RBI To Acquire Majority Stake In Polbank

The repolonization of banks will have to wait PZU's takeover of Bank Pekao SA could have become a catalyst for a wave of mergers and acquisitions in the Polish banking sector. It seems that this will have to wait until all the problems associated with the CHF denominated mortgages are resolved. PZU has been declaring its appetite to purchase banks since 2. The high level of equity and investment funds of the largest state- controlled insurer in the Central and Southeast Europe allowed it to make such plans. Moreover, successive governments, unable to obtain domestic capital from other sources, encouraged the company to pursue the repolonization of banks. In the middle of 2. PZU spent PLN1. 6bn on the purchase of 2.

Alior Bank, founded less than a decade earlier by private owners as a start- up. The insurance company paid PLN8.

Alior Bank, which was already a large institution with assets exceeding PLN3. Following the global crisis, every few years another parent company of a Polish bank was forced to sell its assets in order to save itself. This created an opportunity to purchase another bank. Alior Bank had already exhibited an appetite for acquisitions by purchasing Meritum Bank, which was small but had a highly developed network of branches, for PLN3.

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Raiffeisen's troubles. Two decisions which would prove important for the Polish market were made almost at the same time in 2. The global giant General Electric decided to withdraw from banking and focus on its core business. This meant that Bank BPH, belonging to GE Capital Group, would sooner or later be put up for sale.

We should add that this bank was in a poor condition, was implementing a recovery program, and had one of the highest proportion of CHF denominated mortgages in its balance sheet out of all the Polish credit institutions. A few months earlier, the Austrian Raiffeisen Zentralbank decided that its subsidiary company, Raiffeisen Bank International (RBI), would sell its operations in Ukraine, Hungary, Slovenia and Poland, as the parent company needed capital. It announced the sale of its Polish company for EUR1bn, that is, at book value. The market immediately decided that this valuation was too high, considering the portfolio of CHF denominated mortgages.

The discussion about a conversion of the CHF denominated mortgages into the PLN denominated ones was already gaining steam, and banks were regularly estimating how many billions they would lose on such an operation. Raiffeisen owed its CHF denominated mortgages portfolio, with its low quality, mainly to the Polish subsidiary of the Greek Eurobank Ergasias, Polbank EFG, , which Raiffeisen acquired in 2. The Greek institution, which was actually owned by funds from Switzerland and Luxembourg, launched its activities in Poland in 2.

Like all banks that entered the Polish market too late, it began with aggressive expansion, mainly through the sale of CHF denominated mortgages to customers more risky than those who were granted loans by institutions better established in Poland. The mortgages were mainly financed by the inflow of foreign funds, since Polbank EFG could not keep up with the creation of a deposit base. When the Greek parent- bank was rescued from bankruptcy in 2.

At the end of 2. 01. Polbank was the sixth institution in Poland in terms of value of extended loans. Pożyczki Chwilówki Piotrków Trybunalski Wypełnić Wniosek I there.

It granted loans for a total amount of EUR5. Raiffeisen bought Polbank for EUR4. It's hard to say what the intention and insight into the situation were, but from today's perspective we can see that Polbank, deprived of funding, was in a critical situation.

Some bankers still claim that if not for the offer of Raiffeisen, Poland would have had to spend over a dozen of billions of public funds on the payment of guaranteed deposits. The acquisitions of Alior Bank. Alior – supported by PZU's strong equity and the guarantee of success in the offering of new shares – started its acquisitions with BPH. It ultimately bought 8. BPH shares in April 2. PLN1. 2. 3bn, that is, paying 0.

Alior took over the banking operations without the foreign exchange and PLN mortgages. These will be further managed by a separate institution which will most likely generate losses.

The combined assets of Alior and BPH amount to PLN6. Jest Taki Kredyt Gotówkowy Bez Zaświadczeń Na Dowód. Polish banking sector.

The strategic goal of the bank was to become one of the 5 or 6 largest lenders in Poland. In order to do this, Alior would have to grow by at least another PLN1. It seemed that after selling the leasing company to PKO BP, Raiffeisen would also sell its Polish bank to Alior. Meanwhile an opportunity suddenly presented itself for PZU to purchase a controlling stake in Pekao from Uni. Credit, which still held 4. The transaction with the participation of the Polish Development Fund was finalized in December 2.

