This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
The calendar year 2025 is drawing to a close on an exceptionally strong note for Polish banks. According to data from the National Bank of Poland (NBP), after eleven months, the sector had earned PLN 45.11 billion (approximately EUR 9.9 billion), 7.4% more than in the entire 2024 fiscal year. This suggests that the current reporting year will likely set a record for reported net profit. Several factors explain this performance.
Lower Swiss franc provisions…
Michał Sobolewski, an analyst at DM BOŚ, points to two key factors that supported banks’ performance over the past year.
“Banks reported lower provisions for Swiss franc loans. At mBank and Millennium, we saw a significant reduction in these costs, while at PKO BP the decline has been more gradual,” the analyst notes.
The banks’ own data illustrate this trend. At mBank, after three quarters of 2025, provisions stood at PLN 1.66 billion (EUR 365 million), 50.7% lower than a year earlier. Millennium reported PLN 1.39 billion (EUR 306 million) in provisions, a drop of 7.4%. At PKO BP, provisions increased slightly, although recent quarters show a favorable downward trend. This reflects the fact that the bank had previously set aside substantial reserves for Swiss franc loan risk. At the same time, the number of new lawsuits is falling: mBank reported receiving over half as many in the third quarter as it did a year earlier.
…reducing sensitivity to rate cuts
The second factor was persistently high interest income. Banks demonstrated relative resilience to falling interest rates, which, through the WIBOR benchmark, determine the cost of loans, bonds, and deposits. The NBP reference rate fell by a total of 1.75 percentage points in 2025, to 4%. According to the Polish Financial Supervision Authority (KNF), over ten months, the sector’s net interest margin (the share of interest income in interest-earning assets) fell by just 0.19 percentage points, to 3.61%.
“Banks reported a high net interest margin for most of the year. The sector is much better prepared for rate cuts than in 2020. They have a more favorable portfolio structure, with a larger share of fixed-rate loans. They are also expanding interest-earning loan portfolios and using hedging instruments to protect margins,” Mr. Sobolewski emphasizes.
…and issued mortgages at a record level
The third factor was growth in the loan portfolio, driven primarily by strong mortgage sales. According to the Credit Information Bureau (BIK), over eleven months of 2025, banks and credit unions (SKOKs) issued nearly PLN 96 billion (EUR 21 billion) in mortgages – a record level, up 18.1% compared with a year earlier.
“The main reason for such high activity in this segment is rising credit capacity, stemming from lower interest rates, combined with real income growth. A favorable housing market for buyers is also motivating demand,” comments Waldemar Rogowski, BIK’s chief economist.
Although the sector’s profits in 2025 were likely record-breaking (final December results are pending), return on equity (ROE) was not. It stood at 15.5–16%, well below the 20–22% reported in 2005–2008, just before the global financial crisis.
Margins lose momentum, the least resilient banks will suffer
We asked experts from advisory and auditing firms about trends for the coming year. All agreed that, after exceptionally strong years for the banking sector, 2026 is unlikely to match the recent performance.
“2026 should still be a year of solid, double-digit profitability for the sector, but it will be difficult to repeat the results of 2024–2025,” says Przemysław Paprotny, partner at PwC and head of financial services for Central and Eastern Europe.
In his view, as interest rates decline, the sector is losing one of its main profit drivers: the high net interest margin. He emphasizes that in recent years banks lent far less than the level of deposits would have allowed, giving them significant flexibility in shaping margins – particularly due to low interest rates on deposits and savings accounts. That period, however, is coming to an end, and margins are expected to gradually compress.
Paweł Jagłowski, partner at Deloitte, shares a similar perspective. He believes the key factor will be how individual banks generate income.
“Banks that rely heavily on interest income and are more sensitive to rate cuts may feel the impact more strongly. But it is important to remember that recent years delivered record profits, so even with some decline, the sector will remain stable and profitable,” Mr. Jagłowski notes.
