pko bp initial public offering
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PKO BP INITIAL PUBLIC OFFERING
CONFIDENTIAL | 18 NOVEMBER 2004
THESE MATERIALS MAY NOT BE USED OR RELIED UPON FOR ANY PURPOSE OTHER THAN AS SPECIFICALLY CONTEMPLATED BY A WRITTEN AGREEMENT WITH CREDIT SUISSE FIRST BOSTON.
PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION
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The largest ever equity offering in Central & Eastern Europe – $2.3bn
The second largest European IPO to date in 2004
Largest Financial Institutions IPO in 2004
First / only Polish bank privatised without a strategic investor, presenting a national champion to a global investor base
CSFB’s 3rd Central & Eastern European IPO in 2004
CSFB is #1 in CEE Equity issuance in the last 3 years with c. 50% market share
The Largest Ever CEE Equity Offering
The IPO of PKO BP is a landmark transaction in CEE
3
Transaction Highlights The transaction was heavily oversubscribed
Polish retail offering oversubscribed by more than 10x
International offering more than 10x covered
Offer size increased by more than 25% the day before pricing
IPO priced at the top of the price range
Broad global investor participation
Attractive valuation achieved by The State Treasury of Poland, who retain a 52% stake
IPO priced at a 5% discount to the four largest CEE listed banks
The IPO represents nearly 90% of the Polish privatization budget for 2004
4
Transaction StructureOffering Structure
Issuer PKO Bank Polski
Seller The State Treasury of Poland, retain 52%
Pricing Date 3 November 2004
First Trading Date 10 November 2004
Shares Offered 377 million shares, all secondary
Reverse Greenshoe Reverse Greenshoe option covering 6.5% of Offering (all secondary)
Price Range
Offer Price
PLN 17.5-20.5 per share
PLN 20.5 per share
Offer Size PLN 7.6 billion (US$ 2.3 billion)
Pre Offer Post OfferShareholders Polish Treasury 100.0% 52%
Employees 0.0 10%
Free Float 0.0 38%
Tranche Sizes Polish retail: 42%
Polish institutions: 35%
International institutions: 23%
Listing Warsaw Stock Exchange (No GDRs)
On 3 November 2004, CSFB, acting as Sole Global Coordinator, completed the $2.3 billion Privatisation of PKO BP, the largest bank in Poland
November 3, 2004
PLN 7.6 billion$2.3 billion
Initial Public Offering
Sole Global Coordinator
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Investment Highlights - Poland
Poland is the largest new EU member and has the least penetrated banking market among the major markets
Source: EIU, European Central Bank, National Banks as at 31 December 2003Note: 1) 2002 figures for bank assets
Source: EIU, European Central Bank, National Banks as at 31 December 2003Note: 1) 2002 figures for loans
33
83
85
210
10,523
Slovakia
Hungary
Czech Republic
Poland
EU
5.4
10.1
10.3
38.2
381
Slovakia
Hungary
Czech Republic
Poland
EU
Population (millions) GDP ($billions)
Bank Assets / GDP (%) Loans / GDP (%)
60
86
93
117
246
Poland
Hungary
Slovakia
Czech Republic
EU(1)
37
37
43
60
114
Slovakia
Poland
Czech Republic
Hungary
EU(1)
Source: EIU Source: EIU
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Investment Highlights - PKO BP
Largest Bank in Poland
Leading market position
Profitable track record
Assets of PLN 86.1billion (US$23.0bn)
No. 1 in loans and deposits
No. 1 in cash payment cards issued
Half of entire banking sector’s earnings in 2003
20.7% Return on Equity
Nationwide distribution
network – largest in Poland
1,222 branches, 3,140 agencies, 1,785 ATMs
Over 5.3 million retail and over 400,000 corporate accounts
Financial strength and proven risk
management
Diversified loan portfolio
Strongly capitalised and improving asset quality
PKO BP: Poised for profitable growth
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Equity Capital Market Context
Challenging European IPO market
Investors highly price sensitive and selective in their investment decisions
Mixed aftermarket performance of recently priced IPOs
Macro-environmental uncertainties
US elections on the day before pricing
Unsettled political environment in Poland
Limited knowledge of Poland among non-GEM & EMEA global investor base
Structural expensiveness of Polish market
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Investor Education CSFB’s research team presented the investment case of PKO to over 125 investors in 17 cities (8 in Europe and 9 in the US)
