Bank Handlowy w Warszawie: Poland's 155-Year Banking Institution

I. Introduction & Episode Roadmap

Warsaw, 1870. The Kingdom of Poland exists only on paper—partitioned between three empires, its people yearning for nationhood. In a palatial building on Senatorska Street, a group of financiers, aristocrats, and intellectuals gather to sign the founding documents of what will become the oldest continuously operating bank in Poland. The institution they create that December 28th will survive two world wars, four decades of communist rule, Poland's largest financial scandal of the transition era, and a $70 billion global financial crisis—emerging in 2025 as part of one of the world's largest banking conglomerates.

Bank Handlowy w Warszawie S.A. (literally "Commercial Bank in Warsaw"), rebranded as Citibank Handlowy in 2003 and Citi Handlowy in 2007, is a Polish bank based in Warsaw. It is one of the oldest banks in Poland, the 10th largest Polish bank by assets, and 18th in terms of number of outlets.

The central question this story poses is deceptively simple: How did a bank founded during Russian partition survive two world wars, communism, a major scandal, and still thrive 155 years later as part of a global financial giant?

The answer lies in three distinct capabilities that have defined Bank Handlowy across the centuries: an uncanny ability to position itself as indispensable to whatever regime controlled Poland, a relentless focus on international trade and corporate relationships, and a willingness to transform its business model at critical junctures.

In 2024, Bank Handlowy w Warszawie S.A. achieved the position of 10th largest bank in Poland with a market share of 2.16%. Additionally, the bank became the 2nd most profitable bank in relation to its total assets, showcasing 2.41% return on assets and 17.97% return on equity in 2024.

But the financial performance only hints at the strategic pivot now underway. In May 2025, Bank Handlowy w Warszawie S.A. announced an agreement to sell its consumer banking business to VeloBank S.A, a Poland-based universal bank providing financial solutions to individuals, small and medium-sized companies. This transaction represents the final chapter of Citi's global retreat from international consumer banking—and the beginning of Citi Handlowy's transformation into a pure-play institutional bank focused on Poland's defense modernization and energy transition.

What follows is the story of how a nation-building bank became a communist-era foreign trade monopolist, survived Poland's largest transition-era scandal, merged with a global giant, and now pivots toward a future where institutional banking expertise and global connectivity may prove more valuable than branch networks and credit cards.

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II. The Founder's Story: Leopold Kronenberg & 19th Century Polish Nation-Building

Picture Leopold Kronenberg in the early 1860s: a middle-aged banker of Jewish origin, immaculately dressed in the fashion of Warsaw's financial elite, moving between his palatial residence and the modest banking house on Miodowa Street that his father had established four decades earlier. Leopold Stanisław Kronenberg (born 24 March 1812 in Warsaw, Poland, died 5 April 1878 in Nice, France) was a Polish banker, investor, and financier, and a leader of the 1863 January uprising against the Russian Empire. Kronenberg came from a wealthy family of Jewish rabbis.

The tension in Kronenberg's life—between accommodation and resistance, between personal ambition and national service—would define both the man and the institution he created. His father Samuel Eleazar Kronenberg (1773–1826) was a native of Wyszogród who led a small bank in Warsaw. His mother was Tekla (Theresa), née Levi (1775–1848). Kronenberg had seven siblings. The family navigated the complex world of Jewish life under Russian rule, with several siblings eventually converting to Christianity to advance their social positions.

After graduating from high school in Warsaw, Kronenberg studied at the University of Technology in Hamburg and at the University of Berlin. Having finished his studies in 1832, he returned to Poland and took up conducting business. In 1846 he converted from Judaism to Protestantism.

The conversion was pragmatic—opening doors that remained firmly shut to Jews in Russian-controlled Poland. But what Kronenberg did with those doors revealed his deeper ambitions for his homeland.

From 1839 to 1860, having obtained the concession of the tobacco monopoly in the Kingdom of Poland, Kronenberg amassed a considerable fortune which he used to develop the country's economy: sugar industry, construction of railways, commercial activities, and banking sectors. His investment strategy made him the richest man in the Kingdom of Poland. The railway lines laid by companies associated with Kronenberg still constitute the axis of railway routes in central and eastern Poland—a physical legacy that outlasted the partition itself.

But Kronenberg was no passive capitalist content to accumulate wealth under Russian rule. He was a member of the City Delegation which was the leading force for public order following the bloody suppression by the Russian Army of demonstrations on Krakowskie Przedmieście Street in 1861.

The political turmoil that followed placed Kronenberg in an impossible position. He then joined the leadership of the "Whites", a moderate grouping opposed to insurrectionary activities and favoring constitutional reforms. However, when the January Uprising broke out, Kronenberg eventually supported it and also played a key role in financing the insurgent movement, providing funds for the purchase of weapons.

Kronenberg was an instigator of and a financial supporter of the January uprising of 1863 against the Russians. To avoid arrest by the Russians, he fled to Dresden in June of that year.

