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Moody's Downgrades Top 5 Greek Banks By One Notch

Tyler Durden's picture




 

Full Moody's Press release.

Remaining four Moody's-rated banks unaffected

Limassol, March 31, 2010 -- Moody's Investors Service has today downgraded the deposit and debt
ratings of five of the nine Moody's-rated Greek banks due
to a weakening in the banks' stand-alone financial strength
and anticipated additional pressures stemming from the country's
challenging economic prospects in the foreseeable future.

 

The affected banks are: National Bank of Greece (to A2 from A1),
EFG Eurobank Ergasias SA (to A3/Prime-2 from A2/Prime-1),
Alpha Bank AE (to A3/Prime-2 from A2/Prime-1), and
Piraeus Bank (to Baa1/Prime-2 from A2/Prime-1). Moody's
has also downgraded the deposit and debt ratings of Emporiki Bank of Greece
SA (to A3/Prime-2 from A2/Prime-1), but as a result
of a reassessment of the credit enhancement associated with systemic support
for this institution. The outlook on all five banks' ratings
remains negative. This action concludes the review of these banks
initiated on 3 March 2010.

 

Today's rating actions were prompted by the country's weakening
macroeconomic outlook and its expected impact on these banks' asset
quality and earnings-generating capacity. Pressures on the
macroeconomic fundamentals have been evident for the past year and are
expected to intensify as the year unfolds, said Moody's.

 

Although additional measures taken to address fiscal imbalances at the
national level may have a positive impact over the longer term,
Greece's fiscal challenges will weigh negatively on economic growth
over the short to medium term. As recently noted by the Bank of
Greece, the magnitude of the economic contraction this year is likely
to be more pronounced than was anticipated at the beginning of the year.
Negative growth will give rise to unemployment, lower consumer disposable
income and reduced profitability in the small- and medium-sized
enterprise (SME) and corporate sectors. Moody's expects the
upward trend in non-performing loans, which began in 2008,
to continue in 2010 and, possibly, 2011. Combined,
these factors will place additional pressure on the banking sector's
already weakened asset quality and profitability.

 

Over the past year, Greek banks have increased their dependence
on short-term market funding as access to the wholesale capital
markets has been limited due to the global financial crisis. This,
in turn, has led to a rise in maturity mismatches. In recent
months, negative market sentiment towards Greece has further constrained
the banks' access to the bond and interbank markets. As a
result, Greek banks have had to increase their reliance on European
Central Bank (ECB) funding by an estimated 50%. Going forward,
we expect a rise in the average cost of funding as banks seek longer-term
maturities, which in turn will pressure interest margins.

 

Moody's takes comfort in the fact that the ECB will remain a reliable
source of funding for the banks until market confidence returns.
Continued access to ECB funding has been part of Moody's mainstream
scenario since the beginning of the crisis. Further clarity in
this regard was provided by recent ECB statements effectively indicating
that the central bank plans to maintain its relaxed minimum credit rating
threshold for collateral beyond 2010. It should also be noted that
funding stability is further supported by the primarily deposit-funded
nature of the country's banking system.

 

As part of the review, Moody's also assessed the country's
capacity to support its banking system and, in this regard,
it has decided to maintain the country's systemic support anchor
at A1. The systemic support anchor, which is currently one
notch above the government debt rating, is used to dimension the
systemic support incorporated in the deposit and debt ratings.
Moody's notes however that the country's anchor rating could
come under pressure if credit losses facing the banking sector were to
grow significantly beyond what is currently anticipated (suggesting higher
potential need for systemic support) and/or if the fiscal challenges faced
by the national government were to grow beyond current expectations.

 

National Bank of Greece SA

Moody's downgrade of NBG's deposit and debt ratings to A2
and bank financial strength rating (BFSR) to C- (which maps to
a Baseline Credit Assessment (BCA) of Baa1) reflect the deterioration
in the bank's financial fundamentals, especially its asset
quality, earnings and funding/liquidity indicators. Non-performing
loans (NPLs) as a percentage of total loans have risen to 6.4%
in December 2009 (2008: 4.0%); earnings fell
by 40% in 2009 on the back of increased provision charges and slower
revenue growth; while the bank has increased its reliance on short-term
market funding, with "due to banks" (including ECB funding)
increasing to 19% of total liabilities. For the current
year, Moody's expects asset quality to deteriorate further,
and access to the wholesale capital markets to remain limited, with
the bank's revenue/earnings indicators unlikely to record any material
improvement.

