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With seven open fronts in the Greek banking market, at least until the spring of 2014, the summer laziness is an unattainable luxury for the bank headquarters since projects such as data transfers to BlackRock and the development of restructuring plans are to be completed in August.

The recapitalization is already a forgotten success, as the banks must operate in an extremely demanding environment that is challenging their endurance and their relationships with customers and society. The main challenges that the system needs to address in the coming months include:

1. Market requirements for the financing of the real economy

2. Maintaining the growing trend in deposits

3. Management of non-performing loans

4. Coping with stress tests

5. Restructuring through the sale of subsidiaries

6. Exercising the warrants by private shareholders

7. Eurobank’s privatization

The demands of the business regarding the provision of financing are becoming more persistent after the capitalization and the government supports them.

The banks must find a balance between the need to support the economy and the demand of the public to not exceed their capacities.

As bankers point out, the recapitalization has solved the problem of capital adequacy but not the problem of liquidity which will not return to the pre-financial crisis levels, although, supposedly, it has improved.

This is the message that the bankers are trying to send in this difficult situation and in the presence of a government which is exerting pressure.

According to experts, the key parameter for the sector is its transition to a new era in which it is to effectively support the viable companies and the households which have suffered significant blows during the crisis, and to ensure the timely reversal of the trend of increasing non-performing bank loans combined with economic recovery and with increased employment and incomes.

Improving the liquidity through the required growth in deposits remains a challenge because although the signs are positive, rumours of cuts of deposits and, naturally, of tax and other requirements on the part of the state interrupt the tendency to expand the deposit base.

The Bank of Greece, other banks and the Troika are preparing modus vivendi of lending institutions aiming to improve the management of existing non-performing loans but also of the loans that are about to enter this group.

The problems of business loans are being resolved within the same context. The viable and non-viable borrowers will be determined in order for the first to be backed up and to try to find solutions for the loans of the latter, including even the sale of specialized funds.

At this stage, the teams of BlackRock are obtaining data on the loan portfolios. The teams are in Athens and they will prepare an appropriate assessment, updating the conclusions of the first report, which was the basis of the recapitalization.

ΒlackRock’s conclusions will be used in the stress tests which the Bank of Greece will carry out by the end of the year and which will be of key importance regarding the additional capital requirements of the system.

Subsequent plans

The restructuring plans are still in the stage of preparation by the banking teams. The banks will have to sell their non-banking activities in Greece as well as to gradually reduce their exposure in Southeast Europe over the next three years under the pressure of the Directorate General for Competition of the European Commission.

The department insists on commitments for the sale of the loss generating subsidiaries which is the case with the majority of the branches in the Balkans. Moreover, it insists on an improved utilization of profitable subsidiaries such as Finansbank, without pushing for it.

This will be an exercise in balancing in order for the sector to not lose the opportunities for future profits from the sale of significant assets.

Improving the attractiveness

It is expected that the actions to improve the balance and the restructuring will make the Greek banks more attractive. However, time is pressing them to consolidate the investment interest because the first exercise of the warrants will begin this December.

As pointed out by the bankers, the system must successfully pass tests such as the stress tests and the effective restructuring in order for it to maintain the favourable investment climate observed during the recapitalization.

The stake is the exercise of warrants by private shareholders in order for the Financial Stability Fund to gradually reduce its involvement and for the shareholder base to expand.

The Greek bankers expect to maintain the interest recorded during the capital increase which will allow shareholders with a long-term investment horizon to return to the equity rather than funds that had direct speculative interest and found opportunities in the warrants.

Selling a stake of Eurobank in March

The sale of part of Eurobank to a strategic investor has been postponed for the end of March 2014 with the approval of the Troika.

The management will choose a consultant by the end of August in order to obtain a clear picture of the interested parties by mid October and to begin the necessary due diligence in November.

Over the coming months, it will make efforts to improve the attractiveness of the bank in order to ensure serious investor interest and to make progress regarding the recovery plans of the bank, which is the fourth pillar of the system of the private sector.