Greece Ups the TBTF Ante With Merger Of Alpha Bank And Eurobank, Creates Largest (Jointly Insolvent) Bank In Southeast Europe

As of minutes ago, the speculation that Greek Alpha Bank and Eurobank are merging, in the process creating the largest Greek bank, and first TBTF candidate, has been confirmed, leading to a 30% jump in the stock prices of both Alpha and Eurobank. Not only that, but as AP reports, "the news triggered a Greek share rally, with the benchmark General Index on the Athens bourse gaining more than nine percent in early trading. On Friday, it had hit its lowest in nearly 15 years due to concerns over the future of the country's latest rescue package. The banking sector was up nearly 20 percent, while shares in National Bank of Greece, the country's largest lender, were up 29 percent." This move, which is nothing more than an attempt to pool deposit bases at these two very troubled institutions and thus prevent a bank run, needed a back stop to be credible: sure enough here comes the Petrodollar patsy: "Qatar Investment Authority (QIA), which is already an Alpha shareholder, is expected to take a bigger stake in the new bank. QIA holds 5% of Alpha and is expected to take 15% of the merged entity." The new bank will be the biggest bank in southeastern Europe, with assets of 146bn euros ($212bn; £129bn) and 1,300 branches. Eurobank shareholders will receive five new Alpha Bank shares for every seven Eurobank shares they own. And what would a bank merger be without ridiculous talk of synergies: The banks estimate that the merger will create about 650 million euros of synergy saving per year. Naturally nobody cares about this, as long as the first stake in the Greek bid for TBTFness proceeds as planned. That this step only delays the inevitable is irrelevant: for now the buying spree must resume. We fully expect the pro forma entity to eventually subsume all other Greek banks before finally it reverse mergers with the hollow ECB shell.

From AP:

Greece is in the throes of a major financial crisis, and only avoided bankruptcy after two international bailouts agreed over the past two years, worth a combined total of €219 billion ($315 billion). Central bank and government officials have repeatedly urged bank consolidation, arguing it will afford them greater protection from the fallout of the crisis.

 

Eurobank and Alpha, Greece's second and third-largest banks, told market authorities that their boards would be meeting later Monday to discuss the merger, as well as a capital boost for the new bank. While rumors of the impending deal broke over the weekend, the private lenders have made no official announcements yet.

And from the BBC:

Eurobank has recently sold its Polish subsidiary and promised to raise its capital further after failing EU-wide bank stress tests.

 

As major debtors of the Greek government, Greek banks have fared particularly badly in the sovereign debt crisis, surviving only with the assistance of the European Central Bank.

 

The second bailout for Greece will involve its banks having to accept lower interest payments on their holdings of Greek government bonds, albeit over a longer period.

 

Alpha Bank rejected a merger offer from the country's biggest lender, National Bank, in February.

Sure enough the government is giddy as it sees that the banking sector has finally understood that it needs to get big, big, big for the Eurozone to not let it to implode:

The planned merger between Eurobank and Alpha Bank comes as rare good news for the Greek government, which has been calling on the country's banks to pool their resources.

We congratulate this latest improvised moment in can kicking: in the meantime, we hope to shortly update readers on the €10 or so billion in deposits pulled out of Greek banks in the most recent month as the NBG data is updated.