Out of the parade of European banks to recently raise cash to repay their governments, Alpha Bank’s rights issue on Monday was never really likely to garner much attention outside of Greece.
In many ways the €986m call is merely a variation on a theme already carried forward by the likes of Unicredit, Société Générale, Swedbank, and BNP Paribas.
This is also part of a process where healthier banks pull away from their weaker competitors, leaving them to wriggle under the political scrutiny that comes with government ownership.
Alpha Bank can repay €940m of preference shares taken out by the Greek government and, like other recent issues, can lift its core tier one ratio above 8 per cent level likely to be demanded by oncoming regulatory reforms.
Investors love this. On Monday the bank’s shares added 5 per cent after the deal hit the tape.
But look past these features and the Alpha Bank issue is more interesting than first appears.
Aside from the usual stuff, one line in the accompanying press release says the rights issue will give Alpha Bank the:
capacity to benefit from lending opportunities at cyclically attractive pricing levels.
For “cyclically attractive pricing levels” read juicy lending spreads. This is a different story to the one behind many of the other bank cash calls.
For Alpha Bank, and others left with sturdy enough balance sheets, now is the time to lend. Wholesale money rates are at record lows, meaning large profits are to be made in commercial and retail business.
Alpha Bank, with its substantial operations in the Balkans, is well positioned for growth as conditions become more benign.
This, as key shareholders were presumably told by management, is not an opportunity that will last forever.
Expect banks which are/have been in a position to repay taxpayers’ cash to follow suit soon.
Related links:
Land of the eternal ATM - FT Alphaville
Société Générale - Lex
