Greek banks will try to raise funds amounting to about 3 billion euros on the market this year, in a bid to strengthen their capital adequacy and shield their liquidity so that they will be able to support the economy.
Besides Piraeus Bank’s €1.1 billion share capital increase, aimed at the lender’s capital strengthening ahead of drastic action to streamline its fundamentals, market forays by other banks will take place through Tier II security issues and senior bonds, which should fetch an estimated €2 billion. The funds to come by way of the Tier II bonds will bolster the capital indexes of the lenders, while the cash from the preferred senior notes will be used to enhance banks’ cash flows.
Therefore Alpha Bank will resort to the markets as its management is preparing the issue of a Tier II paper worth €500-600 million, and then a preferred senior note of about €500 million.
Market observers also anticipate similar moves by National Bank, with issues of Tier II bonds and preferred senior notes, while the bond issue by Eurobank will mostly target the enhancement of its liquidity.
The market climate is considered positive, as besides investors’ excessive liquidity, the banks’ Tier II securities offer satisfactory returns of around 5%, at a time when the yields on sovereign papers are plummeting to record lows.
The bond issues are necessary to boost capital and cash flows ahead of the obligation forced by the regulatory authorities, in the context of the Minimum Required Eligible Liabilities exercise, for the expansion of lenders’ capital base and liquidity through bonds, besides shares and deposits.
Through the MREL exercise – the results of which the Brussels-based Single Resolution Board will announce during the first quarter for each bank separately – lenders are asked to strengthen and enrich their funds in order to shield themselves from any future losses.
The monitoring authority’s exercise rules will grant Greek banks ample time, therefore their market forays will not be related to their capital adequacy – but rather will be meant to cover the additional provisions entailed by the pandemic.