“(…) In 2024, profits achieved by banks can be expected at a nominal level similar to the results of last year. High burdens on banks lead to a very strong effective burden on banks' financial results, an increase in the effective tax rate of income and make it difficult to increase equity capital.” – it was written.
“There is an increase in capital, but in the conditions of high inflation in recent years, it is more difficult to achieve their real increase. Additionally, in the conditions of growing regulatory requirements, this affects the reduction of the capital surplus and the possibility of broader development of lending, especially those burdened with higher risk and requiring the use of higher risk weights,” it added.
In 2023, the sector achieved net profit of PLN 27.56 billion.
Bank lending in 2024
The Polish Bank Association does not expect an increase in lending this year.
“It is difficult to expect a dynamic development of lending, as the demand for loans from many customers will probably be limited, and the banks themselves will be more cautious in assessing the borrower's creditworthiness in these conditions. A strong shift in demand towards operational loans indicates either the willingness to finance inventories , or to greater difficulties in financing current operations from own funds,” it was written.
“Large structural investments could be a positive impulse, leading to further investments and an improvement in the economic situation. Time will tell whether this will happen this year. Usually, such investments take time, and it is not known what the actual level of preparation for them is. Carrying out an audit of such projects by the new coalition, which is very justified in itself, will prolong this process and may postpone it until next year or later,” it added.
The Polish Bank Association writes that the gradual improvement in economic conditions should not result in a significant increase in non-performing assets in banks.
“However, it cannot be ruled out that a very slow improvement in the economic situation will result in a deferred deterioration in the quality of the loan portfolio, especially in selected industries that already have worse economic results. Such deterioration in the quality of the loan portfolio may be more visible now when current activity banks' lending is clearly limited and the portfolio retains more loans granted in earlier periods, usually characterized by a higher loss ratio,” it was written.
The Polish Bank Association states that a possible increase in the scale of non-performing assets should not be very significant, as banks have exercised the utmost diligence when granting loans in recent years.
“As long as enterprises do not go bankrupt and lay off employees collectively, which would translate into an increase in unemployment, the threat of deterioration in the quality of loans seems small. It is also worth noting that currently the scale of non-performing assets in banks is relatively small, at least from the historical perspective of the Polish banking sector and they are covered to a significant extent with appropriate reserves/write-offs,” it was written.
Bank deposits under pressure
The Polish Bank Association states that the use of market interest rates below the inflation level will maintain a situation in which depositors will look for alternative forms of investing their free funds in relation to bank deposits.
“Currently, this is not a challenge for most banks, which have significantly larger deposits than their capacity to develop lending to the economy and households. Therefore, banks will not feel pressure to apply higher interest rates on deposits. Capital holders will look for alternative forms of investment in these conditions. funds, as a result of maintaining high prices on the real estate market or taking the risk of losing their funds by investing in more risky ventures,” it was written.
“These higher real estate prices caused by the desire to seek higher returns than bank deposits bring will limit access to housing loans for many potential borrowers. The growth rate of citizens' incomes is slower than the growth rate of housing prices. All in all, high inflation and high interest rates will not strongly favor the banking sector in generating high interest income. The period of the greatest benefits resulting from high interest rates has passed, although the benefits for banks will still be much greater than during the period of very low interest rates,” it said. (PAP Business)
