The Greek stock market received a much-needed shot of positive news Monday as two of the country's largest banks reached an agreement to merge, creating the region's largest lender.

The fusion of Eurobank and Alpha Bank, Greece's second- and third-largest financial institutions, will be aided by a sizeable outlay by the state investment authority of the Arab emirate of Qatar, Greek media reported.

As the two banks' respective boards met to finalize the details of the deal, Greek reports said the Qatari investment would amount to at least 500 million euros ($725 million) in a capital increase that could exceed 2 billion euros. The deal would reportedly give the Qataris a 16-percent stake in the new lender.

Reports of the merger ahead of the official announcement pushed Greek stocks up nine percent.

The new entity, to be known as Alpha Eurobank, will become south-eastern Europe's largest lender with assets worth 150 billion euros, deposits worth 80 billion euros and 2,000 branches.

Analyst Haris Zamanis told Greek broadcaster Mega the deal would "offer great confidence and security to the deposit holders of these banks, in addition to greater liquidity which our economy needs."

The merger offers a rare piece of upbeat news for the Greek economy, which has hit near rock bottom with multiple credit downgrades in recent months. Greece has had to call on the European Union and International Monetary Fund for billions in financial aid in order to avoid defaulting on its mountain of debt.

Since the start of the year, top lender National Bank saw its share valuation plunge by 47.8 percent, Eurobank by 48 percent, Alpha Bank by 42.1 percent and Piraeus Bank by 68.9 percent, the To Vima weekly wrote Sunday.

Author: Darren Mara (AFP, Reuters)

Editor: Nancy Isenson