Polish state bank bids for AIB unit

POLAND is set to back a bid by the state-controlled lender PKO to buy the Polish operations of AIB, a government minister said.

Such a move could damage the Irish bank’s chances of getting the best price for its business, which it needs to sell by the year end.

AIB has to raise at least €7.4 billion by the end of the year to prevent the Government taking a majority stake in the bank.

Potential bidders for Zachodni WBK, one of Poland’s largest banks, include Spain’s biggest bank, Santander, Italy’s UniCredit and BNP Paribas of France.

They are due to submit non binding bids ahead of an end of June deadline.

AIB shares fell more than 7% yesterday to €1.03.

Poland’s financial regulator and other state officials said the sale could provide an opportunity to reduce foreign participation in Poland’s banking sector from the current 70% level.

“I would like to state clearly that it’s not trivial for Poland who will buy this bank (BZ WBK) and how it is done,” treasury minister, Aleksander Grad, said.

“PKO will be strongly supported by us in this process.”

He added that the ministry, which controls 51% of PKO, would suspend the bank’s annual meeting this week to decide whether to cut the proposed 1 billion zlotys (€250m) dividend to build up a potential war chest.

Investors had been hoping that a bidding war for BZ WBK would ensure an attractive price when the winner is forced to buy the 30% of the Polish lender not in Irish hands.

It has also emerged that Santander is trying to resurrect talks to combine its US business with M&T Bank, in which AIB has a minority stake, after negotiations collapsed last month.

Santander and M&T recently scheduled a meeting between the banks’ top executives, sources said.

The banks still disagree on who would control the combined firm – the issue that led the discussions to break down in May.

Before talks collapsed, Santander had been discussing a stock merger of its Sovereign Bank unit and M&T, in which the Spanish bank would end up with a minority stake.

In 2006, Santander was reported to be interested in a full takeover of the Irish bank and is currently regarded as the most likely buyer of AIB’s branch networks in Britain and the North.

The bank has been given until the end of the year to raise sufficient capital from private means to avoid the state taking a stake of more than 50% in the country’s largest bank.

Finance Minister Brian Lenihan said the bank would need “at least” €7.4bn to bring its capital ratios up to the new more demanding levels laid down by the financial regulator.

To comply, the bank plans the sale of its British business, its 25% share in US bank M&T and its majority stake Bank Zachodni WBK in Poland, before the end of the year.