BRE gearing up for strategic investor

“The decision to buy its own shares indicates that BRE’s management will not simply stop at declarations, but will aim to raise the bank’s value and share price."
By : Leo Broomfield

   The decision by BRE Bank to buy 84,000 of its own shares on the Warsaw Stock Exchange (WSE) and shore up the bank’s share price was given a mixed reception by analysts last week.

   Many said the move was either an attempt to find a new strategic investor for one of Poland’s largest banks or simply a precaution against the potential fallout that could affect the WSE after the U.S. terrorist attacks.

   Analysts also pointed to BRE’s strategic investor German Commerzbank’s recent purchase of BRE shares at zł. 86.5 a unit. “If the price fell lower than this level it could not be ruled out that Commerzbank would have to open a reserve fund to cover losses on its assets in the bank,” said Robert Brzoza, analyst at BDM PKO BP in Warsaw. BRE shares ended the week 3% up at zł. 97 per share.

   An official at the bank who wished to remain anonymous said the purchases were being treated as part of its investment portfolio. He said the bank was concerned about the situation on the financial markets and wanted to strengthen its attractiveness in the eyes of potential traders. BRE also said the shares it bought were earmarked for eventual sale, but did not say when or to whom.

   Banking analysts said the move indicated that BRE was doing all it could to hold the bank’s share price. “The decision to buy its own shares indicates that BRE’s management will not simply stop at declarations, but will aim to raise the bank’s value and share price,” said Marcin Materna, analyst at BIG BG in Warsaw. BRE unit Menedżerska Grupa Inwestycyjna said it would pay zł. 99 per share and buy 1% of BRE’s total shares.

   Other analysts said BRE is undervalued on the market, as is Commerzbank (which holds 50% of BRE). Commerzbank has also been the subject of recent speculation that it is looking for a merger with another international bank, recently rumored to be Italy’s UniCredito Italiano.

   Analysts did not rule out the possibility that if Commerzbank links up with another international bank it may decide to sell its BRE share. “In this context, we can see the management’s decision as preparation for a future transaction,” said Robert Sobieraj, analyst at Bank Handlowy.