Greece’s top banks posted historic losses for last year on Friday, hit by a bond swap last month that blew holes in their balance sheets and nearly wiped out their capital base.
National, Alpha, Eurobank and Piraeus posted an aggregate loss of 28.2 billion euros (US$37.3 billion), about 10 times their current market worth, or 13 percent of the country’s GDP.
The banks treated losses from last month’s bond swap to cut the country’s debts — part of a rescue package for Greece negotiated with the EU and the IMF— as if they took place last year.
Inflicting real losses of about 74 percent on bondholders, Greece’s debt swap proved a near-fatal financial torpedo for lenders, crippling the sector’s capital base.
Out of the four big banks, only Alpha spelled out clearly where this left its Core Tier 1 capital ratio. The other three reported where capital ratios would land after their use of standby funds provided by the Hellenic Financial Stability Fund (HFSF), a capital backstop.
“The banks that did not disclose clearly their Core Tier 1 are in a negative position. They are covering this by announcing Tier 1 after including support they will get from the HFSF fund,” Akis Amanis at Beta Securities said.
Alpha’s core capital ratio (Tier 1) fell to 3 percent. Eurobank, Greece’s second biggest, did not disclose the figure, but said the hit left it with total equity of 875 million euros.
National Bank, the country’s biggest lender, with operations in Turkey, said its Core Tier 1 ratio would reach 6.3 percent, taking into account the use of a 6.9 billion euro standby facility provided by the HFSF fund.
Piraeus gave no Tier 1 figure, but said tapping up to 5 billion euros of HFSF funds would boost its total capital adequacy ratio to 9.7 percent.
Greek bank shares have shed 74 percent in the last 12 months, underperforming the Greek stock market, which is down 50 percent.
“The results, so far, are close to what the market had expected, particularly for Alpha, less for Eurobank, which was somewhat below expectations,” Beta Securities analyst Manos Hatzidakis said.
Battered by a shrinking deposit base, rising loan impairments and unable to access wholesale funding markets, banks will need to fill the resulting capital shortfall and meet capital adequacy targets set by the central bank.
They face a core Tier 1 target of 9 percent by the end of September.
On this front, they have acted to boost their core capital, including by issuing preferred shares to the government, buying back hybrid securities and selling foreign subsidiaries.
Athens, which was due to announce a framework to recapitalize banks on Friday, is still working on technical aspects with EU and IMF officials, meaning the structure of the plan will likely be unveiled after Greece’s May 6 national election.
About 50 billion euros have been earmarked in Greece’s second bailout to prop up the banking sector.
The state wants private investors to dig into their pockets for at least 10 percent of capital needs to support banks and avoid nationalizing them.
The bulk of the recapitalization will be supplied by the HFSF fund, which got a tranche of 25 billion euros in the form of European Financial Stability Facility floating rate notes on Thursday. It has been cleared to provide letters of commitment to banks that it will underwrite their capital needs.
With the economy mired in recession and unemployment at a record 21.8 percent, asset quality deteriorated, meaning banks’ non-performing loans rose further — by 130 basis points to 12.9 percent of Alpha’s loan book.
Eurobank’s bad debt provisions rose 4.7 percent last year.
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