Piraeus Bank mum on M&A, swings to H1 loss

ATHENS (Reuters) - Piraeus Bank (BOPr.AT), Greece's fourth-biggest lender, gave few clues about possible M&A partners when reporting a first-half loss after a big impairment charge on a government bond swap.

With merger talk rife after the recent tie-up between Alpha Bank (ACBr.AT) and Eurobank (EFGr.AT), managing director Alex Manos said on Wednesday: "We have always said we believe there is merit in consolidation as long as mergers are friendly."

Greek banks, troubled by sovereign debt downgrades, deposit outflows and rising loan losses in a deepening recession, have been exploring tie-ups to bolster their financial strength in a bid to regain access to wholesale funding markets.

On Monday, Greece's second and third-biggest lenders -- Eurobank and Alpha Bank -- unveiled a merger to form the largest bank in southeast Europe.

Bank of Greece chief George Provopoulos said more bank sector consolidation was likely. "This sets the stage for more changes that will form a very positive picture in the banking system."

Piraeus itself considered combining with state-controlled ATEbank (AGBr.AT) and Post Savings (GPSr.AT) last year, and has also rebuffed a bid by Marfin Popular (MRBr.AT) in the past.

Talk now is that it may team up with National Bank (NBGr.AT) or Marfin. NBG tried to take over peer Alpha Bank earlier this year but was rejected.

On Tuesday, NBG chief executive Apostolos Tamvakakis said the group would not rush into big strategic moves until there was more clarity on the outcome of the debt exchange plan and a test of Greek banks' loan books by BlackRock Solutions, commissioned by the central bank.

CLEAN SLATE POST PSI

Piraeus reported a first-half net loss of 820 million euros ($1.18 billion). Its participation in a voluntary debt exchange (private sector involvement, or PSI) aimed at relieving Greece's debt burden led to a 1.0 billion euro pretax writedown.

PSI will see most of its government bonds exchanged for new, principal-guaranteed paper.

"About 99 percent of our Greek government bonds are in scope for the PSI as they mature by 2020 and will be replaced by safer bonds. We differ on this from most other banks. We will start with a clean slate," Manos told Reuters.

Piraeus had a core tier 1 capital adequacy ratio of 8.2 percent at the end of June. Manos said that after the debt exchange and other mitigating measures, including plans to sell its Egyptian operation, the ratio would rise to 10 percent.

Egypt's central bank has allowed due diligence and Standard Chartered (STAN.L) considering buying Piraeus's Egyptian subsidiary.

Piraeus said it had tapped the emergency liquidity assistance window at the Bank of Greece to cover funding needs.

"We have accessed the ELA mechanism in the third quarter," an official said. "It gives us more room to move, more flexibility. It is more expensive than ECB borrowing. The cost is about 3.5 percent versus 1.5 percent at the ECB."

(Editing by Dan Lalor)