Most experts expected the new round of restructuring in the Greek banking industry to begin around the end of the year or in the first half of 2002 at the latest. The recent announcement of the merger of the country’s two biggest banks, National and Alpha, has fueled scenarios and led to a proliferation of further possible combinations. The basic players, whose moves will determine the new banking map, are now Eurobank, Commercial Bank and Piraeus Bank. But the State, which apart from National also controls the Agricultural, Commercial and Post Office Savings banks, emerges as the crucial factor. Agricultural Bank The government knows full well that the Agricultural Bank (ATE) must implement its restructuring program, which requires significant amounts of funds. This is common knowledge and potential suitors will have to take into account the extra cost entailed in the need to make provision for the bank’s non-performing loans. It is no coincidence that one of the ways which the government is considering dealing with the problem is balancing bad debts with ATE’s net worth, so that tomorrow’s strategic partner may buy the network, deposits and performing loans on condition that he also carries out a direct share capital increase that would restore the bank’s indices, particularly that of its creditworthiness. A scenario that would suit the State would be the absorption of Agricultural Bank by Commercial which would create one more strong pole in the industry operating on private economic criteria, in strategic alliance with France’s Credit Agricole – whose partnership with Commercial is already in place – with the State retaining a still relatively high stake. Commercial Bank But according to sources, Commercial Bank’s chairman, Yiannis Stournaras, does not seem to be keen on the above plan. He is said to take the view that ATE’s incorporation would create problems for Commercial, which is now implementing its own restructuring program. In the present phase, Stournaras, who was in Paris for talks with his French partners last week, would seek to augment the French bank’s existing 7-percent stake in Commercial; Credit Agricole possesses the right of first preference in case the government decides to sell a further stake in the bank. The French, however, are now giving priority to Credit Agricole’s listing on the Paris bourse and are much less concerned about raising their stake in Commercial. Besides, after the recent announcement of the National-Alpha merger, the French would be expected to re-evaluate the situation. While Stournaras of ATE may not be keen, the same, according to sources, is not true of Piraeus Bank Chairman Michalis Sallas. Particularly after the recent acquisition of a majority stake in the Hellenic Industrial Development Bank (ETBA) which has boosted his group’s capital base, its prospects look better, but Sallas would also have to take into account the upheaval which the further acquisition of a bank with serious problems such as ATE would cause. Much seems to depend on the moves of the Latsis group’s EFG Eurobank Ergasias. Its denial last Friday that it intends to make a public offer to Commercial’s shareholders does not seem to have quelled speculation on such a possibility. The group is said to be even keener on the Post Office Savings Bank (POSB), a possibility which the government is believed not to find unpalatable. Post Office Savings Bank With assets of 3.3 trillion drachmas, deposits of 2.8 trillion drachmas, 134 branches and 704 post offices as associated sales points, the acquisition of POSB appears as particularly attractive proposition – and profitable, at that, for the State. Its deposits represent 8.29 percent of total bank deposits in Greece. But for such a deal to go through, the government will have to transfer to the Public Portfolio Management Company all of POSB’s holdings in numerous companies and organizations in the broader public sector, such as in the National and Commercial banks, OTE telecoms and the Hellenic Portfolio Investment closed-end fund. The government wants a restructuring of the State portfolio in order to boost its revenues and promote the structural changes in the economy which would reduce the size of the State and boost competitiveness and productivity. Part of this drive are all the other part-privatization moves involving OTE, Hellenic Exchanges, Hellenic Petroleum, the Public Gas Corporation and the ailing Olympic Airways. But is it in the interest of private sector banks to rush headlong to buy the sheddings of the State? The pursuit of a market share may prove even fatal if all likely effects are not taken into account. If a commercial bank has branches throughout the country, is capable of serving the biggest clients and borrows on the best market terms, any increases in size can only be justified by a reduction in operating costs. A prospective buyer of a bank will have to judge whether its acquisition will lead to economies of scale, how soon this will happen and at what immediate cost, said one of the most experienced senior banking officials. Moreover, in a month and a half, the Greek economy is formally merging with the rest of the EU with the introduction of the euro. Competition will intensify and the biggest problem of Greek banks is how to face it, he adds. Such considerations should perhaps raise questions regarding the National-Alpha merger, which former National Economy Minister Yiannos Papantoniou described as a conservative and defensive move, impeding the entry of foreign competitors and limiting the horizon of the Greek economy. Alpha Bank Chairman Yiannis Costopoulos’s answer to this was no other combination could have created a truly European-sized Greek bank.