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ING Bank Śląski S.A. Group has compiled the annual report in line with the best global practices of integrated reporting. To help readers use the interactive tools, we prepared a user guide with key features. We encourage you to watch a short animated video before reading the report.

Integrated Annual Report
of ING Bank Śląski S.A. 2019

Business environment

Gross Domestic Product

Since the peak in 2018, the Polish economy has been recording a gradual slowdown. In 2019, it grew by 4% y/y, compared to 5.1% a year earlier. The growth slowdown was mainly driven by a decline in investments (7.8% y/y vs. 8.9% in 2018). Public expenditures (e.g. infrastructural investments) were less dynamic due to the slower absorption of EU funds. Meanwhile, the bouncing of private expenditure in this cycle took place relatively late and was short-lived. Companies were reluctant to obtain new loans (their dynamics fell by more than half compared to 2018), and increased their savings. Household spending remained the engine of economic growth, having increased by 3.9% y/y last year, as opposed to 4.1% in 2018. However, the propensity to buy was lower than suggested by the increase in household income, driven by the high wage growth rate and new social transfers. Meanwhile the consumers enhanced their savings – the highest growth of deposits since 2011 was recorded – about 10% y/y.

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ING Bank Śląski’s economists expect that in 2020 GDP growth will slow down to around 3% y/y. This will primarily be the effect of a further slowdown in investment (growth rate down to 1.4% y/y), especially public investment, due to a further slowdown in the absorption of EU funds. Private investment is likely to remain low – surveys suggest a weakening propensity to invest, especially among the smallest entities. The propensity of businesses to invest reduces the deterioration of the institutional environment, strict tax policy, and new burdens. This will probably also mean a further slowdown in corporate lending growth rate. Corporate deposits should also grow at a slightly slower rate than in 2019. ING Bank Śląski’s economists expect the consumption growth to reach 3.3% y/y, supported by earlier transfers, as well as a high minimum wage increase. However, it is unlikely to maintain the dynamics of loans and retail deposits at the last year’s level. In addition, the deposit rate will increasingly outpace the lending growth rate. Polish export industries are still well able to withstand the downturn in the Eurozone, taking advantage of the still strong domestic demand of their own economies This suggests only a slight deterioration of net exports in 2020.

Macroeconomic projections
2017 2018 2019 2020P 2021P
GDP growth (%) 4.9 5.1 4.0 3.0 2.2
General government debt as per the EU methodology (% of GDP) 50.6 48.9 45.9 44.9 44.5
Average annual inflation (CPI) (%) 2.0 1.7 2.3 3.7 2.8
Unemployment rate (%) 6.6 5.8 5.2 5.4 5.9
USD/PLN exchange rate (yearend) 3.48 3.76 3.80 3.81 3.59
EUR/PLN exchange rate (yearend) 4.17 4.30 4.26 4.30 4.31
WIBOR 3M (yearend) 1.72 1.72 1.71 1.73 1.73

Low interest rate landscape

The Monetary Council has maintained interest rates unchanged since March 2014. Last year, the Monetary Council decided not to change the parameters of its policy despite the government’s expansive budgetary policy (e.g. the introduction of new social benefits): 13th pension and the extension of the 500+ programme), the still high GDP growth and the consequent risk of rising inflation. The Monetary Council argued that the threat to price stability is primarily of a regulatory nature (e.g. increase in waste collection fees) and is beyond its control.

According to economists from ING Bank Śląski, the Monetary Council will maintain interest rates at the current level (reference rate 1.5%, lombard rate 2.5%) in 2020 and most likely also in 2021. In its interventions, the Council emphasizes that one of the key drivers of price increases is regulatory change. The gradual economic slowdown will also hinder price growth in 2021. According to the ING Bank Śląski’s economists, inflation in the first quarter of this year will exceed 4.0% y/y, which is higher than the National Bank of Poland’s inflation forecast suggests. It should fall in the following months of the year, but remain close to the upper limit of the NBP inflation target (3.5% y/y). Thus, real rates (after inflation) will remain one of the lowest in Europe.

According to the ING Bank Śląski’s economists, the Monetary Council will pay great attention to the economic growth slowdown, emphasizing the mild attitude of the main central banks or, in its opinion, the temporary nature of price hikes.

Negative level of real interest rates of the National Bank of Poland is a negative factor for the Polish currency (PLN). To date, however, its impact is relatively small.

International business landscape

The year 2019 saw a slowdown in economic activities, mainly visible in Asia and the euro zone. This was caused by several factors, such as the trade war between the USA and China, a drop in demand for electronics (most probably on the eve of the launch of new generation 5G telephony), or numerous problems of the automotive industry (e.g. low car imports from Europe to Asia).

Economists of our bank forecast that the process of rebuilding economic activity in European economies will be long-lasting, among others considering the downtime in manufacturing caused by the coronavirus epidemic – GDP growth in the eurozone in 2020 will still be low, most likely it will not exceed 1.0% y/y. In the case of the US a slowdown is expected from 2.3% to 1.5% y/y – the US economy is doing much better than the euro bloc countries.

The year 2020 will also bring key global political events – one of them will be the US presidential election in November. Donald Trump’s opponent may be a representative of the left wing of the Democrats party. Such a choice will mean the confrontation of two opposing directions of US economic and international policy. This year, the next stage of trade negotiations between the US and China, and potentially also the European Union, will probably take place.

Challenges ahead of the financial sector

Market megatrends are factors that influence the future of our bank. We address them in the assumptions of our business strategy and sustainability strategy, as well as in the value creation model.

We realise that digitalisation of banking services and – by extension – new channels of customer interaction and growing importance of online safety are the consequences of technology progress. New client needs require a personalised approach. With those factors, it is necessary to focus on the banking services from the perspective of experience that we offer to our clients. That is why customer experience at our bank is determined by technology solutions we implement. We focus on availability, speed and intuitiveness, clarity and simplicity of communication, as well as customer safety.

Despite the passage of years, poor financial awareness of Poles remains a key challenge for the market. We feel responsible for the financial education of our clients. That is why we propose them solutions such as Moje ING system that prepare them for taking independent and informed financial decisions.

We also notice market needs and opportunities in relation to environment protection. We focus on responsible investing by ensuring an adequate assessment of social- and environmental risks of large investment projects (in accordance with the international Equator Principles).

The need to be flexible when responding to market changes and growing competition presents challenges in the workplace. In order to attract and retain employees and also ensure competitive quality of human capital, we focus not only on providing a friendly work environment but also on innovative way of working.

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