Erste Says Interest Income to Top €11 Billion After Poland Deal

Erste Group Bank AG said its net interest income may exceed analyst expectations this year after its €7 billion deal to enter the Polish market according to Bloomberg.

The Austrian lender expects net interest income (NII) to surpass €11 billion in 2026, exceeding the €10.6 billion average estimate in a Bloomberg survey. This is expected to help the bank absorb one-off costs from consolidating Banco Santander SA's Polish businesses.

Erste proposed a dividend payment of €0.75 per share on 2025 results, slightly below analyst estimates and the long-term payout target. The bank withheld shareholder payments to fund the Polish acquisition.

Why Did This Happen?

The Polish deal is the largest in Erste Group's history and positions the bank as the region's largest lender. The acquisition allows Erste to enter the largest market in the east of the European Union and anchor its market position.

Chief Executive Officer Peter Bosek emphasized the need for focused integration as the bank of this size requires significant attention and resources.

How Did Markets React?

Analysts at KBW noted that good cost control and a revenue beat leave the bank well-placed to absorb Santander Polska. Erste is rebranding the Polish unit of Santander after acquiring a controlling 49% stake in January.

Net fee and commission income in 2026 is expected to be around €4 billion, aligning with analyst expectations. The bank also expects a 2026 return on tangible equity of about 19% and an increase in earnings per share of more than 20%.

What Are Analysts Watching Next?

Operating performance is expected to improve as net interest income is projected to grow by about 5%. Fee and commission income is expected to continue growing by more than 5%, while operating expenses are projected to grow by around 3%.

The cost/income ratio is expected to improve from about 48% in 2025 to about 47% in 2026. Other operating result is expected to normalize following several positive one-offs in 2025 and align with the amount of banking levies.

Risk costs are expected to remain at a benign level of 20-25 basis points, similar to 2025. However, risk costs in Poland are somewhat higher than in other CEE markets.

Reported net profit for Erste Group is forecast to be somewhat below €4 billion, while net profit adjusted for extraordinary items related to the acquisition is projected at somewhat above €4 billion.

Erste Group aims for a smooth integration of the Polish bank and plans to rebrand it as "Erste Bank Polska" in the second quarter of 2026. The first-time consolidation of the Polish bank will occur in conjunction with the first-quarter 2026 results.

The bank's management will propose a reduced dividend payment of €0.75 per share to the annual general meeting. This corresponds to a payout ratio from 2025 net profit after deduction of AT1-dividends of 9.1%.

The bank's full internal funding of the acquisition in Poland required higher profit retention in 2025. This aligns with the 2025 dividend policy of limiting the payout ratio to 10%.

The CET1 ratio increased significantly to 19.3%, providing a solid capital base for the Polish acquisition. CFO Stefan Dörfler emphasized the strengthening of the capital base and the continued strong CET1 ratio even after the Polish acquisition.

Erste Group expects the loan volume of the group including Poland to surpass €285 billion. The bank aims to leverage the Polish market's growth opportunities and expand its customer base.

The bank's goal for 2026 includes a return on tangible equity of about 19% and an increase in earnings per share of more than 20%. The bank's performance in 2025 was driven by continued growth in the customer business and one-off effects.

Customer loans increased by 6.4% year-on-year to €232.0 billion in 2025. Deposits also rose by 4.7% to €253.0 billion. Net interest income increased to €7.8 billion.

Net fee and commission income increased by 8.6% to €3.2 billion in 2025. The launch of George Invest in Austria and the Czech Republic contributed to the growth in securities transactions.

Operating income increased by 4.3% to €11.7 billion in 2025. Operating expenses rose by 5.8% to €5.6 billion, driven by higher personnel and IT expenses.

Total risk costs increased to €478 million in 2025. The burden from banking levies rose by 52.0% to €372 million.

The other operating result improved to -€158 million in 2025. Taxes on income amounted to €1.1 billion. Erste Group generated a net result of €3.5 billion.

The bank's performance in 2025 demonstrated the strength of its region. The CEE region grew on average at roughly double the GDP growth rate of the eurozone.