Indicative bids for the state-owned Postabank should be submitted today

Indicative bids for the state-owned Postabank of Hungary are expected to be submitted today. The Hungarian Privatization and State Holding Company recently said that seven investors had expressed interest in the state's 100% stake in the bank. Besides Erste Bank, OTP, KBC, HVB, ING, and Budapest Bank (owned by GE Capital) are reportedly interested in the bank (UniCredito will reportedly not bid, despite earlier reports). Binding bids should be submitted September 12. Given Postabank's poor performance over 2000-03, expected high restructuring costs, the tough competitive environment, declining market share, and uncertainty regarding the bank's asset-portfolio quality, we expect bids to be low in terms of PBV multiples. We estimate Postabank's fair value at approx. EUR 235 mil., which implies a 2003E PBV multiple of 1.72.

Postabank's market share has contracted to below 4% over the past several years (total assets of EUR 1.53 bil. in 2002). It incurred a net loss of EUR 7 mil. in 2002, mostly due to poor cost efficiency, and is expected to be loss-making for 2003 as well. However, a new business model is being implemented at the bank, under which Postabank is expected to raise the number of points of sales at post offices (currently it has 115 of its own outlets and provides banking services at 18 postal outlets). Retail deposits account for 72% of Postabank's client deposits and thus fits Erste's profile. The situation with client loans is not as attractive: about 81% of the bank's loan portfolio is corporate loans of mixed quality. As the capital-adequacy ratio stood at a mere 9.3% last year (down from 11% in 2001), it is likely that Postabank will require a capital increase by a new majority owner.

Jan Hájek