Increased competition is leading to consolidation in the banking sector, despite the recent setback with Alpha and the National Bank
ergers
and acquisitions, organic growth and foreign expansion are just a few
of the phrases buzzing round the Greek banking sector, and the country’s
entry into the eurozone can do nothing but stimulate these activities.
Greek banking consultancy group Kantor has already singled out the most
attractive opportunities for strategic investors. Egnatia Bank, General
Bank and Attica Bank are the three most ripe for acquisition, according
to the consultancy’s annual survey. And EFG Eurobank-Ergasias,
along with Commercial Bank of Greece, would benefit from expanding its
branch networks through buy-outs, says Kantor.
Several
Greek companies have been expanding their retail-banking product range,
and restructuring their organisations and branches as a result of mergers
and acquisitions. Most banks already have a fairly good branch distribution
across the country. NBG has the biggest, followed by Alpha.
EFG Eurobank-Ergasias group is in the top three in terms of assets in
Greece’s banking sector. A relative newcomer, EFG has been one
of the most voracious. The bank has fought its way up into the top echelon
through a mixture of private and online consumer banking. Over the past
five years, it has experienced 100 per cent growth.
A little over a year since it merged with Ergobank, EFG – in which
Deutsche Bank has a 10 per cent stake – reported 6.4 per cent net-profit
growth to $154 million for the nine months to September 2001. The bank,
with a market value of $4.18 billion, achieved strong growth in business
volumes, with loans increasing 24 per cent to $8.81 billion and deposits
up 27 per cent to $13.79 billion.
Although
Greek borrowing levels remain low compared with other eurozone nations
like Portugal and Spain in terms of bank loans as a percentage of gross
domestic product (GDP), EFG, part of the Swiss-based Latsis Group, is
well-positioned to take advantage of this.
In the first three-quarters of last year, Greek consumer lending increased
by 54 per cent, housing loans by 37 per cent, and loans to small businesses
rose by 47 per cent.
Non-performing loans (NPL) from the group’s activities remained
below three per cent of its total loan portfolio. Including NPLs from
the acquisition of Bank of Athens and Bank of Crete, which are fully
covered by provisions, NPLs amounted to four per cent of the group’s
loan book.
Late last year, EFG Eurobank Secu-rities brokerage announced a merger
with Telesis and Ergasias Securities, giving EFG a market share of more
than 10 per cent based on the volume of transactions.
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EFG
Eurobank-Ergasias deputy chief executive Nikolaos
Karamouzis believes Greece has a much stronger banking
sector today, partly due to the requirements placed on it by the European
Union.
He says: “The nominal convergence of the Greek economy to the EU
economy, which has taken place in recent years – with lower interest
rates, exchange rate stability, reduction of budget deficits and strong
economic growth – has had significant benefits for the banking
sector.”
“The
intense competition which has prevailed since the liberalisation of
the domestic markets opened up new opportunities – on the one hand
for consumers and borrowers in general and on the other for business
in previously controlled sectors like consumer and mortgage credit.
“The intensity of competition, coupled with the globalisation of
the markets, led several banks to merge in order to take advantage of
economies of scale and revenue synergies in the new, growing market.
Simultaneously, new players have entered the banking market with a view
to exploiting new opportunities.
“EFG Eurobank-Ergasias began 10 years ago with one branch, and
through acquisitions and internal growth it has become the second major
financial institution in Greece.”
Mr
Karamouzis says the company’s aim is to become the most profitable
bank in Greece, but it will follow a cautious strategy in foreign expansion.
“We currently have a presence in Bulgaria via Post Bank, and in
Romania with Bank Post, which is the fourth-largest bank in Romania.
These banks are profitable. We are interested in the region because
of their growth prospects as long-term players.”
The state is to reduce its stake in the Agricultural Bank of Greece
(ABG) from 85 per cent to as low as 35 per cent. This reduction will
be carried out through several methods, including the issue of bonds
that will be convertible into ABG shares.
An
additional 10 per cent stake will be floated on the Athens
Stock Exchange this year, while an eight per cent share will be
placed among institutional invest-ors, agricultural cooperatives and
unions.
A strategic alliance with a domestic or foreign banking institution
for the state-controlled bank will also be sought. ABG’s subsidiaries
will also be floated or partially sold to a strategic investor.
Established in 1929 to serve the agricultural sector, ABG’s strategy
has shifted in recent years with its transformation into a universal
bank with a full range of commercial products. “It was something
that came about out of necessity – we could not stay the way we
were,” says deputy governor Nicolas Zachariadis.
“Non-farm
lending more than quad-rupled between 1996 to 2000, whereas agricultural
lending rose by only 26 per cent over the same period,” he says.
“This trend will continue, with our emphasis on consumer and mortgage
credit and on lending to non-agricultural companies, especially to small
and medium-sized regional enterprises.”
Most banks already have a fairly good branch network
The bank has an extensive branch network and although its strength lies in Greece’s rural areas its presence is familiar in towns and cities across the country. “Our strategy envisages development in non-agricultural sectors, but at the same time we will not be absent or allow our position to be weakened in the agricultural sector, which provides about nine per cent of our gross domestic product,” says Mr Zachariadis.
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