December 7, 2012 / 5:26 PM / 5 years ago

TEXT - S&P affirms 'CCC/C' ratings on Greek banks

-- 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 
EU authorities. 

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.

Piraeus, NBG, Eurobank, Alpha
Issuer Credit Rating                          CCC/Negative/C

SACP                                          cc
 Anchor                                       b+
 Business Position                            Adequate (0)
 Capital and Earnings                         Very weak (-2)
 Risk Position                                Weak (-2)
 Funding and Liquidity                        Average and very weak (-5) 

Support                                        0
 GRE Support                                   0
 Group Support                                 0
 Sovereign Support                             0
 Short-Term Extraordinary Support +2

Additional Factors                             0
0 : 0
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