National Bank of Greece SA, the country’s biggest bank, and seven other Greek lenders had their credit ratings lowered by Moody’s Investors Service on concern over their holdings of the nation’s government bonds.
“Moody’s believes that private creditors may incur substantial economic losses on their Greek government bond holdings beyond the terms of the current debt exchange,” Moody’s analysts including Nicosia-based Nondas Nicolaides wrote in an e-mailed statement today.
Greece’s four biggest lenders, as well as Attica Bank SA and Agricultural Bank of Greece SA, were cut two steps to Caa2 from B3, while Geniki Bank SA and Emporiki Bank of Greece SA had their debt and deposit ratings downgraded two levels to B3 from B1, the statement said.
Greece committed to additional measures this week to secure a second bailout worth 159 billion euros ($215.2 billion) after the European Union-led aid package of 110 billion euros agreed in May 2010 failed to convince investors the country could avoid a default. Greece’s economy is under its fifth quarterly review for the release of a sixth tranche of funds under the first bailout.
Unfavorable developments regarding the implementation of the second support package “would have further negative repercussions on the banking system’s solvency,” Nicolaides said.
National Bank of Greece, EFG Eurobank Ergasias SA, Alpha Bank SA and Piraeus Bank SA, the four biggest Greek lenders, reported losses in the first half of the year on writedowns of Greek government bond holdings eligible for inclusion in a debt swap, part of the second bailout. National Bank reported a 1.3 billion-euro first-half loss, while Piraeus posted an 820 million-euro net loss in the period.
National Bank of Greece dropped 4 percent to 2.88 euros by 11:33 a.m. in Athens trading today, while Eurobank fell 5.6 percent to 1.01 euros, Alpha Bank declined 4.7 percent to 1.43 euros, and Piraeus slid 9.1 percent to 50 cents.
Moody’s cited the risk of an impairment on Greek bond holdings and the effects on capital levels, an expected deterioration of non-performing loans and deposit declines as reasons for the cut.
The balance of deposits held by businesses and households in Greek banks fell to 187.2 billion euros in July from 188.2 billion euros in June, according to Bank of Greece data released on Sept. 12. Deposits by homes and businesses have declined by 22.4 billion euros since December 2010, or 11 percent, as the economy shrinks under the weight of government-imposed austerity measures.
Banking System Stable
Greek bank reliance on European Central Bank liquidity stood at 96.3 billion euros in July, down from 103 billion euros the previous month, according to Bank of Greece data. Moody’s said limited collateral eligible for ECB funding and activation of the Emergency Liquidity Assistance by the country’s central bank show fragile liquidity positions.
Greek Finance Minister Evangelos Venizelos reiterated yesterday that the country’s banking system is “stable” and its liquidity and capital are secure, according to an e-mailed transcript of comments after a meeting with President Karolos Papoulias.
Piraeus Bank and Eurobank are the two worst performers on Greece’s FTSE 20 Index this year, down 72 percent and 71 percent, respectively, before today. Alpha Bank had declined 61 percent and National Bank has lost 51 percent.