Greek stocks rallied, with the benchmark ASE Index climbing the most in more than 21 yrs, as EFG Eurobank Ergasias SA (EUROB) and Alpha Bank SA announced a merger.
Eurobank and Alpha Bank each rose by the allowed daily limit of 30% after saying they will combine and sell new equity to strengthen their capital in an attempt to weather the debt crisis. Larger rival National Bank of Greece SA (ETE) gained the most on record while Piraeus Bank SA (TPEIR) had the highest advance in almost 18 yrs.
The ASE rose 14% to 1,006.59 at the 5 p.m. close in Athens Monday, the best daily performance since April 1990.
The benchmark gauge is still off 81% since October 2007 and is the worst performer in Y 2011 among 24 developed-markets indexes as the Global financial crisis and Greece’s debt woes eroded the value of the Country’s banking assets.
The 22-member Cyprus General Market Index rose a record 18% Monday.
Greek government bonds have dived, pushing the 2-yr Note yield as high as 46%, after the Country was bailed out twice by European Union partners as it struggled to service its debt.
Alpha Bank rose 30% to 2.47 Euros today and Eurobank gained 29% to 2.24 Euros.
Futures on Alpha expiring September 21 and giving the right to 1/shr each rose 57% to 3.02 Euros.
Alpha, the southern European country’s 3rd largest bank, will acquire Eurobank, the 2nd biggest, to create the Nation’s biggest lender as the firms seek to ride out a deepening recession and the Country’s sovereign debt crisis.
The combined bank will strengthen capital by 3.9-B Euros (US$5.7-B), including a 1.25-B Euro rights offering, a 500-M-Euro convertible note to be taken up by Qatari-backed Paramount Services Holding Ltd. and 2.1-B Euros of internal measures, the 2 companies said Monday.
National Bank, Greece’s largest lender, closed 29% higher at 3.59 Euros, the biggest gainer since trading started in Y 1992, after earlier rising 30%. Piraeus Bank gained 29% to 0.72, the highest advance since December 1993.
Paul A. Ebeling,Jnr.