In 2019 the WIG Banks index1 contracted by 9.2%. The correlation between the WIG Banks index and the WIG20 index at the end of June 2019 was 90% (no change y/y). Beta (versus WIG20) was 0.98, i.e. an increase of 0.01 y/y.
In the first half of 2019, the WIG Banks index advanced by 6.1% y/y, or 3.9 p.p. more than the WIG20 index. The unfavorable judgments handed down by CJEU (Court of Justice of the European Union) on consumer loans and Swiss franc loans were among the major contributors responsible for the softening of sentiment in this index. Their outcome was that banks were compelled to set up additional provisions. This also led to lower market expectations regarding future commission and fee income.
The decision of the Bank Guarantee Fund concerning the level of contribution and its allocation among various banks was also an additional burden for the banking sector. In 2019, the entire sector saw its contribution shoot up by 27%. Out of this amount, the contribution to the forced restructuring fund rose by 110% to PLN 2.0 billion, while the contribution to the deposit guarantee fund fell by 36% to PLN 0.8 billion. The greater burden place on banks’ results led to worse performance of the overall WIG Banks index.
In 2019, the share prices of the banks controlled by PZU, i.e. Pekao (a member of the PZU Group since 7 June 2017) and Alior Bank (a member of the PZU Group since 18 December 2015), went down 1.8% (adjusted for a dividend of PLN 6.6 per share) and 46.0%, respectively. Alior Bank’s softer performance relative to the WIG Banks index ensued among other things from the concern for the condition of the loan portfolio in the corporate segment, especially in the context of the emerging potential problems of two corporate clients, exacerbated at a later time by CJEU’s unfavorable rulings on consumer loans. CJEU’s rulings on Swiss franc loans exerted a relatively small impact on the share prices of the PZU Group’s banks – in comparison to most of the banks listed on the Warsaw Stock Exchange, the PZU Group’s banks’ exposure is very low.
The shares of PZU, Pekao and Alior Bank generated 19.7% of total turnover of the Warsaw Stock Exchange in 2019.
1 It is an income-based index and thus, when it is calculated, it accounts for the prices of the underlying shares and the income from dividends and subscription rights.