Banks on privatization back burner

The government is likely to put the sale of any state-controlled lenders on hold due to possible merger activity among banks and weak sentiment in the sector, as the Finance Ministry finalizes the 2010 privatization agenda in coming days. Expectations have been growing that Greek banks will join forces with peers in order to get through the country’s worst fiscal crisis in decades, prompting the government to wait for any changes that might appear on the banking landscape before deciding what to do with its holdings. The government currently controls Hellenic Postbank and ATEbank and has a stake in Attica Bank. Finance Minister Giorgos Papaconstantinou has repeatedly said that banks need to think about their future strategic choices over the next few years. These comments have been interpreted by banking sources as urging lenders to seriously look into mergers or buyouts as a means of ensuring a sustainable future. Investment sentiment in the sector has been low, with the crisis biting hard into their profits, as seen in the earnings figures reported by the country’s biggest lenders this week. This will weigh on the potential asking price the government may get in selling off stakes in banks. Piraeus Bank, Greece’s fourth-largest lender, was the latest to report profits yesterday showing a first-quarter drop-off in earnings due to rising provisions and flat loan growth. Piraeus said net earnings fell 87 percent to 7 million euros, broadly in line with market expectations. National Bank, the country’s largest lender, reported a 93 percent drop in profits, while peer Alpha showed its first loss in five quarters. Shares in the sector have plummeted by 45 percent on the Athens bourse over the last six months, versus a 30 percent slide on the broader market. The government’s 2010 privatization program is likely to be unveiled this coming week once a Cabinet meeting gives the green light to the sell-off plan. The Finance, Economy, Environment and Culture ministries may meet today to finalize the proposals that will be looked at by the Cabinet during the week. The sale of stakes in the Athens and Thessaloniki water and sewage companies (EYDAP and EYATH respectively) are likely to feature at the top of the agenda, with the management in each firm also going to an investor. Additionally, the government is expected to put up loss-making railway company Hellenic Railways Organization (OSE) for sale.

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