Consolidated statement of financial position

Consolidated statement of cash flows

Consolidated statement of changes in equity

Changes in equity from 1 January to 31 December 2016

Changes in equity from 1 January to 31 December 2015

Consolidated statement of comprehensive income

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Prudential consolidation

According to the Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (“CRR Regulation”), mBank is a significant subsidiary of EU parent institution, responsible for the preparation of the consolidated prudentially financial data to fulfil the requirement of disclosures described in IAS 1.135 Presentation of Financial Statements.

Financial information presented below does not represent the International Financial Reporting Standards (“IFRS”) measures as defined by the standards.

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

Basis of the preparation of the consolidated financial data

mBank S.A. Group consolidated financial data based on the rules of prudential consolidation specified by the CRR Regulation (“Consolidated prudentially financial data”) have been prepared for the 12-month period ended 31 December 2016 and for the 12-month period ended 31 December 2015.

The consolidated profit presented in the consolidated prudentially financial data may be included in consolidated Common Equity Tier 1 for the purpose of the calculation of consolidated Common Equity Tier 1 capital ratio, consolidated Tier 1 capital ratio and consolidated total capital ratio with the prior permission of the KNF or after approval by the General Meeting of shareholders.

The accounting policies applied for the preparation of the Group consolidated prudentially financial data are identical to those, which have been applied to the mBank S.A. Group consolidated financial data for the year 2016, prepared in compliance with IFRS, except for the consolidation standards presented below.

The consolidated prudentially financial data includes the Bank and the following entties:

The companies Dom Maklerski mBanku S.A. and mWealth Management S.A. were consolidated until their division described under Note 1.

Entities included in the scope of prudential consolidation are defined in the Regulation CRR – institutions, financial institutions or ancillary services undertakings, which are subsidiaries or undertakings in which a participation is held, except for entities in which the total amount of assets and off-balance sheet items of the undertaking concerned is less than the smaller of the following two amounts:

• EUR 10 million;
• 1% of the total amount of assets and off-balance sheet items of the parent undertaking or the undertaking that holds the participation.

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

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

Consolidated prudentially income statement

Consolidated prudentially statement of financial position

Restatement of the comparative data

Due to the change in accounting policy relating to the valuation method of investments in subsidiaries, associates and joint ventures used in the stand-alone financial statements, the Group restated prudentially consolidated comparative data as at 31 December 2015 and as at 1 January 2015. Starting from 1 January 2016 shares in subsidiaries, associates and joint ventures which are not in the scope of prudential consolidation were valued using the equity method which the Bank applies to the valuation of these assets in the stand-alone financial statements. The Bank applies the equity method to the valuation of such assets following the entry into force of IAS 27 Separate financial statements amendments allowing usage of such valuation method (IAS 27.10 (c)). The scope of prudential consolidation differs from the scope of consolidation under IFRS, therefore prudentially consolidated financial data includes valuation of unconsolidated subsidiaries which in the past were valued using at cost method and now, after the change of mBank S.A. accounting policy, are valued using the equity method.

The impact of changes introduced in the accounting policy on the prudentially consolidated comparative data of the Group is presented in the following tables.

Restatement of the mBank Group S.A. consolidated prudentially statement of financial position as at 31 December 2015.

Restatement of the mBank Group S.A. consolidated prudentially income statement for the period from 1 January 2015 to 31 December 2015.

Restatement of the mBank Group S.A. consolidated prudentially statement of financial position as at 1 January 2015 (opening balance).

Independent Registered Auditor’s Report

To the General Shareholders’ Meeting and the Supervisory Board of mBank S.A.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of the mBank S.A. Group (hereinafter called “the Group”), having mBank S.A., Senatorska 18 Street, Warsaw, as its parent company (hereinafter called “the Parent Company”),which comprise the consolidated statement of financial position as at 31 December 2016, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows for the year from 1 January to 31 December 2016 and a summary of significant accounting policies and other explanatory notes.

Management and Supervisory Board’s Responsibility

The Parent Company’s Management Board is responsible for the preparation of these consolidated financial statements, on the basis of correctly maintained consolidation documentation, and their fair presentation in accordance with the International Financial Reporting Standards as adopted by the European Union and in accordance with the applicable regulations. The Parent Company’s Management Board is also responsible for internal controls as management determines necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

The Management Board and Supervisory Board of the Parent Company are obliged to ensure that the consolidated financial statements meet the requirements of the Accounting Act of 29 September 1994 (“the Accounting Act” – Journal of Laws of 2016, item 1047 as amended).

