Piraeus Bank and Ethniki Insurance: A Step Towards Greater Business Diversification

The commentary analyses Piraeus Bank's plan to acquire Ethniki Insurance.

Summary highlights from the commentary include:

-- On 12 March, Piraeus Bank signed a share purchase agreement to fully acquire Ethniki Insurance in Greece.

-- Piraeus Bank will seek to achieve the status of financial conglomerate while also requesting approval for the so-called Danish Compromise.

-- With this acquisition, Piraeus will enhance its product offering while increasing the contribution of fee and commission income to its total revenues and maintaining strong operating efficiency.

"Piraeus is making strategic moves to diversify its business and ensure sustainability to its earnings in a lower interest rate environment, a decision partly triggered by its business model's reliance on retail and corporate banking activities in Greece," said Andrea Costanzo, Vice President, European Financial Institution Ratings. "While we will continue to monitor any developments surrounding the transaction - and pending the regulatory approvals to which the deal is subject to - we would consider the transaction to potentially have positive implications for the Bank's credit ratings, as it would help improve the degree of diversification of the Bank's revenue streams, ensuring higher stability to its earnings in any interest rate cycle with a manageable negative impact on its capitalisation in the short-term. We believe that execution risks for this transaction should be relatively manageable considering Piraeus' track record in managing acquisitions in Greece".