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HSBC is looking for a large Greek bank

27 June 2010 / 12:06:01  GRReporter
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Foreign banks have started to look for possible benefits on the Greek financial market. The moment is really appropriate because the Greek banks are pressured - on the one hand they have a problem with their liquidity because of the low credit rating of the country, which drove down also the credit ratings of its financial institutions, and on the other hand they have a problem with the revenues and profits due to the recession in the domestic market. Economic weekly "Kefaleo" reports of the interest of HSBC, which last year increased its authorized capital by 14.1 billion euros to acquire a large Greek bank. As a proof the edition reported of an elevation of the level of the Greek branch of the bank, which since the beginning of June is managed by Richard Groves, the most senior manager of the bank engaged ever in Greece.
    53-years-old Groves works in HSBC since 1981, he was CEO of the bank branches in Saudi Arabia, Oman and northern India and is directly subordinate to the executive director of HSBC for Europe Peter Boyls. Groves is a manager three levels higher in the hierarchy of the bank than those who managed its branches in Greece so far. This is a sure evidence that HSBC is thinking of something considerably more serious for the Greek market than what we are witnessing now. "HSBC remains true to its commitments in Greece, which will continue to provide exceptional business opportunities in the coming years," said Richard Groves, cited by Kefaleo.
    Ambitions for a more significant presence on the Greek market also manifested BNP-Paribas, which last year also increased its equity capital by 4.3 billion euros. Foreign banking giants know very well that very soon many Greek banks will face the dilemma and either their shareholders will have to reach deeper into their pockets to increase their equity capital, or they will have to find a strategic investor to come with ready capital. Greek banks are a pretty tempting deal at the moment because their shares on the Athens Stock Exchange are moving in a downward zigzag, the so-called expected values are continuously decreased in assessments not only of the credit rating agencies, but also of the big worldwide banks.
    For example, the assessment of the National Bank of Greece fell to 5.9 billion euros from the 22.7 billion euros worth before the crisis, the assessment of Alpha Bank fell to 2.4 billion euros from 10.66 billion, of Eurobank EFG to 2 billion from 12.58 billion before the crisis and of the Bank of Piraeus to 1.3 billion euros from 9.6 billion before the crisis. Although Greek bankers find these estimates to be unfairly low, their foreign colleagues consider them reasonable and fair for the state of the Greek financial institutions. HSBC and BNP-Paribas in the past have also had contacts with Eurobank EFG and Alpha Bank, and that is why the observers are now expecting for some offers to be made to them which will be discussed now.
    "Our capitalization is very stable and there is no point to take any steps to merge with another bank in the near future", said the Executive Director of Eurobank EFG Nikolaos Nanopoulos at a general meeting of shareholders of the bank last Friday. Nanopoulos did not however exclude the possibility of a merger in the long term. To what extent he was sincere, we will understand soon. September is not so far away, and then are coming also the stress-tests, and along with them also the good credit standing fund.
    Speaking about it, the news is that the draft regarding the Fund is now ready. Greece is obliged to create it as one of the conditions in its agreement with the IMF, the ECB and the EC. The fund shall be established to ensure the stability of the Greek banking system in the event of sudden sharp contraction in its capital base and it will have available 10 billion euros for this purpose. The funds come from the IMF and will not be used to provide liquidity to the banking institutions, but only for the purchase of priority shares which under conditions set by the Bank of Greece will become common shares. The participation in the Fund is mandatory for these financial institutions which can not meet the minimum requirements for capitalization, set again by the Bank of Greece and are unable to find another solution, ie, outside investor. If banks fail to pay back the Fund they will have to move to reforming and merging with larger and more stable banks, both from the domestic and from the international markets. As a start the fund for credit stability will operate for 7 years.
    Bad news during the week also came in relation to the trust of the Greeks in their own banks. Citizens continue to withdraw their investment from the local banks and transfer them to their branches abroad, mainly in Cyprus. Though the total amount of investments that have been moved from Greece to Cyprus does not exceed three billion euros, the phenomenon is alarming, according to Greek bankers. This admitted also Nikolaos Nanopoulos before the general meeting of Eurobank EFG, stressing that the leaking of investments further increases the cost of lending. In Cyprus, however, the subsidiaries of the Greek banks provide on average 1% higher interest on deposits than the interest in Greece and the investor’s interest is quite understandable.
    In May, 1 billion euro has been transferred from the National Bank of Greece in its subsidiary company in Cyprus and 750 million from the banks Alpha, Eurobank EFG and Piraeus have been transferred in their Cypriot subsidiaries. The phenomenon is expected to continue as the expectations of the European Commission are that all EU countries since 2011 will have positive economic growth with the exception of... Greece.

Tags: Greek banks crisis mergers and bankruptcies economy companies
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