Investment Rating - The report assigns a "Buy" rating to PKO Bank Polski with a 12-month price target of PLN 88.00, indicating an upside potential of 20.7% from the current price of PLN 72.88 [11][12]. Core Insights - Management expects a resilient net interest income (NII) and return on equity (ROE) outlook, reiterating an ROE expectation of over 18% in the medium term [2][7]. - The macroeconomic outlook suggests a more expansionary fiscal policy from the ruling party, which is anticipated to stimulate economic and lending growth in the banking sector [3]. - The company expects significant corporate lending growth due to the disbursement of European Union funds for energy transition and infrastructure projects [3]. - The interest rate outlook is leaning towards a "higher-for-longer" scenario, which is expected to support NIMs in the short term, with FY25E NIM guidance reaffirmed at no less than 4.8% [4][7]. - PKO anticipates that 2025 will be the last year of material provisioning for CHF-denominated mortgages, with costs expected to be lower than in 2024 [10]. Summary by Sections Macro and Banking Sector Outlook - The company anticipates a more expansionary fiscal policy that will stimulate economic growth and lending in the banking sector [3]. - A significant boost to corporate lending is expected from EU funds allocated for energy transition projects [3]. Net Interest Margins and Policy Rates - The Monetary Policy Council's hawkish stance suggests no rate cuts are expected in the near term, supporting a "higher-for-longer" interest rate environment [4]. - PKO has reaffirmed its FY25E NIM guidance at a minimum of 4.8% [4]. Lending and Fee Income - Despite potential headwinds for NIMs, PKO expects strong growth in lending volumes and improving fee income, supported by disciplined cost management [7]. Regulatory Environment - There is currently no political momentum for increasing bank taxes in Poland, and no reductions to existing bank levies are expected [8]. - The company does not foresee material risks related to the ongoing legal challenges against WIBOR-based benchmarks [9].