April 10, 2018 / 6:30 AM / in 8 months

BNP Paribas expands in Poland with $1 billion Raiffeisen deal

VIENNA (Reuters) - BNP Paribas (BNPP.PA) (BGZ.WA) is increasing its presence in Poland with the 775 million euro ($954 million) purchase of Raiffeisen Bank International’s (RBI) (RBIV.VI) main business in the European Union’s largest eastern economy.

FILE PHOTO: Raiffeisen Polbank's headquarters in Warsaw, Poland, November 26, 2016. REUTERS/Kacper Pempel/File Photo

The French bank said on Tuesday it will merge Raiffeisen Bank Polska, Poland’s tenth largest lender by assets, with BGZ BNP Paribas (BGZ.WA), which it bought in 2014, bolstering its position as the country’s sixth largest bank.

The deal by BNP Paribas, which is subject to regulatory approvals and is expected to close in the fourth quarter, underlines its determination to become a major player in Poland and could improve BGZ’s margins, Pekao Investment Banking analyst Kamil Stolarski said.

“BGZ has always lacked liquidity... If BNP maintains a large portion of the deposits taken over from Raiffeisen, this may have a positive impact on BGZ margins,” Stolarski added.

The deal with BNP Paribas draws a partial line under a difficult chapter for RBI, which invested a total of around 800 million euros to get control of Polbank in 2012, although it will have to retain a portfolio of soured loans.

“Somehow Raiffeisen has been unable to get a grip on the Polish business. The sale is good news and the price is OK,” a trader, who spoke on condition of anonymity, told Reuters.

BNP Paribas said it would buy Bank Polska corporate and retail gross loans worth 4.5 billion euros at the end of 2017, and customer deposits worth 8.1 billion euros, increasing its managed assets in Poland to more than 24 billion euros.

BNP Paribas shares were up 0.6 percent to 61.23 euros at 1035 GMT following news of the deal, which was welcomed by analysts.

“This is the type of bolt-on acquisition we like: it expands a good franchise and delivers a return on investment above the cost of capital,” Jefferies said, confirming its “buy” recommendation for France’s biggest bank.

UNWANTED LOANS

RBI said it will keep Polbank’s unwanted foreign currency loan portfolio of 3.5 billion euros, mostly in Swiss francs, which will be transferred to a new RBI branch in Poland.

Polish regulator KNF requires that such toxic packages stay in existing investors’ hands for the sake of banking stability.

The purchase price was based on the tangible book value of Polbank’s core banking operations of approximately 815 million euros at the end of last year, RBI said, adding that the sale will weigh on its earnings with 120 million euros.

Shares in the Austrian lender dropped as much as 11 percent in early trade, althought two traders said that this was related to the new sanctions against Russia.

RBI shares were down 1.6 percent to 26.68 euros at 1035 GMT.

Reporting by Kirsti Knolle in VIENNA, Agnieszka Barteczko in WARSAW, Danilo Masoni in LONDON; editing by Susan Fenton/Jason Neely/Alexander Smith

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