NBG initiative to raise 1.2 bln euros

In a surprise move yesterday, National Bank of Greece (NBG), the country’s largest lender, announced it will propose a 1.25-billion-euro rights issue it says will give it the jump on competitors, boosting its capital base and preparing it for possible expansion abroad. News that NBG will sell shares at 11.30 euros each, a discount of 44 percent from Monday’s closing price, sent the stocks 10.69 percent lower on the Athens bourse yesterday to 18.30 euros. The broader market fell 4.62 percent. National Bank said the rights issue will give it capital flexibility ahead of possible similiar moves from international rivals, as it takes into account tightening regulatory requirements. «The bank that will adjust its capital adequacy in time will acquire a serious comparative advantage,» NBG CEO Takis Arapoglou said in a statement. National Bank, which is present in 12 countries, had pulled the brake on expansion plans abroad due to the crisis, but is gearing up to take advantage of low stock valuations among peers. «The increase in share capital will allow National to take advantage of growth opportunities as part of its broader strategic plan to strengthen its leading position in Southeastern Europe,» it said. In the first quarter of 2009, National Bank reported a group net profit of 317 million euros, 44 percent of which came from foreign operations. Senior officials from National reportedly told an analysts’ conference yesterday the lender is not eyeing acquisitions in Greece. The rights issue is expected to be completed by the end of next month and will offer two new shares for every nine held. Brokers said the sharp drop in National Bank’s shares yesterday was also due to investor concerns about earnings per share (EPS) dilution – when the same profits are divided up among a larger number of stocks. Experts added that the news is likely to put pressure on other players in Greece’s banking sector to also improve their capital base. [email protected] News of rights issue welcomed Economy and Finance Minister Yiannis Papathanassiou yesterday welcomed news of National Bank’s 1.25-billion-euro rights issue, saying that it will help protect the country’s banking system. «The right conditions are being created for the stable and healthy growth of Greek banks,» the minister said in a statement. Papathanassiou added that state agencies will participate in the share capital increase in proportion to their holdings, while safeguarding their current asset position. Meanwhile, Greek central bank chief Giorgos Provopoulos also described the news as «positive.» «National Bank’s share capital increase is a positive move in this environment,» Provopoulos told reporters on the sidelines of a press conference on climate change in Athens. «It’s a regulator’s delight to see banks boosting their capital,» he added, according to Reuters. Asked whether the rights issue would better position National Bank for buyouts, Provopoulos said: «It obviously has a comparative advantage to make acquisitions. I’m not saying that anything like that will happen.»