The net profit of the Bank Pekao SA group in the third quarter of 2021 increased to PLN 630.8 million from PLN 370.9 million a year earlier – the bank announced in the report. The bank’s profit turned out to be in line with market expectations, which expected it to amount to PLN 618.9 million.
The expectations of 9 brokerage houses as to the net profit for the third quarter ranged from PLN 605 million to PLN 638 million.
After three quarters of 2021, the net hiss of the Bank Pekao group increased to PLN 1.48 billion from PLN 916.6 million a year earlier.
The bank’s net interest income in the third quarter amounted to PLN 1,387.1 million and was in line with analysts’ expectations, who expected it to amount to PLN 1,366.5 million (in the expected range of PLN 1,360 – PLN 1,373 million). Interest income increased by 15%. y / y and 4 percent kdk.
The interest margin increased to 2.34 percent. from 2.29 percent in the second quarter.
The commission result amounted to PLN 703.7 million and was 2.5 percent. higher than the market estimates, which expected PLN 687.4 million (expectations ranged from PLN 679 million to PLN 700 million). Commission result increased 18 percent. yoy and 5 percent on a quarterly basis.
The bank said in its presentation that it has the potential to further improve core income thanks to the continued high customer activity and interest rate increases.
In the third quarter of 2021, impairment losses amounted to PLN 178.1 million. Meanwhile, the market expected 8 percent. lower write-offs at the level of PLN 164.4 million (range of expectations from PLN 150 million to PLN 182 million). Write-offs fell 36 percent. y / y and 7 percent kdk.
The bank said its cost of risk has stabilized at pre-pandemic levels. The cost of risk in Q3 declined to 41 bp from 45 bp in Q2.
Provision for legal risk related to foreign currency mortgage loans recognized in other operating expenses in the third quarter amounted to PLN 8.1 million.
General administrative expenses, including depreciation and excluding banking tax, amounted to PLN 926.5 million in Q3, i.e. they were 4%. lower than expected (PLN 959.7 million). Costs increased 9 percent. yoy and were 4 percent. lower than a quarter earlier.
The strategic goal of Bank Pekao until 2024 is to reduce the cost / income ratio to 42%. In the third quarter of 2021, it was at the level of 43.4%. compared to 45.4 percent. a quarter earlier.
New sales of loans for individual clients (including cash and mortgage loans) increased by 61 percent in the period July-September 2021 compared to last year, and new sales of loans for SMEs by 40 percent. New sales of mortgage loans increased by 65 percent. up to PLN 2.8 billion, and sales cash loans rose to 52 percent. y / y to PLN 1.1 billion.
At the end of September, the total capital ratio (TCR) was 17.6% and Tier1 was 15.7%.
| The results of the Bank Pekao SA group in the third quarter of 2021 and their reference to the PAP consensus and previous results | |||||
|---|---|---|---|---|---|
| in PLN million | 3Q2021 | consensus | difference | ||
| PAP | |||||
| Interest result | 1 387,1 | 1 366,5 | 1,5% | ||
| Commission result | 703,7 | 687,4 | 2,4% | ||
| Operation costs | 926,5 | 959,7 | -3,5% | ||
| Reserve balance | -178,1 | -164,4 | 8,3% | ||
| Net profit | 630,8 | 618,9 | 1,9% | ||
| 3Q2021 | 3Q2020 | difference | 2Q2021 | difference | |
| in PLN million | rdr | kdk | |||
| Interest result | 1 387 | 1 203 | 15,3% | 1 339 | 3,6% |
| Commission result | 704 | 595 | 18,2% | 673 | 4,6% |
| Operation costs | 926 | 849 | 9,1% | 968 | -4,3% |
| Reserve balance | -178 | -277 | -35,8% | -192 | -7,2% |
| Net profit | 631 | 371 | 70,1% | 605 | 4,3% |
Pekao expects the double-digit ROE to reach faster than it assumed in the strategy
The bank announced that it is on track to implement its strategy for 2021-2024; expects the double-digit ROE to reach faster than assumed.
