Citigroup's Polish unit's second-quarter profit falls on retail business sale

Aug 28 (Reuters) - Polish corporate lender Bank Handlowy BHW.WA posted a smaller-than-expected second-quarter profit decline, but a one-off loss on the sale of its retail arm weighed on its performance.

BY THE NUMBERS

Profit in the second quarter at the Polish division of Citigroup C.N more than halved to 165.6 million zlotys ($45.5 million), while its net interest income fell 5% to 530.1 million zlotys.

Fees grew slightly to 106.5 million zlotys.

WHY IT'S IMPORTANT

Bank Handlowy is targeting a shift to institutional banking and diversifying its revenue streams from 2007 onward, as it aims to finance the country's key investments in defence and energy sectors.

New loans to institutional clients rose by 36% to 3.9 billion zlotys in the first half of the year.

CONTEXT

Despite having faced multiple headwinds from legal provisions for Swiss franc mortgages, mortgage moratoria, falling interest rates, and most recently looming taxes increase, the majority of Polish banks beat second-quarter estimates.

The country's lenders are still enjoying relatively high interest rates with the deposit rate standing at 4.50%, much higher than the euro zone's 2%, helping the banks resist pressure on their margins.

Additionally, most of the Polish banks have forecast a drop in the long-running legal risk associated with disputes regarding Swiss franc mortgages.

($1 = 3.6405 zlotys)