 

National Bank of Greece remains Moody's highest-rated Greek
bank, benefiting from a solid deposit franchise (with a loans-to-deposits
ratio of under 100%), and successful geographical diversification,
as evidenced by the strong positive earnings contribution from its Turkish
subsidiary, Finansbank AS.

 

EFG Eurobank Ergasias SA

Moody's downgrade of EFG Eurobank's deposit and debt ratings
to A3 was triggered by the lowering of its BCA to Baa2 from Baa1 and reflects
the deterioration in the bank's financial performance both in Greece
and abroad. The bank's BFSR was confirmed at C-.
For the year-ended December 2009, the bank's foreign
operations reported post-tax losses of EUR44 million compared to
profits of EUR135 million the previous year. Similar to its local
competitors, EFG Eurobank's credit quality indicators have
weakened, with NPLs rising to 6.7% of gross loans
as of December 2009 and provision charges absorbing 75% of pre-provision
earnings, while its reliance on short-term market funding
has increased and accounts for 20% of total liabilities.
All these issues will likely continue to adversely affect the bank's
financial performance and funding profile for at least the remainder of
2010.

 

Alpha Bank AE

Moody's downgrade of Alpha Bank's deposit and debt ratings
to A3 were triggered by the lowering of its BCA to Baa2 from Baa1,
and reflects the deterioration in the bank's financial performance
and its increased reliance on ECB funding. The bank's BFSR
was confirmed at C-. For the year-ending December
2009, the bank has witnessed an increase in NPLs to 5.7%
- likely to be accelerated further in 2010. Profitability
also fell by 32%. Alpha Bank's ECB funding increased
to 15% of the bank's total liabilities; this percentage
is the highest among the Greek rated banks, with the current market
conditions indicating that the reliance on ECB funding is unlikely to
be substantially reduced during the course of the year.

 

Piraeus Bank SA

Moody's downgrade of Piraeus Bank's deposit and debt ratings
to Baa1 and BFSR to D+ (mapping into a BCA of Baa3) reflects the
bank's increased dependence on short-term market funding
and its deteriorating financial performance. The bank's "due
to banks" (primarily ECB and interbank repo funding) accounts for
approximately 26% of total liabilities as of December 2009 --
the highest percentage among the big Greek banks -- while its liquid
assets and investments account for 21% of total assets, down
from 27% in 2007. Similarly, the bank's 2009
bottom-line profitability fell by 36%; for 2010 Moody's
expects continued pressure on the bank's asset quality and profitability
indicators as the weakening economy hits the SME sector, which accounts
for nearly 50% of Piraeus Bank's loan portfolio.

 

Emporiki Bank of Greece SA

Moody's downgrade of Emporiki Bank's deposit and debt ratings
to A3/Prime-2 reflects Moody's assignment of a lower systemic
uplift given the relatively small size of the institution. Moody's
notes however that Emporiki's deposit and debt ratings continue
to benefit from a five notch uplift as a result of parental and systemic
support. The institutions is 91% owned by Credit Agricole
SA.

 

The ratings of the other four Greek banks rated by Moody's namely,
Agricultural Bank of Greece ( Baa1/Prime-2), Attica Bank
(Ba1/Not-Prime), General Bank of Greece (Baa1/Prime-2)
and Marfin Egnatia Bank (Baa1/Prime-2), are not affected
by today's announcement. These ratings were not part of the
review announced on the 3rd of March. The weak stand-alone
ratings (BFSRs) for these four banks capture the heightened level of risks
under its main scenario. In the case of General Bank of Greece
and Marfin Egnatia Bank, the deposit ratings also confer elements
of stability as a result of our imbedded assumptions regarding the likelihood
of extraordinary support from their foreign parents. Marfin Egnatia
Bank's deposit ratings are expected to converge with those of its
parent bank's -- Marfin Popular Bank Public Company Ltd --
once the absorption process, currently underway, is completed.
Moody's notes however that a reassessment of the credit risk profiles
of these four banks cannot be excluded as the year unfolds, if deterioration
in asset quality and profitability are worse than currently anticipated.

