Polish regulator can maintain limits on dividends. BCP falls 3% on the Lisbon Stock Exchange

The market regulator in Poland is expected to maintain the key requirements for dividend distribution in banks with larger foreign currency loans while continuing to limit the payment of profits to shareholders. One of the most exposed is Bank Millennium, 50.1% owned by BCP. The shares of the Portuguese bank retreat 3% in the Lisbon Stock Exchange.

The KNF – equivalent to the Securities Market Commission – publishes the annual dividend guide for the banking sector during the month of December, and should maintain the limitations on the portion of profits that can be distributed to shareholders (the payout), according to the Bloomberg agency on Thursday, citing the local press.

In the PSI-20, which yields this Thursday 1.33%, the biggest fall is led exactly by BCP: it retreats 2.98% to 0.1989 euros. In the Polish stock market, Bank Millennium (where these FX loans represent 20% of its credit stock) is also recording losses from 3.6% to 5.6 zlotys.

“We recall that last year the Polish regulator announced that banks with a Tier 1 ratio 1.5 points above the minimum requirements could have a payout of 75% of profits as dividends. If today’s news is confirmed, we see it as neutral from a valuation perspective, as the payout ratio included in our estimates is well below previous and new regulatory limits,” said CaixaBank/BPI analysts in a note released Thursday.

“In our current estimates, we do not expect Bank Millennium to pay a dividend based on the 2019 results and we expect a 20% payout based on the 2020″ results, they add.

Bloomberg also quotes statements by Jerzy Banka of the Polish Banking Association, who stressed that the first decisions of local courts after the ruling of the European Court of Justice on unfair terms in Swiss franc loan agreements show that the impact of legal proceedings against banks may be lower than initial estimates. The first predictions were for losses of between 60 billion and 80 billion zlotys (between 13 billion euros and 18 billion euros), equivalent to at least four years of profits in the sector.

The person in charge also advanced another detail of the court decisions that will be more favourable to the banks: the limitation period for the proceedings does not allow the customers’ claim to be extended for the entire life of the loan. It seems that the position of customers “is not as strong” as initially thought, assumed Jerzy Banka.

This case, known as “Francowicze”, has years. In the past decade, Poles have borrowed in Swiss francs to benefit from a strong zloty and low-interest rates in Switzerland. In the meantime, with the crisis, the Swiss currency has soared in the foreign exchange market, adding to the value of household debts to unpayable levels.