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Greek Banks First Merger: Piraeus’ Checkmate – Background

 Piraeus Bank, the  fifth-biggest lender in Greece, has submitted a proposal to the Greek government to buy “significant stakes” in two Greek state-controlled banks, the Agricultural Bank of Greece-ATE and the Hellenic Postbank-TTE,  Piraeus Bank CEO Mihalis Sallas announced in a Press Conference in Athens two hours ago.

The Greek government holds 77,35 % at ATE Bank and 33,04 % at TTE.

All three banks were temporarily suspended from trading today on the Athens stock market.

The administration of the Agricultural Bankcurrently convenes an extraordinary board meeting, and apparently had no advance notice of impending alliance. According to ATE CEO Pantalakis had recommended recently to  Minister of Finance the need to raise capital  of approximately 1.5 billion euro for the bank to recover fully. Had this increase been implemented, the Greek government should had to cover the  77%, stake of Greek government to this bank. A task difficult to achieve. Without capital increase, the ATE would hit the road for Financial Stability Fund in autumn. The ATe holds a 2% stake in Piraeus Bank.

What’s the deal?

According to a Piraeus statetement the new banking group will have a net loan portfolio of EUR 69 billion and deposits of EUR 64 billion. It further said that the merger would produce EUR 300 million a year in savings to shareholders, with EUR 200 million to EUR 220 million coming from cost reductions, and EUR 80 million to EUR100 million from revenue synergies.

It also said that the group would have a capital adequacy ratio of 9% and a loan-to-deposit ratio of 98%.

The banking giant will  have a capital adequacy ratio of 9% and  liquidity over 98%.

The new banking giant  will have 1.000 branches and 25.000 employees .

The price for acquisition of ATE Bank and TTE are 701 million Euros.  Piraeus is offering in cash 372 million euros for ATE Bank ( €0,53/share) and 329 million euros for the Postbank (€ 3,5/share).Piraeus bank offers a little more for Postbank shares and a little less for those of ATE Bank.

Government’s  reaction

The Greek government is ‘studying the offer’ Finance Ministry said in a statement “under the aspect of public interest and sustainable course of the formation”.

Oddly enough Piraeus proposal of 701 million euros  comes out the day coalition  government in Slovakia rejected providing its euro800 million share of the euro110 billion EU bailout plan for Greece. Coincidence?

Last week Greek Finance Minister George Papaconstantinou has urged Greek bankers to adjust to the new economic environment and said that banks need to take decisions that will ensure their competitiveness.

Piraeus, Agricultural and Hellenic Postbank are currently undergoing a stress test by European Regulators. Results are expected to be released on July 23.

Keep “tuned” with as I prepare a report with reactions to this Bank merger .

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