Banks' ratings downgraded

BPH was reduced by two degrees, maintaining a negative outlook rating, one grade down for Bank Millennium, Deutsche Bank Poland, Getin Noble Bank, mBank, Raiffeisen Bank Poland and Santander Consumer Bank (while maintaining a negative outlook of all these ratings) and from a stable to a negative outlook for BOS, BZ WBK and PKO BP.

PKO BP received a rating of A-, BZ WBK BBB+, Deutsche Bank Poland and mBank BBB; BOS, Raiffeisen Bank Poland and Santander Consumer Bank BBB-; Bank BPH BB+, Bank Millennium -BB, while Getin Noble Bank was B+.

In all 10 cases the outlook is negative.

"The main reason for downgrading the creditworthiness of banks is new legislation on special rules for the restructuring of foreign currency mortgages,” a EuroRating statement reads.

Polish bank shares fell last week on news that the Sejm had passed an amendment to the law governing terms of conversion of mortgages taken out in Swiss francs.

The biggest losses were at Getin Noble Bank (a decrease of 25 percent), Millennium (down 17 percent), MBank (down 11.5 percent.), BZ WBK (down 6.7 percent), BPH (down 7.6 percent) and PKO BP (down 6.4 percent).

Governing Civic Platform (PO)'s proposed partial conversion of mortgages denominated in Swiss francs that would allow 20 percent of holders of Swiss franc mortgages to convert them into Polish złoty at the current rate means that lenders will be obliged to cover half the conversion cost. The issue of how to improve the lot of Poles who took out mortgages denominated in Swiss franks has become the focus of controversy ahead of parliamentary elections in October, with the main contenders the ruling PO party and the main opposition PIS party submitting rival proposals. During his election campaign, the newly inaugurated President Andrzej Duda campaigned for a levy on banks to solve the problem.

The governing party's proposal is for home loans on flats and houses no bigger than 75 sqm and 100 sqm respectively.

About half a million Poles took out such mortgages denominated in Swiss francs to benefit from lower interest rates, and later their loans became much more expensive after the franc appreciated earlier this year.

Among lenders with the biggest Swiss franc loan books are PKO BP and Getin Noble, as well as the Polish banking businesses of Santander, Commerzbank, BCP, Raiffeisen and General Electric. Getin is the most exposed to Swiss franc loans, Fitch said. (jh)