Italy's UniCredit expects to complete Poland bank merger by year-end

Italy's UniCredit expects to complete the merger of its banks in Poland, Pekao and BPH, by the end of the year, the group's head of the Polish markets division, Federico Ghizzoni, was quoted as saying Thursday by the Polish Press Agency (PAP).

"We expect the process of the split-up of BPH and the legal integration into Pekao to be concluded by the end of 2007," Ghizzoni told an analyst meeting in Milan, PAP reported.

In April, the two Polish subsidiaries of UniCredit said the process would likely be concluded in the third quarter of the year.

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Under an April 2006 agreement with the Polish government, UniCredit, which acquired BPH through the takeover of its German parent HVB, undertook to spin off the lion's share of the bank's business and integrate it into Pekao, while selling the BPH brand name and some of its assets to a third-party investor.

In April this year, US conglomerate General Electric's finance arm, GE Money, won exclusive negotiating rights to the deal, but talks are reported as hitting the rocks.

"I understand there is the legal risk of having to tender a public bid for all the BPH shares, once the transaction is closed with UniCredit," DM Millennium analyst Marcin Materna said. "And, of course, the price being asked is quite demanding for a bank that is destined to be loss-making for years to come."

UniCredit is reported to be asking up to EUR 1.5 bln for the part of BPH it has put on the block. The so-called "miniBPH" will take over less than a fifth of the bank's assets but its entire back-office operations, along with the brand name and 200 of 485 branches.

The new bank will take over 21.9% of BPH's existing Tier1 capital, but only 13.1% of its assets. The overcapitalization, with capital adequacy ratio of 16%, means meager return on equity in the years ahead.

The new lender will have assets of PLN 8.6 bln, a loan book of PLN 5.6 bln, deposits of PLN 4.8 bln and PLN 1.4 bln in Tier1 capital. The figures mean that only 14.9% of BPH's existing loan portfolio and 12.4% of its deposit base will carry on to the slimmed-down version of the bank.

Pekao will take over the entire corporate-banking business of BPH, while "miniBPH" will hold on to the asset-management division, BPH TFI.
Source: gielda.wp.pl