The two Polish lenders have signed a letter of intent and unsurprisingly, the market has not responded positively: Pekao’s share price dropped by 7% following news of the possible collaboration. Douglas Blakey comments
Central Europe’s biggest insurance group, state-run PZU has a stake in both Pekao and Alior. Pekao has been state controlled since UniCredit’s sale earlier this year of a 32.8% stake for PLN10.6bn ($2.9bn).
PZU acquired a stake of more than 30% in Alior in 2015.
Alior is one of the most innovative digitally focused banks in Europe and any possible acquisition by Pekao would be regrettable.
In a statement released on 23 October, Alior said: “Alior Bank. and Bank Polska Kasa Opieki signed a letter of intent regarding their wish to enter into preliminary discussions concerning potential cooperation strategies that they could develop in order to bring additional value to their shareholders and clients, which could lead to preliminary discussions and analysis, including potential and upon applicable authorisations, exchange of information, concerning the feasibility of cooperation through various potential arrangements.”
That is a lot of words to say ‘possible merger.”
As part of Alior’s digital drive, it is aiming to shrink its branch network from just over 300 outlets to 200 by 2020.
Alior is investing PLN 100m each year until 2020 in four key areas: IT infrastructure, new systems and mobile tools, innovation and fintech and cyber security.
Alior targets include increasing the number of current account holders with a primary bank relation by 77% until 2020 and achieve a 55% share of such clients in the total number of newly acquired daily banking clients.
Approximately 30% its new customers are acquired through digital channels.
Alior ended the first half of fiscal 2017 with market shares of 5.2% for deposits and 5.1% for loans respectively. Comparable figures for the year ago period were 4.0% and 3.7% respectively.
Alior is on target to reduce its cost-income ratio to around 40% by 2020.
Bank Pekao ended the first half of the year with a branch network of 918 outlets. It has 5 million retail banking customers, 1.7 million of whom use its mobile banking channel with 3.5 million internet banking clients.
Pekao’s retail banking market shares in the first half of fiscal 2017 were 9.5% for lending and 10.2% for deposits.
It is debateable if a possible merger with Pekao is in the interests of Alior stakeholders: customers, shareholders and especially employees.
Irrespective of the merits of this particular possible deal, consolidation in the Polish market is widely expected.
By the end of 2016, the market share of foreign-owned banks in Poland stood at 55%, the lowest rate since 1999.
With increased state and local ownership and the decrease of foreign ownership, analysts at Raiffeisen have forecast that the number of banks operating with a country-wide universal banking model may drop from ten to 13 players to around four to six.
PZU has spoken of ambitions to form a new national champion with around a 20% market share. The supporters of a potential Pekao/Alior tie-up will point to the need for sector wide consolidation and the tendency for an increasing degree of digitalisation among the key market players.
At the end of fiscal 2016, PKO ranked first by market share of assets with around 16.7% ahead of Pekao with 10.2% and mBank (owned by Commerzbank) with 7.5%.
International players ING and Santander’s local subsidiary BZ WBK ranked next with around 7% each.
Alior ranked 9th a market share by assets of 3.6%.