Greece’s bank rescue fund picked Eurobank to buy New Hellenic Postbank as part of consolidation in the sector and to meet a condition for the next tranche of Greece’s bailout, it said after a board meeting on Saturday.
Athens agreed with its euro zone and International Monetary Fund backers to sell Postbank (TT) and Proton Bank by July 15 as a condition for the release of more funds from the 240 billion-euro rescue package keeping Greece afloat.
The sale is the latest move in a consolidation of the battered banking sector that aims to form stronger, well-capitalized banks to fund the economy out of its six-year slump.
The Hellenic Financial Stability Fund (HFSF), the rescue vehicle set up to recapitalize Greece’s major lenders, said it aimed to sign a binding agreement with Eurobank on Monday, without providing further details.
In contrast to its slow-moving privatizations agenda, Athens has shown better performance on the banking front. Authorities have met deadlines to stress test and recapitalize the major banks and wind down lenders deemed not viable.
By contrast, targets for state asset sales to pay down public debt have been missed, leading authorities to mark down projected proceeds.
Greece’s unsuccessful attempt to sell state gas company DEPA was the latest setback in its privatizations program that underpins its 240 billion euro EU/IMF bailout.
Goldman Sachs was the fund’s adviser on the Postbank sale. Alpha Bank, National Bank and Piraeus Bank’s Geniki unit had also bid to acquire TT.
HFSF was effectively selling TT to itself as it owns not only 100 percent of TT but also 93.6 percent of Eurobank, Greece’s fourth-largest lender, after recapitalizing it with 5.84 billion euros last month.
On Friday, the HFSF also picked Eurobank to acquire the small lender Proton, which is also fully owned by the fund.
A Eurobank executive who declined to be named told Reuters the bank’s offer involved shares, not cash.
Authorities wound down TT in January after efforts to sell it failed. They stripped out bad loans from its portfolio and transferred less risky assets and deposits to a new entity called New Hellenic Postbank. The bad loans are being sold.
The HFSF pumped 4 billion euros into the bank to cover its funding gap — the difference between assets and liabilities — and a further 500 million to recapitalize it.
Like other Greek lenders, TT was hit by writedowns on Greek bonds and loan impairments in the wake of a debt crisis and deep recession.
The healthy relaunched TT has assets of 13.7 billion euros, deposits of 10.7 billion and a network of about 200 branches. Proton is a much smaller bank with deposits of 1 billion euros and 1.3 billion in assets.
The acquisition of TT improves Eurobank’s liquidity profile and its reprivatization prospects, adding to doubts on whether a suspended merger with its peer, National Bank (NBG), will go ahead.
“As far as the troika is concerned, the merger is dead. The tie-up of TT with Eurobank is the optimum combination. It adds to the value of Eurobank in the HFSF’s portfolio in view of its reprivatization,” the Eurobank executive said.
In April Greece’s international creditors blocked the plan to merge Eurobank with NBG on fears that it would become too big. Last month, Eurobank’s new CEO said the bank must follow an independent course.