Bank Millennium posts 50% jump in Q4 profit, well above forecast

GDANSK (Reuters) - Bank Millennium, the Polish arm of Portugal's Millennium bcp, reported a 50% rise in its fourth quarter net profit on Friday, despite having to bear the high costs related to its Swiss franc mortgage portfolio that was valued at 768 million zlotys ($190 million) after tax at the end of the year.

WHY IT'S IMPORTANT

Foreign currency (FX) mortgage loans, primarily in Swiss francs, remain a burden for Polish banks. Initially appealing due to low rates in the 2000s, their repayment costs have surged due the zloty's depreciation against the franc and Swiss rate hikes, inciting legal disputes and pressuring banks to seek settlements.

BY THE NUMBERS

Bank Millennium's net profit was 173 million zlotys in the fourth quarter, well ahead of analysts' expectations of 81 million zlotys in a Reuters poll.

Quarterly net interest income rose to 1.51 billion zlotys from 1.28 billion a year earlier, while net fee and commission income fell to 188 million zlotys from 190 million zlotys in the fourth quarter of 2023.

The non-performing loan (NPL) ratio was 4.5% in the fourth quarter versus 4.6% in the third.

Provisions related to FX legal risk amounted to 523 million zlotys in the fourth quarter, compared with 702 million zlotys a year earlier.

KEY CONTEXT

While Polish lenders are still affected by the costs of the Swiss franc loans, analysts have said that most of those costs should be much lower in 2025 as the saga around them begins to wind down.

Bank Millennium has said it plans to resume dividend distribution from 2027, contingent on the regulatory environment. Under the 2025-2028 strategy, it also wants to focus on risk management, targeting a NPL ratio of below 4% in 2028.

($1 = 4.0425 zlotys)

(Reporting by Anna Banacka; Editing by Milla Nissi)