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4-Traders Homepage  >  Equities  >  Athens Stock Exchange  >  Alpha Bank SA    ALPHA   GRS015003007

ALPHA BANK SA (ALPHA)
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Greek banks face moment of truth on capital holes

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04/05/2012 | 05:47pm CET

Greek bank shareholders are under pressure from Athens to contribute billions of euros to recapitalize the lenders so that the government can avoid taking them over.

Investors will find out by April 20 the details of the financial support package on offer from the Greek government, technocrat Prime Minister Lucas Papademos said on Thursday. Athens desperately wants to keep the banks in private hands.

The terms are likely to determine whether shareholders decide to take part. If they balk at the offer, the heavily indebted Greek state could end up owning the banks.

In a worst-case scenario, 50 billion euros ($65.6 billion) or a quarter of Greece's gross domestic product (GDP), may be required to shore up the banking system. The money is needed because loan losses and a bond swap that saved Greece from bankruptcy hit its lenders - big buyers of Greek debt - particularly hard.

The government wants at least 10 percent of the capital to come from banks' shareholders through rights issues, a senior banker close to the talks told Reuters.

"Main shareholders will need to make decisions, come up with 10 percent to keep the keys," the banker said. "The total bill could reach 50 billion euros, including recapitalization and resolution which is more costly."

Whether investors are willing to pump in the cash depends on the terms and incentives on offer, although if they decide not to "follow their money" they risk having the value of their investment wiped out completely.

"The problem with the banking sector is that the landscape remains foggy, recapitalization terms have not been spelled out," said fund manager Theodore Krintas at Attica Bank. "Put simply, will the system be nationalised or not?"

Greece's debt restructuring last month inflicted real losses of about 74 percent on bondholders, wiping out 22 billion of the banking system's 23.8 billion euro Core Tier 1 ratio, according to International Monetary Fund (IMF) estimates. Banks held 45-50 billion euros of bonds.

Banks will also need to set aside more cash to cover potential future losses, increasing the size of the capital hole they need to fill to reach a core capital target of 9 percent by the end of September.

The Bank of Greece has hired investment adviser BlackRock to assess banks' loan books for future losses and is expected to disclose the findings of that study later this month.

With the economy mired in a deep recession and unemployment at a record 21 percent, asset quality is deteriorating. Banks' non-performing loans are certain to rise from 14.7 percent of their books at the end of September.

"The authorities will do what they can to keep the banks operating as living entities and avoid nationalizations where possible," said analyst Alex Tsirigotis at Mediobanca Securities in London.

The state does not want to take over the banks and have to put their assets on its balance sheets, which would increase its public debt still further.

CRISIS HITS SHARES, LOANS

The scale of new capital banks need is many times their market value after their share prices imploded. Greek bank shares <.FTATBNK> have shed more than 77 percent in the last year, pummeled by the threat of dilution and a bleak economic outlook.

The big four lenders - National (>> Nat. Bank Greece), Eurobank (>> EFG Eurobank Ergasia), Alpha (>> Alpha Bank) and Piraeus (>> Bank of Piraeus) - together are worth just 2.7 billion euros, a fraction of the value at their prime when they expanded in the Balkans.

A capital backstop has been set up - the Hellenic Financial Stability Fund (HFSF) - to inject most of the financial support, which will most likely be in the form of bonds backed by its international lenders. The fund will do this by buying common shares with restricted voting rights and by buying bonds, known as CoCos, issued by the banks, which would convert into shares if capital falls below certain levels.

Banks want a 3.5 percent annual interest payment and a long maturity of at least 10 years for the CoCos. The HFSF, which is funded by the euro zone and IMF, aims to eventually resell the shares to private-sector investors.

The more contingent convertible debt (CoCos) is issued, the smaller the rights issue will need to be, meaning shareholders will be asked to stump up less cash.

But the devil is in the detail - at what discount will the new shares be issued and will investors and the HFSF be offered new stock at the same price?

"If the price for the fund (HFSF) is lower compared to that for investors it would discourage their (shareholder) participation in the recapitalisation," the Greek banks association said in a memorandum obtained by Reuters. ($1 = 0.7623 euros)

(Additional reporting by Steve Slater and Michele Kambas; Editing by Alexander Smith and Erica Billingham)

By George Georgiopoulos

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Financials (€)
Sales 2017 2 378 M
EBIT 2017 1 218 M
Net income 2017 183 M
Debt 2017 -
Yield 2017 -
P/E ratio 2017 12,46
P/E ratio 2018 5,58
Capi. / Sales 2017 1,05x
Capi. / Sales 2018 1,07x
Capitalization 2 502 M
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Number of Analysts 14
Average target price 2,61 €
Spread / Average Target 61%
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NameTitle
Demetrios P. Mantzounis Chief Executive Officer, Executive Director & MD
Vassilios T. Rapanos Non-Executive Chairman
Spyros N. Filaretos COO, Executive Director & General Manager
Artemis C. Theodoridis Executive Director & GM-Wholesale Banking
Evangelos J. Kaloussis Independent Non-Executive Director
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