The merger of Greek groups Alpha Bank and EFG Eurobank, both with operations in Romania, could be delayed by uncertainties over losses from the Greek state’s debt relief program for private creditors, an Alpha Bank official told Reuters on Monday. Shares in their banks were suspended on the Athens stock exchange on Monday. Before the trading halt, Alpha Bank was up 9.4% on expectations for a change in the terms of the merger in its favour. EFG Eurobank was down 0.25%.
Alpha Bank and EFG Eurobank, ranked second and third respectively in Greece’s top banks, agreed in August to merge to create the country’s largest bank to make it easier to deal with the debt crisis. Alpha said in a statement to the Athens stock exchange on Monday that it could not give a precise timetable for the merger with EFG Eurobank because of several factors, including negotiations with the Greek government on reducing Greece’s debt. “Alpha Bank informs that due to the current macroeconomic conditions directly affecting the banking sector (private sector participation in the Greek bailout), it is currently unable to provide a precise estimate of the timing and overall evolution of the merger with Eurobank EFG. As soon as definitive factors emerge, the bank will make an announcement,” an Alpha Bank statement said.
EFG Eurobank in turn notes that it wants to complete the merger as soon as possible and there are no reasons for delay. “Eurobank informs that it is in consultations with Alpha Bank to complete the merger process as soon as possible and considers that there are no reasons to delay the completion of the merger,” it said in an announcement sent by the bank to the Athens stock exchange. The Greek Finance Ministry notes, in a statement quoted by Athens News Agency and Reuters, that there is no reason why the bond exchange negotiations should affect the merger process between the two banks.
“The management of the two banks has closely followed the negotiations between Greece and private creditors. Thus, they are aware of the PSI framework agreement (private sector participation in the Greek bailout programme – ed.), which is not new and has not been changed from the previously considered option,” the statement said. EFG’s exposure to Greek government bonds is about twice that of Alpha Bank, which means it will be more heavily affected by the fact that losses from the bond buyback included in the Greek debt relief programme will be higher than assumed in the merger negotiations.
“There are financial issues that need to be analysed, such as the current net loss from the bond buyback. That doesn’t mean the merger deal collapses or will stop,” the Alpha Bank official said, declining to be named. The harsh effects of the country rating downgrade and growing portfolio of non-performing loans. Shareholders of the two banks approved the merger last November. Hit by deposit outflows, Greek downgrades and rising non-performing loan portfolios, Greek banks have been forced to explore closer collaboration in the hope of regaining access to financial markets.
The Athens stock exchange regulator suspended trading in the two banks’ shares in the early part of Monday’s session. Before the suspension, Alpha Bank shares were up 9.4% at 1.28 euros, outperforming the Athens stock exchange. EFG Eurobank shares were down 0.25% at 0.8 euros. “The market believes that the terms of the agreement could change in favor of Alpha Bank. EFG Eurobank has the largest portfolio of Greek government bonds, so according to the losses resulting from the net present value of government bonds, n.r.), it will have a higher recapitalisation requirement,” a banking analyst said.
A banking source close to the two banks said there are different views on the pace of the merger and discussions on the issue will continue. “Alpha is asking for a delay, nothing more, but it’s risky. Discussions will take place to reach a common denominator on the different views on the merger’s rhyme,” the source said.