FINANCIAL HIGHLIGHTS	PLN k		EUR k
		31.12.2025	31.12.2024	31.12.2025	31.12.2024
Separate financial statement
I	Net interest income	12 323 166	11 917 462	2 908 328	2 768 798
II	Net fee and commission income	2 697 307	2 552 480	636 578	593 021
III	Profit before tax	8 937 407	7 029 586	2 109 272	1 633 192
IV	Profit for the period	6 708 807	5 197 480	1 583 311	1 207 537
V	Total net cash flows	1 782 582	(4 976 720)	420 698	(1 156 247)
VI	Total assets	300 647 903	276 090 920	71 130 646	64 612 900
VII	Deposits from banks	1 946 975	3 050 432	460 637	713 885
VIII	Deposits from customers	230 200 308	215 776 367	54 463 366	50 497 629
IX	Total liabilities	267 318 385	245 863 553	63 245 176	57 538 861
X	Total equity	33 329 518	30 227 367	7 885 470	7 074 039
XI	Number of shares	102 189 314	102 189 314
XII	Net book value per share in PLN/EUR	326,15	295,80	77,16	69,23
XIII	Capital ratio	21,45%	20,15%*
XIV	Profit per share in PLN/EUR	65,65	50,86	15,49	11,82
XV	Diluted earnings per share in PLN/EUR	65,65	50,86	15,49	11,82
XVI	Declared or paid dividend per share in PLN/EUR**	46,37**	44,63	10,94	10,37

*The data includes profits included in own funds, taking into account the applicable EBA guidelines

**Detailed information are described in Note 53.

The following rates were applied to determine the key EUR amounts for selected financial statements line items:

·         for balance sheet items – average NBP exchange rate as at 31.12.2025: EUR 1 = PLN 4,2267 and as at 31.12.2024: EUR 1 = PLN 4,2730

·         for profit and loss items – as at 31.12.2025 - the rate is calculated as the average of NBP exchange rates prevailing as at the last day of each month in 2025: EUR 1 = PLN 4,2372; as at 31.12.2024 - the rate is calculated as the average of NBP exchange rates prevailing as at the last day of each month in 2023: EUR 1 = PLN 4,3042.

As at 31.12.2025, FX denominated balance sheet positions were converted into PLN in line with the NBP FX table no. 251/A/NBP/2025    dd. 31.12.2025.

I.    Separate income statement66

II.   Separate statement of comprehensive income77

III.  Separate statement of financial position88

IV.  Separate statement of changes in equity99

V.   Separate statement of cash flows1010

VI.  Additional notes to financial statements1212

1.      General information about issuer  1212

2.      Basis of preparation of financial statements  1313

3.      Risk management 3939

4.      Capital management 6767

5.      Net interest income  7070

6.      Net fee and commission income  7171

7.      Dividend income  7171

8.      Net trading income and revaluation  7272

9.      Gains (losses) from other financial securities  7272

10.    Other operating income  7272

11.    Impairment allowances for expected credit losses  7373

12.    Employee costs  7373

13.    General and administrative expenses  7474

14.    Other operating expenses  7474

15.    Corporate income tax  7474

16.    Earnings per share  7575

17.    Cash and cash equivalents  7676

18.    Loans and advances to banks  7676

19.    Financial assets and liabilities held for trading  7878

20.    Hedging derivatives  7979

21.    Loans and advances to customers  8080

22.    Securitisation of assets  8787

23.    Investment securities  8989

24.    Investments in subsidiaries and associates  9090

25.    Intangible assets  9292

26.    Goodwill 9393

27.    Property, plant and equipment 9494

28.    Right of use assets  9595

29.    Deferred tax assets  9696

30.    Other assets  9797

31.    Deposits from banks  9898

32.    Deposits from customers  9898

33.    Subordinated liabilities  9999

34.    Debt securities in issue  9999

35.    Provisions for financial liabilities and guarantees granted  100100

36.    Other provisions  101101

37.    Other liabilities  102102

38.    Share capital 103103

39.    Other reserve capital 104104

40.    Revaluation reserve  105105

41.    Hedge accounting  106106

42.    Sale and reverse sale and repurchase agreements  112112

43.    Offsetting financial assets and financial liabilities  113113

44.    Fair value  115115

45.    Legal risk connected with CHF mortgage loans  120120

46.    Contingent liabilities and litigation and claims  125125

47.    Assets and liabilities pledged as collateral 128128

48.    Information about leases  129129

49.    Related parties  129129

50.    Acquisitions and disposals of investments in subsidiaries and associates  133133

51.    Employee benefits  133133

52.    Share based incentive scheme  135135

53.    Dividend per share  137137

54.    Operating segments reporting  138138

55.    Events which occurred subsequently to the end of the reporting period  138138

        

I.                   Separate income statement

for the period		1.01.2025-31.12.2025	1.01.2024-31.12.2024
Interest income and income similar to interest		16 580 859	16 103 254
Interest income on financial assets measured at amortised cost		14 629 603	14 173 256
Interest income on financial assets measured at fair value through other comprehensive income		1 848 593	1 875 462
Income similar to interest on financial assets measured at fair value through profit or loss		102 663	54 536
Interest expense		(4 257 693)	(4 185 792)
Net interest income	Note 5	12 323 166	11 917 462
Fee and commission income		3 231 059	3 028 193
Fee and commission expense		(533 752)	(475 713)
Net fee and commission income	Note 6	2 697 307	2 552 480
Dividend income	Note 7	227 477	212 332
Gain on the disposal of shares in subsidiaries	Note 50	948 586	-
Net trading income and revaluation	Note 8	262 273	189 422
Gains (losses) from other financial securities	Note 9	11 143	23 419
Gain/loss on derecognition of financial instruments measured at amortised cost	Note 45	(46 940)	(65 278)
Other operating income	Note 10	82 678	74 891
Allowances for expected credit losses	Note 11	(540 114)	(637 924)
Cost of legal risk associated with foreign currency mortgage loans	Note 45	(1 596 631)	(2 252 561)
Operating expenses incl.:		(4 594 964)	(4 206 672)
-Staff, operating expenses and management costs	Note 12 and 13	(3 916 040)	(3 566 752)
-Amortisation of property, plant and equipment and intangible assets		(436 678)	(387 713)
-Amortisation of right of use asset		(134 934)	(131 037)
-Other operating expenses	Note 14	(107 312)	(121 170)
Tax on financial institutions		(836 574)	(777 985)
Profit before tax		8 937 407	7 029 586
Corporate income tax	Note 15	(2 228 600)	(1 832 106)
Profit for the period		6 708 807	5 197 480
Net earnings per share	Note 16
Basic earnings per share (PLN/share)		65,65	50,86
Diluted earnings per share (PLN/share)		65,65	50,86

II.                Separate statement of comprehensive income

	for the period:	1.01.2025-31.12.2025	1.01.2024-31.12.2024
Net profit for the period		6 708 807	5 197 480
Items that will be reclassified subsequently to profit or loss:		1 104 552	(73 304)
Revaluation and sales of debt financial assets measured at fair value through other comprehensive income, gross	Note 23,40	584 875	495 822
Deferred tax		(102 095)	(94 206)
Revaluation of cash flow hedging instruments, gross	Note 40,41	827 126	(586 321)
Deferred tax		(205 354)	111 401
Items that will not be reclassified subsequently to profit or loss:		4 800	150 567
Revaluation of equity financial assets measured at fair value through other comprehensive income, gross	Note 23,40	24 513	188 399
Deferred and current tax		(23 044)	(35 796)
Provision for retirement benefits – actuarial gains/losses, gross	Note 40,52	4 242	(2 514)
Deferred tax		(911)	478
Total other comprehensive income, net		1 109 352	77 263
Total comprehensive income for the period		7 818 159	5 274 743

