The pitfalls of an ill-fated venture

The now dead scheme for the merger of Greece’s two largest banks, the National Bank of Greece (NBG) and Alpha, had been considered by many to be essentially so days before the former’s announcement on Saturday made it official. Even the optimists, who retained hope that a meeting of minds could occur at the last moment, doubted that any deal would go through. Points of friction, after all, were not limited to the level of personal relations but were deeper, substantial and expressed a series of interests ranging from the petty, such as personal posts, to the high financial level, such as whether Alpha’s shareholders would be guaranteed a satisfactory premium. Theodoros Karatzas, a personal friend of the prime minister and successful manager of the country’s biggest bank in the last six years, had envisioned a big move that would leave his seal on NBG’s conversion into a bank capable of maintaining a competitive presence in the eurozone. His opposite number, Chairman of Alpha Yiannis Costopoulos, had been brought to accept Karatzas’s proposal after exhausting all available possible schemes for cooperation with foreign banks, proclaiming that «alone we could not, together we can.» The reasons spurring each man on had differed. Recently, Costopoulos said, «Let’s not fool ourselves, a partnership with a foreign bank would convert Alpha into the Greek arm of a group with a decision-making center outside Greece and with probably differing strategic aims and priorities, ultimately leading to the ‘disappearance’ of the bank.» Was it this which led him to accept the merger proposal? The failure of talks with France’s BNP last summer was attributed to the insistence of the French that, besides a stake in Alpha, they also acquired the management. This led to a search for a Greek alliance. In a letter to Minos Zombanakis, a banker with long service in international organizations, Costopoulos called for an end to all contacts with foreign groups. The Karatzas-Costopoulos alliance initially appeared to serve both sides. First, if Alpha genuinely feared a hostile takeover, a deal with NBG seemed an ideal shelter from prospective suitors, thus salvaging the prestige of the largest private bank and its senior executives and basic shareholders. Second, the only other possible Greek suitor for Alpha was EFG Eurobank. Though seemingly an exclusive problem for Alpha, the latter posed the danger of a bank bigger than NBG that might bring about a dramatic change in the prevailing balances in the country’s financial and credit system. Thus NBG also had good reason to provide protection to the threatened banking elite. The biggest problem was the refusal by Alpha’s senior managers and basic shareholders to sit at the table if their demands for dominance over NBG and for equal participation in the management were not accepted. It seems that pressures were so strong that even NBG’s more amenable administration, backed by the senior directors and executives, appeared to prefer a break rather than «concession and surrender» to Alpha Bank. It may be noted that when the disagreements broke out, Costopoulos, who saw himself losing control, also became the recipient of more pressures from basic shareholders, who are said to have expressed the view that if they let a hostile takeover bid roll,they could secure a better premium for their shares than the swap ratio already agreed with NBG. All this is probably the least painful part of what went on behind the closed doors of the two banks last week. It is enough, however, to show the extent of a crisis in which trade unionists were also drawn in, accentuating it further (see adjacent column). Now that the dust is settling, it is certain that Costopoulos is already considering his next moves, perhaps the rekindling of contacts with foreign banks, or even the examination of a specific proposal. Karatzas, whose tenure can by no means be judged by the failed merger alone, is now expected to show the courage befitting his statement to Kathimerini a few days ago: «I did everything for this merger, (…) NBG is not giving up the vision of growth.»