Polish lender PKO BP's Q3 profit drops on Swiss franc loans provision
Q3 net profit down 11% y/y on Swiss franc loans provisions
Q3 earnings of 2.46 bln zlotys narrowly beat estimates
ROE maintained above 20%
Higher-than-expected Q3 NII, NIM growth - analyst
Adds analyst comment in paragraph 4, details throughout
By Mateusz Rabiega
GDANSK, Nov 7 (Reuters) -Poland's biggest bank PKO BP PKO.WA posted an 11% fall in its third-quarter net profit on Thursday, hurt by a 994 million zlotys ($246.20 million) provision accrued for its Swiss franc mortgage loans, offsetting higher core revenues.
The quarterly reserves for legal risks associated with the Swiss franc mortgage loans rose 1.2% sequentially during the third quarter.
However, the bank managed to maintain its return-on-equity (ROE) ratio above 20% in the third quarter, despite the troublesome mortgages dogging Polish banks for years.
"Despite cost of provisions in CHF loans, ROE exceeded 20%," Erste Group analyst Lukasz Janczak wrote in a note. He also highlighted the bank's profit in line with expectations, with higher-than-expected net interest income (NII) and net interest margin (NIM).
The largest Polish bank by total assets reported a quarterly profit of 2.46 billion zlotys, narrowly beating market expectations of 2.45 billion zlotys, according to data in a bank-compiled consensus.
The company's quarterly NII jumped 23% to 5.73 billion zlotys, while the NIM improved by 53 basis points to 4.88%.
Hundreds of thousands of Poles took out mortgages in foreign currencies, mainly in Swiss francs, in the early to mid-2000s, attracted by lower interest rates.
They are now repaying them in far larger instalments than expected after the Swiss franc soared against the zloty and interest rates in Switzerland were hiked.
The bank signed 1,853 in-court settlements over Swiss franc mortgages in the third quarter, having expected the number to at least equal the inflow of new lawsuits.
The new cases concerning the infamous loans more than halved to 1,309 in the third quarter.
($1 = 4.0374 zlotys)
Reporting by Mateusz Rabiega; Editing by Abinaya Vijayaraghavan
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