Auditor's Responsibility

Our responsibility was to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with section 7 of the Accounting Act and International Standards on Auditing as adopted by the National Council of Certified Auditors as the National Standards on Audit and Assurance with a resolution dated 10 February 2015. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group's preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the accompanying consolidated financial statements:

1. give a true and fair view of the Group’s financial position as at 31 December 2016 and its financial performance and its cash flows for the year from 1 January to 31 December 2016, in accordance with the International Financial Reporting Standards as adopted by the European Union and the applicable accounting policies;
2. comply in terms of form and content with the applicable laws, including the Decree of the Minister of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions of recognizing as equal information required by the law of other state, which is not a member state (“the Decree” – Journal of Laws of 2014, item 133 as amended);
3. have been prepared on the basis of correctly maintained consolidation documentation.

Report on Other Legal and Regulatory Requirements

Opinion on the Report on the Group’s operations

Our opinion on the audit of the consolidated financial statements does not cover the Report on the Group’s operations.

The Parent Company’s Management Board is responsible for the preparation of the Report on the Group’s operations in accordance with the Accounting Act, and the Decree and the Banking Law of 29 August 1997 (“the Banking Law” – Journal of Laws of 2016, item 1988 as amended) . Further, the Management Board and Supervisory Board are obliged to ensure that the Report on the Group’s operations meets the requirements of the Accounting Act.

With respect to our audit of the consolidated financial statements, our responsibility was to read the Report on the Group’s operations and consider whether the information included in this Report complies with the regulations of article 49 of the Accounting Act and the Decree and is consistent with the information in the related consolidated financial statement. Our responsibility was also to consider, based on the knowledge of the Group and its environment obtained during our audit, whether the Report on the Group’s operations does not contain any material misstatements. Further, in accordance with article 111 a paragraph 3 of the Banking Law, our responsibility was to audit the consolidated financial information included in point 6 of the Report on the Group’s operations. We carried out the audit in accordance with the scope described in paragraph Auditor's Responsibility above.

In our opinion, the information contained in the Report on the Group’s operations for the year from 1 January to 31 December 2016 comply with the requirements of article 49 of the Accounting Act, the Decree and the Banking Law and is consistent with the information in the audited consolidated financial statements.

Further, based on the knowledge of the Group and its environment obtained during our audit we have not identified any material misstatements in the Report on the Group’s operations.

With respect to our audit of the consolidated financial statements, our responsibility was also to read the Group’s Statement of Corporate Governance, which is a separate part of the Report on the Group’s operations. In our opinion, the Group included information in accordance with the scope defined in the Decree, and information as indicated in the Decree, complies with the applicable regulations and is consistent with the information contained in the consolidated financial statements.

Auditor conducting the audit on behalf of PricewaterhouseCoopers Sp. z o.o. Registered Audit Company No. 144:

Agnieszka Accordi-Krawiec

Key Registered Auditor 
No. 11665

Warsaw, 1 March 2017

Registered auditor’s report on the audit of the consolidated financial statements for the year from 1 January to 31 December 2016

I. General information about the Group

1. mBank S.A. (“Bank”, “the Parent Company”) with its seat in Warsaw, Senatorska 18 Street is the parent company of the mBank S.A. Group (“the Group”).
2. The Parent Company was established by Resolution of the Council of Ministers No. 99 of 20 June 1986. The Parent Company was formed on the basis of a Notarial Deed drawn up on 11 December 1986 at the State Notary Public’s Office in Warsaw and registered with Rep. A No. I-5919/86. On 11 July 2001, the Parent Company was entered in the Register of Businesses maintained by the District Court for the Capital City of Warsaw XIX Business Department of the National Court Register, with the reference number KRS 0000025237.
3. The Parent Company was assigned a tax identification number (NIP) 526-02-15-088 for the purpose of making tax settlements and a REGON number 001254524 for statistical purposes.
4. As at 31 December 2016 the Parent Company’s share capital amounted to PLN 169,121 thousand and consisted of 42,280,127 shares, with a nominal value of PLN 4.00 each. Total equity as at that date amounted to PLN 13,051,161 thousand.
5. As at 31 December 2016, the Parent Company’s shareholders were:
      

