On the Warsaw Stock Exchange, Polish banks, reporting their financial results, revealed the scale of financial problems related to new loan holidays and ongoing issues with foreign currency loans.
After the series opening the Q1 earnings season on the WSE, most banks reported weaker-than-expected profits. This is mainly due to the ongoing necessity of resolving Swiss franc loan issues, with the creation of reserves negatively impacting financial institutions’ results.
Some banks, like PKO BP, are placing their hopes in settlements. The bank has announced a much more active policy of offering settlements.
“The banks’ approaches vary, but they are very keen on settlements, and the results of these efforts are shown in the quarterly results,” says Tymoteusz Turski, an equity market analyst at XTB, in an interview with MarketNews24. “Bank reserves for Swiss franc loan losses are decreasing, settlements are increasing, but at the same time, Swiss franc borrowers are winning more and more cases, with over 90% of proceedings ending in their favor.”
Following the presentation of quarterly results, the most losing banks during a single trading session were mBank (-5.8%) and BNP PL (over -4%).
Another factor reflected in recent bank valuations is the issue of loan holidays.
“Approximately 562,000 borrowers are expected to take advantage of the loan holidays, according to estimates from the Ministry of Finance regarding the law that came into effect on May 15,” explains Tymoteusz Turski from XTB.
Companies have published estimates of the potential impact of the law on their results, and in most cases, these values were received negatively by the market.
Such a weakening of results is, of course, (for now) a one-time occurrence and should not affect banks’ long-term prospects. However, for many institutions, this one-time impact will be noticeable, as exemplified by the already mentioned mBank. The company estimates the negative impact of the holidays on its results to be around 36% of pre-tax profit for the entire 2023 year. BOŚ’s loss was estimated at 4.8%, and Bank Millennium’s at 17%.
“The biggest impact of the loan holidays will be felt by banks in the second half of this year, at which point they will also know how many borrowers have decided to take advantage of the loan holidays,” comments the XTB expert. “Almost all eligible borrowers will likely do so, and banks will show their losses in the results for Q2 2024. Meanwhile, investors are already trying to price in this risk.”
