Greece's fourth-largest lender Piraeus Bank (BOPr.AT) on Monday won shareholder approval to issue new shares and convertible bonds and give its balance sheet a 1.05 billion euro ($1.4 billion) boost. The green light for the cash call, clinched at a second repeat shareholders meeting requiring quorum of 20 percent, will help the bank ease counterparty worries and regain access to wholesale funding, reducing its dependence on the ECB. "We are shielding our balance sheet from any possible risks," the bank's Chairman Michael Sallas told shareholders, noting that 2011 would be a difficult year. He said the terms of the rights issue would be announced by the board on Jan. 3.
Quorum at Monday's shareholder meeting reached 36.5 percent, after the bank failed to gather enough shareholders for a vote at two previous meetings over the past four weeks. "The recession has led to a significant rise in non-performing loans but the banking system has shown resilience as it had a relatively low leverage. Banks endured the crisis and are now strengthening their capital to help the economy even more," Sallas said. With the macroeconomic backdrop seen tough in 2011 as the economy enters its third straight year of recession and liquidity still challenging, Greek lenders have opted for cash calls to be in a better position to cope with the downturn. A similar exercise by Greece's largest bank NBG (NBGr.AT) in October, when it raised 1.8 billion euros, helped it to pry open the interbank funding market and establish credit lines with foreign lenders.
ECB funding to Greek banks has almost doubled this year to 95 billion euros at the end of November. At the same time, the banking system has also suffered 27 billion euros in deposit outflows, an 11 percent contraction. The economic downturn at home, brought about by belt-tightening to dig out of a debt crisis that shook the euro, has led to a rise in impaired credit to about 10 percent of system loans at the end of the third quarter.
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