Santander Bank Polska S.A.

Business and Financial Review • Feb 22, 2023

Dear All, 2022 was a very challenging year, marked by the war in Ukraine and difficult economic conditions. Just over a year ago, no one could imagine that the political and economic situation would change so dramatically. The refugee crisis, reduced international security, shocks in the commodity, food and currency markets, galloping inflation – these were the implications of the war we had to face in 2022. Like during the pandemic, once again we were put to the test as ordinary people, neighbours, employees or employers, and we have passed that test ever since. It was also a year which brought out the best in us: our open-heartedness, solidarity, responsibility and simple kindness. We proved that we were there for others and that we would always lend a helping hand and keep our doors open to people in need. This huge help we offered to our neighbours from across the eastern border was unprecedented. Santander Bank Polska Group undertook numerous initiatives to support Ukrainian citizens affected by the war. In partnership with the UN Refugee Agency, we created a unique solution (BLIK cheques) to provide Ukrainian refugees with fast and secure access to cash. Together with the Santander Foundation and our customers, we organised the “We Will Double Your Impact” fundraiser to help Ukrainians. More than 26.5k people made donations, and we raised over PLN 4,250k. The funds were transferred to organisations coordinating aid for people impacted by the war in Ukraine. This would not have been possible without dedication of all employees of Santander Bank Polska Group. I would like to thank them for their empathy and support. Our solutions and aid measures in 2022 were recognised and awarded. Euromoney, a prestigious international financial magazine, named Santander the Best Bank for Corporate Responsibility in Central and Eastern Europe. In the Awards for Excellence, we were recognised for the support we had provided to people fleeing the war in Ukraine. The past year was special in many ways for us and for Poland. The Polish economy started 2022 with a great momentum only to decelerate thereafter, weighed down by Russia’s invasion of Ukraine and the resulting surge in energy prices, increased uncertainty and disruptions to international trade. The energy crisis was looming throughout the year. Fortunately, the exceptionally warm autumn and early winter reduced the risk of power cuts under the worst-case scenario. While the decelerating economy has not significantly affected the labour market so far (unemployment has not increased and salaries have continued to grow at a double-digit rate), inflation has surged to the levels not seen in decades. The central bank responded with interest rates hikes (with the NBP reference rate reaching 6.75%, the highest level since 2002), which caused an increase in interest rates on loans and deposits. This in turn had a substantial impact on the banking sector: the demand for loans (particularly mortgage loans) declined considerably, whereas term deposits grew in popularity at the expense of current deposits. Furthermore, banks had to cope with historically high regulatory burdens such as payment deferrals, banking tax and contributions to the Institutional Protection Scheme. What supported the banking sector was the high interest rate environment. Despite the above challenges, Santander Bank Polska Group delivered solid performance, posting an attributable profit of PLN 2.799bn. This result was positively affected by net interest income and net fee and commission income. Total income was PLN 12.4bn. Our results demonstrate that we are a stable and well-performing organisation. Our universal banking business model proved to be resilient to unpredictable events. Santander Bank Polska Group has a sound capital position and a successful customer-centric strategy. For the second time, the Bank was recognised as the best multichannel service provider in the main category of the Golden Banker ranking organised by Puls Biznesu and Bankier.pl. It was the fifth time we were among the top three banks providing best multichannel services. Our Account As I Want It and our mortgage loan earned us the second place. For another year in a row, we ranked top in the Business-friendly Bank ranking by Forbes. Improvement of customer experience and digitalisation, development and simplification of services are our main goals in the retail banking segment. In 2022, we reported growth in the net acquisition of customers, including Ukrainian citizens. We also increased the number of customers using our digital solutions to more than 3.2m. We implemented new solutions and features for customers such as simplified processes related to an online cash loan and account opening for minors, and innovative Referrals Programme available in internet and mobile banking. Furthermore, we introduced a motor insurance comparison engine and a new product – a guaranteed no-deposit home loan. Sales of our key products grew steadily too, notably