PKO bank: 51% owned by Polish state

Poland's largest bank PKO is set to accelerate its advance on AIB's Bank Zachodni (BZWBK) subsidiary in an effort to close a deal before a shareholder-imposed deadline at the end of the year. AIB needs to agree a deal within the next six weeks or it risks missing the Financial Regulator's end-year deadline to raise €7.4bn in fresh capital. So far the Irish bank has raised none.

Shareholders of PKO, which is understood to be one of a handful of banks which submitted formal bids for AIB's 70.4% stake in BZWBK last Friday, gave the board permission to utilise the bank's €377m net profits from the first half of 2010 to help make acquisitions in Poland within the calendar year.

"We have a very good financial situation and management has the broad support of the shareholders after our agm on 23 July," chief executive Zbigniew Jagiello told the Sunday Tribune. "This allows us to think about acquisitions in the Polish market supported by the treasury minister."

PKO is 51% owned by the Polish state and is seen by analysts as an easier fit with local rival BZWBK than other bidders BNP Paribas and Santander. The Polish regulator told analysts earlier this year it would use its powers to influence mergers and would have a bias against banks benefiting from state support in their home market. Market sources said this stance has effectively driven all bidders out of the picture apart from Santander, which is seen as a better strategic fit by analysts compared to PKO and has weathered the financial crisis without help from Madrid – although Jagiello believes home advantage could be telling. "It is easier for the regulator to evaluate when they know both parties," he said.

It is understood AIB's plans to sell its Goodbody stockbroking business to Kerry-based financial services company Fexco will still take several months to complete.

Despite reports of an imminent announcement it is believed that legal issues around the sale have yet to be resolved. It could then take months for regulatory approval. A sale of Goodbody will do little to solve AIB's capital needs. It is expected that Goodbody will be one of a number of businesses the Commission will order the bank to sell.