Lack of clear vision - wariness of banking industry prospects
By Timothy Sifert
Professionals in the country's insurance and banking industries are suspect of the government's motivations for a merger - in any incarnation - of PZU and PKO BP. A marriage between the state-controlled giants could hamper anticipated and applauded privatization plans, allowing the government to sustain control of the companies' impressive cash piles, and keeping politics in the thick of all key business decisions.
Meanwhile, attempts to couple banking and insurance operations across Europe have resulted in lukewarm success at best; and it seems that Cezary Stypułkowski, PZU chief executive officer, is not ecstatic about the concept of bank-insurance.
On the part of the Ministry of the State Treasury, "this is a typical example of the wrong policy, and it's led by political pressure that has influence on the micro and macro economy," says Rafał Antczak, an economist at the CASE Foundation. "If they were private already, it would be different - this would be natural. It would increase efficiency. But here, the goal doesn't seem to be increasing efficiency."
The standard round after round of speculation concluded last week as Piotr Czyżewski, Treasury Minister, said that there are at least plans for a capital merger between the bank and insurance companies. Reportedly, PKO has designs on buying a chunk of the insurer, a move that's subject to a harrying list of variables and struggles.
The main bulwark against any salutary merger is the ongoing tiff between the government and Dutch insurer Eureko, which owns 30 percent of PZU with Bank Millennium. (The treasury owns 56 percent of PZU.)
A year ago, Eureko filed a lawsuit over an April 2001 agreement to have the treasury sell the Eureko-Millennium consortium an additional 21 percent state in PZU, giving it majority control. But since the Leszek Miller government came to power, progress on the agreement has all but dropped dead.
For this reason, whatever the advantages, opponents and proponents don't expect the deal to evolve very soon. Either way, critics say the government will remain pleased to keep its hands on the two companies. The companies not only give them political power - in the ability to award cronies cozy board positions - but also cash to buy state treasury bonds to finance the budget. Antczak notes that should these companies fall into the hands of private investors, there would be no place for the "political Nomenklatura" to go once they've terminated their political careers.
Taking a step away from the politics, there are still questions over whether a more closely combined company would create value. "I am not really sure whether this is needed," says Artur Szeski, banking analyst at CDM Pekao. "There's also a question of whether this cooperation is manageable."
On the one hand, should PKO get a stake in PZU, it could primp up its image in front of investors as it tries to launch an initial public offering - a strategy both companies have considered. Potential PKO investors would not only be able to buy a piece of the country's largest bank, but also be privy to profits from the largest insurer.
In fact, earlier this year the treasury put the kibosh on a PKO IPO, after only a single bidder for the advisory tender was able to meet the strict guidelines set by the government. PZU's Stypułkowski has also said that after the company's shareholder structure is addressed, he would like to attempt an IPO as well.
In any event, he added, existing banking law would forbid the two concerns' operations to be fully merged, which still leaves room for speculation as to what the government's specific plans may be.
