The hidden points from the wine test of the four systemic banks

You Leonida Stergiou

Banks recorded the losses from the consolidation moves in 2021, improved their efficiency and supported the real economy with a net credit expansion of 5.1 billion euros and new loans of 24.6 billion euros. They sharply reduced red loans, significantly reduced risks and operating costs, and managed to reduce losses from the low-interest environment by operating at a lower net interest margin and reducing customer borrowing costs.

Despite the signs of a change of page from 2022 onwards, investors are currently interested in quantifying the possible effects of the war. The positive outlook is supported by the upgrading of business plans, setting new, more ambitious growth and profit targets, by dividend distribution plans, net and recurring profitability and the achievement of single-digit red loan rates, now at the level of the Eurozone.

On the other hand, the uncertainty of investors, the supervisory authorities but also the interest from the banks themselves focus on the effects of the macroeconomic environment due to war and inflation. This may mean a reduction in lending, but also a new round of red loans. That is why the eyes are fixed month by month on the new red loans, as well as on the new loans. So far, bankers and loan management companies are taking the risk, but stress that there are signs that lead to the conclusion that there will be a problem.

The starting position of the protagonists for 2022

The overall picture hides strong differences from bank to bank, which are highlighted only by careful analysis of their balance sheets and specific key indicators for their efficiency.

For this reason, the Capital.gr lists in detail all the critical data of the results, balance sheets, profitability ratios and critical figures for investors for 2021 compared to 2020, with the processing of the data by Axia Ventures.

Eurobank

Eurobank converted the final net losses to shareholders in 2021 to a net profit of 328 million in 2021, while, if it were not for the small increase in organic income from the last securitization, the result would have been even higher, while it managed not to encumber the funds its – on the contrary, to strengthen them. It achieved a significant reduction in operating income and a significant improvement in profitability ratios, significantly reducing costs (in terms of revenue).

At the same time, it increased the net interest income, without burdening the borrowers with higher costs, at the same time achieving the highest net credit expansion after the National. The positive results (international activities, private banking, real estate investments, etc.), in combination with the single-digit red loans index, brought it the first to submit an application to the supervisory authorities for dividend distribution in 2023, with the support of the HFSF.

Alpha Bank

It carried out the second largest red loan securitization in Europe, managing to have a smaller impact on the results in terms of its size, leaving the funds unaffected. However, it technically cut interest income, which in turn affected organic profits and increased organic expenses, which turned the profitable use of banking operations into losses of 2.9 billion euros. But this is not repetitive.

On the contrary, the increase in revenue sources, with restructuring of foreign subsidiaries and strategic partnerships in payment systems and bank insurance, are part of the recurring profitability. The significant reduction in red loans, which cost the results, sharply reduced the risks, freeing up funds, dramatically the cost of risk and the corresponding necessary provisions, allowing a net credit expansion of 1.3 billion euros, remaining in second place in market shares based on loans.

Piraeus Bank

Perhaps this is the most impressive reduction in red loans in 12 months and the faster completion of the consolidation program, which led Piraeus Bank to be the only one in 2021 to increase net income, double its adjusted pre-tax profits and increase its market value by the levels of 350 million euros in mid-2019 at 1.8 billion euros.

However, a capital increase of 1.4 billion euros was needed, after first the majority of the shares passed to the HFSF, then the Sunrise transformation program was implemented with capital raising moves (loan sales, sale of card network, participations, synthetic securitizations, bond issues, etc.). a.). The HFSF reduced the percentage to 27%, the profitability from banking operations increased, however the cost of securitization passed to losses of 3 billion (net result to shareholders). This was a one-off and on April 6 the new three-year development business plan is announced.

National Bank

The National Bank, with the highest regulatory capital, absorbed all securitization costs forward, managing to maintain and increase its profitability vertically in 2021 compared to 2020. It is also the bank that managed to increase net interest income (in unlike all other banks), with a net credit expansion of € 1.4 billion. It managed to increase the net interest income, with a simultaneous reduction of the interest margin and with cheaper lending to the clientele.

NBG is the second bank with the smallest, and in fact single-digit percentage of red loans and the one with the largest reduction in risk costs, from 403 basis points to 96 basis points, allowing it to be the only one that increased the CET1 capital adequacy ratio in fiscal year 2021 to 16.4%, from 14.5% in 2020. Allowing the start of the debate with the supervision for dividend distribution in 2023 for the fiscal year 2022.