Sub-prime crisis to curb Polish corporate loan growth this year

Growth in corporate loans and deposits in the Polish banking sector should slow by half this year, as booming investment needs and tighter credit conditions prompt firms to use up their spare cash, Bank Pekao's deputy chief said today.

Poland's largest lender, which services every second corporate client in the country of 38 mln, expects growth in corporate loans to fall to 12.8 pct in 2008 compared to 23.7 pct a year earlier.

It expects corporate deposits to grow by 7.3 pct this year compared to 14 pct in 2007.

'It is a phenomenon caused by the sub-prime crisis on one hand and also higher costs of loans,' deputy CEO in Pekao Przemyslaw Gdanski told a news conference.

'Companies first want to use their current resources and only then look for credit.'

He reiterated that Pekao hoped its own business in corporate loans and deposits would grow faster than the market as a whole, helped by the acquisition of Bank BPH's corporate clientele under a merger last year.

Poland's statistics office said yesterday that investment outlays by companies last year grew by 26.2 pct, one of the main drivers behind overall economic growth of 6.5 pct -- the highest in a decade.

But Poland's central bank has now raised its base interest rates for loans by a total of 175 basis points, after it hiked for a third month running yesterday, bringing its main rates to 5.75 pct -- almost 2 pct above ECB rates.

The Polish bank is expected to raise borrowing costs further in the next few months, although markets believe it may be nearing the end of its tightening cycle.

Source: By Adrian Krajewski, forbes.com