March 13 (Bloomberg) -- OTP Bank Nyrt. of Hungary and Poland’s BRE Bank SA led advances among lenders in eastern Europe as a weaker Swiss franc eased concern banks will have to boost provisions for foreign-currency loan defaults.

OTP Bank, Hungary’s biggest lender, climbed from a one-week low, while BRE, a unit of Commerzbank AG, surged as much as 12 percent. The franc tumbled after the Swiss central bank said yesterday it will take action to stem the currency’s appreciation and reduced its main interest rate close to zero.

Polish households that have 70 percent of mortgages in foreign currencies, mostly Swiss francs, have been stung with higher repayments as the zloty sank 27 percent against the Swiss franc in the past six months. In Hungary, non-forint mortgage loans account for about 63 percent, contributing to the debt crisis that forced the government to seek an International Monetary Fund bailout in October.

“The weaker Swiss franc brought some relief to banks and their clients,” said Miroslaw Dziolko, who helps manage the equivalent of $470 million at Bank Millennium SA’s mutual fund in Warsaw. “Now we need to keep our fingers crossed this trend will be sustained.”

Hungary’s benchmark BUX Index jumped 4.1 percent to close at 9,852.83 and Poland’s WIG20 Index fell 0.4 percent to 1,488.80. The Swiss franc sank 5.7 percent against the zloty in the past two days.

OTP Bank jumped 80 forint, or 5.3 percent, to 1,580 forint. Foldhitel es Jelzalogbank Nyrt., Hungary’s second-biggest mortgage lender, increased as much as 16 forint, or 3.1 percent, to 535 forint.

Converting Mortgages

Hungary’s government may help finance the cost of converting mortgage loans in foreign currency to reduce risk during the credit crisis, Nepszabadsag reported today, without citing anyone.

BRE, whose foreign-currency loans made up 89 percent of all its retail lending at the end of last year, climbed 8.9 zloty, or 8 percent, to 119.9 in Warsaw. Getin Holding SA, the financial- services group controlled by Polish billionaire Leszek Czarnecki, advanced 0.18 zloty, or 5.5 percent, to 3.44 zloty.

Bank Millennium SA, controlled by Banco Comercial Portugues SA, increased to a one-month high, adding 0.07 zloty, or 4 percent, to 1.84.

Polish banks, which led declines in domestic equities this year, posted a 34 percent drop in fourth-quarter earnings as bad- debt provisions jumped five-fold, according to data published on the financial regulator’s Web site. Foreign banks control 67 percent of Polish banking assets, led by UniCredit SpA, Commerzbank and ING Groep NV.

To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net

Last Updated: March 13, 2009 12:00 EDT