Nordea Bank : Branch Poland Financial Statement 2023

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Nordea Bank Abp Spółka Akcyjna Oddział w Polsce [Branch in Poland]

FINANCIAL STATEMENTS

FOR THE PERIOD

FROM 01/01/2023 TO 31/12/2023

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Nordea Bank ABP S.A.
Financial Statements for the period from 01/01/2023 to 31/12/2023
Contents
Statement of comprehensive income	3
Assets	4
Equity and liabilities	4
Cash flow statement	5
Notes to the Financial Statements	6
Note 1 - General information about the branch	6
Note 2 - Basis for the preparation of financial statements	6
Note 3 - Description of significant accounting policies applied	9
Note 4 - Revenue from sale of services	14
Note 5 - Costs of wages and salaries, including surcharges and other employee benefits	15
Note 6 - Third-party IT services	15
Note 7 - Other administrative expenses	16
Note 8 - Depreciation	16
Note 9 - Other operating expenses and other operating income	16
Note 10 - Costs of operation and maintenance of the premises	17
Note 11 - Financial income and expenses	17
Note 12 - Income tax	18
Note 13 - Property, plant, and equipment, including right of use assets under lease Property, plant, and equipment
from 01/01/2023 to 31/12/2023	21
Note 14 - Intangible assets	23
Note 15 - Deferred tax assets and deferred tax liabilities	24
Note 16 - Long-term investments	25
Note 17 - Trade receivables, uninvoiced receivables and other receivables	26
Note 18 - Cash and cash equivalents	26
Note 19 - Long-term liabilities due to settlements with Branch's Head Office	26
Note 20 - Liabilities due to loans, borrowings and other debt instruments	27
Note 21 - Contingent liabilities	27
Note 22 - Provisions	28
Note 23 - Trade liabilities and other liabilities 31/12/2023	28
Note 24 - Lease	29
Note 25 -Transactions with affiliates	31
Note 26 - Financial instruments, fair value, and other disclosures	33
Note 27 - Financial risk management	34
Note 28 - Employment	37
Note 29 - Fee for the entity authorised to audit financial statements	37
Note 30 - Impact of the COVID-19 pandemic and Russia's aggression against Ukraine on the company's financial
position	38
Note 31 - Events after the end of the reporting period	38

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

Statement of comprehensive income

	Note		01/01/2023 - 31/12/2023		01/01/2022 - 31/12/2022
Revenues, of which:			1,280,302		1,022,280
Revenue from sale of services	4	1,259,897	1,016,420
Other operating income	9	4,063	3,704
Finance revenue	11	16,342	2,156
Expenses, of which:			(1,189,166)		(972,659)
Costs of salaries with overheads and other employee benefits	5	(1,024,155)	(811,708)
Depreciation/amortisation	8	(63,117)	(63,467)
Outsourced IT services	6	(26,628)	(29,273)
Consulting services		(71)	(368)
Other administrative expenses	7	(32,663)	(28,915)
Business travel expenses		(10,884)	(7,219)
Costs of operation and maintenance of the premises	10	(29,633)	(23,856)
Other operating expenses	9	(1,527)	(923)
Financial costs	11	(488)	(6,930)
Profit before tax			91,136		49,621
Income tax	12		(19,995)		(11,610)
Net profit for the reporting period			71,141		38,011
Other comprehensive income			650		106
Items which will be recognised in the profit and loss account			0		0
Items which will not be recognised in the profit and loss account			650		106
Other comprehensive net income for the reporting period			0		0
Total comprehensive income for the reporting period			71,791		38,117

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

Statement of financial position

Assets

	Note	31/12/2023	31/12/2022
Fixed assets		298,782	333,574
Assets from the right of use of assets under lease	13	198,891	223,110
Property, plant, and equipment	13	75,757	81,623
Intangible assets	14	14	18
Deferred tax assets	15	21,476	25,549
Long-term investments	16	2,644	3,274
Operating assets		271,352	267,463
Trade receivables, non-invoiced receivables, and other	17	155,726	156,124
receivables
Short-term prepayments		991	1,475
Cash and cash equivalents	18	114,635	109,864
Total assets		570,134	601,037

