Intellinews - Polish Banking Report - July 2013

The IntelliNews Polish Banking Sector Report offers an extensive summary of the Polish banking sector. It includes a complete coverage of the latest developments, trends and corporate news, accompanied by thorough statistics and comments. This sector report is ideal to keep you abreast on recent company and industry news. Written by local professionals, it is a unique market and business intelligence analysis, tailored to save time by providing in-depth information, while helping you to make confident and informed business decisions.

Poland’s banking system is well capitalised and profitable. It is supported by the country’s resilient economy and is well prepared to weather a contagion from a potential banking crisis in Western Europe. Although about two thirds of the Polish banking assets are held by foreign owners, mainly Western European banks, the sector is not as much dependent on foreign funding as its regional peers. As a whole, Poland’s banking system is among the best positioned in Central and Eastern Europe (CEE) in terms of profitability, capitalisation and stability.

The main threats to the Polish banking industry in the near term are connected with potential funding problems and with a possible deterioration of asset quality. Some Western European parent banks may have difficulties in recapitalizing themselves or in obtaining liquidity, and there could be some spillover to their Polish subsidiaries in the form of withdrawal of funding that could result in reduced lending activities and lower revenues. However, Polish banks are increasingly focusing on funding alternatives, different from parent bank financing, including issuance of debt securities and heightened focus on attracting deposits via higher interest rates. The other threat to the banking sector comes from the still high level of non-performing loans (NPLs), which is expected to increase further this year in line with the worsening economic environment. The high level of foreign currency denominated loans poses a major risk to the asset quality, as a potential weakening of the Polish zloty might hamper credit repayments.

As a whole, the Polish banking sector is expected to experience a slowdown in lending this year, combined with increased focus on deposits to compensate for withdrawal of parent funding. This is expected to lead to depressed interest margins and a holdback in net interest income growth, which could be partly offset by increased fee and commission income. However, the profitability of the banking industry is expected to be lower than last year’s record high level.

The relatively low consolidation level in the sector, coupled with potential liquidity and/or capitalisation problems of foreign parents, provides room for mergers and acquisitions (M&A) activity.