Despite a completed €7 billion acquisition last year [[1]], Santander Bank Polska will continue to operate under its current name for teh foreseeable future due to delays in registering a formal name change with Polish authorities. The continued branding comes as Erste Group integrates its recently acquired 49% stake in the Polish bank, a move signaling confidence in PolandS economic growth and filling a key geographic gap in Erste’s Central and Eastern european network [[2]], [[3]]. This report details Santander BP’s strong 2023 performance and outlook, even amidst declining interest rates.
Austrian banking group Erste Group acquired 49% of Santander Bank Polska last year for €7 billion. While shareholders approved a name change for the bank in January, the change has yet to be registered with the National Court Register. Therefore, the bank will continue to operate as Santander, and will be referred to as such, despite Erste Group’s ownership.
“Erste Group’s acquisition of Santander BP reflects a positive outlook on Poland’s growth potential,” said Michał Gajewski, CEO of the Polish bank, during a press conference presenting last year’s results. “The group views the country as a favorable environment for long-term investment.”
Erste Group has built a strong network of subsidiaries in Central and Eastern Europe since the early 1990s. A Polish bank was the missing piece of that puzzle. The Austrian group’s expanded presence in the region is also expected to benefit Polish customers, delivering increased value through its regional network.
“The international expansion of our Polish clients often begins within our region,” Gajewski explained. “We see significant potential here, as clients increasingly seek a single bank to serve their needs across the entire region.”
The bank conducted an analysis comparing the number of its clients doing business in Central and Eastern Europe to those operating in markets strategically important to Santander’s former Spanish parent company – Spain, the U.S., Mexico, the UK, and South America. The study revealed that the Central and Eastern European region is considerably more important to Polish clients than those key markets for Santander.
Despite this, Santander and Erste have established a strategic partnership, providing clients of both institutions and their subsidiaries with mutual access to the markets where each group operates.
“Initial transactions are already underway, giving clients access to Santander and its local banks,” Gajewski stated.
Resilience Amid Rate Declines
Despite a 175 basis point decrease in interest rates last year, Santander BP’s net interest income increased by 4% year-over-year, reaching 12.7 billion PLN in 2023.
“The results have remained consistent quarter-over-quarter, even with the rate cuts,” Gajewski noted.
“Building resilience to falling rates was crucial,” he added. “We sold a significant portion of our loans at fixed rates and hedged our positions. This demonstrates our ability to anticipate events and proactively manage risk.”
The high interest rate environment and stabilization of rates in 2023 and early 2024 generated substantial profits for banks. This was further bolstered by liquidity within the banking sector, allowing institutions to attract deposits, particularly in current accounts, at minimal cost. Banks implemented various strategies in anticipation of a loosening monetary policy cycle to mitigate the impact of falling rates, at least for a period of time.
Deputy CEO Maciej Reluga explained that the bank has been working for years to protect itself from a rate easing cycle. Several years ago, a 100 basis point rate decrease was estimated to reduce net interest income by one billion PLN; currently, that figure is approximately 250 million PLN.
“Our net interest income is a result of actions taken over the past several years,” Reluga said. “Previously, our results were far more sensitive to rate declines. Currently, fixed-rate loans account for 58% of our portfolio, up from around 5%. This has stabilized our performance.”
“We now have four times less sensitivity to rate declines. We continue to renew hedging transactions. We have significantly reduced our sensitivity to falling rates while maintaining a relatively high margin on a growing balance sheet, allowing us to maintain our results.”
Dividend Outlook
The gross value of loans on the bank’s balance sheet increased by 4% last year, reaching 167 billion PLN.
Santander BP also achieved a record high fee and commission income of 2.95 billion PLN. The bank also reported its lowest-ever risk costs, at 37 basis points for the year.
Gajewski stated that the bank meets the criteria for distributing 75% of its profit as a dividend, in accordance with the Polish Financial Supervision Authority’s dividend policy recommendations. Shareholders holding shares on the dividend record date will be eligible for the dividend, including Erste Group, which holds 49% of the bank.
However, representatives of Santander BP suggested that Erste may not prioritize a cash dividend and could instead choose to strengthen the capital of its Polish subsidiary. If the dividend were instead used to bolster capital, Erste would still consolidate it on its balance sheet, resulting in no loss for the group.
Separately, Spanish banking group Santander, the 23rd largest global bank on the Financial Stability Board G20 list, reported a net profit of €14.1 billion for the year, a 12% year-over-year increase. The group’s net interest income decreased by 3% to €45.4 billion.
Jacek Ramotowski
