Greek banks: Consolidation ahead
Greece is substantially over-banked: with just over 11 million inhabitants – fewer than in the New York City metropolitan area – it has 21 commercial banks and 24 branches of foreign banks, as well as 16 cooperative banks. More significantly, the five largest banks in Greece control 70% of the market, whereas in other similarly sized European countries, such as Austria, Ireland and Portugal, the top three banks routinely have 85% of the market.
In addition, the market capitalization of Greek banks is a fraction of that of banks in comparable countries. National Bank of Greece (NBG) has a market capitalization of around €20 billion and is ranked 25th in Europe, the second-largest bank in the country. EFG Eurobank, has a market capitalization of about €12 billion and is the 40th-largest bank in Europe. "Unless Greece is going to be an unlikely exception to the rule, consolidation will occur – at some point," says Takis Arapoglou, chief executive at NBG.
What will trigger this consolidation? "As the Greek market matures and lending spreads converge to European average spreads, profitability will be reduced and people will focus on containing costs aggressively," says Arapoglou.