   Shareholder’s name	Number of shares held	Par value of shares held (PLN ‘000)	Type of shares held	Votes (%)
   Commerzbank AG	29,352,897	117,412	ordinary	69,42
   Nationale-Nederlanden OFE	2,130,699	8,523	ordinary	5,04
   Other shareholders	10,796,531	43,186	ordinary	25,54
   	42,280,127	169,121		100,00

    

      

   As at 31 December 2015, the Parent Company's shareholders were:

   Shareholder’s name	Number of shares held	Par value of shares held (PLN ‘000)	Type of shares held	Votes (%)
   Commerzbank AG	29,352,897	117,412	ordinary	69.49
   ING Otwarty Fundusz Emerytalny (at present Nationale-Nederlanden OFE)	2,130,699	8,523	ordinary	5.05
   Other shareholders	10,755,328	43,021	ordinary	25.46
   	42,238,924	168,956		100.00

6. During the year the Group’s operations comprised providing banking services and consulting and advisory services in financial matters, as well as of conducting business activities within the scope described in Memorandum of Association of the Parent Company. The Group operates within the scope of corporate, institutional and retail banking (including private banking) throughout the whole country and operates trade and investment activities as well as brokerage activities.
7. During the year the Management Board of the Parent Company comprised:
   

   Cezary Stypułkowski	President of the Management Board
   Lidia Jabłonowska-Luba	Vice-President of the Management Board, Chief Risk Officer
   Przemysław Gdański	Vice-President of the Management Board, Head of Corporate and Investment Banking
   Hans-Dieter Kemler	Vice-President of the Management Board, Head of Financial Markets
   Cezary Kocik	Vice-President of the Management Board, Head of Retail Banking
   Jarosław Mastalerz	Vice-President of the Management Board, Head of Operations and IT
   Christoph Heins	Vice-President of the Management Board, Chief Financial Officer from 1 July 2016
   Jörg Hessenmüller	Vice-President of the Management Board, Chief Financial Officer to 30 June 2016

8. As at 31 December 2016, the mBank S.A. Group comprised the following entities:
      

   Name	Nature of equity relationship (interest in %)	Consolidation method	Auditor of the financial statements	Type of opinion	Balance sheet date
   mBank S.A.	Parent Company	Not applicable	PricewaterhouseCoopers Sp. z o.o.	unqualified	31 December 2016
   mFinanse S.A. (formerly Aspiro S.A.)	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   BDH Development Sp. z o.o.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   Garbary Sp. z o.o.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   mBank Hipoteczny S.A.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   mCentrum Operacji Sp. z o.o.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   mFaktoring S.A.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   mLeasing Sp. z o.o.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o.	audit in progress	31 December 2016
   Tele-Tech Investment Sp. z o.o.	Subsidiary (100.00%)	Full	PricewaterhouseCoopers Sp. z o.o	audit in progress	31 December 2016
   mFinance France S.A.	Subsidiary (99.998%)	Full	PricewaterhouseCoopers Audit SA	unqualified	31 December 2016
   mLocum S.A.	Subsidiary (79.99%)	Full	PricewaterhouseCoopers Sp. z o.o	audit in progress	31 December 2016

    

9. During the financial year, the following changes took place in the scope of consolidation:
   
   1. on 30 September 2016 Aspiro S.A. changed its name to mFinanse S.A.,
   2. on 20 May 2016, there was an incorporation of Dom Maklerski mBanku S.A. („mDM”) and mWealth Management S.A. („mWM”), the Group entities, into structures of mBank S.A.. Due to the incorporation of mDM and mWM, on 20 May 2016 there was a removal of:
      
      1. mDM from the National Court Register by the District Court for the Capital City of Warsaw in Warsaw, XII Business Department of the National Court Register,
      2. mWM from the National Court Register by the District Court for the Capital City of Warsaw in Warsaw, XII Business Department of the National Court Register.
10. The Parent Company is an issuer of securities admitted for trading on the Warsaw Stock Exchange. In accordance with the choice of selecting accounting policies permitted by the Accounting Act, the Parent Company has decided to prepare its consolidated financial statements in accordance with IFRS as adopted by the European Union.
    
