In 2015, the banking sector operated in conditions of economic growth, accompanied by a good situation on the labour market and financial sector. At the same time, the banking sector remained adversely affected by the bankruptcy of the cooperative banking sector, record-low key interest rates and charges resulting from regulatory changes (including the reduction of interchange fees, increased fees for a bank deposit guarantee system, the creation of Borrowers Support Fund). Banks fail to complete a portion of the revenue by engaging in support for currency borrowers (the so-called “six-pack”) after the Swiss central bank’s decision to release the CHF against the EUR. As a result, the net profit of the banking sector in 2015 amount to PLN 11.5 billion, a decrease of 27.6% compared to the net profit realized in 2014.
The results of the banking sector in 2015 were positively influenced by one-off events, including the sale of subsidiaries by some banks, but their impact on the situation of the banking sector was significantly lower than the negative factors.
Chart 1. Change in the banking sector net profit (PLN billion)
Source: PFSA, the calculation of PKO Bank Polski SA
In 2015, a decrease in the result of business activity in the banking sector was influenced by the reduction of the interest income (-4,8% y/y) net fee and commission income (-3.3% y/y). Operating expenses of the banks increased by almost 12% y/y and net write-offs result at the end of 2015 has worsened, despite the improvement in the first half of the year.
Profitability of the banking sector at the end of 2015, was at a record low level – ROE fell to 6.8% at the end of the 2015, from 10% at the end of 2014.
Quality of credit portfolio
In 2015, the quality of the loan portfolio improved compared to 2014. At the end of 2015, loans rate to non-financial sector declined to 7.5% (8.1% at the end 2014), with an appreciable improvement in the quality of all main categories of loans, including consumer loans (quality improvement by 0.8 pp y/y to 12%) and corporate loans (quality improvement by 1.2 p.p. r/r to 10.2%). The improvement of quality of corporate loans applies mainly to large enterprises than loans to SMEs. The quality of the housing loans portfolio improved y/y, the risk index of housing loans in CHF deteriorated and amounted to 3.4% at the end of 2015 (3.1% at the end of 2014), and the rate of mortgage loans risk in PLN fell y/y 0.7 p.p. to 2.7%
Financial position statement
At the end of the 2015, sum of total assets of the banking sector rose to PLN 1 600 billion, and its annual growth rate amounted to 4.4% y/y vs 9.0% y/y at the end of 2014. Equity of the banking sector amounted to PLN 173.7 billion at the end of 2015, this is an increase of 4.7% y/y. At the same time capital leverage in the banking sector (the ratio of equity to assets) remained at a stable level, i.e. amounted to 10.86% at the end of 2015 compared to 10.84% at the end of 2014.
In 2015, the situation on the lending and deposit market was shaped by significant weakening of the Polish currency against the CHF and the decline of the interest rate.
Chart 2. Loan structure of banking sector
Chart 3. The rate change of loans in the banking sector (y/y)
* Other loans include loans to individual entrepreneurs, non-monetary financial institutions, farmer and non-commercial institutions serving households.
Source: NBP, calculations of PKO Bank Polski SA
The situation on the loan market in 2015 compared to 2014 was under the influence of a good macroeconomic situation, the continuing influence of visible weakening of the Polish currency.
At the end of December 2015 the value of loans rose to PLN 1 077 billion (+7.0% y/y), which was the result of both, the increase in household loans and corporate loans.
In 2015, a slowdown in the growth rate of housing loans in PLN (+11.0% y/y, compared to 13.5% y/y in 2014). The consumer loans rate of growth increased (+7.2% y/y vs +4.5% y/y in 2014), this is because of the impact of record low Lombard rates, determining the maximum interest level on consumer lanes. The annual rate of change of consumer lending at the end of 2015 was the highest since May 2010
In 2015, the recovery on the corporate loan market continued, their value increased by approx. PLN 24 billion, and the annual growth rate was 8.3% (compared to 6.5% at the end of December 2014).The situation in the market of corporate loans was the result of economic prosperity.
Chart 4. Deposit structure in the banking sector
Chart 5. The rate of change of deposits in the banking sector (y/y)
* Other deposits include loans to individual entrepreneur, non-monetary financial institution, farmers and non-commercial institutions providing services for households.
Source: NBP, calculations of PKO Bank Polski SA
The situation in the deposit market in 2015 was affected by the low level of interest rates. Total deposits of the banking sector in 2015 increased stronger y/y than loans (respectively 7.6% and 7.0% y/y), and after eliminating the currency effect the annual growth rate of deposits was significantly higher than loans. At the end of 2015, the volume of deposits increased to PLN 1 046 billion, while slowdown of annual growth (of -1.7 p.p.)
The increase in deposits was mainly due to the increase in personal deposits, with a significant decline in deposits of government characterized by relatively higher volatility.
Despite significant reductions in interest rates on term deposits, deposits of individuals maintained high growth rate y/y, which amounted to 9.8% (slightly lower than at the end of December 2014), with the apparent high rate growth of current deposits of individuals (+13.5% y/y). The increase in personal deposits was influenced by the improving situation on the labour market and the relatively low return rate realized on the investment funds market.
In 2015, the annual growth rate of corporate deposits amounted to 10.5% (compared to 9.1% in 2014).