Good morning, everyone. Today, our CFO, Gloria Hernandez, will comment on the main highlights of the EVA acquisition we had just announced. We will follow-up with a Q and A session later on. Thank you.
Okay. Thank you, David. Good morning, and welcome to this webcast presentation. Yesterday, Banc Quinta announced its acquisition of certain assets from the Evo Group in Spain and Ireland. We will be presenting now the main features and impacts of this transaction.
The presentation will be followed by a Q and A session. As usual, you may send in your questions throughout the webcast. This presentation has been filed with the CNMB and is available on our corporate website. As mentioned in the introduction, BancIntel is acquiring from Smartholco, a company Smartholco, a company owned by some funds managed by Apollo, certain Evobank assets linked to its Spanish retail business and its fully owned subsidiary, Avantcard, in Ireland. The transaction specifically excludes other assets such as Ebor's point of sale financing and credit card business.
This transaction presents an excellent opportunity for Bancinte to further develop its growth strategy in key target areas: consumer finance and new digital banking model. Moreover, the financial terms of the transaction are beneficial for a sound and profitable business with a structure in Spain that is a perfect fit for Banquinta's digital operations. Obviously, it is still subject to regulatory approval from Spanish and Irish authorities. Thus, the deal is expected to be closed before the end of April next year. Finally, the relatively small size of the transaction has very limited impacts on the group's balance sheet, earnings and capital.
It also bears a very positive impact in the group's liquidity. Bancinter will acquire 2 specific assets from Evo Group as part of the transaction. Evo Retail's banking business in Spain, Evobanca, and its consumer finance business in Ireland, Avancard. The acquisition of FuegoBanco's business in Spain will reinforce our digital banking model, allowing us to consolidate a leading banking proposition for digital customers in Spain and to increase our value proposition for younger, digital native or self-service customers. Acquiring Avancar presents a unique opportunity to grow and diversify our consumer finance operations abroad and is a further step in BANKINTER's international expansion.
The favorable financial conditions of this acquisition make the deal earnings accretive after the 1st year and is expected to deliver a double digit return on invested capital in the medium term. The rationale for the transaction has to do with 2 facts. On the one hand, it will help us further develop our leading digital offering in the Spanish market and gain scale by adding a business that has been significantly de risked and downsized. Furthermore, in joining forces with COIN, it will be primed for growth. On the other hand, in addition to expansion of Bancinter's digital capabilities, the acquisition of Avant Garde in Ireland is a new step into its international expansion.
Bancinter Group is now operating with a full bank in Luxembourg, a branch network in Portugal and will be operating through a full consumer finance subsidiary in Ireland. The contribution to Bancinter of both businesses is clear. Concerning Evobanko, its customer focused franchise will lead to rapid customer growth, more than 450,000 new clients and market share gains for Bancinter Group. It will accelerate by 3 or 4 years our actual business plan for a new digital offering for native digital and self-service customers. It will act as a catalyst to develop new products and increase service quality with high customer satisfaction and increased customer referrals.
Concerning avancart, this business already has a high return on capital, a robust portfolio and very low levels of delinquency. It has an expected sustainable growth potential. It will significantly improve the geographical diversification of our group's consumer finance loan book. Finally, we will take advantage of its high quality management and staff with extensive experience in the local market and the country itself. All in all, we can say that the strategic fit with Banquinta is high and a good starting point for organic growth prospects in both markets.
The digital banking model of COINC, combined with the one from Evo customers, will incorporate the best of the 2 business models. It will offer several products from mortgages to advisory tools, digital account management, voice self-service, big data and CRM services, rapid money transfers, etcetera. Also, joining forces with 3rd parties such as Amazon, Linea Directa, Ola Luth, Booking, El Tenador, rental cars, etcetera, will enlarge the range of services we can offer to both customers. Bancinter launched a pure digital banking model, COINC, back in 2013. It provides a high level of service quality and a wide range of products and became a leading digital banking player in Spain, multiplying by 3 its customer base.
Evobanca has also an excellent digital platform that has almost doubled its customer base since 2013. It enjoys a very strong brand name in the new digital self-service population. Thus, joining forces, we will complement and enlarge product and service offering, provide more convenience through a truly multichannel distribution and increase our commercial productivity, leveraging in big data and CRM capabilities. The Evobanca customer base is younger and more self-service oriented than the Bancinter 1. However, its product cross selling ratio is still very low, and we believe it can be substantially improved by applying Banquinter's business model, which aims to be present in the whole financial cycle of individuals from lending to insurance.
