According to Polish daily Parkiet, the State Treasury Ministry has put a ban on PKO BP’s foreign expansion plans. The two reasons given by the minister are primarily that foreign expansion is costly (so the dividend paid by the bank could be lowered) and secondly, that money the bank would spend on overseas expansion could be invested in Poland. The second argument is in line with the idea of creating a strong national financial group together with insurance company PZU and Polish Post.
Our view:
A higher dividend for all shareholders is clearly positive news. We took a negative view of the cut in the dividend payout ratio this year (from 60% to 40%), a decision attributed by the bank to the potential capital requirements of foreign expansion. However, we continue to see political influence on PKO BP as negative and investors should recall the recent decision to engage in the financing of non-strategic projects, such as the recent purchase of a 5% stake in Bank BOS. Overall, we would expect the news to have a slightly positive trading impact of PKO BP today, given the outlook for a hike in the company's prospective dividend payout.