Bank BPH and Recent Trends In Poland's Banking Sector

8/10/2019 Bank BPH and Recent Trends In Poland's Banking Sector

1/19

RECENT TRENDS IN POLAND'S BANKING SECTOR ANDBANK BPH 3Q 2014

December 2014

Inteliace Research

Summary


2/19

Inteliace Research

R e c e n t t r e n d s i n t h e b a n k i n g s e c t o r i n P o l a n d a n d b a n k B

P H ,D

e c e m b e r 2

0 1

4

AGENDA

Banking sector

Bank BPH

2


3/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

POLAND'S BANKING SECTOR: SUMMARY AS OF Q3 2014

All key banking volumes keep growing. Most growth taking place in retail segment. Deposits grow faster than loans.

Volumes

Deposit margins have been under pressure again due to falling market interest ratesfollowing central bank rate cuts.

Lending margins are in an increasing trendMargins

The overall lending quality is improving. Both consumer and corporate debt showdecreasing NPL rates. The only loan category where quality is falling is mortgage. The cause is ageing portfoliosand only limited dilution from new loans due to very slow mortgage origination.

Lending Quality

Total interest revenues are increasing thanks to growing volumes.

Pressure on fee and commission income persists mainly due to regulatory developments(e.g. payment card interchange, fx mortgage repayment, bancassurance etc.).

However, slowing f&c income is more than compensated by interest income and fallingrisk cost.

Profitability

3

1

2

3

4

Source: Inteliace Research

SUMMARY


4/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

-6

-4

-2

0

2

4

6

8

10

12

1416

18

20

22

24

26

28

30

D e c - 1

0

M a r - 1

1

J u n - 1 1

S e p - 1 1

D e c - 1

1

M a r - 1

2

J u n - 1 2

S e p - 1 2

D e c - 1

2

M a r - 1

3

J u n - 1 3

S e p - 1 3

D e c - 1

3

M a r - 1

4

J u n - 1 4

S e p - 1 4

-6

-4

-2

0

2

4

6

8

10

12

1416

18

20

22

24

26

28

30

D e c - 1

0

M a r - 1

1

J u n - 1 1

S e p - 1 1

D e c - 1

1

M a r - 1

2

J u n - 1 2

S e p - 1 2

D e c - 1

2

M a r - 1

3

J u n - 1 3

S e p - 1 3

D e c - 1

3

M a r - 1

4

J u n - 1 4

S e p - 1 4

4

BOTH RETAIL DEPOSITS AND RETAIL LOANS ARE GROWING

Annual growth rate in outstanding loans / deposits at banksDec.2010-Oct.2014

Demand deposits

in%

Source: NBP, Inteliace Research

Householddeposits keepgrowing. The termstructure isfluctuating inlinewith changinginterest ratesexpectations

After a temporaryslow-down in 2014,mortgage loans aregrowing again fasterthan consumerlending.

Mortgage loans

HOUSEHOLDS

Term deposits

HH Loans (billion PLN)HH Deposits (billion PLN)

Consumer loans

in%

Totaldeposits

Total HH loans


5/19Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

-24

-21

-18

-15

-12

-9

-6

-3

0

3

6

9

12

15

18

21

24

27

30

D e c - 1

0

M a r - 1

1

J u n - 1 1

S e p - 1 1

D e c - 1

1

M a r - 1

2

J u n - 1 2

S e p - 1 2

D e c - 1

2

M a r - 1

3

J u n - 1 3

S e p - 1 3

D e c - 1

3

M a r - 1

4

J u n - 1 4

S e p - 1 4

-24

-21

-18

-15

-12

-9

-6

-3

0

3

6

9

12

15

18

21

24

27

30

D e c - 1

0

M a r - 1

1

J u n - 1 1

S e p - 1 1

D e c - 1

1

M a r - 1

2

J u n - 1 2

S e p - 1 2

D e c - 1

2

M a r - 1

3

J u n - 1 3

S e p - 1 3

D e c - 1

3

M a r - 1

4

J u n - 1 4

S e p - 1 4

5

THE GROWTH IN CORPORATE VOLUMES HAS BEEN GRADUALLY ACCELERATING SINCEEARLY 2013


Loans in c/a

CORPORATEAnnual growth rate in outstanding loans / deposits at banksDec.2010-Oct.2014

in%

Corporate Loans (billion PLN)Corporate Deposits (billion PLN)

The growth incorporate volumeshas been positive andincreasing since thebeginning of 2013.

