What Bond Issues Did for Greek Banks

The successful bank recapitalizations are what paved the way for the state to regain access to markets, according to BoG governor Giorgos Provopoulos. Market officials agree and going a step further note that the state's recourse to markets for other banks to draw capital from markets and realize plans.

The state bond issue breaks a negative precedent opening the Greek market to more players from abroad. This will have a backlash on banks, forcing their hand towards issuing their own bonds.

After Piraeus Bank that tested the waters with a 500 million euro bond issue, that was overcovered 6 times, other banks are also planning their own exit to markets.

Alpha Bank management has already stated that the bank will continue to monitor developments, but will await the state's moves before continuing its presence on capital markets. Thus the state bond acts as a springboard for Alpha Bank's next move.

National Bank on the other hand, does not exclude the possibility of issuing a bond that will act in tandem with capital plans. The bond issue is a strong alternative possibility in the event that the BoG and DGComp judges that National Bank should draw part of a necessary 2.2 billion euros from the markets.

The change in mood and a resurgence in trust for the Greek market make a recapitalization of Eurobank even more significant. The state's efforts is seen as buttressing the recapitalization, while if it manages to garner 3 billion euros in the largest public tender in Europe this year it will send a resounding answer to all directions. It must be noted that Eurobank's bookbuilding will take place between 25-30 April, while new stock will begin trading on 8 May.

Even Attica Bank, which is in the process of seeking alternative solutions to reinforce its capital position, is looking at all options in search of a strategic investor, at the same time with the application of its revised operational plan.

Foreign analysts foresee that such moves will cause a domino effect, this time in the opposite direction of the domino that led the country in its erstwhile downward spiral. The positive signs in such a case will be the gradual lowering of interest rates and the influx of capital through the stock exchange, which could be realized, at a later time, with the opening of the inter-bank market, and when conditions in Europe allow, perhaps through the bank unification.

The conditions for the state's funding through the markets are expected to smooth out, giving banking a boost in regaining its former position. The moment banks begin to draw capital from bond issues, they will be sending a message of divestment. At this point interest is higher than the ELA (Emergency Liquidity Assistance) and the ECB are offering, but the step has been taken and as conditions improve, the cost of borrowing will recede.

As concerns a capital influx through the stock exchange, banks have the option of warrants, while the larger the interest from investors the quicker they will pass into private hands since the new legal framework allows the Fiscal Stability Fund to proceed with selling its bank assets.