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The National Bank of Greece remains private

13 June 2013 / 19:06:31  GRReporter
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It seems on the last day of the period of share capital increase that the National Bank of Greece (NBG) will remain private and will not be nationalized. Despite the short time that was available to the institution, the NBG has been able to collect the 10% minimum of the amount required for its recapitalization. In the event that the private capital it has raised amounts to 800 million euro, the bank will issue convertible bonds (Coco's) to cover the gap to 975.6 million euro, which is one tenth of the cost of recapitalization.

The bank aims to avoid issuing Coco's and, instead of 10%, to cover 12% of the requirements for additional private capital by issuing new shares. In the best case scenario, the NBG hopes to raise 1.17 billion euro alone and to obtain the rest from the Hellenic Financial Stability Fund, as provided by the rescue programme to the country.

The bank's board will meet next Monday to take a final decision on whether there is a need for the issuance of convertible bonds. The new shares and convertible bonds will be launched on the market on 25 July.

According to the latest data, private entities from the country and abroad hold 35.54% of the NBG’s shares. Separate individual investors hold 45.8%. Public institutions (insurance funds, pension funds, etc.) hold 13.04% of the shares and 5.62% is the share of the Church in the bank. The insurance funds that already hold shares of the bank will not be able to acquire additional warrants, which allow the purchase of an additional number of shares at a later stage. Therefore, the funds consider the participation in the capital increase unattractive and it is expected that their share will decline after the recapitalization.

CityGroup notes that, after the recapitalization process, the bank should focus on strengthening the capital adequacy index. This could be achieved through the sale of its activities abroad (subsidiaries and affiliates) and through the optimization of costs in the country. The status of the NBG depends directly on the macroeconomic environment in which they develop and on the assessment of the quality of their assets.

According to CityGroup’s analysts, the NBG is moving in the right direction and it will cross the 10% threshold related to private capital. They believe that the 9.3% value of the Tier I indicator is sufficient, but it is desirable for the bank to add 1 -2% as an additional guarantee in order to cover additional risks such as asset quality or regulatory changes in the future. It is expected that the sales of the NBG’s assets in Southeastern Europe will be crucial for the stabilization of its capital.

Analysts' expectations are that the bank will provide its shareholders with good returns in the future. In 2014, it must reduce to zero its losses during the crisis and start reporting new profits from the end of 2015 onwards. The return on equity (ROE) after a year and a half may reach 12% as reported by Naftemporiki.

Meanwhile, MSCI announced that it has downgraded Greece from a developed to a developing country. The reasons are the difficulties in raising capital, poor performance of the external debt, long-term recession and the decline in the financial market following the signing of the Memorandum of financial support.

After a sharp decline, the Athens Stock Exchange closed on Thursday with an increase of 3.41%. The main index reached 896.7 basis points whereas turnover was 80.9 million euro. The positive signals from the recapitalization process have affected the banking index and it also increased by +5% compared to yesterday's session. The National Bank of Greece closed with a 4.6% increase in shares, Alpha bank also reported a positive result of 7.9%, Piraeus Bank 4.11% and Attica Bank 3.31%. In total, 93 companies reported an increase in shares, 57 reported a decline and 19 reported no change in shares.

Tags: EconomyCompaniesBanksNational Bank of GreeceRecapitalizationNationalization
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