The current value of foreign institutional investors’ placements in the shares of the five largest Greek banks exceeds 30 percent of the total, or 9 billion euros, and has been rising steadily in recent months. The highest proportions are to be found in the two largest banks, National (NBG) and Alpha, 33 and 32 percent respectively. Alpha has been a steady pole of attraction for foreign institutionals for a long time, having assumed significant innovative initiatives at a time when Greek banking was on the sidelines of foreign investment interest. At Piraeus Bank, Greece’s fifth largest, the foreign holdings represent 26 percent of market value, while a further 4 percent, in the form of a strategic partnership, is held by the Dutch ING group. The lowest foreign participation is in EFG Eurobank, 20 percent of the total, but this is quite high in relation to the dispersion of its shares, given that 40 percent is held by the Latsis group. In the free-floating shares, foreign ownership is about 33 percent. Foreign interest in Emporiki Bank, the country’s fourth largest, is a recent phenomenon. With the exception of France’s Credit Agricole, which has held a strategic stake of 11 percent for some years, Emporiki was by and large ignored by foreign institutionals due to its declining market share and the uncertainties posed by its huge social insurance liabilities. But within a year, the new management, under Giorgos Provopoulos, brought about a bold restructuring with emphasis on cost cuts and achieved a satisfactory settlement of its insurance problem under the government’s overall arrangement for the sector. Foreign institutionals now control about 20 percent of the free float, and the surging interest, which has sent Emporiki’s price share on an uphill course this year, appears to have thrown Credit Agricole somewhat off balance, as it hoped to acquire a further large stake at a much lower price. NBG’s new head, Takis Arapoglou, has also been particularly effective in restructuring the bank and the rebound is proving significantly fruitful. After extensive cost cuts and staff renewals, NBG launched a highly successful roadshow of a three-year business plan with specific performance targets to foreign institutionals in Europe and the US. The restructuring revealed a considerable number of the bank’s underutilized «gems,» boosting total asset value and ending EFG Eurobank’s lead in this field. NBG’s market capitalization today is 2.4 billion euros higher than Eurobank’s, at 10.1 billion. Stock market effect The resurgent interest from foreign institutionals in Greek bank stocks and some other blue chips has had a commensurate effect on the stock market. In 2003, the Athens Stock Exchange (ASE) general index added 29 percent, when the banking index leaped 57 percent. A similar picture took shape in 2004, with the respective figures at 23 and 44 percent. The trend has been slightly reversed this year, with the banking index up 14.5 percent and the general index adding 17.6 percent to date. Nevertheless, foreign investment banks appear upbeat about the prospects for bank stocks, setting target prices considerably higher than current ones, although they have often been accused of somewhat irrational exuberance, linked to prospective business deals that they hope to manage. Some analysts also argue that the strong presence of foreign institutionals is a potential source of instability for the ASE as long as domestic institutionals remain on the sidelines. Given the limited liquidity of the Greek market and the size of the big foreign funds, even limited liquidations could lead to a sharp fall in prices.