* Trade union, leftist opposition against deal *
Piraeus Bank's plan to take over the healthy chunk of ailing state lender ATEbank boosted its shares on Monday as the deal will benefit its balance sheet, help it cope with a debt crisis and make it Greece's second largest bank by assets.
Piraeus, the country's fourth largest bank, on Friday agreed to absorb ATEbank's performing loans and securities portfolio and its deposits while the bad part will be liquidated.
The move signals the coalition government's determination to stick with a bailout plan agreed with its international lenders and resume the flow of funds from the IMF and its euro zone partners.
Central bank chief George Provopoulos will brief parliament on ATEbank's restructuring on Friday.
ATEbank, about 90% state owned, required a significant capital injection to continue operating. Getting it off the government's books was a condition of the 130 bln euro bailout keeping Greece afloat.
EU sources said in June the European Commission had been pushing Greece to wind down certain banks, possibly including ATEbank, an agricultural lender founded in 1929.
"Piraeus Bank gets the sound part of ATEbank, including assets whose value could rise in the future, and its deposits for just 95 mln euros. It's a good deal for Piraeus," said a banking analyst.
Piraeus will pay the 95 mln euros deal price to the liquidator of ATEbank's bad part to cover costs. The state will get no cash from the deal, letting go of an undercapitalised asset it would otherwise have to nurse.
The deal will leave Piraeus Bank with total assets of 74 bln euros, a deposit base of 35 bln and a loan book of 44 bln. It will rank second after National Bank, analysts said.
"At first glance, Piraeus significantly improves its deposit base and deleverages its balance sheet," said Euroxx Securities analyst Manos Giakoumis.
"The sound part of ATEbank will add 27.5 bln euros in assets, 14.1 bln in deposits and 11.1 bln in loans to Piraeus Bank's first quarter figures," he said.
The enlarged bank's loans-to-deposits ratio will improve to 134 from 172%. Deposits as a percentage of total assets will rise to 46.7 from 44% and loans as a percent of assets will drop to 62.7 from 75.6%, Giakoumis said.
Piraeus will operate as one bank but with two brand names. It expects the deal to generate synergies, mainly in the back office. Executives told analysts that the two branch networks were largely complementary and called the move liquidity friendly but would not speculate on whether the group would go after more deals.
"One thing at a time. We need to participate in the ongoing Greek banking evolution as a systemic bank but did a major part of this with ATEbank," said Piraeus Treasurer Tom Arvanitis.
Piraeus Bank, which in May was recapitalised with 4.7 bln euros by the Hellenic Financial Stability Fund (HFSF), a state bank support fund, will get an additional 500 mln euros to maintain its Core Tier 1 capital ratio above 8%.
The difference between the assets and liabilities that Piraeus will take over from ATEbank, the so-called funding gap, will amount to 6.7 bln euros and will be covered by the HFSF, which will hand Piraeus EFSF notes of that amount.
Shares in Piraeus, which surged over 16% early on Monday trimmed gains to end 9.5% higher, slightly outperforming the banking sector's 9.09% advance.
"The market is reacting positively to the deal, waiting to see what will happen as far as the wider restructuring of the banking sector is concerned," said Takis Zamanis, head of trading at Beta Securities.
Earlier on Monday, the Athens stock exchange suspended trading in shares of ATEbank after the deal. ATEbank's union started 24-hour rolling strikes, opposing the deal even though there will be no layoffs among the 6,400 employees.
The network of 483 branches in Greece and 31 overseas will operate within the Piraeus Bank entity under the “ATEbank” brand name.
The deal will also include financial subsidiaries ATE Insurance and ATE Leasing, while the non-financial subsidiaries (SEKAP, Hellenic Sugar, Dodoni, etc.) will be transferred to the government to be later sold by the Hellenic Republic Asset Development Fund. GGBs held by ATEbank will be transferred at fair value to Piraeus Bank, with the losses set to burden the bad part of ATEbank.
“This decision signals the commencement of the restructuring of the Greek banking system. In addition, we expect more deals to follow, with a clear focus centering on Emporiki Bank and Hellenic Postbank. The deal contains implementation risk given the different cultures of the two banks, while on the other hand synergies will be achieved over the long-term,” said Konstantinos Manolopoulos, analyst at Investment Bank of Greece, a Laiki Group subsidiary.
Meanwhile, Piraeus has halted the sale of its Egyptian subsidiary, the bank said on Tuesday, without offering reasons for the move.
In a filing to the Athens Stock Exchange, Piraeus said it would not seek offers of interest for the unit in the near future.
Get all the latest news and videos in your inbox. Register FREE