Posted on: 28/Feb/2011
NBG surprised the market with a bid for smaller rival Alpha Bank earlier in the month, but the move was rejected by Alpha. Greece has called on banks to explore tie-ups to better cope with the country's debt crisis.
"If the merger proceeds, it would be credit positive for the combined entity, given the opportunities for cost synergies and franchise expansion, especially in southeastern Europe," Moody's said in its weekly credit outlook.
Moody's said challenging operating conditions and possible resistance from labour unions to the merger could trim the projected synergies, but a good portion of the proposed tie-up's goals looked achievable.
It said both banks' ratings were still on review for a downgrade as their domestic franchises faced challenges from asset quality, funding and profitability, mainly stemming from Greece's sovereign debt crisis.
Moody's said the combined entity would be dependent on an estimated 37 billion euros in European Central Bank funding and would have around 25 billion euros of exposure in Greek government bonds, nearly twice its combined Tier 1 capital.
"Despite Alpha Bank's rejection, NBG continues to promote the merger proposal with the market and investors, which in our view suggests that NBG is either pursuing a hostile public offer for Alpha or that it will propose a revised bid," Moody's analyst Constantinos Kypreos said.
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