In the consumer finance business, acquiring Avancar allows Buankinter Consumer Finance to increase its loan book by 15% to 20% or €300,000,000 and improve its balanced business model in terms of geographic and product diversification. According to the pro form a balance sheet, Spain will represent 78% of the loan book Portugal, around 6% and Ireland, 16%. To offer you a better understanding of the transactions perimeter, we present here the key Evobanca figures as of June 2018. Total assets of €3,400,000,000 with a loan book of €1,200,000,000 of which 67% are residential mortgages and 15% consumer finance. The loan book's NPL ratio is 0.7%.
Evobanko customer deposits amounted to €3,000,000,000 and asset under management reached €400,000,000 mainly mutual funds, pension funds and equities. It has only 5 branches and 229 full time employees, servicing over 456,000 customers. Finally, with €34,000,000 operating income and €31,000,000 of operating expenses at the end of last June, it is almost a breakeven P and L account. Avancard figures are small in size, less than €400,000,000 in total assets, but with high profitability and return on equity, a low NPL ratio of 2.2 percent and only 145 full time employees in Ireland servicing more than 150,000 customers. Avant garde is the specialized consumer finance leader in Ireland.
It comes from the former MBNA Ireland. Its market share is 15%, behind only the 2 largest Irish banks. Its P and L account as of June this year shows €7,000,000 in earnings before taxes or a 39% implicit ROE, with gross operating income amounting to €24,000,000 and operating expenses of €13,000,000 The transaction is small for bank interest size and will have no material impacts. On the current slide, we present the main figures and management ratios at an individual level and the impact on the combined entity. This data for Bancinter and Evobanko is from June 2018.
In total, both businesses will add some €1,500,000,000 in net credit and loans, which represents around 3% of Bancinter's loan book. The combination will obtain €56,000,000,000 in credit and loans. The new business is more liquid than Bankinter with €3,000,000,000 in customer deposits or 6.3% of total deposits in Bankinter. The combination will have a total amount of €51,000,000,000 in customer deposits. As a result, the 114% loan to deposit rate in Banquinter at the end of June will improve by 4 percentage points to 110%.
Nonperforming loans will marginally increase and remain at €2,000,000,000 whilst the combined NPL ratio will improve slightly to 3.2%. Our balance sheet assets under management will increase by 1.4% and reached €24,000,000,000 Retail Banking customers will grow by 456 1,000 or 50 percent, and consumer finance customers will add 151,000 or 13% more. Finally, employees and branches will increase by 374 and 5, respectively. All in all, as you can see, it will have a small and very manageable impact at group level. As a result of the attractive financial conditions and the restructuring effort already carried out in the franchise, the transaction will bear accretive earnings after the 1st year with a sustainable ROIC in the medium term of over double digit.
It is relevant to note that the assumptions used in the forecast have been very conservative and include no relevant cost synergies. And now on capital. The transaction will bear a very small capital consumption in third one fully loaded terms, 29 basis points, bringing the pro form a Z1 fully loaded ratio as of June this year to 11.26%. The estimated capital consumption of the business acquired amounts to €99,000,000 split between €119,000,000 negative impact of the risk weighted assets increase, a negative impact coming from intangible assets of €35,000,000 from Avancar and the positive impact of €55,000,000 of bad will coming from Evobanko. The bad will of the acquisition will be fully allocated to finance the acquisition.
Excess capital post transaction in the consolidated group will be of approximately 414 basis points over the Z1's REP capital requirement of the group. No dilution is expected for Bancinteres shareholders, thus adding value from the very beginning. In liquidity terms, the group's commercial GAAP will improve by €1,500,000,000 due to the positive difference between deposits and loans. In the following slide, we present the tentative transaction time line. After signing yesterday, the seller will initiate a project to carve out operations included in the transaction from those retained by the seller, that is Evofinance.
We also expect to have all regulatory approvals in Spain by the end of this year. Full regulatory approvals in Ireland will take more time. They are expected by the end of April next year, after which the deal will be closed. And finally, to summarize, the transaction will enable Bancinta to take another step in its successful international expansion since it acquired Barclays in Portugal in 2016 and created a new bank in Luxembourg in 2012. In addition to extending its efficient consumer finance capabilities into the Ares market, acquiring Evobanca will reinforce the bank's strategy to have a leading digital proposition in the largest Spanish banking customers' market.
