Realignments seen as brewing in the banking sector

The countdown to Greece’s much-speculated next round of concentration in the banking sector may have already begun. Last week’s acquisition of a 5.7 percent stake by Eurobank, the country’s second-largest bank, in state-controlled Hellenic Postbank (TT) is a move that puts in motion several «cogs and wheels» of the system, and may eventually prove to have been the spark of broader developments. Nevertheless, Eurobank officials appeared to be playing down the significance of the move, saying that it was purely an investment. They did not sound very convincing, as Eurobank has eagerly eyed TT for a number of years. Indeed, according to unconfirmed reports, its stake in TT is already nearly 10 percent. The one thing for certain is that Eurobank’s competitors will not simply stand by and watch it swallow TT as it would a piece of cake. National Bank has hastened to say that TT’s privatization can only take place through a tender process and that in such an event it would be among the suitors. The big question is whether the government will decide to sell its 44 percent stake in TT. But Eurobank’s acquisition of the 5.7 percent share gives it an advantage and nothing can stop it from buying up even larger stakes of about 40 percent from the remaining free float. Banks Alpha and Piraeus would also be sure to make their interest strongly felt in TT, along with Marfin Investment Group (MIG) if it completes the sale of a 20 percent stake in OTE telecom to Deutsche Telekom, which would boost its liquidity. MIG is in the midst of an investment spree and a new initiative in the banking sector is widely anticipated. The climate of fluidity in the sector is rekindling speculation that the recent contact between National and Piraeus, and even last summer’s between National and Alpha, may be reconsidered from scratch. Investment opportunity Eurobank’s latest move certainly has a strong investment logic: Valuations on the Athens Exchange have receded to very low levels, creating investment opportunities. TT’s exposure to high-risk alternative investment products (CDO’s) has recently led to a steep fall in its share price. It has lost 56 percent in the last 12 months. Eurobank paid 10.5 per share, against 12.5 when TT was floated in 2006 and 18.10 per share which foreign institutionals paid when they were offered a 20 percent stake last July. Clearly, even if Eurobank does not eventually win control of TT, the 5.7 percent it already holds will bring hefty gains. The reason that TT has sparked a mobilization among banks is that it has a very wide depositor base and abundant liquidity, despite its rather small market share. Its total deposits exceed 11 billion euros, with loans only about 5.6 billion euros. This gives it a loans-to-deposits ratio of about 50 percent, when other banks’ vary between 120 and 140 percent.

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