In consequence liquidity of the banking sector in Poland, measured with the Loans/Deposits ratio, improved to 93% from 96% at end of the previous year.
Banking sector’s profit was 2% y/y up after 11 months (according to KNF data), however bearing in mind the significant size of provisions for FX mortgages, created by banks in December, 2019 annual profit will probably be below the previous year’s result. Operating trends of the sector deteriorated materially. The pace of income growth remained solid (+9% y/y) thanks to 11% growth of net interest income and almost 7% increase of net commission income. However the rate of growth of costs also accelerated (almost 9% y/y). The growing level of provisions (+16% y/y) as well as higher effective tax rate (27% vs 25% in the comparable period of the previous year) also adversely affected the sector’s profitability. However when analysing sector data it must be remembered that they have limited comparability y/y due to consolidation processes.
The Polish banking sector maintained a very strong capital position. At end of November 2019 the equity of Polish banks reached PLN 210 billion and solvency ratio was 18.9% (Total Capital Ratio – TCR) and 17.0% (Tier 1 ratio). In November KNF somewhat changed dividend criteria (payment of 100% of profit), however most criteria remained unchanged. Likewise, capital buffers and minimum capital ratios resulting from them remained relatively high. 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 committed by banks’ shareholders (lower ROE and limited dividend).
2019 brought continuation of consolidation processes. In November BNP Paribas Poland finalised the merger with Raiffeisen Polska and Bank Millennium with Euro Bank. In result the number of commercial banks fell to 30 from 32 at the end of 2018. At end of September the share of top 5 banks in the total assets of the entire sector was 53% vs. 51% in the same time of the previous year.
According to the Bank’s projections, 2020 should bring a further deceleration of economic growth (GDP: +3.2%), mainly due to decrease of the rate of growth of investments (2020: +2.1% y/y following 7.8% estimated in 2019). The expected stable growth of household income should involve a continued high rate of growth of retail deposits, while the expected maintaining of high private consumption and demand for real estate should support the balance of loans in the personal customers segment.