Net profit dropped to 142.8 million zlotys ($34.4 million), from 512.3 million zlotys in the same period last year, missing analysts' average forecast of 206 million zlotys.

However, the bank said core revenues were back on upward trend thanks to an increase in net interest income (NII) and improving net fees.

It said the cost of risk, which stood at 79 basis points, was within the guided range, with more of its Swiss franc mortgage portfolio covered by legal provisions. The cost of those in the first quarter amounted to 808.5 million zlotys.

Hundreds of thousands of Poles took out mortgages in foreign currencies, mainly in Swiss francs, attracted by lower interest rates, but were then left paying far bigger instalments than expected after the franc soared against the zloty.

Many mortgage holders took banks to court, with some lenders offering out-of-court settlements.

mBank said its number of active Swiss franc mortgage loan contracts as of April 19 was 38,826, down 19.6% from the end of 2021. It added nearly all active loan holders had received settlement proposals.

The bank has reached a total of 5,050 settlements.

Looking forward, the bank said decelerating loan volumes could impact interest income, while wage and inflationary pressures weigh on operating costs.

Upward trends in customer numbers and transactions may be offset by a slowing economy and weaker demand for banking products, it added.

($1=4.1557 zlotys)

(Reporting by Patrycja Zaras; Editing by Clarence Fernandez and Mark Potter)