Jan Cienski in Warsaw -
A decade ago, ambitious foreign banks rapidly bought up much of Poland's state-owned banking sector as well as swallowing up most the smaller private banks. However, banks that held back are finding it increasingly difficult to get into the game and are now looking for partners they would have turned down just a few years earlier.
Belgium's Fortis, a banking and insurance group, decided late last year it could no longer sit on the sidelines and agreed to buy Dominet, a small Polish bank only 41st in terms of size which had two big assets: 250,000 clients and 152 branches, most run as franchises.
Fortis paid between PLN500m-700m (130m-182m) to buy Dominet, which it anticipates will help it change its current focus from mainly servicing small and medium-sized corporate clients toward expanding its credit card and mortgage loan portfolio as it moves more heavily into consumer banking. It also plans to grow its insurance sales.
Jean-Paul Votron, Fortis's CEO, says the group began analysing the Polish market more closely two years ago.
"In Poland we saw that we were subscale vis-a-vis the other European players and not addressing the full potential of the Polish economy," he says. "Our problem was how do you create more business if you were not in the first wave of expansion?"
That was why Fortis tried so hard to buy Dominet, paying a price that many analysts felt was on the high side. But the benefit is that Fortis now has a base of clients and branches it can use to expand.
"We had been lagging behind a little in Poland," says Votron, adding that after the bank's recent acquisition about 5% of the group's 60,000 employees will be in Poland. Now he says that Poland, with 38m people and the largest economy in Central Europe, is his group's "most critical market."
The interest in getting into the Polish market is understandable. Despite a real estate boom that is sweeping Poland's largest cities, there is still enormous capacity for growth in the mortgage market. Poland only has a 27% loan-to-GDP ratio, compared with 112% in Western Europe.
Poland's real estate boom will push the value of individual mortgage loans for 2006 at least 33% above the level in 2005 and the value of new mortgage loans is expected to be well over PLN30bn, compared with PLN22.5bn in 2005, according to the Polish Banking Association.
The association estimates that in 2006 banks will issue 280,000 new mortgages. In the third quarter of 2006, banks issued 72,000 new loans with a value of about PLN10.8bn, about two-thirds higher than for the same period a year earlier.
Poland's economic growth is expected to come in at about 5% in 2006, according to the finance ministry, though growth this year is expected to be about 6%.
"Poland is going to grow very nicely and there is still a lot of room for Fortis to grow as well," says Fortis' Votron.
Alexander Paklons, who heads Fortis' Polish operations, says the bank hopes to double the number of Dominet franchise branches, which for the time being will remain a separate brand.
Fortis is one of the largest financial services providers in the Benelux countries, and is the 19th largest financial group in Europe. In the first nine months of 2006, Fortis' net profits grew 19% to 3.6bn.
Leftovers and starting from scratch
Now that Dominet has been sold, the only other current chance of gaining an entry into the Polish market through acquisition is the sale of 200 branches of BPH bank, currently being negotiated by its Italian corporate parent, UniCredit Group. Spokesman Robert Moren says that a shortlist of interested banks has already been drawn up. Reuters reported unnamed sources as saying that none of Credit-Agricole, Getin, HSBC and BCP, which owns mid-sized Polish lender Millennium and Belgium's KBC, were on the list.
BPH came onto the market after UniCredit last year merged BPH with another Polish bank it owns, Pekao SA, and was forced by the government to disgorge part of the merged group so as not to overly dominate the Polish market.
Even so those assets wont come cheap, with reports suggesting a price of 1bn-1.5bn as banks such as Austria's Raiffeisen International make a last-ditch attempt to buy direct into the Polish banking sector.
Other banks wanting to get into Poland in recent years have been forced to grow organically.
When Greece's Eurobank Ergasias, the third-largest bank in that country, decided to enter the Polish market in early 2006 it decided to set up a green-field operation, building a network from scratch. The goal is to have 200 branches within three years.
Poland's fast-growing Getin bank has adopted a hybrid strategy. The bank, owned by serial capitalist Leszek Czarnecki, one of Poland's richest men, got its start in 2004. The group was built from a small Silesian bank called GBG and a loss-making bank from the central city of Lodz called Bank Przemyslowy.
In the last couple of years the group has also expanded by acquiring Open Finance, a financial advisory firm, but most growth has been organic. The group's capitalization has shot up from $3.5m to slightly more than $3bn.
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