The Hellenic Financial Stability Fund (HFSF) has secured the agreement of the Ministry of Finance for the implementation of the Fund's strategy of divestment from banks. According to Business Daily, the HFSF sent the final text of the disinvestment strategy, which includes the steps and procedures for the sale of the bank shares it holds in its portfolio, to the ministry in the past few days, with the Ministry of Finance, after reviewing the framework, giving the green light for its implementation. It is noted that the disinvestment process was elaborated by Rothschild on behalf of the HFSF.
This is a key development for the banking system, as the sale of the bank shares held by the HFSF will achieve the weaning of the banks from the State after more than ten years. It is recalled that the HFSF acquired more than 80% stakes in systemic banks in 2013 in the context of the first recapitalization that followed the "haircut" of government bonds, with the PSI causing losses of 37.7 billion euros to the domestic banking system.
The return of banks to private hands will seal the total return of banks to normality and the end of the great banking crisis fuelled by the 2010 public sector failure and the subsequent explosion of non-performing loans.
In the coming days, the disinvestment strategy will be passed by the board and other bodies of the HFSF and in January the process of selling the fund's bank shares is expected to officially begin, with the selection of a consultant to run the process. It is noted that there has been strong investor interest in the Fund's shares for several months and many foreign investors have approached the HFSF seeking additional data and information.
It is noted that at the investment conference held in London last November, the Prime Minister's Chief Economic Advisor, Alexis Patelis, had stated: "There is also a lot of interest in the purchase of the shares of the banks to be made available by the HFSF. The sale of the shares will proceed soon, once the disinvestment strategy is approved."
The initiation of the process with the selection of an advisor will strengthen the government's positive image ahead of the elections, send a strong message to the investment community that reforms are continuing as planned while the return of the banks to private hands will have a positive impact on both the stock market and the effort to regain investment grade status.
The next steps
As far as the process is concerned, although the government wants to take advantage of the strong interest and momentum that has been created for the sector and move quickly with strong investment portfolios that have expressed interest - it is notable that Saudi Arabia's state investment arm Public Investment Fund (PIF) has expressed interest in acquiring 20% of National Bank and ION Group has submitted a proposal to the HFSF to acquire 20% of Piraeus Bank shares -, however, the HFSF is obliged by the legal framework to follow open competitive procedures.
Thus, although there are suggestions to give priority to investors who have expressed interest, it is certain that either at the beginning or at the end of the process there will be an open procedure. However, priority to investors and open procedures cannot work at the same time and there is no investor who will discuss meaningful and numerical discussions when the HFSF will then have to look for more competitive offers. Thus, as analysts believe, the competitive process is most likely to take place at the beginning of the project.
Having tackled the big problem of non-performing loans and benefiting from the strong growth of the Greek economy, domestic banks have dynamically returned to the forefront of investment interest. It is noteworthy that despite the turbulence and high volatility caused by the war in Ukraine in the markets, the index of bank shares since the beginning of the year has risen +10% (compared to +2.7% of the General Index), while financials show losses of -7.7% and -14.3% in Europe and the US respectively.
In any case, the government's aim is to run the relevant procedures as quickly as possible, although the relevant law requires quite lengthy steps and procedures and it is estimated that several months will be required from the start of the sale process to the completion of the transactions.
It is recalled that the HFSF controls 40.39% of the shares of National Bank, a stake with a current value of €1.37 billion, 27% of Piraeus Bank with a current value of €463 million, 9% of Alpha Bank with a current value of €211 million and 1.4% of Eurobank with a current value of €54 million. The current value of the HFSF's shares in the four systemic banks amounts to EUR 2.1 billion.
The HFSF will follow different divestment tactics from each bank depending on its shareholding. It will follow a different strategy for the sale of 40% of National Bank and another for the 1.4% of Eurobank. Depending on the circumstances, the HFSF may dispose of the bank shares it holds through an accelerated book building process, a full-market offering or a dribble-out.