Yesterday, Unicredito signed an agreement with the Polish government, regarding its takeover of Bank BPH, requiring it to sell 200 outlets (along-with the Bank BPH brand-name) and agree to an employment lock-up of 2 years. Further details have been released, regarding the structure of the deal, mainly the timeframe (of up to 30 months), the new fact that branches of Bank Pekao could also form a part of the 200 to be sold-off, and that infrastructure will be included with the branches, enabling them to function. This still leaves the key questions of: 1) what level of assets or client numbers will accompany the disposal?, 2) will Bank BPH be taken over by Bank Pekao prior to the asset disposal?, 3) will the acquisition by Bank Pekao be a cash deal or be executed by a share exchange. In our opinion, the news appears mildly positive for Bank Pekao, as it suggests a deal between Bank Pekao and Bank BPH might precede a disposal of assets, which would allow Bank Pekao shareholders to share in any premium realised from the franchise sale, thereby potentially offsetting loss of synergy. For the same reason, the announcement appears somewhat negative for Bank BPH shareholders. We retain our Hold ratings on both Bank Pekao and Bank BPH, which were both up yesterday on news of the deal.
Separately, State Treasury minister Wojciech Jasiniski stated yesterday that a change of the Polish banking law would be required to allow for the disposal of branches by Unicredito. It will now be up to the Polish sejm (parliament) to introduce legal changes, which we see as likely, though this will take time.