This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Today, Erste is often cited as a model of successful international expansion – an example that large Polish banks could well emulate. At XYZ, we trace the institution’s more than 200-year business history: navigating three financial crises, enduring heavy losses, and now posting record profits.
Austria’s Erste Group has been eyeing the Polish market for more than a quarter of a century. Before the financial crisis, it complained about excessively high prices and the Polish authorities’ reluctance to privatize PKO BP – a bank that would have been a perfect acquisition target. After the crisis, in 2012, it explored buying Alior Bank (three years later acquired by PZU), BGŻ (losing out to BNP Paribas), and in 2019, mBank (which was never put up for sale). It even considered acquiring Citibank’s entire Polish operations. All of these attempts ended in failure.
So when an opportunity arose in April 2025, the Austrians moved with lightning speed. For EUR 6.8 billion, they acquired a 49% stake in Santander Bank Polska, the country’s third-largest bank, whose parent company was exiting the Polish market.
The deal still requires regulatory approvals. Erste has already received the green light from the European Commission and is awaiting a similar clearance from Poland’s Financial Supervision Authority (KNF). The approval covers both the acquisition of Santander Bank Polska and the divestment of the bank’s stake in Santander Consumer Bank, which will remain with the selling group. Erste expects to secure the go-ahead around the end of 2025. If successful, it will finally crown a long, crisis-delayed expansion into Central Europe. Here is how that business journey unfolded.
Erste started with cooperative banking in Austria
The history of Erste Group (Erste means “first” in German) began in 1819, when the first Austrian savings bank (Sparkasse) opened in Vienna. Its mission was to provide broad access to banking services for all social groups, with a particular focus on helping lower-income households build savings.
Erste sparked a trend that gradually gained momentum. Savings banks began to appear across the Austrian Empire, including in what is today Slovenia (1822), Croatia (1822), Italy (1822), the Czech Republic (1825), Romania (1835), Hungary (1839), and again Slovenia (1842). From 1844, growth accelerated due to new regulations that restricted the establishment of savings banks to non-profit organizations and local governments; previously, private individuals had also been able to set them up. Despite rapid expansion, these banks managed to survive a particularly difficult period: the Vienna stock market panic of May 1873, which saw a total of 75 Austrian banks fail.
In 1886, the first Raiffeisen bank was established, which remains not only Erste’s main competitor in Austria but also one of its key rivals in Central European markets. Like Erste, its members included artisans, workers, and merchants. Of course, at the time, Erste and Raiffeisen were just two of many savings banks on the market. By 1910, there were 210 Sparkassen operating across the Austrian Empire.
After 1955, savings banks financed economic reconstruction
Despite growing competition, Erste remained a significant player in Austria. In 1931, when one of the country’s main lenders, Creditanstalt, went bankrupt (later rescued by the central bank and the Rothschild family), the savings banks once again proved resilient in the face of market turmoil. By 1937, Erste ranked second, behind Vienna’s municipal bank, Zentralsparkasse der Gemeinde Wien. That institution later formed the basis for Bank Austria through a merger – the third-largest bank in Austria at the time – which was acquired by Italy’s UniCredit in 2005.
According to Erste’s own history, after Austria’s annexation by Germany in March 1938 (Anschluss), savings deposited in the banks were conscripted to serve political ends, with funds diverted to finance armaments. Jewish accounts were also blocked. Between 1999 and 2007, a historical commission provided restitution for Erste and its legal predecessors’ role during National Socialism, paying EUR 700,000 in compensation to Jewish descendants and transferring EUR 6 million to a special state fund for victims.
When Austria regained full independence in 1955, Erste became the first savings bank in the sector to publish its balance sheet again. Customer deposits returned, financing the reconstruction of destroyed buildings and the establishment of new businesses. In 1968, the bank proudly introduced its first ATM, which operated during working hours and required a card to open the machine’s door. Twenty-three years later, regulations removed restrictions on the development of cooperative savings banks, granting them the same operational freedoms as traditional banks.
