Net profit in the domestic banking sector was PLN 16.2 billion (approx. 4.6 billion) in 2014 and in the first quarter of this year was just over PLN 4 billion.
The banks overall had a 10.2 percent return-on-equity profitability ratio in the first half of last year, one of the highest in Europe, against an EU average of 4.6 percent (in Hungary the ratio was minus 32.2 percent).
But domestic banks are facing historically low interest rates, reduced credit card fees and raised contributions to the Bank Guarantee Fund.
“The banking sector is not in the best position. This year all the bad news is accumulating. It started with low interest rates, higher payments to the BGF and taxes. It is no longer an industry where we will achieve a 15-20 percent return on equity,” Wojciech Sobieraj, CEO of Alior Bank, said.
Furthermore, Polish banks will likely see much slower client count growth and lower earnings per client as the country’s economy is evolving from the stage of fast growth towards more mature growth, Ernst and Young said earlier this year.
The opposition party Law and Justice (PiS) said in June it wants to introduce special taxes on banks and supermarkets if it comes to power.
PiS wants to introduce a 0.39 percent tax on bank assets to bring in PLN 5 billion a year. The flat levy would hit the smallest and least profitable banks hardest. Getin and BOS would reportedly face the biggest problems.
Two-thirds of banks in Poland and most of its large retail networks are foreign-owned. All companies pay a flat income tax rate of 19 percent. Banks also a levy for a banking guarantee fund.
Swiss franc proposals
A proposal made Wednesday by the governing Civic Platform (PO) party on partial conversion of mortgages denominated in Swiss francs could see Polish banks lose USD 2.5 billion, Fitch Ratings said.
PO has proposed legislation that would allow 20 percent of holders of Swiss franc mortgages to convert them into zlotys at the current rate. Lenders would pay half the conversion cost.
About half a million Poles took out such mortgages to benefit from lower interest rates, and later their loans became much more expensive after the franc appreciated earlier this year.
"We believe the estimated potential loss of PLN 9 billion to PLN 9.5 billion (USD 2.4 billion to USD 2.53 billion) for the sector should be manageable, especially as it would probably be incurred over several years," Fitch said.
The governing party's proposal is for home loans on flats and houses no bigger than 75 sqm and 100 sqm.
PiS has proposed an alternative plan with full conversion of foreign currency loans at historical exchange rates, with the financial regulator KNF saying last week its cost could exceed PLN 40 billion and require three banks to raise capital to avoid insolvency.
Among lenders with the biggest Swiss franc loan books are PKO BP and Getin Noble, as well as the Polish banking businesses of Santander, Commerzbank, BCP, Raiffeisen and General Electric. Getin is the most exposed to Swiss franc loans, Fitch said. (jh)