Nordea Bank AB (NDA), Scandinavia’s largest bank, sold its Polish units to the country’s biggest lender PKO Bank Polski SA for 694 million euros ($925 million).
Nordea agreed to sell its bank, financing and life insurance units to PKO, according to separate regulatory statements from both companies. PKO agreed to pay 2.64 billion zloty ($826 million) for Nordea Bank Polska SA, 180 million zloty for the life insurance business and 8 million zloty for Nordea Finance Polska, state-controlled PKO said in the statement.
The transaction will “lead to a minor capital gain and profit and loss effect,” Nordea said in the statement. It will add 50 basis points, or half a percentage point, to Nordea’s core Tier 1 capital ratio.
PKO’s Nordea purchase is the country’s biggest M&A transaction this year, according to data compiled by Bloomberg.
Foreign banks operating in Poland are facing increased competition and lower revenue from lending after demand for goods and services fell. Growth in the European Union’s biggest eastern economy may slow to 1.5 percent this year, the weakest since 2002, according to central bank forecasts.
Nordea had set out ambitious targets in Poland, saying in 2010 that it planned to have 400 branches in the country and double its market share to 8 percent. In April last year, it back-tracked and announced it would reduce staff in Poland by 20 percent and cut branches to about 135 from 193. Citigroup Inc., DNB ASA, Norway’s biggest bank, and BNP Paribas (BNP) have announced similar plans to pare their operations in the country.
As part for the deal, Nordea will keep financing its mortgage portfolio in Poland and will participate in the risk of the loans losing their value, PKO said. The banks need to receive regulatory approvals to close the transaction.
PKO plans to buy all shares of Nordea Bank and withdraw it from public trading. Operating profit at the unit fell to 78 million euros last year from 95 million euros in 2011. Net loan losses swelled to 37 million euros from 14 million euros.
Poland has been among the most active markets in Europe for deals involving banks and insurers in the last three years. Santander acquired Bank Zachodni WBK SA and Kredyt Bank SA and created the country’s third-largest lender this year. Austria’s Raiffeisen Bank International AG bought Polbank SA from EFG Eurobank Ergasias SA of Greece, while Germany’s Talanx AG (TLX) purchased insurer Warta SA from Belgium’s KBC Groep NV.
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