Bloomberg News

Banco Comercial May Struggle to Sell Polish Unit Millennium

September 21, 2011

(Adds share prices in seventh paragraph.)

Sept. 21 (Bloomberg) -- Banco Comercial Portugues SA may struggle to sell its Polish unit as the global financial crisis forces potential buyers to focus on shoring up their capital rather than expanding, analysts and bankers said.

Banco Comercial has received three written expressions of interest, along with other contacts, it said on Sept. 19, without identifying the potential bidders. PKO Bank Polski SA, UniCredit SpA’s Bank Pekao SA unit, BNP Paribas SA, Commerzbank AG’s BRE Bank SA and Intesa Sanpaolo SpA are bidding, Gazeta Wyborcza reported, without saying where it got the information.

“The list of contenders is rather short given that indicative bids are non-binding and that they allow banks to conduct due diligence of the target, an opportunity often explored by Polish players,” Dariusz Gorski, an analyst at Bank Zachodni WBK SA, said in a note to investors yesterday.

Zbigniew Jagiello, chief executive officer of PKO, Poland’s largest lender, wouldn’t be “surprised” if Banco Comercial fails to sell Millennium because of “turbulence” in the industry, he said in an interview with TVN CNBC yesterday.

“The information about the offers is an act of desperation by the seller,” Jagiello said. He didn’t reveal whether PKO placed an initial bid for Millennium.

Erik Burns, a Banco Comercial spokesman, today declined to comment on the sale beyond what the bank said in the Monday statement.

Millennium gained 0.6 percent to 4.73 zloty at 11:46 a.m. in Warsaw, outstripping a 0.2 percent gain in the benchmark WIG20 Index and bringing its gain for the week to 13 percent. Banco Comercial fell 2.5 percent to 19.8 euro cents.

‘Positive’ News

Carlos Peixoto, an analyst at Banco BPI SA, said in a note yesterday that the “manifestations of interest in Millennium” are “positive despite not having any news regarding the prices offered.”

Warsaw-based PKO this year paid a dividend of 2.48 billion zloty ($778 million) compared with management’s proposal of 1.38 billion zloty and won’t be able to buy Millennium without a share sale, Michal Sobolewski, an analyst at brokerage IDM SA, said by phone today. While the bank couldn’t get financing for the acquisition “quickly,” it will “certainly” want to go through Millennium’s books, he said.

The second-largest Polish bank, UniCredit’s Pekao, could pay for the takeover and is benefiting from having fewer competitors, at lower valuations, Sobolewski said.

Banco Comercial won’t get more than 1.5 times Millennium’s book value, Gorski predicts. That compares with 2.7 times book value for Bank Zachodni WBK SA, bought by Banco Santander SA last year or 1.7 times paid by Raiffeisen Bank International AG for Polbank this year.

Swaps, Loans

The chances for the sale “depend on BCP’s determination and willingness to accept a low price,” Gorski said. While “nobody is questioning the Polish market’s growth prospects, Millennium’s swap portfolio and big Swiss-franc loan book are perceived as risky by foreign players.”

For now, Banco Comercial’s “negotiating position is much weaker than a couple of months ago,” according to Sobolewski, as markets’ focus on French banks’ potential losses on debt owed by Greece.

“With increased attention to French banks it’s hard to expect BNP will be taking over other lenders,” Sobolewski said.

--With assistance from Joao Lima in Lisbon. Editors: Nathaniel Espino, James M. Gomez

To contact the reporter on this story: Marta Waldoch in Warsaw at

To contact the editor responsible for this story: Frank Connelly at

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