In a surprise move yesterday, the National Bank of Greece said it plans to absorb its investment banking subsidiary, National Investment Bank for Industrial Development (ETEBA), as part of a strategy to cut operating costs. Greece’s largest bank said the integration of the subsidiary into the group is expected to create synergies and economies of scale. It did not give details of cost-cutting. The bank holds a 75-percent stake in ETEBA which listed on the Athens Stock Exchange in 1973. The Post Office Savings Bank has a 1.8-percent stake. Following lower-than-expected first-quarter results, National Bank has said it plans to curb operating expenses. While the move took many by surprise, the rationale behind the decision makes good sense, said Sophia Skourtis, banking analyst at Marfin Hellenic Securities. «It’s business logic. Why maintain a separate investment banking operation when the parent bank is already active in the sector?» she said. She added that incorporating ETEBA into the group would also improve earnings for National Bank as it would reduce the payout to minority interests. National Bank said the assimilation of the investment banking subsidiary would give it greater clout in advisory services, enabling it to better compete in project finance, mergers and acquisitions and in underwriting activities. The combined portfolio of both banks in asset management is also expected to give National Bank an edge in this sector. Set up in 1963, ETEBA’s mission was to help local industries get a headstart. It graduated to capital market operations in the 1990s, a segment which has gradually overtaken the investment banking side. «Of late, ETEBA has been operating more as a trading house than as an investment bank,» said Skourtis. Like its parent bank, which reported a sharp plunge in first quarter profits as a result of a sharper-than-expected decline in trading income, ETEBA saw its first-quarter group results fall to 9.9 million euros for the same reason. The bank moved into the Balkans in the late 1990s, setting up representative offices in Belgrade, and subsidiaries in Bulgaria and Romania. It is also active in Egypt, Albania and Cyprus. National Bank’s absorption of ETEBA is conditional on approval from shareholders of both banks. The two boards are to meet shortly to determine the share exchange ratio. National Bank yesterday also said it has decided to absorb its French subsidiary, Banque Nationale de Grece (France), as part of its restructuring. It still plans to maintain a presence via a soon to be set up office in Paris.