Polish Swiss-Loan Plan Paves Way for Mergers: Deals to Watch

  • Raiffeisen is selling its Polish unit exposed to Swiss loans
  • UniCredit is said to consider disposing stake in Bank Pekao

Poland’s move to soften the terms for converting banks’ foreign-currency mortgages is set to revive consolidation in its financial industry.

The uncertainty hanging over $36 billion in mostly Swiss franc-denominated home loans, as well as Polish regulators’ decision to block sales of banks with such portfolios, have been major obstacles for bank owners wishing to exit Poland. President Andrzej Duda seeks a gradual exchange of the mortgages into zloty and wants banks to pay back clients as much as 4 billion zloty ($1 billion) for “excessive” exchange-rate spreads, according to details of the plan announced on Tuesday.

The new proposal will cost banks an estimated 25 billion to 40 billion zloty, according to analysts at Nomura Plc in London and Trigon Dom Maklerski SA in Warsaw. That’s less than Duda’s previous plan, which would have seen costs mount to as much as 67 billion zloty and was criticized by Poland’s banking regulator in March.

General Electric Co., which in April agreed to sell Bank BPH SA to Alior Bank SA, had to split off and keep the unit’s Swiss-franc mortgages to make the transaction possible. Foreign owners, including UniCredit SpA, Banco Santander SA, Commerzbank AG, ING Groep NV and Citigroup Inc., control about 60 percent of Polish banking assets.

Here’s a list of potential deals:

* Austria’s Raiffeisen Bank International AG is seeking to sell its Polish unit.
** Poland’s largest lender, PKO Bank Polski SA, and rival Alior Bank were planning to submit non-binding offers. ING Bank Slaski SA and BNP Paribas SA are also interested in buying the bank, according to media reports.
** The unit may sell for as much as 1 billion euros ($1.1 billion), according to the reports
** The deadline for placing non-binding bids was June 30; investors have until early September to submit final offers, a person familiar with the process said in June
** In May, Raiffeisen agreed with the Polish financial market regulator to sell the unit and carve out its portfolio of Swiss franc-denominated mortgages this year. If it fails to do so, the Vienna-based bank would have to honor an earlier pledge to list the unit on the Warsaw Stock Exchange
** The sale of its Polish unit is a key component in Raiffeisen’s plan to restore its capital ratios after posting a record loss in 2014

* Italy’s UniCredit is considering selling its entire 30 percent stake in Bank Pekao SA, Poland’s second-largest lender, to help bolster its capital buffers.
** The insurer PZU SA and the state development fund PFR may team up to buy it, according to Puls Biznesu newspaper
** UniCredit sold a 10 percent stake in Pekao on July 12 for 3.3 billion zloty; the remainder of its stake is valued at 13 billion zloty, based on Tuesday’s closing price
** Poland’s deputy prime minister, Mateusz Morawiecki, said that stake sale marked the beginning of a process through which the Polish government could gain control over one of the country’s prized lenders
** If Polish companies bought Pekao, it would meet the government’s target to reduce non-resident ownership to about half of total assets

* China’s Fosun Group says it wants to enter markets including Poland. The company wants to raise its stake in Banco Comercial Portugues SA, which owns Warsaw-based Bank Millennium SA, to between 20 percent and 30 percent.
** Fosun wants to purchase about 16.7% of Banco Comercial through a private placement, it said on July 30; Banco Comercial’s board will analyze Fosun’s proposal
** Banco Comercial owns 50.1 percent of Bank Millennium. Its stake is worth about 3.3 billion zloty based on Tuesday’s closing price.
** Home loans denominated in foreign currencies account for 39 percent of Millennium’s total loans and 55 percent of its mortgages

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