German lender Commerzbank is seen leading talks to take over Deutsche Bank's Polish banking operations - mBank. The move would allow DB to raise much-needed cash while reducing its non-core assets.
"This [acquisition] would make a lot of sense for mBank," a Warsaw-based private equity (PE) fund owner told DW.
A second PE owner in Warsaw told DW it was most likely a pure "domestic" deal structured as an acquisition of credit portfolio and other assets.
"Given there are not that many buyers left and obvious candidates - PKOBP, PZU, Pekao, Alior - will be tied up with internal consolidation, power struggles etc," he said.
Spain's Santander - owner of the third largest bank in Poland BZ WBK - and the Polish unit of Portugal's Millennium BCP are also reportedly interested.
Deutsche Bank Polska is Poland's twelfth biggest lender in terms of balance sheet size and could be valued at about $450 million (about 400 million euros), the news agency Reuters reported.
Commerzbank - a 70 percent owner of Poland's fourth largest bank, mBank and in the middle of a restructuring program - saw its private client and small business division earnings down 30 percent to 194 million euros in the first quarter, due in part to higher regulatory costs - particularly in Poland.
mBank is Poland's fourth largest universal banking group in terms of total assets and loans and fifth by deposits, offering retail, corporate and investment banking. It's been listed 1992 on the Warsaw Stock Exchange.
mBank - which reported a 29 percent annual fall in its first-quarter net profit reflecting the impact of the cost of bank guarantee funds charges - declined to comment. A Warsaw-based analyst said the chances are most of the action is happening in Frankfurt.
DB reins in
Deutsche Bank was forced to reach a $7.2 billion (6.8-billion euro) settlement with the US Justice Department in late 2016 to resolve allegations of misconduct related to the 2008 financial crisis. It was fined $41 million (36.6 million euros) by the US Federal Reserve in May over failures to screen billions of dollars in potentially suspicions transactions.
The bank has been in the middle of other recent investigations and lawsuits in the US due to its alleged ties to Russia and US President Donald Trump. The bank is also facing stricter regulatory requirements that have forced it to shore up its balance sheet.
The bank in March outlined plans to revise its business model, predominantly focusing the bank's efforts on Germany and a handful of key economies in Europe, the Middle East, North America and Asia Pacific.
Polish assets a hard sell?
The sale may not be straightforward, as Polish regulations have disallowed the sale of foreign-currency loans held by the unit.
Polish regulators require foreign banks to retain all foreign-currency loans even if they exit the country, meaning that Deutsche Bank Polska can sell just over 60 percent of its loan portfolio.
Poland has been a key market for Deutsche Bank over the years, with the bank seeking to build a large retail and commercial banking presence in the country. But tough competition and low interest rates, amid efforts by the Law and Justice (PiS) government to restrict foreign ownership have hurt too.
The bank is expected to split the unit so that it can sell its Polish loan portfolio to one of the remaining players while retaining its portfolio of foreign-currency loans, which will most likely be run off over coming years.
"DB's operations in Poland won't be sold in one piece - the bank separately, stock brokerage etc., to different buyers," the Warsaw analyst said. DB - he added - will likely split the business, selling portfolios of zloty-denominated mortgages, consumer loans and loans for small and medium firms.
Deutsche Bank shut its brokerage unit in Poland (DB Securities) last November.
According to Deutsche Bank's annual report for 2016, the unit held about 7.4 billion euros in outstanding loans and another €1 billion in commitments at the end of 2016. This represents total loans and liabilities of about 8.4 billion euros, of which loans worth 3.2 billion euros are denominated in euros or Swiss francs.
Revenues for Deutsche Bank Polska are included as a part of Deutsche Bank's Private and Commercial Banking Revenues. The bank's annual report showed that the unit noted net revenues of 259 million euros for full-year 2016.