Commerzbank, a German financial institution, announced that it would suffer a 490 million euro ($471 million) loss in operating profit for the third quarter as a result of its Polish mBank unit booking additional provisions for its Swiss franc loans.
The German lender stated that despite this, it still anticipated achieving its net profit goal of over 1 billion euros for the entire year.
Following the information, Commerzbank’s Frankfurt-listed shares fell 5.5 per cent. Commerzbank is undergoing a costly restructuring that will result in the loss of 10,000 jobs and the closing of branches.
In order to take advantage of the low Swiss interest rates, mortgage customers took out loans in Swiss francs more than ten years ago. However, when the value of the Polish zloty plummeted, they were forced to pay much higher interest rates. This problem has affected banks all over Poland and dates back to that time.
Polish courts have been deciding how the loans can be handled, including what interest rates banks can charge for the loans, which has put banks’ financial situations in doubt.
“Despite the new burden in Poland, we are maintaining our earnings target for the full year 2022 in view of the strong overall revenue development,” said Commerzbank’s finance chief Bettina Orlopp.
Commerzbank tried to sell mBank but gave up after the 2020 auction failed to generate any interest.
In July, Commerzbank disclosed that a Polish law allowing mortgage borrowers to forego monthly repayments up to eight times through the end of 2023 would also have an effect on it in the third quarter.
(Adapted from Investing.com)