Polish watchdog rules out further consolidation of banking sector

By bne IntelliNews June 28, 2013

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As speculation grows over another wave of consolidation in Poland's banking industry, the country's financial markets watchdog KNF suggested late last week that there is little interest from foreign players in the country's banks, and that it stands ready to block further concentration in the sector.

"We don't have any signals from foreign banks that they are interested in taking over entities in Poland," KNF head Andrzej Jakubiak told reporters on June 20, according to cbonds. That flies in the face of suggestions that the country's biggest banks are under pressure to grab market share, and that the foreign owners of the country's second- and third-largest lenders are looking for targets.

In the wake of an announcement on June 12 by the country's biggest bank - state-controlled PKO BP - that it has agreed to buy the Polish assets of Scandinavian bank Nordea, speculation has grown that it will spark another round of consolidation in the banking sector, to follow the series of deals seen between early 2011 and 2012.

That set of acquisitions, which saw appetite to grab a slice of a market that appeared to be resisting the crisis at the time meet forced sales by certain Eurozone banks struggling to meet new capital adequacy rules, was bookended by Santander's purchases of Bank Zachodni WBK and Kredyt from Allied Irish and KBC respectively. The Spanish giant completed a merger of the two lenders in early 2013 to create Poland's third largest bank, following UniCredit-owned Pekao and PKO.

Following a break of just over a year, with the crisis having caught up squarely with the Polish economy and continuing to batter business across the Eurozone, the PKO acquisition - alongside the BZWBK/Kredyt merger - has increased competition amongst the country's top banks. The CEO of BZWBK, Mateusz Morawiecki, claimed on June 19 that Pekao is now under pressure and possibly mulling a merger.

On the other side of the equation, speculation persists that Portugal's Millennium bcp will soon be forced to put its Polish unit up for grabs. Rabobank is also said to looking to unload agricultural lender BGZ, despite the Dutch bank having only bought out the remaining 40% stake from the state - at a huge price - less than a year ago. Growing retail player Alior pushed through an IPO in Warsaw last year, but is reported to need to find a strategic investor by the end of the year.

"Taking into account the level of concentration... I believe there will be another consolidation wave," Morawiecki insisted earlier this month, suggesting such a trend is unavoidable.

Close to optimum

However, KNF is likely to block any further major moves, Jakubiak said on June 25. "The takeover of Nordea by PKO is not disturbing the competition on the banking market yet. We have a big bank in a good situation and a relatively small bank being taken over. But we think that we are close to optimum as far as Polish banking sector concentration is concerned."

"In the case of the largest banks - meaning the top ten, perhaps 15 - we expect that changes in the shareholder structure will take place by seeking a new investor and not through consolidation," Jakubiak added in comments to the Polish Press Agency. "In particular, we don't want to allow Poland's three biggest banks control some 70% of the market as that leads to limiting competition."

As the crisis has worn on, KNF has led concern expressed in Warsaw that the level of foreign ownership in the Polish banking sector - although below that seen in regional peers - makes it vulnerable to funding cuts or even outflows to struggling Western European parents. To that end, the watchdog has strictly patrolled M&A activity and dividend policy, insisting on a 25% listing on the Warsaw Stock Exchange and limit on payouts.

Nordea group CEO Christian Clausen said earlier this month that the requirement for a 25% free float was a major factors behind the sale of its Polish assets. It remains to be seen however how strict KNF will be with state-controlled PKO, which has been chasing assets across CEE for some time, with only the PLN2.8bn purchase of the Scandinavian bank to show for it thus far.

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