There has been a significant increase in Polish bank assets since the democratic transition.
The Polish banking sector, measured by the value of its assets, is in the middle of the ranking of European markets. According to data of the European Central Bank (ECB), at the end of 2021, the Polish banking sector's assets1 totaled EUR 563.7 billion.
The largest banking sector in the European Union is that of France (EUR 8,804 billion at the end of 20212), with Latvia occupying the other end of the spectrum (EUR 25.3 billion at year-end 20213). The assets of European banks (EU-27) as at the end of 2021 stood at over EUR 36 trillion (about EUR 32.7 trillion in the eurozone)4.
The Polish banking sector has one of the lowest ratios of assets to GDP in the European Union. As at the end of 2021, this ratio was as little as 97.4%, whereas the eurozone average is over 298%5. The low ratio in Poland results from a slower increase in banking sector assets than in 2020, which was characterized by the large involvement of banks in instruments issued and guaranteed by the State Treasury aimed at preventing the impact of the COVID-19 pandemic and the rise in GDP.
Source: Own calculations based on Eurostat and European Central Bank figures
The asset structures of the Polish banking sector and the European Union differ. Compared to other EU Member States, Poland has the highest share of debt securities in banking sector assets, this share amounting to 28.3% at the end of 20218. This difference became more pronounced in 2020, when Polish banks became significantly involved in buying back debt securities issued to finance schemes to mitigate the impact of the pandemic, and there was reduced demand for loans on the part of enterprises9.
Compared to other European Union states, Poland’s banking sector is small in relation to the country’s GDP. Bank loans in the Polish banking system are at the level of 55% of GDP, while the European average is 120%. Finland (231%) and the Netherlands (219%) have the highest loan-to-GDP ratios11.
Despite the higher demand for loans in 2021, the Polish banking market still enjoys a rather low share of business loans in total loans furnished to the non-financial sector (31% as at the end of 2021, whereas this share is ca. 43% in the eurozone and Central and Eastern European countries)12.
Business loans to GDP in the Polish banking sector (17%) was one of the lowest indices in Europe, with similar levels achieved in Romania and Ireland.
Source: Own calculations based on Eurostat and European Central Bank figures
In 2021, with wider running operations, gradual phase-out of subsidies within the PFR Financial Shields, and a slightly laxer loan policy, one could observe higher demand for loans (business loans in Poland grew by 3.8% y/y). A similar policy was pursued by banks in Central and Eastern European countries (average growth in those countries was 8.6%), whereas in eurozone (3.3% growth rate) the changes to the loan policy were considerably fewer14.
The lending activity of banks in Poland focuses on granting loans to households. The upturn in the housing market and low interest rates throughout most of 2021, along with heightened inflation, contributed to higher household demand for housing loans. The receivables in this respect grew by 6.6%, the fastest growing segment of the non-financial sector loan portfolio.
In 2021, just like in Poland (62%), mortgage loans in all EU Member States (78% in eurozone) made up the biggest share of household loans32. Poland’s lower share of mortgage loans in bank assets results from the fact that these loans are a relatively new product. In comparison, in 2005, said share in household loans amounted to 30% in Poland, while in some Western European countries it exceeded 80%15.
The banks easing their loan terms, and the improving economic situation for households in 2021 contributed to a growth in demand for consumer loans. Poland is one of the EU states with the largest share of consumer loans in household loans (38%)16.
In Poland, to a greater extent than the average for the European Union, banks finance their business with deposits from the non-financial sector. As at the end of 2021, they contributed 60% of the banking sector’s balance sheet total. 62% of total non-financial sector deposits are private deposits17.
In 2021, the financial assets being at the relatively free disposal of households increased by 7.8% y/y to PLN 1,773.1 billion at the end of December, and their ratio to GDP fell to 67.6%, which caused by the faster growth of nominal GDP. As in 2020, households opted for safer options as regards holding their finances, such as bank deposits or cash, which remain the most popular form of collecting financial assets. In 2021, the share of cash rose by 0.6 p.p. y/y to 18.9%. At the same time, in 2021, the share of bank deposits in assets decreased by 0.7 p.p. y/y, but still stood at the considerable 59.8%. The decrease in this asset was caused by, among other things, the smaller scale of resources received by microentrepreneurs within the framework of so-called shields to prevent the impact of the COVID-19 pandemic, the evident outflow towards investment in real property, and greater consumer demand18. At year-end 2021, deposits in banks and credit unions accounted for 60.3% of the financial assets of households (-0.7 p.p. y/y), and 79.2% if counted together with their accumulated cash. Financial assets of households in the form of life insurance assets (including unit-linked funds) totaled PLN 57.5 billion in 2021, which accounted for 3.2% of total financial assets of these households (-0.6 p.p. y/y).
The rather low interest rates maintained throughout 2021 encouraged households to seek ways to hold capital alternative to deposits. Households were more engaged in investing their savings in shares listed on the Warsaw Stock Exchange (5.0% of financial assets; +0.1 p.p. y/y), treasury securities (3.1%; +0.6 p.p. y/y) and investment fund participation units (9.4%; +0.1 p.p. y/y). Non-treasury securities were the rarest form in which households held their money; their share in financial assets was as little as 0.1 % (-0.1 p.p.y/y)19.
1. As at the date of the report, the most up-to-date data for Europe’s banking market are available for 2021.
2. 4. European Central Bank, https://sdw.ecb.europa.eu/
3. https://eng.lsm.lv/article/economy/banks/bank-profits-almost-doubled-inlatvia-in-2021.a448858/
5. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2021 r.
6. National Bank of Poland, banking sector figures
7. Own calculations based on ECB
8. 9. European Central Bank, https://sdw.ecb.europa.eu/
10. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2021 r.
11. European Central Bank, https://sdw.ecb.europa.eu/
12. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2021 r.
13. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2020 r.
14. 15. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2021 r..
16. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2019 r.
17. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2021 r.
18. National Bank of Poland, Dane finansowe sektora bankowego
19. 20. National Bank of Poland, Rozwój systemu finansowego w Polsce w 2021 r.