Poland's Pekao reportedly launches due diligence on Bank BPH

By bne IntelliNews December 7, 2015

Pekao is reportedly conducting due diligence on GE Capital’s Polish banking unit Bank BPH, local media reported on December 7. The news suggests bank M&A in Poland may be set to progress now the new government has revealed some of its plans for the sector, and that the regulator may have eased its objections to further consolidation.

The local unit of Italian giant Unicredit has launched due diligence on BPH after GE’s negotiations with other potential buyers - state-controlled insurer PZU and Polish billionaire Leszek Czarnecki – faltered a couple of months ago, Puls Biznesu reported, citing unnamed sources. Czarnecki reportedly remains in the race.

The bidders were said to have pulled out as uncertainty rose over the sector. With PiS looking likely to win the election in October, its plans to hit lenders with new taxes and punishing schemes to help forex borrowers made valuations all but impossible to agree.

“Everybody is waiting for what the new government will come up with when it comes to the banking tax and regulations regarding Swiss franc borrowers," PZU’s CEO told PAP at the time.  

It is not clear what price Pekao might offer for BPH, but PZU was reported to give up on the talks after GE proposed a valuation equal the bank’s book value. The insurer was speculated to have offered considerably less. Czarnecki reportedly offered 1.2x the book value, but only after BPH sheds its Swiss franc loans portfolio.

The PiS government has now revealed its plans for a tax on bank assets above PLN4bn (€930mn) charged at a rate of 0.39%. The question over Swiss franc mortgags remains open, but with GE keen to unload its Polish unit, the US giant is believed to have offered to strip the portfolio out of BPH.

Meanwhile, the news also suggests regulator KNF may be pulling back on its opposition to further consolidation of the banking sector. The watchdog has been warning the country's top banks for a couple of years it would not look kindly on acquisitions that hand them more market share.

Pekao, Poland's second largest bank, had been suggesting for some time it would like to bulk up via M&A, but has been remarkably quiet this year, despite BPH, and Raiffeisen's Polbank, being up fro grabs. The former government and KNF had appeared to favour the construction of a large new Polish banking group under PZU.

However, it could be a challenge for the Italian-owned bank to persuade the nationalist PiS to agree to let it increase its share of the Polish market. The party prevented Pekao from taking over BPH in 2007, when UniCredit merged with Germany’s HVB.

PiS - in office from 2005-07 said it was wary of allowing the Italian's to build too large a bank, and blocked the deal. BPH was eventually divided into two parts, with the smaller part ending up with GE Capital. The US parent has been looking to sell since October 2014, as it pulls back from its international financial holdings.



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