Outlook

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.

The year 2022 was a time of economic uncertainty, but at the same time the continuation of post-pandemic rebound. Polish GDP eventually grew by 4.9% yoy, reflecting the strong economic activity at the beginning of the year, but later in 2022, economic sentiment deteriorated due to rapidly rising prices and simultaneous tightening of monetary policy. For 2023, we forecast a clear decline in economic growth to 0.8% yoy due to the slowdown in the global economy and the consequences of cooling demand through the channel of monetary policy. The reasons for the slowdown should be sought in weaker private consumption (due to the declining, but still high price growth and the materialization of the effects of interest rate hikes), poor prospects for private investments and further uncertainty related to the geopolitical situation.

The outlook for future economic development will have an impact on demand for banking products and possible further changes in the cost of risk as a result of updated assumptions about the economic situation.

Independently from economic situation, tax and regulatory environment invariably plays major role for banks. In particular, this includes tax on certain financial institutions, high capital requirements, contributions to Bank Guarantee Fund (BFG), costs of further adjustment to a number of regulatory solutions (MIFID II, RODO/GDPR, PSD II, MREL, among others), as well as introduction in Poland of cap on asset management fees. In general the tax and regulatory environment of the sector remains very restrictive, which, combined with the unprecedented economic situation, may constrain certain banks’ credit expansion and impact their financial results. Nevertheless, a factor having a positive impact on the banking sector’s result will be the lack of BFG contribution in 2023 – banks will only be charged a contribution to the bank resolution fund, which is expected to be lower than in the previous year.

The issue of foreign currency mortgages continues to be one of the most important factors in the institutional environment. Considering no systemic solution in this matter, the banking system will be most affected by court decisions in individual cases. A number of events (i.a. the rulings of CJEU) has led towards higher number of borrowers seeking judicial resolution. This will have a strong negative impact on the performance of banks, especially those with a large portfolio of such loans. So far, the reserves established by banks due to the expected legal risk have been the main channel of influence – they have already strongly impacted the results in the last three years. According to most estimates, the total costs for the sector may reach several dozen billion zlotys, but they are difficult to estimate and will be spread over time. Much will depend on, among others, the actual number of lawsuits (how many borrowers will decide to take legal action), the interpretation of national courts in individual cases, the reactions of national supervisory institutions or the actions of the banks themselves. Moreover, it cannot be ruled out that the issue of CHF loans will find a final solution by way of legislation.

Bank Pekao S.A. will monitor the direction of decisions made by Polish courts, as well as market practice and borrowers’ behaviour, and will assess on an ongoing basis the probability of cash outflow with respect to the mortgage loans in question. However, the impact may be indirect in case of potential financial problems of some smaller institutions with a particularly large exposure to the discussed risk.

A relevant factor affecting the results of the banking sector in 2022 and 2023 will be the so-called credit holidays and a 2% credit loan. The burden in the form of the first of these solutions was observed in the third quarter of 2022, when credit holidays reduced the net result of 9 listed banks by almost PLN 13 billion. During the first two and a half months of the credit holiday program, 1 million borrowers decided to take advantage of them. This factor will also be present in 2023 – borrowers will be entitled to one month of credit holidays for each quarter of this year.

A 2% credit loan is a solution offered to people up to 45 years of age who do not have and have not had an apartment, house or a cooperative right to a flat or a house. The maximum value of such a loan is up to PLN 500 thousand for one person and PLN 600 thousand in the case of a married couple or parents with a child. Over the 10 years of loan repayment, the government will pay extra to the loan installment, and the subsidy will cover the differences between the real and 2% interest rate. The programme, just as all interventions aimed at supporting the housing market, will be scrutinized closely.

Prospects for economic development (including, among others, potential weakening of private consumption due to very high inflation, development of monetary policy, possible delays in public investments, risk of a prolonged energy crisis) will affect the demand for banking products and possible changes in the cost of risk. We monitor the development of the situation in the Bank’s environment on an ongoing basis, including the direct and indirect effects of the war in Ukraine, and we adapt our activities to the observed challenges.

In the context of the directions of the observed changes, the business assumptions of the “Responsible Bank. Modern banking” Strategy remain valid, and the goals of the implemented strategic initiatives are periodically reviewed in order to ensure they are adjusted to the current external and internal conditions.

In addition, we will strive to strengthen a structured approach to data management and develop competences in the field of data analytics. The Bank will continue to develop cooperation with the PZU Group in the area of ​​insurance and investment.