III.             Separate statement of financial position

	as at:	31.12.2025	31.12.2024* restated	1.01.2024* restated
ASSETS
Cash and cash equivalents	Note 17	30 504 751	28 722 169	33 698 889
Loans and advances to banks	Note 18	2 370 201	4 167 697	361 474
Financial assets held for trading	Note 19	15 278 958	9 366 581	8 941 960
Hedging derivatives	Note 20	2 023 727	1 363 319	1 559 374
Loans and advances to customers incl.:	Note 21	157 020 100	152 257 402	140 903 101
- measured at amortised cost		153 852 716	147 965 869	138 093 756
- measured at fair value through other comprehensive income		3 167 384	4 289 996	2 798 234
- measured at fair value through profit and loss		-	1 537	11 111
Reverse sale and repurchase agreements	Note 42	4 417 364	4 475 404	2 036 133
Investment securities incl.:	Note 23	78 845 871	65 825 372	56 856 194
- debt securities measured at fair value through other comprehensive income		28 670 006	32 135 296	38 717 640
- debt investment securities measured at amortised cost		49 689 035	33 227 759	17 866 218
- equity securities measured at fair value through other comprehensive income		486 830	462 317	272 336
Assets pledged as collateral	Note 47	2 575 358	1 198 845	271 933
Investments in subsidiaries and associates	Note 24	174 493	2 330 907	2 377 407
Intangible assets	Note 25	937 877	826 533	730 461
Goodwill	Note 26	1 688 516	1 688 516	1 688 516
Property, plant and equipment	Note 27	429 662	415 295	472 100
Right of use asset	Note 28	539 859	449 693	449 610
Deferred tax assets	Note 29	553 123	674 692	986 915
Non-current assets classified as held for sale		8	4 308	4 308
Other assets	Note 30	3 288 035	2 324 187	1 062 826
Total assets		300 647 903	276 090 920	252 401 201
LIABILITIES AND EQUITY
Deposits from banks	Note 31	1 946 975	3 050 432	2 668 293
Hedging derivatives	Note 20	192 875	600 071	829 565
Financial liabilities held for trading	Note 19	12 363 462	9 926 216	8 834 034
Deposits from customers	Note 32	230 200 308	215 776 367	195 365 937
Sale and repurchase agreements	Note 42	2 580 543	1 198 455	273 547
Subordinated liabilities	Note 33	1 601 965	2 127 985	2 585 476
Debt securities in issue	Note 34	10 152 028	7 514 380	5 929 056
Lease liabilities	Note 48	562 579	475 622	484 012
Current income tax liabilities		1 066 403	673 956	1 127 618
Provisions for financial liabilities and guarantees granted	Note 35	161 881	170 350	151 294
Other provisions	Note 36	2 301 979	1 580 516	741 677
Other liabilities	Note 37	4 187 387	2 769 203	3 925 195
Total liabilities		267 318 385	245 863 553	222 915 704
Equity
Share capital	Note 38	1 021 893	1 021 893	1 021 893
Other reserve capital	Note 39	21 713 543	22 427 789	23 369 548
Revaluation reserve	Note 40	911 449	(197 903)	(275 166)
Retained earnings		2 973 826	1 778 108	696 244
Profit for the period		6 708 807	5 197 480	4 672 978
Total equity		33 329 518	30 227 367	29 485 497
Total liabilities and equity		300 647 903	276 090 920	252 401 201

*Data restated following changes to the presentation of cash and cash equivalents; details are presented in Note 2.5.

IV.            Separate statement of changes in equity

Statement of changes in equity 1.01.2025 - 31.12.2025	Share capital	Own shares	Other reserve capital	Revaluation reserve	Retained earnings and profit for the period	Total
Note	38		39	40
As at the beginning of the period	1 021 893	-	22 427 789	(197 903)	6 975 588	30 227 367
Total comprehensive income	-	-	-	1 109 352	6 708 807	7 818 159
Profit for the period	-	-	-	-	6 708 807	6 708 807
Other comprehensive income	-	-	-	1 109 352	-	1 109 352
Share-based incentive scheme	-	-	104 903	-	-	104 903
Purchase of own shares	-	(82 367)	-	-	-	(82 367)
Settlements under share-based incentive scheme	-	82 367	(83 172)	-	-	(805)
Profit allocation to other reserve capital	-	-	104 130	-	(104 130)	-
Profit allocation to dividends	-	-	(840 887)	-	(3 897 632)	(4 738 519)
Other changes	-	-	780	-	-	780
As at the end of the period	1 021 893	-	21 713 543	911 449	9 682 633	33 329 518

Statement of changes in equity 1.01.2024 - 31.12.2024	Share capital	Own shares	Other reserve capital	Revaluation reserve	Retained earnings and profit for the period	Total
Note	38		39	40
As at the beginning of the period	1 021 893	-	23 369 548	(275 166)	5 369 222	29 485 497
Total comprehensive income	-	-	-	77 263	5 197 480	5 274 743
Profit for the period	-	-	-	-	5 197 480	5 197 480
Other comprehensive income	-	-	-	77 263	-	77 263
Share-based incentive scheme	-	-	100 192	-	-	100 192
Purchase of own shares	-	(72 334)	-	-	-	(72 334)
Settlements under share-based incentive scheme	-	72 334	(72 592)	-	-	(258)
Profit allocation to other reserve capital	-	-	87 042	-	(87 042)	-
Profit allocation to dividends	-	-	(1 056 637)	-	(3 504 072)	(4 560 709)
Other changes	-	-	236	-	-	236
As at the end of the period	1 021 893	-	22 427 789	(197 903)	6 975 588	30 227 367

V.               Separate statement of cash flows

	for the period	1.01.2025-31.12.2025	1.01.2024-31.12.2024* restated
Cash flows from operating activities
Profit before tax		8 937 407	7 029 586
Adjustments for:
Depreciation/amortisation		571 612	518 750
Net interest income		(12 323 166)	(11 917 462)
Gains on investing activities		(5 588)	(6 037)
Gains on sale of investments in subsidiaries		(948 586)	-
Dividends		(222 844)	(207 145)
Impairment losses (reversal)		626	14 304
Changes in:
Provisions		712 994	857 895
Financial assets / liabilities held for trading		(3 382 919)	726 931
Assets pledged as collateral		(871 283)	(1 088 492)
Hedging derivatives		(1 097 536)	270 289
Loans and advances to banks		1 787 836	(3 799 998)
Loans and advances to customers		(4 780 298)	(11 250 789)
Deposits from banks		(1 105 761)	379 621
Deposits from customers		14 345 386	20 259 118
Buy-sell/ Sell-buy-back transactions		1 437 682	(1 519 292)
Other assets and liabilities		976 383	(3 266 121)
Interest received on operating activities		13 193 452	12 731 737
Interests paid on operating activities		(3 374 043)	(3 302 076)
Paid income tax		(2 045 988)	(1 991 668)
Net cash flows from operating activities		11 805 366	4 439 151
Cash flows from investing activities
Inflows		25 012 364	15 767 756
Sale of investments in subsidiaries		3 105 000	46 500
Sale/maturity of investment securities		18 427 020	12 827 421
Sale of intangible assets and property, plant and equipment		8 735	1 234
Dividends received		222 844	207 145
Interest received		3 248 765	2 685 456
Outflows		(31 455 173)	(20 885 862)
Purchase of investment securities		(30 901 374)	(20 439 604)
Purchase of intangible assets and property, plant and equipment		(553 799)	(446 258)
Net cash flows from investing activities		(6 442 809)	(5 118 106)

	for the period	1.01.2025-31.12.2025	1.01.2024-31.12.2024* restated
Cash flows from financing activities
Inflows		6 021 356	4 534 224
Debt securities issued		5 816 450	4 350 000
Drawing of loans		204 906	184 224
Outflows		(9 601 331)	(8 831 989)
Debt securities buy out		(3 174 048)	(2 787 443)
Repayment of loans and advances		(719 210)	(617 713)
Repayment of lease liabilities		(141 529)	(147 307)
Dividends to shareholders		(4 738 519)	(4 560 709)
Purchase of own shares		(82 367)	(72 334)
Interest paid		(745 658)	(646 483)
Net cash flows from financing activities		(3 579 975)	(4 297 765)
Total net cash flows		1 782 582	(4 976 720)
Cash and cash equivalents at the beginning of the accounting period		28 722 169	33 698 889
Cash and cash equivalents at the end of the accounting period		30 504 751	28 722 169

*Data restated following changes to the presentation of cash and cash equivalents; details are presented in Note 2.5.

