The governing board of Piraeus Bank approved yesterday the increase of its share capital by -1.35 billion. The funds drawn from the rights issue will be used for the improvement of the capital adequacy of the bank, within the context of its expansion, and for the strengthening of the group’s presence in foreign markets. The new shares will be allocated to current shareholders at a ratio of four new ones for every 10 old at the price of 20 euros each, while there is also the option for shareholders to register to acquire additional shares at the selling price. The bank’s plan provides for the increase to begin in mid-August and sources suggest that already a strong portion of shareholders who control over 40 percent have confirmed their participation. Group officials stressed yesterday that the strong growth rates render the capital increase necessary. Piraeus’s business plan for the 2007-2010 period aims at total of assets of -65 billion (from -30.9 billion at end-2006), the loans issued to -52 billion (from -20.8 billion in 2006) and net profits to -1 billion, while the total network of branches will number at least 900 points. Michalis Sallas, Piraeus president, stated on the share capital increase that «we intend to use the funds drawn to support our organic growth as well as making the most of any opportunity we may identify.» The strong growth rates and the high profits of Greek banks continued during the year’s second quarter. Bank officials suggest that the continuing strong credit expansion in the domestic market, combined with the ever increasing activities in Southeastern Europe, have provided yet another excellent quarter for the sector. Bank of Greece data show that in April there was a small acceleration in the growth of new loans issued, both in mortgages and in consumer credit, while bankers note that the demand by households for new loans was strong throughout the April-June period. Of course, the stiffening of competition in the local market is leading to the shrinking of the interest-rate margins, particularly in housing credit. Nevertheless, big banks manage to maintain their total margins at particularly high levels, through external help: The strong growth of activity in Southeastern Europe, where margins are far higher than those in Greece, decisively helps to keep banks’ profits high. The development of neighboring countries where local banks have made major investments is making the difference in revenues and profits: In the first quarter of 2007, National Bank of Greece posted a rise in loans issued abroad of 314 percent, while pretax profits soared by 515 percent. EFG Eurobank saw its profits from abroad rise by 150 percent, Piraeus by 55 percent and Alpha bank by 29 percent. This strong growth requires additional funds, hence the rights issue by Piraeus. Eurobank also announced a few days ago its decision to increase its share capital by -1.2 billion.