mBank S.A.

The stable outlook reflects our view that mBank will maintain its solid profitability, strong capital, and a balanced risk profile over the next 24 months. We expect that declining legal provision charges and prudent capital management policy will support mBank maintaining its RAC ratio above 10% in 2025 and 2026. We also think that the bank will gradually regain market share and maintain the credit quality of its loan book as it refocuses on growth as legacy issues recede. We could lower the ratings on mBank if: We anticipate the RAC ratio will fall below 10%, which could stem from significantly weaker-than-expected underlying profitability or risk-weighted assets increasing faster than we forecast; Contrary to our base-case expectation, further negative court

...We expect strong underlying profits and gradually receding legal costs should lead mBank to report solid profitability with less volatility going forward. For full-year 2024, mBank reported net profits of Polish zloty (PLN) 2.2 billion, corresponding to a return on equity of 14.8%, in line with its stated target. The bank reported solid performance on strong underlying revenue growth--and despite still material legal provision charges of PLN4.3 billion. Over the next two years, we anticipate that the bank will sustain this profitability level, as two opposing factors largely balance each other out. On the one hand, lower interest rates are expected to reduce revenues, despite the bank's initiatives to expand its loan portfolio and increase fee income. Conversely, we believe that a substantial decrease in legal risks will result in lower provisioning requirements in 2025 and 2026. We expect that enhanced clarity regarding the bank's legal...

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