The National Bank of Greece, the country’s biggest lender, is planning to increase its share capital by as much as 2.1 billion euros ($2.9 billion) to cover a shortfall identified in the national regulator’s stress test, according to a person with knowledge of the matter.
The lender will decide on the proposal at a board meeting on April 15, said the person, who spoke of condition of anonymity because the plan is still being discussed.
On March 7, the bank said it would present a plan to address its capital shortfall without raising new equity. The Bank of Greece, which regulates the financial system, declined to accept that plan, according to two people with knowledge of the discussions with the commercial lender.
The governor of the Bank of Greece, George Provopoulos, said in an interview on Skai television station April 11 that the National Bank of Greece could tap private investors successfully if it chose to.
“National Bank is seizing the opportunity to benefit from the demand for Greek assets to recapitalize quickly, with the added bonus of implementing at its leisure an asset disposal plan that might otherwise have be done in a fire sale,” Thanassis Drogossis, head of equities at Pantelakis Securities in Athens, said in a telephone interview today.
National Bank’s board will propose an increase in the share capital of 2.1 billion euros through payment in cash and the cancellation of the pre-emption rights of the bank’s ordinary shareholders, including Greece’s bank recapitalization fund HFSF, the person familiar said.
The bank will also propose the buyback of 1.3 billion euros of preference shares currently held by the Greek government. To finance that, the lender will sell some assets, two people said.
Two other Greek lenders, Piraeus Bank SA and Alpha Bank AE, last month raised nearly 3 billion euros, mostly from foreign investors, to plug a capital shortfall identified in the regulator’s stress test. Piraeus also sold 500 million euros of three-year bonds, in the first public debt sale by a Greek lender since 2009.
Greece ended a four-year exile from international markets last week with a bond sale of 3 billion euros, more than the government estimated.