After the uprising's failure, Kronenberg returned to Warsaw and redirected his energies from armed resistance to economic development—the philosophy that would become known as "organic work." After the fall of the insurrection, he left for Germany. He eventually returned to Warsaw but withdrew from any political activity.

The most important achievement of Leopold Kronenberg was the founding in 1870, along with other Warsaw financiers and members of the aristocracy and intelligentsia, of Bank Handlowy in Warsaw, operating at present under the name Citi Handlowy. It is the oldest continuously operating bank in Poland.

The first President of the Bank's Board was Count Józef Zamoyski, and after two years this function was taken over by Leopold Kronenberg. The choice of Zamoyski—from one of Poland's most ancient aristocratic families—was strategic, lending the new institution the social prestige that a banker of Jewish origin, however wealthy, could not provide alone.

In 1875, he founded the School of Commerce. That institution evolved to become the Warsaw School of Economics, training generations of Polish business leaders. As a result of his initiative and investments, the Higher School for Commerce was founded in Warsaw in 1875. According to his will, the institution was committed to admitting pupils without any distinction of religion.

Kronenberg died in 1878 in Nice. He was buried in the Kronenberg family chapel at the Evangelical-Reformed Cemetery in Warsaw. He left behind not just a bank, but an entire philosophy of national development through private enterprise—a philosophy that would guide Bank Handlowy through the turbulent decades ahead.

So what for investors? The Kronenberg story illustrates the DNA of an institution that learned from its founding to navigate between powerful external forces while building domestic economic capacity. That same flexibility—the ability to be useful to whoever holds power while maintaining institutional continuity—would prove essential in the decades to come.

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III. Early Growth & Pre-War Dominance (1870–1939)

The bank that Kronenberg founded grew with astonishing speed. By 1872, the bank had branches and offices in St Petersburg, Moscow, Berlin, Gdańsk (Commerzbank in Warschau), Szczecin and Łódź, and representative offices in Włocławek, Płock, Grójec, Guzów, Lublin and Rawa Mazowiecka. Within two years of its founding, Bank Handlowy had established a network spanning both the Russian and German empires—a remarkable achievement for any bank, let alone one operating from a stateless nation.

In subsequent years, it opened branches in other cities, including Sosnowiec (1895), Częstochowa (1897) and Kalisz (1898).

The bank's rapid expansion reflected both the industrialization sweeping Polish lands and Bank Handlowy's strategic positioning as a bridge between Eastern and Western European commerce. Before World War I, Bank Handlowy was the largest privately owned bank in Poland and one of the few ensuring financial processing of the trade with Russia and Western Europe.

The bank made a significant contribution to the construction of the railway network and major industrial plants in the Polish Kingdom. The infrastructure investments that Bank Handlowy financed during this period—railways, factories, utilities—would form the backbone of Poland's economy for the next century.

The scale of operations was staggering. During this period, the bank's turnover fluctuated at the level of 2 billion rubles—greater than the sum of the then budget of the Russian Empire. For a bank operating in a territory that lacked even nominal sovereignty, this was an extraordinary position.

From 1887 to 1926 Leopold Julian Kronenberg served as president of Bank Handlowy in Warsaw. The founder's son continued his father's work, guiding the institution through the tumultuous end of the 19th century and the chaos of World War I.

Poland's restoration to independence in 1918 presented both opportunities and challenges. Following the restoration of Polish independence in 1918, Bank Handlowy w Warszawie, originally established under Russian partition rule, reoriented its operations to serve the newly unified Second Polish Republic, operating as a prominent private commercial bank focused on domestic and international trade finance.

In the 1920s and 1930s the bank represented the Polish government's assets in numerous international companies, notably the Danzig Shipyard. The Free City of Danzig—created by the Treaty of Versailles with an ambiguous status between Germany and Poland—represented exactly the kind of complex cross-border situation where Bank Handlowy's expertise proved invaluable.

The interwar period tested Poland's banks severely. The onset of the Great Depression in 1929 exacerbated Poland's structural vulnerabilities, with national output contracting by roughly 52% through 1935 amid export collapses and deflation. Bank Handlowy, as a privately managed entity, sustained operations and solvency amid widespread banking strains that afflicted less prudent competitors.

Recognized among the five largest private banks, it received a 15 million złoty liquidity injection from the Bank Polski on September 4, 1925, to bolster stability during early post-reform pressures.

By the late 1930s, its branch network had grown to 41 outlets, primarily in urban centers, enhancing its capacity to intermediate capital for trade and industry across the republic.

So what for investors? The interwar period established Bank Handlowy's pattern of institutional resilience. While competitors failed during economic crises, Bank Handlowy's conservative approach to lending and its focus on trade finance provided stability. This conservative DNA—sometimes criticized as overly cautious—would repeatedly prove its value during crisis periods.

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IV. Survival Through War & Communist Era (1939–1989)

September 1, 1939. German forces pour across the Polish border. Within weeks, Warsaw falls. The question facing every Polish institution is existential: how to survive occupation?

