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Macroeconomic environment (by countries)

mBank Group operates not only in Poland, but also in the Czech Republic and Slovakia, where we continue to strengthen our position as a mobile banking leader. Therefore, a continuous analysis of changes in the macro-environment of these markets allows us to identify opportunities and threats.

The condition of the Polish, Czech and Slovak economies remains largely related to the situation on global markets. And this one was characterized in 2017 by a marked improvement in moods, both in the economy and in global politics.

From the perspective of the world economy, 2017 was the most prosperous year since 2011, with particularly strong synchronization of economic cycles in all major economies. Such positive developments were attributable to fiscal and credit stimulation in China, returning investment demand in the euro zone, better consumer sentiment in the USA and economi revival in the emerging markets.

Development of economy and banking sector in in Poland

Key macroeconomic parameters 2017 Banking sector indicators 2017
Real GDP growth rate (forecast) 4.5% Base interest rate 1.5%
Nominal GDP per capita (EUR) 11,100* Loan to Deposit ratio 97.7%
GDP per capita in PPS (EU-28=100) 68%* Non-performing loans ratio 6.8%
Average annual inflation rate 2.0% Total Capital Ratio (TCR) 18.6%**
Average annual unemployment rate 4.9% Return on Assets (ROA) net 0.8%*
Population 38 M Return on Equity (ROE) net 7.1%*


Source: Central Statistical Office (GUS), Eurostat, Polish Financial Supervision Authority.
* Data as of the end of 2016.
** Cumulative data for 9 months (as of September 30, 2017) or latest available.

Contribution to GDP growth

The year 2017 ended with high economic growth and turned out to be one of the best years for the economy in the post-crisis period looking at it ex post. Each quarter surpassed the expectations formulated both a few months before the publication and at the moment of publication. In 2018, GDP will accelerate further, and investments will join the consumption growth.

Private consumption and household income

Private consumption is still the main driver for the economic growth. The high increase in this area stems from a combination of factors:


  • record-high consumer sentiment in 2017 (for the first time in the history, the share of optimists exceeded the share of pessimists);
  • substantial increase in household incomes stimulated primarily by higher salaries;
  • unprecedented tightening of the labour market, with the unemployment rate hitting a new 25-year low every month (currently, it is 1 bp lower than in the best month of 2008);
  • positive effects of the 500+ programme, which eliminated liquidity constraints of a part of relatively poorer households.

Construction output and investment in buildings and structures

The 2017 investment performance should be considered disappointing. The rebound in this sphere took place later and was weaker than expected at the beginning of the year, and only Q3 reversed the stagnation trend observed from Q2 2016 until mid-2017. Investments increased by 3.3% year-on-year and can be almost solely attributed to local governments’ outlays. Private investment remained stagnant for many quarters, but in 2018 they should return to growth. The catalyst that the private sector was looking for could be EU funds.

CPI inflation and NBP reference rate

The year 2017 was marked by normalization of inflation. After an abrupt increase at the turn of 2016 and 2017 (the annual inflation rate exceeded 2%), consumer prices stabilized within the acceptable volatility range, but below the NBP’s 2.5% inflation target.

The rise was at first caused by higher fuel prices, and then, by higher food prices. The growth in the latter category stood at over 6% in the last months of the year, marking one of the highest rates in recent years.

With GDP gaining momentum and stable inflation, the Monetary Policy Council remained dovish and, at the same time, optimistic in its assessments of the economic situation in Poland. Dismissing the possibility of inflation growth, the Council systematically postponed the first interest rate increase in Poland in its announcements. Eventually, interest rates remained unchanged in 2017, and the last announcements imply that the monetary tightening will start only at the beginning of 2019. The Council’s decisions in 2017 were limited to technical changes in the mandatory reserve system, which aimed at matching the mandatory reserve rates on long-term deposits of domestic and foreign banks and decreasing the mandatory reserve interest to the level of the deposit rate.

