Interest rates are falling, banks are thriving. Six charts that show how much they earn – and where their profits really come from

This article is a part of Poland Unpacked. Weekly intelligence for decision-makers

With Thursday’s publication of Citi Handlowy and Bank Ochrony Środowiska (BOŚ) results, the earnings season for Polish banks wrapped up after just a few weeks. In under 21 days, all ten listed lenders reported their third-quarter figures. As we do every quarter at XYZ, we take a closer look at how each bank performed, the trends shaping the sector, and the key drivers behind the industry’s results.

Profits up for banks with Swiss-franc mortgages…

In Q3, the ten listed banks generated a combined net profit of PLN 10.6 billion (EUR 2.5bn) – up 7.2% year-on-year (from PLN 9.89 billion / EUR 2.34bn) and 13.8% compared with the previous quarter (PLN 9.31 billion / EUR 2.2bn). Seven banks improved their results year-on-year, while half recorded quarterly growth.

Bank Millennium delivered the strongest performance. Its net profit jumped 82% year-on-year, reaching PLN 345 million (EUR 81.5m) – despite virtually unchanged interest and fee income. Credit-risk write-offs fell only 3%, so the main driver was elsewhere: the bank cut its provisions for legal risks linked to Swiss-franc mortgages by 15.5%. Millennium also reported a significantly lower effective tax rate this quarter – 18% compared with 40% a year earlier. This is likely due to a growing number of out-of-court settlements (their costs are tax-deductible for banks) and the lower level of legal-risk provisions (which are not deductible).

Among the large banks – a group of five institutions with assets above PLN 250 billion (EUR 59bn) – mBank stood out. Its net profit rose 46% year-on-year to PLN 837 million (EUR 198m), despite a decline in interest income (the main revenue source for Polish banks). The improvement came from other factors, notably a sharp drop in provisions for Swiss-franc mortgage litigation. These provisions fell by 53% year-on-year to PLN 455 million (EUR 107m). The bank also posted a 16% increase in fee and commission income.

BOŚ bank also reported a solid turnaround, with a net profit of PLN 6 million (EUR 1.42m) versus a loss of PLN 9.2 million (EUR 2.27m) a year earlier. It recorded the largest year-on-year reduction in credit-risk provisions in the group (-69%) and also cut its Swiss-franc provisions by more than half.

... and down for banks where ownership changed

Four banks – led by Santander, the third-largest lender in Poland – reported lower profits than a year ago. The decline was modest, at just 3% year-on-year. The drop was mainly driven by higher provisions for Swiss-franc mortgage litigation compared with 2024, although these provisions were still far below the levels seen at mBank and Millennium.

It’s also worth noting that Santander’s results include only its continuing operations, meaning they exclude Santander Consumer Bank (SCB). SCB will remain within the Santander Group and will be rebranded as OpenBank, while Santander Bank Polska’s core business is set to be transferred to Austria’s Erste Group. The Austrians are currently awaiting approval from the Polish Financial Supervision Authority (KNF) to finalize the transaction – a green light they hope to receive by the end of the year.

Citi Handlowy performed noticeably worse, with its net profit dropping 14%. This decline stemmed from lower interest income and higher loan write-offs. As in Santander’s case, it’s important to remember that these results cover only the bank’s continuing operations. For Citi, this refers exclusively to its corporate business – the retail arm is set to change ownership in mid-2026. The buyer will be VeloBank, which is not listed on the Warsaw Stock Exchange.

Alior Bank posted the weakest result among all lenders, with its net profit falling 15%. The reasons were clear: a decline in interest income and the largest increase in operating costs across the pack. We’ll address this issue later in the article.

Interest rates: growth is no longer accelerating

Banks are now starting to feel the impact of falling interest rates. In 2025, the National Bank of Poland (NBP) cut its reference rate five times, bringing it down to 4.25%. As a result, growth in interest income is gradually slowing.

