Thirty-One Percent Cost-to-IncomeNarrow moat

PKO Bank Polski (PKO) — moat facet

31,1 percent is among the best efficiency ratios in European banking, and about half of it is the interest rate.

PKO's cost-to-income ratio was 31,1% in 2025, against 29,5% in 2024, 31,6% in 2023, 45,0% in 2022 and 40,4% in 20211.

Cost-to-income ratio40,4%202145,0%202238,1%202332,6%202431,1%202531,4%H1 2026Among the best in European banking - and it has stopped improving
Half of the improvement came from an income line the reference rate lifted. The ratio turned in the first half of 2026, and costs were not the reason.

The five-year arc is mostly the interest margin rather than cost control: income rose because rates rose, and the ratio fell because the denominator grew. The 2022 figure of 45,0% is what this bank looks like when the margin is 3,79% instead of 4,76%2.

The costs themselves have been well managed. Employees went from 25 657 to 26 252 and branches from 975 to 947 across the same five years3, while customers rose 12% and financing 28%.

But the drift has started. Administrative expenses rose 11,2% in 2025 against income growth of 5,6%4, taking the ratio from 29,5% to 31,1%, and the first half of 2026 shows 31,4% against 29,8%5. Polish wage inflation is the main cause, and it is the same force compressing margins at every company in this collection with a large domestic workforce.

The comparison worth making is with what the ratio was before rates rose. At 40,4% in 20216, on an interest margin of 2,70%7, PKO was an ordinary European bank by efficiency. Everything between then and now was earned in an unusually favourable rate environment, and the reference rate is on its way back down.

The measure is the ratio through the rate cycle. Holding near 31% while the interest margin falls from 4,76% would be a genuine efficiency result. Following the margin upward toward 40% would show that the 2024 figure was a rates artefact.

Moat trajectory: Narrowing

31,1% in 2025 and 31,4% in the first half of 2026. The ratio has stopped improving, and the reason is that the income side stopped helping.

The number that tests this moat
Reported
Cost-to-income ratio
31,1%, and 31,4% in H1 2026

Among the best efficiency ratios in European banking, and roughly half of it is the reference rate rather than anything PKO did. The ratio has already stopped improving. Watch it against the interest margin: if costs hold while the margin falls, the number goes the wrong way through no fault of management.

Source: PKO Bank Polski S.A. Group Directors' Report for 2025 ↗
⚠ Threats to the moat
⚠ THREAT 01
Polish Wages Rise Whether Income Does or Not
Costs are indexed to Polish wage growth; income is indexed to the reference rate, and the two do not move together.
References
  1. ReportedPKO's cost-to-income ratio was 31,1% in 2025, against 29,5% in 2024, 31,6% in 2023, 45,0% in 2022 and 40,4% in 2021.
    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. ReportedThe 2022 figure of 45,0% is what this bank looks like when the margin is 3,79% instead of 4,76%.
    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. ReportedEmployees went from 25 657 to 26 252 and branches from 975 to 947 across the same five years, while customers rose 12% and financing 28%.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the customer base (12 460 thousand customers against 11 120 thousand five years earlier, 9 764 thousand current accounts, and more than 8,7 million active installations of the IKO mobile application) — FY2021-FY2025 · publ. 12 March 2026 · source ↗
  4. ReportedAdministrative expenses rose 11,2% in 2025 against income growth of 5,6%, taking the ratio from 29,5% to 31,1%, and the first half of 2026 shows 31,4% against 29,8%.
    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. ReportedAdministrative expenses rose 11,2% in 2025 against income growth of 5,6%, taking the ratio from 29,5% to 31,1%, and the first half of 2026 shows 31,4% against 29,8%.
    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. ReportedAt 40,4% in 2021, on an interest margin of 2,70%, PKO was an ordinary European bank by efficiency.
    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 ↗
  7. ReportedAt 40,4% in 2021, on an interest margin of 2,70%, PKO was an ordinary European bank by efficiency.
    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 ↗
Sources
Generated September 24, 2026