Statement of financial position

Equity and liabilities

	Note	31/12/2023	31/12/2022
Liabilities
Long-term liabilities		321,246	388,115
Long-term liabilities due to settlements with the Branch Head	19	110,477	142,167
Office
Long-term lease liabilities	24	168,112	211,346
Other long-term liabilities	23	461	146
Long-term provisions	22	42,196	34,456
Short-term liabilities		248,888	212,922
Short-term lease liabilities	24	45,281	46,886
Trade liabilities	23	695	542
Other short-term liabilities	23	200,357	163,267
Short-term provisions	22	2,555	2,227
Total liabilities and equity		570,134	601,037

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

Cash flow statement

	Note	31/12/2023		31/12/2022
Cash flow from operating activities			166,195	81,613
Net profit for the reporting year			71,791	38,117
Adjustments:			94,404	43,496
Depreciation of property, plant, and equipment, including rights to	13		63,117	63,464
use of assets under lease
Depreciation of intangible assets	14		4	3
Foreign exchange gain/loss			(11,093)	6,449
Loss on investing activities			267	91
Change in trade and other receivables	17		399	(57,332)
Change in accruals, prepayments, and deferred income			484	487
Change in trade and other liabilities	23		37,558	34,566
Change in deferred tax assets	15		4,073	(3,807)
Income tax payments			(12,779)	(21,779)
Current tax liability	12		9,484	15,442
Change in provisions	22		8,067	7,874
Interest received			(5,249)	(2,156)
Interest paid			488	481
Other adjustments			(417)	(287)
Cash flow from investing activities			(11,997)	(10,835)
Disposal of property, plant, and equipment			1,444	2,169
Purchase of property, plant, and equipment	13		(13,441)	(13,004)
Cash flows from financial activities			(149,427)	(93,559)
Interest received			5,249	2,156
Loans and borrowings incurred (+)/repaid (-)	20		(57)	(30)
Expenses for repayment of interest on loans, borrowings, and leasing			(488)	(481)
Funds transferred to Head Office from the settlement of result of	19		(103,482)	(41,432)
previous years
Payment of lease liabilities	24		(50,649)	(53,772)
Total net cash flows			4,771	(22,781)
Balance sheet change in cash, of which:			4,771	(22,781)
Change in cash due to foreign exchange differences			35	3
Cash at the beginning of the period			109,864	132,645
Cash at the end of the period			114,635	109,864

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

Notes to the Financial Statements

Note 1 - General information about the branch

Information about Nordea Bank ABP S.A. Oddział w Polsce [Branch in Poland]

Nordea Bank ABP S.A. Branch in Poland (hereinafter: the Branch) has its registered office in Poland: 93-281 Łódź, Al. Śmigłego-Rydza 20, Tax ID NIP PL 105-000-11-72; Statistical No REGON 100926668, is registered with the District Court for Łódź-Śródmieście in Łódź, 20th Division of the National Court Register, Entry No KRS 0000360398.

The Branch's business activity consists of:

• other activities auxiliary to financial services, except insurance and pension funding;
• other monetary intermediation;
• activities of call centres;
• computer IT software activities and related activities;
• information service activities;
• accounting, bookkeeping and auditing activities; tax consultancy;
• other financial service activities, except insurance and pension funding not elsewhere classified;
• data processing, hosting, and related activities.

The Branch is a branch of a foreign bank: Nordea Bank Abp, with its registered office in Finland, FI-00020, in Helsinki at Satamaradankatu 5.

The Financial Statements and annual reports of Nordea Bank Abp are available at https://www.nordea.com/en/investors/reports-presentations.

The entity is exempt from preparing the Report on Activities in accordance with the Accounting Act.

Note 2 - Basis for the preparation of financial statements 2.1 Statement of compliance

Annual separate financial report of Nordea Bank Abp S.A. Branch in Poland for the period ending 31 December 2023 has been prepared in accordance with the International Financial Reporting Standards, as approved by the European Union, and other applicable laws.

The Financial Statements have been prepared on the assumption that the Branch will continue to operate for the foreseeable future and on a substantially unchanged going concern basis.

The Financial Statements were approved by the Management of the Branch on 05/03/2024.

