JP Morgan detected the change in the priorities of the managements of the Greek banks, during its recent trip to Athens, seeing that now, with interest income having peaked, bankers are focusing more on credit expansion and capital return options. A change that, as JP Morgan notes, is in the right direction, as Greek banks understand the change in trend and are adapting.
Discussions from JP Morgan were positive, especially on the lending front, after a subdued year where business loans also dominated. A trend that will continue in 2024, but now the expansion in consumer loans (without collateral), which had suffered subsidence, has also started to improve.
On the loan servicing front, administrations are forecasting a 4%-6% increase in servicing per year. However, mortgage loans have not yet recovered, with annual disbursements hovering at €1-1.2 billion, roughly 10% of pre-crisis levels.
Of course, especially in the last types of loans, i.e. mortgages, the bankers highlighted the housing deficit, after more than a decade of no construction activity, which keeps costs high. Efforts to improve conditions are already underway, but the recovery of this lending requires a concerted effort from both the banks and the government.
The front of non-performing loans
Discussions also touched on the issue of the stock of non-performing exposures (NPEs), which are currently held by servicers. This is a size that reaches 70 billion euros, part of which can return to service, to be “cured” that is, and return to the balance sheets of the banks. Bankers appeared open to acquiring these loans in an attempt to capitalize on the improving economic climate.
On this front, however, estimates of “cured” loans vary widely, reaching as high as €40 billion, with around €6.5 billion of these already classified as non-performing.
The DTC issue
According to JP Morgan, banks appeared optimistic about the return of capital from 2024 with the approval of the SSM. As previously announced, initial dividend payout ratios are modest, ranging from ~10% for Piraeus to over 25% for Eurobank and National, but are expected to increase gradually, reaching 40%-50% in the next 2-3 years.
However, given the strong capital ratios, especially for National Bank and Eurobank, as well as the high organic capital formation expected in 2024-2026, addressing excess capital becomes increasingly important.
While Eurobank highlighted its ongoing M&A in Cyprus, NGE is focusing on portfolio purchases as well as capital development partnerships.
Takeovers are also in focus, with National hoping to supplement dividends with an “aggressive acquisition strategy” from next year onwards. In addition, the bank is monitoring the developments related to the final placement of 18% of National Bank by the HFSF for a possible acquisition. JP Morgan also reiterates that it assumes an 8% repurchase from the National Bank in 2024 in relation to the HFSF stake.
Source OT
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