scorecardresearch
Europe's bankers press pause, not panic over Greece

Europe's bankers press pause, not panic over Greece

"Anything for this week, people will hold back. But it is holding back, rather than cancelling," said a banker working on stock market flotations in London.

Pensioners, hoping to get their pensions, wait outside a National Bank branch in Iraklio on the island of Crete, Greece June 29, 2015. Pensioners, hoping to get their pensions, wait outside a National Bank branch in Iraklio on the island of Crete, Greece June 29, 2015.

Greece's deepening debt crisis prompted bankers to pause, not panic, on Monday, and though markets dropped sharply they held above previous crisis lows.

Euro zone stocks remained well ahead of where they were at the start of the year before the European Central Bank (ECB) started printing money, and while government borrowing costs shot up in Europe's indebted southern countries - Italy, Spain and Portugal - they remained well below the heights scaled at the peak of the crisis in 2011/2012.

"I'm firmly convinced that we will not see an unraveling of the European integration," Axel Weber, chairman of UBS and ex ECB board member told a Swiss banking conference in Bern.

"People all feel that there will be a rational solution. If I look at Europe, rational solutions always take a long time to come around. Usually in Europe these rational solutions aren't found until two minutes before the Asian market opens."

A clutch of German firms including real estate company Ado Properties and specialist lender PBB put their stock market debuts on ice after Greece inched closer to a default - but said they hoped to re-launch them later.

"Anything for this week, people will hold back. But it is holding back, rather than cancelling," said a banker working on stock market flotations in London.

DELAYED IMPACT?

Initial public offerings (IPOs) of Spanish cable company Euskaltel and Swedish healthcare provider Capio were proceeding as planned after winning strong orders last week.

But one investor said bad news from Greece could start to have an impact.

"I'm still attending a meeting this week for another IPO so roadshows are still going ahead," said Neil Wilkinson, European equities manager for Royal London Asset Management.

"I think it depends how long we keep getting hit by negative headlines hour after hour though as that's the kind of environment when you will start to see people sitting on their hands and companies will struggle to get away, irrespective of the quality of the company or the specific deal pricing."

Bankers advising companies on acquisitions said live deals were progressing despite the uncertainty because Greece constituted such a small part of the wider euro zone.

Belgian grocer Delhaize, which has 308 stories in Greece , was not immediately available to comment about whether the situation in the country could affect the pricing of its 25 billion euro merger with Dutch grocer Ahold.

Ahold was not immediately available to comment.

Delhaize told Reuters separately that sales have increased in Greece since the start of the year adding there were no supply issues and customers could still pay by cash or card.

Other deals at an earlier stage of planning are likely to be shelved as corporate boards wait and see what happens with Greece.

"The decision-makers will have to decide if they are comfortable taking on increased volatility, from the uncertainty of how a Grexit will play itself out," said Luca Ferrari, co-head of European corporate advisory at investment bank Greenhill.

Reflecting the uncertainty, companies and banks have halted the sale of new bonds in Europe due to the Greek crisis.

"We're not going to put anyone in the market right now and all the deals that are stuck in the pipeline are going to stay stuck for now," said one banker who arranges such sales.

CHINESE BUYERS

Europe's banks have been at pains to distance themselves from the current turmoil in Greece, having sold businesses there and scaled back their Greek assets over the past four years.

But shares in major European lenders still stumbled towards their biggest daily fall for four years on Monday amid concerns Greece's problems could deepen and spread to other parts of the currency bloc.

By 1330 GMT the Stoxx Europe 600 banks index .SX7P was down 3 percent. The move reversed gains made last week, when there was increased optimism Greece would resolve its problems.

In south-eastern Europe, regional central banks said they had, in effect, quarantined the subsidiaries of Greek banks, cordoning off their capital from their parents so they could not be rocked by the turbulence in Greece.

Millions of people in ex-Communist Bulgaria, Macedonia, Albania, Serbia and Romania have deposits in banks owned by Greek lenders, putting this corner of south-eastern Europe in the frontline if there is contagion from the Greek crisis.

For some investors, Greece's woes could represent a buying opportunity.

Chinese state-run banks, stock brokers and privately owned investment companies have been looking for acquisitions in some of the struggling euro zone economies but they may be reluctant to buy into Greece just yet.

"In the last euro crisis, China actively sought investments in Portugal and Spain as fundamentally those economies had better chances of recovery. Greece is different," said Viral Gathani, head of  energy, natural resources and infrastructure at CIMB Investment Banking in Hong Kong.

"Also, from a geo-political standpoint and perhaps in contrast to others, it is not in China's interest to support Greece and therefore risk antagonizing the euro zone economies - any decision they make will be based on an investment returns analysis."

(Additional reporting by Jonthan Gould and Alexander Huebner in Frankfurt, Robert-Jan Bartunek in Brussels, Pamela Barbaglia and Sinead Cruise in London, Helene Durand for IFR in London and Lisa Jucca and Denny Thomas in Hong Kong)

(Reuters)