    

II. Information about the audit

1. The audit of the consolidated financial statements as at and for the year from 1 January to 31 December 2016 was conducted by PricewaterhouseCoopers Sp. z o.o. with its seat in Warsaw, Al. Armii Ludowej 14, registered audit company no. 144. The audit was conducted on behalf of the registered audit company under the supervision of the key registered auditor, the Group’s registered auditor Agnieszka Accordi-Krawiec (no. 11665).
2. PricewaterhouseCoopers Sp. z o.o. was appointed registered auditor to the Group by Resolution No. 30 of the Ordinary General Meeting dated 24 March 2016 in accordance with paragraph 11 letter n) of the Parent Company’s Memorandum of Association.
3. PricewaterhouseCoopers Sp. z o.o. and the key registered auditor conducting the audit are independent of the entities belonging to the Group within the meaning of art. 56, clauses 2-4 of the Act dated 7 May 2009 on registered auditors and their self-government, registered audit companies and on public supervision (Journal of Laws of 2016, item 1000 as amended).
4. The audit was conducted in accordance with an agreement dated 24 March 2016, in the period from:
   

   interim audit	from 2 November 2016 r. to 23 December 2016 r.;
   final audit	from 3 January 2017 r. to 1 March 2017 r.

5. We conducted our audit in accordance with International Standards on Auditing as adopted by the National Council of Certified Auditors as the National Standards on Audit and Assurance with a resolution dated 10 February 2015. The scope of our audit was influenced by our application of materiality. In accordance with these auditing standards, the concept of materiality is applied by the auditor at the planning stage and when conducting the audit as well as to evaluate the effect of misstatements identified and adjusted (if any) on the consolidated financial statements, and to form the opinion in the Independent Registered Auditor’s Report.
   

    

   An audit was designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. The misstatements are considered to be material, if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
   

    

   Based on our professional judgement, we determined and documented the certain quantitative thresholds for materiality, including the overall materiality for the consolidated financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. Therefore, all statements included in the Independent Registered Auditor’s Report, including those related to the other legal and regulatory requirements, have been expressed considering the materiality determined in accordance with those auditing standards and the auditor’s judgement.

III. The Group’s results, financial position and significant items of the consolidated financial statement

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2016

CONSOLIDATED  STATEMENT OF FINANCIAL POSITION as at 31 December 2016 (cont.)

CONSOLIDATED INCOME STATEMENT for the year from 1 January to 31 December 2016

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year from 1 January to 31 December 2016

Selected ratios characterizing the Group's financial position and results

The following ratios characterize the Group’s activities, results of operations during the year and its financial position as at the balance sheet date compared with previous year:

The above ratios have been calculated on the basis of the consolidated financial statements.

It was not the purpose of the audit to present the Group in the context of the results of operations and ratios achieved. A detailed interpretation of the ratios requires an in-depth analysis of the Group’s operations and its circumstances.

Our audit did not cover detailed comparative data constituting the basis for calculating the ratios for the previous years.

The consolidated financial statements do not take into account the effects of inflation. The consumer price index (on a December to December basis) amounted to 0.8% in the audited year (2015: deflation -0.5%).

The following comments are based on information obtained during the audit of the consolidated financial statements.

The factors described below had a significant impact on the Group’s results of operations and on its financial position as at the balance sheet date:

