Polish Banks Eye Lending & Fee Growth Amid Lower Interest Rates, Higher Taxes
Polish Banking Sector Faces New Challenges and Opportunities in 2025
By Rafal Wojciech Nowak
GDANSK, April 30 (Reuters) - Polish banks are looking for stronger lending and fee income to support their profit this year as lower interest rates and higher taxes slow an earnings boom that had made the sector one of Europe's stronger stock market performers.
Sector net profit reached 48.7 billion zlotys ($13.4 billion) in 2025 as high borrowing costs swelled net interest income but the benchmark rate has since fallen to 3.75% from a peak of 5.75%, pressuring that tailwind.
Profit Trends Among Polish Banks
First quarter profit fell at four of the six listed lenders reporting this week, while mBank and Bank Millennium were lifted by a sharp drop in legal costs related to Swiss franc mortgages, a legacy issue that is now easing.
Mortgage sales rose from a year earlier at all six banks, while growth in cash loans, corporate lending, leasing and factoring varied by lender.
Competitive Pressures and Lending Demand
"We see that demand is growing, which is very pleasing to us," Erste Bank Polska CEO Michal Gajewski told a conference call on Thursday, adding that the competitive pressure on margins is enormous.
Fee Income as a Buffer
Fee Income Offsets Pressure
Banks said fee income was helping offset pressure elsewhere.
Bank Millennium, the Polish arm of Portugal's Millennium bcp, said it expected fee and commission income to keep rising after a 12% year-on-year increase in the first quarter, helped by investment products, brokerage and insurance.
Optimism for Fee and Commission Growth
"We are cautiously optimistic regarding the evolution of fee and commission income," Bank Millennium Chief Financial Officer Fernando Bicho told a press conference on Tuesday, adding that the bank expects a "clearly better performance" in comparison to 2025.
Geopolitical Risks and Credit Impact
Executives said there was no immediate hit from the U.S.-Israeli war on Iran, though they were reviewing risks.
"For the time being, there is no significant impact from the war on credit risk,” mBank's Chief Risk Officer Marek Lusztyn said on Thursday, while warning it was too early for a detailed view.
End of the Rate Boom
Poland's benchmark rate peaked at 5.75% from late 2023 to mid-2025, lifting sector net profit to 48.7 billion zlotys ($13.4 billion) in 2025, with returns on equity well above regional peers. The benchmark rate has now fallen to 3.75%.
Governor Adam Glapinski has indicated rates are likely to remain unchanged, with the Middle East conflict cited as the main factor shaping monetary policy.
Implications for Bank Performance
That run may have flattered weaker business models, Erste analyst Lukasz Janczak told Reuters, warning that high rates might have papered over thin scale and operating leverage at smaller lenders.
Bigger banks are seen as best placed to capture a credit rebound, while weaker, smaller lenders may face pressure to consolidate, he added.
Outlook for 2026
"The overall macroeconomic situation in Poland will support the banking sector's financial results in 2026," Pekao said in its first-quarter report, adding that stable rates will boost interest income without cooling credit demand.
($1 = 3.6297 zlotys)
(Reporting by Rafal Wojciech Nowak, Adrianna Ebert, Anna Jaworska-Guidotti and Alicja Surdy; Editing by Matt Scuffham)