in one-on-one meetings, group meetings and conference calls
Thorough sales force preparation prior to launch and continuous updates to drive momentum
Broadest possible investor base addressed
Dedicated CEE & GEM Investors
Pan-European Investors
Please note: The CSFB Research Department does not form part of the marketing team on any potential transaction. If the CSFB Research Department should issue a research report the only role of the research analyst is to provide information to the market on the issuer and the issuer’s sector
US Investor EducationAmsterdam
Frankfurt
London
Boston
DublinNew York
Seattle
European Investor Education
Paris
Milan
San Francisco
San Diego
Vienna
Wilmington
StockholmDenver
Miami
Zurich
Texas
Global Investors
Financial Specialists
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Key Investor Themes During Investor Education Key Fundamental Themes
Recognition of PKO BP’s leading franchise
Retail exposure
Growth potential of revenues
Favourable economic backdrop
High ROE
Acknowledgement that PKO BP is a “must own” stock locally
Breadth of opinion on choice of other appropriate benchmarks
Concern that Polish banking sector is structurally expensive
Valuation sensitivity was apparent among both domestic and international institutions
Costs and ability to control / cut them
Market share erosion
Management credibility / Government control
Incentivisation of senior management
Excess capitalisation
Sustainability of margins
Lack of GDR
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Addressing Investor ConcernsConcerns Mitigant
Structure of IPO Potential for clawback Lack of GDR Reverse Greenshoe
Managed investor expectations Early education and particular assistance
with access to Polish market Over $500m placed internationally
Cost Control High staffing levels High cost/ income ratio Lack of incentives for senior
management
Focus on revenue story Achievements to date clearly communicated Potential for further operational efficiencies
communicated Targets emphasised by management Highly energised professional Board - a
number under 40
Government Relationship
Majority ownership/influence Possibility of management changes
with Government changes
Government representation on roadshow Government openly supportive of
management team and their targets Marketing strategy promoted management's
clear credibility and operational autonomy
Valuation Structural premium in Polish market Tight discount to CEE peers
Marshalling investor focus on unique characteristics of Poland
Focus on huge growth opportunity in under-penetrated market
Focused investors on Pekao SA as principal benchmark
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International Roadshow Schedule
Aberdeen AM Aeneas Capital
AIG Global Investment Alliance Capital
Atlantic CM Barclays Private Clients
Baring AM BDT
Black Ant Group Cantillon CM
Capital International (2)Charlemagne Capital
Citigroup AM Clariden Bank
ConseqCredit Suisse AM Deephaven CM Deutsche AM Elliott Advisors Everest Capital
F&C AM Fidelity Investment
Fleming Family & Partners Fortis Investments
Fortune FM Gartmore IM Genesis IM
GLG Partners LP Global AM
Goldman Sachs AMGovt of Singapore Inv.
Griffin CMHolte Capital
Investicni Kapitalova S.John A Levin & Co JP Morgan Fleming
Jupiter AM Lansdowne Partners
Lazard AM Legg Mason Investments
London & MercantileLondon & PacificMarble Bar AM
Meditor CMMerrill Lynch IM
Metropole GestionMondrian
Moore Europe CMMT Thaler IMNeptune IMNewton IMNomura AM
Comprehensive roadshow with management presenting to nearly 200 investors
240 orders in the book with high-quality international investors taking up significant stakes
Over 90% hit ratio
Standard Pacific Capital
West Coast
Batterymarch FMBoston Company AM
Boston OverseasEmerging Markets Investors
Evergreen IMFidelityMFS IM
Oechsle Int Advisors Pioneer IM
Putnam InvestmentsState Street Global
Wellington
Boston
AIG Global InvesmentAmerican Century IM
Artha Capital Blue Ridge Capital
Citadel IMClay Finlay
Deutsche AMDuquesneDuPont CM
Emerging Sovereign GroupFederated Global IM
Gilder Gagnon Howe & CoGLS Capital
HBK InvestmentsJulius Baer IM
Kingdon Capital MmgmtLazard AM
Lord Abbett & CoMorgan Stanley IM
Oaktree CMPequot Capital Partners
Rohatyn GroupSatellite AM
Shoreline/Victoire FinanceSierra Global Mgmt
Sigma CapitalSunova Capital
Third Point MgmtTiedemann
United States TrustViking Global Investors
Wasatch Advisors
