Banku Handlowego w Warszawie S.A.

Regulatory Filings • May 27, 2025

Report Content Current report 12/2025

Subject: Signing of anagreement on the exit from the Consumer Business of Bank Handlowy wWarszawie S.A.

Legal basis: Article 17Section 1 of Regulation (EU) No. 596/2014 of the European Parliament andof the Council of 16 April 2014 (MAR Regulation).

In reference to currentreport No. 12/2021 dated 15 April 2021, the Management Board of BankHandlowy w Warszawie S.A. (the "Bank") announces that on27th May 2025 the Bank signed with VeloBank S.A. ("VeloBank"),Promontoria Holding 418 B.V. (the sole shareholder of VeloBank) ("Promontoria")and Citibank Europe Plc an agreement concerning the demerger of theconsumer business of the Bank (the "Consumer Business") toVeloBank (the "Agreement").

The demerger will allowthe Bank to focus on the growth of Institutional Banking, the Bank'sleading business area, which accounted for 72% of the Bank's revenues in2024. The dynamic growth of this business, based on competitiveadvantages and scale, will enable the Bank to achieve higher returns asmeasured by return-on-equity (ROE) and return-on-assets (ROA) ratios.

The exit from theConsumer Business is in line with the Bank's Strategy and is part ofCitigroup's global strategy.

Transaction

The transaction of theexit by the Bank from the Consumer Business (the "Transaction")will take place in two related stages.

The first stage will bethe demerger of the Bank, resulting in the transfer of the ConsumerBusiness to VeloBank, in exchange for which the Bank will receive newlyissued shares in the share capital of VeloBank (the "Demerger").The second stage, which shall take place as soon as possible and nolater than on the day after the registration of the Demerger by therelevant registry court, is the repurchase by Promontoria of all of theshares in the share capital of VeloBank that the Bank will subscribe asa result of the Demerger.

Demerger

On the date ofregistration of the Demerger by the registry court, VeloBank willacquire the Consumer Business comprising consumer banking includingcredit cards business, retail loans and credit (including PLNmortgages), deposits, wealth management (including retail brokerageservices) and the servicing of businesses classified by the Bank asmicro-clients, as well as branches of the Bank and other assets andliabilities of the Bank related to the Consumer Business, with theexception of certain assets and liabilities related to the aboveactivities that will not be transferred to VeloBank, including, inparticular, loans in foreign currencies.

The Consumer Businessthat is to be separated under the Demerger into VeloBank on the basis ofbalance sheet data as at 31 March 2025 comprises a portfolio ofapproximately PLN 6 billion of loans, approximately PLN 22.1 billion ofdeposits, and approximately PLN 8.9 billion of assets under management,with corresponding equity of approximately PLN 0.9 billion. Thedifference between the liabilities and the assets of the ConsumerBusiness will be supplemented by short-term financial assets. TheConsumer Business comprises approximately 1,650 employees (includingthose representing support functions) and branches servicing ConsumerBusiness clients to ensure the continuity of services provided tocustomers of the Consumer Business.

The portfolio of mortgageloans in foreign currencies, amounting to approximately PLN 24 million(based on balance sheet data as at 31 March 2025) and the correspondingprovisions, will remain within the Bank's structures.

The Demerger Plan isexpected to be signed within 30 business days following signing of theAgreement.

VeloBank sharerepurchase price

The number of shares thatBank will acquire as a result of the Demerger will be determined inaccordance with the mechanism set out in the Demerger plan, and will beless than 25% of the total number of shares in VeloBank's share capital.

The above shares will berepurchased by Promontoria from the Bank for an estimated price ofPLN532 million consisting of two components based on the financial metricsset out in the Agreement:

1.the fixedprice component payable in connection with the closing of theTransaction, the amount of which is estimated at approximately PLN 432million, based on netassets transferred by Bank to VeloBank at closingof the Transaction and subject to a standard price adjustment takingplace after the closing of the Transaction; and

2.thevariable price component, payable depending on the achieved businessvolumes of the Consumer Business, of a maximum of PLN 100 million.

The Bank will announcethe final price in a separate current report.

In connection with theAgreement, the Bank will recognize a net loss on the Transaction of c.PLN 380 million in Q2 2025.

In addition, theTransaction will release approximately PLN 400 million of excess capitalresulting from the deconsolidation of the assets and liabilities subjectto the Transaction, which will be used to accelerate growth inInstitutional Banking.

Consumer Business profitsgenerated until closing date will be recognized in Bank's financialresults.

Given its strong capitalposition, the Bank has started preparations for amending the Bank'sArticles of Association and subsequently obtaining the approval of thePolish Financial Supervision Authority for the payment of the Bank'sundistributed profit. In the event of a positive decision from theregulator, the dividend payout ratio in 2025-2026 is planned at75%-100%. In addition, the Bank intends to seek the regulatory approvalrequired for payment in the form of dividend in 2026 of theconsideration received by the Bank under the Transaction.

The Bank will announcethe regulator's decision in a separate current report.

Conditions precedentto the Transaction

The completion of theTransaction is subject to the following actions and the fulfilment ofcertain conditions precedent indicated in the Agreement, comprising,among others:

1.obtainingthe relevant approvals or decisions of the Polish Financial SupervisionAuthority by the Bank, VeloBank and their dominant entities;

2.obtainingthe approval of the relevant antimonopoly authority and other relevantauthorities;

3.obtainingthe tax interpretations specified in the Agreement;

4.theadoption of resolutions on the approval of the Demerger by the generalmeetings of the shareholders of the Bank and VeloBank; and

5.achievingthe readiness of the parties to the Agreement to perform the technicaland operational activities concerning migration of systems specified inthe Agreement in connection with the Demerger.

Contractual liability

The Agreement has beenstructured on the basis of the principles of liability typical intransactions of this type and scale. In particular, the Agreementprovides for liability in respect of the warranties made by the Bank inrespect of the Consumer Business and the commitments entered into byBank in respect of the operation of the Consumer Business in the interimperiod (i.e. from the signing of the Agreement until the date of theDemerger). In addition, the Agreement contains provisions for thegranting of indemnities, up to specified caps, by the Bank in respect ofcertain identified risks.

Independent assessmentof the Transaction

The Management Board ofthe Bank informs that it has received from Ernst _ Young Sp. spółkaz ograniczoną odpowiedzialnością Corporate Finance sp.k. ("EY")an independent opinion (the so-called "Fairness Opinion") on thefairness of the financial effects of the Transaction.

EY made an independentassessment of the estimated value of the Consumer Business, taking intoaccount the data received and using standard valuation methods. In theopinion of EY, presented to the Management Board of the Bank, theproposed pricing terms are fair from the point of view of all existingshareholders of the Bank.

A similar opinionconfirming the fairness of the financial effects of the Transaction wasalso obtained from another reputable financial advisor.

Attachment: Presentation -Consumer Bank Exit