Shareholders in AIB's Polish unit warned to brace for sale
Bank Zachodni WBK is a subsidiary of Allied Irish Bank (Leon Neal/AFP/Getty Images)
Friday April 24 2009
Investment bank Nomura has warned shareholders in Allied Irish Bank's Polish subsidiary, Bank Zachodni WBK, to brace themselves for a possible sale as the parent firm looks to dispose of assets.
In a note on the Polish banking sector, it reduced its price target for Zachodni to 82 zlotys (€18.20) from 120 zlotys, adding that the shares offered a limited upside potential of 8pc.
Regarding Zachodni's future ownership it added: "We believe investors should not rule out the possibility that AIB could dispose of its stake in BZ WBK."
Although it said that the Polish subsidiary is unlikely to be on the top of an asset disposal list, from a pragmatic position, everything could be a matter of price.
Earlier this week, AIB launched a fight to limit state ownership.
It started drawing up a list of asset sales after the Government insisted AIB must raise an additional €1.5bn to top up the planned €3.5bn investment by the State in the bank. Apart from Zachodni, it owns M&T bank in the US.
Decision
Earlier this week, the Irish Independent reported that staff at the Polish bank had received letters informing them of AIB's decision to consider selling the bank.
In the report, Nomura pointed out that the AIB subsidiary was the most exposed Polish bank to the property and construction sectors, which the investment bank considers to be the driver behind "corporate asset-quality deterioration".
"As of 2008, loans to the property sector and construction sectors accounted for 45pc of BZ WBK's corporate lending book. Moreover, 19pc of this portfolio comprised loans for land purchase."
It added that the bank also continued to be highly geared to the performance of asset management and brokerage businesses. In 2008, both accounted for 34pc of all fee income, or 15pc of total revenue.
Capital market activity is also expected to be down in 2009 and is once again expected to be a drag on profitability.
On the plus side, the report noted that the bank was relatively well capitalised.
"As of end 2008, it had a Tier 1 ratio of 10.1pc -- the second highest below Pekao. Moreover, BZ WBK had the lowest loan/deposit ratio among our Polish coverage."
Nomura said it was taking a cautious view on Polish banks and was concerned with expected revenue pressure driven by a squeeze in the net interest margin.
- Ailish O'Hora
