NBG Securities: what the results of the first 3 months of Greek banks showed

Greek banks reported a strong first quarter of 2024, with lower provisions more than offsetting lower interest income.

This is stated in an analytical note from NBG Securities on the Greek banking sector, which, in particular, notes that the decline in provisioning income (PPI) mainly reflects:

1. higher costs for hedging deposits,
2. new payments totaling more than 7.5 billion euros;
3. higher financing costs associated with the issuance of MREL.

Banks: four-pronged cost-cutting operation

These trends were offset by a significant reduction in loan impairment losses as a result of the winding down of loan portfolios. In addition, asset quality continued to improve: the average NPE level decreased by 11 bps. p. for the quarter, thanks to organic activities as well as sales.

Greek banks have retained solid capital and sufficient liquidity, which can continue to be invested in high-yield assets, NBG Securities noted. Finally, all four banks provided guidance for the first time in 10 years on the distribution of dividends from profits in 2023, subject to SSM approval.

Alfa Bank
Alfa-Bank reported that its core PPI for the first quarter amounted to EUR 322 million (-8.9% compared to the previous quarter), driven by higher costs for hedging deposits, front-load issuances and higher operating expenses as 4 In the quarter of 2023, reimbursements related to the Single Resolution Fund (SRF) were received.

As a result, Alpha's profit from continuing operations was €204 million, +4.1% year-on-year, also supported by lower fees. NPE loans remained flat at €2.2 billion as stronger treatment and repayments offset the reclassification of €110 million of government-guaranteed loans to NPE, reflecting supervisory expectations. The NPE ratio remained at 6%, while the pro forma NPE ratio stood at 5.7%.

Alfa Bank's capital position strengthened with its FL CET1 ratio of 14.8% compared to 14.6% in 4Q 2023 and its total capital ratio of 19.2% in 1Q 2023 compared to 19.1%. in the 2nd quarter of 2023.

Management has provided shareholder compensation guidance of 20% of 2023 net profit, or €122 million, which will be split evenly between dividends and share buybacks.

Eurobank
The Eurobank reported a core PPI of €478 million (-1.3% qoq), driven by growth in loans, bonds and international transactions. The final profit amounted to 383 million (+12.7%) before non-recurring payments, thanks to a significant reduction in commissions and a reduction in other impairment losses.

The volume of loans serviced in the first quarter grew organically by 0.4 billion. NPE decreased by 211 million euros to 1.3 billion euros. The NPE ratio decreased to 3% from 3.5% in the fourth quarter of 2023.

Eurobank's capital position strengthened as total CAD reached 20.2% and FL CET1 reached 17.2%. Management provided a dividend forecast of €0.09/share.

National Bank
The National Bank reported a core PPI of EUR494 million (-0.9% qoq), reflecting the impact of hedging costs and higher funding costs, partially offset by a seasonal decline in OpEx.

Profit after tax from continuing operations amounted to 380 million (+1.3%), which was also supported by higher transaction income and fixed commissions. The NPE provision remained unchanged at €1.3 billion, with no significant organic increase in the quarter, which is well in line with the 2024 guidance.

NPE ratio was stable at 3.7% and coverage declined to 86.1% (down from 87.5% in 4Q23). The FL CET1 ratio increased by 0.8% to 18.6%. The overall capital adequacy ratio (CAD) reached 21.3%.

The company's management provided a dividend forecast of 20-25% of net profit, which is equivalent to 0.24-0.30 euros/share.

Piraeus

Piraeus Bank reported an underlying PPI of 470 million (-2.9% qoq), mainly due to the impact of the full phased implementation of the group's deposit hedging strategy. Net profit from continuing operations was €233 million, also supported by lower loan impairment losses. The volume of unused credit resources has actually stabilized at the level of 1.3 billion euros. Accordingly, the NPE ratio remained at the same level – 3.5%.

Piraeus Bank's FL CET1 ratio reached 13.7% at the end of March, mainly due to organic capital increases. The overall CAD FL ratio was 18.5%, which is well above capital requirements as well as regulatory requirements.

Management provided a dividend forecast of €0.06/share.

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