Polish banking sector compared to Europe

At the end of 2024, the value of loans in the Polish banking sector amounted to EUR 381.6 billion, which places Poland in the middle of the European Union countries. For comparison, the average value of loans granted in the European Union in 2024 was EUR 925.6 billion⁸.

However, Poland’s banking sector remains small in relation to GDP. In 2024, with weakened loan demand and high nominal GDP growth, the credit-to-GDP ratio declined. Bank loans in the Polish banking system are at the level of 45% of GDP, while the European average is 123%. Finland (218%) and France (205%) have the highest loan-to-GDP ratios⁹.

In 2024, an improving economy and a very good labor market situation fostered an increase in demand for loans. Credit growth was facilitated by, among other things, strong real wage growth in the first half of the year and an easing of lending policy conditions following the interest rate cuts of late 2023. Although banks were cautious in implementing the changes, the trend in the second half of 2024 was toward easing the criteria – especially for consumer loans and financing for small and medium-sized enterprises. Despite the improvement in market conditions, the credit-to-GDP ratio has not increased, remaining low against the European background¹⁰.

Poland’s corporate loan market in 2024 was still characterized by a relatively low share of corporate loans compared to total loans to the non-financial sector. The ratio remained at around 36%,¹¹ which still placed Poland among the European Union Member States with the lowest share of business loans.

The dynamics of loans for companies in 2024 was improving, with growth based primarily on loans of an investment nature; current financing debt only began to increase in the second half of the year. However, the use of bank loans by companies remained limited for structural reasons: companies traditionally financed their operations mainly with their own funds, while foreign debt and the gradually increasing use of leasing were also important. In addition, in NBP surveys, companies indicated a decline in interest in credit for the second year in a row, with the scale of third-party financing declining from 2022, which translated into a lower share of loans and advances in the balance sheet total of companies than in the multi-year average¹².

In 2024, the annual growth rate of housing loans gradually increased. Since March, household debt on this account increased on an annual basis for the first time since mid-2022. Growth was supported by improved creditworthiness, driven by strong real wage growth, and the temporary effect of the “Bezpieczny Kredyt 2%” program (2% Secure Loan). Although the acceptance of applications ended in 2023, loans granted under this program were still being launched in the first half of 2024, bolstering lending. At the same time, the dynamics of mortgages were undermined by increased overpayments and early repayments, which, according to BIK data, reached about PLN 44 billion – by value, more than half of new lending in 2024. In addition, the balance of mortgages fell due to a rapid decline in the value of foreign currency loans (about PLN 15 billion, – 21.2% y/y), related to current repayments, conversions to PLN and cancellation of contracts¹³.

Consumer loan debt also grew in 2024, with the fastest growth in cash loans – especially high-cost loans, which were 45% higher than a year earlier. Consolidation loans were also a significant part of the new stock, used to pay off households’ previous obligations. As a result, the growth in consumer loan balances (6% y/y) was significantly lower than the growth rate of new lending, reaching about 25% y/y¹⁴.

Structurally, housing loans remain the largest category of loans to the non-financial sector: at the end of 2024, they accounted for about 42% of the portfolio. In the last decade, their structure changed significantly – the share of foreign currency loans decreased to 12% (and, after taking into account provisions, to about 1%), a consequence of the multi-year extinction of this product. In 2023 and 2024, the share of fixed-rate or periodically fixed-rate loans also increased markedly, both among new loans and those remaining on banks’ balance sheets, although variable-rate loans continue to dominate against the EU average. A further shift in the structure towards a fixed rate may be reinforced by the entry into force of the FSA’s recommendation on the long-term funding ratio (WFD) from the end of 2026¹⁵.

The changes observed in 2024 are part of the long-term evolution of the domestic mortgage market. Mortgage loans are the largest category of household loans, with a share of 62.0%.¹⁶ Their relatively lower importance in banks’ assets compared to Western European countries is due, among other reasons, to the fact that they are a relatively new product in Poland. For comparison, in 2005, said share in household loans amounted to around 30% in while in some Western European countries it exceeded 80%.

In Poland, to a greater extent than the average for the European Union, banks finance their business with deposits from the non-financial sector. At the end of 2024, they accounted for 58.6% of the banking sector’s balance sheet total, and as much as 63.5% of total nonfinancial sector deposits were deposits from individuals.¹⁷ Debt financing, excluding BGK’s issuance of special purpose funds, remained marginal, with its low share due to the availability of cheaper deposits and weak demand for credit, among other factors. At the same time, the entry into force of the MREL target requirement increased the nominal value of eligible liabilities, including bond issues. The structure of bank financing in Poland remained stable, with the dominant role of non-financial sector deposits, especially households.¹⁸

Non-financial sector deposits were the main driver of growth in banks’ liabilities in 2024, with household deposits growing most strongly, increasing by PLN 121.1 billion thanks to favorable labor market conditions, a low unemployment rate, and high real wage growth. Corporate deposits grew more slowly, but their value still exceeded the level of corporate loan debt – an effect that persisted since the pandemic. The term structure was dominated by current deposits and short-term household deposits, while businesses mainly increased time deposits. At the same time, the negative funding gap was widening – faster growing deposits in relation to lending led to its level of PLN 729 billion (-61% of total assets) at the end of 2024. Debt financing continued to be of limited importance, although banks increased issuance of domestic debt instruments, mainly to meet MREL requirements; pressure for further increases in issuance is expected to build up as the WFD requirement goes into effect from 2026.¹⁹