Ministry still mum on date for PKO sale
While the government took a first step in the privatization of the nation's largest savings bank, Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP), by turning it into a joint-stock company last week, officials have still shied away from setting any timeline for the institution's sale.
One of the last banks to be sold, PKO BP will not go to a foreign investor, Deputy Treasury Minister Alicja Kornasiewicz confirmed last week. She would not detail how exactly the bank would be sold, however, or the timing of the event. Officials in the Treasury Ministry's press office could only say that the state would privatize the bank "soon."
By refusing to sell PKO BP to a foreign entity, analysts said that the government had virtually determined that the bank would forgo a strong strategic investor as no Polish institutions are large enough to take over the savings bank, which had net assets of zl. 64.3 billion ($16.49 billion) at the end of last year.
"If we are talking about Polish investors, it could only mean strategic or portfolio investors," said Artur Szeski, banking analyst with CDM Pekao Securities. "And since there is no Polish investor strong enough to buy PKO, and without foreign ownership, it leaves only portfolio investors."
The most likely privatization scenario is that the government will float part of PKO BP on the Warsaw Stock Exchange (WSE) as well as sell small packages to domestic institutional investors such as pension funds, Szeski said.
While Szeski said that that privatization approach could raise the desired amount of revenue for the state, it would do little to help the bank become more competitive. PKO BP, which moved from heavy losses in 1998 to a slight profit last year, is seen as being bloated and inefficient. The institution has almost 40,000 employees who work in its 1,270 branches.
"What will be the effectiveness of the institution after privatization?" Szeski said.
Facing increased competition from both domestic and foreign institutions that are eager to plunder the rapidly growing retail banking sector, PKO BP needs strong management capable of pushing through deep restructuring, analysts said. New market entrants such as Handlobank, Millennium and Lukas Bank offer fully automated, customer-friendly banking services 24 hours a day, seven days a week.
PKO BP, with its overcrowded branches and insufficient IT system that precludes the rollout of telephone banking, is gradually losing market share. Once a monopolist in retail banking, PKO's market share in current accounts had plunged to 42% by 1999.
In addition, the bank is grappling with a zl. 5 billion ($1.25 billion) portfolio of problematic housing loans issued under communism.
PKO ended 1998 with a zl. 1.3 billion ($372 million) net loss. After the first 11 months of 1999, PKO showed a net profit of zl. 389 million ($99.74 million). At the end of last year, the bank had zl. 1.6 billion ($410 million) in own capital.
Jean-Pierre Lambert, a senior banking analyst with London-based HSBC, said PKO could survive as a savings bank provided it developed stronger ties with its counterparts in Europe cooperation that would bring know-how and expertise.
"There is a very strong solidarity among savings banks," Lambert said. "If PKO is not going to have a strategic investor, it at least should think about a strong strategic partner."
