlightthatfromtheanalysisperformedsofarnocriticalitieshavearisenthatmaycastdoubtsontheoveralladequacyofthementionedmethodologicalapproaches,pursuanttotherequirementsofthenewprinciple.Atthedateoffirsttimeapplication,themainimpactsofIFRS9ontheUniCreditGroupareexpectedto

comefromtheapplicationofthenewmodelforimpairmentbasedontheexpectedlossesapproach,whichisexpectedtocauseanincreaseinwrite-downsmadeonfinancialassets(especiallyloansandreceivableswithcustomers),aswellastheapplicationofthenewtransferlogicbetweenthedifferentStagesprovidedforbythenewstandard.Inparticular,greatervolatilityisexpectedtobegeneratedinthefinancialresultsbetweendifferentreportingperiodsduetothedynamicchangesbetweendifferent“Stages”ofthefinancialassetsrecognisedinthefinancialstatements(especiallybetween“Stage1”,whichwillincludethenewpositionsoriginatedaswellasallperformingloans,and“Stage2”whichwillincludepositionsinfinancialinstrumentsthathavesufferedasignificantcreditriskdeteriorationsinceinitialrecognition).AdjustmentstothecarryingvalueoffinancialinstrumentsduetoIFRS9transitionwillbeaccountedforthroughEquityasofJanuary1,2018andtheywillhaveanimpactonCET1–grossoftaxeffectisexpectedtobeadecreaseofuptoCZK170million,i.e.theestimatedimpactontheTier1ratiotobeadecreaseofupto5bps.Withreferenceto“ClassificationandMeasurement”,nosignificantreclassificationsofloansanddebtinstrumentsatfairvaluethroughprofitorlossduetothecharacteristicsofthecashflows(SPPIcriterion)areexpected.Consequently,theeffectonCET1grossoftaxeffecttobeanincreaseofuptoCZK63million,i.e.theestimatedimpactonTier1ratiotobeanincreaseofupto2bps.FollowingtheentryintoforceofIFRS9,areviewoftheregulatorytreatmentforthecalculationofthecapitalabsorptionofexpectedcreditlosses(CRD/CRR)isforeseen.Inthatregard,EURegulationNo.2017-2395,issuedon27December2017,allows,asanoption,financialinstitutionstoadoptatransitionalregimewheretheadditionalLoanLossProvisionscouldbeincludedinCET1witha“phase-in”mechanismover5yearsstartingfrom2018.TheBankwillnotadoptthetransitionalregime.

•IFRS15“Revenue from Contracts with Customers”(effectiveforannualperiodsbeginningonorafter1January2018).

IFRS15,effectivestartingfrom1January2018,hasbeenendorsedbytheEuropeanUnionwithRegulationEU2016/1905of22September2016(publishedon29October2016),modifiesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonrevenuerecognitionand,inparticular,IAS18Revenue.IFRS15providesfor:•twoapproachesfortherevenuerecognition(“atpointintime”

or“overtime”);•anewmodelfortheanalysisofthetransactions(“Fivesteps

model”)focalisedonthetransferofcontrol;and•therequestforamoredetaileddisclosuretobeincludedinthe

explanatorynotestothefinancialstatements.

Theadoptionofthenewaccountingstandardcoulddetermine(i)reclassificationbetweenlinesofincomestatementusedforpresentingrevenues,(ii)changeinthetimingrecognitionofsuch


revenue,whenthecontractwiththecustomercontainsseveralperformanceobligationthatmustbeaccountedforseparatelyundertheaccountingstandard,(iii)differentmeasureoftherevenuesotoreflecttheirvariability.BasedontheanalysisperformedsofarnomajorimpactsareforeseenbytheadoptionofIFRS15.

•IFRS16“Leases”(effectiveforannualperiodsbeginningonorafter1January2019)

IFRS16,effectivestartingfrom1January2019,hasbeenendorsedbytheEuropeanUnionwithRegulationEU2017/1986of31October2017(publishedon9November2017),modifiesthecurrentsetofinternationalaccountingprinciplesandinterpretationsonleasesand,inparticular,IAS17.IFRS16introducesanewdefinitionforleasesandconfirmsthecurrentdistinctionbetweentwotypesofleases(operatingandfinance)withreferencetotheaccountingtreatmenttobeappliedbythelessor.Withreferencetotheaccountingtreatmenttobeappliedbythelessee,thenewaccountingstandardsets,foralltheleasingtypologies,therecognitionasanasset,representingtherightofuseoftheunderlyingassetand,atthesametime,aliabilityreflectingthefuturepaymentsoftheleasecontract.Attheinitialrecognitionsuchassetismeasuredonthebasisoftheleasecontractcashflows,whichincludeinadditiontothepresentvalueofleasepayments,anyinitialdirectcostattributabletotheleaseandanyothercostsrequiredforthedismantling/removingtheunderlyingassetattheendofthecontract.Aftertheinitialrecognitiontheright-of-usewillbemeasuredonthebasisoftheprevisionssetfortangibleassetsapplyingthecostmodellessanyaccumulateddepreciationandanyeventualaccumulatedimpairmentlosses,therevaluationmodelorthefairvaluemodelsetbyIAS16orbyIAS40.Animpactanalysisonthelocallevelwasperformedwithnosignificantimpactidentified,includinganimpactoncapitaladequacyratio.

•AmendmentstoIAS28dueto“Improvements to IFRSs (cycle 2014–2016)”resultingfromtheannualimprovementprojectofIFRS(IFRS1,IFRS12andIAS28)primarilywithaviewtoremovinginconsistenciesandclarifyingwording(amendmentstoIAS28aretobeappliedforannualperiodsbeginningonorafter1January2018).TheamendmentstoFIRS1andIFRS12havenoimpactontheBank’sseparatefinancialstatements.

•AmendmentstoIFRS4Applying IFRS 9 “Financial Instruments” with IFRS 4 “Insurance Contracts”(effectiveforannualperiodsbeginningonorafter1January2018).TheamendmenttoIFRS4donotimpacttheBank.

(t) StandardsandInterpretationsPublishedbytheIASB,butnotyetAdoptedbytheEuropeanUnion

•IFRS14Regulatory Deferral Accounts(effectiveforannualperiodsbeginningonorafter1January2016)–theEuropeanCommissionhasdecidednottolaunchtheendorsementprocessofthisinterimstandardandtowaitforthefinalstandard;


•IFRS17Insurance Contracts(effectiveforannualperiodsbeginningonorafter1January2021);

•AmendmentstoIFRS2Classification and Measurement of Share-based Payment Transactions”(effectiveforannualperiodsbeginningonorafter1January2018);

•AmendmentstoIFRS9Financial Instruments – Prepayment Features with Negative Compensation(effectiveforannualperiodsbeginningonorafter1January2019);

•AmendmentstoIFRS10andIAS28–Sale or Contribution of Assets between an Investor and its Associate or Joint Venture(effectivedatedeferredindefinitelyuntiltheresearchprojectontheequitymethodhasbeenconcluded);

•AmendmentstoIAS19Plan Amendment, Curtailment or Settlement(effectiveforannualperiodsbeginningonorafter1January2019);

•AmendmentstoIAS28Investments in Associates and Joint Ventures–Long-term Interests in Associates and Joint Ventures(effectiveforannualperiodsbeginningonorafter1January2019);

•AmendmentstoIAS40Transfers of Investment Property(effectiveforannualperiodsbeginningonorafter1January2018);

•Amendmentstovariousstandardsdueto“Improvements to IFRSs (cycle 2015–2017)”resultingfromtheannualimprovementprojectofIFRS(IFRS3,IFRS11,IAS12andIAS23)primarilywithaviewtoremovinginconsistenciesandclarifyingwording(effectiveforannualperiodsbeginningonorafter1January2019);

•IFRIC22Foreign Currency Transactions and Advance Consideration(effectiveforannualperiodsbeginningonorafter1January2018);and

•IFRIC23Uncertainty over Income Tax Treatments(effectiveforannualperiodsbeginningonorafter1January2019).

(u)TransactionsUnderCommonControlAbusinesscombinationbetweenentitiesorcompaniesundercommoncontrolisabusinesscombinationwhereallcombiningentitiesorcompaniesareultimatelycontrolledbythesamepartyorpartiesaspriortoandpostthebusinesscombinationandthiscontrolisnottemporary.ForbusinesscombinationsundercommoncontroltheBankhasadoptedthemethodofcarryingamountsoftheacquiredbusinessandconcurrentlyreportsthesetransactionsprospectively,iewithoutadjustmentsincomparativeperiods.

4.Criticalaccountingestimatesandjudgements

Thesedisclosuressupplementthecommentaryonfinancialriskmanagement(seeNote40).ThepresentationoftheseparatefinancialstatementsinconformitywithIFRSrequirestheBank’smanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthebalance

sheetdateandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Theseestimates,whichspecificallyrelatetothedeterminationoffairvaluesoffinancialinstruments(wherenopublicmarketexists),impairmentofassetsandprovisions,arebasedontheinformationavailableatthebalancesheetdate.

(a) KeySourcesofEstimationUncertainty

(i) ImpairmentAssetsaccountedforatamortisedcostareevaluatedforimpairment.Thespecificcounterpartycomponentoftheimpairmentappliestoclaimsevaluatedindividuallyforimpairmentandisbaseduponmanagement’sbestestimateofthepresentvalueofthecashflowsthatareexpectedtobereceived.Inestimatingthesecashflows,managementmakesjudgementsaboutthecounterparty’sfinancialsituationandthenetrealisablevalueofanyunderlyingcollateral.Collectivelyassessedimpairmentcoverscreditlossesinherentinportfoliosofclaimswithsimilareconomiccharacteristicswhenthereisobjectiveevidencetosuggestthattheycontainimpairedclaimsbuttheindividualimpaireditemscannotyetbeidentified.Inassessingtheneedforcollectiveimpairment,managementconsidersfactorssuchascreditquality,portfoliosize,concentrationsofcreditrisk,andothereconomicfactors.Inordertoestimatetherequiredimpairment,assumptionsaremadetodefinethewayinherentlossesaremodelledandtodeterminetherequiredinputparametersbaseduponhistoricalexperienceandcurrenteconomicconditions.TheaccuracyinquantifyingtheimpairmentdependsuponhowwelltheBankisabletoestimatethesefuturecashflowsforspecificcounterpartiesandthequalityinestablishingthemodels’parameters.

(ii) DeterminingFairValuesThedeterminationoffairvalueforfinancialassetsandliabilitiesforwhich

therearenoobservablemarketpricesrequirestheuseofvaluationtechniquesasdescribedinaccountingpolicy,Note3(b)(v).Forfinancialinstrumentsthattradeinfrequentlyandhavelowpricetransparency,fairvalueislessobjectiveandrequiresvaryingdegreesofjudgementdependingonliquidity,concentration,uncertaintyofmarketfactors,pricingassumptionsandotherrisksaffectingthespecificinstrument.

(b) CriticalAccountingJudgementsinApplyingtheBank’sAccountingPolicies

(i) FinancialAssetandLiabilityClassificationTheBank’saccountingpoliciesprovidescopeforassetsandliabilitiestobedesignatedoninceptionintodifferentaccountingcategoriesincertaincircumstances;theBankconfirmsthattheassumptionsdisclosedinNote3(b)(i)havebeenmet.

(ii) HedgeAccountingIndesignatingfinancialinstrumentsasqualifyinghedgerelationships,theBankhasdeterminedthatitexpectsahedgetobehighlyeffectiveoverthelifeofthehedginginstrument.Inaccountingforderivativesascashflowhedges,theBankhasdeterminedthatthehedgedcashflowexposurerelatestohighlyprobablefuturecashflows.

(iii) ChangeinAccountingPolicyTherewerenochangesinaccountingpoliciesduringtheyearsended31December2017and31December2016.

(iv) EffectoftheChangesinAccountingStandardsintheseFinancialStatements

Duringtheyearsended31December2017and31December2016,theBankdidnotidentifyanychangesoffinancialreportingstandardsthatwouldsignificantlyaffecttheBank’sfinancialstatements.


5.NetinterestincomeandsimilarincomeMCZK 2017 2016Interestincomeandsimilarincome Balanceswithcentralbanks 410 56 Receivablesfrombanks 112 157 Receivablesfromclients 8404 8326 Available-for-salesecurities 1019 1312 Securitiesheldtomaturity 9 9 Financialassetsatfairvaluethroughprofitorlossheldfortrading 5 17 Financialassetsatfairvaluethroughprofitorlossnotheldfortrading – – Netinterestincomefromhedgingderivatives 977 507Interestincomeandsimilarincome 10936 10384 Interestexpenseandsimilarcharges Depositsfromcentralbank – (5) Depositsfrombanks 170 48 Depositsfromclients (173) (509) Debtsecuritiesissued (940) (969) Financialliabilitiesheldfortrading (3) (2)Interestexpenseandsimilarcharges (946) (1437)Netinterestincomeandsimilarincome 9990 8947

In2017theBankfocusedonrefinancingoptimisationinbothmarkets,i.e.onobtainingcheapsourcesforlending.Thisresultedinadecreaseininterestexpensesarisingfromdepositsfromclients.Amongotherthings,clientstransferredpartofthevolumeoftermdepositstocurrentaccountswithaverylowinterestrateinordertoensurehigherliquidity.

6.NetfeeandcommissionincomeMCZK 2017 2016Feeandcommissionincomefrom Securitiestransactions 1 5 Management,administration,depositandcustodyservices 742 696 Loans 959 1674 Paymentservices 866 798 Accountadministration 529 511 Paymentcards 939 854 Other 178 107Feeandcommissionincome 4214 4645 Feeandcommissionexpensesfrom Securitiestransactions (25) (8) Management,administration,depositandcustodyservices (99) (72) Loans (221) (412) Paymentservices (49) (46) Paymentcards (719) (577) Other (6) (9)Feeandcommissionexpenses (1119) (1124)Netfeeandcommissionincome 3095 3521

7.DividendincomeMCZK 2017 2016Dividendincome Ownershipinterests 2102 – Sharesclassifiedasavailable-for-salesecurities 3 3Totaldividendincome 2105 3

IncomefromownershipinterestsrepresentsadividendfromthesubsidiaryUniCreditLeasingCZ,a.s.,whichis100%ownedbytheCompany.

8.Netincome/lossfromfinancialassetsandliabilitiesheldfortradingMCZK 2017 2016Netrealisedandunrealisedgain/(loss)fromsecuritiesheldfortrading (42) 87Netrealisedandunrealisedgain/(loss)fromderivativesheldfortrading (3400) 701Netrealisedandunrealisedgain/(loss)fromFXspottransactionsandfromrevaluationofreceivablesandpayablesdenominatedinFX 6126 1345Nettradingincome/loss 2684 2133

9.Netincome/lossfromhedgingagainstriskofchangesinfairvalueMCZK 2017 2016Hedginginstruments 435 (158)Hedgedinstruments (466) 154Netincome/lossfromhedgingagainstriskofchangesinfairvalue (31) (4)


10.Netincome/lossfromthesaleoffinancialassetsandliabilitiesMCZK 2017 2016Receivablesfromclients 204 (1)Available-for-salesecurities 308 1085Debtsecuritiesissued (4) (35)Netincome/lossfromthesaleoffinancialassetsandliabilities 508 1049

Theincomefromfinancialassetsavailableforsaleintheyearended31December2016predominantlyincludesincomearisingfromaninternationaltransaction–transformationofVisaEuropeinwhichtheBankheldanequityinterest.

11.Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading

MCZK 2017 2016Debtsecurities – 3Netincome/lossfromfinancialassetsandliabilitiesatfairvaluethroughprofitorlossnotheldfortrading – 3

12.ImpairmentlossesonfinancialassetsMCZK 2017 2016Receivablesfromclients (370) (1130)Provisionforoff-balancesheetitems 52 (80)Available-for-salesecurities – (3)Total (318) (1213)

13.AdministrativeexpensesMCZK 2017 2016Personnelexpenses Wagesandsalariespaidtoemployees (2128) (2201) Socialcosts (785) (758) Other (192) (101) (3105) (3060)Otheradministrativeexpenses Rentandbuildingmaintenance (565) (634) Informationtechnologies (1403) (1186) Promotionandmarketing (277) (448) Consumablesused (48) (70) Audit,legalandadvisoryservices (167) (157) Administrativeandlogisticservices (421) (476) Depositsandtransactionsinsurance (744) (531) Services (258) (275) Other (232) (459) (4115) (4236)Totaladministrativeexpenses (7220) (7296)


Asummaryofremunerationtokeymanagersispresentedinthefollowingtable.Keymanagersarepersonswithauthorityanddirectorindirectresponsibilitiesasregardsplanning,managingandsupervisingtheBank’sactivities,includingall(executiveandother)managers.

MCZK 31Dec2017 31Dec2016Short-termemployeebenefits 180 185Post-employmentbenefits – –Otherlong-termemployeebenefits 30 34Terminationbenefits – –Share-basedpayments – –Total 211 219

Informationonequity-basedbonusesisincludedinNote35.

TheBank’saveragenumberofemployeeswasasfollows:

31Dec2017 31Dec2016Employees 2946 2993MembersoftheBoardofDirectors 7 7MembersoftheSupervisoryBoard 3 3OtherexecutivesdirectlyreportingtotheBoardofDirectors 31 33

Asummaryofoperatingleasesispresentedinthefollowingtable:



14.OtheroperatingincomeandexpensesMCZK 2017 2016Incomefromrent 31 29Otherincome 50 51Totalotheroperatingincome 81 80 Taxes (6) (2)Finesandpenalties (22) (15)Other (25) (17)Totalotheroperatingexpenses (53) (34)Totalotheroperatingincomeandexpenses 28 46

15.CashinhandandcashbalancesMCZK 31Dec2017 31Dec2016Cashinhand 3963 4083Otherbalanceswithcentralbanks 44 109Total 4007 4192

Forcashflowreportingpurposes,cashisdefinedascashinhandandhighly-liquidfunds.


16.Financialassetsatfairvaluethroughprofitorloss(a) HeldforTrading

(i) BasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Debtsecurities 1228 58 – 1286Shares – – – –Derivatives 36 6798 – 6834Total 1264 6856 – 8120 31Dec2016 Debtsecurities 2803 13 – 2816Shares – – – –Derivatives 39 6180 – 6219Total 2842 6193 – 9035

(ii) SecuritiesbyTypeofIssuer

MCZK 31Dec2017 31Dec2016Debtsecurities Governmentsector 1283 2816 Other 3 – Shares Financialservices – – Other – –Total 1286 2816

17.Available-for-salesecurities(a) BasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Debtsecurities 38170 9092 – 47262Shares – – 260 260Total 38170 9092 260 47522 31Dec2016 Debtsecurities 65539 14424 – 79963Shares – – 229 229Total 65539 14424 229 80192


(b) SecuritiesbyTypeofIssuer

MCZK 31Dec2017 31Dec2016Debtsecurities Banking 7501 12240 Governmentsandcentralbanks 29615 57759 Otherpublicsector 2032 2185 Other 8114 7779 Shares Investmentfunds – – Other 260 229Total 47522 80192

(c) ParticipationInterests

MCZK Registered Dateof Acquisition Netbook Netbook ShareoftheBankName office acquisition price value2017 value2016 at31Dec2017 at31Dec2016CBCB–CzechBankingCreditBureau,a.s.(bankregister) Prague 10October2001 0.24 0.24 0.24 20% 20%Total 0.24 0.24 0.24

18.Securitiesheldtomaturity(a) Bytypeofsecurity

MCZK 31Dec2017 31Dec2016Debtsecurities 175 186Total 175 186

(b) Securitiesbyactivitiesofissuers

MCZK 31Dec2017 31Dec2016Debtsecurities Governmentsandcentralbanks 175 186 Other –Total 175 186

19.Receivablesfrombanks(a) AnalysisofReceivablesfromBanks,byType

MCZK 31Dec2017 31Dec2016Currentaccounts 1263 1153Termdeposits 648 6830Loans 4945 7977Reverserepurchasecommitments(seeNote37) 199020 117501Obligatoryminimumreserves 4246 6388Total 210122 139849


(b) AnalysisofReceivablesfromBanks,byGeographicalSector

MCZK 31Dec2017 31Dec2016CzechRepublic 203393 127896Slovakia 429 349OtherEUcountries 1842 5150Other 4458 6454Totalreceivablesfrombanks 210122 139849

20.Receivablesfromclients(a) AnalysisofNetReceivablesfromClients,byType

MCZK Non-default Default Total31Dec2017 Currentaccounts(overdrafts) 37638 475 38113Reverserepurchasecommitments(seeNote37) 378 – 378Residentmortgageloans 94797 611 95408Othermortgageloans 39200 761 39961Creditcardsandconsumerloans 11400 172 11572Factoring 4454 91 4545Otherloans 182891 1558 184449Total 370758 3668 374426 31Dec2016 Currentaccounts(overdrafts) 35257 474 35731Reverserepurchasecommitments(seeNote37) – – –Residentmortgageloans 90932 696 91628Othermortgageloans 62473 1902 64375Creditcardsandconsumerloans 11723 107 11830Factoring 4714 116 4830Otherloans 156921 1983 158904Total 362020 5278 367298

TheBankusesthe‘clientdefault’definitioninlinewiththeCNB’sRegulation163/2014Coll./RegulationNo.575/2013oftheEuropeanParliamentandoftheCouncil;specifically,adebtor’sdefaultinvolvessituationswhere:a) Thedebtorisindefaultwithatleastonerepaymentoftheprincipalorrelatedinterestonanyofitspayablestothebankforaperiodgreater

than90days;and/orb) Itislikelythatthedebtorwillbeunabletosettleitspayablesonatimelybasisandinfullwithoutthebankresortingtorealisingcollateral.

(b) ClassificationofReceivablesfromClientsandImpairment

MCZK Impairment Impairment Gross ofindividual ofportfolios Net value receivables ofreceivables value31Dec2017 Standard 366983 – (995) 365988Watch 4935 – (165) 4770Substandard 4853 (2637) – 2216Doubtful 1014 (637) – 377Loss 5511 (4436) – 1075Total 383296 (7710) (1160) 372426


MCZK Impairment Impairment Gross ofindividual ofportfolios Net value receivables ofreceivables value31Dec2016 Standard 356947 – (1353) 355594Watch 6695 – (269) 6426Substandard 5758 (2966) – 2792Doubtful 927 (570) – 357Loss 6991 (4862) – 2129Total 377318 (8398) (1622) 367298

Thefollowingtablepresentsasummaryofgrossreceivablesaccordingtointernalrating:

MCZK 31Dec2017 31Dec2016Receivableswithoutdefault Internalrating1 5696 6571 Internalrating2 13013 10029 Internalrating3 38793 43091 Internalrating4 136290 108348 Internalrating5 102061 119094 Internalrating6 59013 55874 Otherinternalrating 16712 18742 Receivableswithoutinternalrating 350 1893Total 371918 363642Receivableswithdefault 11378 13676Total 383296 377318

TheBankregularlyclassifiesitsreceivables.ThecategoriesusedforclassificationconsidertheBank’sanalysisastotheprobabilityofrepaymentandanalysisoftheborrower’sbehaviour(numberofdayspaymentsarepastdue,financialperformance,etc.).TheBankassesseswhetherthereisevidenceofimpairmentofloansandreceivables.Ifsuchevidencehasbeenidentified,theamountofthelossismeasuredasthedifferencebetweenthereceivables’carryingamountandthepresentvalueofestimatedfuturecashflows(includingcashflowsfromrealisedcollateral);inrespectofclientsindefaultwithexposureaboveMEUR1onanindividualbasis,otherclientsusingtherelevantmodel.

Thefollowingtablesummarisesgrossnon-defaultloanreceivablesbasedonthenumberofdayspastdue.

MCZK 31Dec2017 31Dec2016Non-defaultreceivables,gross Duereceivables 369827 361790 1–30dayspastdue 2071 1840 31–90dayspastdue 20 12 91–180dayspastdue – – Morethan180dayspastdue – –Total 371918 363642

(c) AnalysisofNetReceivablesfromClients,bySector

MCZK 31Dec2017 31Dec2016Financialinstitutions 43615 40412Non-financialinstitutions 219532 223590Governmentsector 2704 1656Individualsandothers 108575 101640Total 374426 367298


(d) AnalysisofGrossReceivablesfromClients,byTypeofCollateralProvidedandClassification

MCZK Standard Watch Substandard Doubtful Loss Total31Dec2017 Bankandsimilarguarantee 9792 32 1 – – 9825Mortgage 89205 1295 804 74 540 91918Corporateguarantee 3039 15 – – 3 3057Othersecurity 6944 88 12 257 41 7432Unsecured 258003 3505 4036 683 4927 271154Total 366983 4935 4853 1014 5511 383296 31Dec2016 Bankandsimilarguarantee 8483 26 3 1 – 8513Mortgage 82721 1794 864 156 653 86188Corporateguarantee 2728 15 – – – 2743Othersecurity 5762 460 121 47 171 6561Unsecured 257253 4400 4770 723 6167 273313Total 356947 6695 5758 927 6991 377318

Theitem“Unsecured”includes,amongotherthings,receivablesarisingfromprojectfundingthataresecuredbyrealestatecollateralinthenominalvalueofMCZK46,869(asof31December2016:MCZK53,723).Inthecaseoftheprojectfundingofcommercialrealestate(IPRE),thecollateralqualityistakenintoaccountindeterminingthetransactionrating;inthesecases,thecollateralvalueisstronglycorrelatedwiththesolvencyofthedebtor.

(e) AnalysisofNetReceivablesfromClients,byRegion

MCZK 31Dec2017 31Dec2016CzechRepublic 238369 227371Slovakia 116964 120256OtherEUcountries 13868 14800Other 5225 4871Total 374426 367298

(f) AnalysisofNetReceivablesfromClients,byBusinessActivity

MCZK 31Dec2017 31Dec2016Realestateservices 61587 72829Financialservices 43615 40412Wholesale 19854 17736Households(individuals) 105490 98846Retail(entrepreneurs) 8456 7243Leasingandrental 6343 5842Automotiveindustry 8807 8775Powerindustry 28499 27237Other 91775 88378Totalreceivablesfromclients 374426 367298


(g) AnalysisofForbearanceTheBank’sapproachtoforbearancereportingisdisclosedinNote40(b)(iv)–FinancialRiskManagement.

Analysisofforbornereceivablesbysectors:

MCZK Gross Gross Total Impairment Impairment Total non-default default gross ofnon-default ofdefault impairmentof Net receivables receivables forbearance receivables receivables forbearance forbearance31December2017 Non-financialinstitutions 6595 1469 8064 (72) (1052) (1124) 6940Otherfinancialinstitutions 129 – 129 – – – 129Individualsandothers 37 85 122 – (28) (28) 94Total 6761 1554 8315 (72) (1080) (1152) 7163

31December2016 Non-financialinstitutions 8360 2400 10760 (143) (1246) (1389) 9371Otherfinancialinstitutions 8 – 8 – – – 8Individualsandothers 61 63 124 (4) (16) (20) 104Total 8429 2463 10892 (147) (1262) (1409) 9483

Netforbearancerepresented1.9%ofthetotalreceivablesfromclientsasof31December2017(2016:2.6%).

Thetablebelowprovidesananalysisofforbornereceivablesbydaysaftertheduedate:

MCZK Gross Impairment Net forbearance offorbearance forbearance31December2017 Non-defaultreceivables Beforedue 6205 (55) 6150 Pastdue 556 (17) 539Totalnon-defaultforbearance 6761 (72) 6689 Defaultreceivables Upto90dayspastdue 836 (455) 381 91to180dayspastdue 129 (100) 29 181daysto1yearpastdue 133 (76) 57 Over1yearpastdue 456 (449) 7Totaldefaultforbearance 1554 (1080) 474Total 8315 (1152) 7163

31December2016 Non-defaultreceivables Beforedue 7054 (88) 6966 Pastdue 1375 (59) 1316Totalnon-defaultforbearance 8429 (147) 8282 Defaultreceivables 0to90dayspastdue 1742 (667) 1075 91to180dayspastdue 298 (146) 152 181daysto1yearpastdue 17 (14) 3 Over1yearpastdue 406 (435) (29)Totaldefaultforbearance 2463 (1262) 1201Total 10892 (1409) 9483


Thetablebelowshowsmovementsingrossforbearance:

MCZKBalanceat1January2016 4414Transfertoforbearance 8073Additions –Write-offs (157)Settled (379)Transferfromforbearance (1050)Other (9)Totalforbearanceasof31December2016 10892Balanceat1January2017 10892Transfertoforbearance 3300Additions 73Write-offs (5)Settled (2519)Transferfromforbearance (3314)Other (112)Totalforbearanceasof31December2017 8315

During2016,theBankundertookaone-offretroactivereviewofitsactivitiesperformedoverthelasttwoyearsthatcouldmeetthecharacteristicsforclassificationasnon-defaultforbearance.Thisresultedinamajorincreaseinthecategoryofsuchreceivables.

Thetablebelowshowsmovementsintheimpairmentofforbearance:

MCZKBalanceat1January2016 (1468)Transfertoforbearance (647)Chargeduringthecurrentyear (69)Releaseduringthecurrentyear 159Receivableswrittenoff–use 132Transferfromforbearance 482Other 2Totalimpairmentforbearanceasof31December2016 (1409)Balanceat1January2017 (1409)Transfertoforbearance (204)Chargeduringthecurrentyear (295)Releaseduringthecurrentyear 178Receivableswrittenoff–use 5Transferfromforbearance 533Other 40Totalimpairmentforbearanceasof31December2017 (1152)

(h) ImpairmentofReceivablesfromClients

MCZKBalanceasof1Jan2016 (10305) Chargeduringthecurrentyear (2883) Releaseduringthecurrentyear 1753Neteffectonprofitorloss (1130)Receivableswrittenoff–use 1353FXdifferences 62Totalimpairmentofreceivablesfromclientsasof31Dec2016 (10020)


MCZKBalanceasof1Jan2017 (10020)Chargeduringthecurrentyear (2715)Releaseduringthecurrentyear 2345Neteffectonprofitorloss (370)Receivableswrittenoff–use 1077FXdifferences 443Totalimpairmentofreceivablesfromclientsasof31Dec2017 (8870)

21.EquityinvestmentsName Registered Date Acquisition Netbook Netbook ShareoftheBank ShareoftheBank office ofacquisition price value2017 value2016 at31Dec2017 at31Dec2016UniCreditLeasingCZ,a.s. Prague 14Feb2014 3211 3781 3781 100% 100%UniCreditFactoringCzechRepublicandSlovakia,a.s. Prague 20Jan2015 198 198 198 100% 100%Total 3409 3979 3979

22.PositivefairvalueofhedgingderivativesBasedontheQualityoftheInputDataUsedforValuationatFairValue


23.PropertyandequipmentMovementsinPropertyandEquipment

MCZK Buildings Fixtures IT andland andfittings equipment Other TotalCostat1Jan2016 2927 436 743 6 4112Accumulateddepreciationandimpairment at1Jan2016 (1151) (362) (563) (4) (2080)NetBookValueat1Jan2016 1776 74 180 2 2032 Additions 88 8 45 16 157Disposals (661) – – – (661)Depreciationcharges (146) (10) (58) (14) (228)Transferstoassetsheldforsale (4) – – – (4)OtherandFXrategainsorlosses 30 (33) (38) 61 20NetBookValueat31Dec2016 1083 39 129 65 1316 Costat31Dec2016 2036 206 611 238 3091Accumulateddepreciationandimpairmentat31Dec2016 (953) (167) (482) (173) (1775)


MCZK Buildings Fixtures IT andland andfittings equipment Other TotalCostat1Jan2017 2036 206 611 238 3091Accumulateddepreciationandimpairment at1Jan2017 (953) (167) (482) (173) (1775)NetBookValueat1Jan2017 1083 39 129 65 1316 Additions 30 6 15 5 56Disposals – – – – –Depreciationcharges (246) (10) (62) (24) (342)Transferstoassetsheldforsale – – – – –OtherandFXrategainsorlosses (37) (9) 4 (1) (43)NetBookValueat31Dec2017 830 26 86 45 987 Costat31Dec2017 1806 176 553 220 2755Accumulateddepreciationandimpairmentat31Dec2017 (976) (150) (467) (175) (1768)

InFebruary2016,managementoftheBankapprovedthesaleandleasebackofabuildingwiththenetbookvalueofMCZK629,whichwassubsequentlytransferredto“Non-currentassetsheldforsale”.Thebuildingwassoldbeforetheendof2016.

24.IntangibleassetsMovementsinIntangibleAssets

MCZK Software Other TotalCostat1Jan2016 1476 27 1503Accumulatedamortisationandimpairmentat1Jan2016 (833) (7) (840)NetBookValueat1Jan2016 643 20 663 Additions 565 – 565Disposals – – –Amortisationcharges (16) – (16)Other 35 (20) 15NetBookValueat31Dec2016 1227 – 1227Costat31Dec2016 2073 – 2073Accumulatedamortisationandimpairmentat31Dec2016 (846) – (846)

Costat1Jan2017 2073 – 2073Accumulatedamortisationandimpairmentat1Jan2017 (846) – (846)NetBookValueat1Jan2017 1227 – 1227 Additions 581 – 581Disposals – – –Amortisationcharges (56) – (56)Other (9) – (9)NetBookValueat31Dec2017 1743 – 1743Costat31Dec2017 2570 – 2570Accumulatedamortisationandimpairmentat31Dec2017 (827) – (827)

Theincreaseinthevalueofsoftwarein2017and2016wascausedbytheacquisitionofassetsespeciallywithrespecttotheimplementationofanewbankingsystem.Theseassetswereputintousein2017.


25.OtherassetsMCZK 31Dec2017 31Dec2016Deferredexpensesandaccruedincome 262 265PrepaymentsmadeinrelationtocashadditionstoATMsandcashregisters 1004 1151Tradereceivables 192 314Receivablesfromsecurities 10 201Clearingandsettlementaccounts 748 473Dividendprepayment 1002 –Other 21 11Total 3239 2415Impairmentofotherassets (16) (17)Netotherassets 3223 2398

DividendprepaymentrepresentsadividendreceivablefromthesubsidiaryUniCreditLeasingCZ,a.s.,whichis100%ownedbytheCompany.

26.DepositsfrombanksAnalysisofDepositsfromBanksbyType

MCZK 31Dec2017 31Dec2016Depositsfromcentralbanks 17978 11889Currentaccounts 9140 7033Loans 13078 1329Termdeposits 123830 39210Repurchasecommitments(seeNote37) 378 41012Total 164404 100473

TheBankcurrentlyusestheEuropeanCentralBank’scurrencyinstrumentTLTROII(“TargetedLong-termRefinancingOperation”)intheamountofMEUR703.9whichwasdrawnintwotranches.TheBankdrewthefirsttrancheofMEUR440inJune2016anditwillmatureinJune2020.TheBankdrewthesecondtrancheofMEUR263.9inMarch2017anditwillmatureinMarch2021.Bothtranchesarereportedintheline“Depositsfromcentralbanks”.TLTROIIhasthecharacteristicsofalong-termrepotransactionandassuchitissecuredbycollateralacceptedbytheEurosystem.ThefundingobtainedthroughthisinstrumentisusedtorefinancelargelycorporateloansinSlovakia.

