S&P Global Ratings has upgraded its long- and short-term issuer credit ratings for Poland-based Alior Bank S.A. (WSE:ALR) to 'BBB-/A-3', up from 'BB+/B', and set a stable outlook. The ratings agency also reaffirmed the bank's long- and short-term resolution counterparty ratings at 'BBB/A-2'.
The ratings action reflects what S&P describes as material progress by Alior during 2025 in rebalancing its loan book and actively shrinking its stock of nonperforming loans, particularly in the fourth quarter. The bank's portfolio shifted toward a higher share of lower-risk products, including mortgages and loans to small and midsize enterprises, according to S&P's assessment.
S&P's calculations indicate that Alior's year-end nonperforming loan ratio stood at 5.7% after the fourth-quarter improvement, down from 6.4% in third-quarter 2025 and 6.9% in 2024. That decline in NPLs is a central justification for the ratings uplift.
Looking forward, S&P expects Alior's cost of risk to be in the range of 60-80 basis points, a level it considers sustainably lower than in previous years. The ratings agency links that outlook to the bank's tighter underwriting standards and a reduced share of higher-risk lending in the portfolio.
Alior itself has set a target to bring its NPL ratio below 5% by 2026. The bank sees that threshold as a condition for increasing shareholder distributions to as much as 75% of annual net income.
On profitability, Alior reported net profits of PLN 2.4 billion for 2025 and preserved profitability despite a cumulative 175 basis point reduction in reference rates over the year. S&P's base-case projections foresee the bank delivering net profits of about PLN 2 billion annually for both 2026 and 2027, assuming a gradual reduction in net interest margin and moderate expense growth balanced by good fee-income growth.
In S&P's view, Alior's risk-adjusted capital, or RAC, improved to roughly 14.1% at year-end 2025 from 13.0% a year earlier. The ratings firm allows for the RAC to decline to a range of 13.0%-14.0% by 2027 and still considers that range to represent a strong capital position.
S&P expects Alior's net interest margin to recede to about 4.8% in 2027, alongside continued fee-income growth and only moderate operating expense increases, underpinning the projected earnings trajectory for 2026-27.
The ratings on Alior include one notch of group support stemming from its largest shareholder, Powszechny Zaklad Ubezpieczen (PZU). In June 2025, PZU signed a memorandum of understanding with Bank Polska Kasa Opieki S.A., where PZU's parent owns a 20% stake, to explore a potential takeover of PZU by Pekao, a move that would create one of the largest financial-institution groups in Europe. S&P assumes that the potential for extraordinary group support from either PZU or Pekao would remain in place and continue to underpin the rating on Alior.
Methodology note: S&P's assessment and projections cited above reflect the ratings firm's published calculations and expectations for Alior's asset quality, capital metrics, margin trends, and profitability across 2025-2027.