A large Polish bank has estimated how much Swiss franc loans will cost. A considerable amount

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Despite the high costs of legal risk, the bank’s estimated preliminary net result for the first quarter is positive, and income reached a similar level as in the fourth quarter of 2023.

As we read in mBank’s announcement, additional costs of legal risk related to currency loans in the amount of PLN 260.3 million in the first quarter of this year. result from changes in model parameters. After taking into account the updated balances as at March 31, 2024, the total legal risk costs recognized by the bank in this period amounted to PLN 1,370.6 million.

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Results from core operations at the level of Q4 2023

Despite the significant burden of legal risk costs on its results, mBank reported a positive estimated net result for the first quarter of 2024. The bank also indicates that during this period it continued positive results from its core activities, and income reached a value similar to the level from the fourth quarter of 2023.

According to the announcement, the Tier 1 capital ratio and the total capital ratio for mBank Group for the first quarter of 2024 are expected to be at levels significantly exceeding capital requirements, amounting to 9.1% and 11.1%, respectively. The bank expects surpluses over these requirements to amount to over 4.5 percentage points. As reported, liquidity ratios also significantly exceed regulatory requirements.

The problem of loans indexed to CHF in Poland and Europe

Loans indexed to the Swiss franc constitute a significant problem for the banking sector in Poland and some European countries. This type of loans, popular especially in the years 2000-2010, were associated with exchange rate risk and potentially higher costs for borrowers if the franc strengthened.

After the significant strengthening of the CHF in 2015, many people found themselves in a difficult situation, and the issue of settlements and potential claims became the subject of court disputes and public debate. Banks must create provisions for the legal risk associated with these loans, which burdens their financial results.

There’s a lot of money at stake. For example, if someone bought an apartment for PLN 400,000. PLN borrowed from the bank, he repaid the principal and interest in the amount of PLN 270,000 over a period of 15 years. zloty. Meanwhile, as a result of mutual settlements, he will now only have to pay an additional PLN 130,000. zloty. However, according to current valuations, the apartment may be worth about PLN 700,000. zloty. The entire operation will therefore benefit mainly the borrower

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