Political pressure is rising for Polish bank mergers

Significance

State-controlled PZU Group, Poland's largest insurer, was already bidding for a 25% stake in Italian-controlled mid-tier lender Alior Bank, and now wants to acquire Austrian-owned Raiffeisen Polbank and US General Electric (GE) group's local unit BPH. As the sector struggles with the consequences for borrowers in foreign exchange (forex) of the Swiss central bank's decision to scrap its currency ceiling against the euro, consolidation and foreign ownership are returning to the forefront of political debate. In the presidential election, the president-elect from opposition Law and Justice, Andrzej Duda, announced his preference for greater domestic ownership in a sector that is otherwise mostly privately owned.

Impacts

• The household loan/GDP ratio will continue growing, but an upturn in demand for corporate loans in 2016 will reshape bank lending dynamics.
• Profitability margins will remain under pressure in the short term, owing to the Swiss franc debt burden and low interest rates.
• Solid growth in deposit and equity levels will nevertheless underpin financial sector stability in the near term.