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One less private bank after the recapitalization

30 April 2013 / 23:04:12  GRReporter
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Eurobank’s rapid return to the private sector is a key priority for us as stated by the chairman of the general meeting of the banking institution Timos Christodoulou. Eurobank was the only major commercial bank in Greece, which failed to raise 10% private capital to avoid nationalization in the process of recapitalization of the financial system.

"Currently, Eurobank is at the end of one cycle and at the beginning of another. This transitional period will be short and it requires everyone’s support in order to be able to reform the bank and return it as soon as possible within the private sector, where it belongs and can perform its true role of a leading private commercial bank," says Christodoulou.
He forecasts that the Financial Stability Fund, which obtains its funds from the European aid, will initiate the merger of smaller Greek banks to the system of Eurobank. The aim is to create a more powerful and stable financial institution that will attract foreign investors at a later stage.
Eurobank’s executive director Nikos Nanopoulos states that the board has taken into consideration all the facts and circumstances, and has unanimously agreed that the Hellenic Financial Stability Fund should take over the recovery of the bank. It will cover the amount of 5.8 billion euro, required to allow the capital adequacy of the institution to meet the requirements of the supervision. Nanopoulos notes that it is very difficult to find 583 million euro (10% of the recapitalization requirements) from private investors and therefore, the bank will be nationalized.

"Interrupting the process of merger of Eurobank has created serious uncertainty regarding the investment condition of the bank." Potential investors do not know whether Eurobank will follow an independent course or if the merger will continue, or what the ratio of the shares will be in the event that the National Bank of Greece acquired Eurobank. The Bank will reduce its capital by reducing the total number of ordinary shares as reported by Naftemporiki. Ten old common shares will be converted into one new consolidated share which will cost 1.54 euro.

The funds that the Hellenic Financial Stability Fund will put into Eurobank will be slightly more than 5.8 billion euro. Against this amount, the Fund will receive bonds as a financial guarantee from the European Financial Stability Facility (EFSF) as stipulated in the arrangement of the country with the countries of Europe and the International Monetary Fund.

The situation of the National Bank of Greece (NBG) is better and it will not fall under state control. The bank needs 9.75 billion euro and it is planning to issue convertible bonds (Cocos) worth 1.9 billion euro. The National Bank of Greece expects to collect from private investors 12% of the funds required for recapitalization and to avoid nationalization.

The minimal participation of private investors in the process should amount to 975.6 million euro. The bank estimates that the involvement of private investors may exceed 1.2 billion euro thus further strengthening the capital base of the financial institution.

The head of the NBG Alexandros Tourkolias stresses that the bank will not fall under the control of the government thanks to the hundreds of thousands of small and large shareholders. "The data available show that the goal is achievable," states Tourkolias in connection with retaining the private control of the NBG.

Until now, the difficult economic situation has forced the bank to introduce lighter conditions for the payment of loans worth six billion euro. However, the situation is not so severe, taking into account the fact that the bank has gained a 670 million euro pre-tax profit from its subsidiary Finasbank, and that the loans/deposits ratio for the fourth quarter of 2012 was below one hundred percent. Tourkolias notes that the merger of the NBG with Eurobank would have resulted in profits of over four billion euro, but it had to be interrupted in order for the recapitalization of the banking sector in the country to be completed.

The situation of Alpha Bank and Piraeus also looks calm and the two financial institutions had announced earlier this month that they would be able to cross the 10% threshold and to remain private. Alpha Bank is seeking from private investors at least 550 million euro but it is expected that it will be able to obtain slightly more, which will enable it to build up reserves to cover future risks. The requirements of Piraeus amount to 7.33 billion euro and about 750 million euro will come from private capital as promised by the bank's management. Meanwhile, Probank has announced an increase in the share capital of 90 million euro by issuing 150 million new shares with a value of 0.60 euro.

Tags: EconomyCompaniesCrisisRecapitalizationGreece
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