Bank Pekao S.A. will acquire certain assets and liabilities of Idea Bank S.A. as a result of application of the resolution tool
Bank Pekao S.A., as a part of the resolution commenced today by the Bank Guarantee Fund with regards to Idea Bank S.A., will acquire certain assets and liabilities of Idea Bank S.A. The action is based on the administrative decision of the BGF effective on 3 January 2021. The transaction, being executed under the resolution tool of BGF, is to mitigate the scenario of the potential bankruptcy of Idea Bank S.A. For Bank Pekao S.A., the transaction means increasing the activity scale as well as the customer base in micro, small and medium-sized enterprises segment which is strategic for the bank’s development. Transaction structure minimises the impact of the acquisition on the liquidity and capital profile of Bank Pekao S.A.
Acquisition of the Acquired Business of Idea Bank S.A. within the resolution process will secure the funds of Idea Bank S.A. clients, supporting the stability of the domestic banking sector. An alternative scenario of the bankruptcy of Idea Bank S.A., without application of the resolution tool, could incur additional cost for the banking sector associated with the pay-out of guaranteed deposits of several billion PLN. In particular, this might have happened in a period when ability to finance the recovery of the country's economic potential in a demanding COVID-19 environment is of particular importance.
The resolution process undertaken by the BGF in respect to Idea Bank S.A. is based on the BGF Act of 2016. The BGF Act implements the European Union Bank Resolution and Recovery Directive of 2014, which sets a legal framework for the restructuring and resolution of banks in the EU. The BRRD was introduced as a response to the financial crisis of 2008 in order to mitigate insolvencies of banks and to minimise negative effects for depositors and banking sector, as well as wider costs for the economy and tax payers.
Earlier examples of resolution transactions under the BRRD are known and were carried in the last years, for instance in Spain and Denmark.
All deposit funds of the existing customers of Idea Bank S.A. remain safe
Application of the statutory instrument in the form of the acquisition of certain assets and liabilities of Idea Bank S.A. as part of the resolution allows customers of Idea Bank S.A. to maintain a continuous access to banking services as well as secures funds deposited with Idea Bank S.A. as of the date of the commencement of the resolution. Additionally, as of the acquisition date, all employees of Idea Bank S.A. will join Bank Pekao S.A. under the terms of Art. 23 ^ 1 of the Labour Code.
– The structure of the transaction on one hand allows securing liquidity and capital position of Bank Pekao S.A., at the same time not limiting the dividend capacity of the bank. On the other hand, thanks to economies of scale, the transaction can generate value for shareholders through synergies. In particular, we will focus on maintaining access to financing for business clients and providing them with the product offer of Bank Pekao S.A., enabling further growth of their businesses. We will also provide retail customers of Idea Bank S.A. with a very attractive welcome offer, such as a personal account with free of charge ATMs both in Poland and worldwide for the period of 1 year and deposits with attractive interest rates. Simultaneously, a special lending offer for micro-companies will be available – said Leszek Skiba, acting CEO of Bank Pekao S.A.
Impact on strategy and financial position of Bank Pekao S.A.
The transaction will increase Bank Pekao S.A.’s scale by ~PLN 14.4 billion assets (as of the 31 August 2020), solidifying its position as the 2nd largest bank in Poland by assets. The acquisition will accelerate growth in the segment of micro, small and medium-sized enterprises – it will happen as a result of the migration of customer base as well as sales advisors of Idea Bank S.A., and thanks to the wide range of Bank Pekao S.A.’s products. The key elements of the expected synergy effects will be the optimization of the funding cost, as well as economies of scale in terms of optimizing of the operational activities of the acquired business of Idea Bank S.A.
Terms and structure of the transaction
On 3 January 2021 Bank Pekao S.A. will acquire certain assets and liabilities of Idea Bank S.A. under the application of the resolution tool by the BGF involving the sale of a business pursuant to the BGF Act.
In line with the administrative decision of the BGF, Bank Pekao S.A. will acquire certain assets and liabilities. Key asset categories being acquired include:
- Liquid funds and Treasury bonds;
- Loans and advances to customers;
- Financial instruments.
Main category of liabilities comprise customer deposits.
The assets and liabilities acquired as a part of the transaction allow for continuing of banking activity of Idea Bank S.A. In order to minimise risk associated with the up-to-date business activity of Idea Bank S.A. on Bank Pekao S.A., in line with the BGF decision, a number of assets and liabilities will be excluded from the scope of transaction, and in turn will continue in the Institution under resolution managed by the BGF and BGF appointed administrator.