Erste acquired a rival, becoming Austria’s second-largest bank
In 1993, Erste’s savings bank operations were spun off into a joint-stock company, Erste Bank. Four years later, it merged with GiroCredit, which had served as the holding company for Austria’s savings banks. By bringing 70 savings banks and 880 branches under its control, and with assets worth EUR 50 billion, Erste rose to become the country’s second-largest bank, providing a counterweight to the rapidly expanding Bank Austria. In fact, Bank Austria was the seller of GiroCredit, having significantly benefited from its acquisition of the infamous Creditanstalt.
Andreas Treichl officially took the helm of Erste, having already served on the group’s management board for three years. He came from a banking family – his father had led Creditanstalt in the 1970s. Treichl’s first major task was to oversee Erste’s IPO on the Vienna Stock Exchange, which had only been initiated a few months earlier.
“We had just a few months to finalize the prospectus. It was around 400 pages, and working through the nights became routine,” recalled Martin Wohlmuth in 2023 in Trend magazine. Wohlmuth had been partially responsible for the IPO at the time.
Erste’s managers sought investors across Europe and the United States, conducting more than a hundred meetings in 36 countries over the course of two weeks. The IPO was a success, raising EUR 510 million in financing. On the day of the debut, Erste was valued at EUR 1.85 billion.
IPO funds fueled expansion across the region
The capital raised from the stock market enabled Erste to pursue its next strategic goal: international expansion. In response to XYZ’s inquiries, Erste Group’s press office noted that after the fall of the Iron Curtain in 1989, Austrian companies were once again able to strengthen ties with nearby markets with deep historical and cultural connections.
“Erste was founded to provide broad access to basic banking services for all social groups. When the group went public, it had a clear ambition to realize this goal across Central and Eastern Europe. At the same time, the bank sought to capitalize on the attractive growth prospects in the region,” the press office explained.
“Austria was one of the worst banking markets in Europe. Net interest margins were below 2 percent, and profits went to employees and customers rather than shareholders,” commented Michael Mauritz, Erste’s then-spokesperson, in The Banker in 2007.
A milestone: Entering Czechia and Slovakia
Erste’s first steps toward regional expansion began during its merger with GiroCredit. The acquired bank already controlled a savings bank in Prague, which had opened branches across other Czech cities. Moreover, in 1997, GiroCredit participated in the privatization of Hungary’s Mezobank, winning the bid over Raiffeisen, another bank pursuing regional expansion. Before the deal was finalized, GiroCredit itself became the subject of Erste’s acquisition.
Erste’s first acquisition under its own brand took place in Croatia. Together with an Austrian regional savings bank, it bought three local banks and merged them, creating one of the country’s larger lenders.
However, the true milestone came with another transaction. In 2000, through a privatization process, Erste acquired a 52% stake in Česká spořitelna for EUR 530 million – a bank that, like Erste, had its origins as a savings institution. At the time, Česká spořitelna was already the market leader, holding a 34% share of customer deposits and loans. Its assets of EUR 12.3 billion accounted for almost one-quarter of Erste’s balance sheet prior to the transaction.
Shortly thereafter, Slovenská sporiteľňa – the oldest lender in Bratislava and already the market leader in Slovakia – joined the group. It accounted for 35% of retail deposits and 34% of loans in the Slovak market. Erste acquired an 87.2% stake for EUR 425 million, though it later slightly reduced its holding. The bank contributed an additional EUR 4.2 billion in assets to Erste. Through these acquisitions, Erste gained 1.8 million customers, roughly 30% of Slovakia’s population.
Erste becomes a central European leader
Thanks to these two transactions, Erste increased its balance sheet by nearly two-thirds, reaching EUR 86 billion. Since its IPO in 1997, the bank’s customer base had grown from 600,000 to 8 million.
“In 2001, we reached a new milestone in our development. We became a leading provider of financial services in Central Europe… We proved that it is possible to build an international group headquartered in Austria,” Andreas Treichl boasted in a letter to shareholders.
