GENEVA: Surprising surge in value of the Swiss franc has slowed down merger and acquisitions activity in Poland’s banking sector, as buyers and sellers are cautious of a sharp rise in the cost of mortgages denominated in the Swiss currency.
Executives had anticipated a wave of deals this year in Poland, whose banking sector looked ripe for consolidation because it has about 40 constituents compared with the 10 names which some industry insiders say it can profitably support.
But in the past few weeks the sale of one Polish bank, a local unit of General Electric, has been put on hold as a direct consequence of the surge in the franc, two investment bankers and a banking source told Reuters.
A handful of other deals that were in the pipeline are also expected to be delayed, several banking executives said.
The Swiss central bank’s Jan. 15 decision to remove its cap on the franc had widespread knock-on effects.
In eastern Europe, millions of mortgage holders with Swiss franc loans face higher repayments, in turn meaning the ratio of banks’ non-performing loans is likely to go up, potentially affecting their financial health.
Among other deals which have been in the works, according to the banks themselves or to banking sources, are the sale of Raiffeisen’s Polish unit, the possible sale of a stake in Millennium bank (owned by Portugal’s BCP ) and the sales of two smaller lenders, Alior and FM bank.
More than half of BPH’s loan portfolio, or 12 billion zlotys ($3.3 billion), is in Swiss francs. Expressions of interest were put on hold, said two bankers. They were later issued, but according to one of the bankers, “the transaction is on hold due to the francs.”
Raiffeisen’s Polish unit also has a significant Swiss franc mortgage portfolio, as does Millennium Bank.
The other two deal targets, FM Bank and Alior, have no Swiss franc loans, but deals involving them could still be affected if a prospective buyer has such loans.
