Citigroup may soon make a bid for Grupa Pekao, Poland's largest commercial bank, according to banking sources in Warsaw.

Polish authorities are expected to announce in the next couple of days that they will allow Citigroup, as well as Italy's Unicredito Italiano SpA, to perform due diligence on Pekao, these sources said.

The Polish government is looking to sell its 55% stake in Pekao, which was created by the merger of Pekao with three Polish regional banks in 1996. Three percent of the government's stake is expected to go to Pekao employees.

Pekao has nearly 600 branches and an estimated $15 billion of assets, or about 20% of total Polish banking assets. Last year an initial public offering valued the bank at $2.2 billion.

Citigroup executives could not be reached to comment. But sources in Warsaw said the government is more likely to sell its stake in Pekao to a foreign company than to Bank Handlowy, the main local contender, in which J.P. Morgan & Co. last year acquired a 16% stake.

"The government's objective is to strengthen the system by bringing a lot of players into it," said Lejb Vogelman, managing partner and head of the Warsaw office for Hunton & Williams, a Richmond, Va.-based law firm advising Citigroup on its bid for Pekao.

"It doesn't want to allow any one player to dominate the scene."

Poland has steadily allowed a range of foreign banks to buy either majority or minority interests in the country's banks, as part of a broad restructuring of the national banking system. In the most recent acquisition, Bayerische Hypo-Vereinsbank AG acquired 37% of BPH Bank, a Wroclaw-based regional institution.

Poland has largely escaped any real fallout from the collapse of the Russian financial system last year, and now has one of Europe's fastest- growing economies.

As a result, the country is of increasing interest to both foreign and U.S. banking companies, including Citigroup, BankAmerica Corp., J.P. Morgan, Bankers Trust Corp., and Chase Manhattan Corp. GE Capital, the captive finance arm of General Electric Co., recently bought a bank in Poland. And General Motors, the U.S. automotive giant, is reported to be interested in making a similar move.

Among U.S. banking companies, Citigroup has the largest presence and is the only institution to engage in both retail and corporate banking. Citibank opened its first branch in Warsaw in 1991 and has since established offices in Gydnia, Wroclaw, Katowice, and Poznan.

Citigroup has been steadily expanding across Eastern Europe. Last year it opened a banking unit in the Ukraine and bought Europai Kereskedelmi Bank, a Budapest-based corporate bank with $266 million of assets and six branches.

Both J.P. Morgan and BankAmerica opened Polish banking subsidiaries last year.

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