A number of fund managers believed recently that Greek banks had turned the corner and started building positions in the sector. But most of them now looking over their portfolios in disappointment, realizing that there is a massive gap between preparing a proposal that will improve the balance sheets of lenders and implementing it.
At the end of January, fund managers started paying attention to the Greek story and taking a closer look at banks after putting the country on the back burner since 2015 (when lenders were recapitalized)
With bank shares being at historic lows, the Syriza government fully adopting bailout out commitments, the economy being on a growth path for a third year and the prospects of conservatives New Democracy taking office growing, the outlook for Greece was better than ever.
The future was, even more, promising for banks as they sped up the pace of reducing bad loans. Meanwhile, Eurobank unveiled its ambitious "Acceleration Plan" to improve its balance sheet. Above all, however, it was the first time that there were two unconventional plans on the table aimed at helping banks offload their non-performing exposures (NPEs).
The first one had been prepared by the Hellenic Financial Stability Fund (HFSF) and was based on the Italian models and a second proposal had been put together by the Bank of Greece.
The Bank of Greece plan was radical and exceptionally ambitious. Apart from dealing with the bad loan problems, it tackled the issue of deferred tax credits in a proposal that could help lenders return to normal. When presented to investors and the SSM, it was well received.
Then the buying in banks started. The bank index jumped to 415 points on March 1 from 286 points in mid-January. Investors who were going short, betting on a drop in share prices, started losing their sleep.
There were convincing answers to all concerns expressed by investors. Is there a chance that the HFSF plan will not go ahead? No, the banks said. There is the precedent of the Italian model in a plan that is mature and is being prepared for some time now.
Why doesn't the government move ahead with the Bank of Greece plan? Because of political tensions between the central bank and the government. With the change of government these political problems will go away, banks said, and the plan will move ahead.
As a result, there was a jump in bank shares after with the sector's index exceeding 600 points in August. What could go wrong?
What did go wrong
Not only was the summer's positive momentum lost, but bank shares have also lost ground (yesterday the bank index closed at 571 points) and investors that had been picking up stocks since January are concerned and disappointed.
The government may have changed but the Bank of Greece plan remains on the shelf. Why? Because the new Deputy Finance Minister George Zavvos, who oversees the country's financial system, believes that the plan would not be approved by European authorities and did not go to the effort of submitting it to Brussels. At the same time, investors read in the press that the HFSF proposal, dubbed the Hercules plan by the Finance Ministry, may not work as it is excessively based on the Italian model and is too expensive to secure the participation of Greek banks.
Press reports say that the change in government has done little for lenders, that the Bank of Greece is not taking part in talks and that bankers have been left in the dark as the government holds extra ministerial meetings in an attempt to save the day.
For some reason, Greece cannot agree on how to proceed quickly and efficiently in a way to solve the problem. Time is passing and the positive momentum is being lost, as the prospect of a big opportunity being lost grows.
The government is now in scrambling to improve the Hercules plan though fresh talk has emerged that more initiatives are needed to help banks manage their bad loans.