Poland’s banking sector: Facts & Figures

Updated September 2018 – For earlier editions of Facts & Figures click here

Poland is the largest economy in Central and Eastern Europe. According to Eurostat and the European Commission, its economy has been one of the fastest growing among the EU Member States (GDP in 2017 grew by 4.6%). This trend, with rising credit demand, makes Poland a potentially favourable destination for investment in the banking sector. It has a competitive landscape, focused on domestic business and plays an important role in financing private households, SMEs, big infrastructure projects, and project financing. Interest rates in Poland remain positive.

The Polish banking system has shown resilience and avoided serious problems during the financial crisis. The Polish Financial Supervision Authority (Komisja Nadzoru Finansowego [KNF]) is responsible for state supervision of the national financial market. The institution responsible both for operating the deposit guarantee scheme and resolution processes is the Bank Guarantee Fund (Bankowy Fundusz Gwarancyjny [BFG]). The authority responsible for macro-prudential supervision is the Financial Stability Committee (Komitet Stabilności Finansowej [KSF]), comprising the Polish National Central Bank (NBP), the Ministry of Finance, the KNF and the BFG.

At the end of 2017 the Polish financial landscape was made up of 35 commercial banks, 553 cooperative banks and 28 branches of credit institutions. In 2017, the ownership structure of the Polish banking sector changed. For the first time since 1999, the share of domestic investors in the sector’s assets was higher than the share of foreign owners. At the end of 2017 it reached 54.5% (in comparison to 43.4% in 2016).

Cooperative banks are members of two associated banks. Despite the large number of these institutions, their market share is estimated at around 7.3% of the sector’s total assets. Due to preparations for the requirements of the CRD IV package, and taking into account national regulations,  cooperative banks must make the final decision, in 2018, on their further business model: joining one of the two Institutional Protection Schemes, conducting business independently or functioning as part of cooperation within the newly established apex bank.

A banking tax act came into force in February 2016. It applies to selected financial institutions such as domestic banks and insurance companies, branches of foreign banks and insurance companies operating in Poland, and consumer lending institutions. The tax does not cover investment funds, pension funds and small local credit institutions (with total assets below PLN 4 billion). The tax base comprises the assets of financial institutions and only Polish treasury bonds in bank portfolio are excluded from taxation. The rate applied to the taxable base is 0.0366% per month (0.44% annually). This tax is not deductible for income tax calculation. This has imposed a substantial fiscal burden on Polish banks. In 2017 banks paid PLN 3.6 billion ( € 0.86 billion) as banking tax.

In 2017, the Polish banking sector’s assets totalled €427.17 billion. The value of the total balance sheet increased by 4.1% compared to the previous year. The size of the banking sector, relative to GDP, remains quite small in comparison to other EU economies (89.9% at the end of 2017).

The share of credit portfolio in total assets was 56.4% in 2017. After a longer period of stronger growth in retail banking, corporate banking has grown faster during the last three years. The problem of mortgages denominated in foreign currency is still under discussion but this portfolio is diminishing every year. The prudent credit policy and relatively good results of the Polish economy have allowed banks to maintain the NPL ratio at a relatively low level (6.8%), lower than at the end of 2016.

The year 2017 was characterised by rapid growth of household deposits, which represent 71% of all non-financial sector deposits. The ratio of non-financial sector deposits to GDP was estimated at around 54%. However, the share of long-term deposits is limited and term mismatch on the credit and deposit side is significant.

Polish banks registered in 2017 return on equity (ROE) of 8.5% and return on assets (ROA) of 0.77%. However these results were lower than those of 2016 (ROE: 9.4%, ROA: 0.84%). The main reason for these results was the high fiscal and prudential burden imposed on banks.

The average total capital ratio in the domestic banking sector increased significantly. At the end of 2017 the ratio was 19%, and the Common Equity Tier 1 and Tier 1 capital ratios were estimated above 17%. Only 0.3% of the sector did not meet the KNF recommendations on the level of minimum capital requirements.

At the end of 2017, 35.5 million clients had access to online banking services, a 7% increase in comparison to the fourth quarter of 2016. Mobile payments are also increasing their share of transactions. In 2017, the number of transactions made with cards increased by 16% and their value grew by 11%. Since 2015, the BLIK system, which allows payments to be made by portable devices such as mobile phones and tablets, has been dynamically developing in Poland.

Contributor: Katarzyna Pawlik KATARZYNA.PAWLIK@zbp.pl