November 9, 2017 / 2:10 PM / 2 years ago

Poland's No.1 bank seeks Baltics deal, has approached Luminor - sources

WARSAW, Nov 9 (Reuters) - Poland’s biggest lender PKO BP has made an approach to buy Luminor, the Baltic business created last month by Nordic banks DNB and Nordea, two sources familiar with the matter said.

One of the sources said the approach had been rejected, but that state-controlled PKO was still interested in expanding in Lithuania, Latvia and Estonia.

PKO, Nordea and DNB declined to comment.

Luminor was created last month to combine DNB’s roughly 930,000 customers across the three Baltic countries with Nordea’s 350,000 customers there.

It is the third largest financial services provider in the Baltic banking market, with around 15 billion euros ($17 billion) in assets, as well as a 23-percent market share in lending and 16 percent share in deposits.

Its book value is 1.6 billion euros, likely a starting price for any negotiations.

PKO, with 286 billion zloty ($78 billion) of assets, is central and eastern Europe’s biggest bank. In 2014 it acquired Nordea’s Polish business for 2.8 billion zloty.

Both sources said PKO was looking to invest in the Baltics.

“PKO said it does not want to grow its operations here from zero,” the first one said. “PKO said they talked with Luminor about the acquisition but received absolutely no interest.”

The source did not say why Nordea and DNB had spurned PKO’s approach, nor whether further talks were possible.

The second source also said PKO had expressed an interest in Luminor, but did not say how this had been received.

The first source said at least some governments in the region would welcome PKO’s entry, but that they were sceptical about its prospects as the market is tightly held by Scandinavian banks which show no intention of relaxing their grip.

“The Polish government wants PKO to expand, so it seems logical for the bank to be present in the Baltics, which is Poland’s neighbourhood,” Vytautas Plunksnis, chairman of the board at the Lithuanian Investors association told Reuters.

“In the Baltics you can get a significant market share with just one deal, which is much harder in markets such as Czech Republic or Romania, where Polish businesses usually go for acquisitions,” he added.

($1 = 3.6455 zlotys)

$1 = 0.8610 euros Reporting by Marcin Goclowski in WARSAW, Andrius Sytas in VILNIUS, Johan Ahlander in STOCKHOLM, Gwladys Fouche in OSLO, and David Mardiste in TALLINN; Editing by Mark Potter

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