Information regarding liabilities arising from financing activities relating to loans received, subordinated liabilities and the issue of debt securities were presented respectively in notes 31-34.

VI.            Additional notes to financial statements

1.     General information about issuer

Santander Bank Polska SA is a bank located in Poland, 00-854 Warszawa, al. Jana Pawła II 17, National Court Registry identification number is 0000008723, TIN os 896-000-56-73, National Official Business Register number (REGON) is 930041341.

On 7.09.2018, the District Court for Wrocław-Fabryczna in Wrocław, VI Economic Unit of the National Court Register, entered into the register of entrepreneurs changes in the Bank’s statute resulting in, among others, the change of the Bank's name from the Bank Zachodni WBK SA to Santander Bank Polska SA.

As at 31 December 2025, the immediate and ultimate parent of Santander Bank Polska S.A. was Banco Santander S.A., headquartered in Santander.

Santander Bank Polska SA offers a wide range of banking services to individual and business customers and operates in domestic and interbank foreign markets. It also offers the following services:

·         intermediation in trading in securities,

·         leasing,

·         factoring,

·         asset/ fund management,

·         insurance distribution services,

·         trading in shares of commercial companies,

·         brokerage services.

2.     Basis of preparation of financial statements

2.1. Statement of compliance

These standalone financial statements of Santander Bank Polska S.A. were prepared in accordance with the International Financial Reporting Standards (IFRS)  as adopted by the European Union, which are applied on a consistent basis, as at 31 December 2025, and  in the case of matters not governed by the above Standards, in accordance with the provisions of the Accounting Act of 29 September 1994  (consolidated text: Journal of Law 2023, item 120) and related implementing acts as well as the requirements imposed on issuers whose securities are admitted to trading on regulated markets or issuers who have applied to have securities admitted to trading on regulated markets outlined in the Act of 29 July 2005 on Public Offering, on Conditions for the Introduction of Financial Instruments to the Organized Trading System and on Public Companies.

These standalone financial statements have been approved for publication by the Management Board of Santander Bank Polska S.A. on 23 February 2026.

2.2 Basis of preparation of financial statements

These standalone financial statements have been prepared on the assumption that the Bank will continue as going concern in the foreseeable future, i.e. for a period of at least 12 months from the date on which these financial statements were prepared.

Standalone financial statements are presented in PLN, rounded to the nearest thousand.

These financial statements of Santander Bank Polska S.A. have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union and in accordance with following measurement rules:

Item	Balance sheet valuation rules
Held-for-trading financial instruments	Fair value through profit or loss
Loans and advances to customers which meet the contractual cash flows test	Amortized cost
Loans and advances to customers which do not meet the contractual cash flows test	Fair value through profit or loss
Financial instruments measured at fair value through other comprehensive income	Fair value through other comprehensive income
Share-based payment transactions	According to IFRS 2 "Share-based payment" requirements
Equity investment financial assets	Fair value through other comprehensive income – an option
Equity financial assets-trading	Fair value through profit or loss
Debt securities measured at fair value through profit or loss	Fair value through profit or loss
Non-current assets	The purchase price or production cost reduced by total depreciation charges and total impairment losses
Right of use assets ( IFRS 16)	Initial measurement reduced by total depreciation charges and total impairment losses
Non-current assets held for sale and groups of non-current assets designated as held for sale	Are recognised at the lower of their carrying amount and their fair value less costs of disposal.

The same accounting principles were applied as in the case of the standalone financial statements for the period ending 31 December 2024, except for changes in accounting standards p. 2.4., changes in the presentation of “Cash and cash equivalents” described in note 2.5.

2.3 New standards and interpretations or changes to existing standards or interpretations which can be applicable to Santander Bank Polska S.A. and are not yet effective and have not been early adopted

.

IFRS	Nature of changes	Effective from	Influence on Santander Bank Polska S.A.
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7)	Amendments regarding classification and measurement of financial instruments clarify derecognition of a financial liability settled through electronic transfer, present examples of contractual terms that are consistent with a basic lending arrangement, clarify characteristics of non-recourse features and contractually linked instruments and specify new disclosures.	1 January 2026	The amendment may have impact on classification, cash in transits and some of the disclosures in consolidated financial statements.
Annual Improvements to IFRS Accounting Standards	Collection of amendments to IFRS Accounting Standards that will not be a part of any other project and adress necessary, but non-urgent, minor updates. Amendments concern IFRS 7, IFRS 9, IFRS 10, IAS 7.	1 January 2026	The amendment will not have a significant impact on consolidated financial statements.
Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature-dependent Electricity	The amendments made to IFRS 9 include detail on which power purchase agreements (PPAs) contracts can be used in hedge accounting, and the specific conditions allowed in such hedge relationships. The amendments made to IFRS 7 introduce some new disclosure requirements for contracts referencing naturedependent electricity as defined in the amendments to IFRS 9.	1 January 2026	The amendment will not have a significant impact on consolidated financial statements.
IFRS 18 Presentation and Disclosure in Financial Statements	IFRS 18 includes requirements for all entities applying IFRS for the presentation and disclosure of information in financial statements. IFRS 18 replaces IAS 1.	1 January 2027	The amendment may have impact on cash flow statement, some of the disclosures and income statement in consolidated financial statements.*
IFRS 19 Subsidiaries without Public Accountability: Disclosures	IFRS 19 specifies reduced disclosure requirements that an eligible entity is permitted to apply instead of the disclosure requirements in other IFRS Accounting Standards.	1 January 2027	The amendment will not have an impact on consolidated financial statements.*
IAS 21 Translation to a Hyperinflationary Presentation Currency	The amendments apply to companies with a non-hyperinflationary functional currency using a hyperinflationary presentation currency and also apply to companies with hyperinflationary functional and presentation currencies that translate the results and financial position of foreign operations whose functional currency is non-hyperinflationary. The amendmants gives information on how such positions should be translated.	1 January 2027	The amendment will not have an impact on consolidated financial statements.*

*New standards and amendments to existing standards issued by the IASB but not yet endorsed for use in the EU

2.4. Standards and interpretations or changes to existing standards or interpretations which were applied for the first time in the accounting year 2025

IFRS	Nature of changes	Effective from	Influence on Santander Bank Polska S.A.
Amendments to IAS 21: Lack of Exchangeability	Amendments require disclosure of information that enables users of financial statements to understand the impact of a currency not being exchangeable.	1 January 2025	The amendment does not have a significant impact on consolidated financial statements.

esentation of the item "Cash and cash equivalents" in the statement of financial position

2.5 Comparability with the results from the previous periods

Presentation of cash and cash equivalents in the statement of financial position

The section below describes presentation changes made to the financial statements of Santander Bank Polska for 2025, affecting the separate statement of financial position as at 1 January 2024 and 31 December 2024.

Financial assets with original maturity of up to three months, meeting the definition of cash and cash equivalents namely loans and advances to banks and debt investment securities (NBP bills), are presented under “Cash and cash equivalents” together with assets that used to be disclosed under “Cash and balances with central banks”. In the Banks’s view, such presentation is reliable and more relevant for readers of the statement of financial position as the total amount of cash and cash equivalents is directly indicated. It is also consistent with the guidelines of the IFRS Interpretations Committee and requirements of IAS 7 Statement of Cash Flows and IAS 1 Presentation of Financial Statements. The foregoing changes in the accounting policies made it necessary to restate the comparative data but did not affect the Bank’s total assets, net profit or equity.

The changes also had no effect on the value of cash and cash equivalents presented in the cash flow statement.

The impact of the above change on the published financial statements as at 1 January 2024 and 31 December 2024 is presented below.

