THE POLISH government yesterday threw its weight behind a potential bid from state-owned PKO, the country’s largest bank, for Bank Zachodni WBK, which is being put up for sale by AIB.
Poland’s treasury ministry said it may defer a dividend payment to enable PKO, which is 51 per cent state-owned, to buy Poland’s fifth-largest bank.
“I will not hesitate to support PKO BP if it turns out that it can independently acquire BZ WBK,” Aleksander Grad, Poland’s treasury minister, said at a news conference yesterday, adding that “it is not irrelevant for Poland, for our banking system, who buys that bank”.
Buying the smaller bank would increase PKO BP’s market share from 32 per cent to 37 per cent.
The 70 per cent stake in BZ WBK owned by AIB is thought to be worth about 11 billion zlotys (€2.7 billion). AIB is being forced to sell off its Polish affiliate to meet capital targets after receiving aid from the State.
That kind of money will be difficult for PKO BP to raise, even if it withholds its dividend of about 1 billion zlotys, with the likeliest option for funding the acquisition being a new share issue.
“I’m a little worried about this because this is being organised by the government, not by the bank,” said Janusz Jankowiak, a Polish economist.
To finance a purchase, PKO would likely still have to raise a further five to six billion zlotys – its second cash call in less than a year – or seek financial partners.
Bank Zachodni WBK is a well-performing bank that earned 233 million zloty (€57 million) in the first quarter, a 96 per cent increase over the same period a year earlier.
It is the object of widespread interest from foreign banking groups such as France’s BNP Paribas and Spain’s Santander, which are expected to place non-binding offers for the bank by the end of the month.
However, Bank Zachodni WBK’s large presence in the mortgage market, where it has loans denominated in Swiss francs and euro as well as zlotys, makes it a potentially risky partner.
About 70 per cent of Poland’s banks are in foreign hands – a move that was seen as vital in the early years of Poland’s economic transformation, as the foreign banks provided technology and know-how.
However, the risks of having a foreign-dominated banking system became apparent during the global financial crisis, when there were fears that foreign parents would drain liquidity from their Polish banks to prop up operations at home.
In the event, foreign owners acted responsibly, and all of them deferred paying dividends last year in order to boost the capital ratios of their Polish banks.
Still, the conviction has grown in the normally economically liberal ruling Civic Platform party that it pays to be more cautious about who owns what in the Polish banking sector, which analysts say could translate into tougher conditions for a sale to a foreign buyer. – Copyright The Financial Times Limited 2010, Reuters
