Reuters - Financials

CORRECTED-UPDATE 1-PKO BP says mortgage bill affects third of its Swiss franc loans

(Corrects surname of deputy chief executive in third paragraph)

By Marcin Goclowski

Aug 10 (Reuters) – PKO BP, Poland’s biggest bank by assets, expects legislation allowing homeowners to convert Swiss franc mortgages into zlotys will apply to around 30 percent of its 32 billion zloty ($ 8.3 billion) Swiss franc loan portfolio, the bank’s deputy chief executive said on Monday.

Last week, the Polish parliament’s lower chamber passed the law which permits some Swiss franc mortgage holders to convert their loans into zlotys, mostly at the banks’ expense. Analysts estimate the cost for banks would be $ 5 billion.

“The level of loans, which could be covered by the bill … at a conservative estimate, stands at around 30 percent of (PKO BP’s Swiss franc) portfolio,” Piotr Mazur said at a news conference.

“The impact (of the bill) on PKO BP will be lower than the market average, because our (portfolio) is more diversified,” Mazur said. “70 percent of the loans were granted after the (Swiss franc’s) peak strengthening.”

More than half a million Poles took out home loans in Swiss francs, mostly between 2007 and 2008, hoping to benefit from low interest rates. Since then, the franc has risen more than 80 percent against the zloty, increasing repayments and trapping some owners in homes with values below the zloty market price.

A senior banking source told Reuters on the condition of anonymity that if implemented in its current form the conversion bill could cost the state-controlled PKO up to 3 billion zlotys.

Under the legislation, not all holders of Swiss franc home loans would be eligible to convert them into zlotys.

The bill still has to go through several stages before becoming law, including being approved by the country’s upper house of parliament.

($ 1 = 3.8364 zlotys)

(Writing by Wiktor Szary and Adrian Krajewski. Editing by Jane Merriman)

Reuters: Financials

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