National Bank shares soar 5.07 percent

National Bank of Greece (NBG) yesterday saw its share soar by a massive 5.07 percent at the same time as it received praise from Swiss investment bank UBS Warburg for its timely decision to call off merger talks with Alpha Bank over the weekend. NBG stock rose to 26.52 euros, while Alpha’s gains were more limited with its shares up by 0.41 percent. The banks’ strong performances yesterday came on the heels of a minor rally the previous day, underlining the relief felt by investors at the failed merger. NBG and Alpha stocks had come under strong pressure following the news of their planned merger last October. Calling the original decision by both banks to merge a «bold» move, UBS Warburg analyst Dimitris Spanodimos said credit should be given to the management of both banks «which decided early enough to abort the process when the first serious disagreements about management structure and responsibilities arose.» The investment bank said it was maintaining its «hold» rating on both stocks, with the target prices set at 27.4 euros and 21 euros for NBG and Alpha respectively. It said the target prices and ratings «reflect our view about their [the two banks] fair value as single entities.» Spanodimos said it was unlikely that both banks would rush into any cooperative venture in the near future following the high-profile merger fiasco. A better strategy would be for NBG to intensify its cross-selling efforts, strengthen its profitability and cut costs, and for Alpha to focus on specific market segments. US investment bank Schroder Salomon Smith Barney (SSSB) said the failed bank merger could affect other Greek banks seeking to ally with each other and international investors eying the Greek market. «We believe the reasons behind the failed merger – management and organizational structure issues – could deter both the necessary consolidation of the sector and international interest,» it warned in a research note yesterday. SSSB said Greek consumers could benefit from the possibility of the banks adopting more aggressive pricing strategies to reinforce their market share, which would however put pressure on the sector and future earnings.

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