Items in the statement of financial position

	as at : 1.01.2024
	before	adjustment	after
Cash and cash equivalents	-	33 698 889	33 698 889
Cash and balances with central banks	8 275 110	(8 275 110)	-
Loans and advances to banks	9 048 400	(8 686 926)	361 474
Reverse sale and repurchase agreements	12 676 594	(10 640 461)	2 036 133
Investment securities incl.:	62 952 586	(6 096 392)	56 856 194
- debt securities measured at fair value through other comprehensive income	44 814 032	(6 096 392)	38 717 640
Total assets	252 401 201	-	252 401 201

	as at: 31.12.2024
	before	adjustment	after
Cash and cash equivalents	-	28 722 169	28 722 169
Cash and balances with central banks	10 240 316	(10 240 316)	-
Loans and advances to banks	9 002 974	(4 835 277)	4 167 697
Reverse sale and repurchase agreements	12 126 356	(7 650 952)	4 475 404
Investment securities incl.:	71 820 996	(5 995 624)	65 825 372
- debt securities measured at fair value through other comprehensive income	38 130 920	(5 995 624)	32 135 296
Total assets	276 090 920	-	276 090 920

Presentation of net interest income in the statement of cash flows

Changes were made to the presentation of net interest income. Previously, interest accrued on operating activities adjusted, among other things, the balance of financial assets/liabilities held for trading, hedging derivatives, loans and advances to banks, loans and

advances to customers, deposits from banks and deposits from customers. Now, it is presented under a separate line item: Net interest income including accrued interest excluded from operating activities, with the latter item previously presented separately.

Such presentation is based on prevailing market practice and, in the Bank’s opinion, better reflects the nature of the above items in the statement of cash flows. The foregoing changes in the accounting policies made it necessary to restate the comparative data but did not affect the total net cash flows.

Items of the statement of cash flows

for the period:	1.01.2024-31.12.2024
	before	adjustment	after
Cash flows from operating activities
Profit before tax	7 029 586		7 029 586
Adjustments for:
Net interest income	-	(11 917 462)	(11 917 462)
Interest accrued excluded from operating activities	(2 176 110)	2 176 110	-
Changes in:
Provisions	857 895	-	857 895
Financial assets / liabilities held for trading	673 731	53 200	726 931
Assets pledged as collateral	(1 088 492)	-	(1 088 492)
Hedging derivatives	329 435	(59 146)	270 289
Loans and advances to banks	(4 686 721)	886 723	(3 799 998)
Loans and advances to customers	(22 961 885)	11 711 096	(11 250 789)
Deposits from banks	501 649	(122 028)	379 621
Deposits from customers	23 383 643	(3 124 525)	20 259 118
Buy-sell/ Sell-buy-back transactions	(1 915 324)	396 032	(1 519 292)
Other assets and liabilities	(3 266 121)	-	(3 266 121)
Net cash flows from operating activities	4 439 151	-	4 439 151
Total net cash flows	(4 976 720)	-	(4 976 720)
Cash and cash equivalents at the beginning of the accounting period	33 698 889	-	33 698 889
Cash and cash equivalents at the end of the accounting period	28 722 169	-	28 722 169

2.6 Use of estimates

Preparation of financial statement in accordance with the IFRS requires the management to make subjective judgements and assumptions, which affects the applied accounting principles as well as presented assets, liabilities, revenues and expenses.

The estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying amounts of assets and liabilities that are not readily apparent from other sources.

The estimates and assumptions are reviewed on an ongoing basis. Changes to estimates are recognised in the period in which the estimate is changed if the change affects only that period, or in the period of the change and future periods if the change affects both current and future periods.

Key accounting estimates made by Santander Bank Polska S.A.

Key estimates include:

·     Allowances for expected credit losses

·     Fair value of financial instruments

·     Estimates of provisions for legal claims

·     Estimates  of risk arising from mortgage loans in foreign currencies

Allowances for expected credit losses in respect of financial assets

The IFRS 9 approach is based on estimation of the expected credit loss (ECL). ECL allowances reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money; and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and

forecasts of future economic conditions. ECL allowances are measured at an amount equal to a 12-month ECL or the lifetime ECL, when it is deemed there has been a significant increase in credit risk since initial recognition (Stage 2) or impairment (Stage 3). Accordingly, the ECL model gives rise to measurement uncertainty, especially in relation to:

·   measurement of a 12-month ECL or the lifetime ECL;

·   determination of whether/when a significant increase in credit risk occurred;

·   determination of any forward-looking information reflected in ECL estimation, and their likelihood.

As a result, ECL allowances are estimated using the adopted model developed using many inputs and statistical techniques. Structure of the models that are used for the purpose of ECL estimation consider models for the following parameters:

·   PD - Probability of Default, i.e. the estimate of the likelihood of default over a given time horizon (12-month or lifetime);

·   LGD - Loss Given Default, i.e. the part of the exposure amount that would be lost in the event of default;

·   EAD – Exposure at Default, i.e. expectation for the amount of exposure in case of default event in a given horizon 12-month or lifetime.

Changes in these estimates and the structure of the models may have a significant impact on ECL allowances.

In accordance with IFRS 9, the recognition of expected credit losses depends on changes in credit risk level which occur after initial recognition of the exposure. The standard defines three main stages for recognising expected credit losses:

·   Stage 1 – exposures with no significant increase in credit risk since initial recognition, i.e. the likelihood of the exposure being downgraded to the impaired portfolio (Stage 3 exposures) has not increased. For such exposures, 12-month expected credit losses are recognised

·   Stage 2 – exposures with a significant increase in credit risk since initial recognition, but with no objective evidence of impairment. For such exposures, lifetime expected credit losses are recognised.

·   Stage 3 – exposures for which the risk of default has materialised (objective evidence of impairment has been identified). For such exposures, lifetime expected credit losses are recognised

For the purpose of the collective evaluation of ECL, financial assets are grouped on the basis of similar credit risk characteristics that indicate the debtors' ability to pay all amounts due according to the contractual terms (for example, on the basis of the Bank’s credit risk evaluation or the rating process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). The characteristics chosen are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated. The rating/scoring systems have been internally developed and are continually being enhanced, e.g through external analysis that helps to underpin the aforementioned factors which determine the estimates of impairment charges.

In the individual approach, the ECL charge was determined based on the calculation of the total probability-weighted impairment charges estimated for all the possible recovery scenarios, depending on the recovery strategy currently expected for the customer.

In the scenario analysis, the key strategies / scenarios used were as follows:

·   Recovery from the operating cash flows / refinancing / capital support;

·   Recovery through the voluntary realisation of collateral;

·   Recovery through debt enforcement;

·   Recovery through systemic bankruptcy/recovery proceeding/liquidation bankruptcy;

·   Recovery by take-over of the debt / assets / sale of receivables

·   Recovery as part of legal restructuring.

In addition, for exposures classified as POCI (purchased or originated credit impaired) - i.e. purchased or orginated financial assets that are impaired on initial recognition, expected credit losses are recognized over the remaining life horizon. Such an asset is created when impaired assets are initially recognized and the POCI classification is maintained over the life of the asset.

A credit-impaired assets

Credit-impaired assets are classified as Stage 3 or POCI.  A financial asset or a group of financial assets are impaired if, and only if, there was objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset or asset

was recognized as POCI and that impairment event (or events) had an impact on the estimated future cash flows of the financial asset or group of financial assets that could be reliably estimated.

It may not be possible to identify a single event that caused the impairment, rather the combined effect of several events may have caused the impairment. Objective evidence that a financial asset or group of assets was impaired includes observable data:

·   significant financial difficulty of the issuer or debtor;

·   a breach of contract, e.g. delay in repayment of interest or principal over 90 days in an amount exceeding the materiality threshold (PLN 400 for individual and small and medium-sized enterprises and PLN 2,000 for business and corporate clients) and at the same time relative thresholds (above 1% of the amount past due in relation to the balance sheet amount);

·   the Santander Bank Polska S.A., for economic or legal reasons relating to the debtor's financial difficulty, granting to the debtor a concession that the Santander Bank Polska S.A. would not otherwise consider, which fulfil below criteria:

(1)     restructuring transactions classified in the Stage 3 category (before restructuring decision),

(2)     transactions restructured in the contingency period that meet the criteria for reclassification to the Stage 3 (quantitative and/or qualitative),

(3)     transactions restructured during the contingency period previously classified as non-performing due to observed customer financial difficulties, have been restructured again or are more than 30 days past due,

(4)     restructured transactions, where contractual clauses have been applied that defer payments through a grace period for repayment of the principal for a period longer than two years,

(5)     restructured transactions including debt write-off, interest grace periods or repaid in installments without contractual interest,

(6)     restructured transactions, where there was a decrease in the net present value of cash flows (NPV) of at least 1% compared to the NPV before the application of the forbearance measures,

(7)     transactions where there is a repeated failure to comply with the established payment plan of previous forbearances that has led to successive forbearances of the same exposure (transaction),

(8)     transactions where:

·       in inadequate repayment schedules were applied, which are related to, inter alia, repeated situations of non-compliance with the schedule, changes in the repayment schedule in order to avoid situations of non-compliance with it, or

·       a repayment schedule that is based on expectations, unsupported by macroeconomic forecasts or credible assumptions about the borrower's ability or willingness to repay was applied

(9)     transactions for which the Bank has reasonable doubts as to the probability of payment by the customer.

