Polish Banks - It won't be that easy as it seems - IPOPEMA
It won’t be that easy as it seems…
… and it seems to us that market thinks all sector risks have already materialized or at least they are priced in. We do not share this opinion as we think that 2017 will not be an easy year.
FX mortgage drama can return one day
Slower pace of works on resolving issue of FX mortgages, more balanced comments from government representatives regarding potential loans conversion and inflationary expectations resulted in rebound in Polish banks valuations in December. Also recently proposed increase in FX risk weightings were mildly received by the market, while we think it will significantly reduce dividends from Polish banks in the next years. One can argue that FX borrowers are not target group for ruling party and all promises given in the election campaign will backfire, but we would not be so optimistic. FX mortgages are ticking bomb and we think that Polish banks will eventually bear some costs. We assume FX spreads bill will be eventually approved with total cost of PLN 4.0bn for the sector. We incorporate it in respective increase in fundamental beta for particular banks, as we do not have enough visibility of the timing of it and impact on accounting earnings. Additionally we see increasing number of cases regarding FX loans proceeded in Polish courts.
Dividends can be limited not only in 2017E
Only Pekao and Handlowy are expected to pay noticeable dividends in 2017E while “FX-banks” will not meet regulatory criteria. Because of the fact that share of FX loans is declining slowly we believe KNF may continue to reduce payments in selected banks also in the coming years. Recently proposed increase in FX risk weighting only strengthens our hypothesis.
All hope in investments loans
Polish banking sector is becoming more mature so we should expect more mature loan book growth in coming years. PLN-denominated mortgages continue to grow healthy, but double digit growth observable in recent years is not sustainable with flattish new origination. 2017E 6% YoY growth should be more or less compensated for natural amortization of FX mortgages and resulting in mere 1% growth in total mortgage book. Thus assumed 2% growth YoY in retail segment in 2017E should be driven by consumer loans. It is also widely expected that investments will drive demand for corporate loans in 2017E, but we see a risk that new projects will be initially financed by use of growing pile of deposits (both private and public).
When it’s good, it’s pricy
Fundamentally attractive Polish banks (look at ING, BZ WBK or Pekao) are expensive (P/E ratios above 15x), while cheaper banks bear risk of FX mortgage portfolio. In Alior, the only BUY in our coverage universe, we like organic growth story coupled with expected synergies from acquisition of BPH Core. However delivery of additional value from this acquisition will not be an easy task, thus we perceive Alior as high-risk bet.
Alior Bank is a universal lending and deposit-taking bank which renders services to individuals, legal persons and other entities which are Polish and foreign persons. Co.'s core activities include maintaining bank accounts, granting loans and advances, issuing banking securities and purchasing and selling foreign currency. Co. also conducts brokerage activities, consulting and financial agency services and renders other financial services.
Bank Handlowy W Warszawie is a Polish bank holding company engaged in a wide range of banking services for individuals and corporate customers in the domestic and foreign markets. Additionally Co. operates in brokerage operations, lease services and investment operations. Customers have access to these services at the branches, ATM's, telephone services and electronic banking services.
Bank Millennium provides various banking products and services to individual clients, small businesses, corporate, and public sector entities in Poland. Co. offers current account, custody account, and escrow account; standard deposits, negotiated deposits, millenet deposits, and automatic overnight deposits; debit and charge cards; funds management; professional cash services; and management of balances of current and auxiliary accounts. Co. also provides current account overdraft facility, real estate loans, revolving credits, working capital loans, investment loans, energy financing facility, sureties, line of guarantees, letters-of-credit, preferential loans, and bid bond guarantees.
Bank Polska Kasa Opieki (the Bank) is a commercial bank providing a range of banking services, mainly in Poland. The segments of the Bank are as follows: Retail banking, which comprises all banking activities related to retail customers and small and micro companies; Private banking, which comprises all banking activities related to the affluent individual customers; Corporate and Investment banking, which comprises all banking activities related to the companies, interbank market, debt securities and other instruments; and Assets and Liabilities Management and other, which is engaged in the supervision and monitoring of fund transfers, and other activities centrally managed.
ING Bank Slaski is a bank holding company. Through its subsidiaries, Co. is engaged in providing a range of banking services rendered for individual and institutional clients in line with the scope of services outlined in Co.'s charter. Co. runs operations both in the home currency and in foreign currencies. Co. is also active on the domestic and foreign financial markets. The subsidiary, ING Bank Hipoteczny S.A., also runs banking business, including loans secured with mortgage. Additionally through subsidiaries, Co. operates brokerage services, real estate, leasing of real estate and advisory and acts as a financial intermediary as well as provides other financial services.
mBank is a provider of comprehensive corporate banking services in Poland. Co. and its subsidiaries make up the mBank Group which is engaged in offering financial services. Co.'s service offering includes a comprehensive financial offer tailored to the needs of corporate clients, Private Banking clients, and retail clients. The business activities of Co. is conducted in the following business segments: Retail Banking and Corporates and Markets.
PKO Bank Polski is a universal commercial bank offering services to both domestic and foreign retail, corporate and other clients. Co. is licensed to hold foreign exchange and currencies and sell/buy them, as well as perform a full range of foreign exchange services; open and hold bank accounts abroad and to deposit foreign exchange in these accounts. In addition, Co. conducts activities relating to leasing, factoring, electronic settlements via payment cards, as well as renders other financial services. As of Dec 31 2009, Co. had total assets of Zl156,478,685,000 and total deposit of Zl124,628,562,000. Co. operates in the Republic of Poland, Ukraine and Sweden.
Bank Zachodni is a bank seated in Poland. Co. and its subsidiaries provide a range of banking services for individual and business customers and operate in domestic and interbank foreign markets. Additionally, Co. provides also the following services, including intermediation in trading securities, leasing, factoring, asset/ fund management, insurance services, trading in stock and shares of commercial companies, and brokerage activity. Operational activity of Co. and its subsidiaries has been divided into five segments: Retail Banking, Business and Corporate Banking, Global Banking and Markets, ALM (Assets and Liabilities Management) and Centre, as well as Santander Consumer.
Rapidly growing CEE brokerage with over 50 stocks under coverage across CEE4 countries: Poland, Czechia, Hungary, Romania.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.