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Bank Pekao Plans Record Dividend as Profit Tops Estimates

March 11 (Bloomberg) -- Bank Pekao SA, Poland’s second-largest lender and a unit of UniCredit SpA, proposed a record dividend after its fourth-quarter profit exceeded analysts’ estimates.

Management recommended a payout of 9.96 zloty ($3.28) a share, or 94 percent of 2013’s profit, the lender said in a regulatory statement today. That compares with 8.39 zloty last year and an 8.86 zloty forecast by Bloomberg. Fourth-quarter net income was 735.6 million zloty, beating the mean 665.2 million-zloty estimate in a Bloomberg survey of 13 analysts.

“Pekao can afford to pay such a high dividend as it has plenty of excess capital and has no plans to spend it on acquisitions,” Michal Konarski, an analyst at MBank SA’s brokerage in Warsaw, said by phone today.

Polish banks are returning more cash to their owners after the country’s financial supervisor removed restrictions on dividends as the economy started accelerating. Commerzbank AG’s MBank last month announced plans to boost a payout by 70 percent, Citigroup Inc.’s Bank Handlowy SA proposed to spend almost its entire profit on a dividend, while Bank Millennium SA will pay its first dividend in three years.

Pekao shares gained 0.3 percent to 184.2 zloty at 1:43 p.m. in Warsaw, snapping a two-day decline and valuing the bank at 48.3 billion zloty.

Lower Costs

Pekao’s solvency ratio, a measure of capital, was 18.8 percent at the end of last year, compared with the required 8 percent. Full-year profit declined to 2.78 billion zloty from 2.94 billion zloty in 2012, according to its statement today.

The bank plans to keep a “sustainable stream of dividends” through 2020, Chief Executive Officer Luigi Lovaglio said at a press conference today.

Operating costs fell 9.1 percent to 794.6 million zloty in the fourth quarter, offsetting an 8.8 percent decline in net interest income and a 0.2 percent drop in net fees, the bank said. Bad loan provisions dropped to 169.2 million zloty, down from 186.9 million zloty in the last three months of 2012.

Pekao wants its costs to make up less than 42 percent of revenue by 2020, compared with last year’s 47 percent, Lovaglio said. Cost of risk, or a share of bad-debt provisions to total loans, is to drop to 0.5 percent from about 0.7 percent in 2013.

The bank, whose retail lending rose 10 percent and corporate loans increased 3.8 percent last year, wants to grow faster than the Polish market, which the lender forecasts to expand 4.8 percent and 5.9 percent respectively in 2014, according to Lovaglio.

To contact the reporter on this story: Marta Waldoch in Warsaw at mwaldoch@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Pawel Kozlowski, Elizabeth Konstantinova

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