Currency exchange rates in 2017

The year 2017 was marked by the strengthening of the zloty. The appreciation against the euro amounted to ca. PLN 0.25 (from PLN 4.40 to PLN 4.16), against the Swiss franc to over PLN 0.50 (from PLN 4.10 to PLN 3.55) and against the American dollar to nearly PLN 0.70 (from PLN 4.10 to PLN 3.40 at the end of the year). The changes in USDPLN and CHFPLN derive, to a large extent, from the euro strengthening in basket terms in 2017, whereas the appreciation of the zloty against the euro is discussed below in detail. It can be attributed to the improvement in prospects for the Polish economy (the investor sentiment for Polish assets went up alongside the revisions of GDP growth forecasts), inflows of portfolio capital into the emerging markets as well as very good fiscal and domestic risk indicators (stabilization of the political situation and falling risk premium). Occasional increases in EURPLN (i.e. occasional depreciations of the zloty against the euro) can be blamed on the dovish rhetoric of the Monetary Policy Council, geopolitical tensions in the Korean Peninsula and temporary escalation of political risk in Poland in July 2017. However, the general trend remained positive. The zloty’s overall strengthening in relation to the currency basket was substantial and will affect the inflation prospects for the coming quarters. To some extent, the PLN strengthening proved to be a substitute of active monetary tightening on the part of the Monetary Policy Council.

Bond yields in Poland

Lower domestic political risk was also visible in the Treasury securities market, mostly in the segment of long-term bonds (over 7 years). Yields dropped from 3.80% at the beginning of the year to 3.25%, approaching the level of 3.10% in some periods (in June and September 2017). Yields on short-end bonds did not report such a considerable drop: for 2-year Treasury securities, it was only ca. 30 bps, but remained virtually unchanged throughout 2017. Consequently, the yield curve stopped flattening in mid-2017, giving place to a slight steepening trend. The interbank market rates were stable in 2017.

Banking sector

Poland: Corporate loans and deposits

Worse liquidity of the enterprises sector (also noticeable in the data on non-financial enterprises’ finances published by the Central Statistical Office), which was connected both with a dynamic increase in salaries and the effects of the tightening of the tax system, contributed to lower dynamics of corporate deposits. Their slower growth (3.7% in 2017 against 7.2% year on year in 2016) was also a consequence of the strengthening of the zloty, which reduced the value of exporters’ profits in the zloty. The increase in corporate deposits in 2018 should be supported by the expiration of the effects of strong zloty and the tightening of the tax system

In the case of corporate loans, the rebound was significant – their growth rate went up from 3.9% to 7.5% year on year, the main driver being the category of current loans (the dynamics of investment loans remained at ca. 10%).

Poland: Household loans and deposits

The growth rate of retail deposits was dropping systematically in 2017 – at the end of the year, it amounted to 4.8% year on year, which is significantly below the level of 9.4% year on year reported in December 2016. The slowdown in household deposits is the mirror image of the increase in consumption and the fact that households are looking for alternative forms of capital investment.

The growth rate of loans to households net of strong FX effects increased from 3.9% year on year in December 2016 to 4.7% year on year in December 2017. The hike in lending to households was, in particular, attributable to housing loans – according to data from AMRON, their production at the level of approximately PLN 45 billion was the highest since 2011. In 2017, the growth rate of consumer loans and other categories of non-mortgage loans was similar to that recorded in 2016 (5.5% year on year).

Development of economy and banking sector in the Czech Republic

Key macroeconomic parameters 2017 Banking sector indicators 2017
Real GDP growth rate (forecast) 4.30% Base interest rate 0.50%
Nominal GDP per capita (EUR) 16,700* Loan to Deposit ratio 74%
GDP per capita in PPS (EU-28=100) 88%* Non-performing loans ratio 4%
Average annual inflation rate 2.40% Total Capital Ratio (TCR) 18.5%*
Unemployment rate 3% Return on Assets (ROA) 1.2%*
Population 10.6 M Return on Equity (ROE) 14.7%*

Source: Eurostat, Česká národní banka (ČNB).
* Cumulative data for 9 months (as of September 30, 2017) or latest available.

