Best Bank:
Bank Pekao SA
Best debt house:
Bank Handlowy/Citigroup
Best equity house:
BRE Bank
Best M&A house:
CSFB
| Shirish Apte | ||||||
BRE Bank and Bank Pekao SA, last year’s winners for best domestic and best foreign bank, are still the most promising candidates for the title of best bank. While BRE made itself a name as dynamic, flexible and share-holder oriented institution, Bank Pekao is often considered an inflexible giant.
But it is partly because of Pekao’s strong coverage – a network of 800 branches that earns it the second-highest market share, 19%, after PKO the savings bank with 24% – that the bank wins our award. Although BRE equipped with 25 branches shines with larger corporates clients, Pekao is unchallenged in servicing higher-margin SME businesses across the country. It holds 11.4% of Poland’s corporate deposits, and 14% of retail deposits. BRE, by contrast has only started its retail operation in November 2000 with the launch of Poland’s first virtual bank – mBank.
As far as Pekao’s reputation as a slow-moving giant is concerned: it’s outdated. Progress in reforming the bank has not stopped since Italian bank UniCredito and German insurer Allianz bought a 52% stake in mid-1999.
Over the past year, Pekao has developed products such as savings and insurance products and payment cards, which strengthened its position as one of the leading retail operations. As part of the restructuring Pekao has also embarked on an extensive efficiency programme, for example, cutting staff by 17% in 2000. It has reduced its cost-income ratio to 52% and increased ROE to 16.4% in the first quarter of 2001, up from 15.6% a year ago. Profits in 2000 soared by 500%, rising from Zl140 million ($35.3 million) in 1999 to Zl750 million last year. Accordingly, Pekao’s shares have also been one of the best performing of the region.
In October 2000, Pekao strengthened its capital base by issuing new shares in dollar and zloty worth e219 million. However, Pekao’s top position – by capital as well as market share – is being challenged by the merger of Citibank’s operations and Bank Handlowy w Warszawie. In June 2000 Citibank took 66% in Handlowy, which created the third-largest bank after PKO and Pekao by assets – $8 billion, equivalent to 10% of the market. It also overtook Pekao’s lead in corporate banking with a combined share of 16.4%.
The newly merged bank called Bank Handlowy/Citigroup, a member of Citigroup, has been too busy with the merger to be a candidate for this year’s overall award. Problems integrating ATM systems last November did not please retail customers who could not access their accounts for two weeks. Yet, the merging of its corporate operation has been completed without any such glitches this March. “The merger was a perfect fit,” says Shirish Apte, vice president of the managing board at Bank Handlowy. “Citibank served the top multinational customer, and Handlowy the largest local corporates, and both had a growing share in SME businesses.”
The past 12 months have proved that, already, Bank Handlowy/Citigroup is the leading debt house. Citigroup is number one arranger of domestic bonds and CP, ranks number three in arranging internationally syndicated loans, and number five for domestically syndicated loans. The house has also taken part in the most prestigious bond issues in the past year. Schroder Salomon Smith Barney (SSSB) was joint-bookrunner for TPSA’s five-year bond and Elektrownia Turow’s 10-year debut – the longest maturity for a Polish corporate. SSSB was also co-manager for Poland’s 10-year sovereign issue.
The global distribution capability of Citigroup is a particularly important asset in Poland where corporates are more advanced and want to raise money internationally, which is reflected by the growing size of the deals. The new group will also have good domestic distribution channels, that contribute to a top position in fixed income.
After the clean up of Bank Handlowy’s loan portfolio last year, which lead to losses of Zl13 million, the group aims to become one of the most profitable banks. However, it will not only have to take on Pekao, but also a new entry in the top three – the merger between PBK (Powszechny Bank Kredytowy), controlled by Bank Austria and BPH (Bank Przemyslow-Handlowy), which is controlled by HypoVereinsbank. The merged bank will overtake Citigroup/Handlowy as the third largest bank with assets of e10.8 million, and will operate 636 branches – significantly more than Citibank/Handlowy’s 175 branches.
BRE Bank is one of Poland’s leading domestic providers of equity-related services. It has strong research facilities and its share of trading volumes on the Warsaw stock exchange amounts to 6.3%.
BRE can also rely on a strong strategic partner in Commerzbank.
CSFB earns the best M&A house award for its outstanding performance over the past year. CSFB was the exclusive financial adviser to Lukas, Poland’s leading consumer finance company.
CSFB did a great job in creating competition for the acquisition of Lukas. In February 2000 Crédit Agricole offered $262 million for a 75% stake, which was eight times the book value of Lukas and so one of the highest sale valuation achieved for financial institutions.
This transaction strengthened CSFB’s position as one of the leading advisers, and brought mandates for EFL and LG Bank.
CSFB is now advising PBK on the merger with BPH, and has been mandated by the government to lead the second stage of the privatization secondary offering of TPSA, the major Polish telecom.