·   it becoming probable that the debtor will enter bankruptcy, recovery proceedings, arrangement or other financial reorganisation;

·   the disappearance of an active market for that financial asset because of financial difficulties;

Impaired exposures (Stage 3) can be reclassified to Stage 2 or Stage 1 if the reasons for their classification to Stage 3 have ceased to apply (particularly if the borrower’s economic and financial standing has improved) and a probation period has been completed (i.e. a period of good payment behaviour meaning the lack of arrears above 30 days), subject to the following:

·   In the case of individual customers, the probation period is 180 days.

·   In the case of SME customers, the probation period is 180 days, and assessment of the customer’s financial standing and repayment capacity is required in some cases. However, the exposure cannot be reclassified to Stage 1 or 2 in the case of fraud, client`s death, discontinuation of business, bankruptcy, or pending restructuring/ liquidation proceedings.

·   In the case of business and corporate customers, the probation period is 92 days, and positive assessment of the financial standing is required (the Bank assesses all remaining payments as likely to be repaid as scheduled in the agreement). The exposure cannot be reclassified to Stage 1 or 2 in the case of fraud, discontinuation of business, or pending restructuring/ insolvency/ liquidation proceedings.

Additionally, if the customer is in Stage 3 and subject to the forbearance process, they may be reclassified to Stage 2 not earlier than after 365 days (from the start of forbearance or from the downgrade to the NPL portfolio, whichever is later) of regular payments, repayment by the client of the amount previously overdue / written off (if any) and after finding that there are no concerns as to the further repayment of the entire debt in accordance with the agreed terms of restructuring.

A significant increases in credit risk

One of the key elements of IFRS 9 is the identification of a significant increase in credit risk which determines the classification to Stage 2. The Bank has developed detailed criteria for the definition of a significant increase in credit risk based on the following main assumptions:

·   Qualitative assumptions:

·   Implementing dedicated monitoring strategies for the customer following the identification of early warning signals that indicate a significant increase in credit risk

·   Restructuring actions connected with making concessions to the customers as a result of their difficult financial standing

·   Delay in payment as defined by the applicable standard, i.e. 30 days past due combined with the materiality threshold

·   Quantitative assumptions:

·  A risk buffer method based on the comparison of curves illustrating the probability of default over the currently remaining lifetime of the exposure based on the risk level assessment at exposure recognition and at reporting date. Risk buffer is set in relative terms for every single exposure based on its risk assessment resulting from internal models and other parameters of exposure impacting assessment of the Bank whether the increase might have significantly increased since initial recognition of the exposure (such parameters considered types of the products, term structure as well as profitability). Risk buffer methodology was prepared internally and is based on the information gathered in the course of the decision process as well as in the process of transactions structuring.

·  Absolute threshold criterion - a significant increase in risk is considered to have occurred when, over the horizon of the current remaining life of the exposure, the annualised PD at the reporting date exceeds the corresponding PD at the time the exposure was recognised by an amount greater than the threshold.

·  In addition, the Bank applies the threefold risk criterion. It is met when, over the horizon of the current remaining life of the exposure, the annualised PD as at the reporting date exceeds three times the corresponding PD at the time the exposure was recognised.

The fact that the exposure is supported by the Borrowers' Support Fund is reported as a forborne and a significant increase in credit risk (Stage 2), and in justified cases (previously identified impairment, subsequent restructuring action, inability to service the debt forecasted on the basis of defined criteria) constitutes an indication of impairment (Stage 3).

The average thresholds according to data as at 31.12.2025 (expressed in terms of PD over a one-year horizon), exceeding which results in the classification of the exposure to Stage 2 in accordance with the quantitative risk buffer method used by the Bank, are presented in the table below.

Average threshold (annualized) of the probability of default
mortgage loans				3.20%
consumer loans				14.14%
Bussines loans				6.23%

Santander Bank Polska S.A. independently verifies the fulfillment of other quantitative thresholds (the absolute threshold criterion and the threefold risk increase criterion).

Santander Bank Polska S.A. identifies exposures with low credit risk in its corporate segment in accordance with the rules under IFRS 9, which allows for the recognition of 12-month expected losses even if credit risk has increased significantly since initial recognition. As of 31 December 2025, this portfolio was immaterial and represented 0.148% of Santander Bank Polska S.A.'s portfolio classified as Stage 1 or Stage 2.

Exposure in Stage 2 may be re-classified into Stage 1 without probation period as soon as significant increase in credit risk indicators after its initial recognition end e.g. when the following conditions are met: client`s current situation does not require constant monitoring, no restructuring actions towards exposure are taken, exposure has no payment delay over 30 days for significant amounts, and according to risk buffer method no risk increase occurs. 

ECL measurement

Another key feature required by IFRS 9 is the approach to the estimation of risk parameters. For the purpose of estimating allowances for expected losses, Santander Bank Polska S.A. uses its own estimates of risk parameters that are based on internal models. Expected credit losses are the sum of individual products for each exposure of the estimated values of PD, LGD and EAD parameters in particular periods (depending on the stage either in the horizon of 12 months or in lifetime) discounted using the effective interest rate.

The estimated parameters are adjusted for macroeconomic scenarios in accordance with the assumptions of IFRS 9. To this end, the Bank determines the factors which affect individual asset classes to estimate an appropriate evolution of risk parameters. The Bank uses scenarios developed internally by the analytical team, which are updated on a monthly basis at least every six months. The models and parameters generated for the needs of IFRS 9 are subject to model management process and periodic calibration and validation. These tools are also used in the financial planning process.

Determination of forward-looking information and their likelihood

Forward-looking events are reflected both in the process of estimating ECL and when determining a significant increase in credit risk, by developing appropriate macroeconomic scenarios and then reflecting them in the estimation of parameters for each scenario. The final parameter value and the ECL is the weighted average of the parameters weighted by the likelihood of each scenario. Bank uses three scenario types: the baseline scenario and two alternative scenarios, which reflect the probable alternative options of the baseline scenario: upside and downside scenario. Scenario weights are determined using the expected GDP path and the confidence intervals for this forecast in such a way that the weights reflect the uncertainty about the future development of this factor.

The Bank's models most often indicate the dependence of the quality of loan portfolios on the market situation in terms of the level of deposits, loans, as well as the levels of measures related to interest rates.

Baseline scenario

The Polish economy accelerated to 3.6% growth in 2025, compared to 2.9% y/y growth in 2024. The scenario predicts GDP growth of 3.7% in 2026 and 3.2% in 2027. Growth in 2025 was driven primarily by strong private consumption, supported by a robust labour market and the start of a new investment cycle related to the spending of European funds and military spending. A further strong acceleration in investment driven by EU funds is expected in 2026. Inflation has gradually begun to stabilize near the National Bank of Poland target, and the baseline scenario predicts CPI to average around 3% in 2026 and around 2.5% in subsequent years.

Monetary policy in 2025 brought a series of interest rate cuts. High economic growth and relatively high wage growth have led the central bank to adopt cautious decisions, with no clearly declared monetary easing cycle. The baseline scenario assumes a reduction in the NBP reference rate to 3.50% by the end of 2026. In 2027, the scenario predicts a slight upward adjustment to 3.75%. These expectations are based on market valuations as of October 14, 2025.

