Bank Performance and Local Economic Conditions Are Polish Cooperative Banks Vulnerable to Regional Downturns

The aim of this paper is to analyse the vulnerability of Polish cooperative banks to changes in macroeconomic environments within the poviats where those banks operate. We find that the profitability, cost income and growth of cooperative banks are strongly related to local conditions. Banks headquartered in poviats with lower unemployment are able to report healthier earnings and leaner cost structures, and face better growth prospects. Deteriorations and revivals in poviats are reflected in bank performance and growth, demonstrating the sensitivity of these banks to local developments not necessarily mirrored in national economic indicators. In addition, despite homogeneity within the cooperative banking sector, we demonstrate differences in the relation of performance and economic situation between subgroups of small, medium-sized and large banks.