Fairfax chair optimistic that Greek banks will soon recover

CEO backs Eurobank Ergasias, Grivalia merger despite millions lost on turnaround bet

ATHENS— After losing hundreds of millions of euros betting on a turnaround of Greek banks, Prem Watsa still sees recovery around the corner.

Eurobank Ergasias SA’s proposed merger with Grivalia Properties REIC reunites two companies the Canadian investor has built major stakes in over the past five years. The deal, announced on Monday, will make Watsa’s Fairfax Financial Holdings Ltd. the largest shareholder in the new lender with a 33 per cent stake.

Watsa, who founded Fairfax Financial in 1985 and remains its chairman and chief executive officer, is backing the deal after saying in December that he’s suffered losses in Greece of more than $600 million since 2014. Since last year, there’s been no let up: Eurobank has slumped 31 per cent while Grivalia, in which he holds a 51 per cent stake, also posted declines.

“We’re long term,” Watsa, 68, said in a telephone interview. “We bought shares when they recapitalized, we’re putting in more money through Grivalia. We think this is a very good bank.”

Despite the losses, Watsa said he’s thrown his full backing behind the merger and securitization, which aims to slash Eurobank’s ratio of non-performing exposures to about 15 per cent from about 39 per cent. Eurobank is seeking its own solution to a mountain of bad debt while Greece races to find a nationwide approach to accelerating soured loan disposals.

After the problem loans are taken out, Watsa said, “you’ll have a very well capitalized bank in a very good position to serve the Greek clients as well as the Greek economy.” “What Greece has gone through was a unique situation,” Watsa said. “When a country goes through a 25 per cent drop in GDP, it’s very difficult for any bank to do well. It needs to be recapitalized, it needs more money to come in. But that’s history now.”