National Bank: The end of the obligations to DGCom, the dividend, the deal with EVO and the new plans

Of Leonida Stergiou

With the sale of National Insurance, the second securitization of red loans and the strategic agreement on payment systems with the American EVO, National Bank completed its obligations towards the competent European authorities (DGCom and supervision).

The positive progress of the first half of the year, the reduction of the percentage of non-performing loans below 6%, with the simultaneous strengthening of the capital adequacy ratios, allow the management of NBG to proceed with the distribution of a dividend of approximately 20% of the profits of 2022.

Profits, dividend, new loans

With these moves, published results and estimates shared with analysts include:

First, increasing the profitability ratio (based on return on tangible assets – RoTE) by 10% per year. For 2022, a 9% increase is predicted. It is recalled that NGE’s pre-tax profits in 2021 were 125 million euros, with a RoTE close to 8%.

Second, a dividend distribution of 20% of 2022 earnings, without affecting the target for high capital adequacy ratios above 15-16%.

For this reason, the shareholders of NGE will be asked to approve the proposal of the board of directors at the regular general meeting on Thursday. to write off accumulated losses of almost 15 billion euros through reserve funds that have been created.

Thirdly, the achievement and strengthening of the target for net credit expansion of more than 1-1.5 billion euros per year. Already, according to information, this goal from the data of the first semester seems to be exceeded.

The information indicates that the EIB has evaluated and reached the final stage for a large number of business plan contracts through the Recovery Fund.

NBG’s credit expansion will be significantly boosted by business credit (due to TAA), but it is expected to place even greater emphasis on retail banking, with housing loans at the forefront.

Regarding profitability, an increase in interest income is expected from positive credit expansion and an increase in ECB interest rates. The analysis so far shows an extra income of around €60m just from the ECB raising interest rates by half a percentage point. Perhaps, this amount will be higher, as the net stock of serviced loans increases.

Increased revenues from banking operations are expected, mainly through business and investment banking but bancassurance, as the first revenues from cross-selling and product enrichment from the deals with CVC and EVO are expected (although these are expected mainly towards the end of the year ).

Completion of DGCom’s restructuring plan

The release from the restructuring plan is expected to be accompanied by an upgrade and update of the strategic planning of the National Bank.

Already, it is proceeding with a restructuring of the roles and remuneration policy, including the members of the HFSF (due to a change in the HFSF law) and the rest of the executive and non-executive executives with a horizon of up to 2023.

With these moves (sale of foreign subsidiaries -except for Cyprus so far-, sale of its stake in Prodea, reduction of branches and staff in Greece, sale of National Insurance), National Bank completes all the obligations it had undertaken with the Restructuring plan of DGCom with agreed deleveraging of its total assets by 80%.

October NBG Pay

In October (or November at the latest) the deal of the consortium of payment systems of National Bank with the American EVO is expected to be completed, a move which, together with the sale of National Insurance, offers a capital gain of more than 160 basis points.

The deal with EVO that envisages the creation of a joint company, NBG Pay, where NBG will participate with 49% citing its payment systems (merchant acquiring), has already been approved by the d.s. of NGE and has been registered in GEMI, as it had published since May 31 capital.gr.

The total deal is worth 310 million euros, with the National Bank directly benefiting by 158 million euros and in the long term from the increase in transactions of the new company. The regular general meeting on July 28 is also called upon to formally approve the establishment of the joint company NBG Pay.

Red loans

At the same time, it proceeded with two large securitizations of non-performing loans (Frontier 1 and Frontier 2) limiting the non-performing loan ratio to a single digit rate in 2021 (6.9%), limiting it to 6.5% in the first quarter of 2022 and, according to with information below 6% in Q2 (H1 2022). By 2024, the rate is expected to be below 3%.