Abanca admits Covid-19 will affect the price to pay for EuroBic
Abanca advises that it is already negotiating with EuroBic the conditions and the final price for the purchase of the Portuguese bank. The process will be concluded later this month.
The Abanca admits that the coronavirus pandemic will affect the price to pay for EuroBic. Juan Carlos Escotet, chairman of the Spanish bank, said he is already negotiating with Teixeira dos Santos the conditions and final price for the purchase of the Portuguese bank, a process that will be concluded later this month of May.
“The potential effects of Covid-19 will have to be included in the negotiation because there will clearly be adverse effects,” Escotet said during Abanca’s presentation of its Q1 2020 results. The Spanish bank saw profits fall by 13 percent to 127 million euros due to the 78 million increase in provisions it made because of the coronavirus crisis.
“The effect of Covid-19 has to be incorporated and can effectively have some impact on price. It will be part of the negotiation,” the owner of Abanca told reporters this Tuesday.
Escotet stressed that it was “premature to conclude that the price of EuroBic will be lower than the initial approach we had agreed on”. Abanca will have made an offer of around 240 million euros for the bank from which Isabel dos Santos (and other Angolan shareholders) is leaving as a result of the Luanda Leaks controversy.
The final price will result from the “negotiation phase of the contract and financial conditions,” which is already underway, according to the Spanish-Venezuelan manager. Escotet said he expected negotiations “convenient for both the buyer and the seller. But the value of the deal will also depend on the due diligence results. Since February, when an agreement was reached, the Spanish bank has been doing an in-depth analysis of EuroBic’s accounts to learn about the bank’s financial situation and understand the impact of Luanda Leaks. However, the virus outbreak has also become part of this analysis.
The chairman of Abanca explained that the due diligence will also incorporate the Covid effect, namely “the effect it may have on the portfolio and the possible expected loss. The impact of the pandemic “may be of some importance,” Escotet added.
Nevertheless, Juan Carlos Escotet expects that the impact of Covid-19 will not be as serious in Portugal as it will be in Spain. The bank manager stressed the good management of the pandemic in our country.
“Our estimate is that the adverse effects in Portugal are considerably less than we are predicting in Spain given the impact of the pandemic,” he said. “The recovery time [of the economy] will be slower in Spain. In Portugal, taking into account that the number of contagions has been clearly lower, we expect economic recovery to be faster,” he stressed.
At last, Escotet reminded that he intends to make Abanca an “Iberian vocation” institution and that the interest in EuroBic reinforces this strategic intention.
