Polish Banks Getin, Millennium Decline on Loan Conversion Plan
(Bloomberg) — Shares in Getin Noble Bank SA and Bank Millennium SA fell on concern their profits will be cut as much as 30 percent by the Polish financial market supervisor’s plan to convert Swiss-franc mortgage loans to zloty.
“This could have a potentially big negative impact on the Polish banks,” Marta Jezewska-Wasilewska, an analyst at Wood & Co., wrote in a research note in Warsaw on Wednesday. “It wipes out 20 percent to 30 percent of the profits at the two banks.”
Poland’s financial supervisor is working on a voluntary- conversion plan of franc-denominated mortgages into zloty loans after the surprise decision of Switzerland’s central bank to end its currency cap on Jan. 15. The Swiss action sent the zloty tumbling 22 percent against the franc and swelled payments for 563,000 families with such debt. The Polish conversion plan may cost the banking industry as much as 25 billion zloty ($6.85 billion) over 20 to 25 years, Andrzej Jakubiak, head of the supervisor, said on Feb. 3.
Getin Noble and Millennium are among banks with the most loans denominated in Switzerland’s currency, according to data compiled by Bloomberg. Getin, controlled by a Polish billionaire Leszek Czarnecki, plunged as much as 10.5 percent and traded 9.5 percent down at 1.82 zloty as of 2:05 p.m. in Warsaw. Millennium, a unit of Banco Comercial Portugues SA, declined 5.5 percent to 6.75 zloty.
Conversion Plan
Wojciech Kaczorowski, a Bank Millennium spokesman, and Wojciech Sury, a Getin spokesman, declined to comment on the plan.
Jakubiak said his office is analyzing how to convert franc loans into two zloty-denominated ones. The first loan would correspond to the value of the original Swiss-franc credit in zloty on the day it was extended and would be secured by the mortgaged property. A second unsecured loan would represent the excess value of the Swiss-franc debt at the current exchange rate over the converted amount.
Half of this difference would be paid off by the borrower, and half would be forgiven by the lender, Jakubiak said.
Even if the supervisor doesn’t require banks to convert loans, it “will be able to impose proposed solutions on banks,” Kamil Stolarski, a Warsaw-based analyst at Banco Espirito Santo SA, said in a note to investors.
Getin, which has more than 20 percent of its outstanding loans in the Swiss currency, would probably have to sell shares to increase capital if it converts mortgages, Stolarski said. The supervisor’s announcement cut the bank’s market value by 20 percent, he said.
PKO Bank
Other banks at risk are PKO Bank Polski SA, the country’s largest lender, and MBank SA, a unit of Frankfurt-based Commerzbank AG. At MBank, the conversion plan “would wipe out more than 10 percent of annual profit,” Jezewska-Wasilewska said. PKO’s profits may fall about 7 percent, she said.
The supervisor’s proposal is “most profitable” for borrowers who took Swiss franc home loans in the second half of 2008, Maciej Marcinowski, an analyst at Trigon Dom Maklerski SA, said by phone on Wednesday.
“If only those borrowers, who are holders of about a fourth of such loans value, decided to covert to zloty, the loss for banks would be about 6.5 billion zloty.” Marcinowski said.
Jakubiak is to meet with bank representatives on Feb. 6 to discuss the proposal, which he called “a starting point” for talks with the industry.
To contact the reporter on this story: Marta Waldoch in Warsaw at mwaldoch@bloomberg.net To contact the editors responsible for this story: Elisa Martinuzzi at emartinuzzi@bloomberg.net Steve Bailey, Jon Menon
