·
The European Central Bank announced that the Greek
systemic banks will need 4.391 bios euros of additional capital according to basic scenario, 14.4 bios
euros according to worst case scenario. This exercise was based on end-June’15
financials. More specifically:
o
Alpha Bank, 263 mios for basic scenario, 2.743
bios for worst case
o
Eurobank, 339 mios for basic scenario, 2.122
bios for worst case
o
National Bank: 1.576 bios for basic scenario, 4.6 bios for worst case
o
Piraeus Bank: 2.213 bios for basic scenario, 4.933 bios
for worst case
·
According to Greece’s Foundation of Economic
& Industrial Research (IOBE), the local Economic Climate Index continued its
increasing trend since July; it closed at 86.5 in October vs. 83.1 in September
and 75.2 in August. On the other hand, Eurozone’s index slightly increased to
105.9 in October vs. 105.6 in August.
·
Greece's Economic Climate Indices increased across all industrial
sectors i.e. Manufacturing’s index improved to -19.6 in October from -23.3 in
September but it is still lower compared to October 2014 (-0.6). This was due
to an improvement of expectations as regards the following 3 month period (Oct:
+11.7, Sep. +14.3 and Aug: -10.5). In addition, expectations concerning sales improved
for a 2nd month in a row (Oct.’15: 1.2, Sep’15: +2.9 and Aug: -33.1).
·
Greece’s current account closed at surplus for a
third month in a row. More specifically, August’s surplus was recorded at 2.1
bios vs. 1.9 bios in August’s 2014. The current Account’s improvement is associated
to the remarkable performance of Greek tourism which showed an increase of 8.5%
as regards its balance of payment during Jan-Aug period. More specifically
inflows increased by +7.5% while outflows decreased by -1.5%.
·
The number of arrivals of tourists in Greece, increased
by +10.6% (annualised) during the period Jan-Aug, which is lower compared to
the same period in 2014 (+22.1%). In August the number of tourists increased by
+2.8% only, which is lower vs. August 2014 which showed an increase of 25.0%.
·
Arrivals of US tourists in Greece increased by
+35.7% during the period Jan-Aug (+24.8% during the same period of 2014), while
German tourists increased by 22.5% (+4.5% in same period of ‘14), and arrivals
of British tourists increased by +24.9% (+4.5% in same period of ’14). On the
other hand, arrivals of Russian tourists decreased by -62.2% during Jan-Aug
period 2015 (remained stable during the same period of 2014).
·
Greece’s inflows from shipping decreased by +2.3%
during the period Jan-Aug; there was a drop of 46.7% in August due to the implementation of capital controls.
·
Expectations as regards construction slightly
improved to -49.4 in Oct’15 vs. -52.8 in Sep’15. However, this was due to an
improvement in Public Sector Construction only, which showed a remarkable increase
to 80.5 in Oct’15 vs 58.5 in Sep’15 and 36.2 in Aug’15.
·
Turkey
holds parliamentary elections this Sunday Nov 1st, which is the
second in five months, with the governing AK Party hoping to win back its parliamentary
majority. Deterioration of local economy, status of Turkish Democracy, regional
geopolitics and security are among the key issues of concern for Turkish
electorate.
·
Refugees’ tragedy continues in Aegean Sea. More than
100 children have drowned in the Aegean over the last two months. Tsipras
accused some European officials of not caring about these deaths and ‘crying
crocodile tears’ over them.
Risk assessment. Turkey
holds parliamentary elections this Sunday, November 1st, the second elections in five months with ruling AK Party hoping to win parliamentary majority. The geopolitical
developments in Syria combined with escalating attacks in Turkey’s interior by Kurdish
forces and ISIS, have increased anxiety among Turkish citizens and may impact the
final elections’ outcome. Turkey has gradually become ‘a nervous country’ and
this represents a major threat for regional stability.
The developments in Turkey, enhances Greece's geopolitical role in the region of SE Europe and Middle East and this could facilitate the ongoing discussions as regards debt relief and investments. However, Greece has to increase its efforts in order to fulfil its obligations to creditors and enhance competitiveness and internationalisation of its economy.
As it was predicted in previous commentaries, the total capital
needs of Greek Banks are significantly lower than the amount which is included
in the 3rd MoU (25 bios). In addition, this exercise was performed
based on end-June’15 results and before the agreement of July 13th, when local political
uncertainty was skyrocketing.
It appears that both Eurobank and Alpha Bank’s positions are
better, compared to the ones of National Bank and Piraeus Bank. National Bank shows
comparatively higher capital needs but the biggest part could be
covered by the sale of its Turkish subsidiary - Finansbank. It appears that Piraeus Bank shows
comparatively the highest capital needs and will need more work to raise
capital.
The task of the first three banks (Eurobank, Alpha &
National Bank of Greece) to attract capital from markets and maintain
management seems feasible. However, Piraeus Bank will need more effort to
attract foreign capital and this seems highly unlikely at this stage. However, there will be no issue as the additional capital will be provided by state funds, within 3rd MoU context.
In addition, the Bank of Greece performed stress test on
Attica Bank, a small, not systemic bank, which is owned mainly by the Pension Fund
of Engineers (TSMEDE). It appears that Attica Bank has significant capital
needs compared to its size (857 mios for basic scenario and 1.021 bios for
worst case). It is highly unlikely that Attica Bank will raise capital and most probably will be acquired by one of the four systemic banks, with the support of state funds.
All Banks will need to submit by November 6th, a specific strategic plan which will include sources of capital injection.
In general, the results of stress test are better than expected.
Eurobank showed a remarkable improvement as it appears to maintain the best position among the four systemic banks. The leadership Karamouzis-Karavias proved to be successful in its strategy to turnaround the bank's position.
Overall, considering that the local economy shows better performance in 2015
compared to initial estimates, shows that Greek Banks maintain significant value to investors and could be reactivated soon in order to start financing the local real economy again.
However, there are a lot of pending
items starting with the recapitalisation bill which needs to be ratified by local Parliament by tomorrow. In addition, Greece needs to proceed on the implementation of the structural reforms which are
included in the 3rd MoU, which will improve the overall investments' sentiment and facilitate the attraction of private sector's investment funds.
Last, but not least, Greece’s government needs to gradually change the mix of policies from increase of
revenues (through increase of taxation) to decrease of expenses. This will
allow local citizens and enterprises to breath and facilitate the implementation of
structural reforms
.
για όλους (και την Ελλάδα)