Banquinter has a proven track record of integration and organic growth, as demonstrated recently by its profitable Portuguese operations. The strategic fit with the acquired digital oriented business is very high and reinforces our strategic focus on efficient growth in affluent and mass affluent segments, which are where Banquinter has greater capabilities and expertise. It also increases our value proposition to younger, digital native and self-service customers. The very favorable financial conditions of the deal as well as the funding structure with a small impact on capital and a positive effect on liquidity assured that Banquinter will create shareholder value from the 1st year and a recurrent return on investment over double digit in the medium term. All the impacts from the transaction are small and manageable for the size of bancinter and will not impact our current dividend policy.
This is all from my part. I am ready now to take your questions.
Thank you, Gloria, for the detailed explanation. Obviously, we have received a few questions already. As usual, we will try to group questions in topics in the interest of time. Let's start with the financials. For example, we had a few questions regarding the price of the transaction or the multiple we have been acquiring this business.
Okay. Thank you, David. Well, as you have observed in the presentation, no price is mentioned. And the reason for this is that the seller has requested us not to disclose the financial conditions of this private agreement until the closing date. This has to do with the fact that the seller is a private equity firm.
It's not a bank as we are, and that's one of the reasons. Another reason has to do with the fact that they will do the carve out of Evofinance before the closing. And at this stage, they don't know how this carve out is going to be done. In any case, what we can now confirm is that the final price to be paid is including a significant discount over the net asset value of the acquired businesses. And you can notice in the information that we have disclosed that the deal has generated a bad deal around €55,000,000 reflecting this discount.
Additionally, looking at the impacts on capital ratios, The capital consumption of this deal is very small, €100,000,000 So this is equivalent at 29 basis points in our ratio, which can give you an idea about the price of the deal. Finally, as I mentioned in the previous test that I have read to you, this will be funded organically with no dilution for shareholders, which also gives an idea about the small size of the transaction and the small price.
Understood. Do you have any comments on the expected return on these investments or the contribution to P and L that you will provide in the next couple of
years? Well, I will differentiate between Avancard and Evobanko. In the case of Avancar, you have the P and L, the 1st semester P and L. So you can calculate what is going to be the impact in the P and L of the group next year. Apart from this amount in the presentation.
So it's going to be a very profitable business. In the case of Evobanko, we have presented also the 1st semester P and L. That means that Evobanko is, this year, gaining €10,000,000 more or less, but this figure includes some benefits or some revenues coming from the financing of the rest of the group, and this will disappear next year. So on the one hand, the I would say, recurring income coming from Evobanko next year will be close to breakeven, but they will have extraordinary revenue coming from the back wheel of around €55,000,000 that will be used to finance part or to finance the integration costs that are not going to be of such a high amount, but is are going to be financed by this. So in short, in Evobanko, next year, we are waiting for a more or less breakeven P and L.
And from 2020 onwards, we are waiting for a recurring profit, So the deal will be accretive from that moment.
All right. Still on the P and L. Are we expecting any significant cost savings coming this integration, from this acquisition on the Evo underlying business or the significant investments we have to make for the business?
Okay. Again, I will have to differentiate between avancart and Evobanko. In the case of avancart, the recurrent cost operating cost are more or less €25,000,000 per year. And as we are not operating nowadays in Ireland, we are not expecting significant synergies in this franchise. But in any case, I let's we forget that Avancar has a ROE of 39% with this cost structure.
So no problems in our view in maintaining this structure this operating cost in this franchise. In the Evobank case, the situation is a little bit different. They have now operating cost amounting to €65,000,000 twothree of this amount are general expenses. And in this area, we are planning a lot of synergies because, as you can imagine, all the central operations will be done by the group. So we will analyze any possible operational and process redundancies at the corporate level.
And at the same time, we will try to operate through a single banking license in the medium term, and this will reduce our cost basis a lot. At the same time, we have to identify redundant or common suppliers, and this also creates some efficiencies in the medium term. In any case and at the same time, what this acquisition will allow us is to reduce some of the expenses that we have planned for continue developing COINT, because our intention is to integrate these 2 digital platforms, and this can improve service, but above all, it can generate cost efficiencies going forward.
