The net financial result of the banking sector in Poland in 2020, according to preliminary data from the Polish Financial Supervision Authority (KNF), amounted to PLN 7.8 billion and was lower by PLN 6.0 billion, or 43.8%, than the profit achieved in 2019.
The decrease in the banking sector’s net profit resulted from a decrease in net income and an increase in net impairment losses on financial assets and other provisions.
In 2020 the negative dynamics of the sector’s result was influenced by the increase of impairment losses on financial assets and other provisions by PLN 4.1 billion or 33.9% y/y. This change was a consequence of the deteriorating quality of consumer and SME receivables and the incorporation of changes in macroeconomic forecasts related to the COVID-19 pandemic in the risk models. The increase in the balance of impairment provisions was accompanied by a growth in provisions for legal risk related to the portfolio of FX housing loans. This was mainly a result of a growing number of lawsuits and a change in the line of jurisprudence in favour of borrowers.
The sector’s net income in 2020 was 2.9 billion or 4.1% lower than in 2019. The sector’s net interest income decreased by 2.1 billion, or 4.3%. The decrease was caused primarily by the Monetary Policy Council’s triple reduction in NBP interest rates, the sector’s over-liquidity resulting from the launch of government support programs related to the COVID-19 pandemic, which contributed to reduced lending in the corporate segment, and the implementation of the provisions of the September 2019 CJEU judgment regarding proportional refunds of early loan repayment fees accounted under net interest income. Other income decreased y/y by PLN 2.3 billion or 27.7% due to, among others, a significant decrease in the sector’s income from dividends and revaluation of financial instruments at fair value. The negative impact of the above factors was partially neutralized by an increase in net fee and commission income by PLN 1.5 billion or 11.1%.
Operating expenses (including Bank tax and amortization) remained at levels similar to those recorded in 2019. A moderate increase in depreciation and amortization and a slight increase in general and administrative expenses were neutralized to a significant extent by a decrease in employee costs.