Pekao Slumps as UniCredit Sale Spurs ‘Re-Polonization’ Talk

  • Italian owner sold 10% stake in Poland’s second-largest bank
  • Poland seeks bigger role in banking industry, deputy PM says

Bank Pekao SA tumbled to a four-year low after UniCredit SpA divested a 10 percent stake, reviving speculation that Polish government-backed companies will take over the lender.

UniCredit sold a 3.3 billion zloty ($829 million) stake in Poland’s second-largest bank on Tuesday, shoring up its capital to shield against shocks to Italy’s financial industry. Pekao, in which the Italian bank still holds 40.1 percent, fell today 6.4 percent to 126 zloty, same price at which UniCredit sold its shares. It is the lowest close since September 2011 and the biggest daily drop in 28 months.

While international funds not based in Poland bought most of the shares on offer, according to three people familiar with the matter, Deputy Prime Minister Mateusz Morawiecki said UniCredit’s sale kick-started a process where the Polish government could gain control over one of its prized lenders. The ruling Law & Justice party has made a “re-Polonization” of banks a priority as it seeks to boost the state’s role in the economy.

“It’s clear that the decision to change Pekao’s ownership structure has just begun,” Morawiecki told PAP newswire on Wednesday. “We will be trying to increase the role of Polish institutions in the industry.”

Foreign owners, including UniCredit, Banco Santander SA, Commerzbank AG, ING Groep NV and Citigroup Inc, control about 60 percent of Polish banking assets. If Polish companies bought Pekao, it would meet the government’s target to reduce non-resident ownership to about half of total assets.

Treasury Minister Dawid Jackiewicz said last month that state-controlled insurer PZU SA and the country’s biggest lender PKO Bank Polski SA have the “capacity” for bigger takeovers, such as acquiring the units of UniCredit or Raiffeisen Bank International AG. He decline to comment about Pekao today. PZU will “look into” takeover opportunities, Chief Executive Officer Michal Krupinski told Polish radio 3 on Tuesday.

Lock-Up

Polish bank valuations have been hit by a new levy imposed on their assets and a political debate about potentially costly plans to convert the industry’s $35 billion of Swiss franc-denominated mortgages.

Pekao’s shares have declined 35 percent from last year’s high, compared with a 21 percent drop in Warsaw’s broad WIG index. Still, it’s price-to-book ratio exceeds 1.5, the highest among major Polish lenders.

“Foreign investors who were underweight Pekao had a possibility to increase their holdings in a bank considered to be safe,” Jaroslaw Lis, an equity fund manager at BPH TFI SA in Warsaw, said by e-mail. The deal facilitates a potential takeover of Pekao by a Polish investor, as UniCredit’s controlling stake is now worth less, he said.

UniCredit pledged to refrain from selling more Pekao shares for 90 days.

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