By Mateusz Rabiega
GDANSK (Reuters) - PKO BP (LON:BP) reported a 60% drop in fourth-quarter net profit on Thursday as Poland's largest bank was hit by a 1.99 billion zloty ($504 million) provision for foreign exchange mortgage loans, sending its shares lower.
Polish banks have benefited in recent years from high interest rates, but their earnings have been under pressure from costs related to historic Swiss franc mortgage loans.
The fourth quarter provision at PKO BP raised the total hit taken by the state-owned bank for 2023 to 5.43 billion zlotys.
Shares in PKO BP were down 3.6% at 1045 GMT.
The lender said it had signed 37,000 court settlements for Swiss franc loans to the end of last year, adding that it expects to conclude 2,000-3,000 every quarter.
Its quarterly net profit fell 60% to 681 million zlotys, while full-year earnings jumped 66% year-on-year to 5.50 billion zlotys, thanks to favourable interest rates.
PKO BP deputy CEO Piotr Mazur said that the estimated cost of a proposed extension of a mortgage payment holiday scheme, which the government recently approved for 2024, might be between 800 and 900 million zlotys, compared with 1.3 billion zlotys the bank predicted in November.
Trigon analyst Maciej Marcinowski said PKO's profit for the current year, excluding Swiss franc related costs and credit moratoria, could exceed 10 billion zlotys, or possibly 11 billion zlotys should interest rates remain stable.
PKO BP is also ready to pay out dividends thanks to a solid capital base and getting the green light from the Polish Financial Supervision Authority.
The bank's managing director of finance division Jakub Niesluchowski said the payout could reach up to about 66% of standalone annual profit, resulting in dividend yield below 10%
The bank already paid out 1.28 zlotys per share as an advance on the 2023 dividend in February.
PKO paid a dividend of 1.83 zlotys per share in 2022.
The lender is still waiting for regulators' decision on undistributed profits from previous years, which currently amount to nearly 11 billion zlotys, Niesluchowski said.
($1 = 3.9507 zlotys)