27.DepositsfromclientsAnalysisofDepositsfromClientsbyType

MCZK 31Dec2017 31Dec2016Currentaccounts 336735 322807Termdeposits 21437 40877Repurchasecommitments(seeNote37) – 4653Other 2667 2967Total 360839 371304


28.IssueddebtsecuritiesAnalysisofIssuedDebtSecurities

MCZK 31Dec2017 31Dec2016Mortgagebonds 35385 49183Structuredbonds 3834 8170Zerocouponbonds – 1664Otherissueddebtsecurities 781 1090Total 40000 60107

Structuredbondsincludeembeddedoptions–currency,equity,commodityandinterestrateoptions–inthetotalnominalvalueofMCZK7,331(at31December2016:MCZK8,512).ThepositivefairvalueofthesederivativesofMCZK7isreportedunder“Financialassetsheldfortrading”(at31December2016:MCZK17);thenegativefairvalueofthesederivativesofMCZK370isrecognisedunder“Financialliabilitiesheldfortrading”(at31December2016:MCZK293).

29.FinancialliabilitiesheldfortradingBasedontheQualityoftheInputDataUsedforValuationatFairValue

MCZK Level1 Level2 Level3 Total31Dec2017 Liabilitiesfromshortsales 1533 – – 1533Derivatives – 6666 – 6666Total 1533 6666 – 8199 31Dec2016 Liabilitiesfromshortsales 1033 – – 1033Derivatives – 5536 – 5536Total 1033 5536 – 6569

30.NegativefairvalueofhedgingderivativesBasedontheQualityoftheInputDataUsedforValuationatFairValue



31.OtherliabilitiesMCZK 31Dec2017 31Dec2016Deferredincomeandaccruedexpenses 682 932Tradepayables 1222 794Payablestoemployees 726 724Unsettledsecuritytransactions 65 89Clearingandsettlementaccounts 7643 5678Other 101 79Totalotherliabilities 10439 8296

32.ProvisionsProvisionsincludethefollowingitems:

MCZK 31Dec2017 31Dec2016Provisionsforoff-balancesheetcredititems 490 542Legaldisputes 67 68Provisionforrestructuring 100 10Other 174 316Totalprovisions 831 936

(a) ProvisionsforOff-BalanceSheetCreditItems

MCZKBalanceat1Jan2016 1128Chargeduringtheyear 296Usageduringtheyear (667)Releaseduringtheyear (216)Other–FXrategainsorlosses 1Totalprovisionsforoff-balancesheetcredititemsat31Dec2016 542Balanceat1Jan2017 542Chargeduringtheyear 310Usageduringtheyear –Releaseduringtheyear (365)Other–FXrategainsorlosses 3Totalprovisionsforoff-balancesheetcredititemsat31Dec2017 490

(b) OtherProvisions

MCZK Legal Restructuring disputes provision Other TotalBalanceat1Jan2016 63 16 – 79Chargeduringtheyear 7 – 315 322Usageduringtheyear (3) (1) (1) (5)Releaseofredundantprovisionsandother 1 (5) 2 (2)Totalotherprovisionsat31Dec2016 68 10 316 394 Balanceat1Jan2017 68 10 316 394Chargeduringtheyear 5 169 9 183Usageduringtheyear – (60) (148) (208)Releaseofredundantprovisionsandother (6) (19) (3) (28)Totalotherprovisionsat31Dec2017 67 100 174 341


33.Incometax(a) TaxinProfitorLoss

MCZK 31Dec2017 31Dec2016Currenttaxpayable (1564) (1363)Prioryeartax 34 69Deferredtax 74 (199)Totalincometax (1456) (1493)

TheincometaxoftheBankdiffersfromthetheoreticaltaxwhichwouldariseifthetaxrateeffectiveintheCzechRepublicwereappliedasfollows:

MCZK 31Dec2017 31Dec2016Profit/lossfortheyearbeforetax 10277 6812Taxcalculatedusingthetaxrateof19% (1953) (1294)Impactofprioryearsonthecurrenttaxpayable 34 69Non-taxableincome 460 89Taxnon-deductibleexpenses (49) (116)Impactofprioryearsonthedeferredtax 2 (83)ImpactofahigherSlovaktaxrateonthecurrenttaxpayableanddeferredtax (31) (49)Unrecognisedtemporarydifferencesindeferredtax 27 (80)Recognitionofpreviouslyunrecognisedtemporarydifferencesindeferredtax 56 –ImpactofachangeintheSlovaktaxrate – (28)Other (2) (1)Totalincometax (1456) (1493)

TheeffectivetaxrateoftheBankis14.2%(2016:21.9%).

(b) TaxintheStatementofFinancialPositionTheBankmadeincometaxprepaymentsintheamountofMCZK1,069(2016:MCZK1,036),madeanadditionalpaymentofMCZK324(at31December2016:theBankmadeanadditionalpaymentofMCZK685)andreportsanincometaxliabilityofMCZK202tothetaxauthorityintheCzechRepublic(at31December2016:aliabilityofMCZK387)andaliabilityofMCZK101tothetaxauthorityintheSlovakRepublic(at31December2016:areceivableofMCZK248).

(c) DeferredTaxAsset/LiabilityDeferredincometaxiscalculatedonalltemporarydifferencesusingthebalancesheetliabilitymethodundertheapplicationoftheappropriatetaxrate.Incalculatingnettaxassetsandliabilities,theBankoffsetsdeferredtaxassetsagainstdeferredtaxliabilitiesarisingfromincometaxpaidtothesametaxinstitutioninthesametaxcategory.WithregardtotheSlovakRepublic,thenetbalanceisanetdeferredtaxassetwhileintheCzechRepublic,thenetbalanceisanetdeferredtaxliability.ManagementoftheBankbelievesthattheBankwillbeabletofullyrecoverdeferredtaxassetsreportedasof31December2017basedonthecurrentandanticipatedfutureleveloftaxableprofits.

(i) NetDeferredTaxAsset

MCZK 31Dec2017 31Dec2016 Deferred Deferred Deferred Deferred taxasset taxliability taxasset taxliabilityTaxnon-deductibleprovisions 123 – 24 –Impairmentofloansandoff-balancesheetitems 633 – 516 –Differencesarisingfromthenetbookvaluesofassets 44 – 18 –Reservefromrevaluationofhedginginstruments – (128) – (11)Reservefromrevaluationofavailable-for-salesecurities – (242) – (54)Other 156 – 15 –Deferredtaxliability/asset 956 (370) 573 (65)Netdeferredtaxasset 586 508


(ii) NetDeferredTaxLiability

MCZK 31Dec2017 31Dec2016 Deferred Deferred Deferred Deferred taxasset taxliability taxasset taxliabilityTaxnon-deductibleprovisions – – 83 (3)Impairmentofloansandoff-balancesheetitems – – 249 –Differencesarisingfromthenetbookvaluesofassets – – 2 –Reservefromrevaluationofhedginginstruments – – – (434)Reservefromrevaluationofavailable-for-salesecurities – – – (477)Other – – 9 –Deferredtaxliability/asset – – 343 (914)Netdeferredtaxliability (571)

TheBankadditionallycarriesthefollowingdeferredtaxassetswhicharenotrecognisedandaccountedforonthegroundsofprudence:arisingfromnon-taxdeductibleprovisionsrecognisedbytheCzechBankofMCZK21andnon-taxdeductibleprovisionsrecognisedbytheSlovakbranchofMCZK10.

34.IssuedcapitalandsharepremiumTherecorded,issuedandfullypaidcapitaloftheBankamountedtoMCZK8,755asof31December2016and2017.

(a) ShareholderStructure

Nominalvalue Share Registered ofshares premium OwnershipEntity office inMCZK inMCZK percentageAt31Dec2017 UniCreditS.p.A Italy 8755 3495 100.00Total 8755 3495 100.00 At31Dec2016 UniCreditS.p.A Italy 8755 3495 100.00Total 8755 3495 100.00

AspartofrestructuringintheUniCreditGroup,theBank’sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.Awhichistheultimateparentcompanyoftheentiregroupholding100%oftheBank’sshares.

(b) CapitalBreakdown

31Dec2017 31Dec2017 31Dec2016 31Dec2016 Number MCZK Number MCZK ofshares ofsharesOrdinarysharesofCZK16,320,000 100 1632 100 1632OrdinarysharesofCZK13,375,000 200 2675 200 2675OrdinarysharesofCZK10,000 436500 4365 436500 4365OrdinarysharesofCZK7,771,600 10 78 10 78OrdinarysharesofCZK46 106563 5 106563 5Totalissuedcapital 8755 8755

Thesharesarefreelytransferrable.OrdinarysharesincludetheentitlementtoparticipateintheBank’sgovernanceandtheentitlementtoashareonprofit.Bothat31December2017and31December2016,theBankheldnotreasuryshares.


35.Equity-basedbonusesTheBankhasnotimplementedanyemployeemotivationorstabilisationprogrammeforthepurchaseoftreasurysharesorremunerationintheformoftreasuryshareoptions.

36.RetainedearningsandreservefundsThefollowingtableshowsthebreakdownofthereservefunds:

MCZK 31Dec2017 31Dec2016Reservefunds 3372 3372Special-purposereservefund 11611 11611Retainedearnings 31510 26191Total 46493 41174

Aspartofthecross-bordermergerin2013,thesharecapitalofUniCreditBankSlovakiaa.s.ofMCZK6,058,thereservefundofUniCreditBankSlovakiaa.s.ofMCZK1,166andretainedearningsofUniCreditBankSlovakiaa.s.ofMCZK4,387weretransferredintoaspecial-purposereservefunddenominatedinEUR.Thisspecial-purposesreservefundcanonlybeusedtosettlethelossoftheBank.

37.Borrowingsandlendingofsecurities,repurchaseandreverserepurchasetransactions

(a) ReverseRepurchaseTransactions

MCZK 31Dec2017 31Dec2016Receivablesfrombanks 199020 117501Fairvalueofsecuritiesreceived 195204 116305Receivablesfromclients 378 –Fairvalueofsecuritiesreceived 420 –

SecuritiesreceivedascollateralaspartofreverserepurchasetransactionsofMCZK420arefurtherprovidedascollateralunderrepurchasetransactions(asof31December2016:atotalofMCZK12,786).

(b) RepurchaseTransactions

MCZK 31Dec2017 31Dec2016Depositsfrombanks 378 41012Fairvalueofsecuritiesprovided 420 44596Depositsfromclients – 4653Fairvalueofsecuritiesprovided – 4653


Intheordinarycourseofbusiness,theBankconductsvariousfinancialtransactionsthatarenotreportedonthefaceoftheBank’sbalancesheetandthataredesignatedasoff-balancesheetfinancialinstruments.Unlessstatedotherwise,theinformationbelowrepresentsthenominalvaluesoftheoff-balancesheettransactions.

(a) ContingentLiabilities

LegalDisputesAsof31December2017,theBankassessedthelegaldisputesinwhichitactedasadefendant.TheBankestablishedprovisionsfortheselegaldisputes(seeNote32).Inadditiontothesedisputes,legalactionsarisingfromordinarybusinessactivitiesweretakenagainsttheBank.ThemanagementdoesnotanticipatetheresultoftheselegaldisputestohaveamaterialimpactontheBank’sfinancialposition.

TaxationTheCzechtaxlegislationhassignificantlychangedoverthelastyears.Assuch,manycomplicatedlegislationareasremainedunresolved,duetowhichtheinterpretationoftaxationauthoritiesinspecificcasesmaynotbeanticipated.Itisnotpossibletoquantifytheconsequencesofthisuncertainty;theymayberesolvedsolelyundertheconditionthattherelevantlegalregulationsgetadoptedinpracticeorintheeventthatofficialinterpretationsareavailable.

LiabilitiesarisingfromGuarantees,CreditCommitmentsandOtherContingentLiabilitiesContingentliabilitiespredominantlyincludeamountsofundrawncreditcommitments.CreditcommitmentsissuedbytheBankincludeissuedcreditandguaranteecommitments,andundrawnamountsofcreditsandoverdraftloanfacilities.RevocablecommitmentsincludecreditsandguaranteesthatmayberevokedbytheBankatanytimewithoutstatingthereason.Onthecontrary,irrevocablecommitmentsrepresenttheBank’sliabilitytoprovideacreditorissueaguarantee,theperformanceofwhich,eventhoughboundonmeetingthecontractualtermsbytheclient,istoacertainextentindependentoftheBank’swill.LiabilitiesarisingfromfinancialguaranteesincludeirrevocableconfirmationsmadebytheBanktoperformpayments,undertheconditionthatthetermsdefinedunderindividualguaranteecertificatesaremet.Assuchconfirmationsbearsimilarriskascredits,theBankcreatestherelevantprovisionsusingasimilaralgorithmasforcredits(seeNote40).DocumentarylettersofcreditrepresentawrittenirrevocablecommitmentoftheBankissuedbasedonaclient’srequest(orderer),toprovideathirdpartyortoitsorder(recipient,beneficiary),withcertainperformance,undertheconditionthatthetermsoftheletterofcreditaremetbyaspecifieddeadline.Forthesefinancialinstruments,theBankcreatesprovisionsusingasimilaralgorithmasappliedforcredits(seeNote40).TheBankcreatedprovisionsforoff-balancesheetitemstocoverlossesincurredandarisingfromtheimpairmentoftheoff-balancesheetitemsduetocreditrisk.Asof31December2017,theaggregateprovisionsamountedtoMCZK490(asof31December2016:MCZK542),seeNote32(a).


MCZK 31Dec2017 31Dec2016Lettersofcreditandfinancialguarantees 39814 41687Othercontingentliabilities(undrawncreditfacilities) 115928 130331Total 155742 172018

ValuesTakenintoAdministrationandManagement

MCZK 31Dec2017 31Dec2016Bonds 537325 474869Shares 192514 205853Depositorynotes 17305 21489Totalvaluestakenintoadministrationandmanagement 747144 702211

(b) ContingentAssetsTheBankhasanoptiontodrawacreditlineprovidedbytheEuropeanBankforReconstructionandDevelopment(EBRD)amountingtoMCZK383.1(MEUR15)withmaturityon23February2023.TheBankadditionallyhasanoptiontodrawacreditlinefromOesterreichischeKontrollbankAGBankofMCZK594.8(MEUR23.3)withthemaximummaturityon30June2029dependingonthematurityofloansrefinancedfromthiscreditlineandacreditlinefromTheExport-ImportBankofTheRepublicofChinaofMCZK194.4(MUSD9.1)withthemaximummaturityoffiveyearsfromthetimeofdrawing.

38.Contingentliabilities,contingentassetsandfinancialderivatives

(c) FinancialDerivatives

(i) NominalandFairValuesofFinancialDerivatives

MCZK Nominal Positive Negative value fairvalue fairvalue31Dec2017 Tradinginstruments–interbankmarket(OTC) Options 69633 829 843Interestrateswapcontracts 375596 3187 2753Forwardrateagreements(FRA) 10000 – –Crosscurrencyswapcontracts 211237 2584 2561Termcurrencytransactions 34417 55 369Otherinstruments 1432 143 140Total 702315 6798 6666 Tradinginstruments–stockexchange Futures 1379 36 –Totaltradinginstruments 703694 6834 6666 Hedginginstruments Interestrateswapcontracts 334078 4232 4153Crosscurrencyswapcontracts 156542 209 723Totalhedginginstruments 490620 4441 4876

31Dec2016 Tradinginstruments–interbankmarket(OTC) Options 91311 863 (833)Interestrateswapcontracts 307009 3165 (3024)Forwardrateagreements(FRA) – – –Crosscurrencyswapcontracts 43043 1457 (1242)Termcurrencytransactions 77620 589 (334)Otherinstruments 1357 106 (103)Total 520340 6180 (5536) Tradinginstruments–stockexchange Futures 1587 39 –Totaltradinginstruments 521927 6219 (5536) Hedginginstruments Interestrateswapcontracts 265427 4383 (3328)Crosscurrencyswapcontracts 43864 780 (89)Termcurrencytransactions 46 – –Totalhedginginstruments 309337 5163 3417



(ii) ResidualMaturityofFinancialDerivativesConcludedontheInterbankMarket

MCZK Upto1year 1–5years Over5years Total31Dec2017 Tradinginstruments Interestrateinstruments 128862 203368 72772 405002Equityinstruments 2711 12170 – 14881Currencyinstruments 223161 54591 3248 281000Other 1381 51 – 1432Total 356115 270180 76020 702315 Hedginginstruments Interestrateinstruments 31086 213112 89880 334078Currencyinstruments 92729 63272 541 156542Total 123815 276384 90421 490620

31Dec2016 Tradinginstruments Interestrateinstruments 58023 203316 85831 347170Equityinstruments 1420 14129 874 16423Currencyinstruments 104849 44111 6430 155390Other 1241 116 – 1357Total 165533 261672 93135 520340 Hedginginstruments Interestrateinstruments 17071 173026 75330 265427Currencyinstruments 11333 25046 7531 43910Total 28404 198072 82861 309337

39.SegmentreportingTheBankpresentsthesegmentinformationbasedonperformancecriteriaasdisclosedinNote3(q).

(a) SegmentInformationbyClientCategory

MCZK Retail Corporateand andprivate investment banking banking Other TotalAt31Dec2017 Netinterestanddividendincome 2977 6277 2841 12095Othernetincome 1433 4814 4 6251

Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (191) (67) (140) (398)Impairmentofassetsandprovisions 1036 (1443) (72) (479)Segmentexpenses (3729) (3569) 106 (7192)Profitbeforetax 1526 6012 2739 10277Incometax (1456) (1456)Resultofsegment 1526 6012 1283 8821

Segmentassets 113428 531776 14129 659333Segmentliabilities 157630 401701 30560 589891

Theincometaxforallsegmentsispresentedinthesegment“Other”.

TheBankdoesnothaveaclientoragroupofclientsthatwouldcomprisemorethan10percentoftheBank’sincome.

MCZK Retail Corporateand andprivate investment banking banking Other TotalAt31Dec2016 Netinterestanddividendincome 2865 6148 (63) 8950Othernetincome 1444 3385 1873 6702

Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (136) (36) (72) (244)Impairmentofassetsandprovisions 11 (1536) – (1525)Segmentexpenses (3424) (3205) (442) (7071)Profitbeforetax 760 4756 1296 6812Incometax (1493) (1493)Resultofsegment 760 4756 (197) 5319

Segmentassets 100391 501585 13619 615595Segmentliabilities 141330 372815 37915 552060

(b) InformationonGeographicalAreas

MCZK CzechRepublic Slovakia TotalAt31Dec2017 Netinterestanddividendincome 9575 2520 12095Othernetincome 4641 1610 6251

Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (175) (223) (398)Impairmentofassetsandprovisions (22) (457) (479)Segmentexpenses (5150) (2042) (7192)Profitbeforetax 8869 1408 10277Incometax (1195) (261) (1456)Resultofsegment 7674 1147 8821

Segmentassets 533967 125366 659333Segmentliabilities 484011 105880 589891

At31Dec2016 Netinterestanddividendincome 6587 2363 8950Othernetincome 6065 816 6881

Depreciation/impairmentlossesofpropertyandequipmentandintangibleassets (109) (135) (244)Impairmentofassetsandprovisions (707) (818) (1525)Segmentexpenses (5054) (2166) (7250)Profitbeforetax 6752 60 6812Incometax (1248) (245) (1493)Resultofsegment 5504 (185) 5319

Segmentassets 483703 131892 615595Segmentliabilities 445313 106747 552060


40.Financialriskmanagement(a) IntroductionTheBankisexposedtothefollowingtypesofrisk:•Creditrisk;•Marketrisk;and•Operationalrisk.

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

(b) CreditRiskTheBankisexposedtocreditrisksasaresultofitstradingactivities,providingcredits,hedgingtransactions,andinvestmentandmediationactivities.Creditriskismanagedbothonthelevelofindividualclients(transactions)andontheportfoliolevel.TheCreditUnderwriting,CreditOperationsandStrategicCreditRiskManagementdepartmentsaredirectlyresponsibleforcreditriskmanagement.AllthesedepartmentsareorganisationallyindependentofthebusinessdivisionsandaredirectlyaccountabletoamemberoftheBoardofDirectorsinchargeoftheriskmanagementdivision.Underitscreditpolicy,theBankdefinesthegeneralprinciples,methodsandinstrumentsappliedinidentifying,measuringandmanagingcreditrisk.ThedefinitionoftheBank’screditpolicyisrenderedbytheStrategicCreditRiskManagementdepartment.Thepolicyisreviewedbythisdepartmentonaregularbasis,minimallyonceayear.TheBankdefinesinitsinternalguidelinestheapprovalcompetenciesforcreditdeals,includingthedefinitionofresponsibilitiesandcompetenciesoftheCreditCommittee.

(i) CreditRiskManagementontheLevelofIndividualClientsThecreditriskonthelevelofindividualclientsismanagedbyanalysingclients’financialhealthanddeterminingthelimitsofcreditexposure.Theanalysisisfocusedonclients’positionintherelevantmarket,ratingoftheirfinancialstatements,predictionoffutureliquidity,andthelike.Theresultofthisanalysisis,amongotherthings,toestablisharatingthatreflectstheprobabilityofclients’defaultandtakesintoaccountquantitative,qualitativeandbehaviouralfactors.Analysingthefinancialpositionandsettingthelimitsforcreditexposureandratingisrenderedbothpriortograntingacreditandduringthecreditarrangementswithclients.Theinternalratingsystemcomprises26ratinglevels(1to10adding“+”and“–”tocertainratingclasses,suchas:1+;1;1−;2+;etc).Toclassifyclientsintoindividualratingclasses,theBankassesses(apartfromthenumberofdayspastduewithregardtooverduereceivables,ifany)thefinancialindicatorsrelatedtotheclient

(suchasthestructureofandproportionbetweenthebalancesheet,theincomestatement,andthecashflowstatement),managementquality,ownershipstructure,individualclients’marketposition,reportingquality,productionequipment,account-usehistory,etc.Clientswithdefaultreceivablesarealwaysassignedtooneoftheclassesfrom8–,9or10.Forreceivablesfromindividuals,theabilityoftheclienttofulfilhisorherobligationsisdeterminedusingastandardisedsystemofcreditscoringbasedonrisk-relevantfeatures(creditapplicationscoring).TheBanklikewisesetsandregularlyupdatestheprobabilityofclientdefault–naturalentities,usingthebehaviouralscoringmethod.Aclient’sfinalratingcombinesbothapplicationandbehaviouralcomponents.Asanadditionalsourceofinformationforassessingaclient’sfinancialstanding,theBankusesinformationprovidedbycreditregistries.Inaccordancewithitscreditriskmanagementstrategy,priortoprovidingcredits,theBankrequirescollateralforitscreditreceivables(accordingtotheclient’sfinancialhealthandthecharacterofthegiventransaction).TheBankconsidersthefollowingtobeacceptabletypesofcollateral:cash,first-classsecurities,guaranteesissuedbyotherreputableentities(includingbankguarantees),andpledgesinformofproperty.Indeterminingtherealisablevalueofcollateral,theBankprincipallytakesintoconsiderationthefinancialhealthofthepartyprovidingcollateralandthenominalvalueofthecollateral,ieexpertappraisalsmadebyaspecialdepartmentoftheBank.Therealisablevalueofcollateralisdeterminedbasedonthisvaluebyapplyingtheadjustingco-efficientthatreflectstheBank’sabilitytorealisethegivencollateral,asandwhenneeded.

(ii) CreditRiskManagementonthePortfolioLevelThislevelofcreditriskmanagementprincipallyincludesreportingonthecreditportfolioincludinganalysesandmonitoringoftrendsinindividualcreditsub-portfolios.TheBankmonitorsitsoverallcreditriskexposure,ieittakesintoaccountallon-balanceandoff-balancesheetexposuresandquantifiestheanticipatedlossesfromitscreditexposure.Theexpectedlossiscalculatedbasedontheinternalestimatesofriskparameters,ieprobabilityofdefault(PD),exposureatdefault(EaD)andlossgivendefault(LGD).TheBankregularlymonitorsitscreditexposuretoindividualindustries,countries,oreconomically-connectedgroupsofdebtors.TheBankassessestheconcentrationriskoftheloanportfolioonaregularbasisandestablishesconcentrationlimitsasappropriateinrelationtospecificindustries,countries,oreconomically-connectedgroupsofdebtors.

(iii)ClassificationofReceivables,ImpairmentLossesandProvisions

TheBankcategorisesitsreceivablesarisingfromfinancialactivitiesonamonthlybasis,inaccordancewiththeapplicabledecreeoftheCzechNationalBank.



TheBankassessesonaregularbasiswhetheranyimpairmentofreceivableshasoccurred.Ifanysuchimpairmentisidentified,theBankreportsimpairmentlossesforindividualaccountsreceivableorreceivableportfolios,inaccordancewithIFRS.

ImpairmentLossesonIndividualReceivablesImpairmentlossesrelatedtoindividualreceivablesindefaultarerecognisedintheeventthatthecarryingamountofindividualreceivablesisimpairedandtheBankdoesnotwriteoffsuchreceivables,oraportionthereofthatequalsthebalancesheetimpairment.TheBankassessestheimpairmentofthecarryingamountofallreceivablesinrespectofwhichthedebtorsareindefault:(i)individuallyiftheamountofthereceivableexceedsanequivalentofMEUR1,(ii)usingtherelevantmodelreflectingtheexpectedreturnontherelevantreceivableforotherreceivables.TheBankwritesoffreceivablesintheeventthatnoincomeisanticipatedonthegivenreceivablesoronthecollateralreceivedwithregardtothegivenreceivable.TheBankdeterminesimpairmentlossesarisingfromindividualreceivables;(i)forindividuallyassessedreceivables,lossesfromtheimpairmentareequaltothedifferencebetweenthecarryingamountofareceivableandthediscountedvalueofestimatedfuturecashflows;(ii)forreceivablesassessedusingmodels,lossesfromtheimpairmentareequaltothemultipleofthereceivableamountandlossgivendefault.

ImpairmentLossesonthePortfolioReceivablesTheBankrecognisesimpairmentlossesonwithout-defaultreceivableportfoliosbasedonanassessmentoftheportfolio’scarryingamount;impairmentlossesaredeterminedinanamountequallingtheimpairedcarryingamountofthewithout-defaultreceivableportfolioduetoeventsindicatingareductioninanticipatedfuturecashflowsfromtherelevantportfolio.Impairmentlossesareassignedtoindividualportfoliosandarenotdividedorassignedtoindividualreceivablesincludedinthegivenportfolio.Inreportingtheimpairmentlossesrelatedtoindividualreceivableportfolios,theBanktakesintoaccountthetimedelaybetweenanimpairmentevent’soccurrenceandthetimetheBankobtainsinformationontheimpairmentevent(i.e.whenaclient’sdefaultisidentified)–the“incurredloss”concept.

ProvisionsforOff-BalanceSheetItemsTheBankrecognisesprovisionsforselectedoff-balancesheetitems,asfollows:(i) Provisionsforoff-balancesheetitemsinrespectoftheBank’s

clientsonwhomtheBankcurrentlyrecognisesindividualbalance-sheetreceivablesmeetingtheconditionsforbeingclassifiedasreceivableswithdebtor’sdefault.TheBankrecognisestheimpairmentlossesrelatedtosuchindividualreceivables.

(ii) Provisionsforselectedoff-balancesheetitemsinrespectoftheBank’sclientsonwhomtheBankrecordsnobalancesheetreceivablesinthegivenperiod;eventhough,intheeventthatsuchreceivableexisted,theconditionsforclassificationunderreceivableswithdebtor’sdefaultwouldbefulfilled.

(iii)Provisionsforselectedoff-balancesheetitemsrelatingtoclientswithoutdefault.

TheBankrecognisessuchprovisionsonthesamebasisasusedinreportingimpairmentlossesonreceivableportfolios.

(iv)ForbearanceUnderforbearance,theBankclassifiesloanreceivablesthepaymentconditionsofwhichchangedafterthelending(thechangespredominantlyincludepaymentdeferral,temporarypaymentreduction,postponementoftheultimateduedate,etc.).Theseitemsarerecognisedinthebalancesheetunderloanreceivableswithoutadebtor’sdefaultandloanreceivableswithadebtor’sdefault.Loanreceivableswithachangeintheoriginally-agreedpaymentconditionsaregenerallyclassifiedasreceivableswithadebtor’sdefault.Followingarobustassessment,theBankmaycategoriseindividualreceivablesasreceivableswithoutadebtor’sdefaultdespiteofthechangeintheconditions.ThisapproachisappliedifthereasonsforthechangeofthepaymentconditionsarenotseriousaccordingtotheBank’sthoroughconsiderationandtheBankdoesnotanticipateincurringlossarisingfromthefuturecollectionofsuchloanreceivables.Thereceivableswithoutadebtor’sdefaultalsoincludereceivablesthatwereclassifiedasreceivableswithadebtor’sdefaultuponthechangeofthepaymentconditionsandweresubsequentlytransferredintothecategoryofloanreceivableswithoutadebtor’sdefaultconsideringthefulfilmentofthenewly-agreedconditionsinlinewiththeBank’sinternalrules.LoanreceivableswithchangedpaymentconditionsaremanagedbyCreditRestructuring&Workoutandaresubjecttostandardrestructuringandworkoutproceduresandmonitoring.Theexceptionrepresentsreceivablesthatarenotassessedaswithadebtor’sdefaultuponthechangeofthepaymentconditions,whichareonlytreatedbyCreditRestructuring&Workoutafterathoroughassessmentoftheneedforusingtheknow-howofthisunit.Releasingreceivablesfromtheadministrationofthisunitisalsoconsideredwithrespecttothedevelopmentofindividualcasesandtheneedforusingtheknow-howoftheCreditRestructuring&Workoutstaff.Theperiodforwhichtheclientisdesignatedasforborneisreferredtoastheprobationperiodandlastsnolessthantwoyears,countedfromtheclientdefaultend/forbearanceiftheforbearancewaswithouttheclient’sdefault.Inaddition,thisperiodcanbeterminatedonlyiftheclientfulfilstheagreedconditionsdulyandtimely,isnotindelayinexcessof30daysandifthecaseinvolvesaninstalmentproduct,thedebtmustbereducedbyatleast10%duringthisperiod.Duetothesizeoftheforbearanceportfolioandtheabove-specifiedproceduresandpractices,wedonotidentifyseriousthreatsfor

theBankresultingfromthisportfolio.Thisissupportedbythefactthataportionofreceivableswithchangedpaymentconditionsinordertoovercomethedebtor’sdeterioratedfinancialpositionisreclassifiedagainasnon-default(recognisedintheBank’sbalancesheetasnon-defaultforbearance–refertoabove).

(v) RecoveryofReceivablesTheBankhasestablishedtheCreditWorkout&RestructuringUnitwhichadministersthereceivableswhoserecoverabilityisatrisk.Thepurposeofthisunitinvolvesachievingoneoranumberofthefollowinggoalsinrespectofrisk-bearingcreditreceivables:a)“Revitalisation”ofthecreditarrangement,restructuring

andsubsequentreclassificationintostandardreceivables;b)Fullrepaymentofthecredit;c)Minimisationofthelossfromthecredit(realisationofcollateral,

saleofthereceivablewithadiscount,etc);and/ord)Preventionofadditionallossesfromthecredit(comparison

offutureexpensesversusincome).

(c) MarketRisks

(i) TradingTheBankholdstradingpositionsinvariousfinancialinstruments,includingfinancialderivatives.ThemajorityoftheBank’sbusinessactivitiesareperformedinlinewiththerequirementsoftheBank’scustomers.Dependingontheestimateddemandofitscustomers,theBankholdsacertainsupplyoffinancialinstrumentsandmaintainsaccesstothefinancialmarketsthroughquotingofthebidandofferpricesandbytradingwithothermarketmakers.Thesepositionsarealsoheldforthepurposeofspeculationontheexpectedfuturedevelopmentoffinancialmarkets.TheBank’sbusinessstrategyisthusaffectedbyspeculationandmarket-makinganditsgoalistomaximisethenetincomefromtrading.TheBankmanagestherisksassociatedwithitstradingactivitiesatthelevelofindividualrisksandindividualtypesoffinancialinstruments.Thebasicinstrumentsusedforriskmanagementarelimitsonthevolumesapplicabletoindividualtransactions,limitsforportfoliosensitivity(basispointvalue,orBPV),stoplosslimits,andvalueatrisk(VaR)limits.Thequantitativemethodsappliedinriskmanagementareincludedinthefollowingsectionentitled“Marketriskmanagement”.ThemajorityofderivativesarenegotiatedontheOTCmarketduetothenon-existenceofapublicmarketforfinancialderivativesintheCzechRepublic.

(ii) MarketRiskManagementBelowaredescribedselectedriskstowhichtheBankisexposedthroughitstradingactivities,managingthepositionsresultingfromtheseactivities,andalsomanagingtheserisks.TheproceduresappliedbytheBanktomeasureandmanagetheserisksaredescribedindetailinthefollowingparagraphs.TheBankisexposedtomarketrisksarisingfromitsopenpositionsininterestrate,equity

andforeigncurrencyinstrumenttransactionsthataresensitivetochangesinthesituationonthefinancialmarket.TheBank’sriskmanagementfocusesonmanagingthetotalnetexposureresultingfromtheBank’sstructureofassetsandliabilities.TheBankmonitorsinterestraterisksbyobservingthesensitivityofparticularassetsandliabilitiesinindividualtimeperiods,asexpressedbythechangeintheactualvaluesofassetsandliabilitiesifinterestratesincreasebyonebasispoint(BPV).Forhedgeaccountingpurposes,theBankidentifiesspecificassets/liabilitiescausingthisincongruitysothattheaccountingcriteriafortheapplicationofhedgeaccountingaremet.

ValueatRiskValueatRiskrepresentsthemainmethodformanagingthemarketrisksarisingfromtheBank’sopenpositions.ValueatRiskrepresentsthepotentiallossfromanunfavourablemovementonthemarketwithinacertaintimeperiodatacertainconfidencelevel.ValueatRiskismeasuredbasedona1-dayholdingperiodandaconfidencelevelof99%.Thepre-conditionsfortheValueatRiskmodelhavethefollowinglimitations:– Theone-dayholdingperiodpre-supposesthatallthepositions

canbeclosedduringasingleday.Thisassumptiondoesnotnecessarilyapplytomarketswithlowerliquidity.

– The99%confidenceleveldoesnotreflectallpossiblelossesthatcanoccuratthisconfidencelevel.

– VaRiscalculatedfromthepositionsattheendofthetradingdayanddoesnotconsiderthepositionswhichcanbeopenedonan“intra-day”basis.

– Usinghistoricaldataasabasicdeterminantofpossiblefuturedevelopmentdoesnotnecessarilycoverallpossiblefuturescenarios,especiallycrisisscenarios.

TheVaRcalculationdividesthecalculatedriskintointerestrateandcreditportions.ThecreditportionofVaRiscalculatedbasedonthevolatilityofthecreditspreadbetweensecuritiesandthezero-riskinterestrate.Forthispurpose,theyieldcurvesofparticularissuers,industries,orgroupsofissuerswithidenticalratingaredownloadedintothesystemformarketriskmanagement.Specificsecuritiesaremappedtotheseyieldcurvesandthevolatilityofthecreditspreadiscalculated.TheBankregularlyreassessesthemappingofdebtsecuritieswiththerelevantyieldcurvesand,ifnecessary,thedebtsecuritiesarere-mappedtocurvesthatreliablyreflectthecreditriskofthespecificdebtsecurities.TheBankusesVaRtomeasureinterestraterisk,foreigncurrencyrisk,equityriskandothertypesofriskconnectedwiththenegativemovementsinthepricesofmarketfactors(spreadrisk,optionrisk,etc).TheaggregatestructureofVaRlimitsisapprovedbytheAssetsandLiabilitiesCommittee(ALCO);atleastonceayearthestructureandtheamountoflimitsarerevisedinaccordancewiththeBank’sneedsanddevelopmentsonthefinancialmarkets.TheresultsoftheVaRcalculationarepublisheddailyforselectedusers(Boardof


Directors,selectedemployeesoftheFinancialMarketsDepartment,theMarketRiskDepartment,theAssets&LiabilitiesManagementUnit,andtheMARSdepartmentoftheparentbank/sub-holding).