Corporate depositshave been growingslightly faster thancorporate loansrecently. However,looking forward, it iscorporate lending ,which is expected togrow faster thandeposits.

Demand deposits

Term deposits

Investment &other loans

Total deposits Total loans


6/19


7/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

7

THE QUALITY OF CONSUMER AND CORPORATE LENDING HAS RECENTLYIMPROVED. HOWEVER, MORTGAGE LOANS ARE STILL DETERIORATING

The share of non performing receivables in total lending bysegment/product, Jan.2010-Oct.2014

Consumer loans

in %


Quality of lending portfolios ofbanks is improving across all keysegments with exception ofmortgage loans.

Mortgage lending quality isgradually deteriorating asmortgage portfolios of banks aregetting older and there is littledilution due to low new sales.

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

J a n - 1 0

M a r - 1

0

M a y - 1

0

J u l - 1 0

S e p - 1 0

N o v - 1

0

J a n - 1 1

M a r - 1

1

M a y - 1

1

J u l - 1 1

S e p - 1 1

N o v - 1

1

J a n - 1 2

M a r - 1

2

M a y - 1

2

J u l - 1 2

S e p - 1 2

N o v - 1

2

J a n - 1 3

M a r - 1

3

M a y - 1

3

J u l - 1 3

S e p - 1 3

N o v - 1

3

J a n - 1 4

M a r - 1

4

M a y - 1

4

J u l - 1 4

S e p - 1 4

Corporate (big) loans

Mortgage loans

SME loans

Mortgage NPL ratesare growing


8/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

8

DEPOSIT MARGINS ARE SHRINKING AGAIN AFTER THE RECENT DROP INREFERENCE RATES

* Stock of term deposits or loans respectively (loans and funds in current account excluded)** Theoretical margin calculated against WIBOR 6M*** Consumer lending : Loans to households other than mortgageSource: NBP, Inteliace Research

Deposits* (stock, average)

N o m i n a l I n t e r e s t p a i d

o r c h a r g e

d b y b a n k

I n t e r e s t M a r g i n *

*

( o n W I B O R 6 M

)

Loans* (stock, average)

Dec.2011-Sep.2014, in percent, PLN volumes only

Deposit marginsare under pressureagain after the dropof reference ratesin 2014.

Lending marginshave stabilized (at10% for consumerlending and ~2% forcorporate loans) asbanks are able topass changes inmarket interestrates on clients.

00.5

11.5

22.5

33.5

44.5

55.5

66.5

77.5

8

D ec -1 1 M ar-1 2 J un -1 2 S ep -1 2 D ec -1 2 M ar-1 3 J un -1 3 S ep -1 3 D ec -1 3 M ar-1 4 J un -1 4 S ep -1 40

2

4

6

8

10

12

14

16

D ec -1 1 M ar-1 2 J un -1 2 S ep -1 2 D ec -1 2 M ar-1 3 J un -1 3 S ep -1 3 D ec -1 3 M ar-1 4 J un -1 4 S ep -1 4

-1.50

-1.00

-0.50

0.00

0.50

1.00

D ec-11 Mar-1 2 J un -1 2 Sep -1 2 D ec-1 2 Mar-1 3 J un -1 3 Sep -1 3 D ec-1 3 Mar-1 4 J un -1 4 Sep -1 40

