Piraeus Bank to raise EUR 1.35 bln, expand to Cyprus

Piraeus Bank announced its intention to proceed with a EUR 1.35 bln capital increase via a rights issue. The proceeds of the rights issue will be used to further finance the expansion of operations both in Greece and abroad. Specifically, the bank intends to accelerate and selectively augment its previously announced retail branch-opening program, invest EUR 175 mln in its recently acquired bank in the Ukraine, invest EUR 75 mln in a greenfield investment in Cyprus while the remaining EUR 900 mln will be

used to support the bank’s growth.

Overall the bank expects to maintain its sore Tier I ratio above 7.5%.

Rights issue terms: 1 new share for every 4 held, at an exercise price of EUR 20.0/share or a 25% discount against Thursday’s close. The bank said also that it will cancel the whole of its treasury shares (10.4 mln or 3.8%)

Timetable: The subscription period is expected to begin in the second half of August while the bank will shortly file its prospectus for approval to the Hellenic Capital Markets Commission.

According to an analysis by Marfin Egnatia SA, for the rights issue to be neutral on valuation we should be looking for an at least a 20% upward revision in 2008 and 2009 net profit estimates. From a different point of view, the proceeds from the rights issue should have a RoE of at least 9.6% or some EUR 125 mln contribution in 2008 in order

for the capital increase to be valuation neutral. The EUR 125 mln additional net profits that are required for the capital increase to be neutral should have a RoRWA of 0.7% vs. a 1.8% for the group currently. Marfin Egnatia SA analysts believe that this is achievable in the longer term. We note that the proposed rights issue corresponds to 81% of the

Group’s 2006 shareholders equity and the dilution in shares is 21% after the cancellation of treasury shares.