Erste Bank Strengthens Capital Position Ahead of Major Acquisition

3 months ago

Khloe Mele

"Yeah, so they raised their net interest income and their capital guidance this morning which moved the shares higher, with analysts noting that a strong capital position and also improving profitability for a – so it's essentially building up its capital cushion to help it fund the acquisition of Santanderez operations in Poland. So this is a deal that was announced in May, um it's buying those Polish operations for about 7 billion euros which makes it its largest deal ever. Um so it's looking to pay for the transaction with a few in a few different ways. So, with internal funds by retaining earnings and also temporarily reducing payouts to investors but then it's also freeing up capital by offloading risks related to a corporate loan portfolio that's worth more than €10 billion euros. So it seems that the plan to fund the acquisition is being taken quite well by investors even though it does involve having to reduce some payouts. The net interest income guidance boost is also quite reassuring and it really confirms that lending volumes are quite strong in markets like Czecha and Slovakia as well. So it's overall quite a positive update from that really moved the shares this morning."

Erste Bank has raised its net interest income and capital guidance, reflecting a strengthened balance sheet as it prepares for its largest-ever acquisition of Polish operations for 7 billion euros. The bank is using a mix of internal funds and risk offloading to finance the deal, and the positive update has been well received by investors given the strong lending volumes in key markets.

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