Where Do Greek Banks Stand Today?

The estimate of BlackRock Solutions was made after an analysis of the troubled loan portfolios of National Bank, Alpha, Piraeus and Eurobank along with five smaller lenders late last year, the Bank of Greece announced.

The Central bank’s much-anticipated report said that in the period from 2014 to 2016, banks will suffer losses of 50.24 billion euros from non-performing loans in Greece, plus another 10 billion euros from bad loans issued abroad.

The needs of Greece’s lenders are estimated at: 2.945 billion euros for Eurobank, 2.183 billion euros for National, 567 million euros for Attica Bank, 425 million euros for Piraeus, 262 million for Alpha and 169 for Panellinia, while the three other banks (including Attica bank) will need no additional funds.

The question of how much money banks need and where the money will come from are obstacles hanging up an agreement with the Troika before Greece can get a delayed nine billion euro installment from the remains of two rescue packages worth 240 million euros until the end of this year. Moreover, a new draft law may be required, since without a new legal framework, the announced capital increases cannot go through. This issue is still unresolved in discussions with the Troika.

Stabilizing bad loans is a major challenge for Greek lenders. Another major challenge is how much time they have available to gather the required capital. The Bank of Greece has asked all banks to submit their plans for capital reinforcement by April 15, based on these results.

Bank officials estimate that bad loans were close to 35 percent at the end of December, 2013, and that they will continue to increase this year too, although at a slower pace, before peaking in 2015 and starting to decrease from the year after that.

Piraeus announced it will undergo a share capital increase of 1.7 billion euros, while it also announced profits of 2.53 billion euros for 2013. Alpha is expected to announce its own increase today, likely to amount to 1 billion euros. National Bank of Greece said it can cover its requirements without a share capital increase. Panellinia bank has announced that its management is in discussions with possible investors, while Attica Bank said that it will meet all requirements to strengthen its capital base by April 15.

The Bank of Greece has also asked lenders to submit their plans to strengthen their capital bases by April 15. Sources said that the plans should be implemented as soon as possible and that the issue is being negotiated between the government and its creditors, however, banking sources said that a period of at least six months will be required for this procedure to be completed.