Attica Bank plans rights issue, sale
Attica Bank, one of two Greek banks slated for privatization next year, plans a rights issue to boost capital and expand as it heads for a sale, the bank’s chief executive said yesterday. With a current market capitalization of 444 million euros ($591.4 million), Attica is on the government’s privatizations program for next year along with Postal Savings Bank (TT). The sale will involve two 19.1 percent stakes held by TT and the Loans & Consignments Fund. «In mid-December we will propose to the board of directors a rights issue of more than 100 million euros,» Chief Executive Tryfon Kollintzas told Reuters in an interview. «The issue adviser will be a large Greek bank.» Kollintzas, an academic economist and CEO since mid-2004, said Attica Bank needs to write off bad debts to optimize its capital structure. Proceeds from the rights issue will also fund organic growth plans and boost the lender’s capital adequacy. «The rights issue should be completed by the end of the first quarter. It will not jeopardize the bank’s privatization,» he said. «The capital adequacy ratio, at around 8.5 percent currently, needs to get up to around 12 percent.» Greece has penciled in 1.7 billion euros in proceeds from state divestments next year to pay down its debt mountain, which is one the highest in the eurozone at 104.8 percent of gross domestic product (GDP) this year. «The government has signaled its intention to see the 38 percent (combined) stake in the bank held by Postal Savings and the Loans & Consignments Fund sold,» Kollintzas said. He said the goal of Attica’s shareholders is to have the sale completed by the first half of next year. An adviser has yet to be picked. At current market prices the sale of 38 percent in the bank could fetch around 170 million euros. «Based on my knowledge, strong interest in acquiring the stake has been expressed to the bank’s major shareholders by Caisse d’Epargne and the TSAY doctor’s fund,» Kollintzas said. Other parties that have expressed interest in the past included Fortis and Societe Generale. Profit rebound in 2007 Attica is about seven times smaller in terms of market value than Emporiki Bank which was taken over by France’s Credit Agricole earlier this year. Its foray into retail lending is ahead of budgeted targets but earnings have been burdened by provisions and the cost of a voluntary retirement scheme involving five percent of its staff, now at 1,100. Provisioning for a 4 million euro fraud incident also weighed. Kollintzas said mortgages at Attica have grown 31 percent since the start of the year to 340 million euros, with consumer loans up 24 percent to 270 million. The bank’s total loan book has expanded by 22 percent to 2.4 billion euros. «We are aiming for net profit of more than 20 million euros next year from a projected 3 million this year, » Kollintzas said. «There will not be a dividend this year but we hope to do it next year.» Attica Bank will expand its network to 90 branches from a current 65 within the next three years. There will not be a need for excess loan-loss provisioning to clean up the portfolio. Since 2004, provisions have amounted to 80 million euros. «We are aiming at a return-on-equity (ROE) of more than 15 percent by 2008. Our cost-to-income ratio will improve to 60 percent in 2007 from 68 percent this year, gradually converging with the Greek banking sector’s average of around 50 percent,» Kollintzas said. Kollintzas said he expects competition to get stronger, meaning tighter loan and deposit spreads, gradually converging toward EU averages. Small banks need to focus on niche markets to succeed. «Such a niche market for Attica is to build on its special relationship with professional groups, such as engineers and construction groups and go after public-private partnerships,» Kollintzas said. Its shares are down 3.2 percent so far this year, underperforming the broader Greek market’s 15 percent gain. (Reuters)