Small banks at center of speculation on sector restructuring

The new year has begun with strong expectations for a broad restructuring of forces in the banking sector, reflecting the performance of small and mid-sized banks on the Athens Stock Exchange. In the last few sessions, the shares of Geniki, Bank of Attica, Egnatia and Aspis have been the focus of investors’ attention, securing great gains. At the same time, rumors are spreading about a new round of purchases and mergers, even touching the «big five» (National, Alpha, Eurobank, Emporiki and Piraeus Bank). Regardless of the rumors, senior banking officials agree 2005 will be a year of significant restructuring. A great deal is expected from smaller banks, which find it harder and harder to compete with the «big» ones. But banking officials consider highly unlikely the possibility of big banks joining forces, mainly due to inflexible labor regulations. Driving developments is the government’s wish to privatize all banks it has stakes in, except for Agricultural Bank. The new management of Bank of Attica has improved its portfolio and is attempting to modernize so that the state can soon sell its stake in the best possible price. Procedures have also started for listing state-owned Postal Savings Bank on the bourse. Emporiki can also expect major developments. The solution to its serious social insurance problem, either following a universal formula or an exclusive one, will clear the way for the sell-off of the state’s stake and for the bank’s full privatization. Certainly the French group of Credit Agricole, which controls some 11 percent of Emporiki, will have the first say in its purchase. Geniki has attracted a great deal of attention (with its stock climbing very high in the last few sessions) after Societe Generale took control of it in 2004. The French never hid their intention of a swift expansion of Geniki, without excluding purchases. At times, the French have been reported to be interested in buying Egnatia Bank, but the latter’s main stakeholder, the Theocharakis family, categorically denied any such possibility. Even Bank of Attica could interest Societe, though. Novabank, which now has a strong network across Greece, has often been described as another purchase target for big and medium-sized banks. Finally, regarding big banks, any discussion about a merger is considered premature. After all, the failure of the merger attempt between National and Alpha illustrated all the practical difficulties such a big move would entail. Yet it is certain that speculation about the creation of a super-bank (by Greek standards) to dominate the broader Balkan region is intensifying.