Jan Cienski in Warsaw -
The steep rise of the Swiss franc against the zloty is giving heartburn to more than the hundreds of thousands of unfortunate Poles with mortgages denominated in that currency – it is also causing problems for bank owners interested in exiting the Polish market.
That’s because many of the banks which could potentially be put up for sale have their books clogged with Swiss franc loans, which is scaring off potential buyers.
The latest on the auction block is Raiffeisen Polbank, the Polish subsidiary of Austria’s Raiffeisen Bank International, which earlier this week announced it was selling its Polish operation because the cost of growing its market share is simply too high. Raiffeisen Polbank is the country’s eighth largest by assets, and Martin Gruell, RBI’s chief financial officer, told a conference call he had no intention of selling on the cheap.
“In Poland we expect a price above book value,” he said. “We are very confident of getting a high price.”
That may be difficult, in large part because of the €2.8bn in Swiss franc loans on the books of the Polish subsidiary. One of the obvious buyers for Raiffeisen Polbank would be Pekao, a unit of Italy’s UniCredit and the country’s second largest bank. But Luigi Lovaglio, the bank’s CEO, told reporters earlier this week that he has no plans of paying above book value.
“Currently it is very difficult to buy a bank above book value, not just in Poland,” he said. “Pekao especially has no intention of paying such a price.:
The problem is the franc
“It is obvious that a CHF portfolio affects the price, which can be seen in the shrinking capitalisation of banks which had been engaged in franc loans,” he said. His bank was one of the few on the Polish market which did not lend much in francs during the real estate and mortgage boom which preceded the 2008 economic crisis.
The Swiss National Bank’s unexpected decision in January to end its peg to the euro caused the currency to jump by about 20%. Until now, Polish borrowers in Swiss francs have been very diligent in repaying their debt, with only 3.1% of such loans in arrears, compared to 3.6% for zloty-denominated mortgages. The worry is that the franc’s rise could make those numbers much worse; in Hungary non-performing loans rose to more than 20% before the government stepped in to unilaterally end the problem.
The government is under growing pressure from 550,000 Swiss franc borrowers to help them. So far prime minister Ewa Kopacz has said she will not support any scheme that could affect state finances, but regulators are pressing banks to be lenient towards their customers and to pass through Switzerland’s negative interest rates to their borrowers. The issue raises the prospect of political risk, which makes bankers nervous.
“The issue could become much more acute, with the presidential and more particularly the parliamentary elections this year,” noted Peter Attard Montalto of Nomura, the investment bank.
That worry also affects some of the other Polish banks which may be coming up for sale. BPH, also a once-enthusiastic issuer of CHF loans, is being sold by its parent, General Electric. Italy’s Carlo Tassara group is interested in selling its stake in Alior Bank, a successful start-up which opened its doors in November 2008, just weeks after the collapse of Lehman Brothers. The tiny FM Bank PBOP is also up for sale after its owners at the Abris private equity fund got into a fight with the Polish Financial Supervision Authority. Bank Millennium, owned by Portugal’s BCP and another keen franc lender, has been the subject of rumours of years over a possible sale.
Although the regulator has no official position on whether banks already active in Poland or outsiders should take part in the consolidation of Poland's banking sector, Andrzej Jakubiak, its chairman, said in a recent interview that "I would rather that the banking sector develop thanks to the entry of new players on to the market".
However, it is uncertain that a market with slowing growth, high priced assets and the cloud of past franc lending will be all that attractive to newcomers.
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