It has survived two world wars without disrupting its business operations. This remarkable claim requires context. The bank did not stop its activities during the two world wars, it only limited activity. During World War II, the bank's branches in the areas annexed by Germany were liquidated, while those in the General Government operated under the strict control of the occupation authorities.

On September 5, 1939, depositors withdrew a record 4.6 million złoty, depleting cash reserves and requiring emergency funding from Bank Polski to sustain liquidity.

Despite these challenges, the bank maintained continuity of core functions under Nazi occupation in the General Government, limiting activities to domestic transactions amid strict German oversight of the financial sector. German authorities permitted select pre-war banks, including Bank Handlowy, to operate in reduced capacity to support the occupation economy.

The moral complexities of this period cannot be ignored. Operating under Nazi occupation meant, at minimum, tacit cooperation with an occupying power. Asset seizures targeted the bank's holdings and those of its clients, with German actions—such as forced transfers to German-controlled entities—constituting violations of international law by expropriating private property without compensation.

When Soviet forces "liberated" Poland in 1945, the country faced a new form of external control. The Communist authorities who took power implemented a sweeping nationalization of private enterprise—but Bank Handlowy found itself in an unusual position.

Reactivated in 1945, the bank was a private industrial and commercial company and cooperative. As one of the three banks which escaped formal nationalization after the war, it was subjected to controls of a government commissioner and the state took a significant amount of shares. During the People's Republic of Poland it was one of two banks (along with Pekao SA), operating as a joint stock company.

Why did the Communists spare Bank Handlowy from nationalization? The answer lay in Poland's peculiar position within the Soviet bloc and the bank's irreplaceable expertise in international trade.

After 1945, Bank Handlowy became the main Polish correspondent of foreign banks. In 1964 it was granted the official monopoly on Polish foreign trade transactions.

As a result, the largest network of correspondent banks was created. A London branch, representative offices in New York, Moscow, Belgrade, Rome and Berlin as well as affiliates in Vienna, Luxembourg and Frankfurt were opened.

This monopoly position made Bank Handlowy indispensable. Communist Poland needed foreign currency to import Western technology and consumer goods. It needed a financial institution that understood how Western banking worked, that had relationships with Western financial institutions, and that could navigate the complexities of international trade. Bank Handlowy provided all of these capabilities.

The arrangement also created a bubble of relative normality within the Communist system. Bank Handlowy employees traveled to the West, maintained relationships with foreign banks, and operated according to international banking standards—experiences that were largely unavailable to other Polish citizens.

Being one of only two banks operating as a joint-stock company during communism preserved institutional knowledge and international relationships that would prove invaluable after 1989. While other Polish banks would need to build expertise in market economics from scratch, Bank Handlowy emerged from communism with decades of continuous experience in international finance.

So what for investors? The communist era illustrates both Bank Handlowy's survival instinct and the strategic value of its international network. The monopoly on foreign trade created deep relationships with global banks that would become the foundation for the post-1989 transformation.

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V. The FOZZ Scandal & Post-Communist Transformation (1989–1997)

The fall of communism in 1989 presented Bank Handlowy with both unprecedented opportunity and existential risk. Its monopoly on foreign trade transactions evaporated virtually overnight. After 1989, the bank lost its privileged position in foreign trade and began to transform gradually into a commercial bank.

But before the transformation could begin in earnest, the bank found itself at the center of Poland's largest financial scandal of the transition era.

The FOZZ Scandal: A Defining Crisis

After the fall of communism in Poland, the bank played a key role in the Foreign Debt Service Fund scandal, which had a negative impact on the Polish economy during the early 1990s.

Back in 1989, Poland's still communist authorities came up with a magnificent wheeze for reducing the country's $40 billion overseas debt. Instead of repaying the debt dollar for dollar, why not buy it up on the secondary debt market for a quarter of the price? That way, Poland would reduce its indebtedness through coming to owe the money to itself, and at a rock-bottom cost.

The establishment of this institution coincided with the talks of the Round Table and was aimed at the purchase of Polish foreign debts incurred during the period of the PRL, using a range of methods, legal and illegal. The nominal value of Polish debts deviated from market value due to the low economic credibility of Poland.

The management staff of FOZZ were people from the communist secret services, indicating a deep connection to Soviet interests in Poland.

During the political transformation, the bank—especially its branch in Luxembourg—had played a significant role in the scandal of the Foreign Debt Service Fund (Fundusz Obsługi Zadłużenia Zagranicznego - FOZZ). A large number of foreign exchange operations conducted by FOZZ were only through the bank. FOZZ sent two payments of $2.5 million each to ABI-373 in July and August 1989, and a short time later Bank Handlowy International S.A., a cosigner on the ABI-373 loan, released Matingas and his company from any liability.

The report shows that during the period of foreign exchange market control, they were operated to the detriment of the Polish economy with estimated losses during these two years of 5-10 billion dollars.

The scandal carried all the hallmarks of Poland's turbulent transition: former communist officials exploiting their positions, Western financial schemes that few understood, and a new democratic government struggling to establish oversight. The court sentenced former FOZZ director general Grzegorz Żemek to nine years and a fine. His deputy Janina Chim received six years and a fine, and businessman Dariusz Przywieczerski received 3.5 years.

