-- On Dec. 5, 2012, we lowered our sovereign credit ratings on Greece to
'SD' as a result of the Greek government's invitation to private bondholders
to participate in a series of debt buyback auctions.
-- If the four rated Greek banks participate in the auction, we believe
that they will realize economic losses in their government bond portfolios.
-- We expect that the four Greek banks that we rate will continue to
receive sufficient support from the Hellenic Financial Stability Fund to meet
regulatory capital requirements.
-- We are therefore affirming our 'CCC' long-term and 'C' short-term
ratings on the National Bank of Greece, Eurobank, Piraeus, and Alpha Bank.
-- The negative outlook reflects our view that we might lower the ratings
on the four rated Greek banks if we believed they would default on their
NEW YORK (Standard & Poor's) Dec. 7, 2012--Standard & Poor's Ratings Services
said today that it has affirmed its 'CCC/C' long- and short-term counterparty
credit ratings on four Greek banks, National Bank of Greece S.A. (NBG),
Eurobank Ergasius S.A., Alpha Bank A.E., and Piraeus Bank S.A. We have also
affirmed our 'CC' issue rating on these banks' hybrid securities. The outlook
on the long-term ratings on the four banks is negative.
The affirmation follows our downgrade of the Hellenic Republic (Greece) to
'SD' (selective default) on Dec. 5, 2012. Our downgrade of Greece was based on
the Greek government's Dec. 3, 2012, invitation to private-sector bondholders
to participate in a series of debt buyback auctions. In our opinion, Greece's
invitation constitutes the launch of what we consider to be a distressed debt
restructuring. That said, the buyback is one of the European Council
conditions for disbursal of a further EUR23.8 billion to strengthen Greek banks'
capital positions. Hence, our affirmation reflects our expectation that even
if Greek banks participate in the exchange offer and realize losses on their
government bond portfolios, they will continue to receive capital from the
Hellenic Financial Stability Fund (HSFS) that will enable them to comply with
regulatory requirements. Our ratings affirmation also reflects our expectation
that these banks' liquidity positions are not likely to deteriorate further,
based on the European Council statement that the banks will continue to
receive access to European Central Bank (ECB; AAA/Stable/A-1+) and Greek
Central Bank funding support mechanisms.
We assess the stand-alone credit profile (SACP) for the all four banks at
'CC'. The long-term rating on NBG, Eurobank, Alpha Bank, and Piraeus is two
notches higher than their SACPs, reflecting the uplift for extraordinary
short-term capital and liquidity support provided by the Greek government and
In our view, the HFSF will continue to provide capital to the four rated Greek
banks to allow them to comply with regulatory capital requirements. This
support should offset any potential weakening of solvency that might derive
from the banks' participation in the government debt exchange offer. We
believe the HFSF's commitment is also necessary to offset the large net losses
we expect in 2012 and 2013 as a result of increasing credit provisions on the
domestic loan portfolio. We expect that Greek banks will benefit from access
to extraordinary liquidity, as provided under the support package from the
Greek government and the ECB. The European Council has stated that it will
offer credit enhancement to underpin the quality of collateral. Such support
should allow the banks to maintain eligible collateral for discounting through
the European liquidity support mechanism, including the Emergency Liquidity
Assistance (ELA) set up at the Bank of Greece, even if the relevant ratings on
Greece's sovereign debt are lowered to 'D' (default). We have incorporated
this into our assessment of the banks' creditworthiness.
Our negative outlook on NBG, Piraeus, Alpha Bank, and Eurobank is based on the
possibility that we might lower the ratings if we believed the banks would
default on their obligations, as defined by our criteria. We might lower the
ratings on the four banks if their access to the EU's extraordinary liquidity
support mechanisms, including the ELA discount facility at the ECB, became
impaired for any reason. This support currently underpins the banks' capacity
to meet their financing requirements. In this context, despite a somewhat mild
recovery in recent months, we believe the pressure on Greek banks' retail
funding base may lead to further deposit outflows, given the ongoing
recession. This could, in our opinion, increase the banks' need for additional
extraordinary liquidity support from the EU authorities.
We might also lower the ratings if we believed the banks were likely to
default as a result of any developments associated with a substantial
impairment of their solvency. This could happen if, for any reason, the banks
were unable to access external capital support, or if we considered such
support insufficient to allow the banks to continue meeting regulatory capital
requirements, mainly as a result of potential recognition of continued large
impairments on loans.
RATINGS SCORE SNAPSHOT
Piraeus, NBG, Eurobank, Alpha
Issuer Credit Rating CCC/Negative/C
Business Position Adequate (0)
Capital and Earnings Very weak (-2)
Risk Position Weak (-2)
Funding and Liquidity Average and very weak (-5)
GRE Support 0
Group Support 0
Sovereign Support 0
Short-Term Extraordinary Support +2
Additional Factors 0