EU, IMF resisting Greek bank NBG's takeover of Eurobank: sources

ATHENS (Reuters) - Greece's international lenders have asked Athens to halt National Bank's NBGr.AT takeover of rival Eurobank, worried that the resulting lender would be too big for the state to deal with, two bankers close to the talks told Reuters on Saturday.

A woman (L) makes a transaction at an ATM machine outside a Eurobank branch in central Athens October 5, 2012. REUTERS/John Kolesidis

The lenders’ concerns come as an unexpected twist in the takeover deal, which was launched in October and completed with a share swap. The two banks have already begun integrating operations after getting approval by authorities.

National Bank, Greece's biggest lender, took over 84.3 percent of Eurobank EFGr.AT in February via a share swap as the banking industry consolidates to cope with the fallout from the country's debt crisis and a deep recession.

The European Union, European Central Bank and International Monetary Fund “troika” had raised issues over the size of the merged entity relative to Greece’s gross domestic product (GDP) and the banking sector as a whole, the sources said.

The combined NBG-Eurobank group would have assets of 170 billion euros, almost the size of the country’s 190 billion GDP and 36 percent of total deposits.

“Pretty much these are the arguments put forth by the troika,” one of the bankers told Reuters, declining to be named.

NBG had offered 58 new shares for every 100 shares of Eurobank in the deal.

The lenders' concern comes as fellow euro zone member Cyprus reels under a banking crisis that has forced it to shut down its second largest bank, Cyprus Popular Bank CPBC.CY, also known as Laiki, and make an unprecedented raid on deposits over 100,000 euros as part of an EU-IMF bailout.

The European Commission, the government and the banks had no comment on the NBG-Eurobank deal.

An NBG official said the bank had no plans to alter course.

“NBG is going ahead with the legal merger process to absorb Eurobank, which has been approved by Greek and European authorities. Our goal is to complete the process by June,” an NBG official told Reuters, declining further comment.

Newspaper Kathimerini reported on Saturday that the troika’s request that the merger be cancelled was a “red line” for the government since the tie-up is now on its final stretch. But, it said, officials were optimistic the concerns would be resolved.

Officials from the troika are due in Athens next week to resume a visit to inspect Greece’s progress in meeting the terms of its latest bailout, on which it depends to avoid bankruptcy.

“The troika is arguing that the two banks must be recapitalized separately and remain separate legal entities,” the paper said.

The two banks together need 15.6 billion euros in fresh capital to shore up their solvency ratios to levels required by the central bank after incurring losses from a sovereign debt writedown and impaired loans.

Troika officials argue that the combined entity would find it hard to raise a minimum 10 percent of the needed capital from the private sector to stay privately run, as required under the agreed recapitalization scheme, the sources and the paper said.

Such an outcome would bring the group under the full control of a state bank support fund, which would have a harder time finding a buyer for a bank of this size in the future.

“I don’t see why the merged entity would be such a big monster that would be hard to sell. Bigger banks have been sold in Europe,” one of the bankers said.

Editing by Stephen Powell