cash loans, bancassurance and accounts for both individuals and businesses. Strong results were also reported in such areas as leasing for SMEs and services for high net worth customers. In 2022, we strengthened the position of Santander Private Banking as private banking of first choice in Poland. The Wealth Management Area expanded its range of products and services in cooperation with Santander Brokerage Poland. We were also working on new credit and FX products and services as well as alternative investments for affluent customers. Our efforts were once again recognised – for another year, Santander Private Banking was awarded the highest accolade in an international survey by Euromoney and was named the best in Poland. Last year, we organised “EmPOWERed in business”, an initiative supporting enterprising women that included a series of webinars and competitions for grants and capital investments. The project attracted nearly 4k participants. This shows how important it is to create a level playing field and support female business owners. Very strong performance was delivered by the Business and Corporate Banking Division, which serves over 25k customers in traditional and digital channels. Last year, we reported double-digit growth in the value of the credit portfolio, the number of e-commerce transactions, FX income and utilisation of trade finance limits, coupled with record-high sales of overdrafts. We design solutions that improve customer experience due to their quality and technological advancement. We invest in the CLP credit platform, CRM solutions and electronic banking. We simplify our processes and continuously improve our communication and relationship-building standards. The Corporate and Investment Banking Division co-financed large photovoltaic and wind farm projects and provided advisory services in relation to customers’ renewable energy portfolios. We also co-arranged Poland’s largest issue of sustainability-linked corporate bonds. Santander Leasing was the first entity in the leasing sector to introduce a biometric signature, a solution which is already used by more than 80% of the company’s customers. There were also other environmentally friendly initiatives: in 2022, the company joined the “My Electric Car” programme of government subsidies for zero-emission cars, closing the year with a 114% YoY growth in electric car finance. It also generated an 89% YoY increase in photovoltaic project finance. For the third year in a row, Santander Leasing was voted the leader in the leasing category of the Trustworthy Brand survey by MyCompany Polska. In 2022, Santander TFI served almost 173k customers, nearly 20% more than a year before. We keep expanding and simplifying our offer and developing our e-platform for investors. In 2022, we were hailed the best investment fund company in the Good Brand – Quality, Trust, Reputation competition, and for the second time in a row – the best ECP managing company in the Consumer Leader of Quality 2022 survey. Santander Factoring is the leader of supplier finance. The company continues to cooperate with BGK in respect of factoring programmes based on liquidity fund guarantees and is the market leader in terms of guarantee payments. In 2022, Santander Factoring together with the Polish Entrepreneurs Foundation developed a training programme called: “Business of new era”, which helps entrepreneurs enhance their competitive edge and grow their business. The programme attracted 2k participants. Santander Consumer Bank successfully and consistently pursued its business strategy underpinned by customer focus, digitalisation of products and services, and process automation. In 2022, SCB Group posted a net profit of PLN 408m. The net loan portfolio was PLN 15.6bn, and deposits totalled PLN 10.4bn. We made progress on our Responsible Banking agenda. The care about the environment and the society is an integral part of our strategy. We implemented the internal Sustainable Finance Classification System, which allows us to determine which financing we can classify as green.In 2022, our ESG Report included for the first time a climate-related supplement prepared in accordance with the TCFD criteria covering an analysis of climate risks and opportunities. This allows us to take on new challenges in a more conscious way. Work is also in progress to implement regulatory requirements related to ESG reporting as part of Pillar 3 and EU Taxonomy. The integration of national legislation with EU guidelines will be key to delivery of ESG projects. Last year, Santander Factoring was the first company in Poland to enter into an ESG-linked factoring agreement, where the factoring margin depends on the delivery of ESG targets by the customer. Santander TFI customers can invest in two subfunds which promote environmental or social factors, while considering a negative impact on sustainable development. I am confident that the commodity crisis and the decision to stop imports of gas and oil from Russia will increase the commitment to green energy and projects that will make