PKO Bank Polski SA will be on track to meet its estimate of higher 2017 earnings, boosted by better lending as the macroeconomic environment improves, according to an analyst interviewed by S&P Global Market Intelligence.
PKO, which is Poland’s largest lender and 29%-owned by the government, posted on Aug. 28 a 1.8% year-on-year drop in second quarter profit to 857 million zlotys. The second quarter of 2016 had been boosted by a one-off gain due to the sale of the bank's stake in Visa Europe.
The bank's CEO, Zbigniew Jagiello, was quoted by Reuters as saying that that he expects the bank's full-year net profit to be higher. PKO posted an almost 10% rise in 2016 net profit to 2.87 billion zlotys.
Lukasz Janczak, an analyst at Ipopema Securities, told S&P Global Market Intelligence that the forecast was in line with his expectations due to favorable macroeconomic conditions and strong interest income growth in the Polish banking sector.
"There are very strong core revenues among Polish banks with double-digit interest income, helped by cost control and positive macroeconomic conditions," he said, noting that as PKO was the country’s largest lender, it was well-placed to take advantage of an improving economy.
In its earnings presentation, PKO forecast Polish GDP growth at 3.9% in 2017, up from 2.7% in 2016. It predicts the economy will grow by 4.1% in 2018.
PKO's second-quarter net interest income rose more than 10% to 2.11 billion zlotys, while net fee and commission income also increased, to 733 million zlotys.
Janczak said the lending market was strong, which would help growth at the bank going forward.
"There is quite good demand for loans, there is a strong mortgage market and demand for consumer loans," he said. "There are large inflows of deposits, which is allowing banks to reduce their cost of funding."
The bank's gross loans totaled 212.7 billion zlotys at the end of June, up 6.9% from the year-ago period, with mortgages accounting for almost half of that amount and corporate loans around a quarter.
Deposits rose by 4.3% in the first half of 2017 compared the year before, amounting to 203.3 billion zlotys at the end of June.
The lender increased its market share of the loan market to 17.8% in the second quarter of 2017, up from 17.6% in the same period of 2016, helped by improved lending to institutional entities. Its deposit market share, however, decreased slightly to 17.1% from 17.3% amid lower deposits by institutional entities.
The group's Tier 1 capital ratio stood at 16.00% at the end of June, compared with 14.51% at the end of 2016. The total capital adequacy ratio was 16.85% as of June 30, compared with 15.81% as of Dec. 31, 2016.
As of Aug. 25, US$1 was equivalent to 3.59 Polish zlotys.