Two plus two reasons for the bank merger reversal

There are two main factors that have led to the reversal of the merger. According to sources, the tie-up was about to create an additional capital requirement of 1.8 billion euros due to the share exchange between National and Eurobank. The troika had insisted on the merger making sense only if it led to a reduction of capital needs, not an increase.

National’s side disputes that figure, saying that the synergies from the merged banks would amount to 3 or 4 billion euros, thereby offsetting the impact of the share exchange.

The second factor was National’s inability to collect the 10 percent or 1.6 billion euros of its share capital increase in private participation for the recapitalization of the merged group, which would lead to the HFSF having complete control over it. According to the troika, such a big banking group, which would control just under 40 percent of the market, would be far more difficult to sell in the future, as the HFSF would have to do within five years, than finding investors for the two banks separately.

Furthermore, the recapitalization of the Greek credit sector had been planned in a way that would have created four main pillars, one of them being an independent Eurobank, which would later absorb the smaller lenders left in the market so as to consolidate the banking industry.

Finally, the troika did not want to give an extension to the recapitalization project, which would have been necessary in the case of the merged National-Eurobank group.