Bank share plunge fuels fears about Greece’s vulnerability

Bank shares took another hiding on Wednesday with stocks plummeting by 8.78 percent, reflecting what analysts say is Greece’s vulnerability to internal and external pressures. 

With the banking sector having lost 42 percent of its value within just three months, talk has also resurfaced of a possible bank recapitalization – just a few months after the completion of stress tests which showed that Greece’s systemic banks have high capital adequacy ratios. 

Piraeus Bank shares nose-dived almost to the point of a limit down.

Speaking to Kathimerini, senior banking executives said Wednesday’s decline was, despite a lack of confidence in the Greek economy, unexpected and described the market’s reaction as “without logic.” 

The latest shock prompted Prime Minister Alexis Tsipras to convene an emergency meeting on Wednesday afternoon with leading government officials.

The consensus during the meeting, which included Finance Minister Euclid Tsakalotos, Minister of State Alekos Flambouraris and Deputy Prime Minister Yiannis Dragasakis, was that the pressures on bank stocks are not a reflection of their fundamental health and more a result of speculation. 

They insisted that banks are on firmer ground, citing the successful outcome of the stress tests in May, their high capital adequacy ratios, their success in surpassing targets to reduce nonperforming loans (NPLs) in the first half of 2018, an increase in bank deposits and the significant reduction of their dependence on emergency liquidity assistance (ELA). 

However, market experts said the tumble of the banking sector belies a general lack of trust in the Greek economy as it is currently without a safety net against domestic and international pressures. 

The latest political developments in the country and the lack of clarity on the issue of elections have conspired, experts added, to create conditions that will allow speculator pressures to mount. 

Moreover, the abandonment of the state’s plans for Greece to tap the markets has rendered the Greek stock market, and the banking sector in particular, easy targets. 

Pressures also mounted on the banking sector in previous days as lenders prepared to submit their new targets to the Single Supervisory Mechanism (SSM) which fueled renewed concerns over their ability to deliver. 

For its part, conservative New Democracy said that Wednesday's crash is “worrisome” as it is a reflection of the Greek economy. In a statement, ND said that there is no sign that Greece has recovered enough credibility to tap markets.