Okay. We're also getting questions on whether we're buying any bond portfolios in this transaction. Are there any bonds included on this balance sheet?
Yes. In the transaction, well, the balance sheet, as you have seen in the presentation, is 3 total assets are €3,400,000,000 And the total loan book, adding up Evobanca and Avancar is €1,500,000,000 Apart from this, they have an ALCO portfolio around €700,000,000 which is really good ALCO portfolio, good quality ALCO portfolio, very close to the one that Bankinter has and that you know very well. Out of this total loan book, EUR 800,000,000 are mortgages. And then we have in the Evobanko book, 15% are personal loans and another 15% are public sector lending, not the ALCO portfolio. Apart from the ALCO portfolio, they have some good public sector companies included in the loan book.
I don't know if you want any other
It's clear. Okay. Moving on to the rationale and the strategic views. Can you elaborate on why we are buying consumer lending in Ireland and not in Spain?
Well, in the case of Evofinance in Spain, the reason is that when we analyzed the model of this business this business model, we realized that it was based mainly on point of sale financing. And as you know very well, this is a kind of business that we decided to stop doing last year in our own franchise, Banc Inter Consumer Finance. So for us, it has no sense to buy something that is doing a kind of business that we have installed in Spain, in our group. And concerning Ireland, the situation is really very different. As you know, Ireland Avancar Ireland is the year of MVNA business in Ireland and is a highly profitable franchise nowadays, with strong prospects for future growth after a long period of deleveraging.
Why Ireland? Well, because we consider that not we, we, the IMF, the European Commission and every analyst that has studied the country, has realized that the Irish economy has recovered very well since the financial crisis, and it is expected to significantly outperform the rest of Europe in terms of GDP, in terms of job creations and in terms of consumer demand growth. That's why we think that the consumer lending business in Ireland will give us the chance to grow in one of our strategic and most driving business lines, while diversifying our risk geographically. Additionally, the portfolio of Avant Garde Island is a very sound one that has been in runoff for the last few years, and that allows us to increase our balance sheet in bancinterconsumersfinance by an additional 15% to 20%. And finally, the platform the IT platform that Avancar owns is a really very good one, international one, very adaptable.
And this platform will allow us to operate in other countries without having to move there. So all in all, this is in our view, this is a very good fit with bank inter strategy and bank inter targets.
Okay. Just one quick question. And we do have any U. K. Exposure on that portfolio?
No, no, no, no, not at all.
Moving on to the Evo brand now. What are the plans regarding strategic plans regarding this portfolio of customers and this brand?
Well, the ideas are the following. First of all, what we will do logically is to integrate Evobank in the group in Spain. We will integrate what is called a core platform, the called technological platform in the core business platform of Bancinter in Spain. But then we will maintain the brand, Evo brand, which has been acquired as part of the perimeter of the transaction because this is a very well recognized brand. And the idea is that this brand will absorb the COIN brand to further strengthen our digital banking proposition.
From that moment, what we'll do is to implement a multi brand strategy in the medium term under a single banking license. That means that all the clients that are purely digital customers will be operated through Evobanca and the rest of the clients of Bancinter and the rest of the businesses of Bancinter will be operated through the Bancinter brand.
Okay. One more question on table Banco clients. Under bancinter standards, how many clients are we acquiring this transaction? Can you give some color on the profile of the clients?
Well, considering the bank inter criteria for clients, a client is considered when it maintains an account with balances above 0 euros. In that sense, all of these 455,000 customers are homogeneous with Banquinta Criteria. But apart from this, we have analyzed whom of them have also payroll accounts. And in this sense, 105,000 50,000, sorry, clients have payroll accounts, so are more valuable, I would say, customers, okay? Another point here is that 55% of this total, 4 55%, are 55,000 are young people, below 35 years, which is a segment very interesting for bancinter, and this is really new for us.
The added value of these clients is in this segment because the penetration, the cross selling ratio of in this segment is really very low now forever. And bank inter is very good in improving the cross selling, and this is the main reason why we consider that we can have some or we can be very this transaction could add some added value by being managing by Banquinta.
Okay. Very good. That was the last question. Many thanks, everyone, for joining us today. Obviously, for any further questions or queries, please contact our Investor Relations team.
Thank you, and goodbye.
Thank you.