Magdalena Warpas, partner at EY Partheon, adds that lower rates will naturally slow the pace of interest income growth – but this does not signal a deterioration in banks’ health.
“This is more a return to a more normal, balanced level of profitability that better reflects the realities of the Polish market: strong competition, complex regulations, and a cautious approach to risk. The key question is not ‘will profits fall,’ but which banks will navigate the new environment most successfully,” she emphasizes.
2026 should remain a year of solid, double-digit profitability, but repeating the exceptional results of 2024–2025 will be challenging.
Banks can partially offset margin decline
Przemysław Paprotny notes that banks may attempt to cushion the impact of shrinking margins with higher fee and commission income (NFC). However, these revenues will not be able to fully offset the decline in interest income. There are several reasons for this. First, fee income in Poland accounts for only about 20% of interest income, meaning that any drop in margins would need to be compensated by a very large increase in fees. Second, banks cannot freely raise prices, as customers are sensitive to service costs. Third, fee income growth has been moderate in recent years, with double-digit growth recorded only in 2021. Fourth, new competitors such as Erste Group and UniCredit are entering the market, and it is unlikely they will start competing by charging high fees.
“Banks should increase the share of fee and commission income, but today it represents a small portion of their overall financial results. In the first ten months of 2025, the banking sector’s interest income reached PLN 92 billion (EUR 20.2 billion), while fee income totaled PLN 17 billion (EUR 3.7 billion). In practice, this means that even a significant rise in transaction volumes, adjustments to pricing, or the introduction of new products will not be enough to fully cover the shortfall in interest income,” adds Paweł Jagłowski.
Magdalena Warpas shares a similar view. She believes that fee income will remain an important tool for revenue diversification, but in the short term it will not neutralize the decline in net interest results. Over the longer term, the growth of wealth management services and investment-savings offerings – based on stable and recurring commission income – will play an increasingly important role.
“In 2026, a more realistic scenario is reducing pressure on results rather than fully recouping losses from shrinking margins. Banks that most quickly build a diversified revenue model, based on scale, fees, and cost control, will be better positioned to operate in a lower-rate environment,” she emphasizes.
Even a significant increase in transactions, pricing adjustments, or new product launches will not be sufficient to fully offset the decline in interest income.
The challenge of moving to a relationship-based Model
According to Andrzej Gałkowski, partner, head of banking advisory and AI in KPMG Poland and Central and Eastern Europe, the key question for banks will be whether they can move beyond simply earning from interest and adopt a model based on long-term customer relationships. In this approach, revenue comes from the entirety of the client relationship rather than from a single product.
“In Poland, it is clear that the largest institutions are embedding in their strategies a shift away from relying solely on interest spreads as the main source of profit. 2026 will therefore be a test of how far this transformation has actually been implemented, not just of margin resilience. A decline in interest income is possible. However, a bank that can generate revenue from broader customer relationships – through additional services, improved client retention, development of digital channels, and prudent cost management, including automation and AI – can still maintain satisfactory profitability,” Mr. Gałkowski emphasizes.
He also highlights the growing importance of artificial intelligence (AI). In his view, AI facilitates higher fee and commission income by enabling banks to better tailor offerings to client needs, anticipate expectations, and present proposals at the right moment. This boosts sales effectiveness and allows banks to create value across the entire client relationship, rather than relying on individual transactions.
“2026 will thus be a test of how fully this transformation has taken place, not just a measure of margin resilience,” he concludes.
…and smart use of AI in sales and processes
Mr. Gałkowski also sees potential for AI in client onboarding, call center operations, and improving the efficiency of support teams.
“A bank that can streamline its operational backbone reduces costs while simultaneously enhancing service quality. This combination of scale, customer experience, and technology will be a key way to ease the pressure from lower margins in 2026,” the KPMG representative adds.
He emphasizes that in 2026, the Polish banking sector should not be evaluated solely through the lens of net interest margins, but by the maturity of its new value-creation model.
