The Impaired Book Keeps ShrinkingNarrow moat

PKO Bank Polski (PKO) — moat facet

3,34 percent impaired and falling, in a market where the sector average is worse.

The share of impaired exposures fell to 3,34% at the end of 2025, from 3,59%, 3,44%, 3,79% and 3,98% in the preceding four years1.

Impaired exposures against a growing book3,34%Impaired share 2025+27,6%Financing growth 2025Quality improved while the portfolio grew more than a quarter - the harder of the two
Most banks improve the impaired ratio by lending less. PKO improved it while adding 68bn złoty of new loans.

That series matters more than the cost-of-risk line because it is a stock rather than a flow. Cost of risk describes what was charged this year; impaired exposures describe what is already sitting on the balance sheet, wrong. A bank can flatter the first for a while by releasing provisions; the second is harder to manage.

Both improving together, over five years, is the pattern of a loan book that is genuinely getting better rather than one being presented well. In the first half of 2026 the ratio was 3,43% against 3,52%2 — a small deterioration on the year-end figure, which is ordinary seasonality rather than a turn.

The absolute level is unremarkable by European standards and would be poor at a Nordic bank. Polish banks carry more impaired lending than western European peers, and PKO is no exception.

The capital carried against it has grown in step: own funds of 50 122 million złoty against 42 112 million in 20213, and a total capital ratio of 17,10%4. A bank whose impaired book shrinks while its capital grows is moving in the only two directions that matter at once.

Watch the two together. Cost of risk falling while impaired exposures rise is the configuration that says provisions are being released faster than the book is healing, and it is the standard way a bank's credit numbers look good for a year longer than they should.

Moat trajectory: Widening

3,34% impaired, down again, in a book that grew 27,6% to 315 953 million złoty. Growing the portfolio while improving its quality is the harder of the two.

The number that tests this moat
Reported
Share of impaired exposures
3,43% at June 2026, from 3,52% a year earlier

Falling year on year while the book grew; a rise above 3,5% with lending still growing fast would be the first sign the cheap risk is being spent.

Source: PKO Bank Polski S.A. Group Directors' Report for the six months ended 30 June 2026 ↗
⚠ Threats to the moat
⚠ THREAT 01
Three Point Four Percent Would Be Poor in Stockholm
The same ratio that looks excellent in Warsaw would be an embarrassment in Scandinavia.
References
  1. ReportedThe share of impaired exposures fell to 3,34% at the end of 2025, from 3,59%, 3,44%, 3,79% and 3,98% in the preceding four years.
    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. ReportedIn the first half of 2026 the ratio was 3,43% against 3,52% — a small deterioration on the year-end figure, which is ordinary seasonality rather than a turn.
    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 ↗
  3. ReportedThe capital carried against it has grown in step: own funds of 50 122 million złoty against 42 112 million in 2021, and a total capital ratio of 17,10%.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - capital, shareholders and levies (the State Treasury holding 367 918 980 shares or 29,43% of the capital and votes, Nationale Nederlanden at 7,32% and Allianz Polska at 6,01%, own funds of 50 122m złoty, a total capital ratio of 17,10%, the 75% dividend payout from the 2025 profit, and the 1 349m złoty tax on certain financial institutions) — FY2025 · publ. 12 March 2026 · source ↗
  4. ReportedThe capital carried against it has grown in step: own funds of 50 122 million złoty against 42 112 million in 2021, and a total capital ratio of 17,10%.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - capital, shareholders and levies (the State Treasury holding 367 918 980 shares or 29,43% of the capital and votes, Nationale Nederlanden at 7,32% and Allianz Polska at 6,01%, own funds of 50 122m złoty, a total capital ratio of 17,10%, the 75% dividend payout from the 2025 profit, and the 1 349m złoty tax on certain financial institutions) — FY2025 · publ. 12 March 2026 · source ↗
Sources
Generated September 24, 2026