Political uncertainty on the rise as bailout review hits delays
A delay in second program review, combined with the complex political situation in Greece, electoral calendar in Europe and lack of consensus on Greek debt sustainability among its cred itors have contributed to volatility and widening of Greek spreads. Greek 10yr bond yields increased >50 bp after briefly falling below 7% in Jan; Greek banks’ shares fell by up to 20% in this period and now stand c.17%-43% below their 2015 recap levels.
Greek banks prepared to withstand near-term headwinds…
The widening of sovereign yields in the near term has limited impact on banks’ capital given their GGB holdings stand at a modest €5.5 bn (<2% of total assets). Widening of spreads since the start of the year implies a modest €70 mn MtM loss (<5 bp of CET1) and notably follows a gain (c.€210 mn) expected on the back of spread contraction (>130 bp) in 4Q16.