mBank has released the amount of legal risk costs connected with CHF mortgages for Q3 and their impact on the bank’s financial performance in 2022. In addition, the bank has announced a settlement programme for all CHF borrowers due to start in October.
The legal risk costs connected with CHF mortgages for Q3 2022 amounted to PLN 2,336 million (the total value of provisions created for legal risk related to foreign currency mortgage loans as of 27 September 2022 will amount to PLN 6,803 million). Coupled with the costs of credit holidays (initially estimated at PLN 1–1.4 billion), this is likely to push mBank Group’s net profit for 2022 into negative territory. After the first six months of the year, the Group posted a net profit of PLN 742 million (PLN 1,147 million excluding the FX mortgage business).
Regardless of the CHF issues, mBank Group has been running a stable and profitable business. Operating results in Q3 2022 were strong and roughly in line with the trends observed in the previous quarters (the Group will release its Q3 financial statements on 8 November). The bank’s capital and liquidity ratios are ahead of regulatory requirements. This guarantees the security of clients and their deposits entrusted to the bank.
Settlements for CHF borrowers due for launch in October
At the same time, mBank announced its plan to offer settlements to all clients having active CHF mortgages. The offer will comprise loan currency conversion and a reduction in the outstanding principal. The clients will have the option to individually negotiate the terms and conditions of the reduction. To borrowers who decide to convert their mortgages into PLN the bank will additionally offer a semi-fixed interest rate lower than the standard interest rate offered to clients. This will eliminate the foreign currency risk once and for all and the interest rate risk in the next five years.
In working out the programme details the bank drew upon its experience gained from the recent pilot run during which it tested a number of settlement variants among clients representative of the general population of borrowers. This exercise showed that clients interested in settling with the bank expected an individual approach, which was also proved by the results of a preference survey.
The settlement programme will be introduced in stages, starting this October. More details will be revealed at the launch. Customers should wait for information – bank will contact them actively.
Revised assumptions about the risk of litigation from clients
The update of costs relating to legal risk posed by CHF loans is primarily driven by revisions to the bank’s assumptions about the risk of litigation from client and the number of borrowers expected to go to court or settle with the bank. The revised legal risk provisions will adequately secure the bank in the context of CHF litigations.