 

 

The specific rating changes are as follows:

 

National Bank of Greece SA

- Deposit ratings downgraded to A2 from A1

- Short-term rating unchanged at Prime-1

- BFSR downgraded to C- (mapping to a BCA of Baa1) from
C

- Backed (government-guaranteed) senior unsecured MTN downgraded
to A2 from A1

- Preferred Stock downgraded to Ba1 from Baa3

NBG Finance plc:

- Backed senior unsecured debt ratings downgraded to A2 from A1

- Backed subordinated debt ratings downgraded to A3 from A2

National Bank of Greece Funding Limited:

- Backed Preferred Stock (Hybrid Tier 1) downgraded to Ba1 from
Baa3

All ratings carry a negative outlook.

 

EFG Eurobank Ergasias SA

- Deposit ratings downgraded to A3 from A2

- Short-term ratings downgraded to Prime-2 from Prime-1

- BFSR confirmed at C-, mapping to a BCA of Baa2 (previously
Baa1)

- Backed (government-guaranteed) senior unsecured MTN unchanged
at A2

EFG Hellas plc:

- Backed senior unsecured debt ratings downgraded to A3 from A2

- Backed subordinated debt ratings downgraded to Baa1 from A3

- Backed Commercial Paper downgraded to Prime-2 from Prime-1

EFG Hellas (Cayman Islands) Limited:

- Backed senior unsecured debt ratings downgraded to A3 from A2

- Backed subordinated MTN downgraded to Baa1 from A3

EFG Hellas Funding Limited:

- Backed Preferred Stock (Hybrid Tier 1) downgraded to Ba2 from
Ba1

All ratings carry a negative outlook.

 

Alpha Bank AE

- Deposit ratings downgraded to A3 from A2

- Short-term ratings downgraded to Prime-2 from Prime-1

- BFSR confirmed at C-, mapping to a BCA of Baa2 (previously
Baa1)

- Senior Unsecured MTN downgraded to A3 from A2

- Subordinated MTN downgraded to Baa1 from A3

- Backed (government-guaranteed) senior unsecured MTN unchanged
at A2

Alpha Credit Group plc:

- Backed senior unsecured debt ratings downgraded to A3 from A2

- Backed subordinated debt ratings downgraded to Baa1 from A3

- Backed Commercial Paper downgraded to Prime-2 from Prime-1

Alpha Group Jersey Limited:

- Backed senior unsecured MTN downgraded to A3 from A2

- Backed subordinated MTN downgraded to Baa1 from A3

- Backed Preferred Stock (Hybrid Tier 1) downgraded to Ba2 from
Ba1

All ratings carry a negative outlook.

 

Piraeus Bank SA

- Deposit ratings downgraded to Baa1 from A2

- Short-term ratings downgraded to Prime-2 from Prime-1

- BFSR downgraded to D+ (mapping to a BCA of Baa3) from C-

- Senior Unsecured MTN downgraded to Baa1 from A2

- Subordinated MTN downgraded to Baa2 from A3

Piraeus Group Finance plc:

- Backed senior unsecured debt ratings downgraded to Baa1 from
A2

- Backed subordinated debt ratings downgraded to Baa2 from A3

- Backed Commercial Paper downgraded to Prime-2 from Prime-1

Piraeus Group Capital Limited:

- Backed Preferred Stock (Hybrid Tier 1) downgraded to Ba3 from
Ba1

All ratings carry a negative outlook.

 

Emporiki Bank of Greece SA

- Deposit ratings downgraded to A3 from A2

- Short-term ratings downgraded to Prime-2 from Prime-1

- BFSR unchanged at D

- Senior unsecured MTN downgraded to A3 from A2

- Subordinated MTN downgraded to Baa1 from A3

Emporiki Group Finance plc:

- Backed senior unsecured debt ratings downgraded to A3 from A2

- Backed subordinated debt ratings downgraded to Baa1 from A3

All ratings carry a negative outlook.

 

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Wed, 03/31/2010 - 15:05 | 282004 bugs_
bugs_'s picture

Deep Shah.

