Greece's NBG-Eurobank merger suspended, official says

Sun Apr 7, 2013 5:45pm EDT
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By Lefteris Papadimas and George Georgiopoulos

ATHENS (Reuters) - National Bank's plan to absorb Eurobank EFGr.AT to form Greece's biggest banking group will be suspended until both are recapitalised, and a state bank support fund will decide if the they should merge, a Finance Ministry official said on Sunday.

National acquired 84.3 percent of Eurobank via a share swap in February with a view to absorbing it as part of broader consolidation in the banking industry to cope with fallout from Greece's debt crisis and deep recession.

But the plan raised concerns at the lenders' "troika" - European Union, European Central Bank and International Monetary Fund - that a merger would form a bank too big relative to Greece's gross domestic product.

"The final decision on the merger will be taken by the Hellenic Financial Stability Fund (HFSF)," the official, who declined to be named, told reporters.

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.

Under a recapitalisation scheme agreed with Greece's international lenders, most of the fresh capital will be provided by the HFSF, a state bank support fund, in exchange for new shares and contingent convertible bonds.

To stay private, banks must ensure that at least 10 percent of their share offerings is taken up by private investors.

"The two banks sent letters to the central bank saying it is unlikely they will be able to raise the 10 percent from the market," the official said.   Continued...

A man comes out of an Eurobank branch in central Athens October 5, 2012. REUTERS/John Kolesidis