UPDATE 2-Greek banks seen needing 5 bln euros extra capital -sources

Fri Feb 21, 2014 5:37am EST

Related Topics

* Stress test baseline scenario suggests 5 bln euros needed

* Estimate subject to approval by international lenders

* Bank of Greece to release stress test results soon (Adds bankers' comment, share reaction, background)

By George Georgiopoulos

ATHENS, Feb 21 (Reuters) - Greece's four big banks are expected to need about 5 billion euros ($6.9 billion) in extra capital, two senior banking sources said on Friday, the bottom of a wide range of estimates of results from a second stress test by the central bank.

The estimated total, based on figures given by the Bank of Greece to each of the four banks, is subject to approval by the country's "troika" of international lenders - European Union, International Monetary Fund and European Central Bank - overseeing its bailout.

Estimates range from 4.5 billion euros to 15 billion.

The central bank conducted a second health check on the banks - National Bank, Alpha Bank, Piraeus Bank and Eurobank - to assess whether last summer's 28 billion euro recapitalisation has left them capable of absorbing future shocks as bad loans keep rising.

"Each bank was told of its own capital need based on the stress test but subject to final confirmation and approval by the troika," one banker told Reuters, declining to be named.

"The estimate for the total capital need is about 5 billion euros," the banker said, without giving any further details.

Protracted talks with the troika inspectors have delayed the outcome of the tests, which were expected early last month.

The Bank of Greece has held off releasing the results as the troika had not cleared whether the capital needs will be based on a baseline or adverse scenario that assumes two more years of recession, or whether the required capital ratio can be reduced to 8 from 9 percent.

Bank of Greece officials declined to comment, saying only the results would be released soon. Central bank chief George Provopoulos told parliament last month the four big banks would need extra capital but did not specify which ones.

The four banks control about 90 percent of the country's banking market and are majority owned by the Hellenic Financial Stability Fund (HFSF), a bank rescue vehicle funded with 50 billion euros from the country's bailout.

"The central bank gave figures based on the two scenarios but with the disclaimer that it does not have the troika's sign off yet," the second banking source said. "The ballpark figure is around 5 billion, based on the baseline scenario."

Bank shares rose 0.3 percent on the Athens bourse on Friday, slightly underperforming the broader market's 0.51 percent gain.

"If that's the capital need, it is good news, within the range expected by the market and not a negative surprise. About 40 to 50 percent of the total will relate to Eurobank ," a third banker said, declining to be named.

The HFSF bank rescue fund has expressed concerns that lengthy talks with troika inspectors over the health check risked putting off investors looking to take part in the privatisation of No. 3 lender Eurobank.

The long-running row between Athens and the troika over how much extra capital banks need could hamper their ability to lend and help the economy's recovery, National Bank's deputy CEO told Reuters this week.

Eurobank plans to issue about 2 billion euros ($2.74 billion) worth of new shares to boost its capital by March, having become 95 percent-owned by the HFSF after it failed to attract private investors in its recapitalisation last year. (Editing by Louise Ireland)

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