“Market advantage will go to institutions that can combine high-quality service with a broad range of offerings, leverage AI to optimize daily operations, and base client relationships on trust and tailored solutions rather than one-off sales. Banks focused only on the ‘interest and branches’ model will be at a disadvantage. 2026 will not be a sector crisis – it will be a crisis of outdated business models. In 2026, customer service quality will matter far more for competitive advantage than interest rates alone. Banks that deliver simple, intuitive, and fast service will win younger clients while retaining existing loyalty,” Mr. Gałkowski observes.
Paweł Jagłowski adds that AI implementations aimed at revenue growth appear more challenging than those designed to reduce costs. The crucial question is which banks will make the most of emerging opportunities – solutions that directly support customers or those that relieve advisors of non-client-facing tasks.
“The key challenge for banks will be organizational readiness: redesigning processes with AI in mind, establishing a new division of work between humans and technology, and genuinely removing routine tasks from employees’ plates. This is a complex, multi-year process that requires consistency and investment, but it has significant potential to boost productivity and control costs,” emphasizes Magdalena Warpas.
The core challenge for banks will be organizational readiness: redesigning processes around AI, redefining the balance between people and technology, and genuinely relieving employees of routine duties.
Lower interest rates should support demand
Paweł Jagłowski notes that the NBP is expected to cut rates to around 3.5%. This means banks will find it difficult to fully offset the resulting decline in interest income solely through alternative revenue sources.
“An increase in loan portfolios is reasonable to expect, supported by lower interest rates and the economy’s needs related to the energy transition. However, uncertainty stemming from the war may significantly limit borrowers’ willingness to make investment decisions,” he points out.
Przemysław Paprotny is also counting on a revival in credit demand. He highlights an 8% forecasted growth in investment across the economy, which would likely mobilize corporate liquidity surpluses and trigger additional financing from banks. He emphasizes that investment programs in defense, infrastructure, and energy over the next ten years exceed the value of Poland’s GDP. According to PwC estimates, this amounts to over PLN 4 trillion (EUR 880 billion).
“Most of these funds will flow to private enterprises. Each zloty spent in this way could generate up to four times the turnover in the banking sector. This is driven by demand for transactional products, financing, and trade finance solutions,” the PwC partner explains.
“An environment of falling interest rates means cheaper capital for the economy, supporting the recovery of corporate investment activity and boosting household credit demand,” adds Magdalena Warpas.
Małgorzata Pek, partner at Forvis Mazars in Poland and head of financial services for Central and Eastern Europe, cautions that corporate loan demand remains uncertain. Even if banks are ready to offer financing, the key question is whether companies will actually invest and take up bank funding.
Bank profits to decline due to changes in Corporate Income Tax
Although our analysis began with interest and fee income – the elements that most strongly influence the sector’s profit and loss – our interviewees agree that another, one-off factor will have a significant impact on banks’ results in 2026: the increase in corporate income tax (CIT) for the sector.
“2026 is likely to be a year of normalization after very strong years of high interest rates, combined with a substantial one-off tax burden. From 2026, the CIT rate for banks will rise to 30% (then 26% in 2027 and 23% from 2028). This will directly reduce the sector’s net profit and will be the largest measurable factor affecting bank earnings. It will also change incentives for asset allocation. The preference for government bonds driven purely by tax considerations will decline, while the willingness to lend may increase,” says Małgorzata Pek.
“PwC estimates indicate that once the latest changes take effect, the banking sector will face a very high effective tax rate, around 40%. On the positive side, there will be changes in the approach to recognizing deductible expenses for legal risk provisions, as well as planned adjustments to the so-called old bank tax [calculated on assets] from 2027,” adds Przemysław Paprotny.
“Net profits will show a steeper decline than gross profit due to higher tax burdens, primarily CIT. Although this tax is crucial for net results, it remains beyond banks’ direct control. The key question is how institutions will adapt their business models to lower interest rates in an environment of strong competition – from new entrants as well as ambitious strategies from the largest market players,” emphasizes Paweł Jagłowski.
