Greece: Bank Stocks Sink, Will IMF & ECB Stress Test Bad Loans?
Greek bank stocks are tumbling as investors worry that bad loans could come under renewed scrutiny.
By
Dimitra DeFotis
Sept. 15, 2017 12:20 p.m. ET
Shares of Greek banks have been slipping in recent weeks as the threat
of multiple stress tests shine a light on the quality -- and scrutiny
-- of financial assets in the struggling nation.
The financial crisis in Greece and unemployment have resulted in
non-performing loans, though Greek banks entered the 2008 global
financial crisis with 5.5% of loan books in the NPL category,
according to Reuters. In August, Reuters reported that bad loans
accounted for half of Greek bank loan portfolios last year, at 106.9 billion euros, and regulators want the ratio cut to 34%.
This week, Greek newspaper Kathimerini reported that the International Monetary Fund could conduct a Greek bank asset quality review as part of its third bailout review. Then a European Central Bank (ECB) executive board member said there was no need to conduct such a review because "a broader European Union-wide stress test is already being planned for 2018," Reuters reports.
ECB executive board member Benoit
Coeure added that "only the ECB, the supervisor of four biggest Greek banks, could require such a review," Reuters added.
International Monetary Find spokesman Gerry Rice said the following Thursday, according to Kathimerini:
" ... The issue of the asset quality review of Greek banks “will form part of the review.” He also said the IMF may demand new measures for next year, stressing that the programs evolve and conditions change
...
The story says "this will likely cause friction with the European
Central Bank, which has scheduled its own stress tests for the banks in 2018. Sources in Frankfurt have noted that only if the Greek government asks for an asset quality review will the ECB authorize it. However, Athens, as a senior Finance Ministry official has said, has no such intention ..."
The Global X MSCI Greece exchange-traded fund (GREK) is down 2.2%
today. The yield on the Greek 10-year was off by 1 basis point to
5.305%. Shares of $3.3 billion Alpha Bank (ALPHA.Greece and ALBKY) fell 4% in Athens Friday and nearly 3% in illiquid U.S. trading.
The $3.1 billion National Bank of Greece (ETE.Greece and NBBGY) fell 8% in Athens and more than 6% in U.S. trading. (Greece's bank rescue fund, HFSF, controls 40% of National Bank of Greece, the country's largest by asset value, and 11% of Alpha Bank.)
Piraeus Bank (TPEIR.Greece and BPIRD) stock fell 7% in Athens while the ADR was down nearly 5%. Eurobank Ergasias (EUROB.Greece and EGFEY) was down nearly 5% in both markets. Each of the latter two banks has a market value of $1.9 billion.
Shares of National Bank of Greece and Piraeus are down more than 20% over the past four weeks, while Eurobank is down 18% and Alpha is off 14%. In the same period, the ETF invested in Greece is off 7%.
This year, however, Greek equities are still higher, including the banks, and Eurobank is the best performer on the Athens exchange, with a rise of more than 32%. The ETF is up about 24%, slightly ahead of the iShares MSCI Europe Financials ETF (EUFN), up 21%, and just behind the 25% rise in the Vangaurd FTSE Emerging Markets ETF (VWO)
