PZU SA, Poland’s biggest insurer, is in talks to buy two banks to form one of the nation’s largest lending groups after agreeing to acquire a stake in Alior Bank SA for 1.63 billion zloty ($431 million).

“We want to create one of Poland’s top-five lenders,” PZU Chief Executive Officer Andrzej Klesyk told reporters Saturday, declining to name the targets. The Alior purchase is the “first step for us to consolidate the Polish banking industry.”

With Polish interest rates at a record low, government- controlled PZU is expanding beyond its core business to boost returns. General Electric Co. and Raiffeisen Bank International AG have said they are looking to sell their units in Poland as they reorganize their businesses, creating an opportunity for Polish investors, backed by the government, to expand as industry profits peak.

PZU wants to buy two banks this year and merge them in two to three years. While Klesyk said PZU plans to keep less than 50 percent in the banking group it creates, it will structure its holdings to retain control.

Under the preliminary agreement it announced Saturday, it will buy a 25.3 percent Alior stake for 89.25 zloty a share, from the bank’s biggest shareholder, Carlo TassaraSpA. Alior CEO Wojciech Sobieraj may eventually lead the insurer’s banking unit, Klesyk told reporters on Saturday.

Profit Hit
Alior shares fell as much as 4.8 percent to a three-week low and traded down 2.7 percent at 90.50 zloty as of 12:00 p.m. in Warsaw.

Alior is Poland’s 10th-largest bank by assets and owns the fourth-biggest branch network. Created in 2008, the Warsaw-based lender’s profit rose 33 percent in the first quarter from a year earlier to 91.2 million zloty [$2.41 million]. Alior is among the country’s fastest-growing lenders as industry profits reached a record last year.

Polish lenders are now under pressure from a reduction in card fees and higher contributions to the bankruptcy fund, which may cut the industry’s profit this year, according to the country’s largest lenders, PKO Bank Polski SA and Bank Pekao SA.

Efforts to draw buyers to banks may be complicated by a dispute between lenders and the state over how to help borrowers saddled with Swiss-franc debt.

Mortgage Risks

A victory by opposition-backed Andrzej Duda in last week’s presidential elections increased the chances his Law & Justice party will be voted into government this fall. The new leadership could burden the financial industry with levies and rules as well as demands to pay for the conversion of mortgage loans into zloty.

Klesyk said he “couldn’t imagine” the insurer taking on the risk of those loans.

Polish financial market regulator Andrzej Jakubiak, favors that sellers keep those loan packages, he said in an interview with Bloomberg last week. He called on banks to resolve their $38 billion Swiss franc-mortgage burden or face greater capital requirements and extended caps on dividends.

PZU has the Polish government’s support to buy banking units of companies that exit Poland, Polish Treasury Minister Wlodzimierz Karpinski said in an e-mailed statement on Saturday.

“After years of importing capital and know-how from foreign banks, the time for the ‘repolonization’ of the financial industry has come,” Karpinski said. “We are using and we will use opportunities to buy interesting banking assets from foreign owners exiting Poland.”

While dismissing suggestions of following political orders, Klesyk said the company he leads will earn money” on such plan. PZU also has more chances than any foreign investor to get all needed approvals to consolidate the industry.

“If there is anyone well positioned to consolidate banks in Poland, it’s PZU,” he said.