BackTesting–ValueatRiskTheresultsofthismodelareback-testedandcomparedwiththeresultsoftheactualchangesintheinterestratesonthefinancialmarketsonadailybasis.IftheBankidentifiesanyinaccuracies,themodelisadjustedtocorrespondwiththecurrentdevelopmentonthefinancialmarkets.


ThetablebelowshowstheValuesatRiskreportedbytheBank.

At31Dec Average At31Dec AverageMCZK 2017 for2017 2016 for2016AggregateVaR 146,6 132,9 119,5 129,7VaRofcurrencyinstruments 4.5 2.8 2.8 4.5VaRofequityinstruments – – – –

InterestRateRiskTheBankisexposedtointerestrateriskasaresultofthefactthatinterest-bearingassetsandliabilitieshavedifferentmaturitiesorinterestratere-pricingperiodsanddifferentvolumesduringtheseperiods.Intheeventofachangeininterestrates,theBankisexposedtoariskasaresultofthedifferentmechanismortimingofadjustmentstoparticulartypesofinterestrates(suchasPRIBOR),declaredinterestratesondeposits,etc.TheactivitiesintheareaofinterestriskmanagementarefocusedonoptimisingtheBank’snetinterestincomeinaccordancewiththestrategyapprovedbytheBoardofDirectors.Giventhedevelopmentofthemarketinterestratesandthepotentialdecreasetonegativevalues,theBankhasalreadytakenmeasuresforcertainproductstoeliminatethedecreaseinthemarketinterestrate(asthekeyelementoftheclientrate)tonegativevalues.TheBankherebyreconcilesclientratesrelatingtoassetsandliabilitiesofnon-financialclients.TheBank’soverallinterestratepositionasof31December2017ischaracterisedbygreaterinterestratesensitivityontheassetssideascomparedtotheliabilitiesside.Thiscanbeseeninthenegativeaggregatebasispointvalue(BPV)–iftheinterestratesunderindividualcurrenciesincreasedinparallel,therewouldbeadecreaseinmarketrevaluation.TheBank’sinterestratepositionisdiversifiedintoindividualtimeperiods,duetowhichthesensitivitytointerestratevolatilityisnotnecessarilyidentical(positive,negative),andtoanumberofcurrencies,throughwhichthedifferentinterestraterisksrelatedtoindividualcurrenciesarecompensatedundertheaggregateassetandliabilityportfolio.ThemajorsensitivityisconnectedtoCZKandEUR.Interestratederivativesaregenerallyusedtomanagethemismatchbetweentheinterestsensitivityofassetsandliabilities.ThesetransactionsarecarriedoutinaccordancewiththeBank’sstrategy

formanagingtheassetsandliabilitiesapprovedbytheBoardofDirectors.PartoftheBank’sincomeisgeneratedbytheintentionalincongruitybetweentheassetsandliabilitiesthatareinterestrate-sensitive.TheBankappliesa“BasisPointValue(BPV)”approachformeasuringinterestsensitivityofassetsandliabilities.BPVrepresentsthechangeinthepresentvalueofcashflowsderivedfromindividualinstrumentsifinterestratesincreasebyonebasispoint(0.01%),i.e.itrepresentsthesensitivityofinstrumentstointerestraterisks.TheBanksetuptheinterestraterisklimitstorestrictoscillationofnetinterestincomeresultingfromchangesofinterestratesby0.01%(the“BPVlimit”).

Stress Testing of Interest Rate RiskTheBankcarriesoutweeklystresstestingofinterestratesensitivitybyapplyinghistoricalscenariosofsignificantmovementsonfinancialmarkets,internallydefinedimprobablescenarios,andgroupmacroscenariosandsimulatestheirimpactontheentireinterest-sensitivepartoftheregulatorybankingbook.Thestandardstressscenariocorrespondstoaparallelshiftintheyieldcurveby200basispointsformajorcurrencies(CZK,EUR,USD),andthemainalternativescenario(moneymarketstresstest)correspondstoaparallelshiftintheshorttailoftheyieldcurveby250basispointsformajorcurrencies(CZK,EUR,USD),withamaturityofuptotwoyears.ThefollowingtableshowstheimpactoftheparallelshiftoftheyieldcurveontheBank’sresults.TheBankusestheeuroasthebasecurrencyforstresstesting.AllthevaluearetranslatedintoCZKusingtheCNB’sexchangeraterulingasoftherelevantdate.

Basicstresstest MMstresstestMCZK –200bp +200bp +250bpValueat31Dec2017 1520 (1907) (827)Averagefortheperiod 1227 (1688) (753)Maximumvalue 2021 (730) 48Minimumvalue 178 (2369) (1338) Valueat31Dec2016 1144 (1750) (784)Averagefortheyear 1598 (2104) (1058)Maximumvalue 2184 (1750) (784)Minimumvalue 1144 (2361) (1307)

Since7December2015,stressscenariosfornegativemarketinterestrateshavebeenalsoimplemented.


Asalargeportionofthemarketinterestratecurveshowsnegativeratesandafurtherdecreasemaynotbeexcluded,theBankappliesastressscenariotoreflectapossibleprofit/losseffectofafurtherdecreaseinthemarketinterestrates.Thisapproachisappliedtotheentireportfolioofassetsandliabilities,includingproductsforwhichadecreaseofthemarketinterestrates(asanelementofclientrates)intonegativevaluesisrestrictedincontracts(aswellasinthegeneralbusinesstermsandconditions).Usingthisapproach,theBankalsoreflectsthepossibleriskofprofit/lossforproductswherethemarketinterestratescannotachievenegativevaluesaccordingtocontracts.

HedgeAccountingAspartofitsmarketriskmanagementstrategy,theBankhedgesagainstinterestraterisk.TheBank’shedgestrategyusesbothfairvaluehedgesandcashflowhedges.

Fair Value HedgingHedgedinstrumentsincludefinancialassetsandliabilitiesrecognisedattheircarryingamounts(exceptforsecuritiesheldtomaturity)andsecuritiesavailableforsalerecognisedattheirfairvalues,withchangesinfairvaluerecognisedinequity.Hedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).Attheinceptionofthehedgedarrangement,theBankperformsafairvaluehedgeeffectivenesstestonthebasisoffuturechangesinfairvaluesofhedgedandhedginginstrumentsandofexpectedinterestratesmovements(the“prospectivetest”).Onthebasisoftheactualinterestratedevelopments,thetestofeffectivenessiscarriedoutatthelastdayofeachmonth.TheBankhasselectedthemonthlyfrequencyofeffectivenesstestingtobeabletodetectpossiblenon-effectivenessofthehedgearrangements.Forparticularhedgeditemsandhedgingtrades(loans,deposits,securities,interestrateswaps,etc),specificdatesandamountsofcashflowsaredeterminedfromtheinceptionofahedgedarrangementuntilthematurityofthehedgedinstrument,oruntiltheendofthehedgearrangement.Thepresentvaluesofparticularcashflowsfortherelevantdate(dateofeffectivenessmeasurement)

aredeterminedonthebasisofthediscountfactorsforspecificcurrencies.Thefairvalueofatransactionisthetotalofdiscountedcashflowsfromtherelevanttradeatthegiventime.Thecumulativechangeofthefairvalueisdeterminedbycomparingthefairvalueinthegiventimewiththefirstrevaluation.Thesecumulativechangesarefurthernettedforrealisedcashflowsbyaddingthembackorsubtracting.Thehedgeeffectivenessismeasuredusingthecomparisonofthecumulativechangeinthefairvalueofthehedgedandhedginginstrument.Thehedgeisconsideredeffectiveiftheproportionofcumulativefairvaluechangesofhedgedandhedginginstrumentsisbetween80%and125%.

Cash Flow HedgingTheBankusestheconceptofcashflowhedgingtoeliminateinterestrateriskonanaggregatebasis.Thehedgedinstrumentsarefutureforecastedtransactionsintheformofinterestincomeandexpensessensitivetochangesinmarketinterestrates.Futureanticipatedtransactionsarisefromconcludedcontractsandfuturetransactionsestablishedonthebasisofreplicationmodels.Thehedginginstrumentsarederivatives(mostcommonlyinterestrateswapsandcrosscurrencyswaps).TheeffectivenessofacashflowhedgeisdeterminedinaccordancewiththeUCIGroupstandards,basedonanapprovedmethodology.First,thenominalvalues(dividedintoassetsandliabilities)ofexternaltradesbycurrencyareidentified,forwhichtheinterestcashflow(establishedonthebasisofthere-financing–the“funding”rate)maybeconsideredvariable(hedgedcashflows).Second,forthesesamecurrenciesthenominalinterestcashflowsofvariablehedginginstrumentpartsareidentifiedandaremonitoredonanetbasis(i.e.netcashin/outflows).TheBankmonitorswhethertheabsolutevalueoffuturevariableinterestcashflowsfromhedgeddealsforspecifictimeperiodsexceedstheabsolutevalue(havingtheoppositesign,plusorminus)ofnetvariablecashflowsfromhedgingderivatives.Thetimeperiodsaredefinedasfollows:upto2yearsbymonths,furtherbyindividualyears,10-15years,andmorethan15years.Thehedgeisjudgedeffectiveiftheaggregatevolumeofvariableinterestcashflowsfromhedgeddealsisgreaterthanthenetvariable

interestcashflowsfromhedgeddeals(designatedwithanopposite–positive/negativesign)ineachofthetimeperiods,measuredseparatelyforeachmonitoredcurrency.

CurrencyRiskAssetsandliabilitiesdenominatedinforeigncurrencies,includingoff-balancesheetexposures,comprisetheBank’sexposuretocurrencyrisks.Bothrealisedandunrealisedforeignexchangegainsandlossesarereporteddirectlyinprofitorloss.TheBankhasestablishedasystemofcurrencyrisklimitsbasedonitsnetcurrencyexposureinindividualcurrencies.


Thefollowingtableshowsthestructureofassetsandliabilitiesbycurrency:

MCZK CZK EUR USD CHF Other TotalAt31Dec2017 Cashinhandandcashbalances 1666 2159 7 32 143 4007Financialassetsatfairvaluethroughprofitorloss,includingFA 4727 3062 295 – 36 8120of which: –heldfortrading 4727 3062 295 – 36 8120 –notheldfortrading – – – – – –Available-for-salesecurities 19011 28035 476 – – 47522Securitiesheldtomaturity – 175 – – – 175Receivablesfrombanks 203721 5695 255 96 355 210122Receivablesfromclients 190472 180624 1252 14 2064 374426Positivefairvalueofhedgingderivatives 3146 1292 3 – – 4441Equityinvestments 3979 – – – – 3979Propertyandequipment 379 608 – – – 987Intangibleassets 1549 194 – – – 1743Taxreceivables 43 543 – – – 586Non-currentassetsheldforsale – 2 – – – 2Otherassets 2580 401 181 13 48 3223Totalassets 431273 222790 2469 155 2646 659333 Depositsfrombanks 8259 148928 7198 – 19 164404Depositsfromclients 229106 117967 10731 608 2427 360839Debtsecuritiesissued 15961 23914 125 – – 40000Financialliabilitiesheldfortrading 4209 1982 347 – 1661 8199Negativefairvalueofhedgingderivatives 3118 1596 162 – – 4876Taxliabilities 202 101 – – – 303Otherliabilities 4634 5189 432 12 172 10439Provisions 436 385 5 – 5 831Equity 51193 18017 35 191 6 69442Totalliabilitiesandequity 317118 318079 19035 811 4290 659333Gap 114155 (95289) (16566) (656) (1644) –

MCZK CZK EUR USD CHF Other TotalAt31Dec2016 Cashinhandandcashbalances 1865 1954 160 45 168 4192Financialassetsatfairvaluethroughprofitorloss,includingFA 3117 4494 563 3 858 9035of which: –heldfortrading 3117 4494 563 3 858 9035 –notheldfortrading – – – – – –Available-for-salesecurities 40896 38808 488 – – 80192Securitiesheldtomaturity – 186 – – – 186Receivablesfrombanks 129374 9138 823 79 435 139849Receivablesfromclients 180665 180872 2793 1021 1947 367298Positivefairvalueofhedgingderivatives 2736 2424 – 3 – 5163Equityinvestments 3979 – – – – 3979Propertyandequipment 475 841 – – – 1316Intangibleassets 1079 148 – – – 1227Taxreceivables – 756 – – – 756Non-currentassetsheldforsale – 4 – – – 4Otherassets 1208 747 380 12 51 2398Totalassets 365394 240372 5207 1163 3459 615595 Depositsfrombanks 15548 79450 5439 – 36 100473Depositsfromclients 233331 123422 10755 822 2974 371304Debtsecuritiesissued 28782 31058 267 – – 60107Financialliabilitiesheldfortrading 3883 1385 350 3 948 6569Negativefairvalueofhedgingderivatives 1105 2295 17 – – 3417Taxliabilities 958 – – – – 958Otherliabilities 3236 4549 462 7 42 8296Provisions 468 455 8 – 5 936Equity 50200 13338 (4) – 1 63535Totalliabilitiesandequity 337511 255952 17294 832 4006 615595Gap 27883 (15580) (12087) 331 (547) –


EquityRiskEquityriskistheriskofmovementinthepricesofequityinstrumentsheldintheBank’sportfolioandoffinancialderivativesderivedfromtheseinstruments.Themainsourceofthisriskistradinginequityinstruments,althoughsomeequityriskalsoarisesasaresultoftheBank’snon-tradingactivities.Therisksassociatedwithequityinstrumentsaremanagedthroughtradinglimits.Themethodsusedtomanagetheserisksaredescribedabove.

LiquidityRiskLiquidityriskarisesasaresultofthemanneroffinancingtheBank’sactivitiesandmanagingitspositions.ItincludesboththeriskthattheBankwouldbeunabletofinanceitsassetsusinginstrumentswithappropriatematurityandtheriskthattheBankwouldbeunabletodisposeofitsassetsforanappropriatepricewithinthenecessarytimeperiod.TheBankhasaccesstodiversesourcesoffunds,whichcomprisedepositsandothersavings,securitiesissued,loanstaken(includingsubordinatedloans)anditsownequitycapital.ThisdiversificationmakestheBankflexibleandlimitsitsdependencyonanysinglefundingsource.TheBankregularlyevaluatestheliquidityrisk,

inparticularbymonitoringchangesinthestructureoffundingandcomparingthesechangeswiththeBank’sliquidityriskmanagementstrategy,whichisapprovedbytheBoardofDirectors.TheBankalsoholds,aspartofitsliquidityriskmanagementstrategy,aproportionofitsassetsinhighlyliquidfunds,suchasstatetreasurybillsandsimilarbonds.LiquidityriskisevaluatedregularlybytheBankusingtheanalysisofdifferencesbetweentheresidualmaturityofassetsandliabilities.Twoapproachesareused:short-termandlong-term(structural).Intheshort-termapproach,theBankmonitorsdailyandindetailwithaviewtothenextseveralweeksthedifferencebetweenliquidityinflowsandoutflows.Limitsaresetforcumulativeinflowsandoutflows.Iflimitsarebreached,theBanktakesactiontoreducetheliquidityrisk.Inthelong-term(structural)perspective,theBankmonitorsthedifferencebetweenthematurityofassetsandliabilitiesinperiodslongerthanoneyear.Forproductswithnon-specifiedmaturity(i.e.currentaccounts)theBankhasdevelopedamodelfortheirexpectedresidualmaturity.TheBankagainsetslimits,andappropriateactionistakeniftheyarebreached(e.g.byacquiringlong-termsourcesofrefinancing).TheBankhasdrawnupacontingencyplanfortheeventofaliquiditycrisis.Thisplandefinestheroles,responsibilitiesandprocessof

crisismanagement.Italsodefinesthepossiblemeasureswhichshouldbeconsideredintheeventofanemergencysituation.Stresstestsofshort-termliquidityareperformedbytheBankonaweeklybasis.ThestresstestsverifytheBank’sabilitytoovercomeextremesituationssuchassystemicinterruptionoftheinter-bankmoneymarket,adecreaseintheBank’screditrating,ITsystembreakdowns,andreputationrisktotheBank.Thestressscenarios’resultsarepresentedtotheALCO.


Thefollowingtableshowsundiscountedcashflowsofassetsandliabilities,issuedguaranteesandprovidedloanfacilities:

MCZK Carrying Netcash Upto 3months 1–5 Over Unspe- amount flow 3months –1year year 5years cified.At31Dec2017 Cashinhandandcashbalances 4007 4007 4007 – – – –Financialassetsatfairvaluethroughprofitorloss,includingFA 8120 8423 1085 693 4487 2158 –of which: –heldfortrading 8120 8423 1085 693 4487 2158 – –notheldfortrading – – – – – – –Available-for-salesecurities 47522 51982 486 4568 24431 22497 –Securitiesheldtomaturity 175 228 2 34 192 – –Receivablesfrombanks 210122 210151 207947 2157 47 – –Receivablesfromclients 383296 396352 32517 56642 151178 147005 9010Positivefairvalueofhedgingderivatives 4441 4441 77 189 2764 1411 –Equityinvestments 3979 3979 – – – – 3979Propertyandequipment 987 987 – – – – 987Intangibleassets 1743 1743 – – – – 1743Taxreceivables 586 586 . 586 – – –Non-currentassetsheldforsale 2 2 2 – – – –Otherassets 3223 3223 1958 1264 – – 1

Depositsfrombanks 164404 164437 78477 531 84211 1218 –Depositsfromclients 360839 360922 352657 6452 703 1110 –Debtsecuritiesissued 40000 42653 1267 7115 24509 9762 –Financialliabilitiesheldfortrading 8199 8199 2707 1032 3432 1028 –Negativefairvalueofhedgingderivatives 4876 4876 133 352 2119 2272 –Taxliabilities 303 303 – 303 – – –Otherliabilities 10439 10439 9130 1309 – – –Provisions 831 831 – – – – 831Equity 69442 69442 69442

Undrawnloanfacilities 39814 39814 4788 9001 16880 1650 7495Bankguarantees 115928 115928 8477 31228 20876 55347 –


MCZK Carrying Netcash Upto 3months 1–5 Over Unspe- amount flow 3months –1year year 5years cified.At31Dec2016 Cashinhandandcashbalances 4192 4192 4192 – – – –Financialassetsatfairvaluethroughprofitorloss,includingFA 9035 9399 507 714 4720 3585 (127)of which: –heldfortrading 9035 9399 507 714 4720 3585 (127) –notheldfortrading – – – – – – –Available-for-salesecurities 80192 84371 4642 12534 36599 30365 231Securitiesheldtomaturity 186 208 2 7 199 – –Receivablesfrombanks 139849 139967 135570 3400 906 – 91Receivablesfromclients 377318 391856 60833 53080 146875 121073 9995Positivefairvalueofhedgingderivatives 5163 5163 48 172 2698 2249 (4)Equityinvestments 3979 3979 – – – – 3979Propertyandequipment 1316 1316 – – – – 1316Intangibleassets 1227 1227 – – – – 1227Taxreceivables 756 756 – 756 – – –Non-currentassetsheldforsale 4 4 4 – – – –Otherassets 2398 2383 1 – – – 2382

Depositsfrombanks 100473 100476 57006 25220 17261 984 5Depositsfromclients 371304 371442 352083 15090 872 360 3037Debtsecuritiesissued 60107 63765 1600 13035 37287 11797 46Financialliabilitiesheldfortrading 6569 6570 342 536 3329 2363 –Negativefairvalueofhedgingderivatives 3417 3417 29 88 1933 1367 –Taxliabilities 958 958 – 958 – – 958Otherliabilities 8296 8680 1 – – – 8679Provisions 936 936 – – – – 936Equity 63535 63535 – – – – 63535

Undrawnloanfacilities 41687 41687 3470 9456 18962 1884 7915Bankguarantees 130331 130331 27955 42479 18160 41737 –

(d) OperationalRiskTheoperationalriskisdefinedasariskoflossduetodeficienciesorfailuresofinternalprocesses,peopleandsystemsorexternalevents.Thisdefinitionincludesthelegalrisk,however,itdoesnotincludethestrategicorreputationrisk.Thelegalriskincludes,amongotherthings,theriskoffines,sanctionsorpunitivedamagesresultingfromsupervisionmeasuresaswellasprivatesettlement.TheBank’sorganisationalstructureanditsinternalrulesfullyrespectthesegregationofincompatibledutiesandpreventanyconflictofinterests.Internalrulesunambiguouslydefinetheobligationsandcompetenciesofemployees,includingmanagement,andregulatetheworkingprocessesandcontrollingactivities.TheOperationalRiskManagementCommitteeisthemaincontrolanddecisionbodyregardingoperationalrisk.AllmembersoftheBoardofDirectorsarepermanentmembersofthecommittee.TheOperationalRiskDepartmentisanindependentbodyreportingdirectlytoamemberoftheBoardofDirectorsinchargeofriskmanagement.TheOperationalRiskDepartmentisauthorisedtosecureunifiedandcoordinatedoperationalriskmanagementinaccordancewiththeapplicable

regulationsandthestandardsoftheparentcompany.Operationalriskmanagementandmonitoringassuchisperformedbyauthorisedemployeesofindividualdepartments.TheInternalAuditDepartmentidentifiesextraordinarytrendsandbreachofornon-compliancewithdirectivesanditassessesthecontrolandmanagementsystem’sfunctionality.TheBankcontinueddevelopingandsettingupthecomprehensivesystemfortheidentification,monitoringandmanagementofoperationalrisk.Inlinewiththe2017OperationalRiskManagementStrategy,theBankdefineditsprioritiesasregardsmitigatingoperationalriskexposurethatareconsistentwiththeriskprofileandriskappetiteoftheGroupandtheBank.TheoperationalriskappetiteastheoperationalrisklevelacceptablebytheBankwasmeasuredbymeansofELOR(ExpectedLossonRevenue)whichisanindicatordefinedasaproportionofanticipatedlossesarisingfromoperationalrisk(statisticalestimationbasedonhistoricaldata)toincome(budgetedincomeonaquarterlybasis).SettingtheELORlimitanditsmonitoringwasperformedinlinewiththeGroup’spolicies.Toensureeffectivecollectionofoperationalriskeventsanddata,


theBankusesanon-lineinformationsystemdevelopedbytheUniCreditGroup.Thesystemcomplieswiththerequirementsforcapitaladequacymanagement.Thedataacquiredthroughthesystemistakenintoaccountincalculatingthecapitalrequirementaswellasinmanagingoperationalrisk.Itservesasabasisfordesigningprocessesthatreducethenumberofparticulareventsandmitigatetheconsequences(e.g.inpreparingprocessmitigationmeasuresorstrategicinsuranceplanfortheBank).Thedataisalsousedforreviewingthereliabilityofproposedmeasuresforoperationalriskmitigation.ThedataiscollectedonacontinuousbasisincooperationwithindividualdepartmentsoftheBank(allsignificanteventsarereportedandresolvedimmediately).Basedonthecollecteddata,aquarterlyconsolidatedreportisprepared,whichispresentedtotheOperationalRiskManagementCommitteeanddistributedwithintheBank.TheBoardofDirectors,theInternalAuditDepartmentandtheparentcompanyareinformedaboutthemostsignificantcasesofoperationalriskonaweeklybasis,orimmediatelyifnecessary.Thedataisregularlyreconciledwiththeaccountingrecordsandothersourcesinordertoensuredatacompletenessandaccuracy.In2017,theBankanalysedthescenarios,andconfiguredandanalysedtheriskindicators.Anotherimportantelementoftheoperationalriskmanagementsystemismanagingthecontinuityofoperations(emergencyplanning,crisismanagement).TheBankhasupdatedandtestedtherecoveryplans(forcrisissituations)inordertoensuretheirfullusefulnessandeffectivenessundercurrentconditions.Inaddition,theOperationalRiskDepartmentenhancestheoverallawarenessofoperationalriskwithintheBankandtrainstheBank’sstaffbothbymeansoftrainingsessionsande-learningcourses.Basedontheconsentobtainedfromtheregulatorybody,theBankcalculatesthecapitalrequirementforoperationalriskundertheadvancedmeasurementapproach(AMA).Underthisapproach,thegroupmodelisusedbasedoninternalandexternaldata,theresultsofscenarioanalysesandriskindicatordata.

(e) CapitalManagementManagementoftheBankmonitorsthedevelopmentoftheBank’scapitaladequacyanditscapitalposition.Theregulatorofthebankingmarket,theCzechNationalBank,establishedrulesforthecalculationofcapitalrequirementsandmonitorstheirdevelopment.Since1January2014,theBankhasmettherequirementsofBaselIII(Regulation(EU)No.575/2013of26June2013onprudentialrequirementsforcreditinstitutionsandinvestmentfirms)thatwasimplementedbytheCzechNationalBankthroughDecreeNo.163/2004Coll.ontheperformanceoftheactivityofbanks,creditunionsandinvestmentfirms.TheBaselIIIruleswereestablishedinresponsetothefinancialcrisisandintroducerequirementsforincreasedcapitalquality,requirementforanincreasedcoverageofrisks,theminimumstandardforliquiditymanagement,rulesfortheleverageratioandimproveriskmanagementandcorporategovernance.

ThetransfertotheBaselIIIrulesdidnothaveasignificantimpactontheBank’scapitaladequacy.Theoriginalcapital(Tier1)iscurrentlypartofTier1commoncapital(CET1)whichisthesupremequalitycapital.TheBankhasnewlyincludedthecapitalrequirementrelatingtotheriskofthecreditvaluationadjustmentinthecapitaladequacy;thishasnosignificantimpactonthetotalcapital.Severalnewrequirementswereintroducedinrelationtorisk-weightedassetswhich,inaggregate,hadnosignificantimpactonrisk-weightedassets.Theimpactoftheincreaseinthecorrelationcoefficientinexposurestolargeentitiesinthefinancialsectorandunregulatedfinancialentitieswasbalancedbytheimpactofthereductionfactorforexposurestosmallandmedium-sizedcompanies.

TheBank’sregulatorycapitalconsistsofthefollowing:•CommonEquityTier1(CET1)capitalwhichcomprisesregistered

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

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

anticipatedcreditlosseswhenusingtheinternalratingbasedapproach.

TheBankcomplieswiththedefinedminimumrequirementsofBaselIIIrulesforcapitaladequacy,includingcapitalbuffers.

(f) MarketDevelopmentin2017TheCzecheconomywassuccessfulin2017andwithagrowthof4.5%itwasnearthepeakoftheeconomiccycle.Itsgrowthwassupportedbyallcomponentsofaggregatedemand.Householdconsumptionwasstimulatedbythedecreasingunemploymentrate,whichreacheditshistoricallylowestlevelduringtheyear,andincombinationwitharecordnumberofavailablejobpositionsitcreatedpressureonsalarygrowthacceleration.Enterprisescitedlackofworkersasthemainobstacleinbusinessdevelopmentwithincreasingfrequency.Thecreationoffixedcapitalrecoveredfromthepreviousyear’sdroppredominantlythankstotheinvestmentactivityofprivateentities.Theenvironmentdescribedwassuitableforthecreationofdemandinflationpressuresthatmaintainedyear-on-yearinflationabovethelevelof2%throughouttheyear.Averageinflationamountedto2.5%,thehighestlevelinfiveyears.TheinflationaryenvironmentpromptedtheCzechNationalBanktotightenitsmonetaryconditions.First,inAprilitabandoneditsforeignexchangeinterventions,thusceasingtopreventthecrownfromstrengthening.Bytheendoftheyear,thecrownstrengthenedby5.5%withrespecttotheeuro.Atthesametime,theCzechNationalBanktighteneditsmonetarypolicyalsothroughtheinterestratechannelanditincreasedthereporatetwotimesduringtheyear,

withthefinalvalueoftheyearbeing0.5%.Theendoftheinterventionsontheforeignexchangemarketwasprecededbyaperiodofextremelyhighdemandforcrownsfromexportersandforeigninvestors,whichledtoanincreaseintheCzechNationalBank’sforeignexchangereservesequallingalmosttwothirdsofannualGDP.AsecondaryeffectofthegrowthofcrownpositionsofforeignentitieswastheincreaseddemandforCzechgovernmentbonds,whichtemporarilydecreasedtheiryieldtotheleveloftheGermanones.Theshareofcrownbondsheldbynon-residentsthereforegrewfrom32%inlate2016to42%inDecember2017andduringtheyearitevenbrieflyexceeded50%.ThetotalvolumeofloansintheCzecheconomyacceleratedslightlyto7.3%year-on-yearthankstoastrongerhouseholddemandalongwiththeslowingdownofthegrowthofcorporateloans.Thedemandforresidentialrealestatefuelledtheaccelerationofthepricestotwo-figurevaluesandpromptedtheCzechNationalBanktoendeavourtoslowdownthisdevelopmentusingmacroprudentialinstruments.Inthebusinessenvironmentoutsideofthefinancesector,asignificantchangeoccurredintheformofthelaunchofthesecondstageofelectronicsalesrecords,affectingtheareaoftrade.Theimplementationofthefollowingstages,plannedfornextyear,washaltedbytheConstitutionalCourt.Nootherlegislativechangesrelevantforthebusinessenvironmentoccurredduetotheelectioncycle.Governmentregulationsincreasedtariffsalariesinthepublicsectortoanunusualextent.Minimalwagealsogrewbyasignificant11%.In2016,theBankimplementedanewstressscenariorelatingtotheimpactsofBrexit.FollowingtheBrexitdecision,theBankstoppedcalculatingthescenariobutkeepsmonitoringthesituationonfinancialmarketsandevaluatestheimpactsofBrexit-relatedreportsonitsriskprofile.InviewoftheminimalexposuretoGBP-denominatedassets,theBankconsidersthatthedirectimpactofnegativedevelopments(inrespectofBrexit)ontheBank’sfinancialperformancewouldbeminimal.

During2017,theBankcontinuouslyenhanceditssystemsandprocessesunderfinancialriskmanagementasfollows:(i)CreditRisk– Updateofspecificcreditpoliciesforclientsoperatingin

selectedindustries(financingofcommercialrealestate,energy,automotive,construction,engineering,etc);

– Adjustmentofselectedproductparametersandcreditproductsinretailbanking;

– Strengtheningoftheprocedureforcreditfraudidentification,monitoringtheprocessrelatedtotheloanportfolio(timelyidentificationofthewarningsignals)andoftheprocessforrecoveryofloanreceivables);

– ContinuousimprovementoftheBank’sownestimatesofriskparametersusedintheadvanced(IRB)approachtothecalculationofthecapitalrequirementsforcreditriskforthebankingportfolio.

(ii)MarketRisk– TheinternalplatformforthecalculationofVaRandBPVwas

improvedandrecalibratedonanongoingbasistoreflectthecurrentbehaviouroffinancialtimeseriesusedincalculatingmarketriskindicators.

(iii)Liquidity– TheBankcontinuedtofine-tunethecalculationmethodology

fortheBaselIIILCRindicatorsandimplementednewinternalliquidityindicatorsforamoreaccuratequantificationoftheliquidityrisk.TheBankalsoimplementednewliquiditystressteststhatbetterreflectthecurrentmacroandmicroeconomicconditionsinwhichtheBankoperates.

41.Relatedpartytransactions

Entitiesaredeemedtobeentitiesunderspecialarrangementsintheeventthatoneentityisabletocontroltheactivitiesoftheotherorisabletoexercisesignificantinfluenceovertheotherentity’sfinancialoroperationalpolicies.Aspartofitsordinarybusiness,theBankentersintotransactionswithrelatedentities.Thesetransactionsprincipallycompriseloans,depositsandothertypesoftransactionsandareconcludedunderarm’slengthconditionsandatarm’slengthpricesinordertopreventanydetrimenttoanyparty.RelatedpartiesprincipallyincludetheparentcompaniesandfellowsubsidiariesaspartoftheUCI/HVB/BAGroup,subsidiariesandaffiliates,membersoftheBoardofDirectorsandothermembersoftheBank’smanagement.TheGrouphaspreparedanequityprogrammefortheemployeesoftheUniCreditGroupunderwhichtheemployeesmaypurchaseinvestmentsharesofthegroupatadiscountedpriceintheformofdiscountshares.Discountsharesmaynotbesoldoverthetyingperiod.Tiedshareswillbeforfeitediftherespectiveemployeeterminateshis/heremploymentinthegrouporsellshis/herinvestmentsharesbeforetheendofthetyingperiod.Theprovideddiscountisallocatedtoindividualgroupcompaniesthatareinvolvedintheprogrammeandthesecompaniesrecogniseanddeferthediscountoverthetyingperiod.


