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PKO Bank quarterly profit rises 53% on home loans

PKO Bank Polski SA, Eastern Europe's biggest bank, increased quarterly profit at the fastest pace since its shares started trading in 2004 as a three-year property boom continued to drive lending at home in Poland.

Net income in the Q4 advanced 53% to 552.5 million zloty (€142.3 million, $186.8 million) from 362 million zloty a year earlier, the bank said in a statement today. Revenue increased 18%, while costs were little changed. „The only surprise was on the cost side,” said Dariusz Gorski, an analyst at Deutsche Bank Securities in Warsaw. „Though they were higher than expected, they were offset.” PKO was the monopoly lender in Poland during four decades of communism and is still controlled by the state. The Warsaw-based bank plans to grant more loans in an effort to retain market share as competition intensifies, with Italian lender UniCredit SpA's units Bank Pekao SA and BPH SA merging to leapfrog PKO. Total revenue rose to 1.83 billion zloty in the quarter, while costs stood at 1.14 billion zloty, the banks said. Analysts had expected expenses to drop, while nine surveyed by Bloomberg News on average expected profit of 561 million zloty. PKO shares fell 2% to 48.20 zloty as of 10:05 a.m. in Warsaw. They have risen 42% during the past year, increasing the bank's market value to 48 billion zloty. PKO, which has been without a permanent CEO since Andrzej Podsiadlo resigned in June, failed to appoint a replacement at its meeting yesterday. The supervisory board named Robert Dzialak and Stefan Swiatkowski as deputy CEOs, PKO said in a separate statement today. Dzialak has been the bank's head of corporate business and Swiatkowski worked as finance director at a leasing company.

Poles are taking out more mortgages, borrowing more on credit cards and buying more financial products such as mutual funds and pension plans. Growth in the economy, the largest of the 12 newest European Union members, accelerated to 5.8% last year. PKO released a record 11 billion zloty (€2.83 billion) of home loans last year, up from 7.6 billion zloty in 2005. Net interest income, the difference between money paid out on deposits and earnings on loans, at PKO rose 17% to 993 million zloty (€256 million) in the quarter. Fees and commissions increased 45% to 466.6 million zloty. Profit growth at PKO compares with a 15% increase at Pekao and 13% at Bank BPH. The bank boosted deposits by 3.8% to 85.7 billion zloty. Total lending rose 5.2% to 59.5 billion zloty on „growing lending to small and medium companies and home loans,” PKO said in its statement.

In the same period, earnings at OTP Bank Nyrt, Hungary's biggest lender, stagnated compared with a year ago as increasing competition led to less profitable loans. (Bloomberg)