A bloodless privatization

Giorgos Provopoulos remained just 28 months at the helm of Emporiki Bank, from April 2004 to last month, but his was a very full term, during which he turned around what was a shaky operation with 112 million euros in losses in 2003 to a dynamically growing business with expected 2006 profits at 210 million. Emporiki, nationalized in 1975, has returned to the private sector and France’s Credit Agricole, Europe’s biggest bank, which acquired the majority stake, has invested almost 3 billion euros in it. Provopoulos thus not only managed to restructure a state company but also carried out a bloodless privatization. (The only blood shed in the end was his, for he was sacked after the new owners did not accept his proposal to remain as both chairman and CEO, positions that are strictly separate in French-operated companies.) The government was satisfied enough with this performance to consider privatizing OTE in the same manner, that is by inviting a «strategic partner» to invest in the company and, at a later stage, take over the management. Provopoulos, 56, a University of Athens professor, was, until a few years ago, considered a theoretical economist, despite the fact that he had held a few positions in the public and private sectors. Under the previous conservative government (1990-93), he had first served as chairman of the Council of Economic Experts, when Giorgos Souflias was economy minister. In 1992, he had been appointed deputy governor at the Bank of Greece, gaining a thorough knowledge of Greece’s banking system as its supervisor. Then he was hired by Alpha Bank, the country’s largest privately owned bank, as its chief economist. In that capacity, he was directly involved in the acquisition and absorption of privatized Ionian Bank, and the consolidation of Alpha’s various investment subsidiaries. Before being appointed to the helm of Emporiki by the New Democracy government, Provopoulos had advised the party on economic affairs and helped it draft its program. He was ready for his difficult task at Emporiki. He certainly needed all the knowledge and political savvy he had acquired during his long career. At present, Provopoulos appears satisfied, almost relaxed, after finally managing to take a holiday. «If you know what to aim for and apply your strategy methodically and without deviating from it, you may succeed,» he says, referring not to his time in Emporiki but to the national basketball team’s recent second place at the World Championship. It is obvious, though, that this recipe was relevant to him at work. «Emporiki carried all the sins of state-controlled firms: union factionalism, low drive, an inability to reward hard work through better pay,» he says. There was also the issue of the huge deficit in the employees’ auxiliary pension fund which had led Credit Agricole to refuse the previous government’s offer to buy the state’s direct stake (9 percent) at 13 euros per share in 2003. Three years later, it agreed to buy it at 25 euros per share. Asked about the secret of his success, Provopoulos says: «From the beginning, I worked with a small team and concentrated decision-making… I feel vindicated that a solution was found that did not infringe upon employees’ pension rights. After the reduction in capital, we managed, despite the strikes, to achieve dynamic growth.» Emporiki’s strategy to sell its own shares initially led to a clash with Credit Agricole board representatives, who saw the shares of other foreign investors in the bank jump from 4 to 20 percent. But the decision filled the bank’s coffers with 150 million euros. «Then, we increased our capital. The increase was approved by shareholders in September 2005 and carried out the following December. Emporiki was now stronger. It had more capital and we avoided the danger of a credit rating downgrade. Some would have preferred that, so that the share price would drop and they appear as saviors,» he says.