Wednesday , February 8 2023

PKO BP and Pekao the most resilient to the crisis – The banks


The largest Polish banks are at the first European trio in terms of capital stability in case of recession and rising unemployment.

Polish banks found themselves in the midst of endurance tests launched in spring by the European Banking Authority (EBA) on the basis of data from the end of 2017. The survey covered 48 largest lenders in Europe and concerned two macroeconomic scenarios: underlying and extreme.

Not just the prestige

Taking into account the lower volatility of the Tier 1 capital ratio in the extreme scenario, PKO BP, the leader of the Polish banking sector, is the best bet. This rate will reach 15.62% in 2020. As for the extreme scenario, the fall in GDP is down 1.3%. in 2019 and among others an increase in the unemployment rate to 9.2%. and a fall in asset prices, a small change at the end of 2017, the Tier 1 PKO BP ratio is 16.50%. (adjusted for changes in the report for 2017 would have been 15.91%). Pekao was in third place (the second in Spanish Santander, the owner of the third largest asset of the bank in Poland). At Pekao in 2020, in the extreme scenario, the Tier 1 ratio will be reduced to 14.55%, which is relatively small (at the end of 2017, the ratio would be 16.43%, converted to 15.99%).

It is not just a reputable theme, it is also important for the ability to pay dividends. The Polish Financial Supervisory Authority will use the results of the stress tests in its current supervisory work and in the so-called single stress test label that receives the banks willing to pay the 100% dividend. At Pekao, the issue is simple to create almost a year ago, the buffer will not be high (1.27 percentage points) and should not be increased now, so next year Pekao should be able to pay again the full profit from the dividends.

Ambitions and hopes

However, in the PKO BP case, the case is more complex. This bank a year ago will have a surprisingly high general stress test at a height of 2.86 percentage points. Now, as estimated by our analysts, this buffer should be reduced because the sensitivity of the bank's capital to the shock scenario proved to be much less than in recent stress tests that the KNF will determine at the time of current overhead. Therefore, there is the hope that the new general charge may be even smaller.

Of course, PKO BP has no chance to pay 100%. but it has to create a surplus of "paper money" capable of eliminating 100% as mortgage loans according to the KNF's requirements will likely reduce their repayment by 50 percentage points, ie the bank will allocate 50% of the shares to the shareholders. of the profit (this year will pay 25%, the first dividend of PKO BP from 2014). These corrections are the so-called K1 and K2 criteria being the first one related to the share of currency mortgages in the portfolio (shrinking systematically) and the second depends on the number of mortgages granted during 2007-2008 (this change it will no longer be possible).

The good results of the stress tests can be transformed into a personalized position for this reason, so PKO BP will help you get the opportunity to pay a profit next year. The bank itself has these hopes, in addition, it will be helped by the wider use of preferential weightings for mortgage loans, which will imply a silent capital reduction of even 0.51 percentage points. one analyst said, asking for anonymity.

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