For the major German bank, the Polish subsidiary mBank is again a burden.
(Photo: Reuters)
Berlin Commerzbank has to digest high burdens again at its Polish subsidiary M-Bank. As a result of a model review, the institute will make additional risk provisions of 490 million euros for granted franc loans, the money house announced on Tuesday evening. This will have a correspondingly negative impact on Commerzbank’s earnings in the third quarter.
Due to low interest rates in Switzerland, many Poles took out loans in Swiss francs to finance their homes. Then the national currency, the zloty, lost a lot of value against the Swiss franc, increasing the burden on home builders.
Many borrowers then took action against Polish financial institutions because of possibly unlawful clauses. M-Bank therefore had to increase its risk provisions for foreign currency loans several times – with the booking now announced, it now totals EUR 1.43 billion.
CFO Bettina Orlopp still assumes that Commerzbank will achieve a profit of more than one billion euros in the current year, as planned. “Despite the recent burdens in Poland, we are sticking to our earnings target for 2022 in view of the overall strong earnings development,” explained Orlopp.
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However, this forecast is still subject to the proviso “that the economic effects of the geopolitical situation do not worsen significantly and that the uncertainties about the energy supply do not require a significant increase in risk provisions for potential future loan defaults”.
After a decision by the Polish Supreme Court on how to deal with Swiss franc loans had been postponed several times, the Polish financial regulator KNF advised financial institutions in autumn 2021 to seek out-of-court settlements with their customers.
M-Bank then started a pilot project in which they offered comparisons to some customers. The institute has now announced a new comparison program in order to make individual agreements with more customers. “With the additional provision, M-Bank is creating further leeway for agreements in its Swiss franc portfolio,” emphasized Orlopp.
Commerzbank is examining legal steps
Commerzbank had already warned in July that M-Bank would face charges of EUR 210 to 290 million in the third quarter because of zloty loans. The reason is a new law suspending installment payments for real estate loans.
It is intended to relieve private borrowers in Poland in view of the high inflation and increased interest rates on loans. The law allows them to suspend their monthly installment payments on current mortgage loans up to eight times until the end of 2023. M-Bank expects that 60 to 80 percent of eligible borrowers will make use of the so-called “credit holidays”.
In addition, M-Bank has to pay around 30 million euros into a newly created fund for borrowers who have run into payment difficulties. In addition, there is a levy of 83 million euros for the supplement to the Polish deposit insurance.
Commerzbank boss Manfred Knof finds the political intervention in Poland “very unusual, because the burdens are unilaterally borne by the banks,” he said in August. “We doubt that this is compatible with European law.” Germany’s second largest private bank is therefore examining legal steps and also “how we can become active here, for example with the EU in Brussels”.
Commerzbank holds 69.3 percent of its subsidiary M-Bank. Knof’s predecessor Martin Zielke announced a sale of the stake in 2019, but then called off the sale in May 2020.
The M-Bank share price had fallen so much at the time due to the dispute over Swiss franc loans and the outbreak of Corona that Commerzbank was unable to achieve an attractive price. In addition, according to financial circles, the last remaining interested party, the second largest Polish bank Pekao, did not want to take on the risks associated with Swiss franc loans as part of a transaction.
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