Greek banks bounced higher on Thursday, finding some support after the previous session’s losses took an average of 25 per cent off the share prices of the country’s four biggest lenders.
The sector showed the first signs of looking oversold after three sessions of steep falls, which started before last weekend’s general election. As expected, the poll brought the anti-austerity Syriza party to power with a mandate to overhaul the policies brought in under the terms of the international bailout of Greece.
The new government will seek a write-off for some of Greece’s sovereign debts, and with its private banks holding government paper, concerns have grown about the potential implications of the policy on the sector.
There were signs on Thursday that the market looked as if such risk had been priced in during the sell-off, which took 12 per cent off the Athens General index.
The main Greek benchmark recovered 2.5 per cent to 728.91 on Thursday, with banks moving from the vanguard of the selling to the forefront of the gains. Shares in Attica Bank made the biggest single gain on a recovering Athens General index, up 12 per cent at €0.07. Alpha Bank was up 11.8 per cent and National Bank of Greece, one of Wednesday’s most eye-catching casualties, rose 4.2 per cent on Thursday.
Shares in Piraeus, Greece’s largest bank by assets, whose stock price has halved over the past month, regained 9.2 per cent to €0.54.
Nonetheless, shares in the sector remain battered by three consecutive sessions of double-digit losses and doubts remain about the political risks banks face since the election.
“Syriza’s debt-relief rhetoric could be a solvency risk,” said Christy Hajiloizou, analyst at Barclays.
“Potential sovereign and private debt restructurings are a further area of concern and may have a material impact on the Greek banks’ capital positions. While bank sovereign debt holdings are significantly lower . . . they remain significant relative to the size of the banks’ capital bases for all banks except Piraeus.
“Our understanding is that Syriza may also seek partial forgiveness of non-performing loans of certain borrowers, although this may be done over a longer time horizon. Given that uncovered non-performing loans as a percentage of common equity tier one capital are very high for all banks, this may put additional pressure on the banks’ solvency positions.”
Nondas Nicolaides, senior credit office at Moody’s, the rating agency, said Syriza’s win was “credit negative” for Greek banks, with the political uncertainty hampering their access to funding and prompting savers to withdraw deposits.
“Deposit outflows from Greek banks have been evident since early December 2014, but they accelerated in January 2015,” said Mr Nicolaides. “According to our estimates, deposits have declined by more than €12bn so far, from a private sector deposit base of €164.3bn at the end of November 2014.”