2.2 New and amended standards and interpretations applied

Amendments to the following standards that were effective have been applied in these Financial Statements in 2023:

a) IFRS 17 "Insurance Contracts" and amendments to IFRS 17

IFRS 17 "Insurance Contracts" was issued by the International Accounting Standards Board on 18 May 2017, while the amendments to IFRS 17 were published on 25 June 2020.

IFRS 17 Insurance Contracts replaced previous IFRS 4, which allowed for a variety of accounting practices for insurance contracts. The new standard fundamentally changes accounting for all entities that deal with insurance contracts and investment contracts; however, the scope of the standard is not limited to insurance companies only, and contracts entered into by entities other than insurance companies may also contain an element that meets the definition of an insurance contract (as defined in IFRS 17). This change has no impact on the Branch's Financial Statements.

1. Amendment to IFRS 17 "Insurance Contracts"

The amendment relates to the transitional requirements in connection with the first-time application of IFRS 17 "Insurance Contracts" and IFRS 9 "Financial Instruments". The purpose of the amendment is to ensure the usefulness of financial information for investors in the period of first application of the new standard by introducing certain simplifications with regard to the presentation of comparative figures.

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

The amendment relates only to the application of new IFRS 17 and does not affect any other requirements in IFRS 17.

1. Amendments to IAS 1 "Presentation of Financial Statements" and the IFRS Board's guidance on disclosure of accounting policies in practice
   The amendment to IAS 1 requires disclosure of material information about accounting policies, as defined in the standard. The amendment clarifies that information on accounting policies is material if, in its absence, users of the Financial Statements would not be able to understand other relevant information in the Financial Statements. In addition, the Board's guidance on applying the concept of materiality in practice were also revised to provide guidance on the application of the concept of materiality to accounting policy disclosures. The amendments to the standard were incorporated into the Branch's Financial Statements.
2. Amendments to IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"

In February 2021, the Board published an amendment to IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors" regarding the definition of estimates. The amendment to IAS 8 clarifies how entities should distinguish between changes in accounting policies and changes in accounting estimates. The amendments to the standard have no impact on the Branch's Financial Statements.

e) Amendments to IAS 12 "Income Taxes"

The amendments to the standard, published in 2021, clarify how to account for deferred tax on transactions such as leases and decommissioning obligations. Prior to the amendments to the standard, there was ambiguity as to whether the recognition of equal amounts of an asset and a liability for accounting purposes (e.g. the initial recognition of lease) that has no impact on current taxable income triggers the recognition of deferred tax balances or whether what is known as the initial recognition exemption, which states that deferred tax balances are not recognised if the recognition of an asset or liability has no impact on accounting or taxable profit at the time of that recognition, applies. Revised IAS 12 addresses this issue by requiring the recognition of deferred tax in the above situation by additionally stating that the initial recognition exemption does not apply if a company simultaneously recognises an asset and an equivalent liability, and each creates temporary differences.

In May 2023, the Board published further amendments to IAS 12 "Income Taxes" in response to the global minimum income tax Pillar Two regulations issued by the Organisation for Economic Co-operation and Development (OECD) in connection with international tax reform. The amendment to IAS 12 provides a temporary exemption from the requirement to recognise deferred tax arising from tax law enacted that implements the Pillar Two model rules. Companies may apply the guidance of amended IAS 12 immediately, while certain disclosures are required for annual periods beginning on or after 1 January 2023.

2.3 Published standards and interpretations that are not yet in force and have not been previously applied by the Branch but may have an impact on the Financial Statements.

In these separate Financial Statements, the Branch has not decided to apply the following published standards, interpretations, or amendments to existing standards before their effective date:

1. Amendment to IFRS 16 "Leases"

In September 2022, the Board amended IFRS 16 "Leases" by supplementing the requirements for the subsequent measurement of lease obligations for sale and leaseback transactions where the criteria of IFRS 15 are met and the transaction should be accounted for as sale. The amendment requires the seller lessee to subsequently measure lease obligations arising from leasebacks in such a way that no gain or loss on retained right-of-use is recognised. The new requirement is particularly relevant where leaseback includes variable lease payments that do not depend on an index or rate, as these payments are excluded from "lease payments" under IFRS 16. The amended standard includes a new example that illustrates the application of the new requirement in this regard. The amendment is effective from 1 January 2024. The Branch does not expect the standard to have a material impact on its Financial Statements.

