Greece’s largest lender, National Bank of Greece (ADR) (NYSE:NBG), on Monday approved a 9.75 billion euro ($12.7 billion) share offering.
Greece’s top four lenders, including the National Bank of Greece (ADR) (NYSE:NBG), need 27.5 billion euros to replenish their capital after severe losses incurred during the country’s debt crisis. The new capital is required to restore the bank’s solvency ratios to levels required by the country’s central bank.
Shares of National Bank of Greece (ADR) (NYSE:NBG) were earlier down 7.02 percent to $1.06 after the bank’s shareholders approved the share offering.
Earlier this month, it was felt National Bank of Greece (ADR) (NYSE:NBG) might risk being nationalized after admitting it was unlikely to raise enough cash from private investors.
Interestingly last week, Greece’s second largest lender PIRAEUS BANK EO 0,30 (FRA:BKP) has clinched a deal with a Portuguese bank to meet its fundraising targets and stay out of state hands. Piraeus achieved its goal of remaining in private hands by agreeing to a deal to buy the Greek assets of Millennium BCP in return for the Portuguese lender buying 400 million euros ($523 million) of Piraeus shares.
During February, National Bank of Greece (ADR) (NYSE:NBG) bought 84.3 percent of smaller rival EUROBANK ERGASIAS EO 2,22 (FRA:EFG) via a share swap. But lenders feared the combined entity, with assets of about 170 billion euros ($221.4 billion) will be too big compared to Greece’s 190 billion euro economy. Both the banks told the central bank they are unlikely to raise a set portion of their planned shares issues from the market. This would imply they would fall under the control of the support fund, the Hellenic Financial Stability Fund (HFSF).
However the country’s fourth largest bank, Eurobank, earlier this month announced that it had given up its own plans for a capital increase, preferring to fall temporarily under state control. EUROBANK ERGASIAS EO 2,22 (FRA:EFG) had to pick a different course after Greece’s creditors blocked its proposed merger with larger rival National Bank of Greece (ADR) (NYSE:NBG), thereby depriving it of shareholder support. Eurobank indicated it would work on a new business plan to return to private hands at some later point.
Both Greece and Portugal are under international bailouts after being hit hard by the debt crisis. Greece’s other largest bank Alpha Bank A.E. (ADR) (OTCMKTS:ALBKY) also requires fresh funds to tide over sovereign debt write downs and impaired loans.