Pekao beats profit forecasts on lower provisions, higher fees

GDANSK, Poland, Feb 19 (Reuters) - Bank Pekao, Poland's second-biggest lender by assets, reported a more than 13% rise in its fourth-quarter profit on Thursday, driven by lower credit loss allowances and Swiss franc legal provisions, and higher fee and commission income.

The bank's net profit rose to 1.82 billion zlotys ($508.6 million), beating the 1.66 billion zlotys analysts polled by Pekao had expected.

Polish banks are facing a challenging transition as the central bank's easing cycle, which lowered the main interest rate to 4.00% by the end of 2025, begins to squeeze net interest margins after years of record earnings.

Pekao's net interest income fell 1.7% to 3.40 billion zlotys amid lower borrowing costs, while net fee and commission income jumped 14.6% to 890 million zlotys, helping cushion the pressure on yields.

The bank reported new net sales of cash loans of 1.9 billion zlotys in the fourth quarter, a 16% increase year-on-year.

Pekao said provisions for risks associated with lawsuits from Swiss franc mortgage borrowers dropped 22% to 288 million zlotys, while net allowances for expected credit losses dropped 50%.

The bottom line was also boosted by a 180-million-zloty gain from revaluing tax assets ahead of a corporate tax hike.

"Entering a more demanding 2026, we remain focused on further improving customer experience, increasing operational efficiency and building lasting value," CEO Cezary Stypułkowski said in a statement.

($1 = 3.5785 zlotys)

(Reporting by Rafal Nowak;Editing by Milla Nissi-Prussak)