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The bare truth about the Greek banks

30 May 2010 / 13:05:26  GRReporter
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Over the past 10-15 years Greek banks have been progressing and flourishing managed professionally and developing in a country which throughout this period had an average economic growth of around 4.5 percent of the GDP. Entry into the eurozone lead to additional stability and security. Financial institutions exceeded the borders of Greece, invested large amounts of money in the countries of Southeast Europe and around their owners was created such a halo, which shifted the glory of Greek shipping magnates of the mid-20th century. Today nobody talks any more about Onassis or Niarhos and the list of the richest Greeks is invariably led by Spiros Latsis, the owner of the Swiss European Financial Group.
    The world financial crisis from the end of 2008 saw Greek banks concrete. They passed without a problem the stress test of the European Central Bank, received government guarantees and continued to pick up until they faced the crisis of th huge public debt of Greece. The accounts of the banks for the first three months of 2010 carry the bright signs of economic recession and at first reading they cause concerns. Their net profits are either too small, as is the case with the National Bank of Greece and Eurobank EFG or the banks directly register losses - Alpha Bank, Agricultural Bank and the Post Bank. Certainly at a second reading some optimistic signals are found for their work in the conditions of economic crisis - enough capital in hand, strive for profit, reducing the cost of services and very good results of the subsidiaries in the Balkan countries.
    Experts explain the sharp decrease in the profits of the banks with three reasons. The first is the additional tax imposed by the Greek government on the anyway reduced incomes of the banks and by which it actually nationalizes their profits. I am talking about a really severe tax which "seized" 93 million euro from the assets of the National Bank of Greece, 62 million euro from the assets of Alpha Bank, which after the tax reported losses of 10 million euro and 49 million euro from the assets of Eurobank EFG. The second is the decision for the banks to dramatically increase their expectations for the bad credits in order to insure their portfolios. So the National Bank of Greece expects its bad credits to reach 314 million euro, Eurobank EFG - 336 million euro, Alpha Bank - 200 million euro. And the third reason is the "opening" to the Greek government bonds, from which the National Bank of Greece reported losses of 154 million euro, Post Bank - 30 million euro, Agricultural Bank - 31.6 million euro.
    Despite of the clear signs that the Greek banks are already operating in the conditions of economic recession analysts note also positive trends that give them reason to believe that the fiscal system of Greece will not capitulate or at least will not capitulate easily and immediately. The first trend is the high positive values of the indices for capital availability, which for some of the institutions reaches a two digits number. The second is announced by the Bloomberg agency - the first time this year in May is observed substantial return of investment from foreign to Greece banks, which analysts from the agency attribut to the  rescue package for the Greek economy worth 110 billion euro. The third trend is the effort of all financial groups to control their costs, to reduce the cost of the services they offer and retain the profitable course of work. The fourth trend is the recovery of the economies in Southeast Europe, which make the investments there very profitable. Only two examples are enough. While the National Bank of Greece registers a decrease in inside Greece, its subsidiary bank Finansbank in Turkey registered a profit of 122 million euro and its subsidiaries in other Balkan countries bring another 32 million euro. A Eurobank EFG, which for the same period last year registered a loss of 11 million euro from its investments in Southeastern Europe, this year registered a profit of 4 million euro.
    Certainly, the Greek Banking system will survive the crisis, but it will look in a completely different way from what it is today. Its salvation is called consolidation, and the series of mergers of banks is only a matter of time. Many financial experts even believe that mergers of banks are delaying for dangerously long time. It is not surprising, that all scenarios for mergers revolve around Greece's largest commercial bank – the National Bank of Greece. As is most probably seen its merger with Piraeus Bank but this by no means is the only scenario discussed by the bankers in Athens. A very serious option is also its merge with the second largest commercial bank Eurobank EFG, so as to form a true banking colossus that will withstand the next few turbulent fiscal years. Another scenario claims that the owned by Spiros Latsis European Financial Group explores the possibility to buy the French CRÉDIT AGRICOLE GROUP, which in turn owns Emboriki Greek bank.

Tags: banks economic crisis mergers stock news
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