Banks are already expecting a long and deep recession

The outlook for the Polish economy is getting darker. After a temporary rebound in the third quarter, the banking climate collapsed sharply in October and expectations are even worse. One of the largest Polish banks, Santander Bank Polska, had good results in the third quarter, but admits that it grants fewer and fewer loans.

Santander BP is not only one of the largest, but also the strongest Polish banks. According to its president, Michał Gajewski, now has approx. PLN 10 billion (for the entire Polish group) of capital surplus. This means that it would cover losses for bad loans that may arise in connection with the pandemic crisis in the entire Polish banking sector. Many other banks are in a much worse position.

After three quarters of this year, Santander BP had a net profit of PLN 1.6 billion, or 41.4 percent. less than a year ago. But the third quarter was very good – the net profit amounted to nearly PLN 480 million and compared to the second quarter it was 57 percent. more.

– Our sales results are recovering. It was optimistic, but we are all observing the development of the epidemic (…) The repayments look good, you can see that the aid has brought the right effect, the payment discipline has returned, companies are coping and paying off (…) The third quarter itself was a period of a very strong rebound – he said in President of Santander Bank Polska Michał Gajewski.

– I assess the result from the last three months positively if we compare it with the previous quarter. Of course, there is nothing to compare to the situation before the pandemic, it was a completely different world – he added.

Banks’ profits are falling during the crisis, of course, not only in Poland. The entire Santander group, one of the largest in Europe, had a net profit of PLN 3.66 billion after nine months, which is 33 percent higher. less than the same period last year. The situation was saved by the third quarter, when the bank earned EUR 1.75 billion purely.

– Activity is increasing, the third quarter was much better than the second – said the head of the Santander group, Ana Botin, adding that the bank expects EUR 5 billion in net profit this year.

Polish Santander admits that it recorded a decline in the value of loans granted after three quarters. The value of loans in the bank’s balance sheet decreased compared to September last year by only 1 percent. up to PLN 148.2 billion. But if you compare it with the end of March, the decline already amounted to over PLN 5 billion.

– This is a clear impact of both reduced demand and relief efforts. A large part of customers use the aid funds to repay their current loans – said Michał Gajewski.

Public aid for shield companies meant that they did not need to incur new liabilities with banks. Some of them used cash to pay off previous loans. However, the existing “shields” worked in this way in the second quarter of this year, and the demand for loans from enterprises is still absent. Household demand is also falling.

According to the data of the Polish Financial Supervision Authority, the value of loans to enterprises in banks’ balance sheets decreased from the end of March to the end of August by as much as PLN 26 billion to PLN 343 billion. At the same time, the value of loans to small and medium-sized enterprises decreased by PLN 10 billion.

Bankers expect it to get even worse. The Pengab banking climate index, calculated by the Kantar TNS research center for the Polish Bank Association, fell by 12.7 points in October, reaching a level of minus 7.4. This happened mainly due to the sharp deterioration of the macroeconomic situation. But the prospects’ ratings are even worse.

– The October reading indicates a drastic deterioration of medium and long-term forecasting indices for all markets. The largest adjustments in month-to-month forecasts were recorded for the market of housing loans, investment loans, consumer loans and corporate working capital loans. Signs of a drastic decline in optimism are also visible in the six-month forecasts of the economic situation of households, enterprises and the country’s economy – said Marcin Idzik from Kantar TNS at the press conference.

– The activity of bank customers is significantly lower than in the corresponding period of the previous year. Bankers predict a negative outlook for customer activity in the medium and long term (…) Fear of deterioration of the situation is growing – he added.

The outbreak of the “second wave” of the pandemic has not yet resulted in a revision of macroeconomic forecasts, but bankers’ expectations regarding the economic situation portend a deep and long recession. It will be mainly caused by a decline in consumer demand and a decline in investment. Santander BP already admits that in the third quarter it did not record a significant increase in deposits, which may mean that the cash resources of households and companies are starting to dry up.

ram, ew

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