© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
February 3, 2013 10:14 pm
Greece’s banks have begun a frantic lobbying of the bodies behind the country’s bailout, in an effort to ease the conditions imposed on their recapitalisation and avoid full nationalisation.
Under the terms of Greece’s €172bn international bailout – backed by the so-called troika of the European Commission, European Central Bank and the International Monetary Fund – €27bn is to be injected into the big four lenders, with a further €2.5bn to be supplied by private sector investors.
But it is proving difficult to attract that private sector money, given a tight April deadline and equity valuations seen as unrealistic by some analysts. The big four banks together hold negative equity of about €8bn, adding to the disincentive for investors to inject fresh capital.
“New investors aren’t willing to pay for yesterday’s losses,” said Nikos Karamouzis, deputy chief executive at Eurobank. “If you want to attract private capital, you have to re-examine the terms.”
According to bankers and analysts, no serious fund management companies, and only a handful of hedge funds, have shown any interest in buying equity in Greece’s top banks – National Bank of Greece, which is midway through a merger with Eurobank; Alpha Bank; and Piraeus Bank.
“At this point we see little interest from international institutional investors to participate in the recapitalisation under the current structure,” said Antonio Ramirez, analyst at Keefe, Bruyette & Woods.
If outside investors fail to appear, the banks risk being fully nationalised, with the Hellenic Financial Stability Fund, the Greek body that is administering the bailout money on behalf of the troika, taking control.
Bankers complain that the terms of the recapitalisation, set last summer, valued the banks’ equity at a multiple of between one and two times their book value at a time when most banks across Europe are trading at a fraction of that price.
The end-April deadline will also be impossible to meet, bankers say, especially for NBG-Eurobank whose merger process will extend at least until the summer.
Bankers believe the compulsory timetable for the HFSF to exit is equally unrealistic.
Private sector investors would be given warrants entitling them to buy out the HFSF within five years, though only at the current inflated valuations, which bankers say are likely to far exceed market prices for at least that long.
One banker who declined to be named said Greek banks’ books were worse than many realise, given that asset valuations and recapitalisation estimates date back to 2011. “Greece has performed worse than in the adverse scenario,” the banker said. “The macroeconomic contraction was much bigger in 2012 than forecast. Loan portfolios are still deteriorating.”
George Provopoulos, governor of the Greek central bank, told the FT this week: “According to the programme, banks’ capital increases need to be completed by the end of April. Given market conditions and the combined amounts involved, this will be demanding. However, banks are striving to meet this objective.”
Additional reporting by Ralph Atkins in London
Please don't cut articles from FT.com and redistribute by email or post to the web.