Our macroeconomic outlook assumes disinflation slowdown alongside with stable output growth and elevated uncertainty. CPI inflation decreases: it amounted to 11.4% yoy in 2023, while our estimates point to 3.8% in 2024. Further disinflation means that global factors (energy, oil, goods in general) will play a diminishing role in the inflation-setting process, while domestic factors will become more important in 2024.
Bank in 2023
Prospects for Development
The activity of Bank Pekao S.A. and the Group’s companies is in majority conducted on the Polish territory, hence the Group’s performance will be mainly affected by economic situation in the country and international events that have influence on domestic economy.
Perspectives for GDP growth remain optimistic. After contractionary second quarter of 2023 (-0.6% yoy) and worse-than-expected IV quarter 23 (1.1% yoy) average growth in 2023 was 0.2% yoy and will amount to 2.0% yoy in. Growth will be propelled by private consumption (in line with historical trends). Negative contribution of stocks will wane, while net exports will contribute negatively to the GDP growth. A robust, consumption-fueled growth shall be considered a risk factor affecting path of disinflation; however, it may also bolster credit demand and drive further positive innovations to the cost of risk.
Monetary policy has always affected banks’ financial results, and we consider it the pivotal factor shaping next year results. Profits achieved by the banking sector in 2022 and 2023 have been elevated by historically high interest rates. A cycle of rate hikes which started in October 2021 had raised the main interest rate to a historical high of 6.75%, which in turn drove banks interest revenue upwards. Yet we expect that after broad cuts in second half of 2023 (-100 bp) Monetary Policy Council will keep interest rates unchanged throughout 2024, which means that this year Polish economy will be dealing with elevated nominal rates and rising real interest.
Another significant factors are Government mortgage debtor support programs, i.a. so-called ‘credit holidays’ and ‘safe credit 2%’. Aggregate cost of the ‘credit holidays’ has been estimated to PLN 1.9 billion in years 2022-2023. The programme shall be continued in 2024, but under eligibility restrictions (only debtors with installment-to-income ratio of 35% or higher will be eligible). On the other hand, ‘safe credit 2%’ has incured no cost at the Bank – both currently and in the medium-run perspective.
Financial results of the Pekao Group may be subject to the risks related to the investment cycle; in particular, Next Generation EU (NGEU) funds may have particular impact. NGEU funds inflow could boost investment and demand for corporate credit, especially given the slump in absorption of the EU 2021-2027 budgetary perspective resources which is expected in 20242-25. One shall bear in mind that according to our internal forecasts, average investment growth rate in 2025 will be negative. Yet the timing of NGEU funds inflow will be subject to political negotiation between Poland and the European Commission, possibly also to completion of given legislative or administrative procedures.