July 22 (Bloomberg) -- Italian banks including Intesa Sanpaolo SpA may climb after European leaders yesterday announced a 159 billion-euro ($229 billion) aid plan for Greece, analysts at Sanford C. Bernstein & Co. said.
The agreement to swap privately-held bonds into 15 and 30- year debt where the principal is “almost completely collateralized” will remove the risk of the eurozone collapsing, the analysts led by Dirk Hoffmann-Becking said in a note to clients today.
“We expect southern European banks to bounce the most, especially Italian banks since these measures have averted contagion risk, which touched Italy strongly the last few weeks via higher bond yields,” Hoffmann-Becking said.
The euro rallied yesterday after European leaders announced new aid for Greece and cajoled bondholders into footing part of the bill. They also allowed the EU’s 440-billion euro rescue fund to buy debt across stressed euro nations after a market rout last week fueled concern the crisis was spreading. The fund can also aid troubled banks and offer credit-lines to repel speculators.
Along with Intesa Sanpaolo, Credit Agricole SA, Societe Generale SA, Credit Suisse Group AG and UBS AG are all rated “outperform” by Bernstein. The banks’ core Tier 1 capital ratios should fall by no more than 15 basis points as a result of a writedown in Greek debt, the analysts said.
While the bailout plan does little to reduce Greece’s overall debt burden, meaning there’s still a risk of defaults, “this is an entirely manageable risk” for banks, they said.
--Editors: Edward Evans, Frank Connelly.
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