Welcome to the real world
We here at the WBJ are somewhat confused: Has insurer Powszechny Zaklad Ubezpieczen (PZU) been privatized or not?
Last week, the Treasury Ministry postured, positioned, huffed and puffed over Deutsche Bank's move to possibly take over domestic bank BIG Bank Gdanski (BIG BG), a completely private entity. The Treasury Ministry panicked because BIG BG together with Portuguese insurer Eureko hold a 30% strategic stake in PZU a stake they bought this fall during the insurer's "privatization." If BIG BG comes under Deutsche Bank's control, then Deutsche in turn also gains significant control of PZU.
To hold the German bank off, everyone from Treasury Minister Emil Wasacz to President Aleksander Kwasniewski last week decried Deutsche's move, and threatened to intervene if the German bank didn't back off. By the end of the week tempers had cooled. The market now thinks that Wasacz will leave BIG BG's affairs alone if, in the event of takeover of BIG BG, Deutsche promises to sell the 10% stake the Polish bank holds in PZU. That stake would likely go to Eureko, which so far has proven itself to be a fairly quiet investor.
It is clear that the state has been unwilling to have Deutsche Bank take a lead position on the Polish banking market it has refused to sell any entity being privatized to the German bank. But the Treasury Ministry's latest interference has gone too far. PZU was privatized, or at least it was supposed to be. Eventually it, like every other banking and insurance group worldwide, will get wrapped up in the global frenzy of consolidation. What if Deutsche Bank buys Unicredito Italiano, which last year bought 51% of domestic bank Pekao? What is the Polish government going to do then refuse to allow Deutsche Bank to fold Pekao into the merged entity?
Ultimately the government's desire to protect PZU from an agressive investor is wrong. This insurance company is weak, has a poor capital base and is losing market share. Protecting the company by bringing in weak or silent investors such as Eureko and BIG BG is wrong. At some point the Polish government has to allow the company stakes it sells, even if they are only minority positions, to change hands. The government also has to accept that at some point most of Poland's banks and insurance companies will be taken over. Case in point is Handlowy, which may eventually find itself sold to the U.S.'s Citigroup after being stymied in its attempt to merge with BRE Bank.
National identity, which is what the Polish government is ultimately trying to protect, is not an issue on the world market. What is an issue is competitiveness and efficiency, and ultimately having Polish companies able to live up to those standards will help this country, its economy and the living standard of its population more than protecting Polish PZU.
