Positive trends in the business environment in Poland continued, confirmed with high GDP growth at approx. 5%, and improved results of the Polish banking sector in 2018. The rate of growth of total deposits in the banking sector accelerated to 8.5% annually (NBP data), especially strongly in the households segment (+9.8% per year). Likewise growth of total loans reached the level of 7.6% per year and was only partly supported by appreciation of foreign currencies to PLN. The rate of growth of corporate loans was particularly strong (8.5%), although retail loans also maintained a high growth rate: 7.0% per year. In consequence the Loans/Deposits ratio for the entire sector shrunk slightly during 2018 to a level below 96%.
Strong growth of business volumes brought growth of net interest income, which remained the main factor of profitability improvement in Polish banks in 2018 (+5.2% y/y). The unfavourable situation on capital markets brought a decline of total income from fees and commissions (-10.5% y/y) vs. 2017. Operating costs and risk provisions grew in 2018 as compared with the previous year, nevertheless total net profit of the Polish banking sector was PLN 14.7 bn in 2018 i.e. grew by 7.5% yearly.
The Polish banking sector is also maintaining a very strong capital position. In December 2018 the equity of Polish banks reached PLN 206 bn and solvency ratio rose to 19.1% (Total Capital Ratio – TCR) and to 17.2% (Tier 1 ratio). In 2018 KNF confirmed validity of the same restrictive recommendations as in the previous year relating to dividend policy for banks. At the same time KNF carried out a review of Other Systemically Important Institutions’ buffers as well as pillar 2 buffers concerning FX mortgage exposures. Additionally the all-system capital conservation buffer was increased since the start of 2019 by 0.625% to the target level of 2.5%. Maintaining by Polish banks of high buffers and capital ratios is good from the point of view of risk although it does adversely affect return on the equity invested by banks’ shareholders (lower ROE and limited dividend).
2018 brought continuation of the process of growing concentration in the Polish banking sector. In November Santander Bank (previously under the name of BZ WBK), the third-largest bank in Poland, finalised the legal and operational merger with the part of Deutsche Bank Polska it acquired. In October the transaction was finalised of acquisition of the majority of Raiffeisen Polska by BGŻ BNP Paribas. In result of this transaction, BNP Paribas Polska moved up to the sixth place among banks in Poland in terms of size of assets. At the end of September 2018 the top 5 Polish banks held 51% of total assets of the whole sector.
At end of 2018 Bank Millennium Group was 7th among top commercial banks in Poland by total assets and deposits. The Bank’s market share was 5.3% in deposits and 4.6% in loans. Bank Millennium Group, comprising the Bank itself and the lease company, mutual funds company and brokerage house, keeps a relatively stronger position in the household segment (6.2% in deposits and 5.6% in loans, including 7% in mortgages and 8% in transactions made with credit cards). In the corporate segment, where Bank Millennium has a smaller share than in the retail segment (3.9% in deposits and 3.3% in loans), the Bank’s Group maintains a traditionally above-average position in lease and factoring products. The Group continues to distribute its products and services via a network of 361 branches as well as through electronic channels, including cash machines, the internet, phone and mobile apps.