WARSAW, Nov 3 (Reuters) - The cost of payment holidays for mortgage holders plunged Polish bank Pekao into the red in the third quarter, outweighing the positive impact of higher interest rates, its results showed on Thursday.
The government introduced payment holidays for borrowers that allow eight instalments to be postponed in 2022-23, after a series of interest rate hikes imposed by the central bank to tackle inflation hit many borrowers.
In the third quarter, Pekao booked over 2.4 billion zlotys ($498.4 million) in costs related to payment holidays. As a result, it made a net loss of 544 million zlotys, compared with a 631 million zlotys profit a year earlier and a 522 million loss seen in a Reuters poll of analysts.
Pekao, Poland's second-largest bank by assets, said higher interest rates were favourable for banks as they lead to a pick up in net interest income, but could also have a negative impact on credit demand and the quality of loan portfolios.
It said a "very restrictive" tax and regulatory environment for the industry, plus the uncertain economic situation, could affect banks' lending and financial results.
($1 = 4.8158 zlotys)
Reporting by Anna Koper Editing by Mark Potter