PKO Bank Polski proposal for individual clients with a mortgage loan denominated in CHF

- We are handling the significant CHF appreciation proactively, in a responsible and considered manner. We are implementing solutions that should significantly ease our clients servicing of loans in the near future. We are also recommending caution, particularly in the context of the time required for CHF exchange rate to find its new equilibrium - says Zbigniew Jagiełło, President of PKO Bank Polski.

PKO Bank Polski has decided to reduce to 1 per cent the spread (the difference in the price at which the currency is being sold and purchased) for repayment of loans in CHF till the end of June 2015. The decision has been made due to the significant appreciation of the CHF against the PLN (by approx. 20%) and because of the deterioration in the situation of the CHF denominated loan holders, resulting from the Swiss National Bank's decision of 15 January 2015.

At the same time, the Bank offers solutions to support most vulnerable clients, ie. extension of the loan term, temporary suspension of loan installment payments (“loan holidays”) without the necessity to annex the loan agreement, or repayment of a loans directly in foreign currency. The Bank is also working on solutions encouraging CHF denominated loan holders to reduce the exchange rate risk and to convert the CHF denominated loans in the future. The Bank encourages clients envisaging loan payment deferrals to contact the Bank directly in order to find the best solution. For the time being, the Bank does not undertake any actions aiming at establishing additional collaterals should the debt exceed the value of the property.

At PKO Bank Polski, interest rates on CHF denominated mortgages are usually based on the market value of 3M LIBOR and the Bank’s margin. As a result of the Swiss National Bank’s decision to cut interest rates to a level of -0.75% the reference rate at which banks lend to each other declined to historically low levels. In this situation, the PKO Bank Polski will take the negative value of LIBOR into account while calculating the cost of mortgages, with respect to all clients.

The equilibrium, which the CHF exchange rate will find in the near future, will be crucial for clients and banks. Currently, the projections are subject to higher risks resulting, inter alia, from the upcoming decision of the European Central Bank on the so-called monetary easing or the parliamentary elections in Greece. Currently, clients should thoroughly evaluate foreign exchange risk and make informed decisions on potential conversion of loans [to PLN]. In previous years, the Bank encouraged clients to make such decisions when the CHF/PLN exchange rate was relatively low. For that reason only few clients chose to do it.

The share of CHF denominated mortgage loans in the loan portfolio of PKO Bank Polski is relatively small and amounts for approximately 16% (as at the end of the third quarter). Due to its good equity and liquidity position, the Bank is fully prepared to manage significant depreciation of PLN against CHF. The analysis carried out in the banking sector shows that at the current CHF exchange rate there is no systemic risk, neither of significant deterioration in the quality of the loan portfolio nor the cessation of foreign currency loans repayment by clients. Mortgages are among the best repaid loans on the market. NPL ratio for mortgage loans in CHF and PLN amount to 3.1% and 3.6% respectively, while the average NPL for the entire banking sector loan portfolio adds up to approximately 8%.

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PKO Bank Polski is a leader of the Polish banking sector. After three quarters of 2014, PKO Bank Polski Group posted a consolidated net profit of PLN 2 531,5 million. PKO Bank Polski ranked #1 with six stars in the overall classification in the Forbes magazine Best Corporate Bank ranking. The Bank ranked #3 in the Banking Quality 2013 ranking of TNS Polska and Puls Biznesu. The Bank’s Contact Center, for the sixth time in a row, was a winner in a regular survey of banks’ hotlines carried out by ARC Rynek i Opinia. The Bank won for another consecutive year in the ranking of the top 50 banks in Poland published by the financial monthly Bank. PKO Bank Polski won this year’s edition of the ranking in the category of Property Financing Banks and ranked third among Consumer Finance Banks. PKO Bank Polski was awarded for the implementation of the IKO application in the Electronic Banking and E-Finance category of the 12th edition of the Financial Institutions IT Leader 2013  competition of Gazeta Bankowa. PKO Bank Polski was also awarded for its Innovation Centre in the category Back Office Systems. Around a dozen financial institutions, mainly representing the banking and insurance industry, competed for the IT Leader award. The jury of the Competition of the 8th E-Economy Congress awarded PKO Junior in the Project of the Year category. PKO Bank Polski also enjoys the strongest image among Polish banks. According to a prestigious magazine The Banker which values PKO Bank Polski’s brand name at USD 1.25 billion, the Bank remains the most valuable brand in Polish banking sector. According to the ranking of the Most Valuable Polish Brands 2013 by Rzeczpospolita daily, PKO Bank Polski remained the most valuable brand in the financial industry category, valued at PLN 3.7 billion. In 2012, the Jury of the Banking Leaders Competition, organised as a part of the Polish Economic Congress, awarded PKO Bank Polski as the Best Bank and the Most Innovative Bank for the new offer of School Saving Associations. In rankings based on students’ opinions, the Bank was ranked as one of the best employers in Poland. The Bank’s high position is also confirmed by surveys carried out by the international company Universum Global and AIESEC among students of Poland’s best universities. PKO Bank Polski is also a winner of the Golden Banker 2013 award in the Best Mortgage Loan and the Financial Innovation categories for its IKO application.