Who’s exposed to Greece? (III)

We’re closing in on the specific banks who are most exposed to potential haircuts on Greek debt — notwithstanding reports of an enlarged aid package for Athens.

As Evolution Securities explained in a note on Wednesday (emphasis theirs):
Fortis, Dexia and SocGen seem to have the highest exposure relative to their tNAV, with 64%, 35% and 14%, respectively. The three Spanish banks (SAN, BBVA and POP), have declared zero exposure. Lloyds and Unicredit have also said their exposure is “marginal”, and CASA [Credit Agricole] less than €0.5bn.

Credit Agricole controls the Greek bank Emporiki as as subsidiary, while SocGen maintains stakes in Greek lenders as well — as we’ve previously noted. Evolution Securities’ analysts continue:
The impacts can be material for some banks, marginal for the sector. We assume three scenarios: 30%, 50% and 70% default (S&P estimates a 30-50% recovery). To this, we add 10% loss on Emporiki’s €24bn loans for CASA. The worst potential impacts are at Fortis (10-24% of our SotP FV), Dexia (5-12%), CASA (7-8%) and SocGen (3-6%). The average impact for the sector is 0.7-1.6%. These impacts could be increased or reduced depending on which side of the CDS trade some banks have chosen – but here the visibility is non-existent.

As Arturo De Frias Marques and his team observe, bank exposure overall is not very visible — the ones that do report numbers tend to have little exposure anyway.

This contrasts with the country-level data provided by BIS, which we’ve covered.

Evolution accordingly describe their workings-out as ‘informed guesswork’, not precise estimates. Still, here is that working-out:
Because we think that in case of a default losses are likely to be much worse for bondholders than for lenders to the Greek private sector, we have first estimated – somewhat arbitrarily – how much of the country exposure might be lending and how much might be government bonds. For banking systems with large international corporate banks (UK, Germany, France, Switzerland), we assume 50/50. For countries with predominant retail component, we have assumed 90% of their exposure is bonds.

This first calculation comes out at about €65bn Greek bond exposure for European banks, but this isn’t the only way to run the numbers.

Evolution then calculate this Greek bond exposure at perhaps €80bn, by taking the 70 per cent of the €298bn Greek debt outstanding and calculating that 40 per cent of this is held by banks. In order to break this down to individual banks:
In a number of cases (including Santander, BBVA, Popular, Lloyds, Intesa, Fortis, or CASA) we have used the exposure declared by the banks. For the rest, we have used a number of inputs, predominantly Annual Reports and 20-F. In the Annual Reports and 20-F filings, banks normally disclose all their country risk above a certain limit, or all their exposures that exceed 10% of their equity. When Greece is not mentioned in these lists, we have assumed the maximum amount below those thresholds. We have done that for example with Barclays and RBS.

And here are the results in chart form. Exposure as a percentage of net asset value on the left, potential losses according to Evo’s SOTP Fair Value measure on the right.