Idea Bank IPO flops in Warsaw

By bne IntelliNews April 2, 2015

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Getin Holding, the Polish investment and financial group, has failed to sell a large stake in its subsidiary Idea Bank because of its ambitious valuation and the current unfavourable market conditions. 

Idea had planned to sell up to 20mn new shares, while Getin and its managers hoped to offload a further 7mn existing shares, representing 30.7% of the new planned total equity. However, Getin said in a market filing on April 1 that it will not now sell any of its holdings, and instead will sign up to buy some of the new shares the unit is putting on the market.

Getin had said on March 19 as it announced the offer that it hoped to price the debut on the Warsaw Stock Exchange at up to PLN32 (€7.75) per share. That indicated it was targeting a valuation of PLN2.8bn (€689mn) for the unit, or an ambitious 1.9-times book value.

Major banks have said recently they would not pay over book value for Polish banks, considering the risks. Banks trade at around 1.5x book value on the Warsaw Stock Exchange.

After delaying bookbuilding by a day, Getin announced on April 1 that the deal will now go through at PLN24 - the unofficial bottom of the range. Individual investors will buy just 600,000 of the 20m new shares, Getin added. It did not say how much of the issue it will absorb.

The grim fate of the IPO comes against a backdrop of growing risks on the Polish banking market. Lenders are struggling with declining interest rates, lower card transaction rates, rising rescue fund fees, and - last but not least - regulatory pressure linked to exposure to Swiss franc loans. 

The banks are looking anxiously at the government and financial regulator KNF, with Warsaw still to officially confirm that it will not force a painful solution on them to help out the 550,000 or so borrowers whose repayments on their CHF-denominated mortgages have risen since the Swiss central bank lifted its cap on the currency in January.

KNF has suggested clients should be able to convert their mortgages into zloty at historical rates. While the government has strongly hinted it will look for a solution less painful for lenders, the uncertainty has all but halted M&A activity - at a time when several banks are up for grabs - and applied pressure on stock prices.

Getin Holding's main asset - Getin Noble Bank - is one of the most exposed to CHF loans. It is amongst a group of lenders that KNF has said will be "advised" to avoid a dividend payout on 2014 results.

Given the issues, Getin's determination to push the deal through now suggested it was in a hurry to raise capital for Idea. The holding said it wants to grow Idea's core lending business for small and medium enterprises, as well as boost factoring and leasing business lines. Analysts at the time of the original IPO announcement suggested Getin would clearly realise it would have to accept the price the market dictated.

However, the offer hit another bump when Portugal's BPC Millennium announced an accelerated book build of a 15% stake in its Polish unit on March 26. That deal, supported by the EBRD, went through at a heavy discount to the market, apparently draining much of the persisting appetite on the market for banking stocks on the way. 

Idea is currently controlled by Polish investor Leszek Czarnecki, who owns 85.73% of the bank both via directly-held shares and Getin Holding. Idea posted PLN241.3mn (€58.5mn) profit in Poland in 2014 (up 125% y/y) and the total assets of the group at end-2014 amounted to PLN15.1bn (€3.66bn). 

Getin Holding stock fell over 5% on April 1 to PLN1.97 (€0.48) by the close of trading. Getin Noble Bank's slide was just behind at around 3%. 

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