POLAND's PZU bids below book value for Raiffeisen Polish arm

Central Europe's biggest insurance group PZU has submitted an offer to buy Raiffeisen Bank International's Polish arm and wants to pay less than the unit's book value, banking sources with knowledge of the matter said.

The Austrian lender needs to sell its unit Raiffeisen Polbank, Poland's ninth bank by assets, with a book value of 6 billion zlotys, to help shrink its balance sheet and hit a core capital ratio of 12 percent by end-2017.

Earlier this month, Reuters reported that Polish state-run insurer PZU had offered to buy Polbank in an attempt to create its own banking group, after the insurer secured a stake in Poland's Alior Bank.

"PZU's offer is below book value. They have overpaid for Alior, so the maths in their business model would not work otherwise," one banking source told Reuters.

The value of PZU's offer could ultimately hinge on whether it buys Polbank together with its portfolio of Swiss franc loans. These are seen as a potential risk factor after the Swiss currency surged this year, pushing up the costs to borrowers.

The insurer has indicated it would like to see Polbank's parent take over the Swiss franc loans before the sale, though Raiffeisen has not said if it would do this.

"It all depends on what one sees as book value. PZU has said that it would not buy a bank together with a portfolio of Swiss franc-denominated mortgages. When you include the franc then yes, PZU is bidding below book value," another banking source said.

PZU and Raiffeisen declined to comment. Read the full story
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