One of the highlights of 2004 for the Polish banking sector was the IPO of 38% of PKO Bank in November. This was the fifth time the government had tried to privatize the bank, and failure would have been a major embarrassment.
The bank is well positioned, with by far the biggest branch network and a commanding position in retail banking. However, it has been dogged with image problems, and is still occasionally perceived as a politicized, communist-era organization.
But there was nothing outdated about its IPO – the biggest the Polish market has seen. The stock priced at Zl20.50, after Zl20.50 to Zl23 pre-pricing talk, raising the equivalent of about e2 billion. Artur Szeski, bank analyst at CDM Pekao, says: “It was how it did in the secondary market that was the big positive surprise.”
The stock rose 13% in one hour, and is now trading at Zl25. It broke the record for the highest turnover in a single session of the exchange. Bielecki says: “We had people queuing up for three days and nights to open accounts at PKO, in order to get a discount on the shares. I haven’t seen that sort of appetite for a deal since the beginning of the 1990s.”
The IPO was the brainchild of treasury minister Jacek Socha. A former head of the Polish financial regulator, Socha is an avid supporter of the Polish stock exchange, and is angered that so few privatizations in the past five years have been floated in Warsaw.
“The PKO BP debut was a success for the capital market,” Socha says. “A signal that privatization through the stock market is the right direction, and I support the continuation of this method.”
Socha was instrumental in winning the parliamentary battle to market the IPO to international investors, via bookrunner CSFB, as well as to retail investors. Jacek Jonack, partner at Allen & Overy, the lawyer for the IPO, says: “There was heavy discussion whether to sell abroad at all.”
In the end, the stock was very well received by international investors. Szeski says: “Large investors are always complaining that, while they like the Polish story, they can’t find large liquid stocks to invest in. Now they have a company with a market capitalization of e6 billion, of which e2 billion is free float, which will qualify for the MSCI index.”
The success of the deal highlights the growing attraction of IPOs on the Warsaw exchange not just for Polish companies – although Socha says he now plans to do several other privatizations onto the bourse – but also for companies from neighbouring countries. Bank Austria listed on the exchange in 2003 and in 2004 Hungarian PVC manufacturer BorsodChem raised e350 million in a Polish secondary offering.
It also highlights the attractiveness of PKO as an institution, although most analysts say the company still has a lot of room for improvement.
Kurt Geiger, head of the European Bank for Reconstruction and Development’s office in Warsaw, says: “The bank has done a very good job over the past 12 to 18 months, in preparation for this IPO. It was able to protect its market share and maintain its strong position on the retail side. Above all, it shows Polish banks and businesses that you don’t need a foreigner to build a successful bank.”
