National Bank of Poland chairman Adam Glapiński warns that banks will be unprofitable for next few quarters and the sector as a whole may be loss making in 2021.
Profits of banks are down on last year so far by nearly a half, at PLN 5.65 bn (EUR 1.24) and the prospects for next year are even worse, the Chairman of Poland’s central bank Adam Glapiński told the Warsaw International Banking Summit on Monday.
But while bankers complain that their main bugbear is low interest rates which are universal on the global landscape, in Prof. Glapiński’s opinion, the main problem will be losses on their credit portfolios, as the impact of the recession caused by COVID-19 hits companies unable to cover repayments.
Criticism has been levelled at the NBP’s cuts in interest rates this year to the never-seen-before level of 0.1 percent, while no indication is evident of any hikes before 2022.
The bank chairman said that dividends and buying back shares will not be an option in 2021.
While the tears of bankers making losses do not move many people, it could have significant consequences for the Polish banking sector. Poland has been seen as “overbanked” for many years. With many international institutions suffering in the wake of the previous financial crisis in 2008, profitability levels are looked at very carefully.
The last few years have seen Deutsche Bank, Societe General, GE Bank, Nordea and Unicredit retreat from the Polish market. In most cases, market share has been “snapped up” by large local players PZU SA and PKO Bank Polski and Spanish owned Santander. Much has been made of Polish financial organisations rolling back the international domination of the sector.
However, Commerzbank, the German owner of MBank had to cancel its sale before the pandemic, because there were no reasonable offers on the market. Santander has said it is committed to Poland, despite a global strategy to concentrate on Latin American, where profitability is higher.
Other players are closing branches due to the pandemic and 5,000 jobs were lost in a sector that employs 151,000 people - more than coal mining.
The danger is that if profitability is cut even further then if banks are seeking an exit from the market and cannot find a buyer, they will be forced to make more job cuts. Meanwhile services will become more expensive, as banks introduce further charges in order to cover losses and a credit crunch may appear, as lending becomes too risky.