ECONOMY

List of banks expecting ‘Grexit’ getting longer

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With Greece’s creditors having now prepared a blueprint for a the country's departure from the eurozone and given a deadline of Sunday for any potential deal, it may well and truly be crunch time for the Hellenic Republic. Bank analysts began tweaking their expectations of a so-called Grexit, after the country called its surprise referendum, and the list of analysts expecting Greek departure has only been growing longer in the time since.

Here's a look at some of the banks that have now made a Grexit their base case scenario.

Bank of America Merrill Lynch (Gilles Moec, Ruben Segura-Cayuela, Athanasios Vamvakidis):

We think all the ingredients for Grexit are there and it appears the natural slope from now on, with a majority of member states seemingly erring in that direction. We believe there is still a chance it can be avoided, but Tsipras has to surprise to the upside.

Barclays (Francois Cabau, Antonio Garcia Pascual, Philippe Gudin):

Exit now is the most likely scenario… Agreeing on a program with the current Greek government will be extremely difficult for euro-area leaders, given the Greek rejection of the last deal offered, and will be a difficult sell at home.

Citigroup (Willem Buiter, Ebrahim Rahbari, Guillaume Menuet; Tina M Fordham; Antonio Montilla; Michael Saunders; Tiia A Lehto):

We are changing our view and now believe that Grexit – Greece’s exit from the Eurozone – is the most likely outcome, either via a short-term exit (next few months) or over the next 1-3 years.

The proximate drivers of our change of view are the announcement of the referendum, the imposition of capital controls, the emphatic NO outcome in the referendum and a hardening in the stance of Greece's creditors.

Short-run Grexit risks have increased sharply, but a short-term deal is nevertheless still likely (we should know by Sunday). Even if the short-term Grexit risk is eliminated by such a deal, Grexit risk will remain material following such a deal, bringing the cumulative probability of Grexit over the next 1-3 years above 50%.

JPMorgan (Kate Moore):

A Greek exit from the euro appears more likely than not.

BMO Capital Markets (Stephen Gallo):

Sixty-percent odds we now put on a full scale, legislated Grexit at some point in the not too distant future…

Deutsche Bank (George Saravelos):

Attach marginally higher probability of a post-midnight deal being reached; remains a close call.

Morgan Stanley:

Increased the probability of departure by the end of 2016 to 60 percent from 45 percent.

RBS (Michael Michaelides):

We were too benign on the willingness of the Tsipras administration to sign a deal, despite the final plans of the Greek side and the creditors not being substantially different in substance.

Maintains Grexit probability at 55% and odds of a last minute deal at 25%.

ICBC Standard Bank (Steven Barrow)

Esp. concerned with threat of surging global risk aversion from any Greek exit; global assets already at considerable risk from impending turn in US monetary policy cycle

An exit could be “straw that breaks the camel’s back” for global equities, corporate credit and EM currencies

Additional danger of monetary policy being tapped out in major developed countries; inability to react to contagion risks, beyond provision of temporary liquidity, could exacerbate risks to these economies

Goldman Sachs (Dirk Schumacher):

Clear possibility a dovish rhetoric is backed up by announcement of increase in monthly purchases; not base-case scenario

Base case for Greece remains one where an accommodation between Greek govt – potentially a new govt – and its creditors can be found and Greece remains a member of euro zone

UBS Wealth Management (Ricardo Garcia-Schildknecht, Thomas Wacker, Fabio Trussardi, Jens Anderson):

Greece deal will likely include debt restructuring, although nominal value reductions are highly unlikely

Repaying ECB loans of EU27b at nominal value and receiving ECB profits on bonds bought under SMP to repay some of the money owed to IMF possible

Deal possible, not certain; chance of Grexit is 50%-60%; 85% probability ECB will be successful in containing spreads

ING (Carsten Brzeski)

 While deal is still possible, strong language from several euro-area leaders suggests that not only time is running out but that patience with Greek gov't is wearing thin

[Bloomberg]