by Athanasios Adamopoulos

 

  

Greek banks are expected to enjoy increased profitability in 2023, paving the way for the first dividend payment to shareholders since 2008, led by increased revenue from higher interest rates and an estimated significant credit expansion, particularly to enterprises.

 

These optimistic predictions are based on the fact that billions of EU funds will be distributed in the Greek economy mainly through the EU Recovery and Resilience Fund and the European Structural and Investment Funds and expectations that Greece will obtain the investment grade this year.

 

This optimism also includes the factor of uncertainties, particularly the risk of creating a new generation of non-performing loans because of the high inflation rate and the pressures on Greek households. Analysts say this risk is manageable with the four systemic banks reporting single-digit NPEs rates (between 5.6% and 8.7%) and predict a 7% growth in credit expansion this year and increased revenue from rising interest rates (750-900 million euros in the period 2022-2023). Credit expansion is expected to boost revenue from commissions. Greek banks are also expected to achieve a double-digit capital return index (10%) through improving operating results and adhere to commitments of returning to dividend payment for the first time since 2008. Greek banks are also cutting operating costs, although they face increased borrowing costs with the issuance of Minimum Requirement for own funds and Eligible Liabilities MREL bonds. The four systemic banks have scheduled to issue MREL bonds worth 2 billion euros this year.

 

Greek banks recorded the second highest return on equity rate among European banks in the third quarter of 2022, a sign of improving profitability, according to the European Single Supervisory Mechanism, with ROE index of 15.38% compared with Eurozone average index of 7.55%. They reported accumulated profits of 2.8 billion euros in the third quarter of 2022, after losses of 4.6 billion in the corresponding period in 2021. SSM said this profitability was based on interest rate revenue (52%), commissions (16.3%) and financial revenue (19.6%). The four systemic banks also managed to reduce the stock of non-performing loans to 10 billion euros and the NPL rate to 6.82%. However, the NPL rate is the second highest in the Eurozone. Greek banks are already enjoying increased liquidity based on higher deposits, with the liquidity rate (loans/deposits) falling to 61.1% as a result of a successful deleverage programme of their loans portfolio.

 

Another positive development for Greek banks is the start of a programme by the Financial Stability Fund to disinvest from the four systemic banks. This programme is scheduled to be completed by the end of 2025. The Fund owns equity stakes of 9%, 1.4%, 27% and 40% in Alpha Bank, Eurobank, Piraeus Bank and National Bank, respectively.

 

The positive outlook for Greek banks has sparked a series of investments in smaller banks in the country, with the entry of new investors in Attica Bank, mergers between cooperative banks and only recently a decision by Piraeus Bank to raise its equity stake in Marfin Investment Group to 32.66%, launching a public offer for the bank’s outstanding shares.