FILE: Greece's second and third largest banks, Eurobank and Alpha Bank, announce merger deal

Record ID: 560064

  • Title: FILE: Greece's second and third largest banks, Eurobank and Alpha Bank, announce merger deal
  • Date: 29th August 2011
  • Summary: ATHENS, GREECE (FILE) (REUTERS) EXTERIOR OF ALPHA BANK BRANCH WOMAN TAKING MONEY FROM ALPHA BANK ATM MACHINE SIGN ABOVE ENTRANCE TO ALPHA BANK VARIOUS EXTERIORS OF ANOTHER BRANCH OF ALPHA BANK
  • Embargoed: 13th September 2011 13:00
  • Keywords:
  • Location: Greece
  • Country: Greece
  • Topics: Economy
  • Reuters ID: LVA10S9WRQCYE0NZJ0MSU2MLF95K
  • Story Text: Greece's second and third largest banks, Eurobank and Alpha Bank, are set to announce on Monday (August 29) a merger deal to better cope with a severe sovereign debt crisis and recession, banking sources said.
    The expected deal, which would create the biggest bank in southeast Europe by assets, 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.
    "The boards of the two banks will sign the deal early on Monday and the announcement and a press conference will take place at around midday," a banking official close to the deal told Reuters.
    Troubled by rating downgrades, deposit outflows and loan impairments in the wake of the country's worst recession in four decades, Greek bank shares have tumbled more than 55 percent in the year to date.
    "The deal is about a friendly merger between Alpha Bank and Eurobank, with the participation to a significant extent of the Qatar Investment Authority," a senior banker at Alpha Bank told Reuters.
    The new entity will have assets of 150 billion euros (USD$211.3 billion), 8 million clients and 80 billion euros of deposits, said a third banking official, adding that the banks were very close to a deal.
    The Qatar Investment Authority, which is already a shareholder in Alpha, will become a major shareholder in the new group, the officials said . Another banking official said the Gulf Arab state had signed the deal on Saturday.
    Analysts welcomed news of the deal between Eurobank, which failed the latest EU-wide bank stress test, and Alpha, saying it could help the two lenders weather the crisis.
    Investors have been concerned that writedowns from an upcoming bond swap aimed at saving Athens from bankruptcy and loan impairments could force Greek banks to recapitalize and turn to the state for help.
    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.
    The banking officials 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 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 (USD$148 billion) at the end of June, about 20 percent of the Greek banking sector's total assets.
    Alpha Bank, which one banking official said has been advised on the merger by JP Morgan and Citigroup , has a market capitalisation of 1.068 billion euros. Eurobank has a market capitalisation 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 is the country's largest lender, with a market capitalisation of 2.877 billion euros.
    The government, which has long pressed banks to merge to better face the crisis, declined to comment on Saturday (August 27).
    Greek banks will publish their first half results next week, starting with Eurobank on Monday (August 29).
  • Copyright Holder: FILE REUTERS (CAN SELL)
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