Greek Piraeus Bank Eyes $1.2 Billion Capital Raise in March

Piraeus Bank SA, Greece’s third-largest lender, is preparing for a capital increase next month that will reduce the state’s stake and represent a step toward normalization for the rescued lender.

The head of Greece’s bank recapitalization fund, which currently holds a 61.3% stake, said in an interview in Athens Tuesday that Piraeus would issue a prospectus this month and tap the market within the first quarter.

Separately, people familiar with the matter said the lender will seek to raise as much as 1 billion euros ($1.2 billion). They asked not to be named as the details aren’t final yet.

“It’s not decided yet which kind of issue there will be -- if this will be a full market operation or a rights issue,” said the chief executive officer of the Hellenic Financial Stability Fund, Martin Czurda. The fund would like to see its stake fall below the 30% threshold, but this all depends on the market demand, he added.

The lender’s 10-year euro bond due June 2029 climbed the most since Nov. 24, while the stock price jumped as much as 2.3% on the news.

The state boosted its position in the bank after the European Central Bank rejected a request to pay a convertible bond coupon to the HFSF in November amid a general ban on cash payouts due to the pandemic. The government now wants to reduce that holding as part of a push to return the banking sector to a more normal footing a decade after the country’s financial crisis.

Czurda declined to comment on the size of the offering. A spokesman for Piraeus declined to comment on the offering.

Read more: Greek State Set to Be Majority Stakeholder in Piraeus Bank

The global coordinators for Piraeus’s capital increase are Goldman Sachs Group Inc and UBS AG, Czurda said. Morgan Stanley advises the HFSF.

New Law

Czurda said the Greek government is working on changes to the law that governs the HFSF, one of which will allow the fund to participate in share capital increases using its own resources. That’s a measure that would enable the fund to backstop the share sale if needed.

The biggest problem for Greek lenders is the size of bad loans, according to Czurda. As of the end of September, the total number of non-performing loans amounted to 58.7 billion euros, with the ratio of soured credit standing at 35.8%.

“We want to see the non-performing exposure ratio of all four banks below 10% by the end of 2021,” Czurda said. The HFSF was behind the “Hercules” plan to reduce the level of bad debt by 40%.

The second challenge that Greek banks face are their business models, the CEO said. “We’re very critical with the business models and we’re challenging the banks to become really realistic. They have to transform the banks.”

“If things go well and the markets are lets say only normal, I would expect that Greek banks could function normally in one to two years time,” he said.

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