Greek Eurobank's Bulgarian unit to become 3rd or 4th biggest lender after acquisition of Alpha Bank’s branch

By bne IntelliNews July 17, 2015

The acquisition of the Bulgarian operations of Alpha Bank may position Greece’s Eurobank as number three in the Bulgarian market with a share of 10.7%, according to bne IntelliNews calculations based on the latest available central bank data as of end-March.

However, if unconfirmed information, published by Capital Daily is true and Alpha Bank's assets have more than halved during the second quarter, Eurobank will be the fourth biggest lender after the merger with a market share of some 8.6%, surpassing the National Bank of Greece's (NBG's) local unit. Eurobank's Bulgarian unit Postbank was the sixth biggest lender as at end-May.

Although owned by Eurobank, Postbank is an independent entity, regulated by the Bulgarian National Bank (BNB), whereas Alpha Bank operates through a locally-registered branch, which is subject to Greek regulations. Thus, the deal will be beneficial to the stability of the Bulgarian banking sector, as it will remove some of the uncertainty related to the funding of Alpha Bank. As at end-March, as much as 78% of Alpha Bank's funding consisted of ‘deposits from credit institutions’, which typically comprise mainly parent bank funding. It had a negative equity of BGN223.6mn.

Moreover, the deal will hopefully bring more clarity about the exposure of the Bulgarian banking system to potential spillovers from Greece. The former BNB governor Ivan Iskrov said last month that the central bank had taken all possible measures to limit the effects on domestic banks from a negative development in Greece. Bulgarian commercial banks, including the Greek-owned ones, had no exposures to Greece, Iskrov claimed, adding that the three Greek subsidiaries (excluding Alpha Bank) are absolutely independent operationally.

The Bulgarian deal between two of the top four Greek lenders is at the symbolic price of €1 and a final agreement on it is expected to be reached later on July 17, several Greek media outlets reported, quoting sources.

Postbank's total assets stood at BGN5.9bn (€3bn) at end-March, giving it a market share of 6.8%, while Alfa Bank had BGN3.4bn in assets and a market share of 3.9%. The two banks' shares in terms of total loans were 7.5% and 2.4%, respectively.

The Bulgarian branch network of Alpha Bank has about 80 outlets. This is the first consolidation of Greek-owned bank businesses in South east Europe (SEE). To Vima reported that it is a “one-off” deal, not associated with any other sales or trades of assets, but also quoted sources as saying that such combinations may be made in other SEE countries as well.

We note that National Bank of Greece (NBG) and Piraeus Bank also have subsidiaries in Bulgaria. The four Greek-owned banks in Bulgaria - NBG's United Bulgarian Bank (UBB), Postbank, Piraeus Bank Bulgaria and Alpha Bank - are all in the country’s top 10 list by assets and together accounted for 21.7% of the banking system’s total assets as at end-March.

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