Commerzbank AG will take a charge of 342 million euros ($372 million) in the second quarter on some Polish mortgages after an unfavorable court ruling last week.
(Bloomberg) — Commerzbank AG will take a charge of 342 million euros ($372 million) in the second quarter on some Polish mortgages after an unfavorable court ruling last week.
“Despite this burden, Commerzbank still aims for a net result in 2023 well above that of 2022,” the lender said in a statement Friday confirming its previous guidance. However it also said that the outlook “depends on the further development of mBank’s Swiss franc mortgages and is based on the assumption of a mild recession in Germany.”
Last week’s European Court of Justice ruling will allow Polish customers to avoid paying interest on Swiss franc-based mortgages deemed unfair. Commerzbank has been ratcheting up provisions at its Polish unit mBank almost quarterly over the past couple of years as borrowers increasingly win court cases. The lender indicated at the time of the ECJ ruling that it was going to increase provisions as a result.
Read More: Polish Banks Suffer EU Court Blow Over Swiss Franc Mortgages
“mBank will continue to drive forward its successful settlement programme with borrowers,” Chief Financial Officer Bettina Orlopp said in a release. “In addition, a legal solution to the foreign currency issue in Poland would be desirable.”
The total amount of provisions Commerzbank has made for mBank’s Swiss franc mortgages is now about 1.7 billion euros, it said in the release.
The court’s decision is part of a decade-long saga that has led to more than 130,000 lawsuits in Polish courts by disgruntled mortgage holders over potentially “abusive” terms in their contracts, and how to settle payments when the loans get annulled.
The loans are denominated in Swiss franc and essentially a remnant from before the global financial crisis when many Poles took out the mortgages at much lower interest rates than were available in local currency at the time. But the Polish zloty has since depreciated massively against the Swiss currency, making the loans more onerous for borrowers.
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