Poland-based Bank Millennium SA was the least efficient lender among its major peers in central and southeast Europe and the Baltic states during the first half of 2024.
Bank Millennium's cost-to-income ratio was 82.4% in the first half, compared with a median of 46.3% for a sample of 42 large banks in the Czech Republic, Hungary, Poland, Slovakia, southeast Europe and the Baltic states. The bank, which is owned by Portugal-based Banco Comercial Português SA, also had the second highest year-over-year increase among the banks, S&P Global Market Intelligence data shows.
Bank Millennium's cost-to-income ratio takes into account 1.1 billion zlotys of provisions for legal risk related to its foreign-currency mortgage portfolio, which was the largest component of its operating expenses.
The lender has been among the Polish banks with the highest exposure to foreign-currency mortgage loans. It has, however, reduced its foreign-currency mortgage portfolio after provisions to 2.4% of its total mortgage portfolio as of the second quarter from 11.4% at the end of 2021.
Fitch Ratings upgraded Bank Millennium's long-term foreign- and local-currency issuer default ratings in June, citing improvements in the bank's capital position and the rating agency's anticipation that risks associated with the bank's legacy foreign-currency mortgage loans will gradually abate.
Commerzbank AG's Polish unit mBank SA and domestic peer Bank Ochrony Środowiska SA, which also face challenges related to their foreign-currency mortgage portfolio, ranked as the second- and third-least efficient banks among those analyzed.
Czech lender Fio banka a.s. was the most efficient bank in the sample, despite its cost-to-income ratio rising 4.7 percentage points year over year and 1.1 percentage points on a semiannual basis to almost 20%. UniCredit SpA's Croatian unit Zagrebačka banca dd, Poland-based PKO Bank Polski SA and the Baltic units of Skandinaviska Enskilda Banken AB (publ) were also among the most efficient banks in the region.
Czechia-based Trinity Bank a.s. had the highest increase in its first-half cost-to-income ratio both on an annual and semiannual basis, and was the fourth-least efficient bank in the sample, with a ratio of 69.5%. Raiffeisen Bank International AG's Slovak unit Tatra banka a.s. was also among banks with the highest increases year over year and versus the second half of 2023.
BNP Paribas Bank Polska SA, the Polish unit of BNP Paribas SA, showed the largest improvement in the first-half cost-to-income ratio compared with the second half of 2023. The lender also had one of the biggest improvements year over year, but its ratio, amounting to 60.5%, was still above the 46.3% median for the analyzed group.
Overall, 25 of the 42 banks in the sample reported higher cost-to-income ratios on a semiannual basis, and the metric also increased for 50% of the lenders year over year.
On a country level, only three out of 12 sampled recorded lower median cost-to-income ratios year over year.
As of Oct. 9, US$1 was equivalent to 3.92 Polish zlotys.