Bank Pekao / BPH: Banking supervisory commission indicates a positive decision supported by evidence

Poland’s banking supervision commission, in an official statement, announced that an analysis of all the material gathered during its investigation justifies a positive decision from it on whether to grant UniCredito voting rights over a 71% stake in Bank BPH. Whilst the final decision was not actually taken, possibly due to procedural delays caused by the treasury ministry, there will be an extraordinary meeting on 15 March, when a positive outcome now appears likely. We expect to see a significant trading impact on Bank Pekao, which has suffered (as potential merger synergy appears in doubt or at least delayed) and a lesser reaction in Bank BPH, which has benefited (on speculation that minorities could benefit from the high price of a trade sale). As the news was announced yesterday after the session, even yesterday Bank Pekao dropped 1.1% whilst Bank BPH gained 1.6% (versus the WIG20 down 2.6%).

The harsh rhetoric of the Polish government in reaction to the statement should come as little surprise to the markets, at this stage. PM Marcinkiewicz stated that the ‘decision was scandalous and illegal’ and he plans to press forward with reform of the regulatory bodies of the financial sector. Additionally, deputy treasury minister Pawel Szalamacha stated that ‘if the commission will take this wrong decision’ (allowing UniCredito execute its votes), the state treasury would appeal to the court. However, it now appears that the Polish government will be on the defensive, as it must challenge its own regulator, whilst at the same time fighting a legal battle with the European Commission, which pursuing a legal process on two separate fronts (competition and internal markets).