ECONOMY

Lenders hold breath on Cyprus, but recapitalization proceeds

Greek banks are holding their breath for the outcome of the Cypriot crisis as they are waiting for the selection of the lender to absorb the branches of Cypriot banks in Greece, complete with their portfolios, while the countdown for the last part of the recapitalization process begins.

The Hellenic Financial Stability Fund (HFSF) and the Bank of Greece have put the procedure for the absorption of the Greek branches and portfolios of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank, which is at an advanced stage, on hold until there are concrete developments in terms of safeguarding the stability of the Cypriot credit sector as part of the island economy’s bailout.

The Central Bank of Cyprus issued a decree on Wednesday according to which all banks on the island will remain closed today and tomorrow too, which means that they will not reopen before next Tuesday, March 26, as Monday is also a bank holiday in Cyprus as well as Greece.

Banks on Cyprus have remained closed since Friday, March 15. This decision means that the branches of Cypriot lenders in Greece will remain closed too.

The Cyprus Stock Exchange, which has also been closed for the same period, is expected to announce its decision not to reopen this morning given that it cannot operate without trade of bank stocks, which account for 70 percent of its turnover.

However, the Greek bank recapitalization process cannot wait, given the insistence of the government and the country’s international creditors on adherence to the program provided for in the bailout agreement. The only concession could be the extension of the deadline for the exercise of share capital increase rights by a few weeks, from end-April to late May.

Greece’s systemic banks will issue their financial results for 2012 next week, as has been announced. National Bank and Eurobank Ergasias have stated they will issue theirs on Wednesday, March 27, with Piraeus Bank likely to issue its own on the same day. Alpha Bank will publish its figures the following day. All banks will also hold board meetings next week to call for general meetings for the share capital increase to begin, that being the final stage of the recapitalization process.

Fourth-quarter results for 2012 are certain to show a further decline in revenues from banking operations, an increase in bad loans, and net positions deteriorating both on the bank and the group levels.