Against the backdrop of a downward interest rate cycle, the profitability of the Polish banking sector is under pressure, with Handlowy Bank's 2025 performance reflecting a typical trend.
The bank's annual net profit fell by 5% to 1.67 billion zloty, mainly due to the contraction of net interest income. As the Polish central bank reduced rates by a total of 200 basis points over the past year, the bank margin narrowed significantly, directly impacting profitability.
The business structure adjustment also affected short-term performance. Handlowy Bank completed its strategic transformation into an institutional banking business, selling its retail business to VeloBank, and confirmed a one-time loss of approximately 380 million zloty in the second quarter.
Meanwhile, non-interest income became an important support, with fee and commission income increasing by 7% year-on-year, highlighting the rising importance of service-related income in a low-interest-rate environment.
On the regulatory front, the Polish financial regulatory authority has confirmed that the bank possesses a high ability to distribute dividends, with up to 75% of profits available for distribution, which somewhat alleviates investor concerns over declining profits.
