- Consolidated, recurring net income in Q3 2019 – excluding one-off provision linked to the European Court of Justice ruling on cash loans – recorded another quarter of double-digit increase. The reported net income rose in June-September period by more than 8% to PLN 656m in Q3 2019 from PLN 606m in Q3 2018, with an increase in quarterly ROE to 11.7%.
- Growth in core revenue accelerated to 8.4% y/y from 7.4% in Q2.
- Lending expansion in key business segments continued at double-digit pace, while commercial revenues delivered a 12% growth.
- At the end of September, Pekao had 35% more active mobile banking users than a year earlier and gross sales of new current accounts hit the record level in Q3 2019 at 134,000.
– In the third quarter of 2019, Bank Pekao yet again delivered a double-digit increase in its operating result, which puts us among the fastest-growing banks in Poland. We have the ambition to further accelerate this pace next year, by increasing operational efficiency, enabling customer-friendly technologies while maintaining strict cost control – said Michał Krupiński, CEO of Bank Pekao. – From the management's point of view, it is crucial that our growth is sustainable, spanning the key areas of retail and corporate banking and that we achieve it despite ongoing organisational repositioning of our franchise.
Stronger core revenue growth
Growth in core revenues accelerated to 8.4% in Q3 2019 on annual basis, and 2.2% versus Q2 2019. The net interest income rose by nearly 11% y/y to PLN 1.39bn, mainly thanks to strong volume growth, both on lending and deposit side. Double-digit increase in commercial activity allowed offsetting the effect of 2018 dividend payment while keeping the interest margin unchanged compared to the second quarter of 2019.
In Q3 2019 the net fee and commission income grew by 3.8% y/y to PLN 643m, which was attributed mainly to higher commissions on credit origination, stronger fees related to card activity, higher revenues related to customer FX transactions and effective cross-selling initiatives.
Growth in lending volume
Across the entire loan book, volumes in Q3 grew by 8% y/y. In key retail products (mortgages and cash loans) combined volumes expanded by 10.1%, whilst in most profitable areas of corporate banking, Mid and SME franchise, loan volumes grew by 14.3%.
For another quarter the growth was achieved with a prudent approach to risk management. Yet again Bank Pekao is leader among large Polish bank in credit risk management. The cost of risk after three quarters of 2019 stood at 0.41%, in line with the management guidance for 2019, and was only marginally, 3 bps higher y/y.
Bank Pekao maintains a strong capital and liquidity profile. The total capital ratio (TCR) at the group level stood at 17.2%, while Tier 1 capital ratio was at 15.5% at the end of September 2019.
The Loan/Deposit ratio stood at 92,7% at the end of Q3 2019. Retail deposits grew in Q3 2019 by 12.4% y/y.
Operating cost dynamic was again below inflation, despite ongoing investments in operational transformation and digitization. Additionally, in Q3 2019, the Bank incurred PLN 29m one-off provision for the reimbursement of fees on cash loans as a consequence of the CJEU verdict in September 2019.
Growing number of young and mobile customers
In Third quarter of 2019 Bank Pekao achieved a best-ever quarterly result in client acquisition. The number of newly opened current accounts for individual clients increased by 134ths 18% up over the corresponding period of 2018. During nine months of 2019, the Bank opened in total 343ths new current accounts ”Przekorzystne”, The sale of new accounts was driven by products such as the “revolutionary card”, which offers competitive currency exchange rates for payments abroad. Results achieved in terms of new account openings set the Bank at the path of acquiring 500ths new customers per annum.
The selfie-enabled current account opening process, Pekao’s innovation in the Polish market, has been gaining popularity among perspective customers. As a result, in the past quarter, new accounts initiated in remote channels accounted in some weeks even for 20 percent of all new current accounts.
At the same time, Pekao continued to bolster its position of a leading bank for younger clients. In Q3 2019, every other new account was opened by an under-26-year-old, with the strongest growth in the age bracket of 13 to 17 year-olds. Overall, the number of new customers doubled in Q3 2019 vs. level of acquisition in Q3 2018.
The bank’s focus on younger and mobile customers has translated into a strongest quarter in terms of growth of active mobile banking users. Number of active mobile banking users grew in Q3 2019 by 244ths and at the end of September reached 1.6 million, up by 35% on previous year.
Increasing RES financing
– We plan to be more active in financing unconventional and renewable energy projects, such as wind, solar and natural gas power plants. We have also been supporting projects aimed at modernisation of conventional power generation and reduction of its emissions – Michał Krupiński stressed.
Bank Pekao has steadily increased financing of the renewable energy sector, and the share of traditional energy generation in Pekao’s loan portfolio has gradually shrunk. For instance, in Q3 2019, Bank Pekao launched a new ‘ECO loans’ offer for SME customers purchasing photovoltaic panels. This offer goes with a free ‘Biznesmax’ loan guarantee from the BGK Bank (the Polish State development bank).
Over the last 12 months, in June 2019 and October 2018, EBRD invested in total PLN 209m in Pekao’s Tier 2 bonds. The bank is committed to use the equivalent of 150% of EBRD investment for financing projects aimed at increasing energy efficiency. In May, the bank granted a loan for the construction of Poland’s largest onshore wind farm, and in April, a credit line agreement was signed to finance energy efficiency investment of SMEs from the region of Kujawsko-Pomorskie (north-central Poland).
Supporting foreign expansion of Polish businesses
Bank Pekao is also strongly committed to facilitating export by the Polish corporates. The Department of International Banking and Export Financing, which is dedicated to companies that plan to expand abroad, works with Polish exporters in more than 40 countries around the world.
According to own estimates of the Bank, this financing support has translated into foreign contracts for the Polish corporates worth around PLN 1bn. At present, with export financing agreements signed by Pekao since the beginning of this year, Polish exporters are executing contracts worth more than PLN 500m, while financing for potential further export contracts, worth another several hundred million, has been secured.