FRANKFURT (MNI) – Standard and Poor’s has downgraded four Greek
banks to B+ on Thursday and has kept all the ratings on “watch
negative”.

The following is the first part of a verbatim text of the press
release, detailing the reasons for the individual downgrades:

Four Greek Banks Downgraded To ‘B+’ After Greece Downgrade And
BICRA Review; All Ratings Still On Watch Negative

* On March 29, 2011, we lowered our longterm sovereign credit
rating on Greece to ‘BB-‘ from ‘BB+’ and maintained it on
CreditWatch negative. At the same time, we placed our ‘B’
short-term sovereign credit rating on Greece on CreditWatch
negative.
* We now believe that Greece’s financial system faces a greater
deterioration in the operating and economic environment ahead and
an increased likelihood of a government debt restructuring.
* We are lowering our long-term counterparty credit ratings to ‘B+’
on the four Greek banks that we rate–National Bank of Greece, EFG
Eurobank Ergasias, Alpha Bank, and Piraeus Bank. Our ‘B’
short-term counterparty credit ratings on these banks are
unchanged. All ratings remain on CreditWatch negative, with the
exception of our ‘CCC-‘ ratings on the banks’ junior subordinated
notes and preference stock.
* The negative CreditWatch implications reflect those on the
sovereign ratings, as well as our opinion of the vulnerability of
the banks’ financials to the negative operating environment in
Greece.

MADRID (Standard & Poor’s) March 31, 2011–Standard & Poor’s
Ratings Services said today that it has lowered its long-term
counterparty credit rating on National Bank of Greece S.A. (NBG) to ‘B+’
from ‘BB+’ and its long-term counterparty credit rating on NBG’s
strategically important Bulgarian subsidiary, United Bulgarian Bank A.D.
(UBB), to ‘B+’ from ‘BB’.

In addition, Standard & Poor’s has lowered its long-term
counterparty credit ratings to ‘B+’ from ‘BB’ on the other three Greek
banks it rates–EFG Eurobank Ergasias S.A. (EFG), Alpha Bank A.E.
(Alpha), and Piraeus Bank S.A. (Piraeus).

All of the ‘B+’ long-term and ‘B’ short-term counterparty credit
ratings on the Greek banks and UBB remain on CreditWatch with negative
implications, where they were placed on Dec. 3, 2010, with the exception
of our ‘CCC-‘ ratings on the banks’ hybrids.

These rating actions follow our recent two-notch downgrade of
Greece (Hellenic Republic, BB-/Watch Neg/B) and the revision of our
Banking Industry Country Risk Assessment (BICRA) for Greece to Group 7
from Group 5 (see our related article “Greece BICRA Changed To Group 7
From Group 5 On Higher Economic and Industry Risks” published today). In
this context, our rating actions on the individual banks primarily
reflect our view of:

* The ongoing deterioration of the economic and operating
environment in Greece, which we believe is likely to weaken the
business and financial profiles of the four Greek banks we rate;
* Further asset quality deterioration in the banks’ domestic loan
books, on the back of a more adverse economic environment in
Greece than we had previously incorporated into our ratings;
* The overall declining profitability we anticipate, mainly due to
pressured revenue generation and growing impairment charges;
* The banks’ high exposure to the Greek government’s weakening
creditworthiness, through their large portfolios of Greek
government debt, which we estimate represent 90%-220% of total
adjusted capital (TAC) for the four Greek banks (with Alpha having
the lowest exposure). In our opinion, these large government debt
portfolios expose the banks to the increasing likelihood of a
government debt restructuring; and * The sensitivity of the Greek
banks’ deposit bases to perceived or real pressures in Greece’s
sovereign creditworthiness, which may trigger renewed pressures on
the banks’ domestic retail funding due to potentially sizable
outflows of deposits.

Our ratings on the Greek banks incorporate our view that the Greek
authorities–in the EU framework–are “supportive” of the country’s
financial system. Consequently, our assessment of the stand-alone credit
profiles (SACPs) of Greek institutions takes into account what we
consider to be the benefits of being a bank in a regulated and
supervised environment, with access to extraordinary liquidity, such as
that provided under the Greek government’s support package and by the
European Central Bank.

NBG

The lowering of our long-term rating on NBG primarily reflects our
view of the heightened economic and industry risks in NBG’s home banking
market, posed by developments in Greece’s sovereign creditworthiness.
Our ratings on NBG reflect our opinion of NBG’s funding imbalances,
which increased rapidly in 2010; higher credit risk with respect to
Western European standards; and weakening financial and asset quality
performance. The ratings are supported by our view of NBG’s dominant
position in the Greek market and its increased geographic
diversification.

We lowered our long-term rating on NBG in line with that on the
other Greek banks we rate given that the deterioration we have observed
in NBG’s financial profile has, in our view, been broadly in line with
that of its peers, whereas we previously incorporated into our rating
greater resilience than that of peers. Specifically, we have seen NBG’s
asset quality deteriorate quickly and funding imbalances accumulate on
its balance sheet. We anticipate continued growth in NBG’s problem
assets in 2011, mainly driven by faster deterioration in the bank’s
domestic loan book. In our opinion, by year-end 2011, problem assets
(which include problem loans past due by more than 90 days, before
write-offs) could reach about 15% of the bank’s consolidated loan book.
We have factored into our ratings on NBG our belief that the bank will
likely maintain positive, though very moderate, consolidated operating
profitability in 2011, mainly benefitting from positive results at its
foreign subsidiaries–particularly at Turkish subsidiary Finansbank (not
rated)–offsetting negative performance in Greece. We regard positively
NBG’s successful rights issue a few months ago, which boosted
capitalization materially. We estimate a total risk-adjusted capital
(RAC) ratio before diversification of 8.2% at year-end 2010. This ratio
is below the regulatory measures, however, owing to the higher weighting
that we assign under our RAC framework to some of NBG’s loan portfolios,
and because we exclude from our calculation of adjusted total equity
(ATE) all hybrid instruments with a 12-month look-back period issued by
banks in the speculative-grade rating category. For NBG, this means that
about 910 million in hybrids are not eligible to be included in our ATE
calculation. Despite the enhancement in 2010, we still believe that
NBG’s solvency does not immunize the bank from what we see as heightened
risks related to Greece’s economic and operating environment.

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