Bloomberg News

Greek Banks to Post Writedowns as Investors Face Wipeout

November 29, 2011

(Adds today’s shares and Imerisia report on swap committee in 12th paragraph. For more on the euro crisis: EXT4 <GO>)

Nov. 28 (Bloomberg) -- Greek banks, which are predicted to start reporting third-quarter losses today, may also disclose bond writedowns as they tussle with the government over terms of a debt swap related to the nation’s bailout package.

Alpha Bank SA, Greece’s third-biggest lender, may post a loss of 14 million euros ($18.6 million) after markets close, according to the median of seven estimates in a Bloomberg analyst survey. That compares with a 37 million-euro profit in the year-earlier quarter. National Bank of Greece SA, the nation’s biggest, may post a loss of 99 million euros tomorrow versus a 113 million-euro profit, an analyst survey shows.

The banks, which may disclose whether depositor flight is worsening, will also be pressed on how they plan to raise capital to offset the shortfall that will result from the bond writedowns, according to analysts including Panagiotis Kladis of National Securities SA. Greece may be poised to force some banks into a recapitalization that then-Prime Minister George Papandreou last month described as a “nationalization.”

“Even under the best-case scenarios, we are talking about significant losses for the banks,” said Kladis, who is based in Athens. “The quarterly results have become a bit irrelevant because we have a number of issues and uncertainties.”

Asset Sales

Greece has funds earmarked for banks from its 130 billion- euro second bailout package. Recourse to the 30 billion-euro Hellenic Financial Stability Fund would be in exchange for common shares, a move that could wipe out existing shareholders.

All bank stocks listed on the Athens exchange have lost more than 80 percent of their market value since Greece’s first 110 billion-euro bailout in May 2010. The shares recovered some of their losses today, with National Bank increasing 5 percent to 1.91 euros as of 11:41 a.m. in Athens. Alpha gained 6.2 percent and Piraeus Bank SA gained 5.6 percent.

Greek banks may eventually need to raise as much as 12 billion euros through measures such as asset sales to reach the core tier 1 capital ratio of 10 percent required under the bailout, according to Alexander Krytsis, an analyst at UBS AG. The ratio is a measure of financial strength.

EFG Eurobank Ergasias SA also reports earnings after markets close today, while Piraeus reports on Nov. 30.

‘Turbulent Environment’

“Whereas usually the focus would be on their respective operations, we feel that focus will be less on the numbers per se and more on where does the industry stand in a highly turbulent environment,” Nikos Koskoletos, an analyst at Eurobank EFG Equities, said in an e-mailed note.

Greece’s five biggest banks held 53 billion euros of Greek government bonds at the end of 2010, about 15 percent of their total assets, according to the results of European Banking Authority stress tests. Lenders would get 50 cents for each euro the government borrowed under the terms of the swap.

National Bank and Alpha are on the steering committee of lenders that meet today to prepare their position on the debt swap plan, Imerisia reported today, without saying where it got the information. BNP Paribas SA, Intesa Sanpaolo SpA and AXA SA are also on the committee, the newspaper said.

A writedown that marked Greek banks’ bond holdings to market prices would cost them 18 billion euros, according to Krytsis. That may make accepting the government’s swap offer less painful by comparison. Greece’s 4 percent notes due in August 2013 now trade at about 33 cents on the dollar.

BlackRock Review

“The bigger the turmoil and volatility in Greece, the better the chance that Greek government bondholders will eventually tender” to the swap “so as to avoid a potential disorderly default,” Dimitris Giannoulis and Carlos Berastain Gonzalez, analysts at Deutsche Bank AG, wrote in a report.

The country’s lenders lost 5.4 billion euros of deposits in September, the biggest one-month decline since Greece joined the euro, as doubts about the country’s ability to meet the terms of the bailout resurfaced.

In the same month they reduced their direct reliance on the European Central Bank for liquidity by 15 billion euros, while their use of the Bank of Greece’s costlier Emergency Liquidity Assistance program increased more than fourfold to 27 billion euros, close to the program’s 30 billion-euro limit. Finance Minister Evangelos Venizelos on Nov. 21 announced that limit will double to 60 billion euros.

The banks may also disclose progress on BlackRock Inc.’s review of their loans, a process that’s expected to be completed early in 2012.

--Editors: Keith Campbell, Jon Menon

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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