The Strategist

Troubled UniCredit to sell Polish Bank Pekao for € 2,4 billion

12/08/2016 - 13:57

On Thursday, Italian bank UniCredit announced sale of a portion of its stake in Polish Bank Pekao. UniCredit sells 32.8% stake to insurance company Powszechny Zakład Ubezpieczeń and the Polish Development Fund. The deal amounted to PLN 10.6 billion (€ 2,4 billion). UniCredit will sell remaining 7.3% stake on the stock market. Following the transaction, Polish government, which now owns a third of the bank's shares, will become the largest shareholder of Bank Pekao.

Pavel Ševela / Wikimedia Commons
Pavel Ševela / Wikimedia Commons
In mid-November, media reported that UniCredit is planning to raise € 13 billion on the market to strengthen its capital. The bank needs the funds to stabilize its position, which has weakened due to deterioration of overall situation in the country’s banking market. At the end of the third quarter, the total volume of bad debts in UniCredit was € 37 billion. On December 13th, the bank will present a strategic plan, which will probably include sales of assets and cutting costs. Earlier this week, it was reported that the bank is discussing sale of its asset management division, Pioneer Investments, to French company Amundi for € 3,5 Bln.

As a result of the UniCredit- Polish government, foreign-owned share of the Polish banking sector will drop below 50%. Nowadays, the figure is 60%, which is not pleasing for the Polish government. The latter wants to regain control over the country's banking sector.

UniCredit Bank earlier sent a proposal to 10 the world's largest credit organizations. The bank asked for their assistance in increasing the authorized capital.

Reuters agency specified that UniCredit Bank has sent offers to Bank of America Merrill Lynch, JP Morgan, Mediobanca, Morgan Stanley, UBS, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC. The italian bank needs several billion euros to thicken the authorized capital.

Top managers of the banking institution are planning to start process of restoring fiscal balance in February 2017. So far, representatives of the largest international investment banks have been declining to comment on UniCredit Bank’s offer. According to preliminary information, Italy's largest bank plans to attract investment of up to EUR 13 billion in the form of issuance and sales of block of securities.

Current CEO of UniCredit, Jean-Pierre Mustier last served as Head of Corporate and Investment Banking at Societe Generale, and was a member of the bank's Management Board. In July this year, he took charge of UniCredit.

Shares of Italian banks collapsed after announcement of results of the constitutional referendum in the country, which destroyed hopes of Prime Minister Matteo Renzi. Citizens spoke out against a draft reform, which he promoted. As a result, Prime Minister was forced to resign. 

Shares of the Italian banking sector on December 5 fell by 3-5 percent. Italian banks are being in financial trouble because of multi-billion dollar volume of bad debts. Failure of the referendum has also raised chances that opposition Five Star Movement would come to power. The movement is led by Beppe Grillo, who offers the country’s citizens to abandon the euro. This, in turn, causes additional uncertainty around the financial sector.


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