S&P upgrades Alior Bank stock rating, risk situation improves

Investing.com - S&P Global Ratings on Tuesday upgraded the long-term and short-term issuer credit ratings of Alior Bank S.A. (WSE:ALR) in Poland from “BB+/B” to “BBB-/A-3”. The outlook is stable. The rating agency also confirmed the bank’s long-term and short-term counterparty ratings at “BBB/A-2”.

This upgrade reflects Alior’s progress in diversifying its loan portfolio and actively reducing non-performing loans by 2025. The portfolio has become more diversified, with an increasing share of low-risk products such as mortgages and small to medium-sized enterprise loans. By 2025, especially in the fourth quarter, Alior made significant strides in reducing non-performing loans. According to S&P calculations, the non-performing loan ratio at year-end was 5.7%, down from 6.4% in Q3 2025 and 6.9% in 2024.

S&P expects risk costs to be between 60-80 basis points, remaining below levels from a few years ago, reflecting the bank’s stricter lending standards and a decline in risky loans. Alior aims to reduce its non-performing loan ratio to below 5% by 2026, as this is a prerequisite for increasing shareholder dividends to 75% of annual net profit. Despite a 175 basis point decrease in the reference interest rate in 2025, the bank still achieved a net profit of 2.4 billion PLN, maintaining profitability.

S&P projects that, by the end of 2025, the bank’s risk-adjusted capital ratio will increase from 13.0% a year earlier to approximately 14.1%. The rating agency believes that by 2027, the risk-adjusted capital ratio could decline to between 13.0% and 14.0%, which remains a strong level. S&P expects net interest margins to decrease to about 4.8% in 2027, with fee income growing well, operating expenses increasing modestly, and under its baseline scenario, annual net profits reaching approximately 2 billion PLN in 2026 and 2027.

Alior’s ratings include support from its largest shareholder, Powszechny Zakład Ubezpieczeń. In June 2025, PZU signed a memorandum of understanding with Bank Polska Kasa Opieki S.A., whose parent company holds a 20% stake, to explore the possibility of Pekao acquiring PZU, creating one of Europe’s largest financial groups. S&P believes that the potential for support from PZU or Pekao will continue to exist, further supporting Alior’s ratings.

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