“The third quarter was a time of continuation of the economic recovery after the pandemic, and we were able to translate this rebound into good results of our bank. They have already returned for good to pre-pandemic levels. Importantly, the activity of our clients is growing not only compared to the previous year, but also And in the previous quarter, we have a high demand for loans, especially among small and medium-sized enterprises and individual clients, said the bank’s president, Leszek Skiba, quoted in the press release.
“Our continuous work on efficiency and lower operating costs are also responsible for the increase in the bank’s profitability. Thanks to these measures, the recurring ROE in the third quarter amounted to over 9%, and this in the environment of higher interest rates means that we expect faster than assumed in the strategy to achieve two-digit level of this indicator “- he added.
The recurring ROE in Q3 2021 was 9.2%. Bank Pekao assumed 10 percent in its strategy. ROE in 2024.
Interest rate hike will increase Pekao’s net interest income by several percent.
The sensitivity of Bank Pekao’s net interest income to changes in interest rates is several percent, closer to 15 percent. The bank did not make a decision on joining the program of settlements concerning foreign currency loans, the bank’s representatives informed on Thursday.
“Our sensitivity is similar, maybe a little higher – due to the good liquidity situation, than we observed during the rate decline. We are talking about a dozen, closer to 15%, sensitivity of the entire interest income to 100 bp, and now we have 115 bp” – he informed Tomasz Kubiak, vice president of the bank.
Paweł Strączyński, vice-president of the bank added that “about PLN 650 million of additional profit”.
On Wednesday, the MPC raised interest rates, including the reference rate, by 75 bp to 1.25 percent for the second month in a row, and stronger than expected by the market.
Bank CEO Leszek Skiba, when asked about plans to change interest rates on deposits after the rate hike, said that this could be an opportunity to attract new clients to the bank.
“We see no reason to collect customer deposits because of the lack of liquidity,” Skiba said.
The bank announced on Thursday that its interest income in Q3 amounted to PLN 1.4bn and was in line with analysts’ expectations. Interest income increased by 15%. y / y and 4 percent kdk. Pekao’s interest margin increased to 2.34%. from 2.29 percent in the second quarter.
Skiba said that the bank had not made a decision on joining the program of settlements with customers regarding loans in Swiss francs.
“We are analyzing. There are no decisions. We will probably want to wait for the experiences of other banks to see the scale of successes in this process” – said the president.
In the third quarter of 2021, Pekao created an additional PLN 41.9 million write-offs for legal risk related to FX mortgage loans in CHF.
“We have a write-off on francs at a very conservative level, if you look at the age of this portfolio, its much lower + permeability + than those from 2008-2007, the coverage level is relatively high,” Kubiak said.
“The write-offs in the third quarter are related to the inflow of applications, but it is not a pressing problem for us to repeat this type of activity in the following quarters,” Skiba said.
Paweł Strączyński, vice president of the bank, who has been supervising the financial department since Friday, announced that Pekao wants to remain a dividend bank.
“Pekao wants to remain a dividend bank and the work of the management board will, among other things, focus on allowing us, as a Polish bank, to pay shareholders solid dividends every year,” Strączyński said.
Pekao said its cost of risk has stabilized at pre-pandemic levels. In Q3 they fell to 41 bp from 45 bp in Q2.
“Our costs of risk are at historically low levels. In this quarter it was 41 bp, but it takes into account write-offs in francs, which we made mainly due to the weakening of the zloty and some uncertainty of this situation in francs, ”said Tomasz Kubiak, vice president of the bank.
“At this stage, we do not see any pressure on our risk costs, on the contrary – each subsequent month surprised us with an even better situation. (…)” – he added.
According to earlier information, Tomasz Kubiak resigned from the position of vice-president, effective on November 4. (PAP Biznes)
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