The FOZZ fraud brings to light once again one of the injustices in the Poland of the 1990s.

Privatization and the Path Forward

In 1997, the bank was privatized. The government's approach to privatization was unusual. The government did not choose a strategic shareholder for the bank. Bank Handlowy planned a merger with BRE Bank, however this merger did not happen—it was blocked by PZU—so privatization proceeded according to the concept of dispersed shareholding.

Since June 1997, Bank Handlowy has been listed on the Warsaw Stock Exchange.

The dispersed ownership structure created a power vacuum that would be filled within three years by the largest financial institution in the world.

So what for investors? The FOZZ scandal demonstrates how Bank Handlowy's unique position—as the sole conduit for foreign exchange during communism—created both opportunity and risk during the transition. The scandal tarnished the bank's reputation but didn't destroy its fundamental value: the international network, the institutional knowledge, and the brand equity accumulated over 127 years.

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VI. The Citigroup Era: From Local Bank to Global Network (2000–2020)

The year 2000 marked Bank Handlowy's 130th anniversary—and the most significant transformation in its history.

On October 11, 2000 the Commission for Banking Supervision consented to the merger between Citibank (Poland) SA and Bank Handlowy w Warszawie SA, finalized in March 2001.

In 2001 a merger of Citibank (Poland) S.A. and Bank Handlowy w Warszawie S.A. took place to form Citi Handlowy, a Citi subsidiary (with Citi being a majority shareholder).

For Citigroup, the acquisition represented a strategic bet on Poland as a gateway to Central and Eastern Europe. Revenue growth of 24% reflected growth in transaction services and trading results, as well as the contribution of Bank Handlowy, acquired earlier in 2000.

In the 21st century, Bank Handlowy merged with Citibank (Poland) SA in 2001, with Citibank becoming its largest shareholder, owning 75% of shares by 2007. The bank has been listed on the Warsaw Stock Exchange since 1997 and is a constituent of the WIG20 index.

The merger transformed both institutions. The combination meant the liquidation of the retail brand Handlobank, and two years later the commercial brand Citibank Handlowy was introduced. The legal name remained Bank Handlowy w Warszawie S.A., but the brand name became Citibank Handlowy. In 2007, another commercial brand change occurred, to Citi Handlowy.

Since 2001, the bank has been part of the global financial institution Citi and operates in Poland under the Citi Handlowy brand. The bank offers a wide and modern range of corporate, investment and retail banking products and services. As a member of Citi, Citi Handlowy offers its customers access to financial services in almost 100 countries.

The strategic majority shareholder of the bank is Citibank Europe Plc with its registered office in Dublin, Ireland – Citigroup company that holds the group's overseas investments.

Leadership Through Two Decades

In 2021 Elżbieta Światopełk-Czetwertyńska became the CEO of the bank, replacing Sławomira Sikory who held the position since 2003.

Sławomir Sikora's 18-year tenure represented remarkable stability in leadership. Under his watch, Citi Handlowy navigated the 2008 global financial crisis—which hit Citigroup harder than almost any other major bank—while maintaining its strong position in Poland.

Elżbieta Czetwertyńska was appointed Citi Country Officer Poland / CEO Citi Handlowy in June 2021 and in June 2022 received additional responsibility for Ukraine. Prior to her current role, Elżbieta was Citi Country Officer for Switzerland, Monaco and Liechtenstein, based in Zurich. She assumed that role in March 2019, after a five-year stint in Latin America.

Elżbieta has been at Citi for 30 years, working in different countries in Europe and Latin America. She joined Citi Ecuador as corporate bank relationship manager in 1994. From 1999 to 2003, she was Head of Transaction Services, Asset-Based Finance and the SME segment in the Dominican Republic, before moving to the United States for a year as internal auditor covering corporate credit for Latin America.

In 2004, Elzbieta moved to Europe where she joined Citi Handlowy's risk management team in Poland and was appointed Senior Credit Officer a year later. Her last four years in Poland she led the Commercial Bank business.

After receiving regulatory approval, Elżbieta Czetwertyńska became the 27th president and first woman in that position in the 150-year history of Bank Handlowy.

Her appointment signaled Citi's continued commitment to Poland—but also hinted at the strategic shift to come. The choice of new CEO confirmed that Citi would concentrate on corporate client service in Poland. In the bank's announcement, Czetwertyńska emphasized that she would want to use her experience to strengthen Citi's position in the institutional banking market.

So what for investors? The Citigroup era transformed Bank Handlowy from a local champion into a node in a global network. This brought capital, technology, and expertise—but also made the bank's strategic direction dependent on decisions made in New York. The 2025 consumer banking exit represents the logical conclusion of Citi's global strategy, not a response to Polish market conditions.

