PZU is eyeing Poland's second largest lender, Bank Pekao, the CEO of the state-controlled insurer suggested to journalists on June 21. 

Alior Bank, in which PZU bought control last year, is playing the forward role in a project to build a major state-owned banking group. Deputy Prime Minister Jaroslaw Gowin said in mid-June that Warsaw would like to “renationalise” some of the country's foreign-owned banks.

PZU CEO Michal Krupinski's hint that it is eyeing Pekao, which was speculated to be up for grabs in May, comes on top of Alior's interest in the local unit of Austria’s Raiffeisen Bank International (RBI). Italy’s UniCredit is mulling the sale of a stake in Pekao, as part of an effort to boost capitalisation at the European group

“There [is] public news about potential exits by Austrian and Italian banks, we will look at these transactions,” Krupinski said, according to Reuters. Pekao is the only major Polish bank owned by Italians.

The CEO reiterated PZU's need for acquisitions if it is to make Alior a top-five lender in Poland "in the near future," in line with a strategy the insurer discussed last year. The lender's total assets stand at around PLN42bn, although it is currently in the process of taking over BPH.

“Organically we can reach PLN78bn-80bn [€17.8bn-18.2bn] in assets, [and] to play in the big leagues further M&A will be necessary,” Krupinski said. "We have M&A ability to take over also larger entities," he added.

PZU is likely to enjoy a favourable political climate to carry out its strategy. The government of statist Law and Justice (PiS) is keen to reduce the role of foreign capital in the lending segment.

However, a bid by Central and Eastern Europe's largest banking group to sell Pekao would be somewhat surprising. While Polish banks offer significant longer term potential, they are struggling with falling profitability, which has led to a drop in valuations.

That has virtually frozen the M&A market for over a year, while those banks that have been trying to find new owners are much smaller than Pekao. Parents GE Capital - which sold BPH to Alior - or Raiffeisen Bank International - trying to sell Raiffeisen Polbank – have conceded that gaining further market share in Poland would be difficult. Given the stance of regulator KNF to further consolidation, Alior remains the only serious suitor in the market.