(a) Transactionswiththeparentcompany

MCZK 31Dec2017 31Dec2016Assets Receivablesfrombanks 145 3451 Securitiesavailableforsale 1814 1929Total 1959 5380 Liabilities Depositsfrombanks 112590 16534Total 112590 16534 Off-balancesheetitems Issuedguarantees 273 347 Irrevocablecreditfacilities 96 101Total 369 448

MCZK 2017 2016Interestandsimilarincome 35 65Interestandsimilarexpenses (14) (4)Incomefromfeesandcommissions 4 21Expensesforfeesandcommissions (35) (20)Generaladministrativeexpenses (8) 15Total (18) 77

(b) Transactionswithsubsidiaries

MCZK 31Dec2017 31Dec2016Assets Receivablesfromclients 37672 30664 of which: UniCreditLeasingCZ,a.s. 22744 16918 UniCreditLeasingSlovakia,a.s. 9175 8254 UniCreditFleetManagement,s.r.o.(CZ) 1784 1465 UniCreditFactoringCzechRepublicandSlovakia,a.s. 1780 1056 HVBLeasingCzechRepublics.r.o. 1175 1723Total 37672 30664 Liabilities Payablestoclients 758 794 of which: UniCreditLeasingSlovakia,a.s. 447 491 UniCreditpojišťovacímakléřskáspol.sr.o. 251 101Total 758 794 Off-balancesheetitems 178 187 Issuedguarantees of which: UniCreditFactoringCzechRepublicandSlovakia,a.s. 178 187 Irrevocablecreditfacilities 2763 15039 of which: UniCreditLeasingCZ,a.s. 1289 9726 UniCreditFleetManagement,s.r.o.(CZ) 467 536 UniCreditFactoringCzechRepublicandSlovakia,a.s. 347 1806 UniCreditLeasingSlovakia,a.s. 341 2901Total 2941 15226


MCZK 2017 2016Interestincomeandsimilarincome 216 191 of which: UniCreditLeasingCZ,a.s. 131 106 UniCreditLeasingSlovakia,a.s. 59 57 Interestexpenseandsimilarexpense (9) (12) of which: UniCreditLeasingCZ,a.s. (9) – UniCreditLeasingSlovakia,a.s. – (12) Feeandcommissionincome 37 47 of which: UniCreditLeasingCZ,a.s. 15 19 UniCreditLeasingSlovakia,a.s. 20 27 Generaladministrativeexpenses (25) (28) of which: UniCreditFleetManagement,s.r.o.(CZ) (22) (23) UniCreditFleetManagement,s.r.o.(SK) (8) (9)Total 219 198

(c) Transactionswithkeymanagementmembers

MCZK 31Dec2017 31Dec2016Assets Receivablesfromclients 106 89 of which: BoardofDirectors – 2 Othermanagementmembers 106 87Total 106 89Liabilities Payablestoclients 225 170 of which: BoardofDirectors 120 88 Othermanagementmembers 105 82Total 225 170Off-balancesheetitems Irrevocablecreditfacilities 13 11 of which: BoardofDirectors 1 1 Othermanagementmembers 12 10Total 13 11


(d)Transactionswithotherrelatedparties

MCZK 31Dec2017 31Dec2016Assets Financialassetsheldfortrading 1631 1067 of which: UniCreditBankAG 1247 1036 Receivablesfrombanks 5337 7309 of which: UniCreditBankAG 259 287 UniCreditBankAustriaAG 710 722 YapiveKrediBankasiAS 4102 5524 UniCreditBankHungaryZrt. 70 25 AOUniCreditBank 142 730 Receivablesfromclients 766 270 of which: UCTAMCzechRepublics.r.o. 407 – UCTAMSVK,s.r.o 265 270 Positivefairvalueofhedgingderivatives 1883 2078 of which: UniCreditBankAG 1274 2023Total 9617 10724

Liabilities Depositsfrombanks 23648 63047 of which: UniCreditLuxembourgS.A. – 11 UniCreditBankAustriaAG 22144 48475 UniCreditBankAG 1431 10288 UniCreditBankHungaryZrt. 32 4233 Depositsfromclients 250 1222 of which: PioneerAssetManagementa.s. – 897 PioneerInvestmentCompany – 95 UniCreditBusinessIntegratedSolutionsS.p.A. 59 84 Financialliabilitiesheldfortrading 1801 2086 of which: UniCreditBankAG 1625 2025 Negativefairvalueofhedgingderivatives 2010 2105 of which: UniCreditBankAG 1211 2072Total 27709 69424


MCZK 31Dec2017 31Dec2016 Off-balancesheetitems Issuedguarantees 1251 3916 of which: UniCreditBankAG 546 656 UniCreditBankAustriaAG 488 2949 UniCreditBankHungaryZrt. 51 112 AOUniCreditBank 13 20 Irrevocablecreditfacilities 164 276 of which: UniCreditBankAG 102 108Total 1415 4192

MCZK 2017 2016Interestincomeandsimilarincome 514 408 of which: UniCreditBankAG 359 288 UniCreditBankAustriaAG 76 55 Interestexpensesandsimilarcharges 183 51 of which: UniCreditBankAG 16 (3) UniCreditBankAustriaAG 164 55 Feeandcommissionincome 120 69 of which: UniCreditBankAG 72 40 UniCreditBankHungaryZrt. 4 6 UniCreditBankAustriaAG 26 15 Feeandcommissionexpenses (9) (31) of which: UniCreditBankAustriaAG (4) (26) Netincomefromfinancialassetsandliabilitiesheldfortrading 444 553 of which: UniCreditBankAG 246 578 UniCreditBankAustriaAG 206 (24) Netincomefromhedgingagainstriskofchangesinfairvalue 112 (172) of which: UniCreditBankAG 109 (174) Generaladministrativeexpenses (1441) (1476) of which: UniCreditBusinessIntegratedSolutionsS.p.A. (1438) (1475)Total (77) (601)


42.FairvalueoffinancialassetsandfinancialliabilitiesThefollowingtableshowsthecarryingamountsandfairvaluesoffinancialassetsandliabilitiesthatarenotreportedatfairvaluesintheBank’sbalancesheet(thefairvalueiscalculatedusingdiscountedfuturecashflowsundertheapplicationofarm’slengthmarketratestowhichcreditmark-upsderivedfrominternalratingcategoriesofindividualcounterpartiesareadded):

MCZK 31Dec2017 31Dec2016 Carrying Fair Carrying Fair amount value amount valueFinancialassets Receivablesfrombanks 210122 210133 139849 139895Receivablesfromclients 374426 381880 367298 371978 Financialliabilities Depositsfrombanks 164404 164404 100473 100272Depositsfromclients 360839 360839 371304 371304Debtsecuritiesissued 40000 40436 60107 61637

ThefollowingtableshowstransfersoffinancialassetsandliabilitiesatfairvaluebetweenLevels1and2.

MCZK Financialassetsatfairvalue throughprofitorloss Securities Hedging Total Heldfor Notheld available derivatives trading fortrading forsale 31Dec2017 TransferfromLevel1toLevel2 – – – – –TransfersfromLevel2toLevel1 – – – – –

31Dec2016 TransferfromLevel1toLevel2 13 – 609 – 622TransfersfromLevel2toLevel1 3 – 2712 – 2715

Fortheyearsended31December2017and31December2016,nofinancialliabilitiesreportedatfairvalueweretransferredbetweenLevels1and2.


ThefollowingtableshowstransfersoffinancialassetsreportedatfairvaluefromandtoLevel3.

MCZK Financialassetsatfairvalue throughprofitorloss Securities Hedging Total Heldfor Notheld available derivatives trading fortrading forsale Openingbalanceat1Jan2016 – – 635 – 635Revaluationgainsandlosses Inprofitorloss – – – – –Inothercomprehensiveincome – – 11 – 11Purchases – – 195 – 195Sales/maturity – – (626) – (626)Transfersfrom/tootherlevels – – (2) – (2)Other – – 16 – 16Closingbalanceat31Dec2016 – – 229 – 229Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiod: – Of which:Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiodarisingfromfinancialassetsheldattheperiodend – Openingbalanceat1Jan2017 – – 229 – 229Revaluationgainsandlosses Inprofitorloss – – – – –Inothercomprehensiveincome – – 33 – 33Purchases – – – – –Sales/maturity – – (2) – (2)Transfersfrom/tootherlevels – – – – –Other – – – – –Closingbalanceat31Dec2017 – – 260 – 260Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiod: – Of which:Totalrevaluationgainsandlossesincludedinprofitorlossfortheperiodarisingfromfinancialassetsheldattheperiodend –

Intheyearsended31December2017and2016,theBankdidnotrecordanytransfersfromandtoLevel3withrespecttofinancialliabilitiesatfairvalue.

43.OffsetoffinancialassetsandfinancialliabilitiesTheBankdoesnotoffsetfinancialassetsandfinancialliabilities.Thebelowtablesprovideinformationonpotentialoffsetoffinancialassetsandfinancialliabilities.

Financialassetsthataresubjecttooffset,recoverableframeworkcontractsforoffsetandsimilararrangements:

MCZK Gross Gross Net Relatingamountsthatarenotoffset reported offset reported Financial Obtained Net financial financial financial instruments cash amount assets liabilities assets collateral31Dec2017 Derivatives 8804 – 8804 7524 – 1280 31Dec2016 Derivatives 3545 – 3545 1674 – 1871


Financialliabilitiesthataresubjecttooffset,recoverableframeworkcontractsforoffsetandsimilararrangements:

MCZK Gross Gross Net Relatingamountsthatarenotoffset reported reported reported Financial Provided Net financial financial financial instruments cash amount liabilities assets liabilities collateral31Dec2017 Derivatives 9998 – 9998 7524 – 2474 31Dec2016 Derivatives 2157 – 2157 1674 – 483

44.SubsequenteventsTheBank’smanagementisnotawareofanypostbalancesheeteventsthatwouldrequireadjustmenttotheBank’sfinancialstatements.


Approvaldate: Stampandsignature Individualincharge Individualinchargeofthe ofthestatutorybody: oftheaccountingrecords extraordinaryfinancialstatements (name,signature): (name,signature): Ing.JiříKunert ChairmanoftheBoard ofDirectors

LjubišaTešić28February2018 MemberoftheBoardofDirectors Ing.JiříHouška Mgr.MichaelaMrštíková

The transformation of our operating model is fully on track, including cost discipline and efficiency measures to reduce the cost income ratio. Our FTE and branch reductions are ahead of schedule – as we further improve on customer focus, services and products. The digital and IT transformation is fully on track, investments supporting the business transformation with digitalization as a key enabler.

Transform operatingmodel.

Auditor’sreportontheannualreport


INDEPENDENT AUDITOR’S REPORT To the Shareholders of UniCredit Bank Czech Republic and Slovakia, a.s.

Having its registered office at: Želetavská 1525/1, 140 92, Prague 4 - Michle

Report on the Audit of the Consolidated and Separate Financial Statements

Opinion

We have audited the accompanying consolidated financial statements of UniCredit Bank Czech Republic and Slovakia, a.s. and its subsidiaries (hereinafter also the “Group”) and separate financial statements of UniCredit Bank Czech Republic and Slovakia, a.s. (hereinafter also the “Company”) prepared on the basis of International Financial Reporting Standards (“IFRS”) as adopted by the EU.

The consolidated financial statements comprise the consolidated statement of financial position as at 31 December 2017, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information (the “Consolidated Financial Statements”).

The separate financial statements comprise the separate statement of financial position as at 31 December 2017, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including a summary of significant accounting policies and other explanatory information (the “Separate Financial Statements”).

In our opinion:

The accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2017, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

The accompanying separate financial statements give a true and fair view of the financial position of the Company as at 31 December 2017, and of its financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU.

Basis for Opinion

We conducted our audit in accordance with the Act on Auditors, Regulation (EU) No. 537/2014 of the European Parliament and the Council and Auditing Standards of the Chamber of Auditors of the Czech Republic, which are International Standards on Auditing (ISAs), as amended by the related application guidelines. Our responsibilities under this law and regulation are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Company in accordance with the Act on Auditors and the Code of Ethics adopted by the Chamber of Auditors of the Czech Republic and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Consolidated and Separate Financial Statements of the current period. These matters were addressed in the context of our audit of the Consolidated and Separate Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Deloitte Audit s.r.o. Nile House Karolinská 654/2 186 00 Prague 8 - Karlín Czech Republic Tel: +420 246 042 500 Fax: +420 246 042 555 [email protected] www.deloitte.cz Registered by the Municipal Court in Prague, Section C, File 24349 ID. No.:49620592 Tax ID. No.: CZ49620592

Key audit matter Related audit procedures

Impairment of receivables from clients

(See Notes 20 and 40(b) to the Consolidated and Separate Financial Statements for the details) At 31 December 2017, gross receivables from clients (hereinafter “receivables”) were CZK 397 291 million and CZK 383 296 million for the Group and the Company respectively against which impairment of receivables from clients (hereinafter “impairment”) of CZK 10 609 million and CZK 8 870 for the Group and the Company respectively were recorded. The directors exercise significant judgment when determining both when and how much to record as impairment. The Group uses following methods to assess the amount of impairment: 1. For receivables in default with exposure above

1 MEUR or equivalent, the impairment is assessed on an individual basis requiring management to monitor the borrower’s repayment abilities individually including the estimated value from the collateral foreclosure and expected duration of the recovery process etc.

2. For smaller, individually not significant receivables in default where the receivables are homogeneous in nature (for example the consumer and mortgage loans to individuals and smaller corporate portfolios) the impairment is calculated by models using expected return.

3. Impairment losses on the portfolio receivables are calculated for losses that have been incurred but have not been identified at the year-end. Impairment losses on the portfolio receivables are held against non-default loans across all segments and calculated using models based on probabilities of default and loss given default as well as emergence periods between the impairment event occurring and an individual (1.) or model impairment for receivables in default (2.) being recognised.

Because of the significance of these judgements and the size of loans and advances to customers, the audit of impairment of receivables from customers is a key audit matter.

We evaluated whether the internal impairment policies comply with the requirement of the relevant accounting standard (IAS 39). Testing of internal controls We tested the design and operating effectiveness of the key internal controls to determine which receivable from customers are impaired and the amount of impairment for those assets. Our procedures included testing: System-based and manual controls over the

timely recognition of impaired receivables; Controls over the impairment calculation and

impairment recording; Controls over collateral valuation estimate; The governance process of management

validation of impairment calculations; and IT controls relating to access rights and

change management of relevant IT applications

Identification of receivables in default We tested a sample of receivables (including loans that had not been identified by management as potentially defaulted) to form our own assessment as to whether default events had occurred and to assess whether impairments had been identified in a timely manner. Impairment determined individually (1.) For individually assessed receivables we selected a sample of customers and, where we deemed them to be impaired, tested the estimation of the future expected cash flows from customers including testing the cash flows from the realisation of collateral held. This work involved assessing the work performed by external experts used by the Group to value the collateral or to assess the estimates of future cash flows. In some cases, particularly in respect of commercial real estate, we assessed the appropriateness of valuations and estimates used by the Group. Where we determined that a more appropriate assumption or input in provision measurement could be made, we recalculated the impairment on that basis and compared the results in order to evaluate management estimate. Impairment determined using statistical models for impaired loans (2.) For the impairment determined by models used by the Group, we were assessing for selected internal models the model methodology, the



Key audit matter Related audit procedures

internal validation reports and results of the models back-testing. We assessed whether the modelling assumptions used considered all relevant risks were reasonable in light of historical experience, economic climate, current operational processes and the circumstances of the customers as well as our own knowledge of practices used by other similar banks. On a sample basis, we evaluated the appropriateness of risk parameters used in the calculation of impairment. Allowances for loans determined using statistical models for non-impaired loans (3.) We performed analytical procedures and benchmarking.

Interest and fee income recognition

(See Notes 5 and 6 to the Consolidated and Separate Financial Statements for the details) For the year ended 31 December 2017 interest income and similar income comprised of CZK 12 327 million and CZK 10 936 million for the Group and the Company respectively. Fee and commission income for the same period comprised of CZK 4 660 million and CZK 4 214 million for the Group and the Company respectively with the main source being receivables from clients, loans and payment cards. These are the main contributors to the net operating income of the Group and the Company affecting the profitability. While interest income is accrued over the expected life of the financial instrument, the recognition of fee income depends on the nature of the fees as follows: Fees that are directly attributable to the

financial instrument are accrued over the expected life of such an instrument and are presented as interest income

Fees for services provided are recognised when service is provided and are presented as fee and commission income

Fees for the execution of an act are recognised when the act has been completed and are presented as fee and commission income

Revenue recognition specifics, a high volume of individually small transactions which depends on data quality of interest and fee inputs and on IT solutions for their recording resulted in this matter being identified as a key audit matter.

We tested the design and operating effectiveness of the key internal controls and focused on: Assessment of interest/fees recognition during

new product validation; Interest/fee inputs on customer loans and

deposits, including authorisation of the changes in the interest and fee price list and authorisation of non-standard interest/fees;

Recording of fee and interest income and management oversight; and

IT controls relating to access rights and change management of relevant IT applications.

We evaluated the accounting treatment performed by the Company in respect of fees charged to clients to determine whether the methodology complies with the requirement of the relevant accounting standard. We focused our testing on challenging the correct classification of: Fees that are identified as directly attributable

to the financial instrument; Fees that are not identified as directly

attributable to the financial instrument. We assessed the completeness and accuracy of data used for the calculation of interest using data analytics. We evaluated the mathematical formula used for accruing the relevant income over expected life of the loan. We have assessed the interest and fee income by building our own expectation on the revenue and compared with the actual results of the Company.


Other Information in the Annual Report

In compliance with Section 2(b) of the Act on Auditors, the other information comprises the information included in the Annual Report other than the Consolidated and Separate Financial Statements and auditor’s report thereon. The Board of Directors is responsible for the other information.

Our opinion on the Consolidated and Separate Financial Statements does not cover the other information. In connection with our audit of the Consolidated and Separate Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Consolidated and Separate Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. In addition, we assess whether the other information has been prepared, in all material respects, in accordance with applicable law or regulation, in particular, whether the other information complies with law or regulation in terms of formal requirements and procedure for preparing the other information in the context of materiality, i.e. whether any non-compliance with these requirements could influence judgments made on the basis of the other information.

Based on the procedures performed, to the extent we are able to assess it, we report that:

The other information describing the facts that are also presented in the Consolidated and Separate Financial Statements is, in all material respects, consistent with the Consolidated and Separate Financial Statements; and

The other information is prepared in compliance with applicable law or regulation.

In addition, our responsibility is to report, based on the knowledge and understanding of the Group and the Company obtained in the audit, on whether the other information contains any material misstatement of fact. Based on the procedures we have performed on the other information obtained, we have not identified any material misstatement of fact.

Responsibilities of the Company’s Board of Directors, Supervisory Board and Audit Committee for the Consolidated and Separate Financial Statements

The Board of Directors is responsible for the preparation and fair presentation of the Consolidated and Separate Financial Statements in accordance with International Financial Reporting Standards as adopted by the EU and for such internal control as the Board of Directors determines is necessary to enable the preparation of Consolidated and Separate Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Consolidated and Separate Financial Statements, the Board of Directors is responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or the Company or to cease operations, or has no realistic alternative but to do so.

The Supervisory Board and the Audit Committee are responsible for overseeing the Group and Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements

Our objectives are to obtain reasonable assurance about whether the Consolidated and Separate Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Consolidated and Separate Financial Statements.

As part of an audit in accordance with the above law or regulation, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the Consolidated and Separate Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.

Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to


continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated and Separate Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the Consolidated and Separate Financial Statements, including the disclosures, and whether the Consolidated and Separate Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group and the Company to express an opinion on the Consolidated and Separate Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors, the Supervisory Board and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Board of Directors, the Supervisory Board and the Audit Committee, we determine those matters that were of most significance in the audit of the Consolidated and Separate Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Report on Relations between the Controlling and Controlled Entities (the “Report on Relations”)

We have reviewed the factual accuracy of the information included in the accompanying Report on Relations of UniCredit Bank Czech Republic and Slovakia, a.s. for the year ended 31 December 2017 which is included in this annual report on pages 181 to 192. This Report on Relations is the responsibility of the Company’s Statutory Body. Our responsibility is to express our view on the Report on Relations based on our review.

We conducted our review in accordance with Auditing Standard 56 issued by the Chamber of Auditors of the Czech Republic. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the Report on Relations is free of material factual misstatements. A review is limited primarily to inquiries of the Company’s personnel and analytical procedures and examination, on a test basis, of the factual accuracy of information, and thus provides less assurance than an audit. We have not performed an audit of the Report on Relations and, accordingly, we do not express an audit opinion.

Nothing has come to our attention based on our review that indicates that the information contained in the Report on Relations of UniCredit Bank Czech Republic and Slovakia, a.s. for the year ended 31 December 2017 contains material factual misstatements.

The Company has decided not to disclose amounts under related party contracts citing business secrecy restrictions.

Report on Other Legal and Regulatory Requirements

In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament and the Council, we provide the following information in our independent auditor’s report, which is required in addition to the requirements of International Standards on Auditing:

Appointment of the Auditor and the Period of Engagement

We were appointed as the auditors of the Company by the General Meeting of Shareholders on 18 April 2017 and our total uninterrupted engagement including previous renewals has lasted for 9 years.

Consistence with the Additional Report to the Audit Committee

We confirm that our audit opinion on the financial statements expressed herein is consistent with the additional report to the Audit Committee of the Company, which we issued on 5 April 2018 in accordance with Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and the Council.

Provision of Non-audit Services

We declare that no prohibited non-audit services referred to in Article 5 of Regulation (EU) No. 537/2014 of the European Parliament and the Council were provided. In addition, there are no other non-audit services which were provided by us to the Company and its controlled undertakings and which have not been disclosed in the annual report.


Non-financial Information Report

As stated in point 22 on page 180 of the annual report/notes to the financial statements, the Company does not prepare non-financial information since the relevant information is to be presented in the consolidated annual report or separate report of the consolidating entity. As a result, we do not report on the preparation of non-financial information.

In Prague on 25 April 2018

Audit firm: Statutory auditor:

Deloitte Audit s.r.o. registration no. 079

Diana Rádl Rogerová registration no. 2045

We continue to maximise commercial bank value, with the ongoing transformation resulting in higher productivity.Our activities in Western Europe are benefitting from the revamped network with new service models for retail and SME customers as well as a strong multichannel strategy. We have further strengthened our leadership positions in CEE and CIB, while keeping a strong focus on risk.

Maximise commercial bank value.

publishedpursuanttoSection118ofActNo.256/2004Coll.,onCapitalMarketUndertakings,asamended

1.Basicdata

Businessname: UniCreditBankCzechRepublicandSlovakia,a.s.Registeredoffice: Želetavská1525/1,14092Prague4, CzechRepublicCompanyIDNo.: 64948242Companiesregister: recordedintheCompaniesRegistermaintained bytheMunicipalCourtinPrague,SectionB, file3608TaxIDNo.: CZ699001820Dateofincorporation:1January1996,foranindefiniteperiodLegalform: joint-stockcompanyInternetaddress: www.unicreditbank.czE-mail: [email protected]: +420955911111Fax: +420221112132LEI: KR6LSKV3BTSJRD41IF75

UniCreditBankCzechRepublicandSlovakia,a.s.(“UniCreditBank”)isajoint-stockcompanyincorporatedaccordingtoCzechlaw.

Asat1December2013,UniCreditBankmergedwithUniCreditBankSlovakia,a.s.,ajoint-stockcompanyincorporatedaccordingtoSlovaklaw,havingitsregisteredofficeinBratislava,Šancová1/A,PC81333,CompanyIDNo.:00681709,recordedintheCompaniesRegistermaintainedbytheDistrictCourtBratislavaI,SectionSa,FileNo.34/B.Asaresultofthiscross-bordertransformationthroughmergerpursuanttoSection61ofActNo.125/2008Coll.onTransformationsofCommercialCompaniesandCooperativesasamendedandSection69aaoftheSlovakActNo.513/1991Coll.,CommercialCode,asamended,UniCreditBankSlovakiaa.s.wasdissolvedanditsassetsweretransferredtoUniCreditBank.UniCreditBankfulfilsallofitsobligationsinadueandtimelymanner.Nochangeshaveoccurredinthepastthatcouldbeofmaterialsignificanceinevaluatingtheissuer’ssolvency.IncarryingoutitsactivitiesintheCzechmarket,UniCreditBankisgovernedbyCzechlegalregulations,inparticulartheBankingAct,theCivilCode,theActonBusinessCorporationsandregulationsgoverningoperationsinthebankingandcapitalmarkets.IntheSlovakmarket,whereUniCreditBankhasoperatedsince1December2013throughitsorganisationalunit,theBankisalsogovernedbyapplicableSlovaklegalregulations.

2.Personsresponsiblefortheaudit ofthefinancialstatements

Personincharge: DianaRádlRogerováLicenseNo.: 2045Domicile/Placeofbusiness: Karolinská654/2,18600Prague8

Auditor: DeloitteAudits.r.o.LicenseNo.: 079Registeredoffice: NileHouse,Karolinská654/2, 18600Prague8–Karlín

3.InformationaboutUniCreditBank asanissuerofregistered securities

3.1HistoryanddevelopmentoftheissuerUniCreditBankCzechRepublicandSlovakia,a.s.,launcheditsactivitiesintheCzechmarketon5November2007.ItsnamewaschangedafteritmergedwiththeSlovakUniCreditBankSlovakia,a.s.,asat1December2013.UniCreditBankCzechRepublic,a.s.,itselfwasestablishedthroughthemergerofHVBBankCzechRepublic,a.s.,andŽivnostenskábanka,a.s.TheassetsofthedissolvedcompanyŽivnostenskábanka,a.s.,havingitsregisteredofficeinPrague1,NaPříkopě858/20,PC11380,CompanyIDNo.:00001368,recordedintheCompaniesRegistermaintainedbytheMunicipalCourtinPrague,SectionB,FileNo.1350,wereassumedbythesuccessorcompany,HVBBankCzechRepublic,a.s.,asaresultofthemerger.

HVBBankCzechRepublic,a.s.,wasestablishedbythemergerofHypoVereinsbankCZ,a.s.,andBankAustriaCreditanstaltCzechRepublic,a.s.,withoutliquidation,on1October2001.AllrightsandobligationsofthedissolvedcompanyBankAustriaCreditanstaltCzechRepublic,a.s.,wereassumedbyHVBBankCzechRepublica.s.Thechangeofname,amountofissuedcapitalandotherfactsconnectedwiththemergerwererecordedon1October2001intheCompaniesRegistermaintainedbytheMunicipalCourtinPrague,SectionB,File3608.

Živnostenskábankawasestablishedin1868asabankorientedtowardfinancingsmallandmedium-sizedCzechenterprises.ItwasthefirstbankfoundedinAustria-HungaryexclusivelywithCzechcapital.In1945,itwasnationalised,aswereotherbanks.From1950to1956,itstillexistedasalegalentitybutitsactivitiesweresignificantlyrestricted.SomeofŽivnostenskábanka’sassetratioswereadjustedbyDecreeNo.36/1956Coll.,anditslegalcontinuitywassubsequentlyconfirmedbySection27ofActNo.158/1989Coll.,onBanksandSavingsBanks.OnthedayofitsentryintheCompaniesRegistermaintainedbytheMunicipalCourtinPragueinSectionB,FileNo.1350,i.e.on1March1992,ŽivnostenskábankaassumedauthorisationtooperateasabankonthebasisofBankingActNo.21/1992Coll.,furthertoActNo.92/1991Coll.andGovernmentResolutionNo.1from9January1992,bywhichtheprivatisationofŽivnostenskábankawasapproved.InFebruary2003,thebankUniCreditoItalianoSpAcompletedtheacquisitionofan

Supplementaryinformation



85.16%shareintheissuedcapitalofŽivnostenskábanka,a.s.,fromBankgesellschaftBerlinAG,andthustheoldestCzechbankbecamepartoftheUniCreditoItalianoGroup.AspartofrestructuringinUniCreditGroup,theBank‘sshareholderchangedon1October2016fromUniCreditBankAustriaAGtoUniCreditS.p.A.,whichistheultimateparentcompanyoftheentireGroup(hereinafterthe“Group”)holding100%oftheBank’sshares.

UniCreditBankCzechRepublicandSlovakia,a.s.,isastrongandrapidlydevelopingbankofferingawiderangeofqualityproductstobothcorporateandprivateclientsintheCzechRepublicandSlovakia.Itisoneofthestrongestbanksinbothmarketsintheareaofproject,structuredandsyndicatedcorporatefinance.Thebankhasalsobuiltanextraordinarilystrongpositioninacquisitionfinancingandranksfirstincommercialrealestatefinancing.Amongotherservices,UniCreditBank’sclientscanutiliseservicestoobtainprojectfinancingfromtheEUstructuralfundsofferedthroughUniCreditBank’sEuropeanCompetenceCentre.Intheareaofservicesforprivateclients,UniCreditBankplaysasignificantroleinthemarketofprivatebankingorsecuritiesand,intheretailsegment,itisasignificantplayerinthefieldofconsumerloans,mortgages,andcreditcards.Itisdoingverywellinservingclientsinfreelanceprofessions(doctors,judges,attorneys-at-law,notaries,etc.).TheBank’sCompetenceCentreforFreelanceProfessionsisdevotedtotheseclients.

UniCreditBankCzechRepublicandSlovakia,a.s.,operatesinallregionalcitiesinbothcountriesandcurrentlyhas132branchesand402ATMs.

ThemergedBankholdsmorethan9.4%ofthemarketsharewithitsbalancesheetsumtotallingmorethanCZK659.3billion(non-consolidateddata)andisthefourthlargestbankintheCzechRepublicandthelargestinSlovakia.TheBankisauniversalbank,providingtheservicesofsmall,commercialandinvestmentbankinginCzechcrownsaswellasinforeigncurrenciestolocalandforeignclientsmainlyintheCzechRepublic,inSlovakiaand,further,inotherEUcountries.

3.2IssuedsharecapitalTheBank’ssharecapitalamountstoCZK8,754,617,898dividedasfollows:a)100registeredshares,eachwithanominalvalueofCZK16,320,000;b)200registeredshares,eachwithanominalvalueofCZK13,375,000;c)436,500registeredshares,eachwithanominalvalueofCZK10,000;d)10registeredshares,eachwithanominalvalueofCZK7,771,600;e)106,563book-entryregisteredshareswithanominalvalueofCZK46.

Alltheaforementionedsharesareregisteredtotheshareholder’saccountmaintainedbyCentralSecuritiesDepositoryPrague(Centrálnídepozitářcennýchpapírů,a.s.).

UniCreditBank’ssharecapitalhasbeenfullypaidup.

InaccordancewiththeCommercialCodeandtheBank’sArticlesofAssociation,UniCreditBank’ssharesentitletheshareholdertoparticipateinthecompany’smanagementandtoshareinitsprofitaswellasinitsliquidationbalanceupondissolutionofthecompany.UniCreditBankhasissuednosharesgivingtheirholderstherighttoexchangesuchsharesforothersharesortherighttoprioritysubscriptionofothershares.UniCreditBankdoesnotholdanyofitsownparticipatingsecuritiesnordoesanyentityinwhichUniCreditBankhasadirectorindirectownershipinterestexceeding50%ofthatentity’ssharecapitalorvotingrightsholdanysuchsecurities.

TheBank’ssharesarefreelytransferableandnoconsentofanyBank’sbodyisrequiredforthetransferorpledgethereoftobeeffective.

ThesoleshareholderofUniCreditBankisUniCreditS.p.A.,havingitsregisteredofficeatPiazzaGaeAulenti3,TowerA–20154Milan,RepublicofItaly,Reg.No.:00348170101.

InaccordancewithUniCreditBank’sArticlesofAssociation,thesoleshareholdermayonlyinfluencetheBank’sactivitiesusingtheweightofitsvotes.Thecompanyusesstandardstatutorymechanismstopreventtheshareholder’spotentialmisuseofitsposition.UniCreditBankisnotpartytoacontrollingcontractoracontractfortransferofprofit.Thenatureofthecontrolbythecontrollingentity,whichisUniCreditS.p.A.,resultsfromthedirectlyownedportionoftheissuer’sshares.Topreventmisuseofthecontrolandcontrollinginfluenceofthecontrollingentity,UniCreditBankusesthestatutoryinstrumentofthereportonrelationsbetweenthecontrollingandcontrolledentitiesandtheReportonRelationsbetweenthecontrolledentityandotherentitiescontrolledbythesamecontrollingentity(ReportonRelationsbetweentherelatedentities).Noagreementsthatcouldleadtoachangeofcontrolovertheissuerareknown.

3.3AdditionalinformationInaccordancewiththeBank’sArticlesofAssociation,themembersoftheBoardofDirectorsareelectedanddismissedbytheSupervisoryBoard.UniCreditBankhasnospecialrulesforchangingtheArticlesofAssociation.

CurrentlythereexistnoauthorisationsorspecialpowersoftheBoardofDirectorsintermsofSection118,par.5h)ofActNo.256/2004Coll.,onCapitalMarketUndertakings,asamended.UniCreditBankhasconcludednoagreementswithmembersoftheBoardofDirectorsoritsemployeesthatwouldobligetheBanktotheirfulfilmentinthecaseofterminationoftheirfunctionsoremploymentinrelationtoatakeoverbid.TherearenoprogrammesinUniCreditBankthatallowtheBank’semployeesormembersoftheBoardofDirectorstoacquireparticipatingsecuritiesoftheBank,optionsforsuchsecurities,orotherrightstheretounderadvantageousconditions.UniCreditBankhasconcludednosignificantcontractsthatwilltake

effect,changeorexpireincaseofachangeinthecontroloftheissuerasaresultofatakeoverbid.

4.Summaryofbusinessactivities4.1Scopeofbusinessactivities:Thecompany’sbusinessactivitiesincludebankingtransactionsandprovisionoffinancialservicesfullyinaccordancewithBankingActNo.21/1992Coll.,asamended,andActNo.219/1995Coll.,theForeignExchangeAct,asamended,i.e.a) receivingdepositsfromthepublic;b) grantingloans;c) investinginsecuritiesonitsownaccount;d) financelease;e) operatingasystemofpaymentsandclearing;f) issuingandadministeringpaymentproducts;g) grantingguarantees;h) openinglettersofcredit;i) administeringcashcollection;j) providinginvestmentservices:– maininvestmentservicepursuanttoSection8,par.2a)ofActNo.

591/1992Coll.,onSecurities,asamended(hereinafter“theSecuritiesAct”),receiptofandconveyinginstructionsrelatedtoinvestmentinstrumentsonthecustomer’saccount,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2b)oftheSecuritiesAct,executinginstructionsrelatedtoinvestmentinstrumentsontheaccountofanotherparty,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)and1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2c)oftheSecuritiesAct,tradingininvestmentinstrumentsonthetrader’sownaccount,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2d)oftheSecuritiesAct,managementofindividualportfoliosatitsowndiscretionwithinthetermsofacontractualcovenantwiththeclient,ifinvestmentinstrumentsformapartofsuchportfolioandwithrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,

– maininvestmentservicepursuanttoSection8,par.2e)oftheSecuritiesAct,underwritingorplacingissuesofinvestmentinstruments,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1b)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3a)oftheSecuritiesAct,custodyandmanagementofoneormoreinvestmentinstruments,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1c)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3c)

oftheSecuritiesAct,provisionofcreditsorloanstothecustomerforthepurposeofexecutingatransactionwithinvestmentinstruments,iftheprovideroftheloanorcreditisaparticipantinthistransaction,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1d)and1g)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3d)oftheSecuritiesAct,consultingservicesrelatedtothecapitalstructure,industrystrategyandrelatedissues,andtheprovisionofadviceandservicesrelatedtomergersandacquisitionsofcompanies,

– supplementaryinvestmentservicepursuanttoSection8,par.3e)oftheSecuritiesAct,servicesrelatedtounderwritingofissuespursuanttoSection8,par.2e)oftheSecuritiesAct,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1b)oftheSecuritiesAct,

– supplementaryinvestmentservicepursuanttoSection8,par.3f)oftheSecuritiesAct,consultingservicesrelatedtoinvestmentininvestmentinstruments,withrespecttoinvestmentinstrumentspursuanttoSection8a,par.1a)–1g)oftheSecuritiesAct,and

– supplementaryinvestmentservicepursuanttoSection8,par.3g)oftheSecuritiesAct,executingofforeigncurrencyoperationsrelatedtoprovisionofinvestmentservices,

k) issuingmortgagebonds;l) financialbrokerage;m) depositoryservices;n) foreigncurrencyexchangeservices(purchaseofforeign currencies);o) providingbankinginformation;p) tradingforeigncurrenciesandgoldonitsownaccount oronbehalfofclients;q) rentingsafe-depositboxes;andr) otheractivitiesdirectlyrelatedtotheactivitiesspecifiedabove.

4.2KeyactivitiesCorporate&InvestmentBanking•Corporate,investmentandprivatebanking;•Credittransactions;•Financingcommercialrealestate;•Projectfinancingandstructuredfinancing;•Tradeandexportfinancing;•Documentarytransactions;•Treasury&custodyservices;•Assetmanagement;•EUfunds(consultingandpayment);•Maintainingaccountsanddeposits;•Paymentsystems;•Electronicbanking;•Directbanking;•SWIFTservices;•Cashpooling;•Paymentcards;•Cardacquiring;



•EuropeanCommodityClearing;•Comprehensivemanagementofclientassets,includingportfolio

management;•Comprehensivefactoringservices–domesticfactoring,export

factoring,invoicediscounting,creditcover,salesledgermanagement;•GlobalInvestmentStrategy–strategicadvisoryforCapitalmarket

investments;•Openarchitectureofinvestmentproducts;

LaunchingnewproductsoractivitiesTheyearof2017representedanothersuccessfulyearfortheCorporateandInvestmentBankingDivision.WecontinuedtoreinforceourstrongpositionincorporatebankingintheCzechandSlovakmarket.Wedidwellintheacquisitionofnewclientsacrossallsegments,owingtotheprovisionofcomprehensiveservicesandhighflexibility.In2017,inaccordancewithourlong-termstrategyfocusedonsmallandmedium-sizedenterprises,weaccomplishedrecentmodificationsinthesettingofthissegment’sservicemodelinSlovakia.Withinthesegment’soperationalarrangement,wemademodificationsininternalprocesseswithfocusontheirincreasedautomationandsimplification,primarilywithinapprovalofloans,creditreviews,preparationofcontractualdocumentationandmonitoring.FurtherchangeswithininternalprocessesacrosstheDivisionaregoingtobemadein2018,withtheaimtoenhanceinternaleffectivenessandautomation,andtoensurebetterqualityofservicesandsatisfactionofclients.Lastyear,wecontinuedtosuccessfullydeveloptheareaofsupportoffinancingwithcooperationpartners.Recently,wehavekickedoffaprogrammebyEBRDinSlovakia,focusedonpromotingprojectsofenergysavingandinvestmentsinrenewablesources.

