Investors Flee Greece - Says Helmut Studer in Liectenstein

Bendern, Liechtenstein, January 29, 2015 (Newswire.com) - A freefall in shares of Greece’s major lenders is raising concerns about the country’s banking system, as investors increasingly turn wary of the Syriza party’s anti-austerity agenda.

Each of Greece’s four main banks lost about a quarter of their market value on the Athens stock market Wednesday – their worst one-day performance on record – on top of losses totalling about 20 per cent over Monday and Tuesday.

Syriza swept to power this week, promising anti-austerity measures that could lead to a clash with the European Central Bank and European Union over Greece’s debts. Investors are clearly nervous, pushing up yields on Greek bonds sharply this week and dumping bank shares – a reminder of three years ago, when Greece was on the verge of leaving the euro zone and bank deposits were vanishing at an alarming rate.

The biggest loser Wednesday was Piraeus Bank, which fell 29.2 per cent, taking its one-week loss to an astounding 43 per cent. Eurobank, which is partly owned by Prem Watsa’s Fairfax Financial Holdings Ltd. and Brookfield Asset Management Inc., both of Toronto, fell 26 per cent, for a one-week loss of 37 per cent.

“The bank massacre reflected near panic selling triggered by fear of a bank run and the potential shut-off of emergency funding from the European Central Bank if Greece’s bailout program is not extended beyond March,” explained Michel Rodrigues, a Senior Portfolio Specialist at Helmut Studer in Liechtenstein. “With the deposit ‘walk’ threatening to turn into a ‘run,’ the banks recently applied for emergency liquidity from the ECB,” Rodrigues added.

As of Tuesday, the banks had not used the short-term ECB loans but that may have changed on Wednesday, when Moody’s estimated that deposits declined by as much as €8-billion since December. “That’s equivalent to almost 5 per cent of the total deposit base,” said Rodrigues. “Bankers said the money wasn’t leaving the country; it was being withdrawn and stashed in customers’ homes.”

“Should the continuation of the bailout program for Greece be questioned, this could already threaten monetary financing,” said Sandra Dean of Helmut Studer, an independent financial advisory company based in the heart of Europe. “This would have fatal consequences for the Greek financial system. The Greek banks would then lose their access to money from the central bank,” she added.

Standard & Poor’s on Wednesday cited the deposit outflow, plus the Syrzia government’s potential clash with its bailout masters, for its decision to put Greece’s credit rating, already in junk territory, on “negative” watch.

“Greece’s banks are not in imminent danger of collapse. The entire industry has been consolidated and recapitalized – Eurobank alone raised €2.9-billion in new capital from investors last year. But a deposit run and a deadlock in the austerity and debt negotiations with the ECB and the European Union, should it occur, would prove highly damaging to the banks,” Ms. Dean explained.

Syriza scored a overwhelming win in Sunday’s snap election, putting the pro-austerity New Democracy party into opposition. Syriza Leader Alexis Tsipras was sworn in Monday as Prime Minister and formed a coalition with a small, right-wing anti-austerity party. On Wednesday, the new government held its first cabinet meeting, one that sent out both provocative and soothing signals.

While Mr. Tsipras insisted that the government would not seek a “mutual destructive clash” with its international creditors, which includes the International Monetary Fund, he said the government cannot disappoint the voters who supported Syriza’s anti-austerity platform. “We are coming in to change radically the way that policies and administration are conducted in this country,” he said.

Mr. Tsipras’s team gave a powerful hint of its future economic direction by cancelling plans to privatize the government stakes in two big companies, the Piraeus Port Authority and the Public Power Corporation. Piraeus Port, one of the biggest harbours in the Mediterranean, had lined up four suitors, among them China’s Cosco Group.

Germany, the biggest single sponsor of the EU portion of Greece’s €240-billion ($352-billion) in bailout loans, was not happy with the decision, all the more so since the previous government, under prime minister Antonis Samaras, has made privatization commitments. German economy minister Sigmar Gabriel said “Citizens of other euro states have a right to see that the deals linked to their acts of solidarity are upheld.”

The election of Syriza has triggered debates across Europe on the pros and cons of austerity. “It’s obviously a difficult time for Greek investors. In the build up to this election, due to the uncertainty of the outcome, many of our Greek clients were selling their local assets and doing everything possible to invest elsewhere. It seems the general consensus among Greek investors is that until the situation becomes more clear, investing in countries throughout Europe and also in the United States is a much safer option,” concluded Michel Rodrigues.

Helmut Studer is an independent financial advisory company based in Liechtenstein. Founded in 2006, Helmut Studer services private and institutional clients in 54 different countries spanning 6 continents.