M&A: Rabobank sale revives French drive in CEE
BNP Paribas beats Italian and Spanish banks for; Rabobank Polish unit; Commits to third-biggest bank in Ukraine
BNP Paribas is doubling its bet on Poland’s banking market – part of a regional strategy to build up in markets where it is already present rather than enter new ones.
The firm’s takeover of the Polish subsidiary of BGZ, Poland’s 11th-largest bank by assets, adds to a franchise in central and eastern Europe that also includes a top-10 lender in Turkey and the third-biggest bank in Ukraine.
BNP Paribas said in December it would pay around €1 billion for BGZ, and plans to combine it with its own Polish subsidiary, BNP Paribas Polska. The merged entity will have assets of Z57 billion ($18.7 billion) and a market share of just under 5%, putting it in contention – with Raiffeisen Polbank and local lender Getin Noble Bank – for the number-six spot in Poland.
|Stefaan Decraene, head of international retail banking at BNP Paribas|
Stefaan Decraene, head of international retail banking at BNP Paribas, says there is "good complementarity" between BNP Paribas Polska and BGZ, a unit of Dutch agriculture specialist Rabobank. Aside from agriculture, BGZ adds a retail franchise to BNP Paribas Polska’s existing strengths in corporate banking and consumer finance – the latter a legacy of BNP Paribas’ state-sponsored takeover of Belgian-Dutch group Fortis in 2008.
The acquisition will further give BNP Paribas a local branchless banking operation, BGZ Optima, which Decraene says would allow the French group to leverage its growing expertise in mobile banking. The French group last year launched a mobile-only digital lender, Hello Bank!, in France, Germany, Belgium and Italy.
Decraene says BNP Paribas has been looking "for a few years" at opportunities for expansion in Poland. The group made the shortlist for the acquisition of Allied Irish Banks subsidiary Bank Zachodni WBK in 2010, but was outbid by Santander, which two years later also acquired KBC’s Kredyt Bank.
BNP Paribas subsequently stood by while Austria’s Raiffeisen acquired Polbank from Greece’s EFG Eurobank. It also stood by while state-owned PKO BP, Poland’s biggest bank, took over the Polish unit of Sweden’s Nordea. BNP Paribas then emerged with a bid for BGZ in October, following Rabobank’s indication last summer that its 98.5% stake in the lender was up for sale.
Poland’s number-two and number-three players, units of Italy’s UniCredit and Spain’s Santander, had also expressed an interest in BGZ, which has been part of Rabobank’s network since 2004. Local reports suggested the Polish Financial Supervision Authority (KNF) would not look favourably on further consolidation at the top end of the market and would also prefer to see Rabobank replaced with an equally well-capitalized parent.
BNP Paribas’ rating of A2/A+/A+ is a notch below that of the Dutch group and its core tier 1 ratio of 10.8% compares with the latter’s 12.9%, although on both counts the French bank scores better than UniCredit and Santander. Buying BGZ is expected to knock 15 basis points off BNP Paribas’ core tier 1 ratio, which will be reduced by a further 50bp on completion of its €3.25 billion acquisition of the final 25% stake in Fortis from the Belgian government.
BNP Paribas has a smaller presence in CEE than fellow French lender Société Générale. BNP Paribas has insurance, leasing and factoring arms across the region, but outside Poland its retail banking operations comprise only a joint venture with Turk Economi Bankasi (TEB), one of Turkey’s 10 biggest banks by assets, which includes a Kosovan subsidiary, and Ukrsibbank in Ukraine.
Decraene says BNP Paribas has no plans to broaden this footprint in new markets. "Understanding a new market – socially, economically, politically and culturally – is time-consuming and challenging," he says. "We see a lot of potential in the [CEE] countries we are in at present and we will continue to focus on those."
He insists the bank will not follow the example of regional lenders such as Erste Group and Raiffeisen Bank International in exiting – or, in Raiffeisen’s case, planning to exit – Ukraine. That is despite new political instability and growing doubts about the sovereign’s ability to avoid default. Bad debts in the country top 30% of the average loan book. In December Ukrsibbank looked set for a second profitable year in succession in 2013 after an Hrn938 million ($114 million) loss in 2011.
"There are no plans for divestment – we are in Ukraine and we will stay in Ukraine," says Decraene. "Clearly the situation is not easy and it is complicated, but we will continue to manage the bank as well as we can and adapt it to the challenging economic environment."