Saturday, November 7, 2015

Greek Banks - A Good Way To Burn Money!

The Hellenic Financial Stability Fund (HFSF) is the entity which makes recapitalizations of Greek banks when necessary. It does so with funds which it borrows from the European Stability Mechanism (ESM).

The interim financial statement of the HFSF as per March 31, 2015 is something one doesn't see every day: against the 39 BEUR originally lent to the HFSF by the ESM and invested by the HSFS in all Greek banks, there were only 9 BEUR of value left at this date. The rest was 30 BEUR 'accumulated losses'. Accumulated losses represent the decline in the value of the bank investments which the HFSF made. Mind you: this was as per March 31, 2015, i. e. long before the Greek banks really went South.

Below are the numbers for the 4 large Greek banks as of now. The numbers are in BEUR.

HFSF Privates

Cash capital injections since 2010 25,0 11,9
Current value 2,4 1,1

% change -90% -90%

The good news is that the funds which European tax payers invested in the 4 large Greek banks via the HFSF are currently still worth 10% of the original value. It could have come worse if these banks had collapsed when the ECB cut its funding in late June.

The bad news is that those remaining 10% of value will be heaviliy diluted through the recapitalizations which are currently in process. Those recaps could actually become a rather good deal given the fact that the entry price is rather low. In that scenario, current investors could recap some of the losses which they have taken on previous investments.

If, however, these new recaps will not return the 4 banks to prime quality overnight (the possiblity of which I personally exclude), then there is a high chance that we will be looking at similar declines in value in a couple of years when the next recap of these banks becomes necessary.

1 comment:

  1. According to Fitch, the foreseen Greek bank recap is only a first step towards stability.

    Press release: