Bank Millennium: Provisions for legal risk related to CHF loans amounted to PLN 505 million in Q4

Total provisions for legal risk associated with foreign currency mortgages created by Bank Millennium amounted to PLN 505 million (before tax) in Q4 2022, the bank said. For all of 2022, they amounted to PLN 2,017 million.

The further increase in these provisions in Q4 2022 was due to an update of parameters in the bank's provisioning methodology, reflecting, inter alia, an influx of court claims and a higher percentage of cases lost by banks, the bank announced.

At the end of December 2022, the balance of provisions for the bank's portfolio of foreign currency mortgages amounted to PLN 4,986 million (equivalent to 46.8% of the grossed-up foreign currency loan portfolio) and provisions for the former Euro Bank's portfolio of foreign currency mortgages amounted to PLN 409 million, the bank said.

The bank had 16,008 loan agreements and an additional 1,272 loan agreements from the former Euro Bank currently the subject of individual litigation (excluding claims brought by the bank against customers, so-called collection cases), relating to indexation clauses in foreign currency mortgage loans as of the end of December 2022.

The bank places a high priority on reducing its portfolio of foreign currency mortgages and the associated risks, and therefore remains open to individually negotiated amicable solutions (including conversion of loans into PLN, early partial or full repayment, and total "voluntary settlements"). As a result of these negotiations and other natural factors, in 2022 the number of active foreign currency mortgages decreased by almost 9,600 to 38,011, a comparable result to that in 2021 (10,300), the bank announced.

The number of voluntary settlements in Q4 2022 was 1,312, slightly less than in previous quarters. Nevertheless, this was the seventh consecutive quarter in which the decline in the number of active foreign currency mortgage contracts (and the number of voluntary settlements) was greater than the influx of new individual lawsuits against the Bank. For all of 2022, the number of voluntary settlements amounted to 7,943, compared to 8,449 in 2021. Since the beginning of 2020, when the settlement offer was more actively launched, nearly 18,000 amicable settlements have been concluded, the bank announced.

Costs related to voluntary settlements amounted to PLN 110 million (before tax, included in the line of result from exchange items and also in the line of result from modifications) in Q4 2022 and PLN 486 million in the full year 2022, while legal costs, included in administrative expenses and other operating expenses, amounted to PLN 55 million in the period and PLN 131 million in the full year 2022, it said.

As a result of the above trends, the Bank's foreign currency mortgage portfolio decreased by 4% during Q4 2022 (in CHF, gross, excluding the impact of the allocated legal risk provision) while the year-on-year rate of decline was 17%. The share of the total portfolio of foreign currency mortgages (gross less allocated legal risk provisions) in the group's gross loan portfolio declined to 8.9% by the end of 2022, while the share of foreign currency mortgages granted by the Bank fell to 8.1%, according to the bank.

Source: Bank Millennium and ISBNews