Banks dodge stress tests for now

Banking authorities have decided to push back tests to see how well lenders will stand up to worsening economic conditions, allowing for the results of a crucial capital boost by the country’s largest bank, National (NBG). The country’s central bank postponed stress tests, taking into account rising bad loans and the worsening recessionary environment, from September until the end of the year, in agreement with the International Monetary Fund, European Central Bank and European Commission. «Seperate stress tests, closely following the release of recent EU-wide results, are likely to contain no additional information,» the Bank of Greece (BoG) said in a statement yesterday. In July, tests held by the Committee of European Banking Supervisors (CEBS) on all major Greek banks found that ATEbank was the only local lender to fail the grade. The state-owned bank saw its capital adequacy index drop to below the 6 percent minimum threshold set by the ECB, as its Tier 1 level was found to be just 4.36 percent. Analysts said it made sense for Greek bank authorities to delay the next appraisal and wait for more indications on third-quarter earnings and the results of NBG’s 2.8-billion-euro capital boost. Earlier this month, NBG announced plans to move ahead with a rights issue, convertible bond sale and a reduction in its Turkish unit, Finansbank, in order to obtain a more comfortable capital cushion and take advantage of any takeover opportunities. The move, however, has contributed to pushing its stock 13 percent lower in the last 30 days, versus a 6 percent slide in the broader market, as investors take into account earnings dilution, when profit is divided up by a larger number of shares. NBG shares, which ended at 8.84 euros yesterday, will trade ex-rights today and will start at an adjusted price of 7.51 euros, according to Piraeus Securities. Underwritten by five lenders – four foreign and one Greek – the 1.8-billion-euro sale of shares and convertible bonds is guaranteed but the successful outcome of the capital boost will go a long way toward boosting market sentiment and easing concerns of a share overhang. «If underwriters are forced to buy a large chunk of the shares, then there will be concern about how aggressively they might sell them on the market and the impact this might have on the share price,» said a broker. [email protected]

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