The state is promoting privatisation while the banks look to the potential Balkans market of 60 million customers
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Greek banking sector, once dominated by the government, has been utterly
transformed in recent years. There is still a great deal of activity,
with banks competing for strategic partners, in some cases turning to
foreign institutions.
In January, the fifth-ranked Piraeus Bank closed a deal with Dutch bank
ING, which will see the two join forces in providing asset management
products and services in the Greek market, as well as bank assurance
and employee benefits. ING group, which includes insurer Nationale Nederlanden,
has had a local presence since 1995 and has four branches.
The
two banks will combine for joint ventures after Piraeus Bank completes
its expected majority takeover of Hellenic Industrial Bank, which is
currently a public sector entity.
Piraeus president Michael Sallas says the bank will absorb ING’s
four branches and Nationale Nederlanden, with 2,500 advisers and 100
branches, and distribute the joint venture’s products.
“Apart from the deal’s contribution to Piraeus, Greece and
the economy will benefit from the trust shown by ING whose management
has a very positive impression of our economy,” he says.
The Piraeus-ING agreement came two days after the collapse of the proposed merger of Greece’s two largest financial institutions – 161-year-old state-owned National Bank of Greece (NBG) and the private Alpha Bank. The $8.85 billion deal, announced last November, would have been the country’s biggest-ever business merger. Although the two companies and the government believed the creation of a mega-bank with 80 billion euros in assets would lift Greece into a new banking league, critics had questioned the resulting synergy.
Most
analysts say Alpha will now search for a foreign strategic partner instead,
but the National Bank is returning to its pre-merger strategy of domestic
growth and expansion in the potentially lucrative Balkans.
The bank is expressing no interest in forming a foreign partnership.
Its view is that a foreign bank holding a small percentage of a leading
domestic player such as the National Bank would bring little benefit,
except to the product sales of the partner company.
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Vice-chairman
Apostolos Tamvakakis comments:
“A key objective is to expand our market.” At the moment,
this is restricted to Greece’s 11 million inhabitants, whereas
the Balkans has a potential market of some 60 million people. At the
same time, by forging a dynamic presence in southeast Europe, the National
Bank aims to play a major role in regional capital markets.
At the beginning of this year there were 16 venture capital funds operating
in the Greek market, with initial capital totalling $310 million. One
of the largest venture capital funds is the National Bank’s Greek
Fund.
The bank has been gradually building up a presence in the Balkans. It
recently opened its first branch in Belgrade and further developments
are planned in Serbia. The bank is also seeking to exp-and in Bulgaria
and Macedonia, where it owns most of United Bulgarian Bank (UBB) and
Stopanska Bank respectively. It has also been adding branches in Albania
and now has a small presence in both Turkey and Romania.
EFG
Eurobank Ergasias, a domestic
bank, is said to be interested in Alpha. A member of the Latsis Group,
EFG has grown dramatically in recent years, becoming a force in the
domestic banking sector through a string of acquisitions of smaller
institutions.
Since Greece joined the eurozone in January, mergers and acquisitions
have been considered the quickest and most effective means of strengthening
domestic banks in the competitive market.
Analysts say the sector has plenty of scope for profitable growth, particularly
as the country’s economy becomes more integrated into the sophisticated
financial and savings institutions of mainstream European Union states.
The sector has adopted a universal structure to become a modern, integrated
provider of a wide range of products and services in banking and insurance.
Greek
bank lending has been generally low in comparison with the rest of the
EU, with a 46 per cent ratio of loans
to gross domestic product (GDP) against the European average of 72 per
cent. Portugal has a 101 per cent loan-to-GDP ratio and Spain 66 per
cent.
The Greek ratio is expected to increase over the next five years. Mortgage
loans are expected to rise by 21 per cent and consumer loans by 28 per
cent.
16 venture capital funds operate in the Greek market
Falls
in interest rates, the end of credit restrictions and the booming economy
helped to increase credit loans to the private sector by 29 per cent
year-on-year (as at May 2001). Consumer lending, which represents only
4.5 per cent of the GDP in Greece, is expected to increase by 37 per
cent this year as consumer confidence continues to be buoyant.
Tax changes that could reduce corporation tax from 35 per cent to 25
per cent are currently going through parliament, which could lead to
even more mergers and acquisitions.
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