VIENNA Oct 1 Raiffeisen Bank International (RBI) intends to meld the conservative business of its own Polish bank with the more aggressive ambitions of its new Polbank unit to forge a growth machine in Poland, one of its key emerging Europe markets, executives said.
RBI, which vies with Erste Group Bank for second place in central and eastern Europe's banking sector, behind market leader UniCredit Bank Austria, boosted its position by buying Polbank from Greece's Eurobank.
A formal merger of the two units is planned by the end of the year, creating Poland's sixth-biggest bank by assets, number four by credit volume and number five by equity.
Senior executives from all three banks likened the combination to merging the farmers of Raiffeisen, which has its roots in agricultural cooperatives, with Polbank's hunters.
"Hunting with farming under one roof is a good combination," Piotr Czarnecki, chief executive of Raiffeisen Bank Polska, told reporters at a presentation in Warsaw.
In one sign of its push for new business, Polbank head Kazimierz Stanczak plans to launch within weeks a project with Deutsche Telekom to create a smartphone-based "near field communication" (NFC) network for wireless payments.
NFC technology lets customers buy things by holding a chip in their smart phones to a payments register. NFC-enabled phones have existed since 2006 but adoption of the technology has been hampered by infrastructure costs, consumer scepticism and wrangling between mobile operators and banks about who will own the customer relationship.
RBI Chief Executive Herbert Stepic said Poland and Russia were the group's two most important long-term markets, and that Poland and Slovakia would be leaders in developing technology that could eventually be rolled out across the group.
RBI paid 605 million euros ($778 million) for Polbank, which Stepic called a good price for an asset that plugged a strategic hole and which meant the risks of future writedowns were low.
He reiterated the combined bank would generate cost savings of between 40 million euros and 50 million a year from 2013, but declined to say how many of the current 443 branches or 6,200 staff would go. It was likely to generate satisfactory profits only from 2014 once its reorganisation was in place, he added.
Officials said 85 percent of Polbank's mortgages were denominated in Swiss francs, but strict lending criteria meant these loans went bad less often than standard zloty mortgages.
Polbank's overall non-performing loan (NPL) rate is 9.6 percent, relatively high given the Polish average is around 8 percent, but should start improving once it "restarts the engine with lending", Stanczak said.
The combined bank will get a Polish stock market listing by mid-2016, which Raiffeisen Bank Polska head Czarnecki said posed a potential avenue for raising fresh capital if needed.
"(A) return to growth may require of course a capital injection, but from our point of view (a listing) will create a positive challenge for us," he said.
Polbank does not need an immediate infusion of capital since its previous owners carried out a 200 million euro capital increase.
Stepic said the combined bank had a loan-to-deposit ratio of around 130 percent, above the group's target of 120, but added: "I believe we will make a major jump in 2013 to come very, very close to the 120 that we envisage".
Capital requirements were more of an issue given Austrian requirements for major banks to fulfil new Basel III capital rules in full next year, part of the so-called "Austrian finish". But he saw some potential wiggle room.
"I believe specifically if Basel III is being delayed we have a good chance to convince the regulator also to delay the Austrian finish because otherwise if wouldn't make any sense." ($1 = 0.7773 euros) (Editing by David Holmes)