The following years saw further expansion, beginning with the acquisition of another bank in Croatia in 2002. Erste continued to emphasize its intention to strengthen its presence in Central Europe, both through acquisitions and the organic growth of existing operations. At the time, Poland was not mentioned in reports, but the missing piece of the puzzle was obvious. Treichl commented on this in The Banker in 2007.
“Poland does not meet one of the necessary conditions. There are no state-owned banks with a large share of retail business. The largest bank is PKO BP, and it does not appear to be up for sale,” the manager noted.
Instead, he spoke optimistically about other markets: Romania and Bulgaria, which were set to join the European Union in 2007.
The group’s goal remained maintaining high market shares across the region. Seeing that organic growth alone would not suffice, in 2003 Erste acquired Hungary’s Postabank, which held EUR 1.7 billion in assets, for EUR 340 million. The bank outbid other interested parties, including Creditanstalt. As a result, Erste’s market share in Hungary grew from 4% to 8%, making the group the second-largest by customer numbers and the sixth-largest by total assets.
The bank continues expanding and hits record scale
In 2005, Erste entered two new markets. For EUR 3.75 billion, it acquired BCR, the leader of the Romanian market. This remains the largest transaction in Erste’s history and required a substantial share issuance of EUR 2.4 billion. At the time, rating agency Fitch noted that the deal’s value represented “the upper end of expectations,” reflecting both the lack of other attractive banks for sale in Central Europe and BCR’s strong position in Romania.
In the same year, Erste acquired Novosadska banka in Serbia for EUR 86 million. Its market share there was only 2%, but the bank argued that the purchase would support further expansion. The strategy of entering new markets was already bearing fruit: by the end of 2005, 61% of Erste’s profits came from abroad.
“By adding Romania and Serbia, we nearly doubled our market potential to 70 million prospective customers and increased our existing client base to 15.2 million. No other bank offers its customers such broad banking services in such fast-growing markets as we do,” Andreas Treichl wrote in a 2005 letter to shareholders.
The company achieved a record return on equity (ROE) of nearly 20%. That same year, Bank Prestige began operations in Ukraine, joining Erste two years later. This entry followed a different model than in Czechia, Slovakia, and Romania. Prestige had little chance of quickly capturing a 20% share of the Ukrainian market, which also had slim prospects of joining the European Union in the near term. As it turned out, the transaction proved a misstep: in 2012, Erste sold its stake at a price EUR 21 million lower than the original purchase price.
Erste receives a capital injection from the Austrian government
In 2007, the global financial crisis erupted, hitting Erste at a moment of strong performance growth. The group had EUR 200 billion in assets, reported EUR 1.1 billion in net profit for the first time, and employed 52,000 people across eight key markets. This was already the third major crisis Erste had faced.
In 2008, Erste sold its insurance business to Austria’s VIG for EUR 1.5 billion and signed a 15-year partnership agreement with the insurer. It also completed a structural reorganization, creating today’s Erste Group – a holding company overseeing all of Erste’s businesses – with Andreas Treichl at its helm.
Despite initial resilience, both Erste and Raiffeisen eventually felt the impact of the crisis. In 2008, Erste lowered its growth forecasts and soon announced that the Austrian government had approved a support package, acquiring EUR 2.7 billion in capital in Erste Group (Raiffeisen received €2 billion). The bank committed to providing at least EUR 3 billion in financing to the economy in the near term.
Thanks to the sale of its insurance business, Erste posted EUR 860 million in net profit by the end of 2008. However, results reflected significant write-downs on assets in Ukraine, Serbia, and, to a lesser extent, Romania. The bank also established substantial credit reserves, anticipating higher levels of loan delinquency caused by the crisis. Losses related to financing Icelandic banks were also visible in the year-end results.
Losses mount, driven in part by Hungarian legislation
After years of stagnating assets, higher risk costs, and lower profitability, Erste Group once again surpassed EUR 1 billion in net profit in 2010. Just as it seemed poised to weather the crisis unscathed, serious problems emerged. By 2011, the group reported a net loss of EUR 720 million.
