Moody?s positive on NBG, Alpha deal

A merger between National Bank (NBG) and smaller rival Alpha would help the new entity’s credit position, ratings agency Moody’s said on Monday.

NBG surprised the market earlier this month with a bid for Alpha, but the move was later rejected by the smaller sized lender.

“If the merger proceeds, it would be credit positive for the combined entity, given the opportunities for cost synergies and franchise expansion, especially in southeastern Europe,» Moody’s said in a weekly report.

Moody’s said challenging operating conditions and possible resistance from labour unions to the merger could trim the projected synergies, but a good portion of the proposed tie-up’s goals looked achievable.

It said both banks’ ratings were still on review for a downgrade as their domestic franchises faced challenges from asset quality, funding and profitability, mainly stemming from Greece’s sovereign debt crisis.

Moody’s said the combined entity would be dependent on an estimated 37 billion euros in European Central Bank funding and would have around 25 billion euros of exposure in Greek government bonds, nearly twice its combined Tier 1 capital.

“Despite Alpha Bank’s rejection, NBG continues to promote the merger proposal with the market and investors, which in our view suggests that NBG is either pursuing a hostile public offer for Alpha or that it will propose a revised bid,» Moody’s analyst Constantinos Kypreos said.

NBG shares, which have lost some nine percent since Alpha rejected its proposal at the start of last week, were down 2.32 percent at 6.73 euros on the Athens bourse in mid session trade on Monday. Shares in Alpha Bank, which have added two percent in the last week, were off 2.05 percent at 4.79 euros on Monday. The broader market was 1.03 percent in the red.

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