Polish watchdog growls as GE mulls sale of BPH

By bne IntelliNews October 16, 2014

bne -


Polish regulators have reacted furiously to GE’s announcement that it wants to sell its local subsidiary bank BPH, insisting that the US conglomerate has yet to fulfil its obligations as a strategic investor. The response of the banking watchdog KNF will do little to swell the ranks of potential suitors.

BPH announced in a filing on October 15 that GE is considering selling its 89% stake in the bank, and has informed KNF of the plan. It added that GE has hired advisors for the sale of the Warsaw-listed lender. Bloomberg suggests the holding is valued at about PLN2.8bn.

GE is trimming financial arm GE Capital, and sold its Nordic business in June. The announcement came just a day after compatriot Citigroup revealed it plans to withdraw from retail banking in 11 markets, including Hungary and the Czech Republic. At the same time, it will remain in Poland, seen as having perhaps the greatest potential in CEE.

“BPH is a well-run bank with a stable balance sheet and strong capital position,” spokeswoman Susan Bishop, told Bloomberg via e-mail. “The bank would be better positioned to realise its full potential if it was aligned with a company that had a strong commitment to its business plan and growth strategy.”

Poland's regulator patrols the banking sector with something of an iron fist. It has regularly clashed with foreign giants on the market, especially through the global financial crisis, as it has issued tough conditions on M&A and clamped down on dividends heading out of the country to parent groups. Falling capitalisation of local arms has been a fear across CEE since the crisis hit.

It has also made certain to attach strong conditions to any major acquisitions, and in a statement suggested GE has failed to live up to those placed on its 2008 purchase from Pekao of BPH, which PAP reports is the country's 14th largest bank by assets. 

"KNF attaches great importance to the fulfilment of commitments by majority shareholders of banks, especially those commitments that have not been fulfilled," the regulator said in a statement. "Any potential unilateral actions of a shareholder, without seeking KNF's consent, could form a basis of supervisory action against the investor not fulfilling the commitments."

Many have credited KNF's stern approach with keeping the Polish sector stable. But others complain it is holding back development. In particular, it has insisted that it would oppose further consolidation of the sector, even whilst the country's biggest banks have regularly said they are keen to take part in a coming wave of sales. 

Sparked by the acquisition of assets from Nordea by Poland's largest bank, PKO, speculation mounted in the summer of 2013 that many more deals were on the way. However, KNF head Andrzej Jakubiak was quick to try to stomp out such talk.

"In the case of the largest banks - meaning the top 10, perhaps 15 - we expect that changes in the shareholder structure will take place by seeking a new investor and not through consolidation," he said, according to PAP. "In particular, we don't want to allow Poland's three biggest banks control of some 70% of the market as that leads to limiting competition."

However, that will not necessarily put off the country's largest foreign-owned banks from seeking a leg up in their race to catch top banking dog PKO, according to local press reports. The list of potential bidders reportedly includes Spanish giant Banco Santander, which created the country's third largest lender last year when it completed a merger of Kredyt Bank into BZWBK, as well as BNP Paribas, Credit Agricole, Societe Generale and Deutsche Bank.

Meanwhile, the country's leading domestic financial institutions, state-controlled PKO and insurer PZU, are thought unlikely to be interested due to BPH's relatively small size. Analysts at Erste suggest BZWBK is  the likely front runner.

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