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National Bank Of Greece Plans Share Capital Increase (upd)

National Bank of Greece, the country’s largest lender, said late Tuesday it will seek to raise EUR2.8 bil. to boost its capital base.
NBG will proceed to the plan through a pre-emptive equity rights offering in cash, to raise proceeds of EUR631 million, an offering of convertible equity notes by way of pre-emption rights to existing ordinary shareholders of up to EUR1,184 million and a public offering of a minority stake in the share capital of NBG’s Turkish subsidiary, Finansbank.
More specifically, the bank will issue 121.4 million new ordinary shares at a subscription price of EUR5.20 per share and a subscription ratio of one new ordinary share for every five existing ordinary shares. It will also offer convertible equity notes by way of pre-emption rights to existing ordinary shareholders of up to EUR1,184 million by issuing 227.6 million of notes convertible into 227.6 million new ordinary shares of NBG at the ratio of 3 Convertible Equity Notes for every 8 existing ordinary shares.
“Successful completion of both components of the Capital Plan is expected to raise approximately Euro 2.8 billion of additional Core Tier 1 capital representing an increase of Core Tier 1 capital ratio of approximately 380 basis points,” the bank said in a statement.
The bank also said that following the capital increase, it would repay the preference shares the Greek state holds under the Greek liquidity support programme.
“The proposed Capital Plan announced today is testimony to the improving sentiment towards NBG and Greece and should be an important milestone in the country’s adjustment process,” Vasilios Rapanos, Chairman of the Board of Directors of NBG, said.
“Through this landmark proposed Capital Plan, NBG is proactively fortifying its balance sheet as a prudent response to the macro-economic realities in our core market and enhances our strategic options. Our Capital Plan is a conservative and proactive approach to risk and capital management,” Mr. Apostolos Tamvakakis, Chief Executive Officer of NBG, added.
Finance Minister George Papaconstantinou said in statement: “Today΄s announcement from NBG is exceptionally positive, that shows the trust of international investors in the Greek banking system and the wider local economy. We have repeatedly encouraged Greek banks to undertake initiatives to reinforce their positions in the international environment and at the same time assist the local economy.”
No Immediate Plans For M&A
“We don΄t have immediate plans for an M&A transaction. We are not discussing with any other banks,” CEO Apostolos Tamvakakis told analysts in a conference call concerning the bank΄s share capital increase.
“We strongly believe that there is not going to be a default by the Greek state,” he added.
Analysts Welcome Move
UBS says it is abold move that makes a lot of sense while the total amount to be raised is significantly higher than market expectations of EUR1-1.5 bn. The rationale behind the deal is for NBG to strengthen its capital ratios by c400 bp in order to reinforce its balance sheet and improve access to funding markets. Secondarily, the additional capital buffer will provide NBG with strategic flexibility should the environment improve in the medium term.
“We believe that this is strategically the right move for NBG,” it notes.
Goldman Sachs expects key areas of focus to be the adequacy of the new capital buffer to mitigate potential adverse developments in asset quality and sovereign bond markets and to what extent the higher capital buffer will help the bank to improve its funding mix and improve access to commercial funding sources; in other words, reducing reliance on ECB funding.
“We are placing our rating, price target and estimates under review,” it says.
BofA-ML expects Greek peers to underperform short term as while NBG’s announcement may support financial stability in Greece overall, it could also increase pressure on domestic peers to raise capital.

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