mBank SA Earnings Call: Record Year, Tougher Outlook

mBank SA ((PL:MBK)) has held its Q4 earnings call. Read on for the main highlights of the call.

mBank SA’s latest earnings call painted a picture of a bank in peak form but preparing for leaner times ahead. Management highlighted record profit, double‑digit growth in loans and deposits, and a sharply reduced FX mortgage overhang, while acknowledging pressure from lower interest rates, rising costs and regulatory changes that could weigh on 2026 earnings.

Record Profitability and Standout Returns

mBank reported the best year in its history, with 2025 net profit reaching PLN 3.5 billion and profit before tax topping PLN 5 billion. Total revenue came in around PLN 12.4–12.5 billion, driving a return on tangible equity of 20.8% and ROE of 17.9%, while the core business excluding FX mortgages delivered an exceptional 37.2% ROTE.

Loan Growth and Market Share Gains

mBank used the favorable backdrop to expand volumes and win share across key retail segments. Loans grew by roughly 10% year on year, with core retail lending excluding FX mortgages up more than 13%, while deposits climbed 14% to PLN 229 billion as household and mortgage market shares ticked higher.

Record Sales Across Mortgage and Corporate Lending

Sales momentum was particularly strong in mortgages and corporate loans, underscoring robust client demand. New zloty mortgage production surged 38% year on year to a record PLN 14.7 billion, while non‑mortgage retail loans rose about 21% and corporate lending volumes jumped 23% to PLN 49 billion on the back of structured and renewable finance.

Capital Strength Bolstered by Issuance and Securitizations

The bank reinforced its balance sheet, lifting own funds by about 19% to PLN 20.7 billion and executing a EUR 400 million Tier 2 deal alongside synthetic securitizations. As a result, the total capital ratio stood at 16.3%, with a comfortable CET1 buffer of roughly 4.7 percentage points above regulatory minimums, giving management room to pursue growth.

FX Mortgage Legal Risk Sharply Reduced

Management stressed major progress in tackling the legacy Swiss franc mortgage issue, which has weighed on the sector for years. Settlements rose about 31% to over 32,000, pending court cases dropped roughly 63% to below 6,000, and FX legal provisions were cut to PLN 2 billion, less than half the prior year, with Q4 charges also trending lower.

Digital Innovation and Customer Experience

mBank continued to lean into its digital identity to drive growth and engagement across its client base. The bank launched an end‑to‑end digital mortgage process in its mobile app, delivering credit decisions in about 15 minutes, and introduced a smart payment ring in partnership with technology and card providers to boost transaction volumes and attract new users.

Efficiency Remains High Despite Heavy Investment

Even as mBank stepped up spending on people, technology and strategic initiatives, cost discipline remained a standout feature of the story. The full‑year cost‑to‑income ratio was just 31%, well below the 35% strategic ceiling, and the Q4 ratio of 33.1% suggested the bank is managing seasonal and investment‑driven cost pressures without sacrificing profitability.

Stable Deposits and Low‑Cost Funding Base

A growing and sticky deposit franchise underpins the bank’s loan growth and margin resilience in a shifting rate environment. Total deposits hit PLN 229 billion, up 14% year on year, with current and savings accounts rising about 20%, while corporate deposits nearly grew 10%, supporting a corporate deposit share around the 10.3% strategic mark.

NIM Compression from Rate Cuts

The main earnings drag is now coming from monetary easing, which is eroding net interest margins after an earlier boom. The full‑year NIM slipped around 30 basis points to 4.05%, and Q4 NIM fell further to 3.74%, with management warning that 2026 revenues are likely to be slightly below 2025 as cumulative rate cuts of 175 basis points ripple through.

Rising Operating Costs Across the Board

Operating expenses marched higher as the bank invested for growth and absorbed regulatory levies, adding a second area of pressure. Total costs rose roughly 13%, with personnel spending up 10% due to higher headcount and wages, other administrative expenses climbing about 11%, and a near‑doubling in contributions to the bank guarantee fund.

Weak Trading and Other Income

Below the strong core banking performance, market‑related lines proved a drag on the income statement and complicated comparisons with the prior year. Net trading and other income tumbled around 60%, hit by hedge accounting losses, weaker equity results and an accounting reclassification of FX swap negative points of roughly PLN 190 million.

Higher Provisions but Risk Metrics Remain Solid

Credit costs are normalizing from very low levels as loan books grow and a few corporate names stumble, though still remain within strategic comfort zones. Loan loss provisions jumped nearly 30% for the year and 25% quarter on quarter in Q4, pushing cost of risk up by 58 basis points but keeping it below the 80 basis point target, with the NPL ratio at 3.5%.

Non‑Core Losses and Legacy FX Impact Persist

The clean‑up of non‑core and FX portfolios is progressing, yet it still weighs meaningfully on the bottom line and investor perception. Losses in non‑core segments narrowed from PLN 3.4 billion to PLN 2 billion, and while cumulative FX‑related legal costs since 2018 reached PLN 18.6 billion, remaining provisions of PLN 2 billion still represent a sizable legacy charge.

Regulatory and RWA Developments Affect Capital

Regulatory models and risk‑weight assumptions are adding volatility to capital ratios, even as headline buffers look solid for now. An operational risk recalculation boosted CET1 by around PLN 0.6 billion, but the upcoming change to the definition‑of‑default model could lift risk‑weighted assets by up to roughly 5%, potentially squeezing capital metrics in 2026.

Stage 2 Migration and Sector‑Specific Defaults

mBank also called out increased vigilance on credit quality in selected sectors, reflecting stricter risk assessments rather than broad portfolio stress. A climate‑related collective staging move shifted about PLN 4 billion of exposure into Stage 2, while isolated defaults in household appliances, real estate and energy segments have prompted closer monitoring of near‑term credit risk.

Guidance Points to Revenue Normalization

Looking ahead to 2026, management expects a softer top line in a lower‑rate world but sees the earnings drag as manageable. Revenues should edge down slightly versus 2025, while fees remain resilient, costs continue to rise but keep the cost‑to‑income ratio below 35%, and FX‑mortgage legal expenses decline sharply, enabling volume‑driven market‑share gains despite interest‑rate sensitivity.

mBank exits a record year with strong capital, healthy growth and a shrinking legal overhang, yet investors should brace for a more challenging earnings backdrop as rates fall and costs climb. The bank’s ability to maintain efficiency, grow volumes and contain legacy risks will be central to sustaining attractive returns as 2026 brings revenue normalization rather than another record year.