Hellenic is looking into the possibility of not having to increase its capital after all, as it is argued the negative goodwill resulting from the good assets acquisition of the Co-op Bank changes the bank’s capital needs.
Hellenic Bank had assigned PwC with the task of identifying how much the negative goodwill actually is and their findings are now with auditors KPMG.
The negative goodwill occurs as Hellenic paid EUR 74 mln for the acquisition of the Coop’s good assets which is less than the fair value of its net tangible assets of EUR 247 mln.
Hellenic had acquired mainly serviced loans of EUR 4.6 bln, government bonds of EUR 4.1 bln and cash EUR 1.6 bln against deposits of EUR 9.7 bln.
The above development is believed to have encouraged the current shareholders of HB to ask the administration to look into whether the bank can get out of its obligation for a capital increase of EUR 150 mln.
The bank is currently obliged to raise its capital as part of the buy-out agreement of the Co-op.
If the capital raise goes ahead the existing shareholders, Pimco, Emma Alpha Holding and Demetra Investment, would see their share of the bank’s stocks shrink significantly.
Existing shareholders believe that the resulting negative goodwill is a profit that should be recognised in HB's audited accounts for its nine-month financial results.
EU monetary authorities have a completely different view to HB’s shareholders and indicate that the provision of the agreement in relation to the increase of capital cannot be differentiated at any point.
Yangos Demetriou, the Senior Director of the Supervisory Division of the Central bank, told Stockwatch that Hellenic’s capital needs for the acquisition of the good assets portfolio of the Co-op was estimated at EUR 225 mln.
He noted that the negative good will cannot justify a write-off of over 1/3 (EUR 75 mln) of the total EUR 225 mln.
"A capital raise EUR 150 mln is necessary," said Demetriou.
He pointed out that the same practice applied in the case of the HB-Coop acquisition agreement has been applied by the European Supervisory Authorities in all similar cases.
