The Hellenic Financial Stability Fund disbursed 18 billion euros ($23 billion) to Greece’s four biggest banks as part of a recapitalization plan that may enable the lenders to return to the European Central Bank for funding.
The funds were paid today, Panayotis Thomopoulos, head of the fund, said in a phone interview. The banks will receive bonds issued by the European Financial Stability Facility, which approved the transfer last week.
National Bank of Greece SA, EFG Eurobank (EUROB) Ergasias SA, Alpha Bank SA and Piraeus Bank SA (TPEIR) are relying on the Bank of Greece (TELL)’s Emergency Liquidity Assistance program for funding after being cut off from the ECB because their core Tier 1 capital ratios, a measure of financial strength, dropped below 8 percent. Meanwhile, deposit outflows jumped after parties opposed to the nation’s second bailout gained in May 6 elections, raising the prospect of Greece leaving the 17-nation euro region.
“Although only a ‘technicality,’ returning to direct ECB funding would send a strong message of confidence toward Greece,” Thomas Costerg, an economist at Standard Chartered Bank in London, said by e-mail. “By contrast, if the ECB does not resume direct LTRO funding, it would be a key red flag for the banking system. Resuming funding would relieve some pressure on the Bank of Greece’s ELA quota.”
National Bank will receive the largest capital injection of about 7 billion euros, followed by Piraeus, which will get about 4.7 billion euros, Thomopoulos said. Greece’s four biggest banks posted a combined loss of 27.9 billion euros for 2011, arising out of the sovereign debt restructuring, the biggest ever.
The banks have a combined market value of about 2.3 billion euros, based on today’s closing prices. Alpha rose 9.8 percent to 87.3-euro cents, National Bank (ETE) rose 6.6 percent to 1.29 euros, Eurobank gained 9.6 percent to 55-euro cents while Piraeus gained 8.6 percent to 22.8-euro cents in Athens trading.
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