Piraeus Bank SA announced a partnership with Sweden's Intrum AB for the management of nonperforming exposures and real estate-owned assets, as the Greek lender swung to profit in the first quarter from losses in the same period in 2018.
Under the deal, Piraeus Bank will sell 80% of its internal recovery banking unit to Intrum for €328 million and retain a 20% stake in the entity, which will be transformed into a new servicing platform for nonperforming assets. The deal values the platform at €410 million.
The new platform will exclusively manage Piraeus Bank's current €27 billion NPE stock and all new inflows for an initial 10-year period. The companies will form a second servicing platform with the same ownership structure for the lender's real estate-owned assets of €1 billion, along with new inflows.
The two platforms, which will be headed by CEO George Georgakopoulos, can also take on third-party real estate-owned assets. The deal will is expected to close Oct. 1, subject to customary conditions and regulatory approvals, including clearance from the Hellenic Financial Stability Fund.
Intrum said it would fully fund the acquisition through existing facilities. Of the purchase price, €296 million will be paid in cash upon deal closing, while the remainder is subject to the completion of certain financial targets after 2022.
The Stockholm-based company noted that the deal would significantly increase its EPS by roughly 10% in 2020.
UBS Europe SE and PricewaterhouseCoopers Business Solutions SA serve as financial advisers to Piraeus Bank, with Milbank LLP as international legal counsel and Karatzas & Partners Law Firm as Greek legal counsel. Octane serves as licensing adviser to the new servicing platform.
Barclays Bank PLC, through its investment bank, and Goldman Sachs act as financial advisers to Intrum, with Zepos & Yannopoulos and White & Case as legal advisers.
Piraeus Bank reported first-quarter net result attributable to shareholders from continuing operations of €14 million, compared with a year-ago loss of €79 million.
Net interest income rose on a yearly basis to €360 million from €353 million, while net fees and commission income was flat over the period at €69 million. Net trading and investment securities income dropped to €4 million from €13 million a year ago.
The Athens-based lender incurred total operating costs of €231 million in the quarter, down from €383 million a year before. Impairment losses on loans, meanwhile, came in at €174 million, up year over year from €163 million.
The bank's NPE in Greece totaled €26.0 billion as of March-end, down from €26.5 billion as of 2018-end and €31.0 billion a year earlier. Piraeus Bank said it is on track to meeting its 2019 target for reducing NPEs by €3.5 billion, adding that its sale of NPE portfolios with a gross book value of €1.2 billion will be concluded soon.
Its pro forma common equity Tier 1 ratio on a fully loaded basis increased to 11.0% at March-end from 10.9% at 2018-end.
Piraeus Bank also launched a new five-year strategy, under which it will focus on de-risking of legacy assets, spur asset growth and improve efficiency and simplification.
By 2023, the bank aims to have a single-digit NPE ratio, a cost-to-income ratio in the low 40s, a return on tangible equity of a high single digit and a regulatory capital 200 basis points more than its expected requirement.