By Elena Vardon

Polish bank stocks dropped after the country's finance ministry outlined plans to increase the corporate income tax rate paid by lenders in a bid to shore up its budget.

Shares in banks such as PKO Bank Polski, Bank Pekao and Santander Bank Polska logged heavy losses, sending Warsaw's banking sub-index down 8.7% in European midday trading on Friday.

Shares in European banks with operations in Poland also slipped. Germany's Commerzbank, which operates in the country through its mBank subsidiary, was down 4%. Austria's Erste Group Bank recently agreed to a large stake in Santander's local operations and saw its shares drop around 2%. Shares in Banco Comercial Portugues--the majority owner of Bank Millennium--also fell.

Poland's Finance Ministry on Thursday said it was working on a bill to increase the corporate income tax rate paid by banks to 23% from the current 19%. The rate will be set higher at 30% for 2026 and 26% for 2027, it added.

These changes will boost the country's corporate tax revenue by around 6.5 billion zloty, equivalent to $1.77 billion, in 2026, according to the ministry's estimate.

"In total, the proposed solutions are expected to generate over 20 billion zloty for the budget over the next 10 years, representing a significant contribution from the banking sector to financing state budget expenditures, particularly the increased needs for security and healthcare," it said.

The ministry is also proposing a gradual reduction of a separate tax rate on certain financial institutions. This should lead to a 10% trim compared with this year in 2027 and a 20% cut in 2028.

Based on disclosed information, the proposed changes to Poland's tax regime will hit Polish banks' net profit by around 18% in 2026 and 9% in 2027, according to estimates by analysts at Citi.

The increased tax uncertainty might lead to higher cost of equity assumptions, which could weigh on the share prices of banks, the Citi analysts wrote in a note to clients.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

August 22, 2025 07:35 ET (11:35 GMT)

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