Private Equity-Backed VeloBank Eyes Polish M&As After Citi Deal

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(Bloomberg) — Fast growing VeloBank SA, backed by US private equity fund Cerberus Capital Management LP, is on the prowl for more Polish takeovers after it bought Citigroup Inc.’s retail operations in the country.

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“Any assets that will help our strategy to expand our scale may be potentially interesting for us and our investors,” VeloBank Chief Executive Officer Adam Marciniak said in an interview. He declined to name any specific targets but said “our cooperation with Cerberus is optimal.”

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Last month, VeloBank agreed to pay as much as 532 million zloty ($142 million) for the retail operations of Citi’s Bank Handlowy SA, with 8.9 billion zloty of assets, over half a million clients and 1,650 employees. The move will give the US-backed lender entry into private banking once the deal is completed around the middle of next year, Marciniak said. 

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An uptick in Polish M&A activity, including Erste Group Bank AG’s €7 billion ($8 billion) takeover of the local unit of Banco Santander SA, has been driven by improving sentiment for the country’s banking industry, Marciniak said. 

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Investors like growing stability in Poland’s regulatory framework as well as mortgage moratoriums and Swiss-franc loan lawsuits petering out, he said. Polish bank profits have jumped to a record high this year as the central bank has been cautious with interest-rate cuts, boosting the WIG-Bank index of Warsaw-listed lenders by 25% this year. 

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“It seems that Polish banks are now able to mitigate fresh challenges, and there isn’t any new systemic risk for them,” Marciniak said. He declined to comment on calls by a junior government party to impose windfall profit tax on lenders, which caused a selloff late last week.

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Cerberus entered into Polish banking last year by acquiring VeloBank, a retail-focused lender that emerged from the collapsed Getin Noble Bank SA, for 1.08 billion zloty, including recapitalization pledges. Its backing has since enabled VeloBank to buy mutual fund Noble Funds TFI SA and leasing company Noble Finance and Marciniak has ambitions to make the lender the country’s sixth largest in terms of assets. 

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VeloBank is also expanding into financial services for small companies but doesn’t aim to chase larger corporates, the CEO said. Instead, it prefers to specialize in lending in selected areas, such as property developers and renewable energy projects, given the expertize of its minority owners such as the World Bank’s IFC and the European Bank for Reconstruction and Development.

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