Betrothed banks celebrate with strong profits
Pekao and BPH, units of Italy's Unicredit, reported double-digit growth in third-quarter net profits last week, driven by strong demand for credit in Poland's rapidly growing economy.
Pekao reported a net-profit increase of 13 percent, amounting to a record high of zł.455 million, ahead of forecasts. Although BPH's earnings jumped 18 percent to zł.308 million, the figure was slightly below analysts' expectations, due to weaker than expected income from fees and commissions.
The market was unmoved by the results. Pekao shares traded down 0.2 percent to zł.213 and BPH lost 0.7 percent to zł.882 in the wake of the announcement. "Pekao's revenues were worse than expected, partly due to a weaker result on financial and investment operations, but lower costs were a positive surprise," said Marta Jeżewska, an analyst at BRE Bank brokerage in Warsaw. Like most of their local rivals, the two lenders, which the Italian bank plans to merge, have seen their profits rise sharply as the country's economic growth has spurred demand for credit.
Pekao has also benefited from its rapidly growing mutual funds business Pioneer Pekao, the industry leader, as falling interest rates led Poles to shift savings from bank deposits to shares, real estate and other high-yielding instruments. Pekao's net interest income, fell five percent to zł.592 million, while fee income jumped 12 percent to zł.450 million.
BPH boosted its net interest income by nine percent to zł.555 million, while its fee income surged 25 percent to zł.330 million.
Unicredit took over BPH last year as part of its takeover of Germany's HVB. The Italian lender plans to combine it with Pekao next year to create Central Europe's biggest lender. In April the general assemblies of shareholders from both banks are due to decide on the division and merger. The deputy president of Pekao, Luigi Lavaglio, said that the issue of Pekao shares for Bank BPH shareholders could take place in June, while in the first half of 2007 preparations will be undertaken to choose an investor to buy the smaller part of Bank BPH.
After the merger, Pekao will absorb Bank BPH's corporate banking arm, its 285 branches, 420 franchise branches and staff. Pekao will also take over part of BPH's headquarters and a part of its retail small- and medium-company customers. The merger will make Pekao the largest bank in the region. Jan Krzysztof Bielecki, Pekao's president, estimates that in 2009 the synergies from the merger will be worth zł.240 million. (Reuters)
