BUDAPEST (Reuters) - Switzerland’s surprise move to scrap a cap on the franc sent the currency surging, hitting the banking sector in central and eastern Europe, where widespread mortgages denominated in francs suddenly became much harder to service.
Following are details on Swiss franc loans and non-performing loans (NPLs) in the region.
At the end of November, Swiss franc-denominated mortgages were worth 131 billion zlotys (30.42 billion euros). Polish banks’ total credit portfolio was 895 billion zlotys, including households and companies, according to data from banking regulator KNF.
The NPL ratio for the whole loan portfolio of Polish banks was around 8 percent. The NPL ratio on Swiss franc-denominated mortgages was 3.1 percent.
Citibank said with EUR/CHF at 1.0 the debt service costs for Polish households would rise by approximately 17 percent, or less than 0.2 percent of GDP. It said the drag from a stronger franc on Polish consumption should be limited and would be more than offset by the positive impact of lower fuel prices.
Hungary, which used to be one of the countries most exposed to Swiss franc loans, fixed the exchange rate for the conversion of households’ euro and Swiss-franc mortgages late last year at well below current market levels, so the franc’s surge will not affect this huge mortgage loan stock of around 10 billion euros.
However, households still had 540 billion forints (1.7 billion euros) worth of other, mostly Swiss franc-denominated loans in mid-2014. These are mostly car purchase loans. The NPL on these 377,000 loans was 20.3 percent in the second quarter of last year, according to the central bank.
The bank said the share of foreign currency loans in companies’ portfolios decreased last year as small and medium sized companies could refinance their loans under the central bank’s funding for growth scheme.
A Citibank note said total corporate Swiss franc debt exposure could be around 2 billion-4 billion euros.
Swiss franc-denominated loans to households and businesses stood at 29.5 billion euros at the end of November, according to central bank data. It did not provide NPL ratios.
Just under 10 percent of Croatian banks’ total loan portfolio of 275.9 billion kuna (35.9 bln euros) is in Swiss francs, central bank data shows.
The vast majority of that, or 21.9 billion kuna, is retail loans. At the end of September, 17.4 percent of Swiss franc loans were non-performing.
According to banking sources banks will be able to withstand any potential rise in NPLs on franc loans.
In its Q3 2014 report on the banking sector the central bank said that borrowing in euros accounted for 284.5 billion dinars, while borrowing in Swiss francs accounted for 23.5 billion dinars. Borrowing in Swiss francs or indexed in Swiss francs accounted for 8.5 percent of all loans in foreign currencies. Borrowing in euros accounted for 84 percent of all loans in foreign currencies.
Euros accounted for 67 percent of total deposits in banks, followed by dinar deposits on 27 percent.
Romania’s exposure to the Swiss currency is small, and could be up to 6 to 8 percent of total loans last year, a banking source said. The central bank governor’s adviser Adrian Vasilescu told Reuters that Swiss franc credits in Romania accounted for about 5 percent of the total, with the low level due to central bank communication and regulations that had highlighted the danger of currency exchange risk.
Swiss franc loans make up a very tiny portion of lending in the Czech Republic, totaling the equivalent of 1.03 billion crowns ($42 million), or 0.019 percent of the sector’s total balance sheet at the end of November, according to the central bank.
Reporting by Reuters bureaus; Editing by Susan Fenton and Toby Chopra