No end seen to local credit crunch yet

 Return to normal conditions may take longer than many businesspeople and other professionals think

By Dimitris Kontogiannis

The core Greek banks have strengthened their balance sheets by proceeding with sizable share capital increases to meet the capital shortfalls identified in stress tests conducted by the Bank of Greece in cooperation with BlackRock. But businessmen and others expecting bank credit to quickly start flowing back to the private sector are bound to be disappointed. The return to normal credit conditions will likely be slow and may take longer than many businessmen and other professionals think.

National Bank is the latest among the country’s big four credit institutions to secure 2.5 billion euros and satisfy the capital needs identified by the Greek central bank’s stress tests last February. Eurobank has successfully raised 2.8 billion in a share capital increase while Piraeus Bank and Alpha Bank raised 1.7 billion euros and 1.2 billion euros respectively. Alpha used 940 million euros to redeem its preference shares held by the state.

The four banks raised more than 8 billion euros in total in share offerings in a relatively short period of time.

Under the base scenario of the stress tests, Eurobank’s capital shortfall was estimated at around 2.9 billion euros, National Bank’s at around 2.2 billion, Piraeus’s at 425 million and Alpha’s at about 400 million euros. The total bill for the banking sector, including non-systemic Attica Bank and Panellinia Bank, amounted to about 6.4 billion euros.

Readers are reminded that the base scenario in the Greek central bank/BlackRock stress tests projected a contraction of the gross domestic product to the tune of 4.2 percent in 2013, a modest recovery of 0.6...