Annual report
2018

Net profit and returns*

In 2018 the position of the Polish banking sector remained stable, also as a result of the condition of the Polish economy, which developed in a sustainable and stable manner.

PLN 14.7bn
net profit of the banking sector in 2018
+7.5% y/y
rate of change in the banking sector’s net profit in 2018
+7.2%
return on equity of the banking sector (ROE) in 2018

In 2018 the net profit of the banking sector increased by 7.5% y/y[1] to PLN 14.7 billion. The increase in net interest income had an impact on the increase in net profit, while the drop in net fee and commission income and the increase in operating expenses (in conditions of growing wages and salaries and the costs related to mergers and acquisitions) had a negative impact on net profit. Good economic conditions had a positive impact on net write-downs and impairment.

The rate of increase in net profit in the banking sector was supported by market consolidation (two acquisitions of commercial banks), which resulted, among other things, in earning one-off revenues on the so-called bargain purchase.

 

Change in the banking sector's net profit (PLN billions)

Return on equity (ROE) in the banking sector increased slightly to 7.2% as at the end of 2018 (compared with 7.1% as at the end of 2017) and remained, among other things, under the positive influence of the increase in interest margins.

Loan and Deposit Market

In 2018 the low interest rates, good labour market conditions and reanimation of investment activities had an impact on the condition of the loans and deposits market. As at the end of 2018 the total increase in loans (net of exchange rate fluctuations) dropped slightly to +6.3% y/y (+6.6% as at the end of 2017), and total deposits increased significantly to +8.8% y/y (+4.4% as at the end of 2017).

The good financial position of households, supported by an increase in wages and salaries, and low unemployment, determined demand for housing loans in PLN and for consumer loans. As at the end of 2018 the rate of growth of consumer loans (net of exchange rate fluctuations) accelerated to 8.6% y/y, and the rate of growth of housing loans in PLN came close to 12% y/y, which means that it was the highest for more than three years.

Change dynamics of total loans and total deposits (y/y)

New regulatory solutions (the so-called split payment of VAT) and investment initiatives of enterprises stimulated the demand for loans. Own funds remained a material source of financing enterprises’ investments.

 

As at the end of 2018 the rate of increase in corporate loans (net of exchange rate fluctuations) dropped to 7.4% y/y (8.8% y/y as at the end of 2017). This was accompanied by very high increase in the rate of growth in working capital loans (to 13.8% y/y compared with 7.1% y/y as at the end of 2017) and a significant drop in the rate of growth of investment loans.

Change dynamics of loans (y/y)

Compared with 2017 when the rate of decrease in loans to individuals grew, in 2018 the rate of decrease in those loans slowed down considerably. As at the end of 2018 the rate of growth of term deposits increased by 2.0% y/y, accompanied by an increase in individuals’ deposits (to +15.7% y/y compared with 12.6% as at the end of 2017). In the prevailing good financial conditions of enterprises, the annual rate of increase in their deposits was low and amounted to 3.1% (3.4% as at the end of 2017).

In 2018 the liquidity position of the banking sector was good. The loan to deposit ratio was lower than 100% (96.9% as at the end of 2018, -1.2 p.p. compared with the end of 2017).

Change dynamics of deposits (y/y)

*Based on PFSA data.

**Return on equity (ROE) calculated as the ratio of net profit for 12 months to the average equity in the period.

***Data relating to the banking sector published by the PFSA for 2018 takes into account the effect of the merger with two commercial banks. In consequence, according to PKO Bank Polski SA, amounts that related to the spun-off and transferred operations of the acquired banks were removed from the key income statement items, and the total result on those operations was presented in: “Net income from discontinued operations” (on the diagram “Change in the banking sector’s net profit” the result was disclosed under “CIT (and other items)”). This hampered the comparability of particular results components.

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