Nomura cut its earnings outlook for Greek banks as financial institutions face sovereign concerns, growth challenges and higher loan-loss charges, and downgraded its rating on the country's three largest lenders.

Nomura reduced its rating on National Bank of Greece SA and Eurobank to «reduce» from «neutral,» while it cut Alpha Bank SA to «neutral» from «buy."

The brokerage expects the banks to face a potential capital shortfall of 22 billion euro to 24 billion euro for this year and the next.

Greek banks need recapitalization to meet stricter European Union requirements, even as they have to set aside more money to cover potential losses from their borrowers, given the current economic situation and unemployment rates.

"With intensive outflow of deposits, Greek banks continue to derive liquidity from the European Central Bank and the relatively expensive emergency liquidity assistance or ELA funding, which has a negative impact on net interest income,» Nomura said in a note to clients.

Nomura expects Greek banks to report negative profitability for the next two years and sees the government having a significant stake in banks post-recapitalization efforts.

The brokerage also cut its price target on Greek banks, including Piraeus Bank SA, and maintained its negative view on the sector.

The benchmark Greek index has fallen 7 percent to 566.79 basis points since Friday. [Reuters]