Commerzbank AG is set to take a charge of €342 million ($372 million) in Q2 2020 on some Polish mortgages, due to an unfavorable court ruling last week. The lender has been increasing provisions at its Polish unit, mBank, almost quarterly in response to borrowers winning cases. Last week's European Court of Justice (ECJ) ruling will allow Polish customers to avoid paying interest on Swiss franc-based mortgages deemed unfair.
Commerzbank confirmed in a statement on Friday that, despite the charge, it still aimed for a higher net result in 2023 compared to 2022, however, this outlook depends on the further development of mBank's Swiss franc mortgages and is based on the assumption of a mild recession in Germany.
mBank's Chief Financial Officer, Bettina Orlopp, said in a release, "mBank will continue to drive forward its successful settlement programme with borrowers. In addition, a legal solution to the foreign currency issue in Poland would be desirable." Commerzbank added in the statement that the total amount of provisions made for mBank’s Swiss franc mortgages is now around €1.7 billion.
This decision is part of a longer-term saga that has resulted in over 130,000 lawsuits in Polish courts by disgruntled mortgage holders over potentially "abusive" terms in their contracts, and how to settle payments when the loans are annulled. The loans are denominated in Swiss francs and are a remnant from prior to the global financial crisis when many Poles took out mortgages at lower interest rates than were available in the local currency at the time. However, the Polish zloty has since depreciated massively against the Swiss currency, making these loans more onerous for borrowers.