April 5, 2018 / 3:33 PM / a year ago

BNP Paribas closing in on deal to buy Raiffeisen's Polish arm: sources

WARSAW (Reuters) - France’s BNP Paribas (BNPP.PA) is expected to seal a deal to buy Raiffeisen Bank International’s (RBIV.VI) Polish arm in the next few days once last-minute negotiations over the price are settled, two banking sources said on Thursday.

A logo of BNP Paribas is seen outside its Tokyo headquarters, Japan, January 7, 2016. REUTERS/Yuya Shino/File Photo

“In my view the deal regarding taking over Raiffeisen by BNP Paribas is already done, as Raiffeisen is in a no way-out situation,” one of the sources said. “So it will be the Frenchmen who will dictate conditions and the delay in talks is somehow an effect of (efforts aimed at) setting the final price.”

The second source close to the matter said the decision would be announced within days.

Spokespersons for Raiffeisen in Vienna and BNP in Paris both declined to comment.

Raiffeisen is selling Raiffeisen Polbank because the unit lacks the scale to generate decent profits in a highly competitive Polish market where interest rates are very low. BNP, however, is expected to merge Polbank with its existing Polish business, Poland’s sixth-biggest lender, which would give it more economies of scale.

Austria’s Raiffeisen said last month that it still planned to float its Polish business or sell a majority stake in its core banking operations.

It will not sell Polbank’s foreign currency loan portfolio, which are mostly in Swiss francs, as the Polish regulator KNF requires that such toxic packages stay in existing investors’ hands for the sake of stability in the banking sector.

Poles who took out franc-denominated mortgages and other loans before the financial crisis were hit when the franc later soared in value.

Raiffeisen Polbank has a book value of 6.49 billion zloty ($1.9 billion) and assets of around 36 billion zloty excluding foreign currency loans. BNP’s Polish unit Bank BGZ BNP Paribas BGZ.WA has assets worth 73 billion zloty, so the combined bank would have assets of 103 billion zlotys.

Analysts expect Polbank to be sold for between 0.6 and 1.0 to book value.

Poland has seen a number of bank mergers over the last few years, and the second biggest state lender Bank Pekao SA (PEO.WA) is now considering a merger with smaller peer Alior Bank (ALRR.WA), although allies of Prime Minister Mateusz Morawiecki want Pekao to merge with No.1 lender, state-run PKO BP (PKO.WA). Pekao has fiercely denied such a plan, and PKO has said there have been no talks.

Reporting by Wojciech Zurawski and Marcin Goclowski; Additional reporting by Alexandra Schwarz-Goerlich in Vienna and Maya Nikolaeva in Paris; Editing by Susan Fenton

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