CORRECTED-Europe's top banks eye early repayment of ECB cash

(Switches estimates for UniCredit and Intesa in para 22)
* Up to 200 bln euros of LTRO cash repaid early 2013
-analyst
* BNP Paribas, SocGen, UniCredit, Intesa may all repay
-bankers
* Stronger banks keen to save cash, show strength
* Banks can repay from Jan. 30

By Steve Slater and Marc Jones
LONDON, Oct 24 (Reuters) - Europe's banks were grateful
enough for the 1 trillion euros ($1.3 trillion) doled out by the
European Central Bank (ECB) to bolster their finances. Yet some
are already looking to start repaying those debts.
As much as 200 billion euros could be repaid early next
year, according to some estimates, a fifth of what was taken by
more than 800 banks in two special ECB offers in December and
February.
The attraction of an early payback for banks would be to
look good to investors and rating agencies concerned about their
dependency on ECB support. And for the ECB, it would reduce the
risk of a huge funding crunch at the start of 2015 when banks
have to return the cash whether they like it or not.
Banks can start returning the money - in weekly installments
if they wish - from Jan. 30 for the first tranche of 489 billion
euros and from Feb. 27 for the remaining 529 billion.
According to several industry sources, banks including BNP
Paribas, Societe Generale, Unicredit
and Intesa Sanpaolo will be considering
paying back some of the money.
The ECB's so-called long-term refinancing operation, or
LTRO, was a key move by the bank's President Mario Draghi to
prevent a debt crisis spreading across the financial system.
Banks gobbled up the financing as a cheap insurance option.
Although they are getting the ECB cash relatively cheaply,
many banks are just parking it back with the ECB, where they now
get nothing in return. So it is costing about 75 million euros
in annual interest for a bank that took 10 billion euros.
Giuseppe Maraffino, fixed income strategist at Barclays,
said he expects a "moderate and gradual payback" of about 200
billion euros in the first few months of next year.
But banks still have to weigh up the threat that the euro
zone crisis could erupt again and slam the door shut on private
funding options.
"The decision of early repayment will depend on several
things - the situation of the interbank market, the evolution of
the sovereign crisis and also considerations in terms of
deleveraging and long-term funding needs," Maraffino said.
Other analysts expect a smaller repayment, but even if 200
billion euros were paid back it would not cut the amount of
spare funding in the banking system enough to push up the price
of borrowing on open markets.
Reuters calculations show there is roughly 675 billion euros
of "excess liquidity" sitting at euro zone banks.
Analysts say money market rates usually only
start to move once it drops below 200 billion.
Money market prices currently show no major payback of LTRO
money. Traders say interest on an overnight loan in the open
market averages at 0.95 percent, almost no different to the 0.96
percent futures prices quote for doing so in a year's time.

STAGGERED EXIT
Banks would likely see repayments as a badge of honour as
they look to improve their image. But many experts expect an
initial lump of repayments in January, followed by a more
intermittent trickle up until a final big rush of payments.
"For banks where the case is crystal clear and they took the
funding just for insurance, and the insurance wasn't needed,
then they are likely to pay back the money straight away," said
one euro zone central bank official, speaking on condition of
anonymity.
"It is a chance to show their shareholders and the rating
agencies that they are not dependent on central bank funding.
For the rest it will be looked at week by week, probably."
Draghi's promise at the end of July to do "whatever it
takes" to save the euro has bolstered investor confidence in the
euro zone and well regarded banks have used the opportunity to
raise money privately in the past two months, although most
mid-sized banks are still struggling to access markets.
Data on who took LTRO cash is not released by the ECB, but
combing national central bank data shows Spanish and Italian
banks took the lion's share at around 350 billion and 255
billion euros respectively.
Given the country's deepening recession, Spanish banks are
unlikely to pay back large amounts, although the strongest
three, Santander, BBVA and CaixaBank
, could repay some of the combined 80 billion euros
they took to signal they can stand on their own feet.
Barclays' Maraffino says French banks could repay almost
half the 165 billion he estimated they took from the ECB.
Although they never disclosed their amounts, bankers say
that big guns BNP Paribas, SocGen and Credit Agricole
could repay much of the 40 to 80 billion they are estimated to
have taken.
They add that in Italy, UniCredit and Intesa Sanpaolo will
also be mulling the repayment of some of their borrowings,
estimated at 26 billion and 36 billion, respectively.
Banks in Germany are estimated to have taken about 70
billion euros and British and Scandinavian banks took tens of
billions via their euro zone subsidiaries, and some of that
could be repaid, although banks may keep the cash to keep
operations in Spain, Italy or Ireland separately funded.
Some banks, including in Spain and Italy, who used the LTRO
money to load up on high-yielding sovereign debt, may also hold
back from repaying any time soon following Draghi's pledge to
provide potentially unlimited support.
"If you are one of the names with access to the market you
will be thinking of whether you want to repay or start to
stagger your exit," said a source at one of the big European
banks.
"It will start with the national champions and the extent
they are able to execute deals will have a trickle-down effect."
($1 = 0.7651 euros)

(Editing by David Holmes)