⚠ A Mortgage Written Before 2010 Still Costs Four Billion a YearHigh threat

PKO Bank Polski (PKO) — threat to the moat

4 365 million złoty in 2025 and another 685 million in the first half of 2026, on a product PKO stopped selling before the iPad existed.

PKO charged 4 365 million złoty in 2025 for the cost of legal risk on mortgage loans denominated in convertible currencies1 — Swiss franc mortgages, most of them written before 2010.

The legacy charge against the profit it consumes (zl m)9 3042024 net profit4 8992024 CHF charge10 6822025 net profit4 3652025 CHF chargeThe charge fell 534m while the profit rose 1 378m - both moving the right way, slowly
Fifteen years after PKO stopped writing them, Swiss franc mortgages still take two złoty in five of the profit. The settlement programme is what ends it.

The scale is what makes this a root threat. That charge is 41% of the year's net profit of 10 682 million2. It was 534 million złoty lower than the 2024 charge3, which means 2024 absorbed close to 4 900 million. PKO has been taking something of this order every year for years, and has still produced a 19,5% return on equity4.

The mechanism is legal rather than credit, and that distinction is the point. Borrowers largely paid. What failed was the contract: Polish and European courts have progressively found the currency-conversion clauses unenforceable, so a customer who serviced the loan as agreed can nonetheless have it restructured or declared void. None of this appears in a credit statistic — PKO's cost of credit risk is 0,30%5, because a court judgment is not a default.

It is also a liability whose size is set by other people. The charge moves when courts rule and when the bank updates its legal-risk model parameters, which is exactly what happened in the first half of 2026, adding 685 million złoty6.

The bank is managing it toward an end. It runs a settlement programme offering mediation through the Arbitration Court at the Polish Financial Supervision Authority and has extended settlements on a large scale7, and the first-half addition is far below the annual run rate.

The number that tests this threat is the annual charge. It has begun falling and the half-year figure points to a book genuinely running off; a full year below one billion złoty would mean the episode is closing. A model update that raises the provision instead would confirm that after more than fifteen years the size of this liability still belongs to the courts rather than to the bank — and it is the reason a bank earning 19,5% trades at 2,3 times book rather than more.

The number that tests this threat
Reported
Cumulative cost of legal risk on convertible-currency mortgages
4 365m zł in 2025, 685m zł more in H1 2026

PKO stopped writing Swiss franc mortgages around 2010 and they cost it forty percent of net profit fifteen years later. The charge is declining - 534m złoty lower than 2024 - and the settlement programme mediating through the Arbitration Court at the Polish Financial Supervision Authority is what ends it. Watch the half-yearly addition: 685m annualises to about half the 2025 charge, which would be the first genuine sign the tail is closing.

Source: PKO Bank Polski S.A. Group Directors' Report for 2025 ↗
References
  1. ReportedPKO charged 4 365 million złoty in 2025 for the cost of legal risk on mortgage loans denominated in convertible currencies — Swiss franc mortgages, most of them written before 2010.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the cost of legal risk on mortgage loans in convertible currencies (4 365m złoty charged in 2025, 534m less than in 2024, and the settlement programme offering mediation through the Arbitration Court at the Polish Financial Supervision Authority) — FY2025 · publ. 12 March 2026 · source ↗
  2. Moat Explorer calcThat charge is 41% of the year's net profit of 10 682 million.
    Moat Explorer calculation - arithmetic on figures PKO reports: the Swiss franc charge as a share of net profit (4 365 over 10 682), financing per employee (315 953 over 26 252 against 247 572 over 25 657), current accounts as a share of customers (9 764 over 12 460), deposits less financing (460 722 less 315 953), and the levy against fee income (1 349 over 5 243), credit losses excluding legal risk (5 859 less 4 365 = 1 494), the income mix (24 223 and 5 243 over 30 370 = 79,8% and 17,3%), net profit growth (10 682 against 9 304 = 14,8%), financing per employee (315 953 over 26 252 = 12,0m), and customers against Poland's population (12,46m of 37,33m) — FY2021-FY2025 · publ. September 2026 · source ↗
  3. ReportedIt was 534 million złoty lower than the 2024 charge, which means 2024 absorbed close to 4 900 million.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the cost of legal risk on mortgage loans in convertible currencies (4 365m złoty charged in 2025, 534m less than in 2024, and the settlement programme offering mediation through the Arbitration Court at the Polish Financial Supervision Authority) — FY2025 · publ. 12 March 2026 · source ↗
  4. ReportedPKO has been taking something of this order every year for years, and has still produced a 19,5% return on equity.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the efficiency and quality ratios (return on equity of 19,5%, return on assets of 1,9%, a cost-to-income ratio of 31,1%, net interest margin of 4,76%, cost of credit risk of 0,30% and impaired exposures at 3,34% of the portfolio) — FY2025 · publ. 12 March 2026 · source ↗
  5. ReportedNone of this appears in a credit statistic — PKO's cost of credit risk is 0,30%, because a court judgment is not a default.
    PKO Bank Polski S.A. Group Directors' Report for 2025 - the efficiency and quality ratios (return on equity of 19,5%, return on assets of 1,9%, a cost-to-income ratio of 31,1%, net interest margin of 4,76%, cost of credit risk of 0,30% and impaired exposures at 3,34% of the portfolio) — FY2025 · publ. 12 March 2026 · source ↗
  6. ReportedThe charge moves when courts rule and when the bank updates its legal-risk model parameters, which is exactly what happened in the first half of 2026, adding 685 million złoty.
    PKO Bank Polski S.A. Group Directors' Report for the six months ended 30 June 2026, published with reviewed financial statements (profit before tax of 8 319m złoty up 19,9%, income tax of 3 029m up 67,4%, net profit of 5 290m up 3,1%, return on equity of 19,3%, cost-to-income of 31,4%, interest margin of 4,47% against 4,91%, cost of risk of 0,29%, total assets past 608 448m, 12,6 million customers, common equity tier 1 of 15,55%, and a further 685m złoty of convertible-currency legal risk) — H1 2026 · publ. 13 August 2026 · source ↗
  7. ReportedIt runs a settlement programme offering mediation through the Arbitration Court at the Polish Financial Supervision Authority and has extended settlements on a large scale, and the first-half addition is far below the annual run rate.
    PKO Bank Polski S.A. Group consolidated financial statements for 2025 — FY2025 · publ. 12 March 2026 · source ↗
Sources
Generated September 24, 2026