Business is getting much tougher for banks in Poland, the head of BNP Paribas' subsidiary there said on Wednesday, commenting on a wave of large bond issues and cuts in interest rates to record lows.
On Thursday, the central bank cut base rates by 40 basis points to 0.1%, the third in a series of cuts totalling 140 basis points since the coronavirus reached the country in March.
"The conditions for the banking business have deteriorated dramatically," Przemyslaw Gdanski told a conference.
"...Let's not press on banks, let's think about them as a driving force, which can help the economy overcome the crisis,"
The latest rate cut was followed by a number of profit warnings, with PKO BP Pekao, and the Polish unit of Spain's Santander signalling hits of up to 900 million zlotys ($230 million).
Warsaw's WIG Banks index plunged over 4% on Thursday, but has since pared its losses.
"The rate cuts will help loan repayment and debt affordability," Melina Skouridou, Assistant Vice President- Analyst at Moody's said in a note on Wednesday.
But because Polish banks are primarily deposit-funded, "they have limited ability to fully pass on the lower interest rates to their customers to reduce their funding costs," pressuring net interest margins, she added.
Ratings agency Fitch said on Wednesday that some of the Polish central bank's bond buying operations "resemble direct monetary financing".
The central bank is not allowed to buy government debt on the primary market, but it has bought bonds issued by the State Development Fund to the State Development Bank, Fitch said.
The Polish central bank could not immediately be reached for comment.
(Reporting by Agnieszka Barteczko and Anna Koper, writing by Alan Charlish; editing by John Stonestreet)