The Morningstar DBRS rating agency assesses the long-term creditworthiness of National Bank (NBG) with BBB (low), making it the first Greek Bank to regain Investment Grade, almost 15 years after the onset of the Greek financial crisis.
The evaluation of the EIB is equivalent (pari-passu) to that of the debt of Greece.
As stated in the NBG announcement, “the credit rating reflects the leading position in the Greek market, the strengthened balance sheet, the high organic profitability, the stable creation of capital reserves, as well as the Bank’s strong financial position and liquidity”.
The “verdict” of the house
According to DBRS the BBB (low) reflects Ethniki’s leading retail and corporate banking franchise in Greece despite the deep restructuring process required following the global financial crisis and the Greek sovereign debt crisis. Morningstar DBRS also notes the continued progress the Bank has made in strengthening its balance sheet, reducing its stock of non-performing exposures (NPEs) and increasing NPE coverage levels. In addition, Morningstar DBRS notes that National’s core earnings strength has improved due to higher interest margins as well as cost savings and overall lower credit costs. This has resulted in the Bank accumulating stable levels of capital organically and, in turn, in stronger buffers relative to supervisory requirements.
The deposit base
The credit ratings also incorporate National’s solid funding and liquidity position, which benefits primarily from a large and stable deposit base. However, the Morningstar DBRS credit ratings reflect the Bank’s modest diversification in its business model, revenue mix and funding structure, as well as the high level of deferred tax credits (DTC) corresponding to its capital structure.
The stable trend takes into account that while the high interest rate environment is likely to add risks to asset quality, in Morningstar DBRS’ view the favorable outlook for the Greek economy relative to the European average as well as the expected support for credit expansion caused by projects linked to European Recovery and Resilience Fund (RRF) funds, together with further de-risking will help mitigate the negative impact on the National’s risk profile. These risks also remain balanced due to stronger loan coverage levels and capital buffers.
In addition, the Bank’s underlying profitability will remain healthy in the near term despite interest margin compression, higher digital investments and potentially higher credit costs.
Source OT
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