Polish Banks Are Losing Profit to the Tax Office, Not to the Market

The fall in Polish bank profits is fiscal, not commercial. Bank Pekao reported on 29 October quarterly net profit of PLN 1.516bn, down 20.4% year on year but about 3% above consensus 1. The bank attributes the decline to the corporate income tax rise from 19% to 30% in 2026, lower interest rates and higher contributions to the bank guarantee fund 1. Over nine months, it puts the negative year-on-year impact of the tax changes on its profit at more than PLN 0.7bn 6. In our view, the franchise holds: it is the state that takes the cut.

The operating lines confirm it. Net interest income rose 2.8% year on year in the third quarter to PLN 3.525bn despite monetary easing 1. Over nine months, it is still down 1.5% 6. Fee income jumped 11.2% 1. Adjusted for the tax change, nine-month return on equity would reach 19.4%, against 16.8% reported 1. mBank reported on 28 October the highest quarterly profit in its history, at PLN 1.085bn 2.

The market did hesitate. On 22 October the WIG-BANKI index fell 3.0%, against 1.73% for the WIG20, in a broad sell-off: the Warsaw market was pulling back from the previous day's record highs, while Europe's main markets also fell 37. It has since recovered: on 6 November it stood 6% above its 23 October closing low 7. The counter-argument deserves attention: Pekao's cost of risk rose to 0.61% of loans in the third quarter, and provisions were up 38.3% year on year, driven by two corporate clients 1. But these charges remain targeted, and the bank's end-2027 target (0.65-0.75%) already builds in a normalisation of risk 1.

The bottom line

Polish banks are absorbing a lasting but declining tax shock, not an erosion of their franchise. According to the Finance Ministry, the rise meets budget needs linked to defence and healthcare 5. The tax rate, at 30% in 2026, falls to 26% in 2027 and 23% from 2028, a level that stays above the previous 19% 4. In our view, once the shock is absorbed, comparison bases will be more favourable from 2027: revenue growth will once again show through to profit. Warsaw's bank stocks should therefore be read before tax.

What to watch: quarterly results from the other large Polish banks, fee and net interest income momentum as the central bank's rate path evolves, and the gap between cost of risk and Pekao's 2027 target.