Retailbanking•Accountsforindividualclients,UKontoaccount,Dětskékonto

account,UKontoPremiumaccount,UKontoTANDEMaccount,Ukontopromladéaccount,accountsforsmallenterprises;

•Mortgageloansandconsumerloans,includingthePRESTOLoan,andoverdraftsforindividualclients;

•Operating,investmentandmortgageloansforcorporateclients;•Paymentcards,includinginsurance(debit,creditandpartner

cards);•Deposit,savingsandinvestmentproducts(theBank’sown

orincooperationwithPioneerInvestments);•Insuranceproducts(propertyinsurance,lifeinsurance,CPI);•Internet,telephoneandmobilebanking;•Cashandmoneychangingoperationsandsupplementary

services.

LaunchingnewproductsandactivitiesIn2017,weextendedourproductofferbyaspecialPRESTOLoanforHousing(applicabletoSlovakia)andcontinuedinthesuccessfulconceptofrefinancingortransferofloans.Wealsolaunched

specialloansforsmallcompanies(PRESTOBusinessandBusinessKontokorent).Asregardsmortgageloansforindividuals,wefocusedinparticularonsimplificationandupgradeoftheproductoffer;togetherwiththereplacementoftheITsystem,wealsoacceleratedandsimplifiedthecreditprocess.IntheCzechRepublic,weintroducedthepossibilityofapplyingforanddrawingonpre-approvedloansinOnlineBankingallonline.In2017,weenabledourclientstodisplaytheirPRESTOLoanandMortgageLoanrepaymentscheduleintheirOnlineBanking.Owingtotheimplementationofanewinternalapplicationfortradinginsecurities,theworkofbankersbecameconsiderablymoresimpleandeffective.Moreover,byimplementingthisapplication,weasabankpreparedforthefulfilmentofrequirementsarisingfromthenewMarketsinFinancialInstrumentsDirective(MiFIDII),whichenteredintoforceon3January2018.WecompletedtheimplementationofchangesintheSmallBusinessservicemodelwithrespecttothestrategicdecision:tofocusonsmallenterprisesandentrepreneursandtosimplifytheproductofferforthissegment.Wecompletedthesettingsoffastandsimpleinternalprocesses,whichmaybeeffectivelyprocessedbyallbranches.Atthesametime,weanchoredourcreditproductoffersoastocovertheneedsofmostsmall-enterpriseandentrepreneurclientsandbesimplycomprehensibleforclients.

AccountsAsregardsaccountsforindividuals,wefocusedonthedevelopmentofloyaltyoftheU-šetřeteprogramme,whichisconnectedtoanaccount’spaymentcard.Withinthedevelopment,weengagednewpartnersandincreasedthenumberofregisteredusers.In2017,thenumberofpartnersinvolvedintheprogrammestoodat372andthenumberofregistereduserswas102thousand.

InvestmentsanddepositsInorderforouroffertokeeppacewiththecurrentmarketchallenges,wesimplifiedit,focusingonactivelymanaged,highlydiverseandflexibleinvestmentsolutions.Thisappliestobothone-offandregularinvestments.

InsuranceFurther,in2017,weextendedourofferofinsuranceproducts,addinganewinsuranceforbusinessaccounts.GoodresultswerereportedbythesaleofU5–accidentinsuranceforUKontoaccount–whichhasrecentlybeenaddedintheofferofBranchSlovakia.TheuniqueMedicaccidentinsurance,offeredviatelemarketing,hadareallygoodresponseamongourclients.

PaymentcardsIn2017,therewasnomajorproductinnovationincards.Owingtothe3DSimplementationinSlovakiainlate2016,wehaveconsiderablyreducedthenumberofcomplaintsanddamageofclientswhen

conductingtransactionsontheInternet,andtherebyenhancedthesecurityofclientfundswhenpayingontheInternet.Duringtheyear,weintroducedseveralcampaignsinCzechiaandSlovakiatopromoteincreaseduseofcardswithmerchants.WejoinedthepromotionofcashlesstransactionswithintheMasterCardandVisacampaigns,andwealsointroducedaninternalcampaigntoincreasetheuseofcards.Inthelongrun,wehavealsousedtheu-šetřeteprogrammeintheCzechRepublic,owingtowhichclientsgetdiscountsfrompopularmerchantswhenmakingcashlesstransactions.

SmallenterprisesandentrepreneursWecreatedanewportfolioofcreditproducts,reflectingthenewservicemodelandtheneedofourclients.Wemadefundamentalchangesintheinternalcreditprocess.Wedeployedanewcreditapprovaltool,whichisfullyautomated,user-friendlyandpreventsusersfrommakingmistakes.Thistoolhassignificantlyreducedthetimerequiredformakingadecisiononcreditapproval.In2018,wefocusonaddingotherfeatureswhichmakeotherlending-relatedprocesseseasierforbranches.Owingtothedeploymentofthistool,wehavemanagedtoinvolveallbranchesinservicingofsmall-enterpriseandentrepreneurclients.Branchescanthuseffectivelyoffernewandsimplifiedcreditproductsoutsidethepackages,includingcreditproductsforliberal-professionclients.

OnlinesaleAsregardsonlinesale,thepossibilityofapplyingforaPRESTOLoanorBankOverdraftwasintroducedtoallclientswithOnlineBankingintheCzechRepublicin2017.ForclientswhoalreadyhadaBankOverdraft,wepreparedapossibilityofincreasingthisloanonline.Ourclients’responsewasreallypositive.

4.3CompetitivepositionoftheissuerAllchartsbelowprovidenon-consolidateddata.

(i)Profitaftertax

(ii)Totalnetassets

(iii)GrossreceivablesfromclientsinCZ*

(iv)GrossreceivablesfromclientsinSK***

(v)LiabilitiestoclientsinCZ*

(vi)LiabilitiestoclientsinSK***


*PursuanttotheCNBmethod,receivablesfromclientsandliabilitiestoclientsareonlyincludedfortheCzechpartofthebank.

**ConvertedusingtheexchangerateCZK25,54/EURasat29December2017.***DataforSKbranch

Profitaftertax(MCZK) 2017BankingsectorCZ 75906UCBCZ&SK 8821

nOtherbanksnUCBCZ&SK

Otherbanks 88,38%UCBCZ&SK 11,62%non-consolidateddata

Totalassets(MCZK) asat31Dec2017BankingsectorCZ 7009594UCBCZ&SK 659333


Otherbanks 90,59%UCBCZ&SK 9,41%non-consolidateddata

Receivablesfromclients(MCZK) asat31Dec2017BankingsectorCZ 2820360UCBCZ&SK 242834


Otherbanks 91,39%UCBCZ&SK 8,61%non-consolidateddata,residents

Receivablesfromclients(MCZK) asat31Dec2017BankingsectorCZ 52453MEUR** 1339649UCBCZ&SK 112523



LiabilitiestoclientsCZ(MCZK) asat31Dec2017BankingsectorCZ 3973057UCBCZ&SK 261739


Otherbanks 9341%UCBCZ&SK 6,59%non-consolidateddata,residents

LiabilitiestoclientsCZ(MCZK) asat31Dec2017BankingsectorCZ 52956MEUR** 1352491UCBCZ&SK 70121




5.OrganisationalstructureTheBankispartoftheUniCreditBankingGroup(hereinafterreferredtoasthe“Group”).AsamemberoftheGroup,theBankmustcomply,withtheexceptionofcertainrelevantlegalregulations,withdirectivesissuedbyUniCreditS.p.A,astheparentcompany(hereinafterthe“ParentCompany”).TheParentCompanyshallmonitortheproperimplementationandobservationofthedirectives(hereinafterthe“HoldingGuidelines”)issuedbytheParentCompany(hereinafterthe“HoldingCompany”)intheBank.

TheHoldingGuidelinesarerulesthatdefinethemanagement,organisationalstructureandmanagerialresponsibilitieswithinkeyprocessesintheGroupthatareissuedinexercisingitspowerstosuperviseandco-ordinatetheGroupinaccordancewiththeinstructionsissuedbytheItaliansurveillanceauthority,withtheaimtomaintaintheGroup’sstability.

HistoryoftheGroupWhilethebankinggroup’shistorydatesasfarbackas1473,theyearinwhichRoloBancawascreated,thecontemporaryhistoryofUniCreditGroupbeginswiththemergerofnineleadingItalianbanks,thesubsequentintegrationwiththeGermanHVBGroupand,mostrecently,withtheItalianCapitalia.In1999,acquisitionofBankPekaoofPolandmeantthebeginningoftheGroup’sexpansion(atthattimeunderthenameUniCreditoItaliano)intoCentralandEasternEurope(CEE).GrowthcontinuedoverthenextfewyearswithpurchaseofthePioneerInvestmentsgroup,thesubsequentformationofPioneerGlobalAssetManagement,andthenfurtherstrategicacquisitionsgraduallycarriedoutinBulgaria,Slovakia,Croatia,Romania,theCzechRepublic,andTurkey.In2005,UniCreditmergedwiththeGermangroupHVB,whichhaditselfbeenformedin1998bythejoiningoftwoBavarianbanks:BayerischeVereinsbankandBayerischeHypotheken-undWechsel-Bank.Theresultwasasingle,majorEuropeanbank.

IntegrationwiththeHVBGroup–reinforcedbyitsownmergerin2000withBankAustriaCreditanstalt,whichwasstronglyrepresentedinmanyareasofpost-communist“new”Europe–createsabasisforUniCreditGrouptocontinuestrengtheningitsEuropeanfocus.Bymergingin2007withCapitalia,thethird-largestItalianbankinggroup,UniCreditGroupfurtherconsolidatedandstrengtheneditspositioninoneofitsmostimportantmarkets,Italy.Capitaliahadbeenestablishedin2002fromtheintegrationoftwopreviouslyindependententities,theBancaromaGroup(itselftheresultofamergerbetweensomeoftheoldestRomanbanks:BancodiSantoSpirito,CassadiRisparmiodiRomaandBancodiRoma)andtheBipop-CarireGroup.

UniCreditisnowasimpleandsuccessfulpan-EuropeancommercialbankwithafullypluggedinCorporate&InvestmentBank,delivering

itsuniqueWestern,CentralandEasternEuropeannetworktoitsextensive25millionstrongclientfranchise.UniCreditofferslocalexpertiseaswellasinternationalreach.Wesupportourclientsglobally,providingthemwithunparalleledaccesstoourleadingbanksin14coremarketsaswellastoanother18countriesworldwide.UniCredit’sEuropeanbankingnetworkincludesItaly,Germany,Austria,BosniaandHerzegovina,Bulgaria,Croatia,CzechRepublic,Hungary,Romania,Russia,Slovakia,Slovenia,Serbia,andTurkey.

6.Informationontrends

Sincethedateofpresentingthelastfinancialstatements,nosubstantialnegativechangeshaveoccurredtotheissuer’soutlook.

7.CompetenceofUniCreditBank’s bodies,compositionoftheBoard ofDirectors,SupervisoryBoard, andAuditCommittee, anddescriptionoftheir decision-makingprocedures

7.1GeneralMeetingTheGeneralMeetingofShareholdersistheBank’ssupremebody.ItdecidesallmattersoftheBankfallingunderitscompetencebylaworundertheBank’sArticlesofAssociation.

ThefollowingactivitiesfallundertheGeneralMeeting’sexclusivecompetence:a) decidingonchangesintheArticlesofAssociationunlessthe

changeresultsfromanincreaseinsharecapitalbytheBoardofDirectorsunderSec.511etseq.oftheActonBusinessCorporationsorinconsequenceofotherlegalfacts,

b) decidingonanincreaseordecreaseinthesharecapital,oronauthorisingtheBoardofDirectorstheretounderSec.511etseq.oftheActonBusinessCorporations,oronthepossibilitytosetofffinancialclaimsfromtheBankagainstaclaimforpaymentofanissueprice,

c) decidingaboutthesharecapitaldecreaseandbondissuingunderSec.286etseq.oftheActonBusinessCorporations,

d) electinganddismissingmembersoftheSupervisoryBoard,membersoftheauditcommittee,andotherbodiesestablishedbytheArticlesofAssociation,

e) approvingtheannual,extraordinaryorconsolidatedfinancialstatementsand,incasesdefinedbylaw,alsointerimfinancialstatements;decidingondistributingprofitsorotherequityfunds,oronsettlementoflossesanddeterminingtheamountofprofit

sharingformembersoftheBoardofDirectorsandSupervisoryBoard,

f) decidingonremunerationofmembersoftheSupervisoryBoardandtheauditcommittee,

g) decidingonapplyingforlistingoftheBank’sparticipatingsecuritiesfortradingontheEuropeanregulatedmarketorwithdrawalofthesecuritiesfromtradingontheEuropeanregulatedmarket,

h) decidingonwindinguptheBankwithliquidation,appointinganddismissingaliquidator,includingtoestablishtheleveloftheliquidator’sremuneration,andapprovingthedraftdistributionofliquidationbalance,

i) decidingonatransferordiscontinuationofanoperationofaplantoranysuchpartthereofwhichwouldresultinasubstantialchangeinthebank’sscopeofbusinessoractivities,

j) approvingagreementsonsilentpartnerships,amendmentsthereto,andterminationthereof,

k) appointingauditorsoftheBankbasedonrecommendationoftheAuditCommittee,

l) decidingontheestablishmentofnon-compulsoryfundsoftheBankandonproceduresfortheircreationandutilisation,and

m) decidingonotherissuesthattheActonBusinessCorporations,otherlegalregulationsortheArticlesofAssociationdefineasfallingundercompetenceoftheGeneralMeeting.

7.2BoardofDirectorsofUniCreditBankTheBoardofDirectorsisthestatutorybodyofUniCreditBank,andasat31December2017ithadsevenmembers.MembersoftheBoardofDirectorsexercisetheirfunctionsinperson.MembersoftheBoardofDirectorsareelectedbytheSupervisoryBoardforaperiodofthreeyears.TheSupervisoryBoardmayatanytimedismissanyofthemembersoftheBoardofDirectors,irrespectiveoftheirtermofoffice.OnlypersonsmeetingtherelevantlegalrequirementsmaybeappointedasmembersoftheBoardofDirectors.TheBoardofDirectorsmakesdecisionsintheformofresolutionsusuallyadoptedatitsmeetings.TheBoardofDirectorsshallhaveaquorumifanabsolutemajorityofallitsmembersispresent.TheapprovalofanabsolutemajorityoftheBoardmemberspresentisrequiredforaresolutiontobevalid.Intheeventofaparityofvotes,thepresidingmemberofthemeetingshallhavethedecidingvote.Ifallmemberssoagree,theBoardofDirectorsmayadoptresolutionsatthecompany’sregisteredofficeorelsewherebyanymeansofcommunicationthatenablesallitsmemberstosimultaneouslyhearoneanotherduringthemeeting(i.e.viateleconference)orinwritingwithoutholdingameeting(perrollam).Insuchcase,thevotingpersonsshallberegardedaspresent.

ThecompetenceoftheBoardofDirectorsespeciallyincludesthefollowing:a) toorganisetheBank’sday-to-dayactivitiesanddirectitsbusiness

activities,

b) toconvenetheGeneralMeetingandimplementitsdecisions,c) tosubmittotheGeneralMeeting –atleastonceayear,areportonbusinessactivities,thestate

oftheBank’sproperty;thereportformsapartoftheBank’sannualreport,

–regular,extraordinary,consolidatedorinterimfinancialstatementsalongwithaproposalfordistributionofprofitsorsettlementofloss,andtoprocessthesedocuments,

d) topublishthekeydatafromthefinancialstatements(suchastotalassets,totalliabilities,equity,profitbeforetax,profitaftertax)andthereportofthebank’sbusinessactivitiesandthestateofthebank’spropertyinawayapplicabletoconveningaGeneralMeeting,nolaterthan30daysbeforethedateoftheannualGeneralMeeting,includinganinformationastowherethefinancialstatementsisavailableforinspection,orpublish,usingtheprocedureapplicabletoconveningaGeneralMeeting,informationastowhereonthebank’swebsiteisthefinancialstatementsavailableinaccordancewithSec436,par.1,secondsentenceoftheActonBusinessCorporations,

e) todecideonestablishingandcancellationofthebank’sbranches,f) toappointanddismisstheBank’smanagers,g) toexercisetherightsofanemployer,h) toissue,ifitdeemsfit,rulesofprocedurefortheBoardof

Directors,whichmaynotcontradicttheArticlesofAssociation;anyrulesofprocedurefortheBoardofDirectorsissubjecttothepriorapprovalbytheSupervisoryBoard,

i) tograntandwithdrawauthorisationstoactonbehalfoftheBankandthepowersofattorneytotheBank’srepresentatives,

j) inaccordancewithgenerallybindinglegalregulations,establishmandatoryfundsoftheBankincooperationwiththeSupervisoryBoardanddefinehowsuchfundsaretobecreatedandused,

k) tosignthecontractonthestatutoryauditwiththeauditorappointedbytheGeneralMeeting,

l) toestablishcommitteesoftheBankanddefinetheirtasks,m) toappointanddismisstheBank’sproxieswiththepriorapproval

oftheSupervisoryBoard,andn) todischargeotherresponsibilitiesstipulatedbylaworbythe

ArticlesofAssociation.

Ing.JIŘÍKUNERTChairmanoftheBoardofDirectorsresponsiblefortheBank’soverallresultsandformanagingtheChiefOperatingOfficerandtheChiefRiskOfficer.HealsoreportstotheBank’sBoardofDirectorsforthemanagementofthefinance,humanresourcesandlegalissues.Workaddress:Želetavská1521/1,Prague4Domicile:Čerchovská1981/6,Vinohrady,12000Prague2Born:31January1953

PAOLOIANNONEVice-ChairmanoftheBoardofDirectorsresponsibleformanagingandsupervisingtheBank’sbusinessactivitiesandcoordinating



theactivitiesoftheBank’sotherdepartments,sothattheycontributetoachievingtheBank’sbusinessresultstoasgreatanextentaspossible,whetherdirectlyorindirectly.Workaddress:Želetavská1521/1,Prague4Domicile:Prague4–Michle,Baarova1540/48Born:15December1960

Ing.ALEŠBARABASMemberoftheBoardofDirectorsandChiefRiskOfficerresponsibleforpreparingtheBank’screditpolicy,maintainingthequalityoftheloanportfolio,managingallactivitiesintheareaofcreditrisksandadheringtothelimitssetbybankingregulations,aswellasformanagingactivitiesintheareaofmarketandoperationalrisks.Workaddress:Želetavská1521/1,Prague4Domicile:UDubu1371,Prague4Born:28March1959

Ing.DAVIDGRUNDMemberoftheBoardofDirectorsandDirectoroftheCorporateandInvestmentBankingDivisionresponsibleformanagingandsupervisingtheBank’sbusinessactivitiesintherelevantbusinesssegment.Workaddress:Želetavská1521/1,Prague4Domicile:KLukám702,ŠestajoviceBorn:24February1955

GIOVANNIGUIDIMemberoftheBoardofDirectorsandDirectoroftheRetailandPrivateBankingDivisionWorkaddress:Želetavská1521/1,Prague4Domicile:Truhlářská1109/5,NovéMěsto,11000Prague1Born:12February1954

LJUBIŠATEŠIĆMemberoftheBoardofDirectorsandChiefFinancialOfficerWorkaddress:Želetavská1521/1,Prague4Domicile:Udětskéhohřiště743/13,Jinonice,15800Prague5Born:6August1976

Ing.MIROSLAVŠTROKENDLMemberoftheBoardofDirectorsandHeadofBranchSlovakiaWorkaddress:Šancová1/A,81333BratislavaDomicile:Charkovská7,Bratislava,84107,SlovakRepublicBorn:12November1958

ChangesintheBoardofDirectorsin2017TherewerenochangesintheBoardofDirectorsin2017.

7.3SupervisoryBoardofUniCreditBankTheSupervisoryBoardhasninemembers,ofwhichsixareelectedanddismissedbytheGeneralMeetingandthreeareelectedand

dismissedbythecompany’semployeesinaccordancewiththeActonBusinessCorporationswithreferencetotheActonTransformationsofCommercialCompaniesandCooperatives.MembersoftheSupervisoryBoardexercisetheirfunctionsinperson.MembersoftheSupervisoryBoardareelectedfortheperiodofthreeyearsandmaybere-elected.TheSupervisoryBoardshallhaveaquorumifanabsolutemajorityofallitsmembersispresentorotherwiseparticipating(forexample,viateleconference).TheapprovalofanabsolutemajorityofallmembersoftheSupervisoryBoardisrequiredforaresolutiontobevalid.Intheeventofaparityofvotes,theChairmanshallcastthedecidingvote.IfthemajorityoftheSupervisoryBoardmemberssoagrees,theSupervisoryBoardmayadoptresolutionsatthecompany’sregisteredofficeorelsewherebyanymeansofcommunicationthatenablesallmembersoftheSupervisoryBoardtosimultaneouslyhearoneanotherduringthemeeting(i.e.viateleconference)orinwritingwithoutholdingameeting(perrollam).Insuchcase,thevotingpersonsshallberegardedaspresent.

TheSupervisoryBoardestablishedtheRemunerationCommittee,whichconsistsofthreemembersoftheSupervisoryBoard(SimoneMarcucci,HeinzMeidlingerandMilošBádal).ThecompetenceoftheRemunerationCommitteeincludespreparationofdraftresolutionsonremuneration,includingthoseadoptedbytheBank’sSupervisoryBoardandhavingimpactontheobligor’srisksandriskmanagement.Whenpreparingthoseresolutions,theRemunerationCommitteetakesintoconsiderationlong-terminterestsoftheBank’sshareholders,investorsandotherstakeholdersandthepublicinterests.UnderdirectsupervisionoftheRemunerationCommitteeisremunerationofmanagersresponsibleforriskmanagement,internalauditandcompliancefunctions.

TheSupervisoryBoardfurtherestablishedtheAppointmentCommittee,whichconsistsofthreemembersoftheSupervisoryBoard(SimoneMarcucci,HeinzMeidlingerandAndreaDiamanti).ThecompetenceoftheAppointmentCommitteeincludestheselectionofcandidatesforvacanciesintheBank’sBoardofDirectorsandsubmittingthemforapprovalbytheSupervisoryBoard.IndischargeofthistasktheAppointmentCommitteeassesses,interalia,properproportionincompetence,skillsanddiversityincompositionofthebank’sbodyasawhole.TheAppointmentCommitteedevelopsdraftjobdescriptionsincludingskillsrequiredforthepositionandestimatedthetimescheduleformeetingthegoalsrelatedtoexerciseoftheoffice.

Additionally,theAppointmentCommitteerecommendsthetargetgenderproportionintheBoardofDirectorsandtheprinciplesastohowtheshareoflessrepresentedgenderintheBoardofDirectorscanbeincreasedtomatchthetargetgoal;a) regularly,atleastonanannualbasis,evaluatesthestructure,

size,compositionandactivitiesoftheBoardofDirectorsandsubmitsrecommendationstotheSupervisoryBoardregardingamendments,ifany,

b) regularly,atleastonanannualbasis,evaluatestheintegrity,professionalcompetenceandskillofeachmemberoftheBoardofDirectorsandtheBoardofDirectorsasawholeandsubmitstheevaluationreportstotheSupervisoryBoard,

c) regularlyreviewspoliciesoftheBoardofDirectorsastotheselectionandappointmentofacandidatetotopmanagementandsubmitsrecommendationstotheSupervisoryBoard.

TheSupervisoryBoardfurtherestablishedtheRiskManagementCommittee,whichconsistsofthreemembersoftheSupervisoryBoard(WolfgangSchilk,HeinzMeidlingerandAndreaDiamanti).ThecompetenceoftheRiskManagementCommitteeincludes,inparticular,thefollowingactivities:a) regularly,atleastonanannualbasis,evaluatestheintegrity,

professionalcompetenceandskillofeachmemberoftheBoardofDirectorsandtheBoardofDirectorsasawholeandsubmitstheevaluationreportstotheSupervisoryBoard,

b) examineswhethervaluationofassets,liabilitiesandoff-balancesheetitemsreflectedintheoffertotheclientsfullycomplieswiththeBank’sbusinessmodelanditsriskmanagementstrategy.Iftheexistingrisksarenotproperlyreflectedinpricesinaccordancewiththeexistingbusinessmodel,thentheRiskManagementCommitteesubmitsacorrectiveplantotheSupervisoryBoard.

TheSupervisoryBoard:a) reviewsthespecificdirectionsoftheBank’sactivitiesandbusiness

policyandsupervisesitsimplementation,b) isauthorisedtoverifyanystepstakenintheBank’saffairs,c) reviewsregular,extraordinaryandconsolidatedfinancial

statements,and,asthecasemaybe,theinterimfinancialstatements,aswellastheproposalfordistributionofprofitsorsettlementoflossandpresentsitsopiniontotheGeneralMeeting,

d) isauthorised,throughanyofitsmembers,toinspectanydocumentsandrecordsregardingtheBank’sactivities,

e) monitorswhetheraccountingrecordsareproperlymaintainedinaccordancewithrealityandwhethertheBank’sbusinessactivitiescomplywithlegalregulationsandtheArticlesofAssociation,

f) convenestheGeneralMeetingiftheBank’sinterestssorequireandproposesnecessarymeasurestobetakenbytheGeneralMeeting,

g) appointsoneofitsmemberstorepresenttheBankinproceedingsheldbeforecourtsandotherauthoritiesagainstamemberoftheBoardofDirectors,

h) issues,ifitisdeemedappropriate,rulesofprocedurefortheSupervisoryBoard,whichmaynotcontradicttheArticlesofAssociation,

i) approvestherulesofprocedure(ifany)fortheBoardofDirectors,j) electsanddismissesmembersoftheBoardofDirectors.New

membersoftheBoardofDirectorsareelectedfromamongcandidateswhomaybenominatedbyanymemberofthe

SupervisoryBoard.RemovalofmembersoftheBoardofDirectorsfromtheirofficeisalsodecidedbytheSupervisoryBoarduponmotionofanymemberoftheSupervisoryBoard,

k) nominatescandidatesforChairmanandVice-ChairmanoftheBoardofDirectors,

l) stipulatesgeneraltermsandconditionsfortheBank’sactivitiesandtermsandconditionsformaintainingitscreditriskexposureinaccordancewithdecreesoftheCzechNationalBankandlegalnormspublishedintheCollectionofLawsoftheCzechRepublic,

m) approvestheestablishmentanddissolutionoftheBank’ssubsidiariesandtheirtransfertootherentities,

n) approvesmanagementagreementsconcludedbetweentheBankandmembersofitsBoardofDirectorsandanypaymentstobemadebytheBanktothemembersofitsBoardofDirectorspursuanttoSection61,par.1oftheActonBusinessCorporations,

o) decidesonremunerationofmembersoftheBoardofDirectorsandstipulatesrulesforremuneratingtheDirectoroftheInternalAuditDepartment,

p) establishescommitteesoftheSupervisoryBoardanddefinestheirresponsibilities,

q) overseestheeffectivenessandefficiencyoftheBank’smanagementandcontrolsystem,

r) givespriorapprovaltotheappointmentanddismissaloftheBank’sproxies,

s) canasktheChairmanoftheAuditCommitteetoconveneameetingoftheAuditCommittee,and

t) dischargesfurtherresponsibilitiesstipulatedbylaw,theArticlesofAssociationandtheGroup’srules.

SIMONEMARCUCCIChairmanoftheSupervisoryBoardDomicile:20832Desio(MI),ViaParini3,RepublicofItalyBorn:2September1966

HEINZMEIDLINGERVice-ChairmanoftheSupervisoryBoardDomicile:Vienna,Kalmusweg46/Haus107,1220,AustriaBorn:6September1955

BENEDETTANAVARRADomicile:00187Rome,ViadelGambero23,ItalyBorn:24March1967

EVAMIKULKOVÁDomicile:Kladno,Kročehlavy,Dlouhá512Born:29January1957

Ing.JANASZÁSZOVÁDomicile:Bratislava,HanyMeličkovej2989/18,84105,SlovakiaBorn:17January1963

Mgr.MILOŠBÁDALDomicile:Prague5–Motol,Podhorská88/19Born:11April1970



WOLFGANGSCHILKDomicile:2603Felixdorf,Steinfeldgasse36,RepublicofAustriaBorn:16March1967

ANDREADIAMANTIDomicile:1090Vienna,Wasagasse6/20,RepublicofAustriaBorn:1June1973

IVANVLAHODomicile:1020Vienna,Laufbergergasse6/21-22,RepublicofAustriaBorn:8December1973

ChangesintheSupervisoryBoardin2017Asat1January2017,SusanneMalibasresignedfromherofficeofmemberoftheSupervisoryBoard.Asat1March2017,thesoleshareholderappointedSimoneMarcucci,AndreaDiamanti,IvanVlahoandWolfgangSchilk.

7.4AuditCommitteeTheAuditCommitteeisanindependentcommitteewiththetasktooversee,monitorandadviseinmattersofconcernregardingaccountingandfinancialreporting,theinternalcontrol,auditandriskmanagement,theexternalaudit,andmonitoringcompliancewithlaws,theBank’sregulationsandtheCodeofConduct.TheAuditCommitteeconsistsofthreemembersappointedanddismissedbytheGeneralMeetingforatermofthreeyearsfromamongtheSupervisoryBoardmembersorthirdpersons.TheChairmanandthemajorityofthemembersoftheAuditCommitteemustbeindependentfromtheBankandcompetent.TheAuditCommitteecanorderinspectionsandspecificallyfocusedauditinvestigationoftheBank’sfunctions,otherBank’sunitsandtheirsubsidiaries.Additionally,theAuditCommitteecanbeaskedtoassessinterbanktransactionsandintragrouptransactionsandothertransactionsinvolvingdirectorindirectconflictofinterests.Uponconductofitsbusiness,theAuditCommitteecanasktheGroupAuditfunctionforconsulting.Insuchcase,theGroupAuditstaffwillbeobligedtocomplywithallnon-disclosureprovisions.MeetingsoftheAuditCommitteeshallhaveaquorumifattendedinpersonorviateleconferencebythemajorityofitsmembers.DecisionsoftheAuditCommitteearepassedbyasimplemajorityofvotesoftheattendingmembersoftheAuditCommittee,unlessthedecisionsaretaken“perrollam”,whichmustbeapprovedbyallAuditCommitteemembers.TheAuditCommitteeappointsanddismissesachairmanfromamongitsmembers.TheChairmancoordinatesandplansactivitiesoftheAuditCommittee,convenesthemeetingsandchairsthemeetings.

MARCORADICEChairmanoftheAuditCommitteeDomicile:ViaS.Simpliciano,5-20121Milan,RepublicofItalyBorn:28August1957

HEINZMEIDLINGERDomicile:Vienna,Kalmusweg46/Haus107,1220,RepublicofAustriaBorn:6September1955

BENEDETTANAVARRADomicile:00187Rome,ViadelGambero23,RepublicofItalyBorn:24March1967

ChangesintheAuditCommitteein2017StefanoCotiniresignedfromhisofficeofmemberoftheAuditCommitteeasat27October2017.Asatthesamedate,thesoleshareholderappointedMarcoRadice.

7.5Conflictsofinterestatthelevelofmanagementandsupervisorybodies:

Theissuerisnotawareofanypossibleconflictsofinterestbetweenthedutiestotheissueroftheaforementionedpersonsandtheirprivateinterestsorotherduties.UniCreditBankhaspreparedanEthicsCodethatstipulateshowtoproceedincaseofaconflictofinterest.Themainactivitiescarriedoutbythemembersofmanagingandcontrolbodiesoftheissueroutsidetheissuerarenotsignificantfortheissuer.

7.6Informationoncompanymanagementandadministrationcodes

TheBankadoptednocompanymanagementandadministrationcode.TheBankcomplieswiththerulesofconductestablishedbyUniCreditGroup.

8.LegalandarbitrationproceedingsAsat31December2017,theBankreviewedthependinglegaldisputesagainsttheBankandcreatedprovisionsforthelitigation.Inadditiontothosedisputes,theBankwasalsosubjecttootherclaimsresultingfromtheBank’sregularbusinessactivities.TheBankisnot,andduringthepast12monthswasnot,involvedinanyjudicial,administrativeorarbitrationproceedingswhich,intheBank’sopinion,couldhave,orinthepast12monthshad,amaterialimpactontheBank’sfinancialsituationorprofitability.

9.Materialchangeintheissuer’s financialsituationSincethepublishingdateoftheauditedfinancialstatementsfortheyearended31December2017,nosignificantchangehasoccurredinthefinancialsituationoftheissuer.

10.ReceivedLoansfrommultilateraldevelopmentbanksandinternationalorganizationsCreditor: CouncilofEuropeDevelopmentBankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.Loanamount: EUR8571thousandInterestrate: 3MEURIBOR+0,33%Loanoriginationdate: 28.7.2014Maturitydate: 27.7.2021Collateral: Collateralisedbybonds

Creditor: CouncilofEuropeDevelopmentBankDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.Loanamount: EUR14286thousandInterestrate: 3MEURIBOR+0,03%Loanoriginationdate: 16.11.2015Maturitydate: 16.11.2022Collateral: Collateralisedbybonds

Creditor: TheExport-ImportBankofTheRepublicofChinaDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.Loanamount: USD871thousandInterestrate: 6MUSDLIBOR+0,75%Loanoriginationdate: 5.6.2014Maturitydate: 5.6.2019Collateral: Nocollateral

Creditor: TheEuropeanBankforReconstructionandDevelopmentDebtor: UniCreditBankCzechRepublicandSlovakia,a.s.Loanamount: EUR5000thousandInterestrate: 6MEURIBOR+0.40%Loanoriginationdate: 30October2017Maturitydate: 23February2023Collateral: Nocollateral

Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.Loanamount: EUR15000thousandInterestrate: 3MEURIBOR+0,421%Loanoriginationdate: 29.6.2011Maturitydate: 29.6.2018Collateral: Collateralisedbybonds

Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.Loanamount: EUR8227,5thousandInterestrate: 3MEURIBOR+0,559%Loanoriginationdate: 30.9.2011Maturitydate: 30.9.2023Collateral: Collateralisedbybonds

Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.Loanamount: EUR2000thousandInterestrate: 0,809%Loanoriginationdate: 22.1.2014Maturitydate: 31.12.2018Collateral: Collateralisedbybonds



Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingSlovakia,a.s.Loanamount: EUR2812,5thousandInterestrate: 0,41%Loanoriginationdate: 28.8.2014Maturitydate: 31.8.2018Collateral: Collateralisedbybonds





Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingCzechRepublic,a.s.Loanamount: CZK123682,5thousandInterestrate: 0,787%Loanoriginationdate: 22.1.2014Maturitydate: 22.1.2019Collateral: Collateralisedbybonds

Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingCzechRepublic,a.s.Loanamount: CZK423244thousandInterestrate: 0,545%Loanoriginationdate: 10.9.2014Maturitydate: 10.9.2019Collateral: Collateralisedbybonds


Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingCzechRepublic,a.s.Loanamount: EUR4800thousandInterestrate: 0,524%Loanoriginationdate: 10.9.2014Maturitydate: 10.9.2019Collateral: Collateralisedbybonds



Creditor: Evropskáinvestičníbanka,LuxemburgDebtor: UniCreditLeasingCzechRepublic,a.s.Loanamount: EUR5000thousandInterestrate: 0,177%Loanoriginationdate: 26.2.2015Maturitydate: 26.2.2020Collateral: Collateralisedbybonds

Totalloansasat31December2017 CZK3208580thousand

11.MaterialcontractsUniCreditBankhasnotconcludedanysuchcontractswhichcouldgiverisetoanobligationoraclaimofanymemberoftheGroupthatwouldbematerialtotheBank’sabilitytosettleitsliabilitiestosecuritiesholdersbasedontheissuedsecurities.

