Eurobank, Alpha Bank take large hit on bonds

Leading Greek lenders Eurobank and Alpha Bank, which are merging later this year, on Monday announced heavy nine-month losses brought about by write-downs on their Greek government bond holdings.

Eurobank, whose shareholders earlier this month approved a merger with Alpha to create Greece?s biggest bank, was 575 million euros ($768 million) in the red after setting aside 830 million euros in anticipation of state bond losses.

Excluding this provision and a special tax contribution, the bank — Greece?s second largest overall ahead of the merger — would have cleared 89 million euros in profit, down from 105 million euros a year earlier.

Eurobank CEO Nicholas Nanopoulos noted that the bond write-down was imperative under a eurozone bailout for Greece?s economy agreed last month.

?In today?s crisis situation, securing Greece?s European orientation should become a national strategic priority,? Nanopoulos said.

?It is therefore, imperative to fully commit to the objectives of the stabilisation program and implement the October 26th resolutions,? he said.

Eurobank had a 13-million-euro net profit in the third quarter alone.

Third-ranked Alpha Bank earlier announced a 567-million-euro ($757-million) nine-month loss after setting aside 760 million euros before tax to cover anticipated losses on its Greek government bonds.

Without the charge, Alpha said it would have had a net profit of 41.6 million euros, down from 75.8 million euros a year earlier.

The bank lost 41.9 million euros in the third quarter.

?We have led the way for the consolidation in the Greek banking sector, combining the two largest private banks in Greece, in order to craft one of the top 25 largest banking groups in the euro area,? said Alpha Bank chairman Yannis Costopoulos, who will head the new group, Alpha Eurobank.

?With our combination with Eurobank, we reinforce the banking system, we attract foreign investment and we build the capacity to provide the much needed stimulus to our economy,? Costopoulos said.

The merger is expected to be completed in December, Eurobank said.

The move is designed to create Greece?s top bank and the 23rd-largest in the eurozone, with 2,300 branches and 150 billion euros in assets.

A capital increase of 3.9 billion euros inherent in the deal is expected to be carried out in early 2012.

The capital increase will be undertaken by the three major shareholders — the two Greek families behind each bank and Qatari fund Paramount Services Holding Ltd, which will contribute 500 million euros and will control 17 percent of the new bank.

Greece?s parlous public finances have dragged down the country?s banking sector which has significant exposure to state debt.

The Greek government is currently in talks with private debt holders with the aim of securing a 50-percent write-down on its maturing obligations, meaning the banks have to take substantial losses on their holdings of government bonds.

Alpha still had 3.1 billion euros or 4.9 percent of total assets in Greek bonds at the end of September.