Greece’s Alpha, Piraeus Banks Start Sale to Boost CapitalRuth David, Nikos Chrysoloras and Elisa Martinuzzi
Alpha Bank A.E. said it has enough demand for all its stock as the Greek lender joined Piraeus Bank SA in selling 3 billion euros ($4.2 billion) in shares to bolster capital.
Alpha Bank will price the sale at 65 euro cents apiece, it said in a statement. Piraeus Bank stock is being offered at 1.60 euros to 1.75 euros, said two people with knowledge of the matter, who asked not to be named while the transaction is on. The sale has enough demand for all the shares, they said.
Piraeus Bank, the country’s second-largest lender, said in a statement yesterday it plans to raise 1.75 billion euros and Alpha Bank is targeting 1.2 billion euros from new shares.
The sales represent “a vote of confidence for the Greek banking system,” Maria Kanellopoulou, a financial analyst at Euroxx Securities SA, said in an interview. “Major progress has been achieved, especially for those two banks.”
Investors are returning to Greece as it makes a comeback from an international bailout that roiled world markets. Greek lenders need to boost their capital by 6.38 billion euros after six years of recession and the biggest sovereign-debt restructuring in history left them with swelling bad loans, the nation’s central bank said this month.
Both sales began after markets closed yesterday. Piraeus Bank shares fell 1.5 percent to close out to 2.02 euros, and Alpha Bank declined 5.2 percent to 70 euro cents in Athens yesterday, the most since Dec. 3. The Greek stock market was closed today for Independence Day.
Alpha, Piraeus and National Bank of Greece SA, the nation’s largest lender, were able to attract sufficient funds from private investors in stock sales in June to enable them to avert complete nationalization.
Yields on 10-year Greek government benchmark bonds rose two basis points to 6.74 percent, near a four-year low today in Athens. Borrowers are taking advantage of demand for riskier debt as central banks hold interest rates at record lows and as Standard & Poor’s says default rates will fall to 5.2 percent next year from 5.9 percent at the end of 2013.
Greek banks may need more capital than the Bank of Greece stress tests suggest, especially if they don’t “urgently and efficiently address” the high levels of non-performing loans, European and International Monetary Fund officials said on March 20 as they reached a preliminary agreement to unblock money under the Mediterranean nation’s bailout.
Greek banks are tapping investors before a wave of fund raisings by European lenders including Italy’s Banco Popolare SC and Banca Monte dei Paschi di Siena SpA. The European Central Bank review of the region’s top lenders, as it prepares to resume oversight later this year, is prompting banks to clean up their balance sheets, renewing confidence among investors. The Bloomberg Europe 500 Banks and Financial Services Index, which tracks 43 companies including Alpha and Piraeus, gained 18 percent in the past year, outpacing gains by the broader market.
Still, some investors question whether some banks’ valuations are justified by the outlook for earnings.
“The market has made a quantum leap of faith and has moved from fearfully monitoring asset quality, capital and funding on a quarterly basis to focus exclusively on ‘normalized’ 2016-2017 earnings,” said Inigo Lecubarri, who helps manage the Abaco Financials Fund in London. “We believe investors’ desire to rotate into underperforming assets such as European bank stocks is the force behind the rally, not fundamentals.”
JPMorgan Chase & Co. and Citigroup Inc. are managing the Alpha Bank capital increase, along with Bank of America Corp., according to a statement from the sale managers. Piraeus Bank said Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., Mediobanca SpA and UBS AG are among banks overseeing its sale.