Polish banks take another hit

Polish banks take another hit
By bne IntelliNews November 24, 2015

Polish banks suffered more deep losses on the Warsaw Stock Exchange on November 24 as it became clear that they're facing yet another profit hit. Share prices crumbled as analysts forecast they will be forced to pay out close to PLN2bn (€470mn) over the collapse of a small bank.

Several Polish lenders are likely to watch fourth quarter results buckle because of the need for additional payments into the bank guarantee fund (BFG) following the bankruptcy of small cooperative bank SK Bank. The first banruptcy of a bank in Poland in 15 years will test the country's deposit guarantee system, it is claimed.

The country's biggest bank, PKO, fell 3.2% on the WSE, while Getin Noble dropped 4.79%. The mid-sized lender is the most vulnerable to an anticipated scheme to force banks to absorb losses on Swiss franc mortgages. The new Polish government has also pledged to fast track its plans to implement a special tax on lenders. Polish bank stocks have been falling throughout the year on the back of those challenges, helping to drag the WIG20 index to its lowest level in years.

Settling the tab for SK Bank's deposits only increases the pressure. Regulator KNF announced on November 21 that it will file for SK Bank’s bankruptcy because its assets are insufficient to cover its liabilities. The banking sector will now have to pay an additional fee to BFG, on top of their standard annual contributions, to cover the PLN1.7bn in deposits it is estimated were held by SK Bank.

Analysts predict the additional fees, due once the bankruptcy is carried out by KNF, will hit profit hard. “Some banks, such as BPH or Getin Noble, will very likely post a loss in the fourth quarter,” brokerage house ING Dom Maklerski suggests.

Poland’s largest lender, state-controlled PKO BP, has said already it will have to pay PLN350mn into the fund to guarantee SK Bank’s deposits. That is an estimated 10% of the bank’s profit for 2015, ING said.

The analysts estimate Getin Noble will have to pay the equivalent of 37% of projected net profit. Bank BPH does even worse, looking at a hit of 60%. Banks are expected to issue market filings on their contributions in the coming days.

Overall, the total fee will be "equivalent to 12% of total banking sector PLN14.1bn (USD3.5bn) pre-tax profit reported for the nine months to end-September 2015", according to Fitch Ratings.

On top of that, analysts add that the pain will be exacerbated by a special fund to help mortgage borrowers, set up in October. "We expect the sector to contribute PLN600m (all in Q415), equivalent to 4% of 9M15 sector pre-tax profits," warns Fitch.

The bankruptcy of SK Bank "obviously comes as very negative news for the banks", writes Magdalena Komaracka at Erste. "In addition to the charges which are most likely going to be introduced, such as the banking tax and the [fund to help mortgage borrowers], an additional negative event will now dent profitability."