RAROC profile and corporate credit pricing model derived from Pillar 3 disclosures.
PKO Bank Polski is a Poland-based bank with approximately EUR 134bn of corporate credit exposure (EAD) under the A-IRB approach to credit risk capital. The numbers below come directly from PKO Bank Polski's most recent Pillar 3 CR6 regulatory filings and are used to model how this bank prices corporate credit facilities.
| Parameter | Value | What it means |
|---|---|---|
| IRB approach | A-IRB | How the bank computes risk-weighted assets |
| Cost-to-income ratio | 31.1% | Operating cost share of net revenue |
| Effective tax rate | 19.0% | Applied to RAROC numerator after EL and funding |
| Average corporate PD | 2.54% | EAD-weighted probability of default |
| Avg LGD (unsecured) | 40.0% | Loss share if borrower defaults, no collateral |
| Avg LGD (secured) | 22.0% | Loss share with eligible collateral |
| Funding spread | 22bp | Bank's wholesale funding cost above risk-free |
| Corporate EAD | EUR 134bn | Total exposure at default to corporates |
On a representative BBB+ rated, 5-year term loan of EUR 25M at 150bp spread with a 20bp commitment fee, PKO Bank Polski would generate an estimated RAROC of 7.23% against a typical 12% bank hurdle rate. To hit that hurdle on this exact deal, the bank would need a minimum spread of 246bp. This deal is significantly below target — the bank would either reprice it or decline.
| Component | Value |
|---|---|
| Annual revenue (spread + fees) | EUR 385,000 |
| Operating cost | EUR 154,000 |
| Expected loss (PD × LGD × EAD) | EUR 28,750 |
| Capital required (FPE) | EUR 2,451,320 |
| RAROC (after tax) | 7.23% |
| Min spread to hit 12% RAROC | 246bp |
Out of 59 banks in the OpenRAROC dataset, PKO Bank Polski ranks #35 by RAROC on this sample deal.
| Rank | Bank | Country | RAROC | Min spread |
|---|---|---|---|---|
| 1 | Qatar National Bank | Qatar | 9.00% | 203bp |
| 2 | DBS Group | Singapore | 8.18% | 224bp |
| 3 | JP Morgan | United States | 8.12% | 231bp |
| 4 | ICBC | China | 8.06% | 233bp |
| 5 | China Construction Bank | China | 8.06% | 233bp |
| 34 | UBS | Switzerland | 7.25% | 254bp |
| 35 | PKO Bank Polski | Poland | 7.23% | 246bp |
| 36 | Lloyds Banking Group | United Kingdom | 7.21% | 260bp |
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