2026 is therefore expected to be a year of normalization after exceptionally strong years of high interest rates, combined with a significant one-off tax burden. From 2026, the CIT rate for banks will be 30%, directly reducing the sector’s net profit.
The sector will benefit from lower Swiss franc provisions
Another factor set to significantly influence the sector’s results is provisions for legal risk related to Swiss franc loans. According to Paweł Jagłowski, paradoxically, banks holding a substantial portfolio of franc-denominated loans may find themselves in a relatively advantageous position, enjoying greater earnings stability. This stems from a far smaller burden of new provisions compared with previous years.
“Legal risk has become the most important risk for banks in recent years. It is more significant than credit risk and much harder to manage. However, banks have already built very large provisions for Swiss franc loans. As a result, these provisions should not be a key factor affecting results in the coming years. Provisions will likely continue to be set aside, but on a much smaller scale,” Mr. Jagłowski emphasizes.
“The sector has largely recognized the economic cost of this issue. The scale of new charges will gradually decline, and their impact on results will become more predictable. Legal risks have become a permanent part of banking operations. Banks incur related costs continuously, not incidentally. While these risks are varied and selective, they do not undermine the sector’s stability,” adds Magdalena Warpas.
Małgorzata Pek notes that the number of new lawsuits is stabilizing, and in some banks is even declining. At the same time, claims from borrowers who have already repaid their loans are playing an increasingly important role. The scale of future losses will depend on the level of provisions previously set aside for repaid loans, as well as banks’ approach to recovering part of the capital already paid out.
“By contrast, risks related to the Free Credit Sanction (SKD) and WIBOR rates across the sector are unlikely to exceed Swiss franc-related risks in 2026. For banks without franc loan portfolios, however, these may become a more visible new legal cost. Court rulings and the pace of new lawsuits will be crucial,” emphasizes the Forvis Mazars partner.
New ambitious competitors enter the market
Our interviewees also highlight the arrival of new competitors. Erste Bank will acquire Santander Bank Polska in mid-January, and UniCredit is also entering the market. As Przemysław Paprotny notes, two strong players are entering, both with a strong appetite for commercial success, solid capital bases, and international experience. Their debut will increase competitive pressure in the banking sector.
“Erste, as a stable regional group with excess capital, may in 2026 place a stronger focus on expanding its loan portfolio and investing in technology. This will force competitors to reassess their growth plans and capital allocation,” adds Małgorzata Pek.
According to the PwC partner, discussions will simultaneously continue regarding further sector consolidation and potential ownership changes. Additional new players could also enter the market.
“In the past two years, we have seen significant interest in the Polish banking sector from institutions in Asia, Europe, and the U.S. Poland’s economic growth and ambitious investment plans make the market increasingly attractive. At the same time, a natural development path for domestic banks will be internationalization and foreign expansion, following the international success of Polish enterprises,” forecasts Przemysław Paprotny.
Key Takeaways
- Margins under pressure, shift to relationship-based model. Banks will also face declining net interest margins, which cannot be fully offset by higher fees and commissions. According to Deloitte experts, even a significant increase in transaction volumes, changes in fee structures, or the introduction of new products will not fully compensate for the drop in interest income. KPMG experts highlight that the key will be moving from a model based purely on interest to a relationship-based model, where revenue stems from the entire client relationship rather than a single product.
- Banks end 2025 with likely record profits. Polish banks are closing 2025 with a probable record in nominal profits. After ten months, net earnings had already surpassed the total for 2024. The sector benefited from high interest rates and proved remarkably resilient to their gradual decline. At the same time, banks reported growth in loan portfolios and a decline in provisions for legal risk related to Swiss franc loans.
- Profits will be hard to repeat. Repeating such high profit levels in 2026 will be challenging, although the sector can still achieve double-digit return on equity. A key factor will be the higher 30% corporate income tax (CIT), up from the previous 19% rate. PwC estimates suggest that once the changes take effect, the banking sector will face an effective tax rate of around 40%.