Poland’s banking sector: Facts & Figures

Updated December 2020 – For earlier editions of Facts & Figures click here

Poland is the largest economy in Central and Eastern Europe. According to the assessment of the European Commission in 2019 Polish economic conditions remained favourable despite an outlook of slower growth, which was however strong. At the end of the year GDP was estimated at the level of 4.0% (5.1% in 2018). As main drivers of growth, household consumption and employment remained high. The unemployment rate stabilised at record lows (5.2%).  Other factors that had a positive impact on the country’s economic development included: lowered personal income taxes, to some extent increased social transfers, and private and public investment, including the projects supported by EU funds. It is worth noticing that export performance remained generally favourable, especially against the backdrop of weakened global and EU trade.

The Polish banking system is characterized by high stability and safety. It has also shown resilience and avoided serious problems during various financial crises that hit credit institutions in other Member States.

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 representatives of the Polish National Central Bank (NBP), the Ministry of Finance, the KNF  and the BFG.

At the end of 2019 the Polish financial landscape was made up of 30 commercial banks, 538 cooperative banks and 32 branches of credit institutions. In 2019, the ownership structure of the Polish banking sector slightly changed. The number of commercial banks controlled by the State Treasury was still eight, however the number of commercial banks controlled by private capital fell by two in 2019 to 22, with five commercial banks and all cooperative banks still controlled by Polish private capital; 17 commercial banks were controlled by foreign capital, two less than in 2018.

Due to the requirements of the CRD IV package, and in reference to national regulations, cooperative banks had to make the final decision in 2018 on the form of their activity: joining one of the two existing Institutional Protection Schemes or conducting business independently. Nearly all cooperative banks have decided to join the IPS. Despite the large number of these institutions, their market share remains stable at the level of 7.5% of the sector’s total assets.

In 2019, the Polish banking sector’s assets totalled €469.68 billion. The value of the total balance sheet increased by 5.6% compared to the previous year. The size of the banking sector, relative to GDP, remains quite low in comparison to other EU economies (88.3% at the end of 2019).

The credit portfolio plays a dominant position in total assets (55%). In 2019, the trend from the previous four years was reversed. A faster growth rate of banks’ claims on households than on enterprises was noted. The growth rate of claims on enterprises amounted to 3%, and claims on households, approx. 5.2%. However the problem of mortgages denominated in foreign currency is still under discussion but this portfolio is diminishing every year. The prudent credit policy and good results of the Polish economy have allowed banks to maintain the NPL ratio at a relatively low level (6.4%).

The year 2019 was characterised by the rapid growth of household deposits, which represent 72,4% of all non-financial sector deposits. The ratio of non-financial sector deposits to GDP was estimated at around 56,2%. However, the share of long-term deposits is limited and term mismatch on the credit and deposit side is significant.

Polish banks registered in 2019 a return on equity (ROE) of 7.2% and return on assets (ROA) of 0.75%.  These results remain moderate but were higher in comparison to 2018 (ROE: 6.5%, ROA: 0.71%). The improvement in profitability ratios was caused by a moderate growth of banks’ equity within twelve months and the stronger growth rate of the financial result (in case of ROE), and along with a relatively slow growth of banks’ assets (ROA). In the last years, we observe bigger splitting in banking financial results. Bigger institutions achieve higher return rates and the smaller ones much lower returns.

However, the key challenges banks have to face are excessive regulatory and fiscal burdens. For example, the Polish banking tax, which came into force in February 2016, is one of these burdens. 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). In 2019 financial institutions paid around €0.94 billion as a banking tax. The fees paid to the deposit guarantee scheme and to resolution fund are also big burden for banks. Both banking tax and above mentioned fees are not deductible for income tax calculation purposes. Banking tax and fee on the BFG were equal to 1/3 operational costs of bank.

The average TCR in the domestic banking sector remained at the similar level as in previous year. At the end of 2019 the ratio was 19.1%, and the Common Equity Tier 1 and Tier 1 capital ratios were estimated above 17%.

At the end of 2019, 37,4 million clients had access to online banking services. The number of active users of banking mobile applications increased last year by over 15.2% and amounted to 12 million. The Polish banking sector is very modern, amongst one the most modern in the economy. Banks played a very active role in the distribution of public support to enterprises and individuals thanks to their modern infrastructure. During the pandemic time the share of non-cash transaction rised significantly.

Contributor: Katarzyna Pawlik KATARZYNA.PAWLIK@zbp.pl