ATHENS, Nov. 26 (Xinhua)-- Greece's third largest lender Eurobank announced on Monday its merger with real estate investment company Grivalia Properties, in a bid to boost the lender's capital base for about 1.2 billion euros (1.36 billion U.S. dollars), Greek national news agency AMNA reported.
The agreement creates the best capitalized bank in Greece ready to support economic activity in the country and southeastern Europe, the board of directors of Eurobank and Grivalia Properties said in a joint press release posted on the bank's website.
According to the announcement, the two companies join forces in a bid to accelerate Eurobank's non-performing exposure (NPE) reduction from a total capital ratio of 19 percent today to a ratio of approximately 15 percent by the end of 2019 and single digit by 2021.
Under the deal, about 7 billion euro worth of bad loans will be transferred from Eurobank to a Special Purpose Vehicle which will be available for purchase towards private investors.
This was the main idea of the plan outlined last week by the central Bank of Greece (BoG) which aims to reduce the non-performing loans in the Greek banking system by 47 percent within three years.
By mid-2018, the four largest banks in Greece had about 180 billion euros in loans, of which 86 billion euros or 48 percent were NPEs, said BoG's report.
Since the start of the Greek debt crisis in late 2009, the country's banking system has been recapitalized three times in the context of the bailout programs signed with international creditors which concluded this August.
Despite significant progress achieved, Greek lenders still face significant challenges to reduce bad loans.
Toronto-based investment company Fairfax Financial Holdings Limited holds a majority stake of 51.4 percent in Grivalia Properties and a 16.9 percent stake in Eurobank which will now be increased to about 32 percent. (one euro equals to 1.14 U.S. dollars)