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2018/11/13 / Erste Group Research

Issuer Profile - PKO Bank Polski




PKO Bank Polski (PKO BP) looks back on a history spanning around 100 years. The institution started out as a postal savings bank. In the meantime it has positioned itself as a universal bank. Its business focus nevertheless remains on the retail segment in its Polish home market. It is the market leader in this segment and with a balance sheet total of around PLN 300bn (Q3 2018: EUR 72.2bn) it is the largest domestic credit institution. For a long time PKO BP was wholly owned by the government, but since 2004 the company is listed on the stock exchange. However, the government continues to hold a stake of nearly 30% in the company and exercises a decisive degree of control over it.

The bank's earnings results improved significantly in the 2017 financial year. This positive development was largely due to growth in net interest income, which represents the most important earnings component for the bank. Consolidated net earnings rose by 8.1% y/y to PLN 3.1bn (EUR 732mn). This positive trend continues in the current financial year. In the first 9 months of 2018 the company posted net earnings of PLN 2.7bn (EUR 643mn). Once again rising net interest income had the biggest impact on earnings in absolute terms.

Moody's is the only agency that assigns a credit rating to PKO BP. The bank's senior unsecured liabilities are rated 'A3'/'stable'. Its deposit rating is benefiting from an even greater LGF uplift and stands one notch higher at 'A2'/'stable'. Moody's regards the company's leading market position in Poland, its satisfactory asset quality, and its strong liquidity position as fundamentally credit positive factors. Profitability is seen as adequate, but is under moderate pressure. The bank's capitalization has improved to a favorable level in recent quarters. The fairly small legacy portfolio of foreign currency mortgage loans (primarily CHF-denominated) is considered to be a weakness.

The PKO Group issues covered bonds through its wholly owned subsidiary PKO Bank Hipoteczny (PKO BH). As of 30. September 2018 the mortgage cover pool of the latter comprised assets totaling PLN 16.0bn, consisting of Polish residential mortgage loans. Moody's rates the program. The rating is currently capped at 'Aa3' due to the sovereign ceiling.

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General information

AuthorErste Group Research
Date2018/11/13
Languageen
Product nameCredit News
Topic in focusCredits/ Corporate bonds
Economy in focusAustria, Poland
Currency in focusEuro, Polish Zloty
Sector in focus-
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