2

4

6

8

10

12

D ec -1 1 M ar-1 2 J un -1 2 S ep -1 2 D ec -1 2 Ma r- 13 J un -1 3 S ep -1 3 D ec -1 3 M ar-1 4 J un -1 4 S ep -1 4

Retail

Corporate

Corporate

Retail***

Corporate

Retail (consumer)***

Deposit margins wenttemporarily down after

CB rates were cut

Lending marginsare steady

Corporate

Retail


9/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

9

REDUCED EMPLOYMENT AND SHRINKING BRANCH NETWORKS CONTRIBUTETO HIGHER PRODUCTIVITY IN POLAND'S BANKING SECTOR

Evolution of bank outlets and employment at banks*Dec.2012-Jun.2014

in thousand

* Data for all banks operating in Poland including cooperative banks and foreign bank branchesSource: NBP, KNF, Inteliace Research

14.6

14.7

14.8

14.9

15.0

15.1

15.2

15.3

15.4

15.5

15.6

166

167

168

169

170

171

172

173

174

175

176

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

87.6 88.8 90.7 93.0 91.8

94.6 97.2 101.0

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Average bank* assets per bank outletin million PLN

7.7 7.9 8.1 8.2 8.1 8.3 8.6 8.9

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Average bank* assets per bank employee

in million PLN

11.4 11.3 11.2 11.3 11.4 11.4 11.3 11.3

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Average number of employees per bank* outletin FTE

+15%

+16%

0%

Change (in%)Dec.12-Sep.14

Total employment(left-hand scale)

Total number of bank outlets(right-hand scale)


10/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

AGENDA

Banking sector

Bank BPH

10


11/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

11

SINCE 2012, BANK BPH HAS BEEN SHRINKING WHILE THE BANKING MARKETHAS BEEN GROWING

* Compound Annual Growth RateSource: BANK BPH, KNF, Inteliace Research

BANK BPH total assets evolution, 4Q 2012-3Q 2014CAGR*

Market share evolution, 4Q 2012-3Q 2014

PLN billion

Percent (of commercial banks and foreign bank branches assets)

UNCONSOLIDATEDACCOUNTS

33.5 33.7 33.5 32.7 32.1 31.0 30.7 30.2

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

2.65 2.63 2.56 2.45 2.45 2.31 2.21 2.11

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

-12.3

-5.7

BANK BPH has beencontinuously gettingsmaller since 2012. Atthe same time thebanking market hasbeen growing.

As a consequence ofnegative growth rates,the market share ofBANK BPH, ifmeasured by assets,has fallen to 2.1% in

third quarter of 2014.


12/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

226.0

160.4

115.2

113.1

93.6

70.9

66.4

60.3

56.2

49.5

40.2

34.9

30.7

30.2

29.2

Total TOP 15 = 1 177 billion PLN

BANK BPH RANKED # 14 IN TERMS OF TOTAL ASSETS AS OF 3Q 2014

* Market share among commercial banks and foreign bank branches (cooperative banks excluded)** Nordea bank will merge with PKO in Q4 2014Source: KNF, banks, press, Inteliace Research

Assets, PLN billion Share change vs. 12/2013, in p.p.

Top 15 commercial banks in Poland by total assets, as of 3Q 2014

Bank Market Share by Assets*, %

Pekao

PKO BP

BZ WBK

mBank

BGK

Millennium

ING

Getin Noble

Citibank

Raiffeisen

15.7

11.2

8.0

7.9

6.5

4.6

3.9

2.8

2.1

2.0

82.0


10

7

9

8

6

5

3

4

2

1

12

0.8

-0.7

0.1

0.2

0.1

1.6

-0.2

-0.1

0.2

0.0

0.1

0.4

-0.4

-0.3

0.1

11

12

13

14

15

BG

Nordea**

Deutsche B.