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VII. Modern Performance & Strategic Shift (2020–2024)

By 2024, Citi Handlowy had established itself as a highly profitable, specialized institution. Bank Handlowy w Warszawie S.A., together with its subsidiaries, provides a range of banking services for individual and corporate clients in Poland and internationally. The company operates in two segments, Institutional Bank and Consumer Bank.

The Institutional Bank segment offers traditional banking services, including credit and deposit services; cash management, trade financing, leasing, brokerage, and custody services in securities; treasury products on financial and commodity markets; investment banking services on the local and international capital markets, such as advisory services and underwriting financing via public and non-public issues of financial instruments.

The Consumer Bank segment provides bank accounts, credit, deposits, cash loans, mortgage loans, credit cards, and asset management services, as well as acts as an agent in the sale of investment and insurance products to individuals, micro-enterprises, and individual entrepreneurs.

Financial Performance: Above-Sector Returns

The bank's financial metrics consistently outperform the broader Polish banking sector. ROE of 21.1% (vs. 15.7% in the banking sector) delivered returns well above both cost of capital and inflation. ROA of 2.4% (vs. 1.3% in the banking sector) demonstrated exceptional efficiency.

In 2024 its total assets were 72,478.10 mln PLN, representing a 2.16% market share. In 2024 the bank's net income was 1,760.46 mln PLN.

In 2024 as a whole, the bank earned PLN 1.76 billion, 22% less than in 2023 (then it was PLN 2.256 billion). "The decrease in net profit was mainly due to impairment losses on assets in the retail banking segment in the total amount of PLN 432.5 million, which includes write-offs reducing the value of goodwill by PLN 180 million and fixed assets by PLN 252 million."

At Citi Handlowy, this translated into higher loan volumes and continued high revenues. The corporate banking segment, which is strategic for us, recorded high dynamics, with the volume of loans growing by as much as 20% last year.

"It was also important for us to create value for our shareholders. The dividend yield was 10.2%, one of the highest paid by banks in 2024," the CEO added.

Wealth Management Excellence

In Consumer Banking, Citi Handlowy closed last year with a record number of affluent customers, which increased by 9% y/y. Investment activity of new and existing customers contributed to an increase in the volume of investment products (including dual-currency investments) by 17% y/y at the end of December.

The bank achieved a record high number of its most affluent clients (Citi Private Client - CPC). The growth in wealth management highlighted a crucial strategic reality: while Citi Handlowy's overall retail footprint was modest by Polish standards, its position among high-net-worth individuals was disproportionately strong.

ESG Achievements

Citi Handlowy wins "ESG Eagles" award from "Rzeczpospolita" daily. The jury awarded the Bank for diversity and equal participation of women and men on the Management Board and Supervisory Board of Citi Handlowy. Citi Handlowy was among the first companies listed on the Warsaw Stock Exchange that achieved parity on its most important corporate bodies.

The bank achieved its strategic goal of acquiring PLN 1 billion of "green assets"—nearly PLN 1.3 billion acquired in 2022-2024.

So what for investors? The 2024 results revealed a bank with exceptional profitability metrics but a clear strategic tension. The consumer banking segment, while producing strong wealth management growth, required write-downs that depressed headline earnings. The institutional segment was growing faster and generating higher returns—making the strategic pivot that followed almost inevitable.

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VIII. The 2025 Strategic Pivot: Exit from Consumer Banking

May 27, 2025, marked the most significant strategic announcement in Citi Handlowy's 21st-century history. Bank Handlowy w Warszawie S.A. announced an agreement to sell its consumer banking business to VeloBank S.A, a Poland-based universal bank providing financial solutions to individuals, small and medium-sized companies. Bank Handlowy w Warszawie S.A., which operates under the Citi Handlowy brand, is majority-owned by Citibank Europe Plc (CEP), a wholly owned subsidiary of Citigroup Inc.

The transaction involves the demerger of Citi Handlowy's consumer banking operations to VeloBank, including wealth management, micro business banking, credit cards, consumer loans, deposits and assets under management, consumer clients of the brokerage business, branches, and other consumer-related assets.

Transaction Economics

The shareholder value related to this transaction amounts up to PLN 1.1 billion, which implies P/BV about 0.85x. The shareholder value consists of fixed price component estimated at PLN 432 million, variable price component up to PLN 100 million payable at closing depending on the business volumes of the consumer business at the demerger day, and the released excess capital along with retained net profits generated by the consumer business until closing estimated at PLN 570 million.

In the second quarter 2025, the bank will recognize the one-off net loss on sale of about PLN 380 million. Citi Handlowy has received from EY an independent opinion on the fairness of the financial effects of the Transaction for the shareholders of Citi Handlowy as a whole.

Strategic Rationale

"Citi Handlowy has been providing financial solutions to corporations in Poland through a history spanning 155 years, and we remain fully committed to Poland's economic growth and to our institutional clients in the country. This transaction enables us to deploy additional resources to our institutionally focused businesses, so we can continue to connect corporations in Poland to our global network."

