Erste Group Bank AG sold a significant risk transfer linked to more t
han €10 billion ($11.7 billion) of loans as the Austrian bank seeks to free up capital for its largest ever acquisition.
The Vienna-based lender sold the SRT to a small group of insurance
companies, according to people familiar with the matter, who asked not to be named because the details are private. The refere
nce portfolio includes loans from small and mid-sized firms originated by Erste’s network of Austrian savings banks, the people said.
The transaction is one of the largest SRT deals exclusively targeting insurance companies, the people said. Erste said it has concluded its envisaged SRTs for the 2025 financial y
ear, comprising transactions in Austria, Romania, the Czech Republic, Slovakia and Hungary.
“These transactions support our growth ambitions in the respective geographies, as well as group-wide,” a representative for Erste said in an emailed response to questions, without p
roviding further details on SRTs.
Erste is in the process of finalizing the purchase of a 49% stake in Santander Bank Polska as part of a €7 billion deal. The ba
k has said it hopes to close the transaction, which includes the Polish bank’s asset management arm, by mid-January, after regulatory approvals last year.
Erste will pay for the Polish bank without raising new capital, anticipatin
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g its common equity tier 1 ratio, a key metric of financial strength, falling by about 460 basis points. SRT transactions are helping
to partially off-set the impact of this expansion, increasing the CET1 r
atio by over 40 basis points, Chief Financial Officer Stefan Doerfler said in a call with analysts in August.
SRTs allow banks to insure loans against default by selling credit-linke
d notes to funds. Lenders typically obtain default protection for between 5% and 15% of the loan value. The market for these instrume
nts could double over the next five years, according to Man Group estimates.
Insurance companies take part in the market but frequently issue a guarantee instead of buying the notes. European policym
akers are considering improving the terms under which insurers can invest in SRTs as part of a wider overhaul of the region’s capital markets.