The causes included additional write-downs on businesses in Romania and Hungary, rising credit risk in the latter, and changes in the valuation of its CDS derivative portfolio. During this period, Hungary imposed higher bank taxes and legislated a solution to the so-called “Swiss franc loans” problem, allowing borrowers to convert their loans at rates below the market value. Erste had been one of the more active banks selling these loans.
“Everyone knew it was foolish. But there was demand for these instruments, clients used them, and where Erste didn’t offer such loans, for example in Romania, it lost market share,” Andreas Treichl commented in 2018 in the Financial Times.
The Swiss franc issue did not end there. In 2014, Hungary enacted new legislation, this time mandating loan conversions (the previous law had been voluntary). Banks were required to surrender revenues derived from “exchange margin gains and unfair interest rate hikes” within 90 days. Alongside Raiffeisen and Hungary’s OTP, Erste was among the hardest hit.
Additionally, the bank once again made provisions for impairment on its Romanian and Croatian businesses, reflecting deteriorating economic prospects. The result: 2014 became the worst year in Erste’s history, with a net loss of EUR 1.4 billion.
The following year, the Croatian government also allowed conversions of Swiss franc loans, causing a EUR 102 million loss for Erste Croatia, though this had little impact on the group’s overall results.
Launches digital platform and reduces NPL portfolio
In the following years, Erste returned to normal business. Loan and deposit portfolios began to grow again, the group reported profits exceeding EUR 1 billion, and its market capitalization reached EUR 12 billion. In early 2015, Erste launched its new digital platform, George, which attracted 1.5 million users in Austria within three years, making it the bank’s most popular platform in the country. George was later rolled out in Czechia and Slovakia.
“We did not want to create just another online banking system or simply modernize old systems. George is a completely new way of banking… Our clients have high expectations: banking with us should be as simple and intuitive as ordering on Amazon, but with advanced security and comprehensive protection of customer data,” said Peter Bosek, then head of retail banking at Erste Group, in 2018.
At the same time, the bank reported a steadily declining share of non-performing loans (NPLs). By the end of 2017, NPLs had fallen to 4%, down from a record 9.2% in mid-2012. The Romanian market, which had previously caused significant NPL challenges, performed particularly well: at its peak, 26% of loans in the country were overdue. Since then, interest rates fell, wages increased, and the bank’s portfolio gradually shed loans for which high provisions had previously been set. The result: by 2017, only 8.1% of loans were problematic, dropping further to 4.1% two years later.
Interactive chart Erste changes group CEOs three times
At the end of 2019, Andreas Treichl stepped down. Having led Erste for 23 years, he became the longest-serving CEO of a major European bank. He was succeeded by Bernhard Spalt, who had been with Erste since 1991. Spalt had restructured the Czech business and expanded operations in Romania, Slovakia, and Hungary, and prior to becoming CEO, he was responsible for risk management in Austria.
A year later, Peter Bosek, in charge of retail banking at Erste, left to become CEO of Estonia’s Luminor Bank. He did not remain in that role long: at the beginning of 2024, he returned to Erste to become the new head of the Austrian group. However, he replaced not Spalt but Willi Cernko, former head of corporate banking in Austria, who had led Erste Group since 2022.
All of these managers have long histories within Erste, and all are Austrian. This preference for experienced domestic leadership is also evident at rival Raiffeisen, which has been led since 1989 by Johann Strobl, who began his career in Vienna.
Abroad, Erste relies on local management
In other countries, Erste has also relied on experienced local managers. Česká spořitelna has been led by Czech executive Tomáš Salomon since 2016, while Slovakia’s bank has been headed by Slovak manager Peter Krutil since 2018. This reflects Erste’s approach of staying as close to its customers as possible.
“We emphasize accountability and strengthen the role of local leadership. This approach allows each of our international banks to respond effectively to specific market needs, while combining the scale and stability of a regional group with the flexibility and expertise of local teams,” the Erste press office told XYZ.
