Through innovative securitisations, Attica Bank SA (AT:BOAr) has de-risked its portfolio, reducing net impaired loans from over 250% to just 79% of net tangible assets incorporating the gain on the Metexelixis transaction. This will also lift the common equity Tier 1 (CET1) ratio of 12.8% to 14.3%, representing significant headroom over regulatory requirements. Management will now move on to the next stage of recovery, shifting the group’s focus to the small and medium-sized enterprise (SME) market and raising profitability to improve the price/net tangible asset ratio, estimated at just 0.14x.
Balance sheet clean-up
Attica has significantly de-risked its portfolio with two securitisations so that impaired loans have reduced from €2.4bn (end-2016) to c €590m (or c €370m net of provisions. Attica transferred some €2bn of non-performing loans (NPLs) into two special purpose vehicles (SPVs), which then issued junior and senior notes to Attica. Subsequently, Aldridge EDC Speciality Finance and PIMCO, the distressed debt managers, paid a premium to acquire the junior notes. Attica is still at risk on the senior notes, but is protected by over-collateralisation and its position in the debt hierarchy. Although its capital raise in Q218 was only 44.9% subscribed, we estimate that the capital gains on the most recent securitisation deal will allow the bank’s CET1 ratio to reach 14.3%, or 11.2% including full phasing of IFRS 9.
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