-Move towards a more integrated market brings new opportunities-

Overseas banks poised to play a bigger role

Following the intensive bout of mergers and acquisitions of the last two years, no-one is quite sure what will happen next in Greece's fast-moving banking sector. Lucas Papademos, governor of the central bank, the Bank of Greece, anticipates further consolidation in the market, but adds that this "may not start right away". He argues that the big institutions, which led the drive to restructure the sector in the first place, will need time to consolidate their gains in terms of increased efficiency.

Mr Papademos suggests the impetus for future change will come from the increasing presence of foreign banks in the financial sector, which has largely been the domain of local interests until now. "Over a period of three to five years, more Greek banks will combine, and there will also be further alliances with foreign institutions," he says. "There are discus-sions taking place between Greek financial institutions and overseas companies, which may lead to increased foreign participation in our market."

At the state-owned National Bank of Greece, reputedly the country's largest bank, deputy governor Apostolos Tamvakakis warns that the future shape of the sector is still unclear. "There is a serious possibility that much will change," he says. "I'm not sure what will happen to international players because we have yet to see the results of the cross-border acquisitions taking place in continental Europe." On balance, however, he believes it may be three or four years before there are any major moves towards consolidation. In contrast, Yannis Stournaras, chairman of the Commercial Bank of Greece, another market leader, argues that consolidation between the Greek banks is largely over: "I don't think you are going to see many more mergers and acquisitions in this country." But he broadly agrees with the forecast of his colleagues that overseas banks are poised to play a bigger role in the country's financial system. "You will see more alliances between Greek and foreign banks," he says. This would fit in well with his own business strategy, which is aimed at expanding overseas activities.

Like many other Greek entrepreneurs, his ambitions focus less on breaking into the well-established banking markets in the EU - where Commercial Bank has formed an alliance with Credit Agricole of France - and more on the opportunities closer to home in the neigh-bouring Balkan countries."Our ambition is to be a big regional player," says Mr Stournaras. "We are a wealthy regional bank and can play a crucial role in the Balkans. We are particularly interested in a few of these countries where we see opportunities for expansion."

The bank has subsidiaries in Albania, Bulgaria, Romania and, looking slightly further afield, in Armenia, Georgia and Moldova. Commercial Bank's quest to build up business in the Balkans faces stiff competi-tion from other Greek players, not least from Mr Tamvakakis at the National Bank of Greece. His financial institution is actively pursuing a strategy focused on wholesale banking, corporate lending and investment banking in the region's capital markets. It is expanding its business in the Balkans to include retail banking; personal accounts held by private individuals. "We are trying to become the main choice for the 60 million inhabitants of the Balkan region," he says.

Looking further afield, the organisation is boosting its position in the big international financial centres such as New York, Frankfurt and London. It has established a specialist investment bank, National Bank of Greece International, which also manages a private equity fund based in London. For their own part, Greek bankers are fully aware that the move towards a more integrated Europe will also open up fresh opportunities for foreign institutions to break into new business markets on their home ground. Asked about this prospect, Mr Stournaras of Commercial Bank adopts a more sanguine attitude. "That would be good for Greek customers.

Foreign banks would bring the know-how and the technology with them. I don't view them as a threat because they would probably come in through a strategic alliance rather than as a new presence," he says. None of this should be taken to mean that Commercial Bank is about to abandon its home ground. It is keen to play a part in developing the emerging computer-based 'new economy' in Greece, and last year it acquired a 20 per cent shareholding in an internet service provider in the country.

The aim is to get into new areas of business such as e-commerce and e-banking, although Mr Stournaras points to the opportunities presented by the government's policy of opening up the telecoms sector as well. While the battle between the big banks has inevitably dominated the headlines, some smaller institutions such as the Bank of Cyprus are carving out their own niches in the Greek banking market. Bank of Cyprus deputy general manager Dimitris Damkalidis disputes the conventional theory that only the big banks will be able to survive in an integrated European market.

On the contrary, he says, the smaller banks will get by because "they will be able to offer better services to their customers and address their needs more satisfactorily". The Bank of Cyprus, which has nine branches in the UK as well as a presence in both Australia and the US, has built up a network of 26 outlets in Greece. At the present time, the bank has a market share of about two per cent in the country and aims to double this figure by 2004.