If Greece proceeds to restructuring of its debt, its banks will lose between 8 and 25 billion euros, which corresponds to between 26 and 80 percent of their total capitalization, said in a report the investment bank Goldman Sachs. The report of the Bank was published at a time of strong suspicion that, the Greek government is preparing to announce the restructuring of the debt of the type haircut in the coming weeks. "We believe that Greek banks need substantial additional capital to cover the losses from a theoretical debt cut", say the analysts, and urged the Greek financial institutions to immediately proceed to increase their capitalization.
At the same time cutting the Greek debt between 20 and 60 percent will cause losses to the European banks worth between 13 and 41 billion euros. According to Goldman Sachs, however, these losses would not be fatal for Europe, as they represent only 1 to 3 percent of the total capital of its banks in the pillar Tier1.
Citigroup is also interested in the cutting of the Greek debt, which in its analysis "Hellenic Banks, Fancy a Haircut" claims that in case of swift action and cut in the amount of the government securities to 40 per cent Greece may achieve the same value of debt as a percentage of the gross domestic product, which may be served. Citigroup warns that there are still risks that will deepen the recession in the country such as the high cost of labor, which undermines the export of goods. The institution says that the Greek government still has enough tools in their hands to deal with the crisis - more stringent cuts in public expenditure, rescheduling of debt payments, lower interest rates, privatization and certainly haircut.
According to Citigroup the faster the government proceed to the implementation of the number of measures, together with the haircut of around 40 per cent, the sooner will Greece thurst itself up from the bottom of the economic crisis. Bank analysts warn that the more we delay cutting the debt, the more its value will grow in the future. "A cut of the Greek debt of around 40 per cent will reduce the SET1 pillar of the Greek banks to 5.3 per cent from the present 10.9 per cent, and additional capital will be necessary of about 4 billion euros to return value of the pilllar to 7 per cent. Such an increase of capitalization will reduce by about one-fifth the value of the shares in 2012", says further the analysis of the institution.
Most vulnerable in such a scenario seem to be the Agricultural Bank, the Post fund and Piraeus Bank, warned Citigroup, and the best will respond the Bank of Cyprus. Therefore, the institution reduces the expected price of the shares of Greek banks – of the Agricultural Bank it is 0.25 euros from the initial 0.50, of the Bank of Cyprus it is 3.25 euros from 3.50, of Piraeus it is 0.75 euros from 1.35, of Eurobank it is 4.00 euros from 4.50, of Postal Fund it is 2.25 euros from 2.50 and of Marfin it is 0,95 euros from 1,08. Among the European banks, the most will suffer the financial institutions from Belgium, France and Germany, whose pillar Tier1 will be between 8 and 11 basis points.
As far as it goes to the macroeconomic picture of Greece, Citigroup expects the recession for 2011 to reach 3.3 per cent instead of the expected by the European Commission 3 percent. In 2012 the recession will continue and will reach around 1.4 per cent, again higher than the expected from Brussels - 1,1 per cent. The general estimates are negative, as the consumer confidence in Greece is the lowest compared with the other European countries, while exports continue to decline as the high cost of labor reduces its competitiveness. "The fact that Greece is a part of the Eurozone and has no separate currency leads us to expect that the labor cost will remain high for a long period of time" concludes the bank.
RSS
Facebook
Twitter
YouTube
