National Bank of Greece: seeking Alpha

It is no surprise that the Greek government backs National Bank of Greece’s unsolicited €2.9bn all-share offer for Alpha Bank. George Papaconstantinou, finance minister, wants to consolidate the country’s banks, both to strengthen them and to wean them off European Central Bank funding. NBG, 18 per cent state-controlled, is well placed to do his bidding. But the offer is no Trojan horse for a future nationalisation: Athens’ stake would actually decline by 6 percentage points. Rather, NBG’s offer is predicated on safety in scale, ahead of a second round of EU stress tests.

The merger would create Greece’s largest bank with combined assets of about €200bn, equal to more than 80 per cent of the country’s output. But big does not necessarily mean robust: their combined exposure to government bonds equates to almost 220 per cent of tangible equity, according to Goldman Sachs.

Alpha might need some help. It reports a third-quarter core tier one ratio of 8.9 per cent and the market is doubtful; the shares were selling at 0.4 times book value. On the other side, after a rights issue last year and the planned flotation of Turkish subsidiary Finansbank, NBG would have a pre-deal capital ratio of 13.4 per cent. The pro-forma capital ratio of the combined bank would be 10.7 per cent.

A 23 per cent premium was not enough to convince the Alpha board, which presumably wants a larger share of NBG’s claimed €550m in cost and funding synergies. The market was cautious; Alpha shares rose 8 per cent on Monday.

Another problem is that with a combined 34 per cent share of the Greek loan market and 40 per cent of deposits, the combination could fall foul of European antitrust authorities. But Alpha’s board may yet spare Brussels the trouble of investigating.

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