Research and Markets: Banking Market in Poland 2009-2011 - CEE Banking Series, Update 1H2009

Banking Market in Poland 2009-2011, Update 1H2009 is the latest update of our comprehensive annual publication on the banking sector in Poland. It is describing the present market structure and recent trends on the market. It also provides short term estimates of key banking volumes for the years 2009-2011.

If compared to previous - 2008 edition, it has been upgraded with new analyses and contains now 118 pages. When preparing this report we have also responded to the feedback received form our customers and have incorporated several improvements making this new issue even more client-friendly and informative.

Year of change. After the turbulent beginning of the year 2009 with abrupt currency depreciation and sudden standstill on the inter-bank market, the summer 2009 brought some relief to banks. The pressure on exchange rate has eased and most of toxic derivatives held by corporate clients have expired or have been settled. Also the money market started slowly to work again with more liquidity available in the system. Unfortunately the negative consequences of financial crisis are still not over. The level of non-performing assets is still on rise - Only in 1H 2009 this ratio* recorded an increase by almost 50% to 5.9%. As a result, despite quite successful reduction of operating expenses performed by most banks, the huge value of newly created provisions: 5.7 bn PLN [1H09] vs. 1.4 bn PLN [1H08] has been dragging bank's results down. The combined net profit of all banks fell down by nearly 50% YoY to 4.3 bn PLN in the first half of 2009.

Competitive landscape. During the first half of 2009 no significant changes in market concentration could be observed. The market leader PKO BP was able to increase its market share by a fraction while its major rival Pekao continued to lose market share. Among other big players only BRE bank was able to grow in 1H 2009. In contrast, ING was losing market due to increasing deposits outflow. The three recent entrants: Alior, Allianz and Meritum were developing quickly, however, producing much more costs than revenues. AIG bank sale has been finally closed by an equity swap with Santander. At the same time there have been new rumors about other ownership changes with: Kredyt Bank, BZ WBK and GE-BPH as possible acquisition targets, quoted most frequently. On the buyer's side, apart of just raising equity PKO BP, some French and Spanish banks, in particular SG, are reported to plan further growth in Poland.

Expansion of infrastructure. In the first half of 2009 the trend of quick infrastructure growth known from previous years has been reversed. Most banks started to review their distribution networks with selective closures and personnel cuts, being part of larger operating costs improvement programs. Only few players continued opening of new branches (for example Eurobank, Alior, Allianz). Other exception with no or little cost cuts were online banking platforms like: mBank, ING direct, or investments of banks in automated services (for example: self service areas in outlets, call-centers, internet banking functionalities etc.). The reason for this situation is that most banks perceive the future for mass retail banking services to be increasingly dependent on direct channels/self service solutions.

Perspectives & mid-term forecast. It can be expected that revenues of banks will stagnate within next quarters while costs will continue going up, driven by increasing costs of risk. As a result of persisting high funding costs and relatively low interest rates charged on existing loan portfolios (due to common indexation of loans to WIBOR), the net interest income of banks is not likely to grow significantly, despite slightly rising volumes. Consequently, the net profit of banks will fall sharply in 2009 and it is also not likely to increase substantially in 2010. In contrary to profits, the outlook for key banking volumes in 2009/2010 is more optimistic. Both client deposits and loans are not expected to register a negative growth on a YoY basis. Retail banking segment will remain relatively strong although demographic trends will gradually erase positive effects of reduced income tax and lower social security rates - factors, that contributed to a relatively strong retail deposits growth in 2009. In corporate business, deposits may tend to increase faster than lending due to reduced investments and cash hoarding by enterprises

Key Topics Covered:

1. Macroeconomic overview

2. Banking market

3. Retail banking

4. Corporate banking

5. Banks profitability

6. Banks valuation and M&A activity

7. Top banks profiles

8. Mid-term forecasts

9. Note on methodology

Companies Mentioned:

• Dombank
• Raiffeisen
• Pekao
• BPH
• Santander
• GE money
• BRE Multibank
• ING
• Polbank EFG
• Fortis
• BZ WBK
• Millennium
• Kredyt Bank
• PKO Bank Polski
• Dombank
• Raiffeisen
• mBank
• Expander
• Open finance
• BISE
• DnB Nord
• GE money
• AIG
• Cetelem
• Citibank handlowy
• Alior
• Meritum
• Allianz

For more information visit http://www.researchandmarkets.com/research/71111c/banking_market_in

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