On Tuesday, July 23, the draft law of the Ministry of National Economy and Finance entitled “Sanction of the Merger and Investment Agreement from 18.7.2024 between the Financial Stability Fund and the limited liability company with the name “THRIVEST HOLDING” will be submitted to the competent parliamentary committee for processing LTD’. It is expected to be put to a vote in the plenary session of the Parliament on Friday, July 26, 2024.

According to the relevant explanatory report, the bill aims at “continuing its smooth operation Pankritia Bankas well as her Attica Bank, in which the State has already invested significantly. The bank that will emerge after the consolidation and merger of the two above banks will form the basis for the creation of a fifth banking pillar, which will ensure the existence of a more competitive banking environment, for the benefit of depositors, consumers and businesses” .

The road to the creation of a fifth banking pole – The steps before the agreement of 18 July 2024

The definitive shareholder agreement for the creation of the fifth banking pillar through the merger of Attica Bank and Pankritia Bank, which was approved by the Board of Directors of the Financial Stability Fund (HFS) at the meeting of July 18, 2024, was another milestone in the restructuring of the domestic banking system.

The HFSF was invited to contribute to the strategic development course and perspective of Attica Bank in 2021, under the guidance of the managing director Ilias E. Xirouhakis. The strategic direction of the Fund included covering the capital needs of Attica Bank, finding reliable private investors and rejecting controversial or insufficient solutions, creating the conditions that would allow the creation of the fifth banking pole and further strengthening of healthy banking competition.

The HFSF entered the equity capital of Attica Bank through the Deferred Tax Act at the end of 2021 and after the related planning gave the necessary impetus for stabilization and reconstruction. In October 2021, the HFSF and Attica Bank agreed on the Fund’s participation in the bank’s share capital increase. On December 7, 2021, the HFSF signed an agreement with the private investors TMEDE and Ellington Solutions SA, acquiring shares for the amount of 150,765,391.40 euros.

On March 17, 2022, the HFSF signed the Framework Agreement with Attica Bank, defining the framework for its corporate restructuring and modernization, following the model of other banks but with variations, as it took into account the fact that Attica Bank is not a systemic bank. The terms of the transaction were amended on January 31, 2022, with a new agreement to be signed on September 30, 2022.

In 2023, there were important developments, such as the withdrawal of Rinoa LTD – Ellington Solutions AE from the investment agreement and the signing of a new investment agreement with Thrivest Holdings LTD and Pankritia Bank for the second capital increase of Attica Bank, which was successfully completed on 26 April 2023, with the pumping of 473,346,868.50 euros, of which 329 million euros were contributed by the Fund.

According to sources from the Fund, the HFSF contributed decisively to the management of Attica Bank’s non-performing exposures, promoting their inclusion in “Herakles 3”. The Fund’s contribution to the restructuring of Attica Bank, through best corporate governance practices, strengthened transparency and accountability. The Fund provided technical assistance and oversight of the administrative structure, significantly improving the bank’s internal processes and efficiency.

More specifically, in 2023, in collaboration with Thrivest, an independent chairman with experience in risk management and corporate governance was appointed, while new independent board members were elected (after evaluation by the Fund) and the board committees were reconstituted. In addition, a new external auditor was appointed, the role of Regulatory Compliance was upgraded and close cooperation with the Audit Committee was achieved. At the same time, the role of the Corporate Secretary was upgraded, while the operation of the committees and the Board of Directors became more efficient (timely dispatch of material, quality record keeping, timely submission of supervisory reports).

Thrivest, sources from the HFSF point out, was a reliable co-investor that provided the necessary funds to complete the deal, secured the prospects for the strategic development and the new course of Attica Bank and at the same time provided the guarantees for the creation of the fifth banking pillar. in order, among other things, to support small and medium entrepreneurship through Attica Bank. Also to contribute to strengthening banking competition and the national economy in general.

More generally, the role of the HFSF, the same sources point out, in the creation of a new era for Attica Bank was catalytic, contributing significantly to the restoration of the functionality and reliability of the bank, strengthening the stability of the Greek banking sector, for the benefit of the national economy and of Greek depositors.

The agreement reached according to an information notice of the Ministry of National Economy and Finance is the result of:

  • The negotiations of the HFSF with the private investors, shareholders of the two banks (Thrivest etc.) and
  • The investigation carried out by the international investment bank JP Morgan (at the behest of the HFSF) regarding the possible interest of other investors, to participate in the share capital increase under at least the same terms as agreed with Thrivest. Thus, in parallel with the negotiation with the private investors (Thrivest) and while significant progress had been achieved on a basic agreement framework, the HFSF asked JP Morgan to “run” a process of investigating possible investment interest (from international investment houses with a large experience in such transactions) to participate in a capital increase of Attica Bank on at least the same or better terms for the Fund in relation to the framework of key investment return terms of the agreement with the private investor (as it was formulated at that time).

