More pain seen for Greek bank stocks before buyers emerge

By George Georgiopoulos and Sinead Cruise

ATHENS/LONDON (Reuters) - Greek bank shares (.FTATBNK) were expected to be hit by more losses on Tuesday following a 30 percent plunge on the first day of trading after a five-week stock market shutdown.

Traders said buyers were not likely to start looking for bargains until yet lower levels were reached.

"Market value is being destroyed on very light volumes as buyers stay away from bank shares," said one fund manager who declined to be named. "It will take some days for the market to balance out."

All five shares comprising the Athens bourse's banking index (.FTATBNK) - National Bank of Greece (NBGr.AT), Alpha Bank (ACBr.AT), Piraeus Bank (BOPr.AT), Attica Bank (BOAr.AT) and Eurobank (EURBr.AT) - were locked down at the daily volatility limit with no buyers after early trades.

Once investors' darlings as they expanded into under-banked Balkan countries a decade or more ago, Greece's lenders have been battered by bad loans, a flight of euros from Greece and lately by the imposition of capital controls.

fears that existing shareholders could see their holdings diluted given banks' need to recapitalise were also keeping buyers at bay, traders said.

"It is far from clear that when recapitalised, these banks will immediately get back to normal, and that they will shoot up to trade nearer book value again," said a UK-based opportunity investor, currently holding Piraeus shares.

The banks may need as much as 25 billion euros (£17.5 billion) to recapitalise. The flood of money leaving the country out of fear Greece would leave the euro zone, culminated in authorities imposing capital controls on June 29 to prevent a financial meltdown.

Athens will make it a priority to recapitalise the lenders by the end of this year, probably using a bailout fund to plug capital shortfalls, a Greek central bank official told Reuters on Friday.

"Shareholders could get diluted in a very unpleasant way, but bear in mind that the price to book is already very low," the opportunity investor said.

"Even if new money comes in at a discount to book value, then it's probably not the end of the world. There will be some value left. But to put an exact number on what this could be is very difficult."

With authorities set to extend a short-selling ban that expires on Monday, the liquidity situation was improving with Greece's central bank unlikely to ask the European Central Bank for an increase in emergency funding thanks to cash inflows, two sources familiar with the situation told Reuters on Monday.

The sources said the untapped emergency liquidity assistance (ELA) buffer had grown to about 5 billion euros from 1 to 2 billion euros at the height of Greece's debt crisis, helped by tax and tourism inflows, and pension payments.

(Reporting by George Georgiopoulos Editing Ralph Boulton)