At the start of the current decade, Poland was high on the wish list of any European bank with acquisitive tendencies. The largest market in central Europe, the only economy in the EU to avoid recession in 2009, with a liberal-minded party in power bent on market reforms – the country’s appeal was obvious.
Back then, the rules – mainly unwritten – for prospective buyers of Polish banks were simple. Firstly, if at all possible, don’t be a private equity firm. Poland’s ultra-strict banking regulator, the KNF, did unbend to the extent of allowing Anacap to acquire tiny lender FM Bank in 2015, but M&A specialists report that other approaches on behalf of private equity players have been consistently rebuffed.
Secondly, don’t under any circumstances be Russian. A banker describes a meeting with the KNF on behalf of a Russian client: “Every argument was chucked at me as to why the deal wouldn’t work. In the end, they said: ‘Look, it doesn’t matter what you say. We’ll never approve a Russian’.”
For more acceptable bidders, the main restrictions were a requirement to list a substantial chunk of any unlisted bank on the Warsaw Stock Exchange – a rule that has haunted Raiffeisen since its ill-advised purchase of Polbank EFG in 2013 – and an upper limit on market share.
Officially, the latter was attributed to the KNF’s determination to prevent concentration in the Polish banking sector. Unofficially, locals say the aim was also to prevent any foreign subsidiary overtaking state-controlled national champion PKO BP.
“Banks with a market share of around 8% to 10% took the view that they could probably do one more M&A deal if that took them up to 15%, but beyond that the KNF would find an excuse to block the transaction,” says a regional M&A banker.
While occasionally frustrating for individual groups, none of these restrictions prevented a string of western European lenders buying banks in Poland. Raiffeisen, Santander and BNP Paribas all acquired large Polish operations between 2010 and 2013.
Recently, however, a more onerous rule was added to the list: don’t go after an asset that the Polish government has its eye on.
Even before the nationalist Law and Justice Party (PiS) took power in late 2015, plans had been mooted to create a new top-five banking player by consolidating several smaller lenders under the aegis of state-controlled insurance company PZU.
With PiS firmly in the driving seat and bent on the ‘repolonization’ of Poland’s banking sector, the pace of state purchases was stepped up. Alior Bank, the successful startup bought by PZU in 2015, acquired a controlling stake in BPH Bank from GE last March and bid for Raiffeisen Polbank.
Then in December, PZU and development fund PFR combined to buy UniCredit’s stake in Bank Pekao, Poland’s second-largest lender, for $2.6 billion. Despite Pekao’s impeccable track record and strong balance sheet, bankers involved in the process say the two state-controlled entities were the only serious bidders to emerge.
Without that team, I think Alior in its current form is not sustainable- M&A specialist
“The lack of interest was due to several factors,” says one banker. “It’s a very large bank and was a very big equity cheque to write, but I think people were also asking themselves if they really wanted to be competing against PZU and the Polish state. The perception was that it wouldn’t be a level playing field.”
At one point last year locals were suggesting that nationalist policymakers had implemented a total, if unofficial, ban on bank purchases by foreign groups in Poland.
In the wake of the Pekao acquisition, however, attitudes seem to have softened. The shortlist of bidders for the majority of Deutsche Bank’s Polish assets, which were put up for sale earlier this year, reportedly comprised three western groups with existing operations in Poland – Santander, Commerzbank and Millennium BCP.
To the surprise of some in Warsaw, state-owned entities have shown little interest in the process, prompting speculation that the nationalization drive may be losing steam. Rumour suggests that the coming months could even see part of the repolonization programme reversed with the sale of Alior.
“If you ask most people in Poland what will be next on the M&A agenda, they’ll immediately say Alior,” says a regional banker.
This might sound like a tough sell politically, given the strident rhetoric that accompanied the state’s bank purchases, but locals say it could be spun successfully. “They could claim that a disposal is necessary to rebuild PZU’s capital after the Pekao purchase and that Alior was a step in the wider repolonization project,” says one banker.
Whether or not Alior would attract the same interest from foreign groups today as it would have done a year ago, however, is open to question. At the start of June, its charismatic founder, Wojciech Sobieraj, resigned as CEO and sold his shareholding, reportedly due to political interference in the running of the bank. Two deputy CEOs and several other senior managers followed suit.
“Without that team, I think Alior in its current form is not sustainable,” says an M&A specialist. “One western European group has been saying for years that they want to buy the bank. Now Sobieraj has left, they’re no longer interested.”
Two weeks after Sobieraj’s departure from Alior, politics also claimed the scalp of Pekao’s long-standing and widely respected CEO, Luigi Lovaglio, who was replaced by former PZU boss Michal Krupinski.
This makes it all the more remarkable that PKO BP chief Zbigniew Jagiello has so far survived the PiS cull of senior management at state-owned firms. His bank has also managed to remain aloof from the repolonization process, while at the same time scooping up several useful assets.
Recent acquisitions include Raiffeisen’s Polish leasing business and a mutual fund set up by KBC. Locals say further purchases are likely. “I think PKO BP harbour ambitions to do more, but not for the sake of it,” says a local banker. “Despite its ownership, the bank’s strategy is commercially driven.”