ATHENS — Two of Greece's largest lenders, Alpha Bank SA and EFG Eurobank Ergasias SA, Monday announced plans for a merger that would create the country's largest bank, in a bid to address mounting problems in the Greek banking sector.
"I am confident that the new combined entity will act as an important agent for the economic development of the country," Eurobank Chairman Efthymios Christodoulou said. "It is also well placed not only to withstand the current economic turbulence, but to create new opportunities and play a pivotal role in the future growth of the region," Christodoulou said.
According to a joint statement, the combined entity would be among the top 25 largest banking groups in the euro zone with pro forma total assets of EUR146 billion, and 2010 pre-provision income of EUR2.6 billion, also on a pro forma basis.
The banks said they would proceed with a series of measures to boost capital at the combined entity. These include a EUR1.25 billion rights issue, which is expected to take place early next year, and a EUR500 million convertible bond issue.
Another EUR2.1 billion would come from what the banks described as "equivalent internal measures," while also estimating synergies of about EUR650 million a year after three years.
Taking those measures into account, the combined bank would have a pro forma core Tier 1 ratio of 14%, even after expected write-downs for a upcoming distressed debt exchange involving Greek government bonds.
The merger comes as Greek banks have come under pressure from the government and central bank to consolidate amid mounting difficulties in the sector stemming from Greece's ongoing debt crisis.
