Raiffeisen Bank International AG (RBI) has agreed to sell 'the core banking operations' of Raiffeisen Bank Polska by way of demerger to Bank BGZ BNP Paribas, a subsidiary of BNP Paribas.
The sale will boost the French bank's distribution capabilities and coverage of the domestic structured products market as Raiffeisen has been the second most active provider since 2015 in a market dominated by Santander. SRP data shows that BNP Paribas subsidiary in Poland, Bank BGZ BNP Paribas, has played a marginal role in the Polish retail structured products market over the last few years. In 2017, Bank BGZ BNP Paribas marketed just eight structured products compared to 59 products brought to market by Raiffeisen, which has issued over 300 products to date. BNP Paribas will take over the management including redemptions and income payments of 128 live products sold by Raiffeisen Bank Polska.
From a bond provider perspective, the French bank will also bolster its market share as Raiffeissen more than doubles BNP Paribas' hedging activity in the Polish market. In 2017, Raffeissen subsidiaries Raiffeisen Centrobank and Raiffeisen Polbank, were behind 46 and 10 products, respectively, compared to three products hedged by BNP Paribas Arbitrage Issuance. The majority of Raiffeisen's live products in Poland are investment certificates with a medium term five-year investment horizon.
The sale price of the deal is approximately €775m, which equates to a preliminary price/tangible book value multiple of around 0.95 times. This is based on the tangible book value of the core banking operations of approximately €815m as of December 31, 2017 and is subject to closing accounts, stated both banks.
RBI intends to transfer the remaining Raiffeisen Bank Polska operations, mainly comprising the foreign currency retail mortgage loan portfolio, to a Polish branch of RBI which is to be established. Total assets of approximately €3.5bn and total risk-weighted assets of approximately €5bn as of December 31, 2017 have been allocated to the retained operations.
The transaction will further strengthen BGZ BNP Paribas' position as the #6 bank in the Polish market, according to BNP Paribas. 'The combined bank would have attained an over 6% market share in loans and deposits at year-end 2017,' stated BNP Paribas. 'With new cross selling opportunities, the transaction will also enhance the position of all the other BNP Paribas Group subsidiaries operating in Poland (BNP Paribas Securities Services, BNP Paribas Leasing Solutions, BNP Paribas Cardif, Arval, ...) in accordance with the Group's integrated model.'
The direct impact of the sale on the RBI Group's consolidated profit is expected to be around minus €120m, excluding any potential effects from deconsolidation. Under the terms of the agreement with BNP Paribas, total assets of approximately €9.5bn and total risk-weighted assets of approximately €5bn as of December 31, 2017 have been allocated to the core banking operations. For the BNP Paribas Group, the transaction is expected to have an impact of -10bp on the CET1 ratio and to improve the earning per share by ~1.0% as of 2020.
'Combining the existing strengths of BGZ BNP Paribas with the assets and culture of the core banking activities of Raiffeisen Bank Polska, the BNP Paribas Group in Poland will become a reference bank in all market segments, from consumer finance to private banking, from SME financing to CIB,' Jean-Laurent Bonnafé (pictured), CEO of BNPP, said in a statement.
Bank Gospodarki Żywnościowej (BGŻ) merged with BNP Paribas Polska at the end of April 2015 to form Bank BGŻ BNP Paribas. BNP Paribas agreed to buy a 98.5% stake in BGŻ from Rabobank in December 2013. BNP Paribas' move to buy RBI's subsidiary follows a number of high-profile moves over the last few years, including last year's acquisition of ING's structured notes business with an estimated notional value of €5bn; RBS's structured retail investor products and equity derivatives (IP&ED) business in 2014; as well as Credit Agricole's portfolio of equity derivatives, also in 2014, which had a €12.5bn notional.
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