With Greek banks still reeling from big losses imposed by the government in a desperate bid to write down its staggering $460 billion debt, shareholders at Eurobank have voted to accept a buyout offer from the National Bank of Greece (NBG).
The news agency Reuters reported that the vote paves the way for Eurobank to be taken over by its rival and merge to form the country’s biggest lender.
NBG first offered to buy Eurobank in October, jump starting a other possible consolidations as banks are struggling with not only government-imposed losses, but a default rate of 25 percent on loans and credit cards as Greeks buried under pay cuts, tax hikes and slashed pensions have been unable to pay their debts. Greek banks are also awaiting the rest of a 50 billion euros ($66.7 billion)
NBG said in a stock market filing that 84.35 percent of Eurobank’s stockholders accepted its voluntary tender offer, which would have expired on Feb. 22. NBG, advised by Credit Suisse, had offered 58 new shares for every 100 shares of Eurobank. The combined entity will have total assets of 174 billion euros ($232.14 billion,) loans of 113 billion euros ($150.75 billion) and deposits of 85 billion euros ($113.4 billion) based on their financial statements at end-September 2012 along with a significant presence in Turkey, Romania and Serbia.
The merger is expected to produce cost savings of up to 630 million euros ($840.44 billion) per year after the end of 2015. NBG executives have said that up to 25 percent of the combined network’s branches could be restructured following the deal.
NBG also plans to cut up to 2,000 jobs, or about 15 percent of its workforce, to generate savings from its takeover of Eurobank. “The key issue going forward will be implementation, uniting two big banks with different cultures and overlapping branch networks into one bigger entity,” analyst Maria Kanellopoulou at Euroxx Securities told Reuters.
Soon after NBG’s offer was launched, Eurobank’s major shareholders representing 44 percent of its stock said they would back the deal. Eurobank, advised by Barclay’s, Deutsche Bank and Goldman Sachs International, said last month that NBG’s offer was fair from a financial point of view.
NBG will take over a bank that has developed a reputation for aggressively pursuing people who can’t pay their loans and moving to take their homes if they don’t pay their mortgages. Prime Minister Antonis Samaras’ coalition government has yet to move on a promise to help beleaguered Greeks write down their own debts and get the same kind of deals with banks the government has.
Meanwhile, Alpha Bank and Piraeus Bank have also taken over smaller rivals to form bigger operations in the hope of regaining access to wholesale funding markets after they are recapitalized although critics fear the wave of consolidations could limit competition.
Alpha Bank bought Emporiki Bank from France’s Credit Agricole, with Piraeus taking over the healthy assets of the failed state lender ATEbank and Societe Generale’s) Greek subsidiary Geniki Bank. French lenders SocGen and Credit Agricole, which had acquired Greek banks as part of an expansion drive, decided to quit the Greek market because of the country’s continuing deep recession.