12.Thirdpartyinformation andexperts’opinionsand declarationsofanyinterestsTheannualreportdoesnotincludeanyrepresentationsorreportofanentityactingasanexpert.Additionally,itdoesnotincludeanyinformationfromathirdparty,unlessexpresslystatedotherwise.

13.Totalamountofoutstanding bondissues

Totalamountofoutstandingbondissues,includingEURandUSDbondsconvertedusingtheCNBexchangeratevalidasat31December2017:CZK40,000,050,062.

13.1Informationonthenumberofsharesissuedbytheissuerandwhichareundertheownershipoftheissuer’smanagers,includingpersonsclosetothesepersons

Thenumberofsharesissuedbytheissuerundertheownershipofmanagersorpersonsclosetothesepersonsiszero.Therearenooptionsorcomparableinvestmentinstruments,thevaluesofwhichrelatetosharesorsimilarsecuritiesrepresentinganownershipinterestintheissuer.


14.Principlesofremunerating theissuer’smanagers

RemunerationpolicyTheremunerationpolicyformanagersisestablishedinaccordancewith“UniCreditGroup’sRemunerationPolicy”andwithDecreeNo.163/2014Coll.andconsistsofthebasicsalariespolicy,the“GroupIncentiveSystem”,andthebenefitssystem.Thekeypillarsoftheremunerationpolicyare:clearandtransparentgovernance,compliancewithregulatoryrequirements&ethicalrules,continuousmonitoringofmarkettrends&practices,sustainablepayforsustainableperformanceandmotivation&retentionofallemployeeswithparticularfocusonpromisingstaffmembersandthosewhoarecriticalforfulfillingthecompanymission.

BoardofDirectorsTheRemunerationCommitteeoftheSupervisoryBoardofUniCreditBankCzechRepublic,a.s.(hereinafterthe“RemunerationCommittee”)approvestheremunerationforeachcalendaryearformembersoftheBoardofDirectorsonthebasisofthesupportingmaterialssubmittedbytheHumanResourcesDepartmentandpreparedincooperationwiththeHumanResourcesDepartmentofUniCreditGroup.In2017,theRemunerationCommitteeconsistedofSimoneMarcucci(from1March2017),HeinzMeidlingerandMilošBádal(until14July2017and,subsequently,from27October2017).StartingfromMay2014,inlinewithnewcivilcode,membersoftheBoardofDirectorsperformworkaccordingtotheAgreementonDischargeofOfficeofMembersoftheBoardofDirectorsandreceivetheremunerationthatissetasafixedamountpaidmonthly,anannualvariablebonus,andtheyaregrantedcertainadditionalbenefits.ForeignmembersoftheBoardofDirectorsarenotentitledtolocalremunerationforexecutingtheiroffices;remunerationtotheBank’sforeignexecutivemanagers(membersoftheBoardofDirectors)isprovidedbytheparentcompany.Theseremunerationcostsareaccountedforbytheparentcompanyandincludedintheremunerationsummary.

ContractualsalariesoftheBank’sexecutivemanagersThecontractualsalariesaredefinedonthebasisofthevalueofajobpositionwithintheclassificationsystemoftopmanagingpositionsinUniCreditGroup(“GlobalJobModel”),thekeyabilitiesoftheexecutivemanagerandamarketcomparisonwithotherentitiesonthefinancialandbankingmarketsintheCzechRepublic,withinUniCreditGroup,andinCentralandEasternEurope.

ChangesinthecontractualsalariesoftheBank’smembersoftheBoardofDirectors,HeadofCompliance,HeadofInternalAuditareapprovedbytheRemunerationCommitteeeachyearonthebasisofthesupportingmaterialssubmittedbytheHumanResourcesDepartmentandpreparedincooperationwiththeHumanResourcesDepartmentofUniCreditGroup.

VariableannualbonusesoftheBank’sexecutivemanagersThetargetvariablebonusoftheBank’smembersoftheBoardofDirectorsisapprovedbytheRemunerationCommitteeonthebasisofthesupportingmaterialssubmittedbytheHumanResourcesDepartmentandpreparedincooperationwiththeHumanResourcesDepartmentofUniCreditGroup.Thetargetvariablebonusofeachexecutivemanagerisdeterminedindividuallyandcomprises50–100%ofhisorherannualcontractualsalary.Aportionoftheremunerationisintheformofsharesandnon-monetaryinstruments.

UniCreditGroup’s“2017GroupIncentiveSystem”(hereinafterthe“System”)wasapprovedbytheRemunerationCommitteeofUniCreditBankCzechRepublic,a.s.,asabindingregulationforthevariablebonusesofexecutivemanagers.

ThevariablebonusamountthereofandmethodofpaymentareestablishedinaccordancewiththeSystemusingthefollowingcomponents:1.“Bonuspool”;2.“EntryConditions”;

March“GroupandLocalRiskAdjustments”;4.“PerformanceScreen”;5.“Bonuscap”;6.“ComplianceAssessment”,“ContinuousEmployment

Condition”,“ClawBack”and“Personalhedging”.

Ad1.BonuspoolisbasedonCountryrisk-adjustedresults.BonuspoolisdefinedinthebudgetphaseforeachCountryasapercentageoftherespectivefundingKPI,considering:historicaldataanalysis,expectedprofitability,businessstrategyandmarketcontext/externalbenchmarking.

Ad2.Specificindicatorsaresetas“EntryConditions”,measuringannualprofitability,solidityandliquidityresults.The“EntryConditions”isthemechanismthatverifiesthepossibleapplicationofthemaluscondition(ZeroFactor)basedonthelevelofachievementoftheindicators.Inordertoaligntoregulatoryrequirements,incasethe“EntryConditions”arenotmet,aZeroFactorwillapplytotheExecutives/IdentifiedStaffpopulation.IncasetheEntryConditionsaremet,ZeroFactorisnotactivated,andfurtheradjustmentsareperformedpursuanttoPerformance&RiskFactorAdjustments.

Ad3.GroupandLocalRiskAdjustmentsensuresthatthebonuspoolsarealignedwiththeoverallperformanceandriskassessment.Applicationofthe“GroupandLocalRiskAdjustments”parametersaffirms,reducesorentirelyterminatesanexecutivemanager’sbonuspayment.


Inaccordancewithapplicableregulatoryrequirements,finalevaluationofsustainableperformanceparametersandrisk-reward,alignmentisreviewedbytheRemunerationCommitteeanddefinedundertheresponsibilityandgovernanceoftheBoardofDirectors.

In2017,Entryconditionsweredefinedusingthefollowingparameters:

Group LocalNetOperatingProfit(NOP) NetOperatingProfit(NOP)NetProfit(NP) NetProfit(NP)Capitaladequacyindicator(CommonEquityTier1RatioTransitional)Short-termliquidityindicator(LiquidityCoverageRatio)NetStableFundingRatio(NSFR)

AZeroFactorisappliedinyearsofdeferredbonus.TheZeroFactorconfirmsorentirelycancelspaymentofdeferredportionsofthebonus.TheRemunerationCommitteeapprovestheleveloffulfilmentoftheZeroFactorconditionseachyearandthereleaseorcancellationofdeferredbonuspaymentbasedonaproposalfromUniCreditGroup’sBoardofDirectors.

Ad4.The“PerformanceScreen”isatableoftheexecutivemanagers’performanceobjectivesseteachyearbytheRemunerationCommittee.TheperformanceobjectivesarecloselyrelatedtotheBank’sstrategicplan.TheRemunerationCommitteeapprovestheleveloftheirfulfilmentbasedontheproposaloftheexecutivemanagers’directsuperiorsforeachcalendaryearandeachexecutivemanagerseparately.

The“PerformanceScreen”shouldcontainatleast4performancegoals(itisrecommendedtousenomorethan6)ofwhichatleasthalfissustainable.Theexecutivemanagersmayhaveassignedothergoalsinadditiontoperformancegoals.Suchadditionaltargetsmayrangefromindividualtasks,projects,activitiesoranyothergoalsorbehaviours.

“PerformanceScreen”parametersapprovedbytheRemunerationCommitteeforexecutivemanagersfor2017included,forexample:– ROAC,– EVA,– ExpectedLoss(NewBusinessEL,PerformingStockEL),– RevenueSharing.

Othergoalswerequantitativeandqualitativeanddifferedforeachindividualexecutivemanagerdependingontheprioritiesofthesegmentforwhichtheparticularexecutivemanagerisresponsible.

Ad5.TheCapitalRequirementsDirective(CRDIV)approvedbytheEuropeanParliament,introducedthecaponbonuseswithaneffectivedateof1stofJanuary2014.Thebonuscaphasbeensetataone-timeyearly

fixedcompensation,withthepossibilitytoincreaseittotwo-timesyearlyfixedcompensation,ifallowedbylocalregulatorsandsubjecttoshareholders’approvalwithaqualifiedmajority.ForthecompanyControlFunctions,amoreconservativeapproachapplies,providingforthebonuscapsetat80%oftheyearlyfixedcompensation.

Ad6.Anypaymentofthevariablecomponentofremunerationforanexecutivemanagerissubjecttothe“ComplianceAssessment”,whichconfirms,reducesorentirelycancelsthepaymenttowhichanemployeeisentitledineachyearofdeferredremuneration.Anexecutivemanager’sdirectsuperiorshallassesswhethertheexecutivemanageractedduringtheevaluatedperiodinaccordancewiththeprinciplesofUniCreditGroup’sIntegrityCharterandArticlesofAssociation;whetherheorshecommittedseriouserrors,includingerrors,whichcouldhaveatangibleimpactonbankingriskorthebalancesheet;aswellaswhetherornotheorshebreachedlegalnorms,UniCreditGroup’srulesorUniCreditBank’sinternalregulations,regardlessofwhetheradisciplinaryhearingistakingplaceorotherdisciplinarysanctionshavealreadybeenimposed.Thisevaluationiscarriedoutbytheexecutivemanager’sdirectsuperiorandapprovedbytheRemunerationCommittee.

Aswiththeevaluationofindividualperformanceobjectives,thisassessmentmayreduceorentirelycancel(dependingonthegravityoftheviolation)thepotentialvariableremuneration.

The“ContinuousEmploymentCondition”stipulatesthatanemployeeisentitledtopaymentofthevariableremunerationcomponentoritsdeferredpartonlyifheorsheisanemployeeoftheBankoranothercompanywithinUniCreditGroupatthetimeofpayment.

AnyremunerationthataworkercangetinanyyearpursuanttotheSystemaresubjecttotheClawbackapplicationincompliancewithlegislationinforce,includingpaymentofremunerationseffectedonabasislaterprovedtobeincorrect.

Executivemanagersarerequiredtoundertakenottousepersonalhedgingstrategiesonremunerationandliability-relatedinsurancetounderminetheriskalignmenteffectsembeddedintheirremunerationarrangements.InvolvementinanyformofhedgingtransactionshallbeconsideredasabreachofCompliancepoliciesandthereforeanyrighttoreceivevariableremunerationpursuanttotheSystemshallexpire.

BonusPlanPaymentofthebonusforthegivenperiod(2017)isspreadoutoveramultiple-yearperiod:

ExecutiveVice-PresidentsandSeniorPositions– Thefirstpart(2018)ispayableonehalfincashandonehalf

innon-monetaryinstruments,comprising40%ofthebonus


establishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoatwo-yearretentionperiod.

– Thesecondpart(2019)ispayableincashandcomprises10%ofthebonusestablishedforthegivenperiod.

– Thethirdpart(2020)ispayableinnon-monetaryinstruments,comprising10%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefourthpart(2021)ispayableinnon-monetaryinstruments,comprising10%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefifthpart(2022)ispayableinnon-monetaryinstruments,comprising10%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thesixthpart(2023)ispayableincashandcomprises20%ofthebonusestablishedforthegivenperiod.

– In2019-2023,eachbonuspaymentissubjecttotheZeroFactorapplication.

– Ineachyear,thebonuspaymentisconditionaluponcompletingtheComplianceAssessment,ContinuousEmploymentConditionandClawbackapplication,whichconfirm,reduceorentirelycanceltheentitlementtobonuspayment.

SeniorVice-Presidents&OtherIdentifiedStaff– Thefirstpart(2018)ispayableonehalfincashandonehalf

innon-monetaryinstruments,comprising60%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoatwo-yearretentionperiod.

– Thesecondpart(2019)ispayableincashandcomprises10%ofthebonusestablishedforthegivenperiod.

– Thethirdpart(2020)ispayableinnon-monetaryinstruments,comprising10%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– Thefourthpart(2021)ispayableonehalfincashandonehalfinnon-monetaryinstruments,comprising20%ofthebonusestablishedforthegivenperiod;non-monetaryinstrumentsaresubjecttoaone-yearretentionperiod.

– In2019-2022,eachbonuspaymentissubjecttotheZeroFactorapplication.


LocalIncentiveSystem– Thefirstpart(2018)ispayableincashandcomprises40%

ofthebonusestablishedforthegivenperiod.– Thesecondpart(2019)ispayableincashandcomprises20%

ofthebonusestablishedforthegivenperiod;itissubject

totheZeroFactorapplicationinthesecondyear,whichconfirms,reducesorentirelycancelstheentitlementtopaymentofthesecondportionofthebonus.

– Thethirdpart(2020)ispayableinnon-monetaryinstrumentsandcomprises20%ofthebonusestablishedforthegivenperiod;itissubjecttofurtherZeroFactorapplicationinthethirdyear,whichconfirms,reducesorentirelycancelstheentitlementtopaymentofthethirdportionofthebonus.

– Thefourthpart(2021)ispayableinnon-monetaryinstrumentsandcomprises20%ofthebonusestablishedforthegivenperiod;itissubjecttofurtherZeroFactorapplicationinthefourthyear,whichconfirms,reducesorentirelycancelstheentitlementtopaymentofthefourthportionofthebonus.


TheRemunerationCommitteeapprovesthefulfilmentofthepaymentconditionsineachyearandthereleaseofthedeferredbonuspaymentonthebasesofaproposalfromUniCreditGroup’sBoardofDirectors.

BenefitsoftheBank’sexecutivemanagersBenefitsaredefinedinaccordancewiththeprioritiesofUniCreditGroup’shumanresourcesstrategyandtheclassificationofthemanager’spositionintoapre-definedemployeebenefitscategory.− Thefollowingbenefitsareprovidedtoexecutivemanagersbyvirtue

oftheirAgreementondischargeofofficeofmembersoftheBoardofDirectorswiththeBank:contributiontosupplementarypensioninsurance,contributiontocapitallifeinsurance.

− Byvirtueoftheirmanagerialposition,executivemanagersareprovidedacompanycarforbusinessaswellasprivatepurposes.

− InaccordancewiththestandardsforrelocatingtopmanagersinUniCreditGrouptoaforeigncountry,andbyvirtueoftheirtemporaryrelocationtotheCzechRepublicfromothercompanieswithinUniCreditGroup,foreignexecutivemanagersreceivebenefitsconnectedwiththeirlong-termstayabroad.

Theaforementionedbenefitsareprovidedintheformofnon-monetaryfulfilment,andtheiraggregateamountisincludedintheremunerationsummary.

SupervisoryBoardTheSupervisoryBoardconsistsofninepersons,ofwhichthreeareemployedbytheissuerandreceiveasalaryforactivitiesperformedfortheissueronthebasisofanemploymentcontractinaccordancewiththeLabourCode.MembersoftheSupervisoryBoard,iftheyareatthesametimeemployedbyanycompanyofUniCreditGroup(includingtheissuer),arenotentitledtoremunerationforexecutingtheiroffices.FixedcontractualremunerationmayonlybeagreedonwiththosemembersoftheSupervisoryBoardwhoatthesametimedonothold


executivepositionswithinUniCreditGroupbyvirtueofanemploymentcontract.TheremunerationisvalidfortheentireperiodofofficeoftheSupervisoryBoardmember,andisapprovedbasedontheBank’sBoardofDirectorsproposalbythegeneralmeetingofUniCreditBankCzechRepublicandSlovakia,a.s.

TheremunerationtomembersoftheSupervisoryBoardstatedintheremunerationsummarycomprisestheincomesreceivedbythreemembersoftheSupervisoryBoard,whoareemployedwiththeBankandwhoreceivedthepaymentsbyvirtueoftheiremploymentcontractsinaccordancewiththeLabourCode,andbytwoforeignmembersoftheSupervisoryBoardwithwhomtheshareholderagreedfixedcontractualremunerationbasedontheaforementionedregulations.TheremainingmembersoftheSupervisoryBoardarenotremuneratedbytheissuer.

TheremunerationpolicyinthecaseofSupervisoryBoardmemberswhoareemployedwithUniCreditBankCzechRepublicandSlovakia,a.s.,isapprovedbytheBank’sBoardofDirectorsattheproposaloftheBank’sHumanResourcesDepartment,andthebenefitsareprovidedinaccordancewiththevalidCollectiveAgreementsconcludedbetweentheBankanditstradeunionsinparticularcountries.

TheprinciplesofremunerationtomembersoftheSupervisoryBoardemployedwithintheBankandthecomponentsoftheirremuneration,whicharepaidtothembyvirtueoftheiremploymentcontractsincludingthevariableremunerationaredefinedbytheBank’sinternal

regulation.Thevariableannualbonuspaymentisdeterminedforemployeesasapercentageofthetargetvariableannualbonus(0–150%)onthebasisoffulfillingquantitativeandqualitativeperformanceindicatorswhicharedefinedinthe“GoalCard”,whichispartofthesystemofvariableremunerationoftheBank’semployeesbasedonanevaluationofindividualandteamtargets.Theperformanceparametersinthe“GoalCard”ofSupervisoryBoardmemberswhoareemployedwiththeissueraredependentonthejobpositionstheyperformbyvirtueoftheiremploymentcontractsinaccordancewiththeLabourCodeandinnowayrelatetotheexecutionoftheofficeofSupervisoryBoardmember.TheamountsofthefinalannualvariablebonusespaidtomembersoftheSupervisoryBoardwhoareemployedwiththeissuerareproposedandapprovedbytheirdirectsuperiorsaccordingtotheissuer’sorganizationalstructure.

AuditCommitteeTheAuditCommitteeconsistsofthreepersons,noneofwhomareemployedbytheissuer.FixedcontractualremunerationmaybeagreedforexecutingtheofficeofAuditCommitteemember.TheremunerationisvalidfortheentireperiodofofficeoftheAuditCommitteemember,andisapprovedbasedontheBank’sBoardofDirectorsproposalbythegeneralmeetingofUniCreditBankCzechRepublicandSlovakia,a.s.In2017,theaforementionedfixedcontractualremunerationwasagreedwiththreemembersoftheAuditCommittee,andthetotalamountthereofisstatedintheremunerationsummary.

15.Informationonremunerationtoauditorsrecognisedinthereportingperiod(CZKthousand) Bank Consolidated Totalconsol. companies groupAudit 24893 8406 33299Taxadvisory – – –Otheradvisoryservices – – –Total 24893 8406 33299

16.Informationonallmonetaryandin-kindincomeacceptedbyexecutive managersandmembersoftheSupervisoryBoardandtheAudit CommitteefromtheissuerAmountsinCZKMembersoftheBoardofDirectors Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 64751564 12449996 5206036 82407596 MembersoftheSupervisoryBoard Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 3345179 0 0 3345179


MembersoftheAuditCommittee Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 788940 0 0 788940 Otherexecutivemanagers Short-term Employeebenefits Otherlong-term Benefitsupon employee aftertermination employee earlytermination Share-based benefits ofemployment benefits ofemployment payments Total 104894749 4177300 480432 109552481

Note:Thementioneddatacontainamountsactuallypaidduring2017,ascomparedtothefinancialstatements,whichcontaininformationoncostsconcerning2017.

17.Majorfutureinvestmentsotherthanfinancialinvestments (plannedfor2018)Otherinvestments,excl.financialinvestments,for2018areplannedintheamountofCZK2.637billion,ofwhichCZK2billionisthepurchaseofassetsforrentforUniCreditLeasingandCZK74millionistheinvestmentinrentingrealestatetothirdparties(rentedbuildings).InvestmentsinIT(HWandSW)willamounttoCZK486millionandtheyareintendedtoadjusttheexistinginformationsystemsoftheBank,toupgradethedigitalsalesplatformandinternetbanking,aswellastosatisfyvariouslocalandGrouprequirements.ItisonlypartoftotalITinvestmentbecauseITservicesonthepartoftheBankareprimarilysuppliedonanoutsourcingbasisandrecognisedinoperatingcosts.Investmentsinthefixedcapitalarefocusedmainlyonthedevelopmentandrenovationofthedistributionnetwork.

18.Guaranteesprovidedbytheinsurer(CZKthousand) 31Dec2017 31Dec2016Grantedguaranteesandcollaterals 38690054 39981670GuaranteesgrantedunderL/Cs 1124273 1517788Total 39814327 41499458

19.Internalauditpolicyandproceduresandrulesfortheissuer’sapproach torisksassociatedwiththefinancialreportingAllinternalprocesseswitheitheradirectorindirectinfluenceontheBank’sreportinghavebeendescribedintheUniCreditCzechRepublicandSlovakiaGroup.includingtherisksconnectedwiththeseprocesses.Controlswithvaryingperiodicityhavebeensetupinordertoeliminatetheserisks.Allprocessesareevaluatedandupdatedtwiceayear,andthecontrolssetuptoeliminatethedescribedrisksareinspected.

Thegoaloftheaforementionedeffortwastoestablishcorrespondinginternalcontrolsthatguaranteetheaccuracyofthefinancialreporting,achievebroaderawarenessoftherisksconnectedwithcreatingfinancialreportsandkeeptheserisksundercontrolandatanacceptablelevel.TheentireprocessisinaccordancewiththeItalianActNo.262/2005andlegalregulationNo.303/2006,whichwereinspiredbytheAmericanSarbanes-OxleyAct.

TheUniCreditBankCzechRepublicandSlovakiaGrouphaspreparedinternalregulationsrelatingtoparticularareasoftheGroup’sactivitiesthatinfluencetheGroup’saccounting.Thevaluationproceduresappliedtothestatementoffinancialpositionandstatementofcomprehensiveincomeitemsaredescribedinthenotestotheindividualandconsolidatedannualfinancialstatements,whichformapartofthisannualreport.Theseannualfinancialstatementsaresubmittedforreviewbyauditorandfinancialdataintendedforconsolidationoftheparentcompanyarealsosubmittedforreviewbyauditortwiceayear(mid-yearandattheyear-end).


20.LicencesandtrademarksUniCreditBankusesdozensoftrademarksforidentificationandprotectionofitsproductsonbankingmarketsintheCzechRepublicandSlovakia.TheBank,asowner,hasthetrademarksregisteredwiththeIndustrialPropertyOfficeoftheCzechRepublicandtheIndustrialPropertyOfficeoftheSlovakRepublic.

21.Informationonregulatedmarketsandratingoftheissueroritsdebtsecurities

Theissuerhasbeenassignednorating.TheratingagencyMoody‘sInvestorService,Inc.(hereinafterreferredtoas“Moody‘s”)grantedanAa3ratingtoselectedbondsissuedbytheIssuer(pleaseseeasummaryoverviewbelow).Moody‘scarriesonitsactivitiesintheEuropeanUnionandisregisteredinlinewithRegulation(EC)No1060/2009oftheEuropeanParliamentandoftheCouncilasamended(hereinafterreferredtoasthe“RegulationonCreditRatingAgencies”).ItisincludedinthelistofcreditagenciespublishedbytheEuropeanSecuritiesandMarketAuthority(ESMA)onitswebpages(http://www.esma.europa.eu/page/List-registered-and-certified-CRAs)inlinewiththeRegulationonCreditRatingAgencies.

TheIssuerhasnotcontractedanyotherratingagencytoissuearatingofidenticalissuesorbondsreferredtointheoverviewbelow.Ifsuchapossibilityoccursinthefuture,theIssuershallactinlinewithArticle8doftheRegulationonCreditRatingAgencies.

Summary of the issued and outstanding debt securities of the Issuer

AlistofcoveredbondsissuedbytheIssuertodateandadmittedtotradingonthePragueStockExchangeispresentedinthefollowingtable.Thedataarevalidasat31December2017.

Nameoftheissue ISIN Date Due Datewhen Rating oftheissue date tradingbegins (Moody’s)HZLHVB5.00/25 CZ0002000680 23November2005 15November2025 23November2005 –UCBHZL10YFLOAT/37 CZ0002001910 21December2007 21December2037 21December2007 Aa3UCBHZL6.00/18 CZ0002002520 27April2012 27April2018 7May2012 Aa3UCBHZL2.00/2020 CZ0002003080 3June2013 3June2020 19August2013 Aa3UCBHZL3.04/2028 CZ0002003114 7June2013 7June2028 19August2013 Aa3UCBHZL6MVAR/2020 CZ0002003148 18July2013 18July2020 26August2013 –

UCBHZLEUR2.00/18 CZ0002003262 21October2013 22October2018 29October2013 –


AlistofcoveredbondsissuedbytheIssuertodateandadmittedtotradingontheLuxembourgStockExchangeispresentedinthefollowingtable.Thedataarevalidasat31December2017.

Nameoftheissue ISIN Date Due Datewhen Rating oftheissue date tradingbegins (Moody’s)UCBHZL1.875/18 XS1002162136 13December2013 13December2018 13December2013 Aa3UCBHZL3MFLOAT/23 XS1206759406 20March2015 15September2023 20March2015 Aa3UCBHZL3MFLOAT/21 XS1206761139 20March2015 16March2021 20March2015 Aa3UCBHZL0.625/20 XS1225180949 30April2015 30April2020 30April2015 Aa3UCBHZL0.75/22 XS1559750671 3February2017 3February2022 3February2017 Aa3UCBHZLII0.75/22 XS1643471250 11July2017 11July2022 11July2017 Aa3UCBHZLII0.75/22TAP* XS1732340747 7December2017 11July2022 7December2017 Aa3

*TemporaryISIN,whichwasmergedwithXS1643471250asat16January2018.

AlistofbondsissuedbytheIssuertodateandadmittedtotradingontheBratislavaStockExchangeispresentedinthefollowingtable.Thedataarevalidasat31December2017.

Nameoftheissue ISIN Date Due Datewhen Rating oftheissue date tradingbegins (Moody’s)UUCBSK10H SK4120009051 27March2013 27March2018 6March2013 –UCBSK11H SK4120009598 20November2013 20November2018 2December2013 –UCBHZL3Mfloater2018 SK4120009903 31March2014 28March2018 10November2014 –UCBHZL1.55/2021 SK4120010208 28August2014 30August2021 22December2014 –UCBHZL1.20/2022(UCBHZL14H) SK4120010752 25May2015 25May2022 20January2016 Aa3UCBHZLEUR1.40/2024 SK4120011131 15October2015 15October2024 20January2016 –UCBHZLEUR1.80/2025 SK4120011123 15October2015 15October2025 20January2016 –UCBHZLEUR3Mfloater2018 SK4120011248 26November2015 26November2018 20January2016 –UCBHZLEUR6Mfloater2020 SK4120011313 17December2015 17December2020 20January2016 Aa3UCBHZLEUR0.65/2021 SK4120011305 10December2015 10December2021 20January2016 Aa3

22.Non-FinancialInformationUniCreditBankCzechRepublicandSlovakia,a.s.usestheexemptionunderSection32g(7)oftheActonAccountingandthenon-financialinformationispublishedbyparentcompanyUniCreditSpA.UniCreditSpApublishednon-financialinformationfor2017inEnglishathttps://www.unicreditgroup.eu/en/a-sustainable-bank/sustainability-reporting.html.


PursuanttoArticle82etseq.ofActNo.90/2012Coll.onCommercialCorporations,theBoardofDirectorsofUniCreditBankCzechRepublicandSlovakia,a.s.havingitsregisteredofficeatPrague4,Želetavská1525/1,14092,Reg.No.64948242,registeredintheCommercialRegistermaintainedbythePragueMetropolitanCourt,SectionB,Insertion3608(“UniCreditBank“),fortheperiodfrom1.1.2017to31.12.2017(hereinafterreferredtoasthe“Period“)preparedareportonrelations.

1. StructureofRelationsbetweenUniCreditBankandtheControllingentityandentitiesControlledbythesameControllingentity

Overthisperiod,UniCreditBankwasdirectlycontrolledbyUniCredit,S.p.A.havingitsregisteredofficeatPiazzaGaeAulenti3–TowerA–20154Milan,Italy(until12December2017havingitsregisteredofficeatViaAlessandroSpecchi16,00186Roma,Italy.)UniCreditBankitselfcontrolledduringtheperiodthecompaniesUniCreditLeasingCZ,a.s.,Reg.No.15886492,Želetavská1525/1,14010Prague4,UniCreditFactoringCzechRepublicandSlovakia,a.s.Reg.No.:15272028,Želetavská1525/1,Michle,14000Prague4.UniCreditLeasingCZ,a.s.duringtheperiod,wasthesoleshareholderofthefollowingcompanies:UniCreditLeasingSlovakia,a.s.,Reg.No.:35730978,Šancová1/A,81499Bratislava,UniCreditFleetManagement,s.r.o.,Reg.No.:62582836,Želetavská1525/1,Michle,14000Prague4,UniCreditpojišťovacímakléřskáspol.sr.o.,Reg.No.:25711938,Želetavská1525/1,Michle,14000Prague4,HVBLeasingCzechRepublics.r.o.,Reg.No.:62917188,Želetavská1525/1,Michle,14000Prague4(until13February2016),CA-LeasingEURO,s.r.o.,Reg.No.:49617044,Želetavská1525/1,Michle,14000Prague4,BACALeasingAlfas.r.o.,Reg.No.:25751841,Želetavská1525/1,Michle,14000Prague4,CA-LeasingOVUSs.r.o.,Reg.No.:25714538,Želetavská1525/1,Michle,14000Prague4,ALLIBLeasing,s.r.o.,Reg.No.:25708376,Prague4–Michle,Želetavská1525/1,14010UniCreditLeasingSlovakia,a.s.isthesoleshareholderofthefollowingcompanies:UniCreditLeasingInsuranceServices,s.r.o.,Reg.No.:47926481,Šancová1/A,Bratislava81499,UniCreditBroker,s.r.o.,Reg.No.:35800348,Šancová1/A,Bratislava81411aUniCreditFleetManagement,s.r.o.,Reg.No.:35820381,Šancová1/A,Bratislava81499.On3July2017,theAmundiGroupcompletedtheacquisitionofthePioneerInvestmentsGroup.Asofthisday,thecompaniesofthePioneerInvestmentGroupceasedtobecontrolledbythesameentityasUniCreditBankandthereforethisReportonRelationsonlyreflectsontherelationsofUniCreditBankwiththeseentitiesonlywithintheperioduntilthisdate.On7June2017,theUniCreditGroupcompletedthesaleofitsshareinBankPekaoSA(BankPolskaKasaOpiekiSpółkaAkcyjna).ThisReportonRelationsonlyreflectsontherelationsofUniCreditBankwiththiscompanyanditssubsidiariesonlywithintheperioduntilthisdate.

ThestructureoftheUniCreditGroupisdescribedindetailinAnnexNo.1ofthisReport.

2. UniCreditBank’sRolewithinUniCreditGroup:TheCzechandtheSlovakRepublicsareamong3keymarketstheUniCreditGroupintendstodevelopinthelongtermwithintheCEEdivision.ThemergedentityUniCreditBankisthesecondlargestbankwithintheCEEregionintermsofthevolumeofassetsandgeneratedprofits(datafrom2016).UniCreditBankperformstheroleofauniversalbankinSlovakandCzechmarkets;withintheCEEregionitoftenhasaroleofproductinnovator.UniCreditBanksupportsgroup-widesolutionsintheareaofproducts,processesorsaleschannels,whichpilotedwithindifferentcountriesandincasetheyareconfirmedassuccessful,theyarelaterimplementedinotherUniCreditbanksintheCentralandEasternEuropedivisions.UniCreditBankisveryactiveinthisarea.Intheareaofstandardbankingactivities,inadditiontothecontractsprovidedbelow,thecontrolledentityconcludedwiththecontrollingentityandwithrelatedparties,interbank,derivativeandotherbankingtransactions,andtheseentitiescooperatedintheissueofbonds,andalsoenteredintoclientoperations(paymentcards,currentaccounts,depositproducts,cashpaymentsystem,etc.),allthisinstandardmarketconditions.Withinstandardbankingrelations,somelendingbusinessofcontrolledentitiesisbackedbybankguaranteesprovidedbyUniCreditS.p.A.,UniCreditBankAustriaAGandUniCreditBankAG.WithintheGroup,thereisalsotheprovisionofcreditproductsandguaranteesbyUniCreditBank,onstandardconditions.

3. MethodandMeansofControlThegeneralmeetingisthesupremebodyofUniCreditBank.UniCreditBankS.p.A.manifestsitswillthroughexercisingtheauthorityofthegeneralmeetingthroughbysoleshareholder’sresolutionsactingincapacityoftheGeneralMeeting.AccordingtoUniCreditBankArticlesofAssociation,alsotheelectionofSupervisoryBoardmembersfallswithinthecompetenceofthegeneralmeeting.TheSupervisoryBoardmonitorstheconductofBankbusinessandtheexerciseofBoardofDirectorsresponsibilities.TheSupervisoryBoardalsoelectsandremovesthemembersoftheBoardofDirectorsandrecommendscandidatesfortheChairmanandVice-ChairmanoftheBoardofDirectors.However,themembersoftheBoardofDirectorsarenotboundbysucharecommendationintheirelection.ThecontrollingentityhasitsrepresentativesbothintheBankSupervisoryBoardandintheBoardofDirectors.UniCreditBankasamemberoftheUniCreditGroupmust,subjecttorelevantlegalregulations,performtheregulationsissuedbyUniCreditS.p.A(the“HoldingCompany“)withintheBankandallcompaniescontrolledbyitthroughitsdirectives(the“DirectivesoftheHolding”).TheDirectivesoftheHoldingmeansrulesdefiningthemanagement,

betweencontrollingandcontrolledentityandonrelationsbetweencontrolledentitiesandotherentitiescontrolledbythesamecontrollingentity

Areportonrelations


theorganisationchartandresponsibilitiesofthemanagerswithinkeyprocessesintheUniCreditGroup,whichareissuedintheexerciseofHoldingCompany’spowersintheareaofsupervisionoftheUniCreditGroupandcoordinationoftheUniCreditGroup,allthisaccordingtoinstructionsissuedbyItaliansupervisorybodyinordertomaintainthestabilityoftheUniCreditGroup.

UniCreditBankperformsitsinfluenceonitssubsidiarycompaniesthroughtheexerciseofitsshareholderrightsandalsothroughitsrepresentativesinthebodiesofsomeofthesecompanies,inparticularintheirsupervisoryboards.

