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BOCY, Greek banks on different paths

23/09/2015 06:21
In yet another indication that Cyprus is considered a different case than Greece, investors have pushed Cypriot and Greek banking stocks in different ways.

With the elections in Greece out of the way, the investing community is now focusing on the difficult issues to follow and especially on the recapitalization of the Greek banking system.

Foreign investors who "dared" to undertake sizeable positions in Greek banks during the previous recapitalizations of previous years, are "warning" that if the parameters to be included in the ongoing assessments of the banks are strict, resulting in a relatively high necessary amount to be injected in the banks, they will not participate.

Such a scenario could jeopardize the overall attempt by the international creditors to consolidate the balance sheets of the Greek banks once and for all.

The risks created by these uncertainties lead to the considerable downward pressure on banking shares which after Friday's rally on the last pre-election session, are again experiencing significant losses.

It looks like the drama unfolded during the January elections when a strong rally especially in banking shares before the elections was followed by catastrophic post-election sessions, is being repeated.

The downward pressures being exerted on international stock exchanges seem to complicate the situation even more.

Amid these developments the Athens stock exchange general index is losing 18% from the start of the year but the banking sector is down 75% during the same period.

All of the four systemic Greek banks have suffered severe losses with Bank of Pireaus and Eurobank clobbered by 89% and 82% respectively while Alpha bank and national bank of Greece follow with -70% and -64% respectively.

BOC during the same period experienced a relatively mild fall of 14% in Athex and 13% in CSE while the share of the Hellenic bank lost 28%.

Contrary to the stock market, the bond market sends optimistic signals as Greek bond yields are at the lowest level of the last 10 months with the yield of the 10-year bond standing at 8.035%, indicating that investors believe that with the signing of the new memorandum Greece is on the way to further consolidate its fiscal situation leading to a lower country risk.

Cypriot bond yields are at or close to their lowest levels with the bond expiring in 2020 at 3,219% and the one issued last April and expiring in 2022, at 3,572%.

This is a very favourable development given the Cyprus government's intention to tab international markets by the end of the year.