Greek shares in chaos on bank capital worries

Tim Wallace
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GREEK stocks plunged early yesterday after plans to merge two major banks were scrapped, before soaring again on hints at a state rescue.

National Bank and Eurobank intended to merge as part of the sector-wide shrinkage in the wake of the country’s crippling financial crisis and six-year recession.

But progress was halted yesterday on fears that the combined entity would be too big for any future share sales and that they would struggle to raise the funds needed to meet solvency targets.

The pair, as well as Piraeus Bank and Alpha Bank, have to raise 10 per cent of the funds on the stock market under the arrangement, or face using state funds. But that is tough at a time when few investors trust Greek financial shares.

Any combined entity would have assets totalling €180bn (£153.5bn), almost as large as the country’s €190bn GDP and potentially making it a danger to the stability of the economy as a whole.

The two fear they are unable to raise sufficient funds, raising the prospect of nationalisation as they require additional cash.

Uncertainty took Eurobank shares down 30 per cent before ending the day up 20 per cent on suggestions it would end up raising the €580m it needs.

“We will mobilise and try to cover the required 10 per cent from the market. I am not saying we will make it, but we will try,” an executive from the bank said.

However, the state support on offer means all four banks should still be recapitalised on time under the existing schedule.

The Athens stock exchange overall ended the day up 0.74 per cent after falling 2.8 per cent in morning trading yesterday.