4. AnoverviewofmutualcontractsbetweenUniCreditBankandthecontrollingentityorbetweencontrolledentities

4.1.BetweenUniCreditBankandUniCreditS.p.A.,PiazzaGaeAulenti3,TowerA–20154Milan,Italy:

Contractname Subject-matterofcontract ContractconcludedonMACHCoreMigrationProject SupportoftheprojectMigrationtosinglebankingsystem(theMACHproject) 7.1.2015InteradvisoryAgreement AdvisoryservicesrelatedtoM&Aadvisoryforspecificclientsforspecificacquisition 2.2.2015 withrespecttotheCzechRepublic(jointlywithUniCreditBankAustriaAG)Intercompanyservicesagreement Advisoryservicesintheareaofmethodologicalgroupmanagement 11.12.2015ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 29.6.2016GMRAMasterAgreement Ageneralcreditcontractforsecuredbyatransferofsecurities 12.8.2016DepositNettingAgreement Agreementconcerningthereciprocalset-offofpayablesandreceivables 22.9.2016 frominterbankdepositsintheeventofdefault.AgreementforSPPI/BTTestCEEBanks AgreementcoveringthecalculationofSPPI/BenchmarktestfortheloanswithinIFRS9 26.7.2017

4.2.BetweenUniCreditBankandUniCreditBankAustriaAG,Schottengasse6-8,1010Vienna,theRepublicofAustria:

Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Custodyandadministrationofsecurities(abranchinSlovakia) 24.11.1995SubcustodyAgreement storage,managementandsettlementofsecurities 1.8.1997BrokerageAgreement Securitiestrading 2.1.2002ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 24.5.2012ConsultancyServiceAgreement LearningandDevelopmentConsultancyServicesintheareaofspecialprofessionalskills, 2012 softskillstraininganddevelopmentandtalentmanagementServiceLevelAgreement ManagementandassessmentofrisksNettingAgreements 5.9.2008RiskSharingInstrument(RSI) TripartiteagreementwiththeEuropeanInvestmentFundfortheprovisionofguarantees 24.6.2014GuaranteeAgreement withintheRSIprogramme(RiskSharingInstrument)AgreementFundsAdvisory PurchaseandsaleoffundunitsthroughtheplatformUCBankAustria 25.3.2005SwapclearDealerClearingAgreement Contractforsettlementofswaptransactionswithcentralcounterparties 7.7.2014SubcustodyAgreement Managementandcustodyofforeignsecurities 10.11.2014InteradvisoryAgreement AdvisoryservicesrelatedtoM&Aadvisoryforspecificclientsforspecificacquisition 27.2.2015 withrespecttotheCzechRepublicIntercreditorAgreement Settingofrelationsbetweencreditorswithrespecttoasyndicatedloanextended 16.7.2015IntercreditorAgreement Settingofrelationsbetweencreditorswithrespecttoasyndicatedloanextended 11.12.2015MandateAgreement TripartiteagreementwithCYRRUSCORPORATEFINANCE,Inc.regardingactivitiesrelated 25.5.2016 tothesqueeze-outAgreementforFairValue Calculationofthefairvalueandfairvaluehierarchy 25.1.2017

4.3.BetweenUniCreditBankandUniCreditBankAG,Kardinal-Faulhaber-Str.1,80333Munich:

Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Managementandcustodyofsecurities 1.7.2004SecuritiesAccountandCustodyAgreement Managementandcustodyofsecurities 19.9.2007Brokerageagreement ProcurementofpurchasesandsaleofforeignsecuritiesforBankclients 6.7.2009ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 3.3.2010MasterAgreement–GlobalDebt Conditionsofcooperationofbothbanksineurobondissuesofclients. 30.6.2011CapitalMarketsAgreementontheapplicationservice Provisionofservicesforcashpooling 9.5.2012providingforthecashpoolengine


Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Custody,managementandsettlementofsecurities(theLondonbranch) 17.5.2012Agreementonreportingtoatraderepository PerformanceofdutytoreportaccordingtoEMIR 20.3.2014inaccordancewithArt.9EMIRDistributionagreement DistributionofinvestmentvehiclesissuedbyUniCreditBankAGthroughtheBank 10.4.2014Agreementonreportingtoatraderepository PerformanceofdutytoreportaccordingtoEMIR 15.4.2014inaccordancewithArt.9EMIRAgreement DistributionofinvestmentvehiclesissuedbyUniCreditBankAGthroughtheBank 3.11.2014 usingelectronicplatformSLAforcertainco-operativeactivities Thesubjectiscooperationinthedevelopmentanddistributionofanalyticalsourcematerials. 1.10.2015GMRAMasterAgreement Ageneralcreditcontractforsecuredbyatransferofsecurities 21.9.2016SLASophis„Risque“Sub-LicensingAgreement SupportfortheuseofSWMurexandSophisRisque(forOTCderivatives) 16.9.2016

4.4.BetweenUniCreditBank,UnicreditS.p.AandUniCreditBankAustriaAG:

Contractname Subject-matterofcontract ContractconcludedonAgreementforDataFlowandReporting AgreementforDataFlowandReportinginconnectionwiththereorganizationoftheGroup 30.9.2016

4.5.BetweenUniCreditBank,UnicreditS.p.A,UniCreditBankAGandUniCreditBankAustriaAG

Contractname Subject-matterofcontract ContractconcludedonUniCreditGroup–MasterCost Costallocationforsecondedemployees 19.5.2010SharingAgreement

4.6.BetweenUniCreditBankandUniCreditBusinessIntegratedSolutionsS.C.p.A.,ViaLivioCambi1,20151Milan,Italy:

Contractname Subject-matterofcontract ContractconcludedonDataProcessingAgreement Anagreementconcerningtheprocessingandsecurityofdata,dataprotection 5.11.2007 anddutynottodiscloseconfidentialinformationFleetManagementAgreement AgreementtosupplyHWandSWcomponentsandrelatedservices 1.1.2008ServiceLevelAgreementnoBTS2008-006 AforeignpaymentsystemforUCBSK 1.1.2008Contractforoutsourcingandprovision OutsourcingcontractregardingtheCzechpartoftheBank–providingbackofficeservices 1.12.2017ofservicesOperationsandBackOffice inthepaymentsystemarea,accountmanagement,treasury,cardprocessing–newcontract AccordingtoTheGroupoutsourcingrules(servicesaccordingtotheoriginalcontractsof5.11.2007)Contractforoutsourcingandprovision ICTServices–Provisionofservicesintheareaofinformationsystems(UniCreditBank) 28.6.2010ofICTservices –contractswithforeigncompaniesandCzechspin-offenterpriseContractforoutsourcingandprovision ICTServices–Provisionofservicesintheareaofinformationsystems(UniCreditBankSK) 23.12.2010ofICTservicesNon-residentialLeaseAgreementNo. Leaseofnon-residentialpremisesinŠancovaStreetBratislava 31.12.2010018/PP-2010/3560AgencyContract SharingoftheprovisionofservicesofBanksuppliers 1.1.2012Subleasecontract Subleaseofpremisesinthebuildingno.1525,Želetavská1,Prague4 29.6.2012OperatingmanualATM OperatingmanualforATMservices 30.11.2012DataProcessingAgreement Anagreementconcerningtheprocessingandsecurityofdata,dataprotectionanddutynotto 30.9.2013 discloseconfidentialinformationfromthecontractwithaforeigncompanyandCzechspin-offenterpriseContractforoutsourcingandprovision OutsourcingcontractregardingtheSlovakbranch–providingbackofficeservices 1.12.2017ofservicesOperationsandBackOffice inthepaymentsystemarea,accountmanagement,treasury,cardprocessing– newcontractaccordingtotheGroupoutsourcingrules(theservicesremainunchanged)Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinZvolen(from1.4.2014) 20.5.2014dated20.5.2014MACHImplementationProject StandardconditionsforITservicesfortheimplementationprojectMACH 18.12.2015IT-ServicesAgreementProjectcontractfortheproject ContractforCZ 10.3.2016“IFRS9implementation”Projectcontractfortheproject ContractforSK 10.3.2016“IFRS9implementation”Projectcontractfortheproject ContractforCZ 10.3.2016“CZ-BACSReplacement”


Contractname Subject-matterofcontract ContractconcludedonProjectcontractfortheproject ContractforSK 10.3.2016“CZ-BACSReplacement”Projectcontractfortheproject Projectcontract 10.3.2016“FDSproject(cards)”Projectcontractfortheproject Projectcontract 10.3.2016“CEE2020DCC-DynamicCurrencyConversion_ATM”Projectcontractfortheproject ContractforSK 10.3.2016“CEE2020ProductandProcessImprovements”Projectcontractfortheproject ContractforSK 10.3.2016“2020COREPerformanceimprovements”AgreementforITServicesconnected ContractforCZ 10.3.2016totheproject“Projectforsale”AgreementforITServicesconnected ContractforSK 10.3.2016totheproject“Projectforsale”Non-residentialPremisesLeaseAgreement LeaseofcommercialspaceatSvätoplukovaSt.inBratislava 01.08.2016StandardTermsandConditions DevelopmentofsoftwareforprojectCEE2020GTBSpider 18.4.2016StandardTermsandConditions DevelopmentofsoftwareforprojectCEE2020UnitedFrontEnd 24.6.2016AgreementonOutsourcingofICTServices AgreementAgreementforOutsourcingoftheInformationSystemandforProvision 1.12.2017 ofITservices(thisagreementreplacespreviousOutsourcingAgreement)ConfidentialityAgreement ConfidentialityAgreement 1.11.2017Sub-annexIntegrationProject Sub-annexIntegrationProjecttoAgreementforOutsourcingoftheInformationSystem 31.3.2017 andforProvisionofITservices.Servicedescriptionforyears(2014–2018)MIFID2&MIFIRMarketStreamCore ProjectContract–ProjectforSale 31.1.2017andLocalCZ/SKMIFID2–CZ-SKLocalDevelopments ProjectContract–ProjectforSale 30.1.2017PSD2–Openbankingsolution ProjectContract–ProjectforSale 13.11.2017NotDealingDirectorsintoEzYCoreSIRON ProjectContract–ProjectforSale 15.11.2017AgreementonOutsourcingofICTServices AgreementAgreementforOutsourcingoftheInformationSystemandforProvision 1.12.2017 ofITservices(thisagreementreplacespreviousOutsourcingAgreement)(BankSK)NotDealingDirectorsintoEzYCoreSIRON NotDealingDirectorsintoEzYCoreSIRON(BankSK) 15.11.2017

4.7.BetweenUniCreditBankaUniCreditLeasingCZ,a.s.,Reg.No.:15886492,14010Prague4–Michle,Želetavská1525/1:

Contractname Subject-matterofcontract ContractconcludedonContractonleaseofpremises Leaseofpremisesinthebuildingno.28,Široká5,Liberec 28.7.2015forbusinesspurposesContractonsub-leaseofnon-residential Subleaseofpremisesinthebuildingno.1176-1177,Dr.DavidaBechera26,KarlovyVary 23.3.2010premisesincl.supplementsContractforLeaseofSecurityEquipment LeaseofsystemownedbyBankinstalledonleasedpremisesofUniCreditLeasingCZ,a.s. 1.4.2012andCameraSystemAgencyContract SharingoftheprovisionofservicesofBanksuppliers 2.4.2012Subleasecontract Subleaseofparkingspacesinbuildingno.1525,Želetavská1,Prague4 13.3.2013Non-residentialLeaseAgreement Leaseofpremisesinthebuildingno.545,Divadelní2,Brno 30.5.2013ContractforRighttoPositionforLogo Useofapositionforlogoonthebuildingno.1525,Želetavská1,Prague4 3.6.2013ContractforSearchforProspectiveClients ContractformediationofconsumerloansforUCB 1.3.2014Contractonsubleaseofpremises Subleaseofpremisesforbusinesspurposesinbuildingno.3348,28.října65,Ostrava 1.3.2014forbusinesspurposesContractfortheProvisionofServices UCLCZoutsourcedcertainitsactivitiesintotheBank 6.8.2014andContractofMandateContractforProcessingofPersonalData ProcessingofpersonaldataofUCLCZbytheBankwithrespecttooutsourcing 6.8.2014Contractonsubleaseofpremises Subleaseofpremisesforbusinesspurposesinbuildingno.Subleaseofcommercialspace 29.3.2016forbusinesspurposes at457,28.října15,OlomoucContractonsubleaseofpremises Subleaseofpremisesforbusinesspurposesinbuildingno.36,Revoluční2,Chomutov 24.1.2017forbusinesspurposes


4.8.BetweenUniCreditBankandUniCreditFactoringCzechRepublicandSlovakia,Reg.No.:15272028,14000Prague4–Michle,Želetavská1525/1:

Contractname Subject-matterofcontract ContractconcludedonContractforLoanandOtherBankingServices Bankingservices 25.6.2010ProvidedintheFormofMulti-PurposeLineGeneralContractforTradinginFinancialMarket Tradinginfinancialmarket 21.1.2015ContractforExchangeofParkingPlaces MutualexchangeofparkingspacesinbuildingFiladelfie,Želetavská1525/1,Prague4 4.6.2015ContractfortheProvisionofServices Provisionofbankingservices 4.1.2016 andContractofMandateAgreementonMutualbrokerage Mutualbrokerageofbusinesscases 4.1.2016businesscasesContractforRighttoPositionforLogo Useofapositionforlogoonthebuildingno.1525,Želetavská1,Prague4 21.1.2016Riskparticipationcontract Participationintheriskofreceivablenon-payment 29.3.2017 (participationcontract)

4.9.BetweenUniCreditBankandUCTAMCzechRepublics.r.o.,Reg.No.:24275671,11000Prague1–NovéMěsto,NáměstíRepubliky2090/3a:

Contractname Subject-matterofcontract ContractconcludedonNon-residentialLeaseAgreement Leaseofpremisesinthebuildingno.2090,náměstíRepubliky3a,Prague1 12.6.2013 (terminatedas of29.3.2016)Subleasecontract Subleaseofpremisesforbusinesspurposesinbuildingno.2090,náměstíRepubliky3a,Prague1 22.3.2016

4.10.BetweenUniCreditBankandUniCreditLeasingSlovakia,a.s.,Reg.No.:35730978,Šancová1/A,81416Bratislava,SlovakRepublic:

Contractname Subject-matterofcontract ContractconcludedonNon-residentialSubleaseAgreement Leaseofnon-residentialpremisesinPrešovatHlavnáulica–terminated 14.4.2011No.173/3563/2011 byagreementon25.10.2017(asof31.10.2017)Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinNitrainŠtefánikovaStreet 27.6.2011No.301/3563/2011Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinKošiceinRooseveltovaStreet 27.6.2011No.302/3563/2011Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŽilinainNárodnaStreet 15.6.2012No.214/3563/2012ContractfortheProvisionofServices UCLSKoutsourcedcertainitsactivitiesintotheBank 6.8.2014andContractofMandateContractforProcessingofPersonalData ProcessingofpersonaldataofUCLSKbytheBankwithrespecttooutsourcing 6.8.2014Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŠancova1/ABA(from1.11.2014) 31.10.2014dated31.10.2014Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinPlynárenská,BA 31.10.2014Non-residentialSubleaseAgreement Leaseofnon-residentialpremisesinSvätoplukovaStreet,Bratislava 1.9.2015AgreementonLeaseofCommercialSpace LeaseofCommercialSpaceSvätoplukovaSt.vBratislava 01.08.2016Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŠtefánikovaSt.inTrnava 15.01.2017Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinŽelezničnáSt.inLučenec 15.01.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinHlavnáSt.InDunajskáStreda 15.01.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinMajzonovonám.inNovéZámky 15.01.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinNám.s.AnnyinTrenčín 15.01.2017Non-residentialSubleaseAgreement Subleaseofnon-residentialpremisesinGarbiarskaSt.inLiptovskýMikuláš 15.01.2017Non-residentialLeaseAgreement Leaseofnon-residentialpremisesinPrešovinHlavnaStreet(from1.11.2017) 25.10.2017


Nejdůležitějšíkonsolidovanéhospodářskévýsledky

4.11.BetweenUniCreditBankandPioneerAssetManagement,a.s.,Reg.No.:25684558,Želetavská1525/1,Michle,14000Prague4:

Contractname Subject-matterofcontract ContractconcludedonContractforCustodyandManagement Custodyandmanagementofsecurities 16.1.2007ofSecuritiesAgencyContractforSecuritiesSettlement Securitiessettlement 16.1.2007ContractforMediationofManagement Regulationofconditionsformediationofmanagementcontracts. 19.1.2007ContractsContractforMediationofParticipationinSKD Mediationofparticipationinthesystemofshort-termbondsintheCzechNationalBank 22.2.2008ContractforDistributionofRentierInvest, DistributionofproductsRentiérInvestandZlatárybkathroughtheBank 22.11.2012Zlatárybka,PioneerInvestContractforReceiptandProcessing Receiptandprocessingofinstructionsrelatedtomutualfundcertificates 1.7.2013ofInstructions withinproductsRentierInvest,ZlatárybkathroughArbesTAwebDistributionAgreement DistributionofproductsPioneerInvest,UInvest,RytmusthroughtheBank 20.3.2015ContractforPromotionofInvestmentServices Promotionofinvestmentservices 15.5.2015ContractforPromotionofInvestment PromotionofinvestmentservicesthroughabranchinSlovakia 1.5.2015ServicesSKSubleaseagreement Subleaseofpremisesforbusinesspurposesinbuildingno.2090,náměstíRepubliky3a,Prague1 22.3.2016

4.12.BetweenUniCreditBankandPioneerAssetManagementS.A.,8-10,rueJeanMonnet,L-2180Luxembourg:

Contractname Subject-matterofcontract ContractconcludedonAgreementaccordingtoSection269(2) Contactbankandpaymentagent(PIONEERFUNDS) 28.1.2005oftheSlovakActNo.513/1991Coll.,theCommercialCodeAgreementaccordingtoSection269(2) Contactbankandpaymentagent(PIONEERNEWEUROPEFUNDS) 28.1.2005oftheSlovakActNo.513/1991Coll.,theCommercialCodeAgreementaccordingtoSection269(2) Contactbankandpaymentagent(PIONEERP.F.) 7.12.2006oftheSlovakActNo.513/1991Coll.,theCommercialCodeDistributionAgreement Distributionagreement–lux.funds,exclusivityofUCBasthedistributorbetweenbanks, 1.4.2007/ exclusivityofPioneerfundsintheofferofcollectiveinvestmentschemes 8.1.2008OperationalMemorandum Supplementaryprovisionsoftheagreement,PAMa.s.,likeaprocessingagent, 1.4.2007/ nomineearrangement 8.1.2008

4.13.BetweenUniCreditBankandPioneerinvestičníspolečnost,a.s.,Reg.No.63078295,Želetavská1525/1,Prague4:

Contractname Subject-matterofcontract ContractconcludedonAgreementonpromotionofparticipation DistributionofparticipationcertificatesofCzechfundsPioneerthroughtheBank 2.10.2006certificatesofopen-endmutualfundsContractforMediationofParticipationinSKD Mediationofparticipationinthesystemofshort-termbondsintheCzechNationalBank 15.11.2007Agreementtoperformactivitiesrelated DistributionofparticipationcertificatesofCzechfundsPioneerthroughtheBank 1.4.2008toofferofparticipationcertificatesContractforCustodyandManagement Custodyandmanagementofsecurities 15.9.2008ofSecuritiesAgencyContractforSecuritiesSettlement Securitiessettlement 15.9.2008DepositaryAgreement Obligationofdepositarytocarryoutdepositary‘sactivitiesfortheclient 6.6.2014IndemnificationAgreement CompensationofdamageasaresultoffailureoftheBankasacustodian 25.11.2015

4.14.BetweenUniCreditBankandPioneerGlobalFundsDistributorLtd.,MercuryHouse,2ndFloor,101FrontStreet,HamiltonHM12,Bermuda:

Contractname Subject-matterofcontract ContractconcludedonPurchaseConditionsforPioneerAlternative DistributionofmutualfundsPioneerAlternativeInvestmentsbasedinIreland 19.12.2006Investments´investmentfundsaccording andinBermudathroughtheBanktoIrishandBermudanLawContract„Purchaseconditions“ Businesstermsandconditionsforinvestmentfundsaccording 5.10.2005forHedgedfunds totheIrishandBermudalegislation Živnobanka, 28.2.2007HVB

4.15.BetweenUniCreditBankandPioneerGlobalFundsDistributor,Ltd.andPioneerGlobalInvestmentsLimited,1George‘sQuayPlaza,George‘sQuay,Dublin2,Ireland:

Contractname Subject-matterofcontract ContractconcludedonNovationAgreement Transferofrightsandobligationsunderdistributionagreements 1.9.2014 ofcollectiveinvestmentsecuritiesNovationAgreement Transferofrightsandobligationsunderdistributionagreements 1.9.2014 ofcollectiveinvestmentsecuritiesNovationAgreement Transferofrightsandobligationsunderdistributionagreements 1.9.2014 ofcollectiveinvestmentsecurities

4.16.BetweenUniCreditBankandPioneerGlobalInvestmentsLimited,1George‘sQuayPlaza,George‘sQuay,Dublin2,Ireland:

Contractname Subject-matterofcontract ContractconcludedonDistributionAgreement DistributionofparticipationcertificatesoffundsPioneerInvestmentsbased 29.3.2004 inLuxembourgthroughtheBankPurchasedconditionsforPioneerAlternative DistributionofmutualfundsPioneerAlternativeInvestmentsbasedinIreland 5.10.2005Investments´investmentfunds andinBermudathroughtheBankDistributionAgreement DistributionofparticipationcertificatesoffundsPioneerInvestmentsbased 17.10.2006 inLuxembourgthroughtheBankPurchasedconditionsforPioneerAlternative DistributionofmutualfundsPioneerAlternativeInvestmentsbasedinIreland 15.2.2007Investments´investmentfunds andinBermudathroughtheBank

4.17.BetweenUniCreditBank,PioneerAssetManagement,a.s.,andPioneerinvestičníspolečnost,a.s.:

Contractname Subject-matterofcontract ContractconcludedonContractforMutualCooperation DistributionofparticipationcertificatesofCzechfundsPioneer, 29.10.2013andKeepingofAccounts conditionsforkeepingofclientaccounts

4.18.BetweenUniCreditBank,PioneerInvestmentsAustriaGmbH,Lassallestraße1Vienna,A-1020:

Contractname Subject-matterofcontract ContractconcludedonVertriebstellenvertrag ExclusiveauthorizationofHVBbankSlovakia,a.s.forallactivitiesrelatedtothesale 25.11.2002 ofsharesintheSR

4.19.BetweenUniCreditBankandUniCreditBankHungaryZrt.,Szabadságtér5–6,Budapest,1054,Hungary:

Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Storage,managementandsettlementofsecurities 9.1.1999SubcustodyAgreement Managementandcustodyofsecurities(abranchinSlovakia) 23.1.2003ISDAMasterAgreement Ageneralcontractfortradinginderivativesinthefinancialmarket 23.5.2007SubcustodyAgreement Managementandcustodyofforeignsecurities 21.12.2007

4.20.BetweenUniCreditBankandPioneerAssetManagement,a.s.,Reg.No.:25684558,Želetavská1525/1,Michle,14000Prague4,Pioneerinvestičníspolečnost,a.s.,Reg.No.63078295,Želetavská1525/1,Prague4,CSPioneerGlobalInvestmentsLimited,1George‘sQuayPlaza,George‘sQuay,Dublin2,Ireland,PioneerAssetManagementS.A.,8-10,rueJeanMonnet,L-2180Luxembourg:

Contractname Subject-matterofcontract ContractconcludedonAgreementondeepeningCommercial Agreementondeepeningexistingcommercialcooperationestablishedbased 22.8.2016Relationship onseparatedistributionagreements

4.21.BetweenUniCreditBankandBANKPOLSKAKASAOPIEKIS.A.,Warsaw,Grzybowska53/57,Poland:

Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Storage,managementandsettlementofsecurities 15.11.2007



4.22.BetweenUniCreditBankandPekaoInvestmentBankingS.A.,Warsaw,Wołoska18,Poland:

Contractname Subject-matterofcontract ContractconcludedonServiceLevelAgreement AdvisoryservicesrelatedtoM&Aadvisoryforspecificclientsforspecificacquisition 25.6.2015 withrespecttotheCzechRepublic

4.23.BetweenUniCreditBankandUniCreditbankaSlovenijad.d.,Šmartinskacesta140,1000Ljubljana,Slovenia:

Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Managementandcustodyofforeignsecurities 10.11.2014

4.24.BetweenUniCreditBankandUniCreditBroker,s.r.o.,Reg.No.:35800348,Šancová1/A,81411Bratislava:

Contractname Subject-matterofcontract ContractconcludedonCooperationAgreement Mediationofclients 1.1.2011

4.25.BetweenUniCreditBankandUniCreditFleetManagement,s.r.o.,Reg.No.:62582836,14010Prague4–Michle,Želetavská1525/1:

Contractname Subject-matterofcontract ContractconcludedonGeneralContractforHireofVehicles SpecificationofgeneralconditionsformakingindividualLeaseagreement 4.3.2013 andAgreementtoAmendSLAContractforHireofTransportFacility Contractsforhireofvehicles–266cars Contractsvalid in2017

4.26.BetweenUniCreditBankandUniCreditFleetManagement,s.r.o.,Reg.No.:35820381,Plynárenská7/A,Bratislava81412,SlovakRepublic:

Contractname Subject-matterofcontract ContractconcludedonOperatingLeaseContract Conditionsforoperatingleaseofmotorvehicles 30.8.2007ContractforHireofTransportFacility Contractsforhireofvehicles–97cars Contractsvalid in2017

4.27.BetweenUniCreditBankandUniCreditBankSA,SediulCentralBd.,ExpozitieiNr.1F,Sect1,Bucharest,012101,Romania:

Contractname Subject-matterofcontract ContractconcludedonServiceAgreement TemporaryadvisoryactionsandsupportinbankingservicesrelatedtoCEE2020 26.1.2015 TradeFinanceBackandProjectRiskparticipationagreement participationintheloantoaclientinRomania 25.4.2017

4.28.BetweenUniCreditBankandSchoellerbankAG,Renngasse3,Vienna,Austria:

Contractname Subject-matterofcontract ContractconcludedonCooperationagreement OfferandmediationofservicesofSchoellerbankthroughUniCreditBank 23.11.2012

4.29.BetweenUniCreditBankandDinersClubCS,s.r.o.,organizačnísložka(abranch),Reg.No.:2476866911000Prague1,Široká36/5:

Contractname Subject-matterofcontract ContractconcludedonIntermediationContract+Contract ThecontentiscooperationconcerningthemediationoftheissueofchargecardsDinersClub. 21.10.2009forProcessingofPersonalData

4.30.BetweenUniCreditBankandUniCreditBusinessIntegratedSolutionsAustriaGmbH,Nordbergstraße13,1090Vienna,Austria:

Contractname Subject-matterofcontract ContractconcludedonStandardTermsandConditions StandardcontracttermsandconditionsforprovisionofITservices 18.12.2015Agreementonimplementation CooperationinimplementationofITprojects 18.12.2015ofCEE2020projectsStandardTermsandConditions StandardcontracttermsandconditionsforprovisionofITservices(abranchinSlovakia) 18.12.2015Agreementonimplementation CooperationinimplementationofITprojects(abranchinSlovakia) 18.12.2015ofCEE2020projectsDataProcessing,DataSecurity, DataProcessing,DataSecurity,DataProtectionandSecurity 9.6.2016DataProtectionandSecurity

4.31.BetweenUniCreditBankaUniCreditBankAG,LondonBranch,London,120Londonwall,UnitedKingdom:

Contractname Subject-matterofcontract ContractconcludedonFeeSplitAgreement ConsultingservicesrelatedtoM&A/ECMconsultingservicesforspecificclients 11.8.2016 tospecificacquisitionrelatedtotheCzechRepublic

4.32.BetweenUniCreditBankaUNICREDITBULBANKADSofia,7SvetaNedelyaSq,Bulgaria:

Contractname Subject-matterofcontract ContractconcludedonSubcustodyAgreement Storage,managementandsettlementofsecurities 25.11.2015


4.33.Inadditiontotheabovestatedcontracts,inthelastfinancialyear,alsoothercontractswereeffectivebetweenUniCreditBankandsomeothercompaniesoftheGroup,which,however,aresubjecttotheobligationofbankingsecrecy.Thesecontractsrelatetointerbank,derivativeandotherbankingtransactions.UniCreditBankcooperatedwithsuchcompaniesintheissueofbonds,andalsoenteredintoclientbankingtransactions(paymentcards,currentaccounts,depositproducts,cashpaymentsystem,etc.),allthisinstandardmarketconditions.Withinstandardbankingrelations,somelendingbusinessofUniCreditBankisbackedbybankguaranteesprovidedbyUniCreditBankAustriaAGandUniCreditBankAG.WithintheGroup,thereisalsotheprovisionofcreditproductsandguaranteesbyUniCreditBank,onstandardconditions.

5. Actsoccurringinthelastfinancialyear,whichweremadeontheinitiativeoforintheinterestofthecontrollingentityoritscontrolledentities,ifsuchactsrelatedtoassetsexceeding10%ofequityofthecontrolledentityascertainedaccordingtothemostrecentfinancialstatements,

Thelimitof10%ofUniCreditBankequity,accordingtothefinancialstatementsattheendof2016,was63.535mil.CZK,exceededin2017thefundingprovidedbyUniCreditBanktoUniCreditLeasingCZ,a.s.andtoitssubsidiaries.Thefundingwasprovidedonstandardmarketconditions.Inthecourseof2017,thecontrollingentityand/oritscontrolledentitiesdepositedamountsonitsaccountskeptatUniCreditBankexceeding10%ofUniCreditBankequity.Thedepositswereprovidedonconditionswhicharestandardintheinterbankmarketfortherelevantcurrencyandmaturity.

6. Evaluationofwhetheranylosswascausedtothecontrolledentity,andassessmentofthecompensationpursuanttoArticles71and72ofActonCommercialCorporations

TheUniCreditBankBoardofDirectorsdeclaresthatnolosswascausedtoUniCreditBankCzechRepublicandSlovakia,a.s.undertheconcludedcontractsandarrangements.

7. Evaluationofadvantagesanddisadvantagesarisingfromrelationshipsbetweenentitiesunderparagraph82par.1ofActonCommercialCorporations

AdvantagesofintegrationofUniCreditBankintothestructureoftheUniCreditGroup:–Abrandknowninternationallyandreputationalbenefitresulting

fromtheintegrationoftheUniCreditGroupintoSIFI(SystemicallyImportantFinancialInstitution).

–SharingofITinfrastructure,development,maintenancewithintheUniCreditGroupandresultingeconomiesofscaleinthefollowingareas:

–Sharingofknow-howofamajorEuropeanbankandoneofthemostactiveandmostsignificantbanksinCentralandEasternEuropeinthecommercialarea,i.e.inthedevelopmentofproducts,introductionofbusinessinnovationsandmanagementofsalesnetwork.

–PossibleinvolvementingrowthinitiativesoftheUniCreditGroup,e.g.,Transform2019,providingUniCreditBankwithsupportandknow-howintheareaofdevelopmentofastrongpositionofauniversalbankintheCzechandSlovakmarkets.

–HumanResourcesDevelopmentassociatedwithsharingtheUniCreditGroup‘sexperienceinEuropeanmarkets,possibleforemployeestogainpracticalexperienceinotherbanksorHolding‘s


managementstructures,careeropportunitieswithintheUniCreditGroup.

–Possibletoapply,inlocalconditions,theSponsoringandMarketingoftheUniCreditGroupontheEuropeanlevel(e.g.,sponsoringofUEFAChampionsLeagueandofUEFAEuropeanLeague).

–ParticipationofUniCreditBankinasophisticatedsystemofservicesforinternationalclientsthroughInternationaldesk/InternationalclientsUnitsinrelevantcountries,andmutualcooperationoftheseUnitsinhandlinganddealingwiththeneedsofinternationalclients.

WecanincludethefollowinginpossibledisadvantagesofintegrationofUniCreditBankintothestructureoftheUniCreditGroup:–Acomprehensiveorganisationalstructureofatransnational

bankinggroup.–Possiblemutualinfluencefromothercountries,mainlyinthearea

ofreputationandperceptionoftheUniCreditbrand(Cross-bordersentiment).

WhenassessingatotalinfluenceoftheintegrationofUniCreditBankintotheUniCreditGroup,theadvantagesresultingfromthispositionsignificantlyoutweighthedisadvantages.TheBankpreventsactivelythepossibleabovestateddisadvantagesbothintheformofoperationalmeasuresinlocalmanagementofUniCreditBankandcommunication,andbybuildingastrong‘brand’onthelocallevel.

InPrague,on27March2018

OnbehalfoftheBoardofDirectorsofUniCreditBankCzechRepublicandSlovakia,a.s.

Ing.JiříKunertChairmanoftheManagementBoard

LjubisaTesićMemberoftheManagementBoard

Annexes:1.OrganisationChartoftheUniCreditGroup

LjubisaTesić


StructureofUniCreditGroupFinecobankSpA

PioneerGlobalFundsDistributor,Ltd

(a)

UniCreditBankHungaryZrt

ZagrebackaBankad.d.

UniCreditBankAG

Milano-banking-35,39%

Hamilton-distributionofmutualfunds

100%

Budapest-banking-100%

Zagreb-banking-84,475%

Munich-banking-100%

PAIManagementLimited

(a)

UniCreditJelzalogbankZrt

100%

PrvaStambenaŠtedionicad.d.

100%

Dublin-managementofhedgefunds100%

Budapest-banking

Zagreb-banking

…%

UniCreditInternationalBank(Luxembourg)SA

PAI(Bermuda)Limited

(a)

UniCreditLeasingHungaryZrt

100%

UniCreditBankd.d.

99,30%

Luxembourg-banking-100%

Hamilton-holding/man.-adv.ofhedgefunds100%

Budapest-leasing

Mostar-banking

PioneerAlt.Inv.(Israel)Ltdinvolunt.liquidation(a)

LocatCroatiad.o.o.

100%

RamatGan-research,acc.,market.offunds

100%

Zagreb-financialcompany

UniCreditBankIrelandPlc

PAI(New

York)Limited(a)

AOUniCreditBank

UniCreditLeasingCroatiad.o.o.zaleasing

100%

Dublin-banking-100%

Dover(USA)-investmentresearch100%

Moscow-banking-100%

Zagreb-leasing

BarodaPioneerAssetManag.Co.Ltd

100%

OOO"UniCreditLeasing"

ZaneBH

D.O.O.

Mumbay(India)-manag.mutualfunds

51%

Moscow-leasing

Sarajevo-realestatemanag.

BarodaPioneerTrusteeCompanyPrivateLtd

ZAOLocatLeasingRussia

100%

100%

ZagrebNekretnined.o.o..

100%

Mumbay(India)-manag.mutualfund/trustee

51%

Moskow-leasing

Zagreb-realestatemanag.

UniCreditLeasingSpA

ZBInvestd.o.o.

100%

UniCreditBankAustriaAG

Milano-leasing-100%

Zagreb-mutualfundsmanag.

Vienna-banking-99,99%

UniCreditGlob.Leas.P.M.GmbH

100%

UNICREDITBANKS.A.

Pominvestd.d.

88,66%

Vienna-holding

Bucharest-banking-98,33%

Split-realestateco.

v.r.88,95%

…%

BACALeasing(Deutschland)GmbH

94,99%

50,10%

UniCreditConsumerFinancingIFNSA

(b)

seeAnnexA

BadHomburg-leasing

Bucharest-consumercredit

99,95%

UniCreditLeasingCorporationIFNS.A.

0,05%

UniCreditBankCzechRepublicandSlovakiaa.s.

Bucharest-leasing

Prague-banking-100%

100%

UniCreditFactoringCzechRep.andSlovakia,a.s.

Prague-factoring

UniCreditBankaSlovenijaDD

100%

UniCreditLeasingCZa.s.

Ljubljana-banking-100%

Prague-leasing

UniCreditFactoringSpA

UniCreditLeasing,leasing,d.o.o.

100%

UniCreditLeasingSlovakiaa.s.

100%

Milano-factoring-100%

Ljubljana-leasing

Bratislava-leasing

CORDUSIOSoc.Fiduc.perAz.

Milano-fiduciary-100%

CordusioSIMS.p.A.

