UniCredit answered the dilemma of "stakes in banks and companies that provide revenue and profit versus share buybacks" in the first days of the year, converting its synthetic derivatives (20%) in Alpha Bank earlier than expected and ultimately acquiring a strategic stake of 29.8% without being obligated to spend capital on a public tender offer. After all, the Italian CEO of UniCredit, Mr. A. Orcel, emphasizes at every opportunity that, given how the banking system operates in Europe for reasons of capital, liquidity, and IT cybersecurity, banks have fewer benefits when they own 100% of a bank in another country.
The reasons UniCredit decided to act sooner are not only related to the cost of maintaining derivatives but also because the revenues (€1 billion) and the benefits flowing to the Italian bank from Commerzbank and Alpha Bank are higher than its own share buybacks. The latter are carried out by UniCredit and are massive compared to Greek standards, but the common characteristic is that no one knows the exact final cost. Buyback prices can occur at high or low price levels. By investing more in stakes in Commerzbank and Alpha Bank (29% each), UniCredit has built a "machine" that generates revenue and profit. Conversely, if it used these funds solely for share buybacks, it would also create a dilution of value for the bank's shareholders.
Greek banks follow UniCredit, but major shareholders also sell during buybacks
The three banks (Eurobank, Alpha Bank, Piraeus), to a certain extent, follow UniCredit's tactics, having proceeded with company acquisitions, yet they still have remaining balances in their share buyback programs, from which in some cases their major shareholders benefit by selling part of their stake to the bank (see Eurobank, Piraeus, Alpha Bank, National Bank). In most programs, however, the cancellation of the acquired treasury shares or the distribution of free shares to executives is planned, with the exception of Piraeus.
Based on the latest announcements, Eurobank is set to buy back shares that will not exceed €122.9 million, while the total program concerns 365 million shares with a maximum price of up to €10. As announced, at the end of the program, the treasury shares will be cancelled or used for the acquisition of financial instruments. National Bank has a buyback program for 34.8 million shares and to date has proceeded with buybacks of 1.23% of its share capital or 11.2 million shares.
For its part, Alpha Bank has already allocated capital toward acquisitions (Astrobank, Axia Ventures, Flexfin, Altius). To date, it has proceeded with a buyback of 1.15% of its share capital or €26.8 million, with approximately €170 million remaining. Piraeus Financial, alongside the acquisition of Ethniki Asfalistiki, has proceeded with the buyback of treasury shares worth €31.9 million, while by decision of the general assembly, it cancelled the distribution of shares to executives.
The issue, therefore, is whether it is more beneficial for Greek banks to acquire majority stakes in asset management companies, brokerage firms, etc., or to continue share buybacks, which may prove to be expensive.
Dimitris Pafilas
dpafilas@yahoo.com
www.bankingnews.gr
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