Developments are accelerating in the banking sector

The acquisition of the sound part of ATEbank by Piraeus Bank on July 27 kicked off, in my view, the long-awaited new round of consolidation in the Greek banking sector. Following this transaction Piraeus improved its deposit base, while became the second largest bank in the Greek market, leaving Eurobank and Alpha Bank in the third and fourth place respectively.

A few days later, on August 8, the other three leading banks, namely Alpha Bank, Eurobank and National Bank, submitted binding offers for the acquisition of Emporiki Bank, fully owned by Credit Agricole. The offers are subject to approval by BoG and HFSF, which reportedly have set as prerequisite for the sale the recapitalisation and full funding of Emporiki Bank before it is sold. Credit Agricole said on August 28 that “no decision has yet been made on entering into more advanced talks” regarding the aforementioned offers, deferring its decision for a few weeks, most likely to clarify with regulatory authorities all pending issues.

Although the initial perception, following the acquisition of ATEBank, was that Piraeus would not be involved in any other transaction at least in the short-term and the other three potentially on sale banks, namely Emporiki Bank, Hellenic Postbank and Geniki Bank would end up with one of the other three leading banks, Piraeus surprised the market confirming press reports indicating it was interested in Geniki Bank. In particular, both Piraeus and Societe General, dominant shareholder of Geniki controlling 99.1% of the bank, confirmed on August 29 “they are engaged in confidential discussions, which are at an advanced stage”. Reportedly, announcements are due in the next two weeks.

At the same time, the deadline for the announcement of Hellenic Postbank’s FY’11 results was not extended to October 10, as it was previously communicated by MoF, and the bank was due to publish FY’11 financial statements by August 31. Nevertheless, the bank stated that due to “extremely adverse conditions” it was not possible to publish results until the specified deadline. Following this development, Athens Stock Exchange decided the temporary suspension of trading on August 30. In any case, the publication of FY’11 results will clarify the bank’s capital shortfall, primarily due to PSI and determine its recapitalisation needs.

What is more important is that FinMin stressed at the Economic Affairs parliamentary committee that the bank is not viable citing BoG and HFSF. Note that, according to the updated MoU, state capital support can be provided only to ‘viable’ (previously ‘systemic’) banks. As a result, all possibilities regarding the recapitalisation and future of Hellenic Postbank are open, while potential developments are also tied to the approval of the next tranche of €31.5bn to Greece, the bulk of which would be allocated for bank recapitalisation. I remind that, due to its solid deposit base and unleveraged balance sheet, Hellenic Postbank used to be the most attractive acquisition target in the Greek market before the crisis. Greek state is controlling directly 34.4% and indirectly 44.3%, while Eurobank and National Bank each hold a stake of 6.1%.

With bank recapitalisation terms still pending, without any indication on any specific detail at the moment, and the approval of the next aid -the bulk of which would be allocated for bank recap- also unclear, the market is focusing on this unexpected round of consolidation and restructuring of the domestic banking system: Mid-sized banks, either state-controlled (ATEBank and Hellenic Postbank) or subsidiaries of French banks (Emporiki Bank and Geniki Bank), being acquired by the leading Greek banks at a relatively small consideration cost, while consolidation among the top-4 banks -for yet another time- is postponed until the next(?) phase.

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