UPDATE 5-Greece's NBG offers to buy Eurobank in share swap

* Proposes share swap of 58 NBG shares per 100 Eurobankshares

* Merger would form Greece's biggest lender * Eurobank says will consider proposal

(Updates with NBG public offer, Eurobank response, statement byNBG's CEO)

By George Georgiopoulos and Lefteris Papadimas

ATHENS, Oct 5 (Reuters) - National Bank of Greecemade a share-swap offer to buy all of rival Eurobankand create the country's biggest lender, it said on Friday, thelatest move in efforts to consolidate the Greek bankingindustry.

Greek banks are under pressure to merge after sufferingsteep losses from the country's debt restructuring, heavydeposit withdrawals and rising bad loans, but short of cash theyhave no option but to swap shares in order to merge.

"We are convinced that Eurobank's board will see the valueour public offer creates and will propose the transaction toEurobank's shareholders," National Bank's chief executive,Alexandros Tourkolias, said in a statement.

NBG is offering 58 new shares for every 100 shares ofEurobank. Once the share exchange is completed, NBG shareholderswill own 75 percent of the combined entity, with Eurobankshareholders owning the rest.

At current prices, NBG's market capitalisation is 3.2 timesthat of Eurobank.

Eurobank, advised by Barclays, Deutsche Bank and GoldmanSachs International, said in a news release that it wouldconsider the proposed merger "in a constructive spirit."

Eurobank shareholders representing 43.6 percent of thebank's stock had accepted the offer, said NBG, which is advisedby Credit Suisse.

NBG Chairman George Zanias and Tourkolias would keep thesame posts in the combined group, NBG said.

The bourse suspended trading in the shares of National Bankand Eurobank earlier on Friday following a media report of themerger talks, which sent Eurobank's shares up 5.5 percent to1.15 euros and National Bank's 4.5 percent to 2.1 euros, tovalue the two at around 2.6 billion euros ($3.4 billion).

"Such a deal would change the Greek banking landscape,forming a European-size player with better prospects to regainaccess to capital markets and money markets in particular oncethe crisis stabilises," said Theodore Krintas, head of wealthmanagement at Attica Bank.

Recapitalised with 18 billion euros derived from thecountry's international rescue fund, the country's four biggestbanks - National, Eurobank, Alpha and Piraeus

- have already begun the process of consolidation bybuying up smaller rivals.

Without access to interbank funding, Greek banks have reliedon the European Central Bank and the Bank of Greece to relievetheir liquidity squeeze. Their exposure to the Eurosystem ofeuro zone central banks stood at 131.6 billion euros in August.

"The banking system is adjusting faster than people expectedto the overall restructuring the Greek economy has to gothrough. A deal will have a positive market impact, showing thatthings are moving," Krintas said.


A merger between National and Eurobank would create thebiggest single bank in terms of loans, deposits and branchnetworks, with 109 billion euros in net loans, 89 billion indeposits, 178 billion in assets and a domestic network of 944branches, said analyst Maria Kanellopoulou at Euroxx Securities.

National Bank has already tried to merge with Alpha twice,but Alpha has now reached a deal to buy French lender CreditAgricole's ailing Greek unit, Emporiki Bank, beatingNBG and Eurobank which were also interested.

Piraeus took over the healthy part of troubled state lenderATEbank in July and is expected to close a deal with SocieteGenerale soon to buy the French bank's loss-makingGreek affiliate, Geniki .

A merger would need approval from the Bank of Greece and theHellenic Financial Stability Fund (HFSF), the bank support fundthat has started to recapitalise the country's viable banks.

The HFSF bank support fund is due to be allocated 25 billioneuros from the next 31.5 billion euro tranche of Greece'sinternational bailout to carry out the banking sector's furtherrecapitalisation.

National and Eurobank own 6 percent stakes in smallstate-controlled lender Hellenic Postbank (TT) , whichthe government decided in August was not viable. TT could end upbeing absorbed by the combined group according to the news site.

Including TT in the deal could help lower the capital needsof the combined entity, meaning the HFSF would have to dish outsmaller amounts, Krintas said.

"The new bank that would be formed will have a very strongpresence in Greece and synergies in southeastern Europe whichwill mean savings," said Natasha Roumantzi, a banking analyst atPiraeus Securities.

NBG has a big presence in Turkey through its subsidiary,Finansbank, and both banks also have interests in Bulgaria,Romania, Serbia and Cyprus.($1=0.7689 euros)

(Editing by Greg Mahlich, David Holmes and Matthew Lewis)

((george.georgiopoulos@thomsonreuters.com)(+30210 3376437)(Reuters Messaging:george.georgiopoulos.thomsonreuters.com@reuters.net))