Cyprus branches set for absorption

Greece is fully prepared to absorb the Cypriot banks operating in this country, although the rejection of a key bailout measure by the Cyprus Parliament on Tuesday evening has postponed developments for now.

The Finance Ministry, the Bank of Greece and the Hellenic Financial Stability Fund (HFSF) rapidly concluded the necessary groundwork over the long weekend and are now waiting for the Cypriots to proceed with the completion of the transaction, namely the sale of the Greece-based branches of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank.

At least four Greek lenders have expressed an interest in acquiring the Cypriots’ portfolios in Greece, which come to 20 billion euros in loans and 14 billion in deposits. These are National-Eurobank, Alpha, Piraeus and Hellenic Postbank. Sources say that the best offers are from Alpha – which on Tuesday tabled an improved bid – and Piraeus.

Bank sources say that as soon as the Cypriot side makes the necessary decisions, the HFSF will select the most attractive offer and the Cypriot portfolios will immediately be transferred to the local lender of choice. The same sources add that the recapitalization of the Greek arms of Cypriot banks will require about 1.5 billion euros, which will be evenly split between Greece and Cyprus.

Cypriot banks will remain closed on Wednesday in Greece, as was the case on Tuesday. Several of their clients expressed concern regarding the possibility of Cyprus backtracking on the sale process.

In the meantime the governing boards of National and Eurobank decided to speed up the process for their merger, with National officials branding Tuesday a historic day for the group given that it signaled the start of the legal procedure for the creation of the country’s biggest lending group.

The two banks accelerated the procedure in a bid to prevent Greece’s creditors from raising further objections, such as those that surfaced last week from a draft document of the International Monetary Fund.

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