WBK-Zachodni merger nudges closer
With an eye on an eventual merger, Allied Irish Bank (AIB) announced last week that it plans to implement a $100 million IT system aimed at boosting cooperation between its two Polish subsidiaries, Bank Zachodni (BZ) and Wielkopolski Bank Kredytowy (WBK).
"We are asked a lot of questions about cooperation between Bank Zachodni and WBK," said Maurice Crowley, head of the investor relations department at AIB. "We will cooperate where it makes sense, particularly in the area of technology."
Active in Poland since 1993, AIB acquired a 16% share in the Poznan-based WBK two years later. The Irish bank strengthened its position on the market last September when it purchased an 80% share of BZ. Today AIB has a 60% share in the Poznan-based bank.
With two strong regional brands in its Polish portfolio, AIB is moving toward the creation of one large banking entity. "As we progress, we plan to merge both banks," said Liam Horgan, first vice president of Bank Zachodni. However, AIB will have to conquer a few key hurdles before the actual merger can take place.
Under the privatization agreement signed with the Traeasury Ministry last May, AIB is required to keep the Zachodni name and Wroclaw headquarters for another three and a half years. Any earlier merger between BZ and WBK requires AIB to work around this obstacle.
"As you know we have agreements with the Polish government in relation to Bank Zachodni. That agreement stipulates that we would not merge for four years," Horgan said. "There are, however, certain circumstances where that time frame could be shortened." Horgan would not say what provisions in the contract would permit an earlier merger.
Also, while WBK is traded on the Warsaw Stock Exchange (WSE), BZ is still privately held. The easiest way to merge the two entities is to take BZ public as Polish law makes it difficult to merge a privately held entity with a public one. "We have never said that we will or will not take (Zachodni) public," Horgan said. "But obviously if you are going to merge two banks and one is publicly quoted and the other not, then something has to be addressed in that relationship and that would be part of the merger."
At the same time, the restructuring of BZ after its sale to AIB is only in the early stages. Barely into its seventh month under AIB management, BZ has a long way to go before it meets the Irish bank's standards, Horgan said. Moreover, the Wroclaw bank will have to play catch-up to its Poznan sibling before the institutions will be able to merge. "In the case of (Zachodni), we have a considerable amount of work to do," Horgan said.
The announcement of heightened levels of cooperation between the two banks was released at the same time as BZ's 1999 financial results. Most notably, BZ's net profit for 1999 plummeted to zl. 3 million ($769,000) last year from 26.5 million ($7.57 million) in 1998.
