Record Losses at Greek Banks Show Pain of Bond Swap
Greece’s top banks posted historic losses for 2011 on Friday, hit by a bond swap last month that blew holes in their balance sheets and nearly wiped out their capital base.
Together, National, Alpha, Eurobank and Piraeus, posted an aggregate loss of 28.2 billion euros ($37.3 billion), about 10 times their current market worth or 13 percent of the country’s GDP .
The banks treated losses from last month’s bond swap to cut the country’s debts — part of a rescue package for Greece negotiated with the European Union and International Monetary Fund — as if they took place last year.
Inflicting real losses of about 74 percent on bondholders, Greece’s debt swap proved a near fatal financial torpedo for lenders, crippling the sector’s capital base.
From the big four banks, only Alpha spelled out clearly where this left its Core Tier 1 capital ratio. The other three reported where capital ratios would land after their use of standby funds provided by a capital backstop, the Hellenic financial Stability Fund (HFSF).
Alpha’s core capital ratio (Tier 1) fell to 3 percent. Eurobank [EFG-FF 0.623 0.017 ( 2.81%) ], the country’s second biggest, did not disclose the figure but said the hit left it with total equity of 875 million euros.
National Bank [NAG-FF 1.72 -0.03 (-1.71%) ], the country’s biggest lender with operations in Turkey, said its Core Tier 1 ratio would reach 6.3 percent, taking into account the use of a 6.9 billion euros standby facility provided by the HFSF fund.
Piraeus gave no Tier 1 figure but said tapping up to 5 billion euros of HFSF funds would boost its total capital adequacy ratio to 9.7 percent.
Greek bank shares have shed 74 percent in the last 12 months, underperforming the Greek stock market which is down 50 percent.
“The results, so far, are close to what the market had expected, particularly for Alpha, less for Eurobank which was somewhat below expectations,” said analyst Manos Hatzidakis at Beta Securities.
Battered by a shrinking deposit base, rising loan impairments and unable to access wholesale funding markets, banks will need to fill the resulting capital shortfall and meet capital adequacy targets set by the central bank.
They face a core Tier 1 target of 9 percent by end-September.