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Oops: Moody’s Puts National Bank Of Greece (And Four Other Banks) On Downgrade Review

Courtesy of Tyler Durden

The only thing worse than a no news day, is a day like today, when every piece of news/rumor contradicts the prior one. An hour ago Moody’s was praising new Greek initiatives to increase the retirement age to 100, decrease wages by 100% and mortgage the Acropolis. This was promptly followed up by the just released announcement, in which Moody’s said  it has put five Greek banks, most notably among them the National Bank of Greece (which as we first disclosed is still ashamed of disclosing the Titlos prospectus on its website). Should the NBG’s, which currently has an A2 sub debt rating, be notched lower, we expect some interesting collateral calls to occur in the very near future (see our analysis on the Titlos SPV situation). Of course, we are not sure how an independent downgrade of the NBG would occur without Greece itself being downgraded in tandem. Which fits perfectly with the ever increasing confused chatter emanating out of all parties doing whatever they can to bail out Greece, without actually bailing it out.

Full Moody’s report:

Limassol, March 03, 2010 — Moody’s Investors Service has today placed on review for possible downgrade the deposit and debt ratings of the following five Greek banks: National Bank of Greece SA, EFG Eurobank Ergasias SA, Alpha Bank AE, Piraeus Bank SA and Emporiki Bank of Greece SA. In addition, the standalone ratings (bank financial strength rating (BFSR)) of these banks, with the exception of Emporiki Bank of Greece SA, have also been placed on review for possible downgrade.

 

Moody’s says that these banks have been facing growing pressures on their financial performance and fundamental creditworthiness as a result of the economic slowdown in Greece as well as some of the South-Eastern European markets in which they also operate. Over the past year, business growth, particularly in Greece, has slowed and problem loan levels have increased. The sharp rise in loan loss provisioning requirements, coupled with rising funding costs, has been depressing bank profits.

 

Volatility in the financial markets has also given rise to funding challenges and has led to an increased dependence on short-term market funding (primarily from the European Central Bank (ECB)). Opportunities for the banks to secure favourable conditions in the interbank and wholesale markets have become more limited. Moody’s believes, however, that Greek banks will continue to benefit from ECB funding until market confidence returns which, in turn, will allow them to access the capital markets more easily. The rating agency also notes that the banks’ large deposit base continues to offer strong elements of stability. Deposits represent about 60% of the banks’ total liabilities.

 

Moody’s rating review will consider the banks’ most recent results and assess the impact of the increasingly adverse economic and financial market conditions on the banks’ future performance. The rating agency notes that fiscal challenges at the national level may curtail economic growth in the foreseeable future. Moreover, Moody’s says that a possible rise in unemployment and lower disposable income would likely place additional pressure on the banking sector’s already weakened asset quality and profitability. However, the review will also consider the medium- and long-term economic benefits of the country’s fiscal plan, which was updated today with the introduction of additional measures.

 

As part of the review process, Moody’s intends to assess the country’s capacity to support its banking system should solvency support be required. Moody’s continues to believe that the likelihood of government support, if needed, is very high. The (A1) systemic support anchor, which is used to assign the supported deposit and debt ratings to Greek banks, is currently positioned one notch above the national government’s debt rating. However, the weakening credit profile of the banking sector — implying a growing potential need for support — coupled with the financial challenges faced by the government, may introduce some constraints in the ability of the country to provide broad systemic support to its banking system. Greek banks currently benefit from an average two-notch rating uplift due to imputed systemic support. A lowering of the systemic support anchor could have an impact on the supported ratings of the above-mentioned five banks.

 

RATING IMPACT ON AFFECTED BANKS

The specific ratings affected by today’s rating action are as follows:

 

National Bank of Greece

All ratings assigned to National Bank of Greece and its funding subsidiaries (NBG Finance plc and National Bank of Greece Funding Limited) have been placed on review for possible downgrade, including the C BFSR, the A1 deposit and senior debt ratings, the A2 subordinated debt ratings, and the Baa3 hybrid debt (Tier 1) instruments. The Prime-1 short term rating assigned to the bank is not included in the review for downgrade and is being maintained in view of the bank’s strong domestic funding position.

 

EFG Eurobank Ergasias SA

All ratings of EFG Eurobank Ergasias and of its funding subsidiaries (EFG Hellas plc, EFG Hellas (Cayman Islands) Limited, and EFG Hellas Funding Limited) have been placed on review for possible downgrade, including its C- BFSR, A2/Prime-1 deposit and senior debt ratings, A3 subordinated debt ratings, and Ba1 hybrid debt instruments.

 

Alpha Bank AE

All ratings of Alpha Bank — with the exception of government-guaranteed senior debt ratings which retain their A2 negative outlook rating — and of its funding subsidiaries (Alpha Credit Group plc, Alpha Group Jersey Limited) have been placed on review for possible downgrade. This includes its C- BFSR, A2/Prime-1 deposit and senior debt ratings, A3 subordinated debt ratings, and Ba1 hybrid debt instruments.

 

Piraeus Bank SA

All ratings of Piraeus Bank and of its funding subsidiaries (Piraeus Group Finance plc and Piraeus Group Capital Limited) have been placed on review for possible downgrade. This includes its C- BFSR, A2/Prime-1 deposit and senior debt ratings, A3 subordinated debt ratings, and Ba1 hybrid debt instruments.

 

Emporiki Bank of Greece SA

The D BFSR is not affected by today’s rating action and retains a negative outlook.

All other ratings of Emporiki Bank and of its funding subsidiary (Emporiki Group Finance plc) have been placed on review for possible downgrade. This includes its A2/Prime-1 deposit and senior debt ratings and A3 subordinated debt ratings. Although a reassessment of the country’s ability to support the banking system could lead to some adjustment to this bank’s ratings, Moody’s notes that Emporiki’s ratings will continue to benefit from significant uplift as a result of Parental support. The bank is a subsidiary of Credit Agricole SA (CASA). In case of need, Moody’s believe that there is a very high probability that CASA would provide extraordinary support to Emporiki Bank.

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