SHARES in two of Greece’s major lenders soared yesterday after they announced plans for a full-scale merger that will create the region’s biggest bank by assets.
Alpha Bank and EFG Eurobank saw their stock leap 26 per cent and 29 per cent respectively, with their rivals’ share prices also rising as investors welcomed the prospect of consolidation in Greece’s shaky banking sector.
The deal means that Eurobank will avoid having to seek government cash – and effective nationalisation – after being one of nine banks to fail the EU’s stress tests in July.
The bank, which was advised in the merger by Barclays Capital, Goldman Sachs and Rothschild, was ordered to raise at least €58m (£51m) in capital after failing the stress tests.
It also boosts Alpha Bank’s position following National Bank of Greece’s attempted takeover of the lender in February. JP Morgan and Citi advised Alpha Bank’s side of negotiations.
But the deal depends on the successful completion of a €3.9bn capital-raising plan that aims to bring the new bank’s core tier one ratio up 260 basis points to 14 per cent.
That includes selling €500m of convertible bonds to Paramount Services, which represents a family of prominent Qatari investors, and issuing €1.25bn in shares.
If that deal passes investor approval in November, it will see Alpha shareholders end up with 57.5 per cent of the combined entity, while Eurobank investors will own 42.5 per cent.
Paramount will end up with a 17 per cent stake, while the Greek Latsis family will hold 13 per cent and the Costopoulos family will own four per cent. Yannis Costopoulos will also chair the new firm, presiding over the merging banks’ two chief executives, Demetrios Mantzounis and Nicholas Nanopoulos.
Both banks also unveiled first-half results yesterday, with write-downs on Greek government debt pushing them into the red.
Alpha Bank posted a €518m loss due to a €532m impairment on its Greek government bonds while Eurobank also revealed a loss of €588m, with the impact of government bond write-downs at €664m.
The wider Greek market also reacted well to the news, with the country’s benchmark Athens index surging by 16 per cent in its best daily performance since December 1987.