By Mateusz Rabiega
GDANSK (Reuters) -Polish bank Pekao expects its interest margins to decline this year due to higher deposit costs and to a lesser extent a potential reduction in central bank interest rates, Chief Executive Leszek Skiba said on Thursday.
“The strongest factor that will have impact on the bank’s results is an increase in interest costs (…) they will rise gradually, during the current year, and they will reduce the interest margin,” Skiba told a press conference.
Pekao said its interest margin in the fourth quarter of 2022, excluding the costs of payment holidays, fell to 4.13% from 4.41% the previous quarter as it continued to raise deposit rates, while the full-year result added up to 3.3%.
The bank reported on Thursday a 27% rise in fourth-quarter net profit to 886.1 million zlotys ($201.88 million), beating estimates of 735 million zlotys, according to a Reuters poll. However, its shares fell nearly 2% as the jump in profit was mainly due to one-off factors while full-year net profit dropped by 21%. The shares also tracked a 1.9% drop in Poland’s blue-chip index.
“On the one hand, net profit is higher than expected, but this is due to lower risk provisioning, a stronger trading income and a smaller negative impact from one-offs announced earlier … the quality of the beat is not impressive,” Erste Group analyst Lukasz Janczak said.
Pekao said full-year net profit fell to 1.72 billion zlotys, hurt by a payments holiday scheme and provisions for Swiss franc mortgages.
The Polish government introduced payment holidays for borrowers that allow eight instalments to be postponed in 2022-23, after a series of interest rate hikes – imposed by the central bank to tackle inflation – hit many borrowers.
Analysts believe interest rates have now peaked and the central bank will at some point start to cut rates.
Pekao said in January that it had updated estimates of participation in the payment holidays scheme, which improved its net interest income in the fourth quarter by 460 million zlotys.
The company’s results were affected by regulatory decisions and booking of additional, significant provisions for mortgages in Swiss franc, CEO Skiba said.
For the full year, Pekao took a 2-billion-zloty cost related to payment holidays and 1.6 billion zlotys worth of provisions for Swiss franc mortgages.
By 1125 AM GMT Pekao’s shares were down 1.6% at 88.26 zlotys.
($1 = 4.3893 zlotys)
(Reporting by Mateusz Rabiega and Adrianna Ebert; Editing by Kim Coghill, Shounak Dasgupta and Susan Fenton)
