Is it the turn of Greek banks to be targeted by foreign lenders and hedge and private equity funds? Senior banking officials and market observers consider this increasingly on the cards and say it could soon spark off rapid developments and spectacular realignments in the sector. Alpha Bank, Greece’s second-largest lender, last week was strongly rumored in London to be a target of HSBC. EFG Eurobank was also said to be, but to a lesser degree. Within the country itself, Marfin Investment Group’s (MIG) mammoth 5.2 share capital increase – now in the process of implementation – gave rise to expectations that it may attempt to approach Alpha Bank. None of this was confirmed, and Alpha officials attributed the rumors to speculative motives. Still other officials take the view that developments in the banking sector will not begin through any aggressive buyout bid, which is rather rare and difficult to succeed, but simply via an attack by hedge funds to tap hidden values. Such attacks by hedge and private equity funds have taken on the dimensions of a riptide worldwide. Greece, due to its small size, the largely localized focus, the family character of its companies and the relatively small dispersion of shares, has largely remained outside this trend. But Greek banks do not fit this profile. They are outward-looking, with a significant international presence and high dispersion of shares and marketability while a large part of their share capital is owned by foreign investors. Such buyouts elsewhere are helping to fuel speculation that such attributes make Greek banks attractive targets for hedge and private equity funds. Until a few months ago, the hedge fund Children’s Institute, which controlled only 1 percent of ABN AMRO, forced the Dutch-based bank into a series of defensive moves and a search for a so-called «white knight,» that is, a friendly counter-offer for a merger with another bank in order to avoid a hostile takeover bid. When an international banking heavyweight like ABN-AMRO, with a capitalization of nearly 100 billion, comes under attack by a small player, jitters are bound to spread far and wide among bankers. Such developments give rise to questions, such as why the bank’s capitalization is lower than its competitors, why profits per share are lagging, why return on capital is so low, why the bank holds onto assets and activities that are no longer profitable, or even why management has lost its spark and vigor. Hedge and private equity funds feed data into their computers and quickly indentify their prey – companies with weak performance compared to their assets – and launch merciless attacks with the sole aim of forcing them into actions that will boost the value of their shares. Greece’s largest lender, National Bank, has a capitalization about 3.5 times lower than that of ABN AMRO and would obviously be much more vulnerable to even small private equity funds (by international standards). And the possible defensive moves by the preyed on bank’s management would be limited, as officials recognize that the «fat years» are coming to an end. They also agree on one point: When the first shot is fired, the current relative calm will be a thing of the past. Everyone is preparing for a hot summer: Some are merely making defensive moves, or seeking strong allies abroad, while others are already trying on the white knight’s armor.