In Q3, the banks in our analysis generated PLN 22.2 billion (EUR 5.24bn) in interest income – just 0.5% more than a year earlier and 0.6% less than in the previous quarter. By comparison, only one quarter ago, year-on-year growth in interest income was still firmly in double digits (+11.7%).

Only four of the banks in our analysis managed to increase their interest income. PKO BP delivered the strongest result, raising its interest income by 5.8% to PLN 5.73 billion (EUR 1.35bn). Like its competitors, the bank saw a decline in its interest margin (the ratio of interest income to interest-earning assets), but the drop was relatively modest at 0.09 percentage points.

Bank Pekao proved more resilient to falling rates, with a slightly larger margin decline of 0.19 percentage points. Despite this, it still increased its interest income by 5.3% - the second-best result after PKO BP.

At PKO BP, the rise in interest income was driven primarily by asset growth. During the period under review, the bank’s retail loan portfolio expanded by 11.7%, reaching PLN 205 billion (EUR 48.3bn). Sales rose by 44%, allowing PKO BP to increase its market share over the year. The bank regained as much as 1.5 percentage points in the cash-loan segment and now holds 20.6% of that market.

At the other end of the spectrum were BOŚ (-11.2%) and BNP Paribas (-7.7%). At BOŚ, the net interest margin contracted by nearly 1 percentage point to 3.18%, now the second-lowest among the banks in our review (only ING reports a lower margin). The bank notes that, in cumulative terms, its interest costs have remained almost flat – the problem lies in a sharp drop in interest income. Quarter by quarter, BOŚ saw a noticeable increase in term deposits, while its loan portfolio grew only slightly.

At BNP Paribas, the margin also narrowed significantly – by more than 0.5 percentage points. Here, too, weak loan growth played a role: the portfolio grew by just 2.5%. In contrast, customer deposits rose by 5.9% over the same period, more than doubling the pace of lending.

Fee income: growth resumes, mBank leading the pack

Banks continued pushing to boost fee and commission income – their second-largest revenue source after interest – in Q3. The analyzed institutions reported PLN 4.88 billion (EUR 1.15bn) from this business line, up 5% year-over-year (and 1% quarter-over-quarter). Nearly all banks posted gains, with one exception.

mBank was the standout performer, with commission income surging 16.2% year-over-year to PLN 580.2 million (EUR 136.9m). The bank attributes this to a transaction settlement with Mastercard that boosted results by PLN 41.6 million (EUR 9.83m). This marks another quarter of one-off settlements – in Q2, the bank recorded PLN 43 million (EUR 10.15m) in extraordinary revenue from settling its partnership with insurer Uniqa. On an annual basis, the bank saw an 18% increase in insurance sales revenue and a 22% jump in brokerage income. Payment card fees remained the largest component.

At the opposite end was BNP Paribas, whose commission income fell 7.1% to PLN 289 million (EUR 68.2m). This stemmed from an almost 11% decline in revenue from accounts and settlement operations, driven partly by lower fees for retail and SME accounts. Insurance sales revenue contracted even more sharply – down 27% – primarily due to mortgage insurance, the bank acknowledges.

Costs: Rising across nearly all banks

Polish banks are grappling with a substantial cost surge that far outpaces market inflation (2.9% in September). In Q3, they collectively spent PLN 9 billion (EUR 2.12bn) – up 8.6% year-over-year and 1% quarter-over-quarter. Nearly all banks saw cost increases, with half experiencing double-digit annual growth.

Alior Bank saw the sharpest increase – up 19.5%. The lender attributes this primarily to higher contributions to the Bank Guarantee Fund (BFG). After a two-year hiatus, banks resumed paying into the guarantee fund in 2025 – adding nearly PLN 900 million (EUR 212.4m) in sector-wide contributions. Alior notes that excluding this effect, expenses would have risen just 7%. The bank also changed its provisioning methodology for incurred costs to distribute them more evenly.