The EURPLN fell by approximately 0.8% in 2025 compared to the previous year, fluctuating between 4.20 and 4.27 for most of the year, and below 4.25 in the second half. The positive impact of the resilience of domestic economic growth and the likely end of the NBP interest rate cuts will be offset by persistent geopolitical uncertainty, gradually increasing current account imbalances, and expansionary fiscal policy. In 2026 and beyond, we assume a stable EURPLN exchange rate of 4.25.

The credit market saw a significant recovery in 2025, and a growth of 6.4% y/y for the entire year was identified, compared to 5.0% a year earlier. The favourable domestic economic climate and lower interest rates will continue to stimulate the entire market in the coming quarters, leading the baseline scenario to project an acceleration in credit growth to 7.1% y/y in 2026 and a slightly slower rate of 6.7% y/y in 2027. In 2025, deposit growth hovered around 10% y/y, partly due to a strong increase in net foreign assets in the banking system. Deposit volume growth will continue to outpace loan growth, though the difference will be smaller. In the baseline scenario, we assume deposit growth of 8.6% in 2026 and 8.3% in 2027.

Best case scenario

The optimistic scenario assumes rapid disbursement of EU funds, strong private consumption, and a strong inflow of workers into the economy, which will allow it to record higher long-term growth rates.

It is assumed that the economy will accelerate to 6.3% in 2026, and 4.7% in 2027. Strong economic growth and the risk of higher CPI inflation will reduce the Monetary Policy Council's willingness to cut interest rates, and the NBP rate will return to 5.00% in the first half of 2026 and remain at this level in subsequent quarters. As a result, CPI inflation will increase moderately, averaging 3.2% in 2026, and 2.9% in 2027.

The Polish zloty will strengthen in the coming quarters. The euro exchange rate will reach a low of 4.05 in early 2026, stabilizing at 4.10 thereafter.

The acceleration in economic activity will have a positive impact on demand for loans in the banking system, which will also support money creation and deposit growth.

Worst case scenario

The negative scenario assumes a deterioration in consumer sentiment, leading to a decline in private consumption in the short term, accompanied by a weaker absorption of EU funds, which translates into lower investment expenditures in the economy, as well as a weaker inflow of foreign workers, which weakens Poland's long-term growth potential.

In the negative scenario, the economy will grow by 1.1% in 2026, and 1.7% in 2027. Slower growth will translate into slightly faster disinflation, with the CPI falling to 2.6% in 2026, and 2.0% in 2027.

Weaker growth prospects will encourage NBP to further lower interest rates, causing the NBP reference rate to fall to 2.50% by the end of 2026 and remain unchanged in 2027.

Less optimistic economic performance and low NBP interest rates will weaken the złoty, and the euro will appreciate towards 4.40.

Lower economic activity will negatively impact demand for loans in the banking system, both in the household sector and in corporate loans.

The tables below present the key economic indicators arising from the respective scenarios.

Scenario as at 31.12.2025			baseline		best case		worst case
likelihood			60%		20%		20%
			2026	average, next 3 years	2026	average, next 3 years	2026	average, next 3 years
GDP		YoY	3.7%	3.1%	6.3%	4.6%	1.1%	1.9%
WIBOR 3M		average	3.7%	3.9%	5.1%	5.3%	2.7%	2.7%
unemployment rate		% active	3.1%	3.1%	3.0%	2.9%	3.2%	3.5%
CPI		YoY	3.0%	2.5%	3.2%	2.8%	2.6%	2.2%
EURPLN		period-end	4,25	4,25	4,07	4,09	4,42	4,40

Scenario as at 31.12.2024			baseline		best case		worst case
likelihood			60%		20%		20%
			2025	average, next 3 years	2025	average, next 3 years	2025	average, next 3 years
GDP		YoY	3.5%	3.1%	5.7%	5.1%	1.6%	1.7%
WIBOR 3M		average	5.2%	4.5%	5.6%	5.3%	3.9%	3.7%
unemployment rate		% active	2.9%	2.9%	2.7%	2.3%	3.2%	3.7%
CPI		YoY	4.6%	2.8%	5.2%	3.1%	4.0%	2.4%
EURPLN		period-end	4,35	4,37	4,24	4,26	4,43	4,46

Management ECL overlays

At the end of the 2025, Santander Banka Polska S.A. has no significant overlays due to credit risk.

Potential variability of ECL

Significant volatility for the income statement may be reclassifications to Stage 2 from Stage 1. The theoretical reclassification of given percentage of exposures from Stage 1 with the highest risk level to Stage 2 for each type of exposure would result in an increase in allowances according to below table. The above estimates show expected variability of loss allowances as a result of transfers between Stage 1 and Stage 2, resulting in significant changes in the degree to which exposures are covered with allowances in respect of different ECL horizons.

	additional expected credit loss (PLN m)
reclassification from stage 1 to stage 2	individual	mortgage loans	business	Total 31.12.2025	Total 31.12.2024
1%	8,0	4,7	5,0	17,7	14,4
5%	30,9	13,2	43,0	87,1	65,1
10%	49,6	20,7	69,9	140,2	119,1

Changes in forecasts of macroeconomic indicators may result in significant effects affecting the level of created provisions. Adoption of macroeconomic parameter estimates at only one scenario level (pessimistic or optimistic) will result in a one-off change in ECL at the level below.

in PLN m		change in ECL level
scenario					31.12.2025	31.12.2024
	individuals	housing loans	business		Total	Total
pessimistic	58,3	9,9	33,9		102,1	79,2
optimistic	(55,2)	(9,5)	(28,4)		(93,1)	(81,0)

Based on GDP as the main factor determining the condition of the economy, Santander Bank Polska S.A. estimates that a 1% reduction in the target level of gross domestic production in 2025 would translate into an increase in expected credit losses of PLN 39,799 k. The above analysis was prepared assuming that the relationships between macroeconomic factors remain unchanged.

Fair value of financial instruments, including instruments which do not meet the contractual cash flows test

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Santander Bank Polska S.A. applies a methodology for measuring the fair value of credit exposures and debt instruments. 

In the case of the instruments with distinguishable on-balance sheet and off-balance sheet components, the extent of fair value measurement will depend on the nature of the underlying exposure, and:

·    the on-balance sheet portion always will be measured at fair value;

·    the off-balance sheet portion will be measured at fair value only if at least one of the following conditions is met:

·     condition 1: the exposure has been designated as measured at fair value (option) or

·     condition 2: the exposure may be settled net in cash or through another instrument or

·     condition 3: Santander Bank Polska S.A. sells the obligation immediately after its granting or

·     condition 4: the obligation was granted below the market conditions.

The fair value is measured with the use of valuation techniques appropriate in the circumstances and for which sufficient data are available, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 The Bank applies following valuation techniques:

·       market approach – uses prices and other relevant information generated by market transactions involving identical or comparable (similar) assets, liabilities, or a group of assets and liabilities (e.g. a business unit)

·       income approach – converts future amounts (cash flows or income and expenses) to a single current (discounted) date. When the income approach is used, the fair value measurement reflects the current market expectations as to the future amounts.

Santander Bank Polska S.A. uses the income approach for fair value measurement relating to debt financial instruments which do not meet contractual cash flows test.

In the case of credit exposures and debt instruments, the present value method within income approach is typically used. In this method, the expected future cash flows are estimated and discounted using a relevant interest rate. In the case of the present value method, Santander Bank Polska S.A. uses the following elements in the valuation:

·    expectations as to the future cash flows;

·    expectations as to potential changes in cash flow amounts and timing (uncertainties are inherent in cash flow estimates);

·    the time value of money, estimated using risk-free market rates;

·    the price of uncertainty risk inherent in cash flows (risk premium) and

·    other factors that market participants would take into account in the circumstances.

The present value measurement approach used by Santander Bank Polska S.A. is based on the following key assumptions:

·    cash flows and discount rates reflect the assumptions that market participants would adopt in the measurement of an asset;

·    cash flows and discount rates reflect only the factors allocated to the asset which was subject to measurement;

·    discount rates reflect the assumptions which are in line with the cash flow assumptions;

·    discount rates are consistent with the key economic factors relating to the currency in which the cash flows are denominated.

