Greece is ‘on the right track’

Alpha Bank, Greece’s third-largest lender, sees the Greek economy showing more resilience than expected in 2010 and plays down any talk of merger activity taking place in the sector anytime soon. «There is no such issue at the moment,» Alpha’s chairman, Yannis Costopoulos, told the company’s annual shareholders’ meeting yesterday, in response to questions on whether the bank was in merger talks. Speculation that local lenders are exploring mergers to cope with the country’s debt crisis and foreign competition has resurfaced in the Greek media after Finance Minister Giorgos Papaconstantinou said lenders should rethink their strategy. Alpha Bank had attempted to team up with National Bank, the country’s largest lender, in 2001 but the deal fell through. Costopoulos told shareholders the economy, which is set to remain in recession for a second straight year in 2010, may perform better than the 4 percent contraction many, including the central bank, project. «Economic data show that the recession in 2010 will not be as deep as expected,» he said. «Our country is on the right track and I believe that it will exit the crisis stronger than before.» Greek banks are feeling the impact of government austerity measures imposed to secure 110 billion euros of emergency funding from the IMF and fellow countries in the eurozone to deal with the debt crisis. The economic downturn has resulted in weak loan demand and rising bad debt provisions, hurting lenders’ earnings. Alpha Bank suffered a net loss of 10.4 million euros in the first quarter, including a one-off tax charge. Downgrades of Greece’s sovereign rating have also burdened the country’s banks that have large holdings of Greek government paper. Costopoulos told shareholders Alpha’s holdings of Greek government debt amounted to 4.5 billion euros. Analysts described Alpha’s exposure to Greek government bonds as «being relatively low,» placing the bank in a better position than its local peers to get through the tough times, boosted by its strong capitalization and adequate liquidity. Shares in Alpha, which has a market capitalization of 2.47 billion euros, have fallen 27.6 percent in the last three months on the Athens bourse, versus a 20.6 percent retreat in the broader market. Alpha, which received a 940-million-euro capital injection from the government in 2009 via the issue of preferred shares, will pay 58.7 million euros to the state as a return on these shares, Chief Executive Dimitris Mantzounis said. Shareholders will not get a dividend for 2009, as this is not allowed for banks still under the government support package. More losses foreseen for Emporiki Credit Agricole, France’s largest bank by branches, said it will take a 400-million-euro write-down on its stake in Emporiki Bank as it expects higher losses for the unit this year. The lender will book the write-down in the earnings period ending June 30, the Paris-based company said in a statement yesterday. Emporiki’s estimated 2010 after-tax losses may reach about 750 million euros, more than twice as much as estimated in October, according to a presentation on the bank’s website. «Credit Agricole will support Emporiki,» the lender said, adding that the Greek unit has «good dynamics» in operating profit. Emporiki may get a «potential punctual Tier 1 requirement of approximately 550 million euros» by the end of 2011, it said. Analysts described the possibility of pumping more capital into Emporiki as being a negative surprise, after 1 billion euros had already been poured into the Greek lender in March. Meanwhile, Emporiki said in Athens yesterday that it expects to return to a profit in 2012, a year later than previously expected. Credit Agricole has the biggest exposure to Greece of France’s listed banks because of Emporiki, which has private sector loans of around 23 billion euros.