Polish banks relaxed loan rules due to rate cuts in second quarter, boosting demand, survey shows

Polish banks significantly eased lending criteria across business, mortgage, and consumer segments in Q2 2025, driven by heightened competition and interest rate cuts totaling 75 basis points by July 2025. This relaxation, detailed in the National Bank of Poland's quarterly survey, spurred increased loan demand for M&A, working capital, and household consumption. Looking ahead to Q3 2025, banks anticipate maintaining current business lending standards while further easing household requirements, expecting continued robust demand for most loan types, signaling a supportive credit environment for economic activity.

Analysis

A second-quarter 2025 survey from the National Bank of Poland, covering 89% of the country's banking sector, reveals a significant easing of lending criteria for both businesses and households. This relaxation is primarily driven by heightened competition among lenders and a decline in non-performing loans. The trend is further supported by a dovish monetary policy shift, marked by a 50 basis point interest rate cut in May 2025—the first since October 2023—and an additional 25 basis point reduction in July. Consequently, loan demand has surged, with businesses seeking credit for mergers, acquisitions, and working capital, while households have increased borrowing for mortgages and consumption amid lower rates and an improved economic situation. Looking to the third quarter, banks signal a continuation of this trend, planning to further ease standards for households while maintaining current criteria for businesses, and they anticipate broad-based demand growth for nearly all loan types.

Key Decisions for Investors

• The combination of easing credit standards, rising loan demand, and falling non-performing loans creates a favorable operating environment for the Polish banking sector, suggesting potential for loan book growth and improved profitability.
• This report can be viewed as a bullish signal for the broader Polish economy, as increased credit availability for both corporate investment and household consumption is likely to support GDP growth.
• While the outlook is positive, investors should monitor future reports on bank asset quality, as aggressive lending competition can pose risks, and note the expected flat demand for short-term loans to large enterprises as a potential area of relative weakness.