ATEbank head says prefers merger with state banks

The head of state-controlled Greek lender ATEbank <AGBr.AT> said a merger with other state banks was a better option than the government accepting the bid from Piraeus Bank <BOPr.AT> and it would help the economy.

"Forming a state-controlled banking pillar which would consolidate ATEbank, Hellenic Postbank (TT) <GPSr.AT>, Attica Bank <BOAr.AT> and the Loans & Consignments Fund would benefit the Greek economy," ATEbank Governor Theodore Pantalakis told Reuters.

"This (bigger group) would support government plans for growth and the economy's modernisation in crucial sectors, especially in rural areas where it is more needed," he said. Greece's socialist government has called on banks to regroup and consolidate to better cope with an adverse economic environment; the country's debt crisis has made them dependent on the European Central Bank (ECB) for liquidity.

Piraeus Bank has offered 701 million euros ($891 million) in cash to buy government stakes in ATEbank and TT. The offer is being assessed by the government and its advisers Lazard, HSBC and Deutsche Bank. [ID:nLDE67P194]

ATEbank, which is 77 percent government owned, was the only Greek lender to fail a European stress test in July, scoring a Tier 1 ratio of 4.36 percent under the simulation's most adverse scenario.

The bank, which has a current market value of about 930 million euros, swung to a first-half loss of 110 million euros ($140 million) due to higher provisions and trading losses. It plans to raise capital of at least 250 million euros ($318 million). [ID:nLDE67O14J]

"A merger involving all these banks would not require cash outlays from the part of the government to strengthen the new entity," Pantalakis said.

"TT and the Loans & Consignments Fund have surplus liquidity that more than covers the required capital adequacy ratios for the new scheme," he said.