Standard & Poor’s announced on Friday that it was not expecting to raise its “D” rating on Greek banks while current capital controls remain in place, despite the successful completion of their recapitalization plans.
In a report, the agency publicized that the four Greek systemic banks (National Bank, Alpha Bank, Piraeus Bank and Eurobank) will need 2-4 billion euros in additional provisions, on top of the ECB’s baseline scenario, to adequately cover non-performing assets.
Capital shortfall
The credit rating institution commented that the capital being raised by the banks will only be enough to absorb the losses that they are expected to post over the next 12 to 18 months.
The banks must plug a capital shortfall of 14.4 billion euros uncovered by a European Central Bank review last month under an unfavorable scenario, according to which, the capital gap was 4.4 billion euros.
In private hands
At the same time, all four of the country’s systemic banks have successfully ended the process of their share capital increases after Piraeus Bank closed its book on Friday. As a result they will stay in private hands, away from the grip of the Hellenic Financial Stability Fund (HFSF).
According to media reports, Piraeus Bank has amassed offers from investors totaling 1.34 billion euros, exceeding its original target. The share price has been set at 0.003 euros, amounting to an 86 percent discount from the stock’s closing on Thursday at 0.021 euros. This is also 99.8 percent lower than the share price at the previous capital increase in spring 2014, at 1.70 euros.
Completion of capital increases
Piraeus will also draw 3.3 billion euros from the HFSF, a quarter of which will be covered by common shares and the rest with contingent convertible bonds (CoCos), so as to satisfy the requirements stemming from the stress test’s adverse scenario.
Earlier in the week the other three main lenders announced the completion of their capital increases. Late on Thursday National Bank announced it had collected offers of 1.6 billion euros at a share price of 0.02 euros, which constitutes a 93 percent discount on the stock price and a 99 percent drop from the previous share capital increase when its shares cost 2.20 euros apiece.
Shares selling to Greek investors
Within next week, National will sell shares to Greek investors at the same price as that given to foreign investors. With the increase, the bank has covered the requirements of the baseline scenario, and it will draw another 3 billion euros from the HFSF for the needs from the adverse scenario.
Alpha also said it has fielded offers of 2.7 billion euros and Eurobank announced it has collected bids of 2.5 billion euros.
Drastical reduction
The state’s holdings in the four banks are drastically reduced: In Eurobank the HFSF will command just 2.3 percent, in Piraeus it will own 25 percent and in Alpha it will hold 11 percent of shares.
It is only in National Bank that the HFSF will retain a greater stake, as the bank’s preferred shares will be transformed into common shares and it is not possible to calculate the state’s holding with precision.
