October 4, 2018 / 10:41 PM / 2 months ago

Poland's PZU chief expects more domestic bank consolidation

NEW YORK, Oct 4 (Reuters) - The head of Poland’s top insurer, PZU SA, said on Thursday he expects more consolidation in the local banking sector with two to four transactions potentially taking place in the next year.

“Even though (earnings) margins have now picked up somewhat and the average ROE (return on equity) in the banking sector is around the European average of 7 to 8 percent, I think there are some players in Poland who are sub-scale who either want to get bigger or get sold,” PZU Chief Executive Officer Pawel Surowka told Reuters in an interview.

Speaking on the sidelines of an event sponsored by the state-run firm in New York, Surowka said investors were waiting to see if Eurobank, the Polish banking unit of France’s Societe Generale would be put up for sale..

Asked if one of PZU’s banks, Alior Bank, was going to bid for Eurobank, Surowka skirted a direct answer but said Alior “is a player who should participate in the consolidation of the market.”

He said Alior’s strengths include a strong post-merger integration unit and scalable information technology systems.

“The question is whether Societe Generale will discuss with them at all and whether Alior will be interested. As an investor, in general, we support them,” he said, referring to Alior and their efforts to “growing further un-organically.”

Eurobank is the 17th largest Polish bank with assets at mid-year of roughly 14 billion zloty ($3.7 billion). That is more than 20 times smaller than the country’s largest lender PKO BP.

“It all comes down to numbers. What are the synergies, what are the conditions?” Surowka said.

PZU also holds a large stake in Bank Pekao, the nation’s second largest lender. In August the bank said it had ended talks on a potential merger with Alior. Asked if would be wise for Pekao to merger with PKO BP, Surowka was circumspect.

“The situation where Poland has two strong local domestic leaders, that compete with each other, is beneficial to them because it forces them to innovate, to improve,” he said.

When pressed further, he appeared to squash the prospects of a linkup, saying it “might be a little bit too cozy ... not the best idea.”

But on the general idea of acquisitions by PZU, Surowka said the healthcare sector as well as its core insurance markets in emerging Europe are where deals are more likely to be made in 2019.

“I think health is one (where) we will constantly be on the lookout,” he said.

$1 = 3.7422 Polish zloty Reporting by Daniel Bases Editing by Tom Brown

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