National Bank – Eurobank merger stopped; shares plunge -30%

The news fell like a bomb on Sunday night: that the much praised National Bank (NBG) - Eurobank merger was stopped by Greece’s international lenders, the Troika of EU, IMF and ECB representatives. Greek media reported that the Troika had objections about the size of the new bank to have emerged from the merger. The two banks head for state control (HSFS).

According to Troika: a merger would form a bank too big relative to Greece’s gross domestic product.
National Bank of Greece was to absorb the Eurobank.

As if the Troika did not know about the volume of the new bank, when it gave the green light for this…
Greek finance minister Yiannis Stournaras and governor of Bank of Greece Giorgos Provopoulos were obliged to announce that the merger procedure was stopped.
The two banks will call separate EGMs and will be recapitalized separately by the Hellenic Financial Stability Fund (HFSF), suggesting that NBG΄s 85% stake in Eurobank will be fully diluted.

Together, the two banks need 15.6 billion euros in fresh capital to shore up their solvency ratios to levels set by the central bank after incurring losses from a sovereign debt
writedown and impaired loans.
Both banks will fall under the full control of the HFSF bailout fund. (Reuters)

If each of the two banks fails to raise the 10% minimum private participation (the two banks have reportedly informed BoG that they will not be able to raise the 10%) they will be 100% recapitalized by HFSF (according to BoG΄s assessment exercise, NBG needs €9.75 bn of capital and Eurobank needs €5.8 bn).

 ”NBG and Eurobank will create two separate banking groups which may take under their umbrella the banking stakes currently held by the HFSF, namely the good Postbank and the Proton bank, as well as smaller banks that may fail to raise the required capital through private investors such as Attica and Probank – which suggests that Eurobank may absorb the good Postbank and NBG may absorb any remaining stakes.
The aforementioned strategy changes intend to address Troika΄s concerns as expressed lately over the relatively big size of the merged NBG/Eurobank, the potential additional capital needs of the new entity and their impact on Greece΄s finances as well as the difficult task for the HFSF to sell its stake in the merged group recovering a large part of its investment.
The BoG announcement says that the recap process proceeds and should be concluded by end April (meaning that all necessary approvals and documentation should have been concluded by then).
All four bank, Alpha, Piraeus, NBG and Eurobank have already called or about to call the EGMs. The BoG announcement also reminded that the 4 banks have already received the required capital from the HFSF as part of the €50 bn package which have been approved for the banks΄ recap.”(via Capital.gr)

Several Greek journalists suggested that the National Bank of Greece, once the biggest bank of the country,  may have to be sold at the end of the process.
As expected, the shares of NBG and Eurobank plunged on Athens Stock Exchange on Monday.

11:21 a.m.
NBG shares – 30%
Eurobank shares – 30%
Alpha -19.47%
Piraeus – 23.13%

It’s been vehemently assured that deposits are not at risk.
At the end of the day (metaphorically), one will be able buy all Greek banks for a piece of bread and a slice of cheese light. For just 2.5 billion euro.
At the end of the day, banks will break apart in ‘good’ (deposits) and ‘bad’ (loans), the buyers will get the good bank and taxpayers will sit on the bad loans.
And Yes, your bet is on the right place: nobody feels like taking responsibility, nobody feels obliged to resign. Neither the finance minister, nor the CEO of these two banks…
PS I remember when everybody was attacking left-wing SYRIZA for saying that the banks must come under state control
 Posted by keeptalkinggreece in Economy