Citi Handlowy wants to be the preeminent banking partner for clients with international needs and aspirations and a bank focused on financing the country's strategic priorities. Upon execution of the exit of its consumer banking business, Citi Handlowy aims to be one of the most efficient financial institutions on the Polish market.

Part of Citi's Global Strategy

Upon closing, it will be the 10th international consumer business Citi has sold since 2021. The bank will maintain its institutional business in Poland, as it has elsewhere, following the sale.

This is part of a broader retreat from retail banking in 14 international markets, which the bank began in 2021. Thus far, Citi has closed sales in nine markets and wound down three of them. Poland marks its 10th sale, according to a spokesperson. The bank had determined the markets weren't scalable, the spokesperson said. Citi's sole remaining international consumer business is in Mexico.

The Buyer: VeloBank

VeloBank S.A. is owned by funds affiliated with Cerberus Capital Management, the European Bank for Reconstruction and Development and the International Finance Corporation, a member of the World Bank Group.

Cerberus funds own 80.2% of the bank, while EBRD and IFC own 9.9% each.

"Both institutions are rooted in a culture of customer service quality and high organizational standards. Our complementary products will allow us to create a unique offering for both retail and affluent clients, while the professionalism and dedication of our combined teams will support the high standard of service for current and future customers," said Adam Marciniak, CEO of VeloBank.

Employee and Customer Transition

The merger of consumer banking with VeloBank will take place simultaneously with migration after receiving required approvals, including regulatory, and achieving operational readiness, which is expected for mid-2026. The intention of both banks is to carry out the process efficiently so that it has the least possible disruption to customers.

The combined organization, encompassing over 3,000 VeloBank employees and approximately 1,650 Citi Handlowy consumer banking employees, will create an excellent environment for professional development.

Future Shareholder Returns

After exiting the consumer business, Citi Handlowy will remain a company listed on the Warsaw Stock Exchange. Citi Handlowy also plans to continue its dividend policy by allocating 75%-100% of net profit to dividend payments, subject to regulatory approval.

It is the bank's intention to pay out to shareholders the proceeds from the sale of the consumer business, subject to regulatory approval.

So what for investors? The VeloBank transaction crystallizes value from a business segment that Citi had determined wasn't scalable globally. The immediate impact is a PLN 380 million one-time loss, but the medium-term effect should be a more focused, higher-return institution. The key risk is execution—can Citi Handlowy actually grow institutional banking fast enough to replace the departed consumer earnings?

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IX. The Future: "Bank for Global Business" Strategy 2025-2027

With the consumer banking exit announced, Citi Handlowy unveiled its vision for the future: a pure-play institutional bank focused on Poland's most significant economic opportunities.

Financial Targets

By 2027, the return on equity (ROE) is expected to be around 19%, return on assets (ROA) is to be around 2.6%, and cost-to-income ratio (C/I) below 30%.

The company's new goals include keeping the cost of income ratio below 30%, compared to the 45% seen in the strategy published in December.

The strategy assumes annual growth of the Institutional Banking clients' assets at the level of 7% over 3 years, return on equity above 15% throughout the period covered by the strategy and maintaining cost discipline. The bank will also continue to pay dividend of minimum 75% net income, subject to regulatory approval.

Competitive Advantages

Through Citi's global distribution network the bank enables clients to conclude investment banking transactions and offers its clients a wide range of capital market transactions, both in terms of products and geography, which is an unquestionable competitive advantage. The Group aims to further support its institutional clients and develop cooperation regarding products of investment banking and capital markets.

The expansion of Citi Handlowy's operations will be based on the competitive advantages of institutional banking, including access to Citi's global network and Citi's presence in 94 countries. This is not only a geographical advantage but access to expertise and know-how in executing and coordinating complex transactions on global markets.

Defense Sector Opportunity

Poland's defense spending presents a transformational opportunity for institutional banking. Polish President Andrzej Duda announced on Wednesday that his country plans to spend 4.7% of GDP on defence this year. According to Duda, the national defence budget is expected to reach €30 billion, which would make it the largest defence budget among NATO countries.

In 2025, Poland's defense spending is projected to reach a record 186.6 billion zlotys (approximately $45 billion), exceeding the 2024 budget by 28.6 billion zlotys ($7 billion).

4% of its GDP spent on defense in 2024 and plans to reach 4.7% in 2025. Poland now leads the alliance in defense spending as a percentage of GDP, surpassing even the United States, and has arguably emerged as Europe's most capable military power and a key thought leader on defense matters.

From this year, Polish defense spending is expected to amount to 5% of GDP, which is the highest percentage among NATO members. Citi Handlowy expects that defense spending will drive technological innovation and infrastructure development.

Energy Transition

The bank is prioritizing energy sector decarbonization and investing in AI tools to improve service quality.

The bank will also support energy transition, which is the most important element in building Poland's energy security. The necessary spending for this purpose is estimated at PLN 900 billion. Citi Handlowy will provide various forms of financing for energy projects, financial risk management, and foreign exchange.