BPH

Alior

4.9

4.2

3.4

2.4

2.1
http://h/Poland_2008/index.htm


13/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

BANK BPH HAS BEEN LOOSING MARKET SHARE IN KEY PRODUCT/CLIENTSEGMENTS RECENTLY

* Client volumes with exception of public sector and monetary institutionsSource: BANK BPH, NBP, Inteliace Research

Retail

Corporate& SME

13

22.2 22.1 21.8 21.2 20.5 20.3 19.9 19.8

5.2 4.9 4.7 4.6 4.4 4.2 4.1 4.1

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Market share in loans* , in percent

Retail

Corporate& SME

Value of deposits*in billion PLN

As combined loan volumes exceed client deposits, the difference has to be financed on the interbank market and by the major s hareholder. Bank's market share has been falling recently across key segments.

-6

-13

-3

-5

CAGR4Q12-3Q14

CAGR4Q12-3Q14

7.5 7.8 7.7 7.7 7.7 7.6 7.4 7.1

5.2 5.3 5.3 5.2 5.1 4.6 4.6 4.8

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

4.4

2.0

4.4

1.9

4.2

1.8

4.1

1.7

4.0

1.7

3.9

1.6

3.7

1.5

3.6

1.4

Market share in loans* , in percent

1.6

2.8

1.7

3.0

1.6

2.9

1.6

2.7

1.6

2.5

1.5

2.4

1.5

2.4

1.4

2.3

Value of loans*in billion PLN

Retail

Corporate& SME

Retail

Corporate& SME


14/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

14

IN SELECTED REGIONS, THE BRANCH NETWORK OF BANK BPH SEEMS TO BEUNDERDEVELOPED

BANK BPH - branch network by region and its share in the overall banking network, Q1 2014Number of outlets and % share in the total banking network*

Legend

2.75% share and more2.14% share and less

Maj 2011 r.

23(2.79%)

30(2.75%)

76(2.99%)

49(2.30%)

14

(2.89%)

13(2.28%)

27(2.69%)

19(2.09%)29(2.12%)

7(1.38%)

22(2.21%)

9(1.82%)

35

(2.09%)

21(3.07%)

35(2.53%)

32(2.71%)

Regionswhere BPH`snetwork isbestdevelopedrelative toother banks

* Banking network including commercial banks, foreign bank branches, cooperative banks and SKOK credit unionsSource: Inteliace Research Bank outlets database 2014

Average= 2.47%

Regions where

BPH`s network isleast developedrelative to otherbanks

Bank BPH - Network: Total outlets: 441 , of which: 280 own outlets 160 partner/agency outlets

BANK BPH's branch network covers thewhole country and bank is controlling ~2.5% of all banking outlets in Poland.

In selected regions, e.g. in Southern andCentral part of Poland, BANK BPH isrelatively underrepresented in terms ofbank outlets.

Bank BPH could still consider increasing itspresence in few important regionsincluding: Wielkopolskie and Maopolskie ,where its share of network is low ifcompared to competitors.


15/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

15

PROFITABILITY OF BANK BPH IS LOW AND FALLING, PRIMARILY DUE TOEXCESSIVE OPERATING COSTS

Profit before tax

Income tax

Profit after tax

Net interest revenue

Net fee & commission revenue

Net banking revenue

Personnel costs

Other net revenue

Profitability tree Bank BPH vs. commercial banks, 2012- H1 2014*Percent of average assets (May not add to 100% due to rounding)

