NEW YORK *#8211; The National Bank of Greece announced this past Tuesday, October 11, that it has agreed to sell its unit, Atlantic Bank of New York, to New York Community Bancorp for $400 million in cash.
NBG, the Hellenic Republic*#8217;s largest lender, has more than 600 domestic branches and 230 in the rest of the Balkans, currently present in Romania, Bulgaria, Albania and Serbia.
A full service commercial bank, Manhattan-based Atlantic Bank is one of the 20 largest commercial banks in New York State, with deposits of $1.8 billion, assets of around $3 billion and 17 branches in Manhattan, Queens, Brooklyn, and Nassau and Westchester Counties (as of June 30).
Morgan Stanley and Sandler O*#8217;Neill *amp; Partners LP advised NBG on the deal. NYCB was advised by Bear, Stearns *amp; Company and Citigroup Global Markets.
Once the deal is complete, Atlantic will operate as a division of New York Commercial Bank, the subsidiary of New York Community Bank to be established in connection with its pending acquisition of Long Island Financial Corporation announced on August 1.
When NBG unveiled its 2005-2007 business plan earlier this year, management said the bank planned to expand in core geographical areas, expecting market growth in Greece and the Balkans to remain strong over the next three years.
In a press release issued on Tuesday, NBG said selling Atlantic Bank is consistent with its long-term objectives to focus on high-growth markets, such as those of Southeast Europe, which secure high returns for shareholders.
The above-mentioned transaction is consistent with NBG*#8217;s long-term plan and international strategy, focusing on activity in high growth markets where it maintains a comparative advantage and secures high returns for its shareholders. The economies of Southeastern Europe, where NBG Group already operates successfully, are identified as such, the statement said.
The disposal is part of a restructuring of assets to focus on Southeast Europe, NBG said, with proceeds from the sale will partially finance acquisitions in Southeast Europe.
While Atlantic has been profitable during the past few years, NBG said, return on equity benchmarks have been lower than those of the NBG Group as a whole.
Critical mass is essential for achieving competitive returns in the environment where Atlantic bank operates, NBG explained, and Atlantic Banks*#8217; performance reflects the mature and competitive market of the environment in which it operates.
Having evaluated all available alternatives, NBG concluded that the best course of action was the realization of a transaction that would enable Atlantic Bank to continue its future course within an organization that considers rapid growth in the New York market as a key strategic objective. That was deemed to be in the best interests of the shareholders of NBG, as well as the customers and employees of Atlantic Bank, adding that it will look for ways to continue a business relationship with NYCB, given a common strategic direction and NYCB*#8217;s stated intention to retain Atlantic Bank*#8217;s traditional relations with the Greek American community.
National Bank of Greece believes that NYCB is the most suitable acquirer of Atlantic Bank, the statement said. The common strategic direction and company culture of the two banks thus creates all the necessary prerequisites for a successful collaboration and exploitation of the considerable potential of both institutions. One should stress NYCB*#8217;s stated intention to retain Atlantic Bank*#8217;s traditional relations with the Greek American Community, and to preserve the historic character of the Bank.
Established in 1859, NYCB is the number-5 U.S. thrift, operating an impressive network of 141 branches spanning the New York metropolitan region.
NYCB, a family of community banks, said it expects the deal to close in the first quarter of 2006 (pending regulatory approval), and to add to its earnings per share immediately.
Including the assets and deposits to be acquired in the Atlantic and Long Island Financial transactions, NYCB expects to have total assets of about $27 billion, total deposits of about $13.4 billion, and a ratio of securities to total assets of about 19 percent.
The company said it plans to enhance the earnings of the combined company by liquidating $1.3 billion of securities and using the proceeds to reduce the level of wholesale funding. By replacing wholesale funding with low-cost core deposits, NYCB expects to strengthen its interest-rate risk profile and improve its net-interest margin.
NYCB President and Chief Executive Officer Joseph R. Ficalora said the Atlantic deal will extend NYCB*#8217;s market penetration and thus benefit both the customers and the bank.
Atlantic Bank*#8217;s superb reputation as a depository institution, and as a lender to small and mid-sized businesses throughout the New York metropolitan region, strengthens the foundation provided by Long Island Commercial for the franchise that will be New York Commercial Bank. In addition to supporting our strategic focus on growing commercial deposits and services, the transaction with Atlantic will give us a presence in Manhattan, while enhancing our commercial bank presence throughout our marketplace. We are also very pleased that the National Bank of Greece has expressed an interest in maintaining a business relationship with Atlantic following the close of the transaction, Mr. Ficalora said.
Atlantic Bank is very rich in core deposits, which accounted for $1.5 billion, or 77 percent of its total deposits, on June 30, with an average cost of 1.25 percent. We look forward to extending the bank*#8217;s outstanding record of customer service, which earned top marks in a recent survey of Manhattan-based branches of several competing banks. As a result of these two transactions, New York Commercial Bank will have at least 29 branches serving consumers and businesses in the coveted New York metropolitan region, he said.
The diversity and quality of Atlantics solid loan portfolio are also very appealing, and will blend nicely with the mix of loans we will acquire with LICB. At the end of June, Atlantic Bank had $1.3 billion in loans outstanding and, at 3.37 percent, a net interest margin that has widened 12 basis points since the Fed starting raising rates at the end of June 2004, Mr. Ficalora added.
Under the terms of the agreement, which has been unanimously approved by the relevant Boards of Directors, NYCB will pay $400 million for Atlantic in an all-cash transaction, representing 181 percent of Atlantic*#8217;s tangible equity on June 30 of this year.
The transaction is expected to close in the first quarter of 2006, pending regulatory approval, and to be immediately accretive to NYCB*#8217;s GAAP and cash earnings per share.
A Thomson First Call survey on NYCB projects mean first-quarter earnings of 33 cents a share.
The above incorporates information from reports posted by AFX News Limited, Dow Jones International News, Reuters and the Regulatory News Service.