• At the end of the financial year, the Group’s total assets amounted to PLN 133,743,502 thousand. During the year total assets increased by PLN 10,220,481 thousand, i.e. by 8.3%.
• As at 31 December 2016, the balance of loans and advances to customers amounted to PLN 81,763,277 thousand and represented 61.1% of total assets (an increase by PLN 3,329,731 thousand, i.e. by 4.2% compared to the previous year). The gross value of loans and advances to customers amounted to PLN 84,580,772 thousand and comprised mainly term loans to individuals in the gross amount of PLN 42,491,460 thousand and term loans to corporate entities in the gross amount of PLN 28,267,897 thousand. An increase in the gross balance of loans and advances to customers of PLN 3,171,362 thousand was mainly due to growth in term loans to individuals of PLN 2,129,906 thousand.
• At the end of 2016 the balance of investment securities amounted to PLN 31,393,352 thousand and comprised mainly treasury bonds in the amount of PLN 28,251,321 thousand. The balance of investment securities increased by PLN 656,403 thousand, i.e. by 2.1% compared to the previous year, which was a result of an increase in the balance of treasury bonds of PLN 6,012,696 thousand, with a simultaneous decrease in the balance of debt securities issued by the central bank of PLN 5,626,307 thousand.
• At the end of 2016 the assets were primarily financed by amounts due to customers. As at 31 December 2016 such liabilities amounted to PLN 91,417,962 thousand and represented 68.4% of total equity and liabilities (an increase compared to the previous year by PLN 10,277,096 thousand, i.e. by 12.7%). An increase in the balance of amounts due to customers was mainly due to a growth in the balance of amounts due to current accounts of individual customers of PLN 5,583,301 thousand and current accounts of corporate customers of PLN 5,265,111 thousand.
• The balance of liabilities arising from issuance of debt securities at the end of 2016 amounted to PLN 12,660,389 thousand and comprised mainly issue of long-term Eurobonds in the amount of PLN 7,570,459 thousand. An increase in the balance of debt securities in issue compared to the previous year by PLN 3,714,194 thousand, i.e. by 41.5% was mainly due to an issue of long-term mortgage bonds and Eurobonds.
• The ratio of impaired loans and advances to total gross loans and advances decreased from 5.6% as at the end of 2015 to 5.2% as at the balance sheet date. At the same time, provision coverage of impaired loans and advances went down by 1.8 p.p. and amounted to 57.1%. Coverage of gross amounts due to clients with allowances on incurred but not reported losses (IBNR) amounted to 0.3% and has not changed compared to the prior year.
• Net interest income amounted to PLN 2,832,843 thousand and increased by PLN 321,470 thousand, i.e. by 12.8% compared to the previous year. The increase resulted from a growth in interest income of PLN 212,350 thousand (i.e. 5.8%), with a simultaneous decrease in interest expense of PLN 109,120 thousand (i.e. 9.5%). The most significant change in interest income related to loans and advances including the unwind of the impairment provision discount. This income amounted to PLN 2,753,185 thousand in 2016 and was PLN 168,639 thousand higher compared to the previous year. A drop in interest expense resulted mainly from a decrease in expense arising from amounts due to customers of PLN 57,355 thousand.
• Net fee and commission income amounted to PLN 906,445 thousand in the audited year and was PLN 9,269 thousand, i.e. 1.0% higher compared to the previous year. This increase was mainly due to a growth of fee and commission income by PLN 116,916 thousand, which was primarily an effect of growth in credit-related fees and commissions of PLN 21,224 thousand, payment cards-related fees of PLN 19,597 thousand and fees from brokerage activity and debt securities issue of PLN 19,054 thousand. At the same time, fee and commission expense has increased by PLN 107,647 thousand, mainly due to a growth in discharged brokerage fees and other discharged fees of PLN 49,495 thousand and growth in payment cards-related fees of PLN 24,992 thousand.
• Net impairment losses on loans and advances in 2016 amounted to PLN 365,394 thousand and comprised mainly net impairment losses on loans and advances to customers. Net impairment losses on loans and advances has decreased by PLN 55,828 thousand, i.e. by 13.3% compared to the previous year.
• Overhead costs amounted to PLN 1,739,643 thousand in the audited year and decreased by PLN 111,303 thousand, i.e. by 6.0% compared to the prior year. Staff-related expenses were the largest item of overhead costs and amounted to PLN 876,705 thousand in 2016, which constituted 50.4% of overhead costs. Staff-related expenses increased by PLN 21,891 thousand, i.e. by 2.6% compared to the previous year, mainly due to increase of salary costs
• During 2016 the Group recognized profit and loss account paid banking tax, which amounted to PLN 327,939 thousand (in 2015 this cost amounted to PLN 3.650 thousand)
• Effective tax rate, calculated as income tax expense to profit before income tax, amounted to 25.4% and was 6.0 p.p. higher than in previous year, mainly as the result of introduction of banking tax that does not constitute a tax deductible expense.
  
