Poland opts to go slow on Swiss-loan fix

Poland / Bloomberg

Polish banks jumped on a newspaper report that President Andrzej Duda will tone down his proposal to help the country’s Swiss-franc-denominated mortgage takers and won’t force lenders to convert $36 billion in home loans into zloty.
Fixing the issue of foreign-currency loans, mainly in Swiss francs, has hung over Polish lenders for more than a year, preventing consolidation and adding to their troubles as the government imposed the European Union’s highest tax on their assets. Duda plans to make banks pay back to clients “several” billion zloty of “excessive” exchange-rate spreads, daily Rzeczpospolita reported on Tuesday, citing sources it didn’t name.
Duda, whose office will hold a news conference to detail its plans at 11 a.m. in Warsaw, made helping the country’s 565,000 foreign-currency mortgage holders a key plank of his election campaign last year. While Duda’s earlier proposal for the Swiss-loan fix was called “pure evil” by former central bank Governor Marek Belka, Polish lenders rallied on Tuesday on speculation the new plan will not be as costly. “If Rzeczpospolita is right, the bill would have turned out to be very pragmatic,” Kamil Stolarski, an analyst at Haitong Bank SA in Warsaw, said a note. “The CHF-involved banks could see a material rally today.”
PKO Bank Polski SA, Poland’s largest lender, jumped 6.5 percent to 25.35 zloty at 10:16 a.m. in Warsaw, on track for the strongest advance in five years. Bank Zachodni WBK SA and MBank SA, the third- and fourth-biggest, gained 3.1 percent and 4.8 percent, respectively. Lenders with larger Swiss-loan portfolios climbed even more, with Getin Noble Bank SA soaring 16 percent and Bank Millennium SA 14 percent.
Poland is following other eastern European countries that moved to convert foreign-currency mortgages, which accumulated before the 2008 financial crisis as borrowers flocked to secure low interest rates. The zloty has lost half of its value against the franc in the past six years. That has made the value of more than half of such loans higher than that of the underlying property.
An earlier set of proposals for the loan fix, presented by Duda’s advisers in June, envisaged capping bank costs at around 1 billion zloty ($257 million) per year. Such a plan would avoid “an A-bomb” scenario that could rock the country’s lenders, Bank Zachodni analyst Dariusz Gorski said at the time.
Poland’s banking industry, where foreign investors control 60 percent of the assets, earned 11.3 billion zloty last year, central bank data show.
The zloty traded 0.2 percent stronger against the euro at 4.3512, the only developing-nation currency of 24 tracked by Bloomberg to advance on Tuesday. Government bonds gained and the WIG20 stock index rallied 1.2 percent, led by banks.
“If this information is confirmed, it will reduce a significant amount of the risk premium on the zloty and other assets,” MBank economists, led by Ernest Pytlarczyk, said in an e-mailed report to clients. “The zloty may rouse itself from lethargy.”