As part of further expansion, Eurobank Ergasias announced merger with Grivalia Properties from Greece. After the merger, the group will have the highest overall capital indicator on the Greek market – 19%.
Merger will improve the performance of Eurobank Ergasias in a number of ways. In addition to being the best capitalized bank in Greece, customer service will be enhanced, further growth will be encouraged, and support will be given to economic activities in Greece and the countries of South Eastern Europe in which it operates. Also, this merger will allow a significant reduction in problem exposures (NPEs) to approximately 15% by the end of 2019, ie reaching the European average and reducing this indicator to a single digit by 2021.
Joint equity, Level 1 (CET1) will be further increased to 13.8%. The Group, with strong sustained revenues, expects the amount of ROtE (return on equity excluding intangible assets) from over 10% in 2020. Additionally, the income base will be diversified, with around 30% of operating revenues being generated from international business and real estate activities.
Further exploration of potential options for consolidation in South East Europe is expected – Eurobank has already made a significant step in this direction by the announced agreement on the acquisition of the Bulgarian branch of Piraeus Bank, which will make Eurobank Bulgaria the third largest bank in the country.
The merger was unanimously adopted and recommended by both Steering Committees.
Eurobank Ergasias Executive Director Fokion Karavias stated on the occasion of the merger:
“The proposed merger with Grivalia is a milestone for Eurobank. It will enable the bank to achieve the highest total capital ratio in Greece and accelerate the reduction of its problematic exposures (NPEs) through large securitization of about seven billion euros and other initiatives. Considering that we have largely solved our previous exposure, we will be able to fully pay attention to providing services to our clients, and to grow again and support economic activity in Greece and South-East Europe. This will allow us to plan the NPE ratio of around 15% by the end of 2019, i.e. two years earlier than the plan submitted to the Unified Supervision Mechanism (SSM) within the European Central Bank, which will prepare the ground for a single-digit rate by 2021. ”
The merger will also have added value in terms of improving real estate services thanks to the Grivalia team led by George Crisikos. He will be nominated for the non-executive Vice-President of the Eurobank Ergasias Board of Governors and will join his Strategic Planning Committee.
“The proposed transaction represents a unique opportunity for Grivalia and its shareholders.
Shareholders of Grivalia will gain a significant share in the New Group, which will become the undisputed leader in the Greek banking sector in terms of profitability, capital and asset quality, with solid pre-financing revenues and capital generation capacity.
The new group has been given a unique opportunity to provide an improved rating within the Greek banking system in the medium term. Likewise, the transaction will improve Grivalia’s business position by allowing direct access to a large number of real estate and addressing structural shortcomings caused by recent changes in real estate taxation in Greece.
Shareholders of Grivalia will also significantly improve the liquidity of their ownership. I am pleased with the prospects of the New Group and our shareholders, and together with our management team, I remain committed to further business start-ups. ”
Fairfax Financial Holdings Limited, the current owner of 18.23% of Eurobank and 51.43% of Grivalia properties, will be the largest shareholder of the new entity created by the concentration, with a share of 32.93% of shares.
It is planned that the balances of the two entities will merged with the situation on December 31, 2018, and that the merger will end on April 24 next year when it will start trading on the shares of the newly formed entity.