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

b) Amendments to IAS 1 "Presentation of Financial Statements"

In 2020, the Board published amendments to IAS 1 that clarify the presentation of liabilities as long- and short-term liabilities. In October 2022, the Board issued further amendments to IAS 1, which address the classification of liabilities as long- and short-term liabilities, for which a company is required to meet certain contractual requirements known as covenants. Revised IAS 1 states that liabilities are classified as either short- or long-term liabilities, depending on the rights that exist at the end of the reporting period. Neither the company's expectations nor events after the reporting date (for example, waiver or breach of a covenant) affect the classification.

The amendments, as published, are effective for financial statements for periods beginning on or after 1 January 2024.

1. Amendments to IAS 7 "Statement of Cash Flows" and IFRS 7 "Financial Instruments: Disclosures" - disclosure of supplier finance arrangements
   In May 2023, the Board published amendments to IAS 7 "Statement of Cash Flows" and IFRS 7 "Financial Instruments: Disclosures". The amendments to the standards introduce disclosure requirements for vendor finance arrangements
   (known as reverse factoring). The amendments require specific disclosures for such contracts to enable users of financial statements to assess the impact of these contracts on liabilities and cash flows and a company's exposure to liquidity risk. These amendments are intended to increase the transparency of disclosures about liability financing arrangements, but do not affect recognition and measurement principles. The new disclosure obligations will be effective for annual reporting periods beginning on or after 1 January 2024.
   As at the date of this Financial Statements, the improvements have not yet been approved by the European Union.
2. Amendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates"

In August 2023, the Board issued amendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates". The amendments are intended to make it easier for companies to determine whether a currency is convertible into another currency and to estimate the spot exchange rate when a currency is not convertible. In addition, the amendments to the standard introduce additional disclosures when currencies are not convertible on how to determine the alternative exchange rate.

The amendments, as published, are effective for financial statements for periods beginning on or after 1 January 2025. As at the date of this Financial Statements, the improvements have not yet been approved by the European Union.

e) IFRS 14 "Regulatory Deferral Accounts"

This standard allows entities that prepare financial statements in accordance with IFRS for the first time (as at 01 January 2016) to recognise amounts resulting from rate-regulated activities in accordance with the accounting principles applied so far. To improve comparability with companies that already apply IFRS and do not present such amounts, according to IFRS 14 published, the amounts resulting from rate-regulated activities should be presented in a separate item in the statement of financial position, profit and loss account as well as statement of other comprehensive income.

By the decision of the European Union, IFRS 14 will not be approved.

1. Amendments to IFRS 10 and IAS 28 regarding the sale or contribution of assets between the investor and its affiliates or joint ventures
   The amendments solve the problem of the current inconsistency between IFRS 10 and IAS 28. The accounting treatment depends on whether non-monetary assets sold or contributed to an associate or joint venture are "business".
   If the non-monetary assets constitute "business", the investor reports the full profit or loss on the transaction. If, on the other hand, the assets do not meet the definition of business, the investor recognises a gain or loss from only to the extent of the portion representing the interests of other investors.
   The amendments were published on 11 September 2014. At the preparation date of these Financial Statements, approval of this amendment is deferred by the European Union.

2.4 Basis for measurement

The Financial Statements were prepared on the basis of the historical cost principle.

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

2.5 Functional and presentation currency

The figures in the Financial Statements were presented in Polish zloty (PLN), rounded up to full thousands. PLN is the functional currency of the Branch.

2.6 Comparative data

The comparative figures include data for the period 01/01/2022 to 31/12/2022.

Note 3 - Description of significant accounting policies applied

The accounting principles below have been applied to all reporting periods presented in the Financial Statements.

Foreign currency transactions

Transactions expressed in foreign currencies are recognised in the functional currency of the Branch and converted at the average exchange rate of the NBP published on the day preceding the transaction date, except for the situations described below in the Lease Contracts section.

Non-monetary items measured at historical cost in a foreign currency are converted by the Branch using the exchange rate, as published before the transaction date. Exchange rate differences are recognised in the profit or loss for the current period.

