Liquidity in the banking sector remained very good, with the loan/deposit ratio declining below 70% to 69.2% at the end of 2023 vs 75.6% at the end of 2022.
Net profit and returns
(Calculations of PKO Bank Polski S.A, based on the last available PFSA data)
In 2023, the banking sector recorded net profit of PLN 27.9 billion, compared with the profit of PLN 10.7 billion a year earlier. The rolling return on equity (12M ROE) was 11.9%.
The “provisions” item contains, among other things, a part of provisions related to the legal risk of foreign currency mortgage loans.
The main source of the improvement in net profit was the increase in net interest income (+29.3% y/y), which was linked to the achievement (in September 2022) of the peak of the NBP rate cycle. The dynamics were also supported by the absence of the credit holiday that took place a year ago. The improvement in consumer sentiment in the second half of 2023 contributed to the increase in transactivity, while the launch of the government’s „Safe 2% Loan” programme brought about a recovery in the home loan market and, as a result, a slight increase in commission income.
Rising prices, in particular energy, as well as increase in wages, translated into higher operating expenses. At the same time, the regulatory burdens decreased significantly compared to the previous year, owing to the suspension of the contribution to the Deposit Guarantee Fund (in connection with last year’s establishment of System Ochrony Banków Komercyjnych S.A.) and the absence of additional contributions to the Borrower Support Fund.
The banks’ capital position was improving on the back of rising profitability, with further improvement at the end of the year driven by rising profitability, higher valuation of debt instruments on the balance sheet and the issue of bonds to meet the MREL requirement. As at the end of September 2023, the total capital adequacy ratio amounted to 22.0%.
Loan and deposit market
(Based on NBP data and the Analizy Online service site)
At the end of December 2023, the volume of total loans (net of changes in exchange rates) increased by 1.3% y/y (compared to +1.1% y/y at the end of 2022) after several months of negative year-on-year growth. For deposits, the annual growth rate accelerated to 9.3%, up from 6.2% at the end of 2022, posting an increase in momentum across all customer groups (households, corporates as well as central and local government).
December was the second consecutive month in which, after 13 months of negative annual growth, housing loans in PLN recorded a year-on-year increase of 2.2% y/y (compared to a decline of 1.6% y/y at the end of 2022). The recovery in the home loan market due, among other things, to the introduction of the government’s „Safe 2% Loan” programme also led to a series of m/m volume increases from June 2023 onwards. The improvement in consumer sentiment in the second half of 2023 also translated into a recovery in the consumer loan market. Their growth rate (net of exchange rate changes) stood at 2.1% y/y at the end of 2023 (compared to -3.3% y/y at the end of 2022). Business loans, on the other hand, recorded a decline (-0.7% y/y in December 2023 against +9.0% y/y in December 2022), mainly due to a reduction in demand for current financing linked to the reversal of the inventory cycle.
The growth rate of deposits of private individuals accelerated to 12.3% y/y in December (compared to 4.1% at the end of 2022), with a clear change in their structure (current deposits increased by 7.3% y/y at the end of 2023, while the growth rate of term deposits fell to 18.7% y/y). At the end of 2023, assets of investment funds (IFs) for individuals were 32.7% y/y higher than at the end of 2022, driven by an improvement in the stock market and a fall in bond yields and a corresponding increase in their valuations. Investment funds also recorded a positive balance of deposits. Cash in circulation increased by 2.5% y/y in December (+3.9% y/y at the end of 2022).