September 3, 2011
Navigating Greece’s banks through the shoals of economic crisis is a labour worthy of Heracles. With merely mortal powers, the executives running the country’s biggest banks have not done too bad a job. They entered the crisis with relatively prudent balance-sheets and several raised capital earlier this year, when markets were more forgiving. They are also starting to band together to cut costs and plump up their capital cushions.
On August 29th investors cheered the merger of the country’s second- and third-largest banks, Eurobank EFG and Alphabank, to form what will be Greece’s biggest. They also managed to secure a promise of an investment from Qatar and announced plans to issue shares to raise capital.
The news prompted a sharp rally in Greek banking shares, which jumped by almost 30% as investors forecast more mergers. Although the euphoria was ephemeral—shares fell the following day—the deal may do something to help stabilise an embattled financial system.
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