National Bank of Greece SA will stop needing emergency liquidity assistance from the central bank in the coming months, as its financial standing is improved by growing deposits and cash payouts from a series of subsidiary sales, executives said Aug. 31.
ECB and central bank funding to the bank declined by €5.5 billion from the end of 2016 to €6.8 billion in August. Its drawdown of pricey emergency liquidity assistance dropped by €3 billion to €2.6 billion, or 4% of assets, "by far the lowest in the sector," CFO Ioannis Kyriakopoulos told analysts on the bank's first-half 2017 earnings call.
"The execution of remaining capital actions and other initiatives expected in the next few months will permit NBG to disengage fully from ELA," he added.
Greek banks had taken up nearly €90 billion of ELA, which is unsecured and carries higher interest rates than conventional funding methods, at the height of the country's economic crisis in 2015, when panicked depositors pulled their savings in fear of a so-called haircut. Deposits wobbled again at the start of 2017, when it looked as though Greece and its international creditors might not be able to reach agreement over reforms needed to unlock bailout cash.
But after declining to €36.1 billion from €36.8 billion over the course of the first quarter, deposits in National Bank of Greece's home market rose again in the second quarter, to €36.3 billion.
"More importantly, domestic deposit inflows continue so far in the third quarter," said Kyriakopoulos. The sale of Romanian unit Banca Româneasca SA, alongside that of Ethniki Hellenic General Insurance Co. SA in Greece and other disposals in South Africa, Bulgaria, Cyprus and Serbia, are set to boost the bank's capital by €1.7 billion, he added.
The lender booked a loss of €13 million in the second quarter, mirroring an equal profit in the first quarter and putting it at break-even point for the first half. It forecast a more lucrative second half, when it expects to step up corporate lending on the back of an improving Greek economy.
"The combination of lowest reliance on ELA with lowest loan-deposit ratio and a cost of funding below 50 basis points puts NBG in an attractive position to satisfy demand for credit from healthy corporates as the economy recovers," the CFO told the audience.
The loan-to-deposit ratio in Greece stood at 85% at the end of June. Gross loans in Greece decreased to €41.3 billion at the end of the second quarter from €42.0 billion three months earlier and €44.0 billion a year ago.
Deputy CEO Paul Mylonas added that the improvements are set to filter through to earnings toward the end of the year.
"Clearly the economy is doing better. There is more confidence, the tourist season was extremely good, there is more foreign as well as domestic investor interest especially in the more export-oriented sectors and the tourism sector in general," he said. "So, I think that the corporates will be demanding more credit quarter by quarter."