Four Greek Banks Lose $37 Bln On Debt Restructuring

Greece’s four biggest banks reported a combined loss of 27.9 billion euros ($36.9 billion) for last year after participating in the country’s debt exchange, the largest sovereign restructuring in history.

The four, including National Bank of Greece, EFG Eurobank Ergasias SA (EUROB), Alpha Bank SA and Piraeus Bank SA, said they wrote down about 25 billion euros in the combined value of their Greek government bond holdings.

Prime Minister Lucas Papademos is trying to finalize a plan to recapitalize Greek banks, which wrote down more than half the face value of their government bonds and posted an increase in bad loan ratios after five years of recession. Greece’s bank- recapitalization body yesterday got 25 billion euros in a first tranche of funds, or half the total assigned for the purpose, as part of a second bailout by the European Union and International Monetary Fund.

“Recapitalization is a necessary prerequisite to securely finance the real economy and in particular small- and medium- sized enterprises,” Papademos said at a conference today. “It is also a necessary precondition for reinforcing trust in our bank system.”

National Bank, the nation’s biggest lender, had a net loss of 12.3 billion euros for 2011 after a 406 million-euro profit a year earlier, the Athens-based lender said in a statement today. The average estimate from three analysts surveyed by Bloomberg News was for a loss of 9.29 billion euros.
EFG Eurobank Ergasias SA, the second-biggest lender, had a 5.51 billion-euro loss after a 68 million-euro profit in 2010 and Alpha Bank SA, the third biggest, lost 3.81 billion euros after an 86 million-euro profit in 2010. Piraeus Bank SA (TPEIR), the fourth largest, had a 6.3 billion-euro loss.
National Bank took 10.8 billion euros of post-tax impairments on Greek government bond holdings after writing down their value by 75 percent. Eurobank wrote down 4.6 billion euros of government bonds after taxes and Alpha Bank 3.8 billion euros. Piraeus wrote down 5.1 billion euros.
The IMF, EU and European Central Bank, the so-called troika of agencies overseeing the Greek financing, plan to help capitalize banks with incentives for private investors. The goal is to bring core tier 1 capital to 9 percent of assets by the end of September.
“The whole plan for the future is really not clear because the conditions for the recapitalization are not clear,” Alpha Bank General Manager Artemis Theodoridis said in a telephone interview. “What we found out in the last few days is that they will not be clear, at least the legal framework, before the elections,” he said. The country is due to hold general elections May 6.

Alpha Bank SA offered to buy back a nominal 1.58 billion euros of outstanding securities in a bid to boost its capital. If completed, the offer would generate a gain for the group’s Core Tier 1 capital, which the bank reported at 3 percent for 2011.

National Bank (ETE), Eurobank and Piraeus Bank did not disclose what their Core Tier 1 ratios would be without support from the Hellenic Financial Stability Fund, the state recapitalization body. National Bank reported a Core Tier 1 capital ratio of 6.3 percent after an injection of 6.9 billion euros from the HFSF.
Agricultural Bank of Greece SA and TT Hellenic Postbank SA (TT), two state-controlled lenders, were granted extensions and will report earnings by May 31, the banks said in exchange filings.

The bank recapitalization plan includes incentives for private investment such as rights for shareholders to purchase the government’s stake and safeguards for buyers of convertible bonds, according an IMF report released March 16. The HFSF will continue to hold voting rights in the event of strategic decisions related to the banks to avert the risk of asset stripping by investment funds, Bloomberg reported.