mBank S.A.

The positive outlook reflects our view that mBank is taking significant steps to derisk its Swiss-franc-related mortgage loans. We could raise the ratings in the next 24 months if mBank sees a material decline in its extraordinary legal costs and improves its reported profitability closer to the average for Polish banks. We could upgrade mBank if it records a material reduction of legal costs, thereby making its earnings less volatile and its capital cushions more comfortable. An upgrade would also depend on the bank's underlying profitability remaining satisfactory and commensurate with that of higher-rated peers. We could revise the outlook to stable if, contrary to our base case, mBank's legal costs were to remain at levels close to those of

...mBank is taking significant steps to derisk its exposure to CHF-indexed mortgages. Following a series of negative rulings by local and European courts, mBank has set aside provisions for legal costs totaling Polish zloty (PLN) 13.6 billion (about 3.2 billion) between 2018 and end-March 2024. The bank also accelerated its program of out-of-court settlements and received final court verdicts in a meaningful number of cases. Although significant uncertainty on future legal costs remains, we believe that legal costs will be substantial but gradually recede over our two-year outlook horizon....

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