(Provides reaction from ECB official.)
ATHENS–Greece’s Eurobank Ergasias SA (EUROB.AT) declared Monday that it will get real-estate enterprise Grivalia Properties REIC (GRIV.AT), in the first step of a approach to make a so-named lousy bank and deplete its pile of nonperforming loans.
The country’s third-most significant loan company by belongings mentioned it will acquire Grivalia in an all-share acquisition that values the real-estate firm at 780 million euros ($884 million), strengthening its money foundation by close to EUR900 million. The merger will be completed by April, the bank mentioned.
Eurobank mentioned it would reduce its ratio of nonperforming loans to 15% by the finish of 2019 and decrease it to single digits by 2021.
Fairfax Financial Holdings Ltd., which presently holds 18.2% and 51.four% in Eurobank and Grivalia respectively, will turn into the most significant shareholder with a 32.9% stake in the merged entity. The point out bailout fund for banks’ share in Eurobank will minimize soon after the offer to 1.four%, from the 2.four% it presently owns.
Greek financial institutions have been less than hefty pressure for the past a number of months amid fears that they can not digest their mountain of lousy loans and may possibly require contemporary money. Nonperforming loans and other belongings at Greek financial institutions, which have been recapitalized a few occasions all through the country’s financial debt crisis, total close to fifty percent of their overall portfolio.
Just after the merger, Eurobank will go in advance with the generation of a lousy bank plan to transfer some EUR7 billion of its lousy loans, which are regarded as the “worst of the total sour loans,” an official from the bank mentioned.
The destructive impression on money is approximated at EUR1.1 billion to EUR1.four billion, which will be protected by the money boost from the merger as properly as a strategic investor Eurobank will find for its financial loan servicer Eurobank Financial Scheduling Providers SA.
Eurobank mentioned its approach has been authorized by the banking-supervision device of the European Central Lender. An ECB official declined to comment.
Greece’s central bank and the government’s bailout fund for financial institutions are presently doing work on two separate plans to finance a lousy bank. The major dilemma is irrespective of whether the European Fee will deem the approach lawful less than the bloc’s guidelines restricting point out assist for firms.
Eurobank mentioned each plans, if inevitably authorized, could be mixed with its nonperforming-financial loan reduction approach.
Eurobank stocks acquire eight%, although the banking stocks index is buying and selling 3.seven% increased at 1115 GMT. Greek bank stocks dropped some 40% in the very last a few months.
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