UniCreditBankSerbiaJsc

UniCreditBulbankAD

UniCreditBusinessIntegratedSol.Scpa(d)

Milano-advisoryoninvestments

96,10%

Belgrade-banking-100%

Sofia

-banking-99,45%

Milano-Instrumentalservices-99,99%

UniCreditBpC

MortgageSrl

100%

UniCreditLeasingSrbijad.o.o.Beograd

100%

UniCreditConsumerFinancingEAD

UniCreditBusinessIntegr.Sol.AustriaGmbH

100%

Verona-guaranteesprovider-60%

Belgrade-leasing

Sofia-consumercredit

Vienna-Instrumentalservices

UniCreditOBG

Srl

100%

UniCreditFactoringEAD

UniITSrl

51%

Verona-guaranteesprovider-60%

Sofia-factoring

Trento-EDPservices

UniCreditGlobalLeasingExp.GmbH

UniCreditBanka.d.BanjaLuka

100%

UniCreditFleetManageme ntEOOD

CrivelliS.r.l.

Vienna-leasing

100%

BanjaLuka-banking-98,46%

Sofia-fleetmanagement

Milan-realestate-100%

FINECOVerwaltungAG

(inliquidation)

100%

UniCreditLeasingEAD

UniCredit(UK)TrustServicesLtd

Munich-holding-100%

Sofia-leasing

London-trustee-100%

CoritSpA

inliquidazione

EuropaInvestmentFundManagement

BavariaServicosdeRepres.ComercialLtda. (e)

Roma-taxcollector-60%

Budapest-Managementofmutualfunds100%

(1)

SaoPaulo-administrativeservices-99,53%

(1)heldindirectlybyUniCreditS.p.A.

SOFIGERESaSinliquidazione

trhoughcompanynonbelongingtoBankingGroup

Paris-creditrepurchase-100%

SIA"UniCreditLeasing"

Soc.It.Gest.edInc.Cred.SpA(inliquidation)

Riga-leasing-100%

Roma-creditrecovery-100%

Companiesbelongingto

theBankingGroup

banking

financial

instrumental

forcontrolledcompanies

(belongingtoBankingGroup)

seeAnnexA

forcontrolledcompanies

(belongingtoBankingGroup)

(a)nonoperativa(b)49,9%

heldbyUniCreditSpA

(c)inPolish:PioneerPekaoTFISA(d)OthercompaniesbelongingtoUniCreditGroupandthirdpartiesholdsharesofthecompany(e)0,47%

heldbyUniCredit(UK)

TrustServicesLtd


AnnexA

UniCreditLuxembourgS.A.

WealthManag.CapitalHoldingGmbH

VereinWestOverseasFinance(Jersey)Ltd(aa)

SchoellerbankAktiengesellschaft

cardcompleteServiceBankAG

Luxembourg-banking-100%

Munich-holdingcompany-100%

St.Herlier(Jersey)-financialco.-100%

Vienna-privatebank-100%

Vienna-issuingofcreditcards-50,10%

UniCreditLeasingGmbH

100%

WealthCapInitiatorenGmbH

RedstoneMortgagesLimited

SchoellerbankInvestAG

100%

DCBankAG

99,94%

Hamburg-leasing-100%

Munich-holdingcompany

London-mortgageloans-100%

Salzburg-investmentcompany

Vienna-issuingofcreditcards

UniCreditLeasingFinanceGmbH

100%

WealthCapEquityGmbH

100%

HVB

Serv.SouthAfrica(Proprietary)Ltd

"Cafu"Vermögensverwalt.GmbH

inLiqu.

100%

100%

DinersClubPolskaSp.z.o.o.

Hamburg-banking


Johannesburg-economicservices-100%

Vienna-holding

Warsaw-creditcards

UniCreditLeasingAviationGmbH

100%

WealthCapFondsGmbH

100%

HVB

Gesells.fürGebäudembH

&CoKG

PalaisRothschildVerm.GmbH

&CoOG

100%

100%

DinersClubCSs.r.o.

Hamburg-leasing


Munich-realestetemanagement-100%

Vienna-realestateservices

Bratislava-creditcards

MobilityConceptGmbH

60%

WealthCapStiftungstreuhandGmbH

100%

Salvatorplatz-Gr.mbH

&Co.OHGSaarland

100%

PalaisRothschildVermietungsGmbH

100%

KsgKarten-Verrech.-undServiceges.mbH

100%

Oberhaching-leasing

Munich-fiduciary

Munich-realestate

Vienna-realestateservices

vienna-EDPServices

HVB

ExportLeasingGmbH

94,00%

WealthCapPEIAManagementGmbH

GrundstücksgesellschaftSimonb.h.K.

100%

BankAustriaRealInvestImmob.-Managem.GmbH

FactorBankAktiengesellschaft

Munich-leasing-100%

Munich-economicservices-6%

Munich-realestatemanagement

Vienna-realestateinvestment-94,95%

Vienna-factoring-100%

UniCreditCAIBSecuritiesUKLtd(aa)

WealthCapManagementServicesGmbH

100%

AcisImm.-undPr.GmbH

&Co.St.Kronpr...KG

98,11%

BankAustriaRealInvestImm.Kap.GmbH

100%

BankAustriaWohnbaubankAG

London-broker-100%

Grünwald-economicservices

Grünwald-realestatemanagement

Vienna-realestateinvest.company

Vienna-realestatefinancing-100%

HVB

CapitalPartnersAG

100%

WealthCapLeasingGmbH

BayerischeWohn.fürHandelundInd.GmbH

100%

BankAustriaRealInvestClientInvestm.GmbH

100%

BABetriebsobjekteGmbH


Grünwald-holdingcompany


Vienna-investmentadvisory

Vienna-realestateownership-100%

UniCredit(China)AdvisoryLimited

(aa)

HVBFFObjektBeteiligungsGmbH

100%

HAW

AGrundstücksGmbH

&Co.OHGImm.

100%

ImmobilienRatingGmbH(d)

61%

BABetriebsobjektePrahaspol.s.r.o.

100%

Beijing-advising-100%


Munich-realestateman.(dont0,50%TIVOLI)

Vienna-realestateappraisal

Prague-realestateowning

BILLeas.-Fon.GmbH&CoVELUMKG

(a)

HVBFFProduktionshalleGmbH

inliquidation

100%

Hypo-B.Verw.GmbH

&Co.KG

O.Arabellastr.

100%

AlpineCaymanIslandsLtd.

BABetrieb.GmbH

&CoBetaVOG(c)

100%

Grünwald-Leasing-100%



Georgetown(CaymanIs.)-holdingco.-100%

Vienna-realestateownership

HVB

Verwa4GmbH

10%

HVBFFInternationaleLeasingGmbH

90%

PortiaGrund.-Verwalt.mbH

&Co.ObjektKG

100%

BA-CAFinance(Cayman)Limited

100%

BAGVG-HoldingGmbH

Munich-holding-100%



GeorgeTown(CaymanIs.)-issuinghybridcap.

Vienna-holding-100%

HVB

Verwa4.4GmbH

100%

HVBFFInternationalGreeceGmbH

100%

99,67%

TIVOLIGrundstücks-Aktiengesellschaft

BA-CAFinance(Cayman)IILimited

100%

BAGebäudevermietungsgmbH(c)

100%


Munich-leasingcompany


GeorgeTown(CaymanIs.)-issuinghybridcap.

Vienna-realestate

HVB

HongKongLimited

90%

WealthCapInvestmentServicesGmbH

100%

Hypo-BankVerwaltungszentrumGmbH

PaytriaUnternehmensbeteiligungenGmbH

KLEA

ZS-ImmobilienvermietungG.m.b.H.(c)

HongKong-financialcompany-100%

Munich-economicservices-10%


Vienna-holding-100%

Vienna-realest.Ownership-100%

HVB

Investments(UK)Limited

WealthCapRealEstateManagementGmbH

100%

97,78%

Salvatorplatz-G.mbH

&Co.OHGVerwalt

2,22%

BankAustriaFinanzserviceGmbH

KLEA

ZS-LiegenschaftsvermietungG.m.b.H.(c)

GeorgeTown(CaymanIs.)-financialco.-100%

Munich-economicservices


Vienna-mobilesalesanddistribution-100%

Vienna-realest.ownership-100%

UniCreditU.S.FinanceLLC

WealthCapInvestorenbetreuungGmbH

100%

100%

HVZ

GmbH

&Co.ObjektKG

BA-AlpineHoldings,Inc.

LassallestraßeBau-,Plan.,E.-undV.m.b.H.(c)

Wilmington(USA)-holdingcompany-100%

Munich-fiduciary


Wilmington(USA)-holdingcompany-100%

Vienna-realest.own.andadm.-100%

UniCreditCapitalMarketsLLC

100%

100%

WealthCapKapitalverwaltungsgesellschaftmbH

MerkurhofGrundstücks.m.b.H.

AIBeteiligungsGmbH

HumanResourcesServiceanddevel.GmbH

New

York-broker/dealer

Munich-collectiveassetmanagement

Munich-realestatemanagement-100%

Vienna-holding-100%

Vienna-personnelsecondment-100%

TrinitradeVermög.-G.m.b.H.

HVB

ImmobilienAG

Food&moreGmbH

CABET-HoldingGmbH

RamsesImmobilienGes.mbH

&CoOG(c)


Munich-holding-100%

Munich-hotelandrestaurantind.-100%

Vienna-holding-100%

Vienna-realestate-100%

B.I.InternationalLimited

100%

HVB

TectaGmbH

94%

VerwaltungsgesellschaftKatharinenhofmbH

Euroventures-Austria-CA-Manag.GesmbH

100%

PolluxImmobilienGmbH(c)

GeorgeTown(CaymanIs.)-bondissuer


Munich-realestatemanagement-100%

Vienna-holdingrealestate


HVB

CapitalLLC

HVB

ProjektGmbH

94%

UniCreditDirectServicesGmbH

CABOBeteiligungsgesellschaftm.b.H.

100%

RigelImmobilienGmbH(c)

Wilmington(USA)-financialcompany-100%


Munich-callcenterforretailbank-100%

Vienna-holding


HVB

CapitalLLC

II100%

OrestosImmobilien-VerwaltungsGmbH

HVB

SecurGmbH

BankAustria-CEE

BeteiligungsgmbH

SiriusImmobilienGmbH(c)




-100%

Vienna-holding-100%


HVB

CapitalLLC

IIITRICASAGr.Ges.mbH

&Co.1.Vermiet.KG

100%

HVB

ProfilGesells.fürPersonalmanag.mbH

BA-CAMarkets&InvestmentBet.GmbH


Munich-realestate


-100%

Vienna-holding-100%

HVB

FundingTrustII

TRICASAGr.desbürgerlichenRechtsNr.1

100%

UniCreditLeasingKft

UniCreditLeasing(Austria)GmbH(c)

Wilmington(USA)-economicservices-100%

Munich-realestate

Budapest-leasing

100%

(1)

Vienna-holdingandleasing

100%

StructuredInvestSociétéAnonyme

OmniaGrund.-GmbH&CoOb.PerlachKG(b)

94,78%

(1)heldindirectlybyUniCreditBankAustriaAG

LEASFINANZGmbH

(***)

Luxembourg-investmentcompany-100%

Munich-realestate

trhoughcompanynonbelongingtoBankingGroup

Vienna-leasing

100%

(***)

LeasfinanzBankGmbH

(***)

Vienna-smalllendingbusiness100%

(***)

3588

(***)heldindirectlybyUniCreditLeasing(Austria)GmbH

trhoughcompany/iesnonbelongingtoBankingGroup

Companiesbelongingto

theBankingGroup

banking

financial

instrumental

UNICREDITBANKAG

UNICREDITBANKAUSTRIAAG

(a)votingrightsheldbyUCBAG(33,33%)andbyBILLeasing-FondsVerwaltungsGmbH

(33,33%)(b)5,22%

heldbyWealthCapLeasingGmbH

(c)%

consideringsharesheldbyotherCompaniescontrolledbyBA

(d)19%

heldbyBAand19%heldbyUniCreditLeasing(Austria)GmbH

(aa)underliquidationprocess

We have created a lean but steering center to drive Group-wide performance and ensure accountability. Through leaner support functions and transparent cost allocation, we focus on efficiency and simplification. We are positioned as best in class in terms of European corporate governance.

Adopt lean but steering center.


ListofBranches

CzechRepublic

RETAILBRANCHESUNICREDITBANK

REGIONPRAGUE

BDPOBOČKABANKOVNÍDŮMnáměstíRepubliky3a11000Praha1tel.:+420955959835fax:[email protected]

BDOSOBNÍBANKOVNICTVÍnáměstíRepubliky3a11000Praha1

BDPODNIKATELSKÉCENTRUMnáměstíRepubliky3a11000Praha1

BDCENTRUMMEZINÁRODNÍKLIENTELYnáměstíRepubliky3a11000Praha1tel.:+420955962060–3fax:[email protected]

ADRIAJungmannova3111000Praha1tel.:+420955959840fax:[email protected]

ANDĚLŠtefánikova281/415000Praha5tel.:+420955959850fax:[email protected]

BUDĚJOVICKÁOlbrachtova1946/6414000Praha4tel.:+420955959848fax:[email protected]

BUTOVICEPetržílkova143515800Praha13tel.:+420955959898fax:[email protected]

EDENVršovická1398/7010100Praha10tel.:+420955959858fax:[email protected]

FILADELFIEŽeletavská1525/114000Praha4tel.:+420955959904fax:[email protected]

FLÓRAVinohradská15113000Praha3tel.:+420955959846fax:[email protected]

KARLÍNThámova84/2318600Praha8tel.:+420955959856fax:[email protected]

KOBYLISKÉNÁMĚSTÍHorňátecká447/118000Praha8tel.:+420955959857fax:[email protected]

VALDEKJugoslávská2912000Praha2tel.:+420955959845fax:[email protected]

VÍTĚZNÉNÁMĚSTÍVítěznénáměstí1016000Praha6tel.:+420955959852fax:[email protected]

VYSOČANYFreyova945/3519000Praha9tel.:+420955959884fax:[email protected]

REGIONBOHEMIASOUTH

BENEŠOVMasarykovoNáměstí/Řeznická22825601Benešovtel.:+420955959903fax:[email protected]

ČESKÉBUDĚJOVICENÁMĚSTÍnám.PřemyslaOtakaraII.č.122/3537021ČeskéBudějovicetel.:+420955959815fax:[email protected]

JINDŘICHUVHRADECNám.Míru16437701JindřichůvHradectel.:+420955959872fax:[email protected]

KLATOVYKpt.Jaroše4733901Klatovytel.:+420955959897fax:[email protected]

PÍSEKAlšovonáměstí1639701Písektel.:+420955959832fax:[email protected]

PLZEŇNÁM.REPUBLIKYnám.Republiky/Riegrova130100Plzeňtel.:+420955959834fax:[email protected]

PŘÍBRAMNáměstíT.G.Masaryka14426101Příbramtel.:+420955959860fax:[email protected]

STRAKONICELidická20738601Strakonicetel.:+420955959895fax:[email protected]

TÁBORtřída9.května288639002Tábortel.:+420955959862fax:[email protected]

REGIONBOHEMIANERTHEAST

HRADECKRÁLOVÉUlrichovonám.85450002HradecKrálovétel.:+420955959818fax:[email protected]

JABLONECNADNISOUMáchova21/246601Jablonecn.Nisoutel.:+420955959875fax:[email protected]

KOLÍNPražská16728002Kolíntel.:+420955959868fax:[email protected]

KUTNÁHORAŠultysova15328401KutnáHoratel.:+420955959894fax:[email protected]

LIBERECMOSKEVSKÁMoskevská638/846001Liberectel.:+420955959825fax:[email protected]

MLADÁBOLESLAVČeskobratrskénám.132129301MladáBoleslavtel.:+420955959826fax:[email protected]

NÁCHODPalackého92154701Náchodtel.:+420955959878fax:[email protected]

PARDUBICEtřídaMíru9253001Pardubicetel.:+420955959831fax:[email protected]

TRUTNOVKrakonošovonám.13354101Trutnovtel.:+420955959867fax:[email protected]

REGIONBOHEMIANORTHWEST

BEROUNHusovonám.11/8326601Berountel.:+420955959888fax:[email protected]

ČESKÁLÍPAJindřichazLipé10847001ČeskáLípatel.:+420955959891fax:[email protected]

DĚČÍNHusovonám.74/540502Děčíntel.:+420955959817fax:[email protected]

CHEBSvobody520/335002Chebtel.:+420955964254fax:[email protected]

CHOMUTOVRevoluční36/Husovonáměstí43001Chomutovtel.:+420955959821fax:[email protected]

KARLOVYVARYTGMZeyerova892/736001KarlovyVarytel.:+420955963835fax:[email protected]

KLADNOHavířská9627201Kladnotel.:+420955959879fax:[email protected]

LITOMĚŘICEMichalská40/241201Litoměřicetel.:+420955959906fax:[email protected]



MĚLNÍKnám.KarlaIV.14327601Mělníktel.:+420955959883fax:[email protected]

MOSTBudovatelů29543401Mosttel.:+420955959869fax:[email protected]

TEPLICEnáměstíSvobody40/141501Teplicetel.:+420955959863fax:[email protected]

ÚSTÍNADLABEMMírovénám.35A40001Ústí/Labemtel.:+420955959865fax:[email protected]

REGIONMORAVIASOUTHWEST

BLANSKOWanklovonám.143667801Blanskotel.:+420955959882fax:[email protected]

BRNODIVADELNÍDivadelní260157Brnotel.:+420955959810fax:[email protected]

BRNOKRÁLOVOPOLEPalackéhotřída721/7861200Brnotel.:+420955959900fax:[email protected]

BRNOTRINITIÚzká488/860200Brnotel.:+420955959812fax:[email protected]

BŘECLAVUl.17.listopadu369002Břeclavtel.:+420955959881fax:[email protected]

HAVLÍČKUVBRODHavlíčkovonáměstí15858001HavlíčkůvBrodtel.:+420955959874fax:[email protected]

JIHLAVAMasarykovonáměstí5458601Jihlavatel.:+420955959822fax:[email protected]

KROMĚŘÍŽVodní/Farní9576701Kroměřížtel.:+420955959824fax:[email protected]

TŘEBÍČKomenskéhonám.1045/1867401Třebíčtel.:+420955959864fax:[email protected]

VYŠKOVMasarykovonám.145/3068501Vyškovtel.:+420955959889fax:[email protected]

ZNOJMOHornínám.13966902Znojmotel.:+420955959871fax:[email protected]

ŽĎÁRNADSÁZAVOUNáměstíRepubliky14559101ŽďárnadSázavoutel.:+420955959880fax:[email protected]

REGIONMORAVIANORTHEEAST

FRÝDEK-MÍSTEKPivovarská234073801Frýdek-Místektel.:+420955959816fax:[email protected]

HAVÍŘOVČeskoslovenskéarmády195/1a73601Havířovtel.:+420955959901fax:[email protected]

KARVINÁTřídaOsvobození1720/1173506Karvinátel.:+420955959887fax:[email protected]

NOVÝJIČÍNUl.5.května1874101NovýJičíntel.:+420955959870fax:[email protected]

OLOMOUC28.října1577200Olomouctel.:+420955959827fax:[email protected]

OLOMOUCŠANTOVKAPolská177200Olomouctel.:+420955959932fax:[email protected]

OPAVAOstrožná1874601Opava1tel.:+420955959828fax:[email protected]

OSTRAVA28.října3348/6570200Ostravatel.:+420955959829fax:[email protected]

OSTRAVAHRABŮVKAHorní1642/55a70030OstravaHrabůvkatel.:+420955959907fax:[email protected]

OSTRAVAPORUBAHlavnítř.583/9970800OstravaPorubatel.:+420955959830fax:[email protected]

PROSTĚJOVnáměstíT.G.Masaryka879601Prostějovtel.:+420955959859fax:[email protected]

PŘEROVČechova3775002Přerovtel.:+420955959896fax:[email protected]

ŠUMPERKNáměstíSvobody284078001Šumperktel.:+420955959861fax:[email protected]

TŘINECNám.Svobody52773961Třinectel.:+420955959873fax:[email protected]

UHERSKÉHRADIŠTĚPalackéhonáměstí17568601UherskéHradištětel.:+420955959908fax:[email protected]

VALAŠSKÉMEZIŘÍČÍNáměstí90/2375701ValašskéMeziříčítel.:+420955959892fax:[email protected]

ZLÍNBARTOŠOVABartošova553276001Zlíntel.:+420955959866fax:[email protected]

BUSINESSVENUESEXPRES

EXPRESTURNOVHavlíčkovonáměstí3251101Turnov

EXPRESBOSKOVICEKomenského341/968001Boskovice

EXPRESNYMBURKPalackéhoTř.255328802Nymburk

EXPRESDOBŘICHOVICE5.května34825229Dobřichovice

EXPRESDVŮRKRÁLOVÉN.L.Revoluční7954401DvůrKrálovén.Labem

EXPRESLOUNYOsvoboditelů264944001Louny

EXPRESSLANÝMasarykovonám.142/1727401Slaný

EXPRESBRANDÝSNADLABEMPetraJilemnického15/425001BrandýsnadLabem

EXPRESBOHUMÍNtř.Dr.E.Beneše23173581Bohumín

EXPRESŘÍČANYOlivova925101Říčany

EXPRESHODONÍNNárodnítřída2469501Hodonín

EXPRESKYJOVJungmannova1310/1069701Kyjov

EXPRESROUDNICENADLABEMKarlovonáměstí2441301RoudnicenadLabem

EXPRESKRALUPYNADVLTAVOUNáměstíJ.Seiferta69827801KralupynadVltavou–Lobeček

EXPRESPODĚBRADYLázeňská145829001Poděbrady

EXPRESVSETÍNTyršova101975501Vsetín



EXPRESLYSÁNADLABEMHusovonáměstí17528922LysánadLabem

EXPRESSUŠICET.G.Masaryka15334201Sušice

EXPRESVRCHLABÍKrkonošská82554301Vrchlabí

EXPRESDOBŘÍŠPlukovníkaB.Petroviče21926301Dobříš

EXPRESLITVÍNOVnám.Míru18643601Litvínov

EXPRESLOVOSICEOsvoboditelů122841002Lovosice

EXPRESSVITAVYNáměstíMíru133/7056802Svitavy

EXPRESZÁBŘEHNAMORAVĚValová2357/878901ZábřehnaMoravě

EXPRESČÁSLAVDusíkova7828601Čáslav

EXPRESUHERSKÝBRODMasarykovonáměstí10168801UherskýBrod

EXPRESPŘELOUČ28.října14653501Přelouč

EXPRESJIČÍNHusova6050601Jičín

EXPRESHOLEŠOVNáměstíDoktoraEdvardaBeneše3776901Holešov

EXPRESKRNOVZámeckénáměstí13/179401Krnov

EXPRESRAKOVNÍKVysoká8226901Rakovník

EXPRESMARIÁNSKÉLÁZNĚHlavní27935301MariánskéLázně

EXPRESLANŠKROUNNám.J.M.Marků5256301Lanškroun

EXPRESČESKÁTŘEBOVÁStarénáměstí1656002ČeskáTřebová

EXPRESBRNO–VINOHRADYPálavskénáměstí4246/562800Brno–Vinohrady

EXPRESNERATOVICE28.října151027711Neratovice

BUSINESSVENUESEXPRESPARTNERS

EXPRESPARTNERSOTROKOVICEtř.Osvobození15476502Otrokovice

EXPRESPARTNERSCHRUDIMMasarykovonáměstí3253701Chrudim

EXPRESPARTNERSČESKÝTĚŠÍNNádražní20773701ČeskýTěšín

EXPRESPARTNERSHRANICETřída1.máje126075301Hranice

EXPRESPARTNERSČESKÝKRUMLOVUrbinská18238101ČeskýKrumlov

EXPRESPARTNERSRUMBURKTřída9.května3040801Rumburk

EXPRESPARTNERSROKYCANYPalackého1133701Rokycany

EXPRESPARTNERSROŽNOVBayerova5375661RožnovpodRadhoštěm

EXPRESPARTNERSHORNÍPOČERNICENáchodská444/14519300HorníPočernice

EXPRESPARTNERSŠTERNBERKRadniční87/478501Šternberk

EXPRESPARTNERSKUŘIMTyršova8466434Kuřim

EXPRESPARTNERSMORAVSKÁTŘEBOVÁCihlářova5/1557101MoravskáTřebová

BUSINESSVENUESPARTNERSBANKSERVICES

PBSTIŠNOVMlýnská12766601Tišnov

PBSNOVÉMĚSTONADMETUJÍT.G.Masaryka6454901NovéMěstonadMetují

PBSPŘÍBRAMNáměstíT.G.Masaryka15726101Příbram

PBSUHŘÍNĚVESNovénáměstí1110400Praha22Uhříněves

PBSIVANČICEPalackéhonáměstí187/2066491Ivančice

PBSSEMILYTyršova2751301Semily

PBSBRNOBYSTRCKubíčkova663500BrnoBystrc

PBSPARDUBICE17.Listopadu36053002Pardubice

PBSFRÝDEKMÍSTEKVilémaZávady367973801FrýdekMístek

PBSČESKÁTŘEBOVÁLitomyšlská153656002ČeskáTřebová

PBSBYSTŘICENADPERNŠTEJNEMMasarykovonáměstí5359301BystřicenadPernštejnem

PBSZNOJMOObroková271/566902Znojmo

PBSHLUČÍNPodeZdí156/2374801Hlučín

PBSJESENICEBudějovická115525242Jesenice

PBSHUMPOLECDolnínáměstí2539601Humpolec

PBSBRNO–NOVÉSADYNovésady988/260200Brno

PBSHRADECKRÁLOVÉGočárovatřída2850002HradecKrálové

PBSUHERSKÉHRADIŠTĚProstřední13268601UherskéHradiště

PBSBŘECLAV17.listopadu57/869002Břeclav

PBSJABLONECNADNISOUSoukenná144601JablonecnadNisou

PBSLITOMYŠLSmetanovonáměstí2857001Litomyšl

PBSŠUMPERKDr.EduardaBeneše1832/1278701Šumperk

PBSOSTRAVA–NOVINÁŘSKÁNovinářská6a70200Ostrava

PBSČESKÉBUDĚJOVICEB.Němcové1692/3837001ČeskéBudějovice

PBSPRAHA–ZBRASLAVZbraslavskénáměstí46315600PrahaZbraslav

PBSPROSTĚJOVPoděbradovonáměstí1590/179601Prostějov

PBSBEROUNHavlíčkova11026601Beroun

PBSPÍSEKVelkénáměstí180/239701Písek

PBSKOPŘIVNICEZáhumenní49374221Kopřivnice

PBSLIBERECLípová66546001Liberec

PBSPRAHA–SOKOLOVSKÁSokolovská979/20919000Praha9

PBSOLOMOUCDolnínáměstí171/1777900Olomouc

PBSJINDŘICHŮVHRADECPanská97/II37701JindřichůvHradec

PBSOSTRAVA–28.ŘÍJNA28.října439/22170900Ostrava

PBSPRAHA–ARCHEOLOGICKÁArcheologická2256/115500Praha5

PBSORLOVÁOsvobození82873514Orlová

PBSTÁBORHusovonám.529/639002Tábor

PBSÚSTÍNADORLICÍPolská130856201ÚstínadOrlící

PBSDOMAŽLICEPoděbradova30334401Domažlice

PBSOSTRAVA–DLOUHÁDlouhá185/570200Ostrava



COMMERCIALCENTERS

PRAGUE–BANKOVNÍDŮMnáměstí[email protected]

PRAGUE–FILADELFIEŽeletavská1525/114092Praha4tel.:[email protected]

BRNOTrnitá491/360200Brnotel.:[email protected]

ČESKÉBUDĚJOVICEnám.PřemyslaOtakaraII.122/3537021ČeskéBudějovicetel.:[email protected]

HRADECKRÁLOVÉUlrichovonáměstí85450002HradecKrálovétel.:[email protected]

CHOMUTOVHusovonáměstí/Revoluční3643001Chomutovtel.:[email protected]

JIHLAVAMasarykovonáměstí5458601Jihlavatel.:[email protected]

KARLOVYVARYDr.DavidaBechera2636001KarlovyVarytel.:[email protected]

LIBERECŠiroká5/2846001Liberectel.:[email protected]

OLOMOUC28.října1577200Olomouctel.:[email protected]

OSTRAVA28.října3348/6570200Ostravatel.:[email protected]

PARDUBICEČechovonábřeží179053003Pardubicetel.:[email protected]

PLZEŇRiegrova130100Plzeňtel.:[email protected]

ÚSTÍNADLABEMMírovénám.35A40001ÚstínadLabemtel.:[email protected]

ZLÍNBartošova553276001Zlíntel.:[email protected]

SlovakRepublic

RETAILBRANCHESUNICREDITBANK

REGIONBRATISLAVA

AUPARKEinsteinova85101Bratislavatel.:+421908721045fax:+42102/68202035

HRONDudvážska582107Bratislavatel.:+421918861192fax:+42102/40255700

KRÍŽNAKrížna5082108Bratislavatel.:+421918501736fax:+42102/49504412

MOSTOVÁMostová681102Bratislavatel.:+421918501611fax:+42102/59428000

PARKONENám.1.Mája1881106Bratislavatel.:+421918501670fax:+42102/49504501

PLYNÁRENSKÁPlynárenská7/A82109Bratislavatel.:+421911407170fax:+42102/58103085

POLUSCCVajnorská10083104Bratislavatel.:+421903205107fax:+42102/49114800

RUSTICASaratovská6B84102Bratislavatel.:+421905479930fax:+42102/58101403

ŠANCOVÁŠancová1/A81333Bratislavatel.:+421918501728fax:+42102/49502505

REGIONSLOVAKIAWEST

BÁNOVCENADBEBRAVOUJesenského561/395701BánovcenadBebravoutel.:+421918501702fax:+421038/7627015

HLOHOVECM.R.Štefánika492001Hlohovectel.:+421918501635fax:+421033/7351015

MALACKYZáhorácka5190101Malackytel.:+421918501679fax:+421034/7979279

MYJAVAM.R.Štefánika581/29A90701Myjava907984291fax:+421034/6983300

NOVÉMĚSTONADVÁHOMČsl.armády491501NovéMěstonadV.tel.:+421905479912fax:+421032/7484995

PEZINOKHolubyho2790201Pezinoktel.:+421905925738fax:+421033/6905405

PIEŠŤANYNitrianska592101Piešťanytel.:+421908721069fax:+421033/7910833

POVÁŽSKÁBYSTRICAM.R.Štefánika161/401701PovažskáBystricatel.:+421905455880fax:+421042/4379955

SENECLichnerova3090301Senectel.:+421908764266fax:+42102/40202055

SENICAHviezdoslavova6190501Senicatel.:+421907988026fax:+421034/6909133

SKALICAŠkarniclovská190901Skalicatel.:+421908721039fax:+421034/6906125

TRENČÍNNám.SvätejAnny391101Trenčíntel.:+421908793817fax:+421032/6509203

TRNAVAŠtefánikova4891701Trnavatel.:+421915913940fax:+421033/5908305

TRNAVACITYARENAKollárova8834/2091701Trnavatel.:+421918861191fax:+421033/5903495



REGIONSLOVAKIAWESTII

DUNAJSKÁSTREDAHlavná5599/3B92901DunajskáStredatel.:+421908721102fax:+421031/5905500

GALANTARevolučná192401Galantatel.:+421911407569fax:+421031/7884500

LEVICESv.Michala4(blokATOM2)93401Levicetel.:+421908721058fax:+421036/6350315

KOMÁRNOPalatínova3994505Komárnotel.:+421908721158fax:+421035/7900065

NITRAŠtefánikovatr.1394901Nitratel.:+421918501674fax:+421037/6926051

NOVÉZÁMKYMajzonovonám.294001NovéZámkytel.:+421918868118fax:+421035/6913433

PRIEVIDZAG.Švéniho3A97101Prievidzatel.:+421905899853fax:+421046/5189420

SEREĎDionýzaŠtúra101292601Sereďtel.:+421915786004fax:+421031/7892707

ŠALAHlavná12A92701Šalatel.:+421905231101fax:+421031/7838700

ŠAMORÍNGazdovskýrad49/B93101Šamoríntel.:+421905400990031/5627962

TOPOLČANYŠtúrova4914/1895501Topolčanytel.:+421908721098fax:+421038/5327055

REGIONCENTRALSLOVAKIA

BANSKÁBYSTRICASCEUROPASCEUROPA,NaTroskách2597401BanskáBystricatel.:+421918501631fax:+421048/4723000

BREZNOČSA1797701Breznotel.:+421908721038fax:+421048/6700055

ČADCAPalárikova8502201Čadcatel.:+421908788703fax:+421041/4302815

LIPTOVSKÝMIKULÁŠGarbiarska441703101LiptovskýMikuláštel.:+421908721201fax:+421044/5475005

LUČENECŽelezničná1598401Lučenectel.:+421908721114fax:+421047/4303520

MARTINM.R.Štefánika103601Martintel.:+421905455828fax:+421043/4207011

RUŽOMBEROKMostová203401Ružomberoktel.:+421918501626fax:+421044/4320660

ZVOLENNám.SNP5096001Zvolentel.:+421908788698fax:+421045/5248016

ŽIARNADHRONOMŠ.Moyzesa42796501ŽiarnadHronomtel.:+421918501709fax:+421045/6788905

ŽILINANárodná1201001Žilinatel.:+421911094773fax:+421041/5628205

ŽILINAAUPARKVeľkáokružná59A01001Žilinatel.:+421918501629fax:+421041/5628500

REGIONSLOVAKIAEAST

BARDEJOVDlhýrad1708501Bardejovtel.:+421908721134fax:+421054/4880410

HUMENNÉMierová64/206601Humennétel.:+421907735669fax:+421057/7862341

UniCreditBank•Výročnízpráva2016 203

KEŽMAROKHlavnénám.306001Kežmaroktel.:+421917912790fax:+421052/4680035

KOŠICEROOSEVELTOVARooseveltova1004001Košicetel.:+421918501647fax:+421055/6232741

KOŠICETORYSKÁToryská1/C04011Košicetel.:+421905899851fax:+421055/7881860

LEVOČANám.MajstraPavlač.1905401Levočatel.:+421911991444fax:+421053/4182600

MICHALOVCENám.Osloboditeľov107101Michalovcetel.:+421905444157fax:+421056/6880707

POPRADPopradskénábr.1805801Popradtel.:+421907735648fax:+421052/7870327

PREŠOVHlavná2908001Prešovtel.:+421903205143fax:+421051/7729605

ROŽŇAVANám.Baníkov3304801Rožňavatel.:+421907831639fax:+421058/7880700

SPIŠSKÁNOVÁVESZimná5605201SpišskáNováVestel.:+421908721139fax:+421053/4425788

TREBIŠOVM.R.Štefánika2007501Trebišovtel.:+421917225445fax:+421056/6670015

COMMERCIALCENTERS

BRATISLAVA–KRÍŽNAKrížna5082108Bratislava

BRATISLAVA–ŠANCOVÁŠancová1/A81333Bratislava

DUNAJSKÁSTREDAHlavná5599/3B92901DunajskáStreda

KOŠICERooseveltova1004001Košice

NITRAŠtefánikovatr.1394901Nitra

POPRADPopradskénábr.1805801Poprad

PREŠOVHlavná2908001Prešov

TRENČÍNNám.SvätejAnny391101Trenčín

TRNAVAŠtefánikova4891701Trnava

ZVOLENNám.SNP5096001Zvolen

ŽILINANárodná1201001Žilina



Nejdůležitějšíkonsolidovanéhospodářskévýsledky

(IFRSauditované)

2017 Annual Report

Annual Report

www.unicreditbank.cz

2017

2017 annual report - unicredit bank · central and eastern european network to our extensive...

Documents