The list of key exclusions is as follows:
- Assets, rights and liabilities associated with actions, legal acts or unlawful activities connected with:
- trading in financial instruments and other activities concerning (i) financial instruments issued by GetBack S.A. and its related parties; and (ii) investment certificates, in particular the investment certificates issued by Lartiq (formerly: Trigon) (Profit XXII NS FIZ, Profit XXIII NS FIZ, Profit XXIV NS FIZ) represented by Lartiq TFI S.A. (formerly: Trigon TFI S.A.), Universe NS FIZ, Universe 2 NS FIZ and other investment funds represented by Altus TFI S.A.;
- providing insurance coverage, performing insurance intermediation, performing insurance distribution with regard to the distribution of unit-linked insurance, and life insurance where the benefit of the insurance undertaking is determined on the basis of defined indices or other base values;
- rendering services as an agent of an investment firm;
- the business of Idea Bank S.A. in terms of activities that may be incompatible with the bank’s scope of business presented in the bank’s articles of association,
and any claims or obligations that result, or could result, therefrom, including those that are subject to civil law and administrative proceedings, regardless of the date of the commencement thereof.
- shares in the subsidiaries and affiliates of Idea Bank S.A.; and
- corporate bonds issued by GetBack S.A.
The transaction will secure deposits, which as of the acquisition date, will become liabilities of Bank Pekao S.A. in respect to existing customers of Idea Bank S.A. The acquisition price for assuming those deposits is the acquisition of the assets of Idea Bank S.A.
At the same time, as part of the transaction, BGF will provide Bank Pekao S.A. with a Loss-coverage Guarantee arising from potential risks related to the acquired rights and liabilities.
The Guarantee Agreement between BGF and Bank Pekao S.A. will be valid for a period of 8 years and shall enter into force on the Acquisition Date.
The Terms of the Guarantee Agreement allow Bank Pekao S.A. to assign a reduced risk weight for the acquired credit exposures as well as mitigate potential non-credit loss, not reflected in the financial statements of Idea Bank S.A. This will allow for a significant reduction in the capital requirement for credit risk for Bank Pekao S.A. Thanks to this, the transaction will have a minimal impact on the capital position of Bank Pekao S.A., helping maintain strong capital as well as liquidity position of the bank, significantly above the regulatory required levels.
Pursuant to the BGF Act, upon delivery of the decision to commence resolution, BGF becomes entitled to taking decision with respect to Idea Bank S.A. as an authority of the resolution. Additionally, based on the decision, an administrator performing day-to-day management and supervision of the entity is appointed. Bank Pekao S.A. will acquire certain assets and liabilities on 3 January 2021. As of that day, all customers and employees of Idea Bank S.A. will become customers and employees of Bank Pekao S.A., respectively.
All deposits of customers of Idea Bank S.A., both individuals and companies, remain safe and will be fully transferred to Bank Pekao S.A. Customer service will be maintained on an ongoing basis. The bank's branches will continue their activities. Customers can still use the bank's cards and ATMs as well as the hotline. Account numbers, passwords and logins for internet and mobile banking do not change. At the same time, with the acquisition, Idea Bank S.A. clients will gain access to a wide range of financial products, including those dedicated to micro-enterprises and SMEs.
Full operational integration of the Acquired Business of Idea Bank S.A. within the structures of Bank Pekao S.A. is expected by the end of Q4 of 2021.
Bank Pekao S.A., founded in 1929, is one of the largest financial institutions in the CEE region and second largest universal bank in Poland with over PLN 230bn assets. Through the second largest branch network, Bank Pekao serves over 5.6m retail customers. As the leading corporate bank in Poland, Bank Pekao serves every second among largest corporates in Poland. Status of a universal bank is underpinned by a market-leading private banking, asset management and brokerage operations. Diversified business profile is supported by a market-leading balance sheet and risk profile reflected in lowest cost of risk, strong capital ratios and resilience to macro conditions (top 3 banks in EU-wide EBA exercise). Since 1998 Bank Pekao has been listed on the Warsaw Stock Exchange and has been a member of several local (incl. WIG 20 and WIG Banks) and international indices (incl. MSCI EM, Stoxx Europe 600, FTSE Developed). Pekao is among top dividend-paying companies listed in Warsaw, with a total shareholder pay-out of PLN 20bn in the last 10 years.