Poland's banks showing signs of recovery, S&P report says

By Jennifer Chiou

New York, Oct. 3 - The Polish banking sector is exhibiting green shoots of recovery after a prolonged period of economic weakness and credit and operational restructuring, according to a Standard & Poor's report titled "Bank Industry Risk Analysis: Poland (Republic of)."

"Polish banks are benefiting from foreign shareholder support, good economic growth, better corporate performance and rising household income in a low interest-rate environment," said S&P credit analyst Alise Ross.

"Further advances in creditworthiness will depend on the combination of a strengthening economy, sustainable financial performance, improved asset quality and sound capitalization."

The agency noted rapid modernization and restructuring initiated by foreign strategic shareholders after privatization is proving valuable as Polish banks push to gain market shares.

Also, credit pressures in the Polish banking system are likely to lessen because of improved debt serviceability and enhanced credit risk management, combined with continued loan workouts, S&P said.

The agency added that the competitive landscape could intensify if the potential merger of Bank Polska Kasa Opieki SA (BBB+/positive/A-2) and Bank BPH SA (BBB(pi) is completed.

Despite these positive factors, economic convergence with the EU-15 will only take place over the long term and a lack of political momentum to progress with the structural reforms that would result in greater wealth and employment could constrain the banking sector's creditworthiness, the report said.

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