Commerzbank said that its fourth-quarter earnings would be impacted by provisions made at its Polish mBank subsidiary. It would still post a net profit for the full year. The German lender said that mBank had made provisions regarding the foreign currency indexed loan agreements in the amount of 2.006 billion zloty. Also, added that its fourth-quarter results would be impacted by a corresponding amount. The additional sum, which translates to around 436 million euros, brings provisions for Germany’s No. 2 bank to around 600 million euros.
The provision is painful for Commerzbank. It is in the midst of a costly restructuring, involving cutting headcount by 10,000 people and closing branches. The issue, which has affected banks operating throughout Poland, stems from more than a decade ago. This is when mortgage customers took out loans in Swiss francs to take advantage of low Swiss interest rates. And that too, only to face far higher costs when the value of the Polish zloty slumped.
Polish courts have been deciding how the loans can be treated. This includes what banks can charge in interest for the loans. Hereby this is creating uncertainty for banks and their bottom lines. The German lender’s Frankfurt-listed shares were down 3.5% after this announcement. Commerzbank had attempted to sell mBank but this effort has been abandoned after an auction petered out in 2020.
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