Zbigniew Jagiello, CEO of PKO BP, Polands biggest bank, says his staff has sufficient experience to manage the $850 million acquisition of Scandinavian bank Nordeas Polish unit, announced in June. It is the first big acquisition by PKO BP, formerly a communist-era savings bank, and still partly state-owned.
"Sometimes M&A doesnt create profits for shareholders, but in this case we are well prepared to be successful," says Jagiello. "We have a capable team to manage the merger effectively. This acquisition is a good deal for both PKO Bank Polski and Nordea."
According to Jagiello, the deal fits with his stated 2013-15 strategy of gaining share via acquisitions, as a sluggish economy makes organic gains less easy. "Our aspiration is to have a market share of assets of 19% to 21% in Poland," he says. "This acquisition will increase our share from around 15% to 18%."
Compared with some eurozone lenders, Nordea is in less of a rush to sell due to a crisis at home. But according to one of the advisers, it is in a similar position to other groups in deeming a small market share in an individual country in central Europe as less sustainable in the post-2008 funding environment.
After the sale of the Polish units of Greeces Eurobank EFG and after Santanders consolidation of the Polish units of Allied Irish and Belgiums KBC, eyes are turning to other Polish banks with relatively small market shares owned by Crédit Agricole and Société Générale, Rabobank, and above all Portugals Millennium BCP.
UniCredit-owned Pekao is the most likely to make a big acquisition in Poland after PKO BPs deal, and has sufficient capital to do so, says an analyst. Other consolidators could be retail specialist Getin Noble (the countrys seventh-biggest bank by assets) and even Rabobank (perhaps in a merger of equals).
Russias Sberbank views Poland as an interesting market, but has yet to find an entry. With the exception of Getin Nobles 35 million acquisition of Allianz Bank Polska in 2010, this situation makes PKO BP the first central and eastern European-owned bank to buy one of these foreign-owned Polish legacies of the pre-2008 world of banking.
Jagiello says his senior management has much career experience managing other Polish bank M&A deals, including Pekaos takeover of BHP. The latter, resulting from Pekaos Italian parent merging with Germanys HVB in 2006, created the second-biggest bank in Poland, and PKOs main rival.
Still, the Nordea deal is sufficiently important for PKO BP. "The focus for the next year-and-a-half will be on the integration of the Nordea divisions," he says. "During this time we will have to forget about any other acquisition of this scale." Outside Poland, he says the bank has regional aspirations, but no specific targets.
PKO BP is expected to pay 1.07 times book value for Nordeas Polish banking franchise. The Scandinavian bank has also agreed to continue to provide funding for some $5 billion in foreign-currency mortgages and cover 50% of the cost of risk over 40 basis points annually over the next four years.
Goldman Sachs and Bank of America Merrill Lynch advised Nordea, according to Dealogic, while Barclays advised PKO BP on the acquisition, which is particularly attractive to the Polish bank because of Nordeas 140-odd branches, often in sought-after urban areas.
PKO BPs heritage in the smaller settlements means it suffers from an ageing client base. The Nordea deal will bring in younger, more-affluent clients. Jagiello hopes this will enable better cross-selling opportunities.
Meanwhile, for the market as a whole, although an end to a cycle of base-rate cuts might signal a better outlook for bank profits, one ominous aspect of PKO BPs acquisition is its exclusion of Nordeas Polish pensions business. "Uncertainty of upcoming new pensions regulations made it difficult to arrive at a valuation," says Jagiello.