Net interest income earned in 2018 amounted to PLN 8 490 million and was PLN 589 million higher than in 2017. The improvement in net interest income was determined by an increase in the credit portfolio with a simultaneous drop in the cost of funds.
Interest income (in PLN million)
Interest expense (in PLN million)
In 2018 interest income* amounted to PLN 10 504 million and was 4.3% higher than in 2017, mainly in effect of:
- an increase in income from financing granted to Customers (+ PLN 347 million, i.e. +4.1% y/y) – an increase in the average interest on the loan portfolio as a result of positive changes in the loans structure (an increase in the share of consumer loans which bear the highest interest rates, and business loans) and an increase in the average volume of amounts due in respect of loans, generated despite the transfer of the housing loans portfolio to PKO Bank Hipoteczny SA (the value of the portfolio was approx. PLN 2.5 billion in 2018);
- higher income on derivative hedges (+PLN 95 million y/y), mainly in effect of an increase in the volume and average interest on CIRS hedges;
- a drop in other interest income of PLN 29 million y/y, resulting mainly from the drop in interest income on the mandatory reserve of PLN 61 million in connection with the introduction of a new interest rate on those funds by the Monetary Policy Council as of the beginning of 2018 (reduction from 1.35% to 0.50%).
Interest expense amounted to PLN 2 014 million in 2018 and was 7.4% lower than in the previous year, mainly due to:
- a decrease in costs of the deposit base of PLN 69 million y/y, resulting from the change in the term structure in favour of current deposits, whose share increased by 6 p.p. y/y to approx. 62% of the amounts due to Customers;
- a drop in other costs of PLN 91 million y/y, including a drop in the costs of loans and advances received of PLN 120 million y/y as a result of the gradual overpayment of amounts due to Nordea AB – the debt was fully repaid in the first quarter of 2018 – and an increase in costs of the Bank’s own issues of debt securities and subordinated liabilities of PLN 30 million y/y, in connection with an increase in medium-term issues.
The net interest margin increased by approx. 0.2 p.p. y/y to 3.4% as at the end of 2018. In 2018 the average interest rate on PKO Bank Polski SA loans was 4.5%, and the average interest rate on total deposits was 0.7%, compared with 4.4% and 0.7% respectively in 2017.
Average interest rates and interest margin (in %)
*To ensure data comparability interest income was adjusted: income from non-Treasury bonds, which are recognized in income from debt securities in the Financial Statements were transferred to income from financing granted to Customers.