Plan to boost Eurobank’s capital by 1 bln euros

Greece’s plan to return Eurobank to private ownership will see the country’s fourth largest bank issue more than 1 billion euros of new stock to private investors, boosting its capital ratio, a source familiar with the transaction said late on Friday.

Eurobank was the only one of Greece’s four systemically important banks to have its summer 2013 recapitalization needs met solely by the Hellenic Financial Stability Fund (HFSF).

The HFSF, a bank rescue vehicle funded with 50 billion euros from the country’s bailout by the European Union and International Monetary Fund, now owns 95 percent of Eurobank.

The fund has retained JP Morgan and Lazard to advise on ways to re-introduce private investors into the bank’s share register ahead of a March 2014 deadline laid down by the IMF/EU chiefs overseeing Greece’s sovereign bailout, three sources with knowledge of the process said.

The sources said HFSF has decided to issue new shares rather than selling on the shares it already owns, so the bank’s capital position will be improved.

The additional capital will be «north of one billion euros», one of the sources said.

“It will be a capital increase,» HFSF chairman Christos Sclavounis told Reuters, declining to comment on how much capital will be sought.

Other sources familiar with the process said the exact amount of the increase will be determined by the outcome of stress tests consultancy BlackRock is carrying out into Greek banks’ capital positions. The results are due in December, but early indications may come ahead of this.

Eurobank had a capital ratio of 8.1 percent at the end of June, making it the most weakly capitalized of the four main Greek banks, which together have a market share of more than 90 percent.

Two sources told Reuters that some institutional investors have expressed early interest in taking part in a Eurobank deal, including North Americans with experience of investing in financials elsewhere in the eurozone.

“The Fund, with the bank and our respective advisers, will do a thorough job looking for legitimate and value adding investors» Sclavounis said.


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