Wed, 03/31/2010 - 15:19 | 282033 Nolsgrad
Nolsgrad's picture

Also from Moody's

 

26 Mar 2010 New ECB collateral rules reduce liquidity risk for Greece The European Central Bank (ECB) decision to maintain its minimum credit rating threshold for collateral at Baa3 also reduces liquidity risk for other countries in the Eurozone. The ECB will maintain the Baa3 threshold, while introducing a graded haircut system to assess the creditworthiness of government bonds used as collateral. The haircut scheme is consistent with the EU's focus on enforcing fiscal discipline
*Nolsgrad <trout slaps> moody's
Wed, 03/31/2010 - 15:25 | 282045 Leo Kolivakis
Leo Kolivakis's picture

Moody's is still around? Yawn, I really appreciate their downgrades after the crisis hit. Let's see, NBG is down how much since its peak:

Good call Moody's, no price is too high for such great insight! -)

Wed, 03/31/2010 - 15:33 | 282063 Stormdancer
Stormdancer's picture

If memory serves, didn't we just hit the trigger for that $5.3 billion dollar margin call to Titlos PLC that was mentioned here a while back?

Wed, 03/31/2010 - 15:46 | 282097 john_connor
john_connor's picture

Exactly my question.

Wed, 03/31/2010 - 20:16 | 282506 Stormdancer
Stormdancer's picture

I dug up the original post "Is Titlos PLC (Special Purpose Vehicle) The Downgrade Catalyst Trigger Which Will Destroy Greece?"

and it appears that National Bank of Greece is the important player and there's still one downgrade left before the trigger is hit.  Looks like the next downgrade is it.

And the amount of the collateral call was 5.4 billion euros, not the 5.3 billion dollars I mentioned earlier.

Wed, 03/31/2010 - 15:35 | 282065 carbonmutant
carbonmutant's picture

In other news,

Greece Plans $10 Billion Global Bond Sale

even though officials say they are frustrated that the country's borrowing costs haven't fallen after the recent rescue pledge by its fellow European nations.

Wed, 03/31/2010 - 15:44 | 282090 Cognitive Dissonance
Cognitive Dissonance's picture

Staggering how some individuals can speak out of both sides of their mouth simultaneously. Staggering to the 4th power that so many people accept this as normal and acceptable.

Wed, 03/31/2010 - 15:38 | 282077 equity_momo
equity_momo's picture

And yet the market doesnt care.  Price makes news. The market will roll when the market (or the UST) wants to roll.....

Thatll be about another 25-50 bps on the 10 yr. Until then , the Momo's will squeeze this to 1220.  Would be almost too perfect if the 10yr is at 4.25% at the same time. PLUNGE!

Wed, 03/31/2010 - 16:05 | 282132 Gordon_Gekko
Gordon_Gekko's picture

The same Moodys that slapped AAA+ on worthless mortgage securities? Yeah, I'm paying attention.

Wed, 03/31/2010 - 16:23 | 282167 Gimp
Gimp's picture

These ratings agencies are a joke. Pawns in the machine. "Yes master, what ever you say master".

Wed, 03/31/2010 - 16:27 | 282170 carbonmutant
carbonmutant's picture

" These ratings agencies are a joke. Pawns in the machine. "

True, but the markets in Europe and the US are still listening to them. And the price of Greek bonds is going up.

 

Wed, 03/31/2010 - 18:16 | 282385 hooligan2009
hooligan2009's picture

wonder why they had to rate the greek banks from Limassol in Cyprus? Maybe Lemesos is safer! Still I can't help but think that a few of the Turkish banks would love to take them over and up their.....mortgage rates.

Wed, 03/31/2010 - 18:17 | 282387 hooligan2009
hooligan2009's picture

maybe the assho...damn..Greek bank black holes arent big enough?

Wed, 03/31/2010 - 18:35 | 282410 asteroids
asteroids's picture

OPA! I hear more plates breaking in the background

Thu, 04/01/2010 - 01:25 | 282752 doolittlegeorge
doolittlegeorge's picture

NEWS FLASH!  NEWS FLASH!  Financial crisis hits, borrowing increases!  I mean c'mon.  Of course these governments have to borrow more:  we're dealing with sovreigns now.  They tell YOU what to do and not the other way around.  So when the sovreign tells it's banks to "buy our debt" in order for the bank to continue it must buy the worthless paper.  Hence the downgrade, nothing more.  Sure "those jerks at S&P still refuse to point out the obvious."  But so do all you "honest people."

Mon, 04/12/2010 - 04:54 | 296111 mark456
mark456's picture

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