JP Morgan’s process ended without success as it received negative responses to participate in such an investment from all the international investment houses it approached.

Regarding the specific issue in the above letter from the governor of the Bank of Greece, it is also noted that: “Despite the efforts made by the current and previous administrations of Attica Bank and Pankritia, the search for a strategic private investor with a long-term horizon has not been successful , beyond the existing private shareholder”.

What does the agreement provide?

  1. A share capital increase of approximately 730 million euros is being carried out in Attica Bank, in which the HFSF, e-EFKA, Thrivest Holdings together with private investors will participate. It is noted that from this amount, Attica Bank will immediately repay the Greek State Tier2 bond amounting to 100 million euros, due in 2028, which if the agreement was not made, its repayment would be extremely uncertain.
  2. The share capital increase will be contributed by:
  • The HFSF amount of approximately 475 million euros,
  • e-EFKA approximately 48 million euros.

That is, the net financial contribution of the State will be approximately 423 million euros (475 million from the HFSF plus 48 from the EFKA minus 100 million which is the repayment of the bond). In addition, the State will benefit from another 44 million euros which it will not have to pay in 2025 to the new bank created after the merger. The reason is that, based on the agreement, the new scheme that will be created after the merger will waive the right that Pancreatia currently has, to activate the deferred tax procedure.

  • TMEDE 12 million euros.

3. Trhivest Holdings and private investors will contribute 200 million euros, as well as all the shares of Pancreatia Bank which is merged with Attica Bank. Therefore, in the calculations, it is obvious that in addition to the monetary amount of contribution, one should take into account that the investors also contribute substantially with the whole of the Bank of Pankritia.

It is noted that in terms of assets, Pancreatia Bank is a bank of similar size to Attica. Specifically, the assets of Attica Bank (size 2023) are 3.77 billion euros and of Pankritia 3.45 billion euros, the deposits of Pankritia are 2.6 billion euros and of Attica Bank 3.15 billion euros, while the profits before taxes for the year 2023 amounted to 90.8 million euros for Pankritia bank compared to 28.6 million euros for Attica bank. In addition, it is noted that Pancreatia Bank together with Thrivest Holding already own 9.4% of Attica Bank.

The systemic banks have declared that they will not participate in the share capital increase.

The new bank, after joining “Heracles”, reduces the percentage of non-performing loans from 60% (which is the weighted percentage of NDEs in both Attica and Pancreatia) to 3%, a percentage corresponding to the European average and will is fully recapitalized with a CET1 Ratio of over 15%. In this way, all the funds (old and new) allocated by the HFSF obtain a positive rate of return (positive IRR).

The new banking pole will be majority owned by individuals with strong minority rights for the HFSF. The exact shareholding percentages will be finalized after the completion of the share capital increase. It is estimated that the share of Trhivest and other private investors will reach up to 58.5%, the HFSF will range from 35 – 37% and the State as a whole (HFS + e-EFKA) from 38.5-40%.

In other words, two banks with piles of bad loans that are the result of unfortunate and controversial financings in the past and with an uncertain future are not only saved, but with the influx of capital from the public and private sectors they are transformed into a strong pillar of the banking system that will operate with full transparent socio-economic criteria.

The sizes of the two banks

Shareholders of Attica Bank today are:

  • the HFSF with a rate of 72.5%,
  • e-EFKA with a rate of 7.6%,
  • the Bank of Greece with a percentage of 5.0%,
  • Thrivest Holding with a percentage of 4.4%,
  • the TMEDE with a rate of 4%
  • and other shareholders and systemic banks with a total percentage of 6.5%.

Shareholders of Pankritia Bank today are:

  • Thrivest Holding with a percentage of 43.8%,
  • Alfa Ocean Developments with 4.0%,
  • the National Bank with a rate of 3.6%,
  • and other shareholders with a total percentage of 48.7%.

According to the financial data of the banks for the financial year 2023:

Attica Bank has:

  • Assets: 3.77 billion euros.
  • Grants (after provisions): €2.68 billion.
  • Deposits: 3.15 billion euros.
  • Equity: 446 million euros.

Pankritia Bank has:

  • Assets: 3.45 billion euros.
  • Grants: (after provisions): €2.04 billion.
  • Deposits: 2.6 billion euros.
  • Equity: 251 million euros.