Piraeus debacle stokes fears of intervention

By:
Dominic O’Neill
Published on:

CEO resigns after capital raising; NBG sale fails to lift spirits.

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"We made our investment with the understanding that Mr Anthimos Thomopoulos would remain as CEO," said Paulson, in a letter 

Investors who bought into Greek banks’ third capital raising in as many years last November may be regretting their confidence already. Less than two months after asking investors for another €1.6 billion in equity, Piraeus Bank, one of the biggest lenders, announced the unexpected and apparently unwelcome resignation of its CEO Anthimos Thomopoulos

Issuing just a four-line statement, the bank left the market guessing the reasons for Thomopoulos’ resignation, doing nothing to dispel fears for the worst, including influence from the country’s year-old anti-austerity ruling party, Syriza.

Shortly before the news broke, US hedge fund Paulson & Co had pressed state-financed bailout fund, the Hellenic Financial Stability Fund, to deny rumours that it had asked Thomopoulos to resign. 

"We made our investment with the understanding that Mr Anthimos Thomopoulos would remain as CEO," said Paulson, in a letter copied to the prime minister and central bank, and seen by Euromoney. Thomopoulos was "highly capable of leading Piraeus Bank", said Paulson, Piraeus’s largest private shareholder, with over 9% of voting rights.

Handling

The HFSF satisfied Paulson’s demand in a press release denying Fit had asked Thomopoulos to resign, the day before the bank announced his resignation. But the Greek government’s populist rhetoric and continued brinkmanship with creditors – including over the terms of a new foreclosure law, just as the bookrunners were launching the capital raising – has raised concern about its handling of the financial sector.

The foreclosure law is of particular importance to Piraeus, which has an especially large portfolio of overdue SME loans, many backed by businessmen’s homes, says Alex Boulougouris, banks analyst at Wood & Co in Athens. Indeed, of all the four Greek banks raising equity in the market late last year, Piraeus had the hardest job, and its books were open for longest, around two weeks. 

Piraeus’ greater difficulties raising capital may have been less due to a botched process than an unexpectedly high capital shortfall calculated by the ECB in stress tests published in October, higher than any other Greek bank. It had to raise more than twice as much as Alpha Bank or Eurobank. The capital shortfall at National Bank of Greece was disproportionately large too, although it had the benefit of an imminent sale of just under 100% in a crown jewel banking asset. 

In late December, Qatar National Bank agreed to pay €2.75 billion (roughly equal to book value) for NBG’s Turkish subsidiary. QNB further agreed to take $910 million of subordinated debt issued by Finansbank to NBG. 

"As a result of this transaction, NBG will be the best capitalised and the most liquid bank in Greece," said chief executive Leonidas Fragkiadakis. 

The events at Piraeus, however, put a dampener on celebrations around NBG. The oldest and biggest bank in the country, NBG has traditionally been the national champion. But since the sovereign debt crisis, Piraeus has overtaken Alpha Bank and Eurobank, acquiring the Greek operations of Cypriot banks and Société Générale, as well as the performing half of formerly state-owned Agricultural Bank, after the latter was split into good and bad banks.

Thomopoulos arrived once this expansion had begun, but it continued under him. 

"The plan was to bet on a Greek recovery," says Dimitris Giannoulis, equity analyst at ResearchGreece. The early 2015 election victory of Syriza and the attendant political and financial turmoil was not widely predicted, he argues. Thomopoulos’ resignation "had nothing to do with the abilities of the CEO," he says.

Some wonder if the need for more scarce state funds at Piraeus demanded a scapegoat. While the sale of Finansbank should allow NBG to repay the HFSF quite rapidly, Piraeus was the only other bank to have to ask for state aid last year, after Alpha and Eurobank covered the stress test’s adverse case scenario with private money. 

Blame

"Someone had to take the blame, and it ended up being the CEO," muses Giannoulis. Others wonder if Thomopoulos, who is known for his self-assured character, might have ruffled feathers by portraying himself in the media as a saviour of the bank and being embarrassingly over-confident about its ability to pull off the capital raising. 

One theory is that discussion during the bookbuilding of splitting Piraeus into a good and bad bank had raised hackles. Such contingency planning was inevitable, as the books stayed open for longer, says Boulougouris, as the bank would have had to enter a state-directed resolution procedure had it not covered the ECB’s base-case scenario with private funds.

One day

As the rumours swirled around his position in mid-January, Thomopoulos told Bloomberg his relationship with Piraeus’s chairman Michalis Sallas was not an issue and that he remained CEO. The next day, he was out.

Meanwhile, Sallas, who bought the bank alongside his business partners from the state in the 1990s, remains in place. After hiring Egon Zehnder to look for a long-term successor to Thomopoulos, Piraeus named senior insider Stavros Lekkakos as interim CEO.