The latest moves of banks for the profitability of 2021

By Leonidas Stergiou

2021 was the last lap of a two-year speed road for Greek banks, which proceeded to a record reduction of red loans. At the same time, they prepared the ground for increased profits and funds, with strategic deals, which must be completed by the end of December.

The latest moves of the four systems for profitability and current year funds include completion:

First, transactions for the sale of red loans (inside and outside the Hercules program), synthetic securitizations and sales of participations in non-banking activities.

Secondly, strategic partnerships, in the context of the banking transformation, such as deals of subsidiaries inside and outside Greece.

Thirdly, latest outstanding recent employee exit volunteer programs, with simultaneous transformation of stores and digital networks.

Fourth, targets for loan disbursements to households and businesses.

National Bank

In particular, the National Bank, in addition to the completion of the Frontier transaction (securitization of red loans of 6 billion euros) and the recognition of the corresponding arrears from their balance sheets, is also completing the sale of National Insurance to the US capital CVC Partners. These are two large deals, which add 170 basis points to the capital of the National Bank. Frontier, after signing with the preferred investors, ie the consortium led by doValue, is in the final stages, to complete the transaction, ie the so-called migration, and to transfer the red loans outside the Bank’s balance sheets until December 31.

The National Bank was planning to complete the sale of National Insurance to US capital CVC in the fourth quarter of 2021. However, a complaint from a private hospital and an insurance company to the European Competition Authority (DGcom) was delayed. DGcom was required to conduct competition research. According to information, the questions from DGcom and the answers from National Insurance are now at the end. Sources close to the discussions estimate that the research will be completed by Christmas and then the sale will be completed. Of course, the process down to the last detail can take until February.

In terms of the operational sector, the National Bank is preparing the latest details at the level of internal structures and network to support the National 2.0 project which is a package of actions to finance the Greek economy through the Recovery Fund and other national and European structural resources. In the same sector falls the target for total credit expansion in 2021 by about 5 billion euros, with the aim of maintaining the same rate (5-5.5 billion) in the coming years.

Piraeus Bank

By the end of the year, Piraeus Bank is selling shares in non-banking activities (Mayfair plan) and an additional synthetic securitization (Ermis 3). These moves will have a direct positive effect on capital by 0.4 billion euros. According to the presentation of the results to investors, Piraeus will contribute the participations in non-banking activities to a new legal entity, which will be managed by a third party. The move will have a capital benefit of 0.2 billion euros in the fiscal year 2021. An additional benefit of 0.2 billion is expected from the third synthetic securitization of red loans. With synthetic securitization, red loans are not sold, but insured against risk, resulting in the release of funds.

By the end of the year, Piraeus will have run the Sunrise 3 securitizations, through the Hercules scheme and the sale of shipping loans. To date, the Piraeus Group has completed over 90% of the actions and objectives of the banking transformation that it had announced during the period of the share capital increase by 1.4 billion euros. It also made other moves that had a positive impact on capital such as Tier 1 bond issues, credit card sales, bond profits, etc. In total, the additional moves strengthened its capital by 2.1 billion euros (in addition to the AMK of 1.4 billion), thus absorbing the cost of reducing red loans through the Phoenix, Vega and Sunrise 1 & 2 schemes, leaving a positive balance.

At the same time, the Bank closes the latest outstanding issues with the last voluntary exit and completes the planned moves regarding the digital transformation, the network and the sales. In terms of funding, the € 5.7 billion target for 2021 seems to have already been revealed. For the period 2020-2024, the target envisages disbursements of new loans of 18-20 billion euros.

Alpha Bank

Alpha Bank is rapidly completing the latest details and changes to the physical and digital network since the deal with Nexi, as part of the “Supplier” scheme, and is in the final stages of the Skyline project for the real estate market. Nexi is set to make a direct profit of € 570 million through the creation of a joint venture to operate in payment systems. The binding offers have already been submitted by a double-digit number of investors and the evaluation is nearing completion.The deal is scheduled to be completed by the end of the year.

The “Skyline” transaction envisages the transformation of Alpha Urban Real Estate (AAA) into a real estate investment platform, in order to attract a strategic partner (joint venture partner) to exploit investments in the Greek real estate market. 500 million euros, at the same time, has already launched the website www.propertynow.gr

At the same time, Alpha Bank is running the Riviera, Aurora and Crown projects, which were planned until the end of the year and with a direct capital benefit of 1.6 billion euros. The Riviera project refers to the completion of the sale of its subsidiary in Albania, as part of the banking transformation. Corresponding to the Crown move to sell the subsidiary in London. The Aurora project concerns a synthetic securitization of red business loans of 2 billion euros. Finally, the securitizations of Orbit (red loans of 1.3 billion), Sky (red loans of Cyprus 2.2 billion) are proceeding, following Cosmos (red loans of 3.5 billion) which was recently completed.

Alpha Bank’s target for net lending in 2021 is 4.5 billion euros, with a target for new loans of 8 billion euros (net disbursement) in Greece in the three years 2021-2024.

Eurobank

Eurobank, starting the securitization of red loans earlier (with the Cairo transaction first), in 2021 records a single-digit percentage of red loans with the completion of the securitization of Mexico. The percentage of red loans is at 7.5% and within 2022 it will be below 5%. As stated by the Bank’s management during the presentation of the Eurobank 2030 plan, the strategy now focuses on three pillars:

First, financing of emblematic projects and investments of large and medium-sized enterprises, with the aim of changing the productive model of the economy and reducing the investment gap created in the country during the economic crisis, mainly through investments based on ESG criteria (Environmental, Social, Governance), which is estimated at around € 100 billion. Eurobank aims for a 30% share in credit expansion, with € 5.5 billion in three-year disbursements, with half of them incorporating strong ESG criteria in their design. This assessment is based to a very large extent (at least 1/3) on already signed or significantly advanced customer agreements.

Second, the granting of professional fixed-rate investment loans for the entire duration of the investment, activates the first electronic marketplace in Greece for the direct connection of customers with other companies seeking their services. These loans are launched within days. It also partnered strategically with Info Quest Technologies to leverage Microsoft solutions, through its subsidiary Eurobank Business Exchanges, to meet a company’s core digital upgrade needs.

Third, the development of the anthropocentric Phygital model (from physical and digital) that utilizes the perfect technological infrastructure with the human factor for simple, fast, personalized and safe service 24/7. Eurobank has already prepared the first new branches in Athens and the new design of “physgital” will soon be extended throughout Greece.