Room for more?

In Poland there exists no lack of banking institutions, as a stroll down nearly any central urban street will prove. Many bank outlets have secured prime locations or stalls in shopping malls, while others have appeared in prestigious areas, claiming space once occupied by restaurants or cafes.

The banking industry in Poland is booming in large part because of growing affluence - people are getting wealthier, taking out different loan products and using a range of other basic banking services. According to data obtained from the National Bank of Poland (NBP), household debt totalled over zł.302 billion at the end of July.

A report by Bankier.pl, meanwhile, indicates that Polish customers currently have over 20 million bank accounts. It is also increasingly common for clients to have more than one account, a sea change considering that many people who grew up during communism have never opened a savings or checking account.

Congested market

The Polish market is already packed with financial institutions, but new banks are still being drawn in by the promise of profit. Allianz Bank, a part of the eponymous global insurance giant, as well as Alior Bank, which is owned by Italy-based Carlo Tassara, and Bank Współpracy Europejskiej are all entering the market this year, further crowding an already fragmented market.

Allianz, which already has two million insurance customers in Poland, will launch its banking offer in October and plans to have 40 branches by the end of the year and 200 branches within three years. Alior Bank plans to open 400 branch offices and 400 smaller outlets. It has already chosen First Data, an electronic payment services provider, to issue its cards.

Alior, which in Poland will be headed by Wojciech Sobieraj, a former BPH executive, is also offering customers the ability to personalize their account web pages and even choose an account number. These are moves to attract younger clients, but are considered novelties which are unlikely to influence many potential clients.

In response to the new competition, already established banks are preparing a counterattack. Many of them now offer a free account when customers take a loan or a credit card, for example. Products new to the Polish market are also appearing, such as BZ WBK's offer of an account which returns a percentage of each transaction to the customer.

Some banks are offering loyalty programs for their customers, like ING Bank Śląski's "Bankujesz-Kupujesz" program, which lets customers collect gift points for using the bank's services.

"I find the ING incentive interesting. Loyalty programs are widely used by banks in other countries as a means of keeping a customer and it is still something completely new in Poland," Mateusz Ostrowski, an analyst at Open Finance, told WBJ.

The small and the ambitious

Smaller banks are also growing in power. Polbank, a Greek-owned bank that entered the market in February 2006, currently offers deposit accounts earning six-percent interest. It has already lured up to 300,000 clients - the level that Allianz Bank intends to reach within three years.

	Ten giants
	The biggest banks in Poland, according to total bank accounts, as of Q2 2008
	1.	PKO BP (includes Inteligo)	6,264,000
	2.	Pekao	3,025,000
	3.	BRE Bank (includes mBank and MultiBank)	1,561,000
	4.	BZ WBK	1,332,000
	5.	Bank Millennium	1,237,188
	6.	ING Bank Śląski	1,223,000
	7.	Lukas Bank	903,000
	8.	Eurobank	880,000
	9.	Kredyt Bank	578,269
	10.	BGŻ	508,600
	Sources: Bankier.pl, individual banks

Polish tycoon Leszek Czarnecki has founded several prime examples of smaller but lucrative banks. Czarnecki's Getin Holding includes three banks - Getin Bank, Dom Bank and Noble Bank - and is preparing to launch yet another, Introbank. The new project, slated to launch this year, will mainly target SMEs and local governments.

French-owned Eurobank, which joined the top 10 banks in Poland in terms of bank accounts within five years of entering the market, has earned the envy of other institutions. Its success came via its strategy of establishing bank stalls - which are cheaper to maintain than regular outlets - in shopping centers.

Another strategy to gain market share - among both small and large banks - is to target wealthy individual clients. Luxembourg-based Sal. Oppenheim, for example, estimates that there are about 7,000 families with savings of over €1 (zł.3.3) million in Poland. Allianz Bank, for its part, also plans to concentrate on the clientele "that is able to appreciate quality banking services," as Paweł Miller, the Polish branch's CEO, explained to Parkiet daily.

Space to grow, consolidate

According to NBP data, there were 65 retail finance institutions present and active in Poland in H1 2008, but not including cooperative banks (banki spółdzielcze). The data also showed that the Polish banking market is more fragmented than the Czech market, where only 37 banks - domestic and foreign - are present.

Poland has a population four-times larger than its southern neighbor. But according to the European Central Bank's statistics, for every million people in Poland there are 133 bank outlets, compared to 175 in the Czech Republic, 300 inHungary and over 900 in Spain - a country comparable to Poland in both size and population.

So, is there space for more banks in Poland? "It seems there is a lot of room, because the market still has enormous potential," said Mateusz Ostrowski of Open Finance. He pointed out that 20 million bank accounts is a small number for a country of 40 million, adding that some of those accounts may be inactive.

"Two thirds of Polish pensioners don't have a bank account, never have and never will. A large portion of the Polish population living in villages only have access to co-op banks, credit unions [SKOKi] or banks in post offices," Michał Macierzyński, an analyst at Bankier.pl, told WBJ. In his opinion, the Polish banking market is close to saturation only in large urban centers.

Macierzyński also expects to see some consolidation of the Polish market, likely as the result of foreign mergers and acquisitions. "I wouldn't be surprised to see smaller banks like Fortis-Dominet being sold," he said.

No crisis, for now

According to the Central Statistical Office, Polish banks generated revenues of zł.89 billion and a net profit of zł.8.7 billion in H1 2008, y/y increases of 55 percent and 20.5 percent respectively. Results in Q2 were also generally sound. That presents a healthy picture of the industry, especially compared to the American and Western European markets, for example. But not everyone is pleased.

So far, the international credit crisis has mainly affected the Warsaw Stock Exchange. But people have withdrawn money from investment funds and this is starting to have an effect on banks' financial results. Customers still want to invest their money, however, so banks have begun to offer high-yield CDs, and these products may help to alleviate financial difficulties.

Brunon Bartkiewicz, CEO of ING Bank Śląski, has noted that some banks are having trouble financing their own loans and are struggling to increase deposits. "They were concentrating on loans and neglecting deposits. The credit crisis has taught them to change their lending policies," he told The Wall Street Journal Polska. Bartkiewicz described Poland as an "oasis of peace" in the shaky global financial market.

According to experts, a mortgage crisis similar to the one experienced in the US will not be an issue in Poland. Mortgage loans constitute only 10 percent of GDP in Poland, whereas they amount to 75 percent in the US and an average of about 50 percent in the EU, according to Ostrowki. The number of mortgage loans is still relatively small, numbering around two million presently, and Polish banks have been relatively careful in lending.

Ostrowski underscored that "we can easily rest assured" about the safety and stability of Polish banks. "Nothing like a burst bubble should be expected. Financial institutions are closely supervised and … for now and foreseeable future we can feel relaxed about the Polish banking market," he concluded.