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UPDATE 3-Poland to sell down stake in top bank to boost budget

Published 03/29/2011, 09:44 AM

* Govt to decide later whether to sell more of PKO BP

* Sale is part of $5 bln sell-off plan to cut borrowing

* PKO shares fall 2.2 percent; helps stabilise the zloty

(Adds currency dealer comment, updates shares)

By Chris Borowski and Piotr Bujnicki

WARSAW, March 29 (Reuters) - Poland aims to sell at least a tenth of its largest lender PKO BP in September in a deal it hopes will net nearly half of the $5 billion in privatisation proceeds it seeks this year to finance state debt.

Poland has relied on the sale of state assets to help keep borrowing under control over the last two years in the face of huge budget shortfalls, floating several of its largest companies and unloading further stakes in others.

"The treasury ministry will sell as much (of PKO) as the market is willing to buy," Treasury Minister Aleksander Grad told a news conference on Tuesday.

"It's in the ministry's interest to sell as much as possible. We see the 10 percent held by (state bank) BGK as the minimum to sell plus shares held by the ministry" he said.

Poland, along with BGK, controls 51 percent of PKO and has said it could reduce its stake to 25 percent to maintain operational control. It is also pushing for changes in the lender's statutes to prevent hostile takeovers.

"PKO is one of the most attractive assets held by Poland from the point of view of institutional investors," said Marek Juras, head of CEE equity research at UniCredit in Warsaw.

"If the price that Poland is able to get in bookbuilding satisfies, then it could just sell the entire 26 percent."

By 1300 GMT, PKO shares, already weighed down by expectations of a wave of state shares flooding the market, shed another 2 percent compared with a 0.7 percent retreat by Warsaw's main index.

Foreign exchange traders said the announcement also helped support the zloty thanks to expectations of foreign investors buying up the Polish currency.

"The treasury minister has shaken the market today, and it looks like privatisation inflows are likely to be one of the key drivers for the market in the coming months," said Karol Zaluski, chief FX dealer at ING bank in Warsaw.

MARKET LEADER

PKO, which has a market value of some 54.9 billion zlotys, reported a 40 percent rise in earnings last year, relying on its vast retail network and state backing to outdistance local, mostly foreign-owned rivals.

It has also said it is continuing to look for potential targets after losing out in the race for smaller rival Bank Zachodni WBK, put up for sale by troubled Allied Irish Banks and snapped up by the euro zone's largest lender, Santander.

Poland hopes privatisation income will help it reduce a public finance deficit that topped 100 billion zlotys, or some 8 percent of gross domestic product, last year.

However, several of its largest privatisations in recent months have stumbled, including the sale of utilities Enea and Energa.

Grad also said on Tuesday the ministry may extend the March 31 deadline for a deal with France's EdF to buy control of Enea.

A further sale of state shares in insurer PZU will not take place this year, Grad said. (Additional reporting by Dagmara Leszkowicz, editing by Jon Loades-Carter and Hans Peters) ($1=2.832 Zloty)

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