New York
ABN Amro AMDelta Lloyd Verzekeringen
INGLombard Odier Inst. AM
Stichting Shell Pensioenfonds
Amsterdam
Sigma CM Sloane Robinson IM
Standard Life Investments Swiss ReSydbank
Thames River CapitalTheorema AM
Toscafund T Rowe Price
UBSWest Asset Management
ZBI Europe
Odey AMOch-ZiffOxburghPictet AM
Partner Fund Management Pioneer Alternative IM
Plutus CapitalPolygon Inv. Partners
Principal Global InvestorsPutnam Investments
Schroder IMSeneca
London London London
AnovaBank Leu
Clariden BankFortune Management
Julius BaerMC TrustcoSwiss Re
Vontobel AMUBS Global AM
Zurcher Kantonalbank
Zurich
Activest InvestmentAllianz Dresdner AM
AXA Investment ManagersDeka InvestmentDWS InvestmentUnion Investment
Frankfurt
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Demand Dynamics Huge media interest and speculation… more than 500,000 retail investors queuing
for shares
The retail offering comprised 2 tranches
– An offering to bank customers
– An offer open to all retail investors
Retail investors entitled to a price discount as well as bonus shares in a year’s time
Polish institutional demand fuelled by pension fund growth
Pension funds structurally required to invest in PKO BP
PKO BP represents the highest market capitalisation stock in the WIG
Broad global investor participation
Education of investors coupled with relentless marketing resulted in successful cross-selling
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CSFB’s unique distribution platform resulted in superior execution and ultimately the best pricing for the government
Unique Marketing Strategy Maximized Demand
Banks Specialist Sales
Europe US
CEE & GEM Specialist Sales
Financial Institution Specialists
GEM + EMEA Funds
Europe US
Global Salesforces
Europe US
Investor Education: Banks Research Team & EMEA Research Team
European Funds
Sector Other
US Funds
Sector Other
Global Funds
Sector Other
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72 86 104 115 148
242
331
553
890
0m
100m
200m
300m
400m
500m
600m
700m
800m
900m
1,000m
22 Oct 25 Oct 26 Oct 27 Oct 28 Oct 29 Oct 1 Nov 2 Nov 3 Nov
Cum
ulat
ive
Dem
and
(sha
res)
Offering generated significant excitement amongst investors and stimulated demand from a broad range of investor constituencies
Polish specialists (EMEA Funds)
CEE market specialists (GEM + EMEA Funds)
Financial Specialists
Pan-European Funds
Global Funds
Extremely high quality international book of demand including both dedicated EMEA and general funds in Europe and the US
Gross demand of 890 million shares / $5.4 bn
International Demand Analysis
Largest 15 Orders
Evolution of Demand
Tranche size
Name Country Demand $ m
1 Global Long Fund UK 2122 Global Long Fund UK 2013 Global Long Fund UK 1314 EMEA Long Fund Germany 1155 EMEA Long Fund UK 1106 GEM Long Fund USA 1007 Hedge Fund UK 1008 Value Long Fund UK 1009 Global Long Fund Italy 100
10 Financial Specialist UK 10011 EMEA Long Fund UK 9712 Global Long Fund UK 9413 Global Long Fund UK 9214 EMEA Long Fund UK 8815 EMEA Long Fund Germany 86
Total 1,726
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Breakdown of International Demand
2,1792,059
839
307
0m
500m
1,000m
1,500m
2,000m
2,500m
Tier 1 Tier 2 Tier 3 Tier 4
Cum
ulat
ive
Dem
and
($ m
illio
n)
UK52%
US25%
RoE21%
RoW2%
Allocation by Region Breakdown by Tier
Breakdown by Investor Orientation
Note: Tier 1 represent the highest quality institutions
CEE Funds30%
GEM Funds20%
Pan-European Funds20%
Global Funds15%
Sector Funds10%
Other5%
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Pricing and Allocation The decision to price the transaction at the top of the range was based on:
Significant oversubscription levels
The removal of price limits from most investors by the end of the roadshow
Given oversubscription levels, it was imperative to distinguish between aggregate and allocable demand This was particularly challenging given the high quality of international order book
Allocation strategy designed to create an investor base comprising long term holders with appetite to buy more in the after market
CSFB successfully managed international investors expectations so that under allocation was widely expected
Retail allocation needed to take account of the leverage provided by many brokers
The demand tension created by our allocation strategy stimulated significant secondary market flow from international investors
17
Price Performance
