Bank Millennium posts 40% jump in quarterly net profit as FX mortgage provisions decline

GDANSK (Reuters) -Bank Millennium, the Polish arm of Portugal's Millennium bcp, reported a 40% rise in its first-quarter net profit on Monday, thanks to higher net interest income and lower costs related to its foreign currency mortgage portfolio.

The bank's net profit reached 179 million zlotys ($47.5 million) in the first quarter, slightly exceeding analysts' expectations of 172 million zlotys seen in a Reuters poll.

WHY IT'S IMPORTANT

Polish banks continue to be burdened by costs of legal risk related to foreign currency (FX) mortgage loans, primarily denominated in Swiss francs.

Initially appealing to borrowers in the 2000s due to low interest rates, these loans have become increasingly expensive as repayment costs have surged following the zloty's depreciation against the franc and hikes in Swiss interest rates. This has led to legal disputes and pressured banks to seek settlements.

BY THE NUMBERS

Quarterly net interest income rose 5% on the year to 1.42 billion zlotys, while net fee and commission income fell 9% to 183 million zlotys.

Provisions related to FX legal risk fell 19% to 445 million zlotys in the first quarter, compared with 548.8 million zlotys a year earlier.

KEY CONTEXT

While Polish lenders are still affected by the costs of the Swiss franc loans, analysts anticipate that these expenses will significantly decrease in 2025 as the issue winds down.

This outlook is confirmed by peers like mBank, which forecast in October that Swiss franc-related costs will largely subside by the end of the year.

($1 = 3.7687 zlotys)

(Reporting by Anna Banacka and Rafal W. Nowak; Editing by Mrigank Dhaniwala)