mBank, the Polish lender owned by Germany's Commerzbank, reported a 29.6% jump in third-quarter net profit, as robust loan growth and a sharp decline in Swiss franc mortgage-related legal costs helped offset a higher bank tax imposed by the Polish government.
The Warsaw-based bank said net profit reached 1.09 billion zlotys (about $270 million), roughly in line with analyst expectations. The result comes as Poland raised its bank levy to help fund increased defense spending, a move that has weighed on the country's banking sector.
Core lending business stays strong
Despite the tax headwind, mBank's core operations remained resilient. Net interest income—the difference between what a bank earns on loans and what it pays out to depositors—rose 6.5% to 2.67 billion zlotys. The bank attributed the growth to increased mortgage and corporate lending.
Gross loans expanded 18% from a year earlier, while deposits climbed 19%, indicating that more money was flowing into the bank as customers borrowed and saved more. This dual growth suggests healthy demand for credit and a solid deposit base, both positive signs for future earnings.
The drop in Swiss franc mortgage legal costs also played a key role. Many Polish borrowers took out mortgages in Swiss francs years ago, and when the franc surged, they faced much higher repayments. Courts have since ruled in favor of borrowers, forcing banks to set aside money for potential compensation. mBank has been dealing with these costs for years, but the latest quarter saw a significant reduction in new provisions.
Broader context: Polish banks under pressure
Poland's banking sector has been navigating a challenging environment. The government's decision to raise the bank tax—a levy on bank assets—was part of a broader effort to fund military spending amid regional security concerns. This has squeezed profitability across the industry, making it harder for banks to maintain margins.
At the same time, interest rates in Poland have been relatively high, which typically helps banks earn more on loans. However, the tax increase and ongoing legal costs from the Swiss franc mortgage saga have offset some of those gains.
mBank's performance stands out because it managed to grow its loan book and reduce legal costs simultaneously, even as the tax burden rose. This suggests the bank's underlying business is gaining momentum, which could be a positive signal for Commerzbank, its majority owner.
What it means for investors
For everyday investors, mBank's results offer a window into the health of Poland's banking sector and the broader Central European economy. Loan growth of 18% is a strong indicator that businesses and consumers are borrowing more, which often correlates with economic expansion.
The reduction in Swiss franc mortgage costs is also significant. It means the bank is putting a costly legal chapter behind it, freeing up capital that could be used for dividends, buybacks, or further lending. Investors in Commerzbank, which trades on the Frankfurt stock exchange, may see this as a positive development for the parent company's overall earnings.
However, the higher bank tax remains a drag. Poland's decision to raise the levy is part of a broader trend in Europe, where governments are looking for new revenue sources. Banks in other countries, such as Standard Chartered, have also faced regulatory and tax pressures, though their circumstances differ.
Investors should also note that mBank's profit was roughly in line with expectations, meaning the market had already priced in a strong quarter. The real question is whether the bank can sustain this momentum. Loan growth is likely to continue if the Polish economy remains resilient, but the tax burden and potential legal costs could resurface.
For those holding mBank or Commerzbank shares, the key metrics to watch are net interest income, loan growth, and any further developments in the Swiss franc mortgage cases. A continued decline in legal costs would be a clear positive, while any uptick in provisions could signal trouble.
As with any earnings report, it's important to look beyond the headline profit figure. mBank's underlying fundamentals—strong loan growth, rising deposits, and lower legal costs—paint a picture of a bank that is managing its challenges well. The higher tax is a headwind, but not one that appears to be derailing its progress.
In the broader context, mBank's results echo trends seen elsewhere in Europe, where banks are benefiting from higher interest rates and solid loan demand. UBS and Norwegian Air have also reported strong quarters, though in different sectors. The common thread is that companies with pricing power and operational efficiency are thriving even as costs rise.
For now, mBank's third-quarter performance is a reassuring sign for investors in Polish banking. The bank has shown it can grow its core business while managing legacy issues, and that is no small feat in today's environment.
