National Bank surprised by Alpha snub

National Bank (NBG), the country?s largest lender, said on Monday it was ?surprised? by Alpha Bank?s rejection of its friendly takeover bid, indicating that it is not likely to sweeten the offer.

?We were surprised by Alpha management?s negative response to our friendly offer but we are confident the market views the bid very positively despite its rejection,? NBG Chief Executive Officer Apostolos Tamvakakis said on an investor conference call.

NBG caught the market by surprise on Friday by announcing a 2.9-billion-euro all-share offer for its smaller rival, but Alpha?s board unanimously rejected the offer.

Alpha Bank Chairman Yannis Costopoulos said on Moday that his board rejected the proposal in the interests of the company?s shareholders, staff and clients.

?Alpha Bank, at a particularly difficult time for the Greek economy and banking system, is recognized by the market as a strong group with positive prospects,? Costopoulos said in a statement to staff, posted on the company?s website.

People familiar with the negotiations said that Alpha is concerned about increasing its shareholders? exposure to a possible ?haircut? on Greek bonds if a decision is eventually taken to restructure the country?s large sovereign debt.

NBG?s 21-billion-euro bond portfolio is the largest held by a Greek bank, while Alpha?s is the smallest at 4.5 billion euros.

National Bank sources were cited as saying on Monday that the lender is not in talks with Alpha on improving the offer.

It is the second attempt to merge the two lenders. In 2001, despite an agreement at board level, the deal fell through because of management disagreements.

Analysts and investors, however, remain confident that a deal could still be reached.

Alpha?s share advanced 5 percent on Monday to 5.03 euros, after racing ahead some 15 percent at the start of the session. NBG clung onto gains of 0.40 percent at 7.60 euros, after gaining 4 percent earlier in the day.

The broader market ended 2.76 percent in the red.

Alexander Kyrtsis, an analyst at UBS in London, told Bloomberg on Monday ?that there is a lot of value in merging banks in Greece because of the attainment of scale, overlap in the domestic market and strategic complementarity in southern and eastern Europe.? Kyrtsis rates Alpha a ?buy? with a 6.20-euro price target.

The proposed merger has a political dimension as Greece?s multilateral lenders have called for swift consolidation of the sector to stabilize the system and give banks a better chance of regaining access to wholesale funding markets.

Wholesale markets are closed to Greek banks because of fears of a sovereign default, leaving them dependent on funding from the European Central Bank.

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