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The Warsaw Voice » Business » January 9, 2008
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Banking Bonanza
January 9, 2008 By Michal Jeziorski   
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Poland's banks made further gains last year as clients lined up to borrow funds and saved heavily in investment funds available through banks.

In the first three quarters of 2007, the country's 10 biggest banks posted a combined net profit of over zl.8.5 billion, while for the whole of 2006 they reported zl.8.7 billion. PKO BP, which controls a third of Poland's retail banking market, reported a net profit of zl.745 million for the third quarter.

The banks' increased profits are largely due to credit expansion. In the first three quarters of last year, Poles borrowed over zl.30 billion in mortgage loans alone. At the same time, bad debts accounted for just 3.3 percent of the total value of loans taken out. The General Inspectorate of Banking Supervision, which monitors the country's banking sector, says Polish banks earned an estimated zl.12-13 billion throughout 2007.

Last year saw further growth in lending, chiefly in the case of mortgage loans, along with the development of online banking services.

Over the past several years many Polish banks have established strategic alliances with investment funds, which are increasingly popular with savers here. PKO BP and ING have set up their own investment funds, while Bank Pekao SA took over Pioneer First Polish Investment Fund Company, which launched its operations in Poland in 1992. In 2003-2005, Pioneer Pekao's assets grew from zl.5 billion to zl.20 billion, allowing the fund to secure 35 percent of the market.

Over the past several years, many clients have decided to move their savings from deposits to investment funds. In the first quarter of 2006, Polish investment fund assets increased by over zl.11 billion. By early 2007, investment fund companies managed a total of zl.95 billion in assets. Throughout 2007, that figure grew by nearly 25 percent, and at present investment funds account for some 25 percent of Poles' total savings. Some 1.8 million people have invested in them.

Since Poland embarked on market reforms in 1989, the country's banking system has steered clear of most of the problems that have plagued other transition economies in the region. The reform of Poland's banking system began in the early 1990s when nine commercial banks were spun off from the National Bank of Poland. At first, these banks were wholly owned by the state, but later most were sold to foreign investors. Bank Przemysłowo-Handlowy attracted a German investor and merged with Powszechny Bank Kredytowy; Bank ¦l±ski became part of the Dutch ING group; Bank Gdański was taken over by privately owned Bank Inicjatyw Gospodarczych, which was later renamed Bank Millennium; Bank Zachodni merged with Wielkopolski Bank Kredytowy; and Bank Depozytowo-Kredytowy, Pomorski Bank Kredytowy and Powszechny Bank Gospodarczy joined the Pekao SA group. Today the state only controls Bank Gospodarki Żywno¶ciowej and PKO BP. The banks' operations continue to be supervised by the National Bank of Poland as the central bank.

In all, 51 commercial banks currently operate in Poland, most of them controlled by the world's largest financial institutions, which have acquired them through privatization. Foreign investors hold a combined 70 percent of the stock in Poland's banks. In addition to big commercial banks, the country also has several hundred small cooperative banks that operate on local markets.
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