Investor response to Alpha beats recap target

Alpha Bank enjoyed a remarkable response by investors to its rights issue that concluded on Friday with demand far exceeding the required amount, according to sources. The details of the increase will be announced by Alpha on Monday.

The lender had set a target of 457 million euros or 10 percent of its capital increase to come from private investors in order for it to avoid being nationalized after its recapitalization. Sources suggest that the demand was so high that the bank will face restrictions as the recapitalization regulations do not allow the coverage of the amount required more than twice. The amount of 92.9 million euros was covered through private participation by selected strategic and institutional investors.

The bank has issued 10,388,636,364 new shares in total, out of which 1,038,863,636 (10 percent) will be mostly acquired by shareholders and the remaining 90 percent by the Hellenic Financial Stability Fund (HFSF). With the necessary share of private participation secured, Alpha shareholders will have the right to acquire the HFSF stake within the next four-and-a-half years.

According to Alpha’s timetable, both the new shares and the buyback warrants will be credited to shareholders’ accounts next Friday, June 7, and their trading on the local stock market will begin on Monday, June 10.

With the completion of the capital increase and factoring in the acquisition of Emporiki Bank, Alpha’s equities amount to 7.9 billion euros, corresponding to a Core Tier I index of 13.7 percent, against a minimum requirement for 9 percent. With the incorporation of Emporiki, Alpha’s market share amounts to 21 percent in deposits and 24 percent in loans issued. In the first quarter of the year Alpha posted pretax losses of 228 million euros, not including the incorporation of Emporiki.

Rival lender Eurobank announced on Friday that its net operating losses amounted to 245 million euros in the first quarter of the year, down from 295 million euros a year earlier, with an increase recorded in profits from operations abroad and in deposits in Greece, and a reduction in total provisions and operating costs. Thanks to the one-off factor of the deferred tax, Eurobank reported net profits of 375 million euros.

Group deposits in Greece grew by 1.5 billion euros in Q1, while provisions for nonperforming loans declined by 5 percent from the last quarter of 2012 to 418 million euros. Profits from abroad reached a six-quarter high of 12 million euros and operating costs continued to shrink by 9 percent on an annual basis, the lender announced.

Eurobank, Alpha and National Bank will on Monday proceed to adjusting their interest rates, starting with a 25-basis point reduction. In the next few days Piraeus is set to follow suit. However, this will not be the only rate reduction, as lenders will be implementing the policy of reducing the cost of borrowing money over the course of the year so that the average interest comes down to 2.5 percent or lower, abandoning the relatively high level of 4 percent it has floated around over the last couple of years.

New time deposits will therefore have a roof of 3.8 percent on their interest rate, following the reduction of the European Central Bank’s benchmark interest rate to 0.5 percent with a prospect for a further reduction by the end of the year. In the case of Greek banks, the need to contain interest rates on deposits is becoming a priority, after the completion of the recapitalization process.