bne IntelliNews -
Raiffeisen Bank International (RBI) has put its troubled bid to sell its Polish unit on hold, unnamed sources claimed on July 22. The delay suggests the Austrian bank has baulked at taking on any of the risk attached to the unit's portfolio of Swiss franc mortgages as the risk of a huge hit on lenders rises alongside the poll ratings of the populist opposition.
The Polish regulator KNF threatned to impose strict requirements on Raiffeisen when it announced it would seek to sell Polbank in February. However, a deal has looked more likely in recent weeks. State-controlled insurer PZU has reportedly been looking closely at the Austrian-owned lender as a potential part of its bid to build a large bank, and was said to have got as far as doing due diligence on Polbank in May.
Yet the insurer has stated clearly that it will not take on forex loan risk. RBI's CEO said in April that the parent could take on some of the risks in Polbank's portfolio, however the Austrian bank does not appear to have solved the issue sufficiently to impress suitors.
"The talks are on hold. Raiffeisen saw no big interest and sees huge problems with the FX mortgage portfolio, so the only option left on the table right now is a possible IPO next year," an unnamed source told Reuters. Two other banking sources also said the sale is on hold.
A spokeswoman for RBI told the newswire she had no comment on market speculation. PZU spokespeople were unavailable. RBI is due to list 15% of Polbank on the Warsaw Stock Exchange before any sale as part of its commmittments to KNF on buying the lender in 2012.
Similarly to other forex loans in Poland, the RBI unit's €3.3bn or so in Swiss franc loans is a huge potential risk after the currency surged in early 2015, raising Polish borrowers' installments dramatically. The likelihood that the banks will be asked to take on some of the losses has haunted the banking sector through the year, and has all but put a stop to M&A and capital market deals. That leaves the likes of RBI - which wants to sell as part of a group-wide effort to reduce risk-weighted assets - looking stuck.
The government is now trying to push through a scheme that it is estimated will cost lenders over PLN9bn. However, the populist PiS - leading the polls ahead of elections in October - says it wants to force banks to convert loans at historical rates; a move it is claimed could cost PLN30bn-60bn.
Meanwhile, KNF has set strict conditions on any sale by RBI. It has said Polbank’s new owner must come from outside the banking sector in order to prevent further consolidation - a scenario it has long contested. Any suitor should also enjoy a credit rating equal to that of RBI. Moody's rates parent Raiffeisen Zentralbank Österreich at Baa2, S&P at A-, and Fitch at A.
However, the regulator had joined the government in a recent plan to have PZU lead an effort to 'repolonise' the banking sector. The listed insurance giant bought a 25% stake in Alior Bank in April, and confirmed it is looking to build a large lender.
PZU was recently said to be eyeing BOS and GE Capital’s BPH as takeover targets as well. Like RBI, GE met opposition from the KNF when it announced late last year that it wanted to sell. The Swiss franc surge in January has reportedly also made the US giant put the sale on hold.
However, speculation earlier this year suggested GE had been quick to take on some of the forex loan risk at the unit. A financial sector source told Reuters on July 22 that PZU may sign a preliminary agreement to buy Poland's No.10 lender this year.
It makes no sense for PZU to talk about buying BOS before it reaches an agreement with GE over BPH, the source reportedly added.