Greece’s four systemic banks will distribute this year approximately 840 million euros in dividends, out of a total of €3.6 billion, which were the net profits of the previous year.

Eurobank claims the “first place” in the amount of the distributed dividend with approximately €335 million to be distributed (25% of the profits), while more than €300 million is expected to be distributed by National Bank (25%-30% of the profits), followed by Alpha Bank, which will distribute €122 million (20% of profits) and Piraeus Bank with another €80 million (10% of profits).

The return to shareholders for the first time in 15 years is seen to be on a solid footing as the “ambitious” dividend policy for the coming years is supported by the sustainability of bank income, which in turn creates the high interest rate environment combined with the consolidation of bank balance sheets.

Analysis of the results shows that 2023 total revenue, which increased by 10% year-on-year to €10.4 billion, was driven by high net interest income, which increased by 51%, while there was little contribution from financial income, which were the main source of profitability in previous years. To a lesser extent, but boosting profitability, came the commission income which contributed 17% of total revenue. Therefore, net interest income amounted to €8.1 billion and income from commissions to €1.8 billion, for a total organic income of €9.9 billion.

The jump in net interest income could not have been achieved without the support of depositors, who in the midst of high inflation have seen deposit returns turn negative, maintaining at “unprecedented high levels,” as the Center for Economic Planing and Research (KEPE) pointed out in the study published last week, the widening of the interest margin of the Greek banks, which “far exceeds the average price of the eurozone”.

Exercising harsh criticism, the KEPE spoke of “banking greed inflation” and of asymmetric reflexes of Greek banks to the ECB’s interest rate hikes, since while loan rates immediately increased, deposit rates initially remained unchanged and then increased weakly, resulting in the interest margin – i.e. the difference between lending and deposit rates – “breaking one record after another.”

Goals

Bank estimates maintain interest income levels in the coming years, despite expected interest rate cuts and higher deposit funding costs.

The capitalization of Greek banks continued to strengthen and at the end of 2023 the basic capital ratio –CET1– reached 15.6%, while the average total capital ratio reached 19%, from 14% and 17% respectively at the end of 2022.

As DBRS Morningstar pointed out in its report, “the level of capital ratios ensures sufficient average buffers of approximately 560 and 430 basis points respectively for CET1 and the total capital ratio above the minimum supervisory requirements, after taking into account dividends that Greek banks have incorporated in their predictions”.

However, as DBRS noted, “capital quality remains relatively weak, with deferred tax assets (DTCs) representing around 56% of CET1 capital at the end of 2023, albeit down from 63% a year earlier.

Source: Ekathimerini.com