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By Nicholas Paisner, Reuters Breakingviews
When American banks began raising private capital in early 2009, it marked the beginning of a vertiginous rebound for U.S. financial stocks. Europe's lenders will be hoping that National Bank of Greece's 1.8 bln euro cash call will be a similar watershed.
At first glance, it looks as if Greece's largest bank is taking a tortuous route to market. It is asking shareholders to buy 631 mln euros' worth of new shares and 1.2 bln euros of bonds that convert within a week into shares. Though convoluted, the structure in fact helps raise cash quickly as it dispenses with the need for additional shareholder approval.
The move comes on the back of improving sentiment towards Greece, which has managed to implement many budget cuts more quickly than expected. Investors are even starting to wonder whether it may be able to avoid a sovereign default previously considered inevitable. The banking sector is also set to benefit from consolidation. The government has appointed advisers to help deal with the sickly state-owned lenders, while the other big privately-owned banks are rumoured to be exploring tie-ups.
NBG is the obvious place to begin recapitalising. It has a domestic market share of roughly a third and, with a loan-to-deposit ratio of around 100%, is the least leveraged of Greece's big banks. But the biggest attraction may be its exposure to the more buoyant Turkish economy. NBG's Finansbank unit accounted for just over a quarter of first-half revenue, but most of the pre-tax profit. NBG plans to raise a further 1 billion euros by floating around a quarter of Finansbank next year. If it achieves that valuation, the rest of the bank looks like a cheap option on a Greek recovery.
True, NBG remains a stock for the brave. If the government does restructure its debt, the bank will take a big hit on its 20 bln euro portfolio of government bonds. Sceptics also argue that Greece's public-sector cost cuts to date have been easy wins.
Even so, it would have been hard to imagine investors putting money into any Greek bank early this year. If NBG is successful — and the backing of four big investment banks raises the chances that it will be — other capital-hungry European lenders may be encouraged to follow. That could finally put to rest persistent fears that Europe's banking sector is set for another crisis.