Right pricing strategy secured strong aftermarket performance
Stock closed at PLN24.50 on the first day trading, +19.5% above the issue price Offering priced at a 12.2x ‘05E P/E, 2.69x P/BV Currently trading at 14.6x ‘05E P/E, 3.21x P/BV
Trading activity in PKO BP shares set a new record on the Warsaw Stock Exchange Highest turnover for a single stock Highest session turnover for all companies
Note: CEE Average includes: Pekao, OTP, Bank BPH and Komercni BankaMarket data as at 15 November, IBES estimates
(12.0%)
22.3%
13.8% 12.2%
(5.0%)(8.1%)
5.2%
35.2%
-25%
-15%
-5%
5%
15%
25%
35%
PekaoOTP
CEE Average
Erste Bank
Offer Price Today
Pricing Premium / (Discount)Premium / (Discount) based on ‘05E P/E
Note: Volume adjusted for double counting in the Warsaw Stock ExchangeMarket data as at 15 November, Bloomberg
PLN20.0
PLN20.5
PLN21.0
PLN21.5
PLN22.0
PLN22.5
PLN23.0
PLN23.5
PLN24.0
PLN24.5
PLN25.0
10-Nov-04 12-Nov-04 15-Nov-04
Sha
re P
rice
0
5
10
15
20
25
30
35
Volum
e in Millions
Volume PKO BP
Price Performance
Offer Price
18
Implications for Further CEE Equity Issuance
Significant investor appetite for CEE Equities
Continued belief in the economic fundamentals of the region
EU convergence platform provides defensive CEE market exposure
Continued theme of non-specialist investors focusing on CEE as they
continue to chase outperformance
19
CSFB – First Class IPO Execution Platform Bookrunner of 10 IPOs in 2004 YTD, re-opening the
IPO market in a number of countries and sectors
Consistent delivery to vendors by pricing every single IPO within the initially set price range
Priced more IPOs than any other bank (in absolute and percentage terms) at or above the mid-point of the price range
Better aftermarket than any other lead manager
CSFB over the last 5 years has led more IPOs in Europe and globally than any other bank
March 2004
US$127m
IPOJoint Global
Co-ordinator & Bookrunner
February 2004
US$167m
IPO
Bookrunner
March 2004
US$103m
IPO
Bookrunner
March 2004
€217m
IPO
Global Co-ordinator & Bookrunner
March 2004
CHF206m
IPOJoint Global
Co-ordinator & Bookrunner
April 2004
€456m
IPO
Joint Global Co-ordinator &
Bookrunner
June 2004
€1,451m
IPO
Joint GlobalCo-ordinator &
Bookrunner
October 2004
US$194m
IPO
Global Co-ordinator & Bookrunner
November 2004
US$2,300m
IPOSole Global
Co-ordinator & Bookrunner
September 2004
CHF180m
IPO
Bookrunner
CSFB led IPOs in 2004
CSFB is #1 in European IPO issuance in 2004 and has consistently met vendor expectationsSource: Bondware and Datastream
1234
7
0.0%0.0%12.5%
33.3%33.3%50.0%
70.0%
01234567
# of
IPO
s
0%10%20%30%40%50%60%70%
% o
f IP
Os
CSFB ML MS UBS GS CITI DB
# of IPOs Executed in 2004 YTD
# IPOs Priced at or Above Range Midpoint
# of IPOs Priced At or Above Mid Point of Price Range% of IPOs Priced At or Above Mid Point of Price Range
688
1010
CSFB MS GS ML UBS
Premium/Discount to Midpoint of Range
1.6%-2.8% -4.5% -6.0% -6.6% -7.0% -9.3%
CSFB MS ML UBS DB Citi GS
20
CSFB – No 1 CEE Equity Franchise
CSFB has executed more equity offerings than any other bank in CEE over the last 3 years
Source: Bondware; tables include CEE equity offerings >$50m; since November 2001
US$107m ABB
April ‘04
US$194m IPO
October ‘04
US$2,300m IPO
November ‘04
US$127mIPO
March ‘04
US$825m ABB
December ‘03
US$267m Block
June ‘03
US$407m ABB
November ‘03
US$201mABB
April ‘03
US$147mABB
February ‘02
CEE Equity Issuance Last 3 Years
Rank Manager Amt (US$ m) # Deals %Share
1 Credit Suisse First Boston 4,000 9 47.12 Morgan Stanley 1,187 2 14.0
3 UBS 793 4 9.3
4 ING 727 6 8.6
5 Citigroup 495 2 5.8
Other 1,295 6 15.2
Total 8,497 29 100.0
21
CSFB – Led the way in CEE Equity Offerings in 2003
CSFB was named the best Central and East European Equity Bookrunner by Euroweek and led the Deal of the Year (Cesky Telecom) in 2003
Euroweek
Best Central & Eastern European Equity Bookrunner
2003
Euroweek
Central & Eastern European Equity Deal
of the Year Cesky Telecom
2003CEE 2003 Equity Issuance
Source: Bondware
Rank Bookrunner Am't (US$m) # of Issues % Mkt. Share1 Credit Suisse First Boston 1,286.99 4 42.902 UBS 625.51 2 20.853 Morgan Stanley 412.28 1 13.744 ING 265.65 5 8.865 Citigroup 158.55 2 5.296 HVB Group 78.85 3 2.637 Merrill Lynch & Co 53.77 1 1.798 Deutsche Bank 50.94 1 1.709 ConCorde Securities Ltd 48.39 1 1.61
10 PKO Bank Polski SA 12.15 1 0.41Other 6.64 2 0.22Total 2,999.73 22 100.00
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