Polish banks are strategically shifting focus towards stronger lending and fee income to support their profitability this year. This adjustment comes as lower interest rates and higher taxes begin to temper an earnings boom that previously positioned the sector among Europe’s top performers. In 2025, the sector reported a net profit of 48.7 billion zlotys (approximately A$17.9 billion), largely driven by high borrowing costs. However, with the benchmark rate now at 3.75% from its 5.75% peak, this significant financial tailwind has diminished, intensifying pressure on future earnings.
First-quarter results showed profit declines for four of the six listed lenders. Conversely, mBank and Bank Millennium saw profit increases, primarily due to a sharp drop in legal costs related to Swiss franc mortgages, a legacy issue now easing. Mortgage sales rose year-on-year across all six banks, with varied growth observed in cash loans, corporate lending, leasing, and factoring. Executives are highlighting fee income as a crucial offset. Bank Millennium, the Polish arm of Portugal’s Millennium bcp, anticipates continued growth in fee and commission income, following a 12% year-on-year rise in Q1, boosted by investment products, brokerage, and insurance services. Erste Bank Polska CEO Michal Gajewski noted growing demand but also acknowledged intense competitive pressure on margins.
Looking ahead, while executives, including mBank’s Chief Risk Officer Marek Lusztyn, report no immediate significant impact from the U.S.-Israeli conflict on credit risk but are reviewing broader implications. Poland’s central bank governor, Adam Glapinski, has indicated that interest rates are likely to remain unchanged, citing the Middle East conflict as a key factor for monetary policy. Analysts like Erste’s Lukasz Janczak suggest prior high rates may have masked weaknesses in smaller lenders, noting stronger, larger banks are better placed for a credit rebound. Pekao’s Q1 report, however, expresses confidence that Poland’s overall macroeconomic situation will support the banking sector’s financial results in 2026, with stable rates boosting interest income without cooling credit demand.
