Banks merge in bid to withstand financial crisis

The widely anticipated merger would create Greece’s biggest bank, and was immediately welcomed by the country’s Socialist government.

The move saw shares surge on the Athens Stock Exchange, with the banking sector up nearly 20 per cent while shares in National Bank of Greece, the country’s largest lender, were up 29 per cent.

The merger will also see investment from a Qatari investment fund, Paramount Services Holding, a joint statement from the two Greek banks said.

Greece is in the throes of a major financial crisis, and only avoided bankruptcy after two international bailouts worth a combined total of 219bn euros (£194bn).

Central bank and government officials have repeatedly urged bank consolidation, arguing it will afford them greater protection.

“The decision by the two banks to proceed with a merger is a positive development,” finance minister Evangelos Venizelos said. “This initiative demonstrates that today’s crisis could serve as a corrective opportunity and provide a boost in the financial sector as well as in the real economy.”

The deal, which requires regulatory approval, would create Greece’s largest bank by assets – $150 billion euros (£132bn) – with 80bn euros (£70bn) in deposits.

The terms of the merger agreement include an exchange ratio of five new Alpha Bank ordinary shares for every seven Eurobank EFG ordinary shares.

In February, Alpha rejected a takeover bid from National Bank of Greece.

However, this time Alpha Bank chairman Yannis Costopoulos said. “At a time when it is hoped Greece will experience the first signs of a recovery through the implementation of reforms and the support of its European partners, the new bank will aim to contribute to the resumption of growth in Greece and our country’s connectivity with its neighbouring markets in south-eastern Europe.”