In­vestors re­gain­ing con­fi­dence in the do­mes­tic bank­ing sec­tor

Kathimerini English - - Focus - BY YIAN­NIS PAPADOYIANNIS

There was an im­me­di­ate re­ac­tion by in­vestors to the prospect of the sec­ond re­view of Greece’s third bailout be­ing com­pleted in a timely man­ner, with bank stocks reap­ing ma­jor gains that amounted to 30 per­cent within just a few days. The de­par­ture of the cred­i­tors’ rep­re­sen­ta­tives yes­ter­day did not dis­cour­age traders, with bank stocks post­ing fresh gains while ex­pec­ta­tions were bol­stered by Moody’s.

The in­ter­na­tional rat­ing agency up­graded the out­look on Greek lenders from neg­a­tive to sta­ble, which re­flects its an­tic­i­pa­tion of im­proved fi­nanc­ing and prof­itabil­ity de­spite the huge pile of bad loans and lim­ited loan is­sue op­por­tu­ni­ties. Moody’s notes that lo­cal banks will likely re­main de­pen­dent on Euro­pean Cen­tral Bank fund­ing, and sin­gles out tack­ling bad loans as the big­gest chal­lenge.

The lenders’ up­grade com­bined with con­fi­dence that this time the re­view will be com­pleted on time al­lowed bank stocks to reap strong gains, fed by the buy­ing in­ter­est in ATHEX, while the in­ter­ven­tions to come in the na­tional debt and the coun­try’s an­tic­i­pated in­clu­sion in the Euro­pean Cen­tral Bank’s bond­buy­ing pro­gram are cre­at­ing ad­di­tional ex­pec­ta­tions for a dy­namic re­bound of the econ­omy next year.

The banks in­dex has risen by al­most 30 per­cent in just six ses­sions, which is more than three times the bourse bench­mark’s in­crease. Still, de­spite those im­pres­sive gains, bank stocks re­main be­low the prices of last year’s share cap­i­tal in­creases, con­ducted at his­tor­i­cally low price lev­els.

Al­pha Bank of­fers the best pic­ture among the four sys­temic lenders, as its stock closed yes­ter­day just 5.5 per­cent be­low the price of its re­cap­i­tal­iza­tion (2 eu­ros). Na­tional stands 24.33 per­cent be­low the cap­i­tal in­crease price of 0.30 eu­ros, Eurobank is 28 per­cent lower than the 1-euro price of its in­crease, and Pi­raeus still stands 30 per­cent be­low the 0.30-euro price its share­hold­ers paid last year.

The price de­cline recorded ear­lier this year (to more than 50 per­cent be­low the re­cap­i­tal­iza­tion prices) was due to the big de­lay in the com­ple­tion of the first re­view, but the sit­u­a­tion is now chang­ing. This is also ev­i­dent in the in­ter­bank trans­ac­tions through trea­sury bills the banks can con­duct, and the drop in the spread be­tween the Greek and Ger­man 10-year bond yields, which has fallen to less than 7 per­cent.

De­spite their im­pres­sive gains, Greek bank stocks re­main be­low the prices of last year’s share cap­i­tal in­creases, con­ducted at his­tor­i­cally low price lev­els.

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