Greece plans to break up ailing state lender ATEbank into performing and non-performing assets, a source close to the talks said yesterday, amid efforts to bolster the country’s troubled bank sector.

A meeting on the issue was held on Tuesday between Finance Minister Yannis Stournaras, Bank of Greece governor George Provopoulos and the head of the Hellenic Financial Stability Fund Panayotis Thomopoulos.

“The meeting was held on ATE and recapitalisation. The solution of cleaning up ATE through a division into a ‘good’ and a ‘bad’ bank is under examination,” the source said.

“The healthy part can be absorbed by another bank in future, or it can continue operating and be sold at a later date,” the source added.

Founded in 1929, the former Agricultural Bank has a network of nearly 500 branches but is held down by ailing subsidiaries such as the Hellenic Sugar Company and the Greek Cooperative Cigarette Manufacturing Company.

ATEBank failed European stress tests held in 2010 and 2011.

The bank’s union says ATEBank had already carried out an overhaul from 2010 that restored its capital base but suffered another blow from having to join a writedown of Greek sovereign debt earlier this year.

In contrast to private Greek lenders that will receive €50 billion to recoup their losses, ATEBank was entirely left out, the union added.

Announcements on the bank’s annual results for 2011 have been held back until the end of August, and no outlooks have been released for 2012.