=DJ Greek Banks Jump On Deal Talk Following Stress Tests

   By Nick Skrekas
   Of DOW JONES NEWSWIRES

ATHENS (Dow Jones)--Greek banking shares closed sharply higher Tuesday in a rumor-driven market as investors focused on a range of merger scenarios reshaping the country's fragmented banking sector.

But analysts warned that the merger speculation comes on top of already sharp gains in Greek banking shares, which have jumped 12% since the release of Europe-wide banking stress tests Friday.

The banking sub-index Tuesday closed up 7.4%, outperforming the broader Athens Stock Exchange index, which ended up 4.1%, lifted by the sector.

"This is probably an over reaction that is excessive and I hope it doesn't deflate very quickly. It's trading and not fundamental driven," said Panayiotis Kladis, senior banking analyst at National Securities.

"After months of the sector being oversold, because at one stage it was down about 40% from the start of the year, now the mergers and acquisitions talk, even if most of it has no basis, has sparked a short-term rally," Kladis added.

Most of that takeover talk was focused on state-lender ATEbank, which is 77% state-controlled and the subject of a takeover bid by privately owned Piraeus Bank SA (TPEIR.AT). ATEbank shares closed up 15% at EUR1.22 in heavy volume.

That despite the fact that the traditional lender to the farm sector was the only Greek bank that failed the stress test and will need to raise an additional EUR243 million in capital.

Helping lift the share price was a Turkish media report suggesting that Turkey's Ziraat Bank might also be interested in Greece's ATEbank.

"There are unconfirmed Turkish press articles that state-controlled Turkish Ziraat Bank may mount a takeover bid," said the head of trading at a local Greek brokerage. "Why a Turkish bank would ignore the growth and opportunity in its own market and turn to one which is in recession with rising non-performing loans seems somewhat dubious, but the impact is being reflected in a wild share price gain."

Sources at ATEbank told Dow Jones Newswires said the media reports were without substance and they expected the reports to be refuted from within Turkey.

But Tuesday's trading session also saw further market speculation that Dutch lender ING Groep NV (ING) was looking at acquiring Cyprus' second-largest lender, Marfin Popular Bank PCL (CPB.CP). Marfin, which has a dual listing in Athens, saw its shares jump as much as 10% earlier in the session in high volumes. Sources at the bank said they were not aware of any approach from ING.

"Dubai Financial, which is the largest shareholder in Marfin, bought it shares at EUR8.00, so why would it sell at current prices of EUR1.80 to EUR2.00?" said Kladis. "They didn't sell their stake when the Dubai state had financial problems and had to restructure their debt, so it is unlikely they will do so now," he added.

Stocks in other local banks were also sharply higher. Of the big four blue chips, National Bank SA (NBG) was up 7.7% on the week, Alpha (ALPHA.AT) up 21% over the same time, Eurobank (EUROB.AT) up 16% and Piraeus up 16%.

Cash rich state-controlled Hellenic Postbank, which is also the subject of a combined bid by Piraeus, has soared 28% in value this week. It is being touted as the most appealing local target because of its high liquidity compared with most local banks that still are heavily dependent on European Central Bank funding.

"We are in for a hot summer where for a while we will have new speculation every day and while the talk should be treated with caution, but I think it very likely that in due course we will see mergers in the fragmented local sector as the government and the central bank have urged," Kladis added.

-By Nick Skrekas, Dow Jones Newswires; +30 210 2830685; nick.skrekas@dowjones.com

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(END) Dow Jones Newswires

July 27, 2010 11:39 ET (15:39 GMT)

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