The banking sector is facing changes

The pandemic has hit hard a large part of the European economy, including our economy. How has the pandemic affected the banking sector?

The pandemic has affected us in two ways. First of all, the business activity of the banks has been curbed, as the sales of banking products have sharply dropped. On the other hand, the banks have accelerated the process of digitalisation, which had initially been scheduled for seven years, but was implemented in 1.5 years. The goals at the core of the digital transformation and the product sales to customers via remote channels and hybrid solutions proved to be achievable in a very short period of time.

It is also worth to mention the key role of banks, especially PKO Bank Polski, in the protection of the health and life of our society in the face of the pandemic. The banks have created numerous solutions to improve the comfort of life and safety of Polish people. Just to give an example, the e-registration system for vaccinations, which has proved to be a success, was created by IT specialists at PKO Bank Polski. The vaccination process has also been facilitated by our digital and cloud solutions, which have been the specialty area of our bank for many years. We are talking about the digital identification of clients, which has also proved to work in the case of health care solutions.

In this regard, the pandemic proved to be an accelerator for the digitalisation process. The first half of the year in Polish banking sector generated profit of PLN 3.5 billion compared to five foreign banks, which generated only PLN 1.5 billion. Where does this discrepancy stem from?

Let me add that out of the PLN 3.5 billion, PLN 2.4 billion is the result of PKO Bank Polski. These results reflect the very good level of preparation of the Polish banking institutions for the digital transformation. These banks have been operating in Poland, for the Polish society, for years. They are part of our country's identity. In the face of the outbreak of the pandemic, PKO Bank Polski rose to the challenge. It was a period of mobilisation. The whole crew - both employees and management - did exceptionally well in that challenging test. As regards the regular banking matters, we managed to maintain the quality of services. On the other hand, PKO Bank Polski was able to make use of its advanced technologies and mobilise the banking industry to help in the fight against COVID-19.

You are talking about non-commercial activities. However, the purpose of a bank as a commercial institution is mostly day-to-day business, including selling banking products. How do you manage to generate such profits when interest rates and loan costs are so low?

Extremely low interest rates are the reality right now. It is a problem for banks, as revenue from interest is significantly reduced. However, the bank's revenue is not reduced to profits from interest rates, but also from commissions. We are developing banking and banking-related solutions based on revenue from commission. Insurance policies are a good example. Every year we are becoming an increasingly strong player on this market. Our digital internet and mobile banking solutions, such as IKO, allow for daily contact with the insurer, which is part of the PKO Bank Polski Group. We record a significant growth in the sales of insurance, but also leasing and other products that PKO Bank Polski offers as part of its portfolio.

Will this shift in the focus of banks' activities be permanent, or is it likely to change when the Monetary Policy Council decides to raise interest rates?

We are not sure when the Council will take such a step. On the other hand, any bank with a well-balanced strategy should ensure sustainable revenues, a significant part of which should be commission-based income.

What are the opportunities and challenges for the banking sector over the next decade?