State is one step before its full divestment from banks

The Hellenic Financial Stability Fund (HFSF) is one step before the complete divestment from Greece’s four systemic banks, after the successful sale of all the shares it owned in Piraeus Bank.

In this way, the cycle of recapitalizations in the Greek banking system will be officially closed and, by extension, for the Greek economy, which is showing resilience as, despite the new challenges, it is moving at a growth rate four times the average of the eurozone.

The HFSF has fully divested from Eurobank, Piraeus Bank and Alpha Bank while maintaining a stake of approximately 18% in National Bank and a holding of approximately 70% in Attica Bank.

As pointed out after the completion of the divestment of the HFSF from Piraeus Bank by the government, the HFSF, the Bank of Greece and financial analysts, this was a vote of confidence by the international investment community, not only for the Greek banking system, but also for the Greek economy.

As noted by the Minister of National Economy and Finance, Kostis Hatzidakis, on the occasion of the successful completion of the sale of 27% of Piraeus Bank shares to foreign and Greek investors last week, the banking system is turning the page as of today: “From the crisis and the recapitalizations, [we have moved to the] time when high-quality investors express, as was seen in the last months, their interest in all systemic Greek banks,” said the minister, pointing to the fact that the investment interest expressed was eight times greater than the offer.

He also noted that the sale price of the shares was set at levels higher than the closing price of the stock market the Friday before the start of the process, “which is extremely rare worldwide, as in such cases of mass distribution of shares the prices are almost always set at a discount in favor of the buyers, said the minister.

He added: “The latest developments reward the strategy of the HFSF management which prepared and organized the process effectively. They underline the correctness of the government’s choices, not only for the way and the time the divestment of the state proceeded, but also more generally for the banking system itself. And they are, after all, a very serious national success.”

Double benefit

The successful cycle of the HFSF divestment from the systemic banks started with Eurobank and was followed by Alpha, National and Piraeus. According to data Hatzidakis presented to Parliament in February, the state has not only an accounting but also, above all, a more general benefit from divestment. The data show that for the rescue of the four systemic banks, the Greek state – through the HFSF – has paid a total of 30.9 billion euros, while the benefit it has had is:

* €28.2 billion from clipping bonds (PSI program) held by the four systemic banks.

* €3.8 billion from the redemption of convertible bonds (CoCos).  

* €2.8 billion of divestments made to date, without the program being completed yet.

The general total is €34.8 billion, that is, the benefit of the state in relation to the €30.9 billion it gave for the recapitalization is €3.9 billion, not counting the 2013-2023 dividends, amounting to €5.5 billion paid by the Bank of Greece to the state, mainly due to the provision of extraordinary liquidity support to the banking system through the emergency liquidity assistance.

Speaking to Parliament on February 19, Hatzidakis emphasized that the results of the divestment in Eurobank, Alpha and National Bank prove the correctness of the government’s choices.

Hatzidakis’ position is echoed by many experts, including University of Athens professor of Finance Dimitris Kenourgios, who told Kathimerini English Edition that developments “signal a new era for our banking system. We appear to have overcome, with evidence, a period of crisis during which almost half of the loan portfolios were not serviced and banks were unable to play the role of the credit supplier in the Greek economy.”

By saving the systemic banks, of course, the deposits of the Greek citizens were also saved, which were approximately 10 times the cost of the recapitalization, and businesses and households were protected from collapse, according to government officials.

Kenourgios agreed that the purpose of the state’s investment has been fulfilled, even when the PSI haircut and the CoCo redemption are not factored in: “The revenues of the state will be no more than €5 billion, but the flipside of the coin is that through the recapitalizations the banks assisted the Greek economy, the Greek households and the Greek enterprises, and bad loans were reduced. Therefore there has been an indirect effect of the recapitalizations for the Greek economy,” he explained.