DealBook: Two of Greece’s Biggest Banks Plan to Merge

John Kolesidis/ReutersGreek bank shares climbed on Monday on news of a merger between Eurobank and Alpha Bank.

5:11 p.m. | Updated

Two of Greece’s biggest lenders, Alpha Bank and Eurobank, announced plans on Monday to merge, a deal that could help increase confidence in the country’s beleaguered economy.

The combination, which will create the largest lender in Greece, with total assets of 146 billion euros, or $212 billion, comes as the International Monetary Fund completes its latest review of the country’s financial system and the broader economy.

Investors saw the deal as a positive sign for a group hobbled by the sovereign debt crisis. The stocks of Alpha Bank and Eurobank jumped roughly 30 percent on Monday, spurring shares of other financial firms higher.

“I am confident that the new combined entity will act as an important agent for the economic development of the country,” Efthymios N. Christodoulou, chairman of Eurobank, said in a statement. “It is also well placed not only to withstand the current economic turbulence but also to create new opportunities and play a pivotal role in the future growth of the region.”

Greek banks, which own large swaths of the country’s troubled bonds, have been at the center of the sovereign debt crisis. As those securities essentially proved worthless, foreign investors balked at lending to Greek financial firms. Lacking that critical source of funding, banks pulled back and credit tightened, worsening the problems in the economy.

By merging, Alpha Bank and Eurobank are looking to strengthen their capital positions and gain necessary heft to weather the crisis. The deal will help bolster the combined bank’s overall capital position, eventually increasing the buffer to 14 percent. It also signals renewed foreign interest, with the main shareholders including Paramount Services Holding, owned by a prominent family in Qatar.

“This initiative shows that today’s crisis can be an opportunity for structural moves that boost both the financial sector and the real economy,” the Greek finance minister, Evangelos Venizelos, said in a statement on Monday, according to Reuters. “Qatar’s participation sends an international message of confidence in the prospects of the Greek economy.”

The deal, which is still subject to approval by regulators, is expected to be completed in mid-December. Citigroup and JPMorgan Chase served as financial advisers to Alpha Bank, while Eurobank worked with Barclays Capital, Goldman Sachs and Rothschild.

Article source: http://feeds.nytimes.com/click.phdo?i=6edd51a102728a5f54f83503a1d9c00e