Banks cautious to follow RPP
Banks took a cautious approach to lowering interest rates on deposits and credits last week in response to the Monetary Policy Council's (RPP) modest 1% interest rate cut in late February.
The result is that most borrowing costs are still higher than 20%.
"Even if banks follow the recent RPP decision, interest rates are still relatively high, and a 100-point cut may not be enough to boost the economy," said Maciej Krzak, head economist at Citibank in Warsaw. "I would have been surprised if the RPP had cut rates by more than 1%," added Marek Kulczycki, deputy president of Fortis Bank. "On the other hand, I understand that analysts and businesses might be disappointed, because it is not enough to boost the economy. With average credit rates at 22-23%, a cut of one percentage point is too small to have a positive impact," Kulczycki said.
According to Bank Rozwoju Eksportu (BRE), the RPP's rate cut has had only a slight impact on credits and deposits offered to its corporate clients the bank's core business. "The bank changes its rates quite often, taking into account not only the RPP's decision, but other macroeconomic factors," according to the bank's press office. "Since the council's decision, BRE has changed its rates at least twice." BRE holds 7% of the corporate market for deposits and 4% for lending.
Fortis Bank, which targets wealthy individual clients and medium-sized businesses, lowered its rates two days before the RPP's decision. "We are trying to analyze macroeconomic factors and anticipate developments on the financial markets," Kulczycki said.
While Fortis initiated the recent trend among banks to lower interest rates, banks with bigger market share usually determine the retail market's average rates. Bank Pekao, which has 19% of the retail market, may have disappointed its customers last Monday by only lowering deposit rates, leaving borrowing rates unchanged. "In fact, our lending rates went down even before the RPP's decision," said Maria Wisniewska, president of Bank Pekao. "Our rates are linked to WIBOR, the inter-banking money market rate, and this had already dropped earlier in anticipation of the council's decision. But we're concerned that interest rates are still high, so we are seeking to open a preferential credit line for small- and medium-sized companies." She added, however, that Bank Pekao would need to come up with additional funding to support lower interest rates.
Powszechna Kasa Oszczednosci Bank Polski (PKO BP), the largest savings bank with a 40% share of the retail market, had not responded to the RPP rate cut as of last Friday when the Business Journal went to print. However, the board is scheduled to meet this Thursday to discuss the matter.
