BANKS ARE GETTING INCREASINGLY CHEAPER ON THE EUROPEAN STOCK EXCHANGES Greece - the biggest decline

• Shares of ATEbank lost 31% on the Athens Stock Exchange

In July, on the Athens Stock Exchange, shares of Agricultural Bank of Greece (ATEbank) saw the steepest drop among the Greek banks which have branches in Romania (31.81%), to 0.15 Euros/share.

The announcement that ATEbank would be sold caused its stock to rise to 0.20 Euros/share, but not for long. Just a few days later, the shares fell to 0.15 Euros/share, after the Greek press wrote that the recapitalization of the four major Greek banks (including Piraeus Bank, the buyer of ATEbank) would be delayed by at least three months, from the initial deadline, which had been set for September.

George Provopoulos, the governor of the Greek Central Bank, recently said that the sale of ATEbank to PiraeusBank was necessary, because the former was no longer viable, and it needed a share capital increase to remain operational.

Last week, the viable assets of ATEbank (including ATEbank Romania) were taken over by Piraeus Bank, as a last resort to keep the bank operational, after ATEbank failed the stress tests last year. The Greek Central Bank announced that the toxic assets of ATEbank will be taken over by the Greek Financial Stability Fund (HFSF), whereas some will become the property of the Greek state.

After the acquisition of ATEbank, the shares of Piraeus Bank rose 15%. But over the course of a week, the shares fell 13.63%, amid information that Michalis Sallas, the CEO of Piraeus Bank, and his family bought shares in Piraeus Bank using over 100 million Euros, borrowed from a rival bank, without announcing the acquisition to the Stock Exchange.

Overall, in July, the shares of the Greek bank fell 12%, to 0.22 Euros/share.

A smaller drop was seen by the shares of National Bank of Greece (which owns Banca Românească in Romania), of about 10%, down 1.27 Euros/share, and the shares of Eurobank (which controls Bancpost in Romania) fell 6.94%, to 0.67 Euros/share.

Eurobank shares fell from 0.66 Euros/share, to 0.58 Euros/share, after the bank announced it would spin itself off from the EFG group. The EFG Group transferred 43.55% of the shares of Eurobank to nine younger members of the Latsis family (the main shareholder of the lender) and to the John S. Latsis Foundation. In doing so, Eurobank has made it its goal to maintain its profile as a private lender, given the recapitalization requirements imposed by the European authorities.

Out of the Greek banks which are present in our banking system, which did not see the depreciation on the Athens Stock Exchange, we have Alpha Bank, which rose 5%, to 1.26 Euros/share.

At the end of July, the bank announced that it has submitted a bid for Emporiki Bank, which had been put up for sale by Credit Agricole, which is trying to reduce its exposure to the Greek bank due to concerns that Greece may exit the Eurozone.

• Shares of Austrian banks, a fall of up to 7%

Whereas Greek banks fell by up to 31%, the shares of Austrian lenders, depreciated by approximately 7%.

In July, shares of Erste Bank fell 7.23%, to 14.35 Euros/share.

The cut of the subordinated debt rating by ratings firm "Standard&Poor's" from "A-" to "BBB", led to the drop in the share price of Erste Bank from 14.17 to 13.86 Euros/share.

In the first half of year, Erste Bank reported a net profit of 453 million Euros, down 13% YOY, with the result being influenced by the losses booked by its Romanian and Hungarian subsidiaries.

On the day of the earnings report, the bank's stock closed at 14.73 Euros/share, down from 15.27 Euros/share.

Andreas Treichl, CEO Erste Bank, last week said that the bank had no plans to repay this year the state aid of 1.2 billion Euros it received from Austria in 2008-2009, and will await the improvement of the regulatory environment before doing that.

The shares of Raiffeisen Bank International, which owns Raiffeisen Bank Romania, only fell 0.03% in July.

The shares of the Austrian bank gained 1.08%, after British magazine "Euromoney" voted Raiffeisen Bank International as the best lender in Central and Eastern Europe.

Still, the shares of the Austrian bank reached a July low (23.65 Euros/share), as the Austrian Financial Regulation Authority (FMA) began an investigation, concerning the involvement of CEO Herbert Stepic, in illegal businesses in Serbia. If the FMA finds him guilty, he will be forced to leave the bank.

Amid this information, the shares of Raiffeisen Bank International fell 3.46%, but a few days later, after the Austrian Central Bank announced that the in the first quarter, Austrian banks posted a net consolidated profit of 2.12 billion Euros, the stock entered an upward trend.

• Shares of Italian banks fell by as much as 6.36%

The shares of Italian bank UniCredit SpA, which owns UniCredit Ţiriac Bank in Romania, through UniCredit Bank Austria, fell 5.46% in July, to 2.77 Euros/share, on the Milan Stock Exchange.

In the first half of the year, the UniCredit group posted a net profit of 1.1 billion Euros, down 18% over last year's similar period. The result came among the increase of provisions for non-performing loans, following the recession which the third largest economy of the Eurozone is facing. In the first half of the year provisions rose 23.6% YOY, to 3.3 billion Euros.

After the publication of the financial statements, the bank's shares rose 4.3%. Following Moody's decision to cut the deposits and debt ratings by two notches to "Baa2", the bank's shares fell 2.22%, to 2.64 Euros/share.

A negative evolution was also reported by Intesa Sanpaolo, which was among the banks downgraded by Moody's. Also, after the departure of Marco Morelli, the CEO of the bank, shares of Intesa Sanpaolo fell to 0.97 Euros/share.

In July, shares of Intesa Sanpaolo SpA fell 6.36%, reaching 1.03 Euros/share.

The net profit of Intesa Sanpaolo SpA fell 9.1% YOY in Q1 2012, to 1.27 billion Euros, due to the increase of loan provisions.

The bank was forced to book provisions for 2.1 billion Euros in non-performing loans between January-June 2012, up 37% compared to last year, due to the deterioration of lending in Italy, as a result of the recession.

After the bank announced its financial statements, the bank's shares rose 7.25% on the Milan Stock Exchange.

• Shares of French banks fell by up to 4.5%

As for the shares of Societe Generale, which is present in Romania through BRD, they lost 4.48% during the reviewed period, falling to 18.10 Euros/share, on the Paris Stock Exchange.

In the first semester of 2012, the group posted a net profit of 1.16 billion Euros, down 30% YOY.

On the day the earnings were announced, the banks' shares fell 3.6%, over the previous session, reaching 18.01 Euros/share.

The shares of Credit Agricole (which is present in Romania through Credit Agricole - formerly Emporiki Bank) lost 3.77% in July (3.57 Euros/share).

Shares of Credit Agricole rose from 3.39 to 3.43 Euros/share, after the bank denied the allegations of manipulation of the Libor index between 2005-2009, saying that it only became involved in the calculation of the index starting November 2010.

On the other hand, when rumors appeared in the media that Alpha Bank was at an advanced negotiation stage to acquire rival Emporiki Bank, the Greek division of French bank Credit Agricole, the shares of Credit Agricole fell from 3.57 to 3.49 Euros/share.