Net interest income for 2020 amounted to PLN 10 346 million, which was PLN 56 million more than in the previous year. The increase in the y/y net interest income was caused by an increase in interest income on hedge accounting and an increase in income from securities in effect of an increase in their volume, as well as a decrease in interest expense on customer deposits. At the same time income from borrowings granted to customers dropped as a result of the changes which resulted from the MPC’s decision on reductions of interest rates in the first half of 2020.
Interest income amounted to PLN 11 801 million and was 6.6% lower than in 2019. This was mainly the effect of:
- a decrease in income from financing granted to customers of PLN 1 574 million y/y – resulting mainly from the drop in average market interest rates on financing granted to customers of 0.8 p.p., partly compensated by an increase in the average volume of financing of PLN 10 billion, accompanied by a change in its structure (an increase in the share of PLN housing loans accompanied by a decrease in the share of business and foreign currency housing loans),
- higher income on securities (PLN +345 million y/y), mainly as a result of an increase in their average volume of PLN 36 billion, which related mainly to Treasury bonds,
- higher income from hedge accounting (PLN +449 million y/y), as a result of an increase in the volume of IRS PLN transactions and an increase in spreads between interest income received and paid on transactions and accounting for the designated CIRS transactions.
In order to maintain comparability of data, the interest income was adjusted. Income on non-Treasury bonds recognized in the financial statements in income from debt securities was transferred to income on financing granted to customers. In 2020, interest income went down by PLN 233 million in connection with the judgment of the Court of Justice of the European Union in respect of the consumer’s right to reduce the cost of the loan in the event of repayment of the loan before the deadline specified in the loan agreement.
Interest expense amounted to PLN 1 455 million and was PLN 892 million lower compared with 2019. The lower interest expense was mainly the effect of a drop in the costs of the deposit base of PLN 775 million y/y, which in particular was the effect of lower PLN interest rates after the decisions of the MPC.
The interest margin decreased by 0.38 p.p. y/y and amounted to 3.03%. The decrease in the margin was mainly the result of lower returns on assets following from a change in the structure of interest-bearing assets (the share of securities with the lowest interest rates increased mainly at the expense of the share of amounts due from customers bearing the highest interest rates). Additionally, the decrease in returns was impacted by the decrease in market rates in Poland which to a larger degree translated into a drop in interest on assets than on liabilities. In 2020 the average interest rate on PKO Bank Polski’s loans was 4.0% (2019: 4.7%), and the average interest rate on total deposits was 0.3% (2019: 0.7%).