Mobile Solutions Will Grow Market In Poland Despite Margin Risks

Key Takeaways

• Heavy digital investment and improved asset quality position the bank for accelerated customer growth, higher revenue, and stronger long-term returns.
  
• Expansion in retail and SME segments, supported by economic trends and robust capital, enables scalable growth and more stable income streams.
  
• Shifting loan structures, regulatory pressures, lagging corporate growth, greater competition, and elevated credit risks threaten Alior Bank's revenue, margins, and long-term profitability.

Catalysts

Provides various banking products and services for individuals, businesses, and enterprises in Poland.

• The bank's significant investment in digital solutions and mobile platforms has resulted in a double-digit increase in app users and mobile-driven customer engagement, positioning Alior to capture further customer acquisition and higher transaction volumes as digital adoption accelerates in Poland and CEE-likely supporting long-term revenue and fee growth.
  
• Rapid growth in Poland's middle class, rising financial literacy, and increased trust in digital financial services are expanding the addressable market for Alior's retail products and mortgage loans, as evidenced by strong growth in both segments, which should underpin sustained loan and commission income expansion.
  
• Consistent reductions in non-performing loans (NPL ratio declining toward a sub-5% strategic target) combined with disciplined cost-of-risk management and ongoing improvements to asset quality should drive higher net earnings and support a structurally improved return on equity profile.
  
• The launch of new platforms for business (SME/micro) clients and specialization in high-growth leasing niches (e.g., commercial vehicles) are expected to enable Alior to capture outsized market share in segments benefiting from technological and economic modernization, boosting future revenue and balancing fee-based income.
  
• Robust capital and liquidity buffer (Tier 1 and TCR well above regulatory minimums) provide Alior with the flexibility to scale the business-through organic growth or sector consolidation-which could magnify earnings as the sector digitalizes, and ultimately support higher, more reliable dividend payouts.

Alior Bank Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Alior Bank's revenue will grow by 4.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 42.0% today to 32.4% in 3 years time.
• Analysts expect earnings to reach PLN 2.1 billion (and earnings per share of PLN 16.16) by about August 2028, down from PLN 2.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.7x on those 2028 earnings, up from 6.2x today. This future PE is greater than the current PE for the GB Banks industry at 9.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.63%, as per the Simply Wall St company report.

Alior Bank Future Earnings Per Share Growth

Risks

• The rapid shift to fixed-rate and lower-margin mortgage loans, while providing stability, is reducing the bank's net interest margin and interest income growth, making Alior Bank's revenue and profitability more sensitive to further interest rate declines and less able to benefit from future rate hikes.
  
• Increased regulatory risks, particularly from new consumer loan regulations and heightened legal provisions for foreign currency mortgage litigations, could drive up compliance costs and legal expenses, pressuring net margins and earnings.
  
• The stagnation in corporate loan portfolio growth, combined with Alior's strategic focus on micro and mid-sized enterprises rather than large corporates (the current sector growth driver), risks market share stagnation, limiting loan book expansion and long-term revenue growth.
  
• Intensifying competition in consumer finance from new entrants and changing market dynamics-such as end of aggressive deposit promotions and increasing customer price sensitivity-may lead to further outflow of deposits and loss of lending or fee income market share, constraining revenue growth.
  
• Persistent high cost of risk (even excluding one-off NPL sales) and a still elevated NPL ratio, especially in the corporate segment, expose Alior Bank to above-average credit loss risks during economic downturns, which could negatively impact future earnings and return on equity.

Valuation

• The analysts have a consensus price target of PLN128.529 for Alior Bank based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of PLN145.0, and the most bearish reporting a price target of just PLN109.7.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN6.5 billion, earnings will come to PLN2.1 billion, and it would be trading on a PE ratio of 10.7x, assuming you use a discount rate of 10.6%.
  
• Given the current share price of PLN114.0, the analyst price target of PLN128.53 is 11.3% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.