Poland’s bank tax is likely to make corporate lending unprofitable, the CEO of the country’s largest lender PKO BP told local media on May 18.

Poland introduced tax on financial assets that is paid mostly by banks and insurers in February, with a view to boost the state budget’s revenue to cover for expanded expenditure. The government expected the tax would bring PLN5.5bn in 2016, but in early May it conceded the amount would likely be smaller and hinted at changes to the tax to secure the planned income for the budget.

However, Zbigniew Jagiello, head of Poland's largest lender state-controlled PKO BP, claimed the current annual tax rate of 0.44%, makes corporate lending unprofitable.

“We should use the Hungary’s experience and anchor the tax base on total assets at a given point in the past in order not to rein in lending,” Jagiello told newspaper Rzeczpospolita.

Despite difficulties regulations may cause for the banking sector, Jagiello insists he is confident about PKO BP’s performance. The bank will grow and deliver double-digit return on equity (ROE) he forecast, which analysts say is a feasible goal.

“Double-digit ROE is likely to stay the bank’s ambition in the mid term. ROE in [the first quarter] amounted to 8.3%, yet the bank expected an improvement in its results in the following quarters, while Visa related one-offs will boost ROE by 1pp in 2016,” Erste notes.

Jagiello is the last of the 14 heads of major state-controlled companies still standing following a cull carried out by the Law & Justice government since it came to power in November. The PKO CEO has clashed with the new cabinet several times, in particular concerning raised fees at the bank, which senior government officials have warned would be illegal if they are connected to the bank tax.