The situation on the WSE is largely affected by the situation on foreign stock markets and by foreign investor sentiment towards the emerging markets basket. In 2019 shares listed in the US were affected, among others, by fears of a bear market after a long growth period and tensions between the US and China in the aftermath of tariffs imposed on Chinese goods by the US administration. In Western Europe, sentiment on stock markets was driven, in particular, by Brexit, economic slowdown, and the European Parliament election. Despite all the risks, most global and European indices rose in 2019. The rates of return on the WSE indices fell behind the developed stock markets and emerging markets from our region.
2019 was a mixed year for the WSE. Compared with 2018, broad-based WIG Index remained practically unchanged (+0.2% year on year). Only a few companies could boast robust rates of return. This was the case mainly for small companies, especially from the IT industry, game producers, and photovoltaic firms. In 2019 there was no strong demand stimulus on the part of foreign investors or domestic institutional investors. Pension funds continued the sell-off of Polish shares. Investors redeemed their shares in investment funds in response to the GetBack case and issues connected with investment funds associated with the troubled debt collector. Shares of large corporations performed disappointingly. Throughout 2019 WIG-20 Index sank by 5.6%. Only seven companies included in WIG20 generated positive rates of return.
The large supply of shares observed on the WSE resulted from a rebalancing of emerging market indices towards a reduced weighting of Polish assets. This was coupled with fears of bank earnings being pushed down by potentially large provisions for legal risks. Throughout 2019 WIG-Banks Index sank by 9.2%. Only 4 out of 14 companies included in WIG-Banks at the end of 2019 generated positive rates of return.
Fears of a decrease in banks’ financial performance sparked a downgrade from analysts. The key risk factors threatening the banking sector included: uncertainty about the cost of provisions for FX mortgage loans, impact of the CJEU ruling on reimbursement of fees paid by clients who repaid consumer loans ahead of schedule, and the risk of low profitability and capital shortage faced by certain banks. In addition, the sector’s profitability has become more likely to come under pressure from rising contributions to the Bank Guarantee Fund, the expected economic slowdown and its potential adverse effect on risk costs.
mBank’s share price at close of trade in 2019 (December 30) stood at PLN 389.40, which represents a decline by 8.2% compared with the last trading day of 2018 (December 28). The strong downward trend observed since late June was driven predominantly by investor concerns about court rulings on CHF-indexed housing loans becoming increasingly favourable to clients. The trend was bucked in mid-August after the price to book value ratio reached a level appealing to investors. In Q4 2019, mBank’s share price outperformed WIG-Banks on news that Commerzbank intends to sell its majority holding in mBank announced on 20 September. Seven out of 11 bank analysts and brokers actively monitoring mBank’s financial performance and issuing recommendations concerning mBank shares advised investors to sell their shares in the company. The remaining four analysts issued “hold” recommendations.
mBank’s capitalisation amounted to PLN 16.5 billion (EUR 3.9 billion) as at the end of 2019 compared with PLN 18.0 billion (EUR 4.2 billion) at the end of 2018. P/BV (price/book value) for mBank Group stood at 1.0 compared with 1.2 at the end of 2018. P/E (price/earnings per share) ratio stood at 16.3 compared with 13.8 in 2018.
|mBank share price vs. indices
|EURO STOXX Banks Index