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National Bank of Greece sees uptick in digital users, braces for bad-loan inflow

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National Bank of Greece sees uptick in digital users, braces for bad-loan inflow

The number of digital subscribers at National Bank of Greece SA has grown amid the pandemic, and the lender is looking to ramp up digitization efforts in 2021 and beyond, CEO Pavlos Mylonas said in an earnings call for the third quarter.

As of the end of September, the number of digital banking customers stood at 2.9 million, an increase of 27% year over year. E-banking transactions increased by 71% between February and October this year, while the number of in-branch transactions was down by 60% over the same period.

Changing behavior

Greece has typically lagged other European countries in the adoption of online banking, with 40% of Greek internet users reporting having carried out banking transactions online in 2019 — an increase of 38% on the previous year, but well below the EU average of 66%, according to the European Commission's Digital Economy and Society Index.

But signs have emerged that the coronavirus crisis has changed the behavior of Greek consumers. NBG competitor Alpha Bank AE also reported a significant increase in e-banking sign-ups and mobile transactions in the third quarter.

Reducing the number of branches is a "priority" for 2021, Mylonas told analysts during the call. The bank had 388 branches as of the end of the third quarter, with plans to close around 40 "in the next few months," according to a company presentation.

Bad debt inflows, outflows

The bank is preparing for the securitization of a portfolio of €6.1 billion of nonperforming loans, dubbed "Frontier." The securitization is made up primarily of nonperforming mortgage loans, and will be ready to launch in the coming weeks, Mylonas said.

Total nonperforming exposures stood at €9.96 billion at the end of the third quarter, an organic reduction of €200 million during the quarter.

But the bank is also expecting some new inflows of NPLs from borrowers currently under moratoriums, Mylonas warned.

Near the beginning of the pandemic, National Bank of Greece granted repayment holidays to borrowers struggling with debts due to the pandemic, and these will mostly be extended to the end of 2020.

Roughly €3.6 billion of loans were under active moratoriums at the time of the bank's earnings call Nov. 30. Of these, €1.2 billion relate to mortgages, less than €100 million to consumer debt, €200 million to small businesses and €2.1 billion to corporates.

National Bank of Greece is expecting 15% to 20% of loans under moratoriums to default, and expects fresh NPL inflows to the tune of €1 billion as the result of the pandemic, Mylonas said.

His comments come as the bank reported an operating profit of €137 million for the third quarter, up from €67 million in the second quarter.