Banking sector

The Polish banking sector earned a net profit of PLN 13.9 billion (2018: PLN 13 billion). Net interest income was the main item having a positive impact on net profit. Net commission income broke the downward trend, but its growth remained low.

An increase in operating expenses, determined in particular by a large increase in the charges payable to the Bank Guarantee Fund (BGF) had the largest impact on the drop in net profit. Apart from an increase in operating expenses, the deterioration in net impairment allowances, which were impacted by an increase in the loan portfolio and a larger share of higher-risk products (mainly consumer loans) in the structure of the loan portfolio, as well as a deterioration in the condition of selected significant borrowers in the corporate segment, had a negative impact on net profit.

At the end of 2019, return on equity (ROE) in the banking sector stood at 6.9% (6.4% in December 2018). The level of net profit and profitability of the banking sector over the whole 2019 were negatively affected by reserves created by banks in December 2019, in relation to the legal risk of loans in convertible currencies.

*Banking sector’s net profit for 2018 takes into account the significant losses of 2 commercial banks, resulting in a relatively lower base.

In 2019, the situation of the banking sector remained stable, supported by continued high growth rate of the economy, good situation on the labour market and consumer optimism (the registered unemployment rate went down to 5.2% in December 2019 from 5.8% in December 2018, and average remuneration in the enterprises sector in December increased by 6.2% y/y).

At the end of 2019, the annual growth rate of loans (net of exchange rate fluctuations) was significantly lower than at the end of 2018 (5.0% and 6.2% respectively). In the case of deposits, the annual growth rate slowed to 8.2% (compared with 8.8% at the end of 2018), remaining under pressure from lower growth rate of deposits of government institutions.

A good financial position of households, supported by an increase in wages and salaries, and low unemployment, supported the high growth rate of housing loans (+12.2% y/y). The growth rate of consumer loans slowed down (8.3% y/y compared with 8.5% at the end of 2018 – net of exchange rate fluctuations). Own funds remained the main source of financing investments of enterprises. In such conditions, the growth rate of loans granted to enterprises slowed down to 2.7% y/y (net of exchange rate fluctuations) at the end of 2019 (7.4% as at the end of 2018).

The annual growth rate of deposits of individuals, supported by the good situation of households, stood at a high level of 9.3%, despite its gradual deceleration (when compared with 9.9% at the end of 2018). Current deposits increased by 15.4% y/y (15.7% at the end of 2018) and term deposits recorded a drop of 0.2% y/y. At the end of 2019, return rates on 12M investment funds were higher than interest rates on new sales of household deposits. The liquidity situation of enterprises was supported by high growth rate of their deposits that accelerated to 9.7% (3.1% at the end of 2018).

The liquidity position of the banking sector remained good – the loan-to-deposit ratio decreased to 94.1% at the end of 2019 (-2.8 p.p. y/y) and was the lowest since August 2007.