Shares in Greek lenders National Bank and Eurobank have plunged as they put a full merger on hold and said they cannot raise enough money to rebuild their capital.
As a result both now face nationalisation.
Together, the two banks need 15.6 billion euros in fresh capital following losses from Greece’s sovereign debt writedown last year, as well as loans that won’t be paid back.
They have told the country’s central bank they’re unlikely to sell enough new shares to get 10 percent of their capital needs.
That means a state bank support fund will have to provide the money in exchange for new shares and convertible bonds which would dilute the value of the stock.
“The market’s reaction reflects ownership dilution worries and uncertainty on what the future holds for both banks,” said Theodore Krintas, head of wealth management at Attica Bank.
If the merger had gone ahead they would have formed the Greece’s biggest banking group.