PKO bank posts good results but Polish politicians can't stop meddling

By bne IntelliNews May 16, 2007

Jan Cienski in Warsaw -

Poland's largest bank, state-owned PKO BP, on Tuesday surprised analysts with a strong first quarter, reporting a 40% increase in profits thanks to a buoyant rising mortgage portfolio and cost restraints – but the good results can't mask increasing worries about the bank's future due to political interference.

PKO BP, which has about 20% of the Polish banking market, has been without a chief executive since last October, when Andrzej Podsiadlo quit. Podsiadlo left because he had been appointed by the previous centre-left government, and Poland's conservative Law and Justice party government has systematically purged top management at almost every state-owned company in the country and replaced them with party loyalists.

Since then, Poland's political masters have been unable to find a suitable candidate to take over the country's most important financial institution, which is 51.5% owned by the state.

Slawomir Skrzypek, a close ally of Poland's ruling Kaczynski twins, was the bank's acting head late last year, but could not be approved for the CEO post by regulators because he lacked any qualifications. Instead, he was named governor of the central bank. Kazimierz Marcinkiewicz, a former prime minister with no banking experience, was also considered for the top job.

Loyal servants

For the Kaczynskis twins, who are president and prime minister, loyalty is much more important than professional qualifications, because they have visions of using PKO BP as the core of a national financial champion that would include the postal bank and PZU, a government owned insurance company.

Three contests have been held to choose a CEO and most analysts expect another executive search scheduled for this week will also come up empty.

The dithering over choosing a new CEO has left the bank adrift at a time when Poland's banking market is becoming increasingly competitive.

"At the moment politicians are playing around with the bank to the detriment of the other shareholders," says Maciej Majewski, a banking analyst for Deloitte & Touche, the consultancy.

PKO BP is about to lose it place at the top of the bank rankings, pipped by rival Pekao, which is owned by Italy's UniCredit Group. Pekao is in the midst of merging with most of BPH, Poland's third largest bank, which had been owned by Germany's HVB, which was itself acquired by UniCredit in 2005.

Other banks are also growing fast. GE Money of the US is buying 200 surplus BPH branches that Unicredit was forced ot divest in order to merge Pekao with BPH. Other banks like Deutsche Bank, Polbank EFG of Greece and Scandinavian DnB Nord are planning to ramp up their branches over the next year or two.

Burger strategies

PKO BP recently came up with a strategy that consists basically of trying to stay the country's biggest bank.

"It's the kind of strategy which any company, from a hamburger chain to a car rental company, could have come up with," says Maciej Materna, a banking analyst with Bank Millennium.

The bank also wants to expand in neighbouring Ukraine and is thinking of opening a branch in London later this year – an attempt to cater to the hundreds of thousands of Poles who have migrated to work in the UK since Poland joined the EU in 2004.

For now, Poland's fast expanding economy – growth this year is expected to be at 6.1%, according to the European Commission – and booming mortgage market has meant fat times for all banks, including PKO BP. But analysts warn that its assets are growing by only about 8% a year, slower than many of its rivals.

The first-quarter results released on Tuesday showed earnings rose to PLN672m (€177m), up from PLN482m from the same period a year earlier. Analysts had expected earnings of about PLN599m, according to a survey conducted by the IAR news agency. The key was mortgage loans, which jumped by 37% to PLN24.5bn.

PKO BP has enormous advantages. It has by far the largest network of branches in the country, and many of its customers are older and more conservative, which means they are content to go to their home branches when looking for mortgage loans or investment advice.

But PKO BP's corporate banking arm is more troubled, and other banks, like small but aggressive Getin, are setting up lucrative private banking subsidiaries to grab the business of Poland's fast growing wealthy classes.

What PKO BP really needs is a new leader, who will make the tricky strategic and political decisions, like reducing a bloated workforce, that are impossible to do by committee.

"Over time this management problem will have a huge impact," says Materna.

Send comments to The Editor

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Poland's Law and Justice nominates hardline cabinet

Wojciech Kość in Warsaw -   Poland’s Law and Justice (PiS) party, which won an outright majority in the parliamentary elections on October 25, has announced a hardline ... more

Kaczynski expected to appoint hardline cabinet

Wojciech Kość in Warsaw -   The Law and Justice (PiS) party, which won an outright ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.