PKO Bank Polski offers $1.7 Billion to exit Swiss Franc troubles

PKO Bank Polski SA wants to set aside the equivalent of two years of profit to settle with holders of Swiss franc mortgages amid a deadlock in industry talks over resolving the country’s $32 billion pile of foreign-currency loans.

By breaking ranks with its peers, Poland’s biggest bank is seeking to quickly close the chapter on legacy lending that have made local lenders a target of multiple lawsuits and kept their valuations depressed.

To sweeten the message for investors, PKO also said it’s prepared to buy back as much as 10% of its shares with surplus capital which can be released by the resolution of the franc-loan issue.

For months, PKO tried to coalesce the industry’s biggest players — including local units of Commerzbank AG, Banco Santander SA and BNP Paribas SA — around out-of-court settlements that are expected to cost at least 35 billion zloty. The talks have practically stalled because of concerns over legal risks and ahead of next month’s opinion on the issue by the Supreme Court.

PKO also plans to create a 4.5 billion zloty fund for share buybacks, which can be tapped when the bank’s market price is below 95% of its book value, as it has been since the start of the pandemic. It plans to gradually use the fund over a five-year period, if the proposal gains regulatory approval.

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