Warsaw Equity Market Driven by Banking Asset Sales

Warsaw equity sales in January, the largest in Europe, beat the total value of last year’s deals and will rise more with a KBC Groep NV sale as Poland boosts investments to spur the economy and lenders shore up finances.

UniCredit SpA closed the sale of a 9.1 percent stake in Bank Pekao SA yesterday, raising 3.73 billion zloty ($1.21 billion), according to a regulatory statement. Italy’s largest bank, which yesterday said Pekao remains “core” to its strategy, is reviewing its central and eastern European operations as the sovereign-debt crisis and its home country’s third recession in a decade weigh on earnings.

The sale of Pekao, Poland’s second-biggest lender, came less than a week after the government and state-owned Bank Gospodarstwa Krajowego sold a record 5.24 billion-zloty stake in PKO Bank Polski SA. The two transactions bring the total equity sales market in Poland to 9 billion zloty this year, surpassing 2012’s total of 8.75 billion zloty.

“The Polish government and European banks are under pressure,” Andrzej Blachut, the head of emerging-market equities at Zurich-based Swiss & Global Asset Management, which helps manage the equivalent of $89 billion, said by e-mail. “They are seeking money and Polish banks, delicately speaking, are well priced in comparison to its peers.”

KBC Transaction

Polish lenders trade at a market weighted average of price-to-book value of 1.83, versus central and eastern Europe’s average of 1.56.

KBC, Belgium’s biggest bank and insurer by market value, plans to sell a 16 percent stake in Banco Santander SA’s Polish unit in the current quarter. KBC received the holding, valued at 3.92 billion zloty at the current market price, in Poland’s third-largest lender Bank Zachodni WBK SA after selling Kredyt Bank SA last year.

The Belgian bank has been selling assets as part of a disposal program agreed to with European Union regulators in exchange for approval of the state aid it received during the financial crisis.

Alior IPO

The three sales come on top of the initial public offering by Alior Bank SA, the biggest IPO by a private Polish company. Alior, which owns Poland’s third-largest network, and its owners raised 2.1 billion zloty in the transaction in December. Carlo Tassara SpA, owned by French investor Romain Zaleski and founder of Alior, is looking to sell its remaining stake, now valued at 1.7 billion zloty, this year to reduce debt, according to the IPO prospectus.

“The past two months have been heavy with bank share placements in Poland and cash is tight,” Renaissance Capital Ltd. analysts Armen Gasparyan and David Nangle wrote in a research note today. “Markets are also gearing up for a significant unloading of shares from Bank Zachodni.”

Blachut says the “sale potential” in the banking industry is “rather” coming to an end.

Santander Deal

Poland has been one of the most active markets in Europe for deals involving banks and insurers in the last three years.

Spain’s Santander acquired Zachodni and Kredyt Bank. Austria’s Raiffeisen bought Polbank SA. German insurer Talanx AG purchased Towarzystwo Ubezpieczen i Reasekuracji Warta SA. Alior went public in December.

Poland’s government sold a 3.09 billion-zloty stake in PKO in July last year and a 3.17 billion-zloty holding in PZU SA insurer in June 2011.

PKO shares fell 0.4 percent to 34.3 zloty as of 10:04 a.m. in Warsaw, valuing the bank at 42.9 billion zloty. Pekao was down 0.5 percent at 155.1 zloty, heading for the lowest close since November after UniCredit’s sale. Zachodni added 0.1 percent to 250.7 zloty today as fourth-quarter earnings beat estimates.

Sales Plans

The country, the EU’s largest eastern state, has outpaced the rest of central and eastern Europe combined by equity offerings in the past decade, attracting the biggest global investment banks and boosting the Warsaw Stock Exchange.

This year, the government plans to raise 5 billion zloty from asset sales, down from a 10 billion-zloty target in 2012. The state may raise an additional 10 billion zloty in 2013 from selling its stakes in PKO, PZU and utility PGE SA. The option will be used if Bank Gospodarstwa and an investment company that the government is currently setting up say they need additional capital for infrastructure projects.

BGK, as the Bank Gospodarstwa is known, and the company are part of the Treasury Ministry’s program aimed at boosting energy and road investments as funds flows from the EU may decelerate in coming years.

The 67 billion euros ($91 billion) that Poland is set to get from the EU in 2007 to 2013 helped the country become the only member of the bloc to avoid recession during the recent crisis.

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