Financial instruments

Classification

As at the balance sheet date, the Branch did not have any financial instruments classified as financial liabilities measured at fair value through profit or loss. The Branch's only financial assets measured at fair value are cash measured at fair value through profit or loss.

Measurement

At initial recognition, a financial asset or financial liability is measured at fair value, increased or reduced, in the case of a financial asset or liability that is not classified as measured at fair value through profit or loss, by transaction costs that can be directly assigned to acquisition or issue of a financial asset or financial liability.

The exceptions are trade receivables that do not have a significant financing component: the Branch recognises them in the transaction price.

After the initial recognition, the Branch measures financial assets and financial liabilities according to the category to which they are classified.

Measurement at amortised cost is made using the effective interest rate method to the gross carrying amount of the financial asset, taking into account impairment.

After initial recognition, other financial liabilities are measured at amortised cost using the effective interest rate method. Other liabilities include loans, borrowings, overdraft facilities, trade payables and other liabilities.

Subsidies

Government subsidies are initially recognised as deferred income at fair value, if there is sufficient certainty that they will be obtained and that the conditions related to them will be met; then, they are recognised in profit or loss of the current period and presented in other operating revenue.

In the case of uncertainty as to meeting the terms of the contract, the subsidy is presented in regulatory liabilities item.

Hedge accounting

The Branch does not apply hedge accounting.

Operating segments

The Branch operates in one operating segment.

The Notes are an integral part of the Financial Statements.

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Nordea Bank ABP S.A.

Financial Statements for the period from 01/01/2023 to 31/12/2023

Impairment of financial assets

Financial assets measured at amortised cost are evaluated by the Branch at each balance sheet date whether there is any objective evidence that any financial asset (or a group of financial assets) has lost value. Cash in foreign currencies is measured at the exchange rate of the National Bank of Poland at the balance sheet date.

Property, plant, and equipment

Items of property, plant, and equipment and intangible assets are initially measured at purchase cost or production cost. After the initial recognition of property, plant, and equipment and intangible assets, the Branch presents them at the purchase price less accumulated depreciation and accumulated impairment write-offs. Fixed assets with a low unit value (less than PLN 4,500) are charged to expense in the month they are commissioned. For intangible assets, the limit is PLN 1,500.

This item also includes right of use assets according to IFRS 16: see "Lease contracts" below for details.

Depreciation/amortisation

The value of depreciation write-offs is determined based on the purchase price of a given asset less its residual value. Depreciation write-offs are made according to the straight-line method for the useful life of the property, plant, and equipment or intangible assets and are presented in the profit and loss account.

The land is not depreciated. The estimated useful lives are as follows:

• investments in third-party fixed assets, according to the contract term
• plant and machinery 3-5 years
• equipment 5-10 years
• means of transport 5 years
• computer software 5 years
• licenses 1-5 years
• right of use assets, according to the contract term.

The residual value is subject to an annual estimation.

For tax accounting purposes, depreciation rates resulting from current legislation are adopted.

Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents include items payable within three months of the acquisition date, including: unrestricted cash on hand and cash at bank.

The Branch offsets the bank balance of the Company Social Benefit Fund against the liabilities of this Fund: the surplus is presented as cash or as other short-term liabilities. This approach, consistent with common practice, is applied because the Branch does not control the Fund.

The Branch has funds in a restricted-availability VAT account.

Impairment write-off on assets other than financial assets

The carrying amounts of the Branch's assets are reviewed as at the balance sheet date to determine whether there is any reason for an impairment loss. If there is such a reason, the Branch estimates the recoverable amount of individual assets. The write-down of receivables is calculated on a simplified basis, according to IFRS 9, at an amount equal to the expected loss in value over their lifetime.

An impairment write-off is recognised if the book value of the asset or its cash-generating unit exceeds its estimated recoverable amount. The impairment write-off is recognised in the profit and loss account.

Calculation of recoverable amount

The recoverable amount for assets other than financial assets is the greater of selling value less costs to sell and value in use. To determine the value in use, the estimated future cash flows are discounted to their present value by a pre-tax discount rate, which reflects the current market expectations as to the money value and the asset-specific risk. For assets

The Notes are an integral part of the Financial Statements.

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