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National Bank of Greece (NBG) has dug in its heels with its bid for smaller rival Alpha Bank, saying it is not in talks to improve the all-share offer, which is aimed at shaking up the sector.
Alpha rejected NBG's takeover bid on Friday, despite government support for the move by Greece's biggest bank. Athens wants the country's banks to consolidate so they can cope better with the country's debt crisis.
Shrinking deposits have added to strains on Greek banks, which are heavily reliant on European Central Bank funding for liquidity as access to wholesale funding remains mostly shut because of wider Greek sovereign debt concerns.
The proposed deal with Alpha would bring easier access to capital markets, NBG said in a conference call with institutional investors on Monday.
"We felt the talks were constructive which is why we were surprised by the negative response of Alpha's board on Friday," NBG's Chief Executive Apostolos Tamvakakis said. "Our proposal was always meant to be and remains friendly."
Alpha dismissed last week's eight-for-11 share offer, which values the country's third-largest lender at around 3 bln euros, as not being in its shareholders' interests.
Sources close to the discussions said Alpha was concerned about National's bigger exposure to Greek government bonds and felt the offer, coming at a time of depressed shares, did not reflect the bank's real value.
"NBG has a higher core Tier 1 ratio than Alpha but this should be assessed with the risk NBG is carrying on its balance sheet, including the larger exposure to Greek government bonds," one of the sources told Reuters.
NBG officials said the group would not improve its offer and that there was no discussion between the banks. "National Bank is sticking to the offer it has put forth, which is very generous for Alpha's shareholders," an NBG official told Reuters.
Shares in both banks rose after a trading suspension was lifted on Monday, with Alpha up 11.3% at 5.34 euros by noon and NBG's shares 2.7% higher at 7.78 euros.
Alpha's shares were trading at a discount to the value of NBG's offer.
"There is short-covering and a pent-up reaction because of the trade suspension on Friday," said analyst Manos Hatzidakis at Pegasus Securities.
NGB's move caught the market by surprise late last week, sparking a strong rally in bank shares, with investors seeing it as laying the ground for other Greek bank mergers.
The country's fourth-largest bank, Piraeus, said a deal between NBG and Alpha would be positive for the sector as a whole, echoing comments made by Greek Finance Minister George Papaconstantinou, whose government has been pushing the country's banks to merge.
Piraeus, too, was a target for take over by Cyprus-based Marfin Popular Bank in 2007.
Government officials made no secret of their disappointment about the rejection, saying Alpha should have risen to the occasion.
"We must all support a healthy banking sector," Deputy Defence Minister Panos Beglitis told Greek TV. "Bankers must also do their part and, in this case, Alpha did not."
SECOND TIME AROUND
NBG's offer would give Alpha's shareholders 29% of the combined group and the right to nominate the non-executive chairman. But it would put NBG firmly in control with the remaining 71% and the chief executive position.
It is the second attempt to merge the two lenders. In 2001, despite an agreement at board level, a deal fell through because of management disagreements.
Prior to NBG's announcement on Friday, talks with Alpha had been going on for five weeks, according to a source close to the situation, with management issues high on the agenda.
Shares in the country's second-biggest bank EFG Eurobank and Piraeus surged on Friday on market expectations they are next in line.
Piraeus made a bid for smaller, state-controlled ATEbank and Hellenic Post Bank in July but withdrew, saying the government was taking too long to make up its mind.
The other bank likely to play a role in the wider reshaping of the sector is Marfin Popular which made its own move on Piraeus in 2007 but was rebuffed.
NBG is being advised by Morgan Stanley and Merrill Lynch, while Alpha has hired JPMorgan and Citigroup.
