ATHENS--Greece's largest lenders are working to raise money to
cover massive holes left behind by the country's debt
restructuring, with one bank admitting Monday it has given up the
chase and will turn exclusively to the government for help, and
another saying it has enough funds to prevent a complete loss of
management control to the state.
The country's four big lenders--National Bank of Greece SA
(ETE.AT, NBG), Eurobank Ergasias SA (EGFEY, EUROB.AT), Alpha Bank
SA (ALPHA.AT) and Piraeus Bank SA (TPEIR.AT), who, combined,
control more than four-fifths of Greek banking assets--need to
raise some 27.5 billion euros ($35.9 billion) after they were wiped
out by the country's EUR200 billion debt restructuring last
year.
In a day of mixed news for the sector, Eurobank admitted to
being the first domestic bank to fall under state control, dropping
plans to raise money from investors that would have secured
management control of the lender.
Eurobank said its board decided Greece's bank rescue fund, the
Hellenic Financial Stability Fund (HFSF), will fully cover a EUR5.8
billion rights issue and it could be recapitalized as early as next
week.
"As one of the four systemic banks, Eurobank intends to actively
engage in the strategic restructuring of the Greek banking system
through the acquisition of smaller nonsystemic banks," it said.
The news comes after Greece halted earlier this month Eurobank's
merger with National Bank of Greece, at a time of fears by the
country's international lenders that the combined entity could
become too big to be bailed out by the government. A Eurobank
official said uncertainty over whether authorities would finally
give the go-ahead for the merger hurt its chances of raising
capital from investors.
As part of Greece's latest EUR173 billion bailout by its
euro-zone peers and the International Monetary Fund, EUR50 billion
has been set aside to recapitalize the country's four big banks.
Under the terms of the plan, the banks must secure 10% of their
capital needs from the private sector to maintain management
autonomy and retain their private character.
Greece's bank-rescue fund will underwrite the balance but will
have only restricted management rights if its share is less than
90%.
Piraeus Bank, however, had positive news--with the lender saying
it has enough money to meet the 10% threshold after it agreed to
purchase the Greek unit of Portuguese lender Banco Comercial
Portugues SA (BPCGY, BCP.LB). The news sent Piraeus Bank shares 16%
higher on the Athens bourse.
BCP will offload its Greek unit Millennium Bank by selling it
for EUR1 million to Piraeus Bank and will invest EUR400 million in
the Greek lender's upcoming rights issue, the two companies said in
separate statements Monday. In addition, BCP will recapitalize its
Greek unit before the sale closes by EUR400 million, the Portuguese
bank said. About EUR139 million of that has already been
injected.
"We are confident that we can achieve an even higher
participation of private investors, in this landmark rights issue
of Piraeus Bank," said Michalis Sallas, chairman of Piraeus
Bank.
The Greek banking stocks index rose 18% on hopes the other two
lenders--NBG and Alpha Bank-will be able to follow suit and keep
control of management. In Lisbon, BCP shares trimmed gains of more
than 4% to end up 2.1%, with investors cheered by news of the deal.
Its Greek unit has long been a drag on the results of the
Portuguese bank, which is also struggling with a recession at
home.
The Portuguese bank, which last year received government help to
improve its capital ratios, has been losing money in Greece due to
the continuing economic problems in the country. With the
transaction, BCP will lower its risk-weighted assets by about EUR4
billion, in turn raising its capital ratios. As of December, the
bank's core tier 1 ratio was 9.8%.
Write to Stelios Bouras at Stelios.Bouras@dowjones.com and
Patricia Kowsmann at Patricia.Kowsmann@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires