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UPDATE 2-OP-Pohjola offers 3.4 bln euros for rest of banking arm
February 6, 2014 / 6:57 AM / 4 years ago

UPDATE 2-OP-Pohjola offers 3.4 bln euros for rest of banking arm

* OP-Pohjola to buy rest of bank arm for 16.80 euros/share

* Shares rise 18 pct in line with offer premium

* Pohjola Bank to delist

* Analysts say move may help deal with increased competition (Adds share reaction, background on industry competition)

HELSINKI, Feb 6 (Reuters) - Finland’s biggest mortgage lender OP-Pohjola Group has made an offer to buy out the rest of Pohjola Bank, its listed corporate banking arm, for 3.4 billion euros ($4.6 billion) partly to tackle increasing competition in its home market.

OP-Pohjola, Finland’s leading financial services group, said on Thursday it wanted to take full control of the banking arm to centralise decision-making to respond to tighter banking regulations.

The group, made up of about 200 co-operative banks, already owns around 55 percent of shares and 76 percent of voting rights in Pohjola Bank.

OP-Pohjola has offered 16.80 euros in cash for each share, an 18 percent premium to their closing price on Wednesday. Pohjola Bank will be delisted if the deal goes ahead.

The bank’s stock jumped about 18 percent to around 16.81 euros in early trade.

“Pohjola Bank is not a regular listed company and I think it does not belong to the bourse anymore,” OP-Pohjola CEO Reijo Karhinen said.

Analysts said the move would help the group compete with S-Pankki, owned by Finland’s biggest retailer co-operative S-Group and which is expanding aggressively. Originally focused on consumer credit, S-Pankki in the past year has announced acquisitions of mortgage and insurance provider Tapiola Bank and asset management group FIM.

OP-Pohjola has a share of around 35 percent of Finnish mortgages and deposits while Nordea, the Nordic region’s biggest bank, has 30 percent. Some analysts forecast that S-Pankki could gain a market share of at least 25 percent over the coming decade.

“Outside the bourse, (Pohjola) will be under less pressure to guard profitability, and that may help them deal with increased competition from S-Pankki,” Inderes Equity Research analyst Sauli Vilen said.

“The offer is understandable and the price seems right, so it will likely go through,” he said.

The offer was announced along with Pohjola Bank’s results, where the bank made a stronger-than-expected pretax profit for the fourth quarter and forecast growth in 2014.

The bank’s fourth-quarter pretax profit was unchanged from a year earlier at 92 million euros ($124.5 million), compared to the average forecast for a decline to 81 million in a Reuters poll.

It forecast that pretax profit would improve this year. The bank also said its insurance business’ operating combined ratio, a measure of profitability, would be around 87-91 percent in 2014 compared to around 87 percent in 2013. ($1 = 0.7390 euros) (Reporting by Ritsuko Ando and Jussi Rosendahl; editing by Elizabeth Piper and Jane Merriman)

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