Piraeus Bank announces 1.05 bln euro capital boost
Piraeus Bank <BOPr.AT>, Greece's fourth-largest lender, announced a 1.05 billion euros ($1.5 billion) cash call to better deal with stricter capital adequacy conditions and the recession.
Hurt like other Greek banks by the country's debt crisis, Piraeus is aiming to reduce counterparty worries, regain access to wholesale funding and reduce dependence on the European Central Bank.
Extra funds will also give it more flexibility in view of expected consolidation in the sector.
Friday's announcement sent the bank's shares down 6.0 percent to 3.67 euros by 1232 GMT. The Athens Stock Exchange FTSE Banks index <.FTATBNK> was down 3.5 percent.
"The share is dropping due to the capital increase, its size was somewhat bigger than the market expected," said Nikos Galoussis, an Athens-based analyst at Kappa Securities.
Piraeus said it would ask shareholders at a Nov. 23 meeting to approve an 800 million euro rights issue and a 250 million euro issue of convertible bonds.
The bank said it had underwriting commitments for the full amount of the rights issue from Barclays Capital, Credit Suisse, Goldman Sachs and Morgan Stanley, which will act as global coordinators.
"This is an important step for Piraeus Bank, allowing us to further strengthen our capital base…and putting us in a position to benefit from an improvement in economic conditions," the bank's Chairman Michael Sallas said in a statement.
Piraeus will be the second Greek lender to opt for a big capital boost. National Bank <NBGr.AT>, Greece's biggest lender, raised 1.8 billion euros this month.
Industry sources said the move may put pressure on Alpha Bank <ACBr.AT> and EFG Eurobank <EFGr.AT> to raise capital.
"FORTIFICATION EXERCISE"
Greek banks, hit by the country's debt crisis, have been shut out from wholesale funding markets as their bond portfolios were damaged by successive sovereign credit rating downgrades.
Piraeus barely passed a pan-European stress test in July, scoring a Tier 1 ratio of 6 percent under the simulation's most adverse scenario. "It is primarily a balance sheet fortification exercise. It creates a sizeable buffer against any unanticipated worsening in macroeconomic conditions," Managing Director Alex Manos told analysts in a conference call.
"The bond issue is a housekeeping exercise, we want to be able to tap additional pockets of investors demand," he said.
Piraeus said it expected to launch the share issue in January next year.
Piraeus, also present in Bulgaria, Romania, Serbia, Cyprus, Egypt, Ukraine and the United States, said it would ask shareholders to approve a reduction of the par value of its common shares without increasing the number of shares outstanding.
It said a capital increase of 800 million euros would boost its Tier 1 capital ratio by 200 basis points to 10.8 percent based on first-half data, with key performance trends not significantly changed since then.
Last month, Piraeus withdrew an offer to buy government stakes in ATEbank <AGBr.AT> and Hellenic Postbank <GPSr.AT> saying the government was taking too long to make up its mind.
Manos said the bank would not repeat an unsolicited offer to the government.
The government and the central bank have called on Greek banks to rethink strategy and consider forming stronger groups to cope with the effects of the country's debt crisis.
