Erste Group Bank AG sold a significant risk transfer linked to more than €10 billion ($11.7 billion) of loans as the Austrian ban
k seeks to free up capital for its largest ever acquisition.
The Vienna-based lender sold the SRT to a small group of insurance comp
anies, according to people familiar with the matter, who asked not to be named because the details are priv
ate. The reference 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 sa
id it has concluded its envisaged SRTs for the 2025 financial year, comprising tra
nsactions in Austria, Romania, the Czech Republic, Slovakia and Hungary.
“These transactions support our growth ambitions in the respective geo
graphies, as well as group-wide,” a representative for Erste said in an emailed response to questions, without providing further details on SRTs.
Erste is in the process of finalizing the purchase of a 49% stake in S
antander Bank Polska as part of a €7 billion deal. The bank has said it hopes to
See more beautiful photo albums Here >>>
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, anticipating its common equity tier 1 ratio, a key metric of financial
strength, falling by about 460 basis points. SRT transactions are helping t
o partially off-set the impact of this expansion, increasing the C
ET1 ratio 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-linked notes to funds. Lenders typically obtain defaul
t protection for between
5% and 15% of the loan value. The market for these instruments 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 policymakers are considering improving the terms under which insurers can invest i
n SRTs as part of a wider overhaul of the region’s capital markets.