Greece's banking sector is bracing for what local media called a super deal, following the announcement of the National Bank's offer to purchase the third-largest lender Eurobank.
Late on Friday, the National Bank of Greece (NBG), the country's top lender, announced a voluntary offer for "all outstanding common registered shares" of Eurobank.
If an agreement is reached, "current NBG and Eurobank shareholders will be represented by 75 percent and 25 percent respectively," according to the statement, with NBG offering "58 new shares for each 100 shares of Eurobank."
The group will become the country's new top lender, with combined assets of nearly 177.7 billion euros ($231.7 billion), approximately 104 billion from the NBG and 73.6 billion from Eurobank.
It will be followed by Alpha Bank in second place and Piraeus Bank in third.
Greek financial newspaper Naftemporiki on Saturday claimed that NBG and Eurobank were "changing the (banking) map" while Ta Nea talked of a "marriage that will give birth to a giant."
The new group will create an "expanded banking group in Greece, that will act as the main pillar of stability for the country's financial system and will provide the necessary capital to back the country's economic recovery," said NBG head George Zannias in a statement.
"The exchange offer falls within the context of the ongoing consolidation of the Greek banking system," said Eurobank's CEO Nicholas Nanopoulos in another statement also released late on Friday.
Press reports regarding the merger that had been circulating since early on Friday prompted the Capital Market Commission to temporarily suspend the trading of the shares of the two banks at the Athens stock exchange.
The Greek banking sector has been urged to consolidate to bolster its defences and help liquidity, but several attempts to do so have failed, in a country that is heading for a sixth year of continuous recession.
As the country's economic crisis continues for a third year, its banks are now facing a liquidity crisis and are unable to lend to businesses, which in turn face bankruptcy even when they are sound, say local economists.
Earlier this week, French banking giant Credit Agricole announced it was in exclusive talks with Alpha Bank to sell its freshly recapitalised Greek subsidiary Emporiki.
Credit Agricole, one of the biggest banks in Europe by capitalisation, decided to put Emporiki up for sale after reporting in May a 75-percent drop in first quarter earnings because of its exposure to the Greek debt crisis.
Another French banking giant, Societe Generale, is in talks with Greece's fourth lender Piraeus Bank over the sale of its local subsidiary Geniki.
There was talk among local media on Saturday that the new NBG-Eurobank group is likely to purchase the state-owned Hellenic Postbank, which Greek Finance Minister Yannis Stournaras had described as "unviable" in late August.
The Athens stock exchange had said the small bank was unable to release its fiscal report for 2011 on schedule and local media have reported the government is considering splitting the lender in two parts, so as to sell the healthy sector.
A similar solution was used at the end of July for ailing state lender ATEBank, whose healthy part was absorbed by Piraeus Bank.
Greek banks suffered great losses after the heavily-indebted country and its international creditors agreed on a write-down of the value of privately-held government bonds by 107 billion euros earlier this year.
The debt restructuring was part of a broader EU-IMF bailout package for Greece, that has been keeping the financial system of the cash-stripped country alive.
The international rescue package includes up to 50 billion euros to help recapitalise Greek banks and some 18 billion euros have already been disbursed to the four main lenders.
Earlier this week, the Bank of Greece gave local lenders some breathing space after deciding to lower their capital adequacy requirement because of delays in their planned recapitalisation.