ATHENS/SOFIA (Reuters) - Eurobank (EURBr.AT) bought the loss-making Bulgarian branch network of fellow Greek lender Alpha Bank for 1 euro on Friday, a move that will allow Alpha to shore up liquidity in Greece and may also help insulate Bulgaria from the Greek debt crisis.
Greek banks, which have been closed for weeks as the near-bankrupt country negotiates a bailout deal with international creditors, face liquidity problems and are bracing for a deep overhaul including closures or mergers.
They will probably open again next week, propped up by emergency funding from the European Central Bank announced on Thursday.
As part of an earlier bailout agreement, Greek lenders committed to restructuring their operations, selling off assets held in the Balkans and focusing on their domestic market.
As part of Friday’s agreement, Alpha will be allowed to repatriate around 100 million euros ($108.5 million) of funds from Bulgaria, bank officials said.
Unlike all other Greek-owned banks in Bulgaria that are subsidiaries under the supervision of the Bulgarian central bank, Alpha operates as a branch, meaning the central bank in Sofia cannot exercise full control over the lender.
Eurobank runs a subsidiary in Bulgaria known as Postbank, while Alpha bank runs a network of outlets there that are controlled from Athens, which have been allowed to stay open despite bank closures and capital controls in Greece.
“Completion of the proposed transaction is expected by end of 2015 following the execution of definitive transaction documentation and the obtaining of all approvals required,” the two banks said in a joint statement.
“The proposed transaction is capital neutral for Alpha Bank and is fully aligned with its commitment to focus its operations only on its core markets,” they said.
Bulgaria is vulnerable to the fallout from the debt crisis unfolding in its European Union neighbor, as more than a fifth of Bulgaria’s banking assets are owned by Greek lenders.
The deal “will increase Bulgaria’s central bank controls over Alpha Bank’s operations and assets in the country, something that each central bank prefers,” said Georgi Ganev of Sofia-based think-tank the Centre for Liberal Strategies.
“It is possible that the deal will also decrease some of the risks that stem from the fact that Alpha Bank is a branch and not a subsidiary,” Ganev added.
Eurobank Bulgaria had assets worth 5.9 billion levs (3 billion euros) at the end of March and posted a first-quarter net profit of 20.8 million levs.
Writing by Matthias Williams; Editing by Jason Neely and David Holmes