Citi Handlowy was the only bank to post a cost decline, partly reflecting a shift in its operating model. Banking and regulatory supervision costs fell 82%, property rental and maintenance expenses dropped 26%, and advertising and marketing costs declined 12.2%. Among major banks, Santander stood out with costs rising just 3.5%. Employee expenses increased only 1.5%, mainly due to virtually flat salaries. The bank reported 125 job cuts over the year – representing 1.1% of its workforce (currently 11,270 employees).

Credit risk: Write-offs decline slightly year-over-year

The ten analyzed banks set aside PLN 1.48 billion (EUR 349.3m) in provisions for borrower default risk -down 6.8% year-over-year, but up 50% from the previous quarter. On an annual basis, six banks saw improvement, but comparing to Q2, only three show gains.

As with previous metrics, we’ll focus primarily on year-over-year comparisons. Among major banks, ING performs best – though there’s a base effect at work. A year ago, the bank created PLN 348 million (EUR 82.1m) in provisions, mainly for corporate financing. This quarter, it again created most write-offs in that segment (PLN 200 million of PLN 251 million total), with the provision-to-portfolio ratio reaching 0.57%. PKO BP and BNP Paribas share the lowest ratio at 0.28% each.

At the opposite end is Bank Pekao, whose write-offs rose 21% to PLN 240 million (EUR 56.5m) (exceeded only by ING). The bank attributes this to a “moderate increase in losses” and provisions tied to financing one capital group (which it doesn’t name). Alior Bank continues to have the highest risk costs at 0.72%. The bank has been steadily reducing its non-performing loan ratio for years – currently at 6.3%. Only BOŚ has a higher ratio (14.6%), and reducing it remains one of its core strategic objectives.

Legal risk: Provisions shrink by one-fifth

Unlike credit risk, banks have seen significant improvement in legal risk – down 39% quarter-over-quarter and 20.6% year-over-year. Total reserves for this category stand at nearly PLN 2.3 billion (EUR 543m) across the analyzed banks. Five of the eight banks that disclose provisions (ING created none; Citi's portfolio is too small to report) posted improvements. At BNP Paribas, provisions plummeted 77% year-over-year to PLN 65 million (EUR 15.3m). Alior was at the bottom, with provisions more than doubling to PLN 41.4 million (EUR 9.77m).

Banks continued efforts to resolve the Swiss franc mortgage saga. Last year, they made 38,700 additional settlements, bringing the total to 151,200. Simultaneously, they resolved 18,100 active Swiss franc lawsuits (through customer settlements or court rulings). Currently, 97,200 cases are pending in courts against the nine analyzed banks (separate data for Santander and Santander Consumer Bank), initiated by borrowers with Swiss franc-denominated debt.

In terms of settlements concluded, PKO BP leads with 13,600 signed over the year – now totaling 57,000. mBank follows closely, having signed 11,200 customer settlements during this period. mBank is also reducing its court caseload fastest, with a 12,100-case decline in Swiss franc-related lawsuits over the year. In Q3 alone, mBank received 613 new borrower lawsuits – more than half fewer than a year ago and 15% fewer than the previous quarter.

Despite falling interest rates, the net profit of ten banks listed on the Warsaw Stock Exchange continues to grow robustly — up 7.2% year-on-year and 13.8% quarter-on-quarter. Millennium and mBank are the top performers. Both banks are benefiting from lower provisions for legal risks related to Swiss franc-denominated loans compared to last year. Santander, Citi Handlowy, and Alior are underperforming relative to last year. The first two are slated for ownership changes.
Interest income at the six banks surveyed has begun to decline as their net interest margins compress while loan portfolios grow more slowly than customer deposits. The two largest lenders, PKO BP and Pekao, remain relatively resilient to interest rate fluctuations. Their margins are declining only marginally, while their loan portfolios continue to expand significantly.
Banks are benefiting from lower credit risk provisions, though results show considerable volatility from quarter to quarter. Eight banks report that their non-performing loan ratios have decreased compared to a year ago. Alior has achieved significant improvement, while BOŚ faces the most serious NPL challenges—with overdue receivables reaching 14.6% of total customer loans.