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Bond swap hammers Greek banks

By Nicholas Paphitis

Associated Press

Published: Friday, April 20 2012 2:00 p.m. MDT

Pedestrians pass outside the National Bank of Greece headquarters in Athens, Friday, April 20, 2012. Greek banks will publish their annual reports later Friday, which are expected to include severe losses resulting from their participation in the country's massive private debt writedown earlier this year.

Thanassis Stavrakis, Associated Press

ATHENS, Greece — Four major Greek banks on Friday announced combined losses of €28 billion ($36.9 billion) in 2011, hammered by a recent bond-swap deal between Greece and with private creditors that leaves local lenders in pressing need of promised bailout money.

Although the debt restructuring occurred this year, Greece's National Bank, Alpha Bank, Eurobank and Piraeus Bank incorporated the losses into last year's results.

Hardest hit was National Bank, the largest Greek lender by assets, which said it had suffered an operating loss of €289 million ($381.25 million) last year, but a total loss of €12.3 billion ($16.23 billion) when including the damage from the debt swap.

"It is clear that the Greek banking system is suffering the consequences of the fiscal crisis," NBG's CEO Apostolos Tamvakakis said in a statement.

"It faces losses that amount to tens of billions of euros, mainly because of the debt exchange for Greek government bonds, and relatively smaller sums ... from anticipated future losses in banks' loan portfolios."

The other three lenders announced corresponding losses of €5.5 billion ($7.26 billion) for Eurobank, €3.8 billion ($5 billion) for Alpha Bank, and €6.3 billion ($8.31 billion) for Piraeus Bank.

Under the landmark deal, some €105 billion ($138.52 billion) off Greece's €368 billion ($485.47 billion) total debt load will be erased, with banks and other private lenders agreeing to trade in old bonds for new ones that have better repayment terms for the crisis-hit country.

The agreement was vital for Greece to escape default and continue to receive rescue loans from other eurozone countries and the International Monetary Fund, as well as assistance for its cash-depleted banks.

Earlier Friday, Prime Minister Lucas Papademos said had Greece has received the first €25 billion ($32.72 billion) in European funds to bolster its banks.

Papademos said the funding from the European Financial Stability Facility would balance the massive bond-swap losses, as the country stands to draw a total €50 billion ($66 billion) from the EFSF for its banks.

"Without this capital support, the orderly functioning of the (Greek) banking system could not be guaranteed," Papademos told a business conference.

But he added: "If the banks want a capital boost from the state they must increase the funds made available to businesses, especially small businesses."