Key transactions highlighted in the presentation included a PLN 850 million debt securities issue for the European Investment Bank, a PLN 600 million public debt securities issue for a client in the automotive sector, and a PLN 400 million long-term loan for the European Bank of Reconstruction and Development focused on energy sector transformation and decarbonization.

Market Leadership Positions

The bank achieved its highest historical result in Custody activities, reaffirming its dominant market position with over 40% market share in Poland.

Custody, this is where we are number one in the market. When you look at year-on-year growth, it was up 32%.

Recent Performance: Q2-Q3 2025

Despite the transition costs, Bank Handlowy delivered solid financial results in Q2 2025. The bank's net profit excluding the Consumer Banking transaction loss amounted to PLN 546 million, representing a 26% increase quarter-over-quarter.

Institutional Banking emerged as the primary growth driver, with loan volumes increasing by 7% quarter-over-quarter and 19% year-over-year, outpacing the banking sector average.

Bank Handlowy achieved a net profit of PLN 469 million in Q3 2025, with a return on equity of 17.1%. The lending portfolio grew by 14% year-on-year, while deposits increased by 16%.

The bank aims to maintain a strong dividend policy, with plans to distribute PLN 1.3 billion plus an additional PLN 450 million to shareholders.

So what for investors? The 2025-2027 strategy represents a significant bet that institutional banking—powered by Poland's defense modernization and energy transition—can fully replace consumer banking earnings. The early results are encouraging, with institutional loan growth outpacing the sector. But success depends on factors largely outside the bank's control: Poland's economic trajectory, defense spending execution, and the pace of energy transition investment.

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X. Competitive Analysis & Investment Framework

The Polish Banking Landscape

In Poland, banks are relatively concentrated, with the five largest lenders – PKO BP, Bank Pekao, Santander Bank Polska, ING Bank Śląski and mBank – holding a combined 56.6% share.

PKO Bank Polski, as of September 2024, commanded a substantial 15.70% of the market by assets. The bank also leads in deposit gathering, securing a 17.9% market share.

Powszechna Kasa Oszczędności Bank Polski S.A. ranks as the 1st largest bank in Poland by total assets. In 2024 its total assets were 500.75 bln PLN, representing a 14.90% market share. In 2024 the bank's net income was 9,150.00 mln PLN.

Citi Handlowy's 2.16% market share positions it as a niche player by asset size—but its profitability metrics tell a different story. The bank's 21.1% ROE significantly exceeds sector averages, reflecting its focus on high-margin institutional services rather than volume-driven retail lending.

Porter's Five Forces Analysis

Threat of New Entrants: Low Post-2008 global financial crisis reforms, implemented via the EU's Capital Requirements Directive IV and aligned Basel III standards, imposed higher capital buffers—typically 8-10.5% of risk-weighted assets plus additional countercyclical buffers—to enhance resilience against economic shocks. Market competition intensified from state-dominated entities like PKO Bank Polski, which hold over 30% of sector assets and benefit from implicit government support, alongside rising fintech challengers.

Bargaining Power of Buyers: Moderate for Institutional, High for Retail Institutional clients with international needs have limited alternatives to Citi's global network—giving Citi Handlowy pricing power in this segment. The retail exit acknowledges that consumer banking offered little such differentiation.

Bargaining Power of Suppliers: Low Banks source capital from diversified depositor bases and wholesale markets. Citi Handlowy's parent company relationship provides additional funding flexibility.

Threat of Substitutes: Increasing Alternative credit providers are altering financing terms. Strategic moves like mergers and acquisitions significantly alter competitive dynamics. Furthermore, fintech companies are disrupting the traditional banking model with specialized and agile digital solutions.

Competitive Rivalry: Intense The Polish banking sector is characterized by fierce competition. PKO Bank Polski aims to be a leader in customer satisfaction, targeting a top-three Net Promoter Score (NPS) position across all customer segments by 2025.

Hamilton Helmer's 7 Powers Analysis

Scale Economies: Limited With 2.16% market share, Citi Handlowy lacks the scale advantages of PKO BP or Bank Pekao in retail banking. The consumer exit acknowledges this reality.

Network Effects: Strong in Institutional Citi's 94-country presence creates genuine network effects for clients with international operations. A Polish company expanding to Germany, Southeast Asia, or Latin America benefits from relationships with a single bank that operates in all markets.

Counter-Positioning: Potentially Strong The pivot to pure institutional banking represents counter-positioning against larger Polish banks that remain committed to universal banking models. If institutional-only proves more profitable, competitors face the incumbent's dilemma: cannibalize profitable retail franchises or cede institutional ground.

Switching Costs: Moderate to High Corporate treasury relationships, custody arrangements, and trade finance facilities create meaningful switching costs. The more integrated a client's operations with Citi's systems, the higher the cost to move.

Branding: Strong in Target Segment The 155-year heritage combined with Citi's global brand creates credibility with institutional clients. The Kronenberg Foundation continues the founder's legacy of community engagement.

Cornered Resource: Global Network Access to Citi's global infrastructure—in 94 countries—represents a cornered resource that no Polish competitor can replicate. This is Citi Handlowy's most defensible advantage.

