May 14, 2020 / 10:54 AM / 18 days ago

Poland's Pekao CFO sees ROE of 8-9% as possible target

WARSAW, May 14 (Reuters) - Poland’s second largest lender Bank Pekao SA will revise its strategy at year-end, once the economic damage caused by the coronavirus is clearer, but sees return on equity (ROE) of 8-9% as a target, its Deputy Chief Executive Officer said.

On Wednesday state-run Pekao cut its 2020 financial targets for the second time in six months and said no one should expect a double-digit ROE in the Polish banking sector this year.

“Our target for a time frame of several years is a high one-digit ROE, we will specify this in our strategy. The cost of capital amounts to 8-9% for us. We would like to see ROE of 8-9% at least, too,” Tomasz Kubiak said in an interview with Reuters.

Last November the bank cut its 2020 ROE target to 11-12% from 12.5%, which it abandoned on Wednesday. The economy is expected to shrink by around 3.6% this year, according to a Reuters poll.

Kubiak said the bank will remain profitable this year, thanks to its conservative credit and sales policy - the bank has almost no toxic assets such as Swiss franc mortgages or other risky instruments now questioned in courts by clients.

“We want to work in a way that we have no loss in any of the quarters, nor in the whole year. In the second quarter our net profit should be at least the same as in the first quarter.”

Kubiak said he expected Polish banks’ aggregated net profit to fall this year by at least 50%, but hoped Pekao may weather the storm better than others.

He said Pekao will be opportunistically looking at possible targets for takeovers, after it failed to buy its smaller rival mBank, as the sale was shelved.

“The consolidation process will speed up in this sector because of the coronavirus. Within several years we will see just 4-5 banks controlling 80% of sectors’ assets ... Our attitude to consolidation will be opportunistic,” Kubiak said.

“We want to be ready to pay dividends in all scenarios, including M&A ones, as a number of shareholders are dividend-focused. We expect that in 2021 we will be able to come back to a dividend payout comprising of 2019 and previous years profits.” (Reporting by Marcin Goclowski;Editing by Elaine Hardcastle)

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