National Bank (NBG) has agreed to sell 90 percent of its subsidiary Ethniki Insurance to private equity group CVC Capital Partners in a key strategic move for the lender as it reported a rise in earnings last year.
The equivalent nominal consideration corresponding to 100 percent of Ethniki Insurance amounts to 505 million euros, including an “earn-out” payment of up to 120 million euros, which will be subject to meeting targets for the bancassurance channel of NBG by 2026, the bank said in a statement. The transaction includes a 15-year Bancassurance partnership.
The transaction is capital accretive for NBG (c. 60 bps in the Total Capital Ratio as of 31.12.2020).
The successful completion of this transaction will allow NBG to fulfill the commitment made under the Restructuring Plan agreed between the Hellenic Republic and the European Commission following the receipt of state aid by NBG in 2012.
“We have made solid progress towards executing two key strategic transactions; the sale of our insurance subsidiary and the Frontier securitization,” said Paul Mylonas, CEO of NBG, in a statement.
“As regards the latter, we have managed to absorb in the full year 2020 profit and loss the provisions required for the reclassification of the Frontier portfolio as HFS without the need for a hive down. We aim to complete the transaction in the next few months,” he added.
NBG, 40 percent owned by the country's bank rescue fund HFSF, said net profit from continued operations reached 591 million euros versus net earnings of 470 million euros in 2019.
Loan impairments of 1.1 billion euros, or about 400bps over net loans in 2020 incorporate the credit risk charges related to Covid-19 and the Frontier securitization.
“Despite Covid-19 headwinds, our full year 2020 financial results were strong. At the operating level, before trading gains and non-recurring provisions related to Covid-19 and Frontier, group core operating profit increased by 41 percent year-on-year reaching 328 million euros, reflecting resilience in core income and stringent cost cutting yielding an annual cost saving of circa 150 million euros over the past two years,” Mylonas highlighted.
Following the expiry of the loan moratoria periods last year, the bank said it is actively pushing for step-up solutions provided to customers that continue to experience economic difficulties due to Covid-19, in order to avoid a “cliff effect” on their payments. These measures are complemented by the successful state subsidy program “Gefyra”, where 1.4 billion euros of NBG mortgage clients have been included.
“Looking forward into 2021, economic conditions will improve and we will continue to leverage on our successful Transformation Program, currently in its 3rd year, in order to move our NPE ratio near mid-single digits in 2022, permitting us to focus on core business expansion and opportunities. The ongoing migration to digital banking facilitates a more cost-efficient and flexible operating mode,” added the CEO.