RCB Bank has sold a good part of its loanbook, described as a “performing loan portfolio” which is well collateralised and comprises of mainly corporate loans, to Hellenic Bank for €556 mln, helping the latter reduce its exposure to non-performing loans significantly.
It also helps RCB create an additional liquidity buffer to meet clients’ obligations as well as sufficient assets for its operations.
“The transaction increases (Hellenic Bank’s) client base in business lending, provides cross selling opportunities, improves its operating income through higher interest income and creates potential for growing its non-interest income,” said Hellenic CEO Oliver Gatzke.
Limassol-based RCB, which has in recent years built up a strong local clientele in the retail, business banking and credit card sectors, said Tuesday that the loan portfolio being sold is in two tranches – €292 mln relating to Cypriot exposures and €264 mln relating to Cypriot, other European and United Kingdom exposures.
It said that about 75% of the loans are Cypriot exposures, while the remaining 25% are commercial real estate loans in the EU and the UK, all of which are in hotels and accommodation, commercial real estate, construction and development, wholesale and retail trade, manufacturing, food and beverage, renewable energy and education.
RCB underwent a major ownership change on February 24 when VTB Bank sold its 46.3% stake to the bank’s local shareholders and management, in order to protect itself from escalating geopolitical tensions.
This follows downgrades and eventual suspension of VTB Bank after international sanctions were imposed on Russian-owned businesses following the war in Ukraine.
RCB’s shareholder change resulted in major rating agencies downgrading the bank’s issuer credit rating by one notch on March 10. The change of ownership has not yet been approved by local or European banking regulators.
Capital adequacy improves
In its announcement on Tuesday, RCB said that “the total capital adequacy ratio shall increase from 21% to over 27%.”
It said the sale of the loan portfolio to Hellenic, “shall strengthen further the capital and the liquidity buffers of RCB Bank Ltd and shall create additional substantial buffers, thus allowing for significant absorption capacity of any potential external shocks.”
It explained that the bank’s liquidity “shall exceed the total amount of all liabilities, which enables RCB Bank both to meet its obligations towards all of its clients in full, as well as to maintain a sufficient levels of liquid assets for its further operations.”
In turn, Hellenic said the deal involves a performing loan portfolio worth €556 mln, related cash collateral and other credit balances of €89 mln and about €23 mln in letters of guarantee. Up to 16 RCB employees who manage this portfolio will be transferred to Hellenic Bank.
Hellenic said the main sectoral exposures of the loan portfolio are 37% real estate and construction, 29% hotels, and 19% wholesale and retail trade. It is “well collateralised and comprises of performing business loans to 103 borrowers.”
Hellenic added that the borrowers will be vetted for sanctions compliance and anti-money laundering (AML) clearance, in line with the strict monitoring to manage all related risks and comply with the applicable sanctions imposed on Russia and Belarus.
“The bank will have the right to refuse onboarding borrowers that fail to meet its standards,” Hellenic added.
Based on September 2021 figures, Hellenic Bank’s performing loan portfolio is expected to improve by 11%, while the pro-forma NPE ratio will be reduced to 13.4% from 14.5%, excluding non-performing exposures administered by APS.
It added that upon completion of the acquisition of Tranche A of RCB’s portfolio (€292 mln) HB’s pro-forma capital adequacy ratio is expected to be 21.0% from 22.3%.