⚠ The Efficiency Ratio Was Flattered by RatesHigh threat

PKO Bank Polski (PKO) — threat to the moat

A cost-to-income ratio improves automatically when income rises for reasons the bank did not cause.

PKO's cost-to-income ratio fell from 45,0% in 2022 to 29,5% in 20241, and very little of that was cost reduction.

Cost-to-income against net interest margin40,4%202145,0%202238,1%202332,6%202431,1%2025The ratio fell as the margin rose from 2,70% to 4,76% - the same event, seen twice
An efficiency ratio improves automatically when income rises for reasons the bank did not cause. Read it against the margin, or not at all.

Over the same period the interest margin went from 3,79% to 4,80%2 as the National Bank of Poland raised rates. Income rose because money became expensive; the cost base did what cost bases do, which is rise slowly. A ratio improving because its denominator is inflating is not an efficiency gain, and it reverses on the same mechanism.

The reversal has begun. The ratio was 31,1% in 2025 and 31,4% in the first half of 2026 against 29,8% a year earlier3, with the margin down 44 basis points4 and administrative expenses up 11,2%5.

The underlying discipline is genuine — 2,3% headcount growth over five years against a 39% larger balance sheet6 — so this is not a bank that has lost control of its costs.

The number that tests it is where the ratio settles when the reference rate reaches the roughly 3% that PKO's own 2027 strategy assumes7. If it holds near a third, the efficiency is structural. If it returns toward 40%, the last three years were a rate cycle wearing an efficiency ratio's clothes.

References
  1. ReportedPKO's cost-to-income ratio fell from 45,0% in 2022 to 29,5% in 2024, and very little of that was cost reduction.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the efficiency and quality ratios (return on equity of 19,5%, return on assets of 1,9%, a cost-to-income ratio of 31,1%, net interest margin of 4,76%, cost of credit risk of 0,30% and impaired exposures at 3,34% of the portfolio) — FY2025 · publ. 12 March 2026 · source ↗
  2. ReportedOver the same period the interest margin went from 3,79% to 4,80% as the National Bank of Poland raised rates.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the efficiency and quality ratios (return on equity of 19,5%, return on assets of 1,9%, a cost-to-income ratio of 31,1%, net interest margin of 4,76%, cost of credit risk of 0,30% and impaired exposures at 3,34% of the portfolio) — FY2025 · publ. 12 March 2026 · source ↗
  3. ReportedThe ratio was 31,1% in 2025 and 31,4% in the first half of 2026 against 29,8% a year earlier, with the margin down 44 basis points and administrative expenses up 11,2%.
    PKO Bank Polski S.A. Group Directors' Report for the six months ended 30 June 2026, published with reviewed financial statements (profit before tax of 8 319m złoty up 19,9%, income tax of 3 029m up 67,4%, net profit of 5 290m up 3,1%, return on equity of 19,3%, cost-to-income of 31,4%, interest margin of 4,47% against 4,91%, cost of risk of 0,29%, total assets past 608 448m, 12,6 million customers, common equity tier 1 of 15,55%, and a further 685m złoty of convertible-currency legal risk) — H1 2026 · publ. 13 August 2026 · source ↗
  4. ReportedThe ratio was 31,1% in 2025 and 31,4% in the first half of 2026 against 29,8% a year earlier, with the margin down 44 basis points and administrative expenses up 11,2%.
    PKO Bank Polski S.A. Group Directors' Report for the six months ended 30 June 2026, published with reviewed financial statements (profit before tax of 8 319m złoty up 19,9%, income tax of 3 029m up 67,4%, net profit of 5 290m up 3,1%, return on equity of 19,3%, cost-to-income of 31,4%, interest margin of 4,47% against 4,91%, cost of risk of 0,29%, total assets past 608 448m, 12,6 million customers, common equity tier 1 of 15,55%, and a further 685m złoty of convertible-currency legal risk) — H1 2026 · publ. 13 August 2026 · source ↗
  5. ReportedThe ratio was 31,1% in 2025 and 31,4% in the first half of 2026 against 29,8% a year earlier, with the margin down 44 basis points and administrative expenses up 11,2%.
    PKO Bank Polski S.A. Group Directors' Report for the six months ended 30 June 2026, published with reviewed financial statements (profit before tax of 8 319m złoty up 19,9%, income tax of 3 029m up 67,4%, net profit of 5 290m up 3,1%, return on equity of 19,3%, cost-to-income of 31,4%, interest margin of 4,47% against 4,91%, cost of risk of 0,29%, total assets past 608 448m, 12,6 million customers, common equity tier 1 of 15,55%, and a further 685m złoty of convertible-currency legal risk) — H1 2026 · publ. 13 August 2026 · source ↗
  6. ReportedThe underlying discipline is genuine — 2,3% headcount growth over five years against a 39% larger balance sheet — so this is not a bank that has lost control of its costs.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the balance sheet (total assets of 583 079m złoty against 418 086m in 2021, amounts due to customers of 460 722m, financing granted to customers of 315 953m, and total equity of 58 503m) — FY2025 · publ. 12 March 2026 · source ↗
  7. ReportedThe number that tests it is where the ratio settles when the reference rate reaches the roughly 3% that PKO's own 2027 strategy assumes.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - strategy and ecosystems (the 2025-2027 targets of a return on equity above 18% in 2027 assuming a reference rate near 3% and a market share above 20% in banking financing and in financing Poland's energy transition, the Partnership with Allegro described as the Bank's first ecosystem with Allegro Klik and Allegro Kapital, and Automarket.pl as the second with vehicle sales up 60%) — FY2025 · publ. 12 March 2026 · source ↗
Sources
Generated September 24, 2026