Polish banking sector

(Calculations of PKO Bank Polski S.A, based on the last available PFSA data)

In 2022, the banking sector recorded net profit of PLN 12.5 billion, compared with the profit of PLN 6.0 billion in 2021. The rolling return on equity (12M ROE) was 6.4%.

The “provisions” item contains, among other things, a part of provisions related to the legal risk of foreign currency mortgage loans.

The improvement in net profit was primarily attributable to an increase in interest income, which was related to the rise in interest rates. Near double-digit year-on-year growth was also recorded in commission income, due to the dynamic growth of nominal turnover in the economy (mainly triggered by rising prices), including higher transactivity and demand structure. The baseline, which included the first half of 2021, disrupted by anti-pandemic restrictions, was also not insignificant.

Regulatory burdens and administrative costs, whose double-digit year-on-year growth was related to both rising payroll costs and the cost of running day-to-day operations (including energy or service prices), had an opposite effect. Regulatory burdens in 2022 comprised, in particular, one-time costs related to statutory credit holidays, the establishment of the System for the Protection of Commercial Banks, and contributions to the Borrowers’ Support Fund.

The banks’ capital position was good, although it has deteriorated. As at the end of September 2022, the total capital adequacy ratio amounted to 18.2% (most recent data available). The sector’s capital adequacy was negatively affected by declines in securities valuations and losses incurred in the third quarter associated with the recognition of statutory credit holidays in the income statement.

(Based on NBP data and the Analizy Online service site)

At the end of December 2022, the y/y pace of growth in total loans (net of changes in exchange rates) was positive at 1.7% (compared with 4.7% as at the end of 2021). As for deposits, the annual growth rate slowed to 5.6%, compared to 11.1% at the end of 2021, affected, among other factors, by a deceleration in the growth rate of deposits of private individuals and a decline in deposits of sole proprietors (employing up to 9 people) and central government institutions.

Housing loans in PLN declined by 1.6% y/y in December (vs. a 12.5% y/y increase at the end of 2021). The slump in this market is reflected in a 70% drop in the monthly volume of mortgages granted in PLN. The growth rate of consumer loans (excluding exchange rate changes) was negative (-4.0% y/y in December vs. 1.6% y/y at the end of 2021). Business loans (without exchange rate changes) grew rapidly: 9.0% y/y in December (vs. 4.6% y/y at the end of 2021).

The growth rate of deposits of private individuals slowed to 4.8% y/y in December (vs. 6.3% at the end of 2021), with a marked change in their structure (current deposits fell 14.1% y/y in December, while term deposits grew 92.2% y/y). At the end of December 2022, assets of investment funds (IFs) for individuals were 20.7% year-on-year lower, due in part to the weak performance of the WSE and large declines in securities valuations associated with rising interest rates. The growth rate of cash in circulation decelerated in December to 3.9% y/y (10.9% y/y at the end of 2021). At the end of December 2022, the growth rate of corporate deposits increased to 11.6% y/y (compared to 10.7% y/y at the end of 2021), driven by limited investment activity, revenue growth associated with high nominal consumption and liquidity accumulation, among other factors.

The banking sector’s liquidity position remained very good, with the loan/deposit ratio declining to 76.2% at the end of December vs. 78.8% at the end of 2021.