Greece’s Eurobank, Alpha Bank in merger deal

EFG Eurobank Ergasias SA and Alpha Bank SA, Greece’s second and third-biggest banks, plan to merge to become the country’s biggest lender, two people with knowledge of the matter said.

The boards of both institutions will meet to approve the terms of the friendly deal on Monday, one of the people said, declining to be named. The meetings, and plans for a news conference at 2 p.m. that day, were confirmed by the other person.

The team-up between the two lenders would create Greece’s biggest bank with assets of 150 billion euros ($217 billion), more than 2,000 branches and about 80 billion euros in deposits. Qatar private investors who already have a stake in Alpha will participate in the new entity, according to one person. Chairman of the new lender will be Yannis Costopoulos, the present chairman of Alpha Bank, one person said.

Alpha Bank and Eurobank have lost at least 92 percent in Athens trading since the start of 2008 as the global financial crisis and Greece’s debt woes eroded the value of the businesses. The two Athens-based banks ended this week with a combined market capitalization of almost 2 billion euros, according to Bloomberg data, down from about 23 billion euros at the end of 2007.

Eurobank Deputy Chief Executive Nikolaos Karamouzis and George Aronis, a general manager at Alpha and member of the board, declined to comment on the report.

Shares in Alpha have plummeted 50 percent this year while Eurobank’s stock has dropped 54 percent as Greece received a second bailout from its European Union partners. Alpha Bank fell 26 percent this week to 1.9 euros and Eurobank declined 22 percent in the five days to 1.73 euros.

The government and the country’s central bank chief George Provopoulos are pushing the country’s banks to combine after their capital was depleted by the sovereign debt crisis and mounting loan losses, arguing that fewer and stronger banks can ride out the crisis, and extend loans to businesses and households to get credit flowing through to the economy again.

Greece’s banks were weakened as the debt crisis led to a slump in bond prices, a shrinking economy and forced the industry to turn to emergency funding from the ECB. With the country in a third year of recession and the government receiving a second bailout to avert default, Greece’s lenders face increasing loan losses. 

(Bloomberg)