Don't mention the merger

Last week Bank Pekao SA and Bank BPH, Poland's second- and third-largest banks, finally made the headlines for reasons other than their controversial proposed merger.

Both banks, which could soon be one, proved just how profitable they can be. Pekao made a profit of zł.1.538 billion in 2005 - a 17-percent increase in comparison to 2004 - while BPH's profits soared from zł.758.6 million in 2004 to zł.1.03 billion last year. PKO BP, still the largest bank in Poland, made a profit of zł.1.76 billion in 2005.

Pekao and BPH officials are optimistic about the future. "If the political and macroeconomic situation remains stable, our profits in 2006 should be even higher than in 2005," BPH president Józef Wancer said.

"I think that Pekao's net profit will grow by at least single digits," the bank's president, Jan Krzysztof Bielecki, said.

Both banks generated profits mainly from core activities, especially loans. Pekao's loan portfolio grew by 12 percent last year to reach zł.33.2 billion, with retail loans growing rapidly at more than 20 percent. The bank also increased its mortgage lending by 21 percent in 2005. BPH was even better, with its loan portfolio increasing by 14 percent.

Last year was also a record year for Bank Zachodni (BZ) WBK. Its profit jumped by 18 percent to reach zł.516.3 million. However, the company's shares took a hit after the bank announced its results, as the figures were lower than market expectations. The bank says it failed to reach its predictions as a result of one-off costs, mainly for the development of its network.

BZ WBK plans to payout 90 percent of its profits in dividends, a serious increase over its typical annual dividend policy of 40 percent of profits. "If the solvency rate remains at the level close to 2005 [16 percent] then the bonus for shareholders could be higher," the president of BZ WBK, Jacek Kseń, said.