RBI suspends preparations for IPO of Polish unit

RBI suspends preparations for IPO of Polish unit
RBI is under a deadline to float a 15% stake in Polbank by the end of June.
By bne IntelliNews June 7, 2017

Raiffeisen Bank International (RBI) has suspended preparations for an initial public offering (IPO) of its Polish unit Raiffeisen Polbank, the Austrian banking group confirmed on June 7.

Polish financial market regulator KNF announced early on June 7 that it has stopped working on the project after a request from Vienna. Neither the watchdog nor the bank would discuss the reason for the move. However, with RBI under a deadline to float a 15% stake by the end of June, it seems likely that the bank is seeking an agreement from KNF to postpone the sale amidst valuation concerns, or even that it could seek to revive talks to sell, which would release it from its committment to float the unit. Johann Strobl, RBI's CEO, was reported to have recently travelled to Warsaw to negotiate delaying the sale.

KNF announced that it has suspended work on the IPO prospectus, which was submitted by RBI in April, but a spokesman reiterated to PAP, however, that June 30 stands as a deadline.

RBI's commitment to list the stake was a condition of KNF’s consent in 2012 for the Austrian bank's acquisition of the unit from Greek lender Eurobank. The June 30 deadline leaves RBI with just over three weeks to go ahead with a float.

RBI confirmed to bne IntelliNews that it has asked to suspend the process, suggesting there is some room to talk with KNF. “We are in discussions with the Polish regulator about the IPO,“ RBI spokesman Christof Danz said, without offering further detail.

A source at the Austrian group hinted that the bank is hopeful of delaying a deal that is struggling. Pricing conditions in the Polish banking market remain unfavourable as lenders continue to face pressure from the government to unwind huge Swiss franc mortgage loan portfolios.

While talk of forced conversion is off the table due to concerns over the stability of the sector, a bill is in parliament that would require banks to refund forex spreads to customers. Meawhile, the bank tax introduced last year, the low interest rate environment, and raised capital buffer requirements are all impacting on profitability. Raiffeisen Polbank reported a net loss of PLN76mn (€18.1mn) for the first quarter.

“The Polish regulator is definitely a tough one but possibly the idea that a delay of the IPO could be beneficial for all parties will be accepted. A non-flying IPO would not be supportive for Polish markets in general,” the source added. “We still have a lot of restructuring work [to do at Polbank], the source adds.

However, there are hints that the revival of a deal to sell the unit instead of floating a stake could be on the cards. The Austrian group spent around two years trying to offload Polbank, only to see a deal to sell to Alior – controlled by state-controlled insurer PZU – break down in December.

Sources suggested at the time that the tough conditions on the market had left but a single bidder, which had pushed the Austrian group too hard on pricing. PZU, which is busy building a new state banking group, announced the same day that alongside state fund PFR it had bought UniCredit out of Poland's second largest lender Pekao.

A sale to state-controlled entities would allow RBI to evade the demand from KNF to carry out the IPO. However, the Austrian bank remains coy on the prospect that it could relaunch efforts to sell the unit.

"The main reason [for the suspension of the IPO process is] protection of the asset value, regardless of whether we will IPO the franchise or sell it outright," the source says.