The banking industry is ready to open the cannula of financing in the new era of cheaper money that is dawning for the Eurozone after two years of restrictive monetary policy. Now, all the necessary conditions for the acceleration of credit expansion rates are met, and the managements of credit institutions are waiting for the completion of the last piece of the puzzle to implement their plan: strengthening the demand for loans from worthy candidates.
Lines of credit
In particular, the four largest groups have been fully restructured, have high capital adequacy ratios and their liquidity is at multi-year highs. They have, however, returned to the investment category and are constantly expanding credit lines with international markets. At the same time, new non-systemic players are claiming their rightful role. We are talking about Optima Bank, which in recent years has been steadily increasing its shares, but also about the fifth largest pole in the sector, the Attica Bank – Pankritia joint scheme, which is preparing to clean up its balance sheet after the imminent increase capital of 735 million euros.
This means that from the beginning of 2025, a total of 6 credit institutions with sound fundamentals will fight to increase their assets through new financing.
The cost of money
The timing is favorable for the achievement of this goal, as the de-escalation of the cost of money is in full swing. This will pave the way for the offer of more attractive loan programs, which is estimated to lead to an increase in interest from households and businesses. There are two big bets for banks in the coming years. The return of mortgage balance growth rates to positive territory after 15 consecutive years of decline and the acceleration of their rise in business loans. As analysts estimate, as long as the macroeconomic environment remains favorable and growth is maintained above the 2% zone, this goal is completely achievable.
The achievements
However, to get to this point, the industry has recorded significant successes in the past years, with 2024 being considered the milestone year for its return to full normality. Specifically:
1. Return to the private sector:
This year the process of disinvestment of the Greek State by the big banks is completed. Alpha Bank, Eurobank and Piraeus Bank are already 100% private, while 22% of the shares of the HFSF have been allocated to National Bank since last year and the sale of the remaining 18% remains in the first ten days of October.
In this way, the presence of the State in the share capital of the big four of the sector comes to an end for the first time since the recapitalization of 2013, which was carried out to replace the losses from the haircut of the Greek debt (PSI).
2. Intensification of competition:
The creation of the fifth strongest pole in the system, through the merger of Attica Bank and Pankritia, is an important step in expanding competition in the domestic market. The new scheme, which will start operations under a new name in early 2025, will be another alternative non-systemic option for depositors and borrowers, in addition to the dynamically growing Optima Bank.
The legal merger was completed at the beginning of September, while the request was submitted to the Ministry of National Economy and Finance for the inclusion of the red loans of the two banks in the “Herakles” state guarantee scheme. A capital increase of 735 million euros will follow in November, through which the losses of the consolidation will be taken over and the necessary resources will be secured for the development of the new bank’s operations.
According to the presentations of its management, the objective of its business plan is to approach small and medium-sized enterprises for new loans, as it is estimated that there is currently a gap in this sector.
Returning growth rates in mortgage balances to positive territory after 15 straight years of decline and accelerating their rise in business loans are the two big bets for banks.
3. Dividends:
The shareholders of the banks are also winners after years. In 2024, for the first time since 2008, systemic groups received the green light from the supervisory authorities to distribute a dividend from last year’s profits. The shrinking of the stock of non-performing exposures close to the European average, the strengthening of capital and liquidity, the reconnection with the markets, the increase in profitability and the positive macroeconomic outlook created the right environment to secure the necessary approvals. In total, the four systemic groups and Optima Bank distributed around 850 million euros in cash this summer, which corresponds to 23% of 2023 profits, while the execution of Alpha Bank’s own share buyback program, amounting to 61 million euros, is pending .
For this fiscal year, the banks aim to increase distribution to 40% of their net result, which is expected to increase by 15% on an annual basis, exceeding 4 billion euros. In fact, for Alpha Bank, Eurobank, National Bank and Piraeus Bank, it is very likely that a record high level of profitability will be recorded.
4. The investment tier:
Another milestone for the sector is the return of the four systemic groups to the investment category by the rating agencies, for the first time since the outbreak of the financial crisis in Greece. In this way, they rejoin the club of “normal” banks, expanding their investment base and facilitating the work of their management to increase assets under the best possible conditions.
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