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Poland’s banking sector: Facts & Figures

Updated September 2019 – 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. Significant domestic demand drove economic growth to 5.1% in 2018, the fastest pace in more than a decade.  Favourable labour market developments and strong consumer confidence are key factors supporting private consumption. These trends, with quite strong credit demand, makes Poland a potentially favourable destination for development of the banking sector. It has a competitive landscape (the five biggest banks have about 50% share in the market), focused on domestic business and plays an important role in financing private households, SMEs and big infrastructure projects. Interest rates in Poland remain positive.

The Polish banking system is characterized by high stability and resiliences. 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 2018, the Polish financial landscape was made up of 32 commercial banks, 543 cooperative banks and 31 branches of credit institutions. In 2017, 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 2018 it reached 54.1%. Domestic investors controlled thirteen commercial banks (eight banks were controlled by the State and five by private capital) and all cooperative banks.

Due to the requirements of the CRD IV package, and in reference to national regulations, the cooperative banks in 2018 had to make the final decision on the form of their activity: joining one of the two existing Institutional Protection Schemes or conducting business independently. Despite the large number of these institutions, their market share is estimated at around 7.3% of the sector’s total assets.

In 2018, the Polish banking sector’s assets totalled €442.92 billion. The value of the total balance sheet increased by 6.7% compared to the previous year. The size of the banking sector, relative to GDP, remains quite low in comparison to other EU economies (89.6% at the end of 2018) and this ratio remained unchanged last year.

The credit portfolio plays a dominant position in total assets (54.7% in 2018). During the last four years, faster growth has been observed in corporate banking than in retail. 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 non-performing loan ratio at a relatively low level (6.8%).

The year 2018 was characterised by rapid growth of household deposits, which represent 72% of all non-financial sector deposits. The ratio of non-financial sector deposits to GDP was estimated at around 54.7%. However, the share of long-term deposits is limited and term mismatch on the credit and deposit side is significant.

In 2018, Polish banks registered return on equity (ROE) of 8.3% and return on assets (ROA) of 0.80%.  These results were close to those of 2017 (ROE: 8.5%, ROA: 0.78%). The main reason for these results was the high fiscal and prudential burden imposed on banks by European and local regulators. The banking tax, which came into force in February 2016, is a considerable burden for banks. 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 banks’ portfolios are excluded from taxation. The rate applied to the taxable base is 0.0366% per month (0.44% annually). In 2018 financial institutions paid around PLN 3.8 billion (€0.88 billion) as a banking tax. The fees paid to the deposit guarantee scheme and to the resolution fund are also significant burdens for banks. Neither the banking tax nor the above fees are deductible for income tax calculation.

The average total capital ratio in the domestic banking sector increased significantly. At the end of 2018 the ratio was 19.1%, and the Common Equity Tier 1 and Tier 1 capital ratios were estimated above 17%. According to the EBA, from the EU-wide stress test, held in 2018, two Polish banks achieved the best results (ranking first and third) out of all the participants.

At the end of 2018, 38.1 million clients had access to online banking services, whichmeans a 7% increase in comparison to the fourth quarter of 2017. The number of active users of banking mobile applications increased in last year by over 10% and amounted to 8.71 million.

Contributor: Katarzyna Pawlik KATARZYNA.PAWLIK@zbp.pl