Greek stocks rallied, with the benchmark ASE Index climbing the most in more than 21 years, as EFG Eurobank Ergasias SA (EUROB) and Alpha Bank SA announced a merger.
Eurobank and Alpha Bank each jumped by the allowed daily limit of 30 percent 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 steepest advance in almost 18 years.
The ASE soared 14 percent to 1,006.59 at the 5 p.m. close in Athens, the best daily performance since April 1990. The benchmark gauge has still slumped 81 percent since October 2007 and is the worst performer in 2011 among 24 developed-markets indexes tracked by Bloomberg News 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 surged a record 18 percent today.
“Consolidation in the domestic sector makes economic sense given the fragmentation of the market,” Deutsche Bank AG analysts Dimitris Giannoulis and Carlos Berastain Gonzalez wrote in a report to investors dated today. “We would expect the market to react with enthusiasm following the recent pressure on the sector but we maintain our cautious stance ahead of the necessary re-capitalization of the new group.”
Greek government bonds have plummeted, pushing the two-year note yield as high as 46 percent, after the country was bailed out twice by European Union partners as it struggled to service its debt.
Alpha Bank rose 30 percent to 2.47 euros today and Eurobank gained 29 percent to 2.24 euros. Futures on Alpha expiring Sept. 21 and giving the right to one share each rose 57 percent to 3.02 euros.
Alpha, the southern European country’s third-largest bank, will acquire Eurobank, the second-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 billion euros ($5.7 billion), including a 1.25 billion-euro rights offer, a 500 million-euro convertible note to be taken up by Qatari-backed Paramount Services Holding Ltd. and 2.1 billion euros of internal measures, the two companies said today.
National Bank, Greece’s largest lender, closed 29 percent higher at 3.59 euros, the biggest gain since trading started in 1992, after earlier rising 30 percent. Piraeus Bank gained 29 percent to 72 cents, the steepest advance since December 1993. Marfin Investment Group SA (MIG), southeast Europe’s biggest buyout fund, surged 30 percent to 39 cents. Stocks may rise a maximum of 30 percent in a day or the closest that a 1-euro cent move allows, according to exchange rules.
Bank of Cyprus jumped 29 percent to 1.50 euros in Athens and 20 percent to 1.38 euros in Nicosia. Marfin Popular Bank Pcl, Cyprus’s second-biggest lender, gained 17 percent to 34 euro cents.
Today’s gains pared the Athens index’s loss this year to 29 percent. The measure closed at the lowest level since 1996 last week.
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