The fair value determination methodology developed by Santander Bank Polska S.A. provides for adaptation of the fair value measurement model to the characteristics of the financial asset subject to measurement. When determining the need for adaptation of the model to the features of the asset subject to measurement, Santander Bank Polska S.A. takes into account the following factors:

·    approach to the measurement (individual/collective) given the characteristics of the instrument subject to measurement;

·    whether a schedule of payments is available; 

·    whether the asset subject to measurement is still offered by Santander Bank Polska S.A. and whether the products recently provided to customers can be a reference group for that asset. 

Other significant groups of financial instruments measured at fair value are all derivatives, financial assets held within a residual business model, debt investment financial assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and equity investment financial assets. These financial instruments are either measured with reference to a quoted market price for that instrument or by using a respective measurement model.

Where the fair value is calculated using financial-markets pricing models, the methodology is to calculate the expected cash flows under the terms of each specific contract and then discount these values back to a present value. These models use as their basis independently sourced market parameters including, for example, interest rate yield curves, securities and commodities prices, option volatilities and currency rates. Most market parameters are either directly observable or are implied from instrument prices.

In justified cases, for financial instruments whose carrying amount is based on current prices or valuation models, Santander Bank Polska S.A. takes into account the need to identify additional adjustments to the fair value of the counterparty credit risk.

The fair value measurement models are reviewed periodically.

A summary of the carrying amounts and fair values of the individual groups of assets and liabilities is presented in Note 44.

Estimates for legal claims

Santander Bank Polska S.A. raises provisions for legal claims in accordance with IAS 37. The provisions have been estimated considering the likelihood of unfavourable verdict and amount to be paid, and their impact is presented in other operating income and cost.

Details on the value of the provisions and the assumptions made for their calculation are provided in Notes 35, 45 and 46.

Due to their specific nature, estimates related to legal claims of mortgage loans in foreign currencies are described below.

Estimates of risk arising from mortgage loans in foreign currencies

Due to the revolving legal situation related to mortgage loans portfolio denominated  and indexed to foreign currencies, and inability to  recover all contractual cash flows risk materialisation, Bank estimates impact of legal risk on future cash flows.

Gross book value adjustment resulting from legal risk is estimated based on a number of assumptions, taking into account: a specific time horizon and a number of probabilities such as:

·         the probability of possible settlements and

·         the probability of submitting claims by borrowers,and

·         the probability in terms of the number of disputes

which are described in more details in Note 45.

Legal risk is estimated individually for each exposure in the event of litigation and in terms of portfolio in the absence of such.

As explained in the accounting policies, Santander Bank Polska S.A. accounts for the impact of legal risk as an adjustment to the gross book value of the mortgage loans portfolio. If there is no credit exposure or its value is insufficient, the impact of legal risk is presented as a provision according to IAS 37.

The result on legal risk is presented in a separate position in income statement “Cost of legal risk associated with foreign currency mortgage loans” and “Gain/loss on derecognition of financial instruments measured at amortised cost”.

In 2025, the Bank recognized PLN 1 596 631 k as cost of legal risk related to mortgage loans in foreign currencies and PLN 47 213 k as a cost of signed settlements.

Santander Bank Polska S.A. will continue to monitor this risk in subsequent reporting periods.

Details presenting the impact of the above-mentioned risk on financial statement, assumptions adopted for their calculation, scenario description and sensitivity analysis are contained in notes 45 and 46, respectively.

2.7 Judgements that may significantly affect the amounts recognized in the financial statements

When applying the accounting principles, the management of Santander Bank Polska S.A. makes various judgements that may significantly affect the amounts recognized in financial statements.

Assessment whether contractual cash flows are solely payments of principal and interest

The key issue for Santander Bank Polska S.A.'s business, is to assess whether the contractual terms of  financial assets indicate the existence of certain cash flow dates, which are only the repayment of the nominal value and interest on the outstanding nominal value.

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition and ‘interest’ is defined as consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, Santander Bank Polska S.A. considers the contractual terms of the instrument. This includes assessing whether the financial assets contain a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In  making the assessment the Santander Bank Polska S.A. considers:

·       contingent events that would change the amount and timing of cash flows,

·       leverage features,

·       prepayment and extension terms,

·       terms that limit Santander Bank Polska S.A.’s claim to cash flows from specified assets (e.g. non-recourse asset arrangements),

·       features that modify consideration for the time value of money.

A prepayment feature is consistent with the SPPI criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract.

In addition, a prepayment feature is treated as consistent with this criterion if a financial asset is acquired or originated at a premium or discount to its contractual par amount, the prepayment amount substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination), and the fair value of the prepayment feature is insignificant on initial recognition.

Business Model Assessment

Business models at Santander Bank Polska S.A. are determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. The business model does not depend on the intentions of the Santander Bank Polska S.A. management regarding a particular instrument, which is why the model is assessed at a higher level of aggregation.

All business models, quantitative and qualitative criteria used for business model assessment are described in p.2.8 regarding financial asset classification.

2.8 Material accounting policy information

With the exception of the changes described in point 2.3, the Santander Bank Polska S.A. consistently applied the adopted accounting principles both for the reporting period for which the statement is prepared and for the comparative period.

Foreign currency

Foreign currency transactions

The Polish zloty (PLN) is the functional currency of Santander Bank Polska S.A.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Resulting from these transactions monetary assets and liabilities denominated in foreign currencies, are translated at the foreign exchange rate ruling at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated at the foreign exchange rate ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the reporting currency at the foreign exchange rates ruling at the dates that the fair values were determined. Foreign exchange differences arising on translation are recognised in profit or loss except for differences arising on retranslation of instruments of other entities measured at fair value through other comprehensive income, which are recognised in other comprehensive income.

Financial assets and liabilities

Recognition and derecognition

Initial recognition

Santander Bank Polska S.A. recognises a financial asset or a financial liability in its statement of financial position when, and only when, it becomes bound by contractual provisions of the instrument.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, at the settlement date.

Derecognition of financial assets

Santander Bank Polska S.A. derecognises a financial asset when and only when, if:

·       contractual rights to the cash flows from that financial asset have expired, or

·       Santander Bank Polska S.A. transfers a financial asset, and such operation meets the derecognition criteria.

The Bank excludes financial assets from the statement of financial position, inter alia, if they are invalidated, settled, written off, overdue, materially modified or uncollectible as a result of a final court judgment. The above-mentioned components are excluded from the statement of financial position as a result of the provisions recognised for them for expected credit losses or losses due to legal risk (in the case of cancellations of CHF loans).

Derecognition of financial liabilities

Santander Bank Polska S.A. shall remove a financial liability (or a part of a financial liability) from its statement of financial position when, and only when, it is extinguished — i.e. when the obligation specified in the contract is discharged or cancelled or expires.

Classification of financial assets and financial liabilities

Classification of financial assets

Classification of financial assets which are not equity instruments

Santander Bank Polska S.A. classifies financial asset that are not an equity instrument as subsequently measured at amortised cost or at fair value through other comprehensive income or fair value through profit or loss on the basis of both:

·       the business model of Santander Bank Polska S.A. for managing the financial assets and

·       the contractual cash flow characteristics of the financial asset (described in point 2.7).

A financial asset is measured at amortised cost if both of the following conditions are fulfilled:

·       the financial asset is held in a business model whose purpose is to hold financial assets to collect contractual cash flows, and

·       the contractual terms of a financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are fulfilled:

·       the financial asset is held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and

·       the contractual terms of a financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

If a financial asset is not measured at amortised cost or at fair value through other comprehensive income, it is measured at fair value through profit or loss.  

Classification of financial assets which are equity instruments

Santander Bank Polska S.A. measures the financial asset that is an equity instrument at fair value through  profit or loss, unless Santander Bank Polska S.A. made an irrevocable election at initial recognition for particular investments in equity instruments to present subsequent changes in fair value in other comprehensive income.

Business models

Business models at Santander Bank Polska S.A. are determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. The business model does not depend on the intentions of the Santander Bank Polska S.A. key management regarding a particular instrument.

The business model refers to how Santander Bank Polska S.A. manages its financial assets in order to generate cash flows. That is, the business model determines whether cash flows will result from:

·    collecting contractual cash flows

·    selling financial assets

·    or both.