* Data for H1 2014 annualizedSource: BANK BPH, KNF, Inteliace Research

Low profitability

Costs & charges

Depreciation

Cost to income (CIR ratio)%

ROAE%

Very low risk costs


0.7 0.9 0.51.2 1.11.2

2012 2013 14H1

Other operating costs

Low and decliningprofitability

Still highoperating cost

Revenues falling but stillhigher than market average

0.9 1.0 0.61.5 1.4 1.5

2012 2013 14H1

0.2 0.2 0.10.3 0.2 0.3

2012 2013 14H1

5.0 4.4 4.34.4 4.0 4.0

2012 2013 14H1

4.1 3.8 3.73.0 2.7 2.6

2012 2013 14H1

3.6 3.0 3.02.6 2.5 2.5

2012 2013 14H1

1.1 1.1 1.01.1 1.0 0.9

2012 2013 14H1

0.3 0.3 0.30.7 0.6 0.6

2012 2013 14H1

74.8 69.4 81.149.2 51.0 48.5

2012 2013 14H1

6.9 7.4 3.711.0 10.1 11.3

2012 2013 14H1

0.2 0.2 0.20.2 0.2 0.2

2012 2013 14H1

2.0 1.7 1.81.1 1.0 1.0

2012 2013 14H1

1.6 1.4 1.50.9 0.9 0.8

2012 2013 14H1

High CIR ratio

High interest revenue

Legend

Bank BPH All commercial banks

Net reserves

0.3 0.4 0.20.8 0.6 0.6

2012 2013 14H1


16/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

20

40

60

80

100

120

140

160

SINCE EARLY 2010, BANK BPH HAS BEEN STRONGLY UNDERPERFORMING ITSPEER GROUP

16

WIG-BANKS*

BANK BPH

* Performance Index for banks listed on the Warsaw Stock Exchange** Based on book value as of Q3 2014 and net profit for the period Q4 2013 Q3 2014.Source: WSE, Inteliace Research

Bank BPH has relativelylow valuation as it is beingtraded significantly belowits book value (P/B of 0.72).

During last four years ,bank BPH has stronglyunderperformed its peergroup.

Performance IndexJan 1, 2010 = 100%

%

Bank BPH multiples (Dec. 19, 2014) Market cap: PLN 3.6 billion (EUR 0.84 b) P/E** ratio: 24.9

P/B** ratio: 0.72

Difference of 78 pp.:WIG-banks: 131.6%

Bank BPH: 53.3%


17/19

Inteliace Research


P H ,D

e c e m b e r 2

0 1

4

17

MAJOR BANK ACQUISITIONS IN POLAND AFTER 2013

* Implied price (valuation) of a 100% stake *** Multiples as declared by PKO** Market share in terms of total assetsSource: Banks, press, Inteliace Research

2012 Santander Kredyt Bank 1.0 billion EUR

( P/BV: 1.4 )

~3.4% Santander agreed to acquire Kredyt Bank from KBC Group by mergingit with its other business in Poland BZ WBK.

Santander paid with a new issue of BZ WBK shares. The agreement wasbased on an exchange ratio of 6.96 shares of BZ WBK for every 100shares of Kredyt Bank.

Buyer DescriptionDate TargetPrice paid*(for 100%)

Market shareacquired**

2012 Getin NobleBank

Retail business ofDnB NORD

n/a


18/19


19/19

Inteliace Research

R e c e n t t r e n d s i n t h e b a n k i n g s e c t o r i n P o l a n d a n d

b a n k B

P H ,D

e c e m b e r 2

0 1

4

Visit http://www.inteliace.com for more details

Recent Reports:

2013 February - Mortgage Lending in Poland 13 May - Banking Market in Poland 13 May - Bank outlets database 13 June - Insurance Market in Poland 13 September - Top 200 CEE banks 13 November - Investment Funds and Asset Mgmt. 13

2014

February - Mortgage Lending in Poland 14 May - Bank outlets database 14 May - Insurance commissions survey 14 May - Banking Market in Poland 14 June - Insurance Market in Poland 14 September - Top 200 CEE banks 14 November - Investment Funds and Asset Mgmt. 14

and many other ...

RECENT PUBLICATIONS BY INTELIACE RESEARCH

InteliaceResearch

B A Z A P L A C

WE K B A NK

OWY

C HW P

OL S C E I S T A T Y

S T Y K A P

OWI A T W

,2 0 1 1

1

BANK OUTLETS DENSITY IN POLAND (1/3)GSTO SIECI PLACWEK BANKOWYCH W POLSCE (1/3)

37

59

75

176

35

28

38

4888

52

56

44

59

28

67

66

40-60

60

Liczba/Number

Number ofbankoutlets per 1000 sq km, by region,2011Liczba placwekna1000 km2 powierzchni wg. wojewdztw,2011r .

