LONDON (Reuters) - Poland’s biggest lender, state-run PKO BP (PKO.WA), expects to meet analysts’ expectations for 2018 net profit, despite flat interest rates, its CEO said on Monday.
According to Thomson Reuters Eikon, analysts expect PKO BP to improve its 2018 net profit by almost 11 percent to 3.44 billion zlotys ($1 billion), despite signals from the central bank that interest rates may not rise until 2019 or even 2020.
“PKO is doing well in a stable interest rates environment,” Chief Executive Officer Zbigniew Jagiello told Reuters in an interview on the sidelines of a PKO-organized meeting in London for central and eastern European companies with investors from Britain, continental Europe and Scandinavia.
“PKO wants to be a boring, predictable bank. ... If no one-off items occur, then in a future things will be like in the past, that is, the growth in net profit will be in line with analysts’ expectations,” he said.
Low interest rates tend to constrain banks’ profitability because they reduce the spread between what banks can earn on deposits and the interest they pay to savers.
However, PKO reported a 38 percent rise in fourth-quarter net profit last week, as an accelerating economy boosted demand for banking services and products.
Jagiello declined to comment on speculation that PKO may merge in future with its state-run rival Bank Pekao SA (PEO.WA). But he expects further consolidation in the banking sector and in the broader Polish economy.
“I believe that Polish firms must create bigger organisms to better compete in the world,” Jagiello said.
He said there was space for five to seven financial groups in Poland owning banks offering a full range of banking services.
The remainder will be niche lenders only, as the competition is too tough, he said.
Pekao is in turn considering merging with its smaller peer Alior Bank (ALRR.WA).
A key shareholder in Pekao said last month that the state-run lender should consider a super-merger with PKO if it does not go ahead with the Alior deal. Pekao and PKO in December denied a newspaper report that they may pursue a merger.
Santander’s BZ WBK (BZW.WA) bought Deutsche Bank’s Polish assets recently, while BNP Paribas BNP.PA is eying Raiffeisen’s Polish arm Raiffeisen Polbank.
Jagiello also said that in order to support Polish companies abroad and to promote Polish exports, his bank had decided to set up a corporate branch in London, following similar steps in Frankfurt and Prague.
Asked about PKO’s potential share in financing Poland’s future nuclear plant and central airport, Jagiello said that every project that is good for the bank and for the Polish economy should be considered, but he stressed that PKO may commit no more than 10 percent of its over 36-billion zloty equity capital to a single project or company.
Economy minister Jerzy Kwiecinski, also present at the PKO event, told Reuters the government will decide whether to give a green light for nuclear plant construction in March.
($1 = 3.4195 zlotys)
Reporting by Marcin Goclowski; Editing by Adrian Croft