September 10, 2018 / 6:00 AM / 2 months ago

RPT-Poland's Pekao eyes small buys in digital banking, asset management

(Repeats Sept. 8 story with no changes)

* No domestic bank M&A eyed after Alior deal fell through

* Focus on developing digital bank for Polish expats

* CEO says M&A in asset management “makes a lot of sense”

* Sticks to financial targets to 2020

By Valentina Za

CERNOBBIO, Italy, Sept 8 (Reuters) - Poland’s Bank Pekao could buy a small digital bank abroad as well as an independent asset manager at home, the chief executive of the country’s second biggest lender told Reuters on Saturday.

Former Merrill Lynch banker Michal Krupinski, who took over as CEO in mid-2017, ruled out Pekao considering a domestic merger after a deal with smaller peer Alior Bank fell through last month.

Krupinski said he expected further consolidation in the Polish banking market, which could also be affected by mooted cross-border mergers in Europe as foreign banks have operations in Poland.

“I see the Polish banking market consolidating to around five to six players over the next five years,” he said on the sidelines of the annual Ambrosetti business forum on the shores of Lake Como.

“We won’t grow through M&A, although we do watch potential opportunities carefully ... what we’re currently investigating is the best way to develop a digital bank, especially outside of Poland, as there are 10 million Poles living abroad.”

Krupinski said a decision would likely be reached within a couple of quarters over whether Pekao should build a digital bank from scratch or buy a small foreign player.

Piotr Wetmanski, head of strategy and innovation, said Pekao was looking at small “digital speedboats” to buy abroad.

“We’re screening a number of potential targets in countries such as the UK, Germany or France, where there is a significant Polish presence. There are some interesting players in the market,” he said. “It would be a relatively small acquisition which we can rapidly grow.”

Pekao is setting up a representative office in London to serve investors looking to buy Polish assets and, depending on its success, plans to open another in New York next year.

Krupinski said Pekao could also look to acquire small independent Polish asset managers which are under pressure because they lack a distribution network, which bank branches can provide.

Rising compliance costs driven by tighter regulation further increase the importance of scale in asset management and Krupinski said consolidation “makes a lot of sense”.

“We could merge our asset management unit with other players or look at add-on acquisitions. No decision has been taken yet, but the next one or two years are going to be very interesting,” he said.

Pekao’s top shareholders are state-controlled Polish insurer PZU and development fund PFR, to whom Italy’s UniCredit agreed to sell a 32.8 percent stake back in 2016 as part of a broader asset review.

Krupinski said Pekao had refocused its business on more profitable products under shareholders PZU and PFR.

He said he was comfortable with the bank’s financial targets through 2020, including around double digit growth in net profit this year.

“Initially we had assumed there would be a quicker pick-up in interest rates but we don’t see a problem with our targets at present because we’ve been actually taken by surprise by how fast we can grow,” he said. (Reporting by Valentina Za; editing by Jason Neely)

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