Process Power: Emerging The bank's investments in AI and digital transformation aim to build process advantages in client service and risk management.

Bull Case

1. Defense spending catalyst: Poland's €30 billion defense budget creates massive financing needs. Citi Handlowy's expertise in complex project finance and international syndication positions it to capture disproportionate share.

2. Energy transition wave: PLN 900 billion in estimated energy transition spending represents a multi-decade opportunity. Citi's global experience in renewable energy financing—from offshore wind to grid modernization—provides competitive advantage.

3. Operational leverage: The consumer exit should drive cost-to-income ratio from 45% to below 30%, potentially generating significant operating leverage as institutional revenue grows.

4. Capital return: With PLN 1.1 billion from the VeloBank transaction plus ongoing earnings, substantial capital returns to shareholders appear likely.

Bear Case

1. Execution risk: Replacing consumer banking earnings requires 7% annual growth in institutional assets. Any shortfall would depress ROE from the targeted 19%.

2. Parent company constraints: Citi's global strategic decisions—not Polish market conditions—drive major choices. Another shift in New York could disrupt Poland operations.

3. Concentration risk: Defense and energy concentration creates sector-specific exposure. A slowdown in either—whether from budget pressures or policy changes—would directly impact growth.

4. Competitive response: PKO BP and other major Polish banks may intensify institutional banking efforts, eroding Citi Handlowy's differentiation.

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Key Performance Indicators to Monitor

For investors tracking Citi Handlowy's strategic execution, three KPIs merit particular attention:

1. Institutional Banking Loan Volume Growth Target: 7% annually through 2027 Why it matters: This single metric captures whether the strategic pivot is working. Growth above target suggests successful penetration of defense/energy opportunities; shortfalls indicate execution problems or competitive pressure.

2. Cost-to-Income Ratio Target: Below 30% by 2027 Why it matters: The consumer exit should deliver meaningful cost savings. The C/I trajectory reveals whether operational efficiencies materialize as planned and whether institutional banking generates sufficient revenue to offset lost consumer income.

3. Custody Market Share Current: >40% Why it matters: Custody represents Citi Handlowy's strongest competitive position. Maintaining or expanding this share demonstrates the durability of the bank's institutional franchise, while erosion would signal broader competitive pressure.

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Material Risks & Regulatory Considerations

Regulatory Environment

The banks are currently facing a new challenge – a draft law planning to increase the CIT rate from 19% to 30%. The proposal to permanently increase the CIT rate for banks – and banks only – is a sector-specific injustice.

A potential 11 percentage point increase in corporate tax rates would directly impact profitability. Unlike temporary levies, a permanent rate increase would reduce the bank's earnings capacity indefinitely.

Parent Company Dependencies

Citi Handlowy's strategy is ultimately determined in New York, not Warsaw. While the consumer exit aligns with Poland's best institutional banking opportunities, future Citigroup strategic shifts could create discontinuities.

Macroeconomic Sensitivity

GDP growth is forecast between 2.9% and 4.3% through 2026, with investments expected to grow between 3.5% and 4.8%.

Poland's economic trajectory—particularly investment spending driven by EU funds and defense commitments—directly impacts institutional banking demand. Any significant slowdown would pressure loan growth targets.

Swiss Franc Mortgage Legacy

Unlike several Polish competitors, Citi Handlowy has minimal exposure to the Swiss franc mortgage legal risks that have burdened banks like PKO BP and mBank. PKO Bank Polski has been actively addressing legal risks stemming from Swiss franc mortgage loans. In Q1 2025, PKO Bank Polski allocated nearly PLN 1 billion for these provisions. This represents a significant competitive advantage in terms of regulatory capital and legal certainty.

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Concluding Perspective

Bank Handlowy w Warszawie stands at another inflection point in its remarkable 155-year history. The institution that Leopold Kronenberg founded to develop Polish industry during Russian partition, that became the Communist regime's indispensable foreign trade channel, that survived Poland's largest transition-era scandal, and that joined one of the world's largest financial conglomerates, now transforms itself once more.

The consumer banking exit and pivot to pure institutional banking represent the most dramatic business model change since the Citigroup acquisition. Success depends on Poland's defense modernization and energy transition delivering the financing opportunities that management expects—and on Citi Handlowy capturing its share of that demand.

The bank's competitive advantages are real: a 94-country global network, 155 years of institutional memory, dominant custody market share, and relationships with Poland's largest corporations. Whether these advantages translate into the 7% annual loan growth and sub-30% cost-to-income ratio that the strategy requires remains to be seen.

For 155 years, Bank Handlowy has demonstrated an uncanny ability to position itself as useful to whoever controls Poland—while maintaining the institutional continuity and international relationships that make it valuable regardless of political circumstances. The coming years will test whether that adaptability extends to a world where institutional banking expertise and global connectivity matter more than branch networks and credit cards.

The Kronenberg philosophy of national development through private enterprise lives on. The question is whether it can deliver the returns that 21st-century shareholders expect.