Greek banks may soon breathe sigh of relief on capital needs
Greek banks are always at the forefront of domestic market developments. Despite the strong rebound of 6.4 percent on Friday, their shares still recorded cumulative losses of 7.8 percent last week and 23.9 percent over the past three months. Concerns about the outcome of the upcoming comprehensive assessment European Central Bank are one of the key factors weighing on investors’ minds.
Apart from increasing political risk and the market’s negative reaction to the government’s initial plan for an early bailout exit, the single most important short-term risk lies with banks’ potential additional capital shortfall.
During the summer, market rumours indicated that additional capital needs could reach 5-6 billion euros. Since then, there have been a number of positive developments, most markedly the legislation on the conversion of the banks’ deferred tax asset (DTA) to tax credit. This could trim their capital shortfall by more than 2 billion euros.
Citing banking sources, Ta Nea daily indicated on Saturday, October 18 that Greek banks capital needs could reach 1.5 billion euros. Moreover, the report noted that for two banks the capital shortfall could be zero or in the order of a few million euros.