At the presentation of the third quarter results Andreas Treichl, CEO of Erste Group announced that the Republic of Austria will acquire EUR 2.7bn of participation capital in exchange for a fixed annual interest payment of 8% leading to the increase of Tier 1 ratio over 10% by year-end.
The participation capital, which will be repaid at 100% of the nominal value at the earliest after five years, will be non-listed, non-voting and non-transferable. The issuance of these securities, which are recognized as core capital pursuant to 23 (4) of the Austrian Banking Act, will not result in the dilution of existing shares held by shareholders. The state will receive a fixed annual interest of 8% for the capital made available.
This acquisition of participation capital by the Republic of Austria is not contingent on any further conditions. The transaction is expected to complete before the end of the year. The operation will be based on the business model of Erste Group and the savings banks with their focus on the retail and SME segment in the region.
Last year ratio counted to 7%. Current business year the Tier 1capital of Erste Group was driven up to 7.5% by the economic success of the first three quarters.
The participation certificates that will be acquired by the Republic of Austria will ensure that Austrian companies will have enough
liquidity at their disposal in times of difficulty, says Andreas Treichl. In agreement with the Austrian government, Erste Group undertakes to ensure jointly with the savings banks that both Austrian commercial and retail customers will each have access to at least EUR 3bn in credit over the next three years.
L.D.