Italy''s Unicredito Italiano SpA (UniCredit) will sell a 66-per cent stake in Poland''s third biggest bank, BPH, to GE Money for €625.5 million ($861.2 million). The sale means the regulatory authorities will allow UniCredit, which also owns Poland''s number two lender Pekao, to merge its two local units by year''s end. The deal needs approval from Polish regulators.

The Italian group had promised Poland''s conservative government it would sell the BPH brand, 200 of its 485 branches and other assets, as a condition for completing BPH''s tie-up with Pekao, which would become Poland''s largest bank in terms of assets.

The price suggests that UniCredit was in a hurry to sell; analysts had expected the group to get €1 billion to €1.5 billion from the deal.

To appease the regulators, the Italian lender earlier sold Croatian HVB Splitska Banka, the country''s fourth-largest bank, to French rival Société Générale SA for €1 billion.

After Polish regulators refused to clear at UniCredit''s plans to merge the country''s second- and third-biggest banks, UniCredit agreed to sell 200 BPH branches and not retrench any bankers until the second quarter of 2008.

The GE acquisition includes 49.9 per cent of the BPH mutual fund unit, which has €1.8 billion of assets under management. The 200 branches represent about 66 per cent of BPH itself and have assets of €2.2 billion, net loans of €1.4 billion, deposits of €1.2 billion, and shareholders'' equity of €400 million

All figures are for end-2006. The deal will be closed in end-2007 after the remaining part of Bank BPH is merged into Bank Pekao, which is expected to be complete by October.

The stake sold - 200 branches - had a net profit of €7 million against the €324 million profit of the 285 branches that Unicredito kept. Additionally, the part sold had a cost to income ratio of 86 per cent against 35.3 per cent for the branches the Italian bank kept. The total assets in the remaining part of BPH bank, which will be merged with Pekao, totalled €14.7 billion.

GE already has 130 GE Money Bank outlets in Poland. It seems to be banking on Eastern, rather than Western Europe. Last month, the conglomerate announced an auction of its 36 retail Money Bank outlets in Austria, after they showed a return on equity of just 10 per cent, half of the minimum GE demands. Its Austrian operations employed 600 bankers, had 200,000 customers representing assets of €1.2 billion.

The company also wants to sell its German Money Bank outlets after it failed to become the country''s biggest retail bank, attracting just half a million customers.

GE sold its reinsurance business to Swiss Re AG for $7.8 billion last year. Analysts say that GE regularly reviews the performance of individual units, and divests underperforming subsidiaries.