Poland more independent energy-wise. For many years now, Santander Bank Polska Group has supported Polish companies in their green transition. We will continue to deliver our Responsible Banking agenda, carrying out ambitious and advanced projects. We believe in personal development – at each age and stage in life. That is why for many years now we have worked with universities to offer Santander scholarships to students and provide them with an opportunity to continue their education and develop their knowledge and skills for free. Students can learn from practitioners and get certification from prestigious universities. In 2022, nearly 6k people were granted scholarships and participated in internships. The highest number of students were interested in language courses. In 2023, we plan to increase our support and grant 12k scholarships. 2022 was also a busy year for the Santander Foundation. The projects focused mainly on fast and effective response to the situation in Ukraine, including support for refugees, orphaned children and children placed in foster care. The Foundation also co-financed the purchase of two ambulances, medical equipment and transport of a group of refugees from Ukraine to Poland. Alongside this, the Foundation continued its regular projects: it funded 25 scholarships for talented young people and delivered its grant programmes for local communities: “Bank of Young Sports Champions” and “Here I live, here I make eco-friendly changes”. One of the pillars of the Foundation’s activities is the corporate volunteering programme. At the end of 2022, there were nearly 2k active volunteers in our organisation, who delivered social initiatives to meet the needs of local communities. The Foundation also opened the eleventh “Flicker Club”, a place at a children’s home or hospital where children can play and relax. At Santander Bank Polska Group we focus on building a corporate culture that serves interests of diverse groups and each and every employee and promotes equal treatment. We respect diversity and create a safe workplace for people with various needs. We undertake initiatives in the area of diversity, equity and inclusion (DEI). We educate our employee and managers about rights and needs of people with disabilities and introduce new benefit solutions for this group. Since 2021, we have had employee networks at Santander Bank Polska which help build an inclusive corporate culture, strengthen the sense of belonging and empowerment. Our efforts were recognised in 2022 – for the second year in a row – with the Diversity IN Check accolade given by the Responsible Business Forum to most advanced employers in Poland in terms of managing diversity and creating an inclusive workplace. In addition, our ten projects were mentioned in the “Responsible Business in Poland. Best Practice” report. We promote equal treatment and strengthen women’s leadership. Our ambition is to completely eliminate the pay gap with regard to women and men in the same position by 2025. We were the only financial institution and one of a few companies in Poland to receive the Equal Pay Certificate from Business Centre Club in recognition of measures taken in 2022. During the past year, we once again proved that our business is strong and resilient and that we can effectively operate even in the most demanding conditions. The strategy we adopted a few years ago, which is focused on customers’ needs and simplification and development of services, yields tangible results. There is no doubt that this year will also be a big challenge for economies, businesses and communities. It started with high interest rates and decelerating economic growth. However, the Polish economy is likely to gradually expand from the trough, with an inflation rate expected to steadily decrease (although it will probably remain high until the end of the year). We will carefully monitor regulations for the banking sector during this challenging period. We intend to work closely with public authorities to minimise social costs of Russia’s invasion of Ukraine and stimulate economic growth in Poland. Lessons learnt from the pandemic and the difficult past year give us confidence for what lies ahead. 2023 may be another year of a dynamic development of remote services as well as rapid digitalisation and robotisation. Polish banks are well advanced in designing and implementing solutions using bots, artificial intelligence and machine learning. We also offer latest technologies and solutions with respect to payments. Hyper-personalisation and focus on customers’ needs is a global trend. We follow that trend at Santander Bank Polska Group, continuing our digital transformation on multiple levels. I am confident that together with our employees, customers and partners we will successfully deliver on our goals. May the difficult events of the past years make us all stronger and pay off in the future. Michał Gajewski President of the Management Board of Santander Bank Polska S.A. The original Polish document is signed with a qualified electronic signature