NBG among top Greek bank credit down­grades

Financial Mirror (Cyprus) - - FRONT PAGE - By Jon C. Ogg

Greece’s credit rat­ings woes are not yet over. It turns out that Fitch Rat­ings has down­graded the key Greek banks, fol­low­ing its down­grade of Greece’s sovereign rat­ing on March 27. In­cluded in the down­grade are Na­tional Bank of Greece S.A. (NYSE: NBG), fol­lowed by Pi­raeus Bank, Eurobank Er­gasias and Al­pha Bank.

Only the Na­tional Bank of Greece has been in­cluded in this re­view be­cause it is the only ac­tively traded Amer­i­can de­posi­tary shares (ADSs) in New York. Fitch’s down­grade per­tains to the long-term is­suer de­fault rat­ings (IDR), and Na­tional Bank of Greece saw its rat­ing cut to CCC from B- in the call. Fitch fur­ther said that the viability rat­ings (VR) were cut to ccc from b-.

Per­haps the only good news here is that the four banks’ rat­ings have been re­moved from Rat­ing Watch Neg­a­tive (RWN) now that the down­grade has ar­rived. If you go deeper, NBG’s shares have so far ig­nored the down­grade. Af­ter all, who is sur­prised when a credit rat­ing down­grade oc­curs in Greece?

Fitch went on to note that the down­grades re­flect Greece’s weaker eco­nomic prospects putting the as­set qual­ity and sol­vency at fur­ther ma­te­rial risk for the banks. An­other is­sue was the liq­uid­ity and fund­ing pres­sure that is ex­pected to gen­er­ate added de­posit out­flows un­til a com­pro­mise deal be­tween Greece and its cred­i­tors is reached. Fitch said: “The de­te­ri­o­ra­tion in op­er­at­ing con­di­tions in­creases the risk to Greek banks’ al­ready weak fund­ing and liq­uid­ity due to con­tin­ued de­posit out­flows, whilst repo mar­kets re­main closed. The sys­tem has lost EUR 24 bln of do­mes­tic pri­vate sec­tor de­posits since Novem­ber 2014, or 15% of the to­tal, in line with our ex­pec­ta­tions. As a re­sult, cen­tral bank fund­ing in­creased to EUR 104 bln at endFe­bru­ary (26% of sys­tem as­sets), of which 63% is from the Emer­gency Liq­uid­ity As­sis­tance (ELA). Re­main­ing ELA col­lat­eral buf­fers (around 35% of sys­tem do­mes­tic pri­vate sec­tor de­posits) seem suf­fi­cient to face ad­di­tional de­posit out­flows, but will come un­der more pres­sure as loan qual­ity de­te­ri­o­rates. More­over, ELA is only avail­able tem­po­rar­ily for sol­vent banks and its ca­pac­ity is sub­ject to ap­proval by the ECB. This makes the fund­ing and liq­uid­ity of Greek banks ex­tremely sen­si­tive to any changes in the ECB’s su­per­vi­sory arm’s opin­ion of the banks’ sol­vency.”

On the NBG specif­i­cally, Fitch added that the longterm state-guar­an­teed debt of NBG and Eurobank has been down­graded to ‘CCC’, in line with Greece’s Long-term IDR.

“State-guar­an­teed debt is­sues are se­nior un­se­cured in­stru­ments that bear the full guar­an­tee of Greece. Con­se­quently, their rat­ings are the high­est of the is­suer’s Long-term IDR and Greece’s Long-term for­eign cur­rency IDR. Th­ese banks’ state-guar­an­teed debt rat­ings are sen­si­tive to any changes to Greece’s sovereign rat­ings.”

NBG shares ig­nored the rat­ings down­grade in New York trad­ing. They were up 6% at $1.305 in mid-af­ter­noon trad­ing on Mon­day. That be­ing said, NBG’s 52-week trad­ing range is $0.98 to $5.73.

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