Background
Eurobank (the Bank), along with other three systemic Greek banks, was subject to the Comprehensive Assessment (CA) conducted by the ECB.
The results have been derived taking into account the combined effect of: an Asset Quality Review (AQR); and, a Stress Test (ST) – Baseline and Adverse scenario. The ECB conducted the CA taking into account all the latest developments affecting the financial position of the banks, and with the aim to assess the impact of these developments on the economic activity in Greece and on the value of assets held by the Greek banks, including the Bank.
CA results for the Bank
AQR Results
The AQR constituted a thorough review of the carrying value of the Bank’s Greek portfolios as of June 30, 2015 covering 98% of the Greek portfolio. The AQR adjusted capital position provided the starting point for the Stress Test (ST). The AQR identified additional provisioning needs, leading to a CET1 ratio of 8.6%, after taking into account the entire amount of losses identified in the AQR. This implies a capital shortfall of €339 million, relative to the threshold of a CET1 ratio of 9.5%.
ST Results
The ST is a forward looking exercise, carried out for a baseline scenario and an adverse scenario, assessing the resilience of Bank’s financial position to a further deterioration of economic conditions during a time horizon until the end of 2017. The ST was carried out for two scenarios: (i) Under the baseline scenario, the ST provides a projection of The Bank’s financial performance under economic conditions which are deemed to materialize, (ii) under the adverse scenario, the ST provides a projection of financial performance under a scenario of a serious economic downturn. The ST under the baseline scenario has not triggered further negative impact on the Bank’s solvency position, maintaining the post-AQR and baseline scenario CET1 at 8.6%, which corresponds to a capital shortfall of €339 million relative to a CET1 ratio of 9.5%, which is the threshold in the baseline scenario of the ST. The ST under the adverse scenario identified further negative impacts on the Bank’s solvency position, leading to a CET1 ratio of 1.3%, which implies a capital shortfall of €2.122 million relative to a CET1 ratio of 8%, which is the threshold in the adverse scenario of the ST. Following these results, the Bank will shortly submit a capital plan to the ECB for approval, describing in detail the measures it intends to implement in order to cover the shortfall identified in the CA, under both the base and the adverse scenario. The Bank expects to make an announcement once this plan is approved, and announces it has appointed BofA Merrill Lynch, HSBC and Mediobanca to assist in connection with the capital plan and the potential recapitalisation that may result. The Bank will publish the first half 2015 financial results on 31 October 2015 and a further announcement will follow on 3 November 2015 providing a trading update for third-quarter 2015 financial results.