Countries have the flexibility to implement local initiatives, complemented by programs that support the entire group. Individual businesses exchange best practices regularly.
On IT systems, Erste favors centralization with local adaptation. Selected applications are centralized to ensure scalability, security, regulatory compliance, and cost efficiency, supporting a unified banking vision across the region.
“At the same time, we enable local entities to innovate, allowing them to tailor local technologies and application portfolios to the specific needs of their markets,” Erste Group added.
Erste improves metrics and pulls ahead of Raiffeisen
In recent years, Erste Group has experienced dynamic business growth and rising profitability, despite the challenges of the COVID-19 pandemic and high inflation. By 2024, the bank had just over 16 million customers, employed 45,000 staff, and reduced its branch network to 1,800. It once again reported double-digit profitability, maintained a low non-performing loan ratio of around 2.5%, and reduced its cost-to-income ratio year-on-year to 47% in 2024.
By the end of 2024, the bank’s balance sheet had reached EUR 355 billion, and it reported EUR 3.5 billion in net profit. In comparison, competitor Raiffeisen posted EUR 1.1 billion in net profit and held just under EUR 200 billion in assets. The balance sheet gap between the two banks exceeded EUR 150 billion – twice the difference a decade earlier. In 2024, Raiffeisen faced high Swiss franc loan reserves in Poland, legal risk provisions in Russia, and the costs of divesting its Belarusian operations. Erste has no banking operations in these countries.
Filling the gap and raising strategic questions
That is set to change. After years of lamenting the situation in Poland, in April 2025 Erste signed an agreement with Spain’s Santander to acquire a 49% stake in Santander Bank Polska (SPL), the country’s third-largest lender. The bank paid EUR 6.8 billion – both the largest bank acquisition in Erste’s history, doubling the price paid for BCR in Romania, and a record for Polish banking history (the previous highest was EUR 4.1 billion, which Santander paid for 96% of BZ WBK).
“Poland will play an extremely important role in our group. We are entering a new level,” Peter Bosek said at a press conference.
Managers we spoke to emphasize that the Polish acquisition is very different from previous deals. The market is highly competitive, mature, and innovative. SPL is far from the 20% market share considered a target within the group, holding just 11%.
Can Erste grow faster than its competitors on its own? Experts believe the group will not be satisfied with third place and will aim at least to challenge the second-largest player. Today, SPL (after excluding the assets of Santander Consumer Bank, which will remain with Santander) trails Pekao by PLN 53 billion in assets. The gap is surmountable, but closing it will require several years of faster growth than the rival. Another option could be acquiring a smaller bank in Poland, currently ranked around seventh to tenth in the sector. However, it seems unlikely that ambitious competitors PKO BP and Pekao will yield without a fight.
Key Takeaways
- For over a quarter of a century, Erste Group watched Poland’s development with admiration but saw no opportunity to enter the market. High valuations and the government’s reluctance to privatize PKO BP - an ideal fit for the Austrian group’s portfolio - stood in the way. Now, the bank expects to receive approval from the Polish Financial Supervision Authority (KNF) by the end of the year, enabling it to complete the purchase of Santander Bank Polska. This will make Erste the third-largest lender in Poland and mark the largest transaction in its history, doubling the size of its 2005 Romanian deal.
- The bank, which went public on the Vienna Stock Exchange in 1997 and raised capital there, began expanding into Central European markets. Initial moves included acquisitions in Hungary and Croatia, but it was the purchases in Czechia and Slovakia that brought the greatest benefits. There, Erste acquired market leaders that continue to dominate both markets. These acquisitions were supported by dedicated share issuances.
- Expansion also carried risks, as shown in 2011 and 2014, when the group reported significant net losses. The causes included write-downs on banks in Romania, Croatia, and Serbia, as well as legislation on Swiss franc loans in Hungary. The bank later faced similar challenges in Croatia, and its entry into Ukraine ended in failure: five years after acquiring Bank Prestige, Erste sold it at a loss.