UniCredit Lifts Capital Level With $2.6 Billion Pekao Unit Sale

Updated on
  • Sale to boost Italian bank’s CET1 ratio by 55 basis points
  • UniCredit starts placement of Pekao equity-linked cetrificates

UniCredit SpA advanced its plan to boost capital, agreeing to sell 32.8 percent of Poland’s Bank Pekao SA to Insurer PZU SA and a Polish development fund for 10.6 billion zloty ($2.6 billion).

The sale will lift UniCredit’s CET1 capital ratio 55 basis points above its Sept. 30 level, the Italian bank said in a statement on Thursday. The lender also started the sale of its remaining 7.3 percent stake in Pekao on the market via secured equity-linked certificates.

UniCredit Chief Executive Officer Jean Pierre Mustier, a 55-year-old Frenchman who took over in July, is disposing of assets and weighing a capital increase as part of a strategic review, the results of which that will be disclosed on Dec. 13. Italy’s biggest bank by assets emerged from the latest European stress tests with the slimmest capital margin among those deemed important to the financial system.

“These asset sales will help reduce the amount of capital the bank ultimately has to raise,” said Markus Riesselmann, an analyst at Independent Research in Frankfurt with a hold recommendation on UniCredit. “What we’re really focused on is what the bank will say next week at its strategy presentation, but I’m not sure we’ll necessarily hear more about the capital increase then.”

The stake in Pekao was sold for 123 zlotys a share, the Polish companies said in a separate statement. The purchase will make the Polish government the biggest Pekao shareholder, effectively holding about a third of the stock, which will allow it to control the supervisory board and make management changes. The Polish buyers will also purchase UniCredit’s holdings in three asset-management companies for about 142 million euros ($153 million), the Italian bank said.

UniCredit shares were up 1.2 percent to at 2.51 euros as of 12:52 p.m., after having lost as much as 1.7 percent earlier. Pekao shares, which have declined 5 percent since the sale plan was first reported in July, were up 3.1 percent at 124 zloty in Warsaw.

Jean-Pierre Mustier

Photographer: Antoine Antoniol/Bloomberg

The CEO said earlier this week his plans haven’t changed since Italian Prime Minister Matteo Renzi announced his intention to step down after his referendum on constitutional reforms was soundly beaten on Dec. 5. UniCredit, is considering raising as much as 13 billion euros through a combination of a stock offering and asset sales, people with knowledge of the matter have said.

The lender on Monday said it’s in exclusive talks with French fund manager Amundi SA on the sale of Pioneer Global Asset Management SpA, a business that may be valued at as much as 3.5 billion euros, according to people familiar with the matter.

Italian banks are straining under some 360 billion euros in soured loans, the equivalent of about a fifth of the country’s gross domestic product. UniCredit’s third-quarter profit declined 12 percent to 447 million euros from a year earlier, while previous disposals of stakes in Pekao and online lender FinecoBank SpA helped raise the common equity Tier 1 ratio to 10.8 percent from 10.3 percent.

UniCredit and Allianz AG bought a 52.9 percent stake in Pekao in 1999 for $1.09 billion, outbidding competitors such as Citigroup Inc. Since then, the Polish bank’s shares more than doubled. In July, UniCredit sold 10 percent in the Polish unit for an equivalent of $799 million.

In Poland, the deal is part of the government’s effort to “re-Polonize” the banking industry, and it will increase local ownership to more than half of the country’s banking assets for the first time since 1999, when the east European nation was in the midst of a privatization drive. PZU said in a statement that it expects Pekao to continue paying out almost all its profit as dividends as well as maintaining as “low-risk profile.”

Deal Financing

PZU will finance the deal mostly from its excess capital, while PFR will use own funds as well as will seek financing on the market, Chief Executive Officers Michal Krupinski and Pawel Borys said at a joint press conference in Warsaw on Thursday. The takeover will be financed in the Polish currency and UniCredit may exchange funds it raises outside the market to avoid currency volatility, Borys added.

Pekao’s new investors pledged that the bank will keep the policy of paying most of profits as dividend. They don’t plan to change lender’s strategy and want to maintain its “low risk profile,” according to a statement earlier Thursday.

UniCredit also agreed to take on the risk of potential regulatory changes that may lead to costs related to Pekao’s Swiss-franc home-loans portfolio for three years.

— With assistance by Nicholas Comfort

(Updates with analyst, executive comments starting in fourth paragraph.)
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