National Bank

The sale of the share of the Greek Financial Stability Fund to the National Bank is a milestone in the restructuring and consolidation of the Greek banking system, according to the rating agency Standard & Poor’s.

As he recalls, the Greek government established the HFSF in 2010 to stabilize the Greek banking sector during the country’s public debt crisis.

With the support of the HFSF, the Greek banking system has been significantly transformed, meaning that Greece’s four domestic systemically important banks (D-SIBs) and Attica Bank now represent 98% of the assets of the Greek banking system, compared to 68% in end of 2007.

Restructuring efforts have improved the banks’ efficiency and reduced the sector’s average cost-to-income ratio to 32.4% on June 30, 2024 – the second best ratio in the EU, according to S&P.

Also, NPL ratios stood at 3.6% for the four D-SIBs and 6.9% for the banking system as at June 30, 2024, against a peak of 48.6% as at March 31, 2018. This in the house means significantly improved earnings prospects, with the Greek government well placed to exit the domestic banking sector entirely.

The latest developments

The house reminds that on October 2, 2024, the HFSF completed the sale of 10% of National Bank. The remaining 8% of the HFSF will be transferred to another state entity. This follows the sale of 27% by HFSF to Piraeus Bank, 22% to National Bank, 8.98% to Alpha Bank and 1.4% to Eurobank in 2023-2024.

Thus, the HFSF fully divests from Greece’s D-SIBs and retains only 72.5% of Attica Bank.

Because it matters

The HFSF became a shareholder in the Greek D-SIBs, as part of the capital injection they received following the restructuring of the Greek government’s debt. Although the HFSF has not actively influenced the strategies and operations of the banks, it has contributed to their successful recovery.

In recent years, banks have strengthened their solvency, improved their loan portfolios and improved their operational structures. As conditions normalize and profitability improves, the HFSF has gradually divested its stakes in Greece’s D-SIBs.

In addition, restrictions on banks’ capital management are lifted, enabling them to pursue a more active capital management strategy, similar to that of international bonds.

After more than a decade, the banks have again given dividends in 2024, with the aim of gradually increasing their payouts towards the 40%-50% mark.

Some banks also carried out mergers and acquisitions, such as Eurobank which took a majority stake in Hellenic Bank. Further deals and additional shareholder remuneration will likely affect banks’ capital accumulation, the house estimates.

HFSF’s exit from the four D-SIBs will not affect S&P’s view of banks’ creditworthiness

According to S&P, the successful disposal of HFSF shares in the four D-SIBs and the strong demand from foreign institutional investors for National Bank shares demonstrate the increasingly positive market sentiment towards Greek banks.

In October 2023, UniCredit was the first major European bank to sign a strategic partnership with one of the leading Greek banks in over a decade.

The positive investment climate will support Greek banks’ access to the debt markets and strengthen their capital flexibility and financing profiles.

Nevertheless, the HFSF’s exit from the four D-SIBs will not affect S&P’s view of the banks’ creditworthiness, as its ratings have always reflected the assumption that the state’s presence would be temporary and non-intrusive.

What will follow

Deferred tax credits (DTCs) are the last vestiges of Greece’s debt crisis, but resolving them will be a multi-year effort, the house finally estimates.

The high amount of DTCs burdens the creditworthiness of banks because their activation would lead to a reduction in stocks, which discourages banks from using them.

D-SIBs aim to reduce the share of DTCs to around 30% by 2026 and below 20% by 2030 through organic capital formation and depreciation.

Source: ot.gr.