AIB's former Polish subsidiary valued at €14bn in new deal
Erste and Spain's Santander Bank announced the talks in separate statements on Monday, confirming an earlier Bloomberg News report.
The deal would see Erste acquiring a 49pc stake in Santander Bank Polska for around €7.3bn, based on the most recent stock price.
That would value the bank – which under a previous name, Bank Zachodni, was majority owned by Ireland's AIB – at more than €14bn.
The Irish bank was forced to sell its 70pc stake in its Polish subsidiary in 2011 to allay state aid concerns raised by its own €21bn bailout.
AIB sold that stake for €3.1bn to Santander, which then bought up the remaining shares in the Polish bank and bolted on Kredy Bank, another Polish lender acquired from KBC Group, to create Santander Bank Polska.
It is not clear if the talks will lead to an agreement, and completion of any transaction would be subject to closing conditions, the banks said.
Santander said it had 'received interest from several parties'.
Since AIB sold its stake in 2011, the Polish economy has been on a strong growth trajectory, boosting the value of the bank.
Shares of Erste fell as much as 4.7pc in Vienna on news of the deal. Santander Bank Polska shares also declined.
Under the proposed terms, Erste would effectively gain control of the Polish lender as its largest single shareholder despite not having a majority holding, people familiar with the matter said.
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By buying less than 50pc, Erste will avoid triggering a mandatory tender for the remaining shares in the bank.
A deal between Vienna-based Erste and Spain's biggest bank would be one of the largest banking transactions in Europe in recent years.
The deal would deliver on Erste Group chief executive officer Peter Bosek's ambitions to expand into Poland, made public after his return to Vienna last year from Luminor Group.
Erste serves more than 16 million customers across seven European countries, making it one of the largest banks in central and eastern Europe. It currently operates a brokerage in Poland.
Santander Bank Polska is Poland's third-largest lender with about 7.5 million customers. It posted record net income last year, and its shares are at an all-time high.
A sale of much of Santander's stake in the Polish bank would be one of the biggest moves under executive chair Ana Botin to shift the strategic focus away from Europe.
It could allow her to expand in other markets and potentially use proceeds for acquisitions or to help fund buybacks.
The Spanish lender announced in February it intends to buy back €10bn of its shares over the next two years using excess capital and earnings.
Any transaction would require regulatory approval from the European Central Bank and the national banking authorities. That would likely be granted given that it is a deal within the European Union and wouldn't create a dominant market position or any other distortions, some of the people said.
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