A troubled banking sector

After two months of steady growth, the Pengab banking-climate index, a Polish measure of the expectations of the nation’s top 200 bank managers, fell by 8.5 points to 13 in May, down from 21.5 points in the previous month, drawing varied responses from market watchers. The results of the survey, which is based on a minus-100 to 100 point scale, indicate an increase in bank managers’ pessimism about the prospects for their sector – one of the country’s most important – over the coming months. In the survey bank managers give their expectations for major financial aggregates, such as interest rates, volumes of loans and deposits as well as year-end inflation levels. They are also asked to evaluate the general situation of the sector. While Eugeniusz Smilowski, president of Pentor, the agency that compiles the survey, said that the result was a minor downward adjustment to an otherwise rising trend, other observers were more cautious.The one negative factor that observers regarded as new and likely to have influenced bankers’ decreased confidence levels was the announcement of particularly poor results in the German economy and, consequently, in its banking sector in the first quarter of the year. Considering the heavy involvement of German banks on the market here, it is likely that bad results at the capital-group level induced pessimism on the part of the bankers.