Goldman Sachs reiterates Buy on PKO Bank Polski and raises the target price to PLN122

Overview

This is a Goldman Sachs company research and rating adjustment report on PKO Bank Polski. The report reiterates its Buy rating and raises the 12-month target price to PLN122. The core view is that, despite a more balanced near-term risk/reward profile, PKO BP remains one of Goldman Sachs' preferred CEEMEA banks, benefiting from Poland's economic resilience, EU fund inflows, expanding loan demand, non-interest-income transformation, relief from legacy CHF mortgage risks and capital return capacity.

Core views

Goldman Sachs believes PKO BP's valuation premium is fundamentally supported. Its deposit-funded defensive balance sheet, limited Middle East exposure, approximately 20% ROE, approximately 14% net profit CAGR and stable dividend return constitute sources of medium-term alpha. The report expects stronger upside through 2027-2028E, driven by resilient NII during the rate-cutting cycle, approximately 10% CAGR in retail and corporate lending, high-margin corporate credit supported by EU funds, positive operating leverage after 2027, CHF legacy provisions nearing completion and easing tax pressure after 2026.

Analysis framework

The report combines earnings forecasts, consensus comparisons, a ROE/COE framework, P/TB and P/B valuation, regional bank peer comparisons, macro funding-flow analysis and capital adequacy scenario assessment. Goldman Sachs switches its valuation methodology from a 2027E target P/E multiple to P/TB, consistent with its CEEMEA bank coverage, using a target P/TB of 2.4x and an implied P/B of 2.2x.

Methodology notes

• Valuation methodsROTE/COE-based P/TB valuation

  Deriving the target P/TB multiple from ROTE, cost of equity and terminal growth

  The report derives a 2.4x target P/TB from 2027E ROTE of 22.5%, CoE of 11.5% and terminal growth of 3%, resulting in a PLN122 target price.

• earnings_forecastGS estimates vs Visible Alpha consensus

  Comparison of Goldman Sachs forecasts with Visible Alpha consensus

  Goldman Sachs' 2026-2028 earnings forecasts are on average approximately 4% above VA consensus, mainly due to differences in assumptions for core revenue, fee income, cost of risk and tax normalization.

• bank_profitabilityROE and positive jaws analysis

  ROE, revenue growth and the revenue-expense growth gap

  The report emphasizes that loan growth, higher fee income and improved cost efficiency will drive positive operating leverage after 2027 and sustain approximately 20% ROE.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PKO Bank Polski (PKO.WA)

  Core recommended investment; Goldman Sachs reiterates Buy and raises the target price

  Strengths

  Deposit-funded defensive balance sheet, leading position in Poland, approximately 20% ROE, 6%-7% dividend yield, EU funding-driven loan demand and strong capital adequacy.

  Weaknesses

  Near-term risk/reward is more balanced; the valuation premium has expanded, while the 2026 tax peak and regulatory capital buffer requirements create pressure.

  Comparison

  Versus CEEMEA and MSCI EM banks, PKO BP has a higher valuation but stronger earnings quality, capital returns and asset quality; its current relative valuation premium remains below some historical averages.

  Risks

  NIM compression from falling interest rates, weaker-than-expected loan growth, changes in taxation or regulation, slower-than-expected resolution of CHF legacy risks, and geopolitical risks in Poland or the region.

• Polish banks

  Industry backdrop and macro-beneficiary segment

  Strengths

  Poland's GDP growth is stronger than that of CEE and the euro area; EU fund inflows improve bank liquidity and corporate credit demand, while the sector has high ROE and high LCR.

  Weaknesses

  Sector valuations have re-rated, regulatory capital buffers have increased, and investors remain sensitive to macroeconomic and geopolitical volatility.

  Comparison

  Compared with CEE/CEEMEA peers, Polish banks have limited direct exposure to the Middle East conflict and are viewed by some international investors as defensive emerging-market proxies.

  Risks

  The pace of EU fund disbursement, policy and tax changes, slower regional growth, and oil-price and inflation shocks.

Key data

• 12-month target pricePLN122.00Raised from PLN97.
• Current pricePLN107.68Price disclosed on the report cover.
• Expected upside13.3% price upside; 21%-22% total returnTotal return includes dividend yield.
• RatingBuyGoldman Sachs reiterates its Buy rating, which has been in place since 2024-07-18.
• 2026-2028E net profit CAGRc.14%Goldman Sachs forecast, approximately 4% above VA consensus.
• Average ROEc.20%Supports the valuation premium and capital return capacity.
• 2026/27E dividend yield6%-7%Expected payout ratio of approximately 65%.
• 2028E CET1 ratio15.8%Above the 12.5% regulatory requirement and 14% management target.
• Loan balance CAGRc.10%Driven by retail demand, corporate credit and EU fund inflows.
• 2028E cost-to-income ratio28%Below the 35% strategic ceiling.

Impact & implications

For investors, the report positions PKO BP as a high-quality vehicle for exposure to Poland's macro resilience, the EU funding cycle and the CEEMEA bank capital return theme. Although valuation has risen to approximately 2.0x 2027E P/BV and absolute cheapness has declined, Goldman Sachs believes its valuation premium versus CEEMEA and MSCI EM banks remains below historical norms. Further re-rating remains possible if the earnings gap widens, consensus upgrades continue and investor underweights are unwound.

Risks

• NII comes under pressure from rate normalization or NBP easing.
• EU fund inflows, corporate lending and retail loan demand fall short of expectations.
• The 2026 tax peak or the easing path for the asset bank tax is less favorable than expected.
• CRR3/CRD VI, CCyB or PFSA dividend rules result in lower-than-expected capital returns.
• The final resolution of legacy CHF mortgage risks takes longer than expected, extending legal provisioning pressure.
• The valuation premium has expanded; if earnings upgrades or the ROE gap fail to materialize, valuation could decline.
• Middle East- or Ukraine-related geopolitical risks or a slowdown in Poland's macro economy affect investor risk appetite.

What to watch

• Whether 2026-2028E loan growth approaches approximately 10% CAGR.
• NII resilience amid rate cuts and NIM normalization.
• Whether non-interest income and digital ecosystem fee income can offset NIM pressure.
• Whether positive operating leverage emerges after 2027 and the cost-to-income ratio improves toward 28%.
• Whether provisions for legacy CHF mortgages continue to decline.
• CET1, CCyB, PFSA dividend rules and the actual payout ratio.
• The pace of disbursement of Poland's EU Cohesion Policy, KPO, SAFE defense loans and CEF funds.
• Whether the underweight of Polish banks among EM/GEM active funds continues to normalize.