Sat, May 26 2012

Greek bank merger suspended over private sector bond write-downs

Tue, Jan 31 2012 17:43 CET 1740 Views
Greek bank merger suspended over private sector bond write-downs

Left to right: Alpha Bank's chief executive Dimitris Mantzounis, Alpha Bank's president Yannis Costopoulos, Eurobank's non-executive chairperson Efthymios Christodoulou and Eurobank's chief executive Nicholas Nanopoulos at the August 29 news conference announcing the planned merger of the two banks.
Photo: Reuters

Athens Stock Exchange suspended on January 31 trading in shares of Alpha Bank and EFG Eurobank, whose proposed merger would create the country's largest banking group.

The decision came after Alpha Bank said that it froze negotiations until the deal to write-down private sector holdings of Greek government debt is finalised. Reports in Greece said that Alpha Bank, which is less exposed to Greek government debt, was hoping to obtain better merger terms for its shareholders, namely better share-swap ratios, rather than considering cancelling the merger altogether.

In a statement, Alpha Bank said that the private sector write-downs, which aim to reduce Greece's national debt by a much a 100 billion euro, would affect the two banking groups "in a disproportionate manner."

In a separate statement, EFG Eurobank said that all conditions and regulatory approvals for the merger had been secured. The finalisation of the debt deal or the assessment of its impact on the two banks was not set as a pre-condition for the merger.

When the merger was agreed in principle in August, private bondholders were expected to write down 21 per cent of their Greek government debt. The figure later rose to 50 per cent and could now rise as high as 70 per cent, which would put pressure on both banks to maintain capital adequacy ratios.

If the merger goes through, it would create the euro zone's 25th largest lender. The new entity would have assets estimated at 150 billion euro and 80 billion euro in deposits.

It would also create Bulgaria's third largest lender by merging EFG Eurobank subsidiary Postbank with Alpha Bank's branch in Sofia, overtaking National Bank of Greece-owned United Bulgarian Bank. 

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