Santander Polish unit says converting FX loans would mean $947 mln loss

WARSAW, Feb 23 (Reuters) - Santander’s Polish unit estimates converting all of its foreign exchange loans into zlotys as proposed by financial market regulator KNF would amount to a loss of 3.5 billion zlotys ($947 million).

Santander is analysing a KNF proposal under which lenders would offer voluntary settlements to their clients, including retrospectively settling Swiss franc mortgages as zloty loans.

The Spanish bank said it will test potential settlements with its clients in the first half of 2021.

Foreign exchange loans and especially Swiss franc mortgages, remain a major risk factor for Polish banks, which face an increased number of lawsuits from franc mortgages holders.

Polish borrowers took out loans in francs more than a decade ago to take advantage of low Swiss interest rates, but then faced ballooning repayments when the zloty weakened sharply against the franc.

“Assuming that 100% of current borrowers choose to convert their loans as proposed by the KNF chairman, the Group’s loss would be in the order of 3.5 billion (zlotys) at the consolidated level,” Santander Bank Polska said in its 2020 annual report published on Tuesday. It said the calculation was made at an exchange rate of 4.15 zloty per franc.

$1 = 3.6958 zlotys Reporting by Agnieszka Barteczko; editing by Jason Neely