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Poland’s banking regulator, the KNF, has a reputation for playing hardball, particularly when it comes to M&A activity in the sector. Banks that want to sell or buy assets in Poland face a raft of restrictions and conditions. Sellers are obliged to find buyers of equivalent rating to themselves. Buyers have to pledge to list a substantial chunk of their acquisitions on the Warsaw Stock Exchange (WSE). New market entrants are preferred for a takeover of any size and the five largest banks have little hope of obtaining permission for any large acquisition.
This approach has, for the most part, been more than justified by the results. By preventing concentration, the KNF has ensured that Poland remains one of the most competitive banking markets in the region. The foreign subsidiaries that make up a large part of the market have strong, well-capitalized parents. And the requirement to list in size has helped develop local capital markets by adding both depth and breadth to the WSE.
But, in the case of Raiffeisen, the KNF may have overstepped the limits.
Locating the exit
The Austrian bank wants to exit Poland. The KNF, however, is insisting that a sale cannot be approved until Raiffeisen delivers on its commitment, made at the time of its acquisition of Polbank in 2011, to float 15% of its local operation on the WSE within five years.
Clearly, this could drive up the cost of getting out of Poland for Raiffeisen, in terms of both time and money. Launching an IPO of 15% of a relatively small and underperforming lender challenging under any circumstances, let alone when the ultimate owner is unknown. What is more, even if Raiffeisen were to succeed in listing a minority stake, by doing so it would be likely to reduce the value of the remainder of the bank for any potential strategic buyer.
Raiffeisen has not tried to game the system. It clearly wanted to stay and grow in Poland, but it has been hit simultaneously by exceptional fines in Hungary, a severe downturn in Russia and economic meltdown in Ukraine. Something has to give – and the very strength of the Polish market makes it the obvious choice for a disposal.