Banks to trim assets, especially abroad, to boost capital bases

By Yiannis Papadoyiannis

The European Commission’s restructuring plans for Greek banks provide for a drastic scaling back of their activities abroad as well as reductions in the number of branches and staff at home.

The plans for banks National (NBG) and Piraeus were given the green light late last month, following those for Alpha in early July and Eurobank in April.

According to the blueprint, National Bank will retain a presence in neighboring Turkey by retaining majority control of Finansbank, but will have to withdraw from all other countries in Southeast Europe. By June 2018 it has to sell its subsidiaries in Albania, Bulgaria, the Former Yugoslav Republic of Macedonia, Romania, Serbia, South Africa and the branches it operates in Egypt. It will however be allowed to keep some branches in Cyprus, the UK and Malta. As regards Finansbank, it will have to proceed to an increase of at least 20 percent of its existing capital, while NBG has pledged to sell 20 percent of its Finansbank holding. It has also agreed with the Commission that its branch network in Greece will be shrunk to 550 and the number of employees reduced to 10,700 while the loans to deposits ratio will not exceed 115 percent by end-2017.

Piraeus Bank’s restructuring plan provides for a maximum of 870 branches and no more than 15,350 employees by the end of 2017. The plan also includes a drastic cutback in activities abroad. The value of its foreign assets will either have to be reduced to 3.1 billion euros by June 2018 or they will have to be sold altogether except certain combinations (Cyprus-Romania, Cyprus-Bulgaria, or Bulgaria-Albania-Serbia).

The other two big systemic banks, Alpha and Eurobank, have agreed to similar moves. Besides reducing the number of branches and employees, further goals include cuts in the cost of operations and deposits and the sale of subsidiaries such as insurance, real estate and investment arms. The moves are intended to boost their capital bases and limit dependence for liquidity and capital on the state.

Sources say the Bank of Greece has ruled out the idea of one so-called bad bank to take the bad loans of all commercial banks, and each lender will handle its own through special departments they have already created. The government’s planned changes and actions are focused on bankruptcy law, which will help with the restructuring of problematic enterprises.