TheSouthernand Central Poland havethelargestdensity of bank outlets

Poudniowaoraz centralna Polskasnajgciejpokrytesieci placwekbankowychnakm2

rdo/Source:Inteliace Research

rednia /Average=58

In teliace Research

B A Z A P L A C

WE K B A NK

OWY C HW P OL S

C E I S T A T Y S T Y K A P

OWI A T W

,2 0 1 1

1

BANK OUTLETS DENSITY IN POLAND (3/3)GSTO SIECI PLACWEK BANKOWYCH W POLSCE (3/3)

rdo/Source :InteliaceResearch

Number ofoutletsper 1 million inhabitants, by countypow iat , 2011Liczba placwek bankowychna 1milion mieszkacw , wg. powiatw , 2011r.

Minimum:126

Maximum:947

MedianaMedian(443) Number of bankoutlets per 1 million

inhabitants varies a lotoncountylevel

Napoziomie powiatw gsto placwek jestbardzo zrnicowana

100 200 300 400 500 600 700 800 900 1000

3 7 9 p o w i a t w

Inteliace Research

GE MONEY BANK OVERVIEW

7.4 8.3 9.1

2 00 3 2 00 4 2 00 5

10.9

1.6

AssetsPLNbillion

* AlthoughExpander isdistributing productsfrom variousbanks, GE offer /for example mortgage/isreportedtobe favoured** CompoundAnnual GrowthRateSource:InteliaceAnalysis

CAGR**

ConceptDescription Results

1.6 1.7

Timeline

History& Background

LoansPLNbillion

NetProfitPLNbillion

TargetClients

Products

Channels

20.4 26.7 22.8ROE(%)

Marketshare(%)

6.6 7.6 8.6

2 00 3 2 00 4 2 00 5

0.140.30 0.32

2003 2 00 4 2 00 5

14.2

51.2

Affluent individualsandprofessionalslooking for mortgage. Valuing quickprocessing and flexibility,sometimesnotfulfillinglending criteria set by otherbanks(for example jobcontract or ownfundslevel) Massmarket clientslooking for simpleandquick consumer loans

Only lending productsonoffer: mortgage refinancing loan credit cards installment loans cashloans car loans

GE money bank-48branches GEpard,~200usedcar dealers Dobry Kredyt consumer finance 12outletsand~1000POS Expander -33branches-financialproductsdistributor*

In1995,GE grouppurchased asmall regionalbank:Solidarno Chase D.T. Bank.Bankwasrebrandedsoonto GE CapitalBank. In1998,GE grouppurchased anothersmall bank(PAMBank)andconverted it toa mortgagespecialist:GE BankMieszkaniowy In2004,GE groupacquired POSlendingspecialist :Chrobrywithanetworkof ~1000POS.Chrobrywas renamed to:DobryKredyt In2004, aused cardealers networkwas createdunderthe GEpardbrand,being the mainchannelforcarloans sales Asof Jan. 2005,all GE activitiesin Polandwereconsolidated underone roof:GE Capitalbank

Shareholders

Topnotchrisk management andcollection High performing sales staff Fast loanprocessing andflexibility High margins Control overdistributors (GEpard,Expander,DobryKredyt) Advancedcross-selling betweensegments

As ofMarch 2006

99

1

General ElectricCompany

Other
http://www.intelace.com/http://www.intelace.com/http://www.intelace.com/http://www.intelace.com/

Date post:	02-Jun-2018
Category:	Documents
Upload:	inteliace-research
View:	221 times
Download:	0 times

Bank BPH and Recent Trends In Poland's Banking Sector

Documents