Mortgage market to fuel Polish banks' profits
Wojciech Kwaśniak, the head of the central bank's supervisiory body, has said that the banking sector can expect robust profits in 2005 thanks to an expected investment boom after European Union entry, particularly in the property and real-estate market.
"We are sure to see an investment boom. We will see numerous infrastructure development projects, financed with funds from the EU," Kwaśniak told Reuters in an interview.
However, he also warned that the political risk, ahead of the looming general election, may delay planned investments until the second half of 2005.
Last year was a stellar one for Polish banks, who radically improved their results thanks to a surge in demand for retail loans and a decrease in risk provisions.
Currently, Polish banks account for a third of the zł.310 billion total capitalization of the Warsaw Stock Exchange. PKO Bank Polski and Pekao, the market leaders, both boosted net earnings by double-digit percentages to record highs while BPH, third overall in the banking sector, saw its profits more than double, thanks to strong growth in the demand for home loans.
"This is absolutely not the limit of banks' profitability," said Kwaśniak, adding that the sector's capital adequacy ratio-a measure of lending capacity-rose nearly two points to 15.5 percent in 2004 against the internationally required eight percent.
"This shows how well capitalized the Polish banking sector is compared to the scale of its operations. That means that in fact it could double the value of its assets with the current equity ... The question is about client demand," he said.
Lending continues to be the main source of income for Polish banks, which have only recently started to recover form an industry slump, thanks to a broad economic revival in Poland.
Corporate demand for loans should recover from a four percent drop in 2004 as companies are expected to seek funding for major investments alongside EU funds.
A recent PricewaterhouseCoopers report claimed that there is currently far more foreign capital than can be placed in the Central and Eastern European market.
EU structural funds should fuel a building boom, which should go hand in hand with a rise in investment. Poland is set to receive some EUR 13 billion of EU cash to modernize its economy in 2004-2006. This is roughly half of the total earmarked for the 10 new member states that joined the bloc in May 2004.
"The question is whether this [investment boom] will start already in the middle of the year or in the second half, and whether political risk will have an impact because it's an election year in Poland," Kwaśniak said. "It seems that as far as big projects are concerned, decisions will still be postponed and analyzed."
Despite the economic uncertainty, household borrowing has remained robust in recent years. Last year it jumped 13 percent and in 2003 it grew by 14 percent, mainly thanks to demand for mortgages.
New home loans rocketed 25 percent to zł.15 billion last year and the overall mortgage market expanded by a fifth to zł.36 billion, thanks to cheaper credit and worries that prices will close the gap with western European levels. "As far as home loans are concerned I would expect a similar pace of growth this year," said Kwaśniak. (Reuters)
"We are sure to see an investment boom. We will see numerous infrastructure development projects, financed with funds from the EU," Kwaśniak told Reuters in an interview.
However, he also warned that the political risk, ahead of the looming general election, may delay planned investments until the second half of 2005.
Last year was a stellar one for Polish banks, who radically improved their results thanks to a surge in demand for retail loans and a decrease in risk provisions.
Currently, Polish banks account for a third of the zł.310 billion total capitalization of the Warsaw Stock Exchange. PKO Bank Polski and Pekao, the market leaders, both boosted net earnings by double-digit percentages to record highs while BPH, third overall in the banking sector, saw its profits more than double, thanks to strong growth in the demand for home loans.
"This is absolutely not the limit of banks' profitability," said Kwaśniak, adding that the sector's capital adequacy ratio-a measure of lending capacity-rose nearly two points to 15.5 percent in 2004 against the internationally required eight percent.
"This shows how well capitalized the Polish banking sector is compared to the scale of its operations. That means that in fact it could double the value of its assets with the current equity ... The question is about client demand," he said.
Lending continues to be the main source of income for Polish banks, which have only recently started to recover form an industry slump, thanks to a broad economic revival in Poland.
Corporate demand for loans should recover from a four percent drop in 2004 as companies are expected to seek funding for major investments alongside EU funds.
A recent PricewaterhouseCoopers report claimed that there is currently far more foreign capital than can be placed in the Central and Eastern European market.
EU structural funds should fuel a building boom, which should go hand in hand with a rise in investment. Poland is set to receive some EUR 13 billion of EU cash to modernize its economy in 2004-2006. This is roughly half of the total earmarked for the 10 new member states that joined the bloc in May 2004.
"The question is whether this [investment boom] will start already in the middle of the year or in the second half, and whether political risk will have an impact because it's an election year in Poland," Kwaśniak said. "It seems that as far as big projects are concerned, decisions will still be postponed and analyzed."
Despite the economic uncertainty, household borrowing has remained robust in recent years. Last year it jumped 13 percent and in 2003 it grew by 14 percent, mainly thanks to demand for mortgages.
New home loans rocketed 25 percent to zł.15 billion last year and the overall mortgage market expanded by a fifth to zł.36 billion, thanks to cheaper credit and worries that prices will close the gap with western European levels. "As far as home loans are concerned I would expect a similar pace of growth this year," said Kwaśniak. (Reuters)
