Banks, EU – Baltic States, Financial Services, Good for Business, Investments, Lithuania

Szymon Pinderak, spokesman for PKO, said in a comment to BNS that PKO was quoted on the Warsaw stock exchange, therefore, would not comment on its expansion plans.

Zygintas Macenas, executive partner at investment banking company Summa Advisers, said the plans of PKO and Poland's other commercial banks to expand to Lithuania and the other Baltic states had been discussed for years, adding that the current circumstances for translating the plans into reality were favorable.

"I have no facts about the plans of the Polish banks but why not? PKO is a large bank, it is doing well on the domestic market, therefore, with money and willingness to expand, it should indeed take interest in Lithuania and the entire Baltic region," Macenas told BNS.

Stasys Kropas, former president of the Association of Lithuanian Banks, also said he would not be surprised by the expansion of Polish banks to the Baltic states.

"Banks in Poland are growing and expanding, their economic condition is indeed good and promising for growth, therefore, naturally they are searching for expansion possibilities in neighboring states. It is very likely that they are looking at us, especially since Polish businesses have a substantial interest in the Baltic state, and the interest is growing," Kropas told BNS.

Analysts and market participants agree that a Polish bank, if it decided to launch operations in Lithuania, would probably seek to purchase a bank already working here and not opt for an organic way of development. In Kropas' words, starting operations on the Lithuanian banking market from scratch is virtually impossible.

"We have had such attempts from banks from various countries, however, now I think there are no such expansion possibilities, as all possible niches have been filled. In order to be profitable and competitive, you need to have a certain economy of scale, which is guaranteed by purchasing of an existing bank," he added.

Players on the market view the Luminor bank, which opened operations in early October, as the most likely acquisition target for PKO. With operations in all three Baltic states, Luminor is the third-biggest bank in the region, and rumors about it being up for sale have been around since Nordea and DNB announced their plans to merge their Baltic operations.

In Kropas' words, there are no doubts that Luminor was being set up in hopes of selling it sooner or later, and its share on the Baltic banking market makes it rather attractive for investors.

"As a matter of fact, it is a fully untraditional business model when two banks together set up a third bank to operate it jointly. Naturally, managing Luminor is a rather difficult task, and it is the interest of the owners to sell it sooner or later," said Kropas.

Both Macenas and Kropas did not rule out that Polish banks could be interested in the possibility of buying Siauliu Bankas and the Latvian Citadele group – stakes in both banks are held by the European Bank for Reconstruction and Development (EBRD).

According to information available to BNS, PKO purchased Nordea operations in Poland for 694 million euros in 2013, with possible expansion mentioned in the latest PKO operational strategy published in November of 2016.