Greece's Eurobank, Alpha Bank in merger deal: sources
By Lefteris Papadimas and George Georgiopoulos
ATHENS | Sat Aug 27, 2011 2:54pm EDT
(Reuters) -
Greece's second and third largest banks, Eurobank and Alpha Bank, are expected to announce on Monday a merger deal to better face a severe sovereign debt crisis and recession, banking sources said on Saturday.
The expected deal, which is set to form the biggest bank in southeast Europe, will help the two lenders avoid turning to a state liquidity support mechanism and is likely to spark more reshuffling in the country's banking sector, analysts said.
Troubled by rating downgrades, deposit outflows and loan impairments, Greek bank shares have tumbled more than 55 percent in the year to date.
Investors are concerned that writedowns from an upcoming bond swap aimed at saving Athens from bankruptcy and loan impairments could force the banks to recapitalize and turn to the state for help.
"The deal is about a friendly merger between Alpha Bank (
ACBr.AT) and Eurobank (
EFGr.AT), with the participation to a significant extent of the Qatar Investment Authority," a senior banker at Alpha Bank told Reuters.
The banker, and another banking source involved in the deal, said the two lenders will hold board meetings on Monday, which will be followed by announcements and a news conference.
"EFG Eurobank and Alpha Bank are close to a merger deal," the second banking source said. "The new entity will have assets of 150 billion euros ($211.3 billion), 8 million clients, 80 billion euros of deposits," the banker said.
The Qatar Investment Authority, which is already a shareholder in Alpha, will become a major shareholder in the new group, both sources said.
Analysts welcomed news of the deal, saying it could help the two lenders weather the crisis.
"This is a strategic move in the right direction that will protect the two banks from the worst that is ahead for the Greek banking sector," said Takis Zamanis, chief trader at Beta Securities.
"
Qatar will probably inject money into the new entity at a time when Greek banks are facing lack of liquidity, losses from the PSI (private sector involvement in the bond swap) and rising loan impairments," he said. "The two banks may avoid asking liquidity from the existing support mechanism."
Recourse to Greece's Financial Stability Fund, a 10 billion euro safety net set aside to recapitalize lenders that find it hard to raise funds in the market, would set banks up for restructuring.
QATAR FUND
The sources provided no detail of the Qatari fund's involvement in the new group but one said it would participate in the new entity through a rights issue.
"The merger, with Qatar's participation, is a very positive move and keeps away the danger for the two banks to go to the support mechanism," said Manos Hatzidakis, analyst at Pegasus Securities. "It is positive because a new, bigger and stronger private group will be created in southeast Europe with a new shareholder."
The deal may also help the new entity open up access to wholesale funding
markets.
Greek banks have been shut out from the interbank market and are dependent on the ECB for liquidity, borrowing at its money market operations by putting up Greek government
bonds and other assets as collateral.
The latest data show funding from the ECB rose to 103 billion euros ($148 billion) at the end of June, about 20 percent of the Greek banking sector's total assets.
Alpha Bank has a market capitalization of 1.068 billion euros. Eurobank, which failed the latest EU-wide bank stress test, has a market capitalization of 1.017 billion euros. Eurobank shares have fallen 51 percent since the beginning of the year and Alpha shares are down 50 percent.
National Bank of
Greece (
NBGr.AT) is the country's largest lender, with a market capitalization of 2.877 billion euros.
The government, which has long pressed banks to merge to better face the crisis, declined to comment on Saturday.
Greek banks will publish their first half results next week, starting with Eurobank on Monday.
