National says bank merger is going ahead

The big merger of National Bank of Greece and Eurobank Ergasias is set to proceed as planned, National’s chief executive officer Alexandros Tourkolias stressed on Monday.

In response to questions regarding the reported resistance of Greece’s international creditors to the completion of the mega-merger in the local credit sector, the CEO of the country’s largest lender said: “I have not been informed of any reaction. All approvals required have been provided by all institutional bodies in Greece and abroad.”

He added that he and his board are acting within the institutional framework for the realization of the recapitalization and the merger of the two banks.

The country’s creditors have expressed concern regarding the purpose of the merger, arguing that the new bank would be far too big, something that could create problems in finding a private investor after the end of the five-year control period by the Hellenic Financial Stability Fund.

National Bank sources respond that their concern is unfounded, as the economies of scale generated by the merger will be so large that they suffice to support the financial logic of the effort, as they are estimated to amount to 600 million euros per year.

“In the long term, the benefits from synergies are estimated at around 3 to 4 billion euros,” a source from National Bank stressed, and cited the recent interest by Canada’s Fairfax Financial Holdings in National’s recapitalization. That bid, which also included major institutional investors and other high-quality portfolios, was not deterred by the size of the new bank, the same source said, adding that, on the contrary, the prospects and potential of the mega-bank was the very reason for private investor interest.

Analysts say that the plan for the recapitalization is only in favor of retaining the banks’ private character in theory, as in practice it asks private investors to cover major losses they are not responsible for. Sources from National Bank say that were the recap plan to change, so as to give real incentives to private investors to participate, they would be able to cover far more than the 10 percent of the share capital increase needed to preserve the lender’s private character.