Today, the details about the Friday purchase of the Greek agricultural bank's healthy part by the Bank of Piraeus, became clear.
What is Piraeus buying? Liabilities amounted to 21.4 billion euro, of which 14.3 billion are deposits, 6.7 billion are debts to banks and 0.4 billion are other types of obligations. Assets amount to 14.7 billion euro, of which 10.6 billion are loans and the remaining 4.2 billion are other types of assets. The difference between assets and liabilities of the Greek agricultural bank ATE, which amounts to 6.7 billion euro, will be covered by the Greek Fund for financial stability. The Fund will pay an additional half a billion euro to Piraeus Bank, to ensure that the total capitalization of the new institution will be above the minimum level of 8%, estimated according to data from March 2012.
Piraeus Bank's consultant for the purchase of ATE's healthy part is the company Lazard Frères. The new financial institution holds 19 per cent of the deposits in the Greek banking market and 16 per cent of the loans. The credits-deposits index is improving registering 124%. The structure of both loans, where 26 per cent are residential loans, and deposits, of which 28 per cent are savings, has improved. The price Piraeus has paid to buy the healthy part of the Greek agricultural bank is 95 million, while the state has "supported" the deal with 7.2 billion euro.
The total volume of work will reach 155 million euro in the first three years, then this amount will be the annual turnover of the new bank after taxation. Total assets are 74 billion euro, deposits amount to 35 billion euro and loans are worth 44 billion euro. It will operate with 17 thousand employees in 1,230 bank branches in nine more countries besides Greece.
The deal annoyed the Greek agricultural bank's employees, who are now on strike and have announced consecutive 24-hour strikes, starting tomorrow, and requested meetings with Finance Minister Yiannis Stournaras and Minister of Labour Yiannis Vroutsis. The main demand of the bank employees is related to the bank's insurance fund and the one-off benefits payment, given by the mutual fund.
This is the first major banking transaction since the beginning of the economic crisis in Greece. Piraeus analysts believe it will be a very good message to Greek creditors, who, in the last two years, have been emphasizing the need for consolidation of the Greek banking system. The parameters of the transaction have been developed by the consulting companies Alvarez & Marsal and Bain, which were hired by the government and the Bank of Greece. According to them, the Greek agricultural bank ATE had been threatened by bankruptcy and the only chance for it to be rescued was a merger with one of the four major local banks. Experts from the European Central Bank have also agreed with this conclusion.
Piraeus Bank's offer was the best because it is the only one guaranteeing that all jobs at ATE will be saved. The acquisition will be made under a full guarantee on deposits and the interests of ATE's clients, who are mainly farmers in the country. The Bank of Piraeus has pledged to present specific proposals, in coming weeks, for the agricultural development in Greece. ATE's unhealthy part will be liquidated, according to Greek law, and its licence has already been taken.
An interesting detail surrounding the deal is that loans to political parties, given by the Greek agricultural bank, will not be written off, but they will be transferred to Piraeus's portfolio. Party loans are payable and therefore are part of the healthy ATE. The issue caused huge media interest, since otherwise party loans would have been transferred to the shoulders of ordinary taxpayers.
Among the parties, New Democracy owes the most - 120 million, of which 105 million to ATE and which has to be repaid by 2013, and 15 million to Piraeus Bank, which is due by 2015. PASOK owes 111.8 million euro, of which 968,000 to ATE and which has to be repaid by 2013, 10 million to Marfin Bank, due by 2015 and 5 million to Piraeus Bank, which has to be repaid by 2015. SYRIZA owes 6 million euro to the National Bank of Greece by 2014 and the Greek Communist Party owes 4,402,054 to the same bank, which should have been repaid by 2010.