Polish institutions ultimately paid PLN1. Pekao, that is 1. This was a reasonable price for a bank with such great potential. In addition, PZU OFE already held 2 per cent of shares in Pekao. In this way PZU now has strategic packages in two banks and one problem.

It will not be able to combine them. And only the merger of Alior and Pekao could create a new quality on the Polish market – it would accelerate further mergers and acquisitions and open the opportunity for further steps in the repolonization of the banks. Grzegorz Cimochowski, a partner at Deloitte, who has prepared reports on the banking sector in CSE for the past several years, believes that the merger of Alior and Pekao could accelerate decision- making processes at the headquarters of foreign owners on whether it is worth staying in Poland.“It could take two years before the effects of synergy would kick in and the new entity would start to compete on the market.

Then we would not only have an awareness that a large entity can compete, but also the effects. It would be clear that it's difficult to compete with such an entity,” he told the CE Financial Observer.

Will PZU merge Alior with Pekao. Alior and Pekao are two entirely different banking cultures. The former has been using the latest technology since its creation, with its business model resembling that of a fintech company (as the CEO Wojciech Sobieraj likes to call his bank) or a loan company, as it flawlessly entered the consumer finance market, achieving a net interest margin (NIM) at the level of 4. The price for that is the cost of risk reaching 2. Pekao, in turn, is the largest bank servicing corporations, with a conservative approach to credit risk, with low risk costs of 4. It began to pursue the digital agenda relatively recently, although it has achieved undeniable success in this field, such as the introduction of card payment in the Biedronka discount chains. In addition it has approx.

PLN7. 9bn in surplus capital, which gives a huge potential for organic growth or acquisitions. A bank created from the merger of Pekao and Alior would have PLN2. PKO BP (the largest bank in Poland), leaving other institutions far behind. The State Treasury could then directly or indirectly control two banks – PKO and the newly formed entity. This could have happened if Pekao acquired Alior, but PZU will probably not be able to achieve a majority in the Pekao Supervisory Board and have sufficient influence on the decisions of the bank with its current stake.

If it increased its holdings and exceeded 3. However, it doesn't have enough funds for that. The question arises as to why PZU purchased Pekao in the first place. Although after this transaction Polish capital exceeded a 5.

Polish banking sector, the sector hasn't changed much in terms of structure. Meanwhile PZU, as the owner of large blocks of shares of two banks, finds itself in a vulnerable position.

The challenge will be to communicate with the market in such a way as to fend off any suspicion that the insurance institution could engage in arbitrage. The preferred instrument for the consolidation of a banking group should probably be Alior – in line with earlier plans – and it should acquire banks of its own size. The opportunity to buy Pekao appeared quite suddenly, the pace of negotiations was very quick and perhaps because of that there was no time to find a way to structure the transaction and to fulfil all corporate procedures so that ultimately Pekao could be purchased by Alior.

The burden of CHF denominated mortgages. When the opportunity arose to buy shares in Pekao, Alior was involved in negotiations for the acquisition of Raiffeisen Polbank. The business daily “Puls Biznesu” wrote that Raiffeisen had already notified the Polish Financial Supervision Authority that negotiations were concluded, but Alior ultimately withdrew from the deal. The stated reason was that PZU did not want to carry out two transactions simultaneously. Market sources claim that the deal was supposed to be similar to the case of BPH – the CHF denominated mortgages would be excluded from it.

We don't know what price the parties reached in the negotiations, but Raiffeisen had declared previously that it wanted to sell the Polish company for no less than the value of equity. That was not a tempting offer. A little earlier, before the first preparations of banking groups to exit the Polish market, we saw the beginning of a discussion on the conversion of CHF denominated mortgages into PLN ones. A similar operation was carried out a few years earlier in Hungary, which plunged the local banking sector into long- term lack of profitability. These discussions are still going on, despite the calculations of Poland’s central bank NBP and the Polish Financial Supervision Authority. According to the supervision authority, depending on the variant, the losses of the sector would amount to PLN5. The discussions on the issue of CHF denominated mortgages that have gone on for several years and generated increasingly radical proposals caused a spectacular drop in the valuations of Polish banks.