Greece's Alpha and EFG Eurobank sealed a merger on Monday, with help from Qatar, that is expected to trigger more deals to shore up banks battered by the debt crisis and recession. Alpha and Eurobank shares shot up by 30 percent as soon as the bourse lifted a trading suspension, after their boards rubber-stamped the deal to form the largest bank in south-east Europe, aided by a capital injection from the Qatar Investment Authority.
Greece's central bank chief and finance minister welcomed the tie-up as a watershed for Greek banking, saying the participation of a strong foreign investor was a boost to the banking system and the whole economy. "This initiative shows that today's crisis can be an opportunity for structural moves that boost both the financial sector and the real economy," Finance Minister Evangelos Venizelos said in a statement. "Qatar's participation sends an international message of confidence in the prospects of the Greek economy."
The deal comes as European Union and International Monetary Fund inspectors begin a visit to examine the country's performance against conditions set for its rescue by the international community. In Athens the banking sector index rallied 29.1 percent as details of the deal emerged. European bank shares were up 0.8 percent with the Paris CAC 40 index gaining 1.3 percent.
Troubled by deposit outflows, sovereign debt downgrades and rising loan impairments with the economy in its third straight year of recession, Greek banks had been urged to explore tie-ups in hopes of regaining access to wholesale funding markets.
A worsening liquidity squeeze and fears that a thorough audit of their loan books by private equity firm BlackRock would reveal the need for higher provisions have pummelled their shares. Investors worried that recapitalisation needs would force banks to turn to the Financial Stability Fund (FSF), a national capital support safety net. Such action would significantly dilute current shareholder ownership, placing banks in state hands.
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