Bank Pekao Profit Drops on Record Low Rates in Poland

Bank Pekao SA, Poland’s second-largest lender and a unit of UniCredit SpA (UCG), posted the lowest quarterly profit in almost three years after cuts in the country’s interest rates reduced income from loans.

Net income declined to 665.5 million zloty ($210 million) in the first quarter from 710.6 million zloty a year earlier, the bank said in a regulatory statement today. That beat the mean 648.2 million-zloty estimate of 13 analysts surveyed by Bloomberg.

Slowing economy in the European Union’s largest eastern member and the Polish central bank’s cut in borrowing costs to a record low hurt banks’ earnings. The industry’s combined profit fell 5 percent in the first quarter, according to data on the Warsaw-based financial regulator’s website. The National Bank of Poland lowered interest rates by a total of 150 basis points between November and March as the country’s inflation rate fell to an almost seven-year low in March.

Pekao’s net interest income fell 5 percent to 1.13 billion zloty in the quarter, while net fees and commission rose to 552 million zloty from 550.5 million zloty. Bad loan provisions surged 22 percent to 165 million zloty, it said.

To contact the reporter on this story: Marta Waldoch in Warsaw at mwaldoch@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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