Eurobank and Alpha: The marriage that never was

Spiros Latsis, Eurobank EFG’s main shareholder, is reportedly preparing to divest his assets in Greece and reduce his exposure to the country’s debt. Speculation has it that he might also sell his share in Hellenic Petroleum.

It is believed the escalation of Greece’s financial crisis and the shortage of capital his played a role in his decisions. Ending a partnership seemed like a good idea.

On August 29 last year, Eurobank and Alpha Bank, controlled by Yiannis Costopoulos, announced they would merge to create what was set to become the largest bank in Southeast Europe. That was then. A recent announcement by Alpha suggested that the much-heralded banking colossus is no longer in the making. Will it be a consensual divorce? We shall know after the recapitalization of banks.

At Alpha’s headquarters on Stadiou Street in central Athens, officials are cautious. They point to the figures. The agreement started with a mini-PSI, or private sector involvement, of between 20 and 30 percent and the loss was factored in the books. As the haircut grew to 50 percent after the European Union’s October summit, things became more complicated, as they now needed some 3.2 billion euros.

The problem was to be expected, Eurobank officials rightly point out. Perhaps the two banks should have frozen talks when Finance Minister Evangelos Venizelos warned that the haircut could exceed 65 percent.

Recently it became clear that bondholders would be forced to accept a haircut in excess of 70 percent on Greek bonds, bringing the damages up to 5 billion euros. Alpha Bank Chief Executive Dimitris Mantzounis admits no business deal makes sense “if the figures don’t add up.”

Every marriage has its problems. Different personalities, different cultural backgrounds, and different habits -- all quite capable of killing the mood and undermining the agreement high-ranking officials on both sides had been working on. However, both banks can survive without a deal.

The bad loans revealed by the recent BlackRock audit of the Greek financial system are of greater concern than the PSI. Banks need to restructure. Possible merges will be back on the table once there is a firm agreement on the PSI and Greece’s second bailout package.

Free from the influence of political officials, banks will be catapulted back to center stage. We will then see if Costopoulos is willing to go back on his prediction that “the Greek market has room for no more than two-and-a-half banks.”


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