With merger deal off, 2 Greece banks to be taken over by state
Source: Agencies |
April 9, 2013, Tuesday
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TWO of Greece's biggest banks face nationalization after failing to attract private investment and a surprise move by the state to suspend their merger deal.
Shares of Greek lenders National Bank and rival Eurobank plunged by as much as 30 percent yesterday after they confirmed their merger deal had been halted and they are unlikely to raise the private capital they need to stay out of state hands.
National bought 84.3 percent of Eurobank via a share swap in February, with a view to absorb it as part of broader consolidation in the banking industry to cope with fallout from Greece's debt crisis and deep recession. But the deal raised the concerns of the "troika" of the European Commission, European Central Bank and International Monetary Fund that it would create a bank too big relative to Greece's economy and make it difficult to sell in future.
"Their admission that they are unlikely to raise the required 10 percent from private investors is quite negative (as) their shareholders may become owners of a nationalized bank," said Maria Kanellopoulou, an analyst at Euroxx Securities.
Greek government officials have said deposits in the banks will be unaffected by the deal's suspension, in a bid to reassure jittery Greeks after a bailout to rescue Cyprus included slapping a levy on bank deposits.
Together, the two banks need 15.6 billion euros (US$20.3 billion) in fresh capital to boost their solvency ratios to levels set by the central bank after incurring losses from sovereign debt writedowns and impaired loans.
Both NBG and Eurobank shares fell to all-time lows and hit their daily volatility limit, pushing the Athens bourse's banking index .FTATBNK down 17.4 percent. They recovered late with Eurobank rising 10 percent while National Bank recouped losses but was down 9 percent.
"The market's reaction reflects ownership dilution worries and uncertainty on what the future holds for both banks," said Theodore Krintas, head of wealth management at Attica Bank.
Under a recapitalization plan agreed with Greece's international lenders, the Hellenic Financial Stability Fund, a state bank support fund, will supply most of the capital banks need in exchange for new shares and contingent convertible bonds.
But to stay private, banks must ensure private investors buy at least 10 percent of their share offerings. Both have told the central bank they are unlikely to meet this requirement, a finance ministry official said on Sunday. That would mean about 40 percent Greece's banking sector will end up controlled by the state.
Shares of Greek lenders National Bank and rival Eurobank plunged by as much as 30 percent yesterday after they confirmed their merger deal had been halted and they are unlikely to raise the private capital they need to stay out of state hands.
National bought 84.3 percent of Eurobank via a share swap in February, with a view to absorb it as part of broader consolidation in the banking industry to cope with fallout from Greece's debt crisis and deep recession. But the deal raised the concerns of the "troika" of the European Commission, European Central Bank and International Monetary Fund that it would create a bank too big relative to Greece's economy and make it difficult to sell in future.
"Their admission that they are unlikely to raise the required 10 percent from private investors is quite negative (as) their shareholders may become owners of a nationalized bank," said Maria Kanellopoulou, an analyst at Euroxx Securities.
Greek government officials have said deposits in the banks will be unaffected by the deal's suspension, in a bid to reassure jittery Greeks after a bailout to rescue Cyprus included slapping a levy on bank deposits.
Together, the two banks need 15.6 billion euros (US$20.3 billion) in fresh capital to boost their solvency ratios to levels set by the central bank after incurring losses from sovereign debt writedowns and impaired loans.
Both NBG and Eurobank shares fell to all-time lows and hit their daily volatility limit, pushing the Athens bourse's banking index .FTATBNK down 17.4 percent. They recovered late with Eurobank rising 10 percent while National Bank recouped losses but was down 9 percent.
"The market's reaction reflects ownership dilution worries and uncertainty on what the future holds for both banks," said Theodore Krintas, head of wealth management at Attica Bank.
Under a recapitalization plan agreed with Greece's international lenders, the Hellenic Financial Stability Fund, a state bank support fund, will supply most of the capital banks need in exchange for new shares and contingent convertible bonds.
But to stay private, banks must ensure private investors buy at least 10 percent of their share offerings. Both have told the central bank they are unlikely to meet this requirement, a finance ministry official said on Sunday. That would mean about 40 percent Greece's banking sector will end up controlled by the state.
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