Polish Banks With Franc Risk Face Dividend Curbs, Regulator Says

Polish banks with significant Swiss-franc loan holdings may not be able to pay dividends on their 2014 profit as discussions with regulators continue on how to limit risk to the foreign-currency debt.

The Polish financial market regulator, which is at odds with banks over how to reduce franc-denominated loan books, will give individual lenders recommendations for dividends next month, the Financial Supervision Committee said in an e-mailed statement Tuesday, without naming lenders. PKO Bank Polski SA, Poland’s largest lender, MBank SA, a unit of Commerzbank AG, and Bank Millennium SA, controlled by Banco Comercial Portugues SA, are among the biggest Swiss-franc creditors.

“The ban on dividend payout will almost certainly be applied for MBank and Millennium, as their exposure to the Swiss franc is above the market’s average,” Marta Jezewska-Wasilewska, a Warsaw-based analyst at Wood & Co. brokerage, said by phone. “PKO and Bank Zachodni face high risk of not being allowed to pay dividends, as their exposure is at the market’s average and this leaves it for the supervisor’s interpretation how it will treat those two.”

The surprise Jan. 15 decision by Switzerland’s central bank to lift its currency cap sent the Polish zloty tumbling 22 percent against the franc. The financial supervisor proposed a plan to convert 131 billion zloty ($35 billion) of franc loans into zloty, an option bank executives oppose because they say it would hurt the industry. Both sides want to find a solution by end of May.

PKO shares dropped 1.6 percent, the most in six weeks, to 34.85 zloty in Warsaw today. MBank fell 1.3 percent and Millennium declined 0.1 percent.

Because the surging franc has increased the value of some loans in relation properties to above 100 percent, the supervisor is working on increasing capital requirements for banks with Swiss franc exposure, it said in the statement. It aims to complete work on the capital requirement boost by the end of this year.

On March 3, MBank said it plans to pay 17 zloty a share as a dividend from 2014 profit. PKO said in January it plans to continue paying dividends.

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