PKO profit disappoints

Poland's largest domestic bank PKO BP recorded disappointing quarterly earnings this month due to higher corporate loan provisions and weaker fee income.

The state-controlled bank reported a net profit of zł.611 million for Q2. The figure presents a rise of 30 percent from a year ago but below an average forecast of zł.660 million based on a poll of analysts conducted by Reuters. Most Polish banks beat market expectations for the same quarter.

Following its performance, PKO shares fell to a two-month low this month after having risen 15 percent over the year. BZ WBK head of research Marek Juras said, "Loan provisions are at their highest level since 2002 and much higher than expected... Operating performance is in line with expectations."

PKO's recently appointed chief executive Rafal Juszczak said unexpected new provisions of zł.121 million were related to four large corporate clients. He would not elaborate, but said he saw the move as a one-off.

In H1 this year, the bank generated a net profit of zł.1.3 billion, which marks a 35-percent growth as compared to the same period in 2006. "We are growing much faster than our competitor Pekao," said Juszczak. In the same period, Pekao earned zł.1 billion, up by 20 percent from the previous year.

Juszczak now has the task of beating PKO into shape to better compete with foreign-owned competitors. He is likely to launch new credit and plans to issue more than zł.1 billion in Eurobonds in Q2 2008.

He added that the bank was analyzing a potential merger with the country's biggest insurer, state-controlled PZU, but added that no specific action had been taken. (Reuters)