PKO Plans Takeovers to Protect Its Top Position in Poland

PKO Bank Polski SA, Poland’s largest lender, is seeking takeover targets at home and in central Europe to fight off growing competition from foreign-owned lenders.

The state-controlled bank is interested in buying “small and medium-sized” lenders as part of its expansion plans through 2015, Warsaw-based PKO said in a statement today. The region’s biggest bank by market value also plans “a strategic alliance” in bancassurance and electronic payments businesses.

PKO, which this year offered to raise its stake in Bank Pocztowy SA, is looking for opportunities to speed up growth as Spain’s Banco Santander SA and Polish billionaire Leszek Czarnecki’s Getin Noble Bank SA step up expansion. UniCredit SpA’s Bank Pekao SA, Poland’s second-largest lender, seeks to play a “significant” role in the consolidation of the banking market, Chief Executive Officer Luigi Lovaglio said March 15.

“There are several financial institutions that plan to exit Poland,” PKO Chief Executive Officer Zbigniew Jagiello said at a news conference today. “We want to take advantage of the economic slowdown, which is prompting other institutions to change their growth strategies.”

PKO shares rose 0.4 percent to 34.8 zloty at 12:12 p.m. in Warsaw, trimming this year’s drop to 5.7 percent and valuing the bank at 43.5 billion zloty ($13.3 billion).

Takeover Targets

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 purchased insurer Warta SA from Belgium’s KBC Groep NV.

“Institutions whose parent companies are based outside Poland will have to review their strategies because smaller banks don’t have the scale to compete,” said Jagiello.

PKO, which plans to finance acquisitions with retained profits and subordinated debt, wouldn’t name any takeover targets today. Bank Millennium SA, controlled by Banco Comercial Portugues SA, would meet acquisition criteria as it has “strong” presence in large cities, Jagiello said in an interview with the Rzeczpospolita newspaper Feb. 21.

Nordea Bank AB hired Bank of America Corp. to explore the possible sale of its Polish unit, two people with knowledge of the matter said on Feb. 26. Alior Bank SA’s founder, Carlo Tassara SpA, is working with UBS AG to sell at least 30 percent of the bank, three people familiar with the matter said Jan. 31.

Mutual Funds

PKO is also “very interested” in buying mutual funds in Poland to expand its asset-management business, Deputy CEO Jakub Papierski told reporters today, adding “there’s a chance” that one purchase agreement will be signed this year.

Banks in Poland boosted their combined profit 4.4 percent to a record 16.2 billion zloty in 2012 as lending continued to grow even as the economy slowed, according to data on the Polish financial regulator’s website.

PKO, whose net income fell 1.6 percent to 3.75 billion zloty last year, forecasts the Polish loan market to grow as much as 4 percent this year, according to Jagiello.

Its return on equity, a measure of profitability, will exceed 15 percent through 2015 while the cost to income ratio should be below 45 percent, the bank said today. Its ROE was 15.9 percent and cost to income ratio at 39.9 percent in 2012.