Moody's: Bank tax threatens banks’ profitability

Rating agency Moody's on Monday assessed that a tax on banks' assets of 0.44 percent a year will cost the sector about PLN 4.4 billion this year, equal to around 32 percent of banks’ annualized earnings for the first ten months of 2015. The bank tax risks reducing  banks’ return on assets of 0.9 percent generated in the first ten months of 2015 (on an annualized basis) by one third and their return on equity of 8.5 percent for the same period. Such a decline in net income would reduce banks’ ability to absorb shocks, Moody's said in a report. The tax comes at a time when the current government is also considering imposing a conversion of foreign currency mortgages (which totalled 16 percent of total loans as of November 2015) into the local currency. If the conversion were to be enforced on unfavorable terms for banks, burdening them with substantial financial costs, it would threaten the stability of the banking sector. The tax also threatens to hurt credit growth because it reduces banks’ capital creation, which carries the risk of adversely affecting Poland’s economy and resulting in slower GDP growth, the agency also claimed.