WARSAW, March 29 (Reuters) - Polish commercial banks expect their combined net profit to fall by 12 percent in 2017, financial regulator KNF said on Wednesday, mainly because last year the banks' profits were boosted by the sale of their stakes in Visa Europe.
The watchdog publishes its report on the banks' earnings outlook annually, based on estimates provided by the banks. For 2016, the report forecast that the banks' combined net profits would fall by 9.6 percent. Many of Poland's banks actually reported higher profits last year due to the Visa Europe sale.
In its latest report, KNF said banks expected their interest income to increase by 6.3 percent in 2017 and their income from fees and commissions to rise by 6.5 percent this year, with costs up by 4.1 percent.
The regulator's report also said commercial banks expected that their combined portfolio of Swiss franc denominated mortgages would decline by a total of 9.7 percent this year.
More than half a million Poles took out Swiss franc loans to benefit from low interest rates in Switzerland, but now face bigger repayments because the Swiss currency has doubled in value against the zloty over the last few years.
The Swiss franc mortgages held by Polish banks were worth an equivalent of 134 billion zlotys ($34.09 billion), or 7 percent of GDP, at the end of 2016, according to a separate KNF report published this year. The combined value of the mortgages expressed in zlotys fell by 2.5 percent last year, the data from the regulator showed.
Worries that the ruling PiS party could compel the banks to bear the cost of converting the Swiss franc loans into zlotys contributed to sharp falls in the banks' share prices last year.
But since then the government has softened its stance and earlier this year the Financial Stability Committee recommended that banks should put more capital aside if they hold foreign exchange-denominated mortgages, in an effort to get more of the loans converted to zlotys. ($1 = 3.9302 zlotys) (Reporting by Marcin Goettig. Editing by Jane Merriman)