Greece's second and third largest banks announce merger

ATHENS: Greece's second and third-largest lenders, Eurobank and Alpha Bank, announced on Monday they would merge and proceed with a 3.9-billion-euro ($5.7 billion) capital increase.

Amid rising concern about Greek banks given the recession-hit economy and bank exposure to the sovereign debt of the government, the capital increase, led by a Qatari fund, will boost the merged lenders top flight capital ratio to 14 percent.

"The boards of directors of Alpha Bank and Eurobank EFP announce that they have reached agreement on a combination of Alpha Bank and Eurobank EFG by way of a merger," the banks said in a joint statement.

The merger will be completed by a exchange of five new Alpha Bank ordinary shares for every seven Eurobank EFG ordinary shares, giving current Alpha Bank shareholders 57.5 percent of the merged lender and Eurobank shareholders 42.5 percent.

The capital increase will be undertaken by the three major shareholders of the merged bank, two Greek families and Qatar's Paramount Services Holding Limited, the statement said without giving a specific breakdown.

Greek Finance Minister Evangelos Venizelos, hailed the merger as a "positive development which attests to the dynamism and perspectives of the Greek banking system."

"It is also important that Qatar participates and invests in Greece, sending a message abroad of confidence" in the troubled eurozone member's economy, the minister said in a statement.

The merged bank will be headed the by Alpha Bank's chief executive Yannis Costopoulos.

Copyright AFP (Agence France-Presse), 2011