GDANSK, Poland, Feb 19 (Reuters) - Bank Pekao beat fourth-quarter profit expectations on Thursday, as fee income grew in a double-digit percentage and offset a drop in net interest margin, lifting the shares of Poland's second-biggest lender by around 1%.
Pekao's net interest income fell 1.7% to 3.40 billion zlotys ($948.2 million) amid lower borrowing costs, while net fee and commission income jumped 14.6% to 890 million zlotys, helping cushion the pressure on yields.
Polish banks had benefited from high interest rates since autumn 2023, but the central bank's six rate cuts last year, which lowered borrowing costs to 4%, are starting to squeeze net interest margins after years of record earnings in the sector.
Pekao CEO Cezary Stypulkowski told a press conference that Polish lenders could face additional pressure from foreign competitors who, in an environment of low interest rates, might intensify their push in corporate lending.
"We are unable to compete at a certain margin level and a certain interest-rate level with a shortfall of 44 basis points. This is a structural problem arising from the design of the tax system in Poland," Stypulkowski said.
Poland's bank tax, introduced in 2016, levies an annual 0.44% charge on lenders' adjusted assets, excluding own funds and treasury bonds.
Moreover, Polish banks face growing tax pressures after President Karol Nawrocki signed a bill in November raising their income tax rate from 19% to 30% in 2026 to support the country's higher defence spending.
Pekao's net profit rose to 1.82 billion zlotys in the fourth quarter, beating the 1.66 billion zlotys analysts had expected on average. For the whole 2025, it reported a profit of 7 billion zlotys, its highest ever.
"We are aiming to be like a postman and to deliver dividends regularly, and it seems that this year's dividend will ... fall within the range indicated in our strategy," Stypulkowski said. For 2024, the bank had paid a dividend of 18.36 zlotys per share.
($1 = 3.5857 zlotys)
(Writing by Anna Jaworska-Guidotti; Additional reporting by Adrianna Ebert; Editing by Milla Nissi-Prussak)
By Rafal Wojciech Nowak
