UniCredit and Alpha Services and Holdings have announced the signing of a merger in Romania and a partnership in Greece. The two parties have agreed on the key economic terms for the merger of UniCredit Bank with Alpha Bank Romania, to create the third largest bank in the local market with a combined 12% market share by total assets.

The merger combines two complementary franchises in the country, with UniCredit Romania and Alpha Bank Romania having footholds in the corporate and retail segments. As per the press release, the transaction closing is expected in 2024, subject to the completion of a due diligence process, corporate approvals for the merger, and necessary regulatory approvals. After the completion, Alpha Bank is expected to retain 9.9% of the combined entity share capital and receive a cash consideration of EUR 300 million.

The cash component remains subject to post-due diligence adjustments related to asset quality. The merger is set to grant customers of Alpha Bank Romania access to an enlarged range of services and products. Commercial partnership framework in Greece UniCredit and Alpha have agreed on terms for the purchase by UniCredit of a 51% stake in AlphaLife Insurance Company, a wholly-owned life insurance subsidiary of Alpha active in the pension and savings products segment.

They have also agreed on the distribution of UniCredit onemarkets mutual funds through the Alpha Bank network, which serves more than 3.5 million clients in Greece. This cooperation will leverage UniCredit's expertise and products in asset management and in the bancassurance space to accelerate the development of AlphaLife's capabilities and enrich the wealth management offering available to Alpha Bank's customers. The parties will also explore further collaboration opportunities to support their customers' needs in their respective countries of presence, leveraging on their combined international footprint and origination capabilities in regional banking, transaction banking, syndicated lending, advisory, other market, and corporate services as well as other banking services and products.

The final agreement on the commercial partnership is subject to the completion of a due diligence process, corporate approvals, and necessary regulatory approvals. UniCredit purchase of a stake in Alpha UniCredit has submitted an offer to the Hellenic Financial Stability Fund to purchase all the shares the HFSF currently holds in Alpha, equal to 9%. The transaction will have a negligible impact on UniCredit's CET1 ratio.

If the process with the HFSF is not completed, UniCredit has stated that it would purchase an equity stake equal to the lower of 5% or a different percentage of shares which results from UniCredit investing an aggregate pre-agreed amount over a period of 24 months. The benefits of a long-term strategic partnership across geographies and products The transaction will enable UniCredit to enhance its presence in Romania and expand its product and platform reach to Greece. The partnership with UniCredit supports Alpha Bank's strategy and underpins its franchise value, with the enhanced product offering accelerating the delivery of its business plan targets.

It will further enhance Alpha Bank's customer servicing capabilities, through the sharing of know-how and leveraging on UniCredit's products and long-standing presence in the home markets of Italy and Germany as well as its Central European and Eastern European franchise. The Romanian merger will have an impact on UniCredit's CET1 ratio of around 15 basis points and, together with the commercial partnership centred around UniCredit's factories, is expected to add, on a run rate basis, above EUR 100 million in incremental net profit to UniCredit. .