Consequently, the business model assessment is not performed on the basis of scenarios that Santander Bank Polska S.A. does not reasonably expect to occur, such as so-called “worst case” or “stress case” scenarios.

Santander Bank Polska S.A. determines the business model on the basis of the assessment of qualitative and quantitative criteria.

The qualitative criteria include, m.in, how the risks associated with these assets are managed and the principles of remunerating the persons managing these portfolios.

The quantitative criteria are intended to determine whether the sale of financial assets during the analysed period does not exceed the threshold values set in the internal regulations set in percentage terms. The frequency, value, timing of the sale of assets and reasons for the sale are analysed.

Business model types

The analysis of qualitative and quantitative criteria makes it possible to identify three basic business models applied in the operations of Santander Bank Polska S.A.:

·       the business model whose objective is to hold assets in order to collect contractual cash flows (hold to collect),

·       the business model whose objective is achieved by both collecting contractual cash flows and selling financial assets (hold to collect and sell),

·       the other/ residual business model (the business model whose objective is achieved by selling assets).

The predominant business model in the Santander Bank Polska S.A.  is a business model that involves holding assets for the purpose of generating contractual cash flows, with the exception of:

·    debt instruments measured at fair value through other comprehensive income held in the ALM segment and loans and advances subject to the underwriting process described below, for which a business model has been established, the purpose of which is achieved both by generating cash flows arising from the agreement, as well as through the sale of financial assets,

·       instruments held for trading, including debt instruments and derivatives, for which hedge accounting is not used – the appropriate business model is a different/residual business model.

A business model whose objective is to hold assets in order to collect contractual cash flows

In the hold-to-maturity model, incidental sales are possible. Such sales are each time analyzed in terms of frequency, value and distribution of sales in earlier periods, reasons for these sales and expectations as to future sales operations.

A business model whose objective is to hold assets in order to collect contractual cash flows spans the entire spectrum of credit activity, including but not limited to corporate loans, mortgage and consumer loans, credit cards, loans granted and debt instruments (e.g. treasury bonds, corporate bonds), which are not held for liquidity management purposes. Financial assets on account of trading settlements are substantially also recognised under this model. Such assets are recognised in the books of Santander Bank Polska S.A. on the basis of an invoice issued payable within maximum one year.

A business model whose objective is achieved by both collecting contractual cash flows and selling financial assets

A business model whose objective is achieved by both collecting contractual cash flows and selling financial assets includes:

·       financial assets acquired for the purpose of liquidity management, such as State Treasury bonds or NBP bond and

·       loans and advances subject to underwriting, i.e. portion of credit exposures that are planned to be sold before maturity for reasons other than increase in credit risk.

Other/ residual business model

Other, residual, model is used for classifying assets held by Santander Bank Polska S.A. but not covered by the first or second category of the business model. They include assets from the “held for trading” category in the financial statements, such as listed equity instruments, commercial bonds acquired for trading purposes and derivatives (e.g. options, IRS, FRA, CIRS, FX Swap contracts) which are not embedded derivatives.

Changing the business model

Santander Bank Polska S.A. reclassifies all affected financial assets when, and only when, it changes its business model for managing financial assets.

If Santander Bank Polska S.A. reclassifies a financial asset, reclassification occurs prospectively from the first day of the reporting period following the change.

Classification of financial liabilities

Santander Bank Polska S.A. classifies all financial liabilities as subsequently measured at amortised cost, except for: 

·       financial liabilities measured at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.

·       financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies;

·       financial guarantee contracts. After initial recognition , the issuer shall measure contract at the higher of:

(1)     amount of the expected credit loss allowance,

(2)     initial recognised amount, less respective accumulated income recognised as per IFRS 15;

·       commitments to provide a loan at a below-market interest rate. If the liability is not measured at fair value through profit or loss, the issuer shall subsequently measure it at the higher of:

(1)      amount of the expected credit loss allowance,

(2)     initial recognised amount, less respective accumulated income recognised as per IFRS 15;

·       contingent consideration recognised by the acquire under the business combination arrangement governed by IFRS 3. Such contingent consideration shall subsequently be measured at fair value with changes recognised in profit or loss.

Embedded derivatives

For financial assets, that meet the definition of hybrid contracts with an embedded derivative, a derivative that is a component of such a contract is not separated from the host contract which is not a derivative, the entire contract is assessed in terms of the contractual cash flow characteristics.

Measurement of financial assets and financial liabilities

Initial measurement

At initial recognition, Santander Bank Polska S.A. measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

However, if the fair value of the financial asset or financial liability at initial recognition differs from the transaction price, Santander Bank Polska S.A. recognises this instrument on that date as follows:

·       when the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, then Santander Bank Polska S.A. recognises the difference between the transaction price and the fair value at initial recognition as a gain or loss.

·       in all other cases, at the measurement adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, Santander Bank Polska S.A. recognises that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.

At initial recognition, Santander Bank Polska S.A. shall measure trade receivables that do not have a significant financing component (determined in accordance with IFRS 15) at their transaction price (as defined in IFRS 15).

Subsequent measurement of financial assets

After initial recognition, Santander Bank Polska S.A. recognises a financial asset:

·    at amortised cost, or

·    fair value through other comprehensive income, or

·    at fair value through profit or loss.

Allowances for expected credit losses  are not calculated for financial assets measured at fair value through profit or loss.

Subsequent measurement of financial liabilities

After initial recognition, Santander Bank Polska S.A. recognises a financial liability:

·    at amortised cost, or

·    at fair value through profit or loss.

Liabilities measured at amortised costs include: deposits from banks, deposits from customers, liabilities due to repo transactions, loans and advances obtained, issued debt instruments and subordinated liabilities.

Liabilities are recognised as subordinated liabilities  which in the event of liquidation or bankruptcy of Santander Bank Polska S.A. are repaid after satisfaction of claims of all other Santander Bank Polska S.A.’s creditors. Financial liabilities are classified as subordinated liabilities by the decision of the Polish Financial Supervision Authority issued at the request of Santander Bank Polska S.A..  

Amortised cost measurement

Financial assets

Effective interest method

Interest revenue is calculated by applying the effective interest rate to the gross carrying amount of financial assets and presented in “Net interest income”, except for credit-impaired financial assets. At the time a financial asset or a group of similar financial assets is reclassified to stage 3, interest revenue is calculated on the basis of a net value of a financial asset and presented at the interest rate used for the purpose of discounting the future cash flows for the purpose of measurement of impairment.

This does not apply to POCI assets, in the case of which the interest revenue is calculated on the basis of the net carrying amount, applying the effective interest rate adjusted for credit risk over the lifetime of the asset. The credit-adjusted effective interest rate is calculated by taking into account the future cash flows adjusted for the effect of credit risk over the lifetime of the asset.

The gross carrying amount of a financial asset is its amortised cost, before adjusting for any expected credit loss allowances.

Purchased or originated credit-impaired assets  (POCI)

Santander Bank Polska S.A. distinguished the category of purchased or originated credit-risk assets. POCI are assets that are credit-impaired on initial recognition. Financial asset that were classified as POCI at initial recognition should be treated as POCI in all subsequent periods until they are derecognized.

At initial recognition, POCI assets are recognized at their fair value. After initial recognition POCI assets are measured  at amortized costs.

Valuation of POCI assets is based on the  effective interest rate  adjusted for the effect of credit risk .

For POCI assets (purchased or originated credit impaired) expected credit losses are recognised over the lifetime of the asset.

Portfolio of mortgage loans denominated/indexed to foreign currencies

Santander Bank Polska S.A. reduces the gross carrying amount of mortgage loans denominated/indexed to foreign currencies in accordance with IFRS 9 by the impact of legal risk for potential and existing disputes. In the absence of gross carrying amount or its insufficient value to cover, it records a provision in accordance with IAS 37.

Modification of contractual cash flows

The concept of modification

Changes to the contractual cash flows in respect of the financial asset are regarded by Santander Bank Polska S.A. as modification if made in the form of an annex. Changes to the contractual cash flows arising from performance of the contractual obligations are not considered to be a modification.