PKO makes history

PKO Bank Polski announced a better-than-expected increase in Q3 net profit of 26 percent, for a total of zł.614 million, the highest-ever quarterly net profit of any Polish bank.

"The results are far better than expected. This is mainly due to strong revenues ... At the same time we can see a sharp fall in operating expenses in the bank's subsidiaries," said Marek Juras, head of equity research at Bank Zachodni WBK.

PKO benefited from strong loan demand, especially for mortgages. The bank's total loans rose four percent last quarter, and are up 16 percent on the year. At the end of September, they equaled zł.56.6 billion. The growing loans led to a jump in interest income - which makes up over half of the bank's total revenue - of eight percent, to zł.964 million.

Revenue from fees and provisions increased by 50 percent to zł.445 million, mainly as a result of retail-investment products and growing credit-card transactions.

Shares of PKO, Central Europe's largest bank with assets of some zł.97 million, have soared by 30 percent this year, and are trading at approximately 19 times expected 2006 earnings.

The bank announced that it could pay out up to 40 percent of its 2006 earnings as dividends. "I believe it will be near the upper limit of the 20-40 percent range that we mentioned in our [2004] prospectus," said acting chief executive Sławomir Skrzypek.

In 2005 the bank returned 46 percent of its profits to shareholders. (Reuters)