Goldman Sachs’ Proposal for a Merger via Share Swap Between National Bank and Piraeus Bank: 150 Billion in Assets, 15 Billion in Capital Faces Significant Obstacles

Goldman Sachs has presented its proposal, but key stakeholders have run into obstacles… and the scenario now seems to have been pushed to the future

The American investment bank Goldman Sachs, which informally advises the National Bank of Greece – as well as Piraeus Bank – has put forward a proposal that seems promising but faces significant hurdles.

Goldman Sachs’ Proposal

Goldman Sachs has put forward a proposal to the National Bank of Greece, which includes the following key points:

1. Merger of NBG and Piraeus: The proposal involves merging the two banks with a share swap, aiming to create the largest bank in Greece, with assets of €150 billion and €15 billion in capital.

2. Sale of Assets: Part of the assets would be sold to other banks to overcome challenges such as the oligopoly that dominates the Greek banking sector. The four largest banks in Greece control 92% of the market share in loans and deposits.
Greece has the most oligopolistic banking system in Europe, a fact that cannot be ignored.
In contrast, the four largest banks in Germany control 58% of the market, highlighting the significant disparity.

3. Governorship Proposal: The proposal also suggests that one of the two CEOs, either Mylonas of NBG or Megalou of Piraeus, be nominated for the position of Governor of the Bank of Greece in May 2026, replacing Yannis Stournaras.

What Are the Obstacles?

Despite the ambitious nature of the banking project, several serious obstacles stand in its way:

A. SSM – The Single Supervisory Mechanism: The SSM, under the European Central Bank (ECB), currently does not approve bank mergers in Greece. In 2012, it was determined that Greece should have four systemic banks.

B. Extreme Concentration in the Market: The Greek banking system is highly concentrated, with the four largest banks controlling 92% of the market share in loans and deposits.
This makes Greece’s banking system the most oligopolistic in Europe.

C. Job Cuts: Mergers typically lead to layoffs and restructuring.
It is estimated that a merger between NBG and Piraeus could result in 2,500 job losses initially, with another 1,500 layoffs down the line.

D. Financial Terms and Public Involvement: Investors, such as Paulson, who holds 14% of Piraeus, may choose to sell their shares and exit. Additionally, the Greek government would likely retain a significant role, holding a stake of 10% to 20%, depending on the terms.

E. Market Valuation: In financial terms, the sum of merging two banks doesn’t necessarily equal 1 + 1 = 2, but rather about 1.7 to 1.8, meaning the new value needs to be evaluated in stock market terms.
For instance, this merger would result in a bank with a market capitalization of €20 billion and €15 billion in capital, giving a Price-to-Book Value (P/BV) ratio of 1.33.

F) Share Swap Mechanism: While it sounds appealing, the merger would take place through a share swap, with little or no cash involved.
Piraeus has become expensive in the eyes of NBG, as Piraeus has a market value of €9.1 billion, while NBG is valued at €11.7 billion. This creates a significant issue in terms of valuations and the share exchange ratio.
In this way, it becomes clear why they shouldn’t pressure the Hellenic Financial Stability Fund to rush into the bank placements.

G) Country Risk: Even if the merger proceeds, the resulting bank would still be considered medium-sized by European standards. The bank’s €150 billion in assets would make up nearly 60% of Greece’s GDP, whereas the average size of the largest bank in countries like Italy is around 38% of GDP.
This would raise the country risk significantly. Should such a large bank face insolvency in the future, it could severely destabilize the Greek economy.

Conclusion

While Goldman Sachs’ proposal has been submitted, key players have encountered major hurdles, and the scenario is now being pushed to the future. The challenges involved are significant, and it remains to be seen whether the proposal will be revisited or put on hold for an extended period.

www.bankingnews.gr

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