Which factors and assets "boost" the premium for Eurobank

The largest banking investment outside Greece since the crisis is entering the final stage, following the approval of the Cyprus Competition Protection Commission, with Eurobank acquiring full control of Hellenic Bank.

At the same time, the bank's management is escalating its selective expansion moves into new markets (India, Israel, Saudi Arabia, UAE, Dubuque), with Eurobank's deputy CEO Stavros Ioannou currently in Dubai and yesterday visiting Riyadh in Saudi Arabia.

The strong international footprint, which generates large revenues for the group, combined with the large contribution of real estate to the bank's balance sheet, with goodwill close to 800 million euros over the last 5 years, give Eurobank a unique advantage among domestic banks, which is reflected in the significant premium at which the bank's shares are trading on the Athens Stock Exchange.

Yesterday, Cyprus' Competition Commission approved Eurobank's acquisition of an additional 26.1% of Hellenic Bank, increasing its stake to 55.3%. The approvals of the Central Bank of Cyprus - European Central Bank and the Insurance Supervisor of Cyprus are still required to complete the transaction. 

Following the approvals, a Public Offer to the minority shareholders of the Cypriot bank will follow and, depending on the response, Eurobank's total investment in the acquisition of Hellenic Bank will be up to €800 million, making it by far the largest overseas investment by a domestic bank.

Eurobank already has a strong presence in the Cypriot market through Eurobank Cyprus, with assets of €8.6 billion, and with the addition of Hellenic Bank it will gain a dominant position. Hellenic Bank has assets of EUR 20 billion, a loan portfolio of EUR 7,5 billion and deposits of EUR 15,7 billion. With the addition of Hellenic Bank, Eurobank's total external footprint doubles to EUR 40 billion from EUR 20.4 billion today. It should be noted that the group also maintains a strong presence in the Bulgarian market, with assets of EUR 9.3 billion, while its assets in Luxembourg amount to EUR 2.5 billion.

With the addition of the Hellenic Bank, Eurobank's total assets will exceed EUR 100 billion, of which EUR 56 billion are assets from banking operations in Greece, EUR 1.5 billion are the real estate investment portfolio and the remaining EUR 47 billion are banking activities abroad (Cyprus, Bulgaria, Luxembourg).

There will also be a big boost to profitability. The acquisition of Hellenic will add EUR 400 million in profits to Eurobank. Note that in the nine months to 2023, Eurobank's profitability amounted to EUR 546 million from banking operations in Greece, EUR 29 million from the real estate portfolio, while net profit from international banking operations amounted to EUR 465 million. It should be noted, of course, that profitability is receiving a strong boost due to the interest rate environment.

Contacts St. Ioannou's contacts in Dubai - Saudi Arabia

At the same time, the management's plan to open Eurobank to new markets in selected business areas is in full swing. As noted by the group's CEO, Fokion Karavias, speaking last August at a luncheon hosted by Prime Minister Kyriakos Mitsotakis to Indian Prime Minister Narendra Modi, Eurobank will proceed with the establishment of a representative office in India with the aim of becoming a bridge between the two countries.

In addition to India, Eurobank's plan is to establish a presence in Israel, Dubai, Saudi Arabia and the United Arab Emirates with a focus on business support and asset management. The relevant project is being "run" by Mr. Ioannou, who for this purpose is currently visiting Dubai and was in Riyadh, Saudi Arabia yesterday.

EUR 800 million in surplus value from real estate

The bank's second strong asset is its large real estate investment portfolio, which brings multiple benefits to the bank's balance sheet. It should be noted that next May will mark 5 years since the absorption of Grivalia under the Acceleration Plan.

Speaking at a bank event last week, Eurobank's Vice President George Chrysikos noted that over the last 5 years the bank has generated an estimated EUR 800 million in goodwill from the development and management of the group's real estate assets.

The share premium

A strong international footprint, together with a strong real estate portfolio, gives Eurobank a unique advantage. In addition to the strong boost to the group's foreign and real estate figures, they enhance the bank's growth prospects while achieving significant diversification in the group's revenue streams. Finally, Eurobank was the first to proceed and complete the consolidation of its balance sheet, addressing the legacy of the crisis.

These advantages are reflected in the significant premium at which Eurobank's shares trade on the Athens Stock Exchange compared with other systemic companies, a premium that has been built up over a long period of time. 

Yesterday, Eurobank's share closed at EUR 1.9 (+4.4%) and is up +18.01% since the beginning of the year, while the bank's capitalization stands at EUR 7.06 billion. In second place is National Bank with a capitalization of 6.57 billion euros, followed by Piraeus Bank with 4.89 billion euros and Alpha Bank with 4.16 billion euros.