GDP, inflation, interest and FX rates

The economic growth in the Czech Republic is estimated to have accelerated to 4.3% in 2017 from 2.6% a year earlier driven mainly by a strong increase in consumption and a positive contribution of public and private investment. Due to the strong commercial links to the euro zone and its exportoriented nature, the Czech economy has been profiting from the ongoing revival in the global economy. A tightening labour market (the Czech Republic has the lowest unemployment rate in whole EU) and considerable growth in salaries bode well for private consumption. The Czech GDP is expected to grow by an average of 3% in 2018-2019, which will still be above the potential GDP growth rate.

The dynamic increase in salaries and relatively fast economic growth (compared with the potential GDP growth rate) keep inflation high. The average annual inflation rate stood at 2.4% in 2017 with even higher core inflation measures. In view of the mounting risk of the inflation target being exceeded permanently in the medium term, the Czech National Bank (CNB) decided to start monetary policy normalisation in 2017.

On April 6, 2017, the Czech National Bank withdrew its earlier commitment to sell any amount of korunas to prevent the currency from appreciation. On August 3, 2017, the central bank raised the reference rate by 20 basis points starting a cycle of modest rate hikes. The bank increased the rates once again on November 2, 2017 following further positive surprises in macroeconomic data. Consequently, CNB’s reference rate stood at 0.5% at the year-end. As the external environment of the Czech economy was in equilibrium, the start of monetary policy normalisation did not cause rapid appreciation of the koruna.

Banking sector

The favourable developments recorded in the Czech financial sector in past years continued into 2017. Good economic conditions were reflected in growth of the assets of the banking sector, which managed to maintain high profitability and strong capital position. For most of 2017, Czech banks faced a prolonged pressure on core income stemming from low interest rate environment, but the longlasting decline in interest margins halted in the final quarter of the year. At the same time, exceptionally low risk costs were recorded thanks to a decrease of default rate. Funding and liquidity profiles continued to be solid with the sector’s loan-to-deposit ratio of 74.0%. Asset quality remained very resilient as demonstrated by a further decrease of NPL ratio to 4.0% at the end of 2017 from 4.8% observed a year earlier. Better risk indicators in the Czech Republic compared to other countries in the CEE region reflect the country’s relatively strong industrial base and limited foreign-currency lending (predominantly to corporate customers and almost non-existent in retail segment). The situation was also supported by the sales of impaired receivables concluded by some banks and rapid growth in the stock of loans.

The Czech Republic: Household Loans and Deposits

The growth in total retail lending was predominantly driven by mortgage loans, which expanded by 9.7% in 2017, while the volume of consumer and other loans showed a slower increase of 3.9% during the same period.

The share of non-performing loans in the total volume of loans to households was 2.5% in December 2017, declining from 3.2% at the end of 2016. The annual growth pace of household deposits decelerated slightly in the second half of 2017 and reached 7.3% in December. However, the maturity structure of deposit base has been evolving significantly over the last four years, with demand deposits rising at double-digit rate and term deposits falling on average by 5% annually.

The Czech Republic: Corporate Loans and Deposits

After subdued growth in corporate loan volume in 2014, the year-on-year dynamics accelerated visibly during 2015 and stabilized at a moderate pace of around 6% in 2016. Expansion of the outstanding portfolio slowed down slightly in the second half of 2017 and reached 4.8% in December. The share of non-performing loans in the total volume of loans to non-financial corporations has been constantly declining since 2011 and amounted to 4.2% at the end of 2017, compared to 5.2% a year earlier. Corporate deposits decelerated visibly in 2016, while dynamics rebounded to high single-digit levels in 2017.

