BUSINESS

$11 billion wiped from Greek banks on nationalization threat

Sofia Horta e Costa & Fabio Benedetti-Valentini

The amount that investors gave Greek lenders last year was wiped off in three days of trading amid the threat of greater government control.

In a bid to boost balance sheets, the nation’s banks raised more than $11.5 billion in additional share sales in 2014, the most in at least a decade, data compiled by Bloomberg show. That capital was almost wiped out as bank stocks lost about $11.4 billion in market value this week. Shares of Piraeus Bank SA and National Bank of Greece SA plunged the most, becoming fractions of their pre-crisis peaks.

In his first week in office, Prime Minister Alexis Tsipras stood by pledges to renegotiate the terms of Greece’s bailout and has appointed ministers who said they will cease the sale of some state assets. That sparked a record 44 percent selloff in the FTSE/Athex Banks Index.

“Tsipras is not at all pro-market, but the government owns a big chunk of shares in the major banks,” Vassilis Patikis, head of global markets at Piraeus Bank, said by phone from Athens. “Although they have no voting rights, there’s a fear that the new government will try to regain these rights and control the banks. That possibility is really hitting sentiment. It’s not nationalization, but it’s pretty close.”

Raising Funds

The government-owned Hellenic Financial Stability Fund, created in 2010, is the biggest shareholder in Greece’s four largest banks. Lenders raised funds after sustaining losses on government bonds in the country’s debt swap in 2012, the biggest sovereign restructuring in history. A six-year recession also took its toll as bad loans ballooned.

Greek lenders face “risks of a potential change of management,” Maria Kanellopoulou, an analyst at Euroxx Securities SA in Athens, wrote in an e-mail. Deputy Prime Minister Yannis Dragasakis said the new government “will respect the rights of private investors in Greek banks” and will meet with Eurobank Ergasias SA’s biggest shareholders on Friday.

The nation’s stocks and bonds slumped, even as Tsipras and his finance chief pledged to avoid a standoff with creditors. The benchmark ASE Index has fallen 15 percent in the past three days, and bond yields spiked to levels not seen since 2012. A person familiar with the matter said bank-deposit withdrawals accelerated to record levels in the run-up to the Jan. 25 election.

The losses took Greek stocks down 48 percent since a high in March, as anti-austerity party Syriza gained ground among voters. Piraeus Bank trades at less than 1 percent of its 2007 share price and Alpha Bank AE has tumbled 97 percent since its high that year. National Bank of Greece, valued at about 23 billion euros ($26 billion) in 2007, has now a market capitalization of 3 billion euros.

[Bloomberg]

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