Finance Minister Giorgos Papaconstantinou met with senior bank officials yesterday in talks that focused on Piraeus Bank’s offer to acquire two state-controlled lenders, as employees at the buyout targets walked off the job in protest at the possible deal. On Thursday, Piraeus Bank offered to buy a 33 percent stake in Hellenic Postbank (TT) and 77 percent of ATEbank for 701 million euros in a bid to become Greece’s largest banking group. The government, which replied that it will consider the offer, is believed to be hiring advisers on the possible deal early next week. Papaconstantinou met with Governor Giorgos Provopoulos of the Bank of Greece, the country’s central bank, where the two are believed to have looked into the technical and legal issues associated with the possible merger. The finance minister then met with ATEbank Chairman Theodoros Pantalakis. In a move that caught markets by surprise, Piraeus’s merger proposal has fueled speculation of further takeover activity taking place in Greece, involving just about all sector participants. Banks are seen as looking into hooking up with peers in order to strengthen their capital, improve access to liquidity and weather the recession, Greece’s first in 16 years. However, workers at the two lenders launched strike action within hours of the proposal being announced. TT and ATEbank employees walked off the job yesterday and threatened to keep up protest action if the deal goes ahead. Meanwhile, rating agency Fitch placed Piraeus on negative watch yesterday, citing execution and integration risks from its offer. It views ATEbank as comparatively worse positioned to absorb further credit losses due to its weaker earnings capacity and a low equity Tier 1 ratio of 7.7 percent. «This reaction is overdone. There is no deal at all; there’s just an offer on the table,» said UBS analyst Alexander Kyrtsis. «There is admittedly risk in ATEbank’s loan portfolio but, on the other hand, ATEbank has the highest coverage ratio for its nonperforming loans in the Greek banking system. It would also help Piraeus reduce its loans-to-deposits ratio toward 100 percent.» Standard & Poor’s (S&P) placed Piraeus Bank’s rating on negative watch, saying that buying controlling stakes in ATEbank and Postbank could weaken its financial profile. Piraeus Bank’s business profile would emerge with a sizable customer base and leading market shares in the homes market, a larger deposit base and better liquidity if the deal goes through, the agency said. «Nonetheless, we believe that these benefits would be offset by the higher credit risk that would be embedded in the consolidated entity’s loan book compared with Piraeus’s own credit portfolio,» said S&P analyst Luigi Motti.