Pekao and PKO BP shine

   Higher half-year figures for two of Poland's largest banks, Bank Pekao and Powszechna Kasa Oszczednosci Bank Polski (PKO BP), bucked a poor set of results across the banking sector, according to figures released in early August.

   Analysts said the banks' good results stemmed largely from capital increases in 2000.

   State-owned savings giant PKO BP said its total assets hit zl. 82 billion ($19.5 billion) by the end of June and its capital adequacy ratio – a key measure of lending capacity – was at 10.1% against the required 8%. The bank said its interest revenue rose 20% annually to zl. 5.4 billion ($1.3 billion) while profit on banking activity reached zl. 2.6 billion ($619 million) in the first half of the year, up 26% from the same period in 2000. The Treasury Ministry said last week it intends to sell off 30% of the bank while keeping a dominant position after privatization.

   Bank Pekao, a unit of UniCredito Italiano and Eastern Europe's largest bank by assets, netted zl. 516 million ($122.9 million) in the first six months of the year, roughly half its full-year forecast of zl. 1.1 billion ($261.9 million). PKO BP's net profit stood at zl. 515.5 million ($122.7 million) in the first six months, or 16% higher than planned.

   PKO BP said it was confident it would hit its forecast level of zl. 1.25 billion ($297.6 million) net profit in 2001, against zl. 763 million ($173.4 million) in 2000, despite analysts' fears that its low reserves may be insufficient to cover potentially deeper economic downturns in the second half of the year.

   "Lower credits and fears about the future are hitting across the banking sector and could easily hit Pekao's confident predictions too," said Zbigniew Betlewski, head of AmerBank's analysis department in Warsaw.

   Bank Pekao also predicts its return on capital to reach about 20%, with costs to income (a past problem for the bank) reaching an expected 50% by the end of the year. Individual credits rose 49.3% against the first half of 2000, to zl. 6.5 billion ($1.5 billion). Pekao's best results were on the back of large revenues from provisions and fees as well as tightly controlled costs.

   But the success of Bank Pekao and PKO BP came against a backdrop of less-optimistic results across the sector. Despite the top-25 Polish banks noting an aggregate 23.5% rise in gross profits and a 35.3% rise in net profits in the first half of 2001 year on year, the figures mask the relatively poor showing in 2000 when bank profits were subdued by the zl. 500 million ($113.6 million) in payments made to cover the costs of the bankrupted Bank Staropolski.

   A batch of profit corrections mainly hit those banks that failed to record good results in 2000: Bank Slaski, Bank Gospodarki Zywnosciowej (BGZ), AmerBank and DB 24, which in 2000 (then as Bank Wspolpracy Regionalnej) noted a zl. 20 million ($4.5 million) net loss. Two other banks have already lowered their profit expectations for 2001: Bank Zachodni WBK, which noted poor results largely due to the cost of its recent merger, and Fortis Bank. Both pointed to a worsening economic climate that pushed them to set aside additional credit reserves and to a slowdown in the demand for credit and a lower-than-expected rise in deposits.