Headwinds Defied: 2023 Poland's Banking Sector Thrives Amid Economic Shifts

WARSAW, Poland - Nov. 23, 2023 - PRLog -- In Q2 2023, Poland's economy faced near-zero GDP growth, influenced by factors like heightened inflation, increased interest rates, and a challenging external environment. National Bank of Poland (NBP) responded promptly in Q3 2023 with interest rate cuts, though facing criticism alleging it to be election-related and premature. The NBP's strategic shift from aggressive rate hikes in 2022 to cuts in 2023 is expected to act as a cushion, potentially facilitating a soft landing for the economy throughout the remainder of 2023 and into 2024. Nevertheless, the rapid swing in monetary policy is likely to have repercussions, potentially leading to persistent higher inflation and potential setbacks in economic performance down the road.

The surge in market interest rates, rising from zero to approximately 6.5% in 2022, had a profound impact on the banking sector. The escalating cost of money significantly influenced the new investment demand of corporations, while simultaneously limiting the capacity of individuals to secure new loans. Conversely, the notably higher interest rates, though still below inflation, spurred interest in depositing funds in banks. Consequently, overall client deposits at banks reached PLN 1.92 trillion in Q2 2023, reflecting an 11%+ change over 1½ years since the end of 2021. Concurrently, client loans experienced a contraction of over 2%, decreasing from PLN 1.29 trillion at the close of 2021 to PLN 1.26 trillion in Q2 2023. However, the impact of higher interest rates has proven overall beneficial for banks thus far. In 2022, banks operating in Poland recorded PLN 93 billion in net revenue (EUR 20 billion) and realized PLN 10.8 billion in net profits (EUR 2.4 billion).

Despite all these challenges, the outlook for the sector remains fairly favorable. Elevated interest rates and higher-than-normal inflation are likely to boost banking volumes in nominal terms, ultimately leading to higher margins. It is plausible to expect a 10-12% year-on-year increase in client deposits through 2025, and a 4-6% growth in outstanding loans during the same period. Additionally, total banking assets are projected to grow steadily, potentially reaching PLN 3.5 trillion by the end of 2025.

For more details, please refer to the complete research report on Poland's banking, accessible at: https://tinyurl.com/PLBANK23