Development of economy and banking sector in Slovakia

Key macroeconomic parameters 2017 Banking sector indicators 2017
Real GDP growth rate (forecast) 3.30% Base interest rate 0.00%
Nominal GDP per capita (EUR) 14,900* Loan to Deposit ratio 103.80%
GDP per capita in PPS (EU-28=100) 77%* Non-performing loans ratio 3.20%
Average annual inflation rate 1.40% Total Capital Ratio (TCR) 18.8%*
Unemployment rate 8.20% Return on Assets (ROA) 0.80%
Population 5.4 M Return on Equity (ROE) 7.70%

Source: Eurostat, Národná banka Slovenska (NBS).
* Cumulative data for 9 months (as of September 30, 2017) or latest available.

GDP, inflation, interest and FX rates

The Slovak economy continues to grow steadily. After a 3.3% increase in GDP in 2016, the country’s economy is estimated to have grown by another 3.3% in 2017 thanks to stronger private consumption and a higher net contribution of exports.

Even though the increase in private investment is unlikely to have fully offset the considerable decrease in public investment in 2017 related to the spending cycle of EU funds, solid growth in total investment is expected in 2018 and 2019 thanks to considerable investment in the car industry and higher spending on big infrastructure projects. Private consumption was on an upward trajectory throughout 2016 and 2017 profiting from an improving labour market, modest inflation and the resulting growth in real wages.

As a eurozone member, the country has main interest rate set by the European Central Bank (ECB). The reference rate did not change in 2017.

The inflation rate stood at 2.0% in December 2017, up from 0.2% at the end of 2016. The reading was inflated by some components of the core part of the inflation basket. The average annual inflation rate was 1.4% in 2017, which represents an increase of 1.9 percentage points on the previous year.

The unemployment rate has been falling gradually since 2014 thanks to a growing economy and creation of new jobs. The seasonally adjusted unemployment rate stood at 8.2% in December 2017 and decreased by 1.5 percentage points year on year.

Banking sector

Slovak banks have operated in a relatively strong economic environment, but their profitability net of extraordinary income (in particular the sale of holdings in Visa in June 2016) fell slightly in the last two years. Continuing interest margin compression was moderated by the increasing credit growth and declining loan impairment losses. The modest drop in return on equity resulted predominantly from the strengthening of banks’ capitalisation through earnings retention. With strong lending growth, the overall loan-to-deposit ratio has been gradually increasing and exceeded 100% in 2017. However, the Slovak banking sector’s capital adequacy has remained among the highest in the CEE region, along with the Czech Republic. The overall improvement of the NPL ratio was mainly the result of the dynamic expansion in retail loans and small decline in the stock of non-performing loans. The NPL ratio for Slovakia is the lowest in the CEE region at 3.2% at the end of December 2017, dropping from 3.8% a year earlier.

Slovakia: Household Loans and Deposits

Further growth in employment and wages, accompanied by low interest rates, have remained important preconditions for the increase in consumer demand for loans in Slovakia. Retail lending has continued to rise rapidly over the recent years, mainly due to housing loan acceleration, with the yearon-year growth pace exceeding 12% in 2017. Also, non-mortgage portfolio has expanded at a fast, albeit lessening, pace. The share of non-performing loans in the total volume of loans to households declined to 3.2% in December 2017 from 3.7% at the end of 2016. Development of retail deposits showed clearly upward trend from Q1 2014, with the annual dynamics oscilating around 8-9% in 2016. Client inflows decelerated in 2017 and the annual growth pace declined to below 5% in December. Since the mid-2013 the structure of household deposit base have been changing. The volume of term deposits has been decreasing over the past quarters, what is more than compensated by strong inflows of retail demand deposits, which expanded by more than 11% in 2017.

Slovakia: Corporate Loans and Deposits

The corporate credit market is in the expansionary phase of its cycle, with the average annual growth rate remaining at around 7-8% in 2017. This increase has been broad-based across virtually all loan categories, including purpose, maturity, economic sector and borrower size. The share of nonperforming loans in the total volume of loans to non-financial corporations decreased to 5.0% at the end of 2017 from 6.3% in 2016. After acceleration of corporate deposits at the end of 2015, the year- on-year dynamics visibly slowed down in 2016 and finally were negative in the last month of the year. In the second half of 2017, the annual growth rebounded to high single-digit figures.