An important step toward stability should come next week.
1) All large greek banks will publish early next week their quarterly reports, and the EU bond exchange figures should be included. The four largest Greek banks, NBG, Alpha Bank, EFG Ergasias SA and Euro Bank SA Piraeus Bank on Monday and Tuesday next week will publish their quarterly results.
2)The Greek banks may lose a total of some five billion euros in October, by the expected date to end of exchange bond auction.
"The accurate assessment of losses is still ongoing, but it is estimated that cca. five billion euros will be involved. The amount should be included in the bank's 2Q reports" said a Greek government offical. "The banks should communicate early September that they wish to take part in the exchange bond auction, and if so, with what investment means. The operation in October will be closed".
The 109 billion over the next few years to cover the financing needs of the second Greek rescue package was adopted by the EU in July. The key element of the package is the conversion of gov.bonds held by private investors and banks to longer-term papers. Bonds maturing in the next nine years will be replaced into new 15-30year maturity papers with smaller yield, but also extending the maturity profile and addig Eu guaranties in parallel.
The Greek banks' best refinancing option is probably the new 30-year maturity bonds, with 4.75% coupon. The Greek banks hold a total of about 40 billion euro gov bonds in their portfolios.
3)As NGB holds according 1Q2011 report a total of 13.2B GGB, (even after reducing in 1Q2011 by 0.55B), and it is marked at 87%, I estimate their total loss in this exchange should be in the range 1.40-1.65 B Euros.
NGB will probably use this Bond exchange opportunity to its best advantage. It will survive this loss from their total Equity of 10.7B without losing much earnings power.
As soon as this will sink in, we mightn expect a temporary return to reason on the investor side too.
Actually if they picked the 30 year I don't think they'll have any loss at all if they can get 4.5% out of it. The current ggb they own have ~4% coupon. Correct me if I am wrong but i thought the 30year option has no upfront haircut.
(Reuters) - Greece's central bank has readied its emergency liquidity assistance (ELA) to supply lenders with funds if the need arises, bankers said on Thursday, but no bank appears to have asked for money yet despite a cash squeeze.
Troubled by sovereign debt downgrades, deposit outflows and a dwindling stock of eligible collateral to access European Central Bank funding, Greek banks may be forced to resort to the ELA facility if their liquidity squeeze worsens.
"Several banks have done the paperwork involved, whether they will tap ELA, I do not know," a senior Greek banker who requested anonymity told Reuters.
Financial daily Imerisia also reported on Thursday that the ELA facility stands ready to address any liquidity shortage with small and large banks, with the exception of big player National Bank (NBGr.AT), if they tap the window.
Greek central bank and ECB officials declined to comment.
ELA is one of the options the euro zone has at its disposal to
keep Greek banks afloat if the country's sovereign debt is pushed into default
by a new bailout deal that was put together by EU leaders last month and the ECB stops accepting it as collateral.
Athens is keen to avert additional systemic stress given the pressure on the banking sector from rising loan impairments as the recession deepens and from their participation in a debt restructuring, part of the country's second international bailout.
Shut out from the interbank market, Greek banks have become dependent on the ECB for liquidity, borrowing at its money market operations by putting up Greek government bonds and other assets as collateral.