Banking climate index hits new lows in December
The nation's banking climate index hit post-communism lows in December and was downcast on prospects for the New Year as a new tax on interest income dampened an already bleak economic picture and a so-called "Belka-effect" soured the industry's mood.
Poles spent less over the holidays, uneasy about job security, their savings and economic prospects during 2002, said Piotr Kwiatkowski, vice president of the Pentor Institute, which conducts the index survey.
"Banks notice an increase of credits around the holidays, but this year it has been very limited as people are trying keep expenses under control," he said, citing lower spending data for durable goods.
The insecurity is a byproduct of a so-called "Belka effect," evident among bank managers in the survey, Kwiatkowski said, referring to Finance Minister Marek Belka.
"People were expecting the change in government would generate more optimistic news, (but Belka) introduced some tough economic policy," he said. "Psychologically, this has been the worst December since 1989."
The Warsaw-based Pentor Institute's Pengab index, designed to provide an overview of the sector's health, fell 6.6% from November to 11.5%; the lowest level since the survey started nine years ago and a 21.8 point drop year on year. It was the third consecutive decline in the monthly poll commissioned by the Polish Banking Association (ZBP).
"It's an extremely pessimistic outlook, and to some extent reflects the general gloomy mood of the public," Kwiatkowski said.
The survey, which includes responses from 201 bank managers, showed across-the-board falloffs in the deposit market, fueled largely by customers' attempts to protect their savings from a 20% tax on interest from such accounts. Many took advantage of new offers drawn up by banks in response to the tax and moved their money into long-term, non-taxable accounts, or investment funds. Those efforts prompted Prime Minister Leszek Miller to accuse financial institutions of "anti-Polish behavior."
The survey's findings also showed that Poles feared the government would tax their savings, and not just the interest earned on it.
"November's household deposits dropped zł. 1.8 billion ($450 million) the biggest (decline) ever," said Bank Zachodni WBK (BZ WBK) chief economist Krzysztof Rybiński of the bank's year-end results.
Also contributing to the sector's gloom is lower job security in major financial institutions, Kwiatkowski said.
"Signals from management, such as Powszechna Kasa Oszczźdności Bank Polski (PKO BP), about the need to control, or cut, costs have a lot of people not sure if they will have a job next week," Kwiatkowski said. "Also, many with Bank Przemysłowo-Handlowy (BPH) and Powszechny Bank Kredytowy (PBK) are not secure."
A BPH-PBK merger includes plans for 8% of each bank's workforce to be laid off.
Other analysts pointed to the poor second-half performance of numerous Warsaw-bourse listed companies - clients of banks with outstanding loans - that teetered on the brink of bankruptcy as 2001 came to a close.
"The risks of default are real and not just the high-profile companies there are a lot of small- and medium-sized companies in construction and car purchasing," said Andrzej Myśliński, capital investment specialist with Bank Pekao.
Paul Shockley
