ECONOMY

Citigroup says EU deal positive for Greek banks; shares rally

Citigroup said on Monday that a decision by eurozone governments to cut the cost of Greece?s bailout loan and provide the country with more time to pay back money is positive for Greek banks.

?Greek banks are likely to rally should Greek sovereign debt spreads tighten. The higher the exposure to Greek debt as a percentage of equity, the stronger the rally is likely to be,? said Citigroup in a note to investors.

In the early morning hours of Saturday, the EU summit extended the payment period of Greek loans under an EU-led bailout package by four years, as well as reduced interest rates for Greece by 100 basis points, alleviating the debt burden.

In exchange for the more favorable terms, the Greek government promised to complete a 50-billion-euro privatization plan by 2015.

In mid-session trade on Monday, shares in Greek banks were advancing 7.76 percent, led by a 9.5 percent jump in National Bank to 7.14 euros. The Athens bourse?s benchmark general index was gaining 5.32 percent to 1,665.03 points.

Greek 10-year bonds also rallied on Monday in line with gains in Spanish and Italian government paper.

Yields on 10-year Greek debt fell 39 basis points to 12.43 percent. The spread between Greek and German 10-year bonds tightened 43 basis points to 917 basis points.