French house BNP Paribas and banking analyst Thomas Humblot point to a return to normalcy Greek banks with dividend payments, but they also maintain their regulatory capital issue, which includes deferred tax credits and receivables at a high rate.
“Eurobank, National BankAlpha Bank and Piraeus Bank, the largest Greek banking groups based on their regulatory capital, have requested and received approval from the European Central Bank to pay their shareholders a dividend of 24% of their combined net earnings for 2023.
The return to shareholders, totaling €875m, 93% of which is in the form of dividends, is the first of its kind since 2008 for the four Greek banks, which together represent around 90% of the Greek banking system and total assets. it is a positive element,” emphasizes Humblot.
After record losses of 28 billion euros in 2011 and a rise in the non-performing loan ratio to 41 percent in 2015, the Greek banking system has significantly cleaned up its finances.
The four banks posted positive net profit for the second year in a row in 2023, the first time since 2010. As of December 31, 2023, the non-performing loan ratio decreased to a weighted average of 3.1%.
The improvement as a result of divestitures and securitizations through the Hercules III public guarantee program brought NPL ratios closer to the European average of 2%.
The NPL ratio is back to 2008 levels, while capital is doubling from then and under much tighter definitions.
The CET1 regulatory capital ratio on a weighted average basis was 15.9%, which is higher than the ECB/SSM supervisory requirements and recommendations.
However, the ECB’s interest rate cut starting June 6, 2024 will reduce the net interest income of Greek banks, as deposits make up 73% of their total liabilities, thus limiting their domestic ability to generate capital.
This will reduce the rate of improvement in the quality of the total capital, which still includes 44% of deferred tax credits and 9% of deferred tax assets, for which the loss-absorbing capacity is lower than CET1 capital,” emphasizes the French. Bank.
“Understanding these encouraging trends, the Financial Stability Fund has accelerated its holdings in the four banks, which peaked at 81-99% in 2013, but now owns only 18.4% of the National Bank.
The figures for the first quarter of 2024 show that things continue to move in the right direction,” concludes Humblot of BNP Paribas.