  

IV. The independent registered auditor’s statements

1. The Management Board of the Parent Company provided all the information, explanations, and representations required by us in the course of the audit and provided us with a representation letter confirming the completeness of the information included in the accounting records and the disclosure of all contingent liabilities and post balance-sheet events which occurred up to the date on which that letter was signed.
2. The scope of the audit was not limited.
3. The calculation of goodwill arising in the audited year and its recognition in the consolidated financial statements complied in all material respects with the adopted accounting policies.
4. The consolidation of equity items and the determination of minority interests were carried out properly in all material respects.
5. The elimination of mutual balances (receivables and payables) and transactions (revenue and costs) of the consolidated entities were carried out, in all material respects, in accordance with IFRS as adopted by the European Union.
6. The elimination of unrealized gains/losses of consolidated entities included in the book value of assets and in respect of dividend payments was carried out, in all material respects, in accordance with IFRS as adopted by the European Union.
7. The impact of the disposal or partial disposal of shares in subordinated entities was accounted for properly in all material respects, in accordance with IFRS as adopted by the European Union.
8. The consolidation documentation was complete and accurate and it is stored in a manner ensuring proper safeguarding.
9. The consolidated financial statements of the Group as at and for the year ended 31December 2015 were approved by Resolution No. 24 passed by the General Shareholders’ Meeting of the Parent Company on 24 March 2016 and filed with the National Court Register in Warsaw on 30 March 2016.
10. During the audit performed we have not identified any significant instances of Group’s non-compliance with banking regulatory norms during the period from 1 January 2016 to the day of issuance of this report, with the exception of the situation described in the Note 49 in the Financial Statement, where total consolidated capital adequacy ratio was below required level from 1 January 2016 to 24 March 2016. As at 31 December 2016, the regulations of the Banking Law, the Resolutions of the Management Board of the National Bank of Poland, Resolutions of Polish Financial Supervisory Authority and the Regulation of the European Parliament and the Council (EU) No. 575/2013 from 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012 (CRR) and other regulations issued by the Commission (EU) pursuant to this Regulation, included banking regulatory norms in relation, among others, to the following:
    • concentration of credit risk,
    • concentration of investments in shares,
    • classification of loans and guarantees to risk groups and creation of provisions for the risk associated with activities of banks,
    • liquidity measures,
    • level of obligatory reserve,
    • capital adequacy.
11. As at the balance sheet date the capital adequacy ratio of the Group amounted to 20.29% and was correctly determined in accordance with CRR. This statement is based on recalculation of the quotient of own funds amounting PLN 13,244,329 thousand divided by risk weighted assets amounting to PLN 65,259,977 thousand as per COREP reporting prepared by the Group as at the balance sheet date.
12. The notes to the consolidated financial statements, which include the introduction and additional notes and explanations present all the significant information in accordance with IFRS as adopted by the European Union.
13. The information in the Report on Group’s operations for the year from 1 January to 31 December 2016 has been presented in accordance with the provisions of the Decree of the Minister of Finance dated 19 February 2009 on current and periodic information to be provided by issuers of securities and conditions for recognizing as equivalent the information required by the provisions of law of a country not being a member state (Journal of Laws of 2014, item 133 as amended) and is consistent with that presented in the consolidated financial statements.
    
    

V. Final information

This report has been prepared in connection with our audit of the consolidated financial statements of the mBank S.A. Group having mBank S.A., Senatorska 18 Street, Warsaw, as its Parent Company. The consolidated financial statements were signed by the Parent Company’s Management Board on 1 March 2017.

This report should be read in conjunction with the Independent Registered Auditor’s Report dated 1 March 2017 to the General Shareholders’ Meeting and the Supervisory Board of mBank S.A., that includes the unqualified audit opinion on the said consolidated financial statements. The opinion on the consolidated financial statements expresses a general conclusion drawn from the audit and involves assessing the materiality of individual audit findings rather than being a sum of all the evaluations of individual financial statement components. This assessment takes account of the impact of the facts noted on the truth and fairness of the consolidated financial statements.

Person conducting the audit on behalf of PricewaterhouseCoopers Sp. z o.o., Registered Audit Company No. 144:

Agnieszka Accordi-Krawiec

Key Registered Auditor
No. 11665

Warsaw, 1 March 2017