Santander SA Buys Stake In Zachodni Bank

Pedestrians pass a Santander bank branch in London, Britain, 27 May 2009.

Santander, the largest Spanish bank, purchased the participation of the creditor Allied Irish Banks in a bank in Poland, namely Zachodni Bank in exchange for $ 2.94 billion, writes Bloomberg. The acquisition indicates a change in the attitude of the Spanish bank, which now prefers to expand into emerging markets in the context that the economic developments in Western Europe are anemic.

Santander won the bid for a package of 70% of participation in Zachodni Bank, outbidding other European giants, among which BNP Paribas and PKO, the largest bank in Poland.
Allied Irish Banks was forced to sell the stake given the Irish stringent conditions imposed by the State as part of the financial aid agreement it received.

The acquisition is the third of this kind that Santander announced in recent weeks, thus showing that the Spanish banking institution is trying to balance its assets.

Thus, last month, Santander has previously bought 318 of Royal Bank of Scotland branches, after the British bank was forced to sell these branches in order to reduce its market share in Britain.

Bid: Santander has offered around £1.5billion for 318 Royal Bank of Scotland branches

Before doing so, however, the Spanish lender announced that it acquired a portfolio of auto loans worth 4.3 billion from the British bank HSBC,  in July and has also strengthened its presence in the largest European market, Germany, buying 173 branches of the Swedish bank SEB for $ 555 million.

Sandanter bought in July 173 branches of Swedish bank SEB for $ 555 million

Santander, which has been involved in the acquisition of shareholdings in the Polish bank Zachodni just to strengthen its presence in emerging markets, which alone can ensure the current economic growth.

Moreover, Poland is one of the strongest economies in Central and Eastern Europe and is seen by executives from Santander as having the potential to become a “Brazil” to the region. Also, the entry into the South American market through the acquisition of ABN Amro operations proved an inspired decision to Santander.

“The transaction (through which Santander acquired 70% of Bank Zachodni ) meets the criteria of Santander in its strategic procurement and supports our geographic diversification,” said Emilio Ankle, executive director of the Spanish bank.

Moreover, Santander would submit the other shareholders of Bank Zachodni an offer that to take full control over the Polish lender, and will later sell a minority stake to the private equity fund Apex Partners.

In addition, Santander will buy Allied Irish Banks holding the asset management division of Bank Zachodni for $ 150 million.

“Santander bet on Poland and the sustained growth that we expect to see in this country compared with other regions,” said Simon Maughan, analyst at MF Global, quoted by The New York Times.

“The acquisition is costing enough money,” said Maughan, referring to the fact that Santander will pay for shares in Bank Zachodni 2.8 times more than their book value. The creditor expects the acquisition to bring profit in 12 months and generate ROI (an indicator which measures the return on investment – ) of 11% in the third year after completion of the acquisition.

Santander has also voiced interest and other assets that Allied Irish Bank will put up for sale, including a minority stake in M & T, an American bank with regional operations.

Zachodni Bank
* The Polish Bank Zachodni is the third largest lender in terms of market value.
* It a total of 518 branches and is the fifth lender in Poland in terms of assets (13.2 billion euros at the end of 2009).
* It entered the majors’ largest Polish banks in 2001 after it merged with Wielkopolski Loan Bank, while the Allied Irish Banks had majority ownership in both banks.
* In 2009, the Zachodni Bank recorded a net profit of around 250 million euros11