Regional Bank Profits Remain High Despite Rising Taxes
Business operators should expect tighter lending conditions as windfall taxes impact regional banks through 2026.
Updated on Oct. 21, 2026 in Financial Services
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Central and Southeast European banks maintained record annual profits of €31.5 billion in 2025, buoyed by high interest rates and retail lending growth. Operators should note that rising windfall taxes in select nations are significantly impacting earnings for regional lenders.
Why it matters
Resilient balance sheets and high regional demand for credit have allowed banks to outperform the euro area, though firms operating in this space face increasing fiscal pressures. These taxes are currently forcing a recalibration of profit expectations for banks active in the region.
Regional banks achieved record profits of €31.5 billion in 2025, maintaining a 15-16% return on equity against a 9% euro area benchmark. Windfall taxes in Hungary, Romania, and Slovakia are projected to hit €1.8 billion in 2026, up from €1 billion in both 2024 and 2025.
The players
Raiffeisen Research
An analytical arm of the Austrian financial services group that monitors macroeconomic and banking sector trends across Central and Eastern Europe.
Erste Group
A major Central European financial services provider with a focus on retail banking and regional market consolidation.
K&H Bank
A commercial bank operating in Hungary that recently reported significant profit declines linked to localized fiscal policies.
The details
Profit growth is driven by interest rates elevated to combat inflation and increased retail lending supported by German fiscal stimulus. Regional consolidation remains a central strategy, evidenced by moves like Raiffeisen Bank International's pending acquisitions and Erste Group's purchase of Santander Bank Polska. Operators in these markets must account for divergent regulatory environments where levies can cause sharp, localized earnings volatility, as seen in K&H Bank’s 80% profit decline in 1H26.
Timeline
2024: Regional windfall taxes totaled €1 billion.
2025: Banking sector reached record €31.5 billion profits.
1H26: Regional return on equity held at 15-16%.
2026: Windfall taxes are projected to reach €1.8 billion.
2030: Regional profit pool is projected to reach €37-38 billion.
Market Landscape
The regional banking sector’s performance follows the resilience demonstrated during the European energy crisis. Current growth levels are now comparable to Italy's €36.3 billion profit pool, marking a transition toward greater regional market maturity.
Operators in Central and Southeast Europe should adjust financing expectations as retail lending is projected to grow by 10% to 12% annually through 2027. Businesses should also monitor local tax policy, as windfall levies are creating material volatility in regional lending costs.
The takeaway
The regional banking sector shows strong growth potential, but tax policy remains the primary operational risk. Business owners should track the 10-12% projected growth in retail lending as a signal for credit availability in the coming 24 months.
Further reading
For more on shifts in the banking sector, see Financial Services.
Source note: This article includes information reported by Intellinews.
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