Polish, overseas banks prepare bids for Commerzbank's mBank: sources

WARSAW/FRANKFURT (Germany) (Reuters) - Poland's biggest bank PKO BP PKO.WA and a consortium of insurer PZU PZU.WA and its subsidiary Pekao PEO.WA are expected to file initial bids for Commerzbank's CBKG.DE Polish arm, mBank MBK.WA by mid-January, three sources told Reuters.

A Commerzbank logo is pictured after the bank's annual news conference in Frankfurt, Germany, February 12, 2016. REUTERS/Ralph Orlowski/File Photo

Among the other institutions expected to make first-round offers for the stake in mBank are Austria's Erste ERST.VI and Credit Agricole CAGR.PA, the sources said on Tuesday, adding that bids from further contenders could not be ruled out.

Commerzbank, Germany's second-largest lender behind Deutsche Bank DBKGn.DE, aims to sell its 69.3% stake in mBank, Poland's fourth-largest lender by assets, by the end of next year.

Based on mBank’s market capitalization, Commerzbank’s stake is worth $2.8 billion, but the transaction price may differ, as Polish financial regulator KNF will require it to retain a portfolio of foreign currency denominated mortgages.

PKO, PZU/Pekao, Erste and Credit Agricole have all hired investments banks to advise them, the sources added.

ING's Polish unit INGP.WA and Santander Bank Polska SPL1.WA had initially also said they may take part and the local arm of BNP Paribas BNP1.WA had not ruled out making a bid.

But the fact that the Polish government has expressed its interest in a Polish lender buying mBank may deter some foreign banks, several bank executives, who spoke on condition of anonymity, told Reuters.

Of the two Polish contenders PZU/Pekao have an edge over Pekao, one of the people close to the auction said.

“When it comes to state-run investors PZU/Pekao could generate more synergies from a Pekao/mBank merger than PKO BP merging with mBank,” the source added.

mBank’s foreign currency denominated mortgages are seen as one of the biggest problems for the sector, as the European top court ruled in October in favor of Polish consumers which took out such loans and ran into trouble when the Swiss Franc appreciated against the Polish zloty.

Commerzbank’s CFO Stephen Engels said in September that ING Bank Slaski, which has only a tiny portfolio of foreign currency denominated mortgages, would be a good valuation comparison.

Slaski trades at 1.65 times its book value, while mBank trades at 0.97 times.

Commerzbank, PZU, Pekao, PKO, Erste, Santander, BNP and ING declined to comment, while Credit Agricole was not immediately available for comment.

Additional reporting by Pamela Barbaglia; Editing by Michelle Martin and Alexander Smith