The acquisition of CNP Insurance activities in Cyprus and Greece by Hellenic Bank has been labeled as credit positive by the rating agency Moody’s. This move is set to bolster the bank's network of operations and revenue streams, reducing its dependency on interest income.

Moody's, in its "Credit Outlook" report released Monday, noted that the transaction, which is still awaiting regulatory approvals, antitrust clearance, and approval from CNP Assurances' European Works Council, will position Hellenic Bank as a leader in the Cypriot insurance market.

The acquisition price of €182 million equates to a 1x acquisition multiplier relative to the bank's book value, with an estimated capital impact of about 2.6 percentage points, bringing the group's capital adequacy to a robust adjusted rate of 25.8% upon completion of the acquisition.

"However, we expect that the transaction cost will be recovered through retained earnings, as profitability remains strong and the bank is currently not paying dividends," Moody’s added, mentioning that the deal is likely to include CNP's 330 employees.

CNP Cyprus is the second-largest insurance provider in Cyprus, controlling a combined 24% market share of the gross domestic policies, trailing behind Bank of Cyprus' subsidiary, Eurolife Ltd. It is the largest provider in the general sector with 15% in 2023, based on the data from the Association of Cyprus Insurance Companies.

"The potential acquisition will bolster the broader activities of Hellenic Bank with market shares of 30% in life insurance and 23% in general insurance, including the existing insurance companies of Hellenic Bank, Hellenic Life and PanCyprian (general sector)," Moody's stated.

Moreover, Moody’s anticipates that the transaction will enhance the diversification and sustainability of Hellenic Bank’s profitability by bolstering revenue from insurance activities, thereby reducing its reliance on net interest income, which accounted for 80% of total revenues in 2023, compared to 72% for Bank of Cyprus.

The rating agency also projects that the increased insurance operations will generate cost savings through synergies, while also creating opportunities for product